Steven Chubak

Steven Chubak asked about the revenue growth budgeted for Robinhood's expense plan, the model's flexibility, and the role of AI in driving efficiencies while maintaining profitable growth.

Answer

CFO Shiv Verma emphasized a 'profitable growth' mantra, expecting revenue to grow faster than expenses. Investments are underwritten to strong ROIs, focusing on long-term IRR and scalability to $100M+ businesses. He noted that 85-90% of costs are fixed, providing flexibility, and Robinhood will continue investing for growth while staying nimble.

Steven Chubak from Wolfe Research questioned the revenue growth assumptions embedded in Robinhood's expense plan, the model's flexibility, and the role of AI in driving efficiencies while maintaining profitable growth.

Answer

Shiv Verma, CFO, reiterated Robinhood's commitment to profitable growth, expecting revenue to grow faster than expenses. He explained that investments are ROI-driven, targeting scalability to $100 million businesses, and noted the company's nimbleness due to 85-90% fixed costs. He emphasized continued investment for growth while having the flexibility to adjust if market conditions change.

Steven Chubak of Wolfe Research LLC asked a follow-up question on crypto pricing, inquiring how Robinhood can protect its pricing advantage as large incumbent competitors like Schwab and Morgan Stanley enter the space.

Answer

CEO Vlad Tenev argued that recent market share gains were driven by making their offering more competitive for high-volume traders via smart exchange routing, a segment they previously underserved. He expressed confidence in their product velocity, with staking and new assets widening their lead, and stated he doesn't worry about competitors until they have products in the market that are actually beating Robinhood's.

Steven Chubak from Wolfe Research asked for near-term guidance on Net Interest Income (NII) for Q2 and an updated sensitivity to a 25 basis point interest rate cut.

Answer

CFO Jason Warnick did not provide specific Q2 NII guidance but reiterated that a 25 basis point cut would have about a $50 million standalone headwind. However, he stressed that this is misleading in isolation, as the company's rapid growth in interest-earning assets has more than outpaced the effect of dropping rates over the past year. He also pointed to the natural hedge where lower rates are expected to boost trading activity.

Steven Chubak asked about the incremental revenue opportunity from expanding the crypto offering with more coins and services like staking, and how Robinhood assesses the risk of larger competitors entering the space.

Answer

CFO Jason Warnick noted that while competition may increase, it also signals that crypto is becoming more mainstream, which should grow the overall market. CEO Vladimir Tenev emphasized Robinhood's competitive advantage is its integrated platform, allowing users to trade crypto alongside equities, options, and futures, and highlighted the massive future opportunity in tokenization.

Steven Chubak noted a decoupling between revenue and Assets Under Custody (AUC) in Q3 and asked for management's confidence that the strong historical relationship would hold amid further rate cuts.

Answer

CFO Jason Warnick expressed strong confidence in the long-term relationship. He attributed the Q3 deviation to two specific factors: the absence of ~$30 million in seasonal proxy revenue that was present in Q2, and a $14 million sequential increase in contra-revenues from promotions. He noted the main driver of the contra-revenue, the 1% gold deposit boost, is being wound down, which should help normalize the relationship going forward.

Steven Chubak asked about the significant increase in Carlyle's transaction fees, inquiring about potential revenue upside, areas where the firm might be under-earning, and any remaining gaps in its overall platform offering.

Answer

CFO Justin Plouffe deferred detailed forward-looking insights to the shareholder update. He highlighted the platform's agility and strategic focus on capital markets and transaction fees, noting the business's growth from near zero. He acknowledged some remaining upside and gaps due to historical fund documents.

Steven Chubak asked about the sustainability of Carlyle's strong transaction fees, potential revenue upside, and any remaining gaps in the firm's overall offering.

Answer

CEO Harvey Schwartz deferred detailed forward-looking insights to the 2026 shareholder update. He highlighted the platform's agility and strategic focus on capital markets and transaction fees, acknowledging some remaining gaps due to historical fund documents but still seeing upside.

Steven Chubak of Wolfe Research asked to unpack the momentum in the retail channel, seeking insights on achievable run-rate flows and the initial market receptivity to the upcoming CPAP product.

Answer

CEO Harvey Schwartz detailed a systematic global wealth strategy built on brand recognition, key partnerships like the exclusive international deal with UBS, and a diversified platform. He described Carlyle Alpinvest as a "category killer" for wealth clients and noted that the upcoming CPAP launch is one of three flagship products driving a natural flywheel effect.

Steven Chubak of Wolfe Research LLC asked for more details on the retail channel's momentum, inquiring about achievable run-rate flows and the initial market receptivity to the upcoming CPAP product.

Answer

CEO Harvey Schwartz described the global wealth strategy as a long-term trend in its early stages. He highlighted the strength of Carlyle's brand, global partnerships like the one with UBS, and a diversified platform as key differentiators. He noted the three flagship funds, including the upcoming CPAP, create a natural flywheel effect and expressed enthusiasm for the potential opening of the retirement space, stating the firm is 'super enthusiastic about the momentum here.'

Steven Chubak asked for help in framing the revenue opportunity in capital markets, seeking insight into an achievable run-rate for the business and whether it is adequately resourced to capture the potential.

Answer

CEO Harvey Schwartz confirmed that the firm feels "completely well resourced" following strategic changes to incentives and prioritization. He stated that it is already a record year for capital markets revenue, even in a subdued environment. While forecasting a specific run-rate is difficult, he assured that the "engine" is in place for growth. CFO John Redett added that as markets improve, they are comfortable that the revenue number should continue to accelerate.

Steven Chubak inquired about LPL Financial's confidence in achieving its 90% asset retention target for Commonwealth Financial Network, especially given recent press coverage, and sought insight into actions planned to reignite core recruiting efforts outside of Commonwealth.

Answer

President and CFO Matt Audette reaffirmed the 90% asset retention target, clarifying that the methodology focuses on assets expected to land on the platform, and noted that advisors committing to stay are larger and faster-growing. CEO Rich Steinmeier added that while some recruiters were focused on Commonwealth retention, they are now pivoting back to organic recruiting, expecting a gradual return to normalized outcomes driven by increased win rates in traditional markets and expanded affiliation models.

Steven Chubak asked about the reaffirmed 90% asset retention target for Commonwealth, especially given recent press coverage suggesting lower figures, and inquired about actions to get core recruiting ex-Commonwealth back on track amidst a near-record pipeline.

Answer

President and CFO Matt Audette clarified that the 90% retention target is based on assets expected to land on the platform, noting that advisors who have signed to stay are larger, faster-growing, and higher producers. CEO Rich Steinmeier added that many top recruiters were focused on Commonwealth retention, and as that effort winds down, they will pivot back to organic recruiting, expecting a gradual return to normalized recruiting outcomes driven by increased win rates in traditional markets, penetration of wire/regional employee advisor space, and liquidity/succession solutions.

Steven Chubak of Wolfe Research LLC inquired about LPL's expense optimization efforts, asking if the positive momentum that led to updated guidance could drive further efficiency gains and whether a 5% or better core G&A growth rate is sustainable long-term.

