Northern Trust Corp (NTRS) Q1 2023 Earnings Call Transcript

Northern Trust Corp (NASDAQ: NTRS) Q1 2023 earnings call dated Apr. 25, 2023

Corporate Participants:

Jennifer Childe — Senior Vice President and Director of Investor Relations

Michael O’Grady — Chairman and Chief Executive Officer

Jason Tyler — Executive Vice President and Chief Financial Officer

Analysts:

Betsy Graseck — Morgan Stanley — Analyst

Alex Blostein — Goldman Sachs — Analyst

Steven Chubak — Wolfe Research — Analyst

Mike Mayo — Wells Fargo Securities — Analyst

Glenn Schorr — Evercore ISI — Analyst

Brian Bedell — Deutsche Bank — Analyst

Ken Usdin — Jefferies & Company — Analyst

James Mitchell — Seaport Global — Analyst

Brennan Hawken — UBS — Analyst

Thomas Leddy — RBC Capital Markets — Analyst

Vivek Juneja — J.P. Morgan — Analyst

Presentation:

Operator

Good day, and welcome to the Northern Trust Corporation First Quarter 2023 Earnings Conference Call.

[Operator Instructions] At this time, I would like to turn the conference over to Jennifer Childe, Director of Investor Relations. Please go ahead.

Jennifer Childe — Senior Vice President and Director of Investor Relations

Thank you, Cynthia. Good morning, everyone, and welcome to Northern Trust Corporation’s first quarter 2023 earnings conference call. Joining me on our call this morning are Mike O’Grady, our Chairman and CEO; Jason Tyler, our Chief Financial Officer, Lauren Allnut our Controller, and Grace Higgins from our Investor Relations team.

Our first quarter earnings press release and financial trends report are both available on our website at northerntrust.com. Also on our website, you will find our quarterly earnings review presentation, which we will use to guide today’s conference call. This April 25th call is being webcast live live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be made available on our website through May 25th.

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 12 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 Mike O’Grady.

Michael O’Grady — Chairman and Chief Executive Officer

Thank you, Jennifer. Let me join in welcoming you to our first quarter 2023 earnings call. The recent disruption in the banking sector reminds us of the importance of resiliency to be able to meet the needs of clients in all operating environments. During the past six weeks, much like over the past 130 years, our strong balance sheet and conservative approach to risk management, have enabled us to provide the support, liquidity and exceptional service our clients have come to expect from us. Northern Trust continues to be viewed as a source of strength and stability, as symbolized by our anchor.

During the quarter, we continued to assist our clients manage their liquidity, including deposits, money market funds and short-term treasuries through the transition from a period of quantitative easing and low interest rates to one of rapid tightening and higher rates. Overall, we saw client liquidity increase during the quarter as the decline in deposits was more than offset by increases in higher yielding money market funds.

Our results for the first quarter reflect sequential improvement in revenue and expense growth. The sequential growth in trust fees outpaced the slight decrease in net interest income, which still experienced healthy year-over-year growth. Expense growth moderated from recent quarters, which was attributable to both our renewed spending discipline and certain timing differences.

Within our Wealth Management business, assets under management grew mid single-digits sequentially, while our trust fees increased modestly. The turmoil in the banking space contributed to a flurry of new business activity later in the quarter. We saw solid new account openings, particularly at the upper end of the wealth market. We took in almost $1 billion in inflows from the $50 million in low-risk segment alone, and discussions are continuing with a solid pipeline of prospective clients.

In Asset Management, we had a strong start to the year with a sequential increase in new business, including large inflows into our institutional money market platform. New product launches, focused on alternatives and extending securities lending capabilities in our collective fund space with, three new funds launched. Within Asset Servicing, we saw continued momentum with particularly good traction in Europe. For example, during the quarter, we transitioned in Artemis Investment Management, a large UK-based investment manager, for whom we are providing our full suite of services including Custody, Fund Administration, Investment Operations Outsourcing and Risk and Analytics Services for both their UK and Luxembourg funds.

In closing, we are well positioned to continue to serve our clients and navigate the ongoing economic uncertainty from a position of strength.

I’ll now turn the call over to Jason.

Jason Tyler — Executive Vice President and Chief Financial Officer

Thank you, Mike, and let me join Jennifer and Mike in welcoming you to our first quarter 2023 earnings call. Let’s dive into the financial results for the quarter starting on Page 4.

This morning, we reported first quarter net income of $334.6 million. Earnings per share of $1.51, and our return on average common equity was 12.4%.

On a year-over-year basis, currency movements, unfavorably impacted our revenue growth by approximately 100 basis points and favorably impacted our expense growth by approximately 130 basis points. On a sequential basis, currency movements favorably impacted our revenue growth by approximately 70 basis points and unfavorably impacted our expense growth by approximately 90 basis points.

Our first quarter results were also impacted by two notable items. One, we recognized a $6.9 million pre-tax gain on the securities repositioning we announced last quarter and executed in January. We recorded — two, we reported $9.8 million of pre-tax charges associated with various early lease terminations, actions taken to further optimize our global real estate footprint. Notable items from previous periods are listed on this slide.

Excluding the notable items in all periods, revenue was flat on a sequential quarter basis, and up 1% over the prior year. Expenses were flat on a sequential quarter basis, and up 6% over the prior year, reflecting an expense-to-trust fee ratio of 120%. Pre-tax income was down 2% sequentially and down 13% over the prior year.

Trust, investment and other servicing fees, representing the largest component of our revenue, totaled $1 billion and were down 9% from last year, but up 2% sequentially. Excluding notable items, we had year-over-year and sequential declines in all other noninterest income, which is primarily driven by lower foreign exchange trading income.

We saw significantly reduced volumes in the first two months of the quarter, with a modest pickup in March. Net interest income on an FTE basis, which I’ll also discuss in more detail in a few moments was $544 million, up 40% from a year ago, down 1% sequentially. Our provision for credit losses was $15 million for the first quarter, reflecting growth in the size and duration of the commercial real estate loan portfolio.

