Chris McGratty

Chris McGratty asked about Flagstar Bank's degree of confidence in its updated balance sheet guidance, particularly concerning continued high par payoffs if the forward curve suggests rate cuts. He also requested clarification on the cadence of risk-weighted asset (RWA) growth over the year and the first quarter share count, including warrants.

Answer

Lee Smith, Senior Executive Vice President and CFO, expressed confidence in continued par payoffs, expecting a quarterly average of over $1 billion, noting Q1 is typically the lowest. He confirmed the forecast uses the mid-December rate curve (two cuts), which would aid refinancing. Joseph Otting, Chairman, President, and CEO, added that new CRE originations ($2 billion/year) will help offset outflows. Lee Smith provided share counts: Q4 at 459 million, 2026 at ~473 million, and 2027 at ~479 million, all fully diluted including warrants. He explained that RWA growth is not as punitive as it might seem, given that non-accruals (150% RWA) are being reduced, while new C&I loans are typically 100% RWA.

Chris McGratty asked about the degree of confidence in Flagstar Bank's updated balance sheet guidance, particularly if the forward curve implies rate cuts and increased prepayments. He also inquired about the cadence of risk-weighted asset (RWA) growth over the year and the Q1 2026 share count, including warrants.

Answer

Lee Smith, Senior Executive Vice President and Chief Financial Officer, expressed confidence in par payoffs continuing, noting that Q1 is typically the lowest quarter for payoffs, with activity picking up later in the year, expecting over $1 billion quarterly on average. Joseph Otting, Chairman, President, and CEO, added that new CRE originations ($2 billion annually, outside NYC multifamily) would help offset some outflows. Lee Smith provided share counts: Q4 2025 was 459 million, with 2026 forecast at 473 million and 2027 forecast at 479 million, all fully diluted and including warrants. On RWA, Lee Smith explained that reducing higher RWA non-accrual loans (150% RWA) helps offset new C&I growth (100% RWA), making the overall RWA impact less punitive.

Chris McGratty asked about the drivers of Flagstar Bank N.A.'s projected 90-100 basis points margin improvement over the next two years, specifically quantifying the impact of resolving non-accrual loans. He also inquired about the board's discussions on strategic uses of capital for the coming year and the embedded thoughts on cash and securities balances for the next one to two years.

Answer

Lee Smith, Chief Financial Officer, explained that reducing non-accrual loans (with an expected $1 billion reduction in 2026) is a key part of the strategy, as it frees up capital and allows reinvestment into higher-yielding assets, significantly boosting NIM. Other drivers include multifamily resets, C&I growth, new CRE, and deposit management. Joseph Otting, Chairman, President, and CEO, stated that the board has not yet discussed specific strategic uses of capital but is shareholder-friendly and focused on efficient capital use. Lee Smith projected a $1 billion increase in securities in Q4 2025, maintaining that level through 2026, with cash balances expected to be in the $7 billion-$8 billion range.

Chris McGratty from KBW asked about the drivers behind Flagstar Bank N.A.'s projected 90-100 basis point margin improvement over the next two years, specifically how much of this is attributable to the resolution of credit issues and the suppression of the margin from non-accrual loans. He also inquired about the board's discussions on strategic uses of capital (growth, buybacks, other options) for a year from now, and the embedded thoughts on cash levels and security balances for the next one to two years.

Answer

CFO Lee Smith explained that reducing non-accruals is a key part of the strategy, as they are 150% risk-weighted and generate no earnings. He projected a $1 billion reduction in non-accruals in 2026, which would free up capital and allow reinvestment into higher-yielding assets like C&I loans. Other NIM drivers include multifamily loan resets, C&I growth, new CRE and residential originations, and managing core deposits. CEO Joseph Otting stated that the board has not yet discussed strategic uses of excess capital, but will assess options like growth and buybacks mid-2026 after significant progress on NPLs and business growth. Lee Smith added that securities balances are expected to increase by $1 billion in Q4 2025 and remain stable through 2026, with cash levels around $7-$8 billion in 2026.

