The PNC Financial Services Group, Inc. (PNC) Earnings Call Transcript & Summary

Moving right along. Everyone may take their seats. Very pleased to have PNC Financial with us up next. From the company, Rob Reilly, Chief Financial Officer. Before we jump in, maybe just put up the first ARS question that we've been asking for everyone. We get the question? No question. I guess as they put it up, you guys don't know what the question is. Rob, let's get started.

Okay.

And maybe just talk about big picture, broad state of the economy. Obviously, we hear about -- we see inflation. We also hear about it. Fed raising rates. A lot of uncertainty out there. Just maybe walk through your macro outlook over the next or so.

Yes. I think the CPI number here this morning caught everybody's attention. That notwithstanding, right now, things are pretty good. Third quarter economy is humming, maybe a little too loud. But we see what everybody else sees, an increase in consumer spending, gasoline prices coming down, really strong jobs, all contributing to strong economic growth there. The Fed's tightening, maybe even a little bit more than what we're expecting, we'll have to see how that plays out. So that will slow things down, we think probably in 2023. We get asked the question all the time. You asked the question, Jason, what's the chance of a recession? What do you think? And right now, we're looking at the possibility, we've got at about 40% of a recession in 2023. That could change depending on the rate increase outlook. But even if that were to happen, we'd see it as a shallow recession. We don't see anything in terms of anything deep in that perspective. And with these jobs so strong, it's hard to think of that as a recession. Inflation is on everybody's mind. It's high. It's persistent. We do see it coming down. And we do believe that the Fed has a lot of conviction around that, although we do think it might take a while. I think it will be persistent through the better part of next year as we work through sort of the rebalancing there. So that's a generally conventional view. Maybe we're a little bit more conservative in terms of how fast we think inflation comes down, but generally aligned.

Great. And now we get that first ARS question, perhaps. There we go. The same question we ask for everyone. And I guess, Rob, we know your answer. So the audience is...

Overweight.

As they're answering that, maybe start maybe running through the income statement balance sheet of loan growth. Second quarter is really good. You and others have talked about slowing growth in the third quarter. You, in particular, have some payoffs, write offs, your maturity is coming up. But 2/3 through the quarter now, maybe just update us in terms of what you're seeing?

Yes. Loan growth is pretty good. We expected it to continue. As you mentioned, we had a strong growth in the second quarter, in part, driven by large underwritings in our corporate space, which we typically do -- we typically have, but not that many in the same 90-day period. So that added a little bit of extra in terms of the spot. But on an average basis -- good answers here, Jason, by the way. On an average basis, it's still strong. It's driven by the commercial side, the corporate side, and that's all tracking within our expectations for the quarter. What might be a little bit different that's emerged is it's broadening. So we had seen -- we had come up of last year where it was no loan growth, low utilization. We saw an increase in utilization in the first half of the year, driving up loan balances. But I'd say in the last 90 days, the growth has been driven more by originations than increases in utilization, and it's broad. It's not just singularly in the corporate under the revolver book. We're seeing increases in public finance, healthcare, even our real estate book with multi housing. So commercial loan growth is what's driving the loan growth. Consumer is a little bit less in terms of the growth, largely because of the cash flush position of our consumers, and we tend to be, as you know, a prime lender.

I guess on the consumer front, have you got any areas that you started to see maybe some improvement?

Yes. What we've seen mostly, interest rates notwithstanding, we've seen a growth in our mortgage business simply because we've always been sort of underweighted relative to our opportunity there. So we continue to grow mortgages on our balance sheet, largely just jumbo loans, which could -- generated through our private bank. A little uptick in home equity. Credit card's flattish because of that cash flush nature. And auto were down a little bit, largely just because the risk return is not right for us. We don't think it's in the right balance. So we've faded a little bit there. So a little bit of growth driven by the residential side. Importantly, though, and we may get into this, on the credit cards, we're signing up a lot of new credit cards. We're seeing a lot of activity around the spending. It's just not the balances.

