All right, we're ready to kick off on day two. At least I'm ready to kick off. I know there was a session before me. We are delighted to have with us today Mike Santomassimo, Chief Financial Officer of Wells Fargo. Mike, so thankful that you were able to come back to our conference this year.
Yeah, thanks for having me.
All right, my pleasure. You know, the way we see it, there's three main levers for EPS. One is that you are an asset-sensitive beneficiary, so higher for longer, I would think is good. You've got expense ratio improvement on the horizon and capital deployment opportunities. So I did want to tick through those three key themes and then get into some more details.
Great.
So let's talk a little bit about higher for longer. I know today is Fed Day, very exciting. Another day, another new rate curve, and I guess the question we had is: how are you thinking about your NII outlook of down 7%-9% year-on-year, now that the forward curve has only one rate cut in 2024?
Yeah. So again, thanks, thanks for having us. Always good to come and talk to everybody. You know, look, I think, you know, rates obviously have been pretty, expectations around rates have been pretty volatile now for I don't know, I feel like I keep saying that year after year. But. And so in isolation, obviously, rates staying higher for longer is positive, but there are a whole lot of other factors you need to think about as you look at the overall, you know, picture for NII. You know, first being deposits.
I know, I know we'll talk a lot more about those in a little bit, but really sort of the level, the mix, you know, and sort of what's going to and the pricing on deposits is going to sort of be probably the biggest driver, sort of near term as you look at sort of NII. You know, and obviously, loan growth and all the other factors that go into kind of the asset repricing, that's there. So I know everybody likes to focus on, like, every small move in interest rates, you know, the 10 years up, 10 years down, Fed's moving this, and Fed's moving that way.
But I think you really have to keep it in perspective and sort of look through, you know, whatever they're going to announce at 2:00 P.M. today, and sort of look at the overall picture. And all of that stuff is embedded in the guidance we gave. And a lot of the things that we've talked about now, you know, in January and April, you know, the trends are still the same types of trends that we've been seeing across each of those levers.
Okay, so down 7-9, still in play?
No change.
Got it. And then can we dig in then to the deposit side? So can you give us a sense as to what you're seeing in deposit pricing and mix shift so far this quarter? You know, 1Q had deposit yields up a little bit, 2Q. Just wondering how that's trending as well.
Yeah, I mean, what you're seeing in each of the. I'll tick through each of the deposit buckets. And so on the commercial side, you know, we've seen stable to growing slightly deposits now for a few quarters. And then, so that's a good thing. And we're really focused on growing operational deposits across our commercial clients, both in the corporate investment bank and the commercial bank. And so it's good to see those, you know, stable and growing over the last three or four quarters. You know, pricing there has been competitive now for a while. It's not getting worse, not getting better, it's just competitive, which is kind of what we expected it to be. And so that's fine.
And those deposits are, you know, over a cycle, are very valuable deposits. So we're very comfortable with where that is. We're not seeing more pressure there in any way. You know, on the consumer side, you're seeing a little bit more of the same trends that we've seen. You know, people are spending the money in their checking accounts, so we've seen a tremendous, you know, consistency in the activity levels across, you know, debit and credit spend. And, you know, we can all see it in our own personal lives as you look at what's happening around us, very active. You know, people have been very active driving sort of the economy there. So you know, you see some checking account balances coming down.
You know, that's being replaced by CDs and savings in some cases. So the underlying consumer deposits have been pretty stable. And then, you know, you see a little bit more declines in the small business side as people continue to spend their money. But the overall migration that's happening in the book has slowed over the last number of months, you know, call it 5, 6 months. You know, it has slowed from what we saw, you know, prior to that, so that's a good thing. And we'll see how it goes, but as I said, in April, we still expect to see more migration happen. I think you should expect that in this kind of environment.
You know, we've been living in this higher for longer environment now for, you know, for a while, and I think you'll see more of that migration happening, even though at a slower pace than what we saw, you know, as rates really started to rise a couple of years ago.
