State Street Corporation (STT) Earnings Call Transcript & Summary

This is Jason Goldberg. I cover the U.S. large-cap bank stocks here at Barclays. Thank you for joining our 19th Annual Global Financial Services Conference. Next up, very pleased to have State Street with us. From the company, Lou Maiuri, Chief Operating Officer; and Eric Aboaf, Chief Financial Officer. [Operator Instructions]. And also the button called survey. If you hit that, you could participate in our traditional automated response systems. And there are too, if we have time, we'll try and take a look at those. Lou, Eric, obviously, a lot going on at State Street, particularly in light of last week's announcement of the purchase of Brown Brothers Harriman Investor Services unit. So I guess before we dive into my -- the questions that I have, just maybe share your perspectives on the deal. Obviously, Lou, maybe from a strategic standpoint; Eric, maybe from a financial standpoint. And just maybe just give us more texture and color beyond what we heard last week.

Thanks, Jason, and good morning, everyone. Thanks for having us with you. It's a pleasure to be here today, and I'm joined by Lou Maiuri, our Chief Operating Officer. And I thought he and I could just kick off with a couple of opening comments. Before I get started, though, as is customary, I'd like to remind you that today's discussion may contain forward-looking statements. Actual results may differ materially from those statements due to any number of important factors, such as those references to our discussions today 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 the meeting for these change. All right. Additionally, as you know, we are in the midst of an equity offering. So I would like to remind you that we are limited in terms of providing additional financial information outside of what we've already made available, including during our announcement last week. As a result, I'll be able to restate our third quarter outlook from last Tuesday, but we'll not be able to give you the usual details, Michael, you all understand. As Ron and I highlighted last week, the acquisition of Brown Brothers Investment Services business is a compelling and unique opportunity to drive our core strategy. This may be the last independent consolidation opportunity of scale in the global asset servicing landscape. We talked about this on the call, but as a reminder, I want to highlight the financially compelling nature of this transaction. We paid a multiple of 12x 2021 earnings for a premier investment servicing asset for the additional benefit of gaining strategically attractive technology capabilities. We think we can realize $335 million of EBIT synergies from the deal, which is heavily weighted towards cost takeout and therefore, plays into our demonstrated track record of disciplined expense management. Importantly, the deal enables us to drive additional earnings growth and increase State Street's medium-term pretax margin target by 1 percentage point to 31%. Strategically, this transaction is a great fit for State Street, and I would highlight the following. First, it strengthens our market leadership in asset servicing by creating the world's #1 asset servicer, which will allow us to further benefit from scale, which is important in this competitive market as well as enhancing our capabilities. Second, it expands and deepens our position in key markets with client segments that form a growing opportunity, including the middle market asset managers and alternative providers. Third, it also expands and deepens our international presence in key non-U.S. markets, including EMEA offshore, where our market share will increase from approximately 24% to 33%. In Japan, it adds scale and expertise in the Cayman offshore funds for Japanese investors, increasing our Cayman offshore funds position by 4x in that market, and it nearly doubles our Latin America book, which as many of you know, we've targeted for growth. And lastly, it propels our Alpha strategy, which I know Lou will discuss further in a moment. Lou, you've been highly engaged in this process for many months. Perhaps you can add some of your thoughts as well?

