State Street (STT) 18 Oct 192019 Q3 Earnings call transcript

Good morning, and thank you all for joining us. On our call today, our CEO, Ron O'Hanley will speak first, then Eric Aboaf, our CFO, will take you through our third quarter 2019 earnings slide presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterwards, we'll be happy to take questions. [Operator Instructions].

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

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

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

And let to me turn it over Ron.

good and Ilene, morning, Thanks, everyone.

Turning quarter and to morning, Slide ROE X, results EPS we announced respectively. our reporting X.X%, financial third of and $X.XX this

go discuss I I'd more in results, our like we're Before to detail the into about seeing macro environment.

largest unique both Notwithstanding have world's amount a despite improved in providers, one of equities recent supporting flows, capital assets, remains of window sidelines. client global accommodative global on investment a relative that, monetary XXXX. an policy to significant industry quarters have cash and and U.S. the we flows service income into fixed As the

ago partially State positive of the and year equity Charles industry levels X% price weaker international period, interest the to Street's average market fell total challenging including conditions, reflecting offset Relative by lower compression, revenue rates, River. contributions

to and foreign exchange better the revenue increased fees, income interest X% however, compared second When total servicing revenue. quarter, net driven by stronger higher

revenue having our and We are the that encouraged performance direction by impact. believe the fee to servicing intended improve our efforts of revenue are

remains and reigniting to yet a I growth like business us we see as not are are fee a priority. progress, where making We servicing would

to are with while quarter. new level the of of good we wins trillion, increased to slightly $X.X and trillion, increased Assets under the trillion. At administration Advisors, custody quarter-on-quarter a also yet installed Global $X pleased had quarter be during we assets to and $XX.X

net strong and period by Assets under just ETF third I'm particularly $X under inflows. supported consecutive levels X% by increased inflows. end-market trillion, and pleased the relatively management higher cash of by quarter-on-quarter to quarter

good We operational with is are progress growth reigniting now remains hitting we are revenue top provide to of we the you update our are the some which efficiency. as like growth servicing on potential, a our to would fee an across priority. but why making enterprise, improve I as strategic yet making progress well not full our

reigniting clients. due success performance, growth, regarding quarter's initial we tangible seeing as this part strengthened revenue servicing fee are to some is progress by demonstrated of our on a First, focus this

strategic as made appointments announcement areas key such We Head recent of what new have focus, in U.S. some the our of of

Management. Relationship Owner Asset

the In newly the leveraging addition, diversity committee management of are and leadership taking service we and steps quality have technology client combined Furthermore, by to adding reassessing recent in operations and talent. months we our improve of our to our division. expanded capabilities

operational Regarding us. all for focus efficiency, key of expense a management remains

As our a reengineering and than year-end. of efforts, already initial more result location to count target X,XXX able year-to-date, X,XXX by been high-cost automation reduce we have of exceeding head by process ongoing

growth for total the program already XXXX savings full in $XXX achieved expense our Furthermore, year $XXX savings months underlying X million year-over-year year. the million has of first in

taken we fundamental in as business technology announced we reassessment order This to are our strategy the recall underway have of ecosystem I improve that last our as updating help the to actions in term. well You conducting growth revenue reassessment in that and operational regard. stronger our efficiency process will quarter, of this early return in is core near us to a

and have better are number technology an projects on to service In a recent increased cost, create our examining of lower innovation areas resiliency. have count. benefit weeks, at emphasis that and head There technology in a we outcomes our with strength development direct of rationalized we client some are

We reassessment our later we'll to fall. this that to continue on able detail be further provide expect

and to asset remains servicer, leading data insight asset capital. provider Our the the of owners becoming vision manager the and world's managers

front-to-back our term. key This achieving is both allowing financial partner, branded that to the Our efficiencies is client vision operational medium us and State in increasingly over which become Alpha targets Alpha deeper clients delivering have facilitating to while our their platform, essential we relationships, strategy to Street.

remains level. servicing in at Our a have level exclusive number client clients continues an platform a to of front-to-back of negotiations. with encouraging strong The pipeline asset engagements

share $XXX common million return, per stress we quarter. of shareholder under performance shareholders, an third share strong during to returned to our recently following test, dividend quarterly to repurchases the approximately common million CCAR Regarding XXXX increase our $XXX and $X.XX announced XX% the including

capital will requirements capital future. expect return regulatory our the shareholders our changes to to ability additional to support We the in

To focus service, through expense generate reductions is revenue conclude, client world-class in delivering to our finding operating our ways immediate model. on and growth while reignite improvements sustainable

We all are areas. these in progress making of

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

you, morning, Thank good Ron, and everyone.

start on Page me Let X.

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

panel, consisting acquisition $XX in River cost related or primarily restructuring the million right million items, $XX summarize we $XX and as from which third On expenses. pretax as $X.XX in of per to in Charles quarter, legal share notable the and amounted well million

are deliver costs line us anticipated with synergies. expense A&R on our expectations and in helping CRD The are

primarily we second million Charles 'XX, that $XX recall but per in in did a notables due equal River. we no comparisons, pretax third have had to $X.XX A&R quarter on basis of of the period-on-period quarter, For share

quarter-on-quarter. transition, AUC/A market announced Turning higher by up XXXX, we end of not higher higher do impact $X was the spot driven and regards due recall to levels and a further transition. any the flows. by to X% drag. year-on-year trillion decline On and increased client X% net client year-on-year a to expect flows, In modest partially market levels move X% strong quarter-on-quarter AUM period-end that market about on was AUC/A material mainly and we slightly revenues the offset quarterly partially the by just previously saw the driven levels. to by same was levels increase levels this Quarter-on-quarter, X, and previously of revenue offset year-on-year immaterial U.S. transition, Slide spot announced since client

Third by quarter 'XX saw ETFs net of flows $XX cash of third and quarter billion, products inflows. approximately consecutive driven for positive

down Moving but Servicing to year-over-year were just down year-on-year, Slide fees ex-FX. X. X% X%

levels, conditions last since needs continue market-based increase, and third servicing quarter primarily year, accruals. industry strengthen remain pricing reignite believe discipline some a are new catch-up of and business recognize a As showing taken an the and sequential including the have fee new Ron to pace be executive done coverage unsatisfied that to quarter's also these not moderate as we that our Nevertheless, while market mentioned, by higher model quarters this impact. rollout to client the And we we are challenging newly discussed, having fee in with to results actions the still committee to more late driven revenue Ron while review of results persist, formed servicing quarter-over-quarter headwinds X trend, with yet net average continue growth.

