Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of New York Mellon Corp (BK, Financial) reported solid EPS growth, with earnings per share of $1.52, up 16% year over year.
- Total revenue increased by 2% year over year to $4.6 billion, driven by a 5% growth in investment services fees.
- The company achieved a return on tangible common equity of 25%, showcasing strong financial performance.
- BNY Mellon Corp (BK) increased its quarterly common dividend by 12% to $0.47 per share.
- The company secured significant new mandates, including a premier global asset manager with over $100 billion in assets under management and a collaboration with AIA and BlackRock.
Negative Points
- Net interest income decreased by 6% year over year, reflecting changes in balance sheet mix.
- Expenses, excluding notable items, increased by 1%, indicating higher investments in people and technology.
- The company experienced a 4% decline in net new assets for Pershing, reflecting ongoing de-conversion of lost business.
- Investment management and performance fees were flat, showing no growth in this segment.
- The company remains cautious about the second half of the year, expecting a seasonally lower third quarter and maintaining a down 10% NII outlook for the full year 2024.
Q & A Highlights
Q: Can you walk us through the moving pieces for NII in the second half, including seasonality and any over-earning in the first quarter?
A: Historically, Q1 and Q2 are strong quarters, while Q3 is seasonally lower due to reduced client activity. Despite outperforming expectations in the first half, we remain cautious. The market's outlook on rate cuts and client activity in Q3 will influence our NII guidance.
Q: How do you expect the size and mix of deposits to change in the second half?
A: We anticipate a decline in overall deposit balances, particularly in non-interest-bearing deposits. This will likely result in a slight decrease in NII. Our focus remains on managing liquidity and optimizing the balance sheet mix.
Q: Can you parse out the impact of higher clearance and collateral management volumes on revenue growth?
A: It's a combination of increased client activity due to market volatility and new business wins. Our investments in innovation and international expansion have also contributed to this growth.
Q: What is the net impact of T+1 settlement on your business?
A: The P&L impact is minimal. The primary benefit is the opportunity to deepen client relationships by helping them navigate this significant market change. It also enhances market efficiency and reduces risk.
Q: How does the balance sheet positioning affect NII if the Fed cuts rates?
A: Our balance sheet is well-positioned for rate cuts, with cumulative betas in a good range. Small rate cuts are not expected to significantly impact NII, as our book is largely institutional and rates are passed on to clients.
Q: What are the drivers of fee revenue growth in Pershing and other segments?
A: Fee revenue growth is driven by organic growth, new client wins, and the integration of multiple BNY capabilities into comprehensive solutions. Our One BNY initiative and investments in technology, like the Wove platform, are also key contributors.
Q: Can you quantify the benefit from elevated repo activity and its durability?
A: Repo activity contributes about 5% to our NII. We are a top-three provider in this space and continue to innovate for clients. The global scale of our repo services and integration with other BNY capabilities support its durability.
Q: How are you breaking down silos within BNY to deliver more integrated solutions?
A: We focus on culture and execution. By investing in our people and fostering a collaborative environment, we can deliver integrated solutions that meet client needs. This approach is reflected in our One BNY initiative and the success of bundled offerings.
Q: What is the outlook for operating leverage and expense management?
A: We aim to deliver positive operating leverage by running the company better and maintaining expense discipline. Investments in technology and efficiency improvements are key to achieving this, even in a challenging NII environment.
Q: How do you plan to achieve the 25% margin target in Investment and Wealth Management?
A: We have shown good expense discipline and made strategic investments in distribution and fixed income. The addition of new leadership and continued focus on efficiency will help us achieve the 25% margin target over the next few years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
