State Street Corporation (STT) Earnings Call Transcript & Summary

Moving right along. Very pleased to have State Street with us. We have from the company, Eric Aboaf, State Street's Vice Chairman and CFO; and Mostapha Tahiri, who's been with State Street since 2020 and was appointed as State Street's Chief Operating Officer in October of 2023. This is his first conference at State Street. Thank you both for joining us today. Before I open it up, Eric wants to read his disclaimer.

Just to remind our audience that today's discussion may contain some forward-looking statements and that actual results may differ materially from those statements due to a variety of important factors, including risk factors in our Form 10-K and our other SEC filings. Our forward-looking statements speak only as of today, and we may not update them even if our views change.

Thank you, Eric. And maybe to kick off the discussion, we could start with some of the recent management changes at State Street. Eric, State Street, as a whole, kind of recently announced the appointment of a new Head of Investment Services, which is obviously, your largest business. Can we walk through what you've changed from a management perspective? And how you're thinking about the revenue opportunity for that business going forward?

Sure, Jason, and thanks for asking. Investment Services is our largest business, more than $40 trillion of assets under cost administration, second largest custodian in the world, 10% of the world's assets. And it's a business that we've been growing. We've been investing in with Alpha and other propositions, and which is an important area of innovation for us. Joerg Ambrosius, as you mentioned, was named Head of Investment Services just recently. He's a 30-year veteran of the industry, 20 years which was with us at State Street. And he comes with just a distinguished background. He ran our EMEA region for Investment Services, and then just last year was elevated to Chief Commercial Officer. And it's really been part of the refresh of the growth strategy that we actually rolled out last year at this conference. So we're excited to have him. And then Mostapha Tahiri, as you mentioned, our Chief Operating Officer, named to that role last year. I think of Mostapha in 3s. He's run for custodial bank's operations. He's run technology and he's run regions. And he's run those in Asia, Europe and the U.S. now. And so it really brings us sort of expertise and knowledge and sophistication that are important to what we do because in truth, operations and technology is our service, right? And that's a good part of what he'll bring, is how to help not only operate those units, but help for our growth trajectory.

Got it. We could put up the first ARS question. What we ask everyone else? I'm not going to ask to comment on this. But Mostapha, Eric, just kind of hyped you up. So not put you on the spot. But State Street's talked about driving efficiencies and scale kind of being key parts of its strategic priorities. And maybe to start, just maybe share us a little bit more on your background? And just more importantly, just comment on some initial observations as you take on the COO role?

Sure, and thank you for having me. So as Eric mentioned, I've been appointed the Chief Operating Officer for State Street in October last year. My role will cover enterprise technology and operations across all our business units and our corporate functions. I joined State Street 4 years ago as a CEO for Asia Pacific region. I expanded my responsibilities to Middle East and North Africa. I've been privileged to be at the forefront of our business development in these 2 very fast-growing regions. Before that, I spent 2 decades with BNP Paribas, both in Europe and in Asia. And again, I've been privileged in, as mentioned earlier, getting exposure to different parts of the business. My background started in operations and technology. I run digital transformation segment, product management countries and regions. So that gives me a widespread of, I would say, exposure to our business and understanding from a global perspective and international perspective. It's exciting to be in this world to be honestly, at State Street, because when you are [indiscernible] this is what we do. So if there are only few businesses in which operational and technology are the core business. So the impact we can create with the team in both our top line and bottom line is important. So that represent the biggest part of our organization today. I took the role January 3. I've been traveling a lot across different regions, meeting our teams, our clients across the globe. To your point about early observations, the feedback I had so far. So a very impressive culture of service within the company. We are in a service industry. So we pride ourselves to be focused on our clients. But speaking with our clients across the globe, that is what the feedback they share with us and what they things stand out with State Street. The second point, which is we are in business of transforming complexity into simplicity. So our clients are focusing on a lot of complex priorities, cost, growth, expansion, regulation. So our job is to be able to deliver this simplicity to them on their behalf. So again, good feedback from clients when I'm interacting with them about our progress in that space. Obviously, they share as well candid feedback about where we need to improve. And the main feedback is about how can we better assemble our solution in a way that we deliver all of State Street's capability to them in a solution mindset as a trusted advisor. So that's the feedback. So that drives me to early observation where we are hitting our business. And my focus is maybe around 3 key points. Number one is how can we further transform our operating model to deliver efficiency and productivity end-to-end. That comes with resiliency, investment into, I would say, controlled framework, cyber, that comes as well with efficiency and cost reduction. Number two, which is very important, is we are -- how we align our operating model with our client needs, and our client needs are expanding. When we look at the segment, we are addressing today all geographies, so how we can make it more seamless and more effective for our clients. And last, obviously, we are a people business. We are a service business. So the transformation of our human capital is very important. So how we equip our teams with the right technology to operate better, faster and more importantly, how we empower people. We are in a global business, which means ability for us to grow faster tomorrow will be about empowering more decision-making, decentralizing some of the capability and execution. So hopefully, that gives you a sense for early observation in the role.

