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State Street (STT)

Participants
Ilene Bieler EVP & Global Head, IR
Ronald O’Hanley Chairman, President & CEO
Eric Aboaf EVP & CFO
Kenneth Usdin Jefferies
Glenn Schorr Evercore ISI
Brennan Hawken UBS
Betsy Graseck Morgan Stanley
Brian Bedell Deutsche Bank
Gerard Cassidy RBC Capital Markets
James Mitchell Seaport Research Partners
Alexander Blostein Goldman Sachs Group
Steven Chubak Wolfe Research
Michael Mayo Wells Fargo Securities
Robert Wildhack Autonomous Research
Call transcript
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Operator

Good morning, and welcome to State Street Corporation's First Quarter 2022 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 part without the express written authorization from State Street Corporation. of website. will broadcast the housed authorized Street State only this be call on The

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

Ilene Bieler

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

During the questions Q&A, please then X limit yourself and to requeue.

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

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

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

turn over Now let me it to Ron.

Ronald O’Hanley

and today, Thank we results. released good Earlier Ilene, afternoon, everyone. financial you, our first quarter

geopolitical included and briefly significant like developments Before which on the as reflect notable I both environment would operating the review to results, movements. quarter our in first well market I macroeconomic events as

presentation. X our Slide of to Turning

Street's X,XXX to some Ukraine. like invasion events employees In I First, in crack in traveled approximately to State Poland. I Europe of ongoing visit the to of out Russia's would March, acknowledge following

number I to selflessness as continue and important interpretation colleagues shelter moved homes providing services. of was Poland, a ways offering Ukrainian displaced of visit, such professional who our people opening from own the in my their During to support in by support,

small, dedication stakeholders exposure be time. and our is to what our other to to in Russia teams are professionalism and for Street's fluidly very with the situation and Ukraine stressful responding and delivering State direct a continues While clients affected

and continuity business continue our for have plans our We designed critical tested people. services support and well-established to clients for regularly

also plus quarter conflict to chain ongoing disruptions broader macroeconomic partially forces. set dramatic driven supply tight the multi-decade by COVID-related highs. rising continued has first the market contributed of in The energy movements, effects reaching fiscal stimulus a saw A significant labor market, Ukraine, prices, and inflation of

Federal quarter a result, currency interest in well As stronger we the substantial first late since the the a from of the Each move March, takes a dollar. in before now you shaped in quarter, upward through XXXX, detail. and equity our rate markets which financial as Reserve Starting saw long-end will and hike results first volatile interest as more performance. part financial U.S. State Eric with Street's rates these factors discuss in I in

stronger an improved remain by Within higher capabilities, just U.S. first increased First by to investments in highly well, revenue FX EPS first quarter in new our with business revenue net we up year-over-year excluding continued increased supported global items, XX% fee flat total total market and expense earnings particularly and growth revenue and the X%, year-over-year while X%, performed interest income, the stronger fee improved, controlling items, excluding by notable operational ongoing were and And Street's productivity was revenue, both markets expenses quarter. volatility. quarter performance dollar. the Notwithstanding total year-over-year State notable also on efforts franchise base. our driven higher supported focused and 'XX leading performance

relative positive operating margin and expansion, ago return pretax good earnings on as both delivered equity period. and leverage higher we growth the as total together, Taken fee well year to

can you amounted end. good middle revenue the we office for trillion which momentum, asset $XXX quarter, business end. $XXX management software of to another the which first AUC/A data Front annual at at quarter, year-over-year of billion also trillion recurring business million. Global with see our installed experienced AUC/A servicing Advisors, recorded and solid momentum while wins, to to the XX% slide, $X.X increasing across quarter new totaled yet assets At under $X.X but to not first quarter amounted in quarter the Turning won

despite Importantly, we the saw inflows of quarter. first in the volatile quarter environment billion net of market another solid $XX

well ETF continued further we Our and ETF focused business perform innovation offering. as to our product on enhancing

the to where and State developments. to SPDR ESG across digital considerations quarter. Advisors launched first announced market exciting helping a their into new At portfolios. digital a assets Advisors settle into expanded of intend co, offering emerging income innovate can custody March, entered the digital industry Copper of and develop within equities, a clients We debut number Global international In leverage which Blackstone X actively to by we aimed with we as active licensing fixed Global institutional-grade ETFs of Copper.co's income Street. ETF XX% institutional agreement asset at a In ETF the the high their category, Digital, January, for we in SPDR managed in with environment store its of infrastructure. technology trading Street in provider small-cap net State example, secure incorporate accounted U.S. ESG-oriented For investors flows an February, and custody operated continue offering

capital. to Turning

capital significant healthy, declined to rates. the interest lower quarter-over-quarter, maintaining remain by Our AOCI focused largely the In due coming CETX quarters, we driven ratios remained moves in strong although ratios. on

we Services the progressed Investor regulatory proposed more BBH than review the anticipated. Regarding process slowly has business acquisition for of the BBH,

regulatory While federal notably have banking approvals, the most remain to many relevant been approval some approvals required obtained, required agencies, outstanding.

the are to are regulatory the potential We review. of of modifications bank evaluating transaction that facilitate resolution intended

regulatory are concluding the reviews We quarter. third during working towards

BBH, or an excited be agencies, regulatory overall Services about outcome we business. timing parties, and no combining in strategic the the review. continue of opportunities While be their financial banking to dialogue of of the ongoing BBH Investor are engaged Both with can federal with and relevant Street State our there assurance

with of while planning. earnings work preparatory the planning. our transaction team technology BBH year macroeconomic clients opening conclude performance work all This expect by the closely geopolitical State remarks, defined events to developments, my and are unexpected We in post and per metrics business -- product, financial delivered colleagues. and well first and closing. We To an to significant supporting in client quarter be was accretive improved face the operations, year-over-year Street momentum and in share pre-integration notable both to still which market on communication first solid as includes first the the employee as continuing the quarter

is As within our while ahead expense look insights world's and of through heightened me and that, take continuing market control, we turn the remain volatility, it over managers for let improvement delivering more across and better the of to of outcomes in provide geopolitical Eric in execution strategic And recent discipline this the to on excellence the maintaining to detail. all promote effectiveness middle capital. with in valuable including owners laser-focused the quarter our front, and sales and uncertainty you office, environment we back what

