Q1 2023 State Street Corp Earnings Call
Good morning, and welcome to State Street Corporation's first quarter 2023 earnings conference call and webcast.
Days discussion is being broadcast live on state Street's website at investors got deep Street Dot com.
This conference call is also being recorded for replay.
Streets 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 expressed written authorization from State Street Corporation.
The only authorized broadcast of this call will be housed on the state Street website.
I would now like to introduce Eileen Fizzle Bieler global head of Investor Relations at State Street.
Thank you good morning, and thank you all for joining us on our call today are CEO , Ron <unk> will speak first then Eric Adblock, our CFO will take you through our first quarter 2023 earnings slide presentation, which is available for download in the Investor Relations section of our web site investors update Street Dot com.
Afterwards, we'll be happy to take questions. During the Q&A. Please limit yourself to two questions and then re queue before we get started I would like to remind you that today's presentation will include results presented on a basis that excludes or adjust one or more items from GAAP reconciliations of these non-GAAP measures to the most directly comparable GAAP or regulatory.
Measure are available in the appendix to our slide presentation also available on the IR section of our website. In addition, today's presentation will contain forward looking statements actual results may differ materially from those statements due to a variety of important factors such as those factors referenced in our discussion today and in our SEC filings, including the risk factors in our <unk>.
<unk> 10-K, our forward looking statements speak only as of today and we disclaim any obligation to update them, even if our views change now let me turn it over to Ross.
Thank you Eileen and good morning, everyone.
Earlier today, we released our first quarter financial results before I review, our financial highlights I would like to briefly reflect on the eventful operating environment in the first quarter.
Investors have to contend with significant market movements in volatility driven by persistent inflation continued central bank interest rate increases and the recent disruption to certain segments of the banking industry.
First quarter global financial market performance was choppy.
January produced a very strong start to the year with gains across most asset classes, including equities recording the strongest start to a year since 2019. However.
However, investors remain cautious about the prospect of enduring inflation and a potential recession.
<unk>.
February saw that encouraging start recede as strong U S employment data led to growing concerns about the persistence of inflation, which in turn saw market expectations for central bank rate hikes increase fixed income and equity markets declined in the U S dollar strengthen.
March saw continued rising central bank rates, which in turn drove shocks to both the U S regional and international banking sectors and the need to resolve a number of banks.
All of this drove negative market sentiment contributing to large inflows into money market funds and a reversal of a number of the macro trends from the prior month.
Both current interest rates and rate expectations decreased in the U S. Dollar weekend, although relative calm returned to markets by the end of the quarter.
Notwithstanding these events all told global financial markets performed relatively well in the first quarter compared to the fourth quarter of last year with broad based gains were recorded across global equities, while U S treasuries experienced their best quarter since the first quarter of 2020.
However, daily average equity and bond market levels, both remained significantly below the year ago period with average equity markets down approximately 10%, which created headwinds for our fee driven businesses impacting our year over year financial results, which I will discuss shortly.
Before I discuss our financial highlights I would like to briefly comment on the recent events in parts of the banking sector.
Globally systemically important financial institution stage III plays a critical role in the worlds financial system or.
Our strong capital and liquidity positions size scale and sophisticated risk management allow us to help safeguard investors and assist in providing market stability during uncertain times.
We demonstrated this ability at the start of Covid three years ago, when we hope to establish the money market Mutual fund liquidity facility in the main street lending program.
During the first quarter in concert with 10 other large U S banks.
<unk> Street once again use its financial strength to help assist in stabilizing the financial system through the provision of liquidity to a financial institution in the U S, reflecting our confidence in the American banking system.
We stand ready to support the world's investors and the people they serve during this time.
Certainty for our investment servicing and asset management products, which offer clients opportunities insights and liquidity.
Turning to slide three of our Investor presentation, I will review, our first quarter highlights before Eric takes you through the quarter in more detail.
Relative to the year ago period first quarter, EPS was $1 52 down 3% as the positive year over year benefit, resulting from our continued common share repurchases as well as significantly stronger NII growth were offset by lower servicing and management fee revenues, which were impacted by weaker app.
<unk> market levels continued business and personnel investments to support growth in our loan loss provision related to state Street support of the U S banking system, which I just mentioned.
Turning to our business momentum, we remain highly focused on continuing to advance our enterprise outsource solution strategy across our clients front middle and back office activities.
For example in March we announced our agreement to acquire CF Global trading this.
This transaction will further expand state street's current outsource trading capabilities, giving our firm the ability to provide these services to new clients and markets.
Importantly, the acquisition will allow state street to expand its liquidity, providing capabilities and offer a complete global trading solution as part of our Alpha front to back platform. The transaction is expected to be completed by the end of 2023 subject to customary closing conditions.
AUC amounted to 37 six trillion at quarter end, and we recorded asset servicing wins of 112 billion in the first quarter about half of which were higher fee rate alternative mandates consistent with our strategy.
Encouragingly. This was our second best quarterly sales performance by projected revenue within the alternative segments over the last six years.
We also reported an additional alpha mandate during the first quarter as this strategy continues to resonate with clients.
Our AUC, a installation backlog amounted to $3 six trillion.
Right.
At State Street Global Advisors quarter end assets under management totaled $3 six trillion.
While flows across our asset management businesses were negatively impacted by the various market factors in the first quarter.
We continue to see a number of bright spots, we're focusing our efforts.
For example in the U S. Our Spider ETF franchise gained market share in both low cost equity and low cost fixed income. While we also had strong inflows into our gold Etfs.
Investor demand for Safe Haven assets.
While aggregate flows to cash were slightly negative for the quarter. This largely resulted from seasonal outflow activity in January .
However, global advisors gathered strong money market inflows of over 24 billion in the latter part of March amidst the market volatility.
Turning to our financial condition.
State Street's balance sheet liquidity and capital positions remain strong our CE tier one ratio was a high 12, 1% at quarter end, well above state Street's regulatory minimum.
This balance sheet strength enabled us to continue to return capital to our shareholders in the first quarter, while simultaneously supporting our clients in the U S banking system.
We returned $1 5 billion of capital to our shareholders in Q1, including buying back $1 25 billion of our common shares and declaring over $200 million of common stock dividends.
As we look ahead in this uncertain environment, we remain highly focused on maintaining a strong balance sheet position, while continuing to generate and return capital as part of our previously announced common stock repurchase program of up to $4 5 billion for 2023 subject to market conditions and other factors.
To conclude our first quarter included a number of significant events in global financial markets and with the global with the broader banking industry, while market conditions were volatile many asset classes saw sequential quarter gains, although asset prices remained depressed relative to the year ago period, which.
