KeyCorp (KEY) Earnings Call Transcript & Summary

We'll get started. Next up, very happy to have KeyCorp. From the company, we have Clark Khayat. Initially, and I'm not sure how Scotia in this was, we had actually KeyCorp and Bank of Nova Scotia at the same time. But post our recent announcement, we actually moved. So I know some of you are coming into the room from the Bank of Nova Scotia transaction. So maybe that's the best place to start. Clark, welcome back.

It's certainly not been a dull summer for Key. And just maybe if you could start there and just with your perspective on how the Bank of Nova Scotia deal came about and why it's a lot of hard work over the past few years to get Key back on solid footing, you decided to go down this path now?

Sure. These things are never quick. So some of these conversations have been going on for a while. I think as you've heard Chris say, we didn't go out looking for capital, Scotia Bank approached us. Others had at some point in the past year or so. And our view was always didn't make sense for us at that time. It wasn't something we were looking to do. And to your point, Jason, we've done a lot of work we think, to position ourselves for the future. So we said thank you, but no thank you and Scott Thomson, their CEO; and Chris Gorman, continue to talk over the last several quarters. I think got to know each other really well, saw some real strategic alignment. And I think from our perspective, when you take where the share price was, say, 3 or 4 quarters ago versus where it is now getting a premium on that investment. And then where rates are and what we can do with that capital in the investment portfolio specifically and then still keep some capital, those 2 things aligned very well with a partner that we think culturally fits us. So from our perspective, I think issuing at a premium, getting the ability to accelerate some of that return to earnings, better liquidity, improved capital, obviously, and doing that in the context of retaining strategic flexibility made a lot of sense for us.

Got it. We could put up the first ARS question. I meant to put on the beginning. But -- and Clark, I'll ask you my next question. Maybe just talk about the transaction itself. What are some of the things you structured into the deal to ensure Scotia Bank and Keys incentives are and will stay in line moving forward?

Yes. So first of all, I'm the #1 on the question. kind of I shouldn't say that. But the -- look, I think there's 2 sides to that. As I said, important for us to retain strategic flexibility for all of Key shareholders. We think we did that, but we do think we have now a partner here who's going to own 14.9%. We'll have some representation in the boardroom, 2 seats. Eventually once this gets approved, and that's 2 out of 15. So the representative amount, and we'll have the ability as any set of directors will to help influence the direction. On their side, what was a really important component of this was getting equity method accounting, so they could show their proportion of our earnings in their earnings. And so I think to the extent we grow, they're going to want to maintain there, so they could be a source of capital for us going forward. And I just think that puts us in a position where that 14.9% as we know from a regulatory standpoint, it's a little bit of a threading of the needle, but it seems like the right balance place with 2 directors for us to maintain the flexibility with -- we need with them getting the components that they need. So I think that alone aligns itself and then we are at the beginning stages of exploring some partnerships working together. We think there's some potential synergies there that we could realize, again, early stage on that, but we're excited about the potential for that.

I guess a couple of follow-up questions. I guess first is how do you respond to the concerns that you now anchored yourself to Scotiabank and that other banks are less able or less likely want to acquire Key?

My first response is if you can't sleep and you want to do some light reading, we did post the investor agreement a few weeks ago. I think that will demonstrate kind of the position we're in, which is, in my mind, a very importantly kind of clean spot from our ability to make the right decision again for all Key shareholders, not just 14.9% of them. And I think if you walk down that path and the right transaction were to come along for Key, then our Board would do the right thing. And make the decision that makes the most sense to all of our shareholders. So that was a critically important point for us, and I think the ultimate agreement reflects that.

One of the things maybe we get questions on is, is this 5 year standstill agreement, hypothetically, I'm not saying it would happen. If Scotiabank wanted to acquire more share before then and Key would agree, is that something you could agree upon?

