BNY Mellon at Bernstein Conference: Strategic Transformation Unveiled

On Thursday, 29 May 2025, BNY Mellon (NYSE:BK) took center stage at the Bernstein 41st Annual Strategic Decisions Conference 2025. CEO Robin Vince outlined the company’s strategic shift towards a platform-based model, emphasizing growth through diversification and innovation. While the company remains focused on operational efficiency and a conservative balance sheet, it also faces challenges in achieving its ambitious transformation goals.

Key Takeaways

• BNY Mellon is transitioning to a platform-based model, with 65% of its pretax income derived from these businesses.
• The company is focusing on diversification, particularly in digital assets and stablecoins, to capitalize on future opportunities.
• BNY Mellon aims for mid-single-digit growth in net interest income (NII) this year, potentially on the higher end due to deposit inflows.
• Operational efficiency is a priority, with expense growth for 2023 below the initial target at 2.7%.
• The company plans to return around 100% of total capital to shareholders this year.

Financial Results

• 65% of BNY Mellon’s pretax income is from platform-based businesses.
• 40% of revenue is generated outside the U.S., highlighting the company’s global reach.
• Expense growth for 2023 was contained at 2.7%, below the projected 3-4%.
• BNY Mellon aims to restore its investment and wealth businesses to a 25%+ margin in the medium term.
• NII, while a minority of pretax income, is high-margin, with growth expected in the mid-single-digit range.

Operational Updates

• BNY Mellon is desiloing its operations, bringing businesses together under a unified strategy.
• A new chief commercial officer has been appointed to enhance sales efforts and streamline operations.
• The platforms operating model aims to improve efficiency, with full value expected by 2028.
• New products like Wove and buy-side trading capabilities have been launched to drive organic growth.
• The company is expanding into private markets and focusing on micro-innovations.

Future Outlook

• BNY Mellon has a decade-long vision for transformation, with significant benefits from AI anticipated between 2027-2030.
• The company plans to continue launching new products and innovations to sustain growth.
• BNY Mellon remains open to acquisitions that align with its strategic goals and add value.

Q&A Highlights

• Deposit inflows may lead to higher-than-expected NII results.
• The company is managing expenses at the high end of the 1-2% growth guidance range.
• BNY Mellon maintains a conservative balance sheet and is committed to returning capital to shareholders.

Readers are encouraged to refer to the full transcript for a comprehensive understanding of BNY Mellon’s strategic direction.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Ken Usen, Large Cap Banks Analyst, Autonomous: Okay. Hello again, everyone. Ken Usen back here, large cap banks analyst at Autonomous. Really pleased to have another bank session here, another transformation story in BNY. Happy to be joined by Robin Vince who joined BNY in ’2 twenty twenty, became CEO in 2022, late in the year.

He and the management team have embarked on a very ambitious strategy over the last few years to just streamline and desilo the company. We’re gonna talk about that and and future plans. And with that, Robin, thanks for joining us. No.

Robin Vince, CEO, BNY Mellon: It’s great to be here. Thanks for the thanks for the interest. I’m looking at the the advertisement over there for one of the AI companies. This happens to be the one I use. We’re we’re we’re kind of very into AI at PNY, so it’s fun to see that.

Ken Usen, Large Cap Banks Analyst, Autonomous: Excellent. Excellent. So, Robin, let’s start with the market outlook in a big picture perspective. Lot of movement, lot of volatility, a lot of things changing in front of our eyes. What you guys are so connected into all the global markets.

How does this environment put BNY right in the middle of it? What are you seeing? And and and how would you compare and contrast what you’re hearing inside The US versus outside The US?

Robin Vince, CEO, BNY Mellon: Well, first of all, you know, this is part of the strategic positioning, repositioning of the company because making sure that we are taking advantage of all of the components of BNY. We used to operate very much in silos. We’ve been de siloing, bringing the company together. That’s a story that’s sort of been well told. We’ll talk about that.

It’s generating a lot of value for us. But we are increasingly a platforms company, and 65 of our pretax income comes from businesses that would really be responsive to the definition of what is a platform. And so when you have more activity in the market, more things going on, it sort of draws people to the platform, and we see more activity going through platform. And so we’ve been pleased with the fact that things have been going on in spaces which are relevant to us. So treasury markets, very relevant to us.

Trading activity is true of many of our platforms, our clearing business, our custody business, our purging business. So there there are a variety of different ways. We we we like active markets. We also like markets which challenge, our clients and market participants questions about what do they wanna be. And so to the extent that folks are under maybe a little bit of cost pressure or that maybe their platforms didn’t keep up with all of the volumes as well as ours did, then we’re in a position to be able to take advantage of that megatrend associated with a bit more outsourcing.

And so clients are wanting advice about what’s going on. 40% of our revenues come from outside The US. We are number one in clearing. We’re number one in collateral custody, all of these things. We’ve got huge franchises.

And so clients are seeking us out. And they’re saying, I wanna know what you think about what’s going on in the treasury market. I don’t think it’s bragging to say that there probably isn’t a private sector institution that has a better perspective on what’s going on in the treasury market based on the breadth of our platforms and everything we do. So it brings clients to us. We talk to them about that, and then we say, hey.

Would you like some of this with that? And then we talk about what we’re doing. They say, by the way, what are you doing with, AI? What are you doing with digital assets? Could you help us with this?

And we talk to them about those things. But when there’s stuff going on in the market, it causes people to talk to us even more, more interested, and they pull us into their environment. And that’s where our new commercial model allows us to then go do good things.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. And so with that perspective, what are you seeing as the most important swing factors in the big picture environment? If you were to just look out six to twelve months, give granted a lot of uncertainty about which way the winds are gonna blow, but what are the couple of things that you’re either seeing or believing or thinking that we’re gonna be the most focused on?

