State Street Corp (XLF) Q2 2024 Earnings Call Transcript

Good morning, and welcome to State Street Corporation's Second Quarter 2024 Earnings Conference Call and Webcast. Today's discussion is being 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 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, Liz Lynn, 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 2024 earnings presentation, which is available for download on the Investor Relations section of our website, investors.statestreet.com. Afterwards, we will be happy to take questions. Before we get started, I would like to remind you that today's presentation will include results presented on a basis that excludes or adjusts 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 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 in our discussion today and in our SEC filings, including the Risk Factors section of 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.

Thank you, Liz, and good morning, everyone. Before we begin today’s discussion, I want to acknowledge the assassination attempt on former President Trump. It was a horrible act of violence that has no place in our democracy and must be condemned. We are relieved that the former President was not seriously harmed and we are saddened by the tragic loss of innocent lives and injuries that resulted from this senseless action. Each victim was a participant in our democratic process, which makes this an affront to all. We extend our thoughts and condolences to all those impacted. At this time, we hope for unity and respect in our country. Disagreement can and must coexist with civility and a commitment to an even better America. Now turning to the second quarter. Earlier today, we released our financial results, which demonstrated sustained momentum as we delivered good year-over-year fee and total revenue growth in both Q2 and for the first half of the year, along with continued expense discipline. This resulted in modest positive total operating leverage, a pre-tax margin of almost 29% and a return on equity of nearly 12% in the quarter. We also continued to take important steps in the transformation and simplification of our operating model as we successfully consolidated our second operations joint venture in India during the quarter. These actions will enable State Street to continue to improve client experience and unlock further productivity savings in the years ahead. In May, the transition to T+1 settlement was a significant event for global investors. Importantly, it presented State Street with an opportunity to demonstrate our position as an essential partner to our clients. Our role in successfully assisting clients through this transition reinforced our value to clients and underscored the depth of our operational capabilities. The financial market context in Q2 was mixed. While daily average global equity market levels continued to increase and equity markets again reached new all-time highs in the second quarter, gains continued to be narrowly concentrated in a few names. Meanwhile, fixed income markets struggled in Q2 as geopolitical risks persisted, economic data generally remained robust, and investors priced in a more gradual cycle of rate cuts, even as the ECB delivered its first rate cuts since the pandemic. Against this market backdrop, we remain focused and successfully executed against our key strategic priorities. Turning to Slide 2 of our investor presentation, I will review our Q2 highlights before Eric takes you through the quarter in more detail. Beginning with our financial performance, second quarter EPS was $2.15 compared to $2.17 in the year-ago period. The durable nature of our business was evident as year-over-year strength in management fees, foreign exchange trading, and net interest income more than offset a previously disclosed client transition that negatively impacted servicing fee revenues, helping to drive revenue growth of 3%. We also remained focused on tightly managing our cost base while continuing to invest in our business, with Q2 total expenses increasing by less than 3% year-over-year, supported by our ongoing productivity efforts. Turning to our business momentum, as you can see in the middle of the page, we continue to execute well against our strategy, making progress in a number of key areas and generating further fee revenue growth, which gives us confidence in our positioning as we look ahead. Within asset services, we generated assets under custody and administration wins of $291 billion, which were well distributed regionally and included more than $200 billion faster to install back office custody in line with our targeted sales strategy. Encouragingly, roughly a quarter of the AUC/A wins this quarter came from Alpha mandate in the APAC region. The win is a large new client for State Street covering a broad set of our services, including the back office. This mandate serves as another proof point that Alpha is an attractive client value proposition globally. Alpha creates a clear competitive advantage for State Street that strategically positions us to deepen existing client relationships and, as demonstrated this quarter, win new long-term client relationships, in turn helping to drive future growth. This ongoing new business performance, coupled with an anticipated increase in installations, positions us well for future servicing fee growth. Servicing fee revenue wins amounted to $72 million, up from $67 million in the first quarter. This marks the fourth quarter in a row of strong servicing fee revenue wins totaling over $330 million in the last 12 months. Our pipeline is strong, and we remain confident in our ability to achieve our increased servicing fee revenue sales goal of $350 million to $400 million this year. At Global Advisors, buoyed by higher average equity markets, Q2 management fees were $511 million, an 11% increase year-over-year with assets under management reaching a record $4.4 trillion at quarter end. While Global Advisors experienced aggregate net outflows in the quarter, it was largely driven by a limited number of client rebalancing. Encouragingly, we continue to make progress in several key strategic focus areas. For example, total net ETF inflows amounted to $6 billion, benefiting from continued market share expansion in U.S. low-cost equity ETFs. Regionally, we also saw the Spider gain market share in EMEA. Elsewhere, Global Advisors announced a planned strategic investment in Envestnet, a leading provider of integrated technology data and wealth solutions. This investment, consistent with State Street's wealth services strategy, will enhance Global Advisors' access to the independent wealth advisory and high-net-worth distribution channels, driving future growth. Net interest income performance was strong, driven by a number of targeted management actions over the last year to support NII growth. These include increased engagement with our clients to offer them financing and cash solutions, resulting in higher deposit, loan, and sponsored repo balances, while we also carefully expanded our investment portfolio in Q2. These actions have contributed to three consecutive quarters of sequential NII and revenue growth, as well as positive total operating leverage in Q2. Our balance sheet remains strong, enabling over $400 million of capital return in the second quarter, and over $700 million year-to-date. Our financial strength was evident with the release of the Federal Reserve's annual stress test results in June. Subsequently, and consistent with our commitment to return capital to our shareholders, we were pleased to announce our intention to increase State Street's quarterly common stock dividend by 10% to $0.76 per share, beginning in the third quarter, subject to approval by our Board of Directors. As we look ahead, we remain committed to returning excess capital to our shareholders this year, subject to market conditions and other factors. To conclude, our strong start to the year continued in the second quarter. We delivered both fee and total revenue growth, which supported modest total operating leverage year-over-year, and a return on equity of nearly 12% in the quarter, all while continuing to make significant investments in our business, controlling expenses, and returning capital to our shareholders. I am pleased with the progress we're making to drive better business momentum and sales performance as we execute against the sharpened revenue strategy. We recorded another Alpha mandate win in the quarter, which demonstrated the clear advantage that strategy brings to our organization by delivering a large and completely new client relationship to State Street. We already have good visibility into Q3 and remain confident in our ability to deliver on our goals of 6 to 8 new Alpha clients and $350 million to $400 million of servicing revenue wins this year. And with that, let me hand the call over to Eric, who will take you through the quarter in more detail.

