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The Bank of New York Mellon Corporation (BNY Mellon) is a global financial services company that provides a range of services across three principal business segments: Securities Services, Market and Wealth Services, and Investment and Wealth Management. BNY Mellon offers custody, fund accounting, administration, clearing, payment, investment strategies, and wealth planning services to its clients . The company is known for its high-margin businesses, particularly within the Market and Wealth Services segment, which includes Treasury Services and Pershing .
- Securities Services - Provides custody, fund accounting, and administration services through Asset Servicing and Issuer Services.
- Market and Wealth Services - Offers clearing, custody, and payment services, including Pershing, Treasury Services, and Clearance and Collateral Management.
- Investment and Wealth Management - Delivers investment strategies and wealth planning services through Investment Management and Wealth Management.
What went well
- Strong growth in the Wove platform, with expected incremental revenue of $60 million to $70 million in 2025 and 36 clients on the platform with 41 signed contracts, indicating successful expansion in digital offerings.
- Pershing business showing strong momentum, expecting to grow net new assets at mid-single digits through the cycle, tapping into the fast-growing U.S. wealth market with $3 trillion worth of wealth assets.
- Maintaining leadership in Asset Servicing, with continued momentum, investments in infrastructure, and expectation to maintain its position as the world's largest custodian, suggesting ability to navigate market challenges and capitalize on growth opportunities.
Q&A Summary
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Platform Model's Impact on Margins
Q: Will the platform model improve margins and fee growth?
A: Management is confident that the platform operating model will drive incremental top-line growth, enhance fee revenue resiliency, and improve efficiency. They expect to sustainably hit pretax margin and ROE targets through the cycle, with more significant benefits materializing in 2026 and beyond as 80% of employees transition to the model by end of 2025. -
Fee Operating Leverage Focus
Q: How important is fee operating leverage to the firm?
A: While total operating leverage is the "north star," management is also focused on delivering positive fee operating leverage through the cycle. They have multiple levers, including managing NII, fees, and expenses, and feel they have flexibility to ensure positive outcomes even if the fee outlook falls short. -
Net Interest Income Outlook
Q: What are the NII expectations and deposit mix shifts?
A: Management expects net interest income to grow at mid-single digits in 2025, driven by proactive balance sheet management on the asset side, including rolling over 2% yielding assets into current market rates. They anticipate non-interest-bearing deposits (NIBs) to moderate to $44‑46 billion for the full year, with balances expected to be roughly flat. -
Growth in Pershing and Wove
Q: What's driving net new assets at Pershing and progress on Wove?
A: Pershing saw a solid rebound in net new assets, aiming for mid-single-digit growth through the cycle. Growth is driven by large RIA firms and broker-dealers, with 36 clients on the Wove platform and 41 signed contracts. They have guided for incremental Wove revenue of $60‑70 million in 2025, up from a $75 million exit rate in 2024. -
Risks to Business Outlook
Q: What primary risks is management monitoring?
A: Management is monitoring risks including geopolitical tensions, potential downturns or recessions, higher interest rates, and cyber risk. They mention wars in two continents, policy uncertainties, and the impact of higher rates as factors that could create complexity. Despite these risks, they remain pro-growth and believe their platforms position them to help clients navigate uncertainties. -
Impact of Trading Volatility on Fees
Q: How does increased trading volatility affect fee revenue growth?
A: Increased trading volatility benefits businesses like Clearance and Collateral Management, resulting in higher transaction volumes and fees. Treasury issuance has been a significant tailwind, setting records in transaction volumes and positively impacting servicing fee revenue growth over the past couple of years.
Guidance Changes
Quarterly guidance for Q1 2025:
- Staff expenses: Elevated (no prior guidance)
Annual guidance for FY 2025:
- Net Interest Income (NII): Up mid-single-digit percentage points year-over-year (raised from “no headwind expected” for 2025 )
- Fee revenue: Expected to be up year-over-year (no prior guidance)
- Expenses (excluding notable items): 1% to 2% year-over-year growth (raised from “roughly flat” )
- Effective tax rate: 22% to 23% (lowered from 23% to 24% )
- Capital deployment: 100%, plus or minus, of 2025 earnings returned to shareholders (lowered from 100% or more )
- Tier 1 leverage ratio: 5.5% to 6% (no prior guidance)
- Can you provide specific metrics on how your increased investment in AI has translated into tangible improvements in efficiency or revenue growth, and how do you measure the return on this investment within your platform strategy?
- Given the decline in the number of sponsored depository receipt programs, what is your strategy to address this trend, and how do you plan to mitigate its potential impact on your revenues from this business segment?
- With the acquisition of Archer to enhance your managed account solutions, how will you ensure that the integration positively impacts multiple lines of business as expected, and what challenges do you foresee in achieving the anticipated synergies?
- Considering your commitment to return 100% plus of net earnings to shareholders through buybacks and dividends, how do you balance this capital return with the need to invest in growth initiatives, especially in an unfavorable market backdrop that could affect ROE resiliency?
- Your strong EPS growth has been partly attributed to favorable market conditions; can you provide more transparency on underlying client growth metrics such as new client acquisitions, revenue per client, or cross-selling success to demonstrate the sustainability of your performance?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2024
- Guidance:
- Net Interest Income (NII): Expected to be slightly below Q3 results (~$1 billion) for Q4 2024. No headwind expected for 2025 .
- Expenses: Core expenses, excluding notable items, to be roughly flat for FY 2024 .
- Effective Tax Rate: At the lower end of 23% to 24% for FY 2024 .
