U.S. Bancorp (USB) Earnings Call Transcript & Summary

Good afternoon. I have to read a quick disclaimer, and then we'll move on. For important disclosures, please see Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your sales representative. So with that out of the way, I am delighted to have with us today, Andy Cecere, Chairman, President and CEO of U.S. Bank. Thanks for joining us, Andy.

Good afternoon, Betsy.

We also have Terry Dolan, Vice Chair and CFO. Terry, thanks so much for joining us.

Thank you so much. We always appreciate being on the conference.

So I am thrilled to tell you that we very much hope this is our last virtual. Look forward to seeing you in person next year, in New York. But until then, we will be enjoying our virtual experience. Andy and Terry, before we get into the meat of the discussion and about what's going on with the business and the strategy and your drivers for growth in the business, maybe we could kick off with a bit of an update for the quarter, anything that we should know here 10 weeks into the quarter?

Sure, Betsy. I'll start, and Terry will add a little detail. I would say the quarter is progressing very much like we had previously discussed at our quarter -- our earnings call. We still expect NIM and net interest income to have bottomed out in the first quarter. We'll see some increase in both, as we discussed. The recovery is continuing to progress each and every day. Our payments business continues to accelerate. We can talk more about that in detail. And as we expect -- we talked about, we expect expenses to be relatively flat. So it's very consistent with what we talked about and loan growth is sort of flattish as well. Terry, what would you add?

Yes. No, I would just add, credit quality continues to be particularly strong as well, just as we would have expected. And at some particular point in time, that will normalize, but we're enjoying it during the second quarter anyway.

Great. That's good news. And you have not had any impact from the interest rate environment being a little tougher here this quarter then?

Yes. I mean what I would end up saying just from a rate perspective, obviously, rates are down about 25 basis points from where they were early in the quarter. We had the opportunity to be able to be a little bit opportunistic and buy longer-dated securities at that particular point in time, so we deployed a little bit of cash at that point. But with rates coming down, that's obviously going to make it a little bit tougher, at least in the near term. But with the inflation expectations and just with the economy humming, we do expect that the long end of the curve will start to migrate back up and we'll just kind of wait and see what the Fed has to say.

Yes. 2:15 today. I know we'll all be looking for that. Okay. So let's move on to the meat of the discussion here. And I really want to kick off with loan growth. Andy, you were highlighting that things are coming in line with what you're expecting. I will say, based on what we've heard from other folks at the conference, that's new news. Maybe you can give us a sense as to what you're seeing in C&I? Let's just start there. Where are the trajectory for the pressure points? And where are the inflections that you're anticipating?

Yes, I'll start and then Terry will add as well. And in line, just to be clear for what we said, which was flat. So there isn't growth occurring. It's relatively flat. And on the consumer side, card, payment rates continue to be very high. It was upwards of 40%, which is 8 to 10 points above what is typically payment rate level, which is causing pressure on the credit card balances. And on the commercial side, again, the demand is moderate. The utilization rates are low. All that adds up to a relatively flat balance sheet from the perspective of loans. Terry, you have a little bit more detail you could provide.

Yes. So if you end up looking at utilization rates, right now, it's around 19%, 20%. And typically, that is 25% to 28%, 30% kind of in that ballpark. And kind of give you some perspective, any 1% movement in utilization rate adds about 0.7% to overall loan growth and about 1.5% to C&I specifically. So we do kind of expect that to start to strengthen. The things, I think the puts and takes right now is that we're continuing to see paydowns occurring within the industry, simply because of the low interest rate environment. The inventory build, I think when we think about the second half of the year, I do think that customers are optimistic. They're trying to build inventory. I think supply chain happens to be a little bit of a difficult point, but production indices were relatively strong today and consumer spend continues to be strong. And I think that creates a lot of optimism. The -- couple of other things that we're seeing is certainly on the M&A side of the equation, that we're starting to see green shoots. That's getting a little bit stronger and pipelines have been reasonably strong on the corporate side of the equation. We are seeing growth in ABS lending and some of those areas, dealer floor plan has been a little bit weaker, simply again, because of the supply chain issues in the auto area. But again, we think that that's more temporary than anything else. So we do certainly expect as we get in the second half of the year, it'll be strengthening. On the consumer side, the thing I would add to what Andy mentioned is that in auto lending, it has held up very nicely, certainly in line or maybe even a little bit stronger than our expectations going into the quarter. The -- again, the challenges will be supply side. What's happening right now is many of the captives from a financing perspective have kind of pulled back. That gives us a little bit of opportunity. And the other thing is that used car prices have been particularly strong, and that helps us with respect to end-of-term lease gains when we think about fee income a little bit. So that's how I think we're seeing with respect to both the corporate and the consumer side of the equation.

