dance music?
Exactly. Great. Thanks, everyone. I have a disclosure to read, and then we'll get started. For important disclosures, please see Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. With that out of the way, I'm delighted to kick us off here in this room today with Mike Santomassimo, CFO of Wells Fargo. Mike, thanks so much for joining us.
Yeah, thanks for having us again.
I did want to, you know, kind of go through the balance sheet first, if you don't mind. There's been a lot of questions here about deposits, so far in the conference. Maybe if you give us an update on how deposit flows are trending this quarter, a little context around maybe deposit betas, retail versus commercial versus wealth, that kind of thing.
Yeah, you know, I'd say in short, it's a little more of the same in terms of what we've been seeing over the last, you know, couple quarters. If you sort of break down each of the businesses, you know, I think we're largely trending in line with, you know, in aggregate, we're largely trending in line with what you're seeing in the H.8 data. By business, you know, when you look at, you know, the corporate investment bank and the commercial bank, those deposits have been pretty stable for the last couple of quarters. It's good to see, and I'm sure we'll dig in some of the beta questions later.
You know, and then on, on the wealth side, you're definitely seeing, you know, more, movement into cash alts. The pace has certainly slowed over the last couple of months, but you're seeing still a little bit more move into, cash alternatives, which is, again, to be expected. Then on the consumer side, you know, the driver there continues to be, you know, people spending. I think it's still very healthy in terms of the activity levels we're seeing. We're not seeing big behavioral changes in people moving deposits around, either within our accounts or outside. Overall, it's a little bit more of, you know, the same in terms of what we've been seeing, so, which is good to see.
On deposit betas, as of 1Q2023, at least we calculated your cumulative Interest-Bearing deposit beta was somewhere around 27%, which was one of the lowest in our coverage group. Just trying to understand how you're thinking about deposit betas from here for the rest of the rate cycle, where you think it peaks out?
Yeah, you know, I'll give you a little bit of a view by business because I think that'll help you sort of, you know, maybe form an opinion on what you think might happen. You know, in the corporate investment bank, those have been the most competitive from a pricing perspective now for a while. Again, that's, you know, largely, you know, to be expected, but for that type of client base. That'll continue to be the case. We're not seeing accelerations of trends in any way, but they'll continue to be competitive as we go. We know we're not seeing big shifts in, like, custom pricing or other behaviors there.
I think we feel really good about being able to compete for the operational deposits that we want to compete for. As I said just a minute ago, those deposits have been, you know, roughly kind of stable the last few quarters, which is good. The commercial bank's a little less competitive from a beta perspective. Again, there, we haven't seen the shift, that any real significant change over the last few months in terms of behavior there. We're not seeing this pressure build in any way on pricing.
Then when you start looking at the consumer side of the business, we moved pricing on the consumer side last year, at the end of last year, in the fourth quarter. We haven't seen big shifts in pricing at all there, since then. Overall, similar to what we just talked about on deposits, a little bit more of the same in terms of what we've been seeing over the last few months. Not big accelerations either way.
Charlie did mention recently that you've barely grown deposits in your consumer business, and, that's relative to what peers have done.
Mm-hmm.
Is that something that matters to you? Is that the outcome you're looking for?
Well, I, you know, I think you know, you have to remember kind of what we've been focused on for the last few years, and we've been, you know, a little more inward-focused, you know, working on all of the risk and regulatory remediation. We've had the asset cap to deal with at different points in time, you know, where it's been more constraining over the last, you know, few years. We haven't been out there in a big way marketing, like maybe others have done over the, you know, over the last 3 or 4 years. That's what you see when you're, you know, not being as proactive there.
Having said that, you know, we've been focused at the same time at improving our digital capabilities, and you've seen that kind of roll out, you know, over the last year and a half, and it gets, you know, we make it better every single quarter. We've been, you know, continuing to work on, you know, some product simplification and experience, you know, for customers. You know, while we haven't been out there proactively marketing in a big way, we've been working on all of the capabilities we think, you know, are going to be really important to stay, you know, competitive with folks.