Answer

President & CFO Matt Audette confirmed strong momentum on efficiency initiatives, which he noted are improving both operating margins and the client experience. He stated that this is not a one-year effort and sees a 'long runway' for driving efficiencies for 'many, many years,' even before deploying newer technologies, suggesting a durable focus on operating leverage.

Steven Chubak from Wolfe Research asked for more context on the sources of efficiency driving the lowered G&A expense guidance and sought assurance on LPL's ability to achieve positive operating leverage while investing in the platform and the Commonwealth integration.

Answer

Executive Matthew Audette expressed high conviction in delivering operating leverage, attributing the efficiencies to foundational improvements like automating manual processes and reducing system friction. He explained that these investments simultaneously lower costs and improve the client and employee experience. Audette affirmed that these efficiencies enable the firm to invest in the Commonwealth integration without compromising financial discipline, noting this focus is becoming ingrained in the company culture.

Steven Chubak of Wolfe Research questioned the sustainability of LPL's 10% organic growth rate, given its expanding asset base, and asked if the 7% to 13% M&A-inclusive target remains achievable.

Answer

Executive Richard Steinmeier expressed confidence in sustaining performance, attributing the firm's success to winning market share through a superior value proposition, technology, and service, even as overall advisor movement remains below historical norms. Executive Matthew Audette supported this by providing data showing consistent organic growth percentage despite a significantly larger asset base over the past several years.

Steven Chubak asked CEO Rich Steinmeier for his strategic vision for the institutional and private wealth channels and questioned CFO Matt Audette on the stock's valuation disconnect from its strong net new asset growth and the potential for more aggressive buybacks.

Answer

CEO Rich Steinmeier described a significant growth opportunity in the institutional channel, citing pivotal deals with M&T and Prudential, and outlined the strategy to penetrate the private wealth market by building on existing capabilities. President and CFO Matthew Audette acknowledged the stock's undervaluation but emphasized prioritizing a strong balance sheet and higher-return investments in organic growth and M&A over more aggressive buybacks, which are set to resume.

Steven Chubak inquired about the outlook for private credit flows, specifically in Europe, noting the $700 million of equity raised in Q4 and accelerating flows. He asked about the product's reception, marketing approach given Europe's complex regulatory environment, and whether BCRED serves as a scalable paradigm.

Answer

President and COO Jon Gray expressed excitement about the BCRED product in Europe, highlighting compelling opportunities with wider spreads and lower loan-to-values, and 10% inception-to-date returns in a lower-rate economy. He acknowledged the regulatory challenges in Europe but noted that new structures are making distribution easier. He emphasized the consistent performance and growing traction, with EUR 700 million raised in a quarter, viewing it as an example of the platform's globalization and increasing receptivity to private assets globally, though he cautioned against expecting U.S.-market scale.

Steven Chubak asked about the outlook for private credit flows in Europe, the reception for the product, the marketing approach given the complex regulatory apparatus, and whether BCRED serves as a reasonable paradigm for scaling.

Answer

Jon Gray, President and COO, expressed excitement for the BCRED product in Europe, citing compelling spreads and lower loan-to-values, with 10% inception-to-date returns. He acknowledged distribution challenges due to the regulatory matrix but noted increasing traction and new structures making it easier. He believes the product can scale, though not to the size of the U.S. market, driven by consistent performance and growing receptivity to private assets globally.

Steven Chubak inquired about the real estate outlook, specifically the performance outlook for opportunistic and core plus funds in Q4 and next year, and the timing of an inflection in real estate fundraising.

Answer

Jon Gray, President and Chief Operating Officer, reiterated a consistent view of a slow, non-V-shaped recovery, noting improving conditions like lower cost of capital, increased CMBS volumes, and declining new supply. He cited qualitative signs of improving transaction activity and investor sentiment, expecting an inflection point as investors recognize value in the sector.

Steven Chubak asked about Blackstone's real estate outlook, including performance indicators, fundraising pace, and the timing of an inflection in real estate fundraising.

Answer

President and COO Jon Gray reiterated that real estate bottomed in early 2024, with a slow, non-V-shaped recovery. He cited declining cost of capital, picking up CMBS market volumes, and a constructive decline in new supply as positive signs. He noted improving sentiment among global investors and nine months of positive performance for B-REIT, expecting an inflection point as investors recognize value.

Steven Chubak asked about the BMAX launch, inquiring about its potential to scale similarly to other retail vehicles, its early reception, and other retail products in the pipeline.

Answer

President & COO Jonathan Gray indicated that BMAX, as an interval fund launched initially in the RIA channel, will likely take some time to ramp up as investors observe its track record. He contrasted this with the remarkable success of other products like BXP, which became a market leader in just 18 months. Gray emphasized that Blackstone's overall position in the wealth channel is 'incredibly positive' due to its long track record, brand, and broad product suite, and that the firm will continue to introduce new products globally.

Speaking for Steven Chubak, Brian O'Brien asked about the real estate fundraising environment, noting that tariffs could be a tailwind, and questioned how this pitch is resonating with LPs and how their appetite has evolved.

Answer

President and COO Jonathan Gray highlighted recent successful fundraising for European real estate funds as a sign of franchise strength. He noted that while conversations with LPs have improved over the last six months, recent market volatility may create a 'speed bump.' He believes the underlying fundamentals of limited new supply and lower capital costs will ultimately drive a recovery and attract capital, likely favoring new drawdown funds initially.

Steven Chubak asked about the improving flow trends for BREIT and what catalysts could drive increased retail allocations, especially with persistent long-end interest rates.

Answer

Jonathan Gray, President & COO, stated that a significant increase in flows is "all tied to performance." With net redemptions down 97% from the peak, he believes investors are waiting to see a few months of meaningful, positive NAV growth. Once that occurs, he expects flows to resume and build, expressing confidence in the underlying portfolio's quality (logistics, rental housing, data centers) and its 4% same-store NOI growth in the prior year.

Steven Chubak asked about the FRE and net flow outlook, highlighting challenges from 'back book' runoff and seeking clarity on a sustainable organic net flow rate.

Answer

CFO Michael Chae focused on the positive 'building blocks' for 2025 FRE growth rather than a specific net flow algorithm. He cited numerous drivers, including the full-year impact of newly activated funds, new fundraising initiatives, the expansion of perpetual strategies, and significant momentum in credit and insurance, all of which support a strong outlook for FRE.

Steven Chubak inquired about the drivers behind Ameriprise's impressive Q4 2025 organic growth acceleration, particularly in light of a challenging recruiting environment, and sought clarification on how competitive advisor transition packages reconcile with a lower distribution expense ratio. He also asked for the outlook on organic flows and distribution expenses for the coming year. Additionally, he requested preliminary guidance for 2026 firm-wide operating expenses and G&A growth within Advice & Wealth Management, considering significant investment allocation to the wealth segment.

Answer

Chairman and CEO Jim Cracchiolo attributed strong Q4 flows to organic growth, new client additions, and a pickup in recruiting, noting good retention. CFO Walter Berman clarified that distribution expenses align with advisor productivity and revenue generation, remaining within guided ranges despite competitive pressures. Regarding expenses, Jim Cracchiolo highlighted aggressive investments in technology, AI, and product solutions, balanced by continuous re-engineering and transformation efforts. Walter Berman added that the net effect should keep firm-wide OpEx and AWM G&A growth in the low single-digit range, with investments offset by streamlining.

