Huntington Bancshares Incorporated (HBAN) Earnings Call Transcript & Summary

Next up, we have Huntington Bancshares. From Huntington, we have Chairman, CEO and President, Steve Steinour; and CFO, Zach Wasserman. So both -- thank you both for being here. Delighted to have you. And Steve has some prepared remarks. So I'll hand it over to you, Steve.

Thank you, Ebrahim. Thank you very much and BofA for hosting us today. Welcome to all of you. I appreciate your interest in Huntington today. As you know, Zach will answer most of the questions, certainly, all the hard ones, our CFO. But before we get started, if you could look at Page 2, the forward-looking statements we'll make today. So I want to begin with a few comments related to our strategy and recent initiatives. Then we'll turn it back to Ebrahim for a Q&A. Starting on Slide 3 now. At our Investor Day in November, we outlined 5 messages which summarize Huntington and our strategy. First, the culture of the company is embedded throughout the bank, and it resonates. This is where we're looking to engage our colleagues, and we believe this is a differentiator for us. It's how we've accumulated multiyears of J.D. Power and other awards because of their engagement. So there's a lot of emphasis on colleagues and the culture of the company, and that's how we're delivering our organic growth initiatives. Second, these colleagues also have built a powerful brand. We overviewed it in the Investor Day, #1 in Trust, leading Net Promoter Score #1, affinity to switch banks. So there are multiple dimensions of this. Those are just some of the consumer scores. TM and commercial banking and others, wealth would be -- have equivalencies. Again, our colleagues, back to our colleague, culture and then their performance driving the brand, creating the brand we work with today. Third, we're well balanced between consumer and commercial. One of the few regionals that have built this as we've more than tripled the bank over the last decade or so, we've sustained this balance. And we've got a broad set of businesses. We -- I've reviewed those in the Investor Day. I think we surprised some of you with the reach and scale of some of those businesses. But they're in a great position to sustain our organic growth as we move forward. And many of these businesses are complemented by the substantial new revenue synergies that are opportunities coming to us from TCF. Fourth, we're operators at the core. The management team are operators. We have a track record of execution, 2 larger deals in 12 years that have been successfully integrated, and that's all against the culture of accountability. And finally, we're uniquely positioned, we believe, to deliver substantial value creation for our shareholders. We're pleased to have updated our medium-term financial targets at the Investor Day, and we believe these targets. PPNR growth, positive operating leverage and a top-tier return on capital are directly aligned with shareholder value creation. So you got 5 or 6 slides here. We'll turn now to Slide 4. 2022 was a remarkable year for us. We got the expenses from TCF. We got the revenue growth and lift that we wanted. And we entered this year with strong momentum in the business lines. We're operating from a position of strength with clearly defined strategic priorities. And our teams remain focused on driving sustained organic growth, consistent with our risk appetite. You've all heard us talk about aggregate, moderate to low-risk appetite now for many years. Now as the macro -- as for the macroeconomic environment, we said at the Investor Day that we were operating with 3 scenarios, and we remain cautious given the significant ongoing uncertainty in the economic trends and geopolitical events. As we've noted, we're preparing for multiple scenarios. That's why we are proactively taking steps to outperform should the economic conditions soften further later this year. As we've planned, we've grown capital. And last month, we were pleased to announce a $1 billion share repurchase authorization, which provides us with capital flexibility as we go forward. Our loan loss reserve is -- coverage is robust. It's at the top end of our peer group, and we expect it to stay robust as we move forward. Having said that, credit continues to perform very well. We benefit from a well-diversified portfolio, split almost evenly between consumer and commercial. And in consumer, we focus on super prime and prime portfolios. On the commercial side, we have strong customer, industry and geographic diversification as well as a long history of disciplined customer selection. Since the overhaul of credit in 2009 when I joined, credit has become a strength of Huntington. And I believe this will continue to be a differentiator for us. I believe very strongly this will continue to be a differentiator for us. Most of my background, my career was in credit. So I have confidence in our position and our posture and our relative performance. Now these factors give us confidence in our ability to continue to execute on our organic growth priorities while holding true to this aggregate moderate- to low-risk appetite through the cycle. With our breadth of businesses and markets we cover, we see opportunities within our risk appetite to deliver growth over the course of '23 and certainly well beyond that. So with this backdrop, we're executing our plan for '23. In many ways, it's a continuation of what we've spoken about over the last year. We're going to continue to invest in sustainable revenue growth initiatives, which we believe will deliver growth for many years to come. At the same time, given the operating environment we're in, we're dynamically and proactively managing expenses. We are taking numerous actions to manage the overall expense growth of the bank while ensuring we're sustaining the investment capacity for our most critical priorities. On to Slide 5. I want to highlight a few of these efficiency initiatives underway. Collectively, these actions are guided by our commitment to an annual positive operating leverage. First, operation accelerate is a key program for us, and we highlighted this at Investor Day. We're trying to simplify and automate our major customer processes, giving customers through our digital capabilities, the ability to self-service, obtain their information, make their selections, all of which will reduce some of our mid and backroom