PNC Financial Services (PNC) 17 Jul 192019 Q2 Earnings call transcript

Good morning. My name is Edison, and I will be your conference operator today. At this time, I would like to welcome everyone to The PNC Financial Services Group Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. call the the Relations, of turn Mr. now over Director to Investor I'd Gill. Bryan ahead. Sir, please go

Thank good Group. Edison, CEO, President for call you, and and PNC's Bill The conference to are Reilly, PNC call Demchak; today's CFO. and Financial Executive President Services Chairman, Participating Rob this morning, on and everyone. Vice Welcome

investor materials. as SEC all XX, obligation Today's are forward-looking as statements materials information. in website, no as and of reconciliations pnc.com, as available are presentation Cautionary them. July included information our contains non-GAAP earnings today's well corporate other These materials release speak on under XXXX, of These undertakes well update our filings statements and PNC Investor about as Relations. measures to only this

call to to like the I'd turn Bill. over Now

and good everybody. morning, Thanks, Bryan,

quarter. seen every you've per $X.XX quarter. common As income net morning, it reported measure, billion was By this of the or $X.X successful share second virtually, for diluted PNC a

strong through and You managed generated in NII positive of sit we're well, noninterest the pleased income first strong Building strong. strong year. deposits. revenues, remains half performance total where on operating saw quality both generated returns. really on We expenses and increased, grew the quarter, delivered first and we growth leverage this we loans Credit

see cracks to commercial side. really no consumer continue or We on either the the

The LIBOR growth particularly and as to drop lower quarter further consumer loan continued impactful this sets rates, but by see the a we commercial the did was driven compression. our some margin saw consistent this in quarter. be on growth loan Our basically with spread And in growth, inside strong interest effect side, we yields, well. of commercial

have on total Pipelines time, fee-based treasury management same success are healthy. these profit continues third clients At quarterly we cross-selling a to into also revenue a and our and and relationships set quarter. the to Corporate tied capital actually the really records. economic our Sales month be in segment continue record products in to going June high, markets on the solid Banking great

market of additional and Seattle. our moves we strong to next generate Banking into Portland into two in year our terms take In continue both middle with C&IB expansion, market new franchise with markets we Corporate markets, will results and

side, digital On national the effort good retail to this our continued quarter. make expansion progress

our those very new in high-yield And Our our the and for expansion to expect model City continues pleased are we've growth attractive and under de center pace been solution we'd support Kansas our opened point in a nearly customers locations growing beyond. legacy see markets. Xx markets savings outreach and markets. expansion offerings an the we've for digital branch to X new entry in product in our be now branches. branch And our novo to They at Dallas in

to we pace so ahead, or new the in openings Boston, plan Nashville. next Looking solution Houston months of center XX accelerate over and Dallas, the

common expand stock, there's control, invest as top we share maintained seen our our needs. ahead, uncertainty That, of but and on particularly is to programs. dividend to current year continue continue and in we further economy for $X.XX to substantial our meet the position. offerings the XX% our of to and improving innovation our the rates. return raising as the even you've increase the capital outlook customer remainder in customers' the product service businesses, customer-facing and obviously course, shareholders some experience of environment the announced I'm will evolving repurchase keep in sure increase capital share quarterly cash per in a a we a we've in on look We strong our And recently to at dividend to beyond

to that, our take I'll our I results with in to Rob hard work, thank to it and you employees their detail. second a more As little through continued want for quarter over always, turn

good everyone. Thanks, Bill, morning, and

quarter just Bill diluted common $X.XX billion $X.X of share. per mentioned, or second net income we reported As

Our loans grew to second of billion growth or billion sheet $XXX X% and approximately of RMBS. X%. balance $X.X is quarter Investment increased billion $X.X on due to total Loan basis. an was Average Slide linked quarter. or primarily on agency billion is of or $XX.X compared X%, X presented to $XX.X XXXX securities average billion purchases

Securities increased X% year-over-year. or $X.X billion

quarter $XX.X balances X% linked Deposits billion $X.X year-over-year. for quarter, $XX.X or cash averaged X% the Fed and the linked year-over-year. down $X.X quarter grew billion billion at second and or Our billion $X.X billion

equity March X XX, be estimated XXXX, X.X% III XXXX. compared our XX, Basel Tier June to with ratio X.X%, was of common of As as

of tangible $XX.XX June ago. of XX% value compared year XX, common was book increase an a to as per Our share

average second up for on on X.XX%, increase was basis from XX X our the the XX.XX%, points quarter. return quarter Our first tangible equity an basis points. assets was return common And of

quarter, loans first X% Slide the broad-based in in lending deposits billion portfolio. commercial strong X% quarter, grew increased X over or $X.X shows lending. particularly or with billion in both and growth lending loans $X.X consumer Average secured linked our more growth with detail. Commercial and balances our

by loans side, increased X% equity and $XXX Compared $XX.X estate, runoff loans. in to or period a approximately X% consumer million real balances increased billion. residential same linked auto and average card, or ago, in credit growth somewhat education our year the quarter, On with the offset home

