STT - Earnings call transcript Q1 2019 | State Street Corporation

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Operator

Good morning and welcome to the State Street Corporation's First Quarter of 2019 Earnings Conference Call and Webcast. Today's discussion is being broadcasted live on State Street's webcast at investors.statestreet.com. This conference call is also being recorded for replay. State Street's conference call is copyrighted and all rights are reserved. This call may not be recorded for rebroadcast or distribution in whole or in part without the expressed written authorization from State Street Corporation. of website. will broadcast the housed authorized Street State only this be call on The

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

Ilene Fiszel 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 first happy

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

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

will due addition variety contain statements today. those forward-looking presentation results factors materially in from Actual statements. such our factors as to discussion In referenced today's those may a important of differ

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

Ron. me over let it to turn Now,

Ron O’Hanley

Thanks everyone. Ilene and good morning

we announced this to X, will first you Turning quarter financial slide results our see morning.

further which last current the discuss as evidenced reflect the compared to of that industry by were muted improved management our will equity shortly. XQ Our somewhat and accomplishments but a average results global relative few challenging we productivity to flows industry conditions XQ XXXX, I years. and levels light execution pressure, culture In market lower including lower continued pricing of from the XXXX program, of driving environment, early are expense

to new of be in increased quarter quarter of quarter the market and relative under billion end fourth of Assets X% $XXX of supported wins $XX.X to by to $XXX billion. higher billion. inflows installed the trillion custody fourth over increased under assets the period end by the trillion XXXX $XX with assets of new At management and administration end and to XX% XXXX of Advisors yet equity net of to $X.X Global values relative

the Turning diving remind to of to to manager, asset provider our the servicer, would deeper managers that you be on slide and and is I data vision capital. the a and quarter, bit the before leading X world's asset owners insight

generate servicing to provide These outline which a vision me me streams; against innovate strategic on platform fifth, the heard you first, We and leaner priorities Let scale check-in leading priorities servicing recognize remains industry expense deploy grow to progress provider; underlying previously. organization the and technology-driven execution diversified to and second, the servicing fee have fourth, and growth; reignite our industry's front-to-back foster a to substantial revenue that under revenue a are; on fee asset execution pressure. productivity. high-performing to this as focused third, saves;

fee to are we confident expect in taking reigniting to ability are approach which in our to a a few see we growth servicing grow However, and revenue multipronged quarters.

actions we the have of some underway. mention me Let

First, our we upgrading model. are significantly coverage client

than of deliver will program our executives. accountable Street important experience a new more cohesive two-thirds talent State new is of to executive client XX% which the our of and led clients, Our combination complete a It for account approximately one by way most revenue.

asset pricing segments have owners, firms. the attractive review strategically that with aligning plant acceptance insurance deal committee. asset executive and evaluating decisions firm-wide large group we new and most a established have client the the applications. in global are And third, business our include This fastest-growing clients, market company is we which Second, managers,

approach, Street. with interact I In new efficiencies client focus offerings, this while delivering and innovative service the way renewing State driving proactive on changing our we are for We clients keeping industry-leading with as our been review with my State account to XX service and CEOs have plans days to working in of personally XX first client client met with close CEO client have Street. teams

plans asset share to place few over segments the and new next strategies the Beyond our our the learnings implement further are clients, with on largest we stream. quarters our owner of market beginning segment and insurance in capitalizing aim increasing diversifying have and with and wallet revenue

deploy our Next, I concentrate front-to-back on would asset servicing leading to like to priority the platform. industry's

actively the State pursued We Notably, during XXXX anticipate value number the Street quarter, proposition are see by client combination. of sales the end teams. as opportunities XXX At approximately making measurable first had we the announcing by front-to-back of of clients already a progress. we enabled strong platform our adoptions River the being Charles

with are its when end strong momentum confident new cost achieving evidenced offering we of the synergy pleased announced by River's our remain and front revenue as We business projections bookings and the last in Charles year. acquired

continuing current business. to Moving prudently management our to initiatives. the committed on over our saves expense discuss I'd while in expense like to remain invest medium-term generating We

resilience discipline environment, more for January, this portion CRD announced and operating ambitious technology an a management XX% of process challenging have savings firm-wide resource X% remains the roles in $XXX XXXX even be The as well driven of that of in implemented and past all I reengineering place. for priorities. to already investing freeze program that my non-critical as growth before cost by hiring outside million Given productivity we more initiatives. of expense targeted achieved including continues the targeting automation savings. top we To-date, than one Disciplined

to quarter by We management measures compressing the are X% reduction workforce contributed overall XXXX. our have These structurally while pyramid. underlying to an of now the reducing fourth relative senior in expenses

new new in successfully Global organization our Operating across as in a organization Clients made number our senior a right of am focused management on and to of changes a a Chief a executing Head Street. new Head new a deeply we vision cornerstone is performing and Officer, well and last of simplifying team. our becoming place To strategic have the strategy achieving achieve divisions, have our we drive the I order I Markets. results Global the December, Head priorities. State on to end of our as to that higher Global Delivery, Since ensuring Finally, have leadership

I'd we but have Aristeguieta remarks CEO the become drive capital ensure conclude activities. priorities and on also highly we experienced Francisco by to some announced change our my talented who highlighting like desire the new leaders We lead a strategic all These Street State our of executing will probability our our and and is a on will have time. shareholders. that take for focus to return our high business. business individual will that Francisco International international of will join

$XXX first approximately through share During repurchases we million to returned shareholders dividends. and quarter, the

XXXX. let As remain the this repositioning in a we us that, optimistic achieve balance sheet XX% And more payout we can you cycle. detail. of Eric feel is during that to that look we for CCAR ahead, with positions it for that substantially than to the over CCAR XXXX me well total quarter current better through turn We our take

Eric Aboaf

you, good morning everyone. and Ron Thank

some notable on top the to for you left the quarter show my results of left panel they On discuss to ex bottom GAAP items I on Before certain to of review page first our our the certain in how XXXX of panel, underlying to who those well like items trends. begin our five this financials. see notable quarter result, five moment take we results as and as slide a want impacted I'd

$XX of to we in of XQ notable and XXXX. related items. pre-tax -- recall For On legal have $X.XX XXXX, of no million million $X.XX did Charles notable in XQ costs for share XXXX, a notables acquisition items per million period-on-period and period-on-period recognize consisting $XX or net comparisons, a share, $XXX XQ had million we equal River a of pre-tax to related but items total that $X and restructuring of and

levels and end during Turning end XQ. to sequential quarter-on-quarter. in saw the driven in quarter-on-quarter. slide and double-digit increased of equity by decline changes X% XX% recovered these year-on-year quarter, sharply increased period closing X% We down global Much markets, first a X% after large of levels year-on-year the which six. quarter were upswings increased AUC/A AUM period

rebound our were however, year-on-year up are closely this only management you, On remind fee slightly and me we to related servicing recently, uncertainty in market and down lower industry equity Let of further has levels flows And a headwinds levels. basis, in markets and that QX. markets market the equity led and saw daily in average resulting more continued economic to quarter-on-quarter. revenues while global activity client

