State Street Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 17, 2023

There are 14 speakers on the call.

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.

Operator

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 would now like to introduce Eileen Fizel Beeler, Global Head of Investor Relations at State Street.

Speaker 1

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 Abloff, our CFO, will take you through our Q1 2023 earnings slide presentation, which is available for download in the Investor Relations section of our website, investors. Statestreet.com.

Speaker 1

Afterwards, we'll be happy to take questions. During the Q and A, please limit yourself to 2 questions and then re queue. 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 1 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.

Speaker 1

Actual results may differ materially from those 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.

Speaker 2

Thank you, Eileen, and good morning, everyone. Earlier today, we released our Q1 financial results. Before I review our financial highlights, would like to briefly reflect on the eventful operating environment in the Q1. 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. 1st quarter global financial market performance was choppy.

Speaker 2

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 remain 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 increased, fixed income and equity markets declined and the U.

Speaker 2

S. Dollar strengthened. March saw continued rising 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.

Speaker 2

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 Q1 compared to the Q4 of last year With broad based gains recorded across global equities, while U. S.

Speaker 2

Treasuries experienced their best quarter since the Q1 of 2020. However, daily average equity and bond market levels both remained significantly below the 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 a 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.

Speaker 2

We demonstrated this ability at the start of COVID 3 years ago when we helped establish the Money Market Mutual Fund Liquidity Facility and the Main Street Lending Program. During the Q1, 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.

Speaker 2

We stand ready to support the world's investors and the people they serve during this time of uncertainty for 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 Q1 highlights before Eric takes you through the quarter in more detail. Relative to the year ago period, 1st 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 personal investments to support growth and a loan loss provision related to State Street's support of the U. S. Banking system, which I just mentioned.

Speaker 2

Turning to our business momentum, we remain highly focused on continuing to advance our enterprise outsource solution 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 AUCA amounted to $37,600,000,000 at quarter end and we recorded asset servicing wins of $112,000,000,000 in the 1st quarter, about half of which were higher fee rate alternative mandates consistent with our strategy. Encouragingly, This was our 2nd best quarterly sales performance by projected revenue within the alternative segments over the last 6 years.

Speaker 2

We also reported an additional alpha mandate during the Q1 as this strategy continues to resonate with clients. Our AUCA installation backlog amounted to $3,600,000,000,000 at quarterend. At State Street Global Advisors, quarter end assets under management totaled $3,600,000,000,000 while flows across our asset management businesses negatively impacted by the various market factors in the Q1. We continue to see a number of bright spots where we are focusing our efforts. For example, in the U.

Speaker 2

S, our Spider 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 $24,000,000,000 in the latter part of March amidst the market volatility. Turning to our financial condition. State Street's balance sheet liquidity and capital positions remain strong.

Speaker 2

Our CET1 ratio was a high 12.1 percent 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 Q1, while simultaneously supporting our clients and the U. S. Banking system. We returned $1,500,000,000 of capital to our shareholders in Q1, including buying back $1,250,000,000 of our common shares and declaring over $200,000,000 of common stock dividends.

Speaker 2

As we look ahead in this uncertain environment, we remain highly focused on maintaining a of up to $4,500,000,000 for 2023, subject to market conditions and other factors. To conclude, the Q1 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 Q1. 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.

Speaker 2

In keeping with the strategic priorities I outlined in January, we are driving forward with a number of actions. For example, Our AUCA 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 2nd quarter. Last, given the revenue inflationary environments, We will continue to selectively reprice some services, proactively manage our costs, execute on our productivity efforts and stand ready to utilize additional expense levers at our disposal. With a 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.

Speaker 2

Now let me hand the call over to Eric, who will take you

Speaker 3

Thank you, Ron, and good morning, everyone. I'll begin my review of our Q1 results on Slide 4. We reported earnings per share of $1.52 for the quarter, which included a $29,000,000 provision or $0.06 of EPS impact associated with the extension of liquidity to a U. S. Financial institution as we participated in an industry consortium supporting the banking system.

Speaker 3

We were pleased to do our part. On the left panel of the slide, you can see that our Q1 'twenty three results 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 continue to thoughtfully invest in product and client growth initiatives. Turning now to Slide 5. During the quarter, we saw period end AUCA decrease by 10% on a year on year basis, but increased 2% sequentially.

