Fifth Third Bancorp (FITB) Earnings Call Transcript & Summary

All right. Good morning. I'm Manan Gosalia, the mid-cap banks analyst here at Morgan Stanley. On behalf of the entire MS financials team, I'd like to welcome you all to the 16th Annual Morgan Stanley Financials Conference. We've got a great lineup over the next 2 days with 125 companies in attendance. So lot's to look forward to. I'm going to get a quick disclosure out of the way, and that is 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's sales representative. And with that out of the way, kicking off our conference, I'm delighted to have with us today, Fifth Third's Financial Officer, Bryan Preston. Bryan, welcome back.

Thank you. Thank you for having us. Good morning, everyone.

So Bryan, I wanted to start off with your Southeast expansion strategy. I know Fifth Third was one of the early movers into the Southeast and now you're accelerating your build from 25 branches a year to 50. Gave us a great update in November. So I thought it would be a great time for you to give us a quick update on your progress there.

Yes, continuing to progress nicely. We're very pleased with what we're seeing out of the Southeast branch investments. We are now -- have opened about 140 branches in the Southeast. Of the 200 new branches that we announced in November, we have 150 locations under contract in the last 50. We have verbal agreement on. We've got identified, and we're continuing to work through finalization of those deals. So we're feeling really good about the pacing on that. I think one of the important things for us is that we're maintaining the disciplines from all the lessons that we've learned earlier in the process. Finding great locations. We've got a good system for how we open the branches both from a coordination from a talent perspective in the branches, supporting the branches appropriately from a marketing perspective and making sure that we are very present in the markets when we launch these branches and continue to see really strong results. The market share data continues to support these investments. We think from a long-term perspective to really be successful in the industry. You've got to be great at consumer deposits. And that's something that we feel really good about and something that we're going to -- you're going to see us continue to lean into. We actually added a slide in our materials you should take a look at where just using call report data, we have one of the highest concentrations of consumer-oriented deposits out of the peer group. And then the other component is we have what we would see as one of the lowest concentrations of non kind of low-relationship value deposits. So think about broker deposits, non-affiliate sweep deposits, collateralized deposits. So I think that's one of the things that's probably somewhat underappreciated. Like people feel good about our deposit story from an investment perspective. But we've done a lot of work really solidifying the composition of our deposit, and it's just going to be a strong asset for us as we continue to grow.

So can you talk a little bit about the competitive landscape in the Southeast? Over the past couple of years, several of your competitors have also leaned in there. So talk a little bit about the competitor landscape and how Fifth Third is navigating that?

Yes. I mean banking in every market is highly competitive. And even the new entrants in the Southeast or the same entrants that we have been fighting in the Midwest for our history. So we continue to feel good about our ability to win. I think our investments in analytics, our investments in people, our investments in marketing and locations continue to deliver for us. I would tell you that from a retail perspective, we're not really seeing the increased competition yet. It's going to take some time for them to get branches open. What we're hopeful that is people are going to make the same mistakes that we made early in the process that they're trying to go quickly. We see some of that as we don't necessarily see discipline on location selection, and that really matters. And from a middle market perspective, there have clearly been a lot of new entrants in the market. But in many cases, that's really just bankers changing the business card they carry. Certainly, it's going to continue to be competitive because of the growth nature of those markets. But overall, we feel good about our ability to continue to grow and navigate that competition.

So when you build a branch in a market in the Southeast, can you talk a little bit about your go-to-market strategy and what you do to effectively take share and what you have been doing over the past 3 years?

Yes, absolutely. Yes, one of the key insights that we saw early on and it's one of the reasons why we started these investments is you need to have the appropriate density. You hear us talk about that a lot. And for us, it was 7% to 8% market share. And the idea behind that is in an industry where people don't wake up every day thinking about where they want to bank. That's a once in a decade or once in a lifetime decision. You want to make sure that you are part of the consideration set. And it takes a certain amount of presence in a market to be able to do that. So first and foremost, when we thought about going to market, we said, all right, how much density do we have to have in these markets to be part of that consideration set. And that's really where that top 5 that we talk about comes to play. After that, it's making sure that you're in the right locations. When you think about some of the Southeast markets, the speed of growth that they've seen in population over the last 10 to 20 years, the locations where you want to build branches today are very different than the locations where some of the existing branches are from some of the competition, the legacy competition in the Southeast. So that has been a great opportunity for us to build branches where activity is happening today. Then combine that with the marketing, the investments that we've done from an analytics perspective. And I think that's the other thing that's somewhat underappreciated is everything is really connected. The analytics that underlie the direct marketing also underlies what you see from a presentment -- from an advertising perspective and your digital experience. It also feeds the dashboards that we utilize in our banking centers, where the retail personnel and the calls that they're making every day. It helps prioritize that. So it is a really coordinated system. And then the combination of being in the consideration set and then using marketing to attract more volume is how we're ultimately taking share.

