Wells Fargo & Company (WFC) Earnings Call Transcript & Summary

Good morning, everybody. So welcome to day 2 of the UBS Financial Services Conference. Up here with me, we have Wells Fargo CFO, Mike Santomassimo. Welcome.

Great. Thanks for having me.

Absolutely. We were actually just, out there while getting Mike, talking about the first 22 days of the new administration. Maybe talk to us about, have you seen a notable shift in business sentiment? And has that translated at all into activity?

Well, I think as you look at the election, right after the election and sort of into the -- into where we are now, I think there's certainly this optimism that the administration is going to be much more pro-growth, pro-business, remove a lot of the obstacles that may get in the way of growing the economy, emerging businesses, a whole bunch of different activity. And I think that optimism, it's still there. And I think you've seen it in the engagement with clients. You've seen it in the dialogue. You've seen it in a lot of clients now considering doing things that, just a year ago, they probably wouldn't have done. And so I think that's really, really good. As you said, we're 22 days into it, and I think there's still some uncertainty in terms of where a lot of the policy may go across in the near term. And so I think that is putting a little bit of caution into actually pulling the trigger in terms of doing a deal or some of the activity that's there. But I think you sort of have to look a little bit past the first couple of days, a couple of weeks, and we still expect to see that momentum build throughout the year. The pipelines that we have across many of the businesses, very strong. The dialogue, like I said, is very strong. And then I think importantly, we come into this environment with many -- most customers really in really good shape. So they're positioned to do things that they -- a couple of years ago, they would have had to think twice about. And so on the consumer and the commercial side, everything feels like it's set up to really see that translate into more activity. But I think it's going to take a little time for that to really translate into people actually doing things. And others are saying this, too. It takes just time to -- if you're going to do an M&A transaction, you don't think about it on Friday and announce it on Tuesday, right? These things take time to kind of get through in a reasonable way. And I think -- but I think we do expect to see that come as we go throughout the year.

So let me double-click on your comments about the capital markets pipeline, and let's just talk more broadly about capital markets at Wells. I think it's not a surprise for the folks that know you with your big book of corporate customers that you have really honed in on this business. I think it's caught sort of maybe some generalists off guard and think of you as old Wells. So maybe talk a little bit about your efforts in terms of building out the investment banking and markets business. And what are the mile markers that you look at, whether it's league tables or anything else, in terms of where you want to be in a few years' time?

