The Bank of New York Mellon Management Discusses Q4 2013 Results - Earnings Call Transcript

Jan.17.14 | About: The Bank (BK)

The Bank of New York Mellon (NYSE:BK)

Q4 2013 Earnings Call

January 17, 2014 8:00 am ET

Executives

Andy Clark

Gerald L. Hassell - Chairman, Chief Executive Officer, Member of Executive Committee and President of the Mellon Bank NA

Thomas P. Gibbons - Vice Chairman and Chief Financial Officer

Curtis Y. Arledge - Chief Executive Officer

Brian T. Shea - Head of Client Service Delivery & Client Technology Solutions, President of Investment Services and Chairman of Pershing LLC

Timothy F. Keaney - Vice Chairman and Chief Executive Officer of Investment Services

Analysts

Betsy Graseck - Morgan Stanley, Research Division

Kenneth M. Usdin - Jefferies LLC, Research Division

Glenn Schorr - ISI Group Inc., Research Division

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Ashley N. Serrao - Crédit Suisse AG, Research Division

Josh Levin - Citigroup Inc, Research Division

Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division

Michael Mayo - CLSA Limited, Research Division

Cynthia Mayer - BofA Merrill Lynch, Research Division

Andrew Marquardt - Evercore Partners Inc., Research Division

Operator

Good morning, ladies and gentlemen, and welcome to the Fourth Quarter 2013 Earnings Conference Call hosted by BNY Mellon. [Operator Instructions] Please note that this conference call webcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without BNY Mellon's consent.

I will now turn the call over to Mr. Andy Clark. Mr. Clark, you may begin.

Andy Clark

Thanks, Wendy, and welcome, everyone. With us today are Gerald Hassell, our Chairman and CEO; Todd Gibbons, our CFO, as well as our executive management team.

Before we begin, let me remind you that our remarks today may include forward-looking statements. Actual results may differ materially from those indicated or implied by the forward-looking statements as a result of various factors. These factors include those identified in the cautionary statement in the press release and those identified in our documents filed with the SEC that are available on our website. Forward-looking statements in this call will speak only as of today, January 17, 2014, and we will not update forward-looking statements. Our press release and earnings review are available on our website, and we'll be using the earnings review to discuss our results. Now I'd like to turn the call over to Gerald. Gerald?

Gerald L. Hassell

Thanks, Andy. Welcome, everyone, and thanks for joining us. As you saw from the release, for the fourth quarter, we've reported earnings of $0.44 per share. Now this includes an after-tax loss of $115 million or $0.10 per share related to the write-down of an equity investment. After netting out this loss, we had adjusted earnings of $0.54 per share. We had a strong year-over-year growth in core Investment Management and Investment Services fees. The growth reflects improved market conditions and importantly, our success in providing solution sets across our businesses that our clients are seeking. As we have said in the past, we are making strategic investments in several areas to expand our capabilities and we're seeing early evidence of returns on those investments.

For the quarter, we had total revenues of $3.8 billion, which is up 4% over the fourth quarter of 2012. The Investment Management business performance remains terrific. Our success in attracting new assets help drive a 14% increase in assets under management year-over-year to a record $1.58 trillion. In 2013, net long-term flows were $95 billion as we continue to have particular strength in the liability driven investments category. Now this organic growth, along with higher equity values and performance fees, helped mitigate the pressure from higher money market fee waivers year-over-year. Similar to Investment Management, we had strong year-over-year growth in Investment Services. We saw growth in Asset Servicing, Issuer Services and Clearing fees driven by higher volumes, improved equity values and net new business.

Clearing Services in particular continues to show strong growth as our technology platform serving investment advisers is more broadly adopted. But some of our investments also contributed to this growth. Our Global Collateral Services business continue to collect -- gather collateral management assets. We enjoyed better foreign exchange results year-over-year as our investments in the electronic channel had made us more competitive and we are attracting greater volumes.

Now in terms of our expenses, seasonality played a large part of the sequential growth. Our expenses have been impacted by our strategic investments for future growth, as well as increasing regulatory and compliance requirements. Notably, our operational excellence initiatives' savings help mitigate some of this expense pressure. And you will see that we achieved our operational excellence targets of over $650 million, a full 1 year ahead of schedule. And, importantly, we're not done. We're now transitioning to a broader continuous improvement process designed to improve efficiencies. This process is not a program or an initiative or a one-time project. It will be an ongoing area of emphasis that is becoming part of the fabric of our culture. Now we already have line of sight into several hundred millions of dollars of financial benefit over the next few years.

Turning to the capital front. Our business model generates a significant level of capital and allows us to perform well in stress scenarios, giving us increased financial flexibility. In 2013, we have returned approximately $1.7 billion to shareholders in the form of dividends or share repurchases. Now in terms of share repurchases, during the first quarter, we are in a position to potentially increase the total share buyback relative to the fourth quarter. And Todd will cover that in more detail in a minute. So for the quarter, continued growth in core Investment Services and Investment Management fees, successful completion of our operational excellence initiatives, and continued strong capital position.

Now looking ahead to 2014. We expect to see more of the benefits in some of the investments we've been making. In Global Markets, we're continuing to roll out new electronics foreign exchange and capital markets trading capabilities that position us to capture additional activity. The growth of our Global Collateral Services business should benefit as the markets deal with new collateral regulations. In Investment Management, we're in the midst of greatly expanding our wealth management sales force. Additionally, we are making significant progress reaching individual investors by expanding our retail distribution capabilities and product offerings. We've also made progress in expanding our Investment Management and Investment Services capabilities in the Asia-Pacific region with our separately-managed accounts platform scheduled to go live shortly. We've successfully piloted an intermediate -- Intermediary Private Banking program between wealth management and Pershing and will look to build on that momentum. And we continue to reposition to benefit even more as fund managers look to leverage our technology and advisors and brokers move away from self-clearing. We like how we're positioned and we're upbeat about our prospects for 2014. With that, let me turn it over to Todd.

Thomas P. Gibbons

Thanks, Gerald, and good morning, everyone. As in the past, my comments will follow the quarterly review, and let's begin on Page 2. As Gerald noted, EPS was $0.44. That includes the after-tax loss of $115 million or $0.10 per share. That was related to the equity investment we have, a minority interest in ConvergEx. So we see it as a $0.50 -- $0.54 quarter but that does include the benefit of approximately $0.01 on tax.

