Q4 2023 Truist Financial Corp Earnings Call
Greetings, ladies and gentlemen.
Welcome to the Truth Financial Corporation fourth quarter 2023 earnings Conference call.
Currently all participants are in listen only mode.
A brief question and answer session will follow the formal presentation.
As a reminder, this event is being recorded.
It is now my pleasure to introduce your host Mr. Brad Millsaps.
Brad Milsaps: Thank you Rocco and good morning, everyone. Welcome to Trust fourth quarter 2023 earnings call with US today are our chairman and CEO Bill Rogers and our CFO, Mike Mcguire. During this morning's call. They will discuss <unk> fourth quarter results share their perspectives on current business conditions and provide an updated outlook for 2020 for park.
Brad Milsaps: Arc Starnes, our vice chair and Chief Risk Officer, Beau Cummins, Our Vice Chair and Chief Operating Officer, Jay Wilson, Chief Consumer and small business banking officer, and John Howard tourists insurance Holdings', Chairman and CEO are also in attendance and available to participate in the Q&A portion of our call.
Brad Milsaps: The accompanying presentation as well as our earnings release and supplemental financial information are available on the truth Investor Relations website, IR Dot truest Dot com.
Brad Milsaps: Our presentation today will include forward looking statements and certain non-GAAP financial measures. Please review these disclosures on slides two and three of the presentation regarding these statements in measures as well as the appendix for appropriate reconciliations to GAAP.
Brad Milsaps: With that I'll turn it over to Bill.
William Henry Rogers: Thanks, Brad and good morning, everybody and thank you for joining our call today.
William Henry Rogers: Before we discuss our fourth quarter results, let's begin with our purpose on slide four.
William Henry Rogers: As you know tourist as a purpose driven company committed to inspiring and building better lives and communities.
William Henry Rogers: To take just a few moments to highlight some of the ways, we demonstrated our progress during 2023.
William Henry Rogers: There are tourists community capital, we committed nearly $2.1 billion to support more than 15000 units of affordable housing.
This helped create more than 15000 jobs and serve more than 130000 people in low and moderate income communities. This year also our teammates impacted 5300 organizations and causes through their charitable giving and more than 62000 hours of volunteer service.
William Henry Rogers: Sure. When you started the small business community Heroes initiative, which empowers our branch teammates alongside our virtual small business specialist leveraging our digital solutions to proactively connect via carrying conversations with small business owners, who tirelessly work to serve our neighbour's create jobs build our communities.
William Henry Rogers: And to help drive our economy. So those are just a few examples of the meaningful work, we're doing as a company to have a positive impact on the lives of our clients our teammates our communities and our shareholders as we work to realize our purpose alright.
Alright, so let's turn to some of the key takeaways on slide six.
William Henry Rogers: First reported solid fourth quarter results.
William Henry Rogers: Adjusted earnings after excluding several discrete items that impacted our results. The largest of these items of course is a $6.1 billion goodwill impairment charge.
William Henry Rogers: Mike's going to provide more details later in our call. But this is the result of our annual impairment test, which we conduct each year as of October one.
William Henry Rogers: So importantly, this charge is noncash and it has no impact on our liquidity regulatory capital ratios the payment of our common dividend or our ability to do business and serve our clients.
William Henry Rogers: On an adjusted basis, we reported net income of $1 $1 billion or any one cents a share which excludes the impact of the impairment charge the industry wide FDIC special assessment.
William Henry Rogers: The discrete tax benefit.
William Henry Rogers: In addition, pretax merger related and restructuring charges of $183 million negatively impacted adjusted EPS by <unk> 10 per share most of the charges were related to our cost saving plan.
William Henry Rogers: Despite these discrete items in the quarter, we're pleased with our underlying results as you can see almost a lot. Our solid performance was defined by several key themes first we made strong progress on our organization simplification plan. During this quarter. Since these initiatives were announced in mid September.
William Henry Rogers: Reduced head count realize significant elements of our organizational structure to improve efficiency and to drive revenue opportunities in 2024 and beyond.
William Henry Rogers: As a result of these efforts and others through 2023, our fourth quarter marks the second consecutive quarter, we've seen our expenses to Claude.
William Henry Rogers: Although the first quarter will experience typical seasonal expense had wells, we're on track and fully committed to delivering on the cost initiatives that we outlined in September which will limit adjusted expense growth to flat to up to 1% in 2024, while also continuing to invest in initiatives for our core clients technology and risk management.
William Henry Rogers: Although asset quality is normalizing off historically low levels, we're encouraged that nonperforming loans declined during the quarter, while we continue to build our loan loss reserve considering the uncertain economic environment.
William Henry Rogers: Consistent with our capital planning strategy, our CET, one ratio increased 20 basis points sequentially to 10.1.
William Henry Rogers: Although we're committed to building capital our balance sheet also remains open the core clients as our primary capital priorities are supporting the financial needs of new and existing clients and the payment of our common dividend.
William Henry Rogers: So before I hand, the call over to Mike to discuss our financial performance in more detail. Let me provide a quick update on our progress we're making on.
Michael Rose: On improving the experience for our clients will do that on slide seven.
Michael Rose: He was contingent to see improve digital engagement trends with strong transaction growth over the last year.
Michael Rose: Mobile App users grew 9% versus the fourth quarter of 2022, which is contributing to increased transaction volumes, which now account for 62% of total bank transactions.
Michael Rose: The chart on the left growth in digital transactions was primarily reflected by increased xeljanz, such as clients continue to value efficient payments and money movement capabilities. A while this will certainly positive. She was still is a meaningful opportunity to shift the transaction mix, even more towards digital specifically by leveraging our T. Three strata.
Michael Rose: G, which is the concept that touch and technology work together to create trust that further enhances the client experience and drives greater digital adoption and efficiency.
Michael Rose: Our goal is to create seamless experiences for our clients by offering more self service capabilities to enhance the overall client experience.
Michael Rose: Tourist assist is a perfect example of this concept since launching in 2022, we've seen increased client adoption with one third of the total interactions represented in the fourth quarter of 2023 law. Additionally, 85% of our conversations were completed using the automated assessment this quarter.
Michael Rose: As we look into 2024, we expect.
Michael Rose: Accelerated adoption of tourist assessed which should lead to additional operator operational efficiencies for us.
Michael Rose: So overall I'm pleased with the digital progress we've made in 2023 and excited about the opportunity to further leverage Q3, and 2024 and beyond that.
Michael Rose: So let me turn it over to Mike to discuss our financial results in a little more detail Mike.