Got it. And on the deposit front, you actually won a few banks in the earnings calls to increase your deposit beta, something from 22% to 30%. Maybe just talk to kind of what drove that increased expectations and just competitive pressures that you're seeing right now.

Sure. Yes, sure. No, I'm glad you asked that because we did -- we caught a little bit of confusion in the call on that. So let me be clear here. The -- our view in terms of our terminal deposit betas, which have historically been in the mid-30s, has not changed. Some people heard that as maybe changing that. What did change was our expectation in terms of how fast we get there through the cumulative betas. So in the second quarter with rates increasing faster and larger, we had to take a guess. And that's how technical we get in that regard so we could extrapolate historically, but that wasn't all that useful because the rates were faster and larger. So you sort of had to say, hey, it's moving faster and larger. What do you think? So that's how our math got us to an estimation of 30%. The -- it doesn't mean that we're going to do it. It doesn't mean that it's necessarily going to happen. We'll continue to manage that. And so far, we're generally tracking a little bit better on the consumer side than we expected. Most of the pressure has been and continues to be on the commercial side, which you would expect the wealth side and commercial, particularly the nonoperating balances, which was the case back in July on the earnings call, and that continues to be the case.

Got it. And then maybe just in terms of deposit levels. On the earnings call, you talked about likely to remain stable to the end of the year. You talked to some mix shift from noninterest-bearing to interest bearing. Maybe just talk about in terms of what you're seeing there?

Yes, sure. So we've called forward deposits to remain stable. They have remained stable. We're paying a little bit more on the commercial side as we had said, but all within expectations, and we expect that to continue through the balance of the year. We do run -- historically in the fourth quarter, we do run into some seasonal trends where consumer goes -- deposits go down a bit. Commercial tends to go up a little bit. Whether that holds, whether that convention holds because we have so much in flux remains to be seen. But that's sort of what we're planning to. And it's steady as she goes. In terms of the mix, the noninterest-bearing -- and this is important for us in terms of our betas and why our terminal betas are lower. Our mix is very favorable. 70% of our deposits are consumer interest-bearing. And when I take a look at it, I think we're going to be just fine. We've hoped for higher rates for how many years, Jason. So we're getting those higher rates. Not all of it works in our favor, but on a net basis, it works in our favor.

So I guess tying this together, the discussion with that on loans and deposits and betas. Net interest income, you've kind of given us third quarter guidance, given us full year guidance...

Yes, all holding. We expected solid growth there, and we're seeing it.

Got it. One of the things that some of the other banks have talked to was kind of adding swaps to protect against the potential for rate cuts, whether this year, next year or in the future. Maybe talk to in terms of what you're doing around the balance sheet and to protect kind of the NIM.

Yes. Yes. No, we view swaps, obviously, in terms of putting in some fixed rates in terms of a balance sheet that is naturally asset sensitive. It's a popular topic right now in terms of, of course, we live out in the future, people are already trying to position for rate cuts. We don't see that happening anytime soon. So we're not real aggressive right there right now. We watch it all the time. And if and when the conditions are right to do that, we will do it. But right now, we're not actively adding fixed rate swaps.

Got it. And then one thing we saw you do in the first half of the year is move with sluggish securities from AFS to held-to-maturity, obviously, to mitigate the OCI impact. But could you just talk about this? How do we think about these remaining kind of [ unrealized ] losses receding back into book value over time? And just how do you think about the mix between HTM and AFS and all those kind of limitations as a result of this?

Yes. Good question. And you all are up to speed in terms of sort of the AOCI impact for a Category 3 bank. So it doesn't affect our regulatory capital nor our capital return plan. So those all hold in place. I mentioned earlier, we've been hoping for higher interest rates for how long. One of the negative of the higher interest rates was that the AOCI jumped a little faster than we expected. So we finished the quarter at around $8.5 billion or so in AOCI. Again, calculated with intangible book, but outside of our regulatory capital. We're running a little bit higher than that right now, not a lot, and we would expect that now to start coming down. So in rough terms, maybe $1 billion or so between now and the end of the year and then maybe another $2 billion next year, depending on how rates play out. So we get to start getting -- cutting that in half or not quite, but in that kind of position to give you some context. Generally speaking, prior to the tailoring where we ran our mix at around 50%, 50%, 60% held-to-maturity. That's about normal, and that's about where we'll stay. We're not particularly sensitive to those categories in normal times. We're going back to normal times, so we'll let that go even though we sell very few. But that's just been the way that we've managed it.

