Ron O’Hanley: Mike, it’s a good question and one we think about all the time. So part of way we’ve attracted more money market funds going back to one of my prior answers is we just have a broader client base, and that helps. We’ve gained market share, not just in terms of assets, but we’ve just attracted more clients. And once you have them, whether the balances go up or down, typically you have them. I think historically, what’s happened in terms — and you’ve got to look back in history now, because we haven’t had this kind of a marketplace. But the really sophisticated holders of institutional money market funds tend to hang on, because the fund itself, depending on its duration, and there is a little bit of duration in it, actually lags.
So it’s usually the opposite — when rates are rising, the very sophisticated holders are toggling in and out depending on whether they see opportunities to go direct. Just given the nature of our client base, we don’t see a lot of that activity. So we expect to keep them and it really will be around where do their balances go and do they need it for some other reasons, or do they see more attractive investment opportunities. I would expect that we would see, if indeed, we see a continued risk on environment that itself will cause a little bit of reallocation of institutional money market funds, because saying that everybody — what everybody is talking about that there’s so much parked on the sidelines while a lot of it is parked here. But I would go back to where I began the answer, which is it really is about establishing more client relationships, servicing them very well and then continue to grow the number of clients based on that track record.
Mike Brown: The $5 billion share buyback authorization that certainly was a big number. Eric, as you just alluded to in the last question, there’s a lot of puts and takes to consider on the capital front in 2024 and into 2025. I guess my question is really just why come with such a large authorization? You’re targeting 100% payout ratio. So this would seem to me that you certainly would not need all of that in 2024. is this just a desire to have kind of a big authorization in place for a multiyear horizon or just to have more flexibility over time, just love to hear a little bit more about that?
Eric Aboaf: The background here is that the industry has evolved, I would say, pre-CCAR, which is a long time ago, there used to be open ended authorizations in the banking sector. Once we got into CCAR, remember, there was a very defined annual amount of buybacks that you had to submit. In fact, you had to submit the first year and the second year and there was a lot of — making sure that what you submitted within the Fed CCAR process was actually what you did, because wanted to keep consistency with that. And so the industry moved towards quite a bit of disclosure on a one year basis as a result. And if you recall, a lot of those one year disclosures happened right after CCAR was announced at the — either at the end of June or in the second quarter earnings in July.
What we’ve seen as we’ve scanned at least the banking, our peer banks, the G-SIBs, the large US regionals is now that CCAR is — it’s still an annual process, but it’s really with the SCB and some of the refinements to it, it’s really an ongoing process. And what we’ve realized is that I’d say more than three quarters of our peers, you probably know, have actually moved to open ended programs over the last year, year and a half. And so we just wanted to conform to that. As a result, this one is multiyear, it’s open ended and we’ll take it from there.
Operator: Your next question comes from Mike Mayo with Wells Fargo Securities.
Mike Mayo: Well, no good deed goes unpunished $5 billion buyback to that last question. But are you assuming that Basel III gets modified? And if Basel III didn’t exist, how much higher would that $5 billion number be? And at what price do you say buybacks don’t make so much sense anymore?
Ron O’Hanley: Mike, maybe I’ll start on the Basel III. I think where Basel III comes out is very uncertain at this point. The comment period ended January 16th. I don’t know how many millions of pages were submitted, but there’s a lot to be evaluated there. And you all know the various pressure and response that the regulators are getting on this. So it’s very hard to tell. I don’t know that we would have changed the authorization if we had perfect clarity on where it was coming out, it was a factor, but it’s not like we have — we think it’s absolutely going to be this and therefore. So I hope that helps.
Mike Mayo: So where your base case, what is the RWA inflation, the most recent updates, we’ve gotten a few changes here during earnings season due to Basel III?
Eric Aboaf: Mike, let me describe it this way. The headline that we’ve previously disclosed for the ANPR as it’s written is Basel RWA increase for us at about 15%. So that’s what we’ve shared. I think what we said at the time and we actually believe even more so now is that it will come in at a portion of that. There’s been lots of discussion around, for example, energy tax credits, some of the arcane parts of Basel and how that impacts public policy mortgages, which were not really affected on. There’s much more discussion about operational risk literally over the last few months and that would make us quite optimistic that the increases would be relatively small. So we’ve not updated it because it’s just there’s a menu out there, but we’re encouraged.
We think the regulators are trying to navigate public policy on one hand and the right level of capital in the banking system. But we think that the direction of the discussions, in particular, over the last few months are constructive.
Operator: Your next question comes from Brian Bedell with Deutsche Bank.
Brian Bedell: Most of the questions have been asked and answered. Just one quick one on securities portfolio repositioning. I guess, Eric, what’s the desire to potentially do more of those and potentially take losses and look at the sort of the capital usage for doing that and enhancing NII and NIM more versus share buybacks?
