Good morning and welcome to State Street Corporation's First Quarter of 2017 Earnings Conference Call and Webcast. Today's discussion is being broadcast live on State Street's website at investors.statestreet.com. This conference call is also being recorded for replay. State Street's conference call is copyrighted and all rights are reserved. This call may not be recorded for rebroadcast or distribution, in whole or in part, without expressed written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on State Street website. Now, I would like to introduce Anthony Ostler, Senior Vice President of Investor Relations at State Street.

Thanks, Hope. Good morning and thank you all for joining us. On our call today, our Chairman and CEO, Jay Hooley, will speak first. Then, Eric Aboaf, our CFO, will take you through our first quarter 2017 earnings slide presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterwards, we'll be happy to take questions. During the Q&A, please limit your questions to two questions and then re-queue. Before we get started, I would like to remind you that today's presentation will include operating-basis and other measures presented on a non-GAAP basis. Reconciliations of these non-GAAP measures to the most directly comparable GAAP or regulatory measures are available in the appendix to our 1Q 2017 slide presentation. In addition, today's presentation will contain forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors, such as those factors referenced in our discussion today, in our 1Q 2017 slide presentation under the heading Forward-Looking Statements, and in our SEC filings including the Risk Factors section of our 2016 Form 10-K. Our forward-looking statements speak only as of today, and we disclaim any obligation to update them even if our views change. Now, let me turn it over to Jay.

Thanks, Anthony, and good morning, everyone. Our first quarter 2017 results reflect our business momentum across asset servicing and asset management. Strong fee revenue growth coupled with expense control and good progress against our strategic priorities drove significant positive fee operating leverage. On an operating-basis, we increased return on equity by 200 basis points and our earnings per share by 23% from the first quarter last year. Our new business traction is solid, as we continue to invest in our technology and systems, benefiting customers and investors, and our pipeline remained strong. We continue to see strong trends for asset managers to consolidate providers as a way to create efficiencies and improve information needs. Recent mandates would support this trend. We believe State Street has the unique advantage of being able to service complex and global assets on an integrated service platform. This coupled with our investment in technology and digitizing our processes enables us to extract meaningful data and insights for our clients that they would be hard-pressed to obtain anywhere else. We see two other secular growth trends that play to our strengths. The shift towards passive investing is increasing business given our 55% plus share of ETF servicing, and the expansion of international asset managers with multijurisdictional offshore funds is buoying our international growth given our global capabilities. These advantages are illustrated by our 11% increase in assets under custody and administration versus the first quarter of 2016, reflecting strengthening markets, improved client flows and the contribution of our new business wins over the past year. As Eric will lay out for you in more detail, based on the strong start to 2017, our outlook has improved modestly from our January 2017 outlook and remains within our previously disclosed ranges. Turning to slide number four, I'll now…

Thank you, Jay, and good morning, everyone. Please turn to slide 5 where I'll start my review of our first quarter 2017 operating-basis results, which supplement our GAAP results. As you can see, we have made a conscious effort this quarter to narrow the differences. Operating-basis EPS for 1Q 2017 increased to $1.21 per share, up 23% from 1Q 2016, reflecting higher equity markets, new business wins, continued expense discipline, and fewer shares outstanding. 1Q 2017 results reflect strong fee revenue growth over 1Q 2016 in both asset servicing and asset management. At the same time, we carefully managed the expenses with the help of State Street Beacon, delivering over a 5.5 percentage points of positive fee operating leverage over 1Q 2016. This includes 2.3 percentage points from the sale of BFDS/IFDS and the GE Asset Management acquisition. Slide 5 also highlights a few notable items that impacted both GAAP and operating-basis results this quarter. First, we recorded an after-tax gain related to the sale of BFDS/IFDS of $31 million, or $0.08 per share, as we continue to focus increasingly on our core business. Second, we took the opportunity to tactically reposition a portion of the investment portfolio for the current rate environment, which will improve NII going forward. That cost $32 million after-tax, or $0.08 per share. Third, our first quarter results in both 2016 and 2017 included the seasonal effect of deferred incentive compensation for retirement-eligible employees. All-in-all, pre-tax margin was up 1.7 percentage points and ROE was up 2 percentage points to 10.4% as compared to 1Q 2016. Now let me turn to slide 6 to briefly review growth of two key drivers of our businesses. AUCA increased 11% from 1Q 2016, driven by market appreciation, higher inflows in the U.S. from asset managers and ETFs, partially…