Great. Thanks, Eric. Yes, and I often describe this as a consolidation deal plus, plus, plus. And I think Eric touched upon some of the pluses. But let me run through some of those pluses real quickly, and he just mentioned this one. But our intention is to be a more global company. And as Eric mentioned, 2/3 of this -- the revenue of Brown Brothers Harriman is outside the United States. So right from the start, this makes us a more global entity and he highlighted some of the geographies that are really interesting to us that we're either not present in or we're underrepresented in. so that's a really nice plus for us. The second plus is around technology capabilities, and we'll talk more about this, but we're gaining a best-in-class fintech asset with a product called Infomediary. And Infomediary provides transaction messaging and automated data flow connectivity capabilities and it will accelerate our Alpha offering that will enable us to enhance the data management and communications of the whole Alpha data platform. And I can go into that in greater detail because it was a real hidden asset for us that we knew about. It will literally position Alpha at the center of the trade flow process as it transmits and transforms data between different systems, buy side, sell side, clients, different counterparties, which they've been in the middle of for years. And most importantly, this will -- We're pleased because it actually will reduce some of the investment costs that we had to build into Alpha. So we were intending to build this connectivity, if you will, for the industry, the ecosystem. So this accelerates it. It helps us move faster in that development process. And the last plus, which I don't mean to make it last is the talent piece. And Brown Brothers has been known to have long tenured experts with well-known reputation in the industry for excellence. They understand the nuances and complexity of the industry that is critical to our long-term success. And you heard from Ron and Eric last week on the announcement that as part of the transaction, we'll be bringing over the 9 senior partners that have operated the business for decades. I've also noted that we've developed a thoughtful integration plan with incentives tied to revenue growth, expense synergies and employee retention. So we're really excited about that last plus also. So all these pluses strengthen our market leadership in asset servicing and allows us to further benefit from our scale, which is increasingly important in this competitive market. So with that, Jason, we'll hand it back to you for questions and answers.

Yes. No, a lot in that. So maybe we can kind of delved into a bunch of the things you both said a little bit further. I guess, first off, you mentioned this takes you from #3 to #1 in terms of assets under custody is kind of the last remaining piece to buy. Just how important is scale in the asset servicing business, and kind of, where do you most benefit from economies of scale?

Yes. So when we think of our customers, Jason, the most sophisticated leading asset managers in the world, they're prioritizing a few things. So obviously, growth is one of those in asset classes. They want to streamline their global operating models. They want to leverage information technology and the products that go with it. So we want to be in that position to help our clients grow, and this business and this industry is growing, but you have to have the capabilities and the locations to service that. So this is just isn't a pure consolidation deal. As I said, we are taking custody operations stack and extracting costs. We have synergies. We're going to accomplish that. but it does bring some really interesting capabilities and opportunities for us. So I'll highlight a few of them. One, it will drive better profitability for State Street, and that will, in turn, allow us to make more investments in our business, in our core platforms and automation to make us more productive. It will give us access to more clients, enabling faster growth for us, absolute revenue growth. It will accelerate market footholds. BBH investors will bring scale, and Eric touched upon some of these fast-growing markets in Japan and EMEA and LatAm that we're excited about. And then lastly, it builds and strengthens on our capital markets businesses, which will help us with more buying power. And I think you mentioned -- Eric mentioned it and Ron mentioned it last week. This possibly was the last remaining growth, global consolidation deal, a product that was out there and available and asset, if you will, that was out there for us. And so we're really excited about what it's going to deliver for shareholders, which will be achieving our medium-term pretax margin, financial targets and bringing revenue growth. It does make us the #1 provider of these services in the world, which is great. I think for our customers, it shows them that we're investing in the business. We feel very -- we're very bullish about the business, and we've doubled down on that and feel very comfortable in doing that. So in the end, I think we're going to be able to deliver to our medium-term targets and build sustainable future growth for our shareholders.

And then you talked about their data integration technology. It sounds like that could be one of the way more underappreciated aspects of the transaction. Maybe delve deeper into just how that fits into your Alpha strategy and how you just plan on leveraging what they bring to the table.

