State Street Corporation (NYSE:STT) Q3 2023 Earnings Call Transcript

State Street Corporation (NYSE:STT) Q3 2023 Earnings Call Transcript October 18, 2023

State Street Corporation beats earnings expectations. Reported EPS is $1.93, expectations were $1.77.

Operator: Good morning and welcome to State Street Corporation’s Third Quarter 2023 Earnings Conference Call and Webcast. Today’s discussion is being broadcast live on State Street’s website at investors.statestreet.com. This conference call is also being recorded for replay. State Street’s conference call is copyrighted and all rights are reserved. 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 only 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 Investors Relation at State Street. Please go ahead.

Ilene Fiszel Bieler: 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 third quarter 2023 earnings slide presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterwards we’ll be happy to take questions. During the Q&A, please limit yourself to two questions and then re-queue. Before we get started, I would like to remind you that today’s presentation will include results presented on a basis that excludes or adjusts 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, also available on the IR section of our website.

In addition, today’s presentation will contain forward-looking statements. Actual results may vary — 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 P. O’Hanley: Thank you, Ilene, and good morning everyone. Earlier today we released our third quarter financial results. As we issued these results, the world has witnessed a surprise and unconscionable terrorist attack on innocent Israeli citizens and the resulting enormous human toll in Israel and Gaza. These terrible events have shocked the world and created further global geopolitical uncertainty. State Street stands with the people of Israel and we are united with all those impacted. Now turning to the third quarter, global financial market performance was mixed as a positive start for equity markets in July turned decisively negative as the quarter progressed. Against the backdrop of softening economic data, market sentiment was negatively impacted by continued global central bank rate hikes and investor concerns of a higher-for-longer interest rate environment in an economic hard landing.

As a result, equities fell, while global bond yields continued climbing around the world, reaching levels not seen for many years with the US 10-year yield reaching its highest level since 2007. Despite these factors, the third quarter continued to be characterized by relatively low currency market volatility. Turning to Slide 3 of our investor presentation, I will review our third quarter highlights before Eric take — takes you through the quarter in more detail. Beginning with our financial performance, third quarter earnings per share was $1.25 or $1.93, excluding a loss on sale from an investment portfolio repositioning, which was a notable item in 3Q. EPS growth year-over-year, excluding notable items was driven by our significant common share repurchases during the period, coupled with a 3% increase in total fee revenue.

This fee revenue growth reflects higher servicing and management fees, better front office software and data fees, and an increase in other fee revenue. Taken together, the benefit of share repurchases and the improvement in fee revenue more than offset lower NII, market headwinds within trading businesses, as well as the impact of year-over-year expense growth. That said, we are pleased with our ongoing transformation and productivity initiatives, which help us to contain that expense growth, while allowing us to continue to invest in our businesses. Turning to our business momentum, within Investment Services, total AUC/A increased to $40 trillion at quarter end and we recorded $149 billion of new asset servicing wins during the third quarter, largely driven by wins in Official Institutions and Private Markets.

The estimated annual new servicing fee revenue to be recognized in future periods associated with 3Q asset servicing wins amounted to $91 million, which is the highest level of quarterly new servicing fees in over two years, demonstrating our ability to achieve our ambition of driving stronger sales performance. Encouragingly, Alpha’s momentum continued in 3Q. We deepened relationships with existing mandates and recorded two new Alpha mandate wins, including our first Alpha for Private Markets mandate for one of the world’s most influential investors. During the third quarter, we outlined a number of strategic focus areas for our Investment Services franchise, as we aim to drive opportunities across key regions and product areas and realize the full potential of our State Street Alpha value proposition.

Importantly, we are taking actions aimed at gaining market share in reinvigorating revenue growth. We are executing against our plan to improve core back-office custody sales performance as it is our largest revenue pool installed quickly has significant scale and drives high-margin ancillary revenues. As an illustration of our custody sales momentum and the power of Alpha. In the third quarter, State Street in Vontobel, a premier global asset manager headquartered in Switzerland, entered into an agreement to expand our existing front and middle office relationship, by providing back-office services, subject to necessary approvals. State Street had no relationship with Vontobel until discussions began in 2020 around Alpha, resulting in the adoption of our front, middle and now back office services.