Helpful. I guess, maybe looking ahead, if you could just talk to what are your main focus areas when you think about State Street's productivity objectives? And just really the broader transformation of its operating model?

So let me start maybe by saying, first, productivity has been central to State Street's strategy for the last several years. It's been a strong focus. We made a lot of progress. I think we shared here last year, key, I would say, pillar of this transformation, which are basically simplifying our operations, re-engineering our processes and optimizing our resources. And we have set ourselves very ambitious targets around these 3 pillars, and we've been delivering quite well via these targets. Maybe to share a few examples. One, this year, we reduced 20% our data centers. That brings us to 40% reduction of our data centers across the globe. We are on track to deliver the committed 5%, I would say, a reduction in our legacy platforms. So that brings us, again, on a cumulative basis to 40% reduction on our legacy platform. What's important there is there is still a runway there as we are thinking about our operating model, and we will develop this in a later stage. Third maybe example here, as we are modernizing our technology, we have shared our ambition to move more aggressively towards the cloud. So this year, we have moved our biggest proprietary platform, which deliver our data analytics and investment analytics review into the cloud. We announced early last year -- end of last year, earlier this year, 2 integration of our 2 JVs in India that help us delivering $20 million cost efficiency per year, but more importantly, again, paved the way for more transformation on those in India, which is the biggest center of our operations. We've been extremely focused our -- about our third-party spend. We are on track to deliver 3% to 4% reduction of our IT third-party spend this year. So you can see we've been quite progressing well on what we shared with you here last year. If you step back and look at the whole picture, we've been delivering consistently since 2019 from $300 million to $400 million saving productivity, which this year will be the fifth consecutive year, in which we will send significant investment in our business development through these savings. So progressively through this productivity, we are generating capacity to improve our costs. So now the question, what next? What's going to change? Where we are heading? And in that respect, I think few things to share with you. One, Eric mentioned, Tech and Ops is our core business. That's what we do. That's what we sell. So being -- having a superior advanced operating model, scalable client-centric is the levers for us to win in the marketplace. So it's not a support function. We fund the business with our operation in tech. It's a very important element when we think about transformation. And transformation go beyond productivity. It's go about rethinking our operating model and the way we work. So we are looking at 2 things. One is how can we further align our operating model with clients in a way that deliver solution for them for their future needs, not only today and delivering that in a very cost-effective and efficient manner that the tension we are solving for? And if you look at it how we are doing that, so maybe give you more texture. One, we have been looking at integrated end-to-end operating model and make sure how we can create a standardized [indiscernible] purpose model for our clients. leveraging new technologies, as I mentioned, I will develop that and looking as well at our client archetypes, recognizing we have different client types. They have different needs. And our model, whatever standardized it is, should cater for this reality in different segments have different needs and different geographies may have different needs. So how can we optimize this model in which our clients will embrace our model? What are the benefits we would expect? Three, one, will enable our client to do more, will allow them to drive more efficiency and grow faster because they don't have to invest anymore, we can leverage with the depth of our solution, which are fully integrated. That's basically translated into business code. The second, our cost to serve reduction. And again, they have 2 elements in it. One, today, in this business, the legacy is important. So we've been building bespoke operating models and historical setup for past which trigger today, bringing down our efficiency. So by having an advanced model, our clients embrace that model, we will eliminate all these bespoke processes and models. More importantly, just to give you again numbers, Tech and Ops represents $4.5 billion of our expenses, which is 50% of our cost base. So having an obsessive focus on this part on transforming our operating model, will go directly in delivering more efficiency for our clients and for our shareholders. The last benefit is innovation. We are in a fast-moving world. So having a modern operating model allow us to assemble quickly solution, our ability to bring to market faster innovation will only go by having a clear standardized operating model, which is fit for purpose to plug innovation and allow us as well to work with new innovation in the marketplace in which we can bring it to clients and seamlessly -- integrate it seamlessly. So that's basically how we look at the future. I hope that gives you some color. We are still focusing on India, as I mentioned earlier. So we have the fact that we integrated a JV to give you an idea why this is important. It basically allowed us to unlock transformation in there. So today, we've been dependent on different third parties. Now we own all of it. The speed of transformation we prove ourselves in our own operations is very quickly implemented to this new business, but our ability now to co-locate operations and technology allow us to drive further transformation from those centers. So initially, it's been an execution center, a local center. It's becoming more and more an innovation center for our growth, which is important when you look at the tenant there. We are merging more and more Tech and Ops in the way we optimize the way we run op and technology together in engineering future models across the segment I just mentioned and removing frictions in the way we operate and provide a seamless experience for our clients. And last but not least, data becoming an important element, obviously, for our clients and for us. So we are extremely, I would say, focused on how we govern data across the organization for our clients and as an enabler as well to run more AI across the organization. We have 10 initiatives ongoing today within our operations team, and we tend to likely grow exponentially the investment in that space. So hopefully, that gives you a color. I'm sure Eric, myself and others will come and give you more information as we are sizing those opportunities.

