Erika Najarian: Yes. I hate to re-ask this question, but I think a lot of investors want to make a fine point on this in the fourth quarter. Going back to Ryan and John’s question about net charge-offs I think that perhaps what’s holding back credit-sensitive financials is obviously the prospect of recession — but Rich, everything that you’ve said has seen positive pace of delinquency rate normalization slowing, stability of credit performance in recent vintages. As we think about what happened in September in terms of the card charge-off rate and look at the quarterly charge-off rate in third quarter and second quarter. Is it fair to draw the conclusion that as we look forward to the fourth quarter net charge-off rate that given the stability of all the leading indicators that the charge-off rate will be mostly driven by seasonality rather than normalization, if normalization has stabilized for now?
Richard Fairbank: Yeah. So Erika, thanks for your question. Let me say a few things. So let’s — first of all, one of the things that makes this already challenging business for everyone studying it, including those of us who live it every day, is the seasonality — in the volatility, which a big element of that is seasonality. So let’s just let’s — talk just a little bit about seasonality. Card and auto delinquencies tend to improve each year around the tax refund season and then they worsen gradually over the rest of the year. The second quarter is typically the seasonal low point for card delinquencies and Q4 is the seasonal high point. Card losses lag relative to delinquencies. So they tend to be seasonally lowest in the third quarter and highest in the first quarter.
And now in the third quarter, so our domestic card delinquencies increased. So it’s kind of interesting that we’re talking about sort of a leveling — a stabilizing kind of direction when we’re actually looking at delinquencies for the quarter that went up 57 basis points on a sequential quarter basis. And that’s versus a typical seasonal expectation of kind of — sort of somewhere in the neighborhood of like 37 basis points. But — so you can even see for the quarter that most of the increase that we observed was seasonal. But then that’s where we’ve said. If you zoom in the month — the months of August and September, the month-over-month movement is getting really close to just the normal seasonal trend. And so this is one of the early indications that the trend of normalization we’ve been seeing may be stabilizing.
Now one thing I want to say, obviously, you hear bullish man in my commentary, I’m not here to just wave my arms and declare a turn. We have a couple of months of very encouraging data. We’d love to see more data where we have seen a couple of quarters where we’ve seen a longer stretch of data is in the — more on the lower end of the card business, interestingly, as I talked about, and in the auto business. So that’s where things have really kind of appear to have stabilized. Our upmarket card business is getting there a little bit not quite as — not quite there yet. So I start by saying, we’d love to see a little more data to be fully confident of what we’re seeing. The second thing, I want to say with — then now to your question about charge-offs, first of all, what we see, especially in the months of August and September, you’re not going to see that show up with stabilized charge-offs as soon as the fourth quarter because it really is a couple of quarters that — to the earlier question that was asked, it’s really a couple of quarters before the charge-offs performed sort of in line with the delinquencies.
So we’re not going to make predictions here, and I don’t — I just I always — we’re always very kind of try to be as clear as we can on what we see. We happen to see some pretty positive things here, but they can also be ahead fake and a head fake and not be as good as they appear.
Jeff Norris: Next question, please. Next question, please.
Operator: Our next question comes from Dominick Gabriele with Oppenheimer. Your line is open.
Dominick Gabriele: Hey. Good afternoon. Thanks so much for taking my question. When you think about capital ratios and Basel end game and the need to build capital specifically for unused lines, how do you think about mitigating if at all, mitigating your unused lines and given your capital target of about 11% today, maybe you could just talk to us about the factor of Basel unused lines and the effect going over on your capital levels and the ROTCE target? And then I just have a follow-up, if you don’t mind. Thanks.
Andrew Young: Yeah, I’m going to come back, Dominick, because the last half of your question. I wasn’t sure I followed it. But in terms of unused lines, one of our long-standing strategies has been to start people with smaller lines and allow them to grow. And so, I would say, I wouldn’t expect a meaningful shift in that strategy solely in the service of risk-weighted assets. So overall, though, as you look at the risk weightings that have come out in the end game proposal. For us, in aggregate, recall, we’re not in mortgage or trading. So looking at the net of retail and commercial, inclusive of the gold plating, those are largely fighting to a draw in terms of overall risk-weighting impact, specifically on the asset side. Like everyone else, of course, we’re going to have an impact from the operational risk RWA. But I didn’t quite follow the second half of your question around ROTCEs. Could you just repeat that for me?
Dominick Gabriele: Sure. Sorry about that. I was just curious, if you basically had to hold more capital because it’s my understanding that you would have to hold additional capital against unused lines versus just drawn lines now. And so I was just curious, if your capital ratio would have to rise and — and if that would affect the long-term return on like return on in any way?
