Alastair Borthwick: Yeah. I mean, Jim, one of the things that I think gives us some confidence around NII troughing and then growing in the back half of next year is if you think — we’ve seen the last Fed hike or you believe that the last Fed hike is a month from now or two months from now. And at some point, deposit pricing is going to stop going up. And there’ll be a natural lag to that, that’s pretty normal. And then what you see, if you look forward into the forward curve is we’ve actually got Fed cuts, three of them, in the forward curve for next year. So, yes, we anticipate will be some lag. I don’t think we’re any different than anyone else in that regard. But we’re just pointing out that as we get towards peak rates, we’re getting closer now so we can begin to see the end of that in terms of the later innings at this point.
And the other thing just — we always have to remind everyone of this is, the deposits that we have are very relationship based. They’re — a lot of them are core operating deposits where we’ve got the checking, they’re thinking about the way we serve them in terms of digital. We’ve got preferred reward program. And then on the Commercial side, very similar. We’ve got a lot of operating deposits all around the world. and they’re using our world-class CashPro product. So there’s a lot of relationship value here as well that we need to take into account. But fundamentally, we’re just making a judgment that we’re getting towards the top of the rate cycle here for Fed funds and then deposit pricing will sort out in the quarter or two following.
Jim Mitchell: All right. That’s fair. Maybe given the thoughts that there’s three rate cuts in the forward curve and you are asset sensitive, but yet you still expect growth or improving growth in NII in the back half. Is that just sort of the lag effect there, too? Or is there something else there in terms of rate cuts and the impact?
Alastair Borthwick: Yeah, I think the other things that we’ve got going on, especially as we get into the back half of the year, Consumer balances are going to find the floor at some point. They again are in the late innings of returning to sort of more normal pre-pandemic balances per account. So they are going to find a floor and at that point, they’re going to start growing in the same way that Wealth has found the floor, and in the same way the Global Banking found a floor a while ago and is now beginning to grow. So we have a point of view that the Consumer side is going to find the floor. So that’s one. Two is, at that point, you’re poised for deposit growth, but we’re also going to see loan growth through the course of the year.
It’s been slower this quarter. But at some point, you return to a more normal economy, as Brian has pointed out, we’re going to see the loan growth and so we’re thinking that’s going to start to evidence itself in the back half. And then the final thing I’d just say is we have securities reinvestment every month, and that’s going to support and grow NII. And I think it gives us a sense that we’ve got a more durable NII stream underneath.
Jim Mitchell: Great. That’s all very helpful. Thanks.
Operator: We’ll take our next question from Erika Najarian with UBS. Please go ahead. Your line is open.
Erika Najarian: Hi, good morning. I have — my first question is sort of two-pronged on the balance sheet. Alastair, if you could tell us sort of how much in cash flow do you forecast your HTM book will have in 2024 as you think about the moving pieces underneath your NII outlook? And for Brian, clearly, this held-to-maturity portfolio has been a thorn in the side of the stock. And so — and no matter what we say to the investment community, the stock hasn’t quite caught up. And I’m wondering, as you think about the statistics that you share with us every quarter, like net new checking ads, maybe give us a little more statistics in terms of the strength of that growth and the strength of that retention. Because I think that no matter what sort of print that you have on total deposits at the end of the quarter, there’s always sort of pushback so long as the market is not yet confident that we’ve hit peak rates. So that’s sort of a two-part first question.
Alastair Borthwick: All right. So I’ll answer the first part, Erika. I think if you look back through the course of the last couple of years, that portfolio paydowns in terms of maturities or paydowns, it’s sort of averaging $10 billion a quarter. So I think you could probably use that as a good starting point for the reinvestment horizon in 2024. That’s what I would use. And then I’ll let Brian answer the second part of your question.
Brian Moynihan: So, Erika, we drive a organic growth machine based on a responsible set across all the different operating businesses. So as you’ve noted, if you look at what’s driving our deposit base to be larger than the industry, i.e., outperforming the industry is, if you think from — everybody compares against ’19 to now and we’re up $250 billion in Consumer deposit loan, but we also are up probably 10% in checking accounts, net checking accounts. Those are 92% core. The attrition rate and where all the deposit balances are in the preferred part of that segment is 99% — the retention rate is 99% plus long-term customers, the preferred rewards program drives a basis. On cards, we’re now getting the balances back up to where they pre-pandemic was even better credit quality than we had then.
We got home equities hit a trough and are starting to work their way out. Auto loans are start — it will continue to produce a lot. The market is not real strong, we continue to produce several billion a quarter. So all the organic growth engine in the Consumer business are very strong. When you go to Wealth Management, we’re now producing that household growth at a faster rate than we produced in the prior years. If you go to the Commercial Banking businesses in the US, we noted that we produced more customers this year. And that deposit base in the business banking and middle market segments, those come with a big deposit franchise. And you see that those deposits have actually been stable and growing for last six months. So the organic growth engine is in fine shape and just powers through all this and is the strength of the $3 trillion plus balance sheet.
And in fact, it is the reason that we have $1 trillion of — $900 billion on a given day that we have to put to work because you’re just having this great engine go on. And so whether it’s investment accounts in Consumer, checking accounts in Consumer, cards in Consumer, home equity, all that has grown organically dramatically over the last four, five, 10 years. And frankly, the loan growth will continue to follow that as conditions improve. And then on the Commercial side, as people go back to regular line usage, we saw it deteriorate this quarter and it’s due to the demand side, and so we feel very good. And then you talked about the markets business, gave you detail there. And the investment banking team is gaining market share and actually [fought] (ph) to maintain relatively flat fees in a market that was down 20% or something.
So we feel very good about the organic growth engine. That’s what powers our company, and that delivered $7 billion plus in after-tax income for another quarter and 15% return on tangible common equity.
Erika Najarian: Got it. And my second question is for you, Alastair. Do you have any economic ownership of Visa Class B shares remaining? Our understanding is until the litigation was settled, you weren’t allowed to sell it other than to other banks in the initial consortium. But I’m wondering if you’ve sold any economic ownership through swap or if we still have it on the books because we haven’t seen any disclosures on that recently.
Alastair Borthwick: Well, I mean, we essentially sold and hedged our Visa B position years ago. And then in our markets business, we’ve financed the sale of Visa by other banks. You can think about that as a hedge thing that’s just about financing. So depending on how that all develops and what other banks choose to do, we may end up having some RWA or some liquidity that we can recycle for other clients’ benefit in our markets business, but we don’t have any meaningful economic stake in Visa B.
