The Bank of New York Mellon Corporation

Good morning, and welcome to the 2023 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 afternoon, and thank you all for joining us. I'm here with Robin Vins, President and Chief Executive Officer, and Dermot McDonough, our Chief Financial Officer. As usual, we will reference our Financial Highlights presentation, which can be found on the Investor Relations page of our website at bnymellon.com. I'd like to note that our remarks will contain forward-looking statements and non-GAAP measures. Actual results may differ materially from those projected in the forward-looking statements. 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 12, 2024, and will not be updated. With that, I will turn it over to Robin.

Thank you, Marius. Good afternoon, everyone, and thanks for joining us. The fourth quarter marked a solid close to a year in which we supported our clients in navigating through a challenging operating environment with geopolitical tensions, macroeconomic uncertainty, and evolving monetary policy. We started to show some early evidence that we can deliver higher financial performance in the near and medium term. We clarified our strategic priorities and we laid a foundation for a multi-year transformation of our company for the long term. With clearer focus on our direction of travel and having restored some confidence in our ability to deliver on our plans, today we are publishing financial targets for each of our business segments and the firm overall. Dermot will review our fourth quarter financials the outlook for 2024, and our medium-term financial targets in more detail. But let me first briefly address our performance in 2023. Referring to page two of the financial highlights presentation, our results for the year not only highlight BNY Mellon's characteristic resilience, but they demonstrate the strength of our execution when we are appropriately organized and focused. On a reported basis, 2023 earnings per share increased by 38% year over year. On a core basis, excluding notable items, EPS of $5.05 increased by 10% year over year. Both pre-tax margin and return on tangible common equity improved on the back of significant operating leverage. Excluding notable items, we generated approximately 180 basis points of positive operating leverage. ROTCE improved half a percentage point to 21.6%. And pre-tax margin improved roughly 80 basis points to 30%. Moving on to page three. At the beginning of last year, we communicated three financial goals for 2023. First, we expected to generate approximately 20% net interest revenue growth year over year. We delivered 24%. Second, we set out to halve our constant currency expense growth rate in 2022 to approximately 4% year over year expense growth, excluding notable items in 2023. We delivered 2.7%. And third, We sought to return north of 100% of 2023 earnings to common shareholders through dividends and buybacks. We delivered 123%. Over the course of 2023, we returned $3.9 billion of capital to common shareholders, all while having further strengthened our regulatory capital ratios to be well positioned for a wide range of macroeconomic and regulatory outcomes. Though we are still at the beginning of our transformation journey, our ability this past year not just to deliver on our commitments but to exceed them gives us confidence that we can affect meaningful change and consistently improve our financial performance over time. While mindful, there is a lot more work ahead of us. I'm proud of the effort that our people put in over the last 12 months as we embraced a focus on commerciality, accountability, and efficiency, which drove these results. We are committed to improving the firm's financial performance in the near, medium, and long term, and we have framed this work for our people with three strategic pillars, which we describe on page four. Last year, We introduced these three pillars to get at the heart of how we operate and who we are day to day for our clients, managing their money, moving it, and keeping it safe. Pillar number one, be more for our clients. Number two, run our company better. And number three, power our culture. They are deliberately simple, and our people are rallying around them. 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. I'm encouraged by the progress we made in 2023, some of which we highlight on slide five. Our global clients across governments, pension funds, mutual funds, unions, endowments, corporations, financial services firms, and individuals both trust and want to do more business with us. And our analysis clearly shows there is more for them to do with us as we continue to partner alongside them to help achieve their ambitions. As the global financial system grows and becomes ever more complex, demand for a trusted, resilient partner with the scale to service clients across the entire financial lifecycle, such as BNY Mellon, grows as well. In 2023, we launched several new solutions that allow us to deepen our relationships with existing clients and to open the door to new ones. Of course, that includes the launch of Wove, Pershing's wealth advisory platform, as well as the rollout of our buy-side trading solutions offering. But it goes far beyond these more visible product launches. All of our businesses are bringing new client solutions to the markets. Bankify, real-time payments on FedNow, white labeling, Liquidity Direct, BondWise, intraday repo settlement, BNY Mellon advisors are all examples. And in 2023, we filed more patent applications than ever before. At the same time, we have an opportunity to bring more of BNY Mellon to clients who currently use us for just a single service. Last year, we hired our first chief commercial officer, as we began to operationalize our One BNY Mellon initiative across the organization. As part of enhancing the organizational setup and focus of our client coverage organization, we created an integrated team to facilitate multi-line of business solutions at scale, and we also formed a coverage practice group to implement consistency in approach and tooling. Next, While 2023 was a foundational year in what will be a multi-year journey to transform to a more streamlined and effective operating model, we took important steps toward running our company better to improve efficiency, reduce bureaucracy, and be more intentional with how we spend so our investments in the business go further. We generated nearly double the amount of efficiency savings versus the prior year. which allowed us to self-fund over half a billion dollars of incremental investments. And we laid the foundation needed to transition to a platforms operating model, including successful pilots in two areas of the organization, which were important proof points as we start to unlock the power of our platforms in several phases over the next couple of years. While we focus on being more for our clients and running our company better, We know none of it can happen without our people, which is why we are powering our culture to make BNY Mellon a place where people are proud to work and excited to grow their careers. We elevated recruitment and retention programs, including welcoming the largest class of campus analysts in BNY Mellon's history, a class double the size of the previous year, and we're going to double it again this year. We launched our BK shares program to grant shares to the 45,000 employees who didn't previously receive stock as part of their compensation to cascade a sense of ownership and accountability across our company. And we rolled out enhanced employee benefits, recognizing value in fostering both a human and high performing work environment. I'll wrap up where I began. we remained confident in the strength of our culture, our strategy, and our ability to execute to help us unlock value for our clients, our shareholders, and our people. 2023 was an important year in which we assembled more of the team that can deliver on what is needed, and we got ourselves pointed in the right direction for what we need to achieve. But it was also a year where being humble and resilient mattered. While we have a lot of work ahead of us, what has started as a theory and a belief now has early proof points, and we can see the possibility of what we can achieve. We have an ambitious agenda as we move forward, but I continue to be optimistic about the opportunity ahead. With that, I'll turn it over to Dermot.