Looking at the numbers on a year-over-year basis, total revenue was $3.8 billion. That's on a non-GAAP, that's up 4%. In our Investment Services business, we had growth in Asset Servicing, Issuer and Clearing Services. Investment Management and performance fees continued their strong trend. FX revenue was up, and NIR also grew. Expenses were up 2% on a GAAP basis. Adjusted, they were up about 4%, largely reflecting higher staff, legal, consulting and business development expenses.

Turning to Page 4 where we call out some business metrics that will help you understand our underlying performance. You can see that AUM of $1.58 trillion was up 14% year-over-year and 3% sequentially. Now this was driven by net new business wins and higher equity market values.

During the quarter, we had net long-term inflows of $2 billion, and short-term inflows of $6 billion. Assets under custody and administration at quarter end were $27.6 trillion, that's up $1.3 trillion or 5% year-over-year. It primarily reflects the impact of higher market values and net new business. Linked-quarter, AUC/A was up about 1% and that's due to improved market values. Most of our key metrics showed solid growth on a year-over-year basis. Average loans and deposits in wealth management, Investment Services were up very strongly, most clearing metrics were up quite nicely as well. DARTS volumes and average long-term mutual fund assets continued that recent strong growth trend.

DR programs were down in the quarter and that's really reflecting market events including M&A and corporate restructurings. So when you do see an M&A transaction, it can result in the termination of a given program. And we have been disciplined, I might say, around the pricing in that business. Average tri-party repo balances were down year-over-year but up sequentially as we continue to see opportunities for growth for Global Collateral Services. Asset Servicing fees were up -- this is on Page 6, were up 4% year-over-year and 2% sequentially. Both those increases largely reflect higher market values, organic growth and higher collateral management and segregation fees in Global Collateral Services. The year-over-year increase was partially offset by lower securities lending revenue, and that was primarily driven to -- by lower spreads. We had an estimated $123 billion in new AUC/A wins in Asset Servicings. And for the year in total, we had new AUC/A wins totaling $639 billion. Clearing fees were up 10% year-over-year and 3% sequentially. The year-over-year increase was driven by higher mutual fund fees, asset-based fees and volumes, and that was partially offset by higher money market fee waivers. The sequential increase was primarily driven by higher clearing revenue and mutual fund fees.

Issuer service fees were up 10% year-over-year and they were down 26% sequentially. The year-over-year increase primary reflects DR revenue that was really driven by corporate actions, and that was partially offset by the runoff that we've seen in securitizations in Corporate Trust. The sequential decrease, as we've mentioned before, was primarily resulted from seasonally lower DR revenue in the fourth quarter versus the third. Investment Management and performance fees were up 6% year-over-year and 10% sequentially. And if you adjust them for the sale of our Newton private client business last quarter, they were up 7% and 11%. The year-over-year increase was primarily driven by higher equity market values, net new business wins and higher performance fees and that was partially offset by higher money market fee waivers and the average impact that we saw in the strengths of the dollar. The sequential increase primarily reflects seasonally higher performance fees and higher equity market values.

Now in terms of money market fees, the aggregate impact or EPS this quarter was approximately $0.06 to $0.07, that's pretty much in the range that we saw in the third quarter. From a revenue perspective, on a year-over-year basis, that drag was $47 million, and it's split fairly evenly between our Investment Management and our Investment Services business.

Moving on to FX and other trading, revenue was up 5% year-over-year and it was down 9% sequentially. The underlying components, FX revenue was $126 million. That's up 19% from last year, that's down 18% sequentially. The year-over-year increase primarily reflects higher volumes and we did see a little bit higher volatility. The sequential decrease was driven by a significant decline in volatility sequentially, but that was partially offset by volume increases. So as Gerald noted earlier, the enhancements we've made to our electronic trading platforms have contributed to the results and we have definitely seen a significant increase in volume.

Other trading revenue was down $13 million from the year ago quarter and up $14 million from the third quarter. The year-over-year decrease primarily reflects lower derivatives trading revenue. The sequential increase was driven by higher fixed income trading and that was partially offset by a lower equity derivatives stream. Investment and other income was a loss of $60 million compared with income of $116 million in the year ago quarter, and income of $135 million on the prior quarter. Both decreases primarily reflect the write down of the goodwill in our equity investment in ConvergEx.

Turning to Page 8 of the earnings review, you'll see that net interest revenue on a fully tax equivalent basis was up $41 million versus the year ago quarter. It was down $6 million sequentially. The year-over-year increase in interest revenue is primarily driven by higher average interest earning assets. The sequential decrease primarily reflects the change in the mix as we saw a full quarter impact of the move to a defensive rate position that we took pretty much in the third quarter. And that was partially offset by an increase in revenue generated by the higher deposits. The net interest margin for the quarter was 1.09%. It was flat with where we were last year at this time. And down a bit from 1.16% in the third quarter.

Turning to Page 9, total noninterest expenses, and this excludes the amortization intangibles, M&I, as well as litigation restructuring charges, were up 4% year-over-year, and about the same sequentially. The year-over-year increase primarily resulted from increased staff expense and that was driven by higher incentives due to the higher pretax income that we had, as well as increased employee benefit cost and that's really came down to higher pension expense for the year 2013.

Higher legal expense was related to litigation defense. We did see some increased consulting expenses, as Gerald had mentioned, largely driven by regulatory and compliance requirements, but also to support some of our key business initiatives. And we did have higher business development expense, and that's a lot to do with our corporate branding campaign and the marketing initiatives that we've had as we continue to invest in building our brand.

The sequential increase primarily resulted from higher legal consulting and business development expenses reflecting the factors that I noted above, as well as seasonality and the timing of client conferences and corporate sponsorships.

Page 10 details our success in achieving our operational excellence initiative goal of more than $650 million expenses. We've done that a year ahead of schedule. In fact, we've now achieved savings at a rate of about $716 million.

One noteworthy accomplishment in the recent move of our New York Treasury and Trading operations from a leased building in downtown Manhattan to one of our own properties. It's a state-of-art facility and it's another example of how we're taking action to reduce the cost of our real estate footprint around the globe.

Now that we have met our operational excellence goals, this will be the last quarter that we report them to you.

As Gerald mentioned, we're now shifting to a broader transformation process, one that we've internally branded, Transforming for Success. And that moves us from a project or a program orientation to one of a culture of continuous improvement.

