State Street (STT) 19 Jul 192019 Q2 Earnings call transcript

Good morning and welcome to State Street Corporation's Second Quarter 2019 Earnings Conference Call and Webcast. Today's discussion is being broadcasted live on State Street's website at investors.statestreet.com. This conference call is also being recorded for replay. State Street's conference call is copyrighted and all rights are reserved.

This call may not be recorded for rebroadcast or distribution in whole or in part without the expressed written authorization from State Street Corporation. of website. will broadcast the housed authorized Street State only this be call on The

would to I Investor Now like Relations Head Bieler, at of Global State Street. introduce Ilene Fiszel

for section is Good second earnings Thank Relations today operator. the quarter our CEO, will our XXXX Eric O’Hanley, available slide investors.statestreet.com. in Afterward first; Ron On Investor you CFO, you, Thank will our you all take for our website, joining download morning. of be questions. call then Aboaf, which to happy speak presentation, us. through our we'll take

During two re-queue. the limit Q&A, please yourself questions and to then

more get started, of these from measures we on appendix you results are GAAP. to to remind non-GAAP presented slide comparable the directly in the measure that to or today's a regulatory basis Before our or GAAP presentation. items would will available excludes or include I Reconciliations presentation that most like one adjusts

today's those Form Actual In factors, those addition, forward-looking our our differ factors including of in SEC the referenced in due discussion such filings, a statements materially factors risk important as our in statements. variety may results and to today XX-K. presentation will contain from

today and update Our forward-looking speak change. disclaim only as even any obligation statements to if we of them views our

Now, let Ron. over it to me turn

Thanks, good and Ilene, morning, everyone.

respectively. stabilized pricing, results and XX.X% tailwinds conditions, first levels. quarter Turning and uptick within well industry second average to were quarter, supported as seasonal and slide business. asset international slight markets outflows well our global X, our to and within our a of results seen this industry and rates, management servicing ago our market interest morning, market period, investment When including businesses $X.XX as financial compared reporting volatile our weaker by challenging we to the somewhat as results as you second will have the EPS reflect ROE announced client year quarter Relative

$X.X we at be and by under new $XX.X quarter and Global market billion to assets At Assets CRD, X% in encouraged as first client cash the are equity by billion. and period-end well in under front-to-back $XXX additional by trillion, reached are are of values wins agreement client to installed At we investment institutional wins exclusive strong $XXX our encouraged increased inflows. quarter-on-quarter six supported yet custody advanced and discussions that trillion administration higher management Advisors, by assets negotiations. with service as

grow by the quarter At same to the of continues pipeline another as evidenced client engagements. time, increasing

increased anticipate an CCAR the return sheet actions quarter second our to shareholders. as of while under common our increasing share repurchases XX% the in proactive to our to dividend XXXX of in we our billion test, performance Following conducting ability strong the by stress contributed through capital quarter, XXXX $X of XXXX balance third level

We believe servicing currently returned front-to-back long and positions term. well in continue we yet And may stabilization our in us medium to we seeing to some strategy be not the growth. for have while fees, success

fundamental a updating conducting will as of technology we reassessment and sharpening business core well be strategy such, our As our as ecosystem.

growth, on established have non-personnel reducing accelerating reinvigorating teams to and of expenses. revenue focus model, operations simplification We our the

believe these delivering a progress urgency we we areas. with time, culture things with can in same the act while client control execution industry-leading on service. to attention the to reinvigorated making we At continue are productivity fostering and of I

staff very of has that a and as to the increase have by be freeze continues disciplined number that to For outside already more of expense reduced effective. all actions expect location priorities, by CRD than year-end. my X,XXX one been for example we noncritical high-cost result we Year-to-date hiring roles our headcount top management of firm-wide X,XXX can

total even better program outcomes we delivering gear, full in year-to-date for $XXX we million achieved Process expense additional clients. already the $XXX savings $XX for are year-over-year Furthermore, our has $XXX under automation and over January efforts service headcount by million are XXXX. million now in targeted just to the program savings us XXXX and announced while an allowing decrease million in expense increasing saves to our

for to and none. Our trading, now in means achieved the are model. executive right leading securities to in reignite using revenue is completing pricing we better restart increased in our servicing, to we rollout, ways wave focus client finding optimization and and while growth pressure, capacity lending improvements where second our manager additional operating coverage surmounting the asset alternatives driving expense balance and reductions, have sheet of ETF and growth This generate sustainable addressing

these vision becoming client in segments, a to our but and the we the Our the owners we most capital. insight and way. are scalable servicer, aligning provider with and asset the I for clients manager managers organization of more better holistic continue the am to attractive serve data remains strategically find and and all confident fastest-growing ways leading to world asset must

We have by innovate so revenue more diversified to streams. doing to continue and grow

our stack, outcomes are such client as reduce technology and leveraging processes in organizational number operating and better cost. reengineering increased partners by order to lower while service. There our are IT examining, continue a automation of delivering create model areas simplifying efficiencies, client to our complexity across through must industry-leading drive We at to we while our technology

being opportunity hubs leverage on an resource global process drive while have efficiencies, discipline. to also improvements and expertise We constantly our further focused to within

will these we in and of team initiatives fall, reassessment strategy the and I drive As technology including a updates my progress forward, provide our plans.

the to over take it turn Eric me detail. let that, through you more with quarter in And to

and good everyone. morning Ron you, Thank

start X. on page me Let

ex underlying GAAP you show and of well notable some our items for expenses results of those On panel, as seasonal we want see top-left trends. certain as to the who results the

items, of to share On per cost, XXXX and million $XX XQ, including the right Charles notable restructuring or primarily pretax panel, summarize in we acquisition $X.XX related River.

impact and announced of previously X% partially BlackRock regards In levels. was announced remain to levels market revenue the material flat driven to AUC/A no and the quarter-on-quarter. $XXX to please part this quarter-on-quarter the saw decline by of deconversion saw had X. previously the year-on-year period-end which transition, approximately We departure higher The billion in note spot offset move Turning slide of the by quarter. AUC/A XXXX the fund of impact AUC/A BlackRock transition, that fund XQ, was

second levels of by market positive AUM inflows trillion, by wins. to quarter and XQ, flows $XX equity $X.X increased and X% XXXX and billion, X% a were quarter-on-quarter higher institutional of and institutional record year-on-year driven saw largely wins cash. the driven sequential approximately levels

down quarter-on-quarter. flat X. slide were year-on-year, but Servicing X% to fees Moving

client the less moderated XQ's pressure were Unpacking results, XXXX. industry the during that, taken business with headwind. somewhat X% tailwind, While levels flows a fee was client a new market challenging of quarter-over-quarter pace drivers conditions than persist XQ X% net were sequential together of quarter flat servicing slight pricing estimate activity and positive, a the we while

a the we which of that pricing this our some expect couple more for since our are late discipline coverage strengthened opened has shared have new are a leading quarters. year of client pleased We has of we having to include the model, formed moderation review which last us newly wallet actions And continue quarter taken committee up rollout impact. These opportunities.

growth. servicing results restart satisfied with we recognize not need the do more we that as and to Nevertheless, Ron fee fee are mentioned, to

more sales indicators performance of to bottom left fee to page, panel little our AUC/A added dynamics. we some the texture a this provide On servicing

to As wins up AUC/A-to-be-installed and up quarter the XQ, also $XXX significantly you $XXX was past totaled billion same at on our can quarter-on-quarter basis, see, AUC/A this in a while XXXX, year-on-year time, billion.

