Good day, thank you for standing by. Welcome to the Northern Trust Corporation third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to speaker today, Jennifer Childe, Director of Investor Relations. Please go ahead. Thank you, Victor. Good morning, everyone, and welcome to Northern Trust Corporation's third quarter 2022 earnings conference call. Joining me on our call this morning are Michael O'Grady, our Chairman and CEO, Jason Tyler, our Chief Financial Officer, Lauren Allnutt, our Controller, and Mark Bette and Briar Rose from our investor relations team. Our third-quarter earnings press release and financial trends report are both available on our website at northerntrust.com. Also on our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This October nineteenth call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be made available on our website through November eighteenth. Northern Trust disclaims any continuing accuracy of the information provided in this call after today. Please refer to our safe harbor statement regarding forward-looking statements on page 11 of the accompanying presentation, which will apply to our commentary on this call. During today's question-and-answer session, please limit your initial query to one question and one related follow-up. This will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits. Thank you again for joining us today. Let me turn the call over to Michael O'Grady. Thank you, Jennifer. Let me join in welcoming everyone to our third quarter 2022 earnings call. In the third quarter, we continued to execute well through a challenging operating environment. Compared to the prior year, revenue grew 7% as the elimination of fee waivers and the favorable impact from higher interest rates more than offset the significant headwind from weaker equity and fixed income markets, asset outflows, and unfavorable currency movements. Expense growth of 9% reflected inflationary impacts across our cost base, particularly within our compensation, in equipment and software lines. EPS was flat, and we generated a return on average common equity of 14.9%. New business activity in wealth management was encouraging, and we continued to engage actively with new and existing clients. In asset management, weak markets and institutional cash outflows reduced assets under management, yet we saw a continued growth in our alternatives, tax-advantaged equity, and ETF complex. Within asset servicing, we continued to win new mandates, and our backlog of new clients that haven't yet been onboarded has expanded meaningfully and is expected to transition over the coming quarters. In closing, we remain well-positioned to navigate the current macroeconomic and market uncertainties from a position of strength. Our new business pipeline remains robust, and our capital position continues to be strong. In a slowing growth environment, we've also begun prudently tightening our expense controls and focusing on realizing productivity benefits from the investments we've made over the past several years. I'll now turn the call over to Jason. Thank you, Mike. Let me join Jennifer and Mike in welcoming you to our third quarter 2022 earnings call. Let's dive into the financial results of the quarter starting on page two. This morning, we reported third-quarter net income of $394.8 million. Earnings per share were $1.80, and our return on average common equity was 14.9%. Results for the quarter included a $17 million pension settlement charge within the employee benefits expense category. Also, recall that in the first quarter of this year, we implemented an accounting reclassification of certain fees which will continue to impact the year-over-year comparisons, as noted on this page. Let's move to page three and review the financial highlights of the quarter. Year-over-year, revenue was up 7% and expenses increased 9%. Net income was flat. In a sequential comparison, revenue was down 1% and expenses were up 1%, while net income was also flat. Return on average common equity was 14.9% for the quarter, up from 13.7% a year ago and down from 15.7% in the prior quarter. Let's look at the results in greater detail, starting with revenue on page four. Year-over-year, unfavorable currency translation impacted revenue growth by approximately 200 basis points. Trust, investment, and other servicing fees, representing the largest component of our revenue, totaled $1.1 billion and were down 3% from last year and down 6% sequentially. All other remaining non-interest income declined 8% from the prior year and 2% from the prior quarter. Net interest income, which I'll discuss in more detail later, was $525 million and was up 47% from a year ago and 12% sequentially. Let's look at the components of our trust and investment fees on page five. For our asset servicing business, fees totaled $603 million and were down 4% year-over-year and down 6% sequentially. Within asset servicing, custody and fund administration fees were $407 million, down 12% year-over-year and down 6% sequentially. Custody and fund administration fees decreased sequentially, primarily due to unfavorable markets, unfavorable currency translation, and lower transaction volumes. Custody and fund administration fees decreased from the prior year quarter, primarily due to unfavorable currency translation and unfavorable markets, partially offset by new business. Assets under custody and administration for asset servicing clients were $12 trillion at quarter- end, down 19% year-over-year and down 7% sequentially. Both the year-over-year and sequential declines were primarily driven by unfavorable markets and currency translation. Investment management fees within asset servicing were $136 million, up 20% year-over-year and down 8% sequentially. Investment management fees decreased sequentially, primarily due to unfavorable markets and asset outflows. Investment management fees increased from the prior year quarter, primarily due to lower money market funds fee waivers and the accounting reclassification previously discussed, partially offset by asset outflows and unfavorable markets. Assets under management for asset servicing clients were $873.7 billion, down 25% year-over-year and down 8% sequentially. Both declines were driven by asset outflows, weaker equity and fixed income markets, and unfavorable currency translation. Moving to our wealth management business, trust investment and other servicing fees were $475.5 million, down 1% compared to the prior year and down 5% from the prior quarter. Within the regions, the year-over-year declines were primarily driven by unfavorable market impacts, partially offset by the elimination of money market fund fee waivers. Sequentially, the decline within the regions was primarily driven