Q4 2024 Bank of New York Mellon Corp Earnings Call
Good afternoon, and welcome to the 'twenty 'twenty four fourth quarter earnings conference call hosted by B N y.
At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session.
Please note that this conference call and webcast will be recorded and will consist of copyrighted material.
You may not record or rebroadcast these materials without being wise consent.
I will now turn the call over to Marius mirrors B N Y head of Investor Relations. Please go ahead.
Marius: Thank you operator.
Speaker Change: Afternoon, everyone and welcome to all on this call for the fourth quarter of 2024.
Speaker Change: I'm joined by Robin, Vince, our President and Chief Executive Officer, and Tom Mcdonnell, Our Chief Financial Officer.
Speaker Change: Robyn will start with a strategic update followed by a dominant with his financial update and outlook.
Speaker Change: Well, let's we'll reference I'll quote or the update presentation, which can be found on the investor Relations page of our website at <unk> com.
Speaker Change: I'd also note that our remarks will contain forward looking statements and non-GAAP measures.
Speaker Change: Actual results may differ materially from those projected in the forward looking statements.
Speaker Change: Formation about these statements and non-GAAP measures is available in the earnings press release financial supplement and quarterly update presentation, all of which can be found on the investor Relations page of all upset.
Speaker Change: But looking statements made on this call speak only as of today January 15, 2025, and will not be updated with that I will turn the call over to Robyn.
Robyn: Thanks Morris.
Robyn: Afternoon, everyone and thank you for joining us before.
Robyn: Before we get into our results I want to address the ongoing wildfires affecting parts of Los Angeles, we are heartbroken by the tremendous loss being suffered by the community well we have several offices.
Robyn: As always our primary concern is for the safety and well being of our employees and clients located in the affected areas and.
Robyn: And we have also committed matching employee donations to eligible nonprofits, providing relief and recovery to those impacted by the fires.
Turning now to our quarterly update presentation.
Robyn: <unk> 24 was an exciting year for being wide and we are entering 2025 with strong momentum on the right path to unlock the opportunity embedded in our company.
Robyn: Building on the solid foundation that we laid in 2023, we accelerated the pace of our ongoing transformation and closed out 2024 with a strong performance delivering record net income of $4 $3 billion on record revenue of $18 6 billion.
Robyn: And generating a return on tangible common equity of 23% for the year.
Robyn: Aligned to our three strategic pillars to be more for our clients to run our company better and to power. Our culture. At this time last year, we laid out a set of medium term financial targets as well as our action plan to drive sustainably higher revenue growth over time.
Robyn: We're executing against these plans and targets every day.
Robyn: As you can see on page three of our presentation, we made very tangible progress in terms of delivery in 2024.
Robyn: For our clients the rollout of our new commercial coverage model was an important milestone.
Robyn: Effectively cross selling and leveraging the breadth of our business platforms is the single most compelling growth opportunity for the company.
Robyn: And so our commercial model is designed to deliver from across the company at an accelerated pace improve the client experience and ultimately deepen our relationships. This is the operationalization of one being why.
Robyn: But our growth is not just about more of the same.
Robyn: Delivering innovative solutions to the market that leverage the powerful combination of capabilities. We have it be and why is another important way for us to be more for our clients and drive top line growth. This is one being why version two point in time.
Robyn: Our acquisition of <unk> is a good example for being why becoming an end to end solutions provider in this case across the entire managed account ecosystem be it manufacturing and being why investments distribution through Pershing well servicing threw at you.
Robyn: Over the course of 'twenty 'twenty four we also developed numerous new client solutions, such as collateral one bolts bridge and Nextgen ETF servicing platform and new capabilities on was this new product momentum is an important investment for the years ahead.
Robyn: Continuing the investment theme over the course of the year. We further increased our investments to drive both revenues and scalability and we generated approximately half a billion dollars of efficiency savings as we continue to digitize workflows and begin to leverage new technologies, including <unk>.
Robyn: Hi.
Robyn: We also commenced the phased transition to our strategic platforms operating model in the spring and over the course of 'twenty 'twenty four transitioned approximately 13000 employees or roughly one quarter of the company into this new way of working.
Robyn: Zooming out for a moment the wrapper for much of our work is culture.
Robyn: Powering our culture remains essential to everything else and we are starting to see the benefits of our people around the world working more closely together.
Robyn: Celebrating all companies 240th anniversary in 'twenty 'twenty, four with colleagues clients and many other stakeholders around the world felt even more special at a moment in which our people could start to see that hard work, leaving a positive mark on this iconic institution.
Considering the transformation underway at our company, we decided that the time was right last summer to simplify and modernize our brands and logos to improve the market's familiarity of who we are and what we do.
Robyn: The benefits of being wise improved visibility in the market have also supported our recruiting efforts throughout the year, we've been successful in attracting top talent across the firm from recruiting our largest internet analyst classes to further rounding out our executive leadership team and the <unk>.
Robyn: Target investments, we'd be making in the employee experience across learning benefits and facilities are being recognized and valued by our people.
Robyn: Another important aspect of powering our culture is to deliver on our commitments. We've worked hard to say, what we do and to do what we say and so turning to page four I'm pleased that in 2024, we once again met or exceeded our financial goals for the year.
We are confident that the N Y can deliver positive operating leverage across a wide range of scenarios and so we started 2024 determined to at least breakeven from an operating leverage perspective.
Robyn: That was an ambitious goal at the time considering that our revenue outlook at the beginning of the year for saw an approximately 10% NII headwind to largely offset growth in fee revenue.
Robyn: Therefore, we had to set up to keep expenses, excluding notable items roughly flat while at the same time self funding incremental investments in the business.
Robyn: Dermot will discuss the financials in more detail, but in summary in 2024, we delivered 968 basis points of positive operating leverage on a reported basis and 288 basis points. Excluding notable items, we grew fee revenue by 6% year over year and NII.
Robyn: It was down 1% outperforming our outlook from the beginning of the year by approximately nine percentage points.
Robyn: Despite higher than expected revenue expenses were down 4% year over year on a reported basis and up 1% excluding notable items.
Robyn: And finally, consistent with our outlook, we returned 102% 2024 earnings to our shareholders.
Robyn: Taken together, we delivered record financial results and 2024 significant positive operating leverage resulted in pre tax margin expansion and improved profitability and we delivered attractive capital returns to our shareholders all of which underscored the execution of a.