a maintain While we provide client we these performance are by also forward. on excited and our such that need agreement few would help that investment going Charles investment servicing are our about to River drive first we indicators, that encouraged I similar more minutes. Management we Lazard sales servicing continues Asset add for dialogues front-to-back to to momentum know in

Turning X. to slide

our the offset higher revenues. by XX% up and discuss to mix market levels. higher quarter-on-quarter XXXX driven inflows. and X%, higher-fee equity $XX Beginning was net with to by was the partially market volatility. revenue changes year-on-year of mainly fees, equity levels Let due management management were billion away lower FX me late trading products, count XQ day down outflows down by market driven Quarter-on-quarter, and X% fees year-over-year, fee of impact ongoing from X% the rest

limitations Securities half we of year-on-year, some second in the growth were and largely regards are but capacity XX% XXXX, CCAR-related to going down structure business that optimizations sheet finance room reflecting for year, are actions counterparty X% CCAR we've due incremental the now revenues made the taken mainly the quarter-on-quarter confident CCAR-related activity. up to balance last changes made trade In for seasonal creating forward. mitigate to

down contribution quarter and by XX%, recognition approximately reflecting of $XX fees in Quarter-on-quarter processing Finally, absence up processing revenue were million from onetime revenue CRD. were fees the prior in lower items CRD. year-on-year, driven

slide X. to Moving

performance CRD's $XX of generating the You'll see resulting top operating of of revenues pre-tax in of in in a XQ left XXXX, $XX expenses, income. panel $XX million operating million and million summary

the important in servicing saw units, bookings from asset bookings including client during The management quarter business also drive asset $XX a and will significant million our new deal which synergies.

inherited one quarter's standard well, While XXX the across revenue that and in any CRD would perform the remind results. to not continues reporting lumpiness you to I read

update Turning provide to to discussions. we active an our the again upper-right page, client on this you panel on wanted

in with now approximately continue representing XXX As our assets. client $XX to actively you clients, discussions can approximately see trillion here, We're engaged advance.

these are synergy in the opportunities revenue goals resulting dialogues we at announced acquisition. the remain the and and anticipated As in cost of revenue of confident variety a time

two achieved some quarter. we've milestones On panels and bottom this the of listed also page growth the synergy the of

CRD. more when earlier and have opportunities to is mentioned a and front-to-back in new milestone front-to-back an I with acquired currently the exclusive announcements envisioned Asset come. in negotiations of pipeline As strong as currently are growth sort we new important with clients Lazard expect and our call, several a Management reflects We agreement

slide down X% the well reinvestment driven our of NIM resulted amortization regards than In in our declining was mix XX and lower year-on-year Turning primarily sequential NII, as on a NII higher rates respectively. with long-end decline for and eight points, to basis the have lower to and quarter-on-quarter MBS by usual X% premium deposit level as basis X, was balances yields.

of saw client see quarterly XXXX. out noninterest-bearing much of an deposits terms deposit shift in the we last rate this a to quarter what to quarter continue expected, in mix similar amount In and we of behavior the as

the deposits from some time At at came our our though as we that initiatives rates. were some we'd same higher deposit total quarter-on-quarter up average slightly saw lift note

other efforts -- terms to initiatives going this drive side, supported incremental total the opportunities In wallet size while diversity our quarter deposit deposit growth our client going ongoing balances including of client additional of of careful earning of And our we discussions that the of asset share and forward, on sheet initiatives drive average target confident underway These base are to our growth. series to deposit investment in deposit balance there priorities balance the have and on continue portfolio. available increasing forward. we lending modestly we're a

Now, expenses. turning to

expense in And environment. emphasized designed revenue challenging durable laser his every be we're Ron generate expense number executing As we focused productivity management year. to of in initiatives this continue gains efficiency a remarks, to and on on

quarter down On this notable underlying are we've but underlying flat expenses expenses visible. Year-on-year, slide up XX, that trends the so deferred seasonal items compensation X% again notable excluding readily and of excluding and and items, quarter-on-quarter. seasonally CRD view our provided a X% were ex

systems the expense the CRD. again line a material of see across to major only communications base saw result where infrastructure expense and can achieved we investments technology was this effectively you almost As information continue that ex line with make growth every

the The also X% with combined resulted X% year-to-date. two and earlier year reduction headcount fees consecutive implemented our has ongoing our hiring ranks declines headcount down in with quarters senior of in total total quarter-on-quarter this

more we We benefits quality. while of automation higher service higher deliver and previous across now and are more the initiatives harnessing processes operational

Moving XX. to slide

where expense And We going last expenses incremental to are we we turned and to opportunities where on we've more the how with date over reductions on realized see forward. provide the pleased corner year. color

underlying well provided segments we've a as as stacked operations, expenses with of on IT, business our corporate bar the few functions. chart left, categorized Starting and by the

you in in as As significant efforts business cost see XXXX, these management operations segments can reductions of functions. with we as our declines expect realized for three in due year-on-year efficiencies expense our and to two well corporate to achieve

to top-to-bottom see technology our IT We have growth And cost investing too currently on Ron an as to the our while a mentioned in in said, our continuing high. opportunity cost technology resiliency. infrastructure we business That and of invest in costs is core intervene embarked review functionality on structure.

the further of to down with to believe and side continue headcount the we XXXX quarters XXX a service can see cost delivering that we approximately process to headcount the location over page Turning of underway, the initiatives we albeit and our various we reengineering coming high come additional total to reduce quality while automate target processes. right-hand by an beyond resource our expect discipline as X,XXX have in

simplifying to of this reduction to IT committed more goal rationalization consolidate there model. and an globally believe currently applications that our the is need application are do. our of We initial support cost end can technology intense XX% we driving of architecture, we including which a we We an with of operations year. But by

program criteria assessing development payback against straight investing We ruthlessly are now functionality. every client while in

and totaling of our in see underlying expense to notable year the million XXXX plan CRD target compared identified X% we $XX yielding X.X% base as our the a expense year-on-year items and in reduction XXXX, together, end savings Taken an this resulting for additional million earlier year. the by $XXX excluding now

Moving to slide XX.

of ratios consistent to CETX Our cycle. with of $XXX a of We were our quarter, share buybacks the largely under returned again standardized million from authorization during approximately shareholders capital our last total sitting which capital quarter-on-quarter X.X%. the XX.X% million $XXX CCAR leverage our X were Tier remaining at and at

the On capacity. XXXX our you we higher CCAR-stressed see consciously a HQLA, which investment side now rebalanced portfolio of created XQ page, has in the holding of percentage and left significant that relatively we're capital can

to expect capital are released to month of to our an beginning stock return pleased repurchase CCAR third quarter $X.XX XQ results shareholders. our last XXXX, As our our XXXX thus delivering to dividend and incremental priority common you share are significantly increase and to per $X we aware, billion increase through with on

I position on going rules proposed forward. capital in confident perspective ratio would our sharing note any changes the capital a as fulsome position. leverage finalized, that And associated we anticipate we our more and opportunities are optimizations are

and like would to single-digit. equity third assumes slide outlook. fees turning flattish quarter expect XX, we fees be Before will management On servicing quarter low This our levels. a sequential I index to up be cover current basis, will

step-down similar revenues seasonal are we we to take difficult expect a market quarter-over-quarter forecast, them months, year. the what currently always While experienced to given to last summer

be Processing $XX ex-CRD fees the be expected low expected quarterly million to CRD of NII, sequential to lower sequentially, still $XX deposits interest-bearing expectation to cuts rates In regards of long million guidance and two the into of down is X% rate but continued currently and in rotation given others we down X%. to with within our be XXs. expect quarter NII to to