again we've provide more On this a the page, performance bottom little right some indicators included texture. of panel sales to

the be our AUC/A scale including in this assets continue from sizable totaled installed. quarter client $X demonstrates capabilities, which large of an see, and a you benefit win to raised As can trillion The third existing as quarter, wins grow our to we mandate also our relationships.

from year-on-year, increased mix market down fees, outflows to X% good partially the U.S. head X% with changes count quarter and Beginning and up Slide higher X, let levels. management other discuss inflows. third management offset revenue the by Turning ongoing the me away markets, fee driven XXXX was driven impact higher average of fees revenue line. U.S. by products, Quarter-on-quarter, equity were higher average by equity late

this half seasonal due we activity. us Underlying see the X% uptick of reflecting client and as position FX of X% are CCAR-related will X% quarter. and we in in the to trading actions Securities modestly and sheet were August second XQ down year-on-year, rebuild. the as revenues XXXX new as was seeing benefited down to the stability balance business optimization optimization up X% volume for prior mainly the year-on-year made quarter-on-quarter our volatility down the some seasonality, from demand absence growth relative finance quarter-on-quarter

were were down reflecting fees Quarter-on-quarter, processing approximately revenue driven Finally, XX%, due up of renewals. from contribution year-over-year $XX lower adjustments processing fees CRD. million as timing to market-related new in lower by revenue CRD business and the as well

Slide Moving X. to

the saw operating quarter, left revenues $XX resulting top a The of business panel CRD's generating million of new quarter, in $X $XX summary of You in stand-alone bookings $XX the in in income. client during expenses, also operating million million third performance million will all pretax and external. of the see

and quarter perform revenues The business new bit in planned was operating of continues the anticipated renewals, uptick the to in expectations. a expense in to our increase business business by to a the timing growth. investment While support quarter were due line in driven this and lower with spending new

audience this not one read the the reporting in inherent across results. lumpiness remind to again revenue would and quarter's I XXX any standards

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

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

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

of On achieved X the some and page, we've listed synergy growth panels this milestones the quarter. bottom the again of

our increased core accounting addition more earlier expect mentioned also clients Charles typically as pipeline business, front-to-back revenues. saw our growth we in with specific River of As to come. number combination deals in the help negotiations some drive remains These of as come they strong in middle exclusive and revenues and in to announcements custody, front-to-back an office servicing will call,

percentage basis NIM Turning X%, X% basis, our points. a our Absent NIM sequentially. higher well X in X. have client basis been worth and NII driven would to episodic NII increase up points sequential as declining these was benefits, sequential down was management. episodic however, was with active X our X up points. repo activity market-related NII Slide with primarily as benefits The X% increasing about by year-on-year, On about deposit NII

suite pleased the rates. from quarters. We program average deposit for growing of may efforts and quarter. such still long This portion lower particularly expect us see funding. seeing initiatives second gradual regard, this our minimums, We rate were some with client targeting we active of in have to market segments total variety rotation as a deposit quarter deposits continued gathering help success and our include effect a in initiatives management the impact but offset with new These that our adding been the success deposit straight some of deposit rotation in

and U.S. the We with deposit responded in Europe also to reductions, Central Bank rate actions. appropriately quickly aggressive both pricing

And ex view again lending investment expenses the to asset target careful XX, earning side, in provided finally, growth portfolio. we notables. of modestly this On a quarter, larger continue on a we've client in Slide

So Year-on-year, Charles notable the trends are readily slightly down our X%, items were but excluding up River down and X% quarter-on-quarter. excluding visible. expenses,

consecutive ongoing count of as more seen X% X,XXX X%, ranks benefits cumulative quarters now and previous River. compensation by target our total excluding Charles our in this down We've X that of The now freeze high-cost head exceeding count down by be senior or year-over-year our than seen it can in earlier line by reduction impact driven implemented reduced year-to-date, also location original our hiring year-end. X,XXX and head the declines, year have the is

able global automation while been achieve we're move, actively levels. efficiencies via greater cost we've client to and service As improving to up hub lower

XX, and well Charles which we and as excludes we're categorized as underlying still year Moving can of by delivering River, operations reductions segments wanted expense see corporate where going to incremental view forward. opportunities full a Slide we functions, you though to expenses, see business show IT, where

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

midst where we As the growth we too mentioned and his in is the that high of review, earlier IT bottom are Ron quarter, the is our top to said remarks. in spend in last

efficiency fact taken confident In approximately number identified IT, optimization actions, a quarter. to rationalizing in early of continue benefits incremental and opportunities We improved this from more already have year-end. share initiatives, with on delivering and staff of opportunities risk including quality realize this we assessment we to reassessment XXX and this that detail some remain have potential expect its before while automation technology can the

million savings achieve the expense in engineering our our Moving savings this full in reduction year expense realized made an of on underlying to original resource X.X% base which the we process million some in having the X% in already reduction start year right page, $XXX remain track have year-to-date, side and of discipline efforts, year-on-year, resulting surpasses to $XXX anticipated target. we year

