Great. Welcome to the third and final day of Barclays' 21st Annual Global Financial Services Conference. We do got another full lineup of banks in this room. Please plan and join us at noon for lunch. We'll get all the key analysts to do a wrap-up panel, and we'll go through some additional audience response questions and kind of review how we did last year. Very pleased to have kicking off this morning's session, Fifth Third. If we could put up the first ARS question, you know, similar to all the other companies we've had, and we'll tabulate these at the end. But from the company, we have Tim Spence, our CEO, Jamie Leonard, Chief Financial Officer. Tim's going to kick it off with some remarks, and then we'll open up to Q&A.
Thank you, Jason. We appreciate you giving the guys from the Midwest, the industrial heartland, the early morning spot. We published a slide presentation last night on our investor relations page, which I will reference throughout my prepared remarks. And after that, Jamie and I'll be happy to answer questions, including Jason's highly anticipated third quarter guidance update question. And I know it'll be coming. At Fifth Third, we believe that the best banks differentiate themselves not by how they perform in benign environments, but rather by how they navigate challenging markets and change. Our guiding principles of stability, profitability, and then growth will serve us well as we adapt to new liquidity and capital regulations and continue to navigate uncertainty in the economic interest rate outlook. Our focus on stability is evident in how we performed through March Madness.
At the end of the second quarter, we were number one in our peer group and one of only two large cap banks to grow deposits organically compared to the year-ago quarter. Stability is also reflected in how we have maintained credit discipline in Commercial Real Estate, with the lowest CRE concentration and the lowest CRE growth among peers. Our focus on profitability is evident in our balance sheet management and our culture of productivity and expense discipline. We have managed the lowest expense growth among peers over multiple years, and we are achieving one of the highest PPNR per employee ratios of all large cap banks. We are producing a record NII level in 2023, even with one of the most cautious outlooks heading into the year. We choose to grow where returns are strong and competitive, differentiation is sustainable.
We have focused on net new organic primary customer relationships in both Consumer and Commercial for many years, on density over scope in our distribution and geographic footprint, and on investments in Fintech as a product differentiator, and not just as a delivery channel. We delivered a value to you by generating consistent, high-quality earnings and believe our approach will drive outperformance over the long term. Moving to slide 4. In the third day of this conference, you don't need me to tell you that regulatory changes are coming for large banks. As a matter of principle, we believe in the value of adapting to change quickly. Because of our business model, earnings power, and balance sheet strength, the changes required should be more modest for us than for many others.
Our intent is to put them behind us as much as possible this year so that we can return to growth and focus on improving profitability under the new rules. Fifth Third starts the journey of building additional liquidity with one of the lowest loan-to-deposit ratios among any regional bank, which is a byproduct of our peer-leading commercial treasury management business and our strong retail deposit base. The structure of our securities portfolio, and specifically our preference for bullet and locked out structures and one of the lowest allocations to mortgage pass-throughs, provides extension protection in a higher-for-longer scenario that most banks don't have. As a result, our securities portfolio duration has declined more than most peers over the last year. We expect the industry will hold a higher allocation of funding in long-term debt.
Fifth Third was the first Category IV bank to access the debt markets since March Madness, issuing $1.25 billion in July. We are told this was the most oversubscribed single tranche issuance in regional bank history. We've taken other balance sheet management actions as part of our RWA diet exercise, which we have previously discussed, including de-emphasizing certain corporate banking relationships, trimming origination volumes in select consumer channels, and exiting small non-core lending businesses. This exercise represents a modest 3% of RWA. We will complete it before the end of this year and expect to return to loan growth next year. Moving to slide 5. Our recent performance highlights the strength of our deposit franchise and our ability to efficiently fund loan growth. We were the only bank among our peers to succeed in growing deposits faster than loans on a year-over-year basis.
