The PNC Financial Services Group, Inc. (PNC) Q4 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the PNC Financial Services Group Fourth Quarter 2013 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, January 16, 2014. I would now like to turn the conference over to Bill Callihan. Please go ahead, sir.

Good morning, everyone. Welcome to today's conference call for the PNC Financial Services Group. Participating on this call is PNC's President and Chief Executive Officer, Bill Demchak; and Rob Reilly, Executive Vice President and Chief Financial Officer. Today's presentation contains forward-looking information. Our forward-looking statements regarding PNC's performance assume a continuation of the current economic conditions and do not take into account the impact of potential legal and regulatory or federal debt ceiling contingencies. Actual results and future events could differ, possibly materially, from those anticipated in our statements and from historical performance due to a variety of factors and risks. Information about such factors, as well as GAAP reconciliation and other information on non-financial measures we discuss is included in today's conference call, earnings release and related presentation materials and in our 10-K, 10-Q and various other SEC filings and investor materials. These are all available on our corporate website, pnc.com, under the Investor Relations section. These statements speak only as of January 16, 2014, and PNC undertakes no obligation to update them. And now I'd like to turn the call over to Bill Demchak.

Thanks, Bill, and good morning, everybody. As you've seen, today, we reported record net income of $4.2 billion or $7.39 per diluted common share for the full year. That was up 41% versus last year's net income of $3 billion or $5.30 per diluted common share. Our return on average assets for the full year was 1.38%. Now without question, 2013 was a good year for us, and our results offer an important measure of validation of the strategy and the priorities in which we've been executing. Our diversified businesses delivered fee income growth of 22% for the full year in 2013. Now to be fair, this includes a large positive swing from the mortgage business year-on-year. But even excluding mortgage, we increased fees by almost 9%. We also grew loans and deposits throughout the year. Year-over-year commercial and consumer lending combined were up $9.8 billion or about 5%. Deposits were up $7.8 billion or 4%. And it's worth noting that results in the Southeast continue to outpace our expectations as we work aggressively to raise awareness of our brand, capture market share and build franchise value in our recently acquired markets. Consolidated asset management revenue was up by $173 million or 15% year-over-year due to increases in the equity markets and strong sales production resulting in net positive flows. Within our Asset Management Group, net primary client acquisitions were up 22% with referral sales from other PNC lines of businesses up 44% compared to a year ago. In retail, we took important steps to redefine the value exchange between the bank and our retail customers. And we made progress towards a reinvention of the Retail Banking experience that will enable us to more effectively and efficiently meet our customers' needs for generations to come. Indicative of our customers' rapidly…

Yes, good. Thanks, Bill, and good morning, everyone. As Bill just mentioned, 2013 was a very good year for PNC. We ended the year with a strong quarter and accomplished virtually all of our financial goals in 2013. I'll start our fourth quarter review with our balance sheet on Slide 4. Our strong loan and fee income growth along with well-managed expenses resulted in higher retained earnings in the fourth quarter, which led to strengthened capital. As you can see, total assets on our balance sheet increased by $11.7 billion or 4% on a linked-quarter basis. Drivers of this growth were higher investment securities, which increased by $3 billion or 5%, as well as loan growth of $2.8 billion or 1%. In regard to loans, total commercial lending grew $2.7 billion or 2%, primarily in real estate and other specialty lending businesses, including public finance. And consumer lending saw a modest net growth on a linked-quarter basis as we continue to see strong increases in automobile lending and credit card, but that was largely offset by lower Residential Mortgage, home equity and education loans. Turning to the deposit side. Total deposits increased by $4.9 billion or 2% in the fourth quarter. This was primarily driven by increases in transaction deposits, which were up $4.6 billion or 3%, reflecting seasonal increases. Shareholders' equity increased by $1.3 billion or 3% in the fourth quarter due to growth in retained earnings and higher AOCI. This helped drive our capital ratios higher. Our Basel I Tier 1 common ratio at the end of the fourth quarter is estimated to be 10.5%. That's up 20 basis points since the end of the third quarter. Our Basel III Tier 1 pro forma common capital ratio was estimated to be 9.4% as of December 31, without the…

Operator, if you could you give our participants instructions, please.

