Bank of New York Mellon Corp Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ken Usdin - Jefferies LLC - Analyst : Thank you. Good morning.

Question: Ken Usdin - Jefferies LLC - Analyst : Good morning. I'd just like to go, just ask Dermot about that NII humbleness to the second half. Can you just walk us through what the moving pieces would be including the seasonality that you mentioned? And any other things that might have been over earning in the NII in the first quarter so that you would and seemingly in your maintained guides still expect a meaningful ramp down in NII, which I don't think is what seems to be the base case given how well the balance sheet has held up so far, as Jim pointed out relative to your expectations. Thanks.

Question: Ken Usdin - Jefferies LLC - Analyst : Okay, and then just can you -- that follow-up just on the size of the deposits. So you're just expecting the size of the deposit base to decline? Or is the mix or -- just trying to understand like what pieces of it would revert given that seasonality?

Question: Ken Usdin - Jefferies LLC - Analyst : Right. Okay. Thank you.

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Hi, thanks very much. You alluded to the higher clearance and collateral management and higher clearance volumes. I'm just curious if you can parse out how much of that is just clients being more active during more active second quarter versus winning new business and organic growth, which just might help for the thoughts on the go forward and how to model things?

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Thanks, Dermot. You piqued my interest. In the opening remarks, you all talked about T+1 coming into the market and that helping -- you helping clients. I'm curious, now that it's built, now that it's in the run rate, just a couple of quickies of is there a cost to run off now or is that not big enough? Does T+1 come with lower spread for you but does it free up capital with more frequent settlement. Just curious, what the net impact of that all is?

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Okay, great. Thank you.

Question: Ebrahim Poonawala - BofA Securities Inc - Analyst : (technical difficulty) Maybe just a follow, Dormot for you on NII. I guess in this call to Ken's question, you talked about set policy and that's having an impact. Remind us the positioning of the balance sheet if the Fed does decide to cut rates from September and we get 100 bps and 150 bps of cuts. Remind us how the balance sheet will be. How we should think about NII in that backdrop? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 12, 2024 / 1:30PM, BK.N - Q2 2024 Bank of New York Mellon Corp Earnings Call

Question: Ebrahim Poonawala - BofA Securities Inc - Analyst : Understood. And separately, I guess maybe, Robin, for you just in terms of the fee revenue momentum that you talked about at Pershing and elsewhere. Just give us a sense around what the drivers we should be thinking about as we think about sort of the medium-term outlook on fee revenue outside of just pure markets activity that could drive fees in a world where NII might be [disable] to lower? And do you think about sort of momentum on the positive outlook?

Question: Ebrahim Poonawala - BofA Securities Inc - Analyst : Wonderful. Thank you.

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Good morning, Robin. Good morning, Dermot.

Question: Steven Chubak - Wolfe Research, LLC - Analyst : So I just wanted to build on that earlier line of questioning, but really focusing more on repo activity. It's been a big area of investor focus. You've certainly benefited from recent strength on the repo side. And I was hoping you could potentially quantify the benefit year on year from elevated repo activity? And just a longer term, like how you're thinking about the durability of the recent repo strength and what are some of the factors supporting that view?

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Thanks for all that color. And just for my follow up on the Pershing business, I know that the core underlying strength has been obscured to some degree by some large client departures. I was hoping you could give some perspective on what some of the core organic growth trends look like in that business, what the pipeline looks like in that business, given some of the recent excitement around the Wove platform and the offering? And have we lapped those headwinds at this point? Or is there still some remaining pressure on the come?

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Very helpful color. Thanks so much for taking my questions.

Question: Brennan Hawken - UBS Securities LLC - Analyst : Good morning, Robin and Dermot. Thanks for taking my questions. So we saw the ECB cut rates this quarter. And well I know euro is in a huge exposure for you in terms of deposit base. Curious about what impact you saw that on your deposit costs in that currency and maybe how does that experience in the market reaction, inform your expectations for beta and customer behavior around rate cuts in other currencies? Thanks.

Question: Brennan Hawken - UBS Securities LLC - Analyst : Yeah. But what I was asking -- I appreciate that. But what I was trying to understand was the actual experience in the actual marketplace beyond the expectation. The 50% to 60% beta, I think you said, in euros, did that hold when the covenant through? And did you have experienced that?

