Betsy Graseck

Betsy Graseck followed up on deposit trends, asking if the approximately $7 billion sequential increase in deposits, particularly from non-U.S. offices and interest-bearing accounts, was largely attributable to the government shutdown and expected to normalize in Q1. She also inquired about the 'governor' on Northern Trust's share buyback program, specifically which capital ratios influence the decision to maintain an over 100% payout ratio.

Answer

CFO David Fox clarified that while seasonality and some cash hoarding due to the government shutdown contributed to the non-interest-bearing deposit increase (around $3 billion), a significant portion of the $7 billion increase was normal growth, so not the entire amount would normalize. Regarding buybacks, David Fox stated that the decision involves numerous variables, including regulatory capital, earnings power, ROE, loan growth, dividends, M&A, and share price. He indicated that the company expects to maintain the ability for a similar payout ratio in 2026 as in 2025, balancing reinvestment opportunities with capital returns.

Betsy Graseck inquired about the nature of the Q4 deposit increase, specifically from non-U.S. offices and interest-bearing accounts, and the expected normalization of the $7 billion sequential increase. She also asked about the governing factors for Northern Trust's buyback program, particularly which capital ratios influence the decision to maintain an over 100% payout ratio.

Answer

David Fox (CFO) clarified that the non-interest-bearing increase was around $3 billion, with the overall $7 billion increase reflecting normal growth in addition to some cash hoarding due to the government shutdown. He expects some seasonality to fall off in Q1 but not the entire amount. Fox explained that buyback decisions involve many variables including regulatory capital, earnings power, ROE, loan growth, dividends, M&A, and share price, aiming to maintain flexibility for reinvestment while sustaining the payout ratio.

Betsy Graseck asked about the impact of AI across Northern Trust, specifically if efficiency improvements differ materially between the services, wealth, and other business segments. She also inquired about the company's outlook on stablecoin utilization, whether it plans to issue its own or engage with consortiums, and its strategy for tokenized money market funds in the context of 24/7 trading.

Answer

Michael O'Grady, Chairman and CEO, stated that AI impacts all areas of the company, providing examples across operations (private capital processing), technology (20% improvement in programming), asset management (summarizing investor calls), wealth management (prospecting, advisor efficiency), and risk (AML, KYC, fraud detection). Regarding digital assets, O'Grady highlighted innovation, regulation, client demand, and interoperability as key drivers. He indicated Northern Trust would have the ability to utilize stablecoins but does not plan to issue its own, instead focusing on tokenization, particularly as an issuer of tokenized money market funds.

Betsy Graseck asked about the impact of AI across Northern Trust's organization, specifically if efficiency improvements differ materially between services and wealth management. She also requested an update on the company's stablecoin strategy, including whether they plan to issue their own, and their approach to tokenized money market funds for 24/7 trading.

Answer

Chairman and CEO Michael O'Grady stated AI impacts all areas, with varying results but broad applicability, citing examples in operations (private capital), technology (programming), asset management (investor call summaries), wealth management (prospecting, advisor efficiency), and risk (AML, KYC, fraud detection). He clarified Northern Trust will not issue a stablecoin but will utilize them, focusing instead on tokenization, particularly as an issuer of tokenized money market funds.

Betsy Graseck asked for the rationale behind tightening the ROE target range to 13-15% and the company's line of sight on achieving the expense ratio improvements needed to support this higher target.

Answer

Chairman and CEO Michael O'Grady explained that with performance consistently in the upper half of the old range and greater certainty around the regulatory capital framework, the new 13-15% ROE target is appropriate. He added that the company is on a clear path to lower its expense-to-trust-fee ratio from 115% toward its target of 105-110%, which will directly support achieving the higher ROE.

Betsy Graseck asked for details on the strong capital markets activity seen late in the quarter and into April, and inquired about the strategy for the newly launched Family Office Solutions offering, including its target audience and international potential.

Answer

CEO Michael O'Grady explained that market volatility drove capital markets activity, specifically in foreign exchange and outsourced trading, with momentum continuing into April. He detailed that Family Office Solutions leverages existing capabilities for the ultra-high-net-worth segment ($100M+), aiming to enhance service for current clients and attract new ones by offering outsourced services like reporting and bill payment.

Betsy Graseck asked how Northern Trust has successfully reduced headcount in its Asset Servicing business while maintaining high service quality, a known historical challenge. She also inquired about the forward outlook for these efficiency gains and the expected duration of benefits from the new structure.

Answer

Chairman and CEO Michael O'Grady attributed the success to a fundamental organizational change: the creation of a Chief Operating Officer role to centralize, standardize, and automate operations. He stated this improves service and resiliency through technology investments. O'Grady added that while these are multiyear initiatives, the greatest benefits are expected in the next 2-3 years, with a structure designed for sustainable, ongoing efficiencies.

Betsy Graseck asked how the strategic focus on deepening client relationships differs from the past, where the biggest opportunities lie, and how this pivot will translate into profitability and ROTCE.

Answer

CEO Mike O'Grady described the 'One Northern Trust' strategy, which involves businesses collaborating to provide integrated solutions, citing a recent outsourced trading deal with Artemis as an example. He explained that profitability improves because incremental services to existing clients and scalable new business require fewer resources, thus boosting margins.

Betsy Graseck inquired about State Street's digital transformation, specifically what clients are looking to do with digital assets beyond cryptocurrency, the benefits of tokenized money market funds, and the expected financial impact on the P&L.