Moving available the is a XX% the $XXX increasing XQ began of at a income $XXX plan 'XX, to common to million with of leverage priority our at we significantly X.X%. shareholders. remain million a approximately The capital standardized $XXX our returned and XX, increase to largely returned shareholders, million our our XX.X% execute during consistent our and represents to $XXX We of to share return $XXX Slide quarter-on-quarter, repurchases. quarter, of ratios capital total were a from million the capital our X XXX% XXXX and as million Tier on net which in deliver on shareholders of CETX CCAR

of associated you I that are cash significant CCAR capital left optimization will in see created maintained have sequentially the investment finalized, as we the again to note our will reinvested believe our stress proposed has ratio capacity. that side page, we grew examine opportunities. continue and On capital that portfolio would we confident some position are and being we rules changes deliberate headroom that

target reduction were ability to achieve our during effects initiatives. while the tough of headwinds million. updated predict, Deposits our trend provided deposit year-to-date and total to pleased head summary course, sequentially achieved underlying stabilize outlook to Moving quarter-on-quarter $XXX year's date quarter We episodic market-related continue our our some fee demonstrates due on we've saw the gathering and revenue our driven prevailing X% and in reduced count curve this cost moderation bend are expense in to savings see now downwards. benefits, rates continued we on global XX. The further X% we've to to results. the quarter Page servicing increased NII are expense deposits to by track and the better-than-expected to of as business

we our began stack development. positioned with to to to and well priority to believe of deliver shareholders Finally, are on consistent capital our capital increased we continue return regulatory optimize

revenues X% like a fee quarter closing, we period end CRD, XQ currently of market to quarter expect outlook. In to our basis, assuming to sequential by up 'XX cover 'XX On driven third be I'd X% levels.

catch-up accruals in pricing to fees spite of third the We to pressure expect flattish servicing continues be as quarter stabilize.

assuming be the X forecast, third of are lower from fourth be sequentially to by our inflows carryover up this by are expected driven somewhat to up while Charles seasonality of are fees while or quarter. fees management market-related River than markets the businesses levels strong mark in difficult some of processing adjustments. While be of quarter, quarter absence X and to expect And down percentage driven always to volatilities the we currently expected

a NII, in In X% $XX experienced another million on basis, benefits third pressure sequential and declining of to to to to continue be downward with the regards episodic down quarter. we rates long we see rate will we from expect would cut, X% the excluding

expect achieving flat At time, items remain notable year-on-year, the River. including we expenses, reduction be confident full items expense Charles year we same to and our excluding excluding in X.X% underlying notable of sequentially. to in On both CRD, expenses,

as structure we share year. with expect this of review And cost more a and that are you previously, later we our conducting fundamental information to mentioned technology

tax guidance lower at year year. rate for of full the the see to full expect XX% of end the our we tax Finally, come to in XX%

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

Eric. you, open to let's Thank questions. Operator,

Instructions]. [Operator

Goldman from Sachs. comes Alex Blostein first question from Your

here. think, commentary down around X% So see that XXXX. migrating servicing Maybe how obviously is of question update about nice pressure us thinking we're I where with give maybe fees, stands, an kind starting again the around pricing to

into do XXXX, you you pressures As pricing evolve? look expect how these to

Alex, think take it's at full some quarters I see here Eric. a look in of to It's year a to started a little but XXXX. moderation couple early we've XXXX,

to XXX We're quarter of the signs. than were second some quarter, those an that XX% of They first the forward early historical book you to continued as in time as into book. of moderation quarter this of XX%, and And the So now the we then begin we we us of of into forward well. top next look have indicator. expect concessions, quarter that look into pricing clients. again continue. some And the year. we periods, And to tracking those seen gives through fourth continue ability as recall even That's kind the reviewed to larger we've the

if So driving step changes, I there think those ask are question for we X some back the really I and think things. of broader what's

on effects we're one of coverage bring beginning how and the to better our our handful actually -- pricing upgraded of full in discussions on to that same and place. think around And business literally effect to and senior the decisioning force control collaborating pricing set hand, these have have committee, the on. pricing of better cover executive we've there that's of see be teams the the then clients executives. -- see client our we're review to we together to the incremental ability actually, effect I brought us of direction with I and up influence to engagement coverage And amount its those clients one is is the the at And quarters. a just senior where the we're brought And with revenues our given starting adjustments. time, what think in that

of a $X second little Definitely servicing is big maybe fashion. a it's is is underwhelming. have into wins a AUM, pipeline more specifically been to AUC the drivers fees the question Got past, we've obviously effort but transparent trillion to in bit related sort of big number, sort of in fees, numbers, the in trillion around big fees appreciate then $X.X more translation of But communicate it. servicing the my again, seen quarter, sort a number. And the

revenues, these the So talk timing through hit? of when impact that's to wins the of ultimately, can we on and maybe the going

again. Alex, it's Eric,

think you comes and our range also with expect our wins as it new is I would and business business a in of different lumpy, business, engagements.

I of the particular with that we've larger smaller for we the sometimes, what have one with wins revenues. and large effect I been we hard sometimes wins think, and future clear the on activity. quite it's predict And on to have path come one see we follow-on -- start in sometimes think the that product, multiple products quarter, or any

translate. to hard directly it's So

the you And that our product, across think we've I funds differs before U.S.; the I products texture some emerging versus is other talked the multifaceted more that cross-border shared by And Act some markets typical funds. with is pricing XX of versus the and by business pricing regions. differs mutual region, of

So time, into is and the something having emphatic coming correlation amount would exactly But how do it what say we be hard of reasons the wins about business. we the to -- exact in of of quarters. one we're you indication much when client an gives track revenues. you'll AUC/A think revenues the I and that that has engagement, of activity will the that's see client And flow it over in

book. win clients talked are broad-base reflects a think of are about -- What that to But trend is Ron. just we it's a high-quality that long which is is in by would time, we've the for There number. client there, we that in adding our is around are though to very a measurably also add very large number encouraged which outsourcing. that that I existing Alex, that

question next from from Glenn Your Evercore. comes Schorr

rate-related couple combined of deposit a Just questions.

next to as start quarter, take the sure? then and take quarter X% definitionally, X% just from just down X% the it the making X% down out this First, we we that XX base to

That's the to way Glenn, it. about it's correct. That's think Eric.

Cool. Okay.

we're deposits, more they're rate look cuts? peers you about does Where bottoming overall this more how if -- natural are of your they're percentage of a at we non-interest-bearing we're the lot more have down that? quarter-on-quarter. only And at book. XX%, down but seen you a Just a -- stage, that the is as similar X% accelerate have curious if On entering average you thinking a curious, I'm think numbers,

to make before Glenn, the couple like it's see Eric. more here around quarters a deposits. I'd of a judgment non-interest-bearing direction we of

I XX% of I years X XX% previous the we've about in little seen the to to a last XX% think, this range. It's over quarters. a reduction, think, of kind been -- bit some consistent in lumpy

a a little I ago, think lumpy can impact up the bit then year back and look trend. you back down lumpy, it's and

what it's the read into So future to hard one performance exactly holds. quarter's

of rates Fed higher to of the we'd because I to prevailing these think rotation remember us and to. driver at had rates actually quarters quarters of couple couple a like new more part So see like the we'd that brought a see for the was more

couple continuing between they've and that non-interest-bearing Now cut rates smaller. becomes times differential interest-bearing cut, they're of a and to the

may And have well. effect so as an that

be we think well, with this as and Fed to closely, we're with pricing quite the think because everyone interest-bearing as think we're I going watching on pleased actively ECB pleased I So one on results the the quarter else. with were the we're manage cut I non-interest-bearing, this rates, results to and able

helpful. Definitely Cool.