Well, at some point, anything above 5% is going to require some Fed approval, so you'll have to go through those hoops. Again, the contract allows them to -- again, let's presume their set approval, which we hope is coming kind of early first quarter, but it will come when it comes. Then at that point, they'll have 14.9%, They're allowed contractually to buy up to 19.9% in the open market. They have some preemptive rights if we were to issue shares for other reasons. And presumably, we can always sit down and have them do more, but that's going to have all of the kind of regulatory hoops to jump through.

I guess on the notion of regulatory hoops, I guess, as you went to announce this unless you had some kind of comfort that they could get to the 14.9% early next year. I guess any way you can kind of get us comfortable, we've seen like before you in this room was First Horizon, they obviously had their issues getting through the regulatory hoops with their transaction with another Canadian player. So just how do you think about that?

Yes. Look, I think maybe I'd make 2 points. One is the big sticking factor when we originally started these conversations was, we did not want to go above [ 4.9% ] because we didn't want to have to rely on regulatory approval. So we obviously got comfortable enough to do that. And I think to your point, as much as you don't ever want to see anybody suffer any negative consequences, I think that other Canadian U.S. transaction that didn't work was good grounds for us to at least test the theory that we needed to have more confidence before we went down this path. That being said, we'll know it's approved when it's approved. But we wouldn't obviously have taken these steps if we didn't feel highly confident about that.

Got it. And you mentioned partnership opportunities, maybe just elaborate a bit on that? And is that something you actually think could be additive to earnings and revenues over time?

Yes. So maybe give you the 2, and these are I don't generally like to sit up here and talk about anecdotes, but this is how they come out early. We have a lot of them U.S.-based clients who do business in Canada and Mexico. We don't do a lot in those markets. They are struggling with getting appropriate banking support. Scotia is very big in those markets, Europe as well, frankly, and that gives potentially an easy handoff to somebody we know who can help service them who is going to compete with us in the U.S. And there's a kind of converse relationship there where they might have an example, a large commercial real estate player in Canada who wants to start transacting in the U.S. We have a great real estate business in the U.S. so that's a natural place for us to play. I think that's sort of the easy version. If we think that's big enough, then from a -- again, from a control standpoint, you have to probably sit in and say, what does that look like and let's put together some process and kind of an arm's length transaction to make sure that looks appropriate. And we'd only do that if it was worth it. The other piece, and maybe next level version of that, which again is even more work is, are there certain products that we have that would suit their clients or products that they have that would suit our clients that we could basically white label to each other. We've done a lot of that with Fintech. So we have some sense of that. But again, early stage, and those would be the type of things I'd point to.

Got it. We could put up the next ARS question, please. Yes, maybe shift to kind of use of capital. I guess [ there's a first 8-K ] this morning. I guess you started to restructure the securities portfolio. For those in the room that maybe do think you get to see maybe kind of update us in terms of what you announced today.

Sure. So when we announced the deal, we made reference and provided some illustrative numbers to using about half the capital to restructure the investment portfolio. We thought originally we would do that kind of post approval when we had all the capital. As we talked internally and looked at that, thought about the timing risk, the reinvestment rate risk and frankly, market execution risk, we decided last week that we would sort of step into the market and do about half of what we intend to do. So we moved about $7 billion of CMOs and CMBS. Average yield on those is about 2.3%, average duration just under 6 years. We started to reinvest those, which we -- again, we will do over time. But our view was going into the market with the original size of the deal all at once would create some tough market receptivity and some operational risk of just trying to move that many bonds that quickly. So again, we broke it up, at least at this point into -- we actually did it in 3 tranches last week, and we feel really good about the execution there. We'll start to see the ability to, as I said, reinvest in that portfolio. We'll get some near-term earnings pickup. We'll get better liquidity profile on that portfolio. Doesn't really impact market capital or tangible common. And obviously, we used some capital against CET1, that we were running well above our stated targets at this point anyway. So we felt really good net-net about being able to do that last week.

And just maybe beyond the restructuring. Can we kind of dig into how else you intend to minimize the longer-term dilution from the capital raise?

