Ebrahim Poonawala

Ebrahim Poonawala asked about Western Alliance Bancorporation's credit outlook, specifically regarding NDFI business services underwriting standards and the risk of one-off issues versus overall asset quality improvement.

Answer

President and CEO Ken Vecchione highlighted a positive economic backdrop. For NDFI, he emphasized that mortgage-related (warehouse, MSR) loans are low-loss, short-term, and government-backed. For private credit, he detailed lending to brand-name funds with low average loss rates (25 basis points), a 35% attachment point, AA/AAA structures, active portfolio management, and kick-out rights, reiterating no expected loss from Point Bonita. In a follow-up on buybacks and CET1, CFO Dale Gibbons confirmed that accelerating buybacks to move closer to the 11% CET1 target is a "safe inference," pending a debt deal.

Ebrahim Poonawala asked about potential weakening of underwriting standards in the NDFI business services sector and Western Alliance Bancorporation's comfort level in this space, as well as overall asset quality. He also followed up on whether the 30 basis point CET1 buffer implies an acceleration of buybacks.

Answer

President and CEO Ken Vecchione highlighted a positive economic backdrop and emphasized the strength of mortgage-related and MSR NDFI credits, noting no industry losses. For private credit, he detailed lending to brand-name funds with low average loss rates, a 35% attachment point, AA/AAA ratings, and active portfolio management. He reaffirmed no expected loss on the Point Benita Fund 1 credit. CFO Dale Gibbons confirmed that the CET1 buffer (11.3% vs. 11% target) makes an acceleration of buybacks a "safe inference."

Ebrahim Poonawala asked if recent regulatory changes and the CFO transition could accelerate deposit growth, and whether a potential Fed-driven increase in the LFI threshold to $250 billion would be sufficient.

Answer

CFO Dale Gibbons responded that while specific deposit businesses could grow faster, overall growth will be managed to avoid prematurely crossing the $100 billion LFI threshold, with a focus on optimizing the deposit mix. CEO Ken Vecchione confirmed a $250 billion threshold would be a significant net benefit, allowing faster growth and technology re-prioritization, and stated the Fed could enact this change without Congress.

Ebrahim Poonawala of Bank of America asked about the net interest income and margin trajectory, and questioned what the bank could do to improve shareholder returns and its stock valuation, including potential M&A.

Answer

President and CEO Kenneth Vecchione projected sequential NII growth through Q3, with the adjusted net interest margin showing stronger improvement than the reported NIM due to declining ECR costs. Chief Financial Officer Dale Gibbons suggested better promotion of their diversified business model could help the stock. Vecchione dismissed the idea of a strategic M&A, citing the bank's superior organic growth capabilities.

Ebrahim Poonawala asked about Western Alliance's capital deployment priorities, questioning the preference between share buybacks and funding loan growth. He also inquired about the ideal interest rate environment for the bank's earnings and the assumptions behind the fee income guidance.

Answer

Interim CEO and CFO Dale Gibbons explained that supporting the outlined balance sheet growth is the primary use of capital, though buybacks could be considered to capitalize on market dislocations. He stated that a slowly declining rate environment is preferable as it eases credit concerns and supports mortgage activity. Gibbons clarified the fee income guidance assumes flat mortgage revenue year-over-year, not a significant rate-driven pickup.

Ebrahim Poonawala inquired about the drivers of Q3 deposit performance and the Q4 outlook, specifically asking to differentiate between seasonal factors and the impact of a large, one-time settlement from the Juris Banking group. He also sought clarity on the forward-looking trajectory for Net Interest Income (NII) combined with ECR deposit costs.

Answer

CEO Ken Vecchione clarified that a large, earlier-than-expected Juris Banking settlement of $2.7 billion reduced Q3 deposit growth; otherwise, growth would have been $5 billion. He confirmed the Q4 decline is driven by normal seasonality in the mortgage warehouse business. Vecchione stated that for 2025, the bank expects average quarterly deposit growth of $2 billion and loan growth of $1 billion. He projected that the adjusted net interest margin (NII less deposit costs) would rise in Q4 and continue to do so through 2025. CFO Dale Gibbons added that the large settlement was a unique event and no similar-sized outflows are on the horizon.

Ebrahim Poonawala asked about Northern Trust's Net Interest Income (NII) outlook, including deposit trends, growth projections, mix shifts, and the balance sheet's asset sensitivity to potential Fed rate cuts in 2026. He also inquired about challenges at the investment product level within Wealth Management and the actions being taken to address them.

Answer

David Fox, Chief Financial Officer, clarified that deposit performance was in line with expectations, with a slight Q4 pickup, and adjusted NII guidance to mid to high single digits for the full year. For 2026, he projected NII to be flat to up 1-2% due to mitigating factors like repricing initiatives and securities rolloffs. Michael O'Grady, Chairman and CEO, explained that investment product pressures stemmed from index products (pricing, fee pressure, flows to lower-fee products) and the value-leaning multi-manager platform. He highlighted efforts to address this by focusing on ETFs, SMAs, and expanding alternative offerings for wealth clients.

Ebrahim Poonawala asked about Northern Trust's NII outlook, deposit trends, and the balance sheet's asset sensitivity to potential Fed rate cuts in 2026. He also inquired about challenges at the investment product level within Wealth Management and actions to address them.

Answer

CFO David Fox clarified that deposit trends were in line with expectations, with a slight pickup anticipated in Q4, and projected 2026 NII to be flat to up 1-2% due to mitigating factors like repricing initiatives and securities rolloffs. Chairman and CEO Michael O'Grady explained investment product pressures in index and multi-manager platforms, detailing actions like expanding ETF, SMA, and alternative offerings for wealth clients.

Ebrahim Poonawala questioned whether any M&A scenario would be considered given the firm's stated commitment to independence and also asked about the strategy for the pace of share buybacks.

Answer

Chairman and CEO Michael O'Grady reiterated that the company is focused on its independent strategy, which they believe offers a unique value proposition for clients, though small, capability-enhancing acquisitions could be considered. EVP & CFO David Fox added that the pace of buybacks is determined by multiple factors including regulatory capital, earnings, and ROE, not just stock valuation, and that the current pace is healthy.

Ebrahim Poonawala asked for specific proof points on the success of recent expense management initiatives and inquired about the sensitivity of Net Interest Income (NII) to potential interest rate cuts.

Answer

CEO Mike O'Grady detailed progress on efficiency through workforce optimization, location strategy, and technology deployment like machine learning and generative AI. He noted the move to a centralized operating model is a longer-term driver. CFO David Fox stated that NII is not highly sensitive to initial rate cuts, estimating a 25 basis point cut would impact NII by less than $1 million per month.

Ebrahim Poonawala asked for an outlook on revenue growth in the Global Family Office (GFO) business, noting its strong yearly performance but recent quarterly plateau. He also questioned the balance sheet's gearing to interest rates, asking if NII would grow in a flat-rate environment and whether rate cuts are a net positive or negative.

Answer

Chief Financial Officer David Fox clarified that GFO had its strongest year ever for organic growth and that the business has not plateaued, citing a lag effect on revenue and a robust pipeline for 2025. Regarding NII, Fox noted the guide already assumes rate cuts and that other factors like loan activity are influential, but confirmed that fewer rate cuts would be better for NII.

Ebrahim Poonawala asked for perspective on the recent leadership changes and their impact on operational efficiency, and questioned if Net Interest Income (NII) could continue to grow from its strong Q3 level.

Answer

CEO Mike O'Grady explained the leadership changes align the organization with its strategy to drive operational excellence and scale, highlighting the new COO role. Then-CFO Jason Tyler noted that while Q3 NII was strong due to favorable deposit repricing, anticipated rate cuts make further growth unlikely, guiding for Q4 NII between $550 million and $560 million.

Ebrahim Poonawala with Bank of America asked about opportunities for State Street to pursue different capital management strategies beyond the 80% payout ratio, and whether the current regulatory backdrop allows for larger strategic investments or acquisitions to accelerate growth.

Answer

CFO John Woods affirmed State Street's strong capital profile, prioritizing a strong dividend, deploying capital for RWA growth and strategic initiatives (including bolt-on acquisitions), and maintaining an 80% payout ratio for 2025. CEO Ron O’Hanley reiterated that M&A is a tool to accelerate strategy, not a strategy itself, with a high bar for deals. He cited the Apex investment as an example of accelerating wealth services capabilities and noted that while the U.S. regulatory environment might be more benign, State Street's disciplined standards for M&A remain unchanged.

Ebrahim Poonawala from Bank of America asked for clarification on the 80% capital payout target, the key capital ratio being managed, and what might limit more aggressive buybacks. He also asked about the long-term drivers for deposit growth.

Answer

Interim CFO Mark Keating confirmed the 80% full-year payout target would be achieved with a progressive cadence of buybacks. He stated they prudently manage to the higher end of their 10-11% CET1 target range. For future deposit growth, Keating emphasized that the primary driver is winning and installing new back-office custody business, which is supported by the record backlog of new servicing fees.

Ebrahim Poonawala asked about the competitive landscape for deposit growth, whether incremental balance sheet growth is accretive or dilutive to the net interest margin (NIM), and if tax bill-related stimulus, such as bonus depreciation, is driving increased equipment finance lending demand into 2026.

Answer

CFO Zach Wasserman stated that incremental balance sheet growth is accretive, driven by strong marginal returns from optimizing asset yields and efficiently managing deposit costs in a competitive environment. CEO Steve Steinour noted that while the fourth quarter is typically strong for asset finance, 2025 might not be a record year due to tariffs and delivery delays, but expects 2026 to be a very good year for equipment finance.

Ebrahim Poonawala questioned the expectations for incremental funding margins and explored the correlation between the fee income growth outlook and lending activity.

Answer

CFO Zachary Wasserman noted the bank's low 79% loan-to-deposit ratio provides a powerful opportunity to manage funding costs down while growing loans. On fees, Wasserman explained that while there is a correlation, particularly in treasury management, other key areas like wealth management are driven more by market penetration. He expressed confidence in achieving high single-digit to low double-digit fee revenue growth long-term, partly independent of loan growth.

Ebrahim Poonawala asked for clarification on the Net Interest Income (NII) growth trajectory into 2025, its sensitivity to fewer-than-expected rate cuts, and the primary sources of recent deposit growth, particularly from new market expansions.

