Gerard Cassidy: Yeah. And then specifically, it would be more in the C&I space or consumer? Or do you guys have a preference should they call that phone number, Rob?
Bill Demchak: It’s — look, we’re intelligent — hopefully, intelligent takers of risk at the right price.
Gerard Cassidy: Got it.
Bill Demchak: We can evaluate what’s out there.
Gerard Cassidy: Very good. All right. Thank you, gentlemen.
Bryan Gill: Next question, please.
Operator: [Operator Instructions] Our next question is from the line of Bill Carcache with Wolfe Research. Please go ahead.
Bill Carcache: Thanks. Good morning. Bill and Rob, I wanted to follow up on your office CRE comments. How much of an impact to debt service coverage are P&C customers experiencing from swaps that are rolling off, say in cases where they issued floating rate debt under SERP two to three years ago, and put on swaps to lock in low fixed rates at the time but are now facing a significant reset as those swaps mature? I’m just curious if how significant that maturing swap dynamic is inside of the portfolio and whether you feel like you have a good handle on that dynamic?
Bill Demchak: I don’t know the answer to that. I would tell you, though, the bulk of our stuff, and you see it in our maturity schedules, we’re kind of stabilization loans-ish project loans. And so in that instance, the hedge dynamics of somebody would put on that loan, in my experience, would be less than what they would have done on a term, 10-year CNBS alternative. So, my guess is it’s not — I think they’re just in trouble for floating rate loans from lease rates going down, from vacancies going up, and from the rehab costs of redoing floors for…
Rob Reilly: Capital improvements.
Bill Demchak: Yeah. Just dropping the value of the buildings.
Bill Carcache: Understood. That’s helpful. Thank you. And if I could follow up on that, if refinancing loans at current market rates would cause debt service coverage ratios to fall below 1, can you discuss how much leeway there is inside of P&C to refinance loans under potentially more favorable terms to allow debt service coverage ratios to remain satisfactory? And then maybe just more broadly across the industry, do you think so-called extend and pretend dynamics could become pervasive, particularly since banks have made it clear they don’t want to own office buildings and we’ve seen some commentary from regulators sort of urging banks to work with their customers?
Bill Demchak: I think the extend part is possible. I think the pretend part, that doesn’t work.
Rob Reilly: Not so good.
Bill Demchak: Yeah. We work with borrowers to figure out how to maximize the value of the property because that’s ultimately going to maximize the value of our loan. In some instances that means taking the building and selling it. In some instances that means getting more equity capital, extending a loan at a debt service coverage ratio we normally wouldn’t under the theory that they can lease it up itself. But each and every one of those decisions is a decision tree based on what’s the net present value of what we PNC can get against our loan. In any event, if we do something that is uneconomic relative to the original loan, that shows up in our reserves or charge-offs or so on and so forth. There’s no pretend involved.
Bill Carcache: Understood. That’s very helpful, Bill. Thank you. And if I could squeeze in one last one on the point about whether we’re at an inflection point on deposit betas sort of depending on the Fed. Does it [correlate that] (ph) suggest that we could see terminal beta expectations potentially drift higher relative to prior guidance, again, depending on how much higher for longer persists?
Bill Demchak: Yeah, I think. And by the way, this isn’t a forecast. I think it’s just common sense, right? To the extent that we still have a back book of business as does everybody that hasn’t necessarily repriced, and if rates are pinned at 5% forever in time, that beta will continue to go up. It’s a function of how high does the Fed go and how long do they stay there. And everybody’s been wrong so far. So, yeah, it’s a possibility.
Bill Carcache: Understood. I wanted to ask you another one about the CFPB sort of open banking proposal bill, but I’ll queue back up for that one. Thank you.
Operator: Our next question is from the line of Peter Troisi with Barclays. Please go ahead.
Peter Troisi: Hi. Thanks very much for the disclosure on the long-term debt shortfalls in the slides. You talked about $10 billion of debt issuance annually, but do you anticipate needing to issue more than $10 billion to close the shortfalls that you disclosed in the slides? Or can the $8 billion shortfall at the bank be met just by restructuring existing internal debt? And I guess the question really is, do you expect to issue debt at the holding company specifically to invest in the internal debt of the bank?
Rob Reilly: Yeah. This is Rob. So, good question. So, in regard to the long-term debt, our message is, independent of the rules, as we resume a more conventional funding structure in terms of our debt to our deposits that was pre-COVID, we would be compliant. So that’s the takeaway. In regard to how we get there, it’s a combination of everything that you outlined. There will be issuances at the holding company as part of our ongoing plan that will then ultimately be papered down to the bank, but there’s a lot of moving parts there. The message is we’ll get there and we would have gotten there independent of these rules.
Peter Troisi: Okay. Thank you.
Rob Reilly: Sure.
Operator: Our next question is a follow-up question from the line of Bill Carcache with Wolfe Research. Please go ahead.