Robin Vince, CEO, BNY Mellon: Well, you know, from a macro point of view, some stability, understanding how the markets are gonna travel, backdrop, geopolitics, those things are super important because they can cause clients to hunker down in their shelves, and we and we’re not in the investment banking business, but if you’re talking to an investment banker, of course, everybody’s talking about, okay, when deals gonna pick up and all of that stuff. So the good news is is that doesn’t really happen Our platforms are always on capabilities that clients need to use to be able to just go about their daily business. And so there really isn’t a when are we gonna see this cloud lift? When are we gonna see a little bit more certainty for CEO confidence to go do a deal, to do an IPO.

Those things aren’t as relevant to us. We want broad based capital markets activity. And maybe in one quarter, it’s a lot of issuance. That’s great for some of our platforms. Maybe in another quarter, it’s a lot of transaction activities and fixed income.

Well, that’s good for a different platform. Maybe in another quarter, it’s a lot of, activity and trading and equity and retail. Well, that’s good for a different platform. So I don’t wanna be complacent because, of course, we’re always looking around and being careful about this, but there are we’re we’re built for quite a few different environments and different regimes, and that’s very deliberate because diversification we have a sort of three theses around diversification. Number one, it’s actually good to be diversified because your business fires off different cylinders.

Fixed income, great. Equities, great. Market activity up, great. Those things all help us, and they’re unlikely to be correlated to the downside. It tends not to be that you have a down market and low volume and no activity in fixed income.

It just doesn’t tend to happen. So we like that flavor of diversification. The second flavor of diversification that is something that we appreciate is our businesses are related enough to each other that encouraging people to come shop many of our different platforms is a realistic thing. We’re not going to an investment banking client and say, hey. Would you like to do retail banking with us?

We’re going to a collateral client and say, hey. How about some clearing? Well, by the way, if you do custody with us, clearing is kinda super easy because it’s just a book entry transfer on our platform. And so that type of diversified as in we have many different businesses, and we can now we didn’t used to be able to do this, but now increasingly help clients to see them. That’s interesting.

The third flavor of diversification is there are some combinations of our businesses that are unique capabilities at BNY. It’s very, very hard to find some of the things together in nature other than at BNY because we own Pershing. It’s $3,000,000,000,000 of retail distribution. We have a collateral management franchise, which is number one in the world. We have the number one custody business in the world.

We have a large FX, large margin seg, large payments businesses. As a result of that and our focus on digital assets, we can do things in the future, I suspect, with stablecoins that will be hard for others to do. So it’s diversification applied in a way where we’re taking advantage of of of businesses which can come together in unique ways.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. And when we think about the diversification, that also comes with complexity. A lot of businesses inside BNY. And as you’ve embarked on this transformation of the company, you’ve had a a really good start with it and seen some really early wins. Talk through the one BNY ethos, how that has culturally changed the company, and and how that’s allowing you to bring some of those points together that you just mentioned into a a overall better b and y?

Robin Vince, CEO, BNY Mellon: I’d step back. And one b and y is is a philosophy really principally around pulling together as a company, and it was also the early label that we put on our some of our sales efforts to really join the dots. And those things are true today. But if I zoom out for a second, I would take you to our three strategic pillars because we’ve laid them out clearly. We we we published these, you know, a couple of years or so ago now.

Number one was to be more for our clients. This was this point desiloing. Clients can shop multiple platforms in the company. They didn’t used to do that, delivering the whole company to them, and that’s some of the one b and y topic. The second one was running our company better, and this is desiloing the very essence and deduplicating what goes on.

Platform’s operating model, we can talk more about that. That’s the operating operationalization of what it come what it is to take a company apart piece by piece and rebuild it essentially in a slightly different form or while you’re continuing to operate it. That’s a very important part of our journey. And then the third thing is culture. And the way that I talk about this internally to our people is by powering our culture, which is our third pillar, we get to run our company better, and that will allow us to be more for our clients.

And that point on culture, which is really where you’re going with your question, is we had a thesis that if we run the company differently and we have people value different things in the company and we have people really throw in for the whole and really focus on making the customer successful and making the company come together as one to serve the customer, we will have a differentiated experience for our people, for the way we run the company, and for clients. And that has allowed that’s been an unlock for us, which I would say we thought was there, but it’s been a bigger unlock than we than we even had realized. And it’s manifest itself in a hundred ways, but our sales philosophy is one of them. We used to only do sales business by business, and we had a very small group that did mega account type of sales. We didn’t have a chief salesperson.

We didn’t have a chief commercial officer. We now have a chief commercial officer. She has created sales rhythms, targets, processes, culture to bring the sales force together. And so now our sales teams can sell multiple things, which they really weren’t equipped to be able to do before. We haven’t even had one full year in production under that new chief commercial office structure.

This is our first full year of doing that. And in fact, we launched it last summer, and we haven’t yet gotten to the one year anniversary of it. You know what? It’s probably not a complete coincidence that the first quarter, we had a record sales quarter.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. And and so we’ve seen the early wins. But to your last point, this is a longer duration transformation of the company. I mean,

Robin Vince, CEO, BNY Mellon: we’re We’re taking a decade view, actually.

Ken Usen, Large Cap Banks Analyst, Autonomous: Decade view, and you’ve talked about replatforming, becoming more of a solutions provider. And so how does that lay out in terms of what’s changed over the last five,

Robin Vince, CEO, BNY Mellon: ten years, and then where that heads going forward? So right from the beginning, as a as a management team, we did a few things. This is going back to 09/01/2022. We literally started on the first day, and we said, let’s look at what we’ve got. Let’s reunderwrite the businesses of the company.