Key client wins such as Vontobel, demonstrate how Alpha can establish, broaden, and deepen client relationships, further positioning State Street as our client’s essential partner. It illustrates the value of the Alpha proposition and confirms our strategic rationale of how Alpha can grow and tie together the full breadth and depth of State Street’s capabilities in a true one State Street solution for our clients, from front to back. Accelerating the sales cycle and implementation timeline, particularly back-office services remains an important strategic priority to drive even more fee revenue growth. Turning to our front office software and data businesses. CRD continues to perform well and has a strong pipeline. By the end of the third quarter, annual recurring revenue for our front office software and data business increased by 12% year-over-year to $299 million.

At Global Advisors, assets under management reached $3.7 trillion at quarter end, supported by a record $41 billion of net cash inflows in 3Q. Importantly, our cash business gained market share in an expanding market, driven by strong investment performance coupled with a higher yield environment. In aggregate, Global Advisors gathered $10 billion of total net inflows in 3Q. Record quarterly flow performance in cash was partially offset by outflows in the institutional business, coupled with the impact of risk-off market sentiment in our ETF business in 3Q. While our ETF franchise saw modest net outflows in aggregate in 3Q, our US low-cost SPDR ETF franchise continues to be a bright spot, generating $7 billion of net inflows, gaining further market share.

To drive continued growth, in 3Q we reduced the price on 10 low-cost SPDR portfolio ETFs, demonstrating our commitment to delivering institutional quality investment solutions at competitive price points. Lastly, on business momentum. I am proud to highlight that State Street’s foreign exchange business has once again been recognized as the industry leader. After being ranked number one FX provider to asset managers by Euromoney Magazine in 2022, this year Euromoney Magazine’s 2023 FX Awards named State Street as the winner across four categories, including Best FX Bank for Real Money Clients, Best FX Bank for Research, Best FX Venue for Real Money Clients, and Best FX Bank Sales. Turning to our financial condition, State Street’s balance sheet, liquidity and capital positions remain strong.

Our CET1 ratio was a strong 11% at quarter end, well above our regulatory minimum. This strength has enabled us to deliver against our goal of capital return to our shareholders. In 3Q, we returned $1.2 billion of capital, buying back $1 billion of our common shares and declaring over $200 million of common stock dividends. This means that cumulatively over the last four quarters to the end of September, we have returned approximately $5.6 billion of capital to our shareholders, through a combination of share repurchases and common stock dividends. As we look ahead in the fourth quarter, it remains our intention to continue common share repurchases, under our existing authorization of up to $4.5 billion for 2023, subject to market conditions and other factors.

To conclude, amidst the challenges of the market environment in 3Q, we remain dedicated to driving stronger business momentum and improving fee growth. To that end, in the third quarter, we outlined our sharpened execution plan to the Investment Services business, underpinned by a number of actions aimed at accelerating sales and revenue growth, while simultaneously improving the discipline in accountability for this execution. Our laser-focused on expense discipline also remains high. We have a well-established track record of reengineering our processes and transforming our operations to improve our efficiency and realize productivity growth. In the third quarter, we reduced expenses quarter-over-quarter, and announced another step in our multi-year productivity efforts aimed at improving our operating model, while enabling even greater investment in our business.

As part of our ongoing transformation and productivity initiatives, we are streamlining our operations in India, we have now assumed full ownership of one of our joint ventures in the country. This consolidation will continue the transformation of State Street’s global operations and enable us to achieve productivity savings as part of our plans to deliver positive fee operating leverage in 2024. Now, let me hand the call over to Eric, who will take you through the quarter in more detail.

Eric Aboaf: Thank you, Ron, and good morning everyone. I’ll begin my review of our third quarter results on Slide 4. We reported EPS of $1.25, which was down year-on-year due to the impact of the $294 million loss on sale in connection with the repositioning of our investment portfolio, which will benefit NII in the future periods. EPS was up year-on-year at $1.93, excluding the repositioning, which you can see on the right-hand side of the page. Turning to the core business, as you can see on the left panel of the slide, total fee revenue grew by 3% year-on-year, driven by growth in our front, middle and back office investment services business, as well as solid management fee performance at Global Advisors. This performance enabled us to offset some of the industry-wide headwinds we saw in our Global Markets business as well as lower NII, given the mixed macroeconomic backdrop in the quarter.