This work should provide significant beneficial impact as we've identified a number of things that we'll be doing over the next few years. But it's not simply about cost, of course that's very important to me, and an important component. It's also about raising the bar on service quality, driving productivity gains and importantly, reducing risks.

Turning to our capital story, as you can see on Page 11. Our key ratios strengthened substantially over the quarter. At December 31, our estimated Basel III Tier 1 common ratio under the standardized approach was 10.6, and that compared to 10.1 at the end of September. Now this ratio is calculated on a fully phased-in basis. The 50 basis point sequential increase primarily reflects lower risk-weighted assets that are related both to securitizations, as well as to margin-wise.[ph] Our estimated supplementary leverage ratio actually declined by about 10 basis points during the quarter. That was largely due to a spike that we saw in year-end balance sheet. Our year-end balance sheet was actually $18 billion larger than the average for the quarter.

On Page 12, you can see that at quarter end, we had a net unrealized gain investment securities portfolio of $309 million. That was down from $723 million at the end of the prior quarter. And that was driven by the rise in interest rates that we saw in the fourth quarter.

Looking at our loan book on Page 13. You can see that the provision for credit losses was $6 million. This was driven by an increase in the allowance related to a municipal-related entity. And that compares on a year-over-year basis to a credit of $61 million and a provision of $2 million in the prior quarter. The effective tax rate for the quarter was 21.8%, and that was positively impacted both by the tax benefit associated with the loss to an equity investment, in fact that was the major driver, as well as some benefit from lower state taxes.

Now a few points to factor in to your thinking about the current quarter. Incentive expenses is impacted by divesting of long-term stock awards. As we've mentioned in the past, for retirement-eligible employees. So typically, we do see a seasonal increase in the first quarter. We would expect a decrease in our pension expense given the very strong performance that we've seen on the assets in 2013, as well as an increase in the discount rate. We would expect net interest income to be down in the quarter due to a lower day count. So there's 2 fewer days, as well as a smaller balance sheet as we have seen a lot of the spike in deposits run off.

The quarterly provision should be in the range of $0 million to $15 million as we've seen in the previous number of quarters. We expect the tax rate to be around 26%. Also in the fourth quarter, our gross share repurchases, including open market employee benefit plan related repurchases, totaled about $321 million. In the first quarter, our gross share repurchases could increase by as much as $60 million. But that is, of course, subject to market conditions and other factors.

During the quarter and all of 2014, we'll be focused, as I think you've heard from both Gerald and I, on 3 main activities. One is investing in our organic growth opportunities. Number two is transforming our businesses to this continuous improvement that drives productivity gains, saves us some money and generates premium service quality. And number three is we will continue to deploy our capital and manage our risks wisely. With that, let me turn it back to Gerald.

Gerald L. Hassell

Thanks, Todd, and I think we can now open it up for questions, Wendy?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Betsy Graseck with Morgan Stanley.

Betsy Graseck - Morgan Stanley, Research Division

One question just on the outlook for the SLR. There was, over the past weekend, some discussion coming out of Basel that a lot of investors kind of focused on, that did not have a carve out for deposits at the Fed or central banks. And just wanted to get your updated sense on how you're thinking about that. I realize that the U.S. [indiscernible] hasn't opined yet but there's a little bit of a concern since Basel did this, that we'll follow.

Thomas P. Gibbons

Sure, Betsy. It's Todd. I think the good news on the final Basel rule is that they are going to treat unfunded commitments a little more reasonably. So the impact of that is probably a reduction of about 50% on the balance sheet. There still is an open issue, not so much with Basel on the treatment of central bank cash, but ultimately how the U.S. is going to treat that. And I think it's too early to call so there's plenty of room within the U.S. interpretation to do something. And we hear things both positively and negatively along that but I just say, at this point, we really don't know.

Betsy Graseck - Morgan Stanley, Research Division

Okay. Can you give us a sense on the unfunded commitments, what the benefit is to you from that?

Thomas P. Gibbons

Yes. We have anywhere from around $45 billion, $40 billion to $45 billion on unfunded commitments. And it moves it from about 100% to about 50% is our rough estimate, we really haven't -- this news just came out so we really haven't gotten completely underneath that yet.

Betsy Graseck - Morgan Stanley, Research Division

Sure, great. And then separately, on the investments that you've been making in retail, Gerald, you highlighted, I think, at the beginning of the call some of the opportunities out there and expectation. Can you just give a sense as to -- kind of the timeframe for what you're thinking the retail investment spend will drive some increases in top line and over what timeframe magnitude?

Gerald L. Hassell

Yes. I'll start and then perhaps turn it over to Curtis. As you know, we are relatively underexposed to the retail investor. And this has been something of great focus by the firm. We're starting with improving some of our distribution capabilities, investing at wholesalers to get our products on various retail platforms around the world, not just in the U.S. We're investing in some of the product capabilities. We're investing in some of the areas around the Dreyfus brand and capabilities to enhance some of those product offerings. And so this is not a short-term fix because this takes a fair amount of investment in both people and strategies to broaden our exposure to the retail investor. So this is a long-term investment and this is something we plan to continue to push. Curtis?

Curtis Y. Arledge

I think that's well said. We've obviously got a great start. The Dreyfus platform, here in the U.S., has obviously got all the infrastructure and very importantly, the relationships with the adviser community through Pershing, we're able to connect with some of their clients as well. So I think that we have a lot of foundation to build upon. To your specific question, I mean we've gotten -- started adding staff, adding product development capabilities, investing in our brand. And I actually think we're going to see some -- we're going to see the beginning edges of our improvement toward the end of this year. There are some product specifically that we have a very strong investment performance in that I think the market has great demand for. So we're very optimistic about our future here.

Betsy Graseck - Morgan Stanley, Research Division

So what percentage into the investment spend would you say you are?

Curtis Y. Arledge

I'd say we're about 20% of the way into the investments spend. And at the end of 2014, I expect to be closer to 50%.

Betsy Graseck - Morgan Stanley, Research Division

Okay, got it. And then the revenue piece is starting at the end of '14?

Curtis Y. Arledge

Yes, we're, obviously, we're already in the business. So we have revenues in the retail space. But seeing real momentum, I think that, I hope we'll be able to see it in the third and fourth quarter this year.

Operator

The next question is from Ken Usdin with Jefferies.