Thank you, Ron, and good morning, everyone. Starting on Slide 3, we reported EPS of $2.15 for the quarter compared to $2.17 in the second quarter a year ago. EPS was slightly lower year-on-year, but would have shown positive growth were it not for an $80 million reserve release last year. As Ron noted, we delivered 3% revenue growth year-over-year reflecting both higher net interest income up 6% as well as higher fee revenues up 2%, which supported modestly positive total operating leverage in the quarter. The second quarter strong performance contributed to an encouraging first half of the year, with both positive fee and total operating leverage on a year-to-date basis, excluding notable items relative to the prior year period. Turning now to Slide 4, period end assets under custody and administration and assets under management again increased to record levels, largely supported by market tailwinds. As you can see on the right panel of the slide, market indicators related to our trading business remain challenging in the quarter. However, we were pleased to see improved client volumes across our FX trading venues, which I will discuss shortly. Turning to Slide 5, servicing fees declined 2% year-on-year, as higher average equity market levels and net new business excluding our previously disclosed client transition were more than offset by pricing headwinds and lower client activity and adjustments, including the asset mix shift into lower earning cash and cash equivalents. The impact of the previously disclosed client transition represented a headwind of approximately 2 percentage points to year-on-year growth, while lower client activity and adjustments, including the asset mix shift into cash, created a headwind of approximately 1 percentage point on year-on-year growth. Additionally, we saw the pace of quarterly installations track below expectations in Q1 and Q2. We do, however, anticipate a pickup over the next few quarters as our higher level of recent sales begin to onboard. Sequentially, servicing fees were up 1% reflecting higher average equity market levels and client activity as transaction volumes increased and we saw clients start to put cash back to work. We generated $72 million of servicing fee revenue wins in Q2 and more than $330 million over the last four quarters, with the vast majority in back office, consistent with our strategy to prioritize faster installing custody mandates. At period end, we had $276 million of servicing fee revenues to be installed and $2.4 trillion of AUC/A to be installed. Moving to Slide 6, management fees were up 11% year-on-year primarily reflecting our higher average market levels and net inflows from prior periods, partially offset by the impact of our strategic ETF repricing initiative, which we believe is starting to pay off in both volumes and revenues. Sequentially, the benefit of higher average market levels was offset by net flows and lower performance fees. We are pleased with the steady growth we are delivering in Global Advisors. In the second quarter, we continued to expand the breadth of our offerings with the launch of new funds as we broaden our product range across geographies. Our investment management business had a healthy pre-tax margin of 32% in the second quarter, up 3 percentage points year-on-year and up 8 percentage points quarter-on-quarter. Now turning to Slide 7, as I noted, we saw a very nice uptick in client activity in our markets business with higher volumes across our major FX venues. This helped to drive FX trading revenue growth of 11% year-on-year, though volatility remained muted with compressed margin. Securities finance revenues also benefitted from higher balances on both agency lending and prime services. However, our U.S. specials activity was subdued in the quarter, which impacted margins and contributed to the year-on-year decline in securities finance revenues. Moving to software and processing fees, second quarter performance continued to benefit from strong client engagement with CRD. Though the cadence of on-premise renewals negatively impacted year-on-year performance, as shown in greater detail on the following slides. On Slide 8, as you can see, software-enabled and professional services revenues increased 17% in the quarter. We expect these revenues to represent a greater proportion of our front office software and data business over time, as we transition another 20 clients from on-premise to a more durable SaaS model over the last year. As we outlined in May, we believe our software business can be a significant revenue growth driver for State Street, potentially reaching $1 billion in annual revenues over the next 5 years. In addition, we were pleased with the continued momentum we're seeing in Alpha. We reported an additional Alpha mandate win and two mandates went live in Q2, bringing the total number of live mandates to 23 at quarter end. As Ron mentioned, this quarter's Alpha win represents a brand new 10-year relationship with a large APAC client. We view long-term Alpha mandates like this as a key benefit of our differentiated Alpha strategy. Turning to Slide 9. Net interest income was stronger than expected this quarter, up 6% year-on-year and up 3% sequentially to $735 million, as higher investment portfolio yields and higher loan growth more than offset the continued deposit mix shift in both periods. Additionally, on