Over time, we'll do more and more proactive marketing, and I think, you know, we've started to do more of that this year, and I think you'll see that build over time.
The last question here on deposits is, what about deposit durations? Are you thinking at all about that differently or?
Well, I think everybody, anybody that's in a position like mine at a bank these days needs to be thinking about those types of things. Again, you know, we're not, you know, I don't anticipate us significantly changing our points of view. You know, when you look at each of the different kinds of deposits, you know, the durations are a little shorter on, you know, commercial deposits. They're a little longer on consumer deposits. I think you need to be really thoughtful in different rate environments and how those durations change. A lot of that's embedded in all of the work that we already do and have done for a long time around sort of modeling that stuff.
I don't, I don't anticipate, you know, wild swings in terms of perspectives on that. I think that, you know, that's, you know, that's not a great place to be if you start having to, having to do that in a significant way. You know, I don't anticipate that, but it's something we continue to think more about.
Just because it has implications for how you invest it in the assets.
Yep.
That's where that comes from. Moving on to liquidity. Recently, I think Charlie was mentioning that you're reviewing your liquidity assumptions. I wanted to follow up on that statement and understand, you know, what he meant by that, what you're doing, because your LCR ratio is already very high at 122%. Trying to understand how you're thinking about that level.
In addition to what we have to do for the LCR or the NSFR, you know, other all the regulatory calcs, we also do a whole bunch of modeling inside, you know, the firm. You know, you call those internal liquidity stress testing. And those models, you know, are very granular and look sector by sector, deposit type by deposit type, you know, business by business, et cetera. And you have to sort of really, you know, and you're using these models to look at different scenarios that sort of stress the liquidity of the firm.
Given the environment we all just went through over the last, you know, three months or so, you know, again, everybody should be sort of looking at those models to say, "Okay, did I get it right? Is there something changing in the environment that might influence how you think about that?" Again, I don't anticipate significant changes there, but you have to reflect in an environment like this to make sure you're getting it right. You know, for us, you know, a lot of the experience that we use is actually real experience from the Wachovia issues back in 2008.
I think the big difference between what we saw there and what we saw now is the velocity of deposit outflows that some of the banks saw, you know, in March. You have to reflect on that and say, "Okay, should I tweak things or, you know, turn the dial a little bit here or there?" I think, you know, we feel really good about those models, and the Wachovia experience was actually quite severe when you really dig into it. You do need to reflect on it to say, "Okay, should I tweak something at all?" I don't. Again, I don't anticipate significant changes there, but everybody should be looking at that.
should we expect, therefore, a little more HQLA in the mix?
Not, not maybe not, but it's not significant.
Okay. All right.
in terms of changes.
You're on it. That's what you want.
Yeah
reflect.
Yeah.
Okay.
Well, I think that's everybody should be. You know, again, if you're running a bank these days, like, that's part of the job, is to take, you know, the experiences that you're seeing around you and really think about it, reflect on it, and make sure you're incorporating what you need to in sort of the way you're modeling things.
All right. Let's turn to the loan book here, the asset side of the balance sheet. you know, sequential loans were flat in 1Q 2023. I just want to understand what your positioning is here. Is there an opportunity to lean in, or is demand just so weak that there's, you know, we should expect that loans could go negative Q-on-Q this year sometime?
Well, I think the H.8 data would say loans are kind of close to that right now, right? When you look in aggregate across the industry. I think that's certainly a possibility. you know, in an environment like this, it's not really prudent to sort of try to expand your aperture and your credit box in a significant way and try to go get share. It's just not a real great way to manage. I think for us, we've got a pretty well-defined risk appetite, and we're going to stick to that as we go through an environment like this. As you look at each of the portfolios, you know, you're definitely seeing a little less, you know, demand in some cases.
