Q1 2026 KeyCorp Earnings Call

April 16, 2026

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If you would like to ask a question during that time simply press star one on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to Brian money Keycorp Director of Investor Relations. Please go ahead.

Operator: Good morning, and welcome to KeyCorp's Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question during that time, simply press star one on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Brian Mauney, KeyCorp's Director of Investor Relations. Please go ahead.

Thank you operator, and good morning, everyone I'd like to thank you for joining Keycorp's first quarter 2026 earnings conference call I'm here with Chris Gorman, Our chairman and Chief Executive Officer, Clark Khayat, Our Chief Financial Officer, and Mel Romani, our chief risk officer as usual, we will reference our earnings presentation slides, which can be found on the Investor Relations section.

Brian Mauney: Thank you, operator, and good morning, everyone. I'd like to thank you for joining KeyCorp's Q1 2026 earnings conference call. I'm here with Christopher Gorman, our Chairman and Chief Executive Officer, Clark Khayat, our Chief Financial Officer, and Mohit Ramani, our Chief Risk Officer. As usual, we will reference our earnings presentation slides, which can be found in the investor relations section of the key.com website. In the back of the presentation, you will find our statement on forward-looking disclosures and certain financial measures, including non-GAAP measures. This covers our earnings materials as well as remarks made on this morning's call. Actual results may differ materially from forward-looking statements, and those statements speak only as of today, 16 April 2026, and will not be updated. With that, I will turn it over to Chris.

The key Dot Com web site in the back of the presentation, you will find our statement on forward looking disclosures and certain financial measures, including non-GAAP measures. This covers our earnings materials as well as remarks made on this morning's call actual results.

Speaker #1: As a reminder, this conference is being recorded. I would now like to turn the conference over to Brian Mauney, KEYCORP Director of Investor Relations.

Speaker #1: Of businesses, but obviously, you know, it's not without impact from the near-term volatility. Second part of your question is it relates to NDFI as a very as a very great question because this is kind of a developing area.

<unk> may differ materially from forward looking statements and those statements speak only as of today April 16th 2026, and will not be updated with that I will turn it over to Chris. Thank you, Brian and good morning, everyone.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Operator, and good morning, everyone. I'd like to thank you for joining KEYCORP's first quarter 2026 earnings conference call. I am here with Chris Gorman, our Chairman and Chief Executive Officer, Clark Khayat, our Chief Financial Officer, and Mo Ramani, our Chief Risk Officer.

Our strong first quarter performance demonstrates disciplined execution and significant momentum as we continue to deliver on our commitments. We reported first quarter earnings of 44 per share up 33% year over year.

Christopher Gorman: Thank you, Brian, and good morning, everyone. Our strong Q1 performance demonstrates disciplined execution and significant momentum as we continue to deliver on our commitments. We reported Q1 earnings of $0.44 per share, up 33% year over year. Return on tangible common equity exceeded 13% as we continue to make significant progress with respect to our goal of 15%+ return on tangible common equity by year-end 2027. Revenue grew 10% year over year, with revenue growing more than two times the rate of expenses. Adjusted pre-provision net revenue grew an additional $29 million sequentially, marking the eighth consecutive quarter of adjusted PPNR growth. Net interest margin expanded five basis points sequentially to 2.87% as we remain on track to exceed 3% net interest margin by year-end.

Chris Gorman: Thank you, Brian, and good morning, everyone. Our strong Q1 performance demonstrates disciplined execution and significant momentum as we continue to deliver on our commitments. We reported Q1 earnings of $0.44 per share, up 33% year over year. Return on tangible common equity exceeded 13% as we continue to make significant progress with respect to our goal of 15%+ return on tangible common equity by year-end 2027. Revenue grew 10% year over year, with revenue growing more than two times the rate of expenses. Adjusted pre-provision net revenue grew an additional $29 million sequentially, marking the eighth consecutive quarter of adjusted PPNR growth. Net interest margin expanded five basis points sequentially to 2.87% as we remain on track to exceed 3% net interest margin by year-end.

Speaker #1: And so we've seen a steady march down in terms of spreads for a long time because there's just been too much capacity in the market with respect to commercial loans.

Speaker #2: As usual, we will reference our earnings presentation slides, which can be found in the Investor Relations section of the KEY.com website. In the back of the presentation, you will find our statement on forward-looking disclosures and certain financial measures, including non-GAAP measures.

Speaker #1: What we're seeing just as of late is a firming there. And part of the firming of that is that some of the private credit players obviously, in light of redemptions, are not in the market the way they have been.

Return on tangible common equity exceeded 13% as we continue to make significant progress with respect to our goal of 15% plus return on tangible common equity by year end 2027 revenue grew 10% year over year with revenue growing more than two times.

Speaker #2: This covers our earnings materials as well as remarks made on this morning's call. Actual results may differ materially from forward-looking statements, and those statements speak only as of today, April 16, 2026, and will not be updated.

Speaker #1: And I actually think, as you look forward, there's a lot of discussion around private credit. I personally don't think there's a credit problem, but these redemptions are real.

Speaker #2: With that, I will turn it over to Chris.

The rate of expenses adjust.

Speaker #1: And that if you have a bunch of redemption requests, the first thing you do is stop shoveling it out the front door. Which I think will give the banks in some instances, an opportunity to, to, to, to re-intermediate, some of those activities.

Speaker #3: Thank you, Brian, and good morning, everyone. Our strong first quarter performance demonstrates disciplined execution and significant momentum as we continue to deliver on our commitments.

Adjusted pre provision net revenue grew an additional $29 million sequentially, marking the eighth consecutive quarter of adjusted PNR growth net interest margin expanded five basis points sequentially to 287% as we remain on track.

Speaker #3: We reported first quarter earnings of $44 per share, up 33% year over year. Return on tangible common equity exceeded 13% as we continue to make significant progress with respect to our goal of 15% plus return on tangible common equity by year-end 2027.

Speaker #1: So that's kind of a, that—that's my perspective. Anything else on that, Erica? Operator, we'll take the next question.

To exceed 3% net interest margin by year end.

Commercial loan growth was strong and broad based across industries, and geographies, increasing $3 $3 billion or 4% sequentially on a period end basis, we continued to be disciplined with respect to funding cost management total funding costs declined by 15 basis.

Christopher Gorman: Commercial loan growth was strong and broad-based across industries and geographies, increasing $3.3 billion or 4% sequentially on a period end basis. We continued to be disciplined with respect to funding cost management. Total funding costs declined by 15 basis points during the quarter, with interest-bearing deposit costs decreasing 22 basis points, resulting in a cumulative through the cycle down beta of 56%. Asset quality metrics remain strong with a net charge-off ratio of just 38 basis points. In addition to improving our return on capital, we remain committed to substantial return of capital to our shareholders. During the quarter, we took advantage of the pullback in regional bank stock prices and repurchased nearly $400 million of common stock, well in excess of the $300 million-plus commitment we made in January. We are also encouraged by the latest Basel III endgame proposal.

Chris Gorman: Commercial loan growth was strong and broad-based across industries and geographies, increasing $3.3 billion or 4% sequentially on a period end basis. We continued to be disciplined with respect to funding cost management. Total funding costs declined by 15 basis points during the quarter, with interest-bearing deposit costs decreasing 22 basis points, resulting in a cumulative through the cycle down beta of 56%. Asset quality metrics remain strong with a net charge-off ratio of just 38 basis points. In addition to improving our return on capital, we remain committed to substantial return of capital to our shareholders. During the quarter, we took advantage of the pullback in regional bank stock prices and repurchased nearly $400 million of common stock, well in excess of the $300 million-plus commitment we made in January. We are also encouraged by the latest Basel III endgame proposal.

Speaker #2: Yes, of course. Thank you, Erica. The next question will go to the line of Ken Uzen with Autonomous. Ken, your line is open.

Speaker #3: Revenue grew 10% year over year, with revenue growing more than two times the rate of expenses. Adjusted pre-provision net revenue grew an additional 29 million dollars sequentially, marking the eighth consecutive quarter of adjusted PP&R growth.

Speaker #1: Thanks a lot. Appreciate it. I want to ask a question on deposits. I know the first quarter is seasonal, and you had a decline in brokered CDs.

During the quarter with interest bearing deposit costs, decreasing 22 basis points, resulting in a cumulative through the cycle down beta of 56%.

Speaker #1: just wondering how you think that deposits will trend from here. And if you think you're getting close to the bottom of that, NIB, mix, which I know, was part of that seasonality in the first quarter.

Speaker #3: Net interest margin expanded five basis points sequentially, to 2.87%, as we remain on track to exceed 3% net interest margin by year-end. Commercial loan growth was strong and broad-based across industries and geographies.

Asset quality metrics remained strong with a net charge off ratio of just 38 basis points. In addition to improving our return on capital we remain committed to substantial return of capital to our shareholders.

Speaker #1: Thanks.

Speaker #3: Yeah. Hey, Ken, it's Clark. thanks for the question. so you hit on the, I think, the bigger drivers, broker deposits coming out at about 1.6 billion, seasonal, decline.

During the quarter, we took advantage of the pullback in regional bank stock prices and repurchased nearly $400 million of common stock.

Speaker #3: Increasing 3.3 billion dollars, or 4% sequentially, on a period-in basis. We continued to be disciplined with respect to funding cost management. Total funding cost declined by 15 basis points during the quarter, with interest-bearing deposit costs decreasing 22 basis points.

Speaker #3: So first, I would say, as it—as we did decline, we are actually slightly better in the first quarter than we would have planned.

<unk> in excess of the $300 million plus commitment we made in January.

Speaker #3: So, I think just consistent with our expectations. On NIB, you did see that come down on a reported basis. I think if you put our hybrids in there, we're stable.

We are also encouraged by the latest Basel III and gained proposal.

Speaker #3: Resulting in a cumulative through-the-cycle down beta of 56%. Asset quality metrics remained strong, with a net charge-off ratio of just 38 basis points. In addition to improving our return on capital, we remain committed to substantial return of capital to our shareholders.

Our preliminary estimate shows 100, plus basis point benefit to our Mark CET one ratio under the revised standardized approach if implemented as currently proposed.

Speaker #3: So those continue to be, very good vehicle to work with commercial clients and maintain, those high-quality, operating deposits. And I think as usual, we would expect to de to trough kind of mid-May and then build up through the quarter.

Christopher Gorman: Our preliminary estimate shows 100+ basis point benefit to our marked CET1 ratio under the revised standardized approach if implemented as currently proposed. This would imply a fully phased-in ratio of around 11%, higher than our peers and higher than we believe we need to operate our business in the ordinary course. Our capital position gives us flexibility to continue to lean in aggressively this year and in the coming years to support our clients, to support our own organic growth, and to repurchase our shares. Subject to market conditions, we expect to buy back at least $1.3 billion of our shares in 2026, up from the $1.2 billion we previously communicated. While the macroeconomic environment has continued to be dynamic, we will remain laser-focused on managing what we can control, the delivery of our differentiated capabilities, acceleration of new client acquisition, and exceptional service to all our clients.

Chris Gorman: Our preliminary estimate shows 100+ basis point benefit to our marked CET1 ratio under the revised standardized approach if implemented as currently proposed. This would imply a fully phased-in ratio of around 11%, higher than our peers and higher than we believe we need to operate our business in the ordinary course. Our capital position gives us flexibility to continue to lean in aggressively this year and in the coming years to support our clients, to support our own organic growth, and to repurchase our shares. Subject to market conditions, we expect to buy back at least $1.3 billion of our shares in 2026, up from the $1.2 billion we previously communicated. While the macroeconomic environment has continued to be dynamic, we will remain laser-focused on managing what we can control, the delivery of our differentiated capabilities, acceleration of new client acquisition, and exceptional service to all our clients.

This would imply a fully phased in ratio of around 11% higher than our peers and higher than we believe we need to operate our business in the ordinary course.

Speaker #3: So I'd say first quarter to second quarter average balances will be stable to maybe slightly up, but I'd expect ending balances, June 30, to be higher.

Speaker #3: During the quarter, we took advantage of the pullback in regional bank stock prices and repurchased nearly $400 million of common stock, well in excess of the $300 million-plus commitment we made in January.

Our capital position gives us flexibility to continue to lean in aggressively this year and in the coming years to support our clients to support our own organic growth and to repurchase our shares subject to market conditions, we expect to buyback at least one three.

Speaker #3: And those to continue to rise, through the course of the year. So, you know, we feel very good about the liquidity we have. If loan growth, continues or picks up, you know, we have low loan-to-deposit ratio on a relative basis.

Speaker #3: We are also encouraged by the latest Basel III in-game proposal. Our preliminary estimate shows a 100-plus basis point benefit to our marked CET1 ratio under the revised standardized approach if implemented as currently proposed.

Speaker #3: We've brought our market funds down, so we have a lot of third-party capacity if we need it. And then we have great access to client access deposits and new operating deposits.

$2 billion of our shares in 2026 up from the $1 $2 billion. We previously communicated while the macroeconomic environment has continued to be dynamic we will remain laser focused on managing what we can control the delivery of our differentiated.

Speaker #3: This would imply a fully phased-in ratio of around 11%, higher than our peers, and higher than we believe we need to operate our business in the ordinary course.

Speaker #3: So if we need to fund more loan growth, that's a high-class problem that we feel very confident about.

Speaker #1: Yeah. And as a follow-up, on the cost side, y-you put in the slides about the, you know, the cumulative downbeat has been great at 56.

<unk> acceleration of new client acquisition and exceptional service to all our clients.

Speaker #3: Our capital position gives us flexibility to continue to lean in aggressively this year, and in the coming years, to support our clients, to support our own organic growth, and to repurchase our shares.

Speaker #1: with, with rate cuts appo you know, presumably on hold for a while, can you just talk about deposit competition, how much room do you have if, if any, to continue to

We continue to grow clients commercial clients were up 3% and relationship households were up 2% from the prior year in the first quarter.

Christopher Gorman: We continue to grow clients. Commercial clients were up 3%, and relationship households were up 2% from the prior year in Q1. We continue to gain share across our priority fee-based businesses, wealth, investment banking, and commercial payments. In Q1, these businesses collectively grew by 12% when compared to the prior year. This past quarter, we raised nearly $47 billion of capital on behalf of our clients, retaining 19% on our balance sheet. Investment banking pipelines continue to remain elevated, up 5% from year-end, with M&A pipelines at record levels. While we do currently expect investment banking fees to decline in Q2 compared to the record Q1, given current market conditions, we continue to feel very comfortable that we can grow investment banking fees in the mid-single digits for the full year.

Chris Gorman: We continue to grow clients. Commercial clients were up 3%, and relationship households were up 2% from the prior year in Q1. We continue to gain share across our priority fee-based businesses, wealth, investment banking, and commercial payments. In Q1, these businesses collectively grew by 12% when compared to the prior year. This past quarter, we raised nearly $47 billion of capital on behalf of our clients, retaining 19% on our balance sheet. Investment banking pipelines continue to remain elevated, up 5% from year-end, with M&A pipelines at record levels. While we do currently expect investment banking fees to decline in Q2 compared to the record Q1, given current market conditions, we continue to feel very comfortable that we can grow investment banking fees in the mid-single digits for the full year.

Speaker #3: Subject to market conditions, we expect to buy back at least 1.3 billion dollars of our shares in 2026, up from the 1.2 billion dollars we previously communicated.

We continue to gain share across our priority fee based businesses wealth investment banking and commercial payments in the first quarter. These businesses collectively grew by 12% when compared to the prior year.

Speaker #3: While the macroeconomic, environment has continued to be dynamic, we will remain laser-focused on managing what we can control. The delivery of our differentiated capabilities, acceleration of new client acquisition, and exceptional service to all our clients.

This past quarter, we raised nearly $47 billion of capital on behalf of our clients retaining 19% on our balance sheet invest.

Investment banking pipelines continue to remain elevated up 5% from year end with M&A pipelines at record levels.

Speaker #3: We continue to grow clients. Commercial clients were up 3% and relationship households were up 2% from the prior year in the first quarter. We continue to gain share across our priority fee-based businesses.

While we do currently expect investment banking fees to decline in the second quarter compared to the record first quarter given current market conditions. We continue to feel very comfortable that we can grow investment banking fees in the mid single digits for the full year.

Speaker #3: Wealth, investment banking, and commercial payments. In the first quarter, these businesses collectively grew by 12% when compared to the prior year. This past quarter, we raised nearly 47 billion dollars of capital on behalf of our clients.

Commercial loan pipelines also remain very healthy up nearly 20% from year end, despite the strong pull through in the first quarter.

Speaker #3: that. So I think we, we continue to disposal. you know, I think if there were cuts, our deposit base will probably drop a little bit, in year just given the, the timing component of that.

Christopher Gorman: Commercial loan pipelines also remain very healthy, up nearly 20% from year-end despite the strong pull-through in Q1. Our mass affluent wealth strategy continues to bring in new households, net flows, and client assets to Key, reaching 57,000 households and $7.4 billion of total client assets as of 31 March. With a mass affluent household opportunity of 1.15 million customers, we remain less than 10% penetrated, implying a significant runway going forward. We continue to hire frontline bankers. This past quarter, we hired a middle market banking team based in Atlanta and a family office and private capital team based in Kansas City. We also hired talented investment bankers and wealth managers as our differentiated platforms continue to attract top bankers.

Chris Gorman: Commercial loan pipelines also remain very healthy, up nearly 20% from year-end despite the strong pull-through in Q1. Our mass affluent wealth strategy continues to bring in new households, net flows, and client assets to Key, reaching 57,000 households and $7.4 billion of total client assets as of 31 March. With a mass affluent household opportunity of 1.15 million customers, we remain less than 10% penetrated, implying a significant runway going forward. We continue to hire frontline bankers. This past quarter, we hired a middle market banking team based in Atlanta and a family office and private capital team based in Kansas City. We also hired talented investment bankers and wealth managers as our differentiated platforms continue to attract top bankers.

Our mass affluent wealth strategy continues to bring in new households, net flows and client assets to key reaching 57000 households, and seven $4 billion of.

Speaker #3: Retaining 19% on our balance sheet. Investment banking pipelines continue to remain elevated, up 5% from year-end, with M&A pipelines at record levels. While we do currently expect investment banking fees to decline in the second quarter compared to the record first quarter, given current market conditions, we continue to feel very comfortable that we can grow investment banking fees in the mid-single digits for the full year.

Speaker #3: again, our base case is stable. And I think we can hold serve in the mid-50s, as we move forward. But, that's all premised on, you know, the loan growth we're, we're guiding to.

Total client assets as of March 31.

With our mass affluent household opportunity of 115 million customers, we remain less than 10% penetrated implying a significant runway going forward.

Speaker #3: So if that came in stronger, we might see a little bit of a dip there. But I think we'd make that trade-off as long as it's good quality relationship growth.

Speaker #1: Okay. Thanks, Clark.

We continue to hire frontline bankers this past quarter, we hired a middle market banking team based in Atlanta.

Speaker #2: Thank you.

Speaker #3: Commercial loan pipelines also remain very healthy, up nearly 20% from year-end, despite the strong pull-through in the first quarter. Our mass affluent wealth strategy continues to bring in new households, net flows, and client assets to KEY.

Speaker #3: Sure.

Speaker #2: Thank you, Ken. Our next question will go to the line of John Pinkari with Evercore ISI. John, your line is open.

And a family office and private capital team based in Kansas City.

We also hired talented investment bankers and wealth managers as our differentiated platforms continue to attract top bankers, we will continue to grow our banker ranks, including evaluating team hires and niche tuck in non bank transaction opportunities as they arise in order.

Speaker #4: Good morning. Good morning, John. I, I guess just s-similarly on the competitive front on the on the lending side and, one or two of your peers have cited a, a bit more aggressiveness out there on the lending front, particularly, on structure.

Speaker #3: Reaching 57,000 households and 7.4 billion dollars of total client assets as of March 31st. With a mass affluent household opportunity of 1.15 million customers, we remain less than 10% penetrated implying a significant runway going forward.

Christopher Gorman: We will continue to grow our banker ranks, including evaluating team hires and niche tuck-in non-bank transaction opportunities as they arise in order to leverage our unique but currently under-leveraged platforms. Lastly, we are investing approximately $1 billion in technology this year that will give us new product and service capabilities and deliver better outcomes and experiences for those we serve. As it pertains to AI, we are focused on a few thematic use cases that will enhance client experiences, accelerate credit decisioning, increase technology productivity, and strengthen risk and security monitoring. Given the strong start to the year and the favorable dynamics we are seeing across loans and deposits, we have increased our full year net interest income and loan guidance while reiterating each of our other financial commitments. While we enjoy strong momentum, we will remain vigilant as it pertains to a wide variety of potential macroeconomic outcomes.

Chris Gorman: We will continue to grow our banker ranks, including evaluating team hires and niche tuck-in non-bank transaction opportunities as they arise in order to leverage our unique but currently under-leveraged platforms. Lastly, we are investing approximately $1 billion in technology this year that will give us new product and service capabilities and deliver better outcomes and experiences for those we serve. As it pertains to AI, we are focused on a few thematic use cases that will enhance client experiences, accelerate credit decisioning, increase technology productivity, and strengthen risk and security monitoring. Given the strong start to the year and the favorable dynamics we are seeing across loans and deposits, we have increased our full year net interest income and loan guidance while reiterating each of our other financial commitments. While we enjoy strong momentum, we will remain vigilant as it pertains to a wide variety of potential macroeconomic outcomes.

To leverage our unique but currently under leveraged platforms.

Speaker #4: For the most part, also to a degree on pricing. Are you seeing this showing up in, you know, in your markets? And, you know, maybe if you can talk about how it's influenced loan spreads that you're seeing as you're pricing new originations?

Lastly, we are investing approximately $1 billion in technology. This year that will give us new product and service capabilities and deliver better outcomes and experiences for those we serve.

Speaker #3: We continue to hire frontline bankers. This past quarter, we hired a middle-market banking team based in Atlanta and a family office and private capital team based in Kansas City.

Speaker #4: Thanks.

Speaker #3: Yeah, John, so the phenomenon you're talking about has definitely been a prevailing phenomenon for some time. What I was describing in my answer to Erica is sort of real-time—some adjustment that we're seeing.

As it pertains to AI, we are focused on a few somatic use cases that will enhance client experiences accelerate credit decisioning increased technology productivity and strengthen risk and security monitoring.

Speaker #3: We also hired talented investment bankers and wealth managers as our differentiated platforms continue to attract top bankers. We will continue to grow our banker ranks, including evaluating team hires and niche tuck-in non-bank transaction opportunities as they arise.

Speaker #3: But there's no question there's been excess capacity for some time. And I've talked about this at length, that a properly graded commercial loan can't return its cost of capital.

Given the strong start to the year and the favorable dynamics, we are seeing across loans and deposits.

Speaker #3: And there's been just a constant, you know, pressure on spreads. And on structure. I think we may be, and I emphasize the word may, be at an inflection point on that trend.

Speaker #3: In order to leverage our unique but currently under-leveraged platforms. Lastly, we are investing approximately $1.1 billion in technology this year that will give us new product and service capabilities and deliver better outcomes and experiences for those we serve.

<unk> increased our full year net interest income and loan guidance, while reiterating each of our other financial commitments.

While we enjoy strong momentum we will remain vigilant as it pertains to a wide variety of potential macroeconomic outcomes are updated NII guidance assumes a wide range of interest rate scenarios.

Speaker #4: And just from a risk management perspective, again, we have not adjusted any of our credit boxes or underwriting standards. We are still maintaining, again, the same standard that we've always had, so.

Speaker #3: As it pertains to AI, we are focused on a few thematic use cases that will enhance client experiences, accelerate credit decisioning, increase technology productivity, and strengthen risk and security monitoring.

Speaker #3: Yeah. No, I think that's a good point. I mean, we never give on structure. obviously, it's a market out there, and we price where we need to price the advantage we have, John, is we can do a lot of other things for these clients whether it's payments, whether it's strategic advice, hedging, etc.

