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Very well done.
Rob Reilly, PNC, CFO, thank you so much for joining us.
Good morning, Betsy. Great to be with you.
Really delighted to have you with us this morning. I did want to kick off with a strategy question.
Sure.
You know, the reason here is that you're in a great spot, given your size, $560 billion in assets.
Yeah.
You know, there's questions here around how are you thinking about utilizing that size and scale you have? Is there any appetite for potentially expanding more materially over the next several years in either industries, geographies, products, any place you'd particularly like to lean into? I ask it with the backdrop of, you know, coming capital rules and expenses for other institutions that are much smaller than you.
Just that simple question?
Yeah.
Yeah, I got it. Yeah.
Five minutes or less.
Yeah, there you go. No, hey, we're. Well, we're delighted to be here this morning. You know, as far as our franchise goes, we're really excited about what we've built over the last couple of years, you know, particularly most recently with the acquisition of BBVA USA, which, as you know, you know, made us a real player and entered into the Southwest U.S. market. We're now, you know, officially a coast-to-coast bank, national footprint. We're running our plays, our products and services across the United States.
Really, what's right in front of us at the moment is the opportunity to sort of harvest all that, not only in terms of the new markets, but also obviously the legacy markets that we're in, where we're growing, if not geographically, digitally, into deeper and more meaningful client relationships. Feel really great about our franchise, feel great about the success that we've had recently with the new geographies. Bill mentioned a couple of weeks ago, and he was right, that, you know, the revenues are exceeding our expectations in terms of the growth. In some instances, we're up 50% year-over-year, so we've got a lot to do.
In terms of expanding that, in terms of acquisitions, which is implied in the question, you know, in the near term, not likely to see an acquisition, and that's largely a function of the rate environment, as you know, in terms of the fair market value that's required in terms of acquiring fixed rate assets, that would create a capital hole that's probably too big, in terms of an acquisition. That's not necessarily going to slow us down, in the medium and the long term, when things can change. In the meantime, you know, we'll do some bolt-on acquisitions like we've done in our Treasury Management businesses, and such. You know, we like what's ahead of us. We got a lot to do.
Okay, great. Excellent, because your scale could deliver more revenue growth.
Yeah, that was largely the plan, you know, in terms of our deliberate build-out, not only in terms of the acquisitions that we made, but the technology investments that, you know, that we've been at for some time. That is sort of the infrastructure that allows for that scale, and we're seeing the benefits of it.
Let's talk a bit about deposits.
Sure.
It's a hot topic at the conference. Just want to get a sense from you as to how you're seeing deposits flow, you know, quarter to date ...
Yeah
as well as, you know, give us a sense of the mix and the mix shift that you're seeing.
Yeah, pretty consistent. You know, in terms of our deposit balances, you know, so far in the second quarter, we're tracking largely with the H.8 numbers. You know, we outperformed in the first quarter. We grew. We were a bit of an anomaly. We grew both spot and average deposits in the first quarter. Year to date, we're a little bit better than the H8 data. Second quarter, right on that H.8 data as deposits leave the system, no departure from our expectations. You know, we see some pressure, obviously, in terms of non-interest bearing going down, which is what we've called for, which is natural at this point in the cycle, largely coming from our commercial deposits, you know, very much in line with our expectations.
Right. On non-interest bearing, you were at 27%, I think, of total.
Well, that's where we expect to go to.
Okay.
Yeah, about now in terms of where we're running, with the ultimate sort of destination maybe in the mid-20s.
Got it.
There's been a lot of discussion around that, and that's just based on, you didn't ask, but that's based on our own sort of extrapolation of history and our business mix and where we think things are likely to settle out.
Right. Because I remind people that non-interest bearing deposits actually pay for services.
That's right.
Your Payments business is.
That's right.
quite robust.
Treasury Management business. That's right.
Right. Okay. At the same time, your deposit rates have been running at a lower level than peers, so you've been able to keep this in line H.8.
Right
... activity-
Right
With lower rates. Why do you think that's the case?
Well, some of that's just the nature of the, of the business composition, and you mentioned Treasury Management...
Mm-hmm
which is a big, you know, provider. Those deposits are serving other things than just simply looking for the highest rate. Beyond that, our deep relationships, diversification, in terms of, the types of customers, both consumer and commercial. That's a function of it. That, and also, you know, we don't have a screaming need to grow deposits. We've got a lot of liquidity. We did a debt issuance last week-
Mm-hmm
which is TLAC compliance, by the way.
