Q2 2024 Fifth Third Bancorp Earnings Call

Audra: Good morning, my name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2024 Fifth Third Bancorp Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.

Audra: Good morning, my name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter, 2024, Fifth Third Bancorp earnings conference call. Today's conference is being recorded.

Audra: Good morning, my name is Audra and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2024 Fifth Third Bancorp Earnings conference call.

Audra: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to ask all your questions, press star one again.

Audra: Today's conference is being recorded.

Audra: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key, followed by the number one on your telephone keypad. If you would like to continue your question, press star 1 again. At this time, I would like to turn the conference over to Matt Curoe. Please do so.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.

Matt Curoe: At this time, I would like to turn the conference over to Matt Curoe.

Matt Curoe: Please go ahead.

Speaker Change: At this time, I would like to turn the conference over to Matt Curoe. Please go ahead.

Matt Curoe: Good morning, everyone. Welcome to Fifth Third Second Quarter 2024 Earnings Call. This morning, our chairman, CEO and president Tim Spence, and CFO Brian Preston, will provide an overview of our second quarter results and outlook. Our Chief Credit Officer, Greg Schroeck, has also joined for the Q&A portion of the call.

Matt Curoe: Good morning, everyone. Welcome to Fifth Third's second quarter 2024 earnings call. This morning, our Chairman, CEO, and President Tim Spence and CFO Bryan Preston will provide an overview of our second quarter results and outlook. Our Chief Credit Officer Greg Schroeck has also joined for the Q&A portion of the call. Please review the cautionary statements in our materials, which can be found in our earnings release and presentation. These materials contain information regarding the use of non-GAAP measures and reconciliations to GAAP results, as well as forward-looking statements about Fifth Third's performance.

Matt Curoe: Good morning, everyone. Welcome to Fifth Third's second quarter 2024 earnings call. This morning, our Chairman, CEO , and President, Tim Spence, and CFO , Bryan Preston, will provide an overview of our second quarter results and outlook. Our Chief Credit Officer, Greg Schroeck, has also joined for the Q&A portion of the call.

Matt Curoe: Please review the cautionary statements in our materials, which can be found in our earnings or lease and presentation. These materials contain information regarding the use of non-GAAP measures and reconciliation to the GAAP results, as well as four looking statements about Fifth Third performance. These statements speak only as of July 19, 2024, and Fifth Third undertakes no obligation to update them.

Matt Curoe: Please review the cautionary statements in our materials, which can be found in our earnings release and presentation. These materials contain information regarding the use of non-GAAP measures and reconciliations to the GAAP results.

Matt Curoe: These statements speak only as of July 19, 2024, and Fifth Third undertakes no obligation to update them. Following prepared remarks by Tim and Bryan, we will open up the call for questions. With that, I will turn it over to Tim.

Speaker Change: as well as four booking statements about Fifth Third's performance. These statements speak only as of July 19, 2024, and Fifth Third undertakes no obligation to update them. Following prepared remarks by Tim and Bryan, we will open up the call for questions. With that, let me turn it over to Tim.

Matt Curoe: Following prepared remarks by Tim and Brian, we will open up the call for questions.

Tim Spence: With that, let me turn it over to Tim. Thanks, Matt. Good morning, everyone. At Fifth Third, we believe great banks distinguish themselves, not by how they perform in benign environments, but rather how they navigate challenging ones. In that context, I am very pleased with how we are executing as a company in what continues to be an uncertain economic and interest rate backdrop. Our focus on stability, profitability, and growth in that order have produced consistent, predictable results and strong profitability since the bank failures last spring. And we remain confident in our ability to deliver PPRR and earnings outcomes in line with or better than our original expectations for the full year in 2024.

Timothy N. Spence: Thanks, Matt, and good morning, everyone. At Fifth Third, we believe great banks distinguish themselves not by how they perform in benign environments but rather how they navigate challenging ones. In that context, I am very pleased with how we are executing as a company in what continues to be an uncertain economic and interest rate backdrop. Our focus on stability, profitability, and growth, in that order, has produced consistent, predictable results and strong profitability since the bank failures last spring.

Tim: Thanks, Matt, and good morning, everyone.

Tim: At Fifth Third, we believe great banks distinguish themselves not by how they perform in benign environments, but rather how they navigate challenging ones.

Tim: In that context, I am very pleased with how we are executing as a company in what continues to be an uncertain economic and interest rate backdrop.

Tim: Our focus on stability, profitability, and growth, in that order, have produced consistent, predictable results and strong profitability since the bank failures last spring.

Timothy N. Spence: And we remain confident in our ability to deliver PPNR and earnings outcomes in line with or better than our original expectations for the full year in 2021. This morning, we reported earnings per share of $0.81, or $0.86 excluding certain items outlined on page 2 of the release, which exceeded the guidance we provided in our first quarter earnings call.

Tim: And we remain confident in our ability to deliver PPNR and earnings outcomes in line with or better than our original expectations for the full year in 2024.

Tim Spence: This morning, we reported earnings per share of 81 cents or 86 cents, excluding certain items outlined on page two of the release, which exceeded the guidance we provided in our first quarter earnings call. Our resilient balance sheet, diversified fee revenues, and expense discipline continue to produce strong profitability. Our adjusted return on tangible common equity of 15.1% and adjusted return on assets of 1.22% over the last 12 months rank is the best of all peers who have reported so far and the most stable when compared to the same period last year. The second quarter marked the first sequential growth and NII since 2022 and minimum proof for the second consecutive quarter.

Tim: This morning we reported earnings per share of $0.81 or $0.86 excluding certain items outlined on page 2 of the release, which exceeded the guidance we provided in our first quarter earnings call. Our resilient balance sheet, diversified fee revenues, and expense discipline continued to produce strong profitability.

Timothy N. Spence: Our resilient balance sheet, diversified fee revenues, and expense discipline continued to produce strong profitability. Our adjusted return on tangible common equity of 15.1% and adjusted return on assets of 1.22% over the last 12 months ranked as the best of all peers who have reported so far and the most stable when compared to the same period last year. The second quarter marked the first sequential growth in NII since 2022, and NIM improved for the second consecutive quarter.

Tim: Our Adjusted Return on Tangible Common Equity of 15.1% and Adjusted Return on Assets of 1.22% over the last 12 months rank as the best of all peers who have reported so far and the most stable when compared to the same period last year.

Tim: The second quarter marked the first sequential growth in NII since 2022, and NIM improved for the second consecutive quarter.

Tim Spence: That trajectory, along with the benefits we are seeing from strategic investments and continued expense discipline, should allow us to return the positive operating leverage in the fourth quarter of this year and carry over into next year. Strategically, our investments in the Southeast and middle market expansion markets in commercial payments and in wealth and asset management continue to produce strong growth and market share gains. We grew consumer households by 3% year over year in the second quarter, punctuated by 6% growth in our Southeast markets. Middle market loan production and new quality relationships were the strongest in Indiana, the Carolinas, Texas, and California.

Timothy N. Spence: That trajectory, along with the benefits we are seeing from strategic investments and continued expense discipline, should allow us to return to positive operating leverage in the fourth quarter of this year and carry it over into next year. Strategically, our investments in the Southeast and middle market expansion markets, in commercial payments, and in wealth and asset management, continue to produce strong growth and market share gains. Consumer households grew by 3% year over year in the second quarter, punctuated by 6% growth in our southeast market. Middle market loan production and new quality relationships were the strongest in Indiana, the Carolinas, Texas, and California. In our industry verticals, production was strongest where federal government spending has had an outsized benefit, including in aerospace and defense contractors and with manufacturing and infrastructure construction firms.

Tim: That trajectory, along with the benefits we are seeing from strategic investments and continued expense discipline, should allow us to return to positive operating leverage in the fourth quarter of this year and carry over into next year.

Tim: Strategically, our investments in the Southeast and middle market expansion markets, in commercial payments and in wealth and asset management, continue to produce strong growth and market share gains.

Tim: We grew consumer households by 3% year-over-year in the second quarter, punctuated by 6% growth in our Southeast markets.

Tim: Middle market loan production and new quality relationships were the strongest in Indiana, the Carolinas, Texas, and California.

Tim Spence: In our industry verticals, production was strongest, where federal government spending has had an outsized benefit, including aerospace and defense contractors, and with manufacturing and infrastructure construction firms. Commercial payments revenue grew 12% year over year, driven by our investments and our software-enabled managed services and new lines are embedded payments business. Commercial payments is a scale business for us. In the first half of 2024 alone, we processed more than $8 trillion dollars in volume and nearly half of all new treasury management relationships we added year to date with payments led and have no credit extended. Well, the asset management fee revenues grew 11% year over year, and total assets under management grew to $65 billion.

Timothy N. Spence: Commercial payments revenue grew 12% year-over-year driven by our investments in our software-enabled managed services and New Line, our embedded payments business. Commercial payments is a growth business for us. In the first half of 2024 alone, we processed more than $8 trillion in volume. Nearly half of all new treasury management relationships we added year-to-date were payments led and had no credit extended. Wealth and Asset Management fee revenues grew 11% year over year, and total assets under management grew to $65 billion, a 10% increase compared to the same quarter last year.

Tim: In our industry verticals, production was strongest where federal government spending has had an outsized benefit, including in aerospace and defense contractors and with manufacturing and infrastructure construction firms.

Tim: Commercial payments revenue grew 12% year-over-year driven by our investments in our software-enabled managed services and NewLine, our embedded payments business.

Tim: Commercial payments is a scale business for us. In the first half of 2024 alone, we processed more than $8 trillion in volume. Nearly half of all new treasury management relationships we added year-to-date were payments-led and have no credit extended.

Tim: Wealth and Asset Management fee revenues grew 11% year-over-year and total assets under management grew to $65 billion.

Tim Spence: The 10% increase compared to the same quarter last year. Fifth Third Securities, the Private Bank and Fifth Third Wealth Advisors, the RIA platform we launched in 2022, all generated strong performance.

Timothy N. Spence: Fifth Third Securities, The Private Bank, and Fifth Third Wealth Advisors, the RIA platform we launched in 2022, all generated strong performance. Digital Banker and Global Private Banker recognized us again as the best private bank for high net worth clients for the third consecutive year. Turning to capital, our strong profitability allowed us to resume share purchases during the quarter, while also increasing our CET1 ratio to 10.6%. The Federal Reserve stress test results highlighted our strong capital levels, consistent profitability, and simple yet well-diversified business models.

Tim: A 10% increase compared to the same quarter last year.

Tim: Fifth Third Securities, The Private Bank, and Fifth Third Wealth Advisors, the RIA platform we launched in 2022, all generated strong performance.

Tim Spence: Digital Banker and Global Private Banker recognized this again as the best private bank for high net worth clients for the third consecutive year. Turning to capital, our strong profitability allowed us to resume share purchases during the quarter while also increasing our CET1 ratio to 10.6%. The Federal Reserve stress test results highlighted our strong capital levels, consistent profitability, and simple yet well diversified business model. Importantly, we maintain the capacity to increase our dividend, support organic growth, and continue share of purchases. As we look ahead to the rest of the year, we remain cautious due to the wide range of potential economic and geopolitical scenarios that could unfold.

Tim: Digital Banker and Global Private Banker recognized us again as the best private bank for high net worth clients for the third consecutive year.

Tim: Turning to capital, our strong profitability allowed us to resume share purchases during the quarter, while also increasing our CET1 ratio to 10.6%.

Tim: The Federal Reserve stress test results highlighted our strong capital levels, consistent profitability, and simple yet well-diversified business model.

Timothy N. Spence: Importantly, we maintain the capacity to increase our dividend, support organic growth, and continue share repurchases. As we look ahead to the rest of the year, we remain cautious due to the wide range of potential economic and geopolitical scenarios that could unfold. As a result, we will remain disciplined and will not chase loan growth at the expense of our return target, and will continue to maintain flexibility by staying liquid, neutrally positioned, and broadly diversified while investing for the long term.

Tim: Importantly, we maintain the capacity to increase our dividend, support organic growth, and continue share repurchases.

Tim: As we look ahead to the rest of the year, we remain cautious due to the wide range of potential economic and geopolitical scenarios that could unfold. As a result, we will remain disciplined and will not chase long growth at the expense of our return targets.

Tim Spence: As a result, we will remain disciplined and will not chase long growth at the expense of our return targets. We continue to maintain flexibility by staying liquid, neutrally positioned, and broadly diversified while investing in the long term. Before I hand it over to Brian to provide additional details on our second quarter results and our outlook for the remainder of the year, I want to express my gratitude to our employees for the consistent hard work, innovation, and passion for service that you bring to our customers.

Tim: We'll continue to maintain flexibility by staying liquid, neutrally positioned, and broadly diversified, all while investing in the long term.

Timothy N. Spence: Before I hand it over to Bryan to provide additional details on our second quarter results and our outlook for the remainder of the year, I want to express my gratitude to our employees for the consistent hard work, innovation, and passion for service that you bring to our customers. This morning, Your Money Named Us the best super regional bank in the U.S., as part of their 2024 Awards for Excellence. I'm honored to be part of your team. With that, Bryan, over to you.

Tim: Before I hand it over to Bryan to provide additional details on our second quarter results and our outlook for the remainder of the year, I want to express my gratitude to our employees for the consistent hard work, innovation, and passion for service that you bring to our customers.

Tim Spence: This morning, your money named us the best super regional bank in the last as part of their 2024 awards for excellence. I'm honored to be part of your team.

Tim: This morning, Your Money Named Us the best super-regional bank in the U.S. as part of their 2024 Awards for Excellence.

Bryan Preston: With that, Brian, over to you. Thanks, Tim, and thank you to everyone joining us today. Our second quarter results were strong, reflecting our balance sheet strength, diversified revenue strings, and disciplined approach to expense and credit risk management. For more than a year, we have emphasized the importance of maintaining balance sheet strength and flexibility in an uncertain economic and industry environment. This approach is proven effective as the market's expectations on rate cuts changed dramatically from the start of 2024. Despite this change in rate outlook, our NII has been consistent with the performance trajectory we discussed back in December, increasing sequentially during the second quarter from the first quarter bottoming.

Bryan Preston: Thanks, Tim, and thank you to everyone joining us today. Our second quarter results were strong, reflecting our balance sheet strength, diversified revenue streams, and disciplined approach to expense and credit risk management. For more than a year, we have emphasized the importance of maintaining balance sheet strength and flexibility in an uncertain economic and interest rate environment. This approach has proven effective as the market's expectations for rate cuts change dramatically from the start of 2024.

Bryan: I'm honored to be part of your team.

Bryan: With that, Bryan, over to you.

Bryan: Thanks, Tim, and thank you to everyone joining us today. Our second quarter results were strong, reflecting our balance sheet strength, diversified revenue streams, and disciplined approach to expense and credit risk management.

Bryan: For more than a year, we have emphasized the importance of maintaining balance sheet strength and flexibility in an uncertain economic and interest rate environment.

Bryan: This approach has proven effective as the market's expectations on rate cuts changed dramatically from the start of 2024. Despite this change in rate outlook, our NII has been consistent with the performance trajectory we discussed back in December .

Bryan Preston: Despite this change in rate outlook, our NII has been consistent with the performance trajectory we discussed back in December, increasing sequentially during the second quarter from the first quarter bottoming, and MIM has increased for two consecutive quarters from the fourth quarter low. Additionally, our full year 2024 NII outlook remains unchanged.

Bryan Preston: And then has increased for two consecutive quarters from the fourth quarter low. Additionally, our full year 2024 NII outlook remains unchanged. As Tim mentioned, our profitability remains strong and stable, which allowed us to resume share repurchases early and grow our CET-1 ratio.

Bryan: Increasing sequentially during the second quarter from the first quarter bottoming and NEM has increased for two consecutive quarters from the fourth quarter low. Additionally, our full year 2024 NII outlook remains unchanged.

Bryan Preston: As Tim mentioned, our profitability remained strong and stable, which allowed us to resume share repurchases early and grow our CET1 ratio to 10.6%, up 13 basis points. As noted on page two of our earnings release, our reported results were impacted by certain items, including the valuation of the Visa total return swap, an update to the FDIC special assessment, and the impact of certain legal settlements and customer remediation. Excluding the impact of these items.

Bryan: As Tim mentioned, our profitability remained strong and stable, which allowed us to resume share repurchases early and grow our CET1 ratio to 10.6% up 13 basis points.