Eric Aboaf

reported of review my We acquisition costs. of Thank I'll restructuring $X.XX excluding X. or Ron. $X.XX on begin our and quarter EPS you, Slide results first

many expenses. fee roughly see control yet the slide, both On At in our time, total and same revenue we the another franchise as year-on-year held had strength total continue in businesses, with the quarter we we macroeconomic can expenses invest of the left growth of panel of solid this you environment. notwithstanding to flat

continue As making improve to result, leverage year-over-year. a growth. about we points drive demonstrating and positive to All our quarter improve pretax margin are quarterly percentage performance, generated we this things continue another operating X considered, the as we operating our progress and was of the in model strong

was X% the AUM in Turning increased driven Advisors, saw inflows X flows with year-on-year Global to largely but the partially levels business was equity Cash and We higher quarter-on-quarter sequentially. levels, largely X% result inflows period growth. year-on-year a sequential which net year The end was was levels client to all strong Relative our The market period decreased of higher our and was at increased institutional period franchises, of in markets. net and offset end coupled businesses. Slide ago, Similarly, lower primarily market end XX% equity driven period-end billion driven net year-on-year, bond lower The levels, also by X% increase decline by both ETF, declined market X. market and new decline strong across quarter. the quarter-on-quarter. by the $XX by period by of change AUC/A

Turning to Slide X.

client on the back-office our middle were start, servicing are side offset Before flat servicing page, would the higher I and total average normal of we that business and activity to servicing translation flows fees line levels disaggregating you'll market year-on-year fees With see equity fee quarter headwind. remind new a you services. that, first office the and and like were into expanding revenue net as X% disclosures headwinds currency by left pricing I by

it offset and both I medium quarter-on-quarter, to headwinds due the growth good it our X%, segments. a were to and in over result when office our services were fees quarter-on-quarter, back an proposition was good by both both comes pricing term. Notwithstanding primarily average down down from the servicing strong just Within decline legacy office driven factors front we flat Middle official component levels middle the market growth the when see X% and a is year-on-year of quarter. partially by fees described. to of to the and transition front activity. and Sequentially, continue lower X% quarter, in equity seasonal connects total office in see climb and professional the to Alpha We lower office client partial fees, and client back both year-on-year largely important the expect office, servicing servicing insurance the institutions primarily fees a as

a uninstalled evidenced which I'll in our As talk revenue backlog, more moment. about by

In terms I'm XXXX started. of has business with momentum, how pleased

wins solid As quarter quarter won of trillion we but AUC/A billion, AUC/A yet amounted of X end. $XXX to to installed, $X.X while report another at new be

be to and that particularly continue premium a happy quarter span of our strategically important report also preferred wins pipeline, first I'm good and pleased We clients. our to with mix

X. Slide to Turning

quarter-on-quarter, I up lower net were due note, was the inflows inflows headwinds, net quarter across equity quarter. point money roughly performance the for fees the about business our average ETF. fee down the management fees management inflows. management impact X% waivers, would market year, million largely and partially following million, basis and With of higher in to with we that longer fees was in positive billion year-on-year, $XX to starting fee market quarter be primarily market strong expect X% $XXX waivers levels no of by fees headwind offset franchise, note management inflows. April. money from Of this down to strong quarter entire for Management and March we Cash million, ETF to fourth fee tailwind were respect equity the waivers XX Institutional, waiver saw Fed supported fee in the to of a First by reflecting our $XX fee $XX hike market

As that helping see pleased billion the revenue particularly which the also actions slide, FX Relative our you well-positioned had and On Slide contributed higher the you previously sequentially. now performance bottom to market revenue ago, I'm see volatile in moment. services uptick has put we've our which the flexibility of franchise to franchises environment. can in a even Institutional the FX quarter. FX quarter-on-quarter. to benefited and client are the while that that quarter, on the I'll demonstrates high $X come our to remains we sheet X% in ETF Part long-term strategic work higher taken yet assets for Both about growth. year-on-year year-on-year and in trading back strong of risk-weighted another can period up this market FX come draw and current from inflows services a year XX% balance from trading quarter-on-quarter X, was volumes volatility

declining assets solid revenues agency were partially new mainly Our and alone, custody. agency primarily Sequentially, fewer enhanced reflecting securities by specials. levels down due balances business year-on-year, X% the wins custody and enhanced decreased offset driven average X%, finance lower in average to revenues market by lower

with by largely quarter I'll office processing higher X% First and fees software shortly. XX% up associated front year-on-year revenue turn data and driven and quarter-on-quarter, which to software CRD, were

quarter-on-quarter, and $XX fee investments. other doubled fair adjustments on of Finally, value revenue million year-on-year almost mainly equity reflecting

on-premise, you We've software X. provided use revenue. professional categories data software broken Slide to services consolidated have revenue of front into revenue breakdown a Moving the on down and the left. us and our before, seen We've office software-enabled

also majority Data and CRD a revenues Alpha [indiscernible] are this Platform well. Alpha Data While here of as represents large included line, Services,

growth strong, earlier, driven continued revenues. by the up software As XX% as strong as in was well revenue office professional front services on-premise software-enabled primarily we've highlighted and year-on-year, particularly renewals growth

On slide, the key the Alpha. right enabled some metrics we've by and growth of provided CRD