Answer

CEO Ronald O'Hanley clarified that client interest in digital assets is primarily focused on the digitalization of transactions, such as tokenizing cash and money market funds, and bridging traditional and digital finance. He noted that tokenized money market funds offer benefits like collateralization and faster settlement. Both Ronald O'Hanley and CFO John Woods indicated that the financial impact of digital asset work is not expected to be visible in 2026, positioning the firm for medium-term growth rather than immediate P&L replacement.

Betsy Graseck asked about State Street's digital transformation, specifically what clients are looking to achieve with digital assets beyond cryptocurrency. She inquired about the benefits of tokenized money market funds and the expected financial impact on the P&L in the near, medium, and long term, and whether it replaces or adds to current activity.

Answer

CEO Ronald O'Hanley clarified that the focus is less on Bitcoin and more on the digitalization of transactions like cash and money market funds into tokens, bridging traditional and digital finance. He highlighted that tokenized money market funds can function as collateral and offer faster settlement. Clients are interested in increased efficiency and new asset classes. CFO John Woods added that while investments are being made, the financial impact won't be significantly visible in 2026 but is a medium-term matter, positioning State Street for future growth.

Betsy Graseck of Morgan Stanley asked for details on the recently announced partnership with the University of California to build a 'super app' for individuals, questioning the strategic rationale and its potential scalability.

Answer

CEO Ronald O'Hanley described the initiative as a strategic experiment aligned with their commitment to the growing wealth business. He explained that the partnership provides a large-scale platform to develop innovative, democratized investment offerings with the ultimate goal of creating a solution that could be leveraged in other markets.

Sought details on the NII outlook, asking about the underlying rate assumptions and the specific scenarios that would lead to the high or low end of the guided range.

Answer

The NII guide (flat YoY +/- low single digits) is based on market forward curves. The positive side of the range would be driven by tailwinds like strong loan growth, investment portfolio rollovers, and a 'higher for longer' rate environment which supports non-U.S. NII and slows noninterest-bearing deposit decline. The negative side would be driven by headwinds like rate cuts and unfavorable shifts in deposit mix.

Betsy Graseck of Morgan Stanley asked for details on the scenarios underpinning the Net Interest Income (NII) outlook of flat year-over-year, plus or minus low single digits, and what factors would drive results to the high or low end of that range.

Answer

Interim CFO Mark Keating detailed the NII outlook, which is framed by two potential tailwinds (loan growth, investment portfolio rollovers) and two potential headwinds (rate environment, deposit mix). He explained that upside could be driven by a slower decline in noninterest-bearing deposits, favorable deposit mix, central banks pausing rate cuts (especially non-U.S.), and elevated long-term rates. He confirmed the guidance is based on market forward curves.

Betsy Graseck inquired about the net interest margin (NIM) trajectory, specifically the expected dip after Q1 and how low it might go before recovering by year-end. She also asked if the increased tech spend (10-12% of revenue) and headcount offsets are managed quarterly, or if expense ratio changes are anticipated.

Answer

CFO Anil Chadha clarified that the Q4 NIM included approximately 4 basis points of non-recurring benefits, setting a normalized starting point of 366 basis points. He expects Q1 NIM to be around 370 basis points (elevated by day count), then gradually increasing to the low to mid-370s by Q4, assuming a mid-30% deposit beta, low single-digit loan growth, and stable long-term rates. CEO John M. Turner, Jr. explained that tech spend and headcount offsets will be managed over time as opportunities arise, not as a broad one-time initiative, and they do not anticipate significant volatility in quarterly expense structure.

Betsy Graseck sought clarification on Regions Financial's net interest margin (NIM) trajectory, specifically the anticipated dip after Q1 before recovering by year-end. She also asked whether the increased tech investments and corresponding headcount offsets would be managed quarterly to maintain a stable expense ratio or if changes should be expected.

Answer

CFO Anil Chadha clarified that after normalizing for non-recurring Q4 benefits, the NIM starts at 3.66%. He expects it to reach 3.70% in Q1, then inch up to the low to mid-3.70s by Q4, assuming mid-30s beta, low single-digit loan growth, and stable long-term rates. CEO John M. Turner, Jr. explained that expense management is a long-standing strength, with tech investments leading to headcount reallocation rather than broad, one-time initiatives, ensuring no significant quarterly expense ratio volatility.

Betsy Graseck asked about the sustainability of the guided 150-250 basis points of positive operating leverage and the specific factors required for the net interest margin to potentially reach 4%.

Answer

President, CEO, & Chairman John Turner affirmed a commitment to delivering positive operating leverage over time. Senior EVP & CFO David Turner added that while they won't sacrifice necessary investments, positive operating leverage is a core part of their strategic planning. To reach a 4% NIM, he listed several key factors: a normalized yield curve, continued growth in core customer accounts, disciplined deposit cost management, and a favorable mix from high-yielding loan portfolios.

Betsy Graseck of Morgan Stanley asked for clarification on the forecast for 'front-end loaded' net charge-offs this year and questioned if the provision would be neutral since these losses were already reserved for.

Answer

Executive John Turner explained that higher charge-offs are expected in the first half of the year due to workouts in specific portfolios like office and senior housing, but the full-year forecast remains within the 40-50 bps range. Executive David Turner added that while the provision should track charge-offs, it could be higher due to loan growth or economic deterioration. John Turner noted the Q1 provision was also impacted by an increase in general reserves due to market uncertainty.

Betsy Graseck asked if the new loan system implementation in 2025 would lead to an expense roll-off. She also sought context on the plan to hire 140 bankers, asking how this compares to prior years and if it is a multi-year initiative.

