Q3 2023 Northern Trust Corp Earnings Call

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Please standby.

Speaker 1: Good day and welcome to the Northern Trust Corporation third quarter 2023 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jennifer Child, Director of Investor Relations. Please go ahead, ma'am.

Good day and welcome to the Northern Trust Corporation third quarter 2023 earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Jennifer Childe Director of Investor Relations. Please go ahead ma'am.

Speaker 2: Thank you, Melissa, and good morning, everyone, and welcome to Northern Trust Corporation's third quarter 2023 earnings conference call.

Thank you Melissa and good morning, everyone and welcome to Northern Trust corporations third quarter 2023 earnings Conference call. Joining me on our call. This morning is Mike O'grady, our chairman and CEO , Jason Tyler, Our Chief Financial Officer, Lauren I'll note, our controller and great chickens from our Investor Relations team, our third quarter earnings press.

Speaker 2: Joining me on our call this morning is Michael Grady, our chairman and CEO , Jason Tyler, our chief financial officer, Lauren Alnett, our controller, and great tiggins from our investor relations team.

Speaker 2: Our third quarter earnings press release and financial trends report are both available on our website at northerentrust.com.

The release and financial trends report are both available on our website at Northern Trust Dot Com also on our website you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This October 18th call is being webcast live on Northern Trust Dot com. The only authorized rebroadcast of this call is the replay that will be.

Speaker 2: Also on our website you will find our quarterly earnings review presentation, which we will use to guide today's conference.

Speaker 2: This October 18th call is being webcast live on NorthernTrust.com. The only authorized rebroadcast of this call is the replay that will be made available on our website through November 18th.

Unknown Executive: standby. Good day and welcome to the Northern Trust Corporation third quarter 2023 earnings conference call. Today's conference is being recorded.

We made available on our website through November 18th.

Speaker 2: Northern Trust Disclams, any continuing accuracy of the information provided in this call after today. Please refer to our Safe Harbor Statement regarding forward-looking statements on page 12 of the accompanying presentation, which will apply to our commentary on this call. During today's answer, question and answer session, please limit your initial query to one question and one related follow-up. This will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits.

More than trust disclaims any continuing accuracy of the information provided in this call. After today. Please refer to our safe Harbor statement regarding forward looking statements on page 12 of the accompanying presentation, which will apply to our commentary on this call. During today's question and answer session. Please limit your initial query to one question and one related follow up.

Jennifer Childe: At this time, I would like to turn the conference over to Jennifer Childe, Director of Investor Relations. Please go ahead, ma'am. Thank you, Melissa and good morning everyone and welcome to Northern Trust Corporation's third quarter 2023 earnings conference call.

Jennifer Childe: Joining me on our call this morning is Michael Grady, our chairman and CEO. Jason Tyler, our chief financial officer, Lauren Alnet, our controller and great-tiggins from our investor relations team. Our third quarter earnings press release and financial trends report are both available on our website at NorthernTrust.com. Also on our website, you will find our quarterly earnings review presentation which we will use to guide today's conference call. This October 18th college being webcast live on NorthernTrust.com.

This will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits. Thank you again for joining US today, let me turn the call over to Mike O'grady.

Speaker 2: Thank you again for joining us today. Let me turn the call over to Mike O'Grady.

Speaker 3: Thank you, Jennifer. Let me join in welcoming you to our third quarter of 2023 earnings call. Our results for the third quarter reflect solid execution against the challenging phase of this interest rate cycle, particularly as rates appear close to be peaking. Third quarter deposit levels were generally in line with seasonal expectations, but funding costs were significantly higher putting pressure on that interest income.

Thank you Jennifer let me join in welcoming you to our third quarter 2023 earnings call. Our results for the third quarter reflect solid execution against the challenging phase of this interest rate cycle, particularly as rates appear close to be peaking third quarter deposit levels were generally in line with seasonal expectations, but fund.

Jennifer Childe: The only authorized rebroadcast of this call is the replay that will be made available on our website through November 18th. Northern Trust disclaims any continuing accuracy of the information provided in this call after today. Please refer to our safe harbor statement regarding forward looking statements on page 12 of the accompanying presentation which will apply to our commentary on this call. During today's answer question and answer session, please limit your initial query to one question and one related follow up. This will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits.

<unk> costs were significantly higher putting pressure on net interest income.

Speaker 3: We're focusing primarily on those areas of the business that are most under our control, namely trust fees and expenses. And those two areas were pleased with our performance. Trust fee revenue was up both sequentially and year over year. Expenses were well controlled and we improved our capital position.

We're focusing primarily on those areas of the business that are most under our control, namely trust fees and expenses and those two areas. We're pleased with our performance Trust fee revenue was up both sequentially and year over year expenses were well controlled and we improved our capital position.

Speaker 3: Our wealth management business grew trust fees on both the sequential and year-over-year basis. We saw ongoing strength in the higher wealth tiers and within our global family office segment. Our momentum outside the U.S. continues to be brisk.

Our wealth management business grew trust fees on both a sequential and year over year basis, we saw ongoing strength in the higher wealth tears and within our global family Office segment for momentum outside the U S continues to be brisk.

Unknown Executive: Thank you again for joining us today.

Michael OGrady: Let me turn the call over to Mike O'Grady. Thank you, Jennifer.

Michael OGrady: Let me join in welcoming you to our third quarter 2023 earnings call. Our results for the third quarter reflect solid execution against the challenging phase of this interest rate cycle, particularly as rates appear close to be peaking. Third quarter deposit levels were generally in line with seasonal expectations, but funding costs were significantly higher putting pressure on that interest income. We're focusing primarily on those areas of the business that are most under our control, namely, trust fees and expenses and those two areas were pleased with our performance.

Speaker 3: Families with large and complex truck instructors continue to be an area where we excel. Activity with business owners also remains robust. Helping them optimize their complex personal affairs while they attend to growing their businesses is a consistent theme.

Families with large and complex trust structures continue to be an area, where we excel activity with business owners also remains robust helping them optimize their complex personal affairs, while they attend to growing their businesses is a consistent theme.

Speaker 3: We're also seeing early success with various new marketing approaches and referral sources. In particular, during the third quarter, we had healthy new business generation with clients with assets over 50 million.

We're also seeing early success with various new marketing approaches and referral sources in particular during the third quarter, we had healthy new business generation with clients with assets over $50 million.

Speaker 3: In asset management, we saw positive flows into our institutional money market platform for the third consecutive quarter. Relative to benchmarks, our tax advantage equity product performance remains strong within the quarter, cementing its one, three, and five-year track record of outperformance. Importantly, two recent large asset servicing wins contain asset management mandates for index fixed income and outsourced investment solutions, reinforcing our combined strength as one norther.

In asset management, we saw positive flows into our institutional money market platform for the third consecutive quarter relative to benchmarks are tax advantaged equity product performance remained strong within the quarter cementing its one three and five year track record of outperformance importantly, two recent large asked.

Michael OGrady: Trust fee revenue was up both sequentially and year over year. Expenses were well controlled and we improved our capital position. Our wealth management business grew trust fees on both the sequential and year over year basis. We saw ongoing strength in the higher wealth tiers and within our global family office segment for momentum outside the U.S, continues to be brisk. Families with large and complex truck structures continued to be an area where we excel.

Debt servicing wins contain asset management mandates for index fixed income and outsourced investment solutions reinforcing our combined strength as one northern.

Michael OGrady: Activity with business owners also remained robust, helping them optimize their complex personal affairs while they attend to growing their businesses is a consistent team. We're also seeing early success with various new marketing approaches and referral sources in particular during the third quarter we had healthy new business generation with clients with assets over 50 million. In asset management, we saw positive flows into our institutional money market platform for the third consecutive quarter relative to benchmarks.

Speaker 3: Within asset servicing, we had good momentum in court custody and fund administration, and our pipeline remained solidly within historical level.

Within asset servicing we had good momentum in core custody and fund administration and our pipeline remains solidly within historical levels.

Speaker 3: Our front office solutions is resonating particularly well across regions and different client types.

Our front office solutions is resonating, particularly well across regions and different client types.

Speaker 3: One notable front-office solutions win in the third quarter was the $32 billion Abu Dhabi pension fund. Our ability to provide a comprehensive view across public and private assets was cited as a key differentiator. Importantly, we were also selected to provide global custody, liquidity management, performance and risk analytics, and portfolio optimization.

One notable for front office solutions win in the third quarter was the $32 billion Abu Dhabi pension funds, our ability to provide a comprehensive view across public and private assets was cited as a key differentiator.

Importantly, we were also selected to provide global custody liquidity management performance and risk analytics and portfolio optimization.

Michael OGrady: Our tax advantage equity product performance remains strong within the quarter, cementing its one three and five year track record of out performance. Importantly, two recent large asset servicing wins contain asset management mandates for index fixed income and outsourced investment solutions reinforcing our combined strength as one north. Center. Within asset servicing, we had good momentum in core custody and fund administration and our pipeline remained solidly within historical levels. Our front office solutions is resonating particularly well across regions and different client types.

Speaker 3: We also had good success in the U.S. asset owner space, where we continue to take share.

We also had good success in the U S asset owner space, where we continue to take share.

Speaker 3: In closing, we enter the fourth quarter on solid footing. Our balance sheet continues to be very strong with ample capital and liquidity, and our credit quality remains excellent. New business momentum is healthy and our pipeline is robust.

In closing, we enter the fourth quarter on solid footing, our balance sheet continues to be very strong with ample capital and liquidity and our credit quality remains excellent.

New business momentum is healthy and our pipeline is robust.

Speaker 3: Expense growth has declined each quarter of the year, and I'm confident that we will continue to build on this discipline.

<unk> growth has declined each quarter this year and I'm confident they will continue to build on this discipline.

Speaker 3: where well-positioned to navigate the current uncertain environment, including the proposed regulatory changes related to capital and long-term debt and generate value for our stakeholders. I'll now turn the call over to Jason.

We're well positioned to navigate the current uncertain environment, including the proposed regulatory changes related to capital and long term debt and generate value for our stakeholders I will now turn the call over to Jason.

Michael OGrady: One notable first front office solutions win in the third quarter was the $32 billion Abu Dhabi pension fund. Our ability to provide a comprehensive view across public and private assets was cited as a key differentiator. Importantly, we were also selected to provide global custody, liquidity management, performance and risk analytics and portfolio optimization. We also had good success in the U.S, asset owner space where we continue to take share.

Speaker 4: Thank you, Mike, and let me join Jennifer and Mike and welcoming you to our third quarter, 2023 earnings call. Let's dive into the financial results of the quarter, starting on page four.

Thank you, Mike and let me join Jennifer and Mike and welcoming you to our third quarter 2023 earnings call, let's dive into the financial results for the quarter starting on page four.

This morning, we reported third quarter net income of $328 million earnings per share of $1 49, and our return on average common equity was 11, 6%.

Speaker 4: This morning we reported third quarter night income of $328 million. Earnings per share of $1.49 and our return on average common equity was 11.6%.

Michael OGrady: In closing, we enter the fourth quarter on solid footing. Our balance sheet continues to be very strong with ample capital and liquidity and our credit quality remains excellent. New business momentum is healthy and our pipeline is robust. Expense growth has declined each quarter this year and I'm confident it will continue to build on this discipline. We're well positioned to navigate the current uncertain environment including the proposed regulatory changes related to capital and long-term debt and generate value for our stakeholders.

Our assets under custody and administration and assets under management were down modestly on a sequential basis, but up sharply on a year over year basis.

Speaker 4: Our assets under custody administration and assets under management were down modestly on a sequential basis, but up sharply on a year-over-year basis.

Speaker 4: Unfavorable markets and currency movements more than offset positive asset inflows relative to the prior period

Unfavorable market and currency movements more than offset positive asset flows relative to the prior period.

Speaker 4: year-over-year levels benefited from favorable markets, currency improvements, and asset implodes.

Year over year levels benefited from favorable markets currency improvements and asset inflows.

Speaker 4: On a year-over-year basis, currency movements had an approximate 90 basis point favorable impact on revenue growth, largely within our asset services division, and a 100 basis point unfavorable impact on expense.

On a year over year basis currency movements had an approximate 90 basis point favorable impact on revenue growth largely within our asset services Division and 100 basis point unfavorable impact on expenses.

Jason Tyler: I'll now turn the call over to Jason. Thank you Mike and let me join Jennifer and Mike and welcome you to our third quarter of 2023 earnings call. Let's dive into the financial results of the quarter starting on page four.

Speaker 4: On a sequential basis, currency impacts were in material.

On a sequential basis currency impacts were immaterial.

Jason Tyler: This morning we reported third quarter-night income of $328 million. Earnings per share of $1.49 and our return on average common equity was 11.6%. Our assets under question administration and assets under management were down modestly on a sequential basis but up sharply on a year over year basis. Unfavorable markets and currency movements more than offset positive asset inflows relative to the prior period. Year over year levels benefited from favorable markets currency improvements and asset inflows.

