Bank of America Corporation (BAC) Earnings Call Transcript & Summary

As everyone takes their seats, we'll put up the ARS questions we've asked everyone. We don't want to take up any of our time. Next up, I'm very pleased to have Bank of America with us. From the company, Dean Athanasia who runs Regional Banking; Alastair Borthwick, who is the Chief Financial Officer. And we want to focus most of the presentation today on Dean's world, but we fortunately have Alastair here as well. We'll grill them at the end to kind of get us up to speed on some things.

But Dean, maybe just talk about your role. It's been about 18 months since Brian added to your leadership responsibilities as the business by making you the leader of Business and Commercial Banking. Obviously, a big job, responsible for one of the biggest consumer banks in the world as well as the largest commercial bank. Maybe just talk about what are the benefits to the company from the combination of these roles?

Yes. Well, just to explain it a little bit because I think we're organized a little bit differently. But I cover 100 markets, about 100 markets in the U.S. I have all the people in those markets that are covering them from consumers, small business, business banking and commercial banking, which runs up the clients all the way up to $2 billion. So all the distribution that's out there in the market, coordinating in the market, all the products and services that serve those groups and then behind that digital and marketing that helps support the business. So the synergies, if you go down through it and if you're looking at the market, one of the biggest ones we do is we have, in those markets, concentrated on our clients but the teams in those fields are working together. So having it all in 1 group and focused on working together, we've delivered over 5 million client referrals in those markets. And the job of all those people is to deepen it market by market by market. So looking at all those markets in the U.S., making sure we are serving all those clients and then trying to take share in all those markets, helping each other out. And so that number, 5 million referrals, client referrals is up over 14% year-over-year, and we continue to invest in those markets. And I am here to make it all work together and find synergies in between all those different groups.

Can you talk about just the biggest opportunities for Bank of America and consumer/commercial banking?

Yes. It's different in each. Consumer banking, the biggest opportunity for us right now, twofold: one, we are introduced ourselves and we have 9 new markets that we're in. So out of those hundreds, there was 9 that we didn't cover. So our model, digital and financial centers together, putting it in those markets and then working with all the teams in the markets from commercial bank all the way down. That's a huge, huge opportunity for us in getting everything in between, investments and deposits and checking accounts, credit cards. It helps our growth engine not only to deepen in those markets but then entering these new ones so we have our complete model going forward. And then on the commercial side, we've added over -- acquired over 1,100 new clients this year, so that machine is going. We have people in the market. But over the last 3 years, we've put 40% in every market more RMs out into our market to interact with our clients so we can accelerate the client acquisition engine. So that opportunity keeps paying dividends. And then behind that, just like we do in commercial, since I have digital as well, we are going to digitize the business bank, the commercial bank to a more heightened degree and find opportunities there, not only in terms of expenses and efficiencies but being able to reach out and connect with our clients, deliver our portal and our cash flow across all our different client sets. So there's opportunities all the way through the entire client base.

And then maybe we could shift gears and just talk about the economic backdrop. This kind of notion of soft landing appears to be becoming more consensus. From your seat, how healthy is the consumer? Maybe talk about consumer spend, deposit balances, payments, et cetera.

Yes, consumer spend right now, I mean, we -- our economists have pushed things out. So GDP not seeing a downturn, consumer spending not seeing a downturn out to 2025. So if you look at our economists, that's what they're looking at. So we -- when I look at the data in the consumer bank, I see our clients are still holding, versus pre pandemic, about 27% more cash in their accounts on average. It's more acute on the lower end. They're holding between $2,500 to $5,000, on average, more cash in their accounts on the credit side. They're still paying off their credit cards. I don't know what the last group said here. But for our group, in our specific client base, they're paying off at a higher rate than they ever have before. Still, it's pretty high, it's 4 percentage points higher than it was pre COVID. So they've got -- that denotes solid quality there and they're spending at about a 5% clip. So we see that maybe coming down a little bit, but they're still spending at a pretty good clip and they're sort of averaging down to where they were pre COVID. So in terms of consumer spending, that's what we're seeing. Again, this is across 64 million households out there and client base that we have. And so those are all the activities going up. They're in good shape, and they're angling down. They're spending a little bit of it, but they still have, on the lower end, probably 2 to 3x more cash than they had pre COVID.

