Truist Financial Corp (TFC) September 2026 Conference Transcript

If everyone can take their seats, we'll continue with this morning's strong run of large-cap bank speakers. Next up, very pleased to have Truist Financial from the company, their chief financial officer, Mike McGuire. Mike, welcome.

Yeah, thank you, Jason, for having me.

For those that may not have seen this morning, Truist posted a slide, and I guess to me, the two biggest takeaways were, one, they announced the sale of $5.5 billion of auto loans representing substantially all the assets of the regional acceptance corp um basically subprime auto unit um they also mentioned the quarter's tracking as expected um so mike is that correct and maybe just maybe fill us in on some details of the kind of strategic rationale financial considerations you know of the transaction and and maybe any updates on the quarter yeah great so so so absolutely right um we did affirm this morning uh with our slide that we are affirming the quarter and the year, so no outlook changed.

Now, that obviously doesn't take into consideration the transaction impacts related to regional acceptance. But just to talk maybe a little bit about RAC, we are under contract to sell the $5.5 billion in near-prime auto loans and essentially exit that business entirely. As we thought about this business and you think about the year so far and some of the decisions that we've made around stopping originations and marine and wrecked vehicle lending, de-emphasizing some of our national prime auto lending businesses. This was in many respects sort of along those same lines and consistent with that strategy. If you think about the strategic boxes, the financial boxes, we believe all are checked here. From a strategic perspective, you know, regional acceptance is typically a loan-only, loan-first national business where our opportunity to really have a meaningful relationship with these clients beyond that single loan product is extremely limited. And then from a financial perspective, and we did in our slide outline sort of the concept of pairing the sale with an AFS repositioning to offset the increase in capital that the transaction would create, you see a pretty compelling financial case. So you see improvement in EPS, albeit modest, ROTC, tangible book value per share. So across the board, modestly accretive. The concentration in non-performing loans and charge-offs in this business as well creates an opportunity to really, I think, improve our overall credit profile. So you'll see that we believe both charge-offs and non-performing loans as a percentage of loans will decline by, you know, 10-plus basis points, so call it 20%. And then, you know, with the proceeds that are generated through the transaction, we also have an opportunity to reduce some of our borrowings, so improve our funding profile just a little bit. But the AFS repositioning that we outlined in sort of an illustrative way essentially takes that full, call it, $950-ish million of increased capital and offsets it with what will be a one-time loss to reposition and recoupon some of our AFS portfolio. As you know, Jason, in 2024 when we sold TIH, we had an opportunity to take a pretty big swing at the AFS portfolio. but we weren't able to address it all. And so, you know, we felt like this transaction was a nice opportunity to make a little bit more progress there.

I guess the slide says that this business was kind of break-even in the first half of the year, I guess, despite the fact that credit quality is really good. I guess, why wasn't this business, I guess, contributing more profitability?

You know, it's interesting. You know, we've operated this business for a long time and through a number of cycles. There's been an evolution in our own credit risk appetite in this business, and you'll notice that we sort of headlined the businesses near prime. There was a moment where we operated probably a more true subprime, deeper subprime business where we would have seen asset yields and spreads wider. That has tightened over time as our credit appetite has changed. And, you know, and the loss experiences were made, you know, somewhat elevated. So, you know, you think about, you know, despite the fact that this is a higher-yielding asset, you know, maybe call it, you know, 12 percent plus or minus, with a funding charge, you know, call it our marginal funding cost, 4 percent, you take into consideration the loss experience in the 7 to 8 percent area, you just run out of economics. So for us, this was a sort of an easier one, you know, non-regrettable. We really don't impact any of what I consider our true strategic client base. You see the financial benefits across the board, especially with it not being profitable.

Got it. And then I guess you also talked about in the past scaling back regular auto. You discontinued, I think, marine and RV lending last quarter. Or just maybe talk to, you know, are there any other areas that maybe you need to also examine for fit or whatnot or maybe just aren't profitable that we can redeploy better?