Our ability to consistently add new quality relationships in our retail and commercial franchise is what drives that deposit growth. As a result, we have the flexibility to proficiently manage our funding costs. Our second quarter interest-bearing liability costs, compared to a year ago, increased 17 basis points less than the peer median. We are managing the balance sheet holistically for long-term outperformance rather than on a quarter-to-quarter basis. As we look ahead, we will continue building capital and liquidity in the anticipation of the rule changes. We expect to accrete 25+ basis points of CET1 per quarter until the capital rules are finalized and until we can establish new targets. We also expect to have approximately $15 billion in cash and be compliant with the Category I full LCR by the end of this month.
We also expect to issue around $5 billion-$6 billion in additional long-term debt over the next several years to satisfy regulatory requirements. The use of proceeds from these issuances should mitigate most of the impact. We've been consistent in our, in the higher-for-longer rate scenario, and our balance sheet is positioned accordingly. Assuming static rates, we expect NIM to expand from the fourth quarter of 2023 to the fourth quarter of 2024. This outlook anticipates continued deposit repricing pressures and some modest DDA migration, even with the Fed pause. We expect the benefit from the tailwind of fixed rate loan origination volumes from our Auto, Dividend, and Provide businesses at significantly higher yields than our current portfolio. If the Fed continues raising interest rates, we expect to be in line with peers with respect to deposit repricing pressures.
If anything, our enhanced deposit and liquidity position should give us some flexibility to navigate in that environment. Slide 6. Our deposit franchise is built on our multi-year investments in our branch network, our products and services, and our ability to leverage data and analytics. These investments are hard to replicate, and we expect to sustain our advantages over peers as we continue to invest in the future. Our Southeast branch de novo strategy has led to significant market share gains, which we expect will be reflected in the forthcoming FDIC Summary of Deposits report. Fifth Third is now the sixth largest bank in our Southeast markets, having added more than 80 branches since 2017, second only to Chase in that period. We will continue to add 30-35 new branches per year in our focus markets.
At this pace, we would have closer to 50% of our total branch footprint in the Southeast markets in 5 years. Our Momentum Banking platform and TM services address our Consumer and Commercial clients' everyday banking needs. In a world where software is the product, it's critical to continually improve your offerings. Momentum was launched in 2021 and was the first fintech-equivalent everyday banking solution among traditional banks. Shortly thereafter, we established new products and features approximately every six months. Our latest enhancements include a simplified account switching experience and Smart Shield, a proprietary suite of services designed to help customers protect against fraud. In our treasury management business, we are known for our software-enabled solutions that digitize and automate the order-to-cash and procure-to-pay cycles in our managed services business.
We recently announced the expansion of Newline, our embedded payments business, focusing on helping clients build, launch, and scale compliant payment products. We offer the full suite of payment types in Newline, including debit, ACH, real-time payments, and wire, and allow clients to customize through APIs with functionality for more than 70 different product features. The business is in a large addressable market and has grown rapidly over the past several years. We're excited about its potential going forward. We've heavily invested in decision science capabilities over the past decade to enhance internal decision-making and provide a more tailored customer experience. Our customer recommendation engine shapes customer interactions across our channels and is powered by over 75 artificial narrow intelligence algorithms. Additionally, our chatbot, Jeanie, is powered by a proprietary patent-pending NLU to facilitate over 200,000 customer conversations per month.
Jeanie is now able to understand over 30,000 phrases with an accuracy rate of greater than 90%. Slide 7 highlights a unique opportunity for Fifth Third. Given leadership position among peers in lending to the manufacturing sector, we stand to benefit from the resurgence in domestic manufacturing that is occurring disproportionately in our footprint. The map on the left shows 60% of all public and private investments recently announced are within Fifth Third footprint. These investments should provide strong support for both the Midwest and Southeast economies, given the commercial demand they generate, along with the associated labor market benefits. Slide 8 highlights Fifth Third's consistent expense management and productivity discipline.