Given the increased attention being placed on commercial real estate loans, we want to provide some details we felt would be of interest. Commercial real estate loans comprise 12% of our total portfolio, and commercial office loans comprise 2% of total loans. Approximately, 95% of commercial real estate loans are personally guaranteed and approximately 70% have a loan-to-value ratio of less than or equal to 70%.

Turning to our Asset Servicing results on Page 5. Assets under custody and administration for asset servicing clients were $13 trillion dollars at quarter end, down 9% year-over-year, but up 4% sequentially. Asset servicing fees totaled $603 million, which were also down 9% year-over-year, but up 3% sequentially. Custody and fund administration fees, the largest component of fees in the business, were $414 million, down 9% year-over-year, but up 2% sequentially.

Custody and fund administration fees decreased from prior-year quarter, primarily due to unfavorable markets and unfavorable currency translation. They increased sequentially due to favorable markets, favorable currency translation and solid new business activity, particularly later in the quarter.

Transactional activity, which comprises approximately 15% of our custody and fund administration fees, was generally weaker due to lower volumes and lower one time fees.

Assets under management for asset servicing clients were $962 billion, down 12% year-over-year, but up 7% sequentially. Investment management fees within asset servicing were $126 million, down 14% year-over-year, but up 2% sequentially. Investment management fees decreased from the prior-year quarter, primarily due to asset outflows and unfavorable markets, partially offset by lower money market fund fee waivers. Investment management fees increased sequentially due to favorable markets and favorable currency translation.

Moving to our Wealth Management business on Page 6. Assets under management for our wealth management clients were $368 billion at quarter end, down 7% year-over-year, but up 5% on a sequential basis. Trust investment and other servicing fees were $461 million, down 9% compared to the prior year, but up 1% sequentially.

Within both the regions and GFO, the year-over-year declines were primarily driven by unfavorable market impacts and product level asset outflows, partially offset by the elimination of money market fund fee waivers. Sequentially, the increase within the regions in GFO was primarily driven by favorable markets, partially offset by product level asset outflows.

The upturn we saw in our AUM occurred later in the quarter, and was not fully reflected in our trust fees. Importantly, we continue to see modest organic growth in our core advisory fees.

Moving to Page 7 and our balance sheet and NII trend. Given the attention being placed on balance sheet trends, we also thought you might be interested in some additional data points this quarter. We think about client liquidity in three categories, deposits, money market funds and short term treasuries. With that background, we can provide some color and data on what we saw throughout the quarter and through the first few weeks of April.

Most importantly, client liquidity was up meaningfully for the quarter and both Asset Servicing and Wealth Management, and it’s continued to rise during the first three weeks of April. While we saw a decline in deposits through the quarter, it was more than offset by increases in money market funds as clients continued to migrate into higher yielding products. Relative to the fourth quarter, our money market funds are up $15 billion or 7%. As mentioned, average deposits were $112 billion, down 4% sequentially with Wealth Management deposits down 7% and institutional down 3%.

Approximately three quarters of our average deposits are institutional. Within this segment, approximately 68% are considered operational, the stickiest, as clients use these funds to run their ongoing operations. Across the organization, we experienced a $2 billion decline in noninterest bearing deposits as clients shifted to higher yielding alternatives. This reduced the mix of noninterest bearing deposits to 18%.

We actively manage our assets and liabilities considering a wide range of possible stress scenarios, including interest rate risks and how they may affect liquidity and capital. So, let’s shift to the asset side of the balance sheet to see how investments are allocated.

Average cash held at the Fed and other central banks, was up 12% to $37 billion and we had $67 billion of immediately available liquidity, reflecting approximately 50% of average earning assets. Loan balances averaged $42 billion and were down 1% sequentially. Our loan portfolio is well diversified across geographies, operating segments and loan types. Approximately 75% of the portfolio is floating and the overall duration is less than one year.

Securities were down 3% sequentially, reflecting the impact of both our repositioning early in the quarter and the natural run-off which we’ve chosen to reinvest at the short end of the curve. Our $49 billion investment portfolio consists largely of highly liquid U.S. Treasury, Agency and Sovereign Wealth fund bonds. And it’s split 50-50 between available for sale and held to maturity. In the aggregate, the securities portfolio has a duration of 2.3 years. The total balance sheet duration is 1.1 year.

Net interest income was $544 million for the quarter, up 40% from the prior year and down 1% sequentially. NII reflected the impact of several dynamics, many occurring late in the quarter. As mentioned, we saw continued improvement in deposits from our balance sheet to money market funds and treasuries. Deposit costs increased with our interest bearing deposit beta during the quarter at 85% and our cumulative beta for the cycle as of March 31, of 65%. And finally, we had the impact from two fewer days in the quarter.

Net interest margin was 1.62% in the quarter, up 57 basis points from a year ago, and roughly flat over the prior quarter. The sequential results reflect the impact of higher short term market rates, offset by higher funding costs. The prior year increase is primarily due to higher average interest rates. For the second quarter, our NII will continue to be driven by client demand, which is less predictable than it was 90 days ago. Our average client deposits thus far in the quarter are approximately $110 billion. And subsequent to tax season, we’ve observed an incremental typical decline of a few billion dollars.

Turning to Page 8. As reported, noninterest expenses were $1.3 billion in the first quarter, 7% higher than the prior year, but 3% lower sequentially. Excluding charges in both periods as noted on the slide, expenses in the first quarter were up 6% year-over-year, but flat sequentially. Overall, we are focused on reducing the rate of expense growth and controlling those costs that are most under our control.

I’ll hit on just a few highlights. Compensation and technology expense continue to be the areas of highest spend. Compensation expense, excluding charges, was up 6% compared to the prior year and up 7% sequentially. The year-over-year growth largely reflects the annualization of last year’s head count expansion, and inflationary wage pressure, partially offset by lower incentives. The sequential increase is due to our annual payment of retirement eligible equity incentives in the first quarter.

Equipment and software, largely reflecting our technology spend, was up 20% year-over-year, but up 1% sequentially. More than 50% of our spend is comprised of business driven investment, followed by spending on core infrastructure and modernization and to a lesser extent, spending on information security, risk and regulatory areas.

Turning to Page 9. Our capital ratios improved in the quarter and continue to be well above our required regulatory minimum. Our common equity Tier 1 ratio under the standardized approach was up 50 basis points from the prior quarter to 11.3% despite resuming common stock repurchases. This reflects a 430 basis point buffer above our regulatory requirements.

