Q2 2025 Wells Fargo & Co Earnings Call
Welcome, and thank you for joining the Wells. Fargo, second quarter 2025 earnings conference call.
After the speaker's remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press star 1
If you would like to withdraw your question, press star 2.
Please note that today's call is being recorded.
I would now like to turn the call over to your host, Mr. John Campbell director of investor relations. Sir, you may begin the conference.
John Campbell: Thank you, Brad. Good morning, everyone.
Speaker Change: Thank you for joining our call today, where our CEO Charlie sharp and our CFO. Mike's Animo will discuss second quarter results, and answer your questions.
John Campbell: This call is being recorded.
Speaker Change: before we get started, I would like to remind you that our second quarter earnings materials, including the release financial supplements, and presentation deck are available on our website at wellsfargo.com
Speaker Change: I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties.
Speaker Change: Factors that may cause actual results to differ materially from expectations our detailed and our SEC filings, including the form AK filed. Today, containing our earnings materials
Speaker Change: Information about any non-gaap Financial measures referenced including a Reconciliation of those measures to gaap measures.
Can also be found in our SEC filings and the earnings materials available on our website.
Charlie Sharp: I will now turn the call over to Charlie.
Charlie Sharp: Thanks John. Uh, good morning everyone. I'll make some brief comments about our results and update you on our priorities. I'll then turn the call over to Mike to review second quarter results. In more detail before we take your questions.
Let me start with some second quarter. Highlights our second quarter results, reflect the progress, we're making to consistently produce stronger Financial results with net income, diluted earnings per share and our return on tangible. Common Equity, all up from both the first quarter and a year ago.
Charlie Sharp: We continue to invest in our businesses, which is driven higher fee, based income.
Charlie Sharp: This growth was Diversified with each of our business segments increasing during the first half of the year.
Charlie Sharp: While we've been investing. We've also continued to take a disciplined approach to expenses and we have now reduced headcount for 20 consecutive quarters resulting in. A 23% decline from 5 years ago.
Charlie Sharp: We maintained our strong credit discipline and credit performance continued, to improve in the second quarter with lower net loan. Charge offs from both a year ago and the first quarter,
Charlie Sharp: Losses in both our consumer and Commercial portfolios, improved from a year ago.
The big news during the quarter was having the asset cap removed.
Charlie Sharp: The lifting of the asset cap marks a pivotal milestone in our transformation, along with the termination of 13 orders since 2019, including 7 this year alone.
Charlie Sharp: We are far stronger company today because of the work we've done in addition. We've also changed and simplified our business. Mix transform the management team and how we run the company and have been methodically investing in the company's future while improving our financial results and profile.
Charlie Sharp: I know this call is for investors, but I want to once again, thank the over 212,000 employees at Wells. Fargo who all contributed in 1 way or another to this milestone.
Charlie Sharp: Though we have tremendous opportunities, this has been a demanding place to work. We have recognized the contributions of many here by increasing compensation improving benefits. Investing more investing in more employee, Learning and Development programs. And by giving those employees making below 85,000 in total compensation, special year-end cash awards for the p.
Charlie Sharp: 2 years.
Charlie Sharp: With the lifting of the asset cap, we wanted to do something special for everyone who invested so much of themselves into the company in recent years.
Charlie Sharp: As a demonstration of our appreciation, from what we've accomplished, we gave a special award to all employees so they could own part of Wells Fargo and hopefully benefit from our future success. So everyone has been asking, what does the lifting of the asset mean?
Charlie Sharp: First, we will continue to move forward with our risk and control agenda and and embed the disciplines we have built deep into the culture of the company.
But we are certainly in a different position.
With the asset cap and the many orders lifted.
Charlie Sharp: It is hard to convey the amount of time and effort, the senior team has devoted to this work.
Charlie Sharp: And the future.
Charlie Sharp: while we have not ignored this the additional time, we now have to prove meaningful
as you know, though we have generated substantial amounts of capital in the years since the asset cap was imposed
Charlie Sharp: We've been Limited in how much we've been able to deploy to support our customers and communities.
Charlie Sharp: While shareholders benefited from increased stock BuyBacks.
We would have preferred to allocate more Capital, to grow our businesses and the overall balance sheet. We now have the flexibility to proactively grow deposits and to allocate Capital to grow loans and our corporate Investment Bank.
Charlie Sharp: Since I arrived, we've had to make difficult choices where to allocate our balance sheet, given our inability to increase total assets.
As we pointed out, we have turned away deposits from corporate clients. And while we have not turned to a consumer deposits, we've been careful not to aggressively grow consumer deposits. Given the limitations we were subject to
we've also had to be cautious about loan commitments especially given the potential for significant draw Downs of committed facilities as we saw during the early days of Co
Charlie Sharp: We have also pointed out that we have constrained our markets related balance sheet.
Charlie Sharp: To allow for activity, elsewhere in the company.
Charlie Sharp: As we look forward, we are now able to move forward, more aggressively to serve consumers, businesses, and communities, to support us economic growth.
Charlie Sharp: We expect to be more aggressive in our pursuit of consumer and corporate deposits. And we will selectively look to grow loans, though, we will be cautious during periods of economic uncertainty.
We also see opportunities to allocate more balance sheet to our markets business to drive increased profitability. Our goal is to increase customer trading flow and financing activity without significantly, increasing our risk profile.
Charlie Sharp: We also have the opportunity to think more broadly about using our balance sheet as we evaluate additional opportunities.
Charlie Sharp: In addition to the lifting of the asset cap, we expect that changes in both the Regulatory and supervisory environment will allow us to compete more effectively.
Charlie Sharp: We announced earlier this month that our expected stress Capital buffer will decrease by 120 basis points, starting in the fourth quarter, which would reduce our required. Cet1 regulatory, minimum, plus buffers back to 8 and a half percent.
We are also encouraged by the federal reserve's intention to provide more detailed supporting the secar process and that detail along with the finalization of the broader set of capital rules will help us determine the appropriate level of capital. We should hold going forward.
Charlie Sharp: We are also very supportive of the review, the different regulatory agencies are conducting regarding rules and supervisory constraints that go beyond safety and soundness and do not allow us to effectively serve our customers and communities.
Charlie Sharp: We are committed to continuing to maintain a strong Capital position and are excited about using our excess capital and additional Capital generation to reinvest in our franchise, as well as continuing to return excess Capital to shareholders.
Charlie Sharp: As a reminder, we have returned a significant amount of capital to shareholders over the past 5 years, including reduce our reducing our average common shares outstanding by 23% since 2019.
As we previously announced, we expect to increase our third quarter, common stock dividend by 12 and a half percent to 45 cents per share subject to approval by the company's board of directors at its regularly. Scheduled meeting later this month.
