M&T Bank Corporation (MTB) Earnings Call Transcript & Summary

I'm Gerry Benson. I'm a research analyst at Fidelity covering the U.S. banks. And I have the pleasure of hosting Rene Jones of M&T Bank today. M&T is a community-focused banking franchise that provides retail and commercial banking, trust, wealth management and investment services. Founded in 1856, it's headquartered in Buffalo, New York. And at September 30, it had $211 billion in assets. Presenting today for M&T is Rene Jones, Chairman and Chief Executive Officer; Rene has been with M&T for over 30 years and prior to becoming CEO in 2017, he was the Chief Financial Officer since 2005, where he led the key functions of the finance division. And later when promoted to Vice Chairman, you oversaw the growth of the company's wealth and institutional businesses. Please join me in welcoming Rene.

All right. Thanks, Gerry.

So Rene, it's been -- your last appearance to [indiscernible] was in 2023, I believe. So it's been a couple of years. Just curious if you could walk us through. There's been a lot of strategic work done at the bank over the past few years. And actually, since you took over as CEO in 2017, which includes balance sheet transformation, more fee diversification, tech transformation. I was curious if you could kind of walk us through and provide an update of all these initiatives?

Yes. Thanks, Gerry. Thanks, everybody, for being here. It's always fun to be at this conference where we get the collection of everybody. So it's one of my favorites. Yes, so it's been -- next month, it will have been 8 years Bob passed, and I took over as CEO. And so it gives you a chance to step back and reflect on what the journey we've been on. So we've effectively over that time, we've doubled the size of the bank. We've essentially doubled the size of our earnings per share. We -- we've reshaped our thinking about our balance sheet in terms of the level of commercial real estate that we had, which is a topic we'd be happy to talk about, because there's a lot of logic behind that, that it was not about credit about sort of how do you navigate and continue to be considered very, very safe when opportunities come up. We've done all of that and we've sort of remained very profitable. So today, we're probably 20% to 25% more profitable than the average peer in our group, which means that we're generating lots of capital. And actually, we happen to be sitting on quite a bit of that capital and thinking about how we release it. We -- over that same time, we've really sort of -- I call it tech transformation, but really it's a way in which we work and the way in which we think there was a need for the bank to be more modern, more entrepreneurial often tell the story of -- in October '17 when we asked Bob Wilmers, what's your eye wish. What he said was that in the '80s and '90s, we were much more entrepreneurial, and I think we've lost that and it would be fun to get it back. And so we've been on a journey there where our tech transformation today, we spend 3x more than we did 8 years ago. We we've got -- every one of our stats, our resiliency at the time, we had 60% of our technology resources were outsourced. Today, 80% are in-sourced. And we needed to do that to sort of gain control so that we could make the changes that we thought we wanted to make. If you can -- you guys will laugh at this, but if you take yourself back to 8 years ago and you look at your notes, the questions you were asking is, how are you going to keep up with the big guys? What apps are you going to release? Are you going to copy the [ BofA ] app that talks to you and all that stuff? Really what's happened is we've not -- that's not the way it's sort of played out. But it's played out in terms of capabilities, resiliency, how many releases can you do. So today, we probably do 5x the number of releases that touch our customers than we did before. We are 80% down in terms of incident management. So our systems are up and running at a much more consistent space. Not only is that the case, if you look over the 7 years, it just is a continuous drop, right? And all of that was around the idea that we needed a modern capability, and we also had to change out our entire talent. There's not a single person left in an IT leadership today that was there back -- back in 8 years ago. It's had a pretty significant effect not just on the bank and how we think about technology, but how we all work. We have 300 teams of -- agile teams that get reallocated across whatever it is that we happen to need. And in the past, what you had was some analyst in a particular business who was heavily focused on getting something done a particular feature and then they had one technologist. Today, those groups are groups of 10 individuals that have every -- everybody and every skill set that you need all the way through to compliance. And it makes us much more flexible, much more adaptable. We used all that to go through a period, which is probably 3 years long to sort of redo our infrastructure. As we get to the -- probably to the first quarter, we'll have redone the general ledger system and all of the, we call it, Project Rise, all of the financial systems that are out there. This is hugely important in the current environment. Where you'll ask a lot of questions about AI. But for us, it's, is your data there? Is it flexible? Can you move it? Can you get it when you need it. And so that will be done. We've also redone our entire commercial credit process over the last 3 years. Making it more flexible, more agile and also sort of access to information so you can do your job a lot easier. We're in the middle of redoing all of our digital platforms. And so it goes on and on. But we're sort of coming out of this period, where we've been sort of rebuilding and redouble downing on our infrastructure. And as we think about it today, the 2 things that we talk about today are how do we team better together across our businesses to grow, sort of moving into a growth mode? And how do we achieve operational excellence, which we believe resiliency in these times are going to be really important. So stuff is going to happen to you, whether it be cyber, whatever it may be. The question is how quickly can you react and how can -- how much -- how quickly can you make it a nonevent for your customers and get through that. So with the complexity that's going on today, we think that's actually one of the most important things that we're now poised to be able to execute on.