Yeah, yeah, sure. I mean, here's how I think about it. I mean, so first of all, obviously, everybody knows we've got our new CEO, Mike Lyons, is on the ground. I think it's technically day 15, but it feels like he's been with us for a lot longer. We had a chance to onboard with Mike and get him involved in a meaningful way earlier this summer. And so it's been great to have the benefit of his perspective. There's a lot of urgency and intensity that's been, I think, added to this evaluation that really started earlier this year. So you saw decisions like de-emphasizing originations in Prime Auto, the ceasing originations in Marine RV, and then ultimately, you know, Rack fell out of this process, too. You know, Mike's applying a framework that I think everybody can, you know, can appreciate. Number one is, are these businesses aligned to our strategy, right? I think, and look, Mike, you know, in due time will articulate his vision for our business and how we'll become a top-performing bank, but I think in the most simplest form, it's, you know, it's going to be, you know, focusing on, you know, fewer things that frankly leverage our strengths that are going to go drive a great funding franchise and a great collection of wholesale businesses that will fit hand in glove. But as we think through these portfolios, whether they be Prime Auto or other loan-only products or less strategic products, that'll be the first question. Does this fit? Will this matter? Will this drive business value in line with our strategy? And then number two, to the extent that it doesn't fit perfectly, you know what are the uh what are its economic contributions you know maybe not immediately but even potential over time and to the extent that these uh these businesses or certainly these assets you know don't uh you know don't fit our eye and and don't don't fit you know the economics then then we're going to stop doing them and i think it's i think it's that simple and so that work's happening now and um you know this is i think a good example on the balance sheet and capital side of something that was you know pretty clearly and obviously doesn't fit um and you know And there may be a few other things, but I think Mike's eager to conduct that review, make those choices, and then get us, frankly, back into growth mode. He didn't come to Truist to shrink to greatness, right? I think there's going to be some recalibrating, and then it's going to be really more focused on getting back to growth and improving profitability.

I guess from your seat as CFO, how do you think investors should just think about the continuity of the company's current plan? And just, you know, maybe where do you see the biggest opportunities for press perspective as Mike gets up to speed?

I think from a continuity perspective, you know, I've given you a couple of examples of, you know, we were at a moment where, and hopefully you guys have all felt this, where we've been very focused on improving profitability and getting back to offense. I think what Mike has really brought to the table has been really important is a new, fresh, external perspective and ability to challenge you know some of the the choices the inertia whatever it might be you know rack's a good example something we operated for a long time there were moments in time when it was very profitable I think in some of our minds you know you know rack would always sort of offer that opportunity the realities were that that was changing and so Mike was clear eyed on that our board has been involved in that they're clear eyed as well and so just a good example of coming in and having a fresh perspective. Mike also brings a lot of expertise to the table in areas where we believe we have a lot of opportunity to improve. Some really obvious examples of that would be payments technology and products. He ran a really successful offense in his prior life in commercial and corporate banking, delivering treasury products to clients, that's been an area where we've really, you know, under kicked our coverage, however you think about it. You know, we don't have a card program that is, we think, suited to support our deposit franchise. That's an area where Mike brings a lot of expertise. He's got a lot of experience in that broader corporate and institutional business as we think about capital allocation and pricing discipline and relationship profitability discipline. So there's a lot of things that I think Mike just brings to the table, not to mention just a real intensity around accountability and performance. So from a continuity perspective, I think in some respects Mike's come in and really added urgency, added really nice tone from the top. As it relates to things like what we aspire to achieve, I think it's just doubling down. You know, I think he and the board both and management are aligned that we will be a top performing, you know, bank in the United States. And so we get asked a lot of questions this morning about things like, what are ROTC targets? Are those changing? Will we get there faster or slower? And, you know, I don't want to speak for Mike. He'll have chances later this year to articulate his vision, and we'll talk about 27 later. But I know that he's not backing off the 16% to 18% ROTC target. I think again um he'd probably say hey that's table stakes you know there are companies that are peers of ours that are going to be you know uh operating at an even higher level of performance and that's so that's where his mindset is so uh I'd feel pretty confident that we've you know are going to stay the course on on profitability improvement but also just the plus here would be a real focus on growth that's helpful um we're going to double click I think on a lot of what we've said so far, but maybe just kind of pull back for a second and just talk about kind of the backdrop you're operating in, you know, at the moment.

Just what are you hearing, seeing from your commercial clients, consumer clients? You know, you have a, you know, good footprint in some of the better markets. Just, you know, any differences kind of across geographies and the like?

