Good morning, and welcome to State Street Corporation’s Fourth Quarter and Full Year 2021 Earnings Conference Call and Webcast. Today’s discussion is being broadcasted 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 the expressed written authorization from State Street Corporation. The authorized broadcast of this call will be housed on the State Street website. Now, I would like to introduce Ilene Fiszel Bieler, Global Head of Investor Relations at State Street.

Good morning, and thank you all for joining us. On our call today, our CEO, Ron O’Hanley, will speak first. Then Eric Aboaf, our CFO, will take you through our fourth quarter and full year 2021 earnings slide presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterwards, we will be happy to take questions. During the Q&A, please limit yourself to two questions and then re-queue. Before we get started, I’d like to remind you that today’s presentation will include results presented on a basis that excludes or adjusts one 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. 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 and in our SEC filings, including the risk factors in our 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 Ron. Ronald O’Hanley: Thank you, Ilene, and good morning, everyone. Earlier today, we released our fourth quarter and full year 2021 financial results. Before I review our results, I would like to take a moment to acknowledge the dedication and strong performance of State Street employees during the past year. These team members remain central to the continued successful execution of our strategy as we help to create better outcomes for the world’s investors. Together, we accomplished a great deal in 2021, including higher fee and total revenue generation, successful execution against both sales effectiveness and client retention goals that is driving…

Thank you, Ron, and good morning, everyone. Before I begin my review of our fourth quarter and full year 2021 results, let me briefly discuss some of the notable items we recognize in the quarter outlined on Slide 5. First, we recognize acquisition restructuring costs, most of which were related to CRD and whose integration is now complete. Second, we recognize the net repositioning release of $3 million, which consists of occupancy costs of $29 million as we continue to reduce our footprint and a release of previously accrued compensation costs were $32 million, as attrition picked up and we redeployed staff more effectively than anticipated. Third, we saw an opportunity to correct an imbalance in the competitiveness of our compensation program by accelerating expenses associated with certain deferred cash incentive awards. The impact of the acceleration increased expenses by $147 million in this quarter. This change will allow us to realign the mix of immediate versus deferred cash in our incentive compensation awards in future periods, which will make our pay practices competitive and enable us to better attract talent in an increasingly tight talent market. Our mix of deferred equity remains unchanged. Finally, you’ll see that in the fourth quarter also benefited from a $58 million gain on sale legacy LIBOR base securities previously classified as held to maturity. This sale and this quarters’ higher than usual tax benefits help to offset some of the deferred compensation expense acceleration I just mentioned. Turning to Slide 6, I’ll begin my review of both fourth quarter and full year 2021 results. As you can see on the top left of the slide, we finished the fourth quarter with strong revenue growth compared to 4Q 2020. 4Q 2021 fee revenue increased 4%, primarily reflecting strong growth in servicing fees, management fees…

[Operator Instructions] Your first question comes from Alex Blostein of Goldman Sachs.

Hey, good morning, guys. Happy New Year to both of you. So maybe we can start unpacking some of the guidance and I’m sure there’s going to be a good amount of follow-ups on the back of that as well. But maybe just starting with the fee guide, really zoning in on service and fees. State Street has obviously made a considerable amount of improvement in retaining clients and winning a business. So maybe help us unpack within the 2% to 3% growth for the year. What sort of contemplated from markets in terms of the benefit of the 5% that you guys highlighted earlier? So how much is the market benefit versus net new business and pricing? And I’m assuming BlackRock is included in this guidance as well. But how much of a drag in this service and fee revenue you guys expect from loss of the BlackRock mandate?