Charlie Sharp: We've repurchased over 6 billion of common stock during the first half of this year. And during the second quarter, our board of directors authorized an additional common stock repurchase program of up to forty billion dollars. We continue to make significant investments in our Core Business which are helping to improve our returns.
We continue to invest in our credit card business. Not only by launching launching new products, but also enhancing the overall customer experience our commitment to delivering a seamless secure and user-friendly digital experience to our Card members. Whose recently recognized by JD Power, which ranked Wells, Fargo number 2 in both mobile app and online credit card satisfaction, the hansmans like these have spurred new account growth and higher balances, and spending from a year ago.
Charlie Sharp: In consumer small and business banking, we have continued to see momentum in the growth of primary checking accounts benefiting from our investments in marketing offers and enhancements to both the digital and Branch experience. We are on track to have over half of our Branch Network refurbished by the end of this year and to complete a refresh of the entire network, by the end of 2028.
Charlie Sharp: We continue to optimize and better position our Network including expanding in certain locations, including Chicago, New York, City and Nashville. We continue to enhance our digital experience and consumer checking accounts open digitally, continue to increase and active mobile users. Now exceed 32 million up 4% from a year ago.
We also continue to see good momentum from Wells, Fargo Premiere our offering for absolute clients
Charlie Sharp: Let me highlight a few areas that demonstrate our growth. We are investing in more Bankers to serve these clients and have increased branch-based financial advisors by over 10% from a year ago.
Charlie Sharp: The improved collaboration between our bankers and advisors has helped to drive over 16 billion dollars of net asset flows into the wealth and Investment Management Premier Channel during the first half of the Year up over 60% from a year ago.
Charlie Sharp: Deposit and investment balances from Premier clients. Have also been steadily increasing and up approximately 10% from a year ago.
Charlie Sharp: Turning to our commercial businesses, the Investments. We have been making in corporate and Investment Banking have continued to help Drive growth. With Investment. Banking fees up 16% during the first half of the year,
We've also made steady progress in our us Investment Banking market share with our share of each of the last 2 years and again in the first half of 2025 driven by gains in leveraged finance and m&a.
For we're we're continuing to invest in top talent constraint and and expand. Our Commercial Banking business. For example, in our technology banking group, we have grown our team of Bankers by over 25% over the past year, we expect, to continue to add, Bankers to this priority sector and in a number of additional markets and sectors where we have room to grow.
in addition to driving growth in our Core Business, our strategy also includes simplifying our businesses and focusing on the products and services that matter, most to our clients
Charlie Sharp: As part of the Strategic focus. In the second quarter, we entered into agreement. To sell the assets of our rail equipment, leasing business. This transaction is expected to close in the first quarter of next year.
Charlie Sharp: As we look ahead, what we see regarding the health of our clients and customers has not changed.
Charlie Sharp: Consumers, consumers and businesses remain strong as unemployment remains low and inflation remains in check.
Charlie Sharp: Credit card spending growth is often very slightly in the second quarter but is still up.
Charlie Sharp: Year-over-year and remain strong overall and debit card. Spending growth has remained strong and consistent with what we saw in Prior quarters.
Charlie Sharp: Consumer delinquencies. Continue to improve from a year ago and Commercial Credit performance continued to be relatively strong.
Deposit flows, for both our consumer and Commercial clients were in line with seasonal trends.
Charlie Sharp: I've had the opportunity to meet with many of our Commercial Banking clients this past quarter and many have conveyed optimism, that the administration is working to level, the trade playing field.
Charlie Sharp: They would like certainty.
Speaker Change: But prioritize a good outcome for us. Trade above short-term certainty.
Speaker Change: Many have found ways to avoid passing the 10% tariffs onto their customers at the same time. They are preparing for the downside and are not growing inventories or higher aggressively and developing contingency plan. If the downside scenario occurs,
Speaker Change: As I've said before, we are hopeful that the results of the current negotiations will make our clients more competitive and help Drive stronger economic growth in the US. But there is uncertainty and we should recognize there is risk to the downside as the markets seem to have priced in successful outcomes.
Speaker Change: as I highlighted now that the asset cap has been lifted, we are more committed than ever to serving our customers supporting businesses and communities and contributing to economic growth in the US,
Speaker Change: I continue to believe we have 1 of the most enviable Financial Services franchise in the world and excited to continue to move forward with plans to produce industry-leading, sustainable growth and returns. I'll now turn the call over to Mike.
Thank you, Charlie and good morning, everyone.
Mike Animo: In the second quarter, we had net income of 5.5 billion or 1.60 per diluted common share up from both the first quarter. And a year ago, these improved results. Reflect our continued focus on our strategic priorities.
Mike Animo: And continued Capital return. We have steadily increased profitability and returns
our second quarter results, included 253 million or 6 cents per share from the gain associated with our acquisition of the remaining interest in our merchant services joint venture
Mike Animo: Turning to slide 4.
Mike Animo: that interest income increase, 213 million, or 2% from the first quarter driven by lower deposit, costs, 1 additional day in the second quarter and higher Securities yield and higher loan balance is
Mike Animo: I'll update you on our expectations for full year net. Interest income later in the call.
Mike Animo: Moving the slide 5.
Both average and period, and Loans, Grew From the first quarter.
Period and balances were up 10.6 billion from a year ago, driven by growth in commercial and Industrial loans predominantly in the corporate Investment Banking, uh, business as well as slightly higher Auto other consumer and credit card loans, while Residential Mortgage and commercial real estate loans continue to decline.
Average deposits in our businesses increased 4% from a year ago.
Mike Animo: We reduced higher cost. Corporate treasury deposits by 58% from last year causing total average deposits decline 1%.
Mike Animo: Total average, deposits also declined, 1% from the first quarter as a small increase in consumer deposits, was more than offset by lower commercial and corporate treasury deposits.
Mike Animo: Average deposit costs. Continue to decline and were down 6 basis points from the first quarter.
Turning the slide 6.
Mike Animo: Non-interest income increased 348 million or 4% from a year ago.
Results in the second quarter benefited from the gain associated, with our merchant services joint venture transaction.
Mike Animo: I would note that the increase in card fees versus the first quarter, reflected a change in where we recognize merchant services Revenue, resulting from this transaction.
Mike Animo: Revenue is now included in card fees. Whereas, previously, our share of the net earnings in the joint venture were included in other non-interest income.
Mike Animo: We continue to have growth in many of the businesses where we have been investing, including a 9% increase in Investment Banking fees from a year ago.
Mike Animo: The growth in non-interest income more than offset lower net interest income resulting in modest Revenue growth from a year ago.
