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

All right. We'll get started here. Up next, we have Citizens Financial. Before we start, I'm going to read some disclosures, which are, 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. And with that, we're delighted to have with us today, John Woods, CFO of Citizens. John, thanks so much for joining us.

Yes. Great to be here.

Great, John. So maybe to just get right into it, you and the rest of the management team at Citizens have really been leaning into several big strategic initiatives, right? There's a private bank. There's a New York metro build-out, there's a private capital. Can you talk about some of these interesting things going on at Citizens and where that differentiates you from other banks?

Sure. And we've been talking a lot about it being a 3-legged stool and it's really picking up steam here. It's very exciting to be able to talk about the initiatives that are driving each of the legs of that stool. I mean, I guess I would start off with the Consumer Bank, and this really can't be overstated how much progress the Consumer Bank has made since the IPO. There are a number of strategic initiatives that are part of the story but fundamentally, what they've been able to accomplish with respect to driving our deposit costs and our deposit beta to the point where in the last rate tightening cycle, we, I think, were last of the group in terms of deposit beta performance. And then if you fast-forward to where we are cycle to date, we're better than average. It's just a huge accomplishment. And given the fact that we're a 70% consumer deposit platform, it's just absolutely essential that we get that right. Now there's been a lot of blocking and tackling that's driven that in the consumer bank, but we can add the New York Metro as a big sort of piece of the puzzle to what they're trying to accomplish. So not only are we delivering across all of our geographies. But within New York Metro, where we are today, with some really exciting trends. When you look at growth rates that are higher than the rest of our platform, and really productivity has been really quite strong, in particular, with the HSBC legacy branches, which are right here in Manhattan. They had a year head-start in terms of the integration compared with the legacy investors branches, but the legacy investor branches are coming along with great -- really strong growth rates as well. So broadly, the consumer bank is really delivering on that underpinning for the franchise on the deposit side. The second category hit throughout this commercial. Another huge investment story. I mean we've been really building the commercial bank for quite some time. And our capabilities there are end to end. The level of sophistication allows us to go toe to toe with the largest banks in the United States on a coast-to-coast basis with respect to serving middle market and mid-corporate entities. But what I think is really unique about the Commercial Bank, besides having all of that products that for the traditional middle market and mid-corporate customer set, we've been partnering with the private capital segment for around a decade or so. And we've been just adding capabilities all along the way, whether it's M&A advisory, risk management, global markets capabilities, subscription line support, sector support, fast-forward through our M&A advisory acquisitions all the way up to JMP on the West Coast, adding equities and research. I mean we really have a unique end-to-end integrated approach to partnering with private capital. And let me just close it out with the private bank, which, of course, is getting a fair bit of attention these days, but it's our intention to build a premier bank-owned private bank, and we're off to just a fantastic start. We've got coast-to-coast capabilities in the private bank side of things. And then you may have heard that we've embarked upon adviser hiring -- wealth adviser hiring in the last several weeks, an incredibly well-regarded team in San Francisco and then here just in the last week or 2, similarly well-regarded team in Boston. And so you're just seeing both sides of that in terms of the legacy First Republic team and private banker team that we were able to hire just last year, and now we're adding to it on the wealth advisory side of things. So you wrap it all up, a significant amount of exciting things going on at Citizens across all 3 of our businesses.

Perfect. And I have follow-up questions on each of those 3, but maybe I'll start with the private bank because that's where you ended. It is -- the private bank has been a highly competitive space. And several of your peers are getting into it or are pushing their business there. Can you talk about your customers' acquisition strategy there and the path you see to eventually get to the target of $10 billion AUM, $11 billion of deposits, $9 billion of loans?

