State Street (STT) 14 Jul 232023 Q2 Earnings call transcript

Good morning and welcome to State Street Corporation Second Quarter 2023 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 will broadcast State housed authorized website. Street's only this be call on The

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

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

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

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

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

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

Now let me turn it over to Ron.

saw in in by our equity and subdued equities as the Thank varied. experienced consecutive generated strength Global Earlier and the financial in positive developed performance quarter investors for second global weakness third emerging released is but Relative quarter, morning, results. more returns quarter markets, markets. XQ market you, the market financial continued we were good volatility investors Ilene, today, conditions first to significant everyone. in

for bank contend hikes, X% sell market had interest investors first central the of levels income time Fixed inflation rates XXXX. including Federal and above further the raising since was still Reserve rate to elevated as

our for created currency by foreign market volatility, quarter headwinds second falling was also characterized exchange The which business.

you three quarter quarter slide more will ROE by performance, Beginning presentation, to and expanded our detail. to through quarter margin pre-tax the our of investor financial I review percentage year-over-year takes XX.X%. in points second our XX% was second Turning Eric before highlights X.X with

year-ago common period, supported increase revenue. in repurchases, NII, XX% strong significantly Relative by an office finance to data and to $X.XX EPS by XQ revenue increased share the front software and our growth securities higher

Our as as financial results a the institution also of from financial -- adoption. the an benefited an related support well allowance release US accounting to of

in expense businesses of Taken of and together, higher-than-desired fee-based impact headwinds some these our offset other factors the than year-over-year more growth.

primarily of Turning to AUC/A by value line capabilities, benefits onboarding to this Alpha, our sight have in $X.X business trillion services and State a implementation plan this the year. I to of by our second QX, the that realize of Alpha meaningful amount the underscoring Street we of onboarded strategy our driven a proposition quarter, long-term began during momentum, into the client growth. highlighted and We strengthening power investment of

AUC/A increased total AUC/A X% part trillion, at in declined by both while business. of new quarter-end result As to a $X.X a to our result, quarter-over-quarter backlog this trillion, installation $XX.X as

the billion We sales segments. the client owner, second strong quarter, $XXX alternatives in desirable asset and driven also wins servicing institutions by of recorded over official in largely asset

quarters. we and grew pipeline sales on-boardings coming expect substantial Our in the

we XQ. announced to across our back-office continue in broaden and front, solutions ETFs, expansion which capabilities of outsource middle by as demonstrated our strategy enterprise Alpha's to and clients' We advance activities, the

Alpha innovation the largest Street the That XX serviced of more now administrator in has years, market. ETF For the entire ETF past State countries. XX in as world ETF innovated long support State is Street State $XX what ETF to continuously has a than trillion Street cycle supports with become lifecycle. the X,XXX Today, continues

integrating ETFs enable speed-to-market. capabilities, servicing compliance entire platform ETF strategies across Alpha front and provides now a across ETF industry-leading the By increased a the for office growth of centralized and ETF management, Street's issuers to trading variety products State lifecycle, CRD's with including portfolio

our new front of pipeline to office CRD to relative Turning is year-ago a converted recurring by period. quarter, XX% recurring to implementations, which the clients and software client increased when revenue, second data In meaningful overall coupled business, CRD we number revenue annual strong. on-prem the SaaS with SaaS

the clients XXXX to to Solution doubled drove year. this than Management compared revenues remain significant wealth with CRD's a half as addition, grow in Year-to-date, has continues to In we quarter. CRD's of Charles and on-prem more increase and Wealth revenue track first revenue River resonate wealth-driven on this

management Street Global cash levels under from period-end assets totaled Advisors market State three inflows trillion, higher by business of quarter-end and net ETF, $X.X and $XX supported all billion institutional. lines, The

the $XX of business including inflows Our SPY, gathered second net inflows $XX industry's billion ETF. SPDR largest net ETF into in billion of the quarter,

US in delivered our $X billion quarter, which in net market performance gain We also ETF solid share. low-cost a to of segment, the inflows gathered continuing

$XX US funds business from the attractiveness benefited gathered money the net second the of government environment. a in solid inflows asset higher-rate quarter, market billion in Our the cash of cash as class our

sheet, balance to Turning condition, financial and our strong. State capital liquidity remain Street's positions

management business, XX.X% minimum. of balance enabled our goal our has at a The coupled CETX effective deliver strong strong our above significant quarter-end, regulatory of ratio shareholders. returning capital ongoing against our our capital capital well and sheet us with position generation to to Our was

dividends. have common of of a cumulatively returned over of of $X.X approximately the returned $XXX we we June, stock capital more common and common dividends. three buying our end $X our to $X.X of stock share XQ, declaring billion over In last quarters approximately to through that repurchases the capital, and means of billion back billion This shareholders than million shares combination

the intention a dividend share existing increase our we and Street's in XXXX, to the conditions sheet The strength Reserve's subject consideration authorization following remains to highlighted our to for to test common was to release Board for year June, balance our other the third stock the up of announced under in XX% It Federal quarter, in Directors. repurchases subject stress approval annual by with also $X.X continue in and State of market billion of our our third CCAR intention results by which, row factors. common

conclude, financial To second market conditions the were mixed. in quarter

on inflation and recorded of Although rate in to there markets. markets growth, sequential global equities further bank another negative emerging both impact continued witnessed quarter equity currency central of and was and hikes the Meanwhile, weakness volatility fixed-income we decline. persistent