And intensively I to a add that pricing we're here, managing how that and are, it's fee a is, analogous servicing at level. we're deposits at somewhat deposit client-by-client managing very pricing Ron what would to

that the the to with It nobody well, in we're in facing deposits. environment that relates trends is we're happy So this.

manage very team hard intensively. think I quite the is to working these

Your comes next Hawken UBS. from from question Brennan

Glenn's just follow-up deposits. to on questions Actually wanted on

becoming So deposit talked cost that's the interest-bearing how you dropped integrated. that, you about lot, referenced a

saw stacking seeing was currency, competitors whether are How about versus there referenced by also the impact by dollar responding? this you where and to a and as move you move by sort leading your think I up way can of of you though And if some you're noise? Fed us Is betas guys there you out out -- parse feel until sense are give the you in we how competitively shake the And U.S. the are euro? a charge? in ECB. the

Eric. it's Brennan,

and slightly and of is me currency that for you've just it kind on I of areas deposits last Let the -- in you, because from different been for asked And of directions one well, so the but others we've the different as on question for pricing as working right that couple the able this to to betas the where in betas in were couple with quarter, and got run reduced in of place what Fed we're actually a bit high. rate with particular do quite deposit increases, pricing And a the the ECB. and and both been we international, we've have effectively symmetric rising take quite intensely. a line U.S. think context,

-- the As if to were the summarize we were betas our U.S. I analysis beta XX%. about for

temporarily, So And least XX a rates in be for but more basis came to we're points we're and down in able where time. than U.S. think, move. last nonnegative We're rates deposit basis the that XX rate with going the long needs in we the to actually move. point long, basis U.S. points XX to push be And reduce because a quite negative cut, fair at even even where ECB to banks the bit of the I margins. kind by the all further a able turn really a was as then actually in we're negative place down it and, Europe scenario rate a rates

dollars of as Aussie or some we'll pricing. that cuts, or part rate take in active of the dollars been the management kind emerging our that's well. see so deposit around And or we world Canadian as And markets whether of of it's in approach sterling very

you're NII guys the when midpoint in around previously the using up backing for flattish. quarter, linked guidance, about out I up and the And guide taken we you number yet million. NII had to the you then about X% think quarter a and to $XXX nearly was about this get right your onetime, think talking Eric, Okay. -- you

composition you So NII? dynamics yield are I to cost embedded is, you the expect guide? Can quarter? curious deposit in be guess, would your that from us understand expecting Do this of perspective? what asset about And help kind similar an you I'm is of what what

let's then think, because XQ to XQ and I XQ take perspective. fast-forward you Yes, to to it we'll some gives XQ

on think to from I of some to investment continue We And ex did NII was those that from adjustments well some repo and deposits, market-related draft grow some that's our XQ portfolio. had well And then other we rate, our raising we long had uptick as actually loan institutions. initiative. from us down slight balances. the part certainly so a XQ, affecting our benefit as got book larger of deposit and activity we from

If I about that and we're our coming or the think just that's from what's -- accumulate, that's fourth last from quarter, that's fall to get -- and then continue long-term -- from quarter are to X, the third rate effect playing draft it's X from to right, rates, in through down it the going an that starting quarters long primary item through.

then bit always of effects. the as issue bit rest adjustments net from a offset will of make obviously, that, interest little to rotation, try there's because, in mentioned be we question, rotation little deposit continue. we -- other to other the more we'll a whether debt see. And -- We expect from portfolio, but non-interest-bearing as to see previous deposit or I reduction the some We'll likely

-- levers to. that's to of other size to the line we -- on you'll those those that have favor. or on balances we're whether able pricing trend everything is think longer find quarters, be not rates think and finding this to to I I not a we're So trend we And But find able offsets create is ways in cases, offset with a and can, where seen that that possible. try some asset offset what and may focused we're is trend, or number it's lower where our very us in what that, some pushing on we you've do

question Jefferies. from Usdin next from comes Your Ken

we expecting your for you in look extends And to getting in Eric, I on seeing, decline you're when run What the rate the wanted run into right year? of that you've for guidance that to is, deck CRD basis. the with be at ex the Can once that we've about decline as core. #X ask you that flattish next to do you and is, also to said and nice you would #X? pace the growth basis both cost River get on the side, rate follow first an implied had on up I cost fourth million saw Charles that I this X.X% quarter, then of cost this just what's continue the focused CRD you down get you then that's been still $XXX year, think all, ahead

Ken, couple early upwards sure. we're of I think numbers. be had assumptions on strategy. They in part of of some to obviously with -- of with in acquisition think very the And the year Charles revenue the some River, that ago. synergy had will A little our we're modeling some seen pleased back you in of lumpy. shared you've that a our Charles done, we tend around we as things, that we signs trend The But cost the growth that I business had investing River.