Yes. I mean just talking about the targets themselves. I mean we -- you've seen the proof in the pudding here with respect to our ability to drive deposit levels and the way that we've been approaching all of this is very much in a, frankly, net liquidity contribution to top of house way. We're leading with a lot of very attractive deposit taking and that has us on pace. We've been generating $1 billion or more per quarter in deposits, and that will continue. And that puts us on pace for that underpinning that this business will fund itself over time in a very attractive way, which allows us to basically talk about it being accretive to not only net interest margin but ROTCE targets over time. So feeling very good about the trajectory on deposits. If I talk about AUM, which can sometimes be slower to build, we have organic AUM that's getting built through the partnership with our legacy Clarfeld business. But as I mentioned just previously, it's pretty exciting to talk about incredibly well-regarded and reputable teams deciding to join our platform. So there's about $4 billion of AUM under management in the San Francisco team and about $1 billion in the Boston team, adding that to our organic delivery of AUM. We talked about $10 billion by the end of '25, where just you add up all those numbers, we're getting close to basically halfway there in the middle of '24. So the trends there are quite good. On the loan side, that's coming in a little slower, but if we -- we're going to want to hit all of those targets. But if we wanted to have one of them be a little bit behind, we are okay on the lending side. This is capital-light and liquidity-positive in terms of how we're driving this in terms of fees and deposits. It's not surprising that loans will come in a little slower just based on the rate environment. And it's primarily on the commercial side from a loan standpoint, that will even out over time. But broadly, when you pull it way back out and zoom out, our approach to this is to hire the best talent coast to coast and marry that with our very sophisticated product offerings and our sophistication from a risk management standpoint. And so I think we're kind of importing that white glove approach that you saw at First Republic but marrying that with our level of product and risk management sophistication that you would see at Citizens is extremely powerful combination that's driving all those numbers I just talked about.

Perfect. And then maybe on the private capital side, what is the opportunity you see to sell private capital at the commercial bank? Just given the pickup in capital markets activity year-to-date, how do you see that growth opportunity playing out? And how do you see that playing out over the next 12 to 18 months?

Yes. I mean I think that broadly from a loan growth standpoint, I mean, I think there's some encouraging signs in the private capital space. I mean based upon what we're seeing quarter-to-date, we're seeing a building level of sell-side mandates that were being awarded through our partnership with the private capital and sponsor community, that's exciting. It portends strong capital markets fees, opportunities, but it also implies opportunities in the funds finance space where we've been active and also would imply potential tailwinds from a subscription line utilization standpoint. So when you look at this, certainly, we'll be able to engage in the capital market fee space from an M&A advisory standpoint. But it will also potentially support balance sheet growth as you get into the second half when it comes to our partnership with Private Capital. And we're able to engage with them in a number of ways. We are -- again, what's unique to us is we've been in this space for a decade. And we are extremely integrated end to end with respect to the offerings and the advice that we bring to the table, to the sponsor community. And that's playing out, whether it turns out to be a quarter where we're going to be engaging from a fee standpoint, we have that capability or whether we're going to be adding balance sheet, we have that capability as well. And you're seeing some encouraging signs here in late 2Q with Private Capital.

And it sounds like it's going well irrespective of the rate environment with higher for longer rates?

It's a really good point. I mean I'm not saying that maybe a cut or 2 wouldn't be positive, it would be. But again, given the activity that we've seen quarter-to-date, I think there is some realization that sellers need to accept the valuations that are being presented to them. And there's so much cash that needs to get put to work and cash on cash returns that fund managers need to be able to deliver, then we're just seeing a little pickup in activity and sellers willing to transact, sure, a cut or 2 would help. But nevertheless, it appears that activities, again, picking up in the sponsor space from that standpoint, even in the higher for longer world we're living in at the moment.

All right, perfect. And then the third leg of the stool that you mentioned was the expansion in the Consumer Bank and the NY Metro area. I think deposits, say, you mentioned $10 billion as of 1Q '24, and that was up 20% year-on-year. How much more runway do you see both on the deposit side and the loan side there?

