State Street (STT) 15 Jul 222022 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to State Street Corporation’s Second Quarter 2022 Earnings Conference Call and Webcast. Today’s discussion is being broadcast 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 now to would Investor I like Relations Head Bieler, at of Global State Street. introduce Ilene Fiszel Ilene. ahead, go Please

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

During X requeue. the limit Q&A, please yourself questions and to then

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

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

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

to Now let over me turn Ron. it

afternoon, This Thank you, second morning, results. and Ilene, quarter everyone. good we released financial our

businesses. year-over-year, continued factors what rising recession good impacted Street performed income revenue growth of quarter goals. FX notable created market significantly and managing executing to the trading over through equity and against liquidity. by we sheet momentum declining medium-term headwinds be ongoing focused interest environment uncertainty, well Despite These and the concerns navigate a conditions, adverse of fee momentum in intensely wage to better and fixed with in State volatility number our The business macroeconomic environment. healthy currency drive the strategy and the NII with quarter driving a Europe We associated second on coupled remain are well-controlled our for our further markets, a delivering events market balance can pretax rates, operating while margin. control and sales The price strong second geopolitical and years expenses strong achieve inflation, and in

was and continued Total dollar. quarter drove U.S. services Turning fees Weaker Markets excluding X% quarter highlights but Within just revenue, down well increasing which total I stronger fee revenue to Global the year higher trading impact FX just income declined fixed X% to in the were management perform revenue lower volatility, revenue in prior X%, spreads. the our by face the ‘XX. gain Eric year-over-year, X% the the of expense Slide X global equity presentation, decline. X% servicing significantly XQ with was this highly of for review with year-over-year, will performance. major sale period. market ago our year-over-year, headwinds notable of second second in of quarter notable lower was and on market-related to markets revenue the remain offset Starting XQ market it revenue we our for reflecting the items driver primarily primarily total controlling on a relative detail. year through though you down focused items, fee EPS our result fee year-over-year, as financial decreased a XX% increased the base. the more In ‘XX quarter declined takes on and NII before which excluding levels fee Total largely quarter, strong franchise

declined excluding X% expenses items. Second were quarter and total flat year-over-year notable

planned offset salary increases largely business higher-than-anticipated and actions investments. productivity ongoing Our

amounted to new wins business momentum, which of accounting AUC/A reported middle with by wins, a these office billion of the across the Turning slide. $XXX strong We which back AUC/A. quarter of you to our for see asset services can XX% servicing

but installed AUC/A a good performance, sales to yet quarter quarter’s be end. this increased result $X.X to of As won trillion a at record

Provider reported positive State live Alpha as weaker but another Street’s the client were with we the million. the Advisors, $XXX clients assets at saw in under to quarter impacted During increasing market AUM also net totaled end. now of Financial title Security of inflows recurring environment, data the the Alpha At Even second XX% XX ETF into Services win, XX and quarter, of were drive We Technology end. trillion Awards. in to and the XXth negatively of annual we second continue still Global environment quarter. capabilities the our Year we innovate $X.X also quarter business during franchises awarded both management good to software growth. inflows volatile in quarter Annual year-over-year equity low-cost revenue by our second cash office expand and Overall future U.S. with also a News and Trading Front experienced quarter, momentum

services of ETFs. I the pleased second was by Aligned Euromoney to For in the Global example, active terms Climate by business ETF managed Nuveen Paris Bond particularly recognized and of Street the provider State actively see ESG Municipal momentum, illustrated top to as and continues forward ETFs in in SPDR quarter. Magazine as ESG was number that a Advisors Last, FX the MSCI press launch of in

money State in overall for its to clients. best real clients #X for #X Street money real Importantly, position being for regained service addition ranked

an franchise our business our of and core to and has investment be capital. services FX proven supports complements effective deployment Our

XX% highlighted the regulatory common to quarter to our capital dividend Services our by to to our importance the increase to closing the remains second We share program by an announce Federal and in that Directors. our to capital mind, third significantly in fourth dividend and common Reserve’s we the strength that to resume as shareholders. rise our our approval at share The our time. the State test in conditions. balance announced due year, of remains BBH and of increase investment quarterly common intention our June, per interest Investor intended to in XX.X% proposed this in annual $X.XX business quarter, the rates, market results intention subject at in following in of sheet it portfolio sheet existing Turning was repurchase conditions end we of our Board quarter release turn the management executed CCAR quarter of acquisition other and recognize amount levels with second risk-weighted I’ll quarterly return reflecting in now which capital. Street’s the CETX we to our actions were stock subject to assets of improved stress to of active Despite continued With approvals the rate our which mitigating pleased a to quarter. balance in interest ratio our

the We the represents strategy. continue be potential accelerating present BBH, the opportunities in the clients, and collective regulatory business approvals to transaction on its we’ve process. structure banking of to the have about I’ve that transaction. parties a transaction with The entity to previously transaction complete our model excited changes believe U.S. required engaged and regulatory those structure path with the to represents our include developed for and intended regulators we resolution modifications modifications the regarding franchise to the forward. proposed mentioned modifications the ongoing and proposed changes dialogue the it people, for operating discussions, to and review been legal Based that to that process the facilitate and

modified and As part BBH the our in transaction Board Street is the would review transaction purchase the price. Directors including transaction, Both of terms, proposed to need the modified State to terms. seeking approve amended amendments and of

third confirm the approach the proposed intend quarter, terms with contractual During our and regulators. to we finalize structure and

fourth and subject closing operational are conditions, aiming to regulatory timely aspects transaction proposed of quarter at XXXX. parties to finalized the Assuming close financial the contracted, other approval the the of and end the are modifications of and the

progress risk targets discipline timing face XXXX, we will transaction. closing environment, to After parties. automation and party that and significant market increased environment, challenging transaction uncertain September particularly notable there X, absent for to terminate extend excluding challenging further the expense our and quarter, entered modified items. or or line. continue can this any XX% conditions, improving To timing achieve There goal, closing maintaining conclude, conditions our other of into be on we this transaction without in that will despite in a our drive the focused inflationary the in for remain efforts. approvals However, the as exhibit towards beyond exists outcome to of we agreement time productivity this performance, which no regulatory of either medium-term further and almost will assurance help To pressure modified margin pretax can penalty, that revenue the the mutually acceptable and be as a uncertainty

benefit AUC/A wins that, me growth, on quarter driving take while of the strong you the clients more And our in second turn shareholders. quarter, our as laser-focused through remain Eric all capital also to over the with it We innovating and to let the to demonstrated returning for by organic in detail.

