Synchrony Financial (SYF) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us for this fireside chat with Synchrony's CFO, Brian Wenzel. We have a number of prepared questions we're going to be going through [Operator Instructions]. We have also prepared a number of audience polling questions that we would encourage you to answer during the presentation. And we'll be publishing the results in our report summarizing the takeaways from the conference. With that out of the way, let's get to the discussion.

Brian, thank you for joining us. I wanted to start with an update on the environment. You provided some good commentary on 3Q, on your Investor Day last week, indicating that purchase volume would be in the mid-teens, down from 30% plus in 2Q. So can you maybe provide some additional color on what you're seeing around that and what that means for loan growth?

Yes. First of all, thanks, Mark, for the invitation and glad to see you this morning. When you think about our purchase volume growth for the quarter, it's important I think to step back and think about what we saw in '19 and '20. So if you think about '20 for a second, we had a very -- along with everyone else in the industry, a very sizable decline in purchase volume. And when you look sequentially in '20, we had a 20% rise in volume in second quarter and third quarter. So as we stepped in, and we've provided guidance earlier this year. We said, "Hey, listen, we're going to have this big comp in the second quarter." And then you think about the back half, we guided that -- this is back in January, that you'd see growth that is more similar to the pre-pandemic periods, right? So if you think about '20 for a second, you have this big growth of 20%. So going from 35% to mid-teens kind of aligns with that in that return to growth. If you think about it back to '19, we were in the high-teens in the second quarter and will be similar as you think about that mid-teens against '19. So we see it as just more, you have a function of how bad second quarter was last year, but really kind of aligns in it, and the strength of the consumer continues to be there. Now as you think about loan growth, we did highlight that there is an elevation in the payment rate. It has continued. It kind of peaked, I'd say, in July, and it's come down after that a little bit. We see cohorts that are beginning to come back down or begin to trail down. We see certain cohorts that are continuing to remain strong. So we continue to monitor it. It will provide a little bit of headwind to the growth rate. But I think the growth rate you'll see will probably continue to rise, it's just the pace at which it will rise.

Got it. So has the recent surge in the Delta variant impacted consumer spending patterns or behavior that you can see?

Yes. So you'd probably guess, Mark, every day I get a sales and payment file where I can drill in to either any platform, any portfolio, either on the payment side or on the sales side. When we look at the Delta -- when Delta kind of came in, we have not seen any discernible impact of it with regard to sales. And we were expecting because part of our Health & Wellness business has planned procedures. And most certainly, some of the areas that were most impacted by Delta has suggested going that we have not seen any real difference. And if I give you a data point, we went back and we look at sales by week. If you look at sales by week starting in July, all the way through where we are today, it is in a very tight band. It has not moved. Even in the Health & Wellness segment, where I just talked about, you look at it very tight band. And that band hasn't really changed. If I go back and do that same look versus second quarter, it hasn't really changed. So we have not seen any significant change from a sales perspective given Delta. I'd also say from the application and the account perspective, we have not seen any change.

Got it. And then turning to payment rates, you noted that they've come down from kind of the July peaks, but remain elevated. Is there any update on when you think it will start to moderate?

Clearly, I think the consumer has done 2 things. One, they built their balance sheet, right? So they have spending that's in there. Second is you have the wind down now really of the financial support, whether it was for various other financial institutions relative to mortgages or auto, we're seeing people come off the extended unemployment. Some of the rental forbearance is beginning to wane. So you have to get that out into the system. So that's one. The second thing, Mark, and there's been this -- a lot of talk with investors and external people about, well, where is the pent-up demand, right? We always thought there is pent up -- everyone kind of saw the big rise in the second quarter, again, versus very soft second quarter last year. We kind of said at the start of the year, and again, I think it holds true where we would see a return to what we call more normal -- normalized spending in the back half, and then you'll have a pent-up period. And we said to you that pent-up period probably would be end of '21 into '22 with a potential it could come in the fourth quarter. That's still our view, is that you're going to have to wait for that. That's when you're going to start to really see the payment rate, I think, come down when you see some of that bigger spend come through combined with the forbearance and other support payments that will here -- slowdown here in the fourth quarter.

Okay. Great. That's helpful. For the NIM, you indicated 3Q will be close to 15% from the kind of the sub-14% and your long-term target is remains 16%. Can you reiterate the drivers for the 3Q NIM improvement and talk about what gets you the rest of the way at 16% kind of with a timeframe?

