Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Third Quarter 2021 [2022] (sic) Earnings Conference Call. Currently, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr. Ankur Vyas, Head of Investor Relations with Truist Financial Corporation. Please go ahead.

Thank you, Jake, and good morning, everyone. Welcome to Truist's third quarter 2022 earnings call. With us today are our Chairman and CEO, Bill Rogers; and our CFO, Mike Maguire. During this morning's call, they will discuss Truist's third quarter results and share their perspectives on our efforts to transition from an integration focus to an operating focus, current business conditions and our continued activation of Truist's purpose. Clarke Starnes, our Vice Chair and Chief Risk Officer; Beau Cummins, our Vice Chair; and John Howard, our Chief Insurance Officer, are also in attendance and are available to participate in the Q&A portion of the call. The accompanying presentation, as well as our earnings release and supplemental financial information, are available on the Truist Investor Relations website, ir.truist.com. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on Slides 2 and 3 of the presentation regarding these statements and measures as well as the appendix for the appropriate reconciliations to GAAP. In addition, Truist is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized live and archived webcast are located on our website. With that, I'll now turn the call over to Bill.

Thanks, Ankur, and good morning, everyone, and thank you for joining our call today. Our third quarter reflected strong progress in many areas overall. However, financial performance was mixed, reflecting continued challenging market conditions. Strong spread income resulted from significant margin expansion that exceeded our guidance and strong broad-based loan growth. Credit quality remains excellent. At the same time, capital markets revenue did not rebound as anticipated, and in fact, declined link quarter. Strategically, we continue to realize the benefits of shifting from integrating to operating, which I'll share more on later. I acknowledge that operating losses continue to be too high. However, other expense growth reflects targeted investments in talented technology in key areas of long-term sustainable growth. Merger calls diminished again, and our remaining decommissioning activities are mostly complete and be finalized by year-end. We'll share details on each of these themes throughout the call. And turning to our purpose on Slide 4, Truist is a purpose-driven company that's dedicated to inspire and build better lives and communities. This commitment to purpose and our value of care could not have been more apparent in how our teammates responded to each other and their clients and the aftermath of Hurricane Ian. I experienced this firsthand when I visited with our teams in Southwest Florida soon after the storm subsided. Clients expressed their significant appreciation that we opened our branches to care for them during this time loss. The many truckloads of food, water supplies and other critical items that we sent to the region made a real difference. And the $1.25 million donation from the Truist Foundation will continue to provide support to affected areas in Florida. Have begun, and Truist is committed to supporting these communities in the short term, but also helping them be more resilient in…

Thank you, Bill, and good morning, everyone. Before I begin, I would also like to thank Daryl for his guidance and his support throughout my transition into the CFO role. I'm excited about the opportunity, and I'm confident that the transition will be seamless for all of our stakeholders. I also want to thank my teammates in the finance organization for welcoming me and for their support. We have a really talented team, and I look forward to working with all of them. For our analysts and investors, I'll be on the road soon, and hope to meet as many of you as possible. This is really a great opportunity, and I'm excited about helping take Truist to new heights. So moving to Slide 12, for the quarter, net interest income increased 10% sequentially to $3.8 billion as higher short-term interest rates and strong loan growth more than offset lower purchase accounting accretion. Core net interest income was up a strong 14%. Deposit costs remain well-controlled, reflecting the strength of our deposit franchise. Lower purchase accounting accretion was the result of elevated accretion in previous periods due to conversion activity and slowing prepays in the current period. Reported net interest margin increased 23 basis points, while core net interest margin increased 30 basis points, driven by similar trends as net interest income. Moving to Slide 13, fee income decreased $146 million or 6.5% sequentially. Insurance income decreased $100 million primarily due to seasonally lower property and casualty commissions. Investment banking and trading income decreased $33 million as lower fees from structured real estate, investment grade and high-yield bonds and syndicated and leveraged finance were partially offset by increased M&A fees. Wider credit spreads, tightening liquidity and general macroeconomic and geopolitical uncertainty are all contributing to slower activity levels. Despite these…