Chris McGratty from KBW questioned whether all identified cost savings from the Heartland acquisition have been realized and where incremental investments are being made to drive growth. He also asked for a reasonable growth rate expectation for the trust and securities processing line, noting its significant growth.

Answer

CFO Ram Shankar confirmed that 100% of the identified cost savings from the transaction have been realized and are part of the current run rate, with some contract termination costs still impacting Q4. Chairman and CEO Mariner Kemper emphasized a focus on operating leverage, stating that future expense increases would primarily stem from successful sales activities. Regarding trust and securities processing, Mariner Kemper highlighted institutional banking's 12.8% year-over-year growth, driven by alternative fund services and corporate trust, and noted strong momentum and tailwinds without providing specific forward guidance.

Chris McGratty from KBW questioned whether all identified cost savings from the acquisition have been realized and where incremental investments are being made to foster company growth while maintaining operating leverage. He also sought guidance on a reasonable growth rate for the trust and securities processing line, noting its significant growth.

Answer

CFO Ram Shankar confirmed that 100% of the identified cost savings from the transaction have been realized and are part of the current run rate, with normal inflation and seasonal payroll expenses being the main drivers of future expense changes. Chairman and CEO Mariner Kemper emphasized discipline on operating leverage, stating that future expense increases would primarily be tied to successful sales activities. Regarding trust and securities processing, Mariner Kemper highlighted a 12.8% year-over-year growth rate for institutional banking, driven by alternative fund services and corporate trust, and expressed strong momentum without providing specific forward guidance.

Chris McGratty from KBW inquired about the specific growth potential for UMB Financial's trust and securities processing and asset servicing businesses, asking if it's a mid-to-high single-digit or double-digit opportunity. He also questioned the company's potential for operating leverage and efficiency ratio improvement post-acquisition, considering regulatory costs.

Answer

Chairman and CEO Mariner Kemper indicated UMB Financial is 'aiming much higher' than mid-to-high single-digit growth for its trust and securities processing business, citing its ability to win business from global household names due to strong technology and talent. Mr. Kemper also noted significant improvements in profitability metrics post-acquisition, enabling more efficient investment. CFO Ram Shankar added that UMB is cautiously approaching potential regulatory costs, awaiting clearer guidance.

Chris McGratty asked about the sustainability of Western Alliance's non-interest income, particularly the strong service charge number in the quarter, and what components drove it. He also sought near-term expectations for mortgage banking revenue, especially in a seasonally challenging quarter, and asked what factors would drive the net interest income (NII) guidance to the high versus low end of the 11%-14% range.

Answer

CFO Vishal Idnani attributed the service charge strength to treasury management investments and significant fee income from digital disbursements, including the Facebook Cambridge Analytica settlement, expressing confidence in its trajectory. President and CEO Ken Vecchione stated a constructive outlook for mortgage banking in 2026, assuming a 10% year-over-year increase in total mortgage fee-related revenues, with potential for outperformance due to housing programs, regulatory changes, and lower rates. He noted early Q1 2026 mortgage revenues were trending above planning. For NII, Mr. Vecchione indicated that faster growth in average earning assets, particularly from loan and deposit growth timing, would push NII towards the higher end of the guidance, with a floor of 12% or greater. Mr. Idnani added that lower-cost deposit categories like digital assets, trust company, and Business Escrow Services would also contribute to margin expansion.

Chris McGratty inquired about the sustainability of Western Alliance's non-interest income, specifically the large service charge number, and asked for near-term expectations for mortgage banking revenue in a seasonally challenging quarter. He also sought clarification on factors that could drive net interest income to the high versus low end of the 11%-14% guidance.

Answer

Vishal Idnani, CFO, attributed service charge growth to treasury management and digital disbursements, including a significant settlement, expressing optimism for sustained trajectory. Ken Vecchione, President and CEO, noted a constructive outlook for mortgage banking, projecting a 10% year-over-year increase with potential for outperformance due to housing programs, regulatory changes, and lower rates. For NII, Mr. Vecchione linked the high end to faster average earning asset growth, while Mr. Idnani highlighted the focus on lower-cost deposit categories.