Steven Chubak inquired about Ameriprise's impressive Q4 organic growth acceleration, particularly given a challenging recruiting environment. He asked how the company reconciles strong net new flows with a lower distribution expense ratio and sought an outlook for both organic flows and distribution expenses in the coming year. Steven Chubak also asked for preliminary guidance on 2026 firm-wide operating expenses and G&A growth within Advice & Wealth Management, considering significant investments in technology, AI, and new products.

Answer

Chairman and CEO Jim Cracchiolo attributed strong Q4 flows to organic growth, new client additions, existing client flows, and a pickup in recruiting, noting good retention. CFO Walter Berman added that distribution expenses align with advisor productivity and revenue growth, expecting them to remain within comfortable ranges despite competitive pressures. Cracchiolo stated that Ameriprise continues aggressive investments in technology, AI, and product solutions while simultaneously re-engineering and transforming operations for productivity improvements. Berman clarified that the net effect of investments and streamlining should keep company-wide expenses within previous ranges, with a small increase, and AWM G&A growth in the single digits, as investments are offset by transformation efforts.

Steven Chubak questioned the softer organic growth in core brokerage KPIs, including net new assets and sweep cash, compared to peers, and asked about Ameriprise's willingness to invest more heavily to reaccelerate growth, potentially impacting margins. He also sought details on sweep cash trends in Q3, behavior after the September rate cut, and anticipated growth with additional cuts.

Answer

Chairman and CEO Jim Cracchiolo contrasted Ameriprise's consistent, quality-focused approach with competitors' 'top dollar' recruiting, affirming strong investments in technology and solutions, and rational adjustments to recruiting packages. EVP and CFO Walter Berman noted stable cash balances expected to grow in Q4. Walter Berman further stated that sweep cash didn't deviate much after the September cut and anticipates an increase in Q4, with plans to lower short-term cash exposure and utilize longer-dated investments to sustain profitability.

Steven Chubak from Wolfe Research LLC inquired about the drivers behind softer net new asset flows in Q2, whether a reacceleration is expected, and the reasons for the rising distribution expense in the Advice & Wealth Management (AWM) segment.

Answer

James Cracchiolo, Chairman & CEO, attributed the Q2 flow slowdown to seasonal tax payments and market uncertainty, noting a recovery began late in the quarter. He explained that the higher distribution expense was primarily driven by a 9% increase in advisor gross production, which dictates compensation, rather than a significant increase in recruitment package costs.

Steven Chubak inquired about the drivers behind softer wealth management flows in Q2, the potential for reacceleration, and the upward trend in AWM distribution expenses, questioning if recruiting packages are becoming more rational.

Answer

Chairman & CEO James Cracchiolo attributed the Q2 flow slowdown to seasonal tax payments and market uncertainty, noting a recovery later in the quarter. He explained that higher distribution expenses were primarily driven by a 9% increase in advisor gross production, which moves advisors into higher payout tiers, rather than solely by recruiting packages, where he acknowledged some 'irrational' behavior persists in the market.

Steven Chubak asked about the resilience of AWM flows amid competitive recruiting packages, the rationale for removing adviser count and retention disclosures, and recent trends in cash build and recruiting given April's market volatility.

Answer

Chairman and CEO Jim Cracchiolo noted that client activity and flows remained strong, with a good recruiting pipeline driven by the firm's technology and stability. He explained the disclosure for adviser headcount was removed to align with industry peers and avoid confusion around adviser retirements. He added that April cash levels were relatively flat, excluding tax-related movements, and the recruiting pipeline remains robust despite market volatility.

Steven Chubak requested a preview of the 2025 G&A growth outlook for both AWM and the enterprise, and asked for perspective on the competitive landscape for financial advisor recruiting, including the impact of interest rates on acquisition costs.

Answer

CFO Walter Berman projected enterprise G&A to be roughly flat in 2025 (excluding certain items), with AWM G&A growth in the 4-5% range to support investment. CEO Jim Cracchiolo commented that the recruiting market is 'a bit frothy' with some firms using higher rates to boost offers, and he expects this to temper as rates decline.

Steven Chubak drilled down into M&A results and outlook, noting a substantial gap in advisory results between Raymond James and its peers in calendar year 2025 versus 2024. He asked about idiosyncratic factors contributing to this and whether the $1 billion M&A fees target remains credible. He also questioned the firm's ability to bend the cost curve on non-compensation expenses, given double-digit growth in the past three years, and why AUM growth lagged expectations despite strong organic flows and market appreciation.

Answer

Paul Shoukry, CEO of Raymond James Financial, explained that comparisons are difficult as Raymond James does not compete in bulge bracket M&A, which led the recovery in 2025. He emphasized focusing on long-term trends over quarter-to-quarter fluctuations, highlighting strong long-term growth in investment banking. For AUM growth, Mr. Shoukry suggested looking at fee-based assets (up 19%) as a better proxy. Butch Oorlog, CFO, addressed non-comp expenses, citing continued investment in technology (cybersecurity, AI, infrastructure) as a key driver, balancing growth with operating margin improvement.

Steven Chubak questioned the M&A advisory results, noting Raymond James was down 20% in calendar year 2025 while peers were up 20%, asking about idiosyncratic factors, the credibility of the $1 billion M&A fees target, and actions to narrow the gap.

Answer

CEO Paul Shoukry explained that comparisons are difficult due to different market segments, noting that public company M&A (bulge bracket) led the recovery in 2025, a space Raymond James does not primarily compete in. He emphasized the firm's long-term trend of strong investment banking growth over the past 5-7 years, advising against over-indexing on quarter-to-quarter fluctuations. In a follow-up on non-compensation expenses and AUM growth, Shoukry clarified that while overall AUA inflows might appear to lag, fee-based assets were up 19%, aligning with expectations for net new assets. CFO Butch Oorlog added that non-comp growth is driven by continued investment in leading technology (cybersecurity, AI, infrastructure) and growth-related expenses, with a commitment to improving operating leverage long-term.

Steven Chubak from Wolfe Research sought to confirm if the quarterly share buyback run rate would be closer to $400-$500 million to stabilize capital ratios. He also asked for details on the drivers behind the flat NII guidance, given the positive surprise in deposit beta.

Answer

CEO Paul Shoukry affirmed that a $400-$500 million quarterly buyback is a good assumption, absent major M&A or loan growth, to keep capital ratios from rising. He explained the NII outlook is based on spot balances and detailed the two main deposit buckets: a high-beta savings program and a low-beta cash sweep program, which drive the blended deposit cost.

Steven Chubak asked for clarification on the share buyback plan, questioning if a $400-$500 million quarterly run rate was a better assumption than the $250 million floor. He also inquired about the drivers of deposit beta performance and the outlook for NII.

Answer

CEO Paul Shoukry confirmed that a $400-$500 million quarterly buyback is a good assumption to keep capital ratios stable, absent major growth or M&A. On NII, Shoukry noted the flattish guidance is based on spot balances and that deposit betas are blended, with the enhanced savings program near 100% while the cash sweep program is much lower.