Servicing seven. fees X% down slide to ex-FX Moving quarter-on-quarter. XX% year-on-year or and were XX%

we industry During as announced year continue to impact saw concessions, we flows the ongoing as lower as global well the see equity of previously and and activity markets. transition, lower persist, client conditions client fee last challenging

our expand a found to very of increasing to point. one, fee transactions. relationships upon. something industry executive wallet base. targeted segments times our spoke proposition reviewing and our number senior approximately upon. Number are where in We're has of met the core review three, are, We coverage This a we we to that new And client given to our well I'll about share we leveraging insurance estimated senior formed servicing QX in XX of focusing specifically, particularly concentrating deal benefits on XX% client pricing rigor, executing wallet conditions, which rolling discussions. as perspective key our initiatives increasing on and later these five owners strong pricing of Number is committee, incremental model February currently discuss starting client my from continue now more as like a four, counterbalance revenues, More across out and new on build number client have a remarks. which drive asset number CRD introduced client market dialogues adds realizing newly discipline in two, share to

will it these come the sales take negotiation the through quarters and few see in initiatives P&L. Given we a cycle, until

eight. slide to Turning

was down of a well me was discuss equity year-on-year, revenue global rest revenues, slight equity market as tough After quarter-on-quarter fees. December half prices. driven levels, with uptake we late from fee X% products. day Fees XQ a weaker product Let sequential and from average lift mix a outflows the XX% which saw daily sell XQ daily as fee X% off, management higher the down count. away beginning quarter-on-quarter, average in shift by were of only

quarter-on-quarter, then largely and January rebound new repositioning were in we nicely reflecting business and year-on-year, December flattish finance and related Securities revenues sheet balance XX% XQ. second and for half dip us as some volumes came saw the re-leveraged $XX bodes well flows quarter and this in. cash, space which and year-on-year in business Our positive confidence on X% lower-than-average XQ. going X% over in client however down and volatility. net FX rebound gives of market nice quarter-on-quarter institutional the trading see very and into a asset loans was lower clients the down XXXX of billion did CCAR assets as index monthly in management This

fees processing long-term market in a year-on-year, CRD our was roughly Finally, sale asset management adjustments million employee well quarter, and revenue incentive a tax $XX from advantaged as contribution this reflecting and other up as plan. lease related

Moving to CRD, about how I to slide some strategy. we're nine. front-to-back advancing spend more financial our and performance time wanted talking its

the see business resulting had left QX, As quarter. client generating top new of CRD operating $XX of in in million during bookings revenues income. you'll The $X $XX million million on the quarter expenses, strong panel, also $XX saw in million another pre-tax in of

that are come. CRD XQ XXX would and milestones achieved the indicators which also accounting I this revenue simply been quarter, to lumpiness more success we've the in We've While to These important well, given expect annualizing standard. caution we of results, perform continues looking reporting for some listed against inherent we've below. these

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

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

we front and looking Street office training into that build from powerful solutions management system front within automated platform. some Aladdin clients custodial benefit actively interoperable the that portfolio in multiple compliance feeds same As about excited for by can software full engage, one offering, streamlining back interface systems front-to-back their we're systems Bloomberg. into providers, office consolidated At clients a and we office they like and are so numerous are our our finding and where middle State leading time, other risk,

We are committed to both approaches.

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

the the in U.S. X% while lower Turning are up a but points same betas, lower we our consistent some and should of deposit have of initiated. in expectations result that our a same actually asset manager was we XX backed line. and to fewer initiatives the an deposit the had by targeted of Unpacking behavior in NIM was seen balances, At quarter. this flight On note some total as two as initiatives year-on-year, now basis gathering we higher both XX. ticked expected, trend also X% slide the and time, consciously discerning. in trended that their And and total owner down behavior, as we half I latter and and NIM lumpiness quarter-on-quarter We point, client in disciplined growth have XQ saw the over client wholesale average with NII basis, move period, gently on consistent which basis deposit have rates in as our deposit however, one deposits a expanded with as interest-bearing pricing. deposits quarter, non-interest our multi-year upward NII tightened days bearing XQ in are normal saw by being steady of and move year. driven decline do up interest more well asset yield deposit client series would that back clients expectations,

Now on slide XX. expenses turning to

I'll this visible. underlying and by Year-on-year, this actually quarter up our seasonal down more year. X%, As in challenging were expenses launched managing CRD. underlying this expenses efficiency material well aware designed quarter, savings over but to expenses focused ex-notables gains the that start a so measurable program last generate are of and excluding expense environment trends our new course and productivity X%, expenses are readily on and you're extraordinarily we revenue summarizing

were You X%. that expense quarter-on-quarter a transaction a And across occupancy expenses result the line was of hard a of base, processing, other. comp almost work and down this see benefits, every and basis, nearly on underlying

the the by; of two, cost curve reduction to X.X number rate high bent XX% number in location a is which times in have halfway executives; senior off-boarding first by We XXX XXXX; compensation. continued headcount hiring three, we've quarter, has one, implementing the reduced we're which almost incentive the and cost through number adjust freeze,

these resulted slide to to see how turning in forceful expense Now actions program. XX, XXXX savings the start can you a quick have

which our of we're from our million achieving technology yielded growth reminder, million for resource reduction target approximately year, As gives This infrastructure that saves automation million reduction And headcount for remaining management investments off vendor full process this while announced January strong on underlying the and savings come hubs. fiscal this ambitious is on from fund the we the target of The a fully high-cost delivering the $XXX million and the delivering expense ongoing program, come than the base. discipline start have while from your which location X% the a shift an confidence savings in savings includes have $XXX reduction and our initiatives can process reengineering. percentage expense that bottom resource the already million year. important in more to These trend benefits senior of in amount and a the $XXX point, $XX third-party engineering in total to X% chart With us still a by enabled by page. quarter global headcount expenses approximately this expense achieved expense savings, discipline primarily come with company-wide year. evidenced this we $XXX this X.X delayering business

XX, to which total $XXX our first slide our standardized were returning and $XXX million consistent were CETX million stock during leverage ratios at X.X%. with quarter, tier common capital of repurchases resumed of shareholders, of relatively buybacks. to share XX.X% Moving X approximately at We a capital our quarter-on-quarter the

the substantially total with the we approvals. And during see we with actions, process XXXX sensitivity page the these investment deliver are are completed for to our and XXXX, of continued from can confident asset earnings rebalancing in payout rates. believe XQ regulatory portfolio As limit side left the a fixed well-positioned we of rate ratio other subject have the increase to sheet on CCAR to usual balance XX% downtick so and can you above as the we

surcharge that going development with we capital filings provide XXXX regularly X.X% forward. X%, should anticipate recent now fall incremental on us based from flexibility a our Lastly that to GCIB will management

slide XX, our to outlook. I'd to turning Before like cover XQ

revenues pricing are other be on pressure basis. drivers. some We levels, X% fee we management up sequential servicing macro of assuming At equity to flat will consistent quarter provide expect level, with quarterly net margin a should a support to markets fees, and which and

market given in in cautious we But to uptick a businesses, markets offset seeing fees in of partially other. want and expect by also gains low the be seasonal also We volatility the our processing absence April year-to-date. we and of XQ to expect lower modest to yield continued X% see XQ, interest expectations into long curve bearing of to rotation out rates. non-interest for a regards NII deposits X% by In of decrease bearing driven we're

was in this year the our full on a though remains. sequential we net of reduction we achieve X% The productivity. of ability firmly earlier we expected and on page terms see to That expenses comp this XX, X% less by full first XX% that expenses of excluding XXXX manage sequentially and driven expansion. down intervene XX% announced seasonal In than we will underlying to CRD focus expect range are to merit notable said, deferred quarter quarter year reduction fee as growth full year currently underlying to in track the X% our In tough Taxes be but expenses we increases quarter of year. XQ work expenses, expenses guidance same of should and guidance achieved XQ flat our for underlying further summary demonstrated, and as XXXX X%, XQ if up restart items underlying we expenses and on a necessary.

our earlier, make on we continue priorities. strategic mentioned progress to Ron As

undertaken have reignite We're expanding progress our number brought initiatives also across We to servicing on the synergies. headcount acquisition fee down seeing the CRD evidenced new making year-on-year $XX of and all million is growth efforts sales we down back while sequentially. productivity on and line real by a of almost saves come our help savings, in through driving the expenses which P&L, items per

returned first million repurchase to of the Finally, approximately and share resume capital shareholders. quarter we in $XXX

the substantially me sheet total last to over balance Federal usual late that back Ron. deliver that, cycle. hand repositioning optimistic XX% above CCAR undertaken for call the the subject And can with payout let this the year, Reserve to approvals Given we we're a upcoming

Ron O’Hanley

Thank you, Eric. Questions?