I guess, Eric, maybe one way to think about it is last year at this conference, you signed up for positive fee operating leverage. And then on the July earnings call, you kind of update to positive overall operating leverage. Given everything Mostapha just said, when you start to think about 2025, could some of these initiatives help lead to kind of continued positive operating leverage for the company as a whole?

Jason, that's our intention. I mean I think you've seen us both philosophically and practically be highly focused on fee operating leverage and total operating leverage because that's the heart of our business, right? How do we grow at a healthy pace with our clients, across segments, regions as Mostapha described. And then how do we systematically drive productivity. And you've been with us since really 2019, 2020, when we started our journey on productivity. What Mostapha has been describing here is what we've been doing over the last year, this year and in the coming years. And it's just going to be another iteration in that manner. It's hard to predict 2025 right now. We're in the midst, as many other institutions are, of budgeting and planning. But the goal for us, right, the commitment and the intention is continuing to build on the good business momentum from this year, which has been strong. As you said, we took up our guidance in the middle of the year after a good start in the first 6 months. And then continuing this, I guess, integrated approach where the more productivity and savings that we can drive, the more we can invest in the business and the more we can accelerate the growth. And we can do that now across alpha, across software, across private markets. And it's really the interrelationship between operations and technology and that reinvestment which is what we're focused on, but you have it right. Fee operating leverage, total operating leverage, those are our beacon, so to speak, and we see that momentum and that continuing.

Got it. Maybe quickly on to the individual businesses, starting with investment servicing. I guess, in terms of new business, you talked about strong pipelines, that fee -- servicing fee revenue sales going $350 million to $400 million this year. which is up from last year, just maybe more context in terms of what you're winning, who you're winning it from and where it's coming?

Sure. Let me start, and then I think Mostapha, from his background, I'll add some examples. But some of the history here is that we've historically won $200 million, $250 million of sales in the Investment Services business. But what we have designed over time, whether it's through the alpha value proposition or reinvestment in custody, our investment in expansion in private markets is to our ability to actually sharpen those product offerings and effect in a positive way our ability to go to market, in particular with the C-suite because that's who's been buying the services that we offer. This past year, we delivered $300 million of sales in the Investment Services business. We've committed this year to be at $350 million to $400 million. We feel comfortable with that target for the full year. And it's always a little bit lumpy, backloaded, typically in our business, but the trailing 4 quarters were up at $330 million of sales so far. And so it's starting to show the momentum that -- and acceleration that we'd like.

I would just add, I think, as a part of this growth when we think about, again, how we service our clients, how -- what we do as a service capability we deliver? And how we do it are important because our clients are outsourcing their business to us. So they have a look through and how we do stuff. So let's come to risk, come to resiliency, come to inefficiency. So the way we operate is a differentiator too and allow us to win business faster. The second thing we've been as well focusing on onboarding. It's been -- it's the first experience our client has with us when they enter relationship with us, the first experience of service was onboarding on that, improving this client experience, obviously, but accelerating and shrinking as well our time to basically onboard clients, which allow us to improve our installation of revenue.

Got it. We're at the halfway marker. So I'm going to maybe pause kind of the business drivers and maybe if we could switch to more of the financial aspects and kind of come back to this business questions at the end? Eric, I guess since we last spoke in July, kind of puts and takes in the markets in the environment. Perhaps you can just provide us an update in terms of kind of what you're seeing thinking for the third quarter rest of the year, how do you want to frame it?

