Bank of New York Mellon at RBC Conference: Strategic Growth and Efficiency

On Tuesday, 04 March 2025, Bank of New York Mellon (NYSE: BK) presented at the RBC 2025 Global Financial Institutions Conference, highlighting its strategic initiatives and financial performance. The discussion revealed robust growth in asset servicing, driven by technology investments and a focus on integrated client solutions. Despite challenges in the bond market, BNY Mellon demonstrated resilience through diversification and strategic acquisitions.

Key Takeaways

• BNY Mellon achieved a 29% pre-tax margin in 2024, with a focus on revenue growth and expense management.
• The company reported a 60% year-over-year increase in ETF assets under custody and administration (AUCA), nearing $3 trillion.
• Investments in technology and a centralized deposit model have enhanced efficiency and net interest revenue.
• Strategic acquisitions like Archer and initiatives like AltBridge are expanding BNY’s capabilities in managed accounts and alternatives.
• The appointment of a Chief Commercial Officer has improved sales coordination and client retention.

Financial Results

• Pre-tax margin for the security services segment reached 29% in 2024.
• Fee revenue growth was 6%, the highest in a decade.
• ETF AUCA increased by 60% year-on-year, with a 20% rise in the number of funds serviced.
• BNY aims to increase asset allocations significantly across various categories.

Operational Updates

• BNY Mellon is "desiloing" its operations to provide integrated solutions to clients.
• A Chief Commercial Officer has been appointed to enhance sales coordination and data utilization.
• The company is heavily investing in ETFs, alternatives, and managed accounts, with a focus on new technologies like AI.
• The Platform Operating Model (POM) is being implemented to streamline operations and reduce redundancy.

Future Outlook

• BNY Mellon is committed to sustaining business momentum through strategic initiatives and investments in high-growth areas.
• The company sees potential to exceed a 30% pre-tax margin with favorable market conditions.
• New technologies and a healthy pipeline for AUCA and revenue are expected to drive future performance.

Q&A Highlights

• The acquisition of Archer positions BNY to fully integrate retail managed accounts.
• BNY’s resilience in assets under custody (AUC) during Q4 was credited to growth in ETFs, alternatives, and managed accounts.
• The centralized deposit model has contributed to outperforming net interest revenue targets.
• BNY’s culture and performance are attracting and retaining top talent.

For more detailed insights, please refer to the full transcript below.

Full transcript - RBC 2025 Global Financial Institutions Conference:

Unidentified speaker: Well, welcome everyone. Good afternoon now I can say.

Emily Portney, Global Head of Asset Service, BNY: Good afternoon.

Unidentified speaker: Pleased to be joined by Emily Portney from BNY.

Emily Portney, Global Head of Asset Service, BNY: Happy to be here.

Unidentified speaker: Yes, yes. Of course, Global Head of Asset Service, the biggest business for BNY. And I wanted to start two years ago, you became the Head of Asset Servicing, right? Which is of course the largest business as I said. And before that, you served as CFO of the firm.

And there was a medium term target laid out to get pre tax margin up, right? It was at roughly 20% and you wanted to be 30% more and more. And lo and behold last year we hit 29%. So

Emily Portney, Global Head of Asset Service, BNY: I like the Wii.

Unidentified speaker: Okay. The Royal Wii. Yes, sure. I don’t even know if I use that term correctly, but whatever. So what do you see as the major components or pieces of differentiation that allowed for you to drive that margin up so high?

Emily Portney, Global Head of Asset Service, BNY: So first of all, thank you so much for having us and it’s great to be here again. First, yes, you’re right. In 2020 I think it was December of twenty twenty one, yes, happened to have been a CFO. And we did lay out what were ambitious, but very realistic targets for the margin of the security services. Just remember it’s a security services segment and that’s not just asset servicing, but also issuer services.

And we said at that point, we’d like to get it from what was about 20% to closer to 30% through the cycle. But more important than the actual number and target is just really what’s behind that and actually what’s behind the performance because as you rightfully said, we’ve gotten to 29% in 2024, which is great. And it’s really all about execution both on the top line as well as what I call the bottom line or the expense line. And in terms of fees and the top line, look we are winning in the marketplace. And it’s off the back of investments that we’re making some of which I know we’re going to talk about today.

Also de siloing the firm and actually delivering on the whole firm bringing businesses together to better solution for clients. We are not just a trust bank. We have many assets under the BNY umbrella. As you know, our Pershing platform, WealthTech, the distribution, the power of that distribution, it reaches thousands of RIAs, sole clear of U. S.

