Gerard Cassidy

Gerard Cassidy asked Popular's management about potential risks or 'corners' they are watching out for despite the positive 2026 outlook, and for an update on the benefits and future outlook of onshoring manufacturing plants in Puerto Rico.

Answer

Javier Ferrer, President and CEO, Popular, identified affordability (impacting home creation and clients if inflation escalates) and the unresolved PREPA (electric power authority) bankruptcy as key concerns, noting PREPA's situation acts as a 'tax on economic growth.' Regarding onshoring, Mr. Ferrer confirmed Puerto Rico is well-positioned, citing $2.2 billion in new investments and expansions in 2025, including major projects by Eli Lilly and Amgen, creating thousands of jobs. He also mentioned 'grapevine' expectations for more large announcements in 2026, which would further fuel the economy through a multiplier effect.

Gerard Cassidy asked what potential surprises or risks Popular is monitoring for 2026, beyond geopolitical factors, given the generally positive economic outlook. He also sought color on the onshoring trend in Puerto Rico and its future economic impact.

Answer

Javier Ferrer, President and CEO, identified affordability (impacting clients and home creation) and the pending PREPA (Electric Power Authority) bankruptcy as key concerns, viewing the latter as a potential "tax on economic growth." Regarding onshoring, Mr. Ferrer confirmed Puerto Rico is benefiting, citing $2.2 billion in new investments and expansions in 2025 from global manufacturers (e.g., Eli Lilly, Amgen), creating thousands of jobs. He mentioned expectations for more large announcements in 2026, which would have a significant multiplier effect on the economy.

Gerard Cassidy of RBC Capital Markets, with Forrest Hamilton asking on his behalf, inquired about Popular's perspective on the potential impact of stablecoins on its business and deposit base in the medium to long term.

Answer

President and CEO Javier Ferrer stated that following the approval of the Genius Act, the company has assembled a team to conduct deeper analysis and explore potential use cases for stablecoins. He acknowledged that it is still "early innings" but confirmed that Popular has begun to address the opportunity, recognizing its future impact on the industry.

Gerard Cassidy asked incoming CEO Javier Ferrer-Fernández about his strategic vision for Popular. He also questioned the company's high capital levels and whether a more aggressive share buyback program could be implemented, and inquired about the process for increasing the repurchase authorization.

Answer

President and COO Javier Ferrer-Fernández outlined his vision to build on the current strategy, focusing on execution and strengthening areas like payments to achieve a 12% ROTCE by year-end and a sustainable 14% long-term. CFO Jorge Garcia acknowledged the bank's robust capital but stressed a measured, long-term approach to capital reduction. He confirmed the current buyback authorization is open-ended and that new authorizations follow a rigorous internal process involving stress tests and regulatory communication.

Gerard Cassidy asked about the Puerto Rican economy, specifically if there was evidence of population in-migration. He also inquired about the remaining federal aid, the projects it would fund, their timelines, and followed up with a question on specific changes to credit card underwriting standards.

Answer

CEO Ignacio Alvarez confirmed that the Census Bureau reported positive net in-migration for the first time in years. He detailed that $45B-$47B in federal funds remain, primarily for the electric grid, water systems, and housing, with the grid being an 8-10 year project. CRO Lidio Soriano clarified his earlier comment was about the timing of the credit cycle, not underwriting, but confirmed they have tightened standards and are lending to higher FICO scores.

Gerard Cassidy asked about the bank's current asset sensitivity and the reason for rising credit card delinquencies despite higher FICO scores on new originations.

Answer

CFO Jorge Garcia described the bank's rate position as 'fairly neutral' and noted they are hedging against falling rates by buying 2-3 year treasuries. CRO Lidio Soriano explained the credit card disconnect by stating that new, high-FICO originations are still a small part of the total outstanding balance, so their positive impact is not yet fully reflected in portfolio metrics.

Gerard Cassidy asked Northern Trust to identify key risks for 2026, beyond the geopolitical environment, that could potentially surprise the banking industry, given the generally positive outlook.

Answer

Michael O'Grady (Chairman and CEO) identified dramatic interest rate changes (up or down), significant market downturns impacting AUM/AUC, and challenging operational environments (like a pandemic) as key risks that could negatively impact financial performance, despite the current positive outlook.

Gerard Cassidy asked Northern Trust to identify potential risks or 'corners' the company is watching for in 2026, beyond geopolitical factors, that could negatively impact the currently positive banking industry outlook.

Answer

Chairman and CEO Michael O'Grady identified three main areas of concern: dramatic changes in interest rates (both sharp increases and zero rates), significant market downturns affecting AUM/AUC/AUA levels, and challenging operational environments like pandemics that test the business's ability to provide services. He emphasized that while these are hard to predict, the company invests heavily in preparing for and anticipating such environments.

Gerard Cassidy asked about Northern Trust's low exposure to loans to non-depository financial institutions (NDFI), seeking color on how the company views categories within NDFI like private equity and mortgage credit intermediaries. He also inquired about Northern Trust's approach to managing wealth management clients in the event of a significant market correction, given recent warnings from the IMF and Bank of England about inflated asset prices.

Answer

David Fox, Chief Financial Officer, clarified that Northern Trust's NDFI exposure primarily consists of subscription lines to private equity firms (backed by LP capital commitments), loans to management companies (secured by management fees), and diversified NAV loans on the wealth side with low advance rates. Michael O'Grady, Chairman and CEO, emphasized their 'goals-driven wealth management' approach, which involves determining clients' lifetime needs upfront to establish appropriate asset allocation. This strategy includes ensuring sufficient reserve capacity and risk-off assets to navigate market drawdowns, helping clients remain focused on long-term goals rather than overreacting to volatility.

Gerard Cassidy asked for Northern Trust's perspective on loans to non-depository financial institutions (NDFI), given its minimal exposure, and how it views categories like private equity and mortgage credit intermediaries. He also inquired about the company's approach to managing wealth management in the event of a significant market correction, considering warnings about inflated asset prices.

Answer

CFO David Fox clarified Northern Trust's NDFI exposure primarily consists of subscription lines to private equity firms (backed by LP capital commitments), loans to management companies (secured by management fees), and low-advance-rate, diversified NAV loans on the wealth side, distinguishing these from direct lending to private credit funds. Chairman and CEO Michael O'Grady explained their 'goals-driven wealth management' approach, which focuses on long-term client needs, appropriate asset allocation, and maintaining reserve capacity to navigate market volatility without overreacting.

Gerard Cassidy asked for help calibrating fee revenues between asset values and volumes, sought the company's view on upcoming regulatory changes like Basel III endgame, and requested an update on the remaining Visa share position.

Answer

CFO David Fox noted that while AUC is about 50% equities, the company is increasingly moving toward solution-based, custody-agnostic revenues. CEO Mike O'Grady commented that potential Basel III changes to operational risk models could be favorable and that SLR changes would add capacity but are not currently needed. He also stated the remaining Visa stake is carried at zero, has a pre-tax unrealized gain of about $1.1 billion, and is considered restricted.

Gerard Cassidy asked for a definition of the 'sustainable financial model' that management aims to build. He also inquired about the key macro risks, aside from geopolitical issues, that the company is monitoring for 2025.

Answer

Chief Financial Officer David Fox defined the sustainable model as one that does not rely on factors outside the company's control, focusing instead on driving down the expense curve and increasing organic growth to build resiliency. Chairman and CEO Michael O'Grady identified key risks as the things they cannot control, such as significant market downturns, operational stress from volatility, and the impact of central bank actions on liquidity and interest rates, emphasizing preparedness over prediction.

Gerard Cassidy asked how investors should measure the success of the 'One Northern Trust' strategy and whether a steepening yield curve would be a favorable environment for the company's NII.

