Q3 2020 U.S. Bancorp Earnings Call
Following a review of the results by Andy's Tier C series theory, Chairman, President and Chief Executive Officer, and Terry Dolan, Vice Chair and Chief Financial Officer, There will be a formal question and answer session. If you would like to ask a question.
Please press star one on your Touchtone phone and press the pound key to withdraw.
This call will be recorded and available for replay beginning today at approximately 12 o'clock PM Eastern time through Wednesday October 21st at 12 o'clock at midnight Eastern time I will.
I will now turn the conference over to Jen Thompson director of Investor Relations and economic analysis for U.S. Banc Corps.
Thank you Cindy and good morning, everyone with me today are Andy subsidiary, our Chairman, President and CEO and Terry Dolan, Our Chief Financial Officer also.
Also joining us on the call are chief risk Officer, Jody, Richard and our Chief Credit Officer and more critical.
During their prepared remarks, Andy and Terry will be referencing a slide presentation.
Copy of the slide presentation as well as our earnings release and supplemental analyst schedules are available on our website at U.S. think dotcom I'd like.
I'd like to remind you that any forward looking statements made during today's call are subject to risk and uncertainty.
Factors that could materially change our current forward looking assumptions are described on page two of today's presentation in our press release.
In our form 10-K, and subsequent reports on file with the FCC I'll now turn the call over to Andy.
Thanks, Joe and good morning, everyone and thank you for joining our call. Following our prepared remarks, Terry Jody Mark and I will take any questions you have.
I'll begin on slide three in the third quarter reporting earnings per share of 99 cents. Our revenue of $6 billion was higher on both the linked quarter and year over year basis, driven by strong fee income performance across a number of business lines.
The quality metrics deteriorated in line with our expectations, primarily reflecting more challenging operating conditions for shock commercial sectors impacted by called it 19. However.
However, a reserve build in the third quarter was limited to the addition related to our acquisition of $1.2 billion or credit card launch from stinks for.
Our capital and liquidity positions remain strong and our deposit mix improved as the third quarter as demand deposits increased sharply higher cost time deposits declined.
The bottom right quadrant of this slide shows our strong capital position at September Thirtyth, our common equity tier one capital ratio was 9.4%.
Slide four provides key performance metrics in the third quarter, we delivered a 16.6% return on tangible common equity.
Slide five shows steady improvement in digital activities, notably digital sales now account for more than half of all launch sales how lighting highlighting how our business investments are supporting our customers evolving behavior.
Digital remains a focused investment area for us and it's more activity moves to the digital channel It will drive customer loyalty and top like girls as well as cost savings and efficiency opportunities.
Now, let me turn the call over to Terry will provide more color on the quarter. Thanks.
Thanks, Andy.
If you turn to slide six I'll start with a balance sheet review followed by a discussion of third quarter earnings trends.
Average loans declined 2.2% compared with the second quarter in early July we added $1.2 billion in credit card loans [laughter] acquired as part of our New Alliance with State farm. Additionally, loans made under the SP, a paycheck protection program increased by $2.8 billion on.
Average in the quarter.
Next will be the state farm and PBP loans average loans declined by 3.5%.
As strong residential mortgage growth was more than offset by the impact of pay downs.
I see and I portfolio, given strong capital markets activities during the third quarter.
Turning to slide seven average deposits increased 0.6% compared with the second quarter and the overall deposit mix continues to be favorable our noninterest bearing deposits grew 15.0% while time deposits declined 21.7%.
In early October we closed on the acquisition of $10 billion of deposits from state farm, which will add to deposit balances and increased liquidity in the fourth quarter.
Turning to slide eight as expected under the current economic environment credit quality deteriorated in the third quarter, our net charge off ratio was 0.66% in the third quarter up 11 basis points compared with the second quarter as higher losses in our commercial and commercial real estate portfolios repair.
Partially offset by lower credit card and total other retail net charge offs.
The ratio of nonperforming assets to loans and other real estate was 0.41% at the end of the third quarter compared with 0.38% at the end of the second quarter.
