Truist Financial Corporation (NYSE:TFC) Q1 2024 Earnings Call Transcript

Truist Financial Corporation (NYSE:TFC) Q1 2024 Earnings Call Transcript April 22, 2024

Truist Financial Corporation beats earnings expectations. Reported EPS is $0.84, expectations were $0.8. TFC isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation First Quarter 2024 Earnings Conference Call. Currently all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, today’s event is being recorded. It is now my pleasure to introduce your host, Mr. Brad Milsaps.

Brad Milsaps: Thank you, Jamie, and good morning, everyone. Welcome to Truist’s first quarter 2024 earnings call. With us today are our Chairman and CEO, Bill Rogers; our CFO, Mike Maguire; and our Vice Chair and Chief Risk Officer, Clarke Starnes, as well as other members of Truist’s Senior Management team. During this morning’s call, they will discuss Truist’s first-quarter results, share their perspective on current business conditions, and provide an updated outlook for 2024. The accompanying presentation as well as our earnings release and supplemental financial information are available on the Truist Investor Relations website, ir.truist.com. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slides two and three of the presentation regarding these statements and measures, as well as the appendix for appropriate reconciliations to GAAP. With that, I will turn it over to Bill.

Bill Rogers: Thanks, and good morning, everyone. Thank you for joining our call today. So before we discuss our first quarter results, let’s begin as always with purpose. We see that on slide four. Truist is a purpose-driven company dedicated to inspire and building better lives and communities. And I’d like to share some of the ways we brought purpose to life last quarter. Our focus on small-business heroes is a great example of purpose-driving performance This strategy helps community heroes achieve their financial dreams and elevates their ability to support our neighbors and build strong communities. We’re seeing great success with small business, evidenced by the addition of nearly 8,600 small business accounts during the quarter and $700 million worth of deposits.

Our Truist Community capital team committed more than $252 million to support over 1,600 units of affordable housing, over 3,000 new jobs, and projects that will help empower almost 400,000 people in underserved communities over the next three years. Additionally, we announced the initial recipients of grants from the Truist Community Catalyst Initiative, which is a three-year Community Reinvestment Act program aimed at four key focus areas: Affordable housing, small business access to capital, workforce development, and essential community services. There are 17 community organizations receiving grants that will be used to support efforts in 54 communities across 13 states and allow local non-profit organizations to better respond to critical community needs within their states.

Lastly, we published our 2023 Corporate Responsibility and Sustainability report this month, which I encourage you to read and learn more about our progress in building better lives and communities. In all of these examples, our core belief is evident. We’re leaders in banking and we are unwavering in care. All right, so let’s turn to some of our key takeaways on slide six. First, I need to state and remind everyone that our first quarter and for the previous periods have been restated to reflect the pending sale of Truist Insurance Holdings. This change has no impact on our net income available to common shareholders. The restatement does remove TIH’s revenue and expense from our financial statements as net income from TIH has now been reported as net income from discontinued operation.

Mike is going to provide a lot more details around that later in the call. On an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.90 a share, which excludes a $0.04 per share impact from the industry-wide FDIC special assessment, and a $0.05 per share impact from the acceleration of incentive compensation at TIH due to the pending sale. Pre-tax restructuring charges of $70 million negatively impacted adjusted EPS by $0.04 per share. So despite a few discrete items in the quarter, we’re pleased with our underlying results. As you can see on the slide, our solid performance was defined by several key themes. First, we saw a significant increase in investment banking and trading revenue, driven by strong performance across much of our capital markets platform with particular strength in M&A and equity capital markets.

Loan demand continues to remain relatively muted, but we did see some improvement in our commercial lending pipelines during the quarter. On the consumer side, we recalibrated several of the capital-conserving strategies we deployed last year, prior to announcing the sale of TIH. This resulted in an increase in loan applications and in March, we saw the first increase in balance since October of 2022. Second, our results show our expense discipline and continued focus on managing cost. As a result of these efforts, adjusted expenses increased by less than 1% linked quarter and decreased by 4% on a year-over-year basis. Although, the linked-quarter rate of expense growth will increase in the second quarter relative to the first, we are fully committed to delivering our expense objectives in 2024, which excluding TIH should now result in adjusted expenses remaining approximately flat in 2024 versus 2023.