Kenneth M. Usdin - Jefferies LLC, Research Division

Gerald, you guys have made some comments at a recent conference just about operating leverage going forward and what kind of environment you'd need to deliver positive operating leverage. And it seemed like even with these hundreds of millions of expenses and per the last answers about where you are on the build, that the operating environment needs to still get meaningfully better to really generate bigger operating leverage. So can you kind of give us your thoughts as far as next year to on your belief in what revenues you think could look like on the top line? And then if you can, in fact, deliver operating leverage as you look go ahead?

Gerald L. Hassell

Well, first, Kenneth, I don't want to get in the forward guidance business. But I think in this environment, we are challenged. But we're challenging the team to produce positive operating leverage. I think we said in a 4% to 5% zone or north of that and we should be able to produce it. We are obviously bearing the cost of regulatory compliance and investments in our businesses, so we're partially reinvesting some of those gains from operational excellence right back into the business and covering those other costs. But I sure would like to produce positive operating leverage. It's our goal. I know it's top of the mind on our investors and by you all. And that is part of our goal.

Thomas P. Gibbons

Ken, I'd add to that. I think that what we had indicated a couple of years ago at our investors conference is we felt our revenue growth rate should be in the 3% to 5% range. It's been approximately there at about 4% this year. At the lower end of that it's pretty difficult to generate a lot of positive operating leverage as we get to the higher end of it, we do start to generate it. This year we made, and this year being 2013, we made a conscious decision, and I think Curtis just pointed out a couple of the types of investments that we're making. We made a conscious decision to put 1% or 2%, if you will, of our expenses growth into reinvesting in opportunities for the future. So I think that otherwise you would have seen a meaningful operating, the core business did generate a meaningful operating leverage.

Kenneth M. Usdin - Jefferies LLC, Research Division

Yes, and related to that, just on -- you pointed out that this quarter, there seem to be a good amount of partially seasonal expense pickup. But can you help us try to identify how much of that increase might have been one-time or above trend relative to the expense result this quarter?

Thomas P. Gibbons

Sure. I mean, some of it is episodic. So we have seen a sharp rise in our defense -- litigation defenses. That's likely to run for some time but for -- certainly not permanently, we have seen a pickup around certain compliance and regulatory issues, some of that is episodic. But the run rate is certainly higher. I'd say the growth rate of that has probably curtailed a bit. And then we saw marketing costs which tend to be somewhat seasonal as we picked up our advertising campaign and we have a number of conferences and corporate events that typically take place in the fourth quarter. So that is seasonal. And I think we did make a push with our brand campaign in 2013 that would abate a little bit.

Gerald L. Hassell

Ken, the other point I would like to make is one of the reasons why we view this continuous improvement process is something that's got to be part of the core fabric of the company. And we do see, as I said in my opening comments, a line of sight for continuing to get expenses and efficiencies and higher levels of productivity out of our core operations. There's no question in my mind that there's hundreds of millions of dollars there, and we have an ability and certainly an attitude to get at it.

Operator

The next question is from Glenn Schorr with ISI.

Glenn Schorr - ISI Group Inc., Research Division

A quick one on RWA inflation or lack thereof, which is a good thing. So I see RWAs whether it be centralized or advanced came down some in the quarter. So my quick question is, a couple of banks have been reporting inflation on higher operational risk. I think that's been accounted for in your models a while ago. I just want to know if we should be looking for any other RWA inflation as all these final rules have come out?

Thomas P. Gibbons

Sure, Glenn. It's getting complicated because there's a lot going on right now. But if you look at, we give a fairly detailed disclosure around the changes to our risk-weighted assets, both in the standardized and in the advanced approach. And when we reflect that, that's on a fully phased-in basis. Actually now there are phased-ins that start to take place this year, so our actual reported the numbers this year, as we move into Basel III, are going to be quite higher than the fully phased-in numbers. All of that being said, if you look through the numbers, there's a couple of drivers there, OCI had a modest impact to us because we did see a little bit of downturn in the securities portfolio. We got a little bit of a pickup in the pension portfolios, it's gone up in value. And then the meaningful driver is the RWA calculation in the standardized approach. Now just to add complexity, the standardized approach does not take into consideration operational risk. It just has -- uses Basel I, and adds severity to it, if you will. And so the large driver there is around securities, our securities lending mix, as well as margin lending and the quality of the collateral that you have in those margin loans. So we did see some improvement there. And we saw less of that reflected in the advanced approach. So it's not to say that there couldn't be changes. But from our best estimates right now, we're not really -- we don't really require a whole lot of RWAs to build our business. And I think the kind of the other thing to point out is we do have these non-agency securities and the securitizations and they do tend to draw a little bit higher capital charges. And they're slowly paying themselves down. So that should continue to be a positive for us.

Glenn Schorr - ISI Group Inc., Research Division

Okay, I get that. And then LDI flows for the year were awesome. I don't know if I saw what they were for the quarter. And I'm just curious if higher long-end rates are, in a weird way, bad in the short term but really good in the long term for that business. I'm just curious if it had an impact in the quarter and what your outlook for the LDI outflows are.

Curtis Y. Arledge

Glenn, it's Curtis. I definitely think that looking at this funded status ratio of pension plans is an important indicator here of kind of what's going on. If you look at where we are today, that's where the average plan is funded at about a 95%, 96% ratio which dipped actually below 75%, back in 2011. We're at the highest levels we've been at since before the financial crisis, 2008. And so pension plans have been on a pretty wild ride around their funded status ratio. In the quarter, we definitely saw more interest in talking about whether they should move towards locking in some of this recent improvement, there was definitely some de-risking. We even saw it index, in the index businesses where there were actually outflows in equity index products and movement towards fixed income and towards more balanced risk. So I definitely think that the LDI business is still a very promising business as pension plans are, in many ways, better positioned to be able to move to that strategy.

Operator

The next question is from Alex Blostein with Goldman Sachs.

Alexander Blostein - Goldman Sachs Group Inc., Research Division

So I wanted to touch base on the collateral management opportunity and kind of what the learning is this year. So migration to clearing happened this year, fairly seamlessly, which I guess is a good thing. But looking out, I guess, when you think about the opportunity for yourself and it sounded like there's already a little bit of revenues coming through the model today. So I was hoping maybe you can help us quantify that, and maybe give an update on how big do you guys think collateral management could be for you? And I guess what are the catalysts we need to look forward to, to see more a material impact?

