The operator introduces the 2024 Second Quarter Earnings Conference Call hosted by BNY and reminds participants of the copyrighted material. Marius Merz, BNY Head of Investor Relations, and other executives will present financial highlights and discuss forward-looking statements and non-GAAP measures. CEO Robin Vince notes the company's improved financial performance, positive operating leverage, and progress towards their goals of better serving clients, running the company efficiently, and fostering a positive culture. CFO Dermot McDonogh will provide more details on the financials.

BNY recently celebrated their 240th anniversary and believes that their best days are still ahead. They have made changes to their logo and branding to better represent their company and their potential. In the second quarter, BNY saw solid EPS growth and an increase in revenue from investment services fees and foreign exchange. However, net interest income decreased and expenses increased due to investments in people and technology. Their margin was 33% and their return on tangible common equity was 25%.

The financial results for the quarter were positive due to a favorable operating environment, with gradual policy rate easing, lower inflation, and increased investor confidence. The Federal Reserve's stress test confirmed the company's resilience and ability to support clients in extreme scenarios. BNY's critical role in the financial system allowed them to assist clients through major market structure changes. The company's strong combination of services and investments has led to significant mandates from premier global asset managers and partnerships with major companies like AIA.

AIA is implementing BNY's investment operations, data management, and technology with BlackRock's Aladdin to support their investment activities. Their wealth advisory platform, Wove, was named one of the top global financial innovations and has introduced new solutions such as Wove Investor, Wove Data, and Portfolio Solutions. They also introduced a new ONE BNY offering for clients to access multiple BNY capabilities. Pershing was selected by a full service regional bank for custody and clearing services, as well as other services such as direct indexing and private banking. AIA's actions have made them a top destination for recent graduates and experienced leaders.

BNY Mellon has announced that they will be welcoming their largest intern and analyst classes this summer, chosen from over 150,000 applications. They have also made new appointments to their leadership team, including a new Chief People Officer, Chief Information Officer, and Global Head of Engineering. The company is pleased with their progress and improved financial performance so far this year. They attribute their success to hard work and are focused on operating as one BNY for their clients and shareholders. In the quarter, BNY Mellon saw a 2% increase in total revenue, with fee revenue up 4%. Their AUC/A and assets under management also saw growth, primarily due to higher market values. Foreign exchange revenue increased by 16%, driven by higher volumes, and investment and other revenue was $169 million due to strong client activity in their trading business.

The company's net interest income decreased by 6% due to changes in balance sheet mix, but expenses were down 1% due to efficiency savings. Earnings per share increased by 16% and the company reported a pre-tax margin of 33% and a return on tangible common equity of 25%. The Tier 1 leverage ratio was 5.8% and the CET1 ratio was 11.4%. The company returned over $900 million in capital to shareholders and had a total payout ratio of 81%. Liquidity coverage ratio was 115% and net stable funding ratio was 132%.

The paragraph discusses the net interest income and balance sheet trends of a company. Net interest income decreased by 6% year-over-year and 1% quarter-over-quarter due to changes in balance sheet mix. Average deposit and interest-earning assets increased, as did the investment securities and cash/reverse repo balances. The business segment of Security Services reported flat revenue of $2.2 billion, with investment services fees increasing by 3% due to higher market values and new business. In Asset Servicing, investment services fees grew by 4%, while in alternatives they were up mid-single-digits. In Issuer Services, investment services fees increased by 1% due to new business in Corporate Trust and Depositary Receipts.

The Corporate Trust platform has seen significant growth in CLO issuance, with a 4% increase in market share in the past year. Market and Wealth Services also reported a 6% increase in total revenue, with investment services fees up 7%. Net new assets were negative due to the deconversion of lost business, but excluding that, there was a 2% annualized net new asset growth. A multi-year agreement was renewed with Osaic, and there is strong demand for Wove with 12 additional client agreements signed. The goal of $30 million to $40 million in realized revenue in 2024 is on track.

In the Clearance and Collateral Management segment, investment services fees increased by 15%, driven by higher collateral management fees and clearance volumes. The segment has seen strong performance due to a growing market and active trading. The realignment of Pershing's institutional solutions business allows for a wider range of services to be offered to clients, leading to deeper relationships and increased revenue growth. In the Treasury Services segment, investment services fees increased by 10% due to new business and higher client activity. Expenses were up 5% year-over-year, but pre-tax income increased by 8%. In the Investment and Wealth Management segment, total revenue was up 1% year-over-year, with investment management revenue down 1% and wealth management revenue up 3%. Expenses were down 2%, primarily due to efficiency savings.