Year over year headwinds for our fee driven businesses in the first quarter.
While our year over year revenue performance with durable supported by significantly higher net interest income growth. Our results. This quarter were below our expectations, we need to do better and I believe we are equipped and on track to do so by focusing on areas within our control and effectively executing our strategy.
In keeping with the strategic priorities I outlined in January we're driving forward with a number of actions for example, our AUC to be installed as strong and by strengthening our implementation capabilities. We have line of sight into a meaningful amount of client on boarding beginning into Q.
Within our software and data business, we expect to convert a meaningful number of CRD on premises clients to more recurring SaaS revenue in the second quarter.
Last given the revenue inflationary environments, we will continue to selectively repriced some services proactively manage our cost execute on our productivity efforts.
And stand ready to utilize additional expense levers at our disposal.
With a focus on accountability and execution of our strategy.
To firmly believe in the ability of our diversified franchise to successfully meet the needs of the world's investors and the people they serve while delivering value for and capital to capital returned to our shareholders now let me hand, the call over to Eric who will take you through the quarter in more detail.
Thank you Ron and good morning, everyone.
I'll begin my review of our first quarter results on slide four.
We reported earnings per share of $1 52 for the quarter, which included a $20 million at $29 million provision or six tenths of EPS impact associated with the extension of liquidity for our U S financial institution.
We participated in an industry consortium supporting the banking system.
We're pleased to do our part.
On the left panel of this slide you can see that our first quarter 'twenty three results reflected the year on year decline in both equity and fixed income markets, but was more than offset by strength in net interest income and strong momentum in our securities Finance business.
EPS was down just 3% as another quarter of significant buybacks reduced the number of shares outstanding.
Against this challenging backdrop, we again held total expense growth to just 2% year on year, even as we continue to thoughtfully invest in product and client growth initiatives.
Turning now to slide five.
During the quarter, we saw period end AUC, a decrease by 10% on a year on year basis, but increased 2% sequentially.
Year on year, the decrease of AUC was largely driven by lower period end market levels across both equity and fixed income markets globally, which were both down in the 10% range.
Quarter on quarter AUC, a increase as a result of higher period end market levels and client flows.
At Global Advisors, we saw similar dynamics play out.
Overall, our first quarter AUM was negatively impacted by volatile markets.
Period end.
AUM decreased 10% year on year, but increased 4% sequentially.
The year on year decline in AUM was largely driven by lower period end market levels and net outflows.
Quarter on quarter, the increase in AUM was primarily driven by higher quarter end market levels, partially offset by some outflows.
Turning to slide six.
On the left side of the page Youll see first quarter total servicing fees down 11% year on year, largely driven by lower average market levels client activity and adjustments and normal pricing headwinds, partially offset by net new business.
Excluding the impact of currency translation servicing fees were down 10% year on year.
Sequentially total servicing fees were up 1%, primarily as a result of higher average equity market levels, partially offset by lower client activity and adjustments.
On the bottom panel of this page. We've included some sales performance indicators, which highlight the good business momentum, we again saw in the quarter.
AUC <unk> wins in the first quarter totaled 112 billion with about half driven by wins across the growing alternative segment, especially in private markets.
The fee rate on these alternative wins are generally more than four times. The total servicing fee average, which makes us a strong one quarter from a projected revenue standpoint.
At quarter end, AUC, a one but yet to be installed totaled $3 six trillion with alpha representing a healthy portion, which again reflects the unique value proposition of our strategy.
Given the planning and preparation since these deals were announced we expect significant onboarding of the sudden installed AUC a next quarter.
Turning to slide seven.
First quarter management fees were $457 million down 12% year on year, primarily reflecting lower average market levels and our previously reported client specific pricing adjustment.
Quarter on quarter management fees were flat as higher market levels were partially offset by outflows in day count.
As you can see on the bottom right of the slide notwithstanding the difficult macroeconomic backdrop in the quarter, our franchise remains well positioned as evidenced by our continued strong business momentum.
And Etfs, we continue to build on strategic growth segments, which was reflected in net flows in our spider portfolio of low cost equity and fixed income suites.
In our institutional business, we saw net outflows, while sustaining continued momentum in defined contribution with a target date franchise recording inflows of $6 billion.
Across our cash franchise consistent with industry trends late in the first quarter, we saw a flight to quality with significant net inflows were at 7% of cash AUM into SGA money market funds since the week ending March 10.
Which largely reversed as seasonal outflows experienced earlier in the quarter.
Turning now to slide eight.
Relative to the period, a year ago first quarter FX trading services revenue was down 5%, primarily reflecting lower client FX volumes, partially offset by higher spreads.
As a reminder, the start of the war in Europe last year caused some unusually high FX trading activity in <unk> 'twenty two.
Sequentially FX trading services revenue ex notables was down 1% with lower spreads offset by 6% higher client volumes.
And consistent with the significant increases into industry wide money market flows our global link franchise experienced an increase of $20 billion or 13% into its money market cash sweep program. During the last three weeks of March.
Securities Finance performed well in the first quarter with revenues up 14% year on year, driven by higher specials activity and an active focus on business returns.
Partially offset by lower balances, which was consistent with the industry.
Sequentially revenues were up 6% again, mainly driven by higher specials activity, which was consistent with the market and securities lending industry environment.
Moving onto software and processing fees first quarter software and processing fees were down 18% year on year, and 24% sequentially, primarily driven by lumpy on premise renewals in the front office software revenues, which I will turn to shortly.
Lending fees for the quarter were down both year on year and sequentially, primarily due to a shift away from products with higher fees, but lower returns.
Finally, other fee revenue increased $16 million year on year, primarily due to positive market related adjustments.
And $27 million sequentially, largely due to fair value adjustments on equity investments.
Moving to slide nine.
Youll see on the left panel that front office software and data revenue declined year on year, primarily as a result of lower on premise renewals, partially offset by continued growth in software enabled revenue.
Timing of installations will vary quarter on quarter based on the size and scope of prior business wins, and we expect several SaaS conversions and several on premise renewals to come through in the second quarter.
Year on year, our annualized recurring revenue was 16%.
Our software enabled revenue was up 11% year on year, but down sequentially due to the absence of an accounting true up in fourth quarter.
Turning to some of the other alpha business metrics on the right panel. We were pleased to report another alpha mandate win this quarter and the asset owner client segment.
In addition to the reported win this quarter, we expect significant middle office installations in Q as we've completed the PREPA preparations to begin to onboard a portion of a large mandate one back in 2021.