Chris McGrathy inquired about Western Alliance Bancorporation's post-quarter-end buybacks and capital arbitrage strategy. He also asked for biases within the Q4 guidance ranges for net interest income, fees, and expenses.

Answer

CFO Dale Gibbons explained the $300 million stock buyback authorization, with $25 million executed, and the potential for subordinated debt issuance to accelerate buybacks, aiming for CET1 closer to 11%. President and CEO Ken Vecchione noted share purchases in the mid-to-high $80s and further purchases when the stock dropped. Dale Gibbons indicated continued strength in non-interest income (due to a class action settlement), bolstered incentive accruals for expenses, and stable insurance costs for Q4.

Chris McGrathy asked for clarification on Western Alliance Bancorporation's post-quarter-end buybacks and comments regarding capital arbitrage.

Answer

CFO Dale Gibbons explained that the company plans to use subordinated debt to provide liquidity at the parent, accelerating the $300 million stock buyback program and aiming to bring the CET1 ratio closer to the 11% target. President and CEO Ken Vecchione added that shares were purchased in the mid-to-high $80s and more aggressively when the stock dropped. In a follow-up on guidance biases, Dale Gibbons indicated expectations for continued strong non-interest income, bolstered incentive accruals in Q4, and stable insurance costs. Ken Vecchione emphasized the projected 17-19% EPS growth for 2025.

Chris McGraty asked about the effective tax rate for the quarter and whether it was a fair projection for future periods.

Answer

CFO Jim Iroli clarified that the effective tax rate included approximately 40 basis points of unusual items, with 30 basis points being out-of-period adjustments and 10 basis points native to the current period.

Chris McGratty sought clarification on the expense guidance for Q1 and the full year, including the exit rate post-synergies, and inquired about the ongoing need for technology investments and the effective tax rate for 2026.

Answer

Ivan Seda (EVP and CEO) confirmed the Q1 operating expense guidance, provided a full-year estimate of $1.5 billion with a Q4 exit rate south of $370 million (or $330 million excluding CDI). Tory Nixon (Co-President) and Chris Merrywell (Co-President) detailed ongoing investments in talent (RMs, teams, wealth space) and technology, noting that tech investment is part of the run rate. Ivan Seda modeled a 25% effective tax rate for 2026.

Chris McGratty requested clarification on the expense guidance, specifically the Q1 range, the fully loaded exit rate for the fourth quarter, and the impact of CDI amortization. He also asked about the balance between ongoing investment needs, particularly in technology and talent, and achieving operating leverage in the coming year.

Answer

Ivan Seda, EVP and CFO, confirmed the Q1 expense range of $335-$345 million (excluding CDI) and an exit velocity south of $370 million (all-in) or around $330 million (excluding CDI) for Q4. Tory Nixon and Chris Merrywell, Co-Presidents, detailed ongoing investments in talent, including new commercial RMs and teams in various markets, noting that de novo locations are profitable within 12 months. They also stated that technology investments are a continuous part of the run rate.

Chris McGratty asked Wintrust Financial Corporation's management about areas not meeting expectations, such as growth by asset class or operational aspects, and the company's current appetite for M&A, particularly tuck-in acquisitions, given its strong organic growth.

Answer

President and CEO Tim Crane identified the mortgage business as an area for improvement, though expenses are well-managed. He also expressed a desire for more commercial activity while maintaining discipline in relationship selection over transactional growth. Regarding M&A, Tim Crane stated the primary focus is organic growth, but Wintrust remains open to opportunistic, smaller acquisitions, with 2026 plans based on organic expansion.

Chris McGratty of KBW asked Wintrust's management to identify areas where performance was not meeting expectations, whether in growth by asset class or operational aspects, and also inquired about the company's current M&A appetite.

