“On balance, modest inflation that leads to higher rates is good for us. But under some scenarios, elevated inflationary pressures on expenses could more than offset the rates benefit, which could represent around 75 basis points of downside.”

In context

“l case, we assume healthy sales growth from the back of continued economic recovery and strong account acquisitions. And that, combined with relatively constant revolve rates, generates a strong recovery in revolving balances. But there are those who worry about a permanent structural shift in consumer behavior, which could be a source of downside. And in that scenario, revolving balances could stay depressed relative to the long-term pre-pandemic averages, resulting in approximately 50 basis points of downside relative to our central case. Of course, there could be an upside case where revolving balances recover much faster but we believe the risks here are more likely to be skewed to the downside. And then, let’s touch on inflation for a second, which is obviously increasingly relevant. On balance, modest inflation that leads to higher rates is good for us. But under some scenarios, elevated inflationary pressures on expenses could more than offset the rates benefit, which could represent around 75 basis points of downside. And while it’s not on the page, another key driver is capital, where even though we remain hopeful, our central case assumes no recalibration of the rules and that we will operate at a higher CET1, reflecting that we finished the year in the 4.5% GSIB bucket which equates to a 1% increase from GSIB in the central case. Although as a reminder, that does not become binding until 2024. This is a good opportunity to point out that QE deposit growth and growth of the overall financial system proxy by GDP growth of the factors in the original 2015 rule release combined represent two full GSIB buckets. So, in the absence of those, we would still be in the 3.5% bucket. With that in mind, any recalibration could be a tailwind. And each 1% change in the CET1 level is worth about 150 basis points of”