Yes. Look, we've had a corporate and investment bank for a very long time across the business. But we never really talked about it until about 4 years ago, where we changed our segment reporting. We've -- internally and externally, we recognized the opportunity that we had to really grow that business and started to invest in it like we were doing across many of the other business. And we're very happy and really proud of what the team has done so far in a relatively short amount of time as you look at the span of some of these businesses. In the investment banking business, we hired new leaders a few years ago to grow that. We've added dozens of people across different coverage verticals and sectors. We've continued to invest in the product capabilities across equity and debt capital markets as well as sort of the M&A expertise that we need that really help drive some of the deal activity that's there. And the good news is we're getting people from really everywhere. We've been very happy with our ability to recruit really good people, and it just takes some time for them to get in seat and then become more productive. And so I think that's just a matter of time as you sort of begin to see more activity across the industry. And we have a new leader there across the corporate investment bank, too, Fernando Rivas, who's also helping drive some of that activity there. And I think what you'll start to see come out of that business is just very methodical growth in market share. It's not something where you double your market share in a quarter or 2, right? It just takes some time to go through that. And we've added dozens and dozens of senior people across the different areas over the last few years, and we're going to continue to invest. And it's really important that we do that in the right way. We've seen, over time, lots of people try to grow these businesses and not work out so well. And so we've been very thoughtful about the type of people, they have to fit into the culture, the risk appetite that we have. And I think we're happy with what we've seen so far, and I think that will continue. On the market side, it's somewhat similar. We've had many of these businesses for a very long time. But again, they didn't really get the right focus. And so we've just been investing in people, a lot of upgrades, some ads and then investing in a lot of the technology across the different asset classes. And it's just been this slow sort of growth across many of them. And in pretty much every single asset class, we've grown share over the last 2 or 3 years. I like to use FX as sort of a good example because it's just an easy one to illustrate things. 5, 6 years ago, we generally only did FX for corporate payment flows that came out of our commercial or corporate and investment banking clients. And then we had to buy liquidity from other providers across the street. So we've built the capability to add institutional flow into the mix. And then we've just been methodically adding clients. And now we're at the point where that's a bit of a hockey stick in terms of adding the clients and onboarding them, and we should see years of growth from that business. And it's balance sheet friendly. It's not super intensive from a financial resource point of view. And so all that stuff makes sense. And each of the product -- other product areas are similar. And then when you put a big wrapper around it, one of the things that the company 5, 10 years ago was very proud of is you had all these like individual businesses that we're trying to optimize themselves. So we said, okay, look, we really have to get leverage out of all of the lending we provide and all of the other things we do for these customers. And so we've had this focus on -- and particularly in the corporate and investment bank, we've had this focus to make sure if we're lending in the Commercial Real Estate business, we're getting markets business or we're in the investment banking flow. And I think you're starting to really see that come through, where many of our biggest customers just wouldn't have thought about us that way, 3, 4, 5 years ago, and you're seeing that build momentum as we go. And then the last piece is really the commercial bank, where it just wasn't a focus for the company to do the markets business, FX rates and that type of thing, or the investment banking business for the commercial banking customers. We have a really great share. We've got a really great -- a really strong commercial banking business. And so we've just been putting that focus there. And I think we're starting to see some growth there as well as you look across that client base. And so I think as we go, it will be more of the same for the next number of years as we just systematically add people, systematically sort of continue to invest in some of the underlying technology, and I think you'll start to see the share grow in a disciplined way over time.

So bringing it back to the nearer term, how has investment banking and market activity trended so far in the first quarter?

Yes. I mean everybody can see the same data we can in terms of the industry, right? So I think if you look at areas like M&A announced volume, that's down a little. If you look at equity capital markets, it's down a little. And then debt capital in some of the investment-grade side, it's up a little. And on the high-yield side or leveraged loan side, it's a little bit of a mixed bag. And so I would just keep in mind, it's 5 weeks, 6 weeks, 5.5 weeks, whatever it is, like it's -- I think it takes some time for the activity to build throughout the year. And I think going back to where we started, I think we still -- the sense of optimism and this wanting to kind of continue to invest and create more activity, I think will come. It just may take a little bit of time as we go throughout the year.

So Mike, I just wanted to shift maybe our conversation on the consumer. So your efforts in cards are newer clearly versus incumbents. So it's a little bit harder to read into your spend trends, right, because your base is different. So you saw a seasonal bump in the fourth quarter, but similar year-over-year trends in the fourth quarter as in the third quarter. And I guess the question here is -- and by the way, I'm asking that question because your peers saw an acceleration in spend in the fourth quarter. Have you noticed animal spirits, so to speak, filter the consumer spend at Wells?

Yes. I'll start with the last part and then come back to the broader points on the card business. But when you -- each of the peer businesses are just different. So they're hard to compare. Some are more travel-oriented, some different customer segments. And so you got to be a little careful to compare like in a short amount of time and look at that and draw any real conclusions from it. I think overall, the consumer has been quite strong still. And that activity that we're seeing across the card space or debit spend has actually been very consistent. We're not seeing it sort of accelerate one way or decelerate, categories move around or year-on-year growth rates change a little bit depending on sort of what's happening. But it's been quite resilient, quite consistent, and I think that's been the story now for a number of quarters. But when you look more broadly about the card business, again, we've been in the card business for a really long time. It just wasn't a very good business 5, 7 years ago. And so one of the first area -- this is one of the first areas when Charlie got here. One of the first areas that he focused on, right, which was we needed a new team. We didn't have competitive products. The service wasn't where it should be. And so we've, again, systematically gone through that business. Every product has been refreshed. We started launching the new products about 3.5 years ago with our Active Cash card. The cash back piece of the market is the largest piece of the card space. That product has actually been performing really well. We've seen good take-up on it. It's a very simple value proposition. And the credit performance has been quite good. The majority of those customers are still our in-house customers, not new to the bank customers, and that has continued as we sort of looked over the last couple of quarters. And then we've launched a number of products, including a small business card, just a couple of quarters ago. And we've continued to invest in the service, the credit decisioning, the fraud capabilities. And so all of that actually is performing quite well so far. And I think you'll see us continue to do that. And I think it shows you, when you have really good products, really simple value proposition and you continue to do marketing in the right way, then I think you get good uptake from it. And so I think you'll continue to see them.

