State Street Corp (STT) Q2 2020 Earnings Call Transcript

State Street Corp  (NYSE: STT) Q2 2020 earnings call dated July 17, 2020

Corporate Participants:

Ilene Fiszel Bieler — Executive Vice President and Global head of Investor Relations

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Eric Aboaf — Chief Financial Officer

Analysts:

Brian Bedell — Deutsche Bank — Analyst

Betsy Graseck — Morgan Stanley — Analyst

Glenn Schorr — Evercore ISI — Analyst

Brennan Hawken — UBS — Analyst

Kenneth Usdin — Jefferies, LLC — Analyst

Alexander Blostein — Goldman Sachs & Co. — Analyst

Gerard Cassidy — RBC Capital Markets — Analyst

Mike Mayo — Wells Fargo — Analyst

Jim Mitchell — Seaport Global Securities — Analyst

Presentation:

Operator

Good morning, and welcome to State Street Corporation’s Second Quarter 2020 Earnings Conference Call and Webcast. Today’s discussion will be broadcasted live on State Street’s website at investors.statestreet.com. This conference call is also being recorded for replay. State Street’s conference call is copyrighted and all rights are reserved. This call may not be recorded for rebroadcast or distribution in whole or in any part without the expressed written authorization from State Street Corporation. The only authorized broadcast of this call will be housed on the State Street website.

Now, I would like to introduce Ilene Fiszel Bieler, Global Head of Investor Relations at State Street.

Ilene Fiszel Bieler — Executive Vice President and Global head of Investor Relations

Good morning and thank you all for joining us. On our call today, our CEO, Ron O’Hanley, will speak first. Then Eric Aboaf, our CFO, will take you through our second quarter 2020 earnings slide presentation, which is available for download in the Investor Relations section of our website, investors.statestreet.com. Afterwards, we will be happy to take questions. During the Q&A, please limit yourself to two questions and then re-queue.

Before we get started, I would like to remind you that today’s presentation will include results presented on a basis that exclude or adjust one or more items from GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP or regulatory measure are available in the appendix to our slide presentation.

In addition, today’s presentation will contain forward-looking statements. Actual results may differ materially from those statements due to a variety of important factors such as those factors referenced in our discussion today and in our SEC filings, including the risk factors in our Form 10-K. Our forward-looking statements speak only as of today, and we disclaim any obligation to update them even if our views change.

Now, let me turn it over to Ron.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Thank you, Ilene, and good morning everyone. We released second quarter results this morning. Let me begin by saying that I’m very pleased with our continued strong financial performance. I am proud of our team members worldwide who continue to put our clients first and deliver these results for our shareholders.

Turning to Slide 3, I will provide a brief update on how we are successfully navigating the COVID-19 operating environment, while also delivering earnings growth for our shareholders. Providing exceptional service quality through improved client engagement, driving product performance, supporting the overall financial system, and safeguarding our workforce are all key priorities for us. We demonstrated success in each of these areas this quarter and delivered strong results for our shareholders as a result.

Our clients are at the center of everything we do. You will recall that in 2019, we took a number of actions to improve client service quality, engagement, and decision-making. These measures have led to improved client engagement, which is critically important in the current environment, and its impact is evident in our results and business performance.

Our clients are continuing to turn to State Street for our operational capabilities and solutions. During the second quarter, we effectively managed to on-board a number of new client projects across various client segments, including a large asset manager, a significant asset owner, and a national wealth manager in CRD, indeed we see true sustainable momentum developing in our Alpha CRD platform. All this occurred while processing 13% and 35% increases in back and middle office transactions respectively. We were the first service provider to support the launch of the semi-transparent ETF product and we see strong demand in the market for this innovative solution.

Our service quality is being recognized across the industry. For example, we are particularly proud of our ranking in the 2020 Euromoney FX Survey were State Street was named the Number 1 FX provider to asset managers for the third consecutive year with a number one ranking in overall customer satisfaction globally.

The strong client engagement is reflected in our product performance. Our investment servicing assets under custody and administration, which increased 5% quarter-over-quarter to $33.5 trillion had another healthy level of new wins amounting to $162 billion in the second quarter. Assets yet to be installed stood at a strong $1 trillion at quarter end.

At Global Advisors, assets under management totaled $3.1 trillion and we recorded $23 billion of total net inflows during the second quarter. Our spite of range of ETFs recorded its best quarter of inflows since the fourth quarter of 2017 while SPDR GLD, the gold ETF, had its strongest ever level of inflows at $12 billion. Further, we are competing and winning in key strategic areas of focus for us. Our recently expanded and re-benchmark range of low cost ETFs also recorded its highest quarterly level of net flows at $11 billion. Our sector SPDRs, made strong market share gains with almost half of sector industry flows going into the product during the second quarter. And we remain a flight to quality for cash management and liquidity solutions across a suite of product options.

We continue to play a critical role in supporting the financial system. The operating environment remains uncertain as the pandemic continues to impact many parts of the world. While we have seen a partial recovery in some areas, many economic indicators continue to point negatively and unemployment remains high. Reflecting the real human cost of this health crisis. State Street continues to support the broader economy and markets, and is actively assisting client access to various Federal Reserve programs that support the flow of liquidity and credit. Currently, State Street is involved in five Federal Reserve programs, either directly such as with the Money Market Mutual Fund Liquidity Facility or as the programs custodian and administrator, such as the Main Street Lending Facility.

Lastly, developing high performing organization and planning ahead for our global workforce also continues to be a priority. We continue to have about 90% of our employees working from home as we optimize work from home model while leveraging technology to enable better collaboration and more effective ways to serve our clients.

Last quarter, we took measures to protect our employees and announced that through the end of the year we suspended any workforce reductions, other than for performance or conduct reasons in light of the COVID-19 crisis. Now we are going further for our employees by increasing their opportunities for mobility by launching an internal talent marketplace. By supporting our employees as they take on new roles and learn new skills, the marketplace will better develop and redeploy our internal talent to meet our evolving business needs and the growing demands of clients and stakeholders.

Turning to Slide 4, in our second quarter and first half performance highlights. I am pleased by our continued strong performance and the progress we are making towards achieving our medium-term financial goals. Relative to the prior year period, total revenue increased 2% and fee revenue increased 5%. Second quarter EPS was $1.86, up 31% year-over-year and ROE was 12.1%. I am pleased to report that our second quarter pre-tax margin improved by over two percentage points year-over-year to 27%. Our first half pre-tax margin increased by three percentage points.

Front-to-back Alpha platform strategy provides an attractive value proposition for our clients. Our second quarter performance was helped by the strong revenue performance at Charles River Development where we had key business wins and renewals. The Alpha CRD pipeline continues to develop well with a good mix of deal sizes, functionalities and scope. We expect to be announcing new major wins between now and year-end.

Turning to expenses the pandemic created an immediate challenge to our expense reduction planning, relative to our original expectations at the start of the year. To help offset this impact, we took immediate action by implementing a hiring freeze. Watching the talent marketplace, I just referenced and reassessing all discretionary expenses. I am pleased to report that through our continued expense management efforts, further IT optimization, and operational productivity measures, we reduced total expenses by 3% in the second quarter relative to the year-ago period. While we continue to invest in our business, first half 2020 expenses are now down 2% net of those investments relative to the year-ago period.

