State Street Corporation

In terms of our fee schedules, you're right. The fee schedules have several components. They have asset-based. There's an asset under custody basis for some of the fees, which is about half. There are some transactional fees. There are just some flat fees. There are some per-account fees. And those usually end up being negotiated as a package. It's not that when we have negotiations that one particular part of that package is treated very differently. We have large, sophisticated clients. They think of it as a package. And to be honest, they're looking for a fair amount of fees so that as a partnership, which lasts often 10, 15, 20 years, some cases 30, 40 years, right, that they feel they're getting value and that they feel that we as a custodian, you know, can deliver on what their expectations are. And so it comes to be, you know, a reasonable accommodation, I think, in our minds and their minds.

Got it. Thanks. Thank you. Next question will be from Ken Oosden at Jefferies. Please go ahead, Ken.

Thanks, Ron and Eric. Sorry for that earlier. Just one follow-up on just the servicing fee algorithm. So with all the commentary you've made, and you show us the good detail about the business wins and the fees to come on, and we know about the headwinds, some cyclical, some due to the deconversion. Do you have a line of sight when we can really start to see that back office line start to move up in a positive way? And I know we have to consider the middle office and the whole front office kit as a together thing. But that's still the biggest line, and that's still kind of flattish on a year-over-year basis with all the things we talked about. But is there any path forward where you can kind of see some of those headwinds abating and some of the growth starting to come on and transitions that we can see a better growth rate overall? Thanks.

Ken, why don't I start here? The transition, I know it feels like it's been going on forever, but you know, that will basically abate. The effect of that will go away, more or less go away next year, assuming no other changes on the client side. So, you know, a headwind goes to zero. Secondly, and perhaps more importantly, you've seen, you saw the sales performance last year. You're seeing the sales performance this year that's building up the to-be-installed business. That still remains very, very high for us. Part of it is some complicated kinds of alpha clients that they will install. They typically tend to install in waves and tranches. So we'll make progress against that. But I would note from sales performance last year and it continued in this quarter, there's a fair amount of back office in some of these recent sales, which just installs faster. And so we're quite optimistic about the opportunities here in fee revenue growth, particularly servicing fee revenue growth, as you overcome headwinds, but more importantly, start to reap the benefits of what we sold in alpha, what we sold in back office, and get those installed.

And Ken, it's Eric. I would just add that we've had these client activity headwinds that we described, which is a mix of risk-off sentiment, which has led to lower transactions through the custodial accounts. And then we've described this shift towards a cash mix. We don't see those just continuing at the same pace. We see that as somewhat cyclical. I don't think we generally expect much more cash to be on hand with clients. I think there's a case we made that cash levels of clients should actually start to get deployed over the next year and could even be a neutral or a possible tailwind. So I think we've been going through a bit of a cyclical phase here on those environmental and activity type and mixed headwinds. And I think without those, you know, you could then see through to some of what Ron described around sales installations and the underlying growth of the franchise.

Okay. And thank you for all that. And one follow-up then is also, we can see the wins and what you put on and the yet to be installed to Ron's point. Can you just talk about just the pipeline? Is the pipeline... continuing to strengthen? Is it consistent? Have you now put more of that pipeline through? Where do we stand in that?

Ken, I mean, I think what you should have heard from us today is that we have a sales target that we talked about in January. We're standing by that sales target. That's significantly up from last year, which was significantly up from the year before. So, I mean, you get there because of the pipeline. So we're We're encouraged by our pipeline. Okay, great.

Thank you.

Thank you. And at this time, I would like to turn the call back over to Ron for closing remarks.

Well, thanks to all of you on the call for joining us.

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.