Northern Trust Corporation ($NTRS)

Okay. Up next, we have Northern Trust. And I am delighted to have with us today Tom South, Chief Information Officer at Northern Trust; and Dave Fox, CFO. Thanks so much for joining us.

Thank you.

So Tom, maybe let's start with you on the technology function. I think you were lost on the stage with Betsy in about 2023. And clearly, a lot has happened since then, and things have evolved a lot over the last 3 years. So let's start with you. I think with the One Northern Trust strategy, it's built on 3 pillars, right? Optimize growth, drive productivity and strength and resiliency. And I think technology enables all of that. So can you break down your core strategic priorities and where the technology function is overall at Northern?

Yes, I'd be glad to. And by the way, I want to thank you in advance because I made some pretty bold predictions and I was here with Betsy. And some came true, and some didn't. I'm glad not to have to defend any of those.

We can do all of that.

So we've been just a little bit of a look at how we've been prioritizing over the last few years in terms of focus. We've had a pretty meaningful focus on -- in 3 areas, primarily. Risk and resiliency was a big one. I talked about it back when I was here then. There was a couple of big cyber events in the world in 2020 and 2021, and we really upped our game in that space. And that's been running at an elevated level since that time for at least since 2020. Our modernization journey, they're another one of those. We've been on -- those two bundled together to make sure we're a safe, secure reliable partner with whom to do business, whether an institutional client or a personal client or a sovereign wealth, et cetera. So critically important. It's sort of like when we would consider job one, you have to get those things right side or security in particular. Otherwise, everything else we're doing becomes a little bit perfunctory. And so we've had elevated investments in that space for the last few years. Really going back to 2021, you can see a pretty big jump in tech spending in that time frame. And then the other part of that has been in efficiency and productivity, which has had an elevation at that time, but significantly lower than where we are today. So we still think about those dimensions really critically in terms of what I'll call the tech-driven investments. And the place I think we're adding the most incrementally right now is in emerging technology. I know it's been almost 90 seconds, and we haven't mentioned artificial intelligence yet, which may be a record for a tech conversation. But it isn't just AI, it is AI, and it's a lot of AI. But we're interested in making sure we're looking around corners up the curve a little bit. So thinking about quantum, which is starting to gain some acceleration. [ Of entellGroup ]. I wish I could take 10% of the AI mania and switch that into quantum mania. Because I think these things are -- I think quantum AI and digital assets are likely going to have a moment in which they start to converge. It's not this year, but it's not so far off that we aren't starting to think about that a little bit. So we think about those core investment themes in that arena. And then if you think -- I want to think forward a little bit. And not by the way, I should note, lots of folks in this room probably know this. We've been running -- post 2020, we started running at a very elevated growth rate. I think the peak year-over-year was about over 13% and in a range of about 8% to 13% generally over the last 5 years. It's because, I think, post some of those big cyber events in the world, we really dug in on resiliency, broadly cyber, reliability and recoverability. Critically important. And so those are important both because of the exogenous issues in the world at that time. And by the way, I haven't -- it's not like it's a nice quiet environment right now from a geopolitical and other perspective. But from a brand reinforcement perspective too, right? At some point, 1 of the rationales for being a client in Northern Trust is it's a safe place to be in the test troubled of time, so we want to make sure we were investing enough to keep up with the risks around that. But as we look forward, it isn't like those things are important. They're critically important, but we actually moved into the range in which we're performing on the reliability side at the highest level we've ever recorded. For example, we still have improvement targets every year. But we're performing at the highest level ever recorded at a level of change in our environment that's triple what it was when we started measuring that 5 years ago against this plan. And so we've achieved some of the metrics that told us we could start to level that growth and start to tilt that growth towards emerging tech and towards a more business growth unlock over time. So it's not a big shift in 1 year, but we are seeing that tilt. And the other thing you should see from us is we are seeing some abatement in that growth rate. That 8% to 13% is one we're trying to drive single digits this year. We expect it to be single digit this year. And we'd like to aspirationally move into a range of about 4% to 6% or 4% to 7% on a sustained basis. Now you may wonder, boy, in this era of AI, even my time spending here, tech is such a critical component of the success of the firm, how are we seeing that number come down? Well, we're getting efficiencies in the IT space that are pretty substantial. And they're giving us hope that, that new range is more sustainable. But it's hard to predict that far out. And like I said before, even some of the elevated spend was driven by external factors, not so much internal factors. So we always have that -- Dave stresses, and I think it's an awesome flexible financial model to adapt to adverse conditions. I think Dave often refers as adverse economic conditions, but there are other kinds of adverse conditions in the world that we have to react to with the glass wing out there where the industry is reacting to an adverse condition right now. And we have that -- so that flexible model has to lever not just economic conditions as they change, but nonfinancial variables that we have to deal with, and we're flexible enough to do both.