Answer

President and CEO Tim Crane stated a desire for a stronger mortgage business, despite effective expense management in that area, and more commercial activity, while maintaining discipline in relationship-based lending. He reiterated the focus on organic growth for 2026, noting that while M&A conversations occur, nothing is imminent, and the company is adept at smaller acquisitions.

Chris McGratty asked for comments on deposit pricing competitiveness across Old National Bancorp's Midwest markets, particularly Chicago, and sought color on the company's technology spend as a component of overall expenses.

Answer

Jim Ryan, Chairman and CEO, noted that deposit pricing remains competitive but has been very rational across most of their footprint, with only a few 'spicier' markets. Regarding technology spend, Mr. Ryan stated they are investing as much as possible in innovation for payments and client-facing capabilities, effectively self-funding these investments while maintaining a strong efficiency ratio. He is comfortable with the current level of tech spend and plans to increase hiring for front-line staff.

Chris McGratty asked for comments on deposit pricing competitiveness across Old National's Midwest markets, referencing a peer's observation of reasonable pricing in Chicago. He also sought color on technology spend, specifically what portion of expenses is allocated to tech investments, in terms of percentage of revenues or growth rate.

Answer

Jim Ryan, Chairman and CEO, noted that deposit pricing remains competitive but is 'very, very rational' across most of their footprint, with only a few markets being 'spicier.' Regarding technology spend, Mr. Ryan stated they are investing as much as possible without underfunding new initiatives in payments and client-facing capabilities, effectively self-funding these investments while maintaining efficiency. He believes they are at the right level and couldn't handle more organizational change from increased spending.

Chris McGratty questioned the company's capital management strategy, specifically the tension between growing CET1 and returning capital, given the 11% CET1 ratio and the potential for significant capital build even with buybacks. He asked if 11% is the 'right number' for CET1, implying it might be higher than peers. He also asked if NII is expected to grow from the Q4 base into 2026, assuming low single-digit loan growth.

Answer

CEO Jim Ryan acknowledged the healthy tension in capital allocation, considering shareholders, ratings agencies, and economic conditions. He suggested there are opportunities for the CET1 ratio to come down over time and for substantially more buybacks in future periods, but the company is not ready to commit to that yet, expecting a slight capital build in the near term for more clarity. CFO John Moran confirmed that NII is expected to grow into 2026, with margins stable-ish, depending on yield curve dynamics, and noted that steepening of the yield curve would be beneficial.

Chris McGratty questioned Old National Bancorp's capital strategy, specifically regarding the CET1 ratio. He noted the current 11% ratio and the potential to build 50 basis points annually, asking if 11% is the target or if the company might allow it to come down, given that many peers operate at 10.5% or 10%. He also asked CFO John Moran if Net Interest Income (NII) is expected to grow from the fourth-quarter base into 2026, considering the projected rate cuts and loan growth.

Answer

CEO Jim Ryan acknowledged the healthy tension between shareholder expectations, rating agencies, and economic conditions regarding capital. He stated that while there are opportunities to let the CET1 ratio come down over time, they are not ready to make that commitment yet, expecting some capital build as they gain more clarity. He emphasized that returning capital to shareholders is the best use and they could do substantially more in future periods. CFO John Moran confirmed that NII is expected to absolutely grow into 2026, with margins stable-ish, depending on yield curve dynamics, noting that steepening in the yield curve would be beneficial.

Chris McGratty from KBW sought a 'gut check' on the math for the 16-18% Return on Tangible Common Equity (ROTC) guide for the second half of 2027, asking if expense growth moderation from 'Reimagine the Bank' or other factors would drive it. He also inquired about the bank's reserves adjusted for balance sheet optimization compared to CECL Day One levels.

Answer

Chairman and CEO Bruce Van Saun clarified that the 16-18% ROTC is an exit rate for 2027, with full delivery expected in 2028, driven by initiatives, NIM expansion, and strong EPS growth. Regarding reserves, Mr. Van Saun explained that after non-core rundown, loan sales, the Investors acquisition, and balance sheet optimization, the adjusted CECL Day One level was around 1.10%, with the current low 1.50s reflecting a healthy and conservative level of reserves.

