Q1 2024 Huntington Bancshares Inc Earnings Call

Operator: Hello, and welcome to the Huntington Bancshares first quarter earnings call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star one on your telephone keypad.

Hello, and welcome to the Huntington Bancshares first quarter earnings call and so you can once you require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation. He may be placed in the question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded.

Operator: As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Tim Sedabres, Director of Investor Relations. Please go ahead, Tim.

It's now my pleasure to turn the call over to Jill Timm Pseudomonas director of Investor Relations. Please go ahead Sir.

Timothy R. Sedabres: Thank you, Operator. Welcome, everyone, and good morning.

Jill Timm: Thank you operator, welcome everyone and good morning.

Timothy R. Sedabres: Copies of the slides we will be reviewing today can be found in the investor relations section of our website, www.huntington.com. As a reminder, this call is being recorded, and a replay will be available starting about one hour from the end of the call. Our presenters today are Steve Steinour, Chairman, President, and CEO, and Zach Wasserman, Chief Financial Officer. Brendan Lawlor, Chief Credit Officer, will join us for the Q&A. Earnings documents, which include our forward-looking statement disclaimer and non-GAAP information, are available on the investor relations section of our website. With that, I will turn it over to Steve.

Jill Timm: Copies of the slides, we'll be reviewing today can be found in Investor Relations section of our website Www Dot Huntington Dot com.

Jill Timm: As a reminder, this call is being recorded and a replay will be available starting about one hour from the close of the call.

Our presenters today are Steve Stein, our chairman, President and CEO, Zach Wasserman, Chief Financial Officer Brendan.

Jill Timm: Brendan Lawler Chief Credit Officer will join us for the Q&A.

Jill Timm: Earnings documents, which include our forward looking statements disclaimer and non-GAAP information are available on Investor Relations section of our website with that let me turn it over to Steve.

Stephen D. Steinour: Thanks, Tim. Good morning, everyone, and welcome.

Stephen D. Steinour: Thanks, Tim Good morning, everyone and welcome. Thank you for joining the call today, we're pleased to announce our first quarter results, which Jack will detail later.

Stephen D. Steinour: Thank you for joining us today. We're pleased to announce our first quarter results, which Zach will detail later. Again, these results are supported by our colleagues who live our purpose every day as we make people's lives better, help businesses thrive, and strengthen the communities we serve. Now on to slide four. There are five key messages we want to leave you with today.

Steve: Again. These results are supported by our colleagues who live our purpose every day as we make People's lives better help businesses thrive and strengthen the communities. We serve now onto slide four there are five key messages. We want to leave you with today first we are executing our organic growth strategies and leveraging our position of strength.

Stephen D. Steinour: First, we are executing our organic growth strategies and leveraging our position of strength. As planned and managed over the years, our liquidity and capital metrics are top tier. Second, we delivered loan growth in the quarter and expect the pace to accelerate over the remainder of the year. Third, our teams are acquiring new customers and relationships in both commercial and consumer categories.

Steve: As planned and managed over the years, our liquidity and capital metrics are top tier.

Steve: Second we delivered loan growth in the quarter and expect the pace to accelerate over the remainder of the year. Our teams are acquiring new customers and relationships with both commercial and consumer categories. We are maintaining our momentum in deposit gathering with a well managed beta.

Stephen D. Steinour: We are maintaining our momentum in deposit gathering with a well-managed beta. Third, we expect to drive sequential increases in net interest income and fee revenues from the level reported in the first quarter, supported by accelerating loan growth, coupled with effective balance sheet management. Fourth, we continue to rigorously manage credit, consistent with our aggregate moderate to low-risk appetite.

Steve: Third we expect to drive sequential increases in net interest income and fee revenues from the level reported in the first quarter supported by accelerating loan growth coupled with effective balance sheet management fourth we continue to rigorously manage credit consistent with our aggregate moderate to low risk appetite. Finally, we are positioned to power earn.

Stephen D. Steinour: Finally, we are positioned to power earnings expansion over the course of the year and into 2025. Our investments are delivering results, and the underlying core is performing well. I will move us on to Slide 5 to recap our performance.

Steve: Earnings expansion over the course of the year and into 2025, our investments are delivering results and the underlying core is performing well I will move us on to slide five to recap our performance, we delivered loan growth with balances growing by $1.6 billion from a year ago and have grown by a 4% CAGR over the.

Stephen D. Steinour: We delivered loan growth with balances growing by $1.6 billion from a year ago and have grown by a 4% CAGR over the past two years. This pace reflects our intentional optimization efforts last year, and we believe we are positioned to accelerate growth over the course of 2024 and beyond into 2025. Deposit balances also increased, growing $7.9 billion, or 5.5% over the past year. Capital remains strong, with a reported Common Equity Tier 1 of 10.2% and Adjusted Common Equity Tier 1 of 8.5%, inclusive of AOCIs. Liquidity remains top tier, with coverage of uninsured deposits of 205%, a peer-leading level.

Steve: Two years.

Steve: This pace reflects our intentional optimization efforts last year and we believe we are positioned to accelerate growth over the course of 'twenty 'twenty four and carrying into 2025 deposit balances also increased growing $7.9 billion or five 5% over the past year.

Steve: Capital remained strong with reported common equity tier one of 10.2% and adjusted common equity tier one of 8.5% inclusive of a OCI.

Steve: Liquidity remains top tier with coverage of uninsured deposits of 205% a peer leading level credit quality was stable as the charge offs improved by one basis point from the fourth quarter to 30 basis points.

Stephen D. Steinour: Credit quality was stable as debt charge-offs improved by one basis point from the fourth quarter to 30 basis points. We are sustaining momentum and growth of our primary bank relationships, with consumer and business increasing by 2% and 4%, respectively, year over year. We continue to seize opportunities to add talented bankers. In the past two quarters, we've added teams in the Carolinas and Texas.

Steve: We are sustaining momentum and growth of our primary bank relationships with consumer and business, increasing by 2% and 4% respectively year over year, we continue to seize opportunities to add talented bankers over the past two quarters. We've added teams in the Carolinas and Texas.

Stephen D. Steinour: We've also launched new commercial specialty verticals, including Fund Finance, Healthcare ABL, and Native American Financial Services. The momentum we have across our markets, coupled with our strong culture, continues to attract great banking talent to Huntington. We expect to add additional colleagues and capabilities as we move through the year. We have clear objectives for 2024, focused on executing our organic growth strategy.

Steve: We've also launched new commercial specialty verticals, including fund finance health care, a b L and native American financial services.

Steve: The momentum we have across our markets coupled with our strong culture continues to attract great banking talent to Huntington.

Steve: We expect to add additional colleagues and capabilities as we move through the year, we have clear objectives for 'twenty 'twenty four focused on executing our organic growth strategies.

Stephen D. Steinour: This should result in accelerated loan growth, sustained deposit growth, and expanded fee revenue streams. Coupled with our expense outlook, we expect to see PPNR growing over the course of the year and into 2025. The macro environment is conducive to growth with customer demand holding up well in a resilient and stable economy.

Steve: This should result in accelerated loan growth sustained deposit growth and expanded fee revenue streams.

Steve: Bold with our expense outlook, we expect to see P. P N our expanding over the course of the year and into 2025.

Steve: The macro environment is conducive to growth with customer demand holding up well in a resilient and stable economy.

Stephen D. Steinour: The addition of new markets and bankers is supporting expanding loan pipelines, with late-stage commercial pipelines ending the quarter at the highest level in over a year. Zach, it's over to you to provide more detail on our financial performance. Thanks, Steve, and good morning, everyone.

The addition of new markets and bankers is supporting expanding loan pipelines with late stage commercial pipelines ending the quarter at the highest level in over a year.

Speaker Change: <unk> over to you to provide more detail on our financial performance.

Speaker Change: Thanks, Steve and good morning, everyone Slide six provides highlights of our fourth quarter results. We reported GAAP earnings per common share of 26 cents and adjusted EPS of 28 cents. The quarter included $39 million of notable items, primarily related to the updated FDIC deposit insurance fund special.

Zachary J. Wasserman: Slide 6 provides highlights of our fourth-quarter results. We reported GAAP earnings per common share of $0.26 and adjusted EPS of $0.28. The quarter included $39 million of notable items, primarily related to the updated FDIC Deposit Insurance Fund Special Assessment of $32 million, which was driven by higher losses from last year's bank failures. Additionally, we incurred $7 million of costs related to incremental business process offshoring efficiency plans that were finalized during the quarter. These items collectively impacted EPS by $0.02 per common share.

Speaker Change: <unk> of $32 million, which was driven by higher losses from last year's bank failures. Additionally, we incurred $7 million of costs related to incremental business process offshoring efficiency plans that were finalized during the quarter. These items collectively impacted EPS by two cents per common share.

Zachary J. Wasserman: Return on Tangible Common Equity, or ROTCE, came in at 14.2% for the quarter. Adjusted for notable items, it was 15.3%. Average deposits continued to grow during the quarter, increasing by $1.1 billion, or 0.7%. Cumulative deposit beta totaled 43% through quarter end. Average loan balances increased by $701 million, or 0.6% for the quarter. Credit quality remained strong, with net charge-offs of 30 basis points. The allowance for credit losses was stable and ended the quarter at 1.97%. Turning to slide 7.

Speaker Change: Return on tangible common equity or R. O T. C. He came in at 14, 2% for the quarter adjusted for notable items R. O T. C. He was 15, 3% average.

Speaker Change: Deposits continued to grow during the quarter, increasing by $1.1 billion or 0.7% cumulative.

Speaker Change: Cumulative deposit beta totaled 43% through quarter end average loan balances increased by $701 million or 0.6% for the quarter.

Speaker Change: Credit quality remains strong with net charge offs of 30 basis points allowance for credit losses was stable and ended the quarter at 1.97%.

Turning to slide seven.

Zachary J. Wasserman: As I noted, average loan balances increased quarter over quarter and were higher by 1.3% year over year. For the quarter, loans increased at a 2.3% annualized pace. We expect the pace of future loan growth to accelerate over the course of 2024. Loan growth was commercial-led for the quarter, with total commercial loans increasing by $691 million. Commercial balance growth included distribution finance, which increased by $352 million, benefiting from normal seasonality. Auto floor plan growth increased by $313 million. CRE balances declined by $31 million, while all other commercial portfolios were relatively unchanged on a net basis.

Speaker Change: I noted average loan balances increased quarter over quarter and were higher by one 3% year over year for the quarter loans increased at a two 3% annualized pace, we expect the pace of future loan growth to accelerate over the course of 'twenty 'twenty four.

Speaker Change: Loan growth was commercial lead for the quarter with total commercial loans, increasing by $691 million commercial balance growth included distribution finance, which increased by $352 million benefiting from normal seasonality.

Speaker Change: Auto floor plan increased by $313 million.

Speaker Change: CRE balances declined by $31 million all other commercial portfolios were relatively unchanged on a net basis within other commercial we saw notable strength in regional and business banking balances as a result of sustained production levels and the continued retention of all SBA loan production on balance sheet.

Zachary J. Wasserman: Within Other Commercial, we saw notable strength in regional and business banking balances as a result of sustained production levels and the continued retention of all SBA loan production on the balance sheet. However, in total consumer loans, average balances were flat overall for the quarter. Within consumer, residential mortgages increased by $137 million, benefiting from production as well as slower prepay speeds. Average auto balances declined by $59 million, but they increased by $180 million on an end-of-period basis. RV marine average balances declined by $42 million, and home equity was lower by $35 million.

Speaker Change: In total consumer loans average balances were flat overall for the quarter within consumer residential mortgage increased by $137 million benefiting from production as well as slower prepay speeds average auto balances declined by $59 million, however increased by $180 million.