Government securities, large global collateral manager, etcetera, etcetera. The list goes on. So we’ve got many different assets. And one of the things we are doing to drive the growth is to stitch those things together to solution for our clients and that just elevates the conversation. In terms of expenses or what I would call kind of the bottom line or expenses, yes, we’re very focused on expense discipline, but make no mistake, we are investing.

In fact, we are investing more today than we were two years ago. And it’s just about being smarter, being more targeted, prioritizing better to really drive those superior outcomes, but doing all that while we’re also gaining efficiency and gaining scale whether it be by automation, digitization or for that matter leveraging new technology. So really it’s about day in and day out execution.

Unidentified speaker: Got it. Got it. When I was prepping and starting to pull together the questions for this, I was going through my model. And 24 was pretty awesome. Like fee revenue growth in your business 6%.

We got to go back a decade, right? It’s really, really quite good. So I’d love for you to maybe unpack a little bit about strength, primary contributors to the growth and what you plan to do to sustain momentum in the business?

Emily Portney, Global Head of Asset Service, BNY: Sure. So we’re very proud of the growth. In fact that everything we are doing in execution is coming through in the numbers actual results. I do think the momentum is sustainable, so in part to answer your question. And it’s very much both in the what as well as the how.

In terms of the what some of it goes back to some of the things I already just mentioned. So really desiloing the company talking about and delivering solutions for clients across again, if you think about the entire lifecycle of a transaction. And again, based on our assets, we can offer holistic and integrated solutions across manufacturing, servicing and distribution that is presenting a different value proposition to our clients. It’s really unlocking empowering them to get more efficient and to grow to increase their AUM. So it’s all about that, but it’s also then just about the how.

And with the how, I would highlight things like data, like discipline, like basic blocking and tackling. So we now have a Chief Commercial Officer, Katinka Walstrom. She’s wonderful. She’s been in seat about just under two years. And she’s really brought together an entire community.

All of our salespeople really are now seen as one community. We have a lot more data and discipline around account planning, around senior engagement, just around the opportunities that are coming in the next call it six months, nine months, twelve months, even twenty four months and how you engage early, you engage often and again how you’re solutioning and thinking about it across the firm. We’re leveraging data also much more again holistically to think about client sentiment. That’s all extraordinarily important when you think about retention and it’s always easier to retain a client than to acquire a new one. And then it’s a lot of the kind of blocking and tackling, which I kind of help to control what I call the backdoor or revenue leakage.

So think repricing or billing. Are you guys just getting the bills out on time? Are you billing for everything that you should be billing for? Time to monetize the revenue, so time from when to actually hitting the ledger. One of the great examples I think in 2024 of all of these things working and just showing the power of the franchise and our execution was our win of WisdomTree.

It was a full takeaway from a competitor. WisdomTree, if you don’t know, a very large global ETF provider. It started as an asset servicing conversation, but it very quickly became a holistic firm wide enterprise conversation and enterprise solution. So really administering and doing all their indexing in our investment management business and V and Y Advisors. It was all about distribution and the shelf space we can offer on Pershing.

It was all about if you know anything about WisdomTree, they’re incredibly innovative and they’re doing interesting things in the digital asset space, in the payment space with their own wallet. So again, we brought to bear our great expertise in both digital assets and treasury services. And it was that entirety of the proposition, the value proposition that cinched that. And on top of that, we onboarded their entirety of their U. S.

Franchise in less than six months.

Unidentified speaker: So I don’t know if you noticed, but I cover wasn’t sure. Yes.

Emily Portney, Global Head of Asset Service, BNY: Thank you.

Unidentified speaker: I didn’t realize that win was so broad.

Emily Portney, Global Head of Asset Service, BNY: Yes. And that’s part of why I highlight it.

Unidentified speaker: Yes. No, no, no. That’s super interesting. And you’re right they do they have this prime thing this blockchain native, which a few years ago I didn’t know about, but now it could be interesting. Okay.

AUC resilience. So I hounded Marius about this a few weeks ago, but fourth quarter, I was prepped up. You guys have a decent exposure to fixed income, right? So, our bag got hit in the 4Q, but yet you guys your AUC was remarkably resilient. So what happened?

Did you guys have some wins? Were there any notable dynamics planned through the fourth quarter?