Our loan loss provision was $635 million in the third quarter. The provision amount included $120 million related to the credit card loans acquired from state farm at the beginning of the quarter.
Our allowance for credit losses as of September Thirtyth totaled $8.0 billion or 2.61% of loans the allowance level reflected our best estimate of the impact of slower economic growth and elevated unemployment, partially offset by the consideration of benefits of government stimulus programs.
Well estimates are based on many quantitative factors and qualitative judgments our base case outlook assumes an unemployment rate of 8.9% for the third quarter, increasing slightly to 9.1% in the fourth quarter of 2020 before declining somewhat to 7.8% by the fourth quarter of 2021.
On.
Slide nine highlights our key underwriting metrics and loan loss allowance breakdown by loan category we have.
We have a strong relationship based credit culture at U.S. bank supported by cash flow based lending that consent considers sensitivities to stress proactive management and portfolio diversification, which allows us to support growth throughout the economic cycle and produces consistent results.
Turning to slide 10 exposures to certain at risk segments and given the current environment.
Our stable compared with the second quarter. The top left table shows that the volume of payment relief has declined meaningfully meaningfully since the second quarter, new requests have reached a steady state since peaking in April.
Slide 11 provides an earnings summary.
The third quarter of 2020, we earned 99 cents per diluted share.
Turning to slide 12, net interest income on a fully taxable equivalent basis of $3.3 billion was up 0.9% compared with the second quarter as a five basis point increase in our net interest margin offset the impact of a decrease in loan volume.
The increase in the net interest margin was driven by lower cash balances, we expect cash balances to increase in the fourth quarter, primarily due to the recent acquisition of the deposits from state farm.
Slide 13 highlights trends in noninterest income strength in mortgage banking and commercial product revenue drove the year over year increase while linked quarter growth reflected higher payments revenue and deposit service charges as consumers spend activity continued to recover from second quarter lows.
Slide 14 provides information about our payment services business lines, including exposures to the impacted industries.
Year over year payments revenue was pressured by reduced consumer spend compared with pre coated levels. However, consumer sales trends improved throughout the quarter as state and local economies continue to improve and.
And spend activity increased.
In the third quarter credit and debit card revenue benefited from the processing of state unemployment distribution programs that utilize our prepaid cards. We expect this activity to moderate in the fourth quarter over the long term payments revenues are closely tied to spend activity and the resultant sales volume trends.
Turning to slide 15, noninterest expenses increased 7.2% on a year over year basis, driven by higher costs related to the pre card business.
COVID-19 related expenses and higher revenue related costs from mortgage and capital markets production.
On a linked quarter basis noninterest expense increased 1.6%.
Relative to our expectations, we saw an increase in medical claims expenses as employees, we gained access to medical services. Following the stay at home orders.
And higher revenue related costs tied to the mortgage and capital markets activities, and most notably higher prepaid card processing activities.
Slide 16 highlights our capital position, our common equity tier one capital ratio at September Thirtyth was 9.4%.
I will now provide some forward looking guidance.
For the fourth quarter of 2020, we expect fully taxable equivalent net interest income to be flat to down slightly we expect mortgage revenue to decline somewhat compared to the third quarter reflected slower refinancing activity for the industry and seasonality.
Payments revenue is likely to continue to be adversely affected on a year over year basis due to reduced consumer and business spend activity, we expect noninterest expenses to be relatively stable compared to the third quarter.
We expect net charge offs of nonperforming assets to continue to increase from current levels reflective of economic conditions.
Her levels of reserves will depend on a number of factors, including loan production size and mix changes in the outlook of credit for credit quality, reflecting both economic conditions and portfolio performance and any beneficial offset from government stimulus. We will continue to assess the adequacy of the allowance for losses as credit conditions.
Change for the.
For the full year of 2020, we expect taxable equivalent our taxable equivalent tax rate to be approximately 19% I will hand, it back to Andy for closing remarks. Thanks, Gerry the economy is showing signs of recovery, but consumer spending remains below pre cope with levels. The unemployment rate is high by historical sand.
And the outlook remains uncertain.
However, we are well positioned to navigate through a more challenging economic and interest rate environment.
