Erika Najarian

Erika Najarian from UBS revisited the net new cards acquired number, acknowledging the focus on revenue generation, and asked if the remix strategy towards fee-paying cards would impact the trajectory of Net Card Fees and contribute to the company's long-term revenue growth aspirations.

Answer

CFO Christophe Le Caillec confirmed that the portfolio is becoming more premium, with the Platinum portfolio growing rapidly and driving sustained card fee growth, which reached a record $10 billion. He expects card fee growth to accelerate in 2026 as more Platinum card members renew at the new price point. He also cited the incredible credit performance, with stable delinquency and write-off rates below 2019 levels, as further evidence of a more premium portfolio.

Erika Najarian revisited the topic of net new cards acquired, asking how the remix strategy towards fee-paying cards will impact the trajectory of Net Card Fees and contribute to achieving American Express's long-term revenue growth aspirations.

Answer

Christophe Le Caillec, CFO, confirmed that the portfolio is becoming more premium, with Platinum growing rapidly and driving faster spend. He noted that Net Card Fees reached a record $10 billion and are expected to accelerate in 2026 as Platinum card members renew at the new price point. He also cited strong credit performance, with stable delinquency and write-off rates below 2019 levels, as further evidence of the portfolio's premium shift.

Erika Najarian followed up on the pacing of card fee increases, asking for a similar walk-through on the step-up and related expenses for the Platinum Card refresh, specifically if expenses would be heaviest over the next three to four quarters and then subside.

Answer

CFO Christophe Le Caillec explained that predicting expenses for 2027 is difficult, but clarified that benefits are available to all card members (front book, back book) from day one, leading to immediate and sustained engagement. He noted that many benefits are quarterly and expensed as earned, making the expense trend more linear and potentially modest trend up by design, unlike the lagged and amortized card fees.

Erika Najarian of UBS Group raised a potential 'bear case,' asking how American Express can sustain its 8-10% revenue growth target given some spending slowdowns and what she described as fiercer competition for its core client base.

Answer

Chairman and CEO Stephen Squeri countered that the competitive intensity is not new and that the company's consistent performance is driven by a deep focus on customer needs, superior service, and continuous innovation across its global product portfolio. He emphasized that Amex is a much larger company now than when the targets were set and will continue to invest to deliver on its commitments and provide shareholder returns.

Erika Najarian (identified as L. Erika Penala) inquired about the drivers of 2025 billings strength, asking for the expected split between new card growth and higher spend per account, given the planned modest increase in marketing.

Answer

CFO Christophe Le Caillec (identified as Robert Napoli) explained that quarterly new card acquisition (NCA) can be lumpy and isn't always aligned with marketing spend in the same period. He stated that billings growth comes from new customers, organic growth from tenured members, and attrition. He noted attrition is stable and low, making organic growth the most significant variable, which was stronger in Q4. He estimated new customers contribute about 7% to billings growth.

Erika Najarian from UBS sought clarification on Synchrony Financial's 2026 EPS guidance, specifically whether it assumes a decrease in the Allowance for Loan and Lease Losses (ALLL) ratio due to qualitative reserve reductions, offsetting higher reserves from Walmart growth. She also asked for Synchrony's perspective on how elevated tax refunds might impact payment rates, considering different consumer behaviors (spending vs. debt paydown).

Answer

CFO Brian Wenzel clarified that specific ALLL guidance within the EPS range was not provided, only a general trajectory, and the outlook assumes a stable environment without improvement. CEO Brian Doubles discussed the anticipated large tax refund season, noting that higher-income consumers might save or pay down debt, while moderate-income consumers might spend. He concluded that both scenarios (increased spending or debt paydown) would be positive outcomes for Synchrony Financial.

Erika Najarian sought clarification on whether Synchrony's 2026 EPS guidance (9.10-9.50) assumes the ALLL ratio will decrease due to qualitative reserves offsetting higher reserves from Walmart growth. She also asked about the potential impact of tax refunds, specifically whether Synchrony views them more as a tailwind for purchase volume or for better credit, and how different scenarios might affect the payment rate.

Answer

CFO Brian Wenzel clarified that he was discussing the trajectory of the reserve rate over time, not specific guidance for the ALLL ratio within the EPS range, noting the outlook's assumptions for the environment are stable. CEO Brian Doubles noted that the upcoming tax refund season is expected to be one of the largest, with a significant influx of cash, suggesting higher-income recipients might save or pay down debt, while moderate-income consumers might spend. CFO Brian Wenzel added that both outcomes (increased spend or debt paydown) are positive for Synchrony.

Erika Najarian sought clarification on the future cadence of loan growth, asking if the company is now past the impact of its previous credit tightening actions, and also asked about the permanence of recent APR increases.

Answer

EVP and CFO Brian Wenzel confirmed that as of H2 2025, Synchrony has lapped its prior credit tightening actions, and any future loosening would provide a tailwind for 2026 growth, complemented by the Walmart launch. Regarding the pricing changes (PPPCs), Wenzel explained their impact builds over time, with about 50% of balances affected by Q2 and rising to ~75% next year, which will continue to lift the loan portfolio's yield.

Erika Najarian posed a multi-part question on the growth trajectory, asking for an unpacking of spending behavior in Synchrony's specific consumer cohort and questioning whether the high APRs from the PPPCs could disincentivize growth, even if they are accretive to returns.

Answer

President and CEO Brian Doubles noted that consumers are being disciplined, with a pullback seen in lower-income cohorts, and that the company is willing to sacrifice some short-term growth for better credit outcomes. EVP and CFO Brian Wenzel provided key data, stating that test-versus-control groups for the PPPCs show no significant difference in purchase volume or attrition. He argued the product's overall value proposition, including discounts, supports the pricing structure, suggesting the growth slowdown is not driven by the PPPCs.