You know, you look at auto, we've done some credit tightening there, our originations are down, plus you're seeing a little demand, you know, shifts happen. You know, originations, you know, are much lower than they were a year ago in that business. You know, we all know what's happening in the mortgage, and housing market in terms of that impacting sort of the, you know, volumes there. On the commercial side, you know, there is still some demand on the commercial side in certain sectors, in aggregate, you know, there's, it's not likely that you're going to see, you know, big growth in loans.
Maybe you could help us understand how card's going for you, because I know you've been leaning in there a little bit. Is, you know, anything you can share with us with regard to consumer spending that you're seeing in card, payment rate, and is that at all a bright spot on loan growth?
Yeah, I mean, I think, you know, the card business is going really well for us. You know, and as we've talked about maybe in other forums, you know, we knew we had an opportunity, when the management team got there, to do a much better job running that business. The new management team came in the end of 2019. We've launched five new products, over, you know, in that time period. We've seen really good, you know, growth in new account originations across those products. Still early days in the card, you know, in the cycle that you go through when you're launching new products, but we've seen really good activity.
If you look at what's happening in April and May, you know, card spend is up, you know, double digits, you know, close to 10%, you know, in April and May. Some of that is a result of the work that we've been doing, you know, in getting the new products out there. So
That's your own book?
That's our own book.
Year on year.
Year-on-year, spend. You know, doesn't always translate into revolve, but, you know, that is the point-of-sale volume, that's increasing. We would expect some, you know, a little bit of growth in the card outstandings as we go. We actually feel really good about that, and it's performing well.
Okay, great. Then just lastly, on loans before moving to securities, anything to speak to about loan spreads or loan betas?
It's still a little early in terms of looking at spread widening. You're certainly seeing little bits of widening across different portfolios. I think if you go in the middle market business, you're really not seeing a ton there. It's still a very competitive space, lots of demand for those clients. If you look at the asset-based lending and leasing in a commercial bank, you see a little bit more spread widening. You see in some portfolios in the Corporate Investment Bank, you see a little bit of spread widening. It's not massive at this point, but you're starting to see a little bit of it.
Okay.
Yeah.
On securities, is there any change to how you're thinking about duration or composition?
Not a lot. you know, I think we feel really comfortable about where we are. you know, and, you know, the securities portfolio for us is an outlet for liquidity when we don't have when we don't have enough, you know, growth in loans. That's certainly part of it. you know, we've spent the last, you know, few years, repositioning parts of that portfolio. In, you know, 2021, we sold a corporate debt, you know, allocation that we had. We've upgraded some of the CLO exposure in there over the years. We've spent a lot of time, working on that portfolio, and at this point, we feel really good about where it's positioned.
Turning to asset sensitivity, putting this all together, are you tilting a little more asset sensitive because net-net card growth is up or?
Well, I think in aggregate, as rates continue, you know, to increase, you get a little less asset sensitive as rates get higher. We are still asset sensitive at this point. You can see all. You know, we'll obviously update all of the numbers in the Q when it comes out.
Just on NII, maybe you could talk a little bit to how you're thinking about that NII outlook in a higher for longer environment compared to, you know, a sharply lower rate. You know, that's obviously the two tails that people are thinking about.
Yeah. I mean, you got to be prepared for both, right? You know, being asset sensitive, you know, as rates, you know, rise, you still get some benefit, you know, as rates go up. The longer rates stay higher, you're going to see, you know, deposit pricing, you know, increase with that. There'll be some offsets as you go up, and you'll get less and less benefit. On the downside, you really need to be, you know, thinking about how to, you know, how to protect yourself there as best you can, but it there are no perfect solutions there.
Hedges?
Yeah, for sure. We've done a little bit of hedging. You know, rates have been very volatile over the last, you know. That's probably the understatement of the year, but rates have been very volatile over the, over the last number of months and quarters. You know, as we think we've got good levels to, you know, to put on some swaps, we've done a little bit.