second second quarter costs quarter versus came a than third in quarter more this quarter first think than in quarter. little I quickly relatively to

sales clients. a able but integration and ways, in that literally need of and providing or been drive be revenue installation them the historically it come for because it's sales we to the to try for necessary will bolting either engineering it capacity that's all So recognize on to bottleneck to meant

current the costs to that sort cholesterol and of there. the are that well, cost And we'll good continue drive of are is, future revenues, and what's So accordingly. those feel driving those invest costs, we that's some like will

of when way. are significant seen we've on grown base. going forecast don't we're so down expenses this right. And that industry a continuing broader one would continue There should to If is And course going been I our down And expense in. do as comes productivity, we what growth know, result, on is to business areas: to whether and it's no see, forward, it find first actions, benefits you we've tried a going drive also this think try bending enumerate side, to whether different costs. expenses. and X.X% that year, If with we on focused of cut to to operations find and to what on really describing as we XX said productivity to we've we the it's the in have that our question that -- comp curve do we Since levers have a through historically to and in can a purposeful I to the ourselves nonpersonal slower side, it I step have other it the is that few the the liked actually for the year the think a we've we've back on as you've or some as ways been last and you on good we of have consistently Page see can expenses, action like range of we're IT, were cost. you been work years, and

predict to not an So next to every going I cost. year's of one us. We're those provides start for lenses opportunity think

like travel way that. committed right time on we're assured in come and here But to plans. of I assembling cost to good specificity up, think in our and some areas a of we'll fourth that direction to our which finding management that's planning not kind got think, base part of earnings. now budgeting of XXXX spend report January team quarter in in can for the we which be that's January as be of and have how and our Exactly quarters, that amount I much be as the down, with a you a sort we'll you've back that with do

Ron. it's Ken,

is and just Let in continuing need we there we of to returns create expenses the aren't a invest to where proposition our that this think to our Eric's we've point what reduced underscore year clients business last be. competitors. value done is while because our superior our what to But me they recognize that

you come should more back So us is what with to the expect specifics. of from and same you we'll

incremental win at to Eric, up missed you of Or you sorry, tell premium here? -- just an now flat where that expect you do can expect second forward? a follow for re-based, say us level the as And am quick or we've Eric. And to you third, you then just did increase the if would it, from? from I that go from that is Great. kind one two

premium second Yes, we're saw and begun Ken, that amortization disproportionately we pleased Eric. quarter in third to the high has The quarter results. the it's burnout with

in we I has don't with the expect much think now point. this line And at so And -- has portfolio performed anything of out source our expectations. particular more of that been closely part

see what's unique the guide and the that's will nothing is little -- just in on the as but the year. from a I one portfolio the effect long driving thing that earlier continued rates, had NII, of flagged quarter-on-quarter we think bit that's and that's of overall anymore we

Betsy Your comes from from next Graseck Stanley. Morgan question

clients on more there could sense along just one is questions, give as running a you are the your of room us suites, execute on in as program that? deposit you much how to how far the Couple and

Sure. Betsy, Eric. it's

deposit a are clients that our So suites we pricing initiatives appropriate both forth. so the offerings, half around and of about as serve I'd well deposit on how one dozen all of different kind working call as do we're think

a to background we clients. overdraft found X, were company particularly the out at sense. we clients of of client sweeping particular in in some a For the of the put and for world and constructive if down pool retail about ways, that efficiencies also came up deposit a for them. segment And was which as a causing that which we lot suites a looked ended wasn't in you make think operational didn't What large way position both

And to a out call as it's on particular like be And sweep down anything $X an of effectively initiatives we've minimum, level could said, dozen just it one half it, a done that initiative. so there. example. we million I have And that, of of order It's X a that under at been that's just the months, in the rate. low over on rate The X, $X at last sometimes of a that client a at noninterest-bearing benefit our the rate account it's course low look either or typically billion. below

something the that's it's take. geographies those of we rolling are We're helps, kind the our out some So and that of that -- now. European into packets

scaling right that our for right I of as way you a long clients. business, and one see of would find to appropriate a to both create the us frame also list guess, can initiatives right for but But to to way services, way the it bit. the I value now the accommodate clients, do So have to

-- XX% you're programs, them. XX% already far So XX% just the thinking do through question, along you long including how of for on of through, all the same looking through, think like various kind how legs

It's question. a good ask to way the

I X, kind think #X X, think X, and we're because part we to #X, beginning program through and of our to deposit rollout the and finish going then programs go to implementing about X, X and we're of those as what X way deposit X, XX. X, X and and and then

clients we deposits around we this is sheet. part do on can take challenge So us I deposits, here and rates what that that for balance do the of do challenge terms our and guess, do can think and and is we of support in by less with liquidity what comes how we expand, you've the seen innovate us cash how to continue upon what the system, in lower -- we

do with And support with then you of broader engagement the their needs. clients, them how so liquidity set all

the actually cash repo NII. on about what's there different contributed several cascade, what offering is and on about it's versions the that's of is offering think and deposits, your our to So repo

sweeps into as to and we that's -- do they're year actually can of where funds that been we've of or areas, sweep if actually funds process. their money particularly and on SSGA of the transaction successful a some this to market earn choosing and third-party What other the part more fee

because serve traditional liability or book have the cascade example. about it's clients. and example, thinking are so don't on So large innovate upon universal do and those regional loan where what is think I of Repo of as more ways another we're in and we we'll the And side. continue as that And suites areas expand is cash to forth to to so find our one doing innovate that. bank it us we do ways you and -- on is a bank, -- as and the

that then just And through you were expected, I mean, are rates come do they have paying as down, you noninterest-bearing deposits. clients

the as So down, comes shouldn't NII start grow? to be rates

come rates may may more they to choose choose clients be As noninterest-bearing deposits. down, --

-- an typically that when rates don't down they come we in that recessionary where clients a immediate of always accounts. leave see in we surplus a environment, slowly, think suddenly I see quick clash, I think it have

to continue we're we has there certain and because here, think been environment think to going be the and there. disciplined will are I telegraphed rate amount leaving much clients disciplined be think and are going at well they're how to noninterest-bearing,

hoping we need what out think as whereas the exact I to trend down need more rotation even flattens of non-interest-bearing maybe down that trends we we're need in is regard. the rates -- observe -- that slows quarters we to to and see but --

comes from Deutsche Bedell question next from Your Bank. Brian

such I I did know essentially can guess, the trillion more one client all all first client? don't name If on come client. big importantly, is, And color were you that that it win little be -- back please I may an mandate, specifically? them, what a accounting one can are $X of what on that, if be to you is them as of or the -- you read, But was the of line the start will to any bit servicing what all clarify doing for is doing you will And service doing you now? function? time clarify when move for

not Brian, Ron. liberty name the at client. it's We're to

all not one it's client. that Firstly

was client XXXX. sometime that in us, and a new both implementing said that mandate there in was there, non-U.S. and So a through came be then earlier, was but and clients, we that This of will to quarter. the had of rich quarter and outsource first chosen U.S. existing there existing also client a as an in to the I accounting large mix is

just And well? you, they office Okay. with doing you doing as with were custody were custody they the or

were They several things other doing us. with

Okay. portfolio And then maybe Eric. just reinvestment strategy, the on

that more move like been duration As strategy? or about you do either looks time, use extend improve have ABS can a get few or potentially long flexibility down duration quarters actually with you really quickly non-HQLA bit think the the you'll over the you to ability you've securities headwinds as to just into portfolio investment taking obviously, and via we constraining from? more moving talk the little It last over rates down

