Q3 2024 Truist Financial Corp Earnings Call
We are in a listen only mode.
Brief question and answer session will follow the formal presentation.
As a reminder, this event is being recorded.
Speaker Change: It is now my pleasure to introduce your host Mr. Brad Milsap.
Brad Milsap: Thank you Betsy and good morning, everyone welcome to <unk> third quarter 2024 earnings call with US today are our chairman and CEO Bill Rogers, Our CFO, Mike Mcguire, our Vice chair and Chief Risk Officer, Clarke Starnes as well as other members of <unk> Senior management team.
Speaker Change: The New Year's Eve
Speaker Change: Greetings, ladies and gentlemen, and welcome to the Tourist Financial Corporation, third quarter, 2024 earnings conference call.
Brad Milsap: During this morning's call they will discuss <unk> third quarter results share their perspectives on current business conditions and provide an updated outlook for 2024.
Speaker Change: Currently, all participants aren't a listen-only mode. A brief question and answer session will follow the formal presentation.
Brad Milsap: The accompanying presentation as well as our earnings release and supplemental financial information are available on the <unk> Investor Relations website at IR Dot <unk> Dot com.
Speaker Change: As a reminder, this event is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Mr. Bradley Milsaps.
Brad Milsap: Our presentation today will include forward looking statements and certain non-GAAP financial measures. Please review the disclosures on slides two and three of the presentation regarding these statements in measures as well as the appendix for appropriate reconciliations to GAAP with that I will turn it over to bill.
Bradley Milsaps: Thank you, Betsy, and good morning everyone. Welcome to Truist's third quarter of 2024 earnings call. With us today are our Chairman and CEO Bill Rogers, our CFO Mike Maguire, our Vice Chair and Chief Risk Officer, Clarke Starnes, as well as other members of Truist Senior Management team.
Bill: Thanks, Brad and good morning, everyone and thanks for joining our call today.
Bill: Before we discuss the third quarter's results I'd like to begin with purpose on slide four as you all know truest as a purpose driven company, we're dedicated to inspiring and building better lives and communities.
Speaker Change: During this morning's call, they will discuss true third-quarter results, share their perspectives on current business conditions, and provide an updated outlook for 2024.
Speaker Change: The company presentation as well as our energy relief and supplemental financial information are available on the truest investor relations website at IR.truest.com.
Bill: The foundation for everything we do and the belief in this mission has never been more important given the extraordinary start to the fourth quarter were two devastating hurricanes.
Speaker Change: Our presentation today will include forward-looking statements and certain non-gap financial measures. Please review the disclosures on slides 2 and 3 of the presentation regarding these statements and measures, as well the appendix for appropriate reconciliation to get. With that, I'll turn it over to Bill. Thanks for having me and good morning everyone and thanks for joining our call today.
Bill: Since these storms cut a path through the southeast.
Bill: Curious humanitarian aid team and hundreds of teammates volunteers have been out in force to help our communities I've spent time in recent days with teammates and some of the hardest hit areas. These teammates are doing just incredible heroic work, helping their neighbors distributing critical supplies and making sure <unk> facilities were <unk>.
Bill Rogers: Paul, we discussed that third quarter's results. I'd like to begin with purpose on slide four. As you all know, trueist is a purpose-driven company. We're dedicated to inspiring and building better lives in communities.
Bill: <unk> to serve our clients even as their own lives of <unk> and.
Bill: In addition to contributions from the foundation, we have set up several sites, where we've distributed supplies.
Bill Rogers: It's the foundation for everything we do and the belief in this mission has never been more important given that extraordinary start to the fourth quarter with two devastating hurricanes. In the day since these storms cut a path to the southeast, through this humanitarian aid team and hundreds of teammate volunteers have been out and forced to help our communities.
Bill: Also deployed mobile services for basic needs like showers, and laundry facilities as well as mobile branches Atms and generators to serve clients in areas without power. This recovery is going to take time.
Bill: And we're going to play a significant role in helping these communities recover and rebuild in the days weeks months and even years to come.
Bill Rogers: I've spent time in recent days with teammates in some of the hardest-hit areas.
Bill Rogers: These two mates are doing just incredible heroic or helping their neighbors, distributing critical supplies and making sure truth facilities were open to serve our clients.
They can count on truest.
Bill: Okay, let's turn to discussing our third quarter results on slide five.
Bill: We have made demonstrable progress on our strategic priorities during the quarter.
Bill Rogers: even as their own lives have been upended.
Bill Rogers: In addition to contributions from the Foundation, we've set up several sites where we've distributed supplies.
Bill: As I am proud of the results our teammates delivered which included solid underlying earnings improved momentum and sound asset quality metrics on a GAAP basis, we reported net income available to common shareholders of $1 3 billion or <unk> 99, a share adjusted EPS was <unk> 97 per share, which excluded us do small discrete items.
Bill Rogers: We've also deployed mobile services for basic needs, like showers and laundry facilities, as well as mobile branches, ATMs, and generators to serve clients and areas without power. This recovery is going to take time.
Bill Rogers: and we're going to play a significant role in helping these communities recover and rebuild in the days, weeks, months, and even years to come, they can count on trust.
Bill: Mike will discuss later in the call as.
Bill: As you can see on the slide our solid performance was defined by several key themes first we grew adjusted revenue two 4% on a linked quarter basis due to another strong quarter of investment banking and trading income and a full quarter's impact of the balance sheet repositioning we completed during the second quarter.
Bill Rogers: Okay, let's turn to discussing our third quarter results on slide five.
Bill Rogers: We've made demonstrable progress on our strategic priorities during the quarter.
Bill Rogers: As I'm proud of the results our team mates delivered which included solid underlying earnings, improved momentum and sound as equality metrics.
Bill: Second our results show, our continued expense discipline and focus on managing cost as a result of these efforts our efficiency ratio improved on both a linked in light quarter basis, adjusted expenses increased by less than 1% linked.
Bill Rogers: On a gap basis reported net income available common shareholders of 1.3 billion or 99 cents a share. Adjusted EPS was 97 cents per share which excluded us few small discrete items that Mike will discuss later in the call.
Bill: Quarter and decline for the third consecutive quarter on a year over year basis.
Bill Rogers: As you can see on this slide, our solid performance was defined by several key things. First, we grew adjusted revenue to 2.4% on a linked quarter basis due to another strong quarter of investment banking and trading income and a full quarter's impact to the balance sheet reposition, we completed during the second quarter.
Bill: Expenses are now projected to decline in 2024 compared to 2023, which is an improvement from our original commitment to keep expenses flat for the year non.
Bill: Nonperforming loans remained relatively stable, while net charge offs were better than our expectations. We did record a $25 million loan loss provision during the quarter, specifically related to hurricane Helane, which Mike will discuss in more detail later.
Bill Rogers: Episode 2
Bill Rogers: Second, our results show our continued expense discipline and focus on managing cost. As a result of these efforts, our efficiency ratio improved on both a linked and light quarter basis.
Bill: We also returned $1 $2 billion worth of capital to our shareholders through our common dividend and repurchase of $500 million worth of common stock as part of the $5 billion repurchase plan. Our board approved in late July I mean.
Bill Rogers: and Justice expenses increased by less than 1% linked quarter and decline for the third consecutive quarter on a year over year basis.
Bill: In late June excuse me, we anticipate repurchasing another $500 million of our common stock in the fourth quarter.
Bill Rogers: Expenses are now projected to decline in 2024 compared to 2023, which is an improvement from our original commitment to keep expenses flat for the year. Non-performing loans remain relatively stable when net charge-offs were better than our expectations.
Bill: Our CET one capital ratio remained relatively stable, leaving us well positioned to grow our balance sheet.
And to continue to return significant amount of capital to shareholders.
Bill Rogers: We did record a 25-man-dollar loan loss provision during the quarter, specifically related to Hurricane Halene, which Michael discussed some more detail later.
Bill: Finally, we continue to actively pursue growth opportunities in our core consumer and small business and wholesale banking businesses. Although average loans declined during the quarter I'm encouraged by the underlying momentum in terms of increased loan production greater wallet share within certain businesses and the talent, we are attracting to our company all of <unk>.
Bill Rogers: We also returned $1.2 billion for the capital to our shareholders who are common dividend and repurchase a $500 million worth of common stock as part of a $5 billion repurchase plan our board approved and laid to life.
While continuing to maintain our expense discipline and investing in important areas like technology, and our risk infrastructure, maintaining this momentum and continuing to execute against our strategic growth priorities will be key to reaching our mid teams.
Bill Rogers: I mean, late June is excuse me. We anticipate repurchasing another 500 million of our common stock in the fourth quarter. Our CED-1 capital ratio remained relatively stable, leaving its world position to grow our balance sheet, and to continue to return significant amount of capital to shareholders.
Bill: Medium term, our TCE target, which we also announced during the quarter before I hand, the call over to Mike to discuss the quarterly results I want to spend a little time reviewing the positive momentum, we're seeing within business segments and within our digital initiatives on slides six and seven and.
Bill Rogers: Finally, we continue to actively pursue growth opportunities in our core consumer and small business and wholesale banking businesses.
Speaker Change: Walsh, although average loans declined during the quarter, I'm encouraged by the underlying momentum in terms of increased loan production, greater wallet share with this.
Bill: In consumer and small business banking I'm encouraged by the momentum as we experienced an increase in loan production and key focus areas within our lending portfolio and we continue to acquire new clients and households through both digital and traditional channels average consumer loan balances remained relatively stable linked quarter as growth in other.
Speaker Change: Certain businesses and a talent we're attracting to our company all while continuing maintaining our expense discipline and investing in important areas like technology and risk infrastructure.
Speaker Change: Maintaining this momentum and continue to execute against our strategic growth priorities. We'll be key to reaching our mid teams.
Bill: Consumer which includes our specialty consumer lending verticals was offset by lower residential mortgage and home equity loans.
Speaker Change: MediaMterm, RRATC target, which we also announced during the quarter. Before I hand the call over to Mike to discuss the quarterly results, I want to spend a little time reviewing the positive momentum we're seeing within business segments and within our digital initiatives on slide 6 and 7.
Bill: We did experience a 3% linked quarter increase in consumer loan production driven by non real estate lending, which drove period in indirect auto and other consumer balances each higher by 2% on a linked quarter basis.
Speaker Change: and Consumer and Small Business Banking, I'm encouraged by the momentum as we experienced an increase in loan production and key focus areas within our lending portfolio, and we continue to acquire new clients and households through both digital and traditional channels.
Bill: Importantly, we're not sacrificing our credit standards or pricing discipline to drive growth credit metrics remained relatively stable and new consumer loan production spreads are accretive to the portfolio.
Bill: Although overall deposit growth remains muted, we're continuing to add new clients and households, we opened nearly 200000, new digital loan and deposit accounts during the quarter, including over 75000, new to bank clients through our digital channels, which represents a 35% increase over the third quarter of last year.
Speaker Change: Average consumer loan balance remain relatively stable, linked quarter as growth and other consumer, which includes our specialty consumer lending verticals, was offset by lower residential mortgage and how equity loves.
Speaker Change: We did experience a 3% link quarter increase in consumer loan production driven by non-realist state lending which drove period in indirect auto and other consumer balances each higher by 2% on a link quarter basis.
Bill: Net new checking account growth was once again positive in the third quarter as we grew 40000, new consumer and business accounts, bringing our total to 108000 year to date.