Maybe at this point, you could give us an outlook for what you're thinking about NII. At earnings, you guided NII to be up 10%, I think, year on year in 2023. Given what we just discussed, has the outlook changed at all, if any?
Yeah. Maybe I'll broaden that a little bit because I know there'll, you have a few outlook questions, maybe I'll just kind of cover it once and, you know, be done. You know, when you think about NII, as you said, we said up, you know, 10%, in the beginning of the year and reiterated that in April. We still feel very comfortable with that number. As we said earlier in the year, you know, we were hopeful there was going to be upside in the second half, depending on where deposit pricing and deposit levels ended up.
I think as more time goes by, we're more and more confident there'll be some upside, you know, some upside to that, and we'll put a little finer point on that as we get on earnings in the next 4 weeks. We do expect there to be a little bit of upside there. Then the other points I know, you know, everyone's interested in are, you know, the allowance and expenses, and so I'll cover those as well. On the allowance side, you know, I think as you look at what's happening in the quarter, you know, the economic scenarios aren't really changing that much in terms of the different, you know, scenarios that we've got to look at.
You know, a little, but on the margin, that's not really driving, you know, increases or decreases one way or the other. Really, there's two things that we're thinking about, you know, for the quarter, and our work's not quite done yet, so I'll give you some directional view of where it may go. You know, first, as we talked about card, we are seeing some outstandings in card growth, given the way CECL works, like it or not, you know, you're going to book some upfront as card as your card outstandings grow. That'll certainly be a driver there. The other piece is commercial real estate, you know, and particularly office, that we're spending a lot of time on.
As more and more time goes by, you get some more information, and we can refine some of the dials, you know, in the models. Those, you know, those, you know, as you refine those dials, you know, you know, you'll have to likely, you know, reserve a bit, a bit more to hopefully get ahead of, you know, whatever losses could come over time. When you look at that in aggregate, you know, we booked about a $650 million allowance increase last quarter. You know, it could be a little higher than that, could be closer to $1 billion, depending on where it all shakes out.
Hopefully, that helps us get ahead of things a little bit in terms of, you know, where that may go. Doesn't mean, you know, doesn't mean you lose money necessarily, but given the way the accounting model works, we'll have to... You know, there'll likely be a little bit of an increase. Lastly, on expenses, you know, as we look at, you know, the work people are doing across the efficiency agenda, we feel really good about all the activity that's happening. The disciplines are there. You know, we continue to, you know, execute well on all of that stuff. You know, the one point that we're thinking about now is that, you know, attrition has slowed a little bit.
In order to get some of our efficiencies, we may, you know, we may have some additional, you know, one-time expenses, like severance, to make sure that we hit our run rate that we want to get to by the end of the year in terms of people. That's something we're thinking about now. The other piece is we're having some opportunities to accelerate some savings in places like our property portfolio, you know, our own office portfolio, there may be a little bit there. That could put a little upward pressure on the $50.2 billion, but we feel good about the core efficiency work that's happening there.
It's just a matter of, like, you know, can we accelerate some of the things that we're trying to do to, you know, get the run rate where we want, given attrition slowed? I think in aggregate, you know, you look at, you know, the allowance, and you look at expenses, and then you look at, you know, the likely upside on NII. That's, that's how I would think about, you know, overall where we are at this point.
Got it. Just one follow-up on your point on the work you're doing on your own real estate. You're talking about potentially exiting and taking some lease charges-
Mm-hmm.
this year to prepare for a better
Yeah.
-rate next year.
Yeah, exactly.
Okay. All right. While you're on the topic of credit and reserving, maybe we could just talk a little bit about what you're seeing and thinking and doing with regard to standards. Is there any incremental tightening going on? Maybe talk a little bit about how you're working with the consumers that are in a little bit of a tougher spot, the 660 and below.