Let’s re underwrite the question of how we go about how things, how we’re organized, who’s doing it, all of those questions. And we came out with a series of different theses from that, and we spent time with our board and the leaders of the company. We really vetted our plan and came out of that first ninety days and said, okay. We have a pretty good sense of what we need to do, and now we need to go at it. And one of those things was saying we wanted to deduplicate the company.

And we recognized that we had two clearing businesses. We had three different custody businesses. We had eight different, client contact centers. We did client onboarding in every one of the dozen or so different businesses that we had. It was duplication and waste everywhere.

And we knew it would take a long time to really get at that stuff because it’s not small things. It’s not just rub two sticks together and off you go. So what we did was we laid out a multiyear plan at a high level to say, okay. There’s a sequencing that has to happen here. And we wanted to do some things quickly because we wanted to get some early benefit.

We’d had two years in a row of 8% expense growth. That was gonna be a problem. And so we needed to do take some quick action, and we did. And we said we think we can half that for 23 to 4% with the growth rate. We actually delivered 2.7% growth, so we were pleased with that.

But the way we did that was we attacked a whole bunch of different initiatives, which we just thought were things that would have a shorter term payoff. And this year at 2025 is actually the first full year that we’ve had where all of those early initiatives that we started in 2022 have actually come into place. But at the same time, we said, let us lay the groundwork for the things that will be important later, like platforms operating model. We started the work in ’22, but we didn’t actually start any of the conversion until 2024. This year, we’re we’re crossing right just half the 50% part, mark.

But the full year first full year of value of platform’s operating model probably isn’t until 2028. We’ll actually be fully in the model partway through next year. So 2027 would be the first full year operating in the model, but all of our data suggests that the value comes about a year after you’re in the model because it’s a means to an end. Organize people differently, have them work differently, create different levels of agility and forward. So we started working on that in ’22, but we allowed ourselves to recognize that that’s dollars out of the door investment that we were doing in ’23 ’20 ’4, and the payback would be we already see the value of the payback, but most of the values to come.

And then, wow, aren’t we lucky that we live in the world of AI in the age of AI? Because AI is gonna be this gift that we’re gonna get in 2027, ’20 ’8, ’20 ’9, ’30. We’re working on it intensely now getting some benefit today, but the big benefits to come. And so there’s a storyboard on the expense line and a storyboard on the revenue line because the same story is just be more together and try to do more join sales, connect the dots. That was the story for ’23 ’20 ’4.

Now it’s the commercial model actually deliberately being able to sell more things. We just announced today our chief commercial and innovation officer, some new expanded role, new things. And so there’s gonna be a product journey associated with that. We started to deliver product. Last year, we delivered Wove as something that we were doing, buy side trading as a capability.

Now we’re looking at a sort of a variety of new sort of product launches and a lot of micro product launches that nobody notices, but that’s the reason why we’ve been able to grow fee growth. And this is a storyboard that goes out really, call it seven or eight years, which we started planning in ’22, and we’re just executing that plan. We were lucky a little bit that in 2023, we had good markets because we were able to deliver some expense savings, but we didn’t have all the expense, stuff under control yet, and we didn’t have all the organic growth, kicking in. So we were lucky we had a bit of a tailwind. Now we’re not as dependent on the tailwind.

We’ll appreciate it. Positive operating leverage is our north star. So if we get more tailwind on some things, great. We’ll be able to you know, we’ll we’ll recognize that. We’ll spend a little bit more.

We’ll make some changes. We’ll invest differently. But we’ve got plenty of self help on the revenue side and on the expense, work side that we now feel like we’re in control of our destiny on positive operating leverage, which is why we gave some of the guidance that we did at the beginning of the year.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. And so taking the underwriting the businesses one step further, three three major segments, the market and wealth services, which has been the fastest growing and highest margin, security services where you’re focused on

Robin Vince, CEO, BNY Mellon: Is over half 50 over half of the pretax income of the company The biggest business to do with being a trust bank, by the way. I I always smile when people call us a trust bank because we’ve got a trust bank inside us. It’s great. It’s good to have.

We’ve got a bank inside us. It’s great. But, actually, over half the company has got nothing to do with that at all, and it is our fastest growing highest margin segment. Mhmm.

Ken Usen, Large Cap Banks Analyst, Autonomous: Anyway Yeah. Well, that’s a good one starter on that one. And then you got security servicing, which is to your point, you’re working on improving growth there and then in investment and wealth management where you’re focused mostly on improving margin. So maybe just walk us through where the three are in terms of that those trajectories and in terms of the one one or two drivers that are the most important things to think about.

Robin Vince, CEO, BNY Mellon: Right. So so let let’s start with the with the with the, you know, the trust bank custody segment. What we’ve historically were always very much known for, the custody asset servicing business. That was a business where we are number one in the market but where our cost to serve was high. Because all of this duplication that I was talking about on the expense side was dragging down, our our margin in that space, and it was expensive to run it, more expensive than it should be.

If you’re the number one player, you should be more efficient, and we weren’t. And so we set our guidance, late in, in 2021, I think it was, where we said we’re gonna improve the margin in that particular segment, with a target of 30%. There’s some other stuff in the segment, but that’s the biggest business in it. And then the heart of that margin improvement was some revenue improvement. Yes.

There was it was kind of the low point for NII, so there was a little bit of NII improvement, but very much an expense story, in there as well on the path to 30%, and we’re very much knocking on the door of that number now, which we’re pleased about. So that story has been about growth, improving the margin, and getting to a point where we have the benefit of our scale. And then the question is, okay, well, you love a scale business when it’s actually operating with the benefits of being a scale business. So then let’s go be more scaly. That’s a good thing.

