Q2 2024 State Street Corp Earnings Call

Good morning and welcome to State Street Corporation's second quarter 2024 earnings conference call and webcast. Today's discussion is being broadcast live on State Street's website at investors.statestreet.com.

Unknown Executive: 2024 Earnings Conference Call and Webcast. Today's discussion is being broadcast live on State Street's website at investors.statestreet.com. This conference call is also being recorded for replay. State Street's conference call is copyrighted, and all rights are reserved. This call may not be recorded or rebroadcast or distributed in whole or in part without the express written authorization from State Street Corporation.

Unknown Executive: 2024, Earnings Conference Call and Webcast. Today's discussion is being broadcast live on State Street's website at investors.statestreet.com. This conference call is also being recorded for replay.

Unknown Executive: State Street's conference call is copyrighted, and all rights are reserved.

This conference call is also being recorded for replay.

State Street's conference call is copyrighted and all rights are reserved.

Unknown Executive: This call may not be recorded, or re-broadcast, or distributed, in whole, or in part without the express written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on the State Street website.

This call may not be recorded or rebroadcast or distribution in whole or in part without the express written authorization from State Street Corporation.

Unknown Executive: The only authorized broadcast of this call will be housed on the State Street website. Now, I would like to introduce Liz Lim, Global Head of Investor Relations at State Street. Good morning, and thank you all for joining us. On our call today, our CEO, Ronald O'Hanley, will speak first, then Eric Aboaf, our CFO, will take you through our second quarter 2024 earnings presentation, which is available for download in the investor relations section of our website, investors.statestreet.com.

The only authorized broadcast of this call will be housed on the State Street website. Now, I would like to introduce Liz Lib, Global Head of Investor Relations at State Street.

Liz Lim: Now, I would like to introduce Liz Lim, Global Head of Investor Relations at State Street.

Liz Lim: Good morning, and thank you all for joining us.

Ronald OHanley: On our call today, our CEO, Rano Hanley, will speak first.

Liz Lib: Good morning, and thank you all for joining us.

Speaker Change: On our call today, our CEO , Ron OHanley, will speak first.

Ronald OHanley: Then, Eric Aboaf, our CFO, will take you through our second quarter 2024 earnings presentation, which is available for download on the Investor Relations section of our website, investors.statestreet.com. Afterward, we'll be happy to take questions.

Speaker Change: Then, Eric Aboaf, our CFO , will take you through our second quarter 2024 earnings presentation, which is available for download on the investor relations section of our website, investors.statestreet.com. Afterward, we'll be happy to take questions.

Unknown Executive: Afterward, we'll be happy to take questions. Before we get started, I'd like to remind you that today's presentation will include results presented on a basis that excludes or adjusts one or more items from the GAP. Reconciliations of these non-GAAP measures to the most directly comparable GAP or regulatory measure are available in the appendix to our presentation.

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

Speaker Change: Before we get started, I'd like to remind you that today's presentation will include results presented on a basis that excludes or adjusts one or more items from GAP.

Speaker Change: Reconciliations of these non- GAAP measures to the most directly comparable gap or regulatory measure are available in the appendix to our presentation.

Unknown Executive: In addition, today's call will contain forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors, such as those factors discussed in our discussion today and in our SEC filings, including the risk factor section of our Form 10-K. Our forward-looking statements speak only as of today, and we disclaim any obligation to update them, even if our views change. Now, let me turn it over to Ron. Thank you, Liz, and good morning, everyone.

Ronald OHanley: In addition, today's call will contain forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors, such as those factors in our discussion today and in our SEC filings, including the risk factor section of our Form 10-K. Our forward-looking statements speak only as of today, and we disclaim any obligations to update them, even if our views change.

Speaker Change: In addition, today's call will contain forward-looking statements.

Speaker Change: Actual results may differ materially from those statements due to a variety of important factors, such as those factors in our discussion today and in our SEC filings, including the risk factor section of our Form 10-K .

Speaker Change: Our forward-looking statements speak only as of today, and we disclaim any obligation to update them, even if our views change. Now let me turn it over to Ron.

Ronald OHanley: Now, let me turn it over to Ron.

Ronald OHanley: Thank you, Liz, and good morning, everyone. Before we begin today's discussion, I want to acknowledge the assassination attempt on former President Trump. It was a horrible act of violence that has no place in our democracy and must be condemned. We are relieved the former President was not seriously harmed, and we are saddened by the tragic loss of innocent life and injury that resulted from the senseless action. Each victim was a participant in our democratic process, which makes this an act which makes this act in a front to all. We extend our thoughts and condolences to all those impacted.

Unknown Executive: Before we begin today's discussion, I want to acknowledge the assassination attempt on former president Trump. It was a horrible act of violence that has no place in our democracy and must be condemned. We are relieved the former president was not seriously harmed, and we are saddened by the tragic loss of innocent life and injury that resulted from this senseless action. Each victim was a participant in our democratic process, which makes this act an affront to all.

Ronald Philip OHanley: Thank you, Liz, and good morning, everyone.

Ronald Philip OHanley: Before we begin today's discussion, I want to acknowledge the assassination attempt on former President Trump.

Ronald Philip OHanley: It was a horrible act of violence that has no place in our democracy and must be condemned.

Speaker Change: We are relieved the former president was not seriously harmed, and we are saddened by the tragic loss of innocent life and injury that resulted from this senseless action.

Speaker Change: Each victim was a participant in our democratic process, which makes this act an affront to all. We extend our thoughts and condolences to all those impacted.

Ronald Philip OHanley: We extend our thoughts and condolences to all those impacted. At this time, we hope for unity and respect in our country. Disagreement can and must sit alongside civility and a commitment to an even better America.

Ronald OHanley: At this time, we hope for unity and respect in our country. Disagreement can and must sit along civility and a commitment to an even better America.

Speaker Change: At this time, we hope for unity and respect in our country. Disagreement can and must sit alongside civility and a commitment to an even better America.

Ronald OHanley: Now, turning to the second quarter, earlier today we released our financial results, which represented sustained momentum as we delivered good year-over-year fee and total revenue growth in both 2Q and for the first half of the year, along with continued expense discipline. This resulted in modest, positive total operating leverage, pre-tax margin of almost 29%, and a return on equity of nearly 12% in the quarter. We also continue to take important steps in the transformation and simplification of our operating model as we successfully consolidated our second operations joint venture in India in the quarter. These actions will enable State Street to continue to improve client experience and will unlock further productivity savings in the years ahead.

Ronald Philip OHanley: Now, turning to the second quarter, earlier today we released our financial results, which represented sustained momentum as we delivered good year-over-year fee and total revenue growth in both 2Q and for the first half of the year, along with continued expense discipline. This resulted in modest positive total operating leverage, a pre-tax margin of almost 29%, and a return on equity of nearly 12% in the quarter. We also continue to take important steps in the transformation and simplification of our operating model as we successfully consolidated our second operations joint venture in India during the quarter.

Speaker Change: Now, turning to the second quarter, earlier today we released our financial results, which represented sustained momentum as we delivered good year-over-year fee and total revenue growth in both 2Q and for the first half of the year, along with continued expense discipline.

Speaker Change: This resulted in modest positive total operating leverage, pre-tax margin of almost 29%, and a return on equity of nearly 12% in the quarter.

Speaker Change: We also continue to take important steps in the transformation and simplification of our operating model, as we successfully consolidated our second operations joint venture in India in the quarter.

Ronald Philip OHanley: These actions will enable State Street to continue to improve client experiences and will unlock further productivity savings in the years ahead. In May, the transition to T plus one settlement was a significant event for global investors. Importantly, it presented State Street with an opportunity to demonstrate its position as an essential partner to our clients.

Speaker Change: These actions will enable State Street to continue to improve client experience and will unlock further productivity savings in the years ahead.

Ronald OHanley: In May, the transition to T-plus-1 settlement was a significant event for global investors. Importantly, it presented State Street with an opportunity to demonstrate our position as an essential partner to our clients. Our role in successfully assisting clients through this transition reinforced our value to clients, and underscored the depth of our operational capabilities. The financial market context in 2Q was mixed, while daily average global equity market levels continued to move higher and equity markets again reached new all-time highs in the second quarter. Gains continued to be narrowly concentrated in a few names. Meanwhile, fixed-income markets struggled in 2Q as geopolitical risk continued, economic data generally remained robust, and investors priced in a more gradual cycle of rate cuts, even as the ECB delivered its first rate cuts since the pandemic.

Speaker Change: In May, the transition to T plus one settlement was a significant event for global investors. Importantly, it presented State Street with an opportunity to demonstrate our position as an essential partner to our clients.

Ronald Philip OHanley: Our role in successfully assisting clients through this transition reinforced our value to clients and underscored the depth of our operational capabilities. The financial market context in 2Q was mixed. While daily average global equity market levels continued to move higher, and equity markets again reached new all-time highs in the second quarter, gains continued to be narrowly concentrated in a few names.

Speaker Change: Our role in successfully assisting clients through this transition reinforced our value to clients and underscored the depth of our operational capabilities.

Speaker Change: The financial market context in 2Q was mixed. While daily average global equity market levels continued to move higher and equity markets again reached new all-time highs in the second quarter, gains continued to be narrowly concentrated in a few names.

Ronald Philip OHanley: Meanwhile, fixed income markets struggled in 2Q. As geopolitical risk continued, economic data generally remained robust, and investors priced in a more gradual cycle of rate cuts, even as the ECB delivered its first rate cut since the pandemic. Through this market backdrop, we remain focused and successfully executed against our key strategic priorities. Turning to slide 2 of our investor presentation, I will review our two Q highlights before Eric takes you through the quarter in more detail.

Speaker Change: Meanwhile, fixed income markets struggled in 2Q as geopolitical risk continued, economic data generally remained robust, and investors priced in more gradual cycle of rate cuts.

Speaker Change: Even as the ECB delivered its first rate cut since the pandemic. Through this market backdrop, we remain focused and successfully executed against our key strategic priorities.

Ronald OHanley: Through this market backdrop, we remained focused and successfully executed against our key strategic priorities. Turning to slide 2 of our investor presentation, our reviewer at 2Q highlights, before Eric takes you through the quarter, a more detailed. Beginning with our financial performance, second quarter EPS was 215 as compared to 217 in the year-ago period. The durable nature of our business was evident in the quarter, as year-over-year strength in management fees, FX trading, and NII more than offset a previously disclosed client transition that negatively impacted servicing fee revenues, helping to drive revenue growth of 3%. We also remained focused on tightly managing our cost base.

Speaker Change: Turning to slide two of our investor presentation, I will review our two Q highlights before Eric takes you through the quarter in more detail.

Ronald Philip OHanley: Beginning with our financial performance, second quarter EPS was $215,000 as compared to $217,000 in the year-ago period. The durable nature of our business was evident in the quarter as year-over-year strength in management fees, FX trading, and NII more than offset a previously disclosed client transition that negatively impacted servicing fee revenues, helping to drive revenue growth of 3%. We also remain focused on tightly managing our cost base.

Speaker Change: Beginning with our financial performance, second quarter EPS was $215 as compared to $217 in the year-ago period.

Speaker Change: The durable nature of our business was evident in the quarter as year-over-year strength in management fees, FX trading, and NII more than offset a previously disclosed client transition that negatively impacted servicing fee revenues helping to drive revenue growth of 3%.

Ronald OHanley: While continuing to make investments in our businesses, 2Q total expenses increased by less than 3% year-over-year, supported by our ongoing productivity efforts.

Ronald Philip OHanley: While continuing to make investments in our businesses, 2Q total expenses increased by less than 3% year over year, supported by our ongoing productivity efforts. Turning to our business momentum, which you can see in the middle of the page, we continue to execute well against our strategy, making progress in a number of key areas aimed at generating further fee revenue growth, which gives us confidence in our positioning as we look ahead. Within Asset Services, we generated AUCA wins of $291 billion, which was well distributed regionally and included more than $200 billion faster to install back office custody in line with our targeted sales strategy.

Speaker Change: We also remain focused on tightly managing our cost base. While continuing to make investments in our businesses, 2Q total expenses increased by less than 3% year-over-year, supported by our ongoing productivity efforts.

Ronald OHanley: Turning to our business momentum, which you can see in the middle of the page, we continue to execute well against our strategy, making progress in a number of key areas aimed at generating further fee revenue growth, which gives us confidence in our positioning as we look ahead. With an asset services, we generated AUCA wins of 291 billion, which was well distributed regionally, and included more than 200 billion, faster to install back off this custody, in line with our targeted sales strategy. Encouragingly, roughly a quarter of the AUCA wins this quarter came for an alpha mandate in the APEC region.

Speaker Change: Turning to our business momentum, which you can see in the middle of the page, we continue to execute well against our strategy, making progress in a number of key areas aimed at generating further fee revenue growth, which gives us confidence in our positioning as we look ahead.

Speaker Change: Within Asset Services, we generated AUCA wins of $291 billion, which was well-distributed regionally, and included more than $200 billion of faster-to-install back-office custody, in line with our targeted sales strategy.

Ronald Philip OHanley: Encouragingly, roughly a quarter of the AUCA wins this quarter came for an alpha mandate in the APEC region. The win is a large new client for State Street, covering a broad set of our services, including the back office.

Speaker Change: Encouragingly, roughly a quarter of the AUCA wins this quarter came for an Alpha mandate in the APEC region. The win is a large new client for State Street covering a broad set of our services including the back office.

Ronald OHanley: The win is a large new client for State Street, covering a broad set of our services, including the back office. This mandate is another proof point that alpha is an attractive client value proposition globally. Alpha creates a clear competitive advantage for State Street that strategically positions us to deepen existing client relationships, and, as demonstrated this quarter, win new long-term client relationships, in turn helping to drive future growth. This ongoing new business performance, coupled with an anticipated increase in installations, positions us well for future servicing fee growth. Servicing fee revenue wins amounts to 72 million, up from 67 million in the first quarter.

Ronald Philip OHanley: This mandate is another proof point that Alpha is an attractive client value proposition globally. Alpha creates a clear competitive advantage for State Street that strategically positions us to deepen existing client relationships and, as demonstrated this quarter, win new long-term client relationships, in turn, helping to drive future growth. This ongoing new business performance, coupled with an anticipated increase in installations, positions us well for future servicing fee growth. Servicing fee revenue wins amounted to $72 million, up from $67 million in the first quarter.

Speaker Change: This mandate is another proof point that alpha is an attractive client value proposition globally.

Speaker Change: Alpha creates a clear competitive advantage for State Street that strategically positions us to deepen existing client relationships and, as demonstrated this quarter, win new long-term client relationships, in turn helping to drive future growth.

Speaker Change: This ongoing new business performance coupled with an anticipated increase in installations positions us well for future servicing fee growth.

Speaker Change: Servicing fee revenue wins amounted to $72 million, up from $67 million in the first quarter. This is the fourth quarter in a row of strong servicing fee revenue wins, totaling over $330 million over the last 12 months.

Ronald OHanley: This is the fourth quarter in a row of strong servicing fee revenue wins, totaling over 330 million over the last 12 months.

Ronald Philip OHanley: This is the fourth quarter in a row of strong servicing fee revenue wins, totaling over $330 million over the last 12 months. Our pipeline is strong, and we remain confident in our ability to achieve our increased servicing fee revenue sales goal of $350 to $400 million this year. At Global Advisors, buoyed by higher average equity markets, 2Q management fees were $511 million, an increase of 11% year-over-year, with AUM reaching a record $4.4 trillion at quarter end.

Ronald OHanley: Awards. Our pipeline is strong and we remain confident in our ability to achieve our increased servicing the revenue sales goal of 350 to 400 million this year. At Global Advisors, buoyed by higher average equity markets, 2Q management fees were 511 million, an increase of 11% year over year, with AUM reaching a record 4.4 trillion at quarter end. While GA experienced aggregate net outflows in the quarter, it was largely driven by a limited number of client rebalancing. And purgingly, we continue to make progress in a number of key strategic focus areas. For example, total net ETF inflows amount to 6 billion, benefited from continued market share expansion in US low-cost equity ETFs.

Speaker Change: Our pipeline is strong, and we remain confident in our ability to achieve our increased servicing fee revenue sales goal of $350 to $400 million this year.

Speaker Change: At Global Advisors, buoyed by higher average equity markets, 2Q management fees were $511 million, an increase of 11% year-over-year, with AUM reaching a record $4.4 trillion a quarter end.

Ronald Philip OHanley: While GA experienced aggregate net outflows in the quarter, it was largely driven by a limited number of client rebalancing. For example, total net ETF inflows amounted to $6 billion, and benefited from continued market share expansion in U.S. low-cost equity ETFs. Regionally, we also saw Spider gain market share in EMEA. Elsewhere, Global Advisors announced a planned strategic investment in Investnet, a leading provider of integrated technology, data, and wealth solutions.