For us productivity management is a way of life, as we continue to build on the strong culture of expense management we successfully established during 2019, when we undertook significant actions to improve our operational efficiency and reduce expenses through a comprehensive firm wide expense savings program. We cannot control the economic environment, but we can control our expenses. Despite the challenges the COVID-19 pandemic has created, we remain highly focused on driving productivity improvements in automation benefits as we strengthen our operating model, enhance service quality, even during this challenging period.

Turning to our balance sheet and capital. We are pleased with our 2020 CCAR results and the inaugural determination of our preliminary stressed capital buffer at the minimum 2.5% level. The COVID-19 pandemic has provided an unprecedented real time stress test and our strong capital position has enabled us to operate effectively, help stabilize the financial markets, and support our clients, employees and communities. While the environment remains uncertain, State Street’s performance under the Federal Reserve severely adverse scenario is another reminder of our business models resiliency and our capital stability.

We recently announced our intention to continue our quarterly common stock dividend of $0.52 per share in the third quarter. Consistent with the Federal Reserve’s instructions to all large banks, we will be suspending share repurchases for the third quarter. As we look ahead, given our strong capital position, we will consider a full range of capital actions, including the resumption of share repurchases in upcoming quarters. We will of course take into account economic conditions, safety and soundness, the Federal Reserve supplemental CCAR scenarios and review process, our capital levels, and any interim regulatory limitations.

To conclude, I’m very pleased with this quarter’s results, which demonstrates continuing revenue improvement even during difficult times as well as further evidence of our ongoing ability to tightly control expenses, while continuing to safeguard employees and serve our clients.

And with that, let me turn it over to Eric to take you through the quarter in more detail.

Eric Aboaf — Chief Financial Officer

Thank you Ron, and good morning everyone. Let me begin my review of the second quarter by summarizing our year-over-year results on the left panel of Slide 5. EPS is up 31%, revenue was up 2%, expense is down 3%, with expanding margins and healthy ROEs. And I think it is useful to point out that while we continue to operate in an extraordinary environment with the COVID pandemic, our results this quarter show strong underlying momentum and durability in our State Street operating model. Our bellwether servicing fees are up year-on-year, our prior investments in our global FX and CRD franchises have yielded strong results. We’ve been able to carry reserve build, and throughout all of this we have continued to drive expenses lower and lower. And so our pre-tax margin is up 2.3 points year-on-year and our ROE is up two points.

Turning to Slide 6. Period end AUC/A levels increased 2% year-on-year and 5% quarter-on-quarter. The year-on-year move was driven by higher period end market levels and client flows, partially offset by previously announced client transition that had a de-minimis effect on revenue during the quarter. Quarter-on-quarter the AUC/A increase, which is partially reported on a lag, was mainly due to higher period end equity market levels. AUM levels increased 5% year-on-year and 14% quarter-on-quarter to $3.1 trillion, driven largely by higher period end market levels and net inflows. Amidst continued and uncertain economic conditions, Global Advisors saw net inflows of $23 billion, driven by cash and ETF flows, partially offset by institutional outflows. I highlight that our US SPDR ETF saw another strong quarter with $24 billion of inflows, which was well diversified once again. As Ron mentioned, our low cost SPDR portfolio ETF saw their largest quarterly inflow yet and continue to gain share. Our commodity ETFs and sector ETFs saw strong inflows too.

Moving to Slide 7. Servicing fees were up 2% year-on-year, reflecting higher client activity and net new business, only partially offset by some pricing headwinds, which continue to moderate. Servicing fees were down 1% quarter-on-quarter, driven by lower average market levels, partially offset by higher client activity. Despite the recovery in equity markets, since the first quarter average domestic and international equity markets were still down sequentially impacting servicing fees. However, client activity remained elevated, but down from March levels as market volatility persisted throughout the quarter.

Amidst the ongoing pandemic, we have maintained business continuity and continue to provide clients with the benefits of our scale and diverse capabilities. On the bottom right of the panel of this page, we’ve included again some sales performance indicators that underline this dynamic. As you can see AUC/A wins totaled $162 billion in 2Q, with several deals coming through. Assets to be installed as of period end 2Q are strong at $1 trillion. We continue to have a strong pipeline of front-to-back Alpha deal and expect multiple Alpha announcements in the second half of the year.

Turning to Slide 8, let me discuss the other important revenue lines, beginning with management fees. 2Q revenues decreased 4% year-over-year driven by institutional product outflows and mix, partially offset by strong net inflows from both ETF and cash products. With the second quarter now complete and a better sense of the forward rate picture, we now anticipate that the likely impact of money market fee waivers, net of distribution expense will be at the low end of our previously announced range or just $10 million to $15 million for the full year.

As I mentioned earlier in my remarks, FX trading services saw another strong quarter with revenues up 26% year-on-year, but down 25% quarter-on-quarter as the business again saw elevated volumes and increased client demand, but down from the record levels seen in 1Q. The FX trading franchises continue to see market share gains and increased client engagement. As Ron mentioned, we saw strong results across recently released 2020 Euromoney Survey securing the Number 1 spot in Global Customer Satisfaction and Service as well as the Number 1 spot for all products and for electronic trading for our asset manager clients.

Securities finance revenue decreased 27% year-on-year as agency lending demand for asset lightens and shift towards lower spread fixed-income assets and as ongoing hedge fund deleveraging in falling markets drove down enhanced custody demand. Securities finance revenue was flat quarter-on-quarter.

Finally, software and processing fees increased 46% year-on-year, and more than doubled quarter-on-quarter, driven by significant revenue adds at CRD, which I’ll talk more about shortly and past positive outcomes in our market-sensitive activity, which includes certain currency translation impacts and marks on employee long-term incentive plan. These other items were positive this quarter, in contrast to first quarter when they were notably negative.

Moving to Slide 9, CRD generated standalone revenue of $145 million, which was up 59% year-on-year and 45% quarter-on-quarter, driven by a large wealth implementation and several large asset manager renewals. We’ve always talked about the lumpiness inherent in ASC 606 revenue recognition standards, so while we are extremely pleased with these results, we remind you not to read across any one quarter.

Moving to the right hand side of the page. We were quite pleased to see the momentum in CRD this quarter overall, and the progress we have made to expand the CRD presence in the wealth segment in particular, which you may recall was one of our key synergy commitments at the time of acquisition. Wealth now represents approximately 20% of CRD revenue and represents another area of growth for us.

Turning to Slide 10, NII decreased 9% year-on-year and 16% quarter-on-quarter. Excluding the impact of episodic market benefits of $20 million in the first quarter, NII was down 13% quarter-on-quarter. The sequential decline in NII was primarily driven by the full quarter impact of lower market rate, including the impact of central bank intervention with more USD liquidity, driving lower than expected sponsor repo volumes.

We continue to support clients use of the Federal Reserve Money Market Mutual Fund Liquidity Facility. As a result, this quarter MMLF balances averaged $19 billion and finished the quarter at $11 billion. You will see on the left hand side of the slide, this quarter we are also showing our NIM, excluding the impact of the MMLF. While MMLF had a positive impact on NII this quarter, its impact on our NIM was a negative 5 basis points.