a quarter-on-quarter basis, we proactively increased our investment portfolio balances at higher yields, which thus benefited net interest income. Looking at the strong quarterly performance relative to our expectations in early June, we did see an inflow of valuable noninterest-bearing deposits in mid-June and again in late June as clients geared up for the holiday weekend, although I would note that we did see some reversal during the first week of July. Similarly, net interest income also benefitted from higher interest-bearing balances due to our client engagement efforts, as well as better spreads and volumes within our sponsored repo business as more clients joined the program. Average deposits increased 7% year-on-year and 1% quarter-on-quarter. We would expect to continue to operate at this higher level of deposit balances as we look to the back half of the year. Turning to Slide 10, year-on-year expense growth was contained to less than 3%. In the second quarter, we continued to invest in the business while also delivering productivity benefits in two key areas. The first is associated with our decision to consolidate two operations joint ventures in India late last year and this quarter. The year-on-year savings associated with these two joint venture consolidations are approximately $20 million in the quarter, excluding integration costs. Second, we benefitted from our ongoing organizational process improvements and initiatives, including streamlining and delayering staff functions to increase our management's span of control, which enabled us to lower our headcount on a pro forma basis, including the joint ventures, by 5 percentage points year-on-year as detailed on the bottom left of the slide. Together, these actions helped to drive down compensation benefit costs by 2% year-on-year in the second quarter, and facilitate our ability to reinvest in our franchise. The combination of the joint venture consolidations and our ongoing initiatives serves as a catalyst and importantly gives us confidence as we continue to deliver on our strategy to simplify our global operating model with meaningful benefits expected to build over time, including more productivity savings, as well as an ability to better serve our clients and invest for the future. Moving to Slide 11, as you can see, our capital levels remained strong and comfortably above the regulatory minimums. As of quarter end, our standardized CET1 ratio of 11.2% was slightly higher from the prior quarter, as capital generated from earnings was partially offset by continued dividends and share repurchases, as well as higher risk-weighted assets as we support our clients, which in turn drove higher fees and net interest income. We returned over $300 million in the first quarter to shareholders, followed by $400 million through common share repurchases and dividends in the second quarter, as we've tried to strike the right balance between our capital return goals and the support of our clients. Looking ahead to the back half of the year, we have announced a planned 10% per share quarterly common dividend increase on the heels of a strong performance on this year's Comprehensive Capital Analysis and Review starting in Q3 and subject to Board approval. Additionally, our focus is to accelerate the pace of quarterly buybacks relative to the first half of the year. However, given the more modest level of repurchase activity so far this year, the full-year payout ratio for 2024 will likely be closer to the 80% to 90% range, in line with our medium-term targets. In summary, we are pleased with our second quarter and first half results, which demonstrate our ability to execute against our strategy to drive sustained business momentum while delivering positive total operating leverage, excluding notable items. With that, let me cover our improved full-year outlook, which I would highlight continues to have the potential for variability given the uncertain economic and political environment we're operating in. In terms of our current macro assumptions, as we stand here today, we are assuming global equity markets will remain stable for the remainder of the year. Our rate outlook broadly aligns with the current forward curve as of quarter end, while we expect both FX market volatility and specials to remain muted. Given our strong start to the year and higher average market levels, we now expect that total fee revenue will likely be in the range of up 4% to 5% on a full-year basis, somewhat better than our prior expectations for roughly 4% year-on-year growth. Turning to net interest income, given our Q2 performance, along with the continued benefit of management actions we have taken to support NII growth this year, we now expect full-year NII will be up slightly year-over-year, which is also better than our previous guidance of down roughly 5% for the full year. Finally, given these improved top-line expectations, full-year expenses are likely to be somewhat higher than our prior outlook of up 2.5% this year. We now expect expenses, excluding notable items, to be up about 3% this year, given the expected revenue-related costs. Importantly, given this improved outlook, we now expect to deliver both positive fee operating leverage and positive total operating leverage for the full year, excluding notable items. And with that, let me hand the call back to Ron.