Speaker 4: excluding notable items in all periods. Revenue is down 2% on both the sequential quarter and year over year base.

Excluding notable items in all periods revenue was down 2% on both the sequential quarter and year over year basis.

Speaker 4: Expenses were up 1% sequentially and up 5% over the prior year.

Expenses were up 1% sequentially and up 5% over the prior year.

This reflects an expense to trust fee ratio of 115% down from 116% in the second quarter, but higher than the 112% we posted in the third quarter of last year.

Speaker 4: Fisher Flex and expense a trust fee ratio of 115%. Down from 116% in the second quarter, but higher than the 112% we posted in the third quarter of last year.

Pretax income was up 1% sequentially, but down 20% over the prior year.

Speaker 4: Pre-tax income was up 1% sequentially, but down 20% over the prior year.

Jason Tyler: On a year over year basis currency movements had an approximate 90 basis point favorable impact on revenue growth largely within our asset services division and a 100 basis point unfavorable impact on expenses. On a sequential basis currency impacts were immaterial. Excluding notable items in all periods revenue is down 2% on both a sequential quarter and year over year basis. Expenses were up 1% sequentially and up 5% over the prior year. This reflects an expense to trust fee ratio of 115% down from 116% in the second quarter but higher than the 112% we posted in the third quarter of last year.

Speaker 4: Trust, investment and other servicing fees, representing the largest component of our revenue, totaled $1.1 billion. A 1% sequential increase and a 3% increase compared to last year.

Trust investment and other servicing fees, representing the largest component of our revenue totaled $1 1, billion% to 1% sequential increase and a 3% increase compared to last year.

Speaker 4: All other non-interested come was up 6% sequentially, but down 3% over the prior year.

All other noninterest income was up 6% sequentially, but down 3% over the prior year.

Net interest income on an FTE basis was $469 million down, 10% sequentially and down 11% from a year ago.

Speaker 4: Then Interest Income on an FTE basis was $469 million. Down 10% sequentially and down 11% from a year ago.

Speaker 4: Our provision for credit losses was $14 million in the third quarter. Overall, our credit quality remains very strong. With small net recoveries for the quarter, there was a modest increase in non-performing loans. Turning to our address.

Our provision for credit losses was $14 million in the third quarter overall, our credit quality remains very strong with small net recoveries for the quarter. There was a modest increase in nonperforming loans.

Jason Tyler: Protect income was up 1% sequentially but down 20% over the prior year. Trust investment and other servicing fees representing the largest component of our revenue totaled $1.1 billion. A 1% sequential increase and a 3% increase compared to last year. All other non-interested income was up 6% sequentially but down 3% over the prior year. Then Interest Income on an FTE basis was $469 million, down 10% sequentially and down 11% from a year ago.

Turning to our asset servicing results on page five.

Assets under custody and administration for asset servicing clients with $13 two trillion at quarter end down, 2% sequentially, but up 10% year over year.

Speaker 4: Assets under custody and administration for asset servicing clients were $13.2 trillion at quarter end, down 2% sequentially, but up 10% year-over-year. Asset servicing fees totaled $626 million.

Asset servicing fees totaled $626 million.

Custody and fund administration fees, the largest component of fees in the business for $428 million sequential.

Speaker 4: Company and fund administration fees, the largest component of fees in the business, for $428 million.

Speaker 4: sequential performance, reflux favorable markets, and new business activity offset by weaker transaction bonds.

Our performance reflects favorable markets and new business activity offset by weaker transaction volume.

Speaker 4: The year-over-year strength was due to solid new business activity and favorable market and currency impacts that were partially offset by lower debt.

Jason Tyler: Our provision for credit losses was $14 million in the third quarter. Overall, our credit quality remains very strong. With small net recovery through the quarter, there was a modest increase in non-performing loans. Turning to our asset servicing results on page 5. Assets under custody and administration for asset servicing clients were $13.2 trillion in quarter end, down 2% sequentially, but up 10% year over year. Passed servicing fees totaled $626 million. Customering and fund administration fees, the largest component of fees in the business, were $428 million, sequential performance reflects favorable markets and new business activity offset by weaker transaction volume.

Year over year strength was due to solid new business activity and favorable market and currency impacts.

There were partially offset by lower transaction volume.

Speaker 4: Acids under management for asset service and clients were $963 billion. Down 3% sequentially, but up 10% year over year.

Assets under management for asset servicing clients were $963 billion.

Down, 3% sequentially, but up 10% year over year.

Speaker 4: Similarly, because a significant portion of our fees are billed on a lagged basis, the sequential decline in AUM will impact our fourth quarter trustees.

Similarly.

A significant portion of our fees are billed on a lagged basis, the sequential decline in AUM will impact our fourth quarter Trust fees.

Speaker 4: Investment management fees within asset servicing were $137 million. Moving to our wealth management

Investment management fees within asset servicing were $137 million.

Moving to our wealth management business on page six.

Speaker 4: assets under management for our wealth management clients was $370 billion.

Assets under management for our wealth management clients was 370.

$1 billion.

Speaker 4: Trust administration and other servicing fees for wealth management clients were $486 million.

Trust administration and other servicing fees for wealth management clients were $486 million.

Jason Tyler: The year over year strength was due to solid new business activity and favorable market and currency impacts that were partially offset by lower transaction volume. Assets under management for asset servicing clients were $963 billion, down 3% sequentially, but up 10% year over year. Similarly, because the significant portion of our fees are billed on a lagged basis, the sequential decline in AUM will impact our fourth quarter trustees. Investing management fees within asset servicing were $137 million.

Our average balance sheet sheet decreased 4% on a linked quarter basis, primarily due to lower client deposits.

Speaker 4: Our average balance sheet decreased 4% on a length quarter basis, primarily due to lower client deposits.

Speaker 4: client liquidity was essentially flat during third quarter.

Liquidity was essentially flat during third quarter.

Speaker 4: Average deposits were $102 billion, down $4 billion, or 4% sequentially, in line with our expectations for this seasonably weaker quarter.

Average deposits were $102 billion down.

Down $4 billion or 4% sequentially in line with our expectations for this seasonally weaker quarter.

Speaker 4: The decline was seen largely in the interest-bearing channel as clients continued to reallocate cash positions.

The decline was seen largely in the interest bearing channel as clients continue to reallocate cash position.

Jason Tyler: Moving to our welcome management business on page 6. Assets under management for our welcome management clients was $370 billion. Trust administration and other servicing fees for welcome management clients were $486 million. Our average balance sheet decreased 4% on a length quarter basis primarily due to lower client deposits. Plant liquidity was essentially flat during third quarter. Average deposits were $102 billion, down 4 billion or 4% sequentially in line with our expectations for this seasonably weaker quarter.

Speaker 4: Non-interest bearing deposits remain stable, down less than $1 billion sequentially, and the mix held steady at 17%.

Noninterest bearing deposits remained stable down less than $1 billion sequentially and the MX held steady at 17%.

Speaker 4: quarter end, operational deposits remained at approximately two-thirds of institutional deposits, and institutional deposits comprised 75 to 80 percent of the total mix.

Quarter end operational deposits remained at approximately two thirds of institutional deposits and institutional deposits comprised 75% to 80%.

Of the total mix.

Speaker 4: Shifting to the asset side of the balance sheet, the duration of the securities portfolio reduced slightly to 1.9 years. The total balance sheet duration continues to be

Shifting to the asset side of the balance sheet, the duration of the securities portfolio reduced slightly to $1 nine years with.

The total balance sheet duration continues to be less than a year.

Speaker 4: Loan balances averaged $42 billion and were flat sequentially.

Loan balances averaged $42 billion and were flat sequentially.

Speaker 4: Our loan portfolio is well-diversified across geographies, operating segments, and loan types.

Our loan portfolio is well diversified across geographies operating segments and loan types.

Jason Tyler: The decline was seen largely in the interest bearing channel as clients continued to reallocate cash positions. Non-interest bearing deposits remained stable, down less than $1 billion sequentially, and the mix held steady at 17%. In quarter end, operational deposits remained at approximately two thirds of institutional deposits and institutional deposits comprise 75 to 80% of the total mix. Shifting to the asset side of the balance sheet, the duration of the security portfolio reduced slightly to 1.9 years.

Speaker 4: Approximately 70% of the loan portfolio is floating, and the overall duration is below one year.

Approximately 70% of the loan portfolio is floating in the overall duration is below one year.

Speaker 4: Our liquidity remained strong. Cash held at the Fed and other central banks was down, reflecting the absorption of the deposit decreases, but highly liquid assets comprised more than 55% of our deposits and nearly 50% of total earning assets.

Our liquidity remained strong cash held at the fed and other central banks was down.

Reflecting the absorption of the deposit decreases but highly liquid assets comprised more than 55% of our deposits and nearly 50% of total earning assets.

Speaker 4: Net interest income on an FTE basis was $469 million for the quarter, down 10% sequentially, and down 11% from the prior year. And I reflected the impact.

Net interest income on an FTE basis was $469 million for the quarter down 10% sequentially and down 11% from the prior year.

Jason Tyler: The total balance sheet duration continues to be less than a year. Lone balances averaged $42 billion and were flat sequentially. Our loan portfolio is well diversified across geographies, operating segments and loan types. Approximately 70% of the loan portfolio is floating and the overall duration is below one year. Our liquidity remains strong. Cash held at the Fed and other central banks was down. We're reflecting the absorption of the deposit decreases but highly liquid assets comprise more than 55% of our deposits and nearly 50% of total earning assets.

NII reflected the impact of several dynamics.

We saw some continued client migration into higher yielding cash alternatives, but the pace moderated as we expected.

Speaker 4: We saw some continued client migration into higher-yielding cash alternatives, but the pace moderated as we expected.

Speaker 4: Deposit cost increases were a slightly bigger factor, with funding costs up 46 basis points over the second quarter.

Deposit cost increases were slightly bigger factor with funding costs up 46 basis points over the second quarter.

Speaker 4: Due to the competitive environment, we repriced a small number of meaningful products to ensure we're protecting deposit volume.

Due to the competitive environment, we repriced, a small number of meaningful products to ensure we're protecting deposit volumes.

Speaker 4: We're not price leaders, but we're vigorously defending our deposits with an eye toward playing the long game.

We're not price leaders, but we're vigorously defending our our deposits with an eye towards playing the long game.

Speaker 4: We expect to benefit from this strategy when rates decline.

We expect to benefit from this strategy when rates decline.

Client engagement also led to a combination of specific repricing on existing accounts and a shift to higher paying term deposits.

Speaker 4: Client engagement also led to a combination of specific repricing on existing accounts and a shift to higher paying term deposits.

Jason Tyler: That interest income on an FTE basis was $469 million for the quarter, down 10% sequentially and down 11% from the prior year. And I reflected the impact of several dynamics. We saw some continued client migration into higher yielding cash alternatives but the pace moderated as we expected. Deposit costs increases were a slightly bigger factor with funding costs up 46 basis points over the second quarter. Due to the competitive environment, we reprised a small number of meaningful products to ensure we're protecting deposit volumes.

Speaker 4: There's no question that clients want to remain on our balance sheet, but sensing that the rate cycle is close to peaking, they've begun to stretch for duration.

There's no question that clients want to remain on our balance sheet, but sensing that the rate cycle is close to peaking.

They've begun to stretch for duration.

Speaker 4: Our NII in the fourth quarter will continue to be driven by client behavior, which has been less predictable given the speed and extent of this cycle's rate hike.

Our NII in the fourth quarter will continue to be driven by client behavior, which has been less predictable given the speed and extent of this cycle's rate hikes.

Speaker 4: Our average client deposits thus far in the quarter are $100 billion. Modest outflows are expected to continue doing part to client efforts to optimize returns and to some known outflows related to M&A activity and other corporate needs.

Our average client deposits, thus far in the quarter, our 100 billion.

Modest outflows are expected to continue due in part to client efforts to optimize returns and to some known outflows related to M&A activity and other corporate needs.

Jason Tyler: We're not price leaders, but we're vigorously defending our deposits with an eye toward playing a long game. We expect to benefit from this strategy when rates decline. Client engagement also led to a combination of specific reprising on existing accounts and a shift to higher paying term deposits. There's no question that clients want to remain on our balance sheet. But sensing that the rate cycle is close to peaking, they've begun to stretch for duration.

Pricing should remain under pressure with further NIM compression possible.

Speaker 4: Pricing should remain under pressure with further nin compression possible.

Speaker 4: We currently expect fourth quarter NII to be in the range of $430 to $440 million.

We currently expect fourth quarter NII to be in the range of $430 million to $440 million.

Speaker 4: Factors that could swing the outcome include the pace of further deposit outflows, the level of price pressure, the extent to which we continue to see deposit mix shift, and the offsetting impact from the repricing of the securities portfolio.