Mm-hmm
in terms of that. You know, you can raise deposits. We were talking about this earlier. You can raise deposits. Any bank can raise deposits, but you're going to pay 4.5%, 5%.
Right.
You're going to pay the that rate, and that's available to everyone. We don't need to do that as much as others.
Okay. As I'm thinking about what we're seeing with the funding cost changes-
Yeah
the betas there, obviously the next question is: How are betas looking on loans.
Yeah
asset, other asset yields?
Yeah, we'll see that. You know, we'll move into that phase. We were talking about the three phases of a rate cycle. The first phase, all your variable rate loans price up and the deposits lag. That's the fun phase. You know, we get into the second phase, where we are now, where those deposits rapidly catch up at a rate faster than your fixed rate assets repricing. We'll get into the third phase, when our fixed rate assets do reprice, which is happening and will continue to happen, you know, both in the securities portfolio and in our loans.
On the securities portfolio, is there any changes to how you're managing it, given the rate environment that's changed so much over the last 12 months?
Yeah, I mean, we've slowed down, we've told everybody that, you know, our securities balances were not actively investing or growing. You know, we are short duration, one of the shortest among our peer groups. In terms of, you know, our asset sensitivity overall, we're slightly asset sensitive and neutral. You know, we feel good about our positioning. We're, we're positioned in a neutral way, as rates sort of transition, and we're not sure in the near term where they're going to go.
Mm.
The good point is, we're not exposed, in either direction.
A sharp uptick or downtick.
That's right, yeah.
is not gonna make a big difference for you.
Which is delivering, yeah.
The other question we get is just on the duration of deposits and impact on duration of securities. Is there anything there to talk about or not really?
No, the only thing I think on the duration of the deposits is, and it's worth mentioning, is, you know, the surge deposits that we received and a lot of others received, we assigned them no life to.
Mm.
You know, we never viewed those as core deposits. We never managed them as core deposits. We didn't invest those core deposits. I think that's important because obviously what you're seeing in the industry, that wasn't always the case.
Got it. Okay. Let's turn to loans.
Sure.
The question here is around how you're thinking about loan growth. You've got a pretty, you know, decent, I would argue, loan growth that we've seen over the past few quarters. Just wondering if there's a slowdown coming as demand seems to be weakening.
Yeah.
Wanted to get your views on that.
We, you know, we expected loan growth to slow in 2023, and that's happening compared to what we did in 2022, which, as you know, was very strong.
Yeah.
We called for, at the beginning of the year, spot loan growth of 1%-3%. Average was a little bit higher because of that strong performance in 2022, and we're still seeing that. Some loan growth, not as much as we had experienced, but we're tracking along those lines. If you break it down further, you know, commercial's fairly slow right now. We do expect an uptick in the fourth quarter of this year as we sort of get through some of the doldrums that are slowing down sort of corporate activity. On the consumer side, we'll see some growth, not quite as much as the H.8 data. We, most of the growth there is coming through card. We're smaller in card-
Mm.
We tend to be more prime. Prime customers don't carry as much balances, but we'll see some growth there.
Just on C&I, can you give us an update on how the line utilizations are trending? Has that peaked out?
No, I don't think it's peaked out. We pre-COVID, our line utilization was always around 55%. during COVID, as utilization dropped, I think we hit down to 47 range, 47% or something.
Mm.
We've worked our way back up in the last year or so to around 52% or 53%. We're still a little bit, couple % shy of normal-
Mm
... per se. Importantly, that 52 or 53 has been pretty steady over the course of the last year. Line utilization has been, you know, flat.
You're back to normal?
A little below normal.
Okay.
we could see-
Close
... some uptick there, and that's part of the thinking in the, you know, the back half of 2023.
Okay. I think Bill mentioned recently that you're seeing spreads widen out as well.
Yeah. Right.
you know, maybe 100 basis points versus a year ago.
Year-over-year, right.
Could you talk about where that's most pronounced? Does it make you want to lean in more to whatever asset class spreads are widening in?
Well, yeah, we'd like to lean into wider spreads. That sounds good to us. No, I think that's been coming for some time, you know, and we've been calling for that even in the last half of last year. The market conditions were such, and the public debt markets were such that wider spreads were justified in terms of the risk and the return. The banking market just wasn't delivering it.
Mm
... because there was a lot of supply out there. I think this has been coming for a long time. I think it's encouraging. I think it's sustainable. The downside just is we don't have a lot of volume right now.
Mm.
It's not making a big dent in it, but I think it bodes well for us going forward, as we, you know, we'll couple that up with some ultimate loan growth, you know, in the next couple of years.
