Citizens Financial Group, Inc. (CFG) Earnings Call Transcript & Summary

All right. Perfect. Quick disclosure out of the way. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. With that out of the way, we're delighted to have with us today John Woods, CFO of Citizens Financial. John, thanks so much for joining us.

Yes. Great to be here.

Perfect. So John, since maybe to start, since this is fresh off the press, Friday post market, you guys announced that Citizens has hired about 50 private bankers that were formerly at First Republic. Can you give us a brief overview of that and how that fits in with your broader wealth strategy?

Yes. Great. I mean this was a -- this is a really exciting opportunity. As many of you know, for a number of years, we've had an interest in growing that business, both organically and inorganically. So we've made a number of investments on the organic side, hiring financial advisers and really converting that business from a transactional business to more of a recurring sort of annuity financial planning approach. Very customer-centric, et cetera. And so that's a long, but slow and good build that's been building over the years. And then we supplemented that with our Clarfeld acquisition a couple of years ago, and that's been going incredibly well. So fast forward to this opportunity, and as many of you would know that we've had -- we had some interest in the actual FRC as an entity in the FDIC process. And that kind of made it clear that we had some admiration for the way that they've really went after their customers, extremely customer-centric, et cetera. So we had some interest expressed from a number of relationship managers on that side, and it's been nice to be able to announce something along those lines. Just broadly, it's a coast-to-coast team, which -- and what's really great about that is that it's -- we've got a number of bankers very diverse in terms of their capabilities across commercial and on the consumer side of things in terms of what their specialties are. But what's great about it is that the locations being in Boston just our backyard, it's a core market for us. We've got a team in from New York, which fits into our New York Metro approach. And then we also had launched a couple of wealth centers in Florida. So this will accelerate that approach geographically. And then we have our West Coast presence in commercial and with the JMP acquisition in Northern California. So that really works extremely well also. So it's just kind of a hand in glove in terms of what our multiyear strategic kind of objectives were in that business and sort of the customer centricity of their business model just fit perfectly. So we're extremely excited about it and looking forward to getting this thing going this week.

And presumably, you guys want to do more of this as you see the opportunity?

Yes. I mean, I think this is -- we had launched late last year, a private client initiative, where we were assigning relationship managers, who are our wealthy customers. And this is taking it to the next level, really, it's an evolution into a true private banking experience for high net worth and ultra-high net worth individuals, where the entire bank is really delivered by this relationship manager, which is a lot like what you would see in a commercial model, where you have a relationship manager that brings the depth and breadth of the entire bank to bear for a client. This is the same exact model, but for high net worth, ultra-high net worth individuals, and we couldn't be more excited about being able to broaden that out into that space. And it's a massive, multiyear acceleration of our private banking aspirations, and it was nice to be able to get that done.

All right. So maybe let's take a step back. There's clearly a lot of uncertainty in the macro environment. I get a lot of pushback from investors that the overall banking environment has changed for most banks and for all banks really. You guys have put out a ROTCE target of 16% to 18%, which you reiterated at a recent conference. Can you talk about, a, if you're making any change in strategy related to this environment? And b, why shouldn't the longer-term targets be lower given how fundamentally things have changed over the last 3 months?

Yes, it's a great question. I mean, I think I'll offer up right at the outset. The last time we had offered an increase in targets was January of '20, also not exactly the most auspicious moment, 2 months later, the pandemic hit. But a couple of years after that, after getting through those uncertainties, we were able to hit the targets that we set in January of 2020. So here we are again, in January of '23, we set our next goal and yet again another March surprise. But I mean, there's a lot of things left to be played out. I mean businesses -- I mean, banks typically as a business will adapt their business models to the environment. And we've been able to operate in the mid-teens ROTCE, and that's our aspiration for this year is to continue to operate in that space. All of the -- having a rate environment that's more normalized is actually a positive for banks. So after we get through this period of an inverted yield curve, when we get a yield curve that's more naturally upwardly sloping, we get past the days of 0 interest rates. I think you could see us with the multiyear investments that we've made over the last couple of years. And with the strategic initiatives we put in place in both consumer, commercial and top of the house, I think that it's too early for us to basically indicate that that's not a desirable landing zone for the platform. So we're solidifying mid-teens ROTCE at this stage. I think there are some idiosyncratic strategic initiatives that would allow us to continue to aspire to achieve that range of 16% to 18%. And so we're going to keep after it.

