Up next, we have Truist, and we're delighted to have with us today Mike McGuire, CFO of Truist Financial.

Mike, thanks so much for joining us. Yeah, thank you so much for having us.

All right, so let's start with the environment, as we have in several sessions here. I think Bill recently noted that clients continue to invest and pursue strategic opportunities despite the uncertainty in the environment.

It looks like people are more immune to some of that uncertainty. you know pipelines are holding up well where are you seeing the strongest signs of that resilience across either the consumer or the corporate side yeah look i mean you know i think bill we're unchanged in that outlook you know since bill you know not that long ago uh mentioned the sort of shrugging off of of some of what seem to be you know quite a few macro risks out there um you know we're seeing uh continued strength in terms of confidence across our commercial and corporate banking business. As you know, I mean, investment banking markets and deal activity can continue to remain, you know, quite robust. I was actually just out in Philadelphia a week or so ago with a lot of our commercial banking and wealth banking teams. And, you know, they seem to say the same. I don't think people have their heads in the sand either. I think there's some degree of caution that people are, you know, sort of incorporating into their day-to-day. But But in terms of seeing expansionary activity and borrowing and investing, we do still see, you know, pretty strong levels of confidence. On the consumer side, I think that's broadly true, too. I mean, I think if you dip a little deeper into the data, you do begin to see some small degrees of switching on the spending side, you know, especially maybe in the lower-income consumers, perhaps feeling a touch more pressure from things like gasoline prices and inflation and the like. But even there, that tends to be more around some of the spend data and choices versus anything that we're seeing show up in terms of credit quality or otherwise.

Okay, so I think that that's been a consistent theme so far. where people are looking out cautiously, but you're not seeing anything.

Yeah, I think that's right.

All right, perfect. So why don't we bring it a little bit more near, Tim? As we think about the broader trend shaping this quarter relative to the first quarter, what are you seeing this quarter?

Yeah, look, we're off to, I guess, not a start at this point in the quarter, but our outlook is unchanged just to get that out of the way for the quarter and for the year. But we continue to see, you know, nice strength in our fee businesses, as we mentioned. We continue to be focused on a lot of the same opportunities and risks out there in the market. You know, we've said coming into this year that, you know, our balance sheet growth ambitions are a little bit more modest this year than last year with a little bit more focus on quality, and that's playing through. So, yeah, look, we feel like things are on track and have been pretty vocal about our expectations for improving our ROTCE this year and next year to 14% and 15% and see a really clear line of sight to both.

So unchanged outlook for the quarter, unchanged outlook for the year. All right, perfect. And on the low-growth side, you just spoke about a more disciplined approach to balance sheet growth. But where are you seeing the most attractive opportunities today, and how is that mix evolving?

Yeah, look, we continue to lean in. Just to remind the audience, we said that we thought loans, total loans this year would grow 3% to 4%. And I think we're on track to achieve that. But that doesn't mean we're growing all loan categories 3% to 4%. So to your point, we are seeing really attractive opportunities. We still think in our C&I business to, you know, with a focus obviously on total relationship profitability where we see great opportunities and good demand still. And so we will grow our C&I portfolio faster than the 3% to 4%, especially in industries where we feel like we have, you know, insights that our clients, you know, most appreciate. And that's become broader based in terms of our corporate, middle market, and investment banking platforms. On the consumer side, we're continuing to deemphasize some of the products that we've said have just a less attractive margin potential. So things like Prime Auto, mortgage, there's less demand in the first place, but still deemphasizing it a touch relative to some of the higher risk-adjusted margin portfolios like our Sheffield business, our service finance business, where we think we've got really good sort of defensibility, a good moat, and really nice economics. And so we'll continue to grow service finance in Sheffield and aspects of our C&I portfolio and then, you know, hold constant or even in some cases shrink some of the other consumer lending portfolios to get you to that aggregate sort of 3% to 4%. And, you know, so again, just really a focus on profitability and quality. And the same thing goes on the funding side, which I'm sure we'll talk about as well.

Well, so let's dig right into the funding side then. Is your thinking about deposit growth and mix from here? where are you seeing the most strength across both consumer and wholesale businesses?

