Good day. Welcome to the Northern Trust Corporation fourth quarter 2022 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jennifer Childe. Please go ahead, ma'am.
Thank you, Marjorie. Good morning, everyone, welcome to Northern Trust Corporation's fourth 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, Mark Bette, Briar Rose, and Grace Higgins from our investor relations team. Our fourth quarter earnings press release and financial trends report are both available on our website at northerntrust.com. On our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This January 19th 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 February 18th. 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 13 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 you to our fourth quarter 2022 earnings call. I'd like to start by thanking our teams across the company for their strong execution throughout the year in the face of significant global, political, and market turmoil. It is our partners' unwavering focus on supporting our clients in uncertain and volatile times like these that truly differentiates Northern Trust. For the full year, revenue was up 5%, including trust fee growth of 2%, and our return on average common equity was 12.7%. Excluding the impact of $303 million in charges detailed in the presentation, revenue for the full year grew 8% and our return on equity was 14.9%.
Fourth quarter results reflected trends that were consistent with those we saw through the first three quarters of the year. On a year-over-year basis, weaker markets pressured our trust fees. This was more than offset by strong increases in net interest income. Within our wealth management business, assets under management and advisory fees grew sequentially in the fourth quarter. Total fees declined, however, due to the lagged effect of markets, strategic price reductions in our index funds, and shifts in client allocations out of liquidity products. New business generation and wealth management was healthy in 2022. We did see some deceleration in the second half of the year as market activity waned.
We continue to execute on our growth strategy in wealth management, including increasing the size and effectiveness of our sales force, expanding our digital marketing efforts, and leveraging the differentiated capabilities of The Northern Trust Institute. In asset management, assets under management were up sequentially, but fees declined due to the outflows we experienced in our liquidity and index products as a result of the impact of both weaker markets and clients seeking alternatives. We did see solid increases in alternative funds throughout the year, including year-over-year growth of more than 20% in the fourth quarter. Our ETF complex also continued to perform well, with year-over-year organic growth of 12%. Our product launches during the year focused on ESG capabilities, including three new ESG funds in the fourth quarter. Within asset servicing, we delivered a solid finish to the year.
We saw healthy momentum throughout the year with our Whole Office offering, as investment managers are increasingly considering outsourced solutions in the face of continued margin pressure and the challenging macroeconomic environment. Whole Office integrates our global asset servicing platform with innovative partners facilitating access to new technologies, services, and solutions. One recent client win offers an insight into what differentiates us in the marketplace. After an exhaustive RFP process during which we conducted a complete review of a large U.K.-based asset manager's front-to-back operating model, we were selected to provide a holistic full suite of core asset servicing, capital markets, and data and analytics products and services. This client was particularly impressed with our ability to digitalize their investment process to maximize the value of their data. We learned that this client chose us because of our combination of market-leading tools and first-rate client service.
We also saw continued strong demand for our Integrated Trading Solutions offering throughout both the quarter and the year. In 2022, the number of clients on the platform increased 20% year-over-year to nearly 100. Our won but not transitioned backlog that we spoke to you about last quarter started to transition in during the fourth quarter. Our pipeline remains strong. Expense growth continued to be elevated in the quarter, reflecting investments in people and technology to strengthen our resiliency, advance our digital modernization efforts, and drive growth in the business. All critical initiatives. The level of growth is too high. Some of the charges we announced today reflect early steps we are taking to bring down the trajectory to better align with the current operating environment and create capacity for profitable growth.
To underscore our commitment, we recently launched a dedicated office of productivity to reinforce our approach to driving efficiencies throughout the company. Jason will provide more color on in his prepared remarks. In closing, as we begin 2023, we remain well-positioned to navigate the ongoing macroeconomic and market uncertainty from a position of strength. Our focus is on driving organic growth, improving our productivity, and continuing to bolster our foundation. I'll now turn the call over to Jason.
Thank you, Mike, and let me join Jennifer and Mike in welcoming you to our fourth quarter 2022 earnings call. Dive into the financial results of the quarter starting on page two. This morning, we reported fourth quarter net income of $155.7 million. Earnings per share were $0.71, and our return on average common equity was 5.9%. Our results were unfortunately impacted by the inclusion of $266 million in pre-tax charges, which reflect $199 million in net income impacts and $0.94 in earnings per share impacts. These charges included the following on a pre-tax basis. $213 million of investment security losses related to the intent to sell certain available for sale debt securities, which were subsequently sold in early January. $32 million of severance related charges.
$14 million of occupancy charges related to early lease exits, and $6.8 million of pension settlement charges. Also recall that in the first quarter of this year, we implemented an accounting reclassification of certain fees, which continues 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. Including the charges previously mentioned, year-over-year, revenue was down 8%, expenses increased 13%, and net income was down 62%. In a sequential comparison, revenue was down 13%, expenses were up 8%, while net income was down 61%. Excluding the charges previously mentioned, year-over-year, revenue was up 5% and expenses increased 9%. Excluding the charges previously mentioned on a sequential basis, revenue was down 1% and expenses were up 5%.
Let's look at the results in greater detail, starting with revenue on page four. Year-over-year, unfavorable currency translation reduced our revenue growth by approximately 200 basis points. Trust investment and other servicing fees, representing the largest component of our revenue, totaled $1 billion and were down 6% from last year and down 3% sequentially. Our trustees continue to be unfavorably impacted by the weaker equity and fixed income markets and unfavorable currency movements. As a reminder, a significant portion of our trust fees are recorded on a month or quarter lag basis. This quarter's performance is largely reflective of the third quarter's market performance, as well as the months of October and November.
The year-over-year in sequential declines in all other remaining non-interest income are primarily driven by the $213 million pre-tax investment security loss due to the intent to sell certain available for sale debt securities. These securities were subsequently sold in early January 2023, which I'll describe in more detail in a few minutes. Net interest income on an FTE basis, which I'll also discuss in more detail later, was $550 million and was up 48% from a year ago and up 5% sequentially. Let's look at the components of our trust and investment fees on page 5. For our asset servicing business, fees totaled $588 million and were down 6% year-over-year and down 3% sequentially.