Sure. Let me do that. And as you know, at a macro level, we've seen a bit of variability in the first 2 months of the quarter. And despite the selloff we saw in early August, daily average equity markets have been generally constructive for the quarter-to-date. Similarly, while FX volatility increased in early August, it was relatively short-lived, interested expectations though and long-end yields have moved notably lower in a consistent way, given some of the economic data that we've seen, including last Friday. And as a result, we've seen a weakening U.S. dollar, which for us is generally a tailwind to revenue and a bit of a headwind to expenses. On balance, Jason, we feel -- and we continue to feel good about how the full year is shaping up, although I would highlight the potential for variability given the macro and political environment we're operating in this fall. As we previously described, we expect to deliver both fee and total operating leverage this year, excluding notable items. And our full year outlook, ex notable volumes, continues to be mostly in line with our expectations that we provided in mid-July, and we'll need to see how things play out, obviously, over the next few months. So thinking about the year, I'd make the following observations if you just want to keep track of performance in various areas. First, assuming current equity market levels, we continue to expect total fee revenue growth in the 4% to 5% for the full year, comfortably towards the middle of that range, with fee revenue growth up both sequentially and year-on-year in the third quarter and fourth quarter. And again, assuming unstable equity markets, good ongoing volatility in the FX business, some amount of specials in agency lending, we've got good confidence in the top line. On NII, we continue to expect full year NII to be up slightly, which implies that the second half of the year will trend somewhat below the first half, in line with our previous expectations. And what we see while we still have a few weeks to go in the quarter, total average deposit levels, which are important for the underlying franchise, are currently holding up well despite some continued and expected rotation in noninterest-bearing balances. Turning to expenses. We expect a step-up from 2Q to 3Q with expenses up slightly quarter-on-quarter, in part driven by higher volumes as well as a weaker dollar. And for the full year, volume-related costs, the impact of the depreciating dollar will also impact expenses. So a little north of 3% makes sense based on what we're seeing today. And of course, we remain confident that we'll be able to deliver a healthy amount of positive fee and positive total operating leverage excluding notable items. So I think good overall performance and good momentum, including -- into next year as we talked about earlier. And then just to round out on a few, I'll call them, cleanup items. Our prep costs will be about $48 million in the third quarter and $54 million fourth quarter, reflecting the impact of the recent issuance in call. And as we stand here today, our press dividends will then moderate down to about $46 million a quarter. Just a quick note on 3Q provisions. We could see it around the same levels we saw in the first quarter, and we continue to see some quarterly lumpiness, but nothing in particularly moving in any systematic way. And then finally, we continue to expect an acceleration in buybacks in the back half of the year, and we are targeting buybacks of up to $450 million during this third quarter. Of course, and as a meaningful caution, we still have a few weeks left in the quarter and another quarter to go for the -- to finish the year. We'll see how things continue to evolve. But overall, our outlook is generally consistent with what we spoke about back in July, and we feel good about driving that positive fee operating leverage and positive total operating leverage for the year, excluding notable items.

A lot in there?

Yes.

Good thing I asked early on.

Yes. I think a lot in there and good underlying momentum because we started this year with a view that we want to drive top line growth. We want to drive productivity so that we can keep reinvesting those for this year and next year. And we've been finding that our -- both our investments and our execution have been evolving in the right direction this year as we've moved through.

If we could pull up the next ARS question. But Eric, you mentioned kind of deposits holding up well. Could you maybe talk to, I would say that's probably better than expected, at least results we've seen so far. Trying to delve more into in terms of what you're seeing in terms of kind of that mix? And just how you're thinking about deposit pricing that's widely expected to cut next week? Just kind of your thoughts around that?