Anything you're flexing on your strategy? Or are you just saying the cost?

Yes. I mean maybe just a couple of things in consumers, so I'll cover commercial and top of the house as well. So on the consumer side of things, I'll start off with wealth. I already covered the fact that we had launched our private client initiative late last year. We're launching and accelerating the private banking initiative as of our announcement on Friday. So that's been exciting. We're going to see strong results in wealth this quarter. So to me, that's an area of unique benefit that you could see in consumer on the wealth side. Also our New York Metro. So we're seeing great take-up in terms of customer volumes coming out of the New York Metro. I think the statistic is we're getting 50% higher customer acquisition rates out of the New York area than we're getting in the rest of our network. So that's unique in terms of a tailwind for us. We're still -- we still have a pretty distinctive Citizens Pay offering. And later this year, we're going to be -- we actually have mobile app coming out as well as a direct-to-consumer approach in Citizens Pay that we're excited about. And lastly, in Consumer, we've got the National Digital Bank, which has done extremely well. And later this year, we're going to have our checking product launched across that platform after already launching a national storefront on that front. So great things going on in consumer, in commercial that product set -- we go the full life cycle with our commercial customers, and we're deepening our capabilities there from front to back, payments ecosystem, and we're going to -- we're registering as a swap dealer later this year. The last -- I guess the third leg of the stool is top of the house kind of enterprise-wide. We've had a multiyear next-gen tech sort of cloud migration, agile ways of working exercise that has really been going extremely well. And then close to my heart, of course, we've got balance sheet optimization, which we can talk about as well as what's part of our culture of the company is top. And we've been -- we've upsized our TOP 8 in the last quarter or 2 just kind of in reflection of the environment, and we've already begun work on the TOP 9. So stay tuned on how we're going to basically kind of react to what we're seeing in the marketplace by flexing on the expense side as well.

Perfect. So let's start on the balance sheet side. And maybe before we dig into deposits for citizens, specifically, I wanted to get your thoughts on the broader environment. You have -- now that the debt ceiling has been suspended, you're going to have the treasury refill the TGA by issuing more T-bills. What do you think that does to deposits within the banking system?

Yes. It's a great question. I mean, I think the laws of gravity will have to apply here, right? If there's another $1 trillion of liquidity needed to be redirected to the general account of the treasury. At the same time that the Fed is continuing QT -- at the same time, money market yields in the reverse repurchase program remain attractive. I mean there are clearly headwinds for the banking industry. I mean, I think banking deposits have fallen over the last 12 months, they've fallen. But over the last couple of months, they've actually stabilized and started to rise again. So we'll see what the impact on TGA is broadly. But generally, we think that the direction for deposits will be down over -- in the near future. That said, I think that we have some unique initiatives that would allow us to, in a likelihood, do a little better than the industry on that front. Our deposits are up this quarter, which we can talk about quarter-to-date. And all the investments that we've made with New York Metro, we've launched our Citizens Plus initiative recently, where you do more and you get more. That's been going extremely well and all the product and investments that we've made, I think, along with our national digital bank, I think it allows us to potentially do a little better than the industry on the deposit side, acknowledging that the industry will likely continue to have headwinds in terms of deposit levels.

I was just going to say the story for Citizens is different. I mean, I think Bruce highlighted at a prior conference that deposit balances were up. Can you maybe give us some more detail on where you expect deposit balances to wrap up as we get it towards the end of 2Q?

Yes. I mean, I think we're up quarter-to-date across the board, so in both consumer and commercial and driven by -- we're up from a product perspective, we're up in savings and money market as well as CDs. And so that's been going well. I mean, I think that it's important to maintain liquidity and demonstrate the strength, stability and diversification of our deposit-taking franchise, and I think that we've been able to demonstrate that, which is really good to see. It's our expectation to remain stable to modestly higher through the end of the second quarter. You're seeing some of the seasonality kick in a little bit. The first quarter is down quarter just broadly for the banking system. So some seasonality benefits as a tailwind. Some of the investments we've been making unique to us are a tailwind, and we expect that to carry over through the end of '23 to remain in a sort of stable to up position in deposits as you get through the rest of the year.

And what does that mean for the mix of deposits? I think, you're at about 26% of NIB as a percentage of total. Last cycle, you reached about 23% to 24%. Given rates are higher this cycle, is there a lot more room for that to decline further?