Yes. Let me unpack this a little bit for you. The product is called Infomediary. And I'll talk about what it is, and I'll talk to you about how they've integrated this into their business model. So then we just put some texture around it for us. There's 150 clients. They have over 5,000 counterparties or connections in the industry. They process 2,000 messages a day, 500 million a year. They're plugged into one of the largest 25 global asset managers, they're one of the largest swift message bureaus, if you will, in the world, and largest provider of fund messaging. So it sounds like a very technical thing. Why does this matter? So let me tell you what they've done. They basically integrated the buy side and the sell side and they have been doing that for years. So they connect everybody. If you're using a trading system and a different [ custody ] and a different prime broker or a different sell-side market provider, they have built all that language, if you will, from a technology and a data perspective. So that's great. That's what Alpha is trying to do. We're building a platform. We've got to connect consumers and producers together. But here is what's really interesting about what they've done, Jason, once they go on the data flow and they see all your trades and they see all your positions every single day. They started to build ancillary business services around that. And this intermediated the other providers, whether it's custodians or other providers. So for instance, they have a product called InfoFX, which is part of Infomediary. And once you're sending all the trades to all the different custodians, you can see all the cross-border trades. What they do is they pull all of that out of the custody boxes, they aggregate it and net it down and then direct it to their principal desk to help customers achieve better FX execution. So they were literally disintermediating other providers of these liquidity these services. And there's several like that. Security finance, they do the same thing. They have corporate actions capabilities. So they've been -- once they got into the data flow, they built their business, if you will, their asset servicing business around the Infomediary products. So not only is it a technology asset that plugs us in and accelerates Alpha. It's going to accelerate our liquidity businesses also in Global Markets because it has a very substantial foothold there. So hopefully, you can visualize that. Once you're in the data flow, you can start to build services and capabilities that help your customers that are unique by the way because they see the whole flow. And sometimes, as a pure custodian, there may be multiple providers in the mix, you don't see the full trade flow, and they do see it and they provide those capabilities to their customers through Infomediary. So we're really excited about bringing that to Alpha, as you can imagine.

And then you talked about just the international opportunities. Obviously, some of those are lesser developed capital markets, sometimes more opportunities, more secular trends. but also just different kind of risks. Just maybe kind of balance the kind of the opportunities and the challenges of going deeper into these markets and just integrating these other countries? And just how do we kind of think about the size of that opportunity?

Yes. So I'll unpack that a little bit for you, too. So Brown Brothers really specialized in a offshore business, if you will, in the -- They were the go-to platform for highly complex cross-border investment servicing needs. And to your point, they take time to develop, they're risky, more emerging spaces, if you will, that are happening in the business. So they had a really nice footprint there. Those types of businesses, as you can imagine, are less susceptible to pricing challenges. It doesn't mean that they're not susceptible to it. But again, when you have a high specialized capability that sort of defend yourself a little bit. So -- and those areas that Eric talked about was EMEA, Japan and Latin America. So let me just unpack some of those capabilities for you a little bit. So in Japan -- I'm sorry, in EMEA, I believe the CAGR that we're seeing over the next 4 years, about 7% growth in that particular spot. But it's really in the offshore fund markets in Luxembourg and Ireland that they specialized in and that will bolster our capabilities there. It will also make us the #1 transfer agent in European offshore markets. So these are capabilities that we either didn't have in a meaningful way or didn't have at all that they've already matured and developed over the years. Japan is a very another interesting spot here, if you will, for us. We've always been focusing on Japan as well as Brown Brothers but they have some really leading capabilities, and they'll bolster our global custody and asset servicing franchise in Japan, for both institutional investors and Japanese trust banks, but they also brought together a leading capability in the offshore fund business in Japan, especially in the Cayman Trust side. So those are capabilities that we didn't have but they developed there that are very interesting to us. And then LatAm, you may or may not have remembered I think in 2018, the same week we purchased Charles River, we also purchased a Brazilian bank. So we were leaning into that region in LatAm, that sort of flew under the radar because it was a bigger announcement, obviously, that same week. But that particular market, the AUM is expected to grow 9% over the next 4 years. And these guys are the leading provider of nondomestic assets in the region. So it's a growth market for us in Brazil, Mexico, Peru, Chile, Guatemala and Colombia. So again, well-established capabilities. They probably bear some of that risk in bringing those businesses to bear that we get to leverage. So hopefully, that gave you a little bit more texture on those interesting geographic expansion areas.

And Jason, it's Eric. I'd just add that there are really 2 layers behind what Lou is describing. One is the core asset servicing capabilities and depth that we're bringing to each of these either regions or countries or individual markets. That's one. The other is that, that provides a natural flow of FX lending and other activities for our broader franchise. Remember, we run the largest FX network and franchise for asset managers globally, right? We're routinely ranked at the top of the list. And so we have effectively been following our clients for, I'll say, decades around the world. And now we have international clients that we support in the U.S. and that provides a set of flows that actually roll right into our FX and sec lending network, which is unrivaled. And so it provides a natural kind of ability for us to leverage this opportunity, not just on the cost side, as we talked about earlier, when it comes to scale, but on the revenue side, which is we appealing for us.