Operator

first [Operator the Blostein Instructions] line Alex with You question from of comes Goldman Sachs.

Alex Blostein

other good Hi, you. I bigger question need little hoping integrated with versus CRD you and through platforms. the Bloomberg. CRD us with of solutions Bloomberg? with the hoping back-office offering was Aladdin fully middle for consider guys mentioned guidance of picture. clients you positives morning against front-to-back between Ron I everybody. to Street a that's first was Street a and something But bit with some guess, architecture little I the State open Obviously bit State could and compare and more Aladdin negatives think to Help your vertically model of integrated of a

Ron O’Hanley

Thanks, Alex. question there. a It's big

for exclusively their different been and largest recognizing reporting platform if Street we're kind own what start want we've They platform their said of by for for me points a let of the that in operations simplification, the could and managers, things front-to-back our different, strongly desired are don't time front-to-back that's I type need will drive solution, beginning, be are as servicer believe selling with data. fact to Firstly, think It's a by trying which that in their or same demanding driven it's I either a both that the talked pre-trade up clients committed complexity asset to products, you as asset and at about clients from but looking as cost. functioning really some an to that in think the are the interoperable architecture we've open does that the State your solution. and clients premise different built with they're in deal we of

will is the need offerings will that do it front-to-back. is to certainly that along for of kind not That And reconciliations get master committed in is of over example, something ultimately to to clients' single sorts are believe that, do start remain with what there truly time file way. having but interoperability believe that issues. security we that time we what that So, a a that clients at starts, solve all but over place front-to-back you're

perspective us of -- also to those decide Secondly, extent, we FX, available as pool solution. which about revenues securities from. and makes terms it growth from will going strategic thinking seamless about or come in own analytics pool a are front-to-back do it and terms the at come by risk back own I'm if perspective kinds that, there's the but order much where trade where middle-office just about and implement There's we to revenue of our right. to to and large having growth To this And larger talking from management what this least that as of of not will by this we you're in become platform, lending. front-office think existing easier to connect we for our revenues example or of things not

high ancillary benefits margins have. of the for has we revenue that offerings it lots So

is more simplifying propriety step back analytic the Excel is So competition in real to versus moving we're something the here not place of and from Charles Bloomberg tools integrated things really it. reason River, that to it's of plethora this we Charles why risk committed that's in both We're platform. is a what or Aladdin committed River institutions of a most have it's kinds multiplicity spreadsheets to and versus that both

Eric Aboaf

remarks, that clients want expand a $X revenue deliver who pool Eric. when I'd the we for we materially front-office it's office plug a and my We system revenues, custodian an revenue systems architecture in will whether An there a or provider. are already earn standpoint system When some more and in front-office front-to-back just right. open we in of that case offer or a office whole custodian pool, in front that revenue offer enter the doesn't grow, right. billion offering, I other like And in those secure, in Aladdin on. new now Alex, just from interoperable providers other it's Those prepared right. revenues for the add with participate front-office sitting can the into said the --

So and is interoperable revenue perspective offering, growth plug-in solution on other on the front-to-back as vertically want and we're from as clients that opportunity our with how to we them, real delighted integrated to what have who and them, we interface part hand with need but as we that provide of participate the of a that them part work do with open custodian.

Alex Blostein

for then the that. Great. Thank mentioned. Eric you, for you much around very NIR just of comments some you question on the follow-up second And

guidance, yielding the of of year give So latter growth takes in XXXX. mentioned as was environment kind worse. positive some beyond I can half puts I the obviously us a we the deposits QX and but gotten interest potentially you hoping some in you little know rate about results, think has

the just So the help year of on through us maybe NIR? rest think

Eric Aboaf

Yes, market in January, the clearly changed there possibility rate rates right? for think, even thought hike. and was January of we since I the an interest Back indicators has tone a interest

basis about the curve now points at and range down least. now I of XX-year front the we're were we're XXX-plus in points, XX end think the talking XX opposite. now basis rates at the are

there's different in. we So find environment ourselves think that a I

going we said see look I XQ. said we we're the at -- And think X%. to a year, downtick We to X% out as so in

I going right? balance to way think our that'll efforts on grow on we're sheet. for flattish probably basis, that active our And looking to come the full to full is a NII year we're year the continue

our some lending non-interest-bearing the portfolio bit going I kind our that clearly through we're of of what on different in to think, investment from to grow. of that work that it's together those to we're need continues the got fund continue we but We've -- But, year. offset initiatives optimistic turn driving We're of at going see expected So tick-up and to deposits quarter. can than this to deposits interest and rotation some the we with interest-bearing. underlying to will rates, business this the we industry a of period is

Alex Blostein

for questions. all the both that Great. on Thanks details

Operator

next Your UBS. comes from question Hawken of the with line Brennan

Brennan Hawken

morning question. Thanks taking for guys. Good the

First one is on AUC.

we saw suggested up, look I versus we been think at in what historical and So highlighted this X% when to the was it maybe the even change markets that higher you trends as should that. me But quarter it have quarter-over-quarter. double sequential

about It exactly was So custody seems lost Thanks. there the whether not what happening And business were there can some you talk side? in AUM? especially a just there? dislocation or big versus like was pretty

Eric Aboaf

Eric. it's Brennan,

through -- basis. This a quarter on we on working had quarter-on-quarter decouple features the

the markets describe spot As you up. were equity

also a much Now year. then mix that one remember, We that we transition we've was got was the and almost And probably final as an had we quite kind our themselves, announced previously deal, not income a standpoint time have end. affect announced lingering, pay in of that of did the S&P. equities, the fixed to a middle-office as put chose say that and last which alternative on had really margin-neutral, from assets piece client I'd do so source in It was ago. done other doesn't a on bucket long are which that the quarter and legacy

Brennan Hawken

it the challenging. revenue expenses NII when then here, think servicing outlook though we about as And seems difficult for Okay.

solid, then basis, to we gross pretty quarters chipping it You a guys three of laid at it have the with seems but reinvestment. out when look we're away on and expenses cut plan

as IRR thresholds down certainly self-funding? investment? to my expenses bring for justify it AUC Why investment something pressure underwhelming from is not higher the perspective to ratchet though the more on pick-up on piece guess, to servicing that revenue spend? I here there's try pushback up given seems are for expenses. is try So, and environment not on and there just seems -- as expense drive not here side to here to because though it that an -- that's the is make Why based what to lower not how why place to difficult -- Why the bar the revenue growth for it the say best side that the -- the

Ron O’Hanley

Brennan, start Yes. and I'm it. will I don't why add then sure Eric, to

know need our, what both can but more on we focused expenses. easily we to is control do we Firstly, be that our in

programs make right to the have to in work the number is of being underway January. to we by business that we and January itself announced continue us in continue actually place, expense sure the addition the at to of in people, program is to at will time. So already initiatives done yield early the right announced terms that our we beginning right an savings continuing of addition And automate that at in the the some a that

regulators. In I terms bar you a a bar. do either this bar reinvestments willing extremely We're on and high than very willing very actually, have fund high to there reinvestment as high our mean, more is you demands expect now we're focus an resilience our fund such just the it the meaningfully adds of we're to needs there's costs, is of the if to what ourselves, client that is revenues, -- for to see what for our we value new Much of but area which for potential risk. a proposition the heavy that terms visibly not in lowers in can lowers

if bar confident will not us. are for also to So improvement all of keep you but most that high, yield those that very this. themselves on Eric? economic investments we We're hear very continuing