[Operator Instructions] Our first question comes from the line of Paul Miller with FBR Capital Markets.

This is actually Thomas on behalf of Paul. Just a quick clarification point, the $500 million of expenses that you expect to take out in 2014, that's off -- that's full year '14 over full year '13, correct?

That's correct. Yes, that's correct.

Okay, perfect. And then you have about $130 million of repurchase reserves left, do we see that to begin to come back a little bit where [ph] sort of GSEs [ph] behind you and all that?

Yes. Tom, this is Rob. Yes, we would expect to see that come down. We don't have definitive numbers on that, but that'll be part of our disclosures in our upcoming 10-K.

Our next question comes from the line of John McDonald with Sanford Bernstein. John E. McDonald - Sanford C. Bernstein & Co., LLC., Research Division: I was wondering, Rob, in terms of the loan growth, are you seeing any change in customer mindset on loan demand or is the growth you're seeing still kind of market share gains?

I would say in terms of what we're seeing on the commercial side is very consistent with what we saw most during the year in terms of commercial real estate and some of the specialty lending businesses that we've seen. On the consumer side, the growth is coming in the form of the indirect auto, as well as the credit card, offset by the residential mortgages. So I wouldn't say there's any major change. Bill often alludes to the fact that the market share gains that we're seeing are sort of limited to certain geographies that we're in but not necessarily big movements. John E. McDonald - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And the core NII did well this quarter. What's your outlook for the core NII assuming the kind of current rate environment? What are some of the puts and takes on growing core NII?

Well, we -- so we said in our first quarter guidance for core NII, we expect that to be modestly down. What were -- the challenges in the first quarter will be the continued decline in purchase accounting, as well as a couple of few less calendar days. Our ability go against that will be the loan growth. John E. McDonald - Sanford C. Bernstein & Co., LLC., Research Division: Got it. I was thinking broader for the year x purchase accounting that's really loan growth versus still low rates?

Yes, you got it.

Yes. John E. McDonald - Sanford C. Bernstein & Co., LLC., Research Division: And then just a little bigger picture for Robert, Bill, on capital return it seems like you're in good shape to increase capital return as you mentioned. Any kind of broad-level comments even beyond this year about what an appropriate payout ratio should be for PNC when you look at the math of your ROE and your asset growth profile over the next couple of years. Not trying to back into this year's, not...

I'm not -- I'll purposely be vague so you can't. Now going forward, I think for us and the rest of the industry, capital returns are going to become a bigger part of the story. What's going to be interesting is that at some point, as we all hit our operating targets on capital, the total amount of capital return is going to approach 100% or even go over. And then you get into this debate of whether -- how you can split that between dividends and share repurchase. But for PNC, absent the capital we need for organic growth, which has been pretty robust, our intention is to return it back to shareholders. John E. McDonald - Sanford C. Bernstein & Co., LLC., Research Division: Okay. One quick follow-up on the NII. You mentioned LCR, are you now fully prepared for your understanding of what LCR is?

We -- well, we still have some moving parts on their proposal in terms of what's in and what's out. We are close but not there yet and working towards it. You saw this quarter the big increases in balances at the Fed, and that'll continue to increase. We still have some outstanding questions on Level 1 securities we pledge against municipal deposits and a whole bunch of other random things that we need to work through. But long story short on LCR, we can get there. It's kind of a mechanical exercise. It'll cost us a little bit of money at the margin.

Our next question comes from the line of Matt O'Connor with Deutsche Bank.

This is Rob Placet from Matt's team. First question on expenses. Your guidance is for 1Q expenses to be down mid-single digits. Does that include the $50 million charitable contribution and the legal accruals taken this quarter?

Yes. Rob, this is Rob. Yes, it does. And just a clarification to the earlier question around the continuous improvement, that $500 million are additional ideas. But that's largely, as I mentioned in my opening comments, much of that will be used to fund the investments in technology and the retail transformation. So I just wanted to clarify that earlier point.

Okay, right. So on the cost savings, should we not expect that $500 million to reduce your run rate expense levels from here? It'll be used for investments [ph].

The only -- so fourth quarter to first quarter comparison is a big comparison because fourth quarter was elevated. So that's why we said mid-single digits, and then the guidance for the full year is just that we will be down without getting specific about it. Now we have a lot of programs in place, and we're going to try to be aggressive about it, but we haven't given you specific numbers on actual expenses for next year.