Christopher Gorman: Our updated NII guidance assumes a wide range of interest rate scenarios. Additionally, we have added to our already elevated qualitative loan loss reserves this past quarter in order to account for a wider range of potential macroeconomic outcomes. As it pertains to private credit, we have provided additional disclosures this quarter. The summary here is we continue to be very comfortable with these books of business. Finally, Q1 was a strong quarter, and our business enjoys a significant amount of momentum. Before turning it over to Clark, I am pleased to announce that Clark has assumed an expanded role to lead our technology and operations organization in addition to his role as CFO. We look forward to the contributions he will bring to our technology and operations teams at a pivotal and exciting time as we leverage AI to grow our business and better serve our clients.

Chris Gorman: Our updated NII guidance assumes a wide range of interest rate scenarios. Additionally, we have added to our already elevated qualitative loan loss reserves this past quarter in order to account for a wider range of potential macroeconomic outcomes. As it pertains to private credit, we have provided additional disclosures this quarter. The summary here is we continue to be very comfortable with these books of business. Finally, Q1 was a strong quarter, and our business enjoys a significant amount of momentum. Before turning it over to Clark, I am pleased to announce that Clark has assumed an expanded role to lead our technology and operations organization in addition to his role as CFO. We look forward to the contributions he will bring to our technology and operations teams at a pivotal and exciting time as we leverage AI to grow our business and better serve our clients.

Additionally, we have added to our already elevated qualitative loan loss reserves. This past quarter in order to account for a wider range of potential macroeconomic outcomes.

Speaker #3: Given the strong start to the year and the favorable dynamics we are seeing across loans and deposits, we have increased our full-year net interest income and loan guidance, while reiterating each of our other financial commitments.

Speaker #3: That's how we run our business.

As it pertains to private credit we have provided additional disclosures. This quarter. The summary here is we continue to be very comfortable with these books of business.

Speaker #4: And frankly, if the capital markets. Have a better deal, we'll place it.

Speaker #3: Yeah. As, as we did 80% of the time this last quarter.

Finally, the first quarter was a strong quarter and our business enjoys a significant amount of momentum.

Speaker #4: Got it. Okay. Very helpful. Thank you. And Ben, you gave some, pretty good color here on the capital front in terms of, buyback expectations.

Speaker #3: While we enjoy strong momentum, we will remain vigilant as it pertains to a wide variety of potential macroeconomic outcomes. Our updated NII guidance assumes a wide range of interest rate scenarios.

Before turning it over to Clarke I am pleased to announce the Clark has assumed an expanded role to lead our technology and operations organization. In addition to his role as CFO. We look forward to the contributions he will bring to our technology and operations teams at a pivotal and exciting.

Speaker #4: I, I guess just if you could just remind us of your allocation priorities. there and, and if anything, could, impact that, that pace of buyback and, and, and how do you think about any, potential inorganic opportunities?

Speaker #3: Additionally, we have added to our already elevated qualitative loan loss reserves this past quarter in order to account for a wider range of potential macroeconomic outcomes.

Speaker #4: Thanks.

Speaker #3: So, I mean, obviously, what could impact it more than anything is if we had a s-severe macroeconomic downturn and, started having credit losses, we do not see that.

Time, as we leverage AI to grow our business and better serve our clients with that I'd like to turn it over to acquire Clark.

Speaker #3: As it pertains to private credit, we have provided additional disclosures this quarter. The summary here is we continue to be very comfortable with these books of business.

Speaker #3: We feel really good about our credit book. Our capital priorities remain unchanged. It's first to support the growth of our clients, which we were pleased to see that we got in this last quarter.

Thanks, Chris starting on slide four we reported first quarter earnings per share of <unk> 44 <unk>.

Christopher Gorman: With that, I'd like to turn it over to Clark. Clark?

Chris Gorman: With that, I'd like to turn it over to Clark. Clark?

Clark Khayat: Thanks, Chris. Starting on slide four, we reported Q1 earnings per share of $0.44. Revenue is up 10% year over year, while expenses increased by 4%. Taxable equivalent net interest income increased 11% year over year and was up 1% sequentially, despite impact from 2 fewer days in the quarter and seasonally lower deposits. Non-interest income increased 8% year over year as our priority fee-based businesses collectively grew by 12%. Loan loss provision of $106 million included 38 basis points of net charge-offs and a reserve build of $5 million. The net build reflected additional qualitative reserves to account for the macro uncertainty, offsetting improvement in Moody's economic scenarios through credit migration trends. Tangible book value per share increased 10% year over year. Moving to the balance sheet on slide five. Average loans were up $1.4 billion sequentially and increased $2.6 billion on a period-end basis.

Speaker #3: Finally, the first quarter was a strong quarter and our business enjoys a significant amount of momentum. Before turning it over to Clark, I am pleased to announce that Clark has assumed an expanded role to lead our technology and operations organization.

Revenue was up 10% year over year, while expenses increased by 4%.

Speaker #3: The next thing is to invest in our business. And we always talk about, when we talk about investing in our business, it's really people and it's technology.

<unk> equivalent net interest income increased 11% year over year and was up 1% sequentially. Despite impact from two fewer days in the quarter and seasonally lower deposits noninterest income increased 8% year over year as our priority fee based businesses collectively grew by 12% loan loss provision of $106 million included 38.

Speaker #3: And so we'll continue to invest heavily in our business. We also, as I mentioned in my remarks, will continue to hire a lot of individual bankers.

Speaker #3: In addition to CFO, we look forward to the contributions he will bring to our technology and operations teams at a pivotal and exciting time, as we leverage AI to grow our business and better serve our clients.

Speaker #3: We'll hire groups of bankers, and opportunistically, we would look at small acquisitions of kind of boutique-type operations, which are really just an extension of hiring—a hiring group of people.

<unk> points of net charge offs and the reserve build of $5 million. The net build reflected additional qualitative reserves to account for the macro uncertainty offsetting improvement in Moody's economic scenarios to credit migration trends.

Speaker #3: With that, I'd like to turn it over to Clark. Clark?

Speaker #4: Thanks, Chris. Starting on slide four, we reported first quarter earnings per share of $0.44. Revenue was up 10% year over year, while expenses increased by 4%.

Speaker #3: The next priority, of course, is to pay our dividend, which we don't talk about a lot, but it's 20 and a half cents a share, which is not inconsequential as you look at the yield.

Book value per share increased 10% year over year.

Moving to the balance sheet on slide five average loans were up $1 4 billion sequentially and increased $2 6 billion on a period end basis average C&I loans and average CRE loans, both grew by 3%, partly offset by the ongoing intentional run off of low yielding consumer loans.

Speaker #3: And then lastly, you know, purchase, repurchase our shares. And, you know, we, we said earlier in our comments, we John, we plan to repurchase 1.3 billion dollars' worth of, stock in the year.

Speaker #4: Taxable equivalent net interest income increased 11% year over year and was up 1% sequentially, despite impact from two fewer days in the quarter and seasonally lower deposits.

Speaker #4: Non-interest income increased 8% year over year, as our priority fee-based businesses collectively grew by 12%. Loan loss provision of $106 million included 38 basis points of net charge-offs, and a reserve build of $5 million.

Clark Khayat: Average C&I loans and average CRE loans both grew by 3%, partly offset by the ongoing intentional runoff of low yielding consumer loans. On a period-end basis, C&I loans grew by $3 billion or 5%. Growth was broad-based across industries and regions with both institutional and middle market clients. The largest industry contributors were within our financial services and utilities, power, and renewables industry verticals. C&I line utilization increased 1% sequentially to 31.5% as loan growth outpaced commitments. Turning to slide six. With the attention that MDFI and private credit have been getting lately, we've provided some additional disclosures with respect to our portfolio and want to share how we manage the businesses. First, a reminder that the MDFI nomenclature is a regulatory definition.

On a period end basis, C&I loans grew by $3 billion or 5%.

Speaker #4: Great. Thank you, Chris. Appreciate it.

Speaker #3: Sure.

Growth was broad based across industries and regions with both institutional and middle market clients.

Speaker #2: Thank you, John. The next question will go to the line of Ryan Nash with Goldman Sachs. Ryan, your line is open.

Speaker #4: The net build reflected additional qualitative reserves to account for the macro uncertainty, offsetting improvement in Moody's economic scenarios and credit migration trends. Changeable book value per share increased 10% year over year.

Largest industry contributors were within our financial services and utilities power and renewables industry verticals.

Speaker #5: Hey, good morning, everyone. Good morning. So, Chris, i-if I look at the high end of the loan growth guidance, you know, it doesn't imply that much growth from, you know, the 1Q end of period levels.

Ni line utilization increased 1% sequentially to 31, 5% as loan growth outpaced commitments.

Speaker #4: Moving to the balance sheet on slide five, average loans were up 1.4 billion dollars sequentially and increased 2.6 billion dollars in a period N basis.

Turning to slide six with the attention that MDI in private credit have been getting lately. We've provided some additional disclosures with respect to our portfolio and want to share how we manage the businesses.

Speaker #5: Now, I know you mentioned some moving pieces. And one of your other answers, some indications that could be coming in 2Q. But I'm curious on the drivers of loan growth from here, what, you know, what will drive the slowdown?

Speaker #4: Average CNI loans and average CRE loans both grew by 3%. Partly offset by the ongoing intentional runoff of low-yielding consumer loans. On a period N basis, CNI loans grew by $3 billion or 5%.

Speaker #5: And, and can there be some upside from current expectations? Thank you.

First a reminder, that the NDA by nomenclature is a regulatory definition as you know these definitions of change and continue to be refined and we will continue to apply our best efforts to categorize these loans within the spirit of these definitions.

Speaker #4: Growth was broad-based across industries and regions with both institutional and middle-market clients. The largest industry contributors were within our financial services, and utilities, power, and renewables industry verticals.

Speaker #3: Well, thanks for the question. I'll start with, I guess, what's the, the premise of your question is, is the is the loan guide conservative in that if we didn't book a whole bunch of more loans, we'll basically grow at 6% for the year.

Clark Khayat: As you know, these definitions have changed and continue to be refined, and we will continue to apply our best efforts to categorize these loans within the spirit of these definitions. In the quarter, we grew MDFI loans by $2.4 billion. A third of that growth is a result of the reclassification of existing loans. That's not actual loan growth, but rather an expansion of what had previously been included in the category based on further examination of the regulatory guidance. The loans here are real estate non-owner occupied. The additional growth of approximately $1.6 billion comes from three areas. About half of these are loans connected to real estate debt funds run by sophisticated sponsors with whom we have deep relationships and where the underlying properties are geographically diversified. We expect to syndicate about 25% of these loans in Q2.

In the quarter, we grew NDA by loans by $2 4 billion.

A third of that growth as a result of the reclassification of existing loans, so thats not actual loan growth, but rather an expansion of what had previously been included in the category based on further examination of the regulatory guidance.

Speaker #4: CNI line utilization increased 1% sequentially to 31.5% as loan growth outpaced commitments. Turning to slide six, with the attention that NDFI and private credit have been getting lately, we've provided some additional disclosures with respect to our portfolio, and want to share how we manage the businesses.

Speaker #3: And I'd say there probably is some appropriate conservatism in the number, given the macro uncertainty out there. But let me kind of give you the pieces and parts.

Speaker #3: utilization actually for the first time in a long time spiked up. I wouldn't necessarily imagine that that will continue to spike up. we waited a long time for it to start moving.

<unk> share of real estate non owner occupied.

The additional growth of approximately $1 6 billion comes from three areas about half of these are loans connected to real estate debt funds run by sophisticated sponsors with whom we have deep relationships.

Speaker #4: First, a reminder that the NDFI nomenclature is a regulatory definition. As you know, these definitions have changed and continue to be refined, and we will continue to apply our best efforts to categorize these loans within the spirit of these definitions.

Speaker #3: We do have broad-based growth across all geographies and industries, which should play forward. I mentioned in my remarks that we have a 20% increase in our backlog from year-end.

And where the underlying properties geographically diversified we expect to syndicate about 25% of these loans in the second quarter.

Speaker #4: In the quarter, we grew NDFI loans by 2.4 billion dollars. A third of that growth is a result of the reclassification of existing loans.

Speaker #3: obviously, we would expect some of that, to, in fact, pull through. Utilities and power, continue to be, an area of huge opportunity when you think about both renewables and the massive buildout that's required for GenAI.

Second $400 million of this growth is fairly evenly split between insurance and other high quality finance companies.

Speaker #4: So that's not actual loan growth, but rather an expansion of what had previously been included in the category based on further examination of the regulatory guidance.

Clark Khayat: Second, $400 million of this growth is fairly evenly split between insurance and other high-quality finance companies. Third, our specialty finance business loans grew about $400 million, primarily from AAA-rated CLOs. While we will, of course, continue to disclose MDFI under the regulatory rules, this is not the way we think about these loans. They're a reflection of four distinct businesses that are collectively 90% investment grade. Institutional real estate lending, specialty finance lending, insurance and finance companies, and our unitranche funds. Each business is relationship-based and has its own set of credit concentration limits and risk parameters with de minimis NPLs and much lower criticized loan rates than our other commercial loans.

Third our specialty finance business loans grew about $400 million.

Primarily from AAA rated CLO.

Speaker #3: And then there's two other areas where we're starting to see some traction. One is healthcare. we're starting to see consolidation, which is necessary, by the way, in the healthcare industry.

Speaker #4: The loans here are real estate, non-owner-occupied. The additional growth of approximately 1.6 billion dollars comes from three areas: about half of these are loans connected to real estate debt funds run by sophisticated sponsors with whom we have deep relationships, and where the underlying properties are geographically diversified.

While we will of course continue to disclose and EFI under the regulatory rules. This is not the way we think about these loans.

Collection of four distinct businesses that are collectively 90% investment grade institutional real estate lending specialty finance lending insurance and finance companies and our unit tranche funds.

Speaker #3: And then lastly, for the first time in a long time, we're starting to see this backlog of commercial real estate transactional activity. We've been refinancing a lot of commercial real estate, but what we're starting to see is people are starting to trade as the bid and the ask comes in and everybody sort of gets comfortable that we're gonna be in this kind of an interest rate range for a while.

Speaker #4: We expect to syndicate about 25% of these loans in the second quarter. Second, $400 million of this growth is fairly evenly split between insurance and other high-quality finance companies.

Each business is relationship based and has its own set of credit concentration limits and risk parameters with de Minimis mpls and much lower criticized loan rates than our other commercial loans.

As it pertains to private credit there's a waterfall shows we estimate approximately $10 $9 billion of Outstandings as of March 31, with roughly 70% through our specialty finance lending business, which are asset backed loans largely through bankruptcy remote sbe vehicles.

Speaker #4: And third, our specialty finance business loans grew about $400 million primarily from AAA-rated CLOs. While we will, of course, continue to disclose NDFI under the regulatory rules, this is not the way we think about these loans.

Speaker #3: So that's kind of the— that's the puts. Oh, and then also, I just would remind you, we're going to continue to run off $500 million to $600 million of commercial, resi— of residential mortgages per quarter.

Clark Khayat: As it pertains to private credit, as the waterfall shows, we estimate approximately $10.9 billion of outstandings as of 31 March, with roughly 70% through our specialty finance lending business, which are asset-backed loans made largely through bankruptcy remote SPE vehicles. SFL loans are 98% investment grade, diversified by industry and geography with thousands of underlying obligors. We typically underwrite to the counterparty and their underwriting policies and have a long list of collateral eligibility criteria that they must adhere to. First loss cushions typically range from 30% to 50%, and we're very disciplined when it comes to ongoing collateral and liquidity monitoring with structural protections if performance deteriorates. Through Q1, all of our facilities are performing as structured and required. In short, we think these are great businesses.

Speaker #4: There are a reflection of four distinct businesses that are collectively 90% investment graded. Institutional real estate lending, specialty finance lending, insurance and finance companies, and our unit tranche funds.

<unk> loans are 98% investment grade diversified by industry and geography with thousands of underlying <unk>, we typically underwrite to the counterparty and their underwriting policies and have a long list of collateral eligibility criteria that they must adhere to.

Speaker #3: So that's kind of the puts and takes, Ryan.

Speaker #5: Gotcha. No, this is super helpful, Chris. And maybe as a follow-up to something that was talked about before, you know, within the investment banking business, if I look at the mid-single-digit guide, it implies low single-digit growth for the remainder of the year.

Speaker #4: Each business's relationship based and has its own set of credit concentration limits and risk parameters, with de minimis NPLs and much lower criticized loan rates than our other commercial loans.

First loss cushions typically range from 30% to 50% and we're very disciplined when it comes to ongoing collateral and liquidity monitoring with structural protections of performance deteriorates through the first quarter all of our facilities are performing as structured and required.

Speaker #5: And, you know, I feel like coming into the year, you were upbeat on the potential return of M&A to drive upside. It's, you know, historically, it's been a bigger part of your business.

Speaker #4: As it pertains to private credit, as the waterfall shows, we estimate approximately $10.9 billion of outstandings as of March 31, with roughly 70% through our specialty finance lending business, which are SFX loans made.

Speaker #5: So, you know, and it sounded like from your, your, comments earlier that M&A hasn't been as robust as you would have expected. But are there other parts of the business that are trailing?

In short we think these are great businesses their relationship base with excellent credit profiles and required the focus and expertise that make them excellent examples of our targeted scale strategy.

Speaker #4: Largely through bankruptcy remote SPE vehicles. SFO loans are 98% investment grade, diversified by industry and geography, with thousands of underlying obligors. We typically underwrite to the counterparty and their underwriting policies, and have a long list of collateral eligibility criteria that they must adhere to.

Speaker #5: And, you know, what would we need to see for, you know, some of those some parts of the business to begin to outperform expectations?

Clark Khayat: They are relationship-based with excellent credit profiles and require the focus and expertise that make them excellent examples of our targeted scale strategy. Turning to slide 7. Average deposits decreased by 2% sequentially, reflecting typical seasonal patterns and the intentional runoff of $1.6 billion in higher cost brokerage CDs. We expect the deposits to drop in early May and grow from there through year-end. Reported average non-interest-bearing deposits decreased 5.5% sequentially, but remained stable at 24% of total deposits when adjusted for our hybrid accounts. Total deposit costs declined by 16 basis points to 1.65%. Our cumulative interest-bearing deposit beta increased to 56%.

Speaker #5: Thank you.

Turning to slide seven average deposits decreased by 2% sequentially.

Speaker #3: Sure. So, with respect to M&A, what's interesting about M&A, Ryan, is there's been a lot of headline numbers. And as you well know, the GSIBs have reported some incredible numbers with respect to advisory.

A typical seasonal patterns and the intentional run off of $1 $6 billion in higher cost brokered Cds.

We expect the deposits to trough in early May and grow from there through year end reported average noninterest bearing deposits decreased five 5% sequentially, but remained stable at 24% of total deposits when adjusted for our hybrid accounts.

Speaker #4: First loss cushions typically range from 30 to 50 percent, and we're very disciplined when it comes to ongoing collateral and liquidity monitoring with structural protections if performance deteriorates.

Speaker #3: I think deal volumes in total are up like 46%. Transaction volumes, however, are down 26%. And so, when we put all that together, we're still waiting for this huge surge of middle market M&A activity to come through.

Speaker #4: Through the first quarter, all of our facilities are performing as structured and required. In short, we think these are great businesses. Their relationship-based with excellent credit profiles, and require the focus and expertise that make them excellent examples of our targeted scale strategy.

Total deposit cost declined by 16 basis points to 165% for.

Accumulative interest bearing deposit beta increased to 56%.

Speaker #3: And so that is something that, you know, we're keeping a close eye on. That's all—those transactions are binary. What we're guiding to right now is 5% to 6% growth year over year.

We continue to take proactive actions in repricing deposits through limiting our incremental funding needs by remixing loans from consumer to commercial gathering low cost commercial deposits, particularly in payments, while allowing certain rate sensitive excess commercial deposits sleeve.

Speaker #4: Turning to slide seven, average deposits decreased by 2% sequentially, reflecting typical seasonal patterns and the intentional runoff of 1.6 billion dollars in higher cost brokerage CDs.

Clark Khayat: We continue to take proactive actions in repricing deposits through limiting our incremental funding needs by remixing loans from consumer to commercial, gathering low-cost commercial deposits, particularly in payments, while allowing certain rate-sensitive excess commercial deposits to leave, and by actively rotating maturing CDs into money market deposits in consumer. Overall, interest-bearing funding costs decreased by 21 basis points, bringing our cumulative funding beta to 68%. Slide 8 provides drivers of NII and NIM this quarter. Taxable equivalent NII was up 1%, and net interest margin increased five basis points from the prior quarter to 2.87%. The increase was driven by remixing lower yielding consumer loans into higher yielding commercial loans, swap repricing, and proactive deposit beta management, which more than offset the impact of seasonally lower deposits and two fewer days in the quarter.

Speaker #3: So we did about $780 million last year. So, in the middle of the range, that’d be something like $825 million, off of a record year last year.

Speaker #4: We expect the deposits to trough in early May and grow from there a three-year end. Reported average non-interest-bearing deposits decreased 5.5% sequentially, but remained stable at 24% of total deposits when adjusted for our hybrid accounts.

By actively rotating maturing Cds and money market deposits in consumer.

Overall interest bearing funding costs decreased by 21 basis points, bringing our cumulative funding data to 68%.

Speaker #3: So, I feel really good about the business. But, admittedly, some of the, while we have record backlogs, we're not seeing as much come out of the, of the pipeline right now as we would hope.

Slide eight provides drivers of NII and NIM this quarter taxable equivalent NII was up 1% and net interest margin increased five basis points from the prior quarter to 287%.

Speaker #4: Total deposit costs declined by 16 basis points to 1.65%. Our cumulative interest-bearing deposit beta increased to 56%. We continue to take proactive actions in repricing deposits through limiting our incremental funding needs by remixing loans from consumer to commercial, gathering low-cost commercial deposits, particularly in payments, while allowing certain rate-sensitive excess commercial deposits to leave, and by actively rotating maturing CDs into money-market deposits in consumer.

Speaker #3: I think when some of the geopolitical things are resolved, I think it’ll be a little better environment for that. Thanks for your question, Ryan.

The increase was driven by remixing, lower yielding consumer loans into higher yielding commercial loans swap repricing and proactive deposit beta management, which more than offset the impact of seasonally lower deposits and two fewer days in the quarter.

Speaker #5: Cool. Thank you.

Speaker #2: Thank you, Ryan. Our next question will go to the line of Scott Siefers with Piper Sandler. Scott, your line is open.

Our balance sheet position continues to be fairly neutral to changes in interest rates as we move through 2026, we would see some modest benefit from reductions in the short end of the curve as well as from increases in three and five year reinvestment.

Speaker #4: Good morning, guys. Thanks for taking the question. wanted to return for a moment to the capital discussion. you know, it seems like there really should be good capital management runway for a, a while.

Clark Khayat: Our balance sheet position continues to be fairly neutral to changes in interest rates as we move through 2026. We would see some modest benefit from reductions in the short end of the curve, as well as from increases in 3- and 5-year reinvestment rates. On slide nine, non-interest income increased 8% year over year. Investment banking and debt placement fees were $197 million, an increase of 13% year over year and a new Q1 record. Growth was driven by M&A, equity issuance activity, and commercial mortgage debt placement activity. Our pipelines remain elevated, and we're up about 5% from year-end. M&A pipelines were at record levels. Still, as Chris mentioned, given uncertain market conditions, we're planning for Q2 investment banking fees to be in the $175 to $180 million range with upside if geopolitical and other macro risks subside.

Speaker #4: Overall, interest-bearing funding costs decreased by 21 basis points, bringing our cumulative funding beta to 68%. Slide eight provides drivers of NII and NIM this quarter.

Speaker #4: especially if you elect to put to work some of the additional excess you'd, you'd have should the Fed's NPRs pass this proposed. I guess I'm curious to hear, how you would decide when and how aggressively to deploy that additional excess if those proposals in particular do advance and, you know, what other considerations are there, whether it's ratings agencies, investor expectations, etc., just as you think about the appropriate capital levels to sort of land on?

On slide nine noninterest income increased 8% year over year.