operating areas in terms of headcount and make us more efficient. Importantly, we're also seeing where we're getting increasing revenue as a consequence of some of these changes. And second, we continue to optimize the branch network as we have for many years. We completed the consolidation of 30 branches this quarter, representing 3% of the network. These efficiencies support reinvestment and digital capabilities as well as some new branch additions in growth markets like Denver, where we've announced plans to open over 20 locations over the next several years. Third, we launched a voluntary retirement program intended for our middle- and senior-level colleagues, our managers. This was offered to colleagues in late January, and we expect to be able to share more on the efficiencies this will create and the associated restructuring expense in the coming months. We've never done a voluntary retirement program. So we just don't have the ability to project it. Finally, last month on our earnings call, we indicated that we'll be taking actions to align our organization structure with a focus on our most critical priorities. And we've made the decision to make some changes to our organization and reporting segments. If you turn to Slide 6, let me share a few highlights on these changes. Today, we're organized around 4 business segments: Commercial Banking, Consumer & Business Banking, Vehicle Finance and Regional Banking & our Private Client Group. Going forward, we will consolidate these 4 revenue segments into 2 during the month of April by moving our Vehicle Finance and Private Client Group into our Consumer Banking segment and renaming that as Consumer & Regional Banking. These changes will strengthen the alignment of our business units to our core strategic principles while enhancing the focus on our regional banking model. This is really important. The changes are going to strengthen the alignment of our operating business units to our core strategic priorities while enhancing the focus on our regional banking model. We're committed to local, bringing the decision-making and customer service closer to our customers in the communities across our footprint. The change will double down on that commitment, an increase in the coordination of our business units on a regional basis to better serve customers. Now additionally, this consolidation will bring enhanced agility and speed of execution, which we believe will support even greater growth opportunities over time. The new consumer and regional banking segment will become a fully integrated organization, inclusive of all consumer and business banking products and services across the bank. And as we shared at Investor Day, growing primary bank customer relationships is at the heart of our performance, and we believe this change is directly aligned with this objective. One example of this within our consumer-related businesses is a stronger alignment of our advisory initiatives for mass affluent and affluent customers who bridge between our retail brokerage services and our private bank. By aligning these business units within 1 segment, we're bringing all of our wealth management activities under at our central team within the new Consumer & Regional Bank segment. Additionally, the reorg is expected to provide efficiency opportunities as we can better support these revenue segments with scalable and efficient middle and back office support as well as corporate support functions. Now on to Slide 7. We have a long track record of investing in our most critical revenue-producing initiatives and our outlook for '23 contemplates continuing on that pathway. The disciplined expense management, I mentioned earlier, provides us with the capacity to fund to self-fund these initiatives, allowing us to grow investments at a consistent solid pace even as we hold the growth rate of overall expenses to low levels. These investments are centered in the areas of technology development, marketing and revenue-producing personnel additions. Now we've highlighted here a few of the select initiatives underway for '23 across these 3 categories, which are included within our current guidance and operating plan for the year. Three of these I'd call out. First, the continued growth in technology development investments, focused on digital capabilities. And we discussed this at Investor Day. We've doubled the tech dev investment between 2019 and '22. In '23, we're going to continue to grow that tech development at roughly a 20% level with a focus on delivering numerous new products and services across Consumer and Commercial businesses, including what's coming through Operation Accelerate. Second, the investment in the customer acquisition and brand building spend or investment is fueling sustained growth in primary bank relationships and ultimately, core deposits, loans and value-added fee revenues. Our digital marketing and personalized delivery initiatives continue to drive growth in our customer base and have become our leading customer acquisition channel. We believe this type of innovation is imperative to sustaining our brand strength and leveraging the power of our overall digital product set. And then third is the continued addition of key revenue-producing personnel. Over the past year, we added some substantive resources to areas such as business banking, practice finance as well as the build-out of expanded markets in the Twin Cities in Denver. For '23, we'll continue to add key talent, primarily within our specialty commercial banking verticals, where we have tremendous growth opportunities as well as we build out our climate finance team, both of which we highlighted on the Investor Day. The Climate finance team is on a track to have fully onboarded nearly a dozen colleagues by the end of this quarter and have built a pipeline of over $0.5 billion year-to-date. Turning to Slide 8. We heard these themes at Investor Days and they summarize well, our messages from today. We're continuing to invest to drive sustainable profitable growth in the areas of strategic focus we outlined. We're going to continue to differentiate through our leading brand trust and customer experience, and we're taking proactive actions in order to optimize the bank for sustained top quartile performance in a range of economic scenarios. So with those remarks, let me turn it over to Ebrahim for his Q&A session. And thank you again. Ebrahim?