Got it. Okay. Let's dig into the asset side of the equation. I'm going to mix it up a little bit here. Just going to, you know, deposits obviously give you that opportunity to lean into loans. Can you give us a sense as to how the loan side of the book is going?
Yeah, I mean, like, you can see it in the H.8 data on the Fed. You know, loan demand's been pretty muted. Now, you know, I'll remind you, back in January, you know, we didn't expect much coming into the year in terms of loan growth, based on what we were seeing and hearing from our commercial bank and corporate investment bank clients in that side of it. You know, we just haven't seen that demand. I think people are still being very cautious about inventory builds. They're being cautious about big capital investments. and you're seeing less utilization of revolvers, you know, because of that. Price obviously matters too, right? In terms of where rates are.
And so that demand has been pretty muted, and that's what you see on the commercial side, I think, across the industry. But that's kind of what we expected to see for the year, so it's not deviating that much. You know, as I said in April, it's a little lower than what we had modeled, but not, you know, tremendously on the commercial side, and I think that's so that's what you're seeing there. Now, will we see more growth at some point? Maybe, but I think, you know, there isn't. It's not gonna happen overnight if that starts to happen, so I think I wouldn't expect, you know, too much growth in loans over the rest of the year.
Now, you said sort of lean into or chase, and so that's come up a lot. You know, I think our credit underwriting has been very consistent on the commercial side. We haven't tightened much over the last couple of years. We haven't loosened any, you know, and I think that consistency has served us well over a very long period of time as we look at the credit risk that we have in that commercial book. And I think trying to chase or lean into things at this point in the cycle, I'm not sure is the best strategy. I think really sort of being consistent about the credit box on the commercial side is super, you know, is gonna serve us well and is important to us. On the consumer side, you know, you're
In the mortgage market, you know, there's really no refinance volume, and so you see that, you know, coming down a little bit each quarter. On the auto side, we tightened credit, you know, 18 months, 2 years ago, and so you're seeing a little bit of that come through. Now, part of that was credit tightening, part of that was returns, where returns were just not at the level we wanted to see to grow the book. And so we'll see how that progresses. I think those, you know, spreads are a little bit better in parts of that market, and so we'll see how that goes over the coming quarters.
And then we've seen good growth in the card side, from a lot of the work that we've been doing over the last, you know, four years to kind of rebuild that business.
Right. So just digging into it a little bit on the loan side, to your point, auto's been in runoff for a while, and we should just keep that going for a bit?
Well, I wouldn't say it's in runoff, but I think you
Okay
you've seen it come down as, as spreads tighten and we tighten the credit box, and I think, you know, you will see, you know, that won't go on forever.
Okay.
And so we'll see, we'll see how that goes. And I think, you know, we've been. You know, overall, used car prices have hung in there much better than people expected. Credit's performing, you know, very well, given the actions we took a couple years ago. And so I think, you know, you'll hopefully start to see that trough at some point.
Okay. And then we've got card, where clearly you've been leaning in, developing Wells Fargo branded credit card business, right? And with Ray Fischer running it, I think, right?
Right.
Is that right?
Yeah, Ray's running it. Yep.
Yep. So you've got a great growth trajectory there for, I would think, several years to come.
Yeah. Look, on the card, on the card business, you know, we, you know, the new team came in, back in the end of 2019, and just systematically started, you know, improving every aspect of that business. You know, service, operations, line assignments, credit underwriting, and go on and on. And we've now since launched, you know, 9 products, including a couple co-brands and a small business card. You know, the most recent was just, you know, a week ago, that we, we launched another one. And so we're, we're in the, in the process of, rebuilding that. We've got a couple more cards, you know, at some point to come.
And, you know, the first vintages that we put out there on the Active Cash card, you know, started in, I think, July or August, three years ago. So you're starting to see the maturity of the early the earliest vintages, and that'll sort of build over the next few years. And so, and we feel good about the credit box that we've originated those those cards in, and so that should start to really be a more meaningful contributor to the P&L over the coming years. But we're happy with, like, the way that team has executed on it so far.
What portion of those cardholders would you say are new to the bank?