So you mentioned something in your remarks, you said that most of your customers are not new to the bank. As you think about the marketing dollars that the big incumbent spend, JPMorgan, Capital One and they're going to spend more after they close Discover, American Express, could you remind us sort of what lane you're sort of planning to sort of stay in, in terms of your card business? Do you plan to continue to sell deeper into your current depositors and small business clients? Is that really the strategy here?

It's certainly part of the strategy. And again, it's hard to compare absolute dollars of spend just given the differences in the books. But I think when you look at the penetration that we have across our consumer business in the card space, we still have a lot more to do. It's not where it should be in terms of really making sure that we've got that done well. And then I think we'll continue to do more marketing. And as we've -- and we've done that more and more now over the last 3 years, where we get confidence in our ability to continue to grow using sort of digital channels or other ways. And I think we'll continue to do more and more of that. And I think what -- I think importantly, though, when you look at what we're doing in that space, we're not trying to do it by going down the credit spectrum. I think the credit box has been pretty disciplined and pretty tight across really all of the products there. And overall, the credit profile of the new accounts is better than what the back book looked like. And so that's another part of it is we got to be careful about you can get more growth by taking a lot more risk. That's not the strategy. And I think we've been really happy to see that. Again, you go back to a really good product and you get good positive selection when you do that.

Let's talk about Wells for a second. It's a segment that your peers without scale are really trying hard to build out. And just as a reminder for everyone, you have $2 trillion or $2.3 trillion in client assets and about 12,000 advisors. Now Barry Sommers joined from JPMorgan in 2020. Of course, this is the business that's particularly vulnerable to reputational issues. So maybe update us on where Wells is in terms of putting that behind it in terms of the reputational issue specifically in this business? And how do you think about Wells becoming more of a growth contributor beyond market performance?

Yes. Well, the opportunity there is big, and I think -- and I'll walk you through some of the ways we're going after it. But you're right, it was one of the businesses impacted most from some of the reputational issues that we had years ago, and we saw that through attrition of advisors that happened. You fast forward to where we are today, 5 years ago, we had leading attrition, like so very high attrition. Now we have industry-leading retention, right? So industry-leading -- the lowest attrition, we think, across the board. And that's really changed quite a bit. Some of that was putting some of the reputational issues behind us. We had the sales practice consent order go away earlier last year and a whole bunch of other things. And then a lot of it was focused that Barry and his team put on, on ensuring that we're -- we've got the right platform, the right products and the right capabilities for our advisors to be successful with their clients. On the opportunity side, there really -- there's 3 or 4 sort of channels that sort of -- that we're focused on. First is that core advisor market, which has been the hallmark for a lot of the big, including UBS, a lot of folks over time. That's an area that we -- when we look at our recruiting there, it's been really good. We feel like we're in front of any big team that moves across the industry now. We've been quite successful bringing on some of those over the last couple of years. And I think you'll continue to see us look to make that channel more productive, more banking products, more lending products, more alternatives and continue to see that go up. We also have an opportunity to do a better job servicing the affluent customers that we have in our consumer business. We've got a couple of thousand advisors sitting in our bank branches. And we're just in the very early days to see some of the early benefits of focusing on that. And these are customers that have roughly $250,000 and above. And if we can do a better job advising them on their investment side, it generally brings a lot more banking business with it, too, either deposits or lending. And so I think that will be an area that you'll see more and more growth come out of. And again, we're in early days in terms of the benefits, but you're starting to see that really pick up in a more meaningful way. The other piece which I think is a bit unique to us is the independent advisor channel. Again, we've had this business for a while. It was always a bit of an outlet for our advisors that were in the kind of that core advisor channel. And now we're starting to recruit into that channel. It's the fastest-growing piece of the wealth management business in terms of advisors being independent now. It leverages most of the -- really all of the platform that we build for the other channels and so the marginal cost is pretty small. And so you're able to keep the folks that are moving out of our channel and put them in there, and they're able to recruit others coming in from other firms. And I think that will be an area that we'll continue to focus on. And we're just seeing some of those early recruits that we've added get onto the platform, and I think you'll see that grow in a much more meaningful way. The last piece is sort of the digital channels, which is sort of a little bit less of a primary focus for us, but that will complement some of the other things we do across those advisor-led channels.

