State Street Corporation (STT) Q1 2023 Earnings Call Transcript
Operator Good morning, and welcome to State Street Corporation’s First Quarter 2023 Earnings Conference Call and Webcast. Today’s discussion is being broadcast live on State Street’s website at investors.statestreet.com. This conference call is also being recorded for replay. State Street’s conference call is copyrighted and all rights are reserved. This call may not be recorded for rebroadcast or distribution in whole or in part without expressed written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on the State Street website.I will now — I would now like to introduce Ilene Fiszel Bieler, Global Head of Investor Relations at State Street.Ilene Fiszel Bieler Thank you. Good morning, and thank you all for joining us. On our call today, our CEO, Ron O’Hanley will speak first. Then Eric Aboaf, our CFO will take you through our first quarter 2023 earnings slide presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterwards, we’ll be happy to take questions. During the Q&A, please limit yourself to two questions and then requeue.Before we get started, I would like to remind you that today’s presentation will include results presented on a basis that excludes or adjusts one or more items from GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP or regulatory measure are available in the appendix to our slide presentation; also available on the IR section of our website.In addition, today’s presentation will contain forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors such as those factors referenced in our discussion today and in our SEC filings, including the risk factors in our Form 10-K. Our forward-looking statements speak only as of today and we disclaim any obligation to update them even if our views change.Now let me turn it over to Ron.Ronald P. O’Hanley Thank you, Ilene, and good morning, everyone. Earlier today, we released our first quarter financial results. Before I review our financial highlights, I would like to briefly reflect on the eventful operating environment in the first quarter. Investors had to contend with significant market movements and volatility, driven by persistent inflation, continued central bank interest rate increases, and the recent disruption to certain segments of the banking industry.First quarter global financial market performance was choppy. January produced a very strong start to the year with gains across most asset classes, including equities recording the strongest start to a year since 2019. However, investors remained cautious about the prospect of enduring inflation and a potential recession in the United States.February saw that encouraging start recede as strong U.S. employment data led to growing concerns about the persistence of inflation, which in turn saw market expectations for central bank rate hikes increase, fixed income and equity markets declined, and the U.S. dollar strengthen.March saw a continued rise in central bank rates, which in turn drove shocks to both the U.S. regional and international banking sectors and the need to resolve a number of banks. All this drove negative market sentiment, contributing to large inflows into money market funds and a reversal of a number of the macro trends from the prior month. Both current interest rates and rate expectations decreased and the U.S. dollar weakened, although relative calm returned to markets by the end of the quarter.Notwithstanding these events, all told, global financial markets performed relatively well in the first quarter compared to the fourth quarter of last year with broad-based gains recorded across global equities, while U.S. treasuries experienced their best quarter since the first quarter of 2020. However, daily average equity and bond market levels both remained significantly below year-ago period with average equity markets down approximately 10%, which created headwinds for our fee-driven businesses impacting our year-over-year financial results, which I will discuss shortly.Before I discuss our financial highlights, I would like to briefly comment on the recent events in parts of the banking sector. As the globally systemically important financial institution, State Street plays a critical role in the world’s financial system. Our strong capital and liquidity positions, size, scale, and sophisticated risk management allow us to help safeguard investors and assist in providing market stability during uncertain times. We demonstrated this ability at the start of COVID three years ago when we helped establish the Money Market Mutual Fund Liquidity Facility and the Main Street Lending Program.During the first quarter, in concert with 10 other large U.S. banks, State Street once again used its financial strength to help assist in stabilizing the financial system through the provision of liquidity to a financial institution in the U.S., reflecting our confidence in the American banking system. We stand ready to support the world’s investors and the people they serve during this time of uncertainty through our investment servicing and asset management products, which offer clients opportunities, insights, and liquidity.Turning to Slide 3 of our investor presentation, I will review our first quarter highlights before Eric takes you through the quarter in more detail. Relative to the year-ago period, first quarter EPS was $1.52, down 3% as the positive year-over-year benefit resulting from our continued common share repurchases as well as significantly stronger NII growth were offset by lower servicing and management fee revenues, which were impacted by weaker average market levels, continued business and personnel investments to support growth, and a loan loss provision related to State Street support of the U.S. banking system, which I just mentioned.Turning to our business momentum, we remain highly focused on continuing to advance our enterprise outsourced solutions strategy across our clients’ front, middle, and back-office activities. For example, in March, we announced our agreement to acquire CF Global Trading. This transaction will further expand State Street’s current outsourced trading capabilities, giving our firm the ability to provide these services to new clients and markets.Importantly, the acquisition will allow State Street to expand its liquidity providing capabilities and offer a complete global trading solution as part of our Alpha front-to-back platform. The transaction is expected to be completed by the end of 2023, subject to customary closing conditions.AUC/A amounted to $37.6 trillion at quarter-end and we recorded asset servicing wins of $112 billion in the first quarter, about half of which were higher fee rate alternative mandates, consistent with our strategy. Encouragingly, this was our second best quarterly sales performance by projected revenue within the alternative segments over the last six years. We also reported an additional Alpha mandate during the first quarter as this strategy continues to resonate with clients.Our AUC/A installation backlog amounted to $3.6 trillion at quarter-end. At State Street Global Advisors, quarter-end assets under management totaled $3.6 trillion, while flows across our asset management businesses were negatively impacted by the various market factors in the first quarter. We continue to see a number of bright spots where we are focusing our efforts.For example, in the U.S., our SPDR ETF franchise gained market share in both low-cost equity and low-cost fixed income, while we also had strong inflows into our gold ETFs amidst investor demand for safe haven assets. While aggregate flows to cash were slightly negative for the quarter, this largely resulted from seasonal outflow activity in January. However, Global Advisors gathered strong money market inflows of over $24 billion in the latter part of March amidst the market volatility.Turning to our financial condition, State Street’s balance sheet, liquidity, and capital position remained strong. Our CET1 ratio was a high 12.1% at quarter-end, well above State Street’s regulatory minimum. This balance sheet strength enabled us to continue to return capital to our shareholders in the first quarter, while simultaneously supporting our clients and the U.S. banking system. We returned $1.5 billion of capital to our shareholders