by unfavorable markets. Within Global Family Office, the year-over-year growth was driven by lower fee waivers and new business, partially offset by unfavorable markets. Sequential decrease was mainly related to unfavorable markets. Assets under management for our wealth management clients were $336 billion at quarter- end. It's down 10% year-over-year and down 5% on a sequential basis. Both the year-over-year and sequential declines were driven primarily by unfavorable markets. Moving to page six. Net interest income was $525.3 million in the quarter and was up 47% from the prior year. Earning assets averaged $132 billion in the quarter, down 8% versus the prior year. Average deposits were $118 billion and were down 9% versus the prior year, while loan balances averaged $41 billion and were up 8% compared to the prior year. On a sequential quarter basis, net interest income grew 12%. Average earning assets declined 6%. Average deposits declined 8%, while average loan balances were up 2%. The net interest margin was 1.58% in the quarter, up 60 basis points from a year ago and up 23 basis points from the prior quarter. The prior-year quarter increase was primarily due to higher average interest rates and favorable balance sheet mix shift. The sequential increase is primarily due to higher average interest rates. Turning to page seven. Expenses were $1.2 billion in the quarter, 9% higher than the prior year and 1% higher than the prior quarter. On a year-over-year basis, expense growth benefited by approximately 300 basis points due to currency translation. The current quarter's expenses included a $17 million pension settlement charge within the employee benefits category. This compares to similar charges in the prior year quarter of $6.9 million and $20.3 million in the prior period quarter. Also included in the current quarter is the impact of the previously mentioned accounting reclassification, which increased other operating expense by $9.4 million compared to the prior year. Compensation expense was up 12% compared to the prior year and up 1% sequentially. The year-over-year growth was primarily driven by higher salary expense, in part due to inflationary pressures, partially offset by favorable currency translation. The sequential increase is primarily due to higher salary expense, partially offset by lower incentives and favorable currency translation. Outside services expense was $221 million and was up 5% from a year ago and up 4% sequentially. The year-over-year increase is primarily driven by higher consulting and technical service costs, partially offset by lower third-party advisory fees. The sequential increase is primarily due to higher technical services and consulting costs. Equipment and software expense of $212 million was up 15% from one year ago and up 4% sequentially. The year-over-year growth was primarily driven by higher software costs due to continued investments in technology, as well as inflationary pressures and higher amortization. The sequential increase is primarily due to higher software amortization expense. Occupancy expense at $51 million was down 5% from a year ago and up 1% sequentially. The other operating expense of $82 million was up 1% from one year ago and down 9% sequentially. The sequential decline was primarily due to lower miscellaneous expenses in the current period. Turning to page eight. Our capital ratios remain strong with our common equity Tier 1 ratio of 10.1% under the standardized approach, down from the prior quarter's 10.5%. Our Tier 1 leverage ratio is 7%, up from 6.7% in the prior quarter. An increase in net unrealized losses on the available-for-sale securities portfolio was a primary factor in this quarter's change in capital ratios. Accumulated other comprehensive income at the end of the current quarter was a loss of $1.8 billion, with the loss from the third quarter totaling approximately $300 million. As previously announced, in the third quarter, we increased the quarterly common stock dividend by 7% or $0.5 A share to $0.75 per share. During the quarter, we returned $159.5 million to common shareholders through cash dividends of $158.4 million and share repurchases of $1.1 million. The current environment continues to demonstrate the importance of a strong capital base and liquid balance sheet to both weather the uncertain economic conditions and to support our clients' needs. We approach the end of the year on solid footing and remain well-positioned to serve our clients and communities while generating long-term value to our shareholders. With that, Victor, please open the line for questions. Thank you. As a reminder, to ask a question, you need to press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from the line of Betsy Graseck from Morgan Stanley. Your line is open. Hi. Good morning. Morning, Betsy. Hi. How are you doing? Really well. I did want to just dig in a little bit on the expense side. When I listen and look at the, you know, results, you know, there's some areas where it feels like, you know, maybe the inflation is impacting a little bit. I know you're being very disciplined in how you're investing, but I just wanted to make sure I understand how you're thinking about managing the expense base as we go through, you know, this inflationary environment. Is there an opportunity to, you know, pull back on some of the, consulting side, professional services side, or should we anticipate that, the kind of rate of change we're seeing in this quarter should persist? Thanks. Sure. Well, let me start with a direct answer to the question. Yes, there are things we can do, and we've been focused on to address expense growth. Predominantly, even within this period, in mid-September, we announced internally some additional expense controls. We always have those in place, but we meaningfully ramped up expense controls, particularly around hiring. That's obviously the largest component of where we see expense increases. That's our largest line. That'll lead us to have just a higher bar on where we have increases in expenses, and particularly from a hiring perspective. That's not to say that we are gonna stop investing in the thing. That we're not gonna continue investing in the things around technology and other areas where we know we've had important investments to take place. at the same time, we do see an opportunity for us to raise that bar to try and tamp down the growth that we've seen in expenses. Okay. Just separately, as I'm thinking through the growth profile here, you've got some nice exposure to international. At the same time, we've got, you know, the strong dollar weighing on the results to a certain extent. Maybe you could help us think through the impact of the dollar, and if we excluded that, how results