And ex-notable a to the basis on be including expenses, we expect flat build. CRD quarter turning items to expenses sequential

rate see to the XX% similar our we to Finally, tax expect tax XX% between rate. year-to-date to

our to XX. on Moving summary page

result see our with fee unsatisfied performance, revenues some fee remain we we total servicing moderation did quarter-on-quarter. that While headwinds helped revenue in flat in

reduced also to headcount raising this our we've to now million. a we've XXXX expense cost the target our submission as reduction we'll to on to achieved CCAR to further year-to-date, $XXX expense we be able deliver and X% savings And of demonstrates return our shareholders. priority non-objection underlying year's the increasing Moreover, achieved bend capital ability curve, to date while

fall look noted with in Finally, technology the remarks, We results as current be updates in you reassessment. our of back his we'll the on business coming our to to Ron and strategy forward progress. providing opening our

Ron. with me call that, let hand back And the to

can Operator, questions. to we Eric. Thanks, now the call open

Brennan [Operator with from line question UBS. the Instructions] first Our comes of Hawken

is Your now open. line

and Good are doing? How morning, guys Ron Eric. you

Brennan. Well, thanks

cuts providing NII the start guide. in you Fed half to out embedded. thanks I of just what reflect wanted believe the that two is year. about for that. beta fund did But, the referenced back curious Eric, Just with

should And balance but so, sheet about overall -- And should your you we I balance beta continued are for what that's referenced embedded about Thanks. about just assuming you think in expectations there? deposit non-interest-bearing rotation, how think growth continued overall know think you I that how we -- referenced growth? and for

Brennan. Thanks,

give NII the on industry been of know, direction them. the of NII you a that on direction as bank. as kind dependent the components the is Because working maybe Let you different each both features through one several and as we've -- an me of some and

progression. expect some do that interest-bearing is wait on expected deposits interest NII. We're we to we'll non-interest-bearing continued the relative to of first, over into where down extent they downward so investment see continue of some and been the the years So were this past rotation net cycles quarter you rates where from long -- last to seeing they've reinvestment couple and is portfolio

modest balances you the provide we're will some and also -- those think of to securities a the in in book asset I investment up continuing side contrast, right And earning disciplined expansion modestly, lending the grow in see some are uptick. manner investment

equilibrium deposit at an When it specifically comes we're almost betas to point.

in in deposit low as think the and XX% within range significant XX% XX% a the floated quite you about the NII and XX% If were betas tailwind rate Fed it banks other there and the the now the cycle, for us They range. XX% early betas XX% were to to raised and range. was to rates upright so

And at moves anticipated, that level. expectations higher it were much have up, it down, the similarly betas it been and are actually XX as so basis similarly that it is uptick to And in effect right do there in within moves as our NII. that now originally points the wouldn't anticipates had Fed if

quickly And will so. for rates so down first deposits the move naturally reasonably or come

I covering rate respect that's neutral an Fed of kind we're say at effectively or and betas being with -- change. the with what to think I equilibrium point

got or third other for what's think see. movements happens what and after second is rate uncertain I we've that first to the change the

that's provide second continue obviously, some the rates evolve. quarter quarter you a give But texture anyway we'll to on enough to third as some basis. color And hopefully

the That's to Thank helpful. you lower the the to of billion expenses that excluded already on as Okay. outlook. is in more first $X.XX still encouraging Thanks. reported? expenses? on that thanks movements much It's is When which there. think we And expectation see the how expense results update XXXX billion for much then to I which provided for you. really about in really some operating previously provided CRD the And And that assertive comparable how believe $X.XX the is come? half you've

way. that a me kind in do Let fulsome in of

I the been year-to-date. on $XXX progress think good. logged has program the million So, expense We've quite

was are a we $XXX confidence we taking anticipated additionally of why initial out and million able and it taking up. We being -- only of hit by that's in that -- that target that but it up have lot not to

while an us we've one that's to is COO in a we're use that the way I what And X% effectively the it's a to And consistently in because what of of progress for headcount seen used actually of we're we've in we were reversing at growing how widespread do prior addressing that X% our begin finally is described automation of seen in way. automating a growth automation the our we're And used part at is result conferences headcount. you've ensure is industrious And think the actually I think tools. real several on a seen now scaling year and some recent as years. year what

of because quality do in are processes even deliver once straight the actually you levels And and actually higher service fewer you and the mix that better and you through. need people effectively

done year, to the it apples-to-apples for relative guide, we've XXXX. expense overall the On

you notable I it's are CRD-related think quite -- the expenses. ex that Brennan the in underlying and expenses footnote we're items clear that see

We that's you offline you've numbers follow-up some some CRD do for without describe is there question if think this effectively can help other a an on you versus just, a and I'll if model have as kind to specific all what so And is about But with you. the seen of and this. can we that what think way is expense really I this helpful apples-to-apples base.

you've point million therefore versus right simple? already the million is last now is lower how about $XXX Is is much about the that to versus be it difference that go prior to expectation the target difference -- sorry million done just the think of already you've reported. then way the expectations? new $XXX $XXX just that the got left Is And your

the exactly. I've Yes we're headcount Yes. operating the Yes in some at quarter on said second of changes. because and think which ahead that's we're amount our of the as I of rate of the run plan

had described in location had reductions we high-class we that example the headcount XXXX For year. for targeted

months We've there. so of run feel the already is just the confident to in full we gotten the will what And give us savings of XXXX rate in of ahead year first benefit six the we're is kind that $XXX million. plan

for Thanks Great. taking questions. my

from Sachs. question Our comes Alex Goldman Blostein with next

line now Your is open.

Hi. morning, everybody. Good Great.

that pricing we've to of you investors Eric, I for start expand was on the sort historically Obviously, for given bit? the starting couple the around that you've seen of a little is the servicing. moderate. sign important last we decline seen hoping question sort you X%-ish business. quarters pricing I So a with over guess, in to that a annual it's pressure servicing Can of talked obviously pressures mentioned line pretty item. about

should that given Sounds sort persist to of But, seen we pressure is it's pricing we How XXXX? to quarter worst to running about historically? for kind think Or you like it? compression have we've recently other couple think of that we expect X% pricing of of rate? like quarters. guys should X% changes about the that In next closer might or the run through made you the are so this been normalizing X% the words back that beyond

Eric Ron. I up. start pick can Alex, and this is Why don't

we extraordinary large almost and is primarily it, into unusual to some expect a had really seeing driven a been and ourselves. remain. such we're providers asset and pressure. their actual we'd that been looking of relief always pressure what think We've on element business for this asset secular said pressure quarters. of managers by that's But then through owners there's as period price would kind of price downturn as in the for is the price kind themselves, This a now I of couple built

driven had Secondarily, to XXXX get XX% was clients I we have in I than this some when think more just of it a it big the last year, look gee, run-up was and like would somewhat check to wrote back. XXXX you it you the the and and by check in see, seems guys markets

what So we're – extraordinary is what moderation what saying the seeing that pressure. call price we're I that, of

we've Part or routine many to of a kind of it something we some about also that re-pricing that. for the term and be individual she decision it. we've times clients. gone of through might he of is, the done way one worked our of be also it we've going gotten But That couple out said, we years. were We've are or used changing about relatively And decentralized every way RM, it, two any we experiences here.