Speaker Change: Importantly, we're not sacrificing our credit standards or pricing discipline to drive growth. Credit metrics remain relatively stable and new consumer loan production spreads are redeemed to the portfolio.
Bill: Not only are we adding new households, but primacy rates and client retention also continued to increase due to improvements to the client experience as we rolled out more than a 130 enhancements to our digital experience during the quarter and.
Speaker Change: Although overall the posit growth remains muted.
Speaker Change: We continue to add new clients and households. We open nearly 200,000 new digital loan into positive accounts during the quarter, including over 75,000 new to bank clients through a digital channels.
Bill: In wholesale I'm encouraged by the underlying momentum in terms of improved production increase wallet share within certain businesses and the talent, we are attracting to our company during.
Speaker Change: which represents a 35% increase over the third quarter of last year.
Bill: During the quarter, we saw 1% growth in commercial deposits on a 4% increase in wholesale lending production, which was offset by lower line utilization and higher paydowns due in part to greater capital markets activity, which is an area, where we have invested consistently.
Speaker Change: Net, new checking account growth was once again positive in the third quarter as we grew 40,000 new consumer and business accounts, bringing our total to 108,000 year to date.
Speaker Change: Not only are we adding new households, but primacy rates and client retention also continue to increase due to improvements to the client experience as we rolled out more than 130 enhancements to our digital experience during the quarter.
Bill: The third quarter represents the strongest capital markets quarter, we've reported since 2021 as investment banking revenues increased 79% year over year and 43% year to date.
Bill: Experienced record quarterly performance in equity capital markets investment grade issuance public finance and asset securitization.
Speaker Change: in wholesale. I'm encouraged by the underlying momentum in terms of improved production, increase wallet share within certain businesses, and the talent we're attracting to our company.
Bill: The growth is tied to our focus on gaining greater mind share with our clients across our industry verticals, which has led to an increase in the number of lead roles across several product lines.
Speaker Change: During the quarter, we saw 1% growth and commercial deposits at a 4% increase in wholesale lending production, which was offset by lower line utilization and higher pay downs, due in part to greater capital market activity, which is in area where we have invested consistently.
Bill: We're continuing to invest in our wholesale platform as we've made several key new hires this quarter in commercial banking corporate banking investment banking wealth and payments and plan to add additional talent in the fourth quarter and beyond.
Speaker Change: The third quarter represents the strongest capital markets quarter we've reported since 2021 as investment banking revenues increased 79% year a year and 43% year to date.
Bill: These new teammates complement our great existing teams and have significant experience in many cases from larger institutions and are attracted to our results oriented culture.
Speaker Change: Reef France record quarterly performance in equity capital markets, investment-grade issuance, public finance, and asset-scuridization.
Bill: As I mentioned last quarter, we have a specific focus on further building out our middle market.
Speaker Change: The growth has tied to our focus on gaining greater mind-share with our clients across our industry verticals, which is led to an increase in the number of lead roles across several product lines.
Bill: Commercial lending segment, which represents one of the largest growth opportunities within our regional businesses will primarily focus on industries that support existing corporate investment banking coverage and expertise, where we gained significant share. We also continue to enhance our wholesale digital capabilities by improving the client experience during the <unk>.
Speaker Change: We're continuing to invest in our whole cell platform as we've made several key new hires this quarter in commercial banking, corporate banking, investment banking, wealth, and payments and plan to add additional talent in the fourth quarter of the quarter of the year.
Bill: We launched several significant enhancements to the truest, one view platform, including the ability for clients to securely chat directly with Treasury management specialists.
Speaker Change: These new teammates complement our great existing teams and have significant experience in many cases from larger institutions and are attracted to our results oriented culture.
Bill: Enhancing the client experience in growing our digital capabilities are important parts of our strategy, which I'll discuss in more detail on slide seven.
Speaker Change: I mentioned last quarter we have a specific focus on further building out our middle market commercial lending segment, which represents one of the largest growth opportunities within our regional business.
Bill: We continue to show strong and steady growth in our digital capabilities as client mobile App users grew 6% and digital transactions increased 15% compared to the third quarter of 2023, we continue to migrate clients towards self service capabilities, primarily driven by strong growth in zelle transactions, which were up 36.
Speaker Change: will primarily focus on industries that support existing corporate investment banking coverage and expertise where we've gained significant share.
Speaker Change: We also continue to enhance our wholesale digital capabilities by improving the client experience. During the quarter, we launched several significant enhancements to the truest one view platform, including the ability for clients to securely chat directly with Treasury Management Specialist.
<unk> percent year over year and.
Bill: In addition to an increase in account openings were also seen an improvement in the funding of our digital account openings with balances up significantly over the third quarter of last year. Our recently enhanced digital deposit application experience has helped drive a 49% increase.
Speaker Change: and Hansen, the Klein Experts and growing our digital capabilities are important parts of our strategy, which I'll discuss in more detail on slide 7.
Speaker Change: We continue to show strong and steady growth in our digital capabilities as quiet, mobile app users grew 6% and digital transactions increased 15% compared to the third quarter of 2023.
Bill: Mobile device applications, which now account for 72% of total digital applications. These improvements also drove a 500 basis point linked quarter increase in the conversion rate on new digital applications, driving productivity and leading strong digital client satisfaction scores were not only better.
Speaker Change: We continue to migrate clients towards self-service capabilities, primarily driven by strong growth and zel transactions, which are a 36% year over year.
Speaker Change: We're serving and growing with our clients, but we're also doing that more efficiently. So now let me turn it over to Mike to discuss the financial results and I'll come back after that and close us out.
Speaker Change: In addition to an increase in account openings, we're also seeing an improvement in the funding of a digital account openings with balances up significantly over the third quarter last year. A recently enhanced digital deposit application experience has helped drive a 49% increase.
Mike: Thank you Bill and good morning, everyone.
Mike: As a high level summary, we reported third quarter 2024, GAAP net income available to common shareholders of $1 3 billion or <unk> 99 per share. Our adjusted EPS was <unk> 97 per share, which included a $36 million pre tax or one penny per share after tax increase to the gain on sale of jurists insurance holdings.
Speaker Change: Mobile Device Applications, which now account for 72% of total digital applications.
Speaker Change: These improvements also drove a 500 basis point, link order increase in the conversion rate on new digital applications.
Speaker Change: Driving Productivity and leading strong digital client satisfaction scores.
Mike: And a $16 million pre tax or another penny per share after tax reduction on the FDIC special assessment.
Speaker Change: We're not only better serving and growing with our clients, but we're also doing that more efficiently. So now let me turn it over to Mike to discuss the financial results and I'll come back after that and close us out.
Mike: Total revenue adjusted for the losses on the available for sale investment Securities that were sold in the second quarter increased by two 4% linked quarter due to a two 2% increase in net interest income and three 1% growth in noninterest income driven primarily by growth in investment banking and trading revenue.
Mike Cguire: Thank you, Bill and good morning, everyone.
Mike Cguire: As a high level summary, we reported a third quarter of $20-24 gap net income available to common shareholders of $1.3 billion or $99 per share.
Mike Cguire: Our Adjusted EPS was 97 cents per share, which included a $36 million pre-tax or 1 penny per share after tax increased to the gain on sale of tourist insurance holdings and a $16 million pre-tax or another penny per share after tax reduction on the FDIC's special assessment.
Mike: Adjusted expenses increased <unk>, 9% linked quarter, but were down approximately two 3% on a linked quarter basis, reflecting lower personnel costs.
Mike: Moving on to capital our CET one ratio remained relatively stable linked quarter at 11, 6% as current period earnings and a smaller balance sheet were offset by the payment of our common dividend and share repurchases completed during the quarter.
Speaker Change: Hello, Revenue. I just did for the losses on the available for sale investment securities that were sold in the second quarter increased by 2.4% linked quarter due to a 2.2% increase and then interesting come and 3.1% growth and not interesting come driven primarily by growth and investment banking and trading revenue.
From a credit perspective, net charge offs declined by three basis points on a linked quarter basis, and our nonperforming loans remained relatively stable both on a like and linked quarter basis next to getting into additional detail I'll cover loans and leases on slide nine.
Speaker Change: Adjusted expenses increased to 0.9% linked quarter, but were down approximately 2.3% on a light quarter basis reflecting lower personnel costs.
Mike: Alex allowance decreased 3 billion or 1% on a sequential basis, reflecting overall weaker commercial client demand and line utilization, partially offset by modest growth in consumer loans.
Speaker Change: Moving on to Capitol, our CT1 ratio remained relatively stable linked quarter at 11.6% as current period earnings and a smaller balance sheet were offset by the payment of our common dividend and share repurchases completed during the quarter.
Mike: Average commercial loans decreased by $3 2 billion or one 7% primarily due to a decline in C&I balances driven again by lower line utilization and at least in part by greater capital markets activity.
Speaker Change: from a credit perspective, NetCharge Offs declined by three basis points on a linked order basis and are non-performing loans remain relatively stable vote on a like and linked order basis.
Mike: In our consumer portfolio.
Mike: Average loans remained relatively stable linked quarter as growth in indirect auto and service finance was offset with lower residential mortgage loans.
Speaker Change: Next, to getting into additional detail, I'll cover loans and leases on slide 9.
Speaker Change: As Bill mentioned production improved in both consumer and wholesale lending, but paydowns and runoff in certain categories like commercial and residential real estate will likely result in continued pressure on an average balance basis in the fourth quarter likely similar to the rate of decline that we experienced in the third quarter.
Speaker Change: At McLean's decrease $3 billion or 1% on a sequential basis for fighting overall weaker commercial client demand and line utilization, partially offset by modest growth in consumer loans.
Speaker Change: Average commercial loans decreased by $3.2 billion or $1.7 per cent, primarily due to the decline in CNI balances driven again by lower line utilization in at least in part by greater capital market activity.
Speaker Change: Moving to deposit trends on slide 10.
Speaker Change: Average deposits decreased 1% sequentially or $3 7 billion with.
Speaker Change: With approximately $1 $7 billion of the decline due to lowered broker deposits.
Speaker Change: and Arthonsumer portfolio, average loans remained relatively stable linked quarter as growth and indirect auto in service finance was offset with lower residential mortgage loans.
Speaker Change: Average noninterest bearing deposits decreased one 4% and represented 28% of total deposits, which is unchanged versus the second quarter of 2024.
Speaker Change: And Bill mentioned production improved in both consumer and wholesale lending, but pay downs and runoff in certain categories like commercial and residential real estate will likely result and continued pressure on an average balance basis in the fourth quarter, likely similar to the rate of decline that we experienced in the third quarter.
Speaker Change: The $1 7 billion decline in average broker deposits reduced our total and interest bearing deposit costs by a basis point sequentially to two 8% and 288% respectively.
Speaker Change: Moving to the parts of trends on slide 10.
Speaker Change: Overall, we expect deposit balances to remain relatively stable in the fourth quarter.
Speaker Change: Average deposits decreased 1% sequentially, or 3.7 billion dollars, with approximately 1.7 billion of the decline due to lowered broker deposits.
Speaker Change: Moving to net interest income and net interest margin on slide 12.
Speaker Change: Taxable equivalent net interest income increased two 2% linked quarter or $77 million.
