State Street Corporation

Q4 2021 Earnings Conference Call


spk_0: good morning and welcome to stay streets corporations fourth quarter in full year twenty twenty one earnings conference call and webcast today's discussion is being broadcast live on stage streets website at investors that state street dot com this conference call is also be recorded for replay stay streets conference call it's copyright it in all rights reserved this call may not be recorded or rebroadcast or form rebroadcast or distributions in whole or in part without the express written authorization from states three cooperation the only authorized podcast of this call will be housed on the state street website now i would like to introduce eileen that so biller global head of investor relations at state street
spk_1: the morning and thank you for joining us on our culture our ceo run or hamlet will speak for than irregardless or csl will take you through our fourth quarter and four year twenty twenty one earning slide presentation which is available for download an investor relations section and our website investors dot state street dot com afterwards we'll be happy to take questions during the can i please limit yourself to questions and then riccio before we get started i would like to remind you that today's presentation will include results presented on the basis that excludes or just one or more items from gas reconciliations of these non gaap measures to the most directly comparable gap or regulatory measures are available the appendix our slide presentation in addition to presentation will contain forward looking statements actual results may differ materially from the statements do variety of important factors such as those suckers referenced in our discussion today and in our se te filing including the risk factors and are born ten k are forward looking statements big only as of today and we this claim any obligation to update them even if argued change now let me turn it over to toronto
spk_2: thank you i lean and good morning everyone earlier today we released or fourth quarter and four year twenty twenty one finance results before i review our results are would like to take a moment to acknowledge the dedication and strong performance of state street employees during the past year this team members remain central to the continued success executed for strategy as we hope to create better outcomes for the world's investors together we accomplished a great deal on twenty twenty one including higher fee and total revenue generation successful execution against both sales them as a client retention goals that has for ivan growth in business momentum as was announcing the proposed acquisition of brown brothers harriman best reserves all of this would not have been possible without our employees hard work skills and commitments slight three of our presentation highlights the progress we've made during twenty twenty one with both of with both of our business segments performing strongly as we advance towards achieving or medium term financial targets within the investment servicing business we enhanced are enhanced course strategy combined with our strategic pivot to an enterprise out for solutions provider across the front middle and back office manifested it's self and stronger business momentum and revenue growth and twenty twenty one which you can see among the top of the slide as we successfully diversify and radziner wins by reaching the client segments we achieve record a you see a servicing wins or three point five trillion and twenty twenty one and continue to deploy or enterprise outsourcing capabilities underpinned by are integrated front to back out a platform we're now nine additional alpha wins and twenty twenty one with ten alpha for clients now lives a your and we also continued to enhance our product capabilities and twenty twenty one watching out for for private markets as well was our new states read digital division a global advisors we executed well against or long term strategy which contributed to a number of record for that business and twenty twenty one including revenues assets under management and ethiopian close importantly global advisors full test for year pretax margin expanded by over six percentage points and twenty twenty one to a record thirty two percent putting the value of our investment management franchised state street results or spider business perform particular he won't twenty twenty one gaining u s t flow market share including low cost an active in addition to the record inflows i just mention if i look back at twenty twenty one i'm particularly pleased were client impact improvement in our sales effectiveness and frightened of different client satisfaction service quality and retention across our businesses together with a favorable equity market backdrop of the driver stronger revenue performance notably for years servicing and management fees each reached our highest level on record and twenty twenty one with total be revenue increases by five percent year on year and exceeding ten billion for the first time while we delivered a strong revenue performance and twenty twenty one expense management remain to keep focus for us with company wide productivity and engineering efforts achieving approximately three hundred thirty million of gross expand savings because of verse from revenue in sales performance a twenty twenty one and the healthy pipeline in front of us these efficiency savings loudest upon investments in our talents technology and business in the fourth quarter to drive future growth even with this increase investment total expenses will help contain wrote it's revenue growth helping to drive a significant improvement in a number of key financial metrics that you can see on the bottom of a slide despite record low interest rates and excluding notable items we delivered meaningful for your pretax march and expansion positive see in total operating leverage and he ps growth and twenty twenty one and we expect to do this again and twenty twenty two turning slide for i will briefly touched on our fourth quarter highlights before eric takes you through the quarter and more detail for que twenty one fps increased twenty eight percent year over year or eighteen percent excluding notable items the strong euro be your earnings growth growth was driven by solid total fee revenue growth which more than offset interest rate headwinds on an ice leading to a good fourth quarter total revenue performance we delivered one hundred thirty basis points of total positive operating leverage in the fourth quarter excluding notable items importantly weeks again expanded states reach pretax margin which increased by more than a percentage point wrote to the year ago period to twenty eight percent in the fourth quarter excluding notable items soldiers this momentum that we saw during twenty twenty one continued into the fourth quarter which you can see in the middle the slice a you see a increased to a record forty three point seven trillion a quarter and and new asset servicing wins amounted to three hundred thirty two billion for the quarter are you see a one but yet to be installed was two point eight trillion a quarter and or charles rivers annual recurring revenue in the fourth quarter increase nine percent year over year to two hundred forty four million a global advisors assets under management total four point one trillion a quarter and management fees increase to a record five hundred thirty million in the fourth quarter benefiting from higher year on year average equity market levels and record inflows to our each year franchise pretty to our balance sheet at the bottom of slide capital return reads a key part of our medium term targets and we recognize it's importance to our shareholders as you know we suspended common share repurchases and que three and connection with are intended purchase of brown brothers harriman buster services we currently expect real stay calm and share repurchases during the second quarter of this year in line with our previous expectations the conclude my opening remarks i am pleased with the strategic operation financial progress we demonstrated and twenty twenty one we meaningfully improved or for your financial performance across a number of key metrics creating value for shareholders and advancing of towards or medium term financial targets looking ahead i have four cores strategic objectives for twenty twenty two which are aimed at helping us cheap our vision for the organization and position that is this for future success first is to continue to grow revenue by executing on a number of key strategic priorities this year including completion of our pivot to an enterprise outsourcers underpinned by our out the platform build out continuing to develop key product offerings and capabilities particular private markets and further strengthening sales and client management capabilities and processes second the successful integration of bbh and for services as a key priority the pro proposed acquisition is it financially compelling use a capital and once closed to strengthen our market leadership by creating the world's largest custodian expand and deep in our international reach further propel are alpha strategy and had strong talent that will supplement or focused on client and service excellent and expertise third as we didn't twenty twenty one we must continue to transform the way we work by driving increase productivity and efficiency throttle organization we are developing and implementing a simplified scale of both configurable and to and operating model this more skeletal model our will allow us to deliver increase clients qualities operational capacity speed and resilience or we must continue to build an even higher performing organization a performance culture and improved employee experience will enable us to sustain a more diverse engaged in empower team with the experience capabilities and desired behavior is required for further for future growth these for also reflect are relentless focus on performance and achieving our medium term financial targets i have confidence that will be able to meet our strategic and client goals while also delivery positive see in total operating leverage and and expanding our pretax march and each year to our medium term i i said aided by the strong momentum we are seeing across our businesses and with that let me turn it over to eric to take you through the quarter a more detail