Yeah, but I think the overall backdrop is, remains constructive, right? You know, credit's going to be a bright spot. I'm sure we'll talk a little bit about that. I'm not sure if you've heard much different today from any of the other management teams. But we're not seeing a lot of signal from either our consumer or our commercial clients and corporate clients, institutional clients, that there's, you know, some emerging stress. You know, clearly we have our eyes on, you know, it's a less certain world, you know, even today than yesterday. And so geopolitics play into that. You know, we've got a little bit of a volatile rate environment at the moment. And so I think that's a watch item, you know, at what level and at what point might an even higher for a longer rate environment begin to impact, you know, consumers and their spending habits and savings rates or, you know, even commercial and corporate clients. But by and large, you know, pipelines, you know, in commercial banking and in investment banking, you know, again, credit performance, which is probably our best signal in savings rates and consumers are relatively stable. But certainly we have all the antenna up just given all that's going on, you know, around the world.

And I guess as you're kind of pulling back in some of these, you know, consumer-related areas, let me just talk to kind of just where you see the best opportunities to grow the overall, you know, portfolio. And I think last quarter you talked about, you know, pocket strength, particularly on the commercial side. You've talked to, I think, 4% loan growth target for the year. Is that still the right way to think about it?

So, yeah, I mean, you know, we've spent some of our time in the last couple of minutes talking about some of the areas that maybe don't fit the portfolio. I think areas that we really like, you know, are that sort of core commercial, you know, middle market industry oriented, certain pockets of CRE. You know, what's maybe a little newer that I think Mike's bringing a lot of good challenge and ideas to the table around is, you know, So if our goal is to be, you know, to own the relationships, whether they be commercial clients, corporate clients, consumer clients in our markets to truly own them, we have to think about the products that we offer that can more fully serve those clients. And so, again, I mentioned already, historically, we haven't had a credit card offering that's been, you know, sizable and I think probably has opportunities from a feature perspective. That's an area we'd love to see grow in addition to that kind of core commercial, corporate, middle market stuff. You know, home equity line, you haven't heard us talk much about HELOC in the past or even retail mortgage. You know, those are important products to borrowers and to our, frankly, our deposit, our DDA clients in their financial lives. So I think you're going to see us really try to focus on some of these products and the aspects of our distribution that more fully serve these clients and probably spend less of our time on things that, frankly, aren't aligned to that core client.

John, and maybe on the deposit side, you know, obviously gotten a great deal of attention of late, particularly Southeast deposits. Maybe just talk about in terms of what you're seeing in terms of balance, mixed pricings, and maybe segment between the corporate side of the consumer front.

Yeah, you know, we provided a little bit of an update in July when we reported second quarter earnings around just some of the, what we perceive to be a challenge on mix, at least relative to what we would have expected at the beginning of the year. I'm not sure that's worsened or improved. We've seen overall balance production actually be quite good, especially in the wholesale business. I feel like our bankers are out having great conversations. We're onboarding a lot of new clients. We're winning a lot. We want to win more, but we're winning a lot. But what we have seen is just product selection um and then even some product rotation into just higher rate products um and uh and that's i don't think that's a necessarily a truest comment i think that's an industry wide comment and you know when you're at um you know the some of the some of the psychology that goes into the mindset of a consumer or a commercial or corporate client around storing their liquidity environments like this just tend to have a little bit more rate awareness and so um that's not a new update from July. That's just sort of a continuation of what we've seen. And, you know, so we're working really hard to, you know, first and foremost, defend all the right relationships and then bring the right relationships to Truist. And I feel like we have the resources we need. I think one thing you'll see us do is amplify, you know, our focus on our deposit franchise, you know, even more so. And we think we've got the most attractive markets in the country. And a lot of you agree with that. We hear a lot from you guys. And so we want to make sure we're growing at least as fast as our markets.

Got it. Maybe tie it together in terms of net interest margin, you know, and I guess maybe let's segment this discussion into two pieces, I guess, pre-transaction and then maybe post-transaction.

But you were, you know, 298 in the second quarter.

You know, there's, we talked about loan deposit growth. There's obviously some balance sheet remixing that you've kind of already talked about. Just how do you think about the NIM trajectory from here? The Fed, I'm told, is going to hike tomorrow. How does that impact, you know, kind of core NIM over time?