Speaker #4: Taxable equivalent NII was up 1%, and net interest margin increased 5 basis points from the prior quarter to 2.87%. The increase was driven by remixing lower-yielding consumer loans into higher-yielding commercial loans, swap repricing, and proactive deposit beta management, which more than offset the impact of seasonally lower deposits and two fewer days in the quarter.

<unk> banking and debt placement fees were $197 million, an increase of 13% year over year and a new first quarter record growth was driven by M&A equity issuance activity in commercial mortgage debt placement activity.

Our pipelines remain elevated and we're up about 5% from yearend M&A pipelines were at record levels still as Chris mentioned, given uncertain market conditions, we're planning for second quarter investment banking fees to be in the $175 million to $180 million range with upside if geopolitical and other macro risks subside, we continue to feel very comfortable.

Speaker #4: Our balance sheet position continues to be fairly neutral to changes in interest rates as we move through 2026. We would see some modest benefit from reductions in the short end of the curve, as well as from increases in three and five-year reinvestment rates.

Speaker #5: Hey, Scott. It's Clark. Thanks for the question. So, one, you know, we guided on the fourth quarter call that we'd try to get to 10% marked by the end of the year.

All of that investment banking fees will grow mid single digits in 2026.

Speaker #5: We actually arrived there a few quarters early in this quarter. So we feel very comfortable there. And would feel comfortable over the course of the year dipping into that nine-and-a-half to 10.

Speaker #4: On slide nine, non-interest income increased 8% year over year. Investment banking and debt placement fees were 197 million dollars, an increase of 13% year over year, and a new first-quarter record.

Clark Khayat: We continue to feel very comfortable that investment banking fees will grow mid-single digits in 2026. Trust and investment services income also grew 13% year over year, reflecting positive net flows and higher market values. Assets under management remain stable at $70 billion. Service charges on deposit accounts and corporate service fees increased by 12%, and 9% year over year respectively. The increase in service charge was driven by growth in commercial payments, which grew fee equivalent revenue at 11%, while corporate services income was driven by higher loan commitment fees and client FX activity. Commercial mortgage servicing fees were $62 million, down $14 million year over year, largely driven by lower deposit placement fees as well as resolutions in special servicing. At quarter end, we were named primary for special servicer on approximately $720 billion of CRE loans, of which about $265 billion is special servicing.

Trust and investment services income also grew 13% year over year, reflecting positive net flows and higher market values assets under management remained stable at <unk> 70 billion.

Speaker #5: And that's under the current regime. So, again, no, no issues there. to the extent the NPR passes as, proposed, we expect, as we said, 100-plus basis points of additional marked capital there.

Speaker #4: Growth was driven by M&A, equity issuance activity, and commercial mortgage debt placement activity. Our pipelines remain elevated, and we're up about 5% from year-end.

Service charges on deposit accounts and corporate service fees increased by 12, 9% year over year, respectively. The.

Speaker #4: M&A pipelines were at record levels. Still, as Chris mentioned, given uncertain market conditions, we're planning for second-quarter investment banking fees to be in the 175 to 180 million dollar range.

The increase in service charge was driven by growth in commercial payments, which grew fee equivalent revenue at 11%, while corporate services income was driven by higher loan commitment fees and client FX activity.

Speaker #5: So I think that gives us more room to continue to both invest in growing client activities, but also to continue our share repurchase. So, on the one hand, I, you know, we, we're guiding to 1.3 billion for the year, short of some more extreme situations.

Speaker #4: With upside, if geopolitical and other macro risks subside. We continue to feel very comfortable that investment banking fees will grow mid-single digits in 2026.

<unk> mortgage servicing fees were $62 million down $14 million year over year, largely driven by lower deposit placement fees as well as resolutions in special servicing.

Speaker #4: Trust in investment services income also grew 13% year over year, reflecting positive net flows and higher market values. Assets under management remain stable at 70 billion dollars.

At quarter end, we were named primary for special Servicer, and approximately $720 billion of CRE loans of which about $265 billion in special servicing.

Speaker #5: I would expect that to be more like the floor for buybacks for the year. I don't know how much more we'll go over that.

Speaker #5: We'll play that by ear. but we certainly believe over time, as you know, we've got more capacity to lean into capital return. The other point that I would just make is I don't think anybody should expect one big swing at this.

Speaker #4: Service charges on deposit accounts and corporate service fees increased by 12% and 9% year over year, respectively. The increase in service charges was driven by growth in commercial payments, which grew fee-equivalent revenue by 11%, while corporate services income was driven by higher loan commitment fees and client FX activity.

Active special servicing third party assets were $10 billion about half in office. This is down from $12 billion a year ago as the commercial real estate industry continues to recover.

Clark Khayat: Active special servicing third-party assets were $10 billion, about half in office. This is down from $12 billion a year ago as the commercial real estate industry continues to recover. We continue to expect commercial mortgage servicing fees to run about $50 to $60 million per quarter for the remainder of the year. On slide 10, Q1 non-interest expenses of $1.2 billion improved 6% sequentially when excluding the prior quarter's FDIC special assessment and increased 4% year over year. Compared to the year ago quarter, the increase was driven by higher personnel expenses related to our frontline banker hiring, incentive compensation associated with the strong fee performance, and higher benefits costs. Sequentially, expenses declined due to lower incentive compensation, seasonally lower professional fees and marketing expenses, and fewer days in the quarter.

We continue to expect commercial mortgage servicing fees to run about $50 million to $60 million per quarter for the remainder of the year.

Speaker #5: I think you should expect from us thoughtful, orderly, kind of methodical capital management over time, where we are sharing as much visibility as we have, given conditions.

Speaker #4: Commercial mortgage servicing fees were 62 million dollars, down 14 million dollars year over year, largely driven by lower deposit placement fees, as well as resolutions and special servicing.

On slide 10, first quarter noninterest expenses of $1 2 billion improved 6% sequentially when excluding the prior quarter's FDIC special assessment and increased 4% year over year compared to the year ago quarter.

Speaker #5: And kind of marching down, to that range over some meaningful and manageable period of time. But we're not gonna do anything dramatic in any quarter or two.

Speaker #4: At quarter-end, we were named primary or special servicer in approximately $720 billion of CRE loans, of which about $265 billion is special servicing.

Increase was driven by higher personnel expenses related to our frontline banker hiring incentive compensation associated with the strong fee performance and higher benefits cost.

Speaker #4: Gotcha. Okay. Perfect. Thank you. And then, maybe switching gears for just a second, you know, appreciate the refresh and the color you guys have given on the full year.

Speaker #4: Active special servicing third-party assets were 10 billion dollars, about half in office. This is down from 12 billion a year ago as the commercial real estate industry continues to recover.

Sequentially expenses declined due to lower incentive compensation seasonally lower professional fees and marketing expenses and fewer days in the quarter.

Speaker #4: Investment banking expectations. Clark was hoping maybe you could kind of provide some thoughts on how you see some of the other, key areas, you know, whether it's wealth payments, some of those other you know, focus areas, projecting through the, the year.

Speaker #4: We continue to expect commercial mortgage servicing fees to run about 50 to 60 million dollars per quarter for the remainder of the year. On slide 10, first-quarter non-interest expenses of 1.2 billion dollars improved 6% sequentially when excluding the prior quarter's FDIC special assessment, and increased 4% year over year.

Expenses are expected to increase through the balance of the year, reflecting our ongoing investments in people and technology incentive compensation associated with expected continued revenue momentum and other seasonal impacts.

Clark Khayat: Expenses are expected to increase through the balance of the year, reflecting our ongoing investments in people and technology, incentive compensation associated with expected continued revenue momentum, and other seasonal impacts. We continue to feel very comfortable with our full year expense growth guide of 3% to 4%. Turning to the next slide, credit quality remains solid. Net charge-offs were $101 million, down 3% sequentially, and were an annualized 38 basis points of average loans.

Speaker #3: Sure. so one, you know, as Chris noted, we continue to get gains in our wealth business. So to the extent the market cooperates, we'd expect to see investment management fees continue to grow.

We continue to feel very comfortable with our full year expense growth guidance of 3% to 4%.

Turning to the next slide credit quality remains solid net charge offs were $101 million down 3% sequentially and were an annualized 38 basis points of average loans.

Speaker #4: Compared to the year-ago quarter, the increase was driven by higher personnel expenses related to our frontline banker hiring, incentive compensation associated with the strong fee performance, and higher benefits costs.

Nonperforming assets increased by $65 million sequentially back to third quarter 2025 levels and remain below historical levels at 63 basis points.

Speaker #4: Sequentially, expenses declined due to lower incentive compensation, seasonally lower professional fees and marketing expenses, and fewer days in the quarter. Expenses are expected to increase through the balance of the year, reflecting our ongoing investments in people and technology, incentive compensation associated with expected continued revenue momentum, and other seasonal impacts.

Christopher Gorman: Non-performing assets increased by $65 million sequentially back to Q3 2025 levels and remained below historical levels at 63 basis points. The increase was driven by two credits in utilities and multi-family real estate industries, respectively. We're confident we will resolve these credits in the coming quarters, and we are well reserved against them today. Lastly, criticized loans declined by $3 million sequentially. Moving to slide 12, our CET1 ratio was 11.4%, and our marked CET1 ratio was 10% at quarter end. Our preliminary assessment of the updated Basel III endgame proposal is that our risk-weighted assets would decline by approximately 9% under the revised standardized approach, resulting in 100 basis point plus improvement to our marked CET1 ratio. RWA relief would come primarily from lower risk weights associated with off-balance sheet commercial loan commitments, residential mortgages, and corporate loans.

Clark Khayat: Non-performing assets increased by $65 million sequentially back to Q3 2025 levels and remained below historical levels at 63 basis points. The increase was driven by two credits in utilities and multi-family real estate industries, respectively. We're confident we will resolve these credits in the coming quarters, and we are well reserved against them today. Lastly, criticized loans declined by $3 million sequentially. Moving to slide 12, our CET1 ratio was 11.4%, and our marked CET1 ratio was 10% at quarter end. Our preliminary assessment of the updated Basel III endgame proposal is that our risk-weighted assets would decline by approximately 9% under the revised standardized approach, resulting in 100 basis point plus improvement to our marked CET1 ratio. RWA relief would come primarily from lower risk weights associated with off-balance sheet commercial loan commitments, residential mortgages, and corporate loans.

The increase was driven by two credits and utilities in multifamily real estate industry's respectively. We're confident we will resolve these credits in the coming quarters, we are well reserved against them today.

Speaker #4: We continue to feel very comfortable with our full-year expense growth guide of 3 to 4 percent. Turning to the next slide, credit quality remains solid.

Lastly, criticized loans declined by $3 million sequentially.

Moving to slide 12, our CET one ratio was 11, 4% and our Mark CET one ratio was 10% quarter end are.

Speaker #4: Net charge-offs were 101 million dollars, down 3% sequentially, and we're an annualized 38 basis points of average loans. Non-performing assets increased by 65 million dollars sequentially, back to third-quarter 2025 levels, and remain below historical levels at 63 basis points.

Our preliminary assessment of the updated Basel III endgame proposal is that our risk weighted assets declined by approximately 9% under the revised standardized approach, resulting in a 100 basis point plus improvement to our Mark CET one ratio.

Speaker #4: The increase was driven by two credits in the utilities and multifamily real estate industries, respectively. We're confident we'll resolve these credits in the coming quarters, and we are well-reserved against them today.

<unk> relief would come primarily from lower risk weights associated with off balance sheet commercial loan commitments residential mortgages and corporate loans.

As we wait for rules to be finalized we will continue to manage our mark CET one ratio of nine 5%, 10% range under current part of UA methodology.

Speaker #4: Lastly, criticized loans declined by $3 million sequentially. Moving to slide 12, our CET1 ratio was 11.4%, and our marked CET1 ratio was 10% at quarter-end.

Christopher Gorman: As we wait for rules to be finalized, we'll continue to manage our target CET1 ratio in the 9.5% to 10% range under current RWA methodology. We expect to repurchase at least $300 million of our shares per quarter for the balance of the year, which implies at least $1.3 billion for the full year. We remain focused on supporting our clients and growing our business, and as Chris mentioned, delivering a return of capital and a return on capital for our shareholders. Moving to slide 13, we're positively revising our 2026 guidance given the strong start to the year. We now expect full year net interest income growth of 9% to 10%, compared to our prior guide of 8% to 10%. We now also expect to exit the year with a net interest margin of approximately 3.05% on a stable earning asset base relative to Q1.

Clark Khayat: As we wait for rules to be finalized, we'll continue to manage our target CET1 ratio in the 9.5% to 10% range under current RWA methodology. We expect to repurchase at least $300 million of our shares per quarter for the balance of the year, which implies at least $1.3 billion for the full year. We remain focused on supporting our clients and growing our business, and as Chris mentioned, delivering a return of capital and a return on capital for our shareholders. Moving to slide 13, we're positively revising our 2026 guidance given the strong start to the year. We now expect full year net interest income growth of 9% to 10%, compared to our prior guide of 8% to 10%. We now also expect to exit the year with a net interest margin of approximately 3.05% on a stable earning asset base relative to Q1.

We expect to repurchase at least $300 million of our shares per quarter for the balance of the year, which implies at least $1 3 billion for the full year.

Speaker #4: Our preliminary assessment of the updated Basel III end-game proposal is that our risk-weighted assets would decline by approximately 9% under the revised standardized approach, resulting in 100 basis points plus improvement to our marked CET1 ratio.

We remain focused on supporting our clients and growing our business and as Chris mentioned, delivering a return of capital and a return on capital for our shareholders.

Speaker #4: RWA relief would come primarily from lower risk-weights associated with off-balance sheet commercial loan commitments, residential mortgages, and corporate loans. As we wait for rolls to be finalized, we'll continue to manage our marked CET1 ratio in the 9.5 to 10% range under current RWA methodology.

Moving to slide 13, where positively revising our 2026 guidance given the strong start to the year. We now expect full year net interest income growth of 9% to 10% compared to our prior guide of eight 7%.

Speaker #4: We expect to repurchase at least 300 million dollars of our shares per quarter for the balance of the year, which implies at least 1.3 billion.

We now also expect to exit the year with a net interest margin of approximately three point euro 5% on a stable, earning asset base relative to the first quarter.

This guidance holds under a fairly broad range of interest rate scenarios as of today, our base case assumes no cuts this year.

Christopher Gorman: This guidance holds under a fairly broad range of interest rate scenarios. As of today, our base case assumes no cuts this year. We also improved our loan guidance. Average loans are expected to increase 2% to 4% compared to our previous guidance of 1% to 2%, and average commercial loans are now expected to grow 6% to 8% this year. All of our other guidance remains unchanged, although, as you would expect, we continue to monitor macro conditions closely. In summary, subject to the usual macro caveats, we're confident that we will deliver another year of outsized organic revenue and earnings growth for our shareholders. With that, I would like to now turn the call back to the operator to provide instructions for the Q&A session. Operator?

Clark Khayat: This guidance holds under a fairly broad range of interest rate scenarios. As of today, our base case assumes no cuts this year. We also improved our loan guidance. Average loans are expected to increase 2% to 4% compared to our previous guidance of 1% to 2%, and average commercial loans are now expected to grow 6% to 8% this year. All of our other guidance remains unchanged, although, as you would expect, we continue to monitor macro conditions closely. In summary, subject to the usual macro caveats, we're confident that we will deliver another year of outsized organic revenue and earnings growth for our shareholders. With that, I would like to now turn the call back to the operator to provide instructions for the Q&A session. Operator?

We also improved our loan guidance average loans are expected to increase 2% to 4% compared to our previous guidance of 1%, 2% and average commercial loans are now expected to grow 6% to 8% this year.

All of our other guidance remains unchanged, although as you would expect we continue to monitor macro conditions closely.

In summary, subject as usual macro caveat, we're confident that we will deliver another year of outsized organic revenue and earnings growth for our shareholders with that I would like to now turn the call back to the operator to provide instructions for the Q&A session operator.

Thank you <unk>.

Like to ask a question. Please press star followed by Glenn on your telephone keypad.

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Any reason you would like to remove your question or your question has been answered. Please press star followed by Tim.

You are assuming today's call and we'd like to ask a question. Please dial star.

Starwood.

As a reminder, if you are using a speaker phone. Please remember to take as Suzanne said before asking your question, we will pause briefly to allow patients to register.

Our first question will go to the line of Erika Najarian with UBS. Your line is open.

Thank you and good morning.

First one is for you Chris.

Erika Najarian: Thank you, and good morning. The first one is for you, Chris. Given the strength that you showed this quarter on both lending and fees, maybe talk a little bit about client sentiment and how they're balancing the geopolitical volatility with some of the positive on the ground, Big Beautiful Bill stimulus, and everything else that's happening domestically. Additionally, thank you so much for the MDFI, in quotes, breakdown. I'm wondering what you're seeing in terms of sponsor activity, what you're seeing in terms of your private credit clients. One of your peers, David Solomon, mentioned actually in the private credit space, widening spreads. I'm wondering if KeyCorp is seeing something similar.

Given the strength that you showed this quarter on both lending and fees, maybe talk a little bit about client sentiment and how they are balancing sort of the the geopolitical volatility with some of the.

Positive on the ground.

Big Beautiful Bill simulation everything else is happening domestically and additionally, thank you so much for the NDA Fi and quotes breakdown I'm wondering what youre seeing in terms of.

Sponsor activity.

What youre seeing in terms of your private credit clients and one of your peers, David Zalman mentioned actually in the private credit space widening spreads I'm wondering if keycorp is seeing something similar.

Well sure and good morning Erika.

Let me start if I could with the consumer because thats a little less complicated the consumers in great shape. If you look at all of our credit metrics. If you look at the fact that these tax refunds from the big Beautiful Bill will exceed what they did last year. If you look at spending spending is up kind of mid single digits year over year online spur.

Christopher Gorman: Well, sure. Good morning, Erika. Let me start, if I could, with the consumer, because that's a little less complicated. The consumer's in great shape. If you look at all of our credit metrics, if you look at the fact that these tax refunds from the Big Beautiful Bill will exceed what they did last year. If you look at spending is up mid-single digits year over year. Online spending is up maybe double digits. The other thing that's interesting with our client base is the wealth effect. I think this is something that's been underreported. When we talk about mass affluent, we're talking about our customers with between $250,000 and $2 million to invest. 18 months ago, we thought that universe was 1 million of our 3.5 million customers. We went back and redid it based on market activity.

Chris Gorman: Well, sure. Good morning, Erika. Let me start, if I could, with the consumer, because that's a little less complicated. The consumer's in great shape. If you look at all of our credit metrics, if you look at the fact that these tax refunds from the Big Beautiful Bill will exceed what they did last year. If you look at spending is up mid-single digits year over year. Online spending is up maybe double digits. The other thing that's interesting with our client base is the wealth effect. I think this is something that's been underreported. When we talk about mass affluent, we're talking about our customers with between $250,000 and $2 million to invest. 18 months ago, we thought that universe was 1 million of our 3.5 million customers. We went back and redid it based on market activity.

<unk> is up maybe double digits. The other thing that's interesting with our client base is the wealth effect and I think this is something that's been underreported. So were talking when we talk about massive what we're talking about our customers with between 250000.

$2 million to invest.

18 months ago, we thought that universe was $1 million of our $3 5 million customers. We went back and redid. It based on market activity. We now believe it to be one $1 5 million so up 15%. So on the consumer side, the consumer actually our consumers in good shape now on the commercial side, there's obviously.

Christopher Gorman: We now believe it to be $1.15 million, so up 15%. On the consumer side, our consumer is in good shape. Now, on the commercial side, there's obviously some puts and takes. You saw for the first time, as Clark detailed, our utilization went up, which is a good thing. We're starting to see people actually invest more in CapEx with some of the benefits from the Big Beautiful Bill that you pointed out. And then, of course, the flip side of it is just the macro uncertainty. And so what we did see in the quarter is some people pulled some deals forward. Think about if you were going to go to the investment-grade credit markets and the activity started, you probably pulled that forward.

Chris Gorman: We now believe it to be $1.15 million, so up 15%. On the consumer side, our consumer is in good shape. Now, on the commercial side, there's obviously some puts and takes. You saw for the first time, as Clark detailed, our utilization went up, which is a good thing. We're starting to see people actually invest more in CapEx with some of the benefits from the Big Beautiful Bill that you pointed out. And then, of course, the flip side of it is just the macro uncertainty. And so what we did see in the quarter is some people pulled some deals forward. Think about if you were going to go to the investment-grade credit markets and the activity started, you probably pulled that forward.

Lease some puts and takes you saw for the first time as Clark detailed are our utilization went up which is a good thing we're starting to see people actually invest more in capex with some of the benefits from the big beautiful build that you pointed out and then of course, the flip side of it is just the macro.

And so what we did see in the quarter as some people pulled some deals forward. So think about if you were to go to the investment grade credit markets.

The activity started you probably pulled that forward. Conversely on M&A deals what's happening is they're not going away, but people are kind of slow playing it doing a lot of due diligence because theres. So much volatility kind of day to day week to week and so we saw sort of soft both sides of that having.

Christopher Gorman: Conversely, on M&A deals, what's happening is they're not going away, but people are slow playing it, doing a lot of due diligence because there's so much volatility day to day, week to week. We saw both sides of that. Having said that, as we said earlier, our pipelines remain very strong. I'm very optimistic about where we are from our commercial businesses. Obviously, it's not without impact from the near-term volatility. The second part of your question as it relates to MDFI is a very great question because this is kind of a developing area. We've seen a steady march down in terms of spreads for a long time because there's just been too much capacity in the market with respect to commercial loans.

Chris Gorman: Conversely, on M&A deals, what's happening is they're not going away, but people are slow playing it, doing a lot of due diligence because there's so much volatility day to day, week to week. We saw both sides of that. Having said that, as we said earlier, our pipelines remain very strong. I'm very optimistic about where we are from our commercial businesses. Obviously, it's not without impact from the near-term volatility. The second part of your question as it relates to MDFI is a very great question because this is kind of a developing area. We've seen a steady march down in terms of spreads for a long time because there's just been too much capacity in the market with respect to commercial loans.

<unk> said that as we said earlier, our pipelines remain very very strong so I'm very optimistic about kind of where we are from our commercial businesses.

But obviously.

It's not without impact from.

Near term volatility.

The second part of your question as it relates to <unk> is a very.

Great question, because this is kind of a developing area and so we've seen a steady march down in terms of spreads for a long time, because there's just too much capacity in the market with respect to commercial loans.

What we're seeing just as of late is a firming there and part of the firming of that is that some of the private credit players obviously.

Christopher Gorman: What we're seeing just as of late is a firming there, and part of the firming of that is that some of the private credit players, obviously, in light of redemptions, are not in the market the way they have been. I actually think as you look forward, there's a lot of discussion around private credit. I personally don't think there's a credit problem, but these redemptions are real, and that if you have a bunch of redemption requests, the first thing you do is stop shoveling it out the front door, which I think will give the banks, in some instances, an opportunity to re-intermediate some of those activities. That's my perspective. Anything else on that, Erika? Operator, we'll take the next question.

Chris Gorman: What we're seeing just as of late is a firming there, and part of the firming of that is that some of the private credit players, obviously, in light of redemptions, are not in the market the way they have been. I actually think as you look forward, there's a lot of discussion around private credit. I personally don't think there's a credit problem, but these redemptions are real, and that if you have a bunch of redemption requests, the first thing you do is stop shoveling it out the front door, which I think will give the banks, in some instances, an opportunity to re-intermediate some of those activities. That's my perspective. Anything else on that, Erika? Operator, we'll take the next question.

In light of redemptions are not in the market the way they have been and I actually think as you look forward. There's a lot of discussion around private credit I personally don't think there's a credit problem, but these redemptions are real and that if you have a bunch of redemption requests. The first thing you do is stop shoveling it out the front door, which I.

Clark Khayat: grown our commercial businesses. Obviously it's not without impact from the near-term volatility. Second part of your question as it relates to NII is a very great question because this is kind of a developing area. We've seen a steady march down in terms of spreads for a long time because there's just been too much capacity in the market with respect to commercial loans. What we're seeing just as of late is a firming there, and part of the firming of that is that some of the private credit players, obviously, in light of redemptions, are not in the market the way they have been. I actually think as you look forward, there's a lot of discussion around private credit.