And when you think about just a couple of things you said, you talked about how you shifted and maybe we could just -- a couple of data points, just what -- how many engineers you employed like 8 years ago before this journey began and what it is now and maybe a couple of metrics like incidences as well as fraud events and how that's improved?

So, 8 years ago, we didn't have a single person in the company with the title of engineer. We had one guy who -- whose wife was from Buffalo and who was the designer of Windows 7, who worked at the bank, but he refused to tell anybody he was an engineer because he didn't want to be an outlier. Today, we probably have 1,000 engineers, whether they're user design engineers, whatever the discipline is. We -- the change in the capabilities for us has resulted in -- I think I talked about some of them, but like the incidents, we probably had 100 significant incidents a year. We -- I think we've talked about most of them. It's just the agility of our ability to actually go and respond is just much, much higher than it was before. Technical debt would be a one that you guys would understand Instead of talking about what apps and what things have you deployed per se, like we look at our end-of-life systems. And today, that's about, things that are getting close to end of life are about 7%. In the industry average, it would be about 12% right? So we can see that we're actually having a pretty big impact on those things. They're really important.

Right. And just -- thank you for all that. Just at the balance sheet transformation, just where you're at now and if there's any more to go or back in growth mode as well as just the fee diversification, the progress made there?

Yes. I mean the fee diversification part has just come over time, mostly through acquisitions where we acquired a capability, and we've sort of decided whether we want to keep it or not. And then if we keep it, we lean into it. So -- we pretty much offer every service to a commercial customer that there is all the way from starting your business all the way to Wilmington Trust at the end. So that is going to happen very slowly, but you see that we're -- it's provided a lot of stable source of income over time. What was your other part of your question?

Just on the balance transformation. And there's been a big reduction on the commercial real estate side, and you said it was not credit related, just elaborate...

We made that shift in -- at the beginning of 2019. We just felt that our concentration risk was high. And it wasn't, there was a problem with the credits it was that when something happened like 2023, people would sort of label us. And that's a pretty big deal like for us because if you look at our outsized returns and growth that we've actually produced early in our franchise years, they all came from crisis. And so as I said, we've probably produced a return over the last 8 years that averaged just under 16% ROTCE, 8.5% growth, compounded growth per year in earnings per share. How you outperform that is you take advantage of crisis. And you saw that in 2013, like people just all of a sudden labeled us the commercial real estate bank. And so in our minds, what we decided to do was to try to continue to offer all the same services to -- and more to our commercial real estate customers, but just not using the balance sheet as much as we did. And the idea is that you'll get the markets to be more comfortable, which gives you more wherewith-all to take advantage of disruptions, which is part of our history. Most of our growth has come through disruptive periods.

Just one more on the tech transformation, I mean a lot of heavy lifting has been done. Just perhaps you could share a few thoughts. It is -- everyone is talking about AI and the implications for their businesses going forward, just how you guys are thinking about it in different impacts that you expect?