- Capital Return: 100% or more of FY 2024 earnings to be returned to shareholders .
- Pretax Margin: Aim to maintain 33% through the cycle .
- Return on Tangible Common Equity (ROTCE): Medium-term target of ≥23% .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Net Interest Income (NII): Expected to be down 10% year-over-year for FY 2024 .
- Expenses: Expected to be roughly flat for FY 2024 .
- Effective Tax Rate: Between 23% and 24% for FY 2024 .
- Capital Returns: 100% or more of FY 2024 earnings to be returned to shareholders .
- Dividend: 12% increase declared for Q3 2024 .
- Operating Leverage: Aim for positive operating leverage for FY 2024 .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Net Interest Income (NII): Expected to be down 10% year-over-year for FY 2024 .
- Expenses: Expected to be flat for FY 2024 .
- Effective Tax Rate: Between 23% and 24% for FY 2024 .
- Capital Return: 100% or more of FY 2024 earnings to be returned to shareholders .
- Operating Leverage: Aim for some positive operating leverage for FY 2024 .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Net Interest Income (NII): Expected to decrease by approximately 10% year-over-year for FY 2024 .
- Fee Revenue Growth: Expected to turn positive in FY 2024 .
- Expenses: Expected to remain roughly flat for FY 2024 .
- Capital Management: Return north of 100% of FY 2024 earnings to shareholders .
- Operating Leverage: Aim to at least break even from an operating leverage perspective for FY 2024 .
Recent developments and announcements about BK.
Financial Reporting
- Revenue and Profit: BK reported a total revenue of $4.8 billion for the fourth quarter, marking an 11% increase year-over-year. Fee revenue also rose by 9%, driven by growth in investment services fees and higher market values.
- Net Interest Income: This increased by 8% year-over-year, primarily due to higher yields on investment securities and balance sheet growth.
- Expenses: Total expenses were down 16% year-over-year, largely due to the FDIC special assessment recorded in the previous year. Excluding notable items, expenses increased by 2%.
- Earnings Per Share: Reported earnings per share were $1.54, with an adjusted figure of $1.72, reflecting a 33% increase year-over-year.
- 2025 Outlook: BK expects positive operating leverage to continue as a key focus, with net interest income projected to rise by mid-single-digit percentages. Fee revenue is also expected to grow, with expenses increasing by 1% to 2% year-over-year, excluding notable items.
- Strategic Initiatives: The company is advancing its platform operating model, aiming to have 80% of employees integrated by the end of 2025. This transition is expected to enhance fee revenue growth resilience and improve margins and return on equity.
- Market Conditions: BK is navigating a complex market environment with geopolitical risks and interest rate volatility. However, the company remains optimistic about growth opportunities, particularly in the U.S. wealth market and digital assets.
- Strategic Initiatives: BK is focusing on expanding its platform strategy, which includes leveraging AI and digital technologies to drive efficiency and growth. The company is also enhancing its capabilities in asset servicing and wealth management.
- Fee Revenue Sensitivity: Analysts inquired about the impact of market conditions on fee revenue. Management indicated that a 5% market change could affect fees by approximately $70 million, highlighting the company's sensitivity to market fluctuations.
- Platform Strategy: Analysts were interested in the progress of BK's platform strategy. Management emphasized the potential for this strategy to drive incremental top-line growth and improve operational efficiency.
- Total Revenue: $4.8 billion, an increase of 11% year-over-year.
- Net Income: $1.13 billion applicable to common shareholders, marking a 598% increase from the previous year.
- Return on Tangible Common Equity (ROTCE): 23.3%, or 26.1% when adjusted for notable items.
- Pre-tax Operating Margin: 30%, or 34% when adjusted for notable items.
- Revenue Growth: Driven by a 9% increase in investment services fees and a 24% increase in foreign exchange revenue.
- Expense Management: Noninterest expenses decreased by 16% year-over-year, though they increased by 2% when excluding notable items.
- Capital Returns: BNY returned $1.1 billion to common shareholders, including $349 million in dividends and $750 million in share repurchases.
- Average Deposits: $286 billion, up 5% year-over-year.
- Tier 1 Leverage Ratio: 5.7%.
Earnings Call
The Bank of New York Mellon Corporation (BK) recently held its earnings call for the fourth quarter of 2024, providing insights into its financial performance and strategic direction for 2025. Here are the key highlights from the call:
Financial Performance
Management’s Forward Guidance
Market Conditions and Strategic Initiatives
Analyst Questions and Management Responses
Overall, BK is entering 2025 with strong momentum, focusing on strategic initiatives to enhance growth and operational efficiency while navigating a challenging market environment.
Earnings Report
The Bank of New York Mellon Corporation (BNY) has released its financial results for the fourth quarter of 2024. Earnings Per Common Share were reported at $1.54, or $1.72 when adjusted for notable items. For the full year 2024, earnings per common share were $5.80, or $6.03 as adjusted.
Key Financial Highlights:
Significant Trends:
Balance Sheet and Capital Ratios:
These results reflect BNY's strong financial performance and strategic execution, positioning the company well as it enters 2025 with momentum.
Corporate Leadership
Leadership Change
Departure: Senthil Kumar, Senior Executive Vice President and Chief Risk Officer, is leaving his position. The terms of his departure are consistent with the company's policies.
Reason: The document does not specify the reason for Senthil Kumar's departure.
Stepping Up: Rajashree Datta will join as Deputy Chief Risk Officer on December 15, 2024, and will succeed Senthil Kumar as Chief Risk Officer in the first half of 2025 .