PNC Financial Services Group Inc (PNC) 2015 Q4 法說會逐字稿

Good morning.

My name is Pemma and I will be your conference operator today.

At this time I would like to welcome everyone to the PNC Financial Services Group earnings conference call.

(Operator Instructions) As a reminder, this call is being recorded.

I will now turn the call over to Director of Investor Relations, Mr. Bryan Gill.

Sir, please go ahead.

Thank you, operator, and good morning.

Welcome to today's conference call for the PNC Financial Services Group.

Participating on the call are PNC's Chairman, President, and Chief Executive Officer, Bill Demchak, and Rob Reilly, Executive Vice President and Chief Financial Officer.

Today's presentation contains forward-looking information or forward-looking statements regarding PNC performance assuming continuation of the current economic trends and do not take into account the impact of potential legal and regulatory 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 risks and other factors.

Information about such factors as well as GAAP reconciliations and other information on non-GAAP financial measures we discuss is included in today's conference call, earnings release, and related presentation materials, and in our 10-K, 10-Qs and various other SEC filings and investor materials.

These are all available on our corporate website, PNC.com, under Investor Relations.

These statements speak only as of January 15, 2016, and PNC undertakes no obligation to update them.

Now I'd like to turn the call over to Bill Demchak.

Thanks, Bryan, and good morning, everybody.

I know it's been a busy day for all of you, and it was a pretty straightforward quarter and year for us actually, so I'm just going to have a few brief observations to share and then I'll turn it over to Rob.

As you've seen today, we reported full-year 2015 results with net income of $4.1 billion or $7.39 per diluted common share, and the return on average assets for the full year was 1.17%.

In a pretty difficult revenue environment, PNC performed well by executing on our strategic priorities and, as we've said before, controlling the things that are in our power to control.

I'd tell you, I'd even argue that the degree of difficulty in 2015 was probably tougher than the year before.

But again we delivered the solid, consistent results that you guys have come to expect.

In 2015, we grew loans, we had average deposits up 8%, we had fee income up 3%, and noninterest income represented a higher percentage of our total revenue mix in 2015 than in 2014, which is an important priority for us.

You'll have seen we also maintained strong capital and liquidity positions even as we returned more capital to shareholders through repurchases and higher dividends.

And at the same time and importantly we continued to control expenses well.

2015 was the third year in a row that we've brought down expenses despite major ongoing investments in our businesses and infrastructure.

In Retail, we now have more than 375 branches using our universal banking model, and we plan to convert another 100 or even more in 2016.

In technology, we're in the late innings on our work to strengthen our core systems, fortify our cybersecurity, and modernize applications.

Once this is completed, this infrastructure is going to allow us to shift more of our spend to offense, focusing on consumer-facing products and services.

Additionally, we continue to make progress on our other strategic priorities, building a leading banking franchise in our underpenetrated markets and capturing more investable assets.

We've got a few highlights there on the slide, and I'll be happy to talk more about these priorities during Q&A if you have specific questions.

But as we look ahead into 2016, we do expect our strategic priorities are going to continue to drive growth and fee income.

We have the right model, capabilities, culture, and people to continue to manage what is in our power to control and to deliver for the customers, shareholders, and communities that we serve.

I believe that we are well positioned, particularly if the Fed continues to raise rates, to generate positive operating leverage this year.

Now, having said that, we're obviously concerned about the global volatility in markets that we've seen over the last few weeks and even today, and the potential for that to directly impact the US economy, and the resultant Fed actions.

But I'm going to turn it over to Rob for now to just take a closer look at our fourth-quarter and full-year results and give you a few additional thoughts on 2016 before we take your questions.

Rob?

Thanks, Bill, and good morning, everyone.

Overall, our full-year and fourth-quarter results played out largely consistent with our expectations.

For the full year we grew loans, deposits, and fee income and reduced expenses even as we continued to invest in technology and our businesses.

In addition, we returned more capital to our shareholders while maintaining strong capital levels.

As a result, our 2015 net income was $4.1 billion or $7.39 per diluted common share.

Fourth-quarter net income was $1 billion or $1.87 per diluted common share.

Our balance sheet information is on slide 4 and is presented on an average basis.