Or full year.

Yes. But year-on-year comparison target is to be down.

Our next question comes from the line of Keith Murray with ISI.

Would you guys be able to quantify the private equity gains and the hedging gains that you noted on the fee income side this quarter?

Sure. That's in our other income, and that is why it's elevated. I don't think we disclosed a specific number around the private equity transactions. They were up year-over-year, which was part of the elevated incentive compensation that we talked about in the fourth quarter. But generally speaking, in that other income, we say that we can usually count on roughly $300 million or so in that category on a quarterly basis. This particular quarter was a little bit higher because of that transaction, as well as some CBA [ph].

Okay. And then on the $500 million of savings that you've targeted, is there a pension expense improvement in there? And would you be able to quantify that?

No, no. We don't have any pension-related items in the expense savings.

So could that be something on top of that for '14?

It's already embedded in the generic guidance that we think we can be down year-on-year in total expenses. We talk about continuous improvement, and that the important thing is saying that we'll have expenses down year-on-year. So continuous improvement is an internal exercise that allows us to recycle expenses in effect, to fund our investments. So it's an internal goal. It's important because we try to sell fun [ph] things but practically focus on the year-on-year down, and we haven't been specific on that percentage.

That's right.

Okay. And obviously, you showed very strong commercial growth, loan growth this quarter. Is there any uptick on the consumer demand yet? I know there's a small uptick in loans for this quarter, but are you seeing any change in mindset there?

Not particularly. We have gives and takes where you see auto, a little bit of card, offset by residential home equity, and student lending, which will continue to roll off. So basically flat this quarter and fairly muted growth we'd expect going out.

Our next question comes from the line of Ken Usdin with Jefferies.

This is Bryan Batory calling from Ken's team. My first question is just on the size of the balance sheet going forward. So the loans, securities and cash were all up on a quarter-over-quarter basis, and we get your -- the loan guide for modest growth in the first quarter, but how would you expect these securities balances and liquidity to trend going forward?

I don't know that I have specific answer to that. Some of the security balances that you saw on a spot basis kind of all occurred in late in the year, and frankly, where Treasury securities that were asset swapped largely against LCR requirements. So it's inflated, but it's not -- that wasn't what was driving our net interest income. So as we go forward, that mix between what we hold in securities to deal with LCR is going to kind of drive that. Loan growth basis, we're kind of saying mid-single digits. Of course, what changes that is if the economy really comes back, and we see utilization change, when you could then see that growth be quite substantial beyond that.

Okay. And then a final one on loan yields. So we saw them start to flatten out this quarter, and just wondering if you think we should start to kind of see loan yields bottom here in the -- when we move through '14.

We're not -- I don't know that we're expecting that. If you follow cycles and loan yields continue to -- loan spreads, I shouldn't say outright yields but loan spreads continue to contract until something bad happens. So we've seen on the C&I side, I think we said it's seen a pretty steady grind of 4 or 5 basis points a quarter, and our expectation is will continue to see that.

Consistent with what we saw in the fourth quarter.

Yes.

Our next question comes from the line of Erika Najarian from Bank of America Merrill Lynch.

This is Erika Najarian calling in for Erika Najarian. Just to take a step back, Bill, what do you think -- we're hearing you loud and clear. You made such great progress in efficiency this past year, but you think there's more wood to chop. As you think about the franchise over the next 2 or 3 years, without the help of rates, what do you think is the natural efficiency ratio of your business as it stands today? And can we look forward to an efficiency ratio that will go sub-60% at some point this year?

Look, I don't know where it gets to in '14, but we don't target an end efficiency ratio because there's too many variables. I mean, you tell me an interest rate scenario, and I'll tell you what the answer will be on a efficiency ratio. What we do know is when we look at the way we're spending money in our core operations, we're inefficient. And more importantly, as we grow our company, what we were finding was that we weren't getting economies of scale out of the back office. In fact, our back-office costs were growing faster than our front-line operations. So our big focus over the next 2, 3, 4 years is really to streamline operations in technology that -- in a way that not just takes dollars out, but importantly gives us an ability to scale with revenues and create positive operating leverage. So we can be better than where we are on a ratio basis, but I don't tend to think about it that way. I tend to just look at what we're spending and say I can do better through time by rationalizing some of the stuff that we've put together through the integrations.