Steven Chubak noted that Raymond James's sweep cash growth lagged some peers and asked about any promotional changes or actions that may have impacted it, as well as the outlook for balance growth. He also asked for cleanup questions on the Capital Markets comp ratio and the driver of the sequential decline in assets under management (AUM).

Answer

President Paul Shoukry defended the firm's competitive cash offerings, stating decisions are always client-first and that year-over-year trends are more telling than quarter-to-quarter comparisons. On AUM, Chair and CEO Paul Reilly explained the decline was driven by two one-off items: a negative foreign exchange impact from the U.K. and Canada, and the previously discussed departure of a large branch. Regarding the Capital Markets comp ratio, Shoukry advised looking at longer-term trends rather than comparing sequential quarters due to year-end accounting effects, reiterating the firm-wide goal of keeping the total comp ratio under 65%.

Steven Chubak inquired about Stifel's ECM outlook, the drivers behind its ECM share strength relative to larger peers, and the confidence level for continued ECM fee growth in 2026. He also asked about the comp guidance, the expected comp leverage for 2026, how much of the improvement is due to restructuring versus business-as-usual discipline, and what gives confidence in achieving comp leverage amidst elevated competition for talent.

Answer

Ronald J. Kruszewski (Chairman and CEO, Stifel Financial) attributed ECM share gains to moving up in participation levels, leading larger deals, and enhanced capabilities, noting that Stifel is now often lead left on significant transactions. James M. Marischen (CFO, Stifel Financial) provided context by comparing 2025 ECM revenues to 2021. Kruszewski explained that while recruiting puts upward pressure on the comp ratio, Stifel has managed it consistently. Marischen detailed that the sale of SIA and the European restructuring, which had higher comp-to-revenue ratios, will drive the comp ratio lower, along with non-comp savings from these actions.

Steven Chubak with Wolfe Research LLC inquired about Stifel's Equity Capital Markets (ECM) outlook, specifically the drivers behind its significant share gains relative to larger peers and the confidence in continued ECM fee growth for 2026. He also questioned the composition of the 2026 compensation guidance, seeking to understand the split between restructuring benefits and ongoing comp discipline, and the rationale for expecting comp leverage.

Answer

Chairman and CEO, Ronald J. Kruszewski, explained that Stifel's ECM share gains are driven by an increased ability to lead larger deals and higher participation levels, a result of significant investment in capabilities and talent over the last decade. CFO, James M. Marischen, highlighted that 2025 ECM revenues surpassed 2021 figures. Mr. Marischen further clarified that the improved compensation ratio guidance for 2026 is primarily due to the sale of Stifel Independent Advisors (SIA) and the European restructuring, both of which had higher comp-to-revenue ratios, along with associated non-compensation savings.

Steven Chubak of Wolfe Research LLC asked for clarification on the Net Interest Income (NII) outlook, whether recent acquirer stock performance could disrupt bank M&A momentum, and for the specific amount of the aircraft leasing gain.

Answer

CFO James Marischen provided a Q3 NII forecast of $265M-$275M, explaining that while recent loan sales are a headwind, loan growth and funding mix shifts provide a path to the full-year guidance. CEO Ronald Kruszewski added that short-term stock reactions in M&A deals are unlikely to deter boards focused on long-term strategy. Marischen quantified the aircraft leasing gain at approximately $28 million.

Steven Chubak from Wolfe Research asked for an explanation of the significant Net Interest Margin (NIM) contraction, particularly the timing-related impacts on securities yields. He also inquired about the softness in public finance and fixed income trading revenues during the quarter.

Answer

CFO James Marischen attributed the NIM decline to several factors, including the lagging repricing of the CLO portfolio, the absence of episodic success fees seen in Q4, a lower day count, and slower loan growth. CEO Ronald Kruszewski explained that public finance was choppy due to tax policy uncertainty. Marischen added that the fixed income trading comparable was difficult due to strong, episodic activity in the prior year.

Steven Chubak inquired about the revenue potential for the Financial Institutions Group (FIG) business, particularly with a steepening yield curve, and asked for a quantification of the recent sweep cash decline and its impact on NII guidance.

Answer

CEO Ron Kruszewski expressed optimism for the fixed income business, citing a favorable environment and successful investments in structured products and public finance. CFO Jim Marischen cautioned that lumpy trading gains shouldn't be run-rated. On cash balances, Marischen stated sweep deposits were down a 'couple of hundred million dollars' in January but noted the figure is volatile. He clarified the NII forecast assumes loan growth is funded by other deposits, making any build in sweep balances incremental to guidance.

Steven Chubak sought clarification on whether the $8 EPS target is a 2025 forecast or a longer-term goal for a 'normalized' environment. He also asked about the moderation in share buybacks and capital allocation priorities.

Answer

CEO Ron Kruszewski confirmed his view has not changed from earlier in the year when he discussed achieving over $5 billion in revenue and $8 of EPS in 2025. Regarding capital, Kruszewski explained that while buybacks continue, bank growth currently appears more attractive for deploying capital given the stock's appreciation. CFO James Marischen added that achieving the $8 EPS target involves a trade-off between balance sheet growth and share repurchases.

Steven Chubak from Wolfe Research asked about Huntington Bancshares' credit guidance, specifically if the year-on-year increase in net charge-offs is primarily due to the seasoning of loans originated in recent years, and what factors would lead to outcomes at either end of the guidance range. He also inquired about the expected deposit beta for future rate cuts, following the 40% down beta observed in the last two weeks of Q4.

Answer

Chairman, President, and CEO Stephen Steinour confirmed that while there's some seasoning, the credit guidance of 25-35 basis points for net charge-offs is based on historical trends, with an expectation to be at the lower end initially and normalize towards the midpoint. Chief Financial Officer Zachary Wasserman stated that the expectation for future rate cuts is a solid down beta in the high 30s-40%, emphasizing that the objective is core funding loan growth to power peer-leading loan and revenue growth with strong marginal returns on capital, rather than beta in isolation.

Steven Chubak asked about the expense-to-trust-fee ratio used for underwriting new business and the potential for revenue attrition from shedding less profitable clients. He also sought clarification on the NII and NIM outlook, specifically how the glide path to a 33% margin is influenced by retail wins versus volume, and sustainable NII growth beyond 2026.

Answer

Michael O'Grady (Chairman and CEO) stated that the expense-to-trust-fee ratio is considered when pricing new business, varying by business, product, and client type. He noted a continuous review of client profitability to improve relationships rather than necessarily exiting them, with no dramatic attrition expected. David Fox (CFO) clarified that Q4 NIM was artificially boosted by an FTE true-up (actual high 170s), expecting stability in the 170s for 2026 unless interest rates drop significantly. He highlighted levers on both asset/liability sides, ongoing deposit pricing actions, and the benefit of lapping prior actions.

Steven Chubak asked about Northern Trust's underwriting approach for new business regarding the expense-to-trust-fee ratio, given the enhanced focus on profitability. He also questioned whether the mid-single-digit revenue growth guide for the coming year accounts for any revenue attrition from shedding less profitable business. For his follow-up, he inquired about the drivers of sustainable Net Interest Income (NII) growth beyond 2026 and the glide path towards a 33% pre-tax margin, specifically how much is driven by retail wins versus volume.