Well, the hike tomorrow we've had in our outlook, so that's not news to us. You know, we would expect, I think we said this back in July, that we would expect our net interest margin to modestly improve throughout the second half of the year. You know, some of that is, you know, just that fixed rate asset repricing in the background, albeit at a slow pace. So that's the bonds rolling up the curve. You know, traditionally, you would have seen some of these consumer loan portfolios, which we are deemphasizing a touch, you know, roll up the curve, so to speak, as well. You know, you're seeing that, but maybe to a lesser extent, given that we're running on fewer loans than we're running off in some of those portfolios. um but then i think you also have some nice benefit at the end of uh at the end of the year around some seasonal public funds balances that we see so we'll see that interest margin improve a touch at least i mean x rack um you know for the for the third and the fourth quarter you know rack is a good example of uh you know that will obviously be nim dilutive uh and it will reduce our overall nii but obviously one of the um one of the most obvious benefits of that transaction is our, you know, credit losses will go down significantly, and as we've already mentioned, our earnings will actually improve. So, you know, maybe, you know, on a RAC, impact on NIMH might be, you know, call it four to five basis points, but I think a trade-off that's well worth it, again, accretive to ROTC, accretive to DPS.

When you say four to five basis points of NIMH on RAC, is that net of the securities portfolio repositioning or pre?

Sorry, yeah, that would be net. So I'm thinking about, you know, you probably get a few basis points back on securities repositioning. So four to five basis points net. Net of the repositioning.

I guess on the repositioning, right, you took a bite of the apple after the insurance transaction. Another bite of the apple after this transaction. You know, in terms of securities portfolio, there's also some swaps. Like, you know, how much more of the balance sheet, not the capital, the infinite, But, like, you know, is kind of low-hanging fruit to do if you had an offset?

Well, if you size them, you look at the AFS portfolio, you know, around roughly $75 billion of book value. You know, probably $40 billion of that we've purchased, you know, call it since early, you know, 2024. So, like, I'll call, like, the legacy, you know, longer duration, sort of out-of-condition portfolio. you know, is closer to closer to 30 billion dollars. So so look, you know, again, that that that does include the T.I.H. repositioning. So. So look, if you think about the call at nine hundred and fifty million, give or take of capital that we that we'll see created from this transaction and you, you know, size, you know, what would be an AFS positioning to perfectly offset that, that that probably gets you, you know, close to close to nine billion dollars. in book value, so you'd be about a third of the way through sort of what's left in terms of, you know, the real opportunity in the AFS portfolio, if that does that.

Yeah, that's exactly what I was looking for. And then in terms of swaps restructuring, is there something you could do there?

Yeah, there's not like a restructuring, you know, so to speak, opportunity with the swaps. You know, the receive fixed swaps are there really to transform sort of the degree to which the asset and liability and equity yields are moving together. To the extent that we, you know, change that positioning, you know, that contract is in place, whether it's, you know, changing dynamically with rates or whether you sort of strike the NPV of the swap and amortize it over the life of the swap. So that's not so much an opportunity. at least not one that's sort of similar in style to the securities.

Got it. And then just maybe tying all this NI discussion together. I think you were looking at 1% to 1.5% NI growth for the year, I think 1.5% for the third quarter. Is that still the right way to think about it? And then kind of looking ahead, obviously this transaction changes things, but just how you're beginning to think about 2027.

Yeah, so the 1.5% for this quarter, you know, we mentioned we feel fine about that. You've got an extra day. You've got some of the dynamics that I've already sort of mentioned in terms of fixed-rate asset repricing, et cetera. And then, you know, for the year, feel fine with that guidance as well. We talked a little bit about some of the seasonal benefits on the deposits and some of the earning asset growth that we'll see. So we feel fine with the outlook for the quarter and the year. Not ready to talk about 27 yet. You know, there's a lot of moving parts right now, you know, at Truist. But, you know, one thing that we are sure about is that we want to get back to a place where we're growing, you know, our earning assets in a profitable sort of strategic way and that we're funding that growth with, you know, good core client deposit growth. And, you know, if we can do that, that's going to be the way that we grow NII and, frankly, have even an opportunity to accelerate expansion of our net interest margin.