Speaker 3

Year on year, the decrease of AUCA was largely driven by lower Quarter on quarter, AUCA increased as a result of higher period end market levels and client flows. At Global Advisors, we saw similar dynamics play out. Overall, our Q1 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.

Speaker 3

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 1st 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.

Speaker 3

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. AUCA wins in the Q1 totaled $112,000,000,000 with about half driven by wins across the growing alternative 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 us a strong win quarter from a projected Revenue standpoint, at quarter end, AUCA-one, but yet to be installed, totaled 3,600,000,000,000 With Alpha representing a healthy portion, which again reflects the unique value proposition of our strategy. Given the planning and preparation since Turning to Slide 7. 1st quarter management fees were $457,000,000 down 12% year on year, primarily reflecting lower average market levels and a previously reported client specific pricing adjustment.

Speaker 3

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 continue to build on strategic growth segments, which was reflected in net flows in our Spider portfolio low cost equity and fixed income suites. In our institutional business, we saw net outflows while sustaining continued momentum in defined contribution with a target date franchise recording inflows of 6 $1,000,000,000 Across our cash franchise, consistent with industry trends late in the Q1, we saw a flight to quality with significant net inflows Worth 7% of cash AUM into SSDA money market funds since the week ending March 10, which largely reversed the seasonal outflows experienced earlier in the quarter. Turning now to Slide 8.

Speaker 3

Relative to the period a year ago, 1st 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 2022. 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 Our Global Link franchise experienced an increase of $20,000,000,000 or 13% into its money market cash sweep program during the last 3 weeks of March. Securities Finance performed well in the Q1 with revenues up 14% year on year, driven by higher specialty activity and an active focus on business 6% again, mainly driven by higher specials activity, which was consistent with the market and securities lending industry environment.

Speaker 3

Moving on to software and processing fees. 1st 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 $16,000,000 year on year, primarily due to positive market related adjustments and $27,000,000 sequentially, largely due to fair value adjustments on equity investments. Moving to Slide 9.

Speaker 3

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 Several on premise renewals to come through in the Q2. 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 4th quarter. Turning to some of the other Alpha business metrics on the right panel, we were pleased to report another Alpha mandate win this quarter in the Asset Owner Clients segment.

Speaker 3

In addition to the reported win this quarter, we expect significant middle office installations in 2Q Turning to Slide 10. 1st quarter NII increased 50% year on year, but declined 3% sequentially to $766,000,000 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 Q1. Year on year average assets declined Of note, average weekly deposit levels at quarter end increased 5% as we compared with the week ended March 10.

Speaker 3

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 betas for the quarter continued to be much lower in the 30% to 45% range depending on currency. Our international footprint Turning to Slide 11. Our first quarter expenses excluding notable items increased just 2% year on year We're up approximately 4% adjusted for currency translation.

Speaker 3

In the light of the current revenue environment, we are actively managing expenses while continuing to carefully invest Compensation employee benefits increased 5% year on year, primarily driven by higher salary increases associated with 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 On a line by line basis for non compensation expenses, information systems and communications expenses were down 2% 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 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.

Speaker 3

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 where most of our businesses transacted. We were quite pleased to return $1,500,000,000 of capital to our shareholders In the Q1, consisting of $1,250,000,000 of common share repurchases and $212,000,000 and common stock dividends.

Speaker 3

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 $4,500,000,000 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 Q1 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 Q2. At a macro level, our rate outlook is broadly in line with the current forwards, which suggests the Fed, ECB and Bank of England all continue to hike to varying degrees in 2Q.

Speaker 3

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.

Speaker 3

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 $5,000,000 to $15,000,000 though this estimate always depends on market levels. As we adopt this accounting change, our effective tax rate for Q2 'twenty three is expected to be approximately 21%. The adoption will be roughly neutral to EPS. Regarding NII, we now expect NII in the 2nd quarter to decrease 5% to 10 as quantitative tightening and rate hikes continue into 2Q.

Speaker 3

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 181,000,000 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.

