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State Street (STT)

Participants
Ilene Fiszel Bieler IR
Ronald O’Hanley Chairman, President, and CEO
Eric Aboaf EVP and CFO
Alexander Blostein Goldman Sachs
Kenneth Usdin Jefferies
Adam Beatty UBS Securities
Ryan Kenny Morgan Stanley
Brian Bedell Deutsche Bank
Robert Wildhack Autonomous Research LLP
Call transcript
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Operator

Good morning and welcome to State Street Corporation’s Fourth Quarter 2020 Earnings Conference Call and Webcast. Today’s discussion is being broadcasted 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 for rebroadcast or distribution in whole or in any part without the expressed written authorization from State Street Corporation. of website. will broadcast the housed authorized Street State only this be call on The

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

Ilene Fiszel Bieler

us. our for thank XXXX presentation, all of CEO, and Relations earnings investors.statestreet.com. O’Hanley, first. will slide our speak download which we Investor will Eric will call section our take morning Good you Ron for joining through in today, Afterwards, On the you website, happy our Aboaf, CFO available take to Then is our fourth quarter be questions.

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

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

may contain such In from as addition, factors filings, XX-K. discussion will referenced due presentation those important factors those today today’s Actual factors forward-looking risk our our in in differ a of including SEC in statements Form our materially to variety and results the statements.

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

to Now, let over me turn Ron. it

Ronald O’Hanley

financial morning Earlier Thank you, our XXXX this and and Ilene, results. full-year fourth everyone. good morning, we quarter released

recent Street successfully future financial a and clients, the advancing our I our XXXX system, business reflect to results, how would other adapted like review the no for while I State operating to positioning all Before the in year XXXX, was environment memory. like unique and communities supporting success. in on

highlighted the market resulted year, environment volatile the a governments like proud and act enter -- we and pandemic also our I'm these When impact social XXXX global team State be, and to how challenges, address. Street must the economic around together precipitated assist that recession, COVID-XX State faced global being and the Street number essential the dealing limiting injustices members by in few world all how as an the economy. central in predicted Against in generating could of have social with the crisis of act health operating economic clients that quickly which on financial we crisis a backdrop, of solid the a is to trusted to the racial our XXXX. earnings and for world to needed stronger lived our still markets growth would values while As operating banks of and partner with. communities, shareholders this financial institutions

As to the adapt operating worsen for deliver us our products, clients global most. and needed us year, allowed last capabilities services results and they our quickly when pandemic

years, enhancements one same where achieved improvements further approximately a of and transform continue years revenue. lower, strength number our and two for able and increasing we cost the continuing how driving automation the markets and XX% we focus operate been retain while its compete we has transform business. service demonstrated to transform on XXXX invest Street simplifying operating that for during last in FX asset deliver In by in model to product with we'll share managers the to and in be to model At market future, in the to self and uptick productivity fund position ahead. our efficiencies State client investments we we the global an in the franchise, expect drive journey the volatility time, XXXX, addition our the made operating our to operations, and

the has sources with number We to to analytics us of a front the open functionality clients. back delivery State of Street leading of in accelerate platform, architecture pipeline efforts We innovate data new which strong. Through nature our platform, throughout to unlocking we The providers further have able Alpha increase and been has traction and early intense the XXXX Alpha remains continued through development our the signed with with revenue. development. XXXX, six helped where of partnerships adoption rapidly Alpha clients gained

we performance We client an investment While business. coverage, will is the laser drive our broaden time. and servicing, and segments regions growth client enhanced of the leverage of our recently on core in services integral strategy, we facing Alpha over improvements and service focused platform XXXX which our institutional remains during to future improving revenue the and strategy, part also engine remained investment financial within

successful strength result, year-over-year our a discuss will improved model, of and team operating the of As navigation our financial enabled our of members I and which now strategic capabilities performance, the XXXX further. and commitment moves,

impact NII to our $X.XX year to driven period, the of declined headwinds rate X, notable quarter Turning fourth revenue Slide was ago $X.XX quarter the results. EPS X% largely or on Relative interest items. excluding total by fourth

the However, fee in performance, notable off and both Global trends demonstrating flat record step fee in FX results. year-over-year, by the cash. At items. provide had an and improved strong XXXX. both end for well ETFs we fourth strong results servicing Despite management points performance reversing and transaction revenue businesses quarter, These good higher supported X%, and At an period AUM, trading Advisors, increased end increase in total processing, to levels excluding increased of as were AUC/A recent as another markets. expenses

by contribution was the to $X.XX, year XXXX EPS we our up XX% relative strong items. $X.XX results, lower. results items, drive to and made revenue to in very interest a notable fee to as year-over-year progress improvements we management increased were dramatic and X%. well, despite work Turning solid higher financial fees, year fee excluding X% notable servicing rate trading Full perform higher excluding and from full or environment. expenses growth lower XXXX, EPS total continues results which and FX CRD, Supported revenue total revenue

headwinds interest revenue However, of a was on as result year-over-year flat total impact roughly NII. the rate of

X.X% successfully Operating XXXX. expenses drove items in notable conclude most unprecedented to leverage down reduction number a of and culture was history. we total years year-over-year, of positive on in up excluding build faced strong continue Street To the challenges opening my established one as that margin the challenging during remarks, team was of expense State Our in we XXXX.