Gerald L. Hassell

Sure, Alex. I think, as we said in the past, we're still, I think frankly in the early stages of the impact on the marketplace. The dealer side has been impacted early on. Now the -- the long investors of risk accounts, other market participants, the buy-side is now having to deal with this particular issue. We've cited insurance companies as a good example in the past where, historically, they have not had to post collateral and now they have to start doing so. So I think we're still in the early innings of the impact in the market broadly. Though most of the revenues that we've seen as we've been -- seeing some success here in collateral services has been around the segregation or the optimization of the collateral as opposed to moving into the next phase of transforming it and making it more available and more easily movable around the world. And so, I still think we have many innings to go in terms of the opportunity here. And so, we're -- as I said in my opening comments, we're seeing increased revenues. It's showing up in our asset servicing fee line, that's where it shows up. And we're quite positive about the prospects here.

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Got you. And then, Todd, just a question on expenses, follow-up to Ken's question, I guess, as well. But, as you pointed out a couple of years ago, you said I think around 3% expense growth rate is reasonable. There's new investments you guys are making relative to what you outlined a few years ago. But also, it sounds like there's new savings that you will try to achieve. So kind of blending it all together, is a 3% kind of normal expense growth rate for the next couple of years still a reasonable way to think about it?

Thomas P. Gibbons

Yes. But Alex, it's going to, obviously, be tied to the revenues and it's going to be tied to types of revenues that we see. So the mix can have a meaningful impact. Certain of our revenues are very -- have fixed cost, so massive amounts of operating leverage to them, whereas others come with meaningful cost. So the revenue mix has a big impact. I mean the good news is we've had a headwind of increasing pension expenses year-after-year. And that should ease a bit this year. But I think generally, it's going to come with -- depending on the mix of revenues and the amount of investments as opportunities that we see for organic growth.

Operator

The next question is from Ashley Serrao with Crédit Suisse.

Ashley N. Serrao - Crédit Suisse AG, Research Division

So on expenses. I hear you loud and clear on your $100 million program. But maybe you can give us some examples of what you're working on today and how we should be thinking about the incremental investment spend there versus the savings?

Gerald L. Hassell

Sure, I'll take a stab at it and then, Todd, maybe you want to weigh in. In many ways, it's fairly basic and it's -- and we said in the past, we've had -- we have multiple operating platforms. We're going to the conversions of that now and being able to shut down different things. It makes it a much more efficient operating environment when you have fewer platforms and fewer engines to work across, so improvement going from a more manual process or to a more automated process, really applying some metrics and engineering around our capabilities. We have multiple centers around the world, that do things like reconciliations and tax claims and corporate actions and stuff like that, there's ways to consolidate those. Just a whole variety of different things. Brian Shea is really leading the charge with Suresh Kumar, our Chief Technology Information Officer. Brian, maybe you want to weigh in here.

Brian T. Shea

Yes. Thanks, Gerald. I think what we're doing in terms of this Transforming for Success program is expanding the focus beyond just pure expense reductions, although that's an important part of it for sure. A couple of things that are new and different. One is we're working across the Investment Services businesses which have been run more like individual businesses in the past and effectively. But we're trying to drive best practices across those businesses and create more leverage. So an example would be cross line of business solutions for clients which actually generate new revenue streams. One example which -- and that's happening within Investment Services and across Investment Services and Investment Management. And a good recent example would be that we just piloted an Intermediary Private Banking service for Pershing registered investment adviser customers. And in a pilot program of only less than 6 months, we've had over $300 million in loan demand generated from the independents RIAs who are actually leveraging BNY Mellon's wealth management capabilities in a different way. Similarly, by working across the businesses, we're looking at -- we're evaluating the portfolio of services and solutions we deliver, trying to figure out if there are subscale solutions or services that we don't actually need to provide that can reduce expenses. And we're instituting essentially consistent expense management disciplines and process and reporting, and doing other things like that, that actually can drive higher return on what we already do. And it's not rocket science, but it's just working differently across the businesses. So that's one of the big things. And we believe that there's tremendous opportunity in these cross business solutions that we can generate revenue. So that's why this is different. It going to include revenue generation as well as expense reduction.

Ashley N. Serrao - Crédit Suisse AG, Research Division

Great. And maybe on capital. You got a welcome downgrade in the GSIV rankings. I believe the substitutability criteria helped you there. But how does this impact how you think about running a capital cushion on top of your leverage requirements? And how does this impact how you think about CCAR in general?

Thomas P. Gibbons

In terms of running the cushion, we're already, as you can see, actually running a pretty substantial cushion. So that we obviously think that puts us in a better position. But what we do is we sensitize what those capital ratios can be. We do our own internal stress test of many different types to estimate what we ultimately think the cushion ought to be. We don't really know what our additional GSIV requirement is going to be. That was under the Basel framework, the global requirement. But we have not been designated within the U.S. what that might be. But we certainly feel quite comfortable about the level that we're operating today. We think it's prudent and we think it's got plenty of cushion for potential downside. I think the good news in our business model is, we have, as you know, very low risk-weighted assets, so there doesn't tend to be a lot of volatility around those assets. They're very high quality, most of them are secured and short-term. And then our securities portfolio is also extremely high quality, mostly agencies and treasuries. So it survives any stress test typically quite well. I think the other thing in our business model is we do have a lot of annuity-like businesses. And we've got a less risky mix of assets. Now that doesn't always help us when the equity market shoots up like it did in the fourth quarter. But when it goes the other direction, we don't feel the pain quite as much as most. And that makes us a little more resilient in terms of stress testing as well. So hopefully that helps you to get a little better understanding of our perspective.

Gerald L. Hassell

Yes. I think in general that we have a low risk-weighted asset model. We have good capital cushions. We're getting a better line of sight on some of these new rules and regulations as they're unfolding. And as we've said earlier, we think we have some pretty good financial flexibility as we go into 2014. And we'll see the results of the CCAR exam at the end of March and stay tuned.

Operator

The next question is from Josh Levin with Citigroup.

Josh Levin - Citigroup Inc, Research Division

You talked about meeting operational excellence goals a year ahead of schedule. For those of us on the outside who don't work for the company, we only have access to publicly available information. Where can we look to sort of see the fruits of operational excellence? Where is it flowing through?

