Truist Financial Corporation (TFC) Earnings Call Transcript & Summary

Good morning, everyone. We got Truist presenting next. Truist is a financial services company formed by the merger of SunTrust and BB&T. It's headquartered in Charlotte, North Carolina. And it's the sixth largest bank in the United States with $543 billion in assets at September 30. Presenting today for Truist is Mike Maguire, the Chief Financial Officer, a member of the company's executive leadership team. Prior to becoming CFO, he served as Chief Consumer Finance and Payments Officer, where he led the company's consumer finance business. So please join me in welcoming Mike.

Thank you very much.

So I'm going to just start off with some questions, and we'll leave plenty of time for the audience to participate.

But first, Mike, maybe you could just start off talking about loan growth. different factors in different markets and what's impacting them right now?

Yes, sure. So as we think about the -- I guess, a couple of factors. One, we've talked like others about just being a bit more calculated in terms of managing RWA in general. So there's a component to our growth and balance evolution that's driven by our own sort of just being a bit more selective and emphasizing certain businesses versus others. But maybe to your question, focusing on the demand side perhaps. We have seen sluggishness in demand. We've got -- I think, relative to other parts of the country, attractive markets that are still growing. But if you just look at the high funnel pipeline, for example, in our commercial businesses in terms of just borrowing needs, we have seen muted demand. So maybe that's just a little less expansionary business activity with having higher borrowing costs, perhaps driving some of that, just a little bit more caution in general. So I think that's probably a factor again as well coupled with the fact that we're being a bit more disciplined around RWA management.

I mean do you see balances stabilizing soon?

We were down a bit more in the third quarter. We sold a student lending portfolio, which drove a lot of that decline. We also shrunk the balance sheet a bit on the cash side. We had some of the securities portfolio decline. So earning assets were down a little more in the third quarter than they would be in the fourth quarter. But I think they still will experience a little bit of pressure, but it's -- I think very, very manageable. And again, it's growth that we are -- or efficiency that we're really seeking as it relates to the portfolio. So we might continue to apply breaks to some of our national consumer finance businesses like indirect auto or correspondent mortgage, but we might, on the other hand, based on profitability profile, lean a little heavier into our Sheffield specialty business or into our C&I portfolios and the like.

Maybe that we should just segue into the RWA optimization strategy. You mentioned you sold the student loan portfolio. Are there any other opportunities like that? And if so, where and you talked about focusing on the relationship and focusing on the customer on a holistic basis, it's more of a grind, right, over time. So maybe we can kind of dig a little further in that.

I think you got it. I mean we don't have a long list of noncore lending portfolios that we intend to divest. Student wasn't an obvious choice for us. It was portfolio that was really more of a sort of a trading asset. It was serviced by others. We purchased these loans after they've been rehabilitated and guaranteed by the government. So really a truly not a strategic business for us. But as we think about really more calibrating, that's, I think, what the next phase of the journey is for us as we think about capital conservation -- and that's -- you said it. I mean, we're going to evaluate, we're open for business in our communities. We want to do more commercial lending and support our corporate clients and our consumer clients, too. We want to have really fulsome relationships with those clients. That's the promise we think of Truist is having really a fantastic brand and great teammates and loyal clients who want to do business with us and finding ways to fully serve them with really a world-class full-service platform, and that's both on the wholesale and the consumer side. So getting that right and getting our offenses right. Bill's talked a lot about simplifying our business and having a very good alignment around the offense and how we get to market, and that's finds its way to all these discussions around capital management, around pricing, around other things I'm sure we'll end up talking about today.

Yes. I mean before we move on to talking about deposits, just any commentary you have you get offsetting factors on the pricing, right? And you're clearly being more disciplined as well as the rest of the industry. You also have the shadow banking market that's applying some pressure. So kind of where spreads are now and versus where you think they should be at this point in the cycle and what you see coming?

Look, our cost of doing business increased and is increasing. And so as we think about how we allocate capital and the returns that we expect on capital and our delivery model, we have to be more disciplined. So we are seeing some improvements in credit spreads and we look at this on a monthly basis around renewed and new originations adjusted for -- obviously, for credit tier. And we are seeing some upside there. That's obviously if you think about like the totality of the margin, that's a good guy. We're still facing some creeping liability costs as the betas grind a bit, and we can talk about that. But we are seeing some improvement, some widening in the credit spread which has been welcomed. I don't think that -- I'm not sure what the destination is there. I mean we had a view on where we thought the degree that improvement could be. I think there's still room for improvement. So hopefully, that will be a good guide as we sort of roll into the fourth quarter and early next year.