any importantly, So in we're matching that decrease price in And term kind extending business the most centrally. opposed brought – the price decrease and price reasonably decrease – giving we more expertise to any of to business the getting We've successful things and coming like as business. first in-ordinary been price in later. incremental

mitigating effects the driven re-pricing lot of it. that already; we've of say this we accomplished actions So be business basis in there extraordinary that to in ongoing price and both and you from price can a competitive what that fact a I would is that it the of continue seeing but be secondly pressure, our by element will are to expect qualitative own of kind moderation

Eric. it's Alex, And

the that, some that, of things it about headwinds X%, just add here so the kind beacons me decade, X%, I'll history with over X.X% of is So, the keep quantitative right? last, operated to this fee to business call straightforward. normal to of Let say

for then ticked-up X% play What that we're through little and percentage effectively little we to see – revenue right? about starting point quarter, is – the a is and third the to each saw a the tends X% a first line. about quarter, as about – full that lighter year, in sharper to in Now year expect to well XXXX and the this come a fourth During we it X% little comes quarter. and it that second,

describes, our to – we're us And are of is but not or Ron of closer pricing only amounts majority the as wave. imagine area-by-area, what to through own devoured moderate. than and to starting three can you unusual, of an usual hitting that see kind I'll larger client-by-client a quarters as describe what we're we've that And of starting discussions, data are sequential this as

that revenue like As – – was the back – first quarter. the accruals, to was those to peak the towards the quarter end the period feels some peak this time beginning is And the our level. normalize or the of hit we – in it expectation that is

those third clients, some transparent may can and negotiations opened where what about so quarter, we're So got we're visibility our large in are what we of tabulate Because with trying and we happen and We've fourth to have be we quite the seeing. right? amount quarter all you into will likely know those. forth, with pressure fee

some some we're here. confidence that's that, seeing so – gives what signs us And of of moderation some

the X% year-on-year we that to expect this it year-on-year? we seeing that it I what to we as after be this down come of all year, the at coming year last saw start pace we're down, of – to X% moderate. careful Does being think X% want year-on-year that

that learn where then, That's ideally into see, also what that's have balance coming forward think, normalized to Ron described, finding see work the to -- quarters. as we but I to And, in we more further more it year. we to like visibility the we level. some need to some as ways, and expect in need And back we'd move what to down actions. And comes to we'd we'll of our like in

Thanks That's clear. it. that. for Go pretty

some And the Secondly, how hit all on in of period Does that of the trying the the think million. $XX CRD. or of flowing bookings over about was you wanted guys model. subsequent that I'm the intake to just sort through order think into up time? quarter new quarter described kind like in we Looks you or to follow around should about

And you And haven't pipeline economics Lazard, the could ones sure describe or the should about revenues obviously, hit of opportunity? growing? that of will we if but on thinking front-to-back think terms the sort rate, we that one that pipeline be some how of AUM reference it in that guys initiatives of you also should yet. not the about the times frame How around of, then, highlighted, the be like, fee

describe we the our able Alex. then that. expectation at on And business lines When different that years. pursue and X% from we that is this about was did described deal we CRD it on over few be me to Let line CRD-specific two top our and with the decided last double revenue the should you, that angles, to be diligence growing shared

comes clients confident for about that owned of that and started centuries from couple we've And to willingness And kind to one business business. in quite level way a get part on. a the it years of as that's couple deliver. sign of literally, to of that, of being growth in beginning what think to we're And that we're parent large a who's been by of opposed to

confidence of kind and think to bit it we're that way quite one of that's we've a So got seeing lift. that of

and are, size. bookings revenue you what roll you'll X, XX give basis, get tactical we a see months. rate to Those implemented a an on bookings is of the bookings. on and what begin quarter you various to saw through a X, timeframe sense tend in think I The quarters just describe, implementation to run basis, for this

of some takes time. it amount So

think portions right, one, other those it the where that remind business, obviously, they're CRD the this bookings substantial our I that operations. internal then, -- an our through is used to I bookings where out servicing the actually And old now management we one to with just business, in And with actually spike. you quarter systems asset were in rolling offer custody that CRD bookings our a which effectively engine did And business. servicing our have clear two we're are pleased larger, compliance was replacing of we --

will if revenues you those it, be eliminated on in hand, about one think consolidation. And

in manager. on had the platforms a, such we've for those synergies, fulsome systems would expense not on -- asset the I those legacy actually the On hand, way, CRD think, patchwork we other we that that to of large those on been typical lead XX revenues have implemented direct because described

And what becomes it model, do, you trillion of different which own power asset in proves so River we and dollars if of a its right, implement of over can quite Charles assets pleased Charles our actually we're lead effectiveness for an right, can with then a broad range couple of that time, implementations, because a scenarios. manager on effectively can River

you Got very it. Thank much.

of Glenn line Our comes question Evercore. with from Schorr next the

Your line open. now is

and credit mortgages Hi. portfolio. and, points basis some know were over you risk to Thanks. securities got spreads, the switch know, But Question made I'm XX fell it. assets on tight, unlucky rates rates you. generalizing on they when over I prepaid tight low and who super

rate and sheet So grows? Because my all expect question expect is, You much. What do now side picture loan you the as what some you do changed do? do the spread that balance balance some you the asset hasn't growth. on growth,

it's bankers Eric. have always challenges. Hey, had these Glenn, The

you As opportunities down. going be are rate as rates fewer tend The there cycles up, come then. to opportunities have

rates there's even As invert, an to operate. way different

other or are don't or there I out there I would put bullets So CFO with that you. share think treasurer any would any silver

we've to capacity do effectively cash work. and that excess a that to portfolio. couple And technically the liquidity-rich to I our we puts and on this we this add that to effectively yields securities We went continue do some is up environment in securities billion bank in got some think seen do And coming portfolio what of you've and to we continue where the quarters. and balances. dollars we have liquidity a are quarter, provides

don't MBS think some in large of a have agency on continue of that very the We selectively the depending a the lending franchise And then that in inappropriate space, make to or by we part with opportunities. bank jurisdictions franchise. other we'll standards, yield each book or relative space, bank. grow the part We those high-grade the asset and custody credit coincident our value of that for that's not that are the the think tactical choices is we do foreign of lending typical I

as our pace our growth and hand, a clients, which lenders quite well crisis. which and the real and funds, a the bigger call it's of connectivity area financing bigger are capital is business, very grow there operated one other attractive the during building with out at to continues On alternative all

And so that all leverage financing the fund risk-return good kind Act XX dynamics. of capital financing, call have very

I given in see are the good want think at, we're stick cycle. to we to like where and what some we do what opportunities clients there, we but our anyone

bit on this price. little a that's texture point at hopefully, a of anyway, the So,

one. of terms billion color but give terms Yes. one should funded, fees? working $XXX about last impact Thanks. think can Yes. and in we not The in pipeline One its what any way on the yet into of you timing of

composite. we've different, Each a And you The one there our becoming in sector. of the our it's has we're think our segment, literally were industrious I as the we talked some outside wins been insurance much largest of historically emphasized in more about but Yeah. in don't those expansion is already I the of of strong, asset asset the where kind sub-segments think which in manager core. managers, we've to did

some some middle months, management on-boarding, in it hard to to be get insurance XX to accounting just there's simpler a pool. anticipate complex stuff months, custodies works but can done, a there's months, takes So six XX It's months asset And tends it the -- there's six time. get in it the months, way or office is sometimes more directly sometimes exact is but months. done XX wins, XX it's wins,

know to we And to us revenue is sign to deliver as all continue client we client So there driving and to a drive need part a activity to we need that know activity. do growth out you. way that the restart of we that what it's to we to selling we're need of