So talk a little bit more about that coordination because it's not just deposits, right? It's also the commercial bank, it's also wealth management. Can you give us a little color there?

What we're finding is that when we bring the whole bank to the market, we're more successful. And I think we do a really nice job of being a relationship bank. Our middle market banking and our wealth businesses coordinate very well. Our capital markets businesses, half of the activity, at least from our capital markets business comes from the core middle market franchise. It's not an independent silo, that is going out and going out and winning its own business with a separate customer set. So that is a really important point. It's also interesting to see the value of the branches in terms of creating middle market relationships. Because most of these -- what we're trying to bank, we're trying to bank family-owned businesses, people that care about the communities that they're part of, and they want to see a company come and invest in their community. So we see a real synergy when we're building branches. Even though the middle market customer may not ever use a branch for business purposes, they care that we're part of their community.

Got it. Bryan, before we move into some near-term stuff, I wanted to ask on another topic, which is Fifth Third's crypto strategy. There's been some press recently on the bank exploring more ways to offer services for crypto customers using stablecoins. Can you elaborate on that for us and talk about what Fifth Third plans are for the next few years?

Yes. We're always trying to look ahead. And when we think about crypto, we think there are some real use cases, especially in the payment space. And when we use the term crypto, we're really talking about stablecoin. We think that there are some interesting places where stablecoin can really create some efficiencies in the commerce space. Think about international payments today. Being able to settle activity 24/7 in an instantaneous and cost-efficient way. It would be a significant advancement from the existing correspondent banking system and coordination through the Swift reporting. So there are some real opportunities there from a use case perspective. Another use case we're thinking about is the ability to really focus on collateral optimization, like the ability to move collateral from market to market around the globe instantaneously as the markets move is an awesome opportunity when you think about people that are trying to deal with global markets 24/7. So some really interesting use cases. It's one that -- we think from a payments perspective, and it's no different than the Newline strategy, where being a part of the infrastructure, we think there's real value in that. And we think the combination of our Newline and the technology platform, our capabilities in payments positions us well to be an infrastructure provider in that space. We have banking relationships. They're operational accounts. We're not doing anything meaningful with crypto today, but we have banking relationships with 2 of the bigger infrastructure providers in the space. And it gives us a good partner to talk how they can coordinate with the banks in delivering crypto in many more use cases.

And you've been looking at this for a while. This is not new. It's just that the regulations or the rules have been made more clear.

The regulations have made it significantly more clear. There's a lot that has to be done still. We've not figured everything out, but there's clear support that crypto is going to be part of the financial ecosystem in the future. Obviously, significant questions around AML and BSA. So certainly, we are looking for more clarity on that from a banking perspective. But overall, feel good that this is going to be an advancement that the industry is going to have to figure out how they participate as part of it.

Perfect. So maybe pivoting over to near-term stuff. On the environment, Tim gave a great overview at earnings and what you're seeing from both commercial and consumer clients. Can you give us an update on the trends you've been seeing more recently?

Yes, absolutely. Earnings was right around Liberation Day. And certainly, everyone was very -- our clients were very cautious around what was going to happen from a tariff perspective. A lot of questions around are the original Liberation Day tariffs was that a negotiating tactic? Was this a deeply held policy belief? Because there were concerns. 35%, 40% tariffs. There's not a lot of industries that had that kind of margin in their profit -- in their business to absorb. And so people today post some of the pullbacks and some of the delays. There's a lot more confidence that we're going to end up in a better spot. There certainly will be some cost associated with the tariffs. I think most of our customers are trying to figure out a way and recognizing they're going to have to absorb some of that. But some of that will be passed on to consumers as well. And that balance is one where it's giving them more confidence and decisions around future investment. How does it translate into real numbers? In the fourth quarter, we started to see an uptick in utilization. We troughed at about 35.5% and late third quarter from a utilization perspective. And that steadily increased through the end of April, and it peaked at 37.5%. So about a 2-point cumulative increase through the end of April. During the month of May, it stabilized and has now fluctuated kind of within 0.5 point of that 37.5% peak. So we are seeing behavior changes. And when we talk to our customers, most of them would highlight that, yes, they did do some inventory purchases in the run-up to what could have been some of the tariff policies that would come out. And so we are starting to see more comfort that they're willing to let some of that inventory run down. And we're also starting to see pipelines pick up again. At the end of last year, in the third quarter, we saw really strong pipelines building. We were getting confident in investment. And then post election, we saw obviously a fairly strong pull-through and that was a great outcome. That's what drove that end-of-period loan growth that we had last year carried through into the beginning of the first quarter. That started to slow down in March and remains slow through most of April, but we're starting to see pipelines and middle market pick up again now in May. And this pipeline across products and across geographies. So we're feeling really good about what we're seeing overall from an activity perspective.