I just wanted to follow up there. The independent channel does tend to be very attractive to advisors that are a little bit more in the spectrum of affluent to the low end of high net worth, right? In terms of the core advisor channel or the traditional wirehouse channel, given the access to the calendar, access to alternatives and the more ability to sell the whole bank, will you be looking to recruit more heavily on the traditional wirehouse side as well? It seems like the independent side is -- self-recruiting is a strong word, but it seems like there's a lot of momentum without a lot of significant investment.

Yes. No, I think in the core advisory channel, yes, I mean, that's a huge focus for us from a recruiting perspective. And I think all of our managers across the country, across the hundreds of offices that we have, that's a big part of how they're evaluated every year in terms of the recruiting that we can do across those channels. And again, we're seeing really good traction over the last couple of years, and I think that should hopefully continue and I think we're off to a decent start so far this year.

So it's been almost 20 minutes, and we're just touching on risk and controls, I think, which is a good sign. So on this topic, I know it's difficult for you to communicate with investors where your progress stands with regulatory deliverables. So that said, what public data points can you steer investors towards that could help measure progress? And are there any anecdotes that you can share to help us sort of shape where you are from a progression standpoint?

Yes. I mean look, I think it is hard. We appreciate that it's hard sometimes for us to show the progress. I think in the last couple of weeks, we've had 3 consent orders get terminated. So that's obviously the easiest way to show the progress, is to see those consent orders go away. So hopefully, that's a good indicator. And I think I go back to like what we've been saying sort of consistently now for years, right? We, as an operating committee, like this continues to be the most important thing. We've got to get through it all, and we're committed to do that. And we're very confident in our ability to kind of close this stuff out. Every week, we start our conversations on like where we are, what's going well, what's not, how do you make sure it all sort of moves forward at the right pace. And so the disciplines are the same disciplines we've had now for the last 4-plus years. And so I think if you saw that, that would build confidence. I think internally, we can see a lot of the things that -- we can see the benefits of a lot of the things we're doing through the operating metrics that we look at, whether it's operating losses, controls, growth, you can go through a whole bunch of dashboards that we look at each week and sometimes daily, to see some of that progress come through. And it's just a matter of now sticking with it to sort of finish off. And ultimately, you'll see it in -- we disclose our operating losses and so you'll see that come through a more sustainably sort of lower operating loss number over time. But I think we feel really confident about our ability to do that. And hopefully, the last couple of weeks is just another piece -- hopefully, that builds a little confidence with you to sort of see that we're making the progress that we say we're making.

And just as a quick reminder for the audience, although there's apparently a Bloomberg function to easily flip this up.

Oh, is there?

Yes. How many consent orders do you have left? And what do the work streams look like to resolve those?

That's -- I didn't realize there was a Bloomberg function. The -- look, we have 5 left. We've closed 9 since 2019. And I think we'll -- we're working with the right sense of urgency around that.