Speaker Change: While GA experienced aggregate net outflows in the quarter, it was largely driven by a limited number of client rebalancings.

Speaker Change: Encouragingly, we continue to make progress in a number of key strategic focus areas.

Speaker Change: For example, total net ETF inflows amounted to $6 billion,

Speaker Change: Continued market share expansion in U.S. low-cost equity ETFs. Regionally, we also saw SPDR gain market share in EMEA.

Ronald OHanley: Regionally, we also saw Spider gain market share in AMIA. Elsewhere, global advisors announced the plan strategic investment in investment, a leading provider of integrated technology data and wealth solutions. This investment, consistent with State Street's wealth services strategy, will enhance global advisors' access to the independent wealth advisory and high network distribution channels, driving future growth. NII performance was strong, driven by a number of targeted management actions over the last year to support NII growth. These include increased engagement with our clients to offer them financing and cash solutions, resulting in higher deposit, loan, and sponsored repo balances.

Speaker Change: Elsewhere, Global Advisors announced a planned strategic investment in Investnet, a leading provider of integrated technology, data, and wealth solutions.

Ronald Philip OHanley: This investment, consistent with State Street's Wealth Services Strategy, will enhance Global Advisors' access to the Independent Wealth Advisory and High Network Distribution Channels, driving future growth. NII performance was strong, driven by a number of targeted management actions over the last year to support NII growth. These include increased engagement with our clients to offer them financing and cash solutions, resulting in higher deposit, loan, and sponsored repo balance. Furthermore, we also carefully expanded our investment portfolio in 2Q.

Speaker Change: This investment, consistent with State Street's Wealth Services Strategy, will enhance Global Advisors' access to the Independent Wealth Advisory and High Network Distribution Channels, driving future growth.

Speaker Change: NII performance was strong, driven by a number of targeted management actions over the last year to support NII growth. These include increased engagement with our clients to offer them financing and cash solutions resulting in higher deposit, loan, and sponsored repo balances.

Ronald OHanley: While we also carefully expanded our investment portfolio in 2Q. These actions have contributed to 3 quarters in a row of sequential NII and revenue growth, as well as positive total operating leverage in 2Q. Our balance sheet remains strong, enabling over 400 million capital return in the second quarter, and over 700 million year to date. Our financial strength was evident with the release of the Federal Reserve's annual stress test results in June.

Speaker Change: Well, we also carefully expanded our investment portfolio in 2Q.

Ronald Philip OHanley: These actions have contributed to three quarters in a row of sequential NII and revenue growth, as well as positive total operating leverage in 2Q. Our balance sheet remains strong, enabling over $400 million of capital return in the second quarter and over $700 million year-to-date. Our financial strength was evident with the release of the Federal Reserve's annual stress test results in June. Subsequently, and consistent with our commitment to return capital to our shareholders, we were pleased to announce our intention to increase State Street's quarterly common stock dividend by 10 percent to 76 cents per share beginning in the third quarter, subject to approval by our Board of Directors.

Speaker Change: These actions have contributed to three quarters in a row of sequential NII and revenue growth, as well as positive total operating leverage in 2Q.

Speaker Change: Our balance sheet remains strong, enabling over $400 million of capital return in the second quarter and over $700 million year-to-date. Our financial strength was evident with the release of the Federal Reserve's annual stress test results in June .

Ronald OHanley: Subsequently, and consistent with our commitment to return capital to our shareholders, we were pleased to announce our intention to increase State Street's quarterly common stock dividend by 10% to 76 cents per share, beginning in the third quarter, subject to approval by our Board of Directors. As we look ahead, we remain committed to returning excess capital to our shareholders this year, subject to market conditions and other factors.

Speaker Change: Subsequently, and consistent with our commitment to return capital to our shareholders, we were pleased to announce our intention to increase State Street's quarterly common stock dividend by 10% to 76 cents per share beginning in the third quarter, subject to approval by our Board of Directors.

Ronald Philip OHanley: As we look ahead, we remain committed to returning excess capital to our shareholders this year, subject to market conditions and other factors. To conclude, our strong start to the year continued in the second quarter. We delivered both fee and total revenue growth, which supported modest total operating leverage year over year and a return on equity of nearly 12% in the quarter, all while continuing to make significant investments in our business, controlling expenses, and returning capital to our shareholders.

Speaker Change: As we look ahead, we remain committed to returning excess capital to our shareholders this year, subject to market conditions and other factors.

Ronald OHanley: To conclude, our strong start to the year continued in the second quarter. We delivered both fee and total revenue growth, which supported modest total operating leverage year over year, and a return on equity of nearly 12% in the quarter, all while continuing to make significant investments in our business, controlling expenses, and returning capital to our shareholders. I am pleased with the progress we are making to drive better business momentum and sales performance as we execute against the sharp and revenue strategy. We recorded another alpha mandate win in the quarter, which demonstrated the clear advantage the strategy brings to our organization by delivering a large and completely new client relationship to State Street.

Speaker Change: To conclude, our strong start to the year continued in the second quarter. We delivered both fee and total revenue growth.

Speaker Change: which supported modest total operating leverage year-over-year and a return on equity of nearly 12% in the quarter, all while continuing to make significant investments in our business, controlling expenses, and returning capital to our shareholders.

Ronald Philip OHanley: I am pleased with the progress we are making to drive better business momentum and sales performance as we execute against the sharpened revenue strategy. We recorded another alpha mandate win in the quarter, which demonstrated the clear advantage the strategy brings to our organization by delivering a large and completely new client relationship to State Street.

Speaker Change: I am pleased with the progress we are making to drive better business momentum and sales performance as we execute against the Sharpen Revenue Strategy.

Speaker Change: We recorded another alpha mandate win in the quarter, which demonstrated the clear advantage the strategy brings to our organization by delivering a large and completely new client relationship to State Street.

Ronald OHanley: We already have good line of sight into 3Q and remain confident in our ability to deliver on our goals of 6 to 8 new alpha clients and 350 to 400 million of servicing revenue. The revenue went this year.

Eric Walter Aboaf: We already have a good line of sight into 3Q and remain confident in our ability to deliver on our goals of 6 to 8 new alpha clients and $350 to $400 million of servicing fee revenue wins this year. And with that, I will hand the call over to Eric, who will take you through the quarter in more detail. Thank you, Ron, and good morning, everyone.

Speaker Change: We already have good line of sight into 3Q and remain confident in our ability to deliver on our goals of 6 to 8 new alpha clients and 350 to 400 million of servicing fee revenue wins this year.

Eric Aboaf: And with that, let me hand the call over to Eric, who will take you through the quarter and more detail.

Speaker Change: And with that, let me hand the call over to Eric, who will take you through the quarter in more detail.

Eric Aboaf: Thank you, Ron, and good morning, everyone. Starting on slide three, we reported EPS of $2.15 for the quarter as compared to $2.17 in the second quarter a year ago. EPS was slightly lower year on year, but would have been positive growth were it not for an $18 million reserve release last year. As Ron noted, we delivered 3% revenue growth year over year, reflecting both higher net interest income, up 6%, as well as higher fee revenues, up 2%, which supported modestly positive total operating leverage in the quarter.

Eric Walter Aboaf: Starting on slide 3, we reported EPS of $2.15 for the quarter as compared to $2.17 in the second quarter a year ago. EPS was slightly lower year on year but would have been positive growth were it not for an $18 million reserve release last year. As Ron noted, we delivered 3% revenue growth year over year, reflecting both higher net interest income, up 6%, as well as higher fee revenues, up 2%, which supported modestly positive total operating leverage in the quarter.

Eric: Thank you, Ron, and good morning, everyone.

Eric: Starting on slide 3, we reported EPS of $2.15 for the quarter as compared to $2.17 in the second quarter a year ago. EPS was slightly lower year-on-year, but would have been positive growth were it not for an $18 million dollar reserve release last year.

Speaker Change: As Ron noted, we delivered 3% revenue growth year over year, reflecting both higher net interest income, up 6%, as well as higher fee revenues, up 2%, which supported modestly positive total operating leverage in the quarter.

Eric Aboaf: The second quarter's strong performance contributed to an encouraging first half of the year, with both positive fee and positive total operating leverage on a year-to-date basis, excluding notable items relative to the prior year period. Turning now to slide four, period-end AUCA and AUM again increased record levels, largely supported by market tailwinds. As you can see on the right panel of this slide, market indicators related to our trading business remain challenging in the quarter, though we are pleased to see improved client volumes across our FX trading venues, which I will discuss shortly. Turning to slide five, servicing fees to client 2% year on year has higher average equity market levels and net new business excluding a previously disclosed client transition were more than offset by pricing headwinds and lower client activity and adjustments, including the asset makeshift into lower earning cash and cash equivalents.

Eric Walter Aboaf: The second quarter's strong performance contributed to an encouraging first half of the year, with both positive fee and positive total operating leverage on a year-to-day basis, excluding notable items relative to the prior year period. Turning now to slide four, period end AUCA and AUM again increased to record levels, largely supported by market tailwinds. As you can see on the right panel of the slide, market indicators related to our trading business remain challenging in the quarter, though we are pleased to see improved client volumes across our FX trading venues, which I will discuss shortly.

Speaker Change: The second quarter's strong performance contributed to an encouraging first half of the year, with both positive fee and positive total operating leverage on a year-to-day basis, excluding notable items relative to the prior year period.

Speaker Change: Turning now to slide 4, period end AUCA and AUM again increased to record levels, largely supported by market tailwinds.

Speaker Change: As you can see on the right panel of this slide, market indicators related to our trading business remain challenging in the quarter, though we are pleased to see improved client volumes across our FX trading venues, which I will discuss shortly.

Eric Walter Aboaf: Turning to slide 5, servicing fees declined 2% year-on-year as higher average equity market levels and net new business, excluding a previously disclosed client transition, were more than offset by pricing headwinds and lower client activity and adjustments, including the asset makeshift into low-earning cash and cash equivalents.

Speaker Change: Turning to slide 5, servicing fees declined 2% year-on-year.

Speaker Change: As higher average equity market levels and net new business, excluding a previously disclosed client transition, were more than offset by pricing headwinds and lower client activity and adjustments, including the asset makeshift into low-earning cash and cash equivalents.

Eric Aboaf: The impact of the previously disclosed client transition, with a headwind of approximately two percentage points to year-on-year growth, while lower client activity and adjustments, including the asset makeshift into cash, was a headwind of approximately one percentage point on year-on-year growth. In addition, we saw the pace of quarterly installations tracked below expectations in 1, Q and 2, Q.

Eric Walter Aboaf: The impact of the previously disclosed client transition was a headwind of approximately 2 percentage points to year-on-year growth, while lower client activity and adjustments, including the asset makeshift into cash, was a headwind of approximately 1 percentage point to year-on-year growth. In addition, we saw the pace of quarterly installations track below expectations in 1Q and 2Q. We do, however, anticipate a pickup over the next few quarters as our higher level of recent sales begin to take effect.

Speaker Change: The impact of the previously disclosed client transition was a headwind of approximately 2 percentage points to year-on-year growth, while lower client activity and adjustments, including the asset makeshift into cash, was a headwind of approximately 1 percentage point on year-on-year growth.

Speaker Change: In addition, we saw the pace of quarterly installations track below expectations in 1Q and 2Q.

Eric Aboaf: We do, however, anticipate a pickup over the next few quarters at our higher level of recent sales begin to unbore. So, quenchally, servicing fees were up 1%, reflecting higher average equity market levels and client activity as transaction volumes tick back up and we saw clients start to put cash back to work. We generated 72 million of servicing fee revenue wins in 2Q, and more than 330 million over the last four quarters, with the vast majority in back office, consistent with our strategy to prioritize faster installing custody mandates. At period end, we had 276 million of servicing fee revenues to be installed and 2.4 trillion of AUCA to be installed.

Speaker Change: We do, however, anticipate a pickup over the next few quarters as our higher level of recent sales begin to onboard.

Eric Walter Aboaf: Sequentially, servicing fees were up 1%, reflecting higher average equity market levels and client activity as transaction volumes ticked back up and we saw clients start to put cash back to work. We generated $72 million of servicing fee revenue in 2Q and more than $330 million over the last four quarters, with the vast majority in back office, consistent with our strategy to prioritize faster installation of custody mandates. At period end, we had $276 million of servicing fee revenues to be installed and $2.4 trillion of AUCA to be installed.

Speaker Change: Sequentially, servicing fees were up 1% reflecting higher average equity market levels and client activity as transaction volumes ticked back up and we saw clients start to put cash back to work.

Speaker Change: We generated $72 million of servicing fee revenue wins in 2Q, and more than $330 million over the last four quarters, with the vast majority in back office, consistent with our strategy to prioritize faster installing custody mandates.

Speaker Change: At period end, we had $276 million of servicing fee revenues to be installed and $2.4 trillion of AUCA to be installed.

Eric Aboaf: Moving aside 6, management fees were up 11% year on year, primarily reflecting our higher average market levels and net inflows from prior periods, partially offset by the impacts of our strategic ETF for pricing initiative, which we believe is starting to pay off in both volumes and revenues. Sequentially, the benefit of higher average market levels was offset by net flows and lower performance fees. We are pleased with the steady growth we are delivering in global advisors. In the second quarter, we continue to expand the breadth of our offerings with the launch of new funds as we continue to broaden our product range and geography.

Eric Walter Aboaf: Moving to slide six, management fees were up 11% year on year, primarily reflecting our higher average market levels and net inflows from prior periods, partially offset by the impacts of our strategic ETF repricing initiative, which we believe is starting to pay off in both volumes and revenues. However, sequentially, the benefit of higher average market levels was offset by net flows and lower performance fees. We are pleased with the steady growth we are delivering at Global Advisors.

Speaker Change: Moving to slide 6, management fees were up 11% year-on-year, primarily reflecting our higher average market levels and net inflows from prior periods, partially offset by the impacts of our strategic ETF repricing initiative, which we believe is starting to pay off in both volumes and revenues.

Speaker Change: Sequentially, the benefit of higher average market levels was offset by net flows and lower performance fees.

Speaker Change: We are pleased with the steady growth we are delivering in Global Advisors. In the second quarter, we continue to expand the breadth of our offering through the launch of new funds as we continue to broaden our product range and geographies.

Eric Walter Aboaf: In the second quarter, we continued to expand the breadth of our offerings with the launch of new funds as we continued to broaden our product range and geographies. Our investment management business had a healthy pre-tax margin of 32% in the second quarter, up 3 percentage points year-on-year and up 8 percentage points quarter-on-quarter. Now turning to slide 7, as I noted, we saw a very nice uptick in client activity in our markets business, with higher volumes across our major FX venues. This helped to drive FX trading revenue growth of 11% year-on-year, though volatility remained muted with compressed margins. Securities finance revenues also benefit from higher balances on both agency lending and prime services. However, our U.S.

Eric Aboaf: Our investment management business had healthy pre-text margin of 32 percent in the second quarter, up 3 percentage points year on year, and up 8 percentage points quarter on quarter. Now turning to slide 7, as I noted, we saw a very nice uptick in client activity in our market's business, with higher volumes across our major FX venues. This helped to drive FX trading revenue growth of 11 percent year on year, though volatility remained muted with compressed margin. Security's finance revenues also benefit from higher balances on both agency lending and prime services.

Speaker Change: Our investment management business had a healthy pre-tax margin of 32% in the second quarter, up 3 percentage points year-on-year, and up 8 percentage points quarter-on-quarter.

Speaker Change: Now turning to slide 7, as I noted, we saw a very nice uptick in client activity in our markets business, with higher volumes across our major FX venues.

Speaker Change: This helped to drive FX trading revenue growth of 11% year-on-year, though volatility remained muted with compressed margin.

Speaker Change: Securities finance revenues also benefit from higher balances on both agency lending and prime services. However, our U.S. specials activity was subdued in the quarter, which impacted margins and contributed to the year-on-year decline in securities finance revenues.

Eric Aboaf: However, our U.S. Specials activity was subdued in the quarter, which impacted margins and contributed to the year-on-year decline in security's finance revenues.

Eric Walter Aboaf: Specials activity was subdued in the quarter, which impacted margins and contributed to the year-on-year decline in securities finance revenues. Moving to software and processing fees, second quarter performance continued to benefit from strong client engagement with CRD, though the cadence of on-premise renewals negatively impacted year-on-year performance, which is shown in greater detail on the following slide. On slide 8, as you can see, software-enabled and professional services revenues increased 17% in the quarter, and we expect these revenues to represent a greater proportion of our front office software and data business over time, as we transition another 20 clients from on-premise to a more durable SaaS model over the last year.

