Improved NII Guidance
Q: Why is net interest income (NII) outlook better?
A: Eric explained that the NII guidance improved from an expected 10% decline to a 5% decline for the full year due to higher-than-expected deposit balances and fewer anticipated rate cuts by central banks. " They also expect NII to remain comfortably above $600 million per quarter. "

Deposit Growth Sustainability
Q: Will higher deposit balances stick around?
A: Eric noted that deposit balances increased as clients hold more cash and place it into deposits, repo, and sweeps. " They expect these higher deposit levels to continue, attributing it to strong client engagement and cash management strategies. "

Servicing Fee Outlook
Q: When will servicing fees start to grow positively?
A: Ron stated that the headwinds from a previously announced client transition, impacting about 2 percentage points of servicing fees, will abate next year. With strong sales performance and backlog installations, they anticipate servicing fee growth as these effects subside.

Expense Management Initiatives
Q: How will JV consolidation impact expenses?
A: Ron mentioned that consolidating the joint venture unlocks a new wave of productivity growth by eliminating margins in expenses and simplifying end-to-end processes. This will lead to cost benefits and improve job content, making it more attractive to employees. "

Capital Return Plans
Q: What are your capital return priorities?
A: Eric reaffirmed their priority to return capital to shareholders, targeting a payout ratio around total earnings for the year. While the payout ratio was below 100% in Q1 due to factors like the FDIC assessment, buybacks are expected to increase in coming quarters. "

Private Markets Growth
Q: How is the private markets pipeline developing?
A: Ron expressed optimism about the private markets business, describing it as a double-digit growth area. Private Markets Alpha is developing nicely, offering opportunities to improve operations and leverage existing positions. "

Market Impact on Fees
Q: How do market levels affect servicing fees?
A: Eric explained that while the S&P 500 is up 28% year-over-year, the All-World Index is up 18%, which is more relevant to their global business. " This would typically result in a 4% to 5% tailwind to servicing fees, but headwinds like the client transition and lower client activity have offset this benefit. "

Pricing Environment Stability
Q: How is the pricing environment in servicing?
A: Eric noted that pricing headwinds in the servicing business have been around 2% over the last four years, with inflation having little effect on fee rates. Fee schedules are negotiated as a package, and clients look for fair value in long-term partnerships. "

Higher-than-Expected Deposits
Q: Why were deposits higher than expected?
A: Eric attributed the higher deposits to more cash in the banking system due to central bank actions, such as the reduction in the Fed's overnight repo operations, and increased client engagement over the past 1.5 to 2 years. "

Tax Rate Confirmation
Q: What is the expected tax rate for the year?
A: Eric confirmed that they expect a tax rate of 21% to 22% for the full year, as previously guided in January. "

Preferred Dividends Outlook
Q: How will preferred dividends change?
A: Eric stated that preferred dividends will remain elevated at $50 million to $55 million in the second quarter, then decrease to about $40 million per quarter from the third quarter onward. "