generating As our a growth while to to of trusted and year-over-year innovation, we for and and all navigate as challenges essential our communities, result successfully our shareholders. the operational a earnings were capabilities those partner able and solid clients acting

set up the As stock million which the the of we for $XXX repurchases, common in effect by first Fed. quarter look XXXX, ahead, authorized has limit our to Board of is

looking capital more in shareholders and future. for well-positioned to forward the are significantly returning We to

In common F to addition, partial redemption redemption the update following will of our through which you to benefit first term more Board return it our the our and has on the in medium over detail, Series then quarter. stock, partial turn with targets. Eric, its you quarter further shareholders in And that, to take also me authorized the will let preferred I

Eric Aboaf

and you, Thank good everyone. morning, Ron,

deliver of items and Turning of Slide let of declining EPS year outline before briefly review fourth us quarter, expenses totaled collectively to $X.XX in year of quarter and which million the X, $XXX me XXXX. I recognized another that will full in help we notable my our results, XXXX begin fourth

were critical took approximately complements be during will eliminate we middle during and in the we deferred X,XXX junior management, partially through automation and the roles positions, that $XX which by mostly reduction employee years the senior ongoing made management First, pandemic. an to in-sourcing year. severance offset reductions X the of hires million charge COVID-XX of This ago,

about and reduce a we We sites our feet, XX% or for in expect by total square total This that process following square million took about generate the of Back savings estate XX our to X million this of space to XXXX approximately year. $XXX the of $XX occupancy office twice charge is post-COVID approximately in a environment. our reconfiguring million then, across space our start of footage. for office real

reduction in We generate charges, while roughly have expect expense million to repositioning business of X of We underlying so want in minimize investing to a to years try again we in XXXX. but action delivered and do XXXX. in row our this $XX savings

begin Turning results. of X, year full to XQ and will 'XX my I XXXX review our Slide both

expenses combined on see to revenues. translation Total in and $XX finished growth a up rate revenue year-on-year continues environment quarter fee variable million increased in stronger were quarter-on-quarter and be NII. strong quarter-on-quarter of while the X% notables we third flat currency the improvement with ex to than quarter including table, the with increased left was year-on-year, can headwind, fourth a top X% you sheet true-up Total As absence of a interest balance X% costs. expected the X% quarter-on-quarter. but higher And led the

suspension XXXX leverage X.X despite year rate right show interest side the and by challenging delivered lower performance. we and year point growth of rates pre-tax full of points, of full dramatically items. operating basis banks, the excluding operating positive our slide, X% a improvement EPS XX we margin notable in a the On environment, percentage And

across board. were the Our results even better GAAP

client period and business AUC/A index a result change record by flows increases $X.X trillion. higher new Global primarily The end were year-on-year offset but quarter quarter-on-quarter Slide better levels, of the net installations. and increased to to by year-on-year continued period end $XX.X AUM X, in to a outflows coupled inflows, higher clients levels both and period market flows. ETF market net market institutional product period end line. with quarter-on-quarter Turning and year-on-year and as AUC/A XX% levels XX% increased At driven Advisors, trillion. increased Quarter-on-quarter, end was XX% year-on-year and X% The by higher sequential cash equity driven

strong $XX its higher ETF almost inflows SPDR for the net last net and inflows by year. than of quarter European ETF highest to total recorded XX% flows, U.S full-year, over Our taking second business billion driven

to average continued activity well levels, of increase servicing sales higher The Servicing year-on-year translation. expected market Slide normalization activity. reflects average in as quarter were XXXX, increased lower has flat including X. by levels translation Now and than client higher normal of including currency fees offset levels partially on softer fees as X% currency headwinds. Fourth client quarter-on-quarter pricing were market a

yet left to the the of servicing the slide, $XXX performance of billion amounted while On indicators installed in AUC/A summarize for wins our key we be to quarter. some the AUC/A $XXX fourth totaled billion, bottom business.

volume sales needs vary we second more be we half of of which including mix. AUC/A were client which gross number product net will -- XX% think gross to The our This attrition level about over mandates, of factors needed we each on and the a pricing trillion wins offset to Alpha of are impacted amount year. would include by look factors these ahead, of headwinds, $X.X needed normal wins. typical As year-to-year is AUC/A the and offset generating or focused

cycle and complex clients, solution XXXX, of time. sales we've the as asset In our across as So before inflation these owner segments. some and I take within some growth well mentioned strong have had top focused manager asset our services insurance more and success as client XX

We these plan to North a have EMEA mid with our size been however, sales our to of and America asset and managers implementing in are disappointed, address areas opportunity.

bottom our diversifying top XXX some tactical involves to right institutional these segments which the of across a expanding highlight coverage clients strategy, and enhancements pipeline panel, of On services our to and we geographies. our total