Sure. So look, I think the near-term dilution, we've talked about '25, '26, we can get there largely by repositioning the portfolio. I think for us, the rest of the capital, what -- as I said earlier, what's attractive about this deal is you can do a lot of work on the portfolio and still have a fair bit of additional capital there. I think it follows our general capital priorities, so support clients organically. With the notable exception of 2023, we've been a pretty strong leader in commercial loan growth. We'd expect when that market comes back and it's on its way back, we believe. We'll be able to provide support to clients and prospects there, and that's always our first use. We'll continue to pay the dividend, which, again, we've had a lot of conversations about over the last year, maybe we'll stop having that conversation at this point. And then, look, third is, we've talked about share repurchase. We're not going to do that in the near term. Now we're hearing new Basel III rules might be coming out in the next week. We'll get ahead of those. We'll actually try to get the second leg of this deal done. And then when we get our dividend payout ratio back to target, which is 30% to 50%, we'll start to think about the 70% to 80% return of overall capital and share repurchase is a piece of that. We also think there's likely to be some consolidation or some dislocation in the market, and we'll continue to look at inorganic things, but for us, primarily, those are going to look like the tuck-in type niche deals we've done. So M&A boutiques, payments platforms, maybe some wealth-related shops, right, places that focus on the fee income streams we care about.

And then you mentioned using some of the proceeds to accelerate organic growth initiatives. Maybe just elaborate on specific areas where you tend to invest?

I mean we've been talking about playing offense all year. We've been trying to play offense. Some of it has been in the market really hasn't come back as much on the loan side broadly. We do know, and there are certain portfolios that we were really strong in like renewables, where we're seeing traction, but that's a project finance business. It takes a long time to get that moving. Once you start the process, we think we will see that. And we think it's on its way back. We've continued to support affordable, where you'll see us invest and it's really not a capital thing as much as it's probably a little bit of earnings is continuing to develop great wealth offerings. So we've had great traction on mass affluent over the last year. We'll continue to do things like that. And we'll continue to invest in payments capabilities across the board. And we've been pretty aggressive adding bankers to the platform this year. We'll continue to do that as we move forward. So I think it's more of the traditional stuff we've done. But as you earn more, you have the opportunity to spend a little more and I think lean in a little bit harder.

All right. So you talked about some areas of potential growth, so people are thinking what are the expense implications for maybe 2025, 2026. And how should we think about expense growth next year? It's been kind of relatively flat. I think we're 4 straight years now, how are you approaching next year?

So early planning stages for 2025, but what I'd say is flat, as you noted, Jason, flat for 3 or 4 years, that's tough to do in an inflationary environment. We did let a lot of FTE go last year. We took very proactive steps basically to fund investment and keep expenses in line. The way I'd think about it, at least the way I'm thinking about it early right now is you're going to see expenses increase in '25. There's nothing we've been sitting on and delaying. We're pretty good about modernizing platforms every year. So there's no kind of big in the Q expense that's a catch-up. But I do think you'll see something on the positive range of expense pickup going into '25, maybe it's inflation or inflation plus a little bit. I don't think it's going to be major, and I think it will be very supportable given the revenue increase we expect.

Got it. I want to go back to something you said earlier, when we're talking about acquisitions. I mentioned a couple of different kind of fee income verticals bank M&A, is that something now that you have a Scotiabank as a partner potentially capital? Just how does that kind of influence your thoughts on bank M&A?

Yes. Look, I think, as I mentioned, Scotia sitting there can be a source of capital. So I think that's an attractive lever. On the bank M&A front, personally, I'm not spending a lot of time thinking about that right now. I do think to do that, I mean, I'd like to get through the transaction first. I'd like to reposition the portfolio. I'd like to get our earnings back in line with the peer group and start to get our multiple put to a place where we have reasonable currency to go transact. And that's a lot of work to go do. So from my perspective, that's the place I'd start. If the right transaction were to present itself, I think we -- it's our job to consider that, but on the bank side right now, I think our hurdles are going to be pretty high until we're back into a place where we feel like we're -- we've fully done the self-help journey, and we're ready to integrate something else.

