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DATE
Tuesday, July 15, 2025 at 12 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Ron O'Hanley
Interim Chief Financial Officer — Mark Keating
Head of Investor Relations — Elizabeth Lynn
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TAKEAWAYS
State Street Corporation(STT -7.29%)
Earnings Per Share (EPS): EPS was $2.17 in Q2 2025, up from $2.15 (GAAP) in Q2 2024, while EPS excluding notable items grew 18% to $2.53.
Total Revenue: Excluding notable items, total revenue increased 9% year-over-year; fee revenue rose 12% year-over-year.
Operating Leverage: Achieved a fourth consecutive quarter of positive fee operating leverage and a sixth consecutive quarter of positive total operating leverage, excluding notable items.
Pretax Margin and ROTCE: Pretax margin approached 30%, and return on tangible common equity was approximately 19%, both excluding notable items.
Expenses: Expenses rose 6% year-over-year, with about half attributable to higher performance and revenue-related costs, plus unfavorable currency translation; ongoing investments in technology and infrastructure accounted for the remainder.
Notable Items Impact: Recognized $138 million of notable items pre-tax, including a $100 million repositioning charge tied to the severance of roughly 900 employees and about $40 million of notable items related to a client contract rescoping.
Assets Under Custody and Administration (AUCA): AUCA reached a record $49 trillion, up 11% year-over-year due to higher period-end market levels and client flows.
Assets Under Management (AUM): AUM exceeded $5 trillion for the first time, increasing 17% year-over-year, with net inflows of $82 billion.
Servicing Fee Revenue Wins: Secured $145 million in new servicing fee revenue wins and two new State Street Alpha mandates.
To-be-Installed Servicing Fee Revenue: Backlog of $441 million in to-be-installed servicing fee revenue, the highest on record, with about half expected to install in 2025.
ETF Trading Volumes: U.S. ETFs achieved $4.6 trillion in trading volume, leading the industry in equity and commodities, and ranking among the top three in fixed income.
FX Trading and Securities Finance Revenues: FX trading revenue rose 27% and securities finance revenues increased 17% year-over-year, each excluding notable items; prime services fee revenue advanced 29% year-over-year.
Software and Processing Fees: Software and processing fees grew 19% year-over-year, with front office software and data revenue up 27% year-over-year, excluding notable items, mainly from CRD wealth client renewals.
SaaS Recurring Revenue: Annual recurring revenue from SaaS increased about 10% year-over-year to $379 million.
Net Interest Income (NII): NII was $729 million, down 1% year-over-year, mainly due to lower average short-end rates and deposit mix, but up 2% sequentially from Q1 2025.
Deposit Balances: Average deposit balances rose 7% sequentially, reflecting early-quarter macro uncertainty that subsided through May and June.
Capital Return: Returned $507 million to shareholders (comprised of $300 million of share repurchases and $217 million in dividends), with an 82% payout ratio.
CET1 Ratio and LCR: Standardized CET1 ratio at quarter-end was 10.7%, down roughly 30 basis points sequentially; State Street Bank’s LCR stood at 136%.
Dividend Increase: Announced intention to raise the quarterly common stock dividend by 11% to $0.84 per share, pending board approval in Q3 2025.
Full-Year Outlook Update: Management raised 2025 total fee revenue growth guidance to 5%-7% (from 3%-5%) and full-year expense growth guidance to 3%-4% (previously 2%-3%), both excluding notable items (non-GAAP).
Productivity Initiatives: Over the past three years, delivered more than $1 billion in expense savings, largely from productivity initiatives; on track to achieve over $1.5 billion in expense savings by year-end 2025, toward a $500 million 2025 target.
Investment in Technology and Efficiency: Continued operating model transformation prioritized, with over $150 million in year-over-year expense savings generated and approximately $250 million year-to-date toward the annual goal.
Alpha Platform Adoption: Added two new Alpha mandates totaling $380 billion AUCA and converted three Alpha installations.
SUMMARY
Management emphasized sustained growth in core fee-based businesses while maintaining expense discipline through substantial productivity initiatives. Executives highlighted that net interest income remained roughly flat compared to last year’s record in the first half of 2025, despite sector headwinds from lower global interest rates. Enhanced operating model investments—including AI and platform scaling—were identified as key drivers of further efficiency and long-term value creation.
Ron O'Hanley stated that the expanded scale and client relationships in the Alpha platform and back-office sales are essential to driving recurring fees and ancillary revenue streams.
U.S. low-cost ETF products achieved notable market share gains, supported by innovation in defined contribution offerings such as income protection embedded in target date funds.
State Street announced a strategic partnership with the University of California to pilot a “super app” for individual stakeholders, aiming to test scalable offerings for wealth democratization.
Management reiterated that capital return is prudently managed toward the high end of the 10%-11% CET1 target range, with incremental payout increases expected in H2 2025 subject to market conditions.
Executives confirmed the repositioning charge for severance of approximately 900 employees is expected to produce expense savings primarily in 2026.
FX volatility in April was a major contributor to quarterly activity spikes; subsequent deposit normalization aligns with expectations for a progressive moderation in coming months.
Management clarified that recent client contract rescoping was limited in scope and did not impact servicing fee revenue backlog or AUCA to be installed.
Tokenization of assets was described as a strategic opportunity, with anticipated acceleration as regulatory frameworks progress globally.
INDUSTRY GLOSSARY
Alpha mandate: A fully integrated front-to-back investment servicing solution leveraging State Street’s Alpha platform, encompassing data aggregation, analytics, and workflow automation for institutional clients.
CRD (Charles River Development): A subsidiary of State Street providing front and middle office investment management software solutions, integral to the Alpha platform.
Servicing fee revenue to be installed: Contracted, but not yet implemented, annual recurring fee revenue pending client onboarding for asset servicing solutions.
SaaS (Software as a Service): Cloud-based delivery model for software solutions allowing clients to access and utilize applications on a subscription basis rather than via traditional on-premises installations.
CET1 (Common Equity Tier 1): A regulatory capital measure reflecting the highest quality core capital that a bank holds in its capital structure, critical for regulatory compliance and financial stability.
Full Conference Call Transcript
Operator: Good afternoon, and welcome to State Street Corporation's second quarter 2025 earnings conference call and webcast. Today's call will be hosted by Elizabeth Lynn, Head of Investor Relations at State Street. We ask that you please hold all questions until the completion of formal remarks, at which time you will be given instructions for the question and answer session. Today's discussion is being broadcast live on State Street's website at investors.statestreet.com. This 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 part or in whole without the express written authorization from State Street Corporation.