Sure. So we've always broken down the NIM when we're down sub-14% into a couple of different buckets. The first bucket was liquidity and your percentage of ALR, right, relative to the NIM. Second was the yield of the portfolio, and third were benchmark rates. So if you think about the sequential movement from second quarter to third quarter, 2 things happened. We told you we're working on excess liquidity. So I think when you think about the liquidity amount to the company, we trailed it down in the second quarter, continue that push into the third quarter. So I think we're burning off that excess liquidity. So that's down. At the same time, we have asset growth. So I think when you combine those 2, your ALR percent is going to rise. So that excess liquidity headwind that we talked about really comes off. The second thing you see is on the yield side equation, 2 factors in the yield. One, we are seeing increasing late fees. So that yield is starting to come up a little bit. And the second is the benefit from the charge-off environment that was [indiscernible], those 2 [ hostile ] factor in. That's what's going to get you primarily back to around that approximately 15% that I talked about last week. The progress from the 15% then to roughly the 16%, it's going to be a couple of things. One, you are going to see the interest side of the yield rise with -- along with the late fee yield rise with an offset. Then as charge-offs come in, some headwinds that were lowering of the NIM is going to rise. But that's going to be the remaining bridge that gets you back to the 16%. Again, we're in an environment, and I talked about it last week, sub-2.5%, and no one would have guessed 18 months ago. So there's a little bit of benefit this quarter. That will -- again, when we see the yield rise, the write-off piece will get in line and that should be the bridge back to 16%.

Okay. Great. And I think you indicated during the Investor Day that the biggest chunk of that was the reduction in the excess liquidity. Is that right? And if so, how much of that is due to just like stronger loan growth and putting some excess liquidity into receivables versus maybe just letting deposits run off and kind of reducing the overall amount of cash?

Yes. So the majority is related to -- or most of it is relating to the liquidity portion of the portfolio. It's probably a 2/3, 1/3 kind of split right between loan growth and liquidity profile coming down to be honest with you. So we're in that range. But again, we have a long way to get to the end of the quarter. I'd never thought I'd say that in 2-week increments, but that's directionally where we are in regard to that.

Okay. Great. Turning to credit performance, it continues to be very strong. You indicated 3Q will be in below 2.5%. Some of the payment holidays were extended to January and some will expire this month. Any update on how credit will trend over the next several quarters?

Yes. So right now, Mark, to be honest with you, we're working through our last forecast, which will be the basis for our reserve provisioning for the quarter. So I can't give you a quarter-by-quarter, but I sit back and say, we're going to provide up-to-date credit metrics on Wednesday. Again, they've continued to be strong. So if you think about that, you can get a good read at least 2 quarters out, right, relative to how the profile looked. So again, we expect it to continue to be strong through the end part of this year, and then obviously, if delinquency trends forward when we report on Wednesday, you'll see that going into 2022. What I've talked about previously, Mark, is really what we're talking about internally is where does that transition out as you support payments kind of go? There was always a scenario where you're going to see a pretty quick, almost like a bubble kind of come through, where you'll have losses kind of 9 months out because you have people who are really severely impacted by the pandemic or it may just be a gradual ride, and that's where we're doing probability waiting and how we think about the scenario. So we hope to provide some more color on that in October when we talk about our third quarter earnings.

Okay. Great. Trying to do the hot topic of buy now, pay later. Can you talk more about kind of SetPay and how your new Pay in 4 option will fit in with your existing offerings? And then what cases would you expect merchants or consumers to opt for the new Pay in 4 versus your alternative financing solutions?

More -- we've been very -- try to be very clear about -- our vision for work with our partner is a multiproduct strategy, right? To have the product -- the right product to the customer at that point when they want to close the sale and allow the merchants to provide or offer that product so that they can get the best value. Historically, we have provided installment lending inside of our revolving because people want to have repeat purchases. That's why a lot of our products were driving over 50% repeat purchases with them. And that's really important. But clearly, buy now, pay later has come, there's a customer segment that wants that. So we feel it's important to have as part of our product offering with that. So whether it's SetPay, which is that installment or just the Pay in 4, it's going to be part of our full product suite. What we want to be able to do is sit back and say to our market partners, you may want to offer them a certain type of good or services as you think about that inside of our economic region, but we want to really think about how do we take those customers, and what's unique about our company is that we can migrate people. So sort of like what we talked about in our Investor Day how we have been able to take private label and migrate them up to an upgrade into Dual Card. We want to do the same thing with our SetPay or in Pay in 4, how do we migrate those folks up as we know them into a private label or another product. And that's really going to be key in the economics. So we really look at it as a wing-to-wing story, and we're really about choice for the merchants saying what do you want to offer, at what time do you want to offer it. But really, we want to be able to get out the filter and really help them drive sales.

