John Pancari

John Pancari of Evercore ISI asked for further discussion on the competitive landscape in the consumer segment, particularly regarding competing travel rewards programs, and what poses the greatest risk to American Express's 2026 outlook: competitive dynamics or macroeconomic/political factors.

Answer

CEO Steve Squeri identified macroeconomic or political factors as the greatest risk, not competitive dynamics, which have been consistently intense since the financial crisis. He noted that competitors often follow Amex's playbook, and Amex's strategy is to stay ahead and differentiate through superior customer service, which he considers an often-overlooked but heavily invested component of their value proposition.

John Pancari asked for further discussion on the competitive landscape in the consumer segment, particularly regarding competing travel rewards programs, and what poses the greatest risk to American Express's 2026 outlook: competitive dynamics or macroeconomic/political factors.

Answer

Steve Squeri, Chairman and CEO, identified macroeconomic or political factors as the greatest risk to the 2026 outlook, rather than competitive dynamics, which have been consistently tough since the financial crisis. He emphasized American Express's strategy to stay ahead of competitors by elevating its playbook and providing superior customer service, an area where they consistently win awards.

John Pancari asked about the magnitude of positive operating leverage expected in 2026, following a solid expense performance in Q4 2025, and whether the company can maintain the 100 basis points pace achieved in 2025. He also inquired about the reasonable pace of share buybacks for 2026, considering loan growth expectations and capital generation outlook.

Answer

Perry Beberman, Executive Vice President and Chief Financial Officer, expressed satisfaction with 2025's operational excellence, driven by continuous improvement, technology, and AI. He stated that the degree of operating leverage in 2026 will largely depend on macro conditions impacting revenue, while expense management is well in hand, ensuring positive operating leverage. For buybacks, he noted the company's strong capital generation and CET1 ratio, with $240 million remaining on authorization, and the pace will depend on loan growth and capital exceeding stated targets.

John Pancari from Evercore asked about the expected magnitude of positive operating leverage for Bread Financial in 2026, following a solid expense beat in Q4 2025 and 100 basis points achieved in 2025. He also inquired about the reasonable pace of share buybacks for 2026, considering loan growth expectations and the capital generation outlook, given the $120 million buyback in Q4 2025 and a 13% CET1 ratio.

Answer

Perry Beberman, Executive Vice President and Chief Financial Officer, stated that the degree of operating leverage in 2026 will largely depend on macro conditions impacting revenue, such as loan growth, Fed cuts, and delinquency improvement affecting late fees, while the expense side is well-managed. He confirmed the commitment to delivering positive operating leverage. Regarding buybacks, he noted the $240 million remaining authorization and stated that the pace would depend on loan growth and capital in excess of stated targets, emphasizing the company's strong capital generation and ratios.

John Pancari asked about the future pace of share buybacks, given the early completion of the $150 million authorization and a slower loan growth outlook. He also requested insight into the net interest margin (NIM) trajectory from its current level.

Answer

EVP and CFO Perry Beberman stated that capital priorities are unchanged, focusing on responsible growth, technology investment, and maintaining strong capital ratios before returning capital to shareholders. He noted that future buybacks will be discussed with the board, balancing all priorities. Regarding NIM, he reaffirmed the outlook for slight full-year expansion, citing tailwinds from pricing changes that are expected to offset headwinds from anticipated prime rate cuts and lower late fees.

John Pancari requested a breakdown of the drivers behind the 170 basis point linked-quarter decline in loan yield, specifically the impacts from Fed cuts, lower big-ticket sales, and the portfolio shift away from private label. He also asked if the shift to co-brand is happening faster than expected and if the flat average loan growth outlook is conservative.

Answer

EVP & CFO Perry Beberman attributed the yield decline to a 'double whammy' effect: rapid repricing of variable-rate loans due to prime rate cuts, and lower billed late fees from improved delinquency, while high gross losses still caused reversals of interest. He confirmed the loan growth outlook is conservative due to economic uncertainty and that the co-brand shift is a deliberate diversification strategy, partly driven by charge-offs of higher-risk private label accounts.

John Pancari asked for a definition of 'normal seasonality' for credit losses and whether the Q1 2025 loss rate could top 9%. He also inquired about the percentage of cardholders in hurricane-impacted areas and sought confirmation on the materiality of late fee mitigation benefits in 2024.

Answer

EVP and CFO Perry Beberman clarified he was not providing specific guidance but reminding analysts that a seasonal loss rate increase from Q4 to Q1 is normal. He estimated 4-5% of customers were in the impacted FEMA zones. He confirmed the mitigation impact was not material to full-year 2024 results but will begin to build and have a slightly positive effect in Q4, helping to offset some seasonal NIM pressure.

John Pancari asked for additional details on the financial impacts of the Brex deal, including tangible book dilution, earnings accretion, and book value earned back. He also questioned the timing of the acquisition given the ongoing Discover integration.

Answer

CFO Andrew Young stated that Capital One does not intend to provide additional metrics beyond the purchase price, associated balance sheet marks, and integration costs, which will be detailed after close. Chairman and CEO Richard Fairbank explained that the Brex deal was carefully assessed for its impact on Discover integration resources and found to largely involve different business areas, allowing both to proceed in parallel. He noted that the Brex investment offsets some organic spending, and the view of earnings power post-Discover integration remains consistent, inclusive of Brex.

John Pancari requested additional details on the financial impacts of the Brex deal, specifically tangible book dilution, earnings accretion, and book value earned back. He also questioned the timing of the acquisition given the ongoing Discover integration efforts.

Answer

Chairman and CEO Richard Fairbank stated that due to Brex's relative size, specific metrics like tangible book dilution and earnings accretion would not be provided, but purchase price, balance sheet marks, and integration costs would be disclosed. He clarified that the Brex acquisition's integration largely involves different business areas than Discover's, allowing both to proceed in parallel without impacting Discover's integration or expected synergies. CFO Andrew Young confirmed that, in isolation, Brex would initially be earnings dilutive but expected to be significantly accretive over time due to its high growth rate.

John Pancari from Evercore asked for clarification on whether Capital One's 'necessary, significant, and sustained investments' were mostly in the run rate, and how to think about a reasonable near-term or medium-term efficiency ratio given these investments.

Answer

Richard Fairbank, Capital One's Chairman and CEO, clarified that while investments in existing opportunities (like Capital One Shopping, Travel, Auto Navigator) were in the run rate due to years of development, the *incremental* investment imperative was growing. He explained that Capital One's organic growth model requires significant, patient investment, often leading to a 'hole-digging' stage before payoff. Fairbank noted that these investments, while putting short-term pressure on metrics like the efficiency ratio, ultimately drive long-term growth, enhanced customer experiences, efficiency benefits, and breakthroughs in risk management, especially through technology transformation and AI.

John Pancari sought clarification on whether Capital One's significant investments are mostly in the run rate and asked for insights into a reasonable near-term or medium-term efficiency ratio, or if such expectations might be provided in 2026.