Answer

CEO Mike O'Grady stated that the primary external metric for the 'One Northern Trust' strategy's success will be a higher organic growth rate. Then-CFO Jason Tyler explained that despite a steepening curve, the current short duration of the balance sheet means falling short-term rates would be a headwind for NII, though partially offset by deposit stability and reinvestment benefits.

Gerard Cassidy asked about the Private Bank's projected client asset growth of $16 billion-$20 billion for 2026, seeking a breakdown of how much would come from existing customer portfolios versus new customers and teams, and the impact of the recent bull market. He also asked for Bruce Van Saun's big-picture view on M&A opportunities for Citizens over the next couple of years, given the supportive regulatory environment and past successful acquisitions.

Answer

Bruce Van Saun, Chairman and CEO, and Brendan Coughlin, President, explained that Private Bank growth stems from continued acquisition of new teams, existing teams converting their full books, and new business from private bank and corporate bank relationships. Brendan noted that 80-90% of previous books follow new talent, and there's an acceleration of referrals. The mass affluent business also saw significant AUM and fee income growth. While market betas helped (1/3 of private banking revenue uplift), customer acquisition is key. Regarding M&A, Mr. Van Saun stated that the current focus is on strong organic growth opportunities (Private Bank, Reimagine the Bank) due to their significant potential and bandwidth requirements, with large inorganic moves not being the focus for the foreseeable future.

Gerard Cassidy from RBC Capital Markets asked about the projected $16-$20 billion client asset growth in the Private Bank, specifically how much is driven by existing customer portfolios versus new customer acquisition and talent lift-outs, and the impact of the bull market. He also sought a big-picture view on potential M&A opportunities given the supportive regulatory environment, contrasting it with the bank's organic growth focus.

Answer

CFO Aunoy Banerjee clarified that Private Bank growth stems from lift-outs, existing teams converting books, and new business. President Brendan Coughlin elaborated on a bi-directional referral model, accelerating referrals, and continued lift-outs (1-2 teams per quarter). He also highlighted strong growth in the mass affluent business and the virtuous cycle of customer acquisition and market beta. Chairman and CEO Bruce Van Saun stated that the current focus is on strong organic growth opportunities, particularly the Private Bank and 'Reimagine the Bank,' due to bandwidth constraints, with no large inorganic moves planned for the foreseeable future, though smaller business line additions are possible.

Gerard Cassidy followed up on private credit, asking what external indicators could signal potential credit deterioration. He also asked what the administration could do to lower mortgage rates without impacting government bond yields, to stimulate refinancing and originations.

Answer

Chair of Commercial Banking Don McCree advised looking at regulatory filings from credit companies, noting the difficulty of generalizing across different fund types. CEO Bruce Van Saun acknowledged the holistic affordability issue in housing and the challenge of lowering mortgage rates without broader market impact. He stated Citizens is not relying on a mortgage boom, having refocused its business on relationship customers and durable fee revenue sources. President Brendan Coughlin added that with 74% of homeowners having rates under 5%, a massive refi pickup is unlikely, and Citizens is strongly positioned in HELOCs.

Gerard Cassidy asked for the pros and cons of selling the entire noncore loan portfolio, following the student loan sale. He also requested color on the slight uptick in nonaccrual loans within the Commercial & Industrial (C&I) portfolio.

Answer

CEO Bruce Van Saun and CFO John Woods stated they prefer to let the remaining short-duration auto portfolio run off naturally to avoid incurring an unnecessary liquidity cost on a sale, noting the balance will be minimal by year-end. Regarding C&I credit, Head of Commercial Banking Don McCree asserted there is no broad deterioration, attributing the small nonaccrual increase to isolated instances rather than a macro trend. He emphasized that clients remain resilient.

Gerard Cassidy from RBC Capital Markets asked for an outlook on potential regulatory changes under a new administration and for an update on the commercial real estate (CRE) office portfolio workout, specifically asking which 'inning' of the process they are in.

Answer

Executive Bruce Van Saun expressed hope for finalized Basel III rules, refreshed supervision, a more insightful CFPB approach to fees, and less friction for M&A. On CRE, Van Saun assessed they are in the 'middle innings' of the workout. Executive Donald McCree added that deterioration has nearly stopped and inflows to workout have slowed to a trickle, with liquidity returning to the broader CRE market. Executive John Woods confirmed criticized assets declined significantly, led by CRE.

Gerard Cassidy asked about the reasons for State Street's 2025 financial performance significantly exceeding its initial guidance, and what benefits the firm anticipates from the upcoming Basel III Endgame proposal.

Answer

CEO Ronald O'Hanley attributed the strong 2025 performance to an unanticipated market tailwind, better-than-planned execution (including successful Alpha onboardings), and significant growth in Markets due to increased volatility. He noted the 2026 guide uses a flat market assumption to highlight organic growth. Regarding Basel III Endgame, Ronald O'Hanley expects it to be favorable to GSIBs, benefiting State Street proportionally, and highlighted the broader positive impact of a more risk-based and predictable regulatory and supervisory environment.

Gerard Cassidy asked for a comparison of State Street's 2025 actual results (fee revenue, NII, expenses) against its January 2025 guidance. He sought to understand what factors, such as better markets, increased customer penetration, or more business wins, contributed to the 'nice beat.' He followed up by asking what specific benefits State Street anticipates from the upcoming Basel III Endgame proposal.

Answer

CEO Ronald O'Hanley attributed the 2025 beat to a conservative initial guide, unanticipated market tailwinds, better-than-planned execution (good onboardings, Alpha development partners), and significant growth in Markets due to prior investments. He explained the 2026 guide uses a flat market assumption to highlight organic growth. For Basel III Endgame, Ron stated the most important benefit would be the cessation of discussion around it. He expects the GSIB proposal and capital changes related to Basel III to be favorable to GSIBs, benefiting State Street proportionally. He also highlighted the new regulatory policy's shift to more risk-based and predictable application of regulation and supervision as having enormous benefits.

Gerard Cassidy from RBC Capital Markets asked for the specific impact of market movements on Q2 revenue growth and inquired how investors can measure the success of the 'One State Street' collaborative strategy.

Answer

Interim CFO Mark Keating confirmed that higher market levels were a positive contributor to fee growth, consistent with their disclosed sensitivities. CEO Ronald O'Hanley explained that 'One State Street' is about delivering the entire firm's capabilities through integrated relationship management. He acknowledged the measurement question was valid and said the company would consider how to provide disclosures to demonstrate its success.

Requested color on the drivers of loan growth and its risk profile, and asked for perspective on how potential regulatory changes (Basel III, SLR) could impact State Street and the broader market.

Answer

Loan growth is driven by opportunities with private markets clients, including subscription lines and BDC lending, and is closely tied to the growing servicing business. The growth is direct, not from participations. On regulation, management sees a real possibility for thoughtful changes. While direct relief from SLR changes would be limited for trust banks, it would be very positive for market liquidity (e.g., Treasuries). A scenario of moderated capital and tuned liquidity rules would be quite favorable for the industry.

Gerard Cassidy from RBC asked for details on the sources and risks of the firm's loan growth and for a broader perspective on how potential regulatory changes, like Basel III endgame and SLR modifications, might impact State Street.

Answer

Interim CFO Mark Keating identified loan growth opportunities in subscription lines, BDC lending, and middle-market CLOs, often linked to their private markets clients. CEO Ronald O'Hanley added that the balance sheet is deployed to support fee-based businesses. Regarding regulation, O'Hanley anticipates constructive changes to capital and liquidity rules, which would benefit the market system, though the incremental impact on trust banks might be limited. He sees a path to a more favorable regulatory environment overall.