Answer

Zach Wasserman, Chief Financial Officer, detailed that NII is expected to see sustained growth throughout 2025, leading to a record year. This will be driven by NIM expansion as hedge drag turns into a benefit and by robust loan growth. He noted fewer rate cuts would be a short-term positive for NII. Regarding deposits, he highlighted that commercial deposits are accelerating, with the mortgage service vertical being a particularly strong contributor.

Ebrahim Poonawala of Bank of America asked about the target for the loan-to-deposit ratio and the mix of incoming deposits. He also followed up on whether 2025 expense growth would be lower than in 2024.

Answer

CFO Zachary Wasserman expects the loan-to-deposit ratio to drift higher over time but remain in a set range, with deposit growth fueled by new relationships and a mix shifting toward money market accounts. Both Wasserman and CEO Stephen Steinour confirmed that the 2024 expense growth was elevated for investments and that the plan is for a lower rate of expense growth in 2025.

Ebrahim Poonawala asked for more detail on management's upbeat economic outlook and loan demand, questioning how much strength is from the core versus new hiring. He also sought to clarify if a no-cut scenario would push NII toward the high end of its guidance.

Answer

CEO Stephen Steinour cited underlying economic strength, proactive lending in core areas like auto and business banking, and strong initial results from new verticals and market expansions as drivers of growth. CFO Zachary Wasserman responded that for NII, the company aims for the middle of its guided range across scenarios, emphasizing that the combination of a flat-to-rising NIM and accelerating loan growth will drive NII dollars higher from Q1.

Ebrahim Poonawala sought a comprehensive health check on Truist's credit quality, specifically addressing consumer lending (including subprime) and non-accrual C&I loans, and whether recent market events indicate a material deterioration in credit.

Answer

CEO Bill Rogers affirmed overall strong credit quality, noting recent market events as idiosyncratic. Chief Risk Officer Brad Bender clarified that the majority of subprime exposure is in the auto portfolio, with other consumer portfolios being high-quality superprime. He also stated that Truist de-risked the lower end of the consumer spectrum in 2023-2024 and that the NDFI portfolio is highly diversified and investment-grade looking.

Ebrahim Poonawala from Bank of America Merrill Lynch questioned the path to achieving a 15% ROTCE given limited operating leverage in the first half of the year, and asked about the significance of the new RTP payment capability for driving deposits.

Answer

CFO Mike Maguire outlined that improved returns will be driven by capital-efficient revenue growth, fixed asset repricing, and disciplined loan growth. CEO William Rogers explained that the new RTP capability is one example of broader innovation driving a 14% YoY increase in treasury management revenue. He positioned this as a leading indicator for future deposit growth as new and deepened client relationships mature.

Ebrahim Poonawala questioned how much more aggressive Truist could be with share buybacks and asked about the near-term CET1 capital ratio target the bank is managing towards.

Answer

CFO Michael Maguire indicated the established $500 million quarterly buyback is the sustainable rhythm, with the additional Q2 amount being opportunistic and not a new run rate. He reiterated that a 10% CET1 ratio is a sensible operating level but that the bank is awaiting the final Basel rule before setting a firm target, showing no immediate desire to add significant leverage.

Ebrahim Poonawala asked for details on Truist's growth strategy in New Jersey, Pennsylvania, and Texas, questioning whether it would be organic or through M&A. He also inquired about talent attrition and market share defense in the Southeast.

Answer

CEO Bill Rogers clarified that these are existing markets where Truist is increasing investment and leveraging its full product suite, emphasizing that the growth strategy is organic. Rogers also expressed confidence in the company's ability to not only defend but also go on offense in its core markets, citing positive momentum in net new accounts and successful talent attraction.

Ebrahim Poonawala inquired about the potential to increase the pace of share buybacks from the $500 million quarterly rate and asked where the bank expects to gain market share now that merger-related overhangs are resolved.

Answer

CEO Bill Rogers indicated that buybacks will remain at an "elevated level" and could be adjusted if loan growth is slower than anticipated, but the priority is funding growth. He identified market share gains in investment banking, growth in "net new" clients, and increased "primacy" (wallet share) with existing clients as key focus areas, signaling a strategic shift from integration to expansion.

Ebrahim Poonawala of Bank of America asked about the client acquisition strategy through Bank Smartly, branches, and partnerships, seeking clarity on the magnitude of deposit growth these channels can drive and the cost structure of these deposits. He also inquired about the journey from 2.75% to 3% net interest margin (NIM), potential inflection points, and the possibility of reaching 3% by Q4 next year.

Answer

Gunjan Kedia, CEO, explained that consumer deposits are sticky and favorably priced, feeding growth in other businesses like credit cards and wealth. She highlighted digital acquisitions and marketing investments. John Stern, Vice Chair and CFO, added that Bank Smartly clients have three times as many multi-products, indicating stickiness, and half of new card relationships are new to the bank. He also noted strong commercial and investment services deposit growth. Regarding NIM, John Stern stated that the speed to 3% depends on macro factors like programmatic Fed cuts and the curve's slope, with fixed asset repricing and mix being more mechanical drivers.

Ebrahim Poonawala of Bank of America asked about the client acquisition strategy through Bank Smartly, branches, and partnerships, seeking clarity on the magnitude of deposit growth these channels can drive and the cost structure of these deposits. He also inquired about the journey from 2.75% to 3% net interest margin (NIM), potential inflection points, and the possibility of reaching 3% by Q4 next year.

Answer

Gunjan Kedia, CEO, explained that consumer deposits are sticky and favorably priced, feeding growth in other businesses like credit cards and wealth. She highlighted digital acquisitions and marketing investments. John Stern, Vice Chair and CFO, added that Bank Smartly clients have three times as many multi-products, indicating stickiness, and half of new card relationships are new to the bank. He also noted strong commercial and investment services deposit growth. Regarding NIM, John Stern stated that the speed to 3% depends on macro factors like programmatic Fed cuts and the curve's slope, with fixed asset repricing and mix being more mechanical drivers.

Ebrahim Poonawala (Bank of America) questioned U.S. Bancorp on the stickiness and cost structure of its consumer deposits, particularly those acquired through Bank Smartly, branch expansions, and partnerships. He asked for insights into the client acquisition process, the potential magnitude of growth from these channels over the next few years, and their impact on deposit costs. Additionally, he inquired about the journey from the current 2.75% NIM to the 3% target, asking if there would be material inflection points or steady progress.

Answer

Gunjan Kedia, CEO, emphasized that consumer deposits are sticky and favorably priced, supporting fee growth and other businesses like credit cards and wealth. She highlighted Bank Smartly's success in attracting multi-product clients and new relationships. John Stern, Vice Chair and CFO, added that strong growth was seen in both consumer and commercial deposits, with investments in treasury management yielding results. He noted that the speed to 3% NIM depends on macro factors like the Fed's cutting pace and the yield curve's slope, with fixed asset repricing and mix being more mechanical drivers.

Ebrahim Poonawala asked about the future pace of share buybacks given the rising CET1 ratio. He also inquired about the recent flat performance of commercial products revenue and sought reassurance on the bank's confidence in its NII outlook.

Answer

Vice Chair & CFO John Stern stated that while they are committed to a ~75% payout ratio over time, they may prioritize funding strong loan growth over increasing buybacks in the immediate short term. Regarding NII, both he and President & CEO Gunjan Kedia expressed strong confidence in the growth trajectory, attributing it to the strategic actions taken to reposition the balance sheet for better returns and deeper client relationships.

Ebrahim Poonawala from Bank of America sought clarification on whether the 3% NIM is an average target for 2027 and asked if flat-to-lower expenses are a reasonable expectation.

Answer

CFO John Stern clarified the goal is to achieve a 3% NIM during the 2026-2027 timeframe, not for it to be an average. CEO Gunjan Kedia explained that the expense base will be flexed to consistently deliver positive operating leverage, with the absolute level dependent on the revenue environment.

Ebrahim Poonawala asked about the loan and deposit growth assumptions underpinning the 2025 revenue guidance and whether there were any signs of a pickup in lending demand. He also requested a deeper dive into fee revenue expectations for the payments business and its market positioning.

Answer

CFO John Stern indicated that the forecast assumes modest loan and deposit growth for the year. While client sentiment is positive, a significant pickup in loan growth has not yet materialized but is hoped for in the second half. Regarding payments, Stern noted core momentum is strong, with mid-single-digit growth expected in retail cards. He acknowledged that merchant acquiring growth was below aspirations in 2024 due to a client mix shift but expects improvement, while the CPS business is projected to see high single-digit growth.

Ebrahim Poonawala asked about the drivers for fee income acceleration into 2025, the potential cadence for Net Interest Margin (NIM) expansion, and whether the eventual move to Category II bank status constrains current loan growth.

Answer

President Gunjan Kedia and CFO John Stern highlighted the diversified fee mix as a key strength for growth. Stern projected Q4 NIM stability, followed by potential expansion driven by asset remixing and deposit repricing, calling a 3% NIM a "good level to think about" long-term. Chairman and CEO Andy Cecere confirmed the 2027 Category II timeline is not a constraint on current loan growth, which is driven by market demand.

Ebrahim Poonawala inquired if the move towards on-chain tokenization is disruptive to BNY Mellon's revenue margins, accretive, or primarily a client retention tool, and also asked about the current appetite for share buybacks given valuation and book value dilution.

Answer

CEO Robin Vince stated there's tangible revenue opportunity in tokenization, viewing it as a market structure change that can bring greater efficiency and new trading opportunities. CFO Dermot McDonogh confirmed the appetite for share buybacks is broadly unchanged from a year ago, guiding a 90-100% payout ratio for the full year, driven by a conservative bias. Robin Vince added that the company's significant organic transformation runway suggests the stock is not overpriced.

Ebrahim Poonawala asked whether the shift towards on-chain tokenization is disruptive, accretive, or primarily a client retention tool for BNY's revenue margins. He also questioned if dilution on book value or valuation influences BNY's appetite for share buybacks.

