The Bank of New York Mellon Corporation

Good morning and welcome to the 2021 Fourth 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 fourth quarter 2021 earnings 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 earnings 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 January 18, 2022, and will not be updated. With that, I will turn it over to Todd.

Thanks Marius. And thank you everyone for joining us this morning. Emily will review our fourth quarter results and spend some time on our 2022 outlook in a moment. But before that, I'd like to touch on a few financial performance highlights for the full year and talk about the progress the firm has made across a number of dimensions in 2021. Last year was in many regards remarkable for BNY Mellon, and I couldn't be prouder of the resilience, dedication, and innovative mindset of our management team and our exceptional colleagues around the world. You know, as I reflected on the year, there were three broad themes that really stood out to me. One was our outstanding sales performance and improved organic growth. The second one was the number of new and innovative solutions that we're working on, and in many cases have already brought to the market. And the third was our approved effectiveness in harnessing our unique one BNY melon culture and the capabilities that we have by delivering more comprehensive and differentiated solutions to our clients. Now I'll expand a little bit at each of these points in a moment. You know, together with a supportive market backdrop and a benign credit environment, our meaningfully improved organic growth has allowed us to more than offset the stiff headwind that we had from lower interest rates and deliver a solid and improved financial performance in 2021. Referring to slide two of our financial highlights presentation, we reported EPS of $4.14 for the full year of 2021. That's up 8% year-over-year. Revenue of $15.9 billion was up slightly year-over-year as two plus percent organic growth and the benefit of higher market levels offset lower net interest revenue and higher fee waivers. Fee revenue was up 4% year over year and about 9% excluding the impact of money market fee waivers. And expenses were up 5% year over year, reflecting our investments as well as the quality of revenue that we generated. Our pre-tax margin of 29% as well as our return on tangible common equity of 17% were roughly in line with the prior year. And we returned $5.7 billion of capital or 160% of earnings to our shareholders through common dividends and $4.6 billion of share repurchases. You know, as I said earlier, 2021 was marked by outstanding sales performance and a meaningful increase in organic growth. In fact, organic growth was the highest that we've seen in a number of years. In asset servicing, wins were up almost 50% compared to 2020, which has produced a meaningful pipeline of AUCA. Our average deal size was up as we went larger and more complex businesses and, just as importantly, our retention rates also continue to improve. We believe this success is a testament to our service quality and it's also a reflection of our broader capabilities, as well as our open architecture framework, which is resonating with our clients and it's differentiating us in the marketplace. I'd also like to call out our ETF business, which has delivered substantial growth and gained market share. Our ETF AUCA grew by roughly 30%, which outpaced the broader market. And that doesn't yet include our recent win of approximately $350 billion of BlackRock's iShares. Issuer services delivered meaningful organic growth on the back of the resumption of depository receipt issuance and dividend activity following what had been a COVID-related slowdown in 2020. And it continued strong sales performance. Virgin gathered record new assets of about $160 billion and continue to grow active clearing accounts in the mid-single digits, despite the headwind of deconverting a couple of large clients in the second half of the year. Growth has been notably broad-based across broker-dealers and registered investment advisors. Clients have told us numerous times that our ability to bring broker-dealer and RIA solutions together as one is a real differentiator. And we continue to benefit from our uniquely unconflicted role in the marketplace as we don't compete with our clients. Treasury services delivered strong organic growth on the back of payment volumes recovering to above pre-COVID levels. And we improved the average price per payment transaction by about 5% as we continue to shift the product mix towards higher value added channels. Clearance and collateral management is now running at a record $5 trillion of collateral management balances. Balanced growth has benefited from our unique role as a primary clear of U.S. government securities, and we've also seen continued growth in international balances. Our markets business has offset the impact of lower volatility and tighter spreads compared to the prior year, with strong broad-based organic growth across FX and securities lending. Investment management saw the highest net inflows into long-term products since 2017, driven by our LDI and fixed income strategies, but also including strong net inflows into our responsible investment funds, as well as strengthen our initial suite of index ETFs. $70 billion of net inflows into cash products were the highest in over a decade. We optimized our money market fund lineup to provide a more competitive and scalable offering. And with our new CIO in place, we're thrilled to see strong flows and improving market share. And finally, our wealth management