Answer

Chairman and CEO Michael O'Grady explained that the expense-to-trust-fee ratio is a high-level metric, with pricing varying by business, product, and client type. He noted that the company continuously reviews client profitability to improve relationships rather than necessarily exiting them, with no dramatic attrition expected. CFO David Fox clarified that the reported Net Interest Margin (NIM) was artificially boosted by an FTE true-up, suggesting a more stable high 170s NIM for 2026, with levers available on both asset and liability sides. He emphasized that deposit pricing actions taken in mid-to-late 2025 would continue to support NII growth into 2026.

Steven Chubak inquired about the deposit beta assumptions supporting the revised Net Interest Income (NII) guidance and questioned the company's flexibility on its expense growth target if fee revenues face pressure from negative market movements.

Answer

CEO Michael O'Grady noted that deposit betas are stable, with institutional betas near 100% and wealth management betas around 60-70%, highlighting that focused pricing strategies have yielded benefits. CFO David Fox affirmed the commitment to keeping expense growth below 5%, explaining that the company has identified discretionary spending levers in consulting, technology, and incentives to maintain flexibility in various market conditions.

Steven Chubak asked what drove the subdued AUM and AUC growth in Q4 relative to peers despite strong organic growth commentary, and if the company would consider adding organic growth to its formal targets. He also questioned why the pretax margin target was set at 30% when that level was already achieved in the latter half of the year.

Answer

Chief Financial Officer David Fox attributed the sequential AUC decline primarily to unfavorable currency movements (80%) and exposure to underperforming fixed income and international markets. Chairman and CEO Michael O'Grady stated there are no plans to add formal organic growth targets due to the estimates involved. He clarified the 30% pretax margin target is about achieving the right long-term balance between growth and returns, noting the full-year margin was still below that level.

Steven Chubak asked about PNC's capital markets outlook, including pipelines in the middle market space, expected fee growth for the coming year, and whether a normalized Net Interest Margin (NIM) could sustainably settle in the low 300 basis point range.

Answer

Bill Demchak, Chairman and CEO, confirmed increased capital markets activity, particularly in the middle market, driven by M&A and financing for acquisitions, which also boosts related capital markets activities like derivatives and bond issuance. Rob Reilly, EVP and CFO, projected high single-digit growth for capital markets in 2026. Regarding NIM, Bill Demchak stated that a normalized NIM north of 300 basis points is achievable in an upward-sloping yield curve environment. Rob Reilly added that PNC plans to reach the 3% NIM level in the second half of 2026, possibly by the end of Q3.

Steven Chubak from Wolfe Research asked for an update on PNC's capital markets outlook, including pipeline activity compared to year-ago levels, and how the company anticipates growth in capital markets fees for the coming year. He also inquired about the potential for PNC's normalized Net Interest Margin (NIM) to settle sustainably in the low 300 basis point range.

Answer

Bill Demchak, Chairman and CEO, confirmed increased capital markets activity, particularly in the middle market, with the 'logjam' in M&A and credit financing having opened up, reflected in Harris Williams' backlog and spot C&I loan numbers. He noted this activity drives broader capital markets business (derivatives, bond issuance). Rob Reilly, Executive Vice President and CFO, projected capital markets to be up high single digits for 2026. Regarding NIM, Bill Demchak stated that a normalized NIM in the low 300s is achievable assuming an upward-sloping yield curve and similar environment. Rob Reilly added that PNC plans to reach the 3% NIM level in the second half of 2026, possibly by the end of Q3.

Steven Chubak asked about M&T Bank's expected consumer versus wholesale deposit growth within the 2026 guidance and whether the company is nearing a sustainable inflection in Retail deposits due to increased density in markets like New England and Long Island. He also inquired about the persistence of mortgage banking revenue tailwinds from 2025 into 2026, specifically regarding subservicing growth.

Answer

Daryl Bible (VP, Senior Executive and CFO, M&T Bank Corporation) affirmed a strong focus on growing consumer deposits, with all business lines planning for deposit growth. He noted that a conscious decision was made to shrink some time deposits in 2025 due to higher costs, which can be easily reversed. For mortgage banking, Mr. Bible indicated that while subservicing might fluctuate throughout 2026 due to portfolio changes, the company expects to finish the year strong, leveraging its niche in hard-to-service loans like FHA.

Steven Chubak asked about the expected growth in consumer versus wholesale deposits within the 2026 guidance, and if M&T Bank is nearing a sustainable inflection in retail deposits, particularly in New England and Long Island. He also inquired about the persistence of mortgage banking revenue tailwinds from 2025 into 2026 and reasonable growth expectations for the subservicing business.

Answer

Daryl Bible, Senior Executive Vice President and CFO, M&T Bank Corporation, confirmed a strong focus on growing consumer deposits, with all business lines planning for growth in both operating and total deposits. He noted that the bank intentionally shrunk some higher-cost time deposits in 2025 but can easily regain them. Bible described commercial deposits as a 'machine' for wallet share. Regarding mortgage banking, he explained that subservicing will see some portfolio changes in 2026 (losing a smaller portfolio, gaining another, and potentially more in H2), but Mike Drury, who leads the business, feels good about the niche in hard-to-service loans (FHA), expecting a strong finish to the year despite quarterly fluctuations.

Steven Chubak inquired about Goldman Sachs' evaluation of emerging market structure opportunities like tokenization and prediction markets, and how the firm is positioning itself. He also asked about the potential growth of the financing piece of trading revenue and risk management against drawdowns.

Answer

Chairman and CEO David Solomon stated that Goldman Sachs has teams focused on tokenization, stablecoins, and prediction markets, actively engaging with regulatory developments and exploring new business opportunities, though he cautioned that the pace of change might be slower than pundits suggest. Regarding financing, Solomon noted the firm has moved from underweight to more closely weighted, seeing potential for further growth by leveraging the Capital Solutions Group and asset management business to put activity into client funds, thereby managing balance sheet risk.

Steven Chubak asked how Goldman Sachs is evaluating emerging opportunities in market structure, tokenization, and prediction markets, and where the most compelling opportunities lie for the firm. He also inquired about the potential for further growth in the financing piece of trading revenue, which has approached 40%, and how risk is managed against potential drawdowns.

Answer

Chairman and CEO David Solomon stated that Goldman Sachs has significant teams focused on tokenization and stablecoins, actively engaging with regulatory developments, seeing these innovations as important for expanding existing businesses and creating new ones. He also finds prediction markets interesting, noting their resemblance to derivative contracts. Regarding financing, Mr. Solomon noted that the firm has moved from being underweighted to more closely weighted, with some room for further growth. He highlighted the Capital Solutions Group and connectivity with Asset Management as ways to grow this business, allowing more activity to be placed into AWM and reducing reliance on the balance sheet, while maintaining a keen focus on risk management.

Steven Chubak asked if Goldman Sachs would reconsider shrinking its on-balance sheet alternative investments given more favorable capital treatment and questioned the durability of the recent Stress Capital Buffer (SCB) improvement.