Before we shift to the fee income side, why don't we go to the next ARS question.

Do you want to answer that? Did everybody see the answer to the #1 there?

We're going to rank all the banks tonight and show you where you stand.

Okay. Yes, yes. Okay.

So what is your estimate for PNC's NIM in 2023? Way of context, it was 2.50 in the second quarter.

Yes.

2 only? 2 -- interesting. I think we have something higher than that. I don't know if you want to opine around.

I -- well, I'd say that looks a little low to me.

Yes. We're more in sync. I guess on the fee income side, on the second quarter call, I think it was Bill that talked to kind of early indications of the progress of BBVA USA, particularly with kind of noncredit revenue. Just maybe talk to in terms of kind of how that's progressing.

Yes. The BBVA USA acquisition, we -- at the time that we announced the deal, the time that we closed the deal and time after that, we're very, very excited and enthusiastic. And if it's possible to be even more optimistic and enthusiastic than that, we are. It has just taken off in all of our businesses. So I'll just give you some color in terms of what we're seeing. We're in probably -- Jason, you would know better than me. In the Southwest United States, those maybe the highest growth markets in the world. So we're bringing our playbook into the highest growth markets in the world right now, and we're tracking. If you go through the businesses in terms of corporate banking, we talked about this at a conference earlier in the year, we're just running our plays. We're largely staffed, fully staffed with the exception of California, which was a build-out for BBVA USA. So we still have some room to go there. But in all the markets, we've hit the ground running. We're running our plays. The pipelines are building. The business is coming in. The business that is coming in is 60% noncredit business, which is what we expected in terms of percentages, but not in terms of the volume. So corporate banking is doing what we expected to do, just faster. We're applying to BBVA USA's existing commercial customer base, a larger suite of products and services. We may talk about this a little bit more principally largely in treasury management, which is a growth business for us. So everything looks really good there. And again, these growth market dynamics are really, really compelling. In retail, one of the things I'm not sure everybody realized, BBVA USA actually had some of the highest acquisition rates of retail customers in the industry. That's the good news. And I think in part, reflective obviously of their people, but also in terms of the growth markets. What wasn't so good was they had some of the highest -- they had the highest attrition. So it was -- brought them in, in record numbers and lost them in record numbers. Our strength, we have solid acquisition numbers on the consumer side, but our strength is the retention. So the whole idea is if we can match the best of those two, we'll really take off. And so far, so good. So the percentages are high. The acquisition of new clients is tracking BBVA USA, which was best in the industry and the retention is approaching our levels. So I feel great about that. That's going to be a multiyear kind of effort, though, because that moves by definition, a little slower. And then in our Asset Management Group, BBVA USA didn't really have much of it. It was sporadic and sort of spread out a little bit. We're laying all of our models down, our plays down where staff is -- staffing was probably most pronounced in terms of the need there. We've done that. We're seeing positive flows now in those markets. So we're encouraged there equity markets notwithstanding. So I'd say I can't tell you how enthusiastic were are about it.

Got it. And then I guess on the capital markets front. First quarter was weak for you and everyone else. You guys had a sharp rebound in the second quarter, something a lot of others actually didn't experience. And maybe just talk to where do you go from there.