Yes. I think we've been pleased with our deposit levels over the last 3, 4 quarters. And part of it is driven by the external environment, the Fed's stance on interest rates, how clients react or pricing. But a good part of it is also how we engage with clients. We've talked in the past about how we want to engage with clients around their cash and some of that cash goes on deposits. Some of it goes on into our money market funds, some of it we sweep to their own funds, in some cases, where they're expert, some of it goes into repo. And so there's a kind of range. And I think what we've become increasingly sophisticated in doing is actually engaging with our clients all the way up to C-suite to help them understand that we're there for them to support them in their cash holdings. Because every client needs all of their cash. They need some of it for their custodial accounts, and they need some of it as a plan to invest. And so it's been healthy, I think, over the last couple of quarters. I think going forward, as said, just price -- Fed funds rates. Certainly, deposit pricing will broadly move and track to that. And I think the guidance I gave or the perspective I'd share is just like there was a beta that moved slowly and then more steeply upwards with rising rates. We largely expect a relatively symmetric adjustment to deposit pricing as rates come down, but we'll just need to play that out. We want to be there for our clients. We want to be there and provide a healthy service at a good price. And I think part of what's evolved here during this interest rate cycle, in particular, is that our kind of integrated earnings and profitability and balance of trade with clients really spans the whole relationship, everything from servicing fees or FX trading, our agency lending, our software service and our deposits, they are all an integrated part of what we do and how we think about profitability. And in turn clients, especially as we've gone more engaged with the C-suite over the last 3, 4 years, I think are recognizing that, which makes for really a healthy partnership and one that gives us good -- I think good outcomes regardless of the level of interest rates.

I could put up the next ARS question. But Eric, you reiterate guidance of NII modestly higher for the full year, although you were talking down 5% in April and down 10% in January. So things have, I guess, outperformed doing those expectations. But kind of part of your guidance, it's 2H below 1H. So just maybe you could talk to, I mean, what drove that outperformance? Maybe why that's not continuing? And just how you kind of think about the second half of this year as a jumping off point for next year?

Let me take that in 2 parts. First, the outperformance was driven from a couple of different avenues. First, going into this year, right, we had faced a set of declining deposit balance quarters. And the trend line was important to consider. I think some of what changed was the Fed's stance on the reverse repo operation that they operated. They started with several trillion dollars of a reverse repo, which generally actually serves our clients, the asset managers, and actually start to thin that down by $0.5 trillion to almost $1 trillion per quarter, which effectively was an offset to their quantitative tightening as they adjusted their balance sheet. And so that was a healthy tailwind, and I would describe that in the environmental kind of side of the ledger. On the client connectivity side of the ledger, we've been quite effective, and I think we've been pleased on just the engagement with clients that I just described, and that's been meaningful. And that helps clients see us as a destination point for their cash. And so to be honest, I think we've overperformed relative to our expectations, probably against the trend line, probably against the Fed's changing stance on some of their programs and partly because of execution. Going forward, the shape or the direction of NII is really driven by 2 factors that will -- 2 or 3 factors that are pulling there. One is we continue to have the last bit of well [indiscernible] deposit rotation from interest-bearing to noninterest-bearing. And a little bit of final changes in deposit pricing, and those are continuing to play through the book. We've got good visibility into those, which is why we've been able to forecast NII on a quarterly basis with better accuracy. On the other side of the ledger, we've got 2 tailwinds. First, the investment portfolio rolls over. So there's a natural recouponing at higher rates. Now those higher rates are starting to trend down, but they're still higher than the portfolio that was built 2, 3, 4 years ago. And so that continues as a tailwind. And then the part that we do control is the amount of lending and our investment portfolio positioning because what we've continued to find just like we're there for clients in the deposit side and their cash, we're there for clients to lend to them, right? We lend to private markets' clients for capital call financing. We do BDC lending. We do CLOs. We actually support our clients, which then reinforces, right, their interest in doing even more administrative services business. And so that -- those kind of opposing factors, the recouponing of the portfolio and lending, are I think over the next couple of quarters, going to begin to offset -- more than offset the deposit rotation that we -- that we've been seeing slow down, but -- and that we're almost through at this point.

The room seems to think you'll have continued NII growth into 2025?

I like the optimism, and we'll -- I think my stance at this point a bit, as you talked about expectations for 2025, is it's a little early to be sure, right? And in truth, NII will flow right to the bottom line where shareholders will be an important part of how we continue to buy back shares and return capital. I think we'd first like to get through and finish third quarter, get through fourth quarter, and then we'll have a good view. But clearly, the range of outcomes on NII are going to be a lot better than down 10%, down 5% that we expected this year. And so we'll see where it shakes on.

Maybe a couple on fee income questions. But the only thing to get is servicing fees decline year-over-year in the second quarter despite assets under custody of 12%. At what point do you think you can see AUC growth kind of translate into organic service and fee growth?