We’re happy to do that. Grow more, do more things, and do it at that elevated margin as opposed to the reduced margin. So we can play the strengths of being the scale player when we have the benefits of being the scale player, which we didn’t have, but we increasingly will have them. Then, the other segment that we didn’t really talk about is the investments and wealth business, and that’s a business where we are, I would say, underscaled in both of those business. So growth really matters to those two, businesses, both investments and wealth.

They’ve also been challenged from margin point of view, and we have to do work on the expense side. We’ve been doing that. We hired a new leader in that space. In the sequencing of everything that we’ve had to do, we’ve had to make choices. Every leader does, and we made certain choices about tackling some things before other things.

And investments in wealth in all candor was something that we we said, okay. It’s sort of chugging along, but we’ll attack that a little bit after we’ve attacked some of these other things. And so that really became a focus for us in 2024. We hired our new leader. He turned up in September, Jose Monea.

He used to be the CEO of Nuveen, part of TIAA, and he is now taking those businesses and really re underwriting, reimagining them, and taking them forward. And so, you know, we have and we’ve given guidance that we think in our medium term outlook that we think we can return those businesses to a 25% plus margin, which is obviously our target. And then in our platform segment, which is sort of what I how I refer to market and wealth services, Pershing, clearing, collateral management, treasury services, those real platforms like businesses, that is the place where, as you mentioned before, we’re pleased with the grade of growth, we’re pleased with the margin. We’re not trying to improve those businesses from a margin point of view. We’re very happy with the margin in the 45% to 50% zip code depending on the quarter.

And that’s a business where we want top line growth, and then we’ll get pretax income growth. And so it’s great that they’re actually the fastest growing in the company, and they’re increasing as a percentage of the total pretax income of the company. And that’s they’re they’re also in the right neighborhoods. We identified in January in our outlook that there were big megatrends that we were paying attention to. And some of those megatrends very much apply to those businesses, and we wanna we wanna capture those.

So that that’s the way that I think about the segments. And and they and and therefore, our business strategy for each of them has been a little bit different according to whether it’s a margin story or whether it’s really just a growth and do more story, how we thought about acquisitions sort of is being relevant to that and can evolve as well. So all of those things, I would put in the mix.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. And the predominance of the revenue that’s that’s generated by these businesses is fee income. And you talked about earlier the benefit of diversification. And in environments like this, you sit in the middle of all of that. Do environments like this when the market’s up, the market’s down, when there’s volatility, how does that apply itself to the business model in terms of being able to, you know, generate revenues when there’s uncertainty out there?

Robin Vince, CEO, BNY Mellon: Well, it goes back to the point that we talked about before, Ken, which is, if you only have one, thing that drives your business, like market valuation is the dominant theme or worse, market valuation in just one part of the market, you know, whether it’s equities or fixed income or a region or whatever it may be, then you’re very beholden to that one thing. And if that one thing happens in a year and it goes up, then you’re happy. And if the one thing doesn’t happen in the year goes down, you’ll be sad. We don’t wanna run a company on the basis of that, so we wanna run a company on the basis of the fact that that in any one year, there will be there can be things that will make you happy and sad, but the net net effect is that you want it to be a a stable environment. We’re not looking to try to, you know, shoot perfect scores in every year in terms of the market environment.

We wanna be built for the environment where in the vast majority of different market scenarios, we’re gonna be able to perform, and it’s the deliberate strategy to do that. So equity markets, fixed income markets, valuations, versus transaction volumes, software, the the flow of funds, payment volumes, the amount of collateralization in the world, sheer new supply, corporate trust, treasury issuances, all of those things, they’re all aspects of our business which we have identified and are very happy with that breadth of different drivers. So it’s not to say there couldn’t be an environment. You know, a meteor can hit the earth and you can have an environment that’s bad for lots of your businesses, but it’s deliberate that we’ve tried to take out as much of the environment as we reasonably can as being the main line driver, for our revenue. Again, we’ll never be fully successful.

And the same thing’s true on NII because in NII, we NII is a nice we view it as a nice thing to have. It’s a real minority of our of our pretax income, but it’s high margin. Of course, we’re gonna like it. But we don’t wanna be whipsawed around by NII. The story of BNY Mellon, the old place, five years ago was the the the progress year on year in terms of positive operating or or not was a pretty easy algorithm.

Was NII up or down? And what sort of a way to run the business is that? You don’t wanna be bothered. So we’ve taken that away by saying we aren’t gonna shoot for the moon on NII. We’re gonna shoot for relative stability and relative predictability.

The one of the reasons why we’ve had been able to look ahead from January to the end of the year and give a reasonably good outlook for NII is because we generally derisked a lot of aspects of NII which could cause it to go in our face. We look at 20 different scenarios. We think about those scenarios, and we derisk a lot of them, and we say, sure. Could we have made an extra five or 10 basis points of NIM? Yeah.

Maybe. If we’d actually allowed ourselves to be exposed and maybe that thing happens, and that’s great, but that’s not what we’re playing for. NII is a nice additional feature of the business. We aren’t trying to dramatically grow the balance sheet. We’re not trying to do dramatically more lending.

We could do a lot more lending if we wanted to. We could drive more deposits if we wanted to, but we want stability because the the real juices in the fee businesses and everything else that we’re doing.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. And and and one of the benefits has been is that while the markets are doing what they’re doing and while you’ve created this more stable NII, the organic growth has started to come out. And in part, that’s due to some of the newer products you guys have developed. So you mentioned Wove earlier. Talk about that innovation side, the newness part, and and how you expect that to aid organic growth going forward.

Robin Vince, CEO, BNY Mellon: Yeah. So this is that, again, going going back to the storyboarding concept and sort of laying out the framework over a longer period of time. We started off by saying, you know what? We can get more organic growth by just sheer hustle. Let us just, like, push harder, work harder, sell harder, drive harder, and actually make more of what we’ve got.