And then you talked about kind of uses of capital and potential share repurchase at some point, you think that could be a 2025 event? And any other potential uses of capital you want to highlight?

No. I mean I think that -- again, I don't want to commit to share repurchase in 2025. I think we have to see where these rules shake out. I think, again, the way I'd be thinking about it is earnings and dividend payout ratio back in the right place. And then if we don't have clients to support for more compelling uses of capital, I think share repurchase naturally make their way back into consideration to that.

Got it. And maybe kind of pull back to kind of where we are in the quarter, 2 months in, obviously, a lot of puts and takes, but any trends you want to highlight anything you want to call out, NII, I would say, investment banking, credit quality are probably the 3 areas on top of your mind.

Yes. So look, NII, I think, trending to up mid-single digits over second quarter. Again, largely the swaps and treasuries, positions we've been talking about, offset by a little bit of continued deposit cost drift. Fees sort of 3% to 5%, Year-over-year investment banking will come back and will look like -- sorry, 3% to 5% quarter -- over second quarter not year-over-year. Investment banking, we think it looks more like first quarter than second quarter. So it's going to start to come back. We feel very good about the momentum there and getting towards the higher range of what we've talked about for the year. And you'll see, I think, investment banking, wealth, commercial mortgage fees up strong year-over-year. Expenses we talked a little bit about. I think you'll see those up low single digits, incentive comp up on stronger fees and obviously, the impact of a higher stock price, which generally is a good thing. And then credit quality consistent with the dollars of net charge-offs we've talked about. As rates start to come down, we're hoping to see crit and class plateau or maybe even decline by the end of the year.

And when you gave that NII guide up mid-single digits from 3Q to 2Q?

Correct.

And that is inclusive of the securities portfolio restructuring last week?

Is not included.

Does not include that. So that would be in addition too?

Correct.

Okay. You don't want to help us quantify that, or I have to go back and pull up a spreadsheet?

You guys have access to Excel.

I have not touched a spreadsheet all day.

We will, as we come out in the quarter. We'll break those apart. Obviously, the -- what we're doing as it relates to the Scotia investment and repositioning will separate from the organic run.

And then I guess maybe just sticking with NII and maybe just kind of looking ahead to the fourth quarter. In the past, you've talked about an exit run rate this year of $1 billion plus, I think, in NII -- I guess any maybe updated thoughts around that?

Yes. So some of that's going to depend on how many cuts. So we've talked a little bit about more cuts, putting more pressure on that number. I think at 2 cuts, we feel good about the $1 billion plus. 4 cuts, it's going to make it a little bit tighter but it is a function of things like how much loan growth pull through to the end of the quarter. And if loan growth doesn't pull through, how much liability cost management can we do, we think got some leverage there. I think we've talked throughout the year. I think we're a little bit more on the conservative end of where we think down betas go. So we've said kind of 20% to 25% on the downside. We've been working hard to improve our ability to push that. So as an example, over the course of the year, we've moved more commercial clients into index type accounts. So when rates do come down, those will come down a little bit faster. We've stepped out in the last several weeks and gotten out front of front book pricing on CDs and MMDA promotions. So we brought that down proactively. And some of this will then come down to how quickly we move the back book rates on deposits when the cuts actually happen. So -- and to me, that's a little bit more of a combination of competitive pressure and how much liquidity you need based on where the balance sheet is.

So assuming the Fed cuts, say, 3, 4x, $1 billion-plus exit could be a little tough?

I think it's a little tough.

With pre-restructuring or with ...

Prerestructuring.

And then with the restructuring...

I don't think that shouldn't be a problem.