So I guess maybe 1 question we all had, Steve, for you is how many hours do you sleep?

Well, I'm just a show horse. So the executive team works very hard and well as a team.

I guess I had a few questions following up on the org restructure. But maybe before we get to that, you mentioned about the macro outlook, 3 scenarios under which you're operating. Just give us a flavor of what's happening underlying within your markets, the manufacturing economy where you're talking about the Intel plant [ cell. ] So there's some secular themes that are playing out. Would love to start there.

Sure. The underlying economy is actually performing quite well. I'll spend a minute on Intel, if you'd like, but there's a terrific investment in expansion of businesses or new businesses. Just this week, coordinated $3.5 billion commitment with a partner to a new plant in West Michigan. So I mean things are happening literally every week somewhere in our footprint in the mid -- primary footprint print in the Midwest, like what we see. I'm out, routinely talking to customers and other businesses. And there's a lot of confidence in the year ahead. There is -- so there's not a cliff event. They're not expecting a cliff event. Having said that, there's a rationalization of investments that are occurring that are, I think, resulting in some deferrals, some of the investment programs or maybe a sale of a company or other activities. There's just too much volatility and uncertainty at the moment. But the underlying is still very strong. Consumers are [indiscernible] these businesses are generally in very good shape. Even in the softer areas like home building, homebuilders will generally tell you they can't get enough labor. And that's a uniform comment, any business. You just can't get enough labor. Intel, by the way, is the game changer for Central Ohio. It's a fabulous company. What they're doing there is remarkable. And we're very, very fortunate to have landed that. It will be the largest chip making region in the world as they fulfill -- it'll take years, maybe a decade or more, but as they fulfill and put 8, 10 or more chip plants -- chip fab plants in there, you're going to see $100 billion plus of investment just from Intel.

Got it. And I guess when you think about, as you mentioned, deferrals of investments, I think your loan growth guidance is about 5% to 7% for the year. How do you think about the drivers of loan growth this year? Any big difference between what's going to be driving it this year versus the last?