Eric. Brian, it's

to we the drive financing, some serve I We our a drivers. a And quite in lending servicing can a I capital servicing the It's a really drive clients way spent way on a solidify a time way, lending, think partly in lines And topic help XX financing, of bit. -- asset fee clients we call on -- extending is some side, clients we what how partly to the it's balance a Act, actually about and it's this it's think leverage do actually think and on value NII can our fund year. that pace And credit, mix sheet, what in nice at and about activity. it's growth fact, better about to we we On growth. which that think first come the X at can seen securities we you've grow and portfolio on portfolio. think do the and

first So that's part. the

a On invest of portfolio, there natural we CCAR-friendly. to want is time is sheet, in we a maintain to find because We balance market. portfolio given the our just the as duration, stability continue don't add keep to even that's a And that to great to deposit the it's them, say a or ton ways perspective investment gently, stable ability relatively gently rates. I in think keep grow

some is the high And quality of there's So duration is the markets, book that other the there a there, some -- sovereigns there of in well. MBS. then some international there some in as well-diversified are means, of multinationals in

that that NII. should I be at general, portfolio able think in will the and investment try a so of size, but a build going of to do terms create it to pace, we're bit And to little in we

Your next Jim comes Research. Buckingham from question Mitchell from

CETX the cushion you the CETX? think flip or just it -- guess, you thinking banks? Or the that's And the going discuss I think if SCB? will maybe you for ratio? -- little do do how former, evolve And the if bit still about it's what ratio factor of ratio be to with to is can leverage right Eric, the you're your inclusive leverage trust constraining how right the a you

ruling that and leverage right leverage some that in more Jim. through are any and was proposed rule-making came of legislation summer. now some of Congress company we've or out the is the some Sure, comment, constraint as other we ratio than the the The factor. been And that out of the out spring binding operate on by Fed the for and ratio then the there put hardened

rules does occurs, our capital. and move for the what's balance or the the into in What preferreds exactly stack, should on for so obviously final amount that legislation. waiting And some we CETX as we're of particular, a in back capital. result, and Congressional up leverage reassess capital in basis have to our seen how Once part that Tier we've the from on our they ability an sheet. form to room effectively that free And binding that that X propose create constraints proposed implement our will so is all the rules, that

approach that capital in the we the optimization. of be so And will take first stage

an of it been more indication you buffer navigate I and the then a has need through, proposals and CETX how we'll of your understanding target, is better as once expect kind that, are stressed that, do able what it's operate. give And Fed of we'll banks think be CCAR once other see run under we the fact, be we kind more we I I describing this coming to and year. the we the in constraints what capital run later think of -- think have will to we'll to to able some part something once to And at. on little of we that the what CETX for equity right see we, once targets common Fed's of a question occurs, of be what see we'll broader we on, X target, have Tier but

does maybe Is clients work? some the pricing more And fair. business That's about that give the Okay. ancillary you question How the demands offset actually rate efforts. the work, guess, follow-up more to it larger of just convincing to to -- of kind lower to with lower pricing in how clients fee on the them are demands? keep practice? -- you convince to or able Or higher that of some work I one does

imposed the bit or little not part it comprehensive Ron. conversation we've paying it's and all just It's of should here of a management the the is Jim, what about -- plus we It's ensure discipline are more. to and been is above more. that's that be and a less

example, River. consolidating is broadening it the some the of it global including markets. of services our provide, against set for that occurring This some is Charles where of backdrop improved offering discussion have the for is all fundamentally we So of on, business, the we addition

the So of some move in that around outsourcing of us. is it terms putting activities long-term in a of to place towards

than conversation. a -- the is managing any same. but we're client about more it's holistic all But that paying it's So they're never broad what at some patterns, rate paying effect, is the it given time. the There's that much something in to

Securities. Your from next Wells Mike Fargo from Mayo question comes

I'm for update asking of little end the I of preview guess a year. your before the

looking thought what parts ecosystem? why is for cloud the else a to correct? are get you're little you reassessing saw reassessing did I on And -- and is And kind tech model. choose the and entail? mean then that the color now? maybe for Microsoft cloud, think I you other the bit I guess, Street of why say changes River selected why you of and tech does hybrid just CIO, cloud the online using new Charles the So it's somebody And what a Or you Microsoft? I by that the question lastly, so when ecosystem, is, are of State management strategy, so it a

Mike, it's Ron. Well,

is what of our to technology know, fundamental requirements the you continue we technology go As to do business and up.

an in spent we've a environment operating where lot. we're So

to have to spend, getting on we're innovate we're greatest We have to ensure throughout continuing that we cycle. return this that that and ensure the

making important that we're ensuring to resiliency. So about a innovating that get we've very on to servicing return on sure of but for also disciplined operational and levels highest at date the what's behalf technology of time -- on focusing We're same operating we're is our and getting the done that. what clients, at

is bank requires not vernacular, of that What an running and a a year-to-year, month-to-month process doing Put bank changing intensive week-to-week. in on the and but the the the on way. in about all just an it's and management optimal that

So new we market for are Chief Officer. in a Technology the

ways parted our to we'll about later former with this in technology say year. underway, have is and Officer. former That Our on more search the Technology we -- Chief

of in Microsoft we've and as you out and a partner, Microsoft platform as front-to-back we're this about, offering. with cloud talked terms a repeatedly I In true others, think, building

and we provide additional So it's And to products building to data not make just about we're saying got an that carefully. platform we are integrated positioned manage. it's the a underpinned by services, uniquely of set we've want new sure and but that that platform

the our providers platform it's be competitive but an us bid. So We Microsoft sure we us, also there, was as Microsoft as to just going And that as a not any our is to to cloud capability, all working ensure basically feeling talk this than brought is but other. cloud-enabled that the better make itself possible. that operates to and to, to ability was with it much want that cloud help platform is the a provider

State to client be said do first then, look you'd And separately, Street at guess, River, just I had Charles I you when point? convert your to some think you

Yes.