Mike Animo: Turning to expenses on slide 7.
Mike Animo: It's not interest expense increased 860 million, 88, 866 million or 1% from a year ago driven by an increase in Revenue related compensation, predominantly in wealth and investment management.
Our other expenses were relatively stable, as the Investments, we were making in our businesses, including the increased spending, and technology and advertising were offset by lower operating losses. And the impact of efficiency initiatives,
Mike Animo: the 4% decline in non-interest expense from the first quarter was driven by seasonally higher, first quarter of personnel expense
Mike Animo: earning the credit quality and slide 8.
Mike Animo: Credit performance continued to improve and remain strong. Our net loan, charged off ratio declined 13. Basis points from a year ago and 1 basis point from the first quarter.
Commercial net loan, charge offs, increased 36 million from the first quarter to 18 basis points on average loans.
Mike Animo: The losses in our commercial and Industrial loan portfolio were borrower specific with little signs of systemic weakness across the portfolio.
Mike Animo: Commercial real estate losses. Decreased during the first quarter as we have said, it will take time for the office fundamentals to recover valuations appear to be stabilizing and although we expect additional losses they should be well within our expectations.
Mike Animo: Consumer, net loan, charge Ops declined, 48 million from the first quarter to 81 basis points of average loans with Improvement across all of our, non-real estate portfolios. While the Residential Mortgage portfolio continued to have net. Recoveries
Mike Animo: Non-performing assets, decline, 3% from the first quarter driven by the lower commercial real estate non ACR loans predominantly in the office portfolio.
Mike Animo: Moving the slide 9.
Our allowance for credit losses for loans, increased modestly from the first quarter. And our allowance coverage ratio for total loans has been relatively stable for the past 5 quarters as credit Trends, have remained fairly consistent even amid macroeconomic uncertainty
Our allowance for coverage.
Allowance coverage for our corporate Investment Banking commercial real estate office portfolio has also been relatively stable over the past year and with 11.1% in the second quarter.
Mike Animo: Turning to Capital in liquidity on slide, 10.
Mike Animo: We maintained our strong Capital position with our cet1 ratio at 11.1%. While above our current cet1 regulatory, minimum plus buffers of 9.7%.
Mike Animo: Quarter of this year. Our new cet1 regulatory. Minimum plus buffers is expected to climb to 8.5%.
Mike Animo: As you know, the Federal Reserve has a pending notice of proposed rulemaking that would include averaging stress. Test results from the previous 2 years to determine the stress Capital buffer.
if that is finalized as proposed, the effective date May move to Jan January 1st and are expected new cet1 regulatory minimum plus buffers would be 8.6%
Mike Animo: We repurchased 3 billion of common stock in the second quarter and have the capacity to continue to repurchase shares.
Mike Animo: Also, as Charlie highlighted, we expect the ink to increase our common stock dividend of 45 cents per share in the third quarter subject to board approval.
Moving to our operating segments, starting with consumer Banking and lending and slide 11.
Mike Animo: Consumer small and business banking Revenue increased 3% from a year ago, driven by lower deposit costs and higher deposit. Balances
Mike Animo: For the second consecutive quarter deposit. Balances Grew From A year ago, even with higher outflows for tax payments. In the second quarter of this year compared with last year.
Debit card, spending remains strong up 4% from a year ago, consistent with the prior 2 quarters.
home lending Revenue was stable from a year ago mortgage loan originations increased 40% from a year ago as we focused on servicing Wells Fargo customers
Mike Animo: This higher volume also reflected a stronger mortgage Market from a year ago. However, the mortgage Market continued to be weak compared with historical levels due to the high rate environment.
Mike Animo: We continue to reduce headcount, which is declined 49%, since the end of 2022, as we have simplified the business and reduce the amount of third-party mortgage loans, service for others by 303% since the end of 2022.
Mike Animo: Credit card Revenue grew 9% from a year ago as loan balances increased and spending slowed slightly, but remained strong.
Auto Revenue decreased 15% from a year ago, driven by lower loan balances and Loan spread compression from previous credit tightening actions.
Mike Animo: While these actions have reduced Revenue, they have improved credit performance.
Mike Animo: Auto Revenue increased 2% from the first quarter, the first linked quarter increase since fourth quarter 2021.
Mike Animo: The decline in personal lending revenue from a year ago was driven by lower loan balances.
turning into Commercial Banking results in slide 12,
Revenue was down 6% from a year ago as lower net interest income, due to the impact of lower. Interest rates was partially offset, by growth in non-interest, income driven by higher revenue from tax credit Investments, and an increase in treasury management fees.
Mike Animo: Average loan balances in the second quarter increased 1% from both a year ago, and the first quarter as clients have largely remained cautious. While waiting for more clarity on the economic environment.
Mike Animo: Turning to corporate investment banking on slide 13.
Mike Animo: Thank you, Revenue was down 7% from a year ago, driven by the impact of lower interest rates. This decline was partially offset by lower deposit, pricing and higher Investment Banking Revenue, including higher advisory fees.
Mike Animo: Commercial real estate Revenue, declined 6% from a year ago, due to lower loan. Balances the impact of lower interest rates as well as reduced. Mortgage Banking income, after the sale of our commercial non- agency third-party servicing business in the first quarter.
Mike Animo: Market's Revenue declined 1% from a year ago, as higher revenue, and foreign exchange. And rates products was all set by declines in equities. We had 122 million gain related to an exchange of shares for Visa B, common stock that benefited equities a year ago.
Mike Animo: Average loans, grew 4% from a year ago and 3% from the first quarter. The increase from the first quarter was broad-based with higher balances, and markets Banking, and Commercial Real Estate.
Mike Animo: On slide, 14 wealth, and Investment Management Revenue increased 1% from a year ago, as growth in asset based fees, driven by higher Market valuations, was partially offset by lower net interest income due to the impact of lower rates. As a reminder, the majority of women advisory assets are priced at the beginning of the quarter. So third quarter results will reflect higher. July for the higher July 1st Market valuations.
Mike Animo: By 15 highlights corporate results. Um, Revenue increase from a year ago, June, by the gain associated with our merchant services joint venture transaction.
Mike Animo: Turning to our 2025 outlook on slide 16.
Regarding with net interest income. Uh, we currently expect an interest income for 2025 to be roughly in line with full year 2024 and interesting income of 47.7 billion.
Or not.
Mike Animo: The cost of funding this activity results in lower net, interest income While most of the revenue generated is recognized in non-interest income.
Mike Animo: Our updated expectations, still assumes net interest income grows sequentially in both the third and fourth quarter of this year.
We are only halfway through the year and several key variables including and interest income remain uncertain. We will closely monitor how these assumptions evolved over the remaining of the year.