So that's interesting. So you're saying that, on the inventory side, corporates are willing to let the inventories move lower, but you're still seeing utilization rates to be fairly stable, so that points to a lot more core demand.

Yes. They've come down by about 0.5 point at this point, but they fluctuated around there.

Got it. And then with pipeline is picking up again, it feels like you're a lot more comfortable around loan growth.

Yes. feeling good about what we're expecting for loan growth for the rest of the year. There was another aspect that's beyond tariffs. Tax policy was obviously a big consideration for customers. Heading into the year, I think most of our customers were optimistic about deregulation and tax policy. Obviously, those are things that we're now just starting to get to more significantly. So that's creating some more optimism again. But even something as simple as uncertainty around what is going to happen from a depreciation deduction perspective, are we going to have an accelerated bonus depreciation? Are we going to have a full write-off capability and uncertainty whether or not that was going to be retroactive to the beginning of the year, was causing some customers to say, hey, we're not sure it's time to make a big investment until we have clarity around that. With the big beautiful bill, it's clear that, that was the view of that as a benefit here that should be retroactive, and that's giving customers more confidence from a CapEx perspective as well.

Got it. So as you think about your loan growth for 2025, are you starting to be a little bit more optimistic than what you guided to maybe a little bit -- a while back in April?

Yes, it's still -- I mean, it's still early, but we're certainly feeling good about what could happen for the rest of the year. There is the opportunity to have a little bit of outperformance. But there's a lot of ifs in that statement.

Fair enough. You also put out a deck this morning, you reiterated the second quarter guide. Can you unpack that for us a little bit?

Yes. The second quarter is coming together nicely. So reiterated the guide from the beginning of the quarter. Feeling good about the trends we're seeing. NII performance, very, very pleased with. Fees continuing to keep that wide range. Just from the standpoint, there continues to be uncertainty on fees. Capital markets have obviously been impacted by the volatility. A lot of our customers, the hedging businesses and some of the lending businesses as well. Those are areas where a little bit of volatility can be great for those businesses. A lot of volatility can be paralyzing for customers. So waiting and hopeful that we're going to see a good June. But overall, what we're seeing is good broad-based performance. PPNR is going to come in right where we expected, maybe a little bit of puts and takes between fees and expenses. But overall, feeling good about what we're seeing. From a charge-off perspective, charge-off performance, dead in line with what we're expecting as well. So continue to feel good about what we're seeing there.

So higher volatility in June would be better for fees lower volatility would be?

Volatility in the middle, right? So you need some volatility. Volatility creates opportunity. But when there's too much volatility, you end up in a scenario where it's just tough to make a call. You never want to do a trade or be in a position where a trade can make you look like either a hero or a fool and that's some of what you're seeing right now.

All right. Perfect. Maybe digging into loan growth a little bit. Fifth Third has seen some nice C&I growth over the past couple of quarters. You've seen strong middle market growth. You spoke about some of the trends on inventories and that front loading has gone away. Can you talk about the other side, on the consumer side, what are you seeing on auto? What are you seeing in the other parts of the consumer book?

Yes. The consumer portfolio is performing very well. So from a credit perspective, we have been focused on homeowners and prime, super prime. And that our consumers are very, very strong and continue to feel good about the credit performance we're seeing. Auto has been a really strong business this year, continuing to see very attractive spreads. We had one of our highest origination months ever, approaching $1 billion of originations in 1 month at attractive spreads. So continuing to feel good about the auto business. The tailwinds associated with home equity continue to show through, seeing growth again, we would expect to post another quarter of growth from a home equity perspective, given what we've seen and stability in the card portfolio. So overall, continue to feel really good from a consumer lending perspective.

And even as you mentioned earlier that corporates would have to pass on some of the price increases from tariffs to the consumer. So the consumer still looks good and do you think still able to absorb the price increases?

