PNC
#Yes, that is a fair question.
You know, internally we probably think about it just in terms of the way we organize ourselves from call it $30 million to $50 million up to $500 million, practically it is $50 million to $1 billion ---+.
In terms of annual revenues (multiple speakers).
Yes, sorry, annual revenues.
So our sweet spot that kind of fits our product set and that we target is $50 million to $1 billion in revenues.
Having said that we have a number of clients given our treasury management capability and some of the specialty products we have in [TM] that are obviously much, much larger than that.
We have actually grown it faster by every measure into our newer markets.
It is just as competitive.
But I think having an alternative offering in some of those markets, bringing the other products that we can to bear, particularly in the treasury management side, makes a difference.
So having great teams of people that are a combination of terrific people we hired during the downturn and legacy PNC employees that we moved down there.
So, no, in the end we're actually outpacing our more mature markets in the newer markets.
And some of that just is reflective of a smaller base (inaudible).
Well, I think you have to be careful to not just focus on loans.
So one of the things we look at internally a lot is our loan growth versus our total revenue growth inside in the CNIB space.
You can't have a sustainable environment where you are growing loans at 10% and your revenue at 1%, which if you dig through some income statements you will see a lot of people doing that.
So we focus a lot on making sure that we are growing total revenue at a pace that is commensurate with the capital we are deploying, which I think ultimately allows us to provide a good return to our shareholders.
I think people who are chasing loan growth and the thing that ultimately changes is they realize that is not sustainable in terms of providing a return on equity to shareholders.
I don't know that people have figured that out yet.
But lending only relationships in the middle market space, if that is your business plan, without a product set to support it I don't think is sustainable.
He is so happy that you asked that question.
Yes, I am glad you asked that question, <UNK>, because the $54 million really reflects the total first half 2015 activity.
It is a lumpy business, so virtually all of our ---+ so our tax credit business in the first half of the year we did in the second quarter.
The best number that I can give you for the full-year number is $80 million, which is our budgeted number that we budgeted at the beginning of the year.
Again, it is a lumpy business, so we could do a little bit more than that, we could do a little bit less than that.
But that is not a number that you would annualize.
For some context, total tax credits in 2014 were $75 million, so that fits in with that $80 million.
And also, <UNK>, just on that, that is ---+ the $80 million is what we use for the math to give you the guidance on the effective tax rate of 26%.
So that is why you will see (multiple speakers).
So probably your next question (multiple speakers).
That is right, that is right.
Yes, we are ---+ in terms of securities on and securities off, they are getting very close.
So that in the end we will start to lose that bleed as long as the long end stays about where it is.
Part of what you are seeing though of course is just the build in cash.
So the drop in NIM simply is a function of the build in cash, which is sitting earning 25 basis points at the Fed.
Well, on the money market side it shows up in the retail segment, they are all LCR friendly.
All good there.
All good.
And we have been pleasantly surprised and tracking aggressively obviously the retention of new money, new clients.
Interestingly the balances for new households are higher given our product offerings than they have been in our history, partly changing our checking account mix.
As it relates to operating deposits for corporates, they are less valuable to us from an LCR standpoint.
They are still valuable and we still obviously have room on our leverage ratio and the ability to hold those.
So inside of our corporate space it wouldn't surprise me at all that we are getting some growth in corporate balances that is coming as a function of some of the others that are constrained pushing those away.
In its simplest form we are simply suggesting we are going to continue to do what we have done for the last ---+
Maintain the trajectory.
---+ yes, couple of years.
And each one of those line items kind of drills down to a specific business plan that doesn't assume heroic assumptions to be able to accomplish it.
On the corporate side the growth you are seeing, and we have talked about, is coming on the back of cross-selling all the new clients that we onboarded during the crisis.
We had 10% compounded primary client growth in CNIB for two or three years running during the crisis that were largely lending only relationships.
We now have the ability to monetize that through cross-sell.