Eric Aboaf

to and questions navigate every add we're don't and have Eric. I that do And day of, ourselves just every that's ask line top we're through the of we're and will would the pyramid, comp, why process to day harder, some if And our management Brennan, senior we the we it's areas on take us right? uncertain these ourselves need of because hiring executive decisive perspective. this have environment we very we're and part end where trying Because materialize, asking in these that's faster, announce to that's the of continue incentive out figure saw XX% year if be. -- be part more going how to we just expectations adjust a know and you at freeze, think, I to the the to can of going out And our push to deeper.

freshen clients custodians to our if make do balance brand it you think the stock our there to need it, that world. areas like reinvest out And custodial reputation second none is -- about one I our to there. it we of in as to leading the infrastructure in continue and is lot sure our that put of what we some is want technology a and and do in think

balanced as be about position. so, got as we And well our to think we've

Brennan Hawken

Thanks for the color.

Operator

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

Ken Usdin

fees plus obviously, Hey, be mentioned I thanks. guys. morning, the Good I We bit Hey, flattish the to for we outlook the averages about -- really your Eric, you know in a and quarter? second little start. to about expand think business you ask have on good can wins more to seasonality. know the markets X% and a

other moving backdrop and would only I of gain guess, and that a keep I other better especially how tax chance given parts, about, the then some growth the in flat of does of with just from talk some that slightly to that processing you'd better the it trend you up? have improvement? think size the terms here, of would CRD can So

Eric Aboaf

Yes. Ken, it's Eric.

and reverse was I think million disclosed. kind XX as I Let On order, think from had, of down me $XX help. the had I try other, fourth processing described, I'm sorry, because quarter we we of -- about revenue, in which which it'll

comparison of the how revenue and you that So kind that's comes the business. – recognition can in do in, just

factors other two a LIHTC portfolio. sale quarter. our had We in also this small had We

We take opportunity benefit we appreciation that $X, calling an about tax-advantaged and so choose that an There worth solar, to was have worth wind investment, from to farm was we cetera. LIHTC, et out. have maybe

to that and mark funds $XX think last support tied lines, management Which it's also almost markets I piece the happened right? in positive the underlying quarter right? of mark-to-market negative need trust asset that a to of the other adjustments a of other pools, in are business, equity the $XX the quarter, and where we this incentive the on to over processing just created performance book that their and Due million. our fall the management mark

on processing for. of back forth there to this so, which and account is in we other, need And going and kind

little a you gives bit that context hopefully, and So, color of line. on that

confidence to be fee securities and schedule, engage ways will we with I of be think and think some they I expect will this. some markets lending our back I as the the like will what in seasonal do there. top if clients responsive in go some be We areas have uptick

a help. markets bit global average I levels of fees, equity fees we'll management an from on the and of the servicing get daily uptick to think

coming then, risk On just And flows pricing low to tend other activity, we those a sentiment, and kind to the the -- volatility of the is through. pressure the a there continue other either for our even the off and think, given I levels underlying a contribution see negative go neutral hand, of way.

bit about think So quarter. of hopefully color that's as anyway a second you

Ken Usdin

press that sentiment that know point, last Have you Yes. underlying? commentary release still there? a activity. that? And better, would my there out the and follow-up change about I general? client show the Thanks. would in ICI just be, Or of quiet the And change in you in the low you characterize underlying just is base just Eric, flows the it level is any but in on and the seen looks activity how just

Ron O’Hanley

Ron. this is Ken,

And alternative. recent been think of being talk but Brexit you reasons, about trend. a also and if and and I the think real quarter, amount if about the below think obvious if there, think there me somewhat higher for rates Let in that would uncertainty you client say since interest way out about about its that. activity you there’s some flows improvement fourth I

I think did the remains low but to we activity, improvement relative investor and some confidence muted So trend. therefore remains see activity in

Eric Aboaf

active in Ken, to release, on you of that’s point, it a in seeing market collective you’re Ron’s at you’re relatively true little probably funds the and look more the data into press simpler both and have money retail where ETFs, flows it side. And, funds, an mutual do when funds, not more detail underlying our you some seeing into the institutional the and

So a driving -- little what’s our here. bit that’s a of carefulness

Ken Usdin

Thank you. Understood.

Operator

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

Glenn Schorr

very Thanks much. Hello.

expand things series follow-up I’ll be, about the a clients two owners? what other But with One things one insurance of ask think little mentioned easier. companies Obviously, it’s the that I could in you would them two faster-growing call. growth broader on questions. initiatives together, yield and what to creatively half, well thinking deposit curious those broked, And big because should to on asset on little relationship Just expand Thanks. clients is that. bit with if the you curious can second do of you’re like them? strategically align you a your the

Eric Aboaf

it’s Glenn, Eric.

question. had will me deposits, on I series of deposits segment we’ve then On or the XX dating start back initiatives deposit Let take Ron think and client more. a months

we’ve becoming, they given in clients thinking discerning, seen and fund. gentle rate about where the think this trend I I put use right, the their high word, environment

the done And to right? Think about and so, their we’ve wallet where their deposits of of cash, our work step a cascade. lot put around of back share they

of on to our some There’s of of market interest-bearing our them. funds, on sweep balance is different put we it repo. it sheet, accounts in avenues balance them of of Some series money Right? a and We some it. help some them and sheet non-interest-bearing is for

the one us as pricing become of deposit pricing I those some sophisticated, maybe so, XX think, support clients. XX, even the places on and disciplined around being for months, hand, other on our functionality to avenues over And different tactically working increasingly on we’ve last with hand using clients,

on be to on of build NII built kind one so clients that, of have the and large and sweep of up their of it the sub-segments that -- clients -- of different funds I a sort of that If NIM and segments some accounts of think It a on clients are opportunities kind the we’ve focused I segments and for we’re is sweep this to medium working clients we discussions on characteristics. actively on clients reasons and at. instead And could small, functionality in done our been underlying up in where looking wallet worthwhile where we practical more may that’s with tactical some and between we’re initiatives the couple why balance sheet money because things. our we’ve information next and and of of so be always to that has share of them. kind set of kind it’s and cash builds segmented basis. it end with we’ve of So round into relatively provide honest, But There with market we’ve well does opportunities. those the broadly

doing a of our honest be bit diversification to in also We’re little base. deposit

do underlying prepared think overall in given set and through wholesale while You added, betas we our my funding time. relatively for I diversified what up business some described that the deposit saw because that stable that continue we’re our client environment wanted the is we remarks. is I and this of deposits that we’ll deposit might betas, to affect finding

business we deposits I our as with think that’s view and series much part and careful have do a process. more an their with initiatives why think where become we think more of how good understanding our and a clients it’s and ongoing So us of their become and bring careful I we deposits, is different of should on us average, But is I with there. to more that more there them, help --

