Q4 2022 Wells Fargo & Co Earnings Call
Welcome and thank you for joining the Wells Fargo fourth quarter 2022 earnings Conference call.
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After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question during this time simply press star one.
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Please note that today's call is being recorded.
I would now like to turn the call over to John Campbell Director of Investor Relations. Sir you may begin the conference.
Thank you. Good morning, Thank you for joining our call today, where our CEO , Charlie Scharf and our CFO Mike <unk>.
Dale will discuss fourth quarter results and answer your question.
Call is being recorded.
Before we get started I would like to remind you that our fourth quarter earnings materials, including our release financial supplement and presentation deck are available on our website at Wells Fargo Dot com.
I'd also like to caution you that we may make forward looking statements during today's call that are subject to risks and uncertainties.
Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the form 8-K filed today containing our earnings materials.
Information about any non-GAAP financial measures referenced including a reconciliation of those measures to GAAP measures can also be found in our SEC filings and earnings materials are available on our website.
I will now turn the call over to Charlie.
Thanks, John I'll make some brief comments about our fourth quarter results and then update you on our priorities I'll, then turn the call over to Mike to review fourth quarter results in more detail and some of our expectations for 2023 before we take your questions. Let me start with fourth quarter highlights our results were significantly impacted.
By previously disclosed operating losses, but our underlying performance reflected the continued progress we're making to improve returns.
Rising interest rates drove strong net interest income growth our continued progress in our efficiency initiatives helped to drive expenses lower excluding operating losses.
Loans grew in both our commercial and consumer portfolios and charge offs have continued to increase our credit quality remains strong our capital levels also remained very strong and our CET one ratio increased to 10, 6% well above our required minimums plus buffers.
We also continued to make progress on putting legacy issues behind us our broad reaching agreement with the CFPB in December is an important step forward that helps us resolved multiple matters the majority of which have been outstanding for several years.
Over the past three years, we've made significant changes in the business as referenced in the settlement and many of the required actions were already substantially complete prior to this announcement.
While our risk and regulatory work Hasnt always follow the straight line and we have more to do we've made significant progress and we will continue to prioritize our work here in.
In addition to our risk and regulatory work. Its also critical for us to continue to invest in the future as we build off the great market positions. We have we are confident our processes will enable us to continue to prioritize our risk and control work at the same time, we invest in our future.
And as I look back at 22, I'm enthusiastic about the progress we've made this past year and feel even better about the opportunities ahead, let me start with the changes we've made during the year to help millions of customers avoid overdraft fees and beach short term cash needs.
These efforts included the elimination of non sufficient funds fees and transfer fees for customers enrolled in overdraft protection.
Early payday, making eligible direct deposits available up to two days early.
Extra day, Grace, giving eligible customers an extra business day to make deposits to avoid overdraft fees and in the fourth quarter, we launched flex loan the new digital only small dollar loan that provides eligible customers convenient and affordable access to funds teams from across the company came together to rollout.
New product in record time, the rollout has been smooth and though its still early customer response is exceeding our expectations.
These actions build on services, we've introduced over the past several years, including clear access banking our account with no overdraft fees. We now have over $1 7 million of those accounts up 48% from a year ago.
We continue to transform the way we serve our customers by offering innovative products and solutions. We couldnt, we continued to improve our credit card offerings, including launching two new cards Wells Fargo autograph and built our new products helped drive a 31% increase in new credit card accounts in 2022, while we continued to me.
<unk> strong credit profiles, we launched wells Fargo premiere, our new offering dedicated to the financial needs of affluent clients by REIT by bringing together our branch based and wealth based businesses to provide a more comprehensive relevant integrated offering for our clients.
We continued to enhance partnership within our commercial business to bring corporate investment banking products, such as foreign exchange and M&A advisory services to our middle market clients.
Our different approach to technology is helping us better serve our consumer and corporate clients.
We rolled out our new mobile app with a simpler more intuitive user experience, which is improved customer satisfaction in 2022 mobile active customers grew 4% from a year ago, we launched intuitive investor make it easier for customers to invest with a streamlined account opening process and a lower minimum investment.
And total active intuitive investor counts increased 56% from a year ago.
We completed the development of Fargo, our new AI powered virtual assistant that provides a more personalized convenient and simple banking experience, which is currently live for eligible employees and set to begin rolling out to customers. Early this year last month, we announced vintage a new enhanced digital experience for our.
Commercial and corporate clients vantage uses AI and machine learning to provide a tailored and intuitive platform based on our clients' specific needs.
Over the past year, our industry, leading API platform team continued the development of payment Apis for commercial and corporate clients invested in solutions to support our financial institution clients ramps up and group product offerings consumer lending and began developing commercial lending solutions, we are investing heavily in modernizing the it.
Infrastructure in the way, we develop code, we're implementing a cloud native operating model that allows us to innovate faster we will.
Also been investing in modern and modernization in the areas of payments and corporate lending taking out legacy applications and digitizing processes end to end. These.
These enhanced digital capabilities are just the start of the initiatives, we have planned as part of our multiyear digital transformation.
We also continue to evaluate our existing businesses as we announced earlier. This week, we plan to create a more focused home lending business aimed at serving primarily bank customers as well as individuals and families and minority communities. This includes exiting the correspondent business and reducing the.
The size of our servicing portfolio I've been saying for some time that the mortgage business has changed dramatically since the financial crisis and we've been adjusting our strategy. Accordingly, we're focused on our customers' profitability returns and serving minority communities not volume or market share. The mortgage product is important to our customer base in the community.
These we serve so remain important to us, but we do not need to be one of the biggest originators or services servicers in the industry to do this effectively across all of our businesses, we must evolve as the market regulation and competition has evolved.
It may seem counterintuitive, we believe the decision to reduce risk in the mortgage business by reducing size.
And narrowing our focus.
While actual this will actually enable us to serve customers better and will also improve our returns in the long term.
Changing gears now I am proud of all we did last year to make progress on our environmental social and governance work. We are balanced in our approach to these issues and believe that thinking broadly about our stakeholders will enhance returns to shareholders and we provide many examples on slide two of our presentation. So let me just highlight two examples here.
We published our first diversity equity and inclusion report, which highlights the progress that we've made on our <unk> initiatives will continue to make progress and our commitment to integrating <unk> into every aspect of the company under the new leadership of Kirstie FERC.
Who joined Wells Fargo in 2020 to lead our home lending business and was named the company's new head of diverse segments representation that inclusion in the fourth quarter.
We've commissioned an external third party racial equity audits and we plan to publish the results of the assessment by the end of this year.
2022 was a turning point in the economic cycle as the Federal Reserve has made clear that reducing inflation is its priority and it will and it will continue to take actions necessary to achieve its goal.
We are starting to see the impact on consumer spend credit housing and demands for goods and services, but at this point the impact to consumers and businesses has been manageable.