But the result of having relatively flat loans is a great outcome here in this environment.

Yes, it is, actually. As we talked about at the end of the first quarter, we really feel like we're starting to hit an inflection point and with the economic activity really starting to take off, companies are going to start to have to spend in terms of CapEx, building their inventories and all sorts of things. And again, the optimism is pretty strong. Certainly, when we think about net interest income, we do expect, again, first quarter to be that low point and starting to expand second quarter and into the second half of the year. And as I mentioned, we had the opportunity to reinvest in some longer-dated securities at the beginning of the quarter when the 10-year yield curve was stronger. So it was opportunistic we hit that kind of rate, and that will help at least in the near term.

And I was digging into...

Again, Betsy, it also helps with the diverse balance sheet that we have. We have the sort of equal mix of consumer and corporate commercial. And within consumer, some are pressured like credit card I talked about, but some categories are doing well like auto. So having that diversity certainly helps in this environment.

And there's diversity in your C&I loan book as well. I was digging into that in the K analysis that you give, with very clearly supply chain constrained industries being down, but then you've got services book that's up nicely year-on-year. Maybe you could speak to that a little bit because I'm not sure it gets enough attention what you're doing on the services side of your C&I book?

Yes. Again, a lot of that is tied to the consumer spend and some of the things that are happening in that particular space. Services-related industries certainly, have strengthened quite a bit over the last 3 to 6 months sort of time frame. So I do think that there's that opportunity. And then that part of the business is also going to be affected by things like M&A activity and just the strength in the pipeline that I ended up talking about earlier.

What about commercial real estate? You've been pulling that down for the past few years. And I'm wondering, is it at a place now where you would consider reinvesting in that asset class? Or is that where you want it to be and you're really good with the balances that you have there?

Yes. Betsy, what I would say is that commercial real estate is an area that we have been committed to for a long time. We particularly have a strong relationships with developers and on the construction side of the equation, et cetera. It has been coming down over the last several years. Part of it is just us being relatively cautioned -- or cautious from an underwriting perspective. But I think right now, it's really more driven by the fact that people are waiting to see what happens with respect to the office space, return-to-work sort of strategies in the various companies, et cetera and so. There -- I think it's a little bit of a wait and see yet. I think rentals are still coming down a bit, but again, also hit an inflection point where they start to strengthen. So I think that there is opportunity in the future for us, but it's really kind of constrained by just demand on the customer side of the equation.

Got it. Okay. That's very clear. Just want to dig in a little bit on the consumer side. And Andy, you're mentioning the paydowns in card being a little bit tougher, the balances there. Can you flesh that out a little bit just in terms of how do you see your clients spending the stimulus that they've got in their pocket? Has it been at a pace that's in line with last couple of rounds? Or is it faster or slower, potentially? And then give us a sense as to where you think that inflection comes in card balances.

Yes. So let me start on the payments and spend activity first, and then get to the balances side. So first of all, each and every -- we track this very closely, and it's great because we have both an issuing side as well as an acquiring side, so we're able to see all sides of the spend activity. And it's pretty encouraging. So first of all, I will tell you, that we're starting to see now total spend, all in, including airlines, travel and hospitality and every all else for the first time, actually being above, just slightly above 2019 or pre-COVID levels. So that's encouraging. And that's happened in just the last couple of weeks. Secondly, if I peel out, travel and airlines and hospitality, spend versus 2019 across those categories is actually up about 20%. So we're actually spending in those categories 20% more than pre-COVID levels. Now airlines are still down, but it's down 45% to 50% versus where it was 85% to 90%. And the other area that's certainly challenged for obvious regions is corporate T&E. Corporate T&E is still down on our corporate payments business in that 75% to 80% range, and that was down 90% as well. So everything is getting a little bit better and the total is actually, for the first time, about pre-COVID level. So the spend activity is certainly accelerating, getting better each and every week, and I would expect that to continue. So those cyclical trends are very positive from a fee income standpoint. And until we start to see some reduction in that payment rate, which as I mentioned, is at 40% or so, which I do think will start to diminish in terms of the payment rate coming down, we'll then see some increases in loan balances.