Chris McGratty asked for a 'gut check' on the 16%-18% ROTCE guide for the second half of 2027, noting that consensus estimates were closer to 15%. He also inquired about the bank's reserves, adjusted for balance sheet optimization, relative to CECL Day One levels.

Answer

Bruce Van Saun, Chairman and CEO, clarified that the 16%-18% ROTCE is an exit rate for H2 2027, not a full-year forecast, with further momentum expected in 2028. He emphasized the path to achieving this through driving initiatives, NIM expansion, significant EPS growth, and seasonal peaking in Q4. Regarding reserves, Mr. Van Saun stated that CECL Day One was about 1.45%, and after various balance sheet actions (non-core rundown, loan sales, Investors acquisition, BSO), it's now around 1.10%. The current allowance in the low 1.50s demonstrates a fair amount of conservatism.

Chris McGratty asked how the 'Reimagine the Bank' initiative's benefits connect to Citizens Financial Group's 16%-18% ROTCE target and about the company's near-to-intermediate-term uses of capital.

Answer

CEO Bruce Van Saun stated that Citizens is on track for the 16%-18% ROTCE target independently, and 'Reimagine the Bank' benefits would further enhance these numbers, offering optionality for reinvestment. He prioritized facilitating loan growth and regular dividend increases as primary uses of capital. He also mentioned potential for smaller, strategic M&A in specific verticals or tech, alongside continued share repurchases, believing the stock is undervalued.

Chris McGraty asked about Regions Financial's trends in consumer checking account growth, particularly new account openings and the impact of digital origination. He also sought clarification on whether the updated 10-12% tech spend guidance represents a one-year catch-up or a new, sustained level for technology investment.

Answer

Former CFO David J. Turner reported nice growth in consumer checking accounts, driven by a focus on core customers with direct deposits and active debit card usage. He highlighted a significant increase in digital origination and the positive impact of a new capability for easily moving direct deposits. David J. Turner clarified that the 10-12% tech spend guidance is a new, sustained level set, up from the previous 9-11% range, reflecting ongoing investments.

Chris McGraty asked about Regions Financial's trends in consumer checking account growth, given the focus by larger banks and Regions' strong retail deposit base. He also sought clarification on whether the 10-12% tech spend is a one-year catch-up or a new, sustained level.

Answer

Former CFO David J. Turner stated that Regions is experiencing nice growth in consumer checking accounts, focusing on core customers with direct deposits and active debit card use. He noted increased digital origination and the introduction of a new direct deposit transfer capability. CEO John M. Turner, Jr. clarified that the 10-12% tech spend is a new, sustained level set, an increase from the previous 9-11% range where they were operating at the upper end.

Chris McGratty from KBW asked about potential positive surprises for First Bank's $1 per share contribution in 2027, specifically regarding revenue synergies, and questioned if the high single-digit capital markets growth expectation represents the full potential or if conservatism is built in.

Answer

Rob Reilly, Executive Vice President and CFO, identified revenue synergies as the primary area for positive surprise regarding First Bank's 2027 contribution. He highlighted the potential for First Bank's strong community relationships to leverage PNC's broader product and service offerings, which are not heavily built into current estimates. He confirmed that the high single-digit capital markets expectation represents what PNC believes it can achieve, implying it's not overly conservative.

Chris McGratty asked about potential positive surprises for FirstBank's $1 per share contribution in 2027, particularly regarding revenue synergies, and whether the high single-digit capital markets growth expectation represents the full potential or includes an element of conservatism.

Answer

Rob Reilly, EVP and CFO, identified revenue synergies as a key area for positive surprise regarding FirstBank's contribution, citing FirstBank's strong community relationships and the potential for clients to utilize PNC's broader product and service offerings. He stated that the high single-digit capital markets expectation reflects what the team believes it can achieve, implying it is not overly conservative.

Chris McGratty asked about the specific drivers behind the $9 billion surge in commercial interest-bearing deposits during the third quarter. He also sought PNC's expectations for the deposit mix and overall deposit growth heading into 2026, considering a lower interest rate environment.