Well, we have a number of really strong asset-generating businesses. We're #5 in equipment finance nationally. We're top 10 in asset-based lending. We're, I think, #2 in distribution finance. So we've got 13,000 distributors that we were [indiscernible], a number of those and [indiscernible], garden equipment, a host of those that we work with nationally and they have depleted inventories. So they'll restock their inventory. We're a big auto floor plan lenders as you know. That will be a tailwind. There's still a massive amount of stimulus dollars not yet released out of the most recent couple of programs. So I think it's around $1 trillion of tailwind that will go into these different industries and government entities yet to be realized. So then the Midwest will have its proportionate share or better of those as we go forward. So I see a lot of room for continued economic growth. It may be marginal, but I don't see us -- I don't see anything that says a steep drop off. And we're trying to play offense and defense simultaneously here. We're taking expenses out to be contingently ready. We're reinvesting a portion of those, but we're going to take some to the bottom line as well. And so the program referenced this morning, the 4 to 2 revenue segments is an example. The branch consolidation is another example. The voluntary retirement program, a third example. There are other things in addition to those 3 that we're also working on. As the year unfolds, we'll share those.

Understood. And just given sort of your exposure across businesses, supply chain issues? Are those more or less settled and now it's just about...

There are still some supply chain issues, but they're generally getting resolved. People are sometimes taking cars and rationalizing that didn't have the seat warmer, but that's okay, or the steering wheel warmer. And the OEMs, I think, are finding that not all of the bells and whistles or toys within these vehicles and other types of manufacturing that are chip constrained. You can operate without them.

And I guess when you bring it to Huntington, how do you see the -- I'm not sure if you can quantify where those inventories are across like equipment finance, dealer out of floor plan, like what would be normal relative to maybe...

I can take that one. As we've seen -- as Steve noted, just the 3 legs of the stool in terms of commercial loan growth opportunity for us, there are specialty verticals that Steve referenced in his prepared remarks, there's the asset equipment finance business, but this line utilization being the third of those legs is really driving significant growth. It drove growth last year. We expect it to continue to drive growth in loans as we go into 2023. And it's really 3 big buckets. Our general middle market line utilization has essentially returned now to pre-Covid levels. So that was over the course of last year, we've gotten to that level. On our vehicle floor plan business and the auto finance space, that's -- that was trending to give you a sense. Pre-Covid levels of utilization might be sort of 65%. It had reached 30% by the middle of 2022. It was already back to 45% by the end of '22. We think that could very well recover back to pre-COVID levels over the course of the next 4 to 5 quarters. So that's still an ongoing tailwind, which would drive growth. And then our distribution finance business, this is the relationship we have with 13,000 dealers throughout the United States of small-ticket home and garden, personal Motorcraft and things of this nature. And those supply chains have improved as well. And so that line utilization is essentially almost back to pre-COVID levels and now and yet continues to grow even just as the business grows and as we continue to expand the network. So of the 3, Auto Finance has the most room to go, but all of them are showing encouraging signs.

And I think you mentioned at the Investor Day that a lot of your clients are consolidators, and they're acquiring other auto dealers, so that probably helps [indiscernible].

Yes. It does.

I guess maybe going back to the org restructuring. Steve, you obviously at the Investor Day in November, give us a sense of like the catalyst behind this move. And if you can unpack some of the benefits, both on the expense and the revenue side around go-to-market strategy. I assume all of that becomes a lot faster.

Well, this is principally a revenue play. There will be some expense benefit from it, but it's principally a revenue play. I think all of us who were talking about revenue production at that Investor Day talked about being local in the context of the regional banking activities. And we have a very embedded strong belief that are delivering locally. It's about relationships and people. You think about our vision, people first, digitally powered, really important. As we were working through the strategic planning process beginning last summer, we started to ask ourselves, are we as aligned as we'd like to have our wealth businesses, so that we're maximizing opportunities? We see this big growth area for us going forward. We are underpenetrated and have been -- we have been. And while we've made some progress, it's not coming fast enough in my -- from my perspective. So this alignment, I think, helps us significantly in that regard. Also, as we drive more and more through our digital channels, digital and business banking, digital and commercial banking, digital and wealth and consumer, we're getting to where our touch points in branches and others locally are -- it is just they don't need as many touchpoints. And we want that for efficiency and other reasons. But to swim against that tide, we believe this local empowerment will be in a very important and differentiated factor, where our regional presidents and their teams will all be aligned to make sure we're maximizing OCR, maximizing our customer relationships, which are always about being local.