Erika Najarian from UBS asked about the drivers behind the strong loan growth guidance, the current stage of balance sheet optimization, and how the bank plans to balance optimizing Commercial Real Estate (CRE) exposures with potential refinancing opportunities as interest rates decline.

Answer

Chairman and CEO Bruce Van Saun highlighted idiosyncratic growth from the Private Bank, focus on middle market and expansion in the Commercial Bank, and strong consumer products like HELOC and mortgage. Don McCree, Chair of Commercial Banking, noted positive client sentiment, growth in expansion markets, new money demand, and a resurgence in the sponsor business. President Brendan Coughlin added that reduced non-core headwinds, accelerating Private Bank growth, and market-leading HELOC performance are key contributors, emphasizing a shift towards high-quality, relationship-based lending.

Erika Najarian asked for details on the loan growth guide, noting it appeared strong relative to peers. She inquired about the bank's progress in balance sheet optimization and the dynamics between optimizing commercial real estate (CRE) exposures and potential refinancing opportunities as interest rates decline.

Answer

Bruce Van Saun, Chairman and CEO, highlighted idiosyncratic growth drivers like the Private Bank, middle market expansion, and strong HELOC and mortgage performance. Don McCree, Chair of Commercial Banking, noted positive client sentiment, growth in expansion markets, new money demand, and increased sponsor business. Brendan Coughlin, President, added that the headwind from non-core asset rundown is significantly reducing, and Private Bank loan growth is accelerating, particularly in residential lending and granular multifamily CRE. He also emphasized the quality story of balance sheet remixing towards deep relationship-based customer lending.

Erika Najarian from UBS asked about the strategy for the liability side of the balance sheet for the second half of the year, specifically how the bank will balance funding loan growth against optimizing its deposit mix. She also sought commentary on capital requirements for regional banks in light of potential changes to Basel III Endgame and evolving views from ratings agencies.

Answer

CFO John Woods stated that the bank expects a stable to improving deposit mix, driven by strong low-cost deposit growth from the private bank and core retail franchise, which will support loan growth. Head of Consumer Banking Brendan Coughlin added that retail deposits are outperforming peers, allowing for the release of higher-cost funds. On capital, Chairman & CEO Bruce Van Saun noted that while regulatory requirements for larger banks may be easing, rating agencies still want to see sustained profitability and resolution of CRE concerns among regionals. He affirmed CFG will continue to run with a conservative capital position, viewing a fortress balance sheet as a strategic advantage.

Erika Najarian sought confirmation on the full-year Net Interest Income (NII) growth outlook of 3% to 5%. She also asked for the unemployment rate assumption embedded in the credit reserve and the offsetting dynamics from the noncore portfolio runoff.

Answer

CFO John Woods confirmed the 3% to 5% NII growth outlook remains appropriate, supported by strong NIM trends. Regarding reserves, he explained that while the baseline scenario uses a 5.1% unemployment rate, more severe assumptions are applied to portfolios like CRE, resulting in a higher weighted-average assumption that already bakes in a mild recession. CEO Bruce Van Saun and Head of Consumer Banking Brendan Coughlin added that the runoff of noncore assets is being replaced by extremely high-quality, zero-delinquency loans from the growing Private Bank, improving the overall portfolio mix.

Erika Najarian asked for an update on the notional value of receive-fixed swaps, the accounting for their recent termination, and the number of rate cuts assumed in the 4Q '25 NIM target of 3%. She also followed up on the assumed deposit beta for Q4.

Answer

CFO John Woods confirmed the opportunistic termination of $4 billion in short-dated swaps in Q3 to lock in benefits amid aggressive market expectations for rate cuts. He explained the accounting involves amortizing the impact over the swaps' remaining life through May 2025. Woods stated the 3% NIM target for late 2025 is achievable across various rate environments due to the existing swap portfolio's protection. He specified that the Q4 outlook assumes a deposit beta of approximately 40%.

Erika Najarian asked Anil Chadha, the newly appointed CFO, to outline his top three priorities as he steps into the role.

Answer

CFO Anil Chadha stated his top priorities are to continue executing the approved strategic plan, maintain the company's strong performance, and build upon the phenomenal finance team and business partnerships established by his predecessor, David Turner.

Erika Najarian from UBS asked for the baseline and weighted average unemployment rate assumptions used for the credit loss reserve. She also inquired about the expected trajectory of the allowance for credit losses (ACL) given identified problem credits and macroeconomic uncertainty.

Answer

Executive David Turner stated the weighted average unemployment rate embedded in the allowance is in the high 4% range. He explained that as charge-offs from identified problem assets are realized, the ACL ratio of 1.81% should directionally trend down toward the Day 1 CECL level of 1.62% over time, assuming no further economic deterioration.

Erika Najarian asked about the necessary conditions for noninterest-bearing deposit (DDA) growth to resume. She also inquired about the bank's priorities for fee income investments in 2025 and over the medium term.

Answer

Executive David Turner asserted that DDA growth is driven by execution—'boots on the ground'—in acquiring new customer operating accounts, rather than the rate environment. For fee income investments, he mentioned a continuous search for needed products and services, citing past acquisitions. While interested in areas like fixed income platforms or RIAs, he noted that current valuations are too high for potential deals.

Erika Najarian asked for details on the cadence of deposit repricing over the next several quarters and the expected deposit spread at a neutral Fed funds rate. She also asked if expense growth should be calibrated relative to revenue to ensure positive operating leverage.

Answer

CFO David Turner stated that at a 3% Fed funds rate, total deposit costs would be in the 1% range. CEO John Turner confirmed a commitment to positive operating leverage in 2025, explaining that the level of investment is directly calibrated to revenue generation to create shareholder value.

Erika Najarian from UBS questioned PNC's strategic positioning as a 'national bank' versus regional banks, particularly regarding opportunities in direct lending and the impact of potential Fed cuts and changes in leveraged lending limits. She also asked about PNC's capital markets advisory skew and long-term ROTCE expectations.