Answer

Chairman & CEO David Solomon affirmed the firm's commitment to its strategy of being an asset manager and not running a large on-balance sheet alternatives platform, stating 'we're not gonna pivot from that.' CFO Denis Coleman added that the favorable treatment makes their necessary co-investments less of a returns headwind. Regarding the SCB, David Solomon noted that while it reflects their less RWA-dense strategy, a lack of regulatory transparency makes it difficult to confirm the specific drivers or durability.

Steven Chubak asked about the outlook for financial sponsor activity, the cause of fee rate contraction in third-party alternatives, and the potential risk to the investment banking deal backlog.

Answer

CEO David Solomon noted a large backlog of sponsor activity will eventually materialize. Executive Denis Coleman attributed the fee rate contraction to a mix shift toward lower-fee OCIO activities. Solomon added that while uncertainty exists, client dialogues are increasing and the deal backlog is up.

Steven Chubak of Wolfe Research requested an overview of the earnings drag from non-core assets and other self-help levers, and also questioned the firm's capital deployment strategy, particularly regarding buybacks at current valuations.

Answer

CFO Denis Coleman quantified the drag from selected consumer items at 80 basis points on ROE and noted that reducing the HPI portfolio will provide incremental capital relief. On capital deployment, he reiterated prioritizing organic growth, especially in acquisition financing and durable revenues, but stated the current valuation does not preclude returning capital to shareholders via buybacks and dividends.

Steven Chubak asked about Morgan Stanley's firm-wide operating leverage philosophy, specifically whether higher incremental margins can be sustained if revenue momentum continues, given consensus expectations for little margin improvement.

Answer

Ted Pick, Chairman and CEO of Morgan Stanley, affirmed expectations for ongoing operating leverage with a constructive market and strong execution, given the largely fixed cost base. He noted the efficiency ratio at 68% for the quarter and year, indicating room for further improvement. Sharon (CFO, Morgan Stanley) elaborated on AI's role in driving productivity gains in operations, while Ted Pick acknowledged potential 'teething pain' but affirmed real technological advancement.

Steven Chubak questioned the firm-wide operating leverage, asking if Morgan Stanley could deliver higher incremental margins if revenue momentum is sustained and the operating backdrop remains constructive, given consensus implies little margin improvement.

Answer

Chairman and CEO Ted Pick and Sharon (CFO) confirmed expectations for ongoing operating leverage under constructive market conditions and strong execution. They cited the largely fixed cost base, the firm's efficiency ratio consistently below 70%, and continued investments in AI for productivity gains across operations and infrastructure functions as key drivers.

Steven Chubak questioned the 30% Wealth Management margin target, asking why the long-term aspiration isn't higher given current core performance and what might prevent achieving the goal this year. He also asked about the tangible benefits of the new partnership with Carta.

Answer

Executive Sharon Yeshaya explained that while the firm could reach 30%, they prioritize making durable, long-term investments in the business, such as in the Workplace and self-directed channels, which can be margin-dilutive initially. She stressed the goal is durable growth, not hitting a target at the expense of investment. Regarding Carta, Yeshaya described it as an 'exciting partnership' that provides an exclusive referral channel for private companies as they go public, creating opportunities for both the Wealth Management and Institutional Securities businesses.

Steven Chubak inquired about the sustainability of Morgan Stanley's operating leverage and high incremental margins, as well as the drivers behind the strong Q3 momentum in Wealth Management KPIs, particularly sweep deposits.

Answer

Executive Vice President and CFO Sharon Yeshaya explained that efficiency gains are part of a long-term strategy, citing real estate optimization and reduced professional services as funding growth investments in technology and infrastructure. She attributed the strong Wealth Management KPIs to broad-based client engagement and encouraging deposit trends following the recent Fed rate cut, rather than a single idiosyncratic factor.

Steven Chubak inquired about the sustainability of the exceptional performance in equities trading and the factors that could support or derail its momentum. He also asked for an outlook on M&A durability given recent market volatility.

Answer

CEO Ted Pick attributed the record equities quarter to strong, broad-based client activity across all products and regions, driven by investments in technology and client service. He noted that while a weaker economy is a risk, client engagement remains high. CFO Sharon Yeshaya added that the M&A pipeline is supported by encouraging, broad-based flows across all wealth channels and noted a positive pickup in securities-based lending ahead of tax season.

Steven Schubak asked about the sustainability of Webull's impressive incremental margins, given the company's growth phase, and questioned why marketing spend declined year-over-year despite strong momentum. He also inquired about the evolving crypto strategy post-relaunch, current pricing, and future opportunities for aggressive take rates amidst intensifying competition.

Answer

Group President and U.S. CEO, Anthony Denier, stated that mid-20s margins are healthy for a growth company. Group CFO, H.C. Wang, elaborated that Webull consistently maintains adjusted operating margins around 20% by optimizing expenses. Wang explained the opportunistic marketing approach, shifting from free stocks to asset-matching promotions, which increases net deposits and AUM while making marketing expenses more predictable due to amortization. Denier expressed excitement about the crypto relaunch, viewing it as a 'second at bat.' He noted Webull's current crypto pricing at approximately 100 basis points and outlined plans to aggressively reduce take rates in early 2026 to attract active crypto traders, alongside introducing new product additions to compete effectively.

Steven Chubak sought clarification on the all-in ROE potential for KKR's insurance business, asking for a reasonable target once benefits from GA general account rotation, higher sidecar earnings, and incremental capital markets contributions are fully reflected.

Answer

CFO Rob Lewin stated that while there's no explicit target, KKR aims to increase the all-in return from the high teens to over 20%, especially with the full realization of upsides. He identified the maturation of the alts portfolio (generating cash outcomes) and the growth of third-party capital (e.g., $6 billion dry powder converting to $60 billion+ fee-paying AUM) as the two biggest drivers. Lewin also mentioned KKR's competitive advantages in a tight marketplace, including the ability to draw down third-party capital during market dislocations and leverage free cash flow for attractive return environments.

Steven Chubak asked about the all-in ROE potential for KKR's insurance business, specifically the drivers for exceeding 20% given the current 18-19% return and various upside sources.

Answer

Rob Lewin, Chief Financial Officer, reiterated the goal of increasing the all-in return from high teens to north of 20%. He identified the two biggest drivers as the maturation of the alternatives portfolio to generate cash outcomes and the growth of third-party capital. Lewin noted that $6 billion of dry powder is expected to translate into $60 billion+ of fee-paying AUM, significantly boosting management fees. He also mentioned KKR's competitive advantages in a tight marketplace, including the ability to draw down third-party capital for market dislocations and deploy free cash flow into attractive return environments.

Steven Chubak of Wolfe Research LLC asked about the asset-based finance (ABF) deployment opportunity, referencing the Harley-Davidson deal and inquiring if similar transactions with other retailers are repeatable.

Answer

Craig Larson, Partner & Head of IR, explained that the environment is excellent for ABF as companies seek to adopt capital-light models. He positioned the Harley-Davidson transaction, which involved buying a loan portfolio and a forward flow agreement, as part of a broader trend. Larson cited past deals with Discover, PayPal, and BMO as examples of companies freeing up capital for strategic initiatives, suggesting the opportunity is not a one-off.