And though there will certainly be some industries and segments of consumers that are more impacted than others. The rate impact we see in our customer base is not materially I'm sorry, the rate of impacts we see in our customer base is not materially accelerated this plus the strength with which consumers and businesses.
Went into this slowing economy is a helpful set of facts as we look forward.
Our customers have remained resilient with deposit balances consumer spending and credit quality still stronger than pre pandemic levels. As we look forward, we're carefully watching the impact of higher rates of our customers and expect to see deposit balances and credit quality continued to return towards pre pandemic levels, while we are not.
Predicting a severe downturn, we must be prepared for one and we are strong stronger company today than one and two years ago. Our margins are wider our returns are higher they are better managed and our capital position is strong. So we feel prepared for a downside scenario, if we see broader deterioration than we currently.
<unk> C or predict.
We still have clear opportunities to improve our performance as we make progress on our efficiency initiatives and continue to make the investments necessary to grow the business through technology and product enhancements two years ago, we shared a path to a higher rotc's by.
By returning capital to our shareholders and executing on our efficiency initiatives.
While high levels of operating losses in the second half of 'twenty two impacted our results on our.
Our underlying business performance demonstrated our ability to improve our returns in a moment, Mike will highlight the key drivers of our path to a 15% ROE TCE, which we believe is achievable based on the strength of our business model and our ability to execute.
While we are focused on improving our returns making progress on building the appropriate risk and control infrastructure for a company of our size and complexity will remain our top priority and we will dedicate the time and resources necessary I want to conclude by thanking our employees across the company. We're working hard each day to continue to make.
Progress in our transformation I am excited about all of that we will accomplish in the year ahead, I'll now turn the call over to Mike.
Thank you Charlie and good morning, everyone slides, two and three summarize how we helped our customers communities employees last year. So it's Charlie covered.
Start with our fourth quarter financial results on slide four.
Net income for the fourth quarter was $2 9 billion or <unk> 67 per diluted common share our fourth quarter results included $3 3 billion or <unk> 70 per share of operating losses, primarily related to a variety of previously disclosed historical matters, including litigation regulatory and customer remediation.
<unk>.
$1 billion of impairment of equity securities or $749 million. After noncontrolling interests predominantly in our affiliated venture capital business, primarily driven by portfolio companies in the enterprise software sector.
Both slowing revenue growth rates and lower public market valuations of enterprise software companies impact the valuations.
It's important to note that even after recognizing this impairment the current value of these investments at the end of 2022 remains above the amount of the initial investment.
$353 million of severance expense, primarily in home lending, while we've reduced head count in this business throughout 2022. This charge includes the actions we plan to take in 2023 related to the mortgage announcement, we made earlier this week.
These reductions were partially offset by $510 million of discreet tax benefits related to interest on overpayments in prior years.
We highlight capital on slide five.
Our CET one ratio was 10, 6% up approximately 30 basis points from the third quarter, reflecting the benefit from our fourth quarter earnings the annual share issuance for our Orland K plan matching contributions and an increase from OCI.
Our CET one ratio remained well above our required regulatory minimums, plus buffers, which increased by 10 basis points to nine 2% at the start of the fourth quarter as our new stress capital buffer took effect as a reminder, our G. SIB surcharge will not increase in 2023.
While we have not repurchased any common stock since the first quarter of 2022, we currently expect to resume share repurchases in the first quarter of this year.
Turning to credit quality on slide seven credit performance remains strong with 23 basis points of net charge offs in the fourth quarter. However, as expected losses are slowly increasing from historical lows and we expect them to continue to return towards pre pandemic levels over time as the federal reserve continues to take action.
To combat inflation.
Credit performance remained strong across our commercial businesses with only six basis points of net charge offs in the fourth quarter.
Total consumer net charge offs increased $88 million from the third quarter to 48 basis points of average loans driven by an increase in net charge offs in the credit card portfolio, but remained slightly below consumer net charge off levels in the fourth quarter of 2019.
Nonperforming assets increased 1% from the third quarter as lower residential mortgage non accrual loans were more than offset by higher commercial real estate portfolio loans.
Our allowance for credit losses increased $397 million in the fourth quarter, primarily reflecting loan growth as well as the less favorable economic environment.
We are closely monitoring our portfolio for potential risks and are continuing to take some targeted actions to further tightened underwriting standards.
Let me highlight trends in two of our portfolios.
The size of our auto portfolio has declined for three consecutive quarters and balances were down 5% at the end of 2022 compared to year end 2021.
Meanwhile, originations were down 47% in the fourth quarter compared to a year ago, which reflected credit tightening actions and continued price competition due to rising interest rates.
Of note, our new vehicle originations surpassed used vehicles in the fourth quarter, reflecting a combination of credit tightening actions that we've implemented in an industry dynamic of higher new vehicle sales growth.
Turning to the commercial real estate office portfolio.
The office market is showing signs of weakness due to weak demand driving higher vacancy rates and deteriorating operating performance as well as challenging economic and capital market conditions.
While we haven't seen this translates to significant loss content, yet we do expect to see stress overtime and are proactively working with borrowers to manage our exposure and being disciplined in our underwriting standards with all outstanding balances and commitments down compared to a year ago.
On slide eight we highlight loans and deposits.
Average loans grew 8% from a year ago, and $3 1 billion from the third quarter.
Period end loans increased for the sixth consecutive quarter with growth across our commercial portfolios and higher consumer loans, driven by credit card and residential loans, partially offset by continued declines in our auto portfolio.
I'll highlight the specific growth drivers when discussing our operating segment results.
Average loan yields increased to 181 basis points from a year ago, and 85 basis points from the third quarter, reflecting the higher rate environment.
Average deposits declined 6% from a year ago, and 2% from the third quarter compared with the third quarter. We saw declines in each of our businesses lower consumer balances reflected customers continuing to reallocate cash into higher yielding alternatives, particularly in wealth and investment management and continued consumer spending.
As expected our average deposit cost increased 32 basis points from the third quarter to 46 basis points driven by higher deposit costs across all operating segments in response to rising interest rates.
Average deposit costs were up 44 basis points since the fourth quarter of 2021, while market rates have increased substantially more during that same time.
As rates continue to rise, we would expect deposit betas to continue to increase in customer migration from lower yielding to higher yielding deposit products to continue.
Turning to net interest income on slide nine.
Fourth quarter net interest income was $13 4 billion, which was 45% higher than a year ago. As we continued to benefit from the impact of higher rates I'll provide details of our 2023 expectations later on the call.
Turning to expenses on slide 10 the.
The increase in noninterest expense from both a year ago and from the third quarter was driven by higher operating losses, excluding operating losses. Other noninterest expense was flat from a year ago as higher severance expense was offset by lower revenue related compensation and continued progress on our efficiency initiatives.
Our operating losses in the fourth quarter included accruals related to December 2020 to CFPB consent order.