Since 2019, we have the lowest annual expense growth among peers at below 2%, and we have the second highest PPNR per FTE, despite ongoing investments in the franchise, reflecting our culture of hard work and accountability. As many of you know, we are not in the habit of announcing large-scale expense programs every year. Rather, we prefer continuous investment and expense reduction initiatives to be paired versus time-bound programs. Slide 9 highlights the strength and stability of our fee-based businesses. Industry-wide, fee income over the past 2 years has been volatile, driven by the boom-bust cycle in investment banking, large-scale corrections to reduce punitive consumer overdraft fees, and market-related headwinds affecting the mortgage business. We have been focused for several years on growing a diverse portfolio of fee businesses that would perform well in different economic environments.
As a result, Fifth Third stands out favorably with respect to fees as a percentage of revenue, combined with Fifth Third having the lowest fee volatility over the past two years. In summary, Fifth Third is well positioned to navigate the changing regulatory environment.
We have balanced, growing revenue sources. We have a strong balance sheet. We have a maintained expense discipline while continuing to invest for long-term outperformance. We have established a track record of making proactive decisions to improve the business, and we pride ourselves on our transparency with respect to risks, uncertainties, and opportunities for the future. Lastly, given that many investors are focused on this conference, some may not have seen the press release we issued on Monday, where our board authorized a 6% increase in our quarterly common dividend. This marks the eighth consecutive year that Fifth Third has raised its dividend, reflecting our balance sheet resiliency and strong earnings power. Our capital objectives remain unchanged. We continue to balance three capital priorities, continuing to build capital at an accelerated pace, supporting a strong dividend, and supporting clients to drive organic growth.
And as we mentioned in July, we will continue to pause on share repurchases until new capital targets are established. With that, Jamie and I are happy to take your third quarter guidance update.
Well, I noticed we didn't get the first ARS question, you know, in time to answer. So if you'll put that back up. And, you know, I had all these strategic questions that I wanted to go through, but Jamie, you beat me up. So why don't we start with any kind of update to the outlook?
Okay, well, that backfired. We are happy with the strategies and would love to dive a little bit deeper into those, but in terms of getting the quarterly update out of the way, we're having a very nice third quarter and expect a very strong finish to the year. From a balance sheet perspective, loans are squarely in the middle of the range that we guided to down, call it 1.5%. And credit costs are squarely in the middle of the range. There may be a little bit of interplay between charge-offs and ACL, but at the end of the day, squarely in the middle of the range. And then, every category on the income statement will be at the better end of the guide.
So NII is better, fees are better, expenses are better, but, but I would reiterate the guidance. We're in the range, but at the better end of the range. And then part of the driver of the improvement is the very strong deposit growth. We guided, deposits stable up 1%. Currently, we are up 3%, 2.5% on a core deposit basis, which is really what pays the bills, and then the other half point is an interplay between, funding and jumbo CDs. So very strong customer acquisition, continued growth in households, along with the strong treasury management business is delivering, outpaced deposit growth, which obviously has a little bit of benefit to NII in the current quarter, as well as, down the road. So again, guidance very much intact.
Things are definitely trending better, and we feel really good about what we've accomplished.
Okay, so some stuff to unpack there. So just to be clear, so net interest income, you said, guided to down 2-3, so it'd be closer to 2. The income, you said, down 3-4, it'd be closer to 3. And expenses, you said down 1-2, it'll be closer to-
Down one.
Closer to down 1.
Always better.
Um-
Every metric is trending better.
Expenses down 1-2, he was saying.
Oh, yeah, yeah.
Yes. So closer to down 2.
Closer to down 2.
Yeah.
Okay, that's what I wanted to clear up. And then on charge-offs, you said kind of middle of the range, so you got a 35-45, so call it 40, give or take. And then you said interplay with the ACL. Maybe just extrapolate on that.
Yeah, that's probably getting the micrometer out. We still feel very good about the charge-off ratio, 35-45 basis points in the third quarter, trending then back down to 25-35 basis points in the fourth quarter. Now, I was just whether it's 41 basis points, 39 basis points. I know you're very specific, so we're squarely in the middle of the range. The ACL, we had previously given a range of $25 million-$75 million, squarely in the middle of that range, so.