No, makes sense. And just maybe just talk to, I think any of these deals, there's always concerns about just client retention. So I guess maybe two-folds. Just one, how have their client -- the clients reacted? And then just secondly, let me touch on just how the -- How is it going to be integrated? Are those clients that were kind of forced on to the operator platform or just how are you thinking about the integration of the 2?

Yes. So I can tell you that, of course, we speak to the Brown Brothers executives every single day here. So the feedback from clients, they're really, really positive, probably more positive than we expected. So I think they see this as a good match. They see some of the benefits and scale that we'll bring. There's more product capability, but they also see that we certainly want to incorporate the way that they conduct their business. So we've been focused on service excellence over for the last 3 or 4 years, and that's paid off for us. And so this is just going to bolster that. So I'd say, overall, the client feedback has been really positive. With respect to Alpha, and are we going to move everyone to Alpha from Brown Brothers? I think there's a couple of ways to think about it. First of all, clearly gives us more clients to talk to. They have a nice middle market franchise that -- We really weren't geared to it. We've been trying to gear ourselves there, and we think Alpha will play really well into that so that we'll be able to have those conversations with clients. Again, they already have a platform in Infomediary, and it wasn't dealing with the front-to-back aspect of what we're providing, which is the full life cycle capabilities for managers, but they were providing some of that data highway, if you will. So we're going to be able to graft, if you will, Infomediary into Alpha, which will make it easier for these customers to really explore using our front-to-back capabilities, whether that's the full offering or Charles River or middle office services. So we're excited about that. They're excited about that because they saw the Alpha platform as a game changer for the industry to use their words, not mine. And so the combination here of their capabilities and ours really is exciting to us that we can provide those capabilities to our collective customers.

And then, Jason, just on the practical point of client retention and integration. You've been in this business probably as long as I have, that we've done 4 or 5 of these large-sized deals over the last couple of decades. So this is not new. It's in our wheel house. We know how to tackle these. They're each different as we just anticipate consolidation plus deal because of the upside, the international reach, some of the opportunities around the balance sheet. But this is a classic opportunity for us. So we're -- we spend the Monday night and Tuesday morning before or as you guys heard about it, we made hundreds of phone calls. We touched base with dozens and dozens of CEOs and COOs because that's what we do. We -- and I think one of the reasons Brown Brothers choose to sell us is they thought that we would bring the best, not only continuity but enhancement, for their clients. So this is a -- in a way, Brown Brothers wants to entrust their legacy to us, and that's what they're doing, and we're going to do our part. And so that's by embracing their clients, bringing them on -- bring them on at the right pace and in the right way, but adding capabilities and functionality at each step. And it's a path that we're well experienced in.

Eric, I guess, while we're at it, you maybe just dig deeper into some of the financials of the transaction. I guess one of the things you talked about on the call was an extra $35 million on EBITDA opportunities from their deposit, moving some of their deposits on balance sheet. Really just extrapolate that in terms of just how much of your deposits you want to move on and just how you kind of balance that with respect to kind of just capital and rates and the like?