Got it. Okay. The other question on consumer just generally is, is there anything to do with the credit box? Because we've got consumers in much better shape than they have been historically. Is there any thought to loosening standards?

No, our credit standards are, to simply state it, back to pre-pandemic levels. We adjusted a bit for obvious reasons during the pandemic in the middle of last year, but we're back to pre-pandemic levels, and we're comfortable with that level.

Okay. And what about mortgage lending? I think you've been investing a bit there in mortgage and in purchase. Can you give us a sense as to how you're positioned, especially in this market where refi is so hot? And what you're anticipating your competitive position to be as we move forward, given how rates are moving and gain on sales fluctuating?

Yes, Betsy, let me take that one. Yes, I think we're in a really good position, in fact, and you mentioned it. Over the course of the last several years, we have been really repositioning and investing in the retail channel as opposed to the correspondent channel. The gain on sale margins tend to hold up better in that particular space. And then we've also been focused on the purchase mortgage as opposed to the refinancing. Now we did enjoy the benefit of the refinancing boom that took place during the second, third, fourth quarters of last year. While refinancings are coming down and will come down as a result of being part of the industry, now we are capturing market share in the purchase mortgage side of the equation. So I think that that's a great story. And then the other piece, I think, that's adding to that. And then it also really helped us during the refinance boom is We made a lot of investment in digital capabilities in terms of being able to process and take applications, really through digital channel or sort of capabilities. And today, 80-plus percent of those applications through the retail channel come in online and through that digital capability. And that helps us both in terms of being able to manage the productivity of the mortgage loan officers, but also to be able to deal with the backlog that sometimes takes place during refinances, we came through that very well. So I think that's a great story for us. The other thing is that as you move to the purchase mortgage side of the equation as opposed to refinancings, we do enjoy and see some portfolio and of those jumbo type of loans on the balance sheet. So that will help with loan growth as well.

80% digital, that's a very significant number, right? Like what was that pre-COVID?

It's been going up in each and every quarter, each and every month, continuing. And it's a great example of -- we partnered with a fintech. We had a great front end and that, coupled with our great customer base and our mortgage loan officers, it takes a lot of the detail work out of them. They could advise and counsel in this combination of digital capabilities with human interaction advice is exactly what we're focused on and mortgage is a great example.

That's awesome. Okay. One last question just on rates before we move to the -- get into fees a little bit more. But on the rate side, we talked a bit about how you have been reinvesting at the beginning of the quarter very nicely. Would you be looking for opportunities to reinvest more liquidity at this stage? Are you waiting for maybe a better rate environment entry point? And then give us a sense as to why the rate sensitivity came down. I noticed in the Q, it was down a bit.

Yes. So with respect to the -- just reinvesting in securities, right now, I think we're kind of holding back or trying to be a little bit more cautious building cash balances, because when we just look into the future, we do expect rates to be rising initially on the long end of the curve, et cetera. So I think right now, it's best to kind of wait and pause and just kind of see what happens and be opportunistic if rates do go up. The other thing with respect to rate sensitivity, it did come down in the first quarter. It's kind of a dynamic process based upon what you're forecasting at that particular point in time. The decline was really due to the fact that the long end of the curve ended up moving up. And then because of the fact that we were forecasting, that we were going to be reinvesting in mortgage-backed securities at that point. Our expectation is that based upon what we know right now that, that asset sensitivity will again start to move up as we go through the second quarter. And we'll continue to consider the trade-offs between reinvesting securities longer term and asset sensitivity, given where we're at in the rate environment right now.

Makes sense. Okay. I wanted to just jump into fees. And really, by far and away, the biggest differentiating factor, as you well know, with your franchise is your payments business. Andy, you already talked a bit about the cyclical recovery that started in the spend levels that you're seeing in the consumer business. Maybe you could talk a little bit about what you're seeing at all in government, if anything? When you think corporate would start to ramp back up? And how we should think about that baton pass between the cyclical improvement that we're seeing today and the migration towards that secular growth that you've been positioning for?