As a reminder, as a Category II institution under the Federal Reserve’s framework, we already include unrealized losses on our available for sale securities in this calculation. Thus, mark to market losses occur immediately and our capital and capital ratios. Our Tier 1 leverage ratio was 7.3%, up 20 basis points from the prior quarter. Higher net income, improved accumulated other comprehensive income, the securities repositioning and lower loan balances were the primary factors in this quarter’s increase in capital ratios.

We returned $259 million to common shareholders in the quarter through cash dividends of $159 million and after pausing meaningful share buybacks for the prior five quarters, we repurchased over $100 million of common stock.

And with that. Cynthia, please open the line for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And we will take our first question from Betsy Graseck with Morgan Stanley. Please go ahead.

Betsy Graseck — Morgan Stanley — Analyst

Hi, good morning.

Jason Tyler — Executive Vice President and Chief Financial Officer

Good morning, Betsy.

Betsy Graseck — Morgan Stanley — Analyst

Really great quarter. Thanks for all the detailed and the incremental information here. I did just want to understand how you’re thinking about managing the balance sheet in an environment where deposits are under pressure, even though it might be modest. I think you indicated that average deposits year-to-date is around $110 billion and that’s down around 3% from last quarter, I believe. So just wanted to understand how you’re thinking about that. Thanks.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure. The most important thing, and you referenced it, is that it’s just — it’s an uncertain environment. And although we’ve got — we have over $50 billion in what we refer to as economic liquidity, which is the cash we have on hand at the Fed here and central banks around the world, and also the short term securities we have. So, that provides a ton of liquidity, but the environment is just uncertain. And so, on — in some ways, we want to just maintain as much liquidity as possible and not be greedy. And on the other side, the balance sheet is always available for clients. And we — particularly from a liquidity perspective. And that means we want to leave plenty of room for clients that either want deposit with us or also might need lending from us. And so these uncertain times just call for maximum patience for us and maximum flexibility so that we can be available for whatever our clients want.

Betsy Graseck — Morgan Stanley — Analyst

And just as a follow-up to that, could you help us understand how you’re thinking about the loan book going forward, because to the center is demand. It seems like you’ve got a decent amount of capacity there. Thanks.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure. Yeah, you’re right. There is — when you think about this, effectively the securities book at $50 billion acts as the ultimate fulfillment of — and completion mechanism in the balance sheet. We couldn’t do all of that with loans, but we certainly have capacity to do a lot more, but it’s always going to start from our perspective with maintaining prudent credit quality and approach, and then working — the best thing we can do is work with existing clients on existing types of loans. And so that’s why, a couple of years ago you heard us talk about an initiative to do more lending. We did that. That was very largely with existing clients. From here forward, we’re not looking to have any initiatives to dramatically increase the loan book. It’s — from our perspective, it’s responding to clients as they need in different categories and — but the turmoil that we’re looking at, it does provide opportunities. If you look at the — if you look internally at the opportunity set we have, there’s a lot of opportunity. And so, we have to be thoughtful about how to grow and with what clients or prospects we want to grow, but this is a period where there are opportunities out there.

Betsy Graseck — Morgan Stanley — Analyst

Thank you.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure, thanks, Betsy.

Operator

We will take our next question from Alex Blostein with Goldman Sachs. Please go ahead.

Jason Tyler — Executive Vice President and Chief Financial Officer

Good morning, Alex.

Alex Blostein — Goldman Sachs — Analyst

Hey, guys. Good morning. Good morning, and thank you for the question. So, I was hoping we could start with opportunities you guys are seeing in the wealth channel on the back of the dislocation in the banking space. Mike, you mentioned obviously a flurry of activity towards the end of the quarter. So, maybe help us frame what that means in terms of maybe revenues.

And I guess, zooming out a little bit, that does what has been happening and I guess continues to happen in the banking world, does that increase your kind of organic growth prospects, and to what extent in the wealth channel?

Michael O’Grady — Chairman and Chief Executive Officer

Sure, Alex. So as I did mentioned, there has been a lot of activity, and as we’ve talked about before, when there’s more money in motion, we do have the opportunity to grow a little bit faster. And so we did see that pickup in the first quarter after the back half of last year where we talked about the fact that there was less activity as a result of the interest rate environment.

That said, this is something where the nature of the clients that we serve and that we work with and that we look to bring on board are pretty meaningful. And so, it’s a longer term process and I would say business building process than what I would call a sales process to do that. I mentioned some of the momentum that we saw in the upper part of the market above $50 million and the fact that we have a lot of prospects in that area as well.

So, we see this more as, I would say, a longer running opportunity rather than a one quarter, two quarter opportunity. And that’s how we’re approaching it.

Alex Blostein — Goldman Sachs — Analyst

Got it. Great. And then my follow-up, just around deposits and to tackle Betsy’s comments, thanks again for the extra detail. So, 1-10 average so far in April and it sounds like maybe down a little bit more on the back of the tax season where things are standing now. What’s the mix, I guess, between interest bearing and noninterest bearing balances the way you guys see it right now in April? And when it comes to the wealth deposits in particular, it sounds like they were down a little bit more the institutional in the quarter. So, I guess as you think about a rolling forward, what’s the approach to the rate you guys are paying on wealth deposits from here since it seems like a lot of it is ultimately still sorting into money market funds?

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure. So, let me give you a couple of incremental data points to work with. One, you’re right, we — and it’s typical, obviously, as you know well, Alex, for us to see a drop after the peak of tax season. And so it has come down a few — in the range of $4 billion to $5 billion since that average — relative to that average.

And that said, we are, from a mix perspective, not seeing anything dramatically different early on. And we talked about the fact that the noninterest bearing, mix is higher than even it was last time rates were up, but as rates flattened out, probably less incremental shift from that mix. And then within wealth, in particular, Mike mentioned the growth there. And you’re exactly right in calling on a lot of it going to cash. And I mentioned that there is a lift overall in client liquidity. So, of the lift that we’ve seen in cash, about $5 billion of that was in the wealth channel alone over the quarter.