Eric Aboaf: Moving to software and processing fees, second quarter performance continued to benefit from strong climb engagement with CRD, though the cadence of on-premise renewals negatively impacted year-on-year performance, which is shown in greater detail on the following slides. On slide 8, as you can see, software enabled and professional services revenues increase 17 percent in the quarter, and we expect these revenues to represent a greater proportion of our front office software and data business over time, as we transition to another 20 clients from on-premise to more durable SaaS model over the last year. As we outlined in May, we believe our software business can be a significant revenue growth driver for Stage 3, potentially reaching a billion dollars in annual revenues over the next five years.

Speaker Change: Moving to software and processing fees, second quarter performance continued to benefit from strong client engagement with CRD, though the cadence of on-premise renewals negatively impacted year-on-year performance, which is shown in greater detail on the following slide.

Speaker Change: On slide 8, as you can see, software-enabled and professional services revenues increased 17% in the quarter, and we expect these revenues to represent a greater proportion of our front office software and data business over time, as we transition another 20 clients from on-premise to a more durable SaaS model over the last year.

Eric Walter Aboaf: As we outlined in May, we believe our software business can be a significant revenue growth driver for State Street, potentially reaching a billion dollars in annual revenues over the next five years. In addition, we are pleased with the continued momentum we're seeing in Alpha. We reported an additional Alpha mandate win, and two mandates went live in 2Q, bringing the total number of live mandates to 23 at quarter end. As Ron mentioned, this quarter's AlphaWin represents a brand new 10-year relationship with a large APAC client.

Speaker Change: As we outlined in May, we believe our software business can be a significant revenue growth driver for State Street, potentially reaching a billion dollars in annual revenues over the next five years.

Eric Aboaf: In addition, we are pleased with the continued momentum we're seeing in Alpha. We reported an additional alpha mandate win and two mandates went live in 2Q, bringing the total number of live mandates to 23 at quarter end. As Ron mentioned, this quarter's alpha win represents a brand new 10-year relationship with a large APAC client. We view long-term alpha mandates like this are key benefit of our differentiated alpha strategy. Turning to slide 9, NII was stronger than expected this quarter, up 6 percent year on year, and up 3 percent sequentially, just $735 million. As higher investment portfolio yields and higher loan growth, more than offset continued deposit makeshift in both periods.

Speaker Change: In addition, we are pleased with the continued momentum we're seeing in Alpha. We reported an additional Alpha mandate win, and two mandates went live in 2Q, bringing the total number of live mandates to 23 at quarter end.

Speaker Change: As Ron mentioned, this quarter's AlphaWin represents a brand new 10-year relationship with a large APAC client.

Eric Walter Aboaf: We view long-term alpha mandates like this as a key benefit of our differentiated alpha strategy. Turning to slide 9, NII was stronger than expected this quarter, up 6% year-on-year and up 3% sequentially to $735 million. Higher investment portfolio yields and higher loan growth more than offset continued deposit makeshift in both periods. In addition, on a quarter-on-quarter basis, we proactively increased our investment portfolio balances at higher yields, which benefited NII. Looking at the strong quarterly performance relative to our expectations in early June, we did see an inflow of valuable non-interest-bearing deposits in mid-June and again in late June as clients geared up for the holiday weekend.

Ronald Philip OHanley: We view long-term alpha mandates like this as a key benefit of our differentiated alpha strategy.

Eric Walter Aboaf: I would note that we did see some reversal during the first week of July. Similarly, NII also benefited from higher interest-bearing balances due to our client engagement efforts, as well as better spreads and volumes within our sponsored repo business as more clients joined the program. Average deposits increased 7% year-on-year and 1% quarter-on-quarter. We would expect to continue to operate at this higher level of deposit balances as we look to the back half of the year. Turning to slide 10, year-on-year expense growth was contained to less than 3%.

Speaker Change: Turning to slide 9, NII was stronger than expected this quarter, up 6% year-on-year and up 3% sequentially to $735 million, has higher investment portfolio yields and higher loan growth, more than offset continued deposit makeshift in both periods.

Eric Aboaf: In addition, on a quarter-on-quarter basis, we proactively increased our investment portfolio balances at higher yields, which benefited NII. Looking at the strong quarterly performance, relative to our expectations in early June, we did see an inflow of valuable, non-interest bearing deposits in mid-June, and again in late June as clients geared up for the holiday weekend. Although I would note that we did see some reversal during the first week of July. Similarly, NII also benefited from higher interest-bearing balances due to our client engagement efforts, as well as better spreads and volumes within our sponsored repo business, as more clients joined the program.

Speaker Change: In addition, on a quarter-on-quarter basis, we proactively increased our investment portfolio balances at higher yields, which benefited NII.

Speaker Change: Looking at the strong quarterly performance, relative to our expectations in early June , we did see an inflow of valuable non-interest bearing deposits in mid-June, and again in late June as clients geared up for the holiday weekend, although I would note that we did see some reversal during the first week of July .

Speaker Change: Similarly, NII also benefited from higher interest-bearing balances due to our client engagement efforts, as well as better spreads and volumes within our sponsored repo business as more clients join the program.

Eric Aboaf: Average deposits increased 7 percent year on year, and 1 percent quarter on quarter. We would expect it to continue to operate at this higher level of deposit balances as we look to the back half of the year. Turning to slide 10, year-on-year expense growth was contained to less than 3 percent. In the second quarter, we continue to invest in the business, while also delivering productivity benefits in two P areas. The first is associated with our decision to consolidate two operations joint ventures in India late last year in this quarter. The year-and-year savings associated with these two JB consultations are approximately 20 million in the quarter, excluding integration costs.

Speaker Change: Average deposits increased 7% year-on-year and 1% quarter-on-quarter.

Speaker Change: We would expect to continue to operate at this higher level of deposit balances as we look to the back half of the year.

Speaker Change: Turning to slide 10, year-on-year expense growth was contained to less than 3%.

Eric Walter Aboaf: In the second quarter, we continue to invest in the business while also delivering productivity benefits in two key areas. The first is associated with our decision to consolidate two operating joint ventures in India late last year into this quarter. The year-on-year savings associated with these two JV consolidations are approximately $20 million in the quarter, excluding integration costs.

Speaker Change: In the second quarter, we continue to invest in the business while also delivering productivity

Speaker Change: The first is associated with our decision to consolidate two operations joint ventures in India late last year in this quarter.

Speaker Change: The year-on-year savings associated with these two JV consolidations are approximately $20 million in the quarter, excluding integration costs.

Eric Aboaf: Second, we benefited from our ongoing organizational process improvements and initiatives, including streamlining and delaying. We are also providing staff functions to increase or manage and spend at control, which enabled us to lower our head count on a performance basis, including the JVs, by 5 percentage points year-on-year, as detailed on the bottom left of the slide. Together, these actions help to drive down compensation and benefit costs by 2% year-on-year in the second quarter and facilitate our ability to reinvest in our franchise.

Eric Walter Aboaf: Second, we benefited from our ongoing organizational process improvements and initiatives, including streamlining and delaying staff functions to increase our management span of control, which enabled us to lower our headcount on a pro forma basis, including the JVs, by five percentage points year-on-year, as detailed on the bottom left of the slide. Together, these actions help to drive down compensation and benefit costs by 2% year-on-year in the second quarter and facilitate our ability to reinvest in our franchise.

Speaker Change: Second, we benefited from our ongoing organizational process improvements and initiatives.

Speaker Change: Including streamlining and delayering staff functions to increase our management span of control, which enabled us to lower our headcount on a pro forma basis, including the JVs, by 5 percentage points year-on-year.

Speaker Change: as detailed on the bottom left of this slide.

Speaker Change: Together, these actions help to drive down compensation and benefit costs by 2% year-on-year in the second quarter and facilitate our ability to reinvest in our franchise.

Eric Aboaf: The combination of the JB consultations, along with our ongoing initiatives, serves as a catalyst and, importantly, gives us confidence as we continue to deliver on our strategy to a simplified or global operating model, with meaningful benefits expected to build over time, including more productivity saves, as well as an ability to better serve our clients and invest for the future. Moving to slide 11, as you can see, our capital levels remain strong and comfortably above the regulatory minimums. As of quarter-end, our standardized set-1 ratio of 11.2% was slightly higher from the prior quarter, as capital generated from earnings was partially offset by continued dividends and share repurchases, as well as higher RWAs as we supported our clients, which in turn drove higher fees and NII.

Eric Walter Aboaf: The combination of the JV Consolidations, along with our ongoing initiatives, serves as a catalyst and, importantly, gives us confidence as we continue to deliver on our strategy to simplify our global operating model, with meaningful benefits expected to build over time, including more productivity savings, as well as an ability to better serve our clients and invest for the future. Moving to slide 11, as you can see, our capital levels remain strong and comfortably above the regulatory minimum.

Speaker Change: The combination of the JV Consolidations, along with our ongoing initiatives, serves as a catalyst and, importantly, gives us confidence as we continue to deliver on our strategy to simplify our global operating model.

Speaker Change: With meaningful benefits expected to build over time, including more productivity saves, as well as an ability to better serve our clients and invest for the future.

Speaker Change: Moving to slide 11, as you can see our capital levels remain strong and comfortably above the regulatory minimums.

Eric Walter Aboaf: As of quarter end, our standardized Set 1 ratio of 11.2% was slightly higher from the prior quarter, as capital generated from earnings was partially offset by continued dividends and share repurchases, as well as higher RWAs as we supported our clients, which in turn drove higher fees and NII. We returned over $300 million in the first quarter to shareholders, followed by $400 million through common share purchases and dividends in the second quarter, as we have tried to strike the right balance between our capital return goals and the support of our clients.

Speaker Change: As of quarter end, our standardized Set 1 ratio of 11.2% was slightly higher from the prior quarter, as capital generated from earnings was partially offset by continued dividends and share repurchases, as well as higher RWAs as we supported our clients, which in turn drove higher fees and NII.

Eric Aboaf: We returned over 300 million in the first quarter to shareholders, followed by 400 million through common share repurchases and dividends in the second quarter, as we have tried to strike the right balance between our capital return goals and the support of our clients. Looking ahead to the back half of the year, we have announced the plan 10% per share, quarterly, common dividend increase, on the heels of a strong performance from this year's C-CAR, starting in 3Q and subject to board approval. In addition, our attention is to accelerate the pace of quarterly buybacks relative to the first half of the year.

Speaker Change: We returned over $300 million in the first quarter to shareholders, followed by $400 million through common share purchases and dividends in the second quarter, as we have tried to strike the right balance between our capital return goals and the support of our clients.

Eric Walter Aboaf: Looking ahead to the back half of the year, we have announced a planned 10% per share quarterly common dividend increase on the heels of a strong performance on this year's CCAR, starting in 3Q and subject to board approval.

Speaker Change: Looking ahead to the back half of the year, we have announced a planned 10% per share quarterly common dividend increase on the heels of a strong performance on this year's CCAR, starting in 3Q and subject to board approval.

Eric Walter Aboaf: In addition, our intention is to accelerate the pace of quarterly buybacks relative to the first half of the year. However, given the more modest level of repurchase activity so far this year, the full-year payout ratio for 2024 will likely be closer to the 80 to 90 percent range, in line with our medium-term targets. In summary, we are pleased with our second quarter and first half results, which demonstrate our ability to execute against our strategy to drive sustained business momentum while delivering positive total operating leverage, excluding notable items.

Speaker Change: In addition, our intention is to accelerate the pace of quarterly buybacks relative to the first half of the year.

Eric Aboaf: However, given the more modest level of repurchase activity so far this year, the full-year pay-out ratio for 2024 will likely be closer to the 80% to 90% range, in line with our medium-term targets.

Speaker Change: However, given the more modest level of repurchase activity so far this year, the full-year payout ratio for 2024 will likely be closer to the 80 to 90 percent range, in line with our medium-term targets.

Eric Aboaf: In summary, we are pleased with our second quarter and first half results, which demonstrate our ability to execute against our strategy to drive sustained business momentum while delivering positive total operating leverage, excluding notable items. With that, let me cover our improved full-year outlook, which I would highlight continues to have the potential for variability, given the uncertain economic and political environment we're operating in. In terms of our current macro assumption, as we stand here today, we are assuming global equity markets are flat to two second quarter end for the remainder of the year. Our rate outlook broadly aligns with the current forward curve as of quarter end, while we expect both FX market volatility and specials to remain needed.

Speaker Change: In summary, we are pleased with our second quarter and first half results, which demonstrate our ability to execute against our strategy to drive sustained business momentum while delivering positive total operating leverage, excluding notable items.

Eric Walter Aboaf: With that, let me cover our improved full-year outlook, which I would highlight continues to have the potential for variability given the uncertain economic and political environment we're operating in. In terms of our current macro assumptions, as we stand here today, we are assuming global equity markets are flat to second quarter end for the remainder of the year.

Speaker Change: With that, let me cover our improved full-year outlook, which I would highlight continues to have the potential for variability, given the uncertain economic and political environment we're operating in.

Speaker Change: In terms of our current macro assumptions, as we stand here today, we are assuming global equity markets are flat to second quarter end for the remainder of the year.

Eric Walter Aboaf: Our rate outlook broadly aligns with the current forward curve as of quarter end, while we expect both FX market volatility and specials to remain needed. Given our strong start to the year and higher average market levels, we now expect that total fee revenue will likely be in the range of up 4 to 5 percent on a full-year basis, somewhat better than our prior expectations for roughly 4 percent year-on-year growth. Turning to NII, given our 2Q performance, along with the continued benefit of management actions we have taken to support NII growth this year, we now expect full-year NII to be up slightly year over year, which is also better than our previous guidance of down roughly 5% on a full-year basis.

Speaker Change: Our rate outlook broadly aligns with the current forward curve as of quarter-end, while we expect both FX market volatility and specials to remain muted.

Eric Aboaf: Given our strong start to the year and higher average market levels, we now expect that total fee revenue will likely be in the range of up 4% to 5% on a full year basis, somewhat better than our prior expectations for roughly 4% year-on-year growth. Turning to NII, given our 2Q performance, along with the continued benefit of management actions we have taken to support NII growth this year, we now expect full year NII will be up slightly year over year, which is also better than our previous guide of down roughly 5% on a full year basis.

Speaker Change: Given our strong start to the year and higher average market levels, we now expect that total fee revenue will likely be in the range of up 4-5% on a full year basis, somewhat better than our prior expectations for roughly 4% year-on-year growth.

Speaker Change: Turning to NII, given our 2Q performance, along with the continued benefit of management actions we have taken to support NII growth this year, we now expect full-year NII will be up slightly year-over-year, which is also better than our previous guide of down roughly 5% on a full-year basis.

Eric Aboaf: Finally, given these improved top line expectations, full year expenses are likely to be somewhat higher than our prior outlook of up 2.5% this year. We now expect expenses, excluding no items, to be up about 3% this year, given the expected revenue-related costs.

Eric Walter Aboaf: Finally, given these improved top-line expectations, full-year expenses are likely to be somewhat higher than our prior outlook, of up 2.5% this year. We now expect expenses excluding notable items to be up about 3% this year, given the expected revenue-related costs. Importantly, given this improved outlook, we now expect to deliver both positive fee operating leverage and positive total operating leverage for the full year, excluding notable items. And with that, I will hand the call back to Ron.

Speaker Change: Finally, given these improved top-line expectations, full-year expenses are likely to be somewhat higher than our prior outlook, of up 2.5% this year. We now expect expenses excluding notable items to be up about 3% this year, given the expected revenue-related costs.

Ronald OHanley: Importantly, given this improved outlook, we now expect to deliver both positive fee operating leverage and positive total operating leverage for the full year, excluding notable items. And with that, let me hand the call back to Ron.

Speaker Change: Importantly, given this improved outlook, we now expect to deliver both positive fee operating leverage and positive total operating leverage for the full year, excluding notable items.

Speaker Change: And with that, let me hand the call back to Ron.

Ronald OHanley: Thank you, Eric.

Unknown Executive: Thank you, Eric. Operator, we can open it up to questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys.

Unknown Executive: Operator, we can open it up to questions. Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process? Please press the star followed by the two. If you are using a speaker phone, please list the handset before pressing any keys. Please limit yourself to one question and one follow-up before rejoining the queue. One moment for your first question.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the 2.

Speaker Change: If you are using a speakerphone, please lift the handset before pressing any keys. Please limit yourself to one question and one follow-up before rejoining the queue. One moment for your first question.

Unknown Executive: Please limit yourself to one question and one follow-up before rejoining the queue. One moment for your first question. Your first question comes from Glenn Schorr with Evercore ISI. Your line is open. Hi. Thanks so much.

Glenn Schorr: Your first question comes from Glenn Shore with Evercore ISI.

Speaker Change: Your first question comes from Glenn Schorr with Evercore ISI. Your line is open.