Speaker Change: On an end of period basis.

Speaker Change: RV Marine average balances declined by $42 million and home equity was lower by $35 million.

Zachary J. Wasserman: Turning to slide 8, as noted, we drove another quarter of solid deposit growth. Average deposits increased by $1.1 billion in the first quarter. On a year-over-year basis, deposits have increased by $4.6 billion, or 3.1%. However, total cumulative deposit beta continued to decelerate quarter-over-quarter and ended at 43%, consistent with our expectations for this point in the rate cycle. Our current outlook for deposit beta remains unchanged, trending a few percentage points higher so long as there is a pause from the Fed and then beginning to revert and fall when we see rate cuts. However, market expectations for rate cuts have clearly been pushed out compared to our January earnings call.

Speaker Change: Turning to slide eight as noted we drove another quarter of solid deposit growth average deposits increased by $1.1 billion in the first quarter on a year over year basis deposits have increased by $4.6 billion or 3.1% total cumulative deposit beta continued to decelerate quarter over quarter.

Speaker Change: <unk> and ended at 43% consistent with our expectations for this point in the rate cycle. Our current outlook for deposit beta remains unchanged trending a few percentage points higher so long as there is a pause from the fed and then beginning to revert in fall when we see rate cuts market expectations for rate cuts have clearly.

Speaker Change: Pushed out compared to our January earnings call. We continue to believe that there'll be rate cuts over time and the impact of beta will be a function of the duration in this pause from the fed turning to slide nine noninterest bearing mix shift is tracking closely to our forecast average noninterest bearing balances decreased by $1.3 billion.

Zachary J. Wasserman: We continue to believe that there will be rate cuts over time, and the impact of beta will be a function of the duration of this pause from the Fed. Turning to slide nine, the non-interest-bearing mix shift is tracking closely to our forecast. Average non-interest-bearing balances decreased by $1.3 billion, or 4% from the prior quarter. We continue to expect this mix shift to moderate and stabilize during 2024. Moving on to slide

Speaker Change: Or 4% from the prior quarter, we continue to expect this mix shift to moderate and stabilize during 'twenty 'twenty four onto slide 10 for the quarter net interest income decreased by $27 million or 2% to $1.300 billion net interest margin declined sequentially to three point of 1%.

Speaker Change: Cumulatively over the cycle, we have benefited from our asset sensitivity and earning asset growth with net interest revenues growing at a 6% CAGR over the past two years reconciling the change in NIM from Q4, we saw a decrease of six basis points. This was primarily due to lower spread net of free funds, which accounted for nine.

Zachary J. Wasserman: For the quarter, non-interest income decreased by $27 million, or 2%, to $1,300,000,000. Non-interest margin declined sequentially to 3.01%. Cumulatively, over the cycle, we have benefited from our asset sensitivity and earnings asset growth, with non-interest revenues growing at a 6% CAGR over the past two years. Reconciling the change in NIM from Q4, we saw a decrease of 6 basis points

Speaker Change: Basis points, along with a one basis point benefit from lower average fed cash and two basis points positive impact from other items, including lower hedge drag impact we continue to benefit from fixed rate loan repricing. We've seen notable increases in fixed asset portfolio yields thus far in the rate cycle and.

Speaker Change: Many of our fixed rate loan portfolios retain substantial upside repricing opportunity through 'twenty 'twenty four and into 2025 as a reminder, we continue to analyze and develop action plans for a wide range of potential economic and interest rate scenarios for both short term rates as well as the slope and level of the curve.

Zachary J. Wasserman: This was primarily due to lower spread, net of free funds, which accounted for 9 basis points, along with a 1 basis point benefit from lower average Fed cash and 2 basis points positive impact from other items, including lower hedge drag. We continue to benefit from fixed rate loan repricing. We have seen notable increases in fixed asset portfolio yields thus far in the rate cycle, and many of our fixed rate loan portfolios retain substantial upside repricing opportunity through 2024 and into 2025.

Speaker Change: The basis of our planning and guidance continues to be a central set of those scenarios that are bounded on the low end by a scenario that includes three fed fund cuts in 'twenty 'twenty, four which tracks closely to the current fed dot plot.

Speaker Change: This scenario is also aligned to the forward curve from the end of March for longer duration time points.

Speaker Change: It is important to note that the level of the curve in the two to five year term points is an important driver of our asset repricing and spreads the higher scenario assume rates stay higher for longer with no fed fund rate reductions this year.

Zachary J. Wasserman: As a reminder, we continue to analyze and develop action plans for a wide range of potential economic and interest rate scenarios for both short-term rates, as well as the slope and level of the curve. The basis of our planning and guidance continues to be a central set of those scenarios that are bounded on the low end by a scenario that includes three Fed fund cuts in 2024, which tracks closely to the current Fed dot plot.

Speaker Change: This scenario also assumes the longer duration time points remain at or above the levels at quarter end.

Speaker Change: In both of these scenarios as we project further out into 2025, we continue to believe it is most likely that they're all eventually be rate cuts at some point as we get into next year.

Speaker Change: Comparing our latest outlook for those scenarios to the range of outlook. We shared our January guidance. There have certainly been changes given the volatility of rates over the past quarter.

With scenarios now expect fed funds to stay elevated for longer.

Zachary J. Wasserman: This scenario is also aligned to the forward curve from the end of March for longer-durated time points. It's important to note that the level of the curve in the two to five-year term points is an important driver of our asset repricing and spreads. The higher scenario assumes rates stay higher for longer, with no Fed Fund rate reductions this year.

Speaker Change: Which will drive some incremental deposit beta while the belly of the curve has improved which will also support asset yields and repricing benefit.

Speaker Change: It's difficult to predict exactly how the rate environment will play out over the course of the year as.

Speaker Change: As we look at the impact of this rate outlook on our business the fundamental elements of our prior guidance remain unchanged. There's much of the year left to play out and as a result, we're maintaining our range for full year spread revenue growth at the margin, we're seeing somewhat higher funding costs as the expected timing of rate cuts has been pushed out if this.

Zachary J. Wasserman: This scenario also assumes the longer-durated time points remain at or above the levels at quarter end. In both of these scenarios, as we project further out into 2025, we continue to believe it is most likely that there will eventually be rate cuts at some point as we get into next year. Comparing our latest outlook for those scenarios to the range of outlook we shared in our January guidance, there have certainly been changes given the volatility of rates over the past quarter.

Speaker Change: Plays out for the full year, our view is that the overall NIM outcome could be a few basis points lower than our previous guidance in both scenarios. Importantly, we're also seeing strong continued deposit growth that is more likely to be at the top end of our deposit growth guidance range, which provides good core funding for accelerating loan growth.

Speaker Change: We continue to see Q1 as the trough for net interest income on a dollar basis, we expect sequential growth in spread revenues from this level during the remaining quarters of the year.

Zachary J. Wasserman: Both scenarios now expect Fed funds to stay elevated for longer, which will drive some incremental deposit beta, while the belly of the curve has improved, which will also support asset yields and repricing benefits. However, it's difficult to predict exactly how the rate environment will play out over the course of the year.

Speaker Change: We also continue to project that a higher rate scenario will produce a higher overall NIM.

Speaker Change: In this scenario, we would see a more extended trend of higher deposit beta and hence overall funding costs will be higher we would also see an incrementally higher fixed asset repricing benefit.

Zachary J. Wasserman: As we look at the impact of this rate outlook on our business, the fundamental elements of our prior guidance remain unchanged. There's much of the year left to play out, and as a result, we're maintaining our range for full-year revenue growth. At the margin, we're seeing somewhat higher funding costs, as the expected timing of rate cuts has been pushed out. If this plays out for the full year, our view is that the overall NIM outcome could be a few basis points lower than our previous guidance in both scenarios.

Speaker Change: Importantly, our core focus is on driving revenue growth and as I noted, we continue to forecast that the combination of this margin outlook.

Speaker Change: Coupled with accelerating loan growth will drive solid revenue expansion from here. This will support accelerating earnings growth rates as we move throughout this year and continue on into 'twenty twenty-five.

Speaker Change: Turning to slide 11, our level of cash and securities increased as we benefited from higher funding balances from sustained deposit growth as well as our senior note offering and a b S transactions in the first quarter.

Speaker Change: We expect cash and securities as a percentage of total average assets to remain at approximately 27% to 28% as the balance sheet grows over time.

Zachary J. Wasserman: Importantly, we're also seeing strong continued deposit growth that is more likely to be at the top end of our deposit growth guidance range, which provides good core funding for our accelerating loan growth. We continue to see Q1 as the trough for net interest income on a dollar basis.

Speaker Change: We are reinvesting securities cash flows in short duration HQ L. A.

Speaker Change: Consistent with our approach to continue to manage the unhedged duration of the portfolio lower overtime.

Speaker Change: We have reduced the overall hedged the duration of the portfolio from 4.1 years to 3.5 years over the past seven quarters.

Zachary J. Wasserman: We expect sequential growth and spread revenues from this level during the remaining quarters of the year. We also continue to project that a higher rate scenario will produce a higher overall NIM. In this scenario, we would see a more extended trend of higher deposit beta, and hence overall funding costs would be higher.

Speaker Change: Turning to slide 12, you can see an updated outlook for a OCI.

Speaker Change: Based on the rate environment at quarter end, a OCI moved incrementally higher.

Speaker Change: OCI at quarter end was 21% lower than the levels, we saw in the third quarter.

Zachary J. Wasserman: We would also see an incrementally higher fixed asset repricing benefit. Importantly, our core focus is on driving revenue growth. And as I noted, we continue to forecast that the combination of this margin outlook, coupled with accelerating loan growth, will drive solid revenue expansion from here. This will support accelerating earnings growth rates as we move throughout this year and continue on into 2025. Turning to slide 11, our level of cash and securities increased as we benefited from higher funding balances from sustained deposit growth, as well as our senior note offering and ABS transactions in the first quarter.

Speaker Change: Our outlook continues to forecast a substantial portion of a OCI recapture over the next couple of years.

Speaker Change: Turning to slide 13, we have updated the presentation of our balance sheet hedging program in order to more directly illustrate the intent of the hedging program.

Speaker Change: This view shows the effective swap profile in the future, including the effect of forward starting swaps. So you can see more directly the hedging exposures as they will play out over the next two years slide 43 in the appendix provides the total notional swap exposure similar to our prior reporting.

Speaker Change: As of March 31, we had $16 $8 billion of effective receive fixed swaps and $10.7 billion of effective pay fixed swaps or hedging program is designed with two primary objectives to protect margin and revenue and down rate environment.

Zachary J. Wasserman: We expect cash and securities as a percentage of total average assets to remain at approximately 27 to 28% as the balance sheet grows over time. We are reinvesting securities cash flows in short-duration HQLA, consistent with our approach to continue to manage the unhedged duration of the portfolio lower over time. We have reduced the overall hedged duration of the portfolio from 4.1 years to 3.5 years over the past seven quarters.

Speaker Change: And to protect capital and potential operate scenarios.

Speaker Change: The pay fixed swaps, which had been effective in protecting capital. During this rate cycle have a weighted average life of just over three years and will begin to mature beginning in the second quarter of 2025 as these instruments from mature our asset sensitivity will reduce.

Zachary J. Wasserman: Turning to slide 12, you can see an updated outlook for AOCI. Based on the rate environment at quarter end, AOCI moved incrementally higher. However, AOCI at quarter end was 21% lower than the levels we saw in the third quarter.

Speaker Change: Over time, we intend to gradually add to our Downrate protection program at a measured pace as.