Alex, it’s Eric. Happy New Year to you, too. Let me cover fees and then servicing fees, which I think is where your focus. Our guide for total fee revenue is up 3% to 4% for the year, our guide for servicing fees up 2% to 3%. And obviously, that includes about a percentage point of headwind from foreign exchange. So in effect, the servicing fees are up, for example, 3% to 4% in our guide, adjusted for currency translation. If you think about the drivers, we’ve factored in all the known events, both our growth, our installations, net new business and so forth. If you want to peel it apart a little more deeply, we start off at a good equity market level and we expect some year-on-year growth from equity markets, that’s probably worth about 2 percentage points of a tailwind to growth. Flows and client activity, which – variable is probably worth another percentage point and part of our kind of fee structures. Net new business is – continues to tick up. We expect core net new business to be up 2%. And that obviously includes all the new onboarding, offset by any attrition. So that’s on a net basis. And then obviously, there’s just the usual, 2%, grind down of pricing. And that kind of gets you to the low end of our range. We think there’s some upside, which is why adjusted for currency, the servicing fee guide is in the 3% to 4% range. And what it does is, it represents the continued acceleration of our business towards our medium-term targets, which are really in the 4% to 5% range.

Great, that’s perfect. And just maybe staying on the topic, but looking at the expense side of the P&L, the 1.5% to 2% growth, I think, is contemplated on obviously the fee outlook that you’ve just outlined. If we are in a tougher equity market backdrop, and let’s say, you guys don’t hit the 2% to 3% servicing fee growth, or the 3% to 4% fee growth. What is sort of the bookends around the expense growth trajectory that that will continue this year? So in other words, like in flat equity markets, should we expect you to be below the guide on expenses, given there’s maybe more flexibility or kind of the range is the range and the revenue will be more kind of working independently?

Alex, that’s a fair question. And you can see that part of the way we create some, I’ll call it insulation for ourselves as we think about equity markets and where they might go, whether it’s up a lot of modestly flat or down, is that we’ve designed our plans with a view that we should and intend to deliver a couple points of operating leverage, and actually a couple points of fee operating leverage, right? That that couple of points gives us some flexibility to handle some variability in the – in what happens in actuality in equity markets. I think, certainly will move within our range based on what we see. Obviously, if we see a market – an equity market correction of down 5%, or down 10%, we’ll do everything we can to come in below our range. And certainly, we can flex in this business, a full point can be flexed. It’s not easy, but it can be flexed. And that would be the approach that that we take. But we’re confident with kind of the level of equity markets they are today. Part of this – part of what we see is fairly – a fairly nominal uptick in equity markets. So we think there’s a good kind of middle of the fairway plan, but we’ll certainly flex it, we, to the extent that we can.

That’s great. Thanks very much for the color.

Sure.

Your next question comes from the line of Jim Mitchell with Seaport Global.

Hey, good morning. Maybe you could just talk a little bit about the BBH. I appreciate the discussion around the increase in EBIT from rates, how much is that? Can you speak to their off-balance sheet sweep, deposits, maybe update us on the level of that? And how you think those act at a rising rate environment in terms of the sweep fees is pretty similar to the spread on deposits?

Jim, it’s Eric. The business that Brown Brothers has run on the investment services side is performing well. So what we’ve seen is, with the higher equity markets, we’ve seen their servicing fees come in a bit stronger for this coming year. I think that deposits both on-balance sheet and the swept ones are within the range of what we’ve seen. And I think we describe those as bit under $10 billion on-balance sheet and a bit over $65 billion swept and they’re coming in right around that range. And that’s our expectation for 2022. The – both the on and off-balance sheet do have a good translation into higher revenues as rates move up. And the on-balance sheet betas are similar to ours. And we’ve – we had very nice betas in the early part of the last rate cycle and expect to have that again on ours and on there. And then the off-balance suites also have betas. They’re not quite as strong as deposits, but they’re in the range actually and that also will provide some very nice, I think, fee growth as we take on that business.

Okay, great. And then maybe just pivoting to the asset management business, you had record flows, strongest flows in many years. Can you just describe where the biggest drivers of that growth are coming from? What you’re doing to enhance that growth? And is this more just the environment’s grade? Or do you think there’s some sustainability to that inflow? Ronald O’Hanley: Jim, it’s Ron. Let me take that. I think that the growth is reasonably broad-based in the sense that it’s, firstly from our investments – an ongoing investments in the ETF business. So you saw lots of strength in the core SPDR offerings, which are really instruments of choice for the – for large institutional investors and good growth in areas where we invested active ETFs, fixed income, the low-cost ETFs or non-U.S. So we expect to continue to see a good performance there, particularly as we’ve worked to solidify our position with institutional investors. Secondly, in the institutional – in the traditional institutional space, the team’s done a lot of work in developing products that are companions to the core index business. We have a great client roster, and we’ve seen some diversification in the – in that business. Then finally, we’ve got a great cash business. And obviously, it ebbs and flows as cash does itself, but will also benefit a little bit from rising rate environments as is the remainder of the fee waivers goes away. So it’s really across the board.