I guess how long do you think that lasts?

It's the million-dollar question. We're -- we think it will last by the way we're looking at the sort of the economy, it's a slow travel down on the consumer side. They're bringing in more cash. There's plenty of jobs out there. Obviously, they're dealing with higher interest rates but they've got higher wages. They still have a lot of job openings out there. They can find employment, and the cash is still coming in. So I would say slow angling down, getting to more normalized period out into the first quarter of 2024 but just going back to where we were sort of pre COVID where we had moderate 2%, 3% growth in deposits and things like that and revert back into that type of economy.

And then I guess maybe what are you hearing from companies? What are they watching? What are they most concerned about?

Yes. It's different on the lower end. They're much more optimistic than they were last year. They were able to hire people. The supply chains are coming back in line, so they're a little bit on the small business sound a little bit more optimistic. get up towards the middle market and the commercial side, they're a little bit more cautious, right? They're -- anyone who is -- has cash and has loans outstanding, they're paying down their debt. They don't want to pay the higher interest rates. So they're -- you see those type of activities. They're not -- the supplies have come. They don't need to build up on inventory anymore. So there's less borrowing out there and we see them pull back on their revolvers a little bit, maybe 2 percentage points on the upper end on the sort of middle tier business banking type client, probably more like double that, like 4 percentage points lower on the revolver. So they're waiting. They're in a wait-and-see mode, and you see why they're waiting to see where things are going. If not making any, they'll do targeted investments, but they're not doing -- they're not stepping up and they're not taking excess risk then being a little bit more conscious.

Brian talked about organic growth and some of the businesses have contributed to that. We've seen 18 consecutive quarters of net new checking accounts. You're adding credit card accounts, record consumer investment accounts. Maybe talk to in terms of who you're taking share from. What's kind of driving the share gains?

Yes. When you go across the board and we've looked at this, we're taking share across -- again, it's market by market. We're taking it across the spectrum from some of the smaller banks, mid-tier banks and the upper banks so it's pretty consistent across the board. We like our model. Our model is we're out there with our financial centers, our people are on our financial centers. We are in the most key spots. We've renovated that Coupa Financial Center, so we have people on the ground in terms of our consumer team and our investment team. But we also have -- we know we compete against the fintechs, so we've built up the best fintech business in the world or the largest fintech business in the world, our digital bank. So it's those -- that combination of things we can go against some of the smaller markets within smaller companies with this increased technology. We can send off the fintechs. We can get in front of our clients. We're there with them every day. They connect with us over 1.2 billion times every month through the digital platform and then the financial centers are there if they need it, they want something more sophisticated if they want to do planning. So the combination of those 2 things allow us to beat some of the local banks, and the regional banks helps us compete with our payers, the bigger banks is going to help us to ward off the fintechs and keep them away from our client base. So we say we're taking share across all those different groups across the board.

Commercial side, I think earlier added, I think, 1,100 new clients in the first half of the year, growing IB share. GTS has obviously been strong. Maybe just talk about the investments you've made in those businesses and how you're driving growth there?

Yes. I mentioned 40% more RMs in the market. We've added investment bankers out in the middle market, drives 40% of our fee pool in our fee-based and investment banking we put -- we've added 12 new markets where we have investment bankers partnering up with our middle -- our commercial banking RMs. So that's a huge investment for us and we should -- we've got about a 10% share, and we think we can grow that quite handedly over the next year or so. And then on top of the people aspect of it digital, anything we can borrow from consumer and bring over like Erica and things like that, we are bringing over the entire platform. So our commercial and business clients use a system called CashPro. We'll make that our portal. 75% of our clients are digitally active on that portal. But we -- again, we are connected with our commercial clients every single day through that portal. So we are putting all the products up there. They can find anyone, anything that they need in Bank of America, we can interact with them. And then we've increased the speed and efficiency of that platform. And eventually, they'll be -- we'll keep investing in that platform. So anything that needs to be digitized, any documents, loan documents, anything across the board, we're interacting with our client. We've created this digital mechanism to drive more efficiency and interact with our clients more effectively. On top of that, all the payment mechanisms, we added merchant banking and things like that, we can distribute to that platform. So we've got a pretty good connect point with our clients on both sides. And eventually, you guys, if you're a Bank of America client, you have the Bank of America app on the consumer side. You're going to see the same exact integrated app on the corporate side for whoever the client is at the business, the Treasurer, the CFO, the CEO. They'll be able to have that same type of capability on their side. So those are just huge investments we're going to make over the next 2 years or so.