Factors that can swing. The outcome include the pace of further deposit outflows the level of price pressure the extent to which we see we continue to see deposit mix shift and the offsetting impact from the repricing of the securities portfolio.

Jason Tyler: Our NII and the fourth quarter will continue to be driven by client behavior which has been less predictable given the speed and extent of this cycle's rate hikes. Our average client deposits thus far in the quarter are $100 billion. Modest outflows are expected to continue doing part to client efforts to optimize returns and to some known outflows related to M&A activity and other corporate needs. Pricing should remain under pressure with further name compression possible.

As we look out to 2024, there are wide range of scenarios under which net interest income could trend.

Speaker 4: As we look out to 2024, there are a wide range of scenarios under which net interest income could trend.

Speaker 4: Deposit pricing pressure, our securities maturity schedule, investment outlook.

Deposit pricing pressure our securities maturity schedule.

<unk> outlook and.

Speaker 4: and other factors provide upcytes. It's not, upside that's not reflected in the current quarter.

And the other factors provide upside that's not upside thats not reflected in the current quarter.

Turning to page eight.

As reported noninterest expenses were $1 $3 billion in the third quarter down, 4% sequentially, but up 4% as compared to the prior year.

Speaker 4: As reported, non-interest expenses were $1.3 billion in the third quarter. Down 4% sequentially but up 4% is compared to the prior year.

Jason Tyler: We currently expect fourth quarter NII to be in the range of $430 to $440 million. Factors that could swing the outcome include the pace of further deposit outflows, the level of price pressure, the extent to which we continue to see deposit and mix shift and the offsetting impact from the reprising of the securities portfolio. As we look out to 2024, there are wide range of scenarios under which net interest income could trend. Deposit pricing pressure are securities maturity schedule, investment outlook, and other factors provide upside that's not reflected in the current quarter. Turning to page 8.

Excluding unusual items in both periods, including those noted on the slide expenses in the third quarter were up 1% sequentially and up over 5% year over year.

Speaker 4: including unusual items in both periods, including those noted on the slide, expenses in the third quarter were up 1% sequentially, and up over 5% year over year. I'll take a look at the results.

I'll hit on just a few highlights.

Speaker 4: Excluding unusual items, compensation expenses was down 2% sequentially. This reflected reductions in incentive compensation and head count actions taken year to date.

Excluding unusual items compensation expense was down 2% sequentially.

This reflected reductions in incentive compensation and head count actions taken year to date.

Speaker 4: The increase over the last year reflects 2023 base pay adjust.

Increased over the last year reflects 2023 base pay adjustments.

Speaker 4: excluding unusual items in all periods, non-compensation expense was up 3% sequentially. Our expense-to-trust fee ratio improved 100 basis points sequentially to 115%.

Excluding unusual items in all periods non compensation expense was up 3% sequentially.

Our expense to trust fee ratio improved 100 basis points sequentially to 115%.

Jason Tyler: As reported, non-interest expenses were $1.3 billion in the third quarter, down 4% sequentially but up 4% is compared to the prior year. Excluding unusual items in both periods, including those noted on the slide, expenses in the third quarter were up 1% sequentially and up over 5% year-over-year. I'll hit on just a few highlights. Excluding unusual items, compensation expense was down 2% sequentially. This reflected reductions in incentive compensation and headcount actions taken year-to-date.

Speaker 4: but remains higher than our targeted range of 105 to 110%.

So it remains higher than our targeted range of 105% to 110%.

As a reminder.

Speaker 4: As a reminder, we began the year expecting to take at least 200 basis points off of our 2022 Adjusted Expense Growth Rate of 9%.

Minder, we began the year expecting to take at least 200 basis points off of our 2022 adjusted expense growth rate of 9%.

Speaker 4: Our first-quarter adjusted results were meaningfully better, up 5.8% year-over-year. Our second-quarter adjusted results were even better, up 5.3% year-over-year. And our third-quarter results were in the same range despite unfavorable currency impact.

Our first quarter adjusted results were meaningfully better up five 8% year over year, our second quarter adjusted results were even better up five 3% year over year and our third quarter results were in the same range despite unfavorable currency impacts.

Jason Tyler: The increase over the last year reflects 2023 base pay adjustments, excluding unusual items in all periods, non-compensation expense was up 3% sequentially. Our expense to trust free ratio improved 100 basis points sequentially to 115%, but remains higher than our targeted range of 105 to 110%. As a reminder, we began the year expecting to take at least 200 basis points off of our 2022 adjusted expense growth rate of 9%. Our first quarter adjusted results were meaningfully better, a 5.8% year over year.

Speaker 4: For the fourth quarter, we expect continued improvement. Compensation expenses expected to be up $5 million.

For the fourth quarter, we expect continued improvement compensation expense is expected to be up $5 million benefits expense should be our normal fourth quarter lift of $3 million to $5 million.

Speaker 4: then if it's expense should be our normal 4th quarter lift of 3 to 5 million dollars.

Speaker 4: Outside services likely to be up approximately $10 million. Equipment and software should be up approximately $10 million relative to adjusted third quarter levels. Occupancy is expected to increase a few million dollars above adjusted third quarter level.

Outside services likely to be up approximately $10 million equipment and software should be up approximately $10 million relative to adjusted third quarter levels in occupancy is expected to increase a few million dollars above adjusted third quarter levels.

Speaker 4: Other operating expense has many components, including market-driven categories that are not predictable, but it has tended to increase in the fourth quarter.

Other operating expense has many components, including market driven categories that are not predictable, but it has tended to increase in the fourth quarter.

Jason Tyler: Our second quarter adjusted results were even better, a 5.3% year over year. And our third quarter results were in the same range, despite unfavorable currency impacts. For the fourth quarter, we expect continued improvement. Compensation expense is expected to be up $5 million. Benefits expense should be our normal fourth quarter lift of $3 to $5 million. Outside services likely to be up approximately $10 million. Equipment and software should be up approximately $10 million relative to adjusted third quarter levels.

Speaker 4: All in, this would put our full year adjusted expense growth rate at approximately 5%, or roughly 400 basis points lower than 2022 levels.

All in this should put our full year adjusted expense growth rate at approximately 5% or roughly 400 basis points lower than 2022 levels.

Speaker 4: Our financial model is based upon mid-single-digit trust fee growth from a combination of organic growth and market appreciation. Against this backdrop, we hope to generate 100 to 200 basis points in trust fee operating leverage in normal macro environments.

Our financial model is based upon mid single digit trust fee growth from a combination of organic growth and market appreciation against this backdrop, we hope to generate 100 to 200 basis points and trust fee operating leverage and normal macro environments.

Our capital levels and ratios remained strong in the quarter, we continued to operate at levels well above our required regulatory minimum.

Speaker 4: Our capital levels and ratios remain strong on the quarter. We continue to operate at levels well above our required regulatory minimum.

Jason Tyler: Occupancies expected to increase a few million dollars above adjusted third quarter levels. Other operating expense has many components, including market driven categories that are not predictable, but it has tended to increase in the fourth quarter. All in, this has put our full year adjusted expense growth rate at approximately 5%, or roughly 400 basis points lower than 2022 levels. Our financial model is based upon mid-single digit trust fee growth from a combination of organic growth and market appreciation.

Speaker 4: Our common equity tier one ratio under the standardized approach was up slightly from the prior quarter to 11.4%. As capital accretion, more than offset the unfavorable impact from higher rates on our securities portfolio.

Our common equity tier one ratio under the standardized approach was up slightly from the prior quarter to 11, 4% as capital accretion more than offset the unfavorable impact from higher rates on our securities portfolio.

Speaker 4: This reflects a 440 basis point buffer above our regulatory requirement.

This reflects a 440 basis point buffer above our regulatory requirements are.

Speaker 4: Our Tier 1 leverage ratio was 7.9 percent of 50 basis points from the prior quarter. At quarter end, our AOCI was a negative $1.4 billion. The slight improvement over second quarter level.

Our tier one leverage ratio was seven 9% up 50 basis points from the prior quarter.

At quarter end, our OCI was a negative $1 4 billion.

Slight improvement over second quarter levels.

Jason Tyler: Against this backdrop, we hope to generate 100 to 200 basis points and trust the operating leverage in normal macro environments. Our capital levels and ratios remain strong on the quarter. We continue to operate at levels well above our required regulatory minimum. Our common equity tier one ratio under the standardized approach was up slightly from the prior quarter to 11.4%, as capital accretion more than offset the unfavorable impact from higher rates on our securities portfolio.

Speaker 4: We returned $159 million to common shareholders through cash dividends of $158 million and common stock repurchases of $1 million.

We returned $159 million to common shareholders through cash dividends of $158 million in common stock repurchases of $1 million.

Speaker 4: We slowed our buyback activity in order to reserve for the anticipated FDIC special assessment. We're all positioned to meet the proposed regulatory.

We slowed our buyback activity in order to reserve for the anticipated FDIC special assessment.

We're well positioned to meet the proposed regulatory.

Requirements.

Speaker 4: that Mike referenced without significant changes to our operating model. With that, Melissa, please open the...

That Mike referenced without significant changes to our operating model.

With that Melissa Please open the line for questions.

Jason Tyler: This reflects a 440 basis point buffer above our regulatory requirements. Our tier one leverage ratio was 7.9% of 50 basis points from the prior quarter. At quarter end, our AOCI was a negative $1.4 billion, the slight improvement over second quarter levels. We returned $159 million to common shareholders through cash dividends of $158 million and common stock repurchases of $1 million. We slowed our buyback activity in order to reserve for the anticipated FDIC special assessment. We were well positioned to meet the proposed regulatory requirements that might reference without significant changes to our operating model.

Speaker 1: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Thank you.

If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Speaker 1: Again, press star one to ask a question. And we'll pause for just a moment to allow everyone an opportunity to signal.

Again press Star one to ask a question.

Pause for just a moment to allow everyone an opportunity to signal.

Okay.

Okay.

Sure.

Yes.

And we can go with our first question from Glenn Schorr with Evercore.

Unknown Executive: With that, Melissa, please open the line for questions. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Good morning, <unk> sounds like that was like the prices right I like it.

Speaker 5: Morning, Glau. Sounds like the price was right, I like.

Unknown Executive: Amendment. Again, press star one to ask a question. And we'll pause for just a moment to allow everyone an opportunity to signal.

Speaker 5: Okay, so I appreciate the range of outcomes for NII next year that you can control.

Okay. So.

So.

I appreciate.

The range of outcomes for NII next year.

Can control so we'll leave that aside for a second.

Speaker 5: But you mentioned your expensive trust rate show, your target, and what you can do in terms of operating leverage in a better environment or a normal environment. I'm sure it's just what's the overall approach toward two expenses as you enter budget season next year within that mindset of what your goals are. And how do you approach it with that much uncertainty around things that you can't control?

But you mentioned your expenses.

Expenses trustee ratio your target and what you can do in terms of operating leverage in a better environment or normal environment. I'm curious just what's the overall approach towards to expenses as you enter budget season next year within that within that mindset of what your goals are and then how do you approach it with.

That much uncertainty around things that you can't control.

Yeah.

Speaker 4: Yeah, well, you know, as we enter, this is the time of year where we're thinking, trying to get a sense of where the launch points will be. And, you know, I walk through a little bit of a financial model for you guys to think about.

Glenn Schorr: And we can go with our first question from Glenn Schorr with Evercore. I appreciate the range of outcomes for NII next year that you can control, so we'll leave that aside for a second. But you mentioned your expensive trusty ratio, your target, and what you can do in terms of operating leverage in a better environment or a normal environment.

As we enter this is the time of year, where were thinking trying to get a sense of where the launch points will be and I'll walk through a little bit of a financial model for you guys to think about that.

Speaker 4: that if we're over time, we'll get lift from the equity markets and we should also have low to mid single digit organic growth. If we can get 100 to 200 basis points in fee operating leverage, that sets us up really well based on where our pre-tax margin is for good.

Over time, we will get lift from the equity markets.

And we should also have low to mid single digit organic growth. If we can get 100 to 200 basis points and fee operating leverage that sets us up really well based on where our pre tax margin is for good.

Jason Tyler: I'm sure it's just what's the overall approach towards two expenses as you enter budget season next year within that mindset of what your goals are. And how do you approach it with that much uncertainty around things that you can't control? Yeah, well, as we enter, this is the time of year where we're thinking, trying to get a sense of where the launch points will be. And I walk through a little bit of a financial model for you guys to think about that if we're over time, we'll get 100 to 200 basis points in fee operating leverage.

Speaker 4: DPS growth over time and so that's the goal that we it's one of the the metrics that we look at really closely and We're still in an inflationary environment where it's harder to get that

<unk> growth over time, and so that's the goal that we it's one of the metrics that we look at really closely.

And.