Yes. And it's a good question. I mean I think we're in the neighborhood of 24% or so at this point, down from 26%. I think it's our expectation that we're going to get back to something that resembles a pre-pandemic level for the bank, which should be in the neighborhood of 23%, call it, and by the end of the year. And I would say that although on the one hand, you have higher rates, and that might be a headwind to that metric, just the investments that we've been making across the platform that are unique and idiosyncratic to us is really why we think that they're balancing out to probably end up in a similar spot. Just -- I won't go back all through the investments I just mentioned. But the -- we're -- we continue to broaden the product set, deepen with our customers, really intensify the relationship approach to raising deposits. And we have a very diversified model. We have the national digital bank in addition to our branch system that we expanded in the New York Metro area, which is going extremely well. And then all the product investments we've made in commercial is also -- it was like all of those tailwinds, I think, kind of balance out like the macro in terms of rates. And so again, it's our outlook that we'll get into the neighborhood of a prepandemic 23% or so by the end of the year.

And pre-GFC is too low. I know it's too low for Citizens, but do you think it's too low for the industry in general?

I'm sorry, can you say that...

When we go back to pre-GFC, NIB as a percentage of total was a lot lower than where it was even in 2019. So how do you think about the pre-GFC levels for Citizens and for the industry as well?

Yes. I mean we are almost unrecognizable compared to the subsidiary of a foreign bank that we were at that time. Even 3 or 4 years ago, you could almost suggest that we have made so many advancements and investments in our platform that were very different than even the last 3 or 4 years, much less call it, 15 years ago, pre-GFC. So I don't think anything, pre-GFC is really instructive for Citizens. And just given the IPO in 2014 and 2015, it's just night and day. And so I don't think there's anything we can really glean for us from back then.

Got it. Maybe digging into the consumer versus commercial aspect of deposits. I think about 2/3 of your balances are from consumer. Consumer deposits tend to be stickier, but at the same time, deposit betas in the consumer side are lagging and a lot of the deposit beta increase from here should come from the consumer side. So I guess, can you talk about what trends you're seeing there and how that consumer deposit base is helping you?

Yes. I mean, I think, broadly, I mean, I think you heard -- I think we mentioned that our betas were likely going to get to the mid-40s or so by the end of the year. And I think that, that's about where you could see that play out. I think what we like about our consumer base is it's highly diversified, and it's operational in nature, of course, with checking accounts and things like that. So that's quite stable. We've got -- more than 2/3 of our deposits are in that consumer space. But even flipping over to commercial, I mean, there was a little bit of a shakeout in the first quarter and then post-SVB space. But a majority of our commercial customers are core primary. And so -- and I know the uninsured deposits gets a lot of airtime as well. But even uninsured deposits for us on the commercial side you get like 70%, 80% of those deposits have been customers of ours for more than 4 to 5 years. And so it's a very diversified granular, stable deposit base. And it's the way like a traditional commercial bank is constructed, where you basically have this balance of consumer and commercial. And yes, we're getting to sort of unprecedented rate rise levels. And so -- there are a number of uncertainties with respect to where the betas will end up. Customer behavior and migration, all of this will be tested anew. But I think at the end, the consumer will prove to be extremely attractive deposits that are low-to-moderate cost even in this higher rate environment as you get into the end of the year. So we're feeling good about where we're seeing that play out.

Right. So before we dig into some of the other topics like loans and expenses, any thoughts or any updates on the quarter? I know you mentioned deposits are up, but any thoughts on the rest of the guidance that you've given for the quarter?

Yes, sure. So still a few weeks left to play out. But as -- in the NII space, I think we had indicated we would be down about 3% for the quarter. I think you could see that being down a little bit more based upon what's going on with deposit migration and those kinds of things. As I mentioned, noninterest-bearing getting down to 24%. So that will be a little more than that 3% on the NII side of things. In fees, we're seeing some strength in wealth and strength in card. So that's been quite good. A lot of the categories of our fees are playing out as expected. I think, the 1 area where we'll see how the timing plays out as capital markets as always. So we're seeing -- there was a little bit of a slow start to the quarter, slower than we expected with respect to debt ceiling and those kind of things. But things have picked up nicely as you get here to the end of the quarter into June. And so it will all be about timing. We're seeing a nice pipeline in the M&A space as well as some of the financing that comes with M&A activity. And so, we'll watch in the calendar, but we'll see how some of these deals as they close towards the end of the quarter, we'll tell the tale in terms of where we come out for fees. When you get down into expenses, I think we'll be stable on expenses. On the credit side of things, I mean, I think we are seeing some charge-offs that a little bit higher than we had originally expected, mostly given certain valuation aspects of the book, which have come in a little lower than we expected. But overall, loss content over time seems to be well controlled and as expected and certainly really strong on the reserve side of things and capital side of things. So -- those are some of the areas that come to mind.