Lastly, we remain focused on managing costs in the current operating environment, limiting expense growth to just 3% this quarter and achieving productivity savings as part of our plan to deliver positive fee operating leverage in 2024. Turning now to Slide 5. We see — we saw a period-end AUC/A increase by 12% on a year-on-year basis and 1% sequentially. Year-on-year, the increase in AUC/A was largely driven by higher period-end equity market levels and net new business. Quarter-on-quarter AUC/A increased primarily due to client flows and net new business. While net new business was positive, long-term flows in the asset management industry has been muted, as you can see on the bottom right of the slide. This risk-off sentiment leads to the current headwind across the servicing industry.

At Global Advisors, period-end AUM increased 13% year-on-year and was down 3% sequentially. Relative to the period a year ago, the increase was primarily driven by higher quarter end market levels and inflows of $10 billion. Notably in the quarter, our cash franchise continued to perform strongly, generating a record $41 billion of net inflows, as our competitive performance contributed to market share gains. Quarter-on-quarter AUM increase mainly due to lower quarter-end market level. Turning to Slide 6. On the left side of the page, you’ll see third-quarter servicing fees up 1% year-on-year, primarily from higher average equity markets, net new business and the impact of currency translation, partially offset by lower client activity and adjustments, normal pricing headwinds and a previously disclosed client transition.

Sequentially, total servicing fees were down 2% primarily as a result of lower client activity and adjustments in previously — in a previously disclosed client transition, partially offset by higher average equity markets. As I’ve mentioned over the past year, we continue to see lower levels of client activity inflows, all of which impact transactional volumes, leading to a 2 percentage point to 3 percentage point headwind on servicing fees year-to-date. Part of this is the cyclical nature of the servicing business. The full-year effect has ranged from minus 2% — minus 2% to plus 1 percentage point impact over the last five years. Within servicing fees, back office services were generally consistent in total servicing fee — fees. Middle office services, which is part of the Alpha proposition had another quarter of good growth.

On a year-over-year basis, middle office fees were up 3% and up 1% sequentially, largely driven by net new business. On the bottom panel of this page, we highlight the business momentum we saw in the quarter. We won $149 billion of new AUC/A. We onboarded roughly $250 billion of AUC/A in the quarter, primarily in the asset management client segment. And importantly, as Ron mentioned, we achieved new annual servicing fee revenue wins of $91 million this quarter, which will be recognized in future periods. These servicing wins underscore the progress we’re making towards stronger sales performance. While we’ve historically only described wins in AUC/A terms, we recently expanded our disclosure to indicate that a healthy level of annual servicing sales is in $300 million range this year.

You can measure us against this benchmark. We now have about $2.3 trillion of assets to be installed and about $255 million of servicing fee revenue to be installed as well. Turning to Slide 7, third-quarter management fees were $479 million, up 1% year-on-year, primarily reflecting higher average equity market levels, partially offset by a previously described shift of certain management fees into NII. Quarter-on-quarter, management fees were up 4% as a result of higher equity market levels and record quarterly cash net inflows. As you can see on the bottom-right of the slide, our investment management franchise remains well-positioned with very strong and broad-based business momentum across each of its businesses. In ETFs, we had neutral overall flows, but saw positive net inflows and consistent market share gains in the SPDR portfolio low-cost suite.

As you know, we strategically dropped the fees on about a third of our low-cost suite of products and expect more growth in the coming quarters from this action. In our institutional business, notwithstanding net outflows of $30 billion in the quarter, which were primarily driven by client in-sourcing, both our Defined Contribution and Index Fixed Income products continue to drive strategic momentum. Lastly, across our client franchise, we saw record quarterly cash net inflows of $41 billion as we captured some of the cyclical movement of cash in the financial system. I’ll just remind you that cash flows can be volatile quarter-to-quarter. Turning now to Slide 8. Third quarter FX trading services revenue was down 2% year-on-year, while up 3% sequentially.