And so — and that more than offsets the deposit decline that we saw in that channel. And so you just get a sense that the flows in that business are positive and give us a sense that there is good activity there.

Alex Blostein — Goldman Sachs — Analyst

Got you. Sorry. And just, what’s the rate on the wealth deposits that you guys are paying right now?

Jason Tyler — Executive Vice President and Chief Financial Officer

It’s highly depend — it varies by size, by region, by type, and so, it’s hard to give a — it’s impossible to give a specific number on it, but if you look at the — what might be instructive as you’re thinking about it is more of an overall average costs across the bulk, which is call it 2 to 250 basis points — 200 to 250 basis points.

Michael O’Grady — Chairman and Chief Executive Officer

And Alex, I would just add that there is no question with whatever — with everything that’s happened here that the market for deposits is more competitive. So there’s more price competition with lots of banks looking to retain or gain deposits and pricing aggressively to do that. Of course, we have to, likewise, price to make them attractive for our clients, but at a certain point, if it’s just going to get priced away on price as opposed to relationships, then you’re going to see some go away.

And just more broadly on deposits, it’s just, I think, important to understand the nature of our client base, which you know well. But just, asset owners, asset managers, wealth clients that have different characteristics than a lot of other institutions. Certainly on the operational side, these are deposits that they have as a part of running their operations, and so very sticky in the sense that it’s based on transaction flows, rather than necessarily rate per se. And on the other hand, these are institutions that are evaluated based on their performance. And so when rates go up as fast as they have here, they have to make sure they’re earning returns overall.

So they’re looking to be efficient. And with our wealth clients as well. We’re working with them to make sure that they get attractive returns overall. So, a lot of dynamics at play, and I think it’s important to understand the characteristics of our client base relative to others.

Alex Blostein — Goldman Sachs — Analyst

Yeah, for sure. And thank you guys for all the details. Appreciate it.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure.

Michael O’Grady — Chairman and Chief Executive Officer

Thanks, Alex.

Operator

We will take our next question from Steven Chubak with Wolfe Research. Please go ahead.

Steven Chubak — Wolfe Research — Analyst

Hi, good morning.

Jason Tyler — Executive Vice President and Chief Financial Officer

Good morning, Steve.

Steven Chubak — Wolfe Research — Analyst

So just wanted to start off with a question on the non comps. Looking at the component pieces, you guys made some good progress there, a good amount of the bead was really in outside services. I know that that has a heavy variable or activity linked component. Should we expect that to normalize as activity levels pick up consistent with what you saw at the end of March? Just trying to think about what’s a reasonable jumping off point for us to be modeling for next quarter.

Jason Tyler — Executive Vice President and Chief Financial Officer

Yes, absolutely, you’re right. That line item can move around a lot. So let me give you the short term and then maybe a longer term dynamic. In the short run, that line item, it was impacted by, call it, two things. One, some timing. So, we know that there is some of that improvement will likely come back online in second quarter. And then secondly, we’ve taken expense actions in in that category. And so, we worked really hard in — to work down consulting, to work down other tech services, sub custody, negotiating hard on third party advisory fees. And so, some of it definitely is related to the expense measures that we’ve talked about, broadly related to the productivity office, but there’s also some timing there too.

And so as you think about second quarter, this is an area where you will see a meaningful increase, call it $20 million, just quarter-over-quarter going into next year. About $5 million of that is just a movement from on premise processing that would show up in equipment and software, moving up into outside services. And — but there’s also just business growth and timing related there as well. We’re obviously not going to see $20 million less consistently, but that’s one we’re likely to see one going into the second quarter.

Steven Chubak — Wolfe Research — Analyst

Got it. And just for my follow-up, on NII. I know you had alluded to this in some of your commentary, and I’ll also echo I appreciate the additional detail on the deposit side. There’s been some debate previously as to whether NII or NIM had peaked at this juncture, whether it could eclipse levels seen last cycle. I was hoping you could give some perspective just on the NII trajectory, if it’s peaked at this juncture, or if there is room for growth. And given the balance sheet repositioning you alluded to, in terms of shortening the duration on the asset side, how we should think about the NII trajectory in a Fed easing cycle in particular, would be really helpful.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure. So on the first, the reality is, even this quarter, you can see there was a new factor introduced into NII, which is just client preference. And you can see how often even, this morning on this call, we don’t talk about just deposits in isolation, we talk about them in conjunction with money market funds. And part of that is that culturally, we have an incredibly strong focus just on providing advice to clients across whatever is appropriate for them. And there are advantages to being in deposits, there are advantages to being in money market funds, there are advantages to being in short term treasuries. And we think about that — we track inside the company. That’s what we were looking at very very closely on a very periodic — on a very frequent periodic basis. And so, I think that’s important for people understand. We’re not nudging clients in one direction or the other, just talking to them about the advantages of each.

And so, the reality is from here, NII is going to be based on — more than on interest rates, it’s going to be based on volumes. And volumes, last quarter, we were talking about the impact of QT and we were talking about taxes, now this new factor that’s been introduced is what is client preference between those three pillars of client liquidity. And we could see that going in either direction. And for us, that’s totally fine, as long as we’re continuing to grow client liquidity. And so, it’s hard to model in the short run, but if we think about the traditional factors, Fed rate increases, the institutional business, which is, call it, 75-80 — 70% to 80% of our deposits, we’re at about 100% beta there. And that’s kind of flattened out.

In the wealth channel, the betas are meaningfully lower. There, call it 30% to 40%. And so, still with Fed action because that’s all impacted in U.S. dollars, there’s benefit from that lift still. And then you’ve got to introduce the other factors, what happens with QT. And then what happens with client preference across the pillars. And then from a NIM perspective, just the last comment I’ll make is that we — you saw our leverage ratio is strong. And it’s in the mid 7s, and it gives us an opportunity if we want to take advantage if there’s a positive carry to do more leveraging and still maintain great liquidity for our clients. That’s helpful to NII, but it’s obviously — it brings down NIM.

Steven Chubak — Wolfe Research — Analyst

Really helpful perspective, Jason. Thanks for taking my questions.

Jason Tyler — Executive Vice President and Chief Financial Officer

You bet. Thank you, Steve.