The only authorized broadcast of this call will be housed on the State Street website. Now, I would like to hand the call over to Elizabeth Lynn.
Elizabeth Lynn: Thank you, Operator. Good afternoon, and thank you all for joining us. On our call today, our CEO, Ron O'Hanley, will speak first, then Mark Keating, our Interim CFO, will take you through our second quarter 2025 earnings presentation, which is available for download on our website investors.statestreet.com. Afterward, we'll be happy to take questions. 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 presentation. In addition, today's call will contain forward-looking statements.
Actual results may differ materially from those statements due to a variety of important factors, such as those referenced in our discussion today and in our SEC filings, including the risk factor section 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 view should change. With that, let me turn it over to Ron.
Ron O'Hanley: Thank you, Liz, and good afternoon, everyone. Before we begin, I want to take a moment to acknowledge the devastating floods in Texas. Our thoughts are with those who have tragically lost their lives and with the people and communities who have been affected by this event. Now turning to the second quarter, in a period characterized at times by significant financial market volatility driven by geopolitical and economic uncertainty, our strong Q2 results demonstrate the powerful and diversified nature of our franchise.
By advancing and leveraging our deep capabilities in technology and investment services, markets, and investment management, we continue to strategically position State Street as our client's essential partner and execute on our purpose to help create better outcomes for the world's investors and the people they serve. Disciplined execution of this strategic approach is delivering positive results, including accelerating financial performance and strong business momentum. For example, on a year-over-year basis, our Q2 results marked the fourth consecutive quarter of positive fee operating leverage and the sixth consecutive quarter of positive total operating leverage excluding notable items.
New business was strong, as we generated a near-record quarter for sales in investment services, surpassed $5 trillion in AUM at State Street Investment Management, and generated record FX trading volumes in Q2. This positive momentum reflects the strong strategic, operating, and technology foundation we have built over the past several years to support the long-term growth of our businesses. As we work to build on this progress, we remain focused on disciplined execution against our strategy, delivering consistent growth for our shareholders, and maintaining operational excellence in the service of our clients. Turning to slide two of our investor presentation, I will cover our second quarter highlights before Mark takes you through the quarter in more detail.
Beginning with our financial performance, we reported earnings per share were $2.17 as compared to $2.15 in the year-ago period. Excluding notable items, which Mark will speak to, fee and total revenue increased 12% and 9% year-over-year. We delivered positive fee and total operating leverage, increased pretax margin to nearly 30%, and achieved a 19% return on tangible common equity. While EPS increased 18% year-over-year, all excluding notable items. Turning to our business momentum, within investment services, we delivered a very strong sales performance this quarter, securing over $1 trillion in new AUCA asset servicing wins and generated $145 million of related new servicing fee revenue wins, including two new State Street Alpha mandates.
With this continued good sales performance, we remain confident in our ability to meet our full-year servicing fee and A wins target of $350 to $400 million for a second consecutive year. The second quarter marked an important milestone for our asset management business, which we rebranded State Street Investment Management. This new name reflects our commitment to investing in our relationships, innovation, and in the future. Among other benefits, this new brand name reinforces our one State Street approach that aims to leverage collaboration across our firm, expand product offerings, and deepen relationships with our clients. This moment for our investment management business came as period-end AUM exceeded $5 trillion for the first time.
Quarterly net inflows were over $80 billion, and we continued to gain market share in the strategically important US low-cost ETF market segment. The second quarter also offered further evidence of the strength and depth of our ETF franchise, as our US ETFs led the industry in trading volume, surpassing $4.6 trillion in total volume for the quarter, ranking number one in equity, number one in commodities, and among the top three in fixed income. State Street Markets is seeing the results of its efforts to deepen client relationships, and in Q2 clearly demonstrated its ability to support clients through volatile periods with deep liquidity and trading expertise, while also providing important diversification to our revenue profile.
Amid a constructive environment for our markets business, we saw significant year-over-year increases in both FX trading and security finance revenues driven by higher client volumes. Our FX trading business recorded its best quarter since 2020, and security finance revenues rose to the highest level since 2019. Turning to our balance sheet, our strong financial position enabled over $500 million in capital return in the second quarter, over $800 million year-to-date.
Our financial strength was further underscored by the results of the Federal Reserve's annual stress test in June, subsequent to which we are pleased to announce our intention to increase State Street's quarterly per-share common stock dividend by 11% to $0.84 beginning in the third quarter, subject to approval by our board of directors. As we look ahead, we remain committed to returning capital to our shareholders, subject to market conditions and other factors.
Elizabeth Lynn: Turning to our operational efficiency,
Ron O'Hanley: we have a well-established track record of expense discipline. This continues to be supported by a proven ability to generate productivity savings to fund investments in our business, which in turn is driving revenue growth and operating leverage. For example, over the last three years, we have generated over $1 billion of expense savings largely from productivity initiatives. And we anticipate that number will increase to over $1.5 billion by year-end as we continue to progress well against our $500 million expense savings target in 2025. Importantly, as we look further ahead, the next generation of our operating model transformation remains our priority and a key opportunity to add even more value for clients and shareholders.
The charge we as we drive further operational efficiency and unlock productivity gains over time supported by AI and continued platform scaling. To conclude, our first-half results build meaningfully on 2024. The second quarter included a number of strategic and platform milestones for State Street, offering tangible proof points that our strategy is delivering. Reflected in the continuing improvement in our financial performance and the strong momentum we're seeing across our businesses. These results underscore the strength of our franchise and the disciplined execution of our strategy by our teams.
As we look ahead, we have strong conviction in our strategy and in our ability to serve our clients well, underpinned by our distinctive value proposition, financial strength, and the next generation of our technology and operational transformation. With that, let me hand the call over to Mark, who will take you through the quarter in more detail.
Elizabeth Lynn: Thank you, Ron, and good afternoon, everyone. Picking up on slide three, before turning to our second quarter financial results,
Mark Keating: let me briefly walk you through the notable items we recognized this quarter. Notable items totaled $138 million pre-tax, or $0.36 per share, primarily driven by a $100 million repositioning charge associated with our ongoing operating model transformation. This action relates to the severance of approximately 900 employees and, as we noted in June, is expected to drive expense savings mostly in 2026 with a payback period of roughly four to five quarters. We also recognized roughly $40 million of notable items related to a re-scoping of an Alpha client contract along with a few smaller items as detailed on the slide.
