Operator: Thank you. Next question comes from the line of Steven Chubak from Wolfe Search. Please go ahead.
Steven Chubak: Hi, good morning. So Eric, I actually have a two part if you’ll indulge me just on some of the NII guidance. First, I was hoping you could provide just some guardrails on your assumptions for NIB outflow given you’re relatively close to the trough that we saw last cycle? And the — for the second part, just since you alluded to NII stabilizing beyond 2023, even as NID remixing pressures abate and reinvestment tailwinds start to work through the balance sheet, was curious why NII isn’t actually growing beyond 2023, is that a function of rate cuts, international mix, any perspective would be really helpful?
Eric Aboaf: Alright, well the — crystal balling into 2024, I got to tell you, we’ve got a lot of variability playing out right now, whether it’s economic, whether it’s central banks. And I think I know there’s a lot of talk about what’s happening in NII, where do we go to, and then does it — what happens after we get to a peak. So I was just trying in 2024 to kind of level set that we see stability. There’s a scenario where you see growth. There are scenarios where we may not. But it’s hard, it’s — you’re getting far out on our forecasting and predictions to be honest. So let’s come back to that maybe in the middle of the year, that will be a good conversation. In terms of noninterest bearing, you saw noninterest-bearing on average was about $44 billion this quarter.
This quarter, meaning fourth quarter, it was down 5% sequentially. It’s bounced around quarterly but we see — I don’t know, you could have off the $44 billion, you could have a $4 billion rotation out next quarter. You could see that again into the next quarter. Then it starts to — or it could be $3 billion and then $2 billion and so on and so forth. So we’re — I think we’re at this level where we’ve seen some amount of rotation. We think it’s going to continue roughly at the pace that it’s been going. So it could be anywhere between $2 billion, $3 billion and $4 billion a quarter, but you could have some changes to that. What we do think is that we’ll continue to see some of it in the first half of the year, and then it just starts to slow down into the second half.
And what we’ve done is to use that kind of base case into our modeling. And it’s all factored into the 20% increase in NII that we expect for next year.
Steven Chubak: That’s great. And my defense, Eric, since you did talk about stabilization, I felt like I had to take advantage of that window of opportunity, to look forward to talking about it a little bit more in the middle of the year. Just one more for me on capital management, I was hoping you could just speak to or give us some insight into the cadence. Should we expect that buyback to be executed ratably or be a little bit more front-loaded here? And just given the commitment or at least early like a strong effort to optimize your capital levels, how are you scenario planning for the Basel IV proposal or update that we should be getting from the Fed early in 2023?
Eric Aboaf: Yes. All fair and it’s a kind of discussion we have internally. We want to front-load the buyback. You saw us start particularly strong this past quarter. And we want some amount of front loading. On the other hand, it’s actually quite stabilizing to the stock to have buybacks on a consistent basis. So I think we’re — we don’t want to front load at an extreme, and we don’t want to be ratably flat through the year at the extreme either because it gives, I think, it’s a good kind of market practice to have some I’ll call it, front loading, but reasonable consistency in the buyback as well. I think then the goal is to get into our target range at pace. And then we’d love to operate in the middle of our range over time.
That’s kind of how a range is set up. But I think what we always have to do is look out on the horizon is are the economic conditions worsening, right? And so then you may be want to run close to the upper end of the range to insulate and prepare or are they particularly benign and they’re particularly good uses of capital, and you might want to be at the lower end. Similarly, I think we’ll learn more about Basel III and some of the changes in capital rules, maybe that comes with other changes in capital rules, we don’t know. And I think later this year, we’ll evaluate and that’s another reason to either run towards in different areas of the range as well. So it all factors in, but I think we’re quite comfortable with the direction where we want to go and then like you will — we’ll think about what’s on the horizon and plan for that.
Steven Chubak: That’s great, thanks so much for taking my questions.
Operator: Thank you. Your next question comes from the line of Gerard Cassidy from RBC. Please go ahead.
Gerard Cassidy: Good afternoon guys. Eric, as a follow-up on the stock repurchase commentary, did you guys — and especially in the sense you referenced it would be more front-end loaded, did you guys consider an accelerated share repurchase program?
Eric Aboaf: Gerard, we did. And I think what the accelerated share repurchase program typically does is operate in such a way that the stock buyback is accelerated within the course of the quarter, right, within the three-month period. There are typically some benefits of that. You tend to add $0.01 or around that EPS. It’s actually interesting in a high interest rate environment, you also lose the NII benefit of the capital. So we’ve actually found that the ASRs tend to be a push roughly. And so we’re — we often do a more typical buyback within the available trading days in the quarter in a way that’s fairly market practice as a way to return the cash and the capital to all of you.
Gerard Cassidy: Very good. And then I know you pointed to the RWA benefit you had this quarter for the CET1 ratio. And I think you said in your slides, you’re targeted range is 10% to 11%, which, of course, you’re above at this time. Do you have any guidance on when you think you may reach your targeted 10% to 11% CET1 range?
Eric Aboaf: It will depend on — let me say it this way, we want to return the capital at pace and I’ve given some bookends as to what that means. And that’s, I think, a forecast you guys can build off of. And we want to get to our target range, we don’t want to wait until, I don’t know, next Christmas. That’s not the — that would not be at pace in my nomenclature. At the same time, there’s just a range of what will move. If RWAs lighten again, it’ll take a little longer. If they go back and we fully utilize our limits in our various businesses and areas, then it might be a little more quickly. So it’s hard to pin it down, but as I said, we’d like to get to — we’d like to execute the buyback at pace. We’d like to get back to a range — into a range at pace and we’re going to — we’re driving that direction.
Gerard Cassidy: Great, appreciate it, thank you.
Operator: Thank you. Your next question comes from the line of Mike Mayo from Wells Fargo Securities. Please go ahead.
Michael Mayo: Hi, Well thanks for all the answers on the cyclical factors. I wanted to ask about the structural end game, a strategic end game post Brown Brothers. And the reason I ask, I count five restructurings in the last 20 years. They seem to come around like the softness the Olympics. The fourth quarter is yet one more quarter with notable items, account notable items in 18 of the last 20 quarters. And I do get some of it. Like you have incredible headwinds, mutual funds, markets, technical debt. You’ve been reinventing yourself front-to-back, straight reprocessing, serving clients, more agile tech. And I also recognize what you said at the start that the ROE and the margin improved for a couple of years in a row. But when I look at fee expenses, that has gone the other way and it seems like maybe one route issue is fixed cost.
So really, the question is a concrete question, what percent of your expenses are fixed, how does that compare to the past, I’m assuming they’ve come down and where would you like to take that? And then more broadly, what is the end game strategy after Brown Brothers? Thanks.