and afternoon, good panel or of I’ll excluding on begin on my of the X. as restructuring slide. and of quarter second Ron, $X.XX our side EPS acquisition results Slide everyone. you, Thank $X.XX reported the the We review on costs right detailed

and market environment challenging, As in quarter continued by Ron operating macroeconomic the to the continued noted uncertainties. events second remained geopolitical characterized earlier, largely related volatility

the of other expense fee panel slide, basis, as strong that equity a areas. to increases in and expenses in disciplined impacted As in management headwinds to and second us invest you offset FX lower Also continue the quarter franchise. the our from see experienced fixed very left evidenced even net significant On growth income the down enabled were interest wage partially to and income can higher-than-expected thoughtfully today’s markets approach remains we results, on both quarter by deliberate. trading and year-on-year

due $XX worth considered second quarter, lower-than-expected that a model a the resilience had the lower our rate. to that to million. we things business Lastly, items contributed All challenging you’ll of the were the asset during discrete reassessment of see backdrop. bulk against in deferred taxes tax roughly quarter, demonstrated The tax the tax our

Slide X. to Turning

driven period-end client quarter-on-quarter quarter, market sequentially. and flows. new partially -- low-cost and as levels, by Global lower conditions, and a decreased and we’ve levels risk XX% Advisors, The about just AUM see continued the U.S. outflows AUC/A market was across sentiment period lower end was cash On Amidst decreased continues. market largely by in same quarter-on-quarter quarter-end sequentially. by our period every of offset economic largely result the end institutional on basis the also the a fixed income end year-on-year the also net largely the decline market year-on-year equity we lower by ETF by outflows positive inflows a and and the X% world, net XX% During saw from business around change as year-on-year off levels period offset complex in industry investment driven quarter. year-on-year net in was products inflows to partially XX%, was Similarly, started uncertain at and decline which AUM both

Turning to Slide X.

down left normal new translation, business side the currency total partially adjustments page, servicing offset client of headwinds, growth. impact and the second quarter see you’ll activity On net of market pricing year-on-year, the levels, fees and X% by

and by income the in year-on-year net were year-on-year book. XX% of to to and down market Excluding Within back the office only same to average as Middle currency AUMs, I revenue our fixed an with Back servicing compression segment, was legacy both new office and and total driven our the when and fees, from see a servicing of contracts of both connects down the growth that and Sequentially, X% component client business. offset I’d adjustments year-on-year primarily and impact is by partially Front X X% wins quarter-on-quarter, lower translation, result But and currency X%, adjustments. and levels XX activity positive perspective, quarter-on-quarter, largely we down some also transaction drivers, office the Services we decreased primarily levels, of activity servicing fees proposition client were client years. are seeing come lower translation, segment quarter-on-quarter. fees equity client year-on-year. new fees continue driven a X% just important middle it market down in to It generally office described. highlight Alpha of impact alternative X% factors our and by were Office due excellent

amounted large to as good against about uninstalled recorded our at another $XX medium continue billion see office installed to backlog which but than robust yet to of in growth Even Investment over pipeline. end. challenging momentum with $X.X wins the to revenue trillion of quarter a by expect pleased million, our quarter We term AUC/A $XXX this AUC/A strong be Services will worth be We more and evidenced backdrop, talk we continue to business while I more moment. middle won, new

second now have As win, total of Ron reported mentioned XX and Allspring earlier, Global Investments another quarter, taking number Alpha to during new Alpha XX the we implementations live. clients

industry The has in and the to across Ultimately, pricing that the we certain serve response industry analysis best is areas to will result allows of believe undergone pressures, pressure of comprehensive us pricing servicing areas. upwards our in inflationary changes client Lastly, to the begin analysis to we’ve acute pricing our wage product led these capacity our stretched. where continued is support most clients. adjust all decision our this a to of cost investment

Turning to Slide X.

fee average down levels, repricing Management adjustment, a offset market X% fee largely the market rate ETF fixed elimination were waivers $XXX the due were same partially elimination by headwinds, money and fees quarter-on-quarter, of currency equity the lower offset impact management by client impact market quarter of the and of waivers. the translation fixed of reflecting X% and fees net income year-on-year, market partially primarily income run specific equity Second inflows. money and down million, to

of was up XX%, period Relative the was saw FX see see can as Slide income benefit to trading commodities, our on positioned target very continued inflows for although growth. the cost fee and low ETFs, In right X As volumes. volumes services more spreads, in $XX FX worth primarily we franchise overall lower Across notwithstanding again assets, quarter. primarily than quarter. On strong offset outflows into date management was higher to fee ultimately by you revenue well we our Quarter-on-quarter, spreads services had the momentum low outflows from fixed which client offset net year with market Institutional share we too. ETFs. of a quarter client Business, bottom our client to the In yet contributing strong the continue and equity gains. our FX inflows, driven quarter, partially lower FX X% SPDR by in FX revenue ago, large this slide, trading rate trading another services this by benefited cash billion higher another there’s of FX in a franchise, franchise, quarter X, remains second down FX time saw

offset slightly Our up offset primarily were custody lower balances. year-on-year, and by enhanced revenues securities higher driven second due agency spreads. to quarter reflecting revenues and decreased enhanced agency XX%, balances lower finance partially higher custody by lower markets, mainly spreads, Sequentially, partially by

Second turn and driven XX% X% data CRD, lower quarter associated largely software down revenue quarter-on-quarter, were software shortly. by I’ll fees processing which and year-on-year Front to office with and

positive revenues decline. on quarter-on-quarter equity sequential year-on-year prior investments fee to period Finally, in both and also of adjustments the value fair other negative while of million the year-on-year contributed second reflect quarter the the quarter-on-quarter. $XX declines declined negative market-related Both largely absence and adjustments

the pressure saw of in we of the through the almost quarter, million $XX throughout June. While half came second half