Yes. I think we see significant runway in New York Metro. Of course, this is such a large market, and we're taking share given the ability to bring our playbook from other more mature markets into this incredibly attractive market of New York Metro. We're seeing growth rates that are mid- to high single digits year-on-year. That would be outpacing anything you would see in the H8 and what have you. So that's consistent with taking share. And I would say a lot more opportunity from the legacy HSBC, of course, that's been performing quite well but investors legacy branches haven't really hit their full potential. And so we really do see a fair bit of opportunity here in New York Metro not just with respect to how we go to market but as you know, we're very focused on communities. And we're partnered with the New York Road Runners Club and we're going to be present for in Queens for the future race that's going to occur there. And so you'll see Citizens Queen throughout the city, which we're very excited about. So we know that being hyperly focused on communities and serving our customers is important in this metropolitan area, and we're delivering there as well. So I think there's a lot more room to run here in New York Metro, supporting, again, the consumer bank, which has been really firing on all cylinders and from a deposit cost standpoint.

So given how well each of these strategic initiatives is going and is progressing towards your targets. You also have a 16% to 18% ROTCE target. Can you talk about the path to get there? And do you need help from the environment? Do you need any help externally? Or are the strategic initiatives enough to get you there?

Well, I mean, I'd say we feel very good about that trajectory to 16% to 18%, ROTCE. I'd say I would start right off the bat with respect to net interest margin. We were talking about the fact that we have approximately 40 basis point tailwind that we expect to play out over the medium term in the next couple of years from the base of 2.91% in the first quarter. That's a significant number. And that's worth mid-single-digit percentage points of ROTCE. So right there, that will take you near the lower end of that 16% to 18% trajectory alone. And so maybe let me unpack a little bit of that in net interest margin, then I'll come back to some of the other drivers. But the net interest margin drivers, when you think about the balance sheet, I guess, I would hit 3 categories. The balance sheet dynamics themselves with respect to front book/back book as the interest-earning assets turnover, both in loans and securities are playing out very nicely as a tailwind over the next couple of years. From a deposit standpoint, the optimization and the work that we've done to really drive top-performing peer like deposit costs. So you wrap all that together, that's a huge driver of the first of the 3. I'd say the second of the 3 is the runoff from a non-core standpoint. Both the non-core portfolio, which is about $10 billion left outstanding this quarter. There's $10 billion of that we're going to be running off as well as swaps. They both represent negative carry, so they're both a drag on both net interest income as well as net interest margin. And so that -- the swap portfolio and the non-core portfolio are pretty baked and they run off pretty precipitously, particularly when you get out into the end of '25 and into '26. And so that's relatively baked, whether not -- it doesn't matter what happens to rates. I mean it's really not rate-dependent. And then the third category I throw out is our idiosyncratic initiatives. So I've already talked about New York Metro, which is supportive of net interest margin and the Private Bank, which is accretive to margins. The Private Bank is very attractive deposit taking around 500 basis points of interest earnings spread there. And so that is the real -- the underpinning of what we -- of this trajectory to 16% to 18%. You click on all the other drivers from a fee standpoint. Even though net interest income, we expect to grow significantly, driven primarily by net interest margin but as well as a return to driving loan growth over that period of time. We expect that our diversified investments in fees will allow us to grow the percentage of revenues that these represent even with the base with NII growing, so we expect that to grow over time. Our investments in wealth, as you're hearing from our wealth [indiscernible] capital markets, increasingly diversified supportive capital markets, making investments in card and payments as well. So fees look good. On the expense side of things, you can always count on us to be disciplined from a top standpoint. I will throw out there that we do expect to have a couple of unique levers. We, on the one hand, are investing in GenAI like we're all hearing about, but we've got use cases that are going into production here this quarter and next. And we're working on the next round of use cases for GenAI. But the other one I'll throw out there, which is I think is unique to us is the fact that we plan to be out of all of our data centers by the end of 2025 and be 100% in the cloud. That's pretty close to one of the few banks that can be able to say that. I'm not sure if anyone else can say that. But by the end of '25, we'll be 100% out of all of our data centers. There's a windfall there from an expense standpoint. So that keeps that area of our P&L well controlled and allows us to continue to invest. And then I'd say just closing it out with respect to credit, I mean, we're very diversified on credit. We expect that to normalize, in a good way. Recently, normalization has been -- eventually some increase there but I think that over the next couple of years, you could see that normalize from where we are around 50 basis points down to maybe, call it, 35 to 40 and each one of these line items, I think, is very supportive of this trajectory to 16% to 18%.