Robyn: Reinvigorated B N y.
Robyn: But now let's look forward on page five.
Robyn: We are entering 2025 with strong momentum and determination to deliver further value for our clients and shareholders.
Robyn: B N Y plays a central role in global capital markets with 52 trillion dollars of AUC, a 14 trillion dollars of debt serviced three trillion dollars of wealth assets and five six trillion dollars of assets on our collateral management platform.
Robyn: We manage two trillion dollars of a U N and I run average day, we settle over 15 trillion dollars worth of securities and roughly two and a half trillion dollars worth payments for clients around the world.
Robyn: This exceptional client franchise and leadership across our diversified financial services platforms positions us well to capture market beta and capitalize on evolving market trends several of which we described on the left hand side of the page.
Robyn: Some of our fastest growing businesses in 2020 for Treasury services clearance and collateral management and corporate trust demonstrate our gearing towards economic growth and higher capital markets activity, both public and private.
Robyn: And through pushing in wealth, we are a leader in serving one of the fastest growing segments in financial services. The U S wealth market within that market. Our wealth business is focused on the faster growing ultra high net worth space.
Robyn: Hello, Pershing business on the other hand, leverages the size and scale of our platforms to power advisers businesses, helping them navigate an increasingly complex operating environment using the power of our technology.
Robyn: [noise] relevant for both retail and institutional investors the trend towards private markets represents an opportunity for being Y to support our clients end to end from servicing to distribution cash investment FX hedging and lending across traditional and alternative.
Robyn: They are asset classes.
Robyn: Last year also saw the mass adoption of digital assets exchange traded products in the U S, which grew to more than $100 billion in assets under management.
Robyn: Being why has been an early mover in the digital asset space today, We provide fund services for the vast majority of digital asset exchange traded products in both the U S and Canada and over the long term, we believe digital assets and the technology underpinnings have the transformative potential to help solve.
Robyn: <unk> and market needs.
Robyn: And finally on this list of important market trends.
Robyn: As global markets evolve and become ever more complex, both buy side and sell side firms are looking to outsource certain functions and consolidate providers in order to gain scale and reduce risk and we expect the strength in connectivity of our platforms to be a differentiator in this regard.
Robyn: As we think about the operating environment in 2025, just a month ago. There were clear signs of optimism with the U S election behind us inflation moderating and the fed having begun its path towards lower rates.
Robyn: But with a ton of the yeah. We view the outlook for 2025 is a little more uncertain with persistent tail risks across geopolitical tensions and conflicts uncertainty about trade in fiscal policies and volatility in markets.
Robyn: This backdrop being positioned conservatively with a strong balance sheet and operational resilience allows us to remain focused on executing our ongoing transformation.
While we've made good progress against our strategic priorities over the past 12 months, we have a lot more work ahead of us as I've said before strategy is important actually doing it and how we do it matters. The most and so on the right hand side of this page is the reminder of our strategic.
Robyn: Priorities and underneath each awesome indicators for the progress that we're making.
Robyn: The makeup of our new business wins in 2024, we highlighted some of them on our earnings calls over the past year.
Valley dated for us that there is real demand in the market for the type of integrated solutions that <unk> can deliver.
Robyn: For example, last year, we've seen a 30% year on year increase in sales from clients buying from three or more lines of business.
Robyn: This remains a work in progress, but with real runway ahead.
Robyn: Our commercial model enables our client coverage teams to more effectively deliver integrated solutions from a cross being why to our clients and our platforms operating model realigned how we work and organize ourselves across the entire organization in furtherance.
Robyn: Of that commercial opportunity 2025 will be a milestone year for being wise adoption of the platforms operating model.
Robyn: This transition is not just about driving efficiency. It is also about enabling topline growth.
Robyn: By simplifying streamlining and collaborating through cross functional teams, we create more intuitive client journeys improve our ability to anticipate unmet needs and accelerate speed to market.
Robyn: This quarter, we're planning to activate our largest wave of platforms, yet so that by the end of March more than half of our people will be working in the model.
Robyn: We believe that our transition into this model will have a meaningful impact to be and why over the years to come and so we've included in the appendix of this presentation, a summary of the program and the timeline for implementation.
Robyn: Next our investments in Digitization and AI over the last couple of years have laid a solid foundation for us to become more efficient and to drive topline growth overtime.
Robyn: We're embracing the power of AI to make it easier for our employees to do their jobs and channel that energy towards new innovations.
Robyn: To summarize this broader alpha and beta theme, we believe that we are well positioned to capture market beta and capitalize on evolving market trends, while we remain focused on generating alpha through the continued transformation of the company.
Robyn: I'll wrap up on page six by reminding you of the value proposition that we laid out for our clients our shareholders and our people at the beginning of last year.
Robyn: Our strategic priorities and financial goals are clear and we remain focused on consistent execution.
Robyn: Before I turn the call over to them for a financial update and outlook I'd like to close by thanking our teams around the world.
Robyn: I'm proud of what our people have accomplished over the past two years and grateful for everyone's continued dedication to the hard work that's ahead of us.
Dominic: And with that over to you Dominic.
Dominic: Thank you Robin and good afternoon, everyone.
Dominic: I'm picking up on page nine of the presentation and we are the first touch upon 2024 highlights before diving into the results for the fourth quarter.
Dominic: Total revenue of $18 $6 billion was up 5% year over year.
Dominic: Fee revenue was up 6%.
Dominic: Investment services fees grew 7%, reflecting net new business higher market values and client activity across our security services and marketing services segments.
Dominic: Investment management and performance fees from our investments in the wealth management segment were up 3% driven by higher market values, partially offset by the mix of AUM flows and lower performance fees.
Dominic: Despite a year of relatively muted volatility foreign exchange revenue was up 9% on the back of higher client volumes.
Dominic: Net interest income was down 1%, reflecting changes in the deposit mix, partially offset by higher investment securities portfolio yields and balance sheet growth.
Dominic: Expenses of $12 $7 billion were down 4% year over year on a reported basis.
Dominic: Reflecting the net impact of adjustments for the FDIC special assessment.
Dominic: Excluding notable items expenses were up 1%, reflecting higher investments employee merit increases and revenue related expenses, partially offset by efficiency savings.
Dominic: On a reported basis pre tax margin was 31% and return on tangible common equity was 23% for the year.
Dominic: Excluding notable items pre tax margin was 33% and return on tangible common equity was 24%.