As you can see, total assets increased by $1.8 billion or 1% linked quarter.

Compared to the fourth quarter a year ago, total assets grew by $21 billion or 6%, primarily reflecting increases in investment securities, loans, and interest-earning assets, which includes balances held at the Federal Reserve for liquidity purposes.

Total loans grew by $1.2 billion or 1% linked quarter, primarily due to growth in commercial real estate.

It's worth noting that on a spot basis total commercial lending grew $2.4 billion or 2%, primarily in PNC's real estate business, which includes an increase in multifamily agency warehouse lending.

For the year-over-year quarter, total loans increased by $3.1 billion or 2%, again driven by growth in commercial loans -- specifically, real estate and business credit -- as well as increased lending to our large corporate clients.

Consumer lending decreased $396 million linked quarter, as the decline in the nonstrategic consumer loan portfolio was somewhat offset by growth in credit card and auto lending.

Compared to the same quarter a year ago, consumer lending was down $2.8 billion or 4%, primarily due to the continued decline in nonstrategic home lending and lower educational loan balances, again partially offset by growth in credit cards.

Investment securities were up $5.8 billion or 9% linked quarter, and increased $13.6 billion or 25% compared to the same quarter a year ago.

Portfolio purchases were comprised primarily of agency residential mortgage-backed and U.S. Treasury securities.

Our interest-earning deposits with the Federal Reserve were $31.5 billion at the end of the fourth quarter, down from the third quarter, as we reduced commercial paper outstandings and shifted some Fed deposits to higher yielding liquid assets.

Compared to the same quarter a year ago, our interest-earning deposits with the Federal Reserve increased by $3.8 billion in support of our efforts to comply with the liquidity coverage standards.

As of December 31, our estimated short-term liquidity coverage ratio exceeded 100% for both the Bank and the Bank Holding Company under the month-end calculation methodology.

On a liability side, total deposits increased by $3.5 billion or 1% when compared to the third quarter, primarily driven by consumer deposit growth, with an emphasis on savings products.

Compared to the fourth quarter of last year, total deposits increased by $17.5 billion or 8%.

Turning to capital, as of December 31, 2015, our pro forma Basel III common equity Tier 1 capital ratio, fully phased-in and using the standardized approach, was estimated to be 10%, essentially flat linked quarter, as we continued to return capital to shareholders through our dividends and share buybacks.

During the fourth quarter we repurchased 5.8 million common shares for approximately $500 million.

We are on track to meet our repurchase authorization of up $2.875 billion for the five-quarter period which began April 1, 2015.

Period-end common shares outstanding were 504 million, down 19 million or 4% compared to the same time a year ago.

Finally, our tangible book value reached $63.65 per common share as of December 31, a 6% increase compared to the same period a year ago.

Turning to our income statement on slide 5, again, net income was $1 billion in the fourth quarter and $4.1 billion for the full year.

Our fourth-quarter return on average assets was 1.12%, and for the full year it was 1.17%.

In the fourth quarter, total revenue grew by $78 million or 2% compared to the third quarter as a result of higher net interest income and fee income.

Core net interest income grew by $30 million or 1% compared to the third quarter, primarily driven by increased security balances and loan growth, while purchase accounting accretion was flat linked quarter due to greater than expected recoveries.

For the full-year 2015 purchase accounting accretion was down $164 million compared to 2014.

This decline was somewhat less than expected due to higher cash recoveries throughout the year.

For 2016 we expect purchase accounting accretion to be down approximately $175 million compared to 2015.

Total net interest margin was 2.7% in the fourth quarter, up 3 basis points linked quarter.

Total noninterest income increased by $48 million or 3% compared to the third quarter, primarily driven by higher fee income.

Total fee income grew by $27 million or 2% linked quarter due to growth in most categories, partially offset by lower fee revenue from residential mortgage and service charges on deposits.

I'll have more to say about our fee income in a moment.

Noninterest expense increased by $44 million or 2% linked quarter, largely due to higher business activity.

Importantly, full-year expenses were down $25 million; and as Bill mentioned, this marks the third straight year we reduced total expenses while supporting significant investments in our business.

These results were due in part to our Continuous Improvement Program, or CIP.

During 2015 we completed actions and exceeded our full-year goal of $500 million in cost savings.