And just one follow-up. So historically, where we are in the rate cycle, I don't even know if this is answerable, but are we -- where we should be with spreads?

I mean, look, I mean, I think it depends on if you believe we've seen our last hike. I think you would expect that the betas grind from here and you start to get some benefit of the fixed asset. Portfolio repricing, and we get some credit spread and why it should be stabilizing but a lot of assumptions going into that.

All right. Why don't we move on to deposits. And why don't we talk about your deposit strategy now and maybe compare and contrast with, I think, it's been termed "March Madness" earlier in the year.

Yes. No. So Q3 was really important for us to focus on rate paid. We -- well, first of all, I'd just say stepping back, we feel really good about how our deposit portfolio has performed. The diversity of our portfolio, the strength of relationships that we have with our consumer clients, with our commercial and corporate clients, wealth clients, really showed through during what was ultimately a really tumultuous moment for the industry. But look, and we're in competitive markets. and Q3 is still in the background. And so we're -- we spend a lot of time thinking about the efficient frontier around our liabilities management. And so a couple of things we've done throughout the course of the quarter, which is driving some improvement in results for us. We have been thinking about exception-based pricing and local authority. We made some adjustments to that, which we saw that come through, which was great. Just changing the mindset. If you're a frontline teammate, in March, April, you probably had one sort of mindset and mandate, and that's changed in Q3 as we think about retaining and acquiring clients. So we want to be more thoughtful about that. We've been making adjustments to promo rates on the money market side. We've had a little bit more interest in CDs, not surprisingly, as some of the depositors want to lock in rates. And so we've been doing some testing on pricing there. And so I guess maybe just without going through a long inventory of items, there's a number of initiatives that we've put into place in the third quarter that we think really helped us on the rate paid side. And we think there's -- those are going to continue to contribute in the fourth quarter as well. But look, there's still -- there's some pressure out there on balances. The backdrop is what it is. And -- so for us, whether it's a 1% to 2% sort of pressure per quarter. It just feels -- it feels a lot more like pre-March, I'd say, right now in terms of sort of balance pressure. And I think some of the even incremental pricing and rate sensitivity seems to have muted a bit as well.

All right. And so just one more on that. So you talked about some of the on-balance sheet money market accounts. terming out and going to CD, have you seen any off-balance sheet coming on looking to do the same thing? Just like in turn?

Maybe anecdotally. I mean you got to think about that. I mean, what we're not seeing is a lot of off-bank product. I mean we're not -- there was a moment earlier this year when I think there were more questions about banking in general, and you saw large clients and small clients alike, think about nonbank alternatives like treasuries and the like. We haven't seen those same kinds of flows. I mean there were moments that all of us in the industry were looking daily, hourly, weekly, whatever, at sort of where dollars were flowing. In our case, for example, we would track if a money market or a DDA dollar was leaving wealth, where was it going? In our case, it was usually going to the wealth platform into a treasurer and investment account. But I guess my point is we're not seeing that same amount of just money in flight. It seems to have really settled.

Management has mentioned that you expect the net interest income to bottom in the first half of '24. And I mean we've had divergent views across the industry. Just kind of maybe you could walk us through what drives your expectations there?

Sure. On a couple of factors, and we talked a little bit about the margin already. I think so long as we're at the current short rates, you'll continue to have some pressure from the deposits. Again, not from step functional evolution but just sort of grinding a little higher. We think that we can mitigate some of that margin pressure as I mentioned, whether it be some of the nonmortgage fixed assets repricing or whether that be some wider spreads. So you've got some margin compression in the current sort of rate scenario. And then I mentioned also a little bit of pressure on balances. Those two together, both are going to put -- apply some modest pressure to the NII. And in our case, we're positioned intentionally to be a touch liability sensitive. And so I think when we talk about the first half being probably the period where you see a trough, that's driven by the fact that we believe that you could see a cut as early as the middle of next year. And that would be the catalyst for us to turn positive, both on the margin and NII side.

Okay. Maybe we'll take that to the balance sheet side in terms of a lot of macroeconomic uncertainty out there, how the balance sheet is positioned in different rate scenarios and how you're managing the interest rate risk there?

Yes. Well, again, I mean, we're positioned relatively neutral, a touch liability sensitive. We're probably the disclosure that we provide to our investors around NII sensitivity contemplates a 50% through the cycle beta. And obviously, if we saw a rate cut. We believe that the betas would be higher than 50% on those first cuts. So we're perhaps a touch even more liability sensitive than that disclosure would otherwise imply. But that's how we're positioned for rates.