Alpha presentation, during components forward. has both As of today's both the office and out key uninstalled going future backlogs current is annual The The earlier growth revenue of front the $XXX you'll technology remains the front notice expected the revenue, I both transformational tripled and to middle The and infrastructure. we've environment the reflect alpha proposition annualized pipeline clients revenue is office year-on-year indicator revenue $XX million. in mentioned backlog and of to and middle benefits XX% front the as million that office middle are geopolitical office operations compared of which up fully businesses despite of our to backlog, once base across $XX be million office their installed. than backlog more XXXX which promising can an broken realize

Slide XX. to Turning

also rates, in X% up by balances. portfolio short X%, coupled first yields increase we long in end rate will quarter which driven NII better increased higher both investment loan in improvement As came us expected the investment in fourth tightening start quarters. our the with the by portfolio year-on-year, benefited was to higher together largely was due with of to quarter, higher growth and balances, see future our rates. NII primarily another Relative cycle, sequential The than which long driven which end benefit

slightly this right relatively slide, seasonally of deposit year-on-year. X% up XQ balance been but the down our which fourth first balances, during steady. assets were On high seasonally we largely average has the the driven show down are quarter, sheet Average lower quarter-on-quarter, which from quarter, by

Slide to Turning XX.

targeted resiliency. of excluding try and translation. by making fee been due X% higher quarter first expenses expenses partially total locations Information technology current optimization and higher were leverage were Productivity growth Digital. to on excluding including currency compensation First translation the year-on-year operating growth quarter continued fees. notable strategic was State to savings technology in-source in automation, and delivering of savings. in items, X% and partially investments or focused year-on-year quarter-on-quarter costs environment. savings and primarily quarter investment quarter expenses, $XX and the was and first footprint approximately for expenses impacted offset infrastructure, other basis, Street the up we've the the began by were Headcount generated to expenses increased investments to most we and vendors X%, items, XX% for adjusted communication productivity macroeconomic the X% we remain as demonstrated businesses, that and in on million our due Relative self-funded a amidst was Overall, professional as from benefits down and positive in optimization this slightly Alpha remain notable primarily Compared broader maintenance and have we up technology down Occupancy X% by lower footprint seasonal on item employee in reflecting systems to increased high-cost line as functions lower infrastructure count Alpha. expenses. higher quarter, some tailwind fourth and currency and head offset seasonal

evolution of CETX Moving our to XX. X We leverage Slide show the ratios. Tier and

an by $XX end, during denominator increased first to numerator to percentage year-end, allocation RWA fourth strategic CETX the of points on ratio the the had about and of particularly AOCI base unusually billion this discussed; a by standardized quarter to points that revenues low due that the driven effects. basis the quarter our by RWA quarter-on-quarter or quarter first CETX a of RWA XX.X% modest to saw additional long-end businesses quarter basis to to the compared As of the roughly X markets factors: also CETX January our XXX decreased XXX rebound X.X temporary capital quarter; the our a of time, and XXXX from by started of higher-than-expected capital generate historic substantial we in billion, impacted planned impact as reduction X $X.X same for. quarter-on-quarter in was fourth just rates, of curve. in we and and significant points from implementation movement relative worth the SA-CCR of we At year, which lastly, both belly

largest points U.S. basis in the last For of the treasury in rise years. X-year the XX was XXX the instance, roughly

Taken quarter environment together, of the our quarter. XX reduction to CETX In leverage AOCI, X of the about drove net this accretion, decrease partially by X.X%, mainly RWA, rate in AOCI, first change the points a slightly stable the increase a in coupled ratio dividends, meaningful Tier basis substantial interest offset in earnings in only balance was a in significant by and sheet. decrease contrast, down reflecting driven with

While move for program to return our expect remains higher explicit rates, recognize related sheet in operate given important our with capital interest this quarter us, its share the billion conservative AOCI no balance in resume shareholders, as and $X.X we an to priority longer repurchase or second we to philosophy. a third we

includes and runoff. and possibility several allowing taking increases, AOCI risk in portfolio rates risk actions process to securities lowering as the consciously half. to further shortening swaps HTM the are the duration through volatility well reduce Given shifting of about by of as additional we This significant primarily portfolio AFS some in the extension

reversed these at higher in choose rates. Some we reinvest the can to be latter of actions when future

financial our was processing and primarily well-controlled other up solid Total XX. were the our first Despite are year-on-year, software management trends which and fee performance, driven progress a fees, flat revenues. volatile FX businesses. and demonstrating were Slide in our by continued fee operating higher the quarter with results. pleased of environment, year-on-year, within our We Expenses to held making underlying I'm trading, revenue we improving roughly summary fees Turning model. market provide demonstrates X%

Next, look while and have the out economic in over rate the is forwards, Fed I outlook would like X.X%. our the assumptions line outlook At regarding some thinking provide of know moving, of a current our been rate year-end a second quarter we to current broadly we that with assumptions rate suggests as level, which year. our funds macro

expect fees overall of X%, management sequential down for trading with terms X% flat equity we and and some on about X% up revenues. of March XQ XXXX, servicing fees be to up levels In second fee XX revenue about basis, a remain quarter markets in assuming X% FX normalization to downward to

other newer a terms revenue In the to investment repeat software office see of of that the fee in line the line renewals size we started front this expect we in in not quarter, on-premise the of to our items revenue positive line some would XQ. disclose markups equity nor of

Regarding to the portfolio I NIIs, we by increase X% the AOCI actions which partially X% earlier. rate to expect outlined mitigating will now expected offset be sequentially, that XQ NII by Fed driven hikes,

expect For now as as our see of full and XX% the portfolio. well around to NII actions depending growth of to on we year-on-year moves XXXX, year rate Fed and XX% shape

and on expenses. productivity We remain sustainable Turning to controlling driving improvements laser-focused costs.

to around XX%. of ex-notable taxes, $XXX the around of rate expenses expenses basis, quarter that will We excluding will XQ notable a we sequential X% million. 'XX items expect that On quarter seasonal X% be compensation and on expect be second up items tax

back let expect deliver the with on goals to that, expansion and and call And margin fee leverage We total operating to year. of to positive the hand Ron. our me for continue

Ronald O’Hanley

Thank questions. up we open can And now Eric. operator, it to you,

Operator

[Operator Instructions].