Mike Animo: Starting to expenses our expense Outlook is not changed, and we still expect 2025 non-interest expense to be approximately 54.2 billion.
Mike Animo: In summary our second quarter results, reflected the consistent progress, we've been making to improve our financial performance.
Mike Animo: Compared with the year ago we had double-digit growth in net income and diluting diluted earnings per share through Revenue, including fee based growth across many of our businesses maintained our expense discipline improved, our credit performance and reduced common shares outstanding, and increased our dividend.
Now, that the asset cap is lifted, the management team is more time to focus on our growth initiatives. And we'll have, we will also have the flexibility to allocate more Capital with growing, our balance sheet, including deposits, loans, and trading assets.
We will now take your questions.
At this time, we will now begin the question and answer session.
Mike Animo: If you would like to ask a question, please first, unmute your phone and then press star 1. Please record, your name at the prompt.
Mike Animo: If you would like to withdraw your question, you may press star 2 to remove yourself from the question queue. Once again, please press star, 1 and record your name. If you would like to ask a question at this time, please stand by for our first question.
John Mcdonald: And our first question will come from John McDonald of truist security. Your line is open sir.
Hi, good morning, Mike. Thanks for the explanation. Um, you know, on the knee Outlook is helpful, the markets piece of it. Uh, just just on the non-m markets and I could you talk about what kind of loan growth assumptions? You kind of built into the knee outlook, for the back, half of the year. And, and how that connects to what you saw in terms of loan growth in the second quarter,
Yeah, sure John. Um, thanks for the question. You know, when you when you break apart the portfolio, um, on the consumer side, we're not, you know, on the, on the mortgage portfolio we we expect that all likely just, you know, continue to, you know, uh, come down just a little bit, uh, in the second half. I think you should see a little bit of growth in card. Uh, some of that season That season seasonality, in terms of, you know, what happens as you go into third and fourth quarter spending, um, and then we started to see some growth in Auto, um, small but but started to see that turn. So hopefully, that will continue to grow in the in the
Second half of the year, but but relatively modest in the overall balance sheet.
John Mcdonald: On the commercial side, we do expect to see some, you know, modest growth as we go in into the rest of the year. I think it likely comes from the same places, uh, at least in, you know, at least as we come into the third quarter, you know, mostly in the corporate Investment Bank. Hopefully, we'll start to see some of the, the Commercial Bank. Customers borrow a little bit more as well. Um, but I'd say overall, still relatively modest, um, but but as you get to the end of the year, you know, hopefully, you know, if, if things play out, we'll, we'll start to see a little bit more activity. More. Broadly.
Speaker Change: Okay. And then maybe you could just give us your thoughts. In terms of total revenue, I know you don't give total revenue guidance, but just maybe when you look at your own internal projections and budgeting, how's the revenue outlook for this year? Shaping up, what are the puts and takes uh relative to your expectations? If we think about the year so far?
Yeah, no. It's uh, it's uh, it's you know, as you sort of break apart like the, the pieces. You know, we talked a bit about where knee is coming uh out at this point. Um, I think when you look at the fee side, you know the biggest you know you go through the biggest line items. Um you know and and you look at, you know, the investment advisory fees, you know, the Market's been very supportive, you know, as you look at, you know, the rest of the year and so so, you know, you can easily sort of model. What the third quarter looks like based on where the, you know, where the markets ended. This, you know, already given most of the fees are already sort of certain. Um and then and so as long as the market sort of
Speaker Change: Environment now for a couple quarters. Um, so hopefully that that continues. Um, and then I think lastly, just, you know, we'll see how the year comes out on, on the the equity Securities gains that we saw. We did see some modest gains in this quarter. Um, you know, big Improvement relative to what we saw last quarter. Um, you know, as the market, you know, remains constructive that, you know, hopefully that will continue as well.
Okay, and I guess just to clarify Mike, you, you mentioned, you used to previously say that your knee guide assumes, the asset cap remains in place. And now we relax that assumption the outlook's a little worse, is it just this counterintuitive? Mix shift that you're going to grow the capital markets balance sheet but it's going to come in fees.
Speaker Change: Yeah, I I would, I would. Well I'll remind you first. It's it's been off for what 6 weeks now, 5, 5, 5 and a half weeks, 6 weeks. Um, and so, uh, um, so I I do think it. It has been off for a very short amount of time. Um, and, you know, I think what's happened, you know, as we sort of looked at and, and some of the started in, in the, you know, towards the end of the first quarter early second quarter, and we sort of talked about it in some other public, you know, forums, you know, we've we've seen some increase in the activity and that's what's causing it. Uh, the, you know, that's the by far, the largest driver of, what's causing it to move down a little bit, um, from the low end of the range. So we talked about in, in, in April and so, and as we said, like, you know, that's largely offset in in fees, you know, on those because you get paid, uh, in fees for some of those, for some of that activity. Yeah. And let me just add a little, hey, John.
Charlie Sharp: This is Charlie. Let me just add just a uh, 1 thing here, which is as we look forward to the end of the year. Um,
Charlie Sharp: We have so far assumed, I would describe it as a very small increase in the overall size of the balance sheet.
Charlie Sharp: So we do assume it grows um uh above, what used to be the cap, but not in any, uh, really meaningful way. And when we look at where that growth is coming from, uh, you know, part of it is the loan growth at Mike spoke about earlier but um, we have been and assume that we dedicate, you know, balance sheet to, um, our Market's business. And as we think about that, um,
Charlie Sharp: We're not focused on maximizing net interest income. We're focused on maximizing returns. How much money we make overall. Um, and so we'll try and, you know, do as good a job as we can go forward. Giving some more clarity on how we intend to use that balance sheet how it can affect a different pieces. Um, but that is, you know, it's a little bit of what we saw during this past quarter and it's the way we're thinking about the rest of the year.
That's really helpful. Thank you.
Speaker Change: The next question will come from Scott seers of Piper Sandler, your line is open.
Morning guys, thanks for taking the question. Um, was hoping Mike, maybe we could um approach the knee question? Maybe I guess a little differently. Guess what are if lung growth and second in the second half will only be kind of modest. What are the other factors that will allow knee to grow? Because I think you'll still need to average a few percent uh few percent higher in the second half. Then you just did in the second quarter. So just trying to understand what the the major puts and takes are within their
Yeah, Scott. It's a, it's a, it's a little bit of a lot of things, right? That will sort of add up to some growth each quarter. Um, we do expect deposit costs to continue to come down. We do expect to see some loan growth. Uh, you know, come through, we do expect, which will will be a driver. We do expect, you know, to see, you know, more further repricing of the Securities, uh, you know, portfolio. So so it really is, you know, a little bit of a little bit of a, of a lot of things. Plus some, you know, deposit growth as we go into the, into the year. Um, and so I think all all of that sort of adds up to, you know, seeing its grow sequentially, each each quarter.
