Good morning and welcome to State Street Corporation’s Second Quarter 2020 Earnings Conference Call and Webcast. Today’s discussion will be broadcast 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.

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. Ron O’Hanley: Thank you, Ilene and good morning everyone. We released second quarter results this morning. Let me begin by saying that I am 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…

Thank you, Ron and good morning everyone. Let me begin my review of second quarter by summarizing our year-over-year results on the left panel on Slide 5. EPS is up 31%. Revenue is 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 for the COVID pandemic, our results this quarter shows 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 have been able to carry reserve builds. 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 2 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 increased, 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 in 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 U.S. SPDR ETFs 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…

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

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 are 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 am sorry, 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? Ron O’Hanley: Eric, you are muted.

Brian it’s Eric. Thanks for the question. We are clearly navigating through some challenging times with the interest rate environment and obviously trying to do our best to navigate through. When you think about the NII guide, there is clearly the continued downtick in long-term rates, which is affecting the investment portfolio, and we will continue to some extent in the coming quarters after that. And then there is lower volume sequentially and overdraft and then the MMLF balances that are also contributing to that – to the second quarter to third quarter decline. I think once we get to that level, part of what happens is that you have got offsetting factors, you have got on one hand the lower long end rates which put up -- 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 are 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 have shown here, you know, we used to run at $155 billion to $160 billion of deposits. First quarter average was solidly at $180 billion. Second quarter averages solidly at $197 billion. We think we are going to land somewhere between those two points, which means that off of the original base as, 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 you mentioned, did create a downdraft from 1Q to 2Q. And what we are seeing there is that the overnight repo rates are less attractive then they have been relative to 1-month treasury rates, and so that creates reduction in volumes. If that were to persist, then we are not going to get a lift there and we are not going to get the volumes we would 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.

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, it sounds very encouraging in terms of the win that you have announced and potential new wins down the road? And maybe just in terms of sizing that space for you, what you are doing there on the wealth side that’s different than the institutional asset manager side at CRD? Ron O’Hanley: Yes, Brian, why don’t I start and then I’ll turn it over to Eric. So I will start on the latter part of your question there. As we mentioned, when we acquired Charles River in addition to its core institutional client segment, it developed a fair amount of technology applicable to the wealth segment, particularly the larger wealth manager segment, large private wealth managers, warehouses, etcetera. And that is -- we have continued that R&D and also leveraged our own client relationships to be able to help propel that growth, and that’s what you are 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. And the good news about this is that it 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 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 will be ongoing recurring fee. So, that’s how you should interpret the lumpiness. It’s not necessary. 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.

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. And we are quite pleased with the growth trajectory. We are quite pleased with the pipeline with kind of contracted, but not yet installed levels. We track a number of different metrics here to give us confidence in the developing growth. The revenues really come, I will call it, broadly into two buckets. There is SaaS revenues and professional services. And SaaS revenues are pretty straightforward, you win a client, it’s a 5-year contract and the revenue recognition is that the revenue is ratably applied over those five years, very straight forward. And in fact, we want to be in the business of growing SaaS revenues over time and professional services because those create a very regular and recurring set of revenues. The second part of the revenues comes 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 have 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 nine, you go back what we want to be doing, we want to be growing both pieces to be honest and in particular, the regular. The first one, the…

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

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

Hi, good morning. Ron O’Hanley: Good morning, Betsy.

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 cost for most, participants is moving higher and higher every quarter. So 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 and that, specific line item in your expenses?

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 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 find the best mix of service at a declining cost level, in our view that is something we need to keep doing year after year. And we have been able to deliver I think, some good savings 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 of market data ingestion that is 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 pipes, then we end up buying more than we need. We also need to find vendors. And over the last couple of quarters, we have 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 is 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 buyer clients. And we are in many cases working with our vendors against both pools of market data to try to secure the best results for them as well. So, lots 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 are doing in other areas. We talked about starting to drive our technology costs down. And so we are doing similar work on hardware costs and hardware vendors working with them in a more active way. We are doing that in software and maintenance contracts from the technology side. And so it’s really become an expanding, I will call it expertise, but sort of partnerships and approaches that we have 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 would like to help drive our expanding margins.