Asked about the role and importance of AI in improving service quality and when its impact will be measurable by outsiders. Also inquired about the potential size of the loan portfolio and the possibility of enhanced public disclosures.

Answer

Ron O'Hanley detailed that machine learning is already deeply embedded, while newer generative AI is in testing for client service and will be a key part of future transformation. Eric Aboaf stated there are no immediate limits on loan portfolio growth as it's tied to their successful private markets strategy and that the company is open to providing more detailed disclosures in the future.

Gerard Cassidy of RBC Capital Markets inquired about the role of Artificial Intelligence in service quality improvements and its future measurability. He also asked about the potential size limit for the loan portfolio and plans for enhanced disclosure.

Answer

CEO Ron O'Hanley explained that while machine learning is already deeply embedded in operations like NAV calculation, generative AI is in early testing. He anticipates its first applications will be in client service chatbots and internal HR inquiries. CFO Eric Aboaf added that there are no immediate limits on loan growth, as it is a core part of their relationship-based model and State Street remains a capital-light business compared to peers. He also expressed openness to providing more detailed disclosure on the portfolio.

Gerard Cassidy asked about the drivers behind the $2.6 billion in loans refinanced through Capital Markets in 2025, such as lower rates or easier terms, and if this activity was more pronounced than in previous years. He also sought an update on trends within higher-risk portfolios like office commercial real estate and trucking/transportation, and the credit quality outlook for 2026.

Answer

Former CFO David J. Turner explained that the refinancing activity primarily involved investment-grade credits in Real Estate Corporate Banking, REITs, energy, and financial services, driven by lower capital costs and better terms. CEO John M. Turner, Jr. confirmed it seemed more pronounced in 2025 due to market conditions. Regarding credit quality, David J. Turner stated that deterioration peaked a couple of quarters ago, with non-performing loans and criticized loans showing improvement. He noted Q4 charge-offs peaked at 59 basis points, with an expectation to decline to 40-50 basis points in 2026. Trucking and transportation remain challenged but are improving, while some other industries still struggle. He also mentioned the allowance for credit loss ratio could trend down towards a normalized 1.64%.

Gerard Cassidy inquired about the factors attracting customers to refinance $2.6 billion in loans through capital markets in 2025, such as lower rates or easier terms. He also sought an update on trends within Regions Financial's higher-risk portfolios, including office commercial real estate and trucking and transportation, looking into 2026.

Answer

Former CFO David J. Turner explained that investment-grade credits, particularly in real estate, energy, and financial services, found lower cost of capital and better terms in the capital markets, an activity more pronounced in 2025. CEO John M. Turner, Jr. noted that credit quality deterioration peaked a couple of quarters ago, with non-performing loans and criticized loans improving. He added that while trucking and transportation remain challenged, overall credit quality is expected to improve in 2026.

Gerard Cassidy asked for commentary on the strong credit quality trends despite economic uncertainty, with a focus on the office and transportation portfolios, and also inquired about the bank's strategy for stablecoins.

Answer

President, CEO, & Chairman John Turner attributed strong credit quality to healthier customer balance sheets and improved industry-wide risk management. He noted they are working through a few large office credits and that the transportation sector remains stressed but manageable. Senior EVP & CFO David Turner added that consumer credit is strong. Regarding stablecoins, John Turner stated that Regions would likely participate in a bank consortium, similar to its approach with Zelle and other payment initiatives.

Gerard Cassidy of RBC Capital Markets first clarified that the bank's economic outlook statistics are specific to its footprint. He then asked about the potential challenges in convincing regulators of the expected decline in CECL reserves and if any new portfolios are under heightened surveillance.

Answer

Executive John Turner confirmed the economic data is for their footprint. Executive David Turner acknowledged the pace of reserve decline is uncertain but stated the accounting math dictates the ratio must come down as fully-reserved charge-offs are realized. John Turner identified retail trade, manufacturing (consumer durables), and construction as new areas receiving extra attention.

Gerard Cassidy asked what is needed to achieve mid-single-digit loan growth, given the strong market demographics. He also requested a performance update on the EnerBank and Ascentium acquisitions and inquired about the target for the held-to-maturity (HTM) securities portfolio.

Answer

Executive John Turner cited high customer liquidity and real estate headwinds as constraints on loan growth. Regarding acquisitions, he noted Ascentium is performing well despite some small business pressure, while EnerBank's growth is muted due to a runoff portfolio. Executive David Turner stated the interim target for the HTM portfolio is to increase it from 14% to around 25% to reduce AOCI volatility, adding that large-scale repositioning is unlikely in 2025.

Gerard Cassidy asked about PNC's philosophy regarding Return on Tangible Common Equity (ROTCE) targets and sought management's perspective on potential risks on the horizon for 2026, beyond geopolitical factors.

Answer

Rob Reilly, EVP and CFO, stated that PNC views ROTCE as an outcome rather than a target, though they monitor it closely and expect it to rise from 17% to 18% and higher by the end of 2026. Bill Demchak, Chairman and CEO, elaborated that setting an explicit ROTCE target is challenging due to its dependence on the operating environment, yield curve, credit costs, and capital management, which could lead to uneconomic choices. Regarding risks, Bill Demchak indicated that any significant challenges in 2026 would likely stem from exogenous variables, as the underlying economy and consumer health appear strong, providing tailwinds for banks.

Gerard Cassidy from RBC Capital Markets asked about PNC's philosophy on managing Return on Tangible Common Equity (ROTCE), given it's viewed as an outcome rather than a target, and sought insights into potential non-geopolitical risks on the horizon for 2026 that could impact the banking industry.

Answer

Rob Reilly, Executive Vice President and CFO, reiterated that ROTCE is an outcome, not an explicit target, but noted PNC's levels are competitive and expected to rise from 17% (Q4 2025 exit rate) to 18% by year-end 2026 and higher. Bill Demchak, Chairman and CEO, explained that setting an ROTCE target is problematic due to its dependence on the operating environment (yield curve, credit costs) and capital management, which should ideally be disconnected. He stated that the primary risks for 2026 would likely be exogenous variables, as the underlying economy shows no major cracks, and the banking sector has significant tailwinds.

Gerard Cassidy asked for insights into the record debit and credit card transactions observed this quarter and the outlook for consumer spending. He also inquired about the encouragement from Washington regarding regulatory changes, particularly for MRAs, and whether rating agencies or bank regulators will be the primary capital binding constraint going forward.

Answer

Bill Demchak, Chairman and CEO, noted broad-based credit and debit card spending, with higher credit usage in lower-income segments and overall consumer spend driven by the wealth effect among wealthier clients. Rob Reilly, Executive Vice President and CFO, added that PNC's growth in new card users contributed to this activity. Bill Demchak discussed a strong push from Washington to simplify regulatory processes, potentially reducing hundreds of FTEs tied to MRA compliance by focusing on material risks. On capital, he stated that while Moody's was a binding constraint, potential Basel III endgame changes to risk-weighted assets make it too early to determine the future primary constraint, emphasizing PNC's independent goal of maintaining a 'fortress balance sheet.'

Gerard Cassidy asked for more details on PNC's reported record debit transactions and credit card activity, and how these trends might continue into early next year. He also inquired about the encouragement from Washington regarding regulatory changes, specifically the MRA proposal, and whether rating agencies or bank regulators would become the primary capital binding constraint for CET1 ratios going forward.

Answer

Chairman and CEO Will Demchak noted that consumer spending, including credit and debit, is robust across all segments, with higher-income clients driving much of the growth due to the wealth effect, and PNC is adding new card users. On regulation, Mr. Demchak expressed optimism that the MRA proposal could significantly reduce 'hundreds and hundreds' of FTE-equivalent hours spent on process-oriented compliance, rather than actual risk mitigation. He stated it's too early to determine the binding capital constraint until Basel III endgame details are clear, emphasizing PNC's internal 'fortress balance sheet' philosophy.