spk_3: thank you on and good morning everyone
spk_2: before i begin my review or fourth quarter and for year twenty twenty one results let me briefly discuss some the notable items we recognize in the quarter how on inside five
spk_4: first we recognize acquisition restructuring cause most of which were related to charity and who's integration is now complete
spk_3: that can recognize the net repossessing release of three million which consisted occupancy caught a toy nine nine as a container reduce our footprint and release of previously accrued compensation costs were thirty two million at attrition picked up and we we read a flight staff more effectively than anticipated
spk_4: third we saw an opportunity to correct an imbalance in the competitiveness of our compensation program by accelerating expenses associated with certain deferred cash instead of award the impact the acceleration increase expenses by hundred forty seven million this quarter this change will allow us to realign the mix of immediate person deferred cash and are instead of compensation awards in future periods which will make our pay praxis competitive and enable us to better attract town and an increasingly tight talent market
spk_2: or makes a deferred equity remains unchanged
spk_3: follow ill see that in the fourth quarter also benefited from a fifty eight million dollar again on sale legacy libel bay securities previously classified as hell to maturity this sales and this quarter's higher than usual tax benefit helped offset some the deferred compensation expense acceleration i just mentioned putting aside sex i'll begin my review of both fourth quarter and full year twenty twenty one results as you can see on the top left to the slide we finish the fourth quarter with strong revenue growth compared to four to twenty sporty twenty one feet revenue increased four percent primarily reflecting strong growth and servicing fees mansion fees and cod revenues only partially offset by lower affects trading services for to expenses or well managed delivering positive total operating leveraged notwithstanding the significant twenty twenty one and i i had one for to pretax margin is up more than one percentage point year on year and are away is up almost two percentage points on the right side of the slide we shall are full year twenty twenty one revenue performance as ron highlighted earlier twenty twenty one was a record year for us for fee revenues
spk_4: and despite historically low interest rates and twenty twenty one i'm quite pleased that for the full year we still deliver op positive hopping leveraged of more than a percentage point improvement in pre tax march and an iep yes krauss in the double digits
spk_3: turning the slide seven you'll see our investment services balance growth remain strong as we saw record a you see a at the end of the fourth quarter forty three point seven trillion a yearning year at a year and year increase of thirteen percent largely driven by higher market levels klein flows and net new business
spk_4: quarter on quarter a see a growth was muted as markets were pretty mixed
spk_3: a global advisors a you are my ear and increase nineteen percent your on yeah and seven percent quarter on quarter to a record four point one trillion the iranian sequential quarter increases were both primarily driven by higher market levels couple of net inflows of note we reported strong net inflows during the fourth quarter of almost eighty billion dollars or global spidery gf business recorded the highest ever quarter turn by strong us flows pushing total nettie tf inflows to one hundred and seven billion for the full year honey the flight eight you can see another quarter of good business momentum fourth quarter servicing fees increase six percent year on year
spk_4: increase reflects higher average equity market levels klein activity inflows and positive net new business again
spk_3: these items were only partially offset by normal pricing headwinds and about a four point of currency translation on a sequential basis i would remind you that while the snp was up on average international markets were down so markets were relatively neutral servicing fees or down one percent primarily due to klein activity and adjustments and the impact and appreciating us dollar partially offset by another quarter of positive net new business ac a when started a solid three hundred and thirty two billion in the fourth quarter which gets gets a record three point five trillion new went across climb segments and region for the full year and or pipeline remain strong at quarter and ac a one but yet to be installed amounted to two point eight trillion without a representing a nice proportion which reflects a unique value proposition and our competitors strength as the only front to back off ramp from a single provider turning the fly nine fourth quarter match and fees reached a record five hundred thirty million up eight percent year on year and up one percent quarter on quarter resulting in an investment management pretext marginal thirty four percent for fourth quarter the you're on your mansion fee results primarily benefited from higher average equity market levels and strong tf inflows easier on your benefits for only partially offset by previously reported klein ass reallocation and money market fee waivers of twenty million and a quarter a quarter on quarter results are largely driven by a slight uptick in equity market delhi averages as you can see on the bottom right of the side our franchise remains well positioned as evidenced by both strong quietly momentum and for your results are particularly please of the actions that we've previously taken over the years in our long term institutional and each yeah franchises delivered growth over the course of twenty twenty one regarding management fee money market waivers we currently expect that they will come in and a properly five million last in the first quarter of twenty two based on an anticipated march fed rate hike which will be included in our twenty twenty two alpha turning a slide ten slimy discuss the other important see revenue lines in more detail fx reading services was found seven percent you're near reflecting lower effect volatility and lower volumes and are standing instruction business
spk_4: on a sequential basis fx revenue increased eight percent primarily to and by higher effects volatility partially offset by lower volumes
spk_3: moving to security finance fourth quarter fees increase sixteen percent year on year mainly reflecting higher klein securities loan balances and new
spk_4: business plans and enhance custody
spk_3: on a sequential basis fees were down four percent quarter on quarter mainly as a result of lower agency balances finally fourth quarter softer and processing fees were down four percent year on year and two percent lower quarter on quarter largely driven by lower market related adjustment partially offset by continued growth and crt which i'll turn to next
spk_4: movie to slight eleven i'd like to highlight rcr crd an alpha performance we delivered strong standalone thirty results in the quarter with your your revenue growth of thirteen percent
spk_3: full year standalone revenue growth was eleven percent yarn year which makes this a second year in a row or we grew the business revenue in a double digit range the more durable sas and professional services reviews continue to go nicely as the on board and converted more clients to the cloud sad clients now represent nearly half or thirty client base
spk_4: in addition we've achieved record new bookings a sixty two million for full year twenty twenty one for the healthy revenue backlog of one hundred and seventy million a quarter and demonstrating that contain business momentum as we head into twenty twenty two supported by the else of by the state street alpha value proposition