we software developing reached year-over-year continuing asset solid to and our servicing data and in office of EPS And our management Advisors. Despite driving servicing were this gathering strong achieved record Alpha outcomes front capital positive Global the below growth reducing backlog, supported and at including quarter, by our wins, varied results capabilities, new higher potential. further inflows backdrop, number meaningfully a second our we in asset double-digit revenue the interest-rate our net growth environment, while

quarter, to no And revenue on every of NII. growth highly growth the we quarter while business growth to achieved expense demonstrate this NII longer areas quarter focused in need we we fee demonstrate that We are second, is controlling our a First, base. fee as as tailwind. our need fee especially sequential every especially

productivity processes reengineering and transforming track growth. record our order a improve our in operations and to our of have well-established realized We efficiency

addition order utilize We tactical productivity our disposal expense benefit in structural support the ongoing efforts to for shareholders. our in levers at to financial of our additional plan our to performance

to Now hand detail. over take quarter let through me the call you the Eric who'll more in

morning, Ron, and you, good everyone. Thank

relative slide four. results review on my quarter quarter, our the to the a for $X.XX We of quarter second XX% of year begin increase second I'll of EPS reported ago. an

can offset This finance as us solutions by given expansion in securities macroeconomic industry in area, some see on by net backdrop. leader, where you our enabled front-office relatively income. momentum saw left panel areas slide, of grew interest we As strong we are revenue year-on-year, of the other continued in as headwinds fee in X% growth business driven growth mixed the the this the an to well

going benefit simplifies also of We forward. accounting credit which investments, had tax the our for change reporting an

growth sales year-on-year the which to expect discuss I'll presentation. we later a which to overall today's than quarters in and coming was in have upon less build our would see did we pipeline, revenue fee momentum and we step the While in sequential quarter deliver, liked up

on As we continue growth, costs stand we we given focused prudently and current persists. softness environment, drive should on managing the the to operating further remaining expenses in invest intervene the global environment business the to while in ready

and a a period-end increased and higher Alpha market was AUC/A the higher to X% Year-on-year, on client of AUC/A trillion-dollar installation significant levels. basis sequentially. as We by in increased AUC/A Turning the and slide levels Quarter-on-quarter, period-end equity increase result by largely X% year-on-year driven period-end inflows. saw market net now five.

in in strong AUM sequential Advisors, and as sequentially. period-end Global also Quarter-on-quarter, by was play the increased X% positive market At to was year-on-year higher similar Period-end due dynamics inflows. well saw market AUM out increase as higher largely levels. levels quarter. AUM year-on-year net driven in we increase X% the period-end The

Turning to slide six.

you'll offset side custody total in and and quarter to better year-on-year headwinds. down transaction second client largely more the by was the adjustments left activities usual and than On page, lower of see pricing X% fees as than the lower business servicing quarter net-new volume due

market were primarily Sequentially, total markets result as negative quarter. this X% fixed-income by higher offset markets. business headwinds average Positive a year-on-year by offset and levels slightly better-than-usual net-new the equity of were of fees impact servicing up pricing

as constructive are more coming modest segment, an at services $X.X but the to which trillion significant relative onboarding related added manager in market with of quarter a asset well client to AUC/A the the environment first be to of a fee Alpha rate, in client had years. We as expected comes a

consistent office the sequentially, generally meaningfully On just were servicing fees primarily factors I largely a by more and business XX% fees, positive mentioned. up driven installation X% fees back-office net-new fees quarter. described. I reflecting servicing services fees for servicing driven Within just the basis, Middle the year-on-year total up largely were performance by that with and was

saw page, indicators included momentum some sales bottom panel highlight the of the we've quarter. On again which business the performance this we in

service robust wins we institutions quarter healthy and owners, in wins and more with we fee were growth not as saw mentioned. segments, as for AUC/A to us mandates come the including asset which above-average engagement volume official alternatives, in in terms, total rates. across segment, and alternatives those are complex remained wins are the areas including While key previously client which The second strategic

uptick a We have in also quarter. our this healthy pipeline seen

Turning slide seven. to

net million, impact inflows. by management down higher fees quarter cash partially Second fees average and were some $XXX from shift management certain market outflows headwinds, prior offset levels pricing described higher into a of primarily of fees up previously reflecting Quarter-on-quarter, a result the X% NII levels. were as X% management year-on-year, net market periods, of as and

see can $XX ETFs, the very you slide, momentum strong franchise very strong of well-positioned suite. inflows net saw three SPDR of our suite remains as investment portfolio as ETFs we of billion of low-cost the broad-based As management business. with each on and SPY lines bottom-right our well into and sector our business our In across of

net our money institutional continue In defined of to inflows inflows contribution fixed-income Across we franchise, business, index recorded billion. $XX momentum for our our We continued cash see and we well-established saw market in funds. our net with franchises. demand strong

war as the a reflecting the of down Turning volatility. both volatility FX more year sequentially, lower ago, unusually Relative revenue FX first and volumes FX muted was Europe to last primarily XX% client trading half to a in the year-on-year period the eight. and year activity X% FX Relative trading the in volumes year-ago, start second caused period to XXXX. slide industry of services quarter and high lower were

with XQ ceiling May, Many in discussions in debt client April clients falling is during and muted. were June a resolution. also Altogether volumes and risk-off its the rebound