Thomas P. Gibbons

Yes. Josh, I think what we had indicated in the -- 3 years ago, almost 3 years ago now, was if we initiate this program, those numbers amount to about 2% reduction in our annual run rate. And we had indicated there was probably about a 2% inflation in our annual run rate. So by making these improvements, we won't feel the impact of the inflation. That's merit increases, the increase in cost of pensions, and the increased software amortization was largely where I reflect it in the inflation component. So that would let our businesses and our business mix reflect upon itself. So we indicated that a 5% type of revenue growth rate we thought, we could see something like 100 to 150 basis points positive operating leverage, 4%, a little bit less than that. So that's exactly where we are running right now. Obviously, the revenue mix makes a little bit of a difference. But what you saw this year on a GAAP basis was 4% over 2% and, adjusting it for some of those one timers, you saw basically 4% over 4%. And the reason you didn't see more operating leverage is because we made a decision to invest organically. If we were investing -- if we were doing M&A rather than organic growth, you would have seen it. We think the organic growth comes with a much higher IRR. It's much more interesting rather than paying somebody else for their labor, developing ourselves is much more interesting, our long-term run rate. And that's why you see what you see.

Josh Levin - Citigroup Inc, Research Division

Okay. There's been a lot of talk that the M&A environment might pick up. If we do see a lot more M&A activity, how does that impact your various businesses?

Gerald L. Hassell

Well, usually when there's more M&A activity, it increases volumes and volatility in the marketplace. And volumes and volatility help our business model. And anytime there's more action going on in the markets, people are willing to take a little more risk, take a little more positioning. We see that flow through our business model through transactions. And it also improves some values. Areas like Depositary Receipts, anytime there's corporate actions, boy, it shows up there real fast.

Operator

The next question is from Luke Montgomery with Sanford Bernstein.

Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division

So coming back to the asset management business for a second. The margins there are in the low 30% range, and that's below, I think, what you see at some of your peers. So I wondered if you might touch on what you think the issue is there. Is there a good structural reason for it or do you see some opportunity to get it higher? I think you talked earlier on the call about the retail opportunity. Is that part of a margin improvement story? And what level of margin do you think the asset management business could support beyond the investments you're making in retail?

Curtis Y. Arledge

No, I think you're actually right on it which is some of the higher-margin activities within the investment management industry are in the areas that we've talked about investing in, which is retail. Growing our overall absolute return and alternatives efforts which we've seen actually some nice progress. And we actually do a whole lot of work around our margins and benchmarking to the industry. And margins, obviously, vary across different asset classes that investment managers are exposed to. So we're a pretty diversified asset manager that is more weighted towards institutional at the moment. Equity managers might have higher margins, but they're also substantially more volatile. Our margin actually is pretty stable through time. So those are some of the factors that we look to. We -- again, clearly, the last several years have been very challenging in fee waivers. So the business has a large mix of assets that are exposed to the money market business. And that has been a major dampening. You're talking about reasonably higher-margin business that has been under a downward pressure now for a number of years. So that has definitely put a damper on it. We're obviously waiting to see where the SEC goes with the rules around money markets. But hopeful that someday that actually will bear fruit, either in money market form or those assets will have to move somewhere. And potentially to -- some of them will get a short duration, fixed-income product. So that's sort of the thought around margin.

Gerald L. Hassell

And I also would add, that's why strategically and longer term, we feel like we need to make the investments to have greater exposure to the retail investor and retail products, and also in the alternative space, those are 2 key areas of focus that are going to require a level of investment. But I think those are the areas for growth and are also the areas for margin improvement.

Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division

Okay, helpful. And then the issue of spinning off asset management. I'm actually not sure the rationale for that is very good, but it's something you've been asked about more lately on. Some people question whether there are real synergies with the servicing business, so I thought perhaps an opportunity to comment on that.

Gerald L. Hassell

Sure. We obviously like the Investment Management business. We think there are some benefits and synergies across our Investment Services areas. We see clear evidence of it in terms of the clients we serve. When they trust us to manage the money, we have opportunities to servicing and vice versa. Having the intellectual capital internally around our Investment Management boutiques to help us be a better service provider absolutely helps. You heard Brian Shea talk about some of the initiatives that we're doing across Pershing and Investment Management, utilizing that platform more robustly. We just see a number of different opportunities connecting to our wealth business, Investment Management, the whole strategy in Asia-Pacific, it's building the technology platform to put our products on top of it and have attracted advisers and wealth managers globally. We use that platform and put our products front and center on it. We just see lots and lots of different opportunities to continue to grow both businesses together.

Operator

The next question is from Mike Mayo with CLSA.

Michael Mayo - CLSA Limited, Research Division

I have some real specific questions and then just a broader question. But my specific questions, can you just remind us what are your main financial targets? You mentioned 3% to 5% revenue growth, but what are the other main targets?

Thomas P. Gibbons

What we had indicated, Mike, back on investors day that we've anticipated 3% to 5% revenue growth. We expected anywhere from 0 to 200 basis points of operating leverage based upon where we would be within that. Obviously, that would be largely driven by revenue mix. And one of the issues that Curtis just pointed out in fee waivers is meaningful, it's $0.06 to $0.07 a quarter with very limited expenses associated with it. The other indication is we thought we would, over time, generate a 10% plus return on shareholders' equity, that leads to quite a bit higher return on tangible common equity. So those were the basic underlying themes.

Michael Mayo - CLSA Limited, Research Division

And the investment spending that you're talking about, you said you're 27% done. What is the total dollar amount of the investment spending?

Thomas P. Gibbons

We haven't disclosed that, Mike, and what Curtis was speaking to specifically was investment spending within Investment Management where we've got a number of projects that he alluded to. So we're about 20% of the way through that, we'll be, as he indicated, about halfway through by the end of the year. At which point, we'll see some of the benefits of the earlier investments.

Gerald L. Hassell

That was specifically in the retail space.

Thomas P. Gibbons

Right, and that was specific to the retail space. And we also have mentioned on a number of occasion the types of investment that we are making in our Investment Services businesses as well.

Michael Mayo - CLSA Limited, Research Division

So last year, that investment spending equaled 2% of expenses or maybe how much did it equal last year?

Thomas P. Gibbons

I think we had indicated for 2013, it was roughly in line with a 2% increase in our expenses.

Michael Mayo - CLSA Limited, Research Division

Okay. And then as far as the continuous improvement project, you said that should save a few hundred million. Can you specify that a little bit more concretely?