So on the net charge-off front, I think you've said mid-30s basis points. So you're saying it's a little bit higher than that.

Yes, a little higher than that. I'd say in the 40-ish range for the quarter. But coming in a little earlier. But overall, still coverage is if you're adequate. And you may have heard from Bruce, that we stress our coverages pretty conservatively. And so the coverages that we put in place at 3/31 were highly stressed even in the areas that we're all concerned about like CRE office. And so those stress scenarios have yet to realize themselves, so we, therefore, believe that we have good coverages. Nevertheless, with our capital levels to the extent that there would be additional need for different coverage with respect to credit losses, we have the balance sheet strength to support that.

Perfect. And does any of this impact the full year guide? Or is it too early to tell?

Too early to tell on that front. I mean I think the -- on our -- I mean the area of interest is CRE office. In CRE office, our maturities are a little bit more front-loaded than some of our peers. So you could see some of maturities are one of the drivers of charge-offs, as you know. So it could come in a little earlier for us than some peers. And we've -- I think we got about 60% of the book, general office maturing by the end of '24. And it's pretty ratable for that 60% in each kind of half, if you will. So second half of '23, first and second half of '24, it's pretty -- about $700 million or $800 million for each one of those halves coming in. And so you'll see it play out over the next 18 months or so. But again, reiterating pretty strong coverages. We're almost -- I think we were just short of 7% coverage on general office at 3/31. You might see that coverage rise a little bit as you get into June 30 for general office and we'll see how that plays out. But we've got an incredibly seasoned group of workout specialists that have been through these cycles, and we're extremely close on a property-by-property basis on that portfolio. So we're keeping a close eye on it, and we'll see how it plays out.

And are you working with borrowers and sponsors there to bring in more equity if the environment turns.

Yes, absolutely. So we're being extremely creative with sponsors, and we're trying to sort of be flexible as it relates to values that -- properties that are -- that still have value in the eyes of the sponsors, and we're trying to meet sponsors that way where we basically can make a good outcome for both sides, which is, let's keep, these properties operating and let's keep sponsors involved, and we'll be creative in terms of how we support these projects over time.

And as we move away from CRE and you think through your auto, educational, other retail portfolio, anything to call out there on the credit side?

Well, I mean, I think that you've seen normalization outside of commercial on the consumer side, but nothing to be alarmed about just exactly what we expected that things would normalize. We're up a prime, high-prime lender and I think that -- and highly diversified. So nothing really of note outside of what we talked about on the consumer side. So feeling good about where that trajectory of that book is headed.

Perfect. And that -- maybe that feeds into loan growth. Balances were down about 1% in the first quarter. Some of that was related to the auto loan runoff. Can you talk about how you're thinking through loan growth and what you're doing on the lending standards?

Sure. So I mean I think that we've tightened on the underwriting side, just being really careful about where we're allocating in late cycle, allocating RWA and our capital and liquidity, we're being pretty careful about that and really focusing on our relationships and our deep relationships that -- where we can deliver an entire bank solution and be an adviser for our customers and clients. So as it relates to loan growth, you did see that overall decline in 1Q. I think you could see that again as you look out the rest of 2023 driven in large part by the auto runoff, which tends to run off fairly quickly. But there are some other books that were also -- that are also sort of part of what we would call a noncore, lower relationship group of loans that would be -- auto is about $11 billion or $12 billion. I think, there's overall, call it, mid-teen billions of loans that are clearly in runoff that we would describe as not being core relationship focus that maybe in a 0-rate environment, would be kind of reasonably good allocation of capital and liquidity. But in this rate environment, looking for ways to recapture that capital and liquidity that we've got to put those -- put that group of loans into runoff. And so overall, that would cause loan balances to probably be lower than where they -- by the end of the year than where they are today. But the whole point of that is also in recognition of where things are headed with respect to regulations, right? And so our loan-to-deposit ratio was around 89% or a little bit less than 90% at 3/31, but we're headed towards end of the year, probably more like low- to mid-80s on LDR in recognition of running that -- some non-core loan books off. We already are in an incredibly strong capital position. But nevertheless, we have regulations that may actually raise those standards. So we're going to recapture that trapped kind of capital and liquidity in that book and use it to do a couple of things. One is to fund our need and desire to have more liquidity, cash and securities, backstopping the balance sheet, but also rotating that capital into the relationship opportunities that we have with our commercial customers and in other places, frankly, even with the private bank announcement that you saw Friday night. I mean these are the kind of things, where we want to focus on down the line. And so I'm excited about being able to rotate that into higher relationship and higher returning businesses.

