All right. Welcome back. Hope everyone had a nice break. I am here with Truist, and very happy to welcome you back. I think you've been here once or twice at least.
At least, yes.
No, we're glad to be back. Thank you.
Okay. I'll just set it as the little bit of introduction for Truist. Truist is the 10th largest bank in the U.S., headquartered in Charlotte, with $544 billion in assets. Really strong in consumer banking and wealth, corporate and commercial banking, investment banking, and lots of things going on at Truist right now.
No doubt.
We are very lucky to have Mike Maguire here, CFO. Mike has been at Truist for many years, more than two decades, I think.
That is right.
You have been CFO for four years.
And you also spent some time in payments before that. I think that's the first time we met, was when you were in that role. Then I think you were in investment banking for many years.
You got it right.
Okay. We also have Kristin Lesher. Kristin is the Chief Wholesale Banking Officer at Truist. You've been at Truist for-
Little over two years.
little over two years, and spent quite a long time at Wells Fargo.
Yeah.
So-
That is right.
Very nice to meet you, and thank you for coming. I am going to get things started because, as I kind of mentioned, I mean, there is a lot going on at Truist right now.
You have a new CEO that started just in September, so very new. You have got a strategic review going on, and I think lots of changes in how you are going to be managing the company. Can you just maybe give us a little bit of update of how you are kind of the decision framework of how you are approaching this strategic review? We understand that it is early, and we will hear more.
Yeah
probably beginning of 2027. Just how are you approaching it?
Sure. No, great. Good morning, and Ruth, thanks especially for hosting our conversation this morning. The work's ongoing, as you mentioned, so very much in flight in terms of the strategic review, and I can give you a sense for how we're approaching it. A place to start is that, and you heard Mike Lyons articulate this in our earnings call in October, we've got a very clear and a more narrowed strategy, right? Our vision statement is that we want to be the most important financial partner to our clients, and that's both in our consumer segment as well as in Kristin's business.
We believe we have a right to win in both of those businesses, a narrowed focus in consumer on really making sure that we're doing a great job driving core checking, DDA growth, and providing the right products and services around that to frankly accelerate that mission. We're going to continue to invest in and provide strategic lending products, but it's going to be in service of driving that deposit growth engine. On the wholesale side of the business, we've got Kristin here live in the flesh, and she can take you through a lot of the areas where we're most excited. At the end of the day, we have a right to win. We want to more deeply, fully serve these clients, have longstanding relationships so that we can help them achieve their financial goals, and we can, again, be that most important financial partner.
The work and the framework that you referenced, and we talked a little bit about this recently, we're asking three questions. Is an activity, whether it be a line of business, whether it be a process, whether it be a dollar of operating expense, is it aligned to our strategy, number one? Number two, do the profit characteristics or potential of the activity or the line of business or the product or whatever it might be, does it have the ability to meet our return objectives? Then third, if for one reason or another it's either protecting our firm or serving clients, that's an important question to answer too. We're applying that framework really sort of in two containers. The first, and this has been a little bit more public, has been around capital allocation and businesses in the balance sheet.
You have seen us de-emphasize or even stop originating loans in certain businesses like marine and rec vehicle lending, subprime auto. You saw us announce and successfully divest Regional Acceptance Corp, and we have announced that we are selling LightStream as well. Those are good examples of assets or businesses where capital has been allocated where the answer to those questions has led us to say, "Hey, this is not something that is sensible for us to continue to invest in and operate." We have taken advantage of those events to also strengthen our balance sheet. That is another thing that for us is a non-negotiable, is to have a really strong balance sheet through all cycles.
In the course of divesting these businesses, we have had making great progress on things like reducing wholesale borrowings, shortening the duration and improving the flexibility of our securities portfolio, even improving our overall credit profile. We can talk a little bit more about that later in our discussion. So that is sort of container one. Container two, which we have probably been doing a little bit more privately, is rationalizing expense. So that is looking at every single dollar we spend, whether it be on the front line, in the functions, with vendors, tech projects that are solving yesterday's problems, whatever it might be.