would have looked this quarter. Thanks. Sure. Well, at a super high level, you know, the company has a very natural hedge from a currency perspective. This quarter was, you know, very roughly, call it, you know, 200-300 basis points in impact on both the revenue side and the expense side. The dollar does play in, but it plays on both the revenue and the expense side. The other impact that's not as symmetrical is how currency plays in more from an asset level perspective. That played into asset level movements in both assets under custody as well as assets under management. Something people won't typically think about, it even played in on the deposit decline. You think about the movement we've had, and we can talk about that in more detail, but even the deposits had a downward move in value of about $1.5 billion in aggregate across all currencies. Okay. I got it. Thanks. Sure. Thank you. One moment for our next question. Our next question comes from the line of Alexander Blostein from Goldman Sachs. Morning, Alex. Oh, hey, guys. Good morning. Sorry, didn't catch my name there. A couple questions. I guess one, you know, obviously deposit outflows sounds like picked up in September relative to sort of the last update that we heard from you guys at the Barclays conference. I think you said around $120, came in a little bit lower. The mix in particular I think was a little bit more pronounced too, with non-interest bearing declining substantially. Maybe just an update on sort of how the quarter's progressed, but also more importantly, where the deposits stand today and the mix, non-interest bearing and interest bearing, as well as any of your sort of updated thoughts on where the deposit levels could ultimately trough out. It looks like the non-interest bearing piece is getting pretty close to the kind of pre-COVID levels, but curious to get your thoughts there. Sure. You know, first of all, on the deposit levels and where they were relative to our expectation, they actually came in really close, particularly given what we mentioned earlier, and that the currency effect of the non-USD. Where they landed at the quarter, where they averaged actually was pretty close. I mention that because as we get to the next quarter, I think it's very difficult to predict in general. Let me hit mix first. You're right, non-interest bearing dropped significantly during the quarter, and that's something we expect to happen. A lot of our financial services clients that use our balance sheet are often in non-interest bearing accounts, but as rates rise off of zero, they have the opportunity to move into interest-bearing accounts, and they did that. A lot of the a very high percentage of the accounts that are eligible to do that have done so at this point, which gets exactly to your point, Alex, that we're kind of at, in some ways, at those pre-COVID levels. That's not to say we won't see additional movement there, but we think certainly a lot of it has already taken place. The third part of your question of where do we see things today, just looking at the first few weeks of the quarter, deposits behaved about what we would anticipate. They tend to come down a little bit at this point into the quarter. We're in that kind of 110-115. What we expect to happen between now and the end of the quarter is an interesting dynamic. There's two forces working against each other. One is with quantitative tightening and the yield curve being higher and clients across the board continuing to look at how they can allocate non-operational but more investment cash. That continues to put a downward pressure. In the short run, there's an offset to that. There's an upward pressure in the seasonality that we've seen in fourth quarter, which tends to have more of an upward pressure. It's difficult to see which one of those is gonna have stronger influences. Best guess is you might call it flat from here, and so that 1.10%-1.15% level, but appreciating that there's big forces moving against each other. Got it. Thanks for that. Appreciate the color. I guess speaking of institutions looking to earn a little bit extra yield on their cash, when I look at Northern Trust securities portfolio, you guys are yielding I think about 1.8%, and the market rates there are probably closer to 4%, maybe a little higher. I know geographically it could be different with the mix, but obviously an attractive opportunity to reprice there. I guess with AOCI losses already running through your capital, any appetite to sell down, I guess, some of the lower yielding securities without necessarily changing the profile of fixed versus floating and kinda keeping the overall duration of the portfolio in a similar place? I guess crystallizing some of the losses but picking up incremental NIR in the current environment. Yeah. We talk about it a lot. I think an important dynamic for everyone to know, and I know you appreciate this 100%, is that the economics of taking the loss, reinvesting that lower amount at the higher yield, the efficiency of markets are just telling you that over time, the impact of that should be relatively equal. The second component, though, is that there may be other reasons to do that. You might be looking to. You might have a view that the yield curve is gonna change significantly. You might wanna handle other ratios by doing that. It's not to say that we wouldn't do it, but it's just to say that the quick trade to realize the loss, invest at a higher rate, it's not as easy and is not as beneficial. We care about just the long-term value of what the securities portfolio is yielding, not just the NII or NIM in the short run. Right. Fair enough. Thanks, guys. You bet. Thanks, Alex. Thank you. One moment for our next question. Our next question comes from the line of Mike Mayo from Wells Fargo. Your line is open. Hi, Mike. I have two problems. One is tailwinds and one is headwinds. I'm wondering if the tailwinds are done and the headwinds, if you still have to pay. If you can help me out. Jason, you correctly called NIM going back to the level of 2019 and checked there. Is that done? In relation to- Hey, Mike? Yeah. Mike, I'm getting a lot of static in the background, and I wanna make sure we answer your question right. Any way you can try and clarify your line? Is that any better? Dramatically. Good. Go for it, Mike. Much for my iPod. Look, are the tailwinds done? Jason, you correctly predicted the NIM going back toward levels of 2019. You know, the elimination of fee waivers, those are good. On the other hand, I guess you still have some tailwinds from the institutional business, which really isn't clear why that's so much higher. Were there delays? Are you just winning business? On the other hand, you have the headwinds from the lower stock