Yeah. You know, like, we've been on the margins tightening in different portfolios for the last year and a half or more. That's an ongoing discipline that I think we've talked about a number of times in different forums. You know, I'd say it's all still on the margin, you know, you know, generally speaking, that we're sort of where we're looking to do that. As you get more info and where there's risk pockets and different combination of risk factors, you're gonna look to do that. You know, in some markets where you've seen more price depreciation in the mortgage market, you're gonna have, you know, LTV, you know, caps that you put in place and, you know, in the auto business, looking at different risk factors.
I think there's a number of things that we've been doing, and that we'll continue to evaluate as we go. I'd say for the most part, it's still somewhat on the margin. We still feel really good about the core, you know, credit underwriting box that we've had for a while. You know, on the consumers that have less, the FICO is less than 660, it's a relatively small piece of consumer exposure that we have. I do think those consumers are definitely feeling more stressed than others.
I think, you know, that's just, you know, to be expected given the cumulative impact of the inflation that we've seen over the, you know, over the last, you know, few years. You're seeing, you know, definitely, you know, the divergence in payment rates and other factors that are driving that. You know, obviously, you know, we continue to look for ways to, you know, support clients like that. We've introduced new products like Flex Loan. We've worked on, you know, many of the things we're trying to do around early payday and some of the overdraft changes that we've made over the last year and a half. We'll continue to try to do that.
One area we get a lot of questions on is on the non-bank financial exposure that's in your C&I book. I think it's around a third of C&I loans.
Mm-hmm.
I realize the capital call lending piece is relatively low risk, and that's about a third of that book. Maybe you could speak a little bit to the credit quality and the rest of the book there, commercial finance, real estate finance, consumer finance.
Yeah, I mean, look, so far it's been performing quite well. You know, we've got really good attachment points in those portfolios. We've got very experienced teams, very low loss history over a very long period of time. As you pointed out, about, you know, 40% of that is to asset managers, with the biggest piece being, you know, capital call or subscription finance, you know, facilities, which have performed quite well. You know, another third of that is, you know, kind of commercial finance, you know, some of the asset-backed lending that we do, including the corporate debt that, you know, that we lend against. We feel really good about the team and the way they do the underwriting there, so far it's been performing really well.
Just lastly, you touched on reserves going up earlier in.
Mm-hmm
... your comments about the outlook for the quarter, you know, question here is on commercial real estate exposures. When you're thinking about the reserving you're doing this quarter and the skew, I would expect us to, you know, the commercial real estate book, which already has a coverage ratio of around 6%, I think, as of 1Q. You know, we're now looking forward to that going up a bit, I would assume, as we go into 2Q?
Yeah, I think that's likely, you know, gonna increase a little. I think that's, you know, normal given what we've been seeing like in that, in that market. Keep in mind, the book has performed quite well, actually, since, you know, through the first quarter. As Charlie said, and we've said over and over, like, we will see some losses in that portfolio. You know, and the accounting construct, really, you know, you know, you gotta really think as you get new information, how that impacts what you think the life losses could be. So that's likely to be one of the drivers that brings it up, as I said earlier.
In your office space, you've got, what? 80% in Class A, right?
Yep.
And-
In the commercial, in the Corporate & Investment Bank, about 80% of it is Class A. I do think, and I said this in earnings, I do think you have to keep that in perspective, right? That's one data point. You have to look at all the other data points around, you know, the Class A building. Is it new? Is it occupied? Is it renovated? All the other factors that go in, where is it? You know, have to go into sort of the calculus around how you think about each of the underlying properties that you got in the portfolio.
Okay, great. See if there's any questions in the room. All right, I'll keep moving on. I do wanna just talk a little bit about fees. You've got, you know, some pretty important fee lines here in deposit services, trading, mortgage banking. Can you give us a sense as to how you are anticipating these fee line items are likely to be moving?