There is a list 1,000 items long that we are inspecting with a whole new level of intensity and, frankly, purpose, because we know how important it will be to fund the investments that we know that are going to be required to drive us forward.
We internally talk about that as sort of sources or capacity. Then, of course, we have got an investment agenda that is going to be focused on both consumer, as I mentioned, where we have a right to win on the DDA stuff, and then Kris will go into a lot of detail on the wholesale side. Maybe just one last wrapper on that is because we have gotten a lot of questions over the last day or two about, like, "Well, hey, some of these actions, they feel like you are getting smaller and you are taking steps back. Is that sort of the direction of travel?" The answer is, sure, there is a quick shuffle back, we think for very good reasons, right?
I was just talking to one of the analysts out in the foyer here, and these were low, like, bad calorie assets, and we are reducing that side of the balance sheet to reduce bad calorie liabilities. So there is going to maybe be a quick shuffle backwards, but the whole idea is to build the right foundation from which to grow. I can tell you, Mike Lyons' ambition is to grow and to be a high-performing company, and that is what this is all intended to set up.
Oh, that's great. Thank you. Kristin, maybe the wholesale priorities that Mike was talking about, can you maybe expand a little bit of where you think the new strategic review, where that goes for the wholesale business, and maybe what's different or new, or consistent even?
Yeah, happy to. Thanks for having us, and it's great to be back at BAAB. Last year this time, I was here talking about our wholesale business and giving everybody a good picture of it and where we needed to take it and where we needed to grow. So really appreciate the opportunity to bring that forward and talk about where we're going with Mike. First and foremost, I would say that what Mike has found in this franchise is absolutely we share conviction around it's a uniquely advantaged franchise for Truist and in the industry. For us, where we have this incredible position in the best markets with a 150-year history, 30,000 clients, and a long tenure of serving them, paired with the full-service institutional capabilities that we have within our investment bank, it's something that no one else has in the same way we do.
We're able to bring everything that the best regionals bring and compete with the capabilities of our Wall Street competitors. So we share that view first and foremost, that it's a fantastic franchise. Secondly, I think when you look at the strategy, what we talked about last year is really aligned really well with being the most important financial partner to our clients. So talking about bringing an integrated strategy to bear to our commercial and corporate clients, where we are pursuing opportunities with them around payments and advisory services and wealth, that is 100% lined up with where we want to be. I also think what he's bringing to it is a focus on accelerating the growth that we're seeing.
When I really think about that, the timing is perfect for it because we've spent the last 18 months really setting up the foundation and showing the momentum that we can deliver in many of these businesses. So we're primed to do what we're going to do next. I think that what you'll see from us is, and aligned with what Mike Maguire just said, is we need to add more frontline resources to what we've already been doing in all the key areas of middle market, commercial, corporate banking, certain areas of investment banking, and certainly in wealth. We are going to be doing that as well as putting a really high degree of focus and urgency around the places where we have what I'll call the most room to scale. So things like payments, things like the advisory business.
Those are places where we've got tons and tons of opportunity ahead of us. Then we certainly have some places where we've got the opportunity to either tune up and/or add some adjacent capabilities to serve these core clients. But for the most part, I would say the strategy is consistent, tuned, and focused a little further, and we're going to put a lot more resource behind it to help it grow faster.
It sounds like there's an emphasis to really deepen client relationships-
as well. Is that hiring more people, putting more frontline, or is it what else, or is it something else as well?
Yeah. Well, maybe in order to answer that, I'll go just slightly back to what's been accomplished and the progress that's been made, and then layer onto that how we think about deepening. I think that what we really needed to do to establish the right foundation in wholesale is we needed to add a lot of talent in some key areas, and we also needed to invest in some of our product capabilities, and then we needed to make sure that we were refocusing a couple businesses and then feeding and caring for the growth that we wanted to have in some of the places where we've had tons of strength, like commercial real estate and investment banking. If I just reflect on the progress, with talent, we've added close to 500 bankers in wholesale over the last couple of years.