Thanks, Eric. Our long-term growth is being fueled by State Street Beacon and the way ahead. And after 225 years, we can step back and see what has made us successful. It's been our people, technology, insights, and experience combining to create enhanced asset intelligence for our clients. Our future success will be driven by these strengths and our ability to further differentiate ourselves by transforming the way data is utilized to provide additional capabilities to our global client base. Now, Hope, I'd like to open the call to investor questions.

Certainly. Your first question comes from the line of Ken Usdin with Jefferies.

Thanks. Good morning, guys. I wanted to see if you could help us understand some of that push and pull between NII and the processing other. Eric, you didn't mention it in your forward commentary, so can you just walk us through, does that elevated processing and other result, ex the $30 million gain, now stay and then we see the direction change in NII? Or maybe you could just help us through understand that dynamic and what happens from here? Thanks.

Sure, Ken, it's Eric. Let me just take you through it so that you've got a good visibility. I think what you've seen us do this quarter as we designated the bulk of the FX swap activity that we've been doing for a number of quarters and years as economic hedges against the deposits. And as a result, those FX swap costs now sit in NII as opposed to in processing fees. I think that's a kind of – it's a natural way to report our NII and NIM. And our expectation is we'll continue to do that going forward and reflect them along those lines. I think if you're just looking for the numbers, I'm happy to share those with you. On a year-over-year basis, the swing was about 3 bps. On a quarter-over-quarter, it was about 5 bps. And now I think we've got a good path going forward.

And just to confirm then, how do we think about that processing and other line, given – I think you mentioned lower energy credits and that's got some seasonality in it. So if we start at $152 million (20:30), is that now where we go from here?

I think the – you really have to do two things on the processing and other line, which always have some volatility in it, right? One is you've got to take out the BFDS/IFDS gain, right? And then secondly, you've got to remove the 5 basis points worth of swap costs. That was about $25 million on the science (21:01) of our balance sheet and use that as the new baseline. I will remind you, there's always some volatility in that line, plus/minus some. So just keep an eye on that and look back over the past, I think it will give you a bit of an indication.

Okay. And if I could just ask one more just on the BlackRock you had – Jay had mentioned last quarter that he'd expected it to start to roll out in the second half. Can you just update us on timing of that? Is that still incorporated in your guidance and if it's changed at all? Thanks.

Sure, Ken. This is Jay. Happy to do that. The BlackRock transition will occur beginning in 2018, not 2017, and is likely to take several quarters to be completed.

Your next question comes from the line of Glenn Schorr with Evercore.

Hi. How are you?

Good morning.

Question on deposit beta. I mean, it looks a little higher than what we've seen at some of the other companies. I'm just curious, is that just a function of client franchise and how you want to roll, or is there anything contractual that goes towards how the higher rates flow through on the liability side?

Glenn, it's Eric. Let me take that. The client beta is you have to actually – you have to look carefully at the average interest-earning schedule to decipher. This quarter, they were in the 20% to 25% range, which is I think what we've seen towards the start of a rate cycle in the past what we saw a year ago. The way to extract them from that average earning schedule is to take a look at the U.S. deposit costs, U.S. interest-bearing costs. You saw those nudge up about 6 basis points quarter-over-quarter, right, relative to a 25 basis point hike by the Fed. If you also look down at the total interest-bearing or the non-U.S. interest-bearing deposit costs, just remember, the swap costs affect that line, and so there'll be some noise there that you just have to account for.