In the retail side it is on the back of the continuum change of what we did with product offerings, the elimination of free checking, the continued growth in merchant, in debit, in credit card where we're underpenetrated.
In wealth it's (technical difficulty) repeat what we have now done for five years and using the rest of the organization to refer business in cross sell.
So we are ---+ there is nothing heroic in there, we are just hitting on all lines of business against this general notion that we put forth as a Company that we want to be less dependent long-term on net interest income to drive this Company and be able to get back to a more historical balance that we used to run at in terms of fees and net interest income.
So we just prioritized it and people get it is important.
We like the 10-year a lot better at 240 than we did at 179 or wherever it hit towards the end of the first quarter.
I think ---+ and I listened to the conversation you are talking about.
Look, I think at the end of the day the long end is going to have a slow grind higher.
We have deployed, as you saw this quarter, a little more cash into the securities book.
We are never going to make a single big bet, it is not who we are.
We are going to increment our way in as rates change here.
And we have a large opportunity to do that relative to the way we are invested today.
One of the things that I should have mentioned when we talked about loan growth is our residential mortgage holdings on the whole loan side, which are obviously also a form of fixed-rate duration.
While we keep kind of jumbos in some of the production from our mortgage company it is a lot smaller percentage, and an opportunity for us, but it is a lot smaller percentage today than many of our peers.
So we have a lot of ways to play here.
I think by and large nobody is expecting a massive selloff in the long end, there is more value here today than there was a quarter ago.
And even on the mortgage side some of the adds we did were actually in mortgage backed securities.
The OAS spreads on mortgage backs are much, much wider than they were three months ago, so there's an opportunity there.
<UNK> wants to jump in here a little bit too.
<UNK>, you and I have spoken about this a little bit.
First and foremost, nobody knows so we will see.
What we've spent a lot of time on is just being and planning for all sorts of outcomes, recognizing that it has been a long time since we have had an interest rate increase.
And that consumer behavior could be substantially different here 11 years later, particularly around the LCR, the attractiveness of deposits on LCR over and above the margin.
And then of course the increased technology which allows consumers to move deposits from bank to bank a lot more easily than they could have 11 years ago.
So I don't have an answer for you, but I do know that we plan around it obsessively.
That is a priority of <UNK>s and we just have to be ready to go with however the scenario plays out.
I think missing from some of that analysis is ---+ go out and look today at where teaser rates are on new deposit money markets.
They are well over ---+ there is offers out there for a percent ---+.
Or higher.
Yes, so they are well over where rates are today meaning that the beta is 3x already.
The question is as rates rise are those teasers going to go straight up on top of that out of the gate, probably not.
The other thing that will lag is interest-bearing business accounts and so forth will probably lag somewhat.
But I think the core consumer interest bearing accounts given the demand for LCR friendly deposits, they are going to move pretty fast.
And we have got to be ready for that.
No, we are going to ---+ look, we and the rest of the market are going to feel our way around to figure out what is going to move balances or not for the first movement.
So it is not as if we instantaneously change all of our prices, if that is what your question is.
I just think we have proven ourselves because we have had leading offers in the market to grow deposits to complete our LCR process that money moves with slightly higher offers.
And not everybody in the market is LCR compliant.
If in fact deposits shrink in the system because QE goes away and/or loans grow, then (technical difficulty).
---+ technology issue.
So we will answer <UNK>'s question and then ---+.
This is <UNK> and I think I was the one who was talking about that.
I actually don't know the percentages down there, but they have got to be higher.
Yes.
I think they're materially higher.
A little bit high.
It depends on what period you are looking.
From the start materially higher ---+ still higher but not by as much as we mature.
That is a good question.
The change that we made was a reaction in April when we pushed back those rates.
If rates don't rise in 2015 in that September hike, that is really not necessarily expense related.
We bracketed that around in terms of NII, it is not a huge number.
The bigger issue, as <UNK> pointed out, relative to 2016 and beyond in terms of the gradual rate rise, that is a much, much bigger impact to our revenue.
Thank you.