Speaker Change: Average non-interest bearing deposits decreased 1.4% and represented 28% of sell to deposits, which has unchanged versus the second quarter of 2024.
Speaker Change: Primarily due to the strategic balance sheet repositioning we completed during the second quarter a reduction in higher cost wholesale funding and the impact of one additional day in the third quarter.
Speaker Change: The $1.7 billion dollar decline in average broker deposits reduced our total and introspecting deposit costs by basis points, eventually, the 2.08% and 2.88% respectively.
Speaker Change: These <unk> were partially offset by the impact of additional receive fixed interest rate swaps that became effective during the quarter and by lower commercial loan balances.
Speaker Change: Overall, we expect deposit balances to remain relatively stable in the fourth quarter.
Speaker Change: Reported net interest margin increased 10 basis points on a linked quarter basis to $3, one 2% due primarily to the securities repositioning I, just mentioned and a reduction in higher cost wholesale funding.
Speaker Change: Moving to Dennis Restincom and Memphis, Margin on slide 12.
Speaker Change: Taxable equivalent net interest income increased 2.2% linked quarter, $477 million. Primarily due to the strategic balance you're repositioning we completed during the second quarter, a reduction in higher cost wholesale funding, and the impact of one additional day in the third quarter.
Speaker Change: Turning to noninterest income on slide 12.
Speaker Change: Adjusted noninterest income increased $45 million or three 1% relative to the second quarter.
Speaker Change: The linked quarter increase was primarily attributable to higher other income and higher investment banking and trading income, which improved $46 million due to higher M&A equity capital markets and investment grade fees.
Speaker Change: These tailwinds were partially offset by the impact of additional received fixed interest rate swaps that became effective during the quarter and by lower commercial loan balances.
Speaker Change: reported in that interest margin, increased 10 basis points on a linked quarter basis to 3.12%, due primarily to the security three-position I just mentioned, and a reduction in higher cost wholesale funding.
Speaker Change: Adjusted noninterest income increased 11% on a linked quarter basis due to higher investment banking and trading income and higher service charge on deposit income.
Speaker Change: Next I'll cover noninterest expense on slide 13.
Speaker Change: So turning the non-interesting come on Slide 12.
Speaker Change: GAAP expenses of $2 9 billion decreased $167 million linked quarter, primarily due to lower other expenses as the second quarter included a $150 million charitable donation.
Speaker Change: Adjusted non-interesting coming increased $45 million or 3.1% relative to the second quarter.
Speaker Change: The length-quarter increase was primarily attributable to higher-other income and higher-investment banking and trading income, which improved $46 million due to higher M&A, equity capital markets and investment grade fees.
Speaker Change: Regulatory costs decreased by $34 million, partially due to a $16 million reduction on the FDIC Special assessment, which was recognized in <unk> 24.
Speaker Change: Adjusted non-interesting come increased 11% on a light quarter basis, do the higher investment banking trading and higher service charge on deposit income.
Speaker Change: Adjusted noninterest expense increased <unk>, 9% sequentially due to higher professional fees other and marketing expense, partially offset by lower personnel expense.
Speaker Change: Next, I'll cover an honest expense on slide 13.
Speaker Change: On a linked quarter basis, adjusted expenses declined by $67 million or two 3%, reflecting lower personnel and other expenses.
Speaker Change: Gap expenses of $2.9 billion decreased $167 million linked quarter primarily due to lower other expenses as the second quarter included a $150 million charitable donation.
Speaker Change: Now moving to asset quality on slide 14.
Speaker Change: Asset quality remained stable on both alike and linked quarter basis, reflecting our strong credit risk culture, and proactive approach to quickly resolving problem loans during.
Speaker Change: Regulatory costs decreased by $34 million, partially due to a $16 million reduction on the FDIC special assessment, which was recognized in 3Q24.
Speaker Change: During the quarter, our net charge off ratio decreased three basis points to 55 basis points due primarily to lower losses in our CRE portfolio.
Speaker Change: Adjusted non-insured expense increased to 0.9% sequentially, did a higher professional fees, other and marketing expense, partially offset by lower personnel expense.
Speaker Change: Our loan loss provision remained relatively stable linked quarter and includes a $25 million provision related to hurricane Helene.
Speaker Change: On a light quarter basis, adjusted expenses declined by $67 million or $2.3 per cent reflecting lower personnel and other expenses.
Speaker Change: The provision exceeded net charge offs for the fourth quarter, which along with lower loan balances resulted in a three basis point increase in our <unk> triple oil ratio to one 6%.
Speaker Change: Now, I'm moving to acid quality on slide 14.
Speaker Change: Nonperforming loans as a percentage of total loans remained relatively stable for the fourth consecutive quarter. While total delinquencies were also flat on a linked quarter basis.
Speaker Change: As that quality remains stable on both a light and linked water basis reflecting our strong credit risk culture and proactive approach to quickly resolving problem loans.
Speaker Change: During the quarter, our net charge offer ratio decreased to 3 basis points to 55 basis points. Do primarily the lower losses in our CRA portfolio.
Speaker Change: Included in our appendix is updated data on our office portfolio, which is down $232 million linked quarter to one 5% of total loans or office reserve increased from nine 7% to 10, 4% driven by continued expected stress in the office sector.
Speaker Change: Our low-end loss provision remained relatively stable, linked quarter, and includes a $25 million provision related to Hurricane Helene.
Speaker Change: The provision exceeded net charge off to the fourth quarter, which, along with lower loan balances, resulted in a three-bases point increase in our A-triple L ratio to 1.60%.
Speaker Change: Approximately five 1% of our office portfolio is currently classified as nonperforming compared with six 3% at June 30, approximately 90% of these loan balances are paying in accordance with the original terms of alone.
Speaker Change: Non-performing loans as a percentage of total loans remained relatively stable for the fourth consecutive quarter, while total the link when seized were also flat on a linked quarter basis.
Speaker Change: Notably approximately 21% of our office portfolio is housed within our commercial community banking and wealth segments, where loan sizes tend to be more granular guarantor support more prevalent and overall losses lower.
Speaker Change: Included in our appendix is updated data on our Office portfolio, which is down $232 million linked quarter to 1.5% of total loans.
Speaker Change: We expect stress to remain in the office sector and believe that the size of our portfolio is manageable and well reserved but our position is to be very proactive in identifying and resolving issues in this portfolio.
Speaker Change: Our office reserve increased from 9.7% to 10.4% driven by continued expected stress in the office sector.
Speaker Change: Approximately 5.1% of our office portfolio is currently classified as non-performing compared with 6.3% at June 30. Approximately 90% of these loan balances are paying in accordance with the original terms of the loan.
Speaker Change: Turning to capital on Slide 15.
Speaker Change: Tourist CET one ratio remained relatively stable linked quarter at 11, 6% as current period earnings were offset by the return of $1 2 billion in capital to shareholders via our common stock dividend and the repurchase of $500 million of our shares.
Speaker Change: Notably, approximately 21% of our office portfolio is housed within our commercial community banking and wealth segments, where loan sizes tend to be more granular, guarantee or support and more prevalent and overall losses lower.
Speaker Change: Our CET, one capital ratio, including the impact of <unk> increased from nine 6% to nine 9%, reflecting a $1 6 billion linked quarter improvement in OCI due to the decline in longer term interest rates experienced during the quarter.
Speaker Change: We expect stress to remain in the office sector and believe that the size of our portfolio is manageable and well-reserved. But our position is to be very proactive in identifying and resolving issues in this portfolio.
Speaker Change: Although we await the final proposal for the Basel III end game rules, we believe that our current strong capital position gives us the unique ability to utilize our future earnings and OCI accretion to fund balance sheet growth and return a significant amount of capital to our shareholders.
Speaker Change: Learning to capital on slide 15.
Speaker Change: Churus ET1 ratio remained relatively stable linked quarter at 11.6% as current period earnings were offset by the return of $1.2 billion in capital to shareholders. The Archcomansock dividend and the repurchase of $500 million of our shares.
Speaker Change: I will now review our updated guidance on slide 16.
Speaker Change: Our CT1 capital ratio, including the impact of AOCI, increased from 9.6% to 9.9%, reflecting a $1.6 billion linked quarter improvement in AOCI due to the decline in long return interest rates experienced during the quarter.
Speaker Change: Looking into the fourth quarter of 2024, we expect revenue to decrease one 5% from the third quarter 2024, adjusted revenue of $5 1 billion.
Speaker Change: We expect net interest income decreased one 5% in the fourth quarter, primarily driven by lower commercial loan balances and some pressure to our net interest margin due to the temporary lag in our deposit beta.
Speaker Change: Although we await the final proposal for the Basel 3N game rules, we believe that our current strong capital position gives us the unique ability to utilize our future earnings and AOCI creation to fund balance and growth and return a significant amount of capital to our shareholders.
Speaker Change: Our net interest income outlook assumes 225 basis point reduction in the federal funds rate over the remainder of 2024, one cut in November and another cut in December.
Speaker Change: I will now review our updated guidance on slide 16.
Speaker Change: We expect noninterest income to decline by 2% driven primarily by lower investment banking and trading revenue as the third quarter performance was helped by some pull forward of capital markets activity from the fourth into the third quarter.
Speaker Change: Looking into the fourth quarter of 2024, we expect revenue to decrease 1.5% from the third quarter of 2024, adjusted revenue of $5.1 billion.
Speaker Change: We expect that interesting come to decrease 1.5% in the fourth quarter, primarily driven by lower commercial loan balances and some pressure to our net interest margin due to the temporary lag in our deposit beta.
Speaker Change: Adjusted expenses of $2 8 billion in the third quarter are expected to increase 4% in the third quarter driven by investments in areas such as talent, our digital platforms marketing and risk infrastructure.
Speaker Change: Our net interest income outlook assumes two 25 basis point reductions in the federal funds rate over the remainder of 2024, one cut in November and another cut in December.
Speaker Change: For the full year 2024, consistent with our previous guidance, we expect revenues to be down a half a percent to down 1%, which reflects our updated outlook for the fourth quarter.
Speaker Change: We expect non-interesting come to decline by 2% driven primarily by lower investment banking and trading revenue as the third quarter performance was helped by some pulled forward of capital market activity from the fourth into the third quarter.
Speaker Change: As Bill mentioned, we now expect full year 2024, adjusted expenses to be slightly lower in 2023 adjusted expenses versus our previous expectation for expenses to remain approximately flat.
Speaker Change: Adjusted expenses of $2.8 billion in the third quarter are expected to increase 4% in the third quarter, driven by investments in areas such as talent, our digital platforms marketing and risk infrastructure.
Speaker Change: In terms of asset quality, we previously expected net charge offs of about 65 basis points for full year 2024, we would now expect net charge offs to be closer to 60 basis points in 2024.
Speaker Change: For the full year 2024, consistent with our previous guidance, we expect revenues to be down a half a percent to down one percent, which reflects our updated outlook for the fourth order.
Speaker Change: As it relates to buybacks similar to the third quarter, we are targeting approximately $500 million of share repurchases in the fourth quarter.
Finally, we expect our effective tax rate to approximate 17, 5% or 20% on a taxable equivalent basis in the fourth quarter of 2024.
Speaker Change: As Bill mentioned, we now expect full year 2024 adjusted expenses to be slightly lower than 2023 adjusted expenses versus our previous expectation for expenses to remain approximately flat.