We are well reserved well capitalized and our liquidity position is strong.
Remained remain committed to creating long term value for our shareholders by delivering above average returns on equity through the cycle driven by both superior PPNR results and credit performance.
Our third quarter, earning results for highlights the benefits of our diversified business mix and our credit underwriting discipline.
We are optimistic that we can fit continue to win market share over time across our high return fee businesses, such as mortgage payments and trust and investment services.
We will continue to adjust our strategy is consumer pressure preferences evolve, including adjusting our distribution network.
Alliance, which state farm, which brings our digital banking capabilities together with over 1900 State Farm agents is an example, how we can meaningfully expand our reach in a low cost highly efficient way.
Separately about 18 months ago, we announced the branch transformation initiative aimed at better serving our customers in light of their evolving preferences at that time, we announced that we would close 10% to 15% of our branches by early 2021.
To date, we have closed about 10%.
We now plan to close an additional 15% by early 2021 there.
Great majority of these additional closures were branches that were impacted by COVID-19, and they will remain closed.
While physical branches and personal interactions will always be important we need fewer branches today than we did even a few years ago and the branches of the future need to the board advice centres and locations where transactions take place.
I'll conclude on slide 17.
Our culture has always been a key differentiator view of the U.S. Bank story, and we remain committed to supporting our customers our communities and our employees in the good times as well as the more challenging times.
While those all of its been important to US today, there is even a greater emphasis on ensuring that we do that and deliberately inclusive way.
I want to thank our employees, who bring our culture to life every day and for all their hard work throughout the year.
We'll now open up the call to QNX.
Your first question is from John Pancari.
Kerry with Evercore ISI.
Good morning Lee.
I mean, John John.
Just on the.
On that comment regarding the branches.
Is that can.
Can you help us think about the cost impact of the step up in the consolidation of the branches is that factored into your expectations on expenses I guess, if you can comment just elaborate on.
How you see expenses Trajecting and this this could impact your efficiency expectations. Thanks.
Yeah, John Great question, and you know when we think about expenses and our goal is especially in this environment to be able to manage expenses relatively flat and.
And it is one of the things that we have kind of consider factored into that process. You know the cost saves associated with the branches.
It will be important part of that we do expect will flow to the bottom line.
And part of it we will continue to use to reinvest in our business, particularly the digital capabilities and kind of as you can imagine the more we're investing in that the grade of the opportunity with respect to future cost savings will come as well, so thats kind of how we're thinking about it.
Okay, and then just one more thing on that front is are you also do you also see opportunities to ratchet up corporate real estate rationalization outside of the branches and could that be incremental savings on top of this.
Yes, so we will look not only at the branches will also look at our corporate real estate one of the things were still.
Still kind of working through is what is the next horizon from a workforce management perspective look like because that will obviously impact corporate real estate, but I do think that there's opportunity for us to be able to consolidate as we think about 2021.
Okay. Thanks, Terry and then just one more thing on the revenue side I know that your fees definitely came in better this quarter helped by the card and processing fees and just wanted to get your thoughts on your payments.
Revenues given.
Just where do you see him in consumer and corporate payments trajecting through over the next several months I know you commented on the prepaid card expectation, but wanted to get your thoughts more broadly on the payments trajectory here. Yeah. So one thing I would say is that since the second quarter. We've continued to see improvement in cuts.
Tumor and business spend which is good across all those different areas.
And if you end up looking at the one slide you'll see that excluding the airline travel entertainment.
The sales consumer spend is actually come back very nicely. So I think that on a go forward basis, the impacts will be really some of those at risk industries for some period of time.
Ultimately the trajectory of growth in the payments business will be tied to that consumer business spend overall, there will be a little bit of lumpiness.
Third quarter for example, with respect to the prepaid card, which is really driven by the stimulus programs.
See us stimulus program in on the for the first quarter, you know that might give us a little bit left but it's not something that we're contemplating at this point in time.
I would just add this is Andy John that as Terry mentioned, we see continued improvement across all three categories merchant acquiring credit.
Credit card issuing as well as the corporate payment system. The trough for all those were occurred in April.