Got it. You know, no good deed goes unpunished. You also have full-year guide. If I take my better three-year guide, three-quarter, third quarter guide, any kind of thoughts on the full year out?
Yeah, I think the full year will continue to trend favorably, given a very strong third quarter.
Look at that. And then maybe if we could just tell more on your deposit comments. So deposits sounds like during the quarter growth was better than expected, maybe mixed with a non-interest bearing, maybe a little bit better than expected, more core core deposits. Maybe just talk about in terms of more color in terms of where that's coming from, and if you just comment on the, you know, does that allow you to maybe price less?
Yeah. A little too early to tell in terms of the pricing power that that gives you, but certainly, over time, it ought to. In terms of where the growth is coming from, it's 2/3 Commercial, 1/3 Consumer. DDAs continue to trend down exactly as we had guided, so the DDA mix is down a couple of points, 29%-27%. Part of the reason for that decline and why that ratio is not a little better is we're actually growing the denominator, so it's diluting the DDA ratio. But overall, DDA trending exactly to the jump-off point we had guided to for the end of this year. And I do believe, as we had said in the July earnings call, our focus will be pulling down some of the deposit pricing to deliver a better cost outcome over time.
That probably shows up more in 2024 than 2023. But given the strong customer acquisition and deposit results, it certainly gives us a little bit of continued leverage there.
Yeah, we've tried to be consistent in the application of our operating philosophy, right? So we said earlier, we're a big believer that you have to embrace change early. So we were early to push out deposits. I can still remember questions we got in our second quarter earnings call last year, where people were asking why deposit declines at Fifth Third in the quarter were larger than in other places because we walked $10 billion in deposits out of the bank. We then worked faster to make the turn in terms of building defensively, right? And that is the basis for our having been number one in the peer group year-over-year in terms of growing deposits.
The reason you do that is then it provides you with the flexibility to back managing the rate volume trade-offs and the sort of leading edge of the demand elasticity curves a little bit more surgically than others at the end of the hiking cycle. I think we're well positioned to be able to moderate in the right way there.
And then I guess on the deposit growth, is this more kind of new customers to the bank? Is it customers that had deposits that kind of want to diversify now maybe don't need to diversify, or is it just kind of natural growth?
On the Retail side, it's definitely new customer acquisition because average balances continue on a downward trajectory. Not much, but, you know, call it down 1%, on average. So new customer acquisition, 3%, is overcoming the decline. On the Commercial side, combination of both. Certainly when you go on an RWA diet and, you know, you start to kick out some of the empty calories in your diet, then you do get responses from customers that, if they were a lower-term relationship, that they're now more inclined to bring deposits back to get relationships over the hurdle rate, and that provides a little bit of a tailwind. So Commercial's a little bit of both, and Consumer is more new customer acquisition.
I guess, you know, you, you mentioned RWA diet and in Tim's remarks, you talked about loan balances maybe, I guess, supposed to trough by the end of this year. Maybe just talk to in terms of, you know, where you kind of look—you know, kind of where you see kind of growth coming from looking out.
Yep.
Just kind of, you know, I think one of the takeaways from the conference so far has been, you know, deposits may be a little bit better than expected, loan growth may be a bit softer than anticipated. Just thoughts in terms of so much supply-driven, is I guess some of this dieting also demand-driven, given the economy is soft and borrowing costs are high?
Yeah. I mean, there's no question that demand has moderated, right, on the Commercial side in particular, and that's appropriate. Commercial clients are being careful, which is exactly the thing that you would want them to be doing. I think what is misunderstood about Fifth Third is the power of the loan origination engines we have, and in particular, as I mentioned in my prepared remarks, the fixed rate loan origination platforms, when you combine the Auto business, which we still very much believe in, and which is reaching the point when the capacity will have come out and the spreads will continue to widen, it will be quite an attractive business again. Yeah, combined then with Dividend and Provide.