Our asset quality continues to normalize of historically low levels, but we’re pleased that non-performing loans remained relatively stable and the net charge-offs were within our expectations. Finally, during the quarter, we also announced that we’ll be sell — we’ll sell our remaining stake in Truist Insurance Holdings, which is on track to close in the second quarter. The sale of TIH will significantly strengthen our relative capital position, which will create substantial capacity for growth in our core banking businesses. In addition, as we discussed in February, our stronger capital position affords us an opportunity to evaluate a variety of capital deployment opportunities post-closing, including a potential balance sheet repositioning designed to at least replace TIH earnings.

The sale of TIH also positions us to resume share repurchases. The timing and size of repurchase activity will be — will depend on our ongoing capital planning, market conditions, clarity around final capital rules, and other factors. But our goal is to resume a program that’s both meaningful and durable. Before I hand the call over to Mike to discuss our financial performance in more detail, I want to provide a quick update on the progress we’re making and improving experiences for our clients, which we see on slide seven. We continue to show strong and steady growth in our digital capabilities. In the first quarter of 2024, mobile app users grew 8% and digital transactions increased 13%, compared to the first quarter of last year. Though activating teammates — through activating teammates to educate clients on our capabilities, transactions continue to shift towards self-service capabilities with 77% of the deposits occurring through these channels, primarily driven by strong growth in Zelle transactions.

Recently, we rolled out Zelle QR code widget, where users can quickly access their QR codes from their home screens to seamlessly assist with bank transfers. At Truist, we aim to make banking simple and easy for our clients through thoughtful enhancements to their experience. Enhanced offerings coupled with strong growth in digital have resulted in higher retail digital client satisfaction scores. These scores surpassed pre-merger highs as we continue to focus on accelerated adoption and efficiency using our T3 strategy. Overall, I’m proud of the continued momentum Truist is making in digital and optimistic about the opportunity to expand our digital user base and drive self-service transaction volume. So with Mike — with that Mike, let me turn it over to you to discuss our financial results in a little more detail.

Mike Maguire: Thank you, Bill, and good morning, everyone. As Bill mentioned, our financial statements for the first quarter and for previous periods have been restated due to the pending sale of Truist Insurance Holdings. This restatement has no impact on our net income or earnings per share for historical or current reporting periods. However, and as you can see on our financial tables, revenue and expense associated with TIH is no longer shown on our financial statements. TIH’s contribution to Truist net income and earnings per share is now captured in net income from discontinued operations. My comments today will focus on revenue and expense from continuing operations, although I will also provide some detail on revenue and expense for the quarter inclusive of TIH for comparative purposes.

We reported net income available from continuing operations of $1 billion or $0.76 per share, which includes a $75 million pre-tax or $0.04 per share after-tax expense related to the industry-wide FDIC special assessment. We reported net income available from discontinued operations, which represents earnings from TIH of $64 million or $0.05 per share, which includes an $89 million pre-tax or $0.05 per share negative impact from the acceleration of incentive compensation at TIH due to the pending sale. So on an adjusted basis, we reported net income available to common shareholders of $1.2 billion or $0.90 per share, which includes adjusted net income from continuing operations of $0.80 and adjusted net income from discontinued operations of $0.10.

In addition to the items I just noted, we also had pre-tax restructuring charges totaling $70 million in the quarter, which negatively impacted adjusted EPS to common shareholders by $0.04 per share. The bulk of these charges were related to severance and real-estate rationalization. Total revenue, which excludes revenue associated with TIH, decreased by 1.4% linked-quarter due to a decline in net interest income, partially offset by stronger non-interest income led by investment banking and trading. Revenue before the impact of discontinued operations accounting increased 0.2% on a linked quarter basis. Adjusted expenses, which excludes adjusted expense associated with TIH, increased by 0.7%. Adjusted expenses before the impact of discontinued operations accounting increased 1% on a linked quarter basis.

Next, I’ll cover loans and leases on slide nine. Average loans decreased 1.3% sequentially, reflecting overall weaker client demand and our decision to deemphasize certain lending activities during 2023, which impacted growth during the first quarter. Average commercial loans decreased to 0.9%, primarily due to a 1.2% decrease in C&I balances due mostly to lower client demand. In our consumer portfolio, average loans decreased 2%, primarily due to further reductions in indirect auto and mortgage. During the quarter, we did increase our appetite for high-quality indirect auto loans, which as Bill mentioned, resulted in consumer loan balances showing positive growth for the month of March. Overall, we expect average loan balances to decline modestly in the second quarter, albeit at a slower pace than the first quarter.