Okay, thanks for the color.

Your next question comes from Steven Chubak with Wolfe Research.

Hi, good morning. So first, Eric, I just wanted to unpack some of the NII – the assumptions underpinning some of the NII guidance. I was hoping you could just share some insights in terms of what you’re contemplating as the Fed initiates QT in terms of just deposit flight broadly, or deposit runoff, and maybe deposit remixing kind of non-interest bearing deposits. And just in terms of spot rates, where you’re reinvesting today versus the bank book yields?

Steve, it’s Eric. Let me do that in reverse order. I think the front book and the back book are starting to converge in the investment portfolio. And you’ll see that our investment portfolio yields took a – another small tick downward this quarter in fourth quarter. But starting in first quarter, we’ll see that relatively flat and then you’ll see a slow progression upward. So we’re comfortable with where we are in terms of long rates. And obviously, the higher the loan rates come in, the better off, we’ll be. The NI uptick for this year and then let me get to the question around balances and quantitative tightening, I think, is just comfortably dependent on the Fed increases. I think we’re showing 10% to 12% expectations in NII, low more than half of that is off of rising short-term U.S. rates, about a little less than a quarter is off rising non-U.S. short-term rates, and then the last portion is off of the rise in long rates. So, we’re really geared towards the front end rates, and then that flows through directly to balances. For deposit balances, we currently expect U.S. and international deposit balances to be flattish, I’d say this this year. And I think we’re all wrestling with what’s the pace of the Fed’s actions in terms of rising interest rates. When does that start? And then when did they start with the – with some amount of quantitative tightening? And I think it’s just helpful to book in this. There has been a lot of discussion about quantitative tightening over the last week or two. Certainly, it will happen. If you go back to the last cycle, which was just three, four years ago, so not a long time away, quantitative tightening started two years…

Oh, thanks for that context, Eric. And just for a follow-up on how you’re thinking about capital management. You spoke about reinitiating the buyback beginning in 2Q. I was hoping you can give us some context as to like what level of payout you’re planning as we look ahead to 2022 to 2023. And just in terms of future changes to the capital regime, any guidance you can provide on the impact of SACCR or and preliminary thoughts on the impact of upcoming changes under Basel IV regime would be really helpful. Ronald O’Hanley: Sure. There’s a lot there, Steve, in your question. So let me take it kind of from the near end timeframe to further out. We’ve – I think we’re pretty comfortable with our capital guidance that will be at the low end of our 10% to 11% range for CET1 in the first quarter. That includes both the SACCR being implemented and the consummation of the Brown Brothers acquisition. So, that I think will carry us through at the low end of our range for the first half of this year. And we – we’re, I think comfortable with both of those. As we go through the year in the second quarter, we’d certainly like to start the buyback. We’ll see at what pace the pace of a buyback start will depend on the kind of the exact capital ratios as we hit first quarter and then second quarter. We’ll see how OCI swings either positively or negatively. And so I think that then sets us up to start buying back stock in second quarter and then proceeding at pace in the third quarter, fourth quarter and beyond. And then I think at that point, we’re back to trying to, or we’re not trying, but operating…

That’s great a color. And just quickly, can you – did quantify the impact from SACCR just so we could start to reflect that in our models?

Yes. I didn’t in the prepared remarks. But the rough amount, we carry typically about $115 billion of RWAs, it was a little less this quarter. SACCR is – will cost us in the first quarter, just over $10 billion. And we’ve got offsetting actions worth about half of that – about half. So call it around $5 billion. So I think net basis, it’s probably worth about $5 of RWA. But as I said before in my prepared remarks, this has all been factored in to our capitol guidance that we gave back over the last several quarters, and we’re confirming and affirming that we’ll be within our ranges in the first half of the year.

Understood, Eric. Thanks so much for taking my questions.