Jason, through the second half of this year and starting with this quarter, the third quarter, and then into the fourth quarter that we expect that to turn. Part of the challenge we had in the second quarter as we had one of the largest headwind from our previously described client adjustment and exit came through in the first half of the year, including the second quarter. And then we also still had some lingering impacts of clients holding more cash in their accounts as opposed to equities, emerging market equities, those that have the widest pricing levels. And so those 2 headwinds, in particular, along with a bit slower installation, which is really on us, contributed to the year-on-year decline in servicing fees. I think into the third quarter, we see good momentum, which is what's shaped our full year outlook. And honestly, the partnership with -- that Mostapha has with Joerg Ambrosius taking on the Investment Services business is really sharpening our focus on that onboarding. And as we accelerate that, we can see fee revenue growth, servicing revenue growth up both year-on-year and quarter-on-quarter for a couple -- into the next couple of quarters, which is -- which really good momentum to us.

I guess maybe on the asset management fee front. Obviously there's been beneficiaries of the higher market average levels. But we've seen net outflows and fee reductions in ETFs, just maybe some context in terms of what you expect for that line?

Yes. Our Asset Management business is really 3 businesses in 1. First, it's an institutional business, really institutional index, global, largest clients in the world, customized index, everything from asset owners, asset managers to insurers. It's, number two, an ETF business, right, more than $1 trillion of ETF, both oriented towards institutions and now to retail with our low-cost funds. And then finally, a cash money market business that really connects with the custodial operations. The last couple of quarters, you're right, have seen some lumpiness and in particular, in the institutional area, we've seen a handful of clients either rebalancing or adjusting their positions. And given our large index equity position or developing positions in other areas a little more outflows than we would have expected. But we've also seen strong growth. I'd point to the European institutional business has been strong. Target date funds and 401(k) plans in the U.S., were close to or the fastest growth company in that area as a supplier of those offerings. And then our fixed income index business and institutions has become increasingly strong. And so I think there's a level of innovation that we've begun to build into that offering that's going to be productive over time. So clearly, institutional asset management businesses will have some lumpiness, but I think we've seen some good strength in some related areas and have some optimism around the momentum into the second half of the year.

Got it. Maybe the next ARS question. Just to circle back on expenses. You mentioned up a little north of 3% for the full year with your prior guide. Is that all kind of currency related?

It's primarily currency related. And then what we have seen is -- I talked about FX volatility, but we've also seen higher FX volumes, first quarter, second quarter and third quarter, which is actually really a positive for us because it means our engagement with clients is deeper. It's been around the world, a broad cross-section of clients. And we'll serve clients like that all day long. If the volatility is a little lighter, but the volumes are there, we want to be there for them. because we know over time that will be monetized, but that also comes with some brokerage costs and so forth, which goes through the expense line.

And I guess more longer term, you used to talk to this pretax margin target you're approaching, I think, 29% last quarter. Is 30% still the right target? Is there some upside to that given what Mostapha talked about? Just how you're thinking about that given all you know today?

We do still think it's very targeted. I mean it's -- you saw us from 2019, 2020, '21, '22 build up at a point of margin per year in this area. We took a step down with NII in particular, falling and a little bit of reset in equity markets. I think if you think through our full year guidance for this year, we'll be up in margin probably by around 1 point relative to last year. So we're back on that positive trajectory -- and we see with growth momentum and productivity, and I'll describe the new opportunities that Mostapha is bringing to us between Ops and Tech, the integration the simplification for our clients, that's going to be a viable way to deliver on these targets. At the same time, we want healthy margins, but we want also margins that facilitate an ability for us not only to drive productivity, but also the reinvestment business. And so the net of that is, in our minds, around 30% and a target that we're going to continue to work towards, and we think we can deliver on over time.

And our final, I guess, rounding out the discussion on capital. You bought back $300 million of stock in the whole first half of the year. It sounds like $450 million in the third quarter. If I do math quickly, another $450 million in the fourth quarter, probably get to the upper end of the 80% to 90% kind of payout ratio target. Is that how we should think about it? And then how you're kind of thinking about 2025 when you put together the budget?

Yes. We certainly -- Jason, as you said, we are committed to accelerating our buybacks in the third quarter, right? It was $100 million in the first quarter and $200 million in the second quarter. I think going into the third quarter, we're probably closer to planning on about $300 million. Part of the uptick to $450 million really is that as interest rates have fallen, you get an AOCI benefit that adds to capital and so that gives you more room to do buybacks. So third quarter, we think, is particularly strong. Fourth quarter, let's just see what -- where interest rates go. But you can see our commitment is to return substantial amounts of capital to shareholders, 80%, 90% on a full year basis. And then what we've said in the past, along the lines of 30% margin, 80% or more capital return. It's kind of how we want to run the business to really provide the best outcomes for our shareholders.

Great. Please join me in thanking Eric and Mostapha for their time today.

Thank you.