Answer

Bill Demchak, Chairman and CEO, clarified that PNC is a national bank with a ubiquitous presence and a strategic direction to compete nationally, contrasting it with regional banks defending shrinking markets. He noted that changes in leveraged lending guidance allow for making 'smart loans' in specialized businesses, not necessarily riskier ones. He stated that PNC's capital markets mix is more heavily weighted to advisory than larger banks, with Harris Williams showing strong backlog. Regarding ROTCE, he elaborated that while the mechanical outcome could see it cross 20% in the future, variables like credit normalization prevent setting a fixed target, emphasizing current operations are in a 'great space.' Rob Reilly, Executive Vice President and CFO, added that capital markets are expected to be up high single digits in 2026.

Erika Najarian questioned the opportunities for PNC, which she termed a 'national bank,' in direct lending, considering potential Fed cuts and changes to leveraged lending limits. She also asked about capital markets advisory opportunities and PNC's long-term ROTCE outlook.

Answer

Bill Demchak, Chairman and CEO, clarified that PNC is a national bank, not a regional bank. He explained that revised leveraged lending guidance allows for 'smart loans,' particularly in specialized, secured businesses, without increasing overall risk appetite. He noted strong capital markets activity, especially in advisory, with Harris Williams' backlog at an all-time high. Regarding ROTCE, Bill Demchak reiterated that while not a target, the mechanical outcome suggests it could cross 20% in the not-too-distant future, but this is subject to credit normalization and other variables.

Erika Najarian sought confirmation on PNC's Net Interest Income (NII) growth expectations, specifically 6.5% for 2025 and 'comfortably better' for 2026 (excluding FirstBank), clarifying that any perceived slowdown is a timing difference due to rate cuts. She also asked what specific questions investors should pose to banks to assess Non-Bank Financial Institutions (NDFI) risk effectively.

Answer

EVP and CFO Rob Reilly confirmed the NII growth expectations, stating 'comfortably, yes' for 2026. Chairman and CEO Will Demchak reiterated that the NII trajectory is unchanged, with any Q4 NII guide adjustment being a timing shift of Fed cuts, and noted that the commercial deposit growth, while impacting NIM, is NII accretive. On NDFI risk, Mr. Demchak advised investors to look beyond the broad category, highlighting PNC's largest holdings in low-risk securitizations to investment-grade corporates and capital commitment lines, which have historically seen no losses.

Erika Najarian sought confirmation on PNC's Net Interest Income (NII) growth expectations for 2025 (6.5%) and 2026 (comfortably above $1 billion growth, excluding FirstBank). She also asked what specific questions investors should ask to accurately assess Non-Bank Financial Institutions (NDFI) risk on bank balance sheets, given recent headlines.

Answer

Rob Reilly, Executive Vice President and CFO, and Bill Demchak, Chairman and CEO, comfortably confirmed the NII growth expectations, clarifying that any Q4 NII guide shift was a timing difference due to later Fed rate cuts, not a change in the overall NII trajectory. Bill Demchak advised investors to scrutinize NDFI categories, explaining that PNC's largest holdings are low-risk securitizations for investment-grade corporates and capital commitment lines with a pristine loss history, distinguishing them from other potentially riskier NDFI types.

Erika Najarian asked CEO Bill Demchak about his planned tenure at PNC in light of the new President's hiring. She also asked for the specific unemployment rate assumption underlying the current credit reserve.

Answer

CEO Bill Demchak, aged 62, stated he is 'going to be around for a while.' CFO Rob Reilly clarified that the economic scenario used for reserves assumes a 5% unemployment rate, but noted that PNC holds additional qualitative reserves for factors like potential tariffs on top of the modeled output.

Erika Najarian of UBS sought clarification on whether PNC could reach a 3% net interest margin (NIM) as a year-end exit rate and questioned the sensitivity of the NII outlook to the number of Fed rate cuts. She also asked how the current rate environment impacts demand for lines of credit versus capital markets financing.

Answer

CFO Rob Reilly confirmed that approaching a 3% NIM by year-end 2025 is the expectation and noted the NII outlook is not sensitive to one or two rate cuts due to the bank's neutral rate positioning. CEO Bill Demchak added that loan demand is driven by the total cost of capital and economic visibility, not the shape of the yield curve.

Erika Najarian asked M&T Bank to frame its long-term investment case, specifically whether optimizing Return on Tangible Common Equity (ROTCE) or optimizing growth is more important to management and the board over the next three years. She also inquired about the net interest income (NII) guide, the relative importance of the shape of the curve versus growth trends, and the embedded earning asset growth.

Answer

Daryl Bible (VP, Senior Executive and CFO, M&T Bank Corporation) stated that M&T Bank aims for a combination of both ROTCE optimization and growth, emphasizing disciplined returns on capital deployed to customers and significant capital distribution to shareholders. He noted that the shape of the curve impacts NII, but M&T is relatively neutral on the short end due to hedging. Mr. Bible indicated that earning assets are projected to grow about 3% on a point-to-point basis.

Erika Najarian asked about M&T Bank's longer-term investment case, specifically whether optimizing ROTCE or growth is more important to management and the board over the next three years, and for details on the net interest income (NII) guide, including the importance of the curve shape versus growth trends and the embedded earning asset growth.

Answer

Daryl Bible, Senior Executive Vice President and CFO, M&T Bank Corporation, stated that the bank's strategy is a combination of optimizing both ROTCE and growth. He highlighted disciplined returns on capital deployment and significant capital distribution, including retiring 9% of shares in 2025. Regarding NII, Bible noted that the shape of the curve impacts NII (flatter curve means less NII), and while it's hard to hedge, the bank is relatively neutral on the short end. He emphasized that growth will be a key value-add, with earning assets expected to grow about 3% point-to-point.

Erika Najarian followed up on the CRE loan book, asking when period-end balances might consistently tick upward, and sought clarification on M&T Bank's NDFI exposure, the drivers of C&I growth, and how investors should assess credit risk from NDFI and SSFA.