Dominic: We reported earnings per share of $5.80.
Dominic: Excluding notable items earnings per share were $6 <unk> up 19% year over year.
Dominic: And we returned 102% of earnings to common shareholders through dividends and share repurchases in 2024.
Dominic: Now turning to page 11 for the financial highlights for the fourth quarter.
Dominic: Total revenue of $4.8 billion was up 11% year over year.
Dominic: Fee revenue was up 9%.
Dominic: This includes a 9% growth in investment services fees, reflecting net new business higher client activity and higher market values.
Investment management and performance fees were also up 9% driven by higher market values, partially offset by the mix of AUM flows.
Dominic: Formalized AUC a $52 one trillion dollars were up 9% year over year, reflecting higher market values science inflows and net new business.
Dominic: Partially offset by the unfavorable impact of a stronger U S dollar.
Dominic: Assets under management of two trillion dollars were up 3% year over year, primarily reflecting higher market values, partially offset by the unfavorable impact of the stronger dollar.
Dominic: Foreign exchange revenue increased by 24% driven by higher client volumes.
Investment and other revenue was $114 million in the quarter.
Dominic: As a reminder, the fourth quarter of 2023 included a $144 million reduction in investment and other revenue related to a fair value adjustment of a receivable.
Dominic: Excluding notable items the year over year decrease primarily reflects the absence of a strategic equity investment gains.
Dominic: Quarters into fourth quarter of last year.
Dominic: Net interest income increased by 8% year over year, primarily reflecting higher investment securities portfolio yields and balance sheet growth.
Dominic: Firstly offset by changes in deposit mix.
Dominic: Expenses of $3 $4 billion were down 16% year over year on a reported basis.
Dominic: Primarily reflecting the FDIC special assessment recorded in the fourth quarter of 2023.
Dominic: Excluding notable items, which were primarily severance and higher litigation reserves in the fourth quarter of 2024 expenses were up 2%.
Dominic: This reflects higher revenue related expenses employee merit increases and increased investments, partially offset by efficiency savings.
Dominic: Provision for credit losses was $20 million in the quarter, primarily reflecting reserve increases related to commercial real estate exposure.
Dominic: Pretax margin was 10, 3% and return on tangible common equity was 23%.
Dominic: Excluding notable items pre tax margin was 34% and return on tangible common equity was 26%.
Dominic: We reported earnings per share of $1 54, and excluding notable items earnings per share were $1 72 up 33% year over year.
Dominic: Turning to caption on liquidity on page 12.
Dominic: Our tier one leverage ratio for the quarter was five 7%.
Dominic: Tier one capital decreased by 4% sequentially, primarily reflecting a decline in accumulated other comprehensive income and capture returns through common stock repurchases and dividends.
Dominic: Partially offset by capital generation through earnings.
Dominic: Average assets were up 1%.
Dominic: Our CET one ratio at the end of the quarter was 11, 2%.
Dominic: CET, one capsule decreased by 5% sequentially.
Dominic: And risk weighted assets increased by 1%.
Dominic: We returned $1 $1 billion of capital to our shareholders over the course of the fourth quarter.
Dominic: Yeah.
Dominic: Moving to liquidity.
Dominic: The consolidated liquidity coverage ratio was 115% and the consolidated net stable funding ratio was 132%.
Dominic: Next net interest income and balance sheet trends on page 13.
Dominic: Net interest income of $1 $2 billion was up 8% year over year and up 14% quarter over quarter.
Dominic: The sequential increase was primarily driven by the reinvestment of maturing investment securities at higher yields partially offset by deposit margin compression.
Dominic: Average deposit balances increased by 1% sequentially.
Dominic: Noninterest bearing deposits increased by 7% in the quarter and interest bearing deposits decreased by 1%.
Dominic: Average interest, earning assets were flat quarter over quarter.
Dominic: Our cash and reverse repo loan and investment securities portfolio balances all remained flat.
Dominic: Turning to our business segments, starting on page 14.
Dominic: Securities Services reported total revenue of $2 $3 billion up 7% year over year.
Dominic: Total investment services fees were up 6% year over year.
Dominic: In asset servicing investment services fees grew by 7%, primarily reflecting higher market values client activity and net new business.
Dominic: We're pleased with the broad based momentum in asset servicing.
Dominic: <unk> are increasingly looking to leverage the scale of being wife's platforms and utilize the differentiations breath of our capabilities.
Dominic: And at the same time, we continue to see particular strength in ETF and alternative servicing validating the multiyear investments we've made into these platforms.
Dominic: E T F. AUC a of 2.8 trillion dollars were up over 60% year over year.
Dominic: With inflows into Etfs on our platform once again outpacing the market and alternatives AUC eight were up 20% year over year.
Dominic: In issuer services investment services fees were up 4%.
Dominic: Healthy net new business and higher client activity and corporate trust was partially offset by lower depositary receipts fees, reflecting a higher level of corporate actions and cross border activity in the prior year quarter.
Dominic: Over the course of 'twenty 'twenty four we've maintained our market leading share in Straits that servicing and by increasing our market share in cielo servicing further strengthened our number two position.
Dominic: And this segment foreign exchange revenue was up 25% year over year, reflecting growth from higher client activity.
Dominic: Net interest income for the segment was up 7% year over year.
Dominic: Segment expenses of $1 $7 billion were up 1% year over year, reflecting higher litigation reserves employee merit increases and higher investments.
Dominic: Partially offset by efficiency savings.
Dominic: Pretax income was $643 million of touching 9% increase year over year and pre tax margin was 28%.
Dominic: Next March and wealth services on page 15.
Dominic: <unk> services reported total revenue of $1 $7 billion up 11% year over year.
Dominic: Total investment services fees were up 12% year over year and.
Dominic: In Pershing investment services fees were up 9%, reflecting higher market values and client activity.
Dominic: Net new assets were $41 billion, including a large client onboarding in the quarter.
Dominic: In clearance and collateral management investment services fees increased by 13%, primarily reflecting higher collateral management fees and clearance volumes.
Dominic: We continue to see strong U S securities clearance volumes on the back of U S treasury issuance as well as trading activity across the platform.
Dominic: And we remain focused on increasing market connectivity by expanding our global collateral platform to new markets.
Dominic: In Treasury services investment services fees were up 15%, primarily reflecting net new business.