We're still in an inflationary environment, where it's harder to get that that operating leverage if you're just looking at fees because the expenses are elevated in <unk>.

Speaker 4: that operating leverage if you're just looking at fees because the expenses are elevated and you don't get the benefit from higher rates on the trust fee line, but you can tell that we've spent an incredible amount of effort this year working the year over year expense growth rates down. And you go back to 2022 and printing a 9% growth coming into this year we knew we had to do better than that and we've been grinding that down each quarter quarter after quarter. We first tackled it with working hard on labor and you can see you know that's the biggest cost that we have so we have to get that right.

You don't get the benefit from higher rates on on the trust fee line, but you can tell that we've spent an incredible amount of effort. This year working the year over year expense growth rates down and you go back to 2022 and printing a 9% growth coming into this year, we knew we had to do better than that.

And we've been grinding that down each quarter quarter after quarter, we first tackled it with working hard on labor and you can see that's the biggest cost that we have so we have to get that rate head count's down and then another key element is technology that shows up in equipment software and outside services.

Jason Tyler: That sets us up really well based on where our pre-tax margin is for good GPS growth over time. And so that's the goal that we it's one of the metrics that we look at really closely. And we're still in an inflationary environment where it's harder to get that that operating leverage if you're just looking at fees because the expenses are elevated and you don't get the benefit from higher rates on the trust fee line.

Speaker 4: head counts down and then another key element is technology that shows up in equipment, software and outside services. That's still elevated above the rest of the company in terms of growth rate, but we've had a lot of accomplishments there too and expecting to have that growth rate be lower next year than it has historically. And so we think we can have another year next year that's similar to what we did in this year, which is to work that, continue to work that year over your growth rate down.

Still elevated above the rest of the company in terms of growth rate, but we've had a lot of accomplishments there too and expecting to have that growth rate be lower next year than it has historically and so we think we can have another year next year that similar to what we did in this year, which is two to work that could continue to work that year over year.

Jason Tyler: But you can tell that we've spent incredible amount of effort this year working the year over year expense growth rates down. And you go back to 2022 and printing at 9% growth coming into this year. We knew we had to do better than that. And we've been grinding that down each quarter quarter after quarter. We first tackled it with working hard on labor. And you can see, you know, that's the biggest cost that we have.

Growth rate down.

Speaker 5: Jacqueline, look, well, thank you. You have tons of capital, and you've generated plenty also. But I'm curious, some of the big banks have articulated what they thought as is the RWA impact or oil and impact might be. I'm curious about your first glance. What type of impact are we talking? I know it does. You mentioned it doesn't disrupt your model, and I agree. I'm just curious if you can help us box it in in terms of oil's pre-impact if-as is. DO commissions are encouraged.

Exactly.

You have tons of capital and.

And youll generate plenty also but I'm curious some of the big banks have articulated what they call. It as is.

<unk> impact or oil and impact might be.

Curious at your first glance what type of impact are we talking I know you mentioned it doesn't disrupt your model and I agree I'm. Just curious if you can help us box it in in terms of Australia impact if assets. Thanks.

Jason Tyler: So we have to get that right. Head counts down. And then another key element is technology that shows up in equipment software and outside services that's still elevated above the rest of the company in terms of growth rate. But we've had a lot of accomplishments there too and expecting to have that growth rate be lower next year than it has historically. And so we think we can have another year next year that's similar to what we did in this year, which is to work that could continue to work that year over your growth rate down.

Sure.

Speaker 4: Sure, yeah, I'm gonna give you a wide range is like five to 15% in RWA. And that's gonna be impacted by a few different things, but one of the benefits that we have is the diversification of the business model.

I'm going to give you a wide range, 5% to 15% in <unk> and that will that's going to be impacted by a few different things, but one of the benefits that we have is the diversification of the business model.

Speaker 4: And so we've got obviously the custody business comes with a lot of operational risk. That's really the most significant driver, but we'll actually get some benefit from an RWA perspective in some of the loan treatments, just given the nature of our underlying loans.

And so we've got obviously the custody business comes with a lot of operational risk that is really the most significant driver, but we will actually get some benefit from an <unk> perspective, and some of the loan treatments do you given the nature of our underlying loans and then there are some other dynamics that we have that should help on our <unk> as well on a realm.

Jason Tyler: Thank you. You have time to capital and you've generate plenty also, but I'm curious. Some of the big banks have articulated what they thought as is the RWA impact or oil and impact might be. I'm curious about your first glance. What type of impact are we talking? I know it does. You mentioned it doesn't disrupt your model. And I agree. I'm just curious if you can help us box it in in terms of all three impact if as is.

Speaker 4: And then there are some other dynamics that we have that should help on our WA as well on a relative basis.

<unk> basis, but it's we're thinking about at this point it could be anywhere from 5% to 15%.

Speaker 4: It's a, we're thinking about at this point, it could be anywhere from five to 15%. But as we mentioned earlier, feel really comfortable and see where our CT1 levels are and see where our liquidity is. And so we'll keep an eye on where our peers are, we'll keep an eye on what the business is doing, but we've got flexibility in other ways to manage that dynamic as well.

As we mentioned earlier feel really comfortable and see where our CET one levels are and see where our liquidity is and so we'll keep an eye on where our peers are we'll keep an eye on what the business is doing but we've got flexibility in other ways to manage that that dynamic as well.

Jason Tyler: Thanks. Sure. Yeah, I'm going to give you a wide range of like five to fifteen percent in RWA and that's going to be impacted by a few different things. But one of the benefits that we have is the diversification of the business model. And so we've got obviously the custody business comes with a lot of operational risk. That's really the most significant driver. But we'll actually get some benefit from an RWA perspective and some of the loan treatments.

Jason Tyler: Just given the nature of our underlying loans. And then there are some other dynamics that we have that should help on RWA as well on a relative basis. But it's a, we're thinking about at this point it could be anywhere from five to fifteen percent. But as we mentioned earlier, feel really comfortable and see where our CT one levels are and see where our liquidity is. And so we'll keep an eye on where our peers are. We'll keep an eye on what the business is doing. But we've got flexibility in other ways to manage that. That dynamic as well.

That's great. Thanks for all that I appreciate it.

Sure. Thanks, Paul.

We can take our next question from Michael Brown with K B W.

Speaker 1: take our next question from Michael Brown with KBW.

Hi, good morning, everyone.

So I just wanted to start on the custody and fund admin fees are essentially flat quarter over quarter.

Speaker 6: So I guess I wanted to start on the custody and in fun admin fees. They were essentially flat quarter over quarter. I guess a little bit softer than we expected. What?

It's a little bit softer than we expected.

Some of the key drivers that played out this quarter and as you noted the lower market levels presented a headwind here for the fourth quarter, but you did talk about some positive dynamics on the new business front. So what are the puts and takes.

Speaker 6: played out this quarter and as you noted the lower market levels presented a bit of the headwind here for the fourth quarter, but you did talk about some positive dynamics.

We should think about here for the fourth quarter and then heading into next year.

Speaker 4: Sure, so first of all, if you just look at the custody and fund admin line and split it.

Sure. So first of all the.

Just look at the custody and fund admin line.

And split it.

Speaker 4: We talked about the fact that currency on a sequential basis was effectively a push year over year. It helped more than that, you know, roughly in the in the neighborhood of one and a half to 2 percent. But if we just go back and look sequentially at how the quarter looked, the net new business.

We talked about the fact that currency.

Jason Tyler: That's great. Thanks for all of that. Appreciate it. Sure. Thanks.

On a sequential basis was effectively a push year over year and helped.

Michael Brown: We can take our next question from Michael Brown with KBW. Hi, good morning, everyone. So I guess I wanted to start on the custody and in front of admin fees. There were essentially flat quarter over quarter. I guess a little bit softer than than we expected. Of course, some of the key drivers that played out this quarter. And as you noted, the lower market levels presented a bit of a headwind here for the fourth quarter, which you did talk about some positive dynamics on the new business front.

More than that.

Roughly in the neighborhood of one 5% to 2%, but if we just go back and look sequentially at how the quarter looked the net new business.

Speaker 4: was in custody and fund avenues, was a positive. It was low single digits, very low single digits, but positive. And then transaction volumes continue to be light. And we're starting to talk about that dynamic as something that might be more...

Does in custody and fund admin fees was a positive it was low single digits very low single digits, but positive and then transaction volumes continue to be light and we're starting to talk about that dynamic.

Michael Brown: So what are the puts and takes that we should think about here for the fourth quarter and then heading into next year. Sure. So, first of all, if you just look at the custody and fondad and in line and split it, we talked about the fact that currency on a sequential basis was effectively a push year over year. It helped more than that roughly in the neighborhood of one and a half to two percent.

It's something that might be more more long term just as our clients move more toward more indexing as opposed to active management. There is less trading activity theres less reporting it was less transitions and so we did we're continuing to see a lower level of.

Speaker 4: more long term just is our clients move more towards.

Speaker 4: more indexing as opposed to active management. There's less trading activity, there's less reporting, there's less transitions. And so we did, we were continuing to see a lower level of a transaction related activity, but the overall business is strong. Again, net positive in overall net new business perspective and the pipeline as Mike mentioned, look strong.

Transaction related activity, but the overall business is strong.

Again net positive from a.

Overall net new business perspective.

Michael Brown: But if we just go back and look sequentially at how the quarter looked, the net new business was in custody and fund admin fees was a positive. It was low single digits, very low single digits, but positive and then transaction volumes continue to be light. And we're starting to talk about that dynamic as something that might be more, more long term, just as our clients move more toward more indexing as opposed to active management.

And the pipeline as Mike mentioned look strong.

Okay, and then just change gears to the deposit side it sounds like.

The pressure there still.

<unk> could you just maybe unpack some of those underlying dynamics by client type and maybe just touch on where the pressure is perhaps the greatest and maybe where there is a bit less of a challenge in our history.

Speaker 6: impact some of those underlying dynamics by client type and maybe just touch on where the pressure is perhaps the greatest and maybe where there's a bit less of a challenge in our receiving.

Seeing some elements of the deposit base and are seeing stabilization here or is it really kind of across the board.

Michael Brown: There's less trading activity. There's less reporting. There's less transitions. And so we did we were continuing to see a lower level of a transaction related activity, but the overall business is strong. Again, net positive from an overall net new business perspective. And the pipeline is Mike mentioned looks strong.

Uh huh.

Definitely feel it's stabilized in a lot of ways, it's hard to predict where it's going to go because obviously that's been a volatile cycle and clients are clearly trying to figure out what to do from here. There's a lot of clients that are that are terming out their deposits. We saw in the wealth side just to get at your question of how it's.

Speaker 4: definitely feel it's stabilized in a lot of ways. It's hard to predict where it's going to go because obviously it's been a volatile cycle and clients are clearly trying to figure out what to do from here. There's a lot of clients that are terming out their deposits. We saw in the wealth side, just to get at your question of how it's separated by channel, the wealth side, we saw a significant increase in term deposits.

Separating by channel.

Michael Brown: Okay, and then we just change gears to the deposit side. It sounds like the pressure there still remains. Could you just maybe unpack some of those underlying dynamics by client type and maybe just touch on where the pressure, as perhaps the greatest and maybe where there's a bit less of a challenge and you know you're seeing some elements of the deposit base that are seeing stabilization here or is it really kind of across the board?

The wealth side, we saw a significant increase in term deposits. So clients are saying this is an opportunity to move out of checking and into Cds.

Speaker 4: So clients are saying this is an opportunity to move out of checking and into CDs. And part of that is the nature of our clients, where they have large amounts of deposits. And so they can take a component of their deposits and think about that more strategically and less about the need to maintain that liquidity just for day-to-day payment.

And part of that is the nature of our clients, where they have large amounts of deposits and so they can take a component of their deposits and think about that more strategically and less about the need to maintain that liquidity just for day to day payments.

Michael Brown: Definitely feel it's stabilized in a lot of ways. It's hard to predict where it's going to go because obviously it's been a volatile cycle and clients are clearly trying to figure out what to do from here. There's a lot of clients that are that are terming out their deposits. We saw in the wealth side just to get at your question of how it's separating by channel. The wealth side we saw a significant increase in term deposits.

Speaker 4: and then in the institute, but interestingly on the well side, deposit is actually up if you think that if you look 630 to 9.

And then in the Institute, but interestingly on the wealth side deposits are actually up if you think if you look.

630 to $9 30, there are up somewhat and so it gives us an indication that the pricing actions. We took were worked really well clients are they continue to see the strength of the balance sheet. They like to deposit on Northern trust balance sheet. So that increase was meaningful on in the institutional side.

Speaker 4: they're up somewhat. And so it gives us an indication that the pricing actions we took worked really well. Clients, they continue to see the strength of the balance sheet. They'd like to deposit on Northern Trust's balance sheet. So that increase was meaningful.

