Saul Martinez

Saul Martinez followed up on the Brex deal's financial metrics, noting the 80% goodwill allocation, likely unprofitability, and $950 million in transaction costs/investments. He asked for confirmation that the deal would initially be EPS and tangible book dilutive, even if modestly. He also sought clarification on the expected pace of quarterly share repurchases.

Answer

CFO Andrew Young confirmed that, in isolation, Brex will result in initial earnings dilution due to its high growth rate, but is expected to lead to significant accretion over time. Regarding share repurchases, Mr. Young clarified that the Brex transaction's capital impact (over 40 basis points) does not influence Capital One's near-term repurchase thinking. He stated that future buybacks would consider current and projected capital levels, balance sheet growth, the economy, and the regulatory environment, noting healthy capital levels and remaining authorization.

Saul Martinez followed up on the financial impact of the Brex deal, noting the 80% goodwill allocation and potential unprofitability of Brex, along with $950 million in transaction costs, asking if the deal would be initially EPS and tangible book dilutive.

Answer

CFO Andrew Young confirmed that, in isolation, the Brex acquisition would result in initial earnings dilution because Capital One is acquiring a business with a growth rate significantly higher than industry averages, but he expects this growth dynamic to lead to significant accretion over time. He also clarified that the Brex transaction's capital impact would not alter Capital One's approach to share repurchases, which are determined by various factors including capital levels, growth opportunities, and the regulatory environment.

Saul Martinez from HSBC inquired about the assumptions embedded in PNC's 8% average loan growth guidance for 2026, seeking clarification on the organic growth rate excluding First Bank, and asked for a breakdown of the fee guidance, specifically confirming the standalone nature of category growth rates before adding First Bank's contribution.

Answer

Rob Reilly, Executive Vice President and CFO, clarified that the 8% average loan growth includes First Bank, with PNC standalone loan growth projected at approximately 4%. He noted continued momentum in C&I, anticipated inflection in real estate in H1 2026, and limited growth in consumer loans (auto card offsetting residential mortgage declines). He confirmed that the fee guidance for asset management, capital markets, etc., is on a standalone basis, with an additional $100 million from First Bank's fees to be overlaid, which will eventually be distributed into those categories post-integration.

Saul Martinez inquired about the assumptions embedded in PNC's 8% average loan growth guidance for 2026, seeking clarification on the organic growth rate excluding FirstBank, and asked for a breakdown of expectations across C&I, CRE, and consumer segments. He also sought clarification on the fee guidance.

Answer

Rob Reilly, EVP and CFO, confirmed that the 8% average loan growth includes FirstBank, with PNC standalone contributing approximately 4% organic loan growth. He noted continued momentum in C&I, an anticipated inflection point for CRE in the first half of 2026, and modest growth in consumer loans (auto card) offset by a deliberate decline in residential mortgage. Regarding fees, he clarified that the category-specific growth rates are for PNC standalone, with an additional $100 million from FirstBank to be allocated post-integration.

Saul Martinez from HSBC asked for an update on PNC's retail lending strategy, particularly for auto and credit cards, and whether inorganic growth would be considered to make these businesses more relevant.

Answer

Chairman & CEO William Demchak stated that it is 'extremely unlikely' PNC would pursue inorganic growth in retail credit, preferring to avoid buying 'broken' portfolios. Instead, the strategy is to invest heavily in organic growth, particularly in credit cards, by focusing on deeper penetration of their existing client base through improved product, underwriting, and marketing.

Saul Martinez sought clarification on David Solomon's earlier comment regarding 2026 investment banking fees potentially approaching 2021 levels, specifically whether this referred to overall IB fees or advisory volumes, given the significant difference in 2025 figures.

Answer

Chairman and CEO David Solomon clarified that his reference to 2021 levels was specifically about advisory volumes, not overall investment banking fees. He noted that equity capital markets levels in 2026 are expected to be meaningfully below the 2021 peak due to factors like the SPAC phenomenon not recurring, but still higher than 2025.