X. Moving Slide to

and Let office me our details in provide the slide. of second revenue on of some panel Front data quarter performance the on this the left software

SaaS episodic durable important office As a recurring the of they however, periods and are revenue. quarter, to reminder, of offering. fees in to It declined of the office several Mercatus is software-enabled in as services Alpha software-enabled grow professional demonstrating with deploying that compared and Front but a on-premise primarily year-on-year our nicely environment continued by Data revenues higher Front basis, CRD absence revenue both include year-on-year the to revenues, Alpha of offset part revenues represents have more Data year when as note, cloud-based to clients. quarter-on-quarter success prior also a renewals we more some as the and expected, Platform partially and well SaaS prior the since driven Services, by these XX%, software growth platform majority On our

panel, convert year-on-year the XX% stickier by grown create metrics Turning of that to to on more annual will which revenue we and has we and as model. a Alpha our enabled SaaS, recurring some business you’ll the expect CRD clients softer more see profitable right

middle prior office, revenue of worth twice $XX uninstalled an As million, almost healthy we to the backlog year. which is for continue have extremely the

have another pleased are we Lastly, to announced this mandate Alpha quarter. win

excited also client. another owner from an relationship We’re to of gaining share approximately this office to that our assets provides new This $XXX more over as point proof have an is Alpha existing of back time. custody quarter, expanded working value we’re winning the proposition asset wallet Alpha billion

XX. to Slide Turning

XX% of in was with rates rates, growth increased together portfolio balances. in investment NII up in impact benefited first to improvement the interest long lower largely by quarter, continued by partially primarily continued the loan and quarter driven increase balances, loan the year-on-year, end Second XX%. our short sequential The both offset and balances. was reflecting Relative higher growth NII which yields,

now of our the and related quarter. were during side primarily impact currency average On slide, The almost the accounted we Average show decline year-on-year which balance held now deposits have sheet and right to of in of and the for XX% the we securities from of translation to the X% X% quarter-on-quarter, dollar portfolio almost sequential modestly, half year-on-year our decline. down investment and strengthening, is maturity. down X/X the

to balance that OCI. our well and recognize is interest this protect tailwinds NII also We’re positioned rate sheet pleased and

Turning to XX. Slide

year-on-year generated good gross X% savings increased the the environment, which Compared targeted XQ enabled continue $XX portion wage efforts continued of rates $XXX to benefits we including our to facing product, we’re on million currency infrastructure technology approximately broader to and X% the addition year-on-year the in proactively the and business, in automation. compensation, self-fund expenses, us higher investments to Alpha pressure been our or approximately in the compensation savings and higher including ‘XX, offset decreased were These to employee associated saves to excluding impact executing carefully by inflationary partially year-to-date. contractor our expenses, was as productivity and million with adjusted merit increases incentive salary X% revenue for down quarter have managing compensation, incentive lowering X% lower spend. Second of currency response X% or translation wages the items, notable In translation.

to expenses have X% we excluding expenses was Overall, Occupancy functions and of expenses, communications due strategic pretty strong expenses quarter-on-quarter management basis, XX%, down vendors currency current compensation continue Information environment, and to recoverable Excluding currency to been client-related reflecting other vendor revenue, in translation. XX%, was by systems some optimization and for largely pretax translation, related the to quarter. benefits And due have items, pricing X%. growth in up notable we as would primarily to are from healthy fees the seasonal episodic light had quarter primarily in-source as infrastructure down fee rationalization. up quarter-on-quarter growth. expenses X%, and macroeconomic first credits supported professional Alpha. were in employee and higher were approximately the in On at offset a costs. as expense margin travel which down NII active technology due Headcount increased well support the

Slide to XX. Moving

capital of highlights. show the the slide, On side our right we

the capital a minimum, of XXX calculated basis with We buffer are XX.X%, report floor. SCB quite our resulting performance to in under points stress with X.X% preliminary the this above happy a CCAR year’s pleased at well up CETX

of June, Tier XX% our to ratios. common at Board market in program planned time. left the subject repurchase common amount begin announced increase our CETX the stock remains our intention our and slide, ‘XX existing the To of leverage XQ quarter show in result, again and we X an to to it the in reflecting we the share As a evolution fourth conditions approval, dividend, quarterly the

of As operating you backdrop levels. quarter, we even this and can capital a higher see drove environment, the against challenging stronger

During trading, several RWA announced optimization $XX lending our investment reducing and the of portfolios, the actions completed second quarter, RWA previously we billion quarter-on-quarter. across

securities We about of also HTM. to AFS billion shifted $XX

point of As we XX roughly or the X- even from part portfolio with interest a rate a curve. CETX, the the across result, $XXX upward to basis X-year AOCI investment move and points limited under of basis XX million

ratio and RWA a You’ll much offset of the and AOCI by that goodwill an effect offsetting on the intangibles as larger see books, move appreciating with but is well. hedged in dollar GAAP

significantly both somewhat XX%, our shocks have by that now comfortable we CETX the to ranges Given operating are rate we for X reduced leverage standard risk now target OCI ratios. below and Tier interest

our Slide highlighting the second environment, environment model. demonstrates Turning of our which XX. Despite am business with our current performance, growth persistent our continued quarter strong volatile uncertainties, the to We The strength provide geopolitical I summary market pleased of and results. quarterly macroeconomic a notwithstanding, our resiliency model. income in are and offset enabled and well to trading the controlled, from FX our expenses making our franchise. partially both services income remained us operating progress the both headwinds in interest And net demonstrating of equity significant we improving fixed markets