Answer

Richard Fairbank, CEO and Chairman, clarified that while investments in existing opportunities are in the run rate due to years of development, incremental investment is increasing as opportunities accelerate. He emphasized Capital One's organic growth model, where upfront investments in technology and marketing often precede revenue growth, potentially putting short-term pressure on metrics like the efficiency ratio, but leading to long-term benefits across growth, customer experience, and efficiency.

John Pancari of Evercore ISI sought to clarify the distinction between the upfront integration costs, which are rising, and the ongoing investments that might be netted against the previously announced cost synergies.

Answer

CFO Andrew Young delineated three separate financial items: 1) One-time integration costs (deal costs, tech migration), which are trending higher. 2) Cost synergies from combining the organizations, which remain fully intact. 3) Additional, ongoing investments to power future growth, which are evaluated separately and are distinct from achieving the cost synergies.

John Pancari asked if the current regulatory or competitive backdrop could alter the Discover synergy estimates and sought confirmation on previously announced metrics like 15% EPS accretion and a 14% CET1 ratio at closing.

Answer

CFO Andrew Young stated that the strategic and financial benefits of the deal remain intact, but declined to re-affirm specific accretion metrics due to changed variables like stock prices. Chairman and CEO Richard Fairbank added that they still expect to achieve the announced synergies and highlighted significant long-term opportunities not included in the original deal model, such as expanding the network's use.

John Pancari followed up on the efficiency ratio, asking if the low 42% range guided for 2024 would hold for 2025. He also asked if there were any changes to the expected financial metrics for the Discover acquisition.

Answer

CEO Richard Fairbank highlighted the company's long-term, technology-driven efficiency improvements but cautioned against short-term extrapolation and did not provide 2025 guidance. CFO Andrew Young addressed the deal metrics, stating that while variables have moved, the company remains comfortable with the estimates provided at the deal announcement and feels very good about the transaction both strategically and financially.

John Pancari asked about capital management, seeking updated thoughts on share buybacks given the high 13.6% CET1 ratio and the pending Discover deal. He also asked for a breakdown of the recent loan yield increase, specifically the impact from the Walmart portfolio.

Answer

CFO Andrew Young explained that the company is maintaining high capital levels due to uncertainties around final bank capital rules, the macroeconomy, and, most importantly, the pending Discover acquisition. He confirmed the current $150 million quarterly buyback pace is prudent for now. Regarding loan yield, Mr. Young clarified that the year-over-year card yield is flat when excluding the Walmart partnership's impact, and the quarter-over-quarter increase was primarily due to the full-quarter effect of the Walmart termination and normal seasonality.

John Pancari from Evercore ISI questioned the confidence in achieving the 9-11% pro forma loan growth projection for 2026, considering increased market competition and CapEx demand uncertainty, focusing on underlying organic growth and hiring. He also asked about the reason for adjusting the 2026 cost savings recognition from 50% to 40% and potential risks of further delays.

Answer

Kevin Blair, President and CEO, Synovus Financial, expressed confidence, citing 10% pro forma loan growth in Q4 2025, positive client sentiment in the Southeast, and growth driven by existing team members, recent hires, and specialty businesses. He emphasized that growth is not solely dependent on economic expansion but on strategic hiring. Jamie Gregory, CFO, Synovus Financial, attributed the cost savings adjustment to the rapid January 1 merger close, which pushed back some system integrations, and a decision to lean into best-in-class benefits, clarifying that it's a timing difference with no change to total or year-two savings.

John Pancari from Evercore ISI questioned the confidence in achieving the 9-11% pro forma loan growth projection for 2026, considering the competitive environment and CapEx demand uncertainty. He also asked for clarification on the revised 40% cost savings recognition for 2026 and potential risks of further delays.

Answer

Kevin Blair (President and CEO, Synovus Financial) expressed confidence in loan growth, citing 10% pro forma growth in Q4 2025, positive client sentiment in the Southeast, and growth driven by recent hires and specialty businesses, not solely economic growth. Jamie Gregory (CFO, Synovus Financial) clarified that the reduction in 2026 cost savings from 50% to 40% was due to the rapid deal close pushing back system integration and leaning into best-in-class benefits, but the total savings and year-two timing remain unchanged.

John Pancari asked about Regions Financial's approach to share buybacks, given a CET1 ratio of 10.8% and $430 million in repurchases in Q4, balancing capital needs for improving organic loan growth. He also sought updated thoughts on whole bank M&A potential, considering the open window and the potential need for scale.

Answer

CFO Anil Chadha stated that Regions Financial generates about 40 basis points of capital quarterly, with dividends taking 18 basis points. The primary focus is investing in good loan growth, with buybacks used when loan growth is not present, as seen in Q4. Former CFO David J. Turner added that the adjusted CET1 is within the target range of 9.25%-9.75%. Anil Chadha reiterated that depository M&A is not part of the current strategy, and while the window is open, decisions are driven by shareholder value creation, not market timing.

John Pancari inquired about Regions Financial's capital allocation strategy, specifically the pace of share buybacks given a 10.8% CET1 ratio and $430 million in Q4 buybacks, balancing capital needs for organic loan growth versus repurchases. He also asked for updated thoughts on whole bank M&A potential, the perceived need for scale, and the risk of the M&A window closing.

Answer

CFO Anil Chadha stated that Regions generates approximately 40 basis points of capital quarterly, with 18 basis points allocated to dividends. The primary focus is investing in loan growth, but if opportunities are not present, they will repurchase shares, as demonstrated by the $430 million in Q4. Former CFO David J. Turner added that the adjusted CET1, inclusive of AOCI, is 9.6%, within their target range. CEO John M. Turner, Jr. reiterated that depository M&A is not part of their current strategy, emphasizing a focus on executing their business plan and core deposit system transformation over the next 15-18 months, without suffering from 'fear of missing out'.

John Pancari requested a deeper analysis of the loan growth dynamics, including line utilization and key drivers, and asked about the competitive landscape in the Southeast for both loans and deposits.

Answer

President, CEO, & Chairman John Turner reported that loan pipelines are up 17% year-over-year, with growth in energy, asset-based lending, and manufacturing. This growth is partly offset by a disciplined runoff of nearly $1 billion in leveraged lending. He acknowledged intense competition in their markets but emphasized that Regions competes through strong execution, brand reputation, and building broad customer relationships, which has resulted in 5% annualized growth in new commercial relationships year-to-date.

John Pancari of Evercore ISI inquired about the revised lower loan growth guidance, asking for details on line utilization and potential pre-tariff drawdowns. He also asked about the anticipated pace of share buybacks given the muted loan growth environment.

Answer

Executive John Turner explained that loan pipelines are mixed, with softness in the upper-middle market as clients access bond markets, while middle-market and real estate pipelines are expanding. He noted that line utilization remains flat as customers hold significant liquidity. Executive David Turner stated that with strong capital generation and low loan demand, the company expects to "lean into" share buybacks.

John Pancari sought clarification on the 1% loan growth forecast for 2025, asking where the bank is seeing pressure on risk-adjusted returns. He also asked if the 1% to 3% expense growth guidance incorporates a potential increase in the IT budget.