Thank you, Eric. Operator, we can open it up to questions.

Your first question comes from Glenn Schorr with Evercore ISI. Your line is open.

Hi, thanks so much. Question on Global Advisors. You had some institutional lead outflows in the last two quarters, despite the strong markets. I'm just curious how much of that is a function of rebalancing? And should we expect more going forward given the strong equity markets? And are you seeing similar trends in your custody base? Thanks.

Hi, Glenn. It's Ron. You have it correct there. The vast majority of it is around client rebalancing. In one case, an extremely large client is rebalancing away from certain asset classes. So it's idiosyncratic. We don't expect it to continue. We feel very comfortable with the trajectory that Global Advisors is on both with the institutional business and the ETF business.

Okay. Ron, there have been several articles over the last year or so talking about a certain European bank potentially selling their servicing platform. You've been linked to it as you should be. You've been great in consolidating things in the past. So I'm not asking you to comment on that. I am asking about shareholder preferences for buybacks versus capital returns. I'm curious about your approach regarding any consolidation opportunities in services. Thanks.

Glenn, we've been pretty consistent about this. We have a very strong market position. Some of that in the past has been built by M&A, if you go back to the 2000s. But if you think about where we are now, our position is very strong and the vast majority of our activity is around organic build-out of our business. Some of that is focused on clients within geographies, and some of it is focused on building capabilities and extending them to other geographies. That is our focus. To the extent that M&A can help us implement our strategy and passes the test of being a superior use of capital than returning capital to shareholders, then we'll consider it. But our focus is on organic growth and returning capital to shareholders at a reasonable pace while continuing to accelerate what we do.

Operator, can we move to the next question?