Speaker 2

Thanks, Eric. Operator, we can now open the call for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer You will hear a 3 tone prompt acknowledging your request. First question comes from Ken Usdin of Jefferies. Please go ahead.

Speaker 4

Thanks. Good morning. Just wanted to follow-up on the NII side of things. So, Tara, 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

Speaker 5

You made a point in

Speaker 4

your release about how dollars had increased since the early March to the end. What we think about in terms of your expectations

Speaker 3

The largest driver of our NII trends right now, whether it's the Q4 or the Q1 or first Quarter to Q2 is really the level of non interest bearing deposits. Those came down this past quarter About $5,000,000,000 We had expected them to come down about $3,500,000,000 And we do a fair amount of forecasting On this, if you think about January, February, March, it usually comes through in a U shape and we actually 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.

Speaker 3

As we look into 2nd quarter, we expect this pace of non interest bearing If you step back last year, we had periods where non interest bearing deposits were up $1,000,000,000 then Down $2,000,000,000 then down $4,000,000,000 then down $2,000,000,000 right? It's been quite volatile. And right now, we're expecting non interest bearing deposits probably to come down another $4,000,000,000 or $5,000,000,000 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 0, that can be a significant that's a significant Amount of NII, right? Every $1,000,000,000 is worth $12,000,000 sometimes $15,000,000 Per quarter.

Speaker 3

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 the 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 50,000,000,000 And the last level was about $30,000,000,000 And right now, we're sitting at about $39,000,000,000 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.

Speaker 3

But to be honest, some of our clients Institutions are also looking at some of the other strong raise that they can get either in treasuries or money market And so at this point in the cycle with the high level prevailing rates, we expect deposits probably to trend 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.

Speaker 4

Yes. Thanks, Eric. And just one follow-up to that is just that the types of changes in client 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 The last month came through. So are clients just making different decisions with what they're doing with their even operational cash?

Speaker 4

Or How would you kind of describe what's happening across the client base? Thanks.

Speaker 3

Yes. I think clients are the clients We're making a variety of different decisions here. And I think part of what why we're seeing is that We've not lived in an environment where interest rates are at 5%, right, whether you put that at the Fed or in 3 6 months 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.

Speaker 3

Operational deposit balances were steady And the operational percentages continue to be very in a very narrow band. You have clients with Several 1,000,000,000 of dollars each often, but they typically have 100, if not 1,000 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. 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 The rate seeking and these prevailing rates, there is there are they're going to look here and there.

Speaker 3

Now sometimes we match With those rates, so we'll offer deposits at exception rates. Sometimes we help them with their Sweeps are some of their treasurer repo interest. And so there's 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.

Speaker 4

Okay, great. Thanks for the color, Eric.

Operator

Thank you. The next question comes from Brennan Hawken of UBS. Please go ahead.

Speaker 6

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.

Speaker 6

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.

Speaker 6

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.

Speaker 3

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 of 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.

Speaker 3

And we're kind of at that point where clients now have incentives just like we 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, 2 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.

Speaker 3

On one hand. On the other, there tends to be a more There tends to be less price sensitivity on the 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 Lagged modestly the deposit rates that we offer as we see those play through.

Speaker 6

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.

Speaker 6

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.

Speaker 3

Yes, 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, 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.

Speaker 3

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 It's important in our ongoing decisioning around capital return, and we're Conscious of that.

Speaker 3

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 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's 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 may pace these differently if they continue to be at these levels of stability that we're at.

Speaker 3

We feel confident 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 8 to 10 weeks. And this is one of those Quarters where you do them more linearly than not.

Speaker 3

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.

Speaker 6

Great. Good context. Thanks, Sanyard.

Operator

Thank you. The next question comes from Betsy Graseck of Morgan Stanley. Please go ahead.

Speaker 7

Hi, good morning.

Speaker 3

Hi, Betsy.

Operator

Could we talk a

Speaker 7

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're 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.

Speaker 3

Yes. So there's a couple of different ways we look at this. And clearly, we're 1 quarter into the year. We've started to get some outlook for Q2, and we need to see how the conditions and the environment plays out because Equity markets up or down, bond markets up or down, but more than a percentage point or 2, it's going to impact our revenues. And so I think it's still early in the year.

