The paragraph introduces the 2024 Third Quarter Earnings Conference Call hosted by BNY. The operator informs participants that the call is recorded and that they will have a chance to participate in a Q&A session later. Marius Merz, BNY's Head of Investor Relations, welcomes listeners and mentions the presence of Robin Vince, the CEO, and Dermot McDonogh, the CFO. The call will include forward-looking statements and non-GAAP measures, with full details available on BNY's website. These statements are current as of October 11, 2024. Robin Vince then discusses BNY's strong third-quarter performance, highlighting growth across its business segments and consistent execution of strategic priorities. Additionally, he notes that at the start of the year, markets anticipated significant monetary policy easing due to expected economic slowdowns.

The paragraph discusses recent macroeconomic developments, noting the start of an easing cycle in global markets, including the U.S., where the Federal Reserve reduced policy rates by 50 basis points. Despite initial volatility and an equity sell-off, markets recovered by quarter's end with higher equity and fixed income values. There were notable movements in the Fed's repo facilities, indicating a possible shift from abundant to ample reserves, affecting the pace of quantitative tightening (QT). The paragraph also touches on risks from geopolitical tensions and upcoming regulations and elections. The latter part of the text highlights BNY's strong third-quarter financial performance, with a 22% year-over-year increase in earnings per share and a 5% rise in total revenue, while expenses remained stable, reflecting investments in personnel and technology to boost efficiency.

The paragraph discusses the financial and strategic growth of BNY, highlighting improvements in pre-tax margin and return on equity, and achieving over $50 trillion in assets under custody. It references BNY's market position as a global financial services leader and the synergies across its various business sectors. The paragraph also announces the acquisition of Archer, a service provider for managed accounts, enhancing BNY's asset servicing and investments capabilities. This move aims to improve distribution, streamline operations, and expand investment offerings for BNY's clients, utilizing Archer's multi-custodial network to deliver innovative financial solutions.

The transaction with Archer is expected to finalize by the year's end, enhancing BNY's focus on alternatives in financial services. BNY plans to leverage existing relationships with alternatives managers and $3 trillion in wealth assets to expand its reach in the fast-growing alternatives market. The recently launched Alts Bridge aims to simplify alternative investments for advisers, integrating with platforms like Pershing NetX360+ and Wove. BNY is also enhancing its commercial model by adopting an enterprise approach to client coverage, exemplified by a collaborative event called Commercial Lift Off, aimed at fostering a holistic, unified strategy for client service and innovation.

During the quarter, the company advanced its transition to a platform operating model aimed at improving connectivity and empowering employees. About 13,000 employees are now working under this new model. The company emphasizes the importance of action in fostering its One BNY culture to better serve clients and enhance operations. The talented team, strong portfolio, and solid balance sheet are highlighted as key strengths in driving long-term shareholder value. Financial results for the quarter showed total revenue at $4.6 billion, a 5% increase year-over-year, with investment services and fees contributing to this growth. Dermot McDonogh takes over the presentation to detail these financial outcomes.

The firm reported a strong financial performance, with assets under custody and administration rising by 14% to $52.1 trillion and assets under management increasing by 18% to $2.1 trillion, largely due to higher market values and a weaker dollar. Foreign exchange revenue grew by 14% from increased volumes, while investment and other revenue reached $196 million, benefiting from strong trading activity and improved seed capital investments. Net interest income rose by 3% due to better yields and balance sheet growth, despite changes in deposit mix. Expenses remained stable overall, but rose slightly after excluding notable items, as higher investments and employee salary increases were partly offset by efficiency gains. Credit loss provisions of $23 million were mainly due to commercial real estate reserves. Earnings per share improved by 22% to $1.50, and pre-tax margin was 33%. The firm enhanced its capital position, with Tier 1 capital increasing by 4% and a Tier 1 leverage ratio of 6%, while the CEQ1 ratio reached 11.9%.

In the third quarter, the company returned $1.1 billion to shareholders, bringing the year-to-date return to 103% of earnings via dividends and buybacks. The consolidated liquidity coverage ratio increased to 116%, while the net stable funding ratio remained at 132%. Net interest income exceeded $1 billion, driven by increased repo activity and market demand. Average deposit balances were stable, although noninterest-bearing deposits fell by 2%. Investment securities and loans grew by 1%, with overall liquidity reaching a record high of over $1.5 trillion in client cash. Security Services' revenue rose by 6% year-over-year to $2.2 billion, with investment services fees increasing by 4% and ETF assets under custody/administration surging over 70% annually.