Turning to slide four, excluding notable items, second quarter EPS grew a robust 18% year-over-year to $2.53 a share. Total revenue increased 9% and fee revenue increased 12% year-over-year, each excluding notable items, reflecting strong business momentum across the business.
Elizabeth Lynn: Expenses increased 6% year-over-year,
Mark Keating: excluding notable items. Approximately half of the year-over-year increase was driven by a combination of higher performance and revenue-related costs, associated with the more constructive revenue environment in the second quarter, and to a lesser extent, the unfavorable impact of currency translation. The remaining increase primarily reflects continued investments in the franchise, including technology and infrastructure. This performance enabled us to deliver meaningful fee and total operating leverage, with 526 basis points and 241 basis points respectively, excluding notable items. Accordingly, our pre-tax margin expanded to nearly 30% while ROTCE was approximately 19% excluding notable items. Turning now to slide five, AUCA reached a record $49 trillion, up 11% year-over-year, driven by higher period-end market levels and client flows.
AUM also reached a new record in the second quarter, increasing 17% year-over-year to over $5 trillion, reflecting higher period-end market levels and positive net inflows. Key market indicators reflected the dynamic operating environment in the second quarter, with higher period-end market levels and elevated FX volatility across both developed and emerging markets. Against this backdrop, our markets business performed well, supported by record quarterly FX volumes, as we helped clients navigate a shifting market landscape, which I'll speak to in more detail shortly. Turning to slide six, servicing fees increased 5% year-over-year, supported by higher average market levels, net new business, improved client activity, and the favorable impact of currency translation.
We were encouraged by the strong sales momentum in our investment services business this quarter, with $145 million of servicing fee revenue wins. These wins were well distributed across regions, with key new mandates in Europe and North America, and are closely aligned with our strategic priorities, particularly in core back-office solutions and private markets. Installations progressed steadily and as expected during the quarter. Onboarding our $441 million of to-be-installed servicing fee revenue, the highest on record, remains a key priority as we aim to drive consistent and sustainable servicing fee growth. In addition, we reported two new Alpha mandates representing $380 billion of our AUCA wins this quarter.
Our interoperable front-to-back Alpha platform remains a key enabler in deepening and expanding client relationships. Moving to slide seven, management fees increased 10% year-over-year, primarily reflecting higher average market levels and the benefit of prior period net inflows. For the quarter, net inflows totaled $82 billion, driven by solid performance across ETFs and institutional. In ETFs, we saw healthy inflows across the product set, including US low-cost, gold, SPY, and US fixed income. Our US low-cost offering achieved continued market share gains in the quarter, reflecting the strength of our strategic positioning in this segment.
As Ron noted, the market volatility in the second quarter further highlighted the deep liquidity of State Street Investment Management's ETF franchise, which led the industry in US ETF trading volumes. In our institutional business, we delivered a record $68 billion of quarterly net inflows, driven by continued momentum in retirement, including our strategically important US defined contribution business. Overall, we were pleased with the strong performance of our investment management business in the second quarter, which generated a pre-tax margin of approximately 33%. Turning now to slide eight, FX trading revenue increased 27% year-over-year, excluding notable items. This strong performance was driven by record client volumes, with solid activity across our trading venues, reflecting heightened FX volatility.
Securities finance revenues increased 17% year-over-year, with strong balance growth across both agency lending and prime services. Within our prime services business, fee revenue increased 29% year-over-year, supported by higher balances and continued momentum in client engagement. Moving to slide nine, software and processing fees increased 19% year-over-year in the second quarter, excluding notable items. Front office software and data revenue increased 27% compared to the prior year quarter, excluding notable items. This strong performance was primarily driven by higher on-premises renewals largely associated with CRD wealth clients. In addition, software-enabled and professional services revenues increased 10% year-over-year, excluding notable items, reflecting continued momentum in SaaS client conversions and implementations.
We are pleased with our ongoing success in transitioning clients to our cloud-based SaaS platform, with annual recurring revenue increasing by approximately 10% year-over-year to $379 million in the second quarter. Moving to slide ten, net interest income of $729 million was down 1% year-over-year, primarily due to the impact of lower average short-end rates and changes in deposit mix. These headwinds were partially offset by continued loan growth and securities portfolio repricing. On a sequential basis, NII increased 2%, supported by growth in non-US deposit balances, securities portfolio repricing, and loan growth, partially offset by the impact of lower average short-end rates.
As detailed on the right of the slide, the average balance sheet size expanded relative to Q1, driven by a 7% increase in average deposit balances. The sequential increase in average balances was partly a reflection of the more uncertain macro backdrop that we observed early in the quarter, which moderated through May and June. We remain committed to supporting our clients with our strong, highly liquid balance sheet. Looking ahead, while we expect deposit balances to remain somewhat elevated relative to our expectations coming into the year, we do anticipate that balances will continue to moderate over the coming months and quarters, subject to market conditions.
Turning to slide eleven, expenses increased 6% year-over-year, excluding notable items, as I mentioned earlier. Compensation-related costs were up 7% year-over-year, excluding notable items, mainly reflecting higher performance-based costs and the impact of currency translation, while total headcount was down slightly. Information systems and communications expense increased 11% year-over-year, excluding notable items, as we continue to invest in technology and infrastructure to modernize our platforms while enhancing data delivery and user experience. At the same time, we continue to execute on our productivity and optimization savings initiatives, which generated over $150 million in year-over-year savings during the quarter. Year-to-date, these efforts have delivered approximately $250 million of savings towards our $500 million full-year target.
Our ability to consistently generate productivity and optimization savings reflects the intense work of recent years and is a key enabler of strategic investment, fueling technology modernization, supporting revenue growth, and helping us drive six consecutive quarters of positive operating leverage, excluding notable items. We expect the repositioning actions taken in the second quarter to build on this momentum and support the continued transformation of our operating model in the quarters and years ahead. Moving to slide twelve, our capital and liquidity levels remain strong, enabling us to continue supporting our clients as we look ahead. As of quarter-end, our standardized CET1 ratio of 10.7% was down approximately 30 basis points from the prior quarter.