Got it. And from my experience, it seems like this requires some tweaking and leadership in teams. Like, does that require any sense of like hiring of the right people as you rejigger the regional banking focus?

Well, we have a lot of talented colleagues. So we don't have -- this is not -- it's not going to be a hiring business that opens up on this. In fact, 1 of our challenges, we have enough talent and how do we maximize the opportunities for those that are going to be part of our growth and success for years to come. That's why the voluntary retirement program. There is a logic to the steps we're taking to position the company during the first half of this year, coming off of 4 PPNR record quarters and the momentum we had coming in to taking the action now and setting us up for, I think, the next long-term run. The last time we did a reorg like this was in 2009. This is really significant for us.

And I guess maybe in terms of the PPNR and the expense, I think, Zack, you're out in December, you talked about like there's a pathway to kind of grind and deliver positive operating leverage. Just talk to us about the medium-term opportunities to bring down expenses, improving efficiencies.

Sure. Yes, I'll take that one. And I think it sort of -- I'll extend on some of the comments that Steve made in his prepared remarks, which is the overall model is to grow total expenses at less than revenue, less than the growth rate of revenue, drive positive operating leverage, and ultimately, to funnel those expense capacity into the investment categories, as Steve mentioned earlier, to really be on the front foot. I mean I don't want to bury the headline, 20% CAGR over the last 3 years in those offensive oriented expense investments is very significant to our growth and to our strategic positioning. That's what fuels the growth, but it's all funded by Essential's efficiency program. So there's a number I would call out. One that we didn't call out in the prepared remarks, but just very significant is that our run-the-bank costs in technology, not development, but the run-the-cost of tech and run cost of operations, we typically hold to a low single-digit growth rate even as revenues are handling above that. So that throws off a lot of benefits of scale and efficiency improvement. The second 1 is some of these systematic programs that we're doing. So in our retail branch distribution network, we've got about 1,000 points of presence. They're still very relevant, still a really important acquisition channel. But over time, there's an opportunity to pluck the least productive nodes out of that network and had it generate net economics. And so that's what we're doing. Our expectation was to reduce about 2% per year out of the branch network on a go-forward basis, very consistent with what we've done in the past. This year will be 3% to give you a sense. So we're finding economics there that we can drive that efficiency. Operation Accelerate. So just going back and looking systematically at our top customer-facing processes, the term is used journey from customer prospecting to acquisition to onboarding to servicing, et cetera. And as we go through and systematically find ways to automate, simplify, drive efficiencies in those processes, we're finding, I think, in our Investor Day, we highlighted $150 million of profit opportunity in just those first 2021 journeys. And it's about half from expense and half from revenue actually. We're seeing a lot of benefits, both in terms of reduced cost and increased productivity in that program. And then you add that to what we've just been talking about now in terms of the organizational alignment, which is primarily about strategy and revenue but will drive some net efficiencies as well. And so those are the kind of things we'll do. And our line of sight to continuing to operate that play exists over the course of our medium-term horizon. It's a very important part of the medium-term PPNR goal, we gave. In fact, I mentioned in Investor Day, it's about 1/3 of that between 6% and 9% PPNR growth, we expect to come from ongoing efficiency gains.

That's helpful. And maybe just pivoting to more issues near term deposit liquidity, obviously, a big area of focus. You, I think, outperformed the industry last year and your guidance still expects continued growth. Just give us a sense of are getting to a point where Fed funds at 4, 5 finally leads to a lot bigger push within your customer base for higher rates and how that's kind of informing strategy for growth?