I want to turn to commercial real estate.
Okay.
you know, you are in a unique position amongst, folks we cover, given that you own Midland Loan Services.
Yeah, right, yeah.
... right? Commercial loan servicer.
Right.
you really
Special servicer, yeah.
Right. You see what's happening on the ground.
Yeah, we do. Yeah.
Can you give us a sense as to what it is you are seeing and how you're reflecting that in your own book?
So far, it's pretty quiet. You know, we've seen some elevated levels in terms of some special servicing, but nowhere near our expectations in terms of where we thought it would possibly be at this time. That's encouraging. You know, deals are still, you know, being taken out and recapitalized, which, you know, is encouraging. In terms of our own loan book, you know, we went to pretty good detail, or into pretty good detail, rather, in our first quarter call in terms of the breakdown, where our focus is within the office space on the multi-tenant properties. We are among the higher reserved, on commercial real estate and inside that office. Importantly, that's not a reflection of we think that we have a higher risk book.
In fact, we think we may have a lower risk book than average. It just simply reflects, you know, our expectations in terms of, you know, what might happen.
When you're talking about the reserve, I'm assuming that's a function of what you might anticipate roll rate risk might be?
Yeah.
Is that fair?
Yeah. Yeah. Well, obviously, there's a lot of dynamics to it, you know, in terms of, you know, what we think we have real time.
Mm-hmm.
The message we wanted to get across was that we weren't relying on a bunch of old appraisals that suggested loan-to-values, you know, much lower than in fact they are real time. It's a dynamic process. The good news for us is it's a relatively small percentage of our portfolio. It's a hands-on. We know the deals.
Mm.
It's not some giant portfolio that we're just extrapolating, you know, some assumptions onto it. It really is a case-by-case, project-by-project, analysis.
It's interesting that the stress you're seeing in Midland Loan Services is actually less than expected.
It is less than expected.
Right.
Yeah. No, it is.
Demand for yield, I would guess, from the people that are.
Yeah, I think so. Yeah, there's, you know, a lot of money out there, looking for appropriately risked and appropriately priced deals.
Okay. Last thing on loans is the consumer portfolio. Can you just give us an update on how you're thinking about that?
Yeah. I think on the consumer side, you know, we touched on this. We tend to be more on the prime, but I think, you know, the bigger story for us is a multi-year story within our consumer book. We've historically been undersized-
Mm-hmm.
more oversized commercial. With the franchise that we've built out, so that we just talked about, you know, we have close to $11 million consumer clients, the bulk of which still borrow away from us.
Mm-hmm.
That all else being equal, would borrow from us. We're seeing that's nothing new. That's something that's been in place for a while. We see sort of this core underlying growth in our consumer balances, which is encouraging, which is just reflective of our franchise sort of normalizing out. We'll see slow, steady growth there over multiple years. That's our plan. To the extent that we can dial up, you know, appropriately risked assets in some of these new markets, you know, that'll be a plus.
Could we talk a little bit about the fee lines, in particular?
Sure.
Treasury Management, Mortgage, and M&A?
Yeah, sure. Well, now, we're not gonna run out of time before you ask me about guidance, are you?
No. We still have.
Maybe that might be a good shift as I go if I go into some of the categories.
Oh, for sure.
If you'd like.
I think that's a great idea.
I don't wanna... you got a lot of questions there, so you.
No, no.
Tell me where you wanna go.
Dealer's choice.
Dealer's choice. Okay, why don't we do that? Just, because I know people aren't that interested, you know, the bring the drama down. You know, the second quarter is largely shaping out like we expected it to play out. Couple of parts obviously moving in that. Importantly, NII is right on our expectations, in every way, in terms of deposit balances, loan balances, deposit rate paid, betas, right on our expectations. On our fee categories, which I'll go into a little bit, we're a little bit softer there than our expectations back in April. Bill mentioned this a couple weeks ago. You know, we had said maybe stable to down. We're probably down 1%. We'll probably be down a little bit more than that.
All of that coming from Capital Markets, softness in Capital Markets, which is not a surprise, knowing what we know now in June, but in April, we expected a little bit more, and I'll circle back to those fee categories. expenses are right in terms of where we expected, and credit's a little bit better. you know, all in, you know, tracking largely within our expectations. on the fee businesses, you know, the good news with our fee businesses is that they're big businesses in and of themselves, so we have grown those as part of our as our franchise. just in the order that we report them, you know, asset management business continues to do well, better than what we expected at the beginning of the year, largely driven by the equity markets, which have outperformed everybody's expectations.