As part of this settlement, we agreed to one incremental remediation and one new remediation related to overdraft fees the accrual related to the eastern two remediation was approximately $350 million.
Our operating losses in the fourth quarter also included accruals for other legal actions and reflecting these accruals are.
Our current estimate of the high end of the range of reasonably possible losses in excess of our accrual for legal actions as of December 31, 2022 is approximately $1 4 billion.
This is down approximately $2 3 billion from September 32022.
While we still have outstanding litigation resolved.
This estimate would be the lowest level since the second quarter of 2016, though of course, new matters will rise and existing matters will develop over time the.
The estimate for December 31, 2022 will be updated at the time of our 10-K filing in February and May change.
While we acknowledge the elevated level of operating losses, the past few quarters has been significant.
They are they are important steps in putting historical issues behind us as we've been able to absorb these costs, while increasing our CET one ratio as I highlighted earlier.
Turning to our operating segments, starting with consumer banking and lending on slide 11.
Consumer and small business banking revenue increased 36% from a year ago, driven by the impact of higher interest rates.
Deposit related fees continued to decline as we completed the rollout of the overdraft fee reductions and new product enhancements that we announced early last year to help customers avoid overdraft fees. The majority of the revenue impact of these changes was reflected in the fourth quarter run rate.
We continue to focus our branch rationalization as digital adoption and usage among our customers has steadily increased and.
In 2022, we reduced branches by $179 179, and branch staffing levels by 10% and we expect to continue to optimize our branches and staffing levels in response to changing customer needs.
While industry mortgage rates declined in the fourth quarter. They were still up over 330 basis points since the beginning of the year and weekly mortgage applications as measured by the mortgage Bankers Association. We're at a 26 year low at quarter end.
The economic incentive to refinance is extremely limited and refinance applications for the industry were down 87% in December compared to a year ago, reflecting.
Reflecting these market conditions, our own lending revenue declined 57% from a year ago, driven by lower mortgage originations and gain on sale margins as well as lower revenue from the re securitization of loans purchased from securitization pools.
We expect the mortgage origination market will continue to be challenging and gain on sale margins will remain under pressure until excess capacity industry has removed as we announced this week, we will be exiting our correspondent business, which we expect to be substantially complete by the end of the first quarter. We don't expect this action to have a significant impact on our 2023 financial results.
Credit card revenue was up 6% from a year ago due to higher loan balances driven by higher planned sale volume of new product launches.
Auto revenue declined 12% from a year ago, driven by continued loan spread compression from rising rates and credit tightening actions in certain areas as well as lower loan balances.
Personnel lending was up 9% from a year ago due to higher loan balances, partially offset by lower spread compression, while originations grew 19% from a year ago, driven by strong consumer demand and investments in the business. We have remained disciplined in our underwriting.
Turning to some key business drivers on slide 12.
Turning to originations declined 70% from a year ago, and 32% from the third quarter with both declines in correspondent and retail originations.
Refinances as a percentage of total originations where over half of our volume a year ago, but declined to 13% in the fourth quarter of 2022.
I already highlighted the drivers of the decline in auto originations. So turning to debit card spending was up 1% compared to a year ago. All these sensor debit card was flat compared to the 2021 season with lower transaction volume offset by higher average ticket size.
Entertainment was the only category with double digit spending while growth while categories, such as home improvement and general retail goods and fuel were all down compared to 2021.
Credit card spending increased 17% from a year ago, and while the year over year growth rate slowed in the from the third quarter almost all categories continued to have double digit growth.
Average balances were up 22% from a year ago payment rates have started to moderate, but we're still well above pre pandemic levels.
Turning to commercial banking results on slide 13.
Middle market banking revenue increased 78% from a year ago, driven by higher net interest income due to the impact of higher rates and higher loan balances.
Asset based lending and leasing revenue declined 4% from a year ago, driven by lower net gains from equity securities, partially offset by loan growth.
Average loan balances were up 18% in the fourth quarter compared to a year ago, while growth in the first half of 2022 was driven by higher line utilization.
Realization rates stabilized in the second half of the year.
Average loan balances have grown for six consecutive quarters or up 5% in the third quarter with growth in asset based lending leasing driven by continued growth in compliant inventory, which are still below pre pandemic levels.
In middle market banking was driven by larger clients, including both new and existing relationships was more than offset declines from our smaller customers.
Turning to corporate investment banking on slide 14.
Banking revenue increased 22% from a year ago, driven by stronger Treasury management results due to the impact of higher interest rates as well as improved lending results investment banking fees declined from a year ago, reflecting lower market activity with clients across all products and industries.
Commercial real estate revenue grew 16% from a year ago, driven by stronger lending results due to higher balances and the impact of higher interest rates.
Markets revenues increased 17% from a year ago, driven by higher trading revenue in equities rates and commodities foreign exchange.
Municipal products.
Average loans grew 10% from a year ago after growing for seven consecutive quarter average loans declined from the third quarter as utilization rates stabilized across most portfolios.
On slide 15 wealth and investment management revenue was up 1% compared to a year ago as the increase in net interest income driven by the impact of higher rates was partially offset by lower asset based fees due to the decrease in market valuations.
The majority of wind advisory assets are priced at the beginning of the quarter. So asset based fees increased slightly in the first quarter, reflecting a higher market valuations at the end of the year.
<unk> decreased 6% from a year ago, driven by lower revenue related compensation and the impact of efficiency initiatives.
Even as loan growth and securities based lending moderated due to demand caused by market volatility and the interest rate environment average loans grew 1% from a year ago.
Slide 15 highlights our corporate results.
<unk> expenses were impacted by the divestitures last year of our corporate Trust business and Wells Fargo asset management.
Hold these businesses in the fourth quarter of 2021, which resulted in a net gain of $943 million.
Revenue also declined from a year ago due to lower results in our affiliated venture capital and private equity businesses, including the impairments equity Securities I highlighted earlier the increase in expenses from a year ago was driven by higher operating losses.
Turning to our expectations for 2023, starting with slide 17, let.
Let me start by highlighting our expectations for net interest income.
We are assuming is.
We are assuming the asset cap will remain in place throughout the year.
Moving from left to right on the waterfall based on the current forward rate curve. We expect our interest income will continue to benefit from the impact of higher rates, even with deposits repricing faster than they did in 2022.
However, this benefit is expected to be partially offset by continued deposit run off a mix shift to higher yielding products with these declines partially offset by modest loan growth.
We also expect a headwind from lower CIB markets net interest income due to higher funding costs. This reduction is expected to be partially offset by an increase in trading gains in noninterest income so the impact to revenues currently expected to be small.
Putting this altogether. We currently expect net interest income to grow by approximately 10% in 2023 versus 2022.
Ultimately the amount of net interest income we earned in 2023 will depend on a variety of factors many of which are uncertain, including the absolute level of interest rates the shape of the yield curve deposit balances mix and pricing in the loan demand.