Risk-weighted assets increased approximately $8 billion from the prior quarter, reflecting growth in our lending and securities finance businesses, as well as higher volumes and volatility in our FX trading business. The LCR for State Street Bank was a robust 136% in the quarter. Capital return increased to $507 million during the quarter, consisting of $300 million of common share repurchases and $217 million in declared common stock dividends, for a total payout ratio of 82%. As Ron noted, following our strong performance in this year's Federal Reserve stress test, we also announced our intention to increase our per-share quarterly common dividend by 11% in Q3, subject to board approval.
Looking ahead to the second half of the year, we continue to expect a progressive cadence of common share repurchases, targeting a total payout ratio of approximately 80% for 2025. In summary, we are encouraged by our second quarter and first-half results, which highlight our ability to execute on our strategy, driving sustained business momentum while delivering positive fee and total operating leverage, excluding notable items. With that, let me turn to our improved full-year outlook, which, as a reminder, excludes notable items and remains subject to significant variability given the current economic and geopolitical environment. Over the first half of 2025, we have demonstrated our ability to drive sustainable growth across our core businesses.
Given this strong performance, plus the current more constructive market environment and the anticipated impact of currency translation, we now expect 2025 total fee revenue growth in the 5% to 7% range, which is an improvement to our prior 3% to 5% full-year outlook. We expect full-year NII to be roughly flat to last year's record performance, with the potential for some variability driven by global monetary policy and changes in deposit mix and levels, which are difficult to predict.
With our improved revenue expectations, full-year expense growth is now expected to be roughly 3% to 4%, up from our prior full-year outlook of 2% to 3%, reflecting higher revenue-related costs and as well as expectations of a negative impact from currency translation. And importantly, we continue to expect to generate both positive fee and total operating leverage this year. And with that, operator, we can now open the call for questions.
Operator: At this time, we will open the floor for questions. If you would like to ask a question, please press star five on your telephone keypad. Please note, you will be allowed one question and one follow-up question. We will pause just a moment. Okay. Our first question will come from Ken Usdin with Autonomous. Please ask your question.
Ken Usdin: Hi, guys. Good afternoon. I just wanted to just ask on kind of, like, fees and fee operating leverage. Just kind of walking through the implied fee update. And, we'll get what drives that. Is it mostly just the market backdrop? Is it what we see in terms of the yet to convert and anything in terms of, like, how that timing of these, you know, great new wins and still left to convert will come through. Thank you.
Ron O'Hanley: Yeah. Ken, what it's Ron. Why don't I start that? So as we've noted, our pace of sales continues to be at an accelerated level. We said we were going to do in service for fees $350 to $400. We're on track to do that. That's what we did last year. That has led to a fairly sizable, in fact, a record level of fees to be installed, roughly $440 million. About half of that's going to install this year, and yet we're adding to that at about the same pace. So just on sales alone, there's a bit of a flywheel element to it.
We've talked about what's occurred in the asset management business that continues to grow these at a double-digit rate. Some of that market, but there's been positive organic revenue growth throughout this whole period. And then finally in markets, we'd invested heavily in client relationships. We that really do pay off when you get times of elevated volatility. So the organic elements in here are the primary driver of what we're talking about assisted by some constructive markets.
Ken Usdin: K. Great. And can you talk about just, you know, the new ones you're putting on and put it in context with the client rescoping that occurred. Like, is that now kind of a done in the past issue and or is there anything else that we could see regards with regards to that type of thing going forward?
Ron O'Hanley: Yeah. We don't anticipate anything like that going forward. As we noted, we had two new alpha wins this quarter. Three alpha installs. In terms of the nature of the back of our servicing fee revenue wins. About half of that are back office related. Which that's a combination of pure back office sales, plus alpha, which now only comes with back office sales. We will not do so that alpha related without some kind of back office element to it because as you know, back office drives recurring fees, but also gives us the right to other revenue sources like deposits, like FX, like securities finance, and that.
So in terms of that one client, it remains a very important client to us. It's a very important partner to us. And basically, they changed one element of it. Instead of going to a single platform, a multi-platform in their front office. And we have built Alpha to be interoperable. So whether it's Charles River or some other provider or Charles River plus another provider as it will be in this case, we've got the ability to interop in that way, and we'll be providing all the other services that we intended to. More importantly, this was a client that worked with us right in the very beginning. On the development side of all we were doing.
So going back to the 2019 time frame, and all that development IP still remains with us. Which is important because being extended to other clients.
Mark Keating: And, Ken, it's Mark. Maybe I'll just add to that just to make sure. And, you know, this was very contained to a software client contract, rescoping, so it had no impact on the servicing fee. Revenue to be installed, did not have an impact on our assets to be installed. It was very contained, as Ron said, to one particular aspect of a software agreement. Which we, you know, renegotiated and took the appropriate kind of actions on our that we've talked about here in our notable.
Ken Usdin: Okay. Thank you.
Operator: Our next question comes from Glenn Schorr at Evercore. Please ask your question.
Glenn Schorr: Hi. Thanks very much. Maybe we could step back and ask this big picture question of NII that feels a little different for you guys. And you've been consistent in talking about some in the range of flat year on year after a good 2024. But feels like the NIM has moved lower more so than others and balances. Your thought process on moderating is more so. Is that did is there something maybe related to your client base that's a little bit different? I appreciate the full package of operating leverage and better margins and all that. I'm just wanna focus on NII for a sec.
Mark Keating: Yeah. Thanks, Glenn. It's Mark. Let me take you through the kind of two-part of there. One was kind of our overall NII guide and then secondly, is, I think, a specific question on NIM, which I can get at as well. So you know, first, I'd say our guide, as you mentioned, is, you know, generally, you know, consistent with our original outlook of, you know, flat year over year. And I said roughly flat because there's still some amount of variability. The fact is that we always talk about in terms of rates and deposit mix and levels.
You know, I think now that we're halfway through the year, you'd expect that we'd be able to start to narrow, you know, possibly narrow the outcome that we're seeing here. But, again, we feel good about being able to, you know, continue to deliver on our guide of roughly flat, you know, standing here today. You know, if you look at the first half of 2025, NII has been roughly, you know, flat to slightly down versus, again, the record year we had in 2024. First half was down about 0.6% versus the first half of last year. So we're tracking well to our guide, you know, given some puts and takes that I can get into.