Turning to slide 10.
First quarter, NII increased 50% year on year, but declined 3% sequentially to $766 million.
The year on year increase was largely due to higher short term rates and proactive balance sheet positioning partially offset by lower deposits.
Sequentially the decline in NII performance was primarily driven by additional client rotation out of noninterest bearing deposit balances, partially offset by higher short term market rates from central Bank hikes.
On the right of the slide we show our average balance sheet during the first quarter year on year average assets declined 6% and 2% sequentially.
Average deposits declined 3% quarter on quarter, which is relatively consistent with our expectation for first quarter seasonality and client pricing preferences during periods of rising rates.
Of note average weekly deposit levels at quarter end increased 5% as we compared with weekend with the week ended March 10.
Stress in the regional bank space, primarily affected consumer and corporate depositors, rather than the institutional asset manager and asset owners that we serve.
In contrast saw some risk off deposit inflows at the end of the quarter.
Our operational deposits as a percentage of total deposits remains consistent at 75%. These are determined by regulatory guidance.
U S dollar of client deposit betas were 80% to 90% during the quarter as expected.
Foreign currency deposit betas for the quarter continued to be much lower than the $30 to 45% range depending on currency.
Our international footprint continues to be an advantage.
Sure.
Turning to slide 11, our first quarter expenses, excluding notable items increased just 2% year on year or up approximately 4% adjusted for currency translation.
In the light of the current revenue environment, we're actually managing expenses, while continuing to carefully invest in strategic elements of the company, including Alpha private markets technology and operations automation.
Compensation employee benefits increased 5% year on year, primarily driven by higher salary increases associated with wage inflation and higher headcount attributable to lower attrition rates and in sourcing.
Total non compensation expenses on the other hand decreased 1% year on year as continued productivity and optimization savings more than offset increases in certain variable costs and professional services.
On a line by line basis for non compensation expenses information systems, and communications expenses were down 2% due to benefits from ongoing optimization efforts, partially offset by technology and infrastructure investments.
Transaction processing was down 9%, mainly reflecting lower sub custody costs from declining market levels as well as lower broker fees and.
And other expenses were up 9%, mainly reflecting higher professional fees travel and marketing costs.
Moving to slide 12 on the left side of the slide we show the evolution of our CET, one and tier one leverage ratios followed by our capital trends on the right of the slide.
As you can see we continue to navigate the operating environment with extremely strong capital levels, which are well above our targets, let alone the regulatory minimums.
As of quarter end, our standardized CET, one ratio was up slightly year on year, but down one five percentage points quarter on quarter to 12, 1%, which was largely driven by the continuation of our share repurchase program and the expected normalization of <unk>. So we discussed last quarter.
Tier one leverage ratio was flattish at five 9%.
Our LCR for this.
For State Street Corporation increased a couple percentage points quarter on quarter to 108% and four percentage points quarter on quarter to 124% for State Street Bank and trust, where most of our business is transacted.
We were quite pleased to return $1 5 billion of capital to our shareholders in the first quarter, consisting of $1 5 billion of common share repurchases and $212 million.
Common stock dividends.
Lastly, given the high level of capital across every measure positive pull to par in OCI and our strong earnings trajectory. We continue to expect to return up to $4 5 billion of capital in the form of buybacks at pace this year.
Subject to market conditions of course.
Turning to slide 13, which provides a summary of our first quarter results.
While there is certainly still work to do we are pleased with the durability of our business this quarter against a very challenging backdrop and the continued competitive strength of our global franchise.
Next I'd like to provide our current thinking regarding the second quarter at a macro level our rate outlook is broadly in line with the current forwards, which suggest the fed ECB and bank of England, all continue to hike to varying degrees and <unk>.
In terms of markets. We currently expect average U S equity and global bond markets to be up about 1% to 2% quarter on quarter and international equity markets to be flattish.
Regarding fee revenue into Q and on a sequential quarter basis.
We expect overall fee revenue to be up 4% to 5% with servicing fees up 1% to 2% and management fees of approximately flat to up 1%.
We expect to see a significant increase in front office software and data revenues as we have line of sight to a number of on premise renewals and SaaS conversions in Q2.
And our other fee revenue line, which we know is difficult to forecast, we intend to adopt <unk>, the new accounting guidance recently issued regarding renewable energy investments.
Would I expect to see a sequential quarter uptick in total other revenues of between $5 million to $15 million. This estimate always depends on market levels.
As we adopt this accounting change our effective tax rate for <unk> 'twenty three is expected to be approximately 21% the.
The adoption will be roughly neutral to EPS.
Regarding NII, we now expect NII in the second quarter decreased 5% to 10% sequentially, primarily driven by the noninterest bearing deposit rotation.
Interest bearing deposit betas as quantitative tightening and rate hikes continue into <unk>.
Turning to expenses, we remain focused on driving productivity and controlling costs. In this environment. We expect that second quarter expenses will be flat on a sequential quarter basis, excluding the <unk> seasonal compensation costs of $181 million.
Overall, we will offset some of the <unk> NII trends with higher fee revenues as business momentum builds in <unk> and through the year and we continue to actively manage expenses.
And with that let me hand, the call back to Ron.
Thanks, Eric.
Later, we can now open the call for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone.
You'll hear with Frito prompt acknowledging your request.
I wish to decline from the polling process. Please press star followed by the <unk>.
If youre using a speaker phone please lift the handset before pressing any keys.
One moment. Please for your first question.
First question comes from Ken <unk> of Jefferies. Please go ahead.
Thanks, Good morning.
Just wanted to follow up on the NII side of things so.
Maybe you can just kind of walk through how.
How much of that 5% to 10% in the second quarter is simply the averaging back and.
Also just.
You made a point and a release about how deposits had increased simplicity.
The early March and what we think about in terms of your expectations for deposit growth. Both on an end of period average basis going forward as well. Thank you.
Okay.
Yes, Ken it's Eric.
The largest driver of our <unk>.
NII trends right now whether it's.
The fourth quarter of the first quarter, our first quarter to second quarter is really the level of noninterest bearing deposits.
Those came down this past quarter about $5 billion, we had expected them to come down about three.
<unk> three 5 billion.
We do a fair amount of forecasting on this we think about January February March it usually comes through in a U shape and we actually had a.
Had some of the opposite played through in March and so that's what's been driving some of the change in NII.
In contrast, we've actually seen good flows in interest bearing deposits at the same time. So there is a fair amount going on under the surface.
As we look into.
Second quarter.
We expect this pace of noninterest bearing deposits to continue to.