Glenn Schorr: Your line is open. Hi, thanks so much. Questions on global visors? You had some institutional lead outflows in the last two quarters despite the strong markets. I'm just curious how much of that is a function of rebalancing.

Ronald Philip OHanley: A question on global advisors. You had some institutional-led outflows in the last two quarters despite the strong markets. I'm just curious how much of that is a function of rebalancing, and are we supposed to expect more going forward given the strong equity markets? And are you seeing similar trends in your custody base? Thanks. Hi Glenn, it's Ron. You have it correct there; most of it, the vast majority of it is around client rebalancing. In one case, an extremely large client, Rebalancing Away from Certain Asset Classes. So it's idiosyncratic.

Glenn Paul Schorr: Hi, thanks so much.

Glenn Paul Schorr: Question on Global Visors. You had some institutional-led outflows in the last two quarters.

Glenn Paul Schorr: I'm just curious how much of that is a function of rebalancing and are we supposed to expect more going forward given the strong equity markets and are you seeing similar trends in your custody base? Thanks.

Ronald OHanley: And are we supposed to expect more going forward given the strong equity markets and you're seeing similar trends in your custody base? Thanks.

Ronald OHanley: Hi, Glenn. It's Ron. You have it correct there.

Glenn Paul Schorr: Hi Glenn, it's Ron. You have it correct there. Most of it, the vast majority of it, is around client rebalancing. In one case of an extremely large client that's

Ronald OHanley: The most of it, the vast majority of that is around client rebalancing in one case of extremely large client. It's rebalancing away from certain asset classes. So it's idiosyncratic. We don't expect it to continue.

Speaker Change: Rebalancing away from certain asset classes. So it's idiosyncratic. We don't expect it to continue. And we feel very comfortable with the trajectory that we're on.

Ronald Philip OHanley: We don't expect it to continue, and we feel very comfortable with the trajectory that Global Advice is on, both in the institutional business and in the ETF business. Okay, Ron, while we have you, there have been several articles over the last year or so talking about a certain European bank potentially selling their servicing platform. You've been linked to it, as you should be.

Ronald OHanley: And it's very comfortable with the trajectory that global advice is on, both institutional business and the ETF business.

Speaker Change: Global Advice is on both the institutional business and the ETF business.

Glenn Schorr: Okay, Ron, what would have you, you know, there's been several articles over the last year or so talking about a certain European bank potentially selling their servicing platform. You've been linked to it as you should be. You've been great in consolidating things in the past. So not asking a comment on that. I am asking. As some shareholders just prefer buybacks, which you might think is near term. I'm curious on your thoughts. Conception on how you approach these things.

Glenn Paul Schorr: Okay, Ron, what would have you...

Speaker Change: You know, there's been several articles over the last year or so talking about a certain European bank potentially selling their servicing platform. You've been linked to it, as you should be. You've been great in consolidating things in the past.

Ronald Philip OHanley: You've been great at consolidating things in the past. So I'm not asking you to comment on that. I am asking, as some shareholders just prefer buybacks, which you might think is near term. I'm curious about your thoughts, conceptual on how you approach these things, if there were any lessons learned from the Brown Brothers Harriman saga, and just conceptually how you're thinking about any consolidation opportunities and services. Thank you.

Speaker Change: So I'm not asking you to comment on that. I am asking, as some shareholders just prefer buybacks, which you might think is near term, I'm curious on your thoughts conceptually on how you approach these things, if there were any lessons learned from the Brown Brothers Harriman saga, and just conceptually how you're thinking about any consolidation opportunities and services. Thanks.

Ronald OHanley: If there were any lessons learned from the Brown Brothers Haram and saga and just conceptually how you're thinking about any consolidation opportunities and services. Thank you.

Ronald OHanley: Yes, so, Glenn, I mean, we've been pretty consistent about this. We have a very, very strong market position. Now, some of that in the past has been built by M&A. If you go back to the 2000s. But if you think about where we are now, it's very strong. And the vast majority of our activity is around organic build-out of our business. Some of that just in terms of focusing on clients within geographies, and some of that focused on building capabilities and extending them to other geographies.

Ronald Philip OHanley: So, Glenn, I mean, we've been pretty consistent about this. We have a very, very strong market position. Now, some of that in the past has been built by M&A if you go back to the 2000s, but if you think about where we are now, it's very strong.

Speaker Change: Yes, so Glenn, I mean we've been pretty consistent about this. We have a very, very strong market position. Now some of that in the past has been built by M&A. If you go back to the

Ronald Philip OHanley: And the vast majority of our activity is around the organic build-out of our business. Some of that just in terms of focusing on clients within geographies, and some of that focused on building capabilities and extending them to other geographies. That is by far what our focus is. To the extent, and I've said this in the past, I mean, M&A is not a strategy, but if it can help us to effectively implement our strategy, and it is superior to, it passes the test of being superior to, a return of capital to shareholders, then we'll consider it.

Speaker Change: You know, to the 2000s. But if you think about where we are now, it's very strong. And the vast majority of our activity is around organic buildout of our business.

Speaker Change: Some of that just in terms of, you know, focusing on clients within geographies and some of that focused on building capabilities and extending them to other geographies. That is by far what our focus is.

Ronald OHanley: That was, by far, what our focus is. To the extent, and I said this in the past, I mean, M&A is not a strategy. But if it can help us to effectively implement our strategy, and it is superior to passes the test of being superior to a return of capital to shareholders, then we'll consider it. But our focus is on building out organically, returning capital to shareholders at a reasonable pace, and continuing to excel at what we do.

Speaker Change: To the extent, and I've said this in the past, I mean M&A is not a strategy, but if it can help us to effectively implement our strategy and

Speaker Change: It passes the test of being superior to a return of capital to shareholders, then we'll consider it. But our focus is on building out organically, returning capital to shareholders at a reasonable pace.

Ronald Philip OHanley: But our focus is on building out organically, returning capital to shareholders at a reasonable pace, and continuing to excel at what we do. Thanks, everyone. Operator, can we move to the next question? Your next question comes from Ken Usdin with Jefferies. Your line is open. Thanks. Good morning.

Speaker Change: and continuing to excel at what we do.

Glenn Schorr: Thanks, Sean.

Ronald Philip OHanley: Thanks, Ron.

Unknown Executive: Operator, can we move to the next question?

Operator: Operator, can we move to the next question?

Ken Uzen: Your next question comes from Ken Uzen with Jefferies.

Ken Uzen: Your line is open. Thanks. Good morning. So great result on the NII, and we heard the updated outlook for slightly up this year now.

Speaker Change: Your next question comes from Ken Usdin with Jefferies. Your line is open.

Eric Walter Aboaf: So, great result on the NII, and we heard the updated outlook for slightly higher this year now. Eric, just wondering, that would still imply a lower second half versus this really strong second quarter. And I know there's a lot of uncertainty still out there in the environment. So, can you just help us think through what you are contemplating in terms of how deposits track from here, and what caveats should we continue to keep in mind if, in fact, there is still a second half that comes off of this second quarter real strength? Thanks.

Kenneth Michael Usdin: Thanks, good morning.

Kenneth Michael Usdin: So, great result on the NII, and we heard the updated outlook for slightly up this year now. Eric, just wondering, that would still imply a lower second half versus this really strong second quarter, and I know there's a lot of uncertainty still out there in the environment, so can you just help us think through, what are you contemplating in terms of how deposits track from here, and what caveats should we continue to think in mind if in fact there is still a second half that comes off of this second quarter real strength? Thanks.

Eric Aboaf: Erica, just wondering, that would still imply a lower second half versus this really strong second quarter. And I know there's a lot of uncertainty still out there in the environment. So can you just help us think through what are you contemplating in terms of how deposits track from here and what caveats should we continue to think in mind? If, in fact, there is still, you know, second half comes off of this, this second quarter real strength. Thanks.

Eric Aboaf: Ken and Sarah, as you said, we're pleased with the second quarter results on NII. You know, some of that is the interest rate environment, but a good portion of that is the management actions we've been taking in terms of engaging with our clients on deposits and really being there for them on both sides of the balance sheet as we land and support their growth as well. This quarter was particularly strong. You know, we had a nice tailwind from long-term rates during the quarter that helped us build out our investment portfolio a little more. Deposits ticked up a second half of June and towards the end, especially a non-interest bearing.

Eric Walter Aboaf: Ken and Tarek, as you said, we're pleased with the second quarter results on NII. Some of that is the interest rate environment, but a good portion of that is the management actions we've been taking in terms of engaging with our clients on deposits and really being there for them on both sides of the balance sheet as we lend and support their growth as well. This quarter was particularly strong. We had a nice tailwind from long-term rates during the quarter. That helped me understand.

Speaker Change: Ken and Eric, as you said, we're pleased with the second quarter results on NII. Some of that is the interest rate environment, but a good portion of that is the management actions we've been taking in terms of engaging with our clients on deposits.

Speaker Change: and really being there for them on both sides of the balance sheet as we lend and support their growth as well. This quarter was particularly strong.

Speaker Change: You know, we had a nice tailwind from long-term rates, you know, during the quarter that helped. You saw us build out our investment portfolio a little more.

Eric Walter Aboaf: You saw us build out our investment portfolio a little more. Deposits ticked up in the second half of June and towards the end, especially non-interest bearing. But what I find pleasing is that deposits are coming in stronger across what I'll call the pricing stack, the transactional deposits, the exception price deposits, and the initiative, so across the spectrum. That's really a testament to the engagement that we've had with our clients to be there.

Speaker Change: Deposits ticked up second half of June and towards the end, especially a non-interest bearing. But what I find pleasing is that deposits are coming in stronger across what I'll call the pricing stack, the transactional deposits.

Eric Aboaf: But what I find pleasing is that deposits are coming in stronger across the, what I'll call the pricing stack, the transactional deposits, the exception price deposits, and the initiative. So across the spectrum, and that's really a testament to the engagement that we've had with our clients to be there.

Speaker Change: the Exception Price Deposits and the Initiative.

Speaker Change: The Spectrum, and that's really a testament to the engagement that we've had with our clients to be there.

Eric Aboaf: I think as we look forward into the third quarter and fourth quarter, you know, we still see some of the headwinds and tailwinds that we've talked about. You know, short-term rates seem like we'll start to trend down. That'll be a little bit of a headwind deposit. We're still seeing some of that rotation from non-interest bearing to interest bearing that is slowing. You know, that was that rotated out about two billion this this past quarter, and that's been less than the prior quarters, but that still continues and still a little bit of pricing and makeshift that we're seeing in the interest bearing deposit base.

Eric Walter Aboaf: I think as we look forward into the third quarter and fourth quarter, we still see some of the headwinds and tailwinds that we've talked about. Short-term rates seem like they'll start to trend down, which will be a little bit of a headwind.

Speaker Change: I think as we look forward into the third quarter and fourth quarter, we still see some of the headwinds and tailwinds that we've talked about.

Speaker Change: You know, short-term rates seem like they'll start to trend down. That'll be a little bit of a headwind. Deposits, we're still seeing some of that rotation from non-interest-bearing to interest-bearing. Now, that is slowing. You know, that was...

Eric Walter Aboaf: Deposits, we're still seeing some of that rotation from non-interest bearing to interest bearing, but that is slowing. That rotated out about $2 billion this past quarter, and that's been less than the prior quarters. But that still continues, and there is still a little bit of pricing and makeshift that we're seeing in the interest-bearing deposit base. So what we see is just playing out through the end of the year, but at a more modest pace.

Speaker Change: That rotated out about $2 billion this past quarter, and that's been less than the prior quarters, but that still continues and still a little bit up.

Speaker Change: Pricing, and makeshift that we're seeing in the interest bearing deposit base. So that we see is just playing out through the end of the year, but at a more modest pace.

Eric Aboaf: So that we see is just playing out through the end of the year, but at a more modest pace. You know, the offsets to that are, you know, a mix of long-term rates. The lending that we continue to do, lending's up double digits, and that's been purposeful to support our clients and to support NII. And then, you know, tactically adjusting the investment portfolio. And so it's the net of those that probably will come in with some erosion over the next couple of quarters. You know, but we're seeing a place where deposits are, you know, come in at a nice and robust level on our balance sheet; lending continues.

Eric Walter Aboaf: The offsets to that are a mix of long-term rates, the lending that we continue to do, lending rates are up double digits, and that's been purposeful to support our clients and to support NII, and then tactically adjusting the investment portfolio.

Speaker Change: You know the the offsets

Speaker Change: to that are, you know, mix of long term rates, the lending.

Speaker Change: that we continue to do. Lending's up double digits and that's been purposeful to support our clients and to

Speaker Change: Support NII, and then, you know, tactically adjusting the investment portfolio.

Eric Walter Aboaf: And so it's the net of those that probably will come in with some erosion over the next couple quarters. But we're seeing a place where deposits could come in at a nice and robust level on our balance sheet. Lending continues. And so we're getting to a point where we're going to start to see, I think, an inflection of NII and a bottoming, which is nice. And we can see that over the next few quarters. Hard to tell exactly when, but with the headwinds and tailwinds kind of, I'll say, equalizing over time, it gives us a good basis to look forward to.

Speaker Change: And so it's the net of those that probably will come in with some erosion over the next couple quarters. But we're seeing a place where deposits have come in at a nice and robust level on our balance sheet.

Eric Aboaf: And so, you know, we're getting to a point where we're going to start to see, I think, an inflection of NII and a bottoming, which is nice. And we can see that over the next, you know, a few quarters hard to tell exactly when, but with the headwinds and tailwinds, kind of, I'll say, equalizing over time. It gives us a good basis to look forward.

Speaker Change: Lending continues and so you know we're getting to a point where we're we're going to start to see I think an inflection of NII and a bottoming which is which is nice and we can see that over the next you know a few quarters.

Speaker Change: Hard to tell exactly when, but with the headwinds and tailwinds kind of, I'll say, equalizing over time, it gives us a good basis to look forward.

Ronald OHanley: Okay, got it. And then one, Ron, one question you mentioned that you think that the kind of core fees growth should get better from here. And just wanted to ask you to deepen on that a little bit. I mean, I know that you've mentioned the onboardings and such, but we still have that deconversion working against. And you mentioned the episodic stuff in the ETF stuff, but like, you know, I think that's really people are looking for on the increment. So is that, is that what drives that incrementally better? You know, fee guide for the second half is that we're finally going to see you like those that's servicing and management P line start to show a better rate of change.

Ronald Philip OHanley: Okay, got it. And then one question, Ron, you mentioned that you think that the kind of core fees growth should get better from here. And just wanted to ask you to deepen on that a little bit. I mean, I know that you've mentioned the onboardings and such, but we still have that deconversion working against us, and you mentioned the episodic stuff in the ETF stuff. But like, you know, I think that's really what people are looking for in the increments.

Speaker Change: Okay, got it. And then one, Ron, one question, you mentioned that you think that the kind of core fees growth should get better from here. And just wanted to ask you to deepen on that a little bit. I mean, I know that you've mentioned the onboardings and such, but we still have that deconversion working against and

Speaker Change: You mentioned the episodic stuff in the ETF stuff, but like, you know, I think that's really people are looking for on the increment. So is that what drives that incrementally better?

Ronald Philip OHanley: So is that what drives that incrementally better? You know, the fee guide for the second half is that we're finally going to see those service and management fee lines start to show a better rate of change. Yeah, so there's, there's, I think you largely have it, but let me go a little bit deeper, Ken, because if you think about, let's talk about core servicing fees, what really drives them? First is retention. Second is the amount and rate of onboarding. And then third is, you know, do business and sales, and then, you know, rinse and repeat.

Speaker Change: You know, fee guide for the second half is that we're finally going to see, like, those debt servicing and management fee lines start to show a better rate of change.

Ronald OHanley: Yeah, so there's, there's, I think you largely have it, but let me, let me go a little bit deeper, Ken, because if you think about, let's talk about core servicing fees, what really drives it? First is retention. Second is the amount and rate of onboarding. And then third is, you know, do business and sales. And then, you know, we're instant repeat. And our retention levels, which they talked about them before and continuing to track well against them, even coming a little bit higher than what we had planned. Second onboarding is Eric noted they've been slower than expected this year, but we see lots of visibility going forward to that increasing.

Kenneth Michael Usdin: Yeah, so there's, I think you largely have it, but let me go a little bit deeper, Ken, because if you think about, let's talk about core servicing fees, what really drives it?

Kenneth Michael Usdin: First is retention. Second is the amount and rate of onboarding. And then third is you know do business and sales. And then you know rinse and repeat.

Ronald Philip OHanley: And our retention levels, which we talked about before, and we're continuing to track well against them, even coming a little bit higher than what we had planned. Second, onboarding, as Eric noted, has been slower than expected this year. But we see lots of visibility going forward to that increasing. We've got a big book there to onboard, and that will start to onboard and should start to onboard at an accelerating rate. And then third, is sales. And there are two things going on there.