Emily Portney, Global Head of Asset Service, BNY: Look, you said it. You’re right. AUC A in the fourth quarter remarkably resilient. That was despite lower bond markets, despite the impact of a stronger U. S.

Dollar. But really it was offset by growth in both new and existing activities. And some of that was very winning all the themes I already talked about, solutioning coming together won’t repeat all of that. But the other thing I really would highlight here is that there are we are investing in and really executing on some of the areas of the business that are growing at a much faster pace like double digit growth. So think ETFs and ETF servicing.

So we’ve been investing very consistently over the last several years. And IDAR do have a market leading capability as seen by our share. Alternatives, very competitive. However, we’re making a lot of investments to actually become market leading in the alt space. And again, we’re doing things across the firm.

We’ve just announced AltBridge. AltBridge is actually providing a platform for managers to launch liquid alt products again to be distributed on the Pershing platform to retail investors. So how we’re also just and of course, asset servicing will be servicing those products. And then finally, the managed accounts space, another area that’s growing double digit growth rates. And of course, we just recently announced the acquisition of Archer, preeminent player in that space, especially in the retail managed the RMA, what I call the retail managed account space.

And that’s also a fantastic acquisition. So all of those things are kind of behind the resiliency in our performance in our AUCA. And Brennan, I have I am a recovering CFO. So I would be missing a beat if I didn’t remind you that only 50% of our AUCA is based on market levels. Obviously, you’ve got 50% also based on transaction fees as well as account fees and of course any pickup in trading activity helps

Unidentified speaker: No, no, no sure. The revenue side, right? Yes. I was of course the revenue is good too, but I was really yes of course. Not just basically Can’t

Emily Portney, Global Head of Asset Service, BNY: help myself. Former CFO.

Unidentified speaker: Big deal. So you touched on this a little bit when you’re talking about WisdomTree. But I’d love to talk about ETFs and the success that you’ve had in ETFs. So you speak to a next gen platform and servicing capabilities. So could you maybe walk me through what enhancements you made to the ETF offering and help us understand how big that business is and what your expectations are for going forward?

Emily Portney, Global Head of Asset Service, BNY: Sure. I mean first I’ll just say the ETFs in general are growing at a double digit growth rate. It’s a very attractive wrapper, very attractive actually globally. Of course, in The U. S, you’ve got it’s more tax efficient, but even more broadly globally generally lower expense ratios etcetera.

So all of that driving double digit growth in the ETF marketplace. We are clearly outpacing the growth in the market. At the end of last year and I think we disclosed and I think I know we disclosed and shared this, our ETF AUCA was up 60% year on year, just shy of $3,000,000,000,000 in AUCA for ETF. The number of funds we service were up 20%. So again, very good growth.

And we have been focused on investments in this space seeing and knowing where the PUP was going. We’ve been investing in that space over the last several years. We’ve been very focused on what I would call kind of middle office capabilities and ETF servicing capabilities. So think it’s stuff that’s really aimed at the experience of both the fund sponsor and how it connects to and how we help the APs in the ETF ecosystem. And much more specifically, it’s providing like every day.

It’s providing the AP with just better tools for to have much more confidence in pretty much the in execution of their hedging, their hedging strategies etcetera. So it’s all of those things really coming together. And And the only other thing I would just mention in the ETF space is, we also happen to be the preeminent provider. We are basically we administer the vast majority of the digital asset ETPs that have been launched over the last call it two years. We’re really, really proud of that and we’re only one of the very few institutions and perhaps the only bank that actually can custody digital assets literally ourselves.

Unidentified speaker: How? That’s not really against the rules.

Emily Portney, Global Head of Asset Service, BNY: No, no. It is. There were some SAB 121. So there are regulatory there were regulatory and capital implications.

Unidentified speaker: Yes.

Emily Portney, Global Head of Asset Service, BNY: But we have built the capabilities. And ultimately, we’re working very closely with our regulators. Yes. We obviously want to progress that business in a very safe and sound fashion, but we have all of the capabilities to do it ourselves and to do it in house.

Unidentified speaker: Nice. And the SEC just rescinded one of those rules, right? Yes,

Emily Portney, Global Head of Asset Service, BNY: indeed.

Unidentified speaker: Okay. Which is only going to make it easier, right? So okay. Interesting. Alts, love to touch on Alts.