Steven Chubak from Wolfe Research asked for early details on the distribution strategy and areas of differentiation for KKR's new partnership with Capital Group.

Answer

Executive Craig Larson described it as the 'earliest of days,' emphasizing a long-term focus on delivering strong net investment performance over raising capital quickly. Co-CEO Scott Nuttall added that the partnership aims to reach the 95% of households not targeted by existing K-Series products, with plans for private equity, real estate, and infrastructure products, as well as model portfolios and target-date fund solutions.

Steven Chubak asked about the potential upside to KKR's fundraising outlook, given the upcoming 'super cycle' and improved market conditions, compared to the $114 billion raised in 2024.

Answer

Co-CEO Scott Nuttall reiterated comfort with the Investor Day target of $300+ billion over 2024-2026, emphasizing the 'plus' sign. He explained that key drivers from 2024 are sustainable and improving, and the addition of flagship funds being in the market for a greater part of the year should be 'quite additive' to the fundraising momentum.

Steven Chubak of Wolfe Research asked for a mark-to-market on the $300 billion multi-year fundraising target from Investor Day, suggesting it might be conservative given the strong year-to-date results achieved with limited flagship fund contributions.

Answer

Executive Craig Larson stated that while there isn't a new target, their confidence in exceeding the $300 billion goal has increased. He highlighted that flagship fundraising, which has been modest recently, is poised to become a meaningful and incremental contributor. Co-CEO Scott Nuttall reinforced this positive outlook, advising the analyst to "lean even more into the plus" on the target.

Steven Chubak inquired about Apollo's origination targets, noting the current activity exceeding the $275 billion annual goal set at Investor Day, and asked for management's updated outlook for the next few years given this accelerated success.

Answer

President Jim Zelter acknowledged the strong start and accelerated success in origination, attributing it to the expanded universe of buyers and broader product creation. He stated it would be premature to change the five-year estimates 9-12 months into the plan, emphasizing the flywheel effect where 75% of next year's growth comes from existing vehicles. CEO Marc Rowan and CFO Martin Kelly also contributed to the broader discussion on the growth flywheel.

Steven Chubak from Wolfe Research inquired about the outlook for Apollo's wealth channel, specifically asking about flows for the AAA product, progress on distribution platforms, and the durability of recent strong fundraising.

Answer

President James Zelter highlighted the channel's strong growth trajectory, with $5 billion raised in Q1, and reaffirmed the full-year target. He noted that growth was broad-based across multiple strategies, with AAA showing solid performance. Zelter emphasized that momentum is driven by performance, technology, and a comprehensive product suite, and confirmed that April flows remained strong.

Steven Chubak questioned the Capital Solutions (ACS) fee outlook, noting that the Investor Day target implies a significant growth deceleration despite strong historical performance and a positive backdrop. He asked if the target was conservative.

Answer

CEO Marc Rowan clarified that ACS is not a standalone business but a strategic outgrowth of their core strategy, enabling them to originate large deals for their balance sheets while syndicating the rest. President Jim Zelter added that ACS is a critical tool for their open architecture and public-private convergence strategy. They affirmed they are not changing the Investor Day guidance, which was set only four months prior.

Steven Chubak asked about the retirement opportunity within the $15 trillion defined contribution (DC) market, questioning what is tangible in the near-term and how much of that market Apollo can service.

Answer

CEO Marc Rowan clarified that while the DC market represents significant upside, it is not factored into the current 5-year plan. He stated the more immediate, baked-in opportunity is rethinking the retirement product set itself to offer simplification and guaranteed lifetime income. He noted that broad access to 401(k)s would be a positive development for the entire industry, limited only by origination capacity.

Steven Chubak inquired about Ares' fundraising momentum, particularly given the smaller contribution from campaign fundraising this past year, and asked for the outlook for next year against a tough 2025 fundraising comparison, including how the mix of deployment might evolve.

Answer

Mike Arougheti, Co-Founder, CEO, and Director of Ares Management Corporation, expressed high conviction in surpassing the prior record of $93 billion, attributing it to strong underlying performance and investments in global distribution. He noted the diversity of strategies, with over 40 funds in the market, and anticipated flagship credit funds like Pathfinder and senior direct lending funds launching next year. He also emphasized the continuously rising floor for annual fundraising due to open-ended funds, SMAs, and strategic partnerships.

Steven Chubak inquired about Ares Management's fundraising outlook for next year, considering the impressive momentum, the smaller contribution from campaign fundraising in 2025, and the near-record transaction pipeline.

Answer

Mike Arougheti, Co-Founder, CEO, and Director, expressed high conviction in surpassing the prior $93 billion record for 2025 fundraising, attributing it to strong performance and global distribution investments. He highlighted the diversity of strategies, with over 40 funds in the market, and anticipated flagship credit funds like Pathfinder and senior direct lending to launch next year. He also noted that the floor for annual fundraising continues to rise due to open-ended funds, SMAs, and strategic partnerships.

Steven Chubak asked about the fee-related earnings (FRE) margin outlook, questioning if the 0 to 150 basis points expansion target for the year is still achievable given market dislocation and the margin drag from the GCP acquisition.

Answer

CFO Jarrod Phillips affirmed that the 0 to 150 bps FRE margin expansion target remains current. He explained that the recent margin pressure was due to the integration of GCP, but this is temporary. He expects the drag to be offset by significant synergies over the next 12-24 months and improved operating margins as new funds, particularly in the data center business, are raised. He reiterated that the firm prioritizes strategic growth investments over maximizing short-term margins.

Steven Chubak inquired about the drivers of non-flagship fundraising for 2025 and asked for details on the evolution of the Aspida/T. Rowe Price partnership, including its potential to enter the 401(k) market.

Answer

CEO Michael Arougheti explained that the fundraising 'floor' is rising due to numerous continuous-offer funds and accelerating wealth and insurance channels. Regarding the T. Rowe partnership, he expressed excitement about leveraging their capabilities for Aspida and noted that while it's early, there are discussions around developing retirement products together.

Brendan O'Brien, on behalf of Steven Chubak, asked about private credit spread compression, its drivers, and any differences between the middle market and larger deals. He also questioned if Part 1 fees could continue to grow despite falling rates, given the scaling of new funds and increased transaction activity.

Answer

CEO Michael Arougheti attributed spread narrowing to a healthy economy and low defaults, in addition to supply/demand. He noted a durable 150-400 bps spread premium for private credit exists and that Ares's ability to invest across the entire middle market is a key advantage. He confirmed that Part 1 fees are expected to grow, as the growth in fee-earning assets from new vehicles will outpace the impact of lower rates, which are often offset by wider credit spreads and higher upfront fees from increased deal volume.

Steven Chubak inquired about the growth opportunity within TPG's capital markets business, asking about the potential windfall from increased deployment and any remaining capability gaps.

Answer

CEO Jon Winkelried explained that TPG is embedding capital markets expertise within each strategy, enhancing collaboration on complex deals like Altice and xAI. CFO Jack Weingart added that the 'transaction, monitoring and other fee' line item is expected to grow faster than the firm's overall pace.

Steven Chubak of Wolfe Research LLC asked to frame the digital infrastructure opportunity, specifically regarding the timeline for the next flagship fund and the potential for increased fundraising capacity.

Answer

Co-CEO Marc Lipschultz characterized digital infrastructure as a 'generational opportunity' where Blue Owl is uniquely positioned to deploy 'massively larger pools of capital' with top-tier tenants. CFO Alan Kirshenbaum provided a timeline, stating they expect to be in the market for the next flagship vintage in 2026 and will launch a dedicated digital infrastructure wealth product by early 2026, capitalizing on the immense demand.

Steven Chubak asked about the current spread and pricing dynamics in private markets, particularly in light of widening high-yield spreads, and how competition with the broadly syndicated loan (BSL) market is evolving.

Answer

Co-Chief Executive Officer Marc Lipschultz responded that while it's early, market dislocation is beneficial for their business. He noted the syndicated loan market has 'essentially shut down,' reinforcing the value proposition of private credit's durability and predictability. He expects private credit to gain market share and for spreads to widen, though it will take time to fully manifest in the private markets.

Steven Chubak of Wolfe Research, LLC asked about the 41% increase in G&A for 2024 and inquired about the normalized growth rate for operating expenses, given investments in retail and new strategies.

Answer

Co-Chief Executive Officer Marc S. Lipschultz stated that the company invests upfront for growth, and many 2024 investments were in anticipation of 2025's growth. Chief Financial Officer Alan Kirshenbaum provided guidance for 2025, expecting a 57-58% FRE margin, with G&A at about 12% of revenue and compensation at 30-31%.

Steven Chubak asked about the firm's FRE growth algorithm for the next several years, seeking a preview of the growth roadmap ahead of the upcoming Investor Day.

Answer

Co-Chief Executive Officer Marc Lipschultz pointed to the durable business model and new growth streams from M&A as drivers for future success. Chief Financial Officer Alan Kirshenbaum provided specific guidance, stating they expect mid-20s percent FRE growth in 2024 and similar mid-20s percent FRE growth in 2025, with the goal of continuing to lead the industry.

Steven Chubak from Wolfe Research asked about recent changes to cash-sharing economics with RIA and IBD clients in the Pershing business. He also inquired about the softer net new asset (NNA) flows in Pershing, the reasons for the moderation, and the expected impact of the pending Atria departure.

Answer

CFO Dermot McDonogh stated that while Pershing continually reviews its competitive offerings, no significant changes have been made to cash economics, and any impact on the firm's NII guide is "de minimis." Regarding NNA flows, he attributed the quarterly softness to the timing of large mandate signings, which can be choppy. He expressed confidence in the pipeline and reaffirmed the 2025 guide for the Wolfe platform, noting the Atria transition would occur in the next quarter or two.

Steven Chubak asked about Bank of America's capital management strategy, including its comfort level for the CET1 ratio and the sustainability of the $4.5 billion share buyback. He also inquired about the drivers behind the strong Q1 loan and deposit growth and the outlook for commercial lending amid policy uncertainty.

Answer

CFO Alastair Borthwick stated that the bank is comfortable growing into its capital by investing in the business and has flexibility on the buyback, without a specific CET1 target yet. CEO Brian Moynihan attributed loan growth to long-term investments in commercial bankers and technology, which he expects will continue to drive performance.

Steven Chubak asked for the key drivers of the 2025 Net Interest Income (NII) growth guidance and inquired about management's confidence in achieving its long-term operating leverage targets.

Answer

CFO Alastair Borthwick attributed the NII growth to stabilizing deposit trends, accelerating loan growth, and the ongoing repricing of fixed-rate assets and swaps. CEO Brian Moynihan expressed confidence in the operating leverage goal, citing past performance and the benefits of a stable headcount and normalizing revenue mix, which will improve profitability as NII growth from the consumer segment accelerates.

Steven Chubak asked about the degree of expense flexibility in the model if the fee income outlook deteriorates and sought clarity on the net interest income (NII) exit rate for 2025, given the changes in the forward curve.

Answer

CFO Mike Santomassimo confirmed there is expense flexibility, citing variable compensation in Wealth and IB, as well as operating losses, as areas that could adjust with revenue. He stated the firm would actively manage costs while protecting core investments. Regarding NII, he acknowledged the difficulty in predicting the 2025 exit rate due to volatility in rates and loan growth, reiterating that the forward curve is often wrong and multiple scenarios are possible.

Steven Chubak inquired about the potential impact of proposed Supplementary Leverage Ratio (SLR) changes on the firm's appetite for U.S. Treasuries and overall rate risk management. He also asked for an outlook on the Markets business given high volatility but potential client de-risking.

Answer

CEO James Dimon argued that broad regulatory reform across SLR, G-SIB, and CCAR is needed, not just an SLR fix, to benefit the markets. Executive Jeremy Barnum added that while JPM isn't currently bound by SLR, it has been in the past. On the Markets outlook, Barnum declined to give guidance but acknowledged that while volatility is a positive ingredient, significant client de-risking could be a headwind.

Steven Chubak inquired about the drivers behind the expected increase in 2025 expenses and the firm's appetite to extend duration in its securities portfolio amid expectations for rate cuts.

Answer

CFO Jeremy Barnum explained that the expense increase is driven by inflation, the annualization of growth initiatives, and higher volume-related costs. CEO James Dimon added that he views these as investments in areas like private banking, branches, and AI to gain market share. Regarding duration, Barnum stated that extending it is a headwind to short-term NII and that the firm is currently comfortable with its position, having made some minor active choices to extend duration recently.

Steven Chubak of Wolfe Research asked if the move to zero commissions alters the relationship with TD Bank or the potential for a combination, given TD's U.S. wealth ambitions.

Answer

President & CEO Tim Hockey stated definitively that the commission price point has 'no bearing whatsoever' on the company's strong relationship with TD Bank. He deferred questions about TD's future strategic plans to TD itself.

Steven Chubak from Wolfe Research asked about the BDA reinvestment ladder, noting a significant reinvestment headwind in year two, and questioned how the strategy might change if the forward curve holds.

Answer

EVP & CFO Stephen Boyle stated that the company does not plan to dramatically change its ALM profile or take undue risk. He highlighted the benefit of having no negative convexity and indicated they would likely 'stay the course' with their current strategy.

Steven Chubak of Wolfe Research asked for the rough fee rates across the four newly disclosed client cash buckets to better forecast revenue impacts. He also inquired about the company's evolving thoughts on launching a subscription-based pricing model for the trading business.

Answer

EVP and CFO Steve Boyle declined to provide specific fee rates for the cash buckets, stating the information is blended into the overall investment product fee number. On subscription pricing, President and CEO Tim Hockey confirmed they are exploring multiple pricing options as part of their strategy, noting that while subscription models are interesting, other versions are also under consideration, with nothing to announce at this time.

Steven Chubak sought to clarify the non-GAAP expense run rate for the remainder of the year and asked about the strategy for managing the long-term debt on the capital structure.

Answer

President and CEO Tim Hockey reaffirmed the company's full-year expense guidance, noting that the second quarter is seasonally the highest and expenses should decline thereafter. On the capital structure, he stated they target a debt-to-EBITDA ratio of 1 to 1.5 for efficiency and also manage debt to ensure proper liquidity.