Right. Yes. Where are we. Yes, where are we. Yes. No, it bounced around a little bit. So go back all the way back to 2021 where we had record capital market levels -- and in January of this year, which seems like a long time ago, we said, hey, we're going to come down a bit, probably down about 20% or so year-over-year. That was our plan at the beginning of the year. We had a soft first quarter and then a really strong second quarter. And we're different, and so we're back in position. And that's the short answer. A little bit of a backdrop to that, though. Those of you who know us well, the majority of our capital markets business is actually mergers and acquisition, advisory business, Harris Williams, which had a soft first quarter when the world all sort of paused. We expected to bounce back in the second quarter because a lot of the deals that otherwise would have happened in the first quarter were deferred to the second quarter and then, in fact, did close. So that's why we're a little bit different. So we're back in position. Harris Williams' pipelines are strong. Although the timing of those deals can be sensitive like we saw in the first quarter. So we expect the year to play out with it in our expectations at the beginning of the year, but macro items can either slow that down or speed that up.

Fair. Mortgage has certainly slowed across the industry. Some have talked about kind of downsizing their exposure to mortgage. Maybe just talk to kind of your approach to the business and how much leverage do you have on the expense side to the extent that you're sort of challenged?

Yes. So sort of -- I mentioned it earlier, we're a little bit different in the sense that in terms of the way we want to be positioned for the long term, we're still a little bit of undersized. So we're in a little bit of a mix in terms of where we want to build the business in the long term. But in the immediate term, there are some expense savings, obviously, in terms of originations that are off. So it's not a big business for us. It's not a needle mover right now. We will pick up some efficiencies in terms of those costs. It'll probably show up in 2023. Not huge. But I don't want to -- I don't want that to cloud our vision in terms of being a stronger mortgage provider to our 10 million-plus consumers through time.

Got it. And before I shift to expenses, I just want to go back to something you were almost giddy over the BBVA USA acquisition, treasury management...

Did that come through?

Yes. Yes, yes. And treasury management was kind of -- it seems like a driver of that. Could you just maybe talk about how do we size that opportunity, kind of what -- where are you in kind of implementing that product side?

Yes. Well, like I said, those of you who know us well, Jason, you us well, treasury management is a particular strength of ours. And that's well known. And as it overlays into the BBVA acquisition, the immediate opportunity is to bring those treasury management services to the existing BBVA commercial client base, which is good news for them because all of a sudden, they have a whole menu of services with their existing bank that it's just a matter of time until we can get it implemented and get it going. And we ought to be able to do that pretty easily. On top of that, again, these growth dynamics, there's way more growth available to us in these markets. And treasury management has historically been a terrific lead product for us. In many of these instances, when we've gone into new markets, way back when in the RBC Southeast purchase and then a lot of our organic efforts, treasury management was the basis for the initiation of what became a customer relationship. So it's a big business for us. On a stand-alone basis, we've been growing that business high single digits, low double digits, and we expect that to continue maybe even on the high side of that because of the BBVA dynamic.

Got it. And I guess, as you kind of get this growth and expense benefits tied to the acquisition, maybe can you talk to how you think about your ability to control expenses? Everyone's talking about inflationary pressures. You got to have some investments. Just kind of your thoughts around there.

Yes. It's a real issue and it was an issue for us here as we went into 2022. We knew inflation was coming. We knew salaries and wages were going up. In our case, like many companies, that represents more than half of our total expenses. So that's a lot of pressure. What I'd say to that -- we haven't started our budgeting process for '23 yet so I don't have any numbers for you for '23. But positive operating leverage is something at PNC that's core to our strategic planning, and we talk about it every year. And if you look at our record, we're as strong as anybody, maybe stronger than most in terms of being able to deliver that this year, in particular, in part because of the BBVA. I think we'll have our widest positive operating leverage on an annual basis ever. But as we turn into '23 and going forward, we've got to keep that in mind. We're going to face wage pressures certainly in the short term. We've been able to offset that historically with scale savings in technology, which we've been at for a long time and scale savings that will be available to us that weren't before. So yes, that's a key job priority for me to make sure that we do that, and I'm optimistic.