And each and every month. Since then there has been slight improvement in spend across all those categories.
Got it okay, great. Thanks, Andy Thanks, Terry.
Yep.
Your next question.
Is from Bill Carr cash with Wolfe research.
Thanks, Good morning.
Hi, good morning, avian Terry it sounds like you guys have the unemployment rate rising from here or is that just conservatism or is there something else that you guys are seeing if you could just give a little bit of color.
Yes.
I don't think I don't think its anything specific to that we're seeing I do think though that may be our expectation that if you think about corporate America, you know you're starting to see some reductions in force whether it's in the airline industry and some of the entertainment industry. As you know I think that because of the stimulus programs that have existed some of those.
Companies have deferred.
Taking some of those actions our expectation as we think about the fourth quarter or is some of those actions are going to impact the unemployment levels.
Before they start to come back down.
Understood.
And I guess so separate question is how would you characterize your gearing to the short end versus the long end of the curve.
If there is any sensitivities that you could give that would be great.
Oh, we are I'm, sorry interest rate sensitivity chart, along yeah. So maybe just stepping back.
Stepping back our balance sheet is about 50% floaty, 50% fixed we'll continue to see a little bit of churn on the fixed side for some period of time.
The we're always looking for opportunities to be able to reinvest in the investment portfolio with a little bit more duration.
And we will kind of continue to manage that our our asset liability position a wide and so we're asset sensitive and that widened in the first quarter quite a bit.
And since then it's been relatively stable and we will continue to kind of manage that way for some period of time.
When we bring on the deposits as an example will hold.
Hold that generally on the short end.
The increase in liquidity levels, because I think that.
Future opportunity in terms of rate increases.
A better trade off and investing it immediately today.
Got it thanks.
Thanks Jerry.
If I could squeeze in one last one some of your competitors have hedging programs in place that have served as a source of support further net interest margins, but you guys have been benefited materially from edges.
I guess as hedges begin to roll off that.
That should benefit you guys relative to others, because you will just have to.
To deal with those future headway.
Those future headwinds is that by design or I guess, just wondering if there's any color that you can give around hedging strategy and positioning.
Yeah.
Historically, we typically you just use the balance sheet as a way of kind of hedging or setting up our asset liability position. So we utilize for example duration and composition of our investment portfolio in order to do that so we don't do a lot of.
Active hedging I will tell you, though we did do some hedging.
Middle of last year, and when rates came down nicely, we were able to lock in the gains associated with it which I think will help a bit but it's not it's not a major part of our program.
Understood. Thank you for taking my questions. Thanks.
Thanks, Bill Thank you.
Your next question comes from Gerard Cassidy from RBC.
Hey, Gerard good morning morning, Andy Good morning, Terry and good morning, Andy.
Can can you guys give us some additional color I mean as you pointed out in the call that you took some charge offs in commercial and commercial real estate in the cold good related sectors can you give us some color of what you're seeing in terms of the write downs that are required to move through goods.
Period of time with these types of sectors.
Hey, good morning, Gerard this is mark runkle.
Answer that question first off I would just start off by saying our credit quality is performing in line with our expectations at this point and as you know we have a couple of guiding principles and how we think about managing credit. The first thing is that we stay very consistent in our underwriting throughout the cycle number two is we were very proactive at identifying and working through.
Problem credits when they arise and so what I would say is the result of that is and you will have seen this as our criticized commitments did increase early in the downturn in this particular cycle and so as we think of our charge offs the level of charge offs at least this quarter did increase as a result of that so it's really a timing issue.
And in the end, we think we're going to continue to have very superior credit quality performance throughout the economic cycle and I know Mark we've been very actively managing that portfolio of the at risk industries in order to bring that exposure down that's right. That's a driver behind the net charge off levels back right.
And within these portfolios any month using the.
12 properties tend to be gone when do you were actually seeing in terms of you know on a individual credit basins are you seeing 10 or 15% write downs the ones that do not doing so.
Yeah, I think I mean, that's exactly the range that we're currently seeing in on those properties and it's really property specific so it does vary greatly but those that are the most distressed are in that kind of range that you talked about.