Okay. Got it. Now you clearly see a role for buy now, pay later given your offering -- the new offering. But do you see a need for more consumer education to kind of counter some of the misinformation some of these new players are putting out there? For example, one of the larger ones has been very negative about the high cost of credit cards. But the reality is for the borrower with the means to pay their Pay in 4 loan on time, a revolving card is actually cheaper for the borrower, right? They don't pay anything until around day 45, whereas the Pay in 4 customer has to pay 25% on day 1 and 75% by day 30. And also, usually, it's cheaper for the merchant. So it's kind of an open-ended question, but your thoughts around that?

Yes. So first, Mark, what I occasionally say our company, we strive for it, and I think some competitors try to criticize credit card issuers, we strive for transparency with our consumers, both if you're taking a promotional financing, disclosing all the terms and conditions upfront, disclosing at the point in which you're making the purchase. So it is very clear to the consumer what the terms are. And so I think across the industry, whether you're buy now, pay later party or you're a credit card issuer, transparency should be critical for all of us. I'm not in the business to go back and say, is buy now, pay later, transparent enough. Do you understand the cost upfront? Do you understand if your bank account is overdrawn? That's not for me to go and say that. But we think the industry should really focus on providing that transparency to the full economic perspective for someone who has laid out the terms as clearly and conspicuously as possible. That's what we strive for really from an industry practice perspective, and we would encourage everyone to hopefully do that.

Okay. Makes sense. Do you see most buy now, pay later as taking spend from debit, credit or both? And then what kind of uptake or impact do you expect your Pay in 4 product to have on your existing business?

Yes. So first, we have studied buy now, pay later impact over the last couple of years as it really has grown, and we partnered with an outside firm to kind of do a deep analysis really on the -- at the customer account level to kind of understand the behavior patterns it has. So when we see it and the data we've seen, I think, 75% of the buy now, pay later accounts are funded out of a debit account, right? So the view is that they are -- you're using cash and taking what would be a debit transaction through the buy now, pay later. We then looked -- and really the impact of our business, and we looked at it and talked a little bit about it in Q&A last week about the impact on our business. Are we seeing anything that says buy now, pay later is impacting credit? And so when you look at it versus a cohort population of our Mastercard as well as our Dual Cards, we see a low penetration, and we have not seen any changes certainly with how they use credit with us. In fact, they are more engaged with us than our average customer. They generate more revenue for us, but we have not seen any change. So as we look at it and when [indiscernible] -- when we look at applications come through, go over some of these products are offering, we have not seen any change, discernable change. So when you think about the impact to us in credit, we don't really see it yet. We think that there is a shift that's happening probably from cash as a tender type. And I think this is where the merchants and our partners are taking a step back here saying, "Yes, we understand your offer, consumers like it. But is this driving incrementality for us, true conversion? Or is it really just a convenience factor, which changes the economic gain for them." So I think it's an open question, but our view right now is it appears to be more taking from cash, and there hasn't been any sort of going back in our business.

Okay. Got it. Turning to your private label issuing business, what's the state of competition there?

Yes. It's been relatively steady, Mark. We have not seen dramatic shifts. Occasionally, you'll see someone a little bit more random into the mix. But if you think about smaller programs, if I see Alliance Data, a little bit more as they think about it, they are trying to do a lot of new [indiscernible] type programs. I think when you think about the bigger private labels, you really see the cap-on's to a lesser extent than right now, but they've been consistent, they've been fairly rational. And as long as I've been on this business 23 years, I think everyone has forecasted the death of private label in the store card. It has a place in the product strategy. And that really has a place with a lot of partners. And we believe it will continue to be there, but we also believe that there's other products that can really drive engagement. We really want to drive and get to the most engaged customer, and our merchants provide that offer and compelling value prop. That's really what sustains growth for the cycle and that's really what enables us to drive what we think is a higher margin business than like a lot of our competitors.