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

Thanks. Good morning. Great results on the NII and we heard the updated outlook for slightly up this year. Eric, just wondering, that would still imply a lower second half compared to this really strong second quarter. And I know there's a lot of uncertainty still out there in the environment. So can you help us think through how deposits will track from here and what caveats we should keep in mind if the second half comes off of this second quarter strength? Thanks.

Ken, it's Eric. As you said, we're pleased with the second quarter results on NII. Some of that is the interest rate environment, but a good portion of that is the management actions we've been taking in terms of engaging with our clients on deposits. This quarter was particularly strong. We saw a nice tailwind from long-term rates during the quarter that allowed us to build out our investment portfolio a little more. Deposits ticked up in the second half of June and towards the end, especially noninterest bearing. But we did see some reversal during the first week of July. Similarly, net interest income also benefitted from higher interest-bearing balances due to our client engagement efforts, as well as better spreads and volumes within our sponsored repo business as more clients join the program. Average deposits increased 7% year-on-year and 1% quarter-on-quarter. We would expect to continue to operate at this higher level of deposit balances as we look to the back half of the year.

Okay, got it. Ron, you mentioned that you think that core fees growth should improve from here, and just wanted to ask you to expand on that a little bit. I know you've mentioned onboarding and such, but we still have the deconversion working against us. But is that what drives the incrementally better fee guide for the second half? Is that we're finally going to see those servicing and management fee lines start to show a better rate of change?

Yes, I think you largely have it. But let me elaborate, Ken. When we talk about core servicing fees, what really drives it? First is retention, second is the amount and rate of onboarding, and then third is our business and sales. Our retention levels have been tracking well, even coming in a little higher than planned. Onboarding has been slower than expected this year, but we see lots of visibility going forward for that increasing. We've got a big book to onboard that should begin to ramp up. Third is sales. We are on track for our increased servicing fee sales target. There's also a disproportionate focus on traditional back office fees, ensuring that when an Alpha assignment comes onboard, the back office conversions occur first. This gives us encouragement, as does the fact that we are just hitting the bottom regarding deconversion. We should see improvement starting next quarter or two.

Great. Thanks, Ron.

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

Good morning. Thank you for taking my questions. I would like to start with euro deposits; the ECB cut rates this quarter. So I'm curious about what impact you saw from that cut? Where was the beta on that cut? And was it roughly equivalent to the beta you saw on the prior increases? And based on that experience, how does that inform your expectation for upcoming cuts in the fed funds?

Brennan, it's Eric. It's great to see the industry environment top out and begin to reverse, though I think it'll do so slowly. We've seen early signs of that, and it feels like it'll take some time. For context, our portfolio and balance sheet is roughly neutral and relatively insulated from interest rate increases or decreases. If all central banks cut rates by 25 basis points, we are looking at about a $5 million per quarter impact on a $2.5 billion base of annual net interest income. Regarding euro rates, we have noted that euro rates increased more slowly on the way up and are now moving in the opposite direction. We expect to see symmetry in the betas, with a similar pattern playing out as rates rise or fall.

Got it. Thanks for that. Regarding the repo market, it has remained strong over recent quarters. Do you think that strength is sustainable, and could it allow for a less pronounced step down than your improved guidance for the back half of the year seems to indicate?

Brennan, it's Eric again. Most of the net interest income we earn on our balance sheet is based on deposit funding and lending. About 90% of our NII relates to deposits and loans, with only about 10% tied to repo. Repo NII did come in a bit better-than-expected in Q2, due to dislocations in the overnight repo operation of the Fed relative to SOFR. Clients came to us because of dealer balance sheet strains, but the increase was small relative to overall NII. Repo has been relatively flat over the last couple of quarters, as it tends to provide thinner margins than our other income sources, so it won’t be the primary driver of future NII growth.

Thanks for taking my questions.

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

Hey, good morning. Eric, following up on the NII story, can you discuss potentially when you see an inflection coming? Your HTM book is still weighing that down. How quickly will it mature? And how long until it comes back? Is that a significant part of your inflection story?