Answer

Daryl Bible, SEVP and CFO, projected the CRE loan book to bottom in Q1 2026, or potentially sooner, citing reduced maturities in 2026 and growing production. He explained M&T's NDFI exposure is low (7-8% of total loans), focusing on conservative areas like fund banking, industrial CRE (REITs), and residential mortgage warehouse. Mr. Bible highlighted M&T's cautious approach to SSFA due to its pro-cyclical nature and potential capital consumption during stress.

Erika Najarian of UBS asked how much influence rating agencies and regulators have on M&T's capital targets compared to larger banks. She also questioned how core deposit competition is faring and how it might evolve in scenarios of Fed rate cuts versus a prolonged hold.

Answer

CFO Daryl Bible acknowledged that rating agencies and regulators are key constituencies influencing capital targets. He emphasized M&T's de-risking journey, evidenced by the improved SCB, as a key factor. On deposits, he stressed the bank's core strategy is winning the primary operating account, which is tracked closely and remains the foundation of its valuable deposit franchise, allowing it to then offer other products at competitive rates.

Erika Najarian asked about the key influences on M&T's ~11% CET1 operating target, specifically the roles of rating agencies versus regulators. She also inquired about the state of core deposit competition under different potential Fed rate scenarios.

Answer

CFO Daryl Bible acknowledged that rating agencies and regulators are factors in setting capital targets, but emphasized that the primary driver is the bank's internal journey to de-risk the balance sheet, evidenced by its improved Stress Capital Buffer. Regarding deposits, he stated M&T's core strategy remains consistent regardless of the rate environment: focus on winning primary operating accounts first and then competing for share of wallet with fair, reasonable rates.

Erika Najarian followed up on the NII trajectory, the unemployment assumption in the CECL model, and any changes in the stress test process, including how a lower stress capital buffer (SCB) might impact capital allocation.

Answer

Daryl Bible (executive) acknowledged a likely upward NII trend but avoided confirming a specific exit NIM, citing market variables. He stated the CECL model's unemployment assumption now averages around 5%. He noted the stress test process feels normal so far and that a lower SCB is unlikely to immediately alter capital plans given current uncertainty.

Erika Najarian asked about the current 'inning' of the capital market cycle and how the preconditions for 2026 compare to 2021, particularly regarding the firm's EPS potential. She also asked about the role of buybacks in Goldman Sachs' capital deployment strategy, given its excess capital and strong organic capital generation.

Answer

Chairman and CEO David Solomon stated that 2021 is not the ceiling for the business long-term and expects 2026 to be incredibly constructive for M&A and capital markets, with a likely very good year, barring exogenous events. He believes they are not yet in the middle of a full M&A and sponsor cycle. CFO Denis Coleman added that while some investment banking activities are trending up, the IPO business remains below average, indicating further upside. Mr. Coleman reiterated the unchanged prioritization of capital deployment, confirming that buybacks remain an important tool given excess capital and expected generation, contributing to EPS growth while being mindful of the stock price.

Erika Najarian asked for an assessment of the current capital market cycle, comparing the preconditions for 2026 with 2021 to gauge potential EPS upside, and inquired about the firm's strategy for buybacks given its significant excess capital.

Answer

Chairman and CEO David Solomon believes 2021 is not the ceiling for capital markets activity and expects 2026 to be a very constructive year for M&A and capital markets, driven by strategic repositioning, AI growth, and sponsor activity. CFO Denis Coleman added that IPOs and large-cap committed deals are still below average, indicating further upside. Solomon and Coleman affirmed that buybacks remain an important tool for capital deployment, mindful of stock price but with a strategic long-term approach to reduce share count and support EPS growth.

Erika Najarian asked what Goldman Sachs needs to see from a regulatory perspective to become comfortable operating with a smaller capital buffer, closer to its 50-100 basis point target.

Answer

CFO Denis Coleman emphasized the need for more transparency from regulators on stress test models. Chairman & CEO David Solomon elaborated that more clarity is required on three key regulatory areas: the enhanced SLR, G-SIB calibration, and the overall stress testing process. He expressed an expectation that more clarity on these fronts will emerge in the coming 6 to 12 months, which would allow the firm to manage its buffer more precisely.

Erika Najarian asked how Goldman Sachs would allocate capital if regulatory changes redefine 'excess capital' for the industry, and how U.S. policy volatility is impacting the firm's internationally sourced revenues.

Answer

CEO David Solomon outlined the capital waterfall: client support, alternatives platform growth, and shareholder returns. He stated that while international clients dislike uncertainty, he sees no decline in client interest in dealing with Goldman Sachs globally and believes it's too early to determine any marginal effect.

Erica Najarian asked where Morgan Stanley is investing its 320 basis points of excess capital to build competitive moats and if there are still structural opportunities to improve Wealth Management pre-tax margins beyond market factors.

Answer

Sharon (CFO, Morgan Stanley) confirmed structural opportunities for margin expansion across all businesses, detailing capital investments in Investment Banking (talent, resources), lending businesses (loans, fixed secured lending), and equities. Ted Pick, Chairman and CEO, added investments in digital asset transformation (Zero Hash), E*TRADE platform enhancement, and Investment Management (Parametric, alternatives), emphasizing building new adjacencies.

Erica Najarian asked where Morgan Stanley is investing its excess capital to build competitive moats and if there are structural opportunities to further improve wealth management pre-tax margins, independent of market conditions.

Answer

Sharon (CFO) confirmed structural opportunities for margin expansion across all businesses. She detailed investments in investment banking talent and capital (advisory, ECM, DCM), fixed secured lending, and wealth management products like SBLs and mortgages. Chairman and CEO Ted Pick added digital asset transformation (Zero Hash), enhancements to E*TRADE, and continued investment in Parametric and alternatives as key areas for building moats.

