The Bank of New York Mellon Corporation

Good morning and welcome to the 2023 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, and thank you all for joining our third quarter earnings call. As always, we will reference our financial highlights presentation, which can be found on the investor relations page of our website at bnwaymelon.com. I'm joined by Robin Vins, President and Chief Executive Officer, and Dermot McDonough, our Chief Financial Officer. Robin will start with introductory remarks before Dermot takes 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 highlight presentation, all available on the investor relations page of our website. Forward-looking statements made on this call speak only as of today, October 17, 2023, and will not be updated. With that, I will turn it over to Robyn.

Thanks, Marius. Good morning, everyone, and thank you for joining us. Before we get to the earnings call, I'd like to address the horrific terrorist attack on Israel and the ongoing conflict in the surrounding region. We're heartbroken as we continue to witness a human tragedy unfold, and I'm immensely grateful and proud of our employees in Israel who, despite everything that they have been going through, continue to deliver uninterrupted service to our clients. Our hearts go out to colleagues, clients, and community members in the region. Now I'll share some brief comments about our financial results for the third quarter, and we'll then give a quick overview of some of our strategic priorities. The NY Mellon delivered solid financial performance and continued progress on the steady transformation of our company. As you can see on slide two of the financial highlights presentation, we reported earnings per share of $1.22 versus $0.39 in the third quarter of last year. Excluding notable items, which primarily impacted last year's results, EPS of $1.27 increased by 5% year over year. We generated a return on tangible common equity of 20% on $4.4 billion of revenue, up 2% year over year, and a pre-tax margin of 29% in the third quarter. These results once again highlight the efficacy of our prudent and proactive asset and liability management amid a rapidly evolving operating environment. Net interest revenue was up 10% year over year as we continued to maximize the positive aspects of rising interest rates. Our strong liquidity position allowed us to reduce our wholesale funding footprint And despite the significant steepening of the curve, unrealized losses in our investment securities portfolio remained well contained. Our 20% return on tangible common equity, together with all of these actions, allowed us to continue to deliver attractive capital returns to our shareholders while further strengthening our capital and liquidity ratios to be prepared for a wide range of macroeconomic outcomes. As I've just rounded out the first 12 months in my seat, I'd like to take a step back for a moment and reflect on our work to date and where we're headed. For a series of strategic reviews, we have affirmed what we believe to be our key assets. Number one, our client reach and breadth of engagement. Our top-tier clients from all regions of the world both trust and want to do more business with us. Number two, our collection of market-leading businesses. We're a broad-based financial services company with a balance and diversification that makes us stronger, and our unique business mix sets us apart from our competitors. And number three, our culture of teamwork. Our people are naturally collegial and seek out opportunities to work together to serve our clients and communities. These assets are hard to replicate. and it's rare that they exist together. But as I have acknowledged before, the company's long-term financial performance track record hasn't lived up to the quality of this franchise. As a result, we've committed to drive higher underlying growth, consistently deliver positive operating leverage, and improve our pre-tax margin over time. As an important mark of clarity and focus And why? We recently communicated three strategic pillars to our employees around the world. One, be more for our clients. Two, run our company better. And three, power our culture. These three pillars are not fundamentally changing the businesses we're in. Instead, they drive at how we operate and who we are day-to-day for our clients. As I've said before, strategy is important. but ultimately just a set of words. Actually doing it and how we do it matters a lot. While this was just one quarter in what will be a multi-year transformation, I'm optimistic about the steady improvements we are seeing inside of BNY Mellon. And I want to share with you some of this perspective that gives us confidence that we're on the right track with the work that we are doing under each of these pillars. I'm encouraged by the pace of progress toward making BNY Mellon a better run company. Our businesses have historically operated largely in silos. We've run somewhat like a corporate conglomerate with a holding company that owns a series of vertically self-sufficient subsidiaries. This has led to clunky client journeys, wasteful duplication, and a lack of joined up thinking. We have many opportunities to run our company better and more efficiently to reduce bureaucracy, And we need to be smart and disciplined with how we spend so our investments in the business go further. I've talked to you before about our efficiency initiative comprising about 1,500 ideas developed by those who often see items ripe for improvement most clearly and closely, our