Well, why don't we go on to fee income growth. Just Curious if you expect growth next year, it's been a bit suppressed for the industry. And kind of what are the puts and takes as we move into '24?

Our insurance business continues to perform very well. We're continuing to experience high single digits organic growth on the insurance side, there's a good backdrop there from a pricing perspective and a retained premium perspective. And John and the team are doing an excellent job. From an investment banking perspective, we continue to see good progress in our franchise. We look at a lot of different signals of health, whether it be market share in league tables, whether it be average deal size or average economics or proportion of deals that we left lead or actively lead whatever it might be in that business, we feel we're really bullish about the progress we're making in terms of the quality of the franchise and the importance of the relationship that we have with our clients. We expect next year that, that business will experience greater levels of activity. I don't -- it doesn't it go back to the 2021 levels where the deal making was pretty rampant. I don't think so. But I think our view is probably consistent with what I've seen a lot of sort of analysts put forward around deal activity next year. So yes, so we're contemplating growth in the fees next year, some probably still pressure on mortgage, right? And I think deposit service charges continue to feel some pressure. Wealth should be is always a nice business for us. We have had good net asset flows, I think for -- it's a very nice track record there, and the team is doing well. So feel good about the fee business portfolio.

Are you leaning in anywhere and looking to pick off teams and such?

Yes. I mean we're always -- look, we're -- it's -- for us, our advisory businesses. It's all about people, right, and relationships and expertise. And so we're regularly evaluating our teams across investment banking and wealth and insurance and welcoming new teams and teammates to the platform. So absolutely.

SP1 Okay. Great. Why don't I pause there, see if we have any questions from the audience? Mike?

I've said this before, but a fantastic footprint. I've treated a lot of the communities well and your customers well, but shareholders feel left behind. So why wouldn't you go ahead and monetize the insurance business given such a disparity between the valuation of insurance and your bank?

Mike, we obviously -- the transaction we did this spring with insurance, we thought made a lot of sense. And if you think back around the reasons why we executed on the minority stake sale, there were several, but the few that sort of, to me, are most important, were: number one, we agree, it's a great business. It's a valuable business, we need to make sure that it can continue on its trajectory of growth and profitability, and so it was -- we thought useful to bring additional capital providers to the table to potentially create that flexibility; number two, an along similar lines, creating a new currency to be competitive in terms of retaining and recruiting producers in that business, critically important. So we were able to do that to accomplish that through that transaction to stake John and a lot of our producers in the business and to allow the value that they create through growing the business to translate to wealth creation. And then for Truist, of course, as well and for our shareholders to create strategic and capital flexibility. Now obviously, that was all done prior to some of these the proposed rules on capital and liquidity before some of the seismic activity in March and the like. But those 3 objectives were true then and they're true today. A fourth objective, which we talked about when we disclosed the transaction initially was that we hoped that it would highlight the value of the insurance company, not necessarily, I guess, unlock. We we're very specific to say, maybe it's not as well understood that this business is as valuable as it is. TBD It sounds like [indiscernible], you don't believe that, that value has been unlocked. I think maybe a lot of people would agree with you. But those are kind of the facts. And so since then, I think we've been pretty straightforward that there are a lot of trade-offs to consider in terms of the journey forward with insurance, their -- the objectives that we laid out initially are still intact. We feel like having that option is a distinct advantage for Truist. We talked most recently in our Q3 earnings call about some of the separation readiness costs and investments that we're making. And just to be clear on that because there have been a few questions. Really, the origin of that was to make sure that we're operating the company in a way that's reflective of its new capital structure. And if anything, that actually just improves that optionality in terms of wherever we go with the insurance company. But look, we and Bill mentioned, like we're having discussions about all of our businesses and insurance is a great performer for us. There are trade-offs around how it's capitalized today versus how it was capitalized prior to February versus sort of where we go in the future.

And then just one follow-up. Anything else you can do to show that shareholders have moved up in the pecking order. And I only say that because again, whether it's your annual meeting -- CEO -- shareholder letter or a lot of presentations always got the purpose, which is important I think a lot of shareholders feel that they've been left behind, like whether taking your whole pay in stock or just anything else that you say, you know what, we're going to show shareholders we really care about them as a stakeholder, one of the primary stakeholders.

