The Bank of New York Mellon Corporation

Good morning and welcome to the 2022 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 hand the call over to Marius Mertz. BNY Mellon, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to our first quarter 2022 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. I'm joined by Todd Gibbons, our Chief Executive Officer, Robin Vins, President and CEO-elect, and Emily Portney, our Chief Financial Officer. Todd will provide introductory remarks, and then Emily 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 supplements, 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 18, 2022, and will not be updated. With that, I will turn it over to Todd.

Thank you, Marius, and thank you, everyone, for joining us this morning. Referring to slide two of our financial highlights presentation, We continued to see healthy underlying momentum across most of our businesses and reported revenue of $3.9 billion, which was roughly flat year over year. And it was up 2% if you exclude the impact of government sanctions and the additional actions that were taken related to Russia. Now, we're in an increasingly uncertain environment, including the war in Ukraine, volatile markets, and persistently higher inflation, which will require more meaningful monetary policy adjustments. It is in times like these that our strong, lower risk balance sheet and the resiliency of our business model differentiates us. In the face of the tragic events occurring in Ukraine, we ceased new banking business in Russia and suspended investment management purchases of Russian securities. Since the beginning of the war, we stepped up our humanitarian efforts, as well as the support for our employees and the members of our community who have been impacted. And we continue working for our multinational clients that depend on our custody and recordkeeping services to manage their exposures. Expenses of $3 billion were up 5.5% as we continue to invest in further growth and efficiency initiatives. And we reported EPS of 86 cents, and that included an 8 cent impact related to Russia. We continue to generate a significant amount of capital and return close to 60% of earnings to our shareholders. primarily through common dividends. Throughout the quarter, we took actions in the investment securities portfolio to temper the immediate impact to capital from higher interest rates. And we expect higher rates to be both a positive for fees and net interest revenue going forward. Emily will discuss the details for the quarter shortly, but let me briefly touch on a few business highlights. In asset servicing, we managed to keep the strong sales momentum with which we entered the year. Wins and win rates improved off of what had been a healthy quarter a year ago. One in mandated AUCA is up meaningfully both year over year and quarter over quarter, producing a strong pipeline of AUCA to be installed in 2022 and beyond. And our retention rate was an exceptional 97%. Our ETF business continues to stand out, having increased the number of funds serviced by 4% since the beginning of the year. And we were recognized as best ETF custodian at the ETF Express European Awards last month. We also continued building momentum as a leader in digital assets, having been selected by Circle as primary custodian for the USD coin reserves. And late last week, we announced an exciting data and digital collaboration with Aon. Together, we will focus on supporting the ESG needs of clients globally, leveraging our collective data and analytics capabilities, and unique data sets to help clients make better, more informed investment strategy decisions by providing enhanced data sets, advanced analytics, and actionable insights into ESG portfolio level exposures. In Pershing, year-over-year comparisons continue to be impacted by the previously disclosed lost business in the second half of last year. And remember, the first quarter of last year was exceptionally strong on the back of elevated transaction activity. Now, while there are puts and takes here that can impact the amount of organic growth in any given quarter, we remain extremely excited about Pershing's prospects. Our clients are doing well, and as they capture new assets, we're growing with them. And we're well positioned to benefit from a number of secular growth trends, such as the rapid growth number of breakaway advisors and digitally oriented wealth firms. Of course, consolidation in the sector can leave us on either side of any particular transaction. But over time, we find that our clients, who are typically the largest and most complex players in the industry, are more often than not on the acquiring side. And in Pershing X, we continue to make solid progress since announcing the initiative back in October. Following on last quarter's acquisition of Optimal Asset Management, this quarter we made several key hires, which completed the filling out of our leadership team. And we folded Allbridge's wealth reporting and data aggregation tool under the Pershing X umbrella. This alignment strengthens Pershing X's data offering, allows it to draw on Albridge's engineers to accelerate development of the platform, and provides clients with access to a broader suite of technology solutions. Shifting to