So Tom, you started on the cybersecurity side. So maybe let's dig in a little bit there before we move on to the modernization and AI. Well, I guess, cybersecurity, I think you have to talk about it with the AI perspective just given all the headlines around Mythos and everything that's happening out there. So how are you thinking -- maybe delve 1 level deeper on the cybersecurity risk, what you did before? How have things evolved now with AI and where you're spending your time?

Yes. And I'll be candid. That's a bit of a chunky topic because it is hard to extract cybersecurity from artificial intelligence. And not artificial intelligence from the kind of future prospects of the firm on both the top and bottom line. Let me start with cyber and AI and what we're doing on that front. So like every new emerging technology -- and I've been around the firm long enough to have seen a couple of generations of these now -- almost every 1 of this is a double-edged sword in some way, shape or form. And we have been extremely excited like a lot of firms about the prospects of both productivity, efficiency and new products and services as it relates to AI. And I can talk about those in a minute. But if you're not careful, these things come around on you. And the Glasswing and Mythos revelations over the last few months remind us that, that other edge of this is out there, the risks associated can be profound and have to be managed in large regulated firms that can't be accidental. It's got to be quite thoughtful and proactive in many cases. And so -- and I saw a really great article last week from [ Jenny Easterly ], who used to be the Head of [ CISA ] under the last administration, is clear cut a cyber expert as you'll find out there. And you read this really great article saying you don't really have an AI problem with Mythos. You have a legacy of 30-plus years of deficient or vulnerable software that was created and is operating in all of our businesses. And all Glasswing's efforts are doing are taking -- would have been years of exposure or discovery of those and compressing them into a very tight window. And so I happen to subscribe to that characterization of where we're at right now pretty energetically. So -- but to talk about what we've been doing in the years leading up to this, and I'm thankful we were building out more robust programs around vulnerability management, cyber security, hygiene, I'll call it for folks that wouldn't hear that word in that space, your hygiene in cybersecurity, if you're coming at it from a robust position, particularly in vulnerability management, other areas, if you're coming at this from a pretty robust position, then yes, this is an urgent activity in terms of scanning your environment, discovering these vulnerabilities before someone else does. And fixing them, right? Super important. But if you came at this from a standing start, well, it's really a challenging thing to do. We're fortunate enough to have built out a robust program around this. I was telling a couple of clients earlier -- late last week that we already had 5 scanning tools we are running every single day to try and find gaps in our environment and a whole program around remediation around those. So we come at this in our -- from a sense of we had a really good program, but this is new. And what's new about it is the time frames, right? The time from discovery to exploitation was measured in weeks and months in the -- and has been in the industry for a long months usually in the environment that we've operated in. That window is about to go down to hours, days, weeks at best. And so we're going to have to adjust our position in terms of how we clean our environment, remediate our environment. And this is what I always tell people is our goal right now, we're doing the same as probably every other firm. We built intelligent scanning tools. We're using every frontier model provider that's out there to try and inform these tools. But our goal as a financial institution, the brand promise to our clients is not to be the #1 discoverer of cyber vulnerabilities. It's to provide them a safe, secure environment in which to operate. And that means you have to be as good at cleaning up what you find as you are discovering it. And I don't think people talk enough about that. And I don't see enough printed about that in the press because it's not as sexy as I'm working with Anthropic, working with OpenAI or I'm working with Google on this. So I really think that end-to-end treatment of this is what we're really focused on. And yes, we are today sign a little bit, we're investing a fair amount of unplanned energy and time treasure and talent in this right now at our firm to make sure we're ahead of the inevitable release of these tools into the hands of adversaries that would do us harm. But I want to -- just because we're here at the AI junction, talk about -- so I don't want to be a storm cloud on artificial