In the second quarter, the company's pre-tax income increased by 15%, with assets under management also seeing a 7% increase. While there were net inflows in long-term active strategies, there were outflows in index and short-term strategies. Wealth management client assets also increased by 8%. The Other Segment results are shown on page 9. For the full year 2024, the company expects NII to decrease by 10% and expenses to remain flat. The effective tax rate is expected to be between 23% and 24%, and the company plans to return 100% or more of its earnings to shareholders through dividends and buybacks. The third quarter dividend has been increased by 12%, and the company will continue repurchasing shares.

The company is carefully managing its buybacks and considering various factors such as capital management targets, economic conditions, and the size of its balance sheet. The second half of the year is expected to see solid fee growth, better-than-expected NII performance, and continued expense discipline, leading to positive operating leverage in 2024. During the Q&A session, one analyst asked about the expected decline in NII for the second half of the year, and the company explained that this is due to seasonality and the typical performance patterns seen in previous years.

The company has performed better than expected in the first half of the year, with strong activity in their core businesses and an increase in deposits. However, they are cautious about the rest of the year due to potential rate cuts and seasonality. They expect the size of their deposit base to decline in the third quarter, but are pleased with the increase in interest-bearing and non-interest bearing deposits.

In this paragraph, the speaker discusses three main factors that have contributed to the success of their company. These include the collaboration and teamwork between their treasurer, CIO, and global liquidity solutions platform, which has helped them gather good, liquidity-friendly deposits and fuel the growth of their balance sheet. They also mention higher clearance volumes, which is a combination of clients being more active and winning new business. The speaker also mentions their innovation for clients in the domestic market as a contributing factor to their success.

The international business is a key growth opportunity for the company, with teams developing new products and solutions for clients. The implementation of T+1 settlement has not had a significant impact on the company's expenses, but it presents an opportunity to get closer to clients and provide assistance during market changes. The company plans to continue leveraging such opportunities, with treasury clearing being the next example.

Dermot McDonogh discusses the changes in the market that create more efficiency and reduce risk, which is beneficial for both the market and the company. He also mentions that the company's book is well-positioned for potential rate cuts in the future, with cumulative betas remaining unchanged and NII expected to be unaffected by small rate movements.

Robin Vince, in response to a question about the drivers of fee revenue momentum at Pershing and elsewhere, explains that revenue growth is somewhat market-dependent, but their strategy is to fuel organic growth and position their businesses to respond to growth opportunities in the market. They have invested in their treasury market business to benefit from the secular growth in activity, and are also operationalizing their ONE BNY campaign to drive referrals, new targets, and integrated solutions for clients.

The company has been working to increase their fee growth and take advantage of market trends. They have a top three provider in the cleared repo business and it makes up about 5% of their overall NII. They are investing and are well positioned to meet client needs with their cleared repo product.

The speaker expects the business to continue growing, but it is not a major factor in the year-over-year change. The company's global reach and ability to offer innovative solutions make it appealing to clients. The Pershing business has faced some challenges with client departures, but the company is optimistic about its future growth and has seen an end to the deconversion of clients.

The speaker discusses the impact of the ECB cutting rates on their deposit costs in the euro currency and how it informs their expectations for beta and customer behavior around rate cuts in other currencies. They also mention their strong position in the wealth tech market and their revenue growth projections for the year.

Dermot McDonogh, Chief Investment Officer at a financial institution, discusses the portfolio's exposure to euros, which is roughly 10%. He feels well positioned for potential outcomes in euros, sterling, and dollars, and the combination of their deposit book and CIO book allows for room to grow. When asked about the actual market experience with rate cuts, McDonogh confirms that they did experience the expected beta of 50-60% in euros. He also mentions solid gains in their Issuer Services due to a strong market for CLO trustees.

During a conference call, Dermot McDonogh, CEO of BNY Mellon, discussed the growth and strength of their Corporate Trust business, which has been underinvested in technology and leadership in the past. McDonogh noted that they have made important hires and investments in this area, resulting in improved market share and increased activity in CLOs. He also mentioned their focus on leveraging scale and improving client service in this business. In regards to Depositary Receipts, BNY Mellon has good market share and expects it to continue. A question was then asked by Brennan Hawken, followed by another from Betsy Graseck.

The speaker, Dermot McDonogh, is providing an update on the T+1 discussion, stating that it is not a revenue or expense topic, but rather a demonstration of BNY's resilience and ability to execute large-scale infrastructure changes for clients. He also mentions that BNY has added new clients to Wove, their technology platform, and clarifies that this does not cannibalize existing clients. Wove is a significant investment for BNY in terms of technology.