Turning to our 2023 expense outlook on slide 18.
Following the waterfall from left to right. We reported $57 3 billion in noninterest expense in 2022, which included <unk> 7 billion of operating losses, excluding operating losses expenses would have been 53 billion, which is which was in line with the guidance. We provided at the beginning of last year.
You also exclude operating losses from the guidance.
R.
Our 2022 expenses were impacted by inflation and higher severance expense. However revenue related expenses were lower than expected by market conditions.
So we believe a good starting point for a discussion of 2023 expenses was 53 billion, which excludes operating losses.
We expect expenses in 2023 to increase by approximately $1 billion.
Due to both merit increases, including inflationary pressures and an approximately $250 million increase in FDIC expense related to the previously announced surcharge.
These increases are expected to be partially offset by approximately $100 million of lower revenue related expense, primarily driven by decreases in all lending based on current market levels. We expect revenue related expense in wealth and investment management for 2023 to be similar to 2022.
We've successfully delivered on our commitment of approximately $7 5 billion of gross expense saves over the past two years and through our efficiency initiatives, we expect to realize an additional $3 2 billion of gross expense reductions in 2023.
A piece of this is related to the announcement, we made earlier this week to create a more focused on lending business, but expense savings from reducing our servicing business will take more time to be realized.
We highlighted on the slides the largest opportunities for additional savings this year.
And believe we will have more opportunities beyond 2023.
Look to prior years, the resources needed to address our risk and control our for separate separate from our efficiency initiatives and we will continue to add resources as necessary to complete this important work.
And while we continue to focus on executing our efficiency initiatives. We're also continuing to invest.
And expect approximately $1 7 billion of incremental investments in our businesses in 2023 as Charlie discussed investing in our businesses is critical to our ability to drive growth across the company and better serve our customers, but will also continue to be thoughtful and evaluate the level of investments throughout the year.
So putting this altogether expenses, excluding operating losses are expected to be relatively spots in 2023, compared with 2022, even with inflationary pressures are higher FDIC surcharge increase and incremental investments in our businesses.
At 2022 demonstrated operating losses can be significant and hard to predict and therefore, we have not included them in our expense outlook for 2023. However, we currently anticipate ongoing business related operating losses, such as fraud and other business as usual losses to be approximately $1 3 billion. This year was the same assumption we provided last year.
As previously disclosed we are the outstanding litigation.
Have outstanding with litigation regulatory and customer remediation matters that could impact the amount of operating losses.
It's important to note that while we've made substantial progress executing on our efficiency initiatives, we still have a significant opportunity to get more efficient across the company. This remains a multi year process with the goal of achieving an efficient efficiency ratio along with our peers based on our business mix.
Given how critical continuing to invest to.
Continuing to invest in <unk> story on slide 19, we provide details on our primary areas of focus for 2023.
As we've highlighted to continuing to build the right risk and control infrastructure remains our top priority and we will continue to invest in this important work.
Charlie discussed many of the investments we started to make in digital payments. We plan to continue to invest in these areas. This year to make improvements for both our consumer and commercial customers. We also plan to continue to invest to expand our client coverage and investment banking commercial banking and wealth and investment management.
And to continue to transform our technology platforms, including moving more applications to cloud consolidating our data centers and increasing investments in cyber.
Finally by divesting our operations of branches, we expect not only to improve the customer experience, but also improve efficiency reduce operational risk and driving account growth.
As we show on slide 20 in the fourth quarter, we reported an 8% our OTC.
I highlighted at the start of the call our fourth quarter results were impacted by several notable items, including higher operating losses elevated impairments of equity securities severance and discrete tax benefits as we show on this slide you will if you exclude these notable items our fourth quarter Rotc's wood.
Would've been approximately 16%.
However, we don't believe it's accurate accurately reflects our longer term expectations for the following reasons net interest income was higher than our long term expectations due to interest rates funding balances mix and pricing also net loan charge offs were at historically low levels.
If rates funding balances mix and pricing were closer to our long term expectations and charge offs were higher our OTC would be lower depending on what adjustments you make here, we may all get to a slightly different answer.
So to be clear because the interest rates are higher and credit costs are lower than our long term expectations. We believe we have more work to do to improve our returns.
On slide 21, we highlight our path to higher returns.
Since we first discussed our OTC gold in the earnings call for the fourth quarter of 2020, we have executed a number of important items, we executed a $20 billion of gross common stock repurchases $16 billion. When you net issuances, including our 400 K plan.
We increased our common stock dividend from 10 to 30 per share we delivered approximately $7 5 billion of gross expense saves and.
Reduced head count by 11% since the end of 2020.
So we've made good progress over the past few years on things, we can control and we believe we have a clear line of sight to a sustainable <unk> of approximately 15% in the medium term.
Order to achieve that we need to continue to optimize our capital, including returning capital to shareholders.
We redeployed capital to higher returning products and businesses.
Adding more focus on our home lending business should also be a positive contributor to higher returns. We also have additional opportunities to execute on our efficiency initiatives.
Additionally, we expect to benefit from the investments we were planning in our businesses, which I highlighted earlier, while some of these investments will be dependent on the market environment, we expect them to increase <unk>.
At the same time, we will continue to prioritize building, our risk and control infrastructure and the longer term, we believe that running a company and more control and discipline discipline matter will continue to benefit returns and our goal is for our four operating segments should produce returns comparable to our best peers.
In summary, although the high level of operating losses, we had in the fourth quarter significantly impacted our results. The underlying results in the quarter continue to reflect an improvement in our earnings capacity as we look forward. We expect to continue to grow net interest income and our expense and our expenses excluding operating losses are expected to be relatively flat, even after inflation and global.
Vestments, our businesses to drive growth.
Both of our credit performance and capital levels remained strong in the fourth quarter and we expect to resume share repurchases in the first quarter, we will now take your questions.
Thank you at this time, we will now begin the question and answer session.
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Please standby for our first question.
Our first question of today will come from Ken Houston of Jefferies. Your line is open Sir.
Hi, Good morning, good afternoon, I should say.
Mike just a follow up on the NII outlook for the year. So you obviously had a good high end to the year at at 13, and a half of FTE and just looking at what the guide implies implies.
Stepped down a little bit of a step down from thereafter can you just kind of walk us through just how you expect.
The betas to move through and then like what what doesn't necessarily fall through from here in terms of some of the moving parts. Thanks, Yes.
Yes sure Ken Thanks for thanks for the question.
I'm just kind of walk you through some of the some of the drivers there and then obviously also the timing of when we expect to realize some of those matters as well so.
Look at the key things you look at let's take loan growth. We've got we're expecting kind of low to mid single digit loan growth throughout the year, so not not not super.
Fast pace that sort of moderate pace of loan growth.
We are expecting.
Moderate declines across the deposit base stabilizing later in the year, but some moderate declines as we look over the next few quarters.
And then we would expect the betas to.