intelligence because there is this thing. We have to deal with it, and we are in a pretty strong position to deal with it. But there are tons of other opportunities we are still pursuing. It's not like we said, "Well, okay, cancel the AI party. We're going to stop it, it was a fad and we're going to do something else." Our conviction certainly a long time horizon is still very high on both top and bottom line returns in this space. And I would say, because I've been asked this question a few times today in meetings with a handful of folks that are here today in the room. Where are we seeing impacts of artificial intelligence in our business today? Well, by far, the top impact is in IT, right? The tools for our developers have become quite sophisticated quite quickly. Our folks are kind of using the AI as a partner programmer in a lot of cases and partner engineer. It's a consultative partner in some cases. And so we have seen -- as our teams have started to adopt this, the rate of change in our environment going up pretty dramatically. You can literally see the charts as when kind of a pre-AI, post-AI, the metrics we get out of there tells us to change volumes are up dramatically. Good news is code quality continues to maintain to be very strong. That was a concern for us. So we're seeing a pretty big impact in information technology. And it's probably not super obvious in the earnings because a lot of that is CapEx, and it gets a bit diluted by the depreciation schedule, but we are definitely seeing that. And by the way, our conviction, basically talking to a lot of these AI model providers is we're at the beginning of this, not at the end of it. So I think there's a lot of, what I'll call revolution and transformation in software engineering still to come at this point. So a lot more on that horizon. But there are opportunities we're pursuing agentic orchestrated solutions in almost every area of our business. I'll give just a couple of those. We're doing some work in our risk and compliance space that I think is going to be interesting. A lot of that's internal, much like the software development piece. Our audit team is starting to get involved in this. So a lot of good internal use cases where we thought they were lower risk. And that was tough. We were really starting with late last year as we were more in that experimentation mode. Now that we're in implementation mode, we're excited to be building things for our wealth management business to enhance our adviser personalization. I think if you saw our earnings last time, Mike O'Grady talked about hyper-personalization. We've got some really slick tools that we're developing and deploying to help our advisers personalize refine and enhance the advice they're giving to our clients in near real time. So that's combining the brilliant Northern Trust Institute body of knowledge we built over the last couple of years. You've probably heard from [ Jason Tyler ] at some point around that. With our -- the deep knowledge we have about our clients, their goals and aspirations, their behaviors, their transaction history, all those things coming together. And then so my public and public information about them to build maybe the best advice we can. So not just depending on our adviser but adviser plus a digital assist, an AI assist in that case. And then in our asset management business, we've already got doing research across in our municipal bond space. We're reasoning across the 90% of the data that people can't afford to get to with purely human efforts around that. We're tapping into data we never could have covered before on the research side to generate outcomes for our clients in the asset management space. But I expect that is like a lot of a lot of asset managers we expect that to permeate all facets of the everything from research to portfolio construction portfolio deployment to portfolio maintenance and compliance and everything around that. So we're, again, at the early stages on that. Mike Hunstad runs that business, and I'm very bullish on what we can accomplish there, even in the next 6 to 12 months. And we should have continued to have a, what I'll call, a series of key components we deliver, key announcements we can make around capabilities there to the benefit of our clients and the consumers of those products. So I don't want to make it sound like it's a dark cloud of cybersecurity concerns. They're absolutely real. But we've got a good program to manage those, and there's a lot of upside that we're pursuing pretty energetically. And we, like a lot of firms, are talking about -- last year was an experimentation and education year and a bit of evangelism by the IT folks this year is an implementation. And I think we're now embarking upon this reimagination, right? To really extract that game-changing value, you've got to do some reimagination of how you deliver those services. And so we're entering into that phase now.