Sure.

Your next question comes from Gerard Cassidy with RBC.

Good morning, Eric. Good morning, Ron. Ronald O’Hanley: Hey, Gerard.

Eric, can you give us some for the color on, you gave us good detail on the servicing fee growth, and how you expect to see that 3% to 4% grow this year with some new inflows, as you pointed out, but also from some equity improvement in the markets. I think you said about 2 percentage points of that number. When you take the – when you look at the equity portion, how important is the U.S. markets versus and EMEA and the other markets? Can you kind of give us a flavor, is it generally geared toward the U.S. markets that drives your growth?

Gerard, it’s Eric. It’s really a mix, I think, maybe almost if I just think about the ranges, it’s a bit under half, that’s thrown by U.S. markets closer to probably, I don’t know, a 30ish European markets and then Australian emerging markets just because of the, in some cases, the higher fee rates is also important, that could be worth 20%, 25%. The other, as you remember, we have part of our book is fixed income assets that we service. And so, that’s why equity market tailwinds effect part of our book, but not all of our book in rising rates, we’ve thought the opposite effect in – on the fixed income side. What I – just as we from a planning purposes as we go into the year, though, on a point-to-point basis or if we were to stay flat from now through the end of the year versus the average of last year of 2021, that in and of itself should give us at least point and a half of servicing fee lifts. And then what we’re talking about is whether the point-to-point growth from December 31 to – 2022 December 31, can give us that extra half a point. So, I think that’s how you get the roughly 2 percentage point tailwind that we expect, somebody has in a way baked in assuming markets don’t go down. And then a smaller piece is coming from some modest appreciation.

Very good. And then as a follow-up, you discussed it at your peers about the expectation of rising interest rates – short-term rates, Fed fund rates in 2022. Can you share with us the duration of the fixed income portfolio? And what rates should we watch carefully that would impact the AOCI, meaning, the mark-to-market would be negative for the portfolio?

Yes. We – the duration of the investment portfolio, we inch down this quarter, you could have seen that in the NII slide that we had, I think, we’re at about 2.9 years. So, trended down a bit from the last quarters – last couple of quarters. And right now, we’re a little more comfortable. We’ve been investing in the belly of the curve, kind of a two to five-year range. I think the 10-year up through 2 percentage points is quite comfortable for us, including from an OCI management standpoint. I think if you get good bit of buffs, 2 percentage points on the 10-year, you kind of have a – you got a double effect. On one hand, you get an OCI ahead, which obviously creeps back over time. So it’s temporary. And the other hand, you celebrate higher rates flowing through the investment portfolios over the coming quarters. So, I think it’s mix, but net positive if we have some sort of spike at the back end. But it would affect just the mechanics of how we operate quarter-to-quarter on the margin.

I appreciate that. Thank you, Eric.

Thank you, Gerard.

[Operator Instructions] Your next question comes from the line of Rob Wildhack with Autonomous Research.

Good morning, guys. You had another good quarter of loan growth here with average loans up 7.5% sequentially. What were the drivers there? And how sustainable do you think that is into 2022?

Rob, it’s Eric. Loan growth has been good for us the last, say, couple of years, to be honest. I think we’ve comfortably driven loan growth quarter after quarter, up in the low double digits on a year-over-year basis. This quarter, we continue to see good client demand, but we also shifted some – we also added some CLOs in loan form, as we reduced the CLOs and securities form from the investment portfolio. So, there was a bit of a shift. That said, I think, in general, what we’re comfortable doing is continue to grow poor loans, because that’s – we won’t always have a shift every quarter, this is more episodic, just as we rebalance and think about stress testing and how to operate efficiently with our multiple constraints. But we’re still comfortable, continue to grow this loan portfolio in the low double-digit range, it won’t happen every quarter. There’s a little bit of seasonality, but we continue to see quite strong demand from our alternatives clients and private equity capital call financing. We see demand in some parts of the alternative and real estate markets that we play in. And the biggest focus I’d say is as we lend more and deploy capital to our clients, a lot of what we do is work with them and make sure that’s part of a broader relationship because that’s where it really is renew motive for us and for them and helps us grow the – helps us build the reputation and the momentum to build the fee line as well.