spk_3: burning to out on the bottom right of the slides whole your twenty twenty one was a busy year as we announced nine new alpha mandates a nearly double the amount of wins we've achieved since inception
spk_4: at year and we have ten total live alpha clients we've also been busy enhancing are alpha product offering this year in addition to launching out of her private markets and or acquisition located in the third quarter we also went my with our with our alpha data platform in the fourth quarter which is or cloud native platform providing enterprise they demand for an access to all the data and analytics or clients used to perform the daily and to and and that's some processes
spk_3: learning aside twelve fourth quarter and i i was down three percent you're new here mainly driven by the impact of allowed twenty twenty one interest rates on investment portfolio yields partially offset by another quarter of fire loan balances as was growth in deposits and the investment portfolio relative to the third quarter for you and i i came in one percent lower primarily as a result of the expected normalization a premium amortization as you may recall third quarter twenty one include an episodic benefit worth about seven million what we previously noted wasn't expected to repeat and fourth quarter we do however he continued premium amortization and we like many of you are excited about the rides we see and long and write this year
spk_4: however short rates of in flat so far and it's really the prospect of fed action in the march timeframe which would have a significant benefit on and i
spk_3: on the right of the slide we sure average bouncy during the fourth quarter average assets increase four percent quarter on quarter primarily driven by higher deposit levels we consciously allowed average deposits to float up this past quarter
spk_4: which we then expect to monetize and a period of a rising interest rates
spk_3: thirty aside thirteen fourth quarter expenses excluding notable items were up one percent non year as we previously decided to increase in kind of compensation to reflect strong you're on your performance and pulled forward some investments in the business
spk_4: at the end of the or however we also experience some higher than expected episodic expensive medical costs are higher as we saw ramp up in year and claims we saw some elevated i t vendor costs and we realize higher marking stand associated with the a volumes
spk_3: compared to forty twenty on a line item basis excluding notable items compensation and employee benefits was up two percent driven by higher in some compensation medical costs partially offset by lower had counted salaries notably our continued focus on digitization automation as well as resource discipline have helped us reduce or headcount this year by two percentage points even as we on board that larger deals and process more transaction volume information systems and communications were up eleven percent do to continued investment our technology infrastructure and resiliency as well as expect equipment expenses as we move more activities to the cloud transaction processing was down seven percent primarily driven by lower market data and brokerage costs occupancy with sound six percent reflecting the benefits from eliminating another five thousand seats and achieving a hundred and fifteen percent occupancy rates
spk_4: and other expenses or down to
spk_3: overall were pleased this year with our continue to build a demonstrate productivity and expense discipline excluding the impact of currency translation worth approximately one percentage point four year twenty twenty one expenses would have been flat and in a year where fee revenue growth grew by mid single digits we meaningfully expanded our protects margin and generated positive total and see offering leveraged despite a challenging interest rates in by carmen moving to slide fourteen on the left side of the slide we shall the evolution of eighty one and tier one leverage ratios fall by our capital trends on the right side of the fight as you can see we can to navigate the operating environment with strong capital levels with or without the recent equity raise relative to our requirements as of quarter and are standard the eighty one ratio of fourteen point two percent increase as point seven percentage points koran quarter primarily reflect the an outsize reduction of about five billion in our w a related to the impact of fx mark tomorrow is and higher retained earnings
spk_4: we expect rws increase in the first quarter little more normalize business level and the effects of expected regulatory changes coming and twenty twenty two all which has been previously consider in our capital guidance
spk_3: archer one leverage decreased slightly cooler ancora mainly driven by higher client deposits and laugh he returned a total of two hundred nine million to shareholders in a form of fourth quarter dividends as previously communicated we expect rct one and tier one leverage ratios to be at the lower end of our target ranges for the first half of twenty twenty two inclusive of the implementation of as a ccr and the expected closing of the brown brothers investments and best or services acquisition turning to slide fifty he can see a summary of our for to twenty one and four years twenty twenty one results i've already covered fourth quarter in detail let me say a few words about our full your results before jumping into our outlook for twenty twenty two in summary or pleased with are strong performances here notwithstanding the challenging insane varmint we deliver of five percent increase in total few revenue for the year with servicing imagine feet reaching our highest levels on record our expenses for the full your remained well controlled the and despite higher revenue related costs and investments in our business and people
spk_4: as a result even in last year's low rate environment we delivered positive offering leverage am are able to drive pretax margin and are oh closer to our recently enhance medium term targets
spk_3: and with that turns out outlook
spk_4: i'm fine sixteen let me cover full year twenty twenty two outlook as well as provide some thoughts on the first quarter both of which do not yet include the previously announced acquisition of the brown brothers and thus and services
spk_3: we continue to target a closing by the end of the first quarter although the timing could fall in the second quarter we are in the process of obtaining the required regulatory approvals some of which have already been secured the process is proceeding at a slower pace than anticipated with many regulators around the world addressing the high volume of global and in a activity that said given the current higher equity markets step off and new interest rate forward we now expect about twenty five percent year on year keep it growth for the acquired business for each quarter in the first year post closing instead of just fifteen percent year on year he bit growth in our original acquisition the modeling
spk_4: now as i usually do let me first share some assumptions underlying our current used for the full year
spk_3: at a macro level or right outlets largely a launch the current ford curve and assumes we see three us rate hikes and twenty twenty two but the first sight occurring in march we are also semi around five percentage points to point growth for equity markets and twenty twenty two as was further know realize fx market volatility which influences are trading businesses
spk_5: as for a currency translation we expect the us are will be stronger for the year which will be a headwind to revenues bubble sale said it has a benefit to expenses
spk_3: south beginning with revenue
spk_4: for the full year we currently expect that fee revenue will be up three to four percent with servicing fees going to the three percent both include about a point of currency translation had one for twenty twenty two
spk_3: regarding the first quarter of twenty twenty two weeks back the refuse to be up to the three percent year over year given equity market expectations and continue business momentum with servicing fees expected to be appointed to percent in mansions he's expected to be up eight to nine percent her full year and i depending on the timing the projected rate hikes we expect twenty twenty two and i'd be up ten to twelve percent on a year on year basis regarding first quarter twenty twenty to expect an ai to be up three to four percent year over year and still flattish sequentially now turning to expenses as you can see in the walk we expect expenses x notables will the up just one and a half to two percent on a normal basis and twenty twenty two as we continue to invest in the business and are people while driving both positive total and fee ah bring leverage we currently assume that this includes a one percentage point benefits expenses due to this stronger us our you can also see on the walk there for full year twenty two we expect another year of growth phase of approximately three to four percentage points which will help fund bible costs and ongoing business investments in areas like alpha digital pack infrastructure and automation