Bryan Preston: As noted on page two of our earnings release, our reported results were impacted by certain items, including the valuation of the Visa total return swap, an update to the FDFC special assessment, and the impact of certain legal settlements and customer mediations. Excluding the impact of these items, adjusted net interest income for the quarter increased 1% from the prior quarter to $1.4 billion. And the adjusted net interest margin improved three basis points compared to the prior quarter. Increased yields on new loan production contributed to this improvement and offset the impact of increased interest bearing quarter positive costs, which will well manage and increase only four basis points compared to the prior quarter.

Speaker Change: As noted on page 2 of our earnings release, our reported results were impacted by certain items, including the valuation of the Visa Total Return Swap, an update to the FDIC Special Assessment, and the impact of certain legal settlements and customer mediations.

Bryan Preston: Adjusted net interest income for the quarter increased 1% from the prior quarter to $1.4 billion. The adjusted net interest margin improved three basis points compared to the prior quarter. Increased yields on new loan production contributed to this improvement and offset the impact of increased interest-bearing core deposit costs, which were well managed and increased only four basis points compared to the prior quarter. While total average portfolio loans and leases were flat sequentially, we continue to benefit from fixed-rate asset repricing, led by our indirect audit. Average total consumer portfolio loans and leases were flat sequentially, primarily reflecting an increase in indirect auto originations offset by a decrease in other consumer loan balances.

Speaker Change: Excluding the impact of these items.

Speaker Change: Adjusted net interest income for the quarter increased 1% from the prior quarter to $1.4 billion. An adjusted net interest margin improved three basis points compared to the prior quarter.

Speaker Change: Increased yields on new loan production contributed to this improvement and offset the impact of increased interest bearing core deposit costs.

Speaker Change: which were well managed and increased only four basis points compared to the prior quarter.

Bryan Preston: While total average portfolio loans and leases were flat sequentially, we continue to benefit from fixed-rate asset repricing led by our indirect auto business. Average total consumer portfolio loans and leases were flat sequentially, primarily reflecting the increase in indirect auto origination, offset by a decrease in other consumer loan balances. Average commercial portfolio loans decreased 1% due to lower demand from corporate banking borrowers. Period and commercial revolver utilization remained at 36%, consistent with the prior quarter. Middle market loan production increased 2% compared to the prior quarter, driven by strong performance in our Southeast markets, primarily in the Carolina, Georgia, and Florida, as well as continued success in Indiana, Texas, and California.

Speaker Change: While total average portfolio loans and leases were flat sequentially, we continue to benefit from fixed-rate asset repricing, led by our indirect auto business.

Speaker Change: Average total consumer portfolio loans and leases were flat sequentially, primarily reflecting the increase in indirect auto originations, offset by a decrease in other consumer loan balances.

Bryan Preston: Average commercial portfolio loans decreased 1% due to lower demand from corporate banking borrowers, period and commercial revolver utilization remained at 36%, consistent with the prior. Middle market loan production increased 2% compared to the prior quarter, driven by strong performance in our Southeast markets, primarily in the Carolinas, Georgia, and Florida, as well as continued success in Indiana, Texas, and California. The pipeline for the second half of the year is improving, and we are continuing to invest in our middle market banking, including our recently announced expansion in the Alabama market. However, we remain cautious on commercial loan growth expectations in the second half of the year, as customer demand for credit remains muted. Our investment in analytics continues to help us optimize this positive outcome.

Speaker Change: Average commercial portfolio loans decreased 1% due to lower demand from corporate banking borrowers.

Speaker Change: Period-end commercial revolver utilization remained at 36% consistent with the prior quarter.

Speaker Change: Middle market loan production increased 2% compared to the prior quarter, driven by strong performance in our Southeast markets, primarily in the Carolinas, Georgia, and Florida, as well as continued success in Indiana, Texas, and California.

Bryan Preston: The pipeline for the second half of the year is improving, and we're continuing to invest in our middle market banking teams, including our recently announced expansion in the Alabama market.

Speaker Change: The pipeline for the second half of the year is improving, and we are continuing to invest in our middle market banking teams.

Bryan Preston: However, we remain cautious on commercial longer expectations in the second half of the year, as customer demand for credit remains muted. Our investment in analytics continues to help us optimize the positive outcomes demonstrated by our strong deposit growth in 2023, improving management of deposit costs in 2024. Our strong track record of liquidity management, combined with data driven analytics, will aid in maintaining pricing discipline and optimizing liability costs. Average court deposits will flat sequentially driven by higher CD in consumer savings and money market balances offset by lower interest checking and commercial demand balances. Our current focus remains on prudently managing deposit costs with the bet on hold and preparing for potential rate cuts later this year.

Speaker Change: Including our recently announced expansion in the Alabama market.

Speaker Change: However, we remain cautious on commercial loan growth expectations in the second half of the year, as customer demand for credit remains muted.

Bryan Preston: This is demonstrated by our strong deposit growth in 2023 and prudent management of deposit costs in 2024. Our strong track record of liquidity management combined with data-driven analytics will aid in maintaining pricing discipline and optimizing liability. Average core deposits were flat sequentially, driven by higher CDs and consumer savings and money market balances.

Speaker Change: Our investment in analytics continues to help us optimize the positive outcomes.

Speaker Change: Demonstrated by our strong deposit growth in 2023 and prudent management of deposit costs in 2024. Our strong track record of liquidity management combined with data-driven analytics will aid in maintaining pricing discipline and optimizing liability costs.

Speaker Change: Average core deposits were flat sequentially, driven by higher CDs and consumer savings and money market balances.

Bryan Preston: However, offset by lower interest checking and commercial demand balances. Our current focus remains on prudently managing deposit costs with the Fed on hold and preparing for potential rate cuts later this year. By segment, average consumer deposits increased 2% sequentially, while both commercial and wealth deposits decreased. The southeast branch investments are driving both strong household growth and granular insured deposits.

Speaker Change: Offset by lower interest checking and commercial demand balances.

Speaker Change: Our current focus remains on prudently managing deposit costs with the Fed on hold and preparing for potential rate cuts later this year.

Bryan Preston: By segment, average consumer deposits increased 2% sequentially, while both commercial and wealth deposits decreased 2%. The Southeast branch investments are driving both strong household growth and granular insured deposits. Demand deposit balances as a percent of quarter deposits were 25% as of the end of the second quarter, stable with the prior quarter, as migration of DDA balances continues to slow. Consistent with our prior expectations for a higher-for-longer rate environments, we expect DDA admits to fall below 25% during the third quarter and stay around 24% for the remainder of the year. We ended the quarter with full category one LCR compliance at 137% and are loaned to court deposit ratio with 72%.

Speaker Change: By segment, average consumer deposits increased 2% sequentially, while both commercial and wealth deposits decreased 2%.

Speaker Change: The Southeast Branch investments are driving both strong household growth and granular insured deposits.

Bryan Preston: Demand deposit balances as a percent of core deposits were 25% as of the end of the second quarter, stable with the prior quarter, as migration of DBA balances continues to slow. Consistent with our prior expectations for a higher for longer rate environment, we expect DDA mix to fall below 25% during the third quarter and stay around 24% for the remainder. We ended the quarter with full Category 1 LCR compliance at 137%, and our loan to core deposit ratio was 72%.

Speaker Change: Demand deposit balances as a percent of core deposits were 25% as of the end of the second quarter, stable with the prior quarter.

Speaker Change: As migration of DDA balances continues to slow, consistent with our prior expectations for a higher-for-longer rate environment, we expect DDA mix to fall below 25% during the third quarter and stay around 24% for the remainder of the year.

Speaker Change: We ended the quarter with full Category 1 LCR compliance at 137% and our loan to core deposit ratio was 72%.

Bryan Preston: We are well positioned to continue to grow net interest income, and our balance sheet provides flexibility to navigate the evolving economic and industry conditions.

Bryan Preston: We are well positioned to continue to grow net interest income, and our balance sheet provides flexibility to navigate the evolving economic and interest rate conditions. Moving on to P. Excluding the impacts of security gains and the visa total return swap, adjusted non-interest income decreased $32 million, or 4%, compared to the year-ago quarter. This year over year decrease is attributable to a $34 million private equity gain recognized in the second quarter of 2023.

Speaker Change: We are well positioned to continue to grow net interest income, and our balance sheet provides flexibility to navigate the evolving economic and interest rate conditions.

Bryan Preston: Degradations, moving on to fees. Excluding the impacts of security gains and the visa total return swap, adjusted non-interest income decreased $32 million, or 4%, compared to the year-ago quarter. This year or year decrease is attributable to a $34 million private equity gain recognized in the second quarter of 2023. Within our businesses, commercial payments and wealth and asset management fees continue to deliver strong results, both achieving double-digit revenue growth over the prior year, driven by our continued strategic growth investments in products and sales personnel. These areas are not only fast growing, but are sizeable contributors to fee income and profitability today, given our strength and scale in these businesses.

Speaker Change: Moving on to fees. Excluding the impacts of security gains and the Visa Total Return Swap, adjusted non-interest income decreased $32 million, or 4% compared to the year-ago quarter.

Speaker Change: This year-over-year decrease is attributable to a $34 million private equity gain recognized in the second quarter of 2023.

Bryan Preston: Within our businesses, commercial payments and wealth and asset management fees continue to deliver strong results, both achieving double-digit revenue growth over the prior year, driven by our continued strategic growth investments in products and sales personnel. These areas are not only fast growing but are sizable contributors to fee income and profitability today. Given our strength and scale in these businesses, we expect these businesses to continue to deliver strong revenue growth. Our market-sensitive businesses, such as mortgage and commercial customer hedging, have been impacted by the higher rate environment to reduce demand for credit and reduce market volatility.

Speaker Change: Within our businesses, commercial payments and wealth and asset management fees continue to deliver strong results, both achieving double-digit revenue growth over the prior year, driven by our continued strategic growth investments in products and sales personnel.

Speaker Change: These areas are not only fast-growing, but are sizable contributors to fee income and profitability today, given our strength and scale in these businesses.

Bryan Preston: We expect these businesses to continue to deliver strong revenue growth. Our market sense of the businesses, such as mortgage and commercial customer hedging, have been impacted by the higher rate environment, reduced demand for credit, and reduced market volatility. The combined impact for these businesses was a $20 million decrease versus the prior year. Leasing business revenue was down $9 million versus the prior year due to our decision to deemphasize operating leases, but is offset by a $9 million decrease in leasing business expense. The securities gains of $3 million reflected the market impact of our non-qualified deferred compensation plan, which is more than offset in compensation expense.

Speaker Change: We expect these businesses to continue to deliver strong revenue growth.

Speaker Change: Our market-sensitive businesses, such as mortgage and commercial customer hedging, have been impacted by the higher-rate environment, the reduced demand for credit, and reduced market volatility. The combined impact for these businesses was a $20 million decrease versus the prior year.

Bryan Preston: The combined impact for these businesses was a $20 million decrease versus the prior year. Leasing business revenue was down $9 million versus the prior year due to our decision to de-emphasize operating, but it is offset by a $9 million decrease in leasing business expense. The securities gains of $3 million reflected the mark-to-market impact of our non-qualified deferred compensation, which is more than offset by the decrease in compensation.

Speaker Change: Leasing business revenue was down $9 million versus the prior year due to our decision to de-emphasize operating leases.

Speaker Change: But it is offset by a $9 million decrease in leasing business expense.

Speaker Change: The securities gains of $3 million reflected the mark-to-market impact of our non-qualified deferred compensation plan.

Bryan Preston: While we have continued to invest in strategic growth initiatives and technology, we managed our adjusted non-interest expense flat to the year-ago quarter due to our focus on expense discipline and the ongoing benefits from the process automation efforts. Adjusted non-interest expense decreased 7% sequentially, primarily due to seasonal items during the first quarter related to compensation awards and payroll taxes. Moving to credit, consistent with our guidance, the net charge operation was 49 basis points, up 11 basis points sequentially driven by two commercial credits for which we have previously established specific reserves. Consumer charge loss for 57 basis points, a reduction of 10 basis points sequentially, primarily due to improvement in our indirect consumer secured portfolio.

Bryan Preston: While we have continued to invest in strategic growth initiatives and technology, we've managed our adjusted non-interest expense flat to the year-ago quarter due to our focus on expense discipline and the ongoing benefits from process automation. Adjusted non-interest expense decreased 7% sequentially, primarily due to seasonal items during the first quarter related to compensation awards and payroll. Moving to credit, consistent with our guidance, the net charge-off ratio was 49 basis points, up 11 basis points sequentially, driven by two commercial credits for which we had previously established specific reserves.

Speaker Change: which is more than offset in compensation expense.

Speaker Change: While we have continued to invest in strategic growth initiatives and technology, we've managed our adjusted non-interest expense flat to the year-ago quarter due to our focus on expense discipline and the ongoing benefits from the process automation efforts.

Speaker Change: Adjusted non-interest expense decreased 7% sequentially, primarily due to seasonal items during the first quarter related to compensation awards and payroll taxes.

Speaker Change: Moving to credit. Consistent with our guidance, the net charge-off ratio was 49 basis points, up 11 basis points sequentially, driven by two commercial credits for which we had previously established specific reserves.

Bryan Preston: Consumer Charge-offs for 57, a reduction of 10 basis points sequentially, primarily due to improvement in our indirect consumer secured portfolio. Other credit metrics showed strong sequential improvement, with the ratio of early-stage delinquencies 30 to 89 days past due decreasing three basis points to 26 basis points, which is near the lowest levels we have experienced over the last decade. NPAs decreased by $100 million, or 13% during the quarter, and the NPA ratio decreased 9 basis points to 55 basis points.

Speaker Change: Consumer charge-offs were 57 basis points.

Speaker Change: A reduction of 10 basis points sequentially, primarily due to improvement in our indirect consumer secured portfolio.

Greg Schroeck: Other credit metrics showed strong sequential improvement, with the ratio of early stage loan currencies 30 to 89 days past due decreasing three basis points to 26 basis points, which is near the lowest levels we have experienced over the last decade. NPA decreased by $100 million or 13% during the quarter, and the NPA ratio decreased nine basis points to 55 basis points. In commercial, our credit discipline is grounded in generating and maintaining granular high quality relationships and by managing concentration risks to any asset class, region, or industry. We continue to see no material signs of broad-based industry or geographic weakness and believe potential future commercial credit losses will be idiosyncratic in nature.

Speaker Change: Other credit metrics showed strong sequential improvement, with the ratio of early-stage delinquencies 30 to 89 days past due decreasing three basis points to 26 basis points, which is near the lowest levels we have experienced over the last decade.

Speaker Change: NPAs decreased by $100 million, or 13% during the quarter, and the NPA ratio decreased nine basis points to 55 basis points.

Bryan Preston: In commercial lending, our credit discipline is grounded in generating and maintaining granular, high-quality relationships and by managing concentration risks to any asset class, region, or industry. We continue to see no material signs of broad-based industry or geographic weakness and believe potential future commercial credit losses will be idiosyncratic in nature. In consumer lending, our focus remains on lending to homeowners, which is a segment less impacted by inflationary pressure.

Speaker Change: In commercial, our credit discipline is grounded in generating and maintaining granular, high-quality relationships and by managing concentration risks to any asset class, region, or industry.

Speaker Change: We continue to see no material signs of broad-based industry or geographic weakness and believe potential future commercial credit losses will be idiosyncratic in nature.

Greg Schroeck: In consumer, our focus remains on lending the homeowners, which is a segment less impacted by inflationary pressures. We've maintained our conservative underwriting policies and will continue to evaluate our positioning as economic. Conditions change. Our ATL coverage ratio decreased 4 basis points to 2.08% and included a 47 million dollar reserve relief driven by the previously mentioned specific reserves. We continue to utilize moody macroeconomic scenarios when evaluating our allowance and made no changes to our scenario weightings. Moving to capital, we ended the quarter with a CDT1 ratio of 10.6%, significantly exceeding our new buffered minimum of 7.7%, reflecting strong capital levels.

Speaker Change: In consumer, our focus remains on lending to homeowners, which is a segment less impacted by inflationary pressures.

Bryan Preston: We've maintained our conservative underwriting policies and will continue to evaluate our positioning as economic conditions change. Our ACL coverage ratio decreased four basis points to 2.08% and included a $47 million reserve release driven by the previously mentioned specific reserve. We continue to utilize Moody's macroeconomic scenarios when evaluating our allowance and made no changes to our scenario weight. Moving to capital, we ended the quarter with a CET1 ratio of 10.6%, significantly exceeding our new buffered minimum of 7.7%. Reflecting Strong Capital Love.