Importantly, in terms of the asset management business, a big part of it is building out our franchise into these new markets, because BBVA USA didn't have a big wealth management business. A lot of what we're doing there is sort of organic hiring, building out the teams, which has largely happened, and running our plays. The next category is our Capital Markets business, the largest component of which is Harris Williams. M&A, you know, after having several years, great years.
Mm-hmm.
you know, has slowed down a bit. We saw that in the first quarter, second quarter running somewhat similar. The issue with M&A when we get into these transition times is, if you're, if you're selling a company, you want yesterday's prices, and if you're buying a company, you want tomorrow's prices. I don't need to tell Morgan Stanley about that, do I? You guys could probably help me out with that. We need a little time for everybody.
Mm-hmm.
to get back on sort of the same, the same level. Some of the softness that we're seeing in the second quarter goes beyond that. Another big driver in our Capital Markets is our loan syndications, where we arrange large loans, and then syndicate those. With less corporate loan growth, there's been some less of that. The next category, in terms of our card and Treasury Management, that's so that's our steady eddy. That continues to grow. That's, you know, a high single-digit growth business for us on an annual basis, and that's going to continue for some time. You know, the lending fees, deposit fees, pretty stable, and then mortgage is soft, but we expected that to be the case.
Okay.
The fee businesses are all doing well. They're all, you know, addressing, the short-term issues there, but importantly, they're a big part of our franchise and a big part of our expectations for growth, you know, over a multiple-year period.
I do just want to lean in Treasury Management a little bit.
Yeah, sure.
because of, A, rate environment should be supportive.
Yeah.
B, the digital capabilities you have.
Yeah. Treasury Management is, you know, our highest profile business. It's, you know, our largest fee component. It's something that we've been at for a long time, and we're recognized across the industry as being one of the leading industry providers. It's been supported by years and years of technology. You know, everything that's going on in terms of technology, in terms of advancing and accelerating payments and receivables, we're doing. You know, it's an important business to us, so we invest, we invest considerably in it, we apply it regularly, and not surprisingly, it is our most successful product in terms of new relationship generation.
You've got some nice sleeves in there, too, in particular, healthcare, right?
Yeah. Oh, yeah. Lots of verticals, lots of verticals in there. Like I said, it's the best way to initiate a new corporate relationship. Typically speaking, virtually every company that we run into, there's a Treasury Management product or service that they could use.
That's great.
Yeah, really great.
I wanna leg into the tech question then-
Sure.
since tech investments is important.
Yeah.
for Treasury Management.
Yeah. Yeah.
I know, you know. The first question here around tech is the fact that you have spent the last couple of years retooling your own core systems, and maybe you could give us a sense as to how far along that journey you are.
Yeah, sure.
You know, put it in the context, too, of where that's driving your annual tech budget.
Yeah, sure. you know, I mean, how many years have we been doing this, Betsy?
14.
Yeah. I might not have been all 14, but I'm...
Okay
I'm close to.
You mean this concept?
10 of it. Yeah.
Yeah.
Yeah. We've been at a, you know, pretty aggressive build-out of our technology infrastructure over that time period. We completed the infrastructure part a number of years ago. Even though the dollars in terms of what we invest continue to expand, most of that's now going into customer-facing development, applications, largely within Treasury Management, but not just limited to Treasury Management. We're sort of in the fun part of it all. Technology, you know, is gonna continue to be a big driver of our industry. It is a key differentiator in terms, and becoming even more so, in terms of providers. Either you have it or you don't have it, and it's expensive.
In our case, we say, you know, our tech budget is $2.5 billion a year, you know, about 12% of our revenue is growing each year, double digits. You know, I'm the CFO, I'll take the over on that number because that's our line, that's our line item in terms of technology. What is it that we spend on that isn't technology? I could say it's a lot more than that. It is a priority for our company. We, you know, we had a proof point.
We had a favorable proof point because everybody says, "Oh, we spend a lot on technology, and we're the best in class." We proved it with our BBVA integration and conversion, literally fully integrating within a four-month time period, lifting their tech stack and putting it right on top of ours, which at that time was record timing. I don't know if anybody's broken it since. It gives you an example in terms of the capabilities that we have, on top of what we've already invested, and why that, you know, has been differentiating for us.
I do have to ask the question about AI.
Oh, sure.
... as it relates to tech.
Okay.
Just is this something that you're thinking about?
Yeah. Yeah.