We will give the banks in some instances an opportunity too.

Just to re intermediate some of those activities.

That's kind of a that's my perspective.

<unk> anything else on that Erica.

Operator, we'll take the next question.

Yes of course, thank you Erika.

The next question will go to the line of Ken <unk> with autonomous Ken Your line is open.

Operator: Yes, of course. Thank you, Erika. The next question will go to the line of Ken Usdin with Autonomous. Ken, your line is open.

Clark Khayat: I personally don't think there's a credit problem, but these redemptions are real and that if you have a bunch of redemption requests, the first thing you do is stop shoveling it out the front door, which I think will give the banks, in some instances, an opportunity to re-intermediate some of those activities. That's my perspective. Anything else on that, Erica? Operator, we'll take the next question.

Hi, Thanks, a lot I appreciate it.

Let me ask a question on deposits I know the first quarter is seasonal.

Ken Usdin: Thanks a lot. Appreciate it. I want to ask a question on deposits. I know Q1 is seasonal and you had a decline in brokered CDs. Just wondering how you think that deposits will trend from here, and if you think you're getting close to the bottom of that NIB mix, which I know was part of that seasonality in Q1. Thanks.

<unk> and brokered Cds.

I'm just wondering how you think that deposits will trend from here and if you think youre getting close to the bottom of that.

Mix, which I know was part of that seasonality in the first quarter. Thanks.

Yes, Hey, Kenneth Clark. Thanks for the question so you've hit on I think the bigger drivers.

Clark Khayat: Yeah. Hey, Ken. It's Clark. Thanks for the question. You hit on the, I think the bigger drivers, broker deposits coming out at about $1.6 billion seasonal decline. First, I would say as we did decline, we are actually slightly better in Q1 than we would have planned. I think just consistent with our expectations. On NIB, you did see that come down on a reported basis. I think if you put our hybrids in there, we're stable. Those continue to be a very good vehicle to work with commercial clients and maintain those high-quality operating deposits. I think as usual, we would expect to trough kind of mid-May and then build up through the quarter.

Broker deposits coming out at about $1 6 billion seasonal.

Operator 1: Yes, of course. Thank you, Erica. The next question will go to the line of Ken Usdin with Autonomous. Ken, your line is open.

Operator: Yes, of course. Thank you, Erica. The next question will go to the line of Ken Usdin with Autonomous. Ken, your line is open.

Decline so.

So first I would say as we did decline we are actually slightly better than the first quarter than we would've planned so.

Ken Usdin: Thanks a lot. Appreciate it. I want to ask a question on deposits. I know Q1 is seasonal and it had a decline in brokered CDs. Just wondering how you think that deposits will trend from here? If you think you're getting close to the bottom of that NIB mix, which I know was part of that seasonality in Q1. Thanks.

I think just consistent with our expectations.

On Niv, you did see that come down on a reported basis I think if you put our hybrids in there were stable. So those continue to be a very good vehicle to work with commercial clients and maintain.

And those high quality operating deposits and I think as usual, we would expected to trough kind of mid may and then build up through the quarter. So I'd say first quarter to second quarter average balances will be stable to maybe slightly up but I'd expect ending balances June 30 to be higher and those that.

Clark Khayat: Yeah. Hey, Ken, it's Clark. Thanks for the question. You hit on the, I think the bigger drivers. Broker deposits coming out at about $1.6 billion seasonal decline. First I would say, as we did decline, we are actually slightly better in Q1 than we would have planned. I think just consistent with our expectations. On NIB, you did see that come down on a reported basis. I think if you put our hybrids in there, we're stable. Those continue to be a very good vehicle to work with commercial clients and maintain those high-quality operating deposits. I think as usual, we would expect to trough kind of mid-May and then build up through the quarter.

Clark Khayat: I'd say Q1 to Q2 average balances will be stable to maybe slightly up, but I'd expect ending balances 30 June to be higher and those to continue to rise through the course of the year. We feel very good about the liquidity we have if loan growth continues or picks up. We have low loan-to-deposit ratio on a relative basis. We've brought our market funds down, so we have a lot of third-party capacity if we need it. We have great access to client excess deposits and new operating deposits. If we need to fund more loan growth, that's a high-class problem that we feel very confident about.

<unk> to rise through the course of the year so.

We feel very good about the liquidity we have.

Loan growth.

Continues or picks up.

Yes, we are.

Low loan to deposit ratio on a relative basis.

We've brought our market funds down so we have a lot of third party capacity, if we need it.

And then we have great access to client excess deposits and new operating deposit. So we need to fund more loan growth Thats a high class problem that we feel very confident about.

And as a follow up on the cost side.

You put in the slides about the cumulative downgrade has been great at 56.

Ken Usdin: Yeah. As a follow-up, on the cost side, you put in the slides about the cumulative down base has been great at 56. With rate cuts presumably on hold for a while, can you just talk about deposit competition? How much room do you have, if any, to continue to bring down deposit costs and just the environment out there across the businesses for deposit taking? Thank you.

Great.

Presumably on hold for a while can you just talk about deposit competition, how much room do you have.

If any to continue to bring down deposit costs and just the environment out there across the businesses for deposit taking thank you.

Yes sure.

Look I think you hit it.

With no cuts and that is our base case, we would expect deposit pricing in general is sort of stabilize.

Clark Khayat: Yeah, sure. Look, I think you hit it. With no cuts, and that is our base case, we'd expect deposit pricing in general to sort of stabilize. Now, if loan growth really kicked in, some of the dynamics Chris talked about, if banks really step back in, we would expect some intensification of that deposit pricing. Right now, our view is that those will be fairly stable. Our deposit price will be fairly stable at this point. As I just outlined, we will get back some balances on things like NIB and others. I think we have some puts and takes. We will continue to drive down broker deposits through H1, but if we needed more funding and we had to dip into that market to not hit more painful pricing across the book, we can do that.

If loan growth really kicked in some of the dynamics, Chris talked about it banks really step back and we would expect some intensification of that deposit pricing.

Ken Usdin: Yeah. As a follow-up on the cost side, you put in the slides about the cumulative down beta has been great at 56. With rate cuts presumably on hold for a while, can you just talk about deposit competition? How much room do you have, if any, to continue to bring down deposit costs and just the environment out there across the businesses for deposit taking? Thank you.

Right now our view is that those will be fairly stable our deposit price will be fairly stable at this point.

As I just outlined we will get back thing some some balances on things like Niv and others. So I think we have some puts and takes we.

We will continue to drive down <unk>.

Roker deposits through the first half, but if we needed.

More funding and we had to.

You know the environment out there um across the businesses for deposit. Taking, thank you.

Clark Khayat: Yeah, sure. Look, I think you hit it. With no cuts, and that is our base case, we'd expect deposit pricing in general to sort of stabilize. Now, if loan growth really kicked in, some of the dynamics Chris talked about, if banks really step back in, we would expect some intensification of that deposit pricing. Right now our view is that those will be fairly stable. Our deposit price will be fairly stable at this point. As I just outlined, we will get back some balances on things like NIB and others. I think we have some puts and takes. We will continue to drive down broker deposits through H1, but if we needed more funding and we had to dip into that market to not hit more painful pricing across the book, we can do that.

Chip into that market to not hit.

More.

Painful pricing across the book, we can do that so I think we continue to have a lot of avenues at our disposal.

Yeah, sure. Um, so look, I think you hit it, um, with no cuts, and that is our base case.

Clark Khayat: I think we continue to have a lot of avenues at our disposal. I think if there were cuts, our deposit betas will probably drop a little bit in year, just given the timing component of that. Again, our base case is stable, and I think we can hold serve in the mid-fifties as we move forward. That's all premised on the loan growth we're guiding to. If that came in stronger, we might see a little bit of a dip there, but I think we'd make that trade-off as long as it's good quality relationship growth.

I think if there were cuts our deposit betas, probably dropped a little bit.

Here, just given the timing component of that.

Again, our base case is stable and I think we can hold serve in the mid fifties as we move forward, but that's.

All premised on the loan growth, we're guiding to so if that came in stronger.

We might see a little bit of a dip there, but I think we'd make that tradeoff as long as it's good quality relationship growth.

Okay. Thanks, Mark Thank you.

Sure.

Thank you Ken next question, we'll go to the line of John Inquiry with Evercore ISI John Your line is open.

Ken Usdin: Okay. Thanks, Clark.

We'd expect deposit pricing in general, this sort of stabilized. Now, if loan growth, really kicked in some of the Dynamics, Chris talked about. If banks really step back in, we would expect some intensification of that deposit pricing. Um, right now our view is that those will be barely stable. Our deposit price will be fairly stable at this point. Uh, and as I just outlined we will get back thing. You know, some some balances on things like nip and others. So I think we have some puts and takes um, we will continue to drive down, uh, broker deposits through the first half, but if we needed, uh, more funding and we had to dip into that market, to not hit,

Operator: Thank you.

Clark Khayat: Sure.

Clark Khayat: I think we continue to have a lot of avenues at our disposal. I think if there were cuts, our deposit betas will probably drop a little bit in year just given the timing component of that. Again, our base case is stable, and I think we can hold serve in the mid-fifties as we move forward. That's all premised on the loan growth we're guiding to. If that came in stronger, we might see a little bit of a dip there, but I think we'd make that trade-off as long as it's good quality relationship growth.

Operator: Thank you, Ken. Our next question will go to the line of John Pancari with Evercore ISI. John, your line is open.

Good morning.

Good morning, John.

Yes.

Similarly on the competitive front on the on the lending side.

John Pancari: Morning.

Clark Khayat: Good morning, John.

Chris Gorman: Good morning, John.

Christopher Gorman: I guess just similarly on the competitive front on the lending side, and one or two of your peers have cited a bit more aggressiveness out there on the lending front, particularly on structure for the most part, also to a degree on pricing. Are you seeing this showing up in

One or two of your peers have subsided a bit more aggressiveness out there on the lending front, particularly.

On structure for the most part also to a degree on pricing are you seeing this showing up in.

When your markets and maybe if you can talk about how it's influenced.

Ken Usdin: Okay. Thanks, Clark.

Loan spreads that you're seeing as you are pricing new originations.

John Pancari: In your markets, and maybe if you can talk about how it's influenced loan spreads that you're seeing as you're pricing new originations? Thanks.

Operator 1: Thank you.

Operator: Thank you.

Clark Khayat: Sure.

Yeah, John So the phenomenon you are talking about is definitely been a prevailing phenomenon for some time, what I was describing in my answer to Erika is sort of real time, some adjustment that we're seeing but there's no question, there's been excess capacity for some time and I have talked about this at length our.

Operator 1: Thank you, Ken. Our next question will go to the line of John Pancari with Evercore ISI. John, your line is open.

Operator: Thank you, Ken. Our next question will go to the line of John Pancari with Evercore ISI. John, your line is open.

Christopher Gorman: Yeah, John. The phenomenon you're talking about has definitely been a prevailing phenomenon for some time. What I was describing in my answer to Erika is sort of real time, some adjustment that we're seeing. There's no question there's been excess capacity for some time, and I've talked about this at length, that a properly graded commercial loan can't return its cost of capital. There's been just a constant pressure on spreads and on structure. I think we may be, and I emphasize the word may, be at an inflection point on that trend.

Chris Gorman: Yeah, John. The phenomenon you're talking about has definitely been a prevailing phenomenon for some time. What I was describing in my answer to Erika is sort of real time, some adjustment that we're seeing. There's no question there's been excess capacity for some time, and I've talked about this at length, that a properly graded commercial loan can't return its cost of capital. There's been just a constant pressure on spreads and on structure. I think we may be, and I emphasize the word may, be at an inflection point on that trend.

John Pancari: Morning.

Clark Khayat: Good morning, John.

Christopher Gorman: Good morning, John.

John Pancari: I guess just similarly on the competitive front on the lending side, and one or two of your peers have cited a bit more aggressiveness out there on the lending front, particularly on structure for the most part, also to a degree on pricing. Are you seeing this showing up in your markets? Maybe if you can talk about how it's influenced loan spreads that you're seeing as you're pricing new originations. Thanks.

Ah properly graded commercial loan can't return its cost of capital and there's been just a constant.

Pressure on spreads and on structure I think we may be and I emphasize the word may be at an inflection point on that trend.

And just from a risk management perspective, again, we have not adjusted any of our credit boxes or underwriting standards. We are still maintaining again the same standards that we've always had yes, I think thats a good point I mean, we never give on structure, obviously, it's a market out there and we price where we need to price.

Mohit Ramani: Just from a risk management perspective.

John Pancari: Okay.

John Pancari: Again, we have not adjusted any of our credit boxes or underwriting standards. We are still maintaining, again, the same standards that we've always had.

Mohit Ramani: Again, we have not adjusted any of our credit boxes or underwriting standards. We are still maintaining, again, the same standards that we've always had.

Christopher Gorman: Yeah, John, the phenomenon you're talking about has definitely been a prevailing phenomenon for some time. What I was describing in my answer to Erica is sort of real-time, some adjustment that we're seeing. There's no question there's been excess capacity for some time, and I've talked about this at length, that a properly graded commercial loan can't return its cost of capital. There's been just a constant pressure on spreads and on structure. I think we may be, and I emphasize the word may, be at an inflection point on that trend.

Christopher Gorman: Yeah, Mo, I think that's a good point. I mean, we never give on structure. Obviously, it's a market out there, and we price where we need to price. The advantage we have, John, is we can do a lot of other things for these clients, whether it's payments, whether it's strategic advice, hedging, et cetera. That's how we run our business.

Chris Gorman: Yeah, Mo, I think that's a good point. I mean, we never give on structure. Obviously, it's a market out there, and we price where we need to price. The advantage we have, John, is we can do a lot of other things for these clients, whether it's payments, whether it's strategic advice, hedging, et cetera. That's how we run our business.

Vantage, we have John is we can do a lot of other things for these clients, whether it's payments, whether it's strategic advice hedging et cetera, that's how we run our business.

And frankly, if the capital markets, Okay, I have a better deal will place it yes.

We did 80% of the time this last quarter.

Mohit Ramani: Frankly, if the capital markets.

Clark Khayat: Frankly, if the capital markets.

John Pancari: Okay

John Pancari: ... have a better deal, we'll place it.

Clark Khayat: ... have a better deal, we'll place it.

Christopher Gorman: Yeah. As we did 80% of the time this last quarter.

Chris Gorman: Yeah. As we did 80% of the time this last quarter.

Got it okay very helpful. Thank you and then you gave some pretty good color here on the capital front in terms of buyback expectations.

Mo: Just from a risk management perspective.

Clark Khayat: Just from a risk management perspective.

John Pancari: Got it. Okay. Very helpful. Thank you. You gave some pretty good color here on the capital front in terms of buyback expectations. I guess, if you could just remind us of your allocation priorities there and if anything could impact that pace of buyback, and how do you think about any potential inorganic opportunities. Thanks.

Christopher Gorman: Okay.

Mo: Again, we have not adjusted any of our credit boxes or underwriting standards. We are still maintaining, again, the same standards that we've always had, so.

Clark Khayat: Again, we have not adjusted any of our credit boxes or underwriting standards. We are still maintaining, again, the same standards that we've always had, so.

I guess, just if you could just remind us of your allocation priorities.

And if anything could.

Christopher Gorman: Yeah. Mo, I think that's a good point. We never give on structure. Obviously, it's a market out there, and we price where we need to price. The advantage we have, John, is we can do a lot of other things for these clients, whether it's payments, whether it's strategic advice, hedging, et cetera. That's how we run our business.

Pack that that pace of buyback in and how do you think about any.

Potential inorganic opportunities.

So I mean, obviously what could impact that more than anything is if we had to.

Christopher Gorman: Obviously, what could impact it more than anything is if we had a severe macroeconomic downturn and started having credit losses. We do not see that. We feel really good about our credit book. Our capital priorities remain unchanged. It's first to support the growth of our clients, which we were pleased to see that we got in this last quarter. The next thing is to invest in our business, and when we talk about investing in our business, it's really people and it's technology. We'll continue to invest heavily in our business. We also, as I mentioned in my remarks, will continue to hire a lot of individual bankers. We'll hire groups of bankers, and opportunistically, we would look at small acquisitions of kind of boutique type operations, which are really just an extension of hiring a group of people.

Chris Gorman: Obviously, what could impact it more than anything is if we had a severe macroeconomic downturn and started having credit losses. We do not see that. We feel really good about our credit book. Our capital priorities remain unchanged. It's first to support the growth of our clients, which we were pleased to see that we got in this last quarter. The next thing is to invest in our business, and when we talk about investing in our business, it's really people and it's technology. We'll continue to invest heavily in our business. We also, as I mentioned in my remarks, will continue to hire a lot of individual bankers. We'll hire groups of bankers, and opportunistically, we would look at small acquisitions of kind of boutique type operations, which are really just an extension of hiring a group of people.

Severe macroeconomic downturn and.

Started having credit losses, we do not see that we feel really good about our credit book our capital priorities remain unchanged. It's first to support the growth of our clients, which we were pleased to see that we got in this last quarter. The next thing is to invest in our business and we always talk about when we talked about investing in our business, it's really people.

Clark Khayat: Frankly, if the capital markets.

Clark Khayat: Frankly, if the capital markets have a better deal, we'll place it.

Christopher Gorman: Okay

Clark Khayat: have a better deal, we'll place it.

Christopher Gorman: Okay

Christopher Gorman: Yeah. As we did 80% of the time this last quarter.

And its technology and so we will continue to invest heavily in our business. We also as I mentioned in my remarks, we'll continue to hire a lot of individual bankers will hire groups of bankers and Opportunistically, we would look at small acquisitions.

Christopher Gorman: Obviously, what could impact it more than anything is if we had a severe macroeconomic downturn and started having credit losses. We do not see that. We feel really good about our credit book. Our capital priorities remain unchanged. It's first to support the growth of our clients, which we were pleased to see that we got in this last quarter. The next thing is to invest in our business, and we always talk about when we talk about investing in our business, it's really people and it's technology. We'll continue to invest heavily in our business. We also, as I mentioned in my remarks, will continue to hire a lot of individual bankers. We'll hire groups of bankers, and opportunistically, we would look at small acquisitions of kind of boutique-type operations, which are really just an extension of hiring a group of people.

Boutique type operations, which are really just an extension of hiring hiring group people. The next priority of course is to pay our dividend, which we don't talk about a lot, but it's 25, a share which is not inconsequential as you look at the yield and then lastly.

Christopher Gorman: The next priority, of course, is to pay our dividend, which we don't talk about a lot, but it's $0.205 a share, which is not inconsequential as you look at the yield. Lastly, repurchase our shares. We said earlier in our comments, John, we plan to repurchase $1.3 billion worth of stock in the year.

Chris Gorman: The next priority, of course, is to pay our dividend, which we don't talk about a lot, but it's $0.205 a share, which is not inconsequential as you look at the yield. Lastly, repurchase our shares. We said earlier in our comments, John, we plan to repurchase $1.3 billion worth of stock in the year.

Purchase repurchase our shares.

We said earlier in our comments, John we plan to repurchase $1 $3 billion worth of stock in the year.

Great. Thank you Chris I appreciate it.

Sure.

Thank you John.

John Pancari: Great. Thank you, Chris. Appreciate it.

Next question comes from the line of Ryan Nash with Goldman Sachs. Brian Your line is open.

Christopher Gorman: Sure.

Chris Gorman: Sure.

Operator: Thank you, John. The next question will go to the line of Ryan Nash with Goldman Sachs. Ryan, your line is open.

Hey, good morning, everyone.

Hey, good morning.

So Chris if I look at the high end of the loan growth guidance. It doesn't imply that much growth from the <unk> end of period levels. Now I know you mentioned some moving pieces in one of your other answers some syndications that could be coming into <unk>, but curious on the drivers of loan growth from here.

Ryan Nash: Hey, good morning, everyone.

Christopher Gorman: The next priority, of course, is to pay our dividend, which we don't talk about a lot, but it's $0.20 and a half cents a share, which is not inconsequential as you look at the yield. Then lastly, repurchase our shares. We said earlier in our comments, John, we plan to repurchase $1.3 billion worth of stock in the year.

Christopher Gorman: Hey, good morning, Ryan.

Chris Gorman: Hey, good morning, Ryan.

Ryan Nash: Chris, if I look at the high end of the loan growth guidance, it doesn't imply that much growth from the Q1 end-of-period levels. Now, I know you mentioned some moving pieces in one of your other answers, some syndications that could be coming in Q2. I'm curious on the drivers of loan growth from here. What will drive the slowdown, and can there be some upside from current expectations? Thank you.

We'll drive the slowdown and can there be some upside from current expectations. Thank you.

Well thanks for the question I'll start with I guess.

John Pancari: Great. Thank you, Chris. Appreciate it.

The premise of your question is is that as the loan guide conservative in that if we Didnt book, a whole bunch of more loans will basically grow at 6% for the year and I would say there probably is some appropriate conservatism in the number given the macro uncertainty out there, but let me kind of give you the pieces and parts.

Christopher Gorman: Well, thanks for the question. I'll start with, I guess, the premise of your question is the loan guide conservative, and that if we didn't book a whole bunch of more loans, we'll basically grow at 6% for the year. I'd say there probably is some appropriate conservatism in the number given the macro uncertainty out there. Let me kind of give you the pieces and parts. Utilization actually for the first time in a long time spiked up. I wouldn't necessarily imagine that will continue to spike up. We waited a long time for it to start moving. We do have broad-based growth across all geographies and industries which should play forward. I mentioned in my remarks that we have a 20% increase in our backlog from year-end. Obviously, we would expect some of that to in fact pull through.

Chris Gorman: Well, thanks for the question. I'll start with, I guess, the premise of your question is the loan guide conservative, and that if we didn't book a whole bunch of more loans, we'll basically grow at 6% for the year. I'd say there probably is some appropriate conservatism in the number given the macro uncertainty out there. Let me kind of give you the pieces and parts. Utilization actually for the first time in a long time spiked up. I wouldn't necessarily imagine that will continue to spike up. We waited a long time for it to start moving. We do have broad-based growth across all geographies and industries which should play forward. I mentioned in my remarks that we have a 20% increase in our backlog from year-end. Obviously, we would expect some of that to in fact pull through.

Christopher Gorman: Sure.

Operator 1: Thank you, John. The next question will go to the line of Ryan Nash with Goldman Sachs. Ryan, your line is open.

Operator: Thank you, John. The next question will go to the line of Ryan Nash with Goldman Sachs. Ryan, your line is open.

Ryan Nash: Hey, good morning, everyone.

Christopher Gorman: Hey, good morning, Ryan.

Ryan Nash: Chris, if I look at the high end of the loan growth guidance, it doesn't imply that much growth from the Q1 end of period levels. Now, I know you mentioned some moving pieces in one of your other answers, some syndications that could be coming in Q2. I'm curious on the drivers of loan growth from here. What will drive the slowdown, and can there be some upside from current expectations? Thank you.

Utilization actually for the first time in a longtime spiked up I wouldn't necessarily imagine that that will continue to spike up we waited a long time for it to start moving.

We do have broad based growth across all geographies and industries, which should play forward I mentioned in my remarks that we have a 20% increase in our backlog from year end. Obviously, we would expect some of that in fact pull through utilities and power continue to be.

Christopher Gorman: Well, thanks for the question. I'll start with, I guess, what's the premise of your question is, the loan guide conservative in that if we didn't book a whole bunch of more loans, we'll basically grow at 6% for the year. I'd say there probably is some appropriate conservatism in the number, given the macro uncertainty out there. Let me kind of give you the pieces and parts. Utilization actually for the first time in a long time spiked up. I wouldn't necessarily imagine that will continue to spike up. We waited a long time for it to start moving. We do have broad-based growth across all geographies and industries, which should play forward. I mentioned in my remarks that we have a 20% increase in our backlog from year-end. Obviously, we would expect some of that to in fact pull through.

