Truist Financial Corporation (TFC) Earnings Call Transcript & Summary

I guess we'll go ahead and get started. So next up, we have with us Truist Financial. From Truist, we have Mike Maguire, Chief Financial Officer. So Mike, first of all, thank you very much for being here.

Yes. Thank you very much for having me.

And at the risk of going off script, maybe -- so you took over the CFO role post merger a few years ago. Just give us a sense of when we think about before we get into 2026 and what the outlook looks like, just in terms of the evolution of management focus of the Truist franchise over the last couple of years, even during the time you've been CFO, if you could start there.

Sure. Yes, happy to. I think the evolution is a good way to put it, right? Because I think out of the gates, the focus was necessarily insular, right? It was around ensuring that we had the right foundation. It was shoring up this, shoring up that. The environment that the company was operating in was turbulent. We were as a world dealing with the COVID crisis. And in our case, just within our own company, dealing with how do you put 2 companies together and get the right culture, get the right team on the field, have the right strategy, do no harm. And so in many respects, the first sort of phase of the evolution felt very defensive. I think it's a good way to put it. And -- but I think slowly, but surely, throughout the course of -- and really, I had the fortune of -- I became our CFO in late '22, and that was right as we were beginning to make a pivot. We obviously had a little bit of an unexpected change in the macro environment in early '23. But even after sort of we weathered that storm as an industry and certainly as a company, we really did begin to shift to more of an offensive posture. And that's been great. So it's given us a lot more clarity of focus. I think we've -- we know there's no identity crisis at Truist. We know who we want to be. We're -- we want to be the leading regional bank in our markets, which we think are some of the best markets in the country. We've got the products we need. We've got the talent we need. We're very focused on accelerating our earnings growth on improving our profitability. And I think the whole company has rallied around that agenda. So it feels quite good right now. It feels positive. The attitude is right. The momentum is good. And so I appreciate the question.

No, that's helpful. And I want to come back to Truist, but maybe just one big picture question. Like we've had -- we've been at this conference for many years, and the dialogue has always been about loan growth picking up, client sentiment sort of perking up and then something or the other would sort of unravel that. When you think about just client sentiment, what you're seeing, what you're hearing from your bankers, does it feel like things are actually taking shape and you're seeing realization of the pipelines and the conversations that have been happening?

Yes. No. I mean, look, sentiment is pretty good out there right now. If you think about -- we have sort of 2 sides of our business, our wholesale business and our consumer business. And in both instances, a lot of the signal we're hearing back and the data we look at remains pretty upbeat, pretty positive. When we have a chance to meet with our middle market clients or our corporate clients, even our small business clients, it's still lean expansion area. I mean I think people feel generally pretty good. I mean we -- a lot of these businesses got better at managing volatility, I think, through the -- whether it was through COVID or through some of the tariff transitions and expectations. And so people are managing their supply chains well. They've got clarity of focus as well. We're -- all things equal, feel pretty good about sentiment. On the consumer side, same thing. I mean, I think there's more headlines and pockets of this or that. But if you look at the actual data and what people are doing, people are -- continue to spend and they continue to save. And look, we're always a little bit mindful of pockets of softness. We have some exposure to some of the, I'll call it, lower-end consumer where we're starting to see a touch of a touch of signal, but even there, more resiliency probably than I think the headlines might otherwise suggest.

Got it. And you mentioned, Mike, that at this point, there's no question about the identity of Truist, what it wants to be very clear. I think I was with Bill at the end of last year, he talked about we are coming off the J curve. Just sort of maybe break it down for us like what that means when we think about it's coming off the J curve, like what should we -- like what does it mean in terms of the bankers as investors, what should we be looking for, be it revenue growth, operating leverage, et cetera.

Yes. Look, I think it's a little bit of a seasoning of the pivot to offense, right? I think initially, Bill would have seen it and we would have seen it earlier ourselves internally, putting the right people in the right seats. creating clarity of focus around our growth agenda. You saw it last year manifest itself in really nice loan growth. This year, you talked -- we've talked a little bit about like continuing that momentum, but also making sure that we're putting the right amount of emphasis on the deposit opportunity, which I think that environment will be, I think, more favorable this year than last year for a number of reasons. And so I think you should see it really across the board, right? If you think about last year, we delivered positive operating leverage. We grew our business. This year, we'll grow at twice the rate plus. We'll deliver more operating leverage, right? We will grow earnings at a faster rate. We've got a lot more confidence around our ability to improve our ROTCE profile as well. Bill has been declarative about that appropriately given the many moves that we have in motion. So yes, so I think that's how you'll see it. You'll see it in our financial results.