Average assets increased 13% quarter-on-quarter and average deposits increased 9% quarter-on-quarter. However, period end deposits decreased 22% or $57 billion quarter-on-quarter, as a portion of the uptake in the deposits we saw at the height of the pandemic receded in the last few months. Given the Fed’s expansion of the money supply however, we do expect a good portion of the current deposits to stay with us, which we will reinvest in a mix of both loans and securities.

Moving to Slide 11, we’ve again included some color on the loan portfolio as well as the company’s allowance for credit losses. On the top panel of this page, you can see updated detail around our high quality loan book and its characteristics. Compared to first quarter, average loans decreased 4% while period end loans decreased 17%, primarily driven by a reduction in client overdraft levels we saw during March. Overall, the loan book remains healthy with our largest lending category, capital call financing to private equity funds see no change in borrowing pattern, but with continued strong demand for new facilities.

Moving to the bottom panels, the allowance for credit losses increased to $163 million, primarily due to a $52 million in provisions for credit losses driven by changing economic conditions and ratings migrations, offset by $14 million in net charge-offs. You will note, we took advantage of the rally in the leveraged loan market to selectively derisk our leverage loan portfolio and exited certain positions, which effectively cost us $6 million given the necessary reserve bill. So, a good trade.

On Slide 12, we’ve again provided a view of expenses this quarter, ex notables, so that the underlying trends are readily visible. Our 2Q ’20 expenses were down 3% year-on-year and down 1% quarter-on-quarter, excluding both notable items and seasonal expenses with favorable trends across most expense category. As we said last quarter, amidst the ongoing pandemic, we continue to execute on many of the investments and optimization savings initiatives detailed earlier in the year. And while we suspended workforce reductions through year-end, other than for performance or conduct reasons, in light of the COVID crisis, we have found additional expense opportunities to act upon. We continue to make progress on lowering compensation benefits costs, occupancy costs and other costs, while IT costs are lumpy but on track. We’re particularly pleased that our results reflected continued and sustainable expense reduction, notwithstanding the extraordinary market condition, while also delivering top line revenue growth.

Moving to Slide 13, on the right, you can see the evolution of CET1 and Tier 1 leverage ratio. We are thus navigating this challenging environment with strong capital levels. In 2Q, our standardized CET1 ratio increased 1.6 percentage points quarter-on-quarter to 12.3%, driven by solid retained earnings and a reduction in RWAs as market volatility receded. The Tier 1 leverage ratio was essentially flat at 6.1% due to higher capital levels, offset by higher deposits. We’re also pleased with our 2020 CCAR results. Our capital resilience under the Fed’s stress scenarios continues to demonstrate our low risk profile.

And this year, we received a preliminary stress capital buffer requirement of 2.5%, which would have been much lower if it were not floored at 2.5%. As you know, the Fed has large banks to suspend share buybacks in the third quarter. However, we expect to continue to pay a quarterly dividend of $0.52 per share. And finally, as Ron noted, the firm’s capital position remains strong amid the uncertainty created in the COVID-19 pandemic. Accordingly, we will consider a full range of capital actions, including the resumption of share repurchases in upcoming quarters, but will do so considering economic conditions, safety and soundness, the Fed supplemental CCAR scenarios and review process, our capital levels and any interim regulatory limitations.

Turning to Slide 14, we’ve again provided a summary of our 2Q results. As we mentioned earlier, we are pleased with the results and believe they are reflections of the durability and resiliency of State Street’s business model as well as our focus on delivering on our strategy of both growth and productivity. Throughout this crisis, we have differentiated ourselves by proactively reaching out and assisting clients through these difficult times. We believe that our resiliency during this extraordinary period and our constant attention to service quality have created goodwill with our clients and positioned us for share gains over the medium to long term.

Last quarter, I outlined our full year financial outlook under certain set of assumptions, noting that there was a range of possibilities as a result of the potential length of the COVID pandemic and the associated economic impacts. I would like to update those expectations with our current thinking, again noting, there remain a broad range of possible outcomes. We now expect global central banks will keep short rates at current levels for the remainder of the year and long end rates will stay at June 30 spot rates through year-end. We also now assume that average global equity markets levels for the remainder of 2020 will be flat to current levels. As a result of our client engagement, moderating pricing pressure and CRD and alpha front to back wins, we now expect that full year fee revenue will no longer be down 1% to 2% year-on-year for the full year 2020, but instead will be up approximately 1.5% to 2% with servicing fees expected to show a year-over-year improvement relative to 2019.

Regarding NII, given the impact of continued lower long end rates on the investment portfolio and central bank intervention with more USD liquidity, driving down the expected repo volumes, we now expect NII to be down approximately 9% to 11% on a sequential quarter basis and expect the fourth quarter to be relatively in line with the coming third quarter. Turning to expenses, we remain laser focused on driving sustainable productivity improvements and achieving automation benefits. We expect that full year expenses will now be down at the better end of our previous guide of down 1% to 2% year-on-year, excluding notable items as we continue to find ways to control and drive down expenses.

In regards to our provision for credit losses, we continue to see a range of outcomes based on evolving economic conditions and any ratings migrations. On taxes, we expect our tax rate for the full year to be closer to the lower end of our 17% to 19% range.

And with that, let me hand the call back to Ron.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Thank you, Eric. Operator, can you open the call to questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Brian Bedell from Deutsche Bank. Your line is open.

Brian Bedell — Deutsche Bank — Analyst

Great, thanks. Good morning, folks. Thanks for taking my questions. Eric, if you could just unpack a little bit the NII guide just in terms of what you’re seeing for client deposit levels moving into 3Q and to what extent your guidance for 3Q and 4Q includes more reinvestment or more shift of deposits into longer-term securities? I’m sorry, and also one more on that is the repo financing business in terms of the impact, it looks like that was much lighter in the second quarter. So just your thoughts on that for the second half as well.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Eric, you muted.

Eric Aboaf — Chief Financial Officer

Brian, it’s Eric. Thanks for the question. We’re clearly navigating through some challenging times with the interest rate environment and obviously trying to do our best to, to navigate through. When you think about the NII guide, there is clearly the continued down tick in long-term rates, which is affecting the investment portfolio, and we’ll continue to some extent in the coming quarters after that and then there is some lower volumes sequentially and overdraft, and then the MMLF balances that are also contributing to the second quarter to third quarter decline. I think once we get to that level, part of what happens is that you’ve got offsetting factors, you’ve got on one hand, the lower long end rates which put a — which tend to tractor through the investment portfolio for another couple of quarters, which creates a downdraft. And those I think can be offset by the growth in the investment portfolio and lending base, which is really supported by the higher levels of deposits that we’re operating at.

Now, it’s hard to tell exactly what the deposit levels are going to be, but I think if you stare at the data that we’ve shown here, we used to run at $155 billion $160 billion of deposits, first quarter average was solidly at $180 billion. Second quarter average is solidly at $197 billion. We think we’re going to land somewhere between those two points, which means that half of the original base of the, call it, $160 billion of deposits, there is an ability to expand the investment portfolio, put on duration carefully and selectively invest in some high quality position to maintain our HQLA. And we think that together should create some stability on NII in the coming quarters.