Zachary J. Wasserman: Our outlook continues to forecast a substantial portion of AOCI recapture over the next couple years. Turning to slide 13, we have updated the presentation of our balance sheet hedging program in order to more directly illustrate the intent of the hedging program. This view shows the effective swap profile in the future, including the effect of forward starting swaps. So you can see more directly the hedging exposures as they will play out over the next two years.

As the rate outlook moved over the course of the first quarter and the yield curve became less negatively inverted we incrementally added to our downright protection hedges, we added $3 $5 billion of notional forward starting receive fixed swaps in the first quarter. Additionally through the first two weeks of April we added another two.

Speaker Change: Billions dollars of forward starting receive fixed swaps.

Speaker Change: The forward starting structure minimizes the near term negative carry while protecting moderate term net interest margin in 2020 five and 'twenty 'twenty six.

Zachary J. Wasserman: Slide 43 in the appendix provides the total notional swap exposure, similar to our prior. As of March 31, we had $16.8 billion of effective receive fixed swaps and $10.7 billion of effective pay fixed swaps. Our hedging program is designed with two primary objectives, to protect margin and revenue in downrate environments and to protect capital in potential upgrade scenarios. The payfix swaps, which have been effective in protecting capital during this rate cycle, have a weighted average life of just over three years and will begin to mature beginning in the second quarter of 2025.

Speaker Change: These instruments will also reduce the overall asset sensitivity of the business.

Speaker Change: We will remain dynamic to manage the hedging and interest rate positioning of the balance sheet and we may make further changes over time.

Speaker Change: Our current approach is designed to gradually reduce asset sensitivity throughout the next year and a half while allowing us to maximize the benefit from the current rate environment.

Speaker Change: Moving on to slide 14, our fee revenue growth is driven by three substantive areas capital markets payments and wealth management and capital markets total revenues declined from the prior quarter driven by lower advisory revenues commercial banking related capital markets revenues increased sequentially since trough in the third quarter.

Zachary J. Wasserman: As these instruments mature, our asset sensitivity will reduce. Over time, we intend to gradually add to our downrate protection program at a measured pace. As the rate outlook moved over the course of the first quarter and the yield curve became less negatively inverted, we incrementally added to our downrate protection hedges. We added $3.5 billion of notional forward-starting received fixed swaps in the first quarter. Additionally, through the first two weeks of April, we added another $2 billion of forward-starting received fixed swaps. The forward-starting structure minimizes near-term negative carry while protecting moderate-term net interest margin in 2025 and 2026. These instruments will also reduce the overall asset sensitivity of the business.

Speaker Change: <unk> as commercial loan production continues to accelerate this will support growth in areas such as interest rate derivatives FX and syndications.

Speaker Change: Debt capital markets is also expected to notably benefit over the course of the year.

Speaker Change: Within advisory pipelines and backlog continued to remain robust and we expect advisory to contribute to growth in capital markets revenues over the remainder of the year.

Speaker Change: Payments and cash management revenue was seasonally lower in the first quarter and increased 7% year over year.

Speaker Change: Debit card revenue continues to outperform industry benchmarks Treasury management fees have increased 10% year over year as we have deepened customer penetration.

Zachary J. Wasserman: We will remain dynamic to manage the hedging and interest rate positioning of the balance sheet, and we may make further changes over time. Our current approach is designed to gradually reduce asset sensitivity throughout the next year and a half while allowing us to maximize the benefit from the current rate environment. Moving on to slide 14, our fee revenue growth is driven by three substantive areas, capital markets, payments, and wealth management. In capital markets, total revenues declined from the prior quarter, driven by lower advisory revenues.

Speaker Change: We have substantive opportunities across the board in payments to grow revenues over the coming years.

Speaker Change: Our wealth and asset management strategy is delivering results with revenues up 10% from the prior year, we are seeing great execution and the benefits of our investments in this area advisory relationships have increased 8% year over year and assets under management have increased 12% year over year, turning to slide 15.

On an overall level GAAP noninterest income increased by $62 million to $467 million for the first quarter, excluding the impacts of the mark to market on the pay fixed swaps <unk> in the prior quarter and the C. R. T fees declined seasonally by $12 million corn.

Zachary J. Wasserman: Commercial banking-related capital markets revenues increased sequentially since troughing in the third quarter. As commercial loan production continues to accelerate, this will support growth in areas such as interest rate derivatives, FX, and syndications. Debt capital markets is also expected to notably benefit over the course of the year. Within advisory, pipelines and backlog continue to remain robust, and we expect advisory to contribute to growth in capital markets revenues over the remainder of the year.

Speaker Change: For over quarter, our first quarter fee revenue is generally the low point for the year and we expect noninterest income to grow sequentially from this quarter's level moving on to slide 16 on expenses GAAP noninterest expense decreased by $211 million and underlying core expenses decreased by $24 million.

Zachary J. Wasserman: Payments and cash management revenue was seasonally lower in the first quarter and increased 7% year-over-year. Debit card revenue continues to outperform industry benchmarks. Treasury management fees have increased 10% year over year as we have deepened customer penetration.

Speaker Change: During the quarter, we incurred $32 million of incremental expense related to the FDIC deposit insurance fund special assessment as well as $7 million related to our ongoing business process Offshoring program to drive efficiencies.

Zachary J. Wasserman: We have substantive opportunities across the board in payments to grow revenues over the coming years. Our Wealth and Asset Management Strategy is delivering results, with revenues up 10% from the prior year. We are seeing great execution and the benefits of our investments in this area. Advisory relationships have increased 8% year over year, and assets under management have increased 12% year over year. On an overall level, GAAP non-interest income increased by $62 million to $467 million for the first quarter.

Speaker Change: Excluding these items core expenses were marginally lower than the first quarter than we expected largely due to timing of certain spend on tech and data initiatives as well as lower incentive compensation, we continue to forecast, 4.5% core expense growth for the full year.

Speaker Change: From a timing standpoint, we expect core expenses to be higher in the second quarter at approximately $1.130 billion. This level should be relatively stable for the third and fourth quarter there.

Speaker Change: There may be some variability given revenue driven compensation as well as the pace of expected new hiring activities. This level of expense supports our investments into organic growth strategies as well as data and technology initiatives.

Zachary J. Wasserman: Excluding the impacts of the mark-to-market on the pay-fix swaptions in the prior quarter and the CRT, fees declined seasonally by $12 million quarter-over-quarter. However, our first-quarter fee revenue is generally the low point for the year, and we expect non-interest income to grow sequentially from this quarter's level. Moving on to slide 16, on expenses, Gap non-interest expense decreased by $211 million, and underlying core expenses decreased by $24 million.

Speaker Change: Slide 17, recaps, our capital position Com.

Speaker Change: Common equity tier one ended the quarter at 10.2% our adjusted CET, one ratio inclusive of Aoc I was 8.5% and has grown 60 basis points from a year ago, Our capital management strategy remains focused on driving capital ratios higher while maintaining our top priority to fund <unk>.

Zachary J. Wasserman: During the quarter, we incurred $32 million of incremental expense related to the FDIC Deposit Insurance Fund Special Assessment, as well as $7 million related to our ongoing business process offshoring program to drive efficiencies. Excluding these items, core expenses were marginally lower in the first quarter than we expected, largely due to the timing of certain spend on tech and data initiatives, as well as lower incentive compensation. We continue to forecast 4.5% core expense growth for the full year. From a timing standpoint, we expect core expenses to be higher in the second quarter at approximately $1,130,000,000.

Speaker Change: High return loan growth.

Speaker Change: We intend to drive adjusted CET, one inclusive of a OCI into our operating range of 9% to 10%.

Speaker Change: On slide 18 credit quality is coming in as we expected and continues to perform very well.

Speaker Change: Net charge offs were 30 basis points in Q1, one basis point lower than the prior quarter. They remain in the lower half of our through the cycle range of 25 to 45 basis points.

Speaker Change: Allowance for credit losses was stable at 1.97%.

Speaker Change: Nonperforming assets increased approximately 4% from the previous quarter to 60 basis points, while remaining below the prior 2021 level.

Zachary J. Wasserman: This level should be relatively stable for the third and fourth quarters. There may be some variability, given revenue-driven compensation, as well as the pace of expected new hiring activity. This level of expense supports our investments in organic growth strategies, as well as data and technology initiatives. Slide 17 recaps our capital position. Common Equity Tier 1 ended the quarter at 10.2%.

Speaker Change: The criticized asset ratio also increased approximately 3% quarter over quarter with sequential increases slowing quarter over quarter.

Speaker Change: The overall health of the portfolio is strong and tracking to our expectations.

Speaker Change: Let's turn to our outlook for 2024 overall, our guidance ranges are unchanged on loans, we expect to drive accelerated growth from the first quarter totaling between three and 5% on a full year basis.

Zachary J. Wasserman: Our adjusted CET1 ratio, inclusive of AOCI, was 8.5% and has grown 60 basis points from a year ago. Our capital management strategy remains focused on driving capital ratios higher while maintaining our top priority to fund high-return loan growth. We intend to drive adjusted CET1, inclusive of AOCI, into our operating range of 9 to 10 percent. On slide 18, credit quality is coming in as we expected and continues to perform very well.

Speaker Change: This will be driven by solid performance in our core as well as meaningful contribution from the new teams and market expansions.

Speaker Change: On deposits were keeping the overall range the same at between two and 4% we do see it more likely to end up at the higher portion of that range based on our momentum and the traction we're seeing with deposit gathering.

Speaker Change: Net interest income is expected to be within a range of down 2% and up 2% on a full year basis as I noted, we see NIM likely a few basis points lower than our earlier guidance, we project spread revenue to expand on a dollar basis from the Q1 level into the second quarter and throughout 2024.

Zachary J. Wasserman: Net charge-offs were 30 basis points in Q1, one basis point lower than the prior quarter. They remain in the lower half of our through-the-cycle range of 25 to 45 basis points. The allowance for credit losses was stable at 1.97 percent. Non-performing assets increased approximately 4% from the previous quarter to 60 basis points, while remaining below the prior 2021 level. The criticized asset ratio also increased approximately 3% quarter over quarter, with sequential increases slowing quarter over quarter.

Fee growth strategies remain on track and we continue to see core noninterest income growth of 5% to 7% for the full year.

Speaker Change: Expense outlook is unchanged expecting four 5% core expense growth for the full year.

Speaker Change: Credit quality as I mentioned is tracking closely to our expectations and we continue to expect full year net charge offs between 25, and 35 basis points with that we'll conclude our prepared remarks and move to Q&A Tim over to you.

Operator: Operator, we will now take questions, we ask that as a courtesy of your peers. Each person ask only one question and one related follow up and then if that person has additional questions here. She can add themselves back into the queue. Thank you.

Zachary J. Wasserman: The overall health of the portfolio is strong and tracking to our expectations. Now, let's turn to our outlook for 2024. Overall, our guidance ranges are unchanged. On loans, we expect to drive accelerated growth from the first quarter, totaling between 3% and 5% on a full year basis. This will be driven by solid performance in our core business, as well as meaningful contribution from the new teams and market expansions. On deposits, we're keeping the overall range the same at between 2% and 4%.

Operator: Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.

Operator: Start to if he like to remove yourself from the queue. As a reminder, please limit yourself to one question and one follow up.

Operator: First question is coming from Australia from Morgan Stanley. Your line is now live.

Morgan Stanley: Hey, good morning.

Morgan Stanley: Yeah.

Zachary J. Wasserman: We do see it more likely to end up at the higher portion of that range, based on our momentum and the traction we're seeing with deposit gathering. Net interest income is expected to be within a range of down 2% and up 2% on a full-year basis. As I noted, we see NIM likely a few basis points lower than our earlier guidance. We project adjusted revenue to expand on a dollar basis from the Q1 level into the second quarter and throughout 2024.