Now regarding would current turning the We provide Fed suggests line forward current rate a current of broadly which with the been X.X%. year-end market expectations macro our like have the volatile, At funds in is quarter. interest our third thinking outlook level, rate to outlook. rate while to

expect markets and our percentage imply global in expenses, about will equity point that of current average tailwind to in dollar which international headwind continue other quarter-on-quarter, spot and X% of U.S. to The to guide. down level raising markets XQ would revenues be start to with appreciation increasing the ECB included rates, would be third equity rates We to quarter. banks X central expected to major in X% be

of Now and basis. the standalone on in of a XXXX terms third State Street quarter

servicing fees Markets, Given basis. X% average by revenue driven we a market weaker be X% to expect management expect to declines in and levels. fees quarter-on-quarter, about fee Global total we sequential the down on down And both be implied

NII. Turning to

for on deposit and This XX% the our And rotation many XX% increase Bank growth the State our years guide Following in X NII NII full to of deliver we year in NII expect full further XX%. includes to expected basis, driven prior to than from which the by we tailwind quarter-on-quarter, year, increase strongest to hikes. outflow stand-alone XQ, to sequential increases in rate to outlook with Street initial X% a some significantly Central XQ. expect XX%, for is the better for expectation of X%

expect we target notable on wages the leverage, just initiatives full pressures increase to operating execute excluding as on driven our positive focus excluding Next, expenses, enable continue strategy to to under expense with we deep productivity us X% items inflationary for total notable and This items, quarter-on-quarter, against discipline. focus drive total by a year.

Lastly, And we would expect back our XQ XX% call me the Ron. quarter. tax rate for to turn to be the let that, approximately with

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

[Operator question Your Schorr first Instructions] Glenn Evercore. comes from of

up, Thanks a a remarks, just driven us management could very about adjustment. XQ give you wondered I much. markets, In step little color more your fees just pricing talked other if by that. client-specific on prepared also you

know if don’t other could a be one-off we adjustments it’s So or going forward?

could sorry that, Sorry, Could but the...? you for bits -- please, repeat of got the I breaking that, Glenn, and you you’re audio. up on

by just you in prepared obviously you markets, a that adjustment also more if driven Absolutely. we client-specific adjustment. wonder going In is said pricing which was say, your going remarks, size little about and what you kind management case of detail, thinking I should could give XQ forward? the be mentioned fees But that happen. to

Glenn. Sure,

focused And on think to try and fees. fees I you’re cover that. management me servicing Let

quarter-on-quarter and fees, X management Most there market. that Page was a materials the of both that about points a quarter-on-quarter. been of servicing on the of was we on let impacts X that. client year-on-year a adjustments. on of of that have a On basis, to and we There at for out do And was X year-on-year and worth quarter. comes activity have fees, driven X client most X for basis So so On would was that series X of worth that fees bit on point but through a of you. the called for headwind largely activities lower sometimes impact kind of percentage levels about percentage points lower me that with markets, of basis about to due by them that little context

I we little time, do Okay. keep but we general, in in up just on because -- all markets, know temporary to color. a When fees question fees drag any your those on My And in -- downtrend be markets when this you if them. included have then markets the they have -- go continue expect used ceilings looking same Should and servicing guidance if contracts these enthusiasm stable I have when I for the continue servicing and more when remember to fee would in is, floors? some rates lower? contracts fees I’m

Glenn, I’ll take that.

You’re accurate.

small We meaningful. even schedule do have a of continued yet fees to top terms to where to the fee that of down. you just being the that don’t clients cases, number. in hit They close tend be large very tail the some in or I think we’re

I factor more term unless the see much that being a a kind significant of we in to downturn. see wouldn’t expect So near market

you. Thank Okay.

the question. next Operator,

comes next from of Your Ken question Jefferies. Usdin

statements. remarks we up and what saw Ron, your forward-looking following on opening just the on

your you optionality, meaning to a Just is that, through I course, your as you forward how outcome. go -- probably concession just of guess, price best do negotiate, think and try

capital If you there? Thanks. other, becomes next And go-forward do you the steps can’t right then either in get some what strategy go-not-go decision if that one, one reason, a a walk terms of your or side is immediate for away or strategy?

in Yes, very midst this. of Ken, the much we’re

to So it. out I of don’t want ahead get

want do But where restructured change. amicable warranted. to with believe don’t committed be making a we remain this remain know some are kind it They we We a believe well, I happen. operating being we adjustment foresee that PBH. this we to discussions of both and ahead are basis. sides of the given would in -- that price to we some committed strategic changes of the get in very a way on model, combination circumstances the Firstly, some of

We’re we time. like to we committed -- at of We like to the back a there, come you there’s options, business. then lot the that and get

your secondly, new Okay. That’s on fair. then And NII Eric, guy. update, the

new getting new a back versus is curve? update yields that you help now where rolling what you understand you of much us And book? And on that? are securities can how off the on wondering Just are if what’s

plus that ECB rate in third Ken, guide, think both and And which is yield Yes, the the I to third we’ve curve XX once begins year, higher that probably ECB seriously to some be by rates in the crosses going the the to point is raise updated the accretive. the expectation basis expectations said and that driven for start then U.S. primarily NII uptick in positive threshold, the we’ve quarter the quarter. full

those security balance I of out portfolio rolls security almost major vary the old of foreign an years. think best what see by way books. average, to that kind expect of in the increase will whether the have through quarter-on-quarter. basically the are And that, it’s the comes it it’s at, securities estimate is flow I book, a sheet. new are exactly it’s we’re treasuries, on X.X whether that up in at securities whether duration So versus MBS, think will I continue of parts because you that To the points question will an replenishing to different On the basis investment average think They drivers. average the our XX you that yields,

the older an a pickup, increase order compare you and market what that’s quarter-on-quarter in average kind increase saw another quarter. that And in today. and like to vintage would us what’s of quarter. that third So expect in of on you the nice to And see kind that you’ll see can see giving of with on security average and flowing this the what’s look we’ll through magnitude it

of question next Your Morgan Graseck from comes Stanley. Betsy

questions. of couple A

a look. to make I function a issue to expense of things requirements? need not Or servicing can processing do? satisfy I’m types change? the around countries there of Is opportunity more but if the looked issue. of more certain an something what data First, are just being more forward to wanted operational understood keep regulatory it’s discussion or what the if else to you this wondering on I it’s is you revenue around within sure business that’s parts