So talking of that, so you're right, like 2x growth relative to last year. At the same time, I guess, just to be devil's advocate, the macro backdrop sounds very constructive. When I compare that to sort of your loan growth expectations for this year, feels a little bit more tempered. Like what are the puts and takes? Like what's kind of causing you to be maybe cautious, conservative or...

Yes. I don't know whether we're cautious or conservative. I maybe think about it like this. This time a year ago, probably here with you, we were talking about an outlook for low single-digit loan growth. We didn't really know what the market would give us. That certainly, we would have been interested in growing the company faster, growing the balance sheet faster. But the moment we were in, it was less certain as to whether or not the demand would sort of manifest itself. It did. We ended up growing end-of-period loans closer to high single digits. A lot of that growth, really high-quality growth happened in the second half of last year. And so we want to maintain that momentum. I think what we're trying to do in '26, I think, appropriately, is to be even more focused on making sure that it's just really, really profitable growth. We've set the marker out there that we expect to achieve a 15% ROTCE in 2027. To do that, we've got to be ultra-focused on profitability, ultra-focused on efficiency as well and capital optimization. And so I think what you'll see is we will still have the same momentum going into 2026, but we're going to be thinking about how we mix that growth. And so your Main Street C&I, other of our wholesale businesses, middle market, especially where we have great industry expertise, we're going to continue to grow those portfolios, I think, at a at a similar rate to what you saw sort of exiting last year. On the other side of the balance sheet, you think about -- or pardon me, and some of our other businesses that maybe don't have quite as much profit potential short term, whether that's ultimately more diverse relationship opportunity or maybe it's just purely the ROE profile of the assets, we're going to deemphasize some of those businesses. So you might see the C&I businesses grow 4%, 5% plus, and you might see some of the consumer businesses like an indirect auto or mortgage grow slower or grow not at all. Now there are other aspects of our consumer business that offer more profit potential. So some of our specialized businesses like Service Finance and Sheffield and otherwise. So we're really just thinking about the mix of growth with a focus on profitability.

That's helpful. And then when we think about the C&I growth, I think you talked about certain markets where you've added bankers and obviously, a big emphasis on just the wholesale business. Are there certain markets or are there certain industry verticals that's driving that growth or expectations for growth?

Sure. I mean in terms of markets, the bulk of our demographics are growth, right? And so especially relative to the country, we tend to have good sort of migration patterns and good employment, at least on a relative basis. And so it's a thriving world. So I wouldn't expect there to be one particular market versus another. I mean there are areas where we feel like we can better serve markets. We've talked about some of the expansion work that we're doing. And when we talk about, for example, adding more distribution in branches in a market like Philadelphia, it's not just branches. We're typically expanding our wholesale teams, too. And so there are going to be some places where we feel like we have more of an opportunity to be even more impactful. But from a like industry specialization perspective, absolutely, that's our -- we are an advice-driven model in wholesale. And so a lot of the hiring that we've been doing in our sort of our corporate banking and commercial banking businesses have been focused on certain industries where -- and there are going to be some geographic themes for that. So a market like Nashville, you might have more health care expertise and a hub like Atlanta that has fintech and payments expertise. So there's going to be some of that, but we've picked our spots. And by and large, that's what we think our clients -- that's how they want to be served. They want bankers who understand their industry, who can also bring the full spectrum of capital markets and otherwise products.

Got it. And I think, Mike, you mentioned you also want to grow deposits to fund that loan growth. Just talk to us, I mean, I guess, the downside of operating in very attractive markets is just the competitive landscape is extremely intense. So talk to us around strategies for growing that deposit growth and what's the competitive backdrop look like?