Sure, Betsy. Thank you. And as I said, I think the consumer side, for the first time, is actually all in better than it was pre-COVID, and we'll continue to see improvements in areas like airlines, hospitality and travel activity. Corporate T&E, I think we'll continue to get better each and every month, but it probably won't get back to normal until late this year or early next year, if not later. So that one we're watching closely. And government spend has been down a bit but not certainly as impacted as corporate T&E. So big picture, continued improvement as we expected through the end of this year into next year. I do think an important story, so that's a cyclical story. The secular story, I think, is actually more impactful. And that is we've been spending a lot of time thinking about combining this great payments business we have and weaving it together with the banking business that we have into a unified product set to help businesses, small businesses, commercial businesses really run their business and thinking about software-driven tech-led activities and focusing on both the receivable side, the left side of the balance sheet as well as the payable side and helping them run their business via a dashboard. So we've made some acquisitions. talech is a great example, where we provide a dashboard. We provide notifications and information, and information to help them run their business. We combine banking products and services together with the payments. And having that unit by product set, that ecosystem, if you will, is hugely important and really why we think it's about the future of growing both the customers as well as providing more services to current customers.

Okay. One of the things that sets you apart as well is Elavon and you're competing in a group that has other card issuing competitors, but not many that have this full loop like you do. Maybe you could help us understand what you're doing with that strategic asset?

Yes. So the fact that we own Elavon is, in my view, a huge competitive advantage because historically, companies maybe would seek their payments provider, their merchant acquiring provider separate and distinct from their banking provider. And today, if you weave it all in into, like you said, closed loop, it offers additional information, more quick reconciliation, the ability to manage receivables and the ability to get your cash much more quickly using some different rails and mechanisms we have in place, plus this dashboard I talked about. So having it all together, integrated, embedded if you will, in the system and then in the core dashboard that we provide the customer, I think, is a huge competitive opportunity. And the fact that we own it allows us to really focus the investments in those areas that allow for further integration. So we're not beholden to a third party saying this is the next development we're going to have on the system. And that, coupled with all the data that both we as well as the merchant acquirer, the merchant itself gets on those transactions, it's hugely valuable as well. So data, technology, embedded software and running the business, those are the advantages.

And is there an incremental either geography that you would take this offering to or merchant type that you might be underpenetrated in now that you would consider emphasizing more with this suite of products that you've got?

Yes. So from a -- first of all, from a type, we have a number of core strengths and particular capabilities in certain verticals, health care, travel, entertainment, hotels, restaurants, we have secure -- pure capabilities there. And then under the segment that I would call business banking, maybe $25 million and less in revenues, we have a store -- a core capability as well. So those verticals and that segment would be our principal focus.

So those verticals are verticals that have been under a little bit more pressure. So we should expect that you will benefit as that T&E travel hospitality really ramps back up here?

Right. That's back to that cyclical and secular combination, which we're focused on very much. Terry, you were going to say something?

Yes. I was just going to add, and I know you're going to probably talk a little bit about this later, Andy, and that is the alliance that we have with State Farm. When you think about geographies, Betsy, and this focus around creating an ecosystem tied to business banking, State Farm has a very large customer segment within business banking or small business. And over time, we fully expect to roll out that ecosystem through that State Farm alliance, which will get us really more on a national level because of the footprint that State Farm has. And so that's an example of being able to leverage that distribution channel in order to be able to take many of these products and services outside of kind of our traditional footprint.

Got it. Okay. That's helpful color. When we think about some of the challenges here, one of them is the neobanks. They might be small and scrappy, but I don't want to be Detroit in the '70s. So I need to consider all of the various threats to my coverage banks and U.S. Bank. So how do you think about those neobanks? They're small, but they have these attractive offers of no fee and 50 bp plus savings rates. So how do you position yourself against that competitive threat?

Yes. I think that's a fair question and one that we're very focused on as well, Betsy. And I think the fact that we have a full set of products and what we want to do is we want to be great at those digital capabilities that sometimes the neobanks have very good digital and technology capabilities. Our objective is to be great at those, but also have that human element. And we believe that combination of great digital, human advice, counsel and direction is how you win, and having the full product set. So you're right, the neobanks have, sometimes, a thin slice of capability, but we think we have the full robust set. I'm going to have a drink of water while Terry talks.

Okay. That sounds good.

I was going to say the other thing is that oftentimes, these banks are focused on a particular segment. For example, consumer lending, unsecured or whatever might be the case. And I think that time will tell because we really haven't gone through what I would call a real credit cycle to see how they perform during that particular time frame. So one of our strengths is how we end up taking risks with respect to the products and capabilities that we offer. And I think that's kind of one of the things that's a little bit of a wait and see from that particular standpoint.