An area of huge opportunity when you think about both renewables and the massive build out that's required for Gen III and there's two other areas, where we're starting to see some traction one is health care.

Christopher Gorman: Utilities and power continue to be an area of huge opportunity when you think about both renewables and the massive build-out that's required for Gen AI. There's two other areas where we're starting to see some traction. One is healthcare. We're starting to see consolidation, which is necessary, by the way, in the healthcare industry. Lastly, for the first time in a long time, we're starting to see this backlog of commercial real estate transactional activity. We've been refinancing a lot of commercial real estate, but what we're starting to see is people are starting to trade as the bid and the ask comes in, and everybody sort of gets comfortable that we're going to be in this kind of an interest rate range for a while.

Chris Gorman: Utilities and power continue to be an area of huge opportunity when you think about both renewables and the massive build-out that's required for Gen AI. There's two other areas where we're starting to see some traction. One is healthcare. We're starting to see consolidation, which is necessary, by the way, in the healthcare industry. Lastly, for the first time in a long time, we're starting to see this backlog of commercial real estate transactional activity. We've been refinancing a lot of commercial real estate, but what we're starting to see is people are starting to trade as the bid and the ask comes in, and everybody sort of gets comfortable that we're going to be in this kind of an interest rate range for a while.

Turning to see consolidation, which is necessary by the way in the healthcare industry and then lastly for the first time in a long time, we're starting to see this backlog.

Commercial real estate transactional activity, we've been refinancing a lot of commercial real estate, but what we're starting to see is people are starting to trade is the bid and the ask comes in and everybody sort of gets comfortable that we're going to be in this kind of an interest rate range for a while so that's kind of that's the puts its own.

Christopher Gorman: Utilities and power continue to be an area of huge opportunity when you think about both renewables and the massive build-out that's required for GenAI. There's two other areas where we're starting to see some traction. One is healthcare. We're starting to see consolidation, which is necessary, by the way, in the healthcare industry. Lastly, for the first time in a long time, we're starting to see this backlog of commercial real estate transactional activity. We've been refinancing a lot of commercial real estate, but what we're starting to see is people are starting to trade as the bid and the ask comes in and everybody sort of gets comfortable that we're going to be in this kind of an interest rate range for a while.

And then also.

We would remind you we're going to continue to run off a half a million to $600 million of.

Christopher Gorman: That's the puts. Oh, and then also I just would remind you, we're going to continue to run off $ half a billion to $600 million of residential mortgages per quarter. That's kind of the puts and takes, Ryan.

Chris Gorman: That's the puts. Oh, and then also I just would remind you, we're going to continue to run off $ half a billion to $600 million of residential mortgages per quarter. That's kind of the puts and takes, Ryan.

Commercial.

Residential mortgages per quarter, so that's kind of the puts and takes right.

Got you.

Chris and maybe as a follow up to something that was talked about before within the investment banking business. If I look at the.

Ryan Nash: Gotcha. No, this is super helpful, Chris. Maybe as a follow-up to something that was talked about before. Within the investment banking business, if I look at the mid-single-digit guide, it implies low single-digit growth for the remainder of the year. I feel like coming into the year, you were upbeat on the potential return of M&A to drive upside. Historically, it's been a bigger part of your business. It sounds like from your comments earlier that M&A hasn't been as robust as you would have expected. Are there other parts of the business that are trailing? What would we need to see for some parts of the business to begin to outperform expectations? Thank you.

Mid single digit guide it implies low single digit growth for the remainder of the year and I feel like coming into the year you were up beat on the potential return of M&A that drive upside. If you know historically, it's been a bigger part of your business, so and it sounded like from your comments earlier that M&A hasn't been as robust as you would have expected but are there other.

Christopher Gorman: That's the puts and takes. I just would remind you, we're going to continue to run off $ half a billion to 600 million of residential mortgages per quarter. That's kind of the puts and takes, Ryan.

Parts of the business that are trailing and what would we need to see for some of those some parts of the business to begin to outperform expectations. Thank you.

Sure so.

With respect to M&A, what's interesting about M&A Ryan is theres been a lot of headline numbers and as you well know the G. Sibs have reported some incredible numbers with respect to advisory I think deal volumes in total are up like 46% transaction volumes, However are down 26% and so all we can.

Clark Khayat: Sure. With respect to M&A, what's interesting about M&A, Ryan, is there's been a lot of headline numbers, and as you well know, the G-SIBs have reported some incredible numbers with respect to advisory. I think deal volumes in total are up like 46%. Transaction volumes, however, are down 26%. We put all that together, and we're still waiting for this huge surge of middle market M&A activity to come through. That is something that we're keeping a close eye on. Those transactions are binary. What we're guiding to right now is 5% to 6% growth year over year. We did about $780 million last year. At the middle of the range, that'd be something like $825 million off of a record year last year. I feel really good about the business.

Chris Gorman: Sure. With respect to M&A, what's interesting about M&A, Ryan, is there's been a lot of headline numbers, and as you well know, the G-SIBs have reported some incredible numbers with respect to advisory. I think deal volumes in total are up like 46%. Transaction volumes, however, are down 26%. We put all that together, and we're still waiting for this huge surge of middle market M&A activity to come through. That is something that we're keeping a close eye on. Those transactions are binary. What we're guiding to right now is 5% to 6% growth year over year. We did about $780 million last year. At the middle of the range, that'd be something like $825 million off of a record year last year. I feel really good about the business.

Ryan Nash: Gotcha. No, this is super helpful, Chris. Maybe as a follow-up to something that was talked about before. Within the investment banking business, if I look at the mid-single digit guide, it implies low single digit growth for the remainder of the year. I feel like coming into the year, you were upbeat on the potential return of M&A to drive upside. Historically, it's been a bigger part of your business. It sounds like from your comments earlier that M&A hasn't been as robust as you would have expected, but are there other parts of the business that are trailing? What would we need to see for some parts of the business to begin to outperform expectations? Thank you.

Put all that together and we're still waiting for this huge surge of middle market M&A activity to come through and so that is something that you have.

We're keeping a close eye on.

Thats all of those transactions are binary what we're guiding to right now is 5% to 6% growth year over year. So we did about $780 million last year. So it's the middle of the range that would be something like $825 million off of a record year last year.

Christopher Gorman: Sure. With respect to M&A, what's interesting about M&A, Ryan, is there's been a lot of headline numbers, and as you well know, the GSIBs have reported some incredible numbers with respect to advisory. I think deal volumes in total are up like 46%. Transaction volumes, however, are down 26%. You put all that together, and we're still waiting for this huge surge of middle market M&A activity to come through. That is something that we're keeping a close eye on. Those transactions are binary. What we're guiding to right now is 5% to 6% growth year over year. We did about $780 million last year. At the middle of the range, that'd be something like $825 million off of a record year last year. I feel really good about the business.

So I feel really good about the business, but admittedly some of the while we have record backlogs, we're not seeing as much come out of the pipeline right now as we would hope I think with some of the geopolitical things are resolved I think it'll be a little better environment for that thanks for your question Brian.

Clark Khayat: Admittedly, while we have record backlogs, we're not seeing as much come out of the pipeline right now as we would hope. I think when some of the geopolitical things are resolved, I think it'll be a little better environment for that. Thanks for your question, Ryan.

Chris Gorman: Admittedly, while we have record backlogs, we're not seeing as much come out of the pipeline right now as we would hope. I think when some of the geopolitical things are resolved, I think it'll be a little better environment for that. Thanks for your question, Ryan.

Well thank you.

Thank you Ryan. Our next question comes in line of Scott <unk> with Piper Sandler Scott Your line is open.

Ryan Nash: Cool. Thank you.

Operator: Thank you, Ryan. Our next question will go to the line of Scott Siefers with Piper Sandler. Scott, your line is open.

Good morning, guys. Thanks for taking the question.

Good morning to return for a moment to the capital discussion. It seems like there really should be good capital Madison runway for a while.

Scott Siefers: Morning, guys. Thanks for taking the question.

Clark Khayat: Good morning.

Chris Gorman: Good morning.

Scott Siefers: I wanted to return for a moment to the capital discussion. It seems like there really should be good capital management runway for a while, especially if you elect to put to work some of the additional excess you'd have should the Fed's NPRs pass as proposed. I guess I'm curious to hear how you would decide when and how aggressively to deploy that additional excess if those proposals in particular do advance, and what other considerations are there, whether it's ratings agencies, investor expectations, et cetera, just as you think about the appropriate capital levels to sort of land on.

Especially if you elect to put to work some of the additional excess you'd have should the fed NPR is passed as proposed I guess I'm curious to hear how you would decide when and how aggressively to deploy that additional excess if those proposals in particular do advanced than what other considerations are there whether its ratings agencies.

Christopher Gorman: Admittedly, while we have record backlogs, we're not seeing as much come out of the pipeline right now as we would hope. I think when some of the geopolitical things are resolved, I think it'll be a little better environment for that. Thanks for your question, Ryan.

Ryan Nash: Cool. Thank you.

<unk> investor expectations et cetera, just as you think about the appropriate capital levels to sort of land bank.

Operator 1: Thank you, Ryan. Our next question will go to the line of Scott Siefers with Piper Sandler. Scott, your line is open.

Operator: Thank you, Ryan. Our next question will go to the line of Scott Siefers with Piper Sandler. Scott, your line is open.

Hey, Scott It's Clark Thanks for the question.

So one.

We guided.

Clark Khayat: Hey, Scott, it's Clark. Thanks for the question. One, we guided on the Q4 call that we try to get to 10% CET1 by the end of the year. We actually arrived there a few quarters early in this quarter. We feel very comfortable there and would feel comfortable over the course of the year dipping into that 9.5% to 10%, and that's under the current regime. Again, no issues there. To the extent the NPR passes as proposed, we expect, as we said, 100+ basis points of additional CET1 capital there. I think that gives us more room to continue to both invest in growing client activities, but also to continue our share repurchase. On the one hand, we're guiding to $1.3 billion for the year.

Scott Siefers: Morning, guys. Thanks for taking the question. Wanted to return-

On the fourth quarter call that we try to get to 10% marked by the end of the year. We actually arrived there few quarters early in this quarter. So we feel very comfortable there and we would feel comfortable over the course of the year dipping into that nine five to 10 and that's under the current regime. So again no no issues there.

Christopher Gorman: Morning

Scott Siefers: ... for a moment to the capital discussion. It seems like there really should be good capital management runway for a while, especially if you elect to put to work some of the additional access you'd have should the Fed's NPRs pass as proposed. I guess I'm curious to hear how you would decide when and how aggressively to deploy that additional access if those proposals in particular do advance. What other considerations are there, whether it's ratings agencies, investor expectations, et cetera, just as you think about the appropriate capital levels to sort of land on.

To the extent the MPR passes as proposed we.

We expect as we said a 100 plus basis points of additional.

Mark capital there. So I think that gives us more room to continue to both invest in growing client activities, but also to continue our share repurchase so on the one hand.

Clark Khayat: Hey, Scott, it's Clark. Thanks for the question.

Scott Siefers: Hey, Clark.

Clark Khayat: One, we guided on the Q4 call that we try to get to 10% mark by the end of the year. We actually arrived there a few quarters early in this quarter. We feel very comfortable there and would feel comfortable over the course of the year dipping into that 9.5% to 10%, and that's under the current regime. Again, no issues there. To the extent the NPR passes as proposed, we expect, as we said, 100+ basis points of additional mark capital there. I think that gives us more room to continue to both invest in growing client activities, but also to continue our share repurchase. On the one hand, we're guiding to $1.3 billion for the year. Short of some more extreme situations, I would expect that to be more like the floor for buybacks for the year.

Got into $1 3 billion for the year short of.

Some more extreme situations I would expect that to be more like the floor for buybacks for the year I don't know how much more we'll go over that we'll play that by year.

Clark Khayat: Short of some more extreme situations, I would expect that to be more like the floor for buybacks for the year. I don't know how much more we'll go over that. We'll play that by ear. We certainly believe over time, as you know, we've got more capacity to lean into capital return. The other point that I would just make is I don't think anybody should expect one big swing at this. I think you should expect from us thoughtful, orderly, kind of methodical capital management over time, where we are sharing as much visibility as we have given conditions and kind of marching down to that range over some meaningful and manageable period of time. We're not going to do anything dramatic in any quarter or two.

But we certainly believe over time as you know, we've got more capacity to lean into.

Capital return.

The other point that I would just make is I don't think anybody should expect one big swing at this I think you should expect from us thoughtful orderly kind of methodical capital management over time, where we are.

Carrying as much visibility as we have given conditions and kind of marching down to.

That range over some meaningful and manageable period of time, but we're not going to do anything dramatic in any quarter or two.

Gotcha, Okay perfect. Thank you and then maybe switching gears for a second.

Clark Khayat: I don't know how much more we'll go over that. We'll play that by ear. We certainly believe over time, as you know, we've got more capacity to lean into capital return. The other point that I would just make is I don't think anybody should expect one big swing at this. I think you should expect from us thoughtful, orderly, kind of methodical capital management over time, where we are sharing as much visibility as we have given conditions and kind of marching down to that range over some meaningful and manageable period of time. We're not going to do anything dramatic in any quarter or two.

Scott Siefers: Got you. Okay, perfect. Thank you. Maybe switching gears for just a second. Appreciate the refresh and the color you guys have given on the full-year investment banking expectations. Clark, was hoping maybe you could kind of provide some thoughts on how you see some of the other key areas, whether it's wealth, payments, some of those other focus areas projecting through the year.

Perfect.

Repricing. The color you guys have given on the full year investment banking expectation Clark was hoping maybe you could kind of provide some thoughts on how you see some of the other.

Key areas, whether it's wealth payments some of those other.

Focus areas trajectory through the year.

Sure.

As Chris noted, we continue to get gains in our wealth business. So to the extent the market cooperates, we would expect to see.

Clark Khayat: Sure. One, as Chris noted, we continue to get gains in our wealth business. To the extent the market cooperates, we'd expect to see investment management fees continue to grow, and I think that's a mid- to high-single-digit number for the year. That's tracking pretty well, even despite a little bit of volatility in Q1. Our payments business, particularly on a fee equivalent revenue, which as you know, Scott, is the gross fees, continues to be very strong. If you unpacked, for example, what happened in the quarter on deposit service charges, those numbers would have been mid-teens year-over-year. We continue to get really good activity from our payments team, either selling additional services into existing clients or anchoring with new clients as they come in. No reason to think that that's going to stop.

Investment management fees continue to grow and I think that the.

Mid to high single digit number for the year, So that's tracking pretty well, even despite a little bit of.

Scott Siefers: Gotcha. Okay, perfect. Thank you. Maybe switching gears for just a second. Appreciate the refresh and the color you guys have given on the full year investment banking expectations. Clark, was hoping maybe you could kind of provide some thoughts on how you see some of the other key areas, whether it's wealth, payments, some of those other focus areas projecting through the year.

Volatility in the first quarter, our payments business, particularly on a fee equivalent revenue, which as you know Scott is the gross fees continues to be very strong. If you unpack for example, what happened in the quarter on deposit service charges. Those numbers would have been mid teens year over year. So we continue to get really good activity from.

Our payments team.

Either selling additional services into existing clients or.

Clark Khayat: Sure. One, as Chris noted, we continue to get gains in our wealth business. To the extent the market cooperates, we'd expect to see investment management fees continue to grow, and I think that's a mid- to high-single-digit number for the year. That's tracking pretty well, even despite a little bit of volatility in Q1. Our payments business, particularly on a fee equivalent revenue, which as you know, Scott, is the gross fees, continues to be very strong. If you unpacked, for example, what happened in the quarter on deposit service charges, those numbers would have been mid-teens year over year. We continue to get really good activity from our payments team, either selling additional services into existing clients or anchoring with new clients as they come in. No reason to think that that's going to stop.

Anchoring with new clients as they come in.

No reason to think that that's going to stop.

We continue to add new capabilities and payments, whether it's in our portal, our information reporting or things like embedded banking I think all of those are on very good trajectories.

We continue to expect to see those grow so that's again on a gross number kind of low single digits on a net number high sorry, low double digits on a net number high single digits, sorry for that confusion there than corporate services, which is really FX and derivatives.

Sure, um, so 1, you know, is Chris noted, we continue to get gains in our wealth business. So, to the extent, the market cooperates, we'd expect to see, um, Investment Management, fees continue to grow. And I think that's, uh, mid to high single-digit number for the year. So, you know, that's tracking pretty well. Even despite a little bit of, uh, volatility in the first quarter, our payments business, particularly, on a fee, equivalent Revenue. Which, as you

And other hedging so the oil volatility has created some tailwind there if that settles in.

Christopher Gorman: Other hedging. The oil volatility has created some tailwinds there. If that settles in, derivatives tends to follow with loan growth, so that's been very positive. We've seen some good traction in FX as well. I think all of those categories continue to look up and have been consistently strong. The one place that we've called out in the Q4 call, and will continue to be year over year down, but that is not a reflection of the quality of the business, is our commercial real estate servicing business. Again, that's a function of advance rates coming down, clients paying us with deposits versus fees, and some recovery in the industry that causes special servicing and other resolutions to likely be down year over year. Again, nothing negative to say about that business.

Clark Khayat: Other hedging. The oil volatility has created some tailwinds there. If that settles in, derivatives tends to follow with loan growth, so that's been very positive. We've seen some good traction in FX as well. I think all of those categories continue to look up and have been consistently strong. The one place that we've called out in the Q4 call, and will continue to be year over year down, but that is not a reflection of the quality of the business, is our commercial real estate servicing business. Again, that's a function of advance rates coming down, clients paying us with deposits versus fees, and some recovery in the industry that causes special servicing and other resolutions to likely be down year over year. Again, nothing negative to say about that business.

<unk> tends to follow with loan growth. So that's been very positive.

We've seen some good traction in FX as well so I think all of those categories continue to look up and have been consistently strong. The one place that we've called out in the fourth quarter call and we will continue to be year over year down but that is not a reflection of the quality of the business is our commercial real.

Clark Khayat: We continue to add new capabilities in payments, whether it's in our portal, our information reporting, or things like embedded banking. I think all of those are on very good trajectories. We'd continue to expect to see those grow. That's, again, on a gross number, kind of low single digits on a net number. High or sorry, low double digits on a net number. High single digits. Sorry for that confusion there. Then corporate services, which is really FX and derivatives, and other hedging. The oil volatility has created some tailwinds there. If that settles in, derivatives tends to follow with loan growth. That's been very positive. We've seen some good traction in FX as well. I think all of those categories continue to look up and have been consistently strong.

State servicing business.

Again, thats a function of advance rates coming down.

Clients paying us with deposits versus fees and.

Some recovery in the industry that caused the special servicing and other resolutions to likely be down year over year. So again.

You know, Scott is the gross fees continues to be very strong if you unpacked. For example, what happened in the quarter on deposit service charges, those numbers would have been mid, teens year-over-year, so we continue to get really good activity from our payments team. Uh, either selling additional Services into existing clients or, um, anchoring with new clients as they come in. No reason to think that that's going to stop. Uh, we continue to add new capabilities and payments whether it's in our portal, our information reporting or things like embedded banking. I think all of those are on very good trajectories, uh, and we continue to expect to see those grow. So, that's again on a gross number kind of low single digits on a net number high or sorry. Low double digits on a net number High, single digits. Sorry for that confusion there and then Corporate Services, which is really FX and derivatives um and other hedging. So the oil volatility is created some Tailwind.

Nothing.

Negative to say about that business Thats, just the market trends that are affecting it right now.

So in summary.

Christopher Gorman: That's just the market trends that are affecting it right now.

Clark Khayat: That's just the market trends that are affecting it right now.

Expenses and fees, we expect to be relatively close we'd like to see a little bit better on needs, but we're really we're really looking at.

Christopher Gorman: Yeah.

Scott Siefers: Yeah.

Clark Khayat: In summary.

Clark Khayat: That's it.

Scott Siefers: That's it.

Clark Khayat: ... expenses and fees, we expect to be relatively close. We'd like to be a little bit better on fees, but we're really looking at reported fees to be, again, pretty consistent with expense growth over the course of the year, and then adjusted fees being in that mid-single digit range, and on priority fee basis, high single digit.

Clark Khayat: The one place that we called out in the Q4 call and will continue to be year-over-year down, but that is not a reflection of the quality of the business, is our commercial real estate servicing business. Again, that's a function of advance rates coming down, clients paying us with deposits versus fees, and some recovery in the industry that causes special servicing and other resolutions to likely be down year-over-year. Again, nothing negative to say about that business. That's just the market trends that are affecting it right now.

<unk> fees to be.

Pretty consistent with expense growth over the course of the year and then adjusted fees being in that mid single digit range and priority fee basis high single digits.

There, if that settles in um you know, derivatives tends to follow with loan growth, so that's been very positive um and we've seen some good Traction in FX as well. So I think all of those categories continue to look up and and you know have been consistently strong, the 1 place that we called out in the fourth quarter call and we'll continue to be year-over-year down, but that is not a reflection of the quality of the business is our commercial real estate servicing business.

Excellent alright, thank you very much.

Sure.

Thank you Scott.

Scott Siefers: Excellent. All right. Good. Thank you very much.

Our next question will come from the line of Michael <unk> with Wells Fargo. Mike Your line is open.

Christopher Gorman: Sure.

Clark Khayat: Sure.

Operator: Thank you, Scott. Our next question will go to the line of Mike Mayo with Wells Fargo. Mike, your line is open.

Hi.

Uh, and again, that's a function of advanced rates coming down, uh, clients paying us with the deposits versus fees and some recovery in the industry that causes special servicing and and other resolutions to likely be down year-over-year. So again, um, nothing

You already answered part of the question about your investment banking and debt placement business and I know you've built that business.

Christopher Gorman: Yeah. Understood.

Scott Siefers: Yeah. Understood.

Mike Mayo: Hi. Chris, you've already answered part of the question about your investment banking and debt placement business, and I know you built that business, a big organic grower. When you said you're looking for mid-single digit growth this year, that's not so exciting, right? Like waiting this long for capital markets to come back. I know it's been skewed towards the large mergers, and you're saying it's not really back yet. I guess that mid-single digit guide, is that just what it is? Or is that what it is given your thoughts that activity will be delayed maybe until next year? Thank you.

Negative to say about that business, that's just the market trends that are affecting it right now.

Clark Khayat: In summary, expenses and fees, we expect to be relatively close. We'd like to be a little bit better on fees, but we're really looking at reported fees to be, again, pretty consistent with expense growth over the course of the year. Adjusted fees being in that mid-single digit range and priority fee bases high single digit.

Big organic grower.

When you said, you're looking for mid single digit growth this year.

Like that's like that's so exciting right.

Strong for cap markets come back and I know, it's been skewed towards the large mergers.

And.

You're saying, it's not really back yet and so I get that mid single digit guide is that just like what it is.

Range and priority feed bases, High single digit.

Christopher Gorman: Excellent. All right, good. Thank you very much.

Scott Siefers: Excellent. All right, good. Thank you very much.

Or is that what it is given your thoughts that activity will be delayed maybe until next year. Thank you.

Excellent. All right, good. Thank you very much.

Clark Khayat: Sure.

Sure.

Operator 1: Thank you, Scott. Our next question will go to the line of Mike Mayo with Wells Fargo. Mike, your line is open.

Operator: Thank you, Scott. Our next question will go to the line of Mike Mayo with Wells Fargo. Mike, your line is open.

Thank you, Scott.

Well first of all good morning, Mike up that's what it is based on where we are right now in the market.

Mike Mayo: Hi. Chris, you've already answered part of the question about your investment banking and debt placement business, and I know you've built that business, big organic grower. When you said you're looking for mid-single digit growth this year, that's not so exciting, right? Like waiting this long for capital markets to come back. I know it's been skewed towards the large mergers, and you're saying it's not really back yet. I guess that mid-single digit guide, is that just like what it is? Or is that what it is given your thoughts that activity will be delayed maybe until next year? Thank you.

Our next question will go to the line of Mike from Wells Fargo. Mike, your line is open.