Dominic: In November the U S Department of the Treasury's Bureau, after fiscal service selected being why as the new financial agent for the direct Express program.
Dominic: This decision to a point being why speaks to our organization's strength and driving commercial outcomes that broad access to the financial ecosystem.
The program Leverages, our innovative and resilient payments capabilities to provide disbursement services at scale.
Dominic: Net interest income for the segment overall was up 9% year over year.
Dominic: Segment expenses of $852 million were up 2% year over year, reflecting higher revenue related expenses investments and employee merit increases, partially offset by efficiency savings and lower litigation reserves.
Dominic: Pre tax income was up 28% year over year at $806 million, representing a 48% pre tax margin.
Dominic: Turning to investment and wealth management on page 16.
Dominic: Investments in wealth management reported total revenue of $873 million up 29% year over year.
Dominic: And our investment management business revenue was up 41%.
Dominic: Excluding a normalize them in the prior year quarter revenue was up 5%, reflecting higher market values, partially offset by the mix of AUM flows.
Dominic: And in wealth management revenue increased by 9%, reflecting higher market values and net interest income.
Dominic: Partially offset by changes in product mix.
Dominic: Segment expenses of $700 million were up 2% year over year as higher revenue related expenses and employee merit increases were partially offset by efficiency savings.
Dominic: Pretax income was $173 million and pre tax margin was 20%.
Dominic: As I mentioned earlier assets under management of two trillion dollars increased by 3% year over year.
Dominic: Primarily reflecting higher market values, partially offset by the unfavorable impact of the stronger dollar.
Dominic: In the fourth quarter, we saw net outflows of $15 billion. This includes $27 billion of net outflows from long term strategies and $12 billion of less inflows into cash.
Dominic: Yeah.
Dominic: Wealth management client assets of $327 billion increased by 5% year over year, reflecting higher market values and cumulative net inflows.
Dominic: Page 17 shows the results of the other segments.
Dominic: Next on page 19, our current outlook for 2025.
Dominic: Positive operating leverage continues to be our north star and so once again, we have set ourselves up to drive positive operating leverage consistent with our medium term financial targets.
Dominic: Starting with NII based on card market implied forward interest rates, we expect full year 'twenty twenty-five NII to be up mid single digit percentage points year over year.
Dominic: We expect fee revenue to be up year over year.
Dominic: And we expect approximately 1% to 2% year over year growth in expenses, excluding notable items for the full year 2025.
Dominic: Specific to the first quarter I would like to remind you that staff expenses are typically elevated due to long term incentive compensation expense for retirement eligible employees.
Dominic: And then on taxes we.
Dominic: We expect our effective tax rate for the full year 2025 to be in the 22% to 23% range.
Dominic: And finally, our philosophy for capital deployment and distributions remains unchanged, we anticipate to continue to pursue growth opportunities and deliver compelling capture returns to our shareholders through dividends and buybacks.
Dominic: Based on what we are seeing today, we expect to return, 100% plus or minus 2025 of our earnings over the course of the year.
Dominic: As always we will calibrate the pace of our buybacks considering factors such as balance sheet growth opportunities as well as macroeconomic and interest rate environments, which are weird considerations in 2025.
Dominic: Our tier one leverage ratio of management target remains unchanged at five 5% to 6%.
Dominic: And against the backdrop of continued interest rate volatility, we will continue to manage ourselves to the upper end of that range for the foreseeable future.
Dominic: Yeah.
Dominic: To wrap up on page 20.
Dominic: In January of last year, we shared our firm wide medium term financial targets, which were to improve being wise pre tax margin to equal to or greater than 33%.
Dominic: And our return on tangible common equity to equal to or greater than 23% over the medium term, while maintaining a strong balance sheet.
Dominic: We have made solid progress towards these targets over the past 12 months and are excited about the year in front of us as our people harnessed the momentum and continue to embrace our pillars and principles.
Dominic: In order to consistently meet or exceed our targets through the cycle.
Robin: As Robin said at the top of the call. We're pleased with our performance this past year and we're heading into 2025 with good momentum confidence that we're on the right path to unlock the opportunity embedded in our company and with that operator can you. Please open the lines.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: As a reminder, we ask that you please limit yourself to one question and one related follow up question.
Ebrahim: We will take our first question from Ebrahim <unk> with Bank of America.
Ebrahim: Hey, good afternoon.
Speaker Change: Abraham I guess.
Ebrahim: Robin.
Ebrahim: I guess first question and it is.
Ebrahim: With the lens, so if I'm trying to hit your pretax margin auto E targets on an adjusted basis. This year, I guess I understand it's equal to or greater than but I'm trying to get a sense of the resiliency of these numbers.
Ebrahim: You think about I mean, you have done a great job executing over the last year or two.
Ebrahim: What the runway is in.
Ebrahim: Is it reasonable for us to assume that those.
Pre tax margins being higher than where you are today is actually achievable assuming no big market shocks. So maybe if you will do it at a very high level.
Ebrahim: Robin and then I can follow up.
Okay.
Ebrahim: Hi, Ebrahim its dermis here, so I would say.
Ebrahim: As it relates to the medium term targets that we gave this time last year and I think you collectively as a group like those targets that we gave you and since Robin has taken on the role as CEO, we've kind of have eight quarters.
Ebrahim: We've executed very well.
Ebrahim: I'd like to think that we've established a track record of execution and holding ourselves accountable as Robin said in his prepared remarks say, what you do and do what you say and so we feel confident that we're going to hit those targets sustainably through the cycle, So you're going to see more of the same from us.
Ebrahim: And what you've seen in the last couple of years into 'twenty five and beyond.
Speaker Change: Understood and I guess, if I look at slide five and just this whole color they shut down.
Speaker Change: 80% of employees being on sort of if that's a model by end of 'twenty five.
Speaker Change: Against that in two ways in terms of does that result in.
Speaker Change: A lot more resilient to your fee revenue growth.
Speaker Change: Relative to whatever may happen two markets one like that.
Speaker Change: That provides in terms of the synergies you're getting from them moving to that model.
Speaker Change: And.
Speaker Change: And again as that flows through in terms of these targets could.
Speaker Change: Could you actually do much better than where we've been for the last few quarter.
Speaker Change: On the back of the.
Speaker Change: And maybe that's a 26 event, but I'm just wondering if the platform allows for.
Speaker Change: More resilient fee growth and actually an improvement relative to where we are on margins in Italy.