We predict. hard but about are XQ, it's optimistic to

performed by custody engagement up partially spreads higher client specials finance services well again revenues were by the higher balances. agency revenues agency lower activity, Sequentially, deeper or driven mainly with in revenues spreads. second Securities as driven from enhanced by as offset well up year-on-year, X%, quarter and prime X% higher

fees. processing and Moving on software to

Second XX% which software data office year-on-year higher sequentially, by and I fees were up front primarily driven processing and quarter software associated with will XX% revenue shortly. to turn and CRD

lines primarily year-on-year, up Lending in X% strong credit. demand mix, product for by sequentially, of driven client to mainly but fees for down changes the quarter were X% due

includes a Finally, to other accounting year-on-year, negative $XXX of and tax the increased of fee This due change absence adjustments. investment credit revenue accounting adoption. the primarily impact million market-related the new

our on-premise more software a renewals over as to slide and continued in revenue and implant more XX% front services clients see our to continue higher nine, revenue left on panel growth durable convert environment. Moving you'll the that year-on-year, and SaaS office of data professional result primarily software-enabled increased as and to we

nearly now on two-thirds management our About increasingly About and XX% that revenue SaaS for software an of data uptick office clients platform. us. by Sequentially, of wealth was are are our becoming up driven XX%. segment important mandates was front growth this

continues Charles our pipeline solutions to sales River grow Our remains development products. office for front and strong

we significant Turning business more of Alpha portion had I to this our panel, the Alpha Alpha brings we right were go previously mandates some to three the Alpha assets related we mentioned, metrics other of live, and on to XX, clients installed a as pleased, total live which quarter.

of in helping our provide to wallet. these to the the share more client's services related assets increase expect We future, us

Now turning XX. to slide

rates higher $XXX and by lower positioning, long-term to quarter to year-on-year NII proactive XX% balance short-term offset year-on-year, largely million. increase average The rates Second increased was in declined due and sheet deposits. increase partially XX% sequentially but

in Sequentially, rate international decline by US partially performance driven our bank of hikes. NII offset central market balances continued primarily back-book, in short-term pressure deposit the non-interest-bearing the was rates from by rotation higher and

On balance of rates. during and to average other Average our reflect sheet quarter fell trends, right side industry with quarter-on-quarter the total we in shift second rising deposits also in line some deposit the quarter. X% second declined to which periods X% cash preferences client show by products during the slide, of the

as at Our of operational total a deposits XX%. consistent deposits remained approximately percentage

stage betas duration a compression. provides time. as investment entry quarter, the and could now selectively Our long to NII XXX% to see global good we also deposit were NII some second across have roll upside floating-rate Sequentially, tailwind the cycle enhance our rates during curve, leading provides this as points, sequential which the dollar add again positioning We book portfolio opportunity the over US through. client some at loan in

but where a point balancing a the the and in larger usually US accommodate at manner of disciplined now rate broader in do expect to discussion, are a our adjust We clients, for pricing cycle to relationship we opportunities. trade back-book part fee as so

betas lower deposit much XX% continued quarter the in XX% currency Foreign to be range. for the to

included our few XX NII the past appendix, shows also over slide in new page cycles. that trends a rate We've the

it many decreases sheet deposit levels interest as think -- driven Fed of I factors, including be and put equity changes markets. in context, will the larger balance the NII well changes are rates, will mix, by in it hikes, pacing increases as which and

are than You a from that our can business in is of that level activities. quarters come that of inherent see page level our and more recent have with a normalizing to usual we much typical NII now NII higher

Turning to XX. slide

and and items operations, over investing company, expenses just productivity X% strategic private quarter the expenses, technology efforts, second elements we and Sequentially, year-on-year. as markets, continued our quarter excluding of manage seasonal including Second automation. X% carefully notable expenses while increased the expenses excluding optimization Alpha, actively all savings increased in

associated staff X%, primarily growth however, benefits expected employee compensation year-on-year, to for some we higher lower and flat. managed operational driven attrition, basis the insourcing headcount lower with technology be primarily increased headcount by inflation and staff, than rate. attributable line-by-line attrition to Sequentially, a wage have On areas, salary increases

decreased Information systems partially headquarters by up reflecting sub-custody costs overlapping X% X%, professional due initiative. credits efforts temporarily mainly lower Occupancy relocated reflecting expenses vendor and from in mainly savings increased higher credits. and related X%, as building higher infrastructure fees. Transaction from and increased expenses we other to technology sourcing communications ongoing X%, our in vendor costs resulting mainly processing benefits to investments, optimization and offset were

slide to XX. Moving

capital by the the of slide, X leverage CETX side evolution we On the left Tier our the on the of side our followed right show trends ratios, slide. and of

the continue you As very to operating environment well both and our navigate regulatory internal see, capital can with minimums. above our which remained we strong levels, targets

