Ken Usdin

Ken Usdin from Autonomous Research asked for an update on the liability remix, specifically the reduction in brokered deposits versus the use of FHLB advances. He also inquired about the front-book versus back-book dynamics for loan yields.

Answer

CFO Ryan Richards explained that the mix between brokered deposits and FHLB advances is a tactical decision based on relative funding costs, with a continued goal of reducing wholesale funding. He confirmed that new loans are being originated at higher yields (7.38%) than the existing portfolio (7.31%), driven by the repricing of consumer ARMs and commercial loans.

Ken Usdin inquired about the magnitude and duration of fixed-rate asset repricing benefits on the net interest margin beyond Q4 2025, and the drivers and future trajectory of investment banking and trading income.

Answer

CFO Mike Maguire explained that fixed-rate loan repricing benefits, particularly from consumer lending and shorter-duration assets, will diminish but remain a tailwind in 2026. CEO Bill Rogers noted strong performance across investment banking and trading, with robust pipelines and awarded M&A business, suggesting a sustainable trend and historical low double-digit CAGR opportunity.

Ken Usdin of Autonomous Research asked about the dynamics of deposit competition, the outlook for deposit costs, and the size of the non-qualified deferred compensation (NQDC) benefit within other income.

Answer

CFO Mike Maguire stated that the deposit franchise is performing well, with rational competition. He anticipates deposit betas will move toward 40% in Q3, even with a late-quarter rate cut. CEO William Rogers added that Truist's competitive positioning has improved, citing strong net new account growth. Maguire also clarified the NQDC benefit was approximately $25 million, which is offset by a corresponding increase in personnel expense, making it neutral to pre-provision net revenue (PPNR).

Ken Usdin asked for clarification on the expected increase in M&T Bank's fourth-quarter expenses, specifically professional services, and whether this was an atypical surge or a normal year-end ramp.

Answer

Daryl Bible, SEVP and CFO, explained that the increase in professional services expenses was due to finishing up several significant ongoing projects, indicating it's a cost associated with getting things done. He reiterated the commitment to having revenue grow faster than expenses and promised 2026 guidance in January.

Ken Usdin of Autonomous Research inquired about the dynamics of the commercial real estate (CRE) loan portfolio, specifically when it might bottom out, and about M&T's optimal capital level, questioning the balance between its excess capital and potential uses given the strong stress test result.

Answer

CFO Daryl Bible explained that the CRE pipeline is building, with over $5 billion, but linked-quarter growth remains challenging, with a potential turn later in the year. Regarding capital, he stated that despite the good stress test result, market uncertainties (tariffs, geopolitical conditions) justify maintaining the current 10.75% to 11% CET1 range, even though the long-term target is 10%.

Ken Usdin asked for an update on the commercial real estate (CRE) loan portfolio dynamics, questioning when it might reach a bottom, and inquired about M&T's capital management strategy, specifically the appropriate capital level and the balance between excess capital and its potential uses.

Answer

CFO Daryl Bible explained that the CRE pipeline is building, reaching over $5 billion in June, but linked-quarter growth remains challenging, with potential for growth later in the year. Regarding capital, he stated that while the long-term CET1 target is 10%, the current operating range of 10.75% to 11% is appropriate given macroeconomic uncertainties like tariffs and geopolitical conditions.

Ken Usdin of Autonomous Research asked for more details on the moving parts and inflection points for payments growth, specifically addressing corporate payments, credit, and debit card performance. He also inquired about the maturation of the card loss rate, its expected trend, and the outlook for 2025 and 2026, assuming a stable economy.

Answer

John Stern, Vice Chair and CFO, explained that corporate payments have seen negative year-over-year prints due to government spend and corporate T&E headwinds, but improving trends are expected from strong pipelines and online versions. He noted merchant success in key verticals and embedded finance. Gunjan Kedia, CEO, added that debit card growth is tied to the overall consumer franchise, with momentum in consumer deposits driving client numbers and usage. John Stern stated that credit quality is favorable, with strong spend and credit trends, and the 2025 card loss rate is expected to be less than 2024, with no current concerns.

Ken Usdin of Autonomous Research asked for more details on the moving parts and inflection points for payments growth, specifically addressing corporate payments, credit, and debit card performance. He also inquired about the maturation of the card loss rate, its expected trend, and the outlook for 2025 and 2026, assuming a stable economy.

