Sanjay Sakhrani: NIM?
Andrew Young: NIM, sure. There is a lot of factors at play with NIM and maybe I’ll do the same housekeeping with NIM. Just to remind everyone that in the first quarter with one fewer day, we’re going to see roughly a 7 basis points headwind there. But let me then also enumerate here the puts and takes to NIM. On the tailwind side, growth in card balances as percentage of the balance sheet and even within those balances possibly a higher revolver rate. Certainly a tailwind, and that’s something we’ve seen over the last couple of quarters. And then also a lower cash balance, we’ve talked about this before, but cash balances today in total of $43 billion. I think the number is with about $37 billion at the Fed is quite a bit higher than pre-pandemic.
I don’t think we’ll get back to where we were pre-pandemic but I would expect over time that, that will come down from today’s level. So that would also be a tailwind to NIM. On the headwind side, even though the Fed has stopped moving up in July, we continue to see some deposit product rotation, and it creates a bit of upward pressure to the deposit betas. And then even if the Fed starts decreasing rates, we’re going to see the assets reprice more quickly than the deposits. And the competitive environment in the backdrop of QT will potentially have an impact on betas on a downward cycle. So that would create a bit of marketing pressure. And then a couple of other things that I would just highlight as potential headwinds, the uncertainty around potential regulatory changes that could impact interest income as well as just the path of credit.
You’ve seen suppression go up over the last few quarters, as losses go up, so that also creates some pressure to NIM. So, I know that that was a list of puts and takes, but I partially go into that level of detail to say, it’s kind of hard to say where NIM is going to go in the near term, especially because the path of interest rates remains fairly wide at this point, but kind of gives you a sense of all of the forces at play. But over the much longer term, I would say there’s nothing really structurally different about our balance sheet from where it was pre-pandemic, that leads me to believe that NIM will be materially different than where it was based on at least what we know today.
Jeff Norris: Next question, please?
Operator: Our next question comes from the line of Ryan Nash with Goldman Sachs. Your line is open.
Ryan Nash: Hey, good evening, everyone.
Andrew Young: Hey, Ryan.
Richard Fairbank: Hey, Ryan.
Ryan Nash: Rich, when I look you put about $4 billion of marketing expense for the second straight year and you continuing to drive strong growth, we’re hearing about some others with a little bit of a more cautious tone on growth. So maybe just talk about, are you leaning in and do you expect marketing to increase, and really where you’re seeing the best opportunities in the market and how are you thinking about growth looking ahead? Thanks. And I have a follow-up.
Richard Fairbank: Okay. Thanks, Ryan. We feel very good about the opportunities in the marketplace, so we are leaning in, we’re definitely leaning in. The — you can see obviously, there was quite a lot of marketing in the fourth quarter, but we continue to see opportunities across the Board, especially in the card business. But — so let — just pulling up there a few key factors driving our marketing that we want to continue to emphasize. First of all, we’re just really excited about the growth opportunities across our business. We’re making — we have over the last number of years, made some, what we call sort of adjustments around the edges and trimming around the edges. Lately, there is really even not a lot of trimming around those edges, we’re in a very sort of stable place with respect to the business we’re going after, the results we’re getting, and the deal that we have to capitalize on that.
And I think our technology transformation of course has really been beneficial, but it allows us to leverage more data and more machine-learning models to identify basically more attractive opportunities for investment and to create better and more customized solutions for customers along the way. So just the overall opportunities continue to be very strong. The second part of our marketing investment, of course, relates to our quest to win at the top of the market. And we’ve been going after heavy spenders now for almost 15 years and that needs sustained high levels of investment and you can see those out in the marketplace in flagship products, in groundbreaking experiences, like things like best-in-class digital customer experiences, really high level elite customer servicing, online travel portal, and — in the intersection of risk management and the quest to go to the top of the market.
The incredible importance of advanced fraud defense is to ensure that the card always works. And increasingly, we’re also just rolling out exclusive services and experiences that aren’t available in the general marketplace, such as airport lounges and access to select properties. So we continue to lean into growth here and obviously, that quest toward the top of the market involves quite a bit of marketing investment and a lot of upfront investment for annuities that are just wonderful long-lasting fabulous annuities. And the third vector of real marketing investment is our continuing efforts to build our National Bank. And just as a reminder, we have a smaller branch footprint, and so we lean more heavily on our technology investments, our digital experiences, our cafe network, and our brand and marketing investments to continue to organically build this National Bank.
And we are really pleased with the traction there. And it’s been a lot of years in the making, but we are definitely leaning in there and loved the results. So, Ryan, those are kind of a window into how we’re thinking about it in the compelling opportunities behind across the board that we see and we are continuing to capitalize on the opportunity as we see it.