Looking forward to 2016 we have targeted an additional $400 million in cost savings through CIP, which we again expect to help fund a significant portion of our business and technology investments.

Provision in the fourth quarter was $74 million, down $7 million or 9% from the third quarter, as overall credit quality remained relatively stable.

Finally, our fourth-quarter effective tax rate was 26.1%, up from 20% linked quarter, as the third quarter reflected tax benefits.

Our full-year effective tax rate was 24.8%.

Looking ahead, we expect our 2016 effective tax rate to be between 25% and 26%.

As you can see on slide 6, noninterest income as a percent of total revenue has steadily increased during the last four years and currently generates nearly half of our revenue.

We have strategies in each of our lines of business to increase fee income across our franchise.

Three of our business activities -- asset management, corporate, and consumer services -- each generated more than $1 billion in fee income in 2015, and their growth offset lower fee income from residential mortgage and service charges on deposits.

For the full year, asset management fees increased by $54 million or 4% as a result of new primary client acquisition, net asset flows, and positive market performance in the first half of the year.

Full-year 2015 results also benefited from a large trust settlement that occurred in the second quarter.

On a linked quarter basis, asset management fees reflected stronger equity markets and increased by $23 million or 6% due to higher earnings from PNC's equity investment in BlackRock and new sales production.

Assets under administration were $259 billion as of December 31, up $3 billion linked quarter but lower than the $263 billion at the same time a year ago, largely reflecting equity market movements in both comparisons.

Consumer service fees increased $81 million or 6% for the full year as a result of increased customer-related debit, credit, and merchant services activity along with higher brokerage income, all consistent with our strategy of growing share of wallet in retail.

Reflecting this momentum, consumer services fees increased $8 million or 2% linked quarter due to higher merchant services and seasonally higher credit and debit card activity.

Corporate services fees increased by $76 million or 5% in 2015 and included higher treasury management and commercial mortgage service fees.

Our corporate and institutional business also saw strong full-year results in capital markets.

On a linked quarter basis, corporate services fees increased by $10 million or 3% primarily due to higher merger and acquisition advisory fees and higher loan syndications.

Residential mortgage, noninterest income declined by $52 million or 8% for the full year primarily due to elevated secondary loan sales in 2014 that didn't repeat in 2015, as well as lower servicing fees.

On a linked quarter basis, residential mortgage fees decreased $12 million or 10% primarily as a result of lower sales revenue and net hedging gains.

Fourth-quarter originations were $2.3 billion, down approximately $200 million or 8% compared to the same quarter a year ago, due in part to closing delays resulting from the implementation of new disclosure requirements.

Service charges on deposits for the full year declined by $11 million or 2%, and on a linked quarter basis they were down by $2 million or 1%.

In both periods the lower revenue was driven by evolving customer behavior and product changes.

Lastly, full-year total other noninterest income decreased by $51 million or 4% primarily due to a higher level of asset sales in 2014.

Of note, gains from the sales of Visa Class B common shares were approximately $40 million less in 2015 compared to 2014.

On a linked quarter basis, total other noninterest income increased by $21 million or 7%, primarily driven by asset sales.

Turning to slide 7, overall credit quality remained relatively stable in the fourth quarter compared to the third quarter.

Nonperforming loans were down $51 million or 2% linked quarter driven by improvements in the consumer lending portfolio, partially offset by increases in commercial loans.

Total past due loans were down $23 million or 1% linked quarter as we saw small declines in most categories.

Net charge-offs of $120 million increased by $24 million due to higher gross charge-off levels and lower recoveries compared to the third quarter.

In the fourth quarter, the net charge-off ratio was 23 basis points of average loans, up from 19 basis points in the prior quarter.

Our provision of $74 million was down $7 million or 9% from the third quarter.

Consistent with our previous disclosures, during the fourth quarter we implemented the derecognition of $468 million in purchased credit impaired loan balances and the associated allowance for loan losses.

These balances were related to loans that have been paid off, sold, foreclosed, or have nominal value.

Importantly, this change had no impact on EPS, the net carrying value of the pools, or accretion accounting.

The allowance for loan and lease losses to total loans is 1.32% as of December 31.