Speaker Change: We have maintained our conservative underwriting policies and will continue to evaluate our positioning as economic conditions change.

Speaker Change: Our ACL coverage ratio decreased 4 basis points to 2.08% and included a $47 million dollar reserve release driven by the previously mentioned specific reserves.

Speaker Change: We continue to utilize Moody's macroeconomic scenarios when evaluating our allowance and made no changes to our scenario weightings.

Speaker Change: Moving to capital, we ended the quarter with a CET1 ratio of 10.6%, significantly exceeding our new buffered minimum of 7.7%.

Bryan Preston: As we assess our capital priorities, we believe that 10.5% is an appropriate near-term operating level. During the quarter, we completed $125 million in cherry purchases, which reduced our share count by 3.5 million shares. Our pro-forma a CDT1 ratio, including the AOCI impact of the security portfolio, is 8.0%. We expect continued improvement in the unrealized security losses in our portfolio, given that 61% of the AOCI portfolio is in bullet or locked out securities, which provide the high degree of certainty to our principal cash flow expectations. Assuming the forward curve is realized, approximately 26% of the AOCI related to security losses will accrete back into equity by the end of 2025, increasing tangible book value per share by 10% before considering any future earnings.

Bryan Preston: As we assess our capital priorities, we believe that 10.5% is an appropriate near-term operating level. During the quarter, we completed $125 million in charitable giving, which reduced our share count by three and a half million shares. Our pro forma CDT winner ratio, including the AOCI impact of the securities portfolio, is 8.0%. We expect continued improvement in the unrealized security losses in our portfolio, given that 61% of the AFS portfolio is in bullet or locked out securities, which provides a high degree of certainty to our principal cash flow expectations.

Speaker Change: Reflecting strong capital levels.

Speaker Change: As we assess our capital priorities, we believe that 10.5% is an appropriate near-term operating level.

Speaker Change: During the quarter, we completed $125 million in share repurchases.

Speaker Change: which reduced our share count by three and a half million shares.

Speaker Change: Our pro-forma CDT winner ratio, including the AOCI impact of the securities portfolio, is 8.0%.

Speaker Change: We expect continued improvement in the unrealized securities losses in our portfolio given that 61% of the AFS portfolio is in bullet or locked out securities, which provides a high degree of certainty to our principal cash flow expectations.

Bryan Preston: Assuming the forward curve is realized, approximately 26% of the AOCI related to securities losses will accrete back into equity by the end of 2025, increasing tangible book value per share by 10% before considering any future earnings. 62% of the securities-related ASEI will accrete back into equity by the end of 2020. Moving to our current outlook.

Speaker Change: Assuming the forward curve is realized, approximately 26% of the AOCI related to security losses will accrete back into equity by the end of 2025, increasing tangible book value per share by 10% before considering any future earnings.

Bryan Preston: 62% of the securities related AOCI will accrete back to equity by the end of 2028.

Speaker Change: 62% of the securities related AOCI will accrue back to equity by the end of 2028.

Bryan Preston: Moving to our current outlook, while the rate environment and customer credit demand have played out differently than we were expecting at the start of the year, we remain confident in our ability to deliver PPRR and earnings outcomes in line with or better than our original expectations for the full year. We expect full year AOCI to decrease to the 4% consistent with our guidance from January. This outlook assumes the forward curve as of early July, which projected two rate cuts in the second half of the year: September and December. We also believe we can deliver this NI outcome with no interest rate cuts and no longer from the second half of 2024.

Bryan Preston: While the rate environment and customer credit demand have played out differently than we were expecting at the start of the year, we remain confident in our ability to deliver PPNR and earnings outcomes in line with or better than our original expectations for the full year. We expect full-year NII to decrease 2% to 4%, consistent with our guidance from GAINS. This outlook assumes the forward curve as of early July, which projected two rate cuts in the second half of the year, in September and December.

Speaker Change: Moving to our current outlook.

Speaker Change: While the rate environment and customer credit demand have played out differently than we were expecting at the start of the year, we remain confident in our ability to deliver PPNR and earnings outcomes in line with, or better than, our original expectations for the full year.

Speaker Change: We expect full year NII to decrease 2-4%, consistent with our guidance from January .

Speaker Change: This outlook assumes the forward curve as of early July , which projected two rate cuts in the second half of the year, September and December .

Bryan Preston: We also believe we can deliver this NI outcome with no interest rate cuts and no loan growth in the second half of 2024. Given the year-to-date trends and customer activity, we now expect full year average total loans to be down 3% compared to 2023. Average total loans in the fourth quarter of 2024 are expected to be stable to up 1% compared to the fourth quarter of 2023, with similar performance in both the commercial and consumer portfolios. Customer demand is the primary driver of this change given the interest rate environment and other economic uncertainties.

Speaker Change: We also believe we can deliver this NI outcome with no interest rate cuts and no loan growth in the second half of 2024.

Bryan Preston: Given the year-to-date trends in customer activity, we now expect full year average total loans to be down 3% compared to 2023. Average total loans in the fourth quarter of 2024 are expected to be stable to up 1% compared to the fourth quarter of 2023, with similar performance in both the commercial and consumer portfolios. Customer demand is the primary driver of this change, given the interest rate environment and other economic uncertainties. If there is more economic optimism in the second half of the year, we would expect to see the loan growth in line or better than market growth.

Speaker Change: Given the year-to-date trends in customer activity, we now expect full-year average total loans to be down 3% compared to 2023.

Speaker Change: Average total loans in the fourth quarter of 2024 are expected to be stable to up 1% compared to the fourth quarter of 2023.

Speaker Change: with similar performance in both the commercial and consumer portfolios.

Speaker Change: Customer demand is the primary driver of this change, given the interest rate environment and other economic uncertainties.

Bryan Preston: If there is more economic optimism in the second half of the year, we would expect to see loan growth in line or better than market expectations. We're forecasting fourth-quarter average core deposit growth of two to 3% when compared to the fourth quarter of 2023. Our forecast also assumes commercial revolver utilization, and our cash and other short-term investments remain relatively stable throughout the remainder of 2020. We expect full-year adjusted non-interest income to be stable to down 1% in 2024, reflecting the impact of weaker-than-previously-expected credit demand and customer hedging activity.

Speaker Change: If there is more economic optimism in the second half of the year, we would expect to see loan growth in line or better than market growth.

Bryan Preston: We are forecasting fourth quarter average quarter positive growth of 2 to 3% when compared to the fourth quarter of 2023. Our forecast also assumes commercial revolver utilization and our cash and other short-term investments remain relatively stable throughout the remainder of 2024. We expect full year adjusted non-interest income to be stable to down 1% in 2024, reflecting the impact of leaker than previously expected credit demand and customer hedging. We expect strong growth in commercial payments and welcome asset management revenue to continue. In response to this expectation of lower customer activity in the second half, we expect to manage full-year adjusted non-interest expense stable to 2023 levels.

Speaker Change: We are forecasting fourth quarter average core deposit growth of 2-3% when compared to the fourth quarter of 2023.

Speaker Change: Our forecast also assumes commercial revolver utilization, and our cash and other short-term investments remain relatively stable throughout the remainder of 2024.

Speaker Change: We expect full-year adjusted non-interest income to be stable to down 1% in 2024, reflecting the impact of weaker-than-previously-expected credit demand and customer hedging activities.

Bryan Preston: We expect strong growth in commercial payments and wealth and asset management revenue to continue. In response to this expectation of lower customer activity in the second half, we expect to manage full year adjusted non-interest expense stable to 2023 levels. Our expense outlook assumes continued investments in technology, with tech expense growth in the mid-single digits and sales additions in the middle market, commercial payments, and wealth. We will open 30 to 35 new branches in our higher-growth markets and have already closed a similar number of branches in 2020.

Speaker Change: We expect strong growth in commercial payments and wealth and asset management revenue to continue.

Speaker Change: in response to this expectation of lower customer activity in the second half.

Speaker Change: We expect to manage full-year adjusted non-interest expense stable to 2023 levels.

Bryan Preston: Our expense outlook assumes continued investments in technology, with tech expense growth in the mid-single digits and sales additions in middle market, commercial payments, and wealth. We will open 30 to 35 new branches in our higher growth markets and have already closed a similar number of branches in 2024. Our outlook still projects an efficiency ratio of around 57% for the full year. For full year 2024, the net charge-off outlook remains in the 35 to 45 basis points range. While we expect to resume provision builds in connection with long growth and mix in the second half of 2024.

Speaker Change: Our expense outlook assumes continued investments in technology, with tech expense growth in the mid-single digits, and sales additions in middle market, commercial payments, and wealth.

Speaker Change: We will open 30 to 35 new branches in our higher growth markets and have already closed a similar number of branches in 2024.

Bryan Preston: Our outlook still projects an efficiency ratio of around 57% for the full year. For full year 2024, the net charge-off outlook remains in the 35 to 45 basis points range. Well, we expect to resume provision builds in connection with long growth and mix in the second half of 2024. However, we expect the second half bill to be less than the first half of 2024 release. Therefore, we expect the full year provision to be a zero to $10 million release, assuming no change to the credit quality of the portfolio or projected economic conditions.

Speaker Change: Our outlook still projects an efficiency ratio of around 57% for the full year.

Speaker Change: For full year 2024, the net charge-off outlook remains in the 35 to 45 basis points range.

Speaker Change: While we expect to resume provision builds in connection with loan growth and MIGS in the second half of 2024. We expect the second half build to be less than the first half of 2024 release.

Bryan Preston: We expect a second half bill to be less than the first half of 2024 release. Therefore, we expect full-year provision to be a zero to $10 million release, assuming no change to credit quality of the portfolio or projected economic conditions.

Speaker Change: Therefore, we expect full-year provision to be a $0 to $10 million release, assuming no change to credit quality of the portfolio or projected economic conditions.

Bryan Preston: Moving to our quarterly outlook, we expect NII and Memgrove to continue in both the third and fourth quarter. We expect NII and the third quarter to be up to two percent sequentially, reflecting the impact of slowing deposit cost pressures and the continued benefit of our fixed rate asset repricing. Our current outlook assumes interest-bearing court deposit costs, which were 295 basis points in the second quarter of 2024, to increase just four basis points sequentially if we see no rate cuts. We expect average total loan balances to be stable to up 1% from the second quarter. We expect modest middle market, auto, and solar production to offset continued low credit demand from corporate banking customers.

Bryan Preston: Moving to our quarterly outlook, we expect NII and NIM growth to continue in both the third and fourth quarters. We expect NII in the third quarter to be up 2% sequentially, reflecting the impact of slowing deposit cost pressures and the continued benefit of our fixed rate asset repricing. Our current outlook assumes interest-bearing core deposit costs, which were 295 basis points in the second quarter of 2024, to increase just four basis points sequentially if we see no rate cuts.

Speaker Change: Moving to our quarterly outlook, we expect NII and NEM growth to continue in both the third and fourth quarter. We expect NII in the third quarter to be up 2% sequentially, reflecting the impact of slowing deposit cost pressures and the continued benefit of our fixed rate asset repricing.

Speaker Change: Our current outlook assumes interest-bearing core deposit costs, which were 295 basis points in the second quarter of 2024, to increase just four basis points sequentially if we see no rate cuts.

Bryan Preston: We expect average total loan balances to be stable to up 1% from the second quarter. We expect modest middle market, auto, and solar production to offset continued low credit demand from corporate banking. We expect third-quarter adjusted non-interest income to be up 1% to 2% compared to the second quarter, largely reflecting strength in commercial payments and wealth and asset management and a modest increase in commercial banking revenue. We expect third quarter total adjusted non-interest expenses to be up 1% compared to the second quarter due to the impact of the previously discussed investments in branches, technology, and sales. Third quarter net charge-offs are projected to be in the 40 to 45 basis point range.

Speaker Change: We expect average total loan balances to be stable to up 1% from the second quarter. We expect modest middle market, auto, and solar production to offset continued low credit demand from corporate banking customers.

Bryan Preston: We expect third quarter adjusted non-interest income to be up 1% to 2% compared to the second quarter. Largely reflecting strength in commercial payments and wealth and asset management, and a modest increase in commercial banking revenue. We expect third quarter total adjusted non-interest expenses to be up 1% compared to the second quarter due to the impact of the previously discussed investments in branches, technology, and sales personnel. Third quarter net charge-offs are projected to be in the 40 to 45 basis point range. As mentioned in the 40-year outlook, loan growth and mix are expected to drive a provision bill, which should be around $25 million in the third quarter, assuming no change to the economic outlook.

Speaker Change: We expect third quarter adjusted non-interest income to be up 1-2% compared to the second quarter, largely reflecting strength in commercial payments and wealth and asset management, and a modest increase in commercial banking revenue.

Speaker Change: We expect third quarter total adjusted non-interest expenses to be up 1% compared to the second quarter due to the impact of the previously discussed investments in branches, technology, and sales personnel.

Speaker Change: Third quarter net charge-offs are projected to be in the 40 to 45 basis point range.

Matt Curoe: As mentioned in the four-year outlook, loan growth and NICs are expected to drive a provision build, which should be around $25 million in the third quarter, assuming no change to the economic outlook. The trajectory of our income statement performance should deliver positive operating leverage in the fourth quarter of 2024 and a net interest income exit rate for the year that positions us for record results in 2025, assuming no major economic or interest rate outlets.

Speaker Change: As mentioned in the four-year outlook, loan growth and NICs are expected to drive a provision build, which should be around $25 million in the third quarter, assuming no change to the economic outlook.

Bryan Preston: The trajectory of our income statement performance should deliver positive operating leverage in the fourth quarter 2024, and a net interest income exit rate for the year that positions us for record results in 2025, assuming no major economic or interest rate outlook changes.

Speaker Change: The trajectory of our income statement performance should deliver positive operating leverage in the fourth quarter 2024 and a net interest income exit rate for the year that positions us for record results in 2025, assuming no major economic or interest rate outlook changes.

Bryan Preston: Finally moving to Capital. With our consistent and strong earnings, we expect to execute share repurchases of $200 million per quarter in the second half of 2024, assuming a stable economic and credit outlook and capital rules that are no worse than the current NPR. In summary, with our well-positioned balance sheet, discipline, expense and credit risk management, and diversified revenues. Streams. We are positioned to generate sustained top quartile profitability and deliver long-term value for our shareholders, customers, communities, and employees.

Matt Curoe: Finally, moving to capital. With our consistent and strong earnings, we expect to execute share repurchases of $200 million per quarter in the second half of 2024, assuming a stable economic and credit outlook and capital rules that are no worse than the current NPR. In summary, with our well-positioned balance sheet, disciplined expense and credit risk management, and diversified revenues, we are positioned to generate sustained top quartile profitability and deliver long-term value for our shareholders, customers, communities, and employers.

Speaker Change: Finally, moving to capital. With our consistent and strong earnings, we expect to execute share repurchases of $200 million per quarter in the second half of 2024, assuming a stable economic and credit outlook and capital rules that are no worse than the current NPR.

Speaker Change: In summary, with our well-positioned balance sheet, disciplined expense and credit risk management, and diversified revenue streams.

Speaker Change: We are positioned to generate sustained, top-quartile profitability and deliver long-term value for our shareholders, customers, communities, and employees.

Matt Curoe: With that, let me turn it over to Matt to open the call up for Q&A. Thanks, Bryan. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and one follow-up and then return to the queue if you have additional questions. Operator, please open the call for Q&A.

Matt Curoe: With that, let me turn it over to Matt to open the call up for Q&A.

Matt Curoe: Thanks, Brian.

Speaker Change: With that, let me turn it over to Matt to open the call up for Q&A.

Matt Curoe: Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and one follow-up, and then return to the queue if you have additional questions. Operator, please open the call for Q&A. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Matt Curoe: Thanks, Bryan. Before we start Q&A, given the time we have this morning, we ask that you limit yourself to one question and one follow-up, and then return to the queue if you have additional questions. Operator, please open the call for Q&A.

Audra: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We'll take our first question from Ebrahim Poonawala at Bank of America.

Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Ebrahim Poonawala: We'll take our first question from Ebrahim Poonawala at Bank of America. Good morning. Maybe first question for Brian, just looking at slide 49 in the deck around rate sensitivity. It implies that rate cuts should benefit NII. Thank you.

Speaker Change: We'll take our first question from Ebrahim Poonawala at Bank of America.