Within asset servicing, custody and fund administration fees were $406 million, down 11% year-over-year, importantly, they were flat sequentially. Custody and fund administration fees decreased from their prior year quarter, primarily due to unfavorable markets and unfavorable currency translation, partially offset by new business. Assets under custody and administration for asset servicing clients were $13 trillion at quarter end, down 16% year-over-year, up 6% sequentially. The year-over-year decline was primarily driven by unfavorable markets and currency translation. The sequential increase was primarily driven by favorable markets and currency translation. Investment management fees within asset servicing were $124 million, up 9% year-over-year, down 9% sequentially. Investment management fees decreased sequentially, primarily due to asset outflows and unfavorable markets.
Investment management fees increased from the prior year quarter, primarily due to lower money market fund fee waivers, partially offset by asset outflows and unfavorable markets. Assets under management for asset servicing clients were $898 billion, down 25% year-over-year and up 3% sequentially. The year-over-year decline was driven by asset outflows, weaker equity in fixed income markets, and unfavorable currency translation. The sequential growth was driven by favorable markets and currency translation, partially offset by asset outflows. Moving to our wealth management business, trust, investment, and other servicing fees were $454 million, down 7% 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 and asset outflows, partially offset by the elimination of money market fund fee waivers.
Sequentially, the decline within the regions was primarily driven by unfavorable markets, asset outflows, and a strategic repricing initiative. Within Global Family Office, the year-over-year growth was driven by lower fee waivers and new business, partially offset by unfavorable markets. The sequential decrease was mainly related to asset outflows, unfavorable markets, and the repricing initiative. Assets under management for our wealth management clients were $351 billion at quarter end, down 16% year-over-year and up 5% on a sequential basis. The year-over-year decline was driven primarily by unfavorable markets and asset outflows. The sequential increase was primarily due to favorable markets. Moving to page 6. Net interest income was $550 million in the quarter and was up 48% from the prior year.
Earning assets averaged $134 billion in the quarter, down 10% versus the prior year. Average deposits were $116 billion and were down 14% versus the prior year, while loan balances averaged $42 billion, up 6% compared to the prior year. On a sequential quarter basis, net interest income grew 5%. Average earning assets were up 1%. Average deposits declined 2%, while average loan balances were up 2%. The net interest margin was 1.63% in the quarter, up 64 basis points from a year ago and up 5 basis points from the prior quarter. The prior year quarter increase is primarily due to higher average interest rates. The sequential increase is primarily due to higher average interest rates, partially offset by an unfavorable balance sheet mix. Turning to page seven.
On a year-over-year basis, expense growth benefited by approximately 300 basis points due to currency translation. As reported, expenses were $1.3 billion in the fourth quarter, 13% higher than the prior year and 8% higher than the prior quarter. The current quarter's expenses included $53 million in charges. These charges in part reflect steps we're taking in conjunction with the launch of our Office of Productivity to shift the way we approach and manage our expenses. Through this initiative, we expect to leverage data and analytics to help us better understand the efficacy of our spending so as to optimize our cost base and drive greater efficiencies throughout the organization. We'll update you on our progress in the coming quarters as appropriate. Excluding charges in both periods, expenses in the fourth quarter were up 10% year-over-year and up 5% sequentially.
Recall that the current quarter includes the impact of the previously mentioned accounting reclassification, which increased other operating expense by $8.6 million compared to the prior year. Compensation expense was up 15% compared to the prior year and up 6% sequentially. The year-over-year growth was primarily driven by higher salary expense, in part due to inflationary pressures and the previously mentioned severance-related charges, partially offset by favorable currency translation. The sequential increase is primarily due to the aforementioned severance-related charges and higher salary expense, partially offset by lower incentives. Employee benefits expense was down 4% compared to the prior quarter and down 6% sequentially. The year-over-year decrease is primarily driven by lower ongoing pension expense, partially offset by higher medical costs.
The sequential decrease is primarily due to lower pension costs, including the lower pension settlement charge relative to the prior period, partially offset by higher medical costs. Outside services expense was $233 million and was up 4% from a year ago and up 5% sequentially. The year-over-year increase was primarily driven by higher technical service costs, legal services, and consulting services, partially offset by lower third-party advisory fees and sub-custodian expense. The sequential increase was primarily due to higher technical services costs and legal services, partially offset by lower sub-custodian expense and consulting costs. Equipment software expense of $229 million was up 17% from a year ago and up 8% sequentially.
The year-over-year and sequential growth are both primarily driven by higher software costs due to continued investments in technology as well as inflationary pressures and higher amortization. We also recognized a $3.8 million termination charge associated with our mainframe strategy. Occupancy expense of $66 million was up 27% from a year ago and up 28% sequentially. The year-over-year and sequential growth were both primarily driven by the previously mentioned $14 million of charges related to early lease exits. Other operating expense of $108 million was up 37% from a year ago and up 31% sequentially. The year-over-year increase was primarily driven by higher staff-related expense, business promotion, and miscellaneous expense.
The sequential increase is primarily due to higher business promotion, supplemental compensation plan expense, and miscellaneous expenses in the current period. Turning to the full year, our results in 2022 are summarized on page eight. On the right margin of this page, we outline the charges that we called out for both years. Including these items, net income was $1.3 billion, down 14% compared to 2021, and earnings per share were $6.14, down 14% from the prior year. In 2022, these charges had a $227 million impact on net income and a $1.08 impact on earnings per share.
In 2021, these charges had an $18 million impact on net income and a $0.07 impact on earnings per share. Full year revenue and expense trends are outlined on page 9 and include the charges previously mentioned. Trust investment and other servicing fees grew 2% in 2022. The growth during the year was primarily driven by lower money market fee waivers and new business, partially offset by unfavorable markets and unfavorable currency translation. Net interest income grew 36%. Average earning assets during the year decreased by 10%, while the net interest margin increased 64 basis points, driven by higher average interest rates. The net result was revenue growth of 5% in 2022 compared to 2021, and expense growth of 10%.
Excluding these charges in both periods, revenue for the full year was up 8% from the prior year, and expenses were up 9%. Turning to page 10, our capital ratios remain strong, with our Common Equity Tier 1 ratio of 10.8% under the standardized approach, up from the prior quarter's 10.1%. Our Tier 1 leverage ratio is 7.1%, up from 7% in the prior quarter. A decrease in net unrealized losses in the available for sale securities portfolio and less foreign exchange volatility were the primary factors in this quarter's increase in capital ratios. Accumulated other comprehensive income at the end of the quarter was a loss of $1.6 billion.
