The Bank of New York Mellon Corporation

Good morning and welcome to the 2019 Third Quarter Earnings Conference Call hosted by BNY Mellon. At this time, all participants are in a listen-only mode. Later, we'll conduct a questions and answer session. Please note that this conference call will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without BNY Mellon's consent. Now I'd like to turn the call over to Magna Polchinska, BNY Mellon's Global Head of Investor Relations. Please go ahead.

Good morning. Today, BNY Mellon released its results for the third quarter of 2019. The earnings press release and the financial highlights presentation to accompany this call are both available on our website at BNYMellon.com. Todd Gibbons, BNY Mellon's interim CEO, will lead the call. Then, Mike Santomasimo, our CFO, will take you through our earnings presentation. Following Mike's remarks, there will be a Q&A session. As a reminder, please limit yourself to two questions. Before we begin, please note that our remarks today may include forward-looking statements. Actual results may differ materially from those indicated or implied by our forward-looking statements as a result of various factors, including those identified in the cautionary statement in the earnings press release, the financial highlights presentation, and in our documents filed with the SEC. all available on our website. Forward-looking statements made on this call speak only as of today, October 16th, 2019, and will not be updated. With that, I will hand over to Todd.

Thank you, Magda. Good morning, everyone. Glad to be back with you. As it's my first time speaking to you as CEO, I will focus my comments on my immediate priorities. as well as my perspectives on our businesses, and we'll only briefly touch on our third quarter results. I'll leave that to Mike. First, let me say how tremendously excited I am to be leading this great organization. During my long career at BY Mellon, I've held leadership roles across risk, finance, client management, and many of our businesses. And I believe that gives me a strong grasp of the fundamentals of our company and what our stakeholders need and expect from us. I'm looking forward to continuing to work with Mike and the rest of the executive committee, as well as all of our employees, to stay on course in positioning our franchise to drive better performance and create sustainable growth. We've got an ambitious agenda, and I strongly believe that we're absolutely on the right path. The improvements we've made to our culture are clear. We're acting with a greater sense of urgency and greater responsiveness, and I'm proud of the team's ability to stay focused through leadership change and to continue to deliver great service to our clients. It's my intention to ensure we maintain a strong performance culture and remain focused on service quality, continue investing in technology and innovation, and improving every aspect of our operations. Through that focus, we have made significant progress in the last few years, which I believe positions us to improve our results over the longer term. Now, while I was head of global client management, as well as a number of our servicing businesses, I've had the pleasure of working closely with our clients. During this period, I've seen us meaningfully improve our services as well as provide the technology and expertise to help them navigate challenges and achieve their goals. Our investments in our operations and technology are improving and broadening our capabilities, and the adjustments we've made to our client coverage model are helping us deepen relationships and identify more opportunities. Before getting into the quarter, let me run through what I'm seeing in our businesses. In asset servicing, we continue to see the opportunity to do more for our clients as changes in the asset management business puts pressure on their operating margins. These trends should offer more outsourcing opportunities in key segments such as alternatives. In terms of what we're actually doing, we're focused on continuously improving quality, which is fundamental. We're also investing in expanding capabilities to serve alternatives such as private equity, credit funds, real estate, and ETFs. For example, we just recently implemented a significant mandate with Goldman Sachs Asset Management, who appointed us to deliver a range of asset services for their newly launched European ETFs, and we are encouraged by our traction in this space. We are building data and analytic solutions to help clients navigate a changing investment management landscape. The basic offering starts with a powerful aggregation capability. We can then apply analytics around that, leveraging our data and analytic solutions technology we enabled a large global asset manager to insource $250 billion of AUM within three months. The client now has a higher level of transparency into cash and positions for the front office trading and has achieved better operational efficiency by leveraging their previous investments in our technology. We think our data and analytics capabilities will be a true differentiator over time. The alliances we're forming will create a more integrated front-to-back operating model. We recently announced a strategic alliance with Bloomberg to integrate our data, analytics, and servicing capabilities with Bloomberg's portfolio management, trading, and compliance platform. This will allow our common clients to experience faster onboarding, higher straight-through processing rates, and more efficient data exchanges. This new partnership comes on the back of the one we announced with BlackRock's Aladdin platform earlier this year. Client reception to our partnerships has been positive as it helps them simplify workflows, improve efficiency, and drive their performance. In Pershing, we're focused on helping our clients drive their business in a dynamic industry. The pipeline of opportunity remains strong, and we onboarded a number of new clients in the broker-dealer and registered investment advisor space. In the high growth wealth and advisory segment, we're investing in technology to improve the client experience, as well as investing in talent and strengthening brand awareness. One of our priorities is to meet emerging client needs as investor preferences drive firms to transform. For example, we're enabling clients to integrate our technology and leverage pre-built business functions such as trading, reporting, and asset movement without them having to make big investments in their own technology. Overall, we're very excited about the potential for Pershing. Moving on to clearance and collateral management, it's a key differentiator for us. Tri-party collateral management balances are up, mainly the result of growth from existing clients and new business, and to a lesser extent from last year's client conversions. We're confident in the organic growth prospects of this business. We are currently rebuilding our platform to give our clients the ability to seamlessly move securities globally, as well as offer enhanced resiliency in data and analytic capabilities not currently available in the market. We think it will significantly boost our ability to attract new market participants, as well as additional business from our existing clients. In corporate trust, we're seeing benefits from the investments we've made in structured products, and we continue to build out capabilities to better serve clients. This is broadening our relationships, especially in the important alternative asset manager segment. In treasury services, we've been refocusing on higher margin and high growth businesses, such as trade, foreign exchange, and our liquidity offering. Our clients consistently tell me our service is excellent, which reflects on the quality of our people. In addition, we're looking to build off the investments we've made in real-time payments. In asset management, we feel good about a number of the underlying strategies and continue to invest in the U.S. and build solutions to meet investor demand. We're actively launching new products across a number of areas, including fixed income products, ESG, enhanced beta, and multi-asset solutions. For example, Alcentra raised 5.5 billion euros for its European Direct Lending Fund, double the minimum target. We're investing in rebranding to consistently use the BNY Mellon brand and make it easier to navigate our multi-boutique model. Lastly, performance has been solid across many of the largest strategies. Moving to wealth management, it's strengthening our banking investment products and creating a strong foundation by investing in people, technology, and platform. Now let me turn briefly to our results for the third quarter. EPS was $1.07. That's up 1% versus a year ago. Total revenue was down 5% year over year, and that was largely driven by net interest revenue. There are a couple of items that impacted both revenue and expense, and Mike will walk you through those in some detail. Our investment services fee lines were up nearly across the board, as the investment decisions we've been making are starting to yield some incremental positive results. Operating margin was once again resilient at 33%. and we continue to deliver strong capital returns to shareholders. With that, let me turn the call over to Mike.