Good day, everyone, and welcome to the Northern Trust Corporation's Fourth Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Director of Investor Relations Bev Fleming for opening remarks and introductions. Please go ahead, ma'am.

Thank you, Aaron. Good morning, everyone, and welcome to Northern Trust Corporation's Fourth Quarter 2013 Earnings Conference Call. Joining me on our call this morning are Mike O'Grady, Northern Trust's Chief Financial Officer; Jane Karpinski, our Controller; and Allison Quaintance from our investor relations team. For those of you who did not receive our fourth quarter earnings press release or financial trends report via email this morning, they are both available on our website at northerntrust.com. In addition and also on our website, you will find our quarterly earnings review presentation which we will use to guide today's conference call. This January 22 call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be available through February 20. Northern Trust disclaims any continuing accuracy of the information provided in this call after today. Now for our Safe Harbor statement. What we say during today's conference call may include forward-looking statements which are Northern Trust's current estimates and expectations of future events or future results. Actual results, of course, could differ materially from those indicated by these statements because the realization of those results is subject to many risks and uncertainties. I urge you to read our 2012 annual report and our periodic reports to the Securities and Exchange Commission for detailed information about factors that could affect actual results. [Operator Instructions] Thank you again for joining us today. Let me turn the call over to Mike O'Grady.

Thank you, Bev. Good morning, everyone, and welcome to Northern Trust's Fourth Quarter 2013 Earnings Conference Call. On today's call, I'll review both our fourth quarter and full year results. Bev and I will then be pleased to answer your questions. Starting on Page 2. This morning, we reported fourth quarter net income of $170 million and earnings per share of $0.70. Our reported results included a charge of $19 million in connection with an agreement to resolve certain long-standing class action litigation related to our securities lending program. The settlement is not final as it requires further documentation, signed agreements and court approval. The settlement will not resolve all security funding litigation involving Northern Trust but will resolve the majority of the pending claims, those involving Northern Trust index funds. We intend to continue to vigorously defend the remaining securities lending cases. Excluding this charge, net income would have been $182 million and earnings per share would have been $0.75. For the full year, net income was $731 million and earnings per share were $2.99. The operating environment in the fourth quarter continued to be mixed, with both positive and negative implications for our business. Equity markets in the U.S. and Europe were higher, which supplemented our strong new business results, while fixed income markets were a modest headwind. The S&P 500 was up 30% year-over-year and 10% sequentially, while the EAFE Index was up 19% year-over-year and 5% sequentially. The Barclays U.S. Aggregate Bond Index was down 5% year-over-year and down 1% sequentially. Client assets under custody ended the quarter at $5.6 trillion, up 16% over last year. And assets under management ended at $885 billion, up 17%. On a sequential basis, client custody and managed asset levels were up 6% and 5%, respectively. Currency volatility and client…

[Operator Instructions] And we'll go first to Luke Montgomery with Sanford Bernstein. Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division: Just in terms of the regulatory compliance spending. You indicated that should have peaked in the second half of 2013. Just wondering if you have any more clarity around how much and how quickly some of that could fall off in 2014.

Yes. I think that I -- in looking at the increased cost for the regulatory initiatives and compliance initiatives, that we did see the ramp. And that came in the form both of additional personnel, so you saw that through the comp and ben line, particularly in this quarter. I -- and then also through outside services, which increased 9% this quarter year-over-year. And I think, going forward, I -- as I mentioned in the prepared remarks there, we continue to have a number of these initiatives that we're working on, albeit that the portfolio mix changes as we go forward. So for example, things like CCAR, we definitely had a big step-up this year and, as a result, had to bolster our teams but also to use outside consultants in order to help us get to what we thought was the appropriate level for the 2014 capital plan. As we move forward into 2014 and prepare for our 2015 capital plan, we're going to continue to make improvements on that front, but the incremental increase won't be as much. And I would expect that the use of outside consultants to help us get there will also be lower. So you have things like that where the trajectory, I would expect, would go down. At the same time, we have initiatives like AIFMD over in Europe where we did incur expenses in 2013 and again particularly in the second half, but I would say, in 2014, the costs related to that will go up relative to 2013. Now in certain situations, like in AIFMD, that's a new service that we're also providing to our clients, so there are revenues that come along with the incremental costs. So I take all of that together from an expense perspective, what we're looking at is that the expense levels we experienced in 2013, relative to these risks and regulatory initiatives, will be approximately the same, albeit that the mix between what I'll call the permanent costs will go up a little bit from where we are now, where I would expect from the outside costs to begin to come down. Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division: That's helpful. And then just more broadly, would you agree that some of the difficulty with operating leverage over the last few years is that you've been adding clients and mandates and, with that, I think, more support costs, while relationship revenues have obviously been falling? I guess I'm aiming at whether you've attempted to isolate the impact of organic growth on your expense and margin trends.