Okay, and then just as my follow up some of the bigger.
Universal moments and take gains.
Skus that consumer net charge offs, the close of the support from moving in school programs and other types of programs need to be pushed out into the second half of 2021, So it's not necessarily a moving on Macy's the timing I mean do you guys have any color on that.
GGR side.
I mean that you are seeing in terms of the potential for charge offs.
I would I would echo those comments to our this is Andy we did credit.
Credit stats for the consumer portfolio are really good right now and indicators that delinquencies. All those facts are more positive than you would expect given the economic environment that were in part of that certainly is due to the stimulus plans the unemployment benefits all those things, which is creating a bit of a bridge I do expect that at some point in 2010.
And we'll start to see an acceleration.
Credit deterioration in the consumer portfolios once that when once those benefits start to wear down.
Great. Thank you.
You bet.
Your next question comes from Erica none.
Jarring.
From Bank of America.
Good morning.
Good morning America.
I'm wondering and Evan.
Big incremental announcement on identifying another 15% of your branches that you all take offline and I'm wondering if you could help quantify the cost savings that you expect to add.
Derive from those closures and the timing of when that starts impacting your run rate positively.
Yeah.
We end up when we end up looking at the potential savings associated with those branches.
Kind of in that $150 million range plus or minus.
We do expect to see that that impact will really start to hit our run rate.
Even in the first quarter, but again just as a reminder, a you know some of that will come through in terms of expense opportunity or benefit in some of its going to get reinvested in digital capabilities, which.
We'll also.
We will also have an impact in terms of expenses.
Eric I want to reiterate a point I made in my prepared remarks, which is that.
If you think about the additional 15%.
Great Great majority around 75% or so those branches already have been closed as a result of coal that during this period. So what they really are resulting in a permanent closure and again all of this reflects changes in customer behaviors and activities.
We saw an acceleration of digital try.
Transactions and sales you saw the sales numbers on lending activity and that only accelerated during the cold.
Period, and that's the result is what we're doing and again about 75% of those have already been closed for the last few months.
Got it thank you and as a follow up to that that outside perhaps of those potential savings here you have been pretty good at calling out covance related expenses I guess it was 49 this quarter or 79 last quarter and as we think about your statement in terms of running expenses flat shall we say.
Think about those expenses dropping off in the 2021 run rate or are those expenses related to cultivate all going to be reinvested elsewhere in 2021.
Well, it's a little bit of both so when we think about 2021, we do expect that some of those corporate related expenses will continue at least into the early part of the year and tell you know the kind of return to work environment starts to settle in.
And then savings associated with that again part of it will accrue to the bottom line and part of it will be a part of our reinvestment in our business as we think about going forward.
Got it and just one more follow up question.
You know.
Clearly a strong quarter I think we continue to get pushback from portfolio managers in terms of owning bank due to the interest rate outlook and as we think about your outlook for the fourth quarter, and then I I flat to down slightly.
Are you confident that without any further changes in the rate outlook that we'll see the bottom and net interest income in the fourth quarter and then anything from here, whether it's higher inflation, the better growth our yield the yield curve free steepening would be an opportunity.
Yeah, I think it's a little hard to call exactly when net interest income kind of hit the trough I mean part of it I mean, there's just so many different puts and takes in terms of loan demand and.
Where interest rates kind of go from here you know what the impact of premium amortization is there's just a lot of puts and takes so I think it's a little bit early for us to to the safe.
So say for example, it's a in 2020.
Got it thank you.
Hi, Erika.
Your next question comes from Vic.
Juneja with.
JP Morgan.
Hi, Andy Hi, Terry warnings that back.
Morning, So.
So first im going to make just a.
Quest.
Especially since you're on the call and basis I know this wouldn't happen without you I know you guys just put out.
Stuff earnings calls dates for Twentytwenty, one two of them overlap I think exactly the same starting time as another major bank. So I'm, hoping that you can give jeff.