Got it. And then I guess on the fee income side, you know, certainly been a bright spot. I think you're calling for, I think, almost 10 percent growth for this year. Maybe just kind of walk us through, you know, the key drivers. We get asked a lot about investment banking and trading, payments, wealth management. Yeah. Any insights you could provide?

Yeah. No, I mean, I think fees has been a bright spot for us, you know, this year. I mean, And, you know, just maybe the three places where we probably spend the most time talking about our banking and trading and wealth and our payments business. So I'll give you a little bit of color on each, perhaps. You know, banking has been performing really well this year, you know, broad-based across our industries that we serve and across the various products. You know, we always look at things like, you know, the proportion of our deals where we're playing more meaningful roles or average size of transaction or average economics. And so a lot of those, you know, so to speak, health indicators are all in great shape and improving. And Tom Hackett and the team are always out in the market, you know, seeking the best talent in some of these sectors. And so feel quite good about that business. You know, we have an expectation that that on a year-over-year basis will grow in excess of 20 percent. So feeling quite good there. Wealth has been a, you know, we expect to be a, call it a very high single-digit grower this year. A small portion of that is going to be related to just good net asset flows. And I call that a very strong health indicator in that business. And then, of course, we've gotten a lot of help from the market with just market values as well. And then I'd say the place that, you know, we are still, you know, working really hard to add some angle and add some trajectory is the payments, the treasury and payments business. We've invested in the products. We feel like we have a really competitive offering. We've continued to invest in our sales force. We continue to, you know, Kristen and Lesher and her team are very focused on creating an even more scaled and more effective offering there. um and that's an area that that we'll see grow this year but not grow um in line with our with our aspiration that's also an area i feel like we've already talked about this mike's going to be really additive um and uh you think about the recurring nature of of those of that revenue the value of that revenue to a franchise like ours uh the rotc epitentum the footings are in place right so that the capital is working um and this is a great way um to add to add really really high quality profitability. So that's going to be an area we're focused on. But you put all that together, we do say, we do believe that we're going to be growing at least at 10% year over year.

I guess some of the areas you highlighted are kind of high expense businesses, yet expense growth I think this year is targeted to be sub 2%. Maybe just talk to kind of how you've been able to maintain that kind of cost control and kind of balance that against kind of investing back in the franchise?

It was funny. We were joking a little bit when I was walking up onto the stage. It was about three years ago we were at your conference here, and we unveiled a $750 million cost savings initiative, and that was a really impactful and important moment for our company and that we learned a lot from. And I think a lot of the discipline and work and exploration and practices that we put in place as a result of that moment have really paid dividends, you know, in the years after. So I appreciate you saying that. I think we do, we have done a nice job of managing expense. We've got good discipline around trying to find what isn't important and what is and thinking about mix of expense space, right? So as we work with our business leaders and functional leaders, um you know it's not an acceptable thing to say hey i don't have enough resources right but there are billions and billions of dollars of financial resources available to people it's how do we spend them and so i think we've created some really good some really good culture um and and practice around that and that's the moment we're in now too with mike so um the the beauty is um you know there are a lot of things that mike believes and he's still you know getting his thoughts in order But there are going to be a number of things that he believes are really important to our success, to becoming, you know, one of the most, you know, successful, you know, banking firms, you know, in the markets. And so the practice of going and trying to figure out, you know, what does matter, what doesn't matter, where can we remix, reallocate expense, and make sure that we're, you know, remixing resources to the places that are going to add the most business value. that that's that's that's the that's the exercise that we're conducting now you know my team's working closely with mike and the businesses and so on and so forth to make sure that we have that right amount of capacity and allocation into those businesses without you know significantly altering you know our our expense trajectory i guess you you say that i think you know one of the the concerns but one of the thesises out there is you know all of a sudden now truish

and go and kind of just ramp up, start ramping up spending and invest in all initiatives and open more branches and hire all these people to kind of maybe accelerate growth now that there's a new CEO in there. I guess your kind of thoughts around that notion.