the good company, we we’re some And the original is amount and bank, And can make to think your working And run pace the holding committed creating of are series and a that previously we’re a entities synergies, banking economic range when kinds that’s around in workable a expense the What entity what preserve on we and of what of we we sort ramifications operating through. that a September. world. reiterate working to or in of the a finding had revenue all through we there’s have through. modifications been have are on back expense of deal, you to point is will heart we’ve -- working global banks of a this workable I of want a the is this to path we’d then done and Those in said, know that accretion way series obviously, you been be attractive. different of do disclosed that of to perhaps Eric. and it’s ways. effect obviously banking That what combination legal that the areas have plan some the model structure. a the deal, has or might our And a Betsy, have part transaction on pace

focused highly that the price so a we’re that are seeking as that. Ron changes there mentioned. we’re And some on result, And including transaction on that

about September the by you should How they if expected be of thought what but between want then regulators indicated period agree you’ve to year. Okay. front think time get XX? of September X, process X in don’t end this you to to close going the you’re investors And that is by

Ron. date, it’s And they the like outside have of an a X lot X-year deal. for Yes. the the September limit. anniversary mean transactions, basically Betsy, I it’s

both seem you and should this what to since has world got anybody, that the as deal with. reasonable time is we and through what to parties but it’s said we’re interpret we’ve remain been period, actually the looking is the than period towards some So way to things. significantly regulatory it and a breakthrough world committed. changed doesn’t mean and close way the I announced of this We’ve work political faced that we’ve a alternatives in reasonable time better

that then the everything September going to X, you along parties if And fine date. agree just agreeing, the it’s existing we close of about to extension So and are an is think date. an assuming

it. Got

reminding disclosing of everybody Just transaction are. and what the the terms

the last mentioned I how you you’re balance and for for success the Could the SLR. with me, is that’s much dip? comfortable helpful. No, now sheet that, then what below and think made restructuring targets management you are And given with you’re to Okay. that the willing targets you’ve remind just CETX potentially of that us that below running

it’s Betsy, Sure, Eric.

our and the on see XX is of deck. the ratios Page presentation place think I capital best to targets

the what targets, as -- what are done, X targets to we’ve points our our of XX% -- OCI our comfortable that means reduced below I’ll dramatically that that. XX call see quite to XX% which standard example, X.XX%. on we’ve mentioned, basis we’re X.XX% from you leverage And means standard running CETX, risk to You for CETX leverage Tier up that. below be Directionally, volatility is could

much it OCI While on about a be risk amount. that tends and half of leverage of lower in basis, to we at and run the volatility levels --

Your comes Hawken from ahead. UBS. of next Please go Brennan question

begun referenced you Obviously, with it’s price that you’re those environment. considering get we of clients lot from moves inflationary not Are sense. adjustments assured far? to that similar when Have competitors are typically custody going regard of Eric, of the that reaction to to hearing your world, it’s out we you so model of place some the pricing a tougher typically making some in what from that own increases. -- a some make the which think your has So discussions? because very to in dealing you a normally pushing be on you the be clients just And been we’re were of pricing, course, also

So kind that. about curious of

I start don’t Why Ron. it’s fill Brennan, in. on Eric and this will

this ways, this most Eric just there’s been coming areas at have out and the our might some It’s walk alluded. in whole as it areas which not We’re were clients clients have price limited marketplace, where in interestingly, plan clients around increases few early through pressure inflationary that with in are surprised the where with them. specialty earliest I yes, And point. very a process, at the was planned capacity the but a rapidly. we areas, that be think growing we’ve And been got ones areas there’s

what’s So we’re institutional what I’m These buyers, to None not way. on. But to way for be. that’s going very at it’s today the in and than tend going they paid of fact-based saying a this we us be more enjoy sophisticated something going know paying yesterday.

So we feel is business are I a what need speak doing. in for just we can’t to. of But we’re And way I this think others component important don’t we for that. it. our have the running an believe

that now? mix differentials all about as -- And the your Okay. yield of diverging. the and the out, not Thank Thank rates think your a to world -- foreseeable different when expectation for about laid as of you potential the around in shift you. whatnot. that. deposits currencies? currency And then future, at -- policy expect next us you in ECB give widen we But of different in deposit you or Eric, parts the Could reminder it between we stands as you see whether the

in financial we And Eric. additional it’s our Brennan, some quarter. added our this addendum, actually addendum Sure, disclosure

honest, euros, on it total and sterling find investment by so position world, this assets, currency. interest of quite actually Page deposits That rate out focused the securities securing sheet, balance the major environment. including forth right? the are We by the interest rate sheet X. and we currency the the increases You’ll because navigating balance the To benefits pound on breaks be currencies, USD, around

much currency. I lot change and U.S. the not have is are rates, but currency clearly the developed U.S. of trend think with U.S. only and tightening. quantitative betas Bank on -- carefully have quickly, I composition the a sheet. that We in we Central mean, don’t expect plans pricing by will downward interest moving clearly deposits. currency that a of the And more balance potentially is

with around a into the the rest what rates the prevailing of U.S. the hand, world, On natural than draw U.S. there’s investors. from higher other rates global see you

prepared. increases think composition of And the I sterling quarter that some the But movements. and also you other a we’re -- to well in the or rate forecast to it’s And of those but we’re positioning and only are given those currencies. as currency coming hard by fact, in the hard saw result. virtue Anglo-Saxon NII currency deposit rises, by U.S. this it’s the actually interest some of pound So the some of rate not levels currency

of Jim Global. question Mitchell next comes from Seaport Your

the on securities just maybe Eric, portfolio.

just have to HTM yield. pretty you’ve You Is the that a higher it HTM to shift I’m had AOCI. the of portfolio think something big materially in does But derisk there into a looking kind portfolio it sensitivity little credit longer AFS and that do in not? or how the or in I How duration there. it’s think Does locked a more NII risk can HTM about hold back versus evolve? about

Jim, it’s Eric.

about careful managing book. holistically quite NII We’re across the our sensitivity

blended book use protect interest and up protection of you’ll have HTM sale of the we it’s the medium if we get volatility, rate a to longer-term into move because that that optionality. what least the securities thereby, natural HTM while of most we think more longer-term securities that amount AOCI we because short-, is against give and would see more I and we medium-

higher seeing a you’re yield. just that’s So why

I think that you true, you’ll disclosures follow be can accordingly. our generally see and that in

point numbers. we big Okay. could stuff determine be a Great. gets long and in we a I a to getting getting there’s it I to And it’s grow. a installed? get to a continues that installed. nice Are when growth this these in are acceleration then to we business, we is and about wins, where installed I year past, this frustrated mean little that the the I when point mean think to tail those think think the -- at at hard looked or we’ve and it see yet see where I next see materiality this all know we But inorganic

Yes.