Well, I think a lot of the, you know, if you, if you take each one of them, you know, piece by piece, on the deposit side, a lot of the changes we made on overdraft and non-sufficient fund fees and things like that, all are in the run rate and have been in the run rate now for a couple quarters. Really what's gonna drive that are activity levels that we're seeing across the consumer, the consumer base, and activity has been pretty, you know, pretty good overall. You know, the mortgage market is the mortgage market, so you know, I don't anticipate that changing in the next couple of quarters, but we'll see as rates go, and it's been pretty, it's pretty depressed relative to where it's been for a while.
you know, on the trading side, you know, we'll, you know, it's obviously somewhat dependent upon what's happening in the market, but we continue to feel good about the investments we're making there, you know, in places like rates and FX, where we've been just systematically, you know, investing in those businesses. We feel good about the performance there. You saw some of that come through in the first quarter. The equity markets have been helping support what we're seeing in the advisory fee line as well, which is a big driver for our wealth business. We'll see how that ends the quarter.
In banking, I know you recently made some strategic hires, including a new head of, co-head of M&A and head of a financial sponsors group. Just wanted to understand how far along you are in your plans to add headcount to banking and where you're seeing some opportunities of growth. Obviously, right now, the environment's a little light year-on-year, but, maybe your additions will change that for you specifically.
Yeah, a little light. That's probably the most optimistic somebody has talked about investment banking fees in a while. The, you know, look, I think, you know, as you know, you have to really think about investment banking over a long period of time, and you need good consistency of high-quality coverage and good, you know, people from a product perspective, and that'll drive fees, you know, over a period of time. You know, the investment banking business is an area that we've talked about for a while now, where we felt like we've got good opportunity to do a much better job covering not only our mid-corporate, middle-market clients, but you know, the large corporate space where we play as well.
We brought in a new leader last year, I think May of last year. We had a new leader join us, Tim O'Hara. We've just been systematically going through each of the areas to make sure that we've got the right people in the right places. We've been really, really pleased with the quality of folks that we've been able to hire from really across of a number of firms, you know, including the roles you mentioned. I think you'll see us continue to just systematically, you know, make sure we've got all the right people in the right places.
Over a long period of time, you know, we will certainly see that fee pool recover at some point, and hopefully, we'll be well positioned to participate there.
Okay. On mortgage banking, obviously, the correspondent, you've exited ED, it's already done, and in the run rate of revenues, or is there still some pressure there from that exit?
No, I mean, correspondent is largely done. There's a little bit of volume that will come through in the second quarter, but largely done.
Anything with regard to how your mortgage banking strategy is gonna, you know, go forward from here? Anything else that you'd wanna highlight?
You know, and I'll just kind of remind people, like, where we, you know, what we, what we did. You know, in January, we announced the exit of correspondent, and then we also talked about simplifying our servicing book, which means making it smaller over time and less complicated, and really refocusing our efforts on our consumer and wealth clients, primarily. There'll be more than that, primarily our consumer and wealth clients, and just providing a really high-quality experience and then making sure that we get, you know, the scale benefits on the servicing side. You know, I think over time, that business became too complicated.
Our, you know, our goal is to be, you know, have a really well-run business with a great experience that's high returning and drives really good, you know, relationships across those businesses. That's the plan. You know, on the servicing side, it takes time. That's not something, you know, you transform in a day, and so that'll happen over a period of time. As you said, the correspondent work is largely done.
Let's move on to expenses, an area that investors are very focused on with Wells. I think Charlie mentioned recently there's still a, quote, "huge amount of inefficiency," unquote, across the bank. Maybe we could unpack that statement a little bit and see where are those efficiencies, how you're addressing them, and timeframe for execution.
Yeah, you know, when we started this journey back a couple of years ago, it'll be almost 3 years at the end of the year. You know, we knew that there was a big opportunity. I think we laid out some goals, and we'll exceed those goals by the end of this year in terms of the gross savings that we've got. As you mentioned, we still think there's a real big opportunity to drive more efficiency. I would say there's almost no place in the company that's done, you know, and that is as efficient as it should be. So I think to varying degrees, there's work to do everywhere.