Yes, we absolutely look at the impact of organic growth on operating leverage. And I would say, we further break it down or the way, I would say, we think about it is looking at that ratio of expenses to trust fees, and we brought that down over the last couple of years, as we've talked about. Now we have benefited in that from the fact that equity markets have been strong. So that's raised that growth rate. And as again we talked about in the call, it's 8% this year and it's been a compound annual growth rate of 10% relative to expense growth of 4%. So between those 2, clearly a lot of operating leverage, but we're recognizing the fact that we're getting the benefit of the markets in that. I will say, at the same time, even within that line, we've had the detraction as a result of money market fee waivers being up, which detracts from our ability to improve on that. And then outside of that ratio to true operating leverage, meaning revenues versus the expenses, we've seen headwinds, as we've talked about many times on some of the other revenue line items, that has caused us essentially to be basically flat when it comes to operating leverage over the last couple of years.

We'll go next to Alex Blostein with Goldman Sachs.

So just picking up on the last question, Mike. Clearly, 2013, pretty nice tow-in from the market perspective, and it feels like the NII headwinds that you have experienced for the last 1.5 years-plus are at least starting to subside a little bit. So maybe help us understand a little bit more on the type of operating leverage you guys could get from just the market performance and better NII, because it feels like those are obviously 2 pretty high-margin revenue streams for you guys. And any -- and if you could provide any specifics around the type of expenses that would move up along with those 2 kind of line items would be helpful.

Okay. I think I have it there, Alex. So I would say that the way we look at the positive operating leverage is to first look at the areas that we can drive and control the most. So it's looking at that organic fee growth rates and the expectations that we have there and then the related expense growth to that, and we want to ensure that we are achieving positive operating leverage based on that. To the extent that the, I'm going to say, operating environment is more favorable, so whether it's positive equity markets, interest rates, FX, et cetera, that should only accelerate or expand the positive operating leverage for us. To your point, not all of that incremental revenue growth necessarily drops down without incurring some expenses to it. So to your point specifically, when the equity markets go up, we have higher sub-custodian expenses, we have higher market data costs, we have higher third-party adviser fees. So there are a number of line items that also increase with the increase in equity markets, albeit the total amount that derives from those is less than certainly what we pick up on the revenue side. So it is a detractor. And we saw some of that in the fourth quarter where sub-custodian expenses, as you saw, were up a couple million dollars both year-over-year and sequentially. Likewise, I -- when we say that tech services or technical services are higher, that includes our market data costs in there. And so again, I -- generally speaking, those also have gone up with the markets and something that we essentially have to make up for in other areas that are not linked to market growth.

And then the second question is just on the balance sheet. Clearly, a big move up on -- in deposits. How much of that do you guys think is seasonal or are sort of temporary in nature versus maybe a little bit more sticky? And if it is a portion and if there's a portion that is stickier, how do you think about starting to move some of the balances away from the fed into the securities portfolio or something like that? Because it does seem like fed has -- fed balances is closer to 14% or something close to that as a percentage of earning asset, and that feels like on the higher side of things.

Yes, I think your observation is correct, Alex, just in the sense that it was higher. And looking at that increase in deposits and a little bit in borrowings as well there, I would say that I -- our view is that about half of that is -- looks to be just increased client deposit levels. Now the nature of the deposits that we have for our clients on the custody side tends to go up and down over time, but as you know, as we grow the business, it generally increases. So just as you pointed out, when we get new deposit levels in or they begin to go up for some level, we don't immediately move them to longer-term investments on the asset side and we want to make sure that we have essentially established new levels of ongoing operational deposits, if you will. And so that's where we saw it. And as I said, about half of that looks to be, at this point, longer term, which would give us the opportunity to increase the size of the securities portfolio a little bit, as well as some of the other money market investments that really fall in between just being overnight at the fed or being in our securities portfolio which has just a little bit longer duration.

And we'll go next to Ashley Serrao with Crédit Suisse. Ashley N. Serrao - Crédit Suisse AG, Research Division: So Mike, as you look out over the next 2 to 3 years, like how would you rank order all the organic revenue opportunities in front of you across your business? And then how should we think about the payoff there versus the incremental investment spend?