So that's a good segue into regulation in general. When we got the report from the regulators and Silicon Valley Bank and Signature, it seems like we're going to get an upward ramp in regulation for banks of assets under $250 billion. Can you talk about maybe what you think we should be expecting and how you're positioning the bank for that change in regulation?

Yes, sure. So I mean, I'd say, just to start with capital. I mean I think the AOCI adjustment seems like a done deal. We'll see. It's going to come out in a couple of weeks, I guess. But it seems like that's a done deal. So we've been sort of monitoring our capital on a net of AOCI basis for a couple of quarters, just internally. And we have a very strong profile from that perspective. I think we're #2 in our peer group or close to that in terms of when you adjust our capital for the AOCI marks, we're at the top of our -- towards the top of our peer group, number one. And number two, it actually -- that gross number actually exceeds the SCB requirements that the Fed handed us last year. And that's pretty unique. Most banks would be in a deficit on that front. There are RWA proposals that are out there that may require a higher capital levels. And so what we've been doing is, we've set a trajectory even though our operating range was 9.5% to 10%. As I think we've messaged, we plan to deliver a number that is north of 10%, in the 10.20% to 10.25% range, if you will, at June 30, even though we've also been able to have a modest level of buybacks along the way. So we're recapturing some RWA and we're building capital and would expect to continue to build capital for the rest of the year, even though still having capacity to buy back stock to the extent that that's something that seems prudent to do. So that's the capital side of things. I already mentioned on liquidity. We're going to lower our LDR by the end of the year pretty meaningfully. We already are at an LCR, we're a Category 4 bank. We're already operating as an LCR as a Category 3 bank. We're just going to add to that as you get to the rest of the year based on potential input from the regulators. And I guess the last one is what will happen with TLAC, right? And I think there's a lot of -- a lot more uncertainty there. I mean I think there's relative certainty that capital and liquidity requirements will increase. And I think you could see us being extremely sort of energetic about moving forward to comply with the rules from a capital and liquidity standpoint. But when it comes to TLAC, it's still uncertain whether a Category 4 bank will need to comply. And if we do, will it be a single point of entry, multiple point of entry? Will bank level debt qualify or will it be Holdco? There's a lots of uncertainties there, and there'll be a phase in. So -- and I think that that's the one area, where you could see us taking advantage of a phase-in just to sort of be an issuer over time to make up any gap that may be -- that may come our way from a Category 4 perspective, but that's how we look at it. Capital and liquidity, we're extremely well positioned. And nevertheless, we're going to move ahead and probably get through whatever requirements a little earlier than you would expect, but TLAC has many more uncertainties there.

So did you say you expect something in the next couple of weeks and then a longer phasing period?

Well, sure. I mean, I think that some of the -- what we're hearing is that maybe we'll get an NDR later this month, and which would include a reasonably long phase-in that may go out into -- as long as out into 2027. And I think the point we're trying to make is that we are extremely solid on capital. And we wouldn't take all the way -- we probably wouldn't take advantage of full phase-ins, when it comes to what the capital requirements are depending upon what they are, depending upon how onerous they are, but we have quite a lead to begin with on the capital front, and we're going to keep growing capital for the rest of the year and probably move expeditiously through whatever requirements come down from a capital and liquidity standpoint. I think I was making the distinction on the long-term debt requirements rather like that may be something that would behoove us to take advantage of the phase-in so that you're not issuing a lot of long-term debt all at once and just making sure that there's a reasonable environment for bank spreads, if you will, before you make those multiyear decisions.

It's certainly been a tough market on the fixed income side. So maybe before I go to the audience for questions, how do you think that impacts consolidation across the banking space over the next couple of years. As you get more regulation, do you think we'll get more consolidation?

