John Stern: Good morning.
Gerard Cassidy: John, you touched on, in answering a question about commercial loan growth that some of your customers were accessing in capital markets and things of that nature. Can you guys share with us — we read a lot and see a lot about the private credit markets have really become quite active and aggressive in making loans to corporate and commercial customers. Are you guys seeing that competition, number one? And also, is it any different than past years? Or has it intensified? And then, simultaneously, are any of these private — Apollo, Blackstone, et cetera, are these customers of yours? And if they are, how do you balance the competition versus handling their needs?
John Stern: Sure. This is John, Gerard. So, in terms of on the commercial side, when I comment that going to the capital markets, it’s more or less the public market, so taking bond issuance in the public investment-grade market. We tend not to see them or compete on the private credit side of things. It’s just not a structure or type of loan type in terms of our client base that we tend to run into. So, it’s more or less — I can’t say it’s increased or decreased versus — because we just don’t see those names. We compete in the commercial space with our peer banks more or less in that particular venue. In terms of — you mentioned in terms of client interaction, we have great relationships with a number of different names in terms of investment services, capital markets activities, other sorts of categories. So, we do have some very nice relationships with those institutions.
Andy Cecere: Yeah. Our Corporate Trust and Global Fund Services, Gerard, as John mentioned, businesses, they support a number of large private credit funds in the industry and, well, they are customers and clients of ours that we continue to serve.
Terry Dolan: I think the last thing I would just add is that depending upon where the capital rules end up and what sort of — where the emphasis is or isn’t, you could see more or less moving into the private capital sort of markets. They tend to have more flexibility in terms of structure. They take on more risk, all sorts of things. Again, may not be where we compete. But certainly, from an industry standpoint, private credit continues to be an area of focus.
Gerard Cassidy: Thank you, Terry. Just if we step back for a moment and look at beyond Basel III endgame, maybe we do get the final proposal in the middle of this year or later this year. We get through the next DFAST. U.S. Bancorp has always had a hallmark of having one of the highest ROTCEs amongst the regional banks. Obviously, you’re probably going to maintain that. But you also were very disciplined in giving back the excess capital every year to shareholders in buybacks and dividends. Generally, if I recall correctly, around 75% to 80% of total earnings in a combination of both. Andy, do you see that coming on the horizon, maybe 2025, once we get all the rules that we know where you see CET1 ratio needs to be? What’s your outlook there?
Andy Cecere: Yeah, Gerard, we do achieve a high return on tangible common. I mentioned 19% to 20% fourth quarter versus full year ’24. And as we think about going forward, I would expect us to continue to lead the pack in terms of that return, which is key to generating capital, key to returning capital. And again, once we get clarity on the rules, as I mentioned earlier, in both the Basel III endgame as well as the CCAR process, and determine our target capital levels, we will return the difference either through dividends or buybacks has been in our history.
Gerard Cassidy: Very good. Appreciate it. Thank you.
Andy Cecere: Thank you.
Operator: Your next question comes from the line of Ken Usdin with Jefferies. Your line is open.
Ken Usdin: Hey, thanks. Good morning. Just to follow-up on the deposit side, you mentioned in your prepared remarks about starting to moderate pricing a little bit, and you also talked about roll-off of higher-cost deposits. Just wondering if you can amplify both of those comments. So, what types of products or tweaks are you already being able to make on the deposit pricing front? And then, where did those higher cost deposits flow out of from a business perspective? Thanks.
John Stern: Sure. Thanks, Ken. My — the comment was really around in terms of the fourth quarter in just what we saw. Maybe just stepping back a bit. In the third quarter, we grew deposits quite a bit. And part of that was we were just getting through the Union Bank acquisition. We wanted to make sure we were maintaining strong relationships with those clients and really all clients as we’re going through those times. In the fourth quarter, given where loan demand went and where we had a little bit of excess deposits, so we’ve made decisions really just tactically to go away from non-deposit — or non-relationship or less relationship-based and specifically on time deposits declining and things of that nature. So, I think that’s just going to be the ebb and flow of things of just how we manage it going forward depending on loan growth, depending on our profile and depending on the relationship. So that’s really what that comment was intended for.
Andy Cecere: And importantly, John, on our core consumer deposits, we are continuing to see growth there, as you mentioned, as we had in the slide.
John Stern: Yeah. We continue to expect core deposit growth in the consumer side, and that has been something we’ve been — the team has been very focused on, and we feel we’ve had great success there.
Ken Usdin: Got it. And as a follow-up to the UB point, is everything from UB now fully baked, whether it’s the cost actions and structure, and also that’s kind of making sure you’re buttoned up as a starting point, and have that base of loans and deposits gotten to a steady state as well?
John Stern: Yes.
Ken Usdin: Okay. So, we just move forward with everything and listen to the guide comments that you gave earlier. Okay. Got it. Thank you.
John Stern: Exactly. It’s all in the core now, yeah.
Operator: [Operator Instructions] Your next question comes from the line of Saul Martinez with HSBC. Your line is open.
Saul Martinez: Hey, good morning, guys. Maybe on the payment side, if you just add a little bit more detail about how you’re feeling about your payment strategy, how you’re doing and how much — how big the upside opportunity is there? Obviously, you’re growing nicely on the issuing side, the merchant acquiring side, sort of mid-single-digit growth in revenues and volumes. I think you said high-single digit next year. I mean, as you guys know, the banks have ceded a lot of share to software companies, integrated service providers. And just how do you feel it’s going in terms of integrating your commercial banking in payments offering? And it does seem like you have a major advantage in terms of having relationships, both on the retail and commercial side.
And then, obviously, you kind of have that two-sided network that a lot of the fintechs want. But obviously, banks have struggled in this area. So, just maybe if you could just give us sort of an overview of how you’re doing and how you feel the opportunity set is evolving?
Andy Cecere: Yeah, Saul. So, first of all, the high-single digits on merchant processing is a function of the investments we’ve made and the initiatives we have underway. And I would highlight two things. Number one is our tech-led initiative, which is now up over 30% of our activities related to tech-led, so that is integrating our merchant processing capabilities into the software that people use to run their businesses. And number two is this whole integration of banking and payments that we talked about earlier. And the advantage I do believe that we have is that we are not just providing one single service. We’re integrating banking services, deposit lending capabilities, treasury management, together with payments and money movement into one comprehensive offering that helps people again run their business, particularly small businesses and helps them ease into the process of payment activity in a comprehensive way together with the software they’re using to run their company.