Moving to deposit trends on slide 10. Average deposits decreased 1.6% sequentially as growth in client time deposits and interest checking was more than offset by declines in non-interest-bearing brokered and money market balances. Approximately $1.9 billion of the $6.3 billion linked quarter decline in average deposits was due to lower brokered deposits. Adjusting for broker deposits, our average deposits declined approximately 1%. Non-interest bearing deposits decreased 4.9% and represented 28% of total deposits, compared to 29% in the fourth quarter of 2023. During the quarter, consumers continued to seek higher-rate alternatives, which drove an increase in deposit costs. Specifically, total deposit costs increased 11 basis points sequentially to 2.03%, which resulted in a 2% increase in our cumulative total deposit beta to 38%.

Similarly, interest-bearing deposit costs increased 11 basis points sequentially to 2.82%, which also resulted in a 2% increase in our cumulative total interest-bearing deposit beta of 53%. Moving to net interest income and net interest margin on slide 11. For the quarter, taxable equivalent net interest income decreased by 4.2% linked quarter, primarily due to higher rate paid on deposits, lower day count in the quarter, and lower average earning assets. Reported net interest margin declined 7 basis points on a linked quarter basis, due primarily to higher rate paid on deposits. Turning to non-interest income on slide 12. Non-interest income increased $83 million or 6.1% relative to the fourth quarter. The linked quarter increase was primarily attributable to higher investment banking and trading income, which was up $158 million linked quarter, due to strong results across much of our entire capital markets platform with specific strength in M&A and equity capital markets.

Lending-related fees decreased $57 million linked-quarter due to lower leasing-related gains. Non-interest income increased 1.8% on a like-quarter basis, as higher investment banking and trading, wealth, and other income were partially offset by lower service charges on deposit and mortgage banking income. Next, I’ll cover non-interest expense on slide 13. GAAP expenses of $3 billion decreased $6.6 billion linked quarter, as fourth quarter 2023 expenses were negatively impacted by a $6.1 billion goodwill impairment charge, a $507 million FDIC special assessment, and $155 million of restructuring charges primarily related to our cost-savings initiatives. Excluding these items and the impact of intangible amortization, adjusted non-interest expense increased 0.7% sequentially.

The increase in adjusted expense was driven by higher personnel expense of $156 million due to normal seasonal factors and higher variable incentive compensation, partially offsetting the increase in personnel expense were lower other expenses, which declined $82 million, reflecting lower operating charge-offs and lower pension expense. Adjusted non-interest expenses before the impact of discontinued operations, accounting — discontinued operations accounting increased 1% on a linked quarter basis. On a like quarter basis, adjusted expenses declined $120 million or 4.2%, reflecting lower headcount and continued expense discipline. Moving to asset quality on slide 14. Asset quality metrics continue to normalize in the first quarter, but overall remained manageable.

Non-performing loans remained relatively stable to linked-quarter, while total delinquencies were down 6 basis points sequentially, driven by a 7 basis point decline in loans 30 to 89 days past due. Included in our appendix is updated data on our office portfolio, which is virtually unchanged at 1.7% of total loans. However, we did increase our reserve on this portfolio from 8.5% to 9.3% during the quarter to reflect continued stress in this sector. We expect stress to remain in the office sector, but believe that the size of our office portfolio is manageable and well reserved. Approximately 5.5% of our office portfolio is currently classified as non-performing, but 89% of these loan balances are paying in accordance with the original terms of the loan.

During the quarter, our net charge-offs increased 7 basis points to 64 basis points. The increase in net charge-offs for the quarter reflects increases in our CRE and consumer portfolios, offset by lower C&I and CRE construction losses. Our ALLL ratio increased to 1.56%, up 2 basis points sequentially, and 19 basis points on a year-over-year basis due to ongoing credit normalization and stress in the office sector. Consistent with our commentary last quarter, we’ve tightened our risk appetite in select areas that we maintain our through-the-cycle supportive approach for high-quality long-term clients. Turning now to capital on slide 15. Truist’s CET1 ratio remained relatively stable on a linked-quarter basis at 10.1%, as organic capital generation and the impact of lower risk-weighted assets were mostly offset by the impact of the CECL phase-in that occurred during the quarter.