Continue to move move up a little from here and then when you when you think about the pacing of it the first half of the year will certainly be higher than.
In the second half of the year, if all of these things.
Play out.
And so you Shouldnt expect a really big step down in the first in first quarter for sure.
And then I think that provides the opportunity potentially in the second half of the year if things.
If we don't see.
That step down in deposits or the betas are a little bit better than than what we expected and then I'd just point out as we even as we looked at the fourth quarter. You know the betas were a little bit better than what we had modeled and so.
We're all in a little bit of uncharted territory here, but I do think that there's some opportunity potentially in the second half of the year as we look at the the.
Forecast, but it will be dependent upon how we.
How we fair over the over the next quarter or two.
Okay got it and second question I heard your commentary about the the one three of op losses, and the fact that the Rps down to weigh down to one four just how do you. How do you kind of help us understand your range of confidence obviously last year op losses ended at $7 billion as you've made progress so.
How wide the range of expectations around your confidence on.
On that level of op loss for the year.
Well I think.
If you look at what we've.
I've said over the last quarter or two.
It's been roughly in the third and fourth quarter $202 50, just be a U op losses that have been.
And just broad that normal stuff that you should expect us to continue so that gives you a sort of a bottom end and then I think the rest of it is it will be a little dependent upon how we work through the rest of the issues that we've got to work through.
For for.
For next year.
But I think as you look at the the Rps going from $3 70 to $1 four.
As those big.
Items have has moved to the more probable and estimable for us we booked them and hopefully that gives you confidence that we're putting some some of the big things behind us but.
But we still have stuff to work through and there'll be.
There'll be more over time Im sure but.
But we've put a lot of big things behind us.
Okay, great. Thanks, Mike.
Thank you. The next question will come from Scott <unk> of Piper Sandler Your line is open.
Hey, guys excuse me. Thank you for taking the question.
I think maybe a question along the same lines. There. So that you know the tone around the regulatory issues, certainly sounds better than like 90 days ago and that reasonably possible losses seems to give better quanta.
Quantitative.
<unk> thinking as well, but what maybe Charlie what are the major touch points sort of on your on your plate right now I know all road ultimately lead to lifting of the asset cap, but maybe would be curious to hear your thoughts on just sort of the biggest biggest things left in your mind.
Yes, well, let me just so.
Listen we.
We still have a series of consent orders of which and I always point. This out the asset cap is a piece of one of them to all roads don't lead to the asset cap. The roads in this respect to lead to US building the proper control environment.
Which will satisfy ultimately all the consent orders.
And I've tried to be clear that we are making progress on that work.
It has a lot to do.
And the.
A tone hasnt changed relative to the confidence in the progress that we're making there so.
We're going to continue doing it and.
Hopefully it's done to the satisfaction of the regulators, but they'll have to.
Decide that and as we.
Continue to check off the to dues on that work to control environment gets better and better.
We've become a better run company that doesn't have those kinds of operating losses that you've all seen in the past.
Okay, Alright, perfect. Thank you and then.
Mike when you talk about resuming share repurchases in the first quarter, maybe you gave us sort of a sense for order of magnitude and maybe just.
And even higher level sort of how you get comfortable repurchasing in the face of what sort.
Still uncertain rules out there.
But I would start with where our CET one ratio as at the end of the year of $10. Six so we're we're well above our current regulatory minimum and the buffers that are included there. So we have plenty of flexibility.
Regardless of any outcome that comes out of.
The new rules that will be proposed and keep in mind that will take some time to come out and get implemented in phase in and so so there is it's not going to happen in a day.
And I think we will go back to what we've been saying the last number of quarters as we think about the buffer that will put on the Reg minimum.
And buffers of $9, two we will be managing somewhere in the 100, plus or minus a little basis point range and and depending on what happens with loan growth and <unk> growth that we see over the quarter.
That will help guide the.
The share repurchases.
Perfect. Okay. Thank you guys very much.
The next question comes from John Mcdonald.
Bonhomous research your line is open.
Hey, Mike I wanted to clarify your answer to Ken about the first quarter NII. I think you said you do not expect a big step down in the first quarter and maybe you could just frame first quarter NII, a little bit for us relative to the 13 four what are some of the headwinds tailwind.
What might you expect at this point.
Yes, no. Thanks, Thanks John .
Well first you have to normalize for a couple less days in the quarter. So that's that's going to be a step down of call. It 150 to 200 million.
Stepped down just there from the bus days and then as you look at it it should be relatively stable to the fourth quarter, but there could be there could be some a little bit of wiggle room in there.
Stable minus including the day count or not.
And you got to take the day count adjust for the day Count and then stabilize after reducing for the day count yes, Okay got it.
And then Charlie maybe a bigger question just kind of where are you on the efficiency journey. When we think about $50 billion of core expense for this year.
And the timeframe for our TCE.
What will it take is there an efficiency ratio, we should keep in mind or is that too hard to forecast, maybe a little bit on that would be helpful.
No. It's a good question I think so first of all I think when.
Nick.
Couple of comments around.
The expense expense guidance, we gave.
Bedded in that expense guidance.
Still continuing to reduce the core expenses of the company, but as you can see on that slide.
We're anticipating that we will spend more money on investments that are around technology digital building out products and things like that that offset that.
To some extent to get to an overall flat expense base.
Mike did say in his comments and I just want to repeat it that.
We're not going to spend this money at all costs, we're going to see how the year continues to pan out.
It's money that we would like to spend we're planning to spend it.
But theres a lot of discretion in the expense base. So.
We think it's prudent as we sit here today to the.
I plan to spend it but we're going to constantly be looking at our performance and make judgments on what that should be.
And so.
As we look at the efficiency of the company we do.
We expect to continue to get.
Efficiency ratio improvement into place and if we don't see revenue growth and if we don't see payoffs from the things that we're doing.
Then we will spend less money.
And so that's the way we're approaching it read theyre going to get.
The efficiency ratio to continue to improve because we're getting real payoff on some things.
Or we will reduce on a net basis.
But overall there is still gross expenses that should come out of the company, which gives us the latitude to continue to grow the investments inside the company.
And the timing to get to 15% listen.
It's a great question.
<unk>.
As we as we've talked about it is.
Medium term, which is obviously not long term or short term.
But I would say.
Without putting a specific timeframe. It is it should be something that we have in our sights as we look out over the future its not its not something thats theoretical it is something that we believe we should get to in just the problem and we're just trying to stay a little bit away from.
Quantifying exactly where we're starting from is because everyone will make their own adjustments.
And it's just I think we're just trying to do is be really clear that we don't want to take credit for the outperformance in NII, we don't want to take credit for the outperformance.
In.
In charge offs and that we still have to continue to drive improved performance each and every year at the company.
Got it thank you.
Thank you. The next question comes from Steven <unk> of Wolfe Research. Your line is open hi.
Good afternoon.