Erica Najarian asked about the sustainability of investment banking strengths, specifically the preconditions needed for the realization pipeline from sponsors to extend into 2026 activity.

Answer

CFO Sharon Yeshaya confirmed that the realization is already occurring, driven by the capital markets flywheel and IPOs providing exit lanes for sponsors. Chairman and CEO Ted Pick added that a rebalancing regulatory framework and a pro-business environment are making public markets more attractive, fostering large-cap M&A and IPOs, which were previously constrained by companies staying private longer.

Erika Najarian of UBS Group asked about the priority of growing the deposit base as part of an inorganic strategy, noting that Morgan Stanley utilizes its bank subsidiary less than some peers.

Answer

EVP & CFO Sharon Yeshaya confirmed that growing the bank and diversifying its deposit base is a key strategic priority to support future growth of eligible assets on the balance sheet. Chairman & CEO Ted Pick added that the firm's primary focus remains on the vast organic runway in its core businesses, and while inorganic options are considered, the best use of capital is likely continued internal investment.

Erika Najarian asked about the appropriate efficiency ratio underlying the 15% ROTCE target, how Truist balances efficiency optimization with growth investments, and the expected trajectory of net interest margin in 2026 relative to anticipated rate cuts.

Answer

CEO Bill Rogers stated that while there will be marginal efficiency ratio improvement, it won't be the primary driver of ROTCE, as Truist prioritizes growth investments. CFO Mike Maguire expects continued NIM progress in Q4 2025 and into 2026, aiming for the three-teens range in 2027, driven by fixed-rate asset repricing, loan and deposit growth, and business expansion.

Erika Najarian asked for a more detailed outlook on the net interest margin (NIM) trajectory into 2025, including day-count impacts, specifics on the interest rate swap book, and the rationale for a mid-teens ROTCE target when peers are aiming higher.

Answer

CFO Mike Maguire projected that NIM should stabilize in Q1 2025 and then expand, though NII dollars will face pressure from a lower day count. CEO Bill Rogers addressed the ROTCE target, explaining that Truist's capital position post-TIH sale provides a unique and powerful ability to grow its return profile faster than peers as that capital is strategically deployed.

Erika Najarian of UBS sought clarification on the '2 to 3 basis points of embedded lift' for fixed asset repricing, asking if it's a per-quarter statement and its tether to the curve. She also asked how U.S. Bancorp is balancing embedded momentum with pressure on larger management teams regarding scale and inorganic growth, specifically clarifying the bank's focus on organic versus inorganic growth.

Answer

John Stern, Vice Chair and CFO, clarified that the 2-3 basis points refer to a quarterly improvement from mix and fixed asset repricing, and it's more tethered to the belly of the curve, with the five-year Treasury being a good proxy. Gunjan Kedia, CEO, explained that the bank's strategy involves one priority fueling the other: expense discipline (mid to high 50s efficiency ratio) released investment for organic growth, which is now showing up in fee businesses, NII growth from an attractive asset side (C&I, credit loans), and consumer deposits. She emphasized that the focus is 'very much on organic growth,' with significant runway and opportunity.

Erika Najarian of UBS sought clarification on the '2 to 3 basis points of embedded lift' for fixed asset repricing, asking if it's a per-quarter statement and its tether to the curve. She also asked how U.S. Bancorp is balancing embedded momentum with pressure on larger management teams regarding scale and inorganic growth, specifically clarifying the bank's focus on organic versus inorganic growth.

Answer

John Stern, Vice Chair and CFO, clarified that the 2-3 basis points refer to a quarterly improvement from mix and fixed asset repricing, and it's more tethered to the belly of the curve, with the five-year Treasury being a good proxy. Gunjan Kedia, CEO, explained that the bank's strategy involves one priority fueling the other: expense discipline (mid to high 50s efficiency ratio) released investment for organic growth, which is now showing up in fee businesses, NII growth from an attractive asset side (C&I, credit loans), and consumer deposits. She emphasized that the focus is 'very much on organic growth,' with significant runway and opportunity.

Erika Najarian (UBS) asked for clarification on John Stern's comment about fixed asset repricing providing 2-3 basis points of embedded lift, specifically whether this is a per-quarter statement and if it's tethered to the belly of the curve or the 10-year range. She also asked Gunjan Kedia about balancing the bank's embedded organic growth momentum with external pressures regarding scale and the inorganic growth window, and whether the focus remains inward on organic growth.

Answer

John Stern, Vice Chair and CFO, clarified that the 2-3 basis points of embedded lift refers to a quarterly improvement from both mix and fixed asset repricing, and it is more tethered to the belly of the curve, with the five-year treasury being a good proxy. Gunjan Kedia, CEO, explained that the bank's strategy involves expenses fueling organic growth, with the ultimate goal of EPS growth and high returns. She noted that the efficiency ratio has improved, releasing investment for organic growth, which is now showing up in fee businesses and an attractive asset side. Kedia affirmed that the bank's focus is "very much on organic growth."

Erika Najarian asked for the LCR ratio and questioned the reason for what she perceived as outsized commercial deposit pricing pressure. She also asked if the focus on expense management was a short-term necessity or a long-term strategy, and if the market was underappreciating the company's modernization efforts.

Answer

Vice Chair & CFO John Stern confirmed the bank has a healthy LCR and no liquidity concerns, stating deposit actions were strategic. President & CEO Gunjan Kedia clarified that the intense focus on expenses is a short-term priority to fuel investment and rebuild operating leverage post-acquisition. She stressed that the company has significant organic growth opportunities and that productivity from past tech investments is now being 'harvested' to support future growth, suggesting the franchise's trajectory is very strong.

Erika Najarian questioned the factors influencing the pacing of share buybacks, noting the modest start. She also asked if the guidance for 200+ basis points of positive operating leverage is a firm baseline that can be delivered regardless of the revenue environment, given the company's expense flexibility.