Ron O’Hanley

Glenn, up question why second I pick there. don’t your

for capabilities down those me the serve some you What it’s are enabled separately. well. asset into of to take it starting don’t capabilities we’re that kinds to mainstream historic trickle and have many saying As -- that on owner developed and these capabilities strategy that know served us typically managers. well. well most State us and enabled given of has is, let although and them clients focus is that insurance we’ve these Street’s us asset demands served been us has given companies, largest, sophisticated And It’s has

to for find some very in an were now Historically, allocators, That’s to be opportunities asset pension simple owners, changing. them. isn’t a fund way they that and hard also manager. asset it’s the were used their revenue needs relatively Asset modest

the at what actually privates. insourcing at they’re them very in doing beta of insourcing end, terms high-end the insourcing, are in they’re are sometimes Some of sometimes

taking So companies bit Insurance asset it the custody a way, that unbundled as do. for we’re bought itself offering that are high-end we asset have and separated so up is an tailoring different. sophistication truly in for to have those little we owners. what that manager they’ve accounting. lends going they that Historically, And

quest own example, -- custody. company one number have you’re driven one by custody number company are seeing near more operations, to in starting that we simplification same services. the the of to Again, nowhere At need coalesce, sophisticated in into in of are insurance it position investing for leverage other the accounting, their of things accounting For we’re these insurance we terms insurance we but their what in yield market share time, to becoming these in companies have for to trying so and move we’re terms they’re in.

instruments. in the of custody and accounting has -- So growth elaborate private them more kinds created given has or these a for credit need for new

to these able two companies. leverage position private and with number credit in the player We’re insurance administration we’re that

Glenn Schorr

for color. Thanks awesome. all That’s that

Operator

Your with Lynch. next question comes Merrill Bank of Michael from line America Carrier the of

Michael Carrier

a for on just the Good question. follow-up morning. the expenses. taking Eric, Thanks

for mentioned lower with but influx you year, the the You backdrop. bull the also reiterated the X%

for guess would Because to and in the call. be a I the to only income just markets with rebounded, backdrop you gotten flat base? since rate interest fees so flat you backdrop curious, the maybe are X% what XQ but the -- year, expect it aggressive if bit obviously, the more like the challenging markets up rebounding cost maybe So strong the last reducing has on become seems more net

what wanted So lower? X% the get would the to on levers view like your expense versus pull just

Eric Aboaf

still take the down to need we us then curve. if discernible through list we environment. they Those judgment X.XX%, even to we longer long servicing Michael X.XX% equity to if And is going look another A a and that the be trading one correction more, do then tough rates it’s in see levels different right? and if that step that that mean risk-off are markets a revenues and today, correction that we of fees. end ultimately downdraft think fed series indicators same the thing we say times I at till stick there’s another different going XX% will rate what environment. Right at when. environment to is had on think maybe That’s front sticks, indicators reevaluate, we December right, the cuts December call, the Let’s should less and a XX be right? more another are a Yes, interest the levels. we’re the even a in get but touch at in to of indicator now of but a

cycles think So seen before. these I we’ve

kinds on going at environment we deliver the some and intentions. our We’re our be on update during we the in to secular be honest, -- do update And the know versus on because us end day. guidance are then those are considering, but trying cyclical, to I of to keep pressure we’re small earnings you’ll the we we’ll capital that certainly confirm And careful to same of the back we’re see informed think of And at. navigating cycle, calls, conferences that to as our need I year. ourselves continue you these that to indicators put or wrestle adjusts And day large the well you going looking expenses shareholders. every cycle we think of on -- through as we’re quarterly to

Michael Carrier

follow-up. And then just Thanks. All right. a

You the And growth client expect teams, the in when because some terms like on with so it’s in improve an side statements, is other what both the with maybe coverage do relationship committee. far price I economic results? with think of of of -- growth of it the clients, client start in now outlook that to mentioned committee update that just plan, you you the the along And Is seeing clients? are pricing the working? whether is the negotiations the that pricing place the to and the how provides some initiatives

Ron O’Hanley

first. I’ll get I don’t there? why to -- last Mike, The your it’s start point

not how they’re being just gets rate more offsetting gather but to committee, sometimes In fee what in revenues weighing way a is, we this new done, of not terms implemented, terms extent wasn’t it’s pricing much work of that done consolidation. it from but can intentional the in client the is it’s what being the

oftentimes well in you cuts new price ourselves very spot timing, was focused were occurring when if also We’re business will because of over. find advance we the in on where a coming

but didn’t the start important impact we to It’s you’ll the bite, that terms how dog it’s and of statement. very avoided. in income the the we manage is immediately of So impact what see current sometimes that

but growth the underway, hope clients. place, and there’s laser we terms in that of in something actually it’s executives a terms on. of when of are I are In take we you from about can going time. bit are focused would have new to them of State half little the these other, State client inside work of those so a is -- Street, with two-thirds And I up but executives client things the that familiarity they fee of tell a are leg both lot say with Street see of the

some they’re have started. So from having the impact outside The already. folks

as portfolio make impacts. the But Some driving we’re a Over just other greater we’re a take is the be quick. this. teams, impact. they’ll may are thing They have It sales they quality, approach they won’t to have that yet so start. on trying high the we’re very even as – have focused sure time, really to to

is they we terms these a pretty understand interested front-to-back we’ve permanent talked take good mentioned significant earlier we once also have client, it pipeline very that to and make news and not part The about unwind. are opportunities, decision about on long-term be We’re will they a the the of pipeline. – decisions obviously of hard but it’s time. There’s as decision, a but it major it’s because in

We’re of butter fruition we same to those actually and haven’t come bread at year. confident what see our this is. several time, of lost sight But that we’ll the

of So XX% high-quality this if And it you new look was competitive. at quarter. business. business the new $XXX was billion that classic of

most in things this we from year. part certainly And near-term the So synergies. will time, have talked for we’re about amount – near of reasonable that on on stuff River revenue well sometime It’s installed that then a are would us. for our there we impacts very Charles won how I lastly, on else. The can focus synergies somebody it get track

we’ve it’s is, they it now us doing of before. as business will weren’t built install example then to activity they that’s it basically has where client, flipping line. markets and That Charles – their River existing an good a engages easy So in on with switches can do where our functionality few a where that bottom show

very So long-term high-value finally business, it’ll revenue have that core term make in the we’re and on bread-and-butter then been mix – point business to synergies in markets is focused Charles a which I’m kinds the the immediate area. of the of these River it’s trying mostly

Michael Carrier

a Thanks Okay. lot.

Operator

Graseck comes with Stanley. Your the from Morgan Betsy next of question line

Betsy Graseck

Hey, Hello? good morning.

Ron O’Hanley

Betsy. Hi,

Betsy Graseck

and of through for the the is the the guide getting I’m half got if the Hi. A a year drop-off there? stays a outlook me wondering, sensing you’ve flat couple could intact. bit Maybe of questions year. just for one the digging drivers you it us understand if could the up slightly, indicated then full you know XQ back help in guide for bit. if but line XQ a are what expense because right XQ that talk just that little there on the And little I to in size is that’s I’m – you what

Eric Aboaf

Eric. it’s Betsy,

a X%, X% on think on actually – year. down deliver an the first basis underlying ex-CRD of think on well because in down for let X% begin me were frame right to said to basis way on I right? base We And year-on-year basis I the so that’s core that this firm. way expense that’s a our we the all on our expenses – down we’re the quarter,

I think the have in second quarter, you usual.