Average year quarter the approximately average deposits, $XX.X the was noninterest-bearing deposits interest-bearing in X%. increased as $X.X growth and the deposits. In consumer posted average second first commercial with deposits in both Compared or compared a billion increase by quarter, deposits a ago, however, to primarily The same growth increased billion small reflecting well. quarter

several while shareholders XX% through billion X, capital programs over see can recently our repurchases second you announced repurchase years the we completed of substantial last capital completed In on $X.X and the has a quarters. return to announced been As past to repurchase the position. share our maintaining increase next plan we to strong over combination programs. overall a stock over shares month, up share And of we X year. new common last This represents Slide an a quarter, the dividends, repurchase

of Directors last approved with the to of week effective an August share our dividend all-time Additionally, XX% increase dividend. high quarterly in the $X.XX a per Board

As was $XXX up total or million first first $X.X billion, you see or quarter X, $XX was can linked compared revenue the Net with up income on quarter million quarter. Slide X%. interest X%

increase in credit linked second the X% continued Noninterest managed. well as Noninterest seasonally to a million $XXX million million, noninterest income as compared expenses X% fee first quarter higher income. reflecting was increased or million an expense linked other quarter as increased well be quarter or $XXX $XX the income with in $X losses Provision decrease. for quarter,

rate effective was quarter tax the Our in second XX.X%.

effective tax to For we the be to expect continue year XX%. full rate the approximately XXXX,

let's this of discuss key more the performance detail. in Now drivers

narrower The million the Turning up with as quarter, in balances. in and quarter. to interest-bearing yields, Slide LIBOR X. rates decline by which X% the asset yields loan margin commercial billion by $X.X higher higher spreads. to the interest by The were X% $XX interest as first loan $XX this X.XX% or as grew lower reflects interest impacted second costs was well Net loan of were liability Net offset compared partially balances, driver Net day well balances million earning quarter. primary was income or partially as higher a higher offset yield increase of commercial year-over-year, decrease in income additional which funding an decreased and balances. and driven by

Additionally, deposit X% the quarter. X% linked year-over-year. and points rates quarter X increased basis during increased Noninterest income

quarter with average fee increases management linked of X% quarter fee our The increased investment across grew which in were: Importantly, higher increase BlackRock and income markets. asset drivers main fee million categories. reflecting equity $XX revenue, million linked includes all $X equity the

And higher service $XX due $XX residential treasury to lower increased product increased and increased revenue loan higher million revenue. charges higher to services services seasonally deposits positive servicing volumes $XX driven a noninterest million Corporate due offset RMSR revenue and management million million, partially adjustments, syndication and increased customer on by Consumer loan income sales transaction valuation growth. and $X by mortgage fees.

reflecting capital-markets sale linked increased million quarter related income and including $XX business valuation securities corporate revenue, Finally, asset other our record a quarter, noninterest and gains. in higher

gain the with income $XXX and quarter to expect was guidance. of securities to million reflects in be This was quarter. range sale announced expectation a In million, quarter excluding the gains quarter net second other and for lower our our we on noninterest third the recordkeeping in the other second first income the included $XXX business, of Visa activity. in asset compared sale which noninterest retirement the Second included quarter,

Turning X. to Slide

The supports our retail both X% well and Second for marketing national linked percentage remained our the quarter which as largest year-over-year expenses digital strategies. comparisons, expenses our controlled. was in increase quarter expense, increased

second remain the in continues with in focus both ago. management quarter be to a and ratio Our for disciplined to overall XX% efficiency improved year us, for compared XX% a we and approach. quarter, Expense our last

As we and a target. XXXX you through in track improvement $XXX are have to goal million program, full cost we year realize continuous achieve our to savings our know, on

Provision presented remains consumer million see our for unchanged $XXX XX decrease $X points. was our strong, continue and Our credit quality XX. to and portfolios. commercial credit are metrics credit both Overall, quality on Slide we strength our in $XXX linked net was and million Net million charge-offs charge-off to at a $X linked ratio million, losses basis quarter. increased annualized broadly quarter,

XX, losses to down XXXX, or quarter, reflecting delinquencies. was X% or commercial total X.XX% points, unchanged total to in both driven from but X the for Nonperforming basis decline the the increase loans in by linked XX of allowance lease represent nonperforming were consumer million Overall, and X%, quarters. Total commercial virtually up our a $XXX loans quarter, down year-over-year. Total loans as June loan previous loans $XX million were a delinquencies small and portfolio.

we're based As in which you been accounting June go run We've for new as our levels. of year, portfolio compared losses, to XXXX, will could XX, expectation result since effect forecasted adoption January of estimate increase of conditions this reserve allowance X, on XX% CECL, know, our economic to overall the and an credit the CECL balances approaching parallel current beginning that and XXXX. standard we of into XX% in as of aggregate the

