Chris Gorman: Sure. So the first area that I would say would be people doing strategic things. So sort of the whole transaction business, which is just starting to get legs under it. We have a significant backlog, for example, in M&A. That would be an opportunity, John. Other businesses that are really capital-intensive where we have leadership positions in are things like renewables. I was out calling with our renewables team last week, incredible amount of opportunity. By the way, this is partially inflationary because there’s a ton of stimulus around green energy. That’s a huge opportunity. Affordable housing, still a huge unmet need that is very, very capital intensive. And then I think you’ll start to see people really start to invest in property, plant and equipment.
If we continue to get an acceleration in inflation, you’re going to see people start to go a little long on inventory. Those are the areas where I think there’ll be opportunities for loan growth. We’re not really seeing those right now, but I think they’ll develop over the course of the year, John.
John Pancari: Got it. Thanks for that Chris. Just related to that, is any of the weakness related to bond market disintermediation right now?
Chris Gorman: For sure. When you have record issuance of investment-grade debt and you have spreads that continue to grind in, there’s no question that, that plays a role.
John Pancari: Okay, thanks. And then lastly, on the IB and capital markets revenues, I know you indicated that you do expect some pullback in fees in the second quarter. In what areas is that in the IB area, just given the levels that you saw this quarter? And maybe if you can help quantify the magnitude of that pullback that you could see in the second quarter.
Chris Gorman: Yes. So let me kind of start at the top. From a backlog perspective, we are at record backlogs in our M&A business. Our backlogs are above where they were a quarter ago and they’re above where they were at year-end. Having said that, when the 10-year is gyrating around as it is, if the 10-year was just at 4.6%, I think there’d be a lot of transactions. But I think any time there’s this kind of volatility, it causes pause on certain transactions. And so that was really the premise of my comment as we look at what will come out of the backlog in the second quarter. And I’m sure because the first quarter was actually hospitable to getting transactions done, I’m sure some that would have been in the second quarter actually went into the first quarter.
John Pancari: Okay, great. Thank you.
Chris Gorman: Sure.
Operator: Thank you. Next question is from Scott Siefers from Piper Sandler. Please go ahead.
Scott Siefers: Good morning. Thanks for taking the questions. Chris, I was hoping you could address in a bit more detail the decision to build the reserve a bit more. It sounds like from your prepared remarks, you’re just sort of trying to be out in front of anything you might see in a higher-for-longer environment rather than anything you’re actually seeing today. Is that the right way to think about it? Or what are sort of the nuances in there?
Chris Gorman: Yes. Actually, it was completely proactive. I just – I’m of a mindset that we’re in this higher-for-longer. And as a consequence, we have been stressing all of our portfolio. And we – any time we do that, we start with anything that’s leveraged because that’s most vulnerable. And we also focus a lot on real estate. And so as we go through and we make assumptions that perhaps these rates will stay where they are for some time, that’s what’s driving it. And also we made some assumptions about – my view is we probably will have a recession. And that’s part of the – my macro view is part of the calculus as well.
Scott Siefers: Okay. Perfect. Thank you. And then maybe we can go to expenses for a quick second. So just curious around how you’re thinking about expenses sort of holistically for the year insofar as we definitely are getting a more normalizing investment banking environment, which is great, but there could be cost accompanied with that. Within the expense outlook, what kind of provisions have you made for that IB recovery? And would you still be kind of comfortable with the guide even if that recovery comes back even more powerfully than it’s currently contemplated?
Clark Khayat: Yes. Hey Scott, it’s Clark. Thanks for the question. So look, we feel good on the guide kind of relatively stable, plus or minus 2%. That incorporates, as we talked about progression towards normalization. If we get something fuller, I think we can absorb that. Obviously, we weren’t expecting coming into the year to additional FDIC charge. So that’s an extra component. We will continue to look at ways to absorb that intelligently. But we think we can cover the impact of a strong investment banking year, which again, we expect to see even if the second quarter is a little bit later. So we did count, we think for that pretty well.
Scott Siefers: Perfect. Okay, good. Thank you very much.
Operator: And the next question is from Manan Gosalia from Morgan Stanley. Please go ahead.
Manan Gosalia: Hi good morning.
Chris Gorman: Good morning.
Manan Gosalia: I wanted to follow up on the Blackstone partnership and just in general, with partnerships with private credit. In terms of underwriting the loans, do you underwrite the loans? And is it your sole decision? Does private credit partner come in? And how does it impact spreads in term and structure as you do more of these relationships?
Clark Khayat: Hey Manan, it’s Clark. Thanks for the question. First of all, I think it’s just important to understand the rationale behind the partnership, and that is largely to support more clients not to manage capital or move loans off the balance sheet. It’s really for us, largely in our specialty finance area. That’s been growing very aggressively. It’s been an outstanding business, but we do think thoughtfully about managing credit concentrations, and this is the opportunity to do that and not limit the amount of clients we can serve. So I think that strategic rationale is really important. As it relates to underwriting, we basically run the business, do the underwriting, Blackstone has an option to participate in these credits if they fit their box.