Gerard Cassidy of RBC Capital Markets asked about the relationship between regulators and rating agencies on capital, PNC's view on stablecoins and their impact, and the economic potential of recent AI investments in the Pittsburgh area.

Answer

Chairman & CEO William Demchak stated he doesn't believe regulators and rating agencies coordinate on methodologies. On stablecoins, he sees them as 'another payment tool' to be integrated but is not worried about them draining deposits. He also expressed great excitement about the $92 billion in AI-related investment announced for Pennsylvania, seeing it as a major economic catalyst for the region.

Gerard Cassidy asked about the costs of working through commercial real estate (CRE) problems and potential future expense savings. He also inquired about the outlook on the regulatory environment and its impact on capital requirements and buybacks.

Answer

CFO Rob Reilly indicated that any expense savings from resolving CRE issues would be minimal, as staff would be redeployed. CEO Bill Demchak stated his guess is that future capital needs will be less, but he doesn't foresee a massive regulatory change. He noted PNC's historically low CCAR drawdown gives them a strong starting position, and once rules are settled, they can reassess capital targets.

Gerard Cassidy of RBC Capital Markets inquired about competition from private credit, particularly in the middle market, and in the asset-backed lending space. He also asked about the geographic focus for PNC's new branch build-out.

Answer

CEO Bill Demchak stated that while private credit is a factor at the margin, it is not the primary cause of lower loan growth, and competition in asset-backed lending remains with traditional players. CFO Rob Reilly specified that new branch expansion is focused on markets like South Florida, Texas, Arizona, and Colorado.

Gerard Cassidy of RBC Capital Markets asked about credit trends within specific C&I sub-portfolios like SNC and leveraged loans. He also inquired if commercial clients have become stronger post-pandemic and asked about the impact of cap rates on CRE office valuations.

Answer

CEO Bill Demchak reported that credit trends are benign, with downgrades slightly outpacing upgrades due to margin compression, but the overall portfolio is healthy. He agreed that companies are likely better managed post-pandemic, contributing to lower loan utilization. Regarding CRE office, he explained that for deeply distressed properties, vacancy and absorption potential are far more critical to valuation than marginal changes in cap rates.

Gerard Cassidy asked about M&T Bank's capital strategy, specifically if the CET1 ratio would be lowered from the 10.25%-10.5% range given potential favorable Basel III Endgame proposals and stress test results, and what the bank considers its binding constraint for capital.

Answer

Daryl Bible, Senior Executive Vice President and CFO, M&T Bank Corporation, explained that the bank has flexibility to potentially go below 10% CET1, noting that regulatory capital limits are not currently a binding constraint. He identified rating agencies as a key consideration. Bible highlighted the bank's strong asset quality, capital generation, 11% dividend growth, 9% share repurchases, and 7% tangible book value growth in 2025. Cassidy also inquired about the drivers for the anticipated inflection in commercial real estate (CRE) loan growth in Q2 2026, to which Bible responded that the CRE team had strong production in Q4 2025, with all three sectors (regional CRE, M&T RCC, institutional CRE) performing well, expecting point-to-point growth across all four loan portfolios in 2026.

Gerard Cassidy asked about M&T Bank's capital strategy, specifically regarding potential adjustments to the CET1 ratio in light of upcoming Basel III Endgame proposals and stress tests, and inquired about the company's binding constraints for capital. He also sought clarity on the anticipated inflection points and drivers for Commercial Real Estate (CRE) loan growth in 2026.

Answer

Daryl Bible (VP, Senior Executive and CFO, M&T Bank Corporation) stated that M&T Bank is comfortable with a CET1 ratio of 10.25%-10.5% and could potentially go lower, as regulatory capital limits are not currently a binding constraint. He identified rating agencies as another key constituency influencing capital decisions. Regarding CRE, Mr. Bible highlighted strong Q4 2025 production, including over $900 million in December closings, and expects point-to-point growth across all four loan portfolios in 2026, driven by strong performance in regional, M&T RCC, and institutional CRE sectors.

Gerard Cassidy inquired about the factors contributing to the reported doubling of commercial real estate loan approvals and M&T Bank's perspective on the evolving regulatory environment, including the shift from MRAs to observations and the potential impact of the revised Basel III endgame on regional banks.

Answer

Daryl Bible, SEVP and CFO, attributed increased loan approvals to smoother internal systems and closer collaboration between the first line and credit teams. He noted that the shift to observations from MRAs streamlines remediation, making processes faster and more efficient. Mr. Bible expressed hope that the Basel III endgame would be more streamlined and focused on essential capital requirements for banks of M&T's size.

Gerard Cassidy of RBC Capital Markets inquired about M&T's strategy regarding stablecoins and their potential impact on the payments business. He also asked which loan segments were outperforming to drive the improved net charge-off guidance, and for details on the recent CRE loan sale.

Answer

CFO Daryl Bible stated that M&T is monitoring stablecoins and will partner to offer them if customers demand it, but adoption depends on being easier and cheaper than current rails. He attributed the improved NCO guidance to general caution amid market uncertainty rather than specific portfolio outperformance. The CRE sale involved an out-of-footprint portfolio with no customer relationships, allowing capital to be redeployed to core clients.

Gerard Cassidy inquired about M&T's approach to stablecoins and their potential impact on payments and deposits. He also asked which loan segments were outperforming to support the improved net charge-off guidance and requested details on the recent CRE loan sale.

Answer

CFO Daryl Bible stated that M&T is monitoring stablecoins and will adopt them if customers demand it, but noted they must become easier and cheaper than current rails to gain traction. He described the improved charge-off guidance as cautious due to macro uncertainty. The CRE sale, he explained, was a strategic disposition of an out-of-footprint portfolio with no client relationships, allowing capital to be redeployed to core customers.

Gerard Cassidy inquired about M&T's view on the regulatory environment for regional banks and asked for details on the drivers of the commercial real estate (CRE) portfolio decline, questioning if it was strategic or market-driven.

Answer

Daryl Bible (executive) stated the regulatory environment appears more pro-business and focused on tailoring rules, which could be positive. On CRE, he explained the decline is driven by intense market competition leading to aggressive pricing from other lenders and higher-than-expected payoffs, as M&T remains disciplined on underwriting.

Gerard Cassidy questioned the timeline for organically growing the New England and Long Island markets to a significant scale and sought commentary on the potential impact of upcoming leadership changes at federal regulatory agencies.

Answer

CFO Daryl Bible compared the strategy to the bank's successful 20-year build-out in Baltimore, noting the timeline could be accelerated by inorganic opportunities. He expressed optimism about potential regulatory changes, hoping for a more balanced approach focused on safety and soundness, transparency, and tailoring, which aligns with M&T's fundamental approach.

Gerard Cassidy inquired about M&T's optimal CET1 ratio, the potential for increased share buybacks in 2025, and the outlook for net interest income (NII) growth amid potential rate cuts.

Answer

CFO Daryl Bible stated that M&T has significant capital flexibility with a CET1 ratio over 11.5%. He anticipates returning more capital to shareholders in 2025, possibly by targeting a CET1 ratio above 11%, assuming a stable economy. Bible also expressed confidence in NII and margin improvement, citing structural benefits like fixed-asset repricing, a strong deposit base, and favorable hedge repricing, which are not dependent on rate cuts.

Gerard Cassidy asked whether market conditions or valuation challenges would be a greater influence on the IPO market in 2026, given it's still below long-term averages. He also inquired if the current administration's perceived support for consolidation is factoring into executives' M&A decisions, potentially driving activity before a change in administration.