How are you gonna leverage it?
Yeah.
What parts of the business are you most eager to employ it?
Well, you know, we were doing AI before AI was cool.
All right.
We've been at it, we've been at it for a little while. And we've seen some gains. You know, principally where we apply it, is in customer service and support, where, you know, that's come a long way. Fraud, our fraud, AML work, a lot of AI-
Mm.
which, you know, is perfect for AI because it's large volumes of data, being able to see patterns. Then some of our regulatory reporting. Within finance, we've got pilots going on in terms of accounts payable, accounts receivable. Turns out in finance, AI requires more people than you think. That's somewhat my attempt at humor.
Okay.
I said, "Well, what are all these people doing here? I thought it was going to be computers." We've got some way-
The AI labs.
Yeah.
The AI labs.
The AI labs.
has humans in it.
Yeah.
Okay.
We, yeah, so we got to work through that. We're in the early phases there.
Got it. Is that just a function of, "Hey, you need to train the system?
Yeah, that's right.
Okay.
Yeah. No, that's right. In all seriousness, there's real application within banks. We've been at it for a while, and we'll continue it.
Okay, it's more of a gradual impact as opposed to-
Yeah, yeah.
... step function.
Absolutely. Yeah.
Okay.
Absolutely.
Very good. Let's just turn to credit. You mentioned in your guidance update.
Yeah
quarter a bit of a change on the.
Credit's good.
Yeah. Okay.
Yeah.
Let's talk through what's going on there.
Yeah. You know, so far, what we're seeing across our, all our portfolios is good credit performance, even within CRE, in terms of actual, you know, charge-offs or anything along those lines. You know, CRE is obviously on, you know, the main stage in terms of everything that we're looking at, and inside of that office, the multi-tenant that we've talked about, you know, for a good bit. You know, we think we've got adequate reserves there, you know, by definition, in terms of where we are. Outside of commercial real estate and commercial, very good. You know, a little bit of concern around big box retailers, just in terms of, you know, those entities that are selling goods as the consumer shifts from purchasing goods to services.
Mm.
You know, maybe some vendors and suppliers to those big box where there's some outsized inventories, but nothing, you know, terribly flashing red. Healthcare, to a lesser extent, and that's healthcare providers, which is still sort of this tight labor market, and the concerns around the inflationary concerns around that, but, you know, generally very good. On the consumer side, you know, again, we operate on the prime space. You know, credit quality has been very good. We'll see some normalization around some delinquencies, but nothing that's, you know, alarming.
We all try to forecast credit, right?
Yeah, sure.
That's in our models.
Yeah, yeah.
out the next few years.
Well, CECL requires it. Yeah.
Exactly.
Yeah. Right.
How are you thinking about where the credit cycle goes, you know, where peak NCOs go?
Yeah, well, we'll probably see. You know, in terms of our reserves, we're just under 1.7%, 1.67% and we think that's the right number in terms of we don't see big shifts, you know, occurring there. We could see some elevated charge-offs. We've talked about a normalization.
Mm.
-of charge-offs that were not there. We had, for the last-... you know, 10, 20 years, 30 basis points, and if you go longer, 50 basis points. We're below that. We could see some normalization occurring. We've been calling for that now for, I don't know-
Right.
a couple of years.
Right.
Importantly, you know, we're running at a pretty high reserve ratio, so if charge-offs do go up, you know, in many instances, it'll be a reflection of what was already reserved and the economic hit is already taken.
Okay, got it. It feels pretty-
Feels good. Kind of feels good.
Right?
Yeah.
It's interesting just because this cycle we have the inflation as a, you know, headwind.
Yeah, right.
Still we're sitting with excess savings on the...
Yeah.
Right.
There's a lot of anomalies going on in that regard. You know, we got, you know, tight employment. You know, is there a possibility of a recession with full employment? I don't know. You know, we'll see whether that whether that exists. You know, as it relates to credit, you know, with the exception of CRE in the office space, which is, you know, a legitimate concern, you know, it looks good.
Okay. Two other topics.
Sure.
Expenses and capital.
Okay.
Um-
Yeah.
You know, you've got a goal of $400 million in cost saves for 2023.
Yeah.
Right? Maybe you could give us a sense of what you're doing to drive that outcome?
Yeah.
Are there any risks to achieving it?
That $400 million number is what we call our continuous improvement program, which is a program we've had in place for as long as I've been CFO, and hopefully after I'm CFO. We've become very good at it. What it is it's an internal muscle where we take a look in terms of our budgeting, in terms of those savings that we need to extract for efficiency purposes, to be able to apply against our investments, largely technology. That's one of the ways that we've been able to keep our actual expense levels, growth levels down because we sort of self-fund-
Mm.