Speaker 3

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, NII will trend positively for the year, but not as positively as we would have So that's a consideration. You saw that we took up our fee guide for the Q2 and so that gives us a little more Ballast or breathing room or momentum, to be honest. And we'll continue Was up 20%, 30%, 40%, 50%, right? We didn't spend that on the expense line, Right.

Speaker 3

We were quite conscious of continuing to drive investment, but also productivity and calibrated in our expense growth. And so as we look forward, we'll continue to do that. But obviously, with the we'll Keep track of the direction of revenues and obviously try to adapt where we can.

Speaker 7

And then just a quick follow-up on the other feline that you discussed, the $5,000,000 to $50,000,000 increased QQ. 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 and that's it. Just a little color there. Thanks.

Speaker 3

Yes. It's the revenue impact on that line is a little bit of both and we're still Discerning all the specifics and doing the forecasting. In Q2, 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 3rd Q4, not as much as there would be from the 2nd quarter catch up. So we're trying to map that out.

Speaker 3

And As the quarter proceeds, we'll try to get a little more guidance out. But that line will tend to have be, instead of Kind of being centered around 0 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.

Operator

Okay. Thank you. Thank you. The next question comes from Gerard Cassidy of RBC. Please go ahead.

Speaker 3

Good morning, gentlemen.

Speaker 8

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 Shorten the duration of the portfolio as you reinvest the cash proceeds that come off at every quarter. What's your thinking about that?

Speaker 3

Gerard, it's Eric. 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 2.5 to 2.8 years. In that, that provides us some amount of benefit from what Historically, there's 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 over the last 2 years.

Speaker 3

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 a 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 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, etcetera, to invest.

Speaker 3

And we may run somewhat different duration levels in those different currencies. We might be shorter in 1, longer in other, partly to reflect our views on the rate cycle and where each of those are. So There's 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 and 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.

Speaker 8

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 We're at $30,000,000,000 you're sitting at $39,000,000,000 now. And 2 part question, what do you if rates just stay here, let's say the Fed doesn't start cutting rates This year or next year and we get a 4.75% Fed funds rate. Do you sense that the non interest bearing deposits could approach that $30,000,000,000 on a go Forward basis.

Speaker 8

And second, on your operational accounts, do you guys have to pay any interest on those accounts?

Speaker 3

Yes, let me do that in reverse order. The operational accounts are sometimes interest bearing, sometimes non interest bearing. So there's 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 and then 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.

Speaker 3

We saw a $5,000,000,000 trend this past quarter, which It was $1,000,000,000 or $2,000,000 more than we had expected, even back at that early Even back when we last gave guidance, we expect probably another $4,000,000,000 $5,000,000,000 will Come out in the Q2. And then I think we do believe that there's going to begin to be some stabilization. I'd be inclined to think that we'll get to that $30,000,000,000 probably later this year. But this is where there's no amount of crystal balling that we can provide. It's hard to really be sure It could be at that level.

Speaker 3

It could be around that level. There is we've seen movements in non interest bearing Month by month that are plusminus $4,000,000,000 or $5,000,000,000 even in April as an example. We've had days where non interest bearings were in the $44,000,000,000 level, so $5,000,000,000 above The recent average and days when they were at the $34,000,000,000 level. So it's that kind of Range and volatility that we're trying to forecast through, but clearly the trends are here. And I think the last benchmark of that around that $30,000,000,000 level maybe one that we approach Potentially later this year.

Speaker 8

Very good. I appreciate the insight. Thank you.

Speaker 3

Okay. Yes.

Speaker 9

Thank you.

Operator

The next question comes from Jim Mitchell of Seaport Global. Please go ahead.

Speaker 10

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 Seeing an onboarding. So how do we think about the trajectory on the servicing fee line as you onboard?

Speaker 10

It more of a back half story? And how are you thinking about full year with servicing fees?

Speaker 2

Yes, 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 AUCA 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 AUCA to get installed.

Speaker 2

Secondly, The wins this quarter were, while it was a low AUCA amount, it was much more traditional Back office plus this very large alternatives, both of which are Easier to install or 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 years we would look forward.