Sure. Yes. Well, look, without a doubt, deposits is a top focus for us across the board, both segments. And we've got some really nice momentum in deposits, I'll say. You look at the second half of last year, especially the fourth quarter, I know there's some seasonal benefits that you'd always expect in the wholesale business in the fourth quarter with public funds, but we saw actually some favorability beyond that. And so we feel pretty good about the deposit franchise and its potential to grow this year. There's a lot of things we're doing. On the -- I'll start maybe on the retail side. We've had a nice track record of net new households to the company. We're constantly sort of evaluating and recalibrating our marketing strategies and spend. Donta is doing a really good job sort of thinking through the potential of this premier segment, where a lot of these clients have assets off us, whether it's -- it could be liquidity, it could be investments, a lot of intensity of focus just from a sales culture perspective on more fully serving those existing clients, and we're seeing some of the benefits of that. On the wholesale side, some of it is, frankly, just incentives and focus. Kristen and Kerry and the team have just -- have brought a different level of intensity to thinking about deposit production. And we're seeing the benefits of that. Some of that also is just product. We've invested heavily and we'll continue to invest in our treasury management suite of products. And so having a product that we're proud of, that clients have given us a lot of really good feedback about is really is helping us there as well. So if you think about all those factors, coupled with what should be and all things equal, better backdrop for deposits this year, we feel quite good about our outlook. QT coming to an end here, the potential of lower rates, the benefit of the rate cuts we got in the second half of last year. So, so far, so good.

You mentioned the rate cuts at the back half of the last year, the behavior, I guess, as we flex the deposit beta on the downside, is that behaving more or less as expected?

Yes. I mean I think there's still -- in terms of like the history of time, like rate awareness is still high. Rates are still historically higher, but it's better. It's better than it was 3 months ago and 6 months ago and 9 months ago. So we're starting to see a little bit more flexibility in pricing. And we were pleased by how we ended last year with where the betas landed. We're going to grind a little higher here in the first quarter. And I think I mentioned when we reported earnings, our expectation with 2 cuts in the second half of this year is we'll get to sort of that low 50s area. I think we got to the mid-50s in the last cycle up. So we should find our way back there over time.

And maybe, I guess, when you put that together, when we think about the trajectory of NII growth, just talk to us in terms of the factors that could lead to a better versus worse NII than what you expect today here.

Yes. Well, look, I mean, we're going to grow earning assets, right? And so foundationally, that's a good start. Again, mix matters, and we talked about that a little bit on the loan side. I mean, to the extent that good core client deposit funding, to the extent that we have favorability there, that would be a really important driver, maybe create some upside for us on NII for 2 reasons. One is it would improve our funding mix. And then two, it may, all things equal, come with some higher loan growth than we otherwise thought about. The cuts are important to us. I would say we feel quite good about our ability to improve the funding costs on the existing portfolio. Shape of the curve will matter. If we saw more steepness, that would be a good guy. Credit spreads are still awfully tight. I mean, to the extent that you saw some normalization of credit spreads, that could be -- create some opportunity as well. All those factors, of course, present risks on the other side, but that's how we're thinking about things.

So when we think about that, it feels like it should be a decent backdrop for the margin to expand from the 3.03%. Just when we think about -- and you've talked about, Mike, I think, the teens, I guess, in the 3 mid-teens margin, like how quickly can we get there? And is that sort of what you would think is a normalized NIM for the balance sheet that you have?

Yes. Well, look, I mean, we did mention -- I know we live in a world of quarters. We do expect just based on deposit mix in the first quarter, we actually have an expectation that our net interest margin will be a touch lower than what we reported in the fourth quarter. But we should march higher from there throughout the course of the year. I think we'll be in that 3-teens level as we exit '26. So I think for the fourth quarter, that's a reasonable expectation. We see that. Factors that will drive that, we do have the 2 cuts in that outlook. We do have good deposit production in that outlook. We've got the curve kind of at least where it is in terms of the fixed asset repricing benefit that we're that we're counting on. But yes, we're there. And I think it normalized, Sure. I mean does it -- the good news is that improves the '26 NIM will be higher than' '25 and obviously, '27 with the exit rate in the 3-teens should be more normalized. And over time, I'd say we probably still have maybe even some upside, Ebrahim, if you think about the bond portfolio still, we're under earning on a pretty significant portion of our securities portfolio. We've got probably $50 billion of securities held to maturity that are at a sub-2% yield. And so that's a little slower, but it's there in the backdrop, and that should be contributing to some improvement over time as well.