Speaker Change: I'll now hand, it back to bill for some final remarks.
Bill: Great. Thank you Mike.
Bill: So in conclusion I am I'm really pleased with the progress we've made as a company this year and I'm confident that we've got tremendous momentum within our company with our clients and with our teammates as our value proposition has never been stronger.
Speaker Change: In terms of asset quality, we previously expected net charge offs of about 65 basis points for full year 2024. We would now expect net charge offs to be closer to 60 basis points in 2024.
Speaker Change: As it relates to buybacks, similar to the third quarter we are targeting approximately $500 million of share reproaches in the fourth quarter. Finally we expect our effective tax rate to approximate 17.5% or 20% on a taxable equivalent basis in the fourth quarter of 2024.
Bill: First we've got an incredible franchise with leading share in high growth markets got highly motivated and energized teammates we have a fulsome set of specialized wholesale and consumer capabilities that are loyal clients value.
Bill: Our relative capital advantage is a differentiating factor that gives us a unique ability to grow our core banking businesses by serving existing and new clients invest in our infrastructure and returned considerable amounts of capital to our shareholders in the form of dividends and share repurchases over the next several years.
Speaker Change: I will now hand it back to Bill for some final remarks.
Bill Rogers: Great, thank you, Mike. So in conclusion, I'm really pleased with the progress we've made as a company this year and I'm confident that we've got tremendous momentum within our company, with our clients and with our teammates, as our value proposition is never been stronger.
Bill: As we execute our strategic growth and capital management priorities, we see a significant opportunity to improve our profitability over the medium term our path to profitability improvement is multifaceted and a function of client and business growth, while maintaining our cost discipline.
Bill Rogers: First, we've got an incredible franchise with leading cheer on high-growth markets. We've got highly motivated and energized teammates.
Bill Rogers: We have a full set of specialized wholesale and consumer capabilities that our loyal clients value.
Bill Rogers: A Relative Capital Advantage is a differentiating factor that gives us a unique ability to grow our core thanking businesses by serving existing in new clients and vests in our infrastructure and return considerable amounts of capital to our shareholders in the form of dividends and share purchases over the next several years.
Bill: I can say that I am encouraged that much of the profitability improvement potential. We're working towards is centered on further deepening of existing client relationships in verticals and product lines that already existed truest. The good news is we see multiple paths on initiatives that with proper execution will result in improved performance, while we do.
Bill Rogers: As we execute our strategic growth and capital management priorities, we see a significant opportunity to improve our profitability over the medium term. Our path to profitability improvement is multifaceted in a function of client and business growth while maintaining our cost discipline.
Bill: Don't have to experiment with new products or expand into new markets to achieve our goals.
Bill: We plan to accomplish all of this while maintaining our expense discipline and focus on generating positive long term operating leverage while also continue to invest in talent technology and our infrastructure.
Bill Rogers: I can say that I'm encouraged at much of the profitability improvement potential we're working towards is centered on further deepening of existing client relationships and verticals in product lines that already existed truth.
Bill: Although it's too early to provide specific earnings guidance for 2025 based on the current momentum.
Bill: Our confidence in our teams and our franchise, where we are in the planning cycle, we do expect to achieve positive operating leverage next year.
Bill Rogers: The Good News is we see multiple paths and initiatives that with proper execution will result in improved performance while we don't have to experiment with new products or expand into new markets to achieve our goals.
Bill: Finally, we will never take for granted our strong track record on asset quality as we continue to focus on maintaining strong risk discipline and controls.
Bill: I am as optimistic as ever about <unk> future, especially in light of the success I see every day inside of our company I'd like to thank all of our teammates in all of our leaders for their incredible purposeful focus on productivity and moving our company forward again. Thank you for your interest and investment in true us and with that Brad.
Bill Rogers: We plan to accomplish all of this while maintaining our expense discipline and focus on generating positive long-term operating leverage We'll also continue investing talent, technology, and our infrastructure
Bill Rogers: Although it's too early to provide specific earnings guidance for 2025, based on the current momentum, the confidence and our teams and our franchise, where we are on the planning cycle, we do expect to achieve positive operating leverage next year.
Brad Milsap: Let me turn it back over to you for Q&A.
Brad Milsap: Thank you Bill Betsy at this time, we please explain how our listeners can participate in the Q&A session. As you do that I'd like to ask participants to please limit yourselves to one primary question and one follow up in order that we can accommodate as many of you on the call today as possible.
Bill Rogers: Finally, we'll never take for granted our strong track record on asset quality as we continue to focus on maintaining strong risk-disciplining controls.
Bill Rogers: I'm as optimistic as ever about sure this future, especially in light of the success I see every day inside our company.
Thank you we will now.
Brad Milsap: Now begin the question and answer session.
Bill Rogers: I'd like to thank all of our teammates and all of our leaders for their incredible purposeful focus and productivity and moving our company forward. Again, thank you for your interest and investment in truest and with that, Bradley, turn it back over to you for a few minutes.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing thank you.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press star. Thank you.
Bradley Milsaps: Thank you, Bill, Betsy at this time, we're fleeting to explain how our listeners can participate in the Q&A session. As you do that, I'd like to add the participants to please limit yourselves to one primary question and one follow-up, and we're that we can make a commentate as many of you on the call today as possible.
As a reminder, in the interest of time, we ask that you. Please limit yourself to one question and a follow up.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Thank you. We will now begin the question and answer session.
Speaker Change: The first question today comes from Scott <unk> with Piper Sandler. Please go ahead.
Speaker Change: Do ask a question, you may press star, then one, on your touch drum phone.
Speaker Change: Good morning, everyone. Thank you for taking the question.
Speaker Change: If you are using a speaker phone, please pick up your handsets before pressing the key.
Speaker Change: Mike I was hoping you could please maybe unpack the fourth quarter margin guidance a bit more for overall NII certainly understand the ongoing pressure on loans, but I was hoping you might be able to sort of walk through thoughts on how quickly deposit betas might be able to catch up to help support or ideally enhance the margin then and then just makes some sense.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star, then too.
Speaker Change: As a reminder and in the interest of time, we ask that you please limit yourself to one question and a follow-up.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Top level thoughts about the company's overall rate sensitivity at this point.
Speaker Change: Yes, good morning, Scott happy to do that.
Speaker Change: i
Speaker Change: The first question today comes from Scott Beaver's with Piper Chandler. Please go ahead.
Speaker Change: From a NIM perspective, maybe just to sort of start with the third quarter and give you the trend into the fourth and maybe even give you a sense for kind of where we go from there and I'll link that to the beta.
Speaker Change: Morning, everyone. Thank you for taking the question. Mike was hoping you could please maybe unpack the fourth quarter margin guidance a bit more for overall and I certainly understand the ongoing pressure on loans, but was hoping you might be able to sort of walk through thoughts on how quickly deposit betas might be able to catch up to help support or ideally enhance the margin and then just make some some top little thoughts about the company's overall rate sensitivity at this point.
Speaker Change: The bulk of the improvement that we saw in the third quarter was really driven by the repositioning so that.
Speaker Change: The 10 basis points from 302 to $3 12, as you look into the fourth quarter. We mentioned the temporary the temporary beta lag. We do expect two cuts in the fourth we did see some improvement in the third Youll recall.
Speaker Change: We were we were better by a basis point on call. It on average.
Speaker Change: Yeah, good morning Scott, happy to do that. You know, from a NIMM perspective, you know, maybe just to sort of start with the third quarter and give you the trend into the fourth and maybe even give you a sense for kind of where we go from there and I'll link that to the beta. You know, the bulk of the improvement that we saw in the third quarter was really driven by the repositioning. So, you know, the 10 basis points from 302 to 312. As you look into the fourth quarter, you know, we mentioned the temporary beta lag, you know, we do expect two cuts. [inaudible]
Speaker Change: Funds rate that was better by seven basis points for the quarter. So started a call. It a 15% beta our outlook for the fourth quarter is that while we'll accelerate significantly call it into the <unk>.
Speaker Change: Mid maybe even high 30 percents from a beta perspective that will still lag a touch relative to how quickly the assets are repricing. So we see we see some margin compression there.
Speaker Change: It's to the same tune as we guided NII, so call it up a percent and a half or so of net interest margin down into the low 300, <unk> 306 area. We would expect that to catch up very very early probably in the in the first quarter of 2025 and would expect to see the margin stabilized I would say in the first quarter and then begin to improve.
Speaker Change: in the fourth. We did see some improvement in the third. You'll recall.
Speaker Change: We were better by a basis point on, you know, call it an average funds rate that was better by seven basis points for the quarter. So started it call it a 15% beta, you know, our outlook for the fourth quarter is that while we'll accelerate significantly, you know, call it into the, you know, mid maybe even high 30% from a beta perspective, that'll still lag a touch relative to how quickly the assets are repricing. So we see some margin compression there, you know, maybe it's to the same tune as we guided, and I so call it a percent and a half or so of net interest margin down into the sort of low 305, 306 area. You know, we would expect that to catch up very, very early, probably in the in the first quarter of 20.
<unk>.
As we as we have further cuts as we get into into 2025.
Speaker Change: Alright, perfect. That's great color. Thank you and then just wanted to ask separately. So you did the.
Really large balance sheet repositioning earlier this year I've got the impression that that was sort of all your plan there, but you have so much capital flexibility relative to so many banks out there.
Speaker Change: Any thoughts on further opportunities to do so or is it sort of sort of.
Speaker Change: Stand Pat on that front.
Speaker Change: 25 and would expect to see the margin, you know, stabilize that say in the first quarter and then begin to improve, you know, as we, as we have further cuts as we get into, into 2025.
Speaker Change: Yes, I mean look I think you are right and we feel like we took a pretty big swing at this in May.
Speaker Change: We have now fully realized at least the benefit into the run rate in the third quarter.
Speaker Change: We do think that our capital position is an advantage.
Speaker Change: Perfect, that's great color. Thank you. And then just wanted to ask separately. So you know, you did the really large balance sheet for positioning earlier this year. I've gotten the impression that that was sort of a volume plan there, but you have so much capital flexibility relative to so many banks out there. Any thoughts on further opportunities to do so, or is it sort of sort of stamp a stamp hat on that front?
Speaker Change: We're trying to be patient and very focused on growing the business Bill has talked a lot about the various initiatives in both of our business segments, where we do think we're going to have an opportunity to grow footings in and leverage capital obviously as that's been a little slower to develop.
Speaker Change: We're buying back shares at an elevated level I think we would expect to continue buying back shares at an elevated level I think the I think the repositioning incrementally I don't think we want to ever put the tool back in the toolbox necessarily but I think it's a lower priority for us based on what else, we see in front of us.
Speaker Change: Yeah, I think you're right. We feel like we took a pretty big swing at this in May. I've now fully realized at least the benefit into the run rate in the third quarter.
Speaker Change: We do think that our capital position is an advantage. We're trying to be patient, very focused on growing the business. Bill has talked a lot about the various initiatives in both of our business segments where we do think we're going to have an opportunity to grow footings and leverage capital. Obviously, as that's been a little slower to develop, we're buying back shares at an elevated level. I think we would expect to continue buying back shares at an elevated level. I think the repositioning incrementally, I don't think we want to ever put the tool back in the toolbox necessarily, but I think it's a lower priority for us.
Speaker Change: Yep got it alright, thank you very much I appreciate it.