In a little more detail. So, again, holding NII flat to a record year after 6% growth last year. You know, means we're delivering on our guide and, you know, executing well in terms of what we've laid out for you. And, you know, we understand how important NII is, obviously. But, you know, we unpack the NII guide with a little more detail, and I'll frame it in the same way that we've been doing it since January and then again in April. Using kind of the four buckets of drivers and describing what the impact is to us. As a firm in terms of tailwinds and headwinds.
So, you know, the first one would be, you know, deposit levels and obviously you saw those, you know, go up this quarter. So, you know, interest-bearing deposits have certainly provided, you know, upside versus our expectations in what we talked about in January and then again in April. You know, while non-interest-bearing deposits have actually largely played out as expected, not withstanding, you know, an early pop in the second quarter. You know, we did have a near-term benefit in April, you know, during the peak of market volatility and uncertainty.
You know, however, in May and June, and then again, as we sit here in mid-July, we have seen some normalization in deposit balances, you know, since the quarterly high point in April. I'd also point out the majority of the spike in asset and deposits that we saw happened in lower spread buckets, like market rates and exception rates, and so they did carry a more limited, you know, benefit for us. So mix is important. So while deposits are up about 7% sequentially, our non-interest-bearing balances, where we have the widest liability spread, that was down sequentially roughly a billion. So we think deposits will remain, like, somewhat elevated.
But we do expect to see some leveling off over the coming months, and we'll obviously continue to track that closely. You know, in terms of other impacts, again, to us as a firm, our loan growth we've talked about, that's also played out as expected. It's been a tailwind year over year, and I can talk about that a little bit more in-depth. The investment portfolio reinvestment, you know, we talked about $4 billion a quarter. A hundred to a hundred and fifty basis points. You know, in terms of benefit there, given where rates are, we're seeing it more at the lower end around a hundred basis points.
You know, which brings us then to, like, the major, you know, bucket for us, which is short-term rates. And as we've discussed previously, we are an asset-sensitive bank. We've seen rates come down, you know, faster than expected. If you look at the US treasury curve, the two, three, five-year rates are down fifty to sixty basis points over the first six months of the year on a spot basis. Also, non-US central banks. You know, while the ECB and the Bank of England have largely been in line with expectations, albeit a little more aggressive in the case of Bank of England in terms of timing.
Other central banks have actually been relatively more aggressive in lowering their rates, such as the Reserve Bank of Australia and Canada. You know, I've talked previously about a cut at the ECB or Bank of England being worth, you know, about five to ten million per cut per quarter for twenty-five basis points. And while you know, Australia and Canada may not be that large to us, you know, when you start to look across, you know, several of the central banks, you know, it does start to add up as a headwind. So, hopefully, that helps, you know, and that we're putting all this together. We're kind of standing back from it.
We have some positives like a short-term pop in interest rates and interest-bearing deposits. Some negatives like the pacing of cuts. But we see it as being relatively balanced, you know, which brings us back to a guide of roughly, you know, flat, you know, to our record year of NII in 2024. So, again, we understand how important NII is. We've been pleased with our ability to deliver on our guidance, you know, this is 20% of the revenue of the company, and when we stand back and look at what we are delivering for our shareholders, it's really the momentum across the fee revenue franchise, which is roughly 80% of the firm's revenue.
For us, it's really the story.
Glenn Schorr: That was awesome. I really appreciate all that. Ron, I got one quick one for you. I can't resist. You guys have been great acquirers in the past and integrators. You almost got BBH done, but through no fault of you on that one helped through. What I'm curious if you share any thought process with us on what you thought when you saw the news, when we saw the news that maybe BK and Northern were doing the dance. I'm just curious. What crossed your mind and how we should think about that?
Ron O'Hanley: Well, you know, I'm not gonna comment on market rumors either about our sales or others, but our view on M&A remains consistent. We have a lot of confidence in the organic growth capability and potential of our franchise. But we've always viewed M&A as an important complement to our strategy. But it's a high bar. Right? You have to show that is it actually or is it a good trade-off for shareholders to sacrifice a return on capital to some kind of investment that's going to yield some kind of return. And so it's a high bar. And but as you know from us, we evaluate these things. Our focus is of late, has largely been around capability building.
So if you think about some of the relatively small investments we've done over the past year or two. Small case that technology platform in India, ethics, the direct indexing player, the investment in investment, all about helping to augment our capabilities and propel us forward. We will always look for opportunities to build scale. And, you know, you've seen us do some of those in the past. But right here, right now, we're quite happy. With our position, and we'll continue to focus on serving our clients well and building out our capabilities. And if something comes along that makes sense, we'll evaluate it.
Glenn Schorr: Okay. Cool. I appreciate it, Ron.
Operator: Our next question will come from Jim Mitchell with Seaport Global. Your line is open. You may ask your question.
Jim Mitchell: Hey. Good afternoon. Maybe just talk a little bit about the asset management business, record net inflows in the institutional channel and long-term assets. That's a pretty big change of what we see in the recent years. So can you just talk to is there anything kinda lumpy in there that maybe not to get too excited about, or do you feel like there's a turn in sort of the organic growth in that space? And how do we think about the fee rates in the long-term institutional AUM space? Thanks.
Ron O'Hanley: Yeah. So the I'll answer for the second quarter first. For the second quarter, it's a little bit of both. We have seen and talked about consistent organic growth in the institutional channel, mostly in defined contribution. And that's in the US, but not just the US. That's been led by a combination of innovative products. You know, we were the first to be out the door with some kind of an income protection product embedded in a target date fund. We've got a we're doing lots of different partnerships to add innovation to target date funds. And we're doing that not just in the US, but outside the US.
In addition, in the second quarter, we had a large new mandate from an existing client in Asia Pacific, and so that helped drive that number, which was a record quarterly inflow for us in the institutional business. But if you will, on a structural basis here, the investment in DC for us has been very important. We're very tied in with the investment consultants. We've got a very strong product set that we're constantly innovating and bringing both our know-how to it, but also when it makes sense bringing in partner know-how. And so we're quite bullish on that segment.
Jim Mitchell: Okay. That's helpful. And maybe just pivoting to regulation, it seems like some of your bigger peers benefit from the SLR being lowered, you guys already had some exemptions. So you're still somewhat constrained, but tier one leverage ratio. Do you in your conversations with regulators, do you think there's any acknowledgment of the tier one leverage constraint? And do you think that could also be lowered in the future? What's your sense?