And so your comments on the NII guide, we're very thorough so really appreciate that.

Morgan Stanley: And I think it shows at the lower end of your guide is now for the Greek Gods and I think our guide is a little bit more.

Morgan Stanley: And so that is on deposit beta has been some of the other comments. We've heard says wondering if you can expand on that a little bit is that based on conversations you're having with customers or you know.

Morgan Stanley: What's driving that.

Manav: Sure Manav.

Manav: Does that help.

Manav: I'll take that.

Speaker Change: Broadly speaking, we're seeing the same outcome with very similar to the.

Zachary J. Wasserman: Fee growth strategies remain on track, and we continue to see core non-interest income growth of 5-7% for the full year. The expense outlook is unchanged, expecting 4.5% core expense growth for the full year. Credit quality, as I mentioned, is tracking closely to our expectations, and we continue to expect full-year net charge-offs between 25 and 35 basis points. With that, we'll conclude our prepared remarks and move to Q&A. Tim, over to you.

Speaker Change: Jim you had before just as I mentioned to sort of moderate a Q&A lower.

Speaker Change: Clearly the biggest change in the environment over the last two months since we gave guidance in January was the expectation for much less.

Speaker Change: Much longer pause in this fed posture for any rate reductions so at the margin really you'll see slightly higher deposit funding costs.

Speaker Change: Overall interest bearing liability cost, but the other thing that's important to notice in the prepared remarks as well as the deposit volumes are coming in very strong and slightly at the higher end of our prior expectations as well and so that's contributing somewhat although really good core funded equally for really exploring both of those over time so.

Timothy R. Sedabres: Over to you. Thanks, Zach.

Operator: Operator, we will now take questions. We ask that, as a courtesy to your peers, each person ask only one question and one related follow-up, and then if that person has additional questions, he or she can add themselves back into the queue. Thank you. Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. You may press star 2 if you'd like to remove yourself from the queue. As a reminder, please limit yourselves to one question and one follow-up.

Speaker Change: Really the driver as.

Speaker Change: As we entered the quarter as well as the color on that.

As we entered the quarter.

Speaker Change: The market forward was for the first wave production to be in March we always knew that was we took the.

Speaker Change: It's likely not to be the case, but with Cleveland that was the forecast of the market broadly and what we're beginning to execute the early stages of a downgrade of actions we've discussed shortly see term duration.

Speaker Change: Duration.

Speaker Change: Another other elements of our pricing.

Speaker Change: Throughout the quarter, clearly that reset and so you have to forgive me.

Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. You may press star 2 if you'd like to remove yourself from the queue.

Speaker Change: Dynamic as we would always be in managing deposit pricing.

Speaker Change: And likely now those more south to jump down reactions when pushed further out so that's really the biggest driver of it as sort of the timing of when it will begin to see more significant downgrade actions overtime, we would expect to be just as effective.

Operator: As a reminder, please limit yourselves to one question and one follow-up. Our first question is coming from Manan Gosalia from Morgan Stanley. Your line is now live. Hi, good morning.

Speaker Change: Going forward as we visit so nothing is really just.

Speaker Change: Will that occur.

Speaker Change: A few bps of additional funding posture in 2024.

Zachary J. Wasserman: Broadly speaking, we're seeing the NIM outcome very similar to the view we had before, just as I mentioned, the sort of moderate tuning, lower, you know, and clearly, the biggest change in the environment over the last three months since we gave guidance in January was the expectation for a much longer pause in this Fed posture before any rate reductions. So, at the margin, really, we're seeing slightly higher deposit funding costs. Interest-Baring Liability Costs, and the other thing that's important, and I'll try to note this in the preferred market as well, is the deposit volumes are coming in very strong and slightly at the higher end of our prior expectation as well, and so that's contributing somewhat, although really good core funding clearly for the accelerated loan growth over time. So that's really the driver.

Is any of that.

Speaker Change: Because you're also planning ahead as said, it's accelerating loan growth that you're expecting.

Speaker Change: Yeah. It's a good question, but I just looked at the.

Speaker Change: The posture, we're discussing more with you clearly.

When we build great customer reviews, and also not only was the first one happened, but what would be the expected trajectory by the margins my customer clearly thereafter.

Speaker Change: For us, we're very dynamic and granular in how we manage this to really optimize the next best unusual funding here. So.

Speaker Change: Particularly thinking about when if that can happen and obviously.

Speaker Change: Tempting to just laid in front of it without being said type of marginal Tunisia, and I wouldn't overplay that.

Speaker Change: If I could add to Steve.

Speaker Change: Our commercial pipeline is as is very robust and each each order has improved so we.

Zachary J. Wasserman: You know, as we entered the quarter, and I'll just provide one last piece of color on that, the market forward was for the first rate reduction to be in March. We always knew that that was the case; we took the view that that was likely not to be the case, but clearly, that was the forecast of the market broadly, and we were beginning to execute the early stages of down beta actions. We discussed shortening the CD term duration and changing other elements of our pricing.

Speaker Change: We are going to the second quarter was up.

Speaker Change: A very good healthy outlook.

Speaker Change: As we think about our guidance for the year, we think on the loan side, we're going to be closer to the top end, which is at heart.

The consideration for adding a positive though right Julie.

Speaker Change: Here at this earlier stage of the year.

Speaker Change: Yes.

Julie: Thanks for the question.

Julie: Yeah.

Speaker Change: Thank you. Our next question is coming from John Payne carriage from Evercore ISI. Your line is now live.

Good morning.

Zachary J. Wasserman: You know, as we went throughout the quarter, clearly that reset, and so we had to continue to be dynamic, as we would always be in managing deposit pricing, and likely now those more substantive down beta actions were pushed further out. So that's really the biggest driver of it, the timing of when we'll begin to see more significant down beta actions. Over time, we would expect to be just as effective going forward as we've been in the past on that, and it's really just, you know, when will that occur? Now, is any of that because you're also planning ahead of this accelerating loan growth that you're expecting?

Oh gosh.

Speaker Change: So thanks for the color.

John G. Pancari: On the NII guide just so just to confirm.

Speaker Change: And so it does.

Speaker Change: We did indicate that you are factoring in a higher for longer.

Speaker Change: Environment.

Speaker Change: All pulling them in your outlook.

Speaker Change: But then again.

Speaker Change: Down two to up to is the primary reason for the maintaining that versus.

Speaker Change: Outside bias would be mainly the deposit costs.

Speaker Change: The stuff coming in either or is there any other factor.

Zachary J. Wasserman: You know, it's a good question, but look at the posture, we're in this cuspy moment here, clearly, of when will rate cuts reduce, and also, not only when will the first one happen, but what will be the expected trajectory by the market and by customers, clearly, thereafter? You know, for us, we're very dynamic and granular in how we manage this to really optimize the next best unit of funding here, so continually thinking about when that rate cut is going to happen and, obviously, attempting to play in front of it. With that being said, you know, we're talking about marginal tuning here, and I wouldn't overplay it. That's a break that we're doing here at this earlier stage of the year. Thank you for the question.

That is the primary driver. So yes is the answer to that seemed a little lower a few basis points lower NIM, but incrementally somewhat stronger loan growth.

Speaker Change: Things are largely offsetting the ultimate results in that guidance range and importantly.

Speaker Change: But keeping prices that trajectory growing net interest income on a dollar basis out of the first quarter into the second quarter and continued into the third and fourth quarter for the album without going to be solidly expanding revenue growth.

Speaker Change: And and solidly expected profit growth as well so so yes. So the fundamentals of your question.

Speaker Change: Overall outlook generally unchanged.

Speaker Change: Got it okay. Thanks for that Jack.

Speaker Change: Separately, our back for the loan growth topic.

Speaker Change: Steve you just discussed.

Speaker Change: The confidence in the NDA.

Speaker Change: The outlook, particularly given your pipeline.

Zachary J. Wasserman: Thank you. Our next question is coming from John Pancari from Evercore ISI. Your line is...

Speaker Change: Maybe can you talk about where demand.

Speaker Change: Now where utilization now and what type of inflection do you see here.

Zachary J. Wasserman: So thanks for the color on the NII guide. So just to confirm again, so it does indicate that you are factoring in a higher for a long time. Unknown Speaker, Unknown Speaker, Unknown Speaker, Unknown Speaker. That is the primary driver, so yes is the answer to that. I'm seeing a little lower, a few basis points lower than them, but incrementally somewhat stronger loan growth. Those things are largely offsetting. We continue to see the ultimate results in that guidance range. And importantly, what is keeping us is that trajectory.

It seems like you've got confidence in the back half strengthening.

Speaker Change: What anecdotal.

Speaker Change: The data do you have the kind of support that acceleration.

Speaker Change: Thanks Scott.

Speaker Change: The commercial pipeline for the second quarter.

Speaker Change: Particularly in a high probability to close level. So the very very very.

Speaker Change: Very strong relative to the last five quarters. So so.

Speaker Change: As Ive said each month has improved in the first quarter second quarter strength is obvious now at this stage.

Stephen D. Steinour: Growing managers' income on a dollar basis out of the first quarter into the second quarter and continuing on into the third and fourth quarter. The outcome of that is going to be solidly expanding revenue growth and solidly expanding profit growth as well. So yes to the fundamentals of your question and the overall outlook generally unchanged. You know, Steve, you just discussed it, that you've got confidence in the outlook, particularly given your pipelines.

Speaker Change: We're also seeing good business.

Speaker Change: Banking loan growth and as we have the benefit of these new initiatives.

Speaker Change: None of which have.

Speaker Change: The arrogance of the three new initiatives, especially banking last year, the Carolinas off to a really good start Texas was there a couple of weeks ago.

Speaker Change: In there as well.

Stephen D. Steinour: You know, maybe, can you talk about where demand stands now, where utilization is now, and what type of inflection do you see here? You know, because it seems like you've got confidence in the back half strengthening. I mean, what anecdotal evidence do you have, your data, do you have the kind of support that accelerates?

Speaker Change: All of those investments will.

Speaker Change: Will bolster our.

Speaker Change: Our activities throughout the year and then as you know what he said.

One of the largest.

Speaker Change: Companies.

Speaker Change: That tends to be somewhat seasonal fourth quarter. So those are the combination of factors that gave us a lot of confidence that we'll be in that upper end of our guidance.

Stephen D. Steinour: Thanks, John. We see the commercial pipeline for the second quarter, particularly at a high probability of close level, to be very, very good, very strong relative to the last five quarters. So, as I said, each month has improved in the first quarter. The second quarter's strength is obvious now at this stage. We're also seeing good business banking and loan growth.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question today is coming from Scott <unk> from Piper Sandler Your line is now live.

Good morning, guys. Thanks for taking the question I kind of wanted.

Scott: I wanted to revisit the margin as well though.

Scott: Deposit pricing is it.

Scott: Is it possibly make sort of a broad comment about is this.

Scott: Sort of something that you're seeing in reflecting.

Stephen D. Steinour: And we have the benefit of these new initiatives, none of which have books that they're carrying. So the three new initiatives, especially banking last year, the Carolinas are off to a really good start. Texas was there a couple of weeks ago, and they have a great team there as well.

Scott: Market pricing pressures or would you say you're more on sort of the leading cause of it sounds like we're trying to support the loan growth, which is obviously a very positive differentiated factor.

Stephen D. Steinour: All of those investments will bolster our activities throughout the year. As you know, we've got one of the largest finance companies in the country, and that tends to be somewhat seasonal in the fourth quarter. So those would be the combination of factors that give us a lot of confidence that we'll be at or near that upper end of our guide for the whole year.