Answer

John Stern, Vice Chair and CFO, explained that corporate payments have seen negative year-over-year prints due to government spend and corporate T&E headwinds, but improving trends are expected from strong pipelines and online versions. He noted merchant success in key verticals and embedded finance. Gunjan Kedia, CEO, added that debit card growth is tied to the overall consumer franchise, with momentum in consumer deposits driving client numbers and usage. John Stern stated that credit quality is favorable, with strong spend and credit trends, and the 2025 card loss rate is expected to be less than 2024, with no current concerns.

Kenneth Usdin (Autonomous Research) sought a deeper dive into U.S. Bancorp's payments business, specifically asking about the moving parts and expected inflection points for corporate, credit, and debit card segments, given current growth rates. He also inquired about the maturation of the card portfolio, the recent decline in the card loss rate, and expectations for its future trajectory assuming a stable economy.

Answer

John Stern, Vice Chair and CFO, explained that corporate payments faced headwinds from government spend and corporate T&E, but improving trends are expected due to strong pipelines and uninstalled revenue. Merchant services showed strength in key verticals and tech-led strategies, while card issuing benefited from encouraging marketing and account growth. Gunjan Kedia, CEO, added that debit card growth is tied to the overall consumer franchise and deposit momentum. Stern noted favorable credit trends, with the majority of the card book being 720+ FICO scores. He confirmed the 2025 card loss rate would be lower than 2024, with no current concerns for 2026.

Ken Usdin asked about the dynamics of wholesale deposit costs and the outlook for deposit betas in a potential rate-cutting environment. He also sought clarity on the Q3 NII guidance range of $4.1B to $4.2B, asking about potential biases and key drivers.

Answer

Vice Chair & CFO John Stern noted that the deposit environment remains generally competitive. He affirmed that the bank's underlying assumptions for deposit betas in a rate-cutting cycle have not changed. Regarding the Q3 NII guidance, he stated there is no bias toward the high or low end of the range, with the outcome depending on the balance between deposit competition and positive momentum from loan growth and recent strategic actions.

Ken Usdin inquired about the long-term revenue opportunity (Total Addressable Market) for BNY in the crypto and stablecoin space, how it translates into revenue, and when it might become visible. He also asked for confirmation on Q4 expense growth and whether platforming is contributing to better control over overall expense growth.

Answer

CEO Robin Vince described BNY's long-term approach to digital assets as a technological evolution for recording, mobility, and efficiency. He highlighted BNY's broad participation (custody, mobility, treasury services, clearing, collateral management) and its role as a partner for digital asset firms, seeing opportunities in market efficiency and 24/7 trading. CFO Dermot McDonogh confirmed the 3% full-year expense guide implies around 2% YoY in Q4. He stated BNY is a disciplined steward of expenses, generating $500 million in efficiency savings this year, which is redeployed into growth investments, and is optimistic about driving positive operating leverage.

Ken Usdin asked about the long-term revenue opportunity (Total Addressable Market) for BNY Mellon in the crypto and stablecoin space, and for clarification on the Q4 expense growth outlook and the impact of platforming on expense control.

Answer

CEO Robin Vince described digital assets as a long-term opportunity, emphasizing BNY Mellon's role as an infrastructure and enablement business, partnering with stablecoin issuers and seeing opportunities for efficiency and new 24/7 trading. CFO Dermot McDonogh confirmed the 3% full-year expense guide, implying a lower Q4 year-over-year growth, and highlighted disciplined allocation, accelerated investments, and redeployment of efficiency savings into growth.

Ken Usdin from Autonomous Research asked about the drivers of the firm's strong top-line performance, questioning if fee revenue growth was also exceeding expectations, similar to NII, and contributing to the updated expense guidance. He also inquired about the sustainability and environmental drivers of the firm's sticky deposit base.

Answer

CFO Dermot McDonough highlighted that the firm's 'North Star' is positive operating leverage, driven by strong fee and NII growth. He credited record sales from the new commercial model for the fee strength. McDonough also explained that deposit growth is a byproduct of doing more business with clients, particularly in Corporate Trust, and not a primary strategy. He noted the firm has reduced its interest rate sensitivity, giving it confidence in the higher NII outlook.

Ken Usdin asked about PNC's expectation for deposit costs to decline in the fourth quarter and how wholesale versus retail deposit costs will track in the next phase of the rate cycle. He also questioned whether the recent commercial deposit growth, currently held at the Fed, would eventually lead to incremental loan growth or if it's sticky enough to be invested in securities, and what kind of loan growth inflection is expected.

