And one of the reasons why we added the slide we did this quarter in terms of — detail there was to just provide more transparency into that. We’re around 50% fully variable. So you’re seeing benefits of higher rates come through on that portfolio. Another roughly 10% in shorter durated fixed indirect auto. As I just noted, we’re seeing really sizable increases in portfolio yield there. Another 10% in arms with a five-year duration, which we’re gradually seeing that come through. In the higher for longer scenario, every one of those fixed asset categories, including the longer durated remaining third of the portfolio are really seeing the benefit and we’ve seen just in Q3, 50 basis points increase in the coupon yields across the portfolio, greater than 20 basis point increase in back book portfolio yields.
And I do think that will continue to trend here be more than a key drivers for NIM stability and growth as we go into 2024. We’re not seeing any substantive portfolio-wide credit-driven yield repricing [indiscernible] and really, it’s much more fundamental as I noted.
Steve Steinour: Ebrahim, just to add, we’ve got a very diversified portfolio. We’ve been very disciplined with our aggregate moderate to low risk appetite over the years, you’ve seen us report quarterly since 2010 on the consumer book, which is super prime, prime auto and resi, et cetera. So we’re sitting in a position we feel is strong, we have confidence in the portfolio and our ability to manage through even in a tougher cycle. And as we’ve said to our customer base, we’ve got a relationship orientation. We’re here to support them, and we will — we’re in a position to do that with our reserves, our capital, our robust liquidity and that leads us to this stance of playing offense and moving share during these next couple of years.
Ebrahim Poonawala: Got it. Thank you.
Steve Steinour: Thank you.
Operator: Our next question is from the line of Scott Siefers with Piper Sandler. Please proceed with your question.
Scott Siefers: Good morning, everyone. Thanks for taking the question. I just wanted to clarify if I heard correctly just on the NII. Are we expecting it to grow full year 2023 — pardon me, full year 2024 over 2023 or just positively off the fourth quarter base?
Zach Wasserman: Well, Scott, a great question. [indiscernible] to clarify both [indiscernible] trajectory of growth out the year and on a net basis, full year growth as well, which is going to be a function of flat to rising NIMs and been pretty comparable overall full year NIM year-on-year as well as growth in earning assets and loans.
Scott Siefers: Okay. Perfect. Thank you for that. And then I wanted to kind of revisit the cost equation a bit. Maybe on the initiatives that you began in the third quarter, maybe just some thoughts on how substantial they are? And I guess ultimately — I guess the question becomes, we’ll have about 4% expense growth despite these initiatives sort of begs what cost growth might have been without them. So just any sort of further thoughts on exactly where we’re investing, what this will ultimately end up driving et cetera.
Zach Wasserman: Yes, terrific question. [indiscernible] to expand on that. If I think about the equation that we were managing in 2023, we’ve been seeing around a 2%, 2.5% underlying expense growth. And that’s with the benefit of significant efficiencies that we’re generating this year. I estimate that’s around 1% benefit in expenses in 2023 for these cumulative initiatives we are running for the last six, 18 months and self-funding underlying investments. We’ve talked about this model before, driving efficiencies is the core, keeping the underlying core at a low level with the funnel and outsized level of investment and expense growth into key investment earnings like tech, marketing, new additions of personnel to support new strategies, those underlying investments are up almost 20% in 2023, which is what we will hold the competitive capabilities that we’ve got.
As we go into — that model is what drove the overall roughly 2.5% growth that we saw in 2023. I think what we’re seeing as we go into 2024 is roughly similar sort of underlying expense management program, really modeling down somewhat the underlying adjustments in light of the environment, clearly, but also bearing some modest incremental impacts of just the cumulative inflationary environment and the efficiencies will rise as well. And so, the net kind of underlying run rate that I would have expected into next year is around 2.5%. And then on top of that, we are accelerating, again, these investments in regulatory response, risk management capabilities that represents the additional 1.5% expense growth as we go into next year. That’s the 4% trajectory.
If I think about where we’re investing just to touch on this briefly, continued focus on core strategy investments, delivering the TCF revenue synergies, growing our commercial bank through vertical specialized – specialties, expertise, digital and product development in our Consumer Banking and Business Banking division, continue to drive the fee revenue strategies and capital markets, payments and wealth. And then on top of that, clearly dealing with these additional areas around Basel III, CCAR, liquidity, interest rate risk management, resolution planning and data and alteration.