Charlie Sharp: Okay, perfect, thank you for that. And then Charlie maybe just sort of a, a top level thing with the saap. Now off, I guess 1 of the questions that I get pretty frequently is sort of when or how might be the right time to revisit, uh, medium-term return targets. Do you, do you have any broad sense for um, sort of where you are in thinking about, um, that kind of dynamic?
Speaker Change: Sure. Um,
just a couple of things that I think, uh, you know, uh, you didn't directly ask the question below. Let me just maybe talk for a second about Capital levels because Capital levels, obviously, you know, uh, you know, dictate, you know, you know, uh, returns to a certain extent. And, um, so, you know, with what's happening, you know, we, you know, we we've certainly seen a lot of change, um, you know, over the past quarter or so, you know, obviously we've got, uh,
When the asset cap is lifted, it's not like this light switch is going to go off in all of a sudden things are going to dramatically change.
Speaker Change: Um, we didn't know exactly when the cap was going to be lifted, we didn't want to get ahead of ourselves. And so we're very carefully thinking through how we use the additional capacity, uh, to help grow the company. And so, we expect that to happen over time. Um, we do know we, we, we never wanted to lead people to believe that. There'd be any major change in the next week. The next month or next quarter, but it's certainly does open options for us to grow and increase returns beyond what we've seen in the past. And so, um, now that it's off, uh, we're going to be thoughtful about it. And as we go through our planning for next year, like this is the perfect time. We will, you know, do our best to talk more about it and provide more clarity broadly to everyone. So we can create a level of understanding their, um, we have the lower SCB, which, you know is. It's, you know, it is a huge decrease, you know, after a significant increase from the year before, which we commented in the year, before we didn't understand why we saw the increase as we think about how that impacts.
Speaker Change: Where we should be running our Capital levels. Um,
We want to take a little bit of time to let the FED go through its process, um, both on car and on um the work they're doing on Capital requirements. So we can try and get an understanding of what the right long-term level of capital is. So they've said that they're going to provide more transparency on car. Uh, whether it's the underlying assumptions, the models things like that. That'll be extremely helpful for us. So that we're not constantly, you know, re-adjusting Capital Targets on a yearly basis in any material way. When, in our view we haven't materially changed, uh, the risk of the company. So, you know, that'll be forthcoming. Hopefully over the next, uh, couple of months as, um, you know, the work they're doing on Capital. So, you know, that'll allow us to come back with a more definitive, uh, point of view on where we should be running Capital. Um, but
Speaker Change: but certainly all these things are, you know, um, lower levels from where we had been running it because of the increases that we saw. So you know that allows us to uh you know, deploy excess Capital either organically or through BuyBacks. Um, and so
Speaker Change: Um, we do expect to get there and then just, you know, more specifically to your question, you know. We've also said, very, you know, very clearly. Um, 15% is a, uh, you know, is is not the, it's an interim Target. It's not the final Target. Uh, once we get there, it's a good time to revisit where we go. So, both through, hopefully some, uh, you know, increased returns that we're seeing, in terms of how we run the business, you know, running, uh, at some point with lower Capital returns, We Believe will be consistently at that, 15%, and then, we'll provide more information on, you know, uh, where we go from there, you know, which, uh, will obviously be, you know, a higher number, not a lower number.
Speaker Change: All right, that's perfect. Thank you both very much.
Speaker Change: All righty.
Speaker Change: The next question comes from chem of autonomous research. Your line is open.
Speaker Change: All right, thanks. Good morning guys, just 1 more question on Capital. You know, given what all you just said Charlie and uh, that we still have. Now a really big amount of capital, the buy back in the second quarter, was a little smaller than the first and and, um, and and Loan growth, as you said, looks like it's getting better, but not that quickly. So should we can we expect that you might do more in terms of the buyback, in advance, of kind of getting that final zone of where you want to live, given that you just have, it seems like you have enough capacity to do kind of all things you would want to do in terms of growing, the balance sheet and also returning more.
Speaker Change: Yeah, I I don't think we want to, you know, I don't think we want to give a specific forecasts on how much we intend to do, but to your point we have more capacity, not less capacity. Uh, you know, the, um, uh, the price of the stock does matter. Uh, and so, we'll be thinking about that. And, um,
Speaker Change: I think we'll go from there but, you know, I think, you know that, you know, we how do I describe, I guess, I would say, we don't on the 1 hand, we don't feel like
Speaker Change: You know, produce the right kind of returns. It allows us to create the ability to increase the dividend and the, you know, buying stock back is kind of what we're left with. So, um, I, you know what we hope the answer is and what, you know what certain seems like is, we'll have the ability to do all of those things uh, to a greater extent than we've been able to do in the past. And we'll just be very hopefully be very thoughtful about the timing.
Speaker Change: Got it. And on 1 of you, you've laid out all the organic Potentials in the past. But the 1 I wanted to ask you is specific about is, is on on retail deposits? Um, well, there's, there's obviously, a, a strong competitive landscape and a lot of, you know, Banks, still building branches and other territories. You've talked about how that that consent order coming off last year, has helped you kind of just go to market, um, in a, in a broader sense. But like, how do, how will that manifest itself in terms of just retail deposit growth? Can you see you expect an acceleration there and either, you know, net new checking or just overall deposit growth taking on the retail side. Thank you.
Sure. Yeah. I mean the yeah I mean I think the answer is um you know as I said I think you just you know a little bit of you go back for a second is um,
Speaker Change: Uh, you know, when we had the sales practices consent order, it was specifically, you know, driven by, you know, some of the, you know, the things that happened in those businesses. And so, um, we had to be very, very, uh, careful about what we did. We scaled back an awful lot of stuff which stood in the way of our ability to grow. Um, and then even as that order,
Speaker Change: Came off.
Recognizing, we had a deposit cap. Uh, well, I'm sorry. In asset cap which effectively can be a deposit cap. We were even though we were adding back, uh, some of the things that would actually help us grow quicker. You know, we were um, you know, very careful about uh, um, not doing too much too quickly because, um, when you have a constraint you just don't want to bump up against that constraint. So, you know, the activities that we've kind of reinstated inside the consumer business, um, have to do with uh, reporting. They have to do with the way, we manage the business, they have to do with the way we pay people. And so you're starting to see, um, increased, uh, net checking account growth. We're focused on, you know, primary checking account growth, that that should. And we believe will lead to higher deposits. Uh, that you, you know, what you'll see is you're going to see more marketing, you're going to see more aggressive marketing. Um, you're going to see more merchandising in our branches. You're
You're going to see more local advertising as well as National advertising, um, as well as just, uh, you know, expansion of footprint, in areas, you know, where we think we have room to grow. And so those are all things that we've been, you know, have been very, very cautious about doing until now. Um, and with the value proposition that we have for our customers and the strength of the brand and the great quality of the people here. Um, we think we'll be able to compete very effectively and I remind people, um, we're not
Speaker Change: with a small number of banks for competing with a lot of banks out there, uh, that we believe we have a better value proposition for
Charlie Sharp: got it. Great. Thank you, Charlie.