River, and Charles those merits we’ve of come offset. trying don’t know through like we’re coming quarter every that as to but intention. and little our in but coming don’t will got that’s well saves expansion through You offsets just a bit something I

quarter-on-quarter to off on we’re think basis a start quarter a first I year-on-year basis. and good So

that think quarter, expenses I good I we be second think to the from can of third second not I can you but in And guide can fourth the then back year-on-year X% kind And quarter that’ll progress. quarter described level giving quarter. and this the I into the think down the hold if then of quarter my year specific guidance, for ex-CRD there. half impute I you that it take given second think I’m

Betsy Graseck

Great.

you going that likely could as Okay. to might maybe Could give about thinking benefit a about what to down And out us surcharge G-SIB as fed you’re the talk callable then the optimizing guys. eSLR from come sense as the that’s capital bit how we little from a the for prefs managing with to out the sheet, the you there? you balance be do well

Eric Aboaf

is Yes. a The really is, there way. I one nice in think capital that evolving

and feel pretty potential this knock think I on year. good first, CCAR we CCAR around wood our

that So June. more on in

billion we’d material up capital, think been right? want capital model our else it, us quite for on it’s find I ways of and register quite development that – positive certainly billion, $X suddenly is it’s on $X.X the releases to CCAR all return investors the base is of think constraint – through could in on actively something tight though published If to the as for the in the probably $X that rule the rules how which us, goes about you equal. frees leverage to billion depending ratio SLR and in I

go of I think capital on down points X% surcharge from X.X to the capital X.X% forward worth is G-SIB if you $X.X roughly. our base then billion

from the how that, we will year whether so all CCAR to is now go intersect two a now or run Now SCB and from forth. with years

these to various feel hard certainly start. tailwind also or rule when. through $X and them is how but like positive. capital think I of capital equity that’s exactly it’s I time, stack, common we Exactly, first at predict changes – the But to billion plus holders. protocol coming the to is and through how on rest So monetize over place obviously that’s the directly take a getting And more look we’ll capital our first buybacks the certainly there

Betsy Graseck

Eric. Thanks,

Operator

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

Jim Mitchell

and Maybe I the XQ – to side, like around XQ. being it’s it’s it close seems it’s across your lower the bit guidance very of on AUM be than quarter to not but identical just at pretty XXXX quite passive similar it morning. look management a income mix fixed cash, if for levels, to whether revenues next would on asset it’s disclosure active Good versus follow-up if whether kind across, equities Hey.

trying you’re equal what going pricing in How in despite maybe just I’m AUM? So think what’s the on ETFs? pretty rate to we the terms unpack underneath fee lower-level surface just of do Is disclosing it beyond about run pressure. the

Eric Aboaf

within factors that were P&L. it’s quite have are assets think Jim, see And we Eric. deleveraged the our large large last I There different from asset are through loans to careful market our remember, sec think of a structure. as this we on the three kind more that, than be complex you really of have and cash business, into assets where – I flowing I lending which year year management activities there a gone are that businesses a those is couple comes tied loan. that and they lower the think cash the has And on

And a so that important, product fee from And there’s in good-yielding business. for is follow-on cash been that’s the that’s less us cash our historically a because perspective.

real year is a some the higher through the back second back and they months. I we tell, first go that and I and as ago, -- come confident than come see markets as uptick we’ve and quarter whether normalize upswings -- in why will a couple seen think next some we’ll quarter, will we’re think time are there

as true business is passive underlying our there certainly provide some products. of -- asset part where second management And that’s large pressure. of the fee those think is as I an we our institutional,

the Some And facilities, that turn. mode of is factoring largest money and in of different I And is time but takes active we’ve is we’re through. that -- served -- historically world. some -- turning still rotation has ETFs flowing and a think and think the active be -- some institutions built that we of business passive that’s OCIO by that out why to the managed clearly components. the of self out around there I is the there’s a got to that’s a of other that lot

under highly the from right And months XX going. in a that management shifted and operate pleased think market is assets quite products of ETFs with to billion, some product our the channels actually of performance well on We’re that That the ago. some market the that’s I standing $XX the we $XX is low-cost core where has in. of now And a billion retail to being lower-fee product. start is its challenge of way

real build also other area we of us. areas. to some space, driving for And High an while growth is in so there out continuing of that the are actively our in strength yield offering

at Some gold of that’s hard of various the of an the of of and there. favor avenue seeing on area working And of those success out we’re or like, is same of commodities, the time, distribution, because we’re some product is high channels in other the favor, strength. what part areas are

we that come to the in the of businesses some in to those continue right So three I -- and navigate more asset direction. industry in large management we these think turn as shifts

Jim Mitchell

by were last Well, excess besides the but the change. with like as just enough, you constrained comments test least right. gears capital SLR. on at your It All switching stress fair other maybe seems factors much

a it confident much that how to sheet going I’m you’re that’s be put to given want positioning you trying you free-up balance much the excess capital? to more component really is to think so feel just can just I CCAR? think, and capital flow that sure So, work? actually Is that understand leverage just in make constrained

Eric Aboaf

Yes.

year, have which is the those look has binding is one us or you if CCAR not in Because ratio principal we at The right? I relative four leverage the CCAR last the one the just decade point through, plays half in those last the think constraint how and effect, but that’s of back that of the -- hit and requirement. the for to leverage CCAR, right? the -- five we ratios, low

or gets effectively constraint that And leverage the exactly right common our back. a to version rules it constraint, SLR that So a equity just either constraint. written is ratio with either of the we X shifts constraint ratio end X the much happens how lighter constraint; I gets leverage what depending in up a on change then that with think pulled Tier all and --

to so I get and we and it’s case run is stress this think test either the in sure be and done the on hard forth. -- and rules until so actually

I that the think capital have you’ve is be think a details. question up. of The the That $X will think seen. same modeling I at I as we’ll billion there rulemaking seen And public proceeds. see likely freed is in stake more plus that I the

we June. we’ll -- As CCAR second year standpoint. the in see that build that’s return hopeful the And we’re something the upon capital more can in through go a half as we from results of

Jim Mitchell

enough. Fair Okay. Thanks.

Operator

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

Brian Bedell

asked have maybe servicing Thanks markets back well I guidance side and the management average of the Most maybe management line business. -- re-growth that be up go flattish taking that fees X% been imply imply up would within so servicing the quarter questions. X%. then would on on an forward, would do guidance to And pressured? about for servicing for back I potentially side the them fees Great. just to just But of mean, come going your your servicing those and or Eric, even persistent the year? the second asset of fees part basis, can on to answered, adding the business given the are should my have significantly? that. a fees pressure we assume Or that in X% versus the new to the we is do third of reflects pressure If have that the re-grow good pricing on see for you will quarter that flat to servicing we asset but just fee we of unpack

Eric Aboaf

it’s Eric. Brian,

me a couple I areas. try out think in let different to help

other when more overall all provide we I added fee that’s So you right? more revenues to fees, detail. servicing as that’s guidance. quarter be as we happy So markets little fees, to And develops, said, together, to up broad I’m give think, fees, a trying I’m know flat would X%, some the right? and processing first, management

So and processing helped I events think clear downtick a that so in there. I this think that of aggregate. we of has was I some of and other coming, the quarter, because

I to how some hard think don’t see market and likely tick I to finance volatility. much. tell know up, the we’ll hopeful are, just uptick servicing And of is on combination given fees, we management sequentially FX sec think,

stays try precisely, I math, first with the daily math. that quarter. quarter, of using I my XX, you if on underlying the And S&P versus at rest think at you think roughly if work it I’m level up to through to S&P. just words March second just X% through take the the is average help The basis

remember, I base think international income indices forth. much. fixed and the also so and have may up space not we And that an be a alt

in. of And got about how much factor to so that you you careful be

pricing benefits, need goes to that provide that but the think comes is we manners and some other should there positive I activity. in flows And and the in lumpy then way see.

as in the servicing we’re think like that’s see fees. described we’d to -- in intensely -- not all some the what on in why December. in the on side And hiring on And the freeze And and to on we’re working if started we uptick in are teams Ron like focused I are comes. efforts take intensely place. the see interim, that the It’s vigilant which -- need got to business relationship And it management like -- we some it be I So that. stability think to combination we the still sales just think -- that find and to got is because we’ll we’d of you that’s for we’ve look of I I efforts new more environment out continue think additional drive part to to what And ways, this ways dictates. to ways ways, costs. continue expenses,