And actually you touched on it a little bit before when you were talking about, I believe, the resilience and some of the tools you’ve developed where you said that you can now help PL providers actually launch products and went outside. I’d love to hear a little more about that. But maybe before we drill into that detail, big area of growth for BNY. I’d love to know how big it is within the servicing business if possible. And given the kind of a bespoke nature of these tier, how do you scale the ALTS efforts?

Emily Portney, Global Head of Asset Service, BNY: So ALTS is another area that is definitely benefiting from large secular growth trends. The way I kind of think about it is, first of all, GP’s, alt managers are just getting bigger. Traditional managers moving into the alt space, by the way, most not most, but many managers still look and do the ALTS administration in house. So that’s a big area of opportunity similar to kind of what was twenty years ago in public markets. So over time many of more and more of them are looking to also outsource servicing and administration for their alternative funds.

And so that’s as it grows and then as outsourcing grows, it’s obviously a tailwind for us. Likewise, asset owners as we all know are allocating a lot more to alternatives in private markets. And finally, the last trend I’d highlight and it kind of goes back to AltsBridge and just more broadly a trend in the marketplace, but liquid Alts products are becoming much more we’re all looking at interval funds and the like exactly to access the retail market. So it’s kind of all of those three things coming together which are really driving double digit growth in alt. This has it is an area of investment as you can imagine.

A couple of things I’d highlight. So, tech stacks as you rightfully point out are very fragmented in this space. The general ledgers that are used for real estate different than credit different than private equity and infrastructure. So some of the investment is literally just trying to provide putting tools in place and data layers in place to provide just a more seamless and integrated customer experience irrespective of the ultimate tech fact that any part of the portfolio might be on. Look, we’re also building tools to automate really messy and kind of manual processes.

And in the alt space, think about it, it’s like processing of fund expenses, processing it’s basically fee and waterfall calculations, which could have hundreds of different nuances in all of those. It’s the financial reporting. So it’s tools around that kind of stuff, which is I call the messy middle. And then finally, it’s data. And data is critically important for the LPs.

It’s important for both GPs and LPs, but especially for the LP universe As their allocations are increasing to alternative investments, they want to more and more see what we call and they often call the total portfolio view, which is looking and seeing their private and their public markets investments all in one place and being able to do performance and attribution calculations all from one HEM sheet. And the last thing I would just look it would go without saying and I’ll probably sound a bit like a broken record, but what I just said is really what we’re doing in asset servicing, but it’s all about what the firm is doing too and it goes back to this scene about solutions. And AltsBridge again putting a platform connecting the DASA platform to help the asset manager launch place a liquid alt product, alt service it in asset servicing and in Pershing will distribute it to retail investors. I mean that again very unique capability that only BNY can really do. Corporate trust as you all know we’re the largest provider of issuer services.

Therefore, a huge provider of administration services for loans and for structured debt. And more and more we’re connecting that business and the tech capabilities there with everything we have in asset servicing. So if we’re administering the loan and that same loan shows up in a fund that for which I’m doing admin, it’s not getting I’m not getting the data from two different places. It’s completely straight through. So again, I would just think about the it’s the synergies across the company.

Unidentified speaker: Got it. AltsBridge, so the AltsBridge is that do you guys put together interval funds themselves and then facilitate that? That’s interesting.

Emily Portney, Global Head of Asset Service, BNY: And again, that’s an enterprise platform. So it basically is and it’s not quite live, but we’ve announced and but it’s all about looking at it across a platform across the entirety of the firm. So of course, asset servicing can support and service those funds, but we have expertise in investment management, which actually can help to launch and to place those funds in the marketplace. And then in Persian, you can actually distribute it. So it’s literally the manufacturing, the servicing administration as well as the distribution, all in one place at B and Y.

Unidentified speaker: So the Altmanagers don’t need to have that capability at all. They just need the strategy and they can use that the idea?

Emily Portney, Global Head of Asset Service, BNY: Many of them will still of course have many avenues for distribution. Of course, this is probably going to be one of many.

Unidentified speaker: Sure. Interesting. And then the fee rates and the profitability of that business, how does that stack up?

Emily Portney, Global Head of Asset Service, BNY: Needless to say that the fee rates for at least in the servicing side for Alts is higher than what you call in the more plain vanilla registered funds base kind of commensurate with the complexity. But again, we look at when we price business, we look at the entire bundle.

Unidentified speaker: Yeah. Sure. Sure. Okay. You guys have traditionally focused more on tools and services for GPs.