-- So quarter. we're held one be, trying indicators. that's several one this think, that of some for of I the we've indicators, we of And that also to thought but transparent more

Eric. Thanks,

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

now is line Your open.

just Eric one the morning. duration of changes Can Good within faster how is securities recent investments? Thanks. today -- us follow-up just sheet. in the repricing? you the on remind balance after some the And stand the and Thanks. just -- portfolio where on

duration X.X that last and years, been it's years, years to at last over duration. The few couple it quarters about the the the not three just Ken is -- concert in for the in average Yeah. so with I tractors if years. X.X think kind of

rate, I as in about and rates back think rough NII. you impacts Qs thumb think in in long our XX-year might a million have and way disclosures Ks rough rule about to maybe the our basis $X think say the to that treasury be it every in comes a And change year. XX-year the and the we've other that movements I the that's be worth for helpful tried -- of points

can for be XX, to basis down started and be you just out that second part of to first we've drift that's multiply through XX see what we So would worth to. or the and and points sensitive it quarter, need that

it picks would curve little as So does or around cuts if have will flat yield we curve that's banks. inverts for and the the that us can move one steepness maybe think be rates, the other if a see. that That If we'll constructive up stays that -- Fed impact.

very And than year, you CCAR last then you successful my Got Eric, second better. XXX question, meaningfully points that result, the guys had basis less it. burned

capital So that And ahead this SCB obviously on boosting CCAR aggressive talk proposals in about Thanks. where a SLR plan the of might job buyback. looking year's et are this on as cetera? you expected you let good results if CCAR effect on do you didn't but year's be your or the returns? more did views Can --

said capital let It's has banks me a operate that and governors one it different steps. under series this do because Fed of as Ken. have different there's think And metrics stages, Sure, the in Eric. so I about XX

as I room year. with lot that and took a first results this out we CCAR think was our investment the investment we the billion described, of We dollars with several in of some very that And shifted of as portfolio created credit. up pleased of literally portfolio. we're ended you that CCAR actions under

stage. was that first the So

the And room I we CCAR-type a in effectively that what under we think have have is account. demonstrate -- for capital room stress,

a certainly that's first So step.

The are back of spot constraints capital second is capital levels step our our and XX most important constraint. what what you that to stress levels page Then are then binding spot CCAR the are ratio. on if isn't And the the next isn't what -- downdraft happens the of go deck. those

with what spot bank find you much we for I spot becomes come of most the weeks that's through comments to of how rules there. is the the turn have bill frees assessment some levels, custody go And happens comment, then the changes just leverage under ratio that what SLR constraints, a under up that SLR. timing certainly if capital out -- that -- the what are capacity and is got bank, And Feds space for of think that supplementary Holdco, the have out in of free a next into could binding you X% and up concluded the leverage specially Congressional the capital ago. the now And the different looking that rule I is few and on that and the for will happens those ratio is X% at the a what we're do so rule based what now some and and the think Fed as the

then with What waterfall. forth? after it binding most IV And CETX? next the constraint, So What think of as so is go that we to on Basel and a important it SCB? happens and with the happens so

looking we Because to larger there some room stack, of think the CETX we're learn our there is, prepared we'll important remarks three that stress. We Tier about Tier you a that all about But was the do has in we'll capital by as under X know in have potential have I effectively that path the a described is, the custody ratios can obviously down is leverage about that we my we're that's why is And and think coming at more the then And think quarter ratio. time. form than bit what room under right. preferreds, pool, two. one usual banks. points all in little that's back leverage or been optimistic of I opportunities And another the supplementary bank or we've of pool a that alternative created more very X. at go for months and

then effectively and so give to around it's with capital does appropriately shared so what of it and are think opportunities I'm where roadmap is, a can we that bit our have the a but And that you process trying back there could that's speak opportunities we and we how and investors. the about whole you the stack, -- to

a Eric. of color. Got Thanks, lot it. That’s

Our with comes Stanley. Morgan question from Betsy Graseck next

Your line now open. is

Hi. Good morning.

morning. Good

points I lot the wanted I'm thinking in you're of a the You of to just drivers to that be pretax in dug expenses a the just trajectory. coming XXX you're basis the inputs for. given bit when little that basis picture points sense thinking expecting And in terms that that now into about bigger from XXX versus understand how of is going right looking margin you revenues, about have How of today? the the of much you're expenses improvement

see revenue of it experienced first that end the that later. actions of of last revenue will mean, you But client keep high of margin because the wisely longer-term like about the to then a I move terms had improving a we we've ongoing that while cautious to down to and that and pressure But ensure provide environment as result that remains at levels. the is to we're what little given front-to-back bit some that on work, enough about in margin as to would uplift investing ideally the both. the need And we expenses. are downdraft particularly service the that that we is we well in business. we doubling going don't that I as why that's are feel expenses revenue that do this Betsy of start flow think that, continuing that We our now that be year do the we have want taking in at to fee way the we'll we

we conceptually, think where So about that's it.

world out those In last terms our when there. But the of we timing, put goals goals obviously, we're lot standing late a from changed year. by

going very been what's you we've quarter-to-quarter cautious can side. the we try can of get as why that's of revenue -- so with on we really terms picture in going a So, and

so, can focus And which what expenses. is we we know on can control we

it's doing And to I that just to and more we're part of continue Eric. expense add is Betsy, would through a work more of what the base.

earnings One opportunity. full you and more year we've where more there's deck are we that lot like on page shared the actually we of expenses the process is the in made a reasons, progress and with where show to where in you feel we

think, and I do reduction down a X% it after that that year. you'd lot operations. of automate our force you -- see as more And we see year our should year-on-year factory a tools, work costs want automation of in expect you after we've process the go as continue that automated of of that's more year anticipated in exactly what particular, and And and to utilization we some

opportunities. and think our of on headway I one really And the think, want relative more good we've I some personal businesses functions and more to non-personal and we're expense in has to in expense we to to But its made there. do its path -- past. each always good there's a it's some and those those extent, and come

and at decision cost technology cost live as revenue the is growth given COO we've under top and then that And and the of it comes can't the operations the area a technology, of merge a comes finally, the recently technology and with together we where made more that of I part and structure been environment a with it part kind we've decision here operating under. realization think

find going that opportunities And as top we're we've bottom, why opportunities, so, said to to that's proceeds. to address review come more and

see this know I you positioning your we just feel for any securities opportunities optimized with, you for the current or securities. earlier But to like, where a right about out is Thanks. outlook? conversation Okay. now rate Eric, at we wanted do And that just book round restructuring, had stage, then it is

a pretty in is book securities the think overall. position I Betsy, good

the back We can we'll around get we out of do margin. and others. always are Rates some if securities I think some adjustments buy lower. wanted always

think we now mix is like I which the but think So, portfolio. generally, the I we securities have some latitude of convenient,

want selectively and and as prepayments maintain through. of tactically their We've a duration rates you natural have bit way lost think I little we've down to had the we'll duration. come work

it custody for want So, think, portfolio actions. we -- least that's as some I to to at anticipated we good securities bank. of expand of And part our that ways us the I then of yields find a because back. selectively And tactically as add said, the provides

Thanks.