Got it. And just within that context of rates, how do you think about just managing from an ALCO standpoint, either through the bond book or with the swaps portfolio? Just give us a mark-to-market on your thought on sort of your thinking around what this balance sheet needs to look like. Yes.

I think we've got it positioned about right. I think if you're talking about proportion, we -- if you remember kind of mid last year, when loans -- or I guess it was '24, when loan growth was a little more elusive, we actually increased the size of our securities portfolio from maybe the $115 billion area up to the $120 billion. I think we even got up to like $123 billion, $124 billion. And we sort of said at the time, hey, this is probably temporary to the extent that we start to see loan growth reveal itself, then we may fund some of that growth with some of the securities portfolio. And that's what happened last year in part. Obviously, loan growth outstripped deposit growth, and we saw the securities portfolio, I think, end the year in that kind of $117 billion, $118 billion area. So that, coupled with the cash position, call it, like low 30s billions, gets you that $140 billion to $150 billion, which we've talked about with investors over time is, I think, an area given the overall sort of positioning the balance sheet is appropriate. I think that's what you would expect to see this year. Importantly, I try to make this point when we reported, if you look at like the actual average balances year-over-year, that's where you did see a delta. So like I think we have securities and cash in the aggregate down 4% to 5% year-over-year. And so just that was an important, I think, input as people sort of thought about your NII question and trajectory.

Got it. Anything around just from a regulatory standpoint, like there's been a fair amount of chatter around changes. I mean, obviously, the Basel end game rule, we are all waiting for that, but maybe tweaks to liquidity rules. I'm not sure if it's going to be impactful at all for Truist or how you think about balance sheet management. But would love to -- like is there anything in particular you're paying attention to?

We're paying attention to all of it. It's patiently waiting like everyone else. I think we're -- we feel really well positioned for the evolution of the policies. Basel III, we've been sort of studying through its various potential iterations. And again, feel like from a capital and RWA perspective, we've got our hands around it. We're well positioned to sort of manage through a rule being finalized and implemented here. From a liquidity perspective, we've done a lot of work. By the way, if you think back to our TIH transaction, it was with -- there were a lot of, I think, benefits to that transaction. But 2 of them were squarely significantly improving our capital position as well as our -- the quality of our liquidity position, if you think about the follow-on repositioning we did on the bonds. And so we feel really good about, I'll call it, the overall sort of financial condition of the company. We've modernized a lot of the analytics that we utilize internally to think about things like our internal liquidity stress testing and so on and so forth. And so we've gotten really good feedback from all the right stakeholders on that. So feel pretty good about how we're positioned.

I guess the other side from a revenue standpoint, fee income growth, I think the guidance is mid- to high single digits. Just talk to us in terms of top 2 or 3 areas that you expect to drive that growth? And what gets us to high single digits? Is it connected with loan growth playing out? Or is it independent of that?

I would -- short answer to your question, I'll go through some of the components is I'd say the upside in the fee businesses for us, just given the exposure to investment banking and trading and wealth is probably markets. So I think to the extent that you saw really good performance in markets, which drives new issuance activity and mergers and capital markets and helps drive confidence from an investor perspective and asset values increase, those are some of the real upside in those businesses. On the treasury side in payments, we've been pretty consistently beating the drum around how important that is for us long term and short term. And so I think we've made a lot of the right investments in the products. We've made a lot of the investments in sort of the leadership and the sales talent and we're clear eyed on the strategy. So it's really about execution. If you go through the components of our major fee businesses, maybe starting with treasury, we have a new line item we just -- we rolled out in January. We've combined our treasury and cards businesses into a single line on the income statement. We wanted to provide better access for investors to that line because we've said how important it is. One of the components of that line is treasury. We expect treasury to grow double digits. And so -- and I think -- and beyond, like that's just such an important area of focus for us. So that's a component of that mid- to high single-digit line. Wealth, mid- to high single digits, I think I'd say, yes, it's -- we're seeing the right like KPIs, the net asset flows, adviser continuity, having the right number of like planning conversations. So all that feels good. We think that business can and should grow faster than it has historically. And then on banking, we're off to a good start this year. We've got a little bit of turbulence around a couple of things, and I don't know what this sort of software volatility means for markets in general. But that's a business that we've consistently been growing kind of high single to mid- to low double digits. And in this year, that will actually grow faster just given you think back to last year, we all sort of came -- this time last year, we were talking about how excited we were about the investment banking and trading opportunity and not too long down the road, we found ourselves dealing with some volatility. And so for us this year, that will probably be a mid-teens grower as a line, just given the comp.