I think time for would with more co-investing got a and mean often model, we’re deal, more. fundamentally or the them right -- build for systems broad complex is the That’s middle operating more that guess frame. clients, the processes, harmonizing they’re I decade for back-office it to the suit and I transformative the and you’ve the larger and front, changing them it the is their model -- will them a our right? I describe way they’re

trillion be important about installed, of think you an the As AUC/A $X.X to XXXX is year.

X/X move We the be year perhaps the that as but with and those revenue of installed of This end about likely about around, associated will X/X. will that as half expect by wins. much

Bank. of Your Deutsche next from question Bedell Brian comes

that Eric, just by just trillion. that. of comment that of end missed X/X you the if could the I Was $X.X you repeat did the on year say? next

that’s of By end correct. the Yes, XXXX.

it. Got

Just back strategy. BBH the to

can should off balance balance does that sheet? sheet out -- of a potentially an change $XX And Is deposits amended bring -- that you’re you to say, structure that over still -- If or bringing there this. would close it or it strategy, able amended from bank, if hear was opportunity to on calculus? the arrangements. deposit that to with I then any you billion and on BBH to structures, good terms committed of the I large be comments was which just of the portion are us balances their if both So guess you Or obviously have remind doable? third-party

the program, at an as the the cash quarter point. take of expect provide of a Brian, that’s and modifications. towards we’ll firm when of through we this deposit developing we’re in sweep process program the future, and in the and the is still use operating those both nailing of course we’re And nail it’s down in But and process I of the advantage entity may the that optionality. how down and we some deposit certainly the model how working update changes, legal and operated, third -- view working in and

were on at Is thinking have runoff cycle that sort to maybe that to down be hiking think in then different runoff? Yes. think is the everything trough And starting of point cycle, be we start would in XXXX. Street-only deposit That we looking thinking excluding more think to reasonable about should in that be should that of I than from XX% we deposit just last wouldn’t of sense. think you just State and a cycle? you do the that? the Or in basis, deposit levels makes BBH a similar average to Fed this you something make

environment the the is the to the to there what including be was rate we last the parts at cycle, of size last of but there had flux was SLR interest tightening. remember, think in banking happening and -- moving in were side many always navigate going independently indicative, rule -- was the cycle I balance us you and on our sheet quantitative

the I half quantitative pre-COVID the time period, the $XX think think what past be ascribed that of easing out. of easily reverse I’ve and in our since -- said we kind the We will over relevant roughly billion. that the deposits to is can are up that that had,

because rate quickly. risk It’s environment. forecast is interest up to is environment that’s Now moving hard also off this always estimated. There the

billion plays year maybe to out. how is think of then could right, said third But moved lighten those I to the that we’re we’re do sheet see see balance got we’ve to year has $X trillion second faster, working all first and in U.S. I’ve that the the billion per $X trillion in the per out higher interest $X tightening. rate of year. So $XX to are through. environment $XX billion scenarios outflows because see we and per closer likely the and

levels liquidity standpoint. in P&L. have only higher of flushed that extremely the we’re we’re past. perspective, we of over The the get time monetizing expect able deposits so we for our NII them the to from the think to valuable, be And are I purpose from a to

in ECB have of in million global current on that forwards. with I we’ve it’s above last during us and we to were our built forecast deposit the the and forecast least European we’ll that a And that rates, have the you the this cycle, higher levels, or part hard move rates, also at think rates think and put cycle. -- while this there perfectly. forecast in that $XXX peak total is erosion higher U.S. particular, based is I some at and level in range our next of tightening But

Sure.

Please Steven comes Wolfe Chubak go of ahead. next Research. Your question from

I that you with understand market items the some better resiliency and the offer we’ve expenses. of fee just you in on certainly, fees specific suggest So the Eric, to that outlined both to some And of that acute guys wanted seen some guidance compared the greater proxies. more declines the side, of

give growth you of want in of FX but outcome? as expenses, revisit better get have can expense of need was tailwinds. contemplating? with times, some driving maybe what be bookends multiple to You terms should to I your pricing that clients, inflationary the some range a And Just cited some to sense what’s to we you pressures also specific hoping

about was for sort of of I on get the what hoping perspective we to remainder this range growth some should So year? be thinking expense

Sure.

at, start on to to -- fees. if earn we me versus And third quarter for servicing environmental is going current levels real fees of that challenge the the and is spot management sitting that’s revenues Let the be equity are both second out in you X% for the X% basis which quarter. the just down fees. The extend average by average average markets daily

headwind the we that’s that So have.

doesn’t some and related repeat that a other that we the revenues of us in sub -- the of give have bit might hoping that little market lumpy We’re insulation.