X, to fee important in the Slide let other more revenue me Turning discuss detail. lines

that Gold began, receives trading we FX for reclassified the fee the for marketing SPDR management base Global line. acting periods, ETF fees into as agent that and I Advisors the prior services you have for notice AUM the from will the Before current

institutional the we translation. the fee year-on-year $XXX this management reached Year-on-year, partially up of fees reclass market currency ETF million, Inclusive reclass, performance and quarter and mentioned higher timing of better X% management $X at offset Global from outflows of forward, million, by the impact market benefited cash think I about fee outflows. both of Advisors. net fees including the management and earlier, strong Going reflects money rates average quarter-on-quarter, inflows this fourth waivers

our see Our and financial fourth reporting in quarter investment in addendum, leverage. significant which our positive can generated operating you we reached segment management XX%, pre-tax margin

comparisons as quarter-on-quarter, our FX ranked expect currently FX company-wide quarter revenue XXXX, per indirect managers. had current they strength trading $X fell our and and XX% $XX portfolios money strong that Year-on-year up ever securities services quarter surged year-on-year finance continue obviously the in rebalance million rate make the stronger franchise changing quarter. volatility as difficult. conditions. political at discuss global Fourth from will revenue enhanced market and some their as spreads. the Securities million economic outlook help the market custody volumes XX%, of I lower asset XX% higher year-on-year, revenue to demand Regarding on another for elevated leverage XXXX is increased quarter-on-quarter, balances XXXX XX% well light included will we higher agency waivers, FX reemerge. we The FX Fourth X% we assets and revenue shortly. fee of however, of was mainly further in which lending year benefited primarily substantially year-on-year FX more quarter clients sequentially, revenue approximately of finance will full increased custody as driven by balances top as agency for higher FX and result demonstrating saw making in revenue both enhanced a

Finally, were revenue. due to fees down lower software processing CRD fourth and year-on-year quarter X% on-prem

as positive adjustments. fees a revenue market XX% related increased Software of and processing quarter-on-quarter and CRD result stronger sequentially

metrics. Moving to growth X, revenue performance business we show Slide CRD and

pattern in three given quarter-on-quarter into for CRD the services earlier revenues revenues in on- revenue durable quarter CRD XXXX, with XXXX. ASC year, in revenues CRD in largely driven of in revenues strong demonstrated the the as more but particular. success year, standard revenue with inherent fell year-on-year, accounting professional year-on-year XX% CRD XX% result timing recognition lumpy renewals. separated year the the part higher relative a of again Fourth wealth and strongly full was of to growing the and have at the by CRD revenue fourth total its X% for growth recognition full up the quarter strategy SaaS the on standalone up XX% very revenue We revenue XXX categories, of

new the to three On of front including show platform signed portfolio the In of XQ, and the which relationships. transformation slide, XXXX. six clients right State the technology some management to during remains total, in for highlights the and Street back of of platform we of sales needs. two clients Alpha existing begin clients promising client pipeline converted during The one the as included the from Alpha realize potential their Alpha year bottom we

was XX. the the were offset persistent sorts investment of low try these the interest portfolio deposits, effect portfolio the environment of a enough In Slide quarter-on-quarter actions. quarter. surge third that balance but over quarter portfolio but and to quarter, XX% growth swap the to that $XX average rate the yields. we case like some loans, on $XX end The we billion the true-up including declined Not of and $XX with rates coupled quarter-on-quarter. worth the benefits average $X Fourth by true-up, be absence of in every of headwinds year-on-year, the driven quarter offset were investment of taking episodic time. million million, to approximately quarters, higher headwind here, ongoing billion able be put mark-to-market NII we Each up the by to did which tactical as in significant in NII about higher FX Turning offset X% deposit the was of low million work, increase $XX won't fully the to we'll

we the of of end expect side how Last $XXX average highlights. deposits, show given Fed's might right deposit levels but billion we and balance noted the supply. our money our quarter of period that average sheet the increase I operate of to expansion slide, continued the On around

deposit average client turns with and levels it the or to tailwind fourth at -- to expect our operate out, and of even higher begun higher. line As in now we begin see quarter more even

items the a rate for we’ve were 'XX be view flat. we in spreads regarding the largest segment expense currently year-on-year, a investment of the changes. and of risk third expense the impact from opportunistic in cash Slide But On were but XX, systems notable worth to the a portfolio. and ex notables, tight including deployment trends translation, of held be so base X% achieved our mindful XQ quarter of expenses of the this credit held flat will comp we and Relative of notables, again OCI interest which increased quarter decline visible. We excluding that costs are information while benefits, to fourth also the occupancy potential the was here underlying quarter. quarter-on-quarter, ex and need provided from the and currency about and expansion point readily

higher as expenses X% However, brokerage and quarter. by processing offset quarter-on-quarter higher this result marketing the increased a market more rose and Other result Transaction quarter-on-quarter balances of other a was tied data fourth as expenses variable custody transactional fees. volumes, sub than professional XX% costs in volumes. processing of and to higher

notables For will we model in continue sell the natural business improving to want demonstrating the investments operating more shortly. in in down expenses, as again making our approximately I We XXXX, XXXX, and growth. year full progress fund to were down be to detail reduce our total expense which offset solid ex X.X% are expenses we relative than

to Moving Slide XX.

slide, client XXXX of evolution On and portfolio work and the NII. left the deposits the we to of put levels MMLF growth thoughtfully as we've higher clients supported of we support to with show our the investment in