Answer

Chairman and CEO David Solomon believes the valuation challenge previously referenced is no longer present. He expects a constructive confluence of more sponsor activity and IPOs from very large companies that have stayed private longer, provided the current market environment holds. Regarding M&A, Mr. Solomon stated that the regulatory environment for M&A has been very different in the last four years, leading CEOs to believe large-scale consolidation is now possible. This perception is making CEOs 'front-footed,' driving a significant upswing in activity, with a perceived window of a 'handful of years' for strategic transformative deals.

Gerard Cassidy asked about the primary drivers for the IPO market in 2026, specifically whether market conditions or valuation challenges would be more influential, and how the current administration's stance on consolidation impacts M&A activity and executive decision-making.

Answer

Chairman and CEO David Solomon believes valuation challenges are less of an issue, expecting sponsor activity to unlock and more large companies that have stayed private longer to go public, creating a constructive IPO environment. Regarding M&A, Solomon noted that CEOs perceive a window of opportunity for large strategic transactions under the current administration, leading to a significant upswing in activity as scale matters greatly in competitive business environments.

Gerard Cassidy asked for clarification on the 'high bar' for acquisitions in terms of financial metrics and inquired about the key risks the firm is monitoring.

Answer

Chairman & CEO David Solomon explained that the 'high bar' for M&A is primarily strategic and cultural fit, particularly in advancing the Asset & Wealth Management franchise, with financial analysis being a subsequent consideration. Regarding risks, he emphasized the firm's constant focus on risk management for low-probability events and the need to remain vigilant amid geopolitical and policy uncertainty, noting the path forward is 'never a straight line.'

Gerard Cassidy asked how the CET1 capital supporting the HPI portfolio will be released over time and which geographic region exhibits the greatest uncertainty based on CEO conversations.

Answer

Executive Denis Coleman clarified that capital from the HPI portfolio is freed up progressively as it's sold down, not at the end. CEO David Solomon stated that uncertainty is up significantly everywhere, but he hears a 'greater sense of short-term concern' from CEOs outside the U.S.

Gerard Cassidy asked about the key non-geopolitical risks that could derail the current optimistic outlook and when the benefits of AI investments might become visible in financial results.

Answer

CEO David Solomon identified potential risks including market sentiment shifts and uncertainty around new administration policies on trade, tax, and energy, as well as cyber risk. Regarding AI, he explained that while the firm is having early success and is focused on efficiency, investors should not expect a specific line-item impact. Instead, AI and technology create capacity to reinvest in and scale the client franchise, making the firm more productive overall.

Gerard Cassidy of RBC Capital Markets asked for Goldman Sachs's perspective on the relative advantages of private credit versus traditional lending for clients and who its main competitors are in that space.

Answer

CEO David Solomon explained that clients seek the best capital structure for their needs, and Goldman is uniquely positioned to offer a range of solutions from syndicated loans to direct lending. He noted competitors vary by activity: JPMorgan Chase & Co. in syndicated finance, firms like HPS or Ares in direct lending, and Apollo in investment-grade. CFO Denis Coleman added that few competitors match Goldman's breadth across the ecosystem.

Gerard Cassidy asked, given Morgan Stanley's significant capital surplus and potential for further regulatory relief (Basel III endgame, GSIB, SCB recalibrations), at what point the firm would consider returning even more capital beyond current plans.

Answer

Ted Pick, Chairman and CEO of Morgan Stanley, stated the firm is comfortable with its high and growing capital surplus, with no rush to make incremental capital returns beyond prudent dividend growth and stock buybacks. He emphasized the high bar for acquisitions and the firm's focus on being good stewards of capital, noting the business model could support further reductions in the CET1 ratio.

Gerard Cassidy inquired about Morgan Stanley's strategy for capital allocation, specifically at what point the firm would consider returning even more capital to shareholders, given its significant excess capital and potential for further regulatory relief.

Answer

Chairman and CEO Ted Pick stated that Morgan Stanley is comfortable with its growing capital surplus, currently over 300 basis points above requirements, and is in no rush to make incremental capital returns beyond prudent dividend growth and stock buybacks. He emphasized the high bar for acquisitions and the ongoing opportunities to invest capital within the core businesses, while also noting the potential for further regulatory relief to increase the surplus.

Gerard Cassidy asked management to identify the key risks or potential 'curve balls' they are monitoring for the upcoming year, beyond the obvious geopolitical risks.

Answer

Executive Sharon Yeshaya explained that the firm constantly runs stress tests for a variety of risks, including macro, counterparty, and market velocity, to ensure the firm is prepared for unforeseen events. Executive Ted Pick added that the primary risks fall into two buckets: first, the implications of the regime change away from zero interest rates, with a potential downside risk of stagflation; and second, ongoing geopolitical uncertainty, which impacts their global business. He concluded that the firm's consistent 2024 performance through various market conditions demonstrates its resilience.

Gerard Cassidy inquired about the drivers of prime brokerage revenues, asking if it was from existing or new clients. He also requested color on the $100 million in charge-offs in commercial real estate and corporate loans.

Answer

Co-President Ted Pick attributed the strong prime brokerage results predominantly to increasing wallet share with the existing global client base, facilitated by the integrated investment bank model. CFO Sharon Yeshaya explained that the CRE and corporate loan charge-offs were expected and had been largely provisioned for in prior periods as the firm anticipated these credit issues working through the market.

Gerard Cassidy asked about potential stresses in fixed income markets, particularly the treasury 'basis trade,' and where the firm is focusing its attention. He also asked which of the three wealth management channels is best positioned to perform in the current volatile environment.

Answer

CEO Ted Pick reported that while treasury market volumes were higher with some derisking, the markets have remained orderly and client engagement has not signaled broader stress. CFO Sharon Yeshaya highlighted that the adviser-led and self-directed channels see high engagement in volatile markets, with rising unsolicited trades and platform volumes, while the Workplace channel is less in the firm's direct control.

Gerard Cassidy asked how external observers can measure the success of AI integration in Truist's new branches and its broader impact on the banking industry. He also inquired about the size of the First Brands exposure and the context of that client relationship.

Answer

CEO Bill Rogers explained that AI's success will be reflected in overall business performance, leading to disproportionate growth and efficiency, rather than isolated metrics. He views AI as a fuel for accelerating ROTCE. Chief Risk Officer Brad Bender stated that the First Brands exposure is less than $200 million for Truist and is part of a broader base, but declined to provide further details due to the early stage of the process and client confidentiality.

Gerard Cassidy asked about the competitive intensity in the Southeast, whether competitors were engaging in aggressive lending, and for an update on Truist's exposure to non-depository financial institutions (NDFIs).

Answer

CEO William Rogers described the Southeast as 'always competitive' but stated Truist is well-positioned and not seeing unusual aggression in pricing or structure. Chief Risk Officer Brad Bender detailed that NDFI exposure is well-governed, with the largest concentration in REITs, and is considered regular business with long-time clients. Rogers also acknowledged private credit as a known competitor.

Gerard Cassidy asked about the future growth trajectory for Truist's investment banking business and whether its current share of total revenue could grow further or if management is comfortable with current levels.

Answer

CEO Bill Rogers expressed confidence in maintaining a low double-digit growth CAGR for the investment banking business, highlighting its efficiency and middle-market focus. However, he also stressed the importance of growing other fee income streams like payments and wealth to maintain a diverse revenue mix, suggesting a 'steady as she goes' approach rather than allowing one area to become disproportionately large.

Gerard Cassidy asked how external analysts can measure the company's success in growing wallet share and how Truist is integrating its digital and physical channels to enhance customer primacy.

Answer

CEO Bill Rogers stated that the ultimate measure of wallet share gain is improved business returns, specifically ROTCE and ROA, and pointed to metrics like increased checking primacy as evidence. He described the "T3" (Touch + Technology = Trust) strategy, which emphasizes an integrated approach where digital tools and human interaction are complementary, highlighting the critical role of physical branches during recent hurricanes as proof of the model's effectiveness.

