Operator: And next, we’ll go to Erika Najarian with UBS. Please go ahead.
Erika Najarian: Andy, my first question is for you. Specifically yesterday’s announcement is a big win for the Company. And as we think about combining that relief with a generally tighter regulatory environment, what CET1 are you looking at — and what level are you looking at in terms of, okay, now I’m at the right level, this is now my target in the new world. And now in an environment where balance sheet growth is minimal at best, right, I can now return capital back to shareholders through buybacks. I guess I’m just wondering because there’s printed — your GAAP CET1, there’s the adjusted that John gave, right? But then you only have to take into account 25% of that 250 by July 1, 2025, if we get to a final date by then.
So, there’s a lot of moving pieces. So as your investors think about all the parts that you’ve made plus this relief, what is your new target? Is that transitional or fully phased in? And what’s the bogey that investors could look forward to that you would hit before returning capital through buybacks?
Andy Cecere: Yes, Erika, understand the question. And first of all, I just want to highlight, we’re back to 9 7, which is where we started before the deal and we’re able to build. We went from 9 7 to 8 4 and build 130 basis points in basically less than a year, which I thought was a great effort across the Company. In terms of what our new target is, short-term target is to continue to build, as we talked about. Remember, there’s two sets of rules that are yet to be finalized and coming down. Number one, are the Basel III end game finalization of rules, which will, in one shape — one way shape or form increased capital levels. And the second is clarity on CCAR. We’ll set those targets once we have clarity on those two items.
Erika Najarian: And so just to follow up here. At least until June 2024 CCAR results, regardless of how quickly you build the capital, either on an adjusted or on a GAAP basis, you’re going to continue to be at pause on the buyback until at least the until we see the CCAR and the SEB?
Andy Cecere: That’s my expectation, Erika. We want clarity on the finalization of the Basel III and the CCAR importantly. So, we’ll be continuing to build capital and determine our capital targets and buffers and all that activity once we have more clear clarity in the finalization of the rules.
Erika Najarian: Got it. That’s very clear. And just one more for John, if I may. In terms of the net interest income trajectory, I think the fourth quarter is good news, especially relative to what we thought two days ago, which would be more RWA mitigation. As we think about the RWA mitigation ahead that’s less impactful to EPS, should we think about it similar to what we saw early in the year in terms of securitization? Are you more actively — are you going to continue to use credit linked notes, which I assume has cost you 12.5% or so of the pool, plus SOFR and the spread. And as we think about those dynamics, do you feel like you have to warehouse more liquidity as we anticipate LCR rules for regional banks? Because we’re also hearing that there could be pretty significant haircuts on how they’re thinking about HTM as HQLA.
John Stern: Sure. Erika, so maybe I’ll start with your point. On LCR, we will — in addition to what Andy said on the capital side, we’re going to have to wait and see what it is on the liquidity side in terms of any potential changes that come out of LCR. We feel very comfortable that we’ll be able to achieve whatever that change is and feel that we’ll be able to achieve that whatever that scenario is we’ll work into it. In terms of — you talked about the net interest income. We feel like it’s — again, just to kind of reiterate, we are looking for that to bottom at this particular point in time in the fourth quarter. And where it kind of goes from there post — will depend in part of interest rates.