On the Tier extremely environment operating you evolution relative we and the CETX right we requirements. navigate of to our elevated leverage and show ratios, of regulatory strong as capital the challenging our levels X can with continue slide, this to see,

are authorized which $XXX $XXX the common Board optimizing in XQ. We're benefit of stock, the program repurchase will the line the new million a share have redeeming is that noted, stockholders starting in our to excited new stack also common our limits. first million for Ron and As quarter, capital Fed we with which pref by up to

in quarter you our and detail. see XXXX XX, year full XQ fourth 'XX covered summary I've of Slide to already a Turning results. could

returns. words that around been and full me to we've results, growth and a say on journey let turn given improve So margins our about year a few

total successfully increase Following make we full XXXX, a a XXXX. revenue growth fee successfully decline fee initiatives year full Many drove in revenues in together in happen. this in came to X% total X% year

well. in servicing top leading X% XXXX, year-on-year, Following in year strong turnaround. pricing to clients index total executed to decline line, challenging in a pressure, a Alpha full XX% made At fees Global and on we ETF we and a year of our moderate an despite fees for had our strategy long-term X% flows up cash Advisors, XX very which year-on-year business performing our we revamped servicing by with our intervened coverage institutional on our increase quite real year a business our product

for and X.X delivered acquisition told, while All the of we CRD, investing more in some XX the interest results trading to improvement had second in and adjusting with record number higher points, remarkable percentage items, capabilities. business of GAAP year, asset of of the State services XXXX. volumes, a ability and consecutive have FX of investments of year and excluding rate in Our a net were we for to as market a across position full notwithstanding the excluding one our And the we a notable volatility full reap and XXXX, reduction, and products headwinds. All result total pre-tax operating in EPS out board. our year items basis the drive business margin notable demonstrate the leverage all said, benefit client X%, of costs our growth expense point Street prior managers. stronger recording On continue expenses that do of even to year our

let it. me So get into

outlook year our the of cover XXXX. full to XX, first thoughts as let well provide Slide some Turning as XXXX me quarter on

rates the speeds. which is outlook I around in markets year. views of to full our as slowing the volatility, forwards and trading that with current to the point our anticipates underlying well level, me assuming percentage market from X macro modestly modest line in to curve as growth some point and yield rate share As businesses. end assumptions our a X steepening relatively We're the also there do, short current prepayment equity XXXX, At normalized remain impacts flat, for assumes usually some first let

trading includes expect the currently X% we fee servicing And that flat revenue up revenue, X% top the XXXX. with end fee be revenue up towards of X% beginning to fees will ex to This for range. be growing X%. to X% will So

in FX first low early last to the be to year due fee Regarding year-over-year quarter the trading the the such digits by XXXX, pandemic down single of the March. down revenue days outsized as headwinds X%, given to revenues of saw perhaps in we we expect volatility

expect to be XX% we NII, prepayments to down from investment year-over-year full year grind NII on a Regarding to lower as and reinvestments. basis, continue XXXX XX% yields portfolio

driven assumptions rates first there Regarding range continued we expect that NII be count sequentially, of significantly. assuming do and and somewhat should to stabilize and quarter day of our change XX% impact the by down not lower XXXX, about rate be bound,

currency flat down can due ex you of as Alpha expenses assume reduction we will estimate. and resource X% and CRD, be to like continued XXXX walk, X% to infrastructure on translation currently that infrastructure our tech expense basis a on in approximately business a in to X% This investments the will automation. expenses to areas Turning this in see headwind nominal focus and in ongoing and and variable includes X% expect notables net be optimization, costs

expenses first be quarter. this of expect the first the with in Regarding XXXX, the with seasonal to largely and occurring guide year-over-year in usually line expenses quarter consistent we

to Taxes be hand for during also credit the in third range of Ron. losses of XX% was built releases in XXXX. We what with the of XXXX And XXXX. provisions call for least to expect back let XX% at a me should that,

Ronald O’Hanley

Eric. you, Thank

target slide run XXXX XX. business we our thinking which shareholders. for ones to end of still and this on term on the to to time, levels now like the would our to a right our aim update rate consider for by medium achieve you these be on XXXX. Turning basis I At current we targets, the

you the result, a slide. as see As from can unchanged they remained

these as than may we initially anticipated, achieve in take medium factors. now December result of targets XXXX. We these had set largely longer early term to However, expect we a exogenous targets

stimulate a and the in XXXX slowing rates -- just XXXX least targets rates rate ending the percentage XXXX, hit to X.X% from Meanwhile, tried points fell market The expecting impacted expected again XX to no rate basis in average All interest as around just since the X% with thereafter, to points time long then economy Fed heights estimate the also XQ Fed to percentage points no end X.X points. approach with fell rate late XXXX. sharply XX basis went during XXXX. -- at by level the expect to until Soon hikes XQ COVID XXXX, 'XX at in our as about margin has about X environments by pre-tax from gave the told, we that lower we 'XX XXXX. in ROE at by

a We rebound downdraft by markets XXXX, in but global X late markets, in also years equity down. the international over were the U.S last equity followed equity averages large witnessed in market a steady

by fee a in While revenue are when XXXX decline we went we in a trajectory fee delivering in growth clearly a global and the of from markets relative X% to real have fees operating different progress. We servicing our to set dramatically revenue X% environment in we reversing business. targets, made our our in

on the items, peers begin points. timing net percentage In in margin though our have expenses helped become direction with I'm our operator, the of help interest for ability reduced to We needs systematically also meet to our business us -- X We've open to capabilities by gap the rates strong growth, the coverage which ongoing questions. about model productivity impacted our and also close to of ex achieve time We summary, enhancing distinguishing can medium business an to from innovate results. remain confident And we our notable our investment term while has now goals. drive in clients' us provider will are and business the that and confident at improving to and call our enterprise client service focusing deliver same continue our evolving outsource our we expense to while competitors. targets,