Uh huh.
To continue.
Two to rotate so.
If you if you step back last year, we had periods, where noninterest bearing deposits were up $1 billion, then down $2 billion than down.
$4 billion and down 2 billion right, it's been quite volatile.
And right now, we're expecting noninterest bearing deposits probably to come down another $4 5 billion into the second quarter and if you think about it when you earn.
5% or more for those kinds of deposits.
On the asset side, and then pay zero that it can be a significant thats a significant.
Mount of NII right every billion dollars is worth.
12, sometimes $15 million per quarter, and so thats, what we are seeing flowing through.
The hard work, we're trying to do from a forecasting standpoint, and forecasting is always hard.
Is where does that trend how does that trend play out.
We do some of what you probably do which as we've looked at.
The last.
Peak in the last low of noninterest bearing deposits.
Peak was 22% the last low was 18%.
The other hand.
In dollar terms. The last peak was 50 billion in the last level was about $30 billion and right now we're sitting at about $39 billion and so that's what's really playing through the NII forecast.
And then as we as we play that out we expect to see some of that noninterest bearing deposit rotate into.
Into interest bearing deposits, but to be honest some.
<unk>.
Strong raised that they can get either in treasuries or money market funds and so at this point in the cycle with the high level prevailing rates.
We expect deposits probably to trend down.
There are.
Another few billion dollars into the second quarter, but this is all kind of dependent on.
On client the client behavior and activity.
As we.
As we.
As we as we take a look at our forecast.
Yes, Thanks, Eric just one follow up to that is just that the types of changes in client activity is this a different behavior than you've seen in the past in terms of where the ins and outs are coming from I mean, obviously, we're all expecting deposits to come down as were you and then the events over the last month came through so our clients is making different decisions with what they're doing with.
They're even operational cash or.
How would you kind of describe what's happening across the client base. Thanks.
Yes, I think clients are.
The client clients are making a variety of different decisions here and I think part of what <unk>.
We're seeing what we're seeing is that we have not lived in an environment where interest rates are at 5%.
Whether you put that the fat or in.
Three and six months treasuries right and so clients have a fair amount of alternatives and theyre thinking about how to deploy how to maximize inter.
Interest in yields for their own clients, especially the kind of clients, we have who are who are.
Over time, we will always be price sensitive when it comes to the operational nature of the deposits you can see from our disclosure and we added some of this clients are incredibly sticky and stable from an operational standpoint operational deposit balances were.
We're steady and the operational percentages continue to be.
Very in a very very narrow band.
Clients with the <unk>.
Several billions of dollars each Austin, but they typically have hundreds if not thousands of individual accounts with very significant transactional and payment flows and that's why they're categorized as operational in nature, and so that behavior Hasnt changed.
That that behavior of.
Core custodial deposits.
Is.
Is is deeply ingrained in the structure of those accounts the processing, we do for them.
The avoidance of overdrafts that they always try to.
Two.
They don't want to.
Uh huh.
They don't want.
I think what we're seeing instead is clients on the margin will find for their discretionary the last dollar of our.
Of the $100 of deposits Theyre going to.
B rate seeking and at these prevailing rates there is a there are.
There are going to look here and they're now sometimes we match them with.
With those rates so we'll offer deposits.
At at exception rates, sometimes we help them.
With their sweeps or some of their treasury repo.
Interest.
And so there's a there's a variety of different ways, we serve our clients and it will continue to do that but but clearly at this point in the rate cycle, you kind of have some of the patterns that.
You and we would expect to have.
Okay, great. Thanks for the color.
Okay.
Thank you. The next question comes from Brennan Hawken of UBS. Please go ahead.
Thank you and good morning. This is Adam Beatty in for Brennan, just a quick follow up on NII and in particular, the geographic mix of deposits. So you've got kind of fairly steady trends.
U S kind of going up.
And.
Higher beta as you've called out in the past and then non U S somewhat going down with a lower beta just wondering if you expect based on what Youre seeing right now with your clients those trends to continue.
In particular, we continue to see pressure on non U S deposit balances and could those betas, maybe be going up outside the U S.
As you say.
The competing yields are somewhat higher thank you.
Thanks for the question I think we will continue to see a range of behaviors across the geographies I mean, I think the way I would describe them as in the U S.
With prevailing rates are where they are you have this noninterest bearing to interest bearing rotation.
On one hand, and then you have clients nudging on.
On on pricing in general and we're kind of at that point, where clients now have incentives just like we do.
Find are placed.
Two.
To settle at with US I think in Europe and.
And pound Sterling, it's still new right. We've just been at the kind of the first maybe.
Half two thirds of the rate increases.
And there the.
Betas continue to.
To be in that 2030, 40, 50% range and are quite attractive for us. They are good for clients because the clients and to have somewhat fewer alternatives in those international jurisdictions relative to the U S.
On one hand on the other.
There tends to be a more.
There tends to be.
Less.
Price sensitivity on the deposits and we do expect that to continue and I think with more rate increases flowing through and the international jurisdictions that will allow us to continue to lag modestly the.
Deposit.
Rates that we that we offer as we see those those play through.
Great that makes sense. Thanks, Eric and then just turning to the buyback pretty healthy in the quarter, you still got the kind of not to exceed target out there.
So just wondering how youre thinking about that in terms of <unk>.
Deposit trends and capital needs and and whether some of the disruption in the banking backdrop has maybe affected your thinking around the buyback. Thank you.
Yes, good question and it's something that we've been very deliberate.
Thoughtful VAT you can imagine as we saw the events in March unfolds.
We have been.
<unk> Daily weekly about how stable is the broader banking system.
The starting point for US is we've got an incredibly strong balance sheet, our capital ratios are in the 12% range.
That's a 100 basis points above the top end of our range 200 basis points higher than the bottom of our range.
It's 400 basis points above the regulatory requirements and you know many many Ron.
<unk>.
Uh huh.
Much thinner.
In terms of regulatory requirements and we've always chosen to to run with this kind of with a healthy buffer.
So I think on one hand, the starting point for us is important.
Our ongoing decisioning around capital return.
And we're conscious of that on the other hand, just like you say, we assess the market conditions and the environment not for us because this is not about us it's about whats happened in some of the other parts of the banking system, we assess those.
If we would had.
Economic and banking conditions.
Like they were at the beginning of March I think we'd have we'd make different statements around our capital buyback and so we feel like there's been a fair amount of healing.
Since.
Since the beginning middle of March and we think that it gives us.
That factors into our thinking.