Speaker Change: The next question comes from Betsy <unk> with Morgan Stanley. Please go ahead.
Hi, good morning.
Speaker Change: That's helpful.
Speaker Change: Bill you mentioned with proper execution deliver on the.
Betsy: Coles here the targets that you have could you help us understand what what do you mean by proper execution is that just hitting the goals or is there.
Betsy: Is there a change in how you're operating that delivers proper execution.
Speaker Change: in a based on what else we see in front of us.
Speaker Change: Yeah, I mean, that's if there is a.
Speaker Change: Real strong focus on expanding our relationships with our with our existing clients I'm really pleased with the momentum we've created in the execution.
Speaker Change: The next question comes from Betsy Grazic with Morgan Stanley. Please go ahead.
Betsy Grazic: Hi, good morning.
Speaker Change: Coming out of coming out of the merger there was a lot of diversion at a lot of focus on.
Betsy Grazic: and that's all I have to do.
Betsy Grazic: Bill, you mentioned with proper execution deliver on the goals here, the targets that you have. Could you help us understand what you mean by proper execution? Is that just hitting the goals or is there a change in how you're operating that delivers proper execution?
Speaker Change: Activities of getting clients converted and getting teammates Onboarding and all those type things and that's just way behind us and now the teams are really focused on executing against our priorities. We've got a really strong focus and clarity about what we want to accomplish so when I say proper execution, maybe obsession better said.
Bill Rogers: Yeah, I mean, that's where there's a...
Bill Rogers: Real strong focus on expanding our relationships with our existing clients. I'm really pleased with the momentum we've created in the execution.
Speaker Change: <unk>.
Speaker Change: Execution momentum that we've started and youll see some of that in this quarter you see increase in privacy rates you see that continuation of net new so all these things that are demonstrable evidence of the fact that we're continuing to expand and grow our relationships with our clients so proper probably ought to be.
Bill Rogers: Coming out of the merger, there was a lot of diversion and a lot of focus on...
Bill Rogers: You know, activities of getting clients converted and getting teammates on boarded and all those type of things and that's just way behind us and now the team's really focused on executing against our priorities we've got to really strong.
Speaker Change: <unk> and improved momentum.
Speaker Change: Momentum against existing execution.
Speaker Change: Okay, and then as we're thinking about the positive operating leverage in 2025.
Bill Rogers: Focus and clarity about what we want to accomplish so when I say proper execution maybe it's that should better said continuation of the of the
Speaker Change: How much of that is being driven by deposit beta lags catchy.
Bill Rogers: Execution momentum that we've started and you see some of that in this quarter. You see increase in primacy rates, you see that continuation of net new. So all these things that are demonstrable evidence of the fact that we're continuing to expand and grow our relationships with our clients. So proper probably ought to be continuation and improve momentum against existing execution.
Speaker Change: Catching up here with.
Speaker Change: Fed funds I mean is that the major driver of how we're thinking about operating leverage as we roll into 'twenty five you've got you've got all of the factors that come into it. So first is the momentum of the business that we have so take investment banking, let's use that as one example, the momentum we have in this quarter.
Speaker Change: Continuing that type of momentum into into next year as an example.
Speaker Change: Okay, and then as we're thinking about the positive operating leverage into 2025, how much of that is being driven by deposit beta lags, you know, catching up here with.
Speaker Change: The loan growth activities.
Speaker Change: I think we're confidence kind of return we saw production increases this this quarter, particularly on the consumer side, we saw loan production up around 3%. We saw real increases in the areas that we can lean into and think about the things you know about like service finance in Sheffield.
Speaker Change: Fed Funds, I mean, is that the major driver of how we're thinking about operating leverage as we roll into 25?
Speaker Change: Well, you've got all the factors that come into it so first is the momentum and the business that we have to take investment bank agencies that is one example, the momentum having this quarter.
Speaker Change: So we saw really good momentum there increase in production on the wholesale side, but the utilization was the lowest this quarter it's been.
Speaker Change: And the last five quarters so.
Speaker Change: Continuing that type of momentum into next year, as an example.
Speaker Change: But we expect to see some of that return so we've got some loan dependencies.
Speaker Change: The long growth activity is going to, you know, I think we're confident it's going to return. You know, we saw production increases this quarter.
Speaker Change: Got some execution dependency some fee dependencies, and then as you mentioned that deposit beta.
Speaker Change: I'm really pleased with the team.
Speaker Change: But particularly on the consumer side, we saw a low production up around 3% we saw real increases in the areas that we can lean into, think about the things you know about like service finance and chef field. So we saw a really good momentum there increase in production on the...
Speaker Change: Mike and team have provided really great leadership, working really closely with Christina Dante other businesses to really be on top of where we are from deposit betas.
Speaker Change: Mike indicated we've already had a little bit of movement, we expect a little bit of lag, but sort of see that transitioning them.
Speaker Change: Hall-Cale side, but the utilization was the lowest this quarter it's been in the last five quarters, so we expect to see some of that return. So we've got some loan dependencies.
First quarter of next year, and then continuing from there and then and then the final factor is the expense side. So the other side of that is controlling expenses and.
Speaker Change: We've got some executional dependencies, some feed dependencies, and then as you mentioned, the deposit beta. You know, and I'm really pleased with the team. I mean, I'm...
Speaker Change: Hopefully, we're giving good evidence of the fact that we've got a good handle on our expenses.
Speaker Change: Going to be down this year versus last year, and I think we've got a really good capacity too.
Speaker Change: Mike and team have provided really great leadership, working really closely with Chris and Dante on the businesses to really be on top of where we are from deposit data, and Mike can't be kidding. We've already had a little bit of movement, expect a little bit of lag, but you know to see that transitioning in the...
Speaker Change: Correlate our expense growth with our revenue growth opportunity. So it's a lot of things maybe it's a long answer to a short.
Speaker Change: Question, but all of those things I think have the requisite amount of focus and attention and.
Speaker Change: you know, first quarter of next year and then continuing from there and then the final factor is the expense side. You know, so the other side of that is controlling expenses.
Speaker Change: And we don't have a single dependency, we're going to manage them all really tightly in really well with a focus on achieving that positive operating leverage.
Thanks, so much.
Speaker Change: Hopefully we're giving good evidence for the fact that we've got a good handle on our expenses. We're going to be down this year versus last year and I think we've got a really good capacity to...
The next question comes from Erika Najarian with UBS. Please go ahead.
Erika Najarian: Oh good morning, good morning, Mike.
Speaker Change: Coralate our expense group with our revenue growth opportunity. So, it's a lot of things, maybe it's a long answer to a short question, but all of those things, I think, have the requisite amount of focus and attention.
Erika Najarian: Good morning, My first question is a follow up.
Erika Najarian: Mike You mentioned.
Speaker Change: A little bit of guidance on that.
Speaker Change: Fourth quarter.
Speaker Change: As we think about the trajectory from here I can fully appreciate we're not getting.
Speaker Change: and we don't have a single dependency, we're gonna manage them all really tightly and really well with a focus on achieving that positive operating leverage.
Speaker Change: Specific 25 color today.
Speaker Change: We think about the structure of your asset side versus your liability side should we assume that from that 305 six level.
Speaker Change: Thank you so much.
Speaker Change: The next question comes from Erica Nigerian with UBS. Please go ahead.
Speaker Change: Thats can start repricing faster than liabilities.
Speaker Change: Q, but then there is a day count impact on NII.
Speaker Change: Hi, good morning.
Erica Nigerian: My first question is a follow-up, Mike. You mentioned
Speaker Change: That's negative or will the asset repricing faster than liabilities go.
Erica Nigerian: A little bit of guidance on the fourth quarter. As we think about the trajectory from here, and fully appreciate we're not getting specific 25 color today, as we think about the structure of your asset side versus your liability side, should we assume that from that 305 through 06 level that assets can start repricing faster than liabilities in one queue? But then there's a day count impact on NII.
Speaker Change: Come later and to that and you mentioned the swaps if you could give us a little more color on the swaps.
Speaker Change: With the notional active is what the weighted fixed receive fixed rate in silicon.
Speaker Change: For that in our modeling.
Speaker Change: Yeah sure good morning Erika.
Speaker Change: As it relates to the I call. It maybe the NIM trajectory I think you've got it right well lecture let me let me say this so we do expect in the fourth quarter for the for the beta to accelerate I mentioned, you'll call. It mid high <unk>, we would expect that to continue and essentially catch up in the first quarter. So at that point, we would.
Erica Nigerian: , that's negative or will the asset repricing faster than liabilities go, you know, come later. And to that, and you mentioned the swaps, if you could give us a little bit more color on the swaps, what the notional active is, what the weighted receive fixed rate is, so we can factor that into our modeling.
Speaker Change: Back to actually have the balance sheet behaving touch liability sensitive again after a after an asset sensitive fourth quarter.
Speaker Change: And so really as we move deeper into 25 again, a lot of variables here, we would expect the net interest margin to begin to to expand a touch. So that's that's a good guy and I think you mentioned day count glad you brought that up there are two fewer days in the first quarter. So as you think about actual NII dollars, while we might see a more stable.
Speaker Change: Yes, you're a good morning, Erica.
Speaker Change: As it relates to the, I call it, maybe the NIMM
Speaker Change: Projectorie, you know, I think you've got it right. Well, let me, let me, let me say this. So we, we do expect in the fourth quarter, you know, for the, for the, for the beta to accelerate I mentioned, you'll call it mid-high thirties.
Speaker Change: Yes.
Speaker Change: Earning asset base in the first we might see a more stable net interest margin you might still feel a touch of pressure from a dollars of NII perspective.
Speaker Change: We would expect that to continue and, essentially, catch up.
Speaker Change: in the first quarter. So, at that point, we would expect to actually have the balance sheet behaving a touch liability sensitive, again after an asset-sensitive fourth quarter. And so, you know, really as we moved deeper into 25, again a lot of variables here, we would expect an interest margin to begin to expand a touch. So, that's a good guy. And I think, you know, you mentioned day count, I think glad you brought that up. There are two fewer days in the first quarter. So, as you think about actual NII dollars, while we might see a more stable you know, earning asset base in the first, we might see a more stable net interest margin. You know, you might still feel a touch of pressure from the dollars of NII perspective. I think I got most of your...
Speaker Change: I think I got most of your questions <unk> and <unk>.
On the swaps, let's see we did as you know well we have two programs that we used to manage our rate position. We've got our receive fixed program, which we primarily rely on to manage our NII sensitivity and risks and opportunities and we have our pay fixed program to manage.
Speaker Change: Our asset values manage our capital volatility risk risk in the future a OCI et cetera, we did have some activity in the positions during the quarter, we added about 15 Gibbs.
Speaker Change: Give or take $1 billion of forward starting receivers.
Speaker Change: Questions 1A and 1B. On the swaps, let's see, we did, as you know, well, you know, we have two programs that we used to manage our rate position. We've got our received fixed program, which we primarily rely on to manage our NII sensitivity and risks and opportunities, and we have our pay-fix program to manage our asset values, manage our capital vaults that you risk in the future AOCI, et cetera. We did have some activity in the positions during the quarter we added about 15, give or take, billion dollars of forward-starting receivers.
Speaker Change: During the third quarter that takes notional up into the call. It 60, or so billion dollars area. We also added about $5 billion of pay fixed swaps we added.