The sponsored repo program, as we mentioned, did create a down draft from 1Q to 2Q and what we’re seeing there is that the overnight repo rates are less attractive than they’ve been relative to the one month treasury rates and so that creates reduction in volumes. If that were to persist, then we’re not going to get a lift there and we’re not going to get the volumes we’d like to see. On the other hand, if that normalizes back, there could be some upside in the coming quarters. But more time will tell before we can incorporate that into our forecast.

Brian Bedell — Deutsche Bank — Analyst

Okay, great. That’s super helpful. And then maybe on CRD, you had a very strong quarter, very encouraging on the wealth management wins. Maybe just a two-part question, Eric, on the revenue trajectory, obviously, it’s lumpy like you said, maybe if you can just try to characterize what you thought was one-time licensing fee revenue within the second quarter? And then maybe Ron, if you want to talk a little bit about that wealth strategy sounds very encouraging in terms of the win that you’ve announced and potential new wins down the road, and maybe just in terms of sizing that space for you, what you’re doing there on the wealth side, that’s different than the institutional asset manager side at CRD.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Brian, why don’t I start and then I’ll turn it over to Eric. So I’ll start on the latter part of your question there, Rob, as we mentioned when we acquired Charles River that in addition to its core institutional client segment, it is developed a fair amount of technology applicable to the wealth segment, particularly the larger wealth manager segment, large private wealth managers, wire houses, etc. And that is, we’ve continued that R&D and also leveraged our own client relationships to be able to help propel that growth and that’s what you’re seeing playing through. We see it as a solid and additional form of growth on top of the core Institutional business. Right now, I think it’s about 20% of the business, up significantly from when we acquired it. And we would expect it to be growing, probably a little bit more than the — at a slightly higher level than the institutional business The good news about this is that its shares the same technology and operating platform, I mean, there are certain sub applications that are different, but we can do this at scale easily.

And the way I would say you should think about the lumpiness, I mean, Eric will take you through the — how the accounting actually works, but when you start to see kind of a positive lumpiness like this, I mean it’s essentially a client being installed and it’s at the point then that we can start to recognize revenue. And following that, we will be ongoing recurring fee. So that’s how you should interpret the lumpiness, it’s not — it is one-time as it relates to that client, but it’s certainly not one-time as we continue to grow, you will see that same kind of lumpiness.

Eric Aboaf — Chief Financial Officer

Brian, let me add some texture and even some numbers to that so that you can get a better sense of the underlying revenues here. We’re quite pleased with the growth trajectory, we’re quite pleased with the pipeline, with the kind of contracted but not yet installed level, we track a number of different metrics here to give us confidence in the developing growth. The revenues really come, I’ll call it, broadly into two buckets. There is fast revenues and professional services, and SaaS revenues are pretty straightforward. You win a client, it’s a five-year contract, and the revenue recognition is that the revenue is ratably applied over those five years. Very straightforward, and in fact, we want to be in the business of growing fast revenues over time and professional services because those create a very regular and recurring set of revenues.

The second part of the revenues come from on-premise installations and we have a number of clients who’ve had on-premise installations and even some who continue to prefer them. And in those cases, the revenue recognition comes in two parts. You have an upfront piece, which could be in the range of around 60% of the contract, and then you have the balance, call it, 40% in the example I’ve given you, which could be ratably over the contract length, if that were, say a four or five-year contract. And so you get a piece and then you get a trail behind that. So those are the two big pieces.

When we look at the revenue numbers that we showed you on Page 9, you go back — what we want to be doing is we want to be growing both pieces to be honest. And in particular, the regular, the first one, the very recurring revenue base. If you go back on Page 9 and look at the data we’ve shown around revenues, back in the second quarter of 2019 we had $91 million of revenues, about 65% of that was in SaaS and professional fees and so it gives you a sense for the kind of the relative amount. If you go [Phonetic] to the first quarter of this year, those recurring SaaS and professional fee revenues were just over $80 million, but we see both — we see nice growth year-on-year, and in fact, it’s happened consistently over the five quarters. And then the balance of the $145 million is been more in the on-premise kind of revenue installations where you get a good sized piece upfront but then the recurring piece in the future.

And I think if you step back with that kind of revenue recognition where we’re focused on growing client and client engagements, and some clients are delighted to be on the SaaS platform and we’ve seen consistent growth there. So that gives us some confidence in the kind of the completely recurring base and then you have the more on-prem kind of revenues, which start off with a piece, they then have a trail, all right, and then when the contract ends, you get another piece in the — that’s lumpy and then in a trail after that and that’s just the nature of the beast of how the revenue recognition works. All in, we’re quite pleased with this revenue trajectory, the backlog, the contracted but not yet installed and the sales performance. And so while you see some lumpiness, it’s — we’re seeing good underlying metrics as well.

Brian Bedell — Deutsche Bank — Analyst

That’s great color and a lot of detail. Thank you very much.

Operator

Your next question comes from the line of Betsy Graseck from Morgan Stanley. Your line is open.

Betsy Graseck — Morgan Stanley — Analyst

Hi, good morning.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Good morning, Betsy.

Betsy Graseck — Morgan Stanley — Analyst

I wanted to understand a little bit on the expense side, I know you called out improvement there in part from things like market data, which is really impressive given that market data costs for most participants is moving higher and higher every quarter. So I just want to get a little bit of color on that and on the sub-custody savings, and to what degree is there more legs there in that specific line item in your expenses?

Eric Aboaf — Chief Financial Officer

Betsy, it’s Eric. Both of those are sizable expense categories. They both are part of the transaction processing line item that we report. And what we found is that we need to just actively manage those, sub-custody is something that we need provided to us and so we’ve worked with some of the largest banks as well as some of the country banks to fund the best mix of service at a declining cost level. And our view is that, that’s something we need to keep doing year after year and we’ve been able to deliver, I think some good savings for this year and our expectation is to continue that trajectory.

Market data is a little more complicated. To your point is that there is a plethora of market data ingestion [Phonetic] that’s possible. And what we found is that we need to both manage the ingestion pipes, because if we secure market data in too many different types and we end up buying more than we need. We also need to find vendors and over the last couple of quarters, we’ve started to really work more closely with several of our vendors around who gives us the best cost and pricing kind of quality levels, and that’s also been factored in. And then there’s a third piece, to be honest, on market data, which I find helpful from a client standpoint to be honest, which is some of our market data costs are borne by us, which we want to drive down but with the right quality, and others’ market data costs are sometimes borne with our — by our clients and we’re in many cases, working with our vendors, again both pools of market data to trying to secure the best results for them as well.

So, lot of activity there. What I would tell you is that some of what you see on that transaction processing line is the result of some intense focus on those areas and it’s actually a bit of an example of what we’re doing in other areas. We talked about starting to drive our technology cost down, and so we’re doing similar work on hardware costs and hardware vendors, working with them in a more active way. We’re doing that in software and maintenance contracts on the technology side, and so it’s really become an expanding, I’ll call it, expertise but set of partnerships and approaches that we’ve taken. I think to good effect, but to be honest, one that we need to repeat year after year to get the benefits that we’d like to help drive our expanding margins.