So what has happened over the course of the past 18 months is as we came off the pedal in Auto, as we began to moderate growth in certain categories, as we were not getting the growth in Commercial Real Estate that other people were producing, it looked like Fifth Third's loan growth was just lower than the sectors, and it, and it was. It was a deliberate decision. But underneath the surface, the Provide business continues to perform very strongly. The Dividend business continues to perform very strongly. The Auto business will turn the corner. And the other thing that has been really exciting about the progress we've made in Commercial over the course of the past few years is we are setting records now every year on new quality relationship production out of the middle market.
Middle market high lending will actually grow quite nicely this year. It's just masked by the fact that the lending in the corporate banking sector is being pared back as part of the RWA diet, and that will be a nice source of momentum for us next year as well.
I guess the other comment you made, Tim, I'd like to maybe dig more deeper into is, you know, NIM expanding from 4Q 2023 to throughout 4Q 2024. So I guess when you're talking about, so, you know, I guess widely expected NIM to be down in Q3, Q4, you know, others, I guess, have not been as constructive on that front. Maybe kind of, you talked about kind of adding fixed rate loans. You know, there's this expectation that deposit costs will continue to creep higher, you know, despite maybe a little bit better growth in here. You know, just maybe talk to some of the drivers of that.
Yeah, and we agree with you on, deposit costs. I think we're one of the few banks that have been pretty early in our deposit beta guide and continue to think that, deposit costs drift following the last Fed rate cut for several quarters. So if July were to be the final rate cut, then by the end of this year, we'll be through the drift. The other factors on, NIM and NII, from a NIM perspective, we said we wanted to be full LCR compliant, by the end of September. We think that is definitely a fortified balance sheet at that point in time. And in order to do that, we're going to be holding $15 billion-$16 billion of excess cash, at the end, of September.
So what that means from a NIM perspective is that the full quarter average of that then in the fourth quarter creates a NIM drag and what ought to be a NIM trough in the fourth quarter on an average basis. And then, from an NII perspective, the RWA diet, while fairly modest, will be wrapped up by the end of the year, and then, loan growth will pick back up, although at a very modest rate, just given the environment, we continue to be cautious. So, given other day count, impacts on the first quarter, NII dollars probably trough in the first quarter of next year. So, most of this is by design, it's intentional, but it's to better position the balance sheet for the brave new world that we're heading into.
Got it. I guess, speaking of the brave new world, maybe we'll put up the next ARS question, and I'm going to jump ahead here to make sure we get this in. But obviously, you know, we spent the summer reading 1,100 pages on this Basel III proposal. You guys have clearly been taking actions in front of that. Jamie, talk to kind of the impact of, you know, how you see this playing out and how you see it impacting Fifth Third.
I'll start.
Yeah, I was going to say-- There you go. I was going to-- you want your vote first?
Right.
Okay.
In terms of what it means for Fifth Third, the impact is very manageable. Our number is roughly a 5%, so it's, the audience is correct. It's, you know, halfway between one and two, is the RWA impact. And that impact does not impact us until July of 2028 in that last step up of the phase-in. So plenty of time to manage through, the RWA impact. And then obviously, the AOCI impact on AFS is the much bigger impact. And as Tim mentioned in his prepared remarks, we feel very good about the structure and the portfolio that we will roll down. Those losses will continue to mitigate as securities mature. There's not the extension risk that others have.
So managing through the AFS, while it's a sizable number today, we expect that by the time we get to July of 2028 to be in the 115-120 basis point range from a static rates perspective. So for us, you know, that's why we're accreting capital 25 basis points a quarter. We'll get through it. Shifting away from Fifth Third and more to the public policy of this, you know, we'll submit our comment letter, and it will be focused more on what ought to be more prudent capital and liquidity risk management for the industry. And in particular, as we've said before, the HTM and AFS designations just simply don't make sense to us from a public policy perspective. Clearly, every CFO, every treasurer, every CEO would rather have securities in AFS than HTM.