Speaker Change: Up to the investment portfolio during the quarter as well. So so had some accompanied activity there in terms of active versus sort of forward starting.
Speaker Change: We did we did have I mentioned in our in our.
Speaker Change: Our NII results sort of description, we had a touch of a headwind in the third versus the second quarter based on about about $12 billion of incremental receive fixed swaps, becoming active during the quarter.
Speaker Change: That was a manageable headwind as we look at the fourth quarter, we really don't have much else coming on throughout the course of the year, we will have more active in 2025, but.
Speaker Change: During the third quarter, that takes notion a lot into the call it 60 or so billion dollar area. We also added about five billion dollars of pay-fix swaps. We added to the investment portfolio during the quarter as well, so had some accompanied activity there.
Speaker Change: That's going to come on frankly.
Speaker Change: Who knows the curve can change, but based on the curve that we see today.
Speaker Change: In terms of active versus sort of Ford starting, we did have, I mentioned in our NII results sort of description, we had a touch of a headwind in the third versus the second quarter based on about $12 billion of incremental receive fixed swaps becoming active during the quarter. That was a manageable headwind. As we look at the fourth quarter, we really don't have much else coming on throughout the course of the year. We will have more active in 2025, but...
Speaker Change: That's going to come on and actually be less of a headwind each quarter into 2025, our receive fixed rate you asked Erika is around $3 40 on that on that notional.
Speaker Change: Got it.
Speaker Change: A question and thanks for all the detail.
Speaker Change: Now based on what Mike just said you should have.
Speaker Change: Growth next year.
Speaker Change: Yes, everything is supposed to come through that the market's thinking in terms of capital market strengthened 25, youll benefit from that as you did this quarter.
Speaker Change: But that's going to come on, you know, frankly, you know, who knows the curve could change, but based on the curve that we see today, that's going to come on and actually be less of a headwind each quarter into 2025. I'll receive fixed rate you asked Erica is around 340 on that, on that notional.
Speaker Change: The market is good volatile as it could be Oscar an election and a change in administration that can be done from your wealth management business as well.
Speaker Change: So as we think about truth on offense and fully appreciate that.
Speaker Change: Youre aiming for positive operating leverage.
Speaker Change: and my father's question and thanks for all the detail of Fort Fort Bill. Based on what Mike just said, you should have...
Are you thinking about your expense base.
Really just more relative to that revenue potential revenue strengthen and 25 in other words should we.
Speaker Change: and I grow up next year, you know, if everything is supposed to come through that the market's thinking in terms of capital markets strength in 25, you'll benefit from that as you did this quarter. If the market is good volatile as it could be after an election in a change in administration that could be good for your wealth management business as well.
Speaker Change: Think about that too is.
Speaker Change: On offense rather than.
Speaker Change: Because of this and we have to think about managing expenses because of all the issues with the merger integration.
Speaker Change: I wanted to get your thoughts there and additionally, some.
Speaker Change: So, as we think about truest on offense and fully appreciate that you're aiming for positive operating leverage.
Speaker Change: Longer term investors have asked me.
Speaker Change: Why.
Speaker Change: With operate in the mid teens in terms of ROTC is there are two superregional peers are aiming to.
Speaker Change: Are you thinking about your expense based just really just more relative to that revenue, potential revenue strength in 25, in other words?
Speaker Change: Earn in the high teens or the mid to high teens, and I suspect that might be a capital adjustment I know that.
Speaker Change: to be think about tourists as tourists on offense rather than...
Speaker Change: <unk> question, but I wanted to get your thoughts on both thank you so much.
Speaker Change: Oh, because of this and now we have to think about managing expenses because of all the issues with the merger integration.
Speaker Change: Okay.
Speaker Change: Thanks for the comprehensive questions.
Speaker Change: I think you've characterized.
Speaker Change: So I wanted to get your thoughts there, and additionally, some longer term investors have asked me.
Speaker Change: The first part of that question exactly right in the sense of that we are on offense.
Speaker Change: You can feel it in our company that you can feel it in the results you can see it in the.
Speaker Change: You know, why we'll truest operate in the mid-teens in terms of rotsie, if there are two super regional peers, are aiming to um...
Speaker Change: Things that we talked about in terms of this third quarter and you outlined many of those in terms of.
Speaker Change: Um...
Speaker Change: In terms of momentum, we think about the expense side and this is the concept of I talked about about our commitment to long term operating leverage as the expenses are correlate to that opportunity.
Speaker Change: Or in the high teams or the mid to high teams and I suspect that might be a capital adjustment. I know that's a compound question, but I wanted to get your thoughts on both. Thank you so much.
Speaker Change: Good job, sir
Speaker Change: Today, we've got the calibration correlated.
Speaker Change: Thanks for the comprehensive questions.
Speaker Change: I think you've characterized.
Speaker Change: I think as you noted it was sort of uncorrelated as we were coming out of the merger and today I think we've got a really good handle on the capacity to invest.
Speaker Change: and the first product question exactly right in the sense of that we are on offense and you can feel it in our company, you can feel it in the results, you can see it in the...
Speaker Change: And when.
Speaker Change: And grow and be on offense and have those have those be correlated again you saw good evidence of that in this quarter. So.
Speaker Change: I think that we talked about in terms of this third quarter and you outlined many of those in terms of in terms of momentum.
There isn't there.
Speaker Change: We think about the expense side, and this is the concept that I talked about about our commitment to long-term operating leverage, is the expenses are correlated to that opportunity. And I think today we've got the calibration correlated. I think as you noted, it was sort of uncorrelated as we were coming out of the merger. And today I think we've got a really good handle on the capacity to invest and win. I think we've got a really good handle on the capacity to invest and win. And I think we've got a really good handle on the capacity to invest and win.
Speaker Change: There isn't.
Speaker Change: Merger hangover or other activity related to the expenses, we've been investing we're going to continue to invest and we see the results of that in our in our topline revenue growth and opportunities. So again higher correlated and commitment to have an efficient company. So we are operating today at a really much.
Speaker Change: Longer efficiency ratios that we didn't talk about that so this commitment to have positive operating leverage on the platform of a really efficient company. So so let's put that in one category and then on the RTC side I think you highlighted sort of the starting point is a little bit different right because of the sale of the insurance business and the creation of a lot of capital.
Speaker Change: and Grow and be on offense and have those be correlated. Again, you're so good evidence of that in this quarter.
Speaker Change: There isn't a... there isn't a...
Speaker Change: Merger hangover or other activity related to the expenses we've been investing, we're going to continue to invest, and we see the results of that in our...
Speaker Change: So we start from a different framework.
Speaker Change: I think about it is the speed and increase in terms of return so our speed of increase in return I think is unparalleled so where we start from our ability to deploy capital both in growing our business and returning capital to our shareholders I think has us the capacity to grow our RTC fast.
Speaker Change: Top Line Rubinner Growth, and Opportunity. So again...
Speaker Change: High-recoral-related and commitment to having a position company.
Speaker Change: We're operating today at a really much stronger efficiency ratio, so we didn't talk about that, so this commitment to have positive operating leverage on the platform of a really efficient company. So let's put that in one category. And then on the ROTC side, I think you highlighted sort of the starting point is a little bit different, right? Because of the sale of the insurance business and the creation of a lot of capital. So we start sort of from a different framework. I think about it as the speed and increase in terms of return. So our speed of increase in return, I think is unparalleled. So where we start from our ability to deploy capital, both in growing our business and returning capital to our shareholders, I think has this the capacity.
Speaker Change: Rather than anybody else and then once we get to that mid teens sort of level and our business model starts to reflect more of what we've talked about it in the first part of my answer then I think we sort of catapult from there, but the key is we have the most ability to grow our return.
Speaker Change: The medium term.
Speaker Change: So I hope that answers, yes, yes perfect.
Speaker Change: The next question comes from Ebrahim <unk> with Bank of America. Please go ahead.
Speaker Change: and did grow our ROTC faster than anybody else. And then once we get to that mid-teen sort of level, then in our business model starts to reflect more of what we talked about in the first part of my answer, then I think we sort of catapult from there. But the key is we have the most ability to grow our return to the medium term.
Speaker Change: Hey, good morning.
Speaker Change: I guess, maybe just the first question apologies.
Speaker Change: Apologies if I missed it I think you mentioned.
Speaker Change: Pace of buybacks then it gives us a half a million this quarter.
Speaker Change: Should we is there room or are you thinking about it.
Speaker Change: The pace of those buybacks in the near term.
Speaker Change: Loan growth is needed or.
Speaker Change: Should we assume that the $500 million.
Speaker Change: And then can be locked in for the next several quarters.
Speaker Change: The next question comes from Ibrahim Punowala with Bank of America. Please go ahead.
Speaker Change: Yes.
Speaker Change: Bill.
Bill Betsy: I think we ought to think about it is it's going to stay at an elevated level for some some period of time.
Speaker Change: Hey, good morning.
Bill Betsy: <unk> been very clear that we see opportunities to grow our business. So we want to make sure that we've got ample capital to do that and invest in the growth if we see that as being.
Speaker Change: I guess maybe this is the first question and apologies if I missed it I think you mentioned
Speaker Change: Pace of Bivax relative to the half-able in this quarter, it should be, is there room or are you thinking about increasing the pace of those Bivax in the near-term if a loan growth is needed or should be assumed that that $500 million is relatively locked in for the next several quarters.
Bill Betsy: Much longer.
Bill Betsy: Several of our current view, we have the opportunity to recalibrate or to stay at elevated levels longer or to increase those elevated levels.
But for now I think and so we talked about the fourth quarter and how we would enter the first part of next year, we're doing that with a lot of confidence in the ability to grow our business.
Speaker Change: I think we all think about it as it's going to stay at an elevated level for some, you know, some period of time.
Speaker Change: Understood and just on that can you just wanted to thank you to betsy's question earlier.
Speaker Change: We've been very clear that we see opportunities to grow our business so we're going to make sure that we've got ample capital to do that and invest in the growth. If we see that as being much longer than, you know, sort of our current view, we have to opportunity to recaliprate or to stay at elevated levels longer or to increase those elevated levels.
Speaker Change: If you think it's coming from and I would say it's standpoint <unk>.
Speaker Change: You mentioned <unk>.
Speaker Change: This is now.
Speaker Change: <unk> done with the overhang with the deal.
Speaker Change: Remind us when we think about the momentum and growth.
Speaker Change: Across your businesses do you expect to grow market share and do you feel like you're at a point when the bank was stopped beating market share. This morning August market competitors who've been aggressive in terms of hiring across the southeast.
Speaker Change: But for now, I think, and so we talked about the fourth quarter and how we would enter the first part of the next year, we're going to have a lot of confidence in the ability to grow our business.
Speaker Change: Yes, let's talk about market share in terms of all of our all of our businesses.
Speaker Change: on the student, just on that I think it responded slightly to Betsy's question earlier.
Speaker Change: Starting with the investment banking side, we've increased market share consistently through this year and virtually every discipline.
Speaker Change: If you think from an outside standpoint, you mentioned the clue is now all done with the overhang with the deal. This is the mindless build, when we think about the momentum and growth.
Speaker Change: <unk>.
Speaker Change: On the margin increase share in every every discipline and then when I think about when I think about share.