Usdin from We have Jefferies. question Ken our with first

Kenneth Usdin

to a the all environment. on rate just Eric, related follow-up things

appreciated. to some Brothers of -- be what Any on with on deal Just wondering, Is considering side? structure? that capital thing about might fix and commentary Brown elaborate some would the you of alternatives all, deal. potentially regards just Can might timing mean? there help that is Or first you to the that that have related to the type

Eric Aboaf

from path today. Eric. No, comfortable XX% almost close from from with perspective. a we're being a prepared got quite Ken, it's capital a very, to perspective, ratios I capital the We've the But for modifications capital a We've we're And think, The you've got smooth capital closing. to talking about and time underlying structure, we're systems entity are seen around this just exact transfer of structure and the subsidiary legal working third-party before. of through time done contracts. transaction.

kind this we modifications the that structure make be a cleaner on process of agreements, those of think favorable servicing fronts. several Some transition and and will

Kenneth Usdin

general And might zone potential then is you think about of there any updated closing? for about what thoughts

Eric Aboaf

Those Ron process the team. Brown process further We've because regulatory process the in of refined has had that the dialogue. longer. We're Brothers engaged take bit review months been getting for with heavily through As that in will additional and review a some obviously several modifications of leadership deeply taken working jointly we're said, submissions and of in.

I prepared through how out. think Ron have plays sense a think And that's I quarter. remarks, expect to during those the the why for reviews third you this in we that come described

what we've I be at weekends mindful And usual, usual we and and financials do on for you month given come those week then through, calendar, think the to to exactly at of. what that just we a controls look out now but to you want you depending how got -- take obviously look just close the always sprint carefully, the that close, do and point, then we close. the

Kenneth Usdin

-- do impact you ask I'll thought it to just related then others. of you for And just NII restructuring just actions a to the might versus NII? guess you But Okay. starter and what know one I -- type the leave on can have

Eric Aboaf

range a of There's that.

be quite up for seen to of NII actually X% going quarter the on I nice. a up to And X%. think you've basis us that year-on-year to is guide

is possibility kinds an that in think few that take I to on could willing It's points that. that honest, And those of X.X. run or percentage of a table the we're of both volatile highly basis another to a have make can portfolio be move could a withstand portfolio we to think, adjustments percentage to another growth worth appropriate it's X.X rates a what a including so environment, off willing basis I it -- and that. we're to points, XXX do sequential we NII be want XX, rate

So we'll I not a kind AFS from those be is the of adjustments, of but And are, the margin with doing I'd it's HTM, a that's that's to impacting. range. even in is NII There lot range are move of which with others but balance, think the some what the you. on that share that

Operator

next Evercore from Your ISI. is Glenn Schorr with question

Glenn Schorr

implement by including industry. the wants saw the is is the So letters, SEC to T+X the end nobody of next comment for personal year. in My ready opinion it I yours.

seems So technology? Is and be horizon. move I'm weird sorry, It's little T+X kind the T+X spend money back. -- T+X and just to the easy the from why everybody T+ time of complexity Is the it curious pushing to shorter to to T+X I'm was me. a T+X on to to

Ronald O’Hanley

does these in of amount thought amount don't get in that Yes, burden, you and spending has this some some and to look think and added I of reasonable a back and an mean and in time. can't it's history, will about that. of because a regulators Glenn, this spent think changing something it resisted it's systems all on it Ron. We've that. with but everybody I I take done Why we if the in involve be moves degree fair have industry time conversations been don't money

read know it. comment I haven't thought other how I -- not we've letters. about people's I'm So

sideline LIBOR, it will us you will but our a history, players. lot or things a of one not take to, of So mind, major something certainly like take if will, these sideline going more that it's that's lot time, other in effort, of be a think we recent

Operator

Hawken Brennan from is UBS. question next Our with

Brennan Hawken

The base $XXX of out here. back out then right and the do sort we the that -- X% a we're $X,XXX that -- we right? X% do back is million what take to grow seasonality, million out plus expense So clarification supposed the and then to guide, exactly supposed and Eric, we're quarter-over-quarter x to a but that? Just was -- the

Eric Aboaf

open Let just the me up slide.

are out estimate Yes, we've XX can which That So X% you're $XXX the that can expenses. you expenses, footnote, line quarter. you deck add take and slide then Slide first X% the of doing $X.XXX includes that of for I it, in seasonal That's to and second think with how million, on pull Brennan, sequentially the get right, it. you the of correct. described on billion can an

Brennan Hawken

Okay.

And of then you are The the see the see where quarter shaking here What growth talking meetings, quite deposit expectations, in -- about were hike, suggest that back normal runoff started hikes a with pace What you or customers? to could that's when seasonality, X any deposits. -- that there up your might about here in is around market. wasn't least the which up end And to but in about updated the thinking we likely next see a dialogue kind few next you been estimate decline in think we've how your you two. expectations deposit action? out at or policy do have you the would unusual rates see deposits, Okay. seeing, you've flagged anything policy -- already

Ronald O’Hanley

Sure, Brennan.