Michael Rose: Great. Thank you Bill and good morning, everyone.
Michael Rose: For the quarter, we reported a GAAP net loss of $5.2 billion or $3 85 per share as Bill noted reported earnings per share were impacted by several items detailed at the top of slide eight those include a noncash goodwill impairment charge of $6 $1 billion of special FDIC assessment of 500.
Michael Rose: $7 million and the discrete tax benefit of $204 million.
Michael Rose: Excluding these three items adjusted net income was $1 $1 billion or 81 cents per share. In addition merger related and restructuring charges, primarily related to severance and branch consolidation associated with our cost saves initiatives negatively impacted EPS by another 10 cents.
Michael Rose: Before providing further details on this quarter's underlying financial performance I do want to provide some additional background on the goodwill impairment charge that occurred during the quarter, we test our goodwill for impairment annually on October one this year's tests resulted in an impairment of $6 $1 billion.
Michael Rose: The impairment was primarily driven by the continued impact of higher interest rates and higher discount rates and a sustained decline in banking industry share prices, including truth share price importantly, as bill noted in his opening remarks. This is a noncash charge and has no impact on our liquidity no impact on our regulatory capital ratios.
Our ability to pay our common stock dividend or to serve the needs of our clients.
Michael Rose: Moving on to the results for the quarter.
Michael Rose: Total revenue increased 50 basis points sequentially due to a more modest decline in net interest income than expected adjust.
Michael Rose: Adjusted expenses declined four 5% or five 2%, excluding the impact of T. I H independents readiness costs.
Michael Rose: Our net interest margin improved three basis points to 2.98% during the quarter.
Michael Rose: We added 20 basis points of CET, one capital in the quarter and increased our a triple L ratio by five basis points in light of ongoing economic uncertainty.
Michael Rose: Finally, arent, our tangible book value per share increased 13% on a linked quarter basis, due primarily to the impact of lower interest rates on the value of our available for sale investment portfolio now.
Michael Rose: Next we'll turn to page nine to covered loans and leases.
Michael Rose: Average loans decreased 1.7% sequentially, reflecting our ongoing balance sheet optimization efforts and overall weaker client demand.
Michael Rose: Average commercial loans decreased one 8% primarily due to a two 3% decrease in C&I balances, primarily due to lower client demand in.
Michael Rose: In our consumer portfolio average loans decreased one 8% primarily due to further reductions in indirect auto and mortgage.
Michael Rose: Overall, we expect average commercial and consumer balances declined modestly in the first quarter driven by our ongoing mix shift toward deeper client relationships de emphasizing lower return portfolios and the effects of continued economic uncertainty.
Michael Rose: Moving out to deposit trends on slide 10.
Michael Rose: Average deposits decreased one 4% sequentially as growth in time deposits and interest checking was more than offset by declines in noninterest bearing and money market balances noninterest.
Michael Rose: Bearing deposits decreased three 7% and represented 29% of total deposits compared to 30% in the third quarter and 34% in the fourth quarter of 2022.
Michael Rose: During the quarter consumers continue to seek higher rate alternatives, which drove an increase in deposit costs, albeit at a slower pace relative to recent periods.
Michael Rose: Specifically total deposit cost increased nine basis points sequentially to 1.90% down from a 30 basis point increase in the prior quarter, which resulted in just a 100 basis point increase to our accumulative total deposit beta to 36%.
Michael Rose: Similarly interest bearing deposit costs increased 10 basis points sequentially, the 2.67% down from a 38 basis point increase in the prior quarter, which also resulted in a 100 basis point increase to our cumulative total interest bearing deposit beta to 50%.
Michael Rose: Going forward, we will continue to maintain a balanced approach focusing on core relationships staying a tentative client needs and striving to maximize the value we can add to relationships outside of rate paid.
Michael Rose: Moving to net interest income and net interest margin on slide 11.
Michael Rose: For the quarter taxable equivalent net interest income decreased by 0.6% linked quarter due to lower average, earning assets and higher rate paid on deposits, partially offset by favorable hedge income.
Michael Rose: Ported net interest margin improved three basis points on a linked basis quarter.
Michael Rose: While net interest margin expanded in each of the last few quarters, we expected to contract in the first quarter due to an increase in rate paid on deposits, partially offset by continued improvement in spreads on new and renewed loans.
Michael Rose: Turning to noninterest income on slide 12.
Michael Rose: B income increased $47 million or 2.2% relative to the third quarter.
Michael Rose: The linked quarter increase was primarily attributable to higher service charges on deposits, which were up $76 million in the fourth quarter due primarily to the third quarter being impacted by $87 million of client refunds.
Michael Rose: Lending related fees increased $51 million linked quarter due to higher leasing related gains and other fees declined $66 million due to lower equity income.
Michael Rose: Fee income was down three 2% on a like quarter basis, as lower investment banking and trading deposit service charges mortgage banking and other income were partially offset with higher insurance income and higher lending related fees.
Michael Rose: Next I'll cover noninterest expense on slide 13.
Michael Rose: GAAP expenses of $10 $3 billion increased $6 $5 billion linked quarter due primarily to the previously mentioned $6 1 billion dollar goodwill impairment charge, the $507 million FDIC special assessment, and a $108 million increase in merger related and restructuring.
Michael Rose: Spence, partially offset by a $183 million decline in personnel costs.
Michael Rose: Excluding these items and the impact of intangible amortization adjusted noninterest expense declined 4.5% sequentially or five 2%, excluding the impact of $33 million of T. I H independents readiness costs.
Michael Rose: The decrease in adjusted expense was driven by lower personnel expense due to the execution of our cost savings program, resulting in headcount reductions as well as lower incentive compensation to reflect our performance in 2023.
Michael Rose: These improvements were partially offset with higher professional outside processing expenses.
Michael Rose: Adjusted noninterest expenses were essentially flat on a light quarter basis.
Michael Rose: As Bill mentioned, we are pleased with the progress that we've made on our cost savings initiative that we announced in September our original goal was to eliminate or avoid expenses of approximately $750 million over a 12 to 18 month period, which would help us manage our expense growth in 2024 to flat to up 1%.
Michael Rose: The largest category of savings targeted in our plan. It was a reduction in force driven by a company wide assessment of spans and layers of management the elimination of redundant functions and the restructuring of certain business lines. We've made significant progress here Ftes are down 4% from June 30th December 31, with the final set of reductions underway in the first quarter.
Michael Rose: The second category, we highlighted included cost savings opportunities that would be driven by organizational simplification. Examples include re imagining our go to market strategy in CRE, simplifying our benefits programs and right sizing our branch network and related staffing as part of these efforts, we anticipate reducing the size of our branch footprint by nearly four.
