Release Date: April 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you elaborate on the guidance for net interest income and how expectations have changed, particularly around the drivers for achieving the guidance range?
A (John F. Woods - CFO): Net interest margin trends have been positive, supported by investments in the deposit franchise. The first quarter showed better-than-expected deposit levels and interest-bearing deposit costs. Funding improvements also underpin the net interest margin. The front book-back book dynamics on the balance sheet are powerful, contributing to confidence in achieving the net interest income range. Factors that could lead to better outcomes include accelerated execution of strategic initiatives and a stronger second-half commercial rebound.
Q: What are the expectations for credit trends, especially concerning office space losses?
A (Bruce Winfield Van Saun - CEO): There are no surprises in credit trends, and the situation is being managed as expected. Charge-offs may vary slightly quarter-to-quarter, but the overall trend is stable. The company is working closely with borrowers to manage through challenges effectively.
Q: How long do you expect the negative deposit migration to continue, and what are the implications for net interest margin?
A (John F. Woods - CFO): Deposit migration is decelerating, and DDA levels have stabilized, which is positive for net interest margin. The migration is expected to continue decelerating until the Fed makes its first rate cut. Strategic initiatives like the Private Bank are expected to support deposit growth and improve the deposit mix, which will positively impact net interest margin.
Q: Can you provide more details on the expected trends in loan growth and deposit growth for the year?
A (John F. Woods - CFO): Loan growth might be at the lower end of initial expectations due to lower utilization in the first quarter. However, growth is expected to pick up in the second half of the year, driven by commercial activity and the Private Bank. Deposit trends have been favorable, with DDA stabilizing and overall deposit levels higher than expected. Strategic initiatives are contributing positively, supporting the expectation of deposit growth aligning with loan growth.
Q: Regarding capital deployment, how do you prioritize organic growth versus acquisitions or team lift-outs?
A (Bruce Winfield Van Saun - CEO): The focus is currently on organic growth initiatives, with limited attention to inorganic opportunities. Team lift-outs, particularly in wealth management, are being considered to enhance private wealth capabilities. These are treated with the same rigor as small acquisitions but are expected to have minimal impact on capital.
Q: What is the outlook for net charge-offs, especially considering the economic environment and interest rates?
A (Bruce Winfield Van Saun - CEO): The quality of the credit portfolio remains strong, with no significant concerns about increased net charge-offs despite a potentially higher-for-longer interest rate environment. The company has not based its forecasts on assumptions of rate cuts, and the coverage for potential losses, especially in commercial real estate, is robust.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