Saul Martinez sought clarification on David Solomon's earlier comment regarding the investment banking cycle, specifically whether the base case view of 2026 investment banking fees approaching 2021 levels referred to overall IB fees or individual segments like advisory, DCM, or ECM.

Answer

Chairman and CEO David Solomon clarified that his reference to 2021 levels was specifically about advisory volumes, which are highly correlated to fees. He noted that equity capital markets levels in 2026 would likely remain meaningfully below the 2021 peak, which was influenced by the SPAC phenomenon, though they would be higher than the current year. He reiterated that growing advisory activity creates a significant 'flywheel' effect across the firm.

Saul Martinez asked what the significant dividend increase implies about the firm's view of its core earnings power and what drove the strong outperformance in advisory revenue this quarter.

Answer

Chairman & CEO David Solomon stated that the firm has 'enormous core earnings power' and a more durable revenue base, which supports a sustainably growing dividend. On the advisory performance, he attributed the strong quarter to the strength of the long-standing franchise but cautioned that while they expect to maintain a leadership position, the specific level of outperformance seen this quarter should not be extrapolated to every single quarter.

Saul Martinez followed up on RWA progression, noting the low RWA density and asking for an outlook. He also asked about the updated full-year tax rate guidance of 21%.

Answer

Executive Denis Coleman explained the firm actively manages RWA density by shifting out of high-density exposures like HPI and into lower-density activities like private wealth lending. He also confirmed the full-year tax rate guidance is approximately 21%, accounting for Q1 results and the current outlook.

Saul Martinez of HSBC inquired about the long-term margin potential for the Asset & Wealth Management segment, asking if it could exceed 30%, and questioned the firm's capital management strategy amidst regulatory uncertainty.

Answer

CFO Denis Coleman stated that after reaching the mid-20s pretax margin target, the firm will seek further improvement through scale and efficiencies, while balancing margin gains with long-term investments. Regarding capital, he affirmed that the current 90 basis point buffer is appropriate to manage uncertainties, support client opportunities, and continue returning capital.

Saul Martinez of HSBC asked about U.S. Bancorp's assumptions for interest rates in Q4 and 2026, specifically regarding rate cuts and their influence on net interest income (NII) guidance. He also inquired about the continued growth of the Impact Finance business, its implications for the 'other income' line, and the sustainability of its tax benefits.

Answer

John Stern, Vice Chair and CFO, stated that their forecast includes two rate cuts this year and two more in 2026, with longer-term yields (e.g., 10-year Treasury) in the 4.25%-4.5% range for 2026. He explained that Q4 NII stability considers fixed asset repricing and mix, offset by seasonal credit card yield pickup, with a bias to the upside. Regarding Impact Finance, John Stern expects it to be a high single-digit growth business over the medium term, with potential pull-forward from legislative moves and market share gains in areas like renewable energy tax credits and low-income housing. He clarified that the tax benefit (around 3% to the tax rate) is expected to remain stable, with growth primarily in fee revenues from transferability and syndications. Gunjan Kedia, CEO, added that Impact Finance has become sizable due to the Union Bank acquisition and its strong presence in California.

Saul Martinez of HSBC asked about U.S. Bancorp's assumptions for interest rates in Q4 and 2026, specifically regarding rate cuts and their influence on net interest income (NII) guidance. He also inquired about the continued growth of the Impact Finance business, its implications for the 'other income' line, and the sustainability of its tax benefits.

Answer

John Stern, Vice Chair and CFO, stated that their forecast includes two rate cuts this year and two more in 2026, with longer-term yields (e.g., 10-year Treasury) in the 4.25%-4.5% range for 2026. He explained that Q4 NII stability considers fixed asset repricing and mix, offset by seasonal credit card yield pickup, with a bias to the upside. Regarding Impact Finance, John Stern expects it to be a high single-digit growth business over the medium term, with potential pull-forward from legislative moves and market share gains in areas like renewable energy tax credits and low-income housing. He clarified that the tax benefit (around 3% to the tax rate) is expected to remain stable, with growth primarily in fee revenues from transferability and syndications. Gunjan Kedia, CEO, added that Impact Finance has become sizable due to the Union Bank acquisition and its strong presence in California.