We can get more juice out of this, out of this, squeeze, and so that’s exactly what we did. And so we said to our salespeople, you know what? You should sell more of what you have today, and you should you should hustle more and go see more clients and, you know, do all of those things. And that gave us some value. There’s no question about it.

Then we started to say to them, you know what? You should sell the product that’s next to yours. If you sell clearing, you should probably sell collateral. And why don’t you just throw in a little margin seg with that and all of those types of things? And so that horizontal expansion was the next version of more sales, and that’s been great.

Then we came out with our commercial model, which is a much more deliberate approach to actually doing that. Again, we’re in the early innings of it, but early good signs. And right at the beginning, we started working on certain new products because the heart of any, or company is that’s gonna be thriving is is innovation and new products and creation. And so we started on WOVE in 2022. We launched it, obviously, a couple of years later.

That’s one thing. Buy side trading, we had lots of different trading desks in the company, littered all over the place. It was a deduplication play. And in a little bit of a nod to Amazon Web Services, we had an internal capability that could serve multiple different fiduciaries that serviced our own investment management 2,000,000,000,000, base. But we didn’t offer the service to clients, but it was completely set up because you have to be arm’s length fiduciary in order to be able to do that.

So we said, well, why don’t we externalize it? And so we signed up a client, and we signed up another client, and that will be a process that part of the megatrend of clients. When I have client conversations with a $500,000,000,000 or a hundred billion dollar asset manager, and I was like, oh, you have to have trading desks all around the world? And they’re like, yeah. It’s a pain because I’ve gotta have, like, three people, and one of them’s on vacation, and then one can’t go to the bathroom and all this stuff.

But we’ll do that for you because ours is multiproduct capable. So that’s just another example. But then I talked about our chief product and innovation officer. You know, she’s absolutely lights out, super smart, creative, built a bunch of new stuff in her prior employers, and has come to BNY because she views us as the broadest network effect and the broadest toolkit of things to be able to go create new things. She’s very digital asset savvy, thinks about, you know, true product creation, and I think it’ll be interesting over time to see that.

But I mentioned micro innovations, and I wanna pause on that for one sec because there are a lot of different small things that people don’t notice but yet cumulatively add up to a lot. There’s a lot of adding up of 10,000,000 here, 15,000,000 there associated with these different things. Gonna use collateral as an example. We’ve launched intraday repo. So now the Fed and also market participants can do two can do a morning trade and an afternoon trade or a twenty four hour trade, which used to be that’s created a new market.

It allows us to basically earn fee twice in some cases for that product. We have, created this, liquidity cascade out of our whole liquidity pool to be able to harvest out the specific, deposits that we think are more stable deposits in order to be able to drive that NII stability. But as part of that, we’ve been able to feed our money market fund business. We’ve fed our liquidity direct business. We’ve created collateral one, which is a new form of optimization for our collateral business.

That’s creating significant value for clients that’s attracting them to our collateral business. They can do things with our collateral business they can’t do with anybody else’s. That’s a micro innovation. We don’t have to have some big big fancy thing. We don’t have to put it necessarily in our earnings, but all of these little things, that’s a lot of innovation under the hood, and that’s a cultural thing as well.

Our people are encouraged to innovate. They they see, oh, wow. Well, we’ve got this and this, and if we do that, then we can create this new thing, and that’s a cultural evolution. And more important, when you’ve brought like services together. If you think for a second, if you have multiple different trading desks or you have multiple different custody, systems or you have multiple different client onboardings, you haven’t really given people freedom to be able to create and innovate because they’d be like, I don’t know.

Is that their turf over there? Is it mine? Oh, no. No. No.

To create this new thing, I need a bit of what they’ve got and a bit of what I’ve got. Now I have to broker a peace treaty to be able none of that stuff is enablement of innovation. And so deduplication, platforms operating model, single commercial model, chief commercial officer, better org structure, culture where people are playing for the whole team, not for their individual piece, those things are fuel for innovation and the sort of enablement of it. And that’s what I think we’re in the early stages, and I mean early stages of starting to unlock.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. And let’s add one more component to it, is new market growth. So talk about the private market opportunity and how that applies to the different businesses.

Robin Vince, CEO, BNY Mellon: Yeah. This is a business this is one of the megatrends that that we obviously identified as relevant for ourselves. Obviously, it’s sort of well known. And and I think arguably we’re a bit late to it in terms of private markets. We had not focused as much on that as we could.

We’ve been building a lot in the space, really building our client coverage, in that space, building great. We do a lot of things with those clients, but those clients particularly appreciate being able to do multiple of the things that we do together. So that’s important, and and our products are very well suited. And there are a lot of places where this is true, public markets to private markets, mutual funds to ETF to separate accounts. These trends, these evolutions where our products are very well suited for some part, but they gotta be able to cover the full spectrum is important.

Because one of the other learnings is most clients don’t just wanna do one or the other. So if you’re good at mutual fund custody, you wanna be good at ETF custody, and you wanna be good at separately managed account custody. That was a gap. We bought Archer to fill that gap in that case. And it’s not that it it’s that unless you have all of it and you’re complete, you’re not necessarily as useful because a lot of clients say, I wanna do all three.

I don’t wanna have somebody for this one and somebody for that one. I wanna go somebody who has all of it. Private markets is a little bit like that with public markets as well. There are a lot of players who cross both. They wanna see aggregated positions, aggregated risk management, And so the ability to blend public and private together is is, I think, increasingly important to clients.

Yeah. We come back to the the business lines for a second and kinda drill down one level, starting with market and wealth services. Can you just touch on the most important revenue drivers for Pershing, treasury management, and collateral clearing? I think the the most important revenue drivers on each of those are are really future innovations. I mean, in terms of the the growth pathway, I mean, if if you wanna know the third drivers of revenues, Pershing fires off transaction, volumes.