Sure. So let me try to do it by our primary businesses. And I would say, as we have discussed and invested in the last couple of years in our Global Fund Services business within C&IS, that continues to be an area that we see out over the next, as you said, 2 to 3 years, if not longer, as that continues to be an opportunity for accelerated growth. I -- and that comes in a number of different forms. So in other words, that can be traditional fund managers, but as we've talked about within that, we've also been very successful in growing our Hedge Fund Services business within that. So that would be an area, along with just the whole investment outsourcing business that we have there, where we continue to see good growth. Now even having said that, in 2013, that portion of the C&IS business grew well. The traditional part of our business also grew very well. So it's not to say that we only see growth opportunity in Global Fund Services, it's just at a higher rate on that side. Within Wealth Management, we continue to believe that, just within our current footprint, we have a significant opportunity to continue to grow. When you think about the areas where we probably have the greatest area for opportunity, it's going to be areas like the East Coast and the West Coast where we don't have the same penetration that we do in the Central region. And frankly, that's an area where it does require some investment in people, expertise, in marketing in order to continue to develop what are some very large markets. And what we have been trying to do through Driving Performance and otherwise is really to be able to create the capacity to spend more in those areas. We've been reticent to spend aggressively to grow the Wealth Management business in some of those markets until we felt like we have the overall returns for the company at the places where we talk about as far as our targets. And then within asset management, we talked about ETFs, I would say that ETFs right now are close to $7 billion, so that's been very successful for us. And yet at $7 billion, we still think we have significant headroom to continue to grow the ETF business. So those will give you 3 areas, I would say, that not only are they near term but they fit into your 2- or 3-year time frame as well. Ashley N. Serrao - Crédit Suisse AG, Research Division: And I guess, maybe shifting gears to just expenses. Towards the -- I guess you've, more or less, concluded the Driving Performance program, but you've always talked about the cultural shift with respect to expenses. So like maybe, can you give us some examples of what you're working on today? And how should we think about any potential savings above and beyond this program?

Yes. So with Driving Performance, if you went back 2 years ago and just if we talked about the 4 primary categories that we had for opportunity, they were revenue, process optimization, technology and then corporate. I -- and I would say, within each of those areas, we've -- again, we're successful in executing on the initiatives that we've discussed. Those are the same 4 primary areas that we see going forward and, as I mentioned, continue to have new initiatives which we put in place and then measure our performance against those initiatives. So for example, on the revenue front, for Driving Performance, it was focused, with the Wealth Management business, around essentially our pricing structure, which we changed 2 years ago. We don't anticipate changing that pricing structure going forward. However, we still, within that pricing structure, discount our fees for various clients across the business. We have opportunities to continue to align the discounting mechanics, if you will, and process around that, which we think will achieve revenue for us going forward. And there's other very high-value-added services within Wealth Management that we either don't charge for or that we think that are not appropriately aligned with the value that's being delivered. So there continue to be opportunities on the revenue side. On the process optimization front, if you recall, that was all about trying to look at different activities that run across the bank and make those more efficient. So for example, client administration. And going forward, there are still more opportunities essentially to centralize additional functions into more shared service type opportunities. We also talk about our global operating model and the fact that we look to put the right activity in the right place. As much as we've been very successful in that, there…

And we'll go next to Betsy Graseck with Morgan Stanley.

A couple of questions, one just again on the operating leverage. I heard you indicate that some of the external fees that you're paying for, CCAR-related work, will come internal in the coming year. And at that, swap external/internal should be positive to the operating leverage. In addition, beyond that, you got a little bit more work to do on the regulatory front and the CCAR front, but all in on just that line item, should I expect that you're going to be having a reduction in expenses year-on-year and that, that's one of its drivers of positive operating leverage into '14?

Just to be clear, when you say on that line, do you mean on, for example, outside services?

No, just all-in expenses associated with the regulatory performance.

Yes. No, I would say, for 2014, it's likely to be pretty consistent. And the reason why I say that, Betsy, is we really ramped up in those expenses more into the second half. And I would say we're kind of essentially at that level, the mix is changing. We'd like to think that it stabilizes out and starts to go down in 2014, but it's hard to say. And so certainly from a year-over-year basis, we would think that we'll be basically in the same neighborhood.

Okay. I have a question [indiscernible]. There was a little bit of a step-up in comp and benefits in 4Q. And I was wondering if that was at all a function of moving in-house people that were out of house, but maybe you can give some color on why that line item went up.

Sure. So comp and ben went up about 6% year-over-year, as you mentioned there. About half of that relates to more hires that we had during the year in the areas that we've talked about. So that's just the -- approximately, we said 4% increase in staff growth, and here, the hires and salary was an increase of about 3 -- a little over 3% there. The other half of it, part of it, we actually had a restructuring charge in the prior year that went the opposite direction. And then we also have some base pay adjustment, about 1%, that's in there as well. And then currency, given that a number of our partners are outside the U.S., particularly in the U.K. and other parts of Europe, were from a currency impact standpoint, that was about another percentage point increase year-over-year in those quarters. And just to be clear, we get the benefit of currency impacts like that on the revenue side as well, but it does hit different line items differently.

