The Bank of New York Mellon Corporation

Good morning and welcome to the 2021 Second 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 Marius Merz, BNY Mellon Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone. Welcome to BNY Mellon's second 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 the 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 press release, 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, July 15th, 2021, and will not be updated. With that, I will hand it over to Todd.

Thank you, Marius, and good morning, everyone. Now, I'm going to touch on a few of the highlights before I hand it over to Emily, and she'll review our second quarter financial results and the outlook for the second half of the year in more detail. so if we refer to slide two of the financial highlights presentation we reported eps of a dollar thirteen that's on four billion dollars of revenue and we generated a return on tangible common equity of nineteen percent fee revenue was up four percent year over year and it was up ten percent excluding the impact of money market fee waivers average deposits were down one percent quarter over quarter This together with strong capital generation drove an approximately 20 basis point increase in our tier one leverage ratio. And we're pleased with the results of this year's supervisory stress tests, which once again demonstrated the resilience of our business model and the strength of our balance sheet even under severe stress. And we also welcome the Fed's decision to lift the recent restrictions on common stock dividends and share repurchases at the end of June. Now, taking a step back for a look at the broader operating environment, we continue to be impacted by the significant amount of excess cash in the system. We welcome the Fed's decision to raise the IOER and the overnight reverse repo rates by five basis points last month. That provided a bit of support to short-term rates, although they continue to be exceptionally low by historical standards. Money market funds take up of the Fed's reverse repo facility increased from approximately $500 billion prior to the Fed's action to north of $750 billion, and they actually spiked to almost $1 trillion at quarter end. This means that somewhere between 15 and 20% of total U.S. money market fund assets are being parked at the Fed, earning five basis points. Now, given the significant amount of excess cash in the system, and the expectation for further Fed balance sheet expansion. Bank balance sheets will continue to be under pressure, but money market funds may provide some relief. Now, let's turn to a few highlights across the franchise, and I'll start with asset servicing. In asset servicing, we continue to see good momentum as clients increasingly transform their operating models. and they're looking to us for open, modular, front to back solutions, including our leading data and analytics solutions that they can build their own businesses on. As an example, we were awarded new business from Lockheed Martin, and it was led by asset servicing, but it really leveraged our capabilities across the enterprise. We were awarded custody and a full suite of related services as Lockheed was looking to consolidate providers across custody and hedge fund administration. This large corporate asset owner win demonstrates the power of our Omni offering to bring a wide breadth of services, which includes data and analytics, leading FinTech partnerships, and other capabilities from across the enterprise together, which happen to differentiate us from our competitors in this process. We also continue to drive innovation in digital assets. We are excited to have recently been mandated by Grayscale as the world's largest digital currency asset manager to provide fund accounting and administrative services for the Bitcoin Trust. Once conversion to an ETF is SEC approved, we will be able to service the product as an ETF as well, while also providing our unique transfer agency and ETF basket creation services. On ETF more broadly, we continue to see good momentum in ETF servicing with ETF AUCA reaching $1.1 trillion at the end of June. And we've now helped to launch over 100 ETFs year to date. We've also continued to strengthen our capabilities through additional partnerships with leading fintechs. And last week, we announced the acquisition of Milestone. This acquisition will help us advance digitization and automation of core accounting and asset servicing capabilities. If you recall, roughly about a year ago, we formed an elite alliance with Milestone to address an industry need for greater fund oversight and resilience. Following on the success of this alliance, we saw an opportunity to build on the strategic relationship and further our capabilities in OCIO services cash allocation, and fair value controls. I'd also like to highlight our recently announced partnerships with Sapphire and Episod, because both are terrific examples of how we are using open architecture to automate and digitize operations, improve the client experience, and driving efficiencies. Moving on to our markets infrastructure businesses, Pershing had another strong quarter benefiting from equity market strength and continued strong underlying fundamentals. The number of clearing accounts continues to grow at a healthy clip, and we saw strong net new asset flows, and the sales pipeline there remains robust. In May, we reshaped Pershing's operating model into two segments, institutional solutions and wealth solutions. And we did that to organize around our clients and align our expertise to best serve their needs. Aligning around these two segments enables us to focus our people, tech investments, and process improvements to fuel growth. Institutional Solutions serves capital markets firms, investment banks, hedge funds, and alternative investment managers. Pershing's institutional platform provides clients with a single, seamless experience backed by the strength and scale of VNY Mellon, offering financing, collateral management, global trade execution, securities lending, and syndicate capabilities. Now, Wealth Solutions addresses the evolving and converging needs of our wealth-minded broker-dealer and RIA clients by delivering improved lending, digitized account opening, and streamlined asset transfers. Given the rapid growth in the wealth advisory segment, we are making significant new investments to further build out our advisory capabilities. In markets, we were able to offset some of the headwinds from meaningfully lower volatility and narrowing spreads by growing our client volume significantly, reflecting the success of the initiatives we put in place to strengthen our capabilities and improve client targeting across our investment services business. In fact, last week, Euromoney ranked us number one in 18 categories of its 2021 FX survey, And for the first time, we claimed the number one spot as real money overall market leader globally. In treasury services, we saw strong growth in quarterly payment volumes compared to the prior year. And the business experienced healthy client wins in payments, liquidity, and trade across all geographic regions. In June, we introduced cross-currency suites, the latest addition to our rapidly expanding liquidity management product suite. And earlier in May, we launched the first of its kind real-time e-bill and payment solution that we talked about in the past. We're the first bank leveraging the New York Clearinghouse's real-time payments network to provide corporations with an instant digital consumer bill pay service. And today we're actively collaborating with multiple builders and retail banks to drive the adoption of this new functionality. Our production pilots will continue this year, and we're planning to scale them more broadly into 2022. In investment management, we had our fifth consecutive quarter of net inflows into long-term products. We continue to see strong net inflows into cash products, and we ended the quarter with record AUM. We've been making good progress in our realignment to transfer Mellon capabilities in fixed income, equity and multi-asset and liquidity management to Insight, Newton and Dreyfus Cash respectively. And that was the purpose is to bring specialist investment capabilities at scale. And we remain on track for completion of this in the third quarter. We're pleased to see that we're already starting to drive efficiencies and feedback from clients and industry consultants has been quite positive. And last month, Euan Munro joined us as the new head of new. Euan brings three decades of experience with a proven track record in the investment industry, including extensive experience leading one of the UK's largest asset managers with a presence in institutional intermediary and retail markets. And finally, in wealth management, we saw another quarter of strong client asset flows And client assets exceeded 300 billion for the first time. The Financial Times named BNY Mellon the best private bank for digital wealth planning in North America. And they're recognizing there our wealth online client portal and our proprietary goals-based planning tool we call Advice Path. Taken together, we're pleased with the increased momentum that we're seeing across the franchise, which is resulting in organic feed load in excess of our one and a half percent outlook for the year. Our strong performance in the first half of the year and significant capital generation have put us in the position to further accelerate investments in a number of meaningful growth and modernization opportunities in the second half. Now, before I turn it over to Emily to review our second quarter results and the outlook for the second half of the year in more detail, I'd like to provide a quick update on our plans for the return of the office and the future of the workplace. Starting in September, we're planning to begin safely opening our offices around the world, although dates and details may vary by location as we continue to monitor and as conditions evolve. We believe that in the process, we have an opportunity to create a new and better way of working that makes us feel more connected, balanced, and productive while maintaining flexibility. The majority of our almost 50,000 colleagues around the world will follow a hybrid model that allows for a flexible mix of remote and in-person experiences going forward. With that, I'll hand it over to Emily.