So in both your answers on the consumer side and the commercial side, you talked a lot about digital and technology and how you're benefiting from that. How do some of these metro-scale players compete against that?

It is -- it will be at the heart of our business model. I can tell you that. And I think it does create a huge barrier to entry for some of the smaller players. And they try to compete locally in a different way they try to add people. So again, that's why I said, we need people on the ground in those markets to compete against them. And then we add digital on top of it. It gives us the one-two punch, it's a pretty formidable process to go forward. So I mean, you'd have to ask those folks that come through, but we're investing, as I said, we're trying to build the biggest digital bank in the world, and we're going to continue to invest as part of our strategy. Right now, 52% of everything we do in the consumer bank is -- that should go up to 70% and we're striving for that. And then on the corporate side, I talked about that we have 75% digitally active, and we'll do more and more and make more investments on that side, speed and efficiency, safety, security for our corporate clients. We're making payments, making lots of investments across the board, and you'll start to see some of that come out in the next year or so.

And then maybe turning to [indiscernible] kind of the data down modestly. Can you talk in terms of what you're seeing in the consumer commercial businesses?

Yes, it's going to be tying back to the question you asked me to be. It's going to be a different -- a little bit different story by each market. And so I'd explain it this way. On the corporate side, things have leveled out and now the deposits are starting to grow again on the upper end in that -- in our business side of things. On the wealth management space and the investment space and a wealthy clients, you see those have leveled off, and they're sort of pretty consistent in staying where they are. And then on the consumer side, you're still seeing a little bit of the spend down. Again, they have all that excess cash. There's no some rotation is through the system into investments and whatnot, we've captured a lot of that on the investment side. But they are still sort of slowly spending that level of cash down over time. And that's sort of what we're seeing and we'll see for the next -- I think that same scenario will play out through the end of the year.

And maybe just talk to the mix of noninterest-bearing deposits in commercial? How low-bearing deposit per...

Yes . It's about 42% noninterest-bearing right now. I think if I compare that to 2019, check me would be about the level would be about 45%. Again, obviously, short-term fit fund rates are 3x higher now so you can start to see it. So I'd say around 22%, maybe go a little bit lower and tick down a bit, but that's right in line sort of where we were pre pandemic, given all things being equal and actually better given where Fed in is right now.

And then I guess one of the things that may surprise us one of the biggest banks and particularly Bank of America is just how disciplined you guys have been on the consumer deposit pricing Yes. Given how much the Fed has hiked. Do you think this continue? Or at some point, do we see a catch-up?

Our strategy has been the same. We had never chased around short-term cash or whatever you want to call it. So we are always checking account-focused. We brought in something like 300,000 net new checking accounts in the first half of the year or close to 500,000 investment accounts. But just core -- our strategy is get the core operating accounts, bring in the checking accounts. That will bring in sticky cash. Again, I don't -- we don't have an interest rate on checking accounts. I don't -- there's no rate paid there. And so what we advise for clients who want higher rate, we put them in CD, so about -- and there's some wealth management in there. So about $100 million of our deposits are in sort of higher-priced types of products. So CDs are a solution for them. We have all different types, depending on what the client wants and how long they want to stay in that particular vehicle. So that's our model, and that's what we go through it. So I don't see -- I see our pricing discipline just staying right where it is, and it's always been that way through the up and down cycle and we've been pretty true to it.

Maybe turning to kind of the loan side of the balance sheet. Maybe just talk to consumer lending behaviors. What products are they using? Where -- how elevated are critical payment rates? Do you see those...