Yes. I mean it's a big topic, but to try to break it down, we've doubled down on focusing on data, data integrity, data access, and making sure that we have across the bank, so with no spaces missing a very regimented process to understand our data. We think that's -- we're not going to be the ones that develop the AI solutions. They're going to be vended out to -- they're going to be provided by vendors to us. And so to differentiate yourself, having that quality understanding of your data and how you use it, how it gets produced, I think, is really important. There are a bunch of categories we too have probably 100 used cases. I chalk that up to getting the environment to learn about AI and how it works and getting them to be comfortable with things. But in my mind, if I were to -- if I were to pick areas to focus on, it would be much like my annual letter, it would be fundamentals. So I was telling the story earlier, someone asked me like it was actually a regulatory person like you're usually like a third mover, you're never a first mover in technology. Why does it feel like with these issues of AI and stablecoin that you guys are moving up to try to be like a first mover? And I'm like, well, no, I'm concerned about falling behind on liquidity, right? And so of all the uses that you could apply AI to, I think the ones that we would like to focus on are the fundamentals, credit, liquidity, how fast the deposits move. If you think about what we do today with cyber, and we have a 150 solid professionals in our cyber unit who sit in rooms and monitor for anomalies that are happening anywhere in our space so that we can prevent crooks from coming. But you could apply that same technology to your customer behavior patterns and possibly learn more and not get surprised about runoff in deposits or activities that might happen. So I use that as an example. But to me, those would be the way -- the way we would prioritize -- it's not just about expenses, which seems almost relatively easy. It's much more about are we focusing on the fundamentals to build a strong bank.

Okay. Maybe we can shift a little bit. You talked about the investments, all the investment spend, all the efforts and of course, being CAT III ready. Maybe You can talk about the recent easing in the regulatory environment and how that can impact competition with the big banks, which is the theme of the conference asked, what will this result in a step-up in ROEs?

Well, that resulting us to a -- yes, probably will result in a step-up in ROEs. I mean just no mystery. The flexibility on capital is really important. And when you have a -- historically, when you had a test where the variability of the answer was high, you can't then go to the low point and keep your capital or even the medium, you got to keep extra capital just because of the uncertainty of the test from year-to-year as an example. So I think the last part of your question, yes, probably you will see a noticeable change in sustainable ROEs from what's happening there. The thing that always baffles me, maybe you guys can help me with this, so we spent all this time talking about, well, there's lots of regulation, and there's a lot of technology investment that we all need to make. And so what that means is that the small banks aren't going to be able to survive and it's going to be really hard on them because they don't have the scale on that spending. And then when we find out that it's going to ease in the regulatory environment, we say, well, it's only the big banks that are going to win. And I can't reconcile that space at all. I think it is true that there's going to be a big impact on the largest institutions, but the pound for pound impact, everybody's got to keep a BSA/AML environment. And one bank can't have a better one than the other, right? So relief in those spaces against not having to do as much around documentation of things and really focusing on finding real criminals and so forth. I think, is actually a huge relief for smaller institutions.

Right. So I mean, given -- as you spoke to, the easing regulatory standards, though it is an advantage for the big banks, even more in a competitive advantage. The last time we discussed bank M&A, you spoke to not needing to be a national player with scale because your community-focused model is able to achieve adequate scale on a regional basis. I'm just curious if that view has changed at all given the change in the environment?

No. It hasn't changed at all, and in part because it's been working. And we just -- it's not right or wrong. We just don't have Look, if you took 2 paths and you said, okay, I want to be a national bank. I want to be everywhere and then you take our approach. They're just very, very, very different paths. And quite frankly, you can see it in the balance sheets and the income statements that get produced by those things. They're completely different. If you're trying to grow and get loan share and then you have to after the fact, actually focus on deposits, you're going to get a different balance sheet and income statement than what we do, which is we focus heavily on dominating around depositories. That's our thing. And it tends to give us lots of leverage. It gives us pricing power. It gives us awareness power in the places that we're at. So like if you were to look on a scale of awareness of banks, you'll see them all jumbled in the middle. And then then you'll see them -- you'll see like at a really separating from the pack will be like Capital One and JPMorgan. And so you look at that and you say, well, how is this working? But if you run the same thing for Baltimore, you see us up top. Right? And so that's what people have sort of missed. All the things are about like on a national scale, but the question is what is your reputation and the awareness and how well you do your job for those people that you concentrate on. I think for me that as you get further and further away from home in more geographies, I think the management challenge goes up. Because you're really an organization around -- that is built around culture and cultural norms, some of which are documented, many of which are not. And so having enough people to deploy across that kind of a geography who will make the same decisions that you make. I think, becomes more and more challenged as you get larger.