Speaker Change: So the way I think about this is if you kind of look at the three pillars of the strategy be more for clients run our company better empower our culture.
Speaker Change: And then underneath that which we talked about last but are very important in terms of how we run the company internally are the pillars, where and how we show up in terms of behaviors every day.
Speaker Change: The platform operating model, which we've laid out a page for you page 22.
It really is the mechanism by which we kind of drive the three pillars.
Speaker Change: So I do really believe quite strongly that the platform operational model will drive incremental top line growth will make the topline growth more resilient, but also will allow us to run the company better and become more efficient with that and that then in turn.
Speaker Change: We used the words a over the last couple of years decile, owing you know, bringing our businesses closer together and that really speaks to the top line size. The launch of the commercial operating model that we kind of went out within the middle of last year. So you take all those discrete elements together and you add it together you kind of go.
Speaker Change: Okay fee revenue is going to kind of incrementally grind higher for me here with the tools that we're deploying in executing.
Speaker Change: And I'd add one thing to it which is just this concept that we've talked about before on the call about short medium and long term and we have consistently been investing both for the top line and also for expense efficiency with all three time horizons and we've been.
Speaker Change: Trying to do that pretty consistently over the past two years and that's relevant for your question because it isn't just the 26 story, it's actually going to be at 27, 28, and 29 story as well in our opinion because some of what the platforms model enables Israeli a fee.
Speaker Change: <unk> point that then allows us to do other things retiring systems comes after that we've retired some we can retire more being able to do more solutions for clients. We've done some but we can do even more so it's quite a bedrock thing for us and given the fact that we won't even be fully into.
Speaker Change: The model until 2026, I think you can expect there's more pay off to come 26, 27 28 through the end of the decade quite frankly, if we do this well.
Speaker Change: Got it and that could go to slide 27.
Speaker Change: Thank you.
Speaker Change: Well move to our next question from Betsy <unk> with Morgan Stanley.
Speaker Change: Hi, just two things one just to wrap up on that last topic.
Given that 'twenty three 'twenty four you got to 25% of the folks in the one being in the operating model the platform model and in 25 years.
Speaker Change: Putting on an incremental 60%.
Speaker Change: I get that the benefits of all of that multiyear.
Speaker Change: But that the step up and the percentage of employees that are going to be joining the platform and 25. So should we expect that operating leverage will also increase given the.
Speaker Change: Large slug of pellets coming in in 'twenty five.
Speaker Change: I would say the two things on a direct correlation in terms of the way that you are linking it because betsy because as you go back to the beginning of our platforms operating model. We're already three years into this if you include the very thought at the beginning of the process because we started actually looking at this and thinking about this during <unk>.
Speaker Change: The transition into the CEO role. We then designed we then started to test. We then started to actually execute and so are the deliberate and us with which we've gone about this has been very important because we knew that it was a very fundamental change for the company and we wanted to make sure that we were doing it progressively and although there are some benefits.
Speaker Change: From employee satisfaction and speeding up some of the ways that we works people go into the model the real benefit so far we've observed based on the pilots that we actually started doing in 2020 to come more like a year or so afterwards as the teams are getting into their new rhythms of working and then so there's a phase to deliver.
Murray and then you have the benefit of Okay. Now you got a really tight team operating at a higher velocity now what can you do with that better in control of their design of their systems better and control of the design of that client products rationalizing the backend in terms of the multiple potentially duplicative things and so we see the.
Speaker Change: The lead time associated with it and I think that the payoffs that you and Ebrahim what was sort of scratching at are there, but they're not there as immediately as youre talking about now notwithstanding that we've got other things back to my short medium and long term observation that we have invested in that we feel quite confident we will deliver us the.
Speaker Change: Expense benefits in 2025 that are part of our guide.
Speaker Change: Yes, it just feels like going from 25% to 60 to 80, right and N. One year should overtime bump up that operating leverage rate anyway. That's okay. Alright. Thank you so much appreciate it.
Betsy: Thanks Betsy.
Our next question comes from Brennan Hawken with UBS.
Betsy: Brendan Your line is now open.
Betsy: Sorry had the mute button pressed okay. Thanks for taking my questions.
Betsy: So we saw really solid rebound in net new assets at Pershing This quarter.
Betsy: So curious if you could maybe compare and contrast, how that would look like.
Betsy: Net new assets in prior quarters ex the off boarding, which we were dealing with and and Robin I believe you spoke to ultra high net worth as a client segment.
Betsy: Driving.
Betsy: Well strata.
Betsy: Driving some of this but could you speak to maybe what type of firms are driving this growth is at our eye as is it is it broker dealers any particular sources of strength. Thanks.
Betsy: Yeah.
Speaker Change: So thanks for the question Brennan look at 24, it was a noisy year given the large onboarding and we have as I said in my prepared remarks, a large onboarding in Q4.
Betsy: And look we kind of I.
Betsy: I guess I guess the way to think about it is.
Betsy: We would like to reiterate our we think we have a good ability and the right to win and grow our net new assets at mid single digits through the cycle and that's across the space, whether it's our eye as whether its broker dealers banks. That's you know and we have the team and the technology in place.
Betsy: And you know if you, let's just look at wove. This time last year, we kind of gave a guide on Whoa Whoa, we executed at the guide on that we've re guide is higher again this year on World. We've now got 36 clients on the platform with 41 signed contracts. So all in all we feel like we have kind of a really really big momentum.
Betsy: On parging into forward and it's one of the bigger pieces of business, that's going into the platform operating model in Q1, So we see to see incremental benefits for that so pershing continues to be a very very strong business for us and we continue to see a growing and as you know like Robin will touch on the wealth tech sector.
Robin: But that is one of the fastest growing areas are in the market and we are a big player in that space, Yeah, and the thing that I'd add Brendan is just you you made the point about ultra high net worth that's really an a b N Y wealth business, we like that business. It's been a solid performer, we think there's more upside in that over time.
Brendan: And then Pershing is really across the high net worth space and that's got its focus on billion dollar plus or I E firms and that's why we're investing together there are about three trillion dollars worth of wealth assets and so when we think about what is the the market trends, we think though U S melt wealth market.
Brendan: A big trend and we're actually approaching it through both of those businesses one ultra high net worth one real software and service approaching the broader retail market.
Brendan: Great. Thanks for that color that's helpful.
Brendan: And then shifting gears a bit on the NII expectations certainly.