Answer

Executive David Turner clarified there will be no appreciable expense savings from the new loan system in the near term, as its primary benefit is improved client service. He confirmed the 140 banker hires represent a multi-year plan (2-3 years) that will be phased in to maintain positive operating leverage. Executive John Turner added this represents a 10-20% headcount increase in the targeted business functions.

Betsy Graseck asked about the outlook for deposit growth as fuel for the balance sheet. She also inquired about investment plans for the capital markets business, specifically regarding any interest in the growing private credit space.

Answer

CFO David Turner expressed confidence in growing deposits by focusing on core checking accounts and leveraging the bank's attractive markets. CEO John Turner stated that while they are monitoring the private credit space, they have no specific plans to invest, as the focus remains on optimizing existing capital markets investments like M&A advisory.

Betsy Graseck from Morgan Stanley inquired about the progress and scope of PNC's significant investment agenda, including branch expansion and technology initiatives like AI, and how the First Bank acquisition integrates into this strategy, specifically regarding the nature of Continuous Improvement Program (CIP) savings.

Answer

Bill Demchak, Chairman and CEO, highlighted that 2026 CapEx for new initiatives is at an all-time high, with technology spend increasing over 10%, including a 20% increase for AI. Investments focus on ongoing branch builds, payments capabilities rebuild, data center modernization, cloud-native applications, and people in new markets. He explained that the Continuous Improvement Program (CIP) for 2026, targeting $350 million in savings, funds these investments through automation, including Agentic AI for coding, contract savings from system consolidation, and broad-based efficiencies across the company. Rob Reilly, Executive Vice President and CFO, added that CIP is embedded in PNC's DNA, with every part of the company contributing.

Betsy Graseck inquired about PNC's investment trajectory, particularly in branches and technology, the progress made, how FirstBank integrates into these plans, and the composition of savings from the Continuous Improvement Program (CIP).

Answer

Bill Demchak, Chairman and CEO, highlighted that 2026 CapEx for new initiatives is at a record high, with technology spend increasing by 10%, including 20% of that increase dedicated to AI. Investments focus on branch expansion, payments capabilities, data center modernization, and cloud-native applications. He explained that CIP savings, which will continue in 2026, are driven by automation, including Agentic AI for coding, contract savings from system consolidation, and other efficiencies. Rob Reilly, EVP and CFO, added that CIP is ingrained in PNC's budgeting process, with every part of the company contributing to efficiency.

Betsy Graseck asked Chairman and CEO Bill Demchak about PNC's strategy regarding scale in the current environment, particularly after recent M&A deals, and what to anticipate for future growth opportunities. She also inquired about the breakdown of CNI loan growth (NDFI vs. non-NDFI) and the expected duration and inflection point for commercial real estate (CRE) runoff.

Answer

Chairman and CEO Will Demchak emphasized PNC's focus on organic growth, especially in new markets, and described the FirstBank acquisition as an acceleration for retail dominance in specific regions, not a sign of chasing a 'deal frenzy.' EVP and CFO Rob Reilly clarified that all CNI loan growth was non-NDFI and that CRE balances are expected to inflect positively at the beginning of next year, nearing the end of the runoff phase. Mr. Reilly also reiterated confidence in the credit quality of NDFI exposures.

Betsy Graseck inquired about PNC's strategy for achieving scale in the current environment, particularly in light of recent M&A activity, and the role of the FirstBank acquisition. She also asked for a breakdown of C&I loan growth (NDFI vs. non-NDFI) and the expected duration of commercial real estate (CRE) loan runoff.

Answer

Bill Demchak, Chairman and CEO, highlighted PNC's successful organic growth, especially in new markets, as the primary path to scale, noting the FirstBank acquisition was a unique, focused opportunity rather than a sign of a 'deal frenzy.' Rob Reilly, Executive Vice President and CFO, clarified that all C&I loan growth was non-NDFI and that the commercial real estate (CRE) runoff is expected to inflect positively and begin growing at the start of next year.

Betsy Graseck from Morgan Stanley asked how Artificial Intelligence (AI) is contributing to the company's positive operating leverage and efficiency, inquiring whether its impact is nascent or already significant.

Answer

Chairman & CEO William Demchak explained that AI is already delivering significant savings in areas like fraud prevention and is a key part of their long-standing 'continuous improvement' program, which focuses on automation. He views AI as the 'next leg' of a multi-year trend of controlling personnel costs while investing in technology, rather than a single, dramatic change to the cost base.

Betsy Graseck asked for details on the appointment of Mark Wiedman as President, including his expected role and strategic fit. She also questioned if this signaled a larger push into private credit.

Answer

CEO Bill Demchak described Mark Wiedman as a great talent with a broad skill set who will run PNC's businesses and help execute the existing game plan. Demchak explicitly stated that the appointment does not signal a change in strategy or a move into private credit, emphasizing that PNC will continue with its current focus.

Betsy Graseck of Morgan Stanley asked if C&I loan weakness was driven by paydowns and whether the flat yield curve was altering financing choices. She also questioned if PNC was 'leaving money on the table' by holding significant liquidity at the Fed and if redeployment was factored into the NII outlook.

Answer

CEO Bill Demchak clarified that loan weakness stems from low utilization due to weak raw demand, not financing choices, noting that unfunded commitments are actually growing. He acknowledged that if loan growth remains muted, there is an opportunity to deploy excess cash for a higher yield, an upside not currently in the guidance.