It's the majority. So call it 60/40, kind of rough math, but, you know, the majority are still, you know, bank customers. So the minority is new customers. And so we've seen really good traction in both. And, you know, I think for the bank customers, we were under-penetrated in the card business, and so it's good to see as we launch better products, and really good products. You know, it's been a while since you've seen sort of a Wells Fargo card be top of the list when you sort of look for best, you know, best cash back cards, as an example. And so it's good to see that we're seeing both clients and existing clients and new clients pick it.
And then, how many more products are in the, you know, pipeline here?
Couple.
Okay.
Two, yeah.
All right. So that's industry-leading, well, at least my industry-leading, growth rate should continue for a bit.
Well, we'll see. I mean, I think we're certainly growing faster than the overall industry
Right
because of the new products that we've launched, and so we'll see how that goes.
How are you thinking about how the vintages are performing?
Yeah, I mean, you know, we look at each of the products, each vintage, you know, all the time, and, you know, for the most part, they're right on top of what we would have projected, you know, with some very small variants, plus or minus, you know, as you sort of look back 3 years, which is, you know, quite remarkable given the environment we've been in. So overall, performing as, you know, as we would have expected.
Okay. I do want to dig in a little bit on the commercial side, because you indicated, you know, look, at this point in the cycle, lean in. Does that make sense? Not really. I think that's my summary of what you said. Is that fair?
Well, I think you need to have a consistent credit box over the cycle, and I think that'll. That has served us well over a long period of time.
Okay. And part of the reason I'm just digging in here is, we have what looks like by the numbers, a strong economy and very low losses in commercial. So I realize that this cycle is very different from others, but given the, you know, returns that you could get with losses being so de minimis, is there more that's fitting into your credit box than normal? I guess is the question.
No, look, it's a competitive environment too, right? I mean, I think, you know, as you look at what's happening out there, you know, I think you're right, credit performance has been really good. You know, particularly coming out of COVID, I think, you know, everybody would've predicted, you know, some more deterioration, you know, in the overall economy, but also sort of in how that filtered through the credit book. But it hasn't happened. And so like I said, I think our goal is to be there for our clients and be very consistent with them. You know, I think we're very focused on continuing to expand the commercial bank and expand what we do, you know, across the corporate investment bank, but we're gonna do it within the risk appetite that we have.
I think that, again, that's served us, you know, quite well. I think as clients start to have more demand for credit, we'll be there, and it'll work out. But I think, you know, a lot of clients are being very prudent about it, if you think about the risks that they're thinking about across the economy. So we'll be there when the demand's there.
How should we be thinking about private credit and how that intersects with what you do? Obviously, you've got a very, meaningful asset-based lending platform, and you do a tremendous amount in middle market, which seems to be where private credit's, you know, targeting. Can you help us understand that intersection for you?
Yeah, I've heard that's a topic of interest for people. A couple people write about it every once in a while. You know, I think so far, you know, private credit. You know, what private credit providers have been doing mostly so far is stuff we likely wouldn't be putting on our balance sheet anyway. And so, whether it's higher leverage points or structural, you know, considerations around some of these transactions. So I'd say it's, it hasn't sort of taken away yet a lot of what is kind of our core, our core business.
You know, as we look at the client base, there's obviously a role to play for in certain circumstances, for credit that we might not be, you know, comfortable with, or putting on our balance sheet. So that's partly why we partnered with, you know, Centerbridge. We created something called Overland. It gives us an ability to, you know, have a really fulsome conversation with clients to say, "Okay, you've got a whole range of requirements across your credit stack.
You need an ABL, you need some other lending, you need" And so we can offer, you know, all of the pieces, you know, for our clients, and still be relevant for folks, versus saying, "Oh, we can't do that," or, you know, "Move over to this, you know, bucket." And so it's actually been. It's served us quite well in a number of situations so far, where we've been able to sort of provide different solutions, you know, for clients, which I think will be really good. And there's places where we'll. Where some of the private credit providers complement what we do.