We saw higher volumes, you know, associated with some of the market movements in March and April. It fires off software now, which it didn’t used to fire off at all, but software’s a thing. Wove is a software sale. It fires off asset value. It fires off net new asset growth.

All of those things are relevant. And then new features and capabilities that, you know, we can go one by one. I mean, we got a lot of different biz we got a lot of different businesses. So, you know, it it depends on the business. But but it is go back to the diversification, which is when you actually look at the company as a whole and you actually add all of those things up, there are a lot of different drivers.

We like that.

Ken Usen, Large Cap Banks Analyst, Autonomous: And in the security servicing business, I did wanna ask you to just touch on a couple of the the sub business within that. So corporate trust and ADRs have been long standing hallmarks. Just talk about what those add to the company and and and how those fare in terms of that organic growth.

Robin Vince, CEO, BNY Mellon: Yeah. They look. They they they add more they add more more margin. They’re good margin businesses. Both of them are.

You know, ADRs is one of those businesses. I mean, it’s a smaller business for us, but it’s one of those businesses that folks have predicted the decline of forever, but yet it never seems to go away. And so given the fact that it’s a good business that runs at a great margin and actually there are opportunities for innovation and when you have geopolitical tensions and, you know, in one couple of years, people are very hot on listing in this place and they’re listed in that place. Oh, no. I’m listed in this one, but I’d sort of like to have a foot in that one.

I mean, of these type and our team’s very agile. So a lot of that’s very international by definition. So we’re talking to clients all over the world about those types of listings. It’s not just ADRs. It’s also GDRs.

So other listings, you know, will help a company in South America to list in Asia or vice versa. All of those things are permutations of it. And then corporate trust, you know, in which issuer services, know, we’re the world’s largest, in in that in that set of businesses. Corporate trust is a great business from a data point of view as well. We have $15,000,000,000,000 worth of of corporate trustee, assets, and that’s a place where the the the data from all the securitizations, the ability to observe things, Super interesting.

It’s a scale business, and it’s also a business which is historically had a lot of people in it and has been quite inefficient from an operating point of view based on the way that it was run. So it’ll be a particularly strong beneficiary of our platform’s operating model and over time AI. It’s also a great generator of deposits because, you know, our deposits so much of our deposits are are operational in nature. You know, if you have to give us the money to pay your coupon and we require you to give it to us a little while in advance, you can’t just not give it to us, or at least there’ll be some nasty consequences for you if you make that choice. And so there’s a lot of integration between some of these operational businesses and our deposits franchise, and Corporate Trust is actually one of the larger generators of deposits.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. Within the servicing ecosystem, can we talk about digital assets? Obviously, a huge focus of the today, whether it’s crypto, tokenization, stablecoin, etcetera, all ties into AI as well. How are you how is BNY approaching the changing ecosystem?

Robin Vince, CEO, BNY Mellon: Well, I I don’t wanna skip AI because AI, I think, might be one of the most important things that happens to the world over the course of the next ten years. I think it’s gonna transform corporate America, and I think it’s gonna transform lots of firms. Very important to get it right. Very, very bad to get it very, very wrong. But on digital assets, look.

It’s a it’s a it’s a great technology. And blockchain distributed, ledgers are are are an ability. I I think about them, and I encourage you to think about them as sort of a multidimensional ledger. It’s not a binary on or off. Do I have it?

Do I not have it? Do I have two or do I have one? Have I lent it? Have I have I do I own it? It’s a much more multifaceted way to be able to record the state of an asset.

And as such, it’s it’s sophisticated, and it’s more capable and can take create a lot of efficiencies. But the best uses of it, think, the in the meantime, in the in in the medium term are gonna be for assets that are very hard to manage in the traditional financial system, clunky, like private market things, loans, real estate, commodities. These things do not operate well in the traditional rails of the financial system. If you wanna you can certainly tokenize equities and tokenize bonds, and and we will, and we’ve been experimenting with those things, but they’re super cheap. And so if you own some equities, you probably don’t have to pay much to transact.

You don’t have to pay much to look after it, and there’s not a lot of vig there for the digital asset disruption. So, you know, welcome the disruption, but at the end of the day, it’s gonna be hard for those disruptors to make a lot of money in that space, at least for the moment. So we we see a little bit of a split in the ecosystem. Not everybody thinks that. Different people talk their own book on it.

Stablecoins, important. Stablecoins are gonna be part of enabling, an online, commerce world from a digital asset point of view, and we need a stable currency in the online world because Bitcoin’s not super stable. Ether’s not super stable. They move up and down. You know, buy something, sell something, and next, you know, the currency itself has changed in value, which is is is is not great for commerce.

So we’re a big traditional rails firm. We’ve invested significantly in digital assets. We think we’re the intersection of the and the on ramp and off ramp point, but we wanna play in that world as well. We’ve been very supportive. We sent one of our, team members up to Capitol Hill to give testimony on stablecoins.

We we support, you know, the vast majority of the big stablecoins out there. Circle talks very publicly about their appreciation of of our support for them. It’s just one example. I only mention it because they do. And, and and we think it’s we think it’s interesting, but it’s really about the tech first and foremost.

And

Ken Usen, Large Cap Banks Analyst, Autonomous: lastly, to sum up on the the businesses investment and wealth management, it’s been getting better from a a margin perspective, but it’s been the toughest from a revenue perspective. You’ve had new leadership there as well. So what needs to happen to improve both the top line results in addition to the work you’re doing on the bottom line?