Gerard Cassidy (RBC Capital Markets) asked about U.S. Bancorp's strategy and preparations for stablecoins, specifically their impact on the payments business. He inquired about efforts in custody, safekeeping, and stablecoins as a payment rail. Additionally, he sought an update on the bank's long-term capital return strategy, particularly the expectation for returning 75%-80% of earnings to shareholders, given the growing CET1 capital ratio.

Answer

Gunjan Kedia, CEO, explained that the bank is working on stablecoins in two areas: capital markets (custody/safekeeping of collateral and crypto assets) where the business model is clear, and as a payment rail, where client demand is muted but efforts are underway to be ready for onboarding/offboarding and providing services. She mentioned piloting stablecoin transactions this year and studying the market for smaller banks via Elan. John Stern, Vice Chair and CFO, stated that the bank is in the "final lap" of building capital, with CET1 at 10.9%. He anticipates increasing the pace of capital return towards the 75% area in 2026, balancing it with loan growth.

Gerard Cassidy of RBC Capital Markets asked about U.S. Bancorp's preparations for stablecoins in the payments business, covering both custody/investment aspects and stablecoins as a payment rail. He also inquired about the bank's views on returning capital to shareholders, the long-term target of 75-80% of earnings, and the timeframe for increasing the pace of capital returns.

Answer

Gunjan Kedia, CEO, explained that U.S. Bancorp is working on stablecoins in two areas: capital markets/investments (custody and safekeeping of collateral/crypto assets) where the business model is clear, and as a payment rail where client demand is more muted but efforts are underway to be ready for onboarding/offboarding and providing services, with pilots expected this year. She noted the unique Elan franchise also requires readiness. John Stern, Vice Chair and CFO, stated that the bank is in the 'final lap' of building capital, currently at 10.9% CET1, and expects the glide path to increase capital returns to the 75% area in 2026, balancing this with loan growth.

Gerard Cassidy of RBC Capital Markets asked about U.S. Bancorp's preparations for stablecoins in the payments business, covering both custody/investment aspects and stablecoins as a payment rail. He also inquired about the bank's views on returning capital to shareholders, the long-term target of 75-80% of earnings, and the timeframe for increasing the pace of capital returns.

Answer

Gunjan Kedia, CEO, explained that U.S. Bancorp is working on stablecoins in two areas: capital markets/investments (custody and safekeeping of collateral/crypto assets) where the business model is clear, and as a payment rail where client demand is more muted but efforts are underway to be ready for onboarding/offboarding and providing services, with pilots expected this year. She noted the unique Elan franchise also requires readiness. John Stern, Vice Chair and CFO, stated that the bank is in the 'final lap' of building capital, currently at 10.9% CET1, and expects the glide path to increase capital returns to the 75% area in 2026, balancing this with loan growth.

Gerard Cassidy asked for the strategic rationale behind the recent loan portfolio sale and whether more sales could be expected. He also inquired about the bank's view on stablecoins and their potential impact on its payments business.

Answer

Vice Chair & CFO John Stern explained the mortgage sale was a strategic move to divest single-service loans and reinvest the proceeds at a higher spread, better supporting multi-service clients. President & CEO Gunjan Kedia stated that while the bank is prepared for stablecoins, she does not anticipate a material near-term impact on its primarily domestic payments businesses, as current stablecoin use cases are concentrated in cross-border and institutional payments.

Gerard Cassidy inquired about U.S. Bancorp's ideal interest rate environment and the conditions required to resume historical capital return levels.

Answer

CFO John Stern explained that while the bank maintains a neutral interest rate risk position, an upward-sloping yield curve is ideal for profitability. He also stated that share repurchases would increase as the bank approaches its target CET1 ratio of approximately 10% under Category II rules, aligning with the long-term goal of a 70-80% total payout ratio.

Gerard Cassidy inquired if lower industry loan-to-deposit ratios provide extra flexibility in deposit pricing and asked about the company's strategy regarding new branch builds versus digital expansion.

Answer

CFO John Stern responded that the bank doesn't target a specific loan-to-deposit ratio but holistically manages its balance sheet, noting they shed higher-cost deposits amid muted loan demand. President Gunjan Kedia explained the branch strategy is to increase density within their existing footprint while using digital capabilities and partnerships for capital-light expansion into new markets.

Gerard Cassidy asked if recent business wins (TIAA, Franklin Templeton) were primarily due to cross-selling from the new commercial model or new client-created products. He also inquired about BNY's client scorecard for optimal service mix and its openness to inorganic opportunities or acquisitions.

Answer

CEO Robin Vince clarified that it's a transformation from siloed product delivery to equipping sales teams and clients with knowledge of BNY's full, adjacent product suite, noting that clients buying three or more services are up 40% over two years. He humorously stated 'none of them are at the optimal mix' for clients but confirmed BNY uses dashboards and targets to embed commercial model rhythms. Robin stated BNY is 'very open to M&A' if it accelerates or de-risks strategies, but feels 'no pressure whatsoever' due to the success and runway of its organic transformation.

Gerard Cassidy inquired if recent business wins (TIAA, Franklin Templeton) were due to cross-selling from the new commercial model or new products, about a client scorecard for product adoption, and about interest in inorganic opportunities.

Answer

CEO Robin Vince clarified that wins stem from equipping sales teams and clients with knowledge of BNY Mellon's broad, adjacent products, leading to increased value when used together, alongside product innovation and capturing megatrends. He noted that while no client is at an 'optimal mix,' the number of clients buying three or more services is up 40% over two years. Robin Vince also stated BNY Mellon is open to M&A if it aligns strategically and offers strong returns, but feels no pressure due to strong organic transformation.

Gerard Cassidy from RBC Capital Markets asked if BNY Mellon would consider a similar NII immunization strategy for 2026 as it did for 2025. He also inquired about the potential impact of regulatory changes to the supplementary leverage ratio (SLR) on balance sheet management and revenue.

Answer

CFO Dermot McDonogh confirmed that the firm is actively working on optimizing the balance sheet for 2026. CEO Robin Vince addressed the SLR, noting that the Tier 1 leverage ratio is BNY's binding constraint. He argued that the SLR is ill-advised as it penalizes holding cash and Treasurys, hindering banks' ability to absorb market supply and ultimately harming market function. He expressed hope that new agency leadership would move away from such "gold plating" rules.

Gerard Cassidy inquired about the outlook for M&A, given the company's strong capital levels and stock performance. He also asked for clarification on whether the revenue sensitivity to market changes applies equally to down markets.

Answer

CEO Robin Vince characterized the M&A approach as opportunistic, focusing on digestible, capability-enhancing bolt-ons like Archer that accelerate their strategy, rather than pursuing deals out of necessity. He reiterated the capital allocation waterfall: prudence, organic investment, opportunistic M&A, and shareholder returns. CFO Dermot McDonogh confirmed that the market sensitivity analysis applies to both up and down markets.

Gerard Cassidy asked for Bank of America's perspective on the sustained elevated levels of consumer deposits in the banking system since the pandemic, despite expectations for a flow-back.

Answer

Brian Moynihan (Chair and CEO, Bank of America) explained that the economy is larger, leading to more cash in circulation, and Bank of America has gained market share in core transactional accounts, increasing both customer numbers and average balances. He highlighted the operating leverage from stable costs against improved net interest income from these low-cost deposits, noting that the 'flow back' of money out of the banking system has largely already occurred.

Gerard Cassidy asked for insights into the sustained elevated levels of consumer deposits since the pre-pandemic period, despite expectations for money to flow out of the banking system.