Christopher Gorman: Well, first of all, good morning, Mike. That's what it is based on where we are right now in the market. I do take a lot of comfort in that our Q1 was a record. It was a record after last Q1 was a record. Last year was our second best. Our pipelines are at record levels. If we could get some stability out there in terms of rates and in terms of people's perspective going forward, I think there's a huge opportunity here. Right now, as we look at it, what we're comfortable with is guiding 5% to 6%, understanding that the business has a lot of momentum.

Chris Gorman: Well, first of all, good morning, Mike. That's what it is based on where we are right now in the market. I do take a lot of comfort in that our Q1 was a record. It was a record after last Q1 was a record. Last year was our second best. Our pipelines are at record levels. If we could get some stability out there in terms of rates and in terms of people's perspective going forward, I think there's a huge opportunity here. Right now, as we look at it, what we're comfortable with is guiding 5% to 6%, understanding that the business has a lot of momentum.

I do take a lot of comfort in that our first quarter was a record.

It was a record after last first quarter was a record last year was our second best our pipelines are at record levels. If we could get some stability out there in terms of in terms of rates and in terms of.

Hi, uh, press. You've already answered part of the question about your investment banking in-depth placement business, and I know you built that business—uh, big organic grower,

But when you said, you're looking for Mid single digit growth this year.

People's perspective going forward.

Like that's like not so exciting, right? Like waiting this long for Capital markets to come back and I know it's been skewed toward the large mergers,

I think I think there's a huge opportunity here, but right now as we look at it.

What we're comfortable with is guiding 5% to 6% understanding that the business has a lot of momentum.

And um, let me saying it's not really back yet and so I guess that mid signal digit guide if that just like what it is uh, or that what it is.

Christopher Gorman: Well, first of all, good morning, Mike. That's what it is based on where we are right now in the market. I do take a lot of comfort in that our Q1 was a record. It was a record after last Q1 was a record. Last year was our second-best. Our pipelines are at record levels. If we could get some stability out there in terms of rates and in terms of people's perspective going forward, I think there's a huge opportunity here. Right now, as we look at it, what we're comfortable with is guiding 5% to 6%, understanding that the business has a lot of momentum.

Given your thoughts that activity will be delayed maybe until next year. Thank you.

What do you think the differences for the very large mergers and we heard from the biggest banks is that.

Mike Mayo: What do you think the difference is for the very large mergers? What we heard from the biggest banks is that, dereg, pent-up demand, still very high stock prices, and liquidity, that's all transcending the conflict. You're seeing these pipelines get replenished and all that with more of your middle-market companies where the activity is still subdued.

T Reg and pent up demand.

Still very high stock prices.

Liquidity.

That's all transcending the conflict and Youre seeing these pipelines get replenished and all of that with more of your middle market companies.

Activity is still subdued.

Yes, So I think it's I think it's a couple of things one.

Those are transactions that obviously require a lot of regulatory approval and Theres. No question that regulatory approval has improved geometrically. So that's the first thing second thing is many of those deals are stock for stock or a huge component of stock and therefore don't require nearly as much financing.

Christopher Gorman: Yeah. I think it's a couple things. One, those are transactions that obviously require a lot of regulatory approval, and there's no question that regulatory approval has improved geometrically. That's the first thing. Second thing is many of those deals are stock for stock or a huge component of stock, and therefore, don't require nearly as much financing. The third thing is, typically, I've always noticed as you come out of a rut, and we have been in a rut in M&A, the first deals to start coming out are really large, high-quality deals. I think that's what you've seen. I think it will percolate to the entire market.

Chris Gorman: Yeah. I think it's a couple things. One, those are transactions that obviously require a lot of regulatory approval, and there's no question that regulatory approval has improved geometrically. That's the first thing. Second thing is many of those deals are stock for stock or a huge component of stock, and therefore, don't require nearly as much financing. The third thing is, typically, I've always noticed as you come out of a rut, and we have been in a rut in M&A, the first deals to start coming out are really large, high-quality deals. I think that's what you've seen. I think it will percolate to the entire market.

In the market, um, I do take a lot of comfort in that our first quarter was a record. It—it was a record after last first quarter was a record. Last year was our second best. Our pipelines are at record levels. If we could get some stability out there in terms of, in terms of rates, and in terms of, uh, people's perspective going forward, um, you know, I think—I think there's a few opportunity here, um, but right now as we look at it, um, you know, what we're comfortable with is guiding 5 to 6%, understanding that the business has a lot of momentum.

Mike Mayo: What do you think the difference is for the very large mergers? What we heard from the biggest banks is that de-reg, pent-up demand, still very high stock prices, and liquidity, that's all transcending the conflict. You're seeing these pipelines get replenished and all that with more of your middle-market companies where the activity is still subdued.

And then the third thing is typically I've always noticed as you've come out of this.

And what do you think the difference is for the, the very large mergers. And but we heard from the, the biggest banks is that

And we have been in a rut and M&A. The first deals to start coming out a really large high quality deals and I think that's what you've seen and.

I think it will matriculate to the entire market.

Hey, Mike one other element we are seeing more consistently also sorry.

Christopher Gorman: Yeah. I think it's a couple things. One, those are transactions that obviously require a lot of regulatory approval, and there's no question that regulatory approval has improved geometrically. That's the first thing. Second thing is many of those deals are stock for stock or a huge component of stock and therefore don't require nearly as much financing. Then the third thing is, typically, I've always noticed as you come out of a rut, and we have been in a rut in M&A, the first deals to start coming out are really large, high-quality deals, and I think that's what you've seen. I think it will percolate to the entire market.

D Rag, and pent-up, demand and still very high, stock prices and liquidity. Um, that's all transcending. The, the conflict and you're seeing these pipelines, get replenished, and all that with more of your Middle Market companies, where the activity is still subdued.

Clark Khayat: Mike, one other element we're seeing more consistently also, sorry, on the middle market end, which as you know, is heavily sponsor-backed. We're seeing more continuation vehicles as an option versus outright sales, and those obviously don't always translate to the same level of activity.

Middle market in which as you know is heavily sponsored back.

Yeah, so I think it's a couple things. One, um, those are transactions that obviously—

We're seeing more continuation vehicles as an option versus outright sales and those obviously don't always translate to the same level of activity.

Require a lot of regulatory approval and there's no question that regulatory approval has improved geometrically. So that's the first thing. Second thing is,

That all makes sense would you say that some of the same factors, though that could drive more loan demand due to capex could also drive.

Mike Mayo: That all makes sense. Would you say that some of the same factors, though, that could drive more loan demand due to CapEx, could also drive M&A? In other words, to the extent that middle market CEOs become more comfortable, then they're more likely to spend for CapEx, and maybe therefore, they're more likely to do M&A. What's the demand for CapEx-driven financing?

Merger.

Other words to the extent that middle market CEO become more comfortable than theyre more likely to spend for capex and maybe therefore theyre more likely to these two mergers what's the demand for Capex driven financing.

Clark Khayat: Mike, one other just element we're seeing more consistently also, sorry. On the middle market end which as you know is heavily sponsor-backed. We're seeing more continuation vehicles as an option versus outright sales, and those obviously don't always translate to the same level of activity.

Many of those deals are stock for stock or a huge component of stock and therefore, don't require nearly as much financing. Um, and then, the third thing is, you know, typically, I've always noticed as you come out of this of a rut and we have been in a rut in m&a, the first deals to start coming out are really large high-quality deals, and I think that's what you've seen and um, I think it will metric to the entire Market.

Well I don't think Theres any question I think as people get comfortable with the forward view and get comfortable kind of where they think rates are going to be I think that will be an impetus to transact and I think having gone through a bunch of market disruptions I think once people see that.

Christopher Gorman: Well, I don't think there's any question. I think as people get comfortable with the forward view and get comfortable kind of where they think rates are going to be, I think that will be an impetus to transact. I think having gone through a bunch of market disruptions, I think once people see that sort of the coast is clear, I think there's probably a lot of people that are gearing up to go, and we have many in our backlog.

Chris Gorman: Well, I don't think there's any question. I think as people get comfortable with the forward view and get comfortable kind of where they think rates are going to be, I think that will be an impetus to transact. I think having gone through a bunch of market disruptions, I think once people see that sort of the coast is clear, I think there's probably a lot of people that are gearing up to go, and we have many in our backlog.

Hey, Mike, one other just element we’re seeing more and more, consistently also—sorry, on the middle market end, which, as you know, is heavily sponsor-backed.

We're seeing more continuation Vehicles, as an option versus outright sales and those obviously don't always translate to the same level of activity.

Mike Mayo: That all makes sense. Would you say that some of the same factors, though, that could drive more loan demand due to CapEx could also drive merger? In other words, to the extent that middle market CEOs become more comfortable, then they're more likely to spend for CapEx, and maybe therefore they're more likely to do mergers. What's the demand for CapEx-driven financing?

That's sort of the coast is clear I think theres, probably a lot of people that are gearing up to go and we have many in our backlog.

Alright, thank you.

That all makes sense. Would you say that some of the same factors, though, that could drive more loan, demand due to capex, could also Drive?

Thank you Mike.

Mike Mayo: All right. Thank you.

Our next question will go to the line of Matt <unk> with Morgan Stanley. Your line is open.

Christopher Gorman: Thank you, Mike.

Chris Gorman: Thank you, Mike.

Operator: Thank you, Mike. Our next question will go to the line of Manan Gosalia with Morgan Stanley. Manan, your line is open.

Okay.

Hey, good morning.

Chris.

Chris Clark.

Merger. Uh, in other words, the extent that Middle Market, CEO has become more comfortable, then they're more likely to spend for capex and maybe therefore, they're more likely to do mergers. So what the demand for capex driven financing

Manan Gosalia: Hey, good morning.

Since you gave the <unk>.

Christopher Gorman: Hey, Manan.

Chris Gorman: Hey, Manan.

OTC guide.

Manan Gosalia: Clark, since you gave the ROTCE guide, NII and loan growth are trending better. You noted 100 basis points or so of benefit from Basel endgame. That's fairly sizable. I'm assuming you should be able to use some of it. Would that, I guess, all be upside as we think about the 15% or so exit ROTCE for 2027?

NII and loan growth are trading better.

You noted a 100 basis points or so of benefit from Basel and game that's fairly sizable.

I am assuming you should be able to use some of it.

Would that.

I guess all be upside as we think about.

The 15% or so exit ROTC for 2027.

Well, I don't think there's any question I think as people get comfortable with the forward View and get comfortable, kind of where they think rates are going to be, I think that will be an impetus to transact and I think having gone through a bunch of Market disruptions. I think once people see that the that, that sort of the coast is clear, I think there's probably a lot of people that are gearing up to go and we have many in our backlog.

Mike Mayo: All right. Thank you.

Well clearly I think as the rules get finalized we will have greater flexibility, we mentioned to the tune of if you just look at the standard approach a 100 basis points or so so we'll have we'll have more to say about that.

Christopher Gorman: Thank you, Mike.

All right, thank you.

Thank you, Mike.

Operator 1: Thank you, Mike. Our next question will go to the line of Manan Gosalia with Morgan Stanley. Manan, your line is open.

Operator: Thank you, Mike. Our next question will go to the line of Manan Gosalia with Morgan Stanley. Manan, your line is open.

Clark Khayat: Well, clearly, I think as the rules get finalized, we will have greater flexibility. We mentioned to the tune of, if you just look at the standard approach, 100 basis points or so. We'll have more to say about that after the final rules come out and we make final decisions with respect to standard approach or ERBA.

Chris Gorman: Well, clearly, I think as the rules get finalized, we will have greater flexibility. We mentioned to the tune of, if you just look at the standard approach, 100 basis points or so. We'll have more to say about that after the final rules come out and we make final decisions with respect to standard approach or ERBA.

Thank you, Mike.

Our next question, will go to the line of Minong gasalia with Morgan Stanley, Manon. Your line is open.

Manan Gosalia: Hey, good morning.

Clark Khayat: Good morning.

Hey, good morning.

Manan Gosalia: Chris, Clark, since you gave the ROTCE guide, NII and loan growth are trending better. You noted 100 basis points or so of benefit from Basel III Endgame. That's fairly sizable. I'm assuming you should be able to use some of it. Would that, I guess, all be upside as we think about the 15% or so exit ROTCE for 2027?

After we have after the final rules come out and we make final decisions with respect to standard approach or <unk>.

Got it.

Okay, Great and then.

You noted that I guess the balance sheet.

Manan Gosalia: Got it. Okay, great. You noted that, I guess, the balance sheet should stay fairly flat in 2026, which would mean that the LDR moves a little bit higher. How should we think about that going into 2027? Is there still more room to take the LDR up? As we think about deposits and maybe some of the higher cost deposits, at what point does it make sense from a relationship perspective and a franchise perspective to keep and pay up for them rather than let them leave?

Being fairly flat in <unk>.

Um, so, uh, Chris Clark, um, you know, since you gave the, uh, ROTC guide, um, knee and loan growth, the training better, um, you know, you know, at 100 basis points or so of benefit from baseline gain. You know, that's fairly sizable. Um, I'm assuming you should be able to use, uh, some of it. Um, would that, um,

2026, which would mean that the LDR moves a little bit higher.

Just how should we think about that going into 2027 is there still more room to.

I guess I'll be upside as we think about the the 15% or so exit, row, say for 2027

Clark Khayat: Well, clearly, I think as the rules get finalized, we will have greater flexibility. We mentioned to the tune of, if you just look at the Standardized Approach, 100 basis points or so. We'll have more to say about that after the final rules come out and we make final decisions with respect to Standardized Approach or ERBA.

It did take the LDR up and.

As we think about.

Deposits and maybe some of the higher cost deposits at what point does it make sense from a relationship perspective, and a franchise perspective to keep in payout for them rather than let them.

Well, clearly, I think as the rules get finalized, we will have greater flexibility. We mentioned, to the tune of, if you just look at the standard approach, 100 basis points or so. So we'll have more.

Yes.

That is correct. So I think you'll hit that right I mean.

Um, you know, after we have after the final rules come out and we make final decisions with respect to standard approach or erba.

Clark Khayat: Yeah. Hey, Manan, it's Clark. I think you hit that right. On a general basis, that last point is probably the most important here, which is, as we've talked about before, I'll just talk to commercial for the benefit of this answer. 80% of those deposits are operating accounts, and 95%, 96% of the deposits come from clients with operating deposits. Meaning these are strong relationships. We know where the dollars are, and we're making often name-by-name decisions month-by-month about where the bid is on those excess deposits and whether we want to fund with those or not. In Q1, we let some of those go. We did that last year in H1 and then brought them back in H2. I would not be surprised if that happened again this year.

On a general basis that last point is probably.

Got it. Um, okay, great. And then uh,

The most important here, which is <unk>.

We've talked about before I'll, just I'll just talk to commercial FERC for the benefit of this answer 80% of those deposits.

Our operating accounts and $95, 96% of the deposits come from clients with operating deposits deposits, meaning.

These are strong relationships, we know where the dollars are and we're making often name by name decisions month by month about where the bid is on those excess deposits and whether we want to fund with those or not so in the first quarter, we let some of those go.

Point. Does it make sense?

From a relationship perspective and a franchise perspective, to keep and pay up for them rather than let them—

Clark Khayat: Yeah. Hey, Mann, it's Clark. I think you hit that right. On a general basis, that last point is probably the most important here, which is, as we've talked about before, I'll just talk to commercial for the benefit of this answer. 80% of those deposits are operating accounts, and 95%, 96% of the deposits come from clients with operating deposits. Meaning these are strong relationships. We know where the dollars are, and we're making often name-by-name decisions month-by-month about where the bid is on those excess deposits and whether we want to fund with those or not. In Q1, we let some of those go. We did that last year in H1 and then brought them back in H2. I would not be surprised if that happened again this year.

We did that last year in the first half and then brought them back in the second half I would not be surprised if that.

Leave. Yeah, um, hey man it's Clark. So I I think you hit that right? I mean

If that happened again this year and as we go forward.

On a general basis, that last point is probably,

<unk> 2026, and we start to see some balance sheet growth.

Clark Khayat: As we go forward past 2026, and we start to see some balance sheet growth, we will have the opportunity to make those calls as we do today. My guess is if we're starting to grow the balance sheet, we will look to fund with client deposits wherever we can, as long as it makes sense on the margin. The nice thing about those commercial deposits is they are at some level individual decisions, and we're not sort of repricing the whole book across the board. This is why, as I mentioned with the hybrid accounts earlier, that we've gotten real benefit out of that because we get advantageous rates there, and we get deeper client relationships as we provide them with more and more payment services.

We will have the opportunity to make those calls as we do today and my guess is if we're starting to grow the balance sheet. We will look to fund with client deposits wherever we can as long as as long as it makes sense on the margins. The nice thing about those commercial deposits as they are at some level individual decisions and we're not.

The most important here which is you know as we've talked about before of this I'll just talk to commercial for for the benefit of this answer. You know, 80% of those deposits are operating accounts and 95 96% of the deposits come from clients with operating depos, deposits, meaning

Sort of repricing the whole book across the board, but this is why as I mentioned with the hybrid accounts earlier that that we've gotten real benefit out of that because we get.

Fantasias rates there.

And we get.

If our client relationships as we provide them with more and more payment services.

Clark Khayat: As we go forward past 2026, and we start to see some balance sheet growth, we will have the opportunity to make those calls as we do today. My guess is if we're starting to grow the balance sheet, we will look to fund with client deposits wherever we can, as long as it makes sense on the margin. The nice thing about those commercial deposits is they are at some level individual decisions, and we're not sort of repricing the whole book across the board. This is why as I mentioned with the hybrid accounts earlier that we've gotten real benefit out of that because we get advantageous rates there, and we get deeper client relationships as we provide them with more and more payment services.

To add to that.

We would we wouldn't let these excess deposits go if we thought it put our relationship at risk. These are excess deposits with people that are very good customers of ours.

Christopher Gorman: Yeah. Just to add to that, Manan, we wouldn't let these excess deposits go if we thought it put our relationship at risk. These are excess deposits with people that are very good customers of ours. As Clark said, 81% of our commercial deposits are core accounts, core operating. This goes back to our focus on primacy going back a decade. We really have the flexibility to move those in and out as we need to.

Chris Gorman: Yeah. Just to add to that, Manan, we wouldn't let these excess deposits go if we thought it put our relationship at risk. These are excess deposits with people that are very good customers of ours. As Clark said, 81% of our commercial deposits are core accounts, core operating. This goes back to our focus on primacy going back a decade. We really have the flexibility to move those in and out as we need to.

As Clark said, 81% of our commercial deposits are core accounts core operating this goes back to our focus on privacy going back a decade. So.

These are strong relationships. We know where the dollars are and we're making often named by name decisions, month by month, about where the bid is on those excess deposits and whether we want to fund with those or not. So in the first quarter, we let some of those go. Um, we did that last year in the first half and then brought them back in the second half. I would not be surprised if that, um, if that happened again this year and as we go forward past 2026 and we start to see some balance sheet growth. Um, we will have the opportunity to make those calls uh, as we do today, and my guess is if we're starting to grow the balance sheet, we will look to fund with client deposits wherever we can as long as it as long as it makes sense. On the margin, the nice thing about those commercial deposits is, they are

We really have the flexibility to move those in and out as we need to.

I'd say Theres, one last point, just worth making because we talked about.

Clark Khayat: I'd say there's one last point just worth making because we talked about in commercial mortgage servicing, some clients paying us with deposits instead of hard fees. We took deposits back on balance sheet in Q1. We also then, just to manage the deposit base, took some deposits off balance sheet. Those could be brought back if we needed additional funding. We have a fair bit of levers to fund as it grows, and we're not sitting here overly concerned to Chris's point about the marginal dollar funding if a quality loan is available.

In commercial mortgage servicing some clients paying us with deposits instead of hard fees. So we took.

Deposits back on balance sheet in the first quarter. We also then just to manage the deposit base took some deposits off balance sheet.

Christopher Gorman: Just to add to that, Manan, we wouldn't let these excess deposits go if we thought it put our relationship at risk. These are excess deposits with people that are very good customers of ours. As Clark said, 81% of our commercial deposits are core accounts, core operating. This goes back to our focus on primacy going back a decade. We really have the flexibility to move those in and out as we need to.

At some level individual decisions and we're not sort of repricing the whole book across the board. But this is why, you know, as I mentioned with the hybrid accounts earlier that that we've gotten real benefit out of that because we get advantageous rates there. Um, and we get, you know, deeper client relationships as we provide them with more and more payment services.

And those can be brought back if we needed additional funding. So we have a fair bit of levers to fund as it grows we're not sitting here overly concerned to Chris's point about the marginal dollar funding if it quality alone is available.

Got it thank you.

Clark Khayat: I'd say there's one last point just worth making because we talked about in commercial mortgage servicing, some clients paying us with deposits instead of hard fees. We took deposits back on balance sheet in Q1. We also then, just to manage the deposit base, took some deposits off balance sheet. Those could be brought back if we needed additional funding. We have a fair bit of levers to fund as it grows. We're not sitting here overly concerned to Chris's point about the marginal dollar funding if a quality loan is available.

Thank you Manav.

Manan Gosalia: Got it. Thank you.

Question will go to the line of Ebrahim <unk> with Bank of America Abraham Your line is open.

Operator: Thank you, Manan. Our next question will go to the line of Ebrahim Poonawala with Bank of America. Ebrahim, your line is open.

Thank you good morning.

I guess just.

Two sort of macro level question, but Chris you should okay.

Ebrahim Poonawala: Thank you. Good morning. I guess just two sort of macro level questions, but Chris, you should have a great perspective on this. When we think about the AI data center loans that are being made right now, is it your understanding that most of that is being distributed in the capital markets? Or when we think about loan growth at the banks, is some of that being syndicated to banks and it's coming on bank balance sheets? Who knows how to think about AI two years from now in these investments, but is there risk tied to this data center spending that is being put on bank balance sheets at Key and just broadly across the industry?

Okay perspective on this when we think about.

No.

And just to add to that we would we wouldn't let these excess deposits go. If we thought it put our relationship at risk, these are excess deposits with people that are very good customers of ours. Um, as Clark said 81% of our commercial deposits are core accounts, core operating, this goes back to our focus on privacy, going back a decade. So um, but we really have the flexibility to move those in and out as we need to and I'd I'd say there's 1 last point just worth making because we talked about um, in commercial mortgage servicing. Some clients paying us with their deposits instead of hard fees. So we took um deposits back on balance sheet in the first quarter. We also then just to to manage the deposit based took some deposits off balance sheet.

Data center loans that have been being made right now.

Is it your understanding that most of that is being distributed in the capital markets are when we think about loan growth at the banks and some of that being syndicated to banks and it's coming on bank balance sheets and.

Um, and those can be brought back if we needed additional funding. So we have a fair bit of levers to fund as it grows. And I'm, you know, we're not sitting here overly concerned to Chris's point about the marginal dollar funding if a quality loan is available.

Who knows how to think about AI two years from now in these investments, but it did.

Manan Gosalia: Got it. Thank you.

Got it. Thank you.

Operator 2: Thank you, Manan. Our next question will go to the line of Ebrahim Poonawala with Bank of America. Ibrahim, your line is open.

Operator: Thank you, Manan. Our next question will go to the line of Ebrahim Poonawala with Bank of America. Ibrahim, your line is open.

This data center spending that is being put on bank balance sheets at key and just broadly.

Thank you, Milan.

Across the industry.

Our next question will go to the line of Abraham at poonawalla with Bank of America. Ibrahim your line is open.

Ebrahim Poonawala: Thank you. Good morning. Again, just two sort of macro level questions, but Chris, you should have a great perspective on this. When we think about the AI data center loans that are being made right now, is it your understanding that most of that is being distributed in the capital markets? Or when we think about loan growth at the banks, is some of that being syndicated to banks and it's coming on bank balance sheets? Who knows how to think about AI two years from now in these investments. Is there risk tied to this data center spending that is being put on bank balance sheets at Key and just broadly across the industry?

So it's a great question and the answer is the funding for these data center build outs are in the capital markets and also at some of the banks and we've been funding we've been in the power business for a long time and as a consequence.