The article discusses the success of BNY's Wove platform, which has attracted over 1,500 clients and won awards. The platform was initially focused on making advisors' lives easier, but has since evolved to offer a wider range of capabilities, including data aggregation and investment management services from BNY Investments. This has led to a network effect, with more clients wanting to see what BNY has to offer.

Robin Vince discusses how Wove is evolving into a delivery vehicle for the various capabilities of the firm, expanding the way clients think about Pershing and attracting new clients who may not need clearing and custody services. The ONE BNY initiative aims to offer bundled solutions and higher core servicing fees, with a focus on operationalizing and deepening the client-obsessed mentality within the company.

The company is focused on improving the effectiveness of their sales organization and client service, with a focus on innovative new products like Wove. They are also integrating Pershing into the company and working towards a more cohesive approach to meeting client needs through solutions that bring together multiple parts of the company. This involves a shift in their commercial model and a focus on training and equipping salespeople. Overall, they believe this will bring value to both the process and what they deliver to clients.

Mike Mayo asks Robin Vince about the wallet share per customer and where it was a few years ago and where they hope it will go. Vince mentions that they will provide more metrics in the future, but currently they are focusing on key inputs and fee growth. Dermot McDonogh adds that they have seen a third increase in business that touches more than one line of business, indicating the success of their integrated solutions. Mayo asks about the target for core servicing fee growth, to which Vince and McDonogh say that they are still maturing their metrics and will communicate them in the future.

In response to a question about expenses and operating leverage, Robin Vince says that the company is focusing on positive operating leverage and higher fee growth over time. However, each quarter and year may have a different composition. The company is controlling what they can, but are also stoking the engine for organic fee growth. Another question is asked about expenses and operating leverage, and Dermot McDonogh says that they need to consistently meet their medium-term target for pre-tax margin of 33% plus, and that execution and discipline are key to achieving this goal.

The speaker discusses the company's desire to avoid being a one-hit wonder and to repeat their success consistently. They mention a focus on running the company better and the importance of all employees sharing the same aspiration. They also address expenses and mention a positive operating leverage for the year. The speaker feels good about the balance sheet and mentions growth in both the securities portfolio and loans.

Dermot McDonogh discusses the sources of investment and the outlook for deploying liquidity into loan growth and securities. The CIO team has been successful in deploying funds opportunistically and rolling off the book into higher-yielding securities. The GLS team is also doing well in acquiring liquidity-friendly deposits, which allows them to extend credit to clients. As monetary policy shifts to quantitative tightening, Dermot expects the balance sheet to be affected in the next 12-18 months.

Dermot McDonogh and Robin Vince discuss the impact of quantitative tightening on their balance sheet and mention that they constantly model various scenarios to prepare for potential risks. They also highlight the strength and durability of their balance sheet and mention that they have taken proactive steps to reposition it. They also emphasize the importance of being prepared for a wide range of outcomes, given the uncertainty in the world.

The company is conservative with its liquidity and capital, which allows it to be agile in uncertain situations. The company has had success in breaking down silos through its culture and investing in its people.

Brian Bedell asks about the guidance for a 10% decrease in net interest income (NII). Dermot explains that the decrease is mainly driven by seasonal deposit dynamics and that the bank's balance sheet is sensitive to different interest rate scenarios. He also mentions the benefit of reinvesting in the securities portfolio. NIB is factored into the seasonal deposit dynamic, and the bank expects to see a positive increase in NII in the first quarter of next year.

Dermot McDonogh confirms that the seasonal decline in business and deposit growth is a deposit story, similar to last year's trend. He is cautiously optimistic about the outcome and acknowledges the uncertainty. Brian Bedell asks about the positive operating leverage and whether the investments made in the first half can be scaled in the second half. Dermot and Robin confirm that they are able to scale the investments and maintain flat operating expenses.

Dermot McDonogh discusses the importance of running the company well and investing in growth rather than solely focusing on expense reduction. He emphasizes the need for balance between investment and cost management, and the company's efforts to get the best value for their spending. He also mentions the positive impact of previous investments on the company's most profitable segment and the ongoing focus on digitization and automation. Robin Vince adds that there is still much work to be done.

In the second quarter, the company is focused on running the company better and is seeing growth in the Market and Wealth Services segment. They are investing in Securities Services and Investment and Wealth, but are being disciplined in those areas. The company believes they can reach a 25% margin in the Investment and Wealth Management segment over the next few years.

The speaker is discussing the company's financial discipline and expense discipline over the past year, which has led to a 200 basis point increase in margin. They believe that their current momentum in the distribution, fixed income, LDI, and Insight segments, along with the addition of a new leader, will lead to future growth. The speaker concludes by thanking the audience for their interest and directing them to the Investor Relations website for a replay of the conference call.

This summary was generated with AI and may contain some inaccuracies.