This compares to 1.58% linked quarter and 1.63% at the same time a year ago.

The decline in both periods was primarily attributable to the implementation of the derecognition.

We are cognizant of the volatility affecting the energy-related and commodity sectors.

That stated, not much has changed regarding our exposure since last quarter.

Specifically, on oil and gas we have a total of $2.6 billion in outstandings, which is relatively flat quarter over quarter.

This represents approximately 2% of our total commercial loan book.

We have approximately $700 million in outstandings to energy and production companies, $1 billion to midstream and downstream, and $900 million to oil services.

Approximately $200 million of the services portfolio is not asset-based or investment grade, and this poses the greatest near-term risk, consistent with what we've been telling you the last few quarters.

We continue to experience some portfolio deterioration in the fourth quarter, though charge-offs were quite modest.

During the quarter we increased our reserves to reflect the incremental impact of the continued decline in oil and gas prices.

In summary, PNC posted fourth-quarter and full-year earnings consistent with our expectations.

Turning to 2016, we're obviously off to an unexpected rough start to the year, relative to the global macro economy.

However, our 2016 operating plan, completed at the end of last year and prior to this recent volatility, assumes continued steady growth in GDP and a corresponding increase in short-term interest rates three times this year, in March, June and December, with each increase being 25 basis points.

Based on these assumptions, our full-year 2016 guidance is for modest growth in revenue and stable expenses, which by definition positions us to deliver positive operating leverage.

As we said before, we continue to expect credit cost to normalize on a gradual basis.

In regard to the recent economic conditions, we acknowledge it's unclear how long these conditions may persist, but should they continue for a prolonged period it will impact our plan and we will adjust accordingly.

Looking ahead at the first quarter of 2016 compared to the fourth quarter of 2015 reported results, we expect spot loans to be up modestly but average loans to be stable as the calculation of the average balances will be impacted by the derecognition implementation.

We expect net interest income to increase in the low single-digit range (Sic � see presentation slide �up modestly�).

We expect fee income to be down mid-single digits due to seasonality and typically lower first-quarter client activity.

We expect expenses to be down low single digits, and we expect provision to be between $75 million and $125 million.

With that, Bill and I are ready to take your questions.

(Operator Instructions) Erika Najarian, Bank of America.

Hi, good morning.

Thank you so much for giving us detail in terms of what's embedded in your plan from an interest rate outlook perspective.

I'm anticipating that investors will be curious about what you mean by "adjust accordingly." As you can imagine, investors are a little bit more cautious about the pace of the Fed.

As you think about the trade-off between delivering positive operating leverage if the Fed doesn't raise three times, versus delaying some of the investments that you mentioned, I guess it's the adjusting accordingly on the expense side, or just take us through your potential --

It's the adjusting accordingly in terms of the guidance we give you.

Right.

In its simplest form.

So our plan takes those assumptions today -- and by the way, some investors and even the Fed's dot-plot themselves I guess have them going four times.

Obviously the market doesn't believe that today.

We're three weeks into the year, and so we're not going to bend a whole planning process until we see how it plays out.

And as it plays out we would give you, as we do always, quarterly guidance on what you might expect.

I don't think, as we've said before, that near-term pressures on rates and/or localized pressures on the economy are going to dramatically shift our investment profile, largely because we continue to be able to fund that profile through continuous improvement and hold cost constant.

So, your broader question on, can we get to positive operating leverage, there's so many embedded assumptions on that in terms of what credit costs do and rates do and everything else, we'll have to see.

Got it.

In terms of your capital management for the year and in terms of us trying to back into what you could distribute post-2016 CCAR, your CET1 ratio was kept flat at 10%, which seems high relative to the risk profile and the size of the Bank.

I'm wondering if to you, Bill, that seems like an appropriate level to think about for 2016 as well.

I would remind you -- and we've talked about this before -- that there is not a magic boundary on this kind of 100% payout ratio in terms of what we could request.

I'd also remind you that we talk about focusing on the post-stress ratio as opposed to the starting ratio, which is the one that's obviously your binding constraint.

As we run our base case -- and the other thing that we've talked about in the past is that our base case typically for a variety of reasons ends up being lower than what we in fact produce in income.