As higher repurchases standardized and our of quarter-on-quarter, of share driven XX our of basis modestly offset end, retained CETX was down quarter by by continuation XX.X% partially earnings. points the largely RWA, ratio

for Trust. flat and at Bank but Street was for high four decreased Corporation XXX% quarter-on-quarter Street still XXX% Our State percentage points at quite State LCR quarter-on-quarter, and

for happy the In in above in capital sheets one current performance market $X this to minimum, with We're repurchases Board very in our calculated to increase the to continue XXXX, factors. X.X% a under of another stock of billion with preliminary our $X.X XX% SCB also quarter. and total the This subject billion demonstrates floor. strongest results, resulting year's keeping third 'XX We a common XQ intention the share stress to well in at our have quarterly conditions the it we buffer plan remains up our we dividend, authorization CCAR our with and continued planned subject on June, common balance the buyback in industry. other announced of approval

return quite to billion roughly Lastly, in repurchases of in the $X.X stock quarter over shareholders of pleased second we just dividends. million billion are to and $X consisting 'XX, common $XXX common share over

provides our Turning XX, results. which quarter to summary of the second slide

certainly offset durability is and we of continued work solutions and this still the Robust area expansion there business do, pleased quarter mixed to backdrop. a divergent against income our front with our While are of securities office well finance in franchise. in us resiliency some highlighting of of we in the to the strong areas other growth net headwinds the saw fee interest as momentum as the enables

outlook I'd suggest the provide that degrees. macro-level, the a third know Fed, BOE current continue in is to and XQ hike moving, thinking in ECB all with will like broadly that to Next been we to have expectations rate current which forwards, regarding while our rate line At the our varying the quarter. our

US X% flattish be international we to up equity remain now expect markets currently are expecting of from about average to quarter-end, to markets markets, flat we on as markets expect average. In to and quarter-on-quarter we equity terms equity equity be

revenue X% revenue sequential-quarter Regarding This as XQ. below-average on will this also headwind fee overall expect basis, the fee previously a approximately revenue XQ, past expected down fees to X% to be to down in we from X.X%, fee in exit. include normalize X% we a disclosed saw headwinds servicing with quarter to is repricing the client

expect management to to X.X%. up around be fees X.X% We

as front on-premise not this quarter-on-quarter level XQ We expect in data renewals we saw that and we X%, quarter. be to expect of the down software office do

prior XQ in million than which other million fee the We expect in accounting to impact the post line come change $XX to higher but XQ. around in is down revenue $XX years

in to sequential three to deposit Regarding lower a now continued XX% NII, into NII by levels last hikes after we increases continue on and year, double-digit as rate XX% expect basis, XQ. NII decrease sequential-quarter driven rotation

by Our declined outlook deposits $X assumes XQ. billion that average to from XQ approximately non-interest-bearing

As forward our to we the and work XQ, as pause. to see to most look back-book moderation most banks expect through deposit we we to of some of rotation do amount begin central

be to context, depend in our range in small that as be stabilize And it to well down conditions. that is deposits to With decline we down in non-interest-bearing XQ X% will XQ will XQ, $X versus the levels, on expect less somewhere expectation likely that versus X% market much those then billion range but we and declines to the NII XQ. NII of around expect a

to action this remain in environment, costs to XQ focused on Turning curve. we in the expenses, cost take we to bend and controlling expect

to actively to on expenses. that and X% down to will As be intend basis we X.X% sequential-quarter manage such, a continue expenses expect

quarter, XX% on rate keeping the between As quarter. changes always, notable the FDIC adopted and as third which could And we effective accounting expect noted eye assessment, I a an ex-notables we for XQ an tax given and to be we're our this previously, this XX% basis item. be is on

the call With to back that let hand Ron. me

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

And and first question-and-answer we Instructions) Brennan question UBS. begin Ladies our you. now Thank session. will the comes from Hawken from gentlemen, (Operator

Your line is now open.

my the made for I'd you like Good morning. of taking questions. Thanks to that on some of about sort Eric, deposits. double-click comments

could for kind mean a the I also euro is, noise were to out higher that's exceed bps the looks work in for And supplement magnitude of we should breakout there's be reach? betas US currency, when up referenced. some what book. beta that what back-book maybe think me? that when which but that it in because flesh good Does dollar that talked know the through? costs you deal, you by I And than maybe you do could the about starts quarter-over-quarter the you like seems like help that XXX% swap deposit thinking low that's it So the about about could the understand in pricing bit so XXs you here me financial euro potential a to XX% look a

sure. Brennan,

start we basis me the now saw on on points US rates Let and period in are the on had been the quickly much much that cycle a signal we more multiple betas more because where are very a book clients our It's particularly the that strong to visibly. much, at XX moved. in interest-rate much we've higher and

not And time, because yield to past, have they highly of that whether whether alternatives a have can There's the of in. what have they whether at invest range real money treasuries, used substitute the in curve, inverted it's market, repo. they it's it's same they that now

that has the alternatives clients been this and accelerated come and that know And thinking our their the about place speed. active to then swiftness have and we've is primarily of large what we sophisticated that and cycle by are larger clients quite we and found the you

the range think quarters. betas, were we couple deposit to US If last they XX% of XX% about in the

yes, catch-up we'll that next expect over is we in what's and, XXX% driving saw the we back-book. quarter XXX% well This be a and quarter really

look, some have like deposits adjust. sophisticated us mid-tier We it just back with rate that and or are levels us transactional something our happens coming you'd like of for lower levels to clients we expect, but retail rate clients retail large coming to banks, saying, have as they

betas, have we where we we in of playing through. so have XXX% coming us is of way, to is a XXX% spreads of have -- to quarters widened what's seeing that has time, for back-book catch-up think what and convergence it's deposit, a the back then they we XXX% some through been. would a And out beta well-above while going actually the really cycle are what a that's in to and period for below And get a are betas in we're and And played I where number level. then a the that on that's but now quarter