So Charlie I was hoping to ask a follow up to that last line of questioning around expenses.
You indicated that the expense work, it's going to continue beyond 2023, and the one metric that we've been tracking is head count and in terms of the benchmarking analysis that we've done head count is down more than 10% since the 2020 peak or roughly 30000, but it's still elevated versus.
Your money center peers I was hoping you could just speak to what inning you're in currently in terms of optimizing head count and whether as we look beyond 'twenty three whether there is a credible path actually driving investments lower you had talked about balancing investment with the need to drive those efficiency gains I just want to think about the expense trajectory.
Beyond 'twenty three whether further reductions are achievable given some of that inflated that head count style.
Yes.
<unk>.
Listen I think I mean, I think you are.
Your point on head count versus peers is one that we've made.
And so yes, we are all different in terms of the businesses that we're in and what we do.
But we do.
And some in sourcing some outsource some things, but when you look at it we still have.
Higher.
Head count and higher expenses than people, who are more complex than us.
Some of that is explained by the work that we're doing in the expenses in heads that are building out the control infrastructure.
But but there's a lot more beyond that.
That's the work that we're doing to Peel that back piece by piece by piece.
We still have a huge amount of manual processes inside the company.
Duplicate systems.
That is that's the work that we're on so when I say that we still have gross expenses to be reduced in the company.
<unk>.
That's exactly what.
Exactly what we're talking about.
The question is when we get to a net basis, where does that come out as I said before I think.
That's a decision that we want to be able to make at each and every point in time, when we look at what the overall performance of the company is so again I just want to repeat what I said.
We're not we're not going to spend.
Any environment.
At all costs, that's not the way we're thinking about it if we don't see net net improvements in performance of the company.
We've got the ability to ratchet back the.
The discretionary spend so that we do continue to see improved performance of the company what wed like to see is that these things are paying off.
We're seeing real sustainable revenue growth based upon these things and the ability to invest in so.
That's just kind of how thats the framework that we're using to make the decisions and as we get to each point in time and it's not even just an annual decision I mean, Mike and I and the operating committee are going to have these discussions regularly about.
How are things panning out what does it look like.
And how do we feel about our willingness to continue to invest in these things.
We haven't.
It's got to be living and breathing.
No that's helpful color Charley and for my follow up just also as it relates to the discussion around the buyback.
You guys are uniquely positioned in that you arent migrating into a higher G. SIB bucket because of the asset cap youre not going to necessarily see quite as much expansion in terms of balance sheet.
And you've conveyed a high level of confidence around a 15% ROTC, where your stock is trading today at least on price to tangible reflects a pretty healthy degree of scepticism in your ability to get there just given the strength of your capital position why not get a bit more aggressive with the buyback here just recognizing the significant amount of capital you'll generous.
Some of the concerns around Aoc I seem to be abating, but it'd be helpful to get some perspective as to whether you might be willing to step it up meaningfully closer to 100% type payout here.
Well so.
It sounds like Youre, drawing conclusions to the pace at which we said we're going to buy stock back, which I don't think we.
We've actually said what we've said is that we haven't been buying stock back where apps that we anticipate we're going to begin buying it back.
As we think about.
How much we have available net capacity, what Mike said was.
Our CET one went up to 10, 6%.
Our required minimums plus buffers are at nine two.
And we.
It said that we will manage.
100 basis points above the 9% plus or minus so we do have substantial capacity plus the ongoing earnings capacity of the company.
And so that is that's our framework is to target a reasonable CET one ratio if in the future we have to raise the levels of capital because of Basel III in game or whatnot, you've got earnings capacity to be able to do that.
But we do have the flexibility.
And now that we've got resolution.
With CFPB and things like that to be able to go buy stock back.
We will be making that decision based upon our views on the value of the stock and liquidity in the market and things like that but.
As we said, we do anticipate we'll be back in.
As opposed to where we've been.
Okay fair enough more my effort to assess the cadence and the magnitude, but it sounds like you guys are quite comfortable leaning in here. So thanks for taking my questions.
Sure.
Thank you. The next question comes from John Kerry Evercore ISI. Your line is open.
Good afternoon.
I wanted to see if you could just give a little bit more color on the net interest income side, maybe if you can talk a little bit more about the noninterest bearing deposit mix shift that you think could continue here.
It looks like that could be pretty material offset to your interest rate benefit. So just wanted to see if you could perhaps talk about that and then maybe also help quantify the run off that you expect to continue on the deposit side in terms of balances overall.
Yes, John its Mike.
Overall as I said earlier, we do expect some moderate.
Decline in balances in some more mix shift changes as we go throughout the year.
And so you should expect that to continue and it's all the stuff that should be.
Expected as we're in this environment and that's what we're seeing and if you look at each of the businesses.
We're seeing it kind of most of the kind of most acutely happened in the wealth business as people move into cash alternatives.
Out of out of deposits and Thats what.
What's happening in a lot of wealth management businesses. These days as people move that cash around and then across the rest of the consumer business is its part.
People.
Looking for higher yields, but it's also part.
People spending more and so youre seeing some of that decline come down as as overall balances continued to decline.
As the stimulus has worn off and people continue to be out there spending so it's a little bit of a number of drivers there.
And I think as I as I said earlier, you know the as you.
Think about the NII pacing for this year the first half of the year will certainly be higher than the second half of the year given the trends that we expect to happen.
And if those are a little bit better than what were modeling and I think that provide some opportunity as we look at the second half of the year.
Okay, Mike. Thank you that's helpful and then separately.
Gave some pretty good color, obviously around NII expectations now and then.
Also on expenses on the fee side can you, perhaps give us your expectation there around overall growth that you expect in noninterest income and maybe some of the some of the major drivers of where you see growth and as you could possibly size it up.
Perhaps around the investment banking area et cetera that would help thanks.
Yes, sure and so as you break apart fees you know the biggest line item there is the investment.
Advisory fees, and thats going to be somewhat dependent upon where the market goes.
So if we start to see recovery in the equity markets that are more substantial pace that that'll obviously be a big benefit for.
For for that business. When you look at some of the other line items deposit fees as I as I mentioned in my commentary most of the decline that we were expecting to see as a result of the overdraft policy changes and new products that we implemented in the run rate.
You may see some pressure there related to earnings credits in the on the on the commercial side.
But the run rate decline for overdrafts is really in there.
When you think about investment banking fees, that's going to be somewhat market dependent.
We've seen it.
It's too early to know how.
How that's going to shape up in terms of.
The overall industry volume there, but as we as we continue to make the investments in our investment banking business over a longer period of time, we would expect to see some growth there bolt in.
How we go after that opportunity in the commercial bank and middle Middle market space as well as our other large corporate.
Clients, there and so so you know a lot of that is going to be dependent on the market, but we're confident that we're going to be positioning ourselves better and better to take advantage of it.