We still anticipate the sale of TIH will generate approximately 230 basis points of CET1 under current rules and 255 basis points of CET1 capital under proposed Basel III endgame rules. It will also increase our tangible book value per share by 33% through a combination of a $4.8 billion after-tax gain and the deconsolidation of $4.7 billion of goodwill and intangibles from our balance sheet. The divestiture of TIH has a 255 basis point positive impact under the fully proposed phase-in Basel III endgame rules, which is 25 basis points higher than under current rules. The larger impact on our CET1 ratio under the proposed rules is due to the reduction in certain threshold deductions due to the overall higher level of capital from selling TIH.

The sale of TIH accelerates our ability to meet increasing standards for capital and liquidity in the industry. And importantly, creates capacity for Truist to evaluate a wide variety of capital deployment alternatives, including growing our core banking franchise during a time when much of the industry is conserving capital, repositioning our balance sheet, and resuming share repurchases. As it relates to a possible repositioning, recognizing securities losses under proposed Basel III rules would have no impact on our fully phased-in CET1 ratio since current proposed rules include AOCI in the calculation. Moreover, any decision to sell market value securities has no impact on our tangible book value per share. I will now review our updated guidance on slide 16.

First, all of my comments today related to second quarter and full-year 2024 guidance exclude any benefit from interest income that Truist will earn on the $10.1 billion of after-tax cash proceeds that we expect to receive from the pending sale of TIH. Our guidance also excludes any impact from a potential balance sheet repositioning that we plan to evaluate post-closing. In addition, revenue and expense guidance for the second quarter and full year 2024 is based on revenue and expense from continuing operations and does not include any contribution from TIH in previous or in future periods. Looking into the second quarter of 2024, we expect revenue to decline about 2% from 1Q ’24 GAAP revenue of $4.9 billion. Net interest income is likely to be down 2% to 3% in the second quarter due to continued pressure on rate paid and a smaller balance sheet.

We expect non-interest income to remain relatively stable on a linked-quarter basis. Adjusted expenses of $2.7 billion in the first quarter are expected to increase 4% in Q2, due to higher professional fees, some timing of projects delayed from Q1, higher marketing costs, and annual merit increases. For the full-year 2024, we previously expected revenues to be down 1% to 3%, which would have included revenue from Truist Insurance Holdings. If we had excluded revenue from Truist Insurance Holdings from our outlook, our expectation would have been closer to down 3% to down 5% in 2024. Today, we are tightening our previous revenue guidance adjusted for TIH of down approximately 3% to down 5% to now down approximately 4% to 5% to reflect the latest interest-rate outlook and continued pressure on the deposit mix, partially offset by our improved outlook for non-interest income.

Our outlook assumes three reductions in the Fed Funds rate with the first reduction coming in June 2024. Previously, we assumed five reductions in the Fed Funds rate with the first reduction occurring in May 2024. We still assume that net interest income will trough in the second quarter of 2024 and modestly improve in the second-half of the year. Fewer than three rate reductions would add pressure to our NII outlook and result in our annual revenue coming in at the lower end of our range for revenue to be down 4% to 5%. As a reminder, our second quarter and full-year revenue outlook excludes any benefit from interest income earned on the cash proceeds from the sale of TIH or the benefit of potential balance sheet repositioning. As Bill mentioned, we still expect the sale of TIH to be completed during the second quarter.

We previously expected our expenses to remain flat or to increase by 1% in 2024, which included expenses associated with Truist Insurance Holdings. If we had excluded expected expenses from Truist Insurance Holdings from our outlook, our expectation would equate to expenses remaining approximately flat in 2024. Consistent with our previous expense outlook adjusted for TIH, we expect full-year ‘24 adjusted expenses to remain approximately flat over 2023 adjusted expenses of $11.4 billion. In terms of asset quality, we continue to expect net charge-offs of about 65 basis points in 2024. Finally, we expect our effective tax rate to approximate 16% or 19% on a taxable equivalent basis. Our estimated tax rate excludes any impact from the gain on the sale of TIH or a potential balance sheet repositioning that we might consider following the sale.

So now I’ll turn it back to Bill for some final remarks.

