6 Takeaways from Big Banks’ Final 2024 Analyst Sessions
From opinions on the regulatory outlook and the future for bank M&A to branches, credit trends and AI adoption, major bank leaders gave investors and analysts much to chew on at the Goldman Sachs U.S. Financial Services Conference.
By Steve Cocheo, Senior Executive Editor at The Financial Brand
After a tumultuous year, the investment community had one last shot at banking leaders before the country goes into holiday mode. Here is a sampling of what the leaders of seven major banks had to say during the 2024 Goldman Sachs U.S. Financial Services Conference.
1. Leaders Aren’t Banking on Massive Regulatory Rollback
Several of the Q&A sessions with major bank executives touched on aspects of the post-election regulatory picture. Questions and comments paid special attention to the Consumer Financial Protection Bureau, and more specifically on the long-pending Basel III Endgame rules, which are undergoing yet further revision.
Expectations for the regulatory atmosphere. In some quarters a new Trump administration offers hope for major regulatory relief, but William Demchak, CEO and chairman at PNC Financial Services Group, is skeptical.
"Supervision at the margin may be a little easier, but I think people are a little bit too excited about that," said Demchak, "thinking they’re just going to let everybody run free. I don’t see that at all."
Demchak does think that in the immediate term the industry will see "the elimination of some of the more frivolous lawsuits and charges." Going after the industry over so-called junk fees may abate, he said. This would include such measures as the recently court-overturned CFPB final rule on credit card late fees, and the bureau’s new overdraft rule, itself subject to a new lawsuit.
But Demchak said he doesn’t see major shifts in safety and soundness supervision and related regulation.
"I don’t know that there’s going to be much relief on that," said Demchak. "Silicon Valley did happen, and the [regulators] are focused on liquidity. I think there are going to be changes in liquidity requirements, with some debt issuance requirements."
Demchak added that "the whole notion of having liquidity to cover some percentage of your uninsured deposits is going to be a core requirement of the system going forward. And we’re prepared for that."
Regarding CFPB, Marianne Lake, CEO of consumer and community banking at JPMorgan Chase, took the middle of the road.
"A change in leadership should allow the opportunity to re-review the agenda, to re-review the merits of the litigation docket," she said. "Hopefully, therefore, there may be some changes. But there are still risks, because all of the rules matter for different reasons. For some of them, there are constituents on the other side of our arguments. And so it is not obvious that everything is going to go away."
Lake added that the proposed Credit Card Competition Act (favored by the merchant lobby), CFPB’s 1033 open banking rule and other measures intentionally favor other commercial parties besides banks, sometimes to the potential detriment of consumers, in her view. She said that such perceived bias was her greatest concern, and less-so any specific rules.
Speaking more broadly, Mark Mason, CFO at Citigroup, said that in the U.S., "we’ve noticed, and I think most have, a shift from political uncertainty to policy uncertainty." He noted that many policies that are up for consideration — everything from taxes to tariffs — and that may have a lagging impact on regulation, as well as on inflation, competitiveness and more.
These comments were all made shortly before The Wall Street Journal reported that Trump transition teams were quizzing potential nominees to financial supervision posts about their feelings about regulatory reformation — even elimination of the Federal Deposit Insurance Corp. as an independent entity. Department of Government Efficiency Co-Chair Elon Musk has already opined that he’d like to shut down the CFPB — something strongly considered during the first Trump presidency.
ICYMI: The Trump Administration’s Impact on Banking Begins to Take Form
2. Concerns About the Timing on Basel II Endgame
Some of the executives made their frustration about the longstanding evolution of the pending capital rules evident.
"It’s been a decade. At some point, we have to get to an agreed number — one that works, one that’s rational," said Brian Moynihan, chairman and CEO, Bank of America. Moynihan said he didn’t know where the new regulators would come down on the exact requirements and adjustments, but he felt the industry needs closure.
"We need to finalize it with very little impact, because it’s good to put it behind us, because this is the best-capitalized [banking system] in the world. Yet we keep having this debate about capital levels," Moynihan said. He complained that in 2016 regulators indicated that the banking system’s capital "was about right. And 10 years later, we probably have 25% more capital."