Yes. Well, look, absolutely -- I mean when we choose the word stakeholders, shareholders are absolutely right in the center of that. But -- there are other stakeholders, too, right? Whether it be our regulators or whether it be our bond investors or otherwise. So I don't want to sort of over-index on this word versus that more than what it meant. I'll tell you that we're highly motivated to drive shareholder outcomes. We've talked about the KPIs that we believe are most correlated with TSR. We're focused on measuring our progress against those KPIs, growing EPS, growing PPNR, tangible book value per share plus dividend growth. So we -- I think it's a fair challenge, Mike, and we are highly focused on driving shareholder value.

A couple of questions around federal home loan bank borrowings. Earlier this summer, I believe Sandra Thompson, Head of the FHFA introduced the idea of restricting borrowings from their own loan banks, I think it was -- now growth of the Silicon Valley situation, where they borrowed a lot but hadn't financed the housing market in a similar manner, put it that way. Are you aware of what restrictions she might impose on your ability to borrow from the Federal Home Loan Bank systems?

That's -- no, maybe short answer. We view the Federal Home Loan Bank as a good partner. We've been active. As it's part of our liability management strategy. We've taken advantage of the facilities in place and -- but no, I don't have any insights into whether that would be restricted.

As a follow-up on Federal Home Loan Bank borrowings. I think the FDIC has shifted the philosophy from you need to sell assets to raise liquidity to you need to pledge assets and get those structures set up at the Fed window or at the Federal Home Loan Bank window. Am I correct in that, that they're stressing more pledging rather than selling of assets?

Are you talking about in the context of...

Liquidity -- developing a liquidity facility or improving your liquidity profile?

Yes. I mean I think they want -- as we think about liquidity, I think what they want to see is that you have ability to monetize liquid asset buffers and the like. So if that answers your question. There needs to be readily available monetizable liquidity.

Right. But they don't -- as I understand it, they don't want you to actually monetize it. They want you to pledge it. Which is an important difference because if you have to liquidate it, it puts pressure on the rate structure. If they pledge it -- in other words, they're drawing from the success of the BTFP program, we're all going to do is pledge, not liquidate. And that takes some of the rate pressures off the market. Am I correct in that?

I think you're right. My point was simply that you have to be able to demonstrate that it can be monetized.

But I get the sense, they don't want you to monetize it.

No.

Ken?

Mike, this year has obviously been made more difficult by what's happened with rates, what's happened March through May. Towards the end of last year, the company was kind of really fully post-merger, talking about better unit growth and declining attrition. And just wondering like if we kind of move aside some of all this macro stuff that we're talking about, what's happened over the last 6 to 9 months underneath and just trying to move the core franchise forward? And can you give us some tangible examples of where that's starting to show incrementally like the premise and promise of the merger we are just starting to show just underlying in terms of business metrics, new wins, attrition et cetera.

Yes. No, great. And that's a place, obviously, we're spending a lot of time right now is just sort of getting back to the core on Truist and our core franchise, and we've talked more about some of the businesses that perhaps were more complementary versus where we really want to emphasize investment in progress going forward. Yes, there's a number of good proof points, I think, around where Truist is winning. So -- from a net new accounts perspective in small business and retail. We're adding net new accounts. That's been good to see. So we're winning share in the market. I mentioned in our advisory businesses, the net asset flows in our wealth business and onboarding new adviser teams that are excited to join our platform and become a part of Truist Wealth continues to show great results. Again, 9 out of the last 10 quarters, we've had net asset flows that have been positive on the wealth side of the business. Investment banking, I gave you a good sense for -- I mean, there are certain sectors where we've been able to further automize into specialties and add banking captains with industry expertise, that's pulling through the last analysis I saw showed us literally on the examples I gave you, whether it be high yield or leveraged loans or investment grade. We're seeing our market share, again, gently, but improve. And -- but more importantly, we're seeing the -- again, average, whether it be deal size or average economics or average active -- like the importance of the role we're playing in transactions improve. So, same -- our insurance business, again, hitting on all cylinders, the retention of -- business retention of teammates has been stronger in the last 6 months since we did our transaction. So we feel good about the core Truist. And then just connecting it to some of the work we're doing around cost management, which is really important, obviously, given the relative revenue environment that we as an industry are in, I feel really good that and I've got great visibility into sort of the bottoms-up on the $750 million, we're not putting that at risk. We're actually putting that first, the ability to serve clients and grow new relationships and improve our share and improve our penetration and relationships. That's sacred. The work we're doing around the $750 million to manage the cost growth is -- I don't believe puts that at Truist.