Answer

Executive John Turner explained that the focus on risk-adjusted returns leads to exiting relationships that fail to generate expected ancillary business. Executive David Turner added that the net 1% growth reflects robust C&I growth offset by softness in commercial real estate. Turner confirmed the expense guide includes higher IT spending for new systems, which is funded by efficiencies in other areas, a point John Turner reiterated.

John Pancari inquired about the outlook for loan growth, asking for catalysts for a pickup in demand, and separately questioned the confidence in the revised expense guidance and the expectation for positive operating leverage in 2025.

Answer

CEO John Turner noted that while loan demand is currently soft, he expects modest growth in 2025 as economic and political uncertainty subsides. CFO David Turner added that he is highly confident in the updated expense guidance for 2024 and affirmed that the company is set up to achieve positive operating leverage in 2025.

John Pancari from Evercore ISI inquired about PNC's capital management strategy, specifically clarifying the expected quarterly share repurchase pace for 2026, the targeted CET1 ratio post-First Bank acquisition, and a good medium-term ROTCE target for the company.

Answer

Rob Reilly, Executive Vice President and CFO, confirmed the $600 million-$700 million quarterly share repurchase pace for 2026. He stated the CET1 ratio would be around 10.2%-10.3% after the First Bank deal and Q1 repurchases, with a short-term target of 10%. For ROTCE, he noted an exit rate of 17% for Q4 2025, projecting it to reach 18% by this time next year and continue higher. Bill Demchak, Chairman and CEO, added that ROTCE is viewed as an outcome, not a target, due to its dependence on the operating environment and capital management.

John Pancari inquired about PNC's capital management strategy, specifically the expected quarterly share repurchase pace for 2026, the targeted CET1 ratio post-FirstBank acquisition, and a medium-term ROTCE target for the company.

Answer

Rob Reilly, EVP and CFO, confirmed the $600 million-$700 million quarterly share repurchase pace for 2026. He stated that the CET1 ratio would be around 10.2%-10.3% after the FirstBank deal, with a short-term target of 10%. For ROTCE, he noted an exit rate of 17% for 2025, projecting it to reach 18% and higher by the end of 2026. Bill Demchak, Chairman and CEO, added that ROTCE is viewed as an outcome, not a target, due to its dependence on the operating environment and capital management.

John Pancari asked for an updated perspective on PNC's margin and Net Interest Income (NII) outlook, considering fixed asset repricing opportunities and potential tightening loan spreads. He also sought insights into broader commercial loan demand and whether CapEx pull-through is strengthening.

Answer

Rob Reilly, Executive Vice President and CFO, reiterated the full-year NII growth expectation of 6.5% for 2025, with a comfortable increase projected for 2026, excluding FirstBank. Bill Demchak, Chairman and CEO, clarified that any shift in the Q4 NII guide was due to the timing of expected Fed rate cuts, not a change in the overall NII trajectory. Both executives noted a slight strengthening in commercial loan demand, particularly in M&A financing and syndications, with stable utilization rates and growing unfunded commitments.

John Pancari asked for an updated perspective on PNC's margin and Net Interest Income (NII) outlook, specifically regarding fixed asset repricing opportunities given recent curve movements and the potential impact of tightening loan spreads on commercial loan yields. He also sought insight into broader commercial loan demand, CapEx pull-through, and whether the market is seeing strengthening or a wait-and-see approach.

Answer

EVP and CFO Rob Reilly projected 6.5% NII growth for the full year, with continued and increased trajectory into 2026, expecting PNC's standalone NII to grow by about $1 billion. Chairman and CEO Will Demchak clarified that a slight adjustment to the Q4 NII guide was due to a timing shift in expected Fed rate cuts, not a change in the overall NII outlook. Mr. Demchak noted a slight strengthening in commercial loan demand, driven by M&A, financing, and syndications, with stable utilization and growing unfunded commitments, indicating future loan growth.

John Pancari from Evercore ISI asked for more color on the decision to slightly lower the full-year fee income guidance despite a strong quarter, and also inquired about the competitive landscape for loan pricing.

Answer

EVP & CFO Robert Reilly clarified the fee income guidance adjustment from up 5% to 4-5% was minor and reflected 'heightened uncertainty' that emerged after January, with slight softness in areas like mortgages and private equity valuations. On loan pricing, Mr. Reilly stated that competition remains rational and spreads are consistent, with no significant contraction impacting yields.

John Pancari inquired about the drivers of the strong end-of-period C&I loan growth, questioning if it was temporary due to tariff-related inventory building. He also asked about the outlook for the capital markets business and the strength of the M&A pipeline.

Answer

CFO Rob Reilly stated that the C&I loan growth was broad-based and driven by higher utilization, in line with expectations, and not primarily a defensive or tariff-driven move. CEO Bill Demchak added that inventory build is inherent in working capital financing. Regarding capital markets, Reilly noted the M&A advisory pipeline (Harris Williams) is up nearly 20% year-over-year, signaling future strength despite some near-term softness in other areas.

John Pancari of Evercore ISI requested a breakdown of the drivers behind the 5% fee income growth forecast for 2025. He also asked about the expected pace of share buybacks and their sustainability, given the bank's strong capital position.

Answer

CFO Rob Reilly detailed the fee income forecast, expecting mid-to-high single-digit growth in capital markets and card & treasury management, with mortgage being a headwind. Regarding capital, Reilly stated the recent buyback pace of $100-$200 million per quarter is sustainable and expected to continue.

John Pancari of Evercore ISI asked for insights into underlying commercial loan demand, the potential catalysts for a rebound, and reasonable growth expectations for 2025. He also questioned the outlook for the capital markets business following a strong third quarter.

Answer

CFO Rob Reilly acknowledged that loan growth has been slower than expected due to low utilization and uncertainty. However, he pointed to growing loan commitments as a constructive sign for future demand. Regarding capital markets, Reilly stated that the fee income guidance for Q4 anticipates a 5-7% decline, largely because some activity was likely pulled into Q3. He emphasized that momentum remains strong, with capital markets revenue up significantly year-over-year.

John Pancari asked for more detail on underlying commercial C&I growth, including CapEx drawdowns and line utilization, and how these factors influence growth expectations. He also inquired about the 30% jump in 90-day past dues in the quarter and its potential impact on non-performers and losses.

Answer

Daryl Bible, Senior Executive Vice President and CFO, M&T Bank Corporation, reported an increase in middle market commercial line utilization in Q4. He expects good overall C&I growth in the 3-5% range, with broad-based growth across all loan portfolios, including consumer (high single digit) and point-to-point growth in CRE. Regarding 90-day past dues, Bible attributed consumer delinquencies to genuine repurchases (an attractive trade), and commercial delinquencies to administrative delays around year-end, stating there was no concern for credit quality.

John Pancari asked for more specific color on M&T Bank's underlying Commercial C&I growth, including any observed drawdowns tied to CapEx or changes in line utilization. He also inquired about the 30% jump in 90-day past dues in the quarter, asking what drove it and its potential influence on non-performers and losses.

