Paul Reilly: Yes. So it’s first a pretty fickle market. Some [indiscernible] has done well a whole time. They created on volatility. So if you look at volatility, you could probably look at their results. They’re really good, very hedged, very focused corporate training strategy and consistently have executed since day one, and their business has not been off. It’s done well. Our traditional depository business, which is a big part of our franchise, as they got cash squeezed it slowed down, two things were happening. A lot of banks already had plenty of fixed rate maturities and they weren’t looking for more bonds, and they were worried about their liquidity. I think what happened in December as liquidity looked like it was easing some and rates look like they were going to come down, they got much more active.
So I think that environment, which has been okay beginning of the year, but it’s too early to tell is what happens with the rates. People really think these are peak rate and liquidity continues to feel settled, they’ll get more active or at least be active as they are today. But I don’t see the return to 2 years ago until the market really gets a lot better and a lot stable. But the guys, they’ve performed very, very well. And it’s just if rates go up, it’s going to be a headwind if rates go down some or the view of rates going down materializes or people get confident I think it will pick up.
Operator: Your next question comes from the line of Dan Fannon from Jefferies. Your line is open.
Dan Fannon: Thanks. Good evening. Wanted to follow-up on your comments around cash sorting and your expectation that you expect that to continue. And curious if that’s just some of the seasonal cash coming back into the market that may be built up in December and/or what other factors you think that are going to continue to have that be an ongoing trend beyond the billing and other things you mentioned so far in January?
Paul Shoukry: Yes, you touched on them. I mean we, in the December quarter typically have sort of seasonal tailwinds with tax loss harvesting, maturities and those type of things. And then throughout the year, quarterly fee billings alone this quarter were north of $1.3 billion. And we will hopefully see that continue to grow throughout the year. And then we also have the headwind as we enter April with income taxes as well. So rates are still high there — out there. They’ve come in a little bit, as Paul said, just with the expectation for lower rates. So we have seen some declines across the industry. But really money market funds are the yields there are really the biggest competitor we have, if you will. And those yields are still attractive.
And so we still have to have attractive alternatives to bring in new cash to compete against the money market funds. So as I said in the last couple of calls, I think we are much closer to the end of that cash sorting dynamic than we get closer and closer, I feel like every quarter, but we are not going to declare that it’s over until we have several months of history to prove it out.
Paul Reilly: And I think that people look at kind of the beta there is we will say, if rates come down, will that spread increase quickly. Well, on normal sweeps, they kind of follow Fed funds. But really, if you look at money market, they’re more — they’re buying bonds, and it takes 2 to 3 weeks for them to adjust. So if they’re — if you consider them some of the competition for rate, it’s going to take a few weeks, at least for that to sort through before there’s — before rates start moving at the more expensive people who are investing in higher yielding types of certificates. But it will be moving in the right direction of rates saw.
Dan Fannon: Thank you. And then just as a follow-up, within PCG, insurance and annuity products have been growing in a bigger contributor. Just curious with the DOL’s proposal, how you think that these products might be impacted or momentum that might be impacted by the proposal.
Paul Reilly: So first, there’s always been scrutiny on those products over time, and we believe we have good products and systems to manage that. And the DOL, we have put in systems to comply with a fairly similar law in the beginning. And then we had to take them out as we, as the industry defeated the rule. The second interpretation of questions came out and the industry defeated the rule. So we’ll have to see in court and we have to see what this rule finishes with before we look at the impact, and my guess is the industry will challenge the rule again. So, we’ve won twice. Well, my guess, I think there will be a substantial challenge with a lot of things that could challenge what is proposed today. And so we’ll have to see. So I’m kind of early to speculate on that, so it’s finalized until we see if it really can withstand the third quarter challenge.
Operator: Your next question comes from the line of Kyle Voigt from KBW. Your line is open.
Kyle Voigt: Hi. Good evening. Sorry about that. So first on the balance sheet, just given how much sweep cash you have sitting off balance sheet at this point at $18 billion and the excess capital you’re currently running with combined with the shape of the forward curve, would you consider beginning to grow the securities portfolio again over the next few quarters and start to lock in some yield? Or do you still have a preference to allow that to run off?
Paul Shoukry: Yes, Kyle, our position on taking duration on the balance sheet has remained very consistent through different rate cycles, which certainly positioned us well this time last year, which is really to keep more of a floating rate balance sheet and not try to time rates one way or the other. To the extent that we do take duration on the balance sheet, we really wanted to be to support and accommodate client needs, mortgages and those tax exempt loans, et cetera. And so we are really not looking to try to time what might happen to rates. I know the forward curve has been wrong more than right in the last 2 to 3 years and have misguided a lot of other firms. And so we are just going to remain flexible and really focus on getting clients versus making best for our own benefit.