Great. So on expenses, the walk that you provided on your outlook this year is very helpful, and you identified $2.4 billion of efficiency initiatives. At this point, how much of the savings is from risk and control-related projects versus, let's call it, continuous improvement? And as we think about mile markers, like lifting the asset cap or getting rid of those 5 remaining consent orders, do you expect like the contribution from efficiency initiatives to increase? Does that bar increase? Or is that some of that savings already contemplated in that $2.4 billion?

Yes. I mean, look, the vast majority of what we've done over the last 4 years -- and we've delivered about $12 billion of efficiency saves over the last number of years. And really, the vast majority of that is just a basic sort of like hygiene across the whole company. Some of that is headcount coming down, and you can kind of see that coming down pretty meaningfully off the peak from 2020. It's areas like real estate, automation and tech, duplication going away. There's -- really every part of the company has contributed to it. We haven't focused on optimizing the risk and control work. I think in the Charlie shareholder letter the last couple of years, he sort of said we've added about 10,000 people, a couple of billion dollars of spend. That's not an area that we've spent a lot of time trying to optimize. As you finish some of the work, some of the onetime expenses, project expenses fall away, but there's still an opportunity at some point to -- in the future to optimize that more. And I think we'll come -- as we sort of finish more of this, we'll come back to that. But that will be -- that will take a little time to do. And so the $2.4 billion is really more of just sort of the driving efficiency across like every part of the company. And I know it's a bit of a cliche, but like as you sort of peel back the onion...

You find more.

It really does work that way, right? Like you can't -- it's a big company, you got to be really thoughtful and careful about how you go about this work. And what's most important here is you actually want to build it into the DNA of how the place operates. Like we can create lots of projects to cut costs and do other things, but what we want is the management teams of every one of the businesses at all levels of the company to come in every day, saying like, how do I make the place more efficient. Because, by the way, like the saving money part is a good benefit. But in most cases, it's actually going to improve how we serve customers. It's going to make decisions faster. It's going to make the engagement better. It's going to make the technology better. And so there's a whole bunch of benefits that are actually going to drive more value over time than just like the cost saving. And then it allows us to really invest more in the business, right? So we've invested a big chunk of that $12 billion back into the businesses by adding people, building better technology and really across every single one of the businesses. And I think those investments will pay off over a very long period of time.

So I think investors have appreciated that you give your outlook on an absolute expense basis. At what point does Wells Fargo turn more into an efficiency ratio story?

Yes. I think you got to be a little careful like from where we've come on efficiency ratio, right? Because just because revenue goes up a little, it doesn't mean you got more efficient, right? And I think as you look at where we've been focused, it's really driving like real efficiency. It's not making the ratio better. It's like that's a bit of an outcome, not a goal right now. And I think the -- we really want to make sure every part of the company is looking at how many people do we have doing function X over here? And why is that? Why is that the right number? How do we automate it? Like how do we bring better technology into there? And I think you can get a little bit lost into thinking you're doing a better job than you are if you focus only on the efficiency ratio. At some point, will we -- will it switch? Probably. But I think we still have more to do just driving like real discipline there. And so we'll see as we go.

On the theme of automation, AI has clearly been a big theme. How -- are there any use cases for AI right now at Wells Fargo? And as you look forward, what are the best use cases for AI at Wells?

Yes. I mean, look, you can't leave a conversation these days without talking about AI. And I think you have to distinguish between traditional AI and generative AI. On the traditional AI side, banks like us have been using it for a long period of time. On the generative AI side, I'm really excited about what opportunities it presents for us. It's still early to see it sort of really get -- have a big impact. It's evolving really, really fast. But it's going to have an impact on almost every part of the company at some point. I think in the early days, you'll see it focus more on internal use cases. If you're a teller or a branch banker, you may have like hundreds of different policies and procedures to sort of deal with, it can make that much simpler, much faster, much more intuitive, and we've rolled out capabilities in some of our branches to do that for those folks. In a call center, today, a call center rep's got to listen to the person and do the call, type a bunch of stuff into a system and document what happened. AI will effectively do most of that for you at some point in the future. It will transcribe the call. It will put it into the system. It'll do searches for different aspects that you wanted to. That's a real use case that will sort of come to bear pretty quickly. But it will have an impact on pretty much every part of the company at some point. And I think we're -- we've got dozens and dozens of different use cases that are being piloted in some form across the company. Including in functions like finance, it will change -- it will do a lot of things for you that are manual today in terms of understanding things. It will read analyst reports at some point, so I don't have to. Tell me what's important in them and compare them. And is Erika's tone different than like somebody else's tone? And like what's -- and so it will do a lot of that stuff for you and make things much more efficient.