spk_4: regarding the first quarter of twenty two we expect you're on your expense go to be largely in line with a full your guide and includes a seasonal compensation
spk_3: his expenses which occur in the first quarter all in all our plan is to invest behind the revenues and deliver both positive total and positive see operating leverage finally we estimate are effective tax rate to be in the seventeenth ninety percent range for twenty twenty two
spk_2: and with that i'm a hand the call back to run
spk_6: thanks eric operator we can now open the called for questions
spk_0: at this time i feel like to ask a question please press star wine on your telephone again that star wine to ask a question will pass pasa just a moment to compile to kill any roster
spk_7: your first question comes from alex both stain of goldman sachs hey good morning guys are having your odds with you i'm so or maybe we can start unpacking so of the guidance and i'm sure there's going to be a good amount of follow ups on the back that as well but on maybe just starting with the see guide are really zoning and on service and fees the states reasons he made a considerable amount of improvement in retaining clients and winning business so maybe help us and within the two to three percent growth for the year ah what sort of contemplated up from and and you know markets in terms of the benefit of the five percent the you guys highlighted earlier so how much more market benny benefit vs and that you busy
spk_4: as and pricing and i'm assuming blackrock i is included in this guidance as well but how much it would drag in the service if you revenue guys expect from loss of the blackrock minutes
spk_3: alex director happy new year to to let me let me cover fees and then servicing fees which i think is where you're on your focus your guide for a total few reviews up three to four percent for the year or guide for servicing fees up two to three percent and obviously that includes about a percentage point of head
spk_4: when from foreign exchange so we're in a fact that servicing fees are up
spk_8: for example of three to four percent in our guide adjusted for a currency translation
spk_4: i'm if you think about the driver's seat know we've we've factored in all the the the known events
spk_8: both are are growth are installation meant new business and so forth
spk_4: you know if you want to peel it apart
spk_3: little more a deeply you know we leave yeah start off at a good equity market level and we expect some you're on your growth from equity markets such by worth about two percentage points of a of a to tell when to growth
spk_4: i'm flows and klein activity which are variable is probably worth another percentage point and part of our kind of fee structures net new businesses
spk_3: continued to take up we expect cornet new business to be up to person in that obviously include all the you know new on boardings offset by us any any attrition so that's on that basis
spk_4: and then obviously there's just the usual e o two percent grind down of pricing and that kind of gets outta us to the low end of our range we think there's some outside which is why hill adjusted for a currency you know that servicing feet tide is in the three to four percent range and
spk_3: what it does is it represents the continued ah
spk_7: you know acceleration of our business towards er medium term targets which are really afford a five percent range great it's perfect and on just maybe stay on the topic of but but looking at the expense side of the of the on the piano the one and half two percent growth on i think is contemplated on of see the fee outlook the you just outlined on if we are in a tougher equity market backdrop and let's say you guys don't hit the two to three percent service and be growth or the three to four percent see growth on what is sort of the bookends around the
spk_4: expensive girl trajectory that that would see the shares in other words like in flight equity markets should we expect you to be below the guide on expenses given there's maybe more flexibility or kind of the rangers the range and you know the revenue will be more kind of working independently
spk_3: alex that's a fair question and and you can see that part of the way we create some all talat insulation for ourselves as we think about equity markets and where they might go whether it's you know up a lot of modestly flattered down is that we've designed our plans or with a view that we we should and i intend to let a for a couple points of offering leverage and as a couple points of see operating leverage right that that couple points are you know gives us some some flexibility to to handle some variability in the in what happens and in actuality and equity markets am i think
spk_4: it also certainly will move you know within a range based on now what we see in obviously if we see a market and equity market correction of you know down five percent are down ten percent you know will do everything we can come in below our our range and you know certainly we can flex in this business in our you know for point
spk_3: can be flax that's not easy buddy can beat flax ah and i would be the you know the approach sure that that that we take but we're we're confident with kind of the level of equity markets they are today part of this part of what we see his arms his israel of philly normal up taking
spk_9: equity markets we think that's a good kind of middle the fairway plan but will certainly flaccid we yeah
spk_10: to the extent that that we can
spk_0: that's great thanks very much go to church
spk_11: your next question comes from the line of tim mitchell with port global
spk_12: take morning
spk_13: maybe just talk a little bit about
spk_7: the bbh
spk_8: i appreciate the the discussion around the increase in any bit of from rates how much is that can you speak to their off balance sheet sweet deposits maybe update us on the level of that and and how you think those acted are rising rate environment in terms of the sweeties is a pretty similar to the spread on deposits
spk_4: timid sarah tom you know that the business that brown brothers has run on the that's and services inside it's performing well so what we've seen as here with a higher equity markets we've seen you know love their servicing fees come in you know bit stronger for this this coming year i think that deposits both on balance sheet and the swept ones are within the range of what we've seen
spk_14: in a while i think we describe those as a bit under ten going on balance sheet and of a bit over sixty five billion slapped and they're they're come in now you're right around that range and that's our expectation for twenty twenty two i'm the most the on and off balance sheet do have
spk_8: as
spk_4: a good as a translation into you know higher revenues as as rates move up and the on balance sheet say those are some or to ours and
spk_9: you know we we we had very nice betas in the early part of the last rate cycle and expect to have that again on ours and on there and then the at the off found fleets also have as they're not quite as
spk_11: strong as deposits but there's a third third they're they're they're they're they're in the range actually and that's the that also will provide some very nice i think feet rose as we as we take on that does that business
spk_4: okay great and then maybe just pivoting to the us a magic business you get you had record flows
spk_2: trumka flows many years can you just described where the biggest drives that girls are coming from you know what you're doing your hands across it in you know this more just the environments grade or do you think there's some sustainability to that up to that that if flow the gym it's run on let me take that i think that of the growth is reasonably broad based in the sunset or it's firstly from or investments an ongoing in person from easier for the so for have lots of strength emerge in the course spider offerings which are really instruments of choice for the your for large institutional investors and are good growth in areas where he has person activity of fixed income the low cost to or non us so we we expect to continue to see a good performance there are particular years we've we've we've worked to solidify our er physician with institutional investors
spk_4: secondly in the in the institutional on in the in the traditional institutional space
spk_2: what's the the team's gonna lot of work in developing products that are companions to the or to the core index business we have a great client roster and we've seen some diversification or in in the phone in that business then finally we got a great cash business or
spk_15: and
spk_2: obviously it's it's ebbs and flows as casters itself but on
spk_16: also benefit a little bit from rising freedom farm and says
spk_6: as the remainder
spk_0: of the
spk_17: so the fee waivers goes was so it's it's really across the board