Okay. And then on the revenue side, 2 questions. One is on, the Wealth Management fees have a component that is backward looking. Since we ended the year in 4Q at an S&P high, I would expect that, that's pretty much a high for the [ph] Wealth Management fee base for 1Q '14. Is that fair?

Right. As we talked about, there are certain lags that are in the business, one of them is with our Wealth Management regions where we have the 1-month lag.

Okay. And then on the securities portfolio, you've had some nice step-ups in yields over the past couple of quarters [indiscernible] durational [indiscernible] like you mentioned 2 quarters back. Are you pretty much done with the securities duration extension that you had talked about or is there anymore of that you're likely to be doing?

I would say that we're pretty much in a balanced position, if you will, as far as the duration. So the duration of the portfolio was about 1 year and 2 months, 14 months as of the end of the year. We've been a little bit below that before. But at this point, we're not necessarily expecting to extend that duration further. And at this point, we're largely increasing -- we're largely matching the yield on the portfolio as it rolls over and we reinvest. So it's a relative [indiscernible]. And I should say as far as the actual yield on the securities portfolio, if you went back and just backed out the premium amortization over the last 4 quarters, for example, the yield on the portfolio, absent that, is very stable.

We'll take our next question from Mike Mayo with CLSA.

Do you think you will achieve your key financial target ROE of 10% or more in 2014? And the reason I asked that on the downside, you missed it in 2013, you're done with the main part of Driving Performance, the regulatory cost stay elevated. And as the company has said, you're still investing in technology, risk location and capabilities. I guess on the other hand though and this is really my question, you highlight the pretax margin on Slide 10, which you hadn't done before, and you had as you mentioned 24% to 26% to 27% the last 3 years. So where do you think the pretax margin will go or should go? And can you give us some color on the new expense plans for 2014 that you say are in the internal plans? And just more generally, where are you in the investing curve? You're investing a lot, when do we get to that crossover point where the payoff net investing offsets the expenses?

Okay. Let me try to recall all those, Mike, and address them. So to the first one, yes, we expect to achieve a return on equity in our range, in other words, above 10% in 2014. I think that was the first question. The second question with regard to the margin, the first -- the answer to the first question essentially answers the second one in the sense that we need to increase our pretax margin, essentially, in order to achieve the return on equity target that we want. So we're at about 27%. In order to get into the range, we're going to need to be closer to 28%, 29%. So that's certainly our objective to do that. Underlying that is the other part of that page that we showed there which is we need to continue to bring down the expenses relative to the fees because we don't necessarily know what's going to happen with some of the other revenue lines, but we don't want to necessarily plan around those in order to get our margin improvement. And that largely leads, I think, to your third question about how we think and plan around expenses. And if you take the last couple of years, our fees have grown, as we've talked about, let's say, 8% to 10% and our expenses have grown about 4%. Now going forward, that is what we look at. And our expectation is to have a similar-type relationship. So when we develop our plans, we're very focused on how can we drive the fee line there, and that's not with the expectation that markets go up, but rather from an organic perspective, how can we grow that fee line. And as much as we grew at 8% in 2013, we didn't grow it quite…

By the way, what's the name of the Driving Performance Part 2? Do we have a name for that?

We don't have a name per se, so I'll leave it at that. It's really -- as we've talked about, Mike, Driving Performance, one of the key objectives really was to just ingrain it in what we're doing. And so it's not viewed as an initiative that ended per se. But it's also not saying that the only time you have to think about either improving revenues or bringing down expenses is if you use the term Driving Performance. These are things we should be thinking about all the time and I think that people do that. At the same time, it did allow us to develop a discipline around certain initiatives and that discipline really paid off for us to be able to stay on track and make sure that we delivered on some of these plans, so we want to keep that type of Driving Performance structure in place.

We'll go next to Gerard Cassidy with RBC.

Do you guys think that you'll finish the rest of your share repurchase this remaining in the calendar first quarter of 2014? I think you said it was about 168 million shares maybe -- might be remaining. And second as part of that, is there ever a point where the stock price gets too high to repurchase or the valuation is too high and if you think -- and that's a nice problem to have, of course, but if that is ever reached, would you use a special dividend as an alternative to return capital?