Okay. So you covered a lot there. So I'm going to jump around a little bit with my follow-up questions. So let's just wrap up the topic of cybersecurity. So I guess, how long does it take to find the vulnerabilities? It feels like it takes maybe hours or days at this stage, but how long does it take to fix them? And is it a continuous process given that there are -- there is legacy code over several -- probably several decades at this stage? So is it an ongoing process, it's going to take years? Is it going to take just months? And how is AI going to help that process?

Yes, that's a really great question. So the discovery process, once we start deploying these tools, they lived up to the billing. They are incredible at discovering what were unknown, very -- what might have been categorized as low likelihood exploitable vulnerabilities. And so the discovery process is kind of expensive, candidly, but very effective and pretty fast. I think the harder part of that is that back half of that, which is fixing those. So finding and fixing are somewhat discrete today. We would like to bring them together, and we are bringing them together very quickly. So the only way to keep pace with the really efficient engine of discovery of vulnerabilities is to start to get that's happening at machine speed is to start to move towards machine speed on remediation. So we are -- we have -- we originally did like a lot of firms, we built a team to start doing automated intelligent code scanning. And probably within 3 or 4 weeks, we realize is we need to build a team that was pursuing with equal zeal, the fixing of those, the remediation of those issues. So we're building both at once. And we've got a couple of strategic partnerships we're leveraging right now with some of the largest firms in the world that see this problem the same way, that this is an end-to-end problem, not simply a discovery problem. And so we're moving very rapidly towards a lot of automation on that remediation front. You're asking a really great question, which is how long are we in this state. And it's hard to say at this point because I probably could answer that question for us on our the code we've built and deployed and how long that's going to take. And that's months, not years. So that's the best I can do to quantify that. But the entire global financial system is an ecosystem of tons of large financial providers, financial market utilities, lots of big vendors that we all depend on. There's a lot of commonality in terms of large providers. And I think that could be a longer window. It's hard to predict right now, but for all of that ecosystem to be uplifted in terms of the quality, the code, the vulnerability assessment and remediation process, I think it can be longer than that. So I don't want to make a big prediction around that as I did on stage last time I was here, but I think it will be longer than our own in-house scanning and remediation will be. And I think until those firms start doing this -- come to the same conclusion we did, which is machines are -- AI is helping me find this, AI has to help me fix this. And I think that's going to be a longer period of time. When we're done, though, really -- when we're through this, however long this takes, we will have a much healthier, much more resilient global technology platform upon which the industry runs, not just for Northern Trust, but for all the firms that we depend upon and interact with. And that will be better for our clients and quite frankly, better for the sort of Western financial system as we think about it.

Okay. Perfect. So there's certainly a lot more to dig into there, but maybe let's talk a little bit about the modernization effort and the investments there. When you think about the tech investment curve, you've moved, as you noted, past that double-digit growth in equipment and software spend. Where are you headed from here? Is it mid-single digits from here?

Yes, that's the aspiration. It was at mid-single digits, and we're not there yet, will be single digits this year and continuing that trend. So that's the model we have right now. I was -- I didn't characterize it earlier, but because it's a hot topic, talking about AI investment right now, it's a relatively small part of our overall tech budget, but it's the fastest growing by far. So it grew triple this year. We expect that to be double or triple next year and probably the same for the next couple of years. And so while our aspiration is getting to that mid-single digits in terms of growth, it's very possible as our businesses start really getting energized around reimagining the processes that the demand may spike for some period of time. So I'm not ruling that out, but what the model tells us right now that we think we're going to keep in that mid-single digits. I think the piece that -- the other piece that's worth noting is we've been on this modernization journey, as you mentioned, and we still have some work to do. We're running -- just under half of our applications are running in the cloud base today. That's not where we aspire to, we aspired to be higher than that. So we still have some work to do on that. And every time when we migrate things, there's always this bubble between the things we're still running in our on-prem and the things we're running outside of our 4 virtual walls. And so there'll be a bit of that bubble too. So I think when I say we'll get to that mid-single digits, the time frame on that is a little challenging for me to predict right now, but we want to get to single digits this year and sustain that because it's been a long -- it's been 5 years since we've been in the single digits. So that's the start to that when we get to that midrange. It might be '27, it might be '28, sort of depends on some variables outside of our environment.