Answer

CEO Robin Vince affirmed there's tangible revenue opportunity in digital assets, acknowledging disruption risk if ignored. He sees it as improving efficiency for assets like loans and opening 24/7 trading opportunities, benefiting BNY's transaction business. CFO Dermot McDonogh stated the appetite for share buybacks is 'relatively unchanged,' guiding to a 90%-100% payout ratio for the full year. Robin added that BNY sees significant runway in its organic transformation and doesn't feel the stock is overpriced, indicating no pressure to stop buybacks.

Ebrahim Poonawala of Bank of America Merrill Lynch questioned BNY Mellon's capital deployment priorities, asking about the balance between share buybacks and M&A amidst market rumors. He also probed whether the high Q2 ROTCE of 28% indicates a structural shift to a high-20s return profile, potentially justifying a higher stock multiple.

Answer

CEO & Director Robin Vince stated that the primary focus is organic growth, which has strong momentum. He described the bar for M&A as 'very high,' requiring strong strategic, cultural, and financial sense. Vince also explained that the company sees no ceiling on its ROTCE potential, viewing current targets as milestones on a longer journey for a capital-light, platforms-oriented business.

Ebrahim Poonawala of Bank of America asked for an assessment of the U.S. Treasury market's infrastructure and liquidity amid recent volatility. He also inquired about the potential impact of stablecoin legislation on BNY Mellon's digital assets business and future revenue growth.

Answer

CEO Robin Vince stated that the Treasury market's "rails" are functioning well, but market depth has decreased, leading to wider bid-offer spreads. He clarified that markets are not dysfunctional, just less liquid. On digital assets, Vince viewed stablecoin legislation positively as a long-term enabler for on-chain transactions but does not expect it to be a significant near-term revenue driver. He emphasized BNY's strategy is to provide traditional rails to new players and be prepared to custody new asset types.

Ebrahim Poonawala from Bank of America Securities questioned the resiliency of BNY's pretax margin and ROE targets and asked how the new platform operating model would drive more durable fee revenue growth.

Answer

CFO Dermot McDonogh reiterated confidence in sustainably hitting the medium-term targets, citing a track record of execution. He explained the platform model is the mechanism to drive top-line growth and efficiency. CEO Robin Vince added that the benefits are long-term, creating a foundation for growth into 2027-2029 and beyond.

Ebrahim Poonawala asked about the resiliency of the firm's ROE in an unfavorable market and how management weighs stock valuation against its capital return commitments. He also questioned if the current ~$1 billion quarterly NII represents a floor.

Answer

CEO Robin Vince stated that the current stock price is not a deterrent to buybacks. CFO Dermot McDonogh emphasized a commitment to positive operating leverage through the cycle, pointing to the Q3 ROTCE of 23%. Robin added that the diversified business mix provides resiliency. Regarding NII, Dermot guided to ~$1 billion for Q4, noting Q3 was elevated, and said he does not see NII as a headwind for 2025, partly due to repositioning the CIO book.

Ebrahim Poonawala questioned PNC's optimal capital level, specifically regarding the CET1 ratio (adjusted for AOCI) and any influence from rating agencies. He also asked whether PNC anticipates loan demand to pick up or credit issues to worsen, given the economic outlook.

Answer

Rob Reilly, Executive Vice President and CFO, stated PNC's CET1 ratio is 10.6% (9.7% AOCI adjusted), within their 10-10.5% operating guideline, and noted that recent developments, including a Moody's upgrade, could allow for operating at the lower end or even below this range. Bill Demchak, Chairman and CEO, added that potential Basel III proposals could significantly impact risk-weighted assets. Both executives expressed optimism about the economy and strong credit quality, citing declining criticized assets, stable non-performers, and reduced delinquencies and charge-offs.

Ebrahim Poonawala asked about PNC's optimal capital level, considering its CET1 ratio (adjusted for AOCI) of 9.7% and recent peer actions, and the influence of rating agencies. He also inquired about the more likely economic outcome for next year: increased loan demand driven by rate cuts and tax bills, or worsening credit quality due to a stagnant economy.

Answer

EVP and CFO Rob Reilly stated PNC's CET1 ratio is 10.6% (just under 10% AOCI adjusted), within their 10-10.5% operating guideline. Chairman and CEO Will Demchak added that recent developments, like Moody's upgrade, and the fluidity of Basel 3N rules might allow them to operate at the lower end of these ranges, but the situation is still in flux. Both executives expressed optimism about the economy, citing strong credit quality (downward trends in criticized assets, non-performers, delinquencies, and charge-offs) and surprisingly bullish sentiment from corporate CFOs.

Ebrahim Poonawala from Bank of America Merrill Lynch asked about PNC's thinking on target CET1 capital levels and whether momentum in loan growth and capital markets was accelerating enough to suggest upside to the outlook.

Answer

EVP & CFO Robert Reilly stated that the current 10.5% CET1 level 'feels about right' for now, allowing for flexibility with increased buybacks and dividends. Chairman & CEO William Demchak added that rating agency requirements are a key binding constraint. On growth, Mr. Demchak noted that momentum is 'really good at the moment' but can be easily disrupted by the political environment and tariffs.

Ebrahim Poonawala asked about the health of customer balance sheets amid recession concerns and inquired about balance sheet management actions being taken to secure the earnings outlook beyond 2025.

Answer

CEO Bill Demchak noted that while tariff uncertainty has slowed near-term activity, he does not see dramatic credit deterioration unless a steep recession occurs. CFO Rob Reilly explained that with 2025 NII largely locked in, the focus is on outer years. The primary action is continuing the fixed-rate asset repricing strategy, including adding forward-starting swaps, to secure future income.

Ebrahim Poonawala of Bank of America inquired about the potential for transformational M&A given the current regulatory and market environment. He also asked about the outlook for credit quality if the Federal Reserve does not cut interest rates.

Answer

CEO Bill Demchak noted that while getting a deal approved may be easier, a lack of willing sellers makes large M&A unlikely as potential targets are enjoying favorable earnings trends. On credit, he expressed confidence that quality would remain strong even without rate cuts, as the robust economy should prevent solvency issues despite pressure on debt coverage ratios.

Ebrahim Poonawala of Bank of America asked about deposit beta expectations in a down-rate cycle and the health of the commercial customer base. He also followed up on M&A, questioning why a stock-for-stock deal would be unattractive given PNC's valuation.

Answer

CFO Rob Reilly stated that PNC is in a 'down beta cycle' and expects to reduce rates paid, with a terminal beta of around 50%. CEO Bill Demchak described the commercial client base as generally healthy but facing margin pressure, though not to the point of significant layoffs. On M&A, Demchak explained that despite PNC's stock multiple advantage, potential targets do not pencil out financially due to their own valuations and the investment required.

Ebrahim Poonawala (speaking through Eric) with Bank of America asked about the actions First Horizon needs to take to achieve its 15% adjusted ROTCE target for next year and what factors are baked into reaching that goal. He also questioned whether the current CET1 level and potential M&A opportunities would involve tuck-in or larger deals.

Answer

CFO Hope Dmuchowski outlined three key components: bringing capital down to a long-term target of 10-10.5% CET1, credit normalization with lower provision builds, and achieving over $100 million in PPNR growth from existing client base. Chairman, President, and CEO Bryan Jordan stated that any M&A using capital would largely be tuck-in, emphasizing organic investment and share buybacks as tools for capital management, without significant shifts in strategy.

Eric, on behalf of Ebrahim Poonawala at Bank of America, inquired about potential downside to the expense guidance, trends in fee income, and the bank's approach to share buybacks in the coming quarters.

Answer

CFO Hope Dmuchowski noted that fee income from Average Daily Revenue (ADR) was at a one-year low. She explained that second-half expenses will see seasonal marketing increases and amortization from new tech projects. On buybacks, she stated they are contingent on loan growth; activity was paused in May as loan pipelines grew, and future repurchases will be balanced against organic growth needs.

Ebrahim Poonawala asked for the timeline to achieve the 15%+ ROTCE target and the strategy for the mortgage warehouse business in a stable rate environment. He also followed up on whether the bank was considering hedging to protect the NIM from potential rate cuts.

Answer

Chairman, President and CEO Bryan Jordan stated that achieving the 15%+ ROTCE target is tied to normalizing the CET1 ratio to the 10.0-10.5% range and leveraging their strong footprint. He described the mortgage warehouse business as efficient and countercyclical, noting they have raised the floor on balances and see significant upside from potential refi activity. Regarding hedging, Jordan and CFO Hope Dmuchowski explained that the bank's countercyclical businesses provide a natural hedge, and while they constantly model extreme rate scenarios up to 400 bps, they are not taking specific new actions at this time.

Ebrahim Poonawala sought clarity on the loan growth assumptions underlying the 2025 revenue outlook and asked about the expected timeline for achieving the company's 15%+ Return on Tangible Common Equity (ROTCE) target.

Answer

CEO Bryan Jordan indicated an expectation of low-to-mid single-digit loan growth, tempered by likely paydowns in commercial real estate. CFO Hope Dmuchowski explained that reaching the 15%+ ROTCE target depends on three key levers: revenue growth, the normalization of credit provisions, and the deployment of excess capital. Jordan added that repatriating capital via buybacks is a meaningful tool to improve returns.

Ebrahim Poonawala of Bank of America Securities questioned the shift to total revenue guidance, asking about the potential upside for the fixed income business and the bank's target for its loan-to-deposit ratio.

Answer

CFO Hope Dmuchowski stated there is upside potential in fixed income, especially if rates decline further, noting that clients are already considering restructuring. CEO Bryan Jordan added that deposit pricing is viewed through a customer acquisition lens, focusing on growing relationships rather than managing to a specific loan-to-deposit ratio.

Ebrahim Poonawala asked about Citi's credit reserves and unemployment rate assumptions, consumer cards book performance, and whether a recent jump in corporate non-accrual loans was a one-off event. He also requested an update on the wealth business's operating leverage and ROTCE improvement.

Answer

CFO Mark Mason attributed the corporate non-accrual loans increase to two idiosyncratic downgrades, noting they remain a small percentage of funded loans and are well-reserved. He stated consumer card losses and delinquency trends are within expectations. CEO Jane Fraser highlighted Citi's prime consumer base (85% prime) and blue-chip corporate portfolio, emphasizing disciplined credit assessments. For wealth, she noted strong revenue growth, ROTCE improvement, and record net new investment assets driven by strategic initiatives like becoming a lead investment advisor, open architecture, and AI-powered capabilities.