In our lending portfolio, absolutely. When we look at consumers that are on the lower end from a FICO perspective or in particular renters, looking in the deposit data, we've talked about this before, but your average or median balances in those lower-tier customers are below pre-COVID levels. The other trend that we're watching, and this is one that we talked about back in March. We are seeing continued increase in BNPL activity from a low-end consumer perspective. So for us, we have very little subprime exposure, the lowest amongst any of our peers. That is a segment that we would have some concern about. But for our portfolio, it's not an issue.

All right. Perfect. And then on another part of the loan portfolio, there has been a fair amount of competition from private credit. Can you talk about how Fifth Third is set up to service private credit, which areas do you partner with them? Which areas do you compete with them and how that's going?

Yes. It's going -- it's one that we're continuing to evaluate, and it is certainly evolving. I would tell you that our view of private credit and the role that it plays has changed over time. We see some really interesting and good use cases for private credit. We think private credit for takeover transactions from a leverage perspective, that they have a very strong product, their ability to add a few turns of leverage, their ability to take down large pieces of a deal and their ability to ensure certainty of funding is a very powerful product that it's a little harder for the banking system to be able to deliver that. So that is a spot that we think that there will always be a place for private credit. I think once we go through a credit cycle, it will be interesting to see how many of the players in the industry survived. But there will be a long-term role for private credit in the financial ecosystem. From our perspective, we would basically -- we would look to long term evaluate whether we would want to partner with a private credit provider where we could offer a customer if they were interested in having both a traditional bank solution or a private credit solution because that is one of the things that we're hearing would be valuable when I talk to our sales force. We look at it as a broad ecosystem. The -- we look at, obviously, banking the sponsors overall from a private equity and private credit perspective. We look at banking the portfolio companies. And one of the interesting things that we found is that even when we might have a customer that was a longtime customer that gets purchased by a private equity firm and the financing gets done by private credit, we're able to maintain the banking relationship. In many cases, that treasury management aspect of the relationship is very valuable. And so maintaining those partnerships so that those outcomes can continue would be the long-term desired structure.

So you keep the fee relationship, you keep the deposit relationship. Got it. Maybe pivoting over to deposits then. Can you update us on some of the deposit trends you're seeing in the second quarter?

Yes. We are seeing -- one, we're seeing normal seasonality. So it was a year where I would tell you that tax payments were a little bit higher than prior years. But still within the range of normal seasonality. But long term, what we're seeing are the normal trends that we'd see. So continuing to see good activity out of the consumer sector. We've done at the end of last -- basically end of last year and into the first quarter. We were obviously doing some cost rationalization, and that was primarily in our commercial portfolio and a little bit from a repricing in our consumer portfolio that allows us to do some reinvestment. But broad strokes, deposit trends, especially core customer deposit trends have been very strong. Year-over-year, and this is one of the data points that you can see in the results, we've been able to pay off almost $4 billion of brokered CDs from a funding perspective and have been able to use the savings to reinvest in the core franchise. So we feel really good about the core deposit trends. We have not seen a significant uptick in the competitive environment. I think some of that is just broadly speaking, the lack of broad industry loan growth, I think, has helped keep some rationalization from a deposit competition perspective, but we're continuing to work ahead and just to make sure that we're in a strong position from here.

But it would be a good thing if you actually saw loan growth and saw deposit competition pick up overall from the NIM perspective, that would be better.

Overall, yes. Yes, we're seeing -- I mean, we're seeing loan growth, and that's obviously helpful from a NIM perspective. But more loan growth, more activity around kind of economic activity that will drive industry deposit growth, but it does require some reallocation within the industry, and that's where the increased deposit competition comes from.

And as you think about your deposit pricing strategy across the franchise, we've noticed you've been adjusting your rates across different regions. Can you talk about how you're thinking about pricing across different geographies in the Southeast versus the Midwest?

Yes. And it's really just looking at the competitive landscape. Our multi-region footprint really gives us a lot of ability to really dial in a strategy to take advantage of where we see the best cost opportunities. And we also have the ability to do it across businesses. I think we're really coordinated. Our treasury team is heavily involved in the balance sheet strategy across the businesses. They meet regularly with the business leaders. So they're involved in both commercial and consumer deposit strategies and also understanding where the loan growth activity, where we're expecting to see it, and that gives us a good line of sight to really focus on optimization. And we're able to do things like cycle rates through different markets. Take advantage of spots where we're finding more responsiveness to our marketing campaigns or less competition. And we really work hard to take advantage of that.