spk_18: thanks for the car
spk_7: your next question comes from stephen to bark
spk_3: little wolf research
spk_4: i good morning so when or saw eric i just wanted unpack some of the and i have the assumptions underpinning some of the emmy at the and i'd and sesame you to share some insights in terms of what you're contemplating as a said initiate que te in terms of are just deposit flight broadly or deposit run off and maybe to
spk_8: ah sorry mixing out of nine interest bearing deposits and just in terms of spot rates were your reinvesting today versus the back foot shields or i'm steve says eric let me let me do that in in reverse order i think the as the front but in the back foot
spk_4: are starting to a to converge and the and portfolio and you'll see that our investment portfolio yields took us as a you know another a small tick downwards this quarter and fourth quarter of starting in fourth quarter was first quarter we'll see that relatively flat and then you'll see a slow progression upwards so we're we're comfortable
spk_3: where we are in services for a long rates and obviously the higher the law firm great come in the third the better offer will be armed you know the and i have take for this year and then let me get to that question around balances and quantative tightening i think is
spk_4: it's is just comfortably dependent on the
spk_3: on on the feds them you know increases
spk_4: you know by think we're we're we're show and ten to twelve percent expectations in high in and i know more than half of that is of rising short term us rates you know about us
spk_3: than a quarter is off rising non us short term rates and then the in the last portion is off of
spk_8: the rise and long a so we're really geared towards the the
spk_4: front and raids and then that flows through directly to a to balances on for deposit balances we can we expect oh us and international deposit balances to be it'll flattish i'd say this or this year arm and i i i think we're all wrestling with you know what's the pace of
spk_3: the feds actions in terms of rising interest rates you know when does that starred and then when do they start with the you know with some amount of quantitative tightening and i think it's just helpful to book and this you know there's there's been a lot of discussion about quantative tightening you know the last a week or two you know
spk_4: early a will a wolf it will happen if you go back to the last cycle which was just you know three four years ago so that not a long time away i'm a quantitative thing started the two years after the first rate rise and a full year after the second and third and fourth you know kind of that steeper part of the the rate rising cycle and so i think quantitative type things so they'll be they'll be a bit as range on this is something to expect in twenty twenty three more than two twenty two ah and in a woeful thereby and and then have some effect on deposits you know how much it's hard to tell
spk_3: you know it's you know this this this cycle we controlled some the uptick in the positively add the push them often the third quarter as you recall let them back in this quarter
spk_19: you know will certainly see some deposits ab of downwards and twenty three and twenty four perhaps or potentially just say flattish
spk_4: because the the questions the pace of the quantative tightening and if you recall last time around just like s three four years ago i think the fed felt like it titan too much pride and created some disruptions in this short term money markets some so are we expect some tightening to happen in
spk_18: you know say a year and a half from now or thereabouts
spk_7: we'll see the i think the pace of the tightening maybe yeah
spk_4: maybe more and more moderate but anyway we'll see we'll see that's a that's call it a twenty three topic i think twenty twenty two should be fairly fairly straight oh thanks i contacted eric and just for a follow up on i was thinking about capital management you spoke about renegotiating the buyback beginning to que os you can give us some contacts as to like what level of pay out you know you're you're planning as we look ahead to twenty two twenty three and just in terms of future changes to the capsule regime know any guidance you can provide on the impact of soccer or
spk_9: or and preliminary thoughts on the impact of upcoming changes under model for regime would be really helpful
spk_4: sure there's there's there's a lot there as stephen your question salome yeah let me take it kind of from the deer and timeframe to or to further out
spk_20: we've i think we're we're we're we're pretty content with our our capital guidance said no will be the low end of our ten to eleven percent range for seat he won in the first quarter that includes both the fcc cc are being implemented and you know
spk_4: the confirmation of the
spk_3: see a brown brothers acquisition so
spk_4: you know that that that i think will carry us through at the low and arrange for the first half of of this year
spk_21: and we were i think control with most of those as we as we go to the year and second quarter we'd certainly like to worth it to start that buybacks you know we'll we'll see you know at what pace of those the pace of a buyback start will depend on the kind of the exact capital ratios as we had first quarter
spk_4: or and then the second quarter we'll see you know how is the i swings either
spk_22: positively or negatively
spk_4: and so i think that's and sets us up to to start buying back of stock in second quarter and then proceeding you know at at pace and third quarter fourth quarter and beyond
spk_3: and then i i
spk_4: i think at that point you know we're we're we're back to trying to work or we're not trying but operating within our guide and said capper return should be in the eighty percent loss of earnings
spk_8: and
spk_3: that's that's that puts us i think in a in a way that we continue to return through a dividends and buybacks i kept on a nice comfortable way so anyway a nice path forward ah
spk_8: but
spk_4: you know first half of this year i think low end of our our ranges
spk_3: and then the second quarter and then third quarter fourth quarter we we start to reinstate and then i accelerated by backside to account for level you know the of the bottle three yards
spk_18: refinements men's basel for and game you know they're they're different though our way things are full cable or out there he'll certainly come to pass
spk_8: you know clearly will get some benefits and alone both that we have a a small loan book than than others though we'll probably get some headwinds from the fundamental review the trading bug and then some headwinds from a from us the op's risk capital charges so my guess is it'll be a bit of a headwind but
spk_4: like i said before it's been all factored into our our capital ratio guidance
spk_3: we generate quite a bit a capital each year and year we feel comfortable that we can can choose to live on our medium term targets of returning you know eighty percent or more of the of of earnings back to a to or to shareholders
spk_4: that's great color interest just quickly to need to do quantify the impact from soccer to so we get sorts reflected in our models
spk_3: yeah i didn't in the prepared remarks but the the rough amount in a week we harry typically about one hundred and fifteen billion of rw ways with little less or this quarter
spk_4: soccer is
spk_18: will cost us in the first quarter
spk_0: just over ten billion and we've got offsetting actions
spk_23: worth about half of that of about half of college around five billion so i think that basis it's it's fry worth about five bucks
spk_24: rw way but as i said before my prepared remarks this is all been factored in to our our of capital guidance that we gave feel back
spk_7: over the last several quarters and we're we're confirming and affirming that will be within within our ranges in in the first half of the year
spk_23: but or stood eric thanks so much for to my questions sure
spk_25: your next question comes from to gerard cassidy with rbc
spk_8: good morning earth moon
spk_4: hundreds and eric can you give him some for the color on you given speed detail on the servicing see growth in how you'd expect to see that three four percent grow the sheer news
spk_3: new new inflows as you pointed out but also from some equity improvement in the markets big is it about two percentage points of that number
spk_4: we take seaton you look at the equity portions how important is the u s markets vs and be and the other markets can you can you give us a flavor is jim lee due to the us markets the drives you grow
spk_3: your art it's eric it's really a max i think maybe almost i just think about the the the rangers it's a bit under half
spk_4: that thrown by us markets
spk_3: know closer to probably i don't know a third a chef
spk_4: know european markets and then in australian emerging markets as because of the us in some cases the higher fee rates is also are you know i implore lack be worth you know
spk_3: twenty twenty five percent the other is remember