So on your first question, Gerard, there's $164 million remaining on the 2013 capital plan and our intention still is to fully execute on that. On your second question, we've talked before about the framework in which we think about capital returns and how share repurchases play into that. And to your point, a special dividend is something that it is certainly a consideration for us. Having said that, that needs to be a part of our capital plan and our capital management policies and things like that. And so in order to have that type of flexibility, it needs to be a part of the broader capital management that ultimately is reviewed by the Federal Reserve that's part of your capital plan.

Okay. And then as a follow-up, coming back to your comments about your deposit growth on your average balance sheet year-over-year are very strong as you pointed out, and on the corresponding side of the balance sheet deposits that the Fed, of course, were up quite dramatically. If you're confident that about half of them are sticky deposits, what was the thinking not to grow the securities book year-over-year? I think it was actually down a little bit and then the loan portfolio, of course, was about flat with those deposits that you grew in 2013?

Yes. Part of it, as I mentioned are those custody deposits definitely tend to move around and vary over time. And so just -- so it's different I would say than if you think about a retail deposit or deposits we may get in Wealth Management where we have some early indication that, that deposit makes it with us for a long time. Some of these deposits are very large and their needs can change relatively quickly over time. So that's why from our perspective on how that gets invested, we'd like to see what the behavior of the higher level of deposit is because before we necessarily think about extending on the asset side. As I did mention, it does appear that a reasonable portion, about half of that looks like it is just higher levels by clients. And what we do with that is, in addition to just getting invested at the Fed, we also looked invested in money markets which can have a longer-term maturity, if you will, than just overnight. It's still counted in days, so it's, as a portfolio, it's less than 1 month. But depending on market rates and depending on the currency, we're going to get a different spread on that. So for example, we talked about 25 basis points at the Fed, if that deposit is in euro and the marketplace we're getting less than that 25 basis points pretty significantly, it's going to be single digits. Whereas if it's in sterling, we're going to get about 50 basis points right now. So it depends on factors like that. And then just to your last part on the securities portfolio, we really use that then. Once we do see the overall balance sheet growing to a size and expect that there's a certain level of stability to think about increasing the amount that we would invest in the securities portfolio. And we've done some of that over time then we certainly will look at the current size of the balance sheet and to the extent that we do think that it is going to remain stable at this level, look to potentially increase the securities portfolio.

And just quickly on the LCR, I assume your -- with the liquidity that you have at the Fed, the LCR ratio is not an issue for you guys?

That's right. We're obviously, closely watching all the developments with the LCR and making sure that in fact, we think it does meet with what the appropriate way is to measure and when not, to try to be a part of that dialogue. But as it's currently stated, we would be very comfortable at our current ratio.

We'll go next to Ken Usdin with Jefferies.

Mike, I was wondering if you can talk a little bit about business wins and pipelines? Specifically did ADT on board this quarter and for how much of the quarter was it on board to start?

So first, just a general comment which is with regards to new business, it continues to be what I would consider relatively broad based. So that's true both geographically, where North America, we had a very strong year, and then in EMEA where it had dropped off more, we've seen a nice pick up in momentum over there and ATP would be a good example of that. So ATP, a very large client and large win for us, we did on board that during the quarter and was successfully on boarded, but you won't really see the financial impact of that until the first quarter. And I would say, on that front as well, with ATP, a very large client. At this point, we are providing custody and other safekeeping services. So it's a relatively straightforward service offering. And so the fees related to that are not going to be as high as some of the other clients that we have. The pipeline, likewise I would say in general, continues to be very good within C&IS, I gave it geographically there, but also from a product perspective, fund administration and our investment operations outsourcing also continuing to see nice opportunities, both that we've won recently, but I would also say, opportunities to pitch on, if you will, are also high. And on the Wealth Management front, 2012, so going back a little bit over 1 year ago, if you recall, was very, very strong because of some of the changes in tax laws and that rolled over into the first quarter of 2013. It did slow down as we went through the year and I think that's just as far as levels of market activity just slowed down. So we've seen that stabilize here, but all the same, I would say not as strong as it was as we are speaking 1 year ago.

Right. Okay. And then -- so we'll get the follow-through from ATP. And then is Bridgewater still on track for somewhere in midyear?

Yes. I would say with Bridgewater, again another very large, complex situation and the implementation there is ongoing and it's going well. But I would say, given that we are in that case a shadow administrator, that does mean that not only do we have to coordinate with the client, but we have to coordinate with the other administrators. So it's just a more complex proposition to do that. And that is going well. And the expectation now would be that we would have that on board in the third quarter.

Okay. And then 2 just balance sheet-related questions. First of all, just on the premium am side, I know it's a $7 million incremental helper this quarter. Can you just remind us on what you have left in unamortized premium? And then your mechanism, I believe, is some blend of lag versus current. Can you just walk us through that?

