The Bank of New York Mellon Corporation

Good afternoon and welcome to the 2024 Fourth Quarter Earnings Conference Call hosted by BNY. 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's consent. I will now turn the call over to Marius Merz, BNY Head of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome to our earnings call for the fourth quarter of 2024. I'm joined by Robin Vins, our President and Chief Executive Officer, and Dermot McDonough, our Chief Financial Officer. Robin will start with a strategic update, followed by Dermot with his financial update and outlook. Both will reference our quarterly update presentation, which can be found on the investor relations page of our website at bny.com. I'll also 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 is available in the earnings press release, financial supplement, and quarterly update presentation, all of which can be found on the investor relations page of our website. Forward-looking statements made on this call speak only as of today, January 15, 2025, and will not be updated. With that, I will turn the call over to Robin.

Thanks, Marius. Good afternoon, everyone, and thank you for joining us. Before we get into our results, I want to address the ongoing wildfires affecting parts of Los Angeles. We're heartbroken by the tremendous loss being suffered by the community, where we have several officers. As always, our primary concern is for the safety and well-being of our employees and clients located in the effective areas. And we have also committed matching employee donations to eligible nonprofits, providing relief and recovery to those impacted by the fires. Turning now to our quarterly update presentation. 2024 was an exciting year for BNY. and we are entering 2025 with strong momentum on the right path to unlock the opportunity embedded in our company. Building on the solid foundation that we laid in 2023, we accelerated the pace of our ongoing transformation and closed out 2024 with a strong performance, delivering record net income of $4.3 billion on record revenue of $18.6 billion, and generating a return on tangible common equity of 23% for the year. Aligned to our three strategic pillars, to be more for our clients, to run our company better, and to power our culture, at this time last year, we laid out a set of medium-term financial targets, as well as our action plan to drive sustainably higher revenue growth over time. We're executing against these plans and targets every day. As you can see on page three of our presentation, we made very tangible progress in terms of delivery in 2024. For our clients, the rollout of our new commercial coverage model was an important milestone. Effectively cross-selling and leveraging the breadth of our business platforms is the single most compelling growth opportunity for the company. And so, our commercial model is designed to deliver from across the company at an accelerated pace, improve the client experience, and ultimately deepen our relationships. This is the operationalization of 1BNY. But our growth is not just about more of the same. Delivering innovative solutions to the market that leverage the powerful combination of capabilities we have at BNY is another important way for us to be more for our clients and drive top-line growth. This is One BNY version 2.0. Our acquisition of Archer is a good example for BNY becoming an end-to-end solutions provider. In this case, across the entire managed account ecosystem. be it manufacturing and BNY investments, distribution through Pershing, or servicing through Archer. Over the course of 2024, we also developed numerous new client solutions, such as Collateral One, AltsBridge, a next-gen ETF servicing platform, and new capabilities on Wove. This new product momentum is an important investment for the years ahead. Continuing the investment theme, Over the course of the year, we further increased our investments to drive both revenues and scalability, and we generated approximately half a billion dollars of efficiency savings as we continue to digitize workflows and begin to leverage new technologies, including AI. We also commenced the phased transition to our strategic platforms operating model in the spring, And over the course of 2024, transitioned approximately 13,000 employees or roughly one quarter of the company into this new way of working. Zooming out for a moment, the wrapper for much of our work is culture. Powering our culture remains essential to everything else. And we are starting to see the benefits of our people around the world working more closely together. Celebrating our company's 240th anniversary in 2024 with colleagues, clients, and many other stakeholders around the world felt even more special at a moment in which our people could start to see their hard work leaving a positive mark on this iconic institution. Considering the transformation underway at our company, we decided that the time was right last summer to to simplify and modernize our brand and logo to improve the market's familiarity of who we are and what we do. The benefits of BNY's improved visibility in the market have also supported our recruiting efforts. Throughout the year, we've been successful in attracting top talent across the firm, from recruiting our largest intern and analyst classes to further rounding out our executive leadership team. And the targeted investments we've been making in the employee experience across learning, benefits, and facilities are being recognized and valued by our people. Another important aspect of powering our culture is to deliver on our commitments. We've worked hard to say what we do and to do what we say. And so, turning to page four, I'm pleased that in 2024, we once again met or exceeded our financial goals for the year. We are confident that BNY can deliver positive operating leverage across a wide range of scenarios. And so we started 2024 determined to at least break even from an operating leverage perspective. That was an ambitious goal at the time, considering that our revenue outlook at the beginning of the year foresaw an approximately 10% NII headwind to largely offset growth in fee revenue. Therefore, we had to set up to keep expenses excluding notable items roughly flat, while at the same time self-funding incremental investments in the business. Dermot will discuss the financials in more detail, but in summary, in 2024, we delivered 968 basis points of positive operating leverage on a reported basis and 288 basis points excluding notable items. We grew fee revenue by 6% year-over-year, and NII was down 1%, outperforming our outlook from the beginning of the year by approximately 9 percentage points. Despite higher than