I got that. Okay. And, I guess, this is an ongoing question. The revenue growth targets are obviously still in the 8% to 12% range. I think they were maybe 5% ex-GE, but the fees were better. It's more like 8%. But any way slice it, I think fees grow a little less than assets. Do you think of that as just like that's the world we live in, there's some fee compression, there's some mix shift, and we make it up on volume and give the operating leverage, they'll be happy.

I think there is a fair number of themes you just covered in a short sentence, but I think you've got the gist of it. I think what you'll find is, as asset values increase, right – they were up, asset values year-over-year against our mix of equity and fixed income and all were up about 10%, for example – you'll naturally see just because of the denominator effect, the fee rate flowed down. So I think that's just part of the dynamic of the math, and then that's further impacted by mix. I think you are right, though. If you think about the buildup of revenue growth in an asset servicing business, it starts from how much asset appreciation do you expect year-over-year, right, and we've got the last 10, 20, 30 years to look at. You think about flows, right. Are you servicing asset managers who are bringing inflows as opposed to seeing net outflows. So that matters. You then add net new business, right. Are you gaining a point of market share or 2 points, like what the – how effective are you doing that. And, obviously, one of the reasons for that Beacon investment and the technology and the sophistication in the global offering we add is to push that in the right direction. There is always a little bit of pricing headwind. I think there is a little bit of pricing headwind in this business and every business that one operates in, but that's got to be made up. And then there is foreign exchange swings up and down. So those are kind of the – that's the algebra that I think we think about and, obviously, a number of those we can control. And that's how we're focused.

Awesome. Thanks, Eric. Appreciate it.

Yeah.

Your next question comes from the line of Brennan Hawken with UBS.

Hey. Good morning. Thanks for taking the questions. Just wanted to follow up on the question on deposit beta. So I appreciate what we've seen here so far. How are you feeling, though, on a go-forward basis? What's your sense for the gamma on the beta, so to speak? In other words, how should we think about trajectory of beta from here?

I still remember that you asked about the gamma on beta. I think that's the second derivative, if I remember properly from my calculus days. I think it's a fair question. Betas have been relatively low by past historical standards. We saw 20% to 25% this quarter. We saw about that a year ago, though, it's hard to always calibrate the very first uptick. We expect this level again in second quarter, right, at least within that range, given what we see so far. I think what happens after that is the broader question – what happens if there is a hike in September, what happens with hikes next year – because we all know that betas for past cycles are in the 50%, 60% range. And the question is – will those repeat themselves and, if so, when. Obviously, the environment has changed, right? The money market fund and offering is weaker than it's been before, so that could be a positive for banks when you think about betas. On the other hand, there are always pressures the other way. So we'll see. But so far, we've seen I think healthy betas and kind of a good balance, and we expect that to play out for the next hike or two.

And sorry about the gamma there. I'm certainly – I talk too much to derivative traders, I guess. So, to paraphrase, you don't think there is going to be a significant change in the beta, albeit maybe a natural ramp, is that fair?

Yeah, that's fair. Given what we know today, I think that's our current expectation.

Terrific, terrific. Thank you very much. And then just curious if you could give some color on the outflows with the institutional business? What is it that you think is driving that? And maybe what adjustments you guys are looking to make to slow that trend? And your thoughts on the ETF flows versus maybe some of the large competitors that showed really pretty remarkable flow trends on the back of some price reductions?

Yeah, let me start that one, Brennan, and I'll invite Eric to jump in. A two-parter (28:51) question on the institutional outflows this quarter, it kind of continues the trend of mostly passive, largely equity, a little bit of sovereign wealth, but just general repositioning as well as a little bit of currency overlay also affected that institutional outflow. So that's a story that is an ongoing story. I think probably the better part of the story is the ETF flows, which were $12 billion net in the first quarter and were largely made up of sector funds SPY, which is the S&P 500, and we had good growth from EMEA. And I'd just remind you, a quarter is a quarter. But if you look over the past three quarters, our net flows were $12 billion in the first quarter, $36 billion in the fourth quarter, and $12 billion in the third quarter. So I think trends are important here, and we feel pretty good about the investments that we've made in the ETF franchise, both in product and distribution. And I would suggest that those investments are paying off, and we're seeing that. So we feel pretty good about the ETF positioning. Do you want to add anything?