We're seeing good strength across both businesses in terms of overall production. I'd say, and we mentioned this a little bit in April, where we're probably spending the most of our time and putting more attention is just around mix. We've said that improving the overall quality of our funding portfolio is an important initiative, not just this year, but as we pursue our, you know, 16 to 18 percent ROTC, you know, journey. And so there's just been a little bit more rotation out of DDA into more either interest checking or higher beta products. And that's okay. That's not necessarily surprising given the higher for longer rate environment that we're in or even some of the competitive dynamics in our marketplace. But it's certainly an area where we're focused. But we're seeing good balances, just a touch of unfavorability around mix, at least relative to where we would have thought we would have been, you know, back in January. And we, you know, took that into consideration in April when we reported and provided our outlook for the year.

So that's a comment of change since January to April, but not since April? Not since April. All right, perfect. And then as we talk about competition, just given your markets, right, they're the most attractive markets, they're the fastest-growing markets in the country, but also where you see the most competition. So what are you seeing in your geographies today in terms of deposit competition, loan competition?

I think it's – did you say loan as well, or just period? Yeah, I'll hit it all. I mean, you sort of set it up just right. I mean, we do think that there are a lot of new entrants to the market. That's not a new phenomenon, by the way. one that's perhaps been getting a little bit more attention. So it's not a new dynamic for us, but it's one that is true nonetheless. And, you know, I think, you know, on the deposit side, maybe starting first for us, it's different to be the incumbent and one of the leaders in the market as you think about pricing strategy and how you go to market. And so it's very important to us to be conscious of our back book and defending our overall franchise, but also to be sufficiently agile in terms of making sure that we protect relationships that are profitable long-term clients that have great prospects. So we feel like we have the right process and rigor around that process to continue to compete effectively. But, yeah, there are a lot of folks that are coming in with no back book and only front book where you're seeing higher rates, but we're managing that. And then I think on the loan side, you know, we're very focused on where we want to win, and we feel like we have been and will continue to be very successful in winning those spots where we're choosing. So we'll see. Maybe we'll see a slightly different rate environment that will change the sort of overall rate awareness on the funding side. But for now, it's really not very different than even last year where you had higher rates. You know, we talked about this in one of our meetings earlier. you would expect all things equal with rates a little bit lower now versus call it a year ago that you'd have a slower rotation or rate awareness but we really haven't seen that abate so maybe some of that's competitive dynamics or maybe we just haven't quite hit that threshold to where we're starting to see a little bit of relief there.

And anything you're seeing on the on in terms of spread compression anywhere?

You know spreads have been sort of tight you know and bouncing along the bottom here, you know, we saw, you know, it's tough. A month or two doesn't necessarily tell the story, and you get some mix and issues that can change that. But if you look more macro and look at credit markets, you know, spreads are extremely tight. So, you know, I think we did have an expectation coming into this year, given where we were in historic context, that you'd see some spread widening. That hasn't necessarily played itself out yet, but perhaps could create some upside for us this year and next year.

So let's dig in a little bit on net interest income. And the rate environment has changed since April as well. You've had the belly of the curve move higher. Can you talk about, as you wrap up, loan spreads, deposit competition, the rate environment, how you're thinking about NII and the potential for NII upside over time?

Yeah, I mean, I think if you think about sort of the components for us of some improvement to our margin and NII trajectory, you know, in general, you've got a couple of factors. One, you know, we do expect to continue to drive some, you know, again, incrementally even higher quality, albeit modest growth on the balance sheet. So that should be a contributor to some NII improvement as well as margin. We do still have, you know, the benefits of fixed-rate asset repricing, you know, so our fixed-rate loans, primarily on the consumer side, as well as our securities portfolio continues to roll up the curve, which adds some assistance as well. And then, again, the quality of the deposit portfolio and funding, I think, is also an important contributor for us, not just necessarily this year, but in 26, or pardon me, 27 and beyond, you know, improving our overall funding mix. So, you know, as it relates to the second half of this year, you know, we're always a second half heavier, you know, chop. Like, you know, we've got the same phenomenon that the rest of the industry has around just day count, but also we have some nice seasonality in the fourth quarter around public funds and funding mix that should help the margin and NII in the fourth. But we do expect to see, you know, sort of incremental margin expansion throughout the rest of the year and that NII trajectory that's consistent with the outlook that we expressed back in April.