If AI didn't write the report for me.

That's true. It might at some -- maybe it did.

Right. So let's talk about net interest income. And again, fun to be 30 minutes in and just diving into net interest income, which, as a reminder to the audience, you're looking for it to be 1% to 3% higher than 2024. How should we think about overall deposit growth this year? And could noninterest-bearing deposit growth resume in '25 presuming that we're pretty close to the neutral rate?

Look, I think I think the good news on deposits, right, is that you've really seen the stabilization of noninterest-bearing and interest-bearing continue. And I think that's -- we still expect that to be pretty stable as we go through this year. Obviously, depending on where things trend from here, I think that -- but that should still be sort of the good base case. And embedded in sort of our guidance, we do think you'll see a little bit of growth in deposits across the board. Some of that will still be in CDs and other interest-bearing deposits. Hopefully, if the economy continues to be strong and we continue to do a better job at acquiring new customers, you'll also see some noninterest-bearing growth there as well. There's some nuances to the corporate side, where as interest rates come down, you'll see some noninterest-bearing go up potentially because you have earnings credit rates. So I think there's a lot of factors that go into that. But I think it's been good to see over the last couple of quarters that deposits have been performing probably better than people would have expected as you sort of come through this and this cycle and you start to see rates come down a little at least. And we'll see as we go through the year, but we do expect it to still be pretty constructive there.

It's been a while since the neutral rate has not been 0 for a lot of investors. How should we think about your natural cost of deposits in the event that, again, the neutral rate is close to 4%?

Well, to me, it feels forever ago that rates are at 0. But look, I think we'll see, right? I think on the -- it's exactly what you would expect, right, probably. When you look at the commercial side, you'll have competitive sort of pricing on deposits that generally will be fine relative to what you're making on the asset side. And if the last couple of years are any indicator on the consumer side, it will work out fine. Like standard pricing didn't really move a lot, you saw some CDs and savings promos sort of be part of that mix, and I think we'll see. It's a really hard kind of what if, right, depending -- you really have to see what else is happening across the macro backdrop to know how to feel about where it's going to go. But...

On the other side of that, could we unpack your expectations for CIB markets and banking loans for the year? And maybe also touch on auto and credit card growth.

Yes. On the consumer side, we don't really expect that much to happen in aggregate. You'll see mortgages come down a little. You'll see cards go up and you'll see a little bit of growth in auto, potentially. Part of that is we signed an agreement with Volkswagen and Audi that will become operational at some point in the next number of months. And I think it starts to go live quite in the next month or 2, and then it sort of grows from there. And so you'll see. But that probably nets out in aggregate across the consumer side to be not a lot. And then on the commercial side, we generally expect to see a little bit more growth in the second half of the year. And I think that goes back to what we were talking about in the beginning, right? If the environment still remains constructive, it's still -- people still have this confidence in sort of the path that we're on, then I think you'll see more people invest and more people build inventories because there's more demand there potentially if the economy is growing. And I think hopefully, you'll see that as you go through. But I think in aggregate, it's still relatively modest, I think, from -- when you look at fourth quarter to fourth quarter.

Final question on NII. So based on the drivers that you laid out on that earnings slide, it suggests to us that '25 is clearly a year of net interest margin, or NIM, optimization versus balance sheet growth. How should investors think about the NII trajectory from here and the exit rate in 4Q '25, provided that we're in the ballpark of Fed funds and 10-year that you laid out on that slide?