The ETF industry is expanding, and there is a focus on enhancing ETF services through digital adoption and onboarding new liquidity providers. Investment services fees saw a modest increase, with growth in Corporate Trust and foreign exchange revenue, compensating for lower deposit receipt fees. Segment expenses decreased by 3% due to efficiency savings, leading to a 38% rise in pre-tax income. Market and Wealth Services reported a 7% revenue increase, despite a 1% decline in Pershing's investment services fees, largely due to prior lost business. Net new assets were negative, but when excluding deconversion effects, there was a 4% annualized growth. The Wove platform signed up 14 new clients in the third quarter and is on track for its projected 2024 revenue.

The paragraph discusses the positive impact of Wove on client acquisition and relationship building, highlighting its use by Sanctuary, a wealth manager, for portfolio solutions. It notes a 16% increase in investment services fees in Clearance and Collateral Management due to higher collateral management fees and clearance volumes, alongside the development of a global clearing platform through Pershing Institutional Solutions. In Treasury Services, an 11% increase in investment services fees is attributed to new business and advancements in digitizing payments. The segment saw a 3% rise in net interest income and a 5% increase in expenses due to investments and salary hikes. Pre-tax income rose 8% to $704 million, with a 46% margin. Additionally, Investment and Wealth Management revenue grew by 2% to $849 million year-over-year.

The paragraph discusses the performance and financial results of an Investment Management business and Wealth Management. In Investment Management, revenue rose by 1% due to higher market values and better seed capital results, despite lower performance fees and AUM flow changes. Wealth Management saw a 6% revenue increase thanks to higher market values and net interest income, despite a changed product mix. Segment expenses remained constant at $672 million, with efficiency savings balancing out employee merit increases and investments. Pre-tax income increased by 7% to $176 million, with a 21% pre-tax margin. Assets under management grew by 18% to $2.1 trillion, largely due to market value increases and a weaker dollar. The third quarter saw $24 billion in net inflows into cash but $8 billion and $16 billion in net outflows from long-term active strategies and index strategies, respectively. Wealth Management client assets grew by 14% to $333 billion. The outlook anticipates a 10% decline in net interest income for 2024, despite initial plans for positive operating leverage.

The company anticipates a slight decrease in fourth-quarter net interest income compared to the third quarter but has already exceeded its full-year net interest income growth forecast by 5 percentage points. Efforts are being made to keep core expenses flat, excluding notable items, for 2024, and the effective tax rate is now expected to be at the lower end of the previously estimated 23%-24% range. The company aims to return over 100% of 2024 earnings to shareholders through dividends and buybacks, having achieved 103% year-to-date. Broad-based growth across business segments and progress on strategic priorities have been reflected in recent results. The speaker expresses satisfaction with the company's performance and attributes success to the efforts of employees, while anticipating future opportunities. The paragraph ends with a transition to a Q&A session with a question from Brennan Hawken regarding ETF servicing wins and associated revenue dynamics.

The paragraph discusses the growing ETF market and the company's significant role in it, highlighting a 70% year-on-year increase in platform assets to $2.7 trillion and a 20% rise in serviced funds. The growth is attributed to strong leadership and technological investment. While some revenue from new client additions is reflected this quarter, further revenue is expected as the onboarding process continues. The conversation then shifts to deposit betas and interest rates, noting that the company sees the betas as symmetrical, with the first rate cut fully passed on. It's suggested that it's too early to predict how the Fed's easing cycle will affect deposit balances.

In the paragraph, Robin Vince addresses Mike Mayo's question about how much of the company's strong performance in Q3, particularly surpassing $52 trillion in assets under custody (AUC), is due to smart management versus external factors like market volatility. Vince acknowledges that it's a legitimate question and emphasizes that their success isn't just due to favorable market conditions but also results from deliberate and traditional growth strategies. He highlights the company's focus on sustainable growth through client growth, revenues per client, products per client, and managing the company well, rather than relying solely on a favorable operating environment.

The paragraph discusses a strategic approach of the business to leverage market growth by aligning with various financial trends such as asset values, account numbers, and transaction volumes. The management emphasizes a deliberate strategy of diversified business responses to benefit from overall market growth. With the new management team's efforts, they focus on integrating and maximizing their business components' potential by rallying around three strategic pillars. This involves maturing their One BNY philosophy, fostering deeper client relationships, and transitioning from a product-centric to a solution-oriented approach, offering bundled services tailored to client needs.

The paragraph discusses BNY Mellon's strategic focus on improving company operations through enhanced sales practices and fostering a winning culture. Dermot McDonogh highlights a 5% year-on-year fee growth across all business segments, attributing this to the company's evolving platform approach and investments in key areas like Asset Servicing and Corporate Trust. The company is experiencing solid growth and has a backlog in Asset Servicing that is larger than it was at the start of the year, positioning it well for the future.