Charlie Scharf, CEO and president at Wells Fargo, betrayed exasperation: "We absolutely want it to be finalized. I mean, it’s just incredible, it’s just a strange position to be in to have some of the most significant companies in this country unsure of what their capital requirements are going to be. It’s a crazy way to run a system."
"While we don’t know what we don’t know, we feel like most people are more optimistic that there’ll be a more capital neutral type of outcome to that," said Marianne Lake.
Lake added that the uncertainty was not changing how JPMorgan Chase runs its businesses. "We were already leaning into areas where we thought we could deploy capital with strong returns in low risk, low duration assets, and maybe less so in mortgage, where it’s a little more challenging to do it."
Read more: CFPB Targets Large Digital Payment Apps, But Will It Stick?
3. Progress Reports on Major Banks’ Branching Strategies
Some big banks have been engaged in significant rationalizations and optimizations of their existing branch systems, accompanied by expansion into new markets and in-filling of markets where they initially established toeholds. Several executives gave updates.
JPMorgan Chase has multiple branching strategies underway, including a broad multiyear effort on attractive new markets, including beachheads in markets with sparse or no banking services in rural as well as urban areas, and the expansion of branches devoted to serving wealthy clients. Goldman Sachs analyst Richard Ramsden asked Marianne Lake to talk about the branch strategies in the context of JPMorgan Chase’s growth trends.
Lake said that over five years checking accounts had grown by about 30% and credit cards by about 40%. She said that the consumer bank at Chase had gained 220 basis points of market share over the last five years, with 80 basis points of that produced by branches the bank has opened since 2018.
"And remember, they are still pretty young, and so those will continue to fuel growth in the future," said Lake.
Yet, more than half of the growth has been coming from the bank’s legacy branches, and in all, 75% has been from legacy and branches built through yearend 2024. Ingredients include investments in bankers, tools for bankers, omnichannel capabilities, branch tailoring and customer segmentation, according to Lake.
"But we’re not stopping," said Lake. She said branches that the bank is on the verge of opening will continue to provide growth for decades.
"It’s a flywheel," said Lake. "We’re just going to keep going."
In early November, PNC announced that it was boosting its planned investment in new branches and renovated branches, following up on an earlier announcement in February. All told, over the next five years the bank plans to open 200 new branches in 12 cities and renovate 1,400 existing locations.
Demchak explained that a key reason for the branching effort is to be able to keep growing retail deposits over the long term. "We don’t want to be wholesale funded," said Demchak. "We want to grow our retail franchise at a pace that will keep us basically core funded against our C&I franchise."
Historically PNC has used acquisitions to build its deposit base. "That’s tough to do in this environment, particularly in the markets we want to be in," said Demchak. "We weren’t going to sit around and wait for history to pass us by."
Demchak said that the bank typically staffs the new branches ahead of demand and gets these troops out into the field to pull in business. A growing, lucrative area on the business side in new markets has been the bank’s treasury management services. "It’s a $4 billion business for us, and it grew 16% last year," said Demchak.
U.S. Bancorp on the other hand has reduced its branch network, including closing around 60% of its in-store locations. The latter were transaction-oriented and the bank has been emphasizing branches as consultation centers, given the bank’s deep digital commitment and partnerships with local State Farm and Edward Jones agents and advisors.
"We’re in sort of a stable period right now," said Andrew Cecere. "We’ll continue to optimize the footprint in the branch locations we have. In areas with high growth, we might have opportunities to add branches. We might continue to pare back branches in areas that we have opportunities to consolidate in, given the location of two current branch offices."
Going forward, he continued, concerning branching, "we’ll be relatively stable."
Read more: Philly Fed Says ‘Banking Deserts’ Are Growing. Does It Matter — and How Much is a Mirage?
4. The Outlook for M&A
It’s anticipated that Trump regulators and Department of Justice will be friendlier to larger bank mergers than were the Biden players. Demchak has spoken in the past of the need for mergers and acquisitions to enable the smaller institutions among the large banks to build scale so they can remain competitive.
While the climate may be changing — more receptivity and shorter timeframes look likely to Demchak — he doesn’t see the timing, right now, favoring many major deals.