I mean, I think we talked about it a little just now. I mean, I think at the end of the day, we've got a lot of financial resources. Many of them are directed at activities that ultimately, Mike, and many of us will determine aren't aligned to our core strengths and our core banking business. And to the extent that we identify those, we're going to stop doing those things and we're going to make sure that we can do the things that will matter the most. So I think there's a big opportunity to remix. Again, Mike, we're doing this work. I think Mike has a forming view of what matters the most. It's going to be leveraging these amazing markets we have, this deposit franchise that we have that we're not achieving our potential. You know, we think there are things that we can do to get that in better condition. Again, I'll give you a good example. You know, we've, you know, in the last year or so, we've talked about our distribution network and beginning to get back into the business of de novos and refurbishing some of our branches. It will surprise me if Mike doesn't, you know, change the scale and the speed of some of those things. But that's going to be a choice that's made in connection generally with tradeoffs, right? RAC's a good example. There are other activities that we are investing in today that are not aligned to where we're going tomorrow. So I think there'll be enough of a tradeoff on both sides of the ledger to continue to make great progress from a profitability perspective. But, you know, look, Mike's day 15, I think. So the work must continue.

Maybe they could talk a bit about, you know, last year we started off, I think, this presentation talking about, you know, a branch initiative. I think 100 new branches, 300 renovations. Maybe just kind of update this in terms of, you know, where you are with that, kind of early returns on some of those investments, just, you know, the success or not there.

Well, I think it's important. And I just touched on it very briefly. You know, when we completed the merger, you know, a lot of branding was done. A lot of essentially all the branches were touched. Right. And I think since then, there's been, you know, less incremental investment in terms of sort of just, you know, broad maintenance. And so that's an opportunity for us. And, you know, the commitment around, you know, 300 branches over the next several years is one that is underway. That's the easiest work to begin. You know, again, it's a multi-year investment program. As I just mentioned, it will surprise me if we don't change the scale and the speed of that. That's something I know that Mike's giving some thought to. Same thing with the de novos. You know, when we did the merger, we had 3,000 branches. We closed 1,000 of them and really haven't been in the de novo business, you know, since. We've opened a few locations that are more kind of LMI-oriented. So getting back into de novo branching I think is important and, again, something that I would suspect Mike will put his fingerprints on and potentially change the speed and the scale of that. But the de novo openings were always going to be over a five-year period and sort of begin in the second and third year. So not a lot of progress there, you know, more so on the rehab side. But, again, I'd expect that program to accelerate.

Got it. And then maybe on credit quality, you know, you pull back Marine RV selling near prime auto. Any of that decision credit related? And then any other areas of the book you're watching closely? And then maybe a third question, you know, 55 basis point, I think, normalized charge-offs. I get 45 basis points at RAC, but then you're doing some other things. Just how do you think about normalized NCOs? So three questions in there.

So the first question, you know, was it concerns about credit that drove the decisions around MRV and RAC? The answer to that is no. I mean, it was really, again, single product, national dealer network, broker network, less strategic, not aligned to our core kind of deposit gathering client was sort of gate one and then gate two. In both those cases, those businesses, you know, in RAC's case, essentially, you know, essentially break even. Marine RV actually is profitable, but not to the degree that it would be accretive to our long term profit objectives. And so didn't pass those two tests. and so to us that's you know straightforward and you know if mike were here i think he'd say like there are no sacred cows right i mean fairly rigid you know allocation of of capital you know the balance sheet work that we'll do and then you know very rigid discipline focus on the expense dollars to the conversation that we just had around the p l and so so that that was the the motivation around those two choices um i know i remember your third question so i'll answer it about charge-offs we do believe that um that rack will will reduce all things equal our you know annualized net charge-offs by you know call it uh call it 10 10 basis points so if you know guiding this year 55 which we feel good about you're right would would would change that to call it 45 so down by about 20 and what was your second question just areas of concern as you look at the book there's always something i gotta think keeps you up yeah it feels good now but yeah you're going up maybe gosh not knock on wood I mean I you know and I'm sure you've heard this maybe from others um we uh conditions still all things equal remain relatively you know benign I mean there are always going to be little pockets within commercial where you see a little bit of stress um but but that's not been widespread and and something that that that we're spending a lot of time thinking about we are wary of you know the overall rate environment especially even higher for longer and, you know, whether that may ultimately, especially, you know, the less, the lower income bands of consumer, things like that. But again, I'd say the bulk of our borrowing exposure in the truly low income, you know, consumer, you know, we've just divested ourselves of. So, you know, there really isn't a place where we're, you know, particularly concerned at But I think that being said, like we're surveilling, you know, all that's going on in the world. And but but, you know, again, I one of the really nice benefits, I think a lot of several people, at least we've met a few this morning, have been surprised by the concentration of of non-performing loans and overall charge offs for the enterprise that we're in this very small business. So we think that's a really nice, you know, enhancement to our overall credit credit profile as a company.