Kenneth Michael Usdin: And our retention levels, which they

Kenneth Michael Usdin: We've talked about them before.

Kenneth Michael Usdin: and we're continuing to track well against them.

Kenneth Michael Usdin: Even coming a little bit higher than what we had planned.

Kenneth Michael Usdin: Second, on boardings, as Eric noted, they've been slower than expected this year.

Eric: but we see lots of visibility going forward to that increasing.

Ronald OHanley: We've got a big book there to onboard, and that that will start to onboard and then should start to onboard an accelerating rate. And then third is sales, and there's two things going on there. One, the amounts we, we opted in 23. We opted again in 24 on track for that increased servicing the sales target, but we also have disproportionate focus on traditional back office fees either standalone or if they're associated with alpha, making sure that when an alpha assignment comes on board, the back office conversions occur first. And as far as the learning, this whole alpha process.

Eric: We've got a big book there to on-board.

Eric: that will start to onboard and should start to onboard an accelerating rate.

Ronald Philip OHanley: One, the amounts; we opted in 23 and we opted again in 24. We're on track for that increased servicing the sales target, but we also have a disproportionate focus on traditional back office fees, either standalone or if they're associated with alpha, making sure that when an alpha assignment comes on board, the back office conversions occur first. And that's part of the learning in this whole alpha process.

Eric: And then third is sales. And there's two things going on there. One, the amounts. We upped it in 23. We upped it again in 24. We're on track for that increased servicing, the sales target.

Eric: I have disproportionate focus on traditional back-office fees, either stand-alone or if they're associated with alpha, making sure that when an alpha assignment comes on board, the back-office conversions occur first.

Ronald Philip OHanley: So that by itself gives us encouragement. And then, and Eric will probably want to go into this a little bit more, the deconversion that seems like we've talked about forever.

Ronald OHanley: So that by itself gives us encouragement.

Eric: You know, it's part of the learning, this whole alpha process.

Ronald OHanley: And then, and Eric will probably want to go into this a little bit more. The deconversion that seems like we've talked about it forever. I mean, we're hitting bottom right now in terms of that. So, we'll start to see improvement on that as a comp and as its effect and move beyond it, starting in the next quarter or two. So, that servicing fees and management fees, we are very encouraged by what we're seeing at SSJ. It's been; it's part of a carefully crafted strategy, both in the institutional ETS. We've talked about ETF flows, we've talked about market share in the very important low-cost ETFs, which in effect represent penetration into the retail market.

Eric: So that by itself gives us encouragement, and Eric will probably want to go into this a little bit more. The deconversion, it seems like we've talked about forever. I mean, we're hitting bottom right now in terms of that, so we'll start to see improvement on that.

Ronald Philip OHanley: I mean, we're hitting bottom right now in terms of that, so we'll start to see improvement on that as a comp and as its effect and move beyond it starting in the next quarter or two. So, that's servicing fees and management fees. We are very encouraged by what we're seeing at SSGA.

Eric: As a comp and as its effect and move beyond it starting in the next quarter or two.

Speaker Change: So that's servicing fees and management fees. We are very encouraged by what we're seeing at SSJA.

Ronald Philip OHanley: It's part of a carefully crafted strategy, both in the institutional and ETFs. We've talked about ETF flows. We've talked about market share and the very important low-cost ETFs, which in effect represent penetration into the retail market. All that is working well. And then, finally, we have this historically low volatility in FX.

Eric: It's part of a carefully crafted strategy.

Eric: Open the institutional ETFs. We've talked about ETF flows. We've talked about

Eric: Marketshare and the very important low-cost ETFs which in effect represent

Ronald OHanley: All that is working well. Then finally, you know, we've had this historically low volatility in FX. Nonetheless, the team has been highly focused on continuing to build share within our clients to move up on the panels. And we're; you saw some of that pay off in terms of FedEx and Security Finance. Again, there's been a new strategy placed there and some progress there.

Eric: penetration into the retail market. All that is working well. And then finally...

Speaker Change: We've had this historically low volatility in FX.

Unknown Executive: Nonetheless, the team has been highly focused on continuing to build share within our clients to move up on the panels, and you saw some of that pay off in terms of FX and securities finance. Again, there's been a new strategy put in place there and some progress there. So, this is-much of what we do is a game of inches, but there's a lot of inches coming together here that we feel quite good about. Great. Thanks, everyone. Your next question comes from Brennan Hawken with UBS. Your line is open. Good morning.

Speaker Change: Nonetheless, the team has been highly focused on continuing to build share within our clients to move up on the panels.

Speaker Change: And you saw some of that pay off in terms of

Speaker Change: of FX, and Securities Finance. Again, there's been a new strategy put in place there and some progress there. So much of what we do is a game of inches, but there's a lot of inches coming together here that we feel quite good about.

Ronald OHanley: So, you know, this is much of what we do is a game of inches, but there's a lot of inches coming together here that we feel quite good about.

Unknown Executive: Great.

Unknown Executive: Thanks, everyone.

Eric Walter Aboaf: Eric Aboaf

Brennan Hawken: Your next question comes from Brennan Hawken with UBS.

Speaker Change: Your next question comes from Brennan Hawken with UBS. Your line is open.

Brennan Hawken: Your line is open.

Eric Aboaf: Good morning. Thank you for taking my questions. I would like to start with Euro deposits. The ECB cut rates this quarter. So I'm curious to hear. I know Euro, I believe, is your second biggest currency in your deposit base. So curious about what impact that you saw from that cut? Where was the beta on that cut? And was it roughly equivalent to the beta you saw on the final increases? And based on that experience, how does that inform your expectation for the SEC cuts in the Fed funds?

Unknown Executive: Thank you for taking my question. I would like to start with euro deposits. The ECB cut rates this quarter. So I'm curious to hear, I know the euro is your second biggest currency in your deposit base. So curious about what impact you saw from that cut.

Brennan Hawken: Good morning. Thank you for taking my questions. I would like to start with Euro.

Brennan Hawken: The ECB cut rates this quarter, so I'm curious to hear, I know Euro I believe is your second biggest currency.

Speaker Change: in your deposit base. So curious about what impact that you saw from that cut.

Eric Walter Aboaf: Where was the beta on that cut, and was it roughly equivalent to the betas you saw on the final increases? And based on that experience, how does that inform your expectations for when we see cuts in the Fed? Brennan, it's Eric.

Speaker Change: Where was the beta on that cut and was it roughly equivalent to the beta as you saw on the final increases and and based on that experience how does that inform your expectation for when we see cuts in the Fed funds?

Eric Aboaf: Brennan, it's Eric. You know, it's nice to see the interesting environment top out and begin to traverse. So I think it'll reverse slowly. You know, we've seen the beginning of that and feels like it'll take some time, which is, which, which, which will be fine because remember our portfolio and our balance sheet is roughly neutral. And relatively insulated now from interest rate increases or decreases. You know, we have a slight sensitivity across the balance sheet, but it's slight. It's, you know, if they fall, central banks across the curve cut rates by 25 basis points. We're talking about $5 million per quarter impact on a $2.5 billion base of a full year in I.I.

Eric Walter Aboaf: You know, it's nice to see the industry environment top out and begin to reverse. I think it'll reverse slowly. You know, we've seen the beginning of that, and it feels like it'll take some time, which is, which, which, which will be fine. Because remember, our portfolio and our balance sheet are roughly neutral and relatively insulated now from interest rate increases or decreases. You know, we have a slight sensitivity across the balance sheet, but it's slight. If all central banks across the curve cut rates by 25 basis points, we're talking about $5 million per quarter impact on a two-and-a-half-billion-dollar base of full-year NII.

Speaker Change: Brennan, it's Eric. You know, it's nice to see the industry environment top out and begin to reverse.

Speaker Change: So I think it'll reverse slowly, you know.

Speaker Change: and feels like it'll take some time.

Speaker Change: which is which which which will be a fine because remember our portfolio and our balance sheet is roughly neutral and relatively insulated now from

Speaker Change: Interest rate increases or decreases. You know, we have a slight sensitivity across the balance sheet, but it's slight. It's, you know, if all central banks across the curve.

Speaker Change: Cut rates by 25 basis points. We're talking about $5 million per quarter impact on a

Speaker Change: $2.5 billion base of full-year NII. So that's the, we're talking about, you know, small, small effects.

Eric Walter Aboaf: So that's the... We're talking about, you know, small, small effects. To your point, the Euro is a good place to start because Euro rates increased, lagged on the way up, and are now starting to move in the opposite direction.

Eric Aboaf: So that's the, we're talking about, you know, small, small effects. To your point, Euro is a good place to start because, you know, Euro rates increased lagged on the way up and now are starting to move in the opposite direction. We have said, and you know, the euro experience on this first rate move has demonstrated that we expect largely to see symmetry in the betas. So we, as rates rose, you know, we lagged and then the betas increased over time towards the, you know, back into the right cycle. And what we've said is, you know, area by area, transaction rate deposits, exception rate deposits, and the initial rate deposits, we'll tend to see the reversal of that.

Speaker Change: To your point, Euro is a good place to start because, you know, Euro rates increase lag.

Speaker Change: on the way up and now are starting to move in the opposite direction. We have said, and you know the Euro experience on this first great move has has demonstrated that we expect.

Eric Walter Aboaf: We have said, and the Euro experience on this first rate move has demonstrated that we expect largely to see symmetry in the betas. So as rates rose, we lagged, and then the betas increased over time towards getting back into the rate cycle. And what we have said is, area by area, transaction rate deposits, exception rate deposits, and initial rate deposits, we will tend to see the reversal of that, and so specifically in Euros, we did see that.

Speaker Change: largely to see symmetry in the

Speaker Change: Vedas.

Speaker Change: So as rates rose, we lagged and then the betas

Speaker Change: increased over time towards the you know back into the rate cycle and what we've said is you know area by area transaction rate deposits

Speaker Change: Exception Rate Deposits and the Initiative Rate Deposits.

Eric Aboaf: And so specifically in euros, we did see that we, you know, the beta on the first tick down was similar to the beta on the last tick up. And I think is a good representation largely of what we expect to see. And that means that if you step back even further, we feel like our pricing is set at a healthy level. We have a range of pricing and pools of deposits, and in a way have built real engagement with our clients, so they understood, you know, the model as rates floated up. And similarly understand the model as rates floated down and the balance of trade, and it comes together nice.

Speaker Change: We'll tend to see the reversal of that, and so, specifically in Euros, we did see that. We, you know, the beta on the first tick down was similar to the beta on the last tick up.

Eric Walter Aboaf: The beta on the first tick down was similar to the beta on the last tick up and I think it is a good representation of largely what we expect to see. That means that if you step back even further, we feel like our pricing is set at a healthy level. We have a range of pricing and pools of deposits and, in a way, have built real engagement with our clients so that they understand the model as rates floated up and down, and similarly, they understand the model as rates slid down and the balance of trade, and it comes together nicely. Audit.

Speaker Change: and I think is a good representation largely of what we expect to see.

Speaker Change: and that means that...

Speaker Change: If you step back even further, we feel like our pricing is set at a healthy level. We have a range of pricing and pools of deposits.

Speaker Change: and in a way have built real engagement with our clients so they understood the model as rates floated up. And similarly, they understand the model as rates floated down and the balance of trade and it comes together nicely.

Brennan Hawken: Absolutely. Thanks for that. I appreciate it.

Eric Walter Aboaf: Thanks for that. Thank you for that. I appreciate it. On thinking about another factor that has been a bit more robust recently, Repo has been pretty strong in recent quarters. I think, based on what's been happening in the marketplace, that that strength is sustainable, and, you know, it seems as though the NII story is playing out better than you had originally anticipated. Obvious, given you brought up guidance. But, um, you know, is that another x factor that could allow for the back half of the year to maybe see less of a pronounced step down, then your improved guidance seems to continue to embed? Fred, and it's Eric again.

Brennan Hawken: On thinking about another factor that has been a bit more robust recently, repo has been pretty strong in recent quarters.

Speaker Change: Got it. Thanks for that. Thanks for that. I appreciate it. On thinking about another factor that has been a bit more

Speaker Change: Robust recently. Repo has been pretty strong in recent quarters.

Brennan Hawken: Do you think, based on what's been happening in the marketplace, that that strength is sustainable? And, you know, it seems as though the NII story is playing out better than you had originally anticipated. You know, obvious given you brought up guidance.

Speaker Change: Do you think, based on what's been happening in the marketplace, that that strength is sustainable?

Speaker Change: You know, it seems as though...

Speaker Change: The NII story is playing out better than you had originally anticipated, you know, obvious given you brought up guidance, but, you know, is that another X factor that could allow for the back half of the year to maybe see less of a pronounced step down than your improved guidance seems to continue to embed?

Eric Aboaf: But, you know, is that another X factor that could allow for the back half of the year to maybe see less of a pronounced step down? Then you're improved; the guidance seems to continue to embed.

Eric Walter Aboaf: There's been a lot of talk about repo, notwithstanding that most of the NII we earn on our balance sheet is really based on, you know, deposit funding and lending. So 90% of our NII is around deposits, loans, and the investment portfolio. We're talking about 10%, which is on repo. So just for context, and it is true, you know, repo and NII came in a little bit better than expected in the second quarter. Why?

Eric Aboaf: Fred and it's Eric again. There's been a lot of talk about repo, notwithstanding that most of the NII we earn on our balance is really based on, you know, deposit funding and lending. So 90% of our NII is around deposits, loans, and investment portfolio. We're talking about 10% which is on repo. So just for context. And it is true. You know, repo and I came in a little bit better than expected in the second quarter. Why? Because it was some dislocation in the overnight repo operation of the Fed relative to Sofer. So clients came our way.

Speaker Change: [inaudible]

Fred: Brennan, it's Eric again. There's been a lot of talk about repo, notwithstanding that most of the NII we earn on our balance sheet is really based on, you know, deposit funding and lending. So 90% of our NII is around deposits, loans, investment portfolio. We're talking about 10%, which is on repo. So just for context,

Fred: And it is true, you know, Repo and I came in a little bit better than expected in the second quarter. Why? Because there was some dislocation in the overnight repo operation of the Fed relative to SOFR. So clients came our way.

Eric Walter Aboaf: Because there was some dislocation in the overnight repo operation of the Fed relative to SOFR, so clients came our way. We also saw a dealer balance sheet strain, but, you know, the higher than expected was in the, you know, $5 million to $10 million range. It's not a big deal, and it was nice to take, and it was nice to be there for our clients.

Eric Aboaf: We also saw dealer balance sheet strain, but the higher the expectation was in the, you know, 5 to 10 million dollar range. It's not a; it was nice to take. And it was nice to be there for clients. But in fact, repo has been, you know, relatively flat actually, you know, down a smidge over the last couple of quarters. And that's because, you know, it, it tends to be a thinner margin, but a useful way to accommodate our clients. And we think it's not going to be a large driver of the coming NII. It's fully included in our guide.

Fred: We also saw dealer balance sheet strain, but the higher than expectation was in the $5-10 million range. It was nice to take, and it was nice to be there for our clients.

Eric Walter Aboaf: But in fact, repo has been, you know, relatively flat to actually, you know, down a smidge over the last couple quarters. And that's because, you know, it tends to be a thinner margin but a useful way to accommodate our clients. And we think it's not going to be a large driver of the coming NII. It's fully included in our guide.

Fred: But in fact, Repo has been, you know, relatively flat actually, you know, down a smidge over the last couple quarters.

Fred: and that's because...

Fred: You know, it tends to be a thinner margin, but a useful way to accommodate our clients.

Fred: And we think it's not going to be a large driver of...

Eric Walter Aboaf: I think the real big moving parts are really around deposits, loans, and then followed by investment portfolio and, you know, the mix of long and short rates that we'll see. Thanks for taking my question. Your next question comes from Jim Mitchell with Seaport Global. Your line is open. Hey, good morning.

Fred: of the coming NII. It's fully included in our guide.

Eric Aboaf: I think the real big moving parts are really around deposits, loans, and then followed by investment portfolio and, you know, the mix of long and short rates that we'll see.

Fred: I think the real big moving parts are really around deposits, loans, and then followed by investment portfolio and the mix of long and short rates that we'll see.

Jim Mitchell: Thanks for taking my questions. Your next question comes from Jim Mitchell with the Park Global. Your line is open.

Speaker Change: Thanks for taking my questions.

Fred: Your next question comes from Jim Mitchell with Seaport Global. Your line is open.

Jim Mitchell: Hey, hey, good morning. Eric, maybe just following up a little bit on the NII story. You're talking about potentially an inflection coming. Can you discuss maybe the timing of that? And then when I looked at your asset yields, the HTM book is still weighing that down. Can you talk about maybe the pace of maturity on that htm book that's yielding a little over 2% and how much, how long it takes to kind of get that back coming back in? Is that a big part of your inflection story next year? Thanks.