So we have approximately $100 million in premium that needs to be amortized over what is about, I believe, approximately a $5.5 billion MBS portfolio. And right now, that's amortizing at basically $8 million a quarter. But as prepayments speeds change just due to interest rates, that needs to get adjusted and we're on a 3-month lag in looking at prepayment speeds in order to adjust that. So the adjustment in the quarter essentially gets it to the same effective yield over the new estimated life of the portfolio. I will say though, we do this security by security, so it's literally hundreds of mortgage-backed securities and it's each individual one that you do that calculation and then just overall you have the impact, so that we don't do it at a portfolio level.

Right. Okay. And then my last one is I noticed that period-end loans were decently above the average, which is the first time in a while you've seen that period end loan growth shoot up. I was just wondering if you could talk through, have you seen any change in either the C&IS side or the Wealth Management side? And do you expect that any incremental growth opportunities there at this point?

I would say that we continued to see loan growth very difficult. And so as much as they were a little bit higher, it's still is an area that on both fronts, as you mentioned, both the commercial front and the personal front, that we think it's going to be low or slow growth for some time period because one of the things as to whether it can be higher or lower in any particular point in time is that a portfolio is turning. So it's really just the net effect of what you're replacing or as a certain amount rolls off every quarter, are you more than replacing that or not? And we've been largely running in place on the portfolio side as I think the industry has for some time period. And I would say, we continue to essentially be at about that level.

We'll take our next question from Cynthia Mayer with Bank of America Merrill Lynch.

I guess a question on asset management fee rates. I think you mentioned that the few rates were affected by a mix shift to passive, which I guess I can see on the fund and ETF flows for the industry and for you guys. But then you're also mentioning an initiative to maybe restore some of the fees and Wealth Management, which is discount or charge for services which are free right now, so where are those shakeout? Would you expect the fee rate, assuming no change to the mix of equity to stabilize here, go a little bit higher? Or is passive going to push that down?

As you point out, Cynthia, there's a number of factors that impact that yield, if you will. And if you look over the last several quarters, but frankly over the last several years, our overall fee levels have been relatively stable. Even when we changed the fee structure, they largely remain stable. And yet underneath that, you have factors, which I'll get to, but one of them that you didn't mention is you also have money market fee waivers, which is a detractor certainly from that fee level. I think that as we go forward, it's difficult to predict overall where it's going to be, certainly to the extent money market fee waivers come off. You heard some of the numbers that I gave on the asset growth relative to fee growth, you come much more in line when you adjust for those money market fee waivers. I do think that the product mix will continue to experience some dilution as a result of active to passive. I think that, that trend, if you will, as you mentioned, it's not just for us but is broader to the industry. And that happens at what I would call the product level for us, whereas the account management fee, because we broke apart our fee, that part of it and when I talk about Driving Performance opportunities there, that's where I would think that, that remains stable, if not improves a little bit to the extent that we decrease some of the discounting that we've done on that portion of the fees. Because again we've separated what I would call an account management fee from a product fee.

Okay. Yes, I was speaking apart from money market. And then just a really specific one, it looks like commissions and trading income dropped pretty severely. So they got 27%. So that's more than what we saw elsewhere. Was that just market volumes? Or was there something else driving that?

Well, part of that, Cynthia, would be the fact that last year, we would have seen a higher level of activity because of the same reasons that Mike talked about in terms of the new business opportunities there. And there were just a lot going on in the marketplace in the fourth quarter of last year that led to higher trading volumes, especially in the equities arena.

And I would just add to that, that on the institutional side, that also includes our transition management business. And those transitions can definitely move up and down quarter-to-quarter. They're relatively large transaction volumes, but they're also inconsistent.

Okay. So that doesn't necessarily mean we should think of it as coming in at a new, low level for this quarter, it's just going to be lumpy every quarter?

Yes.

We'll take our next question from Nancy Bush with NAB Research LLC.

I hate to beat the dead horse of the ROE range, the 10% to 15% range, but it's easy for me to see what gets you to 10%. It's harder for me to see what gets you sort of to the upper end of that range. And if you could just talk about that and when getting to the upper end of that range might be a realistic expectation?