Michael Brown: So clients are saying this is an opportunity to move out of checking and into CDs. And at part of that is the nature of our clients where they have large amounts of deposits and so they can take a component of their deposits. And think about that more strategically and less about the need to maintain that liquidity just for for day-to-day payments. And then in the institute but interestingly on the wealth side deposits are actually up.

Speaker 4: On the institutional side, that's what drove the period-to-period and most of the average decline, and that comes to a lot of clients as moving to different types of either longer duration or higher yielding liquidity types.

<unk>, that's what drove the period to period and most of the average decline and that comes to a lot of clients is moving to two different types of either longer duration or higher yielding liquidity types or.

Speaker 4: Overall, liquidity across the company was flat across the channels, cumulatively. And so, clients clearly are just saying, Northern's the right place to be, they're moving from one.

Overall liquidity across the company was flat across the channels cumulatively and so clients clearly youre, just saying northern is the right place to be there moving from one.

Michael Brown: If you think if you look 630 to 930, they're up somewhat. And so it gives us an indication that the pricing actions we took were worked really well clients. They continue to see the strength of the balance sheet. They like to deposit on northern trust balance sheet. So that increase was meaningful. On in the institutional side, that's what drove the period to period and most of the average decline. And that comes to a lot of clients is moving to different types of either longer duration or higher yielding liquidity types.

Speaker 4: one overall liquidity mechanism to another. And as we look out, I think it's interesting to see that the balance is thus far in the quarter of held in just over 100 billion. And frankly, that's higher and it's still early in the quarter, but that's higher than what we would have anticipated at this point. And the 430 to 440, just to give some context there.

One.

Overall liquidity mechanism to another and as we look out I think it's interesting to see that the balances thus far in the quarter have held in just over $100 billion and frankly, that's that's higher than it is still early in the quarter, but it's higher than what we would have anticipated at this point.

And the $4 30 to 440, just to give some context there that assumes that net interest margin would be relatively flat up a couple of public coupled with a few basis points.

The deposits would have to come down on average in the $93 billion to $95 billion for us to get down to that $4 30 to $4 40, and so at this point thus far again, it's very we're two weeks into a 13 week quarter. The deposit levels are holding in higher than that.

Michael Brown: Overall, liquidity across the company was flat across the channels cumulatively. And so clients clearly are just saying northern is the right place to be. They're moving from one overall liquidity mechanism to another. And as we look out, I think it's interesting to see that the balance is thus far in the quarter held in just over 100 billion. And frankly, that's higher and it's still early in the quarter but it's higher than what we would have anticipated at this point.

Okay, great. Thank you for all the color Jason.

Sure.

And our next question will come from Alex Blaustein with Goldman Sachs.

Speaker 1: And our next question will come from Alex Blostin with Goldman Sachs.

Michael Brown: And the 430 to 440 is to give some context there. That assumes that net interest margin would be relatively flat up a couple couple couple couple to a few basis points, but deposits would have to come down an average in the 93 billion to 95 billion for us to get down to that 430 to 440. And so at this point thus far again, it's very, we're two weeks into a 13 week quarter. The deposit levels are holding in higher than that.

Good morning out.

Speaker 7: Hey Jason, good morning. Hey Mike as well. So just another one around deposits.

Hey, Jason good morning.

Hey, Mike as well.

So just another one around deposits.

Michael Brown: Okay, great. Thank you for all the colleges. Sure.

You guys seem to have been a bit surprised I guess by this latest move in terms of kind of the catch up that you played there you articulated at the conference in September and obviously today.

Do you feel like you've caught up to where institutional pricing is.

Or do you still think there is might be incremental migration or kind of the need to increase price more and then again on the institutional side of things is there a particular client base or channel internationally. That's driving this pick up or is that fairly broad based because your competitor said there is fairly limited right. I mean, we know there is three or four and at the end of it.

Speaker 8: the need to increase price more. And then again, on the institutional side of things, is there a particular client base or channel internationally that's driving this pickup or is that fairly broad-based? Because your competitive side there is fairly limited, right? I mean, we know there's three or four and at the end of the day, that's who you compete with on the custody side. So I'm just kind of curious where we are in that process. It seems like we caught up and, you know, we made, you know, if we get to...

That's where you compete with on the custody side. So I'm just kind of curious where we are in that process.

Alexander Blostein: And our next question will come from Alex Blostin with Goldman Sachs. Thanks. Morning out. Hey Jason, good morning. Hey Mike as well. So just another one around deposits. You guys seem to have been a bit surprised I guess, but the slightest move in terms of kind of the catch-up that you played there, you articulated at the conference September and obviously today. Do you feel like you caught up to where institutional pricing is?

Speaker 4: It seems like we caught up. And we made, if we get to why we thought we were going to be down about 5% in NII, we ended up down 10. We saw that mid-quarter and hit right on the number. So what happened in the, in call of the August timeframe, we clearly saw that

It seems like we caught up and we've made.

If we get to <unk>.

We thought we were going to be down about 5% in NII. We ended up down 10, we saw that mid quarter and hit right on the number so what happened in the in call. It the.

The August timeframe, we clearly saw that.

Alexander Blostein: Or do you still think there's might be incremental migration or kind of the need to increase price more? And then again on the institutional side of things, is there a particular client base or channel internationally that's driving this pickup or is that fairly broad base? Because your competitive set there is fairly limited, right? I mean we know there's three or four and in the end of the day that's where you compete with on the custody side.

Speaker 4: are in general the market was taking deposit pricing up. And we reacted to that. We're not, again, we're not price makers, we're price takers. And so we reacted to that. And it seems to very much have leveled out the deposit activity. And that's why you see things very kind of flatish. And then also into this quarter.

Or is that.

In general the market was taking deposit pricing up and we reacted to that we're not again, we're not price makers, we are price takers and so we reacted to that and it seem it seems to very much had leveled out the deposit activity and Thats why you see things very.

Alexander Blostein: So I'm just kind of curious where we are in that in that process. It seems like we caught up and we made, you know, if we get to why we thought we were going to be down about 5% in NII, we ended up down 10, we saw that made quarter and hit right on the number. So what happened in the, you know, in call it the August timeframe, we clearly saw that in general the market was taking deposit pricing up.

Kind of flattish.

And then also into this quarter stabilizing at levels, we thought it would be even higher and so I think the big takeaway is it seems like the.

Speaker 4: Stabilizing at levels we thought would be even higher and so I think the big takeaways it seems like the odd

Speaker 4: the pricing is where it needs to be for clients to level things out. And the pricing actions that we took were in a pretty small number, but of big accounts. And you asked about geography. The bigger actions we took were in the U.S. custody book on the institutional side of the business. And then in wealth, it was in MMDA. And so we took a targeted approach to increase those pricings in early.

The pricing is where it needs to be for clients to level things out and the pricing actions that we took run pretty small number but a big accounts and you asked about geography. The bigger actions. We took were in the U S custody book on the institutional side of the business and then in wealth.

Alexander Blostein: And we reacted to that. We're not, again, we're not price makers. We're price takers. And so we reacted to that. And it seems to very much have leveled out the deposit activity. And that's why you see things very, you know, kind of flatish. And then also into this quarter stabilizing at levels, we thought would be even higher. And so I think the big takeaway is it seems like the pricing is where it needs to be for clients to level things out.

It was an NMDA and so we took a targeted approach to increase those pricings in early early reactions look like we got it we hit the mark well.

Speaker 4: early reactions look like we got it, we hit the mark well.

Speaker 7: Got it. All right. Thanks. Shifting gears a little bit, you know, pretty constructive comments from you guys on the new business. We've heard that for the last couple of quarters. As you know, converting that to fees is always a little hard and it's a bit opaque.

Got it alright. Thanks.

Shifting gears a little bit.

Pretty constructive comments from you guys on the new business, we've heard that for the last couple of quarters.

As you know converting net fees is always a little hard and it's a bit opaque. So any way you can frame, maybe the feed backlog and as we sort of work that through.

Speaker 7: Anyway, you can frame maybe the fee backlog and as we sort of worked that through into revenues over the next 12 months, do you feel like you have enough scale in the business to onboard especially some of these larger mandates without a material pick up in expenses? In other words, you know, at the glance point, it sounds like you guys are aiming for, I don't know, three to four percent expense girls in 24. Is that doable with potentially more net new business?

<unk> revenues over the next call. It 12 months do you feel like you have enough scale in the business to onboard, especially some of these larger mandates without a material pickup in expenses. So in other words.

Alexander Blostein: And the pricing actions that we took were in pretty small number but of big accounts. And you asked about kind of geography. The bigger actions we took were in the US custody book on the institutional side of the business and then in wealth. It was an NMDA. And so we took a targeted approach to increase those pricings and early early reactions look like we got it. We hit the mark well. Got it. All right. Thanks.

Glen's point it sounds like you guys are aiming for I don't know, 3% to 4% expense growth in 'twenty four.

Is that doable with potentially more net new business.

Speaker 4: It is and you know we didn't give a number on the expense growth just that we we want to do better than what we did this year and So with that backdrop

It is and we didn't give a number on the expense growth just that we want to do better than what we did this year and so with that backdrop.

Alexander Blostein: Shifting gears a little bit, you know, pretty constructive comments for me guys on the new business we've heard that for the last couple of quarters. As you know, converting that to fees is always a little hard and it's a bit opaque. So anyway, you can frame maybe the fee backlog and as we sort of worked that through into revenues over the next 12 months, do you feel like you have enough scale in the business to onboard, especially some of these larger mandates.

Speaker 4: The growth in the in the asset servicing business in particular has come with expenses. It's a less scalable business relative to wealth, which is obviously highly, highly scalable. That said, we were focused, as you can tell from what we've done this year, not just on top line growth, but on managing the type of business that comes in. And so that's why headcount was such an incredible focus for us this year. The compensation line, an incredible focus.

The growth in the in the asset servicing business in particular has come with expenses, it's a less scalable business relative to wealth, which is obviously highly highly scalable that said we were focused as you can tell from what we've done this year not just on top line growth, but on managing the type of business that comes in.

So that's why head count with such an incredible focus for us this year the compensation line and incredible focus and so as we look at what business to bring on board there is going to be.

Alexander Blostein: Without a material pick up in expenses. So in other words, you know, at the glance point, it sounds like you guys are aiming for, I don't know, three to four percent expense girls in 24. Is that doable with potentially more net new business? It is and you know, we didn't give a number on the expense growth just that we want to do better than what we did this year. And so with that backdrop.

Very strong scrutiny on looking at what expenses come along with it the business is committed to do that there, it's they're leading that effort, saying that they're going to be very diligent about identifying what what business to bring on yes, and Alex I would just add to adjacent and saying there is that's why we're driving so hard on productivity as well.

Speaker 3: Yeah, and now I would just add to what Jason's saying there is that that's why we're driving so hard on productivity as well is because we have to have the capacity to invest in the foundation of the business and what we're building out. The investments we need to make but then also to your point if you're going to bring on new business that has resources you have to be able to offset a portion of that as well.

Alexander Blostein: The growth in the in the asset services business in particular is calm with expenses. It's a less scalable business relative to wealth, which is obviously highly, highly scalable. That said, we were focused as you can tell from what we've done this year, not just on top line growth, but on managing the type of business that comes in. And so that's why head count was such an incredible focus for us this year, the compensation line and incredible focus.

Is because we have to have the capacity to invest in the foundation of the business and what we're building out the investments we need to make but then also to your point, if youre going to bring on new business.

That has resources you have to be able to offset a portion of that as well.

Got it okay that all makes sense Im sorry didn't mean to put words in your mouth on the three to four is it sounds like.

Speaker 9: Got it. Okay, and that all makes sense. And so I already mean to put words in your mouth on the three to four. It just sounds like, you know, less than five. So Maybe maybe what we're thinking. Okay. All right. I appreciate it. Good test. Thanks.

So.

Maybe wishful thinking okay, alright, I appreciate it.

Alexander Blostein: And so as we look at what business to bring on board, there's going to be a very strong scrutiny on looking at what expenses come along with it. The business is committed to do that. They're leading that effort saying that they're going to be very diligent about identifying what business to bring on. Yeah, and now I would just add to what Jason saying there is that that's why we're driving so hard on productivity as well is because we have to have the capacity to invest in the foundation of the business and what we're building out.

The good test thanks.

Our next question comes from Brennan Hawken with UBS.

Speaker 10: Morning, Brandon. Yeah, good morning, Jason. How you doing? Would love to unpack a little bit, because I...

Good morning, Brian Good morning.

Yes, good morning, Jason how are you doing.

Would love to unpack a little bit.

Speaker 10: You walk through some of the, it sounds like you walk through some of the underlying assumptions behind the 430 to 440 expectation 4Q. It's under like you were saying that it predicated a deposit base of 93 to 95 and NIMF flat.

You walked through some of the it sounds like you walked through some of the underlying assumptions behind the $4 30 to $4 40 expectation for Q.