Great. Thank you, Mike. Continuing to our strategic shift on Slide 18. Earlier this year, I expressed my view that the first quarter was a strategic and financial turning point for Truist. Our third quarter results build upon the second quarter progress even as market conditions diminished overall PPNR trajectory, progress is real and it's palpable. We've made significant progress in our digital and technology areas as evidenced by improving mobile app ratings and enhanced client experience within treasury and payments and many other new features and capabilities that strengthen the financial confidence of our clients. Speed to answer in our care centers is now well below our initial service level agreements and more investment will improve the efficiency as well. Loan production in the third quarter was highest it's been at Truist, up 8% compared to the second quarter. Branch loan and deposit production are up a solid 14% and 20% like quarter, respectively, as teammates become more confident with processes and systems, but also improve solutions and capabilities. IRM referrals to our wealth businesses increased 17% sequentially and the amount of income generated from IRM referrals by our commercial community bank was the second highest ever both highlighting the power of our advice-driven and client-centric model. Our brand awareness was up almost 400 basis points in the third quarter while our peers were flat to down. And our brand consideration which measures whether consumers are giving Truist a serious thought was 210 basis points and ranks us fifth highest in our markets, having only been alive for that brand for three years. Almost all of our client satisfaction scores are ascending and in many cases, at their highest levels since we become Truist. The financial benefits of this momentum are being realized and will be increasingly visible as…

Thanks, Bill. Jake, at this time, if you don't mind, will you please explain how our listeners can will you please explain how our listeners can participate in the Q&A session. As you do that, I'd like to ask the participants to please limit yourself to one primary question and one follow-up, so that we can accommodate as many of you as possible today.

[Operator Instructions] And we will begin with Gerard Cassidy with RBC.

Bill, you mentioned that you guys had positive operating leverage on an adjusted basis of 260 basis points. Can you give us some color what you're thinking about -- and when you look at adjusted positive operating leverage for the next 12 months, what do you think that could come in at?

Yes. I think well obviously for the balance of the year, we talked about this as well, but I think we'll have positive operating leverage for the year. As we look into 2023, obviously, there are a lot of puts and takes. There's a lot of uncertainty headed into that. But positive operating leverage is going to be a core tenet of what we do. So if we look at the revenue potential in terms of the loan growth and deposit production we've had, being able to capitalize on those opportunities with those clients as we move forward, so even if the economy slows down a bit, we still have a lot of momentum in that area. We've got great strength in our insurance business. We've got great strength in our overall capital markets business. Wealth has been building its capability. So, we've got a lot of engines and tailwind from that side. And then, we've got a lot of tailwind on the cost sides. So, we'll complete the bulk of the merger cost saves at the end of this year. But heading into next year is really where we get to leverage all those. If you think about the concept of you put two things together, now you make those two things more efficient. So those opportunities for digitization and automation, we're consolidating our card platform. All the things that will continue on in terms of cost saves. So, I'm just -- I am not giving you specific guidance on operating leverage for the year other than to say that will be a core tenet and component of how we plan for the future.

And then as a follow-up question, you pointed out that the deposit beta was 21% on a cumulative basis and then 14% without the brokered CDs. And that was below your models. Two things, can you tell us what your model would have suggested the deposit beta would have been? And then second, using the forward curve, where do you think you end up with a final cumulative deposit beta?

This is Mike, I'm happy to take that one. So, you're right, we've been very pleased by the performance of the deposit portfolio so far at 21%. I think we said earlier this year, we expected betas to be closer to 30% as we get to the second half of the year. We still expect that to be the case by year-end. In terms of a terminal beta, very, very hard to tell, we've seen probably some lag given the rate at which rates have increased. And so, we do expect there to be some catch-up, but whether or not it will be to the tune of the previous cycle in the mid-30s or beyond, we'll observe that together.

We'll move to Ken Usdin with Jefferies.

Just want to ask a question on funding and deposits. You guys are showing fairly good resiliency as is the industry. Just give a little more context of what you're expecting to see in terms of mix shift and also your thoughts. It looked like you did add a bunch of wholesale borrowings relative to your incremental cost of funding through deposits. So just think -- help us think about how you're thinking about liability structure and deposit growth.

Ken, it's Mike, I'll start here as well. So again, we have been very pleased from the deposit perspective with only a sequential decrease of 1%. And so very pleased by how the balances are hanging in there. We are expecting, I think, over the near term, to continue to have some pressure on deposits, as well as some pressure on mix. We did see some shift from DDA into interest-bearing. That's been a moderate shift so far, and we're still well above levels that we experienced pre-COVID. But we are beginning to see that shift take place. In terms of short-term borrowings, you're right, we are accessing brokered markets. We are accessing short-term markets and do expect that to continue over the intermediate term. But don't expect that to shift significantly. As we think about funding, loan growth for one has been very, very high. So far year-to-date, we do expect loan growth to moderate somewhat, which should alleviate some of that gap. But between the deposit balance levels, between leveraging some of the securities portfolio running off to the tune of $10 billion to $15 billion per year, accessing some of the wholesale markets, which is a pretty wide array of tools and even thinking about the capital markets, we feel really good about our funding capability.