During the quarter, we returned $158.9 million to common shareholders through cash dividends of $158.8 million and share repurchases of $0.1 million. In early January of this year, we sold $2.1 billion of higher capital consuming, lower yielding non-HQLA debt securities and reinvested the proceeds into lower capital consuming, higher yielding HQLA assets. This repositioning offered a unique opportunity to de-risk our portfolio, free up capital, and improve our liquidity ratios while simultaneously generating more attractive returns. With that, Marjorie, please open the line for questions.
Thank you very much. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypads. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one. We'll pause for a moment to allow the opportunity to signal for questions. While we do, we'll take our first question from Glenn Schorr from Evercore. Please go ahead.
Good morning, Glenn.
Good morning. I guess I'll try to focus on deposits. The interest bearing down 12, the non-interest bearing down 48% year-on-year. There's a clear declining impact on a sequential basis. I'm curious, a much higher rate paid and a decelerating outflow of deposits, can you help us think through what to expect in 2023 on both attrition mix and betas for deposits? Thank you.
Sure. Well, let me. You know, there's a lot going on with the balance sheet, with the repositioning as well. Let me give you a couple of the key ingredients and then let me know if there's additional detail you'd like. Just on volume, we saw volume up at, well, down less to 116. We still think that that 110-115 is a good starting point for first quarter. As you know, the quarters have some seasonality. We usually get a spike at the end of fourth quarter. First quarter gets some build from tax preparation, in the second quarter we'll start to see outflows as clients pay taxes. As you think about first quarter, at least 110-115 is still a good range.
Let me take beta in 3 different, or rate really, in 3 different parts. First, beta, and you noted that beta was high. We'd indicated we thought it would be at this point in the cycle, and we still think that that's a pretty good indication of what we'll look like over the course of the next 3 months. Beta for interest-bearing deposits was 75-80%. It was in line. We do anticipate that to be similar. Balance sheet repositioning, that takes $2 billion, a little bit more, at what was about 2-2.25%, it reinvested on the short end of the curve a couple hundred basis points higher.
Right now we're mostly overnight. We'll continue to think about what we want to do with that from a non-HQLA perspective. At least the starting point you should be thinking about is moving that $2 billion to overnight. Just lastly, as we're talking about rate, just a quick reminder, the runoff on the portfolio, it's just over $1 billion. You're moving that from 2.25 to higher rates. We're repositioning as we mature securities to the short end, so there's a similar pickup there. Last thing on outlook, just as you think about first quarter, is just remember that day count costs us about $8 million going from fourth quarter to first quarter. Those are the big ingredients. Hopefully, that's helpful.
Wow, that's well prepared. Thank you. Appreciate it. Maybe just follow up is similar question on average earning assets up 1% quarter-on-quarter. Should we feel in the range of stable now? Or I guess...
Yeah, it's hard to tell. I mean, I think about it very much from where obviously, as you know, it's a, it's a liability-driven balance sheet. The commentary on deposits is really what's driving the size of average earning assets in general. What we saw in the quarter, it certainly does look like things, like client behavior has settled and leveled out a little bit. We're not calling it flat at this point. We're still operating in a way that we're anticipating some muted but continued decline. That's why that 110-115, that's really the drive. You should think of that as the driver of average earning assets.
Okay. I appreciate all that. Thanks.
Sure.
Thank you. We'll take our next question from Betsy Graseck from Morgan Stanley. Please go ahead.
Hi, Betsy.
Hi, good morning. I heard all the commentary around, you know, the expenses and, you know, the efforts to, you know, kind of slow the growth rate as we go forward here. Maybe you could help us understand maybe the pace at which you think you can do that. Because when I strip out the one-timers from the expense ratio, it still looks like the expense ratio moved up a bit around 400 basis points Q-on-Q. How should I think about the trajectory from here? Does it stabilize where it is? Is there still some, you know, push up from here, or should we expect that, you know, the arc begins to come down in 1 Q? How should we think through that?
Well, it doesn't stay where it is, and it certainly doesn't increase over time. That expense ratio needs to come down. It's pretty good. You're talking about, I assume, expense to trust fees.
Yeah.
You know, a few things to think about, you know, one, and we can get into more detail on it, but in the short run, at least from an expense perspective, as we think about what first quarter is gonna look like, I can give you some thoughts there just as you start to model out what does it look like. You know, compensation is obviously our biggest line, and so we've got to start there. We've got the $30 million, which you indicated even pulling that out. What does that look like going forward? We actually think that, in general, that line item should start to flatten out in the near term as some of those severance-related activities come online. We should get a benefit from that.
We should, to your question on timing, we should get a benefit on it this year. We're not gonna get a benefit of it right away, but a significant portion, more than half of the actions we're gonna take with severance, we're anticipating to take place first in the by the end of the first quarter. We're gonna start to see benefit of that. We're gonna backfill some of those roles, but they're not gonna be in expensive locations. This is less about us addressing FTE or headcount, and it's getting at what the economics are, which is the salary run rate line for the business showing up in comp. We're gonna get a benefit of that this year.
As you think about first quarter, don't forget that we've also got retirement-eligible incentives coming online that hits $50 million in that quarter, but that's very predictable and seasonal. The other dynamics for compensation, I'd call it a wash as we think about going into first quarter. Equipment software is where we've seen a big uplift over the last couple of years. We talked a few weeks ago externally about the fact that we thought that line would be at about $225 million. It came in higher than that at $229. That difference, 100% of that is the $3.8 million is a contract termination we decided to do very late in the quarter. Otherwise, we feel like that line item is starting to flatten out as well.
We will have a step up as we come into first quarter, we think beyond that line item is gonna flatten out. That's obviously where all of our depreciation is, but we're gonna see an uplift of about $12 million in first quarter in equipment software, 100% of that coming from depreciation and amortization. Other than that, we're anticipating that line item to start to flatten out. We're not gonna see this kind of growth going forward. The other side of it is, as we think about trust fees and growth in the business, that's gonna help the ratio that you started with as well. Mike, I don't know if you wanna talk just more strategically about how you're thinking about this.