business acquired significantly more new clients in 2021 than in 2020. And I'm pleased to see how the team is executing against the strategic plan that we put in place a few years ago. We've continued to gain further traction in the larger, faster-growing client segments. And our expanded banking offering, both on the lending as well as the deposit side, has driven a meaningful uptick in the percentage of wealth management clients who also bank with us. The second theme I mentioned earlier was innovation in some cases it's been outright disruption, this is probably the area that is most exciting for us. You know I cannot recall my tenure at the company year in which we launched or rolled out more innovative products and services than we did over the last 12 months. i'll call out just a few digital assets, while still early days and recognizing that the regulatory landscape for the space is still evolving. Our investments in building an industry-first integrated digital and traditional assets offering are clearly showing positive initial results following the launch of our digital assets unit at the beginning of last year. We solidified our leadership in servicing crypto funds with the announcement of our partnership with Grayscale Investments over the summer. We've contracted with almost half of the pending funds in the US and service most of the crypto funds in Canada. As I said it's still early days but we're excited about the disruptive potential of tokenization as well as smart contracts and the associated opportunities, both on the revenue, as well as the efficiency side. In terms of real time payments, this is an area that we embraced early on, and we continue to lead with innovative solutions to drive the proliferation of real time payments in the US, you may remember that we were the first. bank to originate a payment on the Clearinghouse's real-time payments network several years ago. In late last year, we were the first to launch a real-time bill pay solution from billers and their customers. We're pleased by the initial uptake. We've already onboarded additional clients and the long list of interested prospects continues to grow. As you know, the market for treasury services is large and it's growing, but it's still very fragmented and ripe for disruption. So we're excited about the market leadership coming out of our treasury services business. It really goes far beyond just real-time payments and include examples like being able to leverage the cloud for wire payments and having been the first bank to complete a trade finance deal using SOFR. The third item is the future of collateral. As the world's largest global collateral manager, we continue to lead the charge on driving towards global collateral mobility and optimization by connecting distinct platforms, expanding the scope of eligible collateral and implementing new capabilities. For example, last year we introduced Chinese bonds as eligible collateral on our global tri-party platform. And we were the first bank to add agency mortgage-backed securities as collateral on overnight cleared repo transactions. And another first, we started offering our clients the ability to accept collateral based on their ESG criteria through our digital platform. And finally, I'd be remiss not to mention the launch of Pershing X, which we introduced last quarter. Pershing X will design and build innovative solutions for the advisory industry, including a leading end-to-end wealth advisory platform that will help firms and their advisors solve the challenge of managing multiple and disconnected technology and data sets. While certainly a multi-year project, the team has hit the ground running In this past quarter, we acquired optimal asset management, which is not only an important step in our build-out of Pershing X, in that it will allow us to offer direct indexing capabilities to our advisory clients within Pershing, but it will also benefit our investment management business as well. The third and last theme is what we call One BNY Mellon. Now, I've always been proud of our collaborative culture here at BNY Mellon, and as you know, our broader portfolio of businesses differentiates us from our competitors. Over the years, we've emphasized the interconnectivity of these businesses and the meaningful operational synergies between many of them. But we can still do a better job at delivering the whole firm to our clients. And so last year, we conducted a thorough review of the opportunities and further enhanced our setup for cross-business collaboration. Now, I've been highlighting some of the most notable cross-business client wins, such as Mundi, Lockheed Martin, and Oak Hill, on our earnings calls over the last couple of quarters. Our ability to seamlessly deliver a much broader set of capabilities from across our security services, our market and wealth services, and investment and wealth management businesses is a unique value proposition for our clients in our intensified collaboration efforts already driving higher revenues. In summary, I'm pleased with the progress we've made over the last 12 months. And while we certainly have more work to do, I'm confident that the company is on the right path for sustainably higher organic growth. As we look to 2022 and beyond, we expect double digit earnings per share growth as we are determined to continue delivering consistent organic growth, which together with the current expectation for higher rates should enable us to generate positive operating leverage while at the same time continue investing in the growth and efficiency of our business. With that, I'll turn it over to Emily.