And I think you've also noted a three-teens net interest margin over time. So as you think about the path to that, I think you outlined some of the factors that's going on already.

Yeah, same components, right? I mean, again, the credit spreads component of that is sort of the perhaps unknown, but we are seeing progress in terms of quality on the funding side. We know that the actions that we've taken around quality on the asset side are there, and, of course, just the structural under-earning that's happening on the balance sheet that will come back into our results should get us there.

And maybe to wrap up the conversation around this longer-term trajectory of NII and NIM, there's been this growing discussion around AI-driven cash optimization for the industry overall. How are you thinking about that in terms of, I guess, risk to deposit costs, risk to deposit growth in the longer term.

Yeah, it'll be interesting. I mean, we're not seeing, and obviously this is very early days, and it's more of a sort of conceptual risk than it is an actual risk today. You know, I think one consideration is if you think about the number of the deposits that you'd probably be thinking about as being most at risk, which would be the retail side, you know, I'm not sure that the demand necessarily is there for sort of a transition into, you know, whether it be a stable coin or whether it be sort of cash sorting sort of new technologies that might interrupt, you know, these clients. And if you look at our consumer business as an example, I think the median balance across our consumer deposit portfolio is like $1,500. So we're talking about operational sort of day-to-day primary, you know, banking accounts, not necessarily sort of, you know, rate-seeking, reward-seeking type stuff. Could be wrong. You know, we'll see. But, you know, as we sit here today, we're not really seeing a lot of short-term risk on the horizon. On the wholesale side, you know, to the extent that, you know, again, I think you asked, you know, really more along the lines of, you know, AI and sorting. But if you sort of move, you know, into some of the other threats like or that are being discussed, like a stable coin, you know, I think you've got already a portfolio of deposits that is pretty rate aware in high beta products. And so to the extent that that, you know, moves into a coin, which just, you know, moves that cash to yet another, you know, call it wholesale client, you know, I think we're probably less concerned about that risk. It's really the retail side that we think would be the area where we'd be focused. And then also probably the area that just based on its, you know, characteristics are maybe less likely to be at risk.

Because your point is on the wholesale side, these deposits are already fairly close to fully optimized.

High beta products, yeah.

Right, got it. And then people talk about, I guess, non-interest-paying deposits on the wholesale side as well and those being at risk, but those are also soft dollar payments.

Super operational, yeah, absolutely right.

So operational, they're soft dollar payments as well for the services that they get. All right, perfect. So then let's move it over to the fees. investment banking has been a standout performer, you know, a really strong first quarter as well. What do you see as the key drivers of that performance and how sustainable is that over time?

It's been a pretty consistent performer for us. You know, as you know, I mean, we've consistently invested in our, I'll call it broadly corporate investment banking franchise, our trading capabilities, excuse me, as well. And so it's been a, it's been a story of sort a continuous improvement, you know, so whether that's the build-out of the product platform, the depth, and the investment in the capabilities of the products, making, you know, there was a point in our, you know, in our history where we had, you know, gaps in products. We believe we've closed most of those gaps and really do present a full-service offering at this point, and so, you know, building out the industry teams, and we're an industry-driven firm like a lot of the, you know, more successful full service investment banking firms. So just a continuous improvement and an addition of talent has driven, you know, really strong, you know, results for us, whether it be, you know, which, you know, has translated to sort of high single, low double digit, you know, growth year over year for on a pretty consistent basis, which we would expect to continue. But it's things like, you know, doing, you know, each year of slightly larger transactions each year, you know, gaining, you know, a more prominent role in syndicate structures and each year gaining, you know, slightly better economics on average. So, you know, slightly larger fee per transaction. So all those, you know, as you think about like kind of health indicators in a business like that have sort of been improving and that's not something we take for granted. And so we'll continue to invest in that business to continue to drive it forward. And, you know, you're right in the first quarter, I think for us was, if not our highest, it was one of our, you know, top two or three quarters ever in that business, and hopefully that will continue to, you know, break records in the years ahead as we continue to grow it. And the backdrop right now is quite constructive, as you know.