Yeah, Brennan, I'd just add that from a financial standpoint, the outflows here were in very thin margin passive strategies. I think our overall fee rate in SSGA is about 6 basis points or so. These were a good bit below those. So there's always a bit of question when you have competitive bidding and so forth, as you want to keep low fee, low margin business. And you can imagine we also need to be a little bit disciplined there. I think the important news is that the inflows that came in with that ETF franchise are above those rates. And so in a way, we had a revenue uptick. And if you want to step back, asset under management – assets under management in the business were up 4% sequentially, revenue was up 6%. Why? Because we're actually trading up as part of our business expansion here.

Perfect. Thanks for the color.

Your next question comes from the line of Alex Blostein with Goldman Sachs. Alexander Blostein - Goldman Sachs & Co.: Hey, Jay, good morning. Eric, good morning. A question for you guys – well, Eric, really for you on the balance sheet strategy. So the leverage ratio is in a pretty good place now. The size of the balance sheet came down quite meaningfully sequentially, and I think it kind of jives with your earlier comments that you kind of expect 5-ish percent I think decline for the full year. So I guess, A, should we take that as the balance sheet should be stable from now on? And, B, as you think about any other repositioning or securities remix (31:47) that you guys are thinking about on the balance sheet side just between the securities portfolio?

Sure. Let me start with the balance sheet side. I think you did see us bring it down consciously. The background there is, as you know, as a company, we began to tackle the size of the balance sheet almost two years ago now. I think we've done quite good work there. Second half last year, with some of the large inflows that we had disclosed (32:18) on the asset servicing side, those came with deposits, right, and so deposits started to float up. It took the size of our balance sheet up. And what you saw us do is effectively make sure that we digested those, some of those we cap. And then under the surface, you saw us do some optimization, right? We rolled down some of our treasury CD portfolio, that's down over two quarters by about $5 billion, $6 billion. So we're taking out some of the higher cost deposits as we manage and keep the balance sheet tight. Going forward, I think you're right. I think it's going to be flattish, maybe down a little bit, maybe flat. You never really know with our client inflows and outflows, so I want to be careful there. But I think we're comfortable with the step reduction that we took. And going forward, it will be a little more on the business-as-usual side. On the securities portfolio, that's exactly right. I think we saw an opportunity. We moved just a few billion out of our $100 billion of securities, and we feel pretty confident where we are, so we don't expect further adjustments in the near future. Alexander Blostein - Goldman Sachs & Co.: Got it. And then the second question. Jay, I think this one's for you. Just on the $375 billion of new business that's yet to be installed, any (33:45) fees associated with that? Or at least kind of, how does the fee rate on that book of business yet to be installed compares to your sort of overall blended fee rate on the installed business?

Yes, let me pick that one up, Alex. What I can tell you is that it is a little bit elevated, and it's elevated because the deals that we've been booking the last couple of quarters tend to be meatier, more complex deals, which you can infer from that higher-ish fee rates because it's back office, middle office. And, therefore, the chunkiness causes extended implementation lifecycle. So, I guess that's what I'd say about that. Alexander Blostein - Goldman Sachs & Co.: Got it. All right. Thanks a lot.

Your next question comes from the line of Brian Bedell with Deutsche Bank.

Great. Thanks. Morning, folks. Eric, can you just talk about the assumptions that you have for the 4% to 6% fee growth in terms of market returns from, let's say, the end of the first quarter? And also FX volatility, I think that was still getting pressured here in April.

Yeah. I think the assumptions are in line with what we disclosed back in January. We're expecting several percentage point increase in underlying equity markets, I think, in line with general economic forecast. FX was kind of at the level of where we were in January. The only large swing we've seen so far is the British pound. So just – but that's a piece, not a large piece, but obviously a piece of our European revenues. So not a large swing there. So I'd sort of summarize as basic economic assumptions that you or we or others would have out there.