All of those things suggest that we'll have an opportunity to go back and be aggressive in terms of capital return ask.

Until we see what actually comes out of the Fed in terms of instructions, the definition of aggressive will have to be rather vague at this point.

Because, as I said, despite the fact we're at 10% today it's really dependent on where we're going to end up post their stress scenario.

And just to add to that, Erika, as you know, we're well positioned to return capital to shareholders.

We just have to see what those scenarios are.

Got it.

Thank you very much.

John Pancari, Evercore.

Good morning.

Just wondered, similar to that line of questioning, in terms of how we should think about spread revenue growth and the margin outlook.

Can you just give us some way to think about the sensitivity if we don't see any Fed moves?

What we could think -- what we could expect by way of the margin progression as well as spread rev.

Thanks.

Yes, sure.

As you know, we don't give specific guidance around NIM.

That's an outcome.

Our plans do call for growth in NIM, but they are largely reliant on increases in rates.

Now, naturally there's other variables involved in terms of pricing on loans and securities that would factor into that.

But I think generally speaking, if your question just is where does this outcome play out if you don't get a Fed rate increase, it's probably stable, plus or minus a small amount.

Okay, all right; that's helpful.

Thanks.

Then separately, in terms of how we should think about loan growth beyond the first quarter -- I know you indicated relatively stable for the first-quarter 2016.

But what's a -- how are you thinking about full year, particularly given some of the uncertainty on the macro backdrop?

Thanks.

Our plans call for really a continuation of what we've seen for a while, which is continued growth on the commercial book for PNC, largely in our specialty businesses, and then on the consumer side relatively flat overall.

Home equity, obviously some of the nonstrategic working down, offset by what we would expect to be continued growth in credit card and possibly -- although at smaller levels -- auto.

Yes.

I think one of the offsets if in fact we get into a surprise here as it relates to the distress in the economy and increasing credit costs, our specialty businesses actually tend to pick up growth in stressful situations.

So our plan called along with our GDP assumption for moderate growth.

But in a downturn scenario, same way you saw back through the crisis, we actually have the ability through the specialty lending to do quite well.

Okay.

Bill, if I can give you one more here, on the capital deployment side, could you just remind us of your thoughts around M&A?

I know you've been more tempered in terms of that outlook.

But just wanted to get your updated thoughts at this point.

Tempered is one word.

(laughter)

However you want to put it.

Look, as it relates to traditional bank M&A, we're not interested.

We're not involved.

There is a variety of reasons you've heard me talk about before.

Sometime, through time, could that somehow change?

Sure, because forever is a long time.

But today it's not on our radar.

I would tell you that we have taken some small investments in fintech stuff.

You would have seen an announcement with EWS and clearXchange in partnership with six other large banks to put a P2P product out in a ubiquitous way to all bank clients.

We're interested in distributed ledger block-chain technology.

We're interested in some of the corporate payments disbursement technology.

None of these are big numbers, but in terms of our focus and where we think about growth opportunities and how to deploy capital, it would be much more focused in that area than it would be a traditional bank deal.

Got it.

Thank you.

Matt O'Connor, Deutsche Bank.

Hi, this is Rob from Matt's team.

I was just curious if you can update us on your thinking for the reimbursement of the $30 billion or so liquidity on the balance sheet, where you may look to deploy that, and the timing.

Sure, Rob.

Consistent with what we have said on prior earnings calls, we do have a large balance there that was largely driven by meeting the liquidity coverage ratios.

Given the growth in deposits and the way the year played out, those balances actually went in excess of that.

We have started to put some of that to work this past quarter, you can see, in some investment securities.

Probably the best way to answer your question is, we could shift $10 billion of that into other high-quality securities without jeopardizing the liquidity coverage.

Yes, the other thing you'd see if you dig through the numbers is we paid down some wholesale debt, short-term funding that didn't count for LCR in some of the -- I think there was even a subdebt deal that went off, which drops our funding cost, helps NIM as well.

So you could see that decline both as we change our funding mix but also as we deploy cash into higher-yielding assets.

Okay, thank you.

Gerard Cassidy, RBC.

Thank you.

Good morning, guys.

Rob, can you share with us in terms of what you're seeing on the underwriting standards in commercial real estate and construction loans, or what your loan guys are telling you?

