The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst
: John, I was just wondering if you could help us with lots of the moving pieces that's sort of unfurling in front of us. So -- just I guess
the first question is, you noted stability in the 3% -- at 3% level. Does that mean that fourth quarter 2024 will be at about the third
quarter level? I'm just wondering sort of how those dynamics play out in terms of what you expect for how the balance sheet trends
for the rest of the year. Or will sort of the runoff continue to pressure it at that level? And what is that -- what does that fourth quarter
NII about look like from a range perspective?
Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst
: '23. I'm building off of '24, John.
Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst
: Got it. And so as I think about the fourth quarter, is it fair then to say that your guidance implies NII of $1.52 billion for the third
quarter? So do we assume that we're at or around that range for the fourth quarter? And as we think about the puts and takes of
2024 -- and John, I have to bring this up because a few investors were noting, I think now it's Slide 31, where you have some swaps
rolling off that have very heavy weighted average fixed rate that you're receiving.
So as I think about $1.52 billion perhaps as a starting point, plus or minus, I assume that the -- your guide for down a 100 basis points
NII for full year down 1.2% is still valid if we assume rate cuts next year and includes those swap roll-offs. So that's sort of the first
question.
And the second is, how does balance sheet optimization impact that sensitivity? So I'm assuming that's extraordinarily static. So --
and I'm assuming that from both sides, you're paying off more debt next year as you're awaiting for these loans to come on and then
your -- as you wait for these loans, you're also putting it in higher yielding -- in cash. So if you could just help us think through the
moving pieces as it relates to that original disclosure because I think investors are thinking about the potential for rate cuts next
year.
Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst
: Got it. And just to wrap it up, just because I got a few e-mails to clarify, and I'll step aside. It sounds like your sensitivity hasn't changed.
So whatever that fourth quarter number is, which is stable to third quarter, the down 1.2% and down 100 is still valid. But then the
balance sheet optimization will get you closer to stable despite Fed cuts?
Question: Erika Najarian - UBS Investment Bank, Research Division - Analyst
: Yes, Bruce, that private bank lift-off is a boss move. I think everybody just wanted to figure out what that runway looks like. And I
think this conversation we just had clarified that run rate.
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