Ebrahim Huseini Poonawala: Morning. Maybe the first question, Hey Tim, for Bryan, is just looking at slide 49 in the deck around rate sensitivity. It implies that rate cuts should benefit NII. So you talked about the second half guide, I think, as we think about 25. But just talk to us about the comfort level. I think it says 75 to 80 percent effective beta on the downside. Just talk to us in terms of the deported beta assumptions. What's contractual within your deposit mix that should reprice lower, and is it fair to assume that rate cuts are positive for Fifth Third?

Ebrahim Huseini Poonawala: A good morning.

Speaker Change: Morning. Maybe first question for Bryan, just looking at slide 49 in the deck around rate sensitivity.

Speaker Change: Implies that late cuts should benefit NII. So you talked about the second half guide. I think as we think about 25...

Ebrahim Huseini Poonawala: But just talk to us around the comfort level, I think it says 75 to 80% effective betas on the downside. Just talk to us in terms of the deposit beta assumptions.

Speaker Change: Was contractual within your deposit mix that should reprice lower and is it fair to assume that late cuts are positive for Fifth Third?

Bryan Preston: Thank you, Ebrahim. We certainly believe that rate cuts are positive for Fifth Third. If you look at slide 42, we actually give a little bit more detail on the book. 64% of our book right now would be classified in kind of the higher beta categories. This represents our index of positive.

Bryan Preston: We certainly believe that rate cuts are positive for fifth place.

Bryan Preston: If you would like to slide 42, we actually give a little bit more detail on the mix of the interfering deposit. 64% of our book right now would be classified in kind of the higher beta category. This represents our index deposits, which are up to 35 billion dollars. The CD that we have in place, we've done a nice job of managing maturity with CD buckets, so that most of our CDs will mature by the end of the year. That's another 14 billion dollars of balances and promotional balances as well. So we have a lot of captions where, within that book, that we're going to be able to reprise down.

Speaker Change: Thank you, Ebrahim. We certainly believe that rate cuts are positive for Fifth Third. If you look at slide 42, we actually give a little bit more detail on the mix of the income.

Speaker Change: Interest-Bearing Deposit Book. 64% of our book right now would be classified in kind of the higher beta categories. This represents our index deposits which are up to $35,000

Bryan Preston: The CDs that we have in place, we've done a nice job of managing the maturities of the CD buckets so that most of our CDs will mature by the end of the year. That's another $14 billion of balances, and our promotional balances as well. So we have a lot of captions where within that book that we're going to be able to reprice down.

Speaker Change: Unknown Speaker 05. $5. $5. $5. $5. $5. $5. $5. $5. $5. $5.

Speaker Change: The CDs that we have in place, we've done a nice job of managing the maturities of the CD buckets so that most of our CDs will mature by the end of the year.

Speaker Change: That's another $14 billion of balances, and our promotional balances as well. So we have a lot of captions within that book that we're going to be able to reprice down. Overall, that's about 64% of the deposits. We certainly have some lower rate buckets still that we think the betas are affected by.

Bryan Preston: Overall, that's about 64% of the deposits. We certainly have some lower rate buckets still that we think that the betas are effectively zero. We have a high amount of confidence, though, that we're going to be able to get cost out and be able to manage. We really only need to be in a kind of mid-50s to low-60s beta to be able to be neutral to liability sensitive and more confident.

Bryan Preston: Overall, that's about 64% of the deposits. We certainly have some lower rate buckets still that we think that the betas are effectively zero. So we have a high amount of confidence, so that we're going to be able to get cost out and be able to manage. We really only need to be in a kind of mid 50s to low 60s beta to be able to be neutral, reliably sensitive, and we're confident we can deliver that.

Speaker Change: We have a high amount of confidence though that we're going to be able to get cost out and be able to manage. We really only need to be in a kind of mid-50s to low-60s beta to be able to be neutral to liability sensitive and we're confident we can deliver that.

Ebrahim Huseini Poonawala: That's clear. And I guess maybe one for you, Tim.

Tim Spence: That's clear. And I guess when you won for you, Tim, I think you put back in terms of loan growth much earlier this cycle. As you think about the creditors, you're a comment from Reserve outlook. Is it all clear if you get read costs? Do you just worry less about something really bad happening systemically on credit quality for Fifth Third? And then the other side of that is what's the trigger that leads to that growth? What I heard you say is you should have about average loan growth if things pick up. What's the catalyst we should be working for?

Speaker Change: That's clear. And I guess maybe one for you, Tim. I think you put it back in terms of loan growth much earlier this cycle. As you think about recreditors, your comments on reserve outlook,

Timothy N. Spence: I think you put it back in terms of loan growth much earlier this cycle. As you think about recreditors, your comments on reserve outlook. Is it all clear?

Tim: Is it all clear? If we get late cuts, do you just worry less about something really bad happening systemically on credit quality for Fifth Third? And then the other side of that is...

Timothy N. Spence: If we get late cuts, do you just worry less about something really bad happening systemically to credit quality for Fifth Third? And then the other side of that is, what's the trigger that leads to that growth? I heard you say you should have above-average loan growth if things pick up. What's the catalyst we should be working for? Thanks.

Speaker Change: What's the trigger that leads to that growth? I heard you say you should have above average loan growth if things pick up. What's the catalyst we should be working for? Thanks. Yeah.

Tim Spence: Thanks. Yeah. Good question.

Timothy N. Spence: Yeah. It's a good question. I think that's the million-dollar question for the industry right there. There's no question that if we see some relief on rates, it's a positive, both for loan demand and for credit quality. Jamie, Leonard, and I have been out in several of the markets this quarter doing market visits, and we've been running a straw poll on where rates need to be before activity picks up. And the wisdom of the crowds, at least inside Fifth Third at the moment, is about 4.5%.

Tim Spence: I think that's the million-dollar question for the industry right there. There's no question that if we see some relief on rates, that said positive, both for loan demand and for credit quality. Jamie Leonard and I have been out in several of the markets this quarter doing market visits. And we've been running the straw poll, and where rates need to be before activity picks up, in the wisdom of the crowds, at least inside Fifth Third at the moment, is about 4.5%—the meridian where we'll see a pickup in more activity. That said, while rates would be constructive, I think I continue always to worry about the broader macro issues, and we've got land wars into volatile regions. In the US right now, we have an election that's upcoming.

Speaker Change: Good question. I think that's the million dollar question for the industry right there. There's no question that if we see some relief on rates, it's a positive.

Speaker Change: both for loan demand and for credit quality.

James C. Leonard: Jamie Leonard and I have been out in several of the markets this quarter doing market visits and we've been running the straw poll and where rates need to be before activity picks up and the

Timothy N. Spence: That's the meridian where we'll see a pickup in more activity. That said, while rates would be constructive, I continue to worry about the broader macro issues. I mean, we've got land wars in two volatile regions in the U.S. right now. We have an election that's upcoming. We have massive fiscal deficits in the U.S. We have a ton of Treasury issuance that's going to be required to reload the TGA at some point here, and they're going to have to term that out, and that's going to put pressure on the long end of the curve.

James C. Leonard: Wisdom of the Crowds, at least inside Fifth Third at the moment, is about 4.5%, the meridian, where we'll see a pickup in more activity.

Speaker Change: That said...

Speaker Change: While rates would be constructive, I mean, I continue always to worry about the broader macro issues and when we got land wars and two

Tim Spence: We have massive fiscal deficits in the US. We have a ton of treasury issuance that's going to be required to reload the TGA at some point here, and they're going to have to turn that out, and that's going to put pressure on the long end of the curve. and Wall. I think we have some stability here. I'm uncomfortable with the level of support that the federal government is having to provide to keep GDP growth where it is. At the moment, I mean, the jobs numbers is most recent. Batch, unless I'm mistaken, a third of the new jobs that were created were created by the government.

Speaker Change: You know, volatile regions in the U.S. right now. We have an election that's upcoming. We have massive fiscal deficits in the U.S.

Speaker Change: We have a ton of Treasury issuance that's going to be required to reload the TGA at some point here, and they're going to have to term that out, and that's going to put pressure on the long end of the curve.

Timothy N. Spence: And while I think we have some stability here, I'm uncomfortable with the level of support that the federal government is having to provide to keep GDP growth at where it is at the moment. I mean, you know, the jobs numbers, this most recent batch, unless I'm mistaken, a third of the new jobs that were created were created by the government. When we look at our footprint and we look at where the activity is, where there is federal stimulus, we're seeing robust activity everywhere else.

Speaker Change: And while I think we have some stability here.

Speaker Change: I'm uncomfortable with the level of support that the federal government is having to provide to keep GDP growth where it is at the moment. The jobs numbers is most recent.

Tim Spence: When we look at our footprint and we look at where the activity is, where there is federal stimulus. We're seeing robust activity. We see everywhere else. We've got client and Tennessee tell us that the current environment was, quote, half speed ahead. We will continue to be mindful about that. I'm a believer that in uncertain environments, you have to focus on getting growth from the businesses that you know and the strategies that are proven. You're not going to see us stretching into categories. We don't know. We're doing things that we're uncomfortable with from a, you know, a credit perspective and where we have to bet on a favorable macro to bail us out, you know, in terms of getting repayed.

Speaker Change: [inaudible]

Timothy N. Spence: We had a client in Tennessee tell us that the current environment was, quote, half speed ahead. Right. So we will continue to be mindful about that. I'm a believer that in uncertain environments, you have to focus on getting growth from the businesses that you know and the strategies that are proven. You're not going to see us, you know, stretching into categories we don't know or doing things that we're uncomfortable with from a credit perspective and where we have to bet on a favorable macro to bail us out, you know, in terms of getting repaid.

Speaker Change: We had a client in Tennessee tell us that the current environment was, quote, half speed ahead. Right. So we will continue to be mindful about that. I'm a believer that in uncertain environments,

Speaker Change: You have to focus on getting growth from the businesses that you know and the strategies that are proven. You're not going to see us

Speaker Change: You know, stretching into categories we don't know or doing things that we're uncomfortable with from a, you know, a credit perspective and where we have to bet on a favorable macro to bail us out, you know, in terms of getting repaid.

Timothy N. Spence: That's a great call out. Thank you.

Scott Siefers: Thank you. We'll go next to Scott Siefers at Piper Sandler. Thanks for taking the question.

Robert Scott Siefers: We'll go next to Scott Siefers at Piper Sandler.

Speaker Change: That's a great call out. Thank you.

Robert Scott Siefers: Morning, everyone. Thanks for taking the question. Let's see. Actually, Bryan, I was hoping you could speak a little bit about the fee trajectory. You know, you discussed sort of the second quarter softness a month or so ago. It feels like it might persist a bit into the third quarter, but I imagine we're still feeling like that'll rebound. Just hoping you could maybe share some thoughts on sort of when and how that ends up looking. You know, there's just a little more color on the fee trajectory.

Speaker Change: We'll go next to Scott Siefers at Piper Sandler.

Scott Siefers: Let's see, actually, Brian was hoping you could speak a little bit about the fee trajectory. You know, you've discussed sort of the second quarter of softness a month or so ago. I feel like it might persist a bit into the third quarter, but I imagine we're still feeling like that'll, that'll rebound. Just hoping you could maybe share some thoughts on sort of when and how that ends up looking. You know, there's just a little more color on the fee trajectories. Yeah, absolutely, Scott. You know, the second or third quarter increase, you know, we're talking about, you know, not too aggressive of fee direct perspective.

Robert Scott Siefers: Good morning, everyone. Thanks for taking the question.

Robert Scott Siefers: Let's see. Actually, Bryan, I was hoping you could speak a little bit about the fee trajectory. You know, you discussed sort of the second quarter softness a month or so ago. It feels like it might persist a bit into the third quarter, but I imagine we're still feeling like that'll rebound. Just hoping you could maybe share some thoughts on sort of when and how that...

Bryan Preston: Yeah, absolutely, Scott, the second or third quarter increase, you know, we're talking about not too aggressive of a food growth perspective. We continue to expect continued performance out of our wealth and asset management business, as well as commercial payments. Payments have been ticking along at three to $4 million a quarter increases, and we're also going to see some seasonal impacts actually come out associated with our mortgage base, which has benefited a lot from the servicing portfolio and all the servicing ads.

Speaker Change: That ends up looking, you know, there's just a little more color on that feature trajectory, please.

Speaker Change: Yeah, absolutely, Scott. You know, the second to third quarter increase, you know, we're talking about, you know, not too aggressive of a feed growth perspective. You know, we continue to expect continued performance out of our wealth and asset management.

Scott Siefers: You know, we continue to expect continued performance out of our wealth and asset management business, as well as commercial payments. Payment has been taken along at three to four million dollars a quarter increases, and we expect that to continue and do really good about it. We're also going to see some seasonal impacts actually come out associated with our mortgage business. We've benefited a lot from the servicing portfolio; all the servicing ads that we did right at the end of the low rate cycle have benefited us and generated a lot of great income. But there is a seasonal headwind one to the two queue that we felt that was about $7 million that's not going to repeat, so we're set up really well for that two to three queue growth that is laid out.

Robert Scott Siefers: Business, as well as commercial payments. Payments have been ticking along at three to four million dollars a quarter increases and we expect that to continue.

Speaker Change: You don't feel really good about it.

Speaker Change: We're also going to see some seasonal impacts actually come out associated with our mortgage business. We've benefited a lot from the servicing portfolio, all the servicing ads that we did.

Bryan Preston: Right at the end of the low-rate cycle has benefited us and generated a lot of great income. But there is a seasonal headwind, 1Q to 2Q that we felt. That was about $7 million. That's not going to repeat.

Speaker Change: Right at the end of the low-rate cycle has benefited us and generated a lot of great income, but there is a seasonal headwind 1Q to 2Q that we felt that was about 7 million that's not going to repeat, so...

Bryan Preston: So we're set up really well for that 2Q to 3Q growth that we've laid out. And then in the fourth quarter, we'll get some additional seasonal benefit from the MSR. The payments and card spend will continue to pick up, especially seasonal card spend and consumer. We'll get the $10 million TRA benefit. And then we always see some pickup in both commercial banking and leasing in the fourth quarter that should both generate some additional income as well. That gets a little bit higher growth rate trajectory that you can see. That's implied problem number three.

Scott Siefers: And then in the fourth quarter, we'll get some additional seasonal benefit out of the MSR. The payments and card spend will continue to pick up, especially the seasonal card spend. The consumer will get the $10 million TRA benefit. And then we'll always see some pick up in both commercial banking and leasing in the fourth quarter that should both generate some additional income as well. That gives us to that little bit higher growth rate trajectory that you could see that's implied from three to four to four. Perfect. Okay. Good.

Speaker Change: We're set up really well for that 2Q to 3Q growth that we've laid out.

Speaker Change: And then in the fourth quarter, we'll get some additional seasonal benefit out of the MSR, the payments and card spend will continue to pick up, especially the seasonal card spend and consumer, we'll get the $10 million TRA benefit, and then we always see some pickup in both commercial banking and leasing in the fourth quarter, that should both generate some additional income as well, that gets us to the

Speaker Change: that little bit higher growth rate trajectory that you can see that's implied throughout in 3Q to 4Q.

Robert Scott Siefers: Perfect okay good and then maybe switching gears just a second something you might be able to sort of put into context a CFPB news from earlier this month that just you know based on my read kind of felt like we closed the book on the account issues from a few years ago which is good but then there were the auto related items so I know they're just sort of questions floating out there about sort of cost to comply cost to remediate what's within the existing outlook can you maybe address those kind of kind of broadly please

Scott Siefers: And then maybe switching gears just a second.

Scott Siefers: So you might be able to sort of put into context the CFPB news from earlier this month that just, you know, based on my read count, felt like we closed the book on the account issues from a few years ago. Which is good.

Speaker Change: [inaudible]

Speaker Change: Okay, good. And then maybe switching gears just a second, something you might be able to sort of put into context, a CFPB news from earlier this month that just, you know, based on my read, kind of felt like we closed the book on the account issues from a few years ago, which is good. But then there were the auto related items. So I know they're just sort of questions floating out there about sort of cost to comply, cost to remediate what's within the existing outlook. Can you maybe address those kind of kind of broadly, please?

Scott Siefers: Then there were the auto-related items. So I know they're just sort of questions floating out there about sort of cost to comply, cost to remediate, what's within the existing outlook. Can you maybe address those kind of kind of broadly.

Timothy N. Spence: Yeah, Scott, it's Tim. I'm happy to do that.