spk_4: we have a part of our pockets fixed income assets that we that that we service and so you know that's why you know equity markets that tell ones effect part of our book butter but not all for book and rising rates we've got the opposite effect and not on a fixed income side
spk_25: what what i yam you know just as we from are planning purposes as we go into the year though you know on a point to point basis or are you know if we were to say flat email from now through the end of the year
spk_8: versus the average of
spk_4: of last year of twenty twenty one you know that and of itself should give us at least have a point point a half of servicing see live and then yeah well we're talking about is whether the point the point growth from yeah december thirty first two as twenty twenty
spk_3: two december thirty first can give us that extra you know a half a point so i think that's that's how you get the the roughly two percentage points tell when that we expect somebody is in a way baked in assuming markets some go down and then you know a smaller pieces is is is coming from some you know a modest appreciation very good in in his a fellow you disgusted as have your peers about the expectation of rising interest rates in short term rates said fun rates in twenty twenty two can you share with us the duration of the fixed income portfolio and one rates should we watched carefully
spk_4: yeah that would impact see a oh see i believe the mark to market would be negative out for the portfolio
spk_26: yeah we up their the duration the that's and portfolio we yeah we enjoy down that this quarter you could have seen that and now
spk_4: you know in the as the i slide that we had i think at about thirty two point the or two point nine years so where'd ya trended down a bad from from the last the last quarter last couple quarters and the a right now our lot more comfortable can we've been investing in the in some the on the belly the curve kind of the tutor to five year range i think that ten year you know up thrill you know two percentage points is quite comfortable for us including from an lc i management standpoint i think if you get you know a good bit of thoughts two percentage points on a ten year yet you're kind of have a
spk_0: a kind of have a
spk_6: he had a double effect on one hand you get a know cia
spk_27: oh head which obviously creep back over time so it's not it's temporary and the other hand you celebrate higher rates falling for the investment portfolios over the coming you know quarter so i yeah i think it's you know it's it's next but dub a net positive we have some sort of spike at the back and but it it would have
spk_8: out just as the mechanics of how we operate quarter to quarter of in on the margins
spk_4: i appreciate that think you are and future aren't
spk_28: i can if you wish i would like to ask a question please press starve one on your telephone
spk_29: your next question comes from the line of rob wild heck with autonomous research
spk_4: morning guys he yet another did corner of loan growth fear was average loans up seven and after sent sequentially florida driver's there and how sustainable the think that is and twenty twenty two roberts eric you know loincloths has been good for us see as a last say yes couple years to be honest i think we've consciously yeah driven lung growth
spk_3: quarter after quarter up in the love double digits you know wanna a year over year basis on this quarter week contained it's a good client the man but we also on shifted some we also added some cl lows and loan form as we as reduce the see a loads and security form from the investment portfolios for that was a bit of us have a have a shift that said i think in general you know what we're comfortable doing his country club growth for loans cause that that we only have a shift every quarter this is more and more episodic just and be rebalanced to think about
spk_4: stress testing and you know how to operate officially with are multiple constraints for so comfortable our country to grow this long of portfolio yelena low double digit range it won't happen every quarter there's a little bit of seasonality but we continue see quite strong demand from are alternatives clients and private equity kappa
spk_27: call financing we see your demand in in sanaa arts of the alternative and and real estate
spk_3: the markets that we play and end
spk_4: the other the biggest focus i'd say is you know as we lend more and the play capital to our clients in a lot of what we do is work with them and make sure that's part of a broader relationship because that's where it really is renew murder of our for us and for them and helps us grow the it helps us build the of the other reputation the and the and the and the momentum to build the the feline as well gotta thank you and then he know turning to expenses and operating leverage the outlook implies media two percentage point out between seagrass and expense growth but yeah i'd also dates and plus five or six percent from investments in variable cost you think of that isn't sister
spk_3: oh an elevated level of investment in there some more operating leverage available longer term or is this kind of the required level of investment going for you know it's hard to it's hard to of forecasts the future you know the the amount of investments is partly around you know what's table stakes in the marketplace and partly around where do we see opportunities to differentiate are our offerings and clearly you seen us invest in particular and in alpha
spk_4: a
spk_3: i'm in the front office and alpha that spans into the middle and back office and were also funding options in the back office to to invest
spk_4: the truth that a feature functionality enhancements in custody in some areas of accounting which he also as attractive and segment by segments self
spk_3: you know it's it's hard for me to say what's the that necessary amount of investments we think there's a rains we think you know last year we've we've probably invested the you know it's a bit less than there's probably instead of five to six percent i'd say yeah you know there was probably a point a half last of investments during twenty twenty one you know so i think what you'll see us you'll see a flex the amount of investment from one year to the next i think what we're conscious of is said
spk_30: confidence and investing should come from seeing the revenue growth and seeing the revenue growth and park past investments and for saying we're we're seeing the revenue growth on the path investments that we've made across the franchise and i think that gives us that confidence to third to continue to to take carefully and
spk_31: bass in some cases
spk_2: accelerate the that but i think and and modest ways i think the other part of our culture has been to you know it's the same time as we invest find productivity and savings and that we think that's an important part of how to run a business but certainly a you know a business that over time where digitizing and automating you know should come with with with productivity savings and engineering and i think the the other part of our hum business processes and and i think you'd hear this from from our senior executives the more we can drive and productivity saves the more we feel comfortable on investing in that's a very yeah that's that's a virtuous circle
spk_27: yeah that's horrible rough would have started on god's would i would just add to that is that on it's it's it's actually good news that we're seeing opportunities to invest in the business
spk_6: because that particular years we've built out the alpha platform which was originally aimed at the with the asset management space in the traditional asset managers are you were no starting to rule out on out for for private market so it's good that we're see me opportunities but i would underscore
spk_32: eric's points that
spk_33: that notwithstanding my goodness we're focused on his is continuing to eke out on higher and higher productivity and we see more offered her so we see the ability of this virtuous cycle to continue for quite a while longer and the fact that there are investment opportunities or is actually a good thing because it shows that are notwithstanding the narrowness of our of where we operate there's plenty of places to grow god i didn't fare to characterize it then at this level of investment every last year and this year's gives you the capacity in the room to play both offense and defense yeah
spk_27: great thank you
spk_31: your next question comes from glance for whatever color
spk_2: i like this that runs questions are on the distorted comp accelerations i'm just curious out what level employer we are we talking and i'm asking because
spk_34: that's it does the third portion
spk_2: obviously he sang to get practices more competitive so that a said it's that presumes that you would different more than peers and that going forward you that higher castes peace going forward on i'm just curious time on it's probably included obviously in your expense guys of what's changing here and of wise as well
spk_35: excellent for the armed forces