Got it. And my follow-up question is, thank you for the color that you gave in terms a further -- potentially building our liquidity position, but once that's behind us, if we just think about the core margin for this year, excluding purchase accounting and think about where the forward curve is indicating, is it too optimistic to think that the core margin x purchase accounting will bottom in 2014?

Will bottom in 2014. No, I don't think that's...

I wouldn't say that's too optimistic.

Our next question comes from the line of Moshe Orenbuch with Crédit Suisse. Moshe Orenbuch - Crédit Suisse AG, Research Division: Great. Just given that answer, I guess I'm kind of intrigued about your guidance in the discussion for net interest income because since you do have growth in loans and presumably earning assets, maybe could you just kind of flesh out your kind of expectations for full year net interest income? We know you've got kind of $300 million of purchase accounting reductions that you've got to face. But...

That's our fight, right? So you have the $300 million that comes off the top. We know we're going to grow loans. Loans are contracting in spread by our 4 basis points a quarter. We've largely run out the deposit repricing. And our security balances, all else equal, if we keep them neutral to duration of equity, we're rolling off 3.25 yields and putting on a 2.75. Those are all the moving pieces, right? It can change. If rates went up, and we invested more in securities, if loan growth was higher, utilization went up. But when we look at sort of the assumption that rates are going to do what the forward curve says, and we maintain a negative duration of equity, my comments are it's going to be the same fight in '14 we had in '13 to grow core. Moshe Orenbuch - Crédit Suisse AG, Research Division: Right, but at the same time...

We're going to try to do it. Moshe Orenbuch - Crédit Suisse AG, Research Division: But I guess I was referring to the comment about the stabilization of the core margin during the year that would sort of lend credence to that number.

No. Well, but remember the question was an easy question to answer because she said is it going to bottom. So it could bottom on December 31 of '14. I hope it bottoms before that, but those questions or those comments are kind of unrelated. Moshe Orenbuch - Crédit Suisse AG, Research Division: Got you, and as far...

This is Rob. I [indiscernible] that I think Bill said it will. I think what we expect to see in '14 is very much a continuation of what we saw in '13 in regard to NII. Moshe Orenbuch - Crédit Suisse AG, Research Division: Got it. And in terms of -- on the expense front, I mean, just could you just talk a little bit your thought process about the pace of investment. In other words, is it something that to the extent you have more available, you'll do more but are committed to keeping kind of headline expenses down? Or is there kind of a fixed amount that you feel like you have to do?

Probably a little bit of both. I mean, there is fixed infrastructure expense that we have in our budget that we need to do to be efficient in this environment. We're self-funding that through continuous improvement. At the margin, are there things that we could accelerate? Yes, probably. But we're keeping our eye on that, and it's important to us in this environment to be disciplined on expenses. Moshe Orenbuch - Crédit Suisse AG, Research Division: Got it. And just the very last thing. When you talked about kind of a long-term framework for capital return of everything that isn't needed for internal growth, what do you think is the time frame to get there? Is it, I mean, is it going to be '14, '15, '16 like, what -- when do you think you reach that kind of normal level?

I don't -- we are today running over operating targets that we've put out there before. For an environment where -- for the CCAR process, the body language and guidance is still on a build capital mode coming from the regulators. At some point, my comment was just kind of at some point, we and everybody else are going to get to a point where we're well above whatever threshold you need to hold, and you're going to see total return to shareholders increase. I don't know when that is. It's not this year.

Our next question comes from the line of Gerard Cassidy with RBC.

Bill, speaking of capital, what's the level whatever it's determined that PNC will be required to keep let's say in the Basel III Tier 1 common ratio. I guess, tentatively it's 7% today. There might be a small SIFI buffer for you and your peers, but what level above that are you going to play? Once we get to this normalization period, what level do you think you're comfortable with carrying your Tier 1 common ratio at?