Speaker Change: Where across your business is due to expect to grow market share and do you feel like you at a point where the bank will stop bleeding market share to smaller or out of market competitors who have been aggressive in terms of hiring across the Southeast. Thanks.
Speaker Change: I think about the things that we talked about in terms of for example, net new.
Speaker Change: We've really had a really strong focus on net new growth. So when I think about share its growing or growing share with clients. So increasing the number of net new clients and thats sort of a.
Speaker Change: Yeah, I mean, let's talk about market share in terms of all of our businesses, so, you know.
Speaker Change: Incredible Hallmark and then when we think about share its primacy within our existing client base. So are we growing our primacy in terms of our share in this quarter, particularly both on the wholesale side in terms of <unk>.
Speaker Change: Starting with the investment bank inside, we increase market share consistently through this year and virtually every discipline.
Speaker Change: you know so you know on on the margin and creature in every discipline and then when I think about when I think about share I think about the things that we talked about in terms of for example net new you know we we've really had a really strong focus on net new growth so another about share it's growing our growing share with clients so increasing the number of net new clients and that's sort of a
Speaker Change: Treasury penetration and on the consumer side in terms of product penetration, we grew primacy with all of our all of our clients. So.
Speaker Change: Yes, we have a lot of new clients coming into our markets I mean, a lot of new competitors coming into our markets because we have great markets.
Speaker Change: But our primacy and our net new and our capacity to serve our clients and grow.
Speaker Change: Incredible home mark. And then when I think about share it's primacy within our existing client base. So are we growing our primacy in terms of our share and this quarter particularly?
And our and our share as we as we look at the important parts of share I feel really really comfortable with that and that's going to continue so that paces.
Speaker Change: Granted started slower out of the merger, but now is at a really good pace and I expect that to continue.
Speaker Change: Both on the wholesale side in terms of Treasury Penetration and on the consumer side in terms of product penetration, we grew primacy with all of our clients. So yes, we have a lot of new clients coming into our markets, being a lot of new competitors coming into our markets because we have great markets.
Speaker Change: Got it.
Speaker Change: The next question comes from Mike Mayo with Wells Fargo. Please go ahead.
Speaker Change: But our primacy and our net new and our capacity to serve our clients and grow in our share as we as we look at the important parts of share. I feel really, really comfortable with and that's going to continue. So that pace is...
Mike Mayo: Hi, good morning.
Mike Mayo: Hi, Mike.
Mike Mayo: So we get more meat on the bones for the.
Mike Mayo: The financial expectations in 2025 and beyond.
Mike Mayo: Such as the definition of long term when you talk about operating leverage in 2025% or are you talking about more than a dollar give some kind of <unk>.
Speaker Change: You know, granted, started slower out of the merger but now is at a really good pace and I expect that to continue.
Mike Mayo: Level.
Mike Mayo: Term medium term when you talk about returns.
Speaker Change: i
Mike Mayo: And the reason I ask is I'm trying to better understand the accountability of management to shareholders.
Speaker Change: The next question comes from Mike Mayo with Wells Fargo. Please go ahead.
Mike Mayo: And I've written about this but in the third quarter.
Mike Mayo: Hi, good morning.
Mike Mayo: Hi, Mike.
Mike Mayo: Lowered the return targets from 2019, when it was low 20 to mid teens.
Mike Mayo: Bill, can we get more meat on the bones for the financial expectations in 2025 and beyond, such as the definition of long-term when you talk about operating leverage in 2025, or are you talking about more than a dollar, give some kind of...
Mike Mayo: At the same time granted a special extra leadership bonus award to some executive officers and that was on top of awards. They already get Psus are a huge delta annual incentive awards and for what looks like picking a problem that caused the asset liability management pre the current CFO and then theres the.
Mike Mayo: Level, the medium term when you talk about returns, what you're thinking and the reason I ask is I'm trying to better understand the accountability of management to shareholders. And I've written about this, but in the third quarter you lowered the return targets from 2019 when it was low 20s to mid teens.
Mike Mayo: A question about morale for those who Didnt get the award I mean, two of the five named executive officers I recognize though you did not get that award, but there's others in the 'twenty four member operating committee, who I assume do not get that so aside from the morale.
Mike Mayo: At the same time, you granted a special extra leadership bonus award to some executive officers and that was on top of awards, they already get PSU's, RSU, the Eltip, anyone set of awards and for what looks like picking a problem.
Mike Mayo: And reconciling pay with performance.
Mike Mayo: Im just looking at today's slides and I don't see the word shareholders when you say.
Mike Mayo: On the slide that says mission on the slide It says why Troy and you have taken some steps to restructure the board the balance sheet you Reorient the company you sold Cif.
Mike Mayo: that truest calls the asset liability management, pre the current CFO, and then there's the question about, for those who didn't get the award, I mean, two of the five names, exactly of officers, like I recognize though, you did not get that award, but there's others in the 24th member.
Mike Mayo: Can you kind of expenses, but still.
Speaker Change: Still shareholders the stocks underperformed the bottomline stocks underperformed over most timeframe since you announced the merger. So again, that's my Big Tee up can you give us more detail on financial expectations. After the fourth quarter and the key metrics that you think should drive a higher stock price.
Mike Mayo: Opera and Committee who I assume did not get that, so aside from the morale and reconciling pay with performance.
Speaker Change: I'm just looking at today's slides and I don't see the word shareholders when you say, you know, on the slide that says mission on the slide and says, why truest. And you have taken some steps, you restructure the board, the balance sheet, you re-order the company, you sold TIS to TIA, you cut expenses.
Speaker Change: Thanks, Mike.
Speaker Change: Thanks for acknowledging.
Speaker Change: Set have been underway.
Speaker Change: First say as it relates to the deck every slides about shareholders.
Speaker Change: I just wanted to be really really clear about that everything we do is about shareholders. So.
Speaker Change: That is all in context as it relates to the OTC, specifically I would say what we do we did is reset sort of post the sale of <unk>. So.
Speaker Change: Still shareholders, the stock center performs, it's a bottom line, stock center performed over most time, for instance, to announce the merger, so again, that's my big T-up.
Speaker Change: Can you give us more detail on financial expectations after the fourth quarter and the key metrics that you think should drive a higher stock price. Thanks.
Speaker Change: It was appropriate to sort of reset the return post TIAA, because we generate a lot of capital and we change the construct of our business in terms of in terms of return.
Speaker Change: and thanks for acknowledging the efforts that have been underway. Let me first say as a relates to the deck, every slide's about cheerholders.
We created a significant amount of capital so that actually lowers the return create that capital, but as we deploy that capital we increased that return and I think as I said earlier to an answer I think our capacity to increase that return.
Speaker Change: So I just want to be really, really clear about that. Everything we do is about shareholders. So that is all in context.
Speaker Change: as it relates to the ROTC specifically, you know, I would say what we do, we did as reset sort of post the sale of TIAH, you know, so.
As we are in the best position of anybody because we've got that capital and that capacity to deploy quickly both in our business and as a return to our shareholders. So we raised it efficiently and I think we have a chance to deploy it and return it efficiently.
Speaker Change: It was appropriate to sort of reset the return post-DIH because we generate a lot of capital and we change the construct of our business in terms of returns.
Speaker Change: In terms of in terms of the elements that are part of part of that return hopefully those are many things that I've talked about.
Speaker Change: you know we created a you know significant amount of capital so that actually lowers the return that creates that capital but as we deploy that capital we increase that return and I think as I said earlier to an answer I think our capacity to increase that return
Speaker Change: And focus on things that are critical to expanding relationships with existing clients and markets and places where we already have committed capital and resources. So these are things that have higher returns and faster paybacks. So if you think about our strategy.
Speaker Change: is we're in the best position of anybody because we've got that capital and that capacity to deploy quickly, both in our business and as a return to our shareholders. So we raised it efficiently and I think we have a chance to deploy it and return it efficiently. In terms of the elements that are part of a part of that return, hopefully those are many things that I've talked about, and focus on things that are critical to expanding relationships with existing clients. We're in the best position.
Speaker Change: Not focused on.
Speaker Change: These long term paybacks.
Speaker Change: Go into markets and try new things this is about.
Really executing against the opportunities that we have in our existing franchise.
Speaker Change: Increasing that return faster with with higher paybacks.
Speaker Change: I talk about medium term.
Speaker Change: in markets and places where we already have committed capital and resources. So these are things that have higher returns and faster paybacks. So if you think about our strategy, it's not focused on these long-term paybacks and going to markets and trying new things, this is a button.
Speaker Change: The definition of that is somewhere in that.
Speaker Change: Three year kind of range, but that also depends on sort of where the economy is and what we see in terms of growth and what we see in terms of rates. So that could go faster that could go slower but the key is we will have momentum against that and again I think you see that in this quarter I think youll continue to see that we will use the capital is.
Speaker Change: really executing against the opportunities that we have in our existing franchise, increasing that return faster with higher paybacks.
Speaker Change: In answer to the earlier question will use that capital is a lever.
Speaker Change: So we can return that capital in many ways. So the shareholders all of which will increase returns.
Speaker Change: You know, when I talk about, you know, medium term, you know, the definition of that is somewhere in that.
I think faster than than others are capable of doing I have tremendous confidence in our team.
Speaker Change: You know, through your kind of range, but...
Speaker Change: That also depends on where the economy is and what we see in terms of growth and what we see in terms of rates so that could go faster, that could go slower, but the key is we'll have momentum against that. And again, I think you see that in this quarter. I think you'll continue to see that. We'll use the capital as an answer to the earlier question. We'll use that capital as a lever. We'll use the capital as a lever. We'll use the capital as a lever.
Again, I think you'll see evidence of many of that and then as it relates to the operating.
Speaker Change: Leverage, which said, let us get it let's get into the year, a little bit more let us see where things are coming in terms of where rates are going and where we see.
Speaker Change: Asset growth.
Speaker Change: But that commitment to positive operating leverages.
Speaker Change: So we can return that couple in many ways so the shareholder's all of which will increase.
Speaker Change: Continuous one.
Speaker Change: I think we will we will make that transition next year as I said earlier and then we'll continue to improve on that transition year over year as the returns improve to.
Speaker Change: Reterns. I think faster than the others are capable of doing. I have tremendous confidence in our team. Again, I think you see evidence of many of that. And then as it relates to the operating, you know, leverage, we said, let us get it, let us get into the year a little bit more. Let us sort of see where things are coming in terms of where rates are going and where we see, you know, asset growth. But that commitment to positive operating leverages is a continuous one. So I think we'll make that transition next year, as I said earlier, and then we'll continue to improve on that transition year over year as the returns improve.
Speaker Change: The earlier part of my earlier part of my answer.
Speaker Change: And then just a follow up to the <unk>.
Speaker Change: The incentives.
Speaker Change: Incentives for management.
Speaker Change: Changing cutoff.
Speaker Change: Cut off.
Speaker Change: Page 67 of the proxy last night, that's what you do for your bank analyst for a long time and I'm just trying <unk>.
Speaker Change: Also saw the release that you had this quarter are then third quarter and it looks like there is like 12 financial metrics and then five nonfinancial metrics and Theres. So many different metrics that driving compensation. If you had to pick one.
Speaker Change: to the early part of my answer.
Speaker Change: One or two key metrics that we on the outside can monitor and focus on that should drive shareholder value when should they be yes.
Speaker Change: and then just to follow up to the incentives for management, I think you change it. I cut it up with the...