We've added them primarily in commercial and corporate banking and payments, although it's been a little bit of everywhere. That has been a mix of upskilling the talent that we have. It's really helped us to have a fantastically focused offense against the client set that we're going after. But it hasn't, in fairness, increased the sheer number of bankers that we have on the field by as much as we want to increase that. As it relates to the products, we've meaningfully enhanced some of our products, like in treasury management, which I know we'll spend more time on later. We've refocused our wealth business about being the best wealth business we can be for our consumer and wholesale clients. All of that we've kind of done at this point.
Now what we need to do is we need to add meaningfully more frontline resources in our core coverage areas. We need to add more origination resources in areas that really matter to our client base. Think of things like ABL or FX and rates. We just haven't scaled those as much as we need to.
We've also got an opportunity to deepen with clients by providing a few more lending products that are things that they really care about. We certainly have more opportunity in ABL. We've got more opportunity in some of the asset-based lending areas where we'll add some capabilities. But these are kind of, I won't say easy, but these are really obvious, sort of adjacent to what we're already doing things that we'll continue to develop.
Okay. Thank you.
Sure.
Maybe I'll just go to consumer for a minute.
Sure.
So, kind of similar question that I just asked Kristin from the wholesale business, but for the consumer segment, what do you think is the opportunity to strengthen the consumer franchise?
We feel strongly that there's a lot of potential that we haven't realized in consumer. But if you think about the starting assets, they're actually pretty compelling, right? You think about the markets that we serve, the share, the density that we have in those markets, the loyal client base that Truist has built over a long period of time. Then I think also just a will in these markets to a desire to have a southeastern champion, which we've been, but we think we can even more sort of fully fit that profile. So, the potential's there, but the performance hasn't been there, right? I think that whether it be deferred investment, execution, we haven't gotten it right. So, a lot of our focus now is changing both of those factors.
So, obviously a much more obsessive focus on execution, more accountability on execution, but also a significant amount of investment that needs to be made in these businesses. So, it's broad-based. Kristin talked a lot about frontline teammates and capabilities. I'd say over on the consumer side, it's thinking about the physical network, expanding the physical network, improving the quality of the physical network, thinking about all of our other channels, our ATM fleet, expanding it, improving it, our digital properties, how they interact across all the various channels simultaneously, marketing investment, where we believe there's some debt, thinking about some of the loan products that, again, are there to serve clients to help us become and remain the most important financial partner that will drive the DDA account.
The mission for us in consumer, and I'll sound like a broken record, is that core checking growth and that funding engine. And we believe the opportunity is there. It's going to require investment and focus, but that really is a simpler, more narrowed, focused strategy that everybody's bought into. And ultimately, this is really important. It's good that these questions were sequenced because the funding engine being in consumer is going to fit hand in glove with what Kristin's doing, generating great assets and then fully serving those clients to create sort of a portfolio of businesses that is in harmony and creates our financial return objectives.
Okay.
I'd also add to that that I'm super excited about the addition of both Shim and Jeff Warner. As we think about the investments we're going to make in consumer, we're thinking about them across the sort of horizontal continuum. What do we need to invest in consumer, but how does that also partner with what we need to build in wealth? How do we drive the right continuum between our small business clients and our commercial and corporate clients? We're really thinking about that together.
Holistically. Great. I'm going to change focus just a little bit, and I want to touch on the macro environment because I think there's been a lot of volatility, change in interest rate environment, a lot going on on macro. What are you seeing from client demand? Has higher rates, has that impacted client demand? Have you seen anything about competition, or is there more irrational behavior? Anything that you could comment on on kind of the current environment?
