Jason Tyler: Sure. So let me give you a couple of incremental data points to work with. One, you’re right, we – and it’s typical, obviously, as you know well, Alex, for us to see a drop after the peak of tax season. And so it has come down a few in the range of $4 billion or $5 billion since that average relative to that average. And that said, we from a mix perspective, not seeing anything dramatically different early on. And we talked about the fact that the non-interest bearing mix is higher than even if last time rates were up. But as rates flattened out, probably less incremental shift from that mix, and then within wealth in particular, the – Mike mentioned the growth there and you’re exactly right and calling out a lot of it going to cash.
And I mentioned that there’s a lift overall in client liquidity. So of the lift that we’ve seen in cash, about $5 billion of that was in the wealth channel alone over the quarter. And so and that more than offsets the deposit decline that we saw in that channel. And so you just get a sense that the flows in that business are positive, and give us a sense that there’s good activity there.
Alex Blostein: Gotcha. Sorry. And just what’s the rate on the wealth deposit that you guys are paying right now?
Jason Tyler: It’s highly dependent. It varies by size, by region, by type. And so it’s hard to give a – it’s impossible to give a specific number on it. But if you look at the what might be instructive, as you’re thinking about it, is more of an overall average cost across the book, which is, call it, 200 to 250 basis points.
Michael O’Grady: And Alex, I would just add that there’s no question with whatever with everything that’s happened here, that the market for deposits is more competitive. So there’s more price competition with lots of banks looking to retain or gain deposits, and pricing aggressively to do that. Of course, we have to likewise, price to make them attractive for our clients. But at a certain point, if it’s just going to get priced away on price as opposed to relationships, then you’re going to see some go away. And just more broadly on deposits, it’s just, I think, important to understand the nature of our client base, which well, but just asset owners, asset managers wealth clients, that have different characteristics than a lot of other institutions.
Certainly, on the operational side these are deposits that they have as a part of running their operations. And so very sticky in the sense that it’s based on transaction flows, rather than necessarily rate per se. And on the other hand these are institutions that are evaluated based on their performance. And so when rates go up as fast as they have here they have to make sure they’re earning returns overall. So they’re looking to be efficient. And with our wealth clients as well we’re working with them to make sure that they get attractive returns overall. So a lot of dynamics at play, and I think it’s important understand the characteristics of our client base, relative to others.
Alex Blostein: Yes, for sure. And thank you guys, for all the detail. Appreciate it.
Jason Tyler: Sure. Thanks Alex.
Operator: We’ll take our next question from Steven Chubak with Wolfe Research. Please go ahead.
Michael O’Grady: Hi, good morning.
Steven Chubak: Good morning. I wanted to start off with a question on the non-comps. Looking at the component pieces you guys made some good progress there. A good amount of the beat was really an outside services. I know that that has a heavy variable or activity link component. Should we expect that to normalize as activity levels pick up consistent with what you saw at the end of March? Just trying to think about what’s a reasonable jumping off point for us to be modeling for next quarter?
Jason Tyler: Yes. absolutely. You’re right. And that line item can move around a lot. So let me give you a short term, and then maybe a longer term dynamic. In the short run, that line item it was impacted by call it two things; one, some timing. So we know that there’s some of that improvement will likely come back online in second quarter. And then secondly, we’ve taken expense actions in that category. And so we’ve worked really hard to work down consulting, to work down other tech services, sub-custody, negotiating hard on third party advisory fees. And so some of it definitely is related to the expense measures that we talked about broadly related to the productivity office, but there’s also some timing there too. And so as you think about second quarter, this is an area where you’ll see a meaningful increase, call it $20 million, just quarter-over-quarter going into next year.
About $5 million under that is just a movement from on-premise processing that would show up in equipment and software moving up into outside services. But there’s also just business growth and timing related there as well. We’re obviously not going to see $20 million lifts consistently. But that’s one we’re likely to see one going into second quarter.