And then we talked about mortgage mortgage has a small piece of the much smaller piece of the puzzle than it was today. So we don't expect that to be smaller piece today than it was historically, sorry small piece today than it was historically and so.
And that's going to be a pretty challenging market until.
In this rate environment.
So I think I think we were confident in the investments, we're making that will pay off over time, but.
It may take a little time to start to see some of that come through depending on the market dynamics.
Got it alright, thanks, Mike I appreciate the color.
The next question comes from Abraham <unk> of Bank of America. Your line is open.
Hey, good afternoon.
I just had one question I guess.
Charlie in your opening remarks, you mentioned that the impact on customers from higher rates.
I think you implied was not getting worse.
Same convention hates was that the right takeaway.
If so and if the favorable to stop after another hike do you actually see that the impact to your customers may not be as meaningful SBA over the last six to 12 months in.
Patients of data on the credit quality and the credit performance of your book would love to get any perspective, you can share.
Sure.
What I was trying to say in those remarks was.
The impact on rising rates is continuing to impact customers.
On a period over period basis, and we would expect that to continue.
But it's not accelerating it's much more linear than exponential and the fact that it's much more linear.
<unk> is actually a very helpful thing because that gives people thats just thats, a more orderly transition to a slower growth economy and gives consumers a chance.
It shows that there.
That they are adjusting their spending patterns and saving patterns and borrowing patterns.
To adjust for the reality of higher rates.
And on your second question.
We would anticipate.
That we would continue to see deterioration.
In those metrics continue after the fed stops raising rates for a period just because of the amount of time that it takes those things to filter through.
The economy more broadly.
So hopefully that was helpful.
That's helpful and just a quick follow up I think you mentioned earlier around commercial real estate.
Are you seeing any scans there's some.
Discussion around the ability of these loans to get the fight given the move in rates, we've seen over the last year and these tests within the CRE book than anything just in terms of our home state.
A lot of negative headlines there was San Francisco would love to hear your voice.
Spectrum on that Bill.
Oh, Hey, it's Mike I'll try to take that and Charlie can add if he if he needs.
When you look at the and you're really getting at the office I think space more than more than anything there.
There is certainly more stress in the office space and then there was a quarter or two or three quarters ago and I think.
Youre seeing that now it hasnt translated into loss content at this point.
And so we're keeping a careful eye on it and I think it is as you look at where you see it most of it is in.
Older lower class properties and over 80% of our portfolio is in class a space and so we feel like the quality of it.
Pretty good, but we will see we will lease up we will see some stress as we go through here. So far it's been pretty idiosyncratic in terms of individual buildings and individual places.
But we are very watchful on cities like San Francisco like Los Angeles, like Washington, D C, where youre seeing lease rates overall be much lower than other cities across across the country and so certainly those are markets that we're keeping a pretty close eye on and making sure we're being proactive with.
Our borrowers to make sure where were thinking way ahead of any maturities or.
Or extension options that need to get put in place to help manage manage through it.
Got it thank you.
The next question comes from Erika Najarian of UBS. Your line is open.
Hi.
Afternoon, just one more clarification clarification question, if I may on net interest income.
Mike.
Our underlying assumptions to your NII outlook in terms of low to mid single digit loan growth moderate declines and deposit balances in the first half and stabilizing.
Yeah that does this feel very different from what.
It had been.
Assuming to get to 51 5 billion for 'twenty, three which is clearly higher than what's implied by your outlook. So I'm wondering if I could re ask Ken's question, what deposit betas with terminal deposit betas, what range of expectation are you baking into that.
$49 5 billion forecast.
And did you bake a significant amount of conservatism as you think about your NII outlook.
And I'm asking that question because one of your peer.
You said there are 74 billion outlook was not conservative so I think that you know.
Given the outlook versus consensus expectations I did have to re ask that question here.
Yeah, no look its.
Can I just to start for a second Mike actually goes to the fact again I think one of the things that you're hearing from all of US that we're all very consistent on which I know you appreciate but I just want to say it anyway is we don't know what the right path is going to look like from here over the next 11 five months, which is exactly.
<unk>, what youre asking.
And exactly what the competitive environment is going to be month by month.
Versus all of the people we compete with so you are looking at we don't know what the alternatives is going to be in non bank deposits and we don't know what the alternatives are going to be in bank deposits, but we're trying to make those predictions. So I think when we go through all of this we're all just trying to when our own way make sure that there's clarity that we're.
We're all and I'll speak for myself now we're trying to give you.
What we think is achievable and in our case based upon the rate curve that we've laid out in the document.
And it might or might not turn out that way. We're also assuming and I've talked about this at a conference in December .
We are going to continue to raise rates.
In which we.
Our consumers because we're thinking about this not in terms of <unk>.
<unk> short term NII, but thinking about it in terms of the value of the relationship and making sure that we paid properly for that.
So that were.
Continuing to recognize.
How expensive it is to get a new relationship and how profitable it can be to keep an existing relationship.
And so if your views are different towards the end of the year as to what the rate scenario could be.
That's that's fine.
<unk>.
<unk>.
Specifically.
What we've tried to do as we've gotten.
Closer to the periods with which we see as give you some clarity as Mike did on what were the first quarter's a little clearer to us but beyond that.
Is pretty difficult and you know, we're not going to go through.
Every less beta that we're assuming in terms of what those forecasts are.
Yes, the only thing I would add to it is as you as the fed does when the fed does ultimately peak in terms of rising rates you will see a lag on pricing is that we will continue pricing will continue to increase over a quarter or two quarters three quarters really all depends on the on the competitive environment. So youre going to have some lags there, but I am sure I am.
Sure all of us have our own points of view and assumptions underneath those models, but what we're trying to give you as Charlie said as a as a case that we think is achievable through the year and as I said earlier on the call I think.
If we're if we have depending on how it plays out over the first and second quarter, we could have some opportunity in the second half, but but.
But I think it's.
It's unclear exactly how that will play out so we'll obviously keep you updated as it goes.
Okay. Thanks.
Thanks, Eric.
Thank you. The next question is from Betsy <unk> of Morgan Stanley . Your line is open.
Hi, good afternoon.
Hey, Betsy.
I did want to just unpack a couple of things around the correspondent exit and also some follow up questions as it relates to the mortgage business in general there.
I think you mentioned that it's not substantial impact maybe you could help us understand.
You know revenues expenses EPS I made my own assumptions, but again I've got a lot of questions from people on.
<unk>, what's management side, so would like to understand that piece of it and then could you help us.
I understand how you're thinking about the mortgage business. Once you exit correspondent is there any originate.
You know and sell servicing retained left and in any and all or are you staying with this corresponded exit your exit that youll be moving entirely to portfolio ing for yourself and the MSR will wind down over time.
Give us some color around that would be appreciated. Thanks.
So maybe I'll start on the second and then micro circle around to the first.
So, though we even though we are not assuming that we will balance sheet every loan that we underwrite in the future.