So you could have some, you know, kind of personal sports equipment, snowmobiles, those types of things, you know, where we're very comfortable providing dealer financing for those things, but we don't want to be the front end for the consumer. And so other providers might do that. And so there's ways to partner with people to complement the things we do for some of our clients. And so I think we'll continue to look for ways to do that, as we go forward.
Well, that's helpful. You answered my follow-up question, which was: When you have a particular client that fits your credit box, but they want to, you know, have access to this higher leverage, how do you handle it? So that's great.
Yeah.
The Centerbridge part, Overland, when was that established again?
It's just operational in the last number of months, so it's
Right
still very, very early. And so it'll ramp up over time.
And so you're. With this, you're able to service your clients holistically. If it's a credit that you don't want for your own balance sheet, Centerbridge is there to service.
Yeah, if it makes sense. Yeah, if it makes sense for Overland, they'll do it. And again, we've got some situations where we've been doing the—we did the ABL, there's another sleeve of credit they needed, and so we're able to provide the full solution and stay relevant for clients. And that was really the goal with Overland, is to not have to say no, but say, "Okay, let's talk about the range of options you need, and if you need this option, go to Overland. If you need this option, come to, you know, our balance sheet." And so it gives us a good opportunity to do that with clients.
Okay. And then the asset class we haven't talked about yet, commercial real estate. So can we get a little color from you on what's going on there in your book? You know, you have a long history of successfully investing in commercial real estate, going back many, many decades, many.
Yeah.
Right? And you've got a great team there. And commercial real estate is currently running, I think, at about 16% of total loans. And look, I get a lot of questions about the credit quality, and how are you underwriting, and. Help us understand how the 2.5% reserve ratio against the CRE book is adequate, given what you're seeing and, you know, the price action going on in the various asset classes there.
Yeah, you know, it's. As you said, we have a very experienced team in the commercial real estate space, and, you know, they're doing a great job kind of working through a difficult environment. But when you look at the portfolio, I'll come back to office at the end, most of the portfolio is performing pretty well. You know, multifamily is the biggest piece of the portfolio, a little over $40 billion of outstandings. Very, very low delinquencies, you know, almost nil. And so we feel really good about that. Now, you're seeing, you know, some NOI, some net operating income compression there, whereas expenses are up and rents have stabilized. But you're seeing, you know, the capital markets are wide open for multifamily.
You're seeing a lot of deals, you know, more deals get done, you know, a decent amount of deals get done in the multifamily space. People are putting equity in. They're able to, you know, get financing at reasonable, at reasonable spreads, and so that, that's all operating quite, quite well for our portfolio. You know, I think as you go down the rest of the asset classes, it's a similar theme, whether you look at data centers, logistics, industrial, you know, even our hotel and retail portfolios are doing well, overall. And so, so I think that's good. On the office space, you really have to break it into a couple chunks.
You know, the first is what we see primarily in our commercial bank, which are kind of a side-of-the-highway-type office buildings, smaller buildings, you know, many have recourse, many are owner occupied. You know, and those are performing, those are performing well. Much smaller, you know, size loans there as well, and that's going really, really well. Where the issues are are really the institutional office space. And, you know, there, it's a wide range of outcomes now. Some office buildings are doing really, really, really well. You go to Hudson Yards in New York City, they're doing really well. You go to Times Square in New York City, not doing as well, right?
Older office buildings that are not renovated in certain areas of different cities, you know, are the places that you're seeing the most stress. We've had some charge-off. We have an 11% coverage ratio against that part of the portfolio, so we feel like we're appropriately reserved for a range of outcomes there. It's gonna take some time to play out.
Okay
as we go.
11% against that portfolio would be?
The institutional office portfolio has about 11% coverage ratio.
Got it.
So that's the place where you're seeing the stress.
Just to lean in a little bit on this, criticized and classified was up in 1Q. Maybe you could give us a sense as to what drove those changes, and how's that tracking now?
Yeah, not a big story there. You know, it's a few things across different portfolios, but there's not a huge story in terms of you know criticized and classified. And by the way, on criticized loans, you know, it doesn't mean there's gonna be a loss.
Right.