Like you were saying.

Predicated a deposit base of 93% to 95% NIM flat.

Alexander Blostein: The investments we need to make, but then also to your point, if you're going to bring on new business that has resources, you have to be able to offset a portion of that as well. And so that's why we're doing that. Got it. Okay, that all makes sense. And so I didn't mean to put words in your mouth on the three to four. It just sounds like, you know, less than five. So maybe, maybe we're thinking, okay, all right, I appreciate it. Good test. Thanks.

Did I.

Speaker 10: Did I interpret that correctly and does that suggest that you're sort of, you know, girding for further deposit declines, even though they've been stable-quartered today?

I interpret that correctly and does that suggest that youre sort of girding for further deposit declines, even though they've been stable quarter today.

Just to just to tweak the words I.

Speaker 8: Just a tweak the words, I mentioned that implies NIM would be top of few basis.

I mentioned that implies NIM would be up a few basis points, but the deposit levels, you mentioned are accurate and so.

Brennan Hawken: Our next question comes from Brennan Hawken with UBS. Morning, Brennan. Yeah, good morning, Jason. How you doing? Would love to unpack a little bit, because you walk through some of the, it sounds like you walk through some of the underlying assumptions behind the 430 to 440 expectation for Q. It's not like you were saying that it, you know, predicated a deposit base of 93 to 95 and named flat. Did I underinterpret that correctly?

Speaker 4: but the deposit levels you mentioned are accurate. And so, coming in the last quarter, we came into it thinking we were gonna be down 5% of the market ended up being more competitive. And again, we've got to react to what the market's doing. We don't set it. And so coming into this quarter, we did prepare for further decline in deposits.

<unk>.

Last quarter, we came into it thinking we were going to be down 5%. The market ended up being more competitive and again, we've got to we've got to react to what the market's doing we don't set it and so coming into this quarter. We just we did prepare for with further decline in deposits.

And that could easily still happens so not walking that back we're just saying that early stages of the quarter are indicating the deposit levels are higher than that and we've also got even as we look out to next year.

Speaker 4: and that could easily still happen. So not walking that back, which is saying that early stages of the quarter are indicating the deposit levels are higher than that. And we've also got, even as we look out to next year, you know, we don't think about this 430 to 440 as the run rate of NIO.

Brennan Hawken: And does that suggest that you, you're sort of, you know, girding for further deposit declines, even though they've been stable quarter to date? Just to tweak the words, I mentioned that implies, NIM would be up a few basis points, but the deposit levels you mentioned are accurate. And so coming in last quarter, we came into it thinking we were going to be down 5% of the market ended up being more competitive.

We don't think about this $4 30 to $4 40, as the run rate of NII.

Speaker 8: There's reasons for us to believe that NII is going to go up from there and just that you look at the runoff and the securities portfolio and we're still trading securities that are yielding two and reinvesting it at five and securities yielding in the twos and reinvesting it above that. And so without taking more risk or duration. And so there are things that we can continue to do. We've also had the balance sheet positioned.

There is reasons for us to believe that NII is going to go up from there and just you look at the runoff in the securities portfolio and we're still trading securities that are yielding two and reinvesting it at five and securities yielding in the twos and reinvesting it above that and so without taking more risk or <unk>.

Brennan Hawken: And again, we've got to, we've got to react to what the market's doing. We don't set it. And so coming into this quarter, we just, we, we did prepare for further decline in deposits. And that could easily still happen. So not walking that back, which is saying that early stages of the quarter or indicating the deposit levels are higher than that. And we've also got, you know, even as we look out to next year, you know, I, we don't think about this 430 to 440 as the run rate of NII.

<unk> and so.

There are things that we can continue to do we've also had the balance sheet positioned.

Speaker 4: very defensively. And we saw the decline in deposits that was happening and frankly the stress in the banking industry in the spring and in the summer. And we positioned very defensively. We wanted to, we have the ability to do that based on the strength of the balance sheet. We can stay short. We can, we cannot stretch for NII.

Very defensively, we saw the decline in deposits that was happening and frankly, the stress in the banking industry in the spring and into summer and we positioned very defensively. We wanted to we have the ability to do that based on the strength of the balance sheet. We can stay short we can.

We cannot stretch for NII, but as we feel more confident about the stability of deposits. This ability of the industry. We can use non HQ OLED capacity and so there's multiple levers we have to work on NII.

Speaker 4: But as we feel more confident about the stability of deposits, the stability of the industry, we can use non-HQLA capacity. And so there's multiple levers we have to work on NII for it. So although we're trying to give you as much color as we can about fourth quarter, the interpretation shouldn't be that that's necessarily something that you should annualize, thinking about 20 times.

Brennan Hawken: There's, there's reasons for us to believe that NII is going to go up from there and just that you look at the runoff and the security portfolio. And we're still trading securities that are yielding to and reinvesting it at five and securities yielding in the twos and reinvesting it above that. And so without taking more risk or duration. And so there are things that we can continue to do. We've also had the balance sheet positioned very defensively.

For it so.

Although we're trying to give you as much color as we can about fourth quarter. The interpretations shouldnt be that thats necessarily something that you should annualize thinking about 2024.

Speaker 10: Okay, all that's fair. I guess the 2024 will depend on the competition for deposits. So we'll see how that goes.

Okay.

Fair I guess I guess the 20.

Brennan Hawken: And we saw the decline deposits that was happening and frankly the stress in the banking industry in the spring and in the summer. And we positioned very defensively. We wanted to, we, we have the ability to do that based on the strength of the balance sheet. We can stay short. We can, we, we cannot stretch for NII. But as we feel more confident about the stability of deposits, the stability of the industry, we can use non-HQLA capacity. And so there's multiple levers we have to work on NII for it.

Forward will depend on the competition for deposits. So we'll see how that goes.

So.

Speaker 10: One follow-up here, you guys made a reference, and I apologize if you said it in the prepared marks. There's a couple overlapping calls here this morning. You laid out a visa gain in the press release.

One follow up here you guys made reference to and I apologize. If you said in the prepared remarks Theres couple of overlapping calls here. This morning.

You laid out a visa gain in the press release, but I didn't hear it quantified in the commentary.

Speaker 10: here at Quantified in the commentary. As possible to quantify that.

Possible to quantify that impact.

Speaker 8: Yeah, it's it's up 10 to $15 million relative to relative to second quarter, second quarter is slight loss. This is this was a slight gain and that just a little bit of color.

It's up 10% to $15 million relative to where it.

Relative to second quarter second quarter at a slight loss. This is this was.

Slight gain and that just a little bit of color.

Ryan Kenny: So, although we're trying to give you as much color as we can about fourth quarter, the interpretation shouldn't be that that's necessarily something that you should annualize thinking about 2024. Okay, all that's fair. I guess, I guess the 20124 will depend on the competition for deposits. So we'll see how that goes. So... One follow-up here. You guys made reference. And I apologize if you said it in the prepared marks. There's a couple of overlapping calls here this morning.

Speaker 8: the that relates to a derivative that we have associated with part of our visa position and as the

The debt.

That relates to the derivatives that we have associated with part of our visa position.

And as the.

Speaker 4: the our view of the length of that swap extends or reduces, that has an impact of the mark to market. And as there was news that was

Our view of the length of that swap.

Extends or reduces that has an impact of the mark to market and as there was news that was.

Speaker 8: proposed by those news that was put out this this quarter of visa saying that they're they're they have a shareholder proposal to release half the shares. It reduces the amount of time in that swap and so therefore it it changed the mark from what it normally what it otherwise would be.

Proposed by <unk> news it was put out this quarter of these.

Saying that there.

Ryan Kenny: You laid out a visa gain in the press release, but I didn't hear it quantified in the commentary. Is it possible to quantify that impact? Yeah, it's it's up 10 to 15 million dollars relative to relative to second quarter. Second quarter is flight loss. This was this was a slight gain. And that just a little bit of color, that relates to a derivative that we have associated with part of our visa position.

They are a shareholder proposal to release half the shares it reduces the amount of time and that swap and so therefore, it changed the mark from what it normally what it otherwise would be.

Great Thanks for that color.

Sure.

Speaker 1: Our next question comes from Ryan Kenney with Morton Stanley.

And our next question comes from Ryan <unk> with Morgan Stanley .

Hi, good morning.

Ryan Kenny: And as the our view of the length of that swap extends for reduces that has an impact on the market market. And as there was news that was proposed by those news that was put out this this quarter of visa. These are saying that they're they're they have a shareholder proposal to release half the shares. It reduces the amount of time in that swap. And so therefore it it changed the mark from what it normally what it otherwise would be. Great. Thanks for that color. Sure.

Speaker 11: So, just in thinking through the puts and takes to NII, you mentioned

So then thinking through the puts and takes to NII, you mentioned, taking securities yielding two and reinvesting at five <unk> update us on how much <unk> and HTM rollout, you're expecting per quarter going forward and as those securities mature or are you, mostly reinvesting that onto cash.

Speaker 11: security is yielding two and reinvesting at five. Here's update us on how much AFS and HTM roll off. You're expecting per quarter, throwing forward, and as those securities mature, are you mostly reinvesting that on?

Speaker 8: I want to make sure I got the question fully.

I want to I want to make sure I got the question fully.

Speaker 8: Can you repeat it for me, you just came through a little soft, I want to make sure I got it.

Can you repeat it for me just came through a little soft I want to make sure I got it.

Yes, so as you.

Speaker 11: Yeah, so as you, as your reinvesting security.

Youre reinvesting securities.

Speaker 11: At from 2 and the 5, could you let us know just how much and roll off you're expecting for quarter. And are you reinvesting that on.

From two and five.

You, let us know just how much <unk> and HTM roll off youre expecting per quarter.

Ryan Kenny: And our next question comes from Ryan Kenny with Morton Stanley. Hi, good morning. So just in thinking through the puts and takes the NIA you mentioned taking securities yielding to and reinvesting at five years update us on how much AFF and htm roll off you're expecting for quarter throwing forward. And as those securities mature, are you mostly reinvesting that on to cash? I want to want to make sure I got the question fully.

Are you reinvesting that into cash.

Sure.

Speaker 4: Sure. A lot of the reinvestment recently has been in cash, but again, as I mentioned just a few minutes ago, that's not necessarily where we'll be reinvesting it before, and as we look at the schedule, it probably averages the runoff

A lot of the reinvestment recently has been has been in cash.

Yes.

But again as I mentioned, just a few minutes ago, that's not necessarily where we'll be reinvesting it before and as we look at the schedule it probably averages the run off.

Speaker 4: averages about 2%, particularly let's just take the U.S. dollar denominated amounts and then overall there's

Averages about 2%, particularly in let's just take the U S dollar denominated amounts.

And then overall.

Ryan Kenny: Can you repeat it for me just came through a little soft. I want to make sure I got it. Yeah, so as you as your reinvesting securities from two and five, could you let us know just how much AFF and htm roll off you're expecting for quarter. And are you reinvesting that all into cash? Sure. A lot of the reinvestment recently has been in has been in cash. And I but again, as I mentioned just a few minutes ago, that's not necessarily well where we'll be reinvesting it before.

About.

Okay.

Speaker 4: close to a little over a billion dollars a quarter across all of the currencies that's maturing, that's reinvesting.

Close to a little over $1 billion.

A quarter across all of the currencies.

Thats maturing thats reinvesting.

Thanks.

And turning on to our next question from Brian Bedell with Deutsche Bank.

Speaker 1: Moving on to our next question from Brian Badell with Deutsche.

Great. Thanks, Brian Thanks, Good morning, Hey, good morning folks thanks for taking my question.

Speaker 12: Great, thanks, good morning, hey, good morning folks, thanks for taking my question. Just one clarification on the other investment in or the other income that was the 68 million this quarter versus 55 in the second quarter. Should we take that 55 and think of that as a more normalized run rate given the noise on the Visa swap gain?

Just one.

One clarification on the on the.

Ryan Kenny: And we look at the at the schedule. It probably averages the runoff averages about two percent particularly let's just take the US dollar denominated amounts. And then overall, there's about close to a little over a billion dollars a quarter across all of the currencies that's that's maturing that's reinvesting. Thank you.

The.

The other investment in other income that was $68 million this quarter versus 55 in the second quarter should we take.

55, and think of that as a more normalized run rate given the noise on the visa swap gain.

Yes, I think the.

Speaker 4: Yeah, I think that the visa is going to...

This is going to.

At some point in time I think the noise in that line item will just go away and there is there is visa did announce that they didn't make this announcement and so that should have an impact on the on the swap at some point and so I think it shouldnt be again it has tended to be.

Speaker 4: At some point in time, I think the noise in that line item will just go away. And there's, there's, there's, Visa did announce that they did make this announcement. And so that should have an impact on the, on the swap at some point. And so I think it shouldn't be, again, it has tended to be a negative. That negative will go away. And so the prior run rates are probably too low. And the current run rate might be too high.