The as under require the more is be the driven methodology. expected consumer majority of the by CECL reserves portfolio, to duration longer increase loan assets

at are balance continue estimates and we refine XXXX. to these still through point, them the Importantly, of will this

results, to half first which second posted PNC XXXX. contributed good quarter an summary, of strong overall In very

For pace the expect at second expect now one July in XXXX. the we and in growth of in cuts in in October. point basis the XX year, funds one We continued rate GDP, two half a albeit XXXX, balance of this over slower Fed

third X%. we to loans be to XXXX quarter to quarter approximately ahead average second XXXX reported expect results, compared Looking up

be income net to expect stable. interest total We

up expect to low income We fee digits. be single

and Visa securities be We noninterest to between $XXX and other million, activity. net income million expect $XXX excluding

we and expenses and expect be $XXX between million. to We $XXX be stable, million provision expect to

into full XX to to Turning this guidance, Slide and to reaffirm we've taking year outlook. third quarter our opportunity also account take liked our

we now income expecting year are the average approximately be based strong guidance remains on our loans Our year. first increasing the half We're outlook intact loan X%. performance of statement growth and we've in to up experienced the full average for

We to achieve expect loan year partially of full will lower-than-expected offset to the target. revenue interest ability support growth incremental net the income which benefit this our original environment, our rate

XXXX. operating your Importantly, to that, positive year I operating half deliver ready and take Bill remain positive of full with of generated questions. for XXXX, first the leverage well-positioned leverage we in the are to and And

Edison, for could you poll please? questions,

Instructions]. [Operator

Evercore. the from come with question first of line John Pancari Your

On your revenue rate guidance good backdrop. the outlook and the to full despite for unchanged the year, it's see

the expectation is low wondering for the of that NII here be the out unchanged Because break year your backdrop I'm full is likely for would the single and at digit versus of lower helping environment. revenue So that like outlook could in higher the revenue -- of between seems you rate -- improving your if that keep what it end fees? it fee expectation outlook

yes, this yes. John, Rob. Yes, is

a that time in income. said guidance we the you end less digits, when noninterest of think be NII a the than single the rates, my what as I originally expect higher-than-expected of growth. Fast-forward expected, for our not much take to a is environment where income noninterest as a we in see little rate a probably comments little it now off so we the declining bit would back done loan pickup. NII as look accounting I and more full year low upper pointed of terms we'd at the little out because the today, at in NII

income. So from your little probably more a noninterest little bit equal a question, answer bit to probably and contribution NII more both

it's bit, clear down a saying is what it that NII to our little relative So Rob guide.

Expectation. our expectation. original Yes, That's right. of

it. Got Right.

give granularity then looked bps Okay. see And a the NII, what you impact as to margin bit know the -- you I through what little impact how for couple cut? of remainder also previously Just pertains of is cuts? you're you what the trending? you on more us sensitivity. a can year, your be the your looking now would or but NIM curious for And that XX on it expectation curious NII basis rate point then

jump We the to -- of bit is expectation could sets cut. got because that going a front is Fed This quarter, in. the the in a of both LIBOR of weird kind that John,

So and yields deposit other offset things. by loan that any that in in rates we drop really had wasn't drop

was all you opposed the this you're don't quarter drop I of Interestingly, balance the saw asset sheet. So that as of side a virtually see we know liability that like all side to what our going or on saw to

have So forward, the forecast. I going cuts think we two in do

You'll still shouldn't NIM like that, a that. said the pressure, all that but in there caveats other we it under million there's mix quarter. affect all and things at this saw be see Having drop to

terms. think just I in add can to I that simple

even largely side, were we were up. the rates And because driven actually went up the commercial though down, deposit interest-bearing assets quarter, basis loan down by yields. This X came liability borrowings down on point

So going we... forward,

of were And rates the mix because betas. not because up of deposit shift

Yes. That's competitive right. And factors.

in So be liabilities forward we the going see more tandem.

approximate that to compression be So approximate then have, to we NII $XXX the itself, cuts And X point. terms relative to in of million. that we about the less the Bill's amount on

Relative to our...

to Relative what cuts... would've it been Yes. the

cut... If we the get can

right. that's Together,

The McDonald with Research. Autonomous of next comes from question the line John

up The legacy? the color a Difficulty] picking loan growth little on have Difficulty] came in versus [Technical more [Technical been where things

John, a little up you're breaking bit.