Michael Rose: Percent during the first half of 2024.
Michael Rose: In addition to lowering head count and simplifying our organization. We also reexamined our technology investment spend through this process. We have rationalized re scoped were delayed at the start of a number of projects primarily in non core areas.
Michael Rose: We estimated restructuring costs related to this initiative to be approximately $225 million or 30% of our initial $750 million goal. So far we've incurred around $200 million of charges related to the program, mostly driven by reductions enforced in the facilities related decisions, we would expect to recognize the bulk of the remaining.
Michael Rose: <unk> costs in the first quarter.
Michael Rose: It's clear to state here that the work is never done and we continue to assertively manage costs, but we feel confident that we will achieve our flat to up 1% expense target for 2024.
Speaker Change: Okay moving on to asset quality on slide 14.
Speaker Change: Asset quality metrics continued to normalize in the fourth quarter, but overall remain manageable nonperforming.
Speaker Change: Forming loans declined 6% linked quarter, while early stage delinquencies increased 11 basis points sequentially due to an increase in 30 to 89 day past due consumer and C&I loans.
Speaker Change: In our appendix is an updated updated data on our office portfolio, which represents one 7% of total loans. We are pleased that nonperforming and criticized and classified office loans decreased modestly linked quarter, while we increased the reserve on this portfolio from eight 3% at September 30 to eight 5%.
Speaker Change: At year end.
Speaker Change: During the quarter, our net charge off ratio increased six basis points to 57 basis points. The increase in net charge offs for the quarter reflects increases in our other consumer indirect auto and C&I lending portfolios, partially offset by lower CRE losses.
Speaker Change: We continue to build reserves as provision expense exceeded net charge offs by $119 million, our a triple L ratio increased to 1.54% up five basis points sequentially, and 20 basis points year over year due to ongoing credit normalization and greater economic uncertainty.
Speaker Change: Consistent with our commentary last quarter, we've tightened our risk appetite in select areas, though we remain maintain our through the cycle supportive approach for high quality long term clients.
Speaker Change: Turning now to capital on Slide 15.
Speaker Change: Okay.
<unk> added 20 basis points of CET, one capital in the fourth quarter through a combination of organic capital generation disciplined <unk> management and this quarter's tax benefit partially offset by the FDIC special assessment.
Speaker Change: With a CET one ratio of 10, 1% Jewish remains well capitalized relative to our minimum regulatory requirement of seven 4% that became effective on October one.
Speaker Change: We remain committed to building capital and do not have plans to repurchase shares over the near term.
We continue to be disciplined with our R. W. A management strategy as we allocate less capital to certain businesses, though we have been clear that our balance sheet remains open to core clients. Our primary capital priorities are supporting the financial needs of new and existing core clients as well as the payment of our 52 cents per share quarterly dividend.
Speaker Change: In addition, we continue to believe that truth capital flexibility with tourists insurance holdings is a distinctive advantage.
Speaker Change: We estimate that our residual 80% ownership stake provides greater than 200 basis points of additional capital flexibility and we continue to evaluate our strategic options with respect to T. I H.
Speaker Change: The table in the center of this slide provides an updated analysis of our Aoc I at year end during the fourth quarter. The component of a OCI attributable to securities declined from $13 5 billion to $11 1 billion or by $2.4 billion due to the decline in long term interest rates during the quarter.
Speaker Change: <unk> finished 2023, essentially flat when compared to year end 2022.
Speaker Change: OCI related to our pension plan improved from $1 5 billion to $1 1 billion, which is a level that will remain static throughout 2024.
Speaker Change: Based on estimated cash flows and today's forward curve, we would expect the component of a OCI attributable to securities to decline from $11 $1 billion at the end of the fourth quarter to $8 billion by the end of 2026 or by approximately 28%.
Speaker Change: We continue to feel confident in our ability to meet the requirements and build capital under the proposed phase in periods based on our assessment of the proposed capital rules.
Speaker Change: We have refined our estimate for the impact to risk weighted assets under Basel III and now expect a mid single digit increase in risk weighted assets compared to our previous estimate of a high single digit increase.
Speaker Change: Finally, as it relates to the proposed rules for our long term debt requirement. We estimate the truest binding constraint is at the bank level and that the shortfall is approximately $12 billion.
Speaker Change: We remain confident that we will be able to meet the proposed requirement at both the bank and the holding company level through normal debt issuance during the phase in period as part of a regular way funding plan, we issued $1 $75 billion of long term debt during the fourth quarter of 2023.
Speaker Change: Alright, I'll now turn to page 16 to review our updated guidance.
Looking into the first quarter of 2024, we expect revenues to remain flat or decline by 1% from <unk> 2023, GAAP revenue of $5 $8 billion.
Speaker Change: Net interest income is likely to be down 3% to 4% in the first quarter, which is more than we experienced in the fourth quarter due primarily to one less day, a smaller balance sheet and some pressure on our net interest margin driven by rate paid.
Speaker Change: We expect linked quarter improvement in noninterest income due to higher insurance and investment banking and trading income, partially offset by lower other and lending related fee income.
Speaker Change: Adjusted expenses of $3 $4 billion are expected to increase by 4% due to normal seasonal increases related to payroll taxes and higher incentive accruals.
Speaker Change: For the full year 'twenty 'twenty four we expect revenues to decrease by 1% to 3%.
Speaker Change: Our balance sheet and interest rate sensitivity continues to be positioned as relatively neutral which is in line with our long term goal. Our forecast assumes that net interest income troughs in the first half of 'twenty 'twenty four and then remains relatively stable assuming five reductions in the fed funds rate with the first reduction coming in May 2024.
Speaker Change: In addition, we assume that insurance continues to grow at high single digit rate, while investment banking and trading should benefit from a recovery in capital markets.
Speaker Change: Although we anticipate adjusted expenses rising 4% in the first quarter due to seasonal factors full year 'twenty 'twenty four adjusted expenses are still expected to remain flat or to increase 1% over 2023 adjusted expenses of $14 billion, which includes T. I H independents.
Speaker Change: <unk> costs.
Speaker Change: Our 'twenty 'twenty four expense guidance of flat to up 1% also includes $85 million of T. I H independents readiness costs.
Speaker Change: In terms of asset quality, we expect net charge offs of about 65 basis points, reflecting a continued normalization of loss rates across our consumer and wholesale loan portfolios, a lower denominator from declining loan balances and our strategy to be proactive in resolving higher risk portfolios. Finally, we expect our effective tax rate to approximate 17.