Right. The -- so you have a very strong balance sheet, generating a lot of capital, been very active share repurchases. Maybe you can talk about how you evaluate buying back your own stock versus making acquisitions. And even to the extent like your stock is very attractively valued, so how that influences the level you buy back?

Yes. Gerry, so what we do is we sit around a lot and have this discussion. And we take opposite sides. So like Daryl has been a tremendous addition, right? Because he'll say, yes, so what M&T did it that way. Here's how we think about it. And it actually adds quite a bit of value. But today is an interesting time. First of all, I think banks are sold. I think the regulatory relief change is going to have other banks. Banks are going to -- who are not -- banks who are going to sell are probably going to think about selling and think about it as a window. But from our perspective, we have to think about like, are we doing the right thing for our franchise. One of the facts that if I look back over time, we've done lots and lots of deals. Pretty much they've been at 10 to 9x earnings after cost saves, has been the purchase price, somewhere in that space. And then we would transform the institution and create a fair amount of value from there. We're trading at like 9.5x earnings, and so without buying a bank, it makes our stock repurchase look really strong, really attractive, I should say. Now we have this other issue, which is because we didn't have the AOCI issue, we have a lot of capital, and now we're generating a lot of capital. So we have a lot of capital to deploy and figure out where to go. And so we're trying to be very disciplined about it. Should it be loans, should it be some other investment? Should it be an acquisition or do we just return it. I think down the road, you might see a multiple of those uses over time. The conundrum is -- when you look at all that, what I believe is that you -- bank stocks look cheap even if you adjust for some correction of recession or something like that. And so when you look at the IRRs on deals, you kind of shake your head and saying, well, our corporate finance guys I'm like, "No, go back and do that again because that's not -- that doesn't make sense. But then on the flip side, you get some 4-year payback. I would say 2 to 2.5 is our history. And after thinking about it and thinking about it what you realize is that the problem is, is that our stock is actually such at a low currency, right, that the trade is pretty close. So even though the return looks kind of high, the return of our own stock actually looks really high as well. Purchasing own stock looks really high as well. And so we have to think about that. We have to think about like if there was something that we wanted to do that was a strategic fit and produce the right returns how do we think about longer-term paybacks. And so you -- I think of it like you wouldn't do something just for doing it, even if it was a positive NPV. But if it makes sense to help your franchise round itself out to move to 1, 2 or 3 deposit share or something like that, you probably would try to take advantage of that.

And that one fact -- that being the primary factor, just good quality deposits that dominate some sort of region in your footprint?

I mean, think about this. So we would -- first of all, we were healthy, in 2012 -- is it 2012? I can't remember any more '11. But we would have never gone out and entered the 2 Wilmington Trust businesses on our own and capability. The reason we took on that risk was because we could get the #1 deposit share in Delaware. And as we went into the boardroom and sat down to decide to do it, we -- the question we asked is, could we sell those 2 businesses? We did the transaction. We said, let's spend a little time trying to learn about them, and they actually had capable people in that part of the institution. But the thing that got us there was #1 deposit share in Delaware, right? That's who we are. It's one of the reasons why people thought, I think some thought that when you go on this journey to lower your real estate concentration, well, now your margins, your historically high margins aren't going to be there. And it hasn't changed a bit because most of our pricing power comes from the depository.

Right. Understanding that banks are sold and not bought. And -- there's a lot of other factors at play like we're just talking asset size, what is the profile deal for M&T and maybe kind of the high end and the low end, max-size, min-size?