Speaker Change: The next question will come from Ibrahim poonawalla of Bank of America. Your line is open.
Okay, good morning.
Speaker Change: I just wanted to follow up Charlie on what you said in terms of.
In 1 of your responses around, nothing's going to change dramatically.
15% raw sea was like step number 1 which you were at 2 Q again just 1 quarter appreciate that but I think the glass half full way of to look at this.
You mentioned the word grow aggressively many many times on the call and I think the concern from an investor standpoint is a lot of this growth may come from at the cost of roce. I don't think that's what you're saying but just give us a sense of the lens with which you're looking at these growth speed on consumer, deposits, commercial deposits.
Could it be that we could see a near-term hit in terms of profitability before things pick up and you gain more wallet? Share, just how should we think about the impact on the next 6? 12, 18 months of returns. And are there offsetting factors on the expense side, or productivity side? That could mitigate, uh, things that you do to pursue growth thanks? Yeah. No, uh, thank you.
Speaker Change: Anything that we've said, is anything under that. Uh, uh, other than, uh, we continue to be very focused on those 2 things. Um, you do raise the question about expenses. Um, we, you know, we do point out, uh, in the remarks that we made that, you know, we continue to be very, very focused on using the expense resource that we have as wisely as we can. Um, and so that means that we are still focused on continuing to drive efficiencies in the company. Um, and, you know, as we've done up until now hope to be able to use this, you know, material part of the efficiencies that we continue to drive in the company, uh, as a way to pay for a lot of the Investments, um, that, you know, we intend to make. But that is very consistent with what we've done. So, even as we've increased marketing spend, we've, you know, increased the number of hires that we have in the corporate Investment Bank, we've increased, The Hires in the Commercial Bank, we've increased the number of Bankers that we've had in the
Speaker Change: Consumer business. We've increased, you know, the number of uh, financial advisors that we have um, we haven't stood up and say that those things are dilutive to returns. It's, you know, it's it's it's it's just the opposite. We've been able to do those things because we're driving efficiency elsewhere in the company and those things will drive, you know, uh, increased Revenue over a period of time and ultimately higher returns. And so we're continuing to think about those things. You know, the exact same way, we've been thinking about them. And I would just say that we, as I've said, every quarter,
Speaker Change: Order, including I think we said it on the last quarter. Um we continue to feel like there are significant opportunities to drive efficiencies in the company. Both traditionally and through technology including AI. Um and the only thing I'll just just make sure just make sure we're clear on is yes, we had 15% ro2 TC in the quarter but we also recognize that we had to gain in the uh, in our merchant services business. So we don't really think about that as as ongoing. So, you know, we would say it's, you know, it's a little, you know, still a little bit lower. Um, you know, we were running Capital levels at uh, you know, the, you know, before the SCB adjustment uh, was was put in place.
Got it. So thanks for walking through that and maybe a separate question, uh, Mike for you on in terms of knee.
Speaker Change: Uh, the Market's view on what the FED might do keeps changing. Uh, I appreciate that, but
Speaker Change: The Mind does in terms of asset sensitivity. As we put into context, like the sequential growth in knee in the back half and maybe into next year. But how should we think about what 3 or 4 rate Cuts would do uh to the balance sheet and the ability to maybe offset that given the growth Outlook that you have assumed? Thanks.
Yeah, look, I mean, we're, you know, we look at, you know, the implied forwards and what the Market's pricing in on, on, on Cuts, uh, you know, obviously, and so that's all sort of embedded in sort of the the view of where knee is sort of trending as we look in in into the, you know, latter part of the year. Um, and obviously, you know, even even with that, you're still going to see, you know, you're going to see pricing come down on the positive side and the commercial, you know, businesses you're going to see, you know, continued re-pricing on the on the fixed, you know, for on the fixed assets, you know, uh components of the balance sheet. Um and then you're going to see, you know, hopefully start to see some more growth come out of it. Um that will also uh help uh, from an ni perspective. And so uh, all those things will, you know, should be constructive as you look forward. Um, despite what could be, you know, uh uh, rates coming down a little
No, thank you.
The next question will come from Matt o'conor of Deutsche Bank. Your line is open.
Uh good morning. Uh, I was hoping you could uh just provide some clarity on the interest income, uh, X markets this quarter. I was having a hard time finding that and then maybe just get the guidance or comments on, um, kind of the the 4 year guide on that IX markets just to clarify.
Speaker Change: You know outside of card um has been a little bit slower um you know deposits are sort of mostly behaving the way we thought. We're not seeing any any significant um or we're seeing really the the the trends of any uh cash rebalancing. And to higher yields is sort of been stable now for a bit uh for a number of quarters. And so we're not seeing that uh change in any significant way. And so I'd say overall the trends are you know, X markets are are are pretty stable to what we've seen over the last couple of quarters and and largely consistent with what? Um, uh, what we, what we've expected to see, you know, with a few puts and takes across, you know, the different portfolios.
Okay, that's all Fallen. I'm sure you guys have heard it before, but just as you're growing the training business, I think the clarity on the trading that I I over time, uh, would be helpful. Uh, and then just definitely want to ask about the lower tax rate this quarter.
Speaker Change: Um, and somewhat related. Just the impact of the new legislation. Reducing the clean energy, uh, tax credits. I, I think there's some kind of puts and takes their as you think about some stuff going away and some stuff that you might be able to do that you're not doing now but just a broader tax uh this quarter and going for thanks.
Speaker Change: Yeah. On the, on the last piece, um, on the tax credits, you know, that'll that'll be a few years out before you see anything, uh, any, any real impact on that, in terms of new projects? So we'll, we'll come on. So it'll be a little bit of a walk. It'll be a while before you start to see that. Um, uh, matter much, uh, the broader bill doesn't, you know, have a lot of direct impacts, um, relative to the taxes. Other than, uh, the tax credit piece few small things. Um, you know, I think just more more broadly on the, on the tax line, you know, there's always, there's always puts and takes on tax line, um, you know, given given how big we are, um, you know, there's a few things in the, in the quarter that probably brought the tax line a little bit, you know, the tax rate down a little bit lower than, uh, than you know what you see, you know, over over a longer time period, including, you know, a, a, a California tax. Change. That sort of changed the way they do Revenue attribution and a few other sort of wonky items that sort of um, you know, change it. And so our view on the tax rate over a longer period of time is still
You know, High kind of High Teens. Um, you know, tax rate is sort of, you know, the probably the right place given. Um, uh, what we see, you know, over a longer period of time, but it but there always seems to be a, you know, stuff in the each quarter that sort of changes out a little bit.