Okay, great. And then, just to focus back on the balance sheet. You did mention you're keeping your eye on yield curve flattening. Can you give us a sense of some sensitivity to your 2017 net interest revenue outlook on that? And then also, if you can talk about the repurchase strategy that I think helped. It looks like to me the repo line was up about $12 million sequentially. I'm not sure if it was all due to that, how recurring do you think that could be? And then, any premium amortization decline in the quarter as well?

All right. Let me just try to take through those – all fair questions. The back-end sensitivity, I think the best way to frame it is, we have that interest rate NII disclosure for 100 basis points up/down in our K. We also have the ramp, but the shock is probably the easiest one to talk through. If you remember, about 60% of our interest rate sensitivity is in the dollar book, the balance is in Europe. And then, of the dollar book sensitivity impact, the overall – about 80% of our sensitivity is at the front-end, about 20% at the back-end of the curve. So, I think it's the front-end rate hikes from the Fed that matter the most. But I think what you will see is, had rates stayed up in the 2.50%, 2.60%, 2.70% (37:15) range in the U.S. and U.S. markets, then that would have created a tailwind of NII for most bank portfolios, just given where they have been purchased at in the last few years. I think without that, you won't have a natural tailwind and so you can't count on that. And so, it's not a huge mover, but it's the kind of thing that we want to keep an eye on as we estimate and give outlooks on NII. Repurchase strategy – oh, the repo. The repo line is just the earnings on the repo book. Some of that – it's a pretty typical repo book. Some of that includes some repos that are designated under FIN 41 with netting, all that is, I think, well laid out in terms of balances and size in our K in the footnotes. I think it's footnotes 10, 11 or 12. You can find them. But that's recurring earnings, because it's effectively a matchbook of repos and reverses, and so that line will now, as rates have flowed up, will tend to recur.

And then premium amortization?

Premium amortization is not significant at this point in our book. I think it was down just slightly, but not enough to call out as a movement of NII or NIM this quarter.

Okay, great. Thank you.

Your next question comes from the line of Jim Mitchell with Buckingham Research.

Hey, good morning. First question, just there's been a lot of chatter on amending the SLR, perhaps removing some of the denominator, central bank cash or other things like that. How much – I mean, obviously, that would free you up to expand your balance sheet in deposits. Is there a lot of do you think pent-up, I guess, volume out there that you could put on? Because I would think the incremental profitability with no SLR impact could be pretty significant. Just trying to get a sense of what that deposit opportunity could be if they were to alter the SLR.

Jim, let me start and then I'll let Eric quickly jump in. I think that I agree with your point, which is there is a lot of discussion – even public discussion. I thought it was notable that when Governor Tarullo gave his ending speech a few weeks ago that he spiked out (39:53) custody bank excess deposit/SLR issue as something that was probably an unintended consequence. So I probably never felt better about the uniform view that excess deposits (40:11) leverage ratio was unintended and probably should be corrected over time. Not sure when it will be corrected in what form, whether they exclude the excess deposits or whether they ladder (40:24) adjust the leverage ratio. But I think the outlook is pretty good from the standpoint of getting some relief to be determined when and in what form.

Yeah. And let me – it's Eric. Let me just add to the tactical question. For the leverage ratio to be adjusted, there're obviously a number of different scenarios in which that could happen. I mean, we don't know. If it does get relaxed, certainly there is an opportunity to accept more deposits. I think there's certainly a lot of liquidity floating around the system, both here in the U.S. and in Europe. Obviously, the question is at what rate, and so we'd want to be judicious about that. There's also an ability to lighten our preferred level in the capital stack. We have call options on most of those tranches and so could adjust there. I think what I would point out, though, is certainly there's a question as to whether the rules get – to get adjusted but also how. Because, remember, the leverage ratio, it affects us as a bank on an SLR basis, right, under the SLR rules, but also the spot current leverage ratio impacts us in terms of CCAR and the CCAR ask. So there're kind of two different parts to the leverage ratio that matter. And then I'll also remind you just to be careful that if leverage is not a binding constraint for a bank, then at some point, RWA and CET1 is. And so there's a lot of moving parts here that we'd have the consider if there are some changes.