Answer

CFO John Stern explained that the pace of buybacks is a balance between accreting capital towards the future Category II requirement of ~10% and deploying capital if loan growth remains soft. CEO Andy Cecere confirmed that the 200+ basis points of positive operating leverage is a baseline commitment. John Stern then elaborated on the company's expense levers, including real estate optimization, procurement savings, organizational simplification, and automation, which provide confidence in hitting that target.

Erika Najarian questioned the sustainability and potential for upward movement of the 15.4% ROTCE, and the strategy for managing the efficiency ratio and expense growth.

Answer

CFO Alastair Borthwick stated that the company expects ROTCE to continue to increase, driven by NII growth, organic growth, fixed-rate asset repricing, and fee growth. Chair and CEO Brian Moynihan explained that expenses are managed by controlling headcount and leveraging technology like AI to do more with fewer people, aiming to grow revenue faster than expenses. He noted that the overall efficiency ratio is influenced by business mix, with wealth management at 74%, consumer at 50%, and banking below 50%.

Erika Najarian asked about the sustainability of Bank of America's 15.4% ROTCE and potential for further improvement towards peer targets, also inquiring about the future strategy for expense growth and efficiency ratio improvement.

Answer

Alastair Borthwick (CFO, Bank of America) stated expectations to continue increasing ROTCE, driven by NII growth, organic platform growth, fixed-rate asset repricing, and fee growth, with more details at Investor Day. Brian Moynihan (Chair and CEO, Bank of America) explained that expenses are managed by headcount and productivity, with technology (including AI) enabling more work with fewer people, aiming for revenue to grow faster than expenses to create operating leverage and improve the efficiency ratio.

Erika Najarian of UBS Group inquired about the appropriate capital buffer in light of potential deregulation, which businesses are being prioritized for capital, and whether the Q2 share buyback level is indicative of future appetite.

Answer

CEO Brian Moynihan stated the target capital buffer is around 50 basis points above the minimum and that the bank will work to deploy excess capital, though G-SIB calibration remains a critical factor. He confirmed the Q2 buyback level reflects their strong appetite and noted that while all businesses can grow, a discrete decision was made to allocate more capital to the Global Markets business to support its expansion.

Erika Najarian sought confirmation of the 4Q 2025 exit net interest margin (NIM) of 2.1% and asked about the path to the previously mentioned normalized NIM of 2.3%, particularly in a higher interest rate environment.

Answer

CEO Brian Moynihan confirmed the 2.1% exit rate comment. CFO Alastair Borthwick added that deposit pricing is disciplined, with the rotation from noninterest-bearing to interest-bearing accounts slowing significantly. Moynihan stated that a higher-for-longer Fed funds rate would accelerate the path to the normalized 2.3% NIM, driven by the bank's large, low-cost deposit base.

Erika Najarian asked about the sensitivity of floating-rate loans to rate changes on the way down versus up, considering hedges. She also inquired about deposit beta assumptions on the way down and the bank's natural deposit cost in a normalized rate environment.

Answer

CFO Alastair Borthwick said it is fair to assume similar rate sensitivity on the way down, but noted cushions from asset repricing and cash flow swaps that will benefit commercial yields in late 2025. CEO Brian Moynihan added that the current spread between Fed Funds and their interest-bearing deposit cost is ~100 bps wider than in the 2019 cycle, indicating fundamentally higher earnings power in a normalized rate environment.

Erika Najarian sought clarification on the technical nuances of the Banamex transaction, specifically the capital impact of the CTA at de-consolidation and the ultimate capital benefit from RWA reduction. She also asked about longer-term ROTC and capital targets, including the 100 bps management buffer.

Answer

CFO Mark Mason clarified that the CTA impact is capital neutral at de-consolidation, while the full exit's capital impact will be driven by RWA reduction (approximately $37 billion for Banamex) and cumulative gains/losses on sale. CEO Jane Fraser stated that the 10-11% ROTC is a waypoint, with longer-term targets to be shared at the May Investor Day. She expects more regulatory clarity by Q1, which will inform future capital discussions. Mark Mason added that the management buffer is continuously reviewed, with potential for reduction.

Erika Najarian sought clarification on the capital impact of the Banamex divestiture, including the capital neutrality of the CTA at de-consolidation, the capital release from RWA reduction, and the allocated TCE to Banamex. She also asked if the May Investor Day would address end-state capital targets and the appropriateness of the 100 basis point management buffer.

Answer

CFO Mark Mason clarified that the CTA is capital neutral at de-consolidation, and the full exit capital impact will be driven by RWA release (approximately $37 billion) and cumulative gains/losses on sale. CEO Jane Fraser stated the 10-11% ROTCE is a waypoint, with longer-term targets to be shared at the May Investor Day. She anticipates more regulatory clarity by Q1 2026. Mark Mason added that the management buffer is continuously reviewed, seeking opportunities for reduction.

Erika Najarian of UBS Group asked about Citigroup's capital management strategy, questioning the 13.1% year-end CET1 target and the timing for reassessing the 100 basis point management buffer. She also inquired about the potential for expense reductions following the eventual lifting of the 2020 OCC consent order.

Answer

CFO Mark Mason stated that the year-end CET1 target depends on final clarity regarding the SCB framework, but the firm is pulling forward buybacks while uncertainty remains. He noted the management buffer is reviewed regularly based on RWA volatility and regulatory tone. Regarding the consent order, Mason and CEO Jane Fraser clarified that expenses will start decreasing as transformation work is completed and validated, which occurs before the orders are formally lifted, with a notable decline expected in 2026.

Erika Najarian from UBS inquired about the appropriateness of the 13.1% year-end capital target and the timing for re-evaluating the 100 basis point management buffer. She also asked about the potential for expense reductions upon the lifting of the 2020 OCC consent order.

Answer

CFO Mark Mason stated that the year-end capital target's relevance depends on final SCB rules, but the firm is pulling buybacks forward to return capital efficiently. He noted the management buffer is reviewed regularly based on volatility and regulatory tone. Both Mason and CEO Jane Fraser clarified that transformation-related expenses are expected to decline starting in 2026 as work is completed, a process that occurs before the consent orders are formally lifted.