in Q1, including buying back $1.25 billion of our common shares and declaring over $200 million of common stock dividends.As we look ahead in this uncertain environment, we remain highly focused on maintaining a strong balance sheet position, while continuing to generate and return capital as part of our previously announced common stock repurchase program of up to $4.5 billion for 2023, subject to market conditions and other factors.To conclude, the first quarter included a number of significant events in global financial markets and with the global — with the broader banking industry. While market conditions were volatile, many asset classes saw sequential quarter gains, although asset prices remained depressed relative to the year ago period, which created year-over-year headwinds for our fee-driven businesses in the first quarter.While our year-over-year revenue performance was durable, supported by significantly higher net interest income growth, our results this quarter were below our expectations. We need to do better, and I believe we are equipped and on track to do so by focusing on areas within our control and effectively executing our strategy.In keeping with the strategic priorities I outlined in January, we are driving forward with a number of actions. For example, our AUC/A to be installed is strong, and by strengthening our implementation capabilities, we have line of sight into a meaningful amount of client onboarding beginning in 2Q. Within our software and data business, we expect to convert a meaningful number of CRD on-premises clients to more recurring SaaS revenue in the second quarter.Last, given the revenue inflationary environments, we will continue to selectively reprice some services, proactively manage our cost, execute on our productivity efforts, and stand ready to utilize additional expense levers at our disposal. With the focus on accountability and execution of our strategy, I continue to firmly believe in the ability of our diversified franchise to successfully meet the needs of the world’s investors and the people they serve, while delivering value for and capital to — capital return to our shareholders.Now, let me hand the call over to Eric who will take you through the quarter in more detail.Eric Aboaf Thank you, Ron, and good morning, everyone. I’ll begin my review of our first quarter results on Slide 4. We reported earnings per share of $1.52 for the quarter, which included a $20 million — a $29 million provision or $0.06 of EPS impact associated with the expansion of liquidity for U.S. financial institution, as we participated in an industry consortium supporting the banking system. We were pleased to do our part.On the left panel of the slide, you can see that our first quarter ’23 results reflected the year-on-year decline in both equity and fixed income markets, but was more than offset by strength in net interest income and strong momentum in our securities finance business. EPS was down just 3% as another quarter of significant buybacks reduced the number of shares outstanding. Against this challenging backdrop, we again held total expense growth to just 2% year-on-year, even as we continued to thoughtfully invest in product and client growth initiatives.Turning now to Slide 5. During the quarter, we saw period end AUC/A decrease by 10% on a year-on-year basis, but increased 2% sequentially. Year-on-year, the decrease of AUC/A was largely driven by lower period end market levels across both equity and fixed income markets globally, which were both down in the 10% range. Quarter-on-quarter, AUC/A increased as a result of higher period end market levels and client flows.At Global Advisors, we saw similar dynamics play out. Overall, our first quarter AUM was negatively impacted by volatile markets. Period end AUM decreased 10% year-on-year, but increased 4% sequentially. The year-on-year decline in AUM was largely driven by lower period end market levels and net outflows. Quarter-on-quarter, the increase in AUM was primarily driven by higher quarter end market levels, partially offset by some outflows.Turning to Slide 6. On the left side of the page, you’ll see first quarter total servicing fees down 11% year-on-year, largely driven by lower average market levels, client activity and adjustments, and normal pricing headwinds, partially offset by net new business. Excluding the impact of currency translation, servicing fees were down 10% year-on-year. Sequentially, total servicing fees were up 1%, primarily as a result of higher average equity market levels, partially offset by lower client activity and adjustments.On the bottom panel of this page, we’ve included some sales performance indicators, which highlight the good business momentum we again saw in the quarter. AUC/A wins in the first quarter totaled $112 billion with about half driven by wins across the growing Alternatives segment, especially in private markets. The fee rate on these alternative wins are generally more than 4 times the total servicing fee average, which makes this a strong win quarter from a projected revenue standpoint.At quarter end, AUC/A won, but yet to be installed totaled $3.6 trillion with Alpha representing a healthy portion, which, again, reflects the unique value proposition of our strategy. Given the planning and preparation since these deals were announced, we expect significant onboardings of this uninstalled AUC/A next quarter.Turning to Slide 7. First quarter management fees were $457 million, down 12% year-on-year, primarily reflecting lower average market levels and a previously reported client specific pricing adjustment. Quarter-on-quarter, management fees were flat as higher market levels were partially offset by outflows and day count.As you can see on the bottom right of the slide, notwithstanding the difficult macroeconomic backdrop in the quarter, our franchise remains well positioned, as evidenced by our continued strong business momentum. In ETFs, we continued to build on strategic growth segments, which is reflected in net flows in our SPDR portfolio low cost equity and fixed income suites.In our institutional business, we saw net outflows while sustaining continued momentum in defined contribution with the Target Date franchise recording inflows of $6 billion. Across our cash franchise, consistent with industry trends late in the first quarter, we saw a flight to quality with significant net inflows worth 7% of cash AUM into SSGA money market funds since the week ending March 10th, which largely reversed the seasonal outflows experienced earlier in the quarter.Turning now to Slide 8. Relative to the period a year ago, first quarter FX trading services revenue was down 5%, primarily reflecting lower client FX volumes partially offset by higher spreads. As a reminder, the start of the war in Europe last year caused some unusually high FX trading activity in 1Q ’22. Sequentially, FX trading services revenue ex-notables was down 1% with lower spreads offset by 6% higher client volumes.And consistent with the significant increases into industry wide money market flows, our GlobalLink franchise experienced an increase of $20 billion or 13% into its money market cash sweep program during the last three weeks of March. Securities finance performed well in the first quarter with revenues up 14% year-on-year, driven by higher specials activity and an active focus on business returns, partially offset by lower balances, which was consistent with the industry. Sequentially, revenues were up 6%, again mainly driven by higher specials activity, which was consistent with the market and securities lending industry environment.Moving onto software and processing fees. First quarter software and processing fees were down 18% year-on-year and 24% sequentially, primarily driven by lumpy on-premise renewals in the front-office software revenues, which I’ll turn to shortly. Lending fees for the quarter were down both year-on-year and sequentially, primarily due to a shift away from products with higher fees, but lower returns.Finally, other fee revenue increased $16 million year-on-year, primarily due to positive market-related adjustments and $27 million sequentially, largely due to fair value adjustments on equity investments.Moving to Slide 9. You’ll see on the left panel that front office software