Brendan: Outlook looks better this year than it did a year ago.
Brendan: Could you maybe help us understand what you would think the trajectory would look like do you still think you're largely very neutral. So it should should those should that cadence be largely stable and.
Brendan: You made a reference to changes in the deposit mix.
Brendan: Are there any notable shifts in deposit mix that you're assuming as you as you model out the year.
Brendan: Okay. So in order to answer the question Brennan I'd like to maybe spend a couple of seconds, just reflecting on 24, where we kind of gave the guide down 10%. We came in down 1% when I think back on that year for me. It was really kind of broken into into three years and one when we sat.
At this time last year I think the market implied forward curve was pricing and about six to seven hour rate cuts and then clearly the fed was kind of signaling higher for longer that kind of in the spring and that's the way we were kind of positioned at a time and then clarity over the summer I had Jackson hole.
Brendan: Kind of around the time of the fed pivot and we're kind of we're very proactive on the asset side of the balance sheet. There in terms of repositioning the book in terms of taking advantage of the higher rates at the time before the fed started to easing easing cycle, which we've kind of factored into our guide for this year and then as we went into the fall and kind of we had a very strong finish.
Brendan: At the end of the year and that was really kind of the strength of the franchise clients doing more with us, which led to higher balances overall, particularly and Ibs, particularly in the corporate trust space, where we have more clients doing kind of year end activity.
Brendan: Now on balances overall, we've kind of seen that moderate a little bit at the beginning of the year as you would expect particularly on the <unk> side.
Brendan: And so as you know like that that the whole NII is made up of balances. It's made up with if the forward curve. It's made up of clients doing stuff with us and it was made up of what we're doing on the asset side and I've said. This many times on prior calls like I really do believe that we have a unique strength in terms of the tripods in terms of.
The interaction between our CIO the G. L. S leadership, and then our treasurer and that that team is working really really well to deliver the strength of the flagship franchise, which shows up in that you know strong guide of mid single digits for this year.
Brendan: Thanks for that color.
Speaker Change: Well move to our next question from Mike Mayo with Wells Fargo Securities.
Hi, I'm torn on this financial services platform.
Speaker Change: Transformation on the one hand, I mean, I guess, it's great. If everyone's on the same platform you can have the one being why on the other hand. It just seems like a lot of work to go from 25% employee at the 80% with all of that it looks like Youre ripping the guts out of the company and maybe up to run parallel systems very up training.
And so I'm just.
Speaker Change: When you add it all together in the short term are you guiding for positive fee operating leverage in 'twenty, five and if I mean I.
Speaker Change: When you're going through a transformation like this it's tough to show any positive operating leverage so I get that.
Speaker Change: What are you really playing for Andy and I mean, I get one being why I get one platform I just.
Speaker Change: A little too conceptual could you just.
Speaker Change: Just put a little more meat on the boats.
Mike: Absolutely, Mike Yeah happy to so to to to make this a little clearer. Let me just take you back for a moment to something that we talked about two years ago on the call. When we were describing the work that we had done to really underwrite who be and why was a what we do who does it.
Mike: How we do it and we came to this point of view that the essence of the company is that we really provide technology services and software for clients to build their businesses on we have these market leading platforms number one and collateral and number one in securities lending number one in issuer services, yet we're the number one well its number one.
Mike: And as well we've got this big three trillion wealth platform that we just talked about these things are essentially a combination of technology and software and services and so, allowing our clients to be able to build business rent. The scale of that platform is the very heart of our growth and you can see it in.
Mike: The numbers because market in wealth services, where we've got a lot of those platforms not all of them is the part of the company that is the most profitable with the highest margin and it's the fastest growing and so with that said recognizing who we are we had to do two things around how we approach. It number one we had to get serious.
Mike: Organized around the commercial front end of that that one be and why the new commercial model. The stats that we gave you in the presentation around how we're driving to do more things for those clients were doing more solutions as well as adding new products, but the other thing that we had to do is you just can't run.
Mike: A siloed backend organization with multiple versions of everything and I'm not just talking about systems platforms I'm talking about the very organization of the people. We had we've joked about this before we had a call centers, we had multiple custody pieces of technology, we on boarded clients in every individual.
Speaker Change: <unk> been at the company separately that just doesn't work for the nature of the company that we are and where we're headed so we determined that we had to operate an organized differently. That's what platforms operating model is about but to betsy's question, we've been very deliberate about organizing it over a multiple time.
Speaker Change: Frame, we don't want to create disruption. We don't think we are we don't think we've had any setback in terms of who we are and grinding through the year because of this we actually think at the margin it's been a tailwind each yeah. It can just be an even bigger tailwind in the out years and with three key metrics in mind.
Speaker Change: One employee satisfaction has gone up as people have been in the model and operated in the second thing is we've delivered better for our clients and the velocity of that new deliver direct delivery has gone up and then the third thing is the efficiency with which we're operating those groups has also.
Speaker Change: Proved so wherein youre right. Its a big change. This is not something you drift into it's not something you do if you've got a kind of quick clean up mentality for a couple of years, but if you're trying to make be and why the very best that it can be with a medium to long range mindset. This is the sort of fundamental thing you do the good.
Speaker Change: News is we've also been delivering all along the way and that's important.
Speaker Change: And do you have an example outside the banking industry, our software as a service I mean, when I hang out with my cat colleague they'll use phrases like Youre using is there any examples or maybe another bank somewhere else around the world or a fintech or is there something brand new.
Speaker Change: So this is and this is borrowed broadly speaking from the technology industry I've sat down with Ceos of large tech tightened companies and this is essentially how they've built hill reorganize themselves as you say if you sit down with a CEO of a technology firm it might be a fintech.
A large fintech firm it might be a pure tech firm. This is how they organize themselves and we're not doing it because it's Tac and trendy we're doing it because the nature of what we do is more platforms. Like now there are examples in the bank space of some banks, you've sort of for little bits of that business has gone off to this there are also examples in the broader.
Speaker Change: Syntax space plenty of examples of firms who've adopted this concept because of who they are but we think it's a particularly good fit for us I wouldn't encourage every other bank I think if you are at an investment bank or a big trading house or a big retail bank this doesn't necessarily fit but with different in that we are.
Speaker Change: Our bank, we have bank form, but the nature of our businesses is quite different and we think quite well suited to it and importantly, the early pilots that we've done remember we're into this thing already and we've got a lot of measurement of how it's being going and that's what gives us our confidence is not just theory.