people. This program, internally we call it Project Catalyst, is well underway. And we started to see some early benefits in our financial results. As you may recall, in January, we set out to essentially halve our expense growth rate this year to roughly 4% growth excluding notable items compared to roughly 8% ex-currency in 2022. We have made good progress against this goal. With less than three months left in the year, we are confident that we will outperform our 4% expense growth target for 2023 all while self-funding over half a billion dollars of incremental investments this year. As we've started the budgeting process for 2024, we are determined to bend the cost curve further. We're now working to adopt a platforms operating model, which will help us to do things in one place, do them well, and elevate overall execution. And we're embracing new technologies so we can be more productive, more efficient, and focus on growth. Automation of processes and investment in operations digitization and AI across the firm will make it easier for our employees to do their jobs and subsequently channel their energies toward new innovations. Which brings me to our work toward being more for our clients. Our financial results in the quarter tell a tale of two cities. Against the backdrop of seasonally slower summer months, we once again saw outperformance in some of our differentiating businesses. Strength in clearance and collateral management continued, and we saw healthy underlying growth in purging as well as solid momentum in asset servicing. This was offset by continued softness in investment management fees and lower foreign exchange revenue given the subdued market backdrop. Our path to higher underlying growth is clear. In addition to always being on the hunt for new clients, we have to deliver more to our existing clients, develop new products, and do a better job at connecting the adjacent ones. Our new chief commercial officer has hit the ground running as we start operationalizing One BNY Mellon across the organization to sharpen our commercial focus and elevate the client experience across the firm. At the same time, We're pushing forward with innovative new client solutions that leverage the adjacencies among our businesses. While still early days, initial client wins with our recently launched solutions, as well as the quality of our pipelines, are encouraging. PershingX's new open architecture wealth management platform, Wove, is off to a promising start, including a couple of client agreements already signed several prospective clients in active contracting, and a steadily growing pipeline. As an example, Integrity, a nationwide insurance and financial services firm with a network of over half a million agents and advisors, has selected our Wove platform to support their wealth management business. With Wove, we are also connecting solutions from across BNY Mellon. For example, Integrity will have access to third-party models and institutional-grade solutions from our specialist firms in investment management and broker-dealer clearing and custody solutions through Pershing. In another example, Pershing expanded their long-standing relationship with Lincoln Investment as the company transitioned their self-clearing business onto Pershing's custodial platform and selected Wove, to provide a suite of technology solutions to its financial professionals. As we onboard additional clients through the remainder of 2023, we are planning to start disclosing relevant financial information and leading indicators for you all to keep track of Wove's growth trajectory at the beginning of next year. We also signed the first external client, a leading G-SIB owned European asset manager for our recently launched buy side trading solutions. Without a doubt, we expect our more prominent solutions like Wove and buy side trading to move the needle on growth over time. But we are leaning into innovation to solve evolving client challenges across all of our businesses. For example, in treasury services, we were one of the first banks to go live on FedNow, the Federal Reserve's new instant payment rail. This allows us to expand our capabilities for corporations, non-bank financial institutions and fintechs, and as a service provider, we are helping our financial institutions clients access instant payments, remain competitive, and provide best-in-class service for their customers. As another example, This quarter, the business announced the launch of Bankify, an open banking payment solution that as an alternative to credit or debit cards and third-party payment platforms helps organizations receive consumer payments from bank accounts with a seamless user experience and guaranteed settlement. Let me conclude by saying that we are optimistic about the opportunity in front of us, and our strategic objectives for the short, medium, and long term are clear. We are innovating and pushing forward on our multi-year growth investments, all the while remaining disciplined to deliver positive operating leverage and pre-tax margin expansion. As I've said all along, the path to transforming BNY Mellon into a consistently high-performing company will take some time, but for 2023, we are on track to deliver what we said we'd deliver at the beginning of the year while making steady progress toward our strategic priorities. I'm proud and appreciative of our people's dedication to be more for our clients, run our company better, and power our culture collectively to unlock the NY Mellon's potential. With that, over to you, Dermot.