Ron O'Hanley: Yeah. Jim, so, I mean, you've portrayed it accurately. We've gotten relief earlier. So tier one leverage as it relates to leverage constraint that is the binding constraint at this moment. I think there's some acknowledgment amongst regulators this is something to be looked at. I don't think it's something that's gonna be looked at immediately. You know, it may take till the end of the year for that because there's other things, obviously, around G SIB and stress test and things like that are reportedly higher up on the agenda.
But I would say that in this period where I think fifteen, sixteen, seventeen years after the financial crisis and all the changes that were put in place after that. I think there's for the first time, at least in the US, there's a real look at this. And, well, don't think any of us expect or even are asking for a, you know, a massive across the board rollback, I think that you're seeing a very sensible look both within agencies and across agencies, and I think that will play out favorably. Both in regulation and also even how the supervisory environment works and so it's a I think it's a constructive environment now for large GSIBs.
Jim Mitchell: Right. Okay. Thanks very much.
Operator: Our next question will come from Alex Blostein with Goldman Sachs. Your line is open. Please ask your question.
Alex Blostein: Hey, good afternoon. Thanks for the question. Ron, I wanna go back to the sales momentum you highlighted in these two service in business. And, again, appreciate the disclosure you guys out there a couple of quarters ago, both on the feedback log and the few wins that's obviously relevant. In the last several quarters, you know, maybe a year or so, the redemption have been fairly elevated. Obviously, part of that is BlackRock.
But are you, I guess, aware of anything notable on the redemption side that could sort of offset some of the strong wins you're having and maybe a little bit more color on the sources of these wins and how investors should think about sustainability of this new business within servicing potentially turning kinda the growth algo around in that part of the business.
Ron O'Hanley: So, Alex, let me start. I think that, you know, we've been quite consistent now going back two or three years that we had recognized maybe to make some changes on the servicing side. And, also, at the same time, we're investing heavily over the past several years in our operating model, which drives service quality. And service quality is those two things for you. One, it drives retention rates up and two, it gives you the right to win. Right to win with existing clients of deep relationships with existing clients, but also to be able to show up with new clients or takeaway clients. And that's all playing out as we said it would.
So we do not see any kind of elevated loss rate. In fact, we're quite pleased with where our retention rates are now. In terms of the nature of the clients, again, Alpha is a very important platform for us. So that's driving there. That's driving fee wins kind of across the stack. Front office, middle office, back office. But if we really think about it as if it doesn't as I said earlier, if it doesn't come along with back office, then we're really not interested in it. Or it'll be a lower priority for us. What we're also finding is that there's an increasing appeal for alpha within the private space.
As we're seeing an increasing appeal just in general as the private markets move from an in-source market to an outsource market. And then finally, our global footprint is really helpful. Because we saw a lot of wins a fair number of wins this quarter outside the US. Which again shows the power of the global franchise here.
Mark Keating: And it's Mark. Maybe I'll just jump in to offer a couple of maybe proof points and some context on that and to kinda maybe talk through how this has been building. This is not a, kind of just, you know, recently, we've started looking at posting these type of sales results. So I think I've talked about this before. You know, back in 2019 and 2020, we were doing $140, $160 million in servicing fee sales, and then we started to take that up, you know, in, you know, $250, $260, and 2021 and 2022.
And that's when we started talking to all of you about setting, you know, a more aggressive target for that of the $350 to $400. And again, that came from understanding our business and we've talked you through this before, the kind of, you know, rubric we have around, you know, the compression and, you know, DNC business each year, and then we knew that number needed to be much higher. So then we did, you know, we did $300 million in 2023, and then we did $380 million last year. And, you know, if I put it in context, we just talked about $145 million, you know, for the second quarter, and it was a very good quarter.
And we've talked about how it can be lumpy and all that, but it was a very good quarter. And you go back and put that in context. That's more in the second quarter than we did in all of 2020. So to me, that's, like, real change. That didn't just happen. You know, we changed our organization, our incentives. We focused on service excellence like Ron talked about. We invested in products and features and functionality. So we expect, you know, the performance to stay in that range and we know we need to target that going forward. And with proper execution, that's gonna really power the business forward.
Alex Blostein: Gotcha. Alright. Great. That's very helpful. Mark, I wanted to follow-up with you on your answer to Glenn's question around NII and sort of how you guys are thinking about on a forward basis. So you know, obviously, no 2026 guidance just yet, but as you sort of pointed to being, you know, assets sent to the bank, the forward curve is what it is. Help us maybe think about what are the things you guys could do and what are you working on to perhaps mitigate the effects of lower interest rates as you look out beyond this year. And importantly, is the interplay between NII and operating leverage?
You guys have been focused correctly on both positive fee operating leverage and positive total operating leverage. Is that kind of total operating leverage dynamic still possible if NII sort of peaks and starts to go down from here?
Mark Keating: Yeah. Yeah. I mean, thanks, Alex. I guess, I don't wanna get into anything around, you know, 2026. I mean, there are things that we, you know, have been doing in terms of looking at our, you know, client deposit pricing. We've been looking at our balance sheet strategy. We've been looking at our investment portfolio. So there's many things, you know, that we can look at, all those things that we have been. In trying to gauge, you know, where we're going into 2026 with NII. But I think it's just pretty early to start talking about that now.
Operator: Our next question will come from Mike Mayo with Wells Fargo. Your line is open. Please ask your question.
Mike Mayo: Hi. I just wanted a clarification just with all the discussion here. So did you benefit from heightened volatility and now you see that going down and NII is at a peak, and now you see that going down. I guess, are you over-earning the way you look at things or not?
Mark Keating: Hi, Mike. It's Mark. I'll I can start with that. And, you know, in terms of the volatility, so maybe talk a little bit about our FX, you know, our markets business. And again, as we've said, we think that business performed very well in the second quarter. We saw and we did see some heightened FX volatility, but we also saw the payoff in our strategy of expanding geographically in continental Europe, for example, has been a big focus for us. You know, we've increased our product mix, you know, added some capabilities and things like derivatives.
We've deepened our client engagement, you know, both existing clients and new, you know, new clients at privates and hedge funds, which, again, those businesses, you know, private markets business, we've been talking about that. I mean, that been growing. I think year over year grew 19%. And, again, that brings new clients, new opportunities for our markets business as well. And that's what really powered sequentially FX trading being up 18%, you know, sequentially, and year over year, 27% again ex Notable. So how we look at the second half, I you know, with continued, you know, political and economic risks, you know, we expect, you know, the investment climate's gonna remain challenged.