Speaker Change: Appreciate your diving into the into the proxy I think as you dive into that proxy youll youll see compensation based on performance. So I think youll see that actually quite clearly.
Mike Mayo: Page 67 of the proxy last night. That's what you do if you're a bank analyst for a long time. And I also saw the release that you had this quarter, or then third quarter. And it looks like there's like 12 financial metrics and then five non-financial metrics. And there's so many different metrics that driving compensation. If you had to pick. [inaudible]
Speaker Change: So.
Speaker Change: Don't don't assume that we don't have that mentality at this at this company.
Speaker Change: And I think the primary measures that we look at our OTC and growth in our business. So you have to have really good return and you have to have growth. So we're looking at.
Speaker Change: You know, one or two key metrics that we on the outside can monitor or focus on that should drive shoulder value, you know, what should they be?
Speaker Change: Total book value per share plus dividends, plus our OTC. So total absolute growth in total relative return growth.
Speaker Change: Yeah, I mean, I appreciate you diving into the proxy. I think as you dive into the proxy, you'll see compensation based on performance. So I think you'll see that actually quite clearly. So don't don't assume that we don't have that mentality at this at this company. And I think the primary measures that we look at are ROTC and growth in our business. So you have to have really good return and you have to have growth. So we're looking at total book value per share plus dividends plus ROTC. So total absolute growth and total relative return growth.
Speaker Change: Alright.
Speaker Change: And I think those in fairness are the highest correlated to share price return.
Speaker Change: Alright, thank you.
Speaker Change: The next question comes from Matt O'connor with Deutsche Bank. Please go ahead.
Matt O'connor: Alright, good morning in the prepared remarks, you guys mentioned about increasing in our fourth quarter investments related to risk infrastructure. I was just wondering if you could elaborate on what that is from the drivers I guess why now.
Speaker Change: Yeah, I mean, Matt that's a continuation of the investments that we have and the risk infrastructure. So.
Speaker Change: and I think those in front of the highest correlated to share a price return.
Right.
Speaker Change: It's everything you can think of in terms of how we build a more.
Speaker Change: The next question comes from Matt O'Connor with Deutsche Bank. Please go ahead.
Speaker Change: Enduring.
Speaker Change: Consistent infrastructure. So if you think about the investments in cyber and think about the investments in data.
Matt O'connor: Good morning, and the prepare remarks you guys mentioned about increasing in the fourth quarter of investments related to risk infrastructure. I was just wondering if you could elaborate on what that is and the drivers of I guess why now.
Speaker Change: All the type things that go along with that.
Speaker Change: Go along with that investment.
Speaker Change: There they are bumpy by quarter, but they are increasing and part of our overall guidance and so in the fourth quarter. We just had some.
Speaker Change: Yeah. I mean, Matt, that's a continuation of the investments that we have in the risk infrastructure. So, you know, that's that's everything you can think of in terms of, you know, how we build a more enduring, you know, consistent infrastructure. So think about the investments in cyber, think about the investments and data, you know, all the type things that go along with that, go along with that investment. They, they're, they're bumpy by quarter, but they are, they are increasing and, and part of our overall guidance. And so in the fourth quarter, we just had some.
Speaker Change: Specific items that were.
Speaker Change: More and more unique to that quarter, but theyre also factored into the.
Guidance that we've given on positive operating leverage for next year, we're going to continue to invest in infrastructure. This isn't a one time unusual thing.
Speaker Change: This is a continuous investment for a company our size with our responsibilities under <unk>.
Obligations, we have to to our clients.
Our regulators and our shareholders.
Yes.
Speaker Change: Combined the two companies you guys made a lot of investments in conflict got to the company.
Speaker Change: Specific items that were more unique to that quarter, but they're also factored into the guidance that we've given on positive operating leverage for next year. We're going to continue to invest and infrastructure. This isn't a one-time unusual thing. This is a continuous investment for a company hour size with the responsibilities and the obligations we have to our clients, regulators and our shareholders.
Speaker Change: Taking the basketball and creating some new platforms.
Speaker Change: Maybe just give us a quick snapshot of what is still.
Speaker Change: To do that.
Speaker Change: Up on something that just kind of.
As usual staying up to date like all the other banks are doing.
Speaker Change: Yes, I think I think in terms of.
Basically the risk infrastructure I mean, we've.
Speaker Change: We've seen the.
Speaker Change: The elevation of expectations of how we manage data we've seen elevated expectations in AI and the investments that we want to make that we've seen elevated expectations in terms of cyber.
Speaker Change: And I know when you combine the two companies, you guys made a lot of investments in, you know, called the Guet of a Company, taking the best of both and creating some new platforms. Maybe just like, give us a quick snapshot of what is there still to do? Is it catching up on something? Is it just kind of business as usual staying up to date like all the other banks are doing?
Speaker Change: So they're really more not.
Speaker Change: Things that were left out of the merger, but things that are just continuous improvement of what we want to do and be responsive to the opportunities and challenges that exist in our in financial services.
Speaker Change: Yeah, I think, I think in terms of, you know, basically the risk of infrastructure. I mean, the, you know, we've seen the elevation of expectations of how we manage data. We've seen elevated expectations in AI and investments that we want to make that. We've seen elevated expectations in terms of cyber. So they're really more, you know, not. [inaudible]
Speaker Change: Okay. Thank you.
Speaker Change: The next question comes from Gerard Cassidy with RBC. Please go ahead.
Gerard Cassidy: Hi, Bill Hi, Mike.
Speaker Change: Yeah.
Gerard Cassidy: Can you guys share with US Bill in your prepared remarks, and you talked about market share in response to a question, but you were talking about wallet share how in some of your businesses youre gaining wallet share.
Speaker Change: Things that were left out of the merger, but things that are just continuous improvement of what we want to do and be responsive to the opportunities and challenges that exist in financial services.
Gerard Cassidy: Can you share with us how can we as outsiders measure that success growing that wallet share and second.
Gerard Cassidy: What are you doing to grow that wallet share that's showing up that maybe you didn't see three or four years ago.
Speaker Change: The next question comes from Gerard Cassidy with RBC, please go ahead.
Speaker Change: I mean, the best way to see the wallet share gain as seen in the overall returns of our business. So.
Gerard Cassidy: Hi Bill, hi Mike
Gerard Cassidy: Can you guys share with us Bill and your prepare remark and you talked about market share in response to a question, but you were talking about Wallachier, how in some of your businesses you're gaining Wallachier. Can you share with us how can we as outsiders measure that success growing that Wallachier? And second, what are you doing to grow that Wallachier that's showing up that maybe you didn't see three or four years ago?
Speaker Change: If you think about the.
Speaker Change: You know the return expectations and increasing our OTC, so think about that for us is increasing ROI.
Speaker Change: Note that as the as the focus so we have assets deployed we have resources deployed.
Speaker Change: And we and we increase the penetration.
Speaker Change: This time, we talked about.
Speaker Change: Checking primacy up 1%, we talked about Treasury management penetration of our commercial base up 1%. So hopefully, we're giving you that kind of information that's consistent too.
Speaker Change: I mean, the best way to...
Bill Rogers: See the Wallet Shared Gain is seen in the overall returns of our business, so, you know, I...
Speaker Change: Demonstrate that pharmacy, but you primarily see it and the returns. So that's the that's the focus I mean thats the big way, we drive returns for this business is improving.
Bill Rogers: If you think about the...
Bill Rogers: You know the return expectations and increasing ROTC, think about that for us as increasing ROLA. You know, think about that as the focus. So we have assets deployed, we have resources deployed, and we increase the penetration.
Speaker Change: Improving our primacy with.
Speaker Change: With our clients.
Speaker Change: And following up on that premise C comment Bill how do you guys inter sector into lock.
Bill Rogers: You know, this time we talked about, you know, checking primacy up 1%, we talked about treasury management, penetration of our commercial base up 1%, so hopefully we're giving you that kind of information that's, you know, consistent to demonstrate that primacy, but you primarily see it in the returns. You know, so that's the focus. I mean, that's the big way we drive returns for this business is improving our primacy with our clients.
Speaker Change: Your pursuit of the digital channel with primacy it seems like the industry you guys included.
Speaker Change: The optimal kind of mixes having physical branches as well as the digital channel do most of the primacy relationships still come through the brick and mortar or you're seeing some success and building through the digital channel.
Speaker Change: You really on it and the answer is both.
Speaker Change: And following up on that primacy comment, Bill, how do you guys intersect or interlock your pursuit of the digital channel with primacy? It seems like the industry, you guys included, the optimal kind of mixes having physical branches as well as the digital channel. Do most of the primacy relationships still come through the brick and mortar or are you seeing some success in building it through the digital channel?
Speaker Change: We have this concept called T. Three.
Speaker Change: So.
Speaker Change: This concept of that that touch and technology equals trust.
Speaker Change: So what we want to do and the capability that we built.
Speaker Change: For example, our clients and truest assist so our digital clients can.
Speaker Change: Have a virtual assistant to sort of help them in their transactions, but what we believe is that they also have the opportunity to then transition to a human interaction with that so you've got a sort of supply both of those both of those opportunities when a client is interacting with us digitally.
Speaker Change: You know, you're really on it and the answer is both.
Speaker Change: you know we have this concept called T3 you know so this concept of that touch and technology equals trust
Speaker Change: And shows up in our branch, we want to be able to follow up on that transaction and continue that I can tell you that process. So I think they are actually I think they are actually both really important as part of the as part of the overall process.
Speaker Change: So what we want to do and the capability that we've built, you know, for example, you know, our clients and Truist assists. So our digital clients can, you know, have a virtual assistant to sort of help them in their transactions. But what we believe is that they also have the opportunity to then transition to a human interaction with that. So you've got to sort of supply both of those both of those opportunities when a client is interacting with us digitally and shows up in our branch. We've want to be able to follow up on that transaction and continue that, continue that process.
Speaker Change: It never becomes more clear and something like we've experienced in the last few weeks and the storms.
So those economies.
Speaker Change: Enemies go to cash during that particular time, so our branches and our Atms are the most important thing that those communities need at that time.
Speaker Change: They don't have access to digital Intranets down powers down so being able to toggle between both of those and making sure that we serve our clients in the way that can be best be served but that's why I led with that and this and this particular commentary.
Speaker Change: So I think they're actually, I think they're actually both really important as part of the overall process.
Speaker Change: and it never becomes more clear in something like we've experienced in the last few weeks in the storms.
Speaker Change: To show how important both of those things are because the goal is to create an enduring relationship with the community and with our client.
Speaker Change: So those economies go to cash during that particular time. So our branches and our ATMs are the most important thing that those communities need at that time. They don't have access to digital internet down, powers down. So being able to toggle between both of those and making sure that we serve our clients in the way that they can be best be served. But that's why I led with that in this particular commentary is just to show how important both of those things are because the goal is to create an enduring relationship with a community and with a client. And we do that by investing in the channels that are most important to them when they're most important to them.
Speaker Change: And we do that by investing in the channels that are most important to them when they are most important to them.
Speaker Change: I appreciate that thank you bill.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over for any closing remarks.
Speaker Change: Okay. Thank you Betsy that completes our earnings call. If you have any additional questions. Please feel free to reach out to the Investor Relations team. Thank you for your interest interest and we hope you have a great day Betty you may now disconnect the call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.