And your point is, as you've built up these industry teams, you're already seeing the benefits of some of those larger transactions, RFE transactions come through, and there's more room to go for that.

It's been a better quality game, and, you know, we've, you know, more fully served these clients, You know, you know, a good example is, you know, we've, you know, more recently and continue to invest in our FX platform, you know, a couple of years ago, we made some investments in our electronic trading platform, you know, every once in a while, you know, like a lot of the successful firms, like we're not just looking at health care or financial services, we're really, you know, trying to create even more sort of depth and narrow focus in these practices. And as they sort of season and have good continuity, you know, those practices just, you know, build momentum and are contributing to the results that we've enjoyed.

And, you know, another stat that you've mentioned before is where you have new commercial client acquisition, about 60% of the relationships come with the treasury management mandate, for instance. So as we look out into the other fee businesses and the integrated relationship-based model, where are you seeing the most opportunities there?

Well, certainly Treasury is one. I mean, that's a place where we have sort of been pretty vocal, that we feel like we've under-earned as a firm and even our two predecessor firms. There was a journey that we had to undertake in Treasury. We had technical debt in terms of our platform. We've remediated that. We needed to place greater importance in the minds of our bankers, you know, from a sales culture perspective on the Treasury product as well. And we feel like we've done all the right things there, too. So we have a huge opportunity that we believe in our back books, our current install base, where we are underpenetrated relative to industry on these, like, really profitable, highly recurring, you know, deposit-gathering-aligned products. And so that's a huge opportunity for us. Now, that's a slower grind, right, because you've already got – you've made the loan. You know, you've been serving these clients in a certain way. And so that requires some work. We're seeing good progress there. A lot of the improvement in the pipelines we've seen are coming from the back book. But you said it. On the front book, it's a little bit easier because that's where we're entering perhaps a new relationship, and we can be a little bit more clear around our expectations. That's another reason, you know, it isn't that, like, the loans that we're making are necessarily higher quality, but the approach that we're taking in making the loans is a little bit higher quality. And, you know, and Kristen Lesher, who runs our wholesale business, and Kerry Jasani, who's got corporate and commercial banking, they were very active last year on the front book in terms of growing C&I loans. And so, you know, it's funny, a question we've gotten a few times today is, hey, you're only expecting to grow loans 3% to 4%. this year, that maybe doesn't feel as fast as it could be. The answer is we grew footings quite a bit last year, and we're growing again this year, but we're really working on making sure that we're following through on the profitability opportunity across that client set. So Treasury is a huge, a huge opportunity for us. And that's, again, that's been an investment in product, an investment in people, a change in incentives, a change in expectations kind of across the board. So you'll see outsized growth there, I believe. Wealth is another example. That's a business for us that has historically been lower single-digit growth. We've struggled through some of the aftermath of the conversion with some talent attrition. Our platform needed some work. We feel like we've made those investments in the platform. We feel like we've really stabilized the workforce. We've to run our offense, who want to work with our commercial and corporate investment banking teams to better serve some of those wholesale relationships, and we're of a mindset now that we're more growth-oriented. So I think you're going to see us be more active in acquiring advisor teams that are a good fit for our platform. So if you think about investment banking, go to treasury and payments broadly, and then wealth, we think we can grow all three of those businesses at a nice clip, which will be a real contributor to some of the profitability improvement that we expect, just given a lot of that stuff is either, you know, pretty low, has low capital intensivity, like wealth especially, or in the case of investment banking or payments, there might be a, there's obviously a capital expectation, but a lot of those, a lot of that capital is already working. So it's a matter of like more deeply serving those clients.

And you're looking at returns by customer, by client, right?

A hundred percent, yeah.