We were very encouraged and pleased with the outcome of our strategy to gather deposits during 2022. We saw 3 consecutive quarters of deposit growth, whereas the industry was under clearly large, a lot of pressure on deposits. And everything we're seeing right now continues to corroborate that we'll continue to grow deposits throughout the course of 2023, in line with the guidance we've given, which is between 1% and 4%. In that growth, it's weighted higher to commercial, but consumer will also grow. And the momentum we're seeing in the consumer business right now, which we saw in Q4 is continuing through the early part of this quarter as well, could see consumer even growing better than that in the near term. So it's pretty encouraging. Kind of to the nature of your question, it's clearly a very competitive environment right now, very competitive environment. And we're seeing the mix shifts as you would expect, to the higher interest rate categories. With that being said, it's still very rational. I wouldn't characterize it as a major trajectory. It's fairly consistently competitive as we stand today. And all of the trends we're seeing continue to corroborate both, our volume outlook and our cost and beta outlook.

When you think about -- I think at the Investor Day, what stuck with me was just 3x household growth over the last 10 years, [indiscernible] of relationships with these deposit customers. When we think about acquisition tools to bring in defaults today, is it the payments business on the commercial side, are the CDs on the consumer? Like what's driving that growth?

I mean, fundamentally, it all comes back to our strategy, which is to grow primary bank relationships to drive concerted and systematic acquisition of consumers, business banking and commercial clients, and then to deepen those relationships with multiple products, and ultimately to get the -- often the payments flows from those customers, so you can really win primary and operating account status for each of those segments. That's the strategy, and that's why it's really working. I would say on the consumer side, we're seeing very strong levels of consumer acquisition. January was an incredibly strong month, and we expect that to continue, and that's bearing fruit in terms of additional deposit gathering and also the deepening efforts that we have. We put a lot of investments both, in our branch network and our digital distribution capabilities, to gather more deposits and have a very effective channel and that's working. And on the commercial side, treasury management is a major focus for us not only to grow fee revenues, but importantly, to be the operating account status, and that's where we're seeing significant successes as well.

So I'll add on that, if I can, Ebrahim. We distinguished consumer products -- deposit products for more than a decade. And we've had great customer service year in, year out, J.D. Power and other awards. So we've got the service side right. We've got a distinguished product. What we have found with our marketing technology investment is we now have a much deeper reach using digital tools. And so you've got reach in new channels and personalization that are helping to drive the consumer side. On the business front, we're -- as you know, we're #1 [indiscernible]. We're a very large small business bank. Our deposits are a multiple of our loans outstanding in that business banking arena as a consequence of year in, year out performance. Again, our digital tools are starting to open up that channel even more for us, and they're just coming on board. We've just started with mobile for business last year. So we have more reach, more connectivity and more personalization on the consumer side and more TM focus on the -- even the small business side, making it easier. Think of Amazon like ease of doing business, that's our goal with Project Accelerate. And early signs are quite positive.

Okay. I guess maybe 1 more on [ ALCO ] management and balance sheet strategies, like hedging in the -- even the Feds hike, you're talking about what happened when rates get cut. And I think, Zack, you've talked about you're kind of in a good place hedging wise, remind us where you are? What other actions do you expect to take to protect the margin from lower rates? Do you think about managing to that PPNR sort of target?