So I guess a follow-up to that, and Dave, I do want to bring you in here as well, is when you think about the spend that's falling in to run the bank versus change the bank. How is that changing? And how has that changed? And then what does that mean for operating leverage as we go forward?

Well, I'll start with the run change. It's actually about 3 different ways we slice tech investment. I gave you the 4 buckets of what I'll call the IT-driven investment. And then -- but we want to make sure that we continue to invest enough in the businesses to continue to have them grow. And when we tilted a few years ago into this resiliency in cybersecurity, heavy, heavy accelerated investment, that tilt of business-driven kind of change went under 50% for the first time in a long time. I'm happy to say it's tilting back over that 50% range. So it's to us a little bit less about run and change right now. It's a little bit more what's driving us. And for a while, their cyber risk and resiliency, we're driving us, the majority at least. That's tilted back to business-driven initiatives. And so we hope that's a good unlock around both productivity and growth in those businesses. And so I think that's probably how I [ care ]. From a run change, I'll just give you this because everybody talks about this in the industry. We've gone from 60-40 to 40-60. And I've been over 20 years at the firm. I've seen it at 60% run and 40% change, and I've seen it at the inverse of that. We're somewhere in the middle of that right now. I will say, again, during that tilt towards resiliency, some more of this became run as we added incremental capabilities on the run side. It is starting to tilt back again. So we're seeing the same tilt on business unlock, it's the same on run versus change. But it won't change -- we won't get to our desired range, which is closer to that 60-40 on the change side until we finish some of this modernization work. And that's got another couple of years at least left to it. So this -- we're tilting the right way, but we're on a journey, and it's a few years out still.

Got it. And then, Dave, anything on the operating leverage side as you think about the investments that are required, but also the underlying operating leverage that you're generating in the business, how should we think about that?

Yes. I mean, when I think about operating leverage, obviously, we gave the guidance above, obviously, 1%. And if you think about how we do our planning and what he can spend and what other folks can spend internally, I think you remember this from the call. We start with productivity, right? Productivity informs the amount of investment we can do. And then that investment we do will define the expense growth, right? So at the end of the day, the investment we make in the years large, but the productivity is equally as large, right? So from my perspective, maintaining the operating leverage isn't just holding people back on their investment dollars. It's also doing what we're doing already more efficiently. Right? So that productivity really drives the fact that we can reinvest in growth and in technology at the same time.

And the other aspect -- and we can dig into the AI investment spend here. But the other aspect is as you drive more productivity on the AI side, you also have to think about the cost of tokens. And how are you tackling that right now? And is that a priority? Will that be a priority later on? How should we think about that?