And then what we'll do is we'll continue to evaluate conditions right if market conditions and systemic conditions get more concerning for the system.
We will.
We may pace. These differently if they continue to be at these levels of stability that we're at we feel confident that.
That we can and should continue to proceed but it'll be a week by week reassessment, our buybacks aren't once and done they're done over the course of the next eight to 10 weeks.
And this is one of those quarters, where you do the more more linearly than not and so.
We'll evaluate but our position of strength is just quite.
I think quite.
Quite high and it gives us a fair amount of latitude.
Great Good contact center.
Thank you.
The next question comes from Betsy <unk> of Morgan Stanley . Please go ahead.
Hi, good morning.
Hi, Betsy.
Can we talk a little bit about the expense outlook and how you're thinking about managing it I know that you mentioned <unk>, specifically, but I just wanted to get your thoughts on how youre thinking about operating leverage either on a total rev basis or more on us.
Fee base.
Basis, I really what I'm trying to get at is how you think about the NII piece as we think about operating leverage for the.
<unk> for the full year.
So there is a couple of different.
So we look at this and clearly we're one quarter into the year.
We started to give some outlook for second quarter, and we need to see how the conditions.
Conditions in the environment plays out because equity markets up or down bond market is up or down by more than a percentage point or two it's going to impact R.
Our revenues and so I think it is still early in the year.
We set out this this year.
Two to drive positive operating leverage and continue to look for ways to do that but we need more information about the.
<unk> external conditions to really see that I think as we as we think about the.
The opportunities here, though.
NII.
Will trend.
Positively for the year, but not as part of positively as we would've expected. So that's a consideration.
That we took up our fee guide for the second quarter, and so that gives us a little more.
Ballasts are breathing room or or momentum to be honest.
And we will continue to manage expenses quite actively I would say in the last year and a half as NII.
<unk> was up $20 $30 $40, 50% right, we didnt spend that on the expense line right we were quite.
Conscious of continuing to drive investment, but also productivity and calibrated and our expense growth and so as we look forward. We will continue to do that but obviously with the with <unk>.
We'll keep keep track of.
The direction of revenues and obviously try to adapt where we can.
And then just a quick follow up on the other.
Other fee line that you had.
Scott.
The slides $50 million increase Q2 could you just give us a sense of how we should think about the trajectory of that.
Are you going to be increasing your investment integral renewables, so that should be a growing line in line with an increase in investments to renewables or is that a onetime step up in that sense.
Low color there thanks.
Yes.
The revenue impact on that line is a little bit of both and we're still <unk>.
Turning all the specifics and doing the forecasting in second quarter.
We have.
We need to do a year to date.
Catch up that's how the accounting guidance is is written and then there will be some additional revenues in the third and fourth quarter not as much as there would be from the.
Second quarter catch up so we're trying to map that out.
Quarter proceeds, we'll try to get a little more guidance out but that that line will tend to have.
B.
Instead of kind of being centered around zero will be centered around.
Slightly higher number.
The coming quarters, and we'll try to get some guidance out on that.
We.
Go through all the forecasts.
Okay. Thank you.
Thank you. The next question comes from Gerard Cassidy of RBC. Please go ahead.
Good morning, gentlemen.
Eric can you share with us how you guys are.
Investing your cash in your securities portfolio in terms of durations are you looking at or you're trying to shorten the duration of the portfolio as you reinvest the cash proceeds that come off at every quarter whats youre thinking about that.
Gerard it's Eric.
Quite carefully over the years.
Running a portfolio with a modest amount of duration I think it's typically in the.
Two and a half to two eight years.
In that that that provides us some amount of.
Benefit from what historically has been steepness in the yield curve.
It's also given us some ability to.
Create some amount of stabilization NII without forsaking the opportunity to benefit from interest rate rises which is what we've been able to do.
Over the last over the last two years.
We like that amount of duration because it also protects.
The income statement as rates fall.
And we'll see if that if there is a.
If there are rate cuts.
Late in the year or next year or the year after that so that gives us a surplus.
Stability as well I think what I would tell you, though is we spend as much time on duration curve shape.
As we do lawn.
<unk>.
Carefully.
Also running some MBS portfolios, where there is some additional yield pickup, but you've got to be careful in terms of the level of convexity risk that you take and then because of our deposit franchise.
As mentioned earlier.
Doing this around the globe, we've got about a third of our balance sheets in international jurisdictions and that gives us real opportunities in pound Sterling Euro Canadian and Aussie dollars dollars et cetera to invest and we may runs somewhat different duration levels in those different currencies, we might be.
We might be shorter than one longer another partly to reflect our views on the rate cycle and where each of those are so there's there's a range of kind of approaches that we take there and we find that our flexibility gives us some.
Some opportunities to deliver some some good yields in NII, but obviously being careful we don't want to stretch for duration and we don't want to stretch for yield.
We want to continue to run a conservative.
Portfolio like like we have for many many years.
Very good and then just a follow up on your comments about deposits I think you said that the low point of noninterest bearing we're at $30 billion and Youre sitting at 39 now two part question, where do you if rates just stay here lets say the fed doesn't start cutting rates later this year or next year, and we get at four and three quarter.
5% fed funds rate do you sense that the noninterest bearing deposits could approach that $30 billion on a go forward basis and second on your operational accounts do you guys have to pay the interest on those accounts.
Yes, let me let me do that in reverse order. The operational accounts are sometimes interest bearing sometimes noninterest bearing so theres a wide variety of different.
<unk> pricing structures, but they tend to be.
Remember that these are these are one thousands of accounts often times.
For each of our <unk>.
For each of the asset managers or asset owners that we custody for.
It's less about the pricing in those accounts and then about the nature of the accounts and the payment transactions that clients are funding in effect with the deposits that.
They lead with us.
In terms of noninterest bearing deposits.
I do think we will continue to see.
Yes.
A trend downwards, we saw a $5 billion trend this.
This past quarter, which was.
$1 billion or two more than we had expected even even back.
At that.
Early.
Even back when we last gave guidance.
We expect probably another $4 5 billion will come out in the second quarter and then I think we do believe that there is going to begin to be some.
Some stabilization.
I'd be inclined to think that we'll get to.
That $30 billion, probably later than later this year, but this is where there's no amount of crystal balling that.
We can provide it's hard to really be sure it could.
It could be.
At that level, it could be around that level, there as well.
We've seen movements in noninterest bearing.
Month by month that are plus minus.
Four of $5 billion, even and even in April as an example.
We've had days, where noninterest bearings were in the $44 billion.
Level, so $5 billion.
Above the.
The recent.