Thomas P. Gibbons

At this point, we're debating that internally whether we want to go public with that, Mike. So I think it's too early to say. We are looking at the various expense savings that we're going to be able to generate. As Brian pointed out, some of this is -- as we become much more process-oriented, there are some also revenue benefits that we think we will get out of this as well. But we haven't determined whether we're going to go public with that or not yet.

Michael Mayo - CLSA Limited, Research Division

The reason I ask those specific questions, someone else asked about the operational excellence and where do we see it. And so how do we, on the outside, know if you're achieving your targets with the continuous improvement or the investment spending? Or do you want us just to look at those general financial metrics that you're shooting for?

Thomas P. Gibbons

Yes. That's what we're debating internally, Mike. We really haven't reached a -- ultimately, and I think it was Josh at Citi that pointed this out, ultimately, you got to see it. And we believe you will see it. And I think we've been pretty consistent with the guidance that we gave a number of years ago, there's obviously a lot of factors in markets that go on that can create noise there. But that's why we're debating. And so, let's just -- let's drive it through and perhaps let it reflect itself.

Michael Mayo - CLSA Limited, Research Division

And then my general question. You mentioned that you're underexposed to the retail investors and you want to get more involved in the retail investors. I'm just trying to reconcile my thought of Bank of New York from several years back, when Bank of New York was referred to as the banker to banks, more wholesale, institutional. And now we're talking about Bank of New York getting involved with the retail investor. Going back, you had branches. And so, I'm just trying to reconcile that prior perception with the direction where you're going now. And you also mentioned Investment Management, private banking, how far to the retail investor would you like to go and when did you make this mental change?

Gerald L. Hassell

Yes. So Mike, retail banking and exposure to the retail investor are 2 different things in my mind. When I say exposure to the retail investor, when you think about pension funds, things like that are not growing, that's not where the assets are being accumulated. They're being accumulated at the individual investor as they plan for retirement on a global scale. And so, we manage a lot of money in the institutional space. We manage some money in the retail space. And we'd like to be able to have a better balance there. Dreyfus is our principal retail mutual fund brand. But it's not just Dreyfus, it's having our boutiques and their investment strategies on various platforms around the world. So I don't think you're going to see us get into the retail banking space, but to utilize things like the Pershing platform to make our products available on different platforms around the world where our investment boutiques and investment strategies are quite strong.

Curtis Y. Arledge

Yes. And Mike, maybe I would add, if you think about it, we're the 8th largest investment management firm in the world, and Dreyfus ranks about 23, 24 in terms of mutual fund volume. So we have all of the investment capability around the globe and, certainly, within the United States specifically to create investment offerings we think will be very attractive that -- really the adviser community, so we will reach retail investors and mutual funds primarily through the adviser community. And again, Pershing helps with that. But certainly Dreyfus is a very long, as long as any one relationship with much of this community. We just need to invest more in it to make more of it. And then we directly reach individual clients through our wealth management business. We're the eighth largest wealth management firm in the United States, but have been heavily concentrated in a few key markets. And so, our investment there actually has been expanding our geographic footprint in the wealth management business where, again, we are delivering investment capabilities to clients -- wealth management clients, but not in a large enough part of the market.

Michael Mayo - CLSA Limited, Research Division

And when would you say you made this change overall? I mean, just -- you seemed like you're -- it's a continuum from you don't want to do consumer banking, I guess, that more wealth managers are talking about a little bit more about consumer banking. Take a look at Morgan Stanley, all the way up to your Dreyfus. Where do you draw the line and say we want to be here, we don't want to be on the other side of that line?

Gerald L. Hassell

As the investments company in the world, we go to where the investment assets are. And the investment assets are with wealthy individuals. They're being managed through advisers, they're being managed through different retail strategies, and that's what we want to continue to build upon, Mike.

Operator

The next question is from Cynthia Mayer with Bank of America Merrill Lynch.

Cynthia Mayer - BofA Merrill Lynch, Research Division

Just very briefly to follow up on the investing in organic opportunities. So you guys gave a sense of the timeframe for the Investment Management business. But outside of that, what kind of timeframe are you thinking of? Is this investing over this year, next year or is it sort of a permanent shift?

Thomas P. Gibbons

Well, why don't I -- why don't we hit on a couple of those things in the Investment Services business in some ways, those are even further along. For example, we've talked about Global Collateral Services quite a bit. We've made investments in our capabilities there, and we're delivering on those. Some of that's around financing, that's been a bit disappointing. As Gerald had mentioned, it hasn't moved as quickly as we had hoped. And it's also being impact -- it's being impacted a little bit just by market rates. So very low rate environment has made less need for transforming securities. That's been offset with the segregation business on some of the legacy stuff, which has been terrific, as well as some of the optimization capabilities that we ported to our clients, so we're seeing good growth there. The other area that we've talked a fair amount is the electronification of our FX business. So we have -- we are probably about, I would say, 50% or 60% of the way through that investment. It is starting to pay some dividends -- or it's still early, but I think it's starting to pay some modest dividends. I don't know, Tim, if you have anything to add to that.

Timothy F. Keaney

Yes. I might just add 2 points, Todd. And some of this gets back to the question Mike Mayo was asking. We continue to make investments around Pershing's platform and making it global, as a lot of these private banks see lots of opportunities to serve their clients well, we feel really good about both the technology play there and our domain knowledge. And these private banks have a huge opportunity, but they also have to deal with an increasing regulatory environment that makes it actually much easier for them to outsource. And then, Eagle and outsourcing, it's been a theme now for probably the last couple of years where asset managers and the insurance subsidiaries -- the asset management companies of insurance companies are outsourcing it at an unprecedented rate. And the investments we continue to make in Eagle around data warehouse and accounting are driving well over 1/3 of our new business pipeline now. So those would be the things, Todd, I would say we're investing in and I think we see across the board. The real sign is that they're starting to pay off and should have real traction in 2014.

Cynthia Mayer - BofA Merrill Lynch, Research Division

Okay. And maybe just to follow up on FX. Can you give a little color on how you're thinking about the market -- your market share at this point and the mix of electronic and higher touch? Is the sort of rotation over to more electronic trading done or do you feel like there's more to go? And how is your market share?

