The Bank of New York Mellon Corporation

Please stand by, we're about to begin. Good morning and welcome to the 2021 Third 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 Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our third quarter earnings conference call. Today, we will reference our financial highlights presentation, which can be found on the investor relations page of our website at BNYMellon.com. Todd Gibbons, our Chief Executive Officer, will open with his remarks Then Emily Portney, our chief financial officer, will take you through the presentation. Following their 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, October 19, 2021, and will not be updated. With that, I will turn it over to Todd.

Thank you, Marius, and good morning, everyone. I'll touch on a few highlights before I hand it over to Emily to review our third quarter financial results, and she'll give you the outlook for the remainder of the year in more detail as well. Our financial performance this quarter reflects healthy and broad-based organic growth across our businesses, as well as a supportive global markets backdrop. Now, if you refer to slide two of our financial highlights presentation, we reported EPS of $1.04 and generated a return on tangible common equity of 17%. Revenue was $4 billion, up 5% year-over-year, and fee revenue was up 6% year-over-year, That would have been 11% if you excluded the impact of money market fee waivers. This fee growth included almost 3% of organic growth across our franchise. During the quarter, we returned roughly $2.3 billion of capital to our shareholders, including almost $300 million of common dividends and $2 billion of buybacks. Our continued focus on innovation has led us to announce several groundbreaking new solutions this quarter that will meaningfully improve the client experience and represent exciting growth opportunities for us. Let me start with asset servicing. In the third quarter, we continue to see strong sales momentum. Year to date, wins are up almost 40% versus a year ago, and we are winning larger, more complex deals that span our product offering as clients increasingly see the value we can provide across the value chain. We had a number of exciting business wins this quarter, but one example I'd like to highlight is the work we're doing for Oak Hill Advisors, a leading alternatives investment firm. Oak Hill was receiving fund admin services from one of our competitors and performing middle office functions in-house. Due to our deep expertise and our ability to offer them a seamless solution across multiple services, we were able to win both mandates. This mandate is a real testament to our differentiated capabilities and the strength of our alternative servicing platform, which is seeing very nice fee growth this year of 10% plus. And we remain excited about our ability to scale this business and the growth opportunity for us ahead of us. We're also continue to see good momentum in ETF servicing where year to date, we have already helped clients launch more funds than during all of 2020. And then in our data and analytics business, our capabilities continue to resonate with our clients. This quarter, we signed two additional large asset manager clients to our next generation data management platform for what we call the Data Vault. And another large global asset manager went live bringing the total number of clients signed up or mandated to the vault to six. And we're also thrilled about an extension of our partnership with the Florida State Board of Administration, as they look to leverage our ESG data analytics app into their full investment cycle for 30 plus funds, spanning about $250 billion in assets under management. Now moving on to markets and wealth infrastructure businesses, Pershing had another good quarter and it was on the back of continued organic growth and accounts and new client assets. Over the last 12 months, Pershing generated over $100 billion of new assets, despite the headwind of the few clients lost to consolidation that we've previously mentioned. To give you just one example of our differentiated capabilities and the power of our broader interconnected franchise, a multi-billion dollar wealth management client recently approached Pershing for a strategic partner that can provide a broad set of integrated solutions. In a collaboration between our investment management, our wealth management, and Pershing businesses, we designed a series of risk-based models and turnkey investment solutions that are more cost-effective, tax-efficient, and portable for the end investors. This innovative solution, combined with our leading custodial services and technology, made Pershing the provider of choice. But we're not resting there. This past week, we announced the launch of a new business unit within Pershing, which we're calling Pershing X. This unit will deliver the industry's leading end-to-end platform in the wealth advisory space, offering a comprehensive set of advisory capabilities and helping financial services firms solve the challenge of managing multiple and disconnected technology tools and data sets for their advisors, fueling our clients and therefore our growth. Today, we're already the leading provider of custody and clearing services. And by adding front-end capabilities, Pershing will become uniquely well-positioned with RIAs and the broader wealth tech segment to capture share in one of the fastest growing segments in financial services. I'm also thrilled to welcome Ainsley Simmons to BNY Mellon, who will lead this effort for us. Ainsley has been a transformative leader in the advisory space, for 20 years. She has extensive experience across wealth management and digital, and she has helped launch several successful fintechs. Now, Pershing X is one of our most ambitious multi-year projects to date. The combination of our planned investments and the talent that we recruited, combined with the leading platform that we already have, will meaningfully enhance Pershing's future growth profile. In treasury services, we