Betsy Graseck — Morgan Stanley — Analyst

Okay. And so you’ve got some more legs there is the nut of that answer, and I appreciate all the color. It’s interesting, especially with the client side of it. The follow-up I have for you, Eric, is regarding the net interest income, net interest margin outlook and I know you have 9% to 11% down 2Q and 3Q and then stabilization into 4Q. Maybe you could give us some color on the assumptions around the 4Q stabilization, what has to happen for that to come through?

Eric Aboaf — Chief Financial Officer

Yeah, the 4Q stabilization is really driven by, I think, the economic kind of the interest rate environment, first and foremost. So we’re assuming short-end rates stay more or less where they are, and we’re assuming long-end rates stay more or less where they are. Going forward, we have some expansion and increase and I think we’ve gotten a little gun-shy about always planning for those. And so we feel like we should plan at the current levels. So that’s the first part of the assumption base.

I think the second part of the assumption base is that there is some normalization deposits, but as I’ve said, I think we’ve got a nice chunk there that we can begin to think of as — or that we are confident are stickier, and it depends on the speed of our reinvestment in the investment portfolio into some asset classes that we’re comfortable with. And I think that will factoring us well.

Betsy Graseck — Morgan Stanley — Analyst

Okay, all right. Thanks.

Operator

Your next question comes from the line of Glenn Schorr from Evercore ISI. Your line is open.

Glenn Schorr — Evercore ISI — Analyst

Hi, thanks. Quick follow-up question on the expense side. I heard your overall comments, so that’s what matters most, but within this quarter’s 3.3% drop down, as 40% of the reduction expenses was lower marketing and travel, I’m assuming that’s the product of the environment. So how much of that is sustainable or works its way back and again, I appreciate that’s probably part of your overall expense comment?

Eric Aboaf — Chief Financial Officer

Yeah, Glenn, that’s fair because as you know, we’re trying to find sustainable expense reductions this year and then into next year. And if we just brought them down and they pop back up, that doesn’t count neither for our shareholders, nor for us. There are some tailwinds of travel expenses and even some medical benefit claims are lighter in the expense trends. But remember, there is also some headwinds that we would have or actions and areas where we would have driven expenses down that we weren’t able to. And so the biggest simple example is the pause on layoffs because of the pandemic. That would have been worth at least half a point of expense reduction, if not a little more for every quarter this year and on a full year basis. And I think what we’re going to have to do next year is go back to what we’ve been doing, driving down all of our costs, our compensation and benefit costs where will be able to now action that and continue to drive down third-party spend cost as well. And so I think the trend will line up, there just going to be some ins and outs or headwinds and tailwinds at any point, but we see a path to continue doing what we’re doing, which is to drive expenses lower and lower year-after-year.

Glenn Schorr — Evercore ISI — Analyst

Okay. I appreciate that. And then during the quarter, you announced the venture with FNV on servicing the wealth management space, I’m curious if you could talk a little bit about what the target of that venture is, they seem to have a really strong operation in Europe, what you bring to the table, what they bring to the table? That would be great, thanks.

Eric Aboaf — Chief Financial Officer

Hey, Glenn, it Ron. So, FMC has a very strong operating platform. Its target market is they are certainly in the US would be the smaller end or a lower end in terms of size of market segment than we do in Charles River and CRD. So, it’s quite complementary to what we do, We would also — we would be there custodian and administrator as they move into that space. So we view it as a way to expand into even further into wealth segment that we wouldn’t naturally have leading capabilities in, number one. Number two, they’ve got some really interesting technology that we want to continue to figure out how we can use elsewhere. So it’s a way of getting some technology leadership as well as a revenue stream at a relatively low cost for us.

Glenn Schorr — Evercore ISI — Analyst

Okay, thanks very much.

Operator

Your next question comes from the line of Brennan Hawken from UBS. Your line is open.

Brennan Hawken — UBS — Analyst

Good morning, thanks for taking my questions. First, I’d like to follow up on the Charles River commentary and the front-end fees versus that trail — and the trail dynamic. It sounds like that’s a little less than half of this quarter’s revenue. So I wanted to confirm that’s the case. And then, is the on-boarding, the install, the front-end, is that a multiple quarter dynamic or is that a single dynamic? How does the trailer in those arrangements compared to the upfront? So how should we think about the continuing revenue dynamic? And then, how long are those contracts? And what’s the typical retention rate? I just would love to get a better dimension for the cadence of those revenues, if you can provide some of that. Thanks.

Eric Aboaf — Chief Financial Officer

Brennan, it’s Eric. It’s fair to get into the details, because the details do matter. But as we do that, let me remind you, there’s a range of details and so let me try to answer the questions that we can certainly follow up with you and other investors that are curious, but this is a bit of the bankers working in the software space, which just operates in a different cadence with ASC 606. First, the recurring revenues, the SaaS kind of implementations are pretty straightforward and I think I gave the numbers there and I think you’ve got the right mix. The mix in each of these quarters though been much more kind of SaaS, professional services, the completely — I’ll call it, completely stable revenues and those have been building nicely. And I think we’re quite pleased with that trajectory.

On the lumpier part of the revenue, which is the on-prem — on premise installations, the answer is, there is a range of different situations, which have to do with different contract lengths. And so let me just give you a sense, contract lengths can range from, call it, three years to eight years, right. And for those kinds of ranges, then you tend to get, on three-year contracts, you might get 70% upfront and then the other 30% over the rest of the three years, and it comes in kind of year by year by year or quarter by quarter by quarter to be effect, or for something like seven- or eight-year contract, you’ll tend to get about 50% in the first year and then the other 50% in those seven or eight years ratably. And so there is a range, but I think it’s — I don’t know, it’s the contemplated to measure the revenues in a reasonable way and you’ll have to talk with them if you like it or not, I can’t really opine there, but that’s the range. The upfront piece comes in a particular quarter and why is that because that’s when the system literally goes live and is beginning to serve clients, so it becomes in service and it’s the quarters after that through the length of the contract that you ratably see the rest of the revenues.

What I do want to remind folks though is that once we have a client, the client retentions in our business are very, very high. We retain most of our clients and so on a three-year contract, the description that I just gave of 70% plus 30% over the trail, three years later, it gets repeated, right. Same for a five-year contract, five years out. And so in a way were little hesitant when people occasionally say, well, that’s one time, it’s not really one-time, right. If there is a good piece upfront, there is a good piece ratably brought that we’ve secured and then there is almost always the extension, which brings the same thing again. It’s just that it’s a little lumpier than we’d all like. So maybe I’ll pause there, but happy to talk more at the right time.

Brennan Hawken — UBS — Analyst

One more piece of question, I think that you might have forgotten, Eric, is the retention rate. What’s the historical retention rate on those three-year?

Eric Aboaf — Chief Financial Officer

I think it’s very high. Why don’t we do a little follow-up and get that out to you in a Reg FD. But it’s, we — they was part of our diligence that retention rate for precise number, let me come back to you, but it’s very, very high. It’s something that gives us a lot of confidence because remember, once you have an on-premise installation, like, you’ve invested a lot internally on the client side to integrate it with your with your state, with your other systems and sub-system. And so there is a willingness and there is an ability, which together result in very strong, very high renewal rates.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Brennan, it’s Ron. Maybe just to reinforce why that is, I mean, typically what goes on in these conversions is there is a pretty big and significant operating model change that goes on at the asset manager or the wealth manager. So typically, a new client is not that we’re displacing somebody like Aladdin, typically, it’s a client that has got a bunch of bespoke and scattered technology and they’re moving to a comprehensive kind of system like this. So that’s why you get a very, very high retention rates, because frankly, the switching costs on the client side are pretty high.