Saul Martinez (HSBC) sought clarification on U.S. Bancorp's Q4 net interest income (NII) outlook, specifically asking about the credit card favorability dynamics in Q3 that would reverse, other potential downside risks, and the rate assumptions for Q4 and 2026. He also inquired about the expected continued growth of the Impact Finance business, its implications for the "other income" line, and whether the tax benefit would remain stable.

Answer

John Stern, Vice Chair and CFO, stated that the bank's forecast includes two rate cuts in 2025 and two more in 2026, with longer-term yields (10-year Treasury) in the 4.25%-4.50% range for 2026. He explained that Q3's meaningful credit card yield pickup, including fees, was partly seasonal and expected to reverse in Q4. Stern reiterated a bias to the upside for NII despite these factors. Regarding Impact Finance, he expects it to grow at a high single-digit rate over the medium term, driven by market share gains and legislative tailwinds, leading to an increase in the "other income" line. The tax benefit from Impact Finance, approximately 3 percentage points, is expected to remain stable. Gunjan Kedia, CEO, clarified that Q4 credit card dynamics are seasonal due to the holiday season.

Saul Martinez pointed out that rising short-term borrowing and long-term debt costs had a larger impact than deposits on funding expenses and asked for an explanation. He also inquired about the outlook for the payments business, particularly corporate payments.

Answer

Vice Chair & CFO John Stern clarified that the spike in short-term borrowings was a temporary measure to fund securities purchases ahead of a loan sale closing and will reverse in Q3, benefiting NIM. On payments, he expects corporate spend headwinds to continue in Q3 before abating, with strong sales pipelines driving future growth. President & CEO Gunjan Kedia added that new leadership is executing transformative strategies in the payments division.

Saul Martinez from HSBC noted that the bank's medium-term asset and NIM guidance implies a 2027 NII figure significantly above consensus and asked for a reaction.

Answer

CFO John Stern responded that the slide is intended to provide a path for NIM evolution, not a specific NII forecast for 2027. He emphasized the path is based on mechanical asset repricing, remixing, and deposit optimization, assuming an upward-sloping curve, but acknowledged that forecasting that far out is difficult.

Saul Martinez asked how U.S. Bank differentiates itself in the highly competitive merchant acquiring space and how it measures success, questioning if the business's value is primarily its contribution to the broader franchise. He also asked for a reminder of the expected through-the-cycle deposit beta.

Answer

CEO Andy Cecere reiterated that differentiation comes from the 'interconnectedness' of payments and banking, allowing them to offer embedded solutions in key verticals like healthcare. Success is measured by profitable revenue growth. President Gunjan Kedia added that the bank's large distribution franchise is a key competitive advantage. CFO John Stern reconfirmed that the through-the-cycle deposit beta is expected to land around 50% or slightly higher.

Saul Martinez asked about the sustainability of Institutional Securities' results (20% ROTCE), specifically whether investment banking growth can be consistent with sustained or growing markets revenues, given their benefit from volatility.

Answer

Chairman and CEO Ted Pick acknowledged that markets businesses are linked to asset prices and credit spreads, performing better in strong markets. He discussed the potential for re-accelerated growth versus a later stage market. He emphasized durability through essential client partnerships, prudent capital use, stable fixed income performance, and investment banking share gains, stressing a high bar for new business and prudent risk-taking.

Saul Martinez asked about the sustainability of strong fee-based asset flows, particularly the trend of brokerage assets migrating to fee-based accounts, and what this implies for future flows and fee rates.

Answer

CFO Sharon Yeshaya confirmed that the migration of assets from brokerage to fee-based accounts is a key, durable trend with continued momentum. She explained that the value proposition is increasing as the fee-based platform expands to include more products like fixed income and alternatives, not just equities. This diversification attracts more assets and creates a durable, growing revenue stream.

Saul Martinez questioned the sustainability of impressive commercial loan growth in markets lending without compromising risk, and the interplay and sustainability of results across investment banking and sales & trading.