Answer

Daryl Bible (VP, Senior Executive and CFO, M&T Bank Corporation) noted an increase in middle market Commercial line utilization in Q4 2025 and expressed confidence in good overall C&I growth, including specialty and regional areas, contributing to a total loan growth of 3-5%. Regarding 90-day past dues, Mr. Bible attributed consumer delinquencies to Ginnie Mae repurchases and commercial delinquencies to administrative delays, stating there were no underlying credit quality concerns.

John Pancari questioned M&T Bank's CET1 target range of 10.75%-11%, asking what conditions would lead to a lower target and where a bank of M&T's size could realistically operate. He also inquired about competition in lending and the trend in front-end loan spreads for the commercial book.

Answer

Daryl Bible, SEVP and CFO, stated that discussions about adjusting the CET1 target would occur with the board later in the quarter, with potential updates in the January earnings call. He noted that commercial loan spreads are down 10-15 basis points from a quarter ago due to increased competition, but M&T remains efficient enough to achieve target returns.

John Pancari of Evercore ISI inquired about the anticipated pace of share buybacks for the remainder of the year and whether recent M&A activity has increased M&T's interest in whole-bank deals. He also asked for more detail on the C&I loan sluggishness impacting the NII guide.

Answer

CFO Daryl Bible indicated the bank would likely operate around an 11% CET1 ratio and could go to 10.75% if the economy improves, continuing buybacks when sensible. On M&A, he reiterated that deals will happen when the right partner is found, with no change in outlook. For C&I, he noted robust pipelines but low line utilization and strong paydowns have been a drag, though he expects this to moderate.

John Pancari asked about the anticipated pace of share buybacks for the remainder of the year and whether recent regional bank deals made M&A more attractive to M&T. He also requested more detail on the C&I loan sluggishness that contributed to the revised NII guidance.

Answer

CFO Daryl Bible stated that the buyback pace will depend on the economic outlook, with the bank comfortable operating at an 11% CET1 ratio but potentially moving toward 10.75%. He noted that 5.7% of shares were repurchased in the first half of the year. Regarding C&I loans, he explained that while pipelines are robust, growth has been muted by low line utilization and strong paydown activity, though he expects this to moderate.

John Pancari asked for detail on the loan growth outlook, including when the CRE decline might bottom out and the pace of C&I growth. He also asked about precautionary line drawdowns and drivers of end-of-period deposit growth.

Answer

Daryl Bible (executive) projected the CRE portfolio would bottom out by Q4, with C&I and consumer books showing momentum. He confirmed no evidence of precautionary line drawdowns, with utilization down slightly. End-of-period deposit growth was attributed to normal seasonality and activity in escrow and ICS accounts.

John Pancari asked if the current credit outlook could lead to continued reserve releases in 2025 and requested an updated view on the potential for whole bank M&A given the evolving regulatory environment.

Answer

CFO Daryl Bible indicated that while the commercial portfolio's improving health could reduce allowances, this might be offset by a mix shift toward consumer assets which require a higher allowance. Regarding M&A, he stated the bank is focused on its internal priorities, believing successful execution will create demand for M&T to expand, positioning it as a scaled, community-focused alternative to competitors.

John Pancari asked about the potential for positive operating leverage in 2025 and the expected trend for the loan loss reserve ratio, given improving credit and a changing loan mix.

Answer

CFO Daryl Bible expressed confidence in achieving positive operating leverage in 2025, suggesting a range of 150-200 basis points is in the neighborhood of their plan. Regarding the reserve ratio, he noted that while credit quality is improving, a mix shift towards higher-yielding but higher-charge-off consumer loans could keep the overall charge-off rate from declining significantly, as the bank becomes more diversified.

John Pancari asked for a breakdown of First Horizon's 2026 revenue guide, focusing on the net interest income (NII) trajectory and fee income trends, particularly ADR and capital markets. He also sought updated thoughts from management on potential whole bank M&A, considering the regulatory environment and accelerating deal activity.

Answer

Hope Dmuchowski, CFO, indicated that fee income upside would come from mortgage refinance and FHN Financial, while NII would be influenced by deposit betas and loan growth timing. Bryan Jordan, CEO, emphasized the company's balanced business model, which allows for revenue growth across various economic scenarios, and stated that M&A is not a priority, with the focus remaining on internal growth and profitability. He also expressed no concern about the regulatory window for M&A.

John Pancari of Evercore ISI requested a breakdown of the 2026 revenue guide between net interest income (NII) and fee income, asking if a low or mid-single-digit NII pace is reasonable. He also sought color on ADR trends, capital markets, and their influence on fee growth. Additionally, he asked for updated thoughts on whole bank M&A, considering the regulatory window and accelerating deal backdrop.

Answer

Hope Dmuchowski, Chief Financial Officer, stated that fee income's largest variable is mortgage refinance and gain on sale, with FHM Financial offering upside, while core lines should grow consistently. NII is harder to predict due to deposit betas and loan growth timing. Bryan Jordan, CEO, emphasized that the company intentionally avoids breaking down revenue due to its balanced business model and countercyclical businesses. On M&A, Mr. Jordan stated that he is not concerned about the regulatory window and that current priorities are internal, focusing on customer penetration and driving $100 million in PPNR growth. Small branch or deposit fill-ins would be considered, but M&A is not a priority.

John Pancari from Evercore ISI asked for details on the third-party review, including its scope and whether collateral assessments are primarily in-house or outsourced, along with their frequency. He also inquired about the bank's credit decisioning structure, specifically if it remains centralized or if underwriting and monitoring components are conducted at individual banks.

Answer

President and COO Scott McLean explained that the third-party review is a prudent step to learn from the recent incident and review policies, noting that collateral monitoring is mostly in-house with a strong historical track record. Chief Credit Officer Derek Steward clarified that Zions Bancorporation's model emphasizes local decisioning at affiliates, centrally monitored with second-line oversight, and credit executives report up through him, with his involvement depending on loan size.

John Pancari asked for more details on the third-party review, including its scope and comprehensiveness, and whether collateral assessments are purely in-house or outsourced, along with their frequency. He also inquired about the current state of credit decisioning, specifically if it remains centralized or if components of underwriting and monitoring are conducted at individual banks, referencing changes post-GFC.

Answer

President and COO Scott McLean explained that the third-party review is a prudent step to learn from the incident and review policies and procedures. Chief Credit Officer Derek Steward stated that collateral monitoring is mostly in-house, with rare issues, and field exams or audits are conducted for some customers. Derek Steward clarified that local decisioning at affiliates is core to their model, centrally monitored with second-line oversight, and credit executives report up through him, ensuring local presence while maintaining corporate oversight for larger credits.

John Pancari from Evercore ISI questioned the expected degree of positive operating leverage and the bank's ability to achieve it amid potential revenue pressure. He also asked about the benefits of the new core system in facilitating M&A integration.

Answer

CFO Ryan Richards reaffirmed a target of 100-200 bps of positive operating leverage, driven by revenue growth and investments in producers. President & COO Scott McLean added that the new, single integrated core system significantly simplifies M&A by creating a modern, clean environment for merging acquired entities. CEO Harris Simmons also noted the new platform's real-time settlement capabilities position Zions well for future innovations like tokenized deposits.