Scott: But are you all kind of leading with pricing on the deposit side to fund that growth or what does the competitive dynamic look like as well.

Scott: Great question Scott.

Scott: Thank you.

I would characterize the competitive intensity in the market is generally consistent today, how it was this time last quarter.

Operator: Thank you. Our next question today is coming from Scott Siefers on behalf of Piper Sandler. Your line is now live.

Scott: Substantive change it remains a competitive market and clients are clearly aware of right.

Operator: Morning guys, thanks for taking the question. I kind of wanted to revisit the margin as well. So on the deposit price thing, is it Is it possible to make sort of a broad comment about, is this... Is that sort of something that you're seeing and reflecting kind of market pricing pressures, or would you say you're more on sort of the leading edge? It sounds like we're trying to support the loan growth, which is obviously a very positive differentiated factor, but are you all kind of leading with pricing on the deposit side to fund that growth? Or what does the competitive dynamic look like as well?

<unk>.

Scott: Tumor of the small business side.

Scott: It's a transparent market I think.

Scott: What has happened.

Scott: Part of what we're what we're seeing is not giving you guidance on is not just one.

Scott: Happening right now in the market, but the outlook for the whole year.

Scott: These relationships. These comments is whereas before there was a fairly strong conviction of the marketplace and you saw our guidance ranges. The first cups, beginning somewhere between March and August.

Zachary J. Wasserman: Yeah, great question, Scott. This is Zach.

Timeframe.

Scott: Pushed out period.

Zachary J. Wasserman: I'll take it. I would characterize the competitive intensity of the market as generally consistent today with how it was at this time last quarter, so I don't think there's been any substantive change. It remains a competitive market, and clients are clearly aware of the rate and the competitive rate environment on the consumer, the small business, the commercial side, so it's a transparent market. I think, you know, what has happened. Part of what we're seeing is, and I'm giving you guidance on, is not just what's happening right now in the market but the outlook for the whole year.

Scott: Period of time.

Scott: Substantive downgrade actions.

Scott: Naturally the main driver here.

Scott: Our pricing strategy is very much the sandwiches continue to price.

Scott: Competitive ways, but not least the margins typically are.

Scott: And really drive the fundamentals of deposit growth from customer acquisition.

2% primary bank relationship growth.

Scott: <unk>, 4% in business banking.

Scott: On the commercial side as well so that the younger benzene.

Scott: Pricing strategies really just designed to ensure that there's no fee.

Zachary J. Wasserman: And so that's really, I think, the way you should interpret these comments is that, whereas before, there was a fairly strong conviction in the marketplace, and even our prior guidance ranges had the first cuts beginning somewhere between March and August, clearly, that time frame for cuts has been pushed out, and so the period of time before we can begin to manage substantive down-beta actions has just been extended, and that's really the main driver here. I think, you know, our pricing strategy is pretty much the same, which is, you know, continue to price in competitive ways but not leave the markets, to be clear, and really drive the fundamentals of deposit growth from customer acquisition.

Scott: Fair and appropriate pricing.

Scott: Okay.

Speaker Change: Okay, Alright, perfect and I think you actually touched on sort of my my loan growth questions in prior responses that does I appreciate that color.

Speaker Change: Thanks, so much thank.

Speaker Change: Thank you. Your next question is coming from Steven Alexopoulos from Jpmorgan Chase <unk> Company. Your line is now live.

Steven A. Alexopoulos: Hey, good morning, everyone.

Steven A. Alexopoulos: Alright.

Not to beat a dead horse on the net interest income guidance, but last quarter with three cuts that got us to the high end of the range and now three times to get it to the low end of the range.

Steven A. Alexopoulos: Im somewhat confused Zach I always think your hedge fund magic keeps us relatively stable over short periods of time.

Zachary J. Wasserman: We talked about 2% primary bank relationship growth in consumer, 4% in business banking, and growing on the commercial side as well. And so that's the underpinning of the pricing strategy, which is really just designed to ensure that there's, you know, fair and appropriate pricing as we gather those deposits.

Steven A. Alexopoulos: I'm a little confused why three cuts now puts us down to <unk>.

Two last quarter.

Steven A. Alexopoulos: Yeah.

Zach: Good question I appreciate it.

Zach: What I would just bring me back to the.

Speaker Change: Two key things here overall, the NIM outlook for us in both scenarios is a few basis points lower mainly a devotion of timing of when the rate reductions will begin when we will see.

Zachary J. Wasserman: All right, perfect. And I think you actually touched on sort of my long-growth questions in prior responses. So that does work for me. I appreciate the color.

Speaker Change: Substantive down this action has a somewhat higher cost.

Speaker Change: Cost environment than we expected.

Operator: Thank you. The next question is coming from Steven Alexopoulos from JPMorgan Chase Company. Your line is now live.

Speaker Change: But the main driver second thing I'll say is the.

Speaker Change: The four key factors for us that are driving the.

Speaker Change: It remains the same.

Operator: Hey, good morning everyone. Good morning, Steven.

Speaker Change: The biggest positive factor as fixed asset repricing tried to share in the prepared remarks, we expect to see about $4 billion quarterly repricing of fixed assets, which should drive substantive benefit on the order of between 10, and 12 or 13 basis points, depending on how the development curve.

Operator: Not to beat a dead horse on the net, for sake of guidance, but last quarter, with three cuts, that got us to the high end of the range. And now, three cuts get us to the low end of the range. And I'm somewhat confused. Zach, I always think your hedge fund magic keeps us relatively stable over short periods of time. I'm a little confused why three cuts now put us down two versus up two last quarter.

Speaker Change: Maintains here over the course of this year.

Speaker Change: The second positive factor is a gradual reduction.

Speaker Change: Hedge drag you've got in the mill.

Speaker Change: In Q1, we had 16 basis points of hedge drag and I expect to see something between five to up to 18, eight even 10 basis points, depending on how the curve moves here over the course of the rest of this year until Q4 those are the two biggest positive factors.

Zachary J. Wasserman: Yeah, a good question. I appreciate it.

Zachary J. Wasserman: And I think, you know, what I was just bringing back to are the sort of two key things here. Overall, the NIMM outlook for us in both scenarios is a few basis points lower, mainly as a function of the timing of when rate reductions will begin and when we'll see substantive down-beta action. It's just a somewhat higher funding cost environment than we expected, and that's really the main driver. The second thing I would say is that the four key factors for us that are driving NIM this year remain the same.

Speaker Change: The other two factors are what's going on with variable yields and what's going on in the funding costs those are largely offsetting each other and both of those.

Speaker Change: Those moving all the direct opposite directions.

Speaker Change: And either a hybrid or a lower rate.

Speaker Change: Scenario.

Speaker Change: And those are modestly negative.

Speaker Change: Sure that would offset those positive TV overall, new Gen. One flat July position frontier, so none of that changed.

Speaker Change: <unk>.

Speaker Change: Is that.

Speaker Change: All of the modeling we're doing continues to indicate that a higher rate scenario overall.

Zachary J. Wasserman: The biggest positive factor is fixed asset repricing. We tried to share in the prepared remarks that we expect to see about $4 billion in quarterly repricing of fixed assets, which should drive substantive benefits on the order of between 10 and even 12 or 13 basis points, depending on how the value of the curve holds here over the course of this year. The second positive factor is a gradual reduction in the amount of hedge drag we've got in the NIP.

Speaker Change: Drive to higher NIM for us clearly the how.

Speaker Change: All of this plays out over such a short period of time three quarters.

Speaker Change: It really depends on the shape and trajectory timing.

Speaker Change: That's the best we can do and I think the guidance. What we tried to give you. This range of scenarios designed to allow us to gives you stability in terms of the revenue guidance.

Speaker Change: <unk>.

Speaker Change: Got it.

Zachary J. Wasserman: In Q1, we had 16 basis points of hedge drag, and I expect to see something between 5 to up to 8 to maybe even 10 basis points, depending on how the curve moves here over the course of the rest of this year until Q4.

Speaker Change: We put all those together you see NII bottomed in the first quarter, but I didn't hear you say it bottomed in the first quarter does that imply NIM.

<unk> bottomed in the first quarter.

Speaker Change: I expect to see NIM bouncing around these levels were rising over the course of the rest of the year term depending on how the scenario plays out and for that kind of flat horizon, coupled with accelerating loan growth.

Zachary J. Wasserman: Those are the two biggest positive factors. The other two factors are what's going on with variable yields and what's going on with funding costs. Those are largely offsetting each other; those are moving in opposite directions, to be clear, in either a higher rate path or a lower rate path scenario. And those are modestly net negative for the full year. It would offset those positives and keep the overall NIM in a generally flat to rising position from here.

Speaker Change: To drive accelerating net interest income on a dollar basis out of the first quarter into the second quarter of growth and then continue to grow.

Speaker Change: Got it okay.

Speaker Change: Just one separate question on the noninterest bearing deposit balances down pretty sharp average and period end.

Speaker Change: Some of your peers showing in February and March good stability.

Speaker Change: And those balances did you guys see that as well or did you see balances declining through the quarter. Thanks.

Zachary J. Wasserman: None of that has really changed. The last thing I'll say, a third point, is that all of the modeling that we're doing continues to indicate that a higher rate scenario overall, all things equal, drives a higher NIM for us. Clearly, how this plays out over such a short period of time, three quarters, will really depend on the shape and trajectory and timing and everything. But that's the best we can do. And I think the guidance we're trying to give here with this range of scenarios is designed to allow us to give you stability in terms of revenue guidance, which is ultimately the most important thing.

Speaker Change: Balances are modestly declining through the quarter.

Speaker Change: As we look at that we would see a few things one is.

Speaker Change: The trajectory of dollars if not just there I actually decelerate in terms of their next ships secondly for the most part all of the mix shift that we think will happen within consumer has happened.

Speaker Change: And where there is continued drift in Q1 is really in the business and commercial side.

Speaker Change: Another point would be we expect the noninterest, earning mix shifts mix as a percentage.

Speaker Change: We continue to stabilize in the high teens over the course of this year was 19, 44% as of Q1.

Zachary J. Wasserman: Zach, if we put all this together, you're saying NII bottomed in the first quarter, but I didn't hear you say NIM bottomed in the first quarter. Does that imply NIM did not bottom in the first quarter?

Speaker Change: Lastly, I'll say as you think about that percentage.

Speaker Change: It's very notable she mentioned that percentage overall deposits are shrinking versus a growth for us overall, the buzzer growing strongly as we've said so.

Zachary J. Wasserman: I expect to see NIM bouncing around these levels or rising over the course of the rest of the year, depending on how the scenario plays out, and for that, kind of flasherizing NIM coupled with accelerating loan growth to drive accelerating and then just income on a dollar basis out of the first quarter into the second quarter of growth and then continuing to grow into the third and fourth quarters.

Speaker Change: The mix is one thing, but the dollars are really the most important things that we see stabilizing here.

Speaker Change: Last couple of quarters.

Speaker Change: Got it thanks for taking my question.

Speaker Change: Thank you next question today is coming from Ebrahim <unk>.

Ebrahim: From Bank of America. Your line is now live.

Ebrahim: Hey, good morning.

Hey, Brian.

Ebrahim: I guess I just wanted to go back to something Steve you mentioned.

Ebrahim: I think in your prepared remarks, you said that the outlook and the economy is more conducive for good.

Zachary J. Wasserman: If I just, uh, one separate question. On the non-interest-bearing deposits, the balance is down pretty sharp, average a period, and we're seeing some of your peers showing good stability in those balances in February and March. Did you guys see that as well, or did you see balances decline through the quarter? Thanks.

Brian: Yes, he is probably the most upbeat I've heard this over the last week.

Brian: Don't mind spending some time in terms of.