Got it. Thank you. And then turning to expenses and operating leverage, the outlook implies maybe a 2 percentage point delta between fee growth and expense growth, but it also bakes in plus 5% or 6% from investments and variable costs. Do you think of that is still an elevated level of investment? And there’s some more operating leverage available longer-term? Or is this kind of the required level of investment going forward?

It’s hard to forecast the future. The amount of investments is partly around what’s table stakes in the marketplace and partly around where do we see opportunities to differentiate our offerings. And clearly, you’ve seen us invest in particular in Alpha, in the front office and Alpha that spans into the middle and back office. And we’re also finding opportunities in the back office to invest through sort of feature functionality enhancements and custody in some areas of accounting, which also is attractive in segment by segment. So it’s hard for me to say, what’s the necessary amount of investments, we think there’s a range. We think last year, we probably invested a bit less than this, probably, instead of 5% to 6%, I’d say, there was probably a 0.5 less of investments during 2021. So I think what you’ll see is, you’ll see us flex the amount of investments from one year to the next. I think what we’re conscious of is that confidence in investing should come from seeing the revenue growth and seeing the revenue growth from past investments. And that’s what we’re seeing. We’re seeing the revenue growth on the past investments that we’ve made across the franchise, and I think that gives us the confidence to continue to carefully invest in some cases, accelerate that, but I think in in modest ways. I think the other part of our culture has been to – at the same time as we invest, find productivity and savings. And that’s – we think that’s an important part of how to run a business, but certainly a business that over time, we’re digitizing and automating should come with productivity, savings and engineering. And I think the other part of our business processes, and I think you hear this from our senior executives, the more we can drive in productivity saves, the more we feel comfortable in investing, and that’s a very – that’s a virtuous circle.

Yes, that’s helpful. Ronald O’Hanley: Rob, what…

I’m sorry, Ron, go ahead. Ronald O’Hanley: What I would just add to that is that it’s actually good news that we’re seeing opportunities to invest in the business. Because particularly as we’ve built out the Alpha platform, which was originally aimed at the asset management space in the traditional asset managers, we’re now starting to roll out Alpha for private markets. So it’s good that we’re seeing the opportunities. But I would underscore Eric’s point that notwithstanding that goodness, what we’re focused on is continuing to eke out higher and higher productivity. And we see more opportunities there. So we see the ability of this virtuous cycle to continue for quite a while longer. And the fact that there are investment opportunities, is actually a good thing, because it shows that notwithstanding the narrowness of our, where we operate, there’s plenty of places to grow.

Got it. And fair to characterize it then that this level of investment maybe last year and this year gives you the capacity and the room to play both offense and defense? Ronald O’Hanley: Yes.

Great. Thank you.

Your next question comes from Glenn Schorr with Evercore.

I like that Ron’s. Question, on the deferred comp acceleration, I’m just curious, what level employ we – are we talking? And I’m asking because the deferred portion, obviously, you saying to get practices more competitive. So that is – that presumes that you are different more than peers and that going forward, you have a higher cash piece going forward. I’m just curious on, it’s probably included, obviously, in your expense guide, but what’s changing here and what why was well sticking? Ronald O’Hanley: Yes, Glenn, for the – the employees that are going to feel this would be our – not our most senior employees, it would be kind of the middle senior, lower senior, if you will, and down. So in our parlance, AVPs, VPs, MDs and some of the Senior Vice Presidents will fear.

Okay.

And then, Glenn, just to give you a context, the – we’ve made this change, we had made one change five years back, and I think this now gets us to be competitive with the marketplace. And the way to the content – the facts that might help a little bit is way back when we had immediate cash in the 30% range of compensation for the average employee, the deferred cash was 40% and the equity, the deferred equity was 30%. That was a place that was completely out of market. We fixed about two-thirds of that five years ago and got to 50% immediate cash, 20% deferred cash, and 30% deferred equity. And now we’re – with this final change, we’re going to take that up to the immediate cash to 60% to 65% deferred cash to just 5% to 10%, mostly for the most senior folks and then the deferred equity stays at 30%. So we think we’re now in line with the market as part of this change. What does happen is you’ve got to crystallize some of the – some of these deferrals into the P&L in the current period. And then what that allows us to do is going forward to add to the cash mix. And because we’ve crystallized the previous deferrals, those don’t hit the P&L in the future, but the new cash will hit the P&L in the future. So this will be neutral to subsequent periods on the expense line.