and data revenue declined year-on-year, primarily as a result of lower on-premise renewals, partially offset by continued growth in software enabled revenue. Timing of installations will vary quarter-on-quarter based on the size and scope of prior business wins and we expect several SaaS conversions and several on-premise renewals to come through in the second quarter. Year-on-year, our annualized recurring revenue was 16%. Our software enabled revenue was up 11% year-on-year, but down sequentially due to the absence of an accounting true-up in fourth quarter.Turning to some of the other Alpha business metrics on the right panel. We were pleased to report another Alpha mandate win in the asset owner client segment. In addition to the reported win this quarter, we expect significant middle-office installations in 2Q as we’ve completed the preparations to begin to onboard a portion of a large mandate won back in 2021.Turning to Slide 10. First quarter NII increased 50% year-on-year, but declined 3% sequentially to $766 million. The year-on-year increase was largely due to higher short-term rates and proactive balance sheet positioning, partially offset by lower deposits. Sequentially, the decline in NII performance was primarily driven by additional client rotation out of non-interest bearing deposit balances, partially offset by higher short term market rates from central bank hikes.On the right of the slide, we show our average balance sheet during the first quarter. Year-on-year average assets declined 6% and 2% sequentially. Average deposits declined 3% quarter-on-quarter, which is relatively consistent with our expectation for first quarter seasonality and client pricing preferences during periods of rising rates.Of note, average weekly deposit levels at quarter end increased 5% as we compare with week — with the week ended March 10. The stress in the regional bank space primarily affected consumer and corporate depositors rather than the institutional asset manager and asset owners that we serve. We, in contrast, saw some risk off deposit inflows at the end of the quarter. Our operational deposits as a percentage of total deposits remain consistent at 75%. These are determined by regulatory guidance.U.S. dollar client deposit betas were 80% to 90% during the quarter, as expected. Foreign currency deposit betas for the quarter continued to be much lower, in the 30% to 45% range, depending on currency. Our international footprint continues to be an advantage.Turning to Slide 11. Our first quarter expenses excluding notable items increased just 2% year-on-year or up approximately 4% adjusted for currency translation. In the light of the current revenue environment, we’re actively managing expenses, while continuing to carefully invest in strategic elements of the company, including Alpha, private markets, technology and operations automation.Compensation and employee benefits increased 5% year-on-year, primarily driven by higher salary increases associated with the wage inflation and higher headcount attributable to lower attrition rates and in-sourcing. Total non-compensation expenses, on the other hand, decreased 1% year-on-year as continued productivity and optimization savings more than offset increases in certain variable costs and professional services.On a line-by-line basis for non-compensation expenses, information systems and communications expenses were down 2% due to benefits from ongoing optimization efforts, partially offset by technology and infrastructure investments. Transaction processing was down 9%, mainly reflecting lower sub-custody costs from declining market levels as well as lower broker fees. And other expenses were up 9%, mainly reflecting the higher professional fees, travel, and marketing costs.Moving to Slide 12. On the left side of the slide, we show the evolution of our CET1 and Tier 1 leverage ratios, followed by our capital trends on the right of the slide. As you can see, we continue to navigate the operating environment with extremely strong capital levels, which are well above our targets, let alone the regulatory minimums. As of quarter end, our standardized CET1 ratio was up slightly year-on-year, but down 1.5 percentage points quarter-on-quarter to 12.1%, which was largely driven by the continuation of our share repurchase program and the expected normalization of RWAs that we discussed last quarter.Tier 1 leverage ratio was flattish at 5.9%. Our LCR for State Street Corporation increased a couple of percentage points quarter-on-quarter to 108% and 4 percentage points quarter-on-quarter to 124% for State Street Bank and Trust where most of our businesses transacted. We were quite pleased to return $1.5 billion of capital to our shareholders in the first quarter, consisting of $1.25 billion of common share repurchases and $212 million in common stock dividends.Lastly, given the high level of capital across every measure, positive pull-to-par in AOCI and our strong earnings trajectory, we continue to expect to return up to $4.5 billion of capital in the form of buybacks at pace this year, subject to market conditions of course.Turning to Slide 13, which provides a summary of our first quarter results. While there is certainly still work to do, we are pleased with the durability of our business this quarter against a very challenging backdrop and the continued competitive strength of our global franchise.Next, I’d like to provide our current thinking regarding the second quarter. At a macro level, our rate outlook is broadly in line with the current forwards, which suggest the Fed, ECB and Bank of England, all continue to hike to varying degrees in 2Q. In terms of markets, we currently expect average U.S. equity and global bond markets to be up about 1% to 2% quarter-on-quarter and international equity markets to be flattish.Regarding fee revenue in 2Q and on a sequential quarter basis, we expect overall fee revenue to be up 4% to 5% with servicing fees up 1% to 2% and management fees approximately flat to up 1%. We expect to see a significant increase in front office software and data revenues as we have line of sight to a number of on-premise renewals and SaaS conversions in 2Q.In our other fee revenue line, which we know is difficult to forecast, we intend to adopt in 2Q the new accounting guidance recently issued regarding renewable energy investments. We would expect to see a sequential quarter uptick in total other revenues of between $5 million to $15 million, but this estimate always depends on market levels. As we adopt this accounting change, our effective tax rate for 2Q ’23 is expected to be approximately 21%. The adoption will be roughly neutral to EPS.Regarding NII, we now expect NII in the second quarter to decrease 5% to 10% sequentially, primarily driven by the non-interest bearing deposit rotation and interest-bearing deposit betas as quantitative tightening and rate hikes continue into 2Q.Turning to expenses. We remain focused on driving productivity and controlling costs in this environment. We expect that second quarter expenses will be flat on a sequential quarter basis, excluding the 1Q seasonal compensation cost of $181 million. Overall, we will offset some of the 2Q NII trends with higher fee revenues as business momentum builds in 2Q and through the year and we continue to actively manage expenses.And with that, let me hand the call back to Ron.Ronald P. O’Hanley Thanks, Eric. Operator, we can now open the call for questions.Question-and-Answer Session Operator Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Ken Usdin of Jefferies. Please go ahead.Kenneth Usdin Thanks. Good morning. Just wanted to follow up on the NII side of things. So Eric, maybe you can just kind of walk through how much of that 5% to 10% in the second quarter is simply the averaging effect? And also just — you made a point in your release about how dollar type (ph) increased since the early March going to the end. What we think about in terms of your expectations for deposit growth both on an end-of-period and average basis going forward as well? Thank you.Eric Aboaf Yeah, Ken. It’s Eric. The largest driver of our NII trends right now, whether it’s the fourth quarter to the first quarter or first quarter to second quarter is really the level of non-interest-bearing deposits. Those came down this