Brennan Hawken — UBS — Analyst

Yeah, thank you for that. Appreciate all that color, Ron and Eric. And then following up on, you gave some great color on expenses and I understand it’s really hard to be too granular, Eric, to your point on unusual operating environment that we’re in. But let me give something a shot anyway. Have you reviewed your real estate footprint? Boston is fairly expensive city and when you look at your website, it seems like you have three different offices in the city. Is that really the optimal footprint? Based upon the experience that we’ve been seeing here early read on the pandemic and the shutdown, have you rethought the potential for remote or distributed workplace arrangements? How much do you think you can compress your occupancy expense over the next few years on the back of some of that?

Eric Aboaf — Chief Financial Officer

Brennan, it’s Eric. Let me start on that to give you a little bit of a kind of near end views and Ron make way in as well. And in fact, I might ask your CFO the same question when I see him next, because I think every CFO out there, not just bank CFOs is wrestling with this specific question. Here at State Street, we have occupancy expense of about $435 million, and we had already plans to drive it down this year by about 5%. So taking a chunk out of that in part of that is continued rationalization of our high-cost location footprint and taking advantage at the same time of some of the productivity, right, takes out some of the headcount management that we’ve done around the world as well. I think in the very near-term, a couple of things happen in real estate. One is, we just don’t add any real estate, and Ron and I put an immediate halt as soon as this pandemic happened. Let me tell you, there is no — that’s a halt is perpetual practically. It then — it does have a little bit of an effect, where we can easily sublet. So now what we’re doing is going back to every lease that we have and literally going through and asking the question, when does it to rollover? The question that it really wrestled through is what kind of occupancy rate can you operate at and if most of us have operated at the, call it, 85% to 95% occupancy rate, and I think what this pandemic has demonstrated that the tools and the capabilities through technology and the methods that we have in a company is we can drive occupancy rates up to — we are originally planning to 130%, 140% just by thinking about people’s historic approaches to be in the office or not.

And I think that is kind of what gives us a view that if we originally thought we could get to 120% occupancy rate and now with the pandemic, we’re confident we could get to 150%, that’s how you start to get some real leverage on the occupancy cost. I think the one thing that gets in the way of that and I’m taking a very kind of financial and we have to think about our people, our teams, our clients and all the interactions and all that they do, we also need to be respectful of some of the social distancing requirements in the immediate term. And so I think what we have is, we have a period right now where work-from-home is 90%, let’s say. With social distancing, we can bring a certain number in. At some point, there is a vaccine. So the social distancing may not be at the same level as it is now and we have a whole group of employees who have learned to operate incredibly effectively work-from-home, some who prefer to be home. And so I think there’s a lot to do here.

As I guess the summary, I’d tell you we’re already driving down occupancy costs and I think the question that will come back to in the coming quarters and in the coming year is how much more? It’s not that they won’t come down, they will come down. I think it’s a question of scale off of that base of expense that I circled upfront.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Brennan, it’s Ron. What I would add to that is, in a fairly short period of time, we’ve gone through three kind of phases of work. Work-from-home was about a one week event for us and we got 90% of the people out of the buildings and into a home environment. We started about three weeks after that planning the return to office. In Asia Pacific, as you can imagine, we’ve started back, also parts of Europe slower and for all the reasons that we know. We’ve also launched the third phase of this, which is what we’re calling the workplace of the future, which encompasses a lot of the things that Eric is talking about.

To your point, on Boston, since we had announced earlier, we announced late last year that we’re vacating this headquarters tower at the end of ’22, going to move to a new building in Boston, but there’s much more flexible, better terms, lower amount of space. And it’s early enough now that we have ability to customize that even further, given what we know about COVID-19. So again, I don’t believe that we could operate or should operate anything near 90% work-from-home, but we can operate on a much more flexible basis with work-from-home being an integral part of what we do. It’s certainly part of our disaster recovery now. So you should start to see us shedding disaster recovery spaces to and you should expect and hold us to a much lower footprint really starting quite soon.

Brennan Hawken — UBS — Analyst

That’s great, Eric and Ron. Thanks for the color. And of course Eric, happy to line up a discussion with my CFO, he can give you tips on how to deal with my annoying questions.

Eric Aboaf — Chief Financial Officer

Thank you, Brennan.

Operator

Your next question comes from the line of Ken Usdin from Jefferies. Your line is open.

Kenneth Usdin — Jefferies, LLC — Analyst

Thanks. Good morning guys. Eric, I was wondering if you give us a little bit more color underneath your full-year fee outlook. And I know, given that you’ve got the CRD comments you talked about and then transaction activity, but can you kind of walk us through how you’re now seeing the bigger buckets move both sequentially and year-over-year given at least the average asset pricing we have and your earlier comments about fee income pressure moderating? Thanks.

Eric Aboaf — Chief Financial Officer

Sure, Ken. Yeah, part of the reason we gave an overall fee guide is that there are always are and there are always going to be some — some ins and outs in that — in the various fees. I think if you — if you think about the different bucket, the texture that I’d give against the full-year guide of 1.5% to 2%, first on servicing fees, I think we feel positive. We’ve delivered year-on-year growth in servicing fees now for the first quarter year-on-year and then the second quarter year-on-year. And we think that’ll be a positive for the year and that’s different, I contrast that to previous years where we had more fee headwinds or where we didn’t feel like we had the performance we would have liked, but we think servicing fees will be positive. And that’s without an average equity market uptick really, because globally equity markets are kind of in the more flattish range.

Management fees, I think are doing well. We’ve been a little more negative there. We’d like to do a little bit better than what we’ve done. FX trading and then all the electronic services around that will be a clear positive, Sec lending a little lighter as we’ve described some of the shifts there over the area that we’re working on. And then in the software and processing fees, I think we’re quite confident on the Charles River momentum, especially with some of the recent wins. And then there is kind of the — there is some other in that line, there is some other business activity or loan fees or other software fees, etc. Then there is some of the lumpy stuff that we have to just taking marks. So all in all though, full-year 1.5% to 2% is what we see today, which is I think it gives us the positive momentum that we like and then something to build on for next year and our view is if we can — if we can drive even low single digit fees upward and continue to drive expenses down, we’re getting the right results.

Kenneth Usdin — Jefferies, LLC — Analyst

Yeah. And one big picture one for Ron. Ron, last quarter you talked about a little bit of a push off in either installations and client discussions because of just everything that we’re dealing with. Your win rate in servicing was about flat, can you talk — and you’ve talked about the potential wins in the CRD side, the wealth management platform. Just talk about just the conversations that are happening now and how that’s evolving just in terms of the core business? And any sense that that’s starting to open up at all?