Bill Rogers: Great. Thanks, Mike. I am proud of the results our teammates delivered during the first quarter, which included solid underlying earnings, improved momentum, and the announced sale of Truist Insurance Holdings. As Mike mentioned, TIH will enter its partnership with its new investors with strong momentum as evidenced by its first quarter results. Providing risk advice to our clients is core to our purpose, we look forward to maintaining a strong partnership with that team into the future. We have great confidence in our capability to grow our core banking business and help our clients achieve financial success by delivering our commercial, consumer, payments, investment banking, and wealth platform throughout existing footprint, and specialty areas.

Our top priorities for 2024 are unchanged and include growing and deepening relationships with core clients, maintaining our expense discipline, evaluating various capital deployment options following the sale of TIH, and enhancing Truist’s digital experience through T3, all while maintaining and strengthening strong risk controls and asset quality metrics. Our expense discipline is showing up in our results, which gives us confidence that we’ll meet our expense objectives this year. I’m also encouraged by the improvement in our wholesale banking business, which includes investment banking and trading as it was a key driver of our quarterly results. In investment banking, we’ve increased our market share across several capital market products due to significant investment in talent and industry verticals.

These investments have resulted in significant increase in the number of lead roles across several products, including equity capital markets, leveraged finance, asset securitization, and M&A. In addition, our mind share with clients in our key industry verticals has never been stronger and we continue to expand into new verticals that are primed for growth as capital markets activities recover. We are seeing solid year-over-year growth in referral revenue from commercial banking as we continue to deliver value-added advice and capabilities to our clients. Our commercial teammates have responded to new expectations and we continue to add great talent to our comprehensive platform. And finally, we made new key leadership hires within our payments business during the quarter as this is an area where we see significant opportunity for growth over time.

In consumer, I’m encouraged that our internal consumer satisfaction scores have returned to pre-merger levels. In addition, net new checking account production was positive in the first quarter as we added 30,000 new consumer and business accounts. Importantly, we’re also seeing year-over-year improvement in account attrition rates. Also during the first quarter, our digital channel, we acquired 172,000 accounts, including 63,000 new to Truist, while also seeing a 14% increase in deposit balances over the fourth quarter of 2023. While the branch network represents opportunity for further efficiency in certain markets, we continue to see improvements in productivity due to teammate execution and investments in technology. We’re encouraged by this increased productivity, we’ll look to make investments in branches and select key growth markets in 2025.

Overall, loan demand does remain muted, but I’m encouraged by the improvement in our commercial loan pipelines and the growth we witnessed in consumer balances late in the first quarter. By selling TIH, we’ll have capital capacity to play more offense in our consumer and wholesale businesses, which includes seeking ways to accelerate loan growth in our core franchise. In addition, our significantly stronger balance sheet will be positioned to weather an even wider range of economic environments, while also giving us the unique ability to evaluate a variety of capital deployment opportunities post-closing, including a potential balance sheet repositioning and resuming meaningful share repurchases later in the year. Although we have a plan to replace TIH earnings in the near-term, we recognize that our increased level of capital will result in near-term dilution to our return on average tangible common equity ratio.

Our starting point for ROTCE following the sale of TIH will be exactly that, a starting point. The strength of our markets, our core banking franchise, our capital deployment options we can consider after the sale will result in improved returns over time. We’ll move with pace, but we’ll not be in a rush to deploy capital to meet short-term expectations that don’t have a long-term positive impact on our company, our clients, our shareholders, especially since Basel III capital rules have not been firmly established for the industry. So in conclusion, we’re off to a solid start in 2024, but we acknowledge, as always, there’s more work to do as we strive to produce better results in the future. We view our first quarter performance as another step forward in that direction.

I’m optimistic about our future, I look forward to operating our company from this increased position of financial strength in some of the best markets in the country. And finally, I’d like to thank all of our teammates and our leaders for their incredible purposeful focus and productivity, particularly over the last few months during this important time for both TIH and for Truist. So with that Brad, let me hand it back over to you for Q&A.

Brad Milsaps: Thank you, Bill. Jamie, at this time will you please explain how our listeners can participate in the Q&A session. As you do that, I’d like to ask the participants to please limit yourselves to one primary question and one follow-up, in order that we may accommodate as many of you as possible today on the call.

Operator: [Operator Instructions] And our first question today comes from John McDonald from Autonomous Research. Please go ahead with your question.