Answer

Chair and CEO Brian Moynihan explained that the economy is larger, with more cash in circulation, and the company has gained market share in core transactional accounts, adding 750,000 new primary checking accounts annually. He noted that average balances per account have increased, and the low cost of consumer deposits (58 basis points) significantly boosts profitability. He believes deposits bottomed out 1.5-2 years ago and are now growing with economic expansion and market share gains, with no dynamic suggesting a significant outflow of money from the banking system.

Gerard Cassidy from RBC Capital Markets asked about the potential for the efficiency ratio to return to pre-pandemic levels and for the bank's view on the adoption of stablecoins and their potential impact on the business.

Answer

CEO Brian Moynihan stated that the efficiency ratio can move back toward pre-pandemic levels, noting that 200 basis points of the current ratio is due to the accounting for tax credit deals that will run off, and that accelerating NII growth will also drive improvement. Regarding stablecoins, he views them as a potential new payment rail the bank will be prepared to support for clients, similar to how the industry developed Zelle.

Gerard Cassidy asked for more detail on the risk profile of the commercial loan portfolio, especially the non-U.S. portion, compared to 2009. He also asked why credit card charge-offs are higher now than in recent years despite low unemployment.

Answer

CFO Alastair Borthwick described the commercial loan book as highly diversified, secured, and investment-grade, with growth supporting multinational clients. CEO Brian Moynihan explained that the current credit card charge-off rate represents a normalization from unsustainably low, stimulus-fueled levels and is in line with the pre-pandemic 2019 period.

Gerard Cassidy asked for the reasons behind the benign credit cycle despite rapid rate hikes and what potential 'curveball' risks the management team is focused on.

Answer

CFO Alastair Borthwick credited the strong credit performance to a more resilient consumer with stronger balance sheets and income levels, rather than any change in the bank's consistent underwriting standards. CEO Brian Moynihan identified geopolitical events and the buildup of excess leverage in the non-bank financial system as key risks, emphasizing that the company is managed to withstand such events.

Gerard Cassidy asked for color on the latest Basel proposal and its potential impact on capital returns. He also requested an update on the progress of the bank's branch banking system expansion into new markets.

Answer

CEO Brian Moynihan stated that while details are pending, the latest Basel proposal appears more favorable than the original, which would benefit the bank and support returning more capital to shareholders. He also explained the branch expansion is a disciplined strategy to achieve full market coverage in key cities, providing a 'high touch, high tech' experience, as many customers still prefer opening accounts in person.

Gerard Cassidy inquired about the balance sheet's interest rate sensitivity, specifically the impact of a 100 basis point instantaneous rate change and potential Fed cuts on net interest income over the next six months. He also asked for insights into loans to non-depository financial institutions (NDFIs) and comfort with this credit.

Answer

CFO Mark Mason clarified that a 100 basis point parallel shift across the curve would result in a $1.8 billion drag for total U.S., but only $400 million in U.S. dollar, with this number declining. He explained that NDFI exposure, including private credit, is predominantly investment grade, comprising securitization exposures with diversified collateral pools and structural protections. Citi maintains a selective approach to risk in this category.

Gerard Cassidy inquired about Citi's balance sheet interest rate sensitivity, specifically the impact of a 50 basis point Fed rate cut on NII over the next six months, and sought insights into loans to non-depository financial institutions (NDFIs) given their rapid industry growth.

Answer

CFO Mark Mason clarified that a 100 basis point parallel shift across all currencies would result in a $1.8 billion NII drag, with only $400 million in USD, and this sensitivity is declining. He explained that MBFI exposure, which includes private credit, is predominantly investment grade, made up of securitization exposures with diversified collateral pools, structural protections, and transparency, assuring comfort with the credit quality.

Gerard Cassidy of RBC Capital Markets asked about client flow characteristics in Wealth Management, specifically if net new investment asset flows improved in May and June as markets recovered. He also inquired about the rationale for the year-over-year reduction in allocated tangible common equity (TCE) to the Markets segment.

Answer

CEO Jane Fraser confirmed that Wealth Management saw positive momentum in May and June as clients became more proactive, though they remain cautious. CFO Mark Mason explained the reduction in allocated TCE to Markets was due to the business's excellent work in optimizing RWA and generating higher, more stable returns, which reduced its contribution to stress losses and thus its capital requirement in the firm's annual allocation.

Gerard Cassidy from RBC Capital Markets asked about client asset flow characteristics in the Wealth Management business toward the end of the quarter. He also inquired about the reasons for the year-over-year decrease in allocated tangible common equity for the Markets segment.

Answer

CEO Jane Fraser confirmed that positive momentum in wealth flows returned in May and June as markets recovered, although clients remain cautious. CFO Mark Mason explained that the lower capital allocation to the Markets business reflects its strong performance in optimizing RWA and generating higher, more stable returns, which reduced its contribution to the firm's modeled stress losses.

Gerard Cassidy asked about the drivers behind the strong seasonal growth in trading-related assets and the rationale for lowering the allocated equity to business lines like wealth and banking.

Answer

CFO Mark Mason attributed the growth in trading assets to strong performance and client demand across the entire platform. Regarding equity allocation, he explained it's an annual process and the reduction reflects the improved PPNR, profitability, and resiliency of the businesses in internal stress scenarios. This allows them to get the benefit of improved performance even before it might show up in the regulatory stress capital buffer.

Gerard Cassidy asked for details on the Banamex IPO process, including expected ownership percentage post-IPO and whether a gain or loss is anticipated. He also questioned the strategy for the U.S. Personal Banking business, given its low RoTCE and structural funding differences compared to peers.

Answer

CFO Mark Mason explained that the Banamex IPO process involves multiple steps and regulatory approvals, and he did not provide a precise timeline or ownership structure, noting the P&L impact occurs at deconsolidation. CEO Jane Fraser expressed confidence in the path to mid-to-high teen returns for U.S. Personal Banking, driven by top-line growth from co-brand partnerships like American Airlines, innovation in proprietary cards, and feeding the Wealth business.

Gerard Cassidy asked for more detail on the drivers of U.S. Personal Banking's RoTCE improvement and the reason for the credit loss allowance build in the Banking division.

Answer

CFO Mark Mason cited product innovation, like the STRATA card refresh, and the normalization of credit costs as key drivers for U.S. Personal Banking returns. He clarified the Banking ACL build was due to portfolio mix changes but was not material, pointing to a low corporate non-accrual loan ratio of 31 basis points.

Gerard Cassidy asked for color on commercial real estate trends outside of the office market, such as multifamily, and whether commercial real estate mortgage growth could return in 2026. He also inquired if Wells Fargo has considered using security risk transfers to manage risk.

Answer

CFO Mike Santomassimo reported that commercial real estate trends outside of office are stable, with no significant deterioration, and multifamily excess supply is being worked through. He doesn't anticipate office portfolio growth but sees opportunities in broader commercial real estate over time. CEO Charlie Scharf clarified they are actively lending across all CRE categories. Mike Santomassimo confirmed they have used security risk transfers in the past and will consider more if needed, with Charlie Scharf adding it's a tool to manage overall risk profile if economically sensible.

Gerard Cassidy of RBC asked for color on commercial real estate credit quality outside of the office market, specifically in multifamily and other properties, and whether Wells Fargo anticipates commercial real estate mortgage growth in 2026 if markets continue to bottom out. He also inquired if Wells Fargo has considered or would consider using security risk transfers to manage risk.

Answer

CFO Mike Santomassimo reported that credit quality in multifamily and other commercial real estate properties remains stable, with no significant deterioration or change in trend, and excess supply in multifamily pockets is being worked through. He does not anticipate office portfolio growth but sees opportunities for broader commercial real estate growth over time. CEO Charlie Scharf clarified that Wells Fargo is actively lending across all CRE categories, including office, for quality properties. Mike Santomassimo confirmed that Wells Fargo has used security risk transfers in the past and will consider more if economically sensible, but underwriting is done with the intent to keep assets.