I can start. I think when you think about loan growth and client loan demand, it actually feels pretty steady. Obviously, there have been changes in the interest rate environment, but when you look at it, the foundation that we have around pretty strong GDP growth, we've got strong consumer spending, there's still plenty of client demand out there. I think for us, and I'll piggyback on what Mike said about the strategic review. He talked a lot about some of the things we've been doing in consumer. I just want to share that we're doing many of the same things in the wholesale book.
Looking at every single place that we're deploying our capital, and we're looking at places where we might be deploying that capital to a set of clients where we're not going to be the most important financial partner to them, and/or they're not going to have a lot of value that they're going to take from the broad-based set of services that we have. You all heard in the third quarter some of where we're intentionally trying to reposition that capital into the places where we think we've got the best opportunities to grow. Just know that that's part of what we've been doing as well. In terms of our ability to compete, I feel good about our ability to deliver the loan growth that we've guided towards in the 4%-6% range.
I would also say that I feel great about the places where we try to compete against others, and we bring the industry expertise, and we bring the broad suite of services. We win, and that's really good. We're doing that without any change in how we're thinking about our risk discipline or our risk standards, which has been a hallmark of our company. In all of what we're thinking about, even as we think about repositioning some of the capital that we had in Regional Acceptance Corp or other businesses, a lot of that wholesale will be the beneficiary of using that capital to grow, but we'll be able to do it with a very similar risk profile to what everybody's come to know and respect about Truist.
Okay. Great. Thank you. I would love to just do a double-click on wealth.
Okay.
That's been an area of focus for Truist, and I think you have made progress, but there's a lot of growth opportunity there. How should we think about what that opportunity really is and realizing that?
Yeah. Happy to. Maybe I was actually talking to one of the analysts out in the hall. I know that you all don't get a ton of information on our wealth business, so let me just start by making sure we're grounded in what it is. It's got more than $300 billion of client assets. We've got about 1,000 advisors out there. It is a business that has a super attractive return for us, and it is one that we very much want to continue to grow, especially as it relates to wrapping it around the clients that we have in both consumer and wholesale. Just as a sense of the opportunity, only about 3% of our existing client base utilizes Truist for investment services. There's a lot of room to run within our own client base.
I would say that the progress that we've made over the last couple of years has been focusing our efforts very intentionally on doing more with that client base. What we've seen is that our new client acquisition into wealth is two times as high as it was before, with roughly 50% of that coming from clients that are feeding in from our own areas in consumer and wholesale. We've also seen a dramatic increase in the net flows. We think about the growth of wealth not just with respect to market appreciation, but very importantly, are we actually growing net flows from new clients onto our platform? We're doing that. Mike and Mike referenced in the third quarter that while we want the growth potential in that business to be even higher than it is, we're experiencing now sort of record levels of revenue growth.
Here's the work that I think needs to be done and where we're going to focus our resources coming out of the strategic review. One, we definitively need to add more talent in wealth, and you'll see us go out and add more advisors. Two, we need to put some more technology investment around it. It's a place that honestly needs more investment in improving the client experience and improving how the advisors are able to utilize the platform to serve their clients. Then importantly, we're very early and have tons of opportunity in wrapping our bank around the wealth clients. Think about things like generating deposits and loans with our investing clients. I'll just give you a feel. Only 30% of our wealth clients have a loan, any loan, with Truist. We want them to have securities-based lines.
We want them to do their mortgage with us. We want to be able to make sure that we've got capturing all their checking accounts. That's where you're going to see our focus in wealth, and it's a place that Mike and I are very aligned. Needs to be a real beneficiary of much of the investment dollars that we're creating here.
Okay. You've also talked about payments as being a very important part of the strategy.
Have I?
Yes.
Just kidding.