Average and days when they were at the $34 billion level. So it's that kind of range and volatility that we're trying to forecast thrill.
But clearly the trends.
Here and I think the the last benchmark of.
Of that.
Around that 30 billion level, maybe one that we approach.
Potentially later this year.
Very good I appreciate the insight thank you okay.
The next question comes from Jim Mitchell.
Poor global please go ahead.
Hey, good morning.
Maybe just a little bit on the fee income story, you talked about a pretty hefty sequential growth, but not necessarily coming from the.
The servicing line, so, but you talked about great momentum in servicing and Onboarding. So how do we think about the trajectory on the servicing fee line.
As you onboard is it more of a back half story and how do you thinking about full year with servicing fees.
Yes, Jim it's Ron So maybe I'll start.
Here on on servicing fees.
As Eric noted, we do expect growth and it's driven by a couple of things one is.
We have been carrying.
For a while know a fair amount of AUC to be implemented a lot of that was tied to some <unk>.
Systems development that needed to occur that is occurring.
So we're expecting to see a hefty amount of that AUC to get installed.
Secondly.
<unk>.
The wins this quarter were.
While it was a low AUC a amount it was much more traditional.
Back office plus.
Very large alternatives both of which are.
Easier to install or they take less time to install.
So we're actually quite pleased with.
2023 is shaping up from a from a sales perspective and good that it's shaping up early in the year. So with all that we do expect to have.
Meaningful amount of servicing fee growth that coupled with depending on what you believe about markets.
Since two wash over everything that I'm talking about.
But if you believe that there is some kind of market stability.
Feel pretty good about the year as we look forward.
And Jim it's Eric just to round that out.
Ron covered servicing fees management fees.
Should give us some lift as well as we have some.
Equity market appreciation.
Equity and bond market depreciation into the second quarter I think if you go through the trading lines second quarters.
Good we'll have to see just how much volumes play through in spreads so but.
But you've seen we've been making.
This headway given the market volatility with specials and SEC finance that.
We will likely continue.
In our software and processing line.
We had one of the lowest on premise renewal quarters.
And <unk> and that one just just varies if you just look.
Look at some of the materials.
In the deck that could be $6 million it could be $60 million that was literally the swing from fourth quarter to first quarter, we expect.
<unk>.
As we had said some.
Sizable upticks, there as well so there is there's a range of areas.
In effect.
From a management standpoint, we're focused on every one of the opportunities in businesses.
Harnessing the client momentum that we've been that we've been seeing.
Yes, sure Eric I appreciate all that.
But in terms of the sequential increase of 4% to 5%. It seems like a lot of it's coming from some of these lumpy.
Lumpy revenue streams that don't necessarily continue further out.
Whether it's other kind of catch up whether it's software processes jumping back, but when we think about sort of the momentum in the back half and that sort of new run rate in the second quarter as Ken is that sustainable as you gain momentum in some of the more annuity like revenue streams or do we kind of have to.
Pushed out a little longer just I'm, just trying to get a sense of.
Beyond <unk>, you have a nice jump into queue, but is that really sustainable.
Yes, no I.
I understand the perspective I think what.
So I'll remind you on software and processing, we had an unusually low print in the first quarter. So the first.
Part of the follow up in second quarter is rebound and then continuation on premise revenues.
<unk> averaged about $30 million a quarter for example.
That's a reasonable.
Kind of.
Average that one could expect but we've printed 6 million this past quarter. So it's that kind of I.
Think rebound, we're expecting in second quarter and then.
It should.
It should stay within the averages and then beyond that to your point there are the more annuity like areas, whether it's <unk>.
Software enabled the SaaS revenues in software.
Whether it's some of the we are very.
Very flow oriented.
FX and Securities Finance books, and then as Ron mentioned, we're seeing increasing momentum.
In servicing fees and management fees in the servicing fee momentum is spread.
As we've mentioned both in terms of back office and Middle office, which gives us additional diversity, it's hard for us to predict the second half of the year.
At.
I'll hesitate every market every April .
Two to re estimate the full year, but I think we'll know more as we get to June and July and I'll certainly give it give.
Be able to give you an indication, but but we've.
We're certainly seeing momentum of activity with clients and expect some of these on boardings to come through and we think that that provides.
A step up and then there should be some continuation.
Beyond second quarter that'll be that'll be positive.
Alright, well thanks for all the color.
Okay.
Thank you.
Our next question comes from Stephen <unk> of <unk>.
<unk> research. Please go ahead.
Hey, Good morning, this is actually Sharon Leung for Steven.
Sure.
Bob.
It'll still be.
Not meaningfully at the 20%.
Any numbers you can put around that.
Sample assuming that.
Rotation continues as expected.
Dollar number sometime in the year.
Yes.
This is where the forecast just have a wide range of outcomes I think given the.
The first quarter.
A report and what we expect in the second quarter.
We.
We don't think that one can reach that up 20% for the full year I think what we're what we're wrestling with is just what's the pace of rotation and.
What's the pace of some of the price sensitivity that we see in the U S clients at this point in the cycle.
And that's what's harder to determine.
So there is a range of forecast, we have and if I had to kind of share with you I'd say you know if one.
Thinks of it.
And a more dour away and expect more rotation.
And more price sensitivity NII could be up.
5% to 10% this year instead of 20% on the other hand, if one's optimistic and believe some of the.
History, where there is real attenuation in the noninterest bearing deposits NII could be up 10% to 15%. So there is a larger range than usual.
In the forecast that we have.
And to be honest, just like I quoted some of the <unk>.
April year to date data in the range of of levels that we're seeing we expect that.
Those we expect to be.
That there will be quite a bit of a range in the outcomes just really hard to predict but maybe that gives you.
Some perspective, it's probably a larger range than you were looking for but.
We're trying to be as.
As.
Transparent and forthcoming as we can given the facts and the.
The information that we have here.
Great. Thank you very much.
Thank you. The next question comes from Ebrahim <unk> of Bank of America. Please go ahead.
Good morning.
I guess just a couple of quick follow ups one on NII.
All your comments on the in the Q&A.
Just trying to make sense of.
Is the customer behavior that surprised you today versus January given that you probably assume that rates were going a little bit higher than maybe we're back in Jan what is it the events of the last month.
Inc change customer behavior and increase the intensity of new pricing.
No I don't I don't think its really the events of the last month, which are really in very different client segments different geographies. So those are very different from what we do and who we serve and we had a little bit of a flight to quality that flight to quality, we had a bit of.
This.
Risk off sentiment with with deposits.