And I think capital return also you've mentioned is a kicker in case loan growth doesn't come through. So I'm sure we'll get into it in a little bit.

Yes, absolutely. We've been returning capital to shareholders in the last couple of quarters. And this quarter is no different. But we -- I think that's a testament to our capital strength and our desire to be really efficient and relationship-focused in our front books. And if those opportunities don't present themselves, we have a significant amount of diversification and levers to pull. I think the trends, as we may have mentioned, with respect to net interest margin coming out a little better is frankly an offset and a mitigant to loan growth. And then, of course, if you have a much more capital-efficient approach, then that will give us more opportunities to buy back our stock, which also is a driver of value that you can see for us at the window.

Great. So let's talk about the guidance. Before we dig into some of the balance sheet items, can you talk about the guide you gave at earnings? And has any of that changed either for the second quarter or the full year?

Yes. I mean I think for the second quarter, we're right on track. I mean I think across all the line items, I'd say, I may have mentioned earlier this quarter that we were seeing some loan trends a little lighter than maybe we had expected, but our net interest margin trends are actually coming in a little better. And so no update really to expectations on the NII line or any other line item for the quarter. I will say, for the year, no update to the ranges that we have there. I mean I think we still feel good about that. I will mention though that given all the trends that we've been seeing, and I'll throw out a couple of other points here is that our net interest margin trends were better than expected in the first quarter. I think that quick data point that our interest-bearing deposit costs have contributed not only to us being above average or favorable when I say better than average, I should say, on beta, we've had 8 quarters in a row at Citizens of interest-bearing deposit costs rising. We think that may have peaked in the first quarter in terms of interest-bearing deposit costs. I mean I suspect that in the second quarter, you'll see deposit costs be flat to down, which is a real turning point, frankly, in where -- and is an underpinning of our net interest margin tailwinds that we're being able to deliver on. And so when you think about the full year for NII maybe, as I said, maybe a little lighter on loans, but net interest margin, if I extend that out to the end, we did say that we would exit the year at around 285, just based upon all of the things I've been talking about and the trends we're seeing right now, we think that, that probably comes in a little better than that in terms of the exit NIM. So you put that together, no update for NII either for the quarter or the year. And I'd say that we're feeling very good about our fee trajectory. And again, like we said earlier, to the extent that there's anything lighter on loans, that tends to express itself on the fee line for us. We're so diversified. We get to participate whether or not we have a balance sheet-lite or a balance sheet-heavy approach to serving our customers and clients. And when it's a little lighter on balance sheet, we get fees and we get a little bit more on buybacks given our capital strength. So yes, feeling pretty good about the quarter and the year.

So 2 follow-ups on that. One is on NIM slightly better at the end of the year. Any indication as to where roughly it can be by the end of this year?

Yes. I would just say we said 2.85%, I'd say a little better than that as you exit the fourth quarter.

All right. Perfect. And on the deposit side, I thought it was interesting that the deposit costs could be flat to down even without the Fed cutting rates. Do you think that can continue in the third and fourth quarter? And the reason I ask is there's all these other dynamics of the election coming up and then there's quantitative tightening that continues and the RRP balances are coming down. So can you talk about how you think about the whole deposit backdrop in the back half?

