Operator: Thank you. [Operator Instructions] Our next question is coming from Ken Usdin from Jefferies. Your line is now live.
Ken Usdin: Hi, thanks. Good morning. And thanks for that incremental slide on the swaps detail. I’m wondering if you can just kind of help us understand as we get through the end of this year, both in terms of what that swaps impact looks like and as important, that fixed rate repricing, how should we think about those kind of combined benefits as we get out of ‘24 and think about ‘25? Thanks.
Zach Wasserman: Yeah, it’s a terrific question. Just maybe I’ll say a few things on that. One is the fixed asset repricing benefit that we saw, and as mentioned earlier, somewhere between 10, 11, 12, 13 basis points outside this year from that $4 billion turning quarterly. Our modeling indicates that we’ll continue on into 2025 at kind of a similar pace. It’s really a very long-term phenomenon, and [indiscernible] significant support to the NIM as we get into 2025. On the hedge drag factor within NIM, that’s 16 bps in Q1, reducing down by something like 5 basis points to 8 basis points, as much as 10, depending on the rate scenario, lower by the end of Q4. That should also continue on into the early part of 2025 as well.
You probably get to about neutral position if there are some rate reductions. And if you just look at the rate curve, the forward rate curve, there is an expectation in the forward curve at this point that there will be, in fact, reductions either in the back half of this year, certainly into the early part of next year. And so if that comes to pass, then we’ll see that 16 basis points sort of fully resolved by the middle of 2025. If there are great reductions, then you see less of that hedge drag coming back. But obviously, then – because there are different environment overall, regardless. The other thing I’ll just say, you didn’t ask it, but I’ll share it is, if you look at the sum total of all of our hedging activities, which, as you know, are always designed to protect capital against up-rate scenarios, protect NIM in down-rate scenarios.
That chart that I illustrated in the prepared remarks has a gradual shifting of that exposure as you get into and throughout 2025. The net result of that should be that by the end of 2025, asset sensitivity should be about one-third less. And so that’s sort of the intent of that program, more broadly from an interest rate risk and asset sensitivity management perspective.
Ken Usdin: Okay, cool, and then my follow-up, I’ll just separate them. On just the fixed rate repricing, on the asset side, so we know about the meaningful help that you get this year, but then how did that layer in in terms of incremental fix rate benefit that happens into next year?
Zach Wasserman : So, as I noted a bit ago, I think it’s about the same benefit as we go out into 2025, and that’s fairly similar churn of quarterly volumes, and continue to see the belly of the curve that’s largely on those assets are priced, significantly higher than the historical rate of those assets. Over time, of course, you’ll begin to see that benefit reduce on a sequential basis. At some point, it starts to [indiscernible] but likely not until the latter part of 2025, at the earliest at this point, based on how the curve is shaping up.
Ken Usdin: Okay, my mistake, Zach. I didn’t separate the two in your answer. My mistake.
Zach Wasserman : No worries. Appreciate your question.
Operator: Thank you. Next question today is coming from Jon Arfstrom from RBC Capital Markets. Your line is now live.
Jon Arfstrom: Hey, thanks. Good morning. Can you touch a little bit on the fee income outlook and what you expect there? It seems like you’re implying a bit of a step up in that based on what you saw in the first quarter, but talk a little bit about what you’re seeing there. And then confidence in hitting that midpoint of the guide.
Zach Wasserman : Q1 core fees grew by 3% year-over-year. And our guidance over the full year is between 5% and 7% on a full year. So that clearly implies we’re going to see an acceleration of the income and an acceleration on the year-over-year basis, as we looked at this year, and high confidence to achieve that. The core drivers remain the same, as what we’ve discussed on many prior occasions. Capital markets, payments, and wealth management. You look at, sort of the trends we’re seeing right now, what the performance was in the first quarter. Payments revenue is up 7% in the first quarter. Wealth revenue is up 10%. In capital markets, we saw commercial banking related revenues, around two-thirds of the capital markets activities that are really highly correlated to the pace and volume of commercial banking, that grew sequentially into the first quarter — of the second sequential quarter of growth there.
And I think one of the things that will power continued growth in capital markets from here is the fact that commercial loan production is likewise accelerating as Steve noted earlier. Advisory revenues were really beginning to recover well in the back half of 2023, but typically seasonally lower in Q1 for us in our focus in middle market advisory. We did see those advisor revenues lower into the first quarter. But likewise, our expectation for that is for continued expansion into the remaining part of this year. Pipelines look very good, very high quality, great firms that have contracted with us to look for M&A support. And so those are really the drivers from here. Payments continuing to perform, wealth continuing to execute the strategy, and then capital markets driving acceleration as well.
And overall, continue to feel really good about landing somewhere in that full year’s range.
Jon Arfstrom: Okay, good, helpful. I won’t go back to net interest income, but I do want to ask about credit. Your numbers obviously look good, but anything you want to flag internally that you’re seeing, and I’m curious also what you’re seeing externally from a credit point of view. Thank you.
