Bruce Van Saun: Yeah. So I’ll start and then John can then give some more color. So I think that the kind of push that we’ve seen higher over the course of ’23, that could continue a little bit higher into ‘24. So going from 46, say, to 50 is kind of twofold for the most part. One is that CRE general office is, we’re watching the maturity wall and we’re on top of all these credits very carefully and we’re working them out. And as I said in my opening remarks, a lot of this is fairly predictable. So kind of we can look ahead six months, nine months, we can kind of anticipate where we might have to do some restructurings and where we might take charge-offs. And so I think we have good visibility into that. It’s a long process on CRE General Office.
I think we’ll have this with us all through ‘24 and likely into ‘25 as well. But again, the important thing is, I think we’re well-reserved for it, and it’s baked into that charge-off run rate. The second area is really just continued normalization on the consumer side, which has been extremely slow and gradual, but we’re still slightly better than where we were pre-COVID. And so that will just gently push up as we go forward. And so that would be the other driver. I’d say the good news is that in C&I, we’re not really seeing any kind of hotspots and so we feel that we have a pretty good outlook for broad C&I through 2024. On the question of the ACL is, this year we’ve been consistently building each quarter. And if you get to the scenario where there’s likely a soft landing or a very shallow recession, we’ve put away enough reserves that I think we will be able to start to draw that down.
And so time will tell on that, but you can already see that we’ve been starting to kind of reduce the amount of kind of reserve bill from absolute provision over charge-offs in this quarter. It was flat. It was $171 million over $171 million. And so even if charge-offs can pick up a little bit, I think it’s likely that you could see the need for provision building from having provisions exceed charge-offs reduce as we go through the year. I don’t know, John, if you want to add any color to that.
John Woods: Yeah, just a little bit. I think that all makes sense. And I’d say that the drivers of where you want to be with your reserve is, we have a relatively conservative economic environment predicted over the horizon which is a mile to moderate adverse outcome. So that’s built in We think that we’re seeing stabilization in terms of the performance of the back book in our loan book. So we see visibility into the charge-off outlook. And then the build, which could be the other driver of ACL when you’re building loans, what we’re rotating away from and building into, there’s actually a net flat to improved profile in terms of the very high quality origination front book in the private bank and commercial that we’re putting on the portfolio in ‘24 while other stuff, maybe a higher ACL load is running off in the back book. So those are the things I would just add to what Bruce said.
John Pancari: Great. All right. Thank you for that. And then separately, on the capital front, you indicated that you expect to resume buybacks in the first quarter of ‘24. And maybe if you could help us possibly quantify the pace of buybacks that’s fair to assume. Could you be back at that $200 million quarterly rate or how should we think about that? Thanks.
Bruce Van Saun: Well, at this point, we’ve given a kind of firm estimate for the first quarter of about $300 million. So we probably, with benefit of 2020 hindsight, could have bought some in the fourth quarter, but water under the bridge for [10/6] (ph). So we have a little above-target capital to kind of play with, if you will, in the first quarter. And then in the first half of the year, we’re not going to have much net loan growth. Non-core is going to be running down, and we don’t really see the flex in lending coming till the second half in the private banking commercial, as John indicated. So I think the buybacks would tend to be more first half oriented, but a lot can happen over the course of the year. And so I kind of defer from giving a kind of quarterly run rate just to say we’ll have a solid print in the first quarter and likely more in a second quarter and then we’ll see how the year plays out.
John Woods: Yeah, and I just would reiterate our capital priorities are a strong dividend, and if we have opportunities to put capital to work, serving clients and driving great really strong risk-adjusted returns. That’s our preference. And when that moderates a bit, that’s when you see us give it back in the form of buybacks. And so we’re in an extremely strong position to be able to have the opportunity to trade.
Bruce Van Saun: And one last add-on point to your add-on point is I would say I’m really happy to be buying my stock at these levels because we think it’s great value.
John Woods: That’s it.
John Pancari: Okay, great. Thank you.
Operator: We’ll go next to the line of Ebrahim Poonawala with Bank of America. Your line is open.
Ebrahim Poonawala: Hey, good morning.
Bruce Van Saun: Good morning.
Ebrahim Poonawala: I guess maybe one question for you, Bruce, as you think about capital deployment, you’ve been pretty busy last year in terms of the strategic actions. Just wondering, where do you see, like, as you look at investment opportunities for the franchise, are you done for now in terms of putting the big pieces in place, or how are you thinking about new things and new investments that we could see either on an organic basis, team lift-outs, or just outright M&A?
Bruce Van Saun: Yeah, good question. I would say the orientation right now is for backing our organic initiatives. So we’ve mentioned the private bank and we need to continue to invest there to get that off the ground and make it a big success. And we’ve been investing in the New York marketplace and certainly to get your brand awareness up is expensive proposition, but we’re doing that and that is showing very good results. There are certain businesses like payments that are, I think, going through a lot of change and that change always presents opportunities. And so making sure that we’re investing to position ourselves to deliver for clients and continue to gain share and grow that business, those are the things that kind of come top of mind that we’re very focused on.
I think in terms of acquisitions and our fee-based capabilities, we’ve made significant investments over time in commercial. And so our M&A size and scale is at quite a good level. So we could be selective there. Don’t see anything imminent, but there’s possibilities that if there’s an industry vertical that makes sense, maybe we could do something there. And then wealth, we’ve been looking at trying to buy some things. We bought Clarfeld, which turned out to be a fantastic acquisition, but I think the orientation the rest of this year is to really go the lift-out route and to bring teams onto the platform. And so we’re hard at work on that to try to scale up Citizens’ private wealth. So I would say the franchise is in good shape. There’s a lot of initiatives in place that will, I think, have us outperform from a growth standpoint relative to our peers.