Understood. Just a couple of things. One, on the wealth side, is it -- every bank does it a little bit differently. Is it more about just mining your existing client base on the commercial side, a lot of them are going to go through liquidity events, I guess, what's the strategy to grow that sort of assets under management?

It's across the board. But yes, I mean, it's a really important opportunity for us is doing a better job finding business owners and their families and helping them in these transition events, whether it be succession or liquidity or whatever it might be, working as one firm to serve those clients. That's a really important partnership between those sublines of business. Kristen, of course, says grace over the wealth and the commercial business. So it's, I think, a very sort of natural relationship. There are other places in our Consumer business, in our Premier business, we've got a lot of clients whose banking business we do, but whose investments we don't manage. And that's a huge opportunity. So Donta and Kristen spent quite a bit of time thinking about how do we execute on that at scale in a way that's sort of client-centric. So that's a big opportunity for us, too. And of course, our wealth advisers are constantly showing up in their communities and trying to find a way to bring a client like a wealth-first client to the firm. So it's multipronged and all 3 are important.

Got it. And maybe, Mike, I mean, you spent, what about 15, 16 years in investment banking as a banker. Just talk to us, again, you hear different things from different regional banks around the role of investment banking, capital markets within the franchise. When you think about your banking effort and capital markets effort, like where do you see Truist as positioning itself relative to be it the Wall Street majors or the middle market investment banks? How do you think about that?

Look, I think our identity is we are a full-service firm that has the sort of capabilities, not just from a product perspective, but from an industry specialization perspective to serve companies of a wide variety. I mean, we are -- have historically been middle market, upper middle market focused. We serve some large cap clients and we serve some -- a lot of founder-owned businesses. But for us, where our message and platform most resonates is when people value the industry-specific advice and the execution that we can deliver across really any product. So our view is what we hear a lot from our happiest clients is, "hey, you guys know our industry better than anybody else, and you can execute as well as any Wall Street firm." Or on the other hand, if it's a smaller client, they might say, "Hey, we love you. There are other boutiques who also offer very good industry advice, but they just don't have the same capabilities you have to fully serve us." And so that doesn't mean we're the best fit for everybody, but we feel like we are differentiated in the market. And we align our business towards that goal. So when we talk about our trading business, our trading business isn't designed to as sort of a pure trading business. When we invest in sales traders in high yield and energy. It's because we have a banking practice and we have a corporate banking practice, and we have a derivatives and FX practice that's focused on those same clients. And so we're -- we really want to be -- have the right depth in these places where we pick our spots. This has been really a consistently strong performer for us and will be into the future.

Got it. Maybe I think pivoting just for the time we have left around expense growth, expense outlook. I think you have a relatively narrow band. You put out like 1% to 2% of expense growth for the year. You've already done a lot of work in terms of franchise efficiencies over the last few years. So one, I think are there more opportunities in terms of cost saves? And then where are we investing those dollars to think about going forward?

Well, I would say this, in '23 and '24, especially, we, I thought, executed really well in terms of building some infrastructure around just doing a better job managing expenses, whether it was the routines, whether it was the mindset, planning processes, you name it. And we have not let that muscle atrophy. And so as we think about how we position ourselves to continue to support our growth, but also deliver good financial results and improve our profitability. We -- it's really important to us that we use those muscles that we, I think, really developed in '23 and '24 to create that capacity. So just to give you a little insight into how we think about like '27, right? Our mindset is we know what the 5, 6, 7, 8, 10 things are that we think are going to be the most important to drive our success over the next 3 to 5 years, right? So it's examples we've talked about some of them. It's -- and continuing to invest in our treasury management platform. It's building out our -- maybe it's our FX capabilities to better serve our large corporate clients. It's hiring bankers. The front line has been fortified. If you think about in '25, we grew expenses less than 1% in '25, but we hired investment bankers, corporate bankers, commercial bankers, wealth bankers, retail bankers, like there is a ton of investment net that's happening in the company. The way that's being funded is we're constantly finding waste. If there's redundancy, if there's automation opportunity, you name it. And that's just become sort of the culture of our planning. So in our case, we'll go to a Kristen or a Donta or to our risk organization, and we'll say, "Hey, here are the resources you have. We need to -- we're going to grow the company next year. We need to do the same work with the same or frankly, fewer resources, right? Let's be down in our BAU so that we can fund these 5, 6, 7, 8, 9, 10 things. And so that's worked for us. I'm not sure that's necessarily unique to Truist, but that's how we do it. And that's how we're -- and look, at the end of the day, I think positive operating leverage is -- it's an appropriate expectation for our investors to have. I think that we've proven that we can make the investments that we need to make to grow the company and still manage expenses in a disciplined way.