Ebrahim Poonawala asked about Citi's credit reserves, unemployment rate assumptions, any red or yellow flags in the consumer cards book, and the recent increase in corporate non-accrual loans. He also inquired about the operating leverage and ROTC improvement in the wealth business.

Answer

CFO Mark Mason attributed the corporate NAL increase to two idiosyncratic downgrades, noting they remain a small percentage of funded loans and are well-reserved. For consumer cards, losses are within expectations, and delinquency trends are normal, with a focus on prime customers. CEO Jane Fraser highlighted Citi's prime consumer base and pristine corporate portfolio, emphasizing disciplined credit assessments. Jane Fraser also detailed the wealth business's strong revenue growth and record net new investment assets, driven by strategy focused on becoming the lead investment advisor, open architecture, and AI capabilities, with significant upside ahead.

Ebrahim Poonawala of Bank of America Merrill Lynch asked about capital optimization, specifically how Citigroup is managing its binding constraint between standardized and advanced RWA. He also inquired about the firm's use of stablecoins for treasury management and the potential disruption risk to its Services revenue.

Answer

CFO Mark Mason explained that standardized CET1 is the current binding constraint and the firm is disciplined in managing RWA on both standardized and advanced bases, while being mindful of the evolving regulatory landscape. CEO Jane Fraser addressed stablecoins, viewing them as an opportunity, not a threat. She highlighted Citi Token Services, which allows clients to move billions in tokenized deposits cross-border 24/7, as a superior offering that complements their existing global payments leadership.

Ebrahim Poonawala of Bank of America asked about Citigroup's binding capital constraint between Standardized and Advanced RWA and actions being taken for optimization. He also questioned the potential disruption risk to the Services business from the increased adoption of stablecoins.

Answer

CFO Mark Mason confirmed that Standardized CET1 is currently the binding constraint and the firm is focused on efficient RWA utilization across both frameworks. CEO Jane Fraser positioned digital assets as a significant opportunity, not a threat. She highlighted Citi Token Services as a superior offering that enables clients to move money 24/7 cross-border, complementing the existing product suite and solving client complexities.

Ebrahim Poonawala inquired about the drivers of RWA growth and how it affects the pace of buybacks to reach the year-end CET1 target. He also asked about the macroeconomic assumptions baked into credit reserves and what would cause a significant increase in provisioning.

Answer

CFO Mark Mason stated that the $20 billion share repurchase program remains on track and that RWA consumption is tied to meeting strong, accretive client demand. On credit, he explained that reserves now incorporate a weighted average unemployment rate of 5.1% (with a 6.7% downside scenario), and the firm feels well-reserved based on the current outlook. He noted the consumer remains resilient and credit performance is in line with expectations.

Ebrahim Poonawala asked about the Wealth segment's competitive positioning and key growth opportunities. He also inquired if the Banking segment could see a similar positive RoTCE trajectory and what the key opportunities are to improve its returns.

Answer

CEO Jane Fraser detailed her vision for Wealth to become a global leader by tapping existing client assets, leveraging the firm's global footprint, and focusing on the investment business. She highlighted strong net new investment asset inflows as a key proof point. For Banking, she expressed confidence in reaching its targets, citing recent share gains across all products and geographies, a focus on key sectors like healthcare and technology, and disciplined capital allocation.

Ebrahim Poonawala asked if Net Interest Income (NII) ex-markets had bottomed in Q2 and questioned the progress and future contribution of the Wealth segment to Citigroup's returns.

Answer

CFO Mark Mason confirmed NII ex-markets is expected to be flat sequentially in Q4 and emphasized the firm's strong fee (NIR) growth momentum. CEO Jane Fraser highlighted significant progress in the Wealth business, pointing to 24% growth in client investment assets and steady progress toward its medium-term RoTCE target of 15-20%.

Ebrahim Poonawala inquired about the remaining opportunities for cost savings, such as headcount, technology, and automation, to fund ongoing investments and drive improved Return on Equity (ROE). He also asked for Wells Fargo's perspective on inorganic growth opportunities, particularly in wealth or investment banking, given its U.S. focus.

Answer

CFO Mike Santomassimo stated that significant efficiency opportunities persist across the company, including headcount reductions, automation (with AI assistance), third-party spend, technology rationalization, and real estate cost reductions. He emphasized that efficiency, alongside business investments and capital optimization, provides multiple paths to higher returns. CEO Charlie Scharf noted that while inorganic opportunities are considered, any M&A would be additive to the existing U.S.-focused strategy and strengthen current businesses, with the primary focus remaining on organic growth.

Ebrahim Poonawala inquired about the remaining opportunities for cost savings, such as headcount, technology, and automation, to fund investments and improve ROE, following $15 billion in expense saves. He also asked about Wells Fargo's perspective on inorganic growth opportunities, particularly in wealth or investment banking, given its U.S. focus.

Answer

CFO Mike Santomassimo affirmed significant efficiency opportunities remain across headcount (driven by automation and AI), third-party spend, technology, and real estate, which will continue to drive returns alongside business investments and capital optimization. CEO Charlie Scharf stated that while inorganic opportunities are considered if additive to the existing strategy, the primary focus remains on organic growth.

Ebrahim Poonawala of Bank of America inquired about Wells Fargo's remaining opportunities for cost savings across headcount, technology, and automation to fund investments and drive efficiency. He also asked for the bank's perspective on inorganic growth opportunities, such as M&A in wealth or global investment banking, to accelerate growth strategies.

Answer

CFO Mike Santomassimo stated that significant efficiency opportunities remain across headcount, third-party spend, technology, and real estate, with automation and AI contributing to ongoing improvements. CEO Charlie Scharf acknowledged considering inorganic opportunities that align with existing strategies but emphasized that the primary focus remains on organic growth given the lifted asset cap.

Ebrahim Poonawala from Bank of America Merrill Lynch sought assurance that the company's aggressive growth plans would not dilute its Return on Tangible Common Equity (ROTCE). He also inquired about the bank's asset sensitivity and its ability to offset the impact of potential Federal Reserve rate cuts.

Answer

CEO Charles Scharf asserted that the company will not sacrifice returns for growth, stating that growth initiatives are designed to increase returns, funded in part by ongoing efficiency efforts. He also noted the Q2 ROTCE was boosted by a one-time gain. CFO Michael Santomassimo added that the NII outlook already factors in market expectations for rate cuts, which they expect to mitigate through favorable deposit pricing, asset repricing, and loan growth.

Ebrahim Poonawala of Bank of America Merrill Lynch asked for assurance that the company's aggressive growth plans post-asset cap would not sacrifice returns. He also inquired about the bank's asset sensitivity and how potential Fed rate cuts might impact the NII outlook.

Answer

CEO Charles Scharf emphasized that the company will not sacrifice returns for growth and remains focused on increasing returns, funding investments through ongoing efficiency initiatives. CFO Michael Santomassimo noted that the NII outlook already incorporates market expectations for rate cuts, and that despite potential cuts, factors like lower deposit costs, fixed asset repricing, and loan growth should remain constructive for NII.

Ebrahim Poonawala asked about the path to improving the Consumer business ROE and inquired about the company's capital management philosophy, particularly its target CET1 ratio in light of potential regulatory changes.

Answer

CEO Charlie Scharf detailed that improving consumer ROE involves maturing the card business, enhancing the auto business through partnerships like Volkswagen, and optimizing the home lending business. He noted that while the consumer bank's returns are strong, growth has been constrained. Regarding capital, Scharf stated the company has significant excess capital and found last year's SCB increase illogical. He views the current regulatory direction as positive but will wait for clarity before defining specific capital buffer targets.

Ebrahim Poonawala of Bank of America asked for tangible examples of business changes following the lifting of the OCC's sales practices consent order, particularly regarding branch incentives. He also inquired about future expense efficiency opportunities beyond the recent severance charge.

Answer

CFO Mike Santomassimo stated that the consent order's removal allows for a broader rollout of a standard incentive framework in branches, which has already shown positive results in pilots. CEO Charlie Scharf added that this involves a combination of compensation, reporting, and management routines within a new, robust control framework. Regarding expenses, Mike Santomassimo affirmed that significant opportunities for efficiency remain, comparing the process to 'peeling an onion' where new layers of potential savings are continuously uncovered through technology and automation.

Ebrahim Poonawala questioned if the flat expense trend could continue into 2025 while allowing for reinvestment, and why Q4 NII is not expected to decline despite recent Fed rate cuts.

Answer

CEO Charlie Scharf deferred specific 2025 expense guidance but affirmed the strategy of balancing significant efficiency opportunities with necessary investments in risk and growth. CFO Michael Santomassimo added that underlying efficiencies are materializing but are offset by revenue-related compensation. On NII, he cited a combination of factors, including a stabilizing deposit mix, proactive pricing actions, asset repricing, and the recent securities portfolio repositioning, as reasons for the stable Q4 outlook.

Ebrahim Poonawala of Bank of America Merrill Lynch asked about the U.S. segment's profitability outlook for 2026 given continued loan runoff and expense growth, and sought clarity on the realistic timeline for the asset cap removal post-remediation.

Answer

Leo Salom, Group Head - U.S. Retail, expressed a constructive outlook for 2026, expecting NIAC growth despite headwinds, with productivity efforts helping to fund investments. On the asset cap, he clarified that while most management actions will be done by year-end 2025, some items extend to 2026-2027, and the final timing is subject to a multi-stage validation and regulatory review process.

Ebrahim Poonawala of Bank of America Merrill Lynch questioned the U.S. segment's profitability outlook for 2026 given continued loan runoff and expense growth, and also sought clarity on the realistic timeline for the U.S. asset cap removal post-remediation.

Answer

Leo Salom projected NIAC growth for the U.S. segment in 2026, expecting strong revenue dynamics to offset disciplined expense growth. On the asset cap, he clarified that while the majority of management actions will be done by year-end 2025, the full process involves multiple validation stages and a regulatory sustainability review, making the final timeline uncontrollable by the bank.

Ebrahim Poonawala asked how much of the AML remediation plan is still evolving, the risk of further expense increases, and the expected timeline for completion. He also questioned how the bank can reassure shareholders about the U.S. franchise's health if a multi-year asset cap is imposed.