Betsy Graseck from Morgan Stanley inquired about the medium-term outlook for PNC's organic growth. She asked whether the current pace is a good run rate or if there are factors that could lead to an acceleration.

Answer

CEO Bill Demchak stated there are 'legs on acceleration,' particularly in C&I from new market build-outs. He announced plans to more aggressively invest in the retail distribution franchise, including targeted branch builds in high-growth markets. He noted that the breakeven on a new branch is now easier to achieve. CFO Rob Reilly highlighted the strong momentum in Southwest markets as a key driver.

Betsy Graseck asked about the alignment of equities and fixed income market revenues with the issuance calendar, and how much issuance activity contributes to these line items versus being solely within banking. She also inquired about the Investment Banking backlog, which is at a four-year high, asking for details on what's expected to be released into production in 2026.

Answer

CFO Denis Coleman explained that the fixed and equity businesses are diversified across intermediation and financing, and primary market activity enhances secondary market-making opportunities. He anticipates increased capital markets activity will catalyze incremental intermediation. Regarding the backlog, Mr. Coleman clarified that it consistently includes advisory, debt, and equity underwriting. He highlighted that the growth, primarily driven by advisory, indicates strong replenishment beyond recent results, providing confidence for 2026 and catalyzing other firm activities not directly captured in the backlog.

Betsy Graseck inquired about the alignment of equities and fixed income market revenues with the issuance calendar, and asked for more detail on the composition and anticipated release of Goldman Sachs' investment banking backlog, which is at a four-year high.

Answer

Chairman and CEO David Solomon explained that primary market activity enhances secondary market-making opportunities, and increased capital markets activity should catalyze incremental intermediation. CFO Denis Coleman clarified that the backlog, consistently reported, includes advisory, debt, and equity underwriting, with recent growth primarily driven by advisory, indicating potential for a multiplier effect across the firm's activities beyond just the backlog metrics.

Betsy Graseck asked about the rationale behind the significant 33% dividend increase and the expected impact of AI on the firm's overall efficiency.

Answer

Chairman & CEO David Solomon explained that the dividend increase reflects confidence in the durability of the firm's revenues and earnings capacity, with a primary goal of achieving a 'steady increase pattern' over time. Regarding AI, he highlighted its potential to create efficiency, automate processes, and free up resources for growth investments, mentioning a partnership with Cognition Labs to accelerate software development.

Betsy Graseck inquired about the potential benefits of anticipated regulatory changes, particularly SLR reform, and asked for an explanation of why the firm's Value at Risk (VaR) declined despite heightened market volatility.

Answer

CEO David Solomon stated that while the firm is CET1 constrained, not SLR constrained, a holistic package of regulatory reforms would be a tailwind for the industry. Executive Denis Coleman explained that the lower VaR resulted from reduced exposures which offset the impact of elevated volatility.

Betsy Graseck inquired about the specific drivers for improving the profitability of Platform Solutions in 2025-26 and how the new financing team structure will enhance revenue growth.

Answer

CEO David Solomon explained that the reduced drag from Platform Solutions is primarily driven by the improving performance and profitability of the Apple Card partnership. Regarding the new structure, Solomon described the creation of a 'Capital Solutions' group within Global Banking & Markets. This group integrates financing, sponsor coverage, and capital markets to provide a seamless 'One Goldman Sachs' experience for clients at the intersection of public and private markets, which they believe will accelerate growth.

Betsy Graseck of Morgan Stanley inquired about the risk-weighted asset (RWA) implications of shifting capital from private investments to new loan offerings and asked for details on the GM card portfolio sale, including the closing timeline and future P&L impact.

Answer

CFO Denis Coleman explained that the shift is capital-efficient, as HPI RWA density is high while asset and wealth loan density is low. Regarding the GM card deal, Coleman stated it targets a Q3 2025 closing. Until then, Goldman Sachs will incur run-rate operating losses of around negative $50-$60 million per quarter.

Betsy Graseck asked for clarification on whether the estimated credit impact of First Brands is reflected in the reported quarter or the forward guidance. She also inquired about any changes in Truist's underwriting approach, particularly for C&I loans, and its potential impact on growth into 2026.

Answer

Chief Risk Officer Brad Bender clarified that the First Brands exposure is accounted for in non-performing loans for the reported quarter and in the forward guide for net charge-offs. CEO Bill Rogers emphasized Truist's vigilant and diligent underwriting, noting adjustments made in the last 18 months to ensure the consumer unsecured portfolio remains superprime. He highlighted the strength of Truist's highly diversified portfolio, which mitigates risk and supports growth opportunities.

Betsy Graseck of Morgan Stanley asked for clarification on the Q2 restructuring charges, the pace of ongoing strategic investments, and the specific functionality of the new RTP payments feature.

Answer

CFO Mike Maguire confirmed the restructuring charges were almost entirely severance related to business repositioning, not the past merger. CEO William Rogers stated that the company can maintain its 1% expense growth target while continuing to invest in talent, technology, and digital platforms due to embedded cost-saving disciplines. He further explained the RTP feature allows corporate clients to make real-time disbursements to consumers using aliases like cell phones, enhancing speed and cash flow visibility.

Betsy Graseck requested the specific yield pickup expected on the $42 billion of assets repricing through year-end and asked if Truist was changing its lending standards to achieve its loan growth targets.

Answer

CFO Michael Maguire stated the yield pickup is now expected to be 40-50 basis points lower than previously guided, landing in the 50-60 basis point range on average. CEO William Rogers firmly stated that lending standards are not changing and that growth is a result of strong execution, new client acquisition, and market expansion within their consistent risk framework.