Tim Spence: Yes, Scott, it's Tim. I'm happy to do that. And I think you hit on the most important thing here, which is the best thing for you to do is focus on the statements of fact as opposed to the press releases on this one. I think that by the Bureau's own statements of fact here, these were old issues. So one was nearly five years old. The other was nearly 10 years old, respectively. There are things that we identified and reported. And in case of auto, we completely canceled the program before they ever even started their investigation.

Speaker Change: Yeah, Scott, it's Tim. I'm happy to do that. And I think you hit on the most important thing here, which is the best thing for you to do is focus on the statements of fact, as opposed to the press releases on this one. I think that by the Bureau's own statements of fact here, these were old issues. So one was nearly five years old. The other was nearly 10 years old, respectively.

Timothy N. Spence: And I think you hit on the most important thing here, which is the best thing for you to do is focus on the statements of fact, as opposed to the press releases on this one. I think that by the Bureau's own statements of fact here, these were old issues. So one was nearly five years old, and the other was nearly 10 years old, respectively.

Speaker Change: [inaudible]

Speaker Change: There are things that we identified and reported.

Speaker Change: And in case of auto, we completely canceled the program before they ever even started their investigation.

Timothy N. Spence: There are things that we identified and reported, and in the case of auto, we completely canceled the program before they ever even started their investigation. And I think while, of course, we always take anything that impacts customers seriously at Fifth Third, the size of the fines, which are a fraction of what you've seen in other places, probably speak for themselves in terms of the limited scope of the issues here. We elected to close these things out because, given the fact that they were small and in the past, it just didn't make sense to continue to spend more money litigating than we were going to spend to settle.

Tim Spence: And I think while, of course, we always take anything that impacts customers seriously, a Fifth Third, the size of the fines, which are a fraction of what you've seen in other places, probably speak for themselves in terms of the limited scope of the issues here. We elected to close these things out because, given the fact that they were smaller than in the past, it just didn't make sense to continue to spend more money litigating than it was going to spend to settle. So, you know, we put them in the rearview mirror. We have the one-time expense this quarter.

Speaker Change: And I think while, of course, we always take anything that impacts customers seriously at Fifth Third, the size of the fines, which are a fraction of what you've seen in other places, probably speak for themselves in terms of the limited scope of the issues here.

Speaker Change: Thanks.

Speaker Change: We elected to close these things out because given the fact that they were small in the past, it just didn't make sense to continue to spend more money litigating than it was going to spend to settle. So we put them in the rearview mirror. We have the one-time expense this quarter, and that's where it's going to stay. You shouldn't expect any incremental ongoing expense.

Timothy N. Spence: So, you know, we put them in the rearview mirror. We have the one-time expense this quarter, and that's where it's going to stay. You shouldn't expect any incremental ongoing expense because these are issues that are.

Tim Spence: And that's where it's going to stay. You shouldn't expect any incremental ongoing expense because these are issues that are so old, anything that needed to be done was already done from an ongoing operation. Okay, wonderful.

Speaker Change: Because these are issues that are so old, anything that needed to be done was already done from an ongoing operation.

Robert Scott Siefers: Okay, wonderful. Good. Thank you for taking the questions.

Scott Siefers: Good. Thank you for taking the questions. Thank you.

Speaker Change: Okay, wonderful. Good. Thank you for taking the questions.

Mike Meow: Our next question comes from Mike Meow at Wells Fargo. Mike, hi. I'm not going to read you out.

Michael Lawrence Mayo: Our next question comes from Mike Mayo at Wells Fargo. Hey, Mike. Hi.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Mike Mayo at Wells Fargo.

Michael Lawrence Mayo: Am I quiet? I'm not going to leak you out.

Speaker Change: Hey, Mike. Hi. I'm not going to reach you.

Greg Schroeck: and Greg Rickus. Transcripts provided by Transcription Outsourcing, LLC. We'll go next to Ken Ustin at Jeff

Ken Euston: We'll go next to Ken Euston at Jefferies. Hey, good morning, guys. On the deposit side, heard your comment about four basis points increase in 3Q with no cuts. And I'm just wondering, you talked about the mid 50s, 60 downside beta. Can you give us a little bit of context on how that starts and then how that moves forward. And you talked about having a good two thirds of your deposit-based high beta, but just wondering like how you kind of expect some of the pricing stuff you've been doing to grow deposits in the Southeast to juxtapose against that downside beta.

Speaker Change: We'll go ahead and recuse.

Kenneth Michael Usdin: Hey, good morning, guys. On the deposit side, I heard your comment about a four basis points increase in 3Q with no cuts. And I'm just wondering, you've talked about the mid-50s to 60 downside beta. Can you give us a little bit of context on how that starts and then how that moves forward? And you talked about having a good two-thirds of your deposit base with high beta, but I was wondering how you kind of expect some of the pricing stuff you've been doing to grow deposits in the Southeast to juxtapose against that downside beta thing.

Speaker Change: We'll go next to Ken Ustin at Jeffreys.

Unknown Executive: Hey, good morning, guys.

Unknown Executive: On the deposit side, I heard your comment about four basis points increase in 3Q with no cuts. And I'm just wondering, you've talked about the mid-50s to 60 downside beta. Can you give us a little bit of context on

Speaker Change: How that starts and then how that moves forward and you talk about having a good two-thirds of your deposit base high beta but just wondering like how you kind of expect some of the pricing stuff you've been doing to grow deposits in the southeast to juxtapose against that downside beta. Thanks.

Ken Euston: Thanks. Yeah, absolutely. Thanks, Ken. Great question.

Bryan Preston: Yeah, absolutely. Thanks, Ken.

Ken Euston: What we would tell you is that what it'll create is we'll create some opportunity to be a little bit more aggressive on some of the rate cuts associated with the CDs and the promo portfolio that we've seen. Historically, when we've navigated through these down rate cycles, those first couple cuts on the consumer side do have a pretty decent impact on customer mentality and sentiment and your ability to create some sticky balances. We've been through this a few times now, where we've seen the ability to convert those balances into a lower rate balance and cause them to take around.

Speaker Change: Yeah, absolutely. Thanks, Ken. Great question. You know, what we would tell you is that what it'll create is it'll create some opportunity to be a little bit more aggressive on some of the rate cuts associated with the CDEs.

Kenneth Michael Usdin: Great question. What we would tell you is that it'll create some opportunity to be a little bit more aggressive on some of the rate cuts associated with the CDE. Historically, when we've navigated through these down rate cycles, those first couple cuts on the consumer side do have a pretty decent impact on customer mentality and sentiment and your ability to create some sticky balances. We've been through this a few times now where we've seen the ability to convert those balances to take around.

Speaker Change: and the promo portfolios that we

Speaker Change: Unknown Speaker 05. . . . . .

Speaker Change: Historically, when we've navigated through these down rate cycles, those first couple cuts on the consumer side do have a pretty decent impact on customer mentality and sentiment and your ability to create some sticky balances.

Speaker Change: We've been through this a few times now where we've seen the ability to convert those balances into a lower rate balance.

Kenneth Michael Usdin: And on the other side of that, the commercial balances, in particular, the index balances, those are immediate impacts and will just move with the market. We have really no concern around that index strategy. It's another one that we've executed in prior cycles. I think we did a nice job of kind of navigating and managing those balances in those index portfolios. Rates. He gives us a lot of confidence in the ability to very quickly get those costs.

Ken Euston: And on the other side of that, the commercial balances in particular, the index balances, those are immediate impacts and it'll just move with the market. We have really no concern around that index strategy. It's another one that we've executed in prior cycles. I think we've got a nice job of kind of navigating and managing those balances. And that's core core. He gives us a lot of confidence in the ability to very quickly get those costs out.

Cosmo: and Cosmos stick around.

Cosmo: And on the other side of that, the commercial balances, in particular the index balances, those are immediate impacts and will just move with the market. We have really no concern around that index strategy. It's another one that we've executed.

Cosmo: In prior cycles, I think we've done a nice job of kind of navigating and managing those balances up in those index portfolios as we reach the greats. It gives us a lot of confidence in the ability to very quickly get those costs out.

Ken Euston: Okay, got it, and then just calling up on your comments about record 25 versus 23 NII. Can you talk just about how much of that do you expect to be growth related and how much of that you expect to be just the outcome of great scenarios? I would actually tell you that most of it is just the natural transition of the balance sheet in the business today. I think our not high stories actually pretty simple. Right now it's the continued picture at asset pricing and slowing the positive cost. And if you look at just the trends that we're letting out, you know, we're adding about 8 million a quarter right now, just on the natural repricing of the existing balance sheet.

Bryan Preston: Okay, got it. And then, just following up on your comments about record 25 versus 23 NII, can you talk to us about how much of that do you expect to be growth-related and how much of that do you expect to be just the outcome of rate scenarios?

Speaker Change: Okay, got it. And then just following up on your comments about record 25 versus 23 NII, can you talk to us about how much of that do you expect to be growth related and how much of that you expect to be just the outcome of

Bryan Preston: I would actually tell you that most of it is just the natural transition of the balance sheet in the business today. I think our NII story is actually pretty simple.

Speaker Change: Great scenarios.

Speaker Change: I would actually tell you that most of it is just the natural transition of the balance sheet in the business today. I think our NII story is actually pretty simple. Right now it's the continued fixed rate asset pricing and slowing deposit costs.

Timothy N. Spence: Right now, it's continued fixed-rate asset pricing and slowing deposit costs. And if you look at just the trends that we're laying out, we're adding about $8 million a quarter right now just on the natural repricing of the existing balance sheet. And you think with, we've talked a lot about $4 billion of fixed rate asset repricing that's happening at about. Coins, that's $20 million a quarter. And then the deposit costs were up four bits this quarter on a $120 billion interest-bearing book.

Speaker Change: And if you look at just the trends that we're laying out, you know, we're adding about $8 million a quarter right now, just on the natural repricing of the existing balance sheet. And you think with, we've talked a lot about $4 billion of fixed rate asset repricing that's happening at about $200 billion.

Ken Euston: And you think we've talked a lot about 4 billion dollars to picture an asset repricing that's happening at about 200 basis points, that's 20 million a quarter. And then the deposit cost up for this quarter on 120 billion dollar interest rate, both there's your 12 incremental cost to take us down to that net eight. We get a little bit of continued slowing on the positive cost side. And you know, that can approach, you know, 10, 15, 20 million a quarter day count. Now, you know, we're going to pick up 10 million dollars here in the third quarter.

Timothy N. Spence: There's your 12 of incremental costs to take us down to that net. We get a little bit of continued slowing on the deposit cost side. That can approach $10, $15, $20 million a quarter. Day count, we're going to pick up $10 million here in the third quarter. And then that sets us up for an exit rate where if you just take the four times the fourth quarter math, you're right around what our record at III is of $58.52.

Speaker Change: Basis Coins, that's $20 million a quarter, and then the deposit costs up four bits this quarter on a $120 billion interest bearing book, there's your 12 incremental costs to take us down to that net eight.

Timothy N. Spence: Throw on a little earning asset or loan growth on top of that, and the path is there. The big wildcard, but we always talk about, is you have to have competitive deposit pricing. But if we start to see rate cuts, we would expect to see some decent relief on the liability side. Yeah.

Speaker Change: We get a little bit of continued slowing on the deposit cost side, that can approach $10, $15, $20 million a quarter.

Ken Euston: And then that sets us up for an exit rate where if you just take the four times the fourth quarter math, you're right around what is our record and I 58 52. Throw on a little earning after they're longer on top of that, and the past, the past is there for us. That's what gives us confidence.

Speaker Change: Day count, you know, we're going to pick up $10 million here in the third quarter.

Speaker Change: And then that sets us up for an exit rate where if you just take the four times the fourth quarter math, you're right around what is our record at IIO.

Speaker Change: 5852. Throw on a little earning asset or loan growth on top of that and the path is there for us. That's what gives us.

Ken Euston: A big wild part about the old talk about is you have to how competitive deposit pricing ultimately ends up being. But if we start to see rate cuts, we would expect to see some decent relief on my daughter's side.

Speaker Change: Confidence. The big wild card, like we always talk about, is just how competitive deposit pricing ultimately ends up being.

Timothy N. Spence: Yeah, Ken, it's Tim. I just... We talked a while ago, and maybe we haven't been doing enough of this recently, but about the power of having these intermediate duration fixed rate loan origination platforms. And by that, I really mean you think about provide, you think about the auto business, you think about dividends, like if you just look at the yields on the indirect auto and specialty business year over year, we've added almost 100 basis points to the yield in the portfolio

Speaker Change: If we start to see rate cuts, we would expect to see some decent relief on the liability side. Yeah, Ken, it's Tim. I just.

Tim Spence: Yeah, can it, it's can I just we talked a while ago, and maybe we haven't been doing enough of this recently, but about the power of having these intermediate duration fixed rate loan origination platforms was. And by that, I really mean you think about provide you think about the auto business you think about dividend. Like if you just look at the yields on the indirect auto and specialty business year over year, we've added almost a hundred basis points to the yield in the portfolio. And if you look at the solar product, it's north of the 200 basis points that we have been able to add year over year.

Speaker Change: We talked a while ago, and maybe we haven't been doing enough of this recently, but about the power of having these

Speaker Change: Intermediate Duration Fixed Rate.

Speaker Change: Loan Origination Platforms was, and by that I really mean you think about provide, you think about the auto business, you think about dividends, like if you just look at the yields on the indirect auto and specialty business year over year, we've added almost a hundred basis points.

Timothy N. Spence: And if you look at the solar product, it's north of 200, that we have been able to add year over year, and that just speaks to the power of both the one, the sort of origination capacity that exists there that we can dial up and in an environment where it spreads widely. And two, the fact that these are asset classes that are going to reprice a lot faster than the, you know, 3% mortgages that were originated at the low point in the rate cycle, and that are going to persist much longer than the jumbo mortgages and the other fixed rate product that you see being available to banks out in the market today, which are all likely to prepay if we get any sort of new, Out of the Fed, so that will be an important part of the way that we continue to drive outcomes even in an environment where you don't get a meaningful impact, across the industry.

Speaker Change: to the yield in the portfolio. And if you look at the solar product, it's north of 200 basis points.

Tim Spence: And that just speaks to the power of both the one the the sort of origination capacity that exists there that we can dial up in an environment where spreads wide and that makes sense for us to do it. And to the fact that these are asset classes that are going to reprice a lot faster than the, you know, 3% mortgages that get it as you know that were originated at the low point in the rate cycle. And that are going to persist much longer than the jumbo mortgages and the other fixed rate products that you see being available to banks out in the market today, which are all likely to prepay if we get any sort of meaningful movement.

Speaker Change: that we have been able to add year over year. And that just speaks to the power of both the one, the sort of origination capacity that exists there that we can dial up and in an environment where spreads widen and that makes sense for us.

Speaker Change: to do it.

Speaker Change: And two, the fact that these are asset classes that are going to reprice a lot faster than the, you know, 3% mortgages.

Speaker Change: that were originated at the low point in the rate cycle and that are going to persist much longer than the jumbo mortgages and the other fixed rate product that you see being available to banks out in the market today, which are all likely to prepay if we get any sort of meaningful movement.

Ken Euston: Out of the fed so that that will be an important part of the way that we continue to drive outcomes even in an environment where you don't get a meaningful improvement in loan demand across the industry. Got it.

Speaker Change: [inaudible]

Gerard Sean Cassidy: Got it. Thank you for that call.

Gerard Cassidy: Thank you for the call. We'll go next to Gerard Cassidy at RBC. Hi, Tim.

Speaker Change: and across the industry.

Timothy N. Spence: We'll go next to Gerard Cassidy at RBC.

Speaker Change: Got it. Thank you for that call.

Speaker Change: We'll go next to Gerard Cassidy at RBC.

Gerard Cassidy: I'm Bryan. Morning. Tim, Bryan, can you give us a little color on slide 29, the transfers to non-accrual status of loans. It felt nice like this quarter, and when you go back, you give us the data back to the second quarter, 23, and some meaningful drop from those levels. Any color that you can give us on what led to that drop, and then second, and I apologize if you addressed this already, on the commercial loan charge-off number that jumped in the quarter, were there any specific idiosyncratic loans that caused that to happen?

Gerard Sean Cassidy: Tim and Bryan, can you give us a little color? On slide 29, the transfers to the non-accrual status of loans fell nicely this quarter, and when you go back, you give us the data back to the second quarter of 23, and it's a meaningful drop from those levels. Any color that you can give us on what led to that drop? And then second, and I apologize if you addressed this already, on the commercial loan charge-off number that jumped in the quarter, were there any specific idiosyncratic loans that caused that to happen?