Okay. You highlighted last week some longer-term opportunities to grow sales volume through increasing tender share, acquiring new customers, increasing wallet share of current customers. Can you talk about all of the things you're doing or planning to do to execute on each of those?

I'm not sure I can get to all of them. We only have about 20 minutes left. But listen, we're trying to attack it at a ground level from a lot of different angles. We know we highlighted a couple of different ways where we use the marketplace or a provider locator. When we focus on provider locator, you have a CareCredit card, you're looking for acceptance of that card because you like it and you have a great NPS score on it. But you have to go see another doctor using a provider locator to drive sales to other doctors, other providers. So we see that as the merchant business, we talked about with 1 million referrals out to our merchant partners. Then you think about everything we're trying to do digitally, right? So we're trying to expand the funnel so that this business used to be -- 10 years ago you'd go up to the register and you'd fill out an application, then you went to a digital touchpad. Now we're into QR codes, and it's happening in the store, it's happening before you get to the register. We're providing digital cards in -- on your phone or in your digital wallet by the time you get there. So engaging digitally is 1, creating a good in-store strength and the value proposition, right? That's the important element of why you can get highly engaged customers have that done value prop. And our best customers are people who are highly engaged with our merchants and our partners and then really kind of finding that value prop and being on a regular cadence to refresh that value prop to make sure it continues to resonate. And then the final piece, if I go instead of the 4-letter word, the BNPL, to the 3-letter word, RSA, it's really aligning our economic interest because when we're aligned around growth and profitability, our partners and merchants really want to drive increased sales because we're the lowest cost of tender to them. So they really want engagement. So it's multi-pronged. When you think about technology, we're trying to get down to delivering through our experience. Now that we have the distribution, you have the digital alignment on our digital assets, how do you drive more personalized -- more, I think, personalized experience driving your value prop to them and customizing it that's when you really get increased engagement. So it's a multi-pronged strategy, Mark, that we continue to work, and it varies a little bit by each platform.

Got it. That's helpful. At the Investor Day, you highlighted several innovative customer interfaces and products that you've developed with merchants like Venmo and the role your investments in tech had played in that. Could you talk more about how much of that innovation is driven by Synchrony versus the merchant partner so we can get a better sense of how much value Synchrony is driving in these different partnerships?

Yes. First of all, I hope everyone had the opportunity to listen to Dan Schulman's video, a lot of people have asked us about our digital capabilities. And I think, hopefully, his perspective is helpful. But I'd start, Mark, with you have to think about the breadth of who we deal with, right? We're dealing with on 1 case, PayPal, Venmo, Amazon, which are some of the more sophisticated digital retailers. But then we're down on mom-and-pops on one end and providers that are not very sophisticated. And then you have a middle section, which is in a journey with regard to technology, right? So we've gone along a strategy of making sure that our product's capabilities can plug into easily. Several years ago, we bought a company called GPShopper that allowed us to digitally plug in through our, what we call, [ Sapphire secondary ] plug-in into their app, where we can bring them an app or bring them a way in which we can engage with them. And then at the more sophisticated level when you think about the Venmos, the push alerts, having everything done in digital, we've gone into the API settings where now everything is happening almost on real-time API callout. So we have to be able to service the full spectrum. So in some cases, the [ paperwork ] pushes our timelines, and we will say we want this up on the road map. But really, our foundation has been to drive innovation, to drive diligently. I think where we're advantaged versus a lot of our competitors is when we separated from our former parent a couple of years ago, we were able to build things from scratch, so we didn't have a big spaghetti plate of legacy systems, everything we were building was brand new. So there's an early investment technology to kind of get that. That allows us to scale faster. So our push is best via APIs, SDKs. It allows us to meet the merchant, the partners and the providers where we are. So I think we always like to get pushed by our partners to be innovative, but I think it really -- we have a culture of innovation and a culture of driving these capabilities, and we're going to meet our partners where they are in the journey.

Okay. Got it. You discussed several factors that could impact the pace at which you can ultimately migrate to that 11% CE1 -- CET1 target, such as a need to issue more preferred equity. Could you elaborate more on those factors and what types of scenarios would drive you to a more rapid drawdown and what type would produce a more gradual one?

