The Bank of New York Mellon Corporation

Please stand by, we are about to begin. Good morning and welcome to the 2022 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 conference over to Marius Merz, BNY Mellon Head of Investor Relations. Please go ahead.

Thank you, operator. And good morning, everyone. Welcome to our fourth quarter 2022 earnings call. As always, 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 Robin Vins, President and Chief Executive Officer, and Emily Portney, our Chief Financial Officer. Robin will start with introductory remarks, and Emily will then 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, January 13, 2023, and will not be updated. With that, I will turn it over to Robin. Thank you, Marius.

Good morning, everyone, and thank you for joining us. Before Emily takes you through our quarterly results, I'd like to make a few broader comments on our performance in 2022 and on some areas of focus for 2023. As you can see on page two of our financial highlights presentation, we reported earnings per share for the full year of $2.90, down 30% compared to the prior year, and a return on tangible common equity of 13%. Excluding the impact of notable items, we reported earnings per share of $4.59, which was up 8% year over year. and a return on tangible common equity of 21%, reflecting our solid underlying performance against the backdrop of a complex operating environment in 2022. Our results this year included several notable items. For example, those related to Russia in the first quarter and the goodwill impairment related to investment management in the third quarter. And our fourth quarter results reflect the impact of a number of decisions that we made to improve our revenue growth and efficiency trajectory moving forward. Excluding notable items, revenues grew a little faster than expenses as we continued to see strength in client activity and volumes, while continuously positioning ourselves to derive meaningful benefit from the upward move in interest rates. Together, these factors more than offset the stiff headwinds from lower market levels. On the back of organic growth in AUCA, we're continuing our role as the world's largest custodian, and we saw cumulative net inflows in assets under management. Beyond the numbers, I'd like to highlight a couple of areas where I'm particularly encouraged by our performance in 2022. First, our sales momentum. which speaks to the strength of our client franchise and our capabilities. In asset servicing, we continue to elevate our client dialogue while maintaining a strong focus on service quality to support our clients through a difficult environment. Sales wins increased off a strong 2021 and were winning larger and higher value deals, which is where the elevation of client dialogue matters. In ETFs, AUCA reached $1.4 trillion as we saw strong net inflows throughout the year and the total number of funds serviced rose by 12%. And in alts, we grew AUCA by 14% and fund launches were up by over 25%. Treasury services delivered strong broad-based growth throughout 2022. In the fourth quarter, we announced a collaboration with Conduance to be their trusted payments infrastructure provider as they launch a digital integrated payments hub for businesses and the public sector. This hub will enable access to more secure, faster, and cost-effective options to send, request, and receive payments and refunds in a matter of minutes using real-time payments and other proven payment technologies. And we also onboarded several new clients during the quarter as we continued to build our digital payments and related FX businesses. And finally, while 2022 was no doubt a difficult environment for the wealth market, our wealth management business acquired more clients with particular strength in the ultra high net worth and family office segments. And we continued to deepen existing relationships through our expanded banking offerings. where the percentage of advisory clients who also bank with us rose by about five percentage points. Notwithstanding the tough backdrop, Pershing, which is in fact our largest play as a company in the wealth space, brought in net new assets of over $120 billion, representing 5% growth. In the fourth quarter, we announced two very exciting wins, demonstrating the broad-based offer. The first was State Farm, which is an exciting relationship given State Farm's size and reach, with its thousands of agents across the country serving tens of millions of households. And we also onboarded Arta Finance, which was founded by a team of former Google executives who are now leading a global digital family office that uses advanced technologies to empower investors with tools to invest intelligently. This win is an important proof point of our proven set of APIs and digital capabilities and demonstrates our ability to win with tech-forward clients. The second area of performance I'll call out is that we continued to forge ahead with our longer-term growth initiatives, such as Pershing X, real-time payments, the reimagining of custody and collateral, and digital assets. These initiatives will help position the company for the next leg of growth beyond the medium term. We went live with our digital asset custody platform in the US in October. And as I highlighted in my op-ed in the Financial Times a month ago, this will continue to be a focus for us. Not so much for crypto, but really the broader opportunity that exists across digital assets and distributed ledger technology. If anything, The recent events in the crypto market only further highlight the need for trusted, regulated providers in the digital asset space. We are also now live with our first release of PershingX, just one year after launching the initiative. This release to a small number of select clients includes three core products, portfolio solutions, including direct indexing, client servicing, and data and reporting tools. But equally importantly, This release is about our ability to set a goal on a tight timeline and execute. Finally, the third and probably most important highlight of the year for me is our people and our systems once again demonstrated remarkable resilience. Across the war in Ukraine, the extraordinary moves we saw in several government debt markets and volume surges, the operational readiness of our people and our systems consistently enabled successful outcomes for our clients. I cannot thank our people enough for their hard work and dedication to serving our clients. While we're proud of these accomplishments, it's also important to humbly recognize an area where we fell short this past year. Acknowledging the inflationary headwinds, expense growth for a second straight year was around 5% ex-notables. We consider that number too high, especially considering the expense growth benefited from a stronger US dollar throughout the year. On a constant currency basis, expense growth ex-notables was approximately 8%. While I'm encouraged by the renewed sense of urgency across the organization over the last few months to better manage our expenses, we still have a ways to go on this journey, which brings me to our key focus areas for 2023. First, expenses. My leadership team and I are fully committed to bending the cost curve this year. That will come from instilling further expense discipline across the firm and from focusing more on profitable new business growth, saying no to more things when the economics aren't what they should be. Efficiencies are also going to come from implementing ideas that will make BNY Mellon a simpler, more efficient place to do business with. And so here, we've embarked on an enterprise-wide initiative led by senior leaders and high-performing employees from around the world focused on driving greater efficiency and enabling sustainable growth. No one knows the ins and outs of our products, services, and processes better than our people. And so all of our staff have had the opportunity to take an active role in this initiative by submitting ideas for how we can run the company in a better way for all our stakeholders. To date, we've approved about 1,500 high-quality ideas, of which about 200 are already completed. And another 500 are on track to be implemented this year with a meaningful amount of these ideas requiring little upfront investment. Emily will cover this in more detail, but as a result of these initiatives and our renewed determination, we expect to achieve nearly double the amount of efficiency savings this year compared to what we achieved in any of the recent years. But our priorities are, of course, not just about managing expenses. We're also focused on reinvigorating profitable growth. Our budget commits to achieving positive underlying growth this year across almost all of our businesses, with particularly healthy growth coming from asset servicing, purging, and treasury services. We will continue full speed ahead with our critical long-term growth investments that I mentioned earlier, with clear and specific targets that we expect the teams to hit over the course of the year. Lastly, on the top line, our priorities include goals for our One BNY Mellon program, which incentivizes cross-business referrals and development of innovative multi-business solutions that only BNY Mellon's unique collection of businesses is equipped to provide. In 2022, we saw good initial momentum, and we surpassed our initial goal for the year, and we intend to deliver a further pickup in 2023 as we increasingly sell our platform and better connect the dots for our clients. Finally, on capital management, I'll highlight that our board of directors has authorized a new $5 billion share repurchase program, which provides us ample flexibility. And having ended the year comfortably above our capital management targets, we're now resuming buybacks. And so in summary, while none of us can predict exactly what the operating environment will look like in 2023, we are later focused on growing the franchise and executing against our efficiency plans with discipline and urgency to drive some positive operating leverage in 2023 while returning a healthy amount of capital to our shareholders this year. With that, let me turn it over one last time to Emily as our CFO.