Jan and team the authorization to do some things so that we all don't choose between which one to listen to US is trying to listen to two is never going to work. So since it's one dozen April and one's in October and at six and 12 months away I'm, hoping between the two banks shell can find the time when I can follow up with Janis to which those two.
Yeah.
So thats just yet.
No it does today [laughter].
You know what we keep trying.
[laughter].
So and I've been told by IR, If I don't ask the question the call if I kind of get the onset of my questions. So Terry.
Little bit of color you know the hotel exposure can you give us some sense of the mix type of hotels or urban versus small town.
Upscale don't budget.
Budget and any color on that and.
And also the percentage.
Often criticized Neil cole with related exposures.
That's perfect question for Mark maybe I'll start with the with the lodging exposure I'd say, we have a great diversification by geography.
And property types. So you know it's.
Mix between urban and suburban so we've got great distribution, there and then.
So we feel really good with where that side in terms of the criticized commitments for those and packed it industries will have to follow up and get to that offline.
Okay.
That's great and then.
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Hi, Mark.
Im going to follow up on.
A comment that I think Terry made and Ceos to rise further, but Andy you said consumer charge offs to come on next year.
Terry's comment was NCS rise further in fourth quarter is that therefore still to come and commercial and which categories are you expecting that any color on that.
I think as Andy noted that the consumer side continues to be very strong and our delinquencies where they ended the ended the quarter. We're in a really good spot. So we think.
That will continue to hold true through the remainder of this year I think we're continuing to work through some of those are impacted in the.
Impacted industries on the commercial and commercial real estate side really in the commercial real estate side, it's going to be more in the malls as well as our lodging exposure that will continue to work through the remainder of this year.
To that the deck is mark and team being very active in terms of reducing our exposure, where we think the highest risk categories are so we're just we've talked about in the past we try to be very proactive around this and managing our exposure is down you know in a very early fashion.
Okay great. Thank.
Thanks, Sandy Terri Mark.
Thanks for that.
Your next question comes from Peter Winter with Wedbush Securities.
Good morning here.
Winning.
I'm, just curious with with the outlook for the unemployment rate to move higher would that suggest that there could be some additional reserve building.
In the fourth quarter.
No Peter.
Peter No that was something that was has been a part of our outlook for [noise]. When we were looking at the analysis in the second quarter and so you know we don't think that that would have any impact on seasonal in fact.
At this particular point in time based upon what we know we.
We wouldn't expect any additional reserve build.
Okay.
And then Andy.
I look at the capital ratios and the reserve levels, which are farms are very strong.
If the fed were to lift that restriction on share buybacks.
Keep it to the fourth quarter can you just talk about your view on buying back stock I'm seeing no more fat restrictions.
If we have capacity, we'll do that Peter you know, we're all the big large banks are going through the sheet CCAR Resubmission process right now I think that'll one form a lot of us in terms of the fats Directionally to 2021, so thats where were looking at.
Okay.
Thanks, you bet.
Your next question.
Comes from Christopher Spar with Wells Fargo Securities.
My question good morning.
How are you good morning so.
So regarding the payments growth this past quarter, how much do you think that's kind of green shoots and how much of that was kind of.
Temporary from this saying from the stimulus.
And what do you what do you think it's going to trend into the fourth quarter.
Yes, I am certainly certainly when you think about the third quarter I think the trajectory is helped because of the stimulus program.
You know and I think that's the reason why you saw such a strong.
Strong kind of recovery from the second quarter. So I clearly, it's being impacted when you think about the the fourth quarter.
You know the I think the the increases sales levels will be more commensurate with what we have seen kind of pre colvin.
You know just in terms of the what I would call the excluding the airline travel and entertainment. So on a year over year basis, clearly, it's still going to be down because of those at risk.
Industries, and the impact that that that consumer spend has had on that but.
Regarding kind of the core or other spend level. It's a it's recovered very nicely.
Okay, and then as a follow up.
Andy you've talked about your digital opportunities for the merchant processing and B to B and then your metrics that you give are mostly consumer oriented. It can you give some additional color on what you think could be like how the your commercial customers change their behavior and what do you think are going to be the revenue and expense benefits say in 2021.