Yes, makes sense. One other pressure point question has to do with overdraft. It's been in the press. It's been on the Zoom meetings recently. So just wanted to understand from your perspective, how you think about that revenue line and what you're doing in that product set?

Sure. So for us, Betsy, last year, 2020 was about $340 million. So just 1.3%, 1.4% of our revenues. And it has been coming down, and it's been coming down for 2 reasons. One is the strength of the consumer, but also the initiatives that we've had underway for over a year. Tim, who runs our consumer bank, has been very focused on providing notifications and information to alert customers in situations where they could, given the historic spend and the data we have on them, run into an overdraft situation. And then, secondly, have overdraft protection for them to allow their spend to continue while having avoidance of overdrafts. And so it's something we've been focused on, it's because we believe that is -- shouldn't be a source of revenue that's growing, and we would expect it to shrink. But I think the offset to that is increased satisfaction, increased retention of customers and other products and services. So it's not one that we would expect it to continue to come down, but will be offset by other products and services, some of which are payments related.

Got it. Okay. Let's flip to expenses. Once we get past the impact of lower rates, what's your thought on operating leverage? Do you think that there is an opportunity to return to positive operating leverage, given the fact that you do also have a lot of opportunities to invest in the digital and the tech part of your franchise?

Yes. So let's step back a little bit, Betsy. If I look at the last 3 years, our company is about 20% larger from a size standpoint, and we're running the company with about 10% fewer FTE across the board. And we've been continually optimizing different areas. And probably the best example is the branch system, which is down about 25%. And that's just a function of consumer behavior. So it's a function of fewer people visiting a branch for transaction and the different role a branch plays. So what our focus is on continuing to invest to continue to have the great digital capabilities that we have to grow the business. And the benefit of that is also this cycle of having better efficiency in delivering our products and services and backroom operations. So those digital investments play 2 big roles, more customer acquisition, more efficient operations. And that's how we're focused on it. Now in the short term, where revenue is challenged, we're trying to keep and we are keeping expenses relatively flat, as I talked about right now. But as we continue to focus on as revenue grows, we would expect to achieve and deliver positive operating leverage while continuing to balance those investments for the long-term growth that I talked about.

You are already one of the most efficient banks I cover. So congratulations on that.

Thank you.

I also want to let the audience know if you have a question to please pop it into your browser. In the meantime, I do want to address some of the strategic questions that we get, and I know you get, we've heard your answers before on some of these webcasts. But I did want to take -- just take your temperature on the consumer business and whether -- or how you think about the benefits of going national. We know that many of your corporate businesses are already national, your payments business is national plus, plus, right, because you're in other countries there as well. So how should we think about that white space geographically in the consumer business? Is it white space to be filled in or not?

So Betsy, here's how I think about the consumer business and acquiring or growing the customer base. Number one, the role of the branches changed, and we talked a lot about that. So what we're doing is really creating an appointment process, counsel advice, counsel investment advice as well as just financial goals advice in a branch. So the role of the branch and the productivity of the branch is changing, number one. As a result of consumer behavior changes, we need fewer branches, which is -- allow us to both optimize in our current markets, but also enter new markets and what we're calling this digital-first, branch-light strategy, which is what we've done in Charlotte. And we'll look at other markets, which is the fact that given the behavior changes, Betsy, we don't need as many branches to serve a market. The third part is using digital marketing as a tool to think about the next best action or opportunity for helping the customer, again, achieve their financial goals. And then the fourth one is the one that Terry talked about, which is the strategic partnerships. So the alliance with State Farm allows us, all of a sudden, to have 19,000 agents who are representing us across the country in some of those spaces that you call white spaces, referring U.S. Bank lending and deposit products. So all those ways are ways we can continue to expand, grow our customers and fill on the white space. And of course, M&A will also be something we look at in the mix for step opportunities to continue to grow the customer base.

Okay. And -- go ahead. Sorry.

One final thing I would just add is that we do have certain product sets on the consumer side. If you think about our auto lending business, our mortgage business, aspects of our credit card business, they already operate more on a national level as opposed to just within our retail footprint.

