Matthew O'Connor

Matthew O'Connor from Deutsche Bank inquired about the estimated fee contribution from Huntington Bancshares' recent capital market deals, following the earlier mention of their 1% impact on the expense base. He also asked for details on other key drivers contributing to the company's fee income growth, noting that the fee guidance appeared stronger than anticipated.

Answer

Chief Financial Officer Zachary Wasserman estimated the fee contribution from the two new small capital markets divisions to be between $80 million and $90 million in revenues. He explained that the fee guidance reflects an acceleration across all categories, particularly payments, capital markets, and wealth management, which grew 7% in core fees and 8% in the three major fee-driving categories in 2025. He expects a 1-2% acceleration in these categories for 2026, driven by sustained investment over time, in addition to contributions from Veritex.

Matthew O'Connor asked about the drivers of the revenue beat relative to the intra-quarter update and questioned the future strategy for Credit Risk Transfer (CRT) transactions now that capital targets are nearly met.

Answer

Zach Wasserman, Chief Financial Officer, attributed the revenue upside primarily to Capital Markets, which outperformed even their strong internal expectations. Regarding CRTs, he described them as 'tactical' and 'opportunistic' tools rather than a core part of the capital-building strategy, which remains focused on organic earnings. Future CRT deals are possible but not foundational to the plan.

Matthew O'Connor from Deutsche Bank asked about the logic and cost-effectiveness of the bank's recent credit risk transfer (CRT) transactions, particularly given its strong capital position.

Answer

CFO Zachary Wasserman described the CRT transactions as tactical and opportunistic tools for balance sheet optimization, supporting the primary goals of increasing the adjusted CET1 ratio and funding loan growth. He highlighted a recent deal as 'exceptionally good,' with a cost of capital under 3% that unlocked 17 basis points of CET1, deeming the economics 'incredibly favorable.'

Matthew O'Connor asked for an update on the proposed debit card interchange reform and what the potential financial impact could be for Huntington.

Answer

CFO Zachary Wasserman stated there were no substantive updates on the proposal. He estimated the potential annualized impact, as currently written, would be around $90 million. However, he noted that such proposals often change and that any implementation would likely not occur until mid-to-late 2025. He also confirmed the potential impact is not included in 2024 guidance and that the bank has opportunities to mitigate it with other payments-related growth.

Matthew O'Connor from Deutsche Bank inquired about the bank's deposit growth assumptions and the reasons why earning asset growth is projected to be slightly above loan growth. He also asked if there are other factors, such as changes in hedging strategy or trading assets, driving this divergence.

Answer

Chairman and CEO Bruce Van Saun stated that the loan-to-deposit ratio (LDR) is expected to remain relatively stable in the high 70s. CFO Aunoy Banerjee added that steady non-interest-bearing deposit growth from the Private and Consumer Banks, along with top-quartile DDA performance in the Consumer Bank, supports this outlook. Mr. Van Saun clarified that the earning asset growth exceeding loan growth is likely due to a modest build in liquidity and additions to the securities book, aligning with the lower lendability of Private Bank deposits.

Matthew O'Connor of Deutsche Bank requested more details on the "Reimagining the Bank" initiative, asking who is leading the project and how it differs from the company's previous TOP (Tapping our Potential) efficiency programs. He also inquired about the potential for upfront costs and whether the initiative could be self-funded.

Answer

Chairman & CEO Bruce Van Saun explained that this is a broader, multi-year transformational program, similar to the more complex TOP 6, aimed at redesigning customer service and operations using new technologies like GenAI. He announced that President Brendan Coughlin will lead the effort. Coughlin added that the goal is to simplify the business model and improve both efficiency and customer experience. Regarding costs, Van Saun stated it is too early to specify but that if any large, notable expenditures are required, they would be called out.

Matthew O'Connor asked for clarification on the drivers behind the strong year-over-year growth in service charges, particularly overdraft fees, and also inquired about the reasons for the year-over-year decline in credit card fees.

Answer

Head of Consumer Banking Brendan Coughlin attributed the service charge growth primarily to healthy fee creation from cash management and business banking, not an increase in punitive overdraft fees, which he described as stable. Regarding credit card fees, Coughlin explained there was a temporary pause on expansion activities ahead of new product launches scheduled for late spring, and he expects growth to resume in the second half of the year.

Matthew O'Connor of Deutsche Bank sought to clarify the timing for achieving the medium-term 16-18% ROTCE target and questioned if operating leverage would need to improve significantly beyond 2025 to reach that goal.

Answer

Executive Bruce Van Saun stated that 'medium-term' implies achieving the target by 2027, though it's possibly achievable in 2026. He confirmed that positive operating leverage is expected to be even stronger in 2026 than the 1.5% guided for 2025, driven by accelerating benefits from swap and non-core portfolio runoff, which is crucial for hitting the ROTCE target.

Matthew O'Connor questioned why Q3 net interest income was weaker than initially anticipated and inquired about the medium-term outlook for operating leverage, given that the Q4 forecast appears heavily driven by fee income.

Answer

CFO John Woods explained that Q3 NII was impacted by the bank's slight asset sensitivity and higher-than-expected deposit migration, a trend he noted is now reversing. CEO Bruce Van Saun added that slightly softer loan growth also played a role. Regarding operating leverage, Woods stated there is a significant opportunity driven by NIM reflation. Van Saun emphasized that NIM gains have a low associated cost impact. Head of Consumer Banking Brendan Coughlin also noted that the Private Bank's revenue growth is currently contributing directly to positive operating leverage due to its fixed short-term cost base.

Matthew O'Connor inquired about the rationale behind the 5% long-term asset flow target within wealth management, and sought color on the firm's plans for growing the number of advisors and attracting new customers.

Answer

Chairman and CEO David Solomon explained that the 5% target is an external and internal signal to drive accountability and focus on the significant wealth management opportunity, building on a track record of similar annual growth. He noted that the business scales with people, and there's ample opportunity to grow market share by adding advisors, expanding footprint, and broadening client reach, especially given the fragmented nature of the ultra-high net worth market. He also highlighted the opportunity to grow alternatives penetration and lending with existing clients, alongside technology enhancements.

Matthew O'Connor asked about the rationale behind the 5% long-term asset flow target within wealth management, and how much of this growth is expected from existing advisors/customers versus hiring new advisors. He also sought more color on plans for growing the number of advisors, balancing growth with profitability.

Answer

CFO Denis Coleman explained that the 5% target for wealth asset flows is an external and internal signal to drive accountability and focus on execution in a significant growth opportunity, building on a track record of similar annual growth. Chairman and CEO David Solomon noted that the ultra-high net worth business is fragmented, and Goldman Sachs, despite leading share, has significant ability to grow market share by adding advisors, expanding footprint, and broadening client reach. He also mentioned alternatives as a key component, with specific targets, and opportunities to enhance technology and the digital experience for clients.

Matthew O'Connor asked about the firm's strong balance sheet management, particularly the flat RWA, and inquired about the pace of the historical principal investment (HPI) book reduction and its target.

Answer

Executive Denis Coleman attributed the strong balance sheet metrics to the firm's 'nimble' management of financial resources. He confirmed the HPI balance is now around $8 billion and reiterated the commitment to sell down the vast majority by the end of 2026.

Matthew O'Connor from Deutsche Bank asked for an explanation for the low investment banking and capital markets fees in Q2, questioning the characterization of June as 'normalized' and whether the weakness was due to business mix or timing.

Answer

CEO William Rogers attributed the weakness to market disruption in April that impacted its client-driven trading business, particularly in public finance. He also noted that many M&A deals were deferred from Q2 but are now back in the pipeline, providing optimism for the second half. He emphasized that Truist's client-focused business model can result in different quarterly performance compared to peers with large, standalone trading operations.

Matthew O'Connor asked for details on the specific areas being targeted for cost savings and how the quarter's restructuring charges would contribute to future expense reductions.

Answer

CEO William Rogers explained that current cost savings are a continuation of a 2023 initiative focused on consolidation and simplification, while still funding key investments in digital and talent. CFO Michael Maguire specified that Q1 restructuring charges were for facilities rationalization and severance, and he anticipates only minimal additional charges for the remainder of the year.

Matthew O'Connor questioned Truist's long-term target for its CET1 capital ratio and asked about further opportunities for liability management with preferred stock. He also asked for the current duration of the securities book.

Answer

CFO Mike Maguire reiterated a long-term CET1 target in the 10% area, which considers the potential inclusion of AOCI under new rules, and confirmed that liability management will continue opportunistically. An unnamed executive specified the AFS portfolio has a short duration, the HTM portfolio is near 7 years, and the combined net duration is in the mid-4s.

Matthew O'Connor asked for more details on the planned Q4 increase in investments for "risk infrastructure" and whether this spending was to catch up on post-merger items or represented new, ongoing initiatives.

Answer

CEO Bill Rogers clarified that the investments are a continuation of an ongoing strategy, not a catch-up from the merger. He explained the spending is driven by elevated industry-wide expectations for data management, AI, and cybersecurity. He characterized the quarterly spending as potentially "bumpy" but part of a continuous investment plan already factored into forward guidance.

Matthew O'Connor asked for an outlook on credit quality, particularly the future level of charge-offs and reserves, noting their recent stability.

Answer

Vice Chair & CFO John Stern described the credit environment as 'stable to improving.' He expects the overall net charge-off ratio to remain at current levels or improve in the coming quarters. Specifically for the credit card portfolio, he projected that the full-year 2025 charge-off rate would be lower than in 2024, signaling a positive outlook.

Matthew O'Connor from Deutsche Bank inquired about a potential upfront drag from a new 0% credit card offer and questioned why the Q2 NII guide wasn't stronger.

Answer

CEO Gunjan Kedia explained that while there is an investment in the new card offer, it is managed carefully and should not create a meaningful drag for modeling purposes. CFO John Stern noted that while NII is expected to grow in Q2, the guidance range reflects the volatile market and current macroeconomic uncertainties.

Matthew O'Connor asked about the drivers of commercial products revenue, which was strong year-over-year but down from its recent run rate. He also sought an explanation for the decline in period-end deposits for the third consecutive quarter.

Answer

CFO John Stern attributed the strong commercial products revenue to client derivative activity, loan syndications, and bond underwriting, with new products contributing about 20% of the year's growth. Regarding deposits, he emphasized that average balances are a better indicator than volatile period-end figures and noted that Q1 typically sees seasonal declines in institutional deposits.

Matthew O'Connor requested an update on the search for a new head of the Payments division and asked whether the new leader would be tasked with re-evaluating the current strategy or accelerating its execution.

Answer

President Gunjan Kedia confirmed the search is active and that they are seeking a talented leader who aligns with the bank's integrated, "interconnected" culture. She stated unequivocally that the company has "deep conviction" in its current payments strategy and the focus is on accelerating execution and digital capabilities, not on a strategic rethink.

Matthew O'Connor of Deutsche Bank asked for historical context on the current $8.4 billion level of criticized loans, questioning if it's back to a normalized level. He also asked for the reason behind the $20 million provision for unfunded credit commitments.

Answer

CFO Daryl Bible explained that criticized loans peaked a few years ago and have been declining nicely, with a goal to reach about half of that peak level in the next couple of years. The $20 million provision was related to specific losses in the MTRCC business under a Fannie Mae DUS risk-sharing program, involving four unique, one-off client situations, a rare event for a business that has been profitable since 2003.

Matthew O'Connor asked for context on the current $8.4 billion level of criticized loans, questioning how it compares to historical norms or pre-rate-hike levels. He also requested details on the $20 million provision for unfunded credit commitments.

Answer

CFO Daryl Bible explained that criticized loans peaked a few years ago and have been steadily declining, with a goal to reach about half of that peak level over the next couple of years. He detailed that the $20 million provision was specific to the MTRCC business and its risk-sharing arrangement with Fannie Mae, stemming from four unique, one-off client situations, and affirmed the long-term strength of the business.

Matthew O'Connor questioned the rationale for the loan loss reserve build given positive credit trends, asking how the macro outlook was tweaked. He also asked for the interest rate assumptions in the NII guide and the bank's rate sensitivity.

Answer

Daryl Bible (executive) explained the reserve build was precautionary, reflecting a weighting toward a downside scenario with higher unemployment and lower GDP. For the NII guide, he noted it assumes a few rate drops and a lower yield curve, adding that M&T is relatively neutral to short-term rate changes but a flatter curve is a headwind.

Matthew O'Connor asked if M&T needs a broader product set, particularly in capital markets, to increase the contribution of fee income to overall revenue.

Answer

CFO Daryl Bible acknowledged the focus on growing capital markets and investment banking capabilities to better serve customers. He also highlighted growth drivers in CRE through off-balance sheet alternatives, strong performance in mortgage subservicing, and international expansion in the Institutional Client Services (ICS) business, expressing confidence in the overall positive momentum for fee income.

Matthew O'Connor of Deutsche Bank inquired about the outlook for deposit pricing and growth strategy. He also asked for details on DDA account growth, particularly the split between growth and legacy markets.

Answer

EVP & CFO Robert Reilly projected continued deposit growth with rates paid potentially drifting up slightly due to mix. Chairman & CEO William Demchak added they are debating being more rate-competitive in new markets. Mr. Reilly specified that DDA accounts grew 2% year-to-date, with a much stronger 6% growth in the Southwest expansion market, illustrating their share gain strategy.

Matthew O'Connor asked about PNC's balance sheet positioning for interest rate movements and the strategic goal behind it. He also questioned if there was a tipping point where further rate cuts would become unhelpful for repricing deposits.

Answer

CEO Bill Demchak explained that PNC is better off with more rate cuts at the front end of the curve, while higher long-term rates benefit the NII trajectory into 2026 and beyond. The recent addition of forward-starting swaps is intended to lock in some of this favorable outlook. He does not believe there is a negative tipping point for rate cuts as long as the yield curve steepens.

Matt O'Connor of Deutsche Bank asked if PNC has a specific target for its CET1 capital level and questioned if the core expense growth rate of around 3% represents a new medium-term run rate.

Answer

CFO Rob Reilly stated that PNC does not have an explicit capital target, emphasizing its flexibility with a 10.5% CET1 ratio. He confirmed that core expense growth in the 3% range is typical and reflects ongoing investments. CEO Bill Demchak added these are strategic investments in growth, not catch-up spending.

Matthew O'Connor of Deutsche Bank asked for an updated outlook on where PNC's Net Interest Margin (NIM) could normalize, referencing a prior comment about it approaching 3%. He also inquired about future growth drivers in the consumer lending business, particularly credit cards.

Answer

CFO Rob Reilly reiterated that while PNC doesn't manage to a specific NIM target, he expects it to approach 3% over time. CEO Bill Demchak acknowledged historical underinvestment in the consumer business, stating it represents a significant opportunity. Reilly added that the bank has introduced a new credit card and is investing in people, credit management, and marketing to improve penetration with existing clients.

Matthew O'Connor of Deutsche Bank followed up on expenses, noting the current trajectory implies a higher full-year growth rate than previously guided and asked about the outlook for sustainable expense growth.

Answer

CEO Brian Moynihan explained that a significant portion of the year-over-year expense increase was from revenue-related incentives in wealth management and markets. He reiterated the long-term focus on reducing headcount through technology and achieving operating leverage as NII growth accelerates, which should drive the overall expense base toward a more modest growth rate.

Matthew O'Connor followed up on the concept of growing into capital, questioning if organic growth would consume all generated capital and implying buybacks could remain robust. He also asked about the drivers of the near-breakeven result in the "All Other" fee line.

Answer

An unnamed executive confirmed that capital generation outpaces the business's needs, leaving room for robust buybacks after funding growth and dividends. CFO Alastair Borthwick explained the "All Other" result was impacted by gains on sold leveraged finance positions and a legal settlement, which offset the usual tax credit-related losses.

Matthew O'Connor inquired if the bank would lean into specific business areas if it received capital relief and whether tweaked capital rules could change how it evaluates the profitability of certain businesses.

Answer

CEO Brian Moynihan responded that no business is currently capital-constrained and that capital allocation is driven by a balanced approach to risk management, not just regulatory minimums. He added that while rule changes might reduce the regulatory 'penalty' on some businesses, the bank's evaluation framework, which includes risk and market-based measures, would not fundamentally change.

Matthew O'Connor asked about the outlook for share buybacks given the bank's excess capital and modest loan growth outlook. He also requested an update on the timing for reaching the normalized net interest margin target of ~2.3% in a lower rate environment.

Answer

CFO Alastair Borthwick stated there is no change to the capital strategy; the bank has ample capital and will continue buybacks after funding client growth and dividends, pending final Basel rules. Regarding NIM, he emphasized the focus is on growing NII dollar amounts, which is on track, rather than a specific margin target timeline, with organic growth being the key driver.

Matthew O'Connor of BNP Paribas asked for the expense outlook for the second half of the year, focusing on assumptions for severance and transformation costs. He also questioned if the company was accelerating severance actions into 2025 and if a placeholder for severance still exists for 2026.

Answer

CFO Mark Mason indicated that severance costs would see a meaningful reduction in the second half of the year, as the firm has already incurred about $500 million of its $600 million full-year forecast. This, along with associated compensation reduction, will contribute to a downward expense trend. He did not change the guidance for 2026 but affirmed the firm is on a good path for the remainder of 2025.

Matthew O'Connor of BNP Paribas asked for more detail on the expense outlook for the second half of the year, particularly the assumptions for severance and transformation costs, and whether severance expenses were being pulled forward from next year.

Answer

CFO Mark Mason clarified that of the approximately $600 million in severance forecast for the full year, about $500 million had already been incurred in the first half, implying a significant drop in H2. He did not change the guidance for next year, reiterating confidence in the current path toward the 2026 targets.

Matthew O'Connor asked about the expense trajectory for the rest of the year, noting that Q1 expenses came in lower than expected and that Q1 is often a high-water mark.

Answer

CFO Mark Mason reaffirmed the full-year expense guidance of slightly lower than $53.4 billion. He projected a slight tick up in Q2 expenses due to planned investments in transformation, data, and regulatory reporting, followed by a downward trend in the second half of the year to meet the full-year target. He also noted that expenses would be adjusted accordingly if revenue performance deviates from expectations.

Matthew O'Connor asked for the expected magnitude of technology and transformation investment spending within the 2025 and 2026 expense guidance. He also questioned how management knows if the increased spending is sufficient to meet both internal goals and regulatory requirements.

Answer

CFO Mark Mason did not provide a specific dollar amount but confirmed that technology and transformation investments will increase and are factored into the overall expense guidance, offset by productivity savings. CEO Jane Fraser expressed high confidence that the planned spending is appropriate, stating that a forensic annual planning process determined the need to expand the scope and accelerate work, particularly on the data front, to meet their target states and satisfy all requirements.

Matthew O'Connor sought clarification on the Banamex IPO timeline and the nature of a small credit provision taken in the Services division.

Answer

CEO Jane Fraser reiterated the plan to be IPO-ready by the end of 2025, with timing dependent on market conditions, and noted there is no 'hard rule' requiring four quarters of financials post-separation. CFO Mark Mason explained the small provision was related to Russia exposure, taken per accounting guidelines for unremitted client funds.

Asked about a slowdown in upgrades and paydowns within the criticized commercial loan portfolio, questioning if it was an early sign of credit inflection.

Answer

The slowdown was attributed to timing issues, with several resolutions slipping from late March into April. Management expects the criticized portfolio to be flattish going forward and does not see significant loss content within it.

Matthew O'Connor of Deutsche Bank asked about the drivers for the strong year-over-year and linked-quarter growth in the service charge line, specifically mentioning treasury management and consumer overdrafts, and inquired about the future outlook for overdraft fees.

Answer

Executive David Turner attributed the growth to an increase in customer accounts and corporate-side seasonality. Executive John Turner added that growth in consumer and small business checking accounts, along with a 9% increase in treasury management relationships, were key drivers. Regarding overdrafts, John Turner noted that revenue growth reflects more accounts, not increased usage per customer, and highlighted customer-friendly policy changes.

Matthew O'Connor requested details on the performance and outlook for fee income categories beyond capital markets, such as service charges, card fees, and investment management, noting their decline from the third quarter.

Answer

Executive David Turner attributed the sequential decline to several factors. He highlighted an episodic M&A environment in capital markets and a one-time negative adjustment to the card rewards liability in Q4 that is not expected to repeat. He noted that service charges remain predictable and wealth management continues to show strong growth from both markets and new clients.

Matthew O'Connor pointed out the sequential decline in the card and ATM fee line and asked for the underlying reason and its future growth prospects, particularly as the risk of debit interchange reform has subsided.

Answer

CFO David Turner attributed the decline to normal volume and mix shifts, not a systemic issue. CEO John Turner added that future growth is tied to increasing customer checking accounts, highlighting that Regions' customers have ranked first in Visa's debit card utilization 'power score' for 42 consecutive quarters.

Matthew O'Connor asked about the remaining benefits from ongoing efficiency initiatives and whether the medium-term framework of self-funding investments to maintain stable costs is still reasonable.

Answer

CFO Mike Santomassimo affirmed that significant opportunity remains to improve efficiency across the company through automation, real estate reduction, and other initiatives. He noted that this is a methodical, ongoing process involving hundreds of activities. While not providing a multi-year forecast, he pointed to the company's track record of cutting billions in expenses while reinvesting a significant portion back into the business, suggesting a continued focus on balancing efficiency gains with necessary investments.

Matthew O'Connor of Deutsche Bank asked about the sensitivity of the net interest income guidance to changes in interest rates. He also questioned the year-over-year decline in trading revenue, noting it seemed weaker than peers.

Answer

CFO Mike Santomassimo stated that the balance sheet is marginally asset-sensitive, so rate cuts are a slight headwind while higher rates would be a slight positive. Regarding trading, he attributed the year-over-year decline to a particularly strong prior-year quarter rather than weakness in the current one. CEO Charlie Scharf added that Wells Fargo's trading business is smaller and less complex than many peers, making direct comparisons difficult.

Matthew O'Connor asked for color on the anti-money laundering (AML) investigation disclosed in the 10-Q, including its potential impact on expenses and whether it is an industry-wide issue.

Answer

CEO Charlie Scharf affirmed the company is taking the formal agreement with the OCC very seriously. He stated that the associated costs are not expected to meaningfully impact the current $54 billion expense outlook, as much of the required work was already underway. He declined to comment on whether it was an industry-wide matter, stating he could only speak for Wells Fargo.

Matthew O'Connor asked for more detail on consumer credit card spending patterns, particularly in travel, and the reasons behind the increase in home lending delinquencies.

Answer

Executive Jeremy Barnum confirmed seeing headwinds in airline travel but noted it may not be a broader indicator, highlighting some spending front-loading due to tariff concerns. He stated there are no signs of distress in the lower-income segment. Regarding home lending delinquencies, management indicated they would have to investigate, suggesting it could be noise related to the First Republic portfolio.

Matthew O'Connor from Deutsche Bank inquired about early signs of a pickup in loan growth or investment banking activity due to lower rates, and asked about any changes in consumer spending trends.

Answer

CFO Jeremy Barnum reported that there are generally no significant signs of a pickup, with minor exceptions in opportunistic DCM deals and mortgage applications, as the rate cuts were largely anticipated. On consumer spending, he described the current environment as a 'normalization' post-pandemic, with the rotation from discretionary to non-discretionary spending seen as a return to normal patterns rather than a sign of consumer weakness. He characterized overall spending as solid.

Matthew O'Connor asked for more detail on labor challenges facing middle market clients, whether large corporate clients face different pressures, and if C&I loan growth would be driven more by middle market or large corporate clients.

Answer

CEO Tim Spence noted client responses to labor shortages vary by sector, with some turning to technology while others face structural issues. CFO Bryan Preston added that larger companies have managed labor pressures better due to scale. Spence concluded the goal for C&I growth is balance, with a slight preference for faster growth in the more granular middle market segment.

Matthew O'Connor asked about the strategy to achieve a 50-50 geographic mix between the Midwest and Southeast, questioning if acquisitions were part of the plan. He also inquired about the bank's concept of a 'normalized NIM' over the next few years.

Answer

CEO Tim Spence confirmed the geographic shift is entirely organic, driven by de novo branch construction ('one new branch at a time'). He pointed to the growth tailwind from over 100 existing de novos and an accelerated build plan of 40-50 branches annually. CFO Bryan Preston discussed normalized NIM, suggesting that deploying excess cash and continued fixed-rate asset repricing in a more normal curve environment could potentially push NIM back to the 3.15%-3.25% range.

Matthew O'Connor asked about risk in the commercial real estate bond market, requesting details on the bank's non-agency CMBS portfolio and its structural protections.

Answer

CFO Bryan Preston reiterated the bank's cautious CRE stance, explaining they participate through structured non-agency CMBS for its credit enhancements. He noted their portfolio has very little exposure to the single-asset, single-borrower (SASB) structures mentioned in a recent article and that the broader portfolio has nearly 40% first-loss credit enhancement and a low LTV, with no current concerns.

Matthew O'Connor of Deutsche Bank sought clarification on the Q4 NIM target and asked how KeyCorp is shifting to a 'front-footed' growth posture after its RWA diet. He also inquired about their expected commercial loan growth relative to the H.8 industry data.

Answer

CFO Clark Khayat clarified the NIM guide is '2.7% plus,' with potential to approach 2.8%. CEO Christopher Gorman stated the shift to growth is 'well underway,' emphasizing that they invested in talent throughout the RWA diet and shed non-relationship clients. He affirmed their expectation to outperform the H.8 data on commercial loan growth, consistent with their historical performance.

Matthew O'Connor from Deutsche Bank sought clarification on the Q4 2025 Net Interest Margin (NIM) target and asked how KeyCorp is shifting to a more 'front-footed' growth strategy now that it has a strong capital position after a period of RWA reduction.

Answer

CFO Clark H. I. Khayat clarified the NIM guidance is to 'approach 2.8%,' consistent with the '2.7% plus' in the deck. CEO Christopher M. Gorman stated the shift to offense is 'well underway,' highlighting ongoing investments in wealth management, investment banking, and technology, and noted that the prior RWA diet targeted non-relationship clients, positioning them to outperform on commercial loan growth.