Answer

Leo Salom, President and CEO of TD Bank, America's most Convenient Bank, asserted that the bank has a comprehensive and robust roadmap for a "world-class" AML program and is executing against it, though it is a multi-year effort. To reassure investors, he highlighted the U.S. franchise's strong underlying performance, including peer-leading loan growth and NIM expansion, as evidence of its resilience and continued growth potential.

Ebrahim Poonawala of Bank of America Securities raised concerns about the potential stagnation of the U.S. franchise due to the AML issue. He also asked for an explanation of what went wrong with TD's risk management and whether the problem could extend beyond U.S. AML.

Answer

Leo Salom, President and CEO of TD Bank, AMCB, pointed to strong quarterly results as evidence against stagnation. CEO Bharat Masrani stated the program's failure was unacceptable and is being fixed. Chief Risk Officer Ajai Bambawale attributed the failure to specific procedural weaknesses in the U.S. and actions of some employees, asserting it is a U.S. AML issue, not an enterprise-wide problem.

Ebrahim Poonawala from Bank of America Merrill Lynch asked about the true Return on Equity (ROE) potential for CIBC, questioning if the 15%+ target could realistically be closer to 16% given the current momentum in margins and capital flexibility.

Answer

Robert Sedran, Senior EVP, CFO & Enterprise Strategy, responded that while the official ROE target remains, the bank's conviction in its upward trajectory has never been stronger, even with a higher capital load. He indicated that as CIBC surpasses the 15% mark, they expect the ROE to continue migrating higher over the medium term, driven by consistent strategic execution.

Ebrahim Poonawala of Bank of America Merrill Lynch inquired about the on-the-ground credit reality for Canadian consumers and businesses, seeking to understand the source of management's confidence in their impaired PCL outlook. He also asked for Victor Dodig's view on the prospects for policy changes to stimulate the Canadian economy.

Answer

Frank Guse, Senior EVP & Chief Risk Officer, pointed to leading indicators like declining delinquency rates in Q2 as a source of confidence in their credit outlook. Victor Dodig, President & CEO, expressed optimism about potential government policies to boost growth and believes an eventual 'detente' on the North American trade front will occur.

Questioned the confidence in the impaired PCL guidance given the economic environment and asked for an outlook on Canadian economic policy changes.

Answer

The executive expressed confidence in credit quality, citing declining delinquency rates as a positive indicator. The CEO discussed potential pro-growth policies in Canada, including dropping trade barriers, housing incentives, and fostering risk capital, while expressing optimism for an integrated North American economy.

Ebrahim Poonawala of Bank of America asked for an on-the-ground assessment of stress among Canadian consumers and businesses, seeking to understand the confidence behind the impaired PCL guidance. He also inquired about the prospects for pro-growth policy changes in Canada.

Answer

Chief Risk Officer Frank Guse cited declining delinquency rates in Q2 as a key indicator supporting the bank's confidence in its credit outlook. CEO Victor Dodig expressed optimism for pro-growth policies in Canada, highlighting areas like trade, housing, and resource development as key opportunities for the government to address.

Ebrahim Poonawala asked for an assessment of the on-the-ground stress facing Canadian consumers and businesses, and what provides confidence in the current impaired PCL guidance. He also questioned CEO Victor Dodig on his optimism for policy changes to stimulate the Canadian economy.

Answer

Frank Guse, Chief Risk Officer, pointed to leading indicators like declining delinquency rates in Q2 as a source of confidence in the bank's credit quality and guidance. Victor Dodig, President and CEO, expressed optimism for pro-growth policies in Canada, highlighting opportunities in interprovincial trade, housing, natural resources, and fostering risk capital, while emphasizing the strength of the integrated North American economy.

Ebrahim Poonawala of Bank of America asked for details on where client activity is picking up and how CIBC plans to manage its 13.5% CET1 capital ratio, specifically questioning if the pace of share buybacks could increase.

Answer

President and CEO Victor Dodig confirmed CIBC will continue its buyback activity while preserving capital for organic growth. He then deferred to business leaders Shawn Beber (U.S. Region), Harry Culham (Capital Markets), and Susan Rimmer (Commercial Banking), who all described healthy business pipelines and client readiness to invest once economic certainty returns.

Ebrahim Poonawala asked about the improving economic sentiment in Canada, the impact of interest rates on consumers and businesses, and the outlook for GDP and credit reserving. He also inquired about CIBC's capital allocation priorities, including organic growth, buybacks, and M&A.

Answer

President and CEO Victor Dodig stated that while sentiment is improving, more rate cuts are needed to solidify confidence. Chief Risk Officer Frank Guse added that the credit outlook remains prudent, with unemployment as a near-term headwind. On capital, Victor Dodig prioritized organic growth first, followed by dividend growth, share buybacks, and opportunistic tuck-in M&A, all aimed at delivering a premium ROE.

Ebrahim Poonawala asked about the sustainability of Royal Bank of Canada's high Return on Equity (ROE), whether any business segments are over-earning, and the bank's strategy for capital deployment versus building its CET1 ratio.

Answer

President & CEO David McKay expressed confidence in the sustainability of the bank's performance, attributing the strong results to broad-based client activity rather than over-earning in any specific area. He reaffirmed the 'at least 16%' ROE target for fiscal 2026, noting the bank has the earnings power to support a strong capital ratio while continuing share buybacks and investing in growth.

Ebrahim Poonawala asked for the outlook on impaired PCLs for the rest of the year, the rationale for peak losses being pushed to 2026, and whether new areas of stress are emerging. He also questioned the drivers of Net Interest Income (NII) growth and the impact of future rate cuts.

Answer

Chief Risk Officer Graeme Hepworth explained that 80% of the reserve build is driven by forward-looking macroeconomic uncertainty rather than current credit deterioration. Chief Financial Officer Katherine Gibson detailed that NII guidance depends on loan volumes, the 'tractor' hedging strategy, and variables like client deposit mix and competitive pressures.

Asked for the outlook on impaired PCLs, whether new stress areas are emerging, and details on rate sensitivity and the drivers for net interest income (NII) growth.

Answer

The credit reserve build is primarily driven by forward-looking macroeconomic uncertainty rather than new emerging stress areas. NII growth will be influenced by loan volumes, deposit growth and mix, the 'tractor' hedging strategy, and competitive dynamics.

Ebrahim Poonawala of Bank of America Merrill Lynch inquired about the outlook for impaired PCLs, the rationale for peak losses being pushed to 2026, and the key drivers that would place net interest income (NII) growth at the high or low end of guidance.

Answer

Chief Risk Officer Graeme Hepworth attributed the credit outlook to forward-looking uncertainty rather than current credit migration. Chief Financial Officer Katherine Gibson detailed that NII growth depends on loan volumes, NIM performance driven by the 'tractor' strategy and deposit mix, and competitive pressures.

Ebrahim Poonawala of Bank of America questioned if the stronger Canadian margin was due to balance sheet dynamics or a better competitive environment, and asked how the bank is balancing offense versus defense amid tariff uncertainty.

Answer

CFO Katherine Gibson attributed margin strength to better spreads and a favorable deposit mix, noting competition was less than forecast. Group Head of Personal Banking Erica Nielsen added that RBC is managing pricing effectively. CEO David McKay described their current strategy as 'balanced,' continuing to support client growth with strong momentum while preparing for potential downside scenarios.

Ebrahim Poonawala asked about Royal Bank of Canada's capital allocation strategy, questioning the balance between accelerating share buybacks and accumulating capital for future organic growth or M&A, given the bank's strong capital generation and ROE.

Answer

President and CEO David McKay stated that RBC's significant organic capital generation allows for both share buybacks and capital accretion for strategic optionality. He emphasized that the plan is to return capital to shareholders to drive a premium TSR while patiently building the balance sheet for the right future deployment, similar to the discipline shown with the HSBC acquisition.

Ebrahim Poonawala of Bank of America Merrill Lynch inquired about Scotiabank's capital management strategy, specifically questioning the potential for more aggressive share buybacks given the current stock valuation and strong CET1 ratio.

Answer

Raj Viswanathan, Group Head & CFO, explained that while the 13.3% CET1 ratio is strong, the bank prioritizes capital for organic growth first. He confirmed the bank will continue its buyback program but will maintain a prudent approach, expecting to remain comfortably above a 13% CET1 ratio. CEO Scott Thomson later added that the bank is tracking at or above its Investor Day commitments, with International Banking performing ahead of schedule and GBM showing strong momentum.

Ebrahim Poonawala inquired about the drivers behind the significant performing provision for credit losses (PCL) build, the extent of fundamental credit deterioration, and the outlook for impaired PCLs into 2026. He also asked what catalysts would be needed to revive customer activity amid macro uncertainty.

Answer

Chief Risk Officer Philip Thomas explained that while impaired PCL growth is slowing and credit portfolios remain relatively stable, the performing build reflects a conservative stance against macro uncertainty. He noted that impaired PCLs should remain near current levels for the rest of the year. President and CEO Scott Thomson added that progress on the USMCA trade agreement and increased political certainty in Canada could serve as catalysts for an inflection point in loan growth and business confidence heading into 2026.

Ebrahim Poonawala asked for a breakdown of the significant performing provision for credit loss (PCL) build and inquired about the potential catalysts needed to stimulate a recovery in customer activity.

Answer

Phil Thomas, Group Head & Chief Risk Officer, explained that while impaired PCLs are stabilizing, the performing build reflects a weaker macro outlook and expert judgment. He expressed confidence in credit quality, noting stability in Canadian mortgages and positive trends internationally. Scott Thomson, President & CEO, added that increased political certainty in Canada and progress on the USMCA trade agreement would be key catalysts for improving customer confidence and activity.

Ebrahim Poonawala inquired about the credit outlook excluding potential tariffs, asking if lower rates mitigate the 'higher for longer' risk, and questioned the absence of share buybacks given the stock's valuation and capital levels.

Answer

Chief Risk Officer Philip Thomas stated that while some softness remains in Canadian retail, customers are benefiting from rate cuts, and he expects provisions to trend down in H2 2025, tariffs aside. President and CEO L. Thomson explained that capital return plans are pending tariff clarity, but he anticipates resuming modest dividend growth next quarter and hopes to begin share repurchases by year-end.