It is is higher quarter-on-quarter what this drive beginning to NII XX% this you that the quarter, reduction saw. in

expecting You saw NII apart, we that of the through. XX% are in you it this And in my and to in quarter. if part but outlook, is rotation coming continued that's some XX% out peel reduction some this non-interest-bearing, in of of good that the is playing it of back-book catch-up

over will and think the down that time, areas, context. as seen I'm perspective we've of do We to our moderate and that certainly but bulk drill some to and of we into deeply happy begin into go our that that the that's

On your up. other probably follow should question on euros, we

I just probably of we up probably should offline the IR we think but because do you and XX%, deep that's about with see the team. betas quarter-on-quarter follow think supplement that and I in

Okay, And question then no problem. revenue. just fee on quickly another

is large be is the third outlook. that migration then whatever left for will will up to should and that about when of end going delta? flagged we that thinking playing And much would how be be the quarter How be You timeframe -- how the out? the of impacting client much part

multiple well in X.X% We ago that we year going it about at disclosed that Yeah, as happen I recall, of K broader our over a over to announced we client is large revenue. and was think described Brennan, years. deconversion it the fee context, you

calculate that through. So you can

that a this come reconfirm $XX out that coming then next about In about well. I in think -- quarter, fourth seen come quarter can call piece million third the out see of in had $XX the but I $XX there's on as out, will I about million our in earnings run-rate million another come quarter that. quarter we third another described fourth we'll sequentially. And January,

see final our But quarters the installments. we several that, And and that's then after into before it's incorporated later more guide.

taking Thanks questions. for my Okay.

Your comes next Sachs. Alex Please question ahead. from go Blostein from Goldman

morning, good Hey, guys.

on deposit So guys for We've the well over happening rate in environment catch-up a just another sort now been the staying this Why higher obviously cycle? you year. think late minute. a do for in maybe of question

today. sort you particular if you that can the on around of that is so think customer think US The I relative stabilize? XX% you're of think, how know, is, driving that? Fed cumulative US then in US the color maybe of curious think deposits, segments don't on end the XX%, around sort and approaching, more think, X.X to for And state price that the that do that's So provide interest-bearing rate. about about will we kind XX% beta you Should of funds I discussions I the or where deposit at as in

right? back interesting X% environment you Alex, seen prevailing we're it's rates. a go to good pre-crisis in see an that we've decades, got through two not You've question. I mean, clearly navigating living and before

this you our we if think why if also gotten we've -- think of we put to created you -- I page in that's information swiftly where on XX we how materials. back are, about some

far terms of in in has uptick as twice last the cycle. in rates of half the cycle this see time moved the You

about negotiate imagine occur six, even can having periods. forth. discussions in over expectations, multiple sometimes you is discussions client rates would And and so we as what we three, their clients that that be discussing us nine-month with balance appropriate out move and plays tiers, on large with always putting have that, engaging place And so happens us up, begin as they what maybe

have gone a a to that or and rate-setting but from would kind quarter because year, third early last there ones which might quarter clients so was and in for and X% NIM have perspective. have and if last also put us when to us you did of some perspective year NII rates clients clock continue And last of may started and that among the of turn might discussions second back matter, say, position some quarter X%, them of our our they of X%, occur, those different year, of a fourth

think prevalence an cycles. gives really played other, one forth, money the it's and right, give than I on the clients out of funds alternative, I'd that's past that yield and hand. so some and inverted the the clients So in And and has on treasuries the the this curve speed say, more of vivid, of

that's so behavior. client And kind the of

that you which is come this we seen the our activity have is book, of in if down. deposits, decompose some non-interest-bearing What have

them it And of non-interest-bearing deposits in interest-bearing because some some And to you is segmentation say, look, clients back-book some certain we've real seen make and of that rate. now can is what come the with a interest-bearing book. us at

the As barely is The about XX,XXX million. over in average account an there's example, $X average non-interest-bearing, account accounts.

you the balance out non-interest-bearing analytic surprisingly, is in What terms separate the balance balance year-over-year lower we've done do right. client some from are higher ones. clients accounts can Not higher in accounts down and by work of balance the XX%,

are XX%. The accounts large by down smaller number of

what the what have And is describe right, what now as where work and down. I'll I'll interest-bearing, starting are we so rate. we're with is this the -- through And at the describe back-book. perspective to deposits larger to that through, on much a our catch-up of non-interest-bearing burn migrated the is How working

some of of up. moving Some and is to being priced interest-bearing deposits that that non-interest-bearing interest-bearing is

play the and quarter to and quarter clients. as continue think to and scan larger, will the the the out that And catch-up the smaller that's sophisticated the begin we the catch-up of that fourth the likely third it, into And quarter moderate in more third burn we clients peak about types, we peak we in in quarter third both then expect think down. deposit versus why to as

is the the Got look it. game X.X of funds think in the deposit end at X? kind going you to And what relative cost just like US of Fed terms to ultimately like then and