Yes. I think it's a really good point. I mean I think that we'll stick to the flat to down for 2Q, and I'll hold out the point that net interest margin, again, end of the year is expected to be a little better. So all in, we feel like the ability to basically execute against all these strategic initiatives the Private Bank is accretive to our net interest margin. It is also an opportunity to idiosyncratically grow deposits in a world where deposits are flattish to down. I guess H8 is down quarter-to-date. And so from our standpoint, we think deposits will probably in the quarter, pretty flattish in part due to the idiosyncratic investments we're making in New York Metro and Private Bank and elsewhere. So I think we have some unique mitigants to what's going on in the macro. We'll, of course, react to the fact that the RRP has been a shock absorber for quantitative tightening for a number of quarters. We suspect that RRP in the coming quarters will not be as much of a shock absorber as it's been. If the Fed keeps the foot on the pedal with respect to QT, then that may have an impact on deposit levels across the system. But I do think that our -- as I mentioned, our idiosyncratic investments will allow us to maintain deposit levels and have an attractive outlook there, number one, and begin to grow them if activity picks up. Two, I would also mention that our non-core and balance sheet optimization activities allow us to fund really exciting front book opportunities, not just with deposit growth, which I think we can have, but also with rotating out of loan categories that are less strategic. So I think we've got a number of levers to pull to really be able to be there and support our customers as and when activity picks up in the later part of the year. And I think we've got some unique ability to offset the macro as a result.

Perfect. I do want to dig into loan growth, but just on staying on deposits before that. You mentioned that, okay, you could see alleviating pressure on the deposit side. And I know rate cuts are further out now maybe at the end of this year. But as you start to see the first couple of rate cuts, do you think that you could move faster when those rate cuts come through?

Yes. I mean I think we've already started to move from -- in the context of when you have an inverted yield curve, I think we've taken the opportunity to optimize the deposit costs in our CD book, for example. I mean, and as we've had CDs rolling over and a back book of around 5%, the front book replacement of that has been less than 5%. That's been one of the drivers of managing and optimizing our deposit costs. So yes, I think that, that will be a driver. I think the -- as you get out into the later part of the year to the extent that we get one or 2 cuts, we're going to be able to see deposit betas, call it, in the 20% to 30% range, if we do get a cut or 2 later this year. And that will grow. The amount of time that the cuts are in place matters and the depth of the cuts also matter. So you could see us getting to the point where our betas approach similar numbers on the down that we had on the up and I think that, that will be a part of the story of progression to our 16% to 18% ROTCE as well.

Perfect. And then maybe coming to loan growth. Earlier this quarter, Bruce flagged a tick up in line utilization, and you were starting to see some of that in April as well. Has that continued through the quarter? How has that trended?

Yes. I mean I'd say [indiscernible] for a little bit. I mean, that tends to -- it appears that, that may have been a little bit more seasonal. I mean when you get later in the quarter here, our management teams are highly optimistic when you think about our middle market and the corporate teams and we have our conversations. They, however, have had significant access to debt capital markets. And so a combination of the Fed hasn't cut yet, the debt capital markets are wide open, has been in the traditional sort of middle market and mid-corporate space. We haven't seen the lift off from a lending standpoint here and as you get to the end of the second quarter. But I would hasten to add the other lever and the other customer segment that we support that I mentioned earlier, which is the private capital and sponsor base. Given we're seeing some -- again, some encouraging signs that M&A activity could be picking up and that would be consistent with more opportunities for lending in the fund finance space as well as subscription line utilization as you get into the end of the second and the second quarter, maybe into the second half of '24.

So maybe a little bit more of a geography shift within the income statement, but you're still getting...

Yes. But again, broadly, we're feeling good about our NII guide. And sure, all in, given non-core and everything else that we're doing, loans a little lighter, but feeling good about the offset that net interest margin is providing.

And then in terms of your conversations with customers, what do you think they need to see to really utilize their lines to borrow more? Is it just more an environment thing?