So maybe, Mark, if I could take a second to kind of go back to the journey because one of the feedbacks we get quite a bit is, well, you haven't gotten to 11%, you weren't able to get there before the pandemic. You know we know we didn't have that target necessarily out in the public domain, but can you really get there? And I want to frame the conversation. I think the history makes sense when you think about the perspective is, we came out, we needed capital to make sure that we could from a regulator perspective [ rates, even ] markets say we are well capitalized and that we can run as an independent company. We've been around for 90 years. So our peak was 18% CET1. Then we began share repurchases, and we actually reduced it 390 basis points and folks would say, "Well, why did you get out faster." Again, as a stand-alone new public company, the regulators, other folks were saying -- back saying you're on the prefaces of a credit event, they're going through a recession. So you couldn't really go from 18% to 11% back quickly, right? You just -- they would be uncomfortable if it didn't make any sense, but we reduced 390 basis points. The pandemic happened, we built capital up, which is a great thing because the resiliency of our business model or the earnings power of the business, the buffering RSA, we built the capital up. We started this year, we took out just under $600 million in share repurchases in the first half. We have $2.5 billion remaining, and we will deploy that. So as you think about going forward, people say, can you get there? There's a couple of things. One, you're right. We have to build out a full capital, which means we need some incremental [ push there. ] [indiscernible] preferred. We're about halfway there in that journey. So that's part of it. The second part of it, probably the most important part is making sure that we're comfortable where the environment is, right? As we've talked about, I think your first or second question was around the Delta variant and the pandemic, which is probably the biggest factor that we have in front of us. The second one comes into the credit environment and what's the scoring underneath. So as these forbearance and support items that you referred to that wear off here in the fourth quarter for sure, where does that really go and how does that environment look? So as we get more comfortable understanding that, that's the way our regulators and our external stakeholders think about it checking those off the box, right? So as you see that, as you get that comfort level from the environment, we then will be -- we'll figure out the cadence on how to get there, but we want to -- we recognize we have excess capital. We're going to be aggressive to get down to 11%. It will -- certainly won't happen this quarter, but we are in a [indiscernible] to really push on it. If you go back pre-pandemic, we took down $3.3 billion in a 9-month period just before the pandemic hit. So we can really decide to move. When it's appropriate to move, we will do it. And then the final piece I'd add, we get a lot of questions around are your regulators finding [indiscernible] are your [indiscernible] constraint. We've had conversations with them. Obviously, I think you can take some level of comfort we probably wouldn't have been public if there was a lot of concern about that. We wouldn't have gone out with that target. So we feel comfortable we can get there. The exact timing, we're still working on. But again, I think it's a macroeconomic piece and then you have to underline some of the [indiscernible] any exploring. So I apologize for the long-winded answer, but with that history and the context makes sense to people think -- that we think about our capital more.

Yes. No, absolutely. That was very helpful. I've got a question coming in from an investor listening in. And again, any of you out there, if you have any questions for Brian, please use the Ask A Question button on the upper right hand corner. Question is, could you just comment on expenses this year, and long term, kind of what your expectations are there?

Yes. We obviously did a strategic review of expenses last year. We looked at the portfolio and revenue as we think out 4 or 5 years, okay, what does the efficiency ratio of this business really have to be in order to produce that 2.5-plus ROA. And so we have this kind of target efficiency ratio that's out there. Obviously, the efficiency ratio in and of itself is a little bit off right now because of denominator effect of revenue. But when you think about it on a dollar basis, you are currently trying to manage costs. There have been a lot of onetime things that have come in both '20 and '21, where it's timing of compensation plans, hiring. We've done a lot around new sourcing from third parties. So I would expect dollar amounts to be in line with where we are today, and we're going to have tight control, but really as we kind of get to what that new norm is stepping through the pandemic here. So I wouldn't expect any dramatic rise. I think you'll see in certain cases marketing may be up because volume is up and a lot of our marketing level, we don't have to spend it to acquire customers. It's based off of volume as we provide funds to building upon [indiscernible] cycle. So there will be a little bit -- that will follow volume though with a little bit of discretionary. But I would think they would be relatively consistent from the expense we have made.

Okay. Great. Turning back to buy now, pay later, often solutions are more expensive to merchants than other payment options. Merchants presumably are willing to pay that if they think they will provide a sales lift. Maybe too early to tell, but how sensitive are your merchant partners to kind of clear evidence they're getting a real lift from the buy now, pay later financings? And what are the implications for how big you think that could ultimately get as a share of the market?