The paragraph discusses how Treasury and Services, along with Clearance and Collateral Management, have benefited from a scalable platform with high volumes in a strong market. This has led to improved client interactions and increased cross-line sales, which were not possible a few years ago. The "One BNY" approach is proving successful. Mike Mayo appreciates the detailed information but seeks clarification on expense management. Dermot McDonogh emphasizes their commitment to maintaining flat expenses, although revenue-related pressures may cause slight increases due to higher revenues throughout the year.

The paragraph is part of a financial discussion involving a company's acquisition of Archer, addressing integration costs and financial discipline among its 53,000 employees. It includes a Q&A where Mike Mayo passes the floor to Brian Bedell from Deutsche Bank, who asks about the revenue impact of their commercial and enterprise efforts, as well as the revenue sensitivity to equity market changes. Dermot McDonogh answers that a 5% gradual change in equity markets affects fees by about $60 million annually, while a similar change in fixed income markets affects fees by $40 million annually, providing a sensitivity analysis of market impacts on revenue.

The paragraph discusses the strategic initiatives of a company to enhance its commercial operations. Cathinka Wahlstrom's efforts over the past year have focused on organizing their client coverage team and setting ambitious goals. The company aims to deliver holistic solutions by leveraging its diversified business model. A significant point is made about acquisitions, such as that of Archer, where the approach is to utilize resources across different parts of the enterprise rather than just for one segment. This holistic strategy is expected to drive revenue growth as the company plans for future opportunities in 2025. Brian Bedell acknowledges these efforts, and the session moves to Alex Blostein of Goldman Sachs, who asks about the company's growth areas and cross-selling strategies.

The paragraph discusses the organic fee growth potential of a business, highlighting that while the company does not provide specific guidance on fees, there is underlying growth across its business segments. The speaker expresses confidence in the momentum continuing, citing innovation, integrated solutions, and growth initiatives. Specific realignments, such as Pershing into Clearance and Collateral Management, are contributing to this growth. The company's strategy is seen as a multiyear endeavor to fully realize its potential, with varying progress in different years.

The paragraph discusses the company's focus on operating leverage and investments across short, medium, and long-term goals, highlighting the benefits of their new platform operating model, which has improved dynamism and problem-solving capabilities for clients. Despite not providing a specific growth target, the company is committed to achieving growth. Additionally, Alex Blostein inquires about the company's elevated repo activity, asking for clarification on its overall contribution, particularly regarding net interest income (NII) and fee benefits, and how this compares to a more normalized level of activity.

The paragraph discusses the sustained elevated activity in the cleared repo market, which significantly contributed to the company's strong Q3 net interest income (NII), though the activity has moderated. The firm anticipates approximately $1 billion in NII for Q4, with cleared repo contributing about 5% over the year. Despite a general liquidity reduction, the company has experienced growth, achieving a liquidity ecosystem high of $1.5 trillion, up from $1.2 trillion. This growth is attributed to strong client engagement, product innovation, and a strategic focus on international markets, supported by improved collaboration, digital initiatives, and innovative solutions.

In the paragraph, Robin Vince discusses their strategic approach, emphasizing their role as the largest security lender generating repo activity and as the leading collateral manager that benefits from various financial activities. He highlights their participation in global markets and different product types, which allows them to navigate and benefit from growth in these areas. Alex Blostein appreciates the framework presented. Gerard Cassidy then questions Robin about future acquisitions, considering their strong capital position and stock performance. Robin briefly comments on the forthcoming acquisition of Archer, expected to close in the fourth quarter.

The paragraph discusses the company's strategic approach to market participation and growth. It highlights the shift from mutual funds to ETFs and the emerging growth of separately managed accounts. The company views the acquisition of Archer as a strategic move to capitalize on this trend. The focus remains on improving current businesses, which the company values highly due to their complementary nature and ability to offer integrated solutions to clients. While not in urgent need of mergers and acquisitions, the company is open to opportunities and acquired Archer based on an internal strategic business review, aiming to adapt to long-term trends.

The paragraph outlines the company's approach to mergers and acquisitions (M&A). They aim to acquire capabilities that accelerate their goals or reduce risks, preferring efficient, culturally compatible technology with good returns. Excess capital is managed prudently; if not needed for investment, it may be returned to shareholders. The company operates a capital-light, generative model, allowing for growth without excessive reinvestment. Recent strategies, including the Archer example, demonstrate their ability to balance capital prudence and shareholder returns effectively. Gerard Cassidy acknowledges the explanation and seeks a follow-up with Dermot.

In this discussion, Dermot McDonogh confirms that a sensitivity analysis on a 5% change in equity and fixed income markets applies to both upward and downward market movements, impacting revenue correspondingly. Ebrahim Poonawala from Bank of America asks about the company's approach to capital allocation, particularly regarding stock valuation, ROE resilience, and its commitment to returning capital via buybacks and dividends. Robin Vince responds by emphasizing their focus on investor confidence and internal belief in their direction, noting that current stock prices do not hinder their capital return strategy, including stock buybacks. Dermot McDonogh is expected to address the first part of the question related to ROE resilience.