Speaker Change: Okay, thank you very much.
Speaker Change: The next question will come from Erika najarian of UBS. Your line is open.
Hi. Good morning. Um, wanted to ask another question about Capital Charlie, you know, I I everyone appreciates that the regulatory reform is in flux. You know, you mentioned uh, earlier, you know, an 8.6% minimum on cet1 and your current zt1 level, um, implies 140 basis point minimum. So that 9.7, um, I'm just wondering, you know, as we think about where you should operate going forward, um, are you saying that you want to take the time to make sure that that 8 and a half percent? Is something that, you know, is a little bit sustainable, you know, when if you get G said before, if we get more comprehensive stress, test reform. And if that's the case is 140 basis points, still an appropriate buffer, you know, which would imply that your your sort of minimum would buffer would be about 10%
Speaker Change: so,
Speaker Change: um,
Speaker Change: Listen, I think what I tried to answer this before, I think the way we're in a period. So we're in a period of time where
We have seen over, you know, a uh a 13-month period. We've seen our Capital requirement go up like a hundred.
And how much would it go up? It went up 90 days.
Speaker Change: 190 days 90 days, 190 basis, 90 90 basis points and then we saw it come down 120 basis points.
Speaker Change: um, the FED has said that we're going to give you more information
Speaker Change: Um uh uh you know, the the kind of information to you that we should be providing. So um, uh,
Speaker Change: We just want to take that time to understand what the right level is. And we will also be thinking about you know with other changes that they're making and any other changes to these moving pieces, what the write buffer will be um but directionally you know lower is certainly you know where things are going. Um,
But we don't know enough to actually tell you what that number should be yet.
Speaker Change: And and and the good news is, right? We have a ton of excess Capital, we have more flexibility to deploy it to help support clients. And and you know, the, you know, the broader, you know, economy here, right? And and so that should give us more opportunity to use it and then, yeah, we'll, we'll bring it down. And I think we've, we've shown over the last, you know, 5 years that, you know, we, we are not shy about returning, Capital back to shareholders, you know, through BuyBacks when, um, you know, when we feel that's that's appropriate and so hopefully, hopefully we can. Yeah, listen to that, come through over the quarters. We live in like a really I mean, for us like, this is an incredibly interesting and fun time.
Speaker Change: I mean, you know, we're sitting here where even with the constraints that we've had uh I think we've like, you know, started to show that the things that we're doing, um, have the ability to drive, you know, higher revenues across the company. Uh, regardless of what's happened in the knee cycle. So we spent a lot of time talking about the things that we've been doing to, you know, to to focus on growing non-interest revenues um, which have been, which we've been doing because they're strategic opportunities, not just because of the balance sheet. So those strategic opportunities haven't changed and those will continue to be there for us. So we're still incredibly focused on, uh, increasing the non-interest, revenues of the company. As we've seen, we've been able to do, uh, we're starting to see some loan growth. Yes, the loan growth hasn't turned out this year to be as much as we otherwise would have hoped when we first set our targets um um our guidance. But you know, overall where we sit today
And the types of things that we're seeing is, you know, certainly marginally better than what we had seen in terms of what we're seeing. Um, we're starting to see deposit.
Speaker Change: Flows. As we've talked about, uh, we've got new account growth, we've got expenses in check. Credit is performing well, we've got more Capital uh than you know. We had the last time we had the conversation, we have less constraints um so you know for us as we sit here even though you know there's a lot of work for us to do and we've got a lot to prove we
Speaker Change: Understand that um, those things all line up to, you know, be pretty exciting for the management team here.
Agree with that. Thanks so much.
Betsy Graphic: The next question will come from Betsy graphic of Morgan Stanley. Your line is open.
Betsy: Hi, good morning.
Betsy: um,
Charlie. I had a question about just how you're thinking about the Arc of expenses over the next period of time. Uh, call it a year or 2 um with the asset cap. Removal underlined question is, are there efficiencies that can be generated from Investments? You had to make that were unique to the asset period? And if so, with those efficiencies is there reinvesting in everything you just mentioned on, you know, um, headcount to drive revenues or is there a technology angle to some of this reinvestment that we should be expecting? And how are you? Um, positioned for generating efficiencies from AI, thanks.
Betsy: Sure.
Um so first of all, on the question of expenses related, directly to the asset cap,
Betsy: um,
Betsy: we would the way. So first of all uh it's important to point out that the consent order.
Betsy: If that happens and even then we'll be very, very careful. So, as we think about the opportunities to drive efficiency, we talked about, uh, the fact that there are still substantial opportunities away from our ability to just do things more efficiently from a risk and control perspective and so um, we're continuing to focus on driving those things across the company. It's what you've seen kind of quarter on quarter on quarter is, you know, our headcount has come down using attrition as much as we can, as our friend to Great, those efficiencies. Um, and yes, technology, uh, will be able to help. Um,
Betsy: That trajectory continued even more. Um, we want to be careful about giving any long-term guidance Beyond this year, on expenses, which is why we've stopped. Because, as we've said, very consistently, we really like the idea of going through the planning cycle, being able to take a look at what we want to invest in, what we think we can drive in terms of the efficiencies and then give a number. Um, but I would say the same thing that we've said is uh, similar to the question that uh, that they ever have was asking before. We're very, very conscious of the fact that it expenses are an important lever for us for us to be able to increase the returns, um, for the company. And so hopefully, we'll be able to create the right kind of balance by increasing the level of Investments. While we're keeping expenses in check and um, focus on, not just driving more growth but driving higher returns in the shorter.
and medium-term as we've, uh, uh, tried to do up until now
And Betsy, I would just say from an AI perspective. It's very early to see any impact of any significance from AI. But we've got, you know, capabilities and and, and Pilots, you know, in our Branch system and our Ops system and our call centers, you know, really across anywhere, where you've got anything manual, and a lot of people, um, uh, and those things are starting to, uh, mature a little bit very early but, um, but you're starting to see, you know, some of the benefits. You thought you'd see in terms of efficiency start to come through in some of the early use cases. But it's super, super early, and I think the impact will build over time there.