Yeah, I would just add, Betsy, to your point, it is about trajectories and curves, if you will. You know, we've been on a downward trajectory with trust fees as a result of the factors that Jason has gone through. Obviously, we're trying to drive that the other way, primarily through growth. You know, when it comes to NII, we've had a strong trajectory up. That's not likely to carry through into the new year, or into 2023, just as a result of the rates, the rate cycle.
Looking at the expenses, as Jason went through there, we're clearly trying to bend down that expense growth curve, without a doubt, through the productivity office, but also just, you know, in every day in how we operate the business.
That curve bend downwards sounds like it's a second half. Like, we'll see that more in second half than in first.
Yeah, I think that's right because as Jason's saying, some of these things, there's actions that we already took in the fourth quarter, which we had talked about on the previous call, the intent to get going on those, and then more of them that are happening in the first quarter as well, and then carrying through. You're right. By the time you see the impact, it's delayed relative to the action.
Okay. Thank you. Appreciate it.
Sure.
Our next question comes from Brennan Hawken from UBS. Please go ahead.
Good morning. Excuse me. Good morning. Hope you guys are doing well. Hoping to get some more specifics here. Productivity office, you know, helpful that we're seeing that emerge. Like, what are the objectives, right? What are the metrics that they're looking to drive? You know, you gave some generally kind of high-level comments on how to think about bending the curve and whatnot there in response to Betsy's question. You know, really, expenses have been a bit out of control, just being blunt, especially relative to the peer group and especially relative to the revenue trends. You know, investors are really...
I'm getting hit a lot this morning on looking for some more details, better understanding, and what specific metrics you're using and how we can make sure that you're hitting your goals when you're pushing through to make these changes.
Yeah, first of all, the thing that we look at to litmus test how we're doing from an expense management perspective is still expense to trust fees. Even pulling out the charges from this quarter, being anywhere near 120, that's not where the business is going to be in the long run. That's going to come down. You start to think more tactically, how does the office of productivity look to do that? Just to be, you know, just say, what are the numbers associated with it? Historically, we have talked about productivity matching inflation. When inflation was at 1% or 2%, we felt like we were doing that really well.
With inflation at 8% or 9%, we are not going to get productivity to that level, but we should absolutely have productivity above 2% of our expense base. Second, every group in this company has productivity goals. We go through it all the time, every year in our planning process. Next, if you start to just think tactically, how is this office going to get at this work? Where are the buckets that we're going to get at? I'll give you how the group is laid out. First of all, it's technology. That's the largest component of our and the fastest growing expense item we have. That's $1.4 billion, we've got to get at technology costs.
We accomplished a lot in 2022 and 2021, but we've got to do it efficiently. That means determining how we're purchasing, how we're developing technology, how we're consuming it, how we're delivering it. Two is vendor strategy and how we're thinking about engaging with our partners externally. Three, investment governance. There are areas around the company where we're investing in growth for the business. We're investing to get deeper and stronger, but we've got to accomplish those things, but at the same time, test whether or not we still want to be investing at the same rate, at the same timing. Lastly, fourth is a big pillar is workforce analysis. You know, a couple of things there.
That's, you already see us getting at a larger severance than we normally take, and that should get to 300, 400 positions that will be impacted. That's why we're focused on driving productivity across operations. Then even separately than this, we took out hundreds of technology-related contractors in fourth quarter. Just as an indication of how aggressively we're getting at this internally, and that's a big effort to do that. Again, we accomplished a lot and now it's time to turn the corner on it.
Brennan, I would just add, I think Jason described it well, but think about it as bottoms up and top down, right? Which is each of the groups, as Jason is saying, they have to have their productivity initiatives that work their way up to their productivity goals that are in the plan. The top-down part is the Productivity Office, which is doing things that can cut across the enterprise and also have the structure to, you know, work with the groups to help them meet those productivity initiatives. That's the approach to it. We always have productivity as a part of the planning process.
As Jason is saying, when you have inflation, like we do, you have to be able to ramp up those activities in order to get greater efficiencies.
Sure. Sure. Everybody's dealing with inflation, and it's certainly troubling, and it's weighing on the results without question. That was a lot of color, I appreciate that color, Jason and Mike. I would encourage you please to provide some actual metrics, though, to the investment community so that we can measure your progress, understand what your goals are, and actually have some visibility in order to think about where you're going and what you're trying to do, not just from a conceptual perspective, but from a numbers perspective, because I think that would really help in improving the confidence. One follow-up question would be on wholesale funding. I just took a look at, you know, wholesale funding was up again this quarter.
Should we think about it getting back to the 2019 levels where it was like mid 6% of the funding side of the balance sheet? Is that reasonable because it still looks like there's a little ways to go to get there? Or, you know, is this the upper end of the range and are you trying to limit that growth?
There's nothing strategic that we've been doing in that area to bring it down. It is instructive as you're doing to look back at more historical levels. It's not to say that's the target, but it is to say that where we are right now is not reflective of any strategy that we have for lower levels.
Okay. All right. Thanks for the color.
Sure.
Thank you very much. We'll take our next question from Alex Blostein from Goldman Sachs. Please go ahead.
Morning, Alex.
Hey, good morning. Thanks for the question. Maybe pivot a little bit. I was hoping to spend a couple of minutes on the wealth management and the Global Family Office trends. You guys highlighted outflows, client outflows, asset outflows, I think, in both of those for the quarter. You know, wealth management tends to kind of ebb and flow, but Global Family Office historically, I think, has been a source of stronger organic growth. Maybe help us unpack what's driving the outflows in both of these businesses, and maybe also hit on the strategic price reductions that you mentioned. How much of that is fully captured in the Q4 results? Is there any kind of negative carryover effect into Q1 as we think about fees?
Again, maybe a little bit more color on the reasons behind these, you know, pricing reductions and what you ultimately expect to achieve there.
Sure. Let's just walk the fees because I that's probably what. It's kind of how you're framing the question. You know, fees down roughly $20 million for the quarter. Right at half of that is markets. Then a quarter of it is the repricing that we mentioned earlier. As this group knows extraordinarily well, in the asset management side of the business, fee compression is still persistent. So we've not done those types of reductions a lot recently. We want to make sure that we're priced appropriately. So with some of the index products, we took fee reductions. That's only on the product side, not on the advisory side, and those are done.