Brian: Breaking down what you're seeing from customers in terms of strength in loan demand looking into Q2 and beyond and how much of this can cause just because of the.

Zachary J. Wasserman: Balances were modestly declining through the quarter. As we look at that, we see a few things. One is the trajectory of dollars of non-disparity actually decelerating in terms of their mix shift. Secondly, for the most part, all of the makeshift that we think will happen within the consumer has happened, and where there is continued drift in Q1, it's really in the business and commercial side. Another point would be that we expect the non-disappearing mixed shift, mixed as a percentage, to continue to stabilize in the high teens over the course of this year with 19.4% as of Q1.

Brian: Proactive action Huntington sneak into hired bankers and Carolina, Texas would love some color around both of those aspects.

Speaker Change: Thank you.

Speaker Change: So the economy, we all see that in the aggregate.

Speaker Change: Metrics that are released.

Speaker Change: Yes.

Speaker Change: And underlying strength, we're seeing that.

Speaker Change: Particularly because we've been proactive.

Speaker Change: Our lending activities through last year.

Speaker Change: <unk> is performing well, we're getting growth in our auto book distributions enhance in particular.

Speaker Change: Our business day.

Speaker Change: So very very localized levels principally years. The Midwest. We're also getting growth in the number of our other areas.

Zachary J. Wasserman: You know, and lastly, I would say, as you think about that percentage, it's very notable to measure that percentage if overall deposits are shrinking versus if they're growing. For us, overall deposits are growing strongly, as we've said, so the mix is one thing, but the dollars are really the most important thing. In fact, we see it stabilizing here over the course of the next couple quarters.

Speaker Change: And these new verticals that have been added.

Speaker Change: They are all closed model all generated.

Activity and other activity.

Speaker Change: Andy.

Speaker Change: Carolina expansion in Texas expansion.

Speaker Change: Our deliberate result, and.

Speaker Change: Very promising to us.

Speaker Change: So so we are positioned today.

Operator: Got it. Thanks for taking my question.

Operator: Thank you. The next question today is coming from Ebrahim Poonawala from Bank of America. Your line is now live.

Speaker Change: Core activities.

Speaker Change: And these incremental investments I think two to outperform.

Stephen D. Steinour: I guess I just wanted to go back to something Steve mentioned. I think in your prepared remarks you said that the outlook and the economy are more conducive to growth. Your messaging is probably the most upbeat I've heard this over the last week. If you don't mind spending some time breaking down what you're seeing from customers in terms of strength and loan demand, looking into 2Q and beyond, and how much of this strength is just because of the proactive actions Huntington's taken to hire bankers in the Carolinas, Texas would love some color around both those aspects. Thank you.

Speaker Change: Here's some loan growth, perhaps in a number of other.

Speaker Change: Our response as well.

Speaker Change: Certainly through this year.

Speaker Change: Essentially yes.

Speaker Change: Sure.

Speaker Change: Pipeline activity.

Speaker Change: It's earlier.

Speaker Change: Very proud to see us.

Speaker Change: Again, the strength of the first quarter equity market improving.

Speaker Change: A lot of confidence our investment banking activity capstone.

Speaker Change:

Related.

Speaker Change: Their pipeline is bigger than they've ever had.

As an example, so we've got a lot of a lot of opportunity in front of us and that we have to deliver.

Speaker Change: That is helpful and is that a couple of follow ups for you one apologies on NII I feel like I'm more confused after smoke there's back and forth.

Stephen D. Steinour: Thank you, Ebrahim. You know, the economy. We all see the aggregate metrics that are released. But there's an underlying strap.

Speaker Change: Should we expect if we don't get any rate cuts. So maybe well just one cut NII tends towards up 2% is that did I take rate.

Stephen D. Steinour: We're seeing that, particularly because we've been proactive with our lending activities through last year, the core is performing well. We're getting growth in our auto book, our distribution finance, and, in particular, our business bank. So, very, very localized levels, principally here in the Midwest.

Speaker Change: It will really be a blip it I'd say there. So I think the outcome will be somewhere between that range.

Speaker Change: <unk>.

Speaker Change: Given these ranges we try to generally box our plan.

Stephen D. Steinour: We're also getting growth in a number of our other areas, and these new verticals that have been added have all closed loans. They've all generated lending activity and other activity. And the Carolina expansion and the Texas expansion are delivering results and look very promising to us. So we've positioned the bank both with the core activities and these incremental investments, I think, to outperform peers in loan wealth and perhaps in a number of other respects as well, certainly through this year and potentially beyond.

Speaker Change: Land in the middle of it and of course for us.

Speaker Change: There are various and just normal variability it's hard to forecast.

Speaker Change: <unk>.

Speaker Change: So thats the expectation I think we will see.

Speaker Change: Just to clarify.

Speaker Change: Flat to rising.

Speaker Change: Slightly higher death, and the higher rate scenario, albeit with different drivers.

Speaker Change: And really coupling that with accelerating loan growth will drive dollars out of the law.

Speaker Change: Levels in Q1 up into Q2 and beyond.

Stephen D. Steinour: The pipeline activity I referenced earlier is very promising. And again, the strength of the first quarter, with every month improving, gives us a lot of confidence. Our investment banking activity, capstone, their pipeline is bigger than they've ever had, as an example. So we've got a lot.

Speaker Change: For a full year somewhere in the middle of that.

Speaker Change: Range.

Alright, so multiple scenarios middle of the range in any scenario, where this could exceed the up 2%.

Speaker Change: Yes. It certainly is possible we will have to see how the rate environment plays out here I think.

Speaker Change: Really just one.

Zachary J. Wasserman: That was helpful. And Zach, a couple of follow-ups for you. One, apologies on NII. I feel like I'm more confused after some of this back and forth. Should we expect, if we don't get any rate cuts or maybe just one cut, NII trends towards up 2%? Is that the right takeaway?

Speaker Change: Probably parsing the precision.

Speaker Change: More than is reasonable.

Speaker Change: Still a pretty moving target in terms of the yield curve is now.

Speaker Change: But I think we'll land somewhere in that range of our vessels.

Speaker Change: Thank you.

Speaker Change: Thank you as a reminder, if you'd like to be placed in the question queue. Please press star one on your telephone keypad. Our next question is coming from Ken used them from Jefferies. Your line is now live.

Zachary J. Wasserman: You know, it'll really be a foot and a take there. So I think the outcome will be somewhere in that range, EV. You know, when we give these ranges, we try to generally box our plan and land in the middle of it. But, of course, there's a bit of variance and just normal variability that's hard to forecast with such precision. So that's the expectation. I think we'll see, as I noted, and just to clarify, a flat rising.

Oh, hi, Thanks, good morning, and thanks for that that incremental slide on the on the swaps detail I'm wondering if you can just kind of help us understand as we get through the end of this year. Both in terms of what that swaps impact looks like.

Ken: And as important that fixed rate re pricing how should we think about those kind of combined benefits as we as we get out of 24 and think about 25 banks.

Zachary J. Wasserman: Slightly higher than in the higher rate scenario, albeit with different drivers. And really, coupling that with accelerating global growth will drive dollars out of the level we've seen in Q1, up into Q2 and beyond, and to land for a whole year somewhere in the middle of that range.

Speaker Change: It's a terrific question.

Speaker Change: Maybe I'll say a few things on that.

Zachary J. Wasserman: Alright, so multiple scenarios in the middle of the range and any scenario where this could exceed the up to percent?

Speaker Change: One is the fixed asset repricing benefit that we saw and I mentioned earlier somewhere between 10, and 10 11, 12 13 basis points upside this year from the $4 billion turning quarterly.

Zachary J. Wasserman: You know, certainly it's possible. We'll have to see how the rate environment plays out here. I think, really, at this point, we're probably parsing the precision more than is reasonable. It's still a pretty moving target in terms of where the yield curve is now, but I think we'll land somewhere in that range, our best estimate.

Speaker Change: Our modeling indicates that continue on into 2025 and kind of a similar pace it's really.

Speaker Change: Very long term phenomenon.

Speaker Change: A significant support services.

Speaker Change: Into 2025.

Operator: Thank you. As a reminder, if you'd like to be placed in the question queue, please press star one on your telephone keypad. Our next question is coming from Ken Usdin from Jeffries. Your line is now live.

Speaker Change: On the hedge drag factor within <unk>.

Speaker Change: 16 bps in Q1, reducing down by something like.

Operator: Hi, thanks. Good morning. And thanks for that incremental slide on the swaps detail. I'm wondering if you can just kind of help us understand as we get through the end of this year, both in terms of what that swaps impact looks like and, more importantly, that fixed rate repricing, you know, how should we think about those kind of combined benefits as we, you know, get out of 24 and think about 25? Thanks.

Speaker Change: Five to eight basis point scenario lower by the end of Q4 that should also continue on into the early part of 2025 as well probably get to about neutral position. If there are some rate reductions.

Speaker Change: We encourage all the rate curve there is an expectation in the forward curve at this point because it would be in fact reductions either in the back half of this year.

Zachary J. Wasserman: Yeah, it's a terrific question, and I'll say a few things on that. One is the fixed asset repricing benefit that we saw, and I mentioned earlier, somewhere between 10, 11, 12, 13 basis points of upside this year from that $4 billion turning quarterly. Our modeling indicates that that will continue on into 2025 at kind of a similar pace. It's really a very long-term phenomenon, and there's going to be significant support to them as we get into 2025 on the Hedge Drag Factor within NIMH at 16 bips in Q1, reducing down by something like, Unknown Executive, Erika Najarian, Manan Gosalia, Robert Siefers, Brendan Lawlor, Unknown Executive, Erika Najarian, Manan Gosalia, Robert Siefers, Brendan Lawlor, Huntington Bancshares Inc. The other thing I'll just say, and you didn't ask it, but I'll share it, is...

Speaker Change: Early part of next year, and so if that comes to pass and we will see that the 16 basis points of all resolved by the middle of <unk>.

Speaker Change: 2025.

Speaker Change: There aren't rate reductions that we see less of that.

Speaker Change: Thanks Jack.

Got it.

Speaker Change: Very different environment overall.

Speaker Change: Yes.

Speaker Change: The other thing I'll, just say just.

Speaker Change: Basketball share is.

Speaker Change: If you look at sort of the sum total of all of our hedging activities, which as you know were always designed to protect capital against up rate scenarios.

Speaker Change: Tech nib and down rate scenarios.

Speaker Change: That chart that I illustrated in his prepared remarks.

Speaker Change: Gradual shifting of that exposure.

Zachary J. Wasserman: If you look at the sum total of all of our hedging activities, which, as you know, are always designed to protect capital against up-rate scenarios and protect NIM in down-rate scenarios, that chart that I illustrated in the prepared remarks has a kind of gradual shift of that exposure as you get into and throughout 2025. The net result of that should be that by the end of 2025, asset sensitivity should be about a third less. And so that's sort of the intent of that program, more broadly from an interest rate risk perspective, sensitivity management.

Speaker Change: <unk> dropped from 25, the net result of that should be done by the end of 'twenty five 'twenty five asset sensitivity.

Speaker Change: Third less.

Speaker Change: So that's sort of in terms of that program.

Speaker Change: I think from a.

Speaker Change: Interest rate risk.

Speaker Change: Yes.

Speaker Change: Okay Cool and then my follow up I'll just separate them.

Speaker Change: On just a fixed rate repricing on the asset side. So we know about the the meaningful help that you got this year, but then how does that layer in in terms of incremental fixed rate benefit that happens into next year.

Zachary J. Wasserman: Okay, cool. And then my follow-up question, I'll just separate it out on just a fixed rate repricing on the asset side. So we know about the meaningful help that you get this year. But then how does that layer in, in terms of the incremental fixed rate benefit that happens into next year?