The volatility we've seen is really from multiple sources, so geopolitics, national economics and politics, differing central bank policies. So that type of divergence between countries, we think, is reflected in the FX markets. And so while, you know, a replay of the second quarter is not our base case, you know, we do expect volatility likely be more sustained. We're gonna have to see where it plays out for there from here. Hopefully, that gives you a little more color on the market side.
Ron O'Hanley: Mike, it's Ron. I've got everything I'd add two things to that. The heightened volatility in markets was really an April event. Real spike in volatility then, but it came back down. You know this as well as anybody's. So I think after April, the benefit of our deepened client relationships were as important as anything here.
Mark Keating: On the other hand, I get the cyclical high point here. That you come down to that volatility. On the other hand, seems like some of the core businesses are doing better like Charles River, over quarter. At some kind of growth rate. You've been up-tiering the Salesforce. Are you still upgrading? Seems like you have some core business momentum that you didn't have a few years ago. Am I looking at the right data? Is it are you a big thing to substantiate that?
Ron O'Hanley: Yeah. I mean, you are. And I'll just pick up on what Mark said a few minutes ago. A hundred forty-five million in servicing fee sales in 2020. A hundred and forty-five million of servicing fee sales in the second quarter of this year. And I think that actually does paint a good picture. Secondly, I would just point to the guide and we try and be very straight with our you. When we give guides. The beginning of the year, we gave you a three to five percent guide. We're giving you a five to seven percent guide now, which I think reflects what we're seeing in terms of the increased power of the franchise.
Mike Mayo: Alright. Thank you.
Operator: Just a reminder. Analysts are allowed one question and one follow-up. Thank you. Our next question will come from Betsy Graseck with Morgan Stanley. Your line is open.
Betsy Graseck: Hi. Good morning.
Ron O'Hanley: Hi, Betsy. Good morning.
Betsy Graseck: Hi. Have a question on an announcement that was made on July first with University of California on building a super app for individuals, and it was interesting I wanted to understand thought process behind in, you know, investing in this. And is this a one-off? Or are you anticipating broadening this out to other participants, partners, and is there any way this would feed into other parts of State Street, or is it a goodwill venture just thanks.
Ron O'Hanley: Yep. So Betsy, first of the University of California, it's a long-time partner of ours. And this initiative is quite consistent with our strategic commitment to the wealth business. Within State Street Investment Management, your wealth now is about it's a little over a trillion about $1.2 trillion of our total assets and growing quite rapidly. Through the ETF channel. And we have a commitment to the wealth services business. But part of this is an overall belief that the democratization of wealth is continuing unabated.
And in spending some time with the University of California, we realized that they were a quite interesting partner because if you add up all of their stakeholders there so you look at so students, faculty, employees, and alumni. There's 350,000 potential stakeholders there. They're quite close to most of them, and it becomes an interesting platform to start to experiment with new sorts of offerings. So it's a bit of an experiment for both of us, but certainly our objective would be to develop something that, firstly, work for the University of California and then was leverageable. Other places.
So we look on it as a way to at scale, develop some innovative offerings for the wealth market consistent with this idea of democratizing investing. And being able to extend that or potentially being able to extend that elsewhere.
Betsy Graseck: Okay. Thank you.
Ron O'Hanley: Thanks, Betsy.
Operator: Our next question will come from Ebrahim Poonawala with Bank of America. Your line is open. Please ask your question.
Ebrahim Poonawala: Thank you. Just a couple of follow-ups. One, on capital and apologize if you clarified on this, but I think I heard you talk about 80% payout for the full year. Just give us a sense remind us in terms of from a capital perspective what we are managing to terms of the ratio feels like you've a lot of flexibility there. And what stops you from leaning in and doing more in buybacks than the 80%? Thanks.
Mark Keating: Yeah. Sure. It's Mark. Let me just maybe a two-parter. I'll talk a little bit about our capital return, and then I'll talk a little bit about, you know, CET1, which is really the ratio that we're managing to here. So you're right. I mean, we previously talked about 80% payout. So we've also highlighted, you know, previously that, you know, our intention is to, you know, return capital at a progressive cadence through the year. So you saw that, you know, going from Q1 up into Q2 now at $517, which was an 82% payout. It was $320 in Q1. So and we expect, you know, to move through the third quarter and then into the fourth quarter.
You know, anticipating additional step-ups as we move to deliver on our overall payout target of 80%, you know, subject to market conditions and other factors, obviously. So that's kind of still our guide, and that's what we're committed to. In terms of CET1, I think we've talked about this before, you know, given the current environment, we are, you know, continue to prudently manage toward the higher end of our 10% to 11% CE1 target range. You should generally expect us to continue in that range and managing to that as our clients, you know, really appreciate the value, you know, financial stability and soundness and appreciate us running the business and help capital levels.
And, also, I'd say we're cognizant of our own sensitivities, you know, around our RWA stack, which can swing, you know, several billion at quarter-end, with market volatility. And that's what you saw this quarter, right, with our 10.7 print. So, you know, still, again, very much in line with what we've talked about over the last few quarters.
Ebrahim Poonawala: Thanks, Mark. Just one quick I think you talked about deposit balances. Elevated, but maybe drifting lower in the back half. Just give us a sense of when you think about non-interest-bearing or overall deposit balances, what gets them growing again? Is there a trough that we should look at from a cycle standpoint? Or just how you're thinking about it. Yeah?
Mark Keating: Yeah. So maybe a couple things. First, in terms of overall levels, So, you know, Ron mentioned it earlier too. April was really the month that had the most volatility, and we saw the quarterly, like, period spike. Right? That's what happened in April. And then we saw deposit levels overall, you know, come down in April. Sorry. In May and then again in June. And then, you know, sitting here in mid-July, you know, our deposit levels are, you know, not too far off like our expectations that we had given back in April around the kind of high end of the $230 to $240.
It's not quite down back to that high end of that range, but it's approaching it. You know, sitting here kind of middle of July. So that's number one. Number two on non-interest-bearing, again, it was down a billion quarter to quarter. You know, we expect it, as we said, you know, before, we expect that to continue to, you know, moderately decline. You know, maybe into the low twenties is what we've talked about. You know, so that's kind of generally deposit levels. Now your question about raising deposits, you know, the best way that we can raise deposits is to sell and install back office business. Right?