John Pancari asked for details on loan growth demand and pipeline trends, and also questioned the sharp increase in 30-89 day past-due loans and overall credit quality.

Answer

Chief Credit Officer Derek Steward noted that while C&I loan demand has slowed, CRE is seeing increased activity. Regarding credit, Steward expressed comfort with the reserve levels. Chairman and CEO Harris Simmons added that the past-due metric can be volatile and emphasized focusing on the low nonaccrual numbers for CRE as a better indicator of underlying strength.

John Pancari questioned the drivers behind the increase in classified and nonperforming assets, asking how much was due to an internal risk rating change and why that didn't trigger a larger loan loss reserve increase. He also inquired about the impact of declining interest rates on credit trends and the specific reserve allocation for the multifamily portfolio versus the broader commercial real estate book.

Answer

Chief Credit Officer Derek Steward explained it's hard to quantify the exact impact of the grading change, which is now more conservative and places less emphasis on guarantor support. He noted that under CECL, risk rating changes have less immediate impact on the allowance, which was already built up based on economic forecasts. Steward also provided reserve allocations: 2.4% for multifamily and 2.2% for the overall CRE portfolio. Chairman and CEO Harris Simmons added that post-crisis underwriting requires more borrower equity, creating a disconnect between classifying a loan and reserving for it, as the borrower's equity acts as a reserve.

John Pancari with Evercore sought clarification on Ally Financial's earning asset expectations, specifically the projected inflection to low single-digit growth in 2026 after a 2% decline in 2025, and the underlying components driving this. He also inquired about current liquidation rates and any risks posed by increased refinancing pressure from larger competitors. He followed up by asking CEO Michael Rhodes about potential future modifications to Ally's business base, including expansion into adjacencies or new product lines, given the recent streamlining efforts.

Answer

CFO Russ Hutchinson explained that the flat year-to-year earning asset levels are driven by growth in high-margin Retail Auto and Corporate Finance portfolios, offsetting exits from card and mortgage businesses and softer dealer inventories. He projected low single-digit earning asset growth overall for the medium term, with faster growth in Retail Auto and Corporate Finance. On liquidations, CFO Russ Hutchinson noted normalization from post-pandemic lows, primarily driven by trade-ins of lower-yielding loans, with refinancing still a small part of the overall picture and minimal NIM impact. CEO Michael Rhodes stated that Ally feels good about its current fragmented businesses with relevant scale and sees significant organic runway. He indicated that while adjacencies within existing Dealer Financial Services or Corporate Finance businesses might be explored, going far afield into other product types is not on the radar.

John Pancari asked about the primary limitations on asset growth, questioning if it was risk appetite, returns focus, or capital. He also inquired about the competitive landscape and its impact on retail auto origination yields.

Answer

CFO Russ Hutchinson clarified that capital is not a limiting factor for growth; the focus is on prudent growth with strong risk-adjusted returns, noting the main driver for revised guidance was lower floor plan balances. He acknowledged increased bank competition but highlighted Ally's record application volume and strong yields, attributing this to differentiated dealer relationships. CEO Michael Rhodes reinforced the commitment to discipline.

John Pancari asked for management's confidence in the revised retail auto charge-off guidance and for details on the expected performance of the 2023 vintage versus the 2022 vintage. He also inquired about the company's target for the CET1 capital ratio.

Answer

CFO Russ Hutchinson explained the guidance revision reflects the challenging macro environment and optimistic prior assumptions, but noted that the 2023 vintage continues to outperform 2022, giving confidence in the downward trend over time. Regarding capital, Hutchinson highlighted near-term headwinds from CECL phase-in and a potential EV accounting change, stating the focus is on building a buffer for Basel III requirements rather than targeting a specific number today.

John Pancari asked about Truist's 2026 revenue growth projections, seeking a breakdown between spread revenue and fee income, the underlying pace of balance sheet growth, and further clarification on the expected acceleration of positive operating leverage.

Answer

CEO Bill Rogers indicated that NII growth from continued loan and accelerating deposit growth would be a key component, alongside sustained fee income momentum. CFO Mike Maguire added that while specific guidance for 2026 is still in planning, fees are likely to grow faster than NII, and operating leverage is expected to be higher than the 100 basis points projected for 2025.

John Pancari from Evercore ISI inquired about the flexibility to manage expenses to achieve positive operating leverage if revenue proves stubborn, and sought more detail on the drivers behind the low-single-digit loan growth outlook.

Answer

CFO Mike Maguire affirmed confidence in delivering positive operating leverage, citing levers like performance-sensitive incentives. CEO William Rogers attributed the loan growth outlook to strong production momentum with new clients, which is offsetting flat line utilization. He expressed confidence in this trend continuing in both the consumer and commercial segments, driven by strategic initiatives and expansion efforts.

John Pancari inquired about loan growth drivers, including demand, pipeline strength, and utilization rates. He also asked for color on the investment banking pipeline and why the trading business was not benefiting more from market volatility.

Answer

CEO William Rogers described strong loan production momentum from new and existing clients, with healthy pipelines, particularly in consumer. He clarified the investment banking pipeline is deferred, not lost, due to client caution. He explained the trading business is client-focused with a low VAR, not a proprietary trading desk, so it has less beta to market volatility.

John Pancari asked for clarification on the most significant investment areas impacting the 2025 expense outlook and whether the company has spending flexibility if revenue is weaker. He also inquired if the $500 million quarterly share repurchase pace is sustainable.

Answer

CEO Bill Rogers and CFO Mike Maguire identified key investment areas as talent, product enhancements, and risk and cybersecurity infrastructure. Rogers affirmed a commitment to positive operating leverage, indicating spending could be adjusted. Regarding buybacks, Rogers stated the company has ample capital to maintain the current pace while also funding loan growth, viewing it as sustainable for the short to medium term.

John Pancari of Evercore inquired about U.S. Bancorp's confidence in achieving positive operating leverage for 2025 and potentially exceeding the 200+ basis points expectation in 2026, considering investments and revenue momentum. He also asked about the drivers of payments fee growth, customer acquisition, and the sustainability of the mid-single-digit expectation.

Answer

John Stern, Vice Chair and CFO, stated that while 2026 guidance is not formal, meaningful positive operating leverage is expected, driven by NII growth, mid-single-digit fee growth, and prudent expense management. Gunjan Kedia, CEO, added confidence in expense management due to ongoing signature programs and a positive revenue outlook, emphasizing the business model supports meaningful positive operating leverage. Regarding payments, Gunjan Kedia highlighted progress in creating interconnected product sets, multi-product sales efforts, and measurable lift in marketing effectiveness, citing new card acquisitions and strong 'sold but not installed' business as key drivers for mid-single-digit fee growth with potential upside.

John Pancari (Evercore) asked about the strong positive operating leverage in Q3 and the bank's confidence in achieving over 200 basis points for 2025. He also sought insights into the outlook for 2026, considering investments and revenue momentum, and whether operating leverage could exceed the 200-plus range. Additionally, he inquired about the drivers of fee momentum, particularly in payments, and the impact of customer acquisition and investments on sustainable fee performance.