Maybe let's turn to just credit quality. Obviously, benign across the industry. Charge-offs, NPAs, and DFAST were all record lows. Obviously, can get better. But I think, one -- and it sounds like it's going to be benign for the near term, but how should we think about this whole credit normalization process? Maybe kind of what sectors you're watching more closely? And what do you think or where do you think we'll see the first signs of stress?

Yes. We're -- I mean, you said it well. We're low, right, in terms of losses. Just to give you some numbers in terms of our corporate book, $200 billion of outstanding, $300 billion of DHE. Our charge-offs have averaged in dollar amounts for the last couple of quarters, like $10 million, right? So nothing. Literally, nothing. So we're low. Low isn't strong enough of a word. I mean we're way low. So we do expect things to normalize. And even if they do go up off of these levels, we'll still be at the low end of historical. So that's a good thing. On the corporate side, it has been strong. We would expect to see some normalization. If we get into these recessionary dynamics and higher rates, that sort of thing, we could go even higher than that, although I don't see that in the immediate term. I do expect that to be where it shows up first just because the consumer is so strong as we had said in terms of us, particularly in a prime book. Our consumers are still cash flush. Things look really, really good there. And I think that's going to be -- housing's strong. I think that's going to be in place for a while. So if and when, and it will occur, we see some increases, it will be on the commercial side for sure. The question we get asked, where do you see it or where are you most concerned? We've said within the CRE book, the office exposure, which in our case is about $12 billion or so in terms of outstanding. We think we are well collateralized. We watch that, but just the obvious dynamics in terms of return to office and how that all works its way through the system. Importantly, we're well reserved. You may have a question about that in terms of where we are in terms of the CECL. So we think we've got it covered, but it's obviously got to play out. And again, just to give that theme that I had said earlier, again, a function of higher rates, we think, some normalization, higher rates. We want higher rates. We're a net beneficiary of higher rates, but some of that comes with the territory.

I guess so well reserved that you had a reserve release in the second quarter, one of the few.

Yes. Yes.

Just maybe talk to kind of what drove that release and just how should we think about reserve levels from here, particularly as we get into next year?

Yes. We -- so in the second quarter, we technically had a release, but when it's a release of approximately $50 million on a $5 billion reserve, we would call that stable. One of the questions is why were we sort of an outlier in that regard. And I think the short answer just is we were generally slower to release. All the banks have built up the reserves, ourselves included, us maybe a little bit more because of the BBVA acquisition, which, by the way, we worked out a lot of the credit issues there and rightsized the book relative to PNC's credit profile that -- you didn't ask that, but I wanted to mention that. So yes, we feel good about where our reserves are. I think the days -- you can't release forever. I think that was something that you had said. So I think that's behind us. And we'll move up if we need to. But I'd say right now, things are pretty stable.

I guess on the -- you mentioned credit profile and PNC has had a good reputation as a risk manager. You cycle different. You have the BBVA USA franchise. Maybe talk about how you think the book is going to perform would be to kind of do get that recession that some seem to be calling for.

Yes. Well, like I said, those of you who know us well, and you've heard Bill talk about this, Bill Demchak, talk about this. Within our C&IB, there are -- there's a certain element in our C&IB group that actually hopes for that type of recession because -- and every time we've ever been in the down cycle, and I've been at PNC for 35 years, we gained market share because we are conservative, and we tend to stay in the game longer than those who have higher risk as you go into that. In my CFO role, I'd tell them they're misguided, we don't want downturns. But if they are inevitable, we are positioned in terms of the long term around that market share. And I think that's very much the case now, very much the case, as I take a look at it there. So we've always been conservative in terms of our credit risk in large part because of the diversification of our revenue streams, not quite half, but 40-plus percent of our revenue streams are noninterest-related fee businesses, which are now big businesses in and of themselves. So the treasury management, we talked about, the consumer services, asset management. Mortgage, a little smaller. Large businesses with significant growth opportunities. And that just allows us to not have to drive some hard on the risk side to generate the NII.