Answer

CFO Alastair Borthwick explained that commercial loan growth is client-focused (top asset managers/FIs), structured with high-quality, diversified collateral, and typically investment grade with low loss content, ensuring attractive returns for Global Markets. Chair and CEO Brian Moynihan added that Global Markets has achieved 14 consecutive quarters of year-over-year revenue growth, demonstrating its less volatile nature. He noted that investment banking's $2 billion in fees, combined with Global Banking's holistic client relationships (credit, transaction services, hedging), creates a more stable and sustainable revenue stream.

Saul Martinez questioned how Bank of America maintains impressive commercial and markets loan growth without compromising risk, and sought insights into the sustainability of capital markets businesses' results, particularly the interplay between resurgent investment banking and strong markets performance.

Answer

Alastair Borthwick (CFO, Bank of America) attributed strong commercial/markets loan growth to focusing on top asset managers and financial institutions, high-quality collateral, diversified structures, and low loss content, emphasizing differentiated capabilities. Brian Moynihan (Chair and CEO, Bank of America) highlighted Global Markets' 14 consecutive quarters of year-over-year revenue growth as sustainable due to its 'moving business' model. He explained that the holistic view of Global Banking customers, combining credit, transaction services, and investment banking, creates a more stable revenue stream, making the overall business sustainable.

Saul Martinez of HSBC asked about the path to higher returns in the U.S. Personal Banking (USPB) segment, noting that the current 11% ROTCE is low for a cards-heavy business and questioning what impediments remain.

Answer

CEO Jane Fraser stated the goal for USPB is a mid-teens, then high-teens ROTCE. She outlined a clear path to higher returns driven by revenue growth from new products like the Strata Elite card, expense efficiencies from transformation and AI investments, and improved capital deployment. She also highlighted the strategic importance of the retail bank as a feeder for the Wealth business and noted the upcoming benefit from the Barclays portfolio acquisition next year.

Saul Martinez of HSBC asked about the U.S. Personal Banking (USPB) segment's 11% ROTCE, noting it seems low for a cards-focused business, and inquired about the path to achieving higher returns.

Answer

CEO Jane Fraser stated the goal for USPB is to reach mid-teens, then high-teens ROTCE. The path to higher returns involves revenue growth from new products, expense reduction as elevated transformation costs abate, and improved capital efficiency. She highlighted the strength of the cards portfolio and the strategic role of the retail bank as a feeder for the Wealth business, noting the future benefit from the Barclays portfolio acquisition.

Saul Martinez asked for clarification on the 2026 expense target following a recent accounting change and inquired about the drivers and durability of the impressive net new asset growth in the Wealth Management division.

Answer

CFO Mark Mason confirmed that the 'less than $53 billion' expense target for 2026 could be adjusted down by the ~$400 million reclassification. CEO Jane Fraser attributed the strong wealth performance to Andy Sieg's strategy of focusing on net new investment assets from existing and new clients. She highlighted the strength of the team, investments in client experience, and Citi's position as a destination of choice for global wealth advice, suggesting the momentum is durable.

Saul Martinez questioned the 'up modestly' outlook for NII ex-markets, noting the Q4 run-rate seems to suggest more upside, and asked about the expected quarterly trajectory. He also asked for more detail on the drivers of the sharp expense reduction forecasted for 2026.

Answer

CFO Mark Mason clarified that 'up modestly' for NII ex-markets means approximately 2-3% growth, driven by loan and deposit volume growth offsetting rate headwinds. For the 2026 expense reduction, he pointed to four key drivers: a normalization of severance costs from an elevated $600 million in 2025 to a more typical $300 million, a reduction in stranded costs from legacy franchises, increased productivity savings from prior investments, and benefits from transformation spending beginning to materialize.

Saul Martinez questioned the Banamex exit strategy given Mexico's deteriorating macro backdrop and asked for context on how far current credit costs are from 'normalized' levels for U.S. cards.