Gerald L. Hassell

Yes. As I said in my opening comments, we are seeing the benefits of our electronic platforms being adopted. We are -- we definitely feel we're capturing more volume than we were in the past. We're clearly moving more to more negotiated type trades or commercial type trades on the platform itself. It's very fast, it's very efficient, it's very transparent. And so we feel pretty good about the positioning of it. We're streaming prices to our traders and we're getting in the position to stream prices to our clients on desktops so they can automatically tap into us if they like the price and we'll be able to execute it. So we feel good that the investments we're making are gaining traction.

Cynthia Mayer - BofA Merrill Lynch, Research Division

And maybe just a last small one. You mentioned pension costs will fall. Can you size that?

Thomas P. Gibbons

We're analyzing it right now. We will disclose that in the annual report, but it could be in the range of $10 million to $20 million a quarter.

Operator

The final question today is from Andrew Marquardt with Evercore.

Andrew Marquardt - Evercore Partners Inc., Research Division

Just to pile on a little bit on the Transformation of Success -- or Transforming, sorry. The initiative or non-initiative in terms of cultural shift. Can you help us maybe frame it a different way in terms of how should we think about in terms of operating margins, right? Maybe piling into the former initiative laid out that you've now met and exceeded. How should we think about getting operating margins up from kind of the mid-20s to maybe upper 20s or 30s. Is that going to be kind of the next leg to do that or do you still need to have kind of a better macro rate environment?

Thomas P. Gibbons

Yes. I think there are couple of drivers there, Andrew. So one of the disclosures that we make around our Investment Services business is our revenue, fee revenue, our core fee revenue to expenses. And that will be the first place that you visibly see then, ultimately, that will come into the operating margin as well. Now 2 things can happen there. We're either getting more efficient or less efficient, which you would see, and we're getting better pricing or pricing is more challenging. So right now, we are starting to see some modest improvements. We didn't see a big improvement over last year, this year, and a lot of that can be driven by revenue -- by mix. So as you see more and more loss of fee waivers for example, there's -- that's all pretty much a fixed cost business, there is no additional expenses. That can make noise in those numbers from period-to-period. But I think we've given adequate -- actually we give very good disclosures, so you'll get a sense of where that's driving. And our goal is to get that on average -- there is some seasonality to it, on average, to pick that up 4 or 5 points.

Andrew Marquardt - Evercore Partners Inc., Research Division

Got it. And then -- so does that translate into kind of an all-in pretax operating margin in the upper 20s or can we kind of get back to -- or maybe [indiscernible]...

Thomas P. Gibbons

Most of that would come down -- fall through the operating margin. But if you think about it, if we're saying $0.06 or $0.07 a quarter on fee waivers and you just -- that's a substantial growth rate right there. If it doesn't come with much expenses. That would overwhelm what we do on a period-to-period as we grind down our -- and make ourselves more efficient.

Gerald L. Hassell

Yes. And I think the way to think about it is, certainly, in a traditional custody business, it's highly commoditized. And we want to be very aggressive around making sure we have a highly efficient operations around commoditized products. And so that's one issue. We can't wait for rising interest rates to improve our operating margins, and that's what this program is about, this process. And we were just taking control of what we can do and making it much more efficient using technology, using productivity to drive the cost down in commoditized areas and, on the investment side, introducing applications on those platforms that our clients want and are willing to pay for. So that's a good way to think about it.

Andrew Marquardt - Evercore Partners Inc., Research Division

Got it, that's helpful. And then related to this transformation process. One of the things you noted, obviously cost service and productivity, but then also you had mentioned reducing of risk. Is that more of an outcome of this initiative or this process, or is that kind of a dedicated focus? And how should we think about that, what is that related to?

Gerald L. Hassell

Yes, in some way, it's a dedicated focus, but it's also an outcome. The more human labor content you take out of the process, the more straight through, the more electronic it is, the more you use technology, the less chance for error. And the less chance for error means less risk. And so, we're really trying to constantly drive down the operational risks associated with many things that we do. And using technology and using the capabilities that we have, we think we can improve efficiencies and reduce the operational risk. The infamous [ph] straight-through processing, the higher levels of straight-through processing, the less risk associated with the business.

Andrew Marquardt - Evercore Partners Inc., Research Division

That's helpful. And then just a couple of ticky tack...

Gerald L. Hassell

No, go ahead.

Andrew Marquardt - Evercore Partners Inc., Research Division

Just couple of ticky tacks. On the balance sheet side, you previously talk about excess deposits, maybe in the range of $50 billion, so that's the hold. And what kind of rate environment do you have to see that -- do you think to maybe have that reversed?

Thomas P. Gibbons

Yes. We've -- as we do a lot of analysis around our deposit base, right now it is most correlated to a couple of things. It's correlated to our -- obviously, to our underlying core business. So it's very much tied into fee business. So it tends to be frictional types of cash, so the more we grow our fee business, the more we grow our deposit business. So there's probably an underlying 4% or 5% growth rate in it for our core fee business. But right now, what's overwhelming is the unusual monetary policy that we're facing. So the feds got a $4 trillion balance sheet. It's sitting on $3 trillion of excess reserves. As those excess reserves come down and there is draining, we are going to see a substantial decline in our balance sheet, anywhere from $50 billion to $80 billion would be our expectation as we get to more normalized rate environment. So all that cash that we're leaving at the Fed, and not earning that much, we would expect to, in a normal rate environment, to normalize. And the good news there is we more than offset that with the spread on the remaining cash and the fee waivers. We do have a large balance sheet that, at this point in time, that's really reflecting this current environment. And I think it's important to understand.

Andrew Marquardt - Evercore Partners Inc., Research Division

Got it. That's helpful. And then just lastly on other and fees, investments and other income. Obviously, you reflected the write-down or the loss, but it also had some maybe higher-than-usual C capital gains and asset gains. Should we -- I think you previously talked about that, that line should be in kind of $80 million kind of quarterly range. Does that still hold? I mean it's kind of...

Thomas P. Gibbons

No. We'd indicated that it will be more in the $80 million to $100 million range, and we've been on the high end of it. But then you'd like to -- it's based on circumstances but, yes, we'd still look to keep it in that range.

Gerald L. Hassell

Well, thank you very much, everyone, for dialing in and your interest. And Wendy and everyone else who's still on the line, if you have further questions, please follow up with Andy Clark and our IR team. So again, thanks very much, everyone.

Operator

Thank you. If there are any additional questions or comments, you may contact Mr. Andy Clark at (212) 635-1803. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating.

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