markets. Is that going to continue, or is that mostly in the numbers now? If you can help me with the tailwinds and the headwind question. The reason I ask that is because you got those tailwinds and you still had negative operating leverage. Are you just a hostage to your business model, or can you have revenues grow faster than expenses? Yeah. Couple things in there. Let me try and hit them, but you certainly ask me to clarify if I don't get all of them. One, on rates, is it done? The answer is no. We still have upward movement. In fact, we looked just within the quarter at the month, and September was at just a tiny bit above 160. We got into that level. Even at this point, betas will be much higher but won't be 100%. We'll get an incremental lift. The third dynamic of that is that as the securities portfolio is repricing, as in Alexander Blostein's question earlier, it takes time, but we have opportunity to reinvest at these higher rates. Not done yet. Second is on the pipeline of business that has taken longer to come in. Some of the opportunities we have in asset servicing, in particular, in the one not onboarded category, are very big, and they're chunky. Those just take longer. The volatility in the markets, we think, has just made clients wanna make sure that everything is lined up properly. That one not onboarded category is significantly higher than it is on average, but we're confident about it coming through. The stock market dynamic, you're right. Usually, we talk about operating leverage, and the numbers are just much smaller. It's can we get the expense growth plus a little bit of market lift to match? In this environment, the macro environment is just dominating what's happening to both expense growth and revenue growth. I've been saying all year. There are false positives in the operating leverage. There are false negatives in the fee operating leverage. This is a year where we have to just understand that those numbers are dominated by the macro factor. It's not typical. It doesn't change our long-term financial model. On the one not onboarded, category, can you size that to some degree and give us some sense of timing? Yeah. I can give a sense of timing, which is it's actually more back half of 2023 that we're scheduling some of this stuff coming in play. That seems a long way away, but it's just that's us making sure and working very closely with clients to make sure everything is lined up properly. From a sizing perspective, we don't tend to give a number on that, but what I can tell you is that it's meaningfully higher. That aggregate is meaningfully higher than what it has been historically. Outside of the one not funded, the asset servicing business will tell you that the pipeline activity is also very high. Okay. Thank you. You bet. Thank you, Mike. Thank you. One moment for next question. Our next question comes from the line of Ken Usdin from Jefferies. Your line is open. Morning, Ken. Hey. Morning, Jason. Just follow up on that, organic growth side. Can you just talk about the wealth business? If you could also try to separate the markets from just where organic growth is there and any, you know, updates in terms of is there same type of, you know, hold back at all in terms of customers moving, coming over, bringing assets over, given the environment? Yeah. Actually, I'm really glad you asked that because the wealth business. The journey is very different. The wealth business, the organic growth there was higher first half of the year, and the business is still doing well, but the one not funded is not as strong relative to history as the asset servicing business. Now, both of those client channels will tell you importantly, their win rates in the market are very attractive, and they are very consistent with what they have been historically. It's just about, for wealth, their view is equity markets are lower, less capital markets activity, and it's put just less money in motion. Year to date, organic growth in wealth has been in line with historical levels. First half strong, frankly higher than normal. Second half looks lighter, but money in motion is down. Fewer IPOs, fewer liquidity events. Importantly, their sense is their win rate in the market is consistent with what it has been historically. Okay. If I could just ask one follow-up to Alex's question. If there's more room to go on the NIM, you know, the challenge is overcoming the magnitude of that size decline in the balance sheet. Are, you know, how far out is your line of sight? I know you're not gonna give specific guidance, but in terms of, you know, NII growth being able to continue, you know, post the third quarter result. No. The way you're framing the algorithm is right. It's just, you know, rates are gonna start to flatten out. We're anticipating betas of 80% in this coming quarter. The benefits are just flattening out. As rates go higher, we're still getting a benefit, and the repricing of the securities portfolio is a positive lag effect to that, effectively. Now all that said, the volume levels matter a lot as well. Just as rates were increasing, we talked about the importance of loans. That's where the real yield is, but we can't ignore the fact that when volumes are coming down, it puts pressure on the securities portfolio and on money market assets, which has an impact less on NIM, but more on NII. Right. I got it. Okay. Thank you. No, thank you. Thank you. One moment for the next question. Our next question comes from the line of Brennan Hawken from UBS. Your line is open. Morning, Brennan. Oh, hey, Jason. I'm glad you said good morning because my line cut out when you said my name. Okay. I'd love to ask a question about what you're seeing here so far. Number one, just to clarify, the 110-115, that's kind of like the range you've been seeing in deposits quarter- to- date, right? Assuming that's the case, you know, look, as you said, hard to predict. If we do end up seeing some continued pressure on the deposit side, should we expect that wholesale funding line to, you know, plug the gap to the extent that AFS securities cannot come down quick enough? Should we think that line is gonna continue to grow if the deposits remain under pressure? Yeah, you're right in that. That's what we think it is. That's the last funding mechanism on the balance sheet, and we don't use that. There's no strategic initiative there to use it, but it does in the short run act as the funding mechanism, depending on what's happening. The good news is, you know, there's a positive carry on that, and rates are decent. It helps NII, but we don't use it as a way to push and leverage the balance sheet more than we need to. We use it as effectively just a funding mechanism. Okay. Right. That's sort of the output to the