You sort of referenced this before. You’ve talked about shifting more towards developing tools for LPs recently, right? So I’d be curious probably the market drove that and demand, but I’m curious about your perspective on that. And what are some of the tools and services that you provide for LPs? And what are the how big is the LP business versus the GP business at this point?

Emily Portney, Global Head of Asset Service, BNY: Well, as I said just before, LP is investing more and more in private markets. And I think currently, there are total commitments of LPs to the alternative space is anywhere from $10,000,000,000,000 to $15,000,000,000,000 and that’s uncommitted. So it will be drawn down of course over time. But I mean and I travel a lot, sit in front of clients a lot and whether it’s medium size or large pension plans or D. C.

Plans, endowments, sovereigns. I mean, the conversation with all of those asset owners is, oh, I’m taking my ALF allocation from two to five or 10 to 20 or 25 to 50. So I mean that’s what’s happening. And by the way, asset owners more broadly whether it is the endowments, the the sovereigns, the pension plans, they are all clients, not all of course, but many of them, the vast majority of them I should say are clients of B and Y, many in our institutional accounting business. And so really they’re helping lead the way in terms of what investments to make because their portfolios as I said with the increase in allocations are just getting more complex.

And so they need more tools to help them really think about their the complexity now of their portfolio. And so some of the services that are kind of aimed very specifically at LPs maybe versus the GPs is like thinking about we are investing in tools that help with enhancing the collection and digitization of GP statements. They all look different, etcetera. And so by virtue of kind of ingesting them in a much more seamless way, if you will, or automated way, it just improves the accuracy and the timeliness of fund administration and reporting. We’re doing a lot around subscription and redemptions and that process, which can be very difficult and very fragmented depending upon the manager.

With respect to actual market activities and portfolio kind of the portfolio management of a the management of a portfolio working with asset owners and our market businesses to help with portfolio rebalancing, hedging, execution, things of that nature. And then finally, it comes back to data and a lot of what we talked about. And we have a very extensive data management offering And it really provides these asset owners with more transparency, accessibility and basically integration of their data with third party data. So think FactSet, Morningstar, MSCI, Rhymes and we have all that connectivity. We’ve done all of the data mapping.

So you can connect to us and have all of that and have your data connected and how does that help an asset owner, basically it helps them to then leverage those services for performance and attribution, the total portfolio view I was talking about. It helps also with fund oversight. So as they have to report back to their own boards around concentration risk and geographic risk and investment performance against ESG objectives. So a lot of it is also data and data management.

Unidentified speaker: Got it. That’s interesting. And I agree it’s definitely growing. Sergio was just speaking in Amsterdam. I had a conversation with him and he’s we’re currently mid single digit and he thinks 15 mid teens at least.

So everybody’s got a similar idea there. Archer, so you guys recently acquired Archer. As you said RMA, I think that’s the first time I heard that term. It’s normally you swipe the S away. Okay.

It works though. So you guys have already noted a pickup in new client wins, which is great. Could you put a little bit more meat on the bone though and share some of the goals that you have set out for that business? And maybe how it fits into the overall product suite?

Emily Portney, Global Head of Asset Service, BNY: Sure. So we’re really excited. We closed the deal November 1. We onboarded all of their clients. So managed accounts basically SMAs and UMAs again like ETFs like alternatives a wrapper that is growing double digit growth rates.

Why? It is the preferred vehicle to deliver model. It is the preferred vehicle to deliver tax optimization strategies. It is preferred vehicle to deliver more customization in both the institutional space, but more and more also in the retail space. And I think that’s kind of Nirvana.

The journey with Archer really started to fill a void in asset servicing. None of the large asset servicers really had the capabilities to service retail and that’s where I get the word retail managed accounts at scale. I could do the money market funds or mutual funds or ETFs or private markets, but I couldn’t really do the retail managed accounts. And like I said, that was what was growing. But make no mistake very quickly as we started talking about Archer, it started within asset servicing, but we zoomed out and we realized it was really about entirety of the ecosystem.

So we’re thinking again the firm much more across the enterprise. We had very good relationships with Archer already in our investment management business where they were leveraging Archer to distribute their model. Pershing was already connected to Archer as a sponsor, to deliver some models and other customization to their end. Their RIAs delivered used that to deliver to their own clients. So we actually got to know them.