Yes. Well, I mean, you know me well enough, Erika, that there's no chance I'm going to talk about the exit rate.

I tried.

But look, I think if things -- if our guidance, if it sort of plays out roughly sort of the way our guidance would suggest, right, that will be somewhat constructive, right, and so -- as you look at where it goes from there. But I think there's a long way to go between here and the end of the year.

Great. So deregulation has clearly been a theme since the election. So talk to us about how the new administration might impact future capital and liquidity regulations, and more importantly, supervisory practices?

Yes. I mean, certainly, the tone has changed quite a bit, it feels, in a lot of ways, and I'll sort of try to unpack it quickly. On the capital side, there's a few things happening. You have stress testing or CCAR changing. The Fed put out a statement in December. The industry has been engaged, obviously, with a lawsuit and other engagement with the Fed on that topic. And so we do expect to see some changes happen on the stress testing side. There's some minor nuances for this year's test. But so it will be more -- we're expecting to see some more meaningful discussion of sort of what they're proposing as we go over the coming months. On just the broader capital rule set in Basel III, I mean, the direction it should head, it should be better than what I think was under the old regime. It feels like that will be constructive. I think the industry still thinks we should try to finalize Basel III. I think that puts some certainty around sort of how we should manage the balance sheets. And I think that will be a good thing if we can kind of get that finalized. But I think that's going to take some time given some of the key regulators were just put in seat in the last like 24 hours, 48 hours. And so I do think that will take a bit of time. I don't expect a bunch of changes on liquidity anytime soon, but I do think that, generally speaking, the course of direction should be pretty constructive. On the supervisory side, I think really what we hope there is just that the focus is on material risk. And I think that seems like that will be the case based on what you see. And I think -- but our relationships and our dialogue with a lot -- all the staff that we deal with every day is quite constructive, and we remain very engaged with them.

So you've been buying back about $3.5 billion to $4 billion a quarter in the second half of 2024, how should we think about the buyback pace leading up to DFAST 2025? And how much does a lower SCB result impact the pacing, if you do receive a SCB?

Well, I think, look, our -- we've been really disciplined about not talking about pacing, right, because it really -- the process we go through has been pretty consistent for years now. Like you really have to start with like what do you think the risks are out there, what's the opportunity set over multiple quarters in terms of where you're going to deploy capital. And then you're going to look at all the -- where rates are going and all the other impact that OCI might have, and then think of buybacks as a bit of a toggle for where we want to manage capital. And what we've said is that we'll keep capital out. We don't need to grow it from where we are today in terms of our CET1 ratio. And then we'll see what that gives us in terms of buybacks each quarter and we'll go from there. But certainly, a lower SCB and more certainty around where capital levels overall go give you some confidence, too.

So to the audience, before I ask my last question, just as a reminder, you could send me a question for Mike through the [ QR Q ] code, and I'll see it in this iPad. And we also have mic capabilities, if you prefer the old-fashioned way. So last question for me. The Street has you reaching a 15% ROTCE by 2026. Is that the right timing? And can you accomplish this without the asset cap being lifted?

Yes. Well, before I answer that, I'll go back to maybe on the expense side, just a minor near-term point. We do have seasonal expenses in the first quarter that not everybody is sort of like quite models for some reason, even though we tell you, everybody about it. But so I would just keep that in mind for modeling on expenses. On returns, look, I think we started the journey at 8%. We said we would get to 10%. We then said 15%. I think reasonable people can have a different view on exactly when you get there. The good news is that we're not that far off, right, in terms of when you look at the results coming out of last year. And I think our focus is just to continue to execute on all the things we said we're going to do. And whether it's spend or -- we'll see ultimately. But I think the good news is we're getting much closer, and we feel very confident to get there. And then once we get there, we'll set expectations from there.

Great. So we have one minute left. If anybody have any questions in the audience that they'd like the mic for? All right. Thank you so much.

Thank you.

Thanks, Mike.