Answer

Rob Reilly, Executive Vice President and CFO, explained that the commercial deposit surge was driven by a combination of new and existing corporate clients, as well as some sweep accounts moving on-balance sheet due to narrowing rate differentials with money markets. He anticipates continued deposit growth into 2026 with a generally stable mix, though a slight increase in non-interest-bearing deposits is possible in Q4.

Chris McGraty asked about the drivers behind the $9 billion surge in commercial interest-bearing deposits during the third quarter, whether it represented new balance sheet activity or a change in client behavior, and the outlook for this trend. He also inquired about expectations for the deposit mix growth heading into next year, given lower rates and the commercial focus of year-over-year growth.

Answer

EVP and CFO Rob Reilly explained that the deposit surge was a combination of new and existing corporate clients, with some customers shifting from sweep accounts and money markets to on-balance sheet deposits due to narrowing rate differentials. Mr. Reilly anticipates further deposit growth next year, with the mix remaining fairly stable, though a slight increase in non-interest-bearing deposits is possible in the fourth quarter.

Chris McGratty inquired about Morgan Stanley's views on the growth of its international versus domestic business over the medium term, and which specific markets or business segments hold higher growth or ROE potential, noting 25% of asset gathering is international.

Answer

Sharon (CFO, Morgan Stanley) clarified that while wealth channels are U.S.-based, Investment Management sees significant international distribution (e.g., 50% of fixed income flows from international accounts). Ted Pick, Chairman and CEO, emphasized the impressive revenue growth and margins from non-U.S. businesses, expecting continued nice compounding in EMEA and Asia, even if the relative proportion to total revenue doesn't drastically change.

Chris McGratty asked for Morgan Stanley's views on the growth potential of its international versus domestic businesses over the medium term, and which specific markets or businesses offer higher growth or ROE potential, noting that 25% of revenues came from outside the U.S.

Answer

Sharon (CFO) clarified that 25% of *revenues* came from outside the U.S., with EMEA growing 40% and Asia 50% over the last two years. She highlighted international distribution in investment management, with 50% of fixed income flows from international accounts. Chairman and CEO Ted Pick emphasized the global client base and the expectation for continued compounding growth in EMEA and Asia, even if their proportion of total revenue doesn't significantly shift.

Chris McGratty from KBW asked about the potential impact of lower interest rates on Valley National Bancorp's commercial real estate (CRE) book, specifically how it might influence the expectation for low single-digit growth. He also posed a strategic question to CEO Ira Robbins regarding the consideration of inorganic growth (M&A) versus share buybacks, given the current stock valuation and the open M&A window for larger banks.

Answer

CFO Travis Lan explained that while lower rates could accelerate payoffs, Valley National Bancorp is somewhat insulated due to its fixed-rate loan portfolio. President of Commercial Banking Gino Martocci added that lower rates could also drive transaction volume, noting a rebuilt pipeline. CEO Ira Robbins reiterated a "shareholder first" approach, emphasizing that buybacks at current valuations represent a good use of capital. CFO Travis Lan highlighted the strong organic growth opportunities and how M&A disruption benefits Valley National Bancorp.

Chris McGratty asked for Harris Simmons' big-picture view on deregulation and its implications for Zions. He also followed up on the non-interest-bearing deposit disclosures, inquiring if the recent changes were primarily a reclassification or something more significant, and what to expect next quarter.

Answer

Chairman and CEO Harris Simmons welcomed the current regulatory attitudes focusing on core financial stability rather than politically motivated or trivial issues, stating it would not materially change how Zions operates but would eliminate distractions. CFO Ryan Richards confirmed that the non-interest-bearing deposit changes were a reclassification of a low-cost consumer interest-bearing product, now rolled out across all affiliates, with enthusiasm for market receptivity and future growth from marketing. President and COO Scott McLean emphasized the stability of non-interest-bearing deposits, which have maintained a peer-leading mix for decades, even through rate cycles.