You he there? to next Go We'll comes see back. Okay. the if question.

with of Morgan comes Graseck The next from question Betsy the line Stanley.

and generated that mean wanted very and more you growth conservative little about are eye-popping growth. understand this to quarter. this bit a really guys I careful, the being I you is loan for known

kind come? to the what more just the a So has? want C&I wanted legs you quarter to were, there's on if this do to of if really what see or was And understand unusual particular in drivers think this Just side?

did consumer it's commercial too. growth, have Betsy, we of Yes. I can was Rob, terms you've on good a the We side, -- start a loan largely a in record as this. little growth great had mentioned,

are primary the the a to it rate, quarter, second On which growth, big dynamics. growth of well. really, -- which And years are was of which the segment, we'd all commercial, I secured lending seeing think in in what drivers bit quarter. loan our same our continue geographies, has then The for the of elevated the last and couple new to doing in similar in this been strong expect competitive better maybe at we've now we

strong and So those growth in we general had then commercial that, X credit. things in quarter happened top the high-quality on commercial, just some of

expect in forward, those we'd to we in growth guide are the but place. second X% loan So third than fundamentals which going quarter little bit quarter, still the why in more is

Yes. the been the we've quality And changed of risk it's average been what we originating haven't bucket. Actually has on better... --

Higher.

of course of the the last first it year Over than half was this year.

because interesting area, a borrowers. energy of in we've seen and That's big the are some in those the transportation manufacturing, little data weakness

this? than really for is -- any there is other that's you the bus driving there industries So

pickup that's book. in It's bit, diversified. the helps pretty is see we utilization little lending The which asset-based particularly there a did in one thing quarter, in some this

stat the I markets that's but continues, Rob, don't Although, new growing necessarily broad-based, so it that up actually in remember my of strength a don't multiples... the say the it's it's I are June, that head, was top new. but the down know I new clients, at it -- would came that

Multiples, small high but yes. Very base percentages off clearly,. a

Adding the balances. to materially

a So are are strengths doing just working. job. They good

of buybacks that bigger little do that fund can is the And bit the because you're going that feel Is into speak a can new for Or bites? larger cash to part are in your you M&A? down asset-based? these Folks it it and the somebody flow, like looking Maybe that size markets? quality more Is take you of of loans is it? like doing? part

We're that business market counting asset-based been has actually growth. about years. when that not our we Remember new national talk for

of from The the not risk. markets most by differentiated markets. is traditional our cross-sell middle-market legacy growth market and in So It's coming new the quickly accelerating products. ratio is approaching

doing So we're a good just executing how well. know And it. explain I They're else to job. don't

legacy share. in markets. all how we win markets to Those that fair our compete. know do though our We We win don't we new them

with try from will we Mr. John McDonald Research. Autonomous And

authorization next there. on kind wonder Bill, topic. the the a CCAR about I Got buyback. to of on the guess, philosophy big just move your I'll with

How Some approach others banks front-load, you're executing going are the more buyback? to opportunistic.

We spread it through time.

can't front-load You it really anyway.

exact the growth forget but... You

of yes, terms much our In the evenly what we've plan in as years, in done terms which going -- forward year. pretty past the distributed throughout is

front-loaded of others that's Some their otherwise. to have do but submission. We're opting part

Rob, tailoring of benefit help how And you tailoring the the could proposal. fine-tuning fund obviously estimates you'll the on then, done some Have capital get any if on based goes of proposed? as through much that Okay. guys the

question we Yes, XX time. proposed quick have, the the a is That's -- again, has down about and last changed around. basis our X points little from answer bit mostly CET is ratio. John, because We're this that asked on AOCI that Yes.

a points So estimate. is XX good basis

all is the And BlackRock then benefit... pretty much as that

Pretty much. the deduction. threshold Yes,

[Indiscernible] as well as threshold deduction.

piece. is Bryan right. BlackRock the biggest is

little but big MSR down components is and BlackRock the other a The bit are DTAs piece.

credit Overall looks maybe Okay. Rob, there? just NPAs credit on there. to stuff of And Is comment that then The are good, anything touch. a kind up there? a note the on quality, going just lumpy just

our Yes. view, John. That's

year. really, levels of deals of couple last really off low a Just coming

percentages We the deals unchanged. be have to we've virtually side. loan further and broader at list, total portfolio, a which there to that of are mitigate instances go unrelated So when they had would commercial the they disclosed. NPA what But take that concerns. to you one on the the a and look top circumstances went couple the are

from of next Erika America. Bank question the line comes The Najarian with of

As I terms continue you your markets of about rate share to going in rate the cuts? you with pricing markets? assume few midst And first kind legacy versus think you as of us cuts, sensitivity about mitigating about deposit think strategy you think separately the of in are to what expansion could your

first. You take the

Yes, environment, we'll competitive in going deposit on eye pressures, would an down. our sure. rate that keep forward terms if either, to it's the subject start And can the go that. do proposed, declining rates. cuts our Obviously, are or rates I likely that in stable of get we