Ebrahim Poonawala inquired about the net interest margin (NIM) outlook amid expected rate cuts, the progress of the Canadian deposit franchise, and the strategic focus on growing the U.S. dollar business.

Answer

CFO Rajagopal Viswanathan projected modest NIM improvement in Q4, accelerating through 2025 as rate cut benefits materialize in the 'Other' segment. President & CEO Scott Thomson positioned the KeyCorp investment as a low-risk U.S. market entry. Aris Bogdaneris, Head of Canadian Banking, highlighted a $43 billion deposit increase over 18 months, driven by a focus on primary client relationships. Travis MacHen from Global Banking and Markets noted opportunities in the U.S. fee business.

Ebrahim Poonawala from Bank of America Merrill Lynch requested BMO's perspective on the Canadian macro outlook regarding growth and credit. He also asked about the specific drivers and investments needed to bridge the U.S. P&C ROE from its current level to the 12%+ target.

Answer

CEO Darryl White described Canada's economy as being in a modest, non-recessionary growth phase, with future optimism dependent on trade and policy actions. President - BMO U.S. Aron Levine explained that reaching the ROE target requires sustainable loan and deposit growth, which will be supported by a unified business structure and investments in technology, branches, and talent.

Ebrahim Poonawala questioned if upcoming U.S. stress test results could affect capital allocation and asked for the outlook on the U.S. Net Interest Margin (NIM) given its strong performance.

Answer

CFO Tayfun Tuzun stated he does not expect the CCAR exercise to meaningfully impact capital management. Regarding NIM, he reiterated a strategy focused on stability, driven by business actions rather than interest rate speculation, and expects a stable margin with some potential upside while remaining cautious.

Ebrahim Poonawala of Bank of America asked about U.S. capital allocation in light of the upcoming stress test and questioned the sustainability of the high U.S. Net Interest Margin (NIM).

Answer

CFO Tayfun Tuzun stated he does not expect this year's CCAR exercise to have a meaningful impact on capital management, noting the U.S. capital position is strong and accreting as expected. Regarding NIM, he reiterated a principle of stability, expecting margins to remain stable with some potential upside driven by business actions like deposit optimization, but he remained cautious.

Ebrahim Poonawala inquired about the differential impact of potential trade tariffs on U.S. versus Canadian commercial clients and the bank's outlook on the situation. He also asked if the pace of share buybacks would increase given the strong 13.6% CET1 ratio.

Answer

CEO Darryl White stated it is premature to predict specific tariff outcomes but acknowledged higher anxiety levels among Canadian clients, with some pausing capital deployment. Nadim Hirji, Head of BMO Commercial Banking, added that clients are actively creating contingency plans and BMO's North American footprint is an advantage. Regarding capital, Darryl White confirmed the intention to continue the buyback program to manage the CET1 ratio towards the bank's target.

Ebrahim Poonawala asked about credit risk management, questioning if BMO has an issue with outsized exposures, and separately, what the path is for the bank to return to a 14-15% ROE.

Answer

Chief Risk Officer Piyush Agrawal and CEO Darryl White addressed credit, noting that large losses were episodic, often in syndicated loans from a specific 'pandemic vintage,' and that the issue is known and bounded. On profitability, Darryl White reaffirmed the mid-term 15% ROE target, outlining levers such as credit normalization, sustained positive operating leverage, and an improving U.S. environment as the path forward.

Probed into the nature of the large credit losses, asking if the bank has an issue with outsized credit exposures, and questioned the path back to a 14-15% ROE.

Answer

The large credit losses are not unique to BMO, as about 70% are from syndicated facilities. The issues are described as episodic and related to a 'vintage' of loans from the pandemic era, not a systemic issue. The bank has reviewed the portfolio and feels the problem is contained. Management reaffirmed their commitment to a 15% ROE in the medium term, achievable through credit normalization, operating leverage, and an improved U.S. environment.

Ebrahim Poonawala from Bank of America Merrill Lynch asked for perspective on when shareholders can expect to see bottom-line earnings growth from the expansion strategy, noting that earnings have been flat since 2022 while expenses have grown. He also inquired about the stabilization of non-interest-bearing deposit (DDA) balances.

Answer

CEO Phillip Green stated that the expansion program is expected to become accretive to earnings in 2026, with returns growing over time. He clarified that recent expense growth also reflects investments in personnel and technology, not just new branches. CFO Dan Geddes added context on long-term market share gains. Regarding deposits, both executives indicated that DDA balances are near a bottom and they are hopeful for a return to typical seasonal growth in the second half of the year.

Ebrahim Poonawala from Bank of America questioned when shareholders could expect to see bottom-line earnings growth from the multi-year expansion strategy, noting that earnings have been flat while expenses have grown. He also asked for the outlook on non-interest-bearing deposit (DDA) balances.

Answer

Chairman and CEO Phillip Green projected significant earnings accretion from the expansion program starting in 2026, noting that recent expense growth also includes investments in technology and personnel. CFO Dan Geddes provided market share data for Houston and Dallas to illustrate the long-term growth runway. Regarding deposits, both executives expressed cautious optimism that DDA balances are near a bottom and are beginning to show signs of returning to seasonal growth patterns.

Ebrahim Poonawala asked about the long-term branch expansion strategy, questioning if the current pace was sufficient given the market opportunity and if there were plans for further acceleration.

Answer

CEO Phillip Green affirmed that the expansion is a 'durable and scalable' strategy that will continue with a 'regular cadence.' He explained that after completing current build-outs, the bank will revisit major markets to fill in gaps and follow population growth. CFO Dan Geddes supported this by highlighting the bank's low market share in Houston and Dallas, which provides significant room for continued growth.

Ebrahim Poonawala from Bank of America inquired about the primary drivers of deposit acquisition without promotional pricing and the competitive landscape for lending, including pressure from other banks and private credit.

Answer

CEO Phillip Green attributed strong deposit growth to a combination of factors: the physical branch expansion, world-class customer service driving word-of-mouth referrals, a highly-rated mobile app, and more effective marketing. On lending, Green noted that competition is intensifying, particularly on structure, which Frost avoids. He acknowledged private credit is a factor, often providing bridge financing for commercial real estate projects, but stated that Frost's consumer lending growth is driven by unique products like home equity loans in the current rate environment.

Ebrahim Poonawala of Bank of America Merrill Lynch questioned the 7%+ NII growth guidance, which implies flat performance in the second half, and asked about client sentiment regarding investment pace and the impact of tariffs.

Answer

EVP & CFO Christopher Del Moral-Niles confirmed the bank's asset sensitivity, noting that fewer rate cuts or stronger loan growth could lead to upside on the NII guidance. Chairman & CEO Dominic Ng added that client sentiment is improving as they gain more certainty around tariffs, highlighting that many clients are experienced in navigating such situations and the bank's portfolio is highly diversified.

Ebrahim Poonawala asked about the bank's approach to share buybacks given the stock's pullback amid macro uncertainty, and questioned if risks from U.S.-China tensions are greater now than in 2018-19.

Answer

CFO Christopher Del Moral-Niles stated the bank will be opportunistic with its $244 million buyback authorization while prioritizing a position of strength. CEO Dominic Ng added that clients are better prepared for tariffs now than in 2017, having diversified supply chains. He noted that directly impacted clients represent only 1% of the C&I loan portfolio and the bank is working closely with them, seeing no immediate credit loss risk.

Ebrahim Poonawala questioned the outlook for commercial real estate (CRE) loan balances, potential credit risk from higher rates, and whether the bank's best-in-class efficiency ratio is expected to trend higher due to ongoing investments.

Answer

CFO Christopher Del Moral-Niles stated that CRE growth will be muted as the bank focuses on C&I and residential lending. CRO Irene Oh added that a modest rate increase is not expected to significantly impact credit risk. Regarding efficiency, CEO Dominic Ng explained that the primary focus is on ROE, ROA, and EPS growth, and a slight increase in the efficiency ratio from its current low level would not be a concern as the bank diversifies into fee-generating businesses.

Ebrahim Poonawala of Bank of America asked about the potential for loan growth to return to historical high single-digit levels post-election. He also inquired about plans for branch network expansion and sought clarity on potential non-organic growth opportunities.

Answer

Chairman and CEO Dominic Ng stated the bank is positioned with a "fortress-like balance sheet" but the post-election economic environment remains uncertain. He confirmed no current plans for new branches. CFO Christopher Del Moral-Niles added that fee-driven M&A opportunities are of interest, but the appetite for depository acquisitions is "light right now."

Ebrahim Poonawala from Bank of America Merrill Lynch questioned the path to achieving a 3% Net Interest Margin (NIM) by 2026 and whether it would require a larger balance sheet. He also requested details on the plan to increase frontline bankers by 10%.

Answer

CFO Clark H. I. Khayat affirmed the 3% NIM target by the end of 2026, stating it could be reached without significant balance sheet growth due to favorable asset mix shifts and capital markets distribution. Chairman & CEO Christopher M. Gorman specified that the 10% hiring increase targets investment bankers, middle market relationship managers, wealth managers, and payments advisers to drive future growth.

Ebrahim Poonawala from Bank of America asked for clarity on the outlook for project loans and client CapEx decisions given the high level of uncertainty. He also inquired about the new $1 billion share repurchase authorization, seeking details on the target CET1 ratio and the expected timing and pace of the buybacks.

Answer

Chairman and CEO Christopher Gorman clarified that while existing, in-flight CapEx projects are proceeding, new project launches are being paused by clients pending greater visibility. Regarding the buyback, he stated the target is a 9.5% to 10% marked CET1 ratio. He emphasized that repurchases would likely commence in the second half of the year, but the pace depends on gaining clarity on the economy and Basel III endgame rules, with client support being the top priority for capital.

Ebrahim Poonawala from Bank of America Merrill Lynch asked about the historical correlation between M&A activity and lending demand. He also inquired about the 2025 outlook for deposit growth, funding mix, and the trend for average earning assets.

Answer

CEO Christopher Gorman confirmed that a robust M&A market is historically positive for lending, partly due to private equity's use of leverage. CFO Clark Khayat projected that deposit balances would be 'stable to slightly up' with continued remixing out of brokered deposits, and that average earning assets are expected to be 'relatively flat' throughout the year.