Unknown Executive: Eric, maybe just following up a little bit on the NII story. You talk about potentially an inflection coming. Can you discuss, maybe, the timing of that? And then when I look at your asset yields, the HTM book is still weighing that down. Can you talk about maybe the pace of maturity on that HTM book that's yielding a little over 2% and how long it takes to kind of get that back coming in? Is that a big part of your inflection story next year? Jim, it's Eric.

James Francis Mitchell: Hey, hey, good morning.

James Francis Mitchell: Eric, maybe just following up a little bit on the NII story, you talk about potentially an inflection coming.

James Francis Mitchell: Can you discuss maybe the timing of that and then when I look at your asset yields, the HTM book is still...

James Francis Mitchell: Weighing that down. Can you talk about maybe the pace of maturity on that HTM book? That's yielding a little over 2% and how much how long it takes to kind of get that back coming back in Is that a big part of your inflection story next year? Thanks

Eric Aboaf: Jim, it's Eric. You know, calling an inflection or a turn in NII is one of the hardest things to do. And so we've been, you know, our outlook is that, you know, in the next few quarters, we'll begin to see that. But, you know, we'll first go from, you know, the trends that we're seeing to a stabilization. It'll bounce around some, and then over time, take upwards. The factors are multifaceted. And with a number of ins and outs, you're right, the investment portfolio is turning over. It turned over quite a bit in the second half of last year.

Eric Walter Aboaf: You know, calling an inflection or a turn in NII is one of the hardest things to do. And so we've been, you know, our outlook is that, you know, in the next few quarters, we'll begin to see that. But, you know, we'll first go from the trends that we're seeing to a stabilization; it'll bounce around some. And then, over time, it will take off.

James Francis Mitchell: Jim, it's Eric. You know, calling an inflection or a turn in NII is one of the hardest things to do and so we've been, you know, our outlook...

Speaker Change: is that you know in the next few quarters we'll begin to to see that but you know we'll first go from you know the trends that we're seeing to a stabilization it'll it'll it'll it'll bounce around some

James Francis Mitchell: and then over time take upwards.

Eric Walter Aboaf: And with a number of ins and outs, you're right, the investment portfolio is turning over. It turned over quite a bit in the second half of last year, and it's now turning over by about three, maybe three to $4 billion a quarter. And that's across HTM and AFS. And because there are some longer-dated bonds in HTM, you know, those roll through a little more slowly.

James Francis Mitchell: The factors are...

James Francis Mitchell: multifaceted and with a number of ins and outs.

James Francis Mitchell: You're right, the investment portfolio is turning over. It turned over quite a bit in the second half of last year.

Eric Aboaf: It's now turning over by about three, maybe three to four billion dollars a quarter. And that's across htm and afs. And because there are some longer dated bonds in HTM, you know, those roll through a little more slowly. But in a way that we have is a sustained amount of, I'll say, tailwind that comes with that. Because remember, the roll-ons in the portfolio versus the roll-offs, those are worth a solid two 250 basis point of spread differential. And that'll play through the books as a, as a nice tailwind, you know, assuming long rates stay, you know, somewhere in the area and the primary change on the curve is at the front end.

James Francis Mitchell: It's now turning over by about three, maybe three to four billion dollars a quarter, and that's across HTM and AFS. And because there are some longer dated bonds in HTM, you know, those roll through a little more slowly. But in a way, what we have is a sustained amount of

Eric Walter Aboaf: But in a way that we have is a sustained amount of, I'll say tailwind that comes with that, because remember the roll-ons in the portfolio versus the roll-offs, those are worth a solid 250 basis point of spread differential, and that'll play through the books as a nice tailwind, assuming long rates stay somewhere in the area and the primary change on the curve is at the front end. So I think it'll be a component, right now the biggest component is really the deposit mix, pricing, levels of non-interest bearing, that's what's moving the needle the most, I mean all these factors matter, and I think as the deposits stabilize and we've started to see total deposit levels stabilize the last few quarters, we have to see now the mix stabilize, once that happens the natural benefit from the investment portfolio rolling through, right, and then the growth in loans and you've seen us lean into lending, lending is up more than 10% year on year because we're trying to be out there for our clients and as we lend to our clients they actually often do additional servicing business with us, that factor and the investment portfolio and the long-term rates will then turn to a net positive impact on NII in the coming quarters. Okay, that's that's really helpful.

Speaker Change: I'll say hell when that comes with that.

James Francis Mitchell: Because, remember, the roll-ons in the portfolio versus the roll-offs, those are worth $1.5

James Francis Mitchell: Solid to 250 basis point of spread differential.

James Francis Mitchell: And that will play through the books as a nice tailwind, assuming long rates stay somewhere in the area and the primary change on the curve is at the front end. So I think it will be a component. Right now,

Eric Aboaf: So I think it'll be a component. Right now, you know, the biggest component is really the deposit, mix, pricing, levels of non-interest bearing. That's what's moving the needle the most. I mean, all these factors matter. And I think as the deposits stabilize, and we've started to see total deposit levels stabilize last few course, we have to see now the mix stabilize. Once that happens, the natural benefit from the investment portfolio rolling through. Right. And then the growth in loans, and you've seen us lean into lending. Lending's up more than 10% year on year. Because we're trying to be out there for our clients.

Speaker Change: You know the biggest component is really the deposit, mix, pricing, levels of non-interest bearing. That's what's moving the needle.

Speaker Change: The most I mean all these factors matter

Speaker Change: And I think as the deposits.

Speaker Change: Stabilize and we've started to see total deposit levels stabilize the last few quarters.

Speaker Change: We have to see now the mix stabilize. Once that happens, the natural benefit from the investment portfolio rolling through.

Speaker Change: Right, and then the growth in loans, and you've seen us lean into lending, lending's up more than 10% year-on-year because we're trying to be out there for our clients, and as we lend to our clients, they actually often do additional servicing business with us.

Eric Aboaf: And as we lend to our clients, they actually often do additional servicing business with us. That factor and the investment portfolio in the long-term rates will then turn to a net positive impact on NII in the coming quarter.

Speaker Change: That factor and the investment portfolio and the long-term rates will then turn to a net positive impact on NII in the coming quarters.

Jim Mitchell: Okay, that's really helpful.

Eric Walter Aboaf: And maybe just to your point on deposit growth being a key driver, you know, now that we're looking at rate cuts, QT is less. I feel like rate cuts can be a catalyst for growth based on historical experience. How do you think about getting back to kind of more normal growth levels and deposits? What do we need?

Jim Mitchell: Maybe just to your point on deposit growth being a key driver.

Speaker Change: Okay that's that's really helpful and maybe just to your point on deposit growth being a key driver you know now that we're looking at rate cuts QT is less

Eric Aboaf: Now that we're looking at rate cuts, QT is less, do you feel like rate cuts can be a catalyst for growth based on historical experience? How do you think about getting back to kind of more normal growth levels and deposits? What do we need to see? I think the direct answer is that the rate environment has moved around quite a bit. And we've seen the deposit effects from the rate environment. I think those are relatively been; those have been telegraphed through the banking system. And we've also seen the Fed balance sheet actions as they've been, you know, tightening conditions with their balance sheet, although that's flowing, and the overnight reverse repo operation is an easing.

Speaker Change: Do you feel like rate cuts can be a catalyst for growth based on historical experience? How do you think about getting back to kind of more normal growth levels and deposits? What do we need to see?

Eric Walter Aboaf: I think the direct answer is that the rate environment has moved around quite a bit, and we've seen the deposit effects from the rate environment. I think those are relatively small, those have been telegraphed through the banking system. And we've also seen the Fed balance sheet actions as they've been, you know, tightening conditions with their balance sheet, although that's slowing, and the overnight reverse repo operation is an easing, you know; we've seen that telegraphed through.

Speaker Change: I think the direct answer is that the rate environment has moved around quite a bit, and we've seen the deposit effects from the rate environment. I think those are

Speaker Change: relatively been those have been telegraphed through the banking system

Speaker Change: And we've also seen the Fed balance sheet actions as they've...

Speaker Change: You know, tightening conditions with their balance sheet, although that's slowing and the overnight reverse repo operation is an easing. You know, we've seen that telegraphed through. So I think the exogenous factors that have driven deposits

Eric Aboaf: You know, we've seen that telegraphed through. So I think the exogenous factors that have driven deposits over the last two years have largely been telegraphed. And, you know, the modest number of interest rate cuts I don't expect to have that much of an impact on deposit levels. You know, we'll see, but that's our kind of sense from talking with our client.

Eric Walter Aboaf: So I think the exogenous factors that have driven deposits over the last two years have largely been telegraphed. And, you know, the modest number of interest rate cuts I don't expect to have that much of an impact on deposit levels.

Speaker Change: Over the last two years have largely been telegraphed and and you know the the modest number of interest rate cuts I don't expect to have That much of an impact on deposit levels, you know, we'll see but that's our

Eric Walter Aboaf: You know, we'll see, but that's our kind of sense from talking with our clients and analyzing the vast array of data that we have. What we feel will make the difference over time is sales. So we talk a lot about servicing fee sales, targeting 350 to 400 million this year. That's up from 300 million the year before and even less than the year before that, with a tilt towards custody. And remember, it's the custodial activity, not just the accounting or the middle office, but the custodial activity that brings with it balances, deposit balances, because they're needed as part of the buffer or to handle the transactional activities that we process for clients.

Eric Aboaf: And analyzing the vast array of data that we have, what we feel will make the difference over time is sales. So we talk a lot about servicing fee sales, targeting 350 to 400 million this year. That's up from 300 million the year before, and even less than the year before that. And with a tilt towards custody. And remember, it's the custodial activity, not just the accounting or the middle office, but the custodial activity. That brings with it balances, deposit balances, because they're needed as part of the buffer or the to handle the transactional activities that we process for clients.

Speaker Change: kind of sense from talking with our clients and analyzing the vast array of data that we have.

Speaker Change: What we feel will make the difference over time is sales, so we talk a lot about servicing fee sales.

Speaker Change: Targeting $350 to $400 million this year, that's up from

Speaker Change: $300 million the year before and even less than the year before that.

Speaker Change: and with a tilt towards custody.

Speaker Change: And remember, it's the custodial activity, not just the accounting or the middle office, but the custodial activity that brings with it balances, deposit balances, because they're needed as part of the...

Speaker Change: the buffer, to handle the transactional activities that we process for clients.

Eric Walter Aboaf: And so as we look forward, as sales continue to accelerate, and then we onboard those sales, because both have to happen, that's what we expect will bring on additional deposits and, in a way, are part of our organic growth model, which will bring fee growth but also bring deposit growth and thus NII into the system at a, I think, a nice rate. And it'll be year by year by year that that helps drive growth. Okay, all very helpful.

Eric Aboaf: And so, as we look forward, as sales continue to accelerate and then we onboard those sales, because both have to happen. And that's what we expect will bring on additional deposits. And in a way, our part of our organic growth model, which will bring, you know, fee growth will also bring deposit growth in the SNII into the system at a nice, you know, rate. And it'll be year by year by year that that'll help help help drive growth.

Speaker Change: As we look forward, as sales continue to accelerate and then we onboard those sales, because both have to happen.

Speaker Change: That's what we expect will bring on additional deposits and in a way are part of our organic growth model, which will bring, you know, feed growth, but also bring deposit growth and thus NII into the system at a, I think at a, at a, at a, at a, at a nice level.

Speaker Change: you know rate and it'll be year by year by year that that'll help help help drive growth.

Jim Mitchell: Go all very helpful. Thanks.

Jim Mitchell: Thanks, Eric.

Speaker Change: Okay, all very helpful. Thanks. Thanks, Eric.

Betsy Gracek: Your next question comes from Betsy Gracek with Morgan Stanley. Your line is open. Oh, hi. Good morning.

Unknown Executive: Thanks. Your next question comes from Betsy Graseck with Morgan Stanley. Your line is open. Oh, hi. Good morning. Hi Betsy.

Speaker Change: Your next question comes from Betsy Graseck with Morgan Stanley . Your line is open. Oh, hi. Good morning. Hi, Betsy.

Ronald Philip OHanley: I did just want to key off of the last comment around sales, and to your point, 350 to 400 is the goal for this year. Obviously, on page 5, you show us what the rev wins are for 1Q and 2Q, you know, 67 and 72, so that leaves us with an expectation that you're going to be able to bump that up pretty aggressively towards, you know, the 105 level for each of 3 and 4Q. And so it gets to my question of what gives you confidence in that?

Betsy Gracek: Hi, Betsy. I did just want to key off of the last coming around the sales. And to your point, 350 to 400 is the goal for this year. You know, obviously on page five, you show us what the rev wins are for 1Q and 2Q, you know, 67 and 72. So that leaves us with an expectation that you're going to be able to bump that up pretty aggressively towards, you know, the 105 level for each of 3 and 4Q. And so it gets to my question of what gives you the confidence in that. Is that a function of these are already sales that are, you know, in contract.

Ronald Philip OHanley: Is that a function of these are already sales that are, you know, in contract, and it's just the installation of the new wins that hits this page, and so that gives you a lot of confidence? You know, generate that 105 level in each of the next two quarters. Betsy, it's Ron.

Speaker Change: I did just want to key off of the last comment around the sales, and to your point, $350,000 to $400,000 is the goal for this year, you know, obviously on page 5 you show us what the rev wins are.

Speaker Change: for 1Q and 2Q, you know, 67 and 72. So that leaves us with an expectation that you're going to be able to bump that up pretty aggressively towards

Speaker Change: You know, the 105 level for each of 3 and 4Q. And so it gets to my question of, what gives you the confidence in that? Is that a function of, these are already sales that are, you know, in, you know, you know,

Ronald OHanley: And it's just the installation of the new wins that hits this page. And so that gives you a lot of confidence. that you can generate that 105 level in each of the next two quarters?

Speaker Change: Contract and it's just the installation of the new wins that hits this page and so that gives you a lot of confidence that you can you know generate that 105 level in each of the next two quarters.

Ronald OHanley: If that's your turn, let me take that.

Ronald Philip OHanley: Let me take that first. First, just to clarify that, you know, these numbers that we're talking about are sales and not installations, right? So it wouldn't include anything that's under contract and, you know, and subject to onboarding at this point. But what, I mean, the way to think about it is this: that if you, that's why Eric gave the four-quarter number there. The third and fourth quarter historically for us tend to be a little bit better.

Ronald OHanley: Firstly, just to clarify that you know, these numbers that we're talking about are sales and not installs, right? So, it wouldn't include anything that's under contract and, you know, in subject to onboarding at this point. But, I mean, I think the way to think of about it is this: that if you, that's why Eric gave the four quarter number there. Third and fourth quarter historically for us tends to be a little bit better; second half of the year is a little bit better than the first half of the year. So, that's point number one. Point number two, you know, the pipeline, and we feel pretty good about the pipeline.

Speaker Change: Betsy, it's Ron. Let me take that. Firstly, just to clarify that, you know, these numbers that we're talking about are sales and not installs, right? So it wouldn't include anything that's under contract and, you know, and subject to onboarding at this point.

Ronald Philip OHanley: The second half of the year is a little bit better than the first half of the year. So that's point number one. Point number two, you know, the pipeline. We feel pretty good about the pipeline, so that's why we're continuing to have confidence in that target that we have of $350 to $400 million. Got it. Perfect. Yeah. And I can see last year, you know, the second half was 3X, you know, 2Q. So, you know, history, yes, obviously shows that that should happen.

Speaker Change: I think the way to think about it is this, that's why Eric gave the four-quarter number there. Third and fourth quarter, historically for us, tend to be a little bit better. Second half of the year is a little bit better than the first half of the year. So that's point number one. Point number two, we know the pipeline.

Betsy Gracek: So, that's why we're continuing to affirm confidence in that target that we have of 350 to 400 million. Got it. Perfect. Yeah. And I can see in last year, you know, the second half was 3x, you know, 2Q. So, you know, history, yes, obviously shows that that should happen. So, that's great.

Speaker Change: And we feel pretty good about the pipeline. So that's why we're continuing to affirm confidence in that target that we have of $350 to $400 million.

Speaker Change: Got it. Perfect. Yeah, and I can see in last year, you know, the second half was 3X, you know, 2Q.

Betsy Gracek: Okay. So then follow up.

Unknown Executive: So, that's great. Okay. So, then I will follow up.

Speaker Change: Betsy, let me clarify the first part of my message because I was not clear there. The number would include things that are in contract but not include anything that's actually been onboarded.

Ronald OHanley: Let me clarify the first part of my message because I was not clear there. The number would include things that are in contract, but not include anything that's actually been onboarded. So, when you see the 2B onboarded number that we have out there, that includes basically past sales. So, I hope that's clear. I didn't mean to confuse that. Okay. Thank you.