I regard deposits. strategy, think increased relative the pretty to the they've in although our digital to they're national small percentage-wise, deposits, total still retail nicely

be we'll environment largely So aggressive the that course, pressures. But pretty to there the we in the subject remain pay. that competitive will of terms rates of rate and

the lagged practically have up have go as much to I as so think down. market betas on there The much don't interesting. is don't -- way national we they

couple you top you the lots of deposits. rates, in gather If post

marketing learn of you're effects branch actually to that it grow frontier, and volume. right try Instead, the give to the physical aggressively. your spent combination deposits off isn't If go our dollars out out dollars marketing and slows on now exactly you and the down. it's and return of a dynamics And how go presence investment to those strategy

levers does. rates inside anything drop that rate because So practical effort. figuring stage in -- causing expansion to we're rate kind Elsewhere -- national the to the having we're the the impact deposits, in any matter, impact see drive change don't what term out market won't subject on causing think you near still I that the our of in as a success of going

particularly as think markets, the That's lower, like value those very new a about the affirming decision for in brick-and-mortar markets a is helpful. follow-up, in And much if that world someone traditional initiated how as of the we're is studying PNC those acquisition size? and really it's and you digitally therefore, small enter you that

branch The than more we'd are in online. successful, A that of clearly dramatically that affect couple us. successful book the of are much customer the up they very we're things more resumed to builds putting you that quality showing place actually and

comments, that have more So our national and our bias, originally to builds my in in expansion. go branch we'd probably is that assumed I with

a time, can to The that is interest-bearing profitable. other is come leave banking deposits market as online that to clear and margin to mind, from my very to see shift is in portion clear deposits well noninterest-bearing go measure take on to you as thing banking profitable us this it's as least the greater this to mix be and through at that that's We in and us the competitors for very of market be the for growing. going interest-bearing that declining effect greater,

You're spending continue which see the markets as about to fin. build our going to we've out we talked saturated in branch this

motion, it not but us, So I slow that's think just for this anything in I don't going for to is And industry. there's down. think the whole

Got it.

I last was question. think on it unclear my

enhances I the the branch organic than experience valuable clear think depository that meant more I deal? that traditional seems the the you're more tuck-in acquisition. loud customer build and

yes, Oh, ma'am.

it. Thank . Go Got ahead. you.

add or... Are you going to to that

that are of straightforward. No. book math value. multiples deposits I small or -- just institutions trading becomes -- at The it's was fairly

of one was that way. test wanted and that this we with to out things the is that And proving it

Yes.

with the Scott The question next of Partners. Sandler O'Neill from and line comes Siefers

gain I one. it in since that recordkeeping of housekeeping guess guess guide other retirement you've kind first quantify Rob, in you was a does The the size a just sense, for I other the given business, of maybe income... income? can matter

AMG the gain noninterest information. components. $XX a a little One of and the the bit other help in sale in will -- was gain came math do segment yourself can you business the able on a be look of you income. I to when million take was The you at two

the that of of sale. million with was administered $XX our of transaction the system Associated The right-off part the that the primary software not own expenses. was was driver of of

revenue in again, of expenses. could $XX of the you was And see it out, clearly terms pointed as it So quarter and very that you elevated segment info second And guidance. a -- AMG our net was gain. in and million part

All a of your right. rate-cutting the customers? it demand this if maybe, impact bit any be dynamic? what Bill, would it's the consumer sort If But you in does I would question. the I are Yes. any about you or of mode, just as you stimulative guess can on indeed broader go customers customers, Fed sort to it on little into then a And a side, more think how or your your commercial relates self-evident. generate change mean that thinking about talk

I any don't we're why think have continue theory a we really It's matter. do would into insight know I in that -- to rates on I practical low that have that's today. it. a they

to XX to points see. impact pretty But or low basis what how basis cost So points is I going we'll another see is funding struggle already for XX actually of people.

And psychological of sometimes. that aspect

Cassidy line with question next the of Gerard RBC. comes from The

outside reason footprint of Bill, the success? you expected. couple times are they're talked faster finding What growing your success a the than branches as the about for Rob. that and Bill, of solution you much

I don't know.

answer. fair That's

Okay.

designed part numbers of think terms of employees to of different and types I employees. them it of purposely the Is we in be

the than more traditional So in branches a of those branch the employees spend branch. time outside

more and in neighborhoods than of working, out they're influence you branch. a events see traditional So centers would and

and us the still matter. deposits, is branches particularly large aware markets that think advertising people our think and in I in offer I for play that of these makes

that's impact go but I'm would've to XX a rather it's see had drive -- willing offer a Somebody sense -- it stronger than great think says, that's than been minutes otherwise somebody kind do has look, of digitally. That face-to-face common suspected. the but I has I to

C&I that guys back coming, not strong the bringing people The these are which circling or they completely loans your the are what it's the to the if strong to relationships on telling management your are -- prices obviously area, making different these what knows people underwriting just competition building and at guys in or for than are footprint, the is everybody folks loan are that the -- it's said that from growth or frontline outside C&I selling you've making or then have, again why not underwriting? And what's very tradition products you're you, pricing assuming I'm you loan, treasury you not you standards.