So the fees drive those higher returns for each of those clients? All right, perfect. So on the project finance side, I think you've highlighted the impact of project finance activity on your effective tax rate this year. Can you help clarify the client-driven nature of that business and how investors should think about that contribution over time?

Yeah, sure, yeah. We changed our outlook in April around our effective tax rate for the quarter and for the year, and the driver of that was this project finance business. So I'd say in short strokes, we have a team of bankers who are deeply specialized when it comes to advising and creating financing solutions for high-quality developers of critical infrastructure projects. And some of those critical infrastructure projects are financed through traditional debt capital market structures. So in those cases, it's more plain vanilla kind of corporate banking style business where we earn an arranger fee or underwriting economics on bonds, whatever it may be. But in a lot of instances as well, a better financing solution requires sort of an investment in a partnership where we end up with the majority of the economics in tax equity structures. And the way that those economics work through our results is through a direct reduction in our tax liability. So, in our case, that's been a business that's had a lot of momentum here in the last few months and last couple of quarters. And so, even really, you think back since January, we saw a few deals get larger, and then we've onboarded a few deals that were going to impact our tax rate. And so, we felt like it was important to let investors know. I think the takeaways there are, like, This is good business, right? This isn't like the typical discreet that you see around like, hey, this is a change from a former audit that sort of has been sort of finalized. This is a team of bankers out calling on clients, providing really strategic advice, and in a lot of cases also driving deposits and treasury management, et cetera, that's highly accretive to our earnings and EPS and ROTC and so on and so forth. So we probably went a little bit further in April to let people know that this is, in fact, you know, high-quality business that's going to, you know, come through on the bottom line.

Got it. All right. Perfect. Let's pivot over to expenses. So, you know, I think you've spoken about an expense growth number of a little under 2% this year, and you just reiterated that. You're also investing in the business while you do that. So can you talk about what the right level of, I guess, operating leverage is for Truist over time as the businesses continue to scale?

Well, you know, for this year, based on our outlook, you know, we're expecting, you know, a little over 200 basis points of positive operating leverage. Last year was about 100 basis points, plus or minus. And, look, I think that's generally pretty sustainable, right? I mean, you know, as we think about, you know, our investment planning and OPEX and the revenue opportunity that we have, you know, we're mindful of the responsibility that we have to shareholders to work as efficiently as we can. But we also have an obligation to go realize the opportunity in front of us. And so, you know, our investment planning process, I think, finds the right tension, you know, there. You know, we have a lot of the last three years, if you think about the expense management results that we put up, I think we were, you know, down a touch three years ago, you know, up a percent last year. And this year you said it will be, you know, higher by less than two percent, I think one and three quarters or so. And, you know, to do that, to deliver those results, but also to make the investments that drive the right amount of business value and growth, it just requires tradeoffs. And so I think the culture around our firm has been to really work hard. And people know this is how we're going to plan, right? They say, okay, we're going to set a target for OpEx growth next year based on the revenue opportunity. We know there's a long list of things that we want to do to drive long-term and short-term growth. And so people, you know, continuously are saying, like, what are the activities that we're undertaking that are adding the least amount of business value? Where's the waste? And that's a whole new day now with some of the new tools and technology that are available, which we can get to maybe in a minute or two. But that's the test. So each of our business leaders, not just at the segment but line of business level, are constantly saying, like, if I can only grow whatever, let's say 2%, you know, I can actually grow 4% to 5% if I can reduce 3% up first. And that's how we think about it. So, like, take the 2% to 3% of things that are the least valuable, stop doing them, and then now let's gross that back up, you know, by 4% to 5%. and be very disciplined around what are the things that will truly add the most, you know, business value and be, you know, balanced around some of those need to be shorter term, you know, investing in the FX platform. That's a faster investment that can drive a faster, you know, return on investment versus, you know, we need to build more branches and expand our, you know, retail physical distribution. That's a slower payback, but ultimately very profitable. So finding the right balance in that. But we've been able to, I think, find that balance and still, you know, generate, you know, positive operating leverage. I think as I think about our journey to, you know, this year, 14, next year, 15, and then to be in that 16 to 18 percent ROTC level, you know, generating positive operating leverage is one of the assumptions that we have in sort of driving that improvement.