Speaker 3

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 Q2. I think if you go through the trading lines, 2nd quarter is usually good. We'll have to see just how much volumes Playthrough and spread. So but you've seen we've been making a nice headway given the market volatility with specials and sec Finance, that will likely continue.

Speaker 3

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 look at some of the materials in the deck, that could be $6,000,000 it could be $60,000,000 That was literally The swing from Q4 to Q1, we expect, as we had said, some sizable upticks there as well. So there's 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.

Speaker 10

Yes, sure, Eric. Yes, I appreciate all that. But in terms of the sequential increase of 4% to 5%, 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 and 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 that a little longer?

Speaker 10

I'm just trying to get a sense of Beyond 2Q, you have a nice jump in 2Q, but is that really sustainable?

Speaker 3

Yes. No, I understand the perspective. I think What I'd remind you on software and processing, we had an unusually low print in the Q1. The first part of the follow-up in the second quarter is rebound and then continuation. On premise revenues We have averaged about $30,000,000 a quarter, for example.

Speaker 3

That's a reasonable Kind of average that one could expect, but we printed $6,000,000 this past quarter. So it's that kind of, I think rebound we're expecting in the Q2. 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 The back office and in middle office, which gives us the 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.

Speaker 3

But I think we'll know more as we get to June 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 Q2 that will be positive.

Speaker 4

All right. Well, thanks

Speaker 3

for all the color.

Operator

Thank you. The next question comes from Steven Chubak of Wolfe Research. Please go ahead.

Speaker 11

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 you 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 $30,000,000,000 number sometime in the year? Yes.

Speaker 3

I mean, the this is where the forecasts just have a wide range of outcomes. I think Given the Q1 report and what we expect in the second quarter, We don't think that one can reach that 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.

Speaker 3

So there's a range of forecasts we have. And if I had to kind of share it 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 believe some of the history where there is real attenuation in the non interest bearing deposits, NII could be up 10% to 15%. So there's 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.

Speaker 3

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 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. Great.

Speaker 11

Thank you very much.

Operator

Thank you. The next question comes from Ebrahim Poonawala of Bank of America. Please go ahead.

Speaker 9

Good morning. I guess just a couple of quick follow ups, Eric. 1 on NII, I heard all your comments on the in the Q and A. Just trying to make sense of is the customer behavior that surprised you today versus January given that you probably assume that rates 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 increase the intensity of repricing?

Speaker 3

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 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.

Speaker 3

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 2 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 1 quarter where they were up a little bit, 1 quarter where they were down 5,000,000,000 And then the 3rd to 4th quarter, they were down $2,000,000,000 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.

Speaker 3

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.

Speaker 3

They shift across currencies 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 And I think what we're realizing is all the data sets we have are actually not there's not enough data on this Question of, deposit or I'll call it, depositor pricing behavior because that's what this is about. And that's what we're trying to better estimate.

Speaker 3

But the clients we're serving will continue to serve. The momentum in the business is clear. And just like NII went up faster than we had thought, I think there's 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.

Speaker 9

Got it. And just a separate question. I know it's small for you, but the other element that drove provisions 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?

Speaker 3

Yes. It's a fair good question. I mean, the Aside from the provision that's calculated The provision was about $15,000,000 I think for us provisions have been in the $5,000,000 $10,000,000 $15,000,000 range typically. We've seen a little bit of migration or change in ratings And 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.

Speaker 3

We call BBs down market, right? So we have 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. I can give you a sense of sensitivity.

Speaker 3

But what we 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.

Speaker 9

Got it. Thank you.

Operator

Thank you. The next question comes from Mike Mayo of Wells Fargo Securities. Please go ahead.

Speaker 5

Hi. As you know, the market's been a Little jittery since 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 $44,000,000,000 down to $39,000,000,000 You think base case it might go down to $34,000,000,000 but the low end of the which is possible later this year would be $30,000,000,000 That would be going maybe non interest bearing deposits from $44,000,000,000 down to $30,000,000,000 That'd be $14,000,000,000 less than free money.

Speaker 5

You said it's $12,000,000 to $15,000,000 per $1,000,000,000 So just taking the worst case, You go down to the $30,000,000,000 it hurts you $15,000,000 We're talking about $200,000,000 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.

Speaker 2

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's nothing here that approaches a liquidity issue, Right. These are custody deposits, as Eric noted, they're operating deposits.