Bank of Our next question America. Mike comes from the Carrier with line of

is line open. Your now

more the Thanks that be you may FX, by you did for think I questions. given morning. mentioned for some Good one, balancing CETX clients Eric, there's do last demand think taking capacity repositioning maybe and I first see year. some of the you the

in see Just -- areas? are you those seeing that demand? And soon how could we some growth

answer the create Mike, there. out to demand opportunities found for There I we think have that ways there is is capacity. and are us

created you're it's place providers than serving room about back go understand, shifting refinements, structure come innovations Because clients on. those some that, do in I right, And appropriately task, some and some put reason growth counterparty right cases CCAR with we to that of clients I and the think the for business. them of better current they even clients optimizations reduce also we back And the pace and think, some they that and doing all the part had back of I but constraints of as actually their But about out I've some fine, question the then of say, our described open when constraints right? activity that after came that that trade takes counterparty caps over some is, delighted some time, them of you to as implemented or wallet. diversification comes and time. their then around having where the you are

lumpy comes. report think build that build agency it effects that seasonal as enhanced to other custody what of it months for I it then quarters summer a lending of so and that to little the is And seasonal we'll part takes -- got a see is and also like work to you XQ on and It's way because and third the we’d in and quarter.

I that the evolution. But a did to to as create matter a point us much for we provide and for of But we'll that our want execute. into try time so and here found we now it's is window to ways to think make of teams business capacity

on And update then the the That's in reassessment helpful. and just quickly Okay. strategy the tech just ahead in fall. the

want Just to make partners, or as make in that the expectations are an focused got initiatives -- growth on innovative with get terms I that expectation is it's we'll sure what you update on anything thinking want But when you've sounds sure and it like set guys just any there just to cost. like of on?

Mike Ron. Yeah, its

possible, as tech. innovate this, We’re market as we So do rapidly on And have about clearly to you don't comprehensively. thinking as cost possible. in do is changed as do has tech also about that changes thinking as comprehensively tell world But get about How possible? we're rapidly how mind. substitute our we this I as we as to it's how rapidly

covering the to And as focused on more to moved we -- about user full front-office our applications from the front it's have range comprehensive highly be you interface. and highly activities you're system think much our and back of if

invulnerability about transaction talking amounts system, you think speed will you're of our if resiliency. and about high back-office and You basically

months, on It's And months not that of really it's going it come not started. kind months. many haven't we'll you keep going we reassessment. but done to few will broad-based about. So to I and you already updated thinking take mean It's to we're back what take take a

with question of Buckingham from the line Research. comes Jim next Our Mitchell

is now open. Your line

Is Hey think part? less close I good -- that are How of do build so is is about just Maybe terms you is with we more margin with So client. How the this parts it it -- you you're there on we now fee about a is holding be margin-accretive concerns initially -- it because margin? because than -- you of revenue-accretive think impact separate as reality and/or the more that to was that morning. or the efficient? front-to-back in business contract it's and do some think the pricing would pricing revenue it rate? the seeing up

this we've had here the get access is, it rely been for or I about I throw own that's would quickly that is Yeah to -- how actually think on, client way what is away focused do that is on been operations? have become so cost? always a intention let on How reduce client simplify far an I be my business. able And do what those succeeding not this pretty my actually add-on data do not And the how our Jim, And been more I conversations. that to easy on focused to the and custody data? just actually and own

this X to cost priced X. at the we're the to be into buying and CRD back been key there’s not come at it mean certainly element have to price kind factors. I those want So we seeing some of used but fraction of a it

on out we flavors. and to sorts all of there clients The talking second that from we the rolled exclusive are several would advanced the these front-to-back point as when and are strategy out earliest thing is, said we're in had CRD negotiations days there's negotiations, I that

putting Some we're you of and if them clients, the will Street State already together are so final mile. CRD

– extreme with an not them. who they they they there I we've but described. mean, existing At this no knew relationship a client did were. We But relationship there’s we had we an there. had who other perspective that the knew have were, is we need in

if will new we'd that custody, result expect new see is of accounting it new nature that. be CRD comes to fruition the that as of a and to So

is the of if you some one, So filling the nature the is the the first to opening second will. And pricing, content to and taking question, we're we're there's and up wallet kind thing. other is cases for elements business? two the the but time out whole your wallet In in what's cases us element

short get some Right, to still to okay. about a That's best cuts, neutral long-end neutral we on actually disclosures. just queue, to It's staying fair? the have based NII? Is and helpful. where point think it pretty pretty it I And If it? then If in pivoting you that is that Eric shock. look your on deposits. still maybe XXX Is at the way is basis

Jim it's Eric.

the is XX I in neutral would first think the the for change basis points. rates roughly way the short-end it of particular is in that we U.S. describe

to it cost. after would if basis impact, have to right? down the And points, come negative start be? XX It's starts that, on lower the I were a the if XXX bound compressed think get to against why a rate because that rates deposit -- you

convexity, And the is stair-step a here. so there actually the -- matters

so important factor And to that's in.

of the I to dynamic and is currency And currency other continue add the more those disclosures. one think some we'll information then in

you see what So U.S. if down. could happens the moves

we're and growth bank And is of I changes think my in the some the a Europe. big there's in leadership question economic mark mind change central other environment in that that what's to that seeing. going given happen

some gives that you anyway, hopefully So color.

neutral, I think back that we through. get situation expanded the there's, more that that work one after need should be first to to you

Thanks. fair. That's

question of next the with comes Brian line Bank. Deutsche Bedell Our from

line Your now open. is

of Thanks have are questions very answered. much. I my question one the A just lot two-part side. on cost

basis, half. first but and that for XXXX see the slide the appendix. versus then X.XX on for have in if slide looking on XXXX versus at at XQ looking Just XX basis XXXX, XQ your and the XXXX X.XX on the and half underlying I guidance the XX that to second the increase imply I would a XXXX cost add up basis an and same X%

wanted right if just am doing there? I apples-to-apples the I So verify to

lower in we we as into shouldn't is XXXX? in the -- And XXXX, as question a Ron, be the versus of through a with lower part coming expense second into the be we a we should at of especially you move XXXX ideas then And basis some XQ about cost on saves, endpoint? trajectory at talked year-over-year the get reengineering looking

start. me let Brian,

went just a cover on think the probably specifics I you through, as we hopefully just follow-up. that that

our revenue and the clear do given Ron be our quarterly you a described, the as commitments basis. be to that'll will year, think find next ex-notable little we And a widen or lumpy can do I improve and third need planning for I I the expenses environment, was trending case to think I down well-controlled. early quite expect us to and expenses quarter on have margin to that that think and our that be either like ROE. double ways given we and for items flat down and it's expenses to but on -- given intentions

at -- rate pleased things quarter year. we've which control. our what's indicative of first. we've fourth versus do run be will in of we quarter versus as some year doing. same why because second in And run And we I -- through, our we that think exactly the is, off been gotten run the a the And deliver pace, fourth of run better at half rate can We've quarter that be gotten next in the thinking more kind the should rate what first, what's under of now to what headcount our the the third rate much our shoring that's activities you're the

there's then want we And We industrious more next do to work to hard that be to can need do we above were what industrious over can to we we and find obviously as do. And need always this and the year. we year.