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Q&A Session

John McDonald: Great. Thank you. Good morning. How the rate environment changes at all — if at all, the ability and willingness to deploy through the restructuring of the securities book. Mike, maybe you could just comment higher rates, presumably achieving that neutral impact gets a little bit easier. Does that affect how much you might do? And maybe Bill could just make some broader comments about the options you’ll have to deploy organically and buybacks and other things? Thank you.

Mike Maguire: Yes. Thanks, John, for the question. Look, I mean — we’re certainly taking a look at the market rate environment and I’d say just the framework that we shared back in February, we remain committed to, right? And, so we laid out a set of objectives that spanned maintaining a relative capital position, at least replacing the earnings from TIH, we also have ambitions around advancing our liquidity and ALM position. So the rate environment and we talked about that in February is a touch different than what we’re looking at today, but we think still, you know, actionable and so we — our plans to evaluate repositioning after we complete the sale are still intact. I mean, if you look at the short-end of the curve, certainly, we see probably a little bit of benefit relative to what we talked about from a cash reinvestment perspective, and the same goes if you think about reinvestment rates on the bonds, but on the other hand, you do have the trade-off of a slightly higher realized loss in that instance.

Bill Rogers: I’ll go into the others, and as you said, John, I mean, we’re in a different rate environment, so we’ll evaluate all the other alternatives that exist with that, and there’s some things that have some shorter paybacks that I think should be evaluated in that alternative. And then also we have some tax efficiency as it relates to this. So we have some unique components of doing this in line with the TIH sale. And then you mentioned sort of what are the other capital deployment options? You know obviously, the first and foremost for us is growth in our business. I mean sort of investing in our business. You saw in this quarter some of the things we did on the consumer side where we leaned in a little bit. Quite frankly, we think some of the margins are still strong in those businesses.

So that, what we’re adding is a little more accretive than it would have been in the past. The risk profile has been strong. So we have the capacity to dial some of that up on the consumer side. And then on the wholesale side, just our relevance is more important. So what we’re — we don’t want to give up all the discipline. We created a lot of discipline around pricing and around structure and again, what we’re adding today is much more accretive. So we’ll continue to pursue opportunities in our markets and through our industry verticals and we’ve got good momentum in that front. And then lastly, on the share repurchase side, we’re going to–we’ll be back in the share repurchase business, that will be part of the portfolio. As I mentioned before, we’re going to do all this with pace.

So I think it would be — you know, reasonable to assume we’ll have some type of meaningful share repurchase sort of — sort of short, medium-term, and then longer-term, and just a more durable consistent share repurchase plan. So it’s a combination of all those things factored into the equation, which give us, as I said before a lot of optimism about being able to improve those returns short-term, importantly, but most importantly over the long-term.

John McDonald: That’s really helpful, thanks. And maybe as a quick follow-up, we saw a really strong investment banking results this quarter. How much of that is good environment versus payback on some of the investments you’ve made in that business, and maybe just comment on what’s packed in your outlook for the second quarter there, Mike? Thanks.

Mike Maguire: Yes. I mean, a lot of it obviously is from market improvement, but as you noted, I mean, we’ve been investing in this business for quite some time, particularly over the last several years. You know, our existing team has really set horizon to the challenge. They’re working really great with the commercial team. So we’re seeing all the pull-through from our franchise, we’ve brought 30 plus new MDs into our — into our business. So these are teammates with great expertise and great access. So I think it’s a combination of all those things and we’re really confident. I mean, we’re confident heading into the second quarter and the rest of the year about the momentum in this business.

John McDonald: Thanks.

Operator: Our next question comes from Betsy Graseck from Morgan Stanley. Please go ahead with your question.

Betsy Graseck: Hi, good morning.

Mike Maguire: Hi.

Bill Rogers: Betsy, good morning, and welcome back.

Betsy Graseck: Thanks so much.

Bill Rogers: Great. Great to hear your voice.

Betsy Graseck: Thanks so much, Bill. I really appreciate it. So I did just want to lean in on the loan side, a couple of comments in the prepared remarks that you made. One was on commercial lending pipelines building and I wanted to understand, is this a change? And I mean, we often hear about pipelines in the investment banking side, not as much on the commercial lending side. And I wanted to understand your thoughts around what execution on that requires, is it lower rates, is it customers building more inventory, or just some color on that would be really helpful? Thank you.