Speaker Change: And then last follow up of Tech spending.
Speaker Change: 24, compared to 25, and and how do you feel better worse the same about your AI efforts.
Speaker Change: So like the ZIP codes of tech spending like we're into kind of a $3 $8 billion range of numbers and we have roughly earmarked a half a billion dollars for investments this year I feel like yeah.
Speaker Change: Really really good about where we are on the AI journey. We spent the last couple of years building out the infrastructure, we've got really good relationships.
Speaker Change: With the West Coast, and we have a seat at the table and learning a lot to do and how to do it. So I think youre going to hear a lot more from us in the coming quarters about how we deploy AI to run the company better and as a broader statement. This concept of running the company better has different seasons to it season number one has been a lot of blocking and tackling.
Speaker Change: Late season number two is really the platforms operating model implementation and then harvesting the benefit at last few years, and then AI and we think he is very important and so within the mix of that $3 eight that <unk> mentioned, there's a there's a gradual pivot that's occurring under the hood around.
Speaker Change: Uplifting basic capabilities and infrastructure, which was the passed through to making our systems better through AI and I think that that evolution is quite important. So it may feel like a static number, but it's actually not a static composition.
Speaker Change: Got it alright, thank you.
Speaker Change: Our next question will move to Alex Blaustein with Goldman Sachs.
Alex Blaustein: Hey, good afternoon. Thanks for the question.
Alex Blaustein: Another one for you guys on operating leverage so obviously, great progress so far here, you loud and clear on 2025 and more importantly beyond.
Alex Blaustein: I guess in that context, how important this fee operating leverage to the firm I know you talk about total which is right in NII as a helper in 2025, but for whatever reason of the fee outlook full short how much wiggle room do you guys have against that wanted to 2% and again, maybe talk about the fee operating leverage as well as a metric that you care about or not.
Speaker Change: Thanks, Alex.
Speaker Change: So we do talk about total and we're very focused on delivering bass consistently through the cycle.
Speaker Change: I also think about it in terms of fee operating leverage and we're also focused on delivering positive fee operating leverage as well.
Look as I said in my prepared remarks total operating Leverages the North Star.
Speaker Change: There are a number of factors that go into that NII fees expenses and with each of those categories. We have multiple levers that we can toggle. So we feel like we have flexibility over the inputs in terms of how we end up with that number and so I kind of think if you kind of take last year.
<unk> was a very good year and look there was a reasonable amount of kind of positive contribution to that from NII and so we expect to deliver positive fee operating leverage through the cycle as well as well as total.
Speaker Change: Got it Super helpful. And then a small nuance follow up for you guys just around NII.
Speaker Change: We've seen stronger results in the repo business for a handful of quarters now and I think there's still some expectation for that to normalize, but clearly that hasnt happened yet so maybe talk a little bit about the factors that contributed to the stronger performance in that part of the model are within the quarter, but also maybe within the year what could change that.
Speaker Change: Given where you are in the sort of the environment and the outlook.
Speaker Change: And what do you think is the appropriate run rate I guess without contribution to NII going forward. Thanks.
Speaker Change: So for cleared repo look strong strong performance in Q4.
Speaker Change: The only context I would give you on that Alex is it's kind of it's roughly 5% of the overall NII. So how are we talk about is it still kind of small in the context of the bigger number we've invested a lot of centers in the last couple of years in terms of technology better products being more for clients et cetera.
Speaker Change: So on part of expect it to grow but it's not a meaningful part of the overall number.
Speaker Change: Okay. Thanks very much.
Speaker Change: Our next question comes from Brian Bedell with Deutsche Bank.
Brian Bedell: Great. Good afternoon folks thanks for taking my question.
Brian Bedell: Just on a couple of assumptions on the on our financial outlook for 'twenty five maybe just to start with net interest revenue and I. Appreciate all the commentary you made German on on the factors on that.
Brian Bedell: It it looks like it's more based on.
Brian Bedell: On the asset and deposit side on mix as opposed to growth in deposits and growth in earning assets. So just wanted to get your sense of.
Brian Bedell: All else equal do you.
Brian Bedell: To what extent do you think you can actually grow the deposit base.
Brian Bedell: Via you know all the client initiatives you have.
So for 'twenty for like.
Brian Bedell: We kind of I think we outperformed on the balance side, but as we look out into 'twenty five.
Brian Bedell: And then you kind of talk about and if you reflect on Robin's remarks in terms of starting of the year, a little bit more uncertainty and its kind of post the election. So for now we kind of and the way we've come up with a guide we expect balances to be roughly roughly flat and the mix shift underneath.
Brian Bedell: <unk> kind of from Q4 to Q1, I expect <unk> to moderate a little bit and kind of touched down we're kind of in the ZIP code of kind of $44 billion to $46 billion of N. B's is kind of.
Brian Bedell: It is embedded in the outlook, but we still have a reasonable amount of bulk to roll off I kind of 2% yielding assets into current market rates. So you're correct. David in terms of like a lot of our proactive management of the balance sheet on the asset side is giving us confidence around that mid single digit guide.
Brian Bedell: Okay, Okay, great and then shifting to the fee side. It looks like this guidance is sort of an Alpha guide you talk about the drivers of being you know higher organic growth as you make progress on the platform. The platform strategy of course, partially mitigated by but by our current currency headwinds.
Brian Bedell: But.
Brian Bedell: Does this assume generally flat markets I guess that would be in line with your uncertainty commentary and then I guess, if we do have very strong equity markets say for just 10%, what what what would be the rough delta.
Speaker Change: Revenue on that.
Speaker Change: Ah Ah thanks, Brian So what I would say is roughly kind of 5% on markets from here is about $17 million in fees, that's the rough sensitivity.
Speaker Change: And to your the first part of your question, we've kind of given the last couple of years have you know as you say really strong performance in markets, where it kind of more neutral on kind of market growth in terms of our guide.
Speaker Change: Okay, Okay fair market appreciation.
Speaker Change: Yep, Okay Yep okay.
David Smith: We'll take our next question from David Smith with tourists Securities.
Speaker Change: Yeah.
Speaker Change: Hi, good afternoon.
Speaker Change: Hey, Devin.