whatever offset to headwinds need merit natural also and of so the forth. We

think there's operating to expenses how use. do do industry but it's So in that. how be lots that benefits which and and you to year to going -- you're we that is a advantage that, same the I need we're in after the year, because the an of we you do take That's intimating, mode certainly mind which tackle do year after got that

you. I'll Okay. offline follow-up Thank detail. you. Great. Thank on the

Mosby Our with next of the line question Marty Vining Sparks. comes from

line Your is now open.

decline for we're questions. excited in One interest portfolio at way not about impact kind the that Thanks. a I normal just long-term much the income specific of way premium this net of a million, I two to we amortization. talk the the sequential look particular generate is, quarter, reprice to $XX there's actual accelerated when had pressure. When at

it this So that big premium me to like deal particular pretty was this seems quarter. amortization a

be that could sometimes And catch-up. a

would particular relative to the rate was of that of they I'm if their just But the $XX stay be that headed amortization million And into position kind rates, today, at rates does short-term mean much of what obviously that quarters? not long-term premium stabilize So decline long-term if related rates, how flat, going amortization. then, next nowhere. number curious, sequential couple for

it's Eric. Marty

quarters. me give we'll then coming about first a decomposition the talk Let little

half than million from in on was $XX a less reduction less the and So, the the a rates that little was general of And came then quarter-on-quarter came reduction interest-bearing there another from premium more deposits in from deposits. basis half some stuff amortization decomposition rotation the impacts. just noninterest-bearing little a than other little NII minor and

little gives color. that bit you of So, a

was acceleration last did reason at and X.XX%, part we higher the is as there is of coupon what I prevailing credit think what long out rates were X%, X.XX% has fall some here why when were bonds. that in happened of an we rotated we

acceleration. those have rates you the very the rates of you some and fallen good have as And pay

played what through. that's So,

out. think some I that of is burning

set rates. a then so of good you bonds And at get residual

And working is so about its through that. amount

look third of happening. is there's There premium different a that quarter, some will couple into through. As we features amortization come still amount of

be we quarter -- they in more assuming so begins and from And stay there'll a then to rates where are. third the bit tell there it long

have kind just the reinvestment in quarter level through. third of come tractor is described that earlier the that And rates then general what the we and I of and yields also

modest some some as the the growth in well. out so is portfolio in loans. to playing of growth modest size the some The offset And that's of that

range some the -- And quarter. probably the kind knit able estimate into the quarter. What try give to the third of of larger we that third you should pieces guidance help going deposit together is do and of the and the to then that be obviously be of dynamics bit a to will

of the did get further, the you and year, the negative from left that goes that will but quarter we what first So, into away third or don't least, -- get of the rates say is next quarter be that? that would at some come fourth if quarter, I $XX to hear to million decline by there million $XX time benefit NII the

-- gets of that's towards have a numbers. and quarter. always It mortgage our -- fourth attenuate, less starts floating in you gets it a it But right? quarter amount. always you prepayments amount the been operated with book helpful. be it to a of through it have Yes. remember could to the certain And certain first We've exactly It starts a always

amount the premium you on premium, XX-Q or of through the expect should for we -- you in take the amortization bank. of can for us kind of and disclosure the good some waves any some There's that the

fee And to on I then Okay. was income CRD very due revenue to the standards. hone the other the of recognition particular you thing talked end in wanted in back about revenue

Just that a meant that changed thing? understanding a the you seasonal is was standards? is Is what curious meant? that was standards just that you're shift so had Is curious and now by that revenue it business you What you a that? what better I recognition

accounting. my make double was got XXX, just XXX to I ASC I the ASC I've to think change No, acronym. check going There It's industry-wide sure to that's it.

effect do it a into controller. our as went I'll with businesses also year That affects So, And management software-oriented affected our half the about asset and business. follow-up a that that a I our ago. management guess

revenue prescriptive recognized. quite how it's is And on

to the x contract is of installations that the particular you the contract. revenue some record way. can a natural quarter you entire fast call percent so at you of recognized point, again implementations it And But on-premise in I'll -- a of details quite a the for to renewal literally we and have renewal from contract have get

And even of consistent it lumpy period service I ends the industry, accounting over agree with for do the lumpiness because up the revenues the though we more structured. but ends it's effectively you're the of with literature up are way recognition contracts with it accounting to providing probably way revenue and a mean time. just

there's the the the I reason relationships new that seasonal no you're onboarding not activities? to different of it or to anything guess or within realm or is it's recognition are happening going how just that's actual be things revenue And that

lumpy it's they're way perfectly all in kind new, state year. when the of onboarding but is when they as through and stacked the -- cycle It's that contract existing not during the up also of Correct. up the renewal even contract ends

we down. to is So, -- most – the course measure. numbers over are we're I clear think up it be to quarters, are lumpy the year trying to and a in of GAAP just We're we about do that over go and be see we several appropriate take will the more to what actually wanted going a just clear to to just be revenues, the obviously underlying want the intuitive. way that way They'll or you a revenues

have valuations, for those really Thanks. activities, a market accelerated, picture the all work more become bigger other you're you much are decade increasing lastly, the you are that crystal-clear. your When customer, started started so that price that customers to to And valuations earlier getting which words, the over last are really or gone question. market under mentioned to In pressure up much sense pricing pressure. and that not doing make as it

and much really you doing management for we've yeah, but look under They're per you're you, that more. So down. their paying of much work more revenues well to say, assets not to are kind going going turn that us,

XX% price – I kind think as you mentioned a just kind of the increase a – the example. just

of they is that got on lot busting and paying you valuations. that thought transactions by versus kind the activities so you dictated but made could have, their tied from So, because like or kind being type is where the which processing of on any amount past, and asset, they for you roll away relationship of around process assets is up. a where where In of pay market cash management being get versus more revenue pay to there relationship valuation could market would assets it a you for more sense, per their

is a AUM don't and market processing? the just I there valuation and forward, historically from disconnect versus the going So get to way to transaction know,

Eric. Yeah. Marty, it's

and and – our absolutely – mix is a on work a activity structures result this evolved pricing there do. broader has either directly I transactions this represents we've in that kind the spot clients all you're we of flows of which how fee – we're client You're and as sure describing broader And industry. got with in the think to make having

about what dependent. paid managers asset I some that which often If think basis, going, think those a a large you management or fund, clients our get large the keeps right? large market is managers of history and on asset mutual the fee is

their So expenses the itself like interest We tying there's to an in just a as of service fees like level clients bit our market their charge are. ideally you obviously described. for

we're And so for make need time, but range I will be I is evolution, view our our sure, think there a think to appropriately an over clients. of interest is, And just there here. value creating we

We do it the way can ways – stable that a in we the remunerate – to they that more that So so appropriately. it find better.

are some engaging are areas been areas you the the on. kinds that those so of described that we've of those And

Thanks.