past quarter about $5 billion. We had expected them to come down about $3.5 billion. And we do a fair amount of forecasting on this. We think about January, February. March, it usually comes through in a U shape and we actually had a — had some of the opposite play through in March. And so that’s what’s been driving some of the change in NII.And in contrast, we’ve actually seen good flows in interest-bearing deposits at the same time. So there is a fair amount going on under the surface. As we look into second quarter, we expect this pace of non-interest-bearing deposits to continue to rotate. So if you step back, last year, we had periods where non-interest-bearing deposits were up $1 billion; then down $2 billion; then down $4 billion; then down $2 billion, right? It’s been quite volatile.And right now we’re expecting non-interest-bearing deposits probably to come down another $4 billion, $5 billion into the second quarter. And if you think about it, when you earn 5% or more for those kinds of deposits on the asset side and then pay zero, that can be a significant — that’s a significant amount of NII, right? Every $1 billion is worth $12 million, sometimes $15 million per quarter. And so that’s what we are seeing flowing through.The hard work we’re trying to do from a forecasting standpoint, and forecasting is always hard, is where does the trend — how does that trend play out and we do some of what you probably do, which is we’ve looked at the last peak and the last low of non-interest-bearing deposits. The peak was 22%; the last low was 18%.On the other hand, in dollar terms, the last peak was $50 billion, and the last low was about $30 billion, and right now, we’re sitting at about $39 billion. And so that’s what’s really playing through the NII forecast. And then as we play that out, we expect to see some of that non-interest-bearing deposit rotate into interest-bearing deposits, but to be honest, some of our clients who are sophisticated institutions are also looking at some of the other strong rates that they can get either in treasuries or money market funds.And so, at this point in the cycle, with the high level of prevailing rates, we expect deposits probably to trend down another few billion into the second quarter, but this is all kind of dependent on client behavior and activity as we take a look at our forecast.Kenneth Usdin Yeah. Thanks, Eric. And just one follow-up to that is just that — the types of changes in client activity, is this a different behavior than you’ve seen in the past in terms of where the ins and outs are coming from? I mean, obviously, we were all expecting deposits to come down, as were you, and then the events of the last month came through. So are clients just making different decisions with what they’re doing with their even operational cash? Or how would you kind of describe what’s happening across the client base? Thanks.Eric Aboaf Yeah. I think clients are — the clients (ph) are making a variety of different decisions here. And I think part of what – why we’re seeing, what we’re seeing is that we’ve not lived in an environment where interest rates are at 5%, whether you put that at the Fed or in three and six-month treasuries, right? And so clients have a fair amount of alternatives and they’re thinking about how to deploy, how to maximize interest and yields for their own clients, especially the kind of clients we have who are — over time will always be price-sensitive.When it comes to the operational nature of the deposits, you can see from our disclosure and we added some of this, clients are incredibly sticky and stable from an operational standpoint. Operational deposit balances were steady and the operational percentages continue to be very — in a very narrow band.You have clients with several billions of dollars each often, but they typically have hundreds, if not thousands of individual accounts with very significant transactional and payment flows, and that’s why they’re categorized as operational in nature. And so that behavior hasn’t changed. What we — that behavior of core custodial deposits is deeply ingrained in the structure of those accounts, the processing we do for them, the avoidance of overdrafts that they always try to — that they don’t want to — that they don’t want.I think what we’re seeing instead is clients on the margin will find, for their discretionary, the last dollar of $100 of deposits, they’re going to be rate-seeking. And at these prevailing rates, there is — they’re going to look here and there. Now sometimes, we match them with those rates. So we’ll offer deposits at exception rates. Sometimes we help them with their sweeps or some of their treasury repo interest. And so there is a variety of different ways we serve our clients and we’ll continue to do that. But clearly, at this point in the rate cycle, you kind of have some of the patterns that you and we would expect to have.Kenneth Usdin Okay. Great. Thanks for the color, Eric.Operator Thank you. The next question comes from Brennan Hawken of UBS. Please go ahead.Adam Beatty Thank you and good morning. This is Adam Beatty in for Brennan. Just a quick follow-up on NII, and in particular, the geographic mix of deposits. So you’ve got kind of fairly steady trends, U.S. kind of going up and a higher beta, as you’ve called out in the past, and then non-U.S. somewhat going down with a lower beta. Just wondering if you expect based on what you’re seeing right now with your clients, those trends to continue. In particular, will we continue to see pressure on non-U.S. deposit balances? And could those betas maybe be going up outside the U.S. as you say, the competing yields are somewhat higher? Thank you.Eric Aboaf Thanks for the question. I think we’ll continue to see a range of behaviors across the geographies. I mean, I think the way I would describe them is in the U.S., with prevailing rates at where they are, you have this non-interest-bearing to interest-bearing rotation on one hand. And then you have clients nudging on pricing in general. And we’re kind of at that point where clients now have incentives, just like we do, to find a place to settle at with us. I think in Europe and pound sterling, it’s still new, right? We’ve just been at the kind of the first, maybe half, two-thirds of the rate increases.And there, the betas continue to be in that 20%, 30%, 40%, 50% range and are quite attractive for us. They’re good for clients because the clients tend to have somewhat fewer alternatives in those international jurisdictions relative to the U.S. on one hand. On the other, there tends to be a more — there tends to be less price sensitivity on the deposits. And we do expect that to continue. And I think with more rate increases flowing through in the international jurisdictions, that allow us to continue to lag modestly the deposit rates that we offer to see those play through.Adam Beatty Great. That makes sense. Thanks, Eric. And then just turning to the buyback, pretty healthy in the quarter. You still got the kind of not-to-exceed target out there. So just wondering how you’re thinking about that in terms of deposit trends and capital needs and whether some of the disruption in the banking backdrop has maybe affected your thinking around the buyback. Thank you.Eric Aboaf Yeah. Good question, and it’s something that we’ve been very deliberate and thoughtful about. You can imagine, as we saw the events in March unfold, we’ve been thinking daily and weekly about how stable is the broader banking system. The starting point for us is we’ve got an incredibly strong balance sheet, right?Our capital ratios are in the 12% range. That’s 100 basis points above the top end of our range, 200 basis points higher than the bottom of our range. It’s 400 basis points above the regulatory requirements. And you know many run much thinner in terms of regulatory requirements. And we’ve always chosen to run with this kind of — with a healthy buffer.So I think on one hand, the starting point for us is important in our ongoing decisioning around capital return, and we’re conscious of that. On the other hand, just like you say, we assess the market conditions and the environment, not for us, because this is not about us. This is about what’s happened in some of the other parts of the banking system. We assess those. And if we