Answer

CEO Jane Fraser stated the 'North Star' for the Banamex IPO is maximizing shareholder value, and they will wait for appropriate market conditions. CFO Mark Mason declined to give specific 2025 credit guidance but noted improvement will come from top-line growth and the normalization of credit as multiple loan vintages mature.

Saul Martinez inquired about the outlook for the auto business, given spread compression and the competitive landscape, and asked about the performance of the equities trading business, noting its flat year-over-year results compared to peers.

Answer

CFO Mike Santomassimo explained that auto loan spread compression was driven by a strategic shift to higher FICO borrowers. He expects the business to improve returns through partnerships like Volkswagen and by becoming a more full-spectrum lender, though growth will remain disciplined. Regarding equities, he stated the business is not comparable to larger peers due to its smaller prime brokerage and domestic focus. CEO Charlie Scharf added that the markets team has done an 'amazing job' building the business without the luxury of balance sheet.

Saul Martinez of HSBC asked if there are remaining operational or cultural constraints, such as a risk-averse culture, that need to be addressed to fully unlock growth potential once the asset cap is removed, questioning if the 'shackles' need to come off.

Answer

CEO Charlie Scharf rejected the 'shackles off' framing, emphasizing that the company's approach to growth is and will remain deliberate, controlled, and disciplined. He stated that expansion only occurs where they have full confidence in the underlying risk frameworks and processes, and that future growth will be a continuation of this linear, piece-by-piece approach, not a sudden, material change.

Saul Martinez asked about the firm's cost structure, inquiring about potential cost optimization efforts if revenue slows and what conditions would prompt a pullback in strategic investments.

Answer

Executive Jeremy Barnum explained that while some volume-related expenses adjust automatically, the firm would not cut long-term strategic investments for 'cosmetic' reasons unless their fundamental business case weakens. CEO James Dimon added a focus on cutting 'bad expenses' like bureaucracy and inefficiency, mentioning a new firm-wide streamlining effort and apologizing to shareholders for not initiating it sooner.

Saul Martinez from HSBC asked for a long-term view on the deposit margin and volume dynamics in the Consumer & Community Banking (CCB) segment, particularly if interest rates follow the forward curve.

Answer

CFO Jeremy Barnum explained that the previously 'unsustainably high' deposit margin is now normalizing as policy rates decline and the mix of high-yield CDs likely peaks. He anticipates a future tailwind from a combination of normalized margins and continued deposit balance growth, driven by the firm's branch expansion and market share gains. CEO James Dimon added that he views a normal, long-term deposit margin for the business to be in the 2% to 2.5% range.

Saul Martinez asked for more detail on the international business, including the drivers of its strong growth, momentum in merchant acceptance, and the sustainability of its trajectory.

Answer

CEO Stephen Squeri expressed high confidence in the sustainability of international growth. He highlighted rapid progress in merchant acceptance, now at 80% coverage in key markets. The primary growth drivers are strong card acquisition and a nascent but growing SME business. With low market share (under 6% in top 5 countries), he expects double-digit billings growth to continue, consistent with pre-COVID trends.

Saul Martinez of HSBC asked for the key building blocks for Net Interest Income (NII) heading into 2025, considering factors like the interest rate environment, deposit dynamics, and revolve rates.

Answer

CFO Christophe Le Caillec detailed that the impact of Fed rate changes on NII is small due to the company being only slightly liability-sensitive. He expects loan volume growth to moderate as the post-pandemic balance rebuild stabilizes. Key positive drivers for yield include a continued funding mix shift towards lower-cost high-yield savings accounts and ongoing pricing optimization.

Saul Martinez sought to clarify the full-year revenue guidance, confirming that the low single-digit fee growth implies a higher growth rate for Net Interest Income (NII). He also asked about the expected new money yields on the $42 billion of fixed-rate loans set to reprice.

Answer

CFO Mike Maguire confirmed the interpretation, explaining that headline fee growth is muted by the non-recurrence of fees from the TIH sale and Sterling Capital sale. Excluding these, core fee growth would be mid-single-digits. He also stated that the run-on yield for repricing fixed-rate loans is expected to be 100 basis points or better than the runoff yield.