Speaker Change: Yes.

Speaker Change: No it doesn't.

Speaker Change: I think it was about the same benefit as we go out into 'twenty five.

Speaker Change: And that's.

Speaker Change: Fairly similar churn.

Speaker Change: Quarterly volumes and.

Speaker Change: Sure.

Speaker Change: You'll continue to see the belly of the curve.

Speaker Change: Largely always goes up the price significantly higher than the historical rate of those assets overtime of course, you'll begin to see that benefit.

Zachary J. Wasserman: So, as I noted a minute ago, I think it's about the same benefit as we go out into 2045. And that's, you know, a fairly similar turn of quarterly volumes and, you know, continue to see the belly of the curve that's largely on which those assets are priced. Significantly higher than the historical rate of those assets. And over time, of course, you'll begin to see that benefit diminish on a sequential basis. And at some point, it starts to climb, but likely not until the latter part of 2045, you know, at the earliest at this point, based on how the curve is shaping up.

Speaker Change: So on sequential basis subway starts to asymptote.

Speaker Change: But likely not.

Speaker Change: Lot of fun.

Speaker Change: At this point based on how the curve shape.

Speaker Change: Okay My mistake.

Speaker Change: I didn't separate the two in your answer Microsoft.

Speaker Change: Yes.

Speaker Change: Good question.

Speaker Change: Thank you next question today is coming from John <unk> from RBC capital markets. Your line is that right.

John G. Pancari: Thanks, Good morning.

John G. Pancari: Can you touch a little bit on the on the fee income outlook and what you expect there.

John G. Pancari: It seems like Youre, implying a bit of a step up in that based on what you saw in the first quarter, but talk a little bit about what youre seeing there and then you know confidence in hitting that midpoint of the guidance.

Zachary J. Wasserman: Okay, my mistake, Zach. I didn't separate the two in your answer. My fault. No worries.

Zachary J. Wasserman: No words. I appreciate the question.

Operator: Thank you. The next question today is coming from John Arfstrom from RBC Capital Markets. Your line is now live.

John G. Pancari: Yes.

John G. Pancari: Q1 core fees grew about 3% year over year.

Operator: Hey, thanks. Good morning. Can you touch a little bit on the fee income outlook and what you expect there? It seems like you're implying a bit of a step up in that based on what you saw in the first quarter. Talk a little bit about what you're seeing there and then your confidence in hitting that, you know, midpoint of the guide.

John G. Pancari: Our guidance over the full year is between five and 7% on a full year. So that clearly implies would see an acceleration of fee income and acceleration in year over year basis.

This year.

John G. Pancari: And high confidence to achieve that.

John G. Pancari: The core drivers remaining the same sort of discussed.

John G. Pancari: Prior occasions.

John G. Pancari: Capital markets payments and wealth management.

Zachary J. Wasserman: Q1 core fees grew about 3% year-over-year, and our guidance for the full year was between 5% and 7% for the full year, so that clearly implies we're going to see an acceleration of fee income and an acceleration on a year-over-year basis as we look throughout this year, and we have high confidence in achieving that. The core drivers remain the same, as we've discussed on many prior occasions.

If you look at sort of the trends, we're seeing right now and what the performance was in the first quarter payments revenue was up 7% in the first quarter wealth revenues up 10%.

John G. Pancari: In capital markets, we saw commercial banking related revenues.

John G. Pancari: Around two thirds.

John G. Pancari: Capital markets activities that are really highly correlated to the pace and volume shrinking that grew sequentially into the first quarter or second.

Zachary J. Wasserman: Capital Markets, Payments, and Wealth Management. We look at sort of the trends we're seeing right now and what the performance was in the first quarter. Payments revenue is up 7% in the first quarter, and wealth revenue is up 10%. You know, in capital markets, we saw commercial banking-related revenues, around two-thirds of the capital markets activities that are really highly correlated to the pace and volume of commercial banking, that grew sequentially into the first quarter of the second sequential quarter of growth there.

John G. Pancari: Sequential quarter of growth there and I think one of the things that will power continued growth in capital markets from here is the fact that commercial loan production likewise accelerating as Steve noted earlier.

John G. Pancari: Advisory revenues were really beginning to recover well in the back half of 2023, but typically seasonally lower in Q1 for us.

John G. Pancari: Focus on Middle market Advisory, we did see those advisory revenues.

Lower into the first quarter, but likewise, our expectation for that is for continued.

Zachary J. Wasserman: And I think, you know, one of the things that will power continued growth in capital markets from here is the fact that commercial loan production is likewise accelerating, as Steve noted earlier. Advisory revenues were really beginning to recover well in the back half of 2023, but typically seasonally lower in Q1 for us in our focus on middle market advisory. So we did see those advisory revenues lower in the first quarter. But likewise, our expectation for that is for continued expansion into the remaining part of this year.

John G. Pancari: Tension into the early part of this year.

John G. Pancari: Very good very high quality.

John G. Pancari: Great.

John G. Pancari: Traction with us too.

John G. Pancari: Look for M&A for us and so those are really the drivers from your payments continuing to perform.

John G. Pancari: Well continue to execute the strategy and then capital markets driving acceleration as well.

John G. Pancari: And overall continue to feel really good about landing somewhere in the full year.

John G. Pancari: Growth range.

Speaker Change: Okay. Good helpful.

Speaker Change: I won't go back to net interest income and I, but I do want to ask about credit Bureau numbers, obviously look good but.

Zachary J. Wasserman: Pipelines look very good, very high quality, great firms that have contracted with us to look for M&A support. And so those are really the drivers from here. Payments continuing to perform well, continuing to execute the strategy, and then capital markets driving acceleration as well. And overall, I continue to feel really good about landing somewhere in that four-year forefront.

Speaker Change: Anything you want to flag internally.

Speaker Change: That youre seeing and I'm curious also what youre seeing externally from a credit point of view. Thank you.

Speaker Change: Hey, this is Brandon I'll take that one.

Brandon: As you as you sort of noted in your question.

Brandon: Starting at the quarters really.

Brandon: Across all of the credit metrics.

Brandon: Pretty much in line with where we reported in the fourth quarter our seasonally adjusted.

Brendan Lawlor: Okay, good, helpful. I won't go back to net interest income, but I do want to ask about credit. Your numbers obviously look good, but anything you want to flag internally that you're seeing, and I'm curious also what you're seeing externally from a credit point of view. Thank you.

Brandon: Keith.

Looking back at first quarter of last year right.

Brandon: Really good about the position.

Brandon: We're sitting right now.

Brandon: Sure.

Brandon: The one place that everybody continues to focus on and talk about it and we are highly focused on it ourselves as office.

Brandon: Real estate side.

Brandon: You've talked about in the past.

Brandon: Mahler books.

Brendan Lawlor: Hey, this is Brendan. I'll take that one.

Brandon: Two of our office portfolio, and we have a decent reserve against it so.

Brendan Lawlor: You know, I think, as you sort of noted in your question, that the story of the quarter is silly. You know, we, across all of the credit metrics, are pretty much in line with where we reported either the fourth quarter or seasonally adjusted when you think about delinquencies when you think about the first quarter of last year. We're right in line, and we feel really good about the position that we're sitting in right now.

Brandon: While we were watching it actively to energy and we feel very well protected against at this point.

Speaker Change: Just to add to that.

Speaker Change: Thanks.

Speaker Change: We've reduced the office portfolio by about $500 million over the course of the west.

Speaker Change: <unk>.

Speaker Change: And.

Speaker Change: Our largest loans $40 million.

Speaker Change: So it's very granular.

Speaker Change: And it gets a lot of attention.

Speaker Change: And we expect that we will continue to produce throughout this year.

Stephen D. Steinour: Just to add to that, thanks Brendan. We've reduced the office portfolio by about $500 million over the course of the last...

Speaker Change: Okay. Good.

Speaker Change: If I can ask one more I'm going to violate the one and one follow up but just bigger picture. There's been this myopic focus on.

Stephen D. Steinour: of the course of the last four quarters.

Stephen D. Steinour: Our largest loan is $40 million. The average is $7 million-ish. So it's very granular, and it gets a lot of attention, and we expect it will continue to decrease.

Speaker Change: The margin and net interest income to you guys, you feel incrementally better or worse about that plus or minus 2% guide because on one hand, we're thinking about a lower margin in the very near term and I get that but its seems like its higher funding cost too to fund loan growth, which seems to be at the higher end of it so I guess.

Unknown Executive: The Unknown Executive will continue to be reduced throughout this year.

Unknown Executive: Okay, good. If I can ask one more, I'm going to violate the one and one follow-up rule, but just on the bigger picture, there's been this myopic focus on the margin and net interest income. Do you guys feel incrementally better or worse about that plus or minus 2% guide? Because on the one hand, we're thinking about a lower margin in the very near term, and I get that, but it seems like it's higher funding costs to fund loan growth, which seems to be at the higher end of it.

Speaker Change: The question is with some of these new developments do you feel better or worse about that.

Speaker Change: Or lower end of the of the net interest income guide I think that would help people. Thanks.

Speaker Change: Great Great question, Jeff I'll take that one.

Speaker Change: Tuesday without maintenance versus feel really good about the overall performance of the business.

Speaker Change: It's about executing long term growth long term value accretion in Q was set up really well, we see confidence and logos accelerating great core funding.

Unknown Executive: So I guess, you know, the question is, with some of these new developments, do you feel better or worse about that higher or lower end of the net interest income guide? I think that would help people. Thanks.

Speaker Change: And therefore, the confidence in being within that range is very sought.

Speaker Change: At the margin my revenue is a touch lower than was the case before.

Operator: Great question, John. I'll take that one.

Zachary J. Wasserman: Two statements I would make. First, I feel really good about the overall performance of the business. For us, it's about executing long-term growth and long-term value creation, and Q1 set that up really well. We've seen confidence and low growth accelerate, great core funding, and therefore the confidence in being within that range is very strong. At the margin, my revenue outlook is a touch lower than it was before. But I think we're in the range of tuning at this point, John, and hence should not overly parse this. Typically, somewhere in that range, we typically try to land in the middle of the ranges that we're getting.

Speaker Change: And.

Speaker Change: But I think we're in a range of tools at this point.

Speaker Change: No. It was parse this somewhere in that range.

Speaker Change: In the middle of the ranges.

Speaker Change: Okay, Alright, thank you I appreciate it.

Speaker Change: Thank you next question is coming from Peter Winter from D. A Davidson your line is now live.

Peter Winter: Hi, Good morning, I wanted to follow up.

Peter Winter: I wanted to follow up on Johns question just on credit.

Peter Winter: Okay.

Peter Winter: If I look at the ACL ratio, it's at the top end of the peers and credit is really holding in and you feel good about the economy.

Zachary J. Wasserman: Okay. All right. Thank you. I appreciate it.

Peter Winter: How are you thinking about reserving going forward is the plan to keep the ACL ratio fairly steady.

Operator: Thank you. The next question is coming from Peter Winter from D.A. Davidson. Your line is now live.

And just kind of support loan growth.

Operator: Good morning. I wanted to hear your follow-up. I wanted to follow up on John's question just on credit. If I look at the ACL ratio, it's at the top end of the range, and credit is really holding in, and you feel good about the economy. How are you thinking about reserving going forward? Is the plan to keep the ACL ratio fairly steady and just kind of support loan growth?

Peter Winter: Peter It's Brandon I'll take some of that.

Peter Winter: Yes.

Brandon: You're noting the stability quarter over quarter and that's accurate.

Brandon: As we look forward it's really.

Brandon: That specific as to how the ACL coverage will move quarter over quarter as you know.