Maybe we'll go to the next ARS question. Where do you see PNC's 2023 NPL ratio? 11 basis points in the second quarter as a point of reference. So 20 to 30. Still benign.

Yes, the question always comes up, hey, what's the normal NCO charge-off ratio? And we always say through the cycle, it's 40 basis points. Although I don't know if we've ever had 40 basis points. So I think through the cycle, 40 basis points, but at any given time, it could be higher or lower ratio work through that. The important part is we're very thoughtful in terms of our extension of credit. And history has proven, and I believe we're still positioned that way that we take less risk, so our charge-offs are lower.

Makes sense. Maybe shift to capital. You got the stress test results. Your SCB was a little bit higher. Your regulatory minimum goes from 7.5% to 7.9%. Just curious kind of what you think drove that? Any ways to just kind of mitigate that going forward? And just how do you just think about capital return? You guys were maybe on the more active front in terms of repurchasing shares.

Yes. Yes. So I'd say the 2.9% stress capital buffer was higher than what I was expecting and what we were expecting, and I'll get into that in a moment. But even with that, it didn't get in the way because of the capital position we're in. It didn't get in the way in terms of our capital return story, which as you know, is a good one. We raised our dividend by 20% back -- way back in April, and we continue to be active purchasers of our shares and are well within our capital guidelines. The 2.9% was higher than we expected for 2 reasons. One, which I think applied to everybody, the scenarios that the Fed brought were tougher. Even tougher than what we had said in the previous year, which were really tough. So that was part of it and that applied to everybody. But the part that applied to us uniquely was the BBVA USA acquisition dynamic, which we know in part, and we don't have complete transparency, as you know, that's one of our issues that we'd like to see that. But we're able to derive -- and in fairness to the test itself, it was probably the right approach, but we didn't get any benefit of the expense savings that we had already put in place. We didn't get the benefit of some of the credits that we've already addressed. So the Fed just sort of just takes BBVA USA's expense ratio, put their expense level, put it on top of ours, credit -- stress their credit that doesn't even exist anymore and applied that to ours. So that component, I think next year will go away. And then it will remain to be seen whether the stress test gets even more difficult. But at that point, we'll be like everybody else that didn't do an acquisition in the last 12 months.

Got it. One of the things that we've been reading about is the potential for additional banks, potentially category 3 banks, to start to have some sort of TLAC or long-term debt requirement. How do you think about that? What impact would it have? Is it likely? Your thoughts on that.

Yes. Yes. No, it's a good question because it's topical. There's a lot of chatter around it, although there's no formal declaration or any letters or anything that is informal. So it's all conversational at this point. Our view is it's not necessary, for a host of reasons. The first is, why does the people who think it should be applied think it's necessary? And their premise is if these super regionals have gotten large and if they should fail, the only takeout is the G-SIB buying them, and they don't want that to happen. And that strikes us as a bit off because in terms of the resolution planning that we've done now for how many years, I don't know, 5? How many years, Jason? Is it more?

More.

Is it more? With COVID, you got to add 2 to everything. So you say 5, it's been 7. In each of our -- and all of our resolution plans, which have been well received, none of them said, hey, the answer is we sold to a G-SIB. We go to great lengths in terms of showing where everything would go. And those of you familiar with the test, the basis is your bank goes upside down, but the rest of the world is perfectly normal, which is also a little bit hard to see. But for the basis of the test, that's how it's done. And in our view, if that's the case, there are a lot of our regional, super regional competitors that would be very interested in our businesses, whether it's geographies, business lines, et cetera, for all the reasons you and I just talked about. So that's reason number one not to do it. Number 2 is we're not that risky. Even though we're large, our G-SIB score is a 38 and the threshold for systemically important is 130 because of the risk that we represent. We're a large bank, but essentially, we take deposits. We don't lend them all out in terms of loans. We facilitate payments and if there's money to invest, we do that. So those are pretty straightforward. There's not a lot of complexity to our holding company. There's not a lot of foreign operations with different jurisdictions. All of that's resolution sort of talk. So our view is you ought to take a look in terms of what is -- where the risk is rather than just sort of sliding back to this, if it's big jump on it.