And second, has there been any change in those underwriting standards in the marketplace since the regulators came out in December expressing concerns that those standards are too aggressive?

Well, the first part of your question, Gerard, in terms of our commercial real estate, we continue to see growth there, not quite at the same levels that we've seen in the past years.

But the big difference there -- and it really showed up in the fourth quarter, but it's been happening for a while -- is the shift in the emphasis in terms of what we're lending into.

Much, much more around the permanent lending -- you can see that in our supplement -- and less so on the construction side in terms of a mix.

So our commercial mortgage loan balance, as you can see, it continued to increase quarterly.

And we would expect that to continue.

Part of what's happening is the combination of a lot of the European banks pulling back post-crisis and then the lack of volume that's getting through the CMBS market is continuing the opportunity for what historically has been called life insurance product, but basically balance sheet and term loans with good debt service coverage and loan-to-value ratios as we hit this big CMBS maturity bubble.

Plus the projects get funded and come online.

So that's where we see the opportunity.

The bankers would tell you, and as we look at markets we're obviously concerned about energy-heavy cities.

We're a little bit concerned about some of the technology-heavy cities across all property types.

You would see that in our underwriting criteria and the stuff that we would target, to the extent we're still doing new projects.

Thank you.

Then in your press release in the Corporate & Institutional Banking section you guys give us some color.

You talk about the loans growing about 1% over the third quarter; it was due to some real estate and business credit that you generated as well as large corporate.

But then you had put in there, partially offset by the impact of capital and liquidity management activities.

Can you give us some color what that was?

Yes.

That's -- so, combination of LCR requirements and the cost associated with LCR and simply regulatory capital requirements against certain types of lending-only relationships caused the return to be below the standard we'd otherwise like to hold.

So we've shifted the mix; and inside of our growth you'd actually see a lot of runoff in lower-returning relationship.

A lot of that shows up in what is broadly defined as the financial services space.

You'll see a lot of that in the public finance space where those balances have declined and frankly have somewhat masked the real growth that is underlying inside of C&IB as we've run those balances down.

Yes, and Gerard, you'll recall that was a bigger issue in the third quarter where we had more of those balances run off.

So it's the same issue, just a smaller amount in the fourth quarter.

Not to put words in your mouth, so if it's not meeting your internal return targets you're willing to give this business up; is that correct?

Sure.

Absolutely.

Good.

No, no, that's good.

Then finally, Rob, I apologize if you addressed this in your prepared remarks and I didn't hear it.

But going into the first quarter I know you showed us that the net interest income will be up slightly.

You saw the increase in your margin this quarter.

With the Fed funds rate increase that we saw in December, should that have a positive impact on the net interest margin in the first quarter?

Yes, a bit.

It definitely will have an impact on the net interest income, but the margin moves a lot slower.

Great.

Appreciate it.

Thank you, guys.

Scott Siefers, Sandler O'Neill & Partners.

Morning, guys.

Let's see, Bill, a couple of questions ago you talked about the potential benefit of dislocation on your specialty businesses.

I guess pricing gets out of whack, the risk/reward improves, etc.

I wonder if you could apply those comments to the broader portfolio.

Are you seeing anything thus far just given the dislocation, which I guess for now has been largely limited to the capital markets?

But are you seeing anything in the broader portfolio that would lead you to feel better about things this year?

Yes, it's interesting.

We haven't really seen the spike in lending spreads that potentially could occur -- in fact did occur in 2009, particularly the leverage product.

Where we probably have seen some benefit is as the cash flow leverage loans done to do buyouts and M&A -- think middle-market private equity and so forth -- as the market for that has become tougher, and you've read about the hung syndications, opportunities increase for our asset-based lending business as a substitute for that.

And we've already seen it.

It's part of the growth embedded in there, and I suspect it will continue.

Okay.

All right; that sounds good.

Thank you very much.

Ken Usdin, Jefferies.

Hi, guys.

Good morning.

If I can ask a question on just your fee income outlook, you had some real good seasonal strength, as you usually do; and we understand the first quarter seasonality.

Can you talk about what you expect to be the drivers within fee income this year, given what looks to just still be some challenges, whether it's borne by the markets or residential mortgage comparisons or whatnot?