Bryan Preston: Hi Jim, I'm Bryan.

Bryan Preston: Morning.

Gerard Sean Cassidy: Tim and Bryan, can you give us a little color on slide 29?

Gerard Sean Cassidy: The transfers to nonaccrual status of loans

Speaker Change: Felt nicely this quarter and when you go back you know you give it give us the data back to the second quarter 23 and it's a meaningful drop from those levels any color that you can give us on

Speaker Change: What led to that drop? And then second, and I apologize if you address this already, on the commercial loan charge off number that jumped in the quarter, were there any specific idiosyncratic loans that caused that to happen?

Greg Schroeck: Gerard, it's Greg. Great question. So I'll answer the second one first. So, we're not seeing any thematic concerning trends emerging out of the company. Geodirapically buy into my product. But we've talked about lumpiness on the commercial slide, and that's what we experienced this quarter. We're normalizing off very low loss rates, and so we'll have one or two of these episodic events that are going to get highlighted, and that's what we saw. But, as Bryan mentioned, they were not a surprise. We had reserves against those two loans, and so we think we're through those. The overall credit metrics remained really solid, or the link on C's were down quarter over quarter.

Greg Schroeck: Gerard, hey, it's Greg. Great question. So I'll answer the second one first. So yeah, we had the two names that Bryan mentioned that were two different industries. We're not seeing any thematic concerning trends emerging out of the portfolio geographically by product, but we've talked about lumpiness on the commercial side. And that's what we experienced this quarter. We're normalizing off very low loss rates. And so when we have one or two of these episodic events, they're going to get highlighted.

Greg: Gerard, hey it's Greg. Great question. So I'll answer the second one first. So yeah, we had the two names that Bryan mentioned that were two different industries. We're not seeing any thematic concerning trends emerging out of the company.

Speaker Change: Geographically.

Mike Bottut: Mike Bottut

Speaker Change: Well, we've talked about lumpiness on the commercial side, and that's what we experienced this quarter.

Speaker Change: We're normalizing off very low loss rates and so when we have

Greg Schroeck: And that's what we saw. But, as Bryan mentioned, they were not a surprise. We had reserves against those two loans, and so we think we're through those.

Speaker Change: One or two of these episodic events, they're going to get highlighted and that's what we that's what we saw. But as Bryan mentioned,

Bryan Preston: They were not a surprise. We had reserves against those two loans, and so we think we're through those. The overall credit metrics remain.

Greg Schroeck: The overall credit metrics remain really solid. Our delinquencies were down quarter over quarter. The MPAs that you referred to were down 13% quarter over quarter at 55 basis points. That's below our 10-year average. We're up one basis point year over year on MPAs, and it's really across the board. We had about $80 million in commercial losses this quarter, but we were down almost $100 million. So we're working the portfolio very hard.

Greg Schroeck: The MPAs that you referred to were down 13% quarter over quarter at 55 basis points. That's below our 10-year average, up one basis point year over year on MPAs, and it's really across the board. We had about $80 million in commercial losses this quarter, but we were down on with $100 million. So we're working with the portfolio very hard. We're working out of some of the MPA loans without experiencing the loss rates, but it's really across the board. We're not seeing the MPAs in the commercial real estate portfolio. We had about $3 million in MPAs there.

Speaker Change: Really solid. Our delinquencies were down quarter over quarter. The MPAs that you referred to were down...

Speaker Change: 13%, quarter over quarter, 55 basis points, that's below our 10-year average.

Speaker Change: and Matt Curoe.

Speaker Change: One basis point, year-over-year on NPAs, and it's really across the board.

Speaker Change: We had about $80 million in commercial losses this quarter, but we are down almost $100 million. So we're working the portfolio very hard.

Greg Schroeck: We're working out of some of the MPA loans without experiencing the loss rates. But it's really across the board. Where we're not seeing the MPAs are in the commercial real estate portfolio. We had about $3 million in MPAs there. So that Unknown Executive, Erika Najarian, Manan Gosalia, Robert Siefers, Vivek Juneja, Kenneth Zerbe, Ebrahim Poonawala, Terence McEvoy, James Leonard, Manan Gosalia, Robert Siefers, Vivek Juneja, Matt Curoe, Fifth Third Bancorp, Manan Gosalia, Robert Siefers, Vivek Juneja, Kenneth Zerbe, had a little bit on the consumer side, most of it being driven on the commercial side.

Speaker Change: We're working out of some of the MPA loans without experiencing the loss rate, but it's really across the board. Where we're not seeing the MPAs are in the commercial real estate portfolio. We had about $3 million in MPAs there, so that portfolio...

Greg Schroeck: So that portfolio used to perform very, very well at virtually no delinquencies in that portfolio. So it's really across the board, where we're seeing the improvement in our MPA numbers. That a little bit on the consumer side. Both sectors being driven on the commercial side. Very good.

Speaker Change: It's really across the board, where we're seeing the improvement in our NPA numbers.

Speaker Change: And a little bit on the consumer side. Most of it is being driven on the commercial side.

Gerard Sean Cassidy: Very good. Thank you for the color.

Greg Schroeck: Thank you for the color. And then second, when you look at your shared national credit portfolio, and you give us good details once again on the slide 25, the financial services slice of that portfolio. How much, if any, is in sectors that it's considered private equity or private credit, because, as we all know, it seems like the banking industry has been de-risked since the financial crisis, and the private equity, private credit side of the equation might be taking on more of that risk. Do you guys have many loans to the Black Stones, or the car aisles, or any of those types of companies, and where they might be indirect exposure to that industry?

Speaker Change: Thank you for the color. And then second, when you look at your shared national credit portfolio, and you give us good details, once again, on the slide, 25.

Speaker Change: The financial services slice of that portfolio, how much, if any, is in sectors that is considered private equity or private credit? Because as we all know, it seems like the banking industry has been de-risked since the financial crisis, and the private equity, private credit side of the equation might be taking on more of that risk. Do you guys have many loans to the Blackstones or the Carlisles or any of those types of companies where there might be indirect exposure to that industry?

Bill Karkash: And then second, when you look at your shared national credit portfolio, and you give us good details once again on slide 25, the financial services slice of that portfolio, how much, if any, is in sectors that, you know, are considered private equity or private credit? Because, as we all know, the banking industry has been de-risked since the financial crisis, and the private equity and private credit side of the equation might be taking on more of that risk. Do you guys have many loans to the, you know, Blackstones or the Carlisles or any of those types of companies where there might be indirect exposure to that industry?

Greg Schroeck: Yeah, another great question. So we've got subscription lines to some of those type of companies highly rated borrowers, but as you know, those are mostly predicated on an underwritten, over collateralized to the LP capital. But we're not in that leverage-on-leverage space. We're just, we're not active there. We've got a couple of direct lending lines of credit. They're total, they're total about $30 million. So about $15 million. So we're not active in that. Good, good. Thank you again.

Greg Schroeck: Yeah, yeah, another great question. So we've got subscription lines to some of those type of companies, highly rated borrowers. But as you know, those are mostly predicated on an underwritten over collateralized to the LP capital. But we're not in that leverage on leverage. Space. We're just not active there. We've got a couple direct lending lines of credit. In total, they total about $30 million. So, about $15 million. We're not active in that space.

Speaker Change: Yeah, another great question. So we've got subscription lines to some of those type of companies, highly rated borrowers, but as you know, those are mostly predicated on an underwritten over collateralized to the LP capital.

Speaker Change: But we're not in that leverage on leverage space, we're not active there. We've got a couple of direct lending lines of credit, they total about $30 million, so about $15 million, so we're not active in that space.

Bill Karkash: Good. Okay. Good. Thank you again.

Greg Schroeck: Thank you, thank you.

Timothy N. Spence: Thank you.

Speaker Change: Good, okay, good. Thank you again.

Bill Carcache: We'll move next to Bill Carcache, that wolf research. Thank you. Good morning. I wanted to follow up on your credit commentary and ask for your thoughts on the longer term trajectory of charge offs given what you're seeing in both consumer and commercial. Crystal clear on all the sources and uncertainty that you highlighted to him. But if we assume that the soft landing scenario materializes and think about the lost content implicit in your loan book today, would you expect Fifth Thirds and CO rates to level off from here, drift a little bit higher, revert to 2019 levels.

Bill Karkash: We'll move next to Bill Karkash at Wolf Research.

Speaker Change: Thank you.

Erika Najarian: Thank you. Good morning.

Speaker Change: We'll move next to Bill Karkash at Wolf Research.

Bill Karkash: Thank you. Good morning. I wanted to...

Erika Najarian: I wanted to follow up on your credit commentary and ask for your thoughts on the longer-term trajectory of charge-offs given what you're seeing in both consumer and commercial. Crystal clear on all the sources of uncertainty that you highlighted, Tim, but if we assume that the soft landing scenario materializes and think about the lost content implicit in your loan book today, would you expect Fifth Thirds and CO rates to level off from here, drift a little bit higher, or revert to 2019 levels? I know you can't give, you know, 25 guidance, but any help on how you're thinking about that long-term trajectory would be super helpful.

Bill Karkash: Follow up on your credit commentary and ask for your thoughts on the longer term trajectory of

Bill Karkash: ChargeOffs, given what you're seeing in both consumer and commercial. Crystal clear on all the sources of uncertainty that you highlighted, Tim, but if we assume that the soft landing scenario materializes and think about the lost content implicit in your loan book today, would you expect Fifth Thirds

Bill Carcache: I know you can't give 25 guidance, but any help on how you're thinking about that long-term trajectory would be super helpful.

Speaker Change: NCO rates to level off from here, drift a little bit higher, revert to 2019 levels. I know you can't give, you know, 25 guidance, but any help on, you know, how you're thinking about that long-term trajectory would be super helpful.

Greg Schroeck: Yeah, it's Greg again. So, certainly, as Ken mentioned, any kind of rate cut is going to help us from an overall asset quality perspective. It will on the consumer side; it will on the commercial side. It takes a little while for those rate cuts to play out in the portfolio. So, as Bryan mentioned in his prepared remarks, we still feel good about the 40 or 45 basis points for the rest of this year.

Greg Schroeck: Yeah, it's great again. So, yeah, certainly, as Tim mentioned, any kind of rate cut is going to help us from an overall asset quality. We're on the consumer side; we're on the commercial side. It takes a little while for those rate cuts to play to the portfolio. So, as Brian mentioned and is prepared remarks, we still feel good about 40 or 45 basis points for the rest of this year. And then we'll see how the rest of the marketplace plays out. But, as I just mentioned, the previous questions don't feel really good about the overall metrics of the portfolio.

Greg: Yeah, it's Greg again. So yeah, certainly, as Ken mentioned, any kind of rate cut is going to help us from an overall asset quality. It will on the consumer side, it will on the commercial side.

Speaker Change: Inside.

Speaker Change: It takes a little while for those rate cuts to play into the portfolio, so as Bryan mentioned in his prepared remarks, we still feel good about the 40 to 45 basis points for the rest of this year, and then we'll see how the rest of the marketplace plays out, but as I just mentioned in the previous question, we still feel really good about the overall metrics of the portfolio. You know, our NPA rates is very good. We're looking forward to seeing how that plays out.

Greg Schroeck: Then we'll see how the rest of the marketplace plays out, but as I just mentioned in the previous question, I still feel really good about the overall metrics of the portfolio. Our MPA rates are a good indicator of potential loss rates moving forward in those numbers. And so I think even without rate increases, I still feel really good about our portfolio. Get a little bit of goodness from the rates, and yeah, I think it certainly helps as we get into 2020.

Greg Schroeck: Our NPA rates is a good indicator of potential loss rates moving forward, and those numbers continue to come down and improve. And so I think even without rate increases, I don't feel really good about our portfolio. Get a little bit of goodness from the rates, and yeah, I think it certainly helps you get into 2025.

Speaker Change: is a good indicator of potential loss rates moving forward and those numbers continue to come down.

Speaker Change: Group. And so I think even without rate increases, still feel really good about our portfolio, get a little bit of goodness from the rates. And yeah, I think it certainly helps us get into 2025.

Bill Carcache: Thanks. That's helpful.

Erika Najarian: Thanks, that's helpful. And separately, you talked about some of the variables impacting the curve. Can you discuss how Fifth Thirds would position for either a flatter or a steeper yield curve environment?

Bill Carcache: And then separately, you talked about some of the variables impacting the curves. Can you discuss how fifth, third position for either a flatter or a steeper yield curve environment? Yeah, absolutely. You know, we're typically on normal businesses, about two thirds sensitive to the front end of the curve. Now, we'll tell you what our current cash position will probably closer to 75% sensitive on the front end of the curve. So relief on the front end is part of what would be the big driver from an asset sensitivity perspective. And the interesting thing about how this environment could play out is we could potentially get some of that relief on the front end of the curve and still benefit from the fixed rate asset we're pricing that we're expecting over the next couple of years.

Speaker Change: Thanks, that's helpful. And then separately, you talked about some of the variables impacting the curve. Can you discuss how Fifth Thirds position for either a flatter or a steeper yield curve environment?

Bryan Preston: Yeah, absolutely. Typically, our normal business is about two-thirds sensitive to the front end of the curve. I would tell you with our current cash position, we're probably closer to 75% sensitive on the front end of the curve. So relief on the front end is part of what would be the big driver from an asset sensitivity perspective. And the interesting thing about how this environment could play out is we could potentially get some of that relief on the front end of the curve and still benefit from the fixed rate asset we're pricing that we're expecting over the next couple of years.

Speaker Change: Yeah, absolutely. You know, we're typically our normal business is about two thirds sensitive to the front end of the curve. You know, I would tell you with our current cash position, we're probably closer to 75% sensitive on the front end of the curve. So relief on the front end is part of what would be the big driver from an asset sense.

Speaker Change: Matt Curoe, Unknown Executive, James Leonard, Bryan Preston, Matt Curoe, Unknown Executive,

Bryan Preston: Because what's rolling off right now are a lot of loans that were originated in periods of really low interest rates. So even if you see a little bit of lower rates on the longer end of the curve, you would still have a nice pickup relative to the front and back of the curve. So that front end relief, and as Tim mentioned, our concerns are out there, concerns around continued treasury issues.

Bryan Preston: Because what's rolling off right now is a lot of that loans that were originated in this period of really low interest rates. So even if you see a little bit of lower rates on the longer end of the curve, and you would still have a nice pickup relative to the front of backwards dynamics. So at front end relief, and if 10 mentioned around our concern to route their concerns around continued treasury issuance. If that's the scenario that would apply out, it would be one that would be a nice situation from an eye perspective, but it would probably continue to the longer end of the curve, pick out some additional challenges for the economy from a growth perspective.

Speaker Change: is a fixed rate asset we're pricing that we're expecting over the next couple of years.

Tim: Because what's rolling off right now is a lot of that loans that were originated in those periods of really low interest rates. So even if you see a little bit of lower rates on the longer end of the curve, you would still have a nice pickup relative to the front book-back book dynamics. So that front-end relief, and as Tim mentioned, our concerns are out there. Concerns around continued Treasury issuance.

Bryan Preston: If that's the scenario that were to play out, it would be one that would be a nice situation from an NII perspective, but it would probably continue to, the longer end of the curve could cause some additional challenges.

Tim: If that's the scenario that were to play out, it would be one that would be a nice situation from an NII perspective, but it would probably continue to, the longer end of the curve could cause some additional challenges for the economy from a growth perspective.

Bryan Preston: Understood. Very helpful.

Bill Karkash: understood. Very helpful. Thank you for taking my question.

Bill Carcache: Thank you for taking my questions.

Eric: Thank you. We'll go next to Eric and the Jarian at UBS. Hi.

Speaker Change: Understood. Very helpful. Thank you for

Erika Najarian: We'll go next to Erika Najarian at UBS.

Speaker Change: Thank you.

Erika Najarian: Hi, Hey, just a few follow-up questions. Your cash position was twice that of last year. You know, as we think about it, obviously, that makes you more sensitive to short rates coming down. How do we think about how you're managing that cash position from an interest rate standpoint versus an anticipation of liquidity rules coming? And maybe give us a sense of how much there is sort of supervisory encouragement today to keep, quote, liquid liquidity as we anticipate new rules?

Speaker Change: We'll go next to Erika Najarian at UBS.

Eric: Hey, just a few follow-up questions. Your cash position was twice that of last year. You know, as we think about, obviously, that makes you more sensitive to short rates down.