What would otherwise be growth. We've gotten good at it. It's an annual part of our process. It's across the entire company, and it's averaged out to be just about 3% of our spend. That's how we get to that $400 million number. We're dead on track for it. I fully expect to realize it, and we'll keep that continuous improvement program and that muscle going, you know, in the future.
Okay. No one area really feeding that?
No, it's proportional across the company, which is great. Naturally, you know, where the costs are higher in absolute dollars that we expect more savings. The retail side of the house generates more savings, but proportional to their part of the expense base. Like I said, we're good at it.
Is there anything in the branch network? Is that what you mean when you're talking retail?
Yeah, the branch. Well, the branch network in terms of, you know, taking out some of the expenses, in terms of the efficiency of the delivery, the multi-year strategy in terms of converting a lot of our branches to, A, optimal places, and then, B, optimal configuration, which. Again, this has been happening for some time. It'll continue to happen where the focus is less on the transactions, the day-to-day transactions, which can be accomplished through ATMs or digital means, and more of the high touch. That's, that's a continuation of that process, not anything big right in front of us.
Right. Okay. I'll just see if there's any questions in the room before we-
Wait, you forgot about capital.
No. Oh, I know. Don't worry.
Okay. Oh, okay.
I have
Oh, okay.
I have my final follow-up.
Okay. Okay.
I'm just seeing if.
Sure
... questions that people want to go to. All right, on capital-
Oh, no questions?
No, there appears-
Okay
... to be no questions.
Okay.
All right.
Sure.
My last question here for you.
Last question. Okay.
... is regarding, yes, where you, where you sit right now with your CET1, it's at 9.2%.
Right.
Right? It's at the high end of your target range. It's above.
Yeah, right.
Your range is what?
Right. $8.5.
Right.
As currently defined.
Right.
Yeah.
I guess there's a couple of follow-ups here. One is, how are you thinking about the rule sets that are coming your way, and do you have any sense of the timing? What's your thoughts on CCAR? And just give us a sense as to how comfortable you are with this 9.2.
Yeah
why, you know, where we think it should be trajecting from here.
Yeah, well, I think, you know, if you take a look. There's a lot of proposals out there. Generally speaking, it's, you know, it's our expectation that the capital requirements will be going up for all the banks, PNC included. You know, how much and where and how to find, I don't know. There's, you know, obviously a lot of speculation around not only the SCB in terms of the stress tests that are occurring right now, but then on top of that, defining capital regulations that may include AOCI in some way, shape, or form.
Mm
which for us, as a Category III bank, today is not in our CET1. There's this concept of operational risk that'll be part of your RWAs, that would obviously require some more capital. Lots going on. It's our expectations, well, certainly our strong expectation that the CCAR results will stay on the schedule, and we'll get those here at the end of the month, which will establish our SCB. Beyond that, shortly after that, at least, is our expectation, we don't know, but that we'll receive notice, a notice for proposal, for some new rules that contemplate the AOCI and the operational risk component. You know, the way that we look at it is, you know, right now our CET1 requirement is 7.4%.
As you mentioned, we like a management buffer of about a point, so we say 8.5% is our operating guideline, and we finish the quarter, the first quarter at 9.22%, as you pointed out. You know, we're starting from an excess cash or excess capital position. Ultimately, wherever we need to go above that will be a shorter route for us.
Mm
had we been, you know, simply excess. I think the important part, though, for this morning or for this conference is that, and I think you know this, we have strong capital-generating capabilities through our core profitability. We have got diversified businesses. We're profitable. Our ability to accrete capital to whatever extent is necessary, we can do in pretty straight, you know, straight order. The AOCI, if that is included in the new capital requirement, you know, we burn down pretty fast. We've got, as we've talked about, we've got pretty short duration in terms of our securities portfolio, so we'd expect that to accrete back too. Wherever we need to go, we can get to, and we'll be just fine.
Okay, because you will have time with the new-.
Yeah, Well, the expectation is obviously that there'll be a transitional period.
Right.
Which should be sufficient, and there's potential for tailoring within that, for some of those components, which we would expect to show up, at least in part. We'll have to see.
You've been really efficient with the time, I can give you back-
Oh, excellent.
All right.
Excellent. Well, always a pleasure to be with you.
Thank you so much, Rob, for joining us today.
Thank you.