extent that you don't have that you need to plug. That makes sense. When we think about non-operating deposits, you know, where do we stand in total for non-operating versus, you know, where we were at the peak of the last rate hiking cycle? Have we, you know, retraced that decline? You spoke to the shifting of non-operating from non-interest bearing and interest bearing. I'm guessing that's what's driving up the betas. Well, you know, what kind of magnitude impact does that. Because I'm guessing the non-op is a more demanding customer base on the beta side. Is that fair? Yeah, it is. It is, for sure. There's actually another layer within there, which we've talked about a little bit, so it's fine for you to continue asking more detail on it. Even within the non-operational, there's financial and non-financial. The financial non-operational are the areas where there's the highest rate sensitivity. Frankly, it's also the area where we have to have the highest amount of runoff anticipation, and therefore, it's the area where we do the shortest and least yielding investing on the other side of it. You're right, that component continues to be the higher runoff in terms of volume level so far. If I look at the numbers, it is across all the categories we look at, it's the single highest decline on a percentage basis, even this quarter. That said, there's declines in other areas as well. Even within the operational base was down, I'll call it 5%-10%. But that's more that client base looking at different investment options and saying, "I might have with the yield curve inverted and flat at zero, might not have been looking to ladder in Treasury securities or look at an active fixed income portfolio," but now they're very much looking to do that as they talk to their advisors. Very different dynamics at play. Okay. All right. Thanks for the color. You bet. Thank you. Thank you. One moment for next question. Our next question will come from the line of Brian Bedell from Deutsche Bank. Your line is open. Great. Morning, Brian. Good morning. Good morning. How are you doing? Well. Great. Just first, one clarification on that deposit beta of 80% that you just mentioned, Jason. That's an incremental beta as opposed to, say, an absolute level that you'd be at in the fourth quarter. Is that correct? Well, I wanna make sure I understand. Yes, as we think about incremental rate changes. Yeah That's the beta that we're experiencing on those incremental changes. On incremental. Yep. That's what I wanted to clarify. Yep. Yep. Perfect. Maybe just on expenses, I guess one question just around the seasonality expectations, because you do have some of the cost controls in place that you mentioned that you initiated in September. How should we think about the typical seasonal lift in outside services and equipment software, for example, that we usually see? Also short term, just the pension charges. Should we think of that as more recurring or really sort of you're kind of done with that? Sure. I'll hit the I'll hit the first one just on expenses, and then Lauren is here and can also talk on the pension settlement accounting issues. On the expenses, we've mentioned that the depreciation is higher. In equipment and software in particular, we're anticipating another lift in fourth quarter, similar to what we had in third quarter. Despite the expense actions we're taking, the part of that is just baked into our base right now, particularly from a depreciation and amortization perspective. That said, we'll be looking hard at expenses even within that line item. We've also talked about the importance of us investing in technology. We'll see that similar lift going into fourth quarter. consulting is without a doubt one of the key areas where we're looking very hard to make sure that anything that comes on at this point is critical and that we're handling that with a very high bar of what we're doing. It's very correlated in many instances as well to what we're doing from an equipment and software perspective. With that, Lauren, you wanna talk on pension for a second? When we think about pension, we definitely would expect to see that recur in the fourth quarter. The fact that we have triggered this accounting mechanism, this settlement accounting, does mean that our run rate of pension expense in the current year is lower. We will expect to see that in the fourth quarter. It is difficult to predict whether that's something that we would expect to see going forward into 2023. Okay. Okay, great. If I could just squeeze one more in there on expenses. In terms of the onboardings, of the clients, do you also expect? Typically, we see expenses in advance of that, particularly if they're, you know, more larger, complex assignments in asset servicing. Is that a similar dynamic that we may see either, you know, now or, you know, in the first half of next year in advance of the onboarding of those clients? This is Mike. I would say we've already experienced some of that. As Jason has mentioned, you know, some of these transitions just are taking longer for a number of reasons. I would say part of it, too, is that if you look at the pipeline right now on the asset servicing side, it's a high proportion of asset managers, and those mandates just tend to take longer to transition in than for asset owners. You know, we've already been at work in doing that and incurring some of the expenses that go with it. As you point out, as those start to transition in, it kind of normalizes into the rate. Yes. Perfect. Thank you so much for the color. Thank you. One more question. Our next question comes from Glenn Schorr from Evercore ISI. Your line is open. Morning, Glenn. Hello there. I guess in some way you're a bit of a microcosm of the inflation issue we have in the market. My question on the expense side is headcount up 11, comp up, like, 12. And that's half the expense dollar. Is it fair for me to assume that we could be more careful going forward, but this higher level of dollars on employee comp and benefits is probably gonna be with us for a while, just like the market fears overall? In other words, you can't take comp away that you just gave. Yeah, Glenn, I think that's true in general. You know, just to expand on that, I would say that, you know, for us at least. You know, we've gone through a time period here with inflation, but also tremendous competition for the best talent. As you know, you know, that's where we look or one of the ways we look to differentiate ourselves. It was very important to us to make sure that we were retaining the best talent and also attracting new talent as well. Yes, we've had that increase in comp that is then a part of the run rate going forward. You know, the question is, you know, what happens to the