Okay. Just a couple of follow-ups on that. With the State Farm relationship, what would be the driver to want to expand with physical footprint? Would it be something that would particularly help the commercial business more? Or would it be a function of a desire to own that customer relationship directly? I guess, really, the question here is, has the State Farm relationship made it less likely to want to expand into that white space if it's going well?

I think the way I'd think about it, Betsy, is these are all options. One doesn't necessarily take off -- take one off the table. We look at all the opportunities, again, internal organic growth, partnerships and potential M&A would all be ways that we would continue to expand. And I would start with organic growth driven by the investment that we would make, which is really starting to pay off and having this ecosystem on the business banking, having this full set of capabilities and being great at digital and consumer, allowing to use -- allowing us to use data and digital marketing tools. All these things are making great progress. So one doesn't preclude the other or prevent the other from recurring, they're all part of the mix is how I think about it.

Okay. So once I asked for questions, I got a bunch. So we're going to go through a couple of those quickly.

Okay. Sure.

One is just on the branch closures. So you did close 25% of your branches, and that was in part during the pandemic period. So can you just give us a sense as to how confident you are that consumer behavior has changed permanently that you won't need to take action to expand again?

No, we very closely monitor and track the activity in a branch, both sales activity and transaction activity. 80% of transactions now occur in a digital device. And that accelerated during the pandemic, but it was well on its way pre-pandemic, and it's only accelerated. I don't expect it to come back. So the role of the branch has changed. And big picture, Betsy, we went from just over 3,000 branches to just over 2,300 branches, about 25%. And I think we're at a good spot right now, given our footprint. We'll continue to always adjust to the market and move and add branches where the growth occurs and maybe adjust moderate down, but I think we're at a good spot right now from a total count.

The other question we got in has to do with the accelerating spending volumes that you talked about at the beginning. And the question here is that your update is very bullish on the payments business, just looking to understand the piece parts of where that acceleration in spend is coming from.

Well, it's all categories other than travel, hospitality and entertainment, and a lot of services and some retail activity that you're very well aware of. So it really mirrors what we're seeing in the economy overall where people are spending, getting out after being in their homes for months and months, having both stimulus checks, unemployment opportunities and really excess savings that they didn't spend on things when they were not outside. So all those things are part of the spend activity that we're seeing increasing.

And then lastly from the audience -- oh, go ahead.

I was just going to say that -- and then you can look at the mix of where that spend is not necessarily by sector, but just by kind of product offering early and during the pandemic, debit card spend held up pretty well, and it's accelerated to some extent because of the government stimulus that consumers have and had, et cetera. But also what's catching up to that is really credit card spend. So I think that, that mix will be helpful from our perspective. And then, of course, on the merchant acquiring side of the equation, which really kind of captures all sides, that has continued to accelerate too very nicely.

Okay. Great. Last question here on capital. I know we'll be hearing next week with regard to the SCB. But the question here is, does your outstanding buyback program of $3 billion, which you announced in December, reflect the Fed announcement to put in place the SCB starting in July?

So we put that in place almost a year ago now or 6 months ago, and it was really reflective of the data we had at that time and the capacity we had at that time. And we're on the path to continuing that. In the first quarter, we had about 1/4 of it utilized, and we'll continue to look at it. The SCB does allow a lot of additional flexibility. And just to remind you, so we're sitting at a 9.9% capital ratio right now. We have a lot of additional capital to distribute. Our first choice would always be internal investment opportunity. But then our second priority would be the dividend; and thirdly, buybacks. And as we think about our total capital distribution, we tried to range in that 65% to 85%, Betsy, with the emphasis on the dividend versus the buyback.

But with the capital rate ratio that you mentioned, well above your, not only regulatory, but your own most likely Board-level requirements. You do have an opportunity to potentially buy back in excess of that long-term 60% to 85%?

We do, and we are looking at it. You used the term long term, and that's the right way to think about it. So we will continue. We're at 9.9%. We've articulated a range of 8.5% to 9%, 9% sort of where we've been operating under. And we would continue to expect to migrate to that level over time. And as you said, SCB gives you a lot of flexibility in how you distribute capital and the timing that you distribute it.

Great. Well, we look forward to that announcement. And in the meantime, I hope you have a great rest of your day, and thank you so much for joining me at this conference virtually, and we look forward to next year, live and in person.

Thanks, Betsy.

Thanks, Betsy. Have a great day.

All right. Thank you.