There's a step down there, no incremental benefit going forward, and at this point, no plans to do more. The other quarter of the decline was outflows, that was product-related outflows, so really client repositioning in the money market, in the money market space, in the liquidity space. We've seen a journey there for our clients across both wealth as well as asset servicing. It's very closely aligned to what we saw in deposits of large decline as we came into COVID and decline as markets gained more confidence and then started to redeploy assets into risk assets. If we think about...
The way we litmus test the business and wealth is to think about our advisory fee, frankly, not the product side, but what are the assets and what are the fees related to the advice we have with clients. That's gone well. In the quarter, client flows for wealth management from an advisory perspective or overall were positive. On a linked quarter and year-over-year basis, the net new business and flow activity that we track was positive, low single digits, but it was positive. The business is not in decline. What we're seeing is a lot of clients deploying away from their historical mix of using our money market funds, and then in this quarter, a repricing of product.
Got it. As you think about pricing broadly for the products, not the advisory component, but if you think about the money market offering, given the fact that money market funds are actually given a pretty healthy yield, is there any thought around reducing your money market fees as well to become more competitive to, you know, maybe capture even more of those flows or prevent folks from leaving and seeking a better kind of yield options and net off fees?
We look at it all the time, and that comes more into play on the institutional side. We've got a very large and successful money market mutual fund business. We do a lot of liquidity work for our clients. Even now, there are some strategic waivers that we have in the institutional side of the business where we're working pricing to ensure that we're as attractive as we can be. It's not just pricing that clients look at. On the institutional side, in particular, they look at size, and they look at the underlying quality of the assets. A lot of the ultra large investors have investment policy restrictions on how big they can be within a fund.
The fact that we've got funds that are $40 billion, $50 billion, $60 billion, it enables those large investors to put money to work. The competition set is a little bit lower on the institutional side, and we're above that threshold. In the long run, that's very good for us. There will be ebbs and flows based on other factors. In the long run, it's good. On the wealth side, that's just gonna ebb and flow with the business. Traditionally, it's been more aligned. This is just a period of time where our clients are they're also thinking about deploying to building their own treasury portfolios and laddering in portfolios there, and then potentially other product, they'll use Ultra-Short.
We do have high confidence that the mix of the usage of this product is gonna come back to where it was historically. You're exactly right. It's a very attractive engagement for us economically.
Okay, thanks. I'll hop back in the queue.
Thank you. We'll take our next question from Kenneth Usdin from Jefferies.
Morning, Ken.
Hey, good morning, guys. Jason, sorry to come back to NII, but I was just wondering, can you kind of put that all into context for us in terms of, you know, if the balance sheet's shrinking, you get, you know, a little bit of help from the repositioning, just can NII grow from here? You know, based on what you still expect on the rate curve, and, you know, I guess that would be the question. Thanks.
Yeah. Yeah, yeah. No, I appreciate you pushing on that. The answer is yes. It can absolutely grow from here, and we anticipate that throughout the year it will. I'm not sure it's gonna see meaningful growth, but the trajectories are still in our favor. I mean, the balance sheet repositioning in and of itself is that's a an attractive lift. Then betas are not 100%. So with Fed actions, we're gonna do well. Then we've also got the runoff, which helps us too. So that's us. The only offset to that is volumes, and that's what, you know, we're not sure what that's gonna look like. Even that remained relatively flat.
It was, you know, it was at the top end, maybe a tiny bit above of what our anticipation was last quarter. If I look out through the year, absolutely anticipation for NII to be growing from this $550 level.
Okay. Thank you. My follow-up to that is how do you think about incremental betas from here in terms of deposit cost increases? You know, you had said you'd expected a decent move up this quarter. You did get that. How do we just understand that, you know, that mix of deposits and the beta that you're looking at? Thank you.
Sure. Yeah. I mean, the mix, I don't we haven't seen that changing dramatically, but you're raising an interesting point, which is that the betas are actually different depending on the currency that you're talking about. I just think that's something that's important for people to think about. Most of the way the industry also calculates beta is on just the interest-bearing portion. I think it's instructive to think about the total beta as well, because as we've talked about, the mix of interest-bearing to non-interest-bearing changes over time, so that has an effect as well. The betas on the institutional side, I think you gotta call them close to 100% at this point. It varies by currency, but I think you gotta call it close to 100%.
On the wealth management side, it's less than that. It's, you know. You can imagine for us to get to a blended level that I'm talking about in kind of that, you know, 70%-80% range, wealth is closer to 50, and the institutional side, you know, closer to 100.
Okay. Got it. Thank you, Jason.
Yep.
Thank you. We'll take our next question from Brian Bedell from Deutsche Bank.
Morning, Brian.
Great. Good morning, folks. Good morning, Jason. Thanks for taking my question. Maybe just to focus on that deposit growth trend, and you talked about 110 to 115 in 1Q. As you come into 2Q, maybe it's hard to assess this early, but what type of headwind would tax payments be on that? Then sort of a related question would be, you know, to what extent do you want to or do you think you need to, you know, defend those wealth, the strategic wealth deposits and, you know, raise the.
I'll go in reverse order. I mean, it, you know, we've talked about heavy defense of wealth deposits. The economics are important, those are the things we want to be doing with our clients, hard stop. We're gonna do everything we can to defend those. You know, they're largely relationship driven, but there are pockets where our clients look really aggressively at rate. We've got good governance and infrastructure to make sure we're doing what we can to maximize that. Throughout the year, you're just asking, how are we thinking about it over the course of the year? We've tended
You can go back and look historically at first quarter to second quarter and see what kind of decline there has been. We don't anticipate anything different this year. What I can tell you is that from there, we have more of a flattish outlook, but we've got to just remember that that second quarter decline does take place, and history should be a pretty good judge.
Yeah. That's helpful. Then maybe just on expenses, you mentioned the equipment software of $12 million in the 1st quarter. Is that from the $229 level in 4Q, or is that $225 ex the charge?
Yeah, thanks for confirming that. It's off the 225 level.
Great. Okay, great. Thank you. I'll get back in the queue.
Thanks.
Thank you. We'll take our next question from Jim Mitchell from Seaport Global. Please go ahead.
Morning, Jim.
Hey, hey, good morning. Maybe just a little bit on the pension accounting, did that get triggered again this year, and should we expect more charges this year?
