The Bank of New York Mellon Corporation

Stand by, we're about to begin. Good morning and welcome to the 2021 First Quarter Earnings Conference Call hosted by BNY Mellon. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Please note that this conference call and webcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without BNY Mellon's consent. I will now turn the call over to Magna Polchenska, BNY Mellon Investor Relations. Please go ahead.

Good morning. Welcome to BNY Mellon's first quarter 2021 earnings conference call. Today, we will reference our financial highlights presentation available on the investor relations page of our website at bnymellon.com. Todd Gibbons, BNY Mellon's CEO, will lead the call. Then, Emily Portney, our CFO, will take you through our earnings presentation. Following Emily's prepared remarks, there will be a Q&A session. Before we begin, please note that our remarks include forward-looking statements and non-GAAP measures. Information about these statements and non-GAAP measures are available in the earnings , financial supplement, and financial highlights presentation, all available on the investor relations page of our website. Forward-looking statements made on this call speak only as of today, April 16th, 2021, and will not be updated. With that, I will hand over to Tom.

Thank you, Magda, and good morning, everyone. I will touch on a few financial performance highlights and some other business developments and hand it over to Emily to review the results in more detail. But first I wanted to spend a minute discussing the environment in which we're all operating. You know, as I reflect on the past year, the word that keeps coming to mind for me is resilience. Resilience of our business model, our global financial infrastructure, and of course our clients and our employees. Indeed, we saw the resilience of the financial system itself due to the lessons learned from the previous financial crisis and to the quick and decisive action from the government and regulators. And now we're moving from a period of resilience to a period that we are all optimistic will be one of recovery and growth. While we all remain clear-eyed about the challenges that still exist, I am one of many business leaders who see many reasons to be positive in the period ahead when we move past the COVID cloud. The optimism stems from the confluence of several factors including the deployment of the vaccine, potential strength from consumers. Now, in the U.S., households have been saving at extraordinary levels. Currently, the savings rate is running about 14%, and that's more than twice the 30-year average. And the amount held in cash in households and available for spending is around 15% of GDP, which is way above normal times. stimulus and further U.S. government spending plans are likely to accelerate GDP growth. So we expect significant GDP growth going forward, assuming the pandemic is managed as expected. A strong economy is likely to keep activity and assets levels high, and expectations for stronger growth is beginning to be reflected in the steepening new growth. Now, I also wanted to touch on the future of work and general productivity. The pandemic has driven remarkable levels of innovation and technology adoption, and companies have now become accustomed to a new way of working. We've proven our ability to maintain high-quality service for our clients, adopt and deploy new technologies quickly, and collaborate with one another virtually over this past year. We're going to take the best of what we've learned to continue to innovate and drive enhanced value for our clients and our employees. including assessing what our workforce and workplaces will look like. We intend to embrace hybrid working arrangements and define a future of work that continues to position us as an employer of choice in our industry. Now, with that, let me turn to some highlights on our performance, where we see momentum across our businesses. Starting on slide two, we reported revenue of $3.9 billion, fee revenue excluding the impact of money market fee waivers, increased 6% year-over-year against a prior year quarter that had exceptional pandemic-related volume and volatility. Asset servicing and purging particularly benefited from positive client activity as well as market appreciation. Operating margin of 29% is relatively flat year-over-year, not bad considering the significant loss in interest rate revenue. We had a credit provision release of $83 million EPS of $0.97 was down $0.08 from last year, and return on tangible common equity of 16%. Turning to our businesses now, the strength in asset servicing revenue reflects higher markets, robust client volumes, and continued new business momentum. Our open architecture strategy and platforms continue to gain traction with clients, powered by our data and analytics solutions. In the first quarter, a large global asset manager in acquisition mode signed a multi-year agreement for DataVault. That's our cloud-based platform. DataVault allows our clients to integrate acquisitions quickly and easily interact with data to gain actionable insights to help drive their business decisions. We are proud to have been selected by Gabelli Funds to launch its new actively managed ETF, and that's an ESG-themed product. and to have been named the ETF service provider for First Trust SkyBridge's Bitcoin ETF Trust. During the first quarter, our ETF servicing platform launched a record 51 funds, and our ETF assets under custody or administration has now surpassed $1 trillion. We recently also announced the establishment of a new digital assets unit, which is building a multi-asset platform that will allow us to custody traditional as well as digital assets. including cryptocurrencies, in an integrated way. The growing client demand for official assets and improved regulatory clarity presents an opportunity for us to extend our current service offerings over time to this emerging field. Moving to purging and clearing and collateral management, purging benefited from continued elevated transaction volumes, equity market strength, and strong underlying fundamentals. As I mentioned last quarter, We did lose a couple of clients due to consolidation and this together with the low rate environment will impact purging in 2021 and mask the underlying good organic fee growth. In clearing and collateral management, clearing fees remain strong and we expect healthy activity going forward. In collateral management, international fees were buoyant due to new business wins. In addition, as we announced earlier this week, we now accept Chinese bonds as collateral on our tripartite platform through Hong Kong bond connect. With the Chinese fixed income market only expected to grow, demand has been mounting for such a solution, which until now has not existed. This is another example of BNY Mellon's continued innovation to drive value for our clients. Now turning to investment in wealth management, we recently announced the realignment of Mellon's capabilities in fixed income, equity, and multi-asset liquidity management. with Insight, Newton, and Dreyfus Cash, respectively. This will enhance the scale and capabilities of our specialist firms and strengthen their research platforms, operations, as well as global reach. We've had a year of consistent quarterly long-term inflows, and investment performance across our top strategies continues to be strong. In wealth management, higher markets help to drive client assets to a record level of almost $300 billion. We've implemented many positive changes in this business, including new sales teams, a broader investment and banking offering, and new digital capabilities for clients. We are gratified by very high satisfaction scores in our year-end client survey, with all survey categories up year-over-year. Now, our proprietary goals-based planning tool, Advice Path, was recently named a CIO 100 award winner. This award recognizes 100 technology teams across industries that are driving growth through digital transformation. So a lot has been happening to build momentum for growth with existing and new clients. Moving beyond financial performance, I want to spend a minute on ESG, something that is top of mind for our investors, employees, and our clients. We are committed to ensuring that we use our reach, market influence, and resources to address pressing ESG issues. Our goals include offering our clients leading analytical solutions, empowering ESG investors with new investment strategies, and encouraging and enabling ESG financing. Last month, we published our first report on how we're managing the impacts of climate change on our business, prepared in accordance with the Task Force for Climate-Related Financial Disclosures, or TCFD, guidelines. I encourage you to read it as it includes examples of where we are where we have initiatives in place related to climate risks and opportunities, and lays out multi-year metrics and targets, including plans for enhanced disclosure around how we're doing our part to help the environment. Now, let me close with where I opened. The year started with continued extraordinary efforts by the U.S. government and Federal Reserve to address the economic fallout of the pandemic through fiscal and monetary stimulus. Much uncertainty remains, but equity markets have been generally optimistic although somewhat volatile, and longer-term treasury yields have steepened, but the amount of liquidity in the system and inflows into money market funds have driven short-term rates lower, in some cases even negative. So there are many positive factors that support our business model, but short-term rates continue to be a challenge. Our business has proven to be resilient, and we're well poised for organic growth. Moreover, we continue to bring innovative solutions to the market to help our clients and help them grow. With that, I'll hand it over to Emily to review our results in more detail.