Sure. So as you point out, to get to the 10% side of that range, we're on a path, granted that it's taking us longer than we wanted to get to that path, but we're going to continue to drive towards that. And frankly, absent things that happen in the market, if they don't dramatically impact us, we expect to get into that range. And we expect that, again absent the macro environment changing dramatically, that we also have the ability to move within that range and move towards the middle part of that range. So the 11%, 12% into that neighborhood, doing the same types of things. To your point, to get to the higher end, if you really just said, put all the macro factors aside, we could get there, but it would take a certain amount of time to get there. And so really to get to the high end, that's where if we do have some positive impact from interest rates, FX volatility, those are the type of things that we can get there very quickly because with interest rates, just to give the magnitude of the impact with those money market fee waivers, they're over $100 million this year. And as you would imagine, there's no to very little expenses that are related to that. So those types of revenue streams have relatively high margins. And so it's those types of impact that can quickly get you towards the high end.

Okay. On another note, could you just speak to sort of the risk appetite of your Wealth Management clients right now, whether you've seen any changes there in light of the fact that the market was up quite dramatically last year? And whether you're doing any kind of significant mix shift in their assets?

I would say, as far as our perspective and what we're doing with them, I think the first part, which is critical, is just that our approach to Wealth Management is much more around goals-driven investing, if you will. So less about pure return and less about asset allocation per se. Having said that, as far as risk appetite and the allocations that underlie meeting those objectives, we have been advising our clients to essentially move towards riskier assets for some time period here. And that's a much broader and in-depth view that's developed by our CIO, and the office of the CIO. And we've seen them progress towards that, frankly, more slowly last year that we necessarily were advising. And that's just I think investor or human behavior, it just takes longer to follow up on the advice and to actually execute on that. What we're seeing is that it is continuing now. And so you have seen the equity allocation, for example, in our Wealth Management business continue to go up and is now at a level that's close to some of the highest levels that we've seen. Now part of that, of course, is because the market has performed, but this is on top of the market where we have seen them shift assets from fixed income into equities. And I would say, as to why they're doing that we think overall, it's the direction of the advice, if you will. But we think underlying that, as well, it doesn't hurt that equities are performing well, that's certainly a positive. And I think there's also still the expectation that there's clearly risk in fixed income to the extent that we have expectations that tapering will continue and that interest rates are going to be going up over the next several years.

Our next question is from Jim Mitchell with Buckingham Research.

Most of my question have been asked and answered. I just want to make sure I have this crystal clear, on the premium amortization question, which was very helpful but I just want to make sure when you think about that $10 million benefit this quarter versus the $3 million last quarter, all else being equal if rates stay flat and that's a big statement, all else being equal. But that would mean that, that the $10 million would come back out or wouldn't recur, I guess would be the point, all else being equal.

That's correct. If you truly say, all else equal, no adjustments, et cetera, you would be $10 million lower.

Right, but as rate, but we should kind of keep an eye on rates and if they start to move higher that, that you could still see more adjustments going forward.

Correct, in the opposite direction, correct.

Fair enough. And I guess just on the compensation side, I want to make sure I hear what you're saying on the expense front. Outside services was elevated, could come down. But in compensation, the current run rate reflects new hires and that we should probably think about that as the base into next year and then some growth with revenues on top of that. Is that a fair statement on the compensation cost side?

Yes. I think that's -- overall, that's a fair statement.

We'll go next to Jeffrey Harte with Sandler O'Neill. Jeffrey Harte - Sandler O'Neill + Partners, L.P., Research Division: Question on capital levels and your thinking there. I mean, the buyback has really accelerated the last couple of quarters. And if you actually execute on the whole authorization from or approval from the Fed, it's going to step up again in the first quarter. Have you guys changed your thinking as far as the willingness to return capital to shareholders or that is an attractive alternative because it still seems like there's a lot of capital in there?

Yes. So as I mentioned, we feel very good about our capital levels. We feel good about being able to return over $600 million in 2013. We'd like to return more capital to our shareholders going forward. So of course, that whole process, not only has to do with us, but also the process with the Federal Reserve and our regulators. And so we go through that trying to make sure that not only are we comfortable with our capital levels, but all the processes around determining their capital adequacy and being in a position to handle stress situations, et cetera, and making sure that they're comfortable with that as well. Jeffrey Harte - Sandler O'Neill + Partners, L.P., Research Division: Okay. But this is a recent acceleration, I mean, it seems like the approval spend there, it almost suggests that kind of management's willingness to return capital has improved as opposed to getting approval to necessarily do more.

Yes, I would say from quarter-to-quarter, it can change for any number of reasons. But within the capital plans, we've used our capital plans or what we've been allowed to use over the last several years. Jeffrey Harte - Sandler O'Neill + Partners, L.P., Research Division: Okay. And on expenses, kind of going forward, I mean that's been asked a lot and who knows with the activity levels. But I want to make sure I'm clear, when you were talking about hitting the ROE target next year, you mentioned kind of getting the pretax margin to 28% or 29%. As you think of the pretax margin expanding by 100 basis points maybe 200 basis points, is that revenue driven? Or should we be thinking of kind of a flat revenue environment and you think expenses are actually going to be potentially declining quite a bit?