spk_3: the employees that are gonna feel this would be armed
spk_4: are not not our most senior employees would be kind of the
spk_3: the middle senior lower senior if you will and down so you know our parlance on
spk_4: a be peace peace peace and and some of senior vice president fulfill okay then
spk_3: glenn just a given context see how the as hands with we've made this change we had made one change you know was five years back i think this now gets us to be compared with the marketplace and and the well as such content that the fact that might help a little bit is you know
spk_4: way back when we had some immediate cash in the thirty percent range of compensation for the average employee the deferred cash with forty percent and the equity the deferred equity with thirty percent that was a there was a place that was completely out of market we we fixed about two thirds of that you know love of five year
spk_36: years ago and got to fifty percent immediate cash twenty percent deferred cash and thirty percent deferred equity
spk_37: and now we're with this final change yeah we're going to take that out to the immediate cash as sixty to sixty five percent deferred cash to just five to ten percent mostly for the the the most senior folks and then the deferred equity stays at thirty percent so we think we're now in line with the market
spk_33: as far this change what does happen is you've got us crystallize some of the some of these deferrals into the peon allen the current period and then what that allows us to do was going forward to add to the cash max
spk_27: and because we've crystallize the previous deferrals those don't hit the piano in the future but the new cash will hit the piano in the future so this will be
spk_15: neutral two words a subsequent periods
spk_2: on the on the expense months okay thank you very helpful out look at once i was going to you for objects as ron and the first three i think are straightforward as as high confidence in your ability to to do those i'm curious on the how to and what you're doing what you're going to measure and number for which was the must be a higher performance oriented organization just curious have you so says how you execute on that who are mean this is an ongoing objective of first one and it really is around performance culture and if you think about culture which is a very used and sometimes maligned term for us it's about desired behaviors and
spk_38: on the flipside kind of eliminating undesirable behaviors so what we're focused on his supposed desirable behaviors also related to
spk_0: kind of driving performance i would argue that it's even more important now than when we started a couple years ago because on top of everything else that we need in terms of serving our clients and serving our shareholders and we're now operating normal operating in this hybrid world for the foreseeable future the
spk_39: puts on a burden new burdens and new requirements on managers particular middle managers so it's it's all about being able to eke out the benefits or which are considerable in a hybrid world in terms of employee flexibility and
spk_40: some real they cost savings most kinds of things for the same time making sure that we're continuing to deliver where we are so we think about performance in terms of and we think about
spk_39: culture in high performance in terms of behaviors xr on your next question comes from brennan games with u p s
spk_41: are the morning picture taken my questions i wanted to circle back eric
spk_3: as we've sort of kind of clarify some point you made as attitude talked about or bbh to the event gross i expected to accelerate here in in twenty twenty two up to twenty five for such so just to make sure i'm level setting correctly you also talked about some strength it's service saying it's not all and i
spk_4: i am
spk_42: that twenty five percent should we apply that to the three seventy five said you'd
spk_3: provided pretty soon you know to the deal where did that actual number shift from expectations am i using the right baseline and then battle for the other disclosures you provided around the revenue and whatnot should we do those shake out as in line with expectations or did they work out to be a little better as you would it to and and actually think about that bass line when we think about three quarters of a of a year here for free
spk_4: damn yeah let me fair fair question brennan it's it's eric i'm we had hit says yes as you remember am accurately as estimated their twenty twenty one performance as to be a bit of about three hundred and seventy five million they came in love
spk_3: you're right around that level so we're for a couple for that as a base case and if you recall a we had shown on seventeen percent growth from twenty twenty to twenty one
spk_4: in i kinda in our rob it's of our documentation as we announced as a brown brothers in essence horses acquisition i'm from a deal model perspective at the time we had expected off of the twenty one you know base to grow at about fifteen percent so in line with the past car that was the other the equity markets how when you know well
spk_39: he continued to play through and parlours just good business performance day or brown brothers our colleagues and investment services are really a driver a nice set of farms and ish does each year to try froze klein activity and and so forth and duff what we're finding now is the cause of the equity markets here step off and the interest rates the environment you know where we we expect to be roughly at about a twenty five for sunday the growth from a twenty one to twenty two i think so l a portion that is the is on the us
spk_43: equity eyes on the servicing feline a portion that is on the see line that comes from the sweet member that that comes through the you know fees as well and then a portion is from a from on balance sheet and i i and i don't have the up
spk_2: the sense the pieces so handy but clearly the interest rate of tailwind is
spk_44: is is try them the more significant of those factors that affect both the on balance sheet and the slept deposits
spk_2: okay great thanks you for that clarification and then a separate issue from my second question looks like there's a a a a transitional leadership seems like cyrus is retiring in in to the asset management business and has been a business where there's been bolsa or speculation an open discussion with you all in the past that strategic direction and whatnot what does the transition in leadership present as far as an opportunity to shift strategic direction and what can you let us know about your updated thoughts on that business and whether or not a leadership transition is i is impacting the direction you want to go back brennan i mean as you can maybe see from our results we've we've invested in their business
spk_45: over the years the investments are paying off we like the business
spk_2: it's a very complementary to the tour services business having one of the largest asset managers are so is our clients of our core businesses have been able to let us have a bit of an or in the laboratory there's a client overlap in certain segments for go for owners and sovereign wealth funds that we've gotten on cetera et cetera dog or is leveraging so we like the business we intend to stay in the business
spk_4: i'm sorry undersized leadership that on a great job
spk_39: and you know than the number speak for themselves or so i wouldn't expect to see a a broad st peter's change here
spk_6: certainly not not wrexham i just outlined in there's always opportunities to do more and do better car in in in all of our businesses them so will want to continue to do that
spk_27: we've got a very strong talent based there with this is on the sun practices and one in which we will look inside and out get to get the right person to take of to the to the next level here for we have no intention of of of of continuing to run and grow their business
spk_2: okay sanctioning my questions your next question comes from mike brown with k b w hi good morning thanks for taking my question delays a appreciate that the on and bbh and me either
spk_4: outlook fair and just as we move closer to that closing date i was just was just curious that the change in the eat it outlook and operating environment is that that actually trigger any increase in the total consideration that will need to be be paid aggressive the applied valuation would be would be lower than that announcements i was just stuff
spk_8: and one thought that crossed my mind and then in the follow there's can you just remind yourself
spk_3: the unexpected fee synergy specifically which ones do you feel confident you can go to deliver on sooner after the closer to the one that will take more time to come through you
spk_4: it mike when i start that not from the synergy for the question over to put on know the snow no contingencies and the purchase price either up or down in our own than the usual ones that you would expect in terms of a bomb have you don't have a risk management so know this know it's it's go digital payments that for be to here and that's my kids are just on a sinner jay's arms i think each one of them has okay said some which we we we did sell out i think on the cost synergies which is the