Answer

John Stern, Vice Chair and CFO, stated that while 2026 guidance is not yet formal, the bank expects meaningful positive operating leverage, driven by NII growth, mid-single-digit fee growth, and prudent expense management. Gunjan Kedia, CEO, added confidence in expense management due to ongoing signature programs and a positive revenue outlook, emphasizing the business model supports meaningful positive operating leverage. Kedia highlighted progress in creating interconnected product sets and multi-product sales efforts, leading to measurable marketing effectiveness. She noted strong new card acquisitions and robust "sold but not installed" business in CPS and merchants, supporting mid-single-digit fee guidelines with potential upside.

John Pancari of Evercore inquired about U.S. Bancorp's confidence in achieving positive operating leverage for 2025 and potentially exceeding the 200+ basis points expectation in 2026, considering investments and revenue momentum. He also asked about the drivers of payments fee growth, customer acquisition, and the sustainability of the mid-single-digit expectation.

Answer

John Stern, Vice Chair and CFO, stated that while 2026 guidance is not formal, meaningful positive operating leverage is expected, driven by NII growth, mid-single-digit fee growth, and prudent expense management. Gunjan Kedia, CEO, added confidence in expense management due to ongoing signature programs and a positive revenue outlook, emphasizing the business model supports meaningful positive operating leverage. Regarding payments, Gunjan Kedia highlighted progress in creating interconnected product sets, multi-product sales efforts, and measurable lift in marketing effectiveness, citing new card acquisitions and strong 'sold but not installed' business as key drivers for mid-single-digit fee growth with potential upside.

John Pancari requested an updated outlook for loan and deposit growth. He also asked why the full-year revenue guidance was moved to the lower end of the 3-5% range and whether the bank is still comfortable with its mid-single-digit fee growth target.

Answer

Vice Chair & CFO John Stern indicated that loan growth opportunities, particularly in C&I and card, look better now than at the start of the year. He confirmed the revenue guidance adjustment was due to a slower-than-expected start for Net Interest Income, but expressed strong confidence in the fee outlook. He stated the bank is comfortable with achieving mid-single-digit fee growth, citing momentum in payments, trust, and other fee-based businesses.

John Pancari of Evercore ISI requested a breakdown of the fee growth outlook, questioning the sustainability of card fee growth, and asked about specific expense levers.

Answer

CFO John Stern clarified the mid-single-digit growth target is for total fees, noting that credit card revenue grew 4% ex-items in Q1. He and CEO Gunjan Kedia explained that expense levers include adjusting the pace of savings from programs in real estate and automation, with the main 'flex' being the amount of savings reinvested into the business.

John Pancari asked for the expected trajectory of the net interest margin (NIM) through 2025 and a potential exit rate. He also inquired if the bank's view on large-scale M&A had changed given the political and regulatory environment.

Answer

CFO John Stern projected that NIM would directionally follow NII higher, with potential to move toward the 3% level over time, influenced by loan growth, deposit management, and the yield curve. CEO Andy Cecere stated that the bank's view on M&A is unchanged; it is not a current priority due to factors like purchase accounting, regulatory hurdles, and valuations. President Gunjan Kedia added that the focus is on driving strong organic growth in areas like trust and capital markets.

John Pancari asked for details on the Q3 securities portfolio repositioning, including its size and yield impact, and questioned the expected magnitude of positive operating leverage for 2025.

Answer

CFO John Stern detailed a $10 billion notional securities transaction resulting in a $119 million loss, with a roughly two-year payback, and stated no further repositioning is in the guidance. Chairman and CEO Andy Cecere added that after ~30 bps of operating leverage in Q3, he expects it to be "north of 1%" in Q4 and to expand further into 2025.

John Pancari asked about the expected pace of expense growth for 2026 and the attainable degree of positive operating leverage, considering ongoing investments. He also inquired about the tightening commercial spreads and their impact on margin performance.

Answer

CEO Bruce Van Saun indicated that Citizens is already achieving positive operating leverage, driven by NIM expansion and NII growth without significant additional expenses. He anticipates even stronger positive operating leverage next year due to higher revenue growth and controlled expense growth. Chair of Commercial Banking Don McCree explained that tightening commercial spreads are a result of market liquidity, and Citizens focuses on overall relationship returns, including fee income, to offset this pressure, expecting spreads to remain tight.

John Pancari from Evercore ISI inquired about the competitive landscape, asking about intensifying pressure on both loan pricing and deposit gathering. He also asked for an updated perspective on the M&A environment for regional banks and Citizens' potential participation.

Answer

Head of Commercial Banking Don McCree acknowledged the competitive environment but emphasized that CFG's focus on multi-product relationships is a key differentiator. President Brendan Coughlin added that competition is intense but stable, and the bank will remain return-focused rather than chasing price. On M&A, Chairman & CEO Bruce Van Saun stated that the bank's primary focus remains on executing its organic growth strategy, particularly in the private bank and NYC Metro market. He described the bar for any potential deal as "pretty high" and viewed M&A as a "down the road" possibility rather than an imminent one.

John Pancari inquired about current loan demand, trends in line utilization, the potential for pre-tariff inventory builds to pull forward growth, and the bank's capital management strategy, specifically the trade-off between buybacks and capital preservation in a weaker macro environment.

Answer

CFO John Woods noted increased commercial line utilization driven by M&A and working capital, with some tariff impact. Head of Commercial Banking Don McCree added that a reversal of bond market disintermediation could be a tailwind. Head of Consumer Banking Brendan Coughlin highlighted strong growth in secured consumer loans. Regarding capital, both Woods and CEO Bruce Van Saun affirmed their commitment to the CET1 target range and stated they would opportunistically increase share repurchases if loan growth slows, citing the stock's attractive valuation and the bank's strong capital and reserve position.

John Pancari sought more detail on management's confidence in a loan growth inflection in Q4 and 2025. He also asked about the conviction that non-performing assets (NPAs) are peaking, especially given the sharp year-over-year rise in auto delinquencies.

Answer

CEO Bruce Van Saun clarified the Q4 loan growth outlook is modest but reflects building momentum in the Private Bank and commercial sponsor finance as rates decline. Head of Commercial Banking Don McCree cited strong subscription line growth, while Head of Consumer Banking Brendan Coughlin pointed to slowing non-core runoff and HELOC growth. On credit, Van Saun's confidence in peaking NPAs stems from four quarters of stable criticized and classified loans. McCree added the credit book is performing as expected. Coughlin explained the auto delinquency figures reflect a reversion to the mean and a denominator effect from halting originations, not underlying portfolio stress.

John Pancari asked for more specifics on lower-income cohorts, including differing payment rate behavior, stress in spend, or credit dynamics. He followed up on the capital front, asking about the potential pace of buybacks for Q4 and 2026 given the increased CET1 and $2.1 billion authorization.