Yes. We are expecting to grow our revenues and as I mentioned before, particularly driven through our trust fees. And expenses will go up, as I said, over the last couple of years, the way that we've both planned and then executed has resulted in about 4% growth in that. That's allowed us to improve that ratio between our expenses and our trust fees. We're looking to continue to stay on that line. And absent what happens in the macro environment, that's going to result in improving our in pretax margin.

And we'll go next to Robert Lee with KBW. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: Most of my questions have been asked. I just have a very simple one. I mean, the last several quarters, tax rates kind of drifted down a bit. How much, if at all, is your tax rate being affected by a changing mix, maybe greater non-U.S. business? And any color on what we -- how should we expect that to migrate in the coming year?

Yes. So it does change with the global mix of our business and we continue to expand globally. And so, you have seen some improvement as a result of that. So with lower tax rates outside of the U.S., we've seen our effective tax rate come down a little bit as a result. There's also always from quarter-to-quarter just various aspects within taxes that can move it up or down a little bit. So we're largely speaking in the same range that we've been. But I think that over time, we try to be as efficient on that line item as well. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: Was there anything worth calling out in this quarter that may have driven the tax rate down a little bit or just kind of a unreasonable time going forward?

I would say that, Robert, that this quarter was a little bit lower on the tax rate. It was not any one individual item that affected that. As you can imagine, you're constantly looking at the adequacy of your reserves, your tax reserves to determine if they are appropriate. And as a result of that, you have to look at potential situations that can happen and make sure that the levels are appropriate. And those always get adjusted over time. But there was nothing significant that happened, it's just that the reserve levels and the adjustment made the rate a little bit lower. For the full year, we're at about 32%. That's definitely within the appropriate neighborhood for us.

We'll take our next question from Andrew Marquardt with Evercore.

Also, mostly have asked and answered, but a couple of ticky-tack questions, if you don't mind. Just to be clear on the expenses, I hear you on the 4% kind of ongoing growth rate we should generally expect. But should we think about it on a full year versus '13 base or kind of a 4Q run rate just because to factor in maybe the higher run rate on regulatory compliance cost that maybe were not fully baked in?

Yes, Andrew, I would think about my comments there about growth more on an ongoing basis, meaning kind of multiple quarters year-over-year, if you will, as opposed to necessarily saying, every particular quarter that we're going to achieve a particular growth rate, whether that's revenues or expenses. And I hope that helps it.

And just a reminder that, that typically seasonally higher expenses still to be expected in the first quarter, is that fair because of the Open?

Correct. So that dynamic will still play out this quarter.

Okay, got it. And then in terms of -- can you just remind us where you stand in terms of capital targets that you have internally for Tier 1 common Basel III, I guess, or is it PCE, good old-fashioned PCE? Or how do you think about what's appropriate for you guys?

We think that in the current regulatory environment, it's important to look at a number of the ratios. So certainly Tier 1 common capital is an important ratio for us. Tier 1 ratio, we have internal levels that we look at for that as well. And then total capital, it's important to the regulators, it's also important to us. You saw us issue $750 million of subordinated debt in the fourth quarter. That was to bolster our total capital levels. And then the leverage ratio, also the supplementary leverage ratio, is an important focus, more recently, of the regulators. And so it's important that we feel comfortable with all our levels there, too. So overall, it requires us to look at a number of ratios. I will say that, that's going to get easier going forward with Basel I essentially going away and really being able to focus primarily just on Basel III ratios. That will actually seem easier than where we've been.

And that's because that is really the constraining factor? Is that fair?

It's not as much the constraining factor per se, although we have very high Basel I ratios. But I would say, it's because that's what the regulators -- that's where they're focused, those are the effective regulations, so that's where we need to be primarily focused.

You guys are already at a fairly healthy combined payout ratio, is it fair to assume that you could do more than that in the upcoming CCAR? Or maybe you don't want to trigger them all again and -- how should we think about it?

Yes. Don't know how they would think about it. And so all I can really say at this point, Andrew, given that we've submitted our capital plan, is we feel very good about our capital levels. We've put a tremendous amount of work into the CCAR process this year and that's been submitted. And we're working through the -- I'll call it diligence process with the regulators right now and we look forward to hearing back where they are when it comes down in March.

And with that, we will end our fourth quarter call today. We look forward to talking to everybody in the middle of April when we will hold our Annual Meeting and also release first quarter earnings. Thank you very much.

This does conclude today's conference. We thank you for your participation.