So your bank, like most other regional banks has substantial unrealized losses on health and maturity securities. And yours actually had kind of slightly slower roll-off from longer duration. I guess the question is, how does it impact strategy beyond kind of scaling back buybacks, which the whole industry is doing for multiple reasons? Does it impact anything else, in particular, lending appetite? Does it impact lending appetite given those unrealized losses?

And are you being specific to just the HTM portfolio or just broadly?

Broadly. But I mean I...

Yes, I got it. Like certainly, I mean, like I think how the balance sheet is positioned, certainly, as it has an impact on our liquidity position and how we create liquidity. And it has an impact on our -- particularly with proposed rules going forward, our regulatory capital position and how we think about growth and fuel to grow, and it impacts profitability. If you think about our -- the yield on our securities portfolio, one of the implications of it being as long as it is that the yield on the securities portfolio is lower than perhaps some of our peers and that impacts our net interest margin. So I think it impacts just about every part of our business, if you think about it that way. So -- and look, I mean the -- as we think about the positioning today, we did disclose that over the next 3 years, we have a roll-off rate of about $3 billion a quarter. And we've tried to dimension for all of you what impact that will have in terms of capital accretion over the next 3 years.

And just specifically on the lending [indiscernible] question. Does it have an impact on lending [indiscernible]

Well, I mean, look, I mean, if you think about -- we talked about RWA optimization, I mean, RWA optimization is driven ultimately by capital planning, right? And so as we look forward and acknowledge the fact that the unrealized losses in the AFS portfolio will, over time, be a component of capital, then that's a constraint. It's not the only, but so to that extent, absolutely, could impact our growth prospect.

Maybe I'll jump in here, circle back to Mike's original question just on the insurance company. Maybe you can give us a little bit more color on what the independent readiness costs are comprised of and why they keep increasing?

Yes. And we mentioned them conceptually back in April and then felt like it was important to begin to dimension the costs as they increase in magnitude, and we mentioned at Q3 that we expected the cost in the fourth quarter to be around $35 million. The -- to try to explain the nature of these costs, I mean, initially in the early days of the spring and summer, it was simply planning, like understanding. Okay, for the company to operate more independently, what are some of the gaps that exist. That very quickly rolls into beginning to execute. So I'll give you a really good example. Some of it's just people. So if the CFO of Truist Insurance Holdings and her finance team historically would have reported to me and had a certain complexion based on how we run the finance group within Truist and for all of our businesses. Those now report to John and John has to add expertise around things like accounting policy and SOX and internal controls and so on and so forth, perhaps not a very exciting, but a very maybe tangible example. Other examples are more of larger investments might be. So for example, the application ecosystem that supports insurance. So there are a lot of applications that are insurance only. So it could be -- maybe it's a premium quoting tool or maybe it's a commission tracking tool, those applications, while you might think, well, no problem, those are just insurance tools. Well, they're sitting in Truist data environment. And so our view is that moving them from a Truist data center into a fenced in this case, TIH data infrastructure is sensible. So we're moving forward with that. At the same time, you may also have certain applications that were -- services that we provided to TIH. So general ledger is an example, an HR system is an example. And so doing that implementation work and then having an ongoing license that's separate and apart from Truist. So those are examples. But a lot -- it's governance, it's controls, it's reporting. It's all the services that you would imagine a company like ours would provide for one of our subsidiary companies.

And I guess if you had to break it down roughly in terms of what's onetime and what's recurring, how should we think about it? And I don't know how much color you can give going forward.

I think we'll give more details about that probably in January when we talk about '24, but there are some onetime costs and stand-up costs and planning costs and then there are others that are more like a license that's going to maybe be in the run rate, something that's been important to us as we've thought about what you might think about as investors is sort of dissynergies that come along with something like that is making sure that we're leaning out other processes to do the best we can to make sure that we maintain the profitability of the insurance business.

All right. Okay. And then on the cost saves, you were talking about how it was a bottom-up build plan. Perhaps you can give us a little bit of insight on progress so far. Basically, what you want to achieve with a simpler organization.