Yes. I mean, I think, again, there's some optimism there. I would say that there's a luxury of the debt capital markets being open. What we've been seeing this quarter is primarily a refi market, so not a lot of new money being put to work in the traditional sort of middle market, mid-corporate side of things. To the extent that there is an opportunity to engage with customers again is often in refi, either through a bank syndication or a bond offering. So again, it's been primarily a refi approach. They've been strengthening balance sheet ever since the pandemic. They've been managing their costs. But nevertheless, their input costs are still an issue, right? Rates are still high, inflation is still there. So their wage costs, et cetera, still are rising and other input costs year-over-year. So I think that time passing, I think there is some capitulation in the sponsor side of things. I think that we still have some optimism with respect to the second half that we'll start to see a pickup in loans.

So I think that's a good segue in the credit. You mentioned they have stronger balance sheets, but also they are seeing some pressure on the expense side. C&I credit quality has been getting a lot more attention from our investor base. Are there any industries where you're seeing pressure? Or if not, where do you expect to see that pressure build?

We're really not seeing a lot of pressure to call out uniquely in the C&I space. So we're very diversified on the C&I side of our business and across many sectors, it all tends to be low single-digit exposure from a percentage standpoint compared to the overall loan book. And so nothing really to call out there on the C&I side of things. I will say, we're seeing expected normalization in consumer, but nothing concerning on that front. And we're working through on the CRE side of things, which is -- which appears to be manageable and out the window.

So before I move into CRE, just on the consumer side, BNPL has been getting a little bit more attention recently. Can you talk about what you're seeing there, what you're hearing on the consumer side overall?

Yes. I mean, BNPL, we have that business. We're -- it's a small part of our loan portfolio, a couple of billion, maybe $2 billion or so. And so not a big part of what we do, to the extent that we -- and we have some blue chip partners in that space. And our experience recently has been good from a credit standpoint, frankly, our credit losses there are even a bit better than what we're seeing in the credit card space. So we're feeling very good about how we're managing that BNPL and what trends we see emerging there.

And just as you read through into the rest of the consumer space, you're still pretty comfortable with...

Yes. You look at consumer, where 75% of our consumer book is collateralized by homes or auto. Auto is in a pretty significant rundown and house prices have been incredibly resilient. And so the loss content across 75% of the book is quite low. The rest of the book is very diversified. I already mentioned BNPL is part of it. Card has normalized to the levels that we expected. And we're feeling good about our education and student portfolio as well, all very high prime, super prime to high prime kind of lending approach and diversified and about where we expected things to play out in this part of the cycle. So feeling good about that.

All right, perfect. And I'm going to come to the room in just a sec. But maybe to wrap up on the credit side, can you talk about the office market? Can you talk about what your pipeline is as far as maturities that you're seeing in 2Q and what's coming up? And what is the performance of borrowers been relative to what you model in the reserve?

Yes. I mean we've got quite a strong reserve in place. I mean maybe the headlines is that this is -- I would just say this is very manageable from what we can see. It's -- we're going to be dealing with about $400 million or so of maturities in the second quarter. That is part of the, I'd say, a majority of our general office book. We've had the opportunity to engage with sponsors from a maturity standpoint by the time you get to the end of 2024. That's been quite good. I mean we've accelerated conversations whenever we have these maturity conversations, it gives us an opportunity to improve our standing through a number of opportunities to get additional recourse from sponsors. We've been able to improve our interest reserves and get equity whenever possible, so to improve our equity contributions from sponsors. And so these accelerated conversations gives us the ability to do that. Nevertheless, the majority of these conversations do result in an extension but typically after achieving one or more of those improvements in structure or equity position that I just mentioned. And so I think that this is -- this is going to be a long workout, to be expected a longer workout outlook here. So we're going to be dealing with this through '24 and '25 but it's very manageable from a reserve standpoint. We've already taken 5% or 6% charge-offs. We've got north of 10%, 10.6% in the reserves, and we have a very strong capital position. So again, we feel like this is going to be manageable, but we'll be talking about it for a while till the end of next year.

