John McDonald: Okay. Thanks, Terry. And then, John or Andy, just on the fee revenues, John ticked off on the fee revenues, a number of high-single digit kind of potential growers in ’24. How do we think about kind of the ability to grow total fee revenues and what kind of base should we use for that? It looks like maybe the adjusted base for ’23 was about $10.8 billion of fee revenues. Is that something you can grow off of that? Just trying to contextualize. Total revenue last year was around $28 billion. How should we think about the ability to grow revenues on fees and maybe total revenues this year?
John Stern: Yeah. So I mean, we had, as you mentioned, some of the fee numbers there. From a core fee perspective, we do expect to grow. I ticked off some of the areas in terms of payments, commercial products, trust and all sort of thing. Other — and some of the service charges components there. Of course, in terms of mortgage, that will be probably somewhat in the flat range. And in terms of other, we had a little bit of a high number in terms of the fourth quarter related to tax credit, related impact finance, syndication fees and things like that. So, all those things in, we expect kind of that mid-single in terms of the fee components going forward for this year.
John McDonald: Okay. Kind of a mid-single from that 10.8 adjusted base?
John Stern: Hmm.
John McDonald: Okay. Thank you.
Operator: Your next question comes from the line of Erika Najarian of UBS. Your line is open.
Erika Najarian: Hi, good morning.
Andy Cecere: Good morning, Erika.
Erika Najarian: Good morning. My first question is for you, Andy. Clearly, you went through it in terms of some capital consternation in 2023. And now you’re sitting here with 9.9% CET1. No longer have to be a Category II bank early, and all the color that we’re getting from Washington is that Basel III endgame will be at least delayed, if not soften significantly. As you think about maybe just one more hurdle ahead over the near term in terms of the DFAST, how are you thinking about where U.S.-based proper CET1 ratio is in terms of the minimum looking forward to a future where maybe capital is a little bit tighter, but you’re also growing? And do you feel like you’re now on offense and all the sort of the balance sheet management that was designed to optimize capital is fully behind you?
Andy Cecere: Yeah, Erika, as John mentioned, I think our balance sheet optimization efforts are behind us. Our focus on capital accretion will be from earnings as we go into 2024 and forward. As we talked about, we are at a 9.9% CET1 ratio today. A couple of years ago, our target was between 8.5% and 9%. So, we’re above that target. But we’re also cognizant of the rules that are coming, both from the perspective of Basel III endgame, which is still uncertain, as you talked about, as well as CCAR and how that will evolve over time. So, we will continue to accrete the 20 to 25. We’ll continue to burn down the AOCI. When we get clarity on the capital rules, both Basel III and CCAR, we’ll then determine what the proper capital target will be. My expectation is we’ll be above the 9% that we were a few years ago. But we’ll define that, refine that, and then we’ll get into what the math is around buybacks at that time.
Erika Najarian: Got it. And one follow-up question for you, John. Thank you for giving us some of the components of the NII. I’m just wondering, as you mentioned QT, are you generally expecting deposits to be down — total deposits to be down even if DDA mix shift abates? And also, how quickly do you think the deposit betas on the way down can react to each Fed rate cut?
John Stern: Sure. In terms of — the first part of your question in terms of QT, we do anticipate QT to be throughout the year. And so that’s going to, on whole, put pressure on deposits throughout the year in terms of balances. And so, we don’t expect a lot of growth overall in deposits, but we’ll — we have ways to manage through that. Of course, they’re talking through various ways to change the QT, but that just remains to be seen. In terms of deposits performance on the way down, I anticipate commercial and wholesale type balances will go down just as fast as they would come up. On the retail side, it’s going to be more of an arc. It’ll take some time for that to turn. But those are our expectations.
Erika Najarian: Thank you.
Operator: Your next question comes from the line of Mike Mayo with Wells Fargo. Your line is open.
John Stern: Hey, good morning, Mike.
Mike Mayo: Hi. So, I wasn’t clear, are you guiding for flat, positive or negative operating leverage or none of the above for 2024? And more generally, I mean, the real question is, when do you get back to your historical efficiency ratio? I think you talked about this at a presentation in December. I mean, 61% core efficiency in the fourth quarter isn’t exactly like legacy U.S. Bancorp, and that’s up 300 basis points year-over-year. And earlier last decade, you were 55%. Going back further, you were the low 50%s. Is that just the aspirational target now? Or is that a real target over the next two years or so? And along those lines, I guess, you have all the savings you’re going to get from Union Bank. So, where does the risk come from here?
Andy Cecere: Yeah, Mike, it’s probably more likely a positive operating leverage in the second half of ’24 versus the first half given some of the margin pressures that we talked about. That is still our objective. My expectation is, once we get more to our normalized revenue level, that we will continue to manage expenses below revenue growth and continue to take down that efficiency ratios into the 50%s. That’s the way we’re planning.