Can you, again, kind of just give us a little bit more color on progress, what the investments are? Are you hiring more people? How does payments, how should that look over the-
Yeah. Happy to. There may not be almost anything as core to being the most important financial partner to a client than having their operating accounts and helping them move their money. It is and will continue to be a huge area of focus for us. Maybe if I just take a step back, because I think everybody is probably thinking like, "Okay, so what's been done? How do I think about the phases of this growth trajectory?" Maybe I'll put it in some of those terms. What we needed to do is really establish the right foundation there. That meant investing much more than we had been historically in developing the product capabilities and the digital capabilities, which we've been doing over the last few years.
We also needed to, frankly, establish a sales force that was going to be the right sales force to go out and sell those payments products alongside our bankers. When I talked about the talent that we've added, I would think about more than 50% of the talent in that sales force is new to Truist and has come from other bigger banks where they're used to running this play. With that done, where we are now is we're in the very early innings of commercialization. I think commercialization, the way I think about it is it's got to start with the core treasury management product. With that, we're seeing some pretty nice momentum. We're generating high single-digit type P times V revenue with our core TM product, and the pipelines are building really, really nicely.
It's hard for you all to see that in our card and treasury management line, but that progress I'm seeing. Where we need to go from here is we need to finish the swing on what we're trying to do in payments. What we're really focused on with the strategic review is saying, "All right, let's put as much investment as we can against closing any and all gaps that we have in our product set, and especially making sure that it has got all the capabilities it needs to serve some of the larger corporate banking clients who we've got now these fantastic industry bankers out covering." We also need to advance our capabilities to do more of the embedded products. We need to be able to do, get ourselves onto all the right modernized rails, have the interoperability for interacting with tokenized deposits, et cetera.
We're going to try to accelerate as much of that investment as possible while also ensuring that we're adding even more treasury management salespeople to pair up with the additional set of bankers that we're going to be adding to the platform in middle market. You'll see a lot more frontline sales capacity, a kind of a completion and faster evolution of the remaining product development capacity, and hopefully with that, you'll see the commercialization continue.
Thank you.
Yeah.
So maybe just to round it out, I mean, investment banking is a core strength of Truist. Where do you think that? Where's the opportunity there in investment banking business?
Yeah. Investment banking is a fantastic franchise for us, and if you go back to the beginning, when I talked about this uniquely advantaged franchise that we have, the fact that we have this investment bank with all of the capital markets capabilities that it brings to clients is a really, really great part of our story and one that we want to continue to develop and grow. I think about our investment bank as being, at its core, highly capable debt capital markets capabilities across not just the places that you all think about all the time in investment grade and leverage finance, but also real strength across areas like asset securitization, project finance, et cetera. The opportunity that we have is, this has been kind of a high single-digit, low double-digit grower for us organically over a lot of years.
This year, it'll be higher than that, and we want to keep fueling that type of growth with it. We also want to make sure that we're doing more investment banking business with all of our commercial and middle market clients, and we're seeing a ton of success there. You'll see us put more resource against that.
But when I think about some of the biggest areas that we have to grow, one of the key ones is going to be in the advisory business. We are actually much smaller in the advisory business than what the opportunity set would tell us we should be, so we are going to put a lot of emphasis there. It will just continue to be a place that we feed and invest, but I would say unlike some of the areas where we have got to make a lot of investment in order to continue to build out things, this is a place pretty fully built, and we just need to keep feeding it and growing it and then adding to the advisory platform.
Okay. All right, I am going to keep going just because there is a lot to talk about still. Maybe I am going to go to expenses, Mike. We are talking a lot about the redirecting these businesses and the strategic review of lots of like puts and takes that are happening
Sure
underneath, not more than puts and takes, but lots of big changes happening. Can you talk about how you are evaluating of like that, what you talked about, the sources and uses?
Yeah.
What expense, kind of how to think about expenses?
Talked about it a little bit in response to your first question, which is, it's the same three questions, the criteria around, is it aligned to our strategy? Does it help us achieve our financial objectives? Is it protecting the firm or serving clients in a way that's meaningful? Those are the three questions that we're asking about every single dollar of expense in the company right now. I think we've had a good track record of managing costs, but there is a whole new sort of pulse of energy and investigation and interest in making sure that all of these dollars are in fact aligned to being the most important financial partner to our clients.