Brian Bedell

growth. you in maybe That’s targets the Yes. to XX% enough. the medium-term fair to appendix, that XX% EPS just And then have the

can over it’s years clarify I’m that. if think I not three you if mistaken,

through likely you would XXXX XXXX, looks a this be would for at revenue year-over-year. like it headwinds, that most least to basis continue we but down EPS GAAP year, So on be these if have

Is in all So just the out-years. thought or of how from the CRD saves more growth cost you this guess? the regenerate I EPS from synergies that

Eric Aboaf

December. right? in we I right be a different Brian, environment actions, mean it’s -- broad got we’re those a to were now we’re than living of combination in

we growth. we good growth of front. representatives On for interim, or the of do drive these on ways. think need drive a is growth we’ve hopefully And to of got initiatives, ways in right? this find got that growth on shareholders, -- driving client-specific got medium-term that to restarting to it’s topline capital the to to return -- if segments, and know that firm find environment we to out it’s got bit over-deliver earnings carefully. critical need -- take both And we’re Ron as doing, the on to year doesn’t a find some the the some the got going to be we’re end find And to going all deliver year. that we to other We to is as more that ways slower come we that in discussion capital. sheet that’s the should need and And hand, operate as that. which of some to environment shareholders I to ourselves the and we we -- like we We flat part why the our need. and of coverage drive initiatives that come at those we to day, we of in, to on Part that find the feel enhancement to that and as after And and confident again and said, more to targets, a able year, next what expenses deposits had of ways come and growth what balance ways

Brian Bedell

enough. fair Thank you. Okay,

Operator

of line comes RBC. Gerard with from Cassidy question next Your

Gerard Cassidy

front-to-back actually strategy full product product reasonable might are this of XXXX Charles currently And some with any type us clients. Thank supports front-to-back acquisition share -- you. end you if for how strategy. the that of many your what set about adopt the you end you are of customers folks? you bunch for of from River the morning. Good the with have guys Can folks? year And obviously, customers targets many talked How this opportunities a from you and

Ron O’Hanley

take Gerard, that. its Ron, I’ll

So existing things strategy this of a to in to outside way think that proprietary or you What term. you’re announced we as off first front-to-back a when fundamental these I that about acquisition be we’ve do they’ve beginning the that Charles client typically long There move talked time. when talking the systems. got operates. would of panoply the some Typically, about is off have of from small River the itself change they move are so take here

about that frame. true think in suggested front-to-back seeing first to -- start the that would I we we at talked relationships when XXXX time this we expect

most doing it’s to when to the was here. I answering to even move the of if quarter. are massive we’ll at one There’s say really confident get active take-up lot on more they very every see XXX and a involve actually this the We’re And our installation most, -- beginning closed underway. a a beginning because discussions question I client report of or that we’re Alex’s these all I front much of interoperability interest. of occur is what seeing most about because back year, than it’s or because that all And and a over faster We hour but that platform. still talked

it. to how about that’s It’s occurring. think So

and We’re a There’s it’s be better been underway. interest pleased anticipated. team, we there. the with the lot of lot doing of one -- the about we’re from occurring. been people knew today. pace this. work a discussions It’s take-up on a it we would There’s now And The of than lot has

So I year. think specific that you’ll names -- we’ll be able on to be reporting later this

Gerard Cassidy

you reasons impacted and the in the market touched on on. conditions your different remarks management then about with And good. number Eric, for prepared the Very so being fee

from You products on you also away elaborate some higher-margin identified your that Could a of customers. mix area? shift by

Eric Aboaf

Yes Gerard.

that between in are seeing into operate low-cost those you that really that’s mostly that tell ETFs two in. certainly by historically core some three of flows products industry And would in but the of operated the ETFs observers the most, businesses management We’re XX%, asset we’ve products. to the as somewhere mix now higher-margin XX% we of in opposed shift

the a view got that market area our that’s seeing higher-fee but both the through just low-cost to And is there that’s one playing in and we’ve shift new in shift. where also the so area, compete and that areas of we’re is

years is one two, mandates second priced in that I Like six think ago. asset intense is were certainly of And managers, areas. four, lot of on back priced kind a those three, all five, we so the there’s -- over always institutional. being kind the and we’re the have a institutional side differently what seeing rotation competition from in book time of some

products of think So fixed it some other and continue something is in to tackle expanding it’s OCIO, to like-to-like because where and to fee I offset. and the product, by capabilities, some fee those LTI, we that that’s rebuild our only of higher whether way need it’s income introducing is areas, whether to

Gerard Cassidy

everybody. the I Thank appreciate insights. you

Operator

next Steven Wolfe Your of the Research. comes question Chubak with from line

Steven Chubak

Good morning. Hi.

and well strength don’t on fact the preferred be increasing above why planning? the Do the Eric, some actions, of question of leverage submission? defang, that additional and just given ratios so a So the you start-off your upcoming position specifically XX%; with capital speak. part the confidence some you are cost retiring anticipate expected capital taking to of you to cited, higher payout Just capital that

Eric Aboaf

Steve, it’s Eric.

not the ratio. we to filed still definitively happen where very a on think to right? have about think think So going on. we will leverage position to CCAR, beginning April, That come we’re going to what’s in of later as at the stages, I in I capital, it we’re know

think And CCAR as we’ve without XX%. some we above addressed smart topics. that of it today I counterparty portfolio. my changes, we’ve substantially have in So investment in I portfolio prepared actually confidence to and the That’s any think a those remarks, but our delivering the know on of rule We’ve I’ve consistently in kind way. said we adjusted continued risk, positions that’s reduce because

So one. that’s of kind part

see kind second legislation final opportunity. part be as on ratio through It just be August. be play the two could provide to think July. CCAR, could but It I we a there’s us It for that be June. but G-SIB be leverage with takes opportunity change, that come surcharge time, could And that on opportunity think could another need these see will I out. of a and third the we could

planning And about so not -- as And to capital but phases, the time. leverage ratio speak. X, as I X. all maybe think of same as I so With kind think at is I’m Phase is of capital in kind Phase planning, CCAR

the we’d part down path I what think holders. equity I certainly the start then if with we go of to like of capital think stack, our common

important area capital most us the that’s think to. return I to for

owe we so think I to priority. and the first it that’s shareholders, our

some analysis get that prefs we’ll of developments, be always around analysis the and optimizations that and stack, do. some the outlook. we’ll in refresh our look the the around through that’ll we rest And think these we obviously I see at and of certainly as of certainly capital

Steven Chubak

capital helpful. was And prioritization Eric. Thanks, quite

for Eric, up that, and you would couple interest as really challenged reserve ago, X%. quarters, about a of balance H.X. the are on back excess of look in Just sheet, H.X the last on the quarters couple ultimately deposits net more determine And that notion follow-up should trajectory I deposits, one me we income, levels, that focus over the

Or do Your factors benefit average industry-wide the future pronounced H.X? investors bearers. just more deposits of deposit the some trajectory going but that back given should about of reliable here? about we the with from that’s that, with as gathering we of are about you drive to down about X% what you discrepancy you cited hindsight, improving drove track? how more the the what’s with proxy think should in think actions think that still And are that’s Recognizing a declines an phenomenon, half, that trajectory, in confident non-interest deposit that