Right? So as you go through the process, right, you know, you may mark something that's criticized, and you may take it out of that bucket, you know, in a couple quarters. And so it's a natural process you go through as you sort of look at, you know, places where you might be a little more concerned versus not. But again, it doesn't mean there's gonna be a loss there.
Right. And, I suppose the, last question here is, any loans we haven't talked about yet? Resi?
Oh, mortgage, resi mortgage. I mean, the residential mortgage portfolio is fine, right? I mean, we haven't. We're sort of net recoveries in most quarters. And so I think that's been performing well, and I think we've got a long way to go before you see a long way to go in terms of price declines before you would see any kind of stress.
Right. And we had what? Resi, I think, average home price is up 5.5% last year.
Yeah.
So
It's, you know, for the little supply that's out there, there is, there's quite a big bid, so
What about the growth side of resi? How should we think about that?
Yeah. You know, for. Well, you know, in terms of, you know, the market, I mean, there really is no refinance market at the moment. So generally, in a normal year, you'll have a decent amount of the origination market be refinance, and there's very, very little at this point. And for us, you know, we sort of—we've narrowed our focus in the mortgage business about 18 months ago. We're focused on our bank, our wealth management, and some low- and moderate-income community as sort of the primary focus for the mortgage business. And that's been going well so far in terms of the originations we're seeing there.
All right, so just to round it off on loan growth, it sounds like you're in the camp of, "Look, when the Fed starts cutting rates, maybe there'll be a little more demand, but until then, it's...
Well, I think, I think clients need to have more certainty. Rates are certainly part of it, and they need to also be confident that, you know, the, you know, the base case economic scenario is what's gonna play out over a longer period of time. But rates are certainly part of it.
So when the asset cap does come off, and I'm not gonna ask you when that is, because I know we're not in control of that, but when it does come off, where can you lean into growth?
Yeah, look, I think, you know, the many of the investments we're making today, you know, we're, you know, still are, you know, don't require the asset cap to come off, whether, you know, on the fee side, whether it's wealth, investment banking, and a whole bunch of other places, which I know we'll, we'll talk about. You know, I think the two places that were most impacted by the asset cap was our one, was our markets business, where we took the capital markets balance sheet down by a lot, you know, to, during COVID. And the other place was in commercial deposits, where we took, you know, the deposit base down a bunch there as well.
And so those will be, you know, likely, you know, areas that you'll see some growth at, at some point when the asset cap comes off, but we'll see.
Got it. Okay. So yeah, because I've been getting the question of, "Hey, asset cap coming off for Wells, is this something they can utilize, given loan growth at the industry level is basically flat?" You know. And to your point, leaning into capital markets is an opportunity set. Let's talk a little bit about that side. I think in investment banking, there's been over 50 new hires since 2019, many at the senior leadership level. So do you feel that this revenue benefit from these hires is already in the run rate, or is there more to come?
Short answer is no. I think there's more
No
to come.
Okay.
You know, so we, we've always had an investment banking business, and so we started putting more focus on it, you know, back in early 2021. And I think, as you said, we brought in a new leader. We've been hiring people in very targeted sectors and targeted areas across the product set. You know, I think that's been happening over the last couple years, and so many of those folks haven't been in their seat that long, and are still, you know, coming up to speed from a productivity point of view, and so I think there's more to come. Now, we've seen some good green shoots on some individual deals and some...
You know, we've been able to take advantage of some of the activity that we saw in the early part of this year, in the first quarter, and so that's all positive. But I think there's more to come, and as you know, the market needs to cooperate a little bit there too, in terms of, you know, activity levels, but we've got more to do there.
Okay, great. So there's a trajectory of acceleration continuing, at least for the next foreseeable future. Well, you can decide what foreseeable means, but okay. What about on the trading side? In 1Q, you had a record quarter, I think it was $1.4 billion in trading, supported by a better market, also reflecting the investments you've made. Can you give us a sense as to where you see that puck going? And is it something that you need to invest to drive, or do you have the folks in the seats and the you know tech architecture and investment spend to support in that type of activity accelerating from here?