Sure. And this is one of the features of the deal that was attractive for us and I think attractive for Brown Brothers, right? They looked at us as someone who had a strong balance sheet and a large balance sheet that could accommodate their clients. And we can accommodate our clients in product suite and FX products that they didn't previously have, but also on the deposit side, as you've just mentioned. So they historically because they had a balance sheet that was order of magnitude at tenth the size of ours. I had to limit the amount of balance sheet support they gave their clients. They didn't trade in non-deliverable forwards in FX. They did very little in overdrafts. They had a very tight balance sheet with $6 billion, $7 billion of deposits on the balance sheet itself. And so on their clients' cash account, what they historically did was created a sweet product. But not a money market suite product, the actual bank suite product because those clients wanted the facility to have bank deposits. And so they partnered with a couple of dozen large banks around the world, and actually on a regular basis. And they've had this program in for at least 10 years, kept a portion of the deposits in this case, about $6 billion of -- about $65 billion on their own balance sheet and swept the rest and gave clients relatively similar pricing on that. As we step in, we'd certainly like to continue this program because this program is a great service for clients, but it's also a shock absorber for us as a bank. And certainly, in periods with low rates, we're not incented as banks to hold deposits because of the leverage ratio effects. And so we like a very compact balance sheet. I've mentioned on the call that we've actually even taken our State Street deposits down between the second and the third quarter, so that we manage our leverage ratio alternative Tier 1 capital that we have. I think for the Brown Brothers program, what it does, it gives us an option to either expand our balance sheet or contract our balance sheet within reason, in line with the interest rate environment. And so in the current rate environment, we could see another -- we said on the call, about $10 billion of deposits coming on our balance sheet, but certainly continuing that robust program of sweeps to other banks. As rates move up, you get a different calculus around NII income, the benefit of that, how that offsets preferreds in a very significant way. And so we can imagine keeping more of those deposits on our balance sheet and sweeping a bit less. But it's all within reason because we'd like to keep the program for the duration. We'd like to keep it ongoing. But I think it gives us an ability to scale as rates move up or down again, scale both ways, and that's quite good for our earnings, EPS and our shareholders.

Makes sense. And then you obviously improved your pretax margin guidance from 30% to 31% on this deal, although it's -- Maybe just kind of flesh out what are the kind of the biggest drivers for you achieving that?

I think there are probably 2 or 3 drivers that really matter. I think the first, if you spend some time with some of the Brown Brothers financials that we shared. It is that they run at a healthy fee margin, right, the ratio of fee revenues to expenses and even richer than we do. So they run a, I think, a well-managed operation, and we showed some pro forma results. And if you just combine their 2020 operations with ours, that would boost on a pro forma basis, our margins by 200 basis points. And that's just from operating the 2 companies as they are, number one. And then number two, rolling in the synergies that we expect, which are primarily the cost synergies. I think over and above that, there's growth that we expect from this franchise. We've put a little bit of that in from a tracking basis from a synergy perspective, most of the synergies were cost, but there's some growth there. And then there's some underlying growth because they serve the classic asset managers who continue to grow in a growing industry, and that's going to be, I think, margin accretive. So the deal itself could add as much as 200 basis points or more to our margin. we chose to be careful with our medium-term targets, right? Those are medium term. They are for, I'd like to say, in the medium term and then forever, we're committed to those. We've lifted that 1%. But if there's more upside over time, we certainly are on a path to raise margin, do that through both the top line growth and then continue to work on the productivity. And we think that this just enhances and gives us not only the ability to raise the margin targets, but as to our confidence in being able to deliver on those.

All right. I have a lot more on this transaction I want to ask, but we only have 15 minutes left. So I want to get to some other topics and maybe we'll come back to that if we have time. But Eric, on the call, you also provided a guidance on the third quarter. I know you're somewhat handcuffed in terms of what you could say, but I hope maybe just get some more texture around that, given we've gotten some questions. But you talked about fee revenue being at the upper end of expectations, aided somewhat by the equity markets. Just kind of maybe delve into that in terms of what are you seeing? What are some of the underlying trends? Obviously, new business has been good. Pricing appears to have stabilized, but just any more texture you provide, I think, would be helpful.

Yes, Jason, I think you've hit on it. And in a way, you saw us this year, if I go back, in first quarter, we had a good top line result on fees across the complex servicing fees, management fees, foreign exchange trading, sec lending is up nicely this year in the first quarter. But I did say in the first quarter that our net new business was relatively neutral, right? That was the tax rate provider. I think in second quarter, I was clear that we had strong performance across the different fee lines, certainly driven by equity market appreciation that was positive. But we also turned positive on net new business for servicing fees. And you saw we also had strong inflows in our Asset Management business in the first quarter and again in the second quarter. So I think we've continued to show some good underlying core growth, net new business. There are a number of different ways. We talk about core growth, but you've seen that. And then into the third quarter, as I said, I didn't get into the individual fee lines, but I described the fee growth to be at the upper end of our 7% to 8% range. I certainly described it as you just said, that equity markets continue to be a tailwind. That's healthy. We had certainly planned on some of that as we gave our original outlook in mid-July. But we've also, as I said, continued to have net new business wins, and you've seen some of those announcements in the press, and I think, strong underlying performance in the business, and that's been positive. So we're -- as I described, we're continuing to see the second quarter playing into the third quarter in a nice way. And some of the historical topics like fee headwinds are well contained more in the I wouldn't say they're ever in the rearview mirror, right? We work on those every day, but I've been pretty clear over the last, I think, 3, 4, 5, 6 quarters that those have stabilized more to, kind of, their long-term trends.