Answer

EVP and CFO Rob Reilly confirmed that the rate paid on deposits will decline in Q4, noting that commercial and high net worth deposit rates can adjust quickly (near 100% beta), while retail rates are slower due to their already low base. Chairman and CEO Will Demchak emphasized that corporate excess cash deposits are treated with a short duration and not invested in long-term securities. He highlighted PNC's strong liquidity to support loan growth, citing increased M&A/capital markets activity and growing unfunded commitments, with CNI loan growth (excluding real estate) expected to continue and real estate inflecting positively early next year.

Ken Usdin asked about PNC's expectations for deposit costs to decline in the fourth quarter, comparing the betas of wholesale versus retail deposits. He also inquired how the recent commercial deposit growth, currently held at the Fed, might translate into future loan growth or investment in securities.

Answer

Rob Reilly, Executive Vice President and CFO, confirmed expectations for Q4 deposit rates to decline, noting that C&I and high net worth deposits have faster betas than retail. Bill Demchak, Chairman and CEO, emphasized that PNC avoids putting duration on corporate deposits, treating excess cash with a duration of a day. Both expressed optimism about utilizing the liquidity for future loan growth, highlighting PNC's strong liquidity position and the expectation for C&I growth (excluding real estate) to continue.

Ken Usdin from Autonomous Research asked about PNC's strategy for protecting Net Interest Income (NII) in the future, given limited new hedging activity. He also requested details on the performance drivers within the capital markets business.

Answer

EVP & CFO Robert Reilly stated that for 2025, NII is 'largely baked' and that actions to sustain the trajectory into future years are 'largely in place,' indicating they are already well-positioned. On capital markets, he noted that Harris Williams is tracking to plan, while Chairman & CEO William Demchak added that their 'bread and butter' FX and derivatives businesses saw a pickup late in the quarter.

Ken Usdin inquired about Bank of America's capacity and demand for continued growth in commercial and markets lending, including spreads and returns, and sought insights into the inflection point for retail deposit growth given recent sequential declines.

Answer

Alastair Borthwick (CFO, Bank of America) affirmed substantial capacity for commercial/markets lending, driven by strong client relationships, high-quality collateral, and attractive spreads, noting low loss content. On consumer deposits, he acknowledged a slight sequential dip due to seasonality but expressed encouragement from a 1% year-over-year growth, focusing on high-quality operating deposits rather than chasing CDs. Brian Moynihan (Chair and CEO, Bank of America) added that growth in low-interest and non-interest deposits, coupled with new primary checking accounts, indicates compounding core transactional growth.

Ken Usdin inquired about the capacity, demand, spreads, and returns for commercial loan growth in the market segment, and the trends and strategy for consumer deposit growth given a sequential decline.

Answer

CFO Alastair Borthwick highlighted substantial capacity for commercial loans, robust demand from top asset managers/financial institutions, and attractive spreads from well-collateralized, investment-grade, diversified, and shorter-duration structures, resulting in low risk and strong returns for Global Markets. Chair and CEO Brian Moynihan noted that consumer deposits are up 1% year-over-year, with a focus on high-quality, primary checking accounts (750,000 new per year), and that the 58 basis points cost for consumer deposits significantly boosts profitability.

Ken Usdin from Autonomous Research asked for an update on the net interest income (NII) trajectory for the second half of the year, specifically questioning if the repricing benefits would be linear and seeking details on the cash flow hedge strategy.

Answer

CFO Alastair Borthwick confirmed that the benefits from fixed-rate asset and cash flow swap repricing should be thought of as linear through Q3 and Q4. He also stated that the strategy for cash flow hedges remains unchanged, involving the replacement of older, lower-coupon swaps with new, higher-coupon ones as they mature.

Ken Usdin asked for specifics on the fixed-rate asset repricing benefit to NII, including roll-off amounts and yield pickups for securities and mortgages. He also questioned how much further deposit costs could be reduced while still attracting growth.

Answer

CFO Alastair Borthwick detailed that HTM securities are rolling off at $8-9B per quarter with a 200-225 bps pickup, while new mortgages add a similar yield benefit. He stated the bank will continue its disciplined pricing approach, passing through rate cuts to commercial clients and managing CD and preferred deposit rates in consumer.

Ken Usdin asked for guidance on fourth-quarter expenses compared to the third quarter's $13.6 billion (excluding impairment), considering seasonality, severance, and other factors, in the context of the sub-64% efficiency ratio guidance for the year.

Answer

CFO Mark Mason indicated that Q4 expenses would be influenced by foreign exchange impact and performance-related compensation, which would likely drive them higher than Q3's adjusted figure. He also noted that assumptions for sequential decline in markets revenue would play a role in the overall expense trajectory.