"Everybody out there thinks they’re a buyer now," said Demchak. "Nobody’s a seller."
Demchak explained that most of the industry has a tailwind favoring results — the rate outlook, hope for an improving economy, growth in earnings.
"So I don’t think anybody’s for sale," said Demchak. There are some potential candidates in markets PNC wants to enter, he added, but many have seen their core retail deposit franchises erode. They now rely on deposits and loans tied to real estate, and Demchak says that’s not of interest. Likely asking prices for banks right now are too high, as well.
"The math just doesn’t work. But you never say never," said Demchak. He said that the aggressive branching plans of JPMorgan Chase demonstrate that no bank can "hide in their little part of the country and just do their business."
U.S. Bancorp isn’t currently in the market for bank deals and has been seeking organic growth. But Cecere thinks in time the quest for scale is going to start driving deals.
"I don’t think it’s imminent," said Cecere. "But that scale component may drive consolidation over the long term."
A different sort of merger has been making some progress even during the Biden years: the proposed acquisition of Discover by Capital One. Richard Fairbank, chairman and CEO at Capital One, said that much is now in the hands of the Comptroller’s Office and the Federal Reserve, on his bank’s side of the deal. Still pending are restatements of financials by Discover at the behest of the Securities and Exchange Commission. At issue is the accounting treatment of certain misclassifications of merchant charges.
Fairbank said that Discover has announced that revised financials to be filed by Discover with the SEC before yearend. Once SEC approves the revisions Capital One and Discover will publish a proxy statement and some weeks after that shareholders will vote on the deal.
The combination of a major credit card issuer with one of only four U.S. card networks is expected to produce a financial powerhouse. One key benefit will be moving Capital One’s debit card program onto Discover debit card network. Fairbank said that will give support to his bank’s building of its national bank franchise, a top priority.
Read more: Changing Conditions May Drive More Community Bank Mergers in 2025
5. Was a Consumer Credit ‘Snapback’ Delayed?
Many institutions in the consumer lending and credit card areas have seen rising delinquencies post-pandemic. TransUnion recently forecast that the rise would slow down in 2025.
But what contributed to the rise? Revenge spending? Inflation?
Capital One’s Richard Fairbank thinks a couple of factors have influenced the numbers.
First, during the pandemic, forbearance and stimulus kept a portion of debt out of delinquency status that might otherwise have become classified. Once the aid programs were washed out of the system, he suggested, that meant that normal credit behavior was resumed. It’s not unlike the snap back when a stretched rubber band is released suddenly. Fairbank believes that some people who might have fallen into bad debt ordinarily did so after the Covid-era lifelines were withdrawn.
That said, according to Fairbank, less debt went into chargeoff status during and shortly after the pandemic period. As a result, there was lower inventory of charged-off debt to work out and book recoveries from. He said recovery rates have been improving, but there are simply fewer chargeoffs to recover from.
However, Fairbank added, "this recovery ‘brownout,’ if you will, is running its course and should diminish as a factor."
He noted that while this factor can be deduced intuitively, "you can’t measure it." But he said increases have been seen in the percentage of consumers who make their minimum card payments, "which would suggest stress at the margin."
Read more: Credit Card Delinquency and Balance Growth Will Moderate in 2025
6. BofA Estimates AI-Based Erica Virtual Assistant Filled Roles of Thousands
Host Richard Ramsden noted that BofA’s Brian Moynihan had said he’d trimmed 100,000 employee positions in his time at the top. What impact did artificial intelligence have on headcount? he asked.
Moynihan said the bank’s best calculation indicates that the Erica virtual assistant, introduced in mid 2018, has saved it employing 3,000 people. He said that the user base is growing between 5%-6% per year and that usage growth is in the range of 15%-20%.
He added that the bank’s developer corps numbers 1,000-plus for all automation, a cadre that is expected to grow exponentially as AI takes on more tasks at the bank. AI adoption is growing at BofA in part because many software vendors have been incorporating elements of it into their programs.
"We’re very excited by AI, but you’ve got to be absolutely precise in what you’re doing and how, because our industry has 100% accountability for every answer we give," said Moynihan.
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