Erika Najarian: Hi, just a few follow-up questions.

Speaker Change: Your cash position was twice that of last year.

Speaker Change: You know, as we think about, obviously, that makes you more sensitive to short rates.

Bryan Preston: How do we think about how you're managing that cash position from an interest rate standpoint versus an anticipation of liquidity rules coming standpoint. And maybe give us a sense of how much is there sort of supervisor encouragement today to keep, quote, liquid liquidity as we anticipate new rules. Yeah, I would tell you that we are very focused internally on maintaining plenty of liquidity to deal with any uncertainty associated with potential rules, as well as the market. So that has just been a big driver of our positioning and why we've done that, but the other thing that it allows for us, you know, yes, it is a good liquidity risk management tool, but it does allow us to have a little bit more confidence on the interest rate risk management side as well, because we can be more aggressive on our liability management actions because of that cash solution.

Speaker Change: How do we think about how you're managing that cash position from an interest rate standpoint versus an anticipation of liquidity rules coming standpoint and maybe give us a sense of how much

Speaker Change: Is there sort of supervisory encouragement today to keep quote liquid liquidity as we anticipate new rules?

Bryan Preston: Yeah, I would tell you that we are very focused internally on maintaining plenty of liquidity to deal with any uncertainty associated with potential rules. As a result, that has just been a big driver of our positioning and why we've done that. But the other thing that it allows us, you know, yes, it is a good liquidity risk management tool, but it does allow us to have a little bit more confidence on the interest rate risk management side as well because we can be more aggressive on our liability management actions because of that cash position.

Speaker Change: Yeah, I would tell you that we are very focused internally on maintaining plenty of liquidity to deal with any uncertainty associated with the future.

Speaker Change: with Potential Rules as well as the market.

Speaker Change: So that has just been a big driver of our positioning and why we've done that, but the other thing that it allows for us, you know, yes, it is a good liquidity risk management tool, but it does allow us

Speaker Change: To have a little bit more confidence on the interest rate risk management side as well, because we can be more aggressive.

Bryan Preston: So it really is the combination of that liquidity and liability management benefits that we are focused on and why we continue to keep those levels that we have.

Speaker Change: on our liability management actions because of that cash position. So it really is the combination of that liquidity and liability management benefits that we are focused on and why we continue to keep those levels that we have.

Bryan Preston: So it really is the combination of those liquidity and liability management benefits that we are focused on and why we can. As rates come down, and as we get through that environment and see stability in the market from a liquidity perspective, we would have an ability to take that down.

Bryan Preston: As rates come down, we and as we get through that environment and see stability in the market from a liquidity perspective, we would have an ability to take that down over time. As you pointed out, it was a big increase year over year. The year-over-year increased with a 20 basis point impact on our name. So getting back to more normalized levels would be a nice trend for us from a member perspective.

Speaker Change: As rates come down, and as we get through that environment and see stability in the market from a liquidity perspective, we would have an ability to take that down over time.

Erika Najarian: As you pointed out, it was a big increase year-over-year. The year-over-year increase was a 20 basis point impact on our NIM. So getting back to more normalized levels would be a nice trend for us from an NIM point of view.

Speaker Change: As you pointed out, it was a big increase year-over-year. The year-over-year increase was a 20 basis point impact on our NIM. So getting back to more normalized levels would be a nice trend for us from a NIM perspective.

Tim Spence: Hi, and I'll also not on the liability side later, but I wanted to be squeezing the second question, and this is for you, Tim.

Timothy N. Spence: Got it. And I'll follow up with Matt on the liability side later. And so I wanted to squeeze in a second question, and this is for you, Tim. Tim, you and management and the board have done such a great job in terms of, you know, the makeover of Fifth Third, and now investors, you know, essentially take you for granted and see you as a high-quality bank among your peers. You know, to that end, it seems like the CFPB stuff, in terms of your response to Scott's question, is in the rearview mirror. The one question I keep...

Tim: And I'll follow up with Matt on the liability side later. And so I wanted to squeeze in the second question, and this is for you, Tim. Tim, I think that you and management and the board have done such a great job in terms of, you know, the makeover of Fifth Third. And now investors, you know,

Tim Spence: I think that you were management and the board have done such a great job in terms of, you know, the makeover of Fifth Third and now investors, you know, essentially take regretted and see you as a high quality bank among your peers. You know, to that end, it seems like the CSEB stuff in terms of your response and Scott's question is in the rear of your mirror. The one question I keep getting from investors is, you know, are you still the proper owner for dividend, and you know, it made sense in terms of when you did the deal, and obviously solar is the future.

Speaker Change: Essentially take for granted and see you as a high quality bank among your peers.

Speaker Change: You know, to that end.

Speaker Change: It seems like the CFPB stuff, in terms of your response to Scott's question, is in the rear view mirror. The one question I keep getting from investors is...

Speaker Change: Are you still the proper owner for Dividend?

Speaker Change: And, you know, it made sense in terms of when you did the deal, and obviously solar is the future, but, you know, it's clearly something that is a product that's sold, not bought, and, you know, given all the litigation against you, it just doesn't feel on brand from a quality perspective in terms

Tim Spence: But, you know, it's clearly something that is a product that's sold, not bought, and, you know, given all the litigation, again, it just doesn't feel on brand from a quality perspective in terms of how you, you know, rebuilt Fifth Third. So, you know, how are you thinking about it's so small, but it's like it comes up in conversations often, right. So, like the impact to your dog is, it feels more than the impact to earning. So, love your thoughts here. Sure. So, just to make sure that I'm clear, and I know you were, but that dividend has nothing to do with the CFPB.

Speaker Change: of how you've, you know, rebuilt Fifth Third. So, you know, how are you thinking about, I mean, it's so small, but it's like, it comes up in conversations often, right? But like the impact to your stock is, it feels like more than the impact to earning. So love your thoughts here.

Erika Najarian: Sure. So just to make sure that I'm clear, and I know you were, but I mean, dividend has nothing to do with the CFI. So that is, those are two separate issues, right, right?

Speaker Change: Sure, so just to make sure that I'm clear, and I know you were, but dividend has nothing to do with the CFPB.

Tim Spence: So, that is; those are two separate issues. Right, right. Okay. On the dividend front, we are believers that the best way to get growth is to attach yourself to long-term secular trends. So, the focus on the Southeast was to get the bank link to the demographic migration that was going to support the growth in that market. The focus on commercial payments has been about attaching ourselves to this trend of digitization in general and, in particular, the intermediation of these legacy workflows with software. And in the case of dividend, then what we've elected to do on the project finance on the commercial solar side of the equation, the focus is on both the diversification of energy sources with the focus on renewable.

Timothy N. Spence: Okay, the, Yes, I Look, on the dividend front, we are believers that the best way to get growth is to attach yourself to long-term secular trends. So the focus on the Southeast was to get the bank linked to the demographic migration that was going to support growth in that market. The focus on commercial payments has been on attaching ourselves to this trend of digitization in general and, in particular, the intermediation of these legacy workflows with software.

Speaker Change: So that is, those are two separate issues. Right, right. Okay.

Speaker Change: Look, on the dividend front, we are believers.

Speaker Change: But the best way to get growth is to attach yourself to long-term secular trends. So the focus...

Speaker Change: on the southeast was to get the bank linked to the demographic migration.

Speaker Change: that was going to support the growth in that market, the focus on commercial payments.

Speaker Change: has been about attaching ourselves to this trend of digitization in general and, in particular, the intermediation of these legacy workflows with software. And in the case of dividend and what we've elected to do on the project finance on the commercial solar side of the equation.

Timothy N. Spence: And in the case of dividend and what we've elected to do on the project finance on the commercial solar side, the focus is on both the diversification of energy sources, with a focus on renewable energy, and I think, in particular, in the case of dividend, the need that we're going to have across the country to have more distributed power generation and storage if we're going to avoid rolling brownouts and other sorts of issues that come from the fact that We view residential solar and battery storage as an important part of the way that our customers and people we don't do business with today are going to be able to meet their power needs in the future.

Speaker Change: The focus is on both the diversification of energy sources with a focus on renewable and I think in particular in the case of dividend, the need that we're going to have across the country to have more distributed power generation and storage, if we're going to avoid rolling brownouts and other sorts of issues that come from the fact that we have a very old

Tim Spence: And I think, in particular in the case of dividend, the need that we're going to have across the country to have more distributed power generation and storage. If we're going to avoid rolling brownouts and other sorts of issues that come from the fact that we have a very old energy infrastructure. And in particular now with the explosion in data centers that are going to be required to support AI and otherwise a lot of very power-intensive commercial applications. We view the residential solar and battery storage as an important part of the way that our customers and people we don't do business with today are going to be able to meet their power needs in the future.

Speaker Change: Energy Infrastructure, and in particular now with the, you know, explosion in data centers that are going to be required to support AI and otherwise, a lot of very power-intensive, you know, commercial applications.

Speaker Change: We view the residential solar and battery storage as an important part of the way that

Timothy N. Spence: And I actually think that for products like this with an intermediate duration and a super prime credit risk profile, banks are the best source of liquidity, not the worst. The focus is just making sure that you do business with the best. You're right, the same way that in the auto industry, we're reliant on the quality of care that the dealer provides to ensure that, you know, our borrower has a good experience, we're reliant on the quality of care and the actions that we took shortly after acquiring Dividend to refocus. The 150 best installers in the portfolio are going to continue to be, we think, a very viable and high quality way to go to market.

Speaker Change: Our customers and people we don't do business with today are going to be able to meet their power needs in the future.

Tim Spence: And I actually think that for products like this within intermediate duration and a super prime credit risk profile, banks are the best source of liquidity, not the worst. The focus is just making sure that you do business with the best, because you're right. The same way that in auto, we're reliant on the quality of care that the dealer provides to ensure that our borrower has a good experience, we're reliant on the quality of the installer.

Speaker Change: And I actually think that for products like this, with an intermediate duration and a super prime credit risk profile,

Speaker Change: Banks are the best source of liquidity, not the worst. The focus is just making sure that you do business with the best.

Speaker Change #100: You're right, the same way that in auto we're reliant on the quality of care that the dealer provides to ensure that our borrower has a good experience, we're reliant on the quality of the install.

Tim Spence: And the actions that we took shortly after acquiring dividend or refocus the business on the 150 best installers in the portfolio are going to continue to be, we think, a very viable and high-quality way to go to market. And just to follow up here, I'm sorry that I'm taking up a third question. Are you confident that after the vendor changes that you've made that, you know, Fifth Third is not going to be in the news, but like, you know, some older lady saying like she got solar solar panels. That's the risk. I totally get the secular trend and everything that you have said makes so much elegant.

Speaker Change #100: and you know the actions that we took shortly after acquiring Dividend to refocus the business on.

Speaker Change #100: and the 150 best installers in the portfolio are going to continue to be, we think, a very viable and high quality way to go to market.

Erika Najarian: And just to follow up here, I'm sorry that I'm taking up a third question. Are you confident that after the vendor changes that you've made that, you know, Fifth Third is not going to be in the news with, you know, some older lady saying like, she got sold solar panels she can't afford, right? That's the risk. I totally get the secular trend. And everything that you have said makes so much elegant sense. But I think that's the risk that investors are trying to make sure that it's not embedded in your stock, which is obviously not an EPS impact necessarily but reputational litigation.

Speaker Change #101: And just to follow up here, I'm sorry that I'm taking up a third question. Are you confident that after the vendor changes that you've made that, you know, Fifth Third is not going to be in the news with, like, you know, some older lady saying, like, she got sold solar panels.

Speaker Change #102: That's the risk. I totally get the secular trend.

Tim Spence: But I think that's the risk that investors are trying to ensure that it's not embedded in your stock, which is obviously not a CPS impact, necessarily, but a reputational litigation. Sure. There were some installer failures as interest rates rose because the volume went down. I think, as a matter of policy here, we take care of the customer. So if an installer is unable to complete a job, we completed on behalf of the installers. We have done that in every case where we had an installer who was unable to complete a project and get it to PTO, and you would expect that we should expect that we're going to continue to do that.

Speaker Change #102: And everything that you have said makes so much elegant sense, but I think that's the risk that investors are trying to make sure that it's not embedded in your stock, which is obviously not an EPS impact necessarily, but a reputational litigation impact.

Timothy N. Spence: Sure, there were some installer failures as interest rates rose because the volume went down. I think as a matter of policy here, we take care of the customer. So if an installer is unable to complete a job, we complete it on behalf of the installers. We have done that in every case where we had an installer who was unable to complete a project and get it to PTO, and you would expect that we, you should expect that we're going to continue to do that.

Speaker Change #103: Sure.

Speaker Change #104: There were some installer failures as interest rates rose because the volume went down. I think it's a matter of policy here.

Speaker Change #105: We take care of the customer. So if an installer is unable to complete a job, we complete it on behalf of the installers.

Speaker Change #106: have done that in every case where we had an installer who was unable to complete a project and get it to PTO and you would expect that we should expect.

Tim Spence: That's the standard of care that we would provide for any customer inside the bank, regardless of the channel that they came through, regardless of the product. And so add those installer failures work their way through the system. We're going to take care of the customer.

Timothy N. Spence: That's the standard of care that we would provide for any customer inside the bank, regardless of the channel that they came through, regardless, and so as those installer failures work their way through the system, we're going to take care of the cost.

Speaker Change #106: That we're going to continue to do that. That's the standard of care that we would provide for any customer inside the bank, regardless of the channel that they came through, regardless of the product.

Speaker Change #106: And so as those installer failures work their way through the system, we're going to take care of the customer.

Manan Gosalia: Thank you so much, Tim. We'll go next to Matt and Gassalia at Morgan Stanley. Hey, good morning.

Erika Najarian: Thank you so much, Tim.

Manan Gosalia: We'll go next to Manan Gosalia at Morgan Stanley.

Manan Gosalia: We'll go next to Manan Gosalia at Morgan Stanley .

Manan Gosalia: Hey, good morning. Good morning.

Manan Gosalia: I just wanted to follow up on your comments on level of cash. You noted that the LPR is 137%.

Manan Gosalia: I just wanted to follow up on your comments on the level of cash. You noted that the LCR is 137%. Is there room to take on a little bit more duration and deploy some of this excess liquidity because you really need to be that far above the 100% threshold?

Manan Gosalia: Hey, good morning. Morning, Manan.

Manan Gosalia: I just wanted to follow up on your comments on the level of cash. You noted that the LCR is 137%. Is there room to take on a little bit more duration and deploy some of this excess liquidity? Because you really need to be that far above the 100% threshold?

Bryan Preston: Is there a room to take on a little bit more duration and deploy some of this access to equity because you really need to be that far above 100% threshold? No, I think the other issue that you're facing right now is you're actually not getting paid to extend your duration, given the inversion of the yield curve. I mean, the 10-year rate this morning is 4.2%, so we're earning 5.5%, 5.45%, and a half percent on the front end of the curve.

Bryan Preston: No, I think the other issue that you're facing right now is you're actually not getting paid to extend your duration given the inversion of the yield curve. I mean, the 10 year rate this morning. 4.2%, but we're earning five and a half times earnings, 545, Corp., and given our rate outlook, we just don't think it makes sense at this point to be adding duration, giving up earnings today, when we think over the horizon that we're not sure that 420 is a good entry point.

Speaker Change #108: No, I think the other issue that you're facing right now is you're actually not getting paid to extend your duration given the inversion of the yield curve. I mean the 10-year rate this morning is 4.2% but we're earning five and a half, 540, five and a half percent.

Bryan Preston: And given our rate outlook, we just don't think it makes sense at this point to be adding duration, giving up earnings today when we think over the horizon. We're not sure that 420 is a good entry point.

Speaker Change #108: on the front end of the curve. And given our rate outlook, we just don't think it makes sense at this point to be adding duration, giving up earnings today when we think over the horizon that we're not sure that 420 is a good entry point.

Bryan Preston: Got it, and then Bryan at our conference last month, you noted that you were seeing some competition drive driving loan spreads lower across the industry, and that's not necessarily a level that you're always comfortable with. Has that continued since then? If yes, I know you don't want to lean in here, but with the positive cause coming down, there's some more lean and there and do.