Ken Usdin asked about expectations for fourth-quarter expenses compared to Q3 2025, excluding the impairment charge, considering the year-to-date efficiency ratio of 62% and the full-year guidance of sub-64%.

Answer

CFO Mark Mason indicated that foreign exchange impact and performance-related compensation would be key factors influencing Q4 expenses. He reiterated the NII ex-markets guidance of being up around 5.5% for the full year, suggesting that strong performance would contribute to higher expenses.

Ken Usdin of Autonomous Research asked for the drivers behind the quarter's allowance for credit loss (ACL) build and how 'caught up' the reserves are now. He also inquired about the softer fee revenue in Treasury and Trade Solutions (TTS) and the outlook for global client activity.

Answer

CFO Mark Mason explained the $600 million ACL build was not related to consumer credit but was driven by two main factors: establishing reserves for unremittable dividends in Russia and changes in the corporate portfolio from loan growth and idiosyncratic downgrades. CEO Jane Fraser clarified that underlying TTS fee drivers remain strong, with cross-border transaction values up 9%, and that the reported non-interest revenue was impacted by revenue sharing agreements, while total fee revenue grew 6%.

Ken Usdin from Autonomous Research questioned the drivers of the Q2 allowance for credit loss (ACL) build, given already strong reserve levels. He also asked about the softer fee revenue in Treasury and Trade Solutions (TTS) and underlying client engagement trends.

Answer

CFO Mark Mason clarified the ACL build was not related to consumer credit but was driven by transfer risk associated with unremittable client dividends in Russia and growth in the corporate loan portfolio. Regarding TTS, CEO Jane Fraser highlighted strong underlying client activity, with cross-border transaction values up 9%. Mason added that the underlying total fee revenue for the Services segment was up 6%, with the reported figure impacted by revenue sharing agreements.

Ken Usdin of Autonomous Research asked for clarification on Wells Fargo's new 17%-18% Return on Tangible Common Equity (ROTCE) medium-term target timeframe and inquired about the specific drivers for the fourth quarter Net Interest Income (NII) ramp, including fixed repricing and the contribution from Markets NII.

Answer

CEO Charlie Scharf clarified that the 17%-18% ROTCE target is a reasonable medium-term goal, not for next year, and is dependent on factors like excess capital management and business results, emphasizing it's not the final aspiration. CFO Mike Santomassimo detailed that Q4 NII growth is expected from increased Markets NII, continued loan growth from Q3 and Q4, and fixed asset repricing across the securities, auto, and other portfolios.

Ken Usdin asked for clarification on the medium-term timeframe for Wells Fargo's 17%-18% ROTCE target and sought more detail on the expected Q4 Net Interest Income (NII) ramp, specifically regarding fixed repricing and the contribution from Markets NII.

Answer

CEO Charlie Scharf clarified that the 17%-18% ROTCE target is a medium-term goal, longer than a year but not an extended period, dependent on capital management and business results, and not the company's final aspiration. CFO Mike Santomassimo detailed Q4 NII growth drivers, including increased Markets NII (from financing trades, higher coupons, and hedging), the benefit of Q3 loan growth, anticipated Q4 loan growth, and continued fixed asset repricing in securities and auto portfolios.

Ken Usdin asked for clarification on the timeframe for Wells Fargo's new 17-18% medium-term Return on Tangible Common Equity (ROTCE) target and details on the fourth quarter Net Interest Income (NII) ramp, including fixed repricing and Markets NII contribution.

Answer

CEO Charlie Scharf clarified the ROTCE target is longer than a year but a reasonable timeframe, dependent on excess capital management and business results, and not the final aspiration. CFO Mike Santomassimo detailed the NII ramp drivers, including increased Markets NII from lending and actions, the benefit of third-quarter loan growth, and fixed asset repricing in securities and auto portfolios.

Ken Usdin of Autonomous Research questioned whether Wells Fargo might accelerate its share buyback program given its significant capital position and modest loan growth outlook. He also asked how the removal of the asset cap would specifically translate into retail deposit growth.

Answer

CEO Charles Scharf responded that while they have increased capacity for buybacks, the primary focus is on using capital for organic growth. He emphasized that they now have a greater ability to pursue growth, dividends, and buybacks simultaneously. Regarding deposits, Scharf explained that with the constraint lifted, Wells Fargo can pursue more aggressive marketing, in-branch merchandising, and footprint expansion to drive growth in primary checking accounts and overall deposits.