If you go back before the Great Financial Crisis, you see that preference in that there's only 1% of securities in HTM for the banks above $100 billion. Today, that number is 55%. People have reacted to the rules as Cat 1s and Cat 2s were impacted by it. So you have to adapt. It just is not the right thing to do from managing a bank balance sheet, because that essentially becomes trapped liquidity in the event of a crisis. The only way to access that liquidity is through the repo market, and in a stress environment, odds are there's not going to be the repo capacity to take care of everybody's liquidity needs. So we just think from a public policy perspective, it's a flawed rule. Our comment will address that.
Probably won't matter, so we will just manage through it. And, if you can't beat them, join them and shorten our creation cycle into HTM and move on with life.
Yeah. The, we're hopeful that there will be a bipartisan consensus that emerges, on the capital rules attached to the housing industry. I just spend a fair amount of time out in our markets. I have yet to meet anybody who believes that housing is too affordable right now. And when you look at the impact of the interaction between the proposed capital rules and the liquidity rules, and the way that the industry will respond with regard to how it approaches buying mortgage-backed securities, it just doesn't appear to me to be constructive or in tune with what we're saying publicly about the importance of housing affordability, about promoting homeownership and segments of the population who historically haven't been homeowners and otherwise.
But beyond that, as Jamie said, we're preparing to implement the proposed rules as they stand, today. The playbook here is the same as it was, frankly, the last time that the capital regime was revised, right? So the operating deposits matter, right? They always have mattered. We just went through a 14 or 15-year period where their importance was masked in part by the rate environment and the abundance of liquidity that was out there. High fees to revenue matters, and keeping your overheads as a percentage of assets down matters. So when we think strategically about the way we're focused on growing the business.
Continued net new high-quality organic relationship generation, a continued focus on fee diversification, the particular emphasis on Wealth Management, Treasury Management, and the Capital Markets categories, and ongoing discipline on expenses, with this focus on trying to self-fund our investments year on year on year.
And then on the capital side, you used the phrase, you know, "until our new CET1 target is established." Just any thoughts how you go about kind of sizing what the new capital target would be in the new world?
It would help to have the final rule.
Right.
Start there.
You know, we're running the balance sheet, and we model the balance sheet at about an 8.5 CET1. We have a 50 basis point buffer that got us to our prior target of 9%. So you throw in, call it 50 basis points for RWA flow, random, that's five years down the road, and then managing to the AOCI, AFS, call it 125 basis points, five years down the road. You're in that 10.5-ish area, but then that gets reset down because of the denominator effect of all of this. So a lot of it comes down to how the environment plays out, how the rate environment plays out. You know, because our AOCI numbers are static rates, we could do better than that, we could do worse than that.
We need to see what the final rules are, but we're in, y ou know, we'll be getting to that ballpark pretty quickly, I think, of where we need to be.
And then on a, you know, on expenses, I guess you're, you know, you've done better than a good job on expenses the last several years. This quarter, it sounds like you got to the better end of the range, despite better than expected revenue performance. Yeah, maybe just talk about in terms of just how you think about that as you start planning the, you know, kind of 2024 budget process. You know, is kind of that low single digit type number kind of sustainable?
I like where consensus-
Yeah
- is for next year on expenses. My one caveat on the third quarter is the NQDC will create a little bit of noise on that number.
Right.
But other than that, you guys look through that as well. So, but yeah,
Absolutely.
Our goal, and what you should from Fifth Third is, for 2024, is lining up pretty nicely with where consensus is.
Then, I guess you've been one of the few banks to actually pursue non-bank acquisitions this year. There was kind of a slew in this more kind of fintech acquisitions a couple of years ago. You guys have kind of continued on that path. Others kind of seem to refrain. Maybe just talk to, you know, the thought process there, and is that something you look to continue to do?
Yeah, You know, I think at the moment, we're pretty focused on just integrating and scaling what we acquired. We have been consistent in the comments that we've made around the focus on taking advantage of the pullback in venture capital to find ways to enhance the Treasury Management business. We wanted more fixed rate loan origination, a better balance of Consumer to Commercial, more granularity, and Provide and Dividend address the balance and granularity points. The acquisitions we made of Rize and Big Data Healthcare were direct dead-on hits for what we have been trying to get done in terms of managed services and embedded payments in the Treasury Management businesses.