Yeah, we have been investing over the last few years, and that's all in the context of our overall expense, you know, trajectory. And I don't, and I don't see the, you know, the investments we're making in this space changing that trajectory overall. And so, so it's all in the context of that, but, but we have been making investments in, in some people, in terms of upgrades. We've been, you know, investing in technology across some of our e-trading capabilities and our FX business and our rates business, and you can go on, on and on through each of the asset classes. But we're being very methodical about, about how we go about it, and we're not looking to change the overall risk appetite of the place. But I, but I think you'll see us continue to make...
You know, be systematic about making the investments there. We've been very focused on, getting paid for the exposures that we have across, you know, the company. Markets is a good example of that, where we're able to leverage the relationships in the commercial real estate business, in the, in the investment banking side of the house, in the commercial banking side of the house. And, and you've seen that come through in the markets results without a significant increase in risk-weighted assets in the market risk side. And so we're pleased with what we've seen over the last, you know, it's been, I guess, five quarters, where we've had, you know, solid, you know, fee performance there.
But we've got to do that over a long, long period of time, and we think there's, you know, we do think there's some more growth that we can get there.
So again, on fees, investment banking has some upside trading we just went through. What about wealth and investment management? I think you've got over $2 trillion of client assets today, and I know you're still focused on growing. Can you give us a sense of your strategies for growth and, where you expect this $2 trillion to go?
Yeah. So there's, you know, there's three or four buckets within the wealth management business that we've been focused on. You know, first is the core advisor business that we've had. You know, we're one of a few that has a, a pretty sizable, you know, business in that, in that space. And the team has been focused on, you know, first, stemming some of the attrition that we saw a few years ago, which they've done a good job at. Two, starting to grow the advisor space, and then continue to sort of build out some of the capabilities, which we largely have everything we need there. And so that's, that'll be a good story as we start to see more, you know, more advisor growth over time.
The second piece is providing more investment advice to our bank customers. We launched a couple of years ago now the first iteration of, you know, Wells Fargo Premier. That'll be an area that we continue to focus on. We've got millions of customers that are affluent in the bank system where we have very little of their investment wallet today, and if we're successful at bringing. You know, servicing them, they'll bring more banking with us. I think industry data would say, you know, you service them on the investment side, they bring a lot more deposits and lending to you as well. And so that we're in the very, very early stages of taking advantage of that opportunity there.
The 3rd piece, which is a bit unique to us, which is at least across our big peers, is we have a channel that services the independent advisors world. And so that's one of the fastest growing pieces of the wealth management market. It leverages, you know, the platform that we have for the rest of the other channels that we've got. And so that's an area that we'll continue to focus on, you know, growing, not only, you know, attracting people, you know, saving people that are leaving our advisor channel into that, in the. When they go independent, but also recruiting from others. And so again, early stages in terms of really seeing some growth there, but we're excited about what the opportunity should be across each of those channels, going forward.
Yeah, you started that independent advisor channel how long ago?
It's been a while. Yeah, we've had it for a while, a long time.
Yeah.
Yeah, but historically, hadn't put a lot of focus on it.
Okay, and now there's more focus?
Yep.
Okay, got it. I do have 2 topics to go through in our 5 minutes left.
Sure.
Expenses and capital. Two big levers of the EPS opportunity. So I think Charlie mentioned recently that your operating committee thinks Wells can run more efficiently. Those are obviously the folks that are running the businesses, saying: "Yeah, I'm in for more efficiency." Can you give us some context around how much more efficiently you guys think you can make this organization run?
Yeah. Well, first, you know, we're very happy with, like, what we've been able to accomplish over the last, you know, few years, you know, three and a half years now, where we laid out some goals, initially $8 billion, then $10 billion of gross saves. And so we executed on that, and we're quite happy. We've seen big headcount reductions. We've seen, you know, a number of things happen across the company to get more efficient. But as you look at the place, and as Charlie mentioned, you know, we still have a lot of opportunity, and it's, you know, we still have more excess real estate to get, you know, to take care of across our office space.
