Net Interest Income Outlook
Q: Will NII decline before stabilizing due to deposit pressures and rate cuts?
A: Management acknowledged that NII might decrease in the second quarter before stabilizing later in the year due to deposit pricing pressures and looming rate cuts. They noted that deposit volumes and client behavior are hard to predict ( ).

Deposit Stability Amid Fed QT
Q: How will deposits trend as the Fed's QT progresses and RRP is exhausted?
A: Management expects deposit flows to be influenced by the ongoing Fed QT and client reactions to changing rates. They noted that as the RRP declines, deposits have shown resiliency, but client behavior could shift as rates decrease from 5% to 3% ( ).

Asset Sensitivity to Rate Cuts
Q: How sensitive is the asset side to rate movements as rate cuts approach?
A: Approximately 75% of loans are rate-sensitive, and about one-third of the securities portfolio is floating rate. The duration of the securities portfolio is around 1.8 years, with a weighted average maturity under 4 years, indicating significant sensitivity to rate changes ( ).

Duration Positioning Strategy
Q: Will you consider extending duration to lock in higher yields as rates fall?
A: Management is contemplating extending duration to hedge against a dramatic reduction in rates. While they have shortened duration recently, they recognize the need to adjust their strategy as the rate environment changes ( ).

Expense Growth Outlook
Q: Is expense growth expected to be lower than 2023's ~5%?
A: Yes, management aims for 2024 expense growth to be lower than the approximately 4.8% in 2023. They are working from a base of $5.1 billion in expenses and plan to use productivity improvements to offset increases, including a 3% uplift from base pay and software costs already in the 2024 base ( , , ).

Capital Levels and Buybacks
Q: With high CET1 ratios, is there room to increase buybacks?
A: Management acknowledged room for additional stock repurchases, given their CET1 ratio of 11.4%. They are considering capital deployment options but remain cautious due to uncertainties like the Basel III endgame ( ).

Organic Growth Prospects
Q: What are your expectations for organic growth this year?
A: Management is optimistic about organic growth, citing improved inflows in asset management and a strategic focus on scalable growth across wealth management and asset servicing. They aim to drive profitable organic growth by emphasizing scalable business areas and collaborative client approaches ( ).

Deposit Pricing Pressure
Q: What's driving further pressure on deposit costs?
A: Deposit pricing pressure is due to lags in pricing agreements and adjustments made in the fourth quarter that will impact the first quarter. Management is committed to retaining client deposits and anticipates higher costs in the near term ( ).

Noninterest-Bearing Deposits
Q: Can noninterest-bearing deposits stabilize at current levels?
A: Management observed that certain client channels for noninterest-bearing deposits have flattened and performed better than others. While not declaring a plateau, they noted improved trends in wealth management deposits and aim to maintain these levels ( , ).

Alternative Asset Servicing Opportunities
Q: How are you positioning in the alternative asset servicing space?
A: Management views private markets as a major opportunity and recently won a significant mandate from a large private markets firm. They are investing in capabilities and global footprint to grow in this area ( ).

Visa Class B Shares
Q: What's the plan for disposing of Visa Class B shares and its impact?
A: Pending a shareholder vote, they may monetize half of their over 4 million Visa B shares, worth approximately $1.7 billion. They consider this a non-strategic asset and are evaluating options, which could impact capital and buyback plans ( ).

Incremental NII from Securities Sales
Q: What's the NII benefit from recent securities portfolio repositioning?
A: The November repositioning is expected to contribute about $15 million per quarter, and the January repositioning another $15 million per quarter to NII ( ).

Expense Priorities
Q: What takes precedence—expense-to-fee ratio or absolute expense growth?
A: Management prioritizes improving the expense-to-trust-fee ratio, aiming to drive it back into their target range. They focus on scalable growth and disciplined expense management to achieve this ( ).

NII Sensitivity to Fed Rate Cuts
Q: How would varying Fed rate cut scenarios affect NII?
A: NII impact depends on their ability to maintain spreads amid client deposit behaviors, which are difficult to predict. They indicated flexibility to adapt to different rate cut scenarios but emphasized uncertainty ( ).

Custody Fee Trends
Q: Are custody fee declines due to risk-off or pricing pressure?
A: The approximately 5% year-over-year decline in custody fees is attributed to lower transaction volumes and asset levels rather than pricing pressure. Management sees pricing as relatively stable and notes positive net new business ( ).

Wealth Management and Global Family Office
Q: Any changes or growth areas in Wealth Management, especially GFO?
A: While Global Family Office growth decelerated due to its inherently spiky nature, they have invested heavily in technology and client offerings, positioning them for future growth in wealth management ( ).