It's a great question, and the answer is actually what level do we want to end up at in the stress test. So our starting point kind of is a function of the target of the ending point. And of course, we want to maintain and be above the 4.5% in the severe adverse. Now the reason I say that is, depending on the economy that we're in or risk factors, that could dictate that we would run at an 8.25% in one environment and 8.75% in another environment. So I don't know -- we've talked about being 8% to 8.5% as a guideline. That kind of is reflective of where we sit today and what we expect we see in stresses. That could change through time depending on the environment. One of the things -- if you look at our ratio, the outperformance in B3 Tier 1 common this quarter, some of that came from AOCI and the effect of revaluing pension, right? If you think of in a stress, that will disappear instantaneously the same way it appeared.

And that's 20 basis points in the fourth quarter.

Yes. So in effect, things that -- AOCI swinging around can cause you to carry a higher ratio than you otherwise might. But we don't -- we're not going to simply say we get to 8.5%, and that's where we need to stay. We need to look at the environment, and we need to make sure that in severe adverse case that we're above our thresholds.

Okay. And shifting back to your comments about the investing that you're doing, what are some of the targeted areas where you're going to spend that money this year in the -- on the investment side for the firm?

Yes. So business-focused investment, a lot of it's going into retail where we continue to roll out of image-enabled ATMs and reconfiguration of branches as we make that change. On the technology side, core infrastructure side, we've got a lot going on, both application, replacement, infrastructure, data center upgrades, cybersecurity, all the stuff that I think we need to be a top player inside of this environment and against our -- the expectations we want to have with our retail clients on a seamless delivery through digital and physical space.

Should we anticipate -- I may have missed this, you might have already addressed it, that there will be more branch closings in 2014?

It's -- you're going to see -- it'll be a push. We're going to open some and consolidate some. But what you'll see through time is the reconfiguration of branches with universal employees, with square footage per branch on average going down with the continued rollout of image-enabled ATMs into old branch structures. So we're kind of, the raw number of touch points feels about right. But you're going to still see us reconfigure those touch points.

Is -- do you get a sense, without holding you to a specific number, but when you guys look at the retail delivery channel, you gave us a number today, 30% is being the deposits are coming from outside that traditional teller channel. Do you have an idea where that can go to and then finally kind of like top out?

I don't know that I do. I think it can go materially higher from where it is. Our goal here, and it's important, we will serve the clients in whatever form they want. So whether that's they want to use tellers or universal employees or use digital, we'll do that. Through time, the trend continues to be increasingly towards digital. But we don't know the answer to that, right? That's part of what's playing out in the industry, and we're trying to figure that out as well.

Our next question comes from the line of Betsy Graseck from Morgan Stanley.

It's Betsy Graseck. So a couple of questions. One was on reinvestments. And it does look like you've reinvested in the mortgage market. You mentioned that the purchase mortgage originations you've had are about twice the industry in 2013. So wanted to understand what else you have to do there in the mortgage space to leverage the mortgage banking platform you have and how you are going to be navigating this year with, again, a big decline in refi. Maybe you could just talk to that.

Well, the -- so mortgage investment, we rolled out seamless delivery. We have, I mean, the investment goes back several years where we consolidated underwriting platforms and upgraded technology and worked through all the changing regulations. All that's ongoing. But the big change though is the work we've been doing in integrating mortgage into the company, right? And that's why -- that's one of the primary reasons why you see our purchase volume outpacing perhaps some of our peers. Instead of being a business where they were kind of out on their own originating transactions, now they're integrated into the branch network and part of our company. So we're working our retail channels a lot more aggressively than we used to. New things that will rollout in mortgage through time, we're working on a product that's kind of the equivalent of our Virtual Wallet or Wealth Insight or CFO Insight that will play in the mortgage space that we're pretty excited about and ought to help again with purchase volume. Notwithstanding all that, '14 is going to be tough. Volumes are going to be down. We've taken out costs. You saw in the third and fourth quarter, and we'll continue to watch that and deal with that depending on what volumes are.

And when you think about capacity utilization in the mortgage banking platform that you have, what's your sense of where it's running right now?

It's pretty close to capacity simply because one of the things we did when volumes were -- one of the reasons we saw volume actually stay flat year-on-year is we were -- we had to build capacity to keep up with the refi requests we had. And we had, in fact, a third party out there who was helping us with some of that. So for our downsizing relative to new origination volumes, we were actually just -- we were able to cut this third party out and then take expenses out. So we're pretty much right-sized on the origination side today. We have opportunities on the servicing side as we work our way through the new mortgage regulations and become efficient on that. And then we'll see where we go depending on volumes.