Well, I'll start, and if Dave has a comment, he can chime in. So we have started to -- I know the buzzword is tokenomics now, and I'll use it sparingly. But it is a new variable for us to try to manage at this point because our consumption is going up rather rapidly. And again, it's not -- as I said, not material this year, but it's quickly going to become so. And what -- and maybe more importantly, is prior to -- it's really influencing prioritization right now. And so 1 of the examples that we've often given is with most new tech innovations, it comes out, and it's generally the most expensive it's going to be when it hits the market. Right? You can think of any innovation in the last 25 years, and the unit economics that get better as it gets produced in more scale by more providers. And so we -- so in a lot of ways, you look at NVIDIA sort of had the market on GPUs, and that created scarcity. And so we said, okay, that's the most expensive it's going to be. And it should come down -- AI costs should come down dramatically. But that is not entirely clear that, that's going to play out here because there are a lot of other variables. In this case, one, the demand for this technology is kind of the likes we've never seen before, at least not in a very, very long time. And the outlay of capital around data centers and those kinds of things, infrastructure in general, really substantial. And then this is one of those few technologies where there's power and water and there's a bunch of other sort of commodity or pseudo commodity things that influence this. So it isn't completely clear to us that the economics of this are as sharply downward as virtually every other tech innovation has been over long periods of time. So we do have -- so the reason I bring that up is we are having to prioritize -- we have, as Dave has mentioned to a group earlier, the range of ideas we want to push through in terms of AI development is very large. But the funnel has a filter on it. And one of the filters has to be whether this thing you want to automate or you want to build, actually is going to be affordable to run based on the fact that I have a global operating model and may not be -- we've had -- we've thrown out things we built already because running it was more expensive than the people that were doing it. And that's a weird place to be. And by the way, generally, in most -- almost in my 20-some years in the company, we would have lived with that. We would take that business case because we assumed the cost of that tech was going to come down over time. The uncertainty around tokenomics and how this plays out has us a little more circumspect on just taking neutral business cases and assuming they're going to become positive over time. So it's forcing us to do more prioritization in a way we maybe haven't had to before. So I would say that there's, I'd say, much like the cloud era of 10 years ago, and that started to hit financial services, we're more interested maybe in speed and capability than we are in hard savings in day 1. And I know it wasn't my phrase, but I'll reuse it here. These are assistive technologies we're building for the most part right now, which means they're largely elevating our people, not eliminating our people. Now maybe that's 5 years from now, a change, but that's where the economics happens right now.

Got it. So as we -- I think you went through some of the more impactful initiatives across some of the businesses, but maybe if you can double-click on that across the 3 different businesses, which are the areas you're deploying more AI, which are the areas you're deploying more tech? And where are you in that life cycle?

Yes, I probably jumped into it a little bit earlier. Again, I think the place we moved the earliest and fastest was in asset management. And I talked about some of the -- certainly, a lot of the research there has been assistive, I'll call it. We're not losing researchers. We're just researching across far more information than we ever did before. I think that's going to move up further into the -- more of the asset management activities over time. So I talked about that a little bit already. On the wealth management side, this one wealth adviser tool that we're building that's growing, that's going to help our advisers continue to be assisted to them. You can imagine that over time, make them more effective and be able to have broader coverage. We're also pursuing some strategic partnerships with some of the larger AI firms to build some other tooling in the wealth management space. I won't jump to going to announce any of that, but I think we're excited about the fact that we're clearly an area of -- Dave and Mike have talked about an area we need to grow organic growth. And so we've got investments directly aimed at helping assist that over time. So I'll say stay tuned on that. I'll let that be Jason and Mike and Dave's news to share when those kind of come about. But let's not forget that a big chunk of our company's operational and technology is a big part of that, too. There are a number of initiatives there. I think the one thing that's most exciting for me is this fund transparency tool that we're starting to build out that will give our clients visibility into the life cycle as we're generating NAVs for them, asset valuations for their funds, give them visibility into the sort of supply chain as it's happening every day or every hour as we're doing that. They've been wanting that for a long time. It's generally done by e-mail and phone conversations today. That's going to become entirely automated and digitized over time, which we're excited about. And there are -- we talked about -- and Mike's presentation from our last earnings talked about alpha is 1 of the 3 themes for outcomes we're generating. And absolutely, we should think about that as investment alpha, where we've been aiming. But I do there's a lot of operational alpha opportunity out there. We have not mined a ton of that yet, although we certainly have work -- a lot of work in progress there. But think about that as a turbocharger of our digitalization work that we've been doing for the last 3 years, 3 or 4 years. This is a technology which just makes it faster, more efficient. And quite frankly, the build-out of it just accelerated. So we're excited about that. So we think there's operational alpha generation. But again, I'm not prepared to make any big pronouncements, but more to come on that over the next 12 months.