Yes. It's -- Mark, that is a great question. I think if you think about the time period in which you've seen this heavy growth in that part of the market, there has been a point in time which everyone said listen, we're just going to put consumer [indiscernible] out there. We need sales, it's highly competitive. They weren't spending as much working dollars, right, so to speak. So instead they'll go, maybe we'll spend it here. I think the conversations that we have with folks, they're really taking a step back and looking at, is there really a conversion rate increase here and is it really worth the cost, not too much. So they are going through that today. We obviously think that there will be pressure to that rate, as they kind of look at it and say, am I really going to get this thing. Plus you're seeing a lot of competition in the market. So even if you didn't have the pressure of conversion, there will be between the parties. That's why I think our strategy where we have the multiproduct strategy is we can look about how do I migrate people? What is the value here? And can we offer that a cost that's, in theory, less than what other folks can in the industry? So we think that there will be pressure on the price. We think we're positioned with the multiproduct strategy to take advantage of that and really drive that. And listen, we have a demonstrated history of how we can convert traffic into sales lines through things like our marketplaces or [indiscernible] provider [indiscernible] to do that. So time will tell, but most certainly merchants are now focused much more as we're getting to the -- hopefully, what's the latter stage of the pandemic and things are becoming even more competitive.

Okay. Got it. And often, those types of products tend to get more traction with customers who are weaker and more limited in credit history and less access to alternative forms of credit. So how are you thinking about managing the added credit risk from the new Pay in 4 option?

Yes. We don't -- we're going to be disciplined more. We're not going to go and lower our credit standards in order to drive lines. It's just not who we are as a company. Most of these other competitors have put on a lot of assets and a lot of volume, but probably the best credit environment we have known. I think there's something out there that some people are starting to see some of those delinquencies kind of build in or some of the overdrafts that are happening with banks because they can't complete the payments. So we'll see some pressure with that, but we're not going to incrementally open up. I mean we've operated a very disciplined credit underwriting system. We'll put advanced tools in place that we highlighted last week through PRISM. We combined that with data. And I think that access to the data and our ability to take data from partners and really integrate it into our credit decision will make smarter decisions for us. So we can be at the margin smarter without taking incremental credit risk. So I don't envision us whether we put our SetPay -- Pay in 4 or the SetPay, as we're taking our incremental credit risk inside our credit box.

Got it. Makes sense. Could you discuss what impact if any you would expect Amazon's new partnership where the firm will have your growth opportunity with Amazon?

Yes. Let me just speak broadly, we have a tremendous relationship and long-tenant partnership with Amazon. And we view our product is very compelling with them. And it's continued to resonate even though we've had competition from other people before. So we don't necessarily view it is going to have an impact. If you go on to Amazon today, you go look at certain products. You'll see our banner ad right underneath the product, maybe you're looking for a television or say, 6 installments and that's with the Amazon store card. And the 5% value loss that we provide to Prime members that's a compelling value prop. So I think as long as we're continuing to drive the service that they expect, and that's something that whenever you deal with Amazon you have to provide that love of service. That's why we have a 4-plus star rating, probably we're the better ones [indiscernible]. But provide the service, provide the quality, value prop, you'll have engaged customers. So Amazon is always going to provide different offerings, but again, we're very comfortable in our relationship with them and where we're going to continue to grow. So we're excited to be their partner.

Okay. Great. One more question coming in from the audience, just around private label contracts. And if you just kind of look at what's out there with potential renewals, how does that compare to kind of recent experience? Is it kind of higher or lower average? And also, what impact does potentially you see around that have on kind of the capital deployment strategy?

Yes. Listen, I think there's a mix of some de novo programs that are up there. I think there are some that are rumored to be in the marketplace that are larger and will be coming into market. If you look at our portfolio, we have most of our arrangements out -- [indiscernible]. So we feel good about where our focus is. I think we'll evaluate opportunities. I think that core business is a very good business for us. It's good returning business for us. And if we can get to a place where we can add one of these relationships, and it's at the right risk-adjusted return, we'll go ahead and do that. We're not going to chase return down for growth and leverage, but we can be competitive player. And especially, I think when you think about the digital capabilities that we bring, that's going to be really, really important to manage for us, and we believe there's some opportunities. Again, we're going to be very thoughtful about that.

Okay. Great. We're about out of time, and I'm out of questions for now. So we'll just end it there, and thank you very much for all your time and comments, Brian. Really appreciate it.

Great. Thank you, Mark. Have a great day, good rest of the conference.

All right. Thanks.