We don't have a lower limit, because if you think about it, there could be something out there that really is maybe not that meaningful to the bank but really meaningful to the region. And so if you think about it, we've decided not to be a national bank. So we better be focused on like achieving our goal where we are, right? And so I wouldn't say there's a lower limit there. I think we were talking about this earlier, like MOEs and stuff like that don't make sense to me. The way I think about that is the most recent acquisition we did, we had 17,000 people. We had -- we added 5,000 people, right? And we were running the bank, right? And then we would reduce these curves, which were like customer experience, employee experience, in particular, and then we do it across different channels, right? And we'd see them. And like in the beginning, in peoples, it was like M&T was at a 55, you could see like a negative 54, right? Think of that as culture. I don't know who you are. I don't really care whether I believe the same things that you believe. And then over time, we have that running is for about almost 4, 5 years, right? They've converged. Right? And at the point of convergence, you're operating the same culture. So this idea that you could do like an MOE, like I just don't see it because at least we believe the way we run the bank, it's about culture it's about norms, it's about trying to build an enduring company.

Okay. I have one more general bank question for you or industries, but I'm going to pause right now because just to see if there's any questions from the audience?

How do you pick in front?

Yes, I wanted to just do that. I think the mic is coming down.

Manan Gosalia, Morgan Stanley. Rene, you made a few comments on the capital side. You're sitting on a lot of capital. You're thinking of ways to deploy it. More flexibility on the rules and regulatory side also gives you more flexibility to manage down that capital. But you're already doing buybacks, it's highly accretive. You're already doing that. what in your mind is the highest priority for deploying that excess capital here? And how quickly can you do it from an organic basis?

So, this is may be you want to hear. The #1 priority to making sure that we have all the capabilities that our businesses need in order to get things done. That could be not just the technical capability, but it usually comes in the form of human capital. So hiring talent, keeping people, that's really important to us. But from there, it's just a matter of trying to figure out what's going to have the most meaningful impact if you take all the operations as a given. And so it would just be -- we would back and go back and forth based on returns. So if we had the right transaction to do, we would do it. We're less likely to enter some completely new capability that we're not familiar with. And today, if you think about it, if you don't count the loans to NDFIs, right, there isn't any loan growth really in the space. And so we're sort of sitting in this really good spot, which is we're generating lots of cash, but we're a bit cautious as to where to deploy it because we want to make sure that those actually are positive NPVs as well. So it's not a bias really. It's important for us to continue to expand our franchise.

So do you just view the capital as earnings in store and you'll deploy it as you see opportunities? Or is there an urgent...

No. So it's like -- so we have this big -- we have this good problem, which is relative to everybody else, we didn't invest our cash, so we don't have the AOCI, right? So if you look at the ratios today, our capital ratios look kind of like everybody else's. But really, our tangible ratios are really, really high. And so unfortunately, I don't know why, but people look at the regulatory ratios. And so we have to make sure, like in order to -- if we were to capitalize on all of that right away, what would end up happening is that rating agencies would start to give us grief, right? But it's all -- all that's going to normalize over time because eventually, what's going to happen is that AOCI is going to go away. You're going to probably see regulatory capital ratios for the whole peer groups come down to 10%, maybe to 9%, 9.5%, where they were, right, if you think about it. And so that's going to give you a lot more freedom as you move forward. So what we already -- if you think of the pace at which we bought back shares this year, it's really significant. So doing more, right, in our minds is, okay, let's wait and see what happens with the environment. We've just finished all these investments and maybe there will be opportunities that come up. Maybe if there's a downturn, right, you're going to see us be able to deploy that capital pretty quickly.

Julian?

M&T subsidiary, Wilmington Trust was the trustee for Tricolor, I think, for all of their securitizations. Can you give us any color about that? Maybe what went wrong? I believe the trustee role included like collateral verification. And then Also, like are there any other areas in general that you're worried about or that you're kind of intensifying scrutiny of?