Speaker Change: Percent or 20% on a taxable equivalent basis.
Speaker Change: I'll now turn it back to Bill for some final remarks. Thanks.
William Henry Rogers: Thanks, Mike So looking back at 2020, I'm really proud of the work our teammates accomplished which help accelerate our transformation into a simpler and more profitable company.
William Henry Rogers: As discussed in September our transformation is centered on improving efficiency and realigning certain aspects of our leadership in the operating model within our three current operating segments wholesale consumer and insurance to increase our efficiency and drive revenue opportunities in the third quarter, we've realigned and consolidated several lines of business.
William Henry Rogers: Within consumer and wholesale including creating a single enterprise wide payments group consolidated three commercial real estate units under one and consolidating for consumer lending platforms to leverage technology and capital resources during the fourth quarter, we announced significant leadership appointments within consumer wholesale and we formed.
William Henry Rogers: A new operating council composed of key business leaders from across the organization.
William Henry Rogers: These leaders will help improve accountability efficiency, and ultimately drive better growth across our platform, while controlling risk all of which are primary benefits of the simplification plan.
William Henry Rogers: Strategic organizational changes designed to improve long term revenue growth are complete, but we're beginning to see the impact from our cost savings initiatives.
William Henry Rogers: To that end and as Mike discussed our cost saving efforts are going well and reflect the planning and execution that was ongoing throughout 2020 through these cost saving efforts are funding important investments in our risk management infrastructure and core businesses. While also and also helping to offset natural expense growth in other parts of our organization.
William Henry Rogers: We accomplished all of those while growing net new deposit accounts strengthened our balance sheet through organic capital growth and strategically allocating our capital to core businesses what.
William Henry Rogers: What can be all of the fourth quarter, our top priorities for 2024 include growing and deepening relationships with our core clients.
William Henry Rogers: Leveraging our more efficient platform to gain market share achieving our expense target and enhancing through its digital experience through Q3.
William Henry Rogers: All while building capital and maintaining a strong risk controls and asset quality metrics.
William Henry Rogers: We believe there's a significant potential to help our clients achieve their financial success by delivering our commercial consumer payments consumer payments investment banking wealth and insurance capabilities throughout our existing footprint.
William Henry Rogers: The investment banking, we've increased our market share across virtually all of our capital markets products. We've seen a significant increase in the number of lead roles across several products, including investment grade equity capital markets leveraged finance and asset securitization and.
William Henry Rogers: In addition, our mind share with clients in our key industry verticals has never been stronger as we continue to expand in new verticals that are prime for growth capital market activity recovers.
William Henry Rogers: Across our wholesale businesses recent changes in client coverage strategies should allow us to focus more intently on opportunities in the middle market, where we can bring a unique perspective, given the breadth and depth of our platform, especially in areas like investment banking and payments we're.
William Henry Rogers: We're seeing solid year over year growth in CIB referral revenue from commercial banking as we continue to deliver value added advice and capabilities to our clients.
William Henry Rogers: <unk> wealth, which began at which beginning in 2024 will be part of our wholesale business segment.
William Henry Rogers: Positive asset flows in 10 of the last 11 quarters.
William Henry Rogers: By bringing the wealth business over to wholesale will go to market as one team to deliver business transition to advisory solutions to commercial and corporate clients.
William Henry Rogers: In consumer I'm encouraged but customer satisfaction scores have returned to pre merger levels. In addition, net new checking account production was positive in 2023, as we added 59000, new consumer and 53000, new business accounts and.
William Henry Rogers: During the fourth quarter, we acquired more than 114000 accounts through our digital channel, including 33000, new to truest.
William Henry Rogers: While the branch network presents opportunity for further efficiency in certain markets, we're seeing improvements in productivity due to excellent teammate execution and investments in technology as evidenced by the increase in net new deposit accounts. We are encouraged by this increased productivity and we'll look to make investments in branches on select key growth markets.
William Henry Rogers: In 2025 and beyond.
William Henry Rogers: So in conclusion, the fourth quarter was salt, but we acknowledge there is more work to do as we strive to produce better and more consistent results in the future. We view our fourth quarter performance is another step forward in that direction.
William Henry Rogers: Making strong progress on areas on our control, including managing our expenses building capital and realigning our business. So that it is well positioned to serve new and existing clients as markets recover we're firmly committed to achieving our expense target in 2024, while we will continue to build and allocate capital towards core.
Clients in our home markets, which we view as a distinctive competitive advantage. This heightened focus will lead to increased franchise and shareholder value over time.
Speaker Change: Let me close by just thanking our teammates for their incredible purposeful leadership in 2023. So you manage your focus and commitment fuels our confidence in 2024 and beyond thank you.
Speaker Change: So with that let me turn it back over to you for Q&A.
Speaker Change: [laughter].
Speaker Change: Rocco at this time will you. Please explain how our listeners can participate in the Q&A session. As you do that I'd like to ask the participants please limit yourselves to one primary question and one follow up.
Rocco: In order that we may accommodate as many of you is on the call as possible today.
Rocco: Yes.
Rocco: Thank you if you'd like to ask a question. Please press Star then one on your telephone keypad.
Rocco: Question has been addressed I'd like to withdraw your question. Please press Star then two once again Thats Star then one if you have a question.
Speaker Change: And today's first question comes from John Mcdonald with Autonomous Research. Please go ahead.
John Eamon McDonald: Hi, Good morning, Mike I was wondering if you could unpack the outlook for the net interest income in 2024, a little bit, including you know the assumptions around deposits and whether taking out some fed cut assumptions I would change the outlook much how sensitive there. Thanks.
Michael Rose: Yeah, Good morning, John.
Michael Rose: No problem. So I guess, if you think about 'twenty four NII you know I mentioned in the prepared remarks that we've got five cuts in our base.
Michael Rose: Plan. The first in May and then really another twenty-five at each meeting with the exception of November.
Speaker Change: On balances you know we mentioned I think you know loans, probably a touch of pressure in the first quarter may be down less than 1% and then relatively stable you know on the C&I side, we see a nice a more stable outlook for the for the year on the consumer side a bit of pressure deposit sort of picking up where we are.
Speaker Change: Left off in the fourth quarter, so down call it a percent and a half or so in the first and then declining but you know I think, albeit it may be a declining rate over the year. So.
Speaker Change: So that's I think the primary piece you know John we think about repricing and you know I think you've heard from from peers as well on this I mean, you know probably a bit of caution warranted around around the betas. So we think that some of the higher.