And Ken, maybe just to add to that in terms of the first part of the question, too, is just the strength of our deposit franchise. It's pretty granular, 42% under $250,000. We've got really good market share. But what we're seeing, I talked about this in my prepared comments, our production's really strong. Truist One has been really successful. Our teammates have really responded, clients and both new clients and existing clients have really responded, investments in treasury and payments. So, we're leaning into this in terms of our own capabilities from the deposit production side. And then for the fourth quarter, remember, the third quarter has got some seasonality in things like public funds, for example, where that's a strong area for us. So, I think we'll be sort of stable in the fourth quarter. And then Mike talked, I think, eloquently about the funding side.

And just one quick follow-up, just can you just give us a sense of where you're reinvesting the cash flows that are going back into the securities portfolio versus what's rolling off?

Yes, I mean the cash flow that's coming off is being invested in the loan portfolio. There's de minimis investing to support our CRA efforts, but the bulk of the cash flow is being invested in loans.

The great news is we have something to deploy it towards, which is perfect.

Yes.

Moving on to Ryan Nash with Goldman Sachs.

Bill, you saw -- I saw a nice sequential growth and it's likely to continue to grow into 4Q given your outlook plus the asset balance -- as a sense of balance sheet. So I guess, based on your comments on to Gerard of betas in the mid-30s or maybe a little bit higher, do you think you can continue to grow NII as a -- on a sequential basis as we look ahead over the next few quarters, adjusted for seasonal impacts? And maybe just talk about some of the puts and takes involved in that.

Michael, I'll let you start, and I'll talk about that as well.

Yes, Ryan, you're right. I mean, look, we've got a really good trajectory going into Q4 with the NIM, as we mentioned in our guide, expected to increase 15 or so basis points. Look, as long as rates continue to increase, we expect to continue to see some NIM expansion. At some point, I think we all expect to achieve this terminal policy rate and whether it's higher longer or begins to decline, we'll see. From an NII perspective, we'll obviously benefit from that NIM expansion over that period. And then I think as NIMs begin to feel some pressure, we feel good again today. We've got really nice earning asset growth. We expect that to moderate, but should offset any impact over the intermediate term of the decline in NIM. We see '23 from a rates perspective as a relatively stable period.

To Mike's point, a lot of it also depend on loan growth and what we see going into next year, really positive momentum through this quarter, which I think will continue into the fourth quarter. It all for -- it's a little murkier as we head into next year, but I like the momentum and the production and the pipelines and the relevance and the competitiveness of our franchise right now from that standpoint.

Bill, maybe a bigger picture question for me. So, I think at a recent conference, you highlighted that you expected expenses to grow in '23, which makes sense given you've done a handful of deals as pressure from inflation. However, when we think back on the drivers of the merger, we were talking about best-in-class growth, improving returns. And I know we've now made the shift to offense. But when I speak to investors, I get the sense I feel we're not quite there yet. So while I know you're not giving '23 guidance. What do we need to see for this to begin to come through, whether it's operating leverage or better-than-peer expense growth? And just how are you measuring the success of all these efforts?

Yes, I think overall, I mean, we've talked about this. It's the measurement of can we grow revenue long term over time and PPNR faster and relative to our market opportunities. And I think that opportunity sits squarely in front of us. I think if I look at the things that contribute to that in the areas of production, like loan production, AUM production, deposit production, I'd argue, actually, we're sort of getting to sort of a peak kind of performance in those areas. As it relates to the expense side, and this stuff just doesn't go quarter-to-quarter. You just -- they're going to have different levels of investment. We've made a conscious decision. And while I'll acknowledge, I'm cranky on the operating losses side. So operational losses, I think we've got some opportunity there. I see some improvements coming, but that has been longer and taken longer than I had anticipated, but we're consciously investing in some areas. So we're consciously investing in investment banking and wealth and insurance. And you know us well. I mean we've got a good track record here. When times are a little bumpy and the opportunity is there, we've taken advantage of it, and that's proven to be really, really smart investments on our standpoint. So, we're sort of unabashed about that, and that has a quarter-to-quarter implication to it. And I just have to absorb it and take it because I'm confident that we're doing the things that will create better opportunity for us and allow us to gain share over time. So long answer to a short direct question, I think we can grow disproportionately over time. It just won't look like that quarter-to-quarter. And I think look at the production, look at the capabilities that we're creating today, and I'm confident in manifesting those towards the future.