Operator

from Goldman Instructions] Your first [Operator Sachs. Blostein question Alex comes with

open. Your line is

Alexander Blostein

everybody. Good Great, morning, thank you.

to made for fees. of Eric, clarify servicing maybe some the first, just you So comments you, around

a what of that's kind gross that how you periods? So qualitatively, $X.X prior client And AUC. about in of like sort a think Is sort about this to of compare anything drives that I on of talked about trillion -- thinking annual does that your of changed impact that be should X%, Is attrition. as as sort Has revenues turn higher? well? we

Eric Aboaf

some points amount about new the $X.X to new We're think that's sales question. at net day, that trying to we that the right, overcome wanted accomplish plus about Thanks offset, and new across year really the Eric. growth business, do, across And like of it's that, contribute need that nominal would of clear sales of real do percentage we we'd kind day to it think clear net regions, be to perspective for to that. and end be of able get, amount we a deliver to we that rebound the expectations every growth, business, that our the our so have we client you And for part Alex, because of few of trillion attrition some of gross business I what on be we groups. segments, actually to give to what across always to to is which actually a is see. demonstrate

in Now, about our at new year saw gotten this billion. AUC/A year. and wins truth, was flat $XXX net This there not we've you business

make so it's area we can focus, feel on. dent And that but think of area I the an intense just it's like pretty kind we a of obviously

about we XX made rolled and of segments need ago, on coverage the of we've our now of progress it we've step the We've there. we -- set where seen across and top deepen and years X where a intensity back, good growth out our of franchise. broaden that seen couple you kind in that to If really process clients executives our coverage rest

Ronald O’Hanley

want or like gone to opportunity client example, in market you if M&A, what not if I just oftentimes anything the up. things an if the impression like reduction represents Alex, But that. of there's here to that about retention is think the leave would you with us. for Yes, has facing funds, I'd for terms to client about add a retention problem you think in

broadly attrition attrition. what how as So we're do here as clear attrition we're is a a about it. from And our sales and perspective amount small there's doing what client we it we about to much is on think what of defined asset very to need trying be

Alexander Blostein

-- clear it Great. up bit. a Thank you. That that clears

Street M&A, past, drive SSGA. business. Obviously, trying what in of could to like And you a also the to provide to I been actions business, ask talked around management about you the just clients. potential around for in question headlines you're Ron, strategic Speaking wanted there's State your around several scale that make [indiscernible]

State of can SSGA about acquisitions you think when the you or in a when avenues, financial latest JV as goal you're trying of kind divestitures, a you. ultimate obviously, sort and maybe to these your us Thank for SSGA. as strategic either Street So strategic various was -- of And achieve is comes it out what to kind headline whole for it well. comes as there to on update there thinking

Ronald O’Hanley

on said Yes, what is I'm market rumors. what Alex, before. I'm not going But I've to say comment going to

got product capabilities, space, the as capabilities, about It's it's or SSGA. therefore in this. we strong a how that, the space, see to And said before, to franchise to have both ESG. the and in position strong strong a space, in said add distribution need cash distribution increasingly the We ETF Having particularly evolving. very think we we've access world indexing

made or it's this, we ask you about I past answered income created terms are we're thinking less not several the example, to us think the over arrangement I of new. Anytime about ETFs, we that important -- some constantly way really same steps launched We've this. it years more product for cost technique help those capabilities, the cost low low fixed range the ESG funds, propel of distribution adding capability, funds. we in organically So

it your position do we at the we to It's So look looking answer continue a asset. best activities, And to lot at what we if and best growth. outcome. SSGA the and those [technical best to to got need will it's for we'll we're position is remarkable of we'll continue do last to think of things to question, to inorganic do look what potential difficulty] to part

Alexander Blostein

very you Thank Great. sure. much. for Yes,

Operator

Usdin with comes Your next question from Jefferies. Ken

Your line is open.

Kenneth Usdin

have morning, just on Good everyone. the Hey, NII side. Eric, Thanks. follow-on a

then or first understand us wondering throughout to just a in and benefit about terms if the off see NII [ph] you change pieces of us fourth help and of you type of still of are how help And thereafter? quarter. any part some AUM can And can of type rate moving if stabilization. talked first what Just can wondering Thanks. was that the walk day I'm in from you step is that much quarter, count the the that of stabilization -- you in through premium

Eric Aboaf

Ken. It's Eric. Sure.