Manan Gosalia: Got it. And then, Bryan, at our conference last month, you noted that you were seeing some competition driving loan spreads lower across the industry. And, you know, that's not necessarily a level that you're always comfortable with. Has that continued since then? And, you know, I know, you don't want to lean in here. But, you know, with deposit costs coming down, there's

Bryan Preston: Got it. And then, Bryan, at our conference last month, you noted that you were seeing some competition drive, driving loan spreads lower across the industry. And yeah, that's not necessarily

Speaker Change #109: you know, a level that that you're always comfortable with. You know, has that continued since then? And, you know, if yes, you know, I know you don't want to lean in here, but you know, with deposit costs coming down, is there some more room to lean in there and do...

Bryan Preston: We're looking for a spotlight; it makes sense to continue to evaluate where a loan growth should come from. As Tim talked about, we're certainly not going to sacrifice on earning appropriate returns as part of this, but just given some of the confidence that we have in terms of that we think we are going to see a cop this year, that we are going to start to see some relief, and we're starting to see a little bit of the animal spirit in the market start to build. Like our pipelines are looking better than where they were three months ago, six months ago.

Bryan Preston: Yeah, we're looking for the spots where it makes sense to continue to evaluate where loan growth should come from. As Tim talked about, you know, we're certainly not going to sacrifice earning appropriate returns as part of this. But given some of the confidence that we have in terms of that, we think we are going to see a cut this year that we are going to start to see some relief, and we're starting to see a little bit of The Animal Spirit in the market start to build, like our pipelines are looking better than where they were three months ago, six months ago. So we think there's going to be opportunity to continue to see some growth.

Speaker Change #109: We're looking for the spots where it makes sense to continue to evaluate where loan growth should come from. As Tim talked about.

Speaker Change #110: We're certainly not going to sacrifice on earning appropriate returns as part of this, but just given some of the confidence that we have in terms of that we think we are going to see a cut this year, that we are going to start to see some relief, and we are starting to see a little bit of relief.

Speaker Change #110: The animal spirits in the market start to build, like our pipelines are looking better than where they were three months ago, six months ago, so we think there's going to be opportunity to continue to see some growth in those areas and feel good about it.

Bryan Preston: So we think there's going to be opportunity to continue to see some growth in those areas and feel good about positioning.

Manan Gosalia: Great, thank you.

Speaker Change #110: about positioning.

Maddo Conor: We'll move next to Maddo Conor at Georgia Bank. Hey, man.

Matt Curoe: We'll move next to Matt O'Connor at Deutsche Bank. Amen.

Speaker Change #111: Great, thank you.

Speaker Change #110: We'll move next to Matt O'Connor at Deutsche Bank.

Maddo Conor: Hey guys, there was an article earlier this week just talking about risk in the commercial bond market, and you guys have commercial real estate bond market that is, you guys have a good slide on 43, just reminding all of us that a lot of the most of it is agency, but can you talk to the non-agency CMBF, and I just kind of like almost like dumb down what these are. You cut out there right at the end. Could you repeat the end of the question?

Matt Curoe: Hey guys, there was an article earlier this week just talking about risk in the commercial bond market. And you guys have the commercial real estate bond market that you guys have a good slide on 43 just reminding all of us that A lot of it, or most of it, is agency. Can you talk about the non-agency CMBS and, I guess, kind of, like, almost, like, dumb down what these...

Speaker Change #110: Amen.

Matt Curoe: Hey guys, there was an article earlier this week just talking about risk in the commercial bond market and you guys have a good slide on 43 just reminding all of us that

Matt Curoe: a lot of it or most of it is agency. Can you talk to the non-agency CMBS and I guess kind of like almost like dumb down what these

Bryan Preston: You cut out there, right?

Speaker Change #112: You cut out there right at the end. Could you repeat the end of the question?

Matt Curoe: Just in line, by the way. Thank you. Thank you.

Maddo Conor: Yeah, so we obviously have had a very cautious outlook from a commercial real estate perspective for a really long time. We do think that there is some value in participating in the market, and so where we choose, we will be chosen to do that is in that non-agency portfolio in structured form. Because we do think that structural enhancements create a lot of credit protections for us. The article that you were mentioning this week was in regards to a specific structure called a SASB, a single asset, single borrower structure, which, funny enough, basically every commercial real estate loan is a single asset, single borrower structure.

Bryan Preston: Yeah, so we obviously have had a very cautious outlook from a commercial real estate perspective for a really long time. We do think that there is some value in participating in the market, and so where we've chosen to do that is in that non-agency portfolio in structured form, because we do think those structural enhancements create a lot of credit protection for us. The article that you were mentioning this week was in regards to a specific structure called a SASB, a single asset, single borrower structure, which, funny enough, basically every commercial real estate loan is a single asset, single borrower structure.

Speaker Change #112: [inaudible]

Speaker Change #113: Yeah so the so we obviously have had a very cautious outlook from a commercial real estate perspective for a really long time.

Speaker Change #113: We do think that there is some value in participating in the market, and so where we've chosen to do that is in that non-agency space.

Speaker Change #114: the CFPB portfolio in structured form. Because we do think those structural enhancements create a lot of credit protections for us. The article that you were mentioning this week was in regards to a specific structure called a SASB, a single asset, single borrower structure, which

Speaker Change #115: Yeah, funny enough, basically every commercial real estate loan is a single asset, single borrower structure. But in our case, for our broader portfolio, we have very little SASB within our portfolio. I mentioned about a month ago, more

Maddo Conor: But in our case for our broader portfolio, we have very little SASB within our portfolio. I've mentioned about a month ago, a morning family, that that amount is about $150 million for us and all of our bonds in that structure are continue to be performing very, very strongly. The broader structure, we have nearly 40% credit enhancement that is in front of us from a first loss perspective. The way that average loan to value on the non-agency portfolio is still around 60%. We use some advanced analytic tools that the industry has available, and we stress the portfolio regularly.

Bryan Preston: But in our case, for our broader portfolio, we have very little SASB within our portfolio. I've mentioned about a, That amount is about $150 million for us, and all of our bonds in that structure continue to be performing very, very strongly. In the broader structure, we have nearly 40 percent of credit enhancement that is in front of us from a first-loss perspective, and the weighted average loan-to-value on the non-agency portfolio is still around 60 percent.

Speaker Change #115: and family.

Speaker Change #116: Transcribed by https://otter.ai

Speaker Change #116: That amount is about $150 million for us, and all of our bonds in that structure continue to be performing very, very strongly. The broader structure, we have nearly 40% credit enhancement that is in front of us from a first loss perspective.

Speaker Change #116: And the weighted average loan-to-value on the non-agency portfolio is still around 60%.

Bryan Preston: We use some advanced analytic tools that the industry has available, and we stress the portfolio regularly. As part of our process, our credit underwriting team underwrites and evaluates the top 10 loans in every structure to make sure that we are comfortable. We monitor the portfolio very closely and continue to have no problems.

Speaker Change #116: We use some advanced analytic tools that the industry has available and we stress the portfolio regularly.

Greg Schroeck: As part of our process, our credit underwriting team underwrites and evaluates the top 10 loans in every structure to make sure that we are comfortable. We have monitored the portfolio very closely and continue to have no concern. on what we're seeing.

Speaker Change #116: As part of our process, our credit underwriting team underwrites and evaluates the top ten loans in every structure to make sure that we are comfortable. We monitor the portfolio very closely and continue to have no concerns on what we're seeing.

Maddo Conor: Okay, that's helpful.

Matt Curoe: Okay, perfect. That's helpful. Thank you. We'll go next to Christopher Marinac at Janney Montgomery Scott.

Christopher Marinac: Thank you. We'll go next to Christopher Marinac at Janie Montgomery Scott. Thanks, good morning.

Speaker Change #117: Okay, perfect. That's helpful. Thank you.

Speaker Change #117: We'll go next to Christopher Marinac at Janney Montgomery Scott.

Christopher Marinac: Wanted to ask about the commercial criticized and the fact that you had some of the charge officers hoarder. Would that improve those? And do you see any other kind of upgrade trend that could happen in future quarters? I mean, yeah, the charge officers are going to be both of those loans and overall charge officer coming out of the criticize. So yeah, anytime we're going to have commercial charge officers going to improve, we're pretty stable, quarter of a quarter, you know, in our criticize, and we're starting to see it level off. And so, well, not overly worried that we're going to see continued increases based on what we know today, based on unforeseen economic conditions.

Christopher William Marinac: Thanks, good morning. Wanted to ask about the commercial criticized and the fact that you had some of the charged oxels quarter. Would that improve those and do you see any other kind of upgrade trends that could happen in future quarters?

Christopher William Marinac: I mean, yeah, I mean, charge-offs are going to both of those loans, and overall charge-offs are coming out of the bad. So, yeah, anytime we're going to have commercial charge-offs, it's going to improve. We were pretty stable quarter over quarter in our criticism, and we're starting to see it level off. And so I'm not overly worried that we're going to see continued increases, you know, based on what we know today, based on unforeseen economic conditions.

Speaker Change #119: I mean, yeah, I think charge-offs are going to be both of those loans and overall charge-offs are coming out of the criticized. So, yeah, anytime we're going to have commercial charge-offs, it's going to improve. We were pretty stable quarter over quarter in our criticized, and we're starting to see it level off. And so I'm not overly worried that we're going to see continued increases.

Speaker Change #119: Based on what we know today, based on unforeseen economic conditions.

Greg Schroeck: Yeah, I think that the trend in criticized loans in general has actually been encouraging from my perspective. Greg, you may want to talk about this, but the only real growth we've seen in criticized loans is a few ABL facilities. If you look at it over the last 12 months, and we're well secured there and well within the collateral. That's exactly right.

Greg Schroeck: Yeah, I think the trend in criticized in general has actually been encouraging from my perspective. Greg, you may want to talk about this, but the only real growth we've seen in criticized or a few ABL facilities. If you look at it over the last 12 months, and we're well secured there and well within the collateral. Exactly right. That was the driver of our first quarter increase in criticize assets; about 60% of our criticize assets are in that ABL fully conforming. We're not doing so far, so far. We're within assets. So I think the last content now that said could have a weakness or well-defined weakness that will work out of, but I feel good about the trending that we've seen.

Speaker Change #119: Yeah, I think that the trend in criticized in general has actually been

Speaker Change #119: Encouraging from my perspective, Greg you may want to talk about this, but the only real growth we've seen and criticized are a few ABL facilities. If you look at it over the last 12 months and we're well secured there.

Greg Schroeck: That's exactly right. That was the driver of our first quarter increase in criticized assets, about 16% of our criticized assets are in that ADL, fully conforming, we're not doing sofas, we're within assets, so I think the loss content, now that said, could have a weakness or well-defined weakness that we'll work out of, but I feel good about the trending that we've seen, and for the rest of this year, again, based on what I know today, I would expect stable criticized levels.

Greg: That was the driver of our first quarter increase in criticized athletes, about 16%.

Greg: of our criticized assets are in that ADL only conforming, we're not doing SOFRs, SOFAs.

Greg: We're within assets, so I think the lost content. Now, that said, we could have a weakness or well-defined weakness that we'll work out of, but I feel good about the trending that we've seen, and for the rest of this year, again, based on what I know today, I would expect stable, criticized levels.

Greg Schroeck: And the rest of this year, again, based on what I know today, you know, I would expect stable criticize levels. Great. Thank you very much for the background.

Christopher William Marinac: Great. Thank you both for the background. I appreciate it.

Greg Schroeck: I appreciate it.

Speaker Change #120: Great. Thank you both for the background. I appreciate it.

Ken Euston: And we'll go next to our capacity at RBC.

Christopher William Marinac: Welcome back. Thank you. I've got a follow-up for you. Talking about loan growth, I noticed there was a small uptick in growth in the home equity portfolio. I think it was slide 35 that you guys showed this data on.

Welcome back. Thank you. I've got to follow up for you. Talking about loan growth, I noticed there was a small uptick in growth in the home equity portfolio. I think it was Slide 35. You guys show this data. What's the opportunity for you? Because one of your bank America's are an uptick as well in home equity lending. And do you agree with the fact that people are not refinancing their houses because of where rates are, but there's a ton of equity in houses. Have you guys considered looking at this and maybe as an area of potential growth?

Speaker Change #120: And we'll go next to Gerard Cassidy at RBC.

Gerard Sean Cassidy: Welcome back. Thank you. I've got a follow-up for you.

Gerard Sean Cassidy: I noticed there was a small uptick in growth in the home equity portfolio, I think it was slide 35 you guys showed this data. What's the opportunity for you, because Bank of America saw an uptick as well in home equity lending.

Timothy N. Spence: What's the opportunity for you? Because Bank of America saw an uptick as well in home equity lending, in view of the fact that people are not refinancing their houses because of where rates are, there's a ton of equity in houses. Have you guys considered looking at this and maybe as an area of potential growth? I know home equity has got a bad reputation from what happened in 08 or 09, but obviously, the world is different today. Any of your thoughts here? Yeah, the

Speaker Change #121: In view of the fact that, you know, people are not refinancing their houses because of where rates are, but there's a ton of equity in houses, is this...

I know the home equity has got a bad reputation from what happened to Nobody. They were nine. But obviously, the world is different today. Any any any your thoughts here? Yeah, I tell people here all the time that the first rule of hold is that you have to stop digging. So it is nice. After many years of having brackets around the change in balance number for home equity to see a turn of the tide there. I would not anticipate that it's a big driver of our loan growth over the course of the next few quarters.

Speaker Change #122: Have you guys considered looking at this and maybe as an area of potential growth? I know the home equities got a bad reputation from what happened in 08-09, but obviously the world is different today. Any of your thoughts here?

Timothy N. Spence: Yeah, the, uh... I tell people here all the time that the first rule of holes is that you have to stop digging. So it is nice after many years of having brackets around the change in balance number for home equity to see a turn of the tide there. I would not anticipate that it's a big driver of our loan growth over the course of the next few quarters, not because we wouldn't like it to be, but if you look at the amount of spending on home improvement in general right now, just look at the big home improvement retailers, you'll see that that's a category that remains pretty depressed.

Speaker Change #123: Yeah, the, uh...

Speaker Change #124: I tell people here all the time that the first rule of holes is that you have to stop digging. So it is nice after many years of having brackets around the change in balance number for home equity to see a turn.

Speaker Change #125: of the Tide there. I would not anticipate that it's a big driver of our loan growth over the course of the next

Not because we wouldn't like it to be, but if you look at the amount of spending and home improvement in general right now, just look at the big home improvement retailers. You'll see that that's a category that remains pretty depressed. That said, I do think that the right strategy here for homeowners who have these three percent fixed-rate mortgages. Is going to be to improve where they are as opposed to moving, and home equity is a great way to do that. So we would like to see more growth in home equity. We like the credit quality there.

Speaker Change #125: A few quarters, not because we wouldn't like it to be. But if you look at the amount of spending and home improvement in general right now, just look at the big home improvement retailers, you'll see that that's a category that remains pretty depressed. That said,

Timothy N. Spence: That said, I do think that the right strategy here for homeowners who have these, you know, three percent fixed-rate mortgages is going to be to improve where they are as opposed to moving. And home equity is a great way to do that. So we would like to see more growth in home equity because we like the credit quality there. It's just going to be slow and steady here in terms of the pickup.

Speaker Change #125: I do think that the right strategy here for homeowners who have these...

Speaker Change #126: You know.

Speaker Change #126: 3% fixed rate mortgages is going to be to improve where they are as opposed to moving and home equity is a great way to do that.

Speaker Change #127: We would like to see more growth in home equity. We like the credit quality there. It's going to be slow and steady here in terms of the pickup.

It's going to be slow and steady here in terms of the pick up.

Great, appreciate the color.

Absolutely.

Speaker Change #128: Great. Appreciate the color.

And that does conclude our Q&A session. I want to turn the conference back over to Matt Curoe for closing remarks. Thank you, Audra. And thanks, everyone, for your interest in Fifth Third. Please contact the Investor Relations department if you have any follow-up questions.

Matt Curoe: And that does conclude our Q&A session. I will now turn the conference back over to Matt Curoe for closing remarks.

Speaker Change #128: Absolutely.

Speaker Change #128: And that does conclude our Q&A session. I will now turn the conference back over to Matt Curoe for closing remarks.

Audra: Thank you, Audra, and thanks to everyone for your interest in Fifth Third. Please contact the Investor Relations Department if you have any follow-up questions. Audra, you may now disconnect the call.

Matt Curoe: Thank You Audra and thanks everyone for your interest in Fifth Third. Please contact the Investor Relations Department if you have any follow-up questions. Audra you may now disconnect the call.

Audra, you may now disconnect the call. Thank you.

Audra: Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect.

This thus concludes today's conference call. Thank you for your participation. You may now.

Audra: Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect.