Peter Winter

Peter Winter questioned why the expense forecast was not lowered despite a weaker fee income outlook and asked about expense management flexibility. He also inquired about the outlook for deposit growth and the potential to lower deposit costs, particularly if the Fed does not cut rates.

Answer

CFO Martin Grunst detailed expense flexibility through variable compensation, ongoing efficiency efforts, and the timing of strategic investments. CEO Stacy Kymes clarified that fee income softness was concentrated in the volatile trading business, while core fee lines remain strong. On deposits, Martin Grunst highlighted the firm's low loan-to-deposit ratio and strong cumulative beta, which provide flexibility to continue managing deposit pricing downward, with or without Fed action.

Peter Winter from D.A. Davidson asked for the key drivers that would push NII to the upper versus lower end of its guidance range. He also inquired about the expected cadence of loan growth and the pipeline for new talent.

Answer

CFO Martin Grunst identified the bank's low loan-to-deposit ratio as a key variable, providing flexibility to be more aggressive on deposit pricing, which could drive results to the high end of the NII range. CEO Stacy Kymes stated that loan growth is modeled to be ratable throughout the year and clarified that while there is no specific 'team lift-out' pipeline, the company is constantly recruiting individual revenue producers, a strategy that will continue in 2025.

Peter Winter of D.A. Davidson questioned the company's high expense growth over the past two years, asking about opportunities to lower it and establish a more normalized growth rate. He also asked if the strong deposit growth and low loan-to-deposit ratio would allow for more aggressive deposit cost reductions.

Answer

CFO Marty Grunst and CEO Stacy Kymes responded that while they focus on efficiency, they are deliberately investing in talent and technology for long-term growth, which impacts near-term expense levels. Regarding deposits, Grunst confirmed that the strong liquidity position provides flexibility, noting they successfully lowered deposit rates following the Fed's move and are confident this will drive sustainable net interest margin expansion into Q4.

Peter Winter asked about recent changes in loan demand over the last 90 days and the current trends in loan spreads. He also inquired whether expense growth is expected to moderate next year or if the bank plans to continue heavy investments in revenue initiatives, potentially leading to elevated expense growth.

Answer

Chief Credit Officer Derek Steward noted a slight improvement in loan spreads and described loan conditions over the past year as consistent, with production up in most months compared to 2024, despite recent payoffs muting growth. Chairman and CEO Harris Simmons added that accelerated refinance of commercial real estate due to lower term rates has been a headwind, but pipelines for construction loans are improving. Harris Simmons stated that the bank will continue to invest in business building, including hiring producers and increasing marketing spend, while simultaneously working to offset these with back-office savings.

Peter Winter from D.A. Davidson asked about recent changes in loan demand over the past 90 days and current trends in loan spreads. He also inquired whether expense growth is expected to moderate next year or remain elevated due to continued heavy investment in various revenue initiatives.

Answer

Chief Credit Officer Derek Steward noted slight improvement in loan spreads and consistent loan growth around 3% over the past seven quarters, with production up in most months this year compared to 2024, despite some recent payoffs. Chairman and CEO Harris Simmons stated that the bank will continue to invest in building the business, hiring producers, and increasing marketing spend, while simultaneously working to offset these with back-office savings.

Peter Winter of D.A. Davidson asked for sensitivity analysis around the company's deposit migration assumptions. He also inquired about plans to manage the balance sheet's asset sensitivity, given the potential for a more dovish Federal Reserve.

Answer

CFO Ryan Richards acknowledged their deposit migration assumptions have been conservative and suggested analysts could model the impact by replacing runoff with funding near the Fed funds rate. He stated that while Zions screens as highly asset-sensitive, they are considering actions at the margin to reduce this sensitivity, balancing it with fair value considerations and the use of hedges.

Peter Winter asked about the possibility of upsizing the share repurchase program and requested clarification on the percentage ranges for guidance terms like 'slightly' and 'moderately' increasing.

Answer

An executive explained that the primary constraint on more aggressive buybacks is the goal of building the CET1 ratio, excluding AOCI, to be in line with peer medians. Regarding guidance, another executive clarified that while there are no rigid definitions, 'slightly' implies low-single-digits and 'moderately' implies mid-single-digits, depending on market uncertainty.

Peter Winter asked about the drivers of Citizens Financial Group's loan growth and how loan demand has evolved over the past 90 days. He also inquired about any signs of credit weakness in the consumer or commercial borrowing base amidst slowing economic growth.

Answer

CEO Bruce Van Saun highlighted two consecutive quarters of net loan growth across consumer, commercial, and private bank, offsetting Non-Core reductions and C&I/CRE optimization. He expects continued growth, with consumer led by mortgage and HELOCs, and commercial by NDFI and expansion regions. President Brendan Coughlin noted stable consumer NCOs and delinquencies, expecting further declines due to portfolio mix shifts. Chair of Commercial Banking Don McCree reported no deterioration on the C&I side and stable early indicators, praising middle market companies' professional management.

Peter Winter inquired about the ideal interest rate environment for Citizens, potential risks to the Net Interest Margin (NIM) outlook, and whether there were plans to reduce asset sensitivity. He also asked for an update on the full-year positive operating leverage forecast.

Answer

CFO John Woods explained that the bank's NIM trajectory is primarily driven by time-based benefits like noncore runoff, making them nearly rate-neutral and comfortable in various rate scenarios, though slightly higher rates are beneficial long-term. Woods reaffirmed the positive operating leverage outlook of approximately $150 million, driven by strong NII growth. CEO Bruce Van Saun added that while they have expense levers, the preference is to continue investing in growth initiatives.

Peter Winter from D.A. Davidson followed up on the Net Interest Income guidance, asking why the upper end of the range wasn't increased given fewer expected Fed rate cuts. He also inquired about the future of the branch expansion strategy beyond current projects.

Answer

CFO Dan Geddes responded that the steady NII guidance is due to a shifting deposit mix, with growth in higher-cost CDs partially offsetting the benefit from fewer rate cuts. CEO Phillip Green detailed the expansion strategy, confirming it will remain within Texas. He explained the focus will be on identifying new high-growth areas in both expansion markets like Houston and Dallas and in legacy markets, rather than expanding into new states.

Peter Winter from D.A. Davidson followed up on the net interest income guidance, questioning why the upper end of the range wasn't increased given fewer expected rate cuts. He also asked about the future of the branch expansion strategy, including potential moves outside of Texas.

Answer

CFO Dan Geddes attributed the unchanged NII guidance to a deposit mix shift towards higher-cost CDs, which offsets some of the benefit from fewer rate cuts. CEO Phillip Green confirmed the expansion strategy will remain focused within Texas, targeting high-growth areas in both existing expansion markets and legacy markets. He explicitly stated there are no plans to expand the de novo strategy outside of the state.

Peter Winter from D.A. Davidson asked if the bank was tightening underwriting standards on any loan portfolios and questioned the drivers behind the strong growth in insurance commissions.

Answer

CEO Phillip Green stated that underwriting standards have not been tightened due to uncertainty, as the bank maintains a conservative stance. He highlighted positive resolutions of past problem credits and noted that new issues are isolated, not systemic. CFO Dan Geddes explained that the 15% year-over-year growth in insurance income was primarily driven by new business (80% of the increase), resulting from better alignment between the insurance and commercial banking groups.

Peter Winter asked about capital allocation strategies, including the planned activity for the share buyback and the potential for retiring preferred securities. He also expressed surprise at the high expense growth guidance and later asked for clarification on the impact of potential overdraft fee regulation.

Answer

CEO Phillip Green emphasized that the primary capital priorities are the dividend and organic growth, describing the buyback as 'totally opportunistic.' On expenses, both Green and CFO Dan Geddes defended the investments as necessary for future growth. Geddes confirmed the fee income guidance for 2025 includes a potential negative impact from new overdraft and interchange regulations in the second half of the year.

Peter Winter from Wedbush Securities inquired about the future trajectory of the net interest margin (NIM) amid anticipated Fed rate cuts and whether strong loan growth, driven by organic expansion and potential pent-up demand, could continue.

Answer

Incoming CFO Dan Geddes stated that while the asset-sensitive balance sheet will be impacted by lower rates, there are repricing opportunities in the investment and fixed-rate loan portfolios that could lead to NIM stability in Q4 and potential expansion next year. CEO Phillip Green confirmed his belief in pent-up loan demand, citing election-related uncertainty as a primary cause for current customer hesitancy, which he expects to clear up, allowing underlying fundamentals to drive growth.

Peter Winter of D.A. Davidson inquired about the net interest margin (NIM) outlook for the second half of 2025, particularly with potential Fed rate cuts. He also asked about the bank's ability to lower deposit costs further and if any competitive advantages against credit unions have emerged from recent regulatory discussions.

Answer

EVP & CFO Gavin Mohr stated that the bank's margin forecast remains solid and that two potential rate cuts would not have a significant impact, estimating only a one or two basis point change. He also noted that deposit costs have likely plateaued. President & CEO William Kessel added that while there has been no change in the competitive landscape with non-banks, the pausing of proposed regulations like Dodd-Frank Section 1071 has been a significant benefit for community banks.

Peter Winter of D.A. Davidson & Co. inquired about the net interest margin (NIM) outlook for the second half of 2025, particularly if the forward curve's two rate cuts materialize. He also asked about the potential for further reductions in deposit costs and whether recent regulatory changes have provided a competitive advantage against credit unions.

Answer

EVP & CFO Gavin Mohr stated that the bank is confident in its existing margin forecast, which already factors in two rate cuts, and noted that such cuts would have a minimal impact of one or two basis points. He added that deposit costs have likely plateaued and sees little opportunity to lower them further if rates hold steady. President & CEO William Kessel addressed the regulatory question, explaining that while the pausing of certain proposed rules like Dodd-Frank Section 1071 has been beneficial, there has been no significant change in the competitive landscape relative to non-banks like credit unions.

Peter Winter of D.A. Davidson & Co. inquired about the net interest margin (NIM) outlook for the second half of 2025, particularly with potential rate cuts. He also asked about the potential for further reductions in deposit costs and whether the bank has seen any competitive benefits against credit unions from recent regulatory discussions.

Answer

EVP & CFO Gavin Mohr stated he is confident in the existing margin forecast, which already factors in two rate cuts, noting that a 25-50 basis point cut would have a minimal impact of one or two basis points. He added that deposit costs have likely plateaued and sees little opportunity to reprice them down further in the current environment. President & CEO William Kessel addressed the regulatory question, stating that while the pause on certain costly rules like Dodd-Frank Section 1071 has been beneficial, there has been no change in the competitive playing field regarding non-banks like credit unions.

Peter Winter from D.A. Davidson asked about the net interest margin outlook for the second half of 2025, particularly with potential Fed rate cuts. He also inquired about the potential to further reduce deposit costs and whether any regulatory changes have created a competitive advantage against credit unions.

Answer

EVP & CFO Gavin Mohr stated that the margin forecast remains stable, with one or two potential rate cuts having an insignificant impact of only one or two basis points. He also noted that deposit costs have likely plateaued. President & CEO William Kessel added that while the pause on certain proposed regulations like CRA and Dodd-Frank Section 1071 has been beneficial, there has been no change in the competitive playing field relative to non-banks like credit unions.

Peter Winter from D.A. Davidson asked about client conversations amid economic uncertainty, potential credit stress in the automotive portfolio, the necessity of further reserve builds, and the company's share buyback strategy.

Answer

EVP of Commercial Banking Joel Rahn explained that while clients are cautious due to tariff uncertainty, no tangible credit impact has been observed yet. President and CEO William Kessel stated that the current allowance for credit losses at 1.47% is appropriate and future provisioning will likely align with loan growth. Kessel also detailed that share repurchases are a component of capital management, guided by stock valuation and a three-year earn-back target on tangible book value dilution.

Peter Winter from D.A. Davidson & Co. asked about current loan demand and pipelines, the potential for pent-up demand post-election, the outlook for hiring new bankers, and the rationale for the loan loss provision in the quarter.

Answer

EVP and Head of Commercial Banking Joel Rahn described the commercial loan pipeline as solid for Q4 and early 2025 but was cautious about predicting a significant acceleration beyond the current strong growth. He also confirmed the ongoing strategy to hire talent, noting three recent additions. President and CEO William Kessel explained that the quarter's provision was primarily to support strong loan growth while maintaining a healthy allowance for credit losses, including a subjective reserve for economic uncertainty.

Peter Winter from D.A. Davidson asked about the loan and deposit runoff from the prior Lone Star acquisition and whether it had bottomed out. He also questioned the credit quality of the newly acquired American Bank. Additionally, he inquired about the drivers behind the $29 million linked-quarter increase in non-performing assets (NPAs).

Answer

Senior Chairman and CEO David Zalman explained the Lone Star deposit runoff was expected due to high-cost funds. Chairman Tim Timanus and President and COO Kevin Hanigan confirmed the Lone Star portfolio has now stabilized and contrasted it with American Bank, which they described as a high-quality franchise with minimal expected runoff. Regarding NPAs, Mr. Timanus attributed the increase to three main items: a $13M real estate loan, a $19M legacy auto loan portfolio, and $51M in single-family homes from a discontinued minority lending program, noting the latter two were well-reserved or had low loss expectations.

Peter Winter from D.A. Davidson asked about the performance of the acquired Lone Star portfolio, questioning if the runoff in its loans and deposits was nearing an end. He also inquired about the credit quality of the newly acquired American Bank and the drivers behind the $29 million linked-quarter increase in non-performing assets (NPAs).

Answer

David Zalman, CEO, and Tim Timanus, Chairman, confirmed the runoff in Lone Star's high-cost deposits was expected and that the portfolio has now stabilized. Kevin Hanigan, COO, contrasted this with American Bank, describing it as a high-quality franchise with minimal runoff expected. Regarding NPAs, Tim Timanus explained the increase was driven by three main items: a $13M well-secured loan from Lone Star, a $19M fully reserved legacy loan, and $51M in single-family homes from a discontinued lending program, which are selling quickly upon foreclosure with minimal loss.

Peter Winter asked about the performance of the acquired Lone Star portfolio, specifically if the loan and deposit runoff was nearing a bottom. He also inquired about the credit quality of the pending American Bank acquisition and the potential for runoff there. Additionally, he questioned the drivers behind the $29 million linked-quarter increase in non-performing assets (NPAs).

Answer

Senior Chairman & CEO David Zalman explained the Lone Star deposit runoff was expected due to high-cost funds, and Chairman Tim Timanus added that the portfolio has now stabilized. President and COO Kevin Hanigan contrasted this with American Bank, describing it as a high-quality, 50-year-old franchise with a solid deposit base, expecting very mild runoff. Regarding NPAs, Mr. Timanus detailed that the increase was driven by three specific buckets: a $13M loan from Lone Star, a $19M loan from LegacyTexas, and $51M in single-family home loans from a discontinued minority lending program, all of which are considered manageable.

Peter Winter from D.A. Davidson & Co. asked if the runoff in the acquired Lone Star portfolio was nearing an end and inquired about the credit quality and potential runoff at American Bank. He also sought reasons for the $29 million increase in non-performing assets (NPAs).

Answer

Chairman Tim Timanus stated he believes the Lone Star portfolio has stabilized. President and COO Kevin Hanigan contrasted this with American Bank, expecting minimal runoff. Regarding NPAs, Timanus attributed the increase to three main items: a $13M loan from Lone Star (no loss expected), a $19M legacy auto loan (fully reserved), and a $51M bucket of single-family mortgages from a discontinued program.

Peter Winter from D.A. Davidson asked if there is room to lower deposit costs if the Fed pauses rate cuts and whether the bank expects to maintain a zero provision for credit losses for the rest of the year given economic uncertainty.

Answer

Senior Chairman and CEO David Zalman affirmed there is room to lower deposit costs, noting their cost of deposits is already low at 1.38%. He explained that the timing and pace of Fed cuts would influence their aggressiveness. CFO Asylbek Osmonov added that they haven't yet cut rates on their broad base of interest-bearing demand deposits, representing an opportunity. Regarding the provision, Zalman and Osmonov stated that with a strong reserve of $386 million against $81 million in nonperformers, and with the model already incorporating a recessionary scenario, they do not anticipate significant provisions unless the economy deteriorates substantially.

Peter Winter requested guidance for the mortgage warehouse business for Q1 and the full year, and asked about the outlook for deposit growth and the bank's ability to lower deposit costs if the Fed pauses rate cuts.

Answer

President and COO Kevin Hanigan projected the Q1 average for mortgage warehouse balances to be between $825 million and $850 million, down from Q4 due to typical seasonality. Senior Chairman and CEO David Zalman projected a normalized deposit growth rate of 2.5% for the year and noted that the bank has room to lower costs on special short-term CDs and money market accounts even without Fed action. CFO Asylbek Osmonov added that 77% of CDs mature within six months, offering significant repricing opportunities.

Peter Winter from D.A. Davidson & Co. asked for an update on the loan growth outlook, pipelines, the status of the First Capital loan runoff, and whether the bank's M&A strategy favors smaller deals or larger, market-expanding transactions.

Answer

An unnamed executive reported that the $420 million First Capital loan runoff is nearly complete and projected low-single-digit annualized loan growth for the next two quarters, potentially rising to mid-single-digits thereafter. CEO David Zalman addressed M&A, stating that deal size is not the primary factor; rather, decisions are based on the target's quality, people, asset health, and accretion potential, regardless of its scale.

Peter Winter of D.A. Davidson asked if the strong consumer loan growth is expected to moderate given slowing discretionary spending. He also sought confirmation that average deposits would finish the year at the high end of the $162 to $164 billion range.

Answer

CFO Daryl Bible suggested some recent consumer loan strength was a pull-forward ahead of price increases but remains optimistic about the RV and auto segments. He also highlighted a positive surprise in HELOC and credit card growth. On deposits, he confirmed the bank will continue to grow customer deposits at competitive rates, using the funds to support loan growth or pay down non-core funding, and expects to see continued growth.

Peter Winter questioned whether the strong consumer loan growth might slow down due to moderating discretionary spending and rising prices from tariffs. He also sought confirmation that M&T still expects to reach the high end of its full-year average deposit guidance.

Answer

CFO Daryl Bible acknowledged some consumer loan growth was a pull-forward in auto and RV purchases but expressed optimism for continued momentum, highlighting unexpected strength in HELOC and credit card growth. On deposits, he affirmed their strategy of attracting customer funds at competitive rates, which allows them to fund loan growth and strategically pay down more expensive non-core funding, indicating confidence in meeting their deposit goals.

Peter Winter asked if any specific loan portfolios were being watched more closely due to increased uncertainty or if underwriting standards were being tightened in any areas.

Answer

Daryl Bible (executive) listed several portfolios being monitored, including retail trade, manufacturing, and construction. He specifically noted some stress in government contractors and certain nonprofit portfolios but emphasized that to date, none of the issues observed have been material.

Peter Winter inquired about current borrower sentiment and loan demand, as well as the competitive landscape for deposits and whether DDA migration has stabilized.

Answer

CFO Daryl Bible described loan demand as a 'mixed bag,' with robust activity in specialty businesses but softer demand in middle markets. He noted that noninterest-bearing deposit balances were largely stable across most business lines and that the bank saw strong, customer-oriented deposit growth in the quarter, expressing confidence in winning business through its relationship-based model.

Inquired about the outlook for the Shared National Credit (SNC) portfolio in a downturn and asked for the puts and takes on the NII guidance, which was unchanged despite a higher loan forecast. Also asked for the expected year-end net interest margin.

Answer

The bank is strategically de-emphasizing SNCs in favor of more granular middle-market lending, and the existing SNC portfolio is high-quality and performing well. The NII guidance was maintained because positive loan growth momentum was offset by factors like Q1 deposit seasonality, tighter spreads on higher-quality new loans, and the negative near-term impact of a forecasted December rate cut. The net interest margin is expected to see modest improvement of a few basis points each quarter through year-end.

Peter Winter of D.A. Davidson & Co. asked for the key drivers that would lift KeyCorp's net interest margin (NIM) to its 3%+ medium-term target. He also questioned why the bank isn't repositioning its securities portfolio now to pull forward and lock in benefits, similar to past actions.

Answer

CFO Clark Khayat explained that reaching a 3%+ NIM depends on continued strong commercial loan growth, the runoff of lower-yielding consumer loans, and a favorable yield curve shape. Chairman and CEO Christopher Gorman responded that before considering another major securities repositioning, he wants greater clarity on the economic trajectory and final capital requirements. CFO Khayat added that supporting client loan growth is the current priority for capital.

Peter Winter followed up on the net interest income (NII) guidance, asking for the drivers behind the wide 7% to 10% growth range and why momentum appeared to slow after a strong Q4. He also requested color on a $12.5 million increase in OREO and a related $6.6 million reserve build.