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Yeah, Ken as we talked about last quarter, we said that it was our sense that just given the additional challenges posed to asset managers and asset owners operating models of COVID-19 that we thought that we’d see even at some point an increase in conversations and interest in outsourcing and operating model changes in general. And that’s actually started to happen and was –it started to happen in a big way in the second quarter. So we see continued interest in not just movement of back office to the lowest price, but much more about how do we comprehensively improve — how do we the asset owner or asset manager comprehensively improve our operating model through changes to their back office and even to their front office. So that’s continuing and it’s — we’ve — as I noted in my opening remarks, the — as a result of that, we would expect to see and be in a position to announce some significant new wins between now and the end of the year. That are some combination of front, middle and back office of notable names.

Kenneth Usdin — Jefferies, LLC — Analyst

Got it. Thank you, Ron.

Operator

Your next question comes from the line of Alex Blostein from Goldman Sachs. Your line is open.

Alexander Blostein — Goldman Sachs & Co. — Analyst

Hi guys. Good morning Ron, good morning Eric. So maybe just building on the last comment, I want to dig into CRD a little bit more. As you think about the pipeline in CRD and sort of the sizable implementation opportunity you guys see, what percentage of that is the on-premise versus kind of the SaaS type of contract? And then secondly, I was hoping you guys could dig into the CRD wealth strategy a little bit broadly. Thanks for some of the added disclosure there, but what kind of the — what are the typical sort of client in the wealth management space or wire house? Is it a independent broker-dealers and RAs, so just a little bit more flavor there. And which one of these channels incremental growth has been coming from? Thanks.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Why don’t I start there, Eric can talk about the mix, Alex. But the — on the wealth channel, it tends to be the higher — the larger wealth managers and it’s a combination if I think about both what installed this quarter, but also what’s — where we have conversations and we’ll be installing in future quarters. It’s a combination of the wire houses and that obviously comes with lots of seats as you would imagine, but also the larger private wealth managers. I mean they could be RIAs, but again it tends to be the larger ones and the larger names. And if you think why that is, oftentimes they’re bringing — these institutions are bringing some fairly significant asset allocation capability to bear and while they want to give their advisors some freedom to customize they also want to have a lot of control over that. And the CRD platform works really well in that regard.

And as I mentioned in response to earlier question, the great thing for us is that this — it certainly is a — spoke application for the wealth segment, but it’s leveraging much of the same underlying technology. So there’s a lot of scale in all this, both in terms of the initial development we’ve done, but also as we rollout software improvements.

Eric Aboaf — Chief Financial Officer

And Alex just to around out on the financials. We had a range of implementations this quarter on the on-premise side, the ones that are lumpier, the range was three years to eight years. And they actually runs the gamut of 50% to 70% in the first year and then the balance ratably. I think the largest of implementation was actually on the — close to eight year mark, which would be 50% in the first year and the other 50% in the coming year — in the coming years.

Alexander Blostein — Goldman Sachs & Co. — Analyst

Got you, thanks. And then just maybe to round up the discussion around NIR. So Eric, your comment around kind of stabilizing NIR towards the end of the year, does that already contemplate significant reinvestment of liquidity that you guys have built up on the balance sheet into securities and loans or with a little more reinvest into ’21, could we maybe even see a little bit of growth from that sort of trough level of net interest revenues? Thanks.

Eric Aboaf — Chief Financial Officer

Yeah Alex, it’s little early to get into 2021 to be honest, but with the guide that I gave for 4Q does contemplate some reinvestment in the investment portfolio. And we’re just kind of driving the balance, both the long end rates do you have a kind of a tail effects for us. And so in a way this is the time for us to add to the investment portfolio and do our work to offset what would naturally be a downward headwind, but I think we’re — we got path, it’s just — it’s hard to, it’s hard to see growth NII at this point. We’re — but we see a path to relative stability within a range but it’s going to take some work and we don’t really know what happens with rates and how they evolve. But we can see a path there.

Alexander Blostein — Goldman Sachs & Co. — Analyst

Yeah, that makes sense. Thanks very much.

Operator

Your next question comes from the line of Gerard Cassidy from RBC. Your line is open.

Gerard Cassidy — RBC Capital Markets — Analyst

Good morning Ron, good morning Eric.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Good morning.

Gerard Cassidy — RBC Capital Markets — Analyst

Ron, can you follow on the new wins that you guys gave us this quarter and you mentioned in your comments about the stickiness of not losing customers. Are the wins primarily coming from existing customers where you’re adding more products and services and in the cases where you win a new customer, I think you alluded to lower prices, but can you share with us is it price driven that the new customers are coming over or is it a combination of price and better products that you’re offering them?

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Gerard, I don’t remember referring to lower pricing in the context of the wins. But to answer your question, it’s a mix that we’re seeing. And right now I’m referring to the, what we call our Alpha front-to-back platform in Charles River. It’s a mix of existing clients or new clients that we’re seeing. And that’s particularly true as I look at the — at the near-term pipeline. So for those existing clients in effect we’re expanding our share of activity with them. To use the vernacular, expanding the wallet, where we might historically have had a back office custody relationships and we’re moving to the middle and the front office. But beyond that in the — in the kind of more traditional core business, we continue to see a fair amount of outsourcing there too. Firms that had historically done everything, but custody inside where we might have been one or the only custodian are now reconsidering that and moving things like fund accounting out middle office would be another big part of that because in effect our middle office business is the outsourcing of their back office and that solves lots of challenges for them and we’ve learned how to scale that business. So that would give you a sense of all that.

I mean what has been pleasing about the pipeline as it developed and again, given the comprehensive nature of what we do, these pipelines do take a while to move from when there is the first contact to the actual signing of the business. But what’s pleasing about that as we’re seeing a fair number of new clients there to us. And the attractive thing about that is to really get the full advantage of the front-to-back platform, we’re able to show that we can do the Charles River and middle-office for you, but we are going to get real data advantages is having the full front-to-back so it fuels growth in our traditional back-office business.

Gerard Cassidy — RBC Capital Markets — Analyst

Very good. And then Eric, I know it’s not as material to your business as a traditional bank, but your loan portfolio, you mentioned you think that in some of the leverage loans, two questions, one, can you give us any color on the industries in which you de-risk the balance sheet from? And second, what kind of pricing did you see when you sold those leverage loans? Thank you.

Eric Aboaf — Chief Financial Officer

Sure. Gerard, we are trying to be proactive here, right. The leverage loan market, it’s really moved up and down a good bit and just finding some points where it might make sense. We de-risked roughly about $160 million of balances of leverage loans, I remember one of the cinema chains was within that and we got out at a good price. I think the average pricing on the exits was around, I think around $0.92 I want to say on the dollar. So somewhere in that range. So we feel like we’ve made some good tactical decisions. It didn’t cost us that much, because we would have to build a reserve anyway for those. And that’s why I said on that $160 million it cost us effectively a [Indecipherable]. But for the peace of mind and just trying to be careful because we are a trust and custody bank and that’s our brand, we felt like it was a good trade and we’ll continue to selectively do that, but in truth we feel quite good about this — this loan book. I mean it’s a — most leveraged loans are — in the indices are B and below or they are BB and sometimes even better. And so I think we’re pretty confident here, but there’s always something, and we just. We’re happy to be proactive and make some tactical decisions and that’s what we did.

Gerard Cassidy — RBC Capital Markets — Analyst

Thank you.

Operator

Your next question comes from the line of Mike Mayo from Wells Fargo Securities. Your line is open.