Every year we come into it, and we don't expect there to be to trigger settlement accounting. It's ironic because in 2021, we had the thresholds, but then we did a larger RIF, and those ended up triggering. This past year was interest rates going up significantly. That led to a higher level of retirements than we anticipated. In no year do we anticipate it at this time. We're in the exact same boat this time, which is that we look at the thresholds with our outside actuaries, with our consultants, but we can't predict with high degrees of certainty what the experience will be from a retirement perspective. We have to let that play through.
That said, what we've experienced in 2021 and 2022, we had not experienced prior to that. It's not like this is something that. It's happened the last 2 years, but if you look over the last 10 years, it hasn't happened and, you know, outside of these last 2 years. That's how we think at it. It seems like more of a trend than certainly than what we're planning or anticipating.
Okay. Maybe just on capital, you had a, you know, nice sequential improvement in capital ratios. Is there any? You didn't really do much in the way of buybacks in 22. Do you see that being a bigger part of the EPS story this year?
Yes, at some point. If you think about the framework we've used historically, and I've talked about it a lot, there's no red flags there. We don't have to have all of those components of the framework saying green. We look at it in combination at any given point in time, and we're at 10.8 right now. We also still have $1.6 billion in AOCI. That'll come down a little bit actually in a chunk because of the securities repositioning, because we did that after the quarter. We've got, call it $1.4 billion that's gonna be accreting into capital over time. The returns in the business are still strong. There's no reason we wouldn't be back at some point.
Okay, thanks.
Sure.
Thank you. We'll take our next question from Robert Wildhack from Autonomous Research.
Morning, Rob.
Morning, guys. On the fee side, I just wanted to check in on organic growth in the competitive landscape, you know, this quarter and into 23 for both the institutional and the wealth businesses. Thanks.
you know, I'd say different stories there. If you start with We talked about wealth a little bit earlier, and if we think about just the core underlying business, really focusing more on the account management side, the business had a very strong first half of the year, and the second half of the year was weaker. we've also noted GFO was much stronger than the regions, but again, that's gonna ebb and flow over time. Organic growth, the way we have calculated it and communicated it historically was negative in the regions for the quarter and call it flat for GFO. Actually slightly positive for GFO, if you think about it on a year-over-year basis. It at least gives you a sense of where that business is.
From the advisory side, for the year-over-year and at the end of the quarter, the advisory fees did well. The core business there is strong, just we think it's the product mix and other factors leading to the way we've calculated organic growth as being negative. In asset servicing, different story. We talked at the early part of the year that we felt pipeline was good. That pipeline onboard has started to onboard in fourth quarter, we feel good about the growth in that business. The proxy there should be more custody and fund servicing fees. Just as I talked about account management fees and wealth management, the proxy for the same corollary there is custody and fund servicing.
That was a positive in Q4. It was actually really attractive. We had new business that Mike talked about early coming online in the business to the tune of kind of mid-single digits, and we feel like that business is back to its historical organic growth rate. That's evidenced by what we onboarded. The 1 not onboarded business we have right now is higher than our 3-year average, and the pipeline of business they have that they're still bidding on in late stages is higher than the 3-year average for the business. A lot of positive signs in the asset servicing business from an organic perspective.
That's helpful. Just on that starting to onboard business and asset servicing. I think in the past you had talked about that not really coming online until the second half of 2023. Is that a pull forward there?
Actually, Go ahead, Mark.
Twenty-two.
Yeah. I'm sorry. It was really 2022 that we talked about their being business in the back half of the year that was onboard, so that did come into place. We do have, right now, there's a chunk of business that we know is onboarding in the short run. The pipeline's good. You, you go out farther to the end of 2023, and there's another chunk of large business that we're anticipating to come on in a couple different areas, fourth quarter and even into first quarter of 2024. The pipeline for that business is at various stages is looking good.
Got it. Thank you.
You're welcome.
Thank you. Our next question comes from Mike Mayo from Wells Fargo Securities. Please go ahead.
Hi. On the expenses, it's... Oh, my. I get it. Look, you guys are dealing with the first decline in both stock and bond markets in over 50 years. You said you're preserving growth by investing in people and tech. There's inflation. Wow, this is the worst quarterly operating leverage that I can recall for you guys. For the year, it was negative operating leverage of 500 basis points. Even COP has grown twice the pace of revenue growth. I guess what I'm looking for is more assurance that expenses haven't gotten away from you. I get it. At the high level, you said, you know, it looks like you're rightsizing headcount with severance. You took out hundreds of tech-related contracts. You have some kind of mainframe strategy.
I have to tell you, I just don't understand what that means from a bottom-line standpoint. I guess the question is, you said your expenses-to-trust-fee ratio of 120% is unacceptable, but what is acceptable, and when should you get there? Like, 2024? 2025? What kind of sense of urgency do you have? You know, this is not the Northern we've gotten to know over the past long while, aside from your, you know, resiliency through tough times.
Thanks. Mike, it's Mike. To your point, you know, if you go back a number of years, where we were at levels that are like this, it's been a long time, and that's why it is considered unacceptable where we are.
We were effective in driving that ratio down into an area where, yes, we thought it was, you know, within that range, for us to be able to continue to operate, and that's kind of that 105-110 range. We have the same objective now of getting it back into that range. That's, you know, that calculation is a numerator and a denominator, and we're trying to drive both of those, right? You know, beyond the challenging environment on the fee front, which is gonna happen, you know, at various times, we're trying to drive the organic growth there. As much as we had, you know, good growth in the year, it was not one of our stronger organic growth levels.
Challenged on the numerator, both, I would say conditions, but also, what we did on our part. On the other side, from an expense perspective, I, you know, as Jason said, like, we got a lot done, not just this year, but the last couple of years and really making, I'll call, you know, the company more resilient. I'll get into a little more detail on that. Just contextually, if you think back a few years, you know, with the pandemic and then, you know, the last couple of years, you know, the technology infrastructure of the company is just critical to your ability to be just what you said, you know, which is, you know, resilient and there for your clients in any set of conditions.