So when you think about bringing those deposit costs down, how do you think about what happens in an environment where rates don't come down versus what happens in an environment where you see a few rate cuts this year?

Yes. I mean our base case in a scenario where rates don't come down, I think that is likely a scenario where you are going to see some economic activity. So we're -- we would be more focused on continuing to grow deposits in that kind of environment, less focus on rates down from here. But we still have the ability to deliver more deposit savings if loan growth were not to show up. But our base case is that we're more focused on growth from here than trying to rationalize rate down further. It's been interesting. We had our analytics team go back and we've got a lot of good data now from how did all the deposits that we brought in over the rising rate cycle and the deposits that we've priced down, how did those campaigns perform. We're seeing strong retention, a stronger retention than we had even seen in prior cycles. Some of our campaigns, we're seeing north of 75%, 80% retention after pulling rates down. So we're very, very pleased with what we've seen from a deposit performance perspective.

So maybe bringing that all together for NII, you've spoken about being fairly comfortable with your NII guide even without loan growth or rate cuts that you are seeing a fair amount of loan growth. Can you walk through what the drivers for NII growth are this and why you believe it's so resilient on the different scenarios?

Yes. So the beginning of the year, we were still getting some benefits from the deposit repricing that was really a first quarter impact. Most of that has played out from here. For the rest of the year, the loan growth is really -- it's pretty much kind of -- sorry, the NII growth from here is really 50-50 between loan growth and fixed rate asset repricing. We're still seeing $4 billion to $5 billion a quarter of fixed rate asset repricing. At the current shape of the yield curve, we're still talking about 100 to 150 basis points of pickup on that repricing. So the combination of those 2 things as well as a benefit of 1 extra day, which for us is $10 million for every business -- for every day, calendar day. That creates the NII growth that we're seeing from here.

Got it. All right. Perfect. So let's talk a little bit about fees. Maybe treasury management is a good place to start. You've talked about leading with products that don't require credit extension to win a client relationship. Can you dig more into the strategy there?

Yes, it's -- the idea there is how do we use software to solve problems for our customers. Anybody can sell a wire, anybody can sell an ACH. And what we're trying to create is some differentiated value for our customers. Big Data health care, which is our receivables automation reconciliation business for large health care systems is a perfect example. It is a business where you have a very complicated B2B payments reconciliation process. When you think about both the individual payer, the insurance payer, Medicare, Medicaid payers and then also payments out to the providers that might have been providing services as part of that. What Big Data health care allows for is very large automated reconciliation capabilities, which have been very powerful for our customers. We've got multiple use cases now where customers had, in some cases, 100-plus reconciliation resources that were being utilized offshore and have been able to take that number down into the mid- to low single digits. So great outcome from an automation perspective. And the other complement to it is it also allows for additional revenue realization because it's able to identify and understand what the payment terms are supposed to have been under the contractual relationships. So it's helping customers capture more revenue that they were losing as part of the process as well. That really has been the main focus for us is how do we attach software to kind of the left and right of a payment transaction and help solve some kind of operational problem and create real cost savings for our customers.

And then on the other hand, on fees, wealth is a big opportunity as well. Can you talk about where that growth is coming from and what your plans are there?

Yes. The growth in the wealth business, there's 2 things primarily. One, it's just a continued growth in the franchise. The biggest feeder for our wealth business is our middle market bank and as well as some upstreaming from our retail bank. The combination of those 2 businesses contribute 75% of the AUM growth that we see on an annual basis. So that is part of when we talk about being one thing and being a relationship bank, that is a key part of the strategy. Our investment in and start of our own RIA, FTWA, Fifth Third Wealth Advisors has been another area of growth. And basically, in a 3-year window, that business has gone from 0 to we're now right around $3 billion of AUM from a purely start-up perspective. So we continue to feel good about what we're seeing in that space.

And then to round out the fee conversation on capital markets, can you talk a little bit about both the near-term outlook? And what do you think the core growth of the business can be over the next few years?

Yes. Long term, we view capital markets, and it has -- for us, it's proven to have been in the past mid- to high single-digit growth business. We've compounded that business nicely over the last several years. This is certainly has been a slow year from a capital markets perspective given all the uncertainty in the market. But what we're hearing is that the transactions aren't -- the transactions that are being pushed, they're not being canceled. A lot of the customers, either if it's a refinancing transaction, it has to happen or most of the customers believe that the strategic transaction that they've tried to accomplish still makes sense. They just don't want to execute in a highly volatile market. So continue to feel good that long term, that business will come back once we get a little bit more clarity around the economic environment.