would had economic and banking conditions like they were at the beginning of March, I think we’d have a — we’d make different statements around our capital buyback.And so we feel like there has been a fair amount of healing since the beginning, middle of March, and we think that gives us — that factors into our thinking. And then what we’ll do is we’ll continue to evaluate conditions, right, if market conditions and systemic conditions get more concerning for the system, we’ll — we may pace these differently if they continue to be at these levels of stability that we’re at, we feel confident that, that we can and should continue to proceed. But it will be a week-by-week reassessment.Our buybacks aren’t once and done. They’re done over the course of the next eight to 10 weeks. And this is one of those quarters where you do them more linearly than not. And so we’ll evaluate. But our position of strength is just quite — I think quite high and gives us a fair amount of latitude.Adam Beatty Great. Good context. Thanks, Eric.Operator Thank you. The next question comes from Betsy Graseck of Morgan Stanley. Please go ahead.Betsy Graseck Hi. Good morning.Ronald P. O’Hanley Hi, Betsy.Betsy Graseck Could we talk a little bit about the expense outlook and how you’re thinking about managing it? I know that you mentioned 2Q specifically, but I just wanted to get your thoughts on how you are thinking about operating leverage either on a total rev basis or more on a fee basis. Really what I’m trying to get at is how you think about the NII piece as we think about operating leverage for the 2Q and for the full year. Thanks.Eric Aboaf Betsy, there is a couple of different ways we look at this. And clearly, we’re one quarter into the year. We’ve started to give some outlook for second quarter, and we need to see how the conditions and the environment plays out because equity markets up or down, bond markets up or down by more than a percentage point or 2 is going to impact our revenues. And so I think it’s still early in the year. We set out this year to drive positive operating leverage and continue to look for ways to do that, but we need more information about the external conditions to really see that.I think as we think about the opportunities here though, NII will trend positively for the year, but not as positively as we would have expected. So that’s a consideration. You saw that we took up our fee guide for the second quarter, and so that gives us a little more ballast or breathing room or momentum, to be honest. And we’ll continue to manage expenses quite actively. I would say in the last year and a half, as NII was up 20%, 30%, 40%, 50%, right, we didn’t spend that on the expense line, right?We were quite conscious of continuing to drive investment, but also productivity and calibrate it in our expense growth. And so as we look forward, we’ll continue to do that, but obviously, with a — we’ll keep track of the direction of revenues and obviously try to adapt where we can.Betsy Graseck And then just a quick follow-up on the other fee line that you discussed, the $5 million to $50 million increased Q2. Could you just give us a sense of how we should think about the trajectory of that? Are you going to be increasing your investment into renewables and so that should be a growing line in line with increase in investments to renewables? Or is that a one-time step-up in that? So just a little color there. Thanks.Eric Aboaf Yeah. It’s — the revenue impact on that line is a little bit of both, and we’re still discerning all the specifics in doing the forecasting. In second quarter, we have — we need to do a year-to-date catch-up. That’s how the accounting guidance is written. And then there will be some additional revenues in the third and fourth quarter, not as much as there would be from the second quarter catch-up. So we’re trying to map that out.And as the quarter proceeds, we’ll try to get a little more guidance out. But that line will tend to have — instead of kind of being centered around zero, will be centered around a slightly higher number in the coming quarters, and we’ll try to get some guidance out on that as we go through all the forecasts.Betsy Graseck Okay. Thank you.Operator Thank you. The next question comes from Gerard Cassidy of RBC. Please go ahead.Gerard Cassidy Good morning, gentlemen. Eric, can you share with us how you guys are investing your cash in your securities portfolio in terms of durations that you’re looking at? Are you trying to shorten the duration of the portfolio as you reinvest the cash proceeds that come off with every quarter? What’s your thinking about that?Eric Aboaf Gerard, it’s Eric. We’re — we’ve been quite careful over the years of running a portfolio with a modest amount of duration. I think it’s typically in the two and a half to 2.8 years in that — that provides us some amount of benefit from what historically has been steepness in the yield curve. It’s also given us some ability to create some amount of stabilization in NII without forsaking the opportunity to benefit from interest rate rises, which is what we’ve been able to do over the last two years.We like that amount of duration because it also protects the income statement as rates fall, and we’ll see if that — if there is — if there are rate cuts late in the year or next year or the year after that. So that gives us some stability as well. I think what I’d tell you though is, we spend as much time on duration curve shape as we do on carefully also running some MBS portfolios where there is some additional yield pickup, but you’ve got to be careful in terms of the level of convexity risk that you take.And then because of our deposit franchise, as was mentioned earlier, we’re doing this around the globe. We’ve got about a third of our balance sheets in international jurisdictions, and that gives us real opportunities in pound sterling, euro, Canadian, Aussie dollars et cetera to invest. And we may run somewhat different duration levels in those different currencies.We might be shorter in one, longer in other, partly to reflect our views on the rate cycle and where each of those are. So there is a range of kind of approaches that we take there, and we find that our flexibility gives us some opportunities to deliver some good yields in NII, but obviously being careful. We don’t want to stretch for duration. We don’t want to stretch for yield. We want to continue to run a conservative portfolio like we have for many, many years.Gerard Cassidy Very good. And then just a follow-up on your comments about deposits. I think you said that the low point of non-interest bearing were at $30 billion; you’re sitting at $39 billion now. And two-part question, where do you — if rates just stay here, let’s say, the Fed doesn’t start cutting rates later this year and next year and we get a 4.75%, 5% Fed funds rate, do you sense that the non-interest-bearing deposits could approach that $30 billion on a go-forward basis?And second, on your operational accounts, do you guys have to pay any interest on those accounts?Eric Aboaf Yeah. Let me do that in reverse order. The operational accounts are sometimes interest-bearing, sometimes non-interest-bearing. So there is a wide variety of different pricing structures, but they tend to be — remember — and these are thousands of accounts oftentimes for each of our — for each of the asset managers or asset owners that we custody for. And it’s less about the pricing in those accounts than about the nature of the accounts and the payment transactions that clients are funding in effect with the deposits that they leave with us.In terms of non-interest-bearing deposits, I do think we’ll continue to see a trend downwards. We saw a $5 billion trend this past quarter, which was $1 billion or $2 billion more than we had expected even back at that early — even back when we last gave guidance. We expect probably another $4 billion, $5 billion will come out in the second quarter. And then I think we do believe that there is going to begin to be some stabilization.I’d be inclined to think that we’ll get to that $30 billion probably later this year, but this is where there is no amount of crystal-balling that we can provide. It’s hard to really be sure it could be at that level, it could be around that level. There is — we’ve seen