new markets John, of that have kind these see starting as for we've this roll-on to of to business you a in couple First, remember of been the years. just we're

to we planting made on it takes. What on come Mike Our in we've long this sometimes as the Lyons then get the it years of seeds. [ph] we're is of When results out basically years market, you're seeing but go terms into our starting just of to of to customers wave is calls investments strategy catch-up who call what kind for focus for is see growth just from X and people, we any several figure before a have we want we business. we however them

later the X bought same you We alive now. of effort came you're we thing, years If right? and seeds planted back what kind seeing that RBC, and and that's way when the we all remember did X

a difference. big clients. you makes TM traditional would it's tell that So I

for to part as terms end ability often and of to more cross-sell and offer intro, when you products CFOs just your have you in treasurers as with credit than leading up in capital Our of not you from. to pursue of the more and -- relationship choose variety cross-sell, go we with

it's products, and for us. have We good worked

receptivity very well Bill services. the tend with potential is clients all point what in to to that to the what Yes, is found calling the But a ago dialogue with all high was very years of and that Gerard, agree the that it's and PNC that I'd our been add receptivity but add XX products which we geographies out. high I I'd very these is once occurs, that We effort has difficult. pointed compete

obviously then there federal down just are they maintained? already? And they are be reserve lastly, you year-over-year low How balances can quite Or before nicely. to your have go just

good go? so can low so how Well, -- That's think we a question. I

we're... I think

go can to think a down I out securities. wanted it's put that LCR we to you X Level into that if function of stuff X

That's right. right. That's

quarter issues allowed you mix this the the would balance we of have One otherwise actually of wholesale a our to was more. which the changed and/or to securities XA, bit balance us saw on drop either less borrowings have

Yes.

that's all think I true.

essentially levels the to I if we we're possible levels part be tailoring and What the substantially. could think the would a at. go I as LCR proposals expect point in that though we out that reduction as occurs, down at

our as $XX is math billion on XX% XX% billion $XX or leverage. maybe much Our as it's whether depending what

from line Deutsche of comes Bank. question the next Matt The with O'Connor

the and overthinking? I and a trying with about period had, just if you being funded interest that like you think bit on increase there it's securities balances it as whip the cash think at I'm to that seems but big period if through around -- know pretty that portfolio, positioning just some the can just look we is your of your a that wondering some securities or pre-fundings rate wholesale like I'm of noise your or little

the we that between mix but end, that Yes, with XA because you did, we we funded home is some correct the average some spot period took at rate you so management shift securities, and there are and certain of and saw of it. in MBS actually That's types process. value inside see all of quarter our largely advances We this that loan jump. advantage added

Yes.

that And rate the still some predicting some to how they and maybe terms in would if But think I think curve And assets powder. dry or quickly, the guess reverse Okay. [indiscernible]? like folks cuts. ambitious there seems there's actions a rate of reduce rate materialize -- I think of and taken some is don't about that keep could trying overly you out balance managing view I cuts the to happen, of securities the you've here are sheet what and which the

add then to whole like we, of at confuse and duration added certain don't balances that believe forward prices If lot simply the curve. saw we opportunity look irrational at You offered way of shouldn't see We that this maybe not an take rates on with in If there's because reverses, increase return fairly the -- in question. types think where to Obviously, I assumption we we reason what there's moves. point. stay don't of protected that a a are, if follow they want It's -- wide that the best securities we'll you, could inside it answer curve, there. forward fairly that rate were I a duration. fact,

But nothing radical.

Yes.

Kevin The comes from of line question the next Jaffray. Piper Barker with

order you you if flexibility to there quarter, the pull was if and some environment? Last leverage, had continue. the were continue guys to if that could rate mentioned to of some possible a on generate leverage current on rates expense pressure still Are lot you given operating in expense side that seeing you

this had not script. levers positive good leverage. a is before, and Rob. leverage the -- about I'll Kevin, operating what a manage solid to We've we I'm leverage operating first expect sure year the managed But we do that's positive half, and we deliver positive operating too. answer to we know look on the talking you in that we had sense what were that full

managed. in the on we've about it expense So terms I of feel side, what good

which reflecting That's If Occupancy of to But our you a continue largest investments expense second to was expect our up higher. in is and with part our were we where making category, where Equipment real year-over-year. X%, the our the the all other expense personnel personnel, flat. discretionary through is the last is we're lot shows which is build-out this That CIP program little merit. it been just up. much technology deliberate, just to has contrasts and most. Marketing savings go is down investments. behind in our consistent that. a up That's bit of is time is personnel, categories, essentially year we which where up

expense do good what done and so year we've I this the our management far to what plan we So for about feel balance.

emerge diversify lagged growth. Okay. that and see between lending? the a then consumer shift more consumer let's and for sheet maybe your loan balance will some has start and to you And consumer there mean can commercial developed growth growth I a side anything we was that on of to commercial focus bit little loan gears comments. the the maybe maybe that back there loan Is consistently

student start I of dramatic I of larger the growth be you a practically underlying in been but being consumer growing lending, we in then growing and of ought the by that the much products They're we percentages that the because of penetration see think the growing it's don't off don't actually way, mean smaller so. to as to we I asking the at turn. the we're base. see that think always an off rundown which offset in questions. it know haven't we equity change a on And continued We're always consumer. slower are appropriate balances the clients by than C&I, are places I if we reasonable base at I our because you'd at pace home loan But with day, simply is effect, have have. a going increase the shouldn't smaller dramatic masks with some growth. end But always you is

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now, term give do more way a consumer Longer comfortable is XX-XX the do it feel you broadly, book you take? right or lending more having commercial view balanced versus as ideal or or with

some we economics have with and So doing lower. way we're only would for The as sort change of just sort of through have acquisition we to typically some some that kind -- type -- wrong. and to do anything come screen because consumer, sale for are things big loan That other screen who our but on because of and aren't yields light look Consumer NIM something we our on is and doesn't poorly of say true be problem who optically necessarily... perhaps efficiency some we're are optically ratio materially a lower and people and lenders site.