In the paragraph, Dermot McDonogh and Robin Vince discuss the strategic and financial progress made by BNY since Dermot took on his role. They highlight the evolution of the company's culture and focus on delivering positive operational leverage and shareholder value through strategic pillars. Key financial metrics from the recent quarter are noted, including 5% revenue growth, flat expense growth, and a 23% return on tangible common equity. They emphasize focusing on long-term goals and client satisfaction, rather than daily firm valuation. Both emphasize the importance of consistent returns, diversification in business operations, and active participation in capital markets growth through various services.

The paragraph discusses the company's diversified market participation and commitment to maintaining positive operating leverage despite market changes. They've chosen to manage current expenses to invest in future growth. Ebrahim Poonawala asks if, given recent rate cuts, the company's net interest income (NII) of around $1 billion per quarter is stable unless significant rate changes or deposit growth occurs. Dermot McDonogh responds that the company's NII has varied between $1 billion and $1.1 billion in the past five quarters, with Q3 benefitting from market volatility and client cash flow changes. He anticipates a slight reduction in non-interest-bearing (NIB) deposits going forward.

In this discussion, the speakers address financial guidance and capital structure optimization. The company anticipates around $1 billion for Q4 and does not foresee net interest income (NII) as a challenge for 2025, having taken measures to mitigate risks. Betsy Graseck from Morgan Stanley inquires about share buybacks, noting the company's strong capital position with CET1 above 11% and Tier 1 leverage at 5.5% to 6%. She asks for clarification on the "100%-plus" capital return target. Dermot McDonogh responds, explaining that despite market uncertainties and strategic decisions like the Archer transaction, they remain on track to return over 100% of capital, currently at 103% through three quarters, expecting minimal change going forward.

The paragraph discusses BNY Mellon's transition to a platform operating model, in which a quarter of the firm's employees are currently participating, with plans to have about half by the end of the next quarter and full implementation within 18 months. Dermot McDonogh emphasizes that the platform model is not just for efficiency improvements but is intended to drive top-line growth, improve company operations, and foster a more cohesive culture. The transition aligns with the firm's three strategic pillars and has received positive feedback from employees. Robin Vince adds that the benefits of the new model will continue to unfold beyond the 18-month implementation period, offering long-term advantages. Glenn Schorr from Evercore ISI highlights that achieving revenue growth while maintaining steady expenses demonstrates the effectiveness of BNY Mellon's business model, resulting in significant earnings growth.

The paragraph involves a discussion about business performance and outlook as they move into 2025. Glenn Schorr inquires whether recent flat earnings and slight declines inform any future outlook. Dermot McDonogh assures Glenn that his intuition is correct, indicating that it's a matter of timing and onboarding clients, with a strong pipeline suggesting no major concerns. Rajiv Bhatia raises a question about the declining number of sponsored programs in the depository receipts business. Dermot responds that this decline has been ongoing for years but isn't a major concern, as the business remains important, maintains strong market share, and continues to invest in it. Robin Vince adds that they have off-boarded some smaller clients in this area.

The paragraph discusses the company's focus on maintaining a 33% margin target through the business cycle. After achieving this target sooner than expected, they aim to continue demonstrating their ability to sustain it over time. The upcoming budget season will be significant as the company balances investments for future growth with the goal of achieving positive operating leverage. Plans for next year will shape how they communicate their financial strategies in January.

In the paragraph, Robin Vince discusses how the company is managing operating leverage across its three business segments, with a focus on growing the total size of their Market and Wealth Services segment without aiming to expand its margin. In other segments, they aim to increase the margin to meet medium-term targets. Brian Bedell appreciates this information. Then, Mike Mayo asks about the role of AI in the company's strategy, referencing prior enthusiasm for AI investments. He inquires about specific metrics and the commitment to AI in relation to transitioning employees to a new platform. Robin Vince responds, emphasizing that a quarter of employees are in the new platform model, with an 18-month plan ahead.

The speaker discusses the company's shift towards operating as a platform company, emphasizing its strong market position in delivering large-scale software and services. They highlight their investment in AI, mentioning an AI hub with several hundred employees, as a significant part of their strategy to enhance business opportunities and improve efficiency. Despite not publicly highlighting their efforts extensively, they reassure that this does not reflect a lack of commitment or investment in AI. The speaker stresses the company's ability to balance investment in important areas like AI while maintaining effective expense management, emphasizing their strategic choice to prioritize AI for future growth.

The paragraph is part of a conference call's closing remarks by Robin Vince from BNY. Robin thanks the participants for their time and interest, and encourages them to contact Marius and the Investor Relations team for any further questions. The operator concludes the call, noting that a replay will be available on the BNY Investor Relations website later that day.

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