Chris McGratty from KBW asked for Zions Bancorporation's big-picture perspective on the implications of deregulation. He also followed up on the non-interest-bearing deposit disclosures, inquiring if they represent merely a reclassification with more expected next quarter, or if there are other significant factors at play.

Answer

Chairman and CEO Harris Simmons welcomed the current regulatory attitudes focusing on core financial stability rather than "trivia," stating it would not materially change Zions Bancorporation's operations but would eliminate distractions. CFO Ryan Richards confirmed the non-interest-bearing deposit changes are a reclassification of a low-cost consumer interest-bearing product, slightly beneficial to funding costs, with all affiliates now rolled through. President and COO Scott McLean emphasized the stability of non-interest-bearing deposits and the bank's peer-leading mix over three decades.

Chris McGratty questioned Huntington Bancshares' operating leverage comments, specifically the 250 basis points, and how this trend might evolve medium-term given the balance of synergies and investments. He also asked about M&A conversations following the Veritechs deal close.

Answer

CFO Zach Wasserman expressed satisfaction with the 2.5% operating leverage, noting a sustainable approach involving a 1% annual reduction in baseline operating expenses funneled into offensive investments. He anticipates 1-2% operating leverage for 2026. CEO Steve Steinour emphasized the company's primary focus on organic growth, citing three combinations in 15 years and significant investments in organic expansion, including the Veritechs partnership, while not being involved in other recent M&A.

Chris McGratty sought clarification on the increase in non-accrual C&I loans from $520 million to $800 million, specifically the contribution of the First Brands exposure and whether it has been reserved for or charged off. He also asked for confirmation on the 15% ROTCE target being a full-year goal for 2027.

Answer

Chief Risk Officer Brad Bender confirmed that the increase in non-accrual C&I loans reflects a return to recent levels after outsized resolutions in Q2 2025, with First Brands exposure captured within this increase and accounted for in the forward NCO guide. CEO Bill Rogers confirmed that the 15% ROTCE target is for the full year 2027.

Chris McGratty asked about M&T Bank's operating leverage outlook for 2026 and the medium term, focusing on the drivers of revenue and expense trends. He also sought clarity on the continued improvement in CRE criticized loans and the bank's M&A geographic strategy, specifically regarding 'adjacent markets'.

Answer

Daryl Bible, SEVP and CFO, expressed positivity about operating leverage, expecting revenue growth to outpace expenses, driven by strong fee businesses, NIM expansion, and growing loan portfolios. He confirmed continued improvement in CRE criticized balances across all property types, potentially leading to the removal of the related slide from presentations. Mr. Bible clarified that 'expanded geography' in M&A refers to a target bank having some operations outside M&T's 12-state footprint, while the focus remains on density within existing states.

Chris McGratty of KBW asked about U.S. Bancorp's potential to revisit its medium-term targets, given that the bank is already operating within or achieving many of them, and what specific triggers or conditions would lead to such a revision.

Answer

John Stern, Vice Chair and CFO, stated that while the bank is pleased to be operating within its medium-term targets, there is no formal plan to change them yet, but they do expect to improve over time. He indicated that staying consistently in the range and then hitting the upper end of each range, coupled with an improving operating environment and execution exceeding expectations, would be triggers for revisiting the targets. Gunjan Kedia, CEO, added that consistent performance at the upper end of the ranges would prompt a reevaluation.

Chris McGratty of KBW asked about U.S. Bancorp's potential to revisit its medium-term targets, given that the bank is already operating within or achieving many of them, and what specific triggers or conditions would lead to such a revision.

Answer

John Stern, Vice Chair and CFO, stated that while the bank is pleased to be operating within its medium-term targets, there is no formal plan to change them yet, but they do expect to improve over time. He indicated that staying consistently in the range and then hitting the upper end of each range, coupled with an improving operating environment and execution exceeding expectations, would be triggers for revisiting the targets. Gunjan Kedia, CEO, added that consistent performance at the upper end of the ranges would prompt a reevaluation.