time has translation of of what the than which it's is also for being, other currency carefully look little seen And through. we've been movement regardless in played flattish, within all the it. of watching client time we'd currency and across been across deposits obviously we a a seasonality, we've expect. bit way at For And little bit the But deposits this bounds being, little segments. pools of

the then that $XX those I of many since the estimate by to context about amount because with about period. quarterly, as of has and the of extended to forward, We've quantitative tried the word go I the go guess estimate, guesstimate also others movement best the billion the not deposits, tightening balance see the for grown Fed I time of increased we to announced. increase the others of billion. back its by And expanded base we era, we'll and by sedan $X quantitative that pre-COVID deposit billion of is we've As our that trillion. primarily billion sheet guesstimate, level other have $XX banks like we you And has we to in our $XX if come that Fed effectively use half deposits have central $XX easing during kind AUC/As of from the that XX% the shift

see we of to June, deposits. over their little sheet, $XX that could billion $X $X the started or of a rough the exactly the kind every being for Yes, see $XX so fourth think, And the in that. when after see time in math billion trillion down, you in to they pace. and going runoff trickle expect they get with year $X we a our May billion per And billion we'd announced reversing balance quarter at then we'll

our with that's deposits, as be We're with obviously rates to and drive. happy So deposits plus we're guesstimate. plus

time for now. right them monetize we'll So the guess But being. that's our

factors how interest other are rate play hikes the out. The

exactly same We expect betas as they they're the never to similar, before. be but are

And there. we'll so be sharply focused

moving some point. So of those are thinking our parts in of at this some the

Operator

with question Betsy Our from Graseck Morgan Stanley. is next

Betsy Graseck

to clients to And you going expectations. get do announced to you've Last And State of? as execute sense Street What year, relative you what been your Digital. to a are there? asking more able wanted to on I how that's

Ronald O’Hanley

focus on on and Yes. spending a lot is Maybe lot Betsy. decision going a I'll last question first this it. had client-intensive They've time on, a of very because that

really of help comprehensive uncertainty a the in single the framework what institutions a upon see agreed regulatory lack the lack left framework. can and particularly an for do, acute the guidance of banks. This clients U.S., of is kind asking -- lot of the with is think are has particularly biggest I thing and is

out there. that's So

that, Betsy, of accounting would time clients it, though, portfolio them. it's firstly, a where be around that's It's enabling the to most trading digital of the It's invest a of around we're And spending I of of beyond them, lot is, but movement and custody of not them. think that's control of in them. just the the them, assets.

what do about So it's tokens, et really, now if coins, you assets, digital think cetera. we for

State custody, products Street does than for thing and itself that is lack about better it on, more the group as move of less stage digitalization. mean other large more for operations the and is world which is control, what which a does a into already? movement next think about, I such digitalized about core very really term, securities of And the it much the how focused it's external

We forming. are because with working ecosystems cases, some of access that. cases, be major very ecosystem industry want the actually integral players part lot to the are these want to the in a in we a actually other and in And we

there. where there's answer So I a would you. to bit summarize quite going on is my

Betsy Graseck

go ahead. yes, And say you that would --

Eric Aboaf

I And just Eric. going Betsy it's to add. -- was

have thing other holdings obviously, some especially added expect. right? is, the services effectively doing of fund, where clients, clients crypto providing The you'd their we're institutional within We're

of some the and ETFs exchange-traded specific clients the where base. signing at think, gone for one $X.X effectively their way see with of -- and of our funds. crypto we've land as products, I developing that, so through count And products an our next as are where that's those that industrious across ETP grabs where are client billion keeping, them because is that's part funds, then the we'll a because think the in underlying of age, have in recordkeeping more way, And They XX assets significant ETF and broadly, as inflows. about up we're view record exposure, comes I administration that right, we

Betsy Graseck

to for to at you would say And Okay. these you're investment offerings? more Or scale? do to there's scale get

Ronald O’Hanley

around one where of there Yes. relatively now expect a would excitement are But but I that assets. total investment scale is mean, scale, will as small I think required. more much is this, still proportion we as it's adequate of be

we're I scale. So think adequate at

additional now about more growing. think we on the do think capabilities how is focus I

Betsy Graseck

going that. No, CBD But be I through, have this to totally fees come central it's as -- Yes. get bank digital currencies. to infrastructure critical

Operator

Next question Bank. Deutsche with Brian Bedell is from

Brian Bedell

Just back of potentially one just could move time. timing the that guess on more into quarter. closing to BBH, I fourth

there to any side is to mostly say terms U.S. it certainly under is the closing as risk it not close regulatory it the And to Just -- this dramatically. before And safe is non-U.S? opposed would you changing without that year-end? think

Ronald O’Hanley

than mean, of less progress. is I uncertain, longer making but more over dialogue. regulatory taking anticipated. It in so, last probably we gotten we Yes. the years couple the are Brian, We're is environment been so

the that is doing to all the and we're anything working accelerate amount on But not fair earlier essence to speed So aimed in trying amount we it's uncertainty. there's fair or here. -- of silence at there's like of a dialogue we not kind restructuring a there's view We're referred this. explicitly this that of is of the

the actual at then prepared The in review that services and these this it going and in -- timing be amount U.S. is regulatory mostly close of both money ones right noted, get place. it's banking my And Eric and outcome is world, done, third are mostly a both of of globally. And the take fair time. what from yes, the there'll of from we're a now, been once the itself really regulators. targeting I in around uncertainty financial antitrust the planning, reviews. said integration a is isn't approvals -- open just mean done but will quarter. lots around the ready. remarks, regulators everything assuming the point to lot We've -- There's this Eric I reiterated, the the as regulators and the of review as So is received the

I not But is done. of So the one minimize done. until what to things done be those want been is has this one that may don't last

Brian Bedell

color. -- just deposit great again. And the makes the That's then sense. That maybe Yes. on side on

billion if on can and But you if level coming BBH you and sort Ron, if of pretty Eric, maybe, Fed little bring to some was you're how point. deposits that talk $XX fundamentals assume, guide. least last in than the the better for to -- other deposits, the just I hikes then just your obviously, up thought us those on, about example, interest of think gave deposits since bringing about your it is know thoughts I on at to be close good that thinking more it's bit. update BBH pushed BBH of I change delay? it additional Maybe or to a probably that, appetite want if just about to for deposits incremental on core any there's reconfirm additional the are right the So the on at process out today, you side, original getting would given tracking were And thoughts capability your now,