Answer

President and CEO Samvir Sidhu explained the NII range is primarily influenced by interest rates and the pace of loan growth, with the high end of the range achievable under the current rate curve. EVP and CFO Philip Watkins added that the bank's modest asset sensitivity and the normalization of average noninterest-bearing balances also affect the outlook. Watkins clarified the NPA increase was not OREO but a security placed on non-accrual, for which the bank feels it is well-reserved, and that the provision build was related to overall loan growth.

Peter Winter of D.A. Davidson & Co. asked about the composition and drivers of recent loan growth, the product needs for the ten new banking teams, the deposit growth required for those teams to reach breakeven, and the feasibility of achieving a 50% efficiency ratio by year-end.

Answer

CFO Philip Watkins explained that Q2 loan growth was driven by corporate and specialized verticals like fund finance and healthcare, with similar trends expected going forward. President and CEO Sam Sidhu added that the new teams are on track to break even by Q1 2025, supported by a strong deposit mix with a blended cost around 3%. Watkins noted that while a near-50% efficiency ratio is the year-end target, the timing could shift by a quarter due to the dynamics of the new investments.

Peter Winter questioned why the lower end of the total revenue growth guidance was not increased given the stronger fee income outlook. He also asked about the potential to lower deposit costs and the expected trajectory for deposit betas, even without Fed rate cuts.

Answer

CFO Matt Scurlock outlined the path to achieving the higher end of the revenue guide, which includes hitting a 60% interest-bearing deposit beta by mid-year and achieving $270 million in fees. He reiterated that loan growth is an outcome of client acquisition, not a primary target. Scurlock confirmed they expect to reach the 60% deposit beta target even without rate cuts, citing significant progress already made in Q4 by repricing maturing CDs at lower rates, a trend expected to continue in Q1.

Peter Winter asked if Regions would curtail its planned investments if revenue growth disappoints, given the commitment to positive operating leverage. He also questioned if net charge-offs might exceed the target range in the first half of the year and if the ACL ratio could decline.

Answer

Executives John Turner and David Turner both strongly reaffirmed their commitment to delivering positive operating leverage in 2025, stating that investments would be made in a measured way. On credit, John Turner conceded that charge-offs could be 'somewhat episodic' and temporarily exceed the 40-50 bps range due to resolutions in specific portfolios. He also noted the ACL ratio could decrease with an improving economy and absent loan growth.

Peter Winter of D.A. Davidson asked if the momentum in fee income could continue and push results to the high end of guidance. He also questioned the outlook for the Allowance for Credit Losses (ACL) ratio, given it's at the high end of peers.

Answer

CFO Zachary Wasserman expressed confidence in landing within the 5-7% fee income growth range, driven by strong execution in capital markets, payments, and wealth management. Chief Credit Officer Brendan Lawlor explained that the ACL ratio was held relatively flat due to market volatility and rate impacts on CRE. He stated that a material reduction would require sustained economic strength and continued solid portfolio performance.

Peter Winter asked about the outlook for the Allowance for Credit Losses (ACL) ratio, given it is at the high end of peers, and also requested a breakdown of expected loan growth between core markets and new expansion initiatives.

Answer

Chief Credit Officer Brendan Lawlor explained that the ACL level is determined quarterly based on multiple factors, making it difficult to provide forward guidance. CEO Stephen Steinour added that the bank is maintaining a conservative posture due to macro uncertainties. CFO Zachary Wasserman broke down the full-year loan growth outlook as approximately 60% from the core business and 40% from new organic expansions, highlighting strong early traction in these new areas.

The analyst inquired about credit quality, specifically regarding the U.S. government equipment finance business, a notable increase in loans 30-89 days past due, the multifamily loan portfolio's health amid concerns of overbuilding, and the overall outlook for loan demand and growth.

Answer

The executive explained that the past-due loan issues are temporary and being resolved, with claims filed for the government deals. The multifamily portfolio is considered stable as it focuses on neighborhood properties, not the overbuilt Class A market. Loan growth is expected to be modest in Q4 but pick up to 5-6% in 2024, driven by commercial finance as the bank redeploys cash from the runoff of the government finance portfolio.

Inquired about the requirement to undergo a formal DFAST exam and the outlook for provision expense given the changing composition of the loan portfolio.

Answer

The bank confirmed it is preparing for the DFAST capital planning process in 2024. Management stated that future provisions will be driven by the macroeconomic outlook and portfolio performance rather than a set target for building reserves due to portfolio mix changes.