Mike Mayo — Wells Fargo — Analyst

Hi. So you’re guiding for better fee growth for this year, 1.5% to 2% versus down before, how much of that is already reflected in the first half results and how much should be coming in the second half? You mentioned servicing fee, management fees, FX processing, but is this mostly reflecting what you’ve done already or is it mostly to come. And as a sub-component of that, when it comes to CRD, I guess linked quarter, revenues were up $45 million and pre-tax was up $42 million. So I guess that’s what a 93% incremental profit margin, so that leads me to ask, are there some upfront revenues with the new business wins? And — in terms of timing between the revenues and expenses, how does that work out? And then lastly, if I can throw it in there, you were going to be a client of CRD, and how is that moving along? Thanks.

Eric Aboaf — Chief Financial Officer

Sure Mike, it’s Eric. Let me take the, the first couple and then I think Ron will probably want to take the third. In terms of the full-year guide, you’re right there is a number of different pieces to it. There are some pieces of the full-year 1.5% to 2% fee revenue guide that are driven by the first half of the year and there are some that will be driven by I think continued progress in the second half. I think if you just go through the line items, servicing fees has been good for the first half and we expect them to continue to be good. So I think that’ll be a continued story. Management fees, largely because of the market, I think a little lighter in the first half. We’re hoping that they come in a little stronger on a year-on-year basis in the second half. FX obviously, a first half story where the second half will not be there. Sec finance has been light for us in the first half. We’re hoping for some and looking for some stability there and some sequential stability, if not, some little bit of uptick. And then you have Charles River, where we obviously got a big part in the second quarter. But — and that may be, end up being a little more first-half weighted, but I think you typically get performance in the fourth quarter of the software businesses. So we’ll see I think some activity there. So a little bit of a mix, to be honest.

On Charles River, the — good question on the on-premise installation, in particular or the renewals, but I think it’s really on a kind of combination of the new implementations. You do get some professional servicing fees where we build revenues and we incur expenses. And my recollection is those are fairly aligned. The accounting standards encourage us to do that, but there I think the professional services tend to be billed as incurred. And — and part of the, what I described is the more stable part of the revenues. And what we’re finding is so it’s just — there is professional services and installation work that we do for kind of coming client — clients that are not yet implemented, but are on their way to implementation, there is some during the implementation that last sprint and then there is clients behind that. So it’s a bit of a mix to be honest, but something we can try to parse out a little more detail in future conferences or calls.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Mike, regarding the last part of your question, which is State Street Global Advisors becoming a client of Charles River. They’re actually becoming a client of the full Alpha front-to-back platform including Charles River. So it’s a fairly comprehensive installments it’s underway. It’s — the installations happening.

Mike Mayo — Wells Fargo — Analyst

Because you are going to be like — that’ll be a nice showcase once you get that done. As you are saying, we use it ourselves, you should use it to, kind of what inning are you in as far as implementing it internally?

Ronald P. O’Hanley — Chairman and Chief Executive Officer

I mean I somewhat speculating here now, but we’re well over half installed is the way I would describe it. And again, it is not just installing Charles River, but it’s moving the State Street Global Advisors back office to our middle office platform. It’s accommodating some existing technology that they have in place. So as you’d imagine, it’s a $3.1 trillion dollar asset manager, it’s pretty complicated. So but it’s well over halfway along.

Mike Mayo — Wells Fargo — Analyst

And just one last clarification Eric. So CRD revenue, should we — $145 million in the second quarter, should — I know this is going to be pretty granular, but is that something that’s kind of lumpy or we are not — we should extrapolate that out or how should we think about that?

Eric Aboaf — Chief Financial Officer

No, it’s lumpy. And Mike, that’s why I was trying to give a little bit of color, but just to reaffirm, in that $145 million, we said they are kind of very recurring really kind of recurring revenues of just over $80 million [Phonetic] and then the balance is in the kind of lumpy category where you get these on-premise installations. I also so — you kind of have to take a piece of the lumpy and say there’s always going to be lumpy, because we have three year contract, five year contracts, eight year contracts, and every quarter every year there are some of those contracts roll over and so you’re going to get a new lumpiness or you get new business that you had in the lumpy category.

I also gave, if you want another quarter as a contrast, back a year ago, second quarter of ’19, we have $90 million of total revenues. And I said, we had about $65 million of the very kind of recurring SaaS and professional services revenue. And just a small piece of that was lumpy. So you can kind of I think draw some lines and say the lumpiness this is a — this is big lumpy, that’s for sure, but there is always going to be some, but I think — I think hope they’re giving you enough on the kind of SaaS and professional services to let you extrapolate from there and then put in something in the models on the lumpy part.

Mike Mayo — Wells Fargo — Analyst

Great. Thanks a lot.

Operator

Your next question comes from the line of Jim Mitchell from Seaport Global Securities. Your line is open.

Jim Mitchell — Seaport Global Securities — Analyst

Hey, good morning. Maybe just, we could talk a little bit — a question on the new business wins you’ve had and the cadence and impact, as I look at new business to be installed, you have about a trillion to go. That’s been pretty stable since the big wins in 3Q ’09, I mean ’19. So is it on these bigger wins, does it just really take this long? Is there something unusual here? And I guess going forward with the new, the new business wins, you’ve alluded to in the second half of this year, is it a similar kind of time to install?

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Yeah, Jim. It’s a good question. The — when you see this kind of, to be installed backlog if you will, that typically reflects that there is multiple tranches of business. So for example, it could be custody and fund accounting and middle-office and a custody conversion, we can do very quickly, right. We literally did some — we were notified by a client that they wanted to move in the midst of the crisis, and we got it done intra-quarter. Those moved quickly, and so oftentimes don’t even show up in this backlog here. I mean they would if it was carrying over to a quarter. What you’re seeing here is clients including some very large clients that have multiple tranches of business that they’re either moving over from an existing provider or in some cases moving from an in-force to an outsource model. And again, that reflects the nature of our business. We’re using our ability to do these kinds of outsourcing to actually drive not just the outsourced business, but to drive traditional core custody which scales easily and is quite profitable to us. But that’s how you should think about that — is that in any given quarter, our new business wins will be some very traditional custody — the custody kinds of things or fund accounting to fund accounting. But oftentimes the backlog reflects, it’s just much more comprehensive kinds of both.

Jim Mitchell — Seaport Global Securities — Analyst

Right. And should we assume that those more complex deals have a higher fee rate? Should we see a little bit more of a material impact on servicing fees when they close?

Ronald P. O’Hanley — Chairman and Chief Executive Officer

What you should expect to see is that there is fees coming from more than one source, right. The custody fees, a fund accounting fee and middle office fee, that’s how you should think about it.

Jim Mitchell — Seaport Global Securities — Analyst

Okay, thanks.

Operator

Your next question comes from the line of Vivek Juneja from J.P. Morgan. Your line is open.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Vivek, we can’t hear you.

Operator

Vivek, if you’re on mute please unmute.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Are you there vivek?

Operator

And there are no further questions at this time. I’ll turn the call back over to Ron Hanley for closing remarks.

Ronald P. O’Hanley — Chairman and Chief Executive Officer

Well, thank you operator. And thanks to all of you on the call who joined us. Thanks for the questions, and we look forward to the follow-up.

Operator

[Operator Closing Remarks]