Yes, Chris you're still you know I think the consumer probably is a little bit ahead of the corporate commercial in terms of migration to digital activities part of it is because many of them are already there and some of the new rates that are being built will impact that on a go forward basis. So that continues to remain.
Huge opportunity probably more into 2021, as we think about the platform around merchant processing business banking Treasury management corporate payments, all coming together to serve our corporate commercial and business customers. So that that's probably a little bit more on a 2021 event and we will continue to report on that for you. So you can we can.
Report our progress.
Thank you you bet.
Your next question comes from Scott Siefers with Piper Sandler.
Scott Good morning, Good morning, guys. Thanks for taking the question turn just as sort of a quick question on your thoughts on liquidity deployment, everybody is sort of.
I guess I'm struggling with this high class problem of excess deposits, just curious about how you're thinking about willingness or appetite to deploy some of that just given the challenging interest rate environment. So just very top level question yeah.
Yeah ill again, when you end up looking at kind of the investment alternatives that are out there.
I hate to kind of lock into low rates over a long period of time that you know so as a result, I think you're going to see not only for us, but in the industry liquidity levels being fairly high.
And in a waiting for the longer end of the curve to kind of come up a bit.
That said you know in the investment portfolio will look for opportunities to extend duration.
To some extent in to make some investments a little bit further out on the curve in order to be able to deploy it well.
We feel like in all the liquidity levels that we that we have today.
Pretty good.
Taking into consideration the incremental $10 billion that'll come in which will keep us pretty much on the short end.
Okay perfect. Thank you and then maybe on on the other side of the balance sheet you can see through the ha data and then all the numbers that are coming out I mean, everybody is kind of struggling with this evaporation of of loan demand just curious at a high level. What signs you guys are looking to or what what sort of mile markers. There are.
As to when that would would begin to reverse so I guess the answer its could be whether its vaccine election, a more certainty who knows but just curious given how much of the country you guys see what's your thinking.
One of the greatest impacts in the third quarter was the bond issuance. So if you think about the decline in corporate commercial about 40% of that was from companies take advantage of the low interest rate environment in issuing debt and about 60% was related to the company's just reducing their their balance sheet because.
They're they're they're seeing strong earnings are seeing high productivity. So those two factors.
The debt issuance will really be a function of the interest rate environment in the yield curve going forward and I would expect that to moderate because there was so much activity in the third quarter.
Okay perfect. Thank you guys very much I appreciate it you bet. Thanks Scott.
Your next question comes from David Smith with autonomous.
Hi, David Good morning.
Good morning.
First off you said that you expected the non teeny card spend to have the gross recovered to around where it was pre codes, but just in terms of the mix. There are you still expecting a bigger mix in debit than was the case pre coated.
I'm sorry, the second part of your question was.
In terms of the mix in the consumer card spend between debit and credit are you still expecting.
The the good mix of debit versus credit or to be more weighted towards that in the near term.
Yes, I do I think that people again are being fairly cautious until they are utilizing the debit card because they can more effectively manage their liquidity. So when they have cash balances and their savings account and as you know you know savings levels are a fairly high still on the consumer side I think they are using their debit card a little bit.
More than what they have in the past and so you know throughout the entire.
Timeframe, you know debit card sales have actually strengthened.
During that timeframe compared to a credit card. So I do think that mix will change continue to change a little bit.
Yes.
And then on the branch closures it sounds like the gross savings there will be around 150 million, but.
Are you expecting any any onetime costs from stepping up the branch consolidation and help us get any sense of the timing and magnitude we might expect there.
Yeah. So in the third quarter, we did take a charge associated with the closure of the branches and is included in other revenue because it's principally related to asset impairments.
Offsetting that though are some equity investment gains that if you end up looking at those two things on a net basis.
Were essentially neutral to the to the fee income and the bottom line.
Great. So you're not expecting any no three we don't expect any but we don't expect any further we don't expect any further.
Great. Thank you.
There are no further questions at this time.
Okay, everyone. Thank you for listening to our earnings call and please call the Investor Relations Department. If you have any follow up questions.
Okay.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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