Great. So let's talk a little bit about expenses. You're guiding to about 2% to 3% expense growth in 2025. What do you see as the most important strategic investments you're making right now? And where -- like what innings are you in on those investments?

Okay. The main areas of investment right now, obviously, continued investment in the retail branches. From the current markets we've identified, I would tell you we're in the later innings of those investments, really 3 years left and we'll be done. Obviously, we're going to continue to invest in our middle market sales force and our wealth sales teams, like those are just opportunities across the footprint where we continue to see an ability to grow. We're winning on talent, which is exciting, and we feel good about. So that will be an area of focus. And then it comes down to product and technology. I don't think product and technology investments that you're ever done. We are continuing to focus heavily on AI, making sure that we are understanding the use cases of AI and that our infrastructure and data are in a place for us to be able to take advantage of it as the technology evolves, is an incredible focus of us right now because the ability to be able to move rapidly, especially in the context of being able to get expense saves out of the company that we can then turn around and reinvest in growth, we think will be very powerful and transformational for us and the industry.

Got it. Perfect. I'm going to turn the audience in just a sec, but I do want to cover credit before I do that. Can you talk about how credit is holding up in the second quarter? I know you reiterated the NCO guide. Are there any areas of stress that you're particularly focused on?

Broadly speaking, asset quality trends, asset quality is improving, and we feel really good about what we're seeing on that front. Like I said, I reiterated the charge-off guide. I would tell you that the we're seeing from a criticized asset ratio perspective, that has been an improvement story for us over the last several quarters. And there's nothing that we're seeing right now that would cause us to think anything different for this quarter. And then we continue to have high confidence in resolution of the handful of NPAs that were ABL related. We feel good that we understand the loss content of those. Our ABL business historically has only averaged about 6 basis points of losses. So we feel like the risk is well understood from an NPA perspective and that 40% plus resolution of the existing population over the next 2 quarters, we continue to have high confidence on. I would tell you the one thing that we continue to watch closely is the economic scenario projections that go into CECL. We are a Moody's Shop. Moody's scenarios for May have deteriorated from March. Unemployment rate on a weighted average basis is about 50 basis points higher. Most of that is in their baseline scenario, their baseline unemployment right now is peaking closer to 5%. From a purely mechanical perspective, looking at March 31 balance sheet, that kind of scenario might add a couple of points, maybe 3 basis points to coverage. So it is a consideration that we'll all have to think about from an industry perspective, but overall credit quality has been very strong.

Got it. The other point I wanted to touch on the credit side is shared national credits. They're about 27% of the total loan portfolio. It's been coming down a little bit over the past couple of years. But what are you seeing in that book? Any signs of stress there? Anything that we should be considering as investors and analysts?

No, we continue to feel good about the performance we're seeing out of the shared national credit portfolio. That is a portfolio that we focus on being a relationship lender. It is one where I would tell you that the composition of a shared national credit today in that portfolio looks different than it did prior to the great financial crisis, in particular. We actually put a little bit of this data in our presentation today. The composition of leverage lending has come down meaningfully in that portfolio. Ten years ago, leverage lending was 8% of our total loan portfolio. Today, it's 2%. So the composition of what a shared national credit today looks a lot different than it used to. And I think that's one of the factors that continues to give us confidence. We underwrite these credits ourselves. And these are customers that we have real relationship with.

All right. Perfect. Any questions in the room? So Bryan, maybe to end here, a question on capital. You've talked about targeting about $400 million to $500 million of buybacks for the rest of the year, mostly in the second half of the year. How are you thinking about managing capital levels given the volatility that we're seeing in the long end of the curve?

Yes. We continue to believe 10.5% is the right target for us. We look at the portfolio and we stress and we do a lot of analysis to evaluate those levels and continue to be very, very comfortable. The aspect of the long-end volatility, the bullet locked-out structures of our investment portfolio continues to pay off. That portfolio is continuing to mature, continuing to pull the par over time. We're still seeing about -- a little bit over $1 billion of cash flows every quarter. 60% of the fixed rate exposures are in those bullet locked-out structures, and we're continuing to see a pull into the curve. If you look year-over-year, we had a 20% reduction in our unrealized loss on our AFS portfolio in an environment where the 10-year treasury rate was unchanged. That really is the evidence of that structure working. And we feel very good about the confidence of knowing that those securities are going to pay off over the next several years.

All right. Perfect. With that, we're out of time. Bryan, thanks so much. Thanks for joining us.

Thank you.