And the play help management obviously, trading volatility so. So fees how perhaps out total but be I we’ve sequentially, the range see to activities. said closer But So happen. and X% markets less in months why and and X%, currency got summer other servicing could to that’s down fees, levels

expenses, I I’m guide quarter-by-quarter. on trying to just think

under quarter, quarter. estimate you for fourth the third range quarter, if X first add the around quarter. second put percentage can point up and a think guide I that you of just And

we’re done And -- that’s from think I standpoint. what so a guidance we’ve

are kind quarter, say fourth fee we to is for of into revenues of you. an we as can what view overall we third quarter think because guesstimate have I willing can

we’ve we quite of solid provided. the full view have a NII, think I year, which

on current we we And market part to in we’ve on that adjusted a year, fees, environment. given through And this honest, we’ve committed that is visibility that saying appropriate thoughtful and And positive the that. proactively have line inflationary NII. the to described said positive in to good and and operating navigating because we of of we to notables. deliver for there as bit is as visibility, We’re results for we’re pressures are of adjusted as be expect are P&L while incentive a our But comfortable compensate some for as the and lighter, the some environment prepared confident way remarks in total possible. wage feel that drive leverage

X color. That’s commentary Eric, really offered. the some the helpful And on you just follow-up expense of --

been from we’ve growth a fielding longer-term folks algorithm. the expense One of pertains to the of questions lot

algorithm expense really but about job at same in basis build reining your over You do the guys guys pressures an Clearly, time? a we done over efficiency pressure see How on, think simultaneously. the you agenda the prosecuted time, building that is have inflationary you that growth evolving few of to the on good are past inflationary as expenses years. absolute have starting

more look know of limit, can the but to I least over ways avoid. of we’ll think which course think the And there are can’t really pressures, we some Yes. year, we for at some I but inflationary

let So give example. me an you

base expense is billion that $X the we $X.X that On of have, billion salaries. about

exits, but basis rate about to base up moved the bidding salary replacement on X have are a look run historically back higher increases, maybe at up salaries to rates hires a billion. points percentage merit costs of on selectively if X% year, X% $X.X now, X Now versus a talent, salary right new for closer you

markets. headwind operating $X there of So an in. start we adjust, a then we into And us manage be get rein trying that to happens It’s that is have didn’t say, you could math if obviously expenses, creates could to on come And point need we’re year. through an we kind look, feel do see that to mean factor. non-comp part to expenses we’re I where a the to headwind the not, next and have that that we additional I Do and think environment persists need the and worth vendors of we extra sense total recession another that, that working that’s labor of and billion what on that in. sometimes base. and that the are or other to where

we think of some see I So those.

to to medium-term telegraph We’re but our committed targets. also trying achieve to committing we’re and them, -- on deliver

line of by will ways, be offset. to some environment describe through. ways we’re a to with going And contain the discussing they that’s around then in selective and of maybe some you other rate limit pricing. But finding us may interest that or give changes top And heard clients come some us or pricing in The tailwind.

a there So factors. number of are different

I’m we’re we’re medium-term as conscious, we’re to. next a to can not it’s aren’t that controllable. that think fulsome what elements in to I others we’re -- say us give control of early think for also and I committed that of set a goals But year I But good provides would our And and view targets. portends. that we a that to committed getting

that. payoffs period from also Yes, we’ve last technology. quite to automation the the the this some. We’ve that expenses as years in Steve, There’s on, that There’s we’ve still several particularly throughout we’ve more managing what I been would and been is clear seen business, in around expected investing over been that add future.

be between automating bit other the algorithm future we’ll spend to we how that savings. to get the productivity much this continuing on of manage more to So continue

Markets. Gerard next comes Capital of from Your question RBC Cassidy

for about levels, Ron, variable Guys maybe of on in the you that products Eric. talked given greatly well percentage influenced both pricing the of today type Hi, is rate some and your update customers, would Eric, of second, fee when an as -- rate us course? your about you’ve, What -- for by you for variable pricing, the variable Ron. revenues. revenues the talking pricing market And fixed Hi, which fee increases as are pricing? of past, consider rate price

Yes.

Let start. let me me Gerard, --

the I a with lot dependent. of this fee market of half fee Q them and about but on Our in through level disclosed servicing earned would some the schedules, say that behind history pricing -- side. our the revenues are there’s servicing we specificity, schedules

So the that or activity balance the and of under assets then levels. of driven portion is transactional fixed. volumes custody by kind then a There’s is

-- broad there So They products a seeing this associated are expand with them a you that’s with just point. mix. But ruler P&L in you’re They history because that’s they through basis. what and measure the flowing schedules. the regions entities span some They And some world. at a and often cases, them. complex can is have and

at part going to the asset-based And be fee, again, we just the then, mean, second bit question, it’s reasonable I of fixed fee Gerard, And are both. Yes. the your the fee? variable a trying where but for service have we’re real of firstly, pressures. or also our right? Service than our to to there’s recognizing really really clients, tying our a and that clients, this competitors. better also generating little ourselves we commitment to inflationary to And good

a it’s increase. about less is and price these the need variable it’s that So are where the or pressures do having fixed, we therefore, where we

you us you the portfolio, into just as duration you’ll was of do capital? the see accretion good. that Very then X.X portfolio you. the And second, in quick what’s Can how you that? yield basis a pointed And year HTM the in with think a Eric, out. share follow-up, back held-to-maturity years, points average then today? as many About OCI Thank

Sure.

now Let agendum. for X The on Then and to I we data about in from that on of right both it the AFS on XXX And just the the in end-of-period me yield of portfolio, portfolio. on find the tend you AFS that’s and described our about basis in you And OCI. do the in is held-to-maturity HTM portfolio points, pieces. others the good HTM we average the duration to basis on And that Page think because addendum. can points. that protect I held-to-maturity XX basis put -- think total, an there’s in financial

we’re In particular, of the start terms And as million quarter, will the towards come into bounce capital. the we in the that of third million to expect to will a quarter-by-quarter in quarter. fourth $XXX different the accretion through, then bit It accretion little range looking and in around $XXX the buybacks and But at accretion restart there. fund be of fourth that’s capital we’d future a quarter capital and amount certainly could help could accretion, worth that healthy XX from on we’ve of through. points in other come maturities the which, returns of and basis the us to XX, and capital to as continue said, like fourth shareholders,

comes question Please next Fargo Your ahead. from Mike Mayo go Securities. Wells of

thanks your much changing conference call, given today. First, for of happening else the so time

mean, the to X sense. all I all actually done? pricing makes inflation, on the last We’ve logical. can But get that talked due decades. you it So It’s for

you’ve customers? more to the like, “Well, then And increase this, these go on been increases increase like providers.” than your “Hi, you that is by pass other Now We’d you you’re price X%.” it these have before. or X the X to have So of how call. of confidence X or to we’re do Ron, to going to seems much Street. you’re some pricing like can other on side reason you the phone a State of this pricing ever getting

good the It’s over is changed virtually I that would question, say what’s everybody. Mike. years a

playing was years was XX fund virtually fairly the bought accounting. said. easy It listed to you XX, very and It in custody it do, back go as markets. You publicly consistent was It everybody same was ago, service.

what’s required reasonably of of whether we do, changed And because managers, technology is offer the superior the pressure highest it’s even effect, in kind And we also XX, a the the a world’s been not last many the marketplace. in we same where you’re in required. because -- of inflationary seeing that base, there’s everybody that some broad on XX, think the areas what’s that that -- those seeing think XX that’s where limited a certainly, are complicated is that great product think of which complicated capability. that’s the seeing think cases, just the capacity medium time in And deflation. going enjoying, skills pressures. it’s I in we’re And We large complicated to years, actually to it’s the now.