I've it's basis, a think NIM calculated not on you. versus be basis, back it if -- rate it'd helpful I could on directly to into we I cost a guess but

for long NII, think our NII. some we for range NII of XQ guidance given on book, XQ I've view As about the

a spread will or and up into in helpful, NII I we with think assets cost And on $XXX range our quarter. calculate it's deposits on that back this if instinct million is you. to a funds or million of follow spread try can that per settle to $XXX

you next my as think become And mentioned servicing over got you has you. productivity the in that guided Thanks. to down fees Ron and the several in efforts of a bigger light guys quarters quarter. helpful. fact I you clearly question well third as bigger and headwind picture That's NII for I the

of pre-tax should margin sort a So stability? measuring as you efforts you about Are for ex-NII? of more think like kind fee are about challenging margin stability in overall those revenue measuring of of solving productivities, we How sort you backdrop? light the productivity for think solving

scale are what really I create more Alex, these increase is start with lower -- I we we you're out do new, productivity We speed, Yes. satisfaction, these are where where and the with is, because ongoing. client describing we've we How take increase manual business. not in of mean, interventions. our error how mean, outcomes efforts start rates, do

now for and has So this the been the measures productivity underway would be several years. that traditional measures using we're

the our the NII -- of and outcome relative is asking. about terms been forward, results in manage how no of about in think is I that an going longer think, think that's you're others. leverage, particularly we certainly You've tailwind question managing to costs to, we're the in if business the operating really able key a outcome we've basis, terms given seeing to been we But the

Got right. operating the Thank Yeah, All you very leverage. much. it.

Thanks.

Rob Your from next question from comes Autonomous Wildhack Research.

now open. Your line is

morning, Good guys.

the uplift forward? going the much numbers Just there? NII and yield difference in color, side you Decent ask again sort of repricing can XX the to quickly. basis give And trying about Can plus some around front back-book how assist asset some book, book securities points.

front There tailwind it's that is of comes a bit back-book. book, from the good Eric. Rob,

basis, I this in year-on-year rates basis. kind a on constructive rate the long standpoint, from $XXX think was year-on-year of long million year-on-year were the quite NII tailwind a

substantial. So it's quite

is On closer the $XX long $XX million. a quarter-on-quarter, million, to rate tailwind

or, describe it's convexity the as So curve cases, we've into some, position not less in And curve leg think guess it or of we'd or to find some inversion, amount come I'll helpful. see we've abilities insubstantial. got we I I steepness got some back duration some where in

on that The good XXX runoff XXX or From in said, in closer basis XXX points a XX rates basis of above points so investment range, points, that is point is point south average roll-on or well points basis that basis basis the was bit basis is you XXX like to average so. aggregate occurs standpoint, And of portfolio below a the the kind that. rate XXX more.

So you've got through. a nice tailwind there that's playing

on currencies. a also tailwind international have for We rates short

a sheet. helpful. forth and latitude basis invest got some then to currency given across balance And think we do opportunities as that's So and to we so standpoint well and from our -- about continue global we've that are

then on more or of non-operational down one percentage what I confused that? XX, -- be Thanks, operational the If down operational are Conceptually, numbers why the just I'm than driving be mix. on would use as deposits deposits. to would operational excuse deposits deposits. I deposits me And are down the overall a Eric. more guess page year-over-year operational as

Yes.

data look there's I deposits. think little operational and and at similar non-operational a I got movements of I roughly bit that you've -- in think

of happening what's more custodial think or -- They for are in do cash is deposits thinking must as in I I'll cycle this I keep the cash as in much valuable, how say, their accounts. part the right? about clients our absolutely selectively is

about think managers very accounts by fund different And if and make decision plus decisions XXX,XXX many they XXX,XXX you many, that think set sub more It's I disparate decisions boards. and right? it's of and in, themselves, it, fund a than large

but that's at can they're so point trying in drift this cycle, it down, edge why also I operational. see, see hey, And to the deposits down, total and you

off they off They at certain time trade why really they of that day. deposits hate the and to will needing overdraw. overdraw managers the of fund a it -- don't level up need is end end over the they amount reason What that

And then this got in at they seeing. custody optimize and that what drift that's too enough without you've downwards the we're there's and have but accounts, to going also where a period clients and governor throughput, sure where their cover cash flow to transactional the intraday just core on with we you're engage make our far where they're trying

expected. is this But

the that to hourly right, is flows kind because them which of and of operations, we there expect sticky, need for this the behalf so minute-by-minute to on it's comfortably their kind the XX% so they And operational custodial processing aren't We part what are in stay of makes a deposits daily, very transactional range. significant be that overdrawn. they

Eric. Thanks, Okay.

Sure.

Glenn comes ahead. Please next from Your from Evercore. question Schorr go

Maybe discussion. just different Thanks, a of the attempt Eric. deposit

treasurers discussion did. to So of any all client teed. are to point we Like there I I wanting where what what bought able XXX% more FX areas But deposits profitability discussions want, with State alpha. you're side. the them doing update But the like on like get they what has if maybe yield. non-operating deposit clients us you're is too, with impact move they like impact having you try you can't like lending, about doing could more help Street seems to

So is there do? you anything else can

Yes.

Let will and a me weigh because well with clients. Glenn, of as there, I think start us engaging these Ron in conversations number have

$XXX then deposits very midsized different that if of clients. tiers large sophisticated our billion we clients think angle from and at let we've kind you that standpoint, price of of think of about me down and number burn large and tail kind is of I from it deposits, small take got a a have first

billion, focused about to Of we've that focused the $XXX we very and think $XX been continue on on. be billion there's

been talked clients real deposits couple So on are catch-up a about quarter that as last about of of we've back these with our the the a questions, total book. there's

some balance because is We've of come zero commitments those balance where -- largely, price that We've are these that's for our discussions, trade a price or around which and had some repriced improvements have deposits. those got very larger that those fees, and billion, about of have trade some we've us. behind on and low with on we $XX billion engaging described stability us, or most sophisticated we've and right? either where of of those $XX behind I clients, discussions

