Steven Alexopoulos: I want to start on the ability to generate positive operating leverage in 2024. On the expense side, Kevin, you said you plan to hold adjusted expenses pretty flat in 2024, so I’m hoping first you’d give a little color on that; and then I also want to talk about the revenue opportunity. At this juncture, do you see 2024 as an opportunity to show very modest operating leverage? Do you think it could be more substantial? Maybe we’ll start there.
Jamie Gregory: Yes Steve, let me kick this off. As we look longer term–well first, I’ll speak to our communication strategy for the fourth quarter. The next six weeks, we’ll be out with a couple different presentations. We have today’s, where we’re speaking to the third quarter and the fourth quarter, and then we’ll be presenting at [indiscernible] where we’ll give more of a strategic update, including some of the details of our expense initiatives, and then we have the Goldman Sachs conference in early December, where we will give more details of our financial outlook longer term. But when you look at where we are right now on expenses, so in the very near term, we expect expenses to be down in the fourth quarter versus the third quarter.
We had a range of 302 to 306 on adjusted expenses, and then as we said, we expect adjusted expenses to be relatively stable in 2024. Of course, we’re excluding the FDIC one-time assessment that we expect to come in the fourth quarter. We have a lot of different initiatives behind that flat expense guidance, and really what’s exciting to us a lot of it just improves how we go to market. Embedded in that expense outlook is still spending for growth to grow our core client base, so what you’ll see from us is you’ll see in our businesses that drive core relationship growth, you’ll still see spending to grow, so that’s embedded in that strategy and we’ll speak more to that in a couple weeks up in Boston. We feel good about that outlook, but when you think about positive operating leverage for the calendar year 2024, it’s challenging because the first half of 2023 had such strong revenue growth, that the exit run rate on revenue is just simply lower than it was at the entry to 2023.
But when you look at quarterly increases, and it goes back to Ebrahim’s question just a minute ago, the NII tailwinds, because of fixed rate re-pricing and where yields are today, is very powerful, and so while we may not have positive operating leverage for calendar year 2024, if you’re comparing quarter-on-quarter, year-over-year, it gets pretty powerful as you go through calendar year 2024. The issue is simply just looking at calendar year ’24 versus calendar year ’23.
Steven Alexopoulos: Got it, that’s helpful, then maybe just one other one. On the non-interest bearing deposits, they’re down fairly sharply again. Peers are seeing the pace of outflows abate fairly materially. How close are you to seeing [indiscernible]? When you talk about your expectation for NIM to stabilize in 1Q and then expand, what’s the underlying assumption of where non-interest bearing deposits are? Thanks.
Jamie Gregory: Our outlook for NIB to total remains the same as we said in July, and so we expect to end the year at around 25% non-interest bearing to total deposits. Embedded in that would be a decline in the fourth quarter somewhere around $400 million in NIB deposits. We do believe that that rate of decline will slow significantly as we look out into 2024, and again we’ll give more details on the longer term outlook in early December, but we do believe that that will slow and that’s due to both environmental impacts as well as strategic impacts with our businesses that we’re continuing to grow, like treasury and payment solutions.
Steven Alexopoulos: Okay, perfect. Thanks for taking my questions.
Kevin Blair: Thanks.
Operator: Your next question comes from Michael Rose from Raymond James. You may proceed.
Michael Rose: Hey, good morning guys. Thanks for taking my questions. Maybe just a broader step back question for you, Kevin. Obviously a lot has happened since the investor day earlier last year. Can you just give us an update on some of your initiatives, whether it be Maast or the commercial real estate initiative, and just broadly where you think you stand in some of those efforts, and maybe some of the areas that might require some additional kind of investment from here? Obviously the targets that you laid out back then, I think are going to be tough to achieve in this interest rate environment, but just wanted to get a sense for where you think you are and what the opportunities are as we move forward. Thanks.
Kevin Blair: Yes Michael, it’s a great question, and I think part of the answer is that with this sort of environment, where you’re seeing margin contraction, you’re seeing questions around credit, it kind of masks some of the success that we’ve had in some of the underlying initiatives, and that’s not just with our new initiatives, it also stands to talk about some of our core businesses that continue to see improvements in productivity, deepening of wallet share, things like that. But as it relates to our targets, I would just tell you, as we’ve said in the past, when we did that forecast for our three-year top quartile performance, obviously we did it under a different interest rate environment. Our goal is to continue to focus on generating top quartile performance, and those numbers may be different, but relatively speaking, outperforming that of our competitors.
But when it gets into some of the initiatives, something like a Maast, when we talk about our banking as a service platform, one of the things that we set out from the beginning was we wanted to prove a hypothesis that this was a solution that would be well received by independent software vendors and partners. As I said on the last call, I think we’re proving that hypothesis pretty clearly in that we’ve already on-boarded nine ISVs and payment partners onto the platform. Today, the spend off the payment facilitation portion of that is approaching $500 million, and we have an additional 45 partners in the pipeline evaluating the software and going through the contractual phase. Those 45 partners would represent about $13 billion in payment volume, so it shows that there’s a great deal of interest in the Maast solution.
The second part of that objective was ensuring that we had the right type of products to be able to fully offer the capabilities that the end users would desire. Today, we have payment facilitation and a banking suite of products that includes checking and a debit card, but we just announced this week we signed a strategic partnership with Fintainium, which will provide additional AP/AR capabilities to the end users, so as we entered this, we have just the minimum viable product and we’re expanding that into additional solutions. The third leg of the stool is we have to assess whether the utilization and the adoption by the end users will generate a great deal of revenue, and that’s the part of this equation that it’s still too early to tell, but based on the demand that we have from the software providers, we remain very optimistic as the viability of this solution, and we’re actually expanding it into a banking-only solution, where some folks actually don’t need the payment facilitation, they just want the banking services, and that’s about 40% of the pipeline we have today.
I think it’s also important to note, we’re not betting the bank on this initiative. We’ve spent about $9 million in expenses year-to-date, and so it’s a measured investment for us. CIB, corporate investment banking, we have about 27 FTEs, we’re up to 20 clients that we’ve been able to on-board. We have almost $500 million in outstandings and $3 million in revenue year-to-date from a capital markets standpoint, so that is progressing. We continue to get traction, and that’s just going to take time to continue to build, but it is exceeding our expectations from a P&L impact at this point. Again, we have spent about $8 million year-to-date, so we’re not betting the farm on any one of these initiatives, it’s really the combination of many.