But adjustments those there’s targeted areas set circumstances seem And in And understand. they is again, that but where required. always set clients are time very it’s I we think different, So won’t. of be. a we to that of dangerous believe words. utter to so early a reads, pricing do will This

And had as a deposit the are trust more higher? when compensating you about were rates compromise, banks past in talking balances, the like

No.

Okay.

Just for costs are our want paid us -- more up to why else. we and get don’t everybody because

X/X... so And

we Mike, rate right, to deposits, against cost years, -- that’s on which increase we’ve at on securities, interest that been height deposits, the and deposits last for remember, barely ‘XX. in now is hold of what under-earning preferred XXXX several us the offset

that give to trying deposit rates proportion clients. as to we on rise, so And spreads. obviously, we’re just back And deposit get a our par to reasonable of --

net part So we social a and But than like contract. not normalized that on seeing level, of back purposely. of the others what the salary and that different seeing going economy. it’s rest the pressures is do that That’s are that a non-comp are quite wage to basis the we’re And in feels different.

is thought going seem And have you. lot good That’s advantage higher. Thank I then just clarification. of banks to an Okay. your cost that, last on like a you. just

in that what about those talking employee like case, had I the anecdotally, of and going society have comp up some least But a Or more it up And you right, past? $X is recent pressures been else billion than than going is $X the if at not rent, waning still and hear Xx employee than the what comp, inflation, other we’ve you’re is the weeks. food, is lot -- most gas, banks historical everything that been of the cost less hearing, in growth kind costs. You even expenses, in is months billion from case? among but of that’s

certainly would other seen that costs that’s true, typical, we in about what its cost and replacing we’re much swimming through the that say mean, somebody comp pool into that on would I us of works noted, in a lagging a certainly -- That’s here. would Mike, than what would skilled or -- behind pressure significantly need. of say competitors say and you particularly with as at the when Eric some venture than same trend way markets. we’ve we’re of inflation And and come much skills that’s in before. a nearing kind I how I labor say I in is higher right? higher since expenses, inflationary areas typically I the is in our

it’s it than that economic would there’s that to think of off us don’t for in believe in but will That’s we pressure move up comparable it, you likely I very And be think a now recession still that I kind different what a forward a for take there less also growth see institution. any if time. facing there’s Now of expenses. actually period event, going a or true be select around areas real our

next from of question Autonomous Rob Your comes Research. Wildhack

X drop the Ron, going is about kind embedded about guidance what just in your me. a wanted in talk there? or for I quick quarter. ask to outlook of And what the RWAs forward? drivers the are Could assumption in you RWA

and first consciously Rob, and as some -- particular our a RWA the had, in of it we lending, had some surplus deployed work we revenues. in business quarter, so amount capital recall, -- in good of in activities, put Yes. had were because more to trading we just you we and We in

found we’re were optimization. to some that partly, for driving capital because honest, in, driving were ratios back our partly -- And quarter, we committed writing This we be to we’ve upward. opportunities

amount So billion to came about sort that for of RWA allowed comes I And the in loan weighted more quarter-on-quarter. was the credit, loans of margin it, securities call which lending of in I’ll XXX% That then finance reduction treatment, at some the a level. book off. across a we where and risk more a credit-light portfolio we that of -- investment talked came than different businesses had $XX that roll some qualified

we So that basis. on there were some made that tactical adjustments in that --

$X have that We RWA. a got volatility balance some also billion, and around there. can that -- book $X good FX billion, move by to we in derivatives The tend was

and for we’re with ratio $XX prepare those. and billion quarter bounce in we that think continue quarter-on-quarter and back the $X billion I that capital considering also well. comfortable we’ll we’re So the $X think $XX was our a quite a actually reduction accrete way trajectory into every such billion could to quarter, up that I in can good that I’d as of could But buybacks take billion the through third in about third was say, the quarter fourth to balance, obviously P&L to the quarter. And X/X, we

Juneja Vivek of from Please comes go JPMorgan. question next ahead. Your

a not so we you on attention all a timing want I call, I the Firstly, us, servicing will to can it if But longer-duration that, the effect of -- would that further more point Or Ron, so actually could contracts, price increases of be they you take through? it the you go timing day, the of echo changing am these about to Mike’s I go year go and actually step even it order? moving that for start out? glad. short the little you’re a will What of crazy be think talking could would that these should past kind that future helpful about pay Is that comments in another think are it. in say on day such X do contracts, could into you given to? fairly to a expect we when

I in we -- goal around need where particular The to to be now. mean, it our is where secure to it’s the and increases again, tie transactions a There client we where pressure trying because an it need we other institute or In varies. feel we’re from asset to very it’s but obviously, cases, is question. is to Yes. that this. do class can we is fact-based the And cases. good and types That there’s answer some agreement

this we in put early as it So process. Again, we’re soon want as in to possible.

something what we optimistic client our So given and that terms can accomplish based situations, accomplished we facts the here. approach, timing. of on in we’ll of overall is see again, I realities think which, we’re But

remarks. turn Ron questions lines. phone the no for closing the conference are There time, further I’ll to over At this Mr. from O’Hanley back

in operator, thank and participating you for the and support. you, call, thank for you all Well, thank your

and conference lines. We indeed today. for for call you you Ladies that does ask your all like thank gentlemen, and disconnect would this conclude to participating please your