Question: Brennan Hawken - UBS Securities LLC - Analyst : Excellent. Thank you. Thank you for that, Dermot. I appreciate that. Issuer Services, very solid. You flagged, you know, some COO trustee gains on the back of a market that seems solid volume. Could you help us understand maybe how much of the strength in the growth that you saw in that line was attributed to that, which I assume would be in the corporate trust business and then maybe how to think about the depository receipts fees, just so we're thinking about the right way to baseline and move forward with our models?

Question: Brennan Hawken - UBS Securities LLC - Analyst : Thank you for taking my questions. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 12, 2024 / 1:30PM, BK.N - Q2 2024 Bank of New York Mellon Corp Earnings Call

Question: Betsy Graseck - Morgan Stanley - Analyst : Hi, good morning.

Question: Betsy Graseck - Morgan Stanley - Analyst : Two quick questions. One, just to wrap up a little bit on the T+1 discussion earlier. Could you give us a sense of how much did T+1 drive sequential revenue growth this quarter? And can you give a sense as to if there's enough revenue growth you're expecting from it to impact the expense ratio since you've already made the investment? And then I have a follow up on one other thing.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. Yeah, I was just thinking if you were in a better spot than others, you could pick up some incremental share on the back of that. But that's maybe a couple of conference calls from here. Alright. And then separately on Wove, I know you mentioned that you added new clients to Wove. I just wanted to understand is that new clients of the firm or this is clients who had been years for a while, and they move to Wove?

Question: Betsy Graseck - Morgan Stanley - Analyst : Thanks, Robin.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Hi. Can you put a little more meat on the balance for the One BNY initiative in terms of products for customers when you're talking about more bundled solutions? Thematically, I understand it, and I guess you're having higher core servicing fees. But connecting from the higher core servicing fees from the high level that's bundled, let's have everyone work together, I'm just trying to connect the dots a little more.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : And so when you wrap it all up, I mean, what wallet share do you have per customer today? Where was it a few years ago? Where you hope that to go just in terms of a zip code of expectations?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Understood. So when all's said and done, core servicing fees over time, whether it's aspiration or a specific target, where should core servicing fee growth be?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Got it. Thank you.

Question: Alex Blostein - Goldman Sachs & Co LLC - Analyst : Hey, good morning. Thanks for squeezing me in on this. I wanted to touch on expenses and operating leverage. So expenses up a little bit year to date, year over year. It sounds like you guys are still targeting flat expenses for the year despite the fact that revenues obviously shaking out a little bit better than you hoped. So, maybe kind of walk us through where you see the flex in the expense base to keep it kind of that flattish run rate. But I guess more importantly, you guys had a target for pretax margin to be at 33%-plus recently. You're doing 33% this quarter and obviously you don't want to get too carried away with a single quarter. But feels like you have an ability to reset the bar. So maybe talk a little bit about what that plus within the 33% could look like a couple of years out?

Question: Alex Blostein - Goldman Sachs & Co LLC - Analyst : Excellent. Great. Well, my second quick question around the balance sheet. There's a lot of discussion around deposits, but I wanted to zone in on the asset side of the balance sheet for a second. We've seen pretty nice growth from you guys in both the securities portfolio and loans sequentially. So could you spend a minute on sort of the sources where you're investing and then your outlook and maybe deploying some of the liquidity that seems to be perhaps a bit more sticky into both loan growth and securities?

Question: Alex Blostein - Goldman Sachs & Co LLC - Analyst : Awesome. Thanks very much.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Good morning, Dermot. Good morning, Robin.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Dermot, can you share with us now that we're entering into phase for its monetary policy of quantitative tightening easing up a bit. You guys obviously have been through QE using the initial stages of QT. Do you have any thoughts on how this could affect your balance sheet over the next 12 to 18 months? Have you guys done any type of modeling to see what kind of effect the QT is to shrinks could have on your balance sheet?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Very good. And then just as a follower, Robin, you talked about the new business wins in the quarter and you talked about One BNY as well. It appears that you're having success in chipping down or breaking down some of the silos that many organizations always struggle with. Can you share with us some of the tools you're using to break those silos? And how -- I would assume you're not 100% complete breaking them all down, but how far along are you in actually breaking them down? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 12, 2024 / 1:30PM, BK.N - Q2 2024 Bank of New York Mellon Corp Earnings Call

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Very good. Thank you.

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Great. Thanks. Thanks. Good morning, guys. Maybe if I could just come back to the -- sticking