Operator

We will take our next question from Mike Mayo with Wells Fargo Securities. Please go ahead.

Jason Tyler — Executive Vice President and Chief Financial Officer

Good morning, Mike.

Mike Mayo — Wells Fargo Securities — Analyst

Hi. Mike, you’ve mentioned taking tougher actions on expenses. I think that’s showed quarter-over-quarter. You mentioned benefits from the industry dislocation, but your expense-to-fee ratio is still 100 — still above your 105% to 110% range, quite a bit above. So, when do you think you’ll get there and should we look at the quarter-over-quarter progression or should we be thinking about year-over-year, because quarter-over-quarter looks better than year-over-year?

Michael O’Grady — Chairman and Chief Executive Officer

Yeah, Mike, I would say that our perspective is the same in the sense of we’re looking, I’ll call it sequentially in quarter-over-quarter and looking to make improvement in that and getting there both on the numerator and the denominator. So, holding tight and trying to reduce where we can on the expense side and then growing the fee side as we go through there. And as you’ve seen, if you look at it sequentially there, we kind of bottomed out with the fees in the fourth quarter and now they’re up very, very slightly. But then — depending on markets, but then, more importantly, how we drive organic growth underneath that, we’re looking to increase fees as we go forward on a sequential basis, while at the same time having the discipline on the expense side to keep bringing that expense-to-trust fee ratio down.

Operator

We will take our next question from Glenn Schorr with Evercore. Please go ahead.

Michael O’Grady — Chairman and Chief Executive Officer

Good morning, Glenn.

Glenn Schorr — Evercore ISI — Analyst

Good morning. Question on the other borrowing side. I think most of that is wholesale funding, and I know it’s not a huge number, but it’s also grown to be not nothing. It’s up 43% and the rate paid on that is up 450 basis points. So, I’m just looking for, is that a temporary filling the gap of the gap down in deposits? How do you think about that line item, intermediate term, say? I know you’ve got to do it in the short term.

Michael O’Grady — Chairman and Chief Executive Officer

Yeah, no, part of it is the higher bar and part of it is, the increase more in — I think part of the reason is that the cost of that is elevated, is us doing more of repo for clients and just providing more liquidity options for them. And the way the accounting works for that with the netting, it just leads to a high — makes it look like a higher cost than what it is.

And so, we’re going to talk about weather — maybe even a break that out separately and provide more detail in the future on it because it’s becoming, to your exact point, it’s just becoming a little bit larger, but that’s the reason you see that movement in the short run.

Glenn Schorr — Evercore ISI — Analyst

Okay. Yeah, that would be helpful. It’s — because then, it’s actually a distraction for you.

Michael O’Grady — Chairman and Chief Executive Officer

Yeah.

Glenn Schorr — Evercore ISI — Analyst

Okay, and then maybe, big picture, you talked about capturing client liquidity and you talked about it more holistically than you have in the past as money trends to money markets and treasuries. How much of it is it advised versus clients just self selecting in? And are there things that you could — that you’re tracking to see what you’re actually capturing? In other words, is it actually your dollars from deposits going into your money market fund as opposed to pluses and minuses coming from different directions?

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, sure. So, couple of thoughts. One, it’s — we’re much more accurate in being able to track the money market fund, than we are treasuries. And let me just give an example or two to illustrate what — why that’s the case. We could, and we actually did have a small number of very large institutional clients that might say — might have said a quarter ago, we just like to park some money on the balance sheet. We work with them on what the rate that is and then they might say, you know, for a variety of reasons, we want to go to short term treasuries. If they do that, they might use — if it’s a financial services fund, it could be a hedge fund, it could be an asset manager, if they have a prime broker, they’re more likely to use their prime broker to manage that. Is that really us? It’s certainly not us losing a lot of net interest income because the pricing on the deposit is going to be really tight, but difficult for us to track and really confirm where that’s going.

The other end of the spectrum is in Wealth Management. Financial advisors are literally calling their clients and saying rates are higher, you’re sitting on $750,000 in cash. Let’s talk about what you’d like to do with that. Would you like to move that into a money market fund, would you like to move it into a CD, would you like to start building out an ladder a treasury portfolio? We can track that much more accurately.

And so, different components, but in general, we’re — the statistics that we gave are biased toward the information that we can track and that we know stayed in house. And so if there’s an information bias, it’s toward us ensuring that the numbers we’re telling you are reflective of what we state here.

Glenn Schorr — Evercore ISI — Analyst

Okay. I appreciate that. Thank you.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure.

Operator

We will take our next question from Brian Bedell with Deutsche Bank. Please go ahead.

Brian Bedell — Deutsche Bank — Analyst

Great. Thanks…

Jason Tyler — Executive Vice President and Chief Financial Officer

Good morning, Brian.

Brian Bedell — Deutsche Bank — Analyst

Good morning. Maybe just staying on the — for my first question, just to stay on the deposit trends, and the question would be, as you think about that deposit pricing strategy in the wealth channel, particular — specifically, how do you view raising those deposit rates versus the alternatives? I guess at what point would you be inclined to just let those deposits go into the money funds or into the ladders or rather you would raise rates incrementally to sort of keep those deposits — wealth deposits on the balance sheet?

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure. So, in each of the businesses, there are pricing groups that set an overall rate, but there are also leaders within the regions and then down to relationship managers that have the ability to work at individual client levels to do what’s right. And so, we’re always thinking about what is our overall pricing relative to peers by geographical region, within Wealth Management even, but then there are times when there are very large clients that might come with $50 million, $00 million, $250 million, and that’s obviously not going to be priced off of a rate sheet. We’re going to talk about that. And the overall bias when we’re having conversations with clients again, when we’re talking about what to do and if they’re going to keep a deposit, looking at us versus competition, it’s just keeping on our platform.

And so, even though we’ve thrown out the beta in that 30% to 40% range and that may seem light, it’s — we’re looking at where the market is and making sure that the balance sheet again is available, and making sure that we’re not cannibalizing the whole base of deposits in order to pick up some volume. But obviously, and we’ve talked about it from the beginning, our strategic bias in wealth for deposits is keep the business on our platform.