Yes, clearly, it's been a pretty dynamic [indiscernible] environment here for the last several quarters. It continues to be so. We think we've got the longer-term hedging protection program essentially right at this point. We're not significantly adding to it. There may be opportunities over time to tweak at the margins and optimize to generate a little less upfront cost for the longer-term protection that we're getting, but we think we've generally got the program set as of now. There may be opportunities to extend it over time as well as we go throughout the course of the year, but we'll see. On our securities portfolio, we don't see any significant need to reposition or change. We think it will stay approximately the same size in proportion to the balance sheet. And so we'll grow as assets -- as loans grow. And generally speaking with respect to NIM, our goal is the same as we've said for a while: to blunt the volatility as much as possible and the outcomes around NIM for the next several years to create as tight a corridor as we can for where NIM will trend and ultimately, to generate a top-tier NIM within our peer group, which we been able to do over a 5-year period, over a 10-year period. It's our expectation to do the same thing on a go-forward basis and to couple that with the growing loans that we see to just continue to drive the growth of dollars of interest income or spread revenue on a dollar basis. That's the goal, and everything we see continue to point to our ability to do that.

Got it. I guess maybe some spread revenue to fee revenue, like you've been focused in terms of growing fee income growth as well. And I think some of the org structure might also lend itself to it. But just talk to us in terms of priorities, investment spend, and you've done a Capstone M&A, you've done some of that inorganic -- yes, growth potential.

We gave some guidance around fee revenue growth for 2023. In our earnings call a few weeks ago, and we talked about flat revenue growth. And really, what's going on there is 2 factors. On 1 hand, the strategic areas of focus that we have capital markets, payments, wealth management are doing exceptionally well. Those 3 areas would be on track to drive high single digits, overall fee growth for Huntington. So really performing very well. In 2023, we're clearly held back to some degree by 4 temporary factors, just to grow over on mortgage, which now appears to be actually running pretty well on a run rate basis, but on a year-over-year basis, we'll have a grow over. Our continued evolution of our fair play product set and reducing deposit service charges, again, we're at the run rate now, but year-on-year reduced. There's a little -- the last vestiges of the TCF accounting impact of purchase accounting accretion and fees, a transition of our operating lease portfolio. It also reduces cost by essentially the equal measure. And then our decision to hold SBA loans on sheet as opposed to sell them, which is a great economic trade, drives revenue over the long term but temporarily reduces fee revenues. Those things are keeping us to flat overall. But coming back to the real growth drivers. In capital markets, we're seeing extremely good performance of penetrating the services into our base and just the performance of the team. In the core of our cap markets business, leaving Capstone, the recent acquisition aside, that business grew 25% plus revenue last year. So it's doing exceptionally well. And then you bolt Capstone onto that, so the middle market M&A advisory firm which notwithstanding some of the challenges in the M&A market broadly, continues to see really positive trends and is beating its own internal plan. So we're really encouraged by what's happening there. On payments, we continue to see great traction in treasury management. We've touched on that a number of times. And our card business as well continues to chug along. Growth, high single-digits growth in debit card, 20%-plus growth in credit card, really strong performance. And then our Wealth Management business continues to perform really well and gather assets. So we like what we're seeing, and I think it's set up to see growth emerging. We think the Q1 is typically a seasonal low point for fees. It will probably be the lowest quarter, and we'll start to see growth thereafter throughout the course of '23. And certainly, on a net basis as we go into '24, we'll start to really see the power of that, that strategy manifest even more clearly.

And are there more Capstones out there that you would like to acquire or like just in terms of sizing of the business?

Well, there are probably some complementary businesses that whether it's Capstone related or payments related or other things that we might look at from time to time. But Capstone itself is an extraordinarily talented team. We're very pleased, even in a tough year, they exceeded expectations every quarter. They got a great pipeline. They're just now getting the benefit of the integration. These are longer sales cycles. They had very little penetration in the Midwest, where we have really significant share. And so as we introduce those relationships, that's '24 and '25 revenue that they're building. Things will probably pull back a little bit with the change in yield curves and leverage ratios, et cetera, in the market generally. It just means they get to hustle harder. And we have to, as we come together, help them do that to deliver this year. But really like what we see there. There will be complementary businesses, smaller in nature. I think over time, whether it's payments or wealth or capital markets, these 3 areas of fee emphasis that we have.