I mean, at the margin, I think it did. It just adds another maybe issue that smaller banks will have to deal with. But -- and therefore, maybe at the margin, it encourages more sort of M&A. From us -- for us, in particular, I mean, I think we're big enough to be extremely relevant to our customers and clients. And I think we're also big enough at an adequate size to address the regulations in a very prudent manner. So from that standpoint, I don't know that it affects banks of our size, but it certainly could have an impact for banks that maybe are under the $100 billion range. But nevertheless, they're still going to end up having a lot of regulations that you'll have to deal with.

Perfect. Any questions from the audience? There is one there.

Thanks for being here. In terms of your indirect auto business and the wind down, could you give me thoughts of like how you thought about going through the ABS market versus just trying to sell the book and where you expect that freed-up capital will be used?

Yes. Really good question. So yes, we have -- there's about $11.5 billion of auto on our balance sheet at 3/31. It's extremely high quality. It's high prime. It's perfect for ABS transactions, and we are going to look extremely hard at the ABS market. As we're talking about trying to recapture the capital and liquidity, we can recapture the liquidity even before maturity through an ABS transaction. So that's very much what we would plan. So the liquidity would come back through an ABS transaction, the capital will come back as it matures. A lot of those -- and that's more likely the outcome. I mean, I think the recent originations are close to par. So down the line, if rates and spreads cooperate, you could potentially see some back book sales, but we would be -- remain opportunistic on that front. When it comes in terms of where we're going to reallocate that capital and liquidity, part of it will go -- will stay on the balance sheet as cash and securities as we know that liquidity requirements are going to rise on behalf of banks. And it just so happens, we have about $11 billion of wholesale funding that funds that book. And so we'll bring that back and leave that on the balance sheet. And the rest of the capital and liquidity will be used for commercial opportunities as well as consumer opportunities that we talked about. With respect to the private bank, we still -- we have phenomenal HELOC product that we really like and other relationship lending in Citizens Pay that we're going to take that capital and rotate it into relationship business in both commercial and consumer.

All right. John, maybe to end the CCAR results are out maybe next week or the week after. You have an SCB of 3.4%. Any actions you've taken to sort of protect that SCB or maybe even bring it down as we go into the CCAR process?

Yes. I mean I think -- so last CCAR, I mean our SCB has been a little higher than maybe we felt maybe justified over the years. And some of you have -- I've spoken to a number of you about that over the years. But it started to converge. So we had a pretty significant convergence with peers even last cycle in 2022. As we continue on the PPNR front, continuing to put up solid PPNR years, that's gone into the back book of the Fed's model, and it started to express itself. So that's been good. But it's really scenario driven, right? So the scenario this year is a lot more stressful, when it comes to macro and how that may play out with respect to credit. Whereas the environment or the scenario in terms of how it would impact PPNR seems to be a little bit more benign. Rates a little higher on the jump off than maybe they would have been in prior cycles. So maybe you'll see PPNR continue to improve, but there'll be some pressure potentially coming out of the macro scenario for credit. But unique to us, we put up another year in 2022 of solid PPNR to total assets, which going to the Fed model, that's good. We've got a diversified balance sheet that will play out well. I mean you've got rates falling in the scenario, right, and our portfolio plays out pretty well under that approach with a balanced fix and float profile. Lastly, I guess the other unique thing to us is the inclusion of investors for the first time. And investors based upon hey, it's hard to know with Fed models. But based upon the way that we've attempted to model how investors would be treated in a Fed stress test, it actually stress tests pretty well, both on the PPNR side and on the credit side. So we'll see, but there should be a net positive contribution from inclusion of investors this time around. Significant uncertainties, right? I mean it's hard to predict. Anyone who's attempted to try to predict the Fed has often had some difficult days in late June, but I like how we're positioned going into this. And -- but most importantly, even with an SCB, which let's be frank, I think, is a little too high for us, but I'm sure every bank feels the same way. Even with all of that, our CET1 adjusted for AOCI is 50 basis points higher than our SCB and not a lot of banks can say that, and we're growing our CET1 into -- even beyond that. So if our SCB stays flattish, our cushion over the SCB will actually grow and maybe continue to grow over the rest of 2023, depending upon, where it all shakes out.

Right. With that, we're out of time. John, thanks so much for the time.

Okay. Great. Thanks.