Yes, yes. So we're all consumers so this is not going to be a shocking 1 that mortgage is obviously down. People are not moving out of houses. They've locked in on rates. They've refi-ed in the past, so there's not that asset pool is sort of coming down and there's not people paying higher interest rates so they just have to get out and enter into another one. So there's not a lot of supply going around to that as a diminished asset. Auto loan is coming back strictly because I think supply is caught up, so more expensive and particularly on the electric side, a little bit more expensive, but we see some modest growth there. HELOC is about sort of in line and flattish. And then so that leaves us with credit card, and we still see credit card going pretty strong. It's due to our consumers catching up on experiences, taking a vacation, taking that extra trip on an airline, going overseas, international travel, doing the expensive vacations. So that asset continues to grow, and it's been one of the ones that have So payment rates are still pretty strong, like I said, 4 percentage points above where we were pre pandemic. So still, clients are spending and they're paying off their bounces at a pretty good clip at a normal clip, where they're not getting themselves and not running themselves into a credit quality type of issue.

Yes. And then on the commercial side, we've seen growth slow debate internally. Is it supply-driven? Banks are kind of pulling back, whether it's Basel III or just kind of the loan losses going up, more demand-driven, just people borrowing less, given higher rates in economies. So I would love your perspective.

On our end, it's completely client-driven, to be honest with you. And that's across the board. We see, as I think I mentioned it before, sort of clients pulling back a little bit on their revolvers, not borrowing as much as paying down debt and you still continue to see that being cautious. And so unless they have a better sort of clearer picture of the year ahead and not making those investments they made before and they've leveled out on inventories, so they're not -- they don't need to borrow for that. So we are ready. We're available. We're still seeing some growth in different spots across the organization. But again, on average, it's down, it's completely client-driven.

And then credit quality. We've seen credit delinquencies in max towards 2019 levels. Where do you expect these will go? And do you see any kind of deterioration in the consumer?

Well, I mean, I would say -- I would describe it this way. I would say 2019 was like a decade low in terms of loss rates. So if I'm -- we're still -- so right now, we are still better than 2019. So I would say credit card loss rate will look like '17, '18, '19 a little bit, in that area if you're looking out forward, But as I said, clients got -- they've got plenty of cash. They are paying off their credit cards, have not seen any deterioration there. And so credit quality on average is looking really good and we'll see where it takes us. And cash is still coming in the door. There's still plenty of jobs available and they can find jobs. So there's not -- that would be the 1 that would sort of deteriorate credit quality from here if you saw job loss rate go up or unemployment go up, and that would be the key as we look forward.

And then I guess on the commercial side, any areas of concern that you're watching beyond office?

Yes. No, I mean nothing that sticks out here and the here, client here and there, but different industries across the board, so nothing there. And just for Korea's 7% of our overall portfolio and then an office is probably about 25% as we're talking about 2% of our overall portfolio. And then we've always been very, very trying the business to very -- we've watched that particular area. So we're in 75% of our office space is A-rated. So there's nothing in there and no surprises that what comes through from where we stand right now.

And then earlier, you were talking about these investments you continue to make in digital. Just how do you balance constantly investing in the business of digital while keeping growth and just delivering positive operating leverage?

Yes. I mean, the way we go -- we are -- everything is efficiency driven for our banks. So we have a huge process. We know we spend on marketing, technology and the FTEs I talked about. But everything goes through our group. We look at for technologist, technology and digital, for example, everything goes through, we evaluate every single project that comes through, what's the long term, what's the short-term value deliver? What are we spending we base it and measure it against other projects that come up. So it's a very intense project. And what we're trying to do is account for every single dollar that gets spent digitally. And then we look across the bank. Can that help other areas get that benefit other areas? So every dollar that we spend, we know we're going to get the most out of it. We look at that portfolio every single month, and we check where those projects are and making sure the dollars are being spent wisely. And then after the project is done, we do a post mortem when we look back, did it get the revenue we needed to cut the expense save we needed. Is it driving maybe its credit quality or sort of some regulatory item that we wanted to automate. Anything like that we do a post mortem. So every single dollar gets evaluated. We did the same thing on the FTE side and the same thing on the marketing side. So it's a pretty intense kind of management process all the way through, but it's all to make sure we're not just doing projects. We're getting the most out of it, and we're not wasting any money if we're going to invest.