Speaker Change: The faster stuff that.
Speaker Change: It moved on the way up probably moves fast on the way down, but there's still going to be a considerable amount of of reprice lag and so so I guess those are the sort of fundamentals and then I guess you asked about.
About cuts and whether there were fewer I think we mentioned, where we're relatively neutral versus our base case on the five cuts. So you know whether there are three or four you know maybe six or seven cuts I think we have less sensitivity there that being said I think a scenario where there are no cuts you know that would be Oh, we're significantly.
Speaker Change: Delayed cuts that would be a headwind for us.
Speaker Change: Okay.
And then just a quick one on expenses on the guide for adjusted expenses you know in the 14 area.
Speaker Change: What expenses should we keep in mind for modeling that are outside that adjusted so do you have some amortization, that's usually I guess around 500 million and then some merger restructuring expected this year.
Speaker Change: Yeah, no you're right on the on the amortization that would be excluded on the Merck's you know we mentioned we've got 25 left on our cost savings initiatives based on estimates in the first quarter there'll be down versus last year you know.
Speaker Change: So I you know should not be as much noise in 'twenty four as we saw in 'twenty three.
Speaker Change: And I guess, just other merck's or incremental operating costs like any of that throughout the year that we should keep in mind or a placeholder for some of that to occur beyond the first quarter.
Speaker Change: Maybe just maybe just to touch John but you know I don't I don't I don't expect that to be a significant factor in our 24 okay.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you and our next question today comes from Scott <unk> with Piper Sandler. Please go ahead.
Scott: Thank you good morning, everybody I'm, Mike I was hoping you could talk a little bit about sort of how you might see loan demand trajectory three years, certainly understand and appreciate the comments about a little more pressure on loan balances in the early part of the year and then more stability, but just curious how youre thinking about whether demand can come back if we begin to get them.
Scott: Some rate cuts more macroeconomic clarity etcetera.
Speaker Change: Yeah, I know Scott I think I think you're right I mean, I think our in our base case, we're assuming a couple of things.
Speaker Change: The five cuts, we think will benefit demand a touch but you know to the extent that that's underestimated that would be that would be welcome news and I think we mentioned you know from a C&I perspective, we do expect modest growth in that portfolio you know at least in sort of the second quarter third quarter and beyond I think most of the.
Sure that we're saying for the year is still on the consumer side, you know others may weigh in on on other factors Bill Yeah.
Speaker Change: Part of the pressure on the consumer side as were created you know as were really reducing some of our focus on indirect as an example, and that's somewhat offset by the growth in Sheffield and service finance, but that doesn't sort of isn't a perfect balance on there. So the consumer reflects probably a little more of our own action in capital allocation.
Speaker Change: Than where we are from a market perspective, and then I think as Mike said I mean on the C&I side, where we're open for business.
Speaker Change: We're going to serve our markets.
Speaker Change: I think we've got you know.
Speaker Change: Really really strong markets and when I say recovery comes a it'll come disproportionately faster than our markets and if that happens sooner we will see the benefit of that and will be a you know.
Speaker Change: A recipient of that because we are you know I think gaining share in most of those capabilities and then the other part of it.
Speaker Change: And when we're winning we're winning more disproportionately so on the C&I side, particularly.
Speaker Change: Just you know 15% to 20% more of the deals are in left leads as an example, so you know if we look at sort of our portfolio last year.
We're winning more on the left side. So that's got more profitability and more you know tailwind in terms of an ability to expand those expand those relationships. So I don't I don't know if we're being conservative to use that word, but I think we've got to sort of see what's in front of us and hopefully by the end of the year.
Speaker Change: If the rates turn out as we all are forecast, we will stay a little spur on the economy and I think it will be direct beneficiaries of that.
Speaker Change: Okay perfect. Thank you and then Mike just I'm more of a niche oriented one obviously, great to see that nearly $3 billion improvement in our Aoc I I'm curious if you have an estimate for what your adjusted or sort of a fully loaded common equity tier one ratio is relative to the stated 10, 1%.
Michael Rose: Yeah, Scott can give that to you. So you know on a stated basis. We finished the quarter at 10, 1%. If you look at our the the new balance them from an OCI perspective, and this would include the airport security as well as the pension.
Speaker Change: That's about a 2.9% impact so that would take you down to you know call. It I guess seven two and then the other factors like the the thresholds and the <unk> inflation, we mentioned earlier.
Speaker Change: Earlier in the call.
That we have done more work around an estimate for what the <unk> impact might be under Basel and.
Speaker Change: Also in a little more work on the thresholds call. Those another percent so that walks you down to low sixes.
Speaker Change: Okay perfect.
Speaker Change: Alright, Thank you very much.
Speaker Change: Yeah.
Speaker Change: And our next question today comes from Mike Mayo with Wells Fargo Securities. Please go ahead.
Mike Mayo: Hey, Bill I'm wondering if the optimizations, maybe you could call it through us to point out was going fast and deepen up and I do recognize two items. One you mentioned headwinds in the past from rate regulation in retooling and second your new efforts the $750 million.
Mike Mayo: Savings program, 4% less head count, 4% less branch of that but then I look at.
Mike Mayo: The core efficiency numbers I'm like Oh. This is not what we signed up four right I mean not.
Mike Mayo: Slide eight nine and I think that's your core efficiency of 59% in 2023, and now you're guiding worse for 2024 and your pre merger target of a 51% so.
Mike Mayo: Are you guys doing enough been doing it fast enough to optimize.
Speaker Change: Yeah, Mike I think you know an appropriate inappropriate challenge as always.
We've done a lot. So I think I'm really encouraged by the momentum and you can see it really in the third and fourth quarter.
Speaker Change: And you'll see that significantly.
Speaker Change: Particularly the expense declines and we're committed to what we what we talked about in September I think our $750 million play out and I'm really proud of our teammates I'm proud of our leadership.
Speaker Change: They really got our sleeves rolled up and got after it so the intensity. That's in this company right now are about being more efficient I feel is demonstrably better and being able to apply that over this more simplified organizational structures, where receive the benefits you know so.
Speaker Change: If you think about as I've made in my comments I mean sort of that process is complete. So now this intensity. These efforts. These initiatives we apply that over a much more simplified business model and the decisions that leaders are making I think theyre, just better stronger decisions, which lead us to a more efficient company long term.
Speaker Change: My follow up on the optimization I'll give to our my colleague insurance analyst Elyse Greenspan Elyse.
Elyse Greenspan: Yeah, Thanks, Mike and good morning to everyone.
Elyse Greenspan: The insurance side I know there has been.