Custody brings deposits, Custody brings FX trading revenues, securities finance revenues, all the kind of good stuff that goes around, you know, custody as the hub of the company. So, you know, $444 billion in to-be-installed revenue of which roughly 60% of that is back office, which means custody. That's a good sign in terms of our ability to generate, you know, custody, client-related deposit, you know, And if we keep the flywheel spinning on the servicing fee sales target, that's what we'll see.
Ebrahim Poonawala: Thanks, Mark.
Operator: Our next question will come from Brian Bedell with Deutsche Bank. Your line is open. Please ask your question.
Brian Bedell: Great. Thanks. Good afternoon, folks. Just one housekeeping one quickly and then a longer-term one. The housekeeping is just your assumptions on market returns for the second half that underpinned the 5% to 7% guide?
Mark Keating: Yeah. Sure. Let me take the opportunity, maybe take you quickly through kind of the macro points that are underpinning the guide, and I guess I'll just start with the equity market. So, you know, entering the year, right, we expected 5% point to point, which implied average market levels up, you know, 8% for the year. Obviously, you know, as we sit here today, we're tracking a bit better than the assumptions we had coming into the year. So, you know, that's constructive in our current guide. So you expect that to be a tick higher. You know, that said, we've seen, you know, considerable volatility over the past quarter.
So, you know, we'll continue to monitor developments there and see how the average go up from here. So that should, you know, cover the equity, the, you know, market appreciation side.
Brian Bedell: K. Great. And then longer-term pick one for Ron. Just on the concept of tokenization of equities in any ETPs and other assets, how are you thinking about that longer term? I guess just your view and whether you think that will evolve, you know, more slowly over time, or do you think there's a stronger movement? And maybe some of the pros and cons of that and what is State Street doing to, you know, to be a participant in any kind of trend?
Ron O'Hanley: Yep, Brian. So we think about it in two ways. One is as a bank ourselves, but maybe more importantly, as this as an important servicer to other asset managers. So we do see a tokenization has been slower than I think anybody anticipated. If you go back three, four years, But I think with the current administration and the regulatory framework really in most parts of the world starting to emerge, we think that the pace on that will continue to accelerate. And the opportunities for tokenization are really broad.
I mean, it's not just the tokenization deposits, tokenization money market, funds enables uses of that money market of that of these kinds of assets, and it different way than originally anticipated. It could be on some cases, used for collateral better than it could be in other cases. For example. So we think this will, as regulatory frameworks are developed, we think this actually will accelerate. I think the questions that the regulators, particularly the bank regulators, need to deal with all of these things is how do they think about core deposits and how do they think about banks as the transmitters of monetary policy?
And to the extent to which any of this causes more deposits to leave the banking system, I mean, remember, money market funds seem like a passing fad four years ago, and now $6 trillion is out of the banking system. So I think that's a little bit of the unknown and where regulators come down on this.
But given the breadth of tokenization opportunities, let's broaden it out to real assets and the ability to actually take assets that right now are paper-intensive, very legal-intensive, and be able to make them much more liquid, we think that this will start to take off at an accelerating pace, but probably nowhere near as much as the optimists think, nowhere near as fast as the optimists think it will. But for us, we need to be there and intend to be there. First and foremost as a servicer, as a major servicer to these markets. And secondly, as a bank ourselves.
Brian Bedell: That's great color. Thank you.
Operator: Our next question comes from Gerard Cassidy with RBC Capital Markets. Your line is open. Please go ahead.
Gerard Cassidy: Thank you. Good afternoon. Can you guys come back to the sensitivity of revenues to market moves? I think in your 10-K, you give us that 10% increase in equities global equity valuations generally leads to maybe a 3% increase in service fee revenues. When you look at your service fee revenue growth this quarter of 12% ex notable items, how much was associated to, you know, market conditions moving higher?
Mark Keating: Hey, Gerard. It's Mark. I guess I would just say that 10% 3% is servicing fees. And so our service fee growth year over year is 5%. So 12% is total including software and trading and asset management. So, you know, obviously, the I don't have in front of me, but, obviously, the, you know, impact year over year of where markets have been has been positive. It's been a positive to us, and that has generally, you know, been pretty consistent in terms of the, you know, if you see a 10% growth again over time because quarter to quarter can be we've talked about this before in terms of, you know, billing cycles and whatnot.
But the 10% 3% for servicing fees, and it's, like, 10% 5%, over from asset management. It's been pretty consistent.
Gerard Cassidy: I say thank you. And maybe, Ron, just a broader question. You referenced in your opening comments about the rebranding of State Street Investment Management and how that reinforces your one State Street strategy approach and how you're going to, you know, leverage the collaboration between different product offerings and deepening your relationships with your clients. How as outsiders can we measure that success as you achieve those deeper relationships?
Ron O'Hanley: Yeah. It's a good question, Gerard, and we take that away and think if there's some additional disclosures that we wanna make to help on that. But if you let me talk about it at a conceptual level. If you think about our client base, and this is across the firm, we have one broad set of clients, which is really the global institutional investors. Is our client base. If you think about the subsegments of that, for example, asset owners, pension funds, sovereign wealth funds, insurance companies, those clients, we serve them both from an investment services basis, from an asset management basis, and from a market's basis.
A large segment is our asset managers, there, we're really not servicing them out of their investment management business, but we're providing services and markets. So this idea of one State Street and how do we deliver the whole firm, part of it is because if you think about who we are, notwithstanding our size, right, we've got a relatively small number of relatively large clients. So it's very important we be able to, one, help them help deal with their issues and address their strategic objectives at the highest level. And be able to do that across our firm. So it's not just about words.
I mean, part of that is you have to then think about how your relationship-facing force is squared off against that. We've made a lot of changes over the years. In that regard. So that rather than have just product-specific sales, efforts we have, particularly for our largest clients and our global clients, we have relationship managers that think about the total of State Street. And point's a good one, and we'll think about how we can actually show you the results. We see them, but we can think about how to disclose those in some way.
Gerard Cassidy: Appreciate it. Thank you.
Ron O'Hanley: Thank you.
Operator: There are no further questions. I will turn the call back to management for closing remarks.
Ron O'Hanley: Well, thank you all for joining us this afternoon.