Brian Bedell — Deutsche Bank — Analyst

Right. That’s great color. And then maybe just going back to maybe an early comment that you made, Mike, on the picking up of business given the banking stress that we’ve seen in March, I think you mentioned $1 billion of inflows on the wealth platform, but that it was a longer term dynamic. Maybe if you could just sort of describe what you’re seeing internally in terms of, I guess, you know, thinking about, sort of, I guess, maybe the panic environment where clients were moving assets quickly to go into a strong provider like Northern. Are we sort of past that phase, and then what does that next phase of getting those clients because of the dislocation? I guess, what’s the sort of the — either that sales pitch and as we move through the next couple of quarters in that dynamic?

Michael O’Grady — Chairman and Chief Executive Officer

So, Brian, I would start by saying that the way you characterize the first phase as kind of the panic phase is, although we did have, you know, call it, a strong week of inflows around that time period, it really wasn’t a panic environment where people are pushing deposits over the counter, so to speak. I think there were different dynamics at play relative to other time periods. And that’s why I say what we’re seeing is more kind of the longer play out and this of, I’ll say, clients and prospects thinking about who their long term financial partner is, and ensuring that it’s somebody that they’re comfortable is going to be there and has the strength and stability.

And so that’s why I say, it’s less of a blip and more of a long term, I’ll call it, trend, is the way that we would see it. And for us, without a doubt, it is playing off of our brand, it’s playing off of the 130-year history of being around and being a strong partner. That, as you know, has been consistent for a long time. In certain environments, it plays better than others. We think this is an environment going forward, where it plays very well.

Brian Bedell — Deutsche Bank — Analyst

Okay. Great color. Thank you.

Michael O’Grady — Chairman and Chief Executive Officer

Sure.

Operator

Will take our next question from Ken Usdin with Jefferies. Please go ahead.

Michael O’Grady — Chairman and Chief Executive Officer

Hey, Ken.

Ken Usdin — Jefferies & Company — Analyst

Hey, everyone. Thanks. Coming back on the expense question. I know you talked about moving the trust fees — expense-to-trust fee ratio is positive from here. The 6% adjusted cost growth rate is the best we’ve seen in like six or seven quarters, and I’m just wondering, just philosophically, are you thinking about managing more towards absolute levels of cost, and is there a way to help us think about like how you think? I know it’s tough to generate operating leverage in this type of environment, just given what’s happened and what you’ve walked through, but what’s the right way to just think about absolute cost growth and how you’re managing that on its own in this environment?

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure. It’s good to take a step back on this because it is how we’ve been talking about it internally recently. And one way to frame this, Ken, is if you think ex charges — I’m going to — because that’s just the way we — we’re not ignoring the charges, but the way we talk about them internally, ex charges, we had 9% expense growth last year. And we don’t — that’s not acceptable for us. And we — so, we’ve got to bend that curve aggressively. We know we’re carrying part of that forward with what we know about the impact of hiring and merit increase and off cycle adjustments given the labor environment last year, but that said, we’re targeting getting 2 points out of last year’s growth rate for the full year 2023.

And in general, all the expense areas are going to be addressed collectively to get to that 7% or better expense growth rate. And so, we look at a couple of — couple that are notable, because they’ve got big movements to them. One, you look at comp, and that look good for first quarter. You look in the second quarter, we know there’s about $40 million coming out because of the seasonality of the retirement eligible grant and some other dynamics there, but we also know we’ve got $20 million in merit coming online in second quarter.

The incentive accruals is also in that line, and that varies with profitability. And then from there, everything else is going to be driven by what happens in business from hiring and other actions and expense measures and things like that. And then we talked about outside services and how that’s got a big step up next quarter. And then the last one I’ll highlight, equipment and software. Even though we’ve got that move from equipment and software into outside services, we can — we’ve got clear visibility on some incremental depreciation coming online, maybe not in second quarter, but in third. And so, you could see a $5 million step up in that line item in the second quarter, but then we know we’ve got $10 million in depreciation coming in third quarter.

So, those are the big pieces at a super high level and then as well, a couple of the big moves underneath it.

Ken Usdin — Jefferies & Company — Analyst

That’s super helpful. And in that 7% or better, do you have it — is there an embedded impact on what current — FX currency translation does there?

Jason Tyler — Executive Vice President and Chief Financial Officer

No, not from here. I mean, we know we had a lift in this quarter, just an elevation of lift in — on both revenue and expense, so it hurt on the expense side, but not really modeling significant change from here.

Ken Usdin — Jefferies & Company — Analyst

Okay. And if I could ask one more kind of bring it all together question, you talked about a lot of balance sheet changes happening towards the end of the quarter, you talked about where deposits are. We can see where the betas went to. Do you have a way to help us understand just the range of expectations of what you think NII can do in 2Q versus 1Q to help us put that altogether?

Jason Tyler — Executive Vice President and Chief Financial Officer

We’ve been giving a lot of information that was — I would — we would hope to give you a really good answer on this one, but I think we got to leave it with where the deposit levels are — where the balances have been, where the deposit levels are. And then it look from there on — there’s just so many factors moving around, and particularly just client preference. And we’re being so emphatic and saying we’re not going to try to nudge in any direction, just provide good advice there.

So, it’s hard to bind it. I have to say the big factors that we see from here, with volumes being down so far, it’s hard — I’m hard pressed to see how we match the $544 million of second quarter. And so, I am going to say down, but not do too much more than that to give in anticipation, just given the the volatility in the market about client preference and where deposits are going.

Ken Usdin — Jefferies & Company — Analyst

Okay, that’s fair. Totally understood. Thanks, Jason.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure. Thank you, Ken.

Operator

We will take our next question from Jim Mitchell with Seaport Global. Please go ahead.

Michael O’Grady — Chairman and Chief Executive Officer

Hey, Jim.

James Mitchell — Seaport Global — Analyst

Good morning. Hey. Just maybe on on the buyback, any thoughts on, with your leverage ratios improving, but you did also talk about maybe using some leverage. So, how do we think about your thoughts on the buyback from here. It was a nice uptick from what you’ve been doing the last five quarters.