And I guess, maybe tied to that, just around capital priorities, you mentioned, Steve, $1 billion buyback. At the same time, I think you're in the midpoint of your CET1 target. One, give us a sense of where you want to be in the current climate as it vis-a-vis the CET1 target? And how aggressive should we expect you to be in buybacks at some point during the year?

Well, we -- as Zack said on the earnings call, with the volatility we're seeing right now and the uncertainties, we're going to continue to grow capital for the first half of the year. But assuming we have clarity and we like what we're seeing in the second half and beyond that we would look to execute the buyback at that -- portion of the buyback at that period of time. So we just have to be a little more patient, let this play out. We're generating a lot of capital. We're getting great balance sheet growth in addition, and that's driving revenue and PPNR growth. Like the position we're playing from, very strong credit reserves, one of the top in the regional bank space, and credit is not emerging as an issue, at least thus far in the quarter. And we don't expect it will. This quarter -- and we're very confident of our credit performance over time, as I said in the prepared remarks.

Got it. We only have 2 minutes. I just want to open it up and see if anyone in the room had a question. Steve, was that? All right. No questions, I'm going to continue. I guess I -- 2 last questions. One, TCF, you talked about the synergies coming out of TCF. And from what I recall, they had undergone M&A in close proximity to when they sold the bank to you. Give us a sense of that opportunity, I think $300 million in revenue, any synergies you had talked about.

Maybe I'll touch on it out a little bit. We couldn't be more excited about the growth opportunities that come to us from TCF. We've talked about a run rate of value of $300 million annualized revenue by 2025. We generated $70 million of incremental revenue in 2022. So we are already generating it and on that path toward the $300 million. It will represent a 1% revenue lift for us over the next 3 years. That's quite sizable and significant for our business. So it's really attractive, I think, but it breaks down to 3 big buckets. The first one is roughly 1/3 is in consumer. So we're -- to give you a sense, the acquired TCF branches were terrific, great locations, and it was a solidly run bank, but they were only about half as productive as a Huntington branch. Just -- we have a fuller product set, a stronger brand and all the things that go into what we've been talking about all this morning. And so we've been systematically raising that performance profile of those branches. It's really generating quite a bit of performance. It's one of the reasons why consumer deposit gathering has been so strong in the fourth quarter and then we go into this year. And that comes along with penetrating debit. So we're one of the best debit issuers in the country. We're #2 on the Mastercard network to give you a sense of scale. And we have best-in-class penetration. So it's just those basic blocking and tackling in the consumer business is you're going to generate about 1/3 of that. Another 1/3 is commercial. So TCF was -- had a great footprint exposure to Chicago, the Twin Cities, Denver, Big in Michigan, and was -- it had a commercial business that was largely at the smaller end of the middle market. And so Huntington bring our capabilities going higher in the middle market into the corporate space, adding resources into those geographies to really capture the commercial opportunity is another big one. We're already seeing that come through. We talked about some of the pipelines. And then the last third is split between equipment finance, business banking and wealth management. And all 3 of those are also doing pretty well to capture the opportunities that we see. So got strong line of sight and confidence to get to those synergy numbers. And I think it's -- as I said, it's going to be a real tailwind for our growth for a number of years to come here.

And Ebrahim, we've got great new colleagues. We've bolstered strength in the company and the management team of the company as well, not to be diminished. So we delivered fully TCF. We're going to get the synergies now on the revenue side, strong start, expenses delivered. We like the positioning that the acquired company has given us in a number of these asset businesses as we shared this morning. And I think we're poised to really drive significant shareholder value, no matter what economic scenario comes before us. As I've said before, this is the strongest position in my 14 years at Huntington to play from as we go through '23 and '24 and beyond.

One last question, Steve. I think 10 years ago or so. You launched Fair Play Banking and people didn't know what to make of it, whether you're going to be successful. [indiscernible] defining features been tremendously successful. What should we look out for the next 10 years?

Stay posted. We'll be back to you later this year because we're working on it now as we said at the Investor Day, and we've got some interesting concepts.

I like the suspense.