Ebrahim Poonawala of Bank of America Merrill Lynch asked about the historical correlation between a pickup in M&A activity and loan demand, and sought guidance on deposit growth and the trajectory of average earning assets for 2025.

Answer

CEO Christopher M. Gorman confirmed that a robust M&A market, particularly with private equity involvement, is beneficial for lending. CFO Clark H. I. Khayat projected that client deposit balances would be stable to slightly up, with continued remixing out of brokered deposits, and that average earning assets are expected to be relatively flat throughout the year.

Ebrahim Poonawala asked about the implications of the recent tax bill, including bonus depreciation, on customer sentiment and loan growth, and also inquired about Regions Financial's perspective on bank M&A activity.

Answer

President, CEO, & Chairman John Turner explained that the tax package provides helpful certainty for businesses and consumers, noting an uptick in inquiries for equipment purchases due to bonus depreciation. Regarding M&A, he reiterated that Regions is not interested in depository deals, as the company is focused on executing its current strategic plan and completing its major technology modernization project.

Ebrahim Poonawala from Bank of America asked about the potential for further securities portfolio restructuring versus share buybacks. He also questioned how quickly customer activity might rebound with tariff clarity and if any impacts from auto tariffs have been observed.

Answer

Executive David Turner responded that while a small repositioning was done, they are near the end of such opportunities and will continue to weigh them against buybacks. Executive John Turner suggested a period of stability of at least 90 days, and possibly longer, is needed for customer activity to pick up. He also confirmed that no significant impact from auto tariffs has been seen to date.

Ebrahim Poonawala asked about the credit outlook, specifically if net charge-offs are expected to remain in the 40-50 basis point range or decline. He also questioned if the bank could lower deposit costs without additional Fed rate cuts.

Answer

CEO John Turner explained that the 40-50 basis point range for net charge-offs is considered a typical run-rate for the portfolio. CFO David Turner confirmed that deposit costs are expected to decline in Q4 even without further Fed cuts, driven by maturing CDs repricing at lower rates.

Ebrahim Poonawala from Bank of America asked for an outlook on deposit costs assuming no Fed rate cuts, and also inquired about any recent uptick in sponsor-led lending, particularly in capital call lines, and its impact on the second-half forecast.

Answer

CFO John Woods confirmed that deposit costs should continue to benefit from a significant book of CDs repricing at much lower rates, providing a tailwind for the rest of the year. He reiterated confidence in the bank's cumulative deposit beta performance. On sponsor lending, Head of Commercial Banking Don McCree reported an 8% increase in capital call line utilization in Q2 and expects further growth, as utilization remains about six points below its long-term average and the private equity complex is becoming more active.

Ebrahim Poonawala requested the specific fee revenue assumptions for capital markets for the second quarter and the full year. He also asked about the Fed funds rate assumption underpinning the NIM outlook for 2025 and 2026 and the potential risk from rate cuts.

Answer

CEO Bruce Van Saun and CFO John Woods did not provide a specific breakdown for capital markets revenue but confirmed it is a material driver of the overall fee guide, expressing confidence due to business diversity. On the NIM outlook, Woods explained that their forecast is not highly sensitive to rate cuts due to their near-neutral, hedged position. He noted the long-term NIM range assumes a terminal Fed funds rate of around 3.5%.

Ebrahim Poonawala asked about Fifth Third's capital allocation priorities, particularly regarding M&A, and the impact of a recent tax bill on its Dividend residential solar lending business.

Answer

CEO Tim Spence reiterated that organic growth is the top priority, followed by dividends and share repurchases, emphasizing that any M&A must provide strategic density. CFO Bryan Preston and CEO Tim Spence explained that while the tax bill will reduce future solar loan originations, the existing portfolio is unaffected, credit trends are improving, and the Dividend platform is pivoting to offer home equity products for broader home improvement projects.

Ebrahim Poonawala asked about the payoff from investments in Southeast branches and whether this positions Fifth Third for outperformance. He also questioned how dependent the fee businesses are on balance sheet loan growth.

Answer

CFO Bryan Preston stated that Southeast branches are still in early growth stages, driving future deposit potential. CEO Tim Spence clarified the fee business dependencies: Wealth Management is not dependent, Commercial Payments is mixed (with 40% of new relationships having no credit), and Capital Markets is linked to cross-selling but has significant room to grow within the existing client base.

Ebrahim Poonawala asked about the runoff in the Shared National Credit (SNC) portfolio and the competitive threat from private credit. He also challenged the capital allocation strategy, questioning the decision to accelerate buybacks rather than hold excess capital for growth or defensive purposes.

Answer

CEO Tim Spence indicated the bank is at an inflection point with its RWA optimization, expecting the SNC runoff to moderate, supported by a record middle-market pipeline. He noted that while private credit is a competitor, Fifth Third avoids its higher-risk practices. CFO Bryan Preston defended the buyback strategy, stating the stock is a good value and the bank's strong earnings generation provides flexibility to fund growth while returning capital, thus avoiding the high cost of holding idle excess capital.

Ebrahim Poonawala asked about Fifth Third's rate sensitivity, the confidence in downside deposit beta assumptions, and whether rate cuts are a net positive for NII. He also inquired about the credit outlook and the potential triggers for a pickup in loan growth.

Answer

CFO Bryan Preston confirmed that rate cuts are positive for the bank, noting that 64% of the interest-bearing deposit book is in higher-beta categories, providing confidence in managing costs down. CEO Tim Spence added that while rate relief would be constructive for loan demand and credit, he remains cautious due to broader macroeconomic uncertainties and will not chase loan growth at the expense of returns.

Ebrahim Poonawala of Bank of America Merrill Lynch inquired about the competitive landscape for lending, its impact on pricing, and whether expense plans would be adjusted if strong revenue momentum continues.

Answer

CEO Kevin Blair acknowledged a competitive environment, noting a modest 5 basis point decline in SOFR spreads, but emphasized competing on relationship value. EVP & CFO Jamie Gregory stated that strategic investments like hiring are based on their long-term IRR and are not reactive to short-term revenue, though variable incentive costs could rise with outperformance.

Ebrahim Poonawala of Bank of America questioned Synovus's deposit strategy, including pricing, betas in an easing cycle, and new acquisition sources. He also asked for an update on the Maast embedded payments business and its competitive positioning.

Answer

CFO Jamie Gregory projected a cumulative deposit beta of 40-45% in the easing cycle, driven by active repricing, and expects core deposit growth to continue into 2025. CEO Kevin Blair stated that the Maast platform is being enhanced based on pilot feedback, with resources also focused on expanding the profitable commercial sponsorship business. He affirmed that partnerships, not scale, are key to winning in the embedded finance space.

Ebrahim Poonawala of Bank of America Merrill Lynch asked for the key drivers that could move the net interest margin (NIM) above or below the guided mid-to-high 3.60s range, excluding rate changes. He also requested details on the C&I loan growth opportunity within the former People's United markets.

Answer

CFO Daryl Bible stated that the primary driver for NIM will be the pace of commercial and CRE loan growth. He noted positive repricing in auto/RV loans, the investment portfolio, and the swap book as tailwinds. Regarding C&I growth, he highlighted strong momentum in Eastern Mass and Connecticut, and emphasized the significant contribution from specialty businesses acquired from People's United, such as fund banking and mortgage warehouse.

Ebrahim Poonawala requested details on the net interest margin (NIM) outlook, asking what factors could push it above 3.70% or below 3.60%. He also asked about the C&I loan growth opportunity within the markets acquired through the People's United transaction.

Answer

CFO Daryl Bible explained that achieving a NIM above 3.70% is possible but hinges on stronger commercial and CRE loan growth. He noted positive drivers like fixed-asset repricing and a favorable swap book. Regarding C&I growth, he highlighted significant momentum in former People's United markets like Eastern Massachusetts and Connecticut, driven by new leadership and the successful scaling of acquired specialty businesses like fund banking and mortgage warehouse.

Ebrahim Poonawala asked for customer feedback on tariff uncertainty and its impact on CapEx and C&I growth. He also questioned the pace of achieving the 11% CET1 target via buybacks and the potential for M&A.

Answer

Daryl Bible (executive) noted that while consumer spending is stable, business customers are pausing investments due to uncertainty, though M&T's C&I business is still growing. Regarding capital, Bible confirmed plans to resume share repurchases, adjusting based on economic conditions, and emphasized M&T's strong capital position without commenting directly on M&A.

Ebrahim Poonawala asked for clarity on the net interest margin (NIM) trajectory in a static rate environment and whether current major technology investments will lead to greater long-term efficiency.

Answer

CFO Daryl Bible expressed confidence that NIM would increase through 2025, driven by locked-in swap repricing and fixed-rate asset repricing, even without Fed action. He explained that several current large investments (data centers, new GL system) are once-in-a-decade projects, which, once completed, should reduce the investment burden, while areas like data analytics will require ongoing spend.

Ebrahim Poonawala asked about the drivers behind the decline in criticized loans, whether significant rate cuts are necessary for further CRE improvement, and the sources of recent C&I loan growth.

Answer

CFO Daryl Bible explained that the decline in criticized loans was driven by upgrades, particularly in healthcare and construction, due to improved project performance and client support, not just rate movements. He noted 91% of criticized loans are current. Bible attributed C&I growth to specialty businesses like fund banking and mortgage warehouse, as well as regional strength in markets like Austin and Baltimore. He expects CRE balances to begin growing again in 2025.

Ebrahim Poonawala inquired about Goldman Sachs's target CET1 ratio going forward and where inorganic acquisitions rank as a potential use of capital.

Answer

CFO Denis Coleman indicated that the firm expects to operate with a 50 to 100 basis point buffer above its new minimum regulatory capital requirement. Chairman & CEO David Solomon addressed acquisitions, stating that while they are always looking for opportunities to accelerate the franchise, particularly in Asset & Wealth Management, the 'bar to do anything significant will be very, very high.'

Ebrahim Poonawala inquired about market activity levels in early April and the execution of the firm's three-year efficiency plan, including adjustments to its 'pyramid structure' and expense management.

Answer

CEO David Solomon stated that despite a shift in sentiment, the business was performing well with active clients in early April. On efficiency, he confirmed the firm's commitment to the plan and announced an expected severance charge of approximately $150 million in the second quarter related to performance management actions.