Thank you. Good morning.

um, again, just um,

Christopher Gorman: It's a great question. The answer is the funding for these data center build-outs are in the capital markets and also at some of the banks. We've been in the power business for a long time, and as a consequence, I think we do it pretty well. There's all kinds of nuances in these deals. Who pays for the cost overruns, for example, et cetera? Who has the right to do what under a bunch of circumstances? We feel very good about the loans that we have, but these loans are both in the capital markets and in the banking system.

Chris Gorman: It's a great question. The answer is the funding for these data center build-outs are in the capital markets and also at some of the banks. We've been in the power business for a long time, and as a consequence, I think we do it pretty well. There's all kinds of nuances in these deals. Who pays for the cost overruns, for example, et cetera? Who has the right to do what under a bunch of circumstances? We feel very good about the loans that we have, but these loans are both in the capital markets and in the banking system.

Sort of macro-level questions, but Chris, you should—

have a great perspective on this, when we think about,

um, the AI

I think we do it pretty well.

Data center loans that are being, uh, being made right now.

There's all kinds of nuances in these deals who pays for the cost overruns for example, et cetera, et cetera, who has the right to do what under a bunch of circumstances, we feel very good about the loans that we have but these loans are both in the capital markets and in the banking system.

Yes, Chris I, just might add that our data center exposure.

Is fairly de Minimis. We've also looked at what we call AI adjacent type exposure.

Mohit Ramani: Yeah, Chris, I just might add that our data center exposure is fairly de minimis. We've also looked at what we've called AI-adjacent type exposure, and kind of worked with our board on that as well. Again, very well controlled and monitored. We're really not chasing a lot, again, these larger projects or hyperscalers. Again, it's very well managed.

Who knows how to think about AI 2 years from now and these Investments. But is there risk tied to this data center spending? That is being put on bank, balance sheets at Key and just broadly, uh, uh, in across the industry.

And kind of work with our board on that as well and again very very well controlled and monitor we're really not chasing a lot again, these large larger projects or hyper scaler.

And so again, it's very well managed.

Got it and just one quick follow up Chris I think you talked about this when we think about investment heico's far longer than political cycles.

Ebrahim Poonawala: Got it. Just one quick follow-up, Chris, I think you talked about this. When we think about investment cycles are far longer than political cycles, are you actually seeing some element of manufacturing reshoring showing up in your footprint or across your businesses that's leading to longer-term domestic CapEx, which creates loan growth opportunities not just this year but everything about the next 2 to 5 years?

Christopher Gorman: Et cetera. Who has the right to do what under a bunch of circumstances. We feel very good about the loans that we have, but these loans are both in the capital markets and in the banking system.

Are you actually seeing some element of manufacturing the shorting showing up in your footprint or across your businesses, that's leading to longer term domestic capex.

Mo: Yeah, Chris, I just might add that our data center exposure is fairly de minimis. We've also looked at what we've called AI adjacent type exposure, and kind of worked with our board on that as well. Again, very well controlled and monitored. We're really not chasing a lot, again, these larger projects or hyperscalers. Again, it's very well managed.

Clark Khayat: Yeah, Chris, I just might add that our data center exposure is fairly de minimis. We've also looked at what we've called AI adjacent type exposure, and kind of worked with our board on that as well. Again, very well controlled and monitored. We're really not chasing a lot, again, these larger projects or hyperscalers. Again, it's very well managed.

So it's a great question. The answer. The answer is the funding for these data center. Build outs are in the capital markets and also at some of the banks and, you know, we've been funding, we've been in the power business for a long time, and as a consequence, um, I think we do it pretty well. Um, there's all kinds of nuances in these deals who pays for the cost overruns. For example. Etc. Etc. Um, who has the right to do, what, under a bunch of circumstances, we feel very good about the lungs that we have, but these loans are both in the capital markets, and in the banking system,

Loan growth opportunities not just this year, but everything about the next two to five years.

So we're starting to see that I could give you. Some specific examples of people that are in.

Christopher Gorman: We're starting to see that. I could give you some specific examples of people, and typically it plays out like this. It's people expanding existing facilities in lieu of having contract manufacturers that are overseas. The other thing that we are seeing is people relocating from the Far East to Mexico, really shortening their supply lines, and taking control that way. We're starting to see it, but I wouldn't say it's the biggest driver at all of, say, loan growth. It's very early days on that front.

Chris Gorman: We're starting to see that. I could give you some specific examples of people, and typically it plays out like this. It's people expanding existing facilities in lieu of having contract manufacturers that are overseas. The other thing that we are seeing is people relocating from the Far East to Mexico, really shortening their supply lines, and taking control that way. We're starting to see it, but I wouldn't say it's the biggest driver at all of, say, loan growth. It's very early days on that front.

Typically it plays out like this is people expanding existing facilities in lieu of having contract manager.

Manufacturers that are overseas. The other thing that we are seeing is people relocating.

As well. And again, very, very well controlled and monitored. We're really not chasing a lot, again, these large, larger projects or hyperscalers. Um, and so again, it's very well managed.

Ebrahim Poonawala: Got it. Just one quick follow-up, Chris. I think you talked about this. When we think about investment cycles are far longer than political cycles, are you actually seeing some element of manufacturing reshoring showing up in your footprint or across your businesses that's leading to longer-term domestic CapEx, which creates loan growth opportunities not just this year, but are we thinking about the next 2 to 5 years?

From the far east to Mexico, and really shortening there.

Got it and just 1 quick, follow-up. Chris, I think you talked about this when we think about investment Cycles are far longer than political Cycles.

Supply lines.

Taking control that way so we're starting to see it but I wouldn't say, it's the biggest driver at all of say loan growth. It's very early days on that front.

Got it thank you.

Are you actually seeing some element of manufacturing reassuring, showing up in your footprint, or across your businesses? That leading to longer term? Domestic capex? Which creates loan growth opportunities, not just this year, but everything about the next 2 to 5 years.

Christopher Gorman: We're starting to see that. I could give you some specific examples of people, and typically it plays out like this. It's people expanding existing facilities in lieu of having contract manufacturers that are overseas. The other thing that we are seeing is people relocating from the Far East to Mexico and really shortening their supply lines, and taking control that way. We're starting to see it, but I wouldn't say it's the biggest driver at all of, say, loan growth. It's very early days on that front.

Thank you.

Ebrahim Poonawala: Got it. Thank you.

Thank you Ebrahim.

Christopher Gorman: Thank you.

Chris Gorman: Thank you.

Our next question will go to the line of David <unk> with Jefferies. David Your line is open.

Operator: Thank you, Ebrahim. Our next question will go to the line of David George with Jefferies. David, your line is open.

Hi, Thanks for taking my question I wanted to ask about credit quality, you mentioned about the NPL increase was driven by two credits in utilities and multifamily are you able to point to any emerging trends by sector or geography that you're watching more closely.

David George: Hi. Thanks for taking the question. I wanted to ask about credit quality. You mentioned about the NPL increase was driven by two credits in utilities and multifamily. Are you able to point to any emerging trends by sector or geography that you're watching more closely?

David Chiaverini: Hi. Thanks for taking the question. I wanted to ask about credit quality. You mentioned about the NPL increase was driven by two credits in utilities and multifamily. Are you able to point to any emerging trends by sector or geography that you're watching more closely?

Well, we're always looking at certain sectors as it relates to those two when you have it.

Christopher Gorman: Well, we're always looking at certain sectors. As it relates to those two, when you have it kind of bumping along the bottom, there'll always be one deal or two. Neither of those do we look at as systemic in any way. We're watching a few areas as we always are, things like agriculture, things like transportation. There's nothing that each of those are idiosyncratic in their nature.

Chris Gorman: Well, we're always looking at certain sectors. As it relates to those two, when you have it kind of bumping along the bottom, there'll always be one deal or two. Neither of those do we look at as systemic in any way. We're watching a few areas as we always are, things like agriculture, things like transportation. There's nothing that each of those are idiosyncratic in their nature.

It kind of bumping along the bottom there will always be one deal or two neither of those do we look at is systemic in any way.

So we're starting to see that I could give you some specific examples of people that are and, and typically it, it plays out like this. It's people expanding existing facilities in lie of having contract manager me, contract manufacturers that are overseas. The other thing that um we are seeing is people relocating um from the Far East to Mexico and really shortening their um their supply lines uh and and taking control that way. So we're starting to see it but I wouldn't say it's the biggest driver at all of say loan growth. It's it's very early days on that front.

Ebrahim Poonawala: Got it. Thank you.

Christopher Gorman: Thank you.

Got it. Thank you.

We're watching a few areas as we always are things like agriculture things like transportation, but theres nothing that each of those are idiosyncratic in their nature.

Thank you.

Operator 3: Thank you, Ebrahim. Our next question will go to the line of David Chiaverini with Jefferies. David, your line is open.

Operator: Thank you, Ebrahim. Our next question will go to the line of David Chiaverini with Jefferies. David, your line is open.

And again, just to remind you that slight uptick.

Thank you, Abraham. Our next question will go to the line of David. She has verini with Jeffrey's David. Your line is open.

Not private credit related.

Mohit Ramani: Again, just a reminder, that slight uptick was not private credit related. Again, just to Chris's point, just idiosyncratic so.

But again, just again to Chris's point just idiosyncratic.

Thanks for that and then shifting over to when thinking about expenses and you mentioned about the.

David George: Thanks for that. Shifting over to when thinking about expenses and you mentioned about the hiring of frontline bankers. Curious, is there more to come there? How is the pipeline looking?

David Chiaverini: Thanks for that. Shifting over to when thinking about expenses and you mentioned about the hiring of frontline bankers. Curious, is there more to come there? How is the pipeline looking?

The hiring of frontline bankers curious is there more to come there and how is the pipeline looking.

Hi. Thanks for taking the question. I wanted to ask about credit quality. You mentioned about the npl increase was driven by 2 credits and utilities and multi family. Are you able to point to any emerging Trends by sector or geography that you're watching more closely?

Christopher Gorman: Well, we're always looking at certain sectors as it relates to those two when you have it kind of bumping along the bottom. There'll always be one deal or two. Neither of those do we look at as systemic in any way. We're watching a few areas as we always are. Things like agriculture, things like transportation. There's nothing that each of those are idiosyncratic in their nature.

So last year, we talked a lot about the fact that we hired we grew our sales forces by 10%.

Christopher Gorman: Last year, we talked a lot about the fact that we hired, we grew our sales forces by 10% collectively in our investment banking, in our wealth business, and our payments business. We continue to hire people in all of those businesses. Those are our targeted fee businesses, where you'll see in our report out today we grew about 12% in the aggregate. We track all of this very closely, and we're pleased with the trajectory of the people we've been able to hire and as a consequence, we'll continue to do that.

Chris Gorman: Last year, we talked a lot about the fact that we hired, we grew our sales forces by 10% collectively in our investment banking, in our wealth business, and our payments business. We continue to hire people in all of those businesses. Those are our targeted fee businesses, where you'll see in our report out today we grew about 12% in the aggregate. We track all of this very closely, and we're pleased with the trajectory of the people we've been able to hire and as a consequence, we'll continue to do that.

<unk> and our investment banking and our wealth business and our payments business, we continue to hire people.

In all of those businesses those are targeted fee businesses, where youll see in our report out today, we grew about 12% in the aggregate.

Mo: Again, just a reminder, that slight uptick was not private credit related. Again, just to Chris's point, just idiosyncratic so.

Clark Khayat: Again, just a reminder, that slight uptick was not private credit related. Again, just to Chris's point, just idiosyncratic so.

Well, we're we're always looking at certain sectors as it relates to those 2, when you have, you know, it kind of bumping along the bottom. There will always be 1 deal or 2 any of those do we look at as systemic and any way um, you know, we're watching a few areas as we always are things like agriculture things like Transportation but there's nothing that each of those are idiosyncratic in their nature.

We track all of this very very closely and we're pleased with the trajectory of the people we've been able to hire and as a consequence, we will continue to do that.

And again, just a reminder, that slight uptick was not private credit related. But again, just to Chris's point, just in credit.

Very helpful. Thank you.

Thank you.

Thank you David Our next question will go to the line of Gerard Cassidy with RBC Gerard Your line is open.

David George: Very helpful. Thank you.

David Chiaverini: Very helpful. Thank you.

Thanks for that. And then shifting over to when thinking about expenses and uh you mentioned about the hiring of Frontline Bankers. Curious, is there more to come there and how is the pipeline looking?

Christopher Gorman: Last year we talked a lot about the fact that we hired, we grew our sales forces by 10% collectively in our investment banking, in our wealth business, and our payments business. We continue to hire people in all of those businesses. Those are our targeted fee businesses where you'll see in our report out today, we grew about 12% in the aggregate. We track all of this very closely, and we're pleased with the trajectory of the people we've been able to hire, and as a consequence, we'll continue to do that.

Christopher Gorman: Thank you.

Chris Gorman: Thank you.

Operator: Thank you, David. Our next question will go to the line of Gerard Cassidy with RBC. Gerard, your line is open.

And Chris Clark.

Good morning.

Gerard Cassidy: Hi, Chris. Hi, Clark.

Chris can we circle back to you pointed out about the emerging affluent how it grew 15% and you said the 1.15 million of total customer base of $3 5 million.

Christopher Gorman: Hey, Gerard.

Chris Gorman: Hey, Gerard.

Mohit Ramani: Good morning.

Clark Khayat: Good morning.

Gerard Cassidy: Chris, can we circle back to, you pointed out about the emerging affluent, how it grew 15%, I think you said to 1.15 million out of a total customer base of 3.5 million. How can you guys embrace AI to penetrate that client base and make it even more profitable because you're using AI?

Can you guys and breeze.

AI to penetrate that client base and make it even more profitable because you're using AI.

So, uh, last year, we talked a lot about the fact that we hired, we grew our sales forces by 10%, collectively in our investment banking, and our wealth business and our payments business. We continue to hire people, um, in all of those businesses, those are our targeted fee businesses where you'll see in our report out. Today, we grew about 12% in the aggregate. Um, we're we, we track all of this very, very closely. And we're pleased with the trajectory of the people. We've been able to hire and as a consequence, we'll continue to do that.

David Chiaverini: Very helpful. Thank you.

That's a great question and it's very timely because I spoke to are.

Very helpful. Thank you.

Christopher Gorman: Thank you.

Thank you.

Operator 3: Thank you, David. Our next question will go to the line of Gerard Cassidy with RBC. Gerard, your line is open.

Operator: Thank you, David. Our next question will go to the line of Gerard Cassidy with RBC. Gerard, your line is open.

Christopher Gorman: That's a great question, and it's very timely because I spoke to our big producers in this business as recently as Tuesday morning at their sales conference. I think there's a huge opportunity to use AI. We're already investing heavily in our wealth platforms. I think as you think about serving that many customers, I think there's a huge opportunity for AI. We'll have more to say on that in the future, but that is a perfect application. Many of these customers are rather homogeneous in their needs, and I think just we are armed with perfect information, obviously, because it's all running through the bank.

Chris Gorman: That's a great question, and it's very timely because I spoke to our big producers in this business as recently as Tuesday morning at their sales conference. I think there's a huge opportunity to use AI. We're already investing heavily in our wealth platforms. I think as you think about serving that many customers, I think there's a huge opportunity for AI. We'll have more to say on that in the future, but that is a perfect application. Many of these customers are rather homogeneous in their needs, and I think just we are armed with perfect information, obviously, because it's all running through the bank.

Big producers in this business as recently as Tuesday morning.

Sales conference I think there's a huge opportunity to use AI, we're already investing heavily in our wealth platforms and I think as you think about serving that many customers I think there's a huge opportunity for AI.

Thank you, David. Our next question will go to the line of Gerard Cassidy with RBC Gerard. Your line is open.

Gerard Cassidy: Hi, Chris. Hi, Clark.

Christopher Gorman: Hey, Gerard.

Hi Chris Clark.

Mo: Good morning.

Clark Khayat: Good morning.

Good morning.

Gerard Cassidy: Chris, can we circle back to you pointed out about the emerging affluent, how it grew 15%, I think you said to 1.15 million out of a total customer base of 3.5 million. How can you guys embrace AI to penetrate that client base and make it even more profitable because you're using AI?

I'll have more to say on that in the future, but that is a perfect application. Many of these customers are rather homogeneous and their needs and I think.

Chris can we Circle back to you? You pointed out about the emerging of fluent how it grew 15%. I think you said to 1.15 million and a total of customer base of 3 and a half million.

And I think just we're armed with perfect information, obviously, because its all running through the bank and I think harvesting more detailed information. So we can do a better job of serving these these customers that are already know and trust key but have their money on some other platform, where as you can imagine they're not good.

How can you guys embrace?

AI to penetrate that client base and make it even more profitable because you're using AI.

Christopher Gorman: I think harvesting more detailed information so we can do a better job of serving these customers that already know and trust Key, but have their money on some other platform where, as you can imagine, they're not getting incredible service just because it used to be that if you had $5 million, you got incredible service everywhere. Now, as you know, the number’s a lot higher, and so this is a huge opportunity for us.

Chris Gorman: I think harvesting more detailed information so we can do a better job of serving these customers that already know and trust Key, but have their money on some other platform where, as you can imagine, they're not getting incredible service just because it used to be that if you had $5 million, you got incredible service everywhere. Now, as you know, the number’s a lot higher, and so this is a huge opportunity for us.

Incredible service just because.

It used to be that if you had $5 million you got incredible service everywhere now as you know the numbers a lot higher and so there is a huge opportunity for us.

And then to put Clark on the spot.

And following up with this AI.

Gerard Cassidy: Not to put Clark on the spot, but just following up with this AI, do you think we'll ever get to the point where outsiders, like folks on this call, could actually measure for your dollar of spending in AI, it actually incrementally led to a 50 basis point of ROTCE improvement? Will we ever get to that kind of metric at some point in the future?

Do you think we will ever get to the point, where outsiders like folks on this call could actually measure.

Euro dollar of spending in AI and actually incrementally led to a 50 basis point of Aro TCE improvement.

And that kind of metric at some point in the future.

Well, we would have to get to that first and then share it.

As you know Gerard.

Clark Khayat: Well, we would have to get to that first and then share it because, as you know, Gerard, these are pretty hard to measure. I'd say where we, and I think others are seeing benefits is in efficiency and capacity, but it's really showing up more in avoidance of future investments. It's hard for me to come and say, "Hey, Gerard, I didn't spend these dollars I may have otherwise spent." The way I think we really need to demonstrate that is to scale some of these platforms, which has been a theme of Chris's now for as long as I've known him. If we can do that, then you start to see the scale of the platform and the benefit of that cost avoidance in a real way. We can come back and say, "We spent these dollars.

These are pretty hard to measure I would say.

Where are we and I think others are seeing benefits as in <unk>.

Efficiency and capacity, but it's really showing up more in.

Gerard Cassidy: Not to put Clark on the spot, but following up with this AI, do you think we'll ever get to the point where outsiders, like folks on this call, could actually measure for your dollar of spending in AI, it actually incrementally led to a 50 basis point of ROTCE improvement. Will we ever get to that kind of metric at some point in the future?

Through the bank and I think harvesting more detailed information so we can do a better job of serving these these customers that are already know and trust key but have their money on some other platform where as you can imagine they're not getting incredible service just because it used to be that if you had 5 million dollars, you got incredible service everywhere. Now as you know the numbers a lot higher and so this is a huge opportunity for us.

Avoidance of future investments and so that it's hard for me to come and say Hey, Gerard I didn't spend these dollars I may have otherwise spent so the way I think we really need to demonstrate that is to scale. Some of these platforms, which has been a theme of chris's now for.

As long as I've known him.

If we can do that then you start to see the scale of the platform and the benefit of that cost avoidance in a real way then and then we can come back and say we spent these dollars. We created these improved processes and they drove this level of margin expansion.

And and not to put Clark on the spot. Um, but the following up with this AI, um, do do you think we'll ever get to the point where Outsiders, like, folks on this call? Could actually measure, you know, for your dollar of spending in AI. It actually Inc incrementally led to a 50 basis. Point of our otce Improvement will able to get that kind of metric at some point in the future.

Clark Khayat: Well, we would have to get to that first and then share it, because, as you know, Gerard, these are pretty hard to measure. I'd say where we, and I think others are seeing benefits is in efficiency and capacity, but it's really showing up more in avoidance of future investments. It's hard for me to come and say, "Hey, Gerard, I didn't spend these dollars I may have otherwise spent." The way I think we really need to demonstrate that is to scale some of these platforms, which has been a theme of Chris's now for, I don't know, as long as I've known him. If we can do that, then you start to see the scale of the platform and the benefit of that cost avoidance in a real way. We can come back and say, "We spent these dollars.

Clark Khayat: We created these improved processes, and they drove this level of margin expansion.

Well, we would have to get to that first and then share it because um as you know, Gerard these are these are pretty hard to measure. I I'd say

Great and then just as a follow up question.

This obviously key is well positioned as a commercial lender and it looks like commercial lending for the industry and for you specifically is picking up you're obviously heavier industry verticals that are national that drives us commercial product along with as you pointed out it's not just alone, but it's multiple of chronic.

Gerard Cassidy: Great. Just a follow-up question. Chris, obviously, Key is well-positioned as a commercial lender, and it looks like commercial lending for the industry and for you specifically is picking up. You obviously have your industry verticals that are national, that drives this commercial product along with, as you point out, it's not just a loan, but it's the multiple of products. Outside of those seven verticals, is there much opportunity for commercial lending in the Pacific Northwest or the Midwest or New England? How do you look at that kind of commercial lending, or do you really don't do it, and it's just in those seven verticals?

where we and I think others are seeing benefits is in efficiency and capacity, but it's really showing up more in

Outside of those seven verticals.

Um, avoidance of future Investments and so that it's hard for me to come and say, hey Gerard, I didn't spend these dollars, I may have otherwise spent. So the way I think we really need to demonstrate, that is to scale some of these platforms which has been a theme of Chris is now for

Is there much opportunity for commercial lending.

<unk>.

<unk> northwest of the Midwest, New England, how do you look at that kind of commercial lending or do you really don't do it and it's just in those seven verticals.

Clark Khayat: We created these improved processes, and they drove this level of margin expansion.

No we do both or seven verticals, obviously give us what we think is a unique competitive advantage because our middle market bankers call who are also our payments representatives they call with our investment bankers and Thats something that others can't do so in those seven verticals, we have a huge advantage, but we also are out there.

Gerard Cassidy: Great. Just as the follow-up question, Chris, obviously, Key is well-positioned as a commercial lender, and it looks like commercial lending for the industry and for you specifically is picking up. You obviously have your industry verticals that are national, that drives this commercial product along with, as you point out, it's not just a loan, but it's the multiple of products. Outside of those seven verticals, is there much opportunity for commercial lending in the Pacific Northwest, the Midwest, or New England? How do you look at that kind of commercial lending, or do you really don't do it, and it's just in those seven verticals?

I don't know as long as I've known him. Um, if we can do that, then you start to see the scale of the platform and the benefit of that cost avoidance in a real way. And then and then we can come back and say we spent these dollars. We created these improved processes and they drove this level of margin expansion.

Christopher Gorman: No, we do both. Our seven verticals obviously give us what we think is a unique competitive advantage because our middle-market bankers, who are also our payments representatives, they call with our investment bankers, and that's something that others can't do. So in those seven verticals, we have a huge advantage, but we also are out there looking for great payments and commercial banking customers, just like everybody else. Yes, there are significant opportunities outside of our seven industry verticals, and we compete effectively there as well.

Chris Gorman: No, we do both. Our seven verticals obviously give us what we think is a unique competitive advantage because our middle-market bankers, who are also our payments representatives, they call with our investment bankers, and that's something that others can't do. So in those seven verticals, we have a huge advantage, but we also are out there looking for great payments and commercial banking customers, just like everybody else. Yes, there are significant opportunities outside of our seven industry verticals, and we compete effectively there as well.

<unk> four great payments and commercial banking customers.

Like everybody else and yes, there are significant opportunities outside of our seven industry verticals.