Understood. Understood. Maybe more so as we think into 2025 and maybe that's maybe an easier way to think about it. Just I guess how do you think about that, particularly with expectations for additional security portfolio restructuring in the first part of the year. I know it's early, but clearly, it's a big question that investors have. Is there a way you can help us frame kind of 2025 NII expectations?

Yes. So I'll caveat again kind of early days as we get ready and we're going through the budget and planning cycle, but I'll give you my sense of how I'm thinking about it today. And let me maybe try to disaggregate the organic from the repositioning because it's -- you raised it, and I think it's a fair question. So I'd first start by saying, and I think we've been consistent on this, but it bears repeating that for cuts, while it might be a little tougher in the fourth quarter as long as it's into a constructive economy and not a hard landing, we think it drives more client activity. We think it drives more loan demand, more investment banking and payments, better credit quality, I think, overall, just a better economic situation. And I'll take a little bit of short-term pain for a better runway going into 2025, and I think we make up whatever we lose in the fourth quarter pretty quickly in '25, particularly on the beta side. So I'd start with that. But I'd say going into '25, if you think about NII, you've got probably 5 things you can look at. One, you get the full year value of all of the swaps and treasuries coming through. And again, as a reminder, $1.9 billion of swaps terminating in the third and fourth quarter each, about $2 billion of treasuries in the third quarter, $2.9 billion in the fourth quarter. So still some room there. In 2025, we have an additional close to $16 billion of fixed rate assets repricing at about 2.8%. So depending on where rates are, you have some delta there. As I said, as you move through the year, more rate cuts, you have time to deploy beta. So we've got some catch-up there that we think we'll be able to manage to. We've added about $10 billion of received fixed swaps that start kind of mid-2025, roughly 4% receive rate. So again, if you get all the cuts, we expect, the forward curve tells us by the end of '25. Those will be well positioned. And then to the extent we have loan growth, that will add NII. All of those things going into '25 and again, sort of consistent with a continued fairly constructive macro environment. I think the organic piece comes in very strong. You add the repositioning we've talked about, which is plus or minus $400 million of value, which we talked about on the call back in August, and we think we can get kind of in the ZIP code of 20% year-over-year NII increase, somewhat evenly between those the organic and the restructuring.

So if we take whatever 2024 NII is inclusive of this week -- or last week's restructuring and tack-on 20%, it should be 2025 NII?

We think that's a good starting range. And again, we'll fine tune that as we finish our planning through the quarter. But I think as a starting point, that's a good place to be.

And that, I guess, assumes the forward curve as we sit today?

Yes.

And I think we put up the next ARS question. And I guess you talked about -- we'll come to this, I know you talked about the whole repricing benefit on the treasuries and swaps. I think you had a kind of $950 million number in the third quarter. I guess -- so I imagine that's going to be a little bit less than we thought. Any update on that number and I guess more than offset by all those other factors you talked about?

Yes. So I don't have an update on that. We'll provide it on the call. But again, I think you hit it exactly, Jason, which is that, that isolates the swaps and the treasuries. There's other kind of puts and takes that go with that, which lower funding cost would be the obvious one.

And then I guess when you think about NII up 20% Again, I haven't had a spreadsheet in front of me all day. In terms of like a NIM perspective, I mean Key is, obviously, NIM is below normal, we all agree. At one point, you were talking about I think an exit rate NIM this year, like 2.4% to 2.5% and a lot of puts and takes. And then restructuring impacts that and the proceeds. But how are you kind of thinking about next year maybe from a NIM perspective, given all those -- the 5 factors you laid out?

Yes. I mean I think we're going to start to grind. Again, as I said, the biggest factor to getting to regular way NIM is like a normal slope yield curve, which we still don't have. Hopefully, we'll start to get to that. We think we have seen a little bit of steepening. I think the easiest thing to say at this point is we're going to start gravitating toward that 3% NIM. Whether we get there in any particular quarter in 2025, it depends on a lot of factors, but I think we're going to continue to make progress there. And when we get to a normalized environment, I think that is very sustainable over time.