Rob next Autonomous with comes Wildhack from of Our Research. question line the

now Your open. line is

guys. morning, Good

from me. Just one

And shift accelerating you some was shift. think wondering how that's towards in get discernable that hoping products. going do trend velocity decelerating way? the again – the fee to on Looking that at forward? color a the been you management that Is velocity mentioned the any then lower line I fee of or about

Yeah. Rob, Ron. is this

that I effort some think manage return to something trying here. on we're that, and it's having we're certainly

example, year, outside half traditional pressure. of new for are the – terms of in brought the where passive been of the though realities So seen of The are diversification. we've business where the has price applaud this we've most that flows in going. we kind area, SSGA And has

market that outflows gains flows, driven big if quarter. some offset we institutional cost at continued example by it a share like was But So for of as – the the you at look ETF had I really top spy. products describe Europe level, in in would a low so-so by in and

by that going, and higher is some it's – a these flows same if really typically a that and mutual is as substitute competitors. blocks. ETF And is the for advisers cost, market to particularly a find the whether what's behind low-cost clearly building on where are looked as these shift and preponderance products employing are going, way, this – in funds it's their there's So at the you would large you our of going ETFs,

to up have our gain that we're So those are to our we sure one, in live And continuing that's we that channels, we and have to, reduce make distribution we that. why with two, cost; areas. opening share so

Thanks, Ron, really helpful.

with [Operator from Gerard Cassidy RBC. Instructions] Our next question comes

now is line open. Your

the your much your their under, York this morning. not banks source diversified in that competitive us and to just Thank ago, New this stepping the of for pricing. But focus up amongst has the with competitors are five seems of pricing that of that you many competing intensity Good of is an and got the customers led in I'm you pressure your about your may you. you in Can mentioned especially competitive interested share peers. some today. be which and banks; to area puts competition the the about to Ron, insights custody forces it challenges but was because the on business, be be as they've years dynamics seem revenue

Gerard. Yes,

when would periods it. been times of cyclical. been it's space, has have and those all history the languished. been say they at banks one in And of the there where this the on they're in business look the universal times in been focused cycle I you is have where the If There've

a for that office we the we the back, to be middle to that make That into had all wanted did, where is that offering to and year-and-a-half us to and really the the integrated we same year, sure to a make combating we're And them. able range offer of full of back front rather office stuff, be to our things than drove that re-examine move position one strategy ago. forced a

the mean, bidding nature more the is. price. it custody, service is out changes not are even I of a if client's the certainly -- just changes discussion, there function what It but the There pricing objective custody, the relationship; the of building it really is differences, commodity. it's it's nature changes a out

to on economics they're If be going a And to back, have client firm to is that they it's prospective next a a their having how in they're able to better one, of outcomes; data way going discussion having that you manage client be firm. be their build their or to better really better is years to able services front provide to: to be to scale, going are about clients. a the able that going they're able XX to to their access two, investment but with

bank that that that. to are ones only in the front only to services We're we're do the those be to And position custody has able back.

just set a we very respect conversations. of we're So them. think don't It having different doesn't we mean

are us competitors was space, for it why you differentiate they asset-servicing but are important good, long in the survive that's this our means Our good. it To to offering. that

it's And there operations? improving now successful of your the even a expense good. of programs, years integration number at your right have is of State technology, how some ongoing technology for savings Street. as anyway obviously, can that competitors and State Very a talked we, measure follow-up, outsiders, day-to-day into an underway Is as about Street

day-to-day Or I in focused robots it's and mundane don't the to can the the you us show is metric, actions and you create know, taken evolution a success more percentage versus humans of becoming if the by on by technology, technology could achieve operations?

the is, Yes. are through lot of we I that or straight percentage without something processes mean, my we because to we focus that end that any complex handoff. that The are straight just it's go certainly that of that these are truly some on kind to a from far-flung. human intervention manual of mind kind think through, beginning about, operations two come large

in together. reports the those linking we're tasks closely the this see second robots is the of about -- then replaced industry a for transaction in watched and than And a that sub-segments you're might us robotic robot And talking then processing by of environment. kind you is applications. number number different very is get second of one, manufacturing the What the really then

you time. We've got tens should and of it. And to We've thousands, the got actually installed, done on a so, the robots. we've where of now of done not, disclose from we've that’s which thought a or preparation robots install if externally, us of lot we've to hundreds an good see area work but the to would expect -- I thousands that even about. those fullness of we question us it's think installed in what And for about don't about know -- talked should about think we

a suite near need, And, through XXX. equity if of just Derivative is much on Gerard, if you think complex. the about metrics there's metrics, on basically I might straight add trades, more that a processing the we that

as had this has And so growth -- industry of explosive volumes, part in right? what

manage at We of right right metrics. a what an don't what to because forefront we've always communicate you. and the metrics, us need the shift, of all of And are that's done we suite to better the I be think always as let's can And industry. those that way are better

suite about think metrics. the right we'll So of

that is this that us the we've do year. in -- I total meets that cost. seen for substitute you've the can at done the And there's matters day year say no year, that amount the is, really And then get down other I'd because of that metric end of our metric think road. previous after cost the rubber consistently that we years, where but don't it's

you cost if you dividends… on a that with metrics we to from three doing show just others forward you differentiate up two go could yourselves then is you're suite and progress real out just as said. to the show last years certainly expenses But Certainly and the does come will point the you you or investing paying over as of as

Yeah.

you very thank much. …but

you. Thank

line Our with the next question Brian from KBW. of Kleinhanzl comes

line is open. now Your

fee-rate Great. and or it going in from ETFs to there expecting you management flows zero-fee an is lot out Thanks. going on there fees. their and Are Quick how movement about and you thinking that I mean, know that. the forward question pressure I business, of is here the in but of are accelerate all the decelerate?

the to application see funds And this and funds level mostly I a ETF I At fee, zero-fee about lot at Brian. an attention point. mutual It's these of area that think widespread been certainly there's we're a is of mean, mutual been a don't we concerned limit. it's not some zero zero paid

being larger you those by funds the are is controlled employed, a They're mutual a how distribution offering. sponsor. look at when being of part the So typically

see don't is nor here be participating a sense and of lot adoption widespread there's interested a we would So vehicles. widespread been of zero-fee a in pressure intuitive My in that the what on is probably market higher end see movement. a to an of lot more higher of we're of and industry far And the products. that continued end as likely pressure

alternatives think you've has somewhat little been, other at like pressure it's the and on end the about ironic that. what that the seen been you of relatively on products. pressure pressure market If has the And the things lowest-fee

paid I start to think attention you'll see there. more

just you you're looking the down continue operating Eric, did pressure of leverage? in you light expense wanted then to you're And positive revenue bring Clear. facing. that have that under Does XXXX out to mention environment XXXX? the need And for you to be mean Thanks. versus to the lower given that to revenues in expenses

Eric. to about begin it's too We're halfway this It's to think Yeah, only you year. early XXXX. through

where fee need we got servicing I think some navigate rest of in we've indications some the our the revenues and going be are year. through of third to of quarter, to

may the where management made industry high really Ron It's that I team and always rates -- the that think I is I'll not that single-digit you and and is this think an growth stand productivity revenue I got statement behind, industry partial given if you ever. if of I to that That programs, an as matters. and for that the side calibrated, we broader is where program year. expense have have expense need have needs but the offsets an important the to this of expense program question some to where as is twice every we that industry to expense need but need -- one reinvestments, those be

in that a to as And if continue get revenue, to to margin same ROE. expenses time. want that. is we And to at in So do we'll down grow back the to -- revenues get place best expansion the to and drive of way do get lifts we we

there questions for call no And the O’Hanley back are to at this in comments. time. Ron will over I closing queue turn

much. conversations forward Well, thank for you. with further Thanks wanted having I we joining to just look to you all very and us,

conference today's This concludes call.

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