to you me to first quarter of see quarter context, there. some slide to and what quarter we just kind then and the first see fourth maybe give fourth Let third then quarter from

we they're headwind. as that about have We the headwind And a sequentially and was Going surge some quarter, portfolio quarter, unusual million. of investment cost tune the would attenuating in have kind into valuable because That's in tailwind. that deposits, the fourth five in is FX million. quarter, from a had That headwind our the but markets bucks. portfolio we've of then bit a about us benefits. we -- and Against higher previously worth amortization that the markets we a $XX investment headwind. added of usual both about at $XX actually to, emerging and we'll built in each investment which fourth loans XX had that quite come developed emerging the and markets. in was swap the mark-to-market, about We back premium than from had headwinds Remember, bucks

bill usual, a renumerated but Now a plan. was than larger better that

of to those kind plan are us the help features that XQ in from effect XQ. And so

think first probably instead I investment about if to it's of portfolio, $XX be of quarter, of the we pieces, go into take going in those $XX you kind million. million each headwind,

of are see that neutral you And that So to from XQ. we it is XQ attenuate. part prepayment the think speeds

have then up and And loans investments, day but another And a probably sequentially XX you negative. you mark-to-market headwinds, headwind. of to got deposits of as XX, we still a because tailwinds and that's the which swap the is couple some have turns double then count the positive bucks. XX worth have We worth we worth unwind about have

to partly and is the headwind $XX through yield we expect that we prepayment million, the attenuate side us that that as expect And why rates it's which Once gets rates. expecting effectively coming going we speeds to and a the to the start to portfolio see I million, guide partly of quarter, the to So start that's think been have gave. investment to on trend higher working kind is first what what quarter. of what down see stabilization we but to because is through we're $XX get kind that was we million $XX

And so, lesser expect basis think that And we a be the that, traditional on that will more headwinds. XX. plus actions we we about take worth some against do

be estimate bit and And we a And be so and to that's from get based of so curves, Obviously, it XQ stable be there's on the and range roughly what will always of into, to it'll best our and so expectations neutral today, XQ the rates of forth. bound. obviously, XQ it'll that little we're XQ forth. seeing -- but lumpiness

Kenneth Usdin

to? the there? Just So what Eric, and is you XX speak dollar XX? sorry, first, I add XX million something that to understand your back got at XX decline a all kind can all XX, if of XX, that and that up if for and I mean gets trying

Eric Aboaf

to Yes, I X% X%. I think said

… we're looking at think So I

Kenneth Usdin

Okay.

Eric Aboaf

the $XX stable quarter whatever then from … there. decline million and in first

Kenneth Usdin

going one right. about. a All just we're Yes, on. Understood. ask on follow-up big you. it. Got picture, Great. unfortunate Thank you to news sorry. then item Okay, another And

the for but it news months well just I happen that out keeping understand client, just or specific BlackRock there to headline needs guess a a was if know as going Now, and away. there's either I X helping what ETF codified it's way of us since be as to you're

Just Thank any helpful. would you. be commentary

Ronald O’Hanley

closely still feeling that we are at positive about reasonably any We're very this, is them. made have not Yes, They process with decisions but them. underway. working

Eric Aboaf

I Eric. a a it's growing pace, Ken, it's And also right. just asset a growing a growing remind you at is high that quite business, though, --

And RFP to start kind and so to had to response discussion time work we from forth. it one these, of from think I to so X last years finish the took out of

that think And into that [indiscernible] -- any scenarios you there's run. factor so I the to

Kenneth Usdin

Yes. Understood. Thank you.

Operator

Hawken with from UBS. Your comes next question Brennan

line open. Your is

Adam Beatty

Beatty Thank Brennan. you and Adam morning. This in for good is

broaden mentioned Just bit, that softness And recognizing wanted U.S pricing retain you've got to in terms some it diversify focus in order business. size market of mid a you on right maybe talk you the now. in little your terms could in I’m on efforts just business, in any have help the a or EMEA the wondering and or us the what little committee the impact if interested what with structuring of you phase. and to core of your 'XX in size the guide. bit win Either pricing, the of about either or maybe also that interaction you. there to Thank activities had better of

Eric Aboaf

Adam. Sure, It's Eric.

Let me start.

way the our on side we think across I is the servicing business about right. segments, think

in is insurers, we have we more business asset segments. have geared managers, We owners, the and asset our to asset managers have other

segments more in last Within X of either the asset and the look those you managers, our external in managers. franchise obviously at and And bit the -- when largest success actually in in over as growth year, starting actually in year, particular, we've find there, some we've is so, but less we've done what well. other the size we're places decline historically of last the years, to than quite winning or They're the other asset built last secured smaller growth asset managers. mid a data,

a a be X gap X that percentage or gap it so growth point point gap, And or can -- be growth be particular percentage around. quarter X a that year -- gap, bounces what in and could a it could

we products time we're provide really franchise our spend clients of built client as like our on feel right both midsize finding as important we're senior need we and and kind is we our think that, midsize what the are outstanding of intensity executives. our seniority of clients have part our We largest coverage and an on the so to capabilities. well relationship managers of And the time focused finding we and them, But on the And franchise. clients. I really, really

XX, that And so really in the about that literally and XXX for statistics level product share out opportunities that we that services clients, And executing wallet got coverage granularity that them the one, two, make sure day the and helping players and share offer. wallet. mind product now. at of groups, is of XX, strength the building really where of of we're and focused it's can products in, top see and intensifying area this of those on I've our day product down top includes product midsized and we're we're