Included right still $XX another included beyond that that's of gets $XX $XX million. we'll in the underway that there's $XX the in outlook that have. right? That's billion, the billion And So billion us third to my trail quarter there's then billion, outlook, a almost provide I now. $XX

think and peak. the I discussion negotiation so client from the expect And quarter to standpoint, be third a we

all think engage. They're and to large. find executives and we you'll rates goes the large our management quickly, very these I up way from through the pricing each go are what that those very on balance of most a deposits, senior C-suite But that's standpoint. is to a committee those sheet questions certainly, client where because

absence revenues reductions their do the right, on over one what we on revenues hand. other what of on time see of FX the also sec And think it future, clients work for lending comes through I some you'll right? do in rate that expanding come here And them back we'll when in the is what of to is hand, and fee range and some with managing of the cash, we

to the been we've until the I'd in of our that. in money uptick be clients cash sweep doing of with management some business say, look, because reason seeing think market like I asset those some in you're a cash

is of NII it's stabilizer and very, a stabilizing on to to or some NII You stable do an very it's to shift a year-on-year source an been basis actually able our -- a continues cash NII see of to areas. add we've those and well because business quarter-on-quarter to to the repo income add client

some there. So start. offsets that's well there bit But a of are as a

the a Yeah, pricing think to add Eric our I you five is fee said pricing and focus Glenn, would has initially what last the kind about if over what -- been four, that on on years, was and high and way -- of the to or that where way compression in elevating in be. skilled decisions those not addressing, used -- above way working fee an institutional really escalating very those combating if they and

would because, not weren't share integrated large. as very we had for that institutions wallet until assume now of is the rate implied recognizing a has times part Eric this this of into were that I are included Deposits really discussion, that but cycle just that analysis. And full We've there up also of part these deposits. -- that have mean, the

that on depends we it avoid discussion that really understanding in without what is. of reminding to putting have you worked at this. of you that not they because quotes, a we're and services discussions And have impact is provide it sure or of when the you the a air just assumption to understand have assumption And other going that levels series on highest fee this our the deposits. have to clients, making you have and them what some unilateral pricing And of on

to us. starting clients. of It's well. what in those how engaging a we're another process at engaging we're with more are work But for And change of us, importantly, these actually way for caused and change changed conversations process level it's the

will of go there, skill, And it's cycles developed, through now kinds to think but we a also going various help so us but more forward.

color. Thanks for all that

Your from next from Wolfe comes question Steven Please Chubak Research. proceed.

Leung Good filling for morning. Steven. actually Sharon in This is Hi.

RRP talk on recent Just particularly of out of about liquidity deposits, instead total of outside of the deposits. the more rotation of you drawdown deposits, come trajectory can out NIB, overall looks because the it like has

on from trajectory thoughts in deposits your context So wanted issuance, just for get treasury to here the cetera? on expectations the et of QT the

deposit Eric. outright. gauge to really the changes It's it's hard Yeah,

deposits the I'm an the billion $X less non-interest-bearing we've quarter. likely this outflow coming That's net outflow interest, I another signaled sorry, than little where more a we're quarter. of think the in on focused second

that down you're I've starting burn the So to of some see described.

a the the about from banks, HX external think, X% in In I sequential deposits. we've seen those reports environment, fall

clients. For to coming bank system have deposit the of probably more in when just have deposits tend the we and come the when coming in more the bank out system deposits trust sophistication our out we absolute banks, and increase somewhat

a we're been that's a difference. again just non-interest-bearing because but more downtick deposits quarter, So where makes a on expect big focused the it -- next we in little

higher always expect to stabilization least we a increasingly finding the a rate in of balance as some tier this at we a we're as time little to of what there get clients. little or especially deposits, our movement I is more to get a because think interest-bearing at more with

to that that going it's underlying operating of flowing but a thousands to they'll them transactions an is the move actually for tens has cases, deposits cover treasury. account, thousands, hundreds, are in margin they're sometimes what the deposit Now hard some to particular move to do of their thin through

on they'll on And XX XX points points lose basis up might so treasury. something we basis pick and

driver So that's at And not NII I of as our of in this that's some dominant a as going on. think point. that there's truth

that to for seen impact as in and be impacted color won't ways of able Thanks of to haven't rules expected a proposal for be capital yet. But that. because just guys? the give probably might of updated much a follow-up, businesses on coming. be some we And able that are I just you understand terms mitigate like you some which more might you

to back. many mean, there's we're rules. saw we I regulators several the -- see like obviously, from -- waiting or We've more Yeah, was Basel US the either and last international the draft time III years game from

think some do just to effects there'll I requirements, tell higher on expect hard much. different be businesses. how We of our we've So -- we think parts capital

rules probably deposit capital will will we to charge. relatively operational come businesses. our an That with actually influence hard to So operational be want build because the new fee-driven

come capital will be that's with an so that will And just I add. think, -- a those, requirement

be way. review that negative so while the be then think fundamental book, I universal a the banks some the affect in lending will will on helpful. There'll in And reduction the particular, of book potentially trading

capital will where territory will will positive, hold need indemnify us, sec be positive finance For to in longer be the business tend be to We'll no less. treasury. a to a requirements capital

in riskier to held more safer areas, in finally So activities. we traffic obviously riskier don't -- for needs they be. be capital They But become rational should they'll areas. as the the should right, the economically