That's required a lot of investment, you know, in technology. Some of it, if you think about it, you have to be able to, you know, operate completely remotely, and so you have to invest to be able to do that. You also have to be reliable, you know, for clients. When it comes to modernizing all the technology you have, you know, it does require investment, on that front. And in the meantime, we also push forward with our digitalization efforts, you know, which is much more the client-facing part of that, which is essential to being competitive and essential to growing. It's been very active, across that. Some of that, is, you know, I'll call it nondiscretionary, right?
It needs to be done to be able to do what I said. You know, other parts of it, you do have more discretion in the speed, you know, particularly around the digitalization front, and you're looking at the returns that you're gonna get for that. You know, we've talked about things like Matrix, you know, which has been a meaningful investment, which will drive both productivity, but also, you know, will drive our capabilities and therefore, you know, revenue and organic growth on that front. The same thing is happening in wealth management, where we have to make sure that, you know, our interface with our clients, is frictionless, as Steve would say in the technology interface, you know, with the clients.
That part of it, again, we can pay some, and that's part of what we'll have to do on the technology front. The last part of it is, you know, just the need for efficiencies around the technology spend, and then just more broadly, which we've done, you know, many times and need to just increase the focus on execution around those, what I'll call, more traditional ways to drive productivity. You, you asked the question on, okay, when does it get into that range? Is it, you know, 23? Is it 24? You know, I don't know because I don't know exactly what's gonna happen with the numerator and the denominator, but that's what we're driving towards, is to get it into that range.
In the meantime, you know, also trying to drive profitability, meaning driving pre-tax margins, above 30%. That's kind of the view and the plan.
Can you give any specifics for the year? I know it's not always your style, but in terms of what kind of expense growth for the year or, you know, what the savings are from the elimination of all the tech contracts, or even just if I think of investing along a J curve, seems like, you know, you're on this tech journey like a lot of others are, and some are still in the investing phase, and some are in the harvesting phase. When do you think you go from investing to harvesting on this broader tech strategy, which seems to be impacting your expenses?
Yeah. I'll answer both, but then let Jason add too. You know, we are clearly in the investing stage, but I would say, you know, and you're always investing, of course, you know, in that because the, you know, the needs change over time, et cetera. From a, you know, cresting perspective, et cetera, you know, we're more towards that than we are away from it, if that makes sense. In other words, we have gotten a lot done in the last couple of years on that front. That's my view. As far as the expenses, you know, we've talked about, you know, for the year, expenses at 9%. That's the part where we're saying, you know, that doesn't work. How do we bring that down?
There's still going to be growth in expenses for the year because there are certain aspects that just carry into the year, right? You do have base pay increases, that flow in, and you do have some of the technology costs, you know, that are amortization that just come into the year. You know, outside of that, you're trying to do everything you can with productivity to offset other increases.
All right. Thank you. All right. You said Jason was gonna follow up.
Well, I can give you a little bit, a little bit more color on the year if it's helpful. Whatever information's helpful, obviously, I'm happy to give what we see at this point. One thing as you're thinking about the next several quarters, not just the next one is, yeah, outside services was elevated, and you know, lots of things happening there in fourth quarter. Some of that's episodic. Some of that is other expense. Some of that's agency expense, supplemental pension plan. Some of those have more of a longer term trend. Think, you know, travel, marketing, that was actually up $8 million over third quarter. That's likely gonna stay elevated.
Some of these were episodic, we don't think we're going to see other expenses at $107 million. That should quickly unless some of it's out of our control because things like the supplemental pension plan are market affected, but that should get to below $100 million and hopefully stay that way going forward. You just think about the impact also of compensation, just to give you some color there. We know base pay is going to come online in second quarter. That's going to be a $20 million lift. To severance activity, we think that's going to help us help offset that a little bit, probably $5 million-$7 million on a quarterly basis, starting in, you know, second, third quarter.
Then we'll have some additional hiring, but that's gonna be in line with the growth of the business. That at least gives you a sense of some of the line items. Then last one I can. Visibility on equipment and software and the depreciation we've lift that we've got coming into first quarter, that levels out a lot. There's some growth, you know, call it $2 million, $1 million-$2 million, $2 million a quarter after that, but nowhere near this level. A lot of the. That's where you get to what's the impact of those hundreds of contracts coming out. We're starting to flatten that depreciation and amortization line, which sits within equipment software, which has been the fastest grower. It's just reflective that we've gotten a lot of work done.
Okay, thank you.
Yeah.
Thank you. We'll take our next question from Gerard Cassidy from RBC. Please go ahead.
Morning, Gerard.
Hi, Jason. Coming back to the expense topic and conversation, on the salaries, can you share with us the cost of those salaries? Is it going more to entry-level folks, or is it more your senior people? Then second, are you at risk of losing people, which is why you had to bump up salaries? Maybe a little more details about just the salary portion?
Yeah. Two very different dynamics happening. The actions we're taking this year are not across the board, much more targeted than they have been historically, and very centered around, frankly, around technology and some operations-oriented functions effectively. That just gives you a sense of where we're going. To why we've had some of the increases, some of the salary increase we had last year, obviously, was an inflation-related higher than average merit increase. A lot of the growth we had last year was doing off-cycle adjustments to retain talent, specifically in the wealth management business. We think that's largely done at this point. Can never claim that that's, you know, with certainty that that's fully over, but that was meaningful.
You know how important that franchise is to us and how important that talent base is. We were gonna defend that base. With that episode, that seems to be over at this point, and we're more to a business as usual growth rate across the organization, but we're identifying areas where we can get significant salary run rate savings and getting after those aggressively.
Very good. As a follow-up, can you share with us on the sale of the fixed income portfolio, which resulted in the losses that you reported, can you give us some color on what types of securities were sold and, you know, the yields of those securities? By reinvesting the proceeds from that sale, how long will it take you to earn back that loss that you had to take to exit the portfolios?
What we looked for were securities that had a combination of a couple things. One, poor RWA treatment. Secondly, lower coupons, lower yield. Third, that they still had significant time to maturity. That bucket ended up being $2 billion-$2.5 billion. The coupon on those was in the 2% to 2.25% on average. The reinvestment of those coming in at, you think about in earnings on reserve balances at the Fed in the 4.5% range at this point. In terms of the payback on that is more like a three and a half years. Remember, from a regulatory reporting perspective, we had already stripped out the unrealized loss in that portfolio.