Betsy Graseck requested an explanation of Truist's expense outlook, specifically the drivers for the Q1 sequential decline and the ability to achieve positive operating leverage for the full year with only 1.5% expense growth.

Answer

CFO Mike Maguire attributed the Q1 expense decline to the normalization of elevated professional fees from Q4. CEO Bill Rogers added that the full-year guidance reflects ongoing efficiency initiatives that offset investments, noting that even with a record year in investment banking in 2024, overall expenses declined, demonstrating the company's cost discipline.

Betsy Graseck requested clarification on what management means by "proper execution" to achieve its goals and asked about the primary drivers for achieving positive operating leverage in 2025.

Answer

CEO Bill Rogers clarified that "proper execution" refers to continuing the current momentum of deepening existing client relationships, a focus that is now possible with merger integration activities completed. He stated that positive operating leverage in 2025 will be achieved through a combination of factors, including momentum in investment banking, a return to loan growth, favorable deposit beta trends, and sustained expense discipline, ensuring no single point of failure.

Betsy Graseck of Morgan Stanley inquired about the Impact Finance business, its expected impact on the tax rate, and how this aligns with the 'current tax policy' assumption for medium-term targets, specifically asking if the tax benefit would remain stable despite business growth.

Answer

John Stern, Vice Chair and CFO, clarified that the tax benefit from Impact Finance (around 3% plus or minus to the tax rate) is expected to remain stable. He explained that the growth in the business is primarily on the fee side, related to transferability and syndications, where tax policy changes have allowed the market to flourish, leading to more fee revenues rather than a change in the tax rate benefit.

Betsy Graseck of Morgan Stanley inquired about the Impact Finance business, its expected impact on the tax rate, and how this aligns with the 'current tax policy' assumption for medium-term targets, specifically asking if the tax benefit would remain stable despite business growth.

Answer

John Stern, Vice Chair and CFO, clarified that the tax benefit from Impact Finance (around 3% plus or minus to the tax rate) is expected to remain stable. He explained that the growth in the business is primarily on the fee side, related to transferability and syndications, where tax policy changes have allowed the market to flourish, leading to more fee revenues rather than a change in the tax rate benefit.

Betsy Graseck (Morgan Stanley) followed up on the Impact Finance discussion, asking for clarification on its implications for the tax rate. She inquired about the magnitude and timeframe of the tax benefit, and whether the "current tax policy" assumption in the medium-term targets implies a stable tax rate despite the growth in Impact Finance.

Answer

John Stern, Vice Chair and CFO, clarified that the tax benefit from Impact Finance, approximately 3 percentage points to the tax rate, has been stable and is expected to continue in that range. He explained that the anticipated growth in Impact Finance revenue is primarily from transferability and syndications, areas where tax policy changes have allowed the market to flourish, leading to more fee revenues rather than a change in the tax rate benefit.

Betsy Graseck inquired about the specific drivers behind the accelerated growth in the C&I loan book and the current status of line utilizations. She also asked if there were any meaningful gains or losses from the recent asset sales.

Answer

Vice Chair & CFO John Stern reported that C&I growth was broad-based, with utilization rates ticking up 30-40 basis points. He highlighted strength in ABS lending, small business, and middle-market expansion. President & CEO Gunjan Kedia added that the build-out of new structured credit capabilities over the past few years is now contributing to this growth. John Stern confirmed there were no meaningful gains or losses on the asset sales beyond the associated reserve release.

Betsy Graseck of Morgan Stanley asked for a definition of the 'market' U.S. Bancorp aims to match in payments growth and for details on the drivers of strong C&I lending.

Answer

CEO Gunjan Kedia defined the target payments market as the U.S. market, focusing on a specific credit box and profitable margins, distinct from low-margin large e-commerce. CFO John Stern attributed strong C&I loan growth to ABS lending, higher utilization rates, and expansion in middle-market lending.

Betsy Graseck asked for details on the assumptions behind the NII guidance, specifically the forward curve used. She also inquired about the sensitivity of projections to fewer rate cuts or a higher long-end rate, and the quarterly cadence of fixed asset repricing throughout the year.

Answer

CFO John Stern stated the guidance is based on a forward curve that includes two rate cuts (in May and September) and a 10-year Treasury yield around 4.65%. He noted the bank is positioned to be neutral to short-end rate changes, but a steeper yield curve would be beneficial for NII. Stern confirmed that the pace of fixed asset repricing, involving $5-7 billion per quarter in loans and $3 billion per quarter in securities, is expected to be consistent throughout 2025.

Betsy Graseck questioned the shift to a more precise full-year expense guidance of $16.8 billion and asked if Net Interest Margin (NIM) would expand further as interest rates decline.

Answer

CFO John Stern explained the expense guidance reflects greater certainty late in the year and is appropriate given NII is at the high end of its range. He confirmed that rate cuts are a net positive for NIM, citing a favorable initial deposit beta of ~30% that is expected to rise toward 50% over the cycle.

Betsy Graseck asked about the anticipated duration of BNY Mellon's positive operating leverage and whether the company plans to issue its own stablecoin.

Answer

CEO Robin Vince stated there's a 'long time' of runway for positive operating leverage, citing the early stages of the commercial model, platform operating model benefits expected by 2028, and growth in higher-margin platform businesses. Regarding stablecoins, Robin Vince emphasized BNY Mellon's role as an infrastructure and capital markets enablement business, partnering with and enabling other stablecoin issuers rather than committing to issuing its own.