Okay. So I get 2 -- those are 2 sort of separate things. So we've put out our Q, and so I'm probably not going to say anything more than it's in our Q. But the way I would describe it, I think that might give you context is that typically, our role in one -- one form or role we play a role as custody and paying agent and another role around securitizations. We played the role of trust those same roles plus the role of trustee. And typically, what will happen for that business. We like that business because it's countercyclical because if a security fails or if an instrument fails, it's almost 100% of the time of credit. And because we don't do a lot of large corporate we end up being not conflicted and so people hire us for that reason. The problem you have is that when there's fraud, all that sort of goes out the window, and you have to really understand what exactly occurred and so when you think about, which you guys have all read about, but I'll just talk the construct I'll give you is there's -- in that particular thing, you've got a practitioner, an auto dealer who happens to be a lender who happens to be a servicer. Think of all the roles that the servicer actually plays in terms of information. And then you will have, I don't know, 4 or 5 warehouse lenders in addition to that. And then when you get to the securitization, you have all kinds of parties, which you guys are familiar with around the securitization. So what you know is that the bondholders are going to get their money back. They're going to make sure they do everything to get their money back. So when you ask the question, will you get sued, what will happen? It's just that's probably the process that we all go through. It's very different from the credit environment. But it's impossible for us, particularly today to really tell what impact that's going to have in what happened, who did what, and it has to get unpacked. Unlike if you were a warehouse lender and you had a loan, the loan is just bad. And that's kind of easy. But in the fiduciary space and all those roles that everybody's playing, underwriters, examiners, auditors all the way through you really have to understand what transpired in the transaction to be able to understand whether you have exposure. So I hope that helps. That's sort of how we think about it. Your other -- you had a second part to your question?

[indiscernible]

I haven't seen a cockroach in Buffalo I've seen a lot of bad stuff, but I haven't seen a cockroach in Buffalo. Yes, it's a natural thing for us, right? So I think that question is great. We're -- one of the things that you see and other things in our portfolio from the past is that there's real pressure, right, on a subsegment of the economy. So if you sit back and look overall, everything looks great. There's a lot of capital investment because of AI and other technologies that are happening, but underneath, you're beginning to see all these things around the 9% inflation that we had, which caused prices to go up, the higher interest rates and then the tariffs coming in and that's having a real effect on the low end of the consumer, and it's real. We were just here this morning, I did a panel with the Boston Chamber of Commerce. I had the CEO of Ann Taylor, Talbots in all those brands, all women's buying women driven buying brands. We had a grocer from Chelsea, who predominantly deals with the Hispanic community. And then we had a guy who is a big, big entertainment and hospitality venues. And when you listen to them, you see the stress, right? And so what you tend to find is that when you get long in the cycle and you begin to look at those things, you've got to figure out where the weak links are. They're all those operators who just -- who are new to the business, who weren't there before. I think when we look at things like it's made me think, for example, what we call value chain financing or buy here, pay here. We don't need a bank, you're just friction. Well, then you start to realize, wait a second, you've changed the control structure, right? And those businesses are thinking about it. And if you're then going to the securitization markets, have you been prepared for that change in that structure. So each time we see one of these things, the job is to actually scan the portfolio, think about what other ways it could manifest itself. And the goal is to stay on top of those things so that you never have some big spikes. So -- so a lot of the things that have happened in some sense, could turn out to be good because we need resets when there's so much innovation going on in the economy to be able to make sure we've thought end-to-end, like what are the impacts that could occur. We've got one on the right before Brent.

Christopher with Wells. So in your 2022 annual letter, you got the rate and story right. Rates were 0, you predicted that they were going to go higher if they did. So how does that impact your view right now with the rates potentially going lower in your decisions with ALM and the excess cash you're generating?