Okay. Thank you. Very helpful. The one I was going through your four objectives, Ron, and the first three, I think, are straightforward, and I think everyone has high confidence in your ability to do those. I’m curious on the how to and what you’re doing, what you’re going to measure? And number four, which was the must be a higher performance oriented organization, just curious how you talk to us – how you can execute on that? Ronald O’Hanley: Yes. So I mean, this is an ongoing objective of ours, Glenn, and it really is around performance culture. And if you think about culture, which is a very used and sometimes maligned term, for us, it’s about desired behaviors. And on the flip side, kind of eliminating undesirable behaviors. So what we’re focused on is those desirable behaviors, all those – all related to kind of driving performance. I would argue that it’s even more important now than when we started a couple of years ago, because on top of everything else that we need in terms of serving our clients and serving our shareholders, we’re now operating, we’re now all operating in this hybrid world for the foreseeable future. That puts a burden – new burdens and new requirements on managers, particularly middle managers. So it’s all about being able to eke out the benefits, which are considerable in a hybrid world in terms of employee flexibility and some real estate cost savings and those kinds of things, but at the same time, making sure that we’re continuing to deliver where we are. So we think about performance in terms of – and we think about culture and high performance in terms of behaviors.

Excellent, Ron.

Your next question comes from Brennan Hawken with UBS.

Good morning. Thanks for taking my questions. I wanted to circle back, Eric, I believe, just wanted to kind of clarify some of the points you made. I think you talked about BBH and the EBIT growth expected to accelerate here in 2022 up to 25%. So just to make sure I’m level setting correctly, you also talked about some strengths in servicing, it’s not all NII. That 25%, should we apply that to the $375 million that you provided previously, when you announced the deal? Or did that actual number shift from expectation? And am I using the right baseline? And then for the other disclosures you provided around the revenue and whatnot, should we – did those shakeout in line with expectations? Or did they work out to be a little better, as you alluded to? And how should we think about that baseline when we think about three quarters of a year here for them?

Yes. Let me – fair questions, Brennan. It’s Eric. We had, as you remember, accurately estimated their 2021 performance to be EBIT of about $375 million, and they came in right around that level. So we’re comfortable with that as a base case. And if you recall, we had shown 17% growth from 2020 to 2021 in our – in some of our documentation, as we announced, the Brown Brothers Investor Services acquisition. From a deal model perspective, at the time, we had expected off of the 2021 base to grow at about 15%. So, in line with the past part of that was the the equity market tailwinds continued to play through, and part of that was just good business performance, the – our Brown Brothers colleagues and investment services really tried a nice set of initiatives each year to try grows, client activity, and so forth. And what we’re finding now, it’s because of the equity market step off in the interest rate environment, and we expect to be roughly at about a 25% EBIT growth from 2021 to 2022. I think a portion of that is the – is on the equity – is on the servicing fee line, a portion that is on the fee line that comes from the sweeps, remember that comes through the feeds as well. And then a portion is from on-balance sheet NII, and I don’t have the pieces handy. But clearly, the interest rate tailwind is probably the more significant of those factors, and that’ll affect both the on-balance sheet and the sweat deposits.

Okay, great. Thank you for that clarification. And then a separate issue. From my second question, it looks like there’s a transition of leadership, seems like Cyrus is retiring in the asset management business. That’s been a business where there has been both speculation and open discussion with you all in the past about strategic direction and whatnot. What does the transition in leadership present as far as an opportunity to shift strategic direction? And what can you let us know about your updated thoughts on that business and whether or not a leadership transition is impacting the direction you want to go? Thanks. Ronald O’Hanley: Brennan, I mean, as you can maybe see from our results, we’ve invested in that business. Over the years, the investments are paying off. We’d like the business. It’s very complimentary to the core servicing business, having one of the largest asset managers, also as our client of our core business has been able to let us have a bit of an R&D laboratory. There’s client overlap in certain segments like asset owners and sovereign wealth funds, that we’ve gotten better and better at it leveraging. So we’d like the business. We intend to stay in the business. Under Cyrus leadership, they’ve done a great job, and the numbers speak for themselves there. So I wouldn’t expect to see a broad strategic change here. Certainly not in that direction I just outlined. I mean, there’s always opportunities to do more and do better in all of our businesses. So we’ll want to continue to do that. We’ve got a very strong talent base there, but this is an attractive business and one in which we will look inside and out and get the right person to take us to the next level here, but we have full intention of continuing to plan and grow that business.