Jason, the other thing, and we talked about this when we're talking about priorities for capital, technology is right at the very top of that because it's what fuels our growth and it's fueling the expense saves and the efficiency that Dean's talking about. So priority is part of it. So as when we talk about responsible growth, we talked about there are 4 tenants, 1 of them is sustainability. And so it's, for us now at this point, after 10 years of this, we don't walk in thinking this is a discretionary number. We're walking in and thinking this is something we're going to prioritize. It's going to be flat to up a few percent every year. Even in a pandemic, it was up. So we're just constantly committed to that because it gets to the core of the operating model that Dean is describing and how we think about organic growth and serving the client.

I guess, Alastair, now that you have the mic, Dean some insights into loans, deposits, beta trends for the regional bank. Hoping maybe you could broaden it out a bit for Bank of America as a whole.

You hadn't opened your mouth since now.

No good deed goes unpunished.

But I think we saw $14.3 billion of NII in 2Q. Back on the July call, you talked about $14.2 billion to $14.3 billion for 3Q, about $14 billion for Q4. That would get us up to more than 8% for the full year. [indiscernible]

Not really. I'd say in the -- for this quarter, in particular, Dean just talked to the deposit side. If anything, the deposit side is more constructive for us at this point. Dean described the big 3 blocks of customers in some detail there so I won't go into that. But our deposits are kind of flat to up. That's just kind of where they are right now. That's probably a little better than we thought overall. And as Dean talked about, beginning with flattening out in consumer, flattening out in wealth and growth in global banking. So that's been good. No changes to our thoughts with respect to rotation between interest-bearing and noninterest-bearing changes in terms of the way we think about pricing, as Dean talked about. So no change there. The loan growth is definitely slower. The growth we're seeing, as Dean described, is in card. And that's -- we talked about that at quarter end. But the commercial side is definitely a little slower right now and that is demand driven. But otherwise, no changes to NII at this point. You'll get about that

All right. And then maybe overall expenses, we saw $16.2 billion in Q1 to $16 billion in Q2. In July, you talked about continued decline in Q3, Q4? Any updated thoughts? Do you want to quantify that, how you're thinking about expenses?

Well, we quantified it at the time by saying we wanted to just keep going with that trajectory. We were looking for [ 15 8 ] this quarter. We're looking for [ 15 6 ] next quarter. The key to that trajectory for headcount, and if we went back to January, February, we were running headcount at the time, right around 218,000. We talked about the fact we wanted to end this quarter right around 213,000. I think we're in good shape for that. That should set us up well for the 15 8. Then we think we just got to keep grinding away to the expected base in Q4. We still feel good about the [ 15 6 ] number. So no change there. And if and when we do that, we can do the [ 16 2, 16, 15 8 ] a, [ 15 6 ] at that point, that compares with 15 5 in Q4 of last year. So that's the kind of discipline that we're looking to get back to, and I think it sets us up well for the beginning of next year when we'll start with 213,000 heads or fewer as compared to starting last year at 218,000 So that's what we're trying to do as a management team, and we're on track for that.

It doesn't stop me from making sort of all the investments we talked about. We are finding efficiencies and we're putting people in the market and making the digital investment as. So if you put the 2 together, we've got to do -- we've got to make those investments and get to where Alastair is talking about is a net overall position.

And then no good deeds goes unpunished, but 8 straight quarters of positive leverage. Is it realistic over the next several quarters for that to continue, given the top NII comps we'll see?

Well, it's going to be harder now, no question. I think that's why we're so focused on the expense discipline part of the equation. At the same time, we're pretty good at this pre pandemic. We had 5 years in a row of it. We have done a pretty good job over the course of the past couple of years because we've now got a quarters in a row of that. So we haven't given up the fight. The key will be for us, as Dean just talked about, we've got 2 things at once. We've got to drive the organic growth in so far as we can, and we've got to maintain the expense discipline. So it's probably too early for us to tell, but we know what we're trying to do over the course of the next year.

And then I guess what -- just any thoughts on trading, investment banking, general? [indiscernible]

Well, the big 2 drivers in any given quarter will be the markets and the trading piece, I'd say. Around investment banking, the fee pool is down probably 30%, 35% right now, pretty significantly down year-over-year. We're not -- I think we'll do slightly better than that, but that still puts out investment banking fees for the future probably right around the $1 billion mark. Around global markets, there's always a little bit of third quarter seasonality as compared to second. So it's probably easiest just to compare us to last year, and I think we'll be up versus last year in the single digits, sort of low single digits type number in markets just based on our current run rate. That remains a reasonably constructive environment generally, but low single digits compared to year-over-year.