And Betsy Graseck with Morgan Stanley has the next question.

It's Betsy. I wanted to just dig into a couple of things, one is on loan growth. It's been really strong. And I heard the comments around how you're funding it and how you're thinking about driving that from here. I wanted to get a little bit of an understanding on how you're thinking about the quality of the book relative to its ability to absorb this interest rate hike. So obviously, we've had about 300 basis points so far. We're going to get at least another 150-plus over the next quarter or so. And how are you assessing your borrower's ability to pay you back? Are we all too worried about credit risk? I know you gave the guide for the full year NCOs, which I'm wondering why not having -- have brought that down given the performance you've had to date. So just a few questions on credit from that perspective.

Yes, I'll start, Betsy, if it can also turn it over to Clarke, he's itching to get in and talk about credit quality and the quality of the portfolio and what we put on the books. We've not diminished our commitment to credit quality. We're taking our clients through the appropriate stress testing process. I mean we're underwriting at new rates and new environments. So, I think our production just reflects our just competitiveness. I mean our ability to win more size and relevance with our clients. And then you see that reflected right now in our reserve, particularly on the wholesale side. The quality actually is -- might argue might be improving. So Clarke, why don't you embellish that, if you would?

Yes, thanks, Bill, and I agree with you. We're very careful in our underwriting right now. So we're looking obviously at rate shock and the ability to absorb that. We're looking at other things like pricing power and their margins, given supply and input costs and inflation, looking at clients' investment decisions, how they're deploying capital, their liquidity, their balance sheet and just overall strength. So, we feel really good about the core underwriting. In fact, I would tell you for the quarter, about 95% of our C&I production was investment grade or near investment grade credit, so really high quality there. And as far as our NCO guidance for the full year, we feel really good about where we are. But remember, we normalize as we go into the fourth quarter from a consumer standpoint and we have the seasonal impact. So that's really truly the consumer side that may increase losses on.

And then just digging in a little bit on the commercial side on this theme, can you remind us how you are thinking about your Shared National Credit exposure, what that is, leverage lending? I know legacy SunTrust had a bigger skew in their business model to that, but with the combined organization, it's been reduced a bit as a percentage of total. So just give us a sense as to how big those books are today, how they're trending, and how much capacity you have to lean in with the bigger balance with the bigger balance with the bigger balance with the bigger balance sheet you've got now.

Yes, Clarke, why don't you take that?

Yes, maybe I'll start it, Bill. First, from an SNC standpoint, we're in really good shape. We just went through the exam and had great results. I feel very good about that. We have about $59 billion in outstandings in our SNC book. So it's about 19% of our balances, and that's been fairly steady or so. So, it's a very diversified book. We feel really good about that. As far as our leveraged finance book, just remember, that's about 7% of our total book; however, over half of that is 55% investment-grade clients. So really 3% would be more in the sponsored or non-investment grade side. That book's performing extremely well today. So minimal NPLs, we've had about 9 basis points of losses and are criticized are in good shape. So while there's been disruption and challenges in the market, our overall performance has been very, very good.

I think you characterized it right that as part of the benefits of the merger is the diversification of that portfolio by definition of the denominator. So, we haven't grown it in proportion to the increase in the size of our business, and it's well-diversified. Leverage portfolio is well diversified. Exposures are not significant to any one person. And it's about 50% sponsors and about 50% on us. So this is a business that supports our client base, and it's categorized as leverage, but it's really supporting the growth in our client base and consistent with our strategy of helping our clients with their business life cycles. I mean I think -- so it's a little bit different and a little more focused on an on-us component.

Mike Mayo with Wells Fargo will have our next question.

I'll continue my analogy with your franchise as a core. I mean, you're clearly in the country's sweet spot for population growth. I mean I keep meeting more of investing clients that have moved to New York to Florida permanently, entire firms. And -- so you're certainly in the sweet spot. You did mention momentum and certainly NII and loan growth and how you're going from defense to offense. So I get it. But then I hear, Bill, your target for positive operating leverage of over 0%. It just seems like with a target like that, you're aiming for the Charlotte Motor Speedway instead of Indianapolis 500, right? It seems like -- and this is at a time when your peers are showing much greater positive operating leverage and they don't have this unique in-market merger with these incredible synergies that are possible. So I know you're not giving too much guidance for next year right now, but can you just talk about whatever headwinds may be going away? You talk about the operational losses. It seems like you're doing a lot for your customers. You're making them whole more than others perhaps. You're doing a lot for your employees. You're raising what they get paid, but I'm just thinking about the shareholders here. And so what are some of the headwinds that may or may not go away? And what are some of the tailwinds that you think we'll see more of?