Yes, I guess because one of the questions is couldn't you take your platform and expand over a broader geographic mix than you have right now?

You could, but we're national now, right? So we're integrated into the bank and we deal with our retail footprint, but we're pretty much across the country as we sit today.

Right, right. Okay. I was just thinking, you might be able to do more in non-footprint locations than you have been doing. But I guess your answer is no.

I'm sure there is opportunity. I mean, our presumption is, if we can get good loan originators in this market, we would do so.

Okay. And then the second kind of theme is on auto, and I just wanted to dig in a little bit on what your plans are for focusing on the auto space, given that there's a little bit of a shift going on there, too.

Yes. Sure, Betsy. This is Rob. I'll answer that. We have, as you know, seen significant growth in our auto portfolio. There's been a lot of talk in the industry in terms of where we are in terms of sort of the cycle in that regard. We are starting to see longer tenures and some pricing contraction, which we're cautious about. That being said, we still see growth in 2014 because auto numbers are still -- manufacturing are still very strong. And we've expanded a lot of our dealer networks across geographies, particularly in the Southeast, and we're seeing growth there. So we still see growth, maybe just not at the historical run rate.

And then do you just -- do you feel like there's a better opportunity for you in either prime, near prime, subprime. Some guys are talking about how capital requirements push them one direction or the other.

No. We're not going to change our risk bucket as it relates to auto. So I think what we have the opportunity to do and we've been pursuing is, as we've expanded into the Southeast, we basically bring on board new dealerships with our program. And that's a large part of the growth that you're seeing on our balance sheet.

Our next question comes from the line of Nancy Bush with NAB Research.

Bill, a question for you, and I apologize if you've given this answer. I'm sure you probably have at recent conferences, but I missed it. Could you just sort of give the -- what you see as the high level impact of the Volcker Rule for PNC and if there's any estimate that you have of how much it's going to cost you or not cost you?

Yes. I mean, I will give you a sort of preliminary views. The direct impact that we have, and we've talked about this is that through time, we'll have to run down parts of our alternative investment books or our private equity book. We're prepared to do that. A lot of it's going to be monitoring costs. So we're going to have to have lots of people proving that we don't anything that we never did. And we'll make sure as we go through certain of our hedging activities on the balance sheet that they're compliant. So I don't know in the end that it's going to have a huge impact on us beyond the cost of compliance and the work set to make sure that we're there. One of the things I'll just bring up that you see in the press is the impact on CLOs, where depending on the structure of CLOs, they were ineligible securities. Of course, you see all the noise around the [indiscernible]. We own loan-based, so C&I loan-based CLOs, which are all largely at par thereabouts, and there is some possibility that some of those might need to be exited. But frankly, the industry is kind of working on that, and I think they can be restructured. So no real impact from that either. So I think -- a long-winded answer, but it's going to be a lot of work without a lot of impact I think.

Nancy, this is Rob. I'll just add to that just to round that out. We have very de minimis holdings in CDOs. So that's not an issue for us.

Okay. And along the same line, Bill, I mean, do you -- could you just give us your view of how you see the housing market shaping up in terms of legislation, shape, et cetera, and if you see any sort of long-term impacts for PNC?

I don't have a crystal ball into that. I read the same press and from the same players that you do. I think at the end of the day, housing finance is going to be the single-most important financial transaction that our retail clients are going to deal with. We need to be good at it. We're going to evolve with the industry as it evolves. Fannie and Freddie are obviously going to play a role, but it is a product that we need to be very good at. I don't have insight into the political movement as to whether or how they'll end up winding those things down.

[Operator Instructions] Our next question comes from the line of Chris Mutascio from KBW. Christopher M. Mutascio - Keefe, Bruyette, & Woods, Inc., Research Division: It's Chris Mutascio from KBW. Just 2 quick questions. Rob, on the standard approach, did you give that number on Basel III? I know there's the 9.4 on the advanced approach. I know there's a gap. Did you give the standardized approach to ratio?