spk_3: know the opportunity and that's obviously a come from times will come out of your their base of expenses sometimes our base of expenses as we put the two together you know we had as made about forty percent of ira costs energies would come in any year won and then
spk_4: as the balancer a year or two and three and that's that's try the other the single largest area in terms of the am
spk_9: the a fee synergies year the balance sheet actions
spk_4: should come through a relatively quickly we we can modulate the amount of flap vs you know on balance he departs deposits because we've got the capital resources plan for that and i think that's a oh one of the ways that we create a real value and then the the the last on the m c e o revenue synergies know some the fx kind of our markets
spk_27: we're synergies you know come in a lot more quickly right because it's about offering a broader set of say affects products on which were more capital intensive than simple swaps bollards ah that that is more about setting up clients and then quickly they are being there for them and then some the thing once take a take a little longer part of the the cell cycle but i think that's a good mix and
spk_5: obviously as we
spk_4: as we work on closing and you know bring brown brothers and particle we've been doing is as you'd expect kicking the tires on what are the opportunities how to go the next round of definition on those so that we can you know hit the ground running and you know inside said the when we announce a deal you know we'd like to work to meet or exceed our our our our targets and i think the the sega genesis market talents are part of that we'd also like to do as you know on the through a thrall taschen executions one okay great for shit see i declare that and or maybe just one one last one artistic quick clarification apologies unexpected you quantify that discreet tax benefit or ears the best way to think about that it's just back into it and the after considering your typical tax rates
spk_9: it's some see i wrestled the
spk_4: mike with with with that because they were actually as a series of tax benefits i came through this quarter the with some closing know some
spk_8: you know the previous year tax bookstore some foreign credits that a crew in those jurisdictions which
spk_3: and help our gas taxes and then there are some you know foreign credits of than kind of
spk_46: map back into the us as as tax payments as adoption so there's a there's a series of them i think the best way to do it is the pride take you know our full year tax rates are typically in the seventeen to nineteen percent range so you take the midpoint of that
spk_4: think about death full year this year now while with this with these the a discrete which were
spk_27: in a more elevated than usual and a good way you know gotta stick closer to fifteen percent tax rates i think the difference is probably the
spk_4: yeah you might call the the lumpy peace what what i do what what what i would so also notice that i think tax planning has been in wow
spk_0: the kind of thing that you know we've done for many years we you know we do or die we're always on the bright side of the line and we do it carefully
spk_47: in a part of it being an international law bank harm you know we we like other international banks are are able to have to to do some some you know a modest amount of tax planning and so you'll see it i think it's elite we see we see that come through the piano annually it just cents below lumpy quarter to quarter and and with little more lumpy good than than usual this particular color
spk_48: okay understood i appreciate the taxes or was complicated subject so thanks for that a file clerk
spk_47: sure thank you mike
spk_48: your next question comes from brian the down with deutsche bank
spk_9: bag great thanks money on it
spk_4: circle back on the arm on the deposit opportunity for be the age
spk_49: just to clarify that you said others right now ten billion up because it says on the balance you to be the age and than fifty five additional in the and sweet
spk_4: program and a big initially you're planning to bring about a total of twenty billion
spk_3: an inclusive of those of on the depends on the balance sheet over to see if you to convert some and if we have a fourteen billion with the conversion to get you to twenty
spk_4: maybe you just updated on the plan after twenty twenty two if you do close at at quarter and in the first quarter of what you'd like to bring on and and maybe to talk more strategically about what you know maybe we're kind of portion of that of that sweet opportunity might bring on to on on the bounty to gets capital submitting bryan it's a it's eric i think of us as good as a good estimate of those just for the the brought a group i think we said you know was about five to ten billion or on the balance sheet today
spk_3: about sixty five billion or off balance sheet and slap them you know as we're ah as we the consummate the acquisition you know we're talking the first quarter we selected the end of the first quarter were targeting we said he could be in the second chorus the stuff just just takes time
spk_4: you know whoa lol yeah we're looking to bring on the as a five to ten that they have on the balance sheet and probably another tennis yourself that his his wife's i think over time the question is really am i what interest rates levels to we operate
spk_47: as you know if we're at prevailing you know short rates of
spk_50: fifty basis points let's say you know then the l on bouncy deposits arms to iraq was terribly attractive but when you hit the prevailing charade of a hundred deaths or two hundred deaths and obviously you can do this across different currencies then you're more inclined to bring more on balance sheet and so we think of it
spk_47: as a as a range i think we also though our clay
spk_3: we want to be quite thoughtful about maintaining a program that that works well it works well for our clients and and the brown brothers investment services clients it works well for a number of global financial institutions that they have relationships with that you know they flee primarily dollar deposit to who appreciate those deposits and self you know we we certainly want to maintain the program or for for swedes want to maintain it in size you know but you can certainly you know see ah yelled swings of another ten billion you know beyond the initial move feel potentially but we're adequate for see when we get there and part of it'll be had discussions with the key find themselves in one hand and part of it will be the with the counterparties and i think they'll be a hobby so big goodness and opportunity here ah in in most circumstances edit that that's great color and needed it's as a great you second question on deposit beta expectations on much as you mentioned he thought they might be the similar to the last on fucking psycho i'm concerned that it does seem like it he moved around a bit during the cycle but kind of ended up and runs away
spk_4: for glue over thirty percent
spk_3: of it's prosecutor roads it's you said sons rates at the time and at an average maybe she can clarify that you think that would be similar this psycho and farm and in an obviously if you would you be treating that bbh deposits in a similar fashion or do they have a different profile
spk_9: rbi i'm and it was actually a good opportunity we see rates rise in the other the see i'm the likelihood of said funds a we did get a chance to go back and are
spk_4: you know revisit what we both sad and more we saw in from a from a deposit debate as standpoint back in the yeah twenty fifteen twenty six twenty seventeen i do expect the brown brothers deposits behave similarly dollars you know they are primarily with asset managers they are
spk_48: get our currency by currency a similar to ours but if you go back and i think we were a good about this closing our our quarter on quarter interest bearing deposit state as and usually have to do it by currency right so
spk_0: because of how the of that data as a play through but in the first rate the first one or two rate hikes you know we are we saw in expect again to see deposit betas and call it ten percent range where we ten to fifteen percent range but it's ah
spk_2: they quite loud when you get to the third fourth or fifth pie here in the pl thirty percent range you know plus or minus some as as you'd like into the as a raid cycle and it's really when you get you know in the past there in the fifth six seven hi where
spk_0: if you're likely to get closer to fifty percent interest bearing deposit bed as know i'd like to get their eyes i die yeah we'd be pleased with of with fifty percent if we get there with us that level of prevailing rates but there's i think there's a good to the good opportunity here because in truth we've been quite limited in our ability to earth

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