Ronald Philip OHanley: Betsy, let me clarify the first part of my message because I was not clear there. The number would include things that are in contract but not include anything that's actually been onboarded. So, when you see the number to-be-onboarded that we have out there, that includes basically past sales. So, I hope that's clear. I didn't mean to confuse you.

Speaker Change: So when you see the to-be-onboarded number that we have out there, that includes basically past sales. So I hope that's clear. I didn't mean to confuse that.

Ronald Philip OHanley: Okay, appreciate it. Thank you. And then the follow-up just on the buyback, I understand you've got, you know, the opportunity for increasing buybacks, and I'm expecting that you're going to be flexing that versus your SLR constraint. Is that fair?

Betsy Gracek: And then the follow up just on the buyback. I understand you've got, you know, that's opportunity for increasing buybacks. And I'm expecting that you're going to be flexing that versus your SLR constraint. Is that fair? And with SLR at 6.3 and the minimum is 5, that feels like you've got a lot of room. So, just want to understand how you're thinking about what the, you know, what level of SLR you want to hold. Regulatory minimum is 5. What kind of buffer should we expect that you're anticipating holding on top of that? Just as we're working through our models on how much buybacks we estimate for you.

Betsy Lynn Graseck: Okay, appreciate it. Thank you. And then the follow-up just on the buyback, I understand you've got, you know, this opportunity for increasing buybacks and I'm expecting that you're going to be flexing that versus your SLR.

Speaker Change: Constraint, is that fair? And with SLR at 6.3 and the minimum at 5, that feels like you've got a lot of room. So just want to understand how you're thinking about what the...

Eric Walter Aboaf: And with SLR at 6.3 and the minimum at 5, that feels like you've got a lot of room. So just want to understand how you're thinking about what the, you know, what level of SLR you want to hold. The regulatory minimum is 5. What kind of buffer should we expect that you're anticipating holding on top of that, just as we're working through our models on how much buybacks we estimate for you? Betsy and Tarek, let me take that.

Speaker Change: You know, what level of SLR you want to hold? Regulatory minimum is five. What kind of buffer should we expect that you're anticipating holding on top of that, just as we're working through our models on how much buybacks we estimate for you? Thank you.

Eric Aboaf: Thank you.

Eric Aboaf: That's the attack. Let me take that as, as we had said, and you're reflecting on, you know, buybacks were lighter in first quarter at 100 million. Then we booked 200 million in the second quarter. We expect that pace to accelerate into the third quarter and then again into the fourth quarter. So, that's our intention. And we have a good amount of room and capital generation each quarter to be able to. To deliver on that. In terms of the constraints, the ratio constraints, the most important one for us. And I think for our various stakeholders is the CET-1 ratio.

Eric Walter Aboaf: As we said, and you're reflecting on, buybacks were lighter in the first quarter at $100 million, then we booked $200 million in the second quarter. We expect that pace to accelerate into the third quarter and then again into the fourth quarter. So that's our intention, and we have a good amount of room and capital generation each quarter to be able to deliver on that. In terms of the constraints, the ratio constraints, the most important one for us and, I think, for our various stakeholders is the CET1 ratio, which I think we can continue to operate at at a good level, but also that allows us a good pace of accelerating buybacks. The Tier 1 leverage or the supplementary leverage ratio is informative but actually relatively manageable.

Speaker Change: Betsy and Tarek, let me take that as we had said and you're you're reflecting on you know buybacks were lighter

Speaker Change: in first quarter at $100 million, then we book $200 million in second quarter. We expect that pace to accelerate into the third quarter and then again into the fourth quarter. So that's our intention and we have a good amount of room and capital generation each quarter to be able to deliver on that. In terms of the constraints, the ratio constraints, the most important one for us and I think for our various stakeholders is the CET1 ratio and that I think we can continue to operate at at a good level, but also that

Eric Aboaf: And that, I think we can continue to operate at a good place, at a good level, but also that allows us a good pace of accelerating buybacks. The tier one leverage or the supplementary leverage ratio are informative, but actually relatively manageable, right? With the, you know, right level of preferred equity, we can, you know, we can, you know, operate where we need to. I think we've been clear on Tier One leverage. What are ranges, and, you know, we'll operate within that range. And, you know, we can, we can adjust the preferred equity stack as necessary.

Eric Walter Aboaf: With the right level of preferred equity, we can operate where we need to. I think we've been clear on Tier 1 leverage, what our range is, and we'll operate within that range. And we can adjust the preferred equity stack as necessary. We've not really formalized, at least externally, a supplementary leverage ratio range, but I'd say it kind of flows in a similar way as the Tier 1 leverage, and you can think of those as related from a conceptual and operational standpoint.

Speaker Change: That allows us a good pace of accelerating buybacks.

Speaker Change: Tier 1 leverage or the supplementary leverage ratio

Speaker Change: Actually, relatively manageable, right, with the right level of preferred equity, we could, you know, we can, we can, you know, operate where we need to. I think we've been clear on tier one leverage, what our range is, and, you know, we'll operate within that range.

Speaker Change: and, you know, we can adjust the preferred equity stack as necessary.

Eric Aboaf: We've not really formalized, at least externally, a supplementary leverage ratio range, but I'd say it kind of flows in a similar way as the Tier One leverage. And you can think of those as related from a conceptual and operational standpoint. And both of them are, you know, eminently manageable and are not really the constraint when it comes to common share buybacks.

Speaker Change: Really formalized, at least externally, a supplementary leverage ratio range, but I'd say it kind of flows in a similar way as the Tier 1 leverage, and you can think of those as related.

Speaker Change: From a conceptual and operational standpoint, and both of them are, you know, eminently manageable and are not really the constraint when it comes to common share buybacks.

Eric Walter Aboaf: And both of them are eminently manageable and are not really the constraint when it comes to common share buybacks. Right. Okay. That's great. And then when we're thinking about the pace of accelerating from here, is that total dollars, or is that the pace of up a hundred percent Q on Q? How should we think about the pace you're talking about?

Eric Aboaf: Right, okay, that's great. And then when we're thinking about the pace in accelerating from here, is that total dollars? Or is that the pace of up 100 Q1Q? How should we think about which pace you're talking about? That's as well-run and a management team that's both careful, but also, you know, leans into capital return, and you've seen our commitment. I think, you know, we certainly, we certainly feel the 100 million in the first quarter was, you know, below what we would have liked to deliver. We feel the 200 million was below what we would have liked to deliver.

Speaker Change: Right. Okay. That's great. And then when we're thinking about the pace in accelerating from here, is that total dollars or is that the pace of up a hundred Q on Q? How should we think about which pace you're talking about?

Unknown Executive: [inaudible] You know, when we talk about buybacks, there's always the, you know, depends on market conditions and the environment and so forth. So we always want to be careful with that. And, you know, you'd expect that of us as a well-run company and a management team that's both careful but also, you know, leans into capital return. And you've seen our commitment. I think, you know, we certainly feel that the 100 million in the first quarter was below what we would have liked to deliver. We feel the 200 million was below what we would have liked to deliver.

Speaker Change: You know, it's, when we talk buybacks, there's always the, you know, depends on market conditions and the environment and so forth. So we always want to be careful with that and, you know, you'd expect that of us as a well-run and a management team that's both careful but also, you know, leans into capital return and you've seen our commitment. I think...

Speaker Change: You know, we'd certainly...

Speaker Change: We certainly feel the $100 million in the first quarter was below what we would have liked to deliver. We feel the $200 million was below what we would have liked to deliver. So I think there's a solid increase coming. You can think about it in dollar terms. Two points begin to create a line, but that could be a curve as well. I think you've got enough to go on. Thank you so much. I really appreciate it.

Unknown Executive: So I think there's a solid increase. Coming, you can think of it in dollar terms, you know, two points beginning to create a line, but that, you know, that could be a curve as well. And I think you've got enough to go on. I think you've got Thank you so much.

Eric Aboaf: So I think there's a solid increase coming. You can think about it in dollar terms, you know. Two points begin to create a line, but that could be a curve as well. And I think you've got enough to go on. I think you've got.

Unknown Executive: I really appreciate it. I really appreciate it, and I appreciate the conceptual chart. Thanks so much.

Eric Aboaf: Thank you so much. I really appreciate it. Yeah, I really appreciate it. And I appreciate the conceptual chart. Thanks so much. You're welcome.

Speaker Change: Yeah, I really appreciate it and I appreciate the conceptual chart. Thanks so much. You're welcome.

Unknown Executive: You're welcome. Your next question comes from Mike Mayo with Wells Fargo Securities. Your line is open.

Mike Mayo: Your next question comes from Mike Mayo with Wells Fargo Securities. Your line is open. Hi. I just want to make sure I understand what you're saying and not read too much into it. But I think what you're saying is, over the next two quarters, you should be pretty much done with the NII declines. You should be pretty much done with the non-interest fair and deposit declines. And you should be pretty much done with the decommission of the major client. Am I reading too much of that, or did I hear that correctly?

Speaker Change: Your next question comes from Mike Mayo with Wells Fargo Securities. Your line is open.

Unknown Executive: Well, hi. I just want to make sure I understand what you're saying and not read too much into it, but I think what you're saying is, for the next two quarters. You should be pretty much done with the NII decline. He's pretty much done with the non-interest-bearing deposit decline, and you should be pretty much done with the decommissioning of the major client. Am I reading too much into that, or did I hear that correctly? Mike, it's Eric.

Michael Lawrence Mayo: Well, hi.

Michael Lawrence Mayo: I just I just want to make sure I understand what you're saying and not read too much into it but I think what you're saying is over the next two quarters you should be pretty much done with the NII declines.

Speaker Change: You should be pretty much done with the non-interest bearing deposit declines, and you should be pretty much done with the decommission of the major client.

Speaker Change: Am I reading too much into that or did I hear that correctly?

Eric Aboaf: Mike, it's Eric with regard to NII and non interest bearing deposits. I said the next few quarters. So, you know, I'm giving myself a little bit of room to be honest because it's hard to predict perfectly. And so I'll stick with a few quarters. I think that that kind of works, and that certainly covers your range and maybe a little bit more. So, you know, we just want to live through this, but we can see, we can see, you know, I think over the horizon here in a way, and that's what we wanted to communicate.

Eric Walter Aboaf: With regard to NII and non-interest-bearing deposits, I said the next few quarters. So, you know, I'm giving myself a little bit of room to be honest because it's hard to predict perfectly. And so I'll stick with a few quarters. I think that that kind of works.

Eric: Mike, it's Eric. With regard to NII and non-interest bearing deposits, I said the next few quarters, so you know I'm giving myself a little bit of room to be honest because it's it's hard to predict perfectly.

Michael Lawrence Mayo: And so I'll stick with a few quarters. I think that that kind of works. And that certainly covers your range and maybe a little bit more. So, you know, we just want to live through this, but we

Eric Walter Aboaf: And that certainly covers your range and maybe a little bit more. So, you know, we just want to live through this. But we, we can see, you know, I think over the horizon here in a way, and that's what we wanted to communicate. On clientee conversion, if you recall, we said this would be the largest year on a year on year basis; it was originally worth about two percentage points of total fees.

Michael Lawrence Mayo: We can see, I think, over the horizon here, in a way, and that's what we wanted to communicate.

Eric Aboaf: On the clienty conversion, if you recall, we said this would be the largest year on a year-on-year basis. It was originally worth about two percentage points of total fees. We said about a percentage point year-on-year this year, half a point year-on-year last year, and about half a point year-on-year next year. So by the end of this year, we'll be through, I'll call it three quarters of the effect, but there'll still be a piece of that coming through next year and then it'll be behind us.

Speaker Change: On the client deconversion, if you recall, we said this would be the largest year on a year-on-year basis. It was originally worth about two percentage points of total fees.

Speaker Change: We said about a percentage point year-on-year this year, half a point year-on-year last year, and about half a point year-on-year next year. So by the end of this year we'll be through, I'll call it three-quarters of the effect, but there'll still be a piece of that.

Speaker Change: Coming through next year and then it'll be behind us.

Mike Mayo: And you also mentioned continuing pricing pressure, which we've talked about for about 30 years, which is nothing new, but you did highlight pricing pressure. So, in what context are you referring to? I imagine, like your new win in APAC, I assume spreads are better in Asia and outside the U.S. and the U.S.

Speaker Change: And you also mentioned continuing pricing pressure, which we've talked about for about 30 years, which is nothing new, but you did highlight pricing pressure.

Speaker Change: In what context are you referring to? I imagine like your new win in APAC, you know, I assume spreads are better, you know, in Asia and outside the U.S. than in the U.S. So when you talk about pricing pressure, where are you seeing it?

Eric Aboaf: Mike, it's Eric again. I think we talk about pricing pressure because just part of the natural course of events, right? We get pricing increases from market upticks, and then, you know, with clients, they ask for a part of that back. That's just how the business has operated as you saved the last 30 years. This quarter and last quarter and this year and for the rest of the year, we expect pricing headwinds to be in line with the previous years and guidance. We've said pricing headwinds of about 2% per year. We're not seeing any more or any less of that.

Eric Walter Aboaf: We said about a percentage point year on year this year, half a point year on year last year, and about half a point year on year next year. So by the end of this year, we'll be through I'll call it three quarters of the effect, but there'll still be a piece of that coming through next year, and then it'll be behind us. Mike, it's it's Eric again. I think we we talk about pricing pressure because it's just part of the natural course of events, right? We get market we get pricing increases from market upticks.

Speaker Change: Mike it's it's Eric again I think we we we talk about pricing pressure because just part of the natural course of events right we get a market we get pricing increasing increases from market upticks

Eric Walter Aboaf: And then, you know, with clients, they ask for a part of that back. That's just how the business has operated, as you say, for the last 30 years. This quarter and last quarter and this year and for the rest of the year, we expect, you know, pricing headwinds to be in line with the previous years and guidance. We've said pricing headwinds of about 2% per year. We're not seeing any more or any less of that.

Speaker Change: and then you know with clients they ask for a part of that back that's just how the business has operated as you say for the last 30 years

Speaker Change: This quarter and last quarter and this year and for the rest of the year we expect

Speaker Change: You know, pricing headwinds to be in line with the...

Speaker Change: The previous years and guidance, we've said pricing headwinds of about 2% per year.

Eric Aboaf: You know, it tends to be a little more geared towards the asset manager segment because those are the, that is the group of clients that has mutual funds and some mutual fund versus, you know, ETF shifting. But it's not; we're not seeing anything out of the ordinary or anything that is unexpected at this point.

Eric Walter Aboaf: You know, it tends to be a little more geared towards the asset manager segment because those are the group of clients that have mutual funds and some mutual fund versus, you know, ETF shifting. But it's not that we're not seeing anything out of the ordinary or anything that is unexpected at this point. And then one last one to follow up on that. I mean, I guess maybe as goes your clients, as goes any company, or as goes State Street, and with the record-high stock markets and historically such a strong position with the mutual funds you just mentioned, are you seeing that uptick, or is it still a slog for your big long only asset managers that are your legacy strength? Mike, it's Ron.

Speaker Change: We're not seeing any more or any less of that. You know, it tends to be a little more geared towards the asset manager segment because that is the group of clients that has

Speaker Change: mutual funds and some mutual fund versus, you know, ETF shifting. But it's not, we're not seeing anything out of the ordinary or anything that is unexpected at this point.

Ronald OHanley: And then one last one to follow up on that. I mean, I guess maybe as goes your client, as goes any company or as goes State Street, and with the record high stock markets and historically such a strong position with the mutual funds, which you just mentioned, are you seeing that uptick, or is it still a slog for your big, long-only asset managers that are your legacy strength?

Speaker Change: and then one one last one to follow up on that I mean

Speaker Change: I guess maybe as goes your clients, as goes any company, or as goes State Street, and with the record high stock markets and historically such a strong position with the mutual funds which you just mentioned.

Ronald OHanley: Mike, it's Ron. Let me take that. I mean, I think that the, you know, as you would know as well as anybody, the business continues to change. And we've seen the continued move from the mutual fund to the ETF to the SMA. But you're also seeing these firms, particularly the well-managed ones, respond. And they're responding in a couple of ways. I mean, one new product types. I mean, even the most traditional mutual fund companies now have pretty interesting ETF lines. Most of you know, they're involved in the DC 401K business. They've got a mutual fund offering, but they've got a collective trust offering too.

Ronald Philip OHanley: Let me take that. I mean, I think that, as you would know as well as anybody, business continues to change. And we've seen the continued move from the mutual fund to the ETF to the SMA. But you're also seeing these firms, particularly the well-managed ones, respond. And they're responding in a couple of ways. I mean, one, new product types. I mean, even the most traditional mutual fund companies now have pretty interesting ETF lines.