And AI is going to be a driver of some of that operating leverage as well down the line. So talk about how you're leveraging some of these tools and what productivity benefits you're seeing there.

It's widespread, and I'm sure like a lot of firms who've been asked that question, it's not an easy thing to necessarily estimate or quantify at this point. But I'll tell you a little bit about how we're experiencing it and planning for and incorporating the benefits of AI. I think initially it started as a little bit more of like creating awareness, right? And so we had a lot of focus on the firm of, hey, bottoms up, you know, application by application, line of business by line of business, to the extent that people, you know, could lean in or were seeing opportunities either vended or otherwise for how we could begin to sort of test and learn. And that's been great, and that's created great awareness. So simple things like providing licenses to co-pilot to a lot of teammates or if the investment banking team showed up and said, hey, we found this really cool application that's AI-enabled that's allowing for deeper, faster research or analytics techniques or client prep work that would really change the game in terms of productivity or the call centers kind of saying, hey, here's a really cool tool that would, you know, not just summarize the call, but, you know, create next best actions and seek other similar examples and provide suggestions. So all those things, you know, not particularly scalable, but creating good awareness and energy around the potential of AI, and that continues, right? And so we've got sort of a fast lane from an investment planning perspective. When good or, you know, great ideas are surfaced, we can move really, really quickly and mobilize. But I think more importantly is the work that we're doing kind of from the center out. So our chief technology and data officer, Steve Hagerman, very much a forward-thinking guy on AI in general and its potential, very focused on investing and garnering the right investment in sort of the foundational kind of systems capabilities to not just sort of say, hey, here's a problem, here's a problem, let's find a solution that's AI-enabled. It's a let's create the right data architecture, data hygiene, you know, systems and architecture to make sure that we're well positioned to, at scale, engage with these models and solutions and software to go solve bigger problems. So to me, that's all the opportunity. You know, can I tell you exactly how that's going to manifest itself from a dollars and cents basis? No, but it is something that we take into consideration in our sort of medium and long-term planning, which is there is going to be greater productivity on the front line, meaning like just sales enablement. There is going to be, you know, greater efficiency in the middle and the back office, and so that should hopefully unlock some capacity to grow, invest even more heavily, ideally, in some of those higher business value investment projects, which we do have a backlog. We don't get to fund them all.

I'm going to turn to the room in just a sec to see if there's any questions here. But, you know, as we spoke about the environment, you spoke about how you're not really seeing any major signs of stress. So as we think about credit overall, how are we thinking about the credit environment right now?

The credit environment for us has continued to be, you know, stable and relatively benign, right, at least in a historic context. And so no updates today, you know, relative to our outlook for charge-offs this year. You know, perhaps more anecdotally, you know, we do, I mentioned, see, you know, a touch of stress. And we've seen this stress already in that sort of lower-income consumer, inflation, gas, you name it. It's not employment, but maybe those prior two factors driving that. We see a touch of that in our regional acceptance auto business, which is a nonprime business. But that's been operating there, you know, for some time. But, you know, especially on the CNI side, you know, very resilient. And I know there's a lot of focus in the fall and into the spring around the NDFI portfolios and before that CRE and multifamily. But, you know, we really just are not seeing any signal from our portfolios from a monitoring perspective that give us concern at this point. I do think people are mindful of the, you know, world events and rates. So there's a lot of uncertainty in the world at the moment, but that today hasn't manifested itself in changes and delinquencies, as an example, or payment patterns.

Got it. Are there any questions here in the room? So maybe to end, let's talk about capital and returns. As we think about capital and we think about the changes in the Basel endgame rules, I think you spoke about that being a 9% to 11% improvement in risk-weighted assets. So how are you thinking about the implications for your CET-1 target and the capacity for continued share repurchases?