Betsy Graseck asked how many more years of positive operating leverage BNY anticipates delivering, considering past headcount reductions. She also inquired if BNY plans to issue its own stablecoin.

Answer

CEO Robin Vince stated there's a 'long time' of positive operating leverage ahead, citing the commercial model's one-year maturity, platform operating model benefits expected by early 2028, and the early stages of the AI journey. He highlighted increased contribution from higher-margin platform businesses and future opportunities in Investment and Wealth Management. Regarding stablecoins, Robin reiterated BNY's strategy as an 'infrastructure capital markets enablement business,' focusing on partnering with and enabling other stablecoin issuers rather than directly answering about issuing its own.

Betsy Graseck from Morgan Stanley inquired about the impact of BNY Mellon's AI initiatives, specifically the ELISA platform, on the company's strong operating leverage. She asked if the benefits are already visible in the P&L and whether AI is primarily a revenue or expense story.

Answer

CEO & Director Robin Vince explained that AI is viewed as both a top-line and expense story, as it unlocks capacity that can be reinvested into higher-value activities. He stated that while it's still 'early days' with not a 'ton in the P&L right now,' the company is investing heavily in AI for the medium to long term. He expects the benefits to accelerate in 2026 and beyond as part of the broader strategy to drive positive operating leverage through multiple initiatives like the commercial and platforms operating models.

Betsy Graseck of Morgan Stanley asked about the P&L impact and timing of the Treasury Direct Express program moving to BNY's platform. She also sought clarification on the outlook for noninterest-bearing deposits (NIB) and what factors, other than rate cuts, could significantly impact Net Interest Income (NII).

Answer

CFO Dermot McDonogh indicated the Treasury Direct Express program win is a strong proof point for their model but will not have a visibly lumpy P&L impact, ramping up in late 2025. He expects NIB deposits to remain roughly in their current range. CEO Robin Vince added that the firm deliberately immunized 2025 NII and that positive operating leverage is the "North Star," with fees and controllable expenses being other important levers if needed.

Betsy Graseck of Morgan Stanley asked if the significant acceleration of the platform model rollout in 2025, covering a large percentage of employees, should lead to a corresponding step-up in operating leverage.

Answer

CEO Robin Vince clarified that there isn't a direct, immediate correlation. He explained the rollout has been a deliberate, multi-year process, and the most significant benefits, such as efficiency gains and higher velocity, typically materialize about a year after teams transition. He noted that other, shorter-term investments are expected to deliver the expense benefits guided for 2025.

Betsy Graseck questioned the scale of the 'plus' in the '100% plus' capital return guidance, suggesting room for optimization. She also asked if the entire firm would move to the new platform model and what the runway for efficiency improvements looks like.

Answer

CFO Dermot McDonogh indicated that given market uncertainty and the Archer acquisition, the full-year payout would likely remain near the 103% year-to-date level. He confirmed the goal is for 100% of the firm to be on the platform model over the next ~18 months, stressing it's a driver for growth and culture, not just efficiency. CEO Robin Vince added that the benefits from the new model will be a multiyear endeavor extending beyond the initial transition.

Betsy Graseck sought clarification on Bank of America's 2026 NII growth guidance (5%-7% over 2025), confirmed the Q4 expense outlook as flat, and inquired about the capital markets backlog and expectations for compensatory revenues.

Answer

Alastair Borthwick (CFO, Bank of America) confirmed the 5%-7% NII growth for 2026, driven by core growth and fixed-rate asset repricing. He reiterated expectations for flattish Q4 expenses due to stable headcount. For capital markets, he noted a good investment banking pipeline and a constructive environment for sales and trading, despite normal Q4 seasonality, emphasizing long-term management.

Betsy Graseck sought clarification on the 2026 NII growth guidance (5-7%), the Q4 expense outlook (flattish), and the capital markets backlog and overall outlook.

Answer

CFO Alastair Borthwick confirmed 2026 NII growth of 5-7%, driven by core growth, fixed-rate asset repricing, and anticipated rate cuts. He reiterated that Q4 expenses are expected to be flattish due to stable headcount. He noted a constructive environment for investment banking with a good pipeline, and a generally constructive environment for sales and trading despite normal Q4 seasonality. Chair and CEO Brian Moynihan highlighted Global Markets' 14 consecutive quarters of year-over-year revenue growth and the stable revenue stream from Global Banking's holistic client relationships.

Betsy Graseck from Morgan Stanley asked about the allocation of risk-weighted assets (RWA) to the markets business and the bank's strategy for wind and solar investments following the recent tax plan changes.

Answer

CEO Brian Moynihan and CFO Alastair Borthwick clarified there is no ceiling on RWA for the Global Markets business, provided it achieves the required returns. Borthwick explained that new wind and solar tax credit investments will phase out by 2027, with the existing portfolio running off through 2033, while low-income housing tax credit investments will continue.

Betsy Graseck asked how the threat of tariffs impacts the bank's investment plans in international markets. She also inquired about the current sentiment and investment behavior of small business clients.

Answer

CEO Brian Moynihan stated the bank would continue to invest where it sees opportunities, helping clients navigate supply chain realignments. He noted that small businesses are currently performing well but are unsettled by policy uncertainty, which is slowing some investment decisions.

Betsy Graseck asked how rising small business optimism is translating into C&I loan demand and whether Bank of America is positioned to benefit from this trend.