That's just a whole different ecosystem than those in those clients that we serve I think what's really happening here and what.
We've been trying to estimate but maybe is on.
Estimate able aren't Forecastable is just how do clients operate when prevailing rates are at 5% in the United States right, we've not had that scenario.
In our <unk>.
For some of us in our careers right, but for some of us.
Going back many many.
Probably two decades.
And so the data is thin on.
On that question and I think what we've seen is.
Back in January when we had given some of our NII guidance for the quarter.
Just on noninterest bearing deposits, we had seen one quarter, where they were up a little bit one quarter, where they were down $5 billion and then and then the third to fourth quarter. They were down $2 billion right. So you are in this situation, where youre trying to guess.
Our cast estimate we can we got to use all of those words.
And I think we are.
We thought we might have reached some attenuation, but we didn't there was another step of rotation playing through.
It's not a rationale for clients to do that and so they've.
They've shifted now they shift from noninterest bearing to interest bearing.
Shift across currencies, sometimes because of their sophistication.
I think what's interesting is if we actually got more deposits in the U S.
And we had some outflows in.
And.
Net reductions.
In in in.
In Europe and.
In Asia, and so you kind of have a real mix out there and I think what were realizing is all of the data sets. We have are actually not.
Theres not enough data on this question of.
Deposit or I'll call, it deposit or pricing behavior, because that's what this is about.
And that's what we're trying to to better estimate but the.
The clients were serving will continue to serve the momentum in the business is clear and just like NII went up faster than we had thought I think there is a trend here that it's.
It's coming down a bit sequentially, it's still going to be up for the full year, but we'll need to see how much.
Got it and just a separate question I know, it's small for you, but the other element that drove provisions higher the credit portfolio rating in your mind.
Mrs.
Sensitivity.
That we should expect from the balance sheet from an economic downturn. If there are more but do you think the agency downgrades like what that means from a credit cost provisioning perspective, as we look forward.
Yes, that's good.
Good question.
Aside from the.
The provision that calculated using all the seasonal techniques and fairly regimented that we had for that.
For the one cash placement that we made the provision was about $15 million I think for us provisions have been in the five to $10 million to $15 million range typically.
We've seen a little bit of migration.
Or or change in ratings.
And a half dozen credits, but its a kind of thing that plays through and part of that is we have higher prevailing rates and that puts.
A little bit of pressure.
Different parts of the economy and I think it's probably.
Fairly typical I think the.
We run quite a high quality and high grade lending book.
Even where.
We're a little more down market we call.
Double BS Downmarket right. So we have we have.
Ratings distributions that are typically in the a or a minus or even better range. So we'll have some sensitivity to economic conditions you can go back to.
Around the start of Covid right a number of banks built reserves that can give you a.
Sense of sensitivity, but what we feel like we're well reserved now given what we know both on the.
The economic conditions in individual.
Positions that we hold it's highly diversified it's high quality and.
Well, obviously well.
We will continue to monitor but.
Feel like it's.
It's.
It's a reasonably stable with a little bit of drift down situation.
Given.
The direction of rates and the economy.
Got it thank you.
Okay.
Thank you. The next question comes from Mike Mayo of Wells Fargo Securities. Please go ahead.
Hi.
As you know the market's been a little little generation Silicon Valley.
Can you just make it crystal clear I mean, I think kind of the answer but I need you to really explain why this is an earnings issue and.
And not a liquidity issue and on the earnings issue just to make sure I heard you correctly your noninterest bearing deposits. One from 44 billion down $39 billion, you think base case it might go down at $34 billion at the low end of the range, which is possible. Later this year would be $30 billion that'd be going maybe non interest bearing deposits from 44 billion down 30.
That would be $14 billion less in free money.
It was $12 million to $15 million per $1 billion. So just taking the worst case you go down in the $30 billion or $15 million you were talking about 200.
Million dollars of earnings lost.
Which might be around seven or 8% of your EPS. If you look at kind of a run rate sort of thing. So first is my math correct there.
That is the earnings issue.
And then reassure if it's appropriate that this is not a liquidity issue.
Mike.
Mike why don't I start I think that.
As you are calculating the worst case I think your math roughly is correct.
We're doing all we can to avoid the worst case.
But I think your math and how you get to the earnings impact is right assuming the.
Effect of a 100% margin on the on the deposits.
In terms of liquidity there is nothing here that approaches the liquidity issue right. These are custody deposits as Eric noted there operating deposits.
Give you a sense and a little more explanation of why we've got X number of clients with a multiple number of accounts and if you think about a mutual fund company probably has at least one account per fund they have with us if not more.
It's to actually run their funds.
If you look at the liquidity coverage ratio, which Eric.
Walked you through it so I put on 124% now it's actually gone up not down. So yes. This is an earnings issue.
And one that we intend to offset to the extent possible with.
Primary source of our revenue which is fees.
As well as continued careful management of expenses.
And then a follow up to that.
You said, you're not changing your buyback.
$4 5 billion for the year, you've done 125 billion. So you have $3 billion to $5 billion left with the current market decline that would be 14% of your market cap so to the extent.
You see this as a step down but not life threatening.
Your appetite towards completing that buyback and how soon are you able to enter the market.
Mike I think Eric explained it well.
If you look at our capital levels.
And the fact that we are.
It held off buying back shares for quite a while.
A large amount of <unk>.
For most of last year.
We feel comfortable continuing the buyback.
We're obviously conscious of the environment.
So we feel comfortable doing that and we certainly feel comfortable about ourselves, but there is the system in which we live and to the extent to which.
System started too.
Look very different from what it is today.
More like or even worse than what we saw in March we're certainly not going to ignore the.
Based on what we know now.
Our financial strength.
We think it's actually quite prudent to do so and are forecasting puts us I mean, we don't think about it in terms of market cap, we think about it in terms of.
What's our CET one ratio our capital ratio and this will still put us above our range.
So well within our range I mean so.
This is something that at this point we feel.
We feel very comfortable doing and Mike, It's Eric I'd, just underscore right the capital and liquidity.
Frank and ratios.
Are just incredibly high and with cost by every measure.
That one can see and we've shared.
Quite a bit of that.
That's the reason why we're comfortable at this point.
Proceeding with our buyback.
I said in my prepared remarks, we do it.
Through the rest of the year I said, we do it at pace and even within a quarter, we typically start buybacks.
The day after earnings and then we will operate and execute on them subject to market conditions of course, but we typically execute on them over the eight to 10 weeks.
Available days during the quarter. So it's.
We will.
We've got we've got good confidence.
And.
And the broader system.
