Scott Siefers: And then I guess just on the notion of deposit pricing, it sounds like you’re expecting deposit cost to ease right around the time the Fed starts cutting. What’s your sense for the sort of the pace of deposit betas on the way down vis-a-vis what they were on the way up?
Rob Reilly: Well, I would say on the commercial and the high net worth side fast, and then we talked about on the consumer, sort of the core consumer, we could — and this is what Bill was alluding to there earlier, we could continue to see some drift up in rate paid even though we get some cuts. So that’s a big variable, obviously, and we’ll have to play it out.
Operator: Our next question comes from Manan Gosalia with Morgan Stanley.
Manan Gosalia: Thanks for outlining the macro assumptions behind the outlook, and I appreciate your comments on loan growth being more back end loaded. But can you give us some more color on how you’re thinking about it? Because you also mentioned a mild recession midyear. So is it really a big uptick in CNI, maybe like 4Q as rates begin to come down and as we come out of that mild recession? So I was hoping you could give us some more color on both commercial and consumer there.
Rob Reilly: So I would just say just to follow up on that. So yes, back half of the year. On the commercial side, we see the uptick in the third and the fourth quarter. A big part of that being expected increase in utilization, which is a little bit lower right now and then just some pickup in general economic activity, not a lot, 3% to 4% spot to average up 1%. And then on the consumer, just sort of slow, steady growth, nothing big there, maybe a little bit more in card and auto and a little bit less in resi.
Manan Gosalia: And then just on the credit side, last quarter you had some CRE loans move from criticized into NPLs. And it looks like things have been pretty steady this quarter on both criticized and NPLs. So do you think at this stage you guys have scrubbed the books and it should remain steady over the next few quarters with just NCOs ticking up or is it likely to be lumpy? The question is more, given the new outlook for rates to come down, do you think the worst is behind us?
Bill Demchak: Well, not on charge-offs. We think we’re reserved correctly. But you have to remember that as these loans go to NPL and eventually if we have charges against them, we’ll charge them off. It won’t run through P&L because we’ve already created a reserve for it, but the work set on actually maturing the loans and dealing with the outcome is yet to come.
Rob Reilly: And I would just add to that the key number to look at there is the criticized percentage, which has not changed much. To Bill’s point, that’s the first bucket. The the movement of that to nonperforming or charge-offs will occur, but it’s that criticized number that’s the key number.
Operator: [Operator Instructions] Our next question comes from Gerard Cassidy with RBC.
Gerard Cassidy: Can you guys share with us — you talked, Rob, about the commercial loan growth in the quarter when you ex out the Signature purchase was down slightly. I know you have prospects for growth here in 2024, as you pointed out. But can you share with us, do you guys see much competition from the private credit market, the private equity guys that have been much more aggressive recently in lending? And second, on part of that, you have them as customers as well, so do you have to balance them as competitors as well as customers?
Bill Demchak: We don’t compete with them head-to-head with the types of loans that are typically — and because we don’t play that that much in the unsecured leverage space. Most of the decline at Signature we saw was in utilization. As we go forward, more and more of the lending markets are moving into private hands and longer term that is of a concern if they kind of move up scale in what they do. We do serve them. I would say that our client base, just call it, private equity or private managers at large, they’re probably our largest clients between what we do with and for them from Harris Williams and Solebury and business credit and treasury management with their portfolio companies and on and on and on. So they are good clients. And I guess, at the margin, we could end up competing with them in certain things.
Rob Reilly: But not so much today.
Bill Demchak: Yes.
Gerard Cassidy: And then, Rob, the follow-up with your comments and you gave us the Visa ownership and the unrealized gain. If I recall correctly, I think first quarter of ’24 the owners of those shares are permitted to monetize that. Can you give us your updated thoughts on what you guys are thinking with your position in Visa?
Rob Reilly: So our position is, we have $1.5 billion in unrealized gains, 3.5 million b-shares. As you pointed out, there’s a vote by the Visa shareholders at the end of this month to approve an action to enable the b-holders to monetize maybe up to 50%. So we don’t control that. We see when the vote is scheduled, should it be approved, then we’ll move forward with our monetization plans that would be allowed under whatever is approved.
Operator: Our next question comes from Bill Carcache with Wolfe Research.
Bill Carcache: Following up on credit, if we play out what the soft landing scenario could look like and the Fed starts cutting rates in mid-24, would you expect to be in a position to possibly start releasing reserves? Or are there sort of likely to still be late cycle concerns that would lead you to want to maintain the reserve levels that you’ve already established?