One of the things I think that's been great that Mike Lyons has brought into the company is sort of recognized sort of assertive focus on making sure that we do create the capacity to direct the dollars to places that will create the most business value over the time, and that's been motivational from a bottoms-up level as well. There are a lot of teammates who are very energized by the idea of stopping things that they don't believe are valuable. Maybe it was a process, maybe there's, again, a solution that's been in the works for a long time for a problem that, if you think hard about it, maybe has changed or no longer exists. That's true in technology. It's true in terms of how we think about our real estate strategy.
It's true in terms of how we think about how people in core finance are interacting with people out in the businesses that maybe are performing similar tasks. There's a whole new sort of focus around the company to try to fund the journey, so to speak. That's been the focus. We had a lot of investor engagement yesterday, sort of thinking about this. There's a lot of exciting things that we're doing that we're really confident are going to really change the trajectory of our performance, and this is a really critical component of it, getting this piece right. We're mindful of the continued profitability over the medium and long term, so that's a factor as well. We've talked about in October that we don't expect there to be a, quote unquote, "seismic shift" in sort of how we're thinking about cost management.
This is an important moment for us. It's a reset in many respects, and we want to get it right. I truly believe that we're spending the dollars where they matter to drive long-term business value.
Okay. I'm going to pause and see if there's any questions, and we can go. Manan, do you want to start here? We'll just wait for the microphone just for a second. We're going to do Manan first.
Hi. Manan Gosalia, Morgan Stanley. Kristin, as you think about everything you mentioned, putting in more frontline coverage, putting more resources in businesses that are not at scale, how much of this is an acceleration versus what you're already doing? How much of this is already in the run rate in terms of investment spend on the expense side?
I would say it's a little bit of both. One thing I would be clear on is, we've been making these investments over the last couple of years, and even over the course of the last six months, eight months, we've been funding, putting more frontline salespeople out there. The other thing I should have said at the outset was, the momentum that you're seeing in our financial results is coming on the back of these 50% of the sales force being new to seat in especially commercial corporate and treasury. That's like their first year to 18 months of building momentum, and we don't have everybody at full productivity yet. We'll see some continued acceleration just on the back of that. Separately, I'd say that I'd put the investments into a couple of categories.
A lot of it is funding more of what we're already doing and just going faster and making the teams bigger. But there are areas, importantly, where we are saying, "Okay, we hadn't yet gotten to putting enough originators out there for FX and rates. We hadn't gotten enough originators out there for ABL." We've got to make those investments now. Then there are areas where we don't offer the capabilities that are really relevant to those clients, and those can be anything from a great workplace banking solution that we'll develop in partnership with Shim, to a couple areas in asset-based finance where we just haven't had some of the products that would be relevant. So you'll see a little bit of everything, but most of it, I would say, is against putting more behind what we've already done.
Importantly, one of the reasons that I have even more confidence today than I had last year at this time in our ability to produce the outcomes you all want is because of the momentum we're seeing in the financial results with what we've been doing.
All right. I'm going to take one more. Yeah, Mike.
Yeah. Kristin, you presented here last year, and I think it's a similar message, except now you have a CEO who says, "Go bigger, better, a lot more resources." What is your biggest constraint? Is it hiring the people that you need? Because hiring is about as intense as it's ever been. Is it the internal controls? Is it Mike there who says, "Hey, let's make sure we allocate capital-
Mike loves me. Okay.
that we allocate capital correctly? Because you can't just snap your fingers and get where you want to be.
Yeah.
When do you put on the brakes, and when can you say, "Hey, just let it all out"? Thank you.