And like I said, it quickly became apparent that this was an acquisition that could help us literally own the entirety of the ecosystem as it relates to retail managed accounts across manufacturing, servicing and distribution. Archer by the way was there are very few assets in this space, very much a preeminent provider whenever I sat in front of clients and said, gee, who are you using? The name Archer more often came up, one of the few that do operational and middle office services as well as has the tech at scale. Like I said, we closed the deal November 1. All the clients are onboarding.

There’s an immense amount of interest. I sit there’s not one conversation with an asset manager median size or big for that matter, where they’re not asking me about how can you help me with managed accounts. It’s tough. It’s messy. You need scale.

The proliferation of models, how do I get them to all the sponsors, all the sponsors have a different kind of interface, how can you help me? And that’s exactly where Archer fits in.

Unidentified speaker: Got it. Any goals for that business? I mean, obviously, SMAs are growing really quickly, right? But how should it might be too small to matter. And if that’s the case, fine, just let me know.

Emily Portney, Global Head of Asset Service, BNY: It’s not that it’s too small to matter actually, but it’s embedded within the asset servicing business. And by the way, it’s a little bit difficult. I mean, we of course had very clear deal models and goals. But when you think about it, it just becomes another wrapper just like ETFs, just like registered funds. So it’s hard to kind of separate out just very specifically what will be Archer versus anything else I can do for the same asset manager.

Unidentified speaker: Fair. Okay. Part of achieving the medium term targets for the security services was to optimize platforms across the core services. Could you explain maybe what you’re doing there and what impact we should expect?

Emily Portney, Global Head of Asset Service, BNY: Sure. So we’ve talked a lot about some of the more like innovative and big picture things. I just we don’t forget about what I kind of call the core services and think about things like tax services and tax reclaims that we all know are kind of bundled with custody. And again, it’s uplifting those capabilities, digitizing those capabilities. I’d say the same thing about corporate actions and income processing, etcetera.

We talked a little bit about the connectivity between ourselves and our corporate trust business. So to think about alone and the entirety of the life cycle. By the way, it’s all about in this core bucket, I’d put leveraging new technologies. I think we’ve spoken about leveraging AI. We all talk about AI and the promise of AI, but actually we have literally leveraged AI now across in excess of 10,000 funds and two fifty clients for NAV oversight.

And it really helps a fund accountant in the golden hour when you got to get that NAV out of the door out the door to really understand what’s a real exception versus a false positive. So again, makes us just smarter and better. And look, we’re why are we doing it all? We’re doing it for it really translates into just better performance, more resilience, we’re more scalable and frankly happier clients.

Unidentified speaker: Okay. That all sounds good. We’re down to the few more minutes. I’ll see if there’s any questions in the audience.

Emily Portney, Global Head of Asset Service, BNY: Got to get to the platform of operations.

Unidentified speaker: Don’t worry. I got it. We’ve been having a very low batting average with the audience questions. Don’t sweat. All right.

There we go. I have to go through my motions sometimes. Platform operating model. So this became the topic of the call on the fourth quarter. And I had mind chambered.

I had to change because it was like the prior two questions were on the same thing. So forget it. So has asset servicing transitioned to this new platform operating model yet? And what has been your experience? And can you share maybe any metrics you noted and that would help us understand the impact of this transition?

Emily Portney, Global Head of Asset Service, BNY: Sure. So, Brendan, sorry. We’re just really excited about the platform’s operating model. So, hence, why I’m making sure that we have some time to actually talk about it.

Unidentified speaker: I’m glad you’re keeping me on time.

Emily Portney, Global Head of Asset Service, BNY: Good. There you go. So the one thing I’d first say is that we call it internally POM, Platform Operating Model, and it’s all about how we do things. It’s not about our strategy, but it’s just literally about how we run the company. And at the core, its principle is we do things once, we do it in one place, we do them well, and it’s all about the execution and the metrics associated with delivering.

And then how does that translate like into the day in and day out? Like what it really means is we are removing redundancy from the company. We’re streamlining the company and you think about running a business or a product truly, truly end to end. Look, it means just faster speed to market. So embedded in palm is the notion of agile and its agile ways of working, not just for tech, but the entirety.

So every product you stand up pods. Those pods are interdisciplinary. So you’ve got people from product and people from engineering and people from operations and they’re all in a pod. And it just means you can iterate through development or a client issue that much faster. It simplifies how we work.

It’s reducing risk. We have less risk events. And the most, most important thing is that honestly it’s empowering our people. So about a third, now a third maybe 25% of the companies in the model. We’re about to go to 50% over the next couple of weeks.