rate of growth going forward? We're looking at that very carefully, I would say, but we need to be competitive on that front. Then the other part, as Jason mentioned, you know, we've added a number of additional partners, you know, employees for us. That's something which was very appropriate as we invest in taking care of our clients, invest in technology, invest in resiliency. All makes sense. We just going forward have to be really, really focused on making sure that we're only adding for, you know, very critical roles so that that growth rate of headcount is appropriate. I hear you. You're not alone there. One question on when markets are going up a lot like they used to, you would have plenty of clients that would have either fee ceilings or fee caps such that your fees just don't scale up as markets go up. My question is, does it work that way in reverse when the market's fallen like 22% this year? Do we have any protection on the way down for whereas maybe fees might not drop as much as the markets would imply going forward? Well, a couple thoughts there. One, even within the contracts that are asset-based, a lot of the components of them are flat. As you see increases and decreases, the fee rates don't move 100% in the same magnitude. Secondly, outside of that, there are certain transactions that are charged for on a per unit basis. That in and of itself adds a layer that's uncorrelated in many ways to the level of assets. Even this quarter, one of the things we experienced as we think about organic growth, and particularly in the asset servicing business, that was another dynamic. Transaction volumes were down, and that may have had some correlation with markets being down, but we actually think it was more correlated to just the volatility, where a lot of the managers that the asset manager clients we have were doing less because of the, particularly the currency volatility. Different dynamics at work, but without a doubt there, the trust fees won't move 100% in line with markets. Yep. Maybe one last one in wealth management. Big difference in the AUM change year-over-year, down 10% versus down 25% for asset servicing. I'm assuming that's mostly mix and wealth management clients holding 20-something% in cash. I wonder if you could, A, confirm that, and B, talk about what wealth clients are now doing with all that cash. Sure. From a wealth perspective, the clients may take a different approach in saying that they're thinking about investing, and they might. It's more of an asset class change for them, an asset allocation change by class. In the institutional market, those clients will often think differently and they might be moving between providers, and they've got more options to think about what their existing option sets are. I will say in general, if you think about deposits and the money market funds combined, the wealth, the movements tend to not be as extreme. Deposits might be a better place to look at that. They've actually just been, you know, flatter. The wealth clients just tend to be, ironically, I mean, we all think about, you know, that component of the market maybe being more, moving around more, but I think it's the nature of our specific clients that they tend to be, to move less and just be more patient through cycles. Okay. Thank you for all that. Sure. One moment for our next question. Our next question comes from the line of Gerard Cassidy from RBC Capital Markets. Your line is open. Morning, Gerard. Good morning, Jason. Digging a little deeper into the decline year-over-year of assets under custody and administration, you touched on it in your prepared remarks. Can you share with us, you know, how it breaks out between just market conditions and fixed income versus equity? You already discussed a lot about the deposit issues. Also would the dollar have contributed to that decline? Lastly, were there any customers that left? Sure. AUCA was down, call it 6.5%. Markets were over half of that. Currency, to your point and observation, was about a third. We've got a significant international exposure, higher than what most people realize in AUC. In fact, only 70% is USD. Then client outflows were the remainder, and so not heavily significant portion of either AUC or of the decline itself. Importantly, the decline in AUC that was related to outflows, it was related to our, largely our asset manager clients' underlying business having outflows and our asset owners rebalancing. There was no material change in our client base or in our wallet share. The business just emphasizes that win rate continues to be high and consistent, but this was a dynamic of our underlying clients having outflows, and over time, that works in our favor. Our clients do well. It's. We grow with them. This period was one where particularly the asset managers had outflows which impacted AUC. Very good. Second, asking the revenue question a little differently, can you share with us what percentage of your fee revenues are variable rate price? Meaning, you know, you charge maybe a couple of basis points to your customer as a percentage of assets under custody. As assets under custody go up and down, revenues, of course, follow. Where does that stand today? Yeah. I mean, it may be something just to give you a quick soundbite that we could come back on. Okay. Across asset servicing. Let me offer a couple things that might be helpful to you. In asset servicing, you know, 40% of the fees are not asset value sensitive. They're driven by transaction volumes and account level fees or flat fees. Of the asset-sensitive fees, you know, that 60%, about 75% operate on a month lag and about 25% on a quarter lag. If I transition to wealth management, I'll split it between the family office and the regions because they're different. In the family office, probably it's about a third of the fees are sensitive to equity markets in some ways, and about 10% are sensitive to the fixed income markets. You know, close to half overall. In the regions, about half, a little bit more are sensitive to equity markets, but a quarter are sensitive to fixed income. That should give you a good tool set to work from. Yeah, it does. Thank you. Yeah, thanks. Sure. Thank you. One moment for our next question. Our next question comes from the line of Vivek Juneja from JP Morgan. Your line is open. Thanks. Morning. Thanks for taking my questions. A couple of questions here. Capital. Your CET1 is down to 10.1%. Mike, you've always wanted to keep a gap versus your peers. That gap has really disappeared for the moment. What are you thinking, especially if rates stay high for a while, what is your plan in terms of trying to bring back that gap? Vivek, you're right, as to our objective on capital there. I would say that hasn't changed. You