Relative to the period a year ago, the decrease was mainly due to lower direct FX spreads and lower FX volatility, partially offset by higher volumes. Quarter-on-quarter, the growth primarily reflects higher volumes. Industry volatility is down 25% to 40% across developed markets and emerging markets relative to the period a year ago, and down 5% to 10% sequentially, which is presenting fewer trading opportunities and lower spreads. Securities finance revenues were down 6% year-on-year due to lower specials activity and lower agency balances. Sequentially, revenues were down 12%, primarily as a result of seasonally lower activity and the recent industry drop-off of US Equity shoring activity and specials. Third quarter software and processing fees were up 2% year-on-year, but down 15% sequentially, largely driven by CRD, which I’ll turn to shortly.

Other fee revenue increased $49 million year-on-year, primarily due to the tax credit investment accounting change and the absence of negative market related adjustments. Moving to Slide 9, you’ll see on the left panel that front office software and data revenue increased 2% year-on-year, primarily as a result of higher growth in our more durable software-enabled and professional services revenue, as we continue to convert and implant more clients to the SaaS environment, which now accounts for about 60% of our clients, partially offset by fewer on-premise renewals. Sequentially, front office software and data revenue was down 20%, primarily driven by lower on-premise renewals, partially offset by higher software-enabled revenues. Our sales pipeline continues to grow and remain strong for our Charles River Development Front office solutions products.

Turning to some of the other Alpha business metrics in the right panel, we are pleased, we had two more mandate wins in the quarter for Alpha. Most notably, we also had our first Alpha for Private Markets win. We also meaningfully advance CRD’s institutional fixed income capabilities. Turning to Slide 10, third quarter NII decreased 5% year-on-year and 10% sequentially to $624 million. The year-on-year decrease was largely due to the continued mix-shift from non-interest-bearing deposits to interest-bearing, and lower average deposit balances, partially offset by higher interest rates. Sequentially, the decline in NII performance was primarily driven by lower average deposit balances and the deposit mix-shift, partially offset by the benefit of higher interest rates, including international central bank hike and our investment portfolio repositioning.

The NII results were somewhat better-than-expected due to non-interest-bearing deposit levels coming down slightly less-than-expected, and the portfolio repositioning, partially offset by client repricing, some of which will be delayed and will impact the fourth quarter instead. On the right of the slide, we showed our average balance sheet during the third quarter, with average deposits declining 4% quarter-on-quarter. Cumulative US dollar client deposit betas were 73% since the start of this recent cycle, while cumulative foreign currency deposit betas for the same period continued to be much lower in the 25% to 50% range. Finally, as I mentioned earlier, last month, we executed an NII accretive and capital accretive investment portfolio repositioning exercise to take advantage of both higher yields and spreads, which all else equal, should drive NII towards the higher end of the previously disclosed range of $550 million to $600 million per quarter next year.

Turning to Slide 11. Third-quarter expenses excluding notable items increased 4% year-on-year. Sequentially, third-quarter expenses were down 1% as we actively managed expenses and continued our productivity and optimization savings efforts, all while carefully investing in the strategic elements of the company including Alpha, Private Markets and Technology, and Operations Automation. On a line-by-line basis, year-on-year compensation and employee benefits increased 4% primarily driven by salary increases associated with wage inflation, higher headcount, and the impact of currency translation. Sequentially, however, we brought headcounts down and we also reduced incentive compensation this quarter, in line with our year-to-date performance.

Information systems and communications expenses increased 3%, mainly due to higher technology and infrastructure investments, partially offset by the benefits from ongoing optimization efforts, insourcing, and vendor savings initiatives. Transaction processing increased 6%, mainly reflecting higher sub-custody vendor costs. Occupancy increased 4% as we relocated our headquarters building, and other expenses were up 4%, mainly reflecting higher marketing spend and professional fees. Moving to Slide 12. On the left side of the slide, we show the evolution of our CET1 and Tier 1 leverage ratios, followed by our capital trends on the right side of the slide. As you can see, we continue to navigate the operating environment with very strong capital levels, which remain above both our internal targets and the regulatory minimum.