No, no. I didn't. What I did mention, though, is in terms of our calculations, we do use the advanced approach. That's the 9.4% number. What I've mentioned was that the standardized, which we do calculate, is converging with that and going forward may be our binding constraint. Christopher M. Mutascio - Keefe, Bruyette, & Woods, Inc., Research Division: Right. So, if it's going to be your binding constraint is it something that you might disclose at a -- in a future date so we can see the difference between the 2 right now?

Yes, sure. On a future date, absolutely. Christopher M. Mutascio - Keefe, Bruyette, & Woods, Inc., Research Division: The other thing I wanted to ask, if I back out the Visa gains in third quarter, the other income line item that was very strong this quarter would have been about $380 million versus $270 million, so that about $110 million delta. I know you kind of glossed over the private equity, maybe some hedging. Are there -- can you provide any of the sequential quarter deltas, 2 or 3 line items? And if you can't provide them, can you just talk to the sustainability of roughly the $380 million number that you posted this quarter?

Yes. No, good question. It's similar to the earlier one. Now I'm going to refrain from the specific categories, but we did see higher-than-usual equity management gains, if you will. And generally speaking, in terms of that other noninterest income per quarter, a $300 million number seems to be where we average over time. Christopher M. Mutascio - Keefe, Bruyette, & Woods, Inc., Research Division: And there's -- but you won't provide what that was this quarter?

Well, the total was $383 million.

Our next question comes from the line of Todd Hagerman with Sterne Agee. Todd L. Hagerman - Sterne Agee & Leach Inc., Research Division: Just a couple of quick questions. First maybe, Rob, just in terms of credit quality and the provision guidance. You guys have been pretty consistent in terms of the provision outlook over the last several quarters. It's come down slowly over that period of time. But you look at the credit measures where we are today, 39 basis points of loss, things have gotten markedly better over the last 12 to 18 months, if you will. But as I think about the growth in the portfolio, are we now at a point where we're likely to kind of converge between charge-offs, reserves as we think about growth in '14?

Yes. It's a great question, Todd, and one that we spend a lot of time on, as you know. You're right. We've -- throughout -- particularly throughout 2013, we continue to be surprised on the upside in terms of the improvement in credit quality. And as a result, in terms of our guidance, we've continued to lower the range around provision. As I said in my opening remarks, the -- we don't believe that these low levels, particularly a 39 basis point charge-off ratio, are sustainable over time. So we would expect, and I don't know what quarter that would be, but we would expect those numbers to go back more to historical norms. And that's why our guidance for 2014 is above the $113 million number that we had here in the fourth quarter. Todd L. Hagerman - Sterne Agee & Leach Inc., Research Division: Okay, great. And then just secondly, just in terms of on the legal accrual in the quarter, granted, it was effectively for settlements, if you will, and we've obviously seen a lot of that within the industry this quarter. I'm just wondering as we think about the volatility within your legacy mortgage segment, Nat City and so forth, are we at the -- have we hit that inflection point at this stage? Is the bulk of kind of the primary litigation now behind the company? Or could we expect to see a little bit more volatility from time to time as we go through the next 12 to 18 months, if you have any sense for that?

Without commenting on specific litigation, we disclosed all that in the Qs, and you could look through it. I think the biggest piece of volatility we got out of the mortgage business was the settlements with the GSE, which weren't really litigation per se. And we'll see. We continue to operate in a fairly strange environment as it relates to people coming after banks, but we disclosed everything, and I guess we'll leave it there.

Our next question comes from the line of Andrew Marquardt with Evercore.

It's Andrew Marquardt with Evercore. Couple of [indiscernible] questions. In terms of fees or core fees, however you look at it. Sorry if I missed it. Did you give any color comment in terms of how you think about the full year '14 shaping up?

Andrew, this is Rob. No, we didn't do it for the full year. Again the full year guidance was in broad categories in terms of revenues and expense, total expenses. What I did say was for the first quarter guidance, we expect fees to be down modestly because the -- largely, the Residential Mortgage repurchase release was a contra revenue or a fee item, if you will, in the fourth quarter.

Right. Got it. And in terms of spread revenue, understood that kind of core NIM is still grinding lower. But then I thought I heard maybe a comment that we should think about spread revenue for this year being similar to last year. And on a core basis, that was down 2%, 2.5%. Is that how we should be thinking about it x PCI or did I not understand that correctly?