Great. And then, as just as the follow-up question, uh, Chris obviously, in key is well, positioned as a commercial lender and it looks like commercial lending for the industry and for you specifically he's picking up you obviously have your industry verticals that are National that drives this commercial product along with as you pointed out it's not just a loan but it's the multiple of products outside of those 7 vertical.

And we compete effectively there as well and Gerard just just as a reminder, over the last couple of quarters, we've seen not just great industry vertical growth, but we've seen very consistent broad based geographic middle market growth. So it's been a combination of both we've been adding bankers and verticals and markets and as we have.

Clark Khayat: Gerard, just as a reminder, over the last couple quarters, we've seen not just great industry vertical growth, but we've seen very consistent broad-based geographic middle market growth. It's been a combination of both. We've been adding bankers in verticals and markets. As we've talked about before, whether it's Chicago, Southern California, recently Atlanta, or this family office business, we're adding bankers in new geographies with new capabilities in the middle market because we see exactly what you're referencing, which is really good opportunity to grow in specific geographies.

Is there much opportunity for commercial lending? You know, in, you know the Pacific Northwest or the Midwest or New England? How do you even look at that kind of commercial lending? Or do you really don't do it and it's just in those 7 verticals.

<unk> talked about before whether its Chicago, Southern California, recently, Atlanta, or this family office business were adding bankers in new geographies with new capabilities in the middle market, because we see exactly what youre referencing which is really good opportunity to grow in specific geographies.

Our uniqueness isn't limited to just the investment banking area and our payments area.

Christopher Gorman: Our uniqueness isn't limited to just the investment banking area. In our payments area, which Clark at one point ran, by the way, and now Ken Gavrity runs both our commercial business and our payments business. We feel like we have a competitive advantage there as well, Gerard.

Chris Gorman: Our uniqueness isn't limited to just the investment banking area. In our payments area, which Clark at one point ran, by the way, and now Ken Gavrity runs both our commercial business and our payments business. We feel like we have a competitive advantage there as well, Gerard.

Which clarke at one point ran by the way.

And now Ken Gavarnie runs, both our commercial business and our payments business, we feel like we have a competitive advantage there as well.

Clark Khayat: Gerard, just as a reminder, over the last couple quarters, we've seen not just great industry vertical growth, but we've seen very consistent, broad-based geographic middle market growth. So it's been a combination of both. We've been adding bankers in verticals and markets. As we've talked about before, whether it's Chicago, Southern California, recently Atlanta, or this family office business, we're adding bankers in new geographies with new capabilities in the middle market because we see exactly what you're referencing, which is really good opportunity to grow in specific geographies.

And speaking of payments and here's a lay up maybe for Clarksons, who used to run payments.

No, we do. We do both our 7 vertical, obviously, give us what we think is a unique competitive Advantage, because our Middle Market Bankers call, who are also our payments Representatives, they call with our investment bankers, and that's something that others can't do. So, in those 7 vertical, we have a huge Advantage but we also are out there looking for great payments and Commercial Banking customers, um, just like everybody else. And yes, there are significant opportunities outside of our 7 industry verticals. Um, and we compete effectively there as well and Gerard, just just as a reminder over the last couple quarters we've seen not just great industry, vertical growth, but we've seen very consistent broad-based.

Gerard Cassidy: Speaking of payments, and here's a layup maybe for Clark since he used to run payments. We all know about the risk in credit, and you guys have been very clear how you manage your credit risk, and it's quite good. What's the risk in payments? As you grow new commercial customers, is it an increasing fraud risk we got to watch out for? I mean, which is totally out of the risk questions that we normally ask. What do you guys think about that part of the equation that as payments, and not just for you folks, because every commercial bank seems to be telling us the whole relationship includes a payments part of it. Do we have a risk here that none of us are really focusing in on yet?

We all know about the risk in credit and you guys have been very clear on how you manage your credit risk and is quite good.

Geographic middle market growth. So it's been a combination of both.

What's the risk in payments and as you grow the grew new commercial customers.

Is it an increasing fraud risk, we're going to watch out for I mean, which is totally out of the risk questions that we normally ask but what do you guys think about that part of the equation as payments not just for you folks with every commercial bank seems to be telling is the whole relationship includes our payments part of it do we have a risk here that most of it.

We're really focusing in on yet.

Yes, I mean, there is a little bit of credit risk and things like aviation merchant, but those are very manageable and I think well understood.

We've been adding bankers and verticals and markets. And as we've talked about before, whether it's Chicago, Southern California recently, Atlanta, or this Family Office business, we're adding bankers in new geographies, with new capabilities in the Middle Market, because we see exactly what you're referencing, which is really good opportunity to grow in specific geographies. And our uniqueness isn't limited to just the investment banking area and our payments area, which Clark at one point ran, by the way, and now Ken Gabourey runs both our Commercial Business and our Payments business. We feel like we have a competitive advantage there as well. Sure.

Clark Khayat: Yeah. There is a little bit of credit risk in things like ACH and merchant, but those are very manageable, and I think well understood. To your point, I think you see probably two versions of risk. The biggest pool is going to be operational. This is a technology business, so whether it's fraud or security, and often the easiest doors in are through clients who aren't necessarily educated enough to manage the risk. So we do a lot of proactive client outreach on how to better secure their own platforms. It is clearly a technology and software business, and that's why you need to be very dialed in on that level of risk. The other one is just reputational, right? You're getting into clients, you're offering services.

And speaking of payments, and here’s a layup—maybe for Clark, since he used to run payments.

To your point I think you see probably two versions of risk. The biggest pool is going to be operational. This is a technology business, so whether it's fraud or security and often.

<unk> stores in our through clients, who arent necessarily educated enough to manage the risks. So we do a lot of proactive client outreach on how to better secure their own platforms, but it is clearly a technology and software business and Thats why.

You need to be very dialed in on that level.

We all know about the risk and credit and you guys have been very clear, how you manage your credit risk and it's quite good. Well what's the risk and payments? And and as you grow the pay, you know, grow new commercial customers. What is it? An increasing fraud risk? We got to watch out for, I mean, which is totally out of the risk questions that we normally ask. But what do you guys think about that part of the equation that as payments and not just for you folks because every Commercial Bank seems to be telling us, the whole relationship includes a payment part of it. Do we have a risk here? That none of us are really focusing in on yet.

Clark Khayat: Yeah. There is a little bit of credit risk in things like ACH and merchant, but those are very manageable, and I think well understood. To your point, I think you see probably two versions of risk. The biggest pool is going to be operational. This is a technology business, so whether it's fraud or security, and often the easiest doors in are through clients who aren't necessarily educated enough to manage the risk. We do a lot of proactive client outreach on how to better secure their own platforms. It is clearly a technology and software business, and that's why you need to be very dialed in on that level of risk. The other one is just reputational, right? You're getting into clients, you're offering services.

Of risk and then the other one is just reputation of rates youre getting into clients you're offering services.

I used to joke, but I think it's true that when we make a loan to a client. They said that they've worked to get the money we talked to them in a couple of weeks or months when you sign up payments.

Understood.

Clark Khayat: I used to joke, but I think it's true that when we make a loan to a client, they sign the paperwork, they get the money. We talk to them in a couple of weeks or months. When you sign a payments contract with the client, the work begins because you pop open the hood and you start rewiring the enterprise. That comes with a lot of potential client friction. You have to manage that onboarding and servicing relationship very carefully and very thoughtfully. It's a bit of an offensive lineman game where they expect things to work, and when they don't is when you hear from them. There's a lot of very important proactive communication and management of that process. I really think about it in the obvious operational risk you raise, which we spend an enormous amount of time thinking about and managing.

Contract with the client the work begins because your pop open the Hood and you start rewiring the enterprise so that comes with a lot of potential.

Potential client friction you have to manage that onboarding and servicing relationship very carefully and very thoughtfully.

It's a bit of an offensive lineman game, where they expect things to work and when they don't is when you hear from them. So there is a lot of very important proactive communication and management of that.

And so I really think about it in.

The obvious operational risky raise which we spend an enormous amount of time thinking about and managing and then the reputational piece because.

Clark Khayat: I used to joke, but I think it's true that when we make a loan to a client, they sign the paperwork, they get the money. We talk to them in a couple of weeks or months. When you sign a payments contract with a client, the work begins because you pop open the hood and you start rewiring the enterprise. That comes with a lot of potential client friction. You have to manage that onboarding and servicing relationship very carefully and very thoughtfully. It's a bit of an offensive lineman game where they expect things to work, and when they don't is when you hear from them. There's a lot of very important proactive communication and management of that process. I really think about it in the obvious operational risk you raise, which we spend an enormous amount of time thinking about and managing.

We say a key our payments business is about helping clients run their business better every day because they use it every day, which means there is an opportunity for something to go wrong every day and we have to manage that.

Clark Khayat: The reputational piece because, as we say at Key, our payments business is about helping clients run their business better every day because they use it every day, which means there's an opportunity for something to go wrong every day, and we have to manage that.

Thank you very insightful Clarke and good luck with the new responsibilities. Thank you.

To your point, I think you see probably two versions of risk. The biggest pull is going to be operational. This is a technology business—so whether it's fraud or security, and often, you know, the easiest doors in are through clients who aren't necessarily educated enough to manage the risk. So we do a lot of proactive client outreach on how to better secure their own platforms, but, you know, it is clearly a technology and software business, and that's why, uh, you know, you need to be very dialed in on that level of, uh, of risk. And then the other one is just reputation, right? You're getting into clients, you're offering services. Uh, I used to joke, but I think it's true, that when we make a loan to a client, they sign the paperwork, they get the money, we talk to them in a couple weeks or months. When you sign a payments contract with a client, the work begins, because you pop open the hood and you start rewiring the enterprise. So, that comes with a lot of—

Gerard Cassidy: Thank you. Very insightful, Clark, and good luck with the new responsibilities. Thank you.

Thanks.

Thank you Gerard our last question will go to the line of Christopher Mcgratty with <unk>, you can see them Christopher Your line is open.

Clark Khayat: Thanks.

Operator: Thank you, Gerard. Our last question will go to the line of Christopher McGratty with KBW. Christopher, your line is open.

Hey, good morning.

This is Chris filling in for Chris.

Just wondering.

Christopher O'Connell: Hey, good morning. This is Christopher O'Connell filling in for Chris.

Chris O'Connell: Hey, good morning. This is Christopher O'Connell filling in for Chris.

Uh potential client friction, you have to manage that onboarding and servicing relationship very carefully and very thoughtfully. And you know it it's a bit of an offensive lineman game where they expect things to work and when they don't is when you hear from them. So there's a lot of very important, proactive, communication and management of that process. And, and so I really think about it in

Circle back to the margin discussion and just given the overall shift in the rate environment this past quarter towards.

Christopher Gorman: Oh.

Chris Gorman: Oh.

Christopher O'Connell: I just wanted to-

Chris O'Connell: I just wanted to-

Christopher Gorman: Good morning, Chris.

Chris Gorman: Good morning, Chris.

Christopher O'Connell: ... circle back to the margin discussion. Just given the overall shift in the rate environment this past quarter towards higher for longer environment, what impact do you think that might have on the margin improvement story?

Chris O'Connell: ... circle back to the margin discussion. Just given the overall shift in the rate environment this past quarter towards higher for longer environment, what impact do you think that might have on the margin improvement story?

Higher for longer.

Environment.

What impact do you think that might have on on the on the margin improvement story.

The obvious operational risk you raise, which we spend an enormous amount of time thinking about and managing and then the reputational piece because, you know, as we say a key, our our payments business is about helping clients run their business better every day because they use it every day, which means there's an opportunity for something to go wrong every day. And we have to manage that

Gerard Cassidy: Thank you. Very insightful, Clark, and good luck with the new responsibilities. Thank you.

Yeah. So.

So as we noted our base case would be no cuts. So thats incorporated in this and we did improve the margin guidance update so what I would say maybe alternatively is we feel very good about managing to those to that guidance under a variety of circumstances we'd.

Thank you, very insightful, Clark and good luck with the new responsibilities. Thank you.

Clark Khayat: Thanks.

Clark Khayat: Yeah. As we noted, our base case would be no cuts. That's incorporated in this, and we did improve the margin guidance a bit. What I would say, maybe alternatively, is we feel very good about managing to that guidance under a variety of circumstances. We'd likely feel a little stress if there were hikes, and we've got some upside potentially if there were cuts, assuming those cuts as we would expect, at least at this point, come with a little bit of steepening of the curve. Right now, the reflected slight improvement in that margin guidance incorporates a flat, no cut scenario. Hopefully that's responsive to your question.

Operator 3: Thank you, Gerard. Our last question will go to the line of Christopher McGratty with KBW. Christopher, your line is open.

Operator: Thank you, Gerard. Our last question will go to the line of Christopher McGratty with KBW. Christopher, your line is open.

Thanks. Thank you. Gerard. Our last question, we'll go to the line of Christopher McGrady with KBW, Christopher. Your line is open.

Christopher O'Connell: Hey, good morning. This is Christopher O'Connell filling in for Chris.

We'd likely feel.

Christopher Gorman: Oh, okay.

Christopher O'Connell: I just wanted to circle back to the margin discussion, and just given the overall shift in the rate environment this past quarter towards higher for longer environment, what impact do you think that might have on the margin improvement story?

A little stress if there were hikes and we've got some upside potentially if there were cuts assuming those cuts.

Hey, good morning. Uh this is Chris okay, filling in for Chris. Oh okay. I just wanted to uh

We would expect at least at this point come up a little bit of Steepening of the curve. So.

Right now the <unk>.

Afflicted slight improvement in that margin guidance incorporates a flat no.

Clark Khayat: Yeah. As we noted, our base case would be no cuts. That's incorporated in this, and we did improve the margin guidance a bit. What I would say, maybe alternatively, is we feel very good about managing to that guidance under a variety of circumstances. We'd likely feel a little stress if there were hikes, and we've got some upside potentially if there were cuts, assuming those cuts as we would expect, at least at this point, come with a little bit of steepening of the curve. Right now, the reflected slight improvement in that margin guidance incorporates a flat no cut scenario. Hopefully that's responsive to your question.

Uh, circle back to the margin discussion, and just given, you know, the overall shift in, uh, the rate environment this past quarter towards, you know, a higher-for-longer, uh, you know, environment. Uh, what impact do you think that might have on the, on the margin improvement story?

Cut scenario, so hopefully that's responsive to your question there.

Yeah. So

um,

Okay, Great and then you guys provided a ton of color.

On private credit and the specifics both in the discussion in the deck.

Christopher O'Connell: Okay, great. Then you guys provided a ton of color on private credit in the specifics, both in the discussion, the deck, and overall credit quality, relatively stable for the quarter. Just wondering if you could kind of stack rank or update us on your real worry on maybe more hot button credit pockets. Then where private credit either as a whole or kind of within the parts that you disclosed and discussed kind of falls within that stack ranking. I guess in particular with context of your view versus the overall markets.

Chris O'Connell: Okay, great. Then you guys provided a ton of color on private credit in the specifics, both in the discussion, the deck, and overall credit quality, relatively stable for the quarter. Just wondering if you could kind of stack rank or update us on your real worry on maybe more hot button credit pockets. Then where private credit either as a whole or kind of within the parts that you disclosed and discussed kind of falls within that stack ranking. I guess in particular with context of your view versus the overall markets.

And overall credit quality is relatively stable for the quarter.

But just wondering if you could kind of stack rank or update us on.

so as we noted, our base case would be no Cuts. So that's Incorporated in this and we did improve the margin guidance a bit. So what I would say, maybe alternatively is we feel very good about managing to those to that guidance under a variety of circumstances. We'd we'd likely feel

Youre wall worry on.

It may be more hot-button credit pockets and then.

Private credit either as a whole or kind of within the parts that you disclosed and discussed kind of falls within that stack ranking I guess in particular with context.

Your view versus.

The overall markets.

Sure so I'd be happy to address that Chris So.

A little stress if there were hikes and we, we've got some upside potentially, if there were Cuts assuming those cuts, as as we would expect, at least at this point, come with a little bit of steepening of the curve. So um, you know, right now the reflected slight Improvement in that margin guidance, incorporates a flat, no cut scenario. So hopefully that's responsive to your question there.

Christopher O'Connell: Okay, great. You guys provided a ton of color on private credit in the specifics, both in the discussion, the deck, and overall credit quality, relatively stable for the quarter. Just wondering if you could kind of stack rank or update us on your worst worry on maybe more hot button credit pockets and then where private credit, either as a whole or kind of within the parts that you disclosed and discussed, kind of falls within that stack ranking. I guess in particular with context of your view versus the overall markets.

I wouldn't put <unk>.

Christopher Gorman: Sure. I'd be happy to address that, Chris. I wouldn't put private credit in my basket of things that we're really focused on right now. A few areas that we spend time thinking about, first is the oil and gas producers. Depending on how they're hedged, they actually could be making more money in this environment, particularly if they're unhedged. We have $2 billion of exposure there. We have another $2.5 billion or so exposure in transportation. To the extent people don't have escalators with their customers, obviously fuel costs are a significant issue. There's no issue yet with respect to consumer discretionary, but if we remain in an inflationary environment and people are spending a lot more for gas, the theory is that they'll have less money to spend on discretionary consumer, which I agree.

Chris Gorman: Sure. I'd be happy to address that, Chris. I wouldn't put private credit in my basket of things that we're really focused on right now. A few areas that we spend time thinking about, first is the oil and gas producers. Depending on how they're hedged, they actually could be making more money in this environment, particularly if they're unhedged. We have $2 billion of exposure there. We have another $2.5 billion or so exposure in transportation. To the extent people don't have escalators with their customers, obviously fuel costs are a significant issue. There's no issue yet with respect to consumer discretionary, but if we remain in an inflationary environment and people are spending a lot more for gas, the theory is that they'll have less money to spend on discretionary consumer, which I agree.

Private credit.

My basket of things that we're really focused on right now.

Okay, great. And then, you know, you guys provided a ton of color.

A few areas that we spend time thinking about first is the oil and gas producers, depending on how they're hedged they actually could be making more money in this environment, particularly if they're unhedged, we have a couple of billion dollars of.

You know on private Credit in in the specifics, both, you know, in the discussion, the deck um and overall credit quality, you know, relatively stable for the quarter. Um, but just wondering if you could kind of Stack rank or update us on,

I have exposure there we have another $2 5 billion or so exposure in transportation and to the extent people don't have escalators with their customers. Obviously fuel costs are a significant issue. There is no issue yet with respect to consumer discretion.

Scenario, but if we remain in an inflationary environment and people are spending a lot more for gas.

You know, your wall of worry on on, you know, maybe more hot button, uh, credit pockets and then, you know, where private credit either as a whole or or kind of, you know, within the parts that you disclose and discuss, uh, kind of Falls within that stack ranking, you know, I guess, in particular, you know, with context of, you know, your view versus, uh, you know, the overall markets.

It goes to.

The theory is that they'll have less less money to spend on discretionary consumer which I agree on the other side of it we've seen some interesting recovery we've been worried a bit about healthcare healthcare is firming up nicely. So we feel good about that we also were really focused on some.

Christopher Gorman: On the other side of it, we've seen some interesting recovery in that we've been worried a bit about healthcare. Healthcare is firming up nicely, so we feel good about that. We also were really focused on some materials and construction products. Those areas have also firmed up nicely. That's kind of where we look. Anytime I focus on areas of concern, it's where there's leverage, and we frankly have very little. If you look at our leverage book, it's about $2 billion, and it's been $2 billion for as long as I can remember. I'm not too worried about that. That's kind of the around the horn on our portfolios.

Chris Gorman: On the other side of it, we've seen some interesting recovery in that we've been worried a bit about healthcare. Healthcare is firming up nicely, so we feel good about that. We also were really focused on some materials and construction products. Those areas have also firmed up nicely. That's kind of where we look. Anytime I focus on areas of concern, it's where there's leverage, and we frankly have very little. If you look at our leverage book, it's about $2 billion, and it's been $2 billion for as long as I can remember. I'm not too worried about that. That's kind of the around the horn on our portfolios.

Sure. So I'd be happy to address that Chris, so um, I wouldn't put, um, private Credit in in my basket of things that were really focused on right now. Um, a few areas that that we spent time thinking about first is the oil and gas producers, depending on how they're hedged, they actually could be making more money.

Materials and construction.

Products those areas are also firmed up nicely, so that's kind of where.

Where we look anytime I focus on areas of concern, it's where there is leverage and we frankly have very little if you'd look at our leverage book, it's about $2 billion and it's been $2 billion for as long as I can remember so I'm not too worried about that so that's kind of the around the horn on.

On our portfolios.

Christopher Gorman: On the other side of it, we've seen some interesting recovery in that we've been worried a bit about healthcare. Healthcare is firming up nicely, so we feel good about that. We also were really focused on some materials and construction products. Those areas have also firmed up nicely. That's kind of where we look. Anytime I focus on areas of concern, it's where there's leverage, and we frankly have very little. If you look at our leverage book, it's about $2 billion, and it's been $2 billion for as long as I can remember, so I'm not too worried about that. That's kind of the around the horn on our portfolios.

Yeah.

Perfect I appreciate all the color. Thank you for taking my questions.

Happy to do so.

Christopher O'Connell: Perfect. Appreciate all the color. Thank you for taking my questions.

Chris O'Connell: Perfect. Appreciate all the color. Thank you for taking my questions.

Thank you Christopher.

Christopher Gorman: Happy to do so.

Chris Gorman: Happy to do so.

No additional questions waiting in queue I would now like to pass the conference over to our CEO Christopher Gorman for any closing remarks.

Megan: Thank you, Christopher. With no additional questions waiting in queue, I would now like to pass the conference over to our CEO, Christopher Gorman, for any closing remarks.

Operator: Thank you, Christopher. With no additional questions waiting in queue, I would now like to pass the conference over to our CEO, Christopher Gorman, for any closing remarks.

Well, thank you Megan and thank you all for joining our call today. We appreciate your continued interest in key if you have additional questions. Please do not hesitate to reach out directly to Brian or others on the Investor Relations team. Thank you and have a great day. Operator. This concludes today's call you may now disconnect.

Christopher Gorman: Well, thank you, Megan, and thank you all for joining our call today. We appreciate your continued interest in Key. If you have additional questions, please do not hesitate to reach out directly to Brian or others on the investor relations team. Thank you and have a great day. Operator, this concludes today's call. You may now disconnect.

Chris Gorman: Well, thank you, Megan, and thank you all for joining our call today. We appreciate your continued interest in Key. If you have additional questions, please do not hesitate to reach out directly to Brian or others on the investor relations team. Thank you and have a great day. Operator, this concludes today's call. You may now disconnect.

It, you know, goes to, you know, the theory is, is that they'll have less, uh, less money to spend on discretionary consumer, which I agree on the other side of it. We've seen some interesting recovery in that we've been worried. A bit about Health Care. Health Care is firming up nicely. So we feel good about that. We also, uh, we're really focused on some, you know, materials and construction, uh, products. Those areas have also firmed up nicely. So that's kind of where we're we're worried. You know, where we where we look anytime I focus on areas of concern, it's where there's leverage and we frankly have very little if you look at our leverage book it's about 2 billion dollars and it's been 2 billion dollars for the as long as I can remember. So I'm not too worried about that so that's kind of the the around the horn on on our portfolios.

Christopher O'Connell: Perfect. Appreciate all the color. Thank you for taking my questions.

Christopher Gorman: Happy to do so.

Perfect. Appreciate all the caller. Thank you for taking my questions.

Happy to do so.

Operator 3: Thank you, Christopher. With no additional questions waiting in queue, I would now like to pass the conference over to our CEO, Christopher Gorman, for any closing remarks.

Operator: Thank you, Christopher. With no additional questions waiting in queue, I would now like to pass the conference over to our CEO, Christopher Gorman, for any closing remarks.

Thank you, Christopher.

There was no additional questions waiting in queue. I would now like to pass the conference over to our CEO. Christopher Gorman for any closing remarks

Well, thank you, Megan, and thank you all for joining our call today. We appreciate your continued interest in Key. If you have additional questions, please do not hesitate to reach out directly to Brian or others on the investor relations team. Thank you, and have a great day. Operator, this concludes today's call. You may now disconnect.

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