know, what has changed is, you know, with rates, the impact of AOCI on that. Over time, you know, that will accrete back into capital, and that's our plan, if you will, is to allow the capital ratio to continue to be in the range that we've had for some time period. Right now it's just in, you know, the lower part of that range as a result of AOCI. No plans to shrink the balance sheet or anything in the near term to try and do anything about it? I would say there are no specific plans around that, Vivek, but we do look at risk-weighted assets very closely because it is, you know, that's a proxy then for, you know, the amount of capital that's being deployed in that activity and are we getting the right return. Jason talked about, you know, the size of the balance sheet earlier and the fact that we do get positive returns across all of those activities, but some of them more than others. We've never looked to just expand the balance sheet if it was gonna be in, you know, low returning activities. That will be the same. In this environment, every dollar of RWA is precious. Got it. Thank you. Different question, a little detailed one. Jason, you mentioned other operating expenses were down due to lower miscellaneous expenses. Is it sustainable at this lower run rate given the cost sort of focus that you've got? Or is that just temporary and comes back? There's a lot of different factors going on within that line item, and so it's just a difficult one to predict. We try to call out the big moves, but it's difficult to say that there's any trend within that. There's nothing we'd call out at this point. Yes. Yeah. One last one, if I may. You mentioned investment management seeing outflows. How much and which products are you seeing that? Well, across AUM in general, the decline's about 7%. The majority of that is within asset servicing. From an asset class perspective, it's a combination of mostly cash, but also equity, and then also Securities Lending cash collateral pools. At the same time, markets drove about 40% of the decline, and currency was the remaining approximately 10%. Okay. All right. Thank you. Thank you. You're welcome. Yes, thank you. One moment for next question. We have a follow-up from the line of Brennan Hawken from UBS. Your line is open. Hey, thanks for taking my follow-up. You touched briefly on this before, Jason, but could you give us an updated currency mix of the deposits, and whether or not the FX moves we've seen has caused some shift there? Yes. Give me a second. Mark or Jennifer, if you get it before I do. Yeah. This is Mark. The USD deposits is that you were asking about the currency mix of deposits, Brennan? Yeah, exactly. Currency mix of deposits. Yeah. In the current quarter, it's a little bit over 70% US. It's 71% US. Then as you go down for total deposits, a little bit more than 10% is pound, a little bit more than 5% is euro, and then you get to Aussie dollar, which is also right around 5%, and then the rest is kind of spread out among the remaining 5% or so, 5%-10%. Still not a significant change from what we've seen before, even though the volumes have come down. Okay. Got it. Then, earlier on expenses, you guys spoke to taking some actions on expenses to try to diminish some of the inflationary pressure. Is it possible to give some color or help us think about what kind of magnitude we should be expecting as far as those actions go, those potential actions go, and what the timing would be? Yeah, I'll hit on timing. You know, from that perspective, it's, you know, we started and announced internally these higher levels of controls in early mid-September. We were already seeing some beneficial impact from that and certainly just change in heightening of the bar on what we're bringing in. Again, got to emphasize there are still things that we think about from an investment perspective. To the extent we have growth, we're gonna follow that growth with appropriate level of investment. But this is also about productivity and making sure that we address inflation very aggressively. Those are the two components that we're looking at, and we've taken more of a five-quarter approach to this year's planning process for 2023 to ensure we work hard on fourth quarter so that we maximize our ability to do well and be where we wanna be in the next year. You know, from a magnitude perspective, too early to, you know, we're not gonna give numbers on that at this point. It's just, it is noteworthy enough that we wanted to make sure to communicate that this is something that it's been a pivot and a significant increase in the controls around higher level around spend increases. Okay. Just framing it, is it best to think about, 'cause you said that this was about addressing the inflation and whatnot, and you're not stopping the investment, of course. Given the challenging environment, should we think about this could help to offset some of the recent inflationary pressure that you saw this year? It's about like bringing the growth rate down, right? Is that the right way to think about it? Or is it more containing further pressure and sort of like stopping it from continuing to go higher? Well, it's both. It's, you know, if we go back, and it's a good thing to, for you to encourage us to frame it. Let's just come back to the way we always talk about our expenses, which is around productivity, inflation, growth, and investing. If we use that framework, typically, we'd like to see productivity offset inflation. That's a lot easier to do when inflation's at 2%. Inflation at 8%, 9%, 10%, it's very difficult, but that should tell you we are gonna be looking extremely hard at productivity, at where we can look at our existing base of business and find opportunities to be more efficient. In the concept of investing, that's where you just have to have a high bar. We have to say, you know, our growth rate historically has been high, but we've accomplished a lot of the things we wanted to do. In wealth management, we went through Digital Metamorphosis. In our infrastructure, we've gotten a lot of work done on migrating to the cloud. In our risk and cyber and regulatory bucket, we've done a lot of investing to ensure that the brand that we have is protected well. Those are the three components around technology spending, importantly, that we're talking about things internally. That infrastructure foundational piece is one. The second is that middle layer of risk regulatory cyber, and the third is around what's client-driven. There are opportunities in each of those, but the risk regulatory cyber is one where you'd say, "We're going to ensure that we're doing everything we need to do there to make sure we are where we should be as a franchise." The other two buckets, we've got to think