Yes. No, I'm sorry. What I meant by saying what we'll see in '14 is similar to what we saw in '13 was more around the struggle, just in terms of spread compression, low rates against loan growth. So just that struggle in itself, not the outcome of that struggle for '14.

Okay. But maybe loan growth could be better with maybe less margin pressure but still there on a core basis. Is that, so that loan growth directly [ph] could offset the ongoing pressures? Is that how we should think about it conceptually?

Yes. Theoretically, absolutely.

Okay. And then just lastly on expenses being down on a year-over-year basis, just to be clear that the base of that is that you're -- that we should think of is $9.8 billion kind of all-in number. Is that correct for this year, for '13?

$9.8 billion for -- $9.801 billion to be exact for the full year 2013.

Got it. And then should we anticipate that you'll be able to generate positive operating leverage in '14 with that kind of expense management though still challenged kind of top line? Is it possible to get positive operating leverage with that kind of backdrop scenario?

Well, we didn't really approach it like that. What we said in terms of our guidance for '14, was that we do expect revenues to be under continued pressure, principally, from the purchase accounting in the lower Residential Mortgage activity. And in light of that, that we have expense management as a priority and we do have plans for the expenses to be down year-over-year.

Our next question comes from the line of Brian Foran with Autonomous Research.

The -- most of my questions have been asked, but Visa, it's a big line item for you versus others. You kind of talked about the $300 million other fees, that's a lot of moving parts. But $300 million with quarterly volatility is a good guess. With Visa, any potential monetization of Visa be included in that $300 million or should we think about Visa as kind of a discrete item? If it's monetized, that would be above and beyond that $300 million run rate?

Yes, I think the majority of that would be above the $300 million.

Got it. And then on capital, certainly we'll wait for the standardized disclosure, but hopefully I'm thinking about it right. The standardized would end the opportunity to continue to have RWAs come down while assets are going up or changing, optimizing RWA mix, whatever you want to call it. But your numerator deduction has shrank a lot over the past year, too. It's still $1 billion. AOCI will do what it does on rates. But are there still opportunities to optimize the numerator independent of this standardized floor kicking in or is the numerator about where it's going to be now, and we should expect it to grow with earnings?

Well, I think -- this is Rob. I think I can answer that. I think, clearly, earnings will help grow it. I think, within the disallowance of the cin [ph] bucket, probably the room where we could get more room is as we grow our Tier 1 common capital, that 15% general bucket, as you will, gets larger, creating more room in terms of what would otherwise be disallowed.

Got it. So we should kind of build in a little bit of a multiplier where, every dollar of earnings less dividend, less buyback kind of creates $1.15 of capital?

Formulaically, that's right.

Our last question comes from the line of Stephen Scinicariello with UBS.

It's Steve Scinicariello, UBS. Just a quick one for you. Just curious -- just given the strength in the asset management side, and I know that's an area where you guys are looking to focus and grow. Just kind of curious what some of the key drivers are there. And as you look forward, what are some of the opportunities to kind of keep that going into '14 and beyond?

Sure. This is Rob. Yes, we've been very pleased in terms of the growth in the Asset Management business, particularly following, as you know, several years of investments in terms of building out that distribution. We're still optimistic. The -- as Bill mentioned earlier, in terms of what we're trying to do with the mortgage company is largely what we've been doing with the Asset Management Group. And that's why referrals being up 44% is driving those kinds of numbers and confirming and validating our strategy in terms of that cross-sell, if you will. So we do see opportunities within the existing consumer base. And then obviously, with the addition of the Southeast territories and the offices that we put in place there, we'll continue to be optimistic.

And so you still feel you'd be able to kind of grow that year-over-year at kind of a high-single-digit or even better kind of number in terms of revenues?

Yes.

Yes. That's right.

Bill, do you have some closing comments?

No. It's -- just quickly I guess. '13 was a great year for us and for the industry. We're looking forward to '14. I think we've been pretty clear on what our challenges and opportunities are. We appreciate everybody joining us this morning.

Thank you. Operator, you want to close the call?

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask you to please disconnect your lines.