Yeah. I'd say a couple things. One, as it relates to attracting talent, we've had a fantastic run in attracting talent to Truist already. I would say the interest in coming to Truist is as high as I've ever seen it right now. So attracting talent is something that I'm not really concerned that we're going to have the ability to do. People are really excited about where we're going and what we're doing. I think that there is a natural sequencing too.
Like, you can only put so much through the pipe at the same time, and we'll be really, as we lay out the investment agenda, we're spending a lot of time thinking about, "Let's make sure we're phasing and ramping in all the right ways." To me, one of the bigger constraints, and please weigh in, Mike, is, we got to make sure that we've got our funding engine going at the right rate also, and that we're delivering the right amount of low-cost funding to Truist. We've had a lot of progress around delivering wholesale deposits, and that has started with the liquidity conversations and the payment conversations that we're having. But we got to make sure that across the company, in consumer and small business and in wholesale, that we're funding that growth in all the right ways.
All right. Thanks. All right. I'm just going to go back. I have a couple other things I'd love to talk about. Maybe just to conclude the strategic review, I mean, in the conference call, you guys talked about a 16%-18% ROTCE.
over time. Is there any context of how we can kind of put that? What does the path look like? What does-
Yeah.
Are you going to-
Yeah, happy to. Look, we still feel confident in our ability to drive a 15% ROTCE next year and over a more medium-term horizon, 16%-18%. To be fair, that's a characteristic of high-performing companies in our space, that's what's at stake. That's what we're focused on achieving. There's a long list of factors that are going to contribute to that improvement over time. Many we've touched on today. Just maybe starting with a lot of what Kristin was talking about. She is very focused on driving growth in really capital-efficient revenue streams. So you think about the footings are in place, the relationships are in place. To the extent that we can deepen those relationships, add on to that capital commitment with things like rates, things like FX, wealth, capital markets, treasury, that is a huge component of our ability.
So just better execution, delivering the right products with the right focus is going to be important. Kristin just touched on deposits, our lifeblood. Improving our overall funding mix over time is going to be a contributor to improving our returns. Capital allocation and discipline. You've seen some of that sort of top-of-house action around businesses that don't meet our return objectives. That same discipline applies micro as we're thinking about entering new credit relationships, being disciplined on exiting relationships that aren't working for us, where we can't be the most important financial partner. There's some structural under-earning that still is happening on our balance sheet. We've got a securities portfolio that still has a yield profile that's going to improve over time, so that will contribute too.
There are a lot of sort of bricks that sort of build the house, but we feel very confident that we're going to be able to improve profitability to that level over time.
Okay. Capital return, you've been buying back stock.
You guided to continuing buying back stock in the fourth quarter. Is that part of the plan as well?
It is. We are still in an elevated, at least relative to most peers, capital return position. Our capital planning contemplates the full direction of travel right now that's happening out there between the current rule environment and a Basel III world. First I should say, and I've said this a couple times today, but we are committed to having a very, very strong balance sheet through all cycles. That's first and foremost a requirement. As we think about where we exited the third quarter, our CET1 ratio was 10.7%. Even in a world where you fully burden that capital stack with AOCI, for us, that takes us down into the low 9% area.
With Basel, also some of the benefits, the day one benefits, not phased in over time, takes us back up to the low mid-10s. We feel good about the capital position that we're in today. That's not the only measure that we focus on. We think about TCE. We think about it's more of a constellation of measures. That gives us a lot of confidence that we're on an appropriate path. We've said that a 10% CET1 operating target plus/minus is a reasonable place to be. We still believe that. That we believe over this horizon supports a continued elevated payout. That's the plan for now.
All right. You're sticking to it.
Sticking to it.
I'd say, let's leave everybody with the comment that you've got a company that's completely galvanized around our growth opportunity and the speed at which we're going to go get it with our new CEO. All the opportunity in front of us where we're under-penetrated in areas that we can absolutely go get, and we're thrilled to continue to show you the progress that we're going to make.
Thank you, Mike. Thank you, Kristin. Appreciate you coming to BAAB.
Thanks.
Thank you.