about pacing. We've got to think about who we're using to help us on those things. There are levers we can pull. Then that last overall bucket of what do we do from a growth perspective, to the extent that there's good business out there for us to bring on, we're gonna do it. That we care as much about the organic growth of the company as about wanting to make sure that the expense growth rate is where it should be. Okay. Thanks for taking my follow-ups. No, thanks for encouraging the framework. Hopefully, that's helpful. One moment for next question. Our next question comes from the line of Michael Brown from KBW. Great. Thanks for taking my questions. Mike, you there? Sure. I just wanted to ask about the volatility that we saw in the Gilt market. We saw some headlines about, you know, some challenges related to processing for your business. Can you add some context around the situation there? You know, will there be any financial impact related to the volatility there and specifically for your business? Yeah. Mike, you know, you've given the background there largely just that there has been a significant amount of both volumes and volatility in the Gilt market. We have a meaningful client base. Of U.K. pensions that are affected by that. A number of those pension clients also utilize liability-driven investment strategies and managers that provide those strategies. Likewise, we have some very meaningful clients on that front. You know, we've been in the middle of that volume and volatility and have been doing everything that's required to be able to handle that. Needless to say, it has presented challenges for, you know, all of the players in that marketplace. As you know, it's continued to work its way through. I would say, you know, still uncertain, and our expectation is that, although some of the volumes may have come down here more recently, we are prepared that they could pick back up again and that the volatility has not gone away. From that perspective, we've been very focused on taking care of the clients, making sure that everything is getting done. I would say, as far as any particular, you know, financial exposure or anything like that, there's no change to, you know, the business model for us or necessarily exposures or things like that. Okay. Very good. Thank you. Just on share buybacks, I don't think we really heard much about that on this call. Certainly we're very low this quarter. You know, if I heard Jason's comment correctly before, it sounds like you know, a lot of focus will probably be on rebuilding the CET1 ratio. Is it fair to assume that the buybacks will probably be relatively muted here and maybe just dependent on how the AOCI accrues back into capital? Just any thoughts on the framework for thinking about buybacks would be helpful. Yeah, I think you've got it largely right. That with, like, AOCI at, you know, $1.5 -2 billion in on a cumulative basis, that's a high amount. We care about our CET1 levels, and we've got very strong capital positions, but we think about it so much on a relative basis as well, and an aggregate basis. We feel good about the capital levels, but also are, have a, I'd say, a bias toward making sure we stay relatively where we want. Great. Thank you, Jason. You bet. One moment for next question. We have a follow-up from the line of Gerard Cassidy from RBC Capital Markets. Your line is open. Thank you, Jason. Jason, just a quick follow-up on the beta that you mentioned. Incrementally 80% for the upcoming quarter is what you pointed out. Two parts to the question. How does that compare to the last tightening cycle? Is 80% at this point normal or similar, I should say, not normal? Second, if rates continue to go higher, let's say another 75-100 basis points, will the incremental beta approach 100%? In terms of where it is relative to prior cycles, it has not been linear in this cycle. Each rate hike seems to have its own dynamic to it. Another dynamic is that historically we've seen the most of the dynamic come from the Fed, but this cycle and the mix of our deposits, there's more impact from non-USD currencies, and so you've got to play that in as well. It's really important. To the second, those betas also behave very differently. Our wealth, even within USD, the wealth deposits behave differently. They don't flatten out as much. Even at higher levels from here, which gets to the second part of your question, does it, you know, does it level off completely at some point? It doesn't. Not up another 100 basis points for sure. Each currency behaves differently and depending on where we are, behaves differently too. Betas are very high in non-USD negative rates. You can imagine clients who are highly demanding of getting 100% of the benefit as they were in negative territory. As they got to zero and a little bit above, the conversations change. And then also the dynamics of what do alternatives look like? The shape of the yield curve matters. All those things come into play, but the direct answer is we don't anticipate a flattening even with another 100 basis point lift, but we'll continue to see higher betas as we get there. Very good. Mike, just to follow up on the pension answer that you gave over with the London or UK accounts. Is it safe to assume that you guys are primarily acting as agent for those customers rather than any balance sheet risk or you're not underwriting LDI products? Correct. We are not an LDI, you know, product provider, if you will, on the asset management side. You're right. We're the asset servicer for either the UK pension or for the LDI manager. That's our client. Yes, we're acting as agent for them. Now with sales of gilts, with moving collateral around that, there's a tremendous amount of movement of cash and bonds as a part of that. You know, we will act as a go between, because of that. That can create, you know, temporary exposures, if you will, which is what would be the case. You know, that's normal as part of the offering that we have for them. I would just add that with all of the increases in volumes and volatility that I talked about, which have been, you know, multiples of what is normally the case, you know, we've put additional resources doing everything we can to make sure that we can handle those. That's really been our position on it. Again, can't predict where it's going to go, but we're trying to be prepared for this to continue for some time. No, very helpful. Thank you. Sure. Thank you. That concludes our Q&A for today. I would like to turn the call back over to Jennifer Childe for any closing remarks. Thanks, Victor. Thanks everyone for joining us today, and we look forward to speaking with you again very soon. Thank you for participating. You may now disconnect. Everyone, have a great day.