Bruce Van Saun: Okay, very good.
Peter Winter: And just on mortgage banking.
Brendan Coughlin: Yeah, so John hit some highlights on Q4 for mortgage. Production was down a bit. Our underlying servicing business was up modestly. And then our hedge performance was down over a big quarter in Q3, Q4. I think as we look the outlook going forward, we obviously announced the exit of the wholesale mortgage business. If you rewind the clock back to prior to the Franklin American acquisition, we were under scale in mortgage and really were trying to diversify the business. We’ve done that really successfully in hindsight. It was an incredibly well-timed acquisition and we performed exceptionally well through the COVID years. And as we exit that period of time and look forward, our MSR concentration versus peers is really strong.
It’s a little bit on the high side. We looked at our business model and said, wholesale mortgage, we’re one of the only lenders in there. The margins were really challenged and the outlook for rates don’t necessarily suggest a [boom lift] (ph) of refi activity in the medium term. And so wholesale mortgage being a non-relationship business, we decided that it was time to move on and we’re committed to correspond it. We’re really committed to retail mortgage for relationship lending. But despite rates coming down, we do expect the mortgage market to be, call it, a $2 trillion originations platform in 2024, which is about a normalized mortgage market. So we should see some modest uptick in originations. And with rates coming back down, the servicing business might see a little bit of offsetting pressure.
So I think we feel like we’re in the right zone in terms of mortgage performance with where we’re at Q4, within a range of normal volatility. And we’re going to make sure that we’re executing on driving up returns higher and making sure allocating balance sheets to deep relationship based customers, whether it’s in the private bank or in the core retail business, to continue to offer that product to our very best customers.
John Woods: Yeah, just to wrap it all that up, in ‘24 we do expect volumes to improve as well as margins. So that’s another tailwind if we get into next year in terms of the production business.
Bruce Van Saun: Okay. Thank you, Peter. Next question.
Peter Winter: Thanks a lot.
Operator: Next question will come from the line of Matt O’Connor with Deutsche Bank. Your line is open.
Matt O’Connor: Good morning. Can you guys elaborate a bit on the expense cuts that you did this quarter in terms of where they’re coming from? And obviously you’re leaning in on the private bank, but kind of ex that, have you made sure you’re not cutting too much during these initiatives and the ones that you’ve had in prior years?
Bruce Van Saun: Yeah. I’ll start off here. But I think we have been very, very diligent in kind of looking at staffing levels across all the different activities in the bank and seeking efficiencies. There’s always the playbook where if you kind of eliminate your bottom X percent of performers and redistribute some of the work that you can run a little leaner. And so we’ve gone through that exercise to make sure that we won’t be caught short in any areas. We carved out important areas like risk and audit and some of the control areas so they were spared kind of from taking reductions. And then we also carved out the areas that are important investment activities. And so, the rollup of all that, Matt, comes to a relatively modest number, 3.5% of total staff count. But I think we’re kind of lean and mean and in good fighting shape as we enter into 2024.
Matt O’Connor: Okay, that’s helpful. And then just separately, the deposit growth that you’ve had from the private bank, have you disclosed what that rate is? I think a third of them are not expiring, but what’s the blended rate? And I guess are you using promotions, whether it’s rate or other stuff to help grow those? Thanks.
John Woods: Yeah, we haven’t really talked about that, but I mean, I think what we should look at is that this is accretive to the low-cost profile top of the house. When you look at DDA and operating accounts, it’s extremely attractive mix that we’ve seen come in early days. So we’re extremely encouraged about our expectations for this to be a very sort of solid franchise deposit fully funding our loan growth that we expect on that side of — on the other side of the balance sheet. So, yeah, I would say the mix is quite good and overall cost, very attractive and accretive to top of house.
Bruce Van Saun: Yeah, I would — there’s a Slide 11, Matt, that lays out a pie chart of the character of the deposits, but DDA and then checking with interest, which are very low costs, roughly 40%, very little term, and most of that in kind of liquid savings and money market with no promotions that are outside the norm of what we’re offering to the core franchise.
Matt O’Connor: Okay. Thank you.
Operator: Your next question comes from the line of John Pancari with Evercore. Your line is now open.
John Pancari: Good morning.
Bruce Van Saun: Hi.
John Pancari: Just a couple questions on the credit front. Charge-offs came in at around 46 basis points in the fourth quarter. You expect an average of about 50 basis points overall in 2024. Can you maybe talk to us about where you expect losses to peak and to hit that 50 bps for the full year and what gives you confidence that they can remain there? And then similarly, on the reserve front, I know you added to reserves in the fourth quarter, but you implied you could see releases in 2024. What do you need to see to drive the releases? Thanks.