Okay. Thanks for taking my questions.

Your next question comes from Mike Brown with KBW.

Hi, good morning. Thanks for taking my question. So I appreciate the update on BBH and the – you made outlook there. And I guess as we move closer to that closing date, I was just curious that the change in the EBIT outlook in the operating environment, does that actually trigger any increase in the total consideration that will need to be be paid? Obviously, the implied valuation would be lower than at announcements. So that was just one thought that crossed my mind. And then the follow-up there is, can you just remind us of the unexpected fee synergies specifically, which ones do you feel confident that you can deliver on sooner after the close versus the one that will take more time to come through? Thank you. Ronald O’Hanley: Yes, Mike, why don’t I start that and I’ll turn the synergy part of the question over to, Eric. But no, there’s no contingencies in the purchase price either up or down other than than the usual ones that you would expect in terms of risk management. So no, there’s no additional payment that will be due here.

And, Mike, it’s Eric. Just on the synergies, I think each one of them has a cadence, some of which we did spell out I think on the cost synergies, which is the opportunity, and that’s obviously sometimes will come out of there base of expenses, sometimes our base of expenses, as we put the two together. We had estimated about 40% of our cost synergies would come in, in year one, and then the balance, year two and three, and that’s probably the single largest area. In terms of the the fee synergies, the balance sheet actions should come through relatively quickly. We can modulate the amount of swept versus on-balance sheet deposits, because we’ve got the capital resources plan for that. And I think that’s one of the ways that we create real value./ And then the last one on the fee revenue synergies. Now some of the FX kind of markets, synergies come in a little more quickly, right, because it’s about offering a broader set of, say, FX products on which were more capital intensive than simple swaps forwards, that is more about setting up clients, and then quickly being there for them. And then some of the servicing ones take a little longer and part of the sales cycle, but I think there’s a good mix. And obviously, as we work on closing and bring Brown Brothers in, part of what we’ve been doing is, as you expect kicking the tires on what are the opportunities, how to go the next round of definition on those, so that we can hit the ground running. And as I said, when we announced the deals, we’d like to meet or exceed our targets. And I think the exogenous market, tailwinds are part of that, but we’d also like to do it on through old fashioned execution as well.

Okay, great. Appreciate the color there. And maybe just one last one, just a quick clarification. Apologies, I missed. But did you quantify that discrete tax benefit? Or is the best way to think about that is just back into it after considering your typical tax rate?

It’s – I wrestled, Mike, with that, because there were actually a series of tax benefits that came through this quarter, there was some closing of the previous year tax books, there were some foreign credits that accrue in those jurisdictions, which then help our GAAP taxes, and then there’s some foreign credits that then kind of map back into the U.S. as a tax payments as deduction. So there’s a series of them. I think the best way to do it is to probably take our full year tax rates are typically in the 17% to 19% range. So, you take the midpoint of that, think about full year this year now with this – with these discrete, which were more elevated than usual in a good way got us to closer to 15% tax rates. I think the difference is probably the – you might call the lumpy piece. What I do – what I would though also notice that I think tax planning has been the kind of thing that we’ve done for many years. We do it. We’re always on the bright side of the line, and we do it carefully. We – part of it being an international bank. We, like other international banks, are able to do some a modest amount of tax planning. And so you’ll see it, I think it’s – we see that come through the P&L annually, it just tends to be a little lumpy quarter-to-quarter and it was a little more lumpy, good than usual this particular quarter.

Okay, understood, I appreciate. The taxes are always complicated subject. So thanks for the color there, Eric.