As of quarter end, our standardized CET1 ratio of 11% was down 80 basis points quarter-on-quarter, largely driven by the continuation of our share repurchases and modestly higher RWA, partially offset by retained earnings. Our LCR for State Street Corporation was a healthy 109% and 120% for the State Street Bank and Trust. In the quarter, we were quite pleased to return roughly $1.2 billion to shareholders, consistent — consisting of just over $1 billion of common share repurchases and over $200 million in common stock dividends. Over the last year ending September 30th, we repurchased approximately 12% of shares outstanding. Finally, a few brief closing thoughts before turning to outlook. Our third-quarter performance was solid with fee revenue growth of 3% year-on-year.

We executed on our plan to improve sales capacity and reported $91 million in new servicing fee wins in the quarter, as we look towards our goal of $350 million to $400 million in servicing fee wins in 2024. And as you’ve seen us do for the last four years, we again demonstrate expense discipline, while continuing to invest in the business. Next, I’d like to provide our current thinking regarding the fourth quarter. At a macro level, our interest rate outlook is broadly in line with the current forwards. We currently assume global equity markets will remain flat from now to quarter end, which implies the daily averages down about 3% quarter-on-quarter, bond markets are also expected to be down about 3% on average quarter-on-quarter. Regarding fee revenue in 4Q on a year-over-year basis, we expect overall fee revenue to be flat to up 1% year-over-year, with servicing fees approximately flat, and management fees to also be flattish.

As we expect the year-on-year business drivers, similar to what we saw this quarter. We do expect fourth quarter sales momentum to be similar to the strong sales performance we saw in the third quarter. We also expect that our market businesses will be down modestly year-over-year, given lower volatility. We expect software and processing fees to be up 10% to 12%, largely due to the timing of on-prem renewals and the expected new SaaS installations, and we expect the other revenue line to come in at around $30 million to $40 million in the fourth quarter. Regarding NII, we now expect 3Q NII — we now expect 4Q NII to be towards the middle of the $550 million to $600 million range we previously mentioned. This includes continued expected rotation of about $3 billion to $4 billion out of non-interest-bearing deposits and the impact of deposit pricing, which we previously noted, but with more stability in the total deposit averages.

Turning to expenses, we remain focused on controlling costs in this environment and expect to maintain relatively flat expenses in 4Q quarter-over-quarter. As always, this is on an ex-notables basis, and in this regard, we are keeping an eye on the likely FDIC assessment. And we expect our adjusted effective tax rate for 4Q will be around 22%. And with that, let me hand the call back to Ron.

Ronald P. O’Hanley: Thanks, Eric. Operator, we can now open the call for questions.

See also 18 Most Popular Cereals in America and ChatGPT Stock Advice: 15 Recent Stock Recommendations.

Q&A Session

Operator: Thank you. Ladies and gentlemen, we will now conduct a question-and-answer session [Operator Instructions]. Your first question comes from Mr. Alex Bostein from Golden — Goldman Sachs, sorry. Your line is open.

Alexander Blostein: Hey, good morning. Thanks. Thanks, everybody. Hey, Ron and Eric, I was hoping maybe you can touch on your comments earlier around positive fee operating leverage into 2024, which is definitely very encouraging to hear after a couple of years of very good cost management already. So, as you think about the revenue uncertainty between the markets and customer flows, I guess, what is the range of outcomes you’re assuming for fees as you look out into 2024? And if revenues prove to be more challenging than the base case, is there enough room to still deliver that positive fee-operating leverage? Thanks.

Ronald P. O’Hanley: Yeah, Alex, it’s Ron. I mean we’re basing that comment largely on two things. One is, we feel like we’ve got quite good visibility around what we’re doing from a cost perspective. So we feel like, we’ve got a series of initiatives underway that will continue into 2024 on managing our costs, while also continuing the investment program that we’ve got in place. That investment program includes some investments that will drive revenues in 2024 and beyond. But also the second thing it’s based on is some of the actions we’ve taken around strengthening our sales and sales effectiveness and just pointing to the results we had in Q3, the note that Eric just made to you in terms of the visibility we have on 2024.

So those two things, our confidence in expenses and what we believe is a nicely developing pipeline, and it’s a set of sales capabilities and processes. I mean, obviously, markets could turn everything upside down, but based on a reasonable market forecast and not necessarily one that’s going to be necessarily a tailwind, we do believe we can achieve positive fee operating leverage.