Right. Absolutely. That's why I think deposit growth would probably be the better outcome versus CET1 running up against CET1. And maybe, Jay, a question on middle-office outsourcing outlook, it seems like your mutual fund clients have faced some pressure. Do you see those discussions picking up? And what's your kind of outlook on the pipeline for that since it is a little bit higher margin?

Yeah, Jim, there is enormous pressure, as has become very visible in the last year or so on the traditional long-only fund companies and so they're doing everything they can to get more efficient. And it has created an uptick – a significant uptick in not only deal flow, but the complexity of deal flow, meaning the middle-office. Gosh, I would get to at least an half of the mutual fund related activity today that's got a middle-office component. And even probably, more interestingly, it also has a data component to it. So there's DataGX, which is a fairly new offering for us where we act as the data integrator, taking the middle-office, not only the data that we have but data from other custodians. That product is surging too. So I think it's a natural consequence of more downward pressure on the investment management business generally. And we're in a pretty good place, given the product offering and the things that we're continuing to do, not only to help solve the middle-office issue, but edge our way into the front office with DataGX and other analytics products.

Okay. So you feel good about the pipeline?

I do.

Okay, great. Thank you very much.

Your next question is from the line of Geoffrey Elliott with Autonomous.

Hello. Thank you for taking the question. Eric, you mentioned at the beginning of your remarks efforts to bring GAAP and operating earnings closer together. And clearly, you've made the change around discount accretion. But is there anything else you've done there or anything else you're thinking about doing?

Jeff, it's a good question. We've certainly had a history of the disclosures with GAAP and operating. I think there's some benefit to that, right, because they provide you a sense for the underlying business, especially the big program like Beacon, their restructuring charges that are important to note. I do think, though, that there's investor interest, there's analyst interest, and making sure we're as simple to understand as possible. I met with a number of you down in New York, here in Boston over the last couple of months, and that came through as some of the feedback that I picked up. So I think you saw us narrow down the number of lines. Discount accretion was all of $5 million, and so to kind of call it out as a separate line, I'd rather just tell you how much it is and incorporated in both results just to make all of our work easier. So I think you saw us take a step change this quarter. I think we'll continue to reevaluate during the course of the year. And, obviously, year-ends are a more natural time to make – to potentially make some more changes. But I'll be out there listening and seeing if there is some feedback one way or the other, and we'll take it from there.

Great. Thank you.

Your next question comes from the line of Betsy Graseck with Morgan Stanley. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Hi. Good morning.

Hi, Betsy.

Good morning. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Hi. A couple of questions. One, a bit of a ticky-tacky one just on operating deposits versus non-operating deposits when we're talking about deposit beta highlighting there're some things that are different this time around, that's one of them. And just wanted to understand how far along you are in shrinking the non-operating deposits that you have?

Yeah, Betsy, it's Eric. I think part of the optimization that you saw us do over the course of the last quarter is obviously focused on the excess deposits or the non-operating deposits. I think those come in a couple of flavors, right? Some deposits by virtue of coming from financial institutions, and there is a very broad definition under the U.S. and Basel rules, all count as non-operating. I think you saw us a couple years back reduce those amounts, and we want to stay in a comfortable zone because those financial institutions, hedge funds, private equity funds, those are our natural clients we're servicing. And even though those don't count as sticky deposits, we may think they should, but they don't under the rules. We need to accommodate those and we'll continue to do that. So I think we've made some step changes there a year-and-a-half ago and are comfortable with the level. I think what we find is in the balance of our business, what happens is you have deposits and up to a point, they count as operating. And over that point, when they are above the kind of natural flows that you would expect them to cover, the rules require you to do some calculations or statistical analysis, designate a kind of a level for different types of clients based on their activities and the levels above that tend to be excess. Those are the ones that we've obviously spent more time trying to calibrate and adjust. It's not a science, but that's what we're focused and that's been the effort. I think, going forward, as I said, I think the balance sheet size is comfortable where it's at. We'd like to keep it flattish from here. I'm an ex-Treasurer. So I always say down a tick just to keep things tight, but we like where we are. We'll always do work, though, under the surface. And so we still have a wholesale CD book in the $8 billion to $9 billion range. If some good client deposits come in, I can bring that down. That would improve NIM because of the interest rate cost differential, and you'll see us take those kinds of actions if we can. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Okay. That's great, Eric. And then just second thing. We talked a little bit about the SLR and the CET1. How do you think about the tangible equity to tangible assets ratio? If you didn't have these other constraints to consider, what do you think a good range is for running the bank on that measure?