And I guess, you know, your slide re-rated the five billion dollar buyback for this year. I think you've talked to getting to a 10% CT1 by the end of next year, although new capital rules should be beneficial. Should we just talk about kind of current capital priorities? I know you have a new boss, but just how you're thinking about that.

Yeah. I mean, I think, look, it seems like the direction of travel around Basel seems relatively set, timing to be determined, but we're doing a lot of work right now to create readiness for, again, at this moment, based on all that we know about the proposed rule, you know, moving to, you know, very likely the ERBA approach. And so that will obviously create a benefit, you know, in early 2028. Between now and then, you know, we've said that we believe 10% is an appropriate area to operate the company. We're obviously in an excess position today, and therefore we have the buyback size the way it is. You know, we actually took the buyback up this year, earlier this year to $5 billion. We're still committed to that. We mentioned that in our slide this morning, and we're committed to maintaining a buyback that's elevated next year as well. That's going to glide us to that 10%. The puts and takes on that is that we'd love to see high quality earning asset growth. So to the extent that we see more loan growth than we might otherwise expect, then that's our first priority will be to serve our clients. But after that, it's the dividend and the buyback, and obviously we really like the idea of pairing, you know, this capital creation transaction with the AFS, you know, repositioning.

Got it. You know, you've outlined a path to 15% ROTC for 27, 16, 18 over time. You mentioned, you know, you didn't think Mike would change those objectives and, if anything, strive to, you know, be top quartile. Just maybe talk to kind of, you know, what do you think are the big drivers, you know, to kind of close your gap to peers and becoming a higher performer? And then, I mean, does this change your leadership, maybe change the timing of getting to those returns, even if ultimately they're going to be better?

You know, I think that 16 to 18, you know, was framed as a medium term target. I don't think Mike will shy away from that at all, just to hit that. You know, at the end of the day, I mean, there are a lot of different ways, you know, a lot of irons in the fire around improving profitability. Some of them we've talked about today, just more disciplined balance sheet management, capital management. But at the end of the day, it's driving more capital efficient revenue through our business. And so, you know, our fee businesses are going to contribute to that in investment banking, in wealth. The Treasury opportunity is going to be a huge contributor to that. We do believe that over time, there's structural opportunity in our net interest margin. As we think about the securities portfolio, whether that happens in, you know, sort of episodic actions like we're talking about today or whether that happens more slowly. Obviously, the HTM portfolio, you know, call it, you know, $45 billion in bonds with a 165 yield is something that doesn't sort of change overnight, but that's a structural long-term opportunity, too, that's happening in the background. And look, we're committed to continuing to manage the business in an efficient way. I mean, there are a lot of drivers out there that'll impact that some of it's some of the cultural um you know practices that i mentioned earlier um around remixing and uh and and being very rigid there um you know um you know and there's other aspects like uh some of the productivity benefits that we're seeing from things like you know ai and otherwise auto you know and non non non-ai like just good old-fashioned automation so sounds good and maybe just in closing you know when you think about show is let's call it three years from now, you know, what, if anything, do you believe will look meaningfully different than it does today?

And maybe what metrics should investors focus on to determine whether you've been successful?

You know, maybe this will feel a little soft, but what I'd say is today we're winning a lot, but we're not winning enough, right? And I think, you know, Mike will have time later this year to articulate, you know, his vision and and to you know be you know i think to simplify our focus and talk about how we're going to invest in certain areas to drive a lot of value but i think at the end of the day where we're focused on is is is winning more right and especially in our markets in our core banking businesses um you know owning owning clients and so that's um that's not where we've been operating again we we win plenty but we're not winning enough and so i think that's going to be that's more of a feeling and you'll see that in our financial results as well but that's that's that's our vision is to is to is to get back to winning great on that note please join me in

thanking Mike for his time today