Elyse Greenspan: Press reports on the potential monetization and sales process of that asset. So I was just hoping that you can provide an update to us and just you know where where you stand with that process.
Speaker Change: Yeah. So you know I think we've said pretty clearly that.
Speaker Change: Insurance business creates a capital opportunity for us and then outline ladder and a lot of it a lot of specificity.
Speaker Change: We've said clearly that we're always evaluating alternatives or we're going to do the best thing for the insurance business and the best thing for our troops going forward and I don't think is as it relates to any specific timing and those type of things I don't think I should comment beyond that.
Speaker Change: Okay. Thank you.
Write backs.
Speaker Change: And our next question today comes from Ken <unk> with Jefferies. Please go ahead.
Ken: Hey, Thanks, good morning.
Ken: Wanted to ask you expand a little bit on your outlook for credit and then noticing the MTA decline. This this this quarter and you have this unexpected charge off normalization path I'm, just wondering what youre seeing in terms of what areas of the portfolio, we're expecting to see that that loss trend trended higher in the most and just your general sense of just how the.
Ken: Customer sat feels in terms of.
Ken: You know that that because that certainly implies a good ramp from here, but one that's controllable. So just kind of juxtaposing that MPA decline with your expected ramp and losses. Thanks.
Ken: And this is Clark thanks for the question, our 24 NCO guidance as Mike said it assumes we're going to continue to see normalization occur.
Clark: Occur both in consumer and wholesale we've already seen a lot of it in the consumer side, we have a higher mix as bill said of our higher margin consumer finance businesses and less relative.
Clark: Mortgage and Prime I'll tell you that's a factor on the loss assumption, but I think the biggest one that you've pointed out we're working really hard to get ahead of any potential areas of stress think CRE office and so our guidance also reflects opportunities to be opportunistic to work through if we see more challenges in that.
Clark: Space is that structural risks and unfolds. So we hope to do better, but we're assuming we're going to work hard to make sure that we get ahead of any risk.
Speaker Change: Got it. Thanks, Thanks, Clarke and just one follow up I'm, just wondering I know you said that you're expecting so I hope I hope will bounce in the investment banking business, just wondering where you where those level of conversations are and just given your mix of business, where we are.
Speaker Change: Where we might expect to see that either you know come back sooner or have a lag relative to the environment. Thanks.
Speaker Change: Yeah, Great question and the good news is we've got a really good balanced investment banking business, so and seen some positive things on you know.
Speaker Change: A lot of the different buckets. So if you think about.
You know our equity capital markets I mean, you know theyre starting to starting to come back I think you know, we're starting to see some IPO components of that our pipeline. There is probably the strongest it's been in a long time and pipeline as active book runner when and if all that comes to bear I think that's we'll just have to that'll be a little bit more market depend.
Speaker Change: On the.
Speaker Change: You know on the debt side, so the high yield investment grade I mean, you've got a lot of a lot of them you know maturity sort of running off in 24, So there's sort of a natural.
Speaker Change: Refinance opportunity I think again sort of that'll be where clients are <unk>.
Speaker Change: <unk>, where they think rates are going to come so they've got a lot of natural things that have to do it and they'll have to pick that point of demarcation, where they want to see.
Speaker Change: Let's start the refinancing side and then the M&A pipeline is really strong you know we spent a lot of time and energy with our verticals and being really relevant so the size and scope of some of the things that we're doing are proportionately higher but we've also built is really great.
Speaker Change: Pipeline with our transition to advisory business with our commercial our commercial clients.
Speaker Change: We've got you know more in the pipeline. There then we closed all of last year, just as an example, so that sort of that core.
Speaker Change: Bread and butter kind of work and then we have things like well like public finance, which was sort of a nascent business for US you know 12 to 18 months ago and now starting to build up some momentum and as we see you know.
Speaker Change: Public finance opportunity to start to grow so we have a lot of cylinders that are working.
Speaker Change: That effect can offset each other and would be a good reason that we would be confident.
Speaker Change: In a pretty nice recovery on the investment banking side, it will be like everything else, a little bit quarter to quarter dependent, but but hopefully a little less volatility for us given that we've got a lot of cylinders running.
Great. Thanks for that Bill.
Speaker Change: Yes.
And our next question today comes from Erika Najarian with UBS. Please go ahead.
Erika Najarian: Hi, good morning.
Erika Najarian: First question is from.
Erika Najarian: For Bell.
Erika Najarian: My just not saying anything too different about loan growth from the rest of your peers for 2024, Yeah. You know that being said I think obviously when if the genesis of the merger of equals and you know this combined franchise and footprint with better than everybody else's. So I guess my question here.
Erika Najarian: There is you know how much of your current adjusted cap at all you know them you.
Erika Najarian: Yeah.
Erika Najarian: State right now is sort of impacting how you're thinking about gross and going to market.
Erika Najarian: And you know clearly there Scott.
Erika Najarian: Lot of questions on use of proceeds.
Erika Najarian: T cells, Iraq as current insurance holdings, but you know how much different is your approach going to be to market. If at all you know if you do monetize Ti age.
Speaker Change: Yeah, Let me, let me ask answer the first part of that.
Speaker Change: So you know I think that's a great a great question.
Speaker Change: If you look at sort of a barometer I was trying to say this earlier and sort of where we go I think we will reflect our economy and our opportunity. So and we'll just have to see sort of how that gets unleashed or important I think the correlation will probably be more directly you're seeing in the C&I side, because we're as I mentioned before not just.
Speaker Change: Just a capital preservation, but or optimization really more around optimization around return.
Speaker Change: You know when sort of looking at our core and non core so we've pulled the throttle back on some of the consumer side that we considered to be less capital efficient. So that's got a little bit of an overhang in terms of where we look at that so I think if we go into 2024 and you know trying to answer your question I think the barometer for us ought to be on the.
Parts of consumer where we're investing in C&I overall.
Speaker Change: As I said earlier I think you know when we see the recovery, we'll see it more disproportionately on our markets and we should reflect that so I think that's I think that's exactly right, but the net of your whole question. You know, we're not we're not capital constrained in terms of the opportunity for growth.
Speaker Change: And poor business in the places where we're investing.
Speaker Change: Got it and just a follow up question from Mike One of your peers have framed it this way.
Mike: I think the investors found it helpful. But you did mention earlier that you had caution on the beta is to the downside in your first Cai is presumed to be may considering a lag you know could you give us a sense of what your range as assumption is in terms of downside betas for the firm.
Mike: 100 basis point cut that's embedded in your guide.
