Mike Mayo: So fish or cut bait time?
Chris Gorman: Yes, for sure.
Mike Mayo: Okay. Thank you.
Chris Gorman: Thank you, Mike.
Operator: We’ll go next to the line of Erika Najarian with UBS.
Erika Najarian: Hi. First question from…
Chris Gorman: Hi, Erika.
Erika Najarian: Hey. What was your adjusted CET1 in the quarter, including AOCI? And I presume at 9%, 9.5% CET1 target would be like your fully loaded target even after we get an NPR that would be inclusive of AOCI and CET1?
Clark Khayat: Yes. So, whatever that ultimate target is, Erika, will reflect the appropriate rules. So if the AOCI of that is eliminated, then yes, I think you stated that correctly. So, 630 that level for AOCI AFS is about 630.
Erika Najarian: Got it. So, my second question is for you, Chris. And I apologize if this sounds challenging, but this is sort of the big conversation that I’m having with long-term shareholders. Clearly, the stock price performance today is trying to price out some of the dividend fears that were in the market given where your yield is. And I think the big discussion I’m having with your investors is that, that 80% payout, right, that you mentioned and that happened for this quarter, it feels like three years ago sort of in the pandemic, you were getting the same question about the sustainability of your dividend. And it feels like at the end of the day, it’s really the denominator that has been challenged. So, whether it’s been expenses previously or steady having the balance sheet set up to have these received fixed rates that essentially imply a zero rate environment forever, it just feels like your efficiency ratio isn’t just quite right and doesn’t really reflect the potential of the business.
So, as you think about the next three years, how are you — what discussion are you going to have with your Board to have that earning — the potential of your franchise really be reflected in your earnings power? I mean the NIM is the NIM, and I get the swaps. But like I feel like that — gets wrapped up in the dividend conversation at the entire time, not necessarily because the dividend is an albatross, but it feels like that your earnings power is sensitive to vagaries of the macro?
Chris Gorman: Well, first of all, I appreciate the question. I agree with the premise of it. Our business — the challenging thing for us, and we just — I was with my Board last week and we were talking at length about this, our challenge is our business is performing well. We clearly are under-earning, and we’re under-earning based on how we have our balance sheet position. And that’s why I mentioned one of the things that gives me confidence, Erika, is when we get the normalized earnings power of the company, we just talked about investment banking fees, that’s driven by something else. But what we really need is the position that we have, which is liability sensitive at a time when you wouldn’t want to be liability sensitive, we need for that to burn off.
And the passage of time will do a lot on that. Unfortunately, it is the passage of time. But as I mentioned, the burn down between now and 12/31/2024, and 55%, this is as it relates to AOCI by 12/31/2025. So, that is the issue. And I think we are — said differently, we are under-earning right now and we will be over-earning as the position unwinds and rolls down.
Erika Najarian: Got it. Okay. Thank you.
Chris Gorman: Thank you.
Operator: And we’ll go next to the line of Gerard Cassidy with RBC.
Gerard Cassidy: Hey, Chris and Clark.
Chris Gorman: Good morning.