Got it. And then the audience thinks next year would be 2.6% to 2.7%?

Yes.

Okay. We'll see. I guess the other factor other than NIM is just loan growth and maybe just expand in terms of what you're seeing there. I think on the earnings call, you talked about commercial loan pipelines were building nicely. You're starting to see any pull through. And then does -- since the kind of the BNS announcement, any impact in terms of client engagement and how that's transpired?

Yes. So I think it does all well good client activity and pipeline build through the year. We've seen loan balances really start to stabilize. We've seen utilization tick up a bit. It's still off historic lows. So there's probably some upside there. And we have seen, as I mentioned, a lot more client dialogue, a lot more client activity. That client activities at this point, started more on the capital market side, than fully pulling through to the balance sheet, but we'd expect that to be kind of a leading indicator. And as it relates to the Scotiabank announcement, I think, hugely rejuvenating for our bankers to be out there just feeling much more confident as much as you tell them to go play offense. This makes it a little bit easier psychologically, I think and clients have wanted to engage and they sort of show up in the anecdotes I shared, which is we have been trying to do business in Mexico for x number of years. This a place where you can help. So they sort of have that tenor to them at this point.

Maybe throw up the next ARS question. While I ask Clark my question. Maybe talk to deposit situation in terms of balances or pricing competition, what you're seeing, particularly as the market is now pricing in lower rates. I think on the last earnings call, you talked about a down beta of 20%, 25% in the fourth quarter, but that was 2 cuts. Now we have 4 cuts and how that just plays through?

Yes, it's interesting. So the prior cycles, I think up beta was sort of in that mid-40s -- low to mid-40s range also. So obviously, this hiking cycle was higher. It'd be easy to say you sort of expect a little bit of symmetry, which I think would be my initial reaction. The question is -- and I think that's probably right. I think the question will be how quickly do you get there. And is it -- is the curve any steeper as we know, it tends to start slowly and then pick up. It feels like at least what I'm hearing from folks that they're getting more ready to move sooner than I think prior cycles. So it will be interesting to see, but my view on most of these cycles is they tend to run their course kind of pretty symmetrically. So I'd expect to be around 50 or so over time.

And in terms of deposit balances that you would call out mix? Anything?

No. I mean we continue to -- we'll see kind of low single-digit deposit growth in the quarter, which is what we expected. We're keeping our betas kind of mid-50s where we thought they'd be low to mid-50s. And so I think that's pretty normal. I think we're still seeing a little bit of mix shift. And I'd expect as rates come down, there might be an initial pull of folks trying to catch the last bit of rate in a CD or something, which is in part why we led with some of that pricing coming down. But I'd expect, again, maybe some normal shifts. I don't know if we'll get back to -- I would not expect actually we'll get noninterest-bearing back to where it was at the beginning of this cycle. That felt very kind of pandemic-driven and stimulus driven, but I'd expect to move back into the maybe upper 20s to close to 30.

Got it. I want to throw up the next ARS question. I ask with Clark, but credit quality you haven't gotten to that yet at all. Clearly, I think the first half of this year running low 30s in terms of charge-offs, historical use to have a long-term [ driver of 40 to 60 ]. Just anything on credit quality you would call out at the moment, kind of what areas are you focused on and just how you're thinking about that?

Yes. I mean it hasn't changed a lot. I would say consumer -- anything related to the consumer, consumer business, consumer goods continues to be stressed a little bit. And I think that's a function of tougher demand in some of those businesses with now several quarters of higher interest costs. And I think that's been a pretty toxic mix. We've talked about commercial real estate. We don't have a lot of concerns in that book, aspects of health care, some are improving. Some are deteriorating. The ones that are improving, tend to be improving off some pretty rough spots and the ones that are deteriorating seem to be coming off some pretty good spot. So maybe health care is all kind of migrating to an average-ish level. And then we don't have a huge leverage book. And I think as rates come down to the extent the real pressure on companies is debt service. We'll see some relief. But I do think there are some companies where we're going to -- they probably made it a little bit longer than they should have, and we'll see those losses pull through as we expected this year. But there's nothing we're seeing that would cause me to be concerned about anything related to where we think the quality of our book is and long-term targets.