Answer

Brian Wenzel (EVP and CFO) explained that non-prime cohorts performed better in transaction value and frequency due to credit actions removing the lower end of that population. He noted strong payment trends for non-prime borrowers, with more paying minimums. Regarding capital, he emphasized Synchrony's strong capital generation and excess position, stating the board approved the incremental $1 billion authorization with confidence, and the company plans to deploy the $2.1 billion aggressively but prudently over the next three quarters.

John Pancari of Evercore ISI asked what a stressed charge-off level might look like for Synchrony in a recessionary scenario, given its current business mix and recent credit tightening. He also questioned whether the company's evaluation of growth-accelerating actions includes potentially widening the credit box.

Answer

CFO Brian Wenzel declined to provide a hypothetical stressed charge-off number for a future recession but noted that due to lags, a recession starting now would likely have a more significant charge-off impact in 2026 than 2025. CEO Brian Doubles confirmed they are evaluating methodically widening the credit box, likely starting with existing customers, but any action would be managed to stay within their long-term 5.5%-6% net charge-off target range.

John Pancari questioned the strategy behind maintaining higher liquidity levels to prefund growth, asking for the long-term outlook. He also asked what Synchrony is hearing from its D.C. contacts about potential CFPB actions on the late fee rule following the election.

Answer

EVP and CFO Brian Wenzel explained that maintaining higher liquidity is a positive EPS trade and a strategic move to attract deposit customers now rather than re-accelerating acquisition efforts later. He sees the long-term liquidity level around 15-17%. Regarding the late fee rule, Wenzel stated it is hard to speculate on political outcomes, noting the legal process has many uncertainties and the appeal window remains open, so the company is monitoring it closely without making predictions.

John Pancari asked about the efficiency ratio assumption baked into Wells Fargo's 17-18% ROTCE target, specifically if it factors in reaching the high 50s. He also inquired about the cadence of reducing the CET1 ratio to 10-10.5% (organic growth vs. buybacks) and the specific regulatory factors that could allow for managing CET1 even lower over time.

Answer

CFO Mike Santomassimo stated that achieving 17-18% returns should lead to a meaningfully lower, more comparable efficiency ratio, without providing an exact number. He confirmed an expected $6 billion buyback in Q4, with the rest of the CET1 reduction depending on the pace of business growth. He noted that revised Basel III rules and the G-SIB package are key regulatory factors that could influence future capital management.

John Pancari of Evercore ISI asked about the efficiency ratio baked into Wells Fargo's 17%-18% Return on Tangible Common Equity (ROTCE) target, specifically if it factors in reaching the high 50s. He also inquired about the cadence of reducing the CET1 ratio to 10%-10.5% from the current 11%, distinguishing between organic opportunities and buybacks, and the specific regulatory drivers for potentially managing CET1 even lower.

Answer

CFO Mike Santomassimo stated that while he wouldn't provide an exact efficiency ratio, achieving 17%-18% ROTCE would imply a significantly lower, more comparable efficiency ratio than current levels. Regarding CET1, he mentioned the intention to repurchase approximately $6 billion in Q4, with the rest dependent on the pace of business growth. He noted that revised rules around regulatory capital (Basel III and G-SIB) are the key regulatory drivers for potentially managing CET1 lower.

John Pancari asked about the efficiency ratio assumption embedded in Wells Fargo's 17%-18% Return on Tangible Common Equity (ROTCE) target, specifically if it factors in reaching the high 50s. He also inquired about the cadence for reducing the CET1 ratio to the 10%-10.5% target (organic growth versus buybacks) and what specific regulatory factors could allow for managing CET1 even lower over time.

Answer

CFO Mike Santomassimo did not provide an exact efficiency ratio number but stated that achieving 17%-18% ROTCE would imply a 'meaningful improvement' in the efficiency ratio, making it 'much lower than it is right now,' potentially in the high 50s or 60s. Regarding CET1, he confirmed the intention to repurchase approximately $6 billion in common stock in Q4, with the remaining reduction dependent on the pace of business growth. For managing CET1 lower, he cited waiting for revised rules on regulatory capital, including Basel III and the G-SIB package.

John Pancari of Evercore ISI asked for an explanation for the relatively flat loan yields during the quarter, which seemed unexpected. He also inquired about the primary sources of competitive pressure on loan pricing.

Answer

CFO Michael Santomassimo attributed the flat loan yields to intense and consistent competition, which is keeping loan spreads tight. He specified that the pressure is most pronounced in the middle-market commercial banking segment and that the primary competitors are other banks.

John Pancari of Evercore ISI questioned why loan yields were relatively flat in the quarter despite front-book/back-book dynamics. He also asked about the intensity and source of competitive pressures on loan spreads.

Answer

CFO Michael Santomassimo explained that loan spreads, particularly on the commercial side, remain very tight due to intense competition. He noted that this competitive pressure has been consistent for a number of quarters and is primarily coming from other banks, especially in the middle-market commercial banking space, rather than non-bank lenders.

John Pancari questioned the outlook for the pace of share buybacks given the economic backdrop and asked if the company is seeing precautionary C&I line drawdowns or implementing further credit tightening.

Answer

CFO Mike Santomassimo stated that the approach to buybacks remains consistent: supporting clients first, assessing risks, and then considering repurchases, noting the company has capacity. CEO Charlie Scharf added that the company is monitoring line drawdowns very closely but has not seen any significant activity related to economic fears. He also mentioned that while Wells Fargo entered this period with already conservative underwriting, they will be slower to reverse any previous tightening actions.

John Pancari of Evercore ISI sought more detail on the modest loan growth expectation for 2025, asking about its potential level, trajectory, and key drivers. He also asked about the bank's capital return appetite for 2025, particularly regarding share buybacks.

Answer

CFO Mike Santomassimo projected low to mid-single-digit loan growth for 2025, weighted towards the second half of the year, driven by card, auto, and new commercial clients. On capital, he reiterated that organic growth is the first priority, but given the asset cap, he expects Wells Fargo will continue to return excess capital to shareholders via buybacks, as the current CET1 ratio of 11.1% is considered sufficient.

John Pancari asked to quantify the NII benefit from the recent securities repositioning and sought commentary on the forward trajectory for key fee income lines like wealth management, card, and investment banking.

Answer

CFO Michael Santomassimo clarified the repositioning had minimal Q3 impact but is fully in the Q4 run rate, noting the $16 billion of securities sold were reinvested at a 130 basis point higher yield. For fee income, he highlighted that wealth management is driven by market levels, card fees by economic activity, and investment banking by market conditions and the bank's ongoing investments to gain share.

John Pancari, on behalf of Michael Dufry at Evercore ISI, questioned the contribution of GLP-1 therapy to outcomes in the German two-year follow-up and asked about the protocols for weight measurement to ensure accuracy.

Answer

Harith Rajagopalan, Co-Founder, CEO & Director, clarified that GLP-1 use by a few patients in the German study did not affect the interpretation of Revita's efficacy, as the weight loss signal was consistent among all patients. He also confirmed that the company employs rigorous, standardized protocols for scale calibration and weight measurement to control for variability.

John Pancari of Evercore ISI requested more detail on the industry drivers behind C&I loan growth and asked for KeyCorp's updated perspective on bank M&A. He also questioned if the current guidance accounts for a potential acceleration in capital markets activity.