Steven Chubak: Got it. And just for my follow up on NII. I know you had alluded to this in some of your commentary. And so I appreciate the additional detail on the deposit side. There’s been some debate previously as to whether NII or NIM, had peaked at this juncture, whether it could eclipse level seeing last cycle. I was hoping you could give some perspective just on the NII trajectory, if it’s peaked at this juncture, or if there’s room for growth, and given the balance sheet repositioning you alluded to in terms of shortening the duration on the asset side, how we should think about the NII trajectory in a Fed easing cycle in particular would be really helpful.
Jason Tyler: Sure. So on the first. The reality is even this quarter, you could see there’s a new factor introduced into NII which is just client preference. And you can see just how often even this morning on this call, we don’t talk about just deposits in isolation. We talk about them in conjunction with money market funds. And a part of that is that culturally, we have an incredibly strong focus just on providing advice to clients across whatever is appropriate for them. And there are advantages to being an in deposits. There are advantages to being in money market funds. There are advantages to being in short term treasuries. And we think about that. We tracked inside the company, that’s what we were looking at very, very closely on a very periodic, on a very frequent periodic basis.
And so I think that’s important for people to understand we’re not nudging clients in one direction or the other; just talking to them about the advantages of each. And so the reality is from here NII is going to be based on more than on interest rates. It’s going to be based on volumes and volumes last quarter, we were talking about the impact of QT, and we were talking about taxes. Now, this new factor that’s been introduced is what is client preference between those three pillars of client liquidity, and we could see that going in either direction. And for us, that’s totally fine, as long as we’re continuing to grow client liquidity. And so it’s hard to model in the short run. But if we think about the traditional factors, Fed rate increases, the institutional business, which is called 70% to 80% of our deposits, we’re at about 100% beta there.
And that’s kind of flattened out. In the wealth channel, the betas are meaningfully lower. They are call it 30% to 40%. And so still with Fed action, because that’s all impacted in U.S. dollars, there’s benefit from that lift still. And then you’ve got to introduce the other factors what happens with QT and then what happens with client preference across the pillars. And then from a NIM perspective, just the last comment I’ll make is that you saw our leverage ratio is strong, and it’s in the mid 7s. And it gives us an opportunity if we want to take advantage if there’s a positive carry, to do more leveraging and still maintain great liquidity for our clients. That’s helpful to NII. But it’s obviously, it brings down NIM.
Steven Chubak: Really helpful perspective Jason. Thanks for taking my questions.
Jason Tyler: You bet. Thank you, Steven.
Operator: We will take our next question from Mike Mayo with Wells Fargo Securities. Please go ahead.
Michael O’Grady: Morning Mike.
Mike Mayo: , you mentioned taking tougher actions on expenses. I think that showed quarter-over-quarter. You mentioned benefits from the industry dislocation. But your expense to fee ratio is still 100, still above your 105% to 110% range quite a bit above. So when do you think you’ll get there? Should we look at the quarter-over-quarter progression or should we think about year-over-year, because quarter-over-quarter looks better than year-over-year?
Michael O’Grady: Mike, I would say that our perspective is the same in the sense of we’re looking I’ll call it sequentially and quarter-over-quarter and looking to make improvement in that. And getting they’re both on the numerator and the denominator. So holding tight and trying to reduce where we can on the expense side, and then growing the fee side as we go through there. And as you seem if you look at it sequentially there, we kind of bottomed out with the fees in the fourth quarter, and now they’re up very, very slightly, but then depending on markets, but then more importantly, how we drive organic growth underneath that. We’re looking to increase fees as we go forward on a sequential basis while at the same time having the discipline on the expense side to keep bringing that expense, the trophy ratio down.
Operator: We will take our next question from Glenn Schorr with Evercore. Please go ahead.
Jason Tyler: Good morning Glenn.
Glenn Schorr: Good morning. Question on the other borrowing side. I think most of that is wholesale funding. And I know it’s not a huge number, but it’s also grown to be not nothing. It’s up 43%. And the rate paid on that is up 450 basis points. So I’m just looking for is that a temporary filling of the gap of the gap down and deposits? How do you think about that line item intermediate term say? I know you got to do what you got to do in the short term?