And particularly in the case of the last two, you know, we were able to pick them up at a point in time with really excellent products and the ability to demonstrate product-market fit and good reference clients. But they needed to be able to have the access to distribution in order to scale the businesses the way that the businesses had the potential to scale. So those, just integrating those, scaling those, getting the value out of them really is the focus at the moment, barring, you know, some unique, small tactical situation. But we're not going to be making large non-bank acquisitions, as I stated from a capital priorities perspective. We want to build the CET1 ratio, continue paying a strong dividend, again, dividend, and then fund organic growth.
And then maybe from a, you know, a credit quality perspective, appreciate that things are tracking in line with your guidance. It's kind of, I guess, you know, loan losses have kind of been better than expected for, I think, a lot of banks all year, other than kind of maybe one or two credits here and there for the industry. As you kind of, you know, look to your markets, talk to your customers, you know, obviously, office CRE, which I know is not a big thing for you, gets a lot of attention. But, you know, any other areas or pockets that you're focused on in terms of, you know, kind of potential degradation?
Yeah, the, it's the same categories of things that everybody has been talking about in Commercial, right? It's the city center, Commercial Real Estate offices, the hotels. There really is not anything that is anything other than idiosyncratic going on in CNI that we've seen, at least, and I don't hear anything there. But if there was something, I think the, the folks that are going to continue to struggle are going to be the ones that haven't yet been able to adapt to the reset in labor costs, or who, for whatever reason, lost access to supply chains. There just, there just is very little of that, at least in our portfolio.
On the Consumer side of the equation, the most interesting thing that's going on that I don't think people spend a lot of time talking about is the divergence in liquidity buffers between the folks who own their home and were able to lock in historically low fixed-rate mortgages, and therefore, were able to literally fix the single largest expense caption that they deal with on a month-to-month basis, and the renters who are still feeling the pain of the rapid acceleration in rents that we saw over the course of the past few years.
I think the other side of that then is your lower, the folks that are lower on the income spectrum, so call it less than $50,000 in income, who may have gotten a bump on hourly wages, but may be working a few fewer hours today, at least according to the data than they were previously. When you look at the deposit account balances, because we don't have. Our book is so heavily concentrated among homeowners and on sort of mass plus borrowers on the Consumer side. We don't see a lot of this on our own, but if we look at our checking account data, what you see is the renters with lower incomes are essentially back to or below pre-pandemic levels of liquidity.
There is no buffer left there, whereas the folks who own their homes, and/or who sit higher on the income spectrum still have a fairly significant buffer, of excess liquidity built up. That should have an impact on credit performance, over time.
When you put numbers to it, you gave us grief last year at this conference for giving a 2024 charge-off guide a couple of years ahead of it. We just wrapped up our mid-cycle stress test. We still do mid-cycle stress tests, even though we're not required to, and 2024 charge-offs continue to be in that 35-45 basis point range. If anything, you should have confidence we're pretty good modelers at this, and we understand the risks we're taking. You know, things are playing out pretty much as advertised 12 months later.
You gave us 2024 expenses and 2024 charge-off guidance. Why don't we put up the next ARS question? For the audience, where do you see Fifth Third's 2024 NIM?
That one we're not gonna answer.
Yeah.
Oh.
I was gonna say-
Tell me the rate environment, right?
Assuming a forward curve will be easy here.
Five rate cuts? Well, let's see what the audience-
You can give us, you know, the 5 rate cut and the no rate cut outlook, and we'll interpolate in between.
Yeah.
Okay, so the—
I think we have a pretty smart audience.
Yeah. Fair enough.
It probably helps that we said Q4 2024 would be in line or a little bit better than 2024, 2023.
You know, I guess, your guidance implies exiting the year higher than the average for the full year. Given we're kind of approaching the zero on the clock, please join me in thanking Tim and Jamie for their time today.
Thank you.