Adam Beatty

Thank I Do a it much as the there feel reversal before dynamics. though just that driver helpful Thank such quick level of previously? same prepays. you and is that. very rates? course, any prepayments be as XXXX will That's on there. you. year that linked Excellent. detail the the of past pull Or And in to refinancing, still might a generate prepays or was in then downward main on the you. forward, follow-up type ticking appreciate this not rates from MBS interest of rates Recognizing,

Eric Aboaf

always that that through to I've are I just learned to Eric. a pop environment. been like hoping a then going the through there's it's and isn't operate that right. but to they're strategy, burning Adam, have prepayments one-time hope attenuate, We

and and through out how quarter we've think of because providers. with and modeling some certainly starting the opinion can focused XQ speeds we'll quarter, We then -- end X should investment I'll do, that's there edge we our got though, that begin just third said, on deposit X we're is we've the second plays informed we've I to on the we what best loans, various because estimate And them, those we see a time is right, it and prepayment think knew that trying I That figured from into suggests stay diversity and or in XQ. probably continue control we're got subscribe the first we need live reinvestment, down here quarter, always something that of to to once XQ, by actions. seen to surge to that sure What in on do during the and make on taking people of in actions know of more. how prepayments, paperwork portfolio, the to is stepwise the out improvement. COVID can

Adam Beatty

Thank enough. you, Fair Eric.

Operator

next Betsy from Stanley. with Morgan Your question comes Graseck

line open. Your is

Ryan Kenny

Ryan on Kenny This is Hi. Betsy. behalf Good morning. of

Ronald O’Hanley

Good morning.

Ryan Kenny

the we this So saw approval through month. come earlier stablecoin OCC

Street, Just your how you're wondering going and any if thinking that strategy State forward? on impact about has blockchain

Ronald O’Hanley

is Hi. Yes. Ron. This

OCC you first, will, doesn't directly to impact, In most us. payments impacts it the regulate challenge the banks. if terms direct of poses the or, And secondly,

base create of that general, more in neutral currency holdings digital coins, us. in at client within an digital continue itself, we'll and did part in not asset is would relevant space, and custody because going more in lots interested directly say, actually increasingly, important we've in to blockchain as us the of is that this positive stimulates And that servicing, us, cryptocurrency a I blockchain of significantly time. doing past But to we to see it's the particularly anything work quite part fairly as things to in custody of and that. in For for we're have our interest probably OCC's we been itself said and invest investing opportunity

Ryan Kenny

the the about from Thanks. we waivers Or think impact should Is other rate XXXX? it should Thanks. question. And we expect any run then in here? one upset fee money in quick market Wondering now? from how

Eric Aboaf

fix, coming part is to we said years. $XX about $X run the Good and rate in of quarter it now a one tick Ryan, runway million expecting we're its do step million up Eric. million We it in more about we $X the in I XQ. to think expect

net less money So high much We have with don't don't market funds. fees. I have retail than We funds exposed others. higher worth think we're

but So the figures. those are --

Ryan Kenny

Thank you.

Operator

Your Deutsche next Brian Bedell question from with comes Bank.

is line Your open.

Brian Bedell

net to maybe along for guide income interest 'XX. Eric, the just continue Good morning, Great. folks.

talk if million that and about a XQ some can that building your you think Maybe XQ, XQ. if assumptions fact, your you can growth up then they business on deposit to leverage? about Just But the and $XX deposit in you're to in servicing earning -- realized talk from trying and you're want million year [indiscernible]. enhance you of as I strategies. obviously, asset $XXX also And the for about amortization, the to assumptions just is the and premium spiked I just 'XX? your for strategy

Eric Aboaf

Brian, it's Eric.

reverse me those in Let do order.

down premium I what to think of -- from that XQ combination then grind investment $XX said that the and starting would $XX a XQ living quarter. the million I And quarter, to headwind. XQ million each be wave. out headwind further million actually -- closer yield the to portfolio. in the quarterly would we're we're $XX through XQ, in the a because including was $XX a million XQ in quarters basis million seeing headwind was higher from investment What those we on investment That said and thought the premium to about is amortization still combination -- the $XX portfolio amortization down then I even trend it of we to second thought

premium partly what of as the speeds expectation, starting edge see investment I downwards. lower through attenuation amortization an playing we're of partly levels expected and begin is or tractor portfolio think that So to the kind is which of to have

X% at deposit the billion X% month, gauge. it's money a the are of of earning really deposits, terms deposits. continues In the the $XXX forecast to to supply hard and by expand The asset Fed strategy, we what about or

So month. we here just pick every deposits being by up

risk read, lots belling. and there's reallocation bar risk to of to off tailwind. from really -- bills, just given to hard So on about amount talk of It's asset risk stimulus some allocation

I assuming to edging we're at bit little quarter that least stay probably now, deposits, these up. level of a fourth with of going think, we're at right So average

and And just this you point happens. surge, -- I obviously yet so of we're that we're but not expecting and respond, not know, yet another we'll at don't think

tough one. In terms of that's a asset strategy,

very but for on take and you it. curve, I bank, because get every certainly risks some other tough can don't think much paid for we the for it's us

powder that keep. I dry think balance And there's which much so, making, how is we're a you to want

versus you've leg see -- interest when do into some a in And you that spike higher of the you can investors to better picky trying do build curve. that treasuries always return up. we’re be come And short-term. and us and and a rates, MBS we'll seen of your add around at are opportunistic And forsaking our carefully income go. about in so then kind that, the will

the MBS last by Our a book solid billion. year over $XX

some -- careful prepayment just -- of We've SCB because want during want the a be we too, we to is careful think process. of the done credit. there and We protected CCAR to little isn't to want We impacted I be credit bit there. sub-segments. prefer

pretty a diversified it's So approach.