Speaker Change: Yeah, Erika you know I'm not.
Erika Najarian: It's it's.
Speaker Change: It's a great question and one we're spending a lot of time on look I mean, I think initially out of the gates.
Speaker Change: And if these come in call it 25.
Speaker Change: At a time and you think about the first 100, so the first four for us.
Speaker Change: It is I think the first half of that it's going to be really pressured by the bye bye guys still repricing up you know across the retail business in certain products and segments. So you know you know I think I guess my my my my use of the word cautionary is thinking about kind of where we're ending up right now on accumulative beta perspective.
Speaker Change: And I'm, just acknowledging that we're going to be lower than that out of the gates.
Speaker Change: Yeah for certain but I don't think you know and if you think about our NII outlook I think I think you've got a pretty good sense for how we're thinking about the reprice trend and we mentioned you know we think in the first quarter and are in sort of a static rate environment, we're going to be down 3% to 4% on balances and day count in and then a touch worse on rate paid and you know from there as we started to see the car.
Speaker Change: What's in our case, we think we flattened out and are pretty stable.
Speaker Change: Got it thank you.
Speaker Change: Thank you and our next question comes from Ebrahim <unk> with Bank of America. Please go ahead.
Ebrahim: Hey, good morning I.
Ebrahim: I guess.
Ebrahim: Just wanted to follow up maybe bill and Mike on the goodwill charge I'm, assuming it's more than a mathematical exercise.
Ebrahim: And it's hard for me to imagine that higher need to structurally bad for banking organization with good deposit base, which is the case with twist.
So to some extent I guess does he too is some of the deal synergies tied to the Suntrust BB&T merger no longer look as appealing as they did at the time of the deal announcement, one is am I missing something there and secondly, bill just so you've talked about a bunch of strategic actions.
Ebrahim: Is it fair for us to expect that.
Ebrahim: From now we will see very clearly some of the synergies be it in terms of market share gains.
Ebrahim: You can see tied to this tied to the deal that investors can start getting on board with the franchise.
Yeah, I'll I'll I'll go I'll go on the first one ebrahim. Thanks for the question.
Ebrahim: You you sort of said, Hey, I assume it's sort of not just mathematics.
Ebrahim: You said it is a mathematical and that's right I mean at the end of the day, we do it for an annual test for impairment.
Ebrahim: There are I mean, thousands and thousands of factors that go into this work their customary valuation approaches.
Ebrahim: Oh wait each each each each each reporting unit.
Ebrahim: If you think about it the factors that are significant that we cited in our in our prepared remarks is that you do have a very you've had degradation in operating conditions for the industry. You had a significant decline in broadly speaking bank stock valuations a tourist market valuation.
Ebrahim: The timing and we we do this test as of a certain day each year in our case. It's October 1st. So so all those factors are considered and influence the outcome, but at the end of the day are you know the.
Ebrahim: The estimated fair value was below the carrying value and that's the that's the output, but again just to reiterate there is absolutely zero impact to our financial condition or you know, how we think about our opportunity or our strategy of what we're doing and it's just done by segment. Yeah. That's right. If you look at the various reporting segments. The reporting units for us which are the.
Speaker Change: The consumer and wealth business at least in twenty-three corporate and commercial and then insurance and then on your on your second question hopefully.
Speaker Change: I was indicating is that that process start. So if you look at the net new account gains we're seeing the growth in primary accounts, though.
Speaker Change: The growth in market share in investment banking, so those things are actually underway and happening.
Speaker Change: I think they'll continue to accelerate there continue to build they will continue to manifest as you said both on the revenue and both on the efficiency side I think I think you actually pointed out.
Speaker Change: You'll see both sides of that.
Speaker Change: But thanks for that and just wanted to follow up with me.
Speaker Change: We look at the commercial real estate multifamily book, you get a bunch of like southeast markets.
Speaker Change: Are probably seeing a fair amount of supply coming through any concerns I mean, what are you seeing in the multifamily CRE today and any markets, where you are particularly focused on in terms of what supply over the next year or two.
Speaker Change: Yeah, I'll get I'll get Clark to comment as well, but yeah. There are you know part of the great part of our markets as we have a lot of in migration. So we've got a lot of building in anticipation of that.
Speaker Change: So you're talking about some of our larger larger markets Austin Orlando I mean, some of the suspects where you've seen a little bit of that I'll get Clark to comment on the quality of the portfolio sort of it you know the multifamily you know large developers that were in a long time, you know long term that migration positive continues.
Clark: And I was looking at some data interesting I'll just make a comment broadly on that within our markets last year, we added a metropolitan Charlotte. So just think about that in context, you know so we added about $2.
Clark: Net in migration into our market. So the overall demographics are good but I think you know I think in fairness to your question, we probably have a little bit of a.
Clark: Shorter term watch item versus worry I met with Clark I agree with your view you know overall, we still think multifamily long terms, a very favorite asset class and some of the current challenges and are.
Clark: Our perspective relate more to our margin or current debt service coverage risk issue given rate increases you know higher operating cost and to your point that the new pipeline supply that's coming on and we just view that very differently than the structural risk we see in office as an example, so we're working with our borrowers.
Clark: To address their specific situations as we look out.
Clark: How they're going to address.
Clark: This impact, but again, so what we would expect more temporary increase in watch list some non accruals, but not nowhere near the same loss risk exposure you see in office and I would remind you that there's very active secondary placement sources, a lot of equity sources willing to come in and the clients that we had to Bill's point they.
Clark: These assets and they're they're supporting those so we think it's a manageable risk even though there are some short term pressure.
Speaker Change: Thank you so much.
Speaker Change: Thank you and the next one.
Speaker Change: So it comes from Matt O'connor with Deutsche Bank. Please go ahead.
Hi, good morning, sorry, I missed it but have you guys talk about what you are targeting capital level is you know obviously, you said going from here with no buybacks in the near term and.
Speaker Change: Again, making impact on the art of the waves from the Basel III and proposals, but how are you thinking about kind of targeted capital level.
Speaker Change: Over the medium or longer term.
Speaker Change: Yeah, Matt for you know for right now we're.
Speaker Change: There were 10, one and building and so I think I think until we get more information and so we sort of.
Stand the dynamics a little bit more.
Speaker Change: In fact about our company construct.
Speaker Change: I think the best thing for US right now is to be you know in an organic capital build and mode. So we haven't set a specific target.
Speaker Change: But I think you know.
Speaker Change: 10, plus for the for the short term to medium term seems a good place for us to be landing right now.