Enormous confidence in.
In our particular position here on earnings we'll work through the earnings issue you know NII was.
Was.
Yes.
It was.
Is something that we can figure our balance sheet to earn when rates move up and the balance sheet.
It does give some of that back when rates come down.
And we'll obviously continue to drive.
Our focus on fees and.
Manage expenses and drive what really is a multiyear trajectory.
One last time Chris.
Crystal clear so theres nothing about the reduction in the free money noninterest bearing deposits or anything else in the results that would give you pause to continue buying back your stock.
None.
Alright, thank you.
Thank you. The next question comes from Rob Wild Heck of Autonomous Research. Please go ahead.
Hi, guys I wanted to unpack some of the R. W. A dynamics in the quarter, our <unk> were up 7% sequentially, but the overall balance sheet I think was down.
Three years to 4% so can you just.
Give us some color on what was going on there.
Sure Rob.
It's Eric and I think there is some.
Materials on <unk>, both in the earnings deck on page 12, and then.
They're back in the addendum.
I think if you if you remember fourth quarter, we had a particularly low print and RW way, which we had signaled.
At our fourth quarter earnings call in January Overdrafts came in lower than expected some of the risk weighted assets associated with the FX books came in lower because of the late December .
And.
In dollar rates and so we had expected a rebound of about.
10, $15 billion of articulate from fourth quarter to first quarter and you saw we got about eight or $9 billion of that we still came in a little light on overdrafts, which is fine part of that is the amount of <unk>.
Cash in the system and the <unk> and the cash and deposits that were that were holding on.
Behalf of our clients, you'll see <unk> is still down year over year, and that's because of a fair number of optimization efforts, we felt like there's real opportunities for us to.
To grow the franchise on one hand, but deploy our <unk> and very.
High quality and higher returning weighs on the other and support our clients and so we've been we've been.
Adjusting.
Deployment across the FX books, you think about how much of a when deploying the forward space in the long dated forwards versus spot and securities Finance.
There are different amounts but.
Sure.
We're quite.
Well off when it comes to capital.
Our plans here really to continue to find ways to smartly deploy additional capital and additional RW way to drive organic growth.
Thank you and then I appreciate the color on the to be installed business in the on Prem enterprise trajectory from here, but could you just remind us how long those installs.
We would take to convert to revenue.
Yes, when we when we described.
The installation going into the second quarter, we were describing those ads.
Realized revenue installation so in effect the way the accounting works typically is when we win we don't book the revenues, but it's only at the installation date that you'd begin to book them. So you'll see both the.
The backlog assets under custody in the second quarter begin to come down and some of the servicing and middle office revenues.
Float float upwards and similarly for the software and data.
Processing areas Youll see something.
In that direction as well.
Okay. Thank you.
Thank you. The next question comes from Vivek <unk> of Jpmorgan. Please go ahead.
Hi, Eric.
Couple of questions.
Firstly.
D revenues I know you said it should Eric.
Yes.
Premise revenue should bounce back in the second quarter, but just wanted to step back and look at it on a full year basis.
The entire <unk>.
Our data revenues.
Is your expectation at this point for full year growth.
And that we're looking at all of those three components together.
Yes, I don't.
In fact, I don't know that we in January we went into that level of detail I think what we've said in the past is that the.
Sure.
That there is a range of revenue growth and are different.
Fee categories. We've described back office is growing.
Towards the traditional back office growing closer to the.
Lower single digit.
Revenue growth, we've described middle and front office, which would include.
CRD at high single digit growth there will be years, when it could be double digit revenue growth.
So that's what we said about that category. This category I think what we see in particular in software is.
The on premise revenues over time will.
May not be as heavy but we do see real momentum in the combination of the software enabled in SaaS, but all in that should grow in the higher single digit revenues typically although there'll be some.
There'll be some range around that in a given year.
Okay.
And then going back to this question that's come up on the large amount of new Biz.
Business that remains to be installed in servicing and you said you should see a pick up in Q.
Ron and Eric What's your expectation for how much of that do you expect would get installed over the course of this year to Q3 Q4 Q.
Yes.
By the time, we exit this year, how much should be done and therefore, what benefits should there be.
The fees from that.
Yes, I think the fact that a couple of ways to think about that because.
What happens here.
Is that it gets on boarded on in tranches. So we might onboard the assets under custody administration, but there are multiple services that were often providing for those assets. So.
We had a couple of wins over the last year or two with a trillion dollars trillion dollar wins would have had some custody. Some accounting you might've had some performance analytics. They would've had some middle office services and in many cases, because they were alpha mandates. So theres three four or five.
Kind of.
I'll call it.
Revenue installations right for each of the.
The.
The balances that sit there.
When we describe them as assets under custody and administration.
I think roughly our view is that.
We'd expect about.
Half of the backlog in custody and administration.
To come through during the course of this year I will say that.
Roughly right it tends to vary.
And then the.
The revenue piece is it won't be quite at that level, because the revenues come through over time as you get the different I'll call. It layers of services that are provided.
Associated with.
That assets under custody administration, but what we'll do is we'll I think it's it's.
That may be some kind of broad perspective, what we will try to do each quarter ill give you.
More and more visibility as we get to those implementation points. Because you remember these are implementations where not only heavily configured.
Front to back offering.
I'll leave.
That we've designed for clients, but clients need to reconfigure many of their processes and systems in parallel with that to adopt and so it's it's a joint effort on both sides.
Okay.
I may sneak in one more just CF global any color on what that could add to your fee revenue, Eric and when do you expect that to start to add.
Okay.
Yes.
<unk> global for US is a very.
The attractive opportunity, we've historically done some outsource trading.
Over the years in the U S and Asia, we werent, particularly large in that space in Europe , just gives us some real heft and.
Credibility in Europe .
It's an acquisition that will close likely at the end of the year. So I think it's really a 2024 topic.
We're looking at a business like that between what we have and what we're adding to.
To be in the.
The $30 million to $50 million range of revenues.
Next year now we've got some of that today, but this this what we purchased in CF global really.
Is distinguishing in terms of capabilities product lines.
Is built around what we have and then drive some some real incremental growth and so something we're very excited about because it fits into being the enterprise outsourcer.
That for custody accounting Middle Office front office, and we do it for the.
For the CIO.
Small and mid size companies and it's really.
Thank you.
Okay.
Thank you.
There are no further questions at this time I will turn the call over to Mr. Hanley for closing remarks.
Thanks, operator, and thanks to all on the call for joining us.
Ladies and gentlemen, this does conclude your conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
Yes.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.