Okay. And so you have 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 a 9% to 11% down 2Q and 3Q and then stabilization into 4, maybe you could give us some color on the assumptions around the four key stabilizations, what has to happen for that to come through?

Yes. The 4Q stabilization is really driven by I think the economic kind of the interest rate environment first and foremost. So we are assuming short-end rates stays more or less where they are and we are assuming long-end rates stay more or less where they are. You know, the forwards always have some expansion and increase and I think we have 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 have said, I think we have got a nice chunk there that we can begin to think of this, whether we are confident, are stickier. And it depends on the speed of our reinvestment in the investment portfolio into some asset classes that we are comfortable with. And I think that will factor in as well.

Okay, alright. Thanks.

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

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% dropdown, 40% of the reduction expenses was lower marketing and travel, I am 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?

Yes, Glenn, that’s fair, because as you just – as you know, we are 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 aren’t some tailwinds of travel expenses and even some medical benefit claims, you know, are lighter in the expense trends, but remember, there is also some headwinds that we would have are actions in areas where we would have driven expenses down that we weren’t able to. And so as 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 are going to have to do next year is go back to what we have been doing driving down all of our costs or compensation benefit costs, where we will be able to now action that and continue to drive-down third-party spend costs as well. And so I think we are – I think the trends will line up, there are 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 are doing, which is to drive expenses lower and lower year after year.

Okay, I appreciate that. And then during the quarter, you announced a venture with FNZ on servicing and the wealth management space. I am 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 will be great? Thanks. Ron O’Hanley: Hey, Glenn, It’s Ron. So FNZ has a very strong operating platform. It’s target market is certainly in the U.S. 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 complimentary to what we do. We would also – we would be their custodian and administrator as they move into that space. So, we view it as a way to expand into even further into wealth, a segment that we wouldn’t naturally have leading capabilities in number one. Number two, they have 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 that as well as a revenue stream at a relatively low cost for us.

Okay, thanks very much.

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

Good morning. Thanks for taking my questions. First, I would 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 wanted to confirm that’s the case? And then is the on-boarding, you know, the installed 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.

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 is a range of details. And so let me try to answer the question that we can certainly follow-up with you and other investors that are curious, but this is a bit of the bankers working in a 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 have got the right mix. The mix in each of these quarters has always been much more kind of SaaS professional services, the completely, I will call it completely stable revenues and those have been building nicely. And I think we are quite pleased with that trajectory. On the lumpier part of the revenues 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 length. And so let me just give you a sense, contract lengths can range from call it 3 years to 8 years, right. And for those kinds of ranges, then you tend to get on 3-year contracts, you might get 70% upfront and then the other 30% over the rest of the 3 years comes in kind of year by year by year or quarter by quarter by quarter the effect or for something like that 7 or 8 year contract you will tend to get about 50% in the first year and then the other 50% in those 7 or 8 years ratably. And so there is a range, but I think it’s I don’t know it’s contemplated to measure the revenues…

Well, one more piece of my question, I think that you might have forgotten, Eric, is the retention rate, what’s the historical retention rate on those 3-year rates?

We can, I think it’s very high. Why don’t we – why don’t we do a little follow-up and get that out to you in a Reg FD.

Okay.

But it’s – we have been with part of our diligence of retention rates. Before I quote a precise number, let me come back to you, but it’s very, very high.

Yes.

It’s something that gives us a lot of confidence, because remember, once you have an on-premise installation like you have invested a lot internally as become a client side to integrate it with your state, with your other systems and subsystems. And so there is a willingness and there is an ability which together result in very, very strong, very high renewal rates.