Interestingly, the audience response shows a larger increase in expected charter of the Key that I think several of the other regional banks have presented this morning. Maybe it makes sense to remind people that Key today is not the Key that was 10 years ago. And your commercial real estate exposure is particularly on a relative basis, a lot smaller than it was, your office exposure is, I think, the smallest among your regional bank coverage as a percentage of?

Yes. I mean we don't do the things that caught us in 2008, right? We don't do developers. We don't do all of the homebuilding stuff that we used to do. Our book is largely multifamily or industrial in nature and commercial real estate. We think we're pretty solid C&I lender. I mean, our strategy tends to be lend money to high-quality borrowers and then monetize that balance sheet usage with fees. And we think we generally do that reasonably well. What I'd say is I've been at Key since 2012, and I tend to have this conversation all the time. So if we get a cycle, it will be up to us to show you the book's performance.

Got it. You gave us, I think, good color in terms of what the third quarter should look like. Come October when we see kind of your full year outlook slide, I guess, how different do you think it's going to look in October versus the one that you published in July?

Boy, I'd have to think about that a little. I don't think it's hugely different at the moment. I mean I think we called out sort of the trajectory we're on. I mean the things we're talking a lot about, which is NII. We covered some of that. I mean there's going to be differences, obviously, as it relates to the equity investment and the related impact. So that will clearly be different. But as I said, we'll try to break that out because I think we owe folks clarity on what we did versus our prior commitments and not mudding that up with the impacts of that transaction, but we'll clearly tighten ranges. So I think every fourth -- every third quarter call, we come in and we try to get much sharper. So we would expect to do as we generally do.

Got it. I can pull up and see if there's any questions from the audience. I guess one question we get is when Key kind of always gives its earnings outlook in the slide deck. It always kind of had this long-term targets underneath. We talked about net charge-offs, there's some other ones. The Bank of Nova Scotia investment kind of change at all kind of how you think about what this company could do going forward?

So one, I think we've said and I'll just reiterate, we'll update those once again, we have some final rules on capital liquidity, long-term debt, all those things. I don't know that it changes what this company could do. It probably accelerates the time frame in which we can do it. And again, I think we can all have a corporate finance conversation about the NPV 0 value of restructuring your securities portfolio. But I do think getting back to peer level earnings and peer level return sooner is actually valuable. So if it's net presence 0 -- net present value is 0, I'd rather do it sooner rather than later and put ourselves in a position to compete more effectively. I think if the market does go badly from a macro standpoint or a geopolitical standpoint, which we don't expect it will, but if it does, that equity investment positions us to withstand that better as would restructuring and improving earnings and liquidity. And if it doesn't, then I think we're just more able to play offense more effectively.

And I guess, maybe with the rate environment, changing fairly rapidly during the third quarter. I guess, come next year, is there a chance that you maybe forego the security portfolio restructuring and look to do something else with that capital? Or is your kind of mind made up and that's the route you're going to go?

No, I think -- I mean, I think that's a good question. I do think there was a component of what we wanted to do, and that's why we did what we did last week. And I think the timing of that mattered. But look, the world can change significantly between now and whenever we get the capital. So it might not even be a rate issue, it could be the macro economy changes materially. Could be there's something else that is a more compelling use of capital in the moment than the securities restructure. I think all other things being equal, the securities restructure the additional component. Again, not all the capital sort of feels like the right next step. And by the way, some of these aren't mutually exclusive, but I think the question is a good one, which is depending on where you land when you have it, we're not wed to doing it because we have to just given where we think the world will be, we think that's the best answer today.

Perfect. On that note, please join me in thanking Clark for his time today.