Got it. And I guess, we talked a lot about the BBVA expansion. We didn't really talk about kind of before BBVA, these new market expansions, where you'd go in, plant the flag. How is that tracking? And what are the opportunities there?

It's going great. And it's all sequential in terms of how it's played out, largely within our corporate space because that's what we see sort of as the most immediate opportunity. So if you go back to 2012 on the purchase of RBC Southeast U.S. operations, we went down to the Southeast and what we were surprised about was the reception to our brand and how quickly, particularly on the commercial side, we were able to run our play. So that gave us a lot of conviction to say, hey, if it work down there in some of these markets, maybe we'll try and some of these other ones. Let's go organically into Kansas City, into Dallas, into Minnesota, so on and so forth, Denver, and everywhere we went, it was the same story. And it was big pipelines, majority of the sales, noncredit sales, as I was saying, so it wasn't like going into one of these cities leading with credit. So that led to -- when we got to BBVA USA, said, this is putting all this on steroids and on top of it, you get a big base. So it's really going well. The PNC is now a national brand, very well received on the commercial side, increasingly received on the consumer side. And it's a key component to our enthusiasm in terms of being able to grow.

So you have this good treasury management story. You built out a good capital market story. You're now in the -- I think the top 30 MSAs.

Yes, all 30. Yes.

Proven integrator.

Yes.

When should we expect your next bank acquisition?

Well, yes, here we go. Well, let me -- I'm glad you mentioned the top 30 because after the BBVA USA acquisition, our headline was we're in 29 of the top 30, right? So we took an over-under on the bank in terms of how long would it be. The 30th, by the way, was Las Vegas. So I'd say what's the over-under before we have a Las Vegas office, and it was 3 months, and we were -- we beat it. So we're there. The -- a major acquisition, I don't see it. We don't see it in the immediate term largely because of sort of the regulatory environment that's not real conducive to that. And that's just fine. We've got plenty to do. As you mentioned, there's plenty on our plate in terms of being able to grow. We're fully capable of making an acquisition, particularly on the technology side. One of our pride points was the full conversion of BBVA USA within 4 months, record speed relative to closing. So we're well positioned to be able to do it if and when the opportunity presents itself. We don't see the opportunity presenting itself nor being supported in the short term. So we got to do it the hard way and do what we do in each of these businesses.

Got it. And we put up the last ARS question. Which would have the most impact on improving PNC's valuation? I think we lost it. As they fix that, let me -- I'll pull that. Here we go.

Here's the countdown.

Here we go. So continued above pure loan growth comes in at one, which is interesting, followed by better NIM performance.

I thought the slowdown might be because everybody wanted to punch #8, which was all of the above.

I guess, maybe in closing, you said you haven't started your 2023 budgeting process yet, but we were all focused on our 2023 models, but it's -- because it feels like when I look at the fundamental picture, right, good loan growth dynamics, rising net interest margins, yet, obviously, bank stock valuations have come in. Can you maybe just talk to -- do you think the market is kind of overreacting to these recessionary fears? How do you think PNC is positioned relative to these concerns?

Yes. Again, just our view in terms of the valuation. As you know, the multiples have compressed for just about everybody. And when I take a look at it, certainly based on history, it looks to me like the market is priced in at full-fledged recession, which is no surprise. And I think there's certainly possibilities that we don't get a recession of that kind of depth. And it's interesting because it's a disconnect because you don't necessarily see in a lot of other valuations that by definition, if we were to go into the recession that's being overlaid to the banks, other valuations, which should be lower, but that's your business, not my business. So it does look like we've sort of priced in the worst case scenario, and there's reasonable possibilities that the worst-case scenario doesn't occur. It's possible, but there's -- it seems to me that there ought to be some waiting on the less than worst-case scenario implied in that.

Great. On that note, please join me in thanking Rob for his time today.

Thank you.

Next up is JPMorgan Chase.