And the surveys, the employee satisfaction from folks in the model is truly higher than folks that are not yet in the model, because there’s something about the accountability and the empowerment and the interdisciplinary nature of it that is really compelling to our client base. Before you stand up any platform at all, it’s about the it’s what we call OKRs, which are really KPIs, which great example for asset servicing in particular, I was in Lake Mary. We have a wonderful, about 2,000 person office in Lake Mary. And I was doing a floor walk and I spoke to our middle office outsourcing team. They had got they were transitioned into Palm in the third quarter of last year.

And they were telling me a story about how they on boarded a middle office client in record time and they attributed that. They really did. I said, how did you do that? And it was about three months less than it would have taken them otherwise and they truly said it was the POM model. It was the fact that they had everyone sitting at the table, they had stand ups every morning and they were just iterating through any challenges that came up, iterating through how do we solve this, how do we think about it.

And I think it’s like that kind of example that power if that’s the power of the POM platform.

Unidentified speaker: Got it. Yeah. That’s helpful. And of course, we’ll learn more about it as we go through the year, right? And you’ll be transitional people.

Deposits, so you guys changed the deposit. It’s now centrally managed. So I’d love to hear how significant that was. And now if you’re in the servicing business, right, and you’ve got the relationship with the servicing client and they want to come to you about deposit pricing and what yields they’re getting, does that get routed to the central team? Like how does that work?

Emily Portney, Global Head of Asset Service, BNY: So it’s interesting. When I think about our deposit kind of model and team the operating model and the team, it almost was a pilot platform before we actually went full into palm, right? It kind of it was probably the first real platform across the company. And it’s been incredibly effective. I’d argue that part of our outperformance in NIR over last year really was as a result of having this operating model across the firm.

By bringing everyone together, it really allows us to work with clients just much more proactively and seamlessly. Like we work much more across the businesses to help them optimize their cash and their short term liquidity. And by the way remember BNY, we manage a liquidity ecosystem of about $1,500,000,000,000 on a daily basis. That’s both on balance sheet and off balance sheet. That’s both proprietary and third party product.

So it’s a large ecosystem. And by bringing it all together, the client we service them, it’s more you think about it as a continuum. You can kind of service them on they have many more options. Those options are like a ladder and they can actually understand them against like or across a continuum. So we can have talk to them more holistically about what are your liquidity needs over what kind of time horizons.

It frankly just also simplifies their experience. It simplifies how we price them. So all of those things are beneficial. And the last thing I would highlight is that it’s not just about the liability side. It is also about the kind of the asset side and the strategic management of the overall balance sheet.

So by virtue of bringing this team together, we just have more predictability and understanding of our liabilities. And as a result, it just enhances better decision making across frankly the asset side, the loan portfolio, the investment portfolio, the loan portfolio. So it really I think has translated into better overall performance especially in the NIR line.

Unidentified speaker: Got it. We only got a million or so left. So I want to finish where we started, right? Really impressive operating leverage in 2024. You are at just a 28.8% pretax margin, right?

So you basically we’ll call it 29%. What’s 20 bps between trends? So what’s the plan to continue to drive operating leverage? Of course, what have you done for me lately? Always more high stubs beyond the come.

And how high do you think we can get that pretax margin in that business?

Emily Portney, Global Head of Asset Service, BNY: So, look, we’re very like I said, we’re really proud of the performance and how we’ve executed thus far. The 30% remember is through the cycle. I do think there will be times that we can exceed that. So certainly, it’s very, very possible, especially with a if there’s a very constructive market backdrop. But again, it’s just everything around the execution.

And it kind of goes back to the three pillars of the company and many of the things I’ve been saying. So just being more for our clients, solutioning, elevating the conversation, putting the wins on the board. We have a very healthy pipeline for both AUCA and revenues to be installed. It’s all about just running the company better, the palm model, automation, leveraging new technology. Look AI is very promising.

I think that could potentially at some point have a meaningful impact on margins, but it’s too early to tell. Right now it’s just making us smarter and better. And again, it’s all about powering our culture and empowering our people. And the performance that we’ve seen and the culture that we’ve built, we’re literally attracting great talent and retaining and developing the talent that we already have. So it’s just literally execution, execution, execution.

Unidentified speaker: That’s a great point to end on, Emily. Thanks a lot for your time today.

Emily Portney, Global Head of Asset Service, BNY: Thank you.

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