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, it was good, and there’s no reason we can’t continue to be in the market. There are a couple of things working in our favor. One, if we got good return on equity in this even — it’s something like, we picked up 35, 40 basis points from net income, you give up maybe half of that in dividends, but we also know that we’re getting a lift from — over time, the AOCI is going to pull to par and that gives a lift. I think it’s also noteworthy, the balance sheet repositioning we did, it was — that was accretive to CET 1 because it helped reduce RWA.

And so, those things helped. And so, if you think about those dynamics of what is return on equity, where are we from a dividend-payout ratio perspective, and then the pulling power of AOCI, in general, it gives us some room to buy back stock, while at the same time increasing CET1 to be at levels that are more consistent with — if you look at our long term history, we’re still bit lower than where we were. And you know we’re always looking at where our peers and where is that — where is the competition and making sure we have good buffers, but that’s how we’re thinking about it nowadays.

I’ll tell you, we do look — every day, we know where — we know the impact of rates on AOCI. And so, that’s a factor you can — you should imagine, we’re thinking about intra-quarter.

James Mitchell — Seaport Global — Analyst

Okay, that’s fair. And then maybe, just maybe a bigger picture. We’ve talked a lot about NII on the fee side, you’ve had — you had good flows at the end of the quarter into money market funds, which is one of your higher fee rate products, you’re talking about perhaps increased flows in the wealth side. How do we think — and you had a move in the market, how do we think about total fee income? Any puts and takes to think about as we go forward into the next quarter and beyond?

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, we’ve talked about the — we gave good sense of where we are at the end of the quarter relative to the averages. And so, it gives us — the launch point frankly, is positive relative to where we are. And you’re right that the money market funds in general, that’s an attractive fee business for us. And so, those — all those things playing in our favor, but we also know markets have a really big impact. And then also, as much as we talk about — we talk about organic growth in the business, what happens with markets in the short run is often the bigger driver.

The last thing I’ll mention is that in Asset Servicing in particular, that pipeline in the short run of one not funded, one not onboarded, is still above historical levels. And so the short run looks positive. We have less visibility out late in the year, but the asset servicing side is still — is also attractive relative to history. And we gave you even more information, I think, on the wealth management side of the business.

James Mitchell — Seaport Global — Analyst

Okay. Yeah. Thanks.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure.

Operator

We will take our next question from Brennan Hawken with UBS. Please go ahead.

Jason Tyler — Executive Vice President and Chief Financial Officer

Good morning, Brennan.

Brennan Hawken — UBS — Analyst

Good morning. Good morning, Jason. Thanks for taking my questions. Just wanted to try and make sure I understand something on expenses. You had spoken to getting below 7% expense growth, and I believe that was on a number that was ex one timers. Do I understand that right? And what is that base on 2022 if we back out the one timers, just so I can kind of fully level set and understand how we’d be really thinking about that?

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, it’s — think about it as 4893, to be very very specific.

Brennan Hawken — UBS — Analyst

That certainly is. Thank you. I appreciate that.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure.

Brennan Hawken — UBS — Analyst

So, one more, just clarifying, you had chatted about how there’s some noise in that other financing line that we most usually think about as wholesale. So, with deposits coming down, would think that you’d be probably building out the wholesale, at least in the near term given the quarter-to-date decline in the balances. Is that operating assumption fair? And then, if we were to strip out some of that fixed financing line, what does that core cost to your wholesale, just so we can model that appropriately when we’re thinking about truing up for the — some of the quarter-to-date trends you flagged? Thanks.

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, in general, it’s going to depend on where we go in the market and how we — and what sources of wholesale funding that we use. And so, it’s FHLB and sometimes we’re doing other sources, but in general, it’s been in the mid-4s this past quarter, and going forward, I think it’s just — it’s obviously going to be impacted by rates and where and what happens with the Fed. And so — but I think the fact that we’ve gotten two questions this time means we’ll probably, in the future, try and give you guys a little bit more information on the impact of FICC repo and how that’s impacting the borrowing costs. And there is also impact on the asset side, to be fair, as well. So we’ll provide some more information on it.

Brennan Hawken — UBS — Analyst

Great. Thanks, that would be really helpful. I’d love to just do — and this is a little bit of a ticky-tacky but I’d love to just do one more on expenses, if you don’t mind. You spoke to $20 million pickup quarter-to-quarter, it seemed like on non comp, but $5 million of that was just like one — going from one bucket to another. So, does that mean it’s like $15 million quarter-over-quarter or does that mean that $20 million is the total step up we should think about for non comp, and then underneath the surface of that, there is $5 million moving from one bucket to another? Just if you could clarify that, that would be helpful.

Jason Tyler — Executive Vice President and Chief Financial Officer

Yes, I’m going to — there’s a couple areas where I mentioned 5s and 10s. So, let me — I’m going to be a little bit repetitive, forgive me, but it will make sure that I was a 100% clear on them because there is a couple of different areas that you might have been referencing.

On comp, no movements between buckets. We think it take first quarter, reduce it by $40 million for the retirement eligible and some other factors that play into the incentive line, and then add $20 million for merit increase. That gives you a decent starting point to say, okay, what’s going to happen with the business going forward.

Second dynamic that I mentioned does have movement between line items. It’s movement between outside services and equipment and software. And there’s about a $5 million move that’s going to happen second quarter from equipment and software into outside services. Outside services should be about $20 million higher than first quarter. That $20 million includes the $5 million from equipment and software.

On equipment and software, still think that that line item is going to be up a few million dollars in second quarter.

Brennan Hawken — UBS — Analyst

Thanks for walking through that.

Jason Tyler — Executive Vice President and Chief Financial Officer

You bet.

Operator

We will take our next question from Gerard Cassidy with RBC. Please go ahead.

Jason Tyler — Executive Vice President and Chief Financial Officer

Good morning, Gerard.

Thomas Leddy — RBC Capital Markets — Analyst

Good morning, everyone. This is Thomas Leddy calling on behalf of Gerard. Circling back a bit on the fee side and following up a bit on Alex’s question earlier, can you give us some color on the competitive landscape you saw this quarter and any organic growth opportunities you see as we look further into 2023 on the institutional side? You guys gave some good color on the wealth side, but just on the institutional side, any additional color there?