Yes, okay. Ron O’Hanley: Yes, 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 are displacing somebody like Aladdin. Typically, it’s a client that’s got a bunch of bespoke and scattered technology. And they are moving to a comprehensive kind of system like this. So that’s why you get very, very high retention rates, because frankly the switching costs on the client side are pretty high.

Got it. Thank you for that. Appreciate all that color, Ron and Eric. And then following up on, you gave some great color and expenses. And I understand it’s really hard to be too granular, Eric, to your point in the unusual operating environment that we are in, but I am going to give something a shot anyway. Have you reviewed your real estate footprint? Boston is a 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 have 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?

Brennan, it’s Eric. Let me start on that to give you a little bit of kind of near-in views and Ron may play 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 bucks. And we had already plans to drive it down this year by about 5%. So, taking a chunk out of that, and part of that is continued gratification of our high cost, location footprint, and taking advantage at the same time as some of the productivity, right, think both from the headcount management that we have done around the world as well. I think, I think in the very near term a couple things happen in real estate one is we just don’t add any real estate and Ron and I put immediate halt. As soon as this pandemic happens, let me tell you, there’s no, there’s no that a halt is, is perpetual practically. If then, it does have a little bit of an effect where we can easily sublease. So, now what we are doing is going back to every lease that we have, and literally going through and asked him the question, when does it roll over? The question that it really wrestles through is what kind of occupancy rate can you operate add? And if you know most of us have operated at the – call it 85% to 95% occupancy rate. And I think what this pandemic has demonstrated is that the tools and the capabilities through technology and the methods that we have in a company, if we can, we can drive…

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

Thank you, Brennan.

Your next question comes from a line of Kenneth Usdin from Jefferies. Your line is open.

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 have got the CRD comments you talked about then and ask transaction activity but can you kind of walk us through how you are now seeing the bigger buckets move both sequentially and year over year given that we see average asset pricing we have in your earlier comments about the income pressure moderating? Thanks.

Sure, Ken. Part of the reason we gave an overall fee guide is that there is always are and always going be some ins and outs in that in the various fees I think if you think about the different buckets the texture that I give against the full year guide 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 will 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 have the performance we would alike 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 a more flattish range management fees I think are doing well we have been a little more negative there we would like to do a little bit better than what we have done FX trading and then all the electronic services around that will be a clear positive FX lending a little lighter as we described some of the shift there but area that we are working on and then in the software and processing fees I think we are quite confident on the Charles river momentum especially with some of the recent win and then there is a kind of the there are some other in that line there are some other business activity or loan fees or other software fees etcetera then there’s some of the lumpy stuff that we have to just take in Mark 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 live and then something to build on for next year and our view is if we can drive even low single digit fees upwards and continue to drive expenses down we are getting the right results.

Yes. And one big picture one for Ron. Ron last quarter you talked about that a little bit of a push off in either installations and client discussions because of just everything that we are dealing with your win rate in servicing was about flat can you talk and you talked about the potential wins in the CRD side wealth management platform can you 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’s starting to open up at all. Ron O’Hanley: Yes, Kenneth. As we talked about last quarter we said that it was our sense that just given the additional challenges post to asset managers and asset owners operating models of COVID-19 but we thought that we would see even at some point an increase in conversations an interest in outsourcing and operating model changes in general and that’s actually started to happen and was 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 much more about how do we comprehensively improve – how do we – the asset owner or asset manager comprehensively improved our operating model through changes to their back office, and even to their front office. So that’s continuing. And it’s we have, as I noted in my opening remarks 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.

Got it. Thank you, Ron.

