Jim Mitchell

Jim Mitchell inquired about the implied flatness of the balance sheet in the NII guide, opportunities for balance sheet optimization, and the base assumptions for deposit mix and growth in 2026.

Answer

CFO John Woods confirmed that the 2026 NII guide implies a stable or slightly declining balance sheet, driven by optimization efforts. These efforts include running off higher-cost short-term wholesale funding, focusing lending on deep relationship activities (subscription finance, fund finance, CLOs), and ongoing securities portfolio repricing. He stated that the base assumption for deposits in 2026 is around $250 billion, with non-interest-bearing deposits comprising approximately 10% of that total.

Jim Mitchell asked about the implications of State Street's NII guide and NIM discussion, suggesting a flat implied balance sheet for 2026. He inquired about opportunities for balance sheet optimization and the outlook for balance sheet growth. He also asked for the base assumption embedded in the guide regarding the mix and growth of deposits.

Answer

CFO John Woods confirmed a stable overall balance sheet for 2026, with optimization efforts focused on running off higher-cost short-term wholesale funding that was non-customer-facing and diluted to NIM/NII. He also mentioned pulling back on thinner relationship activities in the loans portfolio to reserve capital for attractive, deep relationship lending, and ongoing repricing/optimization in the investment portfolio. He stated the base assumption for deposits is around $250 billion (stable), with about 10% non-interest-bearing (~$25 billion) for 2026, slightly off from Q4.

Jim Mitchell with Seaport Global asked about the strength in State Street's Markets business, specifically FX trading and securities finance, inquiring about the market environment, efforts to gain share, and the growth outlook from current elevated levels. He also asked about State Street's flexibility in expense management for the next year to maintain positive operating leverage if the revenue environment softens.

Answer

CFO John Woods noted that rising volatility in equities and FX is a tailwind for the Markets business in Q4. He emphasized the integrated offering of Markets with core investment services and investment management clients, driving growth in flow business and securities lending. CEO Ron O’Hanley highlighted efforts to build channel capability in FX, resulting in double-digit volume growth year-over-year. Regarding expenses, John Woods stated that while there are discretionary levers, State Street aims to invest through downturns, protecting 'crown jewels.' He also noted that the Markets business and NII can act as shock absorbers, and investment pace can be recalibrated based on revenue outlook.

Inquired about the degree of flexibility in the expense base if revenues weaken and how the market volatility in April is affecting deposit flows and trading activity.

Answer

Management stated they have significant flexibility on expenses due to ongoing multi-year transformation efforts, allowing them to pull forward productivity initiatives without harming long-term strategy. In April, they are seeing what is typical for uncertain times: elevated deposit levels and increased trading volatility, which their trading organization is able to capture.

Jim Mitchell questioned how the Asset Management turnaround and potential operating/comp leverage might lower the bar for the advisory side in achieving the 60% compensation ratio goal in the intermediate term.

Answer

Peter Orszag, Lazard's CEO and Chairman, expressed confidence in operating leverage kicking in further in 2026 and progress on reducing the comp ratio. He explained that operating leverage on the advisory side stems from improved productivity per MD (as new hires mature), while on the asset side, it comes from 'scale for strategy' and efficiencies from AI.

Jim Mitchell inquired about the operating and comp leverage in the Asset Management business and how its turnaround impacts the firm's intermediate-term goal of achieving a 60% compensation ratio.

Answer

Peter Orszag, Lazard's CEO and Chairman, expressed confidence in further operating leverage kicking in during 2026 and progress in reducing the comp ratio. He explained that operating leverage on the advisory side comes from improved productivity per MD (as new hires mature), and on the asset side, from 'scale for strategy,' along with efficiencies from artificial intelligence.

Jim Mitchell questioned the expected duration of wholesale funding paydown and its impact on earning asset growth, and sought clarification on Bank of America's capital buffer strategy, particularly regarding the CET1 ratio relative to regulatory minimums.

Answer

Alastair Borthwick (CFO, Bank of America) indicated that wholesale funding paydown would continue for a bit longer, contributing to net interest yield accretion, with earning asset growth potentially 1% slower over the next year. Brian Moynihan (Chair and CEO, Bank of America) stated the target is 50 basis points over regulatory minimums for CET1, expecting to work it down further once new rules are finalized, ideally through organic growth.

Jim Mitchell asked about the strategy behind reducing more expensive wholesale funding, its impact on net interest yield, expected earning asset growth, and the long-term target for the capital buffer.

Answer

CFO Alastair Borthwick indicated that paying down wholesale funding is net interest yield accretive, with a little more to do, potentially slowing earning asset growth by about 1% over the next year. Chair and CEO Brian Moynihan added that the CET1 ratio is well above the 10% minimum, with a target of 50 basis points over regulatory minimums, and the company expects to work it down once new rules are finalized in the first half of next year.

Jim Mitchell asked about the net interest income (NII) outlook for next year, potential for growth from Q4 levels, and the puts and takes regarding asset repricing, balance sheet growth, and rate headwinds. He also asked about the capital target and buyback pace.

Answer

CFO Mark Mason anticipates continued NII growth into 2026, driven by deposit growth, loan momentum (branded cards, trade lending), and reinvestment of maturing investment portfolios at higher rates, mitigating rate cut pressures. He reiterated the $20 billion buyback program and the 12.8% CET1 target, expecting the current 13.2% to decline over the next couple of quarters, balancing growth investments and shareholder returns.

Asked about the potential impact of the new administration on the regulatory structure and whether loan demand has improved following the election.

Answer

The bank hopes for a more coherent, rational, and less bureaucratic regulatory framework that balances safety with economic growth, but avoided specific predictions. They are not yet seeing a significant increase in loan demand despite improved business sentiment, attributing it to open capital markets and healthy corporate balance sheets.

Jim Mitchell from Seaport Global inquired about Evercore's Equity Capital Markets (ECM) business, asking about its current market share position and the potential for growth and upside as the IPO market recovers.

Answer

CEO John Weinberg explained that the ECM business is gaining momentum with a goal to be a top-10 firm, currently ranking around 11th. He highlighted that the business has successfully broadened its reach beyond its traditional strength in biotech, noting its role as a bookrunner in five of the last eight U.S. tech IPOs. He expressed optimism about ECM being a significant growth area for the firm.