Bruce Van Saun: So it’s Bruce. And let me start off and then John can amplify. But the TOP program, I think, has been a real consistent contributor to our ability to deliver positive operating leverage. But to actually get to flat for next year, we have to go beyond that. So we’ve geared up a very nice TOP program and we’re adding to it. But I think we’re going to have to look at kind of employment levels broadly to see where we can extract some folks and we’ll look at certain business activities that may be less important going forward than what we have been engaged in historically. We’ve already done some of that this year. So we downsized the mortgage business quite a bit. We exited the auto business. So I think it’s a combination of actions.
It’s continuing to find ways to upsize TOP, leverage things like AI, where we can do that. look at our overall board structure and staffing levels and see if we can pinch some efficiencies there and then look hard at our business mix and figure out where the key years not to just have a knee-jerk revenues, there’s revenue pressure in the environment. So let’s really take a hard knife at all expenses. We have to be judicious about where we’re cutting and protect the things that we feel are really going to help us grow and outperform in the medium term. So things like the private banks, things like the New York Metro expansion. There’s things that we’re going to ring fence and then there’s other areas we’re going to have to go a little harder with the knife.
John?
John Woods: Yes, I think that covered it well Bruce and just ongoing the fundamentals, our bread and butter of focusing on organizational related items and third-party spend and the like. And I won’t repeat all the categories that Bruce articulated, but we’ve got a fundamental underpinning that we feel like we have the opportunity to broaden out with while protecting the initiatives that are going to help us outperform over the medium term.
Operator: Your next question comes from the line of Manan Gosalia from Morgan Stanley.
Manan Gosalia: You have 67% of deposits from consumer, so a strong franchise there. And you noted that you should outperform peers on a relative basis. But one of your large peers noted last week that banks may still be overearning on NII. So I guess my question was, how do you see competitive factors playing out for consumer deposits next year, especially if the rate environment stays higher for longer?
Bruce Van Saun: Brendan, do you want to?
Brendan Coughlin : Yes. We certainly have seen continued heavy competition for consumer deposits. You’re seeing kind of money market and CD rates in the mid-5s in some spots. We feel like we’re competing really, really well on that. Obviously, it’s supported by our transformation on low cost, that’s where you kind of start on how you manage strong NII levels and NIM levels as having a solid foundation of low-cost, highly engaged customers. We have probably more levers than others have to manage through whatever the competitive intensity ends up coming our way in 2024. Certainly, we have Citizens Access, which has been an incredibly positive tool for us to grow interest-bearing deposits in a smart way with really sticky relationships, but also it helps not put too much contagion into the retail banking system with heavy kind of window rates on the front of the branches that may drive in hot money and bring the franchise into non-relationship-based banking.
And so that’s been an incredibly effective tool to both raise money and also protect how we manage and compete on interest-bearing costs. We’ve also — where we have competed in the core franchise with some of the more aggressive rates. We’ve done it in an incredibly relationship-based way. So the access into — no pun intended, with Citizen’s Access, access into higher rates on deposits of your core banking customer of ours requires you to be in a relationship product. We call it Quest or a private client, which is our mass affluent or affluent value proposition. So when you do more with us, you get more, that strategy has enabled us to be more targeted in how we think about introducing interest-bearing costs into the environment that we’re able to protect and retain balances in a really thoughtful way versus reprice the entire book in some spots.
So it’s intense out there. We expect that to continue through the first half of the year as deposits are sort of hard to come by through the U.S. banking system, but we think we’ve got the right tools and the right levers to continue to win and compete well with our peers.
John Woods: And just maybe just to add, that’s all great points there. And then just to add one other point about this. I mean, the rate environment is not — is expected to become more constructive, I guess, is the point. Meaning if you’re raising deposits in a world where the yield curve is inverted or at best getting less inverted. That’s always going to be a tricky situation for banks until it becomes a more stable upward sloping situation, which I think is more likely to be the case as you get into ’24 and certainly to the end of ’24, when you start seeing lower short-term rates and nevertheless, an attractive long-term rate where we can basically deploy our capital and make a positive return. So that’s really what I think is going to shake out as you get into ’24.
Bruce Van Saun : I mean the other one last piece of color I would add is that as we enter 2024, we’re still kind of having a net loan shrink, and that will eventually turn around as the Private Bank starts to put on loans, and we’ll see where the economy is. But we won’t really need to we’re not pressured to grow deposits given that dynamic on loans. We can still see the LDR improve just by keeping loans stable or even letting them drop a little bit. So factoring that into the calculus of do you really need to be aggressive given that’s your dynamic around loans and deposits that helps you manage the cost of your deposit franchise.
Manan Gosalia : Great. I appreciate all the color there. And just separately on the LCR requirements, you mentioned that you’re compliant in both Category 1 and Category 3 now and that this build is also NII neutral. But I guess the question is, how much more do you think you need to build from here? And how do you think about that increasing your asset sensitivity in the long run?
John Woods: Yes. I mean I think we should say — a couple of questions in there. I mean I think the regulatory requirements are generally inducing banks to become more asset sensitive. You got the issue of more broadly, if the long-term debt rule goes in, that would be along with having to hold liquidity that is shorter duration, that’s going to cause asset sensitivity to grow over time. We’re naturally an asset-sensitive bank. And those forces would cause us to be more asset sensitive. So that will — we’ll have to consider in the coming and during the transition periods, whether it makes sense to moderate those positions with all balance sheet types of actions. But nevertheless, there’s generally a tailwind of asset sensitivity being created from the regulatory environment, but also idiosyncratic to us, our Non-Core portfolio as that runs off that’s mostly a fixed book and that has a tailwind to asset sensitivity.