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

Hi, thanks guys. Good morning, Ronald and Eric. So, should maybe just building on the last comment, I wanted to big into share it a little bit more. As you think about the pipeline and CRD and sort of this sizable implementation opportunity you guys see, what percentage of that is the on premise versus kind of the SASB type of contract? And then secondly, I was hoping you guys could begin into the shared the 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 clients in the wealth management space that are warehouses is it a independent broker dealers and RIA. So, just a little bit more flavor there and which one of these channels incremental growth has been coming from? Thanks. Ron O’Hanley: Why don’t I start there? Eric can talk about the mix, Alex, but 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’s installed this quarter, but also what’s – where we have conversations and we will be installing a future quarters. It’s a combination of the warehouses 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 are 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. And in that regard. And as I mentioned, in response to an earlier question, the great thing for us is that this, it’s it, it certainly is a bespoke application for the wealth segment, but it’s leveraging, much of the same underlying technology. So there’s a lot of scale and all this both in terms of the initial development we have done but also as we, as we roll out software improvements.

And Alex, just have round out on the financial fleet, we had a range of implementations of this quarter on the on premise side, that ones that are lumpier. The range was 3 years to 8 years. And it actually runs the gamut of 50% to 70% in the first year and then the balance ratably. I think the largest of implementations was that’s going to be on the close to 8-year mark, which would be 50% in the first year and the other 50% in the coming year – in the coming years.

Got it. 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, because that already contemplates significant reinvestment of liquidity that you guys have build 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.

Yes, Alex, it’s little early to get into 2021 to be honest, but with the guide I gave for 4Q does contemplate some reinvestment in the investment portfolio. And we are just kind of driving the balance both the long end range do have a kind of a tale of 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 are – we have got a path. It’s just – it’s hard to see growth in NII at this point. We are both what 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 we can see a path there.

Yes, that makes us. Thanks very much.

Yes

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

Morning, Ron. Good morning Eric. Ron O’Hanley: Good morning.

Morning.

Ron, can you follow up on the new wins that you guys gave us this quarter? And you mentioned in your comments about the stickiness of not losing customers, and the wins primarily coming from existing customers where you are adding more products and services and in the cases where you win a new customer? I think you alluded to the lower prices, but can you share with us is it price driven that the new customers are coming over or are there are combination of price and better products that you are offering them? Ron O’Hanley: That’s right. I don’t remember referring to lower pricing and in the context of the wins, But to answer your questions, it’s a mix that we are 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 are seeing. And that’s particularly true. As I look at the near-term, pipeline. So in for those existing clients, in effect, we are expanding our share of activity with them to use the vernacular expanding the wallet where we might historically have had a back office custody relationship. And we’re moving to the middle of the funnel of this but beyond that, 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, or the only custodian or we are now reconsidering that and moving things like fund accounting out. Middle office would be another big part of that because in fact, our middle office business is the outsourcing of their back office and that solves lots of challenges for them, and we have 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’s developed and again, given the comprehensive nature of what we do, these pipelines do take a while to move from when there’s the first contact to the actual signing of the business, but what’s pleasing about that is we are seeing a fair number of new clients there to us, and the, the attractive thing about that is to really get the full advantage of the front to back platform. We are able to show that, we can do the Charles River in 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.

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 exited some of the leverage loans. Two questions one, can you give us any color on the industries in which you do risk the balance sheet for him? And second, what kind of pricing. Did you see when you sold those leveraged loans? Thank you.

Sure, Gerard. We are trying to be proactive here, right. The leveraged loan market has really moved up and down and a good day. And just finding some points where it might make sense. We de risked roughly about $160 million of balances of leveraged loans. I remember, one of the cinema chains was in 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 $1, so somewhere in that range, so we feel like we made some, good tactical decisions. It didn’t cost us that much, because we would have had to build the reserve anyway for those. And that’s why I said on that $160 million in cost that’s effectively a net fix. 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 will continue to selectively do that. But in truth, we feel quite good about this loan book. I mean, it’s a most leveraged loans are in the indices are single B and below are the double B and sometimes even better. And so I think we are pretty confident here, but there is always something and we just – we are happy to be proactive and make some tactical decisions and that’s what we did.