But what do you think is going to drive the income growth?

Well, I think, if you take a look at it, we agree.

We think we had a strong fee story in 2015, and I think much of what drove that we would expect to continue into 2016, because this is central to our strategies, to grow these fee businesses across the broader franchise.

So if you just walk down them a bit, asset management we would expect to be able to continue to grow.

I guess we have to put some parentheses around where these markets play out; and to my earlier comments, in terms of if they continue to persist over a prolonged period, that could in the short term affect that.

But long-term we see big growth continuing there.

Consumer services, a lot of momentum.

We've been growing it mid-single digits, and we would expect to be able to do that through time.

Same with corporate services.

Residential mortgage, it is struggling in terms of where we are in the rate cycle and everything that's going on there; but of course, that's a smaller number.

So I think it's pretty --

I think that the one caveat, if we ran into a lumpy capital markets -- inside of corporate services the biggest driver there is our treasury management business, and we continue to grow that at a healthy clip both through introduction of new products but also through cross-sell down into the Southeast.

But this year we did have a great year inside of our capital markets activity with corporate securities fees, loan syndications.

And Harris Williams, while down a bit from last year, it's the second best year ever.

That's right.

So we could see some pressure conceivably in what we would call our capital markets line.

But in terms of raw size, that is so dwarfed by what we do in treasury management, we'd like to think we could outgrow it.

Understood.

One just follow-up, that other income line, ex- the Visa and securities gains, can you just remind us what a typical range is for that line?

And do you see any major changes one way or the other there?

Not a whole lot.

Ex- Visa we guide $250 million, $275 million a quarter.

And I think that's a good number.

Okay.

Thanks a lot, guys.

Paul Miller, FBR.

Yes, thank you very much, guys.

I know in your past guidance that you've been somewhat bullish, and I think you were calling for like 200 basis points of rate hikes.

Has the volatility over the last -- if you answered this question already, I apologize; I've been jumping all over the place.

But has the volatility in the markets over the last two weeks changed those assessments?

Sorry, let me.

First off, our guidance had three rate hikes --

25 basis points.

-- of 25 each through the course of 2016.

And the volatility in the last three weeks has caused concern, but hasn't caused us to bend a plan after three weeks of disruption.

We'll let this play out and see where we end up.

You have to -- the thing you always have to hold in the back of your mind is we are coming off of a base of zero.

So we were still wildly accommodative; and notwithstanding some localized stress and the economy, does that necessarily stop you from raising rates?

The offset to that is we've seen even in some numbers today -- we know the Fed is watching inflation and the inflationary numbers continue to be really benign, notwithstanding some at-the-margin inflation in wages, where we're seeing it from imports and other places.

So we'll let that play out.

But we had three increases in our plan.

They happen or they don't.

It will affect our results or not, and we'll update you as we go.

And I know a lot of people been asking about credit out there.

But do you see any regions -- because you do go across pretty much most of the mid to East Coast -- do you see any regions besides some of those energy sector areas in Pennsylvania that are struggling?

It's energy sectors broadly, but I wouldn't isolate that to Pennsylvania.

We're actually -- the localized economy here notwithstanding, some reliance on coal and natural gas is actually quite strong.

We see some pressure down, not surprisingly, into Texas and other areas on our energy book; and it's starting to spread as you would expect it would, into -- at-the-margin real estate and other service providers, everybody from accountants to lawyers and anybody who was in the game as the oil boom started.

But that's kind of at the margin.

And beyond that I don't do that we see a particular region in the country that is standing out.

Although I'd tell you Mike Lyons, who runs our C&IB business, just finished a grand tour around the country, seeing a lot of clients, and came back with a notion that more so than he saw the last time he was through, he said people are feeling more margin pressure and at the margin a little lower activity than they otherwise thought they'd see at this point in the year.

But that was (multiple speakers) broad based across --

That's just a point in time, right.

Yes.

Thank you, guys.

Yes, thank you very much.

(Operator Instructions) Gentlemen, there are no further questions.

Thank you.

Okay, well thank you all for participating on the conference call this morning and we look forward to working with you during the quarter.

Thank you.

Thanks, everybody.

This concludes today's conference call.

You may now disconnect.