And then could you talk [indiscernible] next question as audience response, and I guess, Alastair, I'll ask you to talk broadly and maybe Dean, we could talk about your businesses separately. But [ Module 3 game ] is obviously getting a lot of attention. I'd love to kind of get your thoughts on Bank of America as a whole maybe [indiscernible] mitigation actions. Any updated thoughts [indiscernible] that to out ?

[indiscernible] actually, I mean, this is a reasonable understanding of where we think we'll come out here. we've seen the popular press say the big things will be up about 20% or so. And we think that's a reasonable starting point for the mix of our business. Now that, of course, assumes that there's no changes to the current rules. And I think I'll come back to that at the end, but there's obviously a reason to hope there may be changes to the roles. But let's just use 20% for a moment because I think it's an okay place to start. If you took our Q2 RWAs and just close to up by 20%, you're going to get to a number like $1.95 trillion. That would imply we're going to need $195 billion of CET1. And we ended Q2 at $190 billion. So it gives you an idea of our gap. And we've been adding pretty significant clip of CET1 each quarter. So we should get there in a quarter or 2. At that point, then the rest of the challenge is just growing to build the buffer over time and to support the growth over time and to support the growth in the dividend by the shares. We got 5 years to do that. So I think we'll have plenty of flexibility once we get through the course of the next quarter or 2 to just build the capital we want. Then we get to the point where we've got a lot of flexibility, and we can just go through our usual priorities for how we think about setting up the balance sheet.

A lot on this. So maybe buybacks on hold for the back half of this year and then kind of we think of next year as you get to where you want to be?

Well, we said in Q2 that we were going to prioritize right now just on capital build because we wanted to see the final rules come out and then we wanted to see how this might all impact. I think based on where we are, we may have a little more flexibility there as we go into the fourth quarter and as we get into next year, but we work through finalizing some of this stuff. And we'll give an updated earnings on how we're thinking about that.

And in your response, you sounded a touch hopeful there may be some changes in this proposal. [indiscernible] hearing in of where you see the greatest possibility out getting

Yes. Look, I think there's going to be some important points of advocacy on the part of industry and by businesses in America, who are the ones who ultimately are going to pay for this. First, I mean, we've talked about this before, but there's a significant amount of double cap in the markets trading RWAs. And in the operational risk RWAs, at least as it sets up relative to the stress capital buffer test. So that's a significant point of difference, I suppose, in points of view. So we'll see how that goes. I'd say, third, if those are 2, a third would be co G-SIB inflation. Now that's one of those things where it was always anticipated that along the way, Basel III endgame might have a place where the G-SIB numbers stop inflating based on nominal and start to be adjusted for the size of the economy. That would be meaningful. That's a meaningful thing to the very large banks. And at some point, it's appropriate that, that finish around some of the things like equity investments, if you think about what's going on with tax equity and the ESG investments, in many places, people are trying to incentivize those investments and yet this by being 400% risk-weighted assets, we changed that totally. So there'll be a variety of things that have to get worked through, and I'm sure are going to come out in the comment period. And we're hopeful that some of this will come down and in our favor. But if not, I think we're in a place where our capital is in a pretty good position, and then just about managing it over the course of the next 5 years. And then, of course, we get to optimize the balance sheet as well. We'll think about how we reprice everything, and we'll think about the composition of our balance sheet. So we'll have a lot of levers, and we've got a lot of time. But the important thing, I think, is we have the capital that we need.

I guess, Dean could be a business guy here. So I would love to get kind of your perspective, right? You're running a business from your perspective, any other negative surprises from Basel III and game -- and then are there any activities or areas you could see changing some pullback? And then any opportunities to mitigate some of that RWA inflation? I know not a lot of it's in your business, I got to think some of it is. Just how you think about that.