Ken Usdin of Autonomous Research asked if Wells Fargo might increase its share buyback activity given its significant excess capital and modest near-term loan growth. He also questioned how the removal of past consent orders would manifest in retail deposit growth.

Answer

CEO Charles Scharf indicated that while the company has more capacity for buybacks, the priority is to use capital for organic growth. He stated they have the ability to do all things—grow, increase dividends, and buy back stock—to a greater extent than before. Regarding deposits, he explained that with constraints lifted, the bank can be more aggressive with marketing, merchandising, and footprint expansion to drive primary checking account growth, which they believe will lead to higher deposits.

Ken Usdin inquired about the drivers of strong asset servicing fees, particularly the impact of transaction activity, and followed up by asking when a definitive change in the organic growth rate for wealth management might be observable.

Answer

EVP & CFO David Fox confirmed that higher transaction volumes boosted asset servicing fees and noted that year-over-year growth comparisons are still impacted by two large client losses that have not yet been lapped. Chairman and CEO Michael O'Grady stated that while wealth management organic growth is positive, it will take time for initiatives like new leadership and talent acquisition in key markets to accelerate it to the target level.

Ken Usdin from Autonomous Research noted that KeyCorp kept a higher-than-average 22% of originated capital on its balance sheet and asked about the strategy behind this. He also inquired about the dynamics of C&I line utilization, which saw only a modest increase.

Answer

Chairman & CEO Christopher M. Gorman explained the higher retention rate was a strategic decision to capitalize on market dislocation in April, allowing KeyCorp to hold attractively structured assets. Regarding line utilization, he expressed surprise it wasn't higher and noted it remains a key watchpoint. CFO Clark H. I. Khayat added that growth in total commitments also factored into the utilization percentage.

Ken Usdin asked about the long-term efficiency benefits and strategic implications of the core technology modernization and also inquired about the progress of hiring new commercial bankers.

Answer

President, CEO, & Chairman John Turner stated the new cloud-based core platform will provide a competitive advantage by enabling faster product delivery. Senior EVP & CFO David Turner added that while tech costs will rise, the investment should drive efficiency by allowing the company to manage headcount through attrition by leveraging AI and other tools. John Turner also confirmed they are on track with their plan to hire new bankers, expecting half to be hired by the end of Q3.

Ken Usdin from Autonomous Research asked for more color on the capital markets pipeline, beyond the $30 million in fees expected in July, and inquired about the drivers behind the higher-than-usual "Other Income" line and its expected run rate.

Answer

Head of Commercial Banking Don McCree expressed optimism, noting a pent-up desire for M&A transactions and signs that the "new money engine" for financing is beginning to start after a period of refinancing activity. Chairman & CEO Bruce Van Saun highlighted the benefits of a diversified capital markets business, with strength in equity and syndicated loans offsetting weakness elsewhere. Regarding "Other Income," Van Saun explained that the line consists of many small, volatile items and that a few things simply "broke our way" in the quarter, suggesting it should be viewed on a full-year basis rather than as a new run rate.

Ken Usdin asked about the level of confidence in closing the record capital markets pipeline and questioned what offsets, such as compensation flexibility, are available if the expected fee revenue does not materialize.

Answer

CEO Bruce Van Saun expressed high confidence in the M&A pipeline, noting that no mandates have been lost, only delayed. He detailed several offsets to potential revenue shortfalls, including the diversity of fee streams like financing and hedging, a direct reduction in incentive compensation, and broader expense management through their ongoing efficiency programs. Head of Commercial Banking Don McCree added that deal delays are partly procedural and that financing markets remain attractive for their core mid-sized transactions.

Ken Usdin from Autonomous Research asked about the key drivers for the upgraded fee revenue guidance and sought clarification on the client contract rescoping that was listed as a notable item.

Answer

CEO Ronald O'Hanley explained that the improved outlook is primarily driven by strong organic business momentum, including a record backlog of new servicing fees to be installed, rather than just market appreciation. He and Interim CFO Mark Keating clarified that the client rescoping was a contained software contract issue with one client, does not impact servicing fees, and is not expected to recur.

Asked about the initial market response to the recent changes in the Sapphire card's pricing and benefits, and questioned whether the strong trading results were driven by the environment or a more sustainable strategy.

Answer

The Sapphire card refresh is a normal-course update that is going well, with a focus on providing a market-leading customer value proposition. The strong trading results were attributed to a combination of a favorable environment and the deliberate deployment of capital and resources into the business, which adds a degree of durability to the revenue stream, though it is not 'free' growth.