Speaker Change: Okay, thanks. And I know you said that you would address the Rossi Target when you hit the 15%, which you did this quarter. So can you give us a sense of the timing when we should expect that? You would be revisiting that Target?
so just as a reminder, the 15%
Speaker Change: That we uh, reported this uh, quarter did include the merchant services gain. So again we try and be, you know, as transparent as we can and look through that and some stuff you saw in taxes. So we don't, you know, we're not declaring Victory on getting to the 15% yet. Um. Uh. And then some, you know, maybe as we get towards the end of the year and we talk about next year, we'll talk a little bit more about the timing um on those things and recognize that people want to understand a little bit more about how we're thinking about the future.
Speaker Change: Super, thank you. So maybe the January call, Post the strategy deck,
Speaker Change: You just don't.
Speaker Change: I we'll see. We'll see. Okay, no thanks.
We hear you though, thanks.
Speaker Change: Yep, thank you.
Speaker Change: Bye.
Speaker Change: The next question will come from John pancari of evercore isi. Your line is open.
John Pancari: Good morning. Um, just want to see if you can give us a little bit more color on the loan deals, uh, this quarter. The, you know, it looks like there were relatively flat, I guess overall would have expected an increase given the sum of the front book back book Dynamics. So could you maybe talk us through some of the puts and state puts and take and and, and your expectation, as you look out, given the rate environment and the curve Outlook as well.
John Pancari: Yeah, I mean, when you look at, when you look at, um, you know, spreads that are, you know, you particularly in the commercial side, John, it's still very competitive.
John Pancari: Um and so, you know, there's been a couple spots where you see a little bit of widening of spreads but not a lot. Um, in most cases it's you know what, what's holding spreads to be as tight as they are, is really the competition. We're seeing across the space particularly in the Middle Market Commercial Banking uh, side of things. And so um that that's that's what's driving it. Um, when you look at that side of the house,
John Pancari: and that that competition intensified to a greater degree than you may have thought, but it seems like, you know, higher, a higher loan yield expectation, would have been fair to assume
Uh, know it's been pretty consistent now for a number of quarters, right? It EBS and flows, a little bit, depending on, which part of the country or which segment you may be talking about. But, uh, but it's been the competition's been pretty, uh, pretty intense there, uh, for a while. And so, you're just not seeing sort of the widening that you might, if in sort of a slowing, you know, economic environment. That's just not materializing. That way.
Speaker Change: That too. Like, where are you seeing that competitive pressure come from, is it private credit? Is it? Other types of non-banks? We've heard some studying, you know, Insurance players stepping up again in certain parts of real estate, are there um areas that you'd flag and then has that impacted anything around loan growth expectations.
Speaker Change: Mary competitor. Particularly when you're talking about the Middle Market, you know, Commercial Bank or other Banks.
Speaker Change: Um, you certainly see, you know, other non-bank players that, you know, at times in certain pieces of it. But but the primary competitor still is, is other Banks. Um, uh, you know, and, and they vary depending on what part of the country, you're in, uh, obviously. But um, uh, but, but I think that's, that's what's, what's driving? It mostly
Speaker Change: Okay, thank you.
Speaker Change: The next question will come from Gerard Cassidy of RBC Capital markets.
Speaker Change: Please go ahead.
Gerard Cassidy: Hi Mike. Hi Charlie. Mike, you talked about the growth in the commercial and Industrial loans on the quarter. It was predominantly in the corporate and Investment Bank. Can you give us a little more color and insights into where you saw that in that segment of the commercial and Industrial loan portfolio growth?
Gerard Cassidy: Yeah, sure. It's it's, uh, it's a little it's across the board, uh, in a in a bunch of sectors, you know, Gerard. But you know, I'd say we're seeing growth in places like fund Finance which are are capital call facilities with big private Equity. Uh firms. We're seeing you know we saw a little bit of growth in probably 3 or 4 sectors uh across you know, the large corporate space including TMT and uh, Industrials Healthcare. So a little bit, you know, a little bit across the board. You're also seeing some more asset backed, uh, loan growth, uh, coming out of our markets business across, you know, whether it's mortgages or other types of, you know, collateral, uh, a little, a tiny bit of, you know, growth in Prime brokerage. And so it really is sort of across, you know, across the board in terms of a number of different, um, areas within the corporate Investment Bank.
Very good. And you guys have talked a lot about improving efficiencies and, and improving profitability of with the asset cap being lifted, I got a kind of a pivoting question. You you talked about exiting the rail equipment, leasing business and you've exited other businesses over the years. Are there any other businesses left that are not meeting your internal profitability targets? Possibly, that could enhance the longer term profitability of the of the company or is this essentially it for divesting of different segments?
Gerard Cassidy: Yeah, the rail portfolio is really the the last thing of any size. I mean, we, you know, we looked at the the, the businesses, you know, a few years ago now and sort of have methodically sort of worked our way through, you know, each of each of them. And, and really the the rail, uh, portfolio is sort of the last, uh, last of those
Gerard Cassidy: Very good. Thank you.
Speaker Change: And the last question for today will come from Chris, McGrady of KBW, your line is open.
Oh great, thanks for squeezing me in. Um,
Just on operating leverage a little bit more broadly. Um, the market, the markets feel better today, the more optimism in markets but certainly we know that's fluid. Um I know you touched briefly on it, but just maybe unpacking the degree of confidence in the operating leverage over the medium term and then I guess both both sides of it, the revenue and the expenses. Thanks.
Speaker Change: Yeah, Chris. I mean look I I just come back to what we talked about a little bit earlier in the call. I think on the on the expense side you know we feel, you know, as confident um as we can be that there's a lot more to do on the efficiency side of it and and over the last, you know, 4 or 5 years, we've we've taken out 12 billion already. You've seen headcount gown, come down by you know 20 20 consecutive quarters in a row. Um and so you know we're going to continue to focus on that and it's it's how we start all of our conversations with the Business Leaders and our budgeting our each quarter. Um, uh, we go through it. And so I think there's
Speaker Change: More to do there really across almost every part of the company. And I think, we'll, we'll continue to drive that the same way we've done that the last number of years and and look, I think on, on the revenue side, you know, I just come back to the broader, you know, opportunity that we have to grow across each of the businesses. You know, how that manifests itself in any given quarter, you know, is a little out of your control to some degree and so, uh, given given how markets can be. But, but I do think, you know, across every single 1 of our businesses. There's a tremendous amount of opportunity to grow. Um, and so I think that's that's those those 2 things together. Should you know, provide uh, you know, growth and profitability and returns, you know, over uh, over the long run.
Great. Thank you.
Speaker Change: And we have no more questions.
Speaker Change: Great. We uh we appreciate the time and look forward to talking to you next quarter. Thank you.
Thank you all for your participation on today's conference call at this time. All participants May disconnect