Chris McGratty (speaking through Andrew Leischner) from KBW inquired about First Horizon's capital allocation strategy, asking if buybacks would continue to be a function of loan growth or if there would be a greater appetite for them as the company progresses towards its 10.75% CET1 target.

Answer

CFO Hope Dmuchowski confirmed that the first priority for capital deployment is loan growth, with any remaining capital then allocated to share buybacks. This approach considers the forecast for loan growth at the beginning of each quarter.

Chris McGratty asked if Bank of America had any credit quality concerns or areas of lending avoidance, given the strong credit results and picking up balance sheet growth.

Answer

Alastair Borthwick (CFO, Bank of America) stated that credit portfolios are performing very well, with consumer and commercial charge-offs declining, and no current changes to risk appetite. Brian Moynihan (Chair and CEO, Bank of America) reinforced that the industry's regulated banks are in strong shape, comparing current credit performance favorably to 2019, a 50-year low for credit losses.

Chris McGratty asked about any emerging credit quality concerns, areas of caution, or specific lending segments the company is avoiding despite overall strong credit results.

Answer

CFO Alastair Borthwick stated that there are no immediate changes in credit outlook, with continued strong performance in credit portfolios, and both consumer and commercial charge-offs declining. Chair and CEO Brian Moynihan emphasized the company's responsible growth strategy, which aims for a strong risk appetite and industry-leading loan growth, noting that the industry's credit statistics are robust, comparable to 2019's 50-year low.

Chris McGratty asked about the sustainability and sources of improvement in operating leverage by segment as Citi approaches its 10-11% ROTC goal for next year.

Answer

CEO Jane Fraser attributed sustained operating leverage to continued volume growth, new client acquisition, disciplined market strategies (e.g., prime, financing), USPB growth (Barclays portfolio, product innovations), and synergies across businesses. CFO Mark Mason added that positive operating leverage is targeted for the full firm and most segments in 2026, with strategic investments potentially impacting specific segments, all driving improved returns beyond 2026.

Chris McGratty asked about the sustainability and sources of improvement in operating leverage across Citi's segments as the firm approaches its 10-11% ROTCE target for the next year.

Answer

CEO Jane Fraser attributed operating leverage improvement to volume growth from new and existing clients, disciplined market strategies (prime, financing, securitizations), and growth in USPB (including the Barclays portfolio and product innovations). She also highlighted synergies across businesses and continued operational efficiency. CFO Mark Mason added that positive operating leverage is targeted for the full firm and most segments in 2026, with potential for strategic investments in some areas.

Chris McGratty of KBW asked about Wells Fargo's deposit growth expectations within retail, specifically identifying geographies or products being pushed hardest and where the biggest opportunities for growth lie in the coming years.

Answer

CFO Mike Santomassimo stated that on the consumer side, Wells Fargo is most focused on growing checking accounts and expanding active core primary checking accounts for households over the long term.

Chris McGratty asked about Wells Fargo's deposit growth expectations within the retail segment, specifically identifying which geographies or products are being prioritized and where the largest opportunities for growth lie in the coming years.

Answer

CFO Mike Santomassimo stated that Wells Fargo's primary focus on the consumer side is growing checking accounts and expanding the number of active core primary checking accounts for households over the long term.

Chris McGratty asked about Wells Fargo's deposit growth expectations within retail, specifically identifying geographies or products being pushed hardest and the biggest opportunities for growth in the coming years.

Answer

CFO Mike Santomassimo stated that the primary focus on the consumer side is growing checking accounts and expanding the number of active core primary checking accounts for households over the long term.

An analyst on behalf of Chris McGratty from KBW inquired about the expected cadence of the net interest margin (NIM) throughout 2025 and whether the company's appetite for share buybacks has increased.

Answer

CFO Rick Kraemer explained that while avoiding specific margin guidance, he anticipates Net Interest Income (NII) will start lower in Q1 due to day count and then gradually increase through 2025. CEO Curtis Myers stated that capital allocation priorities remain unchanged, with share buybacks ranked third, although the company maintains the flexibility of an approved authorization.