Again, what we're just what we're trying to do in the.
And the path that we've laid forward is just make very clear that we're not interested in running.
And having a business, which is focused on a stand alone mortgage product.
We very much appreciate the importance of mortgage.
To the consumer base.
And we're going to continue to stay in the business, but we're going to view it as.
Art of a.
The importance in the broader relationship so that means we'll be originating both conforming and nonconforming mortgages and we will continue to make the decision as to what goes on our balance sheet as we have done in the past.
The fact that we'll be originating a lot less will certainly mean that over time are the MSR.
And the overall servicing book will come down very naturally based upon that over a fairly long period of time.
But we'll also look for intelligent and economic ways to reduce the complexity and the size of our serving servicing book between now and then and if those present themselves.
We will we will certainly be interested in doing that.
And I know, Mike will talk a little bit about this but I think one of the things. We were just trying to say when we think about the size of the impact of exiting the correspondent business immediately is given the fact that mortgage.
Mortgage volumes are so low and revenues are so low the revenue impact of exiting the correspondent business in the short term is not meaningful it is a very small number of people.
So that's not all that meaningful in the short term the real benefit comes over time as we reduce the size of the servicing business, which as we've tried to make the point is it's not just reducing expenses.
But it's not.
Profitable for us today.
And a whole bunch of these segments.
Where we continue to have the servicing and so it becomes a positive over time.
And it's just but but that is.
Not a short term benefit for us, but certainly a medium to longer term one.
Yes, the only thing I'd add is all you lose initially Betsy is the gain on sale on the origination servicing still here.
And that in any given quarter over the last couple of years of low tens of millions of dollars. So it's a really small impact.
The servicing cost is low tens of millions.
The only thing you lose today by exiting correspondent is the gain on sale on the origination of the mortgage.
The low tens of millions is the gain on sale.
Correct, yeah, Okay. So what we're seeing.
The existing portfolio is still here and as part of the broader servicing dialogue.
And is there because one of the follow ups I got was.
Does it impact the scale.
Obviously, it reduces the flow of our existing plant.
So does that matter to how you are.
Yeah I mean.
It's not even close I mean, the amount that we're originating today relative to the scale we have in the business it's immaterial.
And we will and even as we downsized the portfolio on the servicing side.
The whole point of our servicing portfolio can be substantially substantially lower and we will still have scale to be able to originate the product and we would say in a more profitable way than we're doing it today.
And so the remaining mortgage origination channels are 100% retail is that right.
Yes.
Okay.
So you're out of wholesale ear out of correspondent.
Yes, Okay correct alright, thank you.
Okay.
The next question comes from the back to nature.
Morgan Your line is open.
Thanks, Thanks for taking my questions.
Okay.
For you with the CFPB settlement, there was a comment by the head of CFPB about.
Our growth initiatives.
Slowing progress.
Charlie just a question to you is what are you planning to do in regards to that comment in terms of the growth initiatives that you're trying to slow anything any color on that.
I addressed it in my remarks, which is.
We've been very very clear and I think if you look back on every earnings call.
<unk>.
Let alone any time I speak publicly.
We're very consistent in making sure that everyone understands both internally and externally that our number one priority is getting that work done.
That is how we're running the company.
We have very clear processes internally to make sure that that happens.
And we're very confident that that's the case and the things that we are doing to grow the business. We think are actually helpful.
To actually making it a more controlled place.
And we're going to continue to go forward. The same way, we've been going forward being very conscious of making sure things don't get in the way.
Okay. Thanks, a completely different question on in the past you've given some color on deposits.
Amongst different tiers of customers any color any update on where those stand currently and.
Your outlook on that.
It's still it's still very much the same which is that which is kind of intuitive that those who went in with lower balances.
Are the ones, who were living more paycheck to paycheck and they are seeing.
More stress than those.
<unk>.
That have not had that but but but I would say that it's the rate of <unk>.
Change, it's still the same across most of.
The affluent spectrum so.
The trends are still very consistent.
Thanks.
And our final question for today will come from Gerard Cassidy of RBC. Your line is open. Thank you good afternoon Charlie.
Excuse me flip this question from your answers to the servicing in the residential mortgage business are there any lines of businesses that I know you can't go out and make an acquisition of course, but any lines of businesses, you're looking to grow and enhance and beef up maybe through hiring of groups of people to do that strategic increase.
<unk>.
Listen I think when we look at all of the I mean I've said this in the past we look at each of these businesses that we have.
And that can be consumer bank is consumer lending wealth commercial and the corporate investment bank.
With the exception of the home lending business.
And in that and the rest of the consumer lending businesses that lend it's all going to be based upon.
Returns and what we're seeing in terms of market competitiveness.
All of these businesses have the opportunity to continue to grow share.
And when we think about that.
Things that we're doing to invest we are targeting investment banking.
Ads in both coverage and products.
We're focused in commercial banking the build out of both the corporate investment offerings for that customer base, both the corporate investment bank and the commercial bank of opportunities to continue to improve what we do from the Treasury services perspective, and so we see growth opportunities there.
I've talked about the opportunities.
Our wonderful wealth management business.
To bring.
Bring on some more investment teams as we have.
Ah.
Reoriented that business.
And when we wind up looking at the consumer lending side, you've seen growth in the credit card side of the business, which we would expect to continue.
And our consumer bank is we very carefully evolve from.
Fixing the problems that we've had.
Taking advantage of the franchise. So when we talk about we had this page in the deck page 19 in the Investor present.
In the earnings.
<unk> presentation.
We do see multiple places for us to be able to increase.
The rate of growth by just organically, which sometimes involves adding people sometimes it's building technology, sometimes it's just improved execution in.
Are there other things like affluent whatnot that I haven't mentioned, but there were a bunch and they are pretty broad.
Great and then just as a quick follow up.
Mike you guys mentioned that there was a private equity or equity write down in the quarter can you share with us how big that was and then just I know over the years you guys have done very well in this area, but and then second how big is the portfolio what's remaining there.
Sure. It was about $1 billion write down 750 after noncontrolling interest.
And so that's on the first page of the release, if you want to refer back.
It was primarily driven by a some write downs in enterprise software companies and in particular it was really one.
One investment that drove most of it and I would just point out we had a <unk>.
Investment is still a very good investment company is a good investment and we're still holding at well above where we were.
The invested amount is supposed to be collect we're holding it at something like bill.
Little under half a billion, yes, I'll say 10 times, what we invested in it.
But like all soft all enterprise software companies.
The company, it's just the it's the.
The rate of growth over the over the next year or so has come down substantially, but it's still a very high quality company.
And then just more broadly on the venture business, we've done that.
The team has done a great job over very long period of time, and we we still think it's a very good business.
And that was the original question okay.
Okay. Thank you all and we appreciate the time and we'll talk to you next quarter take care everyone Bye bye.
Thank you all for your participation on today's conference call at this time all parties may disconnect.