The drivers of this were very largely around the opportunity to improve capital ratios. Not that we needed to improve capital or liquidity, we didn't. Seeing the opportunity to benefit CET1 in the form of lower RWA treatment helped improve liquidity ratio and at the same time, not hurt the economic value of your earning stream was very attractive to go after. That's really what led us to do this.
Great. Thank you.
Sure.
I think we'll take our next question from Steven Chuback from Wolfe Research.
Steven.
Hey, good morning. Gerard actually asked my question, but I did wanna clarify one item relating to the securities portfolio repositioning, which is whether you have any appetite to actually engage in further repositioning of the book from here.
Well, we would have appetite, frankly, 'cause it's an attractive thing to do. At the same time, we feel like we've harvested just about everything that's there. I'm glad you asked the follow-up 'cause as soon as I finished, I realized, Gerard, and now you might be interested in just a little bit more color. Corporate bonds within the $2 billion was about half. Munis and mortgage-backed securities were about a quarter each, just so you know. It's an attractive time to go after something like that, given the yield curve and the ability to change non-HQLA assets to HQLA assets, pick up capital, pick up liquidity, and no impact from an economic perspective, and in fact, making it positive.
That's great. Thanks for taking my follow-up.
Sure.
Thank you. We'll next go to Michael Brown from KBW.
Morning, Mike.
Great. Hey, good morning. I just wanted to follow up on one of the capital and share re purchase question from earlier. You know, I guess, you know, I look at your capital ratios are well above your minimums, which is consistent with how you've always managed the capital. But you've got a number of tailwinds on that front. Jason, you mentioned that you plan to resume the buybacks at some point. I guess it seems to me that there's really no time like the present. My question is, should we expect the share repurchases to engage in a more meaningful way in the first quarter?
When we think about the full year, what are the guardrails we should consider for your capital ratios as we think about modeling capital return from here?
Sure. We won't comment more on timing. If I get to the guardrails, it's instructive, I think, to look... Again, none of these are 100% determinative. They're just part of how we think about it. These are the factors we think about. Look at the absolute levels, which tells you to look at history, look at where we are relative to peers, then relative to regulatory perspectives, we look at those things. Then the other dynamic is that RWA has been less predictable than pre-COVID. We used our balance sheet to be there for our clients.
We were one of the few institutions that actually let RWA increase over the last several years, and it's because we wanted our clients to have loan demand, and they wanted us to be there in FX activity and Securities lending. We did that because we were able to because we had the capital strength and flexibility to do that. That's the thing that we're also looking forward on to make sure that we're not missing any significant changes in client demand that might impact our behavior. You're right in that sitting at 10.8%, it's much better position. Back to this concept of, you know, $1 billion for an AOCI pulling apart over the next several years, plus the, you know, the return on equity in the business is still attractive.
We're still each quarter accreting capital. No reason we won't be in the market at some point.
If I could just follow up on that, Jason. The loan balances were down about 2.5% sequentially. sounds like I guess, how are you thinking about that loan demand from here? Our view is it sounded like it was kind of softer going forward, but you kind of alluded to the fact that maybe you want to be there to meet client demand. Are you expecting that loan demand to pick up here in 2023? I guess just one other follow-on on the capital side. If you guys think about-- How do you think about inorganic actions here in terms of capital allocation?
Like, do you see any other opportunities to, you know, change your strategic asset mix and scale so that perhaps that could be another avenue that you would consider on a capital allocation front?
On loan demand, I always remind people, super spiky. You know, on the base of business we have and the clients that we have, they can come with really significant asks, and we're happy to do it because a lot of times they've got potentially billions of dollars in assets, and then they might have a liquidity need, and they don't want to liquidate the asset. It's a great opportunity for us to help them at very large dollar amounts. It solidifies relationships well. We just don't look quarter-to-quarter at loan volumes as much as I think it's appropriate for other institutions. In general, our growth expectations are for more of a business as usual growth rate. We do anticipate some growth this year in the business. Not a ton, but more business as usual.
Then on capital, there's no problem we're trying to fix in mix or scale and or frankly, in capability. We're just thinking opportunistically, if things come up, we've got the capital to be able to look at it. We have talked about having more of a bias at this point toward wealth management. We've done some things from an acquisition perspective in asset servicing over the last several years. They've gone well, but we've got a whole product circle there that we feel good about. We do in wealth. The more we can bring on attractive wealth clients that don't necessarily have the holistic product approach that we can bring, it's a great opportunity for us to create value.
That'd be top of the list, but no problems we're looking to solve from a mix or scale perspective.
Okay. Very interesting. Thank you for taking my questions.
You bet.
Thank you. We'll go to our last question from Brian Bedell from Deutsche Bank.
Morning, Brian.
Great. Thanks for taking my follow-up. Switch gears a little bit just on the wealth side. To what extent are you seeing any impact from some of your entrepreneur clients that they may have had, you know, lower valuations in their private businesses or in their, you know, public businesses? Are you seeing any kind of pullback from those clients? Is it, you know, significant or is it really just not that big a deal?
Yeah. Brian, it's Mike. I would say we definitely are seeing a different perspective on the part of the clients that you're talking about or prospects, right? I mean, a lot of the activity in 2021, beginning of 2022 was as a result of business owners who, you know, were selling their businesses, were monetizing assets. That was an uplift for us. With the reduced activity that you're seeing of IPOs and, you know, market activity there, also certainly in the private marketplace, you know, lower activity there, definitely has had an impact for us of just less market opportunity for us.
Yeah. Okay. Thanks. Then just one more on expenses. A lot's been asked and answered, but just in terms of the onboarding for the asset servicing pipeline, should we expect what is typically in the business where you have some onboarding expenses ahead of when the contracts are installed and generating revenue. Is that something also that might create some noise for 2023, given the 4Q larger chunky mandate that I think you're bringing on?
Yeah. A couple things. One, nothing that we'd call out at this point. If that changes, we'd call it out for you. In some instances, even some of those expenses are capitalized if in long-term contracts. Nothing at this point that we'd want you to be thinking ahead on.
Okay, great. Great. Thank you so much for taking my follow-ups.
Sure.
We'll now turn it back to our speakers for any closing remarks.
Thanks very much for joining us today. We look forward to speaking with you again soon.
Thank you. Ladies and gentlemen, that does conclude today's conference. We appreciate your participation. Have a wonderful day.