Our goal is to get back to those medium to long-term targets we put out a couple of years ago.
Saul Martinez: Okay. Thank you.
Brian Wenzel: Thank you. Have a good day.
Operator: Thank you. We’ll take our next question from Don Fandetti with Wells Fargo. Please go ahead.
Donald Fandetti: Yes. Good morning. Your capital position is still pretty strong. I was just curious if you thought the CFPB changes could lead to some portfolio movements over the next year or two. And do you see any more opportunistic deals like Ally?
Brian Doubles: Yeah. Look, we’re always on the lookout for potential acquisitions or new programs. Ally fit our business model perfectly. It’s exactly the type of acquisition that we look for. It’s in industries that we know really well, we understand the products, a great cultural fit, like, it just — it checked all the boxes. So we do — we have excess capital today. We generate a lot of capital over the calendar year. And if we have the opportunity to do something opportunistic, we certainly have the financial resources to do it.
Brian Wenzel: Yeah. The only thing I’d add on to that, just to dimensionalize it for you, if you look at Page 12 of our earnings deck, we showed that the earnings power of this business does generate that capital. And you look year-over-year, last 12 months we generated 2.5% CET1 just from the net earnings of the business. So really positive effects that you can look at and lean into. Plus you have the excess capital that weighs between there and our target level CET1.
Brian Doubles: Yeah. The only other point I’d make on this is, we are very disciplined when it comes to accretive acquisitions that have a really good strategic fit. I mean, I think you’ve seen that discipline over the years. We haven’t done really large scale M&A. We’ve been very thoughtful about finding things that are relatively modest from a capital outlay perspective but are businesses that we can grow really well. That’s a great example of that, a perfect example of that, Allegro, I think Ally is going to be a home run for us. So we are very disciplined in terms of what we look for.
Donald Fandetti: Thank you.
Brian Doubles: Thanks, Don.
Operator: Thank you. We’ll take our next question from Rick Shane with J.P. Morgan. Please go ahead.
Rick Shane: Hi, guys. Two questions this morning. First, on the CFPB, one of the consequences that the industry has raised in terms of the rule change is the loss of deterrence, which suggests that DQs will be higher. I’m curious, if you guys have had discussions with your accountants related to how you will tweak reserve policies if you have higher delinquencies, but potentially assume lower pull-throughs.
Brian Wenzel: Yeah, Rick. Thanks for the question. Look, most certainly, we’ve had internal conversations about the effects of deterrence and it’s really going to be how we model any potential change in delinquency. And again, what you’re looking at here are individuals who are making a choice not to pay, those who lost their job or had a health event and roll into delinquency. You’re not going to rehabilitate and then this wasn’t a deterrent for them, they either roll to loss or roll to settlement, etc. This is people who made an active decision to prioritize one payment over another payment. We would have to model that out and then most certainly get our accountants comfortable with how that is. But again, we’ll have to see, because no one really did a lot of test and control at this level of deterrence. Most certainly, there’s things done back in the CARD Act that’s demonstrated deterrence, but we’ll have to see how it plays out, Rick.
Rick Shane: Got it. Thank you. And then, in terms of the concept of charge-off peak in the middle of the year, seasonality works in your favor really steadily over the next six months and then starts to reverse in the fourth quarter. When you’re talking about a peak, are you suggesting that as we move into the fourth quarter, charge-offs will continue to decline or that they will normally seasonally rebound, but perhaps not quite as much as they have in the past?
Brian Wenzel: Yeah. Thanks for the question again, Rick. We haven’t given quarterly guidance. Again, I’m just going to give you the framework. We applied seasonal patterns to how the loss rate works. Again, we believe we’re more normalized and back to the pre-pandemic levels. And I think as you begin to see, you will see again, in April, dollar declines in 30 plus and 90 plus, which have a flow-through effect both on the third quarter and the fourth quarter as they kind of come through. So we’re not going to get into specific quarter guidance now, but again, the rates in the first half of the year will be higher than the rates in the second half of the year.
Rick Shane: Got it. Brian, thank you very much.
Brian Wenzel: Thanks, Rick. Have a good day.
Operator: Thank you. We’ll take our next question from Brian Foran with Autonomous Research. Please go ahead.
Brian Foran: Hi. I was wondering if you could just speak to your annual internal stress testing process, and it’s a little screwy, I guess, in this two-year window because you’ve got the late fee folding in, but then you would arguably hit the business with peak losses. Does that become a constraint at all for capital considerations, or do you feel like you have enough excess capital and enough line of sight to this ROA neutrality that you can kind of look through that, maybe a temporarily elevated stress test result?