Ebrahim Poonawala inquired about the regulatory outlook for capital markets and the potential timing and magnitude of a recovery in M&A and IPO activity.

Answer

CEO David Solomon addressed the regulatory environment, noting the industry's lawsuit over the Federal Reserve's stress test (CCAR) transparency and expressing hope for a more constructive dialogue on Basel III and G-SIB rules. He stated that while unpredictable, the environment feels more constructive. Regarding dealmaking, Solomon confirmed a meaningful pickup in large-cap M&A and sponsor dialogues, expecting a more robust environment throughout 2025 driven by renewed CEO confidence.

Ebrahim Poonawala of Bank of America inquired about the competitive threat from non-bank trading venues in fixed income and the key drivers required for Goldman Sachs to achieve a sustainable 15%+ return on equity (ROE).

Answer

CEO David Solomon addressed competition by highlighting the firm's scale, breadth of services, and integrated client relationships. On the path to a 15%+ ROE, Solomon outlined three building blocks: 1) continued strong performance in Global Banking & Markets with a potential tailwind from a recovery in M&A, 2) improving margins and returns in Asset & Wealth Management, and 3) reducing the drag from the consumer platform business.

Ebrahim Poonawala of Bank of America Merrill Lynch asked about Morgan Stanley's potential for incremental returns on capital and future profitability given the evolving regulatory backdrop. He also questioned the current sentiment in boardrooms regarding macro volatility and its impact on M&A activity.

Answer

Chairman & CEO Ted Pick stated that regulatory reform and improving market sentiment are clear tailwinds. He outlined organic capital deployment priorities in Investment Banking, Wealth Management, and Markets financing. Pick emphasized that while the dividend is paramount, the firm is seeing a pickup in strategic M&A activity as clients grow more accustomed to uncertainty, suggesting a strong second half of 2025.

Ebrahim Poonawala inquired about the status of investments in AML/BSA systems within Wealth Management and whether completing these is a prerequisite for pursuing international wealth growth. He also asked about the integration progress of the bank and the opportunity for deposit growth from wealth clients.

Answer

Executive Sharon Yeshaya stated that the firm has been investing in robust infrastructure across all processes for multiple years to support broad growth objectives, not just in one sector, and that results demonstrate their ability to attract assets. Regarding the bank, Yeshaya and Executive Ted Pick confirmed they are 'not there yet' and see the bank as a major growth engine. They highlighted opportunities to expand deposit products beyond sweeps and savings, particularly through E*TRADE and Workplace channels, and to grow lending, noting that loans to wealth households have doubled since 2018 but still lag peers.

Ebrahim Poonawala asked about Morgan Stanley's capital allocation priorities given its CET1 buffer and where the best investment opportunities lie. He also questioned if Net Interest Income (NII) is nearing a bottom.

Answer

Co-President and Head of Institutional Securities Ted Pick outlined the capital priorities as: 1) the dividend, 2) organic investment across all business segments, and 3) opportunistic buybacks, noting the firm is comfortable with its capital buffer. CFO Sharon Yeshaya addressed NII, stating that while deposit trends are encouraging, near-term guidance is for a modest decline. She emphasized that growth in durable asset management fees is significantly outpacing the NII decline.

Ebrahim Poonawala questioned management's constructive tone given market volatility, asking if a significant deterioration in client activity had been observed. He also asked about the potential impact of changes to the Supplementary Leverage Ratio (SLR) on balance sheet management.

Answer

CEO Ted Pick clarified that while some clients have paused, the banking pipeline hasn't fundamentally changed, and the firm had not seen a material slowdown at the start of the quarter. CFO Sharon Yeshaya stated that while SLR reform would be welcome, a more holistic review of the entire capital regime, including G-SIB and CCAR, is more important for the firm's capital deployment strategy.

Asked for an assessment of the health of U.S. middle-market businesses and consumers, inquiring about the credit quality outlook and any emerging areas of stress given interest rates, tariffs, and slowing spending.

Answer

Executives stated they will continue to grow the middle-market business regardless of the economic environment. On credit, they see no significant signs of weakness. The consumer remains fine, supported by a strong labor market, with expected stress only in lower-income bands. Commercial credit is also generally fine, with companies adjusting to macro factors like tariffs.

Ebrahim Poonawala asked what is needed for the current macroeconomic uncertainty to subside for corporate clients. He also questioned the firm's comfort level with the functioning of the Treasury market and the potential for Federal Reserve intervention.

Answer

CEO James Dimon suggested that the quickest way to reduce uncertainty would be for the administration to finalize its trade agreements. Regarding the Treasury market, he noted that sticky inflation is a factor and that while the market plumbing has flaws due to regulations, the Fed will likely step in only when it sees signs of panic, which is not the case currently.

Asked about areas of credit vulnerability in a no-rate-cut scenario and for the bank's thoughts on the appropriate timing for the Federal Reserve to end quantitative tightening (QT).

Answer

The biggest driver of credit vulnerability is always unemployment, with stagflation (high rates and high unemployment) being the worst-case scenario. On QT, the conventional wisdom is that it will end mid-year, which is consistent with the bank's own models and its outlook for deposit stabilization and growth in the second half of the year.

Ebrahim Poonawala from Bank of America asked about the competitive risk from non-bank market makers in fixed income and the risk of a market liquidity shock as the Fed continues Quantitative Tightening (QT).

Answer

CFO Jeremy Barnum described competition from non-banks as a 'reality' and noted that regulations pushing activity outside the banking system create an untested market structure. CEO James Dimon added that JPM is prepared to compete and will deploy capital to serve clients. On liquidity, Barnum suggested the recent repo market spike could indicate QT should be wound down soon. Dimon expressed more caution, citing inflationary risks and systemic issues if banks are constrained from providing liquidity.

Ebrahim Poonawala from Bank of America asked how recent public stock price volatility affects M&A psychology and the potential for deals. He also inquired about the long-term outlook for the mortgage warehouse business in a potentially prolonged low-refinance environment.

Answer

Senior Chairman and CEO David Zalman expressed confidence that deals can still be done, as potential partners have seen Prosperity's stock volatility before and trust its long-term value. He also highlighted that the bank's large capital base provides flexibility for cash components in deals. President and COO Kevin Hanigan added that while there's a psychological impact, sophisticated CEOs understand that exchange ratios are relative. Regarding the warehouse business, Hanigan acknowledged its rate dependency, noting that current high rates could impact the latter part of Q2 and the typically strong Q3, as activity is driven by purchase mortgages, not refinances.

Ebrahim Poonawala from Bank of America sought clarification on the 2025 Net Interest Margin (NIM) outlook, its underlying interest rate assumptions, the potential for M&A activity, and the specifics of the loan portfolio's repricing dynamics.

Answer

CEO David Zalman confirmed the 2025 NIM average target of 3.27% is based on the prime rate ending 2025 at 6.5%, with rapid rate cuts being the biggest risk. On M&A, Zalman emphasized that the primary focus is on improving NIM but the bank remains open to value-accretive deals. CFO Asylbek Osmonov added that approximately $5 billion in annual loan cash flow is expected, with fixed-rate loans yielding under 5% set to reprice around 7.5%.

Questioned the business momentum throughout the quarter, asking if there was any slowdown, and inquired about the growth contribution from newly hired bankers bringing their client relationships.

Answer

Momentum was strong throughout the quarter with no significant tail-off, and the Q2 pipeline remains robust. Growth is driven by both the significant contributions from new, experienced hires and very strong performance from the core, existing business lines.

Inquired about the details of two ABL credits that drove an increase in non-performing loans (NPLs) and the potential for further credit migration. Also asked for an update on the solar panel lending business regarding policy, growth, and credit risk.

Answer

The increase in non-performing assets was attributed to two specific ABL credits undergoing workout plans, which can ultimately reduce losses. The bank is not concerned about a broader trend and has visibility on resolving a significant portion of NPAs. For the solar portfolio, policy risk affects future originations, not existing loans. Credit performance is improving, with a decrease in NPAs, and production remains stable.

Inquired whether future credit risk from loan repricings is fully accounted for, the sensitivity of this analysis to interest rate changes, and how investors can measure the impact of new senior hires on future performance.

Answer

The recent decrease in rates is favorable to the credit profile, but the company remains cautious. Provisioning for '25-'26 is in line with expectations, reflecting loans expected to reprice through mid-2026. Performance progress can be measured by the rebalancing of the balance sheet, with a goal to reduce CRE to the low $30B range and grow C&I to $30B by 2027, driven by the new hires.

Inquired about asset quality in the office and multifamily portfolios, and the expense outlook regarding cost savings from acquisitions and ongoing investments.

Answer

CEO Thomas Cangemi expressed confidence in the multifamily portfolio's health and noted the office NPL was a specific case. On expenses, the bank is investing for growth but expects savings from system integrations in 2024. The 2023 expense guide remains the same.

Ebrahim Poonawala from Bank of America questioned the durability of the 30-35% deposit beta forecast, especially in a scenario without Fed rate cuts. He sought clarity on the quarterly NIM trajectory for 2023 and asked about the current environment for gaining market share in lending, particularly given wealth disruption's impact on home buying. He also probed whether the bank has gained pricing power on new loans.

Answer

CEO and President Michael Roffler expressed confidence in the deposit beta forecast, noting that while it could be slightly higher if rates hold, the slowing pace of hikes mitigates the pressure. He clarified the NIM would stabilize mid-year, not fall to 2%, before inflecting higher. Founder and Executive Chairman Jim Herbert described the disruptive mortgage market as an "extraordinary opportunity" to gain market share, emphasizing it's a service and availability play, not a pricing one. Chief Banking Officer Mike Selfridge added that clients receive good pricing for full relationships.

Ebrahim Poonawala questioned the risk of net interest margin compression in 2023 due to rising funding costs and asked if new relationship deposits are priced differently. He also inquired if the current macro environment creates better market share opportunities.

Answer

CEO Mike Roffler stated that new deposit pricing is not materially different from the existing portfolio and highlighted the large base of noninterest-bearing deposits as a buffer. He reiterated the focus on stable, long-term growth in net interest income, not margin expansion. Founder and Executive Chairman James Herbert confirmed that a cooling environment generally creates opportunities as competitors pull back, but noted First Republic's small market share makes gaining share consistently achievable.