Yes, product, I think we're all still left product by product. We'll look after and we'll evaluate. So mortgage has a higher RWA to it. So we'll do some pricing actions we have to take. We have to look at balance sheet loans. We have to look at the appropriate. We have to evaluate that at a different higher capital level, unused credit card lines, another 1 there's a capital charge there. So how does that impact our strategy? Where do we go? We have clients that sort of borrow and hold balances. We have others that just transacted. So that activity will be more costly from a capital standpoint, so we'll adjust there as well. But for every change in there, there's a sort of -- we don't sit still. There's an action to help mitigate it, reposition our balance sheet and we'll do a product or some things at the macro, again, that Alastair talked about, but product by product, we're looking at that, evaluating it and just taking actions, whether that's sort of pricing and repricing actions or just the level of pure activity if we can offset where we put capital and put it into more useful spots and more beneficial spots for our consumers will do that. So we'll constantly change it and look to offset it, mitigate as much as possible.

Great. We've got about 5 minutes on the clock I call up and see if there's any questions from the audience. I see one. Robbie?

Dean, this question's for you. You mentioned earlier your ambitions to increase the digital nature of your bank, especially both on the commercial and retail side. And you named some ways you're going to do that. Can you talk about bill payment in particular? It sounds like you bill.com and what you anticipate doing in terms of creating more sticky small business user base by having payments integrated into your banking network?

Yes. So it's fully integrated. It starts with our portal and small business. It's [ BA360 ] and we have cash flow in the sort of upper end. So that portal will be expanded to include everything, all of our merchant products and services, which we just brought into the bank. That product will be integrated into our core operating account. So if you think of a small business as an account, everything would be integrated around that account. And everything built into it, bill pay, everything, repositioned, reset the clients. So they can choose to use one of the relationship managers at the field or if they just want to completely do it themselves, they should be able to come in and do a completely digital from start to finish open an account and operating an account and get approval, transact, borrow, invest because we have the 401(k) side as well, which will be integrated in there. So that is the general plan moving forward. We've done that on the consumer side. and we're just bringing that same mentality over on the business side just -- and we're borrowing as much as we can from a technology perspective, just huge upside, right? And think of it, yes, great to have relationship managers out in the field and they interact with our clients, they go visit them, but there's nothing like interacting with your client every day through a portal and making sure you're delivering on message, making sure you're delivering advice in anything else they need because we can see what they're doing, how they're transacting. So any way we can be helpful. We're right there in front of them everything and it's daily. It's not quarterly or monthly or whatever, it's every single day. That just gives us much more opportunity to build a relationship grow relationships and grow revenue.

Time for 1 more.

This is for Alastair. It seems that the market is very focused on held-to-maturity losses. And relative to tangible book, it's a big number. I thought it would be great to hear how you think about it. And then also when it might turn into a tailwind as those begin to mature.

Yes. So I'll answer in that sequence. So first, look, it's obviously not a capital issue. It's also not a liquidity issue for us. It hasn't been an earning issue either. In so far as we got to a point in pandemic where we had a $1 trillion of excess of deposits over loans. We got to invest in some year. And we made a determination to invest some of those in long-term fixed and the rest in short-term and floating. And we put that out every quarter so you can see that. You can also see over the course of time then how the interest received and the rate received on that has gone up over the course of time as compared to the price that we pay on deposits. And that, in turn, has really helped to increase our NII. So we were $9 billion in the core banking book prior to -- but below today, we're at $14 billion-plus. So we've added $5 billion in NII per quarter, $20 billion a year, if you look to PV that. That would be a big number, right, because it's not just one thing on our balance sheet. It's everything. And yet in terms of how I think about it in terms of tailwind, it's already a tailwind. So this is the week where we get pay downs. We get pay downs every month from those securities. And each time that we're taking them off, just sweeping them into cash. At some point, we'll put those into longer-dated investments. We'd put them into loans right now [ that we're on ]. That's always going to be our first choice. But we're sweeping them into cash so they're coming off the focus of low coupon, they're going to read on the books at a much higher coupon. And obviously, we'll take the benefit of that every month as we pay down every quarter as we pay down, and we'll continue to give everybody updated with that progress all the time.

Great. Perfect. With that, please join me in thanking Alastair and Dean for their time today.

Thank you.

Thank you.