Erika Najarian followed up on buybacks, questioning the cautious pace given the stock's discount to tangible book and asking about any restrictions on moving capital from the bank subsidiary to the holding company. She also asked about global rate assumptions in the NII outlook.

Answer

CFO Mark Mason confirmed an acceleration in buybacks from $1.5B to $1.75B and a focus on opportunities to do more, but noted volatility in the SCB result warrants some caution. He stated there are no restrictions on the buyback program and multiple sources of funding for it. For global rates, he pointed to the firm's IRE analysis, which suggests a 100 bps move in non-U.S. dollar rates would have a $1 billion impact over 12 months, though he cautioned this is a static risk measure.

Erika Najarian pressed for specific milestones Citigroup needs to see to accelerate its share buyback pace from the initial $1.5 billion per quarter. She also asked for context on the revised 2026 targets, suggesting it may simply take longer to achieve goals sustainably, and inquired about the expected impact of the Banamex IPO.

Answer

CFO Mark Mason clarified that the buyback pace is not constrained by consent orders but is managed toward their 13.1% CET1 target, with the upcoming CCAR stress test being an important factor for the second half of the year. CEO Jane Fraser confirmed the 2026 target is a 'waypoint' on a longer journey to improve returns sustainably. Regarding Banamex, she noted the IPO timing depends on market conditions and regulatory approvals and could extend into 2026.

Erika Najarian requested a progress update on the Banamex separation and IPO timeline, and asked about interest rate sensitivity, the impact of late fee rules, and core non-capital markets fee drivers.

Answer

CEO Jane Fraser stated the Banamex separation is expected to complete in Q4, with a plan to be IPO-ready by the end of 2025, contingent on market conditions. CFO Mark Mason clarified that the firm's interest rate sensitivity skews non-U.S. and highlighted strong, broad-based fee momentum in Services, Banking, and Wealth as key growth drivers.

Erika Najarian questioned the opportunity in Wells Fargo's third-party spend to fund future revenue-related compensation or initiatives, and the potential for Wealth & Investment Management (WIM) to improve its sub-20% pretax margin through revenue or expense actions. She also asked what questions investors should pose regarding Non-Bank Financial Institution (NBFI) exposure and risk, and concerns about the Simplified Supervisory Formula Approach (SSFA) in relation to low Risk-Weighted Assets (RWA) for structured NBFI products.

Answer

CFO Mike Santomassimo confirmed opportunities to improve WIM margins by increasing banking and lending penetration with clients and enhancing advisor productivity. He expects margin improvement in WIM. On third-party spend, he noted some is volume-driven but there's scope for efficiency across vendors, real estate, and automation. Regarding NBFI, Mike Santomassimo stressed understanding specific exposures, highlighting Wells Fargo's focus on large private equity firms for capital call facilities and individual underwriting for middle market loans. He emphasized that not all NBFI lending is equal and the regulatory capital framework is one input for risk assessment.

Erika Najarian of UBS asked about the opportunity to fund future revenue-related compensation or initiatives through Wells Fargo's year-to-date third-party spend. She also inquired about the potential for margin improvement in Wealth and Investment Management (WIM), specifically whether it would be driven by revenue growth or expense reduction, and asked about assessing Non-Bank Financial Institutions (NBFI) exposure and risk, including concerns about SSFA's role in RWA calculations.

Answer

CFO Mike Santomassimo confirmed opportunities to improve WIM margins by increasing banking and lending business with clients and enhancing advisor productivity. He noted that professional services spend, while partly volume-driven, has efficiency opportunities through vendor rationalization and technology. Regarding NBFI, Mike Santomassimo explained that Wells Fargo's exposure is primarily to large private equity firms and middle-market loan lending, with a focus on strong underwriting and cross-collateralization, and that regulatory capital frameworks are one input for risk assessment.

Erika Najarian asked about the opportunity to fund future initiatives through third-party spend efficiency and how Wealth and Investment Management's (WIM) sub-20% pretax margin could improve towards the 17-18% ROTCE target, specifying if it's revenue or expense driven. She also sought guidance on assessing Non-Bank Financial Institutions (NDFI) exposure and risk, and concerns about SSFA's role in RWA for NDFI.

Answer

CFO Mike Santomassimo confirmed WIM margin improvement opportunities through increased banking/lending penetration and advisor productivity, expecting margin growth. He noted ongoing efficiency efforts in third-party spend, regulatory costs, real estate, and automation. Regarding NDFI, he stressed understanding specific exposures, highlighting Wells Fargo's focus on established private equity firms and detailed underwriting for middle market loans, with regulatory capital as one input for risk assessment.

Erika Najarian of UBS Group asked for more detail on capital planning, specifically whether the bank intends to maintain its current management buffer over the new, lower minimum CET1 requirement, which would imply a target of around 10%.

Answer

CEO Charles Scharf reiterated that they will wait for more regulatory clarity from the Federal Reserve on CCAR and capital rules before committing to a new, definitive capital target. He emphasized that while the direction is lower, they want to avoid setting a 'moving target.' CFO Michael Santomassimo added that the company has significant excess capital and a history of returning it to shareholders when appropriate.

Erika Najarian of UBS Group sought more detail on future capital levels, asking if the company would maintain its current buffer over the new, lower CET1 minimum of 8.5% and how management is thinking about a sustainable capital target amid regulatory flux.

Answer

CEO Charles Scharf responded that while the direction for capital requirements is lower, the company wants to wait for more transparency from the Fed on CCAR and capital rules before setting a definitive new target. He emphasized they want to avoid a moving target. CFO Michael Santomassimo added that the company has significant excess capital and flexibility to deploy it to support clients and return it to shareholders, as demonstrated over the past five years.