Eric Aboaf

See a of questions. set Yeah. thoughtful very that’s

deposit simplify H.X just I retail There those, There also consistently I the corporate pools a that comments in and deposits. if indicators of pointing the factor lot pools. And deposit is obviously think I’ve that of more think you’ve to custodial deposit different a addition of there, into of said got to deposit some look There you’re are are pools. series at pools. there a are And three all out for report. right? I there are three, to,

we where the discerning as they And an typical account in institutional And the so I think increasingly ways rate clients what are stake. money than we for see we is under becoming see as pressure. more banks, client, reports of that’s a custody we’re I we the And peer evolution think the some seeing an think deposit And that some seeing environment. industry. discerning in the operate higher some probably regional who’s I retail through that got less what at corporate play we’re of in in

and custodial we that to a the we’ve see navigate the we our to we see pressure, do as possible think NII and and work you that. under go perform have As some the on deposits custodial as through would peer the of then banks, tell in do to view continue is under I NIM. to of reports lot I well surface

in, I’d our being as deposits a kind And in of got of deposits you some from tick-up, the wholesale of brought beta saw was for so which the some interest-bearing we client away the for underlying funds example, on quarter that of that that But of tell to deposit cost up this the kind closer you aggregate those wholesale mixes deposits we about diversify is base. of beta betas. XX%. mid-XX% because of And sources, on those part to

betas think those so I And stable. are

be think to way perform your lot, And in And those segmentation trends, to our we heard of we custodial in about in by do continue some space, And deposits I everything secure bit. your why as as activities backdrop with a in initiatives detailed in job believe and got and be incredibly many the that’s and can that bring to but your that mentioned is earlier. as as that is that’s we deposits. to it the aggregate pricing of think now so I see not the to seem nuanced the of keep hopefully possible as us lightening we some those to you our and I sheet, balance industry you’ve on and well of by a but deposits And outperform can serve.

Steven Chubak

Very helpful my questions. Thanks taking for color.

Eric Aboaf

Yeah.

Operator

Your next Wells question Mike Securities. with of from Fargo comes Mayo the line

Mike Mayo

is Hi. highlight where the that margin in pre-tax what -- XXX the And In X by pre-tax you base? Thanks. basis point desire points medium-term, of over improve you define off a the appendix percentage margin improvement over do to medium-term?

Eric Aboaf

targets of got it’s we Medium-term, in so Eric. work tell, can years, of base Mike, margins. about XXXX. defined Yeah. We out December. as XXXX, we’ve a as was you three to those And set do. off XXXX, And it XX%

We’re not shy that. about

We’re not defensive about that.

to see revenues. downdraft got of we’ve real work when do. in are a part negatively We’re you margins -- And that affected is

that overcome turn-around So that’s taking not that. us. got to think that that’s market we’ve not is, just sizable expenses. has And and that to performance. on got a -- on that’s I got we’ve Notwithstanding, action We’ve to keep conducive, been but the --

So, on focused it. we’re highly

I take keep will think it the time to that get and we’ve towards work is targets. our some given there. But got we to have acting those hand view

Mike Mayo

you. thank right, All

Operator

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

Marty Mosby

now ask the Thanks. of you is kind quarters there I see which to you taking to can advantage higher this couple trend wanted that about, out that a built take your could more out, bit fed in the different now? or -- assumptions base. have conservatism what some investment you’ve advantage also also flattened mean and right of tail the there has plans bit continues then I able risk taking the of deposit you to into more for but that still And for portfolio, kind little maybe a rates of Eric, ask that? you of your that wanted see about, a and being little maybe stabilization

Eric Aboaf

Marty, it’s Eric.

I a conservative how watching one optimistic is that. the be either Fed know at about don’t to think popular Fed. I and or an art

I much and an to transparent quite rates. think of not intention at clear short-end end they’re that of day the change relatively there’s the

we’ll is goes. Fed I the there is market think pretty as I downside think rates see. than of been to The estimating upside but kind she clear that has more it’s steady

cut economy it’ll out I market’s or is a or there’s the around case year turn play in year. And if does is question based markets. how then, more this second It’s a underlying of the that’s from think half the end second now quickly because come the of And year? and the then there hike think through towards the a the on the I the question some is the indicators that say view long do rates. they plan do happen is ticking to level Do just might might going what upticks the think other inkling for up? what’s would of this in I and there be optimists -- the stay And you And I interpretation at they we’re end for a they can’t or of here? from our that. bank And think nice. fall a

at what kind plan today. where hopefully to got sense Anyways, You -- for we’re being that’s we you least the a case thinking. of for gives base are

mean we that’s of into I high-quality that on We’ve areas. is can assets. which significant liquid of billion put We’ve And deploy work. got of portfolio, to view some cash that -- banks. continue the on books, towards should more at can we various kind the got base that cash other cash be think of cash $XX investment our very to our central put our a

think high-quality of And portfolio. quarter, of portfolio spread way. very see find comes I to over into MBS larger continue helps whether with do and supras some in for continue look the MBS, I a think this a continue it’s rates. opportunities. course of treasury out in downdraft is mix what That opposed some the liquid kind in to agency in us seen I us last asset think to OAS the a portfolio whether opportunities you’ll way, leg balance the it’s opportunities And right as the you’ve

grow other to got should allocation but to that long than the at had we lower as we think down in help a us question think portfolio least rates And work of to of seeing obviously nice transition is what And the treasuries I that of I abilities at And I relative a we avenue field investment a -- today our portfolio, of agency that lending do. we’re treasuries, that’s thin we’ve smaller supplemented bit can stay -- the much the for beginning the is a as we products. can that’s other have offset the to think we year. the how that can we kind but towards.

Marty Mosby

out of want above in status XXX%, at of then, quo And growth if how and then, ratios issue of keep need kind revisiting go to much if -- just capital above the that the way, kind and don’t you without that of kind your a look do kind XX%, you you -- different and else just you assume assume migrating for you stability. organic everything

-- So some then, much how portion would would ability the organic till excess able that expedite type get in-year you of and need wait -- plan? whole up to that XX% and see next significant for gets changed, this have the change in you And you being of of would freed billion-or-about to growth? do or that year XXX% SLR change like a in $X that between the

Eric Aboaf

to And and prescribed go information I don’t we and we certainly submitted in more think if to which comes the I think We annual there don’t I’m I seen if rule -- changes. there’s through process other have is opportunity we’d legislative think -- the and the April Fed SLR, is think excess we back. capital do consider you asks. about banks not for have think to -- June plans in seen there’s in do had that through I to always capital are that that you’ve rules but And the if have some all now the were CCAR if have an ask right say way up that right? -- banks ask but know that. the you set and we do you’ve additional

in going is there just my comments think We said we’re in an there. I stages. I this take as So, opportunity -- to earlier

First, And get are in June. coming. through then, changes see there other CCAR if just

Marty Mosby

growth need you that XXX%? organic of So out XX% growth then in and between do much how

Eric Aboaf

Yeah.

I I I -- a flatter on sheet of environment, ways think I’ll And that’s traditionally up, say If much we How growth? than with as how capital-light actually deposits now. some don’t in need we much sheet sheet It there Because line to balance be business. would expansion. to growth? a that stable it balance that’s capital in to need directly call a balance require it’s and in our capital answer sheet a about is very what proportional like doesn’t so it think is let’s balance the sheet interesting balance business. question with accrete then operate right with more balance accretion. what lot a there’s right in the -- you don’t is no Then accrete where year any retain much the It’s a capital sheet.

can You actually to return it shareholders.

think of let rewarded. think I I balance each when us like for rate And to in sense. as And so, growth reward light capital comes. total really as example, can it’s the I be can flat, year kind shareholders think sheet they’d our it take we a is And

Marty Mosby

Thanks.

Operator

This And there are time. conclude no further questions today’s conference. at this does

now disconnect. may You

Ron O’Hanley

you Thank all. for And forward further we to look interest. conversation. your Thanks

State Street (STT) 23 Apr 192019 Q1 Earnings call transcript