Yes, thanks, Mike. And we'll continue to keep the corvette network going, I guess. But if we define speed as related to how are you doing against your markets, I look at the loan deposit AUM, the production side. And I'd say we're actually at a really good high rate of speed. And I'd say we're at our speed that reflects the opportunity that sits in our market. So if we define it that way, if we define the opportunity, which I 100% agree with is to have improved positive operating leverage overtime and increased revenue and PPNR growth. We also have to invest to make that happen. So we like you to see the same things that you're seeing in our markets, and we've got to make sure that we invest in those. And again, I wish it sort of balanced out quarter-to-quarter. It just doesn't. So the opportunities for us to invest right now, and I think gain share long term in areas I mentioned before, like investment banking, like insurance, like wealth, we're just going to do that. And I think that's going to have a good long-term impact for us. You've seen this before, you've seen this movie and you know how well it ends for us. So we know how to do this. So I'm very confident on that side. And then the part about the operational losses and the commitments that we made to our clients, those are also good long-term decisions. I mean, look, we were in the middle of a merger. We gave the benefit of the doubt to a client. Whenever there was a benefit of a doubt, I think long term, that's going to create sustainable long-term relationships and the same thing with teammates. Increasing minimum wage is fantastic for shareholders. I cited some of the stats that we're seeing already an improved turnover and improved vacancy rates. I didn't mention the care center. We're seeing that as well. So long term, that's going to have a tremendous benefit for our shareholders, as well as our teammates. So I'm confident. I think we're materializing the things that we want to have. It's just not coming in quarter-to-quarter as I'd like. It's not as matched as I'd like. There are some pesky things that I think will come down, and I'm already seeing that at the end of the quarter and the first of this quarter in terms of operational losses. So, we can have a cleaner more focused, easier to understand and easier to have the production and those things result in the kind of PPNR growth that I think we're able to do long term.

So a follow-up, even if I can see the speed part, I guess, the cost of gas is quite high, and maybe, Mike, from your perspective, coming into the CFO spot, things that you might be able to do to control the expenses, as Bill was alluding to.

Yes, Mike, good morning and happy to react to that. I mean, I think, first and foremost, still, at this point, absorbing and coming in and meeting the team, getting a sense for where we are. Look, Bill made some great points. I don't come to the table with some predefined view or silver bullet as it relates to these things. The headwinds that Bill talked about, minimum wage, inflation, some of the investments that we're prioritizing, they're important. But then again, we have some great tailwinds as well, whether it'd be realizing the benefits of the savings. I think there's some benefit from an automation perspective, some work we're doing that's in more nascent phase, and then just overall productivity. I mean, look, if we -- I think we've got a great track record in terms of being able to manage expense. If and when that becomes a more important priority based on market conditions, but no, I think Bill said it well, Mike.

Now, we'll move to our next question from Ebrahim Poonawala with Bank of America.

I guess one follow-up first for Clarke on the reserves, and Clarke, apologies if I missed it, but can you remind us what's the base case of the weighted unemployment rate that's baked into your reserving at the end of the quarter? And I guess, as we think about sort of what the next 12 months could look like, what are the other one or two big inputs that could change the reserving outlook other than unemployment?

That's a great question. In our base case, which we wait at 40%, we have unemployment going up to 4% and then going higher into the mid-4s as we go into '23 and beyond. So clearly, a little more pessimistic on as we ran the reserves this quarter. I would say for us, other big drivers would be a housing HPI would be another input there in our models, and you've already mentioned GDP. So from our standpoint, the big driver for us would be the scenario weighting and the scenario outlook would have the biggest impact on our reserves, obviously, versus other things like our mix of production and our overall portfolio performance. But right now, I think the scenario outlook would be the biggest driver.

And I guess just one follow-up, Bill, for you. As we look at the next stage, I mean, obviously, BB&T, SunTrust history of acquisitions, a lot of your peers might be struggling in terms of deposit, deposit pricing, given what the fed might be doing. Talk to us in terms of as we look forward to the next year or two, appetite for bank M&A extending the franchise and how you think about that?