I'll make a note to have that in my question next year. But maybe on the office reserve, the 10.6% reserve that you have. You mentioned the 6% cumulative loss rate? Like when would you be comfortable bringing that reserve down?

Yes. I mean I think I'd focus really on the dollars. I mean the reserves may jump around a little bit just based on if good stuff refinances out and you're left with other stuff, you could see changes in the percentage. But I mean, I think that maybe the way to talk about it is possibly seeing losses peaking when you get into the first half of '25. And I think that will be a time frame when we'll start to look at the dollars that we have allocated and start thinking about whether it makes sense to charge off against that reserve. But that could happen a little earlier, a little later than that, but that's a reasonable outlook as we sit here today.

All right, perfect. Are there any questions in the room? Well then, John, maybe let's wrap up on the capital and regulation side. Since the events of last spring, there seem to be a lot more new rules and regulations that are coming down the pipe for banks of your size. There's long-term debt, there's AOCI, there's OCR. Can you talk about, just generally, what do you think the likely outcome is across these areas and what the impact is to Citizens specifically?

Sure. I'll just hit those quickly. I mean from a capital standpoint, the Basel III end game doesn't appear to be a meaningful impact. I mean RWA seems to be not a significant impact based upon some of the changes that are expected. The AOCI opt-out we're likely -- we're expecting that to occur. But our situation is that we're fully compliant on day 1. Even without a rule of not coming out, where our AOCI deduction has put us in a place where we're compliant with the rule on the day it would be issued. So that's not really a huge impact to us. And frankly, that will just get better over time as AOCI burns down. From a liquidity standpoint, we did a lot of -- we did our liquidity build in '23, and we did it trying to anticipate where we should be as a management team based on the macro, but also keeping an eye on where we thought the regulators may end up -- may head. And so we basically built liquidity that's compliant with Category 1 levels. And we -- at 3/31, we were at 120% of Category 1 bank level. Even without any tailoring, right now, we're not subject to any OCR. But we're -- so that -- we feel like we're really well positioned from a liquidity standpoint. And from a long-term debt standpoint, that will be extremely manageable. There's -- we've issued $2 billion of senior debt since the beginning of the year. And we'll be much more of a programmatic issuer of long-term debt on a go-forward basis and therefore don't -- and that's all built into our trajectory and into our outlook for the 16% to 18% ROTCE over time, incorporates us being a more programmatic issuer. And likelihood building levels that would be near what is likely to be a tailored outcome from the initial draft of long-term debt. I mean the 6% level, maybe that comes down even if it doesn't, we feel good about being able to comply with that over time.

Al right. And to wrap up, any thoughts on capital return. I think you already mentioned you're doing buyback so far this quarter. I think the trajectory from here really depends on what loan growth is for the back half, but can you talk a little bit more about buybacks?

Yes. I mean we've been buying back our stock. I mean, I think you can expect to see more of that into the third quarter. I'm not sure about the fourth quarter. We'll see. It all depends, as you say, in terms of the ability to put RWA to work. That's our -- that's our number one objective to basically put capital to work that's accretive to our cost of capital and a good use of capital from in the context of our investor base. We -- from a cascading waterfall perspective, if that's not part of the story, then we'll have the opportunity to buy back more stock. But just given our capital strength, it's just been something we've been able to do. And given where valuation is, it's a really somewhat easy decision for Bruce and I to basically think about buying our stock at these levels. And so it will be -- I think we have a nice mitigant to the environment if it ends up being a little bit more balance sheet-lite, we can generate fees and buy back our stock and still maintain our altitude in terms of earnings.

All right, perfect. With that, we're out of time. John, thanks so much for joining us.

Thank you.