That's a great question. The source was a little different. It was -- it was 2 things. We didn't know -- we had all this cash, we didn't know why we had it. Like a lot of the things that happened that are positive for us are that we didn't know. So we're sitting around with $35 billion, $45 billion of cash that we never had before. And we just couldn't figure out why it was we had it, and therefore, what would happen to it. And then the second part was just like literally like Finance 101. I hate to say it that way, but it's literally like you just don't get paid enough. You get -- I think it was like something like it, we got an extra 8 basis points for taking this massive risk, right, on that trade. And sometimes I think what happens is we tend to take those individual trades, those individual economic decisions. And we say, "Well, it's a big bank. We can just go to make them. But you really have to think about that. So those 2 things had us avoid the process. And if we look today, you've got a different level of risk, right? Just by the fact that the rates moved, you're still going to think about like when they were at 5%, what's the probability they go to 7%, but that math and that risk reward is just a totally different equation. I mean you were on the worst possible place you could be in any cycle, right, at that moment. So as I look forward, I mean, we're focused on keeping our balance sheet neutral. We're not necessarily worried that we don't have asset growth, so we're looking for asset growth for the sake of asset growth in terms of keeping our neutral position. I don't think there's anything fancy that we're doing other than trying to stay neutral, think about what happens if rates go up and what happens if they continue to come down. We're kind of in an advantaged place right now because as we built the bank to be neutral for changes in interest rates over the last couple of years, we've got the steep curve, which actually is giving us some benefit in the margin. Right?

Brent Erensel from Portales Partners. The last time the Buffalo Bills were in the Super Bowl, we had a pretty wicked credit cycle in 1991, and early '90 and I want to follow up on Julian's question, where are we in the credit cycle? Where do you think we are? We've seen some flare-ups, but could you try and to mention this and give us some idea as to dimensioning and pace?

While we don't have a lot of cockroaches in Buffalo, we may win the Super Bowl. Is that answering. It's a great question. I think it's a hard question. I think that we're -- it's been a long run without any credit problems. I mean really, you can't count the pandemic because there was so much infusion. We didn't see anything there. And so 15 years without a real credit cycle that might tell you that it's time. But I think the way it works is that you get these events, and if you get them over time, and you can begin to identify risk, you could actually put yourself on a path, if nothing goes wrong, you could put out yourself on a path for another period of expansion. But the question is, how do we get more risk identification, the thing that used to worry me a lot of worries me a little bit less because of what I see the industry doing is that if you think of the financial crisis, there are 2 things, there were a regular recession. There were high asset prices on mortgages, right, all that stuff. But then what we underestimated is how much leverage within the system, right? So we were just looking at, again, the regulatory capital ratios and then we were missing the fact that we had CDO-squared and CDOs and CDO-squared, and we had more leverage. So that fuel, right, made the situation very different. Today, the banking industry doesn't provide most of the loans, that's where all the transparency is. So oftentimes, when we talk or we've written about nonbank financials in the private credit markets, we're actually not saying that they're not a good development. We think they're an outstanding development. When we started our careers, we couldn't securitize real estate and middle-market loans and now you can. What worries us is the transparency. So how do you tell relative to 2010, how much leverage is in the system? Well, you need to get transparency and need things reported, not the say someone is doing something wrong, but just to actually see it. And that's what worries me. But if we get at that and we can get really informed and we can sort of to your earlier question, really double down, look at our portfolios and learn from what we're seeing at these small events, you could put yourself on a path to grow again. I mean if you think about -- think about '80s and '90s, right? I mean there were bumps in there. but a bunch of those bumps were pretty healthy for us in the end, not in the moment.

We have time for one more quick question.

Quick means we have 21 seconds.

Yes, 21 seconds. Let me just follow up to Brent's question then just and we'll wrap up after this. But Rene, like what do you think can be done to improve the transparency. So we have better visibility into the actual leverage in the system?

I think it's starting to happen. I think it will -- for better or for worse, it will start through the banking industry examiners and other people will start looking, requiring more disclosures, which is just a window into the world. It's maybe not the perfect window, but you'll begin to see that. I think you could get. If -- if you were to get some -- the place that you could do it would be through the SEC. I don't think that's going to happen, not in the current administration. I think it's really really -- everything is very clear about pro growth. And then maybe these events, right, force people to ask better questions about who they're giving their money to and what fund. Again, if I were to guess, I'd say that we've got a rock-solid industry in that space with rock-solid people. But on the fringe, who are the new players, who's got 2 years of experience in starting a fund, right, and who doesn't necessarily have the risk management infrastructure and if we could better understand that, you'd really understand the macro risk in a much better way, a much deeper way.

Right. That's great. I appreciate it. Thank you, Renee. I appreciate it.

Thanks, Gerry.