continue to see healthy growth in payment volumes. on the back of an improving global economy and net new business. In September, we announced that Verizon has become the first corporate client to roll out BNY Mellon's innovative real-time e-bills and payments functionality to its customers. Now, we've spoken about this a few times about the capability in the past, and we're just incredibly excited about its future. We see enormous opportunity across our client roster, as more retail banks enable their customers to receive and pay e-bills via the real-time payments network. As some of you have seen, CEOs from 23 of the largest banks in the country, including myself, signed a letter committing to bring these capabilities to the market. And we expect that 40% of digitally enabled U.S. consumer accounts will eventually have this functionality by year-end. With over 15 billion bills paid annually within the U.S., many of which are still paper-based, This ecosystem is ripe for disruption, which our innovative capability is built to address at scale. And we are uniquely positioned in the market as we don't compete with other banks in consumer banking or card issuing. As a result of our leadership in this space, we were recently recognized by the banker as the best transaction bank in payments. It's a real honor and we think it's just the beginning, so a lot more to come in this space. Turning to clearing and collateral management, the business continues to benefit from the higher collateral management balances. In fact, they reach a record $5 trillion at one point this quarter. Outside the U.S., we are seeing growth as clients continue to migrate from bilateral to tri-party. And domestically, recent growth has been driven by the elevated utilization of the Fed's reverse repo facility, where we are the sole clearer. Globally, we continue to implement new capabilities that allow clients to more efficiently mobilize collateral interoperability between our U.S. and international platforms and vice versa as part of our future of collateral program. Additionally, this quarter, we were the first bank to add agency MBS as collateral on overnight cleared repo transactions, and these are done via the Fixed Income Clearing Corporation's new general collateral-sponsored repo program. This new capability expands the universe of clients that now can indirectly transact with central counterparties as well as the scope of eligible collateral. And by sponsoring these transactions, we help our clients reduce costs and free up capital that could not otherwise be available on a bilateral basis. Last but not least, the recent deadlines for the phase five of non-cleared margin rules really differentiated us in the market and validated the multi-year investments we've been making in automation and client experience. While many across the industry really struggled and were ultimately unable to repaper all their counterparty relationships in time to meet these go-live deadlines at the end of September, BNY Mellon was lauded for having a more streamlined process for client onboarding experience and for having digitized and automated the collateral scheduled negotiation and amendment process. Once again, our automation has enabled our clients to do things better, faster, and cheaper. In markets, client volumes remain very strong on the back of continued organic growth, offsetting the headwind of lower volatility. This quarter, we also rolled out several enhancements to our liquidity direct platform that gives clients additional short-term investment options. Clients can now seamlessly invest their cash in commercial paper and ultra-short duration fixed income ETFs, and also now have the ability to select money market funds based on their ESG investing criteria and preferences, leveraging our ESG data analytics app. While still early days, client feedback so far has been extremely positive. Pivoting to our investment and wealth management business, in investment management, we saw our sixth consecutive quarter of net inflows into long-term products. And our initial suite of eight index ETFs, including the industry's first true zero fee ETFs in the largest equity and fixed income ETF categories, now exceeds $1 billion of AUM and is growing quickly. And we recently launched our first active ETF, the BMI Mellon Ultra Short Income ETF, sub-advised by Dreyfus. On the 1st of September, we successfully completed the transition of almost $200 billion of Mellon's AUM and over 2000 client mandates into Insight and Newton, as well as the integration of Mellon's cash capabilities with Dreyfus to drive further investment specialization at scale. This realignment positions us to better meet client's needs. It creates greater scale and it enhances the differentiation in the value proposition of our investment firms. Not only are we pleased with the timely completion of this project, but the feedback from clients and consultants has been very encouraging and we have experienced virtually no client attrition during this transition. And finally, in wealth management, the business continues to execute on its clear three-pronged strategy to focus on client acquisition, expand the investment and banking offering, and invest in technology to drive efficiency. Year-to-date, we've acquired about 40% more clients than over the same time period last year, and the average size of our new clients is up by over 20%. The business saw another strong quarter of net inflows and continued growth across lending and deposit products, and our investment performance remains strong. And so in summary, we're intensely focused on driving innovation across the franchise. In fact, we were recently named among Fast Company's 100 Best Workplaces for Innovators, a testament to our forward-thinking culture and our continued investments in our people, technology, efficiency, and growth. We're pleased with the continued pickup in organic growth, and we're continuing to make the investments necessary to drive further growth and efficiency. So with that, I'll hand it over to Emily.