expected revenue, expenses were down 4% year-over-year on a reported basis and up 1%, excluding notable items. And finally, consistent with our outlook, we returned 102% of 2024 earnings to our shareholders, Taken together, we delivered record financial results in 2024. Significant positive operating leverage resulted in pre-tax margin expansion and improved profitability, and we delivered attractive capital returns to our shareholders, all of which underscored the execution of a reinvigorated BNY. But now, let's look forward on page five. we are entering 2025 with strong momentum and determination to deliver further value for our clients and shareholders. BNY plays a central role in global capital markets with $52 trillion of AUCA, $14 trillion of debt serviced, $3 trillion of wealth assets, and $5.6 trillion of assets on our collateral management platform. We manage $2 trillion of AUM, And on an average day, we settle over $15 trillion worth of securities and roughly $2.5 trillion worth of payments for clients around the world. This exceptional client franchise and leadership across our diversified financial services platforms positions us well to capture market beta and capitalize on evolving market trends, several of which we describe on the left-hand side of the page. Some of our fastest growing businesses in 2024, Treasury Services, Clearance and Platform Management, and Corporate Trust, demonstrate our gearing toward economic growth and higher capital markets activity, both public and private. And through Pershing & Wealth, we are a leader in serving one of the fastest growing segments in financial services, the U.S. wealth market. Within that market, our wealth business, is focused on the faster growing ultra high net worth space. Our purging business, on the other hand, leverages the size and scale of our platforms to power advisors' businesses, helping them navigate an increasingly complex operating environment using the power of our technology. Relevant for both retail and institutional investors, the trend toward private markets represents an opportunity for BNY to support our clients end to end, from servicing to distribution, cash investment, FX hedging and lending across traditional and alternative asset classes. Last year also saw the mass adoption of digital assets exchange traded products in the US, which grew to more than $100 billion in assets under management. BNY has been an early mover in the digital asset space, Today, we provide fund services for the vast majority of digital asset exchange traded products in both the US and Canada. And over the long term, we believe digital assets and the technology underpinnings have the transformative potential to help solve client and market needs. And finally, on this list of important market trends, as global markets evolve and become ever more complex, both buy-side and sell-side firms are looking to outsource certain functions and consolidate providers in order to gain scale and reduce risk. And we expect the strength and connectivity of our platforms to be a differentiator in this regard. As we think about the operating environment in 2025, just a month ago, there were clear signs of optimism with the U.S. election behind us, inflation moderating, and the Fed having begun its path toward lower rates. But with the turn of the year, we view the outlook for 2025 as a little more uncertain, with persistent tail risks across geopolitical tensions and conflicts, uncertainty about trade and fiscal policies, and volatility in markets. Against this backdrop, being positioned conservatively with a strong balance sheet and operational resilience allows us to remain focused on executing our ongoing transformation. While we've made good progress against our strategic priorities over the past 12 months, we have a lot more work ahead of us. As I've said before, strategy is important. Actually doing it and how we do it matters the most. And so on the right-hand side of this page is the reminder of our strategic priorities, and underneath each are some indicators for the progress that we're making. The makeup of our new business wins in 2024, we highlighted some of them on our earnings calls over the past year, validated for us that there is real demand in the market for the type of integrated solutions that BNY can deliver. For example, last year, we've seen a 30% year-on-year increase in sales from clients buying from three or more lines of business. This remains a work in progress, but with real runway ahead. Our commercial model enables our client coverage teams to more effectively deliver integrated solutions from across BNY to our clients. And our platforms operating model realigns how we work and organize ourselves across the entire organization in furtherance of that commercial opportunity. 2025 will be a milestone year for BNY's adoption of the platform's operating model. This transition is not just about driving efficiency. It is also about enabling top-line growth. By simplifying, streamlining, and collaborating through cross-functional teams, we create more intuitive client journeys, improve our ability to anticipate unmet needs, and accelerate speed to market. This quarter, we're planning to activate our largest wave of platforms yet, so that by the end of March, more than half of our people will be working in the model. We believe that our transition into this model will have a meaningful impact at BNY over the years to come, and so we've included in the appendix of this presentation a summary of the program and the timeline for implementation. Next, Our investments in digitization and AI over the last couple of years have laid a solid foundation for us to become more efficient and to drive top-line growth over time. We're embracing the power of AI to make it easier for our employees to do their jobs and channel their energy towards new innovations. To summarize this broader alpha and beta theme, We believe that we are well positioned to capture market beta and capitalize on evolving market trends while we remain focused on generating alpha through the continued transformation of the company. I'll wrap up on page six by reminding you of the value proposition that we laid out for our clients, our shareholders, and our people at the beginning of last year. Our strategic priorities and financial goals are clear. and we remain focused on consistent execution. Before I turn the call over to Dermot for our financial update and outlook, I'd like to close by thanking our teams around the world. I'm proud of what our people have accomplished over the past two years and grateful for everyone's continued dedication to the hard work that's ahead of us. And with that, over to you, Dermot.