Speaker Change: Thank you.

Speaker Change: Taking into account the mark.

Speaker Change: Of our economic scenarios to view of credit at that time as well as our loan growth as you referenced in your question.

Brendan Lawlor: Peter, it's Brendan. I'll take a swing at that. You know, you know, the, you're noting the stability of quarter over quarter and that I think, you know, as we look forward, it's really, um, [inaudible] You know, we put all of that into the mix to sort of drive out of our modeling what we believe the right level of coverage is. And so it's harder for us to, you know, for anybody, frankly, in this environment, to really give any So, you know, it's hard for me to come out and say, well, we think it will do this and we think it will do that.

Speaker Change: We put all of that into the mix considered dry.

Speaker Change: Modeling, we believe the right level of coverage and so on.

Speaker Change: It's harder for us.

Speaker Change: Frankly.

Speaker Change: In this environment to really give any strong guidance as to which the ACO as it's really core earnings quarterly specific metrics.

Speaker Change: Drops out.

Speaker Change: It's hard for me to come out and say well. Thank you.

We think it'll do.

Speaker Change: Yeah.

Speaker Change: Okay. Peter this is Steve I'll, just add to that.

Steve: We've tried to be conservative with reserves over the years, we believe we're in that posture.

Steve: And we expect to grow loans above peer.

Steve: This year in <unk>.

Steve: Essentially the investments in new businesses and regions, we have made.

Brendan Lawlor: Peter, Steve, this is Steve. I'll just add to that, you know, it's, uh, uh, we've tried to be conservative with our reserves over the years. We believe we're in that position.

Speaker Change: There's still a lot of uncertainty about where rates are going to go when that was going to move the geopolitical tension.

Speaker Change: The uncertainties and spun from from from elections, both ours and other countries. So we're just trying to be conservative at this stage.

Stephen D. Steinour: Uncertainties that can arise from elections, both ours and other countries, so we're just trying to be conservative at this stage. Should we continue to perform at the level we are, there will be reserve recapture at some point.

Speaker Change: Should we continue to perform at the level. We are there will be reserve recapture at some point.

Zachary J. Wasserman: Okay, thanks, Steve. Just one quick follow-up. Just that comment that you're feeling better about loan growth. How much of the loan growth acceleration is new markets versus just core strength? And is that part of that positive outlook, given the early success that you're seeing on the new initiatives?

Speaker Change: Okay. Thanks, Steve.

Speaker Change: One quick follow up just.

Speaker Change: Just that comment that you're feeling better about loan growth.

Speaker Change: Of the loan growth acceleration as new markets versus just a core strength and as part of that positive outlook given the early success that you're seeing on the new initiatives.

Zachary J. Wasserman: This is Zach. I'll take that one. If you look at the full-year loan growth outlook that we've got, it's between 3% and 5%. About 60% of that growth, we think, will come from the core, and about 40% from these new organic expansion areas and recesses within. The mix of the overall company's growth will be weighted toward commercial, but consumer is also growing pretty well. So that's the kind of broad answer in terms of the magnitude of them.

Speaker Change: This is Jack I'll take that one if you look at the full year loan growth out of that we've got it's between three and 5% about 60% of that growth will come from the core.

Jack: 40% from these new.

Jack: The extension areas.

Jack: And the mix of the overall company's growth.

Jack: Weighted towards commercial.

Speaker Change: We're also growing pretty well.

Speaker Change: So that's the kind of broad answer in terms of the magnitude of them.

Zachary J. Wasserman: And really, the other point is yes, the early traction is really very positive. We're seeing customers already being acquired, loans being booked, and pipelines across all of the five new areas of focus, the three commercial verticals, Carolinas, and Texas. The pipeline cumulatively is approaching $2 billion of loans and also a very significant deposit pipeline. Remembering these tend to be full relationship strategies that are gathering loans, but also deposits, also fee income businesses, and capital markets, and payments, and treasury management.

Speaker Change: The other point is yes.

Speaker Change: Early traction is really very positive.

Seeing.

Speaker Change: Customers are already being acquired loans being booked in the pipelines across all of <unk>.

Speaker Change: Five of these areas of focus the three commercial verticals Carolinas in Texas pipeline cumulatively is approaching $2 billion of molds and also very significant deposit pipeline reviews are tend to be full relationship strategy gathering loans, but also deposits also.

Speaker Change: Businesses and capital markets and payments Treasury management.

Zachary J. Wasserman: So quite good early traction here. Obviously, starting from a low base, as Steve mentioned, so we're going to see that build over the course of time. The last thing I'll say is, of those five, the most significant contributors in 2024, we expect to be the fund finance vertical and the Carolinas. But over time, the others will also be very significant, particularly Texas. But just in terms of the early momentum that we're seeing, and based on when they started and were staffed, those two will be the most significant for 2024.

Quite good early traction here, obviously, starting from a from a low base as Steve mentioned.

Speaker Change: That bill's here over the course of time Lucky I'll say is <unk>.

Speaker Change: Five the most significant contributors in 2024, we expect to either fund finance vertical.

Speaker Change: Carolinas overtime.

Speaker Change: We'll also be very significant particularly in Texas.

Speaker Change: But just in terms of the early momentum that we're seeing.

Speaker Change: And when they started and were staffed those cheaper.

Speaker Change: 24.

Speaker Change: And just one last final just just the core loan growth assume.

Zachary J. Wasserman: And just one last question, does the core loan growth assume a pickup in line utilization?

Speaker Change: A pickup in line utilization.

Zachary J. Wasserman: Not in substance. So if you think about the three big areas where we have outstanding lines in the broad middle market commercial lines, we saw that tick up just a tiny bit in the first quarter, pretty flat. And it's not our expectation that that will change substantively from here. So we are not counting on it really for continued growth, although certainly benefiting to some degree just from seasonality in the first quarter. In each of those businesses that we referenced, we expect a net increase in customers. So they'll have core organic growth as primary drivers.

Speaker Change: But not in substance. So if you think about kind of the three big areas that we have outstanding lives in the broad middle market commercial lines, we saw that tick up just a tiny bit into the first quarter pretty flat and that's not our expectation that that will change substantively from here.

Speaker Change: The second one being distribution finance.

Speaker Change: And that one we did see a benefit into the first quarter from when that was typically the typical seasonal pattern we think the.

Speaker Change: That line generally now isn't it.

Speaker Change: Stable level broadly.

Speaker Change: Seasonal pattern is highest in the first quarter its lowest in the third quarter.

Operator: I appreciate all the color. Thank you. The next question today is coming from Matt O'Connor from Deutsche Bank. Your line is now live. Good morning.

Speaker Change: The cycles of inventory and sales and then the last one is auto floor plan. We did see that also benefit somewhat into the first quarter, but again, we think we're now at a point coming out of Covid, particularly in the auto floor plan business, where manufacturing has reached a stable level relative to sales.

Operator: Thank you. The next question today is coming from Matt O'Connor from Deutsche Bank. Your line is now live.

Zachary J. Wasserman: So the answer is no, broadly, no substantive updates in terms of where that may be going. If, for us, we've got, you know, a really strong debit card franchise, it's one of the best in the country in terms of relative penetration and utilization within our consumer and small business base, and so that's a real benefit to us.

Speaker Change: The line utilization generally trending in pretty consistent area from here in the floor plan business, so not counting really for.

Speaker Change: Continued growth.

Speaker Change: So the benefit for countries seasonality in the first quarter in each of those businesses Zack referenced we expect net increase in customers.

Speaker Change: So the core organic growth.

Speaker Change: The primary driver.

Speaker Change: Okay. Thanks, I appreciate all the color.

Matt O'connor: Thank you. Your next question today is coming from Matt O'connor from Deutsche Bank. Your line is ally.

Matt O'connor: Good morning, most of my questions have been answered, but just from an industry point of view are there any updates on the debit card interchange reform and remind us how meaningful that could be for you guys and if any of that's incorporated in guidance, but which I assume it's not but any updates on that front. Thank you.

Zachary J. Wasserman: If you were to just run the numbers on the proposal as it was proposed, I think it's around a $90 million annualized impact for us. But, if history is a guide, often those proposals are changed substantively between the time they're initially put forth and when they are enacted, either to not come forth at all or to be, you know, substantively altered. So, you know, we'll see. For us, in our payment strategy, there is so much growth opportunity and so many opportunities to engage our customers that there will be, over time, ways to mitigate some of that and to certainly offset it with other payments-related growth.

Speaker Change: It's a good question I think so.

Speaker Change: The answer is no broad no substantive.

Speaker Change: Updates in terms of where that may be going.

Speaker Change: Yes.

Speaker Change: For us we've got a really strong debit card franchises.

Speaker Change: The best in the country in terms of relative penetration.

Speaker Change: And utilization within us.

Speaker Change: Consumer and small business base and so.

Speaker Change: That's a real benefit to us.

Speaker Change: If you were to just run the numbers on a proposal out it was proposed I think it's around 99 zero million dollar.

Zachary J. Wasserman: As best we can tell at this point, to the extent there is a proposal, it would be at some point between the mid to latter part of 2025 that it would take effect, and so it is not in the guidance for 2024.

Speaker Change: Annualized impact for us with that being said if history is a guide often those proposals are changed substantively between the time the initially.

Speaker Change: But for US it was enacted.

Speaker Change: Not not unimportant at all or where it can be.

Speaker Change: Substantively alter so we'll see.

Stephen D. Steinour: Thank you. We have reached the end of our question and answer session. I'd like to turn the floor back over to Steve for any further closing comments.

Speaker Change: For us and our payment strategy.

Speaker Change: So much growth opportunity so many opportunities to two.

Speaker Change: We engage our customers that there will be overtime ways to mitigate some of that certainly offset it with other payments related growth.

Stephen D. Steinour: So in closing, we're pleased with our first quarter results. We're seeing momentum build across the bank, which will drive improved performance over the course of the year. NBI

Speaker Change: As best we can tell just like Jimmy said, there isn't proposal would be at some point mid to latter part of 'twenty five.

Speaker Change: And so not in the guidance for 'twenty for us.

Stephen D. Steinour: We clearly expect our investments in our businesses to deliver growth this year and in the future. The balance sheet is well-positioned with ample capital and robustly put in place to support our growth initiatives. Our focus remains centered on driving core revenue growth, carefully managing expenses, and growing loans consistent with our aggregate moderate to low-risk appetite. Just as a reminder, the board executives and our colleagues are among the top ten shareholders collectively, reflecting our strong alignment to build shareholder value.

Speaker Change: Doug.

Doug: Thank you we reached end of our question and answer session I'd like to turn the floor back over to Steve for any further closing comments.

Doug: Again, we're pleased with our first quarter results, we're seeing momentum build across the bank, which will drive improved performance over the course of the year and beyond.

Steve: We clearly expect our investments in our businesses to deliver growth this year and future balance sheet, well positioned ample capital and robust liquidity to support our growth initiatives. Our focus remains centered on driving core revenue growth carefully managing expenses and growing loans consistent with our aggregate moderate.

Steve: It's low risk appetite.

Steve: As a reminder, the board executives our colleagues our top 10 shareholders collectively reflecting our strong alignment to build shareholder value.

Stephen D. Steinour: Finally, we would not be able to take care of our customers without the efforts of our nearly 20,000 employees.

Steve: Finally, we will not be able to take care of our customers without the efforts are going to be able to play.

Stephen D. Steinour: Thank you for your support. Thank you for your questions and your interest in Huntington.

Steve: Exceptional colleagues engaged every day across today. Thank you for your support Thank you for your questions and your interest in <unk>.

Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Speaker Change: Have a great day.

Speaker Change: Yes.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.