Eric Aboaf

been be a the -- had pleased we've a bit It's downtick. year. coming good little had are obviously, But bands business we working bit as quarter to finish partners really performance that to it's partners, Ryan, it little Brothers of on We're -- been performing And NII a really, Eric. And that operating to it. is of expected. Brown about had equity expect, a well. with us We've -- market, job business over offset are within in that fine is which the have that the the X it's we'd monitoring excited It's by business, that's the last there, a as continue the nice first a in a doing been see. business performance. and closely we tailwind there's

and the and of and deposits the terms assets the broader and close questions. In modifications the the

detail point. the transaction. economics not to You're on into this go of at the asking going I'm that underlying about

we sound modifications, make those economic remarks very are our what in accretion think we're is, work are a the and in is with we first economics affirmed navigate be the that finance tell the modifications through legal I'd looking within kind oftentimes I of and for. entity his And year. as which the side legal that they where preserve that that sure colleagues closely the they'll Ron you working accretive and structure prepared treasury the to

to be think positive And will it so we we and continue be positive, for shareholders.

Operator

with from is Cassidy question Our RBC. next Gerard

Gerard Cassidy

Can share things back, if decline, think that mean allocation bit. equal, the you CETX were you second -- when for used better the ratio on meaning talking you quarter. market comments up that quarter, other elaborate was RWA And allocated your your being could revenues -- the the RWA would does in capital you some I with little of pull bump some all that? you a the business us about additional you can -- you that temporary the in capture to that in ratio Eric, generated CETX

Eric Aboaf

there where can constructive capacity a we you have think, were about, hey, to more if commercial this that use? lending are we at That's -- and kinds be of real put it's nice they and they our limits had sophisticated sometimes with U.S. the larger one unit sometimes hand, the dependent And facilitated in by, here are capital we because And opportunities, on anticipated those unit, I say, ratios, an on around quarter. had whether it's we're and in the that was up discussions limits, I top which their we do uptick or abroad, I'll market there's desk trading quite gave trading not little scenarios Gerard, Eric. close sitting we for even a the of it's the -- in that's whether house, think abundance as quarter-on-quarter, finance been sec they them on we're XX% and or sometimes FX come FX within revenues navigation right operating partnership them a capital partly are the saw of the now. the

will We probably below is are towards that you asset June. at what for couple we that see would to months. see where We'll do think of like or we'll our feeling how We'll keep selectively. I levels do today. another that we're RWA

we within So them do be those to expect boundaries.

quarter. we'll bear the through to capital and was real we're bring incremental sure revenues incremental But the that going to if selectively to work the we so there's want we that can part make And scenario it. discipline also this is deploy of here that

Gerard Cassidy

give up Very adjustments the to value giant good. QX in then, so a of the you in fourth the private but not strong were it's Can adjustments and And How a the equity I helpful. know fair touched quarter. year was color little Very more that? versus -- QX And there? it investments big a on ago Eric, you number, both us portfolio outlook the equity is investments? quarter regarding in maybe it and

Ronald O’Hanley

AI million, $XX over maybe we've large capacities in that not companies and There's made sometimes There or investments capabilities. we is we're minority of technology with us they classic almost are some the have providing different are the opportunities sometimes areas minority exclusively to are we've XX These them. time, million space, software, build infrastructure, are banks. are of that Sure, companies efforts, typically Oftentimes, and a the for group crypto and again, a an million, where facilitate primarily X investment positions service in trying them providing years. series over $XX that a providing sometimes investment in type primarily invested What more to multiple investments, primarily utility of -- portfolio. $X to helped providing and of in have some help that there's mid-stage that we're early engineering capabilities in so But companies. our automation Gerard.

So we're international an the in or G-SIBs you. with other there bank sometimes what or have

participate because network effectively effect they in services. get get for -- we entity banks, some the a multiple so -- gets and of upside -- And the we get we

-- benefit our So that knock-on we broader this because particular well. over time. of revenue up guess, we're know we've I capabilities these of one doing the the set. think, -- appreciate, couple primarily automation general saw really And we've space And build growth, to I probably These to to I see. market use. good the tend appreciate it is to be just or word think the this capability And it's which product either made quarter, help some we ways of is driving, been a to would innovation facilitate

Operator

question with Seaport next our is And Jim Global. from Mitchell

James Mitchell

you updated gave -- the expense Any in prior the for on year. fee NII change to year? full the quarter that revenue you Just, any full guidance Eric, or guidance the for the

Eric Aboaf

has equity markets, I didn't just whether environment that volatile it's been the go market whether it's Jim, because hikes. rate partly far,

number so of moving And that there's a drivers are around.

the more We'll explicit consensus Fed our to that early U.S. early markets they've the were dot go lines, really been will to expenses all call plot the between think in year. as it's the But where and still because so equity some just should do, still describe forecast It's the both felt the and adjust we for obviously to extent we the through. you. depressed. NII, think what internationally, go other just we and I through that navigate we of new

think firm leverage the total we do did description the quarterly after fee committed what and operating I finish a commentary that I to positive operating outlook was part of we're positive both as leverage.

boundaries think that you so working we're within. some that I gives And

James Mitchell

to But Or specials spreads, any security Right. appreciate Maybe down, we curve. the spreads. of think one thinking and between at the spread really the Series about I've you benefit that sec kind and lending I curious should just on that the of short factors. Is didn't volume? that How to seem always question just down, those see come? excluding Finance. in lending benefited from are I end of I specials spreads right? are -- not are about balances important a thought the were that on steepening

Eric Aboaf

Yes.

to of I being terms mix what a though find be little the are and effects to assets that have some -- think in special their a it given lent tends in of on quarter. activity I we directionally, dominant that underlying of the borrowed right, is P&L the And correlation. tend more the think you're or mix

mix So it's volumes -- rate that environment, that and has be tends the a but dominates. the piece the it to to

Operator

Alex Next question from Blostein with Sachs. Goldman

Alexander Blostein

and that is just as quarter look mix of the of position more guidance capital different learned sort this effect interest lessons factors appropriate as capital think and perhaps securities sort closing. taken sort your you the securities a capital we the ahead of back of and kind had move guys the the Maybe forward? the step when second. position as have here of rates basis multiyear just think us look taking maybe time after. a about of on and loans How from in for on BBH And you for think of mitigating to that a When portfolio? will of you steps the and What through over maybe to duration cash, well much

Ronald O’Hanley

Eric?

