Alexander Blostein: Yeah, the operating leverage. Got it. All right. Thank you very much.
Ronald P. O’Hanley: Thanks.
Operator: Your next question comes from Rob Wildhack from Autonomous Research. Your line is now open.
Rob Wildhack: Good morning, guys. Just trying to ask about the asset side and the securities book quickly. Decent uplift in yield again plus 21 basis points. Can you give some color, some numbers around the front book, back-book difference there? And how much repricing can sort of assist NII going forward?
Eric Aboaf: Rob, it’s Eric. There is a good bit of tailwind that comes from the front book, back-book. I think this on a kind of year-on-year basis, long rates were quite constructive from a year-on-year NII standpoint, the long rate tailwind year-on-year was in the $100 million basis. So it’s quite substantial. On a quarter-on-quarter, the long rate tailwind is closer to $15 million, $20 million. So it’s not insubstantial. And I think as we see some steepness in the curve come back or I guess I’ll describe less inversion, we’ve got some, we’ve got abilities to leg into duration or curve position or, in some cases, some amount of convexity where we’d find it helpful. From a rate standpoint, like you said, average rates on the investment portfolio in aggregate was 270 basis points or so.
The runoff is a good bit below that kind of in the 180 basis point range, so 90 basis points, 100 basis points south of that. And the roll-on that occurs is well above that 270 basis point average is closer to 410 basis points or more. So you’ve got a nice tailwind there that’s playing through. We also have a tailwind on short rates for international currencies. So that’s helpful. And then we are — we continue to invest and think about opportunities across currency from a basis standpoint and so forth and we’ve got some latitude to do that as well given our global balance sheet.
Rob Wildhack: Thanks, Eric. And then one more just on the operational deposits. If I use the numbers on page 10, operational or excuse me overall deposits are down — operational deposits are down as a percentage of the mix. Conceptually, what would be driving that? I guess I’m confused as to why operational deposits would be down year-over-year more than non-operational deposits.
Eric Aboaf: Yes. I think there’s a little bit of — I look at that data and I think you’ve got roughly similar movements in operational and non-operational deposits. I think what’s happening in this part of the cycle is as deposits or I’ll say, as cash for our clients is more valuable, right? They are selectively thinking about how much cash do I absolutely must keep in the — in their custodial accounts. And if you think about it, they make that decision in, I think it’s more than 100,000 different accounts themselves, right? It’s a very large and disparate set of decisions and sub decisions by 100,000 plus fund managers and many, many fund boards. And so they’re trying to see, hey, can I edge it down, and that’s why at this point in the cycle, you see total deposits drift down, but also operational.
What they end up needing to trade off and the reason why it will level off over time is that they need a certain amount of deposits that they don’t overdraw. They — fund managers really hate the overdraw at the end of day. And then there’s also a governor where we engage with our clients on intraday and make sure that they have enough cash to cover their transactional flow and throughput, but we’re just at the period where in the core custody accounts, you’ve got this drift downwards where they’re trying to optimize without going too far and that’s what you’re seeing. But this is expected. We expect the operational deposits to stay comfortably in this kind of 75% range. And it’s a part of the kind of custodial operations, which is what makes them so sticky, right, because they need to be there for the very significant daily, hourly and minute-by-minute transactional flows that we are processing on their behalf so that they aren’t overdrawn.