Erika Najarian followed up on the net interest income (NII) outlook, asking if the trajectory of a flattish first half and a second-half ramp still holds, and questioned the impact of the trading NII swing and recent securities repositioning.

Answer

CFO Mike Santomassimo confirmed the NII trajectory expectation is 'pretty similar,' with a flattish start and more loan growth expected in the second half. He noted the incremental securities repositioning was relatively small. He declined to provide specific detail on trading NII due to rate volatility but reminded listeners that swings in trading NII are often offset by changes in fee revenue, making it largely revenue-neutral.

Erika Najarian of UBS questioned the medium-term 15% ROE target, suggesting it might be conservative given the nearly 13.5% achieved in 2024, future profitability improvements in card and home lending, and excess capital. She asked about the 'true natural return' of the business beyond the remediation story.

Answer

CEO Charlie Scharf responded that while they compare each business to the best performers, the company's focus is on achieving the 15% target first and not getting ahead of themselves. He emphasized that remaining consent orders are still a constraint and that they will address aspirations beyond 15% in due time, after making more progress.

Erika Najarian asked about the procedural steps following the submission of the third-party review to the Federal Reserve related to the asset cap, and about the expected pace of share buybacks.

Answer

CEO Charlie Scharf outlined the general consent order process, which involves submitting a plan, receiving feedback, execution, and a final regulatory review, without providing specific timing. CFO Michael Santomassimo stated that while there is no quarterly buyback guidance, the bank has significant excess capital (150 bps above its new minimum) and will determine the pace each quarter based on market conditions and client needs.

Erika Najarian of UBS Group AG pressed for a timeline on optimizing the company's capital level from the current 14% CET1. She also sought to reconcile the commentary on higher costs and investments with the assertion that pro-forma EPS power remains consistent with initial deal estimates.

Answer

CFO Andrew Young reiterated that a timeline for capital optimization is pending a full analysis of Discover's data. Richard Fairbank, Founder, Chairman & CEO, clarified that while individual line items have moved since the deal announcement, the net drift has been favorable. This, combined with growing opportunities, supports the view that the ultimate earnings power will be similar to original estimates.

Erika Najarian from UBS Group sought clarification on the full-year loan growth guidance, noting that the 2% target for period-end loans was already met. She also asked about the plan for deploying excess cash and the balance between deposit pricing and growth in the second half.

Answer

CFO Clark H. I. Khayat clarified that the loan growth guidance accounts for expected runoff in the residential and commercial real estate portfolios offsetting C&I growth. He stated that KeyCorp would likely reduce its excess cash position if market conditions remain constructive and would take a more "balanced approach" to deposit growth versus pricing in the second half of the year.

Erika Najarian from UBS Group asked for the deposit beta assumption within the 20% NII growth guidance and questioned the appetite for more aggressive talent acquisition and growth investments, given KeyCorp's strong capital position.

Answer

CFO Clark H. I. Khayat stated they expect a cumulative deposit beta in the mid-to-high 40s, approaching 50% during 2025. CEO Christopher M. Gorman affirmed they will 'absolutely' continue to invest aggressively, citing plans to grow the investment banking platform by 10%, hire more wealth advisors, modernize technology, and pursue 'bolt-on acquisitions' in adjacent industry verticals.

Erika Najarian asked if the loan growth mix would shift in the second half, given soft commercial and strong consumer trends, and questioned the deposit strategy for the remainder of the year.

Answer

CFO Bryan Preston projected balanced loan growth for the second half, noting that a 50% increase in the commercial pipeline should supplement continued consumer momentum. On deposits, he said the focus is on core deposit funding and cost stabilization, reflecting a 'higher for longer' interest rate view, with a priority on balanced growth that is constructive for NII and NIM.

Erika Najarian asked for the expected cadence of deposit beta repricing over the next several quarters and the bank's view on a 'natural' deposit spread in a normalized rate environment. She also inquired about 2025 expense growth expectations and any major projects being revisited.

Answer

CFO Bryan Preston projected that full deposit beta realization would take about two quarters, driven by CD maturities, with 75% of the portfolio maturing by Q1 2025. He estimated a potential normalized deposit spread of 150-200 bps but stressed the ultimate focus is on total NII. CEO Tim Spence addressed expenses, confirming the bank has not delayed key investments and funds them through ongoing efficiencies. He suggested the historical long-term expense growth rate of around 3% is a reasonable baseline for 2025.

Asked if a simplified regulatory framework would raise JPMorgan's 17% ROTCE target or if gains would be competed away, and questioned what drove the late-quarter pickup in market activity.

Answer

Executives believe that in a competitive market, the benefits of deregulation would likely be passed on to clients through better pricing rather than leading to a higher sustainable ROTCE. The pickup in activity was attributed to a general improvement in sentiment and a sense that clients need to move forward with business, though they cautioned that pipelines can change quickly and significant tail risks remain.

Inquired about the cross-currents affecting the capital denominator, specifically the G-SIB surcharge and stress test transparency, and sought clarification on the plan for capital returns.

Answer

The bank is confident it ended the year within the 5% G-SIB bucket due to normal seasonality and is pleased with moves toward more CCAR transparency. They reiterated that at 15.7% CET1, they have a 'ton of excess' capital. The plan to arrest the growth of this excess naturally implies buybacks, but they will not provide specific guidance on the timing or amount.

Erika Najarian of UBS inquired about the outlook for deposit growth and pricing, asking if current growth was pre-funding future lending. She also asked how the balance sheet would evolve to potentially benefit from lower rates in 2025.

Answer

CFO Zachary Wasserman confirmed that strong deposit growth has helped pre-fund future lending, lowering the loan-to-deposit ratio to 81%. He stated the bank is strategically reducing its asset sensitivity by about one-third by mid-2025 through its hedging program, which should help stabilize Net Interest Margin (NIM) as rates fall. He sees NIM remaining relatively stable in the near term before potentially rising in a more upwardly sloped yield curve environment.