We still have a number of processes across the businesses and the functions that are more manual than they should be. And so it's just hundreds of different, you know, projects that, you know, are ongoing at any point in time across the company that will drive that. And so it's just, you know, consistent execution on that over a long period of time will get us where we want to get to. But we've got a lot still to do. It's
Is it within every
Everywhere.
Every commercial and CIB, the expense
Everywhere
Ratios are so good.
Everywhere.
Okay, everybody can contribute.
Everybody has something to do.
Okay.
Some more than others.
Where's technology fit into all this? I don't know if you've given your tech budget recently, but
No. I mean, technology is a part, certainly part of it, right? And I think technology can be more efficient in how they deliver, but technology is an enabler for some of that efficiency as well, depending on what project it is.
Within this year, I think you've identified, what? $2.7 billion of efficiency initiatives. With all of that being reinvested in the business. Is that fair?
Close.
Okay. And is that the kind of level that you think you can keep running at?
We'll see. You know, we'll give you guidance every year in terms of breaking out the, you know, the gross and the net, each year, but we still think there's more to do, and we'll break it out each year.
Okay. All right, excellent. And then I guess, just lastly, could you give us a sense as where those investments are going?
It's really across the board. It's people, you know, in each of the businesses that face off clients. It's digital capabilities. It's. There's a whole range of things that, you know, across each of the businesses that we're investing in new product capabilities, like card, that we talked about. So every single one of our businesses have investments that we're making to grow.
All right, and pulling it all together, in 2023, the expense ratio clocked in at about 63%. So, there's opportunity to pull that down.
It should be better over time.
Okay. And then the other piece of the expenses that people focus on or ask about, I should say, we can't really we don't have too much in the way of numbers to focus on, but, you know, the question is around the risk and control expenses. And you've been clear that, look, since you and Charlie joined in 2019, is it? Risk and control expenses did increase, for good reason $2 billion. And so the question I get all the time is, "Hey, consent orders are coming down," and so as these are continuing to roll off, are there opportunities to optimize this?
Yeah, I mean, our first priority is getting all the work done and getting it implemented in a way that satisfies us and our regulators, and I think any optimization of it will come after that. So we're not that focused on optimizing today. And so there'll be some opportunity, but that's a while, that's a way off.
All right, onto capital. CECL looks pretty similar to last year. Are there any nuances that we should be aware of for you?
No, I mean, look, it looks similar. It's a black box, and so we'll find out on the 26th.
And then, you know, based on current rules, it does look like you have a nice amount of excess capital. You know, we estimate $28 billion, 21% of your CET1. And this brings me to the buyback question, which is, on buybacks, you did, what? $12 billion last year. You've already done $11 billion this year, and I know you indicated that you'd have, you know, a more buybacks this year than last year, but maybe you could give us a sense as to how you're thinking about that excess capital utilization in the context of what we discussed on loan growth, and what the opportunity set is here for you.
Yeah, look, we go, you know, we go into every quarter the same way, thinking about what the opportunity is to serve clients. We've got an asset cap in place, too, and so we still have, we generate capital each quarter, and so we'll make a decision of the quantum that we'll give back. I think we feel good about where the capital levels are today, and so, you know, and to deal with whatever comes with Basel III and what opportunities there. And so we'll make decisions each quarter around buybacks. And I just want, you know, remind, like we did buy. You know, since 2020, we've bought back $47 billion of stock, and so, you know, we'll focus on it. It is important to us.
We've done a lot, and, we'll see how it goes.
Excellent. So as final question on the outlook here for the ROTCE, we know you have your goal in the medium term. Bringing everything together, from your perspective, what's the most important drivers that you're focused on for delivering on that ROTCE goal?
Yeah, look, we got to continue to execute on the, the work that we're doing in the card and the home lending space. We've got to. You know, we're focused on optimizing capital levels, and continuing to work there. And then we've got to, you know, we've got to focus on efficiencies and, and continue to see a little bit of return from the investments we're making. But we feel really good about getting to the 15% return. And it'll be a little bit of a number of those things that I mentioned that get us there.
Super. Mike
Thank you
T hanks so much for joining us this morning.