So maybe last question on the tech side. You mentioned quantum and you mentioned wanting to invest more there. I guess, what exactly should investors be focused on from a quantum perspective?

Well, I think in the early days, there was just -- there always have been tech circles, this -- well, all of your encrypted data that somebody may or may not have seen before is going to be able to be decrypted, right? And that's absolutely true. But we -- like for those of us that are spending a lot of time on quantum now, we're moving past that. And we're moving past that partly because quantum is starting to become more real, right? And I know that there have been firms that have been hyping this for 5 or 6 years, but the material science issues are being solved more quickly. And frankly, there's a lot more diversity and the approach is being taken. So we're starting to get ready. So I think there still is a security concern, but it's going to be less about decrypting old data and more about the way we all interact with each other and that you're going to have to have far more variability in encryption technologies. I don't want to bore this audience with all that. All that's going to mean though is that the way we send data in a trusted sense today has been fixed for a long time. It's going to become variable and it's going to require us to start to work together in ways we hadn't before. Us and our clients, us and other financial firms and us another financial market intermediaries. And so that's an area where it's starting to be talked about more. And I think I expect in 2027, a lot of people that come to realization that there's a lot of work to be done for us to start to move in some sort of lockstep around that. Having said that, I think there are going to be product service and investment opportunities on the top line side. And I do think it will be broadly in financial services. There are firms already making some moves in the space, but there'll be the types of optimization and products we haven't contemplated because they simply couldn't be performed before. Now whether they're economically viable, I think it's just like AI, it's a big question. These are expensive infrastructure to run. And so that's hard for me to see. So that's why we're starting being with preparedness using the [ NIST ] guidelines and our own interaction with our counterparties and a number of other academic institutions to make sure we're ready when variable encryption methodologies are required sort of post-quantum preparedness is the term you'll hear a lot about. So we're in that, and I know a lot of our peer firms are too. But I do think there's top line opportunities. We've got to set to mine those because we're going to spend a lot of money on the preparation end of this.

So Tom, that's a fascinating world, and I'm sure there's a lot more to dig into. But maybe we should bring this back to the environment. And Dave, can you give us an update on where you see the environment today, how you're thinking about the second quarter as we're about 2/3 of the way through?

Yes. One, it's been less than 50 days since we reported earnings. So you're really saying what's happened in that period of time. And when I think about the current market environment, the word that comes to mind mostly is sustainability. And that's the thing we think about mostly is we've had a good run, the first quarter into the second quarter. The market conditions have been very conducive. You could call it a Goldilocks-type situation for banks with our kind of financial model, right? So -- and I have that information at earnings as well. And so from my perspective, everything I said last time still holds, and my conviction is still there. What I'm looking for, I think, going forward in terms of full year is more sustainability, right? And so a lot of different things moving in different directions. Certainly, rates look like they're going to be stable, which is great. The market is still very volatile. Even though it's trending upward, it's still volatile. Happy to see earnings where they are. Our capital plans really haven't changed. Our NII strategy is still there. So I think it's -- it hasn't been that much time actually since we gave the guide. So I think we're sticking to our guns, and we're hoping that there's some sustainability built into this, and it continues to trend in the right direction.

And can you just remind us on the Visa sale gains and the payout ratios and how you're going to use that?

So yes, well, so Visa -- when I -- we talked about the payout ratios of our goal of 100% for the year, that did not include the Visa gain, right? So that wouldn't be something that would be included in there. But obviously, there is going to be a gain. And I think you guys generally know what the number is. And so what we do with that is something we -- as I said in the earnings call, we're thinking about and what the game plan should be. So I would -- but I continue to think about the 100% as it relates to the ongoing earnings of the firm versus the onetime gain process.

All right. Perfect. With that, we're out of time. John, Dave, thanks so much for your time.

You bet. Thank you.