Gerard Cassidy asked for insights into commercial real estate (CRE) trends outside of the office market, such as multifamily, and whether any changes were observed compared to earlier in the year. He also inquired if Wells Fargo anticipates CRE mortgage growth in 2026, particularly if markets continue to bottom out, and whether the company has considered or would use security risk transfers to manage risk, similar to peers.

Answer

CFO Mike Santomassimo reported overall stability in other CRE segments, with no significant deterioration or trend changes, noting that pockets of excess supply in multifamily are 'getting worked through.' He does not anticipate office portfolio growth but sees opportunities for broader CRE growth over time, depending on market conditions. CEO Charlie Scharf clarified that Wells Fargo is actively lending across all CRE categories, including office (for quality properties), but growth depends on new lending versus payoffs. Mike Santomassimo confirmed Wells Fargo has used security risk transfers in the past and will consider more if needed. Charlie Scharf added that while it's a tool, underwriting is done with the intent to keep assets, and future use would be for economic risk management.

Gerard Cassidy of RBC Capital Markets requested more detail on the drivers of commercial and industrial (C&I) loan growth within the Corporate and Investment Bank. He also asked if any other business divestitures were planned following the sale of the rail equipment leasing unit.

Answer

CFO Michael Santomassimo explained that the C&I loan growth was broad-based, with contributions from fund finance, TMT, industrials, healthcare, asset-backed lending, and prime brokerage. He confirmed that the rail portfolio was the last significant business divestiture planned as part of the company's multi-year strategic simplification.

Gerard Cassidy of RBC Capital Markets asked for more color on the commercial and industrial (C&I) loan growth within the Corporate and Investment Bank. He also inquired if there were any other businesses slated for divestiture following the sale of the rail equipment leasing business.

Answer

CFO Michael Santomassimo detailed that the C&I growth was broad-based across the Corporate and Investment Bank, including areas like fund finance, TMT, industrials, healthcare, asset-backed lending, and prime brokerage. He also confirmed that the rail portfolio was the last major business identified for divestiture as part of the company's strategic simplification.

Gerard Cassidy asked about the optimal mix between net interest income and noninterest income after the asset cap is lifted, and inquired if specific C&I loan categories are receiving more rigorous credit scrutiny.

Answer

CEO Charlie Scharf stated that the company has not defined a specific optimal revenue mix post-asset cap, but emphasized that building fee businesses in card, wealth, and payments is strategically sound regardless. CFO Mike Santomassimo responded that the entire C&I portfolio is under continuous review, highlighting the company's long-standing and robust credit discipline rather than focusing on specific categories.

Gerard Cassidy of RBC Capital Markets asked about the key risks the bank focuses on, aside from geopolitical issues. He also inquired about the potential for M&A, particularly depository acquisitions, once all regulatory issues are resolved, noting Wells Fargo's deposit share is now below the 10% threshold.

Answer

CEO Charlie Scharf identified cybersecurity as the biggest non-economic risk they focus on, with the overall strength of the U.S. economy being the most critical factor for business performance. CFO Mike Santomassimo addressed M&A by stating the company is 100% focused on its significant organic growth opportunities and that this focus will not change even after the asset cap is lifted.

Gerard Cassidy asked for an update on the commercial real estate (CRE) office portfolio's credit quality and whether conditions are stabilizing, as well as how customer deposit behavior has responded to lower rates.

Answer

CEO Charlie Scharf stated that while CRE office performance is within expectations, conditions are not improving but rather worsening as more properties are impacted by revaluations. CFO Michael Santomassimo added that the bank's allowance is appropriate for a workout that will take a long time. On deposits, he noted that customer behavior has not changed significantly, with the year-long trend of slowing migration to higher-yielding products continuing.

Asked why the 17% ROTCE target hasn't increased despite higher capital levels, questioning if the business is now inherently more profitable or if current returns are inflated by temporary tailwinds. Also asked for clarification on weaker performance in securitized products.

Answer

Executives explained that the true value for shareholders is the ability to reinvest capital at a high ROTCE, not just achieving a static target. They acknowledged the current environment is exceptionally favorable but also that long-term strategic investments are paying off. The competitive landscape prevents them from declaring permanent victory on returns. The comment on securitized products simply reflected normal diversification within the markets business during the quarter.

Gerard Cassidy asked if JPMorgan Chase is seeing any signs of customers re-intermediating from private credit back to traditional banks due to market volatility. He also inquired about their confidence level in achieving meaningful regulatory reform under the new administration.

Answer

Executive Jeremy Barnum stated it's too early to see a clear trend of re-intermediation but emphasized the bank's commitment to lending through all cycles. Regarding regulation, Barnum gave a diplomatic response about working constructively with any administration, while CEO James Dimon added that he believes there is now a 'deep recognition of the flaws in the system' among policymakers.

Inquired about the drivers behind elevated consumer checking deposit levels and asked for the pros and cons of using a special dividend to reduce excess capital.

Answer

The bank sees healthy checking account growth driven by the end of yield-seeking outflows combined with successful client acquisition from its branch expansion strategy. Regarding special dividends, Jamie Dimon stated bluntly that the bank is not going to do one, as they are not believed to add shareholder value and that holding cash patiently is a better strategy.

Gerard Cassidy of RBC Capital Markets asked for an update on the potential impact of the new Basel III rules and whether the firm would consider using its excess capital to increase its loan-to-asset mix.

Answer

CEO James Dimon stated his excess capital estimate of $30 billion already assumes a less severe Basel III outcome based on recent regulatory commentary. CFO Jeremy Barnum added that the firm needs to see the detailed proposal and advocated for a holistic review of all capital rules. Regarding the asset mix, Dimon responded 'Absolutely positively not,' clarifying that loan growth is an outcome of good business, not a primary tool for deploying excess capital.

On behalf of Gerard Cassidy from RBC, a representative asked if further reserve releases should be expected in 2025 given the stable NCO guidance. They also requested color on the C&I loan book, which saw a slight pickup at quarter-end.

Answer

CFO Clark Khayat stated that while he doesn't expect 'massive reserve releases,' the credit book is viewed as stable to improving. Regarding C&I loans, he acknowledged the slight pickup and strong pipelines but noted they are waiting for borrowing activity to materialize more consistently, citing continued low line utilization rates.

Gerard Cassidy asked about the potential impact on 2025 Net Interest Income (NII) if the inverted yield curve normalizes to a positively sloped curve. He also questioned the bank's capital return policy, specifically the target payout ratio for dividends and buybacks once Basel III endgame rules are finalized.

Answer

CFO Bryan Preston described a steeper yield curve as 'very powerful' for NII, as it would provide relief on liability costs and improve spreads on fixed-rate assets. CEO Tim Spence added that this outlook is realistic, citing macroeconomic factors that could support a stickier long end of the curve. Regarding capital, Preston reiterated a target dividend payout ratio of 35-45% in normal environments, with buybacks determined by capital capacity after funding organic growth.

Gerard Cassidy asked for color on the significant drop in transfers to nonaccrual loans and the reason for the increase in commercial loan charge-offs. He also inquired about the Shared National Credit (SNC) portfolio's exposure to private equity and private credit firms.

Answer

Chief Credit Officer Greg Schroeck explained the commercial charge-offs were driven by two idiosyncratic, previously reserved loans and not a systemic trend. He noted overall credit metrics, including NPAs, improved. Regarding SNCs, he stated exposure to private credit is minimal, with the main exposure to financial sponsors being through well-collateralized subscription lines.