Alexander Blostein: That’s great. And, I appreciate the new disclosure on the backlog and the revenue backlog, definitely helpful. So maybe within that, can you help us maybe understand the cadence of how quickly some of that $255 million of backlog will sort get converted into service and fee revenues? Is that expected largely over the course of 2024 or some of that is going to spill into 2025? And then ultimately, do you think that’s going to be enough to offset some of the BlackRock related outflows and revenues that you still expect? Thanks

Eric Aboaf: Alex, it’s Eric. Let me answer that from a couple of different directions to give you some texture, because as we think about go-forward fee revenues, right? Part of what matters is installing the backlog. Part of what matters is new sales, right? Sort of maintaining the third quarter momentum to the fourth quarter and into next year, because some of those sales actually come through in the subsequent few quarters. And then, as we talked about back in September, making sure that we’re very effective on our retention activities. So every one of those matters. In terms of the backlog, we said there’s about $255 million of revenues in the backlog on the — on servicing fees and north of $2 trillion on an AUC/A basis.

The implementation is a little bit different in each of the regards. In terms of revenues, we think about 5%, 10% of that will come through, specifically in the fourth quarter, so that’s included in our guide. We expect 50% to 60% of that $255 million to come through next year, and then the balance in 2025. So it’s kind of a good mix and aligned with what we’d like. The AUC/A implementation is a little more — is little quicker. Just sometimes that happens, it’s quicker, sometimes slower, that’s a little closer to 30% in fourth quarter and around 60% next year, but those will move around as they play out. But we’ve got good visibility now. And what we’ve been particularly pleased with on our third quarter sales in particular was that, a lot of that was around back office services.

And back office services as you know, are one of the fastest to onboard and implement, and that’s going to provide some momentum into the first half of 2024.

Alexander Blostein: That’s great. Thank you very much, both.

Operator: Thank you. And your next question comes from Mr. Ken Usdin from Jefferies. Your line is open.

Kenneth Usdin: Hey guys, good morning. Eric, just one follow-up, the fourth quarter NII you’re expecting to be in the middle of that kind of [indiscernible] zone and then you’re talking to the upper-end for next year. I just wanted to ask you to walk us through that direction of travel. Like, what are the factors that start to turn to perhaps a slight positive as you exit the year into next year with regard to either — is either left side repricing or just deposits getting to the right zones, just kind of walk us through the moving parts? Thanks.

Eric Aboaf: Yeah, Ken, it’s Eric. As you surmised, there are a number of factors that matters, especially at this point in the cycle. As we transition from declining NII to some level of stabilization, and we see a good rationale for some uptick from fourth quarter into the first quarter of next year. So let me just go through them, right? There is a continued amount of rotation of NIB, non-interest-bearing deposits. We still expect some in the fourth quarter, but we expect that that starts to flatten out at the beginning of next year. We’ll see exactly how much and when. It’s hard to call and it moves around. We’ve got quite a bit of visibility into our repricing, especially for our largest and most sophisticated clients, I described that last year.

And then we’re through a good bit of that. We have — we execute on some more of it in the third quarter, we expect and we have very good visibility into fourth quarter. And so, the kind of the repricing effects and the catch-up is kind of a bubble that works its way through. On the tailwind side, we then have the investment portfolio rolling through. And the investment portfolio matures $4 billion, $5 billion bonds quarter, you’ve got the new bonds come on roughly at 200 basis points, sometimes 300 basis points higher than the ones that are maturing. And so, that’s what’s giving us a positive trajectory. And so it’s really those three factors, plus a little bit of lending growth and some of our other actions that we can control that we think starts to shape, a stabilization of NII as we get from fourth quarter to the first quarter, but, it’ll depend.

There’ll be some movements and as you know we update all of you as frequently as we are in public and we’ll continue to do that, but those are the trajectories and our expectations at this point.

Kenneth Usdin: Understood. Thanks. And my second one is just the costs were, I think, a little better then you had thought and your flat to 4Q also probably little better than the market thought and a slower implied year-over-year rate of growth. Just wondering, have you done anything incremental to slow the organic growth rate of expenses? And is that something we should think about as we go forward as well?