Answer

CEO Brian Moynihan noted that while optimism is up, driven by hopes for a better regulatory climate, actual loan demand via line of credit utilization remains muted due to higher interest rates. He agreed the bank is well-positioned to benefit once that optimism translates into activity, highlighting that the largest dollar impact would come from increased borrowing in the middle-market commercial segment.

Betsy Graseck inquired about the extent to which the rate environment has driven deposit trends and whether the pressure from sweep account pricing has passed. She also asked for color on the drivers behind the pickup in corporate loan demand late in the quarter.

Answer

CEO Brian Moynihan stated that overall deposits have grown for four consecutive quarters and that rate-driven movement from higher-balance clients has now stabilized. On loan demand, CFO Alastair Borthwick noted the late-quarter growth was broad-based across small business and commercial clients, though revolver utilization has not yet picked up, representing potential future upside.

Betsy Graseck inquired about Citi's strategy and timing for the Banamex transaction, specifically the balance between direct offers and the planned IPO route for ultimate shareholder value.

Answer

CEO Jane Fraser emphasized that the 25% stake sale is a significant step towards de-consolidation and full exit, aiming to maximize value and certainty. She highlighted Fernando Chico Pardo's partnership as valuable for the IPO and confirmed his regulatory approval filing has commenced, typically taking 9-12 months.

Betsy Graseck asked for clarity on Citi's Banamex divestiture strategy, focusing on the timing between potential offers and the planned IPO, and the overall timeframe for maximizing shareholder value.

Answer

CEO Jane Fraser confirmed the 25% stake sale is a significant step towards de-consolidation and full exit, emphasizing the IPO path for maximizing value and certainty. She noted strong government support and the value of Fernando Chico Pardo's partnership. Regulatory approval for the 25% stake, which takes 9-12 months, has already commenced.

Betsy Graseck of Morgan Stanley requested an update on the status and timing of the Banamex IPO. She also asked if there was a specific market condition 'bogey' or threshold that would determine when the IPO proceeds.

Answer

CEO Jane Fraser stated there was no new update, but the firm remains on track with preparations, including finalizing audited financials, with a goal to be ready for an IPO by year-end. However, she noted the final timing depends on market conditions and regulatory approvals, which could push it into 2026. Both Fraser and CFO Mark Mason confirmed there is no specific market 'bogey,' emphasizing the goal is to maximize shareholder value at the right time.

Betsy Graseck of Morgan Stanley asked for an update on the status of the Banamex IPO and whether there was a specific market condition "bogey" that would determine the timing of the transaction.

Answer

CEO Jane Fraser reported no new updates, stating that preparations are on track to be in a position for an IPO by year-end, but the final timing is subject to market conditions and regulatory approvals, which could extend into 2026. CFO Mark Mason added that the goal is to maximize shareholder value and there is no specific market bogey for the IPO.

Betsy Graseck asked for clarification on the pace of the share buyback program and inquired about the progress of the firm's transformation, specifically the modernization of its infrastructure.

Answer

CFO Mark Mason stated the firm is targeting a 'similar level' of buybacks as the $1.75 billion in Q1, with the pace informed by the upcoming SCB results and client demand. CEO Jane Fraser added that returning capital is a priority. On the transformation, Fraser said she feels good about the progress, with benefits now visible in how the bank is run. She noted significant work has been done on data, risk management, and simplifying technology, though work remains.

Betsy Graseck questioned why Citigroup is not more aggressively utilizing its share buyback authorization, given the stock is trading below tangible book value, which she noted would be a highly accretive way to boost RoTCE.

Answer

CEO Jane Fraser affirmed her commitment to returning capital but noted that while a more aggressive Basel III scenario is off the table, there isn't complete certainty on future capital requirements. She stressed that the bar for growth investments is high, with a focus on attractive marginal RoTCE, and the $20 billion buyback program reflects a balance between these investments and returning capital to shareholders.

Betsy Graseck asked if Wells Fargo's trading activities are nearing their maximum capacity relative to its risk profile and client demand, or if further growth is anticipated at a similar pace. She also inquired whether the $2 billion in compliance expenses has been fully reduced to a normalized level, or if more reductions are expected.

Answer

CFO Mike Santomassimo stated that there is 'a lot of opportunity' for continued growth across the Markets business, including financing trades and trading inventory, all within the company's risk appetite, without specifying an exact pace. Regarding compliance expenses, Mike Santomassimo clarified that Wells Fargo is currently spending more on controls than before CEO Charlie Scharf's arrival, and these costs are still embedded in the run rate. He expects future optimization through technology and process redefinition. Charlie Scharf added that while project-related third-party consultant spend has decreased, the core control spend remains, with opportunities for future efficiency.

Betsy Graseck asked if Wells Fargo's trading activities are maxed out relative to its risk profile and client demand, or if further growth is expected. She also inquired whether the initial $2 billion in compliance expenses has been fully reduced, bringing the bank back to a normalized expense run rate for that area.

Answer

CFO Mike Santomassimo stated there's significant opportunity in the markets business, including financing trades and inventory growth, all within the bank's risk appetite, without providing exact pacing. He clarified that while project-related compliance spend has been reduced, the overall compliance cost is still higher than before CEO Charlie Scharf's arrival, with future optimization opportunities through technology and process redefinition.

Betsy Graseck of Morgan Stanley asked if Wells Fargo's trading activities, which impacted Net Interest Income (NII), are maxed out relative to risk profile and client demand, or if further expansion is expected. She also inquired if the initial $2 billion in compliance expenses have been fully reduced, bringing the bank back to a normalized expense run rate for that area.