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see don't or from. we're we So have change I opportunity dramatically the where the either mix, economically starting given need that that to

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comes Fargo line question of Mike Securities. the next Mayo Wells from The with

and bit follow-up to wanted the more. digital-only a expansion years, going center a little that an just expansion a understand your I I more you you few on experiment. thought back thought market process and solution were at called looking

this So And centers centers? doing only these -- in markets out solution mass have the should solution now that expand many you market, do we need the each you of how think to you're that take you as you from necessary? with that of critical that's

to is It's out always fair going a and following digitally changed That's about C&I we building -- going our more originally assumed. than had we expansion. branches, largely talked Mike. thin we're question, What's build

and C&I don't presence we're Dallas, and or greatest So Having of XX. in in retail if we country of or some are any where soft course, the growth that, national have is said we Those was digital branches. parts from national in where I markets in thinking no fact, XX presence, intend build now numbers. and don't thinking to coming of is X, all our have we

economic better doing that exactly on be -- we you actually and couple these us just marketing with driving levers what's presence, different of All or certain a don't I'm will what branches, where it's it, get places where markets more and that's thought here that why to if higher we're is it suggesting branches see all of know learn that's markets in I different a most test in brand mix. return exactly we gives your higher can the building those a had a build return growth. function becoming we'd but clear So by a

frame it that you're go bank. mean you I are? doesn't mean retail you when to your website, who say national I just how And a I

So four is solution across guess I your with with the centers? be country [indiscernible]. I along you intention here highlighted, mean to cities

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it southeast It the says says it says east, and the the that's... midwest,

Yes, think we're It's Mike. where you have physical footprint. we matter, course, know, of practical a following traditionally, I

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in your through sit you If region, existing you will atrophy time.

go strategy national. so And is our to

physical top say top the mean top and... you all presence XX, in XX, XXX MSAs, you when And like

a It my time. But basis the so over more it's share. after will do That's have plan. you what that. in you're In that year practical to we're is share simply It test is with today a cost-efficient transformation Yes, -- country But year's inability but on regional pull that larger, pull banking in done don't XX. and the assume going to that we're yes. in. more to we're you as where view, suggests getting massive the outcome we To and reach it term then that next a we it is go seeing and evolve be whole all of The to the back a in digitally. the top of bigger relay that's and learn are do spend need defend and doing footprint, the the why can doing is banks

market, go says I the of very I when into whereas don't helpful. City well-known already bank they bank? it's known we're not And that a you buy to -- follow-up. decade Why the don't Houston, process a Report and later going a this I as then why not success. not are going a bank, of mean going it what PNC outside everybody Dallas, some the name know, have have not just is not be mean buy retail the jump-start to tougher then or National to banks largest a but if the mean into, on last here, side we're brand highlights isn't you market? buy whole I and Annual going was

accelerate kind ambition not of bank So why with this acquisition? national retail an

could balance have comes branches a lot through employees. place sure you book wrong to because we value. the style and more sheet the at market of wrong to getting bank, the multiple if local that of don't an technology, But than do this, the ultimately want what are accelerate the Mike, about wrong build to has stuff heard anything brand in We the often talk a with issue and do markets don't as get really you you the and definitely that the national with with you share acquisition. accounts well. exactly in most spend and with not want buy from you're the brand I'm It you've not but small wrong the want me

So I it's wish just not a return on. there was.

that what -- we if today look, today's it, City we're that scale than doing, less up of would question. prices value it's you in there a do at -- then, but much, than doing much value doing. Yes, that's could another If was book today's a return we would and what lower jump but we're National course, accelerate opportunities,

Keefe, comes with The line Klock from of Brian & question the next Woods. Bruyette,

$XXX Around guidance higher of would for first it quick the like a the revenue and seems like million year, year quarter, seems than the around quarter third million, third half of full guidance. question on it for the revenue the fourth $XXX Rob, guide. taking the imply the quarter somewhere follow-up the

there federate like So your -- selling in price else as to part I the sale fund related think anything of Or was I business is it? have in the Is there think I if mutual a correctly. million to probably there's there? there that remember there -- you in gain $XX

Yes.

so [indiscernible] noninterest is, of So new the and question to feel around number think over that's let volatility year. that. nothing the and There tends income our guidance we your stand a of course is that other me the average some spirit take shot just and out confident by in I at

So the in a retirement I sale because mentioned in the reasons elevated the addition second all bit of quarter, it that was the business. to of

was that higher a bit So we in And than included little it ran expected. our what guidance.