Robin Vince, CEO, BNY Mellon: Yeah. This is a business that is particularly unfortunate that we operated in a silo, in a bubble. In fact, both businesses were independently bubbled. So wealth was was a bubble. Investments was a bubble.

And then maybe in the ultimate travesty of it is we allowed all of the subsidiary investment management brands because our investment management business is really run through five big brands. Most people don’t know BNY Investments. They know Insight. They know Walter Scott. They know Dreyfus.

They know Newton, and they know Mellon. Those are the brands that makes up the 2,000,000,000,000. And so the fact that we would have siloed bubbles within the siloed bubble in a company that sort of operated generally in silos was not a recipe for success. So breaking those down takes time because there are layers of it in this particular case. New leadership was required, and Jose has arrived.

He’s really just over six months in, so he’s still very much, kinda working the opportunity here. But, it is a top line issue. It’s also a distribution issue. So it’s odd that so little of our own investment product ends up in our distribution channels. We have over $3,000,000,000,000 worth of distribution in Pershing, and it’s tiny percentage of that.

Now we’re open architecture in Pershing. We like being open architecture, so we’re not trying to close it out. But still, there’s real opportunity there, as well that we haven’t tapped into. There’s also opportunity inside into asset servicing clients. You know, we’re the world’s largest asset servicer.

And if you look at some of our competitors, they actually distribute a lot of their own investment management product into their own asset servicing channel. We do not, which is again a bit of a miss. And so we’ve spent more time now that we’ve got new leadership. We’ve spent more time really looking at this, understanding how others do it, and it’s important. The actual manufacturing of the firms underneath is really pretty good.

You know, Insight’s number one in his business. Walter Scott’s a terrific franchise. Dreyfus is a terrific $400,000,000,000 money market funds, super high margin business for marginal, for marginal assets. And so the actual manufacturing capabilities are good, but it’s really been an org model, an organization, and a strategy thing. And that’s really what our focus is.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yeah. So let’s talk a little bit about the the the environment and and some of the metrics you’ve talked about. You you mentioned earlier the goal to try to create a more stable NII environment as part of creating a more stable environment for the revenue trajectory of the company, and it’s been a really good success over the last couple of years. You’ve talked about mid single digit growth this year. Given the environment that we’re in and just the ins and outs of everything, how should we be what do we need to know, and what do we need to be thinking about, like, your expectations of of how that trajects from here and any anything that’s going on in the current environment?

Robin Vince, CEO, BNY Mellon: Sure. So, you know, as a general matter, we’ve sort of been careful to not, like, do fully updated reguidance on a quarterly basis. So we gave guidance at the beginning of the year. As you pointed out, we said mid single digits for NII. Now, Dermot alluded to this a little bit in April when we did our first quarter earnings call, but we have seen more deposits.

It’s not really about the actual rate environment because as Dermot said, our CFO, we sort of took out the rate view from our 2025, NII book by doing work in ’24 so that we were really more insulated from the ups and downs of the yield curve and the specific timings. But the events of earlier in the year did drive volume to us from a deposits point of view. And so I think if you were looking at the mid single digits today, you’d sort of say it would be probably for the year on the higher end of the mid single digits ZIP code. But let me give two caveats to that. Number one is, the third quarter is seasonally slower for deposits, and so that would be our expectation, has been the case generally in the past and would certainly be our expectation as well for this year.

And so you you have to be careful when you look at it quarter by quarter by quarter, which is why I say for the whole year, it was mid single digits now, maybe on the higher end of mid single digit. And and then there’s a flip side to that as well, which I think is relevant as well for the year, which is on the expenses side, which is we’ve deliberately allowed ourselves to run at the high end of the range on the expense guideline. And so people sort of look at our at our observation of one to 2%, and they sort of split in and think, hey. Okay. Maybe it’s one and a half.

And we’ve sort of been running on the high side of that expense, for the year. And that’s deliberate because and I know we can’t say this enough, so therefore it bears repeating. Positive operating leverage is our North Star. So according to what happens in the environment, things like the deposit flows coming in, okay, that’s great. So you know what?

We’ll carry on in doing a little bit more investing. We’ve also had some currency impact. There’s volume related expenses, but we didn’t need to offset the volume related expenses because, okay, that’s alright. We’ve had more revenue. The deposits or inflow is allowing us to be able to do it.

Positive operating leverage North Star, that’s okay to do it. Had the opposite occurred and we had had a softer I was here saying, gosh, it’ll be at the lower end hypothetically of the mid single digits, then you would not see expenses be on the higher end. It’s not that they’re buffeting us around. We’re in control of that destiny, but we’re making deliberate choices because we’re focused on positive operating leverage.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yep. And on the deposit NII is driven by deposits at a at a firm like BNY. Has anything changed with regard to, like, the type of deposits that are coming in or the the mix of them?

Robin Vince, CEO, BNY Mellon: Well, NII is driven by deposits and the assets. And one of the things that we think has been a little bit of a secret source in our NII story, though we talk about it publicly, we’re not trying to make it a secret, is we have three very, very important constituencies in managing that. We have our treasury function. We have our asset investment function, and we have our, kind of liability platform function, which we call Global Liquidity Solutions. And those three teams are focused on driving the ultimate outcome.

And so it isn’t about, wow. Can we drive the asset yield higher or can we drive the deposit yield lower? It’s about how do we optimize for our goal of stable NII that we can look at that that kind of grad obviously, you’d rather have an up year rather than a down year, but, like, how do we construct that, and how do we do it ahead of time so that it fits with our planning? And that’s really been the way that we’ve actually focused on. And then deposits itself, we’ve talked about the fact that we have this $1,600,000,000,000 ecosystem of deposit of cash.

And that cash comes as a result of all of the client interactions across all of our platforms. We invest cash. We help clients invest cash. Treasures, we have LiquidityDirect, which is a portal. By the way, we sell that as a white label service as well, another sort of AWS type parallel, do it ourselves.