clearance and collateral management, there we delivered a strong quarter of organic growth on the back of higher securities clearance volumes, and its collateral management balances remained elevated at a record $5 trillion in the quarter. Market volatility is driving dealer demand for U.S. Treasuries, And we're also seeing a promising pickup in new collateral balances related to our future of collateral initiatives, with asset balances already being mobilized to the EMEA region and growing, providing our clients with optimization and funding benefits. Treasury services also delivered another solid quarter of growth, driven by higher payment volumes and an improved product mix. The business continued to build on its recent track record of industry first, this quarter being the first bank to successfully connect to and send a message on the FedNow real-time payment system. And we're excited to welcome Jennifer Barker to the company as the new CEO of the business starting in May. Jennifer brings almost two decades of global client experience in the treasury service industry, and she's the perfect leader to build upon the business's recent success and innovative track record. In investment management, given the environment, it's not surprising to see some challenges as clients and higher earning funds rebalance and de-risk. That said, investment performance remains strong, with over 80% of our top 30 strategies by revenue in the top two quartiles on a three-year basis. We're also seeing good traction with our expanding suite of passive and active ETFs. We launched the BNY Mellon Responsible Horizons Corporate Bond ETF, managed by Insight. And total ETF AUM grew by 8% quarter over quarter. I also want to highlight an exciting new share class for the Dreyfus Government Cash Management Fund called BOLD. This share class, which provides investors the opportunity to make a direct social impact supporting Howard University, a historically black college and university, already grew to over $1 billion in AUM within only weeks of launch at the end of February. We also continue to be pleased with the healthy growth that we're seeing in wealth management, client acquisition rates continue trending in the right direction, and our improved digital tools and expanded banking offering are driving deeper client relationships as evidenced by the solid loan and deposit growth. As an example, during the quarter, we successfully completed the initial rollout of LoanPath, our new digital platform for investment credit lines, which allows us to streamline our processes and significantly improve the client experience at the same time. Across the franchise, we're honored to have once again been recognized by Fortune for making both its world's most admired companies in 2022, as well as its Blockchain 50 list, which recognizes 50 companies around the world for deploying blockchain technology to speed up business processes, increase transparency, and potentially save substantial costs for the industry. We're also proud to have been named to Barron's 100 Most Sustainable Companies list, which recognizes the companies that score highest across 230 environment, social, and governance indicators. Now, before I turn it over to Emily, I'd also like to touch on my decision to retire as CEO on August 31st and the appointment of Robin as my successor. You know, when I joined BNY Mellon 36 years ago, I was drawn by the company's rich history, its special culture, and the important place it occupies in the global financial system. Over the last four decades, we have undergone an incredible transformation from the traditional commercial bank that we once were to the globally significant lower risk financial services company that we are today. And I'm particularly proud of what we've accomplished over the last couple of years. With a new leadership team in place, we launched a compelling agenda for growth and innovation under which we've already seen a meaningful pickup in organic growth. We've also really evolved our culture. Today, we're much more performance-oriented and client-centric. We're more nimble in our decision-making, and we're doing a lot better at connecting the dots across our differentiated businesses. When our strategic ambitions and the strength of our franchise were tested by the global pandemic, our people once again rose to the occasion and not only delivered on our commitments to our clients, communities, and shareholders, but we also continued to make significant progress in our journey to position the company for the future. In Robin, we have found an outstanding leader to build on this agenda and to lead BNY Mellon into its exciting next chapter. Having known Robin as a client for almost a decade, I was thrilled to recruit him to the company in 2020 and to work directly with him these last two years. Since then, he has not only had a profound impact on the company through his leadership of Pershing, Treasury Services, Clearance and Cloud Management, and our markets businesses, but he has been a trusted strategic advisor to me and the rest of the executive management team. Rob and I are working closely together and with our executive committee to ensure a seamless transition in the next couple of months. With that, I'll turn it over to Emily.