And then you also said net interest income kind of above expectations. You mentioned today that deposits have been down quarter-to-date. Can you just talk to, is that kind of driven by you, driven by your clients? I think, you also mentioned kind of incremental security investments. Just maybe more color in terms of what you're doing with the overall balance sheet.

Yes. We continue to optimize the balance sheet, both for risk-weighted assets and for earnings. And I think we've been able to do that. relatively well in a low rate environment here, and you saw some of that in the first quarter moving into second quarter. In the second quarter, we widened our range of NII on a quarterly basis. This quarter, as I mentioned, we had 2 objectives. One objective was to tamp down on the volume of deposits we took on more than we wanted to a little more than we saw in the industry. And we've been able to contain that. And that's just engaging with our clients, helping them understand what we can do, what we can't do, what our limitations are, what other alternatives we have for them because we have a host of suite alternatives for our clients. So we've been able to gently bring some of those deposit levels down, and that obviously puts us in a comfortable position on Tier 1 leverage on but not needing to change the capital structure too much, that sort of thing. And then on the income side, we are coming in, as I mentioned, a bit above the range. I described that as partly the continued investment process with our investment portfolio and also our balance sheet optimization efforts. And so on the investment portfolio, we've continued to gently reinvest deposits, have a little bit here, have a little bit there. I think you've seen the premium amortization trends in the industry from the Fannie, Freddie pools. We're -- we have a significant position there. And those have, I think, trended in the right direction, kind of in line with models for most of the industry. So I think there's a parallel there that you could draw. And being in line in the optimization. Remember the optimization is around how do you selectively invest in the right securities mix and portfolio and duration. And then how do you continue to carefully expand the lending book, which is the other part of the optimization, and that's been that's been a helpful and remunerative process as well. So we're pleased by -- when we're at this level of low interest rates, and we're bouncing along at the bottom of the barrel as I'd like to say, you do all the small things and you see if you can bring those together. And I think we going into this month as we closed both July and August, we saw some good performance and are pleased to be a bit above that original guide for the quarter.

And then I guess, lastly, you talked about expenses being at the upper end of expectations. Is that driven by just what we're seeing on the revenue side? Or is there something else within that?

No, it's primarily what we see on the revenue side. I mean, we -- as revenues come in, there's always a little more that you're doing for clients, whether it's onboarding costs or bring them on. And then there's the classic with equity markets, which feed into higher revenues for servicing fees and management fees, you either have higher fund expenses on the asset management side, you have more subcustodian costs so we try to keep those in the -- at the right level. If market data tends to tick up as because some of that is charged on the AUC or AUCA or AUM basis. And so it's primarily the revenue-related costs that are just following. What I did emphasize though is that we were within our range just within the upper half of our range, but within the range on expenses. So we feel like we're continuing to drive the underlying productivity that we'd like in the system across comp and benefits, across non-comp and benefits the kind of the engineering work that we're doing, and that's continuing to be, I think, effective, and we're delivering on our commitments there, but there are some of these volumetric or revenue-related costs that you tend to have to absorb. But I think we're pleased with the overall performance that we're showing.

Got it. All right. We got 5 minutes left, and I don't want to forget about SSGA. But I guess maybe on that then, right, this acquisition makes asset servicing even a bigger piece of the pie. Just kind of what is your view of, kind of, SSGA? There's, kind of, always comes up in news reports every now and then in terms of buy, sell, hold, JV, whatnot. You mentioned that flows have been pretty strong in the last 2 quarters. Just how does -- I guess, has your view of SSGA changed at all? Maybe start with that.