of you. it's act, the of we I core we'll looking on strategy, and of them to report our as for those see some all will think And I think opportunities. certainly

Brian Bedell

headwinds. that. That's you. to just then the the great on you went -- service, Thank trillion $X.X talk just the growth portion that of you color. Okay. the to Can And mentioned of offset you back some about cross-sell of

would adding that importance cross-sell within this the Maybe to then services how So outlook, clients. sort be a and clients. also business of indexing that tracking new existing different servicing as asset to of SSGA's

Ronald O’Hanley

the division, in piece it accounted performance, mean, segment, a was for Yes, was client. client largest global at about said the our XXXX Ron. Cross-sell if or XXXX. same growth in look this. which our most very you growing think earlier, the what largely is The I it's big segments Eric of fact Brian, that fastest is

was but but there. we consolidate institutions the of -- providers traditional both install to Charles front. growing the have continue as consolidate servicing River of asset in a Alpha where definition, put in back these the that, front adding activities if some many key to our we part we to office, situation middle not install some a we even continue providers, by back of these for either or fully Alpha also substantially growth but in going And weren't what for So as forward, were to will be any, that doing products,

key part a it. that's So of

that's As certainly there. that asset we the not That describing look and assumption the have where the to for in we servicer both those Eric's attractive, think about always we're the clients ability opportunities. numbers, indexer the is common

gotten obviously number. do So questions based less that response trying to what dimension, more on do averages. is we many here, we've what it's we were revenue, need in grow It's or to really to to

in quarter, fee we're So to goes assets, given in which, kinds of down. to the X.X bringing extent then year or given obviously, higher the a

think it. that's the to So way about

never can you'll not, go what are any particular us. be got quarter You of or the you're from quarter of making to it of if nature at able there you way you a say, understand business not and the to well, of was which down -- end underlying one the kind you the click say

Brian Bedell

Okay, you. great. Thank That’s helpful.

Ronald O’Hanley

Thanks, Brian.

Operator

Rob with Research. next question from comes Autonomous Wildhack Your

is line Your open.

Robert Wildhack

morning, Good guys.

Ronald O’Hanley

Rob. Hi,

Robert Wildhack

You in quarter. called is pressuring out fourth client reduced fees servicing some the activity

wondering or level about? Just out then And respect with played activity, it outlook that year Is client this year, the how you're the next qualitatively, thinking more expectations. of for XXXX? to

Eric Aboaf

is business. servicing trading of of activity are fluctuates a growth Yes, our we really features of Rob. quantify tailwinds Client of It's those the how of Eric. There kind stuff. represents in number some one others volumes there's our the we and of to headwinds, just do particular, than creation, for more in complicated, cash little because they're ETF of a tolls more some that have clients, because that tolling trades that, tend likely have kind derivative redeem and that

list we a our fee volumetric elements. part long of of kind of to a schedules has it's try but So it that quantify,

XQ of I think trended ago, down. the volumes year-on-year -- a those some activity client 'XX year basis, the -- versus on a actually that

hits a servicing it So an time That's of servicing about fee worth fees, us. was it percentage headwinds. a point example against of

X year it of XXXX, full almost a For percentage was points. positive actually

-- activity in saw a quarter, So tailwind. we the first And particular, was that helpful. obviously, the second in as all quarter,

on we're to that. year, going to lap Next have ourselves

a probably So be X%. it'll headwind.

headwinds. what there's net got If there's it's or And matters client then in on does back historical is referenced that right, our us new one of everything fee drive and of those matters, close an that to that always normalized market, well the last importance kind right. gross is normalized I tailwind to that something levels. new headwind that and So news matters, good have business, kind effect. the pretty the equity matters. it to activity And it reminds This business as of sales growth, [indiscernible]

Robert Wildhack

give you'll Can potential us thanks. to also business there? products how offering you're today? detail PIMCO on with about Microsoft, be I IHS, compare that there the others. And to the you Okay, What standalone wanted more some contributing services offering and forming and ask and will structure the your

Ronald O’Hanley

it's Yes, the to good referring happen. as Rob, to own early terms custodian And our that going was role that what's given days to early a a days we And as well this our hang Alpha you hub. around, you're in was it's if play initiative of as that product, view will. there

have early We more focus early on, much initial that's report. helping firms not to and a terms in it's so that to are going managing usage efficient very also in of really data clients data data but is how part it's way. it, just employee develop kind its again, of and But, there's days on of

Robert Wildhack

Okay. No you. Thank problem.

Operator

Aboaf would closing to over questions Eric further like time. remarks. There I are turn no call at back this for the to

Ronald O’Hanley

and your we I'll attention to take It's up with it. you look forward for Ron. following you. Thank and time everybody

Operator

today's concludes This conference call.

You may now disconnect.