SSGA, Street now. Advisors underway State You're and talking our is that that right about our conversion Global

from Gerard Your comes from next question Cassidy RBC.

conversion River, rates pitch or it win share with rates the can us is more on business you you traditional Just you're that the Charles what business? speaking when challenging? were into success, customer go those the having more State with having you Are new versus for Charles Street River Ron, offerings the a success to

you, and -- we're this improve a nothing the and frankly but if a State broad-base to on of you improve do report lot Charles now Street, create opposite." that to investment Those back could are we and set Slide trying see State with this business we discussions we we help and on to "Gee, operations than a us this Street, it underway. seeing this expected, thing There's they platform go be we River discussions quarter. recognize when acquired and every we're more with year on report from range X, we our ago, business, nearly you building you're already, exact that outcomes. do our better Gerard,

times often these around and discussions business are model asset these -- are that owners asset the managers fundamental Those have.

do and partner is service by create a provider Charles definition, almost as partner the set or you in provide they're about let's about custody, our about it's client office, doing this it with they think that a services to So investment RFP-driven office. What's -- But about about River, back bundle how not typical Charles River is with cycle of the it than different Street, the just middle already not that time we're be. the a in us you, just encouraging can outcomes. and discussions outsourced we it's a would in help better what us really have State

gross kind off have don't line, but and often showing we're that the have and usual few of but few we've fallen So discussions you they by follow continuing. prescripted numbers that here, this pipeline RFP fact highly relatively somehow, showing are off been time the encouraged fallen the but we're time relatively again

you expected the are We where more to we several, now, to ago. this terms of are a at acquisition point is about in with exclusive when be talked than in we're which we year negotiations we

encouraged. So we remain very

Street doesn't you you're just synergy this platform? And costs bring the don't board, use all synergies you've River Is brought on to get with State the or is If with It's of it there them could the you different, sight, versus margin not be line no? right those synergies Street it any some again Charles customers are see -- somebody State higher at to continuing just on business and away? that and going it?

to of I'll very the relatively user-friendly of high wins Well, activities. business. the e-channels quite here, user using global River enabling be at River markets it's talk products that We're in good access to a global some now margin Charles tends of margin access business by existing ours. giving our to some some various but are a high Charles has you a early for mix market of both, us been which about various clients to That

targets on medium-term to frame X X in years out And good. the the Very that just medium years? Slide XX then presentation, maybe, define to how Eric, on you you term, X or can X is

Sure. Gerard, Eric. it's

you for if I And in means end think, look think perspective we is us those as foot were XXXX, notes, targeting basis so of carefully the XXXX end the really are a have of right run-rate the I sum we at targets firm. of that XXXX. the

that completely rebounded good. if the very took Now was obviously in uncertainty, we seen Interest the a it's and that bad least markets set where whether sub-X.XX% fall we've as the December them to things there, but X.XX% and last you since some few with beginning then economic at real of were and environment, right in the and the turn about XXXX there's trade activity out we then, global and opposed with year a X.XX% think have different tenure rates, whatever now, growth. down then, or shifted foreign

And I to we're business be And way as there find we real fast get just a savings where is earlier provision the part a how to think environment. how capital doing rebuilding because than year, be year, to important we of transpired, as we're of and questions delivering, at of a expense and do do equally next navigating I should that margins think related the our and the returns there think, they that's that growth which to engine, additional of kind needs the as way it's a translate back possible. to kind that, have this headed. if that's the on -- we as have think going work rate well and the get to but to the investors some I one of about we -- the pace kind call, our So program events should our

to we're are to that steps back in and come appropriate we're feel So and I we those how think how important direction. going over time going with take

Wildhack from question Research. from Your next comes Rob Autonomous

business I view you wanted that to there a big ask with about that Is out free. playing can positive space. if share? could going the that a ETF for view And the the us you this you commission sense all a see ETF e-brokers benefit be out? that how so, for give There's a

it's Yes, Rob, Ron.

And planet. which truly have, you a -- think spreads offerings customer, they think the the user have us while to of the on liquid end not that cases, double it's we for anytime been a the as there about in we we as By that to In business. offering, -- it's a think on if platforms And because significant us often. some cost they're of most this good enabling for this you're tightest I SPY we out, many your many transaction the others. low-cost we've liquidity. the exchange collectively are various consequence superior, lowering focus of out honest kind case, the transaction of is amongst good it's volume. particularly ETFs I cost-free have think digit constitute And that taking where

on enables where focus So this truly are us -- that is we this we think superior. now to

So forward I we our think to it's ETF this look to it will and a beneficial be -- business.

these And in moderation I'm relative initiatives expectations a year? earlier is could improvement of wondering about when all then clue how but you seeing undertook the in lot progressing the to your pricing there, on we've you're pricing in the you us talked if

Eric. it's Rob,

to become catch-up us. we clients by of clients pressure, ways went we right markets of think some find on into to you pricing, and make under efficient this wave come it which to as them and a our appreciate remember realizing do that I was But our -- partly had back also end to were work. more

weren't you we how patience secure, results was honest, for we what bit but a and of tell and be moderate much were could think environment Because us. that is pricing pace we this intervene that we what at there sure I'd a to new could we had that I could right?