Sure. I think, Jason, if I take us back, you've asked before, how do you think about capital allocation and using -- deploying some of your capital? Maybe I can start there. And I've said, I think for the last 3, 4 years, first priority is bolt-on acquisitions and asset servicing. And I used to say, you don't find those every day. but when you do, you want to jump, and I actually feel good about those statements because that's what we did. So that was first priority. Second priority was finding bolt-ons or tuck-ins in asset management, and you saw us do that with the GE Asset Management deal 5 years ago. But those are hard to find, too. But that's certainly an area. And then the third one was we've done our large fintech deal, but you always find $50 million, $100 million opportunities here and there to fill in capabilities or speed development. So that's kind of how we think about capital allocation. I think SSGA more broadly has been really strong as from a business performance standpoint over the last 1.5 years to 2 years. I think we've gone from inflows that were net inflows that tended to be a little bit uncertain to a more regular pace of inflows certainly in the ETF side, where we're seeing that in a very strong way. We've seen that in the cash business. And then I think more recently, over the last 6 to 12 months, we've seen that even in the institutional area, which is an area where we're a large index provider, and that doesn't always put us in the best market position. So I think we've had good performance. I think what we do in asset management and SSGA is continue to build on our strengths and then fill in some of the areas where we're a little lighter. So we've continued to expand the product array in ETFs, and that's been quite effective, not only across the low-cost range, but in different parts of the world and different kind of industry or product types. In institutional, we've been strong on target date funds and some other areas. And so we've gone hard there. So there continues to be, I think, a runway for us. And so we like the business. It provides top line, bottom line growth for our shareholders on the financial side. And it's one that's performing well. And our view is we've got some real opportunities to continue with strong execution that we've been on and certainly continue to do that.

And then I guess, does the acquisition that you just announced and that precludes you from doing something in the asset management space should it come along?

Right now, we're busy. Right? Lou and I and Ron and the entire executives team, we're focused on wrapping our arms around those Brown Brothers clients and bring them on carefully and smoothly on one hand. And on the other hand, we still have 90% of the -- our existing business is non Brown Brothers and we've got to run that incredibly well. from the largest, the smallest to the most distant to the most home -- closest to home client and continue on our journey. So I think we're busy right now. I don't think there's any other way to say it. I think a year or 2 years or 3 years from now, probably 2 or 3 years from now, certainly, we'll look up at the horizon. But for now, we're just incredibly focused on doing what we started and doing it incredibly well, to be honest.

Got it. We have a couple of minutes remaining, and I have more questions. We did get a bunch from the audience on the deal. So I want to at least get to some of those. One of them was, Lou, you alluded to an earn-out structure in the Brown Brothers acquisition. Can you run through the key 1 or 2 financial hurdles you've baked into the earn-out?

Yes. So we're bringing over -- hopefully, we said this up front, 9 of the partners that have been operating this business for decades are coming over. And so all the synergies that were -- that Eric had spoken about, whether it's revenue retention, cross-sell, expense synergies. That's built into the success pools that we've built in for them and the incentive pools for the -- not only for them, but their teams. So it percolates down into deeper levels of the organization. So we wanted to align the success here and the goals and the outcomes that we have with their incentive pools. So it's all the elements that you would think about with the synergies. I don't know, Eric, if you want to highlight any more specifics, but it really comes down to the revenue expense synergies and revenue retention and client retention. And employee retention, too, by the way. We want to make sure we keep the team here to help us preserve the customers, too.

Yes. I'd add, Jason, to what Lou just said is, clearly, like many deals, we've created a success pool for those -- that senior team that's coming over. And we don't always bring over the senior team. We're incredibly excited about that senior team, what they can do in every element of the business that Lou mentioned. But the other thing you've got to keep in mind is, over and above that specially designed success pool, this team, just like Lou and I, who will get PRSUs every year as part of year-end compensation. The PRSUs are all about ROE, EPS growth, margin and we added revenue growth more recently. And so that brings us back to shareholders where we want to expand earnings and then return capital to shareholders because that's what drives growth and ROE in our business. And so this is just another way to do that. just off of a platform that gives us even more room to run.

Great. A lot more questions, but we are out of time. Eric, Lou, thank you so much for joining today, and I look forward to delving more into this transaction and other State Street aspects in the future.

Great. Thanks for having us.

Thank you for having us.