And I guess within that context, I think you're going to hit a 14% return on tangible equity, give or take, for this year, getting to 15% that Bill called out back in October for next year. Just the level of confidence that you can get there, like what are the risks to getting to that 15%? Sure. And the follow-up to that is, can we do better than 15% beyond 2027?

Well, I mean, so one thing I'd say is the whole company is focused on accelerating profit growth and profitability, which is important. And it's actually -- it's really important. It goes back to your very first question, which is like, hey, where are we in the evolution of Truist? Like last year, if you'd ask me like where are people focused, people are focused on growth and getting back on offense and let's go. And that's all important, and I want to continue to have that in the backdrop. But the first thing out of people's mouth needs to be how are we going to improve our profitability, drive returns higher, better understand what role you have in the company to make that happen. In our case, we got to -- the numerator has got to go up, like we've got to improve ROA. Some of that's through doing a better job serving our existing clients with some of the fee businesses we talked about. Some of that's driving the net interest margin higher. By the way, some of that's mix. Some of that's discipline, some of that's deposit growth, right, funding mix. So these are all factors that are going to be important in driving that numerator higher. And then from a capital optimization perspective, one way to think about it is TCE, we're going to hold relatively constant is a way to think about it, right? The buyback is happening in the background. We've said that operating at about a 10% CET1 ratio by the end of '27 is sort of the glide path for us. So the buyback is sort of constantly recalibrating to get us to that point. And so if we can deliver on the productivity piece -- and by the way, there's an efficiency piece of that, too, but the productivity and the efficiency and then get the capital piece right, we've got a great deal of confidence that we're going to deliver.

Understood. So CET on 10% when we think about just the overall capital deployment priorities, organic growth, buybacks, you mentioned. When we think about the dividend, I think Truist is a little bit of an outlier when we think about the payout ratio today. Just do you think about that? Is there a right level that you think that you want to be over time?

We're a touch higher. We're growing into it. We're very focused on growing earnings. That's how we're going to get the payout ratio lower, just to be clear. Yes, I don't think 50-plus percent payout ratio from a dividend payout ratio perspective is where we want to be. We've sort of said like maybe it's a 30% to 40% dividend payout ratio, maybe it's a 30% to 40% call it, buyback ratio, and then that leaves you with 20% to 40% to sort of just reinvest and grow. I think that's an appropriate framework. And so I think you see a sort of trend in that direction over time. Meanwhile, yes, we're a touch out of whack, right? We're a little higher on the dividend payout ratio, and we're over 100% on the full payout ratio because the buyback, we believe, is elevated, but appropriately given our current capital position and our objectives.

Two questions. One, so you, I think, mentioned when you talk about investment banking, the risk around AI disruption has emerged recently, at least the market has been paying attention to that. Just talk to us when you look at your portfolio and sort of underwriting, like how much of AI disruption risk to the clients informs that view today?

Sure. Yes. So actually, we've had some good meetings this morning and talked to a few investors about this. Our Chief Credit Officer, Mark Huffstetler, is here with me today. Look, I mean, maybe this week or last week, it's been sort of a software-specific story, but it's broader than that, right? It's everywhere. But if you think about software specifically, I'll just give you an example, like when we look at any business, especially in like a levered scenario like -- which a lot of these software deals tend to be, we're very focused on disintermediation risk. It hasn't always been in the context of AI, but it's been, hey, like a lot of times, these businesses are quite defensible and they've got nice moats and they're very vertically specialized and they're multiyear deal contracts. So they're very nice businesses, which is why they can which is why they can be -- afford the structures that they often get. But we do think about that on a deal-by-deal basis. We say, hey, what if something did change here, what if there was disruption. I'm not sure that we've specifically gone back -- we will learn from everything. It's a new world we're living in. But we absolutely do say, hey, like here's a business case, like we need to assume some like idiosyncratic stress or some sort of a disintermediation, and we sort of contemplate that in the various underwriting scenarios. So -- but look, the team is -- it's a new world. And so we're going to be looking differently at all the businesses that we underwrite and try to think about these types of risks. But look, at the end of the day, these -- a lot of these software companies that this week and last week have seen a little bit less interest from investors. These are, generally speaking, very strong business models. We obviously are a consumer of a lot of software, and they're very important partners to us.

