I think the final point I’d make, and I mentioned it in the prepared remarks, is that we have to remember that the loss rates in both portfolios reflect multiple vintages maturing at the same time. And you’ll recall, and this is an industry dynamic, you know, through the COVID and pandemic period, losses were at an all-time low, payment rates at all-time highs, supported by government stimulus. And now coming out of that, we’re seeing the COVID vintages mature albeit at a lagged pace from what would be normal. And we’re seeing the incremental acquisitions that we’ve done, start to mature at their normal pace. And so these loss rates are exacerbated by that impact, and that’s an important factor we can’t lose sight of. But the bottom-line is that we’re watching it.
The macro factors matter. We feel good about the quality mix that we have and we’ll kind of see how things evolve from here.
John McDonald: Okay, and on the branded side, you still expect kind of the peak this year. You’re still inside of the range for the full year and expect 2025, you could move lower on the branded charge-offs?
Mark Mason: Yes, I still kind of expect that trend line of peaking and then kind of moving a bit lower in branded.
Operator: Our next question is from Ken Usdin at Jefferies. Your line is open. Please go ahead.
Ken Usdin: Great, thanks. Can I follow up on the card line of thinking and just ask you, Mark, to talk a little bit about just cost of credit? We did still see some card-related build this quarter, even with the comments you just made and seasonal softer loan growth. So just from a bigger picture perspective, how do you think — continue to think about reserve builds from here and how that informs your outlook for cost of credit?
Mark Mason: Yeah, sure. Look, I think that, you know, when I think about the reserve builds, I think it’s the same factors that come into play. So obviously the view on the macro is important. And right now, if you think about some of the key macro factors that impact the cards portfolio, the unemployment assumption weighted is about 5%, the downside is about you know 7% kind of weighted over the period. And so feel — how that evolves will be an important factor. How [HPI] (ph) evolves will be, you know, important consideration here for this portfolio. But also what happens with volumes becomes a factor on reserve builds and how important or how much they increase or decrease. And then the final piece is mix, and it’s kind of related to that revolver point.
As we see the mix evolve from transactors to revolvers, that’s going to play into how much of a reserve, from a lifetime point of view, we have to continue to build. And so it’s — why I mentioned on John’s question, you know, the importance of looking at, you know, the interest rates looking at what’s happening with inflation, watching the lower income customer base, because all of those things combined with how we think about the scenarios and the weighting will be a factor on the reserves. But I will say, Ken, as I sit here and think about what we have in the quarter, I feel very good about the reserve levels. The 8.2% for combined kind of, you know, ACL to loan ratio feels right for the mix of this portfolio, and we’ll continue to watch it.
Ken Usdin: Okay. And a separate question on TTS. That NII related to TTS has been remarkable with rising rates. This quarter, granted there was a lesser day and there could be currency stuff in there, the first quarter that it stepped back, I’m just wondering like where is that in its asset liability sensitivity, the TTS-NII, and what are your thoughts about that piece of the NII puzzle going forward? Thanks.
Mark Mason: Sure. Yeah, I think I’d say a couple things. We do have some Argentina playing through the NII line. I will say that the best way to think about it is kind of the underlying beta activity. And we have seen, this is a corporate client, it is an institutional client, we have seen betas, particularly in the US, at kind of normalized or terminal levels and playing a bit through that. We are seeing betas outside of the U.S., continue to increase as it relates to the TTS client base. But all of that, again, is inside of the range that we’ve talked about. I don’t expect to see kind of year-over-year growth on the NII line anywhere close to kind of what we’ve seen in prior years, prior quarters, just in light of kind of how the rate environments evolved and in light of kind of quantitative tightening – and tightening and the impact on deposit levels.
The last point I’d make on this is, we will continue to drive and see growth as it relates to the operating deposits. And that’ll be an important tailwind that kind of plays through.
Operator: Our next question is from Vivek Juneja at JP Morgan. Your line is open. Please go ahead.
Vivek Juneja: Hi, thank you. Jane, Mark, just a question maybe on Argentina. You had — you’ve shown $100 million in NII, total net income benefit of $500 million after tax, so probably implying about $500 million, $600 million of non-interest income benefit. Which line item — sorry, which segment did that come through and is that sustainable?
Mark Mason: Yeah, look, there’s a mix obviously of things that are driving that net income, including a tax impact on the heels of last year Argentina devaluation activity that’s in that line. But the short answer is that you know if you think about the nature of the business that we do in Argentina, it is a big part of our institutional client relationships. And the primary activities include some of the TTS type of activities that we’ve talked about, so liquidity management payments, custody within the services business. And so you’d see a good portion of the activity in Argentina playing through the services business, some of it in markets as well, but again, the majority of the activity in services.
Operator: [Operator Instructions] Thanks so much. Our next question is from Scott Siefers at Piper Sandler. Your line is open. Please go ahead.