That's a good question, Betsy. And I've not actually spent a lot of time with that historic measure, probably because we have so many measures, whether it's SLR, fully phased-in SLR, we have CET1, we have Tier 1, we have advanced and standardized. And so, to be honest, my perspective is I expect some refinements on the current capital rules, but not so much that we could go back to some of those historic measures like TE to TA. I think that will just be an outgrowth of what the current rules are, to be honest. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Right. Got it. Okay. Hey, thanks a lot.

Yeah.

Your next question comes from the line of Vivek Juneja with JPMorgan.

Hi. Eric, the first question for you. Can we talk a little about other operating costs? Normally, they seem to come down a little bit in the first quarter. Did not see as much of a decline linked quarter, in fact, year on year, and I recognize there is the GE acquisition partly, but it's up very sharply. So could you tell us what's going on with that line and why it's running a little higher than it has previously?

Sure. Other operating expense – and I think other folks on the call can find it on the supplement or the earnings report, it's up year-on-year really for two reasons. One is the GE sub-advisory fees actually get booked in that line and that was about – I think about half, a third to half of the uptick. The other is that there is some regulatory and insurance costs, right. There's FDIC, there is some of that equivalent in Europe, and I think there might even been some of those VAT taxes (51:20) and so forth that come through on the expense line. Quarter-on-quarter, what you did see is a reduction. The quarter-on-quarter reduction is down about 5%. And that was professional fees coming down, some of that is we've in-sourced more of regulatory activities, so you see that in a different line, as an example. But that was down sequentially.

So, looking forward, any color on how we should think about that given that that's clearly running on a year-on-year basis much higher, presuming the sub-advisory fees are going to (52:02) regulatory, obviously, down from the fourth quarter, and same with the insurance.?

Yeah, I think that's fair. I think you can think of that line as flattish – within a range. I think there's some volatility. We've got some of our regulatory costs, but those at least – unless we hear more, right, from some of the supervisors, we expect those to continue, and some of those are good run-the-bank kind of activities. So I think relatively flattish going forward.

A question for Jay. Jay, there was a comment in the release about hedge fund outflows having some impact. Can you give us an update on where you stand on that? What you're seeing in – since that's obviously an important client base for you folks, and you've been a leader in that one?

Sure. Happy to do that, Vivek. As you know, over the past probably 10 years, we have moved into the alternative administration space, both hedge, private equity, and real estate and, in fact, are a leader in that marketplace. And you also are well aware that the hedge fund industry has suffered many sequential quarters of outflows due to performance and other reasons. And so we would reflect some of that movement. And in the quarter, we continue to see outflows in hedge funds. And I would just suggest that we hope that turns, but we're not fully in control of that. But I'd also mention that that's just one dimension of our servicing complex. I could also point to a few other things, just to provide some balance. The long-only business – the traditional long-only business in the U.S. actually looked a little bit better. You've seen outflows for a long time. That kind of went to neutral in the past quarter, which we view as constructive. And then, just to give you a couple of other dimensions. Outside of the U.S., the offshore markets continue to run very fast, and we're the market leader in the offshore services, most of which are centered in Luxembourg and Dublin. And then just final point to that, just to give you kind of the highlights of the big movers. As money has moved out of hedge funds, we've seen it flow into private equity and real estate. And so, we've seen our private equity administration business pick up, and even real estate more recently, as the complexity of doing back-office for real estate assets is overwhelming some of the asset managers. So I would say I wouldn't focus overtly on just hedge funds. I think it's always a portfolio where some things are in favor, some things are out of favor. And I'd say, for now, hedge funds continue to look to be out of favor, which reflects on our – that component of our servicing fees.