We can sell the software to others, which we do. We have another GSIB that uses that software. But because of that large ecosystem, we’re then in a position to say, okay. A little bit like a distillation plant, let’s tap off the stuff that’s exactly right for our deposit base. If you’re gonna give us a volatile deposit here today, gone tomorrow, you want, you know, Fed funds, you know, minus not very much, great.

You sound great custom made for a money market fund. Let’s pop you right in there. But yet if you’re gonna leave the money for a while, if it’s adjacent to another piece of business, whatever the case may be, then we’ll let you go onto our balance sheet. And I use those words advisedly. We’ll let you go onto our balance sheet.

We consider it to be a privilege to be allowed to be on our balance sheet as a deposit. And so it’s that approach to thinking about curating the deposits, which is a critical part of ensuring the right composition and stability as well.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yep. And I wanna come back on the expense point you made. It’s if as you drive towards positive operating leverage as the North Star, in a good revenue environment, it’s always easy to add that spend and still drive it. It’s harder to just pull back. But as you built this incremental flexibility into the business model, how much better or deeper is your ability to pull back outside of just, you know, compensation, which is the most obvious choice?

Robin Vince, CEO, BNY Mellon: Yeah. So it’s it’s much improved, and that’s what the the work of exposing the levers of expenses has been very important to us. And so platforms is part of this as well. We do quarterly platform reviews. We have spend envelopes, which we can adjust.

We have a lot more transparency onto that. And so Dermot, our CFO, is able at any point in time to make adjustments to the trajectory of expenses and to say, you know what? We chose that we were gonna lean in more to that, but you know what? Now we probably won’t, and we’ll sort of pull back a little bit. Constructing our workforce in a way where it has some, agility to it as well.

We have flex. Of course, you know, you’re not suddenly gonna be up 10, down 10 types of swings. You can’t do that on a dime. But being able to pull the levers and tilt the trajectory of expenses is something that we feel within reason is in our control. And so that’s exactly what we allow ourselves to do, which is, you know, last year, we have one set of conditions, and so we say, okay.

We’re gonna lean a little bit more in this direction. The year develops. We make a little adjustment. And so we’re making these adjustments as we go through the year. And so the question people often ask is, okay.

So what’s your guiding north star in terms of how you choose whether or not you’re gonna be at the lower end of the range or allow it to be at the higher end of the range? The answer is positive operating leverage. That’s what we’re focused on.

Ken Usen, Large Cap Banks Analyst, Autonomous: Yep. And and as we wrap up, I wanna talk about capital and usages usage of capital. You have been very, consistent about talking about wanting to maintain very strong levels, you know, way above any regulatory minimums. You talked about this year returning around 100% total capital return. How do you think about just the cascading of organic growth versus dividends versus buybacks?

And how, if at all, would you consider acquisition to be a part of that capital utility?

Robin Vince, CEO, BNY Mellon: Yeah. Sure. So we we like having a conservative balance sheet because if you’re a platforms company, balance sheet is not really meant to be the focus. We’re not trying to drive our balance sheet to be much bigger. When we’re we like our balance sheet, it can experience a little bit of growth over time, but it’s not a strategic objective to make it bigger.

We view it as a great tool and a means to an end to support the rest of the company’s business. Now there are a lot of great uses that we can put our balance sheet to, but that quality that well, we don’t have to worry about BNY. Remember, resilience for us is an incredibly important attribute, and we prize resilience. We celebrate with our operations and engineering teams that resilience is a commercial attribute because it allows clients to say, I don’t worry about them. And if you go back to things like the regional banking crisis, there were two banks that picked up deposits, and there’s a flight to quality.

A lot of people talk about being put in a storm, but there were two banks that were put in the storm in that time. It was JPMorgan and BNY. And because we really focus on making sure that resilience is a commercial attribute to us, and so that’s been sort of how we thought about it. Now the waterfall to your other question is, yeah, invest in the business. Now we don’t need that much capital to invest in the business because we’re more of an expense investment type firm as opposed to a capital investment firm, but we will if we see opportunities to it.

To the extent that we don’t need it, we’re happy to return, of course, after we’ve made sure that we’ve got our capital ratios at that high end of the range, which is kinda where we like it. Now we can flex. You know, market environments move up and down. CAPA ratios can move. We have ranges for a reason, but we like to run the place conservatively.

And then m and a. I would say this is a thing that’s evolved and should continue to evolve, for any company. You know, in 2022, I was pretty categorical, which is, like, we’re not doing any m and a. We’ve gotta get our house in order. We gotta organize ourselves.

My goodness. We’ve got platforms, operating model. We’ve got expense problems. We have all these issues. We gotta get ourselves sorted.

And so we were like, it was a it’s always high bar for m and a. It’s gotta be right. It’s gotta be the right thing. It’s gotta be really additive. But then it was like, I can’t imagine what it would be.

2023, we’re doing work. 2024, we’re doing work. Now we did talk about adding tuck ins if they had special capabilities, and we did the Archer transaction for exactly that reason. Separately managed accounts, I talked about that before. But now we’re in a mode where it’s still a very high bar, but we will be thoughtful if we see ways to make our business get faster and better and and leverage this great chassis that we think we’ve built with platforms operating model, our commercial model, our balance sheet strength, our liquidity strength, our improvements in scale in some of these businesses, our fast organic growth, if there are ways that we can do things to now take advantage of all of that, of course, it’s the responsible thing to do.

Ken Usen, Large Cap Banks Analyst, Autonomous: Very good. Well, we’re out of time. Thank you so much, Robin. Please join me in thanking Robin for joining us today. Thanks, Ken.

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