Michael O’Grady — Chairman and Chief Executive Officer

Yes, Tom, the additional color I’d give you there is that — certainly, highly competitive, but there are quite a few opportunities that are out there. So, active market. And I would say a lot of what’s driving it is with the impact on the markets last year, equity markets being down 19%, 20%, that put a lot of pressure on asset managers. And as a result, having them look at their operating models, how they can become more efficient and looking to either outsource activities and/or consolidate providers. And so, that has increased, again, the level of opportunities in the marketplace and can cut both ways. I mean, situations where we’re advantaged, but other situations where I’ll say we’re more on the defensive because it’s an existing client or one of two being an existing clients.

So, very active at this point, and obviously, trying to win more than our share.

Thomas Leddy — RBC Capital Markets — Analyst

Thank you. That’s helpful. And then just lastly, high level, can you detail for us what an ideal environment would look like for you guys in terms of an interest rate and global markets perspective.

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, So, it’s interesting. I think, Gerard, actually might have asked that exact question a few weeks ago, which seems like quarters ago. And my thought on that is that it — first of all, the trajectory — the slope of the curve matters a ton. And having a somewhat steeper yield curve matters a lot. And secondly, you want rates to be above very low. And so when rates are, call it, 58 — when Fed fund rate are below 50 basis range or below, it’s hard — it’s just hard for us to get good return on equity and we start to play in the fee waiver land which just is not — it’s not that we lose money in money market funds, but that whole business, the economics of it change a lot.

And but then lastly, the pace with which you get to any environment matters a lot. And that’s why a lot of banks who struggled this time, it’s not the yield curve, it’s the pace of change. And literally 12 months ago to today and Fed moving this aggressively in a relatively short period of time, it just creates a — it’s very tough to deal with pace.

So, those would be — those are the three dynamics that are forefront of mind from our lens.

Thomas Leddy — RBC Capital Markets — Analyst

Great, thank you. That’s helpful. And thank you guys for taking the questions.

Jason Tyler — Executive Vice President and Chief Financial Officer

Oh, you bet.

Operator

We’ll take our next question from Vivek Juneja with J.P. Morgan. Please go ahead.

Vivek Juneja — J.P. Morgan — Analyst

Thank you.

Jason Tyler — Executive Vice President and Chief Financial Officer

Hi.

Vivek Juneja — J.P. Morgan — Analyst

Hi. Hi, Jason. Hi, Mike. Couple of questions. One is the headcount cuts, the severance that you took in the fourth quarter, have we seen that flow through yet in terms of the numbers?

Jason Tyler — Executive Vice President and Chief Financial Officer

So we have actually gotten a pretty good head start on those but very little impact already in the numbers. That happened later in the quarter, and just the areas of the business where they happened, we just haven’t seen that play through very much at. Some impact, but light.

Vivek Juneja — J.P. Morgan — Analyst

So, should we — in those numbers that you gave us, should there be some benefit from that coming through, Jason, in Q2 or not, or 3Q or any color on that?

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, we’ve — all along, I think we said — we think the meaningful impact should be visible third — by third quarter.

Vivek Juneja — J.P. Morgan — Analyst

Okay.

Jason Tyler — Executive Vice President and Chief Financial Officer

And again, remember that — remember also that we’ve said this is about getting jobs into the right places. And so, in many instances, this is about transitioning jobs from lower costs — from higher cost locations to lower cost locations. And so, we’ll see some benefit, but it’s not the impact of taking the roles that we’re exiting times the average cost. There’s some exit in some instances. And again, I think, just super instructive to focus on what we mentioned earlier, we’re thinking about — our target is to try and get that overall expense growth rate into the right level and we’re thinking about all of these different expense categories in aggregate, to get there.

Vivek Juneja — J.P. Morgan — Analyst

Okay. Shifting gears, completely different one, you talked about — the reverse, if I want to separate from that, your other borrowings went up from about $3.5 billion a year ago, $8 billion last quarter to now over $11 billion. It doesn’t seem like you’re making much of a spread on that. Any color on how we should think about that and what’s driving that increase?

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, that’s also where the FICC repo activity is going to be reflected, but…

Vivek Juneja — J.P. Morgan — Analyst

I see, not just in the repo line but on top of that and the other borrowings line too is it?

Michael O’Grady — Chairman and Chief Executive Officer

I think in the Other borrowings, Vivek, we also have some of the Federal Home Loan Bank borrowings which during this time period, we term some of those out, which previously was more all overnight. And just in this time period, with the uncertainty, wanted to add additional liquidity to the balance sheet.

Jason Tyler — Executive Vice President and Chief Financial Officer

Yeah, and there was about $3.5 billion in that increased FHLB line item. That’s — I think you’d find that…

Vivek Juneja — J.P. Morgan — Analyst

And…

Jason Tyler — Executive Vice President and Chief Financial Officer

That’s sequentially, not year-over-year.

Vivek Juneja — J.P. Morgan — Analyst

Right, and you’re done with that, Mike, or are you still looking to leave some — do more there?

Michael O’Grady — Chairman and Chief Executive Officer

No, as opportunities come up for us, we’re still contemplating it, not necessarily dawn — I mean, as you know, the spread’s not — it’s not extremely high there. So, there is a combination of liquidity management, but also the spread that’s available. But moving that from from 7-6 to 11-4 is a big move.

There is also one other dynamic in that line item, which is that there was some euro investment leveraging that had been up in the non-U.S. office interest bearing line that has been reclassed into other borrowings. And so, that’s a little over $1 billion. And so, it’s just another dynamic to the increase that you see there. But back to — we’ve got capacity for leveraging, and we’ll continue to think about where to use it.

Vivek Juneja — J.P. Morgan — Analyst

Thank you.

Jason Tyler — Executive Vice President and Chief Financial Officer

Sure.

Operator

That will conclude today’s question and answer session. Ms. Childe, I will turn the conference back to you for any additional or closing remarks.

Jennifer Childe — Senior Vice President and Director of Investor Relations

Thank you, Cynthia. And thanks, everyone for joining us this morning. We look forward to speaking with you again soon.

Operator

[Operator Closing Remarks]