Brian Bedell: And moving on to our next question from Brian Badell with Deutsche Bank. Great. Thanks.

A negative that negative will go away and so the prior run rates are probably too low and the current run rate might be too high.

Brian Bedell: Good morning. Good morning folks. Thanks for taking my question. Just one one clarification on the on the the other investment in or the other income that was to 68 million this quarter versus 55 and the second quarter. Should we take that 55 and think of that as a more normalized run rate given the noise on the visa swap gain? Yeah, I think the visa is going to, at some point in time, I think the noise in that line item will just go away.

Speaker 12: the way to, that's what I think about it. Okay, okay. Turn off on that. And then just on the NII guide, just to clarify also the 430 to 440, is that FTE. And then, well, let me just have that first. That's FTE.

The way the best way to think about it okay. Okay fair enough on that and then just on the NII Guide just to clarify also the 430 to $4 40.

Brian Bedell: And, you know, there's, there's a visa that did announce, they did make this announcement and so that should have an impact on the swap at some point. And so, I think it shouldn't be, again, it has tended to be a negative, that negative will go away. And so, the prior run rates are probably too low and the current run rate might be too high, the way to, the best way to think about it.

Is that FTE.

Well, let me just ask that first.

That's FTE correct.

Yes, Okay. Okay, great and then just as we move into 'twenty for some of the elements. Obviously, a lot of wide ranges of what could potentially happen, but on the competition front sounded like that was fairly episodic. This third quarter you got resolved.

Speaker 12: Okay, okay, great. And then just as we move into 24, some of the elements, obviously a lot of wide ranges of what can potentially happen. But on the competition front, sound alike, that was fairly episodic, just third quarter, it got resolved, and just sort of, I guess, you know, your view on...

And just sort of I guess.

Your view on whether you think that might reemerge.

Speaker 12: whether you think that you might reemerge uh... of course it always tough to predict but just in terms of the fact that you're able to descend it with higher rates but keep those deposits

It's always tough to predict but just in terms of the fact that youre able to defend it with higher rates, but keep those deposits.

Speaker 12: you know, would that seemingly be a disincentive for, you know, for other providers to try to grab those deposits and not actually get them?

That seemingly be a disincentive for for other providers to try to grab those deposits and not actually get them.

Speaker 12: And then, you know, what would you think of maybe this tough to answer to you? But, you know, what level of deposits is that risk of that?

And then what would you think of maybe this is tough to answer to you, but what level of deposits is at risk of that.

Speaker 12: competition within the custody and the wealth business.

Competition within within the custody in the wealth business.

Brian Bedell: Okay, okay. That's FTE, correct? Yeah. Okay, okay, great. And then, just as we move into 24, some of the elements obviously a lot of wide ranges of what can potentially happen. But on the competition front, sounded like that was fairly episodic. Just their quarter, it got resolved. And just sort of, I guess, you know, your view on whether you think that you might re-emerge. Of course, it's always tough to predict, but just in terms of the fact that you're able to defend it with higher rates but keep those deposits, you know, with that seemingly be a disincentive for, you know, for other providers to try to grab those deposits and not actually get them.

And the.

Yes.

In the institutional business. So let's start there the a lot of those deposits are there for our clients to be processing payments and they not only have the end of day deposit needs of an intraday needs as they have they can have intraday overdrafts and so they've got to think about their liquidity not just in the.

Speaker 4: In the institutional business, let's start there, a lot of those deposits are there for clients to be processing payments. And they not only have the end of day deposit needs, but intraday needs as they have, they can have intraday overdrafts. And so they've got to think about their liquidity, not just in today, but intraday. And we process a tremendous amount of payments across the system. And so that's why,

Day, but intra day, and we process a tremendous amount of payments across the system and so that's why we always are talking about not just the traditional operational component, but the amount of.

Speaker 4: We always are talking about not just the traditional operational component, but the amount of dollars in velocity that we have in the asset servicing business, which is very high.

Brian Bedell: And then, you know, what would you think of maybe this tough to answer to, but, you know, what level of deposits is that risk of that competition within, you know, within the custody and the wealth business? In the institutional business, let's start there. A lot of those deposits are there for clients to be processing payments. And they not only have the end of day deposit needs, but the intraday needs as they have, they can have intraday overdrafts.

Dollars and velocity that we have in the asset servicing business, which is very high.

Speaker 8: The amounts that are more sensitive to rates tend to be very large clients that are making a decision on where to park large amounts of dollars and those tend to be negotiated. And that's kind of the top end, but that's also where there's lighter spread.

The amounts that are more sensitive to rates tend to be very large clients that are making <unk>.

The decision on where to park large amounts of dollars and those tend to be negotiated and that's the that's kind of the top end, but thats also where theres lighter spread and.

Speaker 8: In the wealth side of the business, clients are making decisions more from a product perspective, and they're moving between term, treasuries, money market funds, and traditional

In the wealth side of the business clients are making decisions more from a product perspective, and they are moving between term treasuries money market funds and.

Brian Bedell: And so they've got to think about their liquidity not just in the day, but intraday. And we process a tremendous amount of payments across the system. And so that's why we always are talking about not just the traditional operational component, but the amount of dollars and velocity that we have in the asset servicing business, which is very high. The amounts that are more sensitive to rates tend to be very large clients that are making a decision on where to park large amounts of dollars, and those tend to be negotiated.

Traditional checking accounts and we've seen increases in all non checking account areas over this cycle and we've seen <unk> go from less than $1 billion to close to $4 billion in it.

Speaker 4: And we've seen increases in all non-checking account areas over this cycle. And we've seen CDs go from less than a billion dollars to close to $4 billion. And that obviously has a really big impact when you think that that's coming from a traditional checking account into a market rate CD. There's hundreds of bases at points of difference. And so if...

And that obviously is a really big impact when you think that that's coming from a traditional checking account into our market rates CD, there's hundreds of basis points of difference and so if it gives you a little bit of a sense of on the wealth side as we've talked about about 75% of the deposits overall.

Speaker 4: It gives you a little bit of a sense of on the well side if we've talked about about 75% of the deposits overall that we have are in wealth and I'm sorry, are an institutional and 25% in wealth.

Brian Bedell: And that's the, that's kind of the top end, but that's also where there's lighter spread. In the wealth side of the business, clients are making decisions more from a product perspective, and they're moving between term, treasuries, money market funds, and traditional checking accounts. And we've seen increases in all non checking account areas over this cycle. And we've seen CDs go from less than a billion dollars to close to $4 billion. And that obviously has a really big impact when you think that that's coming from a traditional checking account into a market rate CD, there's hundreds of basis points of difference.

But we have our in wealth and Darren I'm, sorry, or an institutional and 25% and wealth.

Speaker 4: And so, and then you see the type of movement that can happen if we're talking about two, three, $4 billion of movement of that, of that 20 to $30 billion base, it's pretty meaningful. And, but it's the good news. It's, it is, it has stayed with us and we've, we've done a good job of holding onto the deposits. Again, it's been deposits up this past quarter and overall client liquidity for the business flat from one quarter to another. Yeah.

So.

When you see the type of movement that can happen. If we're talking about two to three $4 billion of movement of that of that $20 billion to $30 billion base, it's pretty meaningful and but the good news is it has stayed with us and we've we've done a good job of holding onto the deposits again, it's been deposit.

It's up this past quarter and overall client liquidity for the business flat from one quarter to another.

Okay. That's great color. Thank you very much.

Speaker 13: Sure.

Sure.

Our next question will come from Mike Mayo with wells.

Brian Bedell: And so it gives you a little bit of a sense of on the wealth side, if we've talked about about 75% of the deposits overall that we have are in wealth, and I'm sorry, are an institutional and 25% in wealth, and so, and then you see the type of movement that can happen if we're talking about two, three, four billion dollars of movement of that of that 20 to 30 billion dollar base, it's it's pretty meaningful and but it's the good news it's it is it is stayed with us and we've done a good job of holding onto the deposits again it's been deposits up this past quarter and overall client liquidity for the business flat from one quarter to another yeah yeah that's great color thank you very much sure our next question will come from Mike Mayo with well Fargo hi yeah I'm a little confused on the NAI guidance so you're looking to be down 6 to 8% in the fourth quarter to 430 to 440 and but you said don't take that as a run rate and so you know what kind of run rate do you think you'll have because I guess you're guiding down NII 20% every year in the fourth quarter so how much of that do you think you get back as you take those 2% securities and invest them in 5% and take all your other actions and do you think the fourth quarter will be the low point or the NII inflection comes later or just a little bit more color on that if you could yeah sure no fourth quarter could be it could definitely be a low point and particularly thinking about some of the things that we mentioned but the just taking the securities run off alone the math gets to you get to over you know they call it a 10 12 13 million dollar left per quarter coming just from securities from just the securities maturing and reinvesting again in similar duration similar credit profile and that's without us taking these other actions and just as our clients are thinking about where are we in the yield in the overall rate cycle we think about that as well and we've again we've had the the balance sheet position in a pretty defensive manner and it just this provides us an opportunity to start thinking about what do we do differently but just the the maturity schedule alone has kind of a call it a 50 million dollar annualized left to it and that's just one of the levers that we have that will be we'll be working from in light of just more headwinds though then you had expected I know you said no more expense plans but and then you have kind of bent the cost curve which is the expression I guess of the the year any cost up tightening up expenses even more than you've already done yeah the the productivity office and we we launched just in this year from kind of a standing start and we're going to get over a hundred million dollars within this a hundred million dollars of savings in this year most of those are on a recurring basis and so you see a lot of that reflected in the actions we took from a compensation perspective but negotiations with consulting firms how we're looking at demand for technology consumption how we're managing real estate and so we've pulled a lot of levers there and couldn't have a higher sense of urgency on what we're thinking about from a productivity perspective but we should be getting above 2% a year in in in help from productivity and we're not going to stop uncovering opportunities and and having difficult conversations about what we can stop doing or how we can be thinking about things differently might might definitely continued focus on productivity is Jason is saying to just want to emphasize that point there are still plenty of opportunities to you know functionalize automate centralize you know a number of different call more fundamental structural things that we're doing already but just have longer you know longer time frames to implement them in order to get those savings longer term and a lot around technology that that enables that so it absolutely has been a focus but will continue to be a focus particularly as the environment is so uncertain and not necessarily knowing you know what the direction of whether it's rates or markets are going to be all right thank you And our next question will come from Gerard Cassidy with RBC. Gerard, I'm Jason, how are you? Very well.

Speaker 1: Our next question will come from Mike Mayo with Wells Fargo.

Embargo.

Hi.

Speaker 14: Yeah, I'm a little confused on the NIA guidance. So.

Yes, I'm a little confused on the NII guidance.

So.

Speaker 14: You're looking to be down 6 to 8% in the fourth quarter to 430 to 440. And, but you said, don't take that as a run rate. And so, floor's own.

You are looking to be down 6% to 8% in the fourth quarter to $4 30 to 440.

Are you said don't take that as a run rate.

So.

What kind of run rate do you think youll have because I guess, you're guiding down NII, 20% year over year in the fourth quarter.

Speaker 14: what kind of run rate do you think you'll have? Because I guess you're guiding down NII, 20% year to year in the fourth quarter. So how much of that do you think you get back as you take those 2% securities and invest them in 5% and take all your other actions? Do you think the fourth quarter will be the low point or the NII inflection comes later or just a little bit more color on that?

Much of that do you think you'd get back as you take those 2% securities in our investment and 5% and take all your other actions.

We think the fourth quarter will be the low point or the NII inflection comes later or just.

Little bit more color on that that'd be great.

Speaker 4: Sure, no, fourth quarter could be, it could definitely be a low point. And particularly thinking about some of the things that we mentioned, but just taking the securities run off alone, the math gets to, you get to over, you know, call it a,

Sure no fourth quarter could be.

It could definitely be a low point and particularly thinking about some of the things that we mentioned, but just.

Just taking the securities run off alone the math gets to you get to over call. It 10, 12 $13 million lift per quarter coming just from securities.

Speaker 8: $10,000,000,000,000 per quarter.

Speaker 4: coming just from securities maturing and reinvesting, again, in similar duration, similar credit profile. And that's without us taking these other actions. And just as our clients are thinking about where are we in the overall rate cycle, we think about that as well. And again, we've had the balance sheet positioned in a pretty defensive manner, and this provides us .

Just the securities maturing and reinvesting again and similar duration similar credit profile and that's without US taking these other actions and just as our clients are thinking about where are we in the yield in the overall rate cycle, we think about that as well and.

Again, we position we've had that the balance sheet positioned in a pretty defensive manner and this provides us an opportunity to start thinking about what do we do differently, but just the maturity schedule alone has kind of a call it a $50 million annualized lift to it.