Sure. Thank you, Mike.

Your next question comes from Brian Bedell with Deutsche Bank.

Great, thanks. Good morning. Maybe circle back on the deposit opportunity for BBH. Just to clarify, I think you said there’s right now $10 billion of deposits set on the balance sheet at BBH and then $55 million additional in the sweep program. And I think initially, you’re planning to bring about a total of $20 billion, inclusive of the deposits on the balance sheet over to, say, if you convert, initially, I think $14 billion was the conversion to get you to $20 billion. Maybe if you could just update us on the plan for 2022, if you do close at quarter-end in the first quarter of what you’d like to bring on? And then maybe just talk more strategically about what – maybe what kind of portion of that sweep opportunity you might bring on to on the balance sheet, I guess capital submitting?

Hey, Brian, it’s Eric. I think you have a good estimate of those just for the broader group, I think we said about $5 billion to $10 billion are on the balance sheet today. About $65 billion are off-balance sheet and swept. And as we consummate the acquisition, and we’re targeting the first quarter, we said it – at the end of the first quarter, we’re targeting, we said it could be in the second quarters, this stuff just takes time. We’ll – we’re looking to bring on the $5 billion to $10 billion that they have on the balance sheet, and probably another 10ish or so, that is swept. I think over time, the question is really, at what interest rate levels do we operate at if we’re at prevailing short rates of 50 basis points, let’s say, then on balance sheet deposits aren’t terribly attractive. But when you hit prevailing rates of 100 bps, or 200 bps, and obviously, you can do this across different currencies, then you’re more inclined to bring more on balance sheet. And so we think of it as a range. I think we also, though, are quite – we want to be quite thoughtful about maintaining a program that, that works. It works well, for our clients, and the Brown Brothers Investment Services clients. It works well for a number of global financial institutions, that they have relationships with that they sweep, primarily dollar deposits to who appreciate those deposits. And so we certainly want to maintain the program for suites, want to maintain it in size. But you can certainly see swings of another $10 billion beyond the initial move potentially. But we’re – I think we’ll see when we get there. And part of it will be discussions with the clients themselves on one hand, and part of it will be the with the counterparties. And I think there’ll be goodness and opportunity here in most circumstances.

That’s great color. And maybe just this segue to second question on deposit beta expectations. I think you mentioned, you thought they might be the similar to the last hiking cycle, just to confirm that. It seemed like it moved around a bit during the cycle, but kind of ended up around, it looks like a little over 30% of its deposit beta relative to Fed funds rates at the time. I don’t know maybe if you can clarify that and if you think that would be similar this cycle and obviously, if you would – you’d be treating those BBH deposits in a similar fashion or do they have a different profile?

Sure, Brian, and it was actually a good opportunity as we see rates rise and the likelihood of Fed funds, but we did get a chance to go back and revisit what we both said and what we saw in from a deposit beta standpoint back in 2015, 2016, 2017. I do expect the Brown Brothers deposits behave similarly to ours. They are primarily with asset managers. They are currency by currency similar to ours. But if you go back, and I think we were good about disclosing our quarter-on-quarter interest-bearing deposit betas, and usually you have to do it by currency, right? So, because of how the betas play through. But in the first rate, the first one or two rate hikes, we saw and expect, again, to see deposit betas and, call it, 10% range, maybe 10% to 15% range, but it’s quite low. When you get to the third, fourth or fifth hike, you’re in the 30% range plus or minus some as you like into the rate cycle. And it’s really, when you get in the past, they’re in the fifth, sixth, seventh hike, where you’re likely to get closer to 50% interest-bearing deposit betas. Now, I’d like to get there. I – we’d be pleased with with 50% if we get there with that level prevailing rates. But there’s – I think there’s a good opportunity here, because in truth, we’ve been quite limited in our ability to earn NII that covers our cost of capital. And so a lot of this is just catch up in a to a levels that are more in line with the long-term averages.

That’s great color. Thank you.

There are no further questions. I’ll turn the call over to Ronald O’Hanley for closing remarks. Ronald O’Hanley: Thank you, operator, and thanks to all on the call for joining us.

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