Sure. Well, I think at the highest level, on Simpler, Bill is looking forward to talking more about this. And we talked about it a little bit at another conference in September is really making sure that we have great alignment around, again, the offense in these businesses and creating the right incentives, creating the right behaviors enforcing those behaviors, thinking about even like within segments, how we sort of deliver offer. So we think there's -- and by the way, that's simplification and that avoidance of any sort of siloed or inefficient decision-making, we believe, not just on the revenue side, we'll create productivity, but also will help guide a lot of the decisions we're making around just organizational design and the org chart said another way. But from the progress we're making, it's been fast paced. So first of all, this is planning that we've been doing for a number of months, and we didn't talk about it earlier this year, but we we're obviously aware that expense control was going to be a really important part of our agenda for 2024. We had a chance to talk about it in September. And again, when we released earnings here in the third quarter. But the fastest print and the fastest savings that can be realized have to do with just assessing what I just described, which is organizational health. So based on the design that our go-to-market strategy is that Bill has laid out, making sure that we have assessed the spans, the layer exercises assessed what work is -- needs to continue what work needs to stop. And that's a very productive exercise from an efficiency perspective. And we're making good progress on that. We -- so that's very much in flight. Some of the other work that we talked about was just rationalizing the investments that we're making or spend that we have on the technology side of the business. So understanding, hey, if -- again, getting back to the guiding light of -- hey -- this the core, Truist and more fully serving clients like that's the sacred path, okay, that's true, then maybe some of these other things that we had planned to work on are less important and could be deferred or altogether stopped. And so that work's underway. There's facilities rationalization that we're working through. There's consolidating vendors, medical providers, things that with the whole company focused on cost control, we've been able to really, from the bottoms up, identify and begin to action. So feel very good about the progress we're making there. And the commitment that we've made around managing expense control next year.

So it sounds like a good portion is blocking and tackling. And I don't know if I [indiscernible] will say, but it sounds like it's front-end loaded. So it seems like you can be well positioned. I'm just curious how you think about looking even further out? Like how does it position you for growth in '25?

Yes. Look, I mean, I think the way we think about it is, as we roll into '24 with the benefit of a lot of these efficiency actions we're taking, we'll have growth in the expense base, but it will be very moderate. And we think we will have designed our teams and our processes and our structures to succeed going forward. So I -- and is there another horizon of cost this is something that you have to do all the time, right? So I think we thought it was important, our investors wanted to better understand what our plans were for '24. And so we felt confident in dimensioning the $750 million program, and that was a true initiative, but that's not something that you sort of put down in 6 months and say, okay, well, mission accomplished. You constantly have a focus on identifying and eliminating ways to managing costs. So -- and look -- and you said it right, some of this stuff is maybe faster, lower-hanging fruit. But there are other horizons as well, whether that be in things that frankly take a little longer, could be like how do you better leverage automation and those types of tools to drive efficiency.

Right. Okay. And I'll ask one more then John. Just continuing on -- so how do you just -- how do you think about the potential for positive operating leverage in '24 than assuming the 4 yield curve is correct, which is a big assumption these days.

Well, look, I mean, I think we're off to a -- feel really good, as I mentioned, we're not here to talk about guidance for '24, but we did earlier than typical, give you a sense for what our expectation is on the expense side. And we're committed to that. We're also committed to and deeply appreciate the importance of generating positive operating leverage. I mean if you look at the revenue environment that we're in, especially in the first half, I think that that's tricky. But -- and we hear it from a lot of our investors and that, that's an important criteria for them. It's important for us, and it's absolutely something we think about constantly in the planning we're doing and in the decisions we're making.

John?

Just regarding the $750 million expense program, I know you mentioned the revenue backdrop [indiscernible] a bit, but how much of that is also imperative sort of like reaction to the underlying expense pressures you're seeing. Do you need that to invest still in certain areas. Either risk regulatory or anything. [indiscernible] back-end investment pressure that has been driving rationale for the second year.

Well, no, I mean, that's -- when we initially talked about the $750 million and the 0 to 1, we are very intentional about acknowledging that there are other just natural expense growth factors. Some of that's just the simple fact that we're in an inflationary environment. Think about our entire sourcing portfolio of vendors, they reprice and recontract over time. Sometimes we can improve the pricing, some -- oftentimes, there are actually contractual reasons why those costs get higher. Obviously, we're a highly regulated company and supervisors are -- give us feedback all the time around ways that we can improve our business, that drives investment in spending and expense. And so those are two examples. There are others, right? I mean, look -- looks back to the earlier question about the franchise. We're going to make investments as well in onboarding and lead generation and client acquisition and promotional marketing, and we want to pay people who are generating business to go generate business. So those are natural expense drivers and to be successful financially, we've got to offset as much of that as we possibly can through these efficiency measures.

All right. Yes. Our time is up. I appreciate it, Mike. Please join me again Mike, a round of applause.

Thank you.