Answer

Chairman & CEO Christopher M. Gorman identified renewables, affordable housing, and healthcare as key C&I growth areas, clarifying that guidance assumes a continuation of the current market environment. On M&A, he stated that whole-bank M&A is not a high priority, but the company consistently evaluates non-bank, tuck-in acquisitions that fit its strategic verticals. Chief Risk Officer Mo Ramani added that growth was achieved without expanding risk appetite.

John Pancari of Evercore ISI requested more detail on the loan growth assumptions for 2025, particularly the drivers for the flat end-of-period forecast and current trends in commercial borrowing activity.

Answer

CFO Clark Khayat explained the guidance includes a ~$3 billion consumer loan runoff offset by 2-4% growth in commercial loans. CEO Christopher Gorman added that while client confidence is high, significant business investment is pending policy clarity. He noted that historically low line utilization and record M&A backlogs are expected to drive future loan growth.

John Pancari from Evercore ISI inquired about the rationale for maintaining the 20% NII growth outlook despite positive factors like a steeper curve and the early Scotiabank deal closing, and asked for details on commercial loan growth assumptions.

Answer

CFO Clark H. I. Khayat explained that while some factors were positive, lower starting loan balances for the year acted as a headwind, keeping the guidance at 20%. CEO Christopher M. Gorman added that while client optimism is high and M&A pipelines are strong, a significant pickup in business investment and line utilization has not yet materialized, but he remains confident in Key's ability to capture growth when it occurs.

John Pancari asked about the trend in credit card delinquency formation and whether the 15-17% charge-off target is for 2025 or a longer-term goal. He also inquired about the company's interest in M&A for its growth areas.

Answer

CFO Jenny Osterhout clarified that the 15-17% card loss target is a longer-term goal for the mature portfolio, not a 2025 guide, and noted that current delinquency trends are positive. CEO Douglas Shulman stated that while they are comfortable with their organic plan, they are always 'opportunistically looking' at M&A but will remain 'discerning buyers,' only pursuing deals that are a strong strategic, cultural, and financial fit.

John Pancari asked about the degree of expense flexibility amid revenue uncertainty and the potential for positive operating leverage in 2025. He also inquired about Comerica's stance on M&A, both as a buyer and a potential seller.

Answer

CFO James Herzog reiterated the 2-3% expense growth target, noting flexibility to calibrate spending to revenue while protecting key investments. CEO Curtis Farmer stated the bank remains focused on its independence and organic growth, viewing the M&A environment as 'murky' and not anticipating significant industry consolidation in the next 12-18 months.

John Pancari questioned Comerica's long-term target for its efficiency ratio, currently in the high 60s, and the potential catalysts for improvement. He also sought clarity on the stability of the Direct Express deposit balances.

Answer

Chief Financial Officer Jim Herzog addressed the efficiency ratio, stating the long-term goal is the 50s range, driven by achieving consistent positive operating leverage through revenue growth and expense discipline. Chief Banking Officer Peter Sefzik confirmed they foresee no material changes to the Direct Express deposit outlook for 2025 and into 2026 based on the current transition plan.

John Pancari asked about the net interest income (NII) trajectory beyond Q4 2024, given modest loan demand, and questioned the potential for accelerating share buybacks in 2025 due to the high CET1 ratio.

Answer

Chief Financial Officer Jim Herzog expressed a bullish outlook for NII in 2025, viewing Q2 2024 as an inflection point and anticipating a continuous upward trend supported by future loan growth. Regarding capital, Herzog acknowledged the strong CET1 level but stated the bank will remain measured with buybacks, prioritizing capital for customer loan growth and aiming to maintain a CET1 ratio 'well above 11%' in anticipation of Basel III endgame rules.

Asked for details on the drivers of the better-than-expected deposit costs and inquired about the yields on new loans from recent growth initiatives, questioning if pricing was a key factor.

Answer

The deposit cost success was attributed to strong execution of their existing down-beta strategy, not new programs. New loan growth is driven by the expertise of newly hired bankers and relationships, not aggressive pricing, with new loan yields being consistent with the overall portfolio.

John Pancari asked for an update on the company's M&A appetite for both nonbanks and whole banks, and also inquired about the outlook for key return metrics like ROTCE and the efficiency ratio for 2025 and beyond.

Answer

CEO Tim Spence stated that while industry consolidation is likely, Fifth Third will not pursue scale at any cost, given its strong organic growth capabilities, but remains interested in nonbank deals in commercial payments. Regarding returns, he said the focus is on sustaining current strong levels (mid-to-high teens ROTCE, mid-50s efficiency) and growing tangible book value per share.

John Pancari asked for specifics on new money loan yields, particularly from new initiatives, and questioned the outlook for capital returns, including share buybacks.

Answer

CFO Zachary Wasserman indicated that new loan yields are consistent with existing spreads, supporting a stable NIM, and highlighted the ongoing benefit from fixed asset repricing. Regarding capital, Wasserman reiterated that funding high-return loan growth is the top priority. He expects the adjusted CET1 ratio to enter the 9-10% target range in the first half of 2025, leaving little capacity for near-term share repurchases.

John Pancari sought confirmation that higher deposit costs are the main reason for maintaining the NII guide despite a higher-for-longer rate outlook. He also requested anecdotal data on loan demand and pipeline strength.

Answer

CFO Zachary Wasserman confirmed that incrementally higher funding costs are largely offsetting stronger loan growth, keeping the NII guidance range intact while still projecting sequential dollar growth from Q1. CEO Stephen Steinour highlighted that the commercial loan pipeline is at its highest level in five quarters and that new market expansions in the Carolinas and Texas are bolstering activity, providing confidence in achieving the higher end of the loan growth guidance.

John Pancari of Evercore asked for a breakdown of the mid-teens loan growth forecast by category and inquired about the noninterest income growth assumptions underlying the efficiency ratio guidance. He specifically sought details on the outlook for wealth management fees and the LTVs on new and existing commercial real estate loans.

Answer

Chief Banking Officer Mike Selfridge stated that the mix of loan growth would be consistent with prior years and that the majority of refinances are new households to the bank. President of Private Wealth Management Bob Thornton projected Q1 investment management fees to be around $150 million, expecting a strong year for overall wealth fees. CEO and President Michael Roffler guided to double-digit growth for total noninterest income. On credit, Selfridge noted the median LTV on CRE originations has been about 46% and reaffirmed the bank's consistently conservative underwriting standards.

John Pancari asked for the bank's outlook on loan growth for 2023 and whether the mid-teens expectation is still attainable. He also inquired about the forecast for wealth management revenue in the second half of the year, considering market volatility and asset flows.

Answer

CEO Mike Roffler expressed confidence in achieving mid-teens loan growth in 2023, citing the strength of the client service model and high satisfaction rates driving repeat business and referrals. President of Private Wealth Management Bob Thornton projected Q3 investment management fees around $148-$150 million and highlighted that strong growth in other wealth management services, up 40% in the first half, helps to offset market-driven headwinds on asset-based fees.