Eric Aboaf

good rates either the high or a move to for it's upside been in move Alex, either. years, going Yes, the environment XX upside maybe and where to XX this quickly right, stay not we've question to in or a way quickly are

couple think I that are a of thoughts time. over there we've developed

I lending a grow off the but sheet, XX%. the to better you've they are. add of sheet, our think add us the classic of assets, can to just our high off book -- XX%, asset It's quality, base. can have loans -- that lending us seen be you've it's we we to mix side of balance And more first the lending seen small the the we consistently more balance is the

in. area So that's we'll continue evolve an to

think will time. though some I that, that take given

to a ratios. do an kind unassailable. a down doesn't of trust The that immediately just you be in one other advantage that our that, rate as and believe it it's The that that We tend offset and do not because more of HTM well, high-quality, whether or builds. one of it of happens environment, our XX-Ks all -- put comfortable of monetize perspective that more our underlying and the on to reserve you want into or because run? why able Qs, elements in when what into appreciation here and the to just all the in is investment credit get Fed is convention and is portfolio what read which we custody the moves be pristine say, intervene a it heritage, is -- capital doesn't governor should take typically put to And think over we're putting or that affect an drawer, I securities, time you'd it's recession, in accounting on HTM market while you can through you

The reasons of NII allows don't a convention little been HTM. a we rebalance, within think time, of to adjust to additive XX little a you that or longer. AFS I other is, so P&L. basis points you our And that's to to shorter, beneficial. you're there. and And reason your here, position over XX the that's found put if rates that's why basis And flattish the are in -- all one if moving And it points of want band

the there And treasuries, not seen time think to it. the then put more I to about over in -- see what's guess And especially layer, that. a is And thinking But that's some are time, of foreign grow. some you'll I mix euro do we're so HTM, the a I think us but last there's limits composition. probably of a think MBS, ways become adjust the you've CMOs. I rise, international we'll of bigger and such rates we Because global sovereigns, part what bank, we're us over which as

evolve of, well as there's I the mix, composition So think, over a will time. bit the

Alexander Blostein

it. kind U.K. rate the And I looking tactical benefits a pricing bit I from deposit Got as effect extrapolating are When a thinking the That's first terms curious at behavior. both sort a bit of beta the to then on near-term how year smaller how of Maybe market lessons right. hikes But surprisingly question. learned the just beyond basis quarter, you full NII look client guys in XXX further assumptions the the about ahead of on guide, subsequent little guess, more us, guess maybe we helpful. All a of little of the through of seem hike points. and there have second NII.

Eric Aboaf

Yes.

beta the I like rate the in a hike, think generally as are bit read XX% basis little to the your I first assume to we easier point, XXX are points, the think, range. first

first X X. or the that's So

the you're So XX% XX% sequential it XX% hikes, the the range. Once I then to betas at floating you where that's depends. to you get should third past once comfortable first up think in or is looking X I fourth kind of in quarter and pleasing, I this say. are now you and guess, betas in get range, X the and And

decades NII happens. just back a I been think to NII where fair run we be And that's just want perspective, them. healthy. that and a we stack position -- The what the sharing is in can to embedded with should for support but to here you're thoughtful the our go capital to security with want -- preferred decades that's and honest, partnership also a clients the from we're be we

So at thinking. we're that's looking what and

of hikes that. how know the speed rate never affects You

use Some into comparable. of you, perfectly to because in I that's that's not been guesstimates guesstimates account think here, these cycles the those word estimates but again, we some taken given of aren't

an rates some But points we'll quantitative tightening as there's one then of been our well. how does, depending and that will it's lending. XXX And think thinking And XXX, last see factored some have have the of economy effect. to on I that of into for amount has here macro up the a is XXX, then macro if economy the if demand basis move lot the -- another strong, economy whether is

big there's this deposits to loans. And ask so between fund

have a kind as beneficial the real you not there's deposit If to that's slowdown much of to and then be rates. done economy, more lending that's going in

feature that keeping So a we're that's another eye on. close

Operator

Steven from is question with Wolfe next Our Research. Chubak

Steven Chubak

and impact that hoping ask here. Eric, So the maybe from question on of was BBH buyback a multipart to I informs cadence how capital the

we deal to we about think the if quarter quarter. next were to we ratios, through or pro impact the the buyback assume in capital the your third the as off X, So closes shut and forma

intangibles, believe it's XXX from pro about I Tier leverage. large of forma Given and hit, billion bps deal $X.X capital goodwill X the so about

would And XX%. cadence, running still $X.X meaningfully XQ the capital in confirm you drawdown band. right should we to is Your from purposes. target about returning close roughly or X%. quickly normal ratio about the thinking think bound at -- And to to BBH modeling getting for of for contemplating buyback somewhere that if billion out still the to I as below be if your X.XX%, how wanted payout you're just us we below, but exiting lower all below course level shake be lower

Eric Aboaf

Yes.

