Eric Aboaf: David, it’s Eric. We gave guidance at the beginning of the year on a full-year basis purposely, right, because each quarter there’s going to be a different set of variables as we navigate through. So we described capital return in aggregate to be around total earnings for the year and we reaffirmed that in our prepared remarks. If you then go into the specifics of the first quarter, remember we had expected a normalization of the lower than usual RWA that came through in the fourth quarter. Some of that is just market factors playing through on the FX book. Some of that is equity markets upticking in the agency and securities financing space. And some of it, to be honest, is just putting capital to work with our clients, where we’re engaging with them, and that’s driving some of the fee revenue growth that you saw.
At the same time, our priority is to get capital back to shareholders. We continued our dividend at pace, as you’d expect. We had some buybacks this quarter. If you do the math, that buyback activity will increase going forward for the next few quarters. We also had the new information about the FDIC assessment. And so we had to accrue for that expense instead of returning capital to shareholders for this particular quarter. So anyway, just a way to describe, we’re on track with our priority and to be honest, our commitment to get capital back to shareholders in line with earnings this year. And it will just — every quarter is a little bit different, but I think you’ll see that accelerate into the second quarter.
David Smith: And I think you gave the tax rate for the second quarter. Are you still expecting 21% to 22% for the full-year?
Eric Aboaf: I think I need to quickly go back to the January remarks, but we did not update those and — so I think that’s a good place, a good estimate to use for the full-year, the one that you had back on the January call. Yes, that’s correct.
David Smith: Okay. And just one last cleanup. The preferred dividend, they’ll still be elevated in the $50 million to $55 million range in the second quarter, but then it will be kind of more like $40 million in the second-half of the year?
Eric Aboaf: Yes. Yes, that’s correct. We’re just kind of moving through this past quarter 1 and quarter 2 between the redemptions, the issuance and redemptions and then literally, the tactical timing of some of the dividends, you’ve got it right. There’s one more quarter of elevation in the $50 million to $55 million range next quarter, meaning second quarter and then it will run at about $40 million a quarter from third quarter onwards.
David Smith: Thank you.
Operator: Thank you. Next question will be from Mike Mayo at Wells Fargo. Please go ahead.
Mike Mayo: Can you hear me?
Ron O’Hanley: We can.
Mike Mayo: Can you talk about the relationship between stock markets and revenues you used to have for every 10% change the S&P 500, it impacts your servicing fees by x amount. Can you remind us what that is these days and how much of a lag there is with that? And along with that, I guess your guidance for NII instead of being down 10% to down 5%. What exactly changed the last kind of month or so?
Eric Aboaf: Yes, Mike, it’s Eric. Let me answer those in reverse order. On NII, what happened in the first quarter was really higher deposit balances across the interest-bearing stock and even relative to our expectations on noninterest-bearing in March. So that changed in a positive way, created an uplift into the first quarter that we had not expected. The last time we gave full-year guidance on NII was back in January when we expected it to be down, on a full year basis, 10% for the full-year. And it’s only today that we’ve reassessed that. We did not reassess that back at the beginning of March. We reassessed that today. And what we’re factoring in is the higher step off, the higher level of deposits with us generally. And the fewer rate cuts that we’re expecting from central banks around the world.
And so that’s what gets us to a better full-year guide on NII. If I then turn to the equity market question, how it factors through servicing fees. We need to be — we need to go through it in pieces. And so let me start. First, what matters to us is not just the S&P equity index, because we’re global, right? More than 40% of our revenues are broad, including in emerging markets. And while the S&P is up year-on-year 28%. The All-World Index is up only 18%, and that’s what’s more material to our financial statements given the international and global footprint that we have. With that 18%, we’d expect a substantial tailwind of servicing fees on a year-on-year basis and up 4% to 5% range, typically. But it tends to move around. As you said, sometimes there’s a bit of timing there.
Sometimes there’s a bit of mix there and so forth. What we did see that was a headwind to that this year were two things: one was the previously announced client transition, and that was worth about 2 points of servicing fee headwinds; and then we’ve continued to see a lower — or I’ll describe different level of client activity that was worth almost 2 percentage points of headwind this year, some of which we think is cyclical. Some of that is transactional activity that we’ve talked about that we tend to get paid for on a unit basis through our fee schedules. And then this quarter, we also referenced the shift to client cash and cash equivalents within the AUC/A stack, which tends to come in at a much lower fee rate for custody and accounting services.
And so those were the pieces that went against us.
Mike Mayo: And just one follow-up, just — you said more-than-expected deposits. Why was that?