Thank you.

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

Hi. So, you are 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 fees, management fees FX processing, but is this mostly reflecting what you have done already or is it mostly to calm? And as a subcomponent 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 about 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 the expenses, how does that work out? And then lastly, if I can throw it in there, you are going to be a client of CRD and how is that moving along back?

Sure, Mike. It’s Eric. Let me take the first couple and then I think Ron will probably want to take the third. In terms of the full year guide, you are right, there is a number of different pieces to it. There was 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 is 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, but I that will be a continued story. Management fees largely because of market, I think a little lighter in the first half, we are 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 are hoping for some and looking for some stability there and some sequential – 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 maybe end up being a little more first half weighted, but I think you are – you typically get performance in the fourth quarter of these software businesses, but we will 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 centers encourage us to do that. But there – I think the professional services tend to be billed as incurred. And then – and part of what I described is the more stable part of the revenues. And what we are finding is there is just there is professional services installation work that we do for kind of coming clients, 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. Ron O’Hanley: And Mike regarding, the last part of your question, which is State Street Global Advisors becoming a client of Charles River, they are actually becoming a client of of the full Alpha front-to-back platform, including Charles River. So it’s a fairly comprehensive installments, it’s underway. Alright. It’s the inflation is happening.

What – because you are going to be like that will be a nice showcase once you get that done as you say and we use that ourselves, you should use it too, kind of what inning are you in as far as implementing it internally? Ron O’Hanley: I mean, I am somewhat speculating here now, but we are well over half installed is the way I would describe it. And again, it’s 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 too. So as you would imagine, it’s a $3.1 trillion asset manager, it’s pretty complicated, but it’s well over halfway to one. And just one last clarification, Eric, so the CRD revenue, should we $145 million in the second quarter, I know this is going to be pretty granular, but is that coming that’s kind of lumpy or were you not – we should extrapolate that out or how should we think about that?

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 literally kind of recurring revenues of just over $80 million 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 is always going to be lumpy, because we have 3-year contracts, 5-year contracts, 8-year contracts. And every quarter, every year, there is some of those contracts rollover. And so you are going to get a new lumpiness or you get new business that you add 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 revenues. And just a smaller piece of that was lumpy. So you can kind of think I think draw some lines and say the lumpiness – this is big lumpy, that’s for sure, but there is only going to be some, but I think – I think hopefully I have given 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 on the lumpy part.

Great. Thanks a lot.

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

Hey, good morning. Maybe just we could talk a little bit a question on the new business wins you have had and the cadence and impact. If I look at new business to be installed, you have about a $1 trillion to go. That’s been pretty stable since the big wins in 3Q 09s, I mean, 19s. 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 business wins you have alluded to in the second half this year, is it a similar kind of time to install? Ron O’Hanley: Yes, 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 in middle office. And a custody conversion we can do very quickly, right. We have – 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 moves 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 are seeing here is clients, including some very large clients that have multiple tranches of business that they are either moving over from an existing provider or in some cases moving from an in-source to an outsource model. And again, that reflects the nature of our business. We are using our ability to do these kinds of outsourcing to actually drive not just the outsource business, but not 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 to custody kinds of things or fund accounting to fund accounting. But oftentimes, the backlog reflects it was much more comprehensive kinds of moves.

Right. And should we assume that those more complex deals have higher fee rate? Should we see a little bit more of a material impact on servicing fees when they close? Ron O’Hanley: Well, what you should expect to see is that there is fees coming from more than one source right, the custody fee, fund accounting fee and middle office fee etcetera. So, that’s how you should think about it.

Okay, thanks.

Your next question comes from the line of Vivek Juneja to JPMorgan. Your line is open. Ron O’Hanley: Vivek, we can’t hear you.

Vivek, if you are on mute, please un-mute. Ron O’Hanley: Are you there, Vivek?

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

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.