Speaker Change: Mike, it's Ron. Let me take that. I mean, I think that the, as you would know as well as anybody, the business continues to change.

Michael Lawrence Mayo: And we've seen the continued move from the mutual fund to the ETF to the SMA.

Speaker Change: But you're also seeing these firms, particularly the well-managed ones, respond. And they're responding in a couple of ways. I mean, one, new product types.

Speaker Change: I mean, even the most traditional mutual fund companies now have pretty interesting ETF lines. Most of, you know, if they're involved in the

Ronald Philip OHanley: Most of, you know, if they're involved in the DC 401k business, they have a mutual fund offering, but they've got a collective trust offering too. So, you know, they're responding to that market pressure. Most of them are figuring out ways to participate in the wealth business, and we continue to respond to and support them in that. So the nature of the business is changing. In some cases, you know, some things were more lucrative than others. And so what you're also finding in those businesses, they're very focused on their cost base, their technology stack, their operating stack. And again, that plays in our favor as we think about the alpha front-to-back solution.

Speaker Change: In the DC 401k business, they've got a mutual fund offering, but they've got a collective trust offering too. So you know, they're responding to that market pressure. Most of them are figuring out ways

Ronald OHanley: So, you know, they're responding to that market pressure. Most of them are figuring out ways to participate in the wealth business. And we continue to respond and support them in that. So, the nature of the business is changing. In some cases, you know, some things were more lucrative than others. And so what you're also finding in those businesses, they're very focused on their cost base, their technology stack, their operating stack. And again, that that presses in our favor, as we think about the alpha front-to-back solution, where the largest middle office provider by far in the industry.

Speaker Change: to participate in the wealth business, and we continue to respond and support them in that. So the nature of the business is changing. In some cases, some things were more lucrative.

Speaker Change: and others. And so what you're also finding in those businesses, they're very focused on their cost base, their technology stack, their operating stack. And again, that presses in our favor.

Ronald Philip OHanley: We're the largest middle office provider by far in the industry, and we've gotten quite good at that. So, you know, we describe ourselves as an essential partner to our clients, and I think that shows through both in supporting them in their revenue and product activities, as well as in their cost and operations. Okay, thank you. Your next question comes from Vivek Junija with J.P. Morgan. Your line is open.

Speaker Change: As we think about the Alpha front-to-back solution, we're the largest middle office provider by far in the industry, and we've gotten quite good at that.

Ronald OHanley: And we've gotten quite good at that. So the, you know, we describe ourselves as an essential partner to our clients. And I think that plays through both in supporting them in their revenue and product activities, as well as their cost and operations.

Speaker Change: We describe ourselves as an essential partner to our clients and I think that plays through both in supporting them in their revenue and product activities as well as their cost and operations.

Vivek Juneja: Thank you. Your next question comes from Vivek Juneja with JP Morgan. Your line is open. Hi, thanks. Eric, I just have a quick follow-up trying to understand your NII guidance. But look at your U.S. interest bearing deposit costs linked quarter. They actually declined. Did you actually start cutting rates? Was there something else that drove that?

Speaker Change: Okay, thank you.

Speaker Change: Your next question comes from Vivek Junija with J.P. Morgan. Your line is open.

Eric Walter Aboaf: Hi, thanks. Eric, I just have a quick follow-up trying to understand your NII guidance. If I look at your US interest-bearing deposit costs linked quarter, they actually declined. Did you actually start cutting rates? Was there something else that drove that? Can you give some color on that and is that likely to continue? Vivek, it's Eric.

Vivek Junija: Hi, thanks. Eric, I just have a quick follow-up, trying to understand your NII guidance. I look at your US interest bearing deposit costs, linked quarter, they actually declined.

Eric Aboaf: Can you give some color on that, and is that likely to continue?

Vivek Junija: Did you actually start cutting rates? Was there something else that drove that? Can you give some color on that and is that likely to continue?

Eric Walter Aboaf: I would describe that as just part of the normal volatility that we'll see in deposits. I mean, we run such a large franchise, and our clients' transactional activity tends to vary over time. But we're seeing healthy levels of deposits across dollars and across euros, and so we haven't seen anything particularly surprising in one area or another.

Eric Aboaf: Vivek, it's Eric. I would describe that as just part of the normal volatility that we'll see in deposits. We run such a large franchise, and our clients' transactional activity tends to vary over time. But we're seeing healthy levels of deposits across dollars across euros. We haven't seen anything particularly surprising in one area or another. I think a total U.S. interest bearing deposits. If you look at our addendum. You are up slightly, Euros are up slightly and so on and so forth. And to the extent that there are some movements not driven by our pricing actions, per se, in truth, clients need a certain amount of transactional deposits to fund their custody accounts.

Vivek Junija: Vivek, it's Eric. I would describe that as just part of the

Vivek Junija: Normal volatility that we'll see in deposits. I mean, we run such a large franchise and our clients' transactional activity tends to vary over time, but we're seeing, you know, healthy levels of deposits.

Vivek Junija: across dollars, across

Vivek Junija: Eros

Vivek Junija: And so we haven't seen anything particularly surprising in one area or another.

Vivek Junija: Total U.S. interest bearing deposits, if you look at our addendum, are up slightly, euros are up slightly.

Vivek Junija: and so on and so forth. So, and to the extent that there are some movements, not not driven by our pricing actions per se, and in truth

Vivek Junija: Clients need a certain amount of transactional deposits to fund their custody accounts.

Eric Aboaf: And the pricing tends to be something that we have negotiated and is well understood now, given where we are in the cycle and isn't the determined of movements at this point.

Vivek Junija: and the you know the pricing tends to be something that we have negotiated and is well understood now given where we are in the cycle and isn't the determinant of the of movements at this point.

Eric Walter Aboaf: I think total U.S. interest-bearing deposits, if you look at our addendum, are up slightly, euros are up slightly, and so on and so forth. And to the extent that there are some movements, they are not driven by our pricing actions per se. In truth, clients need a certain amount of transactional deposits to fund their custody accounts, and you know the pricing tends to be something that we have negotiated and is well understood now given where we are in the cycle and isn't the determinant of movements at this point. Your next question comes from Gerard Cassidy with RBC. Your line is open. Good morning, guys.

Gerard Cassidy: Thank you. Your next question comes from Gerard Cassidy with RBC. Your line is open. Good morning, guys. Ron, you mentioned in one of your answers about the servicing and management fees that foreign exchange activity, the volatility was actually quite low relative to history. Can you share with us what drove that?

Speaker Change: Thank you.

Speaker Change: Your next question comes from Gerard Cassidy with RBC. Your line is open.

Unknown Executive: Ron, you mentioned in one of your answers about the servicing and management fees that the volatility of foreign exchange activity was actually quite low relative to history. Can you share with us what drove that? And second, what macro factors should we keep an eye on to see, you know, to drive that volatility higher as we go forward, especially in view of the geopolitical environment we're all living in? Well, I'll start, but Eric runs this business.

Gerard Sean Cassidy: Good morning guys. Ron, you mentioned in one of your answers about the servicing and management fees that

Speaker Change: Foreign exchange activity, the volatility was actually quite low relative to history.

Gerard Cassidy: And then second, what macro factor should we keep an eye on to drive that volatility higher as we go forward, especially in view of the geopolitical environment we're all living in?

Gerard Sean Cassidy: Can you share with us what drove that, and then second, what macro factors should we keep an eye on to see, you know, to drive that volatility higher as we go forward, especially in view of the geopolitical environment we're all living in?

Ronald OHanley: Well, I'll start, but Eric runs this business. But I think if you know what caused it, I mean, there's been really remarkably low dollar volatility. And I think some of the things that have been driving that one is just the simple strength of the dollar for an awfully long time. And it's almost become too dangerous for things to bet against the dollar. And so, even in times where you would expect to see some volatility, we simply haven't seen that. So I think that's been the primary driver of that; you've got this inordinate strength of the dollar.

Ronald Philip OHanley: So, but I think if you know what caused it, I mean, there's been really remarkably low. I think some of the things that have been driving that. One is just the simple strength of the dollar for an awfully long time. And it's almost become too dangerous a thing to bet against the dollar. And so even in times where you would expect to see some volatility, we simply haven't seen that. And I think that's been the primary driver of that, that you've got this inordinate strength of the dollar. But Eric, why don't I turn it over to you?

Speaker Change: Well, I'll start, but Eric runs this business, so I'll start, but I think if, you know, what's caused it? I mean, there's been really remarkably low

Eric: dollar volatility. And I think some of the things that have been driving that, one is just the simple strength of the dollar for an awfully long time. And it's almost become

Eric: You know, too dangerous a thing to bet against the dollar.

Speaker Change: And so even in times where you would expect to see

Eric Aboaf: But Eric, I'm over to you. Gerard, I think to add to that, maybe in two ways. The dollar has been strong and continues to be the dominant currency globally for whether it's petrol, whether it's for core commodities, and the currency a choice. And what we've seen, Ebb's inflows in potential substitution, Euro's won, et cetera. None of that has really come to pass. And so you have a bit of a stabilizing factor. I think the other thing that we've seen recently is because the clients have been underweight in cash, and underweight in equities and bonds, and they've started to put more of that cash to work.

Eric Walter Aboaf: Gerard, I think to add to that, maybe in two ways, you know, the dollar has been strong and continues to be the dominant currency globally, for whether it's petrol, whether it's for, you know, core commodities, and, you know, the currency of choice, and, you know, what we've seen ebbs and flows and, you know, potential substitution, euros, won't, none of that has really come to pass And so you have a bit of a stabilizing factor.

Speaker Change: Gerard, I think to add to that, maybe in two ways,

Gerard Sean Cassidy: You know, the dollar has been strong and continues to be the dominant currency globally for whether it's petrol, whether it's for, you know, core commodities.

Speaker Change: and, you know, the currency of choice. And, you know, what we've seen ebbs and flows in, you know, potential substitution, euros won, et cetera. None of that has really come to pass. And so you have a bit of a stabilizing factor.

Eric Walter Aboaf: I think the other thing that we've seen recently is that clients have been underweight, I'm sorry, overweight in cash and underweight in equities and bonds, and they've started to put more of that cash to work. They're doing that both in the US and abroad. And as a result, there's not, we're not seeing a lot of speculation in currency markets where we're seeing more, okay, I'll describe it as natural and transitional flows.

Speaker Change: I think the other thing that we've seen recently is because of the clients have been overweight in cash and underweight in equities and bonds and they've started to put more of that cash to work.

Eric Aboaf: They're doing that both in the US and abroad, and internationally. And as a result, there's not; we're not seeing a lot of speculation in currency markets. We're seeing more, OK, I'll describe it as natural and transitional flows. And so we've not seen disruptions on one hand, knock on wood. And on the other hand, we have seen consistent holding of dollars and consistent buying of other currencies. And so that's created, it feels like a set of muted volatility levels that are fine for clients, and our point of view is we need to serve clients during those times.

Speaker Change: They're doing that both in the U.S. and abroad and internationally, and as a result, there's not...

Speaker Change: We're not seeing a lot of speculation in currency markets, we're seeing more, I'll describe it as natural and transitional flows.

Eric Walter Aboaf: And so we've not seen disruptions on the one hand, you know, knock on wood. And on the other hand, we have seen a consistent holding of dollars and consistent buying of other currencies. And so, you know, that's created a set of, you know, muted volatility levels that, you know, are fine for clients. And our point of view is that we need to serve clients during those times. And, you know, the more we can offer them ways to trade through us, through our multiple venues, some of them are platforms, some of them are single dealers, some of them are multi-dealer, and then some of them are algos, we'll continue to do that, and we'll support them. And that, because of the higher volumes we're seeing, notwithstanding the lower volatility, has been fruitful and helped drive revenue growth for us Very good. Thank you for that color.

Speaker Change: And so we've not seen

Speaker Change: Disruptions on one hand, you know, knock on wood.

Speaker Change: and on the other hand we have seen

Speaker Change: consistent holding of dollars and consistent buying of other currencies. And so, you know, that's created, it feels like a set of, you know, muted volatility levels that, you know, are fine for clients. And our point of view is we need to serve clients during those times. And, you know, the more we can offer them ways to trade through us, through our multiple venues, some of them are platforms, some of them are single dealers, some of them are multi-dealer, and then some of them are algos. We'll continue to do that and we'll support them and that'll, because of the higher volumes we're seeing, notwithstanding the lower volatilities.

Gerard Cassidy: And the more we can offer them, ways to trade through us, through our multiple venues, some of them are platforms, some of them are single dealers, some of them are multi dealer, and then some of them are algos. We'll continue to do that, and we'll support them. And that'll because of the higher volumes, we're seeing notwithstanding the lower volatility has been fruitful and help drive revenue growth for us on that area. Very good. Thank you for that color.

Speaker Change: It has been fruitful and helped drive revenue growth for us in that area.

Unknown Executive: And circling back, you both touched on onboarding being slower than expected in the first half of the year, but you expect it to pick up as we go forward. What caused the slower than expected onboarding in the earlier part of this year? Eric, it's Ron. Excuse me, Gerard. It's Ron. I'll take that.

Eric Aboaf: In a certain bank, you both touched on onboarding was slower than expected the first half of the year, but you're expected to pick up as we go forward. What caused the slower than expected onboarding in the earlier part of this year?

Speaker Change: Very good. Thank you for that color. And circling back, you both touched on onboarding was slower than expected the first half of the year, but you expect it to pick up as we go forward. What caused the slower than expected onboarding in the earlier part of this year?

Ronald OHanley: Eric, it's not out to excuse. Gerard, it's Ron. I'll take that. It's concentrated in some large clients that also happen to be development partners, and I think we've talked about this concept of development partners. These are early partners that joined us in this journey, and we're doing a fair amount of development around them. So that's caused some of it. And then some of it has been idiosyncratic to those same institutions in terms of things going on in their own operation that have delayed some of the onboarding. So that's been a big part of it.

Speaker Change: Eric, it's Ron, excuse me, Gerard, it's Ron, I'll take that.

Ronald Philip OHanley: It's concentrated in some large clients that also happen to be development partners, and I think we've talked about this concept of development partners. These are early partners that joined us on this journey, and we're doing a fair amount of development around that. So that's caused some of it, and then some of it has been idiosyncratic to those same institutions in terms of things going on in their own operations that have delayed some of the onboarding.

Eric: It's concentrated in some large clients that also happen to be development partners, and I think we've talked about this concept of development partners. These are early

Eric: ...partners that joined us in this journey and we're doing a fair...

Eric: And then some of it has been idiosyncratic to those same institutions in terms of, you know, things going on in their own operation that have delayed some of the

Ronald Philip OHanley: So that's been a big part of it. The second thing that's been driving it has been really around private markets. While we've continued to bring on new clients, and we're really pleased with our offering and the clients that we've brought on, the whole slowdown in private markets is actually affecting us because we start to get paid when the fund starts to draw capital. And if you've been following this, many of the new funds that have been raised, including some of the very, very largest ones, actually haven't drawn capital yet. So we've got them, quote, set up and ready to go. But we're not actually deriving meaningful revenues from that yet, so that would be the other major factor that's going on here.

Ronald OHanley: The second thing that's been driving is been really around private markets. Well, we've continued to bring on clients, and we're really pleased with our offering and the clients that we've brought on. The whole slowdown in private markets is actually affecting us, because we start to get paid when the fund starts to draw capital in us. And if you've been following this, many of the new funds that have been raised, including some of the very, very largest ones, actually haven't drawn capital. So we've got them, quote, set up and ready to go. We're not actually deriving meaningful revenues from that yet, so that would be the other major factor that's going on here.

Eric: on boarding. So that's been a big part of it.

Eric: The second thing that's been driving has been really around private markets. Well, we've continued to bring on new clients, and we're really pleased with our offering and the clients that we've brought on.

Eric: The whole slowdown in private markets is actually affecting us because, you know, we start to get paid, right, when the fund starts to...

Eric: [inaudible]

Eric: Many of the new funds that have been raised, including some of the very, very largest ones, actually haven't drawn capital.

Eric: So, we've got them, quote, set up and ready to go, but we're not actually deriving meaningful revenues from that yet, so that would be the other major factor that's going on here.

Unknown Executive: Great.

Ronald Philip OHanley: Great, thank you. There are no further questions at this time. We're on. Please continue. Well, thanks, everybody, for joining us. This concludes today's call. Thank you for your participation. You may now disconnect.

Ronald OHanley: Thank you. There are no further questions at this time.

Ronald OHanley: Ron, please continue. Well, thanks everybody for joining us.

Eric: There are no further questions at this time. Ron, please continue.

Ronald Philip OHanley: Well thanks everybody for joining us.

This concludes today's call. Thank you for your participation. You may now disconnect. We'll see you next time.

Ronald Philip OHanley: This concludes today's call. Thank you for your participation. You may now disconnect.