movements in non-interest-bearing month by month that are plus/minus $4 billion or $5 billion.Even in April, as an example, we’ve had days where non-interest bearings were in the $44 billion level, so $5 billion above the recent average and days when they were at the $34 billion level. So it’s that kind of range and volatility that we’re trying to forecast through, but clearly, the trend’s here, and I think the last benchmark of that — around that $30 billion level may be one that we approach potentially later this year.Gerard Cassidy Very good. Appreciate the insight. Thank you.Eric Aboaf Okay. Yeah.Operator Thank you. The next question comes from Jim Mitchell of Seaport Global. Please go ahead.James Mitchell Hey. Good morning. Maybe just a little bit on the fee income story. You talked about a pretty hefty sequential growth, but not necessarily coming from the servicing line, so — but you talked about great momentum in servicing and onboarding. So how do we think about the trajectory on the servicing fee line as you onboard? Is it more of a back half story and how are you thinking about full year with servicing fees?Ronald P. O’Hanley Yeah, Jim. It’s Ron. So maybe I’ll start here. On servicing fees, we — as Eric noted, we do expect growth, and it’s driven by a couple of things. One is, we’ve been carrying for a while now a fair amount of AUC/A to be implemented. A lot of that was tied to some systems development that needed to occur that is occurring. So we’re expecting to see a hefty amount of that AUC/A to get installed.Secondly, the wins this quarter were — while it was a low AUC/A amount, it was much more traditional back office plus this very large alternatives, both of which are easier to install, but they take less time to install. So we’re actually quite pleased with how 2023 is shaping up from a sales perspective and it’s good that it’s shaping up early in the year.So with all that, we do expect to have a meaningful amount of servicing fee growth. That coupled with — depending on what you believe about markets, tends to wash over everything that I’m talking about, but if you believe that there’s some kind of market stability, we feel pretty good about the year as we look forward.Eric Aboaf And Jim, it’s Eric. Just to round that out, Ron’s covered servicing fees. Management fees should give us some lift as well as we have some equity market appreciation — equity and bond market appreciation into the second quarter. I think if you go through the trading lines, second quarter is usually good. We’ll have to see just how much volumes play through in spread, so — but you’ve seen we’ve been making nice headway given the market volatility with specials and sec finance that will likely continue.In the software and processing line, we had one of the lowest on-premise renewal quarters this — in 1Q. And that one just varies. If you just you look at some of the materials in the deck, that could be $6 million, it could be $60 million. That was literally the swing from fourth quarter to first quarter. We expect, as we had said, some sizable upticks there as well. So there is a range of areas. And in effect, from a management standpoint, we’re focused on every one of the opportunities and businesses and harnessing the client momentum that we’ve been seeing.James Mitchell No. Yeah. Sure, Eric. I appreciate all that. But in terms of the sequential increase of 4% to 5%, it seems like a lot of it’s coming from some of these lumpy revenue streams that don’t necessarily continue further out whether it’s other kind of catch-up, whether it’s software processes jumping back. But when we think about sort of the momentum in the back half, can that sort of new run rate in the second quarter — is that sustainable as you gain momentum in some of the more annuity-like revenue streams or do we kind of have to push it out a little longer? I’m just trying to get a sense of beyond 2Q, you have a nice jump in 2Q, but is that really sustainable?Eric Aboaf Yeah. No, I understand the perspective. I think what I will remind you on software and processing, we had an unusually low print in the first quarter. So the first part of the follow up (ph) in second quarter is rebound and then continuation. On-premise revenues have averaged about $30 million a quarter, for example. That’s a reasonable kind of average that one could expect, but we printed $6 million this past quarter. So it’s that kind of, I think, rebound we’re expecting in the second quarter and then it should stay within the averages.And then beyond that, to your point, there are the more annuity-like areas, whether it’s the software enabled, the SaaS revenues in software, whether it’s some of the — we have very flow-oriented FX and securities finance books. And then as Ron mentioned, we’re seeing increasing momentum in servicing fees and management fees, and the servicing fee momentum is spread as we’ve mentioned, both in terms of back office and in middle office, which gives us additional diversity.It’s hard for us to predict the second half of the year, and I’ll hesitate every April to re-estimate the full year, but I think we’ll know more as we get to June and July, and I’ll certainly give — be able to give you an indication. But we’ve — we’re certainly seeing momentum of activity with clients and expect some of these onboardings to come through. And we think that provides a step-up and then there should be some continuation beyond second quarter that will be positive.James Mitchell All right. Well, thanks for all the color.Eric Aboaf Yeah.Operator Thank you. The next question comes from Steven Chubak of Wolfe Research. Please go ahead.Sharon Leung Hey. Good morning. This is actually Sharon Leung on for Steven. For NII, I know you noted that you — it will still be up, but maybe not as meaningfully as the 20% you had guided to previously. Is there any numbers you can put around that, for example, assuming that the NIB rotation continues as expected and you get to that $30 billion number sometime in the year?Eric Aboaf Yes. I mean, the — this is where the forecasts just have a wide range of outcomes. I think given the first quarter report and what we expect in the second quarter, we don’t think that one can reach that — at up 20% for the full year. I think what we’re wrestling with is just what’s the pace of rotation and what’s the pace of some of the price sensitivity that we see in the U.S. clients at this point in the cycle. And that’s what’s harder to determine. So there is a range of forecasts we have. And if I had to kind of share with you, I’d say if one thinks of it in a more dour way and expects more rotation and more price sensitivity, NII could be up 5% to 10% this year instead of 20%.On the other hand, if one’s optimistic and believes some of the history, where there is real attenuation in the non-interest-bearing deposits, NII could be up 10% to 15%. So there is a larger range than usual in the forecast that we have. And to be honest, just like I quoted some of the April year-to-date data and the range of levels that we’re seeing, we expect that those — we expect to be — that there will be quite a bit of range in the outcomes, just really hard to predict. But maybe that gives you some perspective. It’s probably a larger range than you’re looking for, but we’re trying to be as transparent and forthcoming as we can given the facts and the information that we have here.Sharon Leung Great. Thank you very much.Operator Thank you. The next question comes from Ebrahim Poonawala of Bank of America. Please go ahead.Ebrahim Poonawala Good morning. I guess just a couple of quick follow-ups, Eric. One on NII. I heard all your comments on the — in the Q&A. Just trying to make sense of, is the customer behavior that surprised you today versus January given that you probably assumed that rates were going a little bit higher than where we were back in Jan, or is it the events of the last month that have changed customer behavior and increased the intensity of repricing?Eric Aboaf No, I don’t think it’s really the events of the last month, which are really in very different client segments, different geographies. Those are very different from what we do and who we serve. And we had a little bit of a flight to quality — not flight to quality; we had a bit of this risk-off sentiment with deposits, but that’s