Speaker Change: Alright, you managed to hold your AUC a flat despite a big decline in the fixed income markets in the fourth quarter can you remind us just how much of that $52, one trillion might be showing off the wagon that reflect the full decline in markets. We saw later in the quarter either way it seems like in both of the asset servicing business, where we're really strong in the quarter could you comment on.
Speaker Change: The competitive and the competitive environment that youre seeing there as well please.
Speaker Change: So look I'll start with.
Speaker Change: The competitive environment I think.
Speaker Change: Very pleased with where our asset servicing is in terms of competitive strength in terms of new business won over the last year. We came in to 'twenty four with strong momentum and we executed very well and we talked about a number of the deals that we won on prior calls we've invested in.
Speaker Change: And the infrastructure I think we're showing up well for clients and we exited the year feeling feeling very good about the business and I think you know in some ways asset servicing everybody looks at asset servicing is that as the bellwether of the firm and so we kind of enter into 2025 with continued momentum.
Speaker Change: And you know our right to win and winning our share and you know with the world's largest custodian and I think we're going to do do just fine and 25.
Speaker Change: And there's not a ton of lag.
Yeah.
Speaker Change: Okay, and then just to clarify you mentioned 44 to 46 billion of <unk>.
Speaker Change: It's embedded in the outlook is that the average for the first quarter for the full year.
For the full year.
Speaker Change: Alright, thank you.
Speaker Change: As a reminder, if you would like to ask a question you May Press Star one on your telephone keypad now we will take our next question from Gerard Cassidy with RBC.
Hi, Good afternoon. This is Thomas let he's standing in for Gerard.
Speaker Change: From the obvious geopolitical risks you know we all see in the news are what are the primary risks you guys are monitoring for your businesses.
Speaker Change: Well you know so there are a lot of risks in the world at the moment.
Speaker Change: I've been asked this question a bunch of times over the course of the past few months and as you can imagine you know we got was.
Speaker Change: And and it's essentially two different continents, we've got uncertainty in terms of policy in many countries. We've got some countries important major economies that have really been struggling to be able to find growth. We've just gone through the the great year of elections and so we've.
Speaker Change: Got a lot of new teams in place in countries around the world are that's clearly at some point the risk of a downturn or a recession in the U S. It's not something that we see around the corner right now there's the impact of higher rates. If we lock in rates are at higher levels, maybe even 10 years.
Speaker Change: Is it 5% five in a quarter, who knows suddenly possible those things can create complexity as well. So the market is ready contending with a long list of things, which today are probably each fairly low probability, but there are a lot of them. So the chances of something happening I'd probably out there. So we're not in the predictions business. We're just.
Speaker Change: Trying to prepare I think all platforms give us the ability to to help clients navigate these uncertainties. So that's that's plenty I'll focus, but you know that if you had to pick a couple you're gonna say geopolitical risk probably a curve risk absolute levels of issuance, which is true for several different countries and.
Speaker Change: Cyber risk now on the flip side of that and I should I think it's important to mention it where our capital markets oriented company. You know, we're a financial services platform company and so with pro gross we benefit from growth in its very encouraging including particularly here in the U S with the new incoming administration to hear this.
Speaker Change: Pro growth mantra because growth is a important for our business and be it enables so many other things and so on the flip side off the risks I think there is this undertone of this sort of sense of possibility of the year, which we certainly haven't lost sight of all the while we're managing for the for the risks that are out there.
Speaker Change: Got it that's helpful. Thank you and sort of sticking to the theme of you know many cross currents can you give us some color on how increased trading volatility attributed to the dynamic interest rate environment might impact your servicing fee revenue growth.
Speaker Change: Well it definitely.
Speaker Change: If you just look at last year, if you just pick one.
Speaker Change: Business in particular, our clearance and collateral management, where it's really.
Speaker Change: You know benefits from increased treasury issuance increased volatility.
Speaker Change: Our clients doing more activity.
Speaker Change: <unk> process much more volume on the platform and when you hear us talking about increased volume, we mean talking about increased fees and last year. There were a number of times, where we had records in records on records in terms of what's going through the pipes. So I think.
Speaker Change: <unk>.
Speaker Change: Gregory issuance has been a real tailwind for us over the last couple of years and there were two things that I'd add just quickly on composition of revenues because you know to the prior question the absolute levels of assets does matter in some parts of our business to your question transaction volumes matter elsewhere, we have re.
Speaker Change: Revenues from direct software sales, that's a growing part of who we are and part of this sort of platform concept, but if you just take something like fixed income and this goes to the gearing to capital markets that we laid out in one of our trends pages in the presentation, you know take fixed income.
What's happening in public markets private markets and credit touches so many of our businesses our clearance business, our collateral management business, our asset servicing business, our corporate trust business, our debt capital markets business, our investment management fixed income business, our investment management LTI business, our cash strategies and so the.
Speaker Change: Across the breadth of who we are is really able to capitalize in a lot of different ways back to this point on growth in activity.
Speaker Change: Thank you that's helpful and thank you guys for taking my question.
Thank you.
Speaker Change: And our final question comes from the line of Brian Bedell with Deutsche Bank.
Brian Bedell: Oh, great. Thanks for taking my follow ups.
Brian Bedell: Just want to circle back on World I think Jeremy you mentioned and maybe I missed. This you said you had a revenue guide I saw the $75 million of exit and exit rate annualized in 'twenty for did I Miss the actual guide for 25 years that the Oh 40 point and maybe if you could just talk about the just general progress it was.
Brian Bedell: So incremental revenue for 25 of 60 to 70 and I would say.
Brian Bedell: We're very pleased 36 clients on the platform 41 kind of signed contracts.
Brian Bedell: In the prepared remarks, we kind of talked about the proliferation of products that we announced at insight last summer, so becoming more sophisticated and clients really liking what they're saying.
Brian Bedell: Got it and then 67% incremental to the 30 of fish of 24 is that right.
Brian Bedell: Yeah, that's correct.
Brian Bedell: Got it got it okay, great. Thank you.
And with that that does conclude our question and answer session for today I would now like to hand, the call back over to Robyn for any additional or closing remarks.
Speaker Change: Thank you operator, and thanks, everyone for your time today. We appreciate your interest in being why please reach out to Meredith and the IR team. If you have any follow up questions B well.
Speaker Change: Thank you. This does conclude today's conference and webcast.
Speaker Change: Replay of this conference call and webcast will be available on the Investor Relations website at four o'clock P. M. Eastern standard time today have a great day.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change:
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Yeah.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
[music].