Nate Stein: Thank you.
Operator: Our next question is from the line of Scott Siefers with Piper Sandler. Please go ahead.
Scott Siefers: Good morning, everyone. Thanks for taking the call.
Rob Reilly: Hey, Scott.
Scott Siefers: I wanted to ask sort of a broad question — hey, kind of a broad question on NII. Are we getting to a point where that will start to trough? So, maybe Rob, just sort of some of the puts and takes. It seems like your deposit betas are coming in as expected or better. I know there should be some asset repricing as we look into next year, but some of the larger banks have been sort of vocal about the degree to which they’re still over earning on NII, which I think is kind of kept these fears of still bleeding out NII alive sort of industry-wide. Maybe just some thoughts on how you see things playing out for PNC in particular.
Bill Demchak: I’ll start.
Rob Reilly: Okay.
Bill Demchak: All of it ends up being dependent on what you think the Fed is going to do. Personally, I think the Fed is higher for longer, even higher for longer than the market expects. In our official forecast, I guess we have two cuts towards the back half of next year. As short rates stay higher, you will continue to see betas creep up, both because we’re going to reprice the back book and secondly because you’ll just not on betas but just on the shift from noninterest-bearing to interest-bearing. So, when that inflection point is — has in some ways to do the most with what’s going on with the yield curve in the Fed, as the curve continues to flatten by the long-end selling off, all else equal, that helps, notwithstanding the marks on our existing bonds, it helps with the price we get on the roll down and reinvestment.
There’s too many variables in there, but the basic notion that we’re — at the inflection point, I think, is entirely dependent on what happens with the Fed in the coming year. And we haven’t done our budget yet, so we’re not going to call it.
Rob Reilly: Yeah. I would just add to that, just observations. Deposits continue to decline. We expected that, but that decline is slowing. Betas have gone up, but the increase has slowed. In fact, in the third quarter, the actuals came in lower than what we expected for the first time since rates have been increasing rapidly. So things have slowed as far as that trajectory is, and then obviously the inflection point issues that Bill just covered are valid.
Scott Siefers: Okay. Perfect. Thank you. And then maybe a question on credit as well. I guess just in the last few weeks, there’s been a couple commercial hiccups in the industry in the shared national credit space. Just was hoping you might be able to remind us about PNC’s exposure in this next space, and then just generalization sort of how that portfolio quality compares to the rest of the book, how much you lead, et cetera?
Rob Reilly: Yeah, pretty good there, Scott, in terms of credit. So, all of the noise, so to speak, is in the commercial real estate office space that we spoke about. As far as the shared national credit results went, they’re complete. They’re represented in our numbers. And it was pretty benign in terms of total deals. Upgrades were more than downgrades, but they were a handful of each.
Scott Siefers: All right. Thank you very much.
Rob Reilly: Sure.
Operator: Our next question is from the line of Gerard Cassidy with RBC. Please go ahead.
Gerard Cassidy: You guys gave us good color on the burn-off of the securities portfolio. And the question I had is, it looked like this quarter you put more up at the Fed. So, what are you guys doing with the cash flows from the portfolio now in terms of where you’re putting it in other securities? And then, second, once the Basel III Endgame is finalized, how do you think you guys will approach in carrying your securities? Will you carry less than available for sale or more? Can you share with us your thoughts there as well?
Bill Demchak: I guess just with the existing book, it’s running down. We’ve run down the DV01 in our securities and swaps through the course of the entire year. We’ve had some purchases, but not to the extent we’ve had maturities. And we’ve been buying, I don’t know what average yield is, but stuff that roughly carries flat versus leaving it in the Fed. Going forward, the switch from available for sale to held to maturity doesn’t really affect anything. It’s an accounting entry. So, we’ll keep some amount unavailable for sale to the extent we trade around that book, but we don’t trade around that book all that much, and the rest will just buy into held to maturity, which is, by the way, what we’ve been doing thus far since rates have gone up.
Rob Reilly: There’s a couple things to add there. One of the uses of cash, Gerard, was the purchase of the Signature loans. So that was our biggest…
Bill Demchak: Yeah, that was biggest…
Rob Reilly: Yeah, that was our biggest outlay. And then on the [split] (ph). Bill has it right. Where we are now is probably about where we are plus or minus to your views in terms of what — but where we got to holding it all to 100% of AFS was the tailoring, which has passed us. So, we’re back to sort of the normal [split] (ph).
Gerard Cassidy: Very good. And then as a follow-up, you just mentioned about the purchase of the Signature loans. You guys are in a good position that you’re not being impacted by Basel III Endgame, RWA, inflation like some of the big money centers, of course. Do you think there’s going to be opportunities for you guys to buy other portfolios, not from the FDIC per se, but from some of your peers or banks that do mitigation strategies to get to these RWA targets they need to get to?
Bill Demchak: Yeah, I suppose there could be. I don’t know that we’ve actually seen any. We get pitched by everybody to execute one, which we have no need for.
Rob Reilly: Right.
Bill Demchak: But the purchase side of that is actually pretty attractive. They’re giving away a lot of economics. So, it’s actually a good thought. I’ll go look around.
Rob Reilly: No, we have the capital flexibility to do it, and people know our telephone number.