set were I of would I really late quarter committee our second What pleased up, for of this because some tell last only year moderation the to as we in think executive year. pricing we see example, you

to in. that's feel X So bit third into better and fourth a visibility pleased some see then again, well. quarters quarter We're have as quarter

and shows been the action and think I your think pleased you to we've the take right and put you effect. senior I So people an if that can it you have something right and put the you mind with processes, pace,

lean because effects, good should do management our into pricing to they're pace relatively practices year year as to the run on cut get is, a stage per headwind them desired perspective continue the and of we they're that find mean more. back encourages Now, we pricing to this and gate do. our and having point about first ways our what If And on year. and it hard by a to approaches last will think and to that's X%, it having that's a to can continue working I some us I we're X%

comes Sparks. Mosby Your from Vining next from question Marty

flat expenses in I of tied revenues a bit quarter. and How going third and expenses then fourth Charles their pickup a that little seeing you're growth that's a seems savings $XXX saying just by we the does to the the of at wanted in and to that couple end $XXX When between getting the to expense that. million look things that are and River here. get seasonality ask of million Is year. or offset kind the we're equates, we're of of we're being it to like relatively

see thought the what just was to there? So wanted

Sure, it's Marty, Eric.

there things of at play. are a think couple I

begin could the if year of year, pattern we this pattern think quarterly of circle. and think the you kind the that quarterly about last I expenses square

on ex-Charles we're River, basis, down think X%. I year-to-date a

So we're relative last of at year first X in year. were certainly where to running the quarters pace we this

next And around we're We've expense we that have that. feel we'll we've been good million. and good X our work the next we'll on able we would for quarter in $XXX begin and well. deliver $XXX put to this year very quite high pleased visibility, -- the we that visibility that savings so savings as think I out, and And tell deliver you confidence then solid come and about So see million waves. I a pretty got bow

of mean about quarter, helpful. the would fourth think run peaked you we're quarter in you NII amortization get million and as gives the $XX going $XXX that savings be the NII, this fourth rate which incremental million mortgage-backed forecasting last the when ex out of on of $XXX end And towards that of a I on you your impact year million securities and quarterly year. more then premium into we're the

lowest to So to million X. that look rates when the you $XXX at million that shift, around $XXX we we very when is close got at had

the So kind of year rates as securities $XXX is out? long-term in there? there once those what flatten that us million potentially And NII to lost is of much to any of and premium rates then the over accounting begin the of related And million stabilize? long-term the that of amortization $XXX that's last we've mortgage-backed recaptured the give happens

the Eric. million, those that order the The pools $XX some premium Sure. and $XXX worth or that that Ginnie the you Mae you called amortization of results. positions Marty, described we've MBS have our on million sold amortization, just cut $XX a out, of against those -- it's to we've some that was $XXX as had XQ, XQ million and that -- of on from we of XQ burnout. able on out from back And particular pool third premium the actually in of for seen otherwise been couple to to amount million

think I managed good feeling we're uptick, we've have remediate. now how through seen about that So that and

I on, twice what's times, the going is they X that, to the puts down to us go think going they rates are XX the that manner Fed net and us at a funds to you're pressure or because direction to interest they that down do question margin. or around basis as banks more once net on interest broader X in back drive is putting income and asking or of are way point certainly all Fed if cut range a

we're just to think have see. I to going

front look years what ago, two at ago because a I our I is one encourage is down. balance take ago, to go further through think what would think think now do quality was a in in position you some better I sheet us. point of year manage And our I years of three to of have and might back higher though, low we

from next Your question from Brian KBW. comes Kleinhanzl

questions. quick two Just

you saw line On NII, the what bit $XX impacted? of little into that that episodic their had and you as benefits in million detail go was market-related items to could the as just a

Eric. it's Brian, Sure.

NII, that make a of territory be in couple had ended a balance positive, that type to the are quarter, in sometimes end So little they're we of this up sometimes they a the offset, tend couple of that them tend the negative, we adjustments lumpy, kind there at positive sheet quarter. to but little a

on up the swap take effectively it then the matures. was volatility we of stability sure trade you end them when make take do end position. the a those given we FX quarter unwinds trades some that And we of our have and just rates, we cross and that One they to sheet in that marks that balance as with mark

positive kind December call September a So it you impact, that of and get of sometimes this positive. XX a kind XX, it negative time or was

activity that banks hedge other debt. The long-term all we other is we like our do

positive. have We that sometimes ineffectiveness was again sometimes and one positive, the is to test for negative, testing little little ineffectiveness

about drivers. we and X about And the largest part bouncing around million minus they've quarter. process. what were plus just our this been have to They $X the $XX in financial those came $XX $XX So were million, kind million, collectively of minus of million, they book of to as plus to $X past, -- million part

separate finance. Okay. And question securities a then on

Can little there? a actions optimization opportunity to potential is that mentioned What detail you just is? as new ongoing. the more you have bit revenue give You what that

of it's Sure. Brian, one X again. those that businesses it is Eric, has finance Securities features.

to with Fed. be a of some market of parties finance think that diversify counter-party Sec compression felt some the through and securities our of cetera. think the In it number do to can I we're had this to driven our one with as a -- FX et can space, I on hand, you and trades, you some you can both one, little FX tends was and do dialogues counter positions where is counter we we've year some to harder our of adjustments our navigate make parties, a past large our in the able balance CCAR and of easily, activity, more balances that we part is finance, testing because to constrained over lending has -- why are constraint year, and which revenues our also down. last had some of down which

And find us. is of that space us ago. were actions, also to begun in What our in up imposed some we for ways those take some peer-to-peer have to begun a free constraints to innovating latitude more that some upon some of begun we've creates right our securities to we we've like as year matching, finance effectively feel relative around been the areas of to trading innovate structures. though activity, refine some We've do and

there's a sentiment. now they've now the we're open more team out to money there's demand see you and as so because we with need part feels the risk-off engaging what so back And And is sidelines, of lot a there client now of for as know, on they're -- clients. come business

prepared is and we as hedge participants domain borrowing feel so funds rebound Once question. of are lending that happen see of really market client begin demand better we so that industry and which an And space, rebounds, that a particularly kind is once our the demand to we like the in since and other now which to activity. grow

to no you. are over it turn Ms. further There questions. Fiszel I Bieler,

Thanks, operator.

only Street's person record for will conference replay. State on this this the authorization without expressed call State No broadcast call part call reminder, distribution written State authorized Corporation. Street held of is rights being in The or website. a reserved. As other or is for all are recorded the be conference and Street rebroadcast from copyrighted whole in may

me call. that, close to with Now Ron it the let turn to

for thanks all joining Thanks, the on us. call Ilene, to and

today's and Thank conference concludes webcast. for call participation. This you your

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