Jim, it's Eric. Calling an inflection point for NII is challenging. We believe in the next few quarters, we'll begin to see that; we'll transition from trends to a stabilization, and then eventually up. The turnover in investment portfolios has increased, now rolling over at about $3 billion to $4 billion quarterly across HTM and AFS. Given the longer-maturity bonds in HTM, their rollout occurs slowly but will eventually provide a tailwind over time. The biggest factor now is deposit mix and pricing of noninterest-bearing balances. We see stabilization, leading to a net positive impact on NII in the coming quarters.

Okay. That's really helpful. And regarding deposit growth as we anticipate rate cuts, do you believe rate cuts can serve as a catalyst for growth based on historical experience? What are the indicators we need to watch?

The rate environment has fluctuated greatly, and we've seen its effects on deposits. We expect modest cuts in interest rates will not have a significant effect on deposit levels as that has been largely telegraphed. The true growth will likely come from sales: we're targeting $350 million to $400 million against last year’s $300 million in servicing fee sales. Our organic growth model aims to secure additional deposits and ultimately increase both fee growth and NII.

Got it. Very helpful. Thanks.

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

Oh, hi. Good morning.

Hi, Betsy.

I wanted to follow on the $350 million to $400 million target for this year. The numbers for 1Q and 2Q were $67 million and $72 million. So that leads us to expect up to $105 million for each of Q3 and Q4. What gives you confidence in that? Is it a function of sales already contracted but just needs to be installed? And does that give you confidence to generate those levels?

Betsy, it's Ron. Firstly, the numbers we referenced are sales, not installs. They wouldn't include what’s under contract but still onboarding. Historically, the second half tends to be stronger for us, and we feel good about our pipeline, which is why we continue to affirm confidence in maintaining our target of $350 million to $400 million.

Got it. Perfect. Yes, and I understand the second half tends to be stronger. Thank you.

As we mentioned, we will be increasing buybacks after a lighter repurchase activity in the first half of the year. We expect the buyback activity to accelerate through the back half. We have good room in capital generation to support that.

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

I just want to ensure I understand correctly. Over the next two quarters, you expect to be done with net interest income declines, management and deposit declines, and client deconversions. Is that accurate?

Mike, it's Eric. I said in the next few quarters, we're giving ourselves some room for that. But we can see over the horizon in a way. By the end of this year, we expect to be through about three-quarters of the client deconversion effect, but there’ll still be a piece of that coming through next year.

And you also mentioned continued pricing pressure, which we’ve been discussing forever. Can you provide context on where you’re seeing it?

Mike, it's Eric again. Pricing pressure is part of our normal course of action. We expect about 2% headwinds from pricing this year, which is in line with previous years. The impact tends to be geared towards asset managers, particularly in mutual fund and ETF spaces. But it’s not anything out of the ordinary at this point.

Thank you, both.

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

Hi, thanks. Eric, quick follow-up on your net interest income guidance. U.S. interest-bearing deposit costs actually declined quarter-over-quarter. Did you start cutting rates, or was there something else that drove that? Can you provide color on that? Is that likely to continue?

Vivek, it's Eric. That decline is part of the normal fluctuations we see in deposits, and we run a large franchise with varying transactional activity. Overall, our interest-bearing deposits are up slightly, and we did not cut our pricing. Clients need certain transactional deposits for custody accounts that undergo well-understood pricing.

Thank you.

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

Good morning, guys. Ron, you mentioned spotting low volatility in foreign exchange activity. Can you share with us what drove that? And what macro factors should we keep an eye on for potential increased volatility?

There has been remarkably low volatility, driven partly by the dollar's prolonged strength. Several factors have contributed, including uncertainty around the geopolitical landscape and the lesser speculative activity overall.

It’s important to maintain focus on how our clients are prioritizing value solutions amidst this context. We've not seen much speculation in currency markets, rather seeing consistent dollar holding and buying of other currencies, resulting in muted volatility levels.

Great, thank you for that context. And regarding onboarding, you noted it was slower-than-expected; what caused that?

The slow onboarding was concentrated in some large clients acting as development partners. We did face some delays due to their operational issues and a slowdown in private markets, which has affected our revenue from those clients.

Thank you.

There are no further questions at this time. Ron, please continue.

Thank you, everyone, for joining us.

This concludes today's call. Thank you for your participation. You may now disconnect.