just a whole different ecosystem than those clients that we serve.I think what’s really happening here and what we’ve been trying to estimate, but maybe is unestimatable or unforecastable is just how do clients operate when prevailing rates are at 5% in the United States, right? We’ve not had that scenario in our — for some of us in our careers, right? But for some of us, going back many, many — probably two decades. And so the data is thin on that question.And I think what we’ve seen is back in January, when we had given some of our NII guidance for the quarter, just on non-interest-bearing deposits, we had seen one quarter where they were up a little bit, one quarter where they were down $5 billion. And then the third to fourth quarter, they were down $2 billion, right? So you’re in this situation where you’re trying to guess, forecast, estimate we can — we’ve got to use all those words.And I think we thought we might have reached some attenuation, but we didn’t. There was another step of rotation playing through. It’s not a rational for clients to do that, and so they’ve shifted. Now they shift from non-interest-bearing to interest-bearing. They shift across currency sometimes because of their sophistication. I think what’s interesting is that we actually got more deposits in the U.S. and we had some outflows in — or some net reductions in Europe and in Asia. And so you kind of have a real mix out there.And I think what we’re realizing is all the data sets we have are actually not — there is not enough data on this question of deposit or, I’ll call it, deposit or pricing behavior because that’s what this is about. And that’s what we’re trying to better estimate. But the clients we’re serving, we’re continuing to serve, the momentum in the business is clear. And just like NII went up faster than we had thought, I think there is a trend here that it’s coming down a bit sequentially. It’s still going to be up for the full year, but we’ll need to see how much.Ebrahim Poonawala Got it. And just a separate question. I know it’s small for you, but the other element that your provision is higher, the credit portfolio rating, remind us of the credit sensitivity that we should expect from the balance sheet from an economic downturn, if there are more rating agency downgrades, like what that means from a credit cost provisioning perspective as we look forward.Eric Aboaf Yeah. It’s good question. I mean, the — aside from the provision that’s calculated using all the CECL techniques and fairly regimented that we had for that — for the one cash placement that we made, the provision was about $15 million. I think for us, provisions have been in the $5 million, $10 million, $15 million range typically. We’ve seen a little bit of migration or change in ratings in a half dozen credits, but it’s the kind of thing that plays through. And part of that is we have higher prevailing rates, and that puts a little bit of pressure in different parts of the economy and I think it’s probably fairly typical.I think the — we run quite a high-quality and high grade lending book. Even where we’re a little more down market, we call BBs down market, right? So we have a ratings distributions that are typically in the A or A- or even better range. So we’ll have some sensitivity to economic conditions. You can go back to around the start of COVID, right? A number of banks built reserves, that can give you a sense of sensitivity. But what we feel like we’re well reserved now given what we know, both on the economic conditions and individual positions that we hold. It’s highly diversified. It’s high quality. And we’ll obviously — we’ll continue to monitor, but feel like it’s reasonably stable with a little bit of drift down situation just given the direction of rates in the economy.Ebrahim Poonawala Got it. Thank you.Operator Thank you. The next question comes from Mike Mayo of Wells Fargo Securities. Please go ahead.Michael Mayo Hi. As you know, the markets that’s a little generations (ph) Silicon Valley. And can you just make it crystal clear? I mean, I think I know the answer, but I need you to really explain why this is an earnings issue and not a liquidity issue. And on the earnings issue, just to make sure I heard you correctly, your non-interest-bearing deposits went from $44 billion down to $39 billion. You think base case, it might go down to $34 billion, but the low end of the range, which is possible later this year would be $30 billion. That would be going maybe non-interest-bearing deposits from $44 billion down to $30 billion, that would be $14 billion less than free money.You said it was $12 million to $15 million per $1 billion. So just taking the worst case, you go down to the $30 billion, it hurts you $15 million, we’re talking about $200 million of earnings lost which might be around 7% or 8% of your EPS, if you look at kind of a run rate sort of thing. So first, is my math correct there that that is the earnings issue? And then reassure if it’s appropriate, that this is not a liquidity issue.Ronald P. O’Hanley Mike, why don’t I start? I think that as you’re calculating the worst case, I think your math roughly is correct. We’re doing all we can to avoid the worst case, but I think your math and how you get to the earnings impact is right, assuming the — in effect, 100% margin on the deposits. In terms of liquidity, there is nothing here that approaches a liquidity issue, right? These are custody deposits. As Eric noted, they’re operating deposits. They give you a sense and a little more explanation of why we’ve got X number of clients, but a multiple number of accounts.And if you think about it, a mutual fund company probably has at least one account per fund they have with us, if not more. It’s to actually run their funds. If you look at the liquidity coverage ratio, which Eric walked you through, it’s up at 124% now. It’s actually gone up, not down. So yes, this is an earnings issue and one that we intend to offset to the extent possible with the primary source of our revenue, which is fees as well as continued careful management of expenses.Michael Mayo And then a follow-up to that. You said you’re not changing your buyback. So you have $4.5 billion for the year. You’ve done $1.25 billion. So you have $3.25 billion left. With the current market decline, that would be 14% of your market cap. So to the extent you see this as a step down, but not life-threatening, what’s your appetite toward completing that buyback and how soon are you able to enter the market?Ronald P. O’Hanley I mean — Mike, I think Eric explained it well. If you look at our capital levels, and the fact that we held off buying back shares for quite a large amount of — basically for most of last year, we feel comfortable continuing the buyback. We’re obviously conscious of the environment. So we feel comfortable doing that, and we certainly feel comfortable about ourselves, but there is the system in which we live, and to the extent to which the system started to look very different from what it is today, look a whole lot more like or even worse than what we saw in March, we’re certainly not going to ignore that.But our — based on what we know now and our financial strength, we think it’s actually quite prudent to do so. And our forecasting puts us — I mean, we don’t think about it in terms of market cap. We think about it in terms of what’s our CET1 ratio, our capital ratio, and this will still put us above our range, so — well within our range, I mean. So this is something that, at this point, we feel very comfortable doing.Eric Aboaf And Mike, it’s Eric. I’d just underscore, right, the capital and liquidity strength and ratios are just incredibly high end with us by every measure that one can see. And we’ve shared quite a bit of that. And that’s the reason why we’re comfortable at this point proceeding with our buyback. We’ll — I said in my prepared remarks, we do it through the rest of the year. I said we do it at pace.And even within a quarter, we typically start buybacks the day after earnings and then we will operate and execute on them, subject to market conditions, of course, but we typically execute on them over the eight to 10 weeks of available days during the quarter. So it’s — we’ll — we’ve got good confidence in the broader system and enormous confidence in our