Got it. And I guess, maybe tied to that, but when you think more broadly about credit quality, anything on the commercial or the consumer side that feels like a red flag or maybe a yellow flag that you're watching closely?

Look, we've talked a lot about CRE office. We feel really good, at least about our own exposure and how that story is unfolding. So I'm not sure there's new ground to tread there. We were talking probably this time last year, we may have talked about like a yellow blinking light on multifamily. I'd say that probably has stopped blinking, at least in our markets. We're seeing the absorption that we would have otherwise sort of expected sort of play out, really strong sponsors, good projects. So I'd say feel okay there. There are maybe like pockets of not concern, but focus, things like despite how we opened on like sentiment, like always a little concerned about some of the consumer discretionary stuff, like so if we've got restaurants in the portfolio, we're watching a little more carefully there. You're seeing some substitution in spending. So we're not seeing, by the way, negative signal there, but that's -- I'd say, if you're asking for a watch item, that would be a good example. And then on the consumer side, I think it really probably is that lower-end consumer. Our biggest exposure in that is our regional acceptance business. We've sort of been consistently evolving our credit policy in regional acceptance to probably be a little more near prime than true lower end. And so we're not seeing a lot of -- there are no surprises in our portfolio there, but we're probably a touch cautious in that lower end. There's other -- our Sheffield business, we buy a little deeper there. It's a small portion. to serve our OEMs to make sure that we're good partners there. But we're just not seeing a lot of that. We don't have a big credit card business. So we're not seeing that signal there either. So I mean, knock on wood or whatever that table is, we feel quite good about things.

And when we think about just the overall level of reserves, given the macro outlook that you have, is there room to release reserves from where they are today or...

Yes. I don't think so. I mean I think we feel well reserved. I think a more likely trend would be relatively consistent, at least for the sort of short to medium term.

We have a couple of minutes. Two questions. One, there's a constant debate about scale and the advantages of scale in the banking business. you did double your scale. So just talk to us in terms of as that happened, has that created opportunities that otherwise would not have happened because of that scale?

Sure. I mean we only have 2 minutes. I wish you asked this one first. But look, just even think about the marketing economies of scale. Again, I always joke when a lot of our investors are from different parts of the country. And when they have a chance to come to our region, I always -- sometimes I get the comment like I just didn't realize how important, how big Truist is in these markets. we're often we're the #1 or the #2 players. So whether it's in Orlando or Atlanta or Tampa or Richmond or Knoxville or do you name it, or Conyers, Georgia or Wilmington, any of these primary, secondary, tertiary markets where generally -- we're the big guys there. And so that marketing economies of scale, that client referral, that's a really big deal for us, and I think in banking in general. And other ways that I think our size manifests itself as a strength is upmarket in our big corporate investment banking businesses, we can be even more meaningful partners when it makes sense for clients. And so it's -- there have been a lot of great benefits of scale, and we feel like we have the size and the products and the people that we need to win.

I guess one last one. Investors have digested a lot as the Truist story has evolved. What would be the 1 or 2 sort of key points that you would want investors to take away as they think about the franchise, evaluate the risk reward in the stock?

Yes. Well, I mean, I think a couple of things. Number one, going back to your first question, like where are you in the evolution of Truist, never better positioned to win, clear eyed on a narrow set of strategic imperatives that we think we can execute on. And I think maybe just the exclamation point would be a lot of confidence amongst our team, starts with Bill and the Board and our leadership team around our ability to go drive faster earnings growth and ROTCE to 14% to 15% in '26 and '27.

On that note, thank you very much, Mike.Thank you.

Yes. Thanks.