Speaker 2

To 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 1 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 I walked you through. It's up at 124% now.

Speaker 2

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.

Speaker 5

And then a follow-up to that. You said you're not changing your buyback. So you have $4,500,000,000 for the year. You've done $1,250,000,000 So you have $3,250,000,000 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.

Speaker 5

What's your appetite toward completing that buyback? And how soon are you able to enter the market?

Speaker 2

Yes. I mean, Mike, I think Eric explained it well. If you look at our capital levels And the fact that we had 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.

Speaker 2

So we feel comfortable doing that and we certainly feel comfortable about ourselves, There is a 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 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.

Speaker 2

So well within our range, I mean. So this is something that at this point We feel very comfortable doing.

Speaker 3

And Mike, it's Eric. I just underscore, right, the capital and liquidity strength and ratios are just incredibly high and robust 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. I said in my prepared remarks, we do it through the rest of the year. I said we do it at pace.

Speaker 3

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 8 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 a is something that We configure 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 multiyear trajectory.

Speaker 3

One last time, Your trajectory.

Speaker 5

One last time, crystal clear, so there's 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?

Speaker 3

None. All

Speaker 5

right. Thank you.

Operator

Thank you. The next question comes from Rob Wildhack of Autonomous Research. Please go ahead.

Speaker 12

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?

Speaker 3

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, Q4, we had a particularly low print in RWA, which we had Signaled at our 4th 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 $10,000,000,000 $15,000,000,000 of RWA from Q4 to Q1. And you saw we got about $8,000,000,000 or $9,000,000,000 of that.

Speaker 3

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 We've been adjusting the deployment across the FX books. You think about how much do I want to deploy in the forward space and the long dated forwards versus spot and securities finance?

Speaker 3

There are different amounts, but we're quite well off when it comes to capital. And Our plans here are really to continue to find ways to smartly deploy additional capital and additional RWA to drive organic growth.

Speaker 12

Thank you. And then I appreciate the color on the to be So, business in the on prem enterprise trajectory from here. But could you just remind us how long those installs Typically take to convert to revenue?

Speaker 3

Yes. When we described the installation Jen, going into the Q2, we were describing those as Realized revenue installation. 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 2nd quarter begin to come down and some of the servicing in middle office Revenues float upwards. And similarly for the software and data Processing areas, you'll see something in that direction as well.

Speaker 12

Okay. Thank you.

Operator

Thank you. The next question comes from Vivek Jananja of JPMorgan. Please go ahead.

Speaker 3

Hi, Eric.

Speaker 13

Hi, Ram. A couple of questions. Firstly, CRD revenues, I know you said it should, Eric, the on premise revenue should bounce back in the Q2, 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 3 sub components together?

Speaker 3

Yes. 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 there's a range of revenue growth in our different fee categories. We've described back office is 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.

Speaker 3

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 It may not be as heady, but we do see real momentum in the combination of the software enabled and SaaS. Yes. But all in, that should grow in the higher single digit revenues typically, although there There'll be some range around that in a given

Speaker 4

year. Okay.

Speaker 13

And then going back to this question that's come up on A 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 benefits should there be

Speaker 3

Yes. I think Vivek, there are a couple of ways to think about that because What happens here is that it gets onboarded in tranches. So we might onboard the assets under custody administration, but there are multiple services that we're often providing for But there are multiple services that we're often providing for those assets. So in a we had A couple of wins over the last year or 2 with $1,000,000,000,000 Those $1,000,000,000,000 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's 3, 4 or 5 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.

Speaker 3

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 assets under custody administration. But what we'll do is we'll I think it's that may be some kind of broad perspective.

Speaker 3

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 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.

Speaker 13

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?

Speaker 3

Yes. 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.

Speaker 3

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 $30,000,000 to $50,000,000 range of revenues next year.

Speaker 3

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 And so something we're very excited about because it fits into being the enterprise outsourcer. You do that for 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.

Speaker 13

Thank you.

Operator

Thank you. There are no further questions at this time. I will turn the call over to Mr. Ohanley for closing remarks.

Speaker 2

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.

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Earnings Conference Call
State Street Q1 2023
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