I think largely that'll be the case for a while, right? This is not something that you solve in a quarter or two or even a year. What we've been equally focused on over the last couple of years is embedding the disciplines that we wanna see come through, you know, from all of our management teams across the company to really every quarter, every month, they should be looking at, you know, are they executing on their investments? Are they driving the efficiencies? What else is next? How do they continue to unpeel the oven or onion? Continuing to do that. I think it'll be something that just, you know, is a continuous effort that happens that happens over time.
I think we feel really good about what we've been able to do. You know, we've taken our headcount from a peak of roughly 275 to around 240 last quarter. You know, that's a significant change over, you know, over just a couple year period. You know, we're continuing to work on, you know, all the third-party spend, and so I think we feel good about that there's more to do, and it'll just happen over a period of time.
That's at a time when you are also increasing, what, around 10,000 people for regulatory and risk work?
Yeah, that's about $2 billion a year, you know, as Charlie mentioned in his letter, in shareholder letter. We've increased the spend that we've got there. By the way, we continue to make investments across each of the businesses. You highlighted the people in the investment bank. We're also making, you know, investments in our digital capabilities in consumer and the commercial bank, you know, so you really have to be able to do both as we go forward.
All right, two last questions, one on capital, one on strategy. On capital, you know, you've got tightening loan standards, you're exiting some businesses, right? The MSRs shrinking. It seems like you're freeing up capital. You've got CET1 already well above regulatory management buffers. Can you give us a sense of, you know, room size to increase buybacks potentially from 1Q 2023 pace?
Well, you know, I think, you know, first priority for capital is always to support clients, right? We do want to make sure that we're always in a position to, you know, support clients as they need it. That's always going to be the first priority. You know, you have to look at all the things happening around us. You know, we're weeks away from CCAR results. We've got, you know, Basel III, you know, finalization coming, you know, at some point. You've got... There's a lot of things that, you know, you've still got a bit of an uncertain economic environment.
You do need to keep it, all of that in, you know, in your thinking around, you know, what you're going to do for your capital. As you said, that, you know, we ended the quarter in a very good place, you know, 160 basis points above where our reg minimum plus buffers is. As we've said, you know, a couple of times, you know, earnings and a couple of weeks ago, we have been in the market buying back stock this quarter. We'll make the decision on a quarter-by-quarter basis as we go.
What about the dividend? Your payout ratio is in the low 20s%, and pre-COVID, it was 35%-40%.
You know, I think we've talked about that a little bit. You know, I think over time, you know, we would expect the payout ratio to be higher than where it is today. That's got to be on what you think a normalized earnings number might be. Ultimately, it'll be a decision for the board. It is an area that we spend a lot of time on.
Okay. Lastly, as you think about how, you know, not just the next 12 months, but beyond, as you know, get out of the consent orders, I'm not asking you when that's going to be, but as you exit from those, how would you think about leveraging the franchise differently?
Well, you know, I have to start with our first priority is, like, the risk and reg work. That's, you know, going to be the case until we're done. I think we're, you know, we continue to do everything we can to execute well on that. Then I think for each of the businesses, we've got plans across every single one of them to continue to make sure that we've got the right people, we've got the right capabilities, and that we're systematically sort of investing across them. We've talked about the investment bank, we've talked about cards. You know, we've got our wealth business, where we've been making investments.
In the commercial bank, making sure we've got coverage in all the places we want, and the product capabilities in all the places we want. Each business, you know, has a plan to continue to not only, you know, have really great products and capabilities, but grow over time. I think that's just. You know, that'll take some time to see the results, but I think we feel like those plans are, you know, becoming more in focus for each of the businesses.
As that happens, we could see the, you know, growth rate in those businesses accelerate potentially?
Well, you know, that's a big what if, right? You know, I think there's a lot that would go with that in terms of what the economic environment is and everything around it. Hopefully, you know, you know, assuming, you know, conditions, you know, are supportive, we would hope to be able to take advantage of the opportunity in each of those businesses over a period of time.
All right. Great. Mike, thanks so much for joining us this morning.
Thank you.