Speaker 8: an opportunity to start thinking about what do we do differently. But just the the the maturity schedule alone has kind of a call it a 50 million dollar annualized lift to it. And that's just one of the levers that we have that will be will be working from.

That's just one of the levers that we have that will be we will be working from.

Speaker 14: In light of just more headwinds, though, than you had expected, I know you said no more expense plans, and you have kind of bent the cost curve, which is the expression, I guess, of the year, any thoughts

In light of just more headwinds there than you had expected I know you said no more expense plan.

And then you have kind of.

That's in the cost curve, which is the expression I guess.

The year.

Any thoughts.

Tightening up expenses, even more than you've already done.

Speaker 4: Yeah, the the productivity office we we launched just in this year from kind of a standing start, and we're going to get over $100 million within this $100 million of savings in this year. Most of those are on a recurring basis. And so you see a lot of that reflected in the actions we took from a compensation perspective. But

Yes.

Productivity office, and we launched just in this year from kind of a standing start and we're going to get over $100 million within this $100 million of savings in this year. Most of those are on a recurring basis and so you see a lot of that reflected in the actions we took from a <unk>.

Compensation perspective, but negotiations with consulting firms, how we're looking at demand for technology consumption, how we're managing real estate and so.

Speaker 4: negotiations with consulting firms.

Speaker 4: how we're looking at demand for technology consumption, how we're managing real estate.

Speaker 4: And so we've pulled a lot of levers there and couldn't have a higher sense of urgency on what we're thinking about from a productivity perspective, but we should be getting above two percent a year in help from productivity. And we're not going to stop uncovering opportunities and having difficult conversations about what we can stop doing or how we can be thinking about things differently.

We've pulled a lot of levers there and it couldnt have a higher sense of urgency on what we're thinking about from a productivity perspective, but we should be getting above 2% a year in help from productivity and we're not going to stop uncovering opportunities and having difficult conversations about.

What we can stop doing or how we can be thinking about things differently.

Speaker 3: My, my definitely continued focus on productivity is Jason is saying so just want to emphasize that point. There are still plenty of opportunities to, you know, functionalize, automate, centralize, you know, a number of different, I'll call it more fundamental structural things that we're doing already, but just have longer, you know, longer timeframes to implement them in order to get those savings longer term.

Mike definitely.

Continued focus on productivity as Jason is saying so just wanted to emphasize that point there is still plenty of opportunities to.

Functionalizing automate centralized.

Number of different I'll call. It more fundamental structural things that we're doing already but just have longer longer timeframes to implement them in order to get those savings longer term.

Speaker 3: and a lot around technology that enables that. So it absolutely has been a focus, but will continue to be a focus.

And a lot around technology that enables that so it absolutely has been a focus but we will continue to be a focus.

Speaker 3: particularly as the environment is so uncertain and not necessarily knowing what the direction of whether it's rates or markets are going to be.

Particularly as the environment is so uncertain.

Necessarily knowing what the direction of whether it's rates or markets are going to be.

Alright, thank you.

Sure.

And our next question will come from Gerard Cassidy with RBC.

Speaker 1: And our next question will come from Gerard Cassidy with RBC. Hey, Gerard.

Hey, Gerard.

Jason how are you.

Great well Keith.

Speaker 7: Can you guys, can we take a step back? We're obviously on the weeds in the quarter to quarter stuff for all of the banks understandably so. But when you step...

Can you can we take a step back we're obviously on the weeds on the quarter to quarter stuff for all of the banks understandably. So.

But when you step back.

Now after one is since the financial crisis, let's call it 2014 years.

Speaker 15: One is since the financial crisis. It's called a 14 years of a incredibly low interest rate environment with a little blip up in 2018, of course. But if we're now in a new environment for the next three to five years, where the shuriken of the curve stays above three or four percent, maybe even five percent for nobody knows for sure. How does that maybe, all the way you guys have been running the business for the last ten years in a zero percent rate environment, to one now that is going to be three to four hundred basis points higher at the front end of the curve or does it all the way you run the business?

Incredibly low interest rate environment with a little blip up in 2018 of course, but.

If we're now in a new environment for the next three to five years for the short end of the curve stays above three or 4%, maybe even 5% for nobody knows for sure.

Does that maybe alter the way you guys have been running the business over the last 10 years and a zero percent rate environment to one now that is going to be three to 400 basis points higher at the front end of the curve or does it alter the way you run the business.

Gerard it's Mike.

Speaker 3: Gerard, it's Mike.

Gerard Cassidy: Can you guys, can we take a step back? We're obviously on the weeds in the quarter to quarter stuff for all of the banks understandably so. But when you step back, if we're now after one of the financial crisis, let's call it 14 years of a incredibly low interest rate environment with a little bloop up in 2018, of course. But if we're now in a new environment for the next three to five years, where the short end of the curve stays above three or four percent, maybe even five percent for nobody knows for sure.

Speaker 3: Appreciate the question and the answer is yes, it does alter the way that we have to look at the business.

I appreciate the question and the answer is yes.

It does alter the way that we have to look at the business.

Speaker 3: And just starting with some of your comments there just around, you know, low interest rate environment, higher interest rate environment, you know, what aspects of that are cyclical versus maybe permanent changes. Jason mentioned some of the shifts in the way institutional investors invest and the implications on transaction volumes that may come with that. And as a result, beyond, you know, looking at the productivity of the business, which I think we've emphasized here, we also have to look at the pricing side of the business.

And just starting with some of your comments there just around.

Low interest rate environment higher interest rate environment, what aspects of that are cyclical versus maybe permanent changes Jason mentioned some of the shifts in the way institutional investors invest and the implications on transaction volumes that may come with that and as a result beyond looking at the productivity of the business, which I think we've emphasized.

Gerard Cassidy: How does that maybe alter the way you guys have been running the business for the last ten years in a zero percent rate environment to one now that is going to be three to four hundred basis points higher at the front end of the curve or does it alter the way you run the business? Gerard, it's Mike. Appreciate the question and the answer is yes, it does alter the way that we have to look at the business.

Here, we also have to look at the pricing side of the business to ensure that we are being appropriately compensated for all of the high value added services that we're providing I'll take to all our clients because it really isn't specific to just institutional clients or wealth clients.

Speaker 3: to ensure that we are being appropriately compensated for all the high-value-added services that we're providing. I'll say to all our clients, because it really isn't specific to just institutional clients or wealth clients.

Speaker 3: But, you know, if there was an expectation that you were managing a certain level of deposit as a part of an overall relationship, you know, that was a part of, you know, the value you were receiving for all the services you're providing.

But if there was an expectation that you were managing a certain level of deposits as a part of an overall relationship that was a part of the value are you receiving for all of the services youre, providing if thats going to be different for some time period, then you have to be compensated in different ways.

Gerard Cassidy: And just starting with some of your comments there just around low interest rate environment, higher interest rate environment, what aspects of that are cyclical versus maybe permanent changes. Jason mentioned some of the shifts in the way institutional investors invest and have the implications on transaction volumes that may come with that. And as a result beyond looking at the productivity of the business, which I think we've emphasized here, we also have to look at the pricing side of the business.

Speaker 3: If that's going to be different, you know, for some time period, then you have to be compensated in different ways.

Speaker 3: that you know our model well enough to know, it's not a consumer product or something where you change the pricing daily or even monthly. So it's something that you have to work through the longer-term way that your services are priced.

Our model well enough to know, it's not a consumer product or something where you changed the pricing daily or even monthly. So it's something that you have to work through.

The longer term way that your services are priced.

Gerard Cassidy: To ensure that we are being appropriately compensated for all the high value added services that we're providing. I'll take to all our clients because it really isn't specific to just institutional clients or wealth clients. But if there was an expectation that you were managing a certain level of deposits as a part of an overall relationship, that was a part of the value you were receiving for all the services you're providing. If that's going to be different for some time period, then you have to be compensated in different ways.

Speaker 3: and that the way relationships work. I mean, we're always looking to, you know, retain relationships, but also very focused on expanding them. And the more we can do with the clients, you know, the better the overall economic. So my point, which I think you're on to it, is we, you know, we do and have been looking at this holistically, both on the revenue side and on the expense side, so that we can, you know, continue to look at meeting the financial targets that we have.

<unk> relationships work I mean, we're always looking to retain relationships, but also very focused on expanding them and the more we can do with the clients the better the overall economics. So my point, which I think you're onto it is we do and have been looking at this holistically.

Both on the revenue side and on the expense side. So that we can continue to look at meeting the financial targets that we have.

Very good thank you, Mike and then as a follow up.

Speaker 15: Very good. Thank you, Mike. And then as a follow-up, Jason, you were talking about, you know, obviously you're approaching your budgeting season and I'm not asking you to obviously tell us what's going on yet. But can you frame out for us a year ago this time when you were doing the budgeting for 2018?

Jason you were talking about obviously youre approaching your budgeting season.

Gerard Cassidy: Now you know our model well enough to know it's not a consumer product or something where you change the pricing daily or even monthly. So it's something that you have to work through the longer term way that your services are priced and that the way relationships work. I mean we're always looking to retain relationships but also very focused on expanding them. And the more we can do with the clients, the better the overall economic.

I'm asking you to.

Tell us what's going on yet but.

Can you frame out for us.

A year ago. This time when you were doing the budgeting for 2000.

Speaker 15: As you pointed out, you guys have made progress in reducing expense rate of growth. But can you frame out for us the outside factors that you were dealing with last year at this time, whether it's wage inflation or just inflation in general versus today? Is it a little easier today or no just the stuff the outside factors haven't really changed and it's going to be a tough environment to put together a budget.

23.

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And as you pointed out you guys have made progress in reducing expense rate of growth, but can you frame out for us. The outside factors that you are dealing with last year at this time, whether it's wage inflation or just inflation in general versus today is it a little easier today or no just the stuff the assay factors haven't really change.

Gerard Cassidy: So my point which I think you're onto it is we do and have been looking at this holistically both on the revenue side and on the expense side so that we can continue to look at meeting the financial targets that we have.

And that's going to be.

Environment to put together a budget.

Last year, we were we were in a heavy heavy inflationary environment that was hitting us.

Speaker 4: Last year, we were in a heavy, heavy inflationary environment that was hitting us.

Gerard Cassidy: Very good thank you Mike and then as a follow up Jason you were talking about you know obviously you're approaching your budgeting season and I'm not asking you to obviously tell us what's going on yet but can you frame out for us a year ago this time when you were doing the budgeting for 20. 23, and as you pointed out, you guys have made progress in reducing expense rate of growth. But can you frame out for us the outside factors that you were dealing with last year at this time, whether it is wage inflation or just inflation in general versus today?

Speaker 4: in not just our labor costs, but also we were defending we were defending from.

In not just our labor costs, but also we were defending we were defending from others trying to take our talent a lot was one of the talking points that we had at the time that had implications and we were just spending time on that as well and then we were seeing.

Speaker 4: trying to, you know, take our talent a lot was one of the talking points that we had at the time that had implications and we were just spending time on that as well.

Speaker 4: And then we were seeing inflation come in technology costs in a lot of different ways. So every budget year is really, really difficult.

Inflation common technology costs, and a lot of different ways. So the every every budget year is really really difficult.

Speaker 4: I have to say that the macro headwinds last year, I feel, were heavier than they are this year.

I have to say the macro headwinds last year I feel were were heavier than they are this year.

Gerard Cassidy: Is it a little easier today or no just the stuff the outside factors haven't really changed and it's going to be a tough environment to put together a budget? Last year we were in a heavy, heavy inflationary environment that was hitting us in not just our labor cost, but also we were defending from others trying to take our talent. A lot was one of the talking points that we had at the time that had implications and we were just spending time on that as well.

Very good thank you.

Thanks Gerard.

Speaker 1: It appears there are no further questions at this time. Ms. Child, at this time, I will turn the conference back to you for any additional or closing remarks.

It appears there are no further questions at this time Ms.

At this time I will turn the conference back to you for any additional or closing remarks.

Thank you Melissa we'd like to thank everyone for joining us today, and we look forward to speaking with you again soon.

Speaker 2: Thanks, Melissa. We'd like to thank everyone for joining us today and we look forward to speaking with you again soon.

Speaker 1: This concludes today's call. Thank you for your participation. You may now disconnect.

This concludes today's call. Thank you for your participation you may now disconnect.

Gerard Cassidy: And then we were seeing inflation come in technology costs in a lot of different ways. So every budget year is really, really difficult. I have to say that the macro had wins last year. I feel we're heavier than they are this year. Very good. Thank you. Thanks, Gerard.

Okay.

Jennifer Childe: It appears there are no further questions at this time. Ms. Child, at this time I will turn the conference back to you for any additional or closing remarks. Thanks, Melissa. We'd like to thank everyone for joining us today and we look forward to speaking with you again soon. This concludes today's call. Thank you for your participation. You may now disconnect.