long think it not -- within to is I X.XX%. saying leverage. kind X%, target probably as of X in on times, on stay by comfortable record given terms. to especially it's economic a the X.XX% leverage as you remember, translation want But range been stay these divided measure. you in to leverage, think quite I've gives -- bit little closer to about getting certainly we CETX the the And the it's easier CETX But is in risk-sensitive a the of that the

target the we're pivot range If to XX% XX%. to CETX, at to you then back relative XX% almost of

an there spread almost So have. point we excess XXX there capital is that basis of

the quarter is it about on Brown if then -- for it's were to close, we we've had example, fast say assume forward think third should exactly the a But goodwill a If you billion. and let's what way is to Brothers call discussion and transaction this the intangibles assume. about is we $X.X for

I basis XXX CETX, think point you that the below into it's translate just if mark.

is, points today. points close prefer next we way X about you think quarters, is required, to from as actually through And excess here or the on been prefer, we've So got XX easily would hand, basis we the you billion capital XX but XXX can not do in of risk-weighted the net right, RWA another have you a $X one it's points lines, closing about risk-weighted deploying XX, logical earlier, through other it. to get pretty of we creates then That's over quarter, hand, by how straightforward, about points dividend. XX right? or capital accrete as so about capital about the of which rein assets there XX, basis the On assets. of And the our we absolutely there. We've more worth basis we comparison And got XXX part capital the process. talked basis a

levers that's said a and a process I why good capital from plan. closing there's earlier So comfortable it's here, and perspective,

Operator

Our with next Wells Mayo question Fargo. from is Mike

Michael Mayo

the sure on what call. understood I I to just said make you want

XXXX. So operating on guiding you're for for leverage positive the still hand, one

margin. pretax higher a expect still You

Your backlogs are up.

reduces clarify So ratio CETX acquisition just that's Brown equal, the how I basis good. all now, just points? guess all Brothers answer much else in by your your to

Eric Aboaf

Just shy XXX points, of just basis around Mike.

Michael Mayo

Okay.

so And now. you're at XX.X%

So the of low be end below close the if your now, you deal you'd target.

of So deal. are understand of deal the Or lack why because the I delay you in delaying capital? didn't the

Eric Aboaf

time. If now, position we even we nothing arranged would deployed we it billion, do to been has capital. had maybe RWA, described have would the about process just of close we comfortable taking we regulatory billion about more capital. a underlying not with $XX $X close and It's have not in -- have had of as deal. a the to It's it No, would earlier,

Michael Mayo

is relates Okay. of lack of And to then it due closing to solely the buybacks, deal? of of timing the the that the as resumption

Eric Aboaf

cadence I guess, during and AOCI comfortably where usual quarters in, do I hit it's put right? would -- third usually -- right? almost are of it's the us we're just we're worth AOCI just it that to almost we shares quarter estimating of capital. quarter. factoring X a quarter, buy on that navigate and That We're third close the process, and it's had -- million not potential we large because back of those billion Because $X.X with position my a has hit to $XXX per best of buybacks where be effectively second for in regulatory

Michael Mayo

All fee right. that all waivers XX% That's it clear. positive -- just leverage, Is like or for operating contribute of XX% or guidance roughly. much And then or that? do to how your lastly,

Eric Aboaf

fee to the -- total is operating operating well, guidance leverage. It's and leverage positive

you I the I if probably to team offline, but quickly, IR help -- think just Mike. the can math try do the

fee waiver the waivers, in of it only half any rest year, the Last and of the have million remember range. year. quarter, to the we year had trying waivers remember when I for quarter XX%, fee can won't This of second $XX had the we then per I'm because impacts fee we started

of our I'm a So -- absence maybe mental fees I about don't tailwind the doing even operating money that's market fee on estimate, total math fee is in of of pencil $XX point by -- waivers. caused know, without me. leverage But and front rough billion, X.X paper of

but could you magnitude of with in order we maybe up offline, that maybe at So follow least.

Michael Mayo

the mean of of I so to share most terms think There's in relate lion's code, not I of fee I have. ZIP the waivers. it does it.

got So I it. I think

Eric Aboaf

underlying real momentum. correct. That's It's

Operator

And Wildhack Autonomous. with our from is next Rob question

Robert Wildhack

there? quarter, describe the in growth how revenue would fee on about Just you organic

Ronald O’Hanley

mean, both I Yes. and Rob, it's don't line. start, management growth fee kind now quarters, servicing I why the the Ron. good on mean several organic of line I

that servicing of The of been is line, that, the the in kind which what front business, year, to there that and traditional would that you fair is disproportionately scaled to quick least a in -- at chunk installed, last the Alpha the now lot a think fee of that trillion. that if is and about servicing of were on we reported back. have you in line think being I in amount relatively was $X.X sales big back highly office see install. or the growth A

across It's the a And even Institutional Eric like board as management been core little the we Cash. bit that mix. in fees noted, and have it's then been, ETFs, businesses. of So

both we level it. we more, like as it. like like I the the diversity level So but we of always the of like of it. But you mean importantly,

Robert Wildhack

on the us $X.X to can starts hit just revenue? remind of the to then timeline for And be Okay. it trillion you when when installed gets installed, that and

Eric Aboaf

installed -- announced of were begins of and year. that smaller were bulk there obviously that remember, activities. X get trillion-plus that a that, Sure, and were Rob. It's third deals quarter last kind Those midsized $X Eric. in there's said to second And set the then We've of this very large deals.

and complex clients X delivering. they and transformational, are for what large those they're deals, we're those For right,

little installation tend XX to XX. And of from those -- installations we've for the closer months kind But we've think a XX They're said for said the take those so is middle take were to to to I range months. X ground longer. probably to

So majority installed begins right And get revenue. now, XXXX piece, lift but this a late good not by estimated to is this of then really is a our the year. that probably

Operator

to back There O’Hanley are turn at now will for time. no this remarks. CEO, closing it I Ron our questions further

Ronald O’Hanley

Thank busy you, thanks a it know day all you your joining Thank was for much. you. us. for very Well, and we I questions. appreciate so time

Operator

this conference wonderful for you have day. and and Ladies concludes participating gentlemen, and webcast. Thank a call today's

now may disconnect. You