Yes. I mean right now, we have the best franchise to invest in and it's called Truist. And that's where our focus is and that's where our opportunity is. And ability to expand and create more capacity within our existing markets is really our primary focus right now.

We'll move on to Matt O'Connor with Deutsche Bank.

Can you guys talk about the openness to maybe some restructuring of the securities portfolio? I mean obviously, rates have gone up a lot and the yields on your current book are a lot lower. So it would cost a lot to restructure a big part of it, but there might be some opportunities here and there as you think about the strong capital generation and what to use the capital for?

Matt, it's Mike, good morning and happy to react to that. As of this moment, there are no plans to restructure the securities portfolio. I think I mentioned that we do view the portfolio as a tool for funding loan growth. As that continues, it's creating cash flow of approximately $10 million to $15 million per year.

Yes, and Matt, I mean, today, we -- today, we're redeploying it into the growth in our business, and you acknowledge that would be very expensive. And what we try to do is look at that securities portfolio over time. And so we're going to take that cash flow. And right now, we've got great opportunities to reinvest it and not take a capital hit for the securities portfolio. I'd rather use that capital to invest in our business.

And then just separately, you had mentioned earlier some mix shift out of auto and mortgage. Can you frame how much you expect that to be over time? And then maybe you mentioned it, but just where is the mix shift going if it's out of mortgage and auto? What are you leaning into?

Yes, Matt, it's just basically sort of an overall return focus and make sure that we're maximizing our capital. As we see some of the returns in the mortgage business and the auto business being a little more stretched. We want to make sure we're serving our clients, and we're doing a great job in doing that. But by the same token, we're seeing the other opportunities in our commercial portfolio and our consumer portfolio. So we just want to get the right balance and a return focus versus we've never been sort of the growth for growth's sake. We want to be return-oriented. We want to maximize the return on the capital that we're investing in the portfolio.

Jake, I think we've got time for one more question.

And that final question will come from Erika Najarian with UBS.

I just I had one follow-up question, Bill. You got asked this several times, but I just wanted to make sure your shareholders understood what you were saying. You've been asked a lot about delivering operating leverage. At the same time, dislocation creates opportunity. And is this also a sort of once-in-a-cycle help from rates, right, in terms of operating leverage, helping the denominator? So is the message here really that you are going to always try to deliver positive operating leverage as a way of Truist Life, but you're seeing opportunities to invest today? And as we think about the tougher part of the cycle, whether we fall into a recession next year, and we don't have rate hikes helping. Your investments today are going to help Truist deliver above-average PPNR over a longer period of time other than just now when you're getting a lot of help from rates?

I think that's really well stated, and I wish I had stated it as well as your question. So no, I think that's exactly right. And as I mentioned, I mean positive operating leverage will be a hallmark of what we do. So that is -- that's core and focus of what we do. We just can't be wed to that quarter-to-quarter when we see an opportunity. So we're going to have positive operating leverage this year. It will be a little less than we'd hoped for six months ago, but we're investing that I think is going to create not only better operating leverage, but more importantly, strong PPNR growth for the future. And we just have to make sure that we're, for the benefit of our shareholders, thinking long term and thinking about this incredible opportunity that sits in front of us and maximizing our ability to capitalize on it. So I think you stated actually quite well.

And my last question is for Clarke. Thank you so much for sharing that data on your ACL. And just in terms of how CECL works, if we do hit a 4% unemployment rate, which is your base case, does that mean that you have to then wait worse scenarios in that 4%? In other words, do you say, okay, we hit 4%, that's our base case. We don't have to build reserves further, or does the model say, oh we're at 4%, it could get worse, so we now need to build for something worse than 4%?

Great question. I would say, keep in mind that we run multiple scenarios. So we have our base case, which I described, but we also run a much more severe set of downside scenarios. And as we look forward, those scenarios get worse as well as even if the baseline deteriorates some additionally. So we weigh all of that, and we look at it each quarter. And so, even if the baseline is at one place, the downside scenarios may be more and would be more severe. So, we're going to look at all of that and decide how we weigh all of those factors and determine the allowance. And so yes, I mean, the downside scenario could push it even further even if the baseline is going up.

All right, thank you, Erica. That completes our earnings call. If you have any additional questions, please feel free to reach out to the Investor Relations team. Thank you for your interest in Truist. We hope you have a great day. Jake, you may now disconnect the call.

Very well. Once again, everyone, this does conclude your conference for today. Thank you for your participation and you may now disconnect.