Answer

CFO Mike Santomassimo stated that Wells Fargo still sees significant opportunity in the markets business, including financing trades and inventory growth, all within their risk appetite. CEO Charlie Scharf clarified that most of the initial compliance spend is still in the run rate, with only project-related third-party consultant costs reduced, but there's an ongoing opportunity to optimize this spend more efficiently over time.

Betsy Graseck from Morgan Stanley inquired about the expense trajectory over the next one to two years, asking if efficiencies could be realized from investments made during the asset cap period and how AI fits into their strategy. She also asked about the timing for revisiting the ROTCE target.

Answer

CEO Charles Scharf clarified that since the underlying consent order for the asset cap is still in place, they cannot yet assume material expense changes related to it. However, he stressed that significant efficiency opportunities exist elsewhere. CFO Michael Santomassimo noted that AI's impact is in its very early stages. Regarding the ROTCE target, Scharf stated they are not yet 'declaring victory' on the 15% goal due to a one-time gain in the quarter but will provide more information toward year-end.

Betsy Graseck of Morgan Stanley asked about the trajectory of expenses over the next couple of years, inquiring if the asset cap removal would unlock new efficiencies and how the company is positioned to leverage AI. She also pressed for timing on when the ROTCE target would be revisited.

Answer

CEO Charles Scharf stated that significant expense changes related to the asset cap are unlikely until the underlying consent order is fully lifted. He reiterated a focus on driving efficiencies across the company to fund investments. CFO Michael Santomassimo added that while it's very early for AI, pilots are underway in branches, operations, and call centers. Scharf clarified they are not yet declaring victory on the 15% ROTCE target due to a one-time gain and will provide updates toward year-end.

Betsy Graseck inquired about the tangible impacts of closing five consent orders, such as freeing up management time or reducing expenses, and asked for more detail on the drivers of future growth, both with and without the asset cap.

Answer

CEO Charlie Scharf explained that closing consent orders frees up significant management time and resources, allowing for a greater focus on running the business more efficiently. He stated that future growth with the asset cap on is driven by fee-based businesses like credit cards, wealth management, and investment banking. Without the asset cap, the company would have greater freedom to grow its balance sheet to facilitate more customer financing and deposit growth, ultimately aiming for a sustainable ROTCE of 15% and beyond.

Betsy Graseck of Morgan Stanley asked about the primary drivers for reaching the 15% ROE target, questioning if it would come from revenue growth or expense cuts. She also inquired about the recent management change in the credit card division.

Answer

CFO Mike Santomassimo explained that multiple paths exist to the 15% ROE target, with maturing profitability in the credit card and home lending businesses being significant contributors. CEO Charlie Scharf added that the 2025 outlook implies revenue growth is a key factor. Regarding the management change, he clarified that it was a natural retirement for the previous head, Ray Fisher, and that the strategy remains unchanged under the new leadership.

Betsy Graseck inquired about specific areas where Wells Fargo could increase asset growth once the asset cap is removed and whether the expenses tied to consent order remediation could be reduced afterward.

Answer

CEO Charlie Scharf identified wholesale deposits and the markets financing business as the primary areas that have been constrained and would see an immediate, though not dramatic, impact. Regarding expenses, he stated the company is not focused on reducing risk and control spending post-remediation, as the priority is embedding the changes into the culture. He noted that other significant efficiency opportunities exist elsewhere in the company.

Inquired about the specific drivers behind the increase in wholesale lending RWA, JPMorgan's strategy for stablecoins and its own deposit token, and whether the pause in open banking rules offers an opportunity to adjust pricing for fintech relationships.

Answer

The increase in wholesale lending was attributed to broad-based financing activity across various areas late in the quarter. On digital currencies, JPMorgan plans to be involved in both its own deposit token and other stablecoins to learn and compete. Regarding open banking, the focus is on ensuring data sharing is done properly with customer consent, transparency, and a clear liability shift for fraud, rather than on pricing.

Betsy Graseck asked CEO Jamie Dimon for his perspective on how the next economic cycle might progress compared to past cycles. She also questioned the drivers behind wholesale loan growth and whether clients were drawing down credit lines for liquidity.

Answer

CEO James Dimon described the current environment as 'different' from past cycles, emphasizing that geopolitical stability is more critical than near-term economic performance. An executive, likely Jeremy Barnum, noted that while clients are discussing liquidity, the bank has not yet observed meaningful drawdowns on credit lines, suggesting anxiety has not reached a critical level.

Requested details on the key drivers of the NII outlook, potential areas for loan growth inflection, and clarification on the specific business areas with the most opportunity for market share gains.

Answer

The main potential for loan growth inflection is in acquisition finance, dependent on M&A activity, as card loan growth is decelerating. The single biggest area of opportunity ('reds and ambers') is in the affluent segment of Wealth Management, where the bank feels it is significantly underpenetrated.

Betsy Graseck of Morgan Stanley asked for clarification on the NII outlook, specifically if the end of QT was factored in, and inquired about Jamie Dimon's interest in using capital for portfolio acquisitions like private label credit cards.

Answer

CFO Jeremy Barnum confirmed that the potential end of QT is a factor in their outlook, which could turn deposit balances into a tailwind. He also clarified that recent management commentary on NII weakness referred to NII ex-Markets. CEO James Dimon reiterated his cautious stance on acquisitions in the current environment and stated there was 'no chance' of acquiring a private label card portfolio, though he remains open to re-evaluating if market conditions change dramatically.