I those us quite that ways, give think are deploy some base that an with that, areas will and actively. to capital in like sec finance our And aligned grow more opportunity actually client

were impacts, and -- does. considering react of there'll what's think but to I comes see come it I accordingly as through, so And many it be as we're mix we're a we'll going to like

Great. you. Thank

proceed. Brian from question Bedell comes from Please Bank. Deutsche next Your

the, that if to revenue taking on Thanks your can to client, guess summarize pay my question. back Amidst the I Great. wanted can business, per different I comments for are how I it aside come asset from the sort Ron, there basically, the overall there that are of Obviously, for of servicing clients fees clients, and that. core way. they many do different ways components the

base, improve going balances? able think down? deposit more to per looked across actually over you you're as So many on have I going the compensating able sort of But rate the that know revenue that many, paying to you as do clients up, across the that fee they the client at Or is much given years. holistically you aren't this think about be client with beta

to what this is elements would I what this we you're to client think the but come Brian, good tactically I how client, it's and referring a And referring strategic also. to about was I question. back call what want of to also by

of core terms -- the any pricing element particular if In with client typically no that along there's fund because business, to and deposits. back for answer you you've think one it, a in office associated about got custody accounting there's

-- client we've In have middle office FX? managers. is more then to we And managers Obviously, do, line all FX the with finance FX securities are are them? we're there's securities manager, and a doing and way assignment And with question where increasingly, the going of a and function they of finance use Alpha. -- might they occasion more do -- instances, most we obviously have office doing are a back to their obviously, us

that needs for remember that few So to a the -- for it's through challenges the here. both to fee sides, you to the lay occur it's were X. on on all having, get client over they that ours past reason you there's why out we holistic predicated I'm important saying included, it's And tactical, did conversation years was whatever

be Cayman could here isn't Islands and more outcome assumed let's cases, We or doing never talked that more about, this. there's level, is whatever can you, and this the out. on let's X lead playing fees it that, and of funds on might we to FX something, in well, And have that if could, to might deposit hey, those. assumed or be And an see an conversation set need X level, typical a over we're with move not a even we've try that do or it

I opportunities. The on the in moment a these spurring it. because conversations And doing positive lot be There's people them. opportunities. mean we situation involved it's there a intimately don't is get challenge. are of This redos are real is the senior to

way to of an headwind, we is some I again, it's of opportunity a outflow So think we NII the a to, it. mitigate it's kind significant think mean, but

Alpha, The all Charles Because the launch lose, strategic side back don't now I happening development onboarding the of this, Brian, there. River, seeing acquisition doing, we've want to right? we're been going the to of of

typical to office of stuff tends complicated the journey With be lower starts the middle first. onboarding kind fee

And implementing as services. And are we making it's there's services then possible. follow-on follow-on as and addressing fast implementing, that those sure

when earlier that and to So onboarding, I about talked a over onboarded we to little move into the trillion $X able onboarded. we talked talked about were to be

we -- quite the short Eric in would per kind the XXXX -- of we've asset revenue We're increase revenue of picture. and terms mean got services the Alpha way is other that's to the going transition. is works issues raised notwithstanding Alpha which out, look why I this optimistic I short-term way actually that call client per there follow into term and to will What play is over about what has the the that's medium the as

to just they cost That's great do Eric, you to more nature? then mentioned And of levers. an Are in base. tactical on continue side, see maybe you expense reengineer the color. the -- expense sort Or ability the reengineer

years. initiatives? already know do Or last reinvest you reducing costs to You've we're in overall several saves cost and the there cost sort when growth is that job an through don't in of a I them ability great done have over structure? you the like mostly the if structurally reduce

lot reengineering a of get on more want that The we without now but investment, me we a do, are the a lot And side fruit, a Eric couple lower-hanging call We've you place both side technology let of reengineering, down technology progress we -- address ago, addressed we're without mean, to of this. things working this lot on there it, operations the and years is not got started this we Brian, making of the I are on could and at people the in through obviously that that, of kinds then comment. that and which it. first, journey when by definitely through. will

The way we you'll And seen but we've the able expenses you've and that more in to has been report this quarter. journey and think more we has than invest that played our on what to have through that quarter in that, our we'll businesses otherwise been, results, after also see go, would.

What we also talked kind can and more reengineering would described short-term do about, things though, we do given there's that that things. of some should tactical less things those and to we we've and just that how those about consensus the like do be about And outlook you. is think about

pay got for And we've round just out, to performance. to that

when lighter. we have that when pay we we'll it's larger larger So for little -- deliver sales, a

also that mines last increases We've reign quarters of that's through all the in, part saw, you have. the some the salary last and worked on the couple that we of over of execution we've over we'll evolution just and As that given year.

We put need we time enough we've costs. and freeze because a in where so our contain staffing place also have we it's to feel like staff hiring

to, actually areas our growth new areas say, So need redeploy reengineer, we folks to business we sure and down pair we as or to make actually others.

in limit is disciplined it. tactically, particularly emphatic hiring, way And to on way that do right, that freeze a be to or the and more just

you And short-term the performance, as gives bend well, curve. that so a cost which for to sense doing the we're willingness given our

very Thanks color. Eric. Ron great and That's much,

questions time. like this would the I are Ron at There over back for to remarks. to turn no further O'Hanley closing call

the joining call for thanks, us. to in and Well, thanks operator, all

Thank This for you, conference. Thank your concludes and you gentlemen. participation. ladies today's

You this now disconnect time. at may