Okay. Thanks. And where are you on asset management? Since GE seems to have been well absorbed, any color on what you're thinking on that front now, and particularly from an acquisition standpoint?

Yeah, I would say – my broad comment about asset management is, we feel we focused our strategy more in ETFs and solutions, and we've been making investments. And I think the performance that you've seen this quarter and the last couple quarters is a reflection of that. So we feel good about the space that we've decided to compete in. And the GE Asset Management acquisition has exceeded expectations from a standpoint of getting everybody onboard and even having a little bit of – it's early days, but some uptick in new business. It's given us much more variety in our asset classes in order to fulfill our solutions business. And from an acquisition standpoint, Vivek, I would say there's probably some gaps, smaller gaps in our asset offering that, if we could fill them with a team or a small acquisition, we would entertain, but nothing more significant than that.

Okay. Thanks, Jay.

Your next question comes from the line of Gerard Cassidy with RBC Capital Markets.

Hi. This is actually Steve Duong in for Gerard's team. Thanks for taking our questions. Just regarding the BlackRock business that is being transferred to JPMorgan. Are there any deposits with that business? And if so, how much is going?

Yeah – go ahead.

Steve, it's Eric. There's a bit of deposits with every client that we have, and we'll certainly factor that in, and that's factored in our view of this year and next year. I will say, though, there are more deposits that tend to come our way than go. Our treasurer and our businesses do quite a bit of balancing between price and just active discussions with our servicing counterparties about how much they can leave with us. And so, if a little deposits flow out, let me tell you, there'll be other clients who want to leave deposits with us in a pretty simple exchange.

Understood. Thank you. And just a second question regarding your dividend. What are you guys thinking about, just as far as a long-term dividend payout? Is something like a 40% fair?

Steve, it's Eric. I think that's a good question, and I'd kind of answer it in two ways. I think we're comfortable with the current level of dividends versus buyback. It gives us a good amount of flexibility in terms of the capital structure. We like the opportunity to have the mix that we have. And, obviously, that's all part of our CCAR ask that we submitted back in April. I think I'd also say that, as said has (58:50) become clear, that there isn't really a 30% dividend cap as a way to return capital to shareholders, we'll consider over time whether we want to make some adjustments, but that will be something we consider. But no, no new news to report at this point.

Great. Thanks for taking our questions.

Yes.

Your final question comes from the line of Brian Kleinhanzl with KBW. Brian Kleinhanzl - Keefe, Bruyette & Woods, Inc.: Yeah. Thanks. So just two quick questions really. You did mention on the new business yet to be installed that was coming in with higher fee rates than what you currently see across the company. Is that also the same for the BlackRock business that's going away? Is that a higher fee rate business as well?

Yeah. Let me just clarify that, Brian. What I described is that it's a higher – the $375 billion is a higher level of backlog to be installed than we have traditionally had. And connected to that, I mentioned that the reason for that is that they're bigger, meatier, more complex deals, therefore, they have a longer implementation timeframe. You can infer from that that there's more middle-office and complexity and so a higher fee rate. The BlackRock business is kind of standard kind of 1940 Act-ish straightforward common trust fund business, so a little simpler. Brian Kleinhanzl - Keefe, Bruyette & Woods, Inc.: Okay. And then, was there any impact from the run rates from the sale of the BFDS business?

There was not in this quarter. It's Eric. Brian, there's not in this quarter just because it was done at the end of the quarter. There'll be a small one, but it's fairly minor in the scheme of our revenues and certainly incorporated in our fee and revenue guidance that we've provided. Brian Kleinhanzl - Keefe, Bruyette & Woods, Inc.: Okay, great. Thanks.

There are no further questions at this time. I will now turn the floor back over to management for any further or closing remarks.

Thanks, Hope. And I just want to thank everybody for their participation today and we look forward to speaking with you in July with the second quarter results. Thank you.

Thank you. This does conclude today's conference call. You may now disconnect.