So you're right. So our initial review of the proposal, at least, I know we don't have a final rule yet, is that the ERBA approach would be, call it 11%, and the enhanced standardized approach would be closer to 9%. We do believe we'll be operationally ready to the extent that ultimately we do decide to opt into ERBA as early as call it the beginning of 2028. But we'll need to see a final rule and obviously do the math and get a sense for what makes sense. I think the so what for us on the proposal at least is we will get that day one RWA credit benefit. And if you look at our capital policy over the last call it year, And as we've expressed for the rest of this year, we've essentially said, hey, we're going to maintain an elevated payout ratio, in our case above 100%, until we get to our target operating level, you know, call it 10%. And I think what this does is potentially expands the horizon for that elevated, you know, payout level. You know, at some point we will normalize to, you know, something in the 30 to 40 percent, you know, dividend payout ratio, call it 30 to 40 percent, you know, call it buyback ratio, and then 20 to 40 percent, just reinvestment in the business. But as we sit here today, we feel like we're in an excess capital position, and we feel like that will, if anything, be extended, you know, for some period based on, you know, Basel being finalized as proposed. Now, of course, you know, you have to incorporate the fact that, you know, AOCI will now be incorporated as well, but it's over a horizon, and, you know, our approach to that will be to always be mindful of the fact that that's phasing in over time, but obviously as it phases in, it will also diminish in terms of its overall impact to our capital planning. You know, we're not here today to express a change in our outlook for 10%. You know, it is something that we evaluate continuously. You know, we set an operating target based on our own perspective as a firm of what an appropriate minimum amount of capital is to continue to operate as a financial intermediary. You know, we take into consideration, you know, severe stress and how our portfolio, we believe, would perform. And then we take into consideration things like forecast imprecision and other factors to sort of get us to, hey, here's sort of a reasonable limits framework that, you know, in our case, our board approves. And then we set management level limits as well. So that's what gets you to that 10%. And, you know, those factors change over time. So could you see us operating, you know, with slightly more leverage? You know, possibly. But I think we want to see a final rule. I think we want to see what the overall economy has to offer over the next year or so and get a sense for also how ratings agencies are thinking about RWAs as an example. It's not perfectly clear that they're going to adopt the same approach. So still some cards to turn before we revise that target, if we revise it. And at this point, we're operating at a level that's so much in excess of that. Our focus will be to continue to follow through on the buyback.

Yeah, I was just going to say, with the rating agencies as well, I guess it's a little bit more of a wait-and-watch approach on what they're doing. Would TCE to TA factor into how you're thinking about things?

Absolutely, yeah. You know, we operate today in sort of the high 7% area. We've had a lot of questions, you know, from investors about whether TCE, you know, is there sort of a floor? You know, we haven't expressed a public view on that. You know, I'd feel comfortable saying that, you know, a seven-handle for sure, you know, seems reasonable at this point. I mean, again, for a lot of the reasons, you know, or factors that I articulated a moment ago, you know, things can change. But we could definitely see ourselves operating below where we are operating today. And I think that's incorporated into that even outlook if you think about RWA density going forward. But there is some level at which, you know, that becomes a constraint.

All right. So to conclude, maybe round out the conversation for us in terms of returns. You know, you have a 15% ROTC target for 27, 16 to 18% longer-term opportunity. What are the building blocks that get us to that longer-term target?

Yeah, I think at the highest level, I'd maybe hit three buckets, and I think we've hit on all three of those in terms of the path. And we believe, by the way, that our ROTC improvement opportunity is as good as any firm out there in terms of the improvement that we think we can deliver. But the first is productivity. We talked about quality growth. We talked about quality funding. We talked about the fee businesses, more discipline in pricing, you name it. Those are all factors that are going to drive the numerator and our ROA higher. We talked about efficiency and a commitment to cost management. We believe that we'll be a more efficient company over the next two to three to four years. You know, think about like our efficiency ratio as an example, aided by higher revenue lift, also by good cost management, and then some of the balance sheet optimization that we've talked about, RWA, density and improvement, and then operating the company with a little bit more leverage. Those three factors are going to be what drive us from where we are today to 14 to 15, and they're going to continue to drive us into that 16% to 18% corridor over the medium term.

All right. Perfect. Very clear. Mike, thanks so much for joining us.

You got it. Thank you.