Speaker Change: Okay, and then as you think about kind of the 10 o'clock medium term is that including a OCI because obviously you already know him.
Speaker Change: Santa Cruz capital fairly quickly and see how they printed given her name or not much balance sheet growth.
Speaker Change: No Matt I mean, I think we're just you know.
Speaker Change: In a moment we're in you know we're looking at spot capital. We're thinking about transitioned you know capital measurements, if we phase into new roles and we're looking at fully phased in I think that I think the whole industries thinking about it that way. So so I think when bill thinks about 10, I mean, I think about it like on a transitional basis staying at or above 10 is probably what bill was implying but I think shorter term.
Speaker Change: It's like we're we're building capital we're going to.
Speaker Change: Continue to do that through organic earnings and.
Speaker Change: And hopefully we'll have a little more visibility on this rule when you can and can give you a little better sense for kind of a medium term target.
Speaker Change: Okay.
Thank you. Our next question comes from Gerard Cassidy with RBC capital markets. Please go ahead.
Speaker Change: Good morning, Bill Good morning, Mike.
Speaker Change: Yeah.
Speaker Change: Bill.
Speaker Change: When we go back to the original merger I think if I recall correctly, there was a targeted 20% return on tangible common equity and you've just discussed about the capital levels, you know on Basel, III being higher than what I presumed to be lower numbers back and you know when the deal was announced can you share with US are you still thinking too.
Speaker Change: 20% return on tangible common equities are reasonable goal or you can attain that even with these higher capital levels that you and the industry has to carry.
Speaker Change: Yes.
Speaker Change: We'd go back to 2019, you know that was a different world in a different environment. Both in terms of where we were from a rate standpoint, and where we were from a channel standpoint regulatory standpoint, now we've got Basel III in front of us.
Speaker Change: So you know I think in fairness 20, you know certainly short and medium term as you know.
Speaker Change: Not necessarily in the you know in the it's in the windshield, but I think we can continue to perform at a high level in terms of in terms of royalties.
Speaker Change: So you know all the.
Speaker Change: Efficiency opportunities the things we're building revenue growing.
Speaker Change: Those are things that continue to build on that so I think to think about us being a top performer in that category versus setting a specific target that was constructed in 2019 in a different environment is.
Speaker Change: A different way to think about it.
Speaker Change: Very good and then coming back obviously, you guys talked I've talked about credit quality, you referenced Mike about commercial real estate in your opening remarks, and you just talked about multifamily and in truth has always been good on its credit. So my question on the commercial real estate in the office area and maybe this is for Clark.
Clark: Can you kind of draw a line for us from early 'twenty two when there wasn't really any problems before rates started to go higher in downtown office, where they were maybe just emerging and incrementally it's clearly deteriorated.
Clark: Clark can you show us is the deterioration accelerating on a sequential basis in the office market or have we seen the rapid acceleration of down values real workouts taken charge offs and going forward, yes, you're still going to see higher charge offs, probably but the actual incremental.
Clark: Deterioration is lessening or worsening can you share with us.
Clark: Men standpoint.
Speaker Change: Great question, we talk a lot about Gerard and so I would say as a niche.
Speaker Change: <unk> as opposed to multifamily we view the risk in the CRE sector is more structural and it still will take some time to play out over the next couple of years and no way what do you think about it everyone with credit in the sector is exposed to the risk.
And so the big challenge will be for those that have large concentrations, which we don't so we feel good about that and our strategy has been to try to identify the risk early and work through with our borrowers to address all options and you'll you see that in how we approach risk grading accrual status and reserves.
Speaker Change: So that's kind of where we are right now we feel good about our efforts but to your point we.
Speaker Change: We still think about the fact that very few trades real trades today. So it's hard to know what real price discovery and whether we've hit the bottom of.
Speaker Change: The cycle or not I think everyone's trying to recognize that and so you've seen that acceleration would I think is still left to come incrementally as we are still seeing as leases fully mature.
Speaker Change: Company's lessees resizing their space needs and so you can have performing loans today and a good outlet, but you really don't know until you see the leases mature. The other thing I would say is we are seeing some interest some early interest on long term investors coming in and that May help.
Speaker Change: I would say still more to come.
Speaker Change: Great. Thank you.
Speaker Change: Thank you we have room for one final question and that comes from Manav Gupta with Morgan Stanley. Please go ahead.
Manav Gupta: Hi, Good morning, Thanks for taking my question I wanted to come back to the NII Guide and you know I appreciate all the detail on loan growth and deposit betas.
Manav Gupta: Can you talk about how we should think about the impact of securities repricing in the back of swaps as we think through that 2020 for NII.
Speaker Change: Yeah, No no problem on the Securities repricing side, you know not a huge factor as you know our speeds are we mature call it $2 billion to $3 billion.
Speaker Change: $1 billion per per quarter, and so probably not as big of an impact on in terms of upside for 'twenty four but as you think about the swap book I think I mentioned in the fourth quarter, we had a little bit of a tailwind.
Speaker Change: To the tune of call it a $20 million to $25 million relative to Q3, and our outlook for 'twenty for really interesting enough you know the first half it's a tailwind with some of the payers.
Speaker Change: Payers in our portfolio, but.
Speaker Change: But we do have some receive fixed swaps that will become effective throughout the course of the year, which will which will.
Speaker Change: Later in the call. It first half begin to mute the benefit and then by the second half create out create a headwind but for the full year impact it's actually negligible at least based on the current curve.
Speaker Change: But that's all factored into our NII outlook.
Speaker Change: Got it and then just as we think through the sensitivity to the different rate environments.
Speaker Change: I think you mentioned some forward starting swaps is there any more color or any.
Speaker Change: Quantification, there or anything else, we need to think through in terms of the impact.
Speaker Change: The impact on NII from from any swings in the forward rate assumptions.
Speaker Change: Look I mean, we disclosed this I mean, if you look at our swap portfolio. You know we've got about $30 billion of receivers are on today are about 10 billion of those will be effective sort of day. One this year and by the end of the year, most will be effective but again that's incorporated into our.
Speaker Change: Into our outlook.
Speaker Change: Got it thank you.
Speaker Change: Ladies and gentlemen. This concludes the question and answer session I would like to turn the conference back over to Brad Milsap for closing remarks.
Speaker Change: Okay.
Brad Milsaps: Completes earnings call. If you have any additional questions. Please feel free to reach out to the Investor Relations team. Thank you for your interest interest and we hope you have a great day Rocco you may now disconnect the call.
Speaker Change: Thank you Sir This concludes the conference call you May now disconnect your lines have a wonderful day.