particular position here.On earnings, we’ll work through the earnings issue. NII was — is something that we can figure our balance sheet to earn when rates move up and the balance sheet does give some of that back when rates come down. And we’ll obviously continue to drive our focus on fees and manage expenses and drive what really is a multi-year trajectory.Michael Mayo One last time, crystal clear. So there is nothing about the reduction in the, quote, free money non-interest-bearing deposits or anything else in your results that would give you pause to continue buying back your stock.Eric Aboaf None.Michael Mayo All right. Thank you.Operator Thank you. The next question comes from Rob Wildhack of Autonomous Research. Please go ahead.Rob Wildhack Hi, guys. I wanted to unpack some of the RWA dynamics in the quarter. RWAs were up 7% sequentially, but the overall balance sheet, I think, was down 3% or 4%. So can you just give us some color on what was going on there?Eric Aboaf Sure, Rob. It’s Eric. And I think there’s some materials on RWA both in the earnings deck on Page 12 and then further back in the addendum. I think if you remember, fourth quarter, we had a particularly low print in RWA, which we had signaled at our fourth quarter earnings call in January. Overdrafts came in lower than expected. Some of the risk-weighted assets associated with the FX books came in lower because of the late December move in dollar rates.And so we had expected a rebound of about $10 billion, $15 billion of RWA from fourth quarter to first quarter. And you saw we got about $8 billion or $9 billion of that. We still came in a little light on overdrafts, which is fine. Part of that is the amount of cash in the system and the cash and deposits that we’re holding on behalf of our clients. You see RWA is still down year-over-year, and that’s because of a fair number of optimization efforts.We felt like there’s real opportunities for us to grow the franchise on one hand, but deploy RWAs in very high-quality and higher returning ways on the other and support our clients. And so we’ve been adjusting the deployment across the FX books. You think about how much we want to deploy in the forward space and the long-dated forwards versus spot and securities finance, there are different amounts. But we’re quite well off when it comes to capital and our plan is here really to continue to find ways to smartly deploy additional capital and additional RWA to drive organic growth.Rob Wildhack Thank you. And then I appreciate the color on the to-be installed business and the on-prem enterprise trajectory from here, but could you just remind us how long those installs typically take to convert to revenue?Eric Aboaf Yeah. When we described the installation going into the second quarter, we were describing those as realized revenue installations. So in effect, the way the accounting works typically is when we win, we don’t book the revenues, but it’s only at the installation date that you begin to book them. So you’ll see both the backlog assets under custody in the second quarter begin to come down and some of the servicing and middle office revenues float upwards. And similarly, for the software and data processing areas, you’ll see something in that direction as well.Rob Wildhack Okay. Thank you.Operator Thank you. The next question comes from Vivek Juneja of J.P. Morgan. Please go ahead.Vivek Juneja Hi, Eric. Hi, Ron. A couple of questions. Firstly, CRD revenues, I know you said it should — Eric, the on-premise revenue should bounce back in the second quarter, but just want to step back and look at it on a full-year basis, the entire CRD revenues. What is your expectation at this point for full-year growth in that — looking at all those three subcomponents together?Eric Aboaf Yeah. I don’t — Vivek, I don’t know that we — in January, we went into that level of detail. I think what we’ve said in the past is that that there is a range of revenue growth in our different fee categories. We’ve described back office as growing towards the — traditional back office growing closer to the lower single-digit revenue growth. We’ve described middle and front office, which would include CRD at high single-digit growth.There will be years when it could be double-digit revenue growth. So that’s what we said about that category — this category. I think what we see in particular in software is the on-premise revenues over time will — may not be as heavy, but we do see real momentum in the combination of the software enabled and SaaS. But all in, that should grow in the higher-single digit revenues typically though there’ll be some range around that in a given year.Vivek Juneja Okay. And then going back to this question that’s come up on the large amount of new business that remains to be installed in servicing, and you said you should see a pickup in 2Q. Ron and Eric, what’s your expectation for how much of that do you expect would get installed over the course of this year, 2Q, 3Q, 4Q? And by the time we exit this year, how much should be done? And therefore, what benefit should there be to [indiscernible] from that?Eric Aboaf Yeah. I think, Vivek, there are a couple of ways to think about that because what happens here is that it gets onboarded on — in tranches. So we might onboard the assets under custody, administration, but there are multiple services that we’re often providing for those assets. So we had a couple of wins over the last year or two years with $1 trillion. Those $1 trillion wins would have had some custody, some accounting, they might have had some performance analytics. They would have had some middle office services in many cases because they were Alpha mandates.So there is three, four or five kind of, I’ll call it, revenue installations, right, for each of the balances that sit there when we describe them as assets under custody and administration. I think roughly, our view is that we’d expect about half of the backlog in custody and administration to come through during the course of this year. I’ll say that roughly, right? It tends to vary.And then the revenue pieces, it won’t be quite at that level because the revenues come through over time as you get the different, I’ll call it, layers of services that are provided associated with those — that assets under custody, administration. But what we’ll do is we’ll — I think it’s — that may be some kind of broad perspective.What we’ll try to do each quarter is give you more and more visibility as we get to those implementation points because, remember, these are implementations where not only have we configured a front-to-back offering that we’ve — that we’ve designed for clients, but clients need to reconfigure many of their processes and systems in parallel with that to adopt. And so it’s a joint effort on both sides.Vivek Juneja If I may sneak in one more, just CF Global, any color on what that could add to your fee revenue, Eric? And when do you expect that to start to add [indiscernible]?Eric Aboaf Yeah. I mean, CF Global for us is a very attractive opportunity. We’ve historically done some outsourced trading over the years in the U.S. and Asia. We weren’t particularly large in that space in Europe. This gives us some real heft and credibility in Europe. It’s an acquisition that will close likely at the end of the year. So I think it’s really a 2024 topic. And we’re looking at a business like that between what we have and what we’re adding to be in the $30 million to $50 million range of revenues next year.Now, we’ve got some of that today, but this — what we purchased in CF Global really is distinguishing in terms of capabilities, product lines, lets us build around what we have and then drive some real incremental growth. And so something we’re very excited about because it fits into being the enterprise outsourcer. You do that for a custody, accounting, middle office, front office, and we do it for the CIOs of small and midsized companies. And it’s really — it fits very well with our positions — positioning and strength.Vivek Juneja Thank you.Operator Thank you. There are no further questions at this time. I will turn the call over to Mr. O’Hanley for closing remarks.Ronald P. O’Hanley Thanks, operator. And thanks to all on the call for joining us.Operator Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.