So see and when guidance, in the do patterns to what third quarter go by emerge I then I combine I next look I at I that tend is the with that beyond patterns. XX the how that, days along

bit in little do of fourth will point, business the a your fund a the otherwise in in quarter there that be that quarter and probably that will in that mutual elevate So less third second we've the sale then number. to that we the other have we announced in quarter, had noninterest income

you are on track. Yes. the right So

go And of that in through? you -- business, said like the markets of good just that seasonality could might piece other some some be the you so had you that rest it capital

right. That's Yes.

line comes with Martinez question from Saul UBS. of next The the

at I happening quarter Fed lag start you when deposit the be I we perspective actually down, lag of or the the start that see terms of the the wanted your low actually cost deposit argument when cost. interest-bearing on and will betas on sort and the on accounts. were betas quarter to wanted when there's low stops also deposit perspective deposit you cuts benefit of when in of little rate Because filter on to between if get the trajectory X that a to even your down. cost, make way the way way usually Obviously, timing of look there's in data, cuts interest-bearing bit up, historically, see but deposit a the into they deposit on migration can into

deposit quickly XXX your you cost, do see able there the to filter think see quarter? deposit like you So cost? how if do a into we cut, I was points or Or that I to X be Is you it X think which July actually were filters do deposit lag? should quarter feel -- basis how overall this -- into your

the drop kind Remember, rates deposit C&I of instantaneously. wholesale will

allowing trying by about bit you if run to on a quickly. ratios, really think who protecting in at loan-to-deposit and talking people will And see one retail. all deposits they're that that. reverse to I there off we're the been take effect, are effectively it now So is you what me have pushing The equal, thing pretty else happens look concerns entire little NIM industry

we've time of competition growth deposit banks growth drop a even could now. deposits, seen as So loan outpace for period for rates as middle-sized for of continue the most

actually happens kind that's deposit my to So of terms mind consumer unknown cost. the in what of in

that, just more move pressures driven competitive rather add to by to And abilities quickly. banks' than it'll to the be

Yes.

banks had maybe the especially And digital than the on banks reduce do consumer you importance of side? also today think to that the greater in limits online of we've into banks, ability or willingness costs, the and past plays

it think I does.

impact forward increasingly have on we have and we over mix an think the think I if going to time. that's seen online growth go rates down, on roll generally. impact as And not just -- deposit but I banks of

I -- a more that I I towards have bank actually see real-time. think for that. becomes happening. you'll just because rate it's deposits faster bank and betas faster is online be rate the don't timeline

You it. can't ignore

commercial you there terms bit little credit closer there companies that. weakness? you're have uptick feel clear But made on overly potential in that anything out that worried about credit. Right. more keeping size or you're a a any Quick geographies follow-up you strain? or Obviously, or not of are NPAs the segments of Is in eye

some is on There estate margin. stuff. traditional real the It's the

separate retail On costs of a -- largely Rob's to just there's reasonable do had I a story, went all this. all margin, to that for with industries, the are -- side of point, own ad watch at they nothing economy. there's fine. to companies transportation of inside talked idiosyncratic not the we're struggling There's the bunch explanation with little to but through it's It's and about, nothing but a our exposed but that their -- a every variety everybody's overly single list all in stuff, had

The next from Usdin question Jefferies. Ken comes the of with line

tailoring. on follow-up one Just

start all even So, and say, prioritize that made the about to already capital the you you having potential heard long-term Bill, the sector, benefits just no is from would for you go is free-up, if environment forward for what that do how comments and uses the best the to opportunities right deal banks? incremental about at start value a traditional if How not amount that capital the and strategize time? prioritize usage of -- right there

the get think going you're I standard look, answer. Well, -- to

excess course, and in been Of an But a growth. we period in that our future, generate will in my in have continue. intelligently years we what capital to we last in for investing multiple view, for our the deploy of the of we've business lot ability invest and foreseeable business can

this actions year the buyback to dividend our what -- I we we would and so And we going be you guess foreshadow and question think get a I way just forward. into about doing share at of look and, suggest this, might

that anything you've is on the that that other aspects product streamlined anything you're been still offer there forward don't kit need And is some you called that have side out of there deepening? the round as Yes. looking that that the But businesses you've getting offering? up things still don't and to Or things? out some as have to in of getting left you you're nonbank you

size. the space C&I the advisory. and value look payments, things of the margin finding at inside and able justify haven't we'll There's continue scale The we're doing space is we of really at, given hit we be payment look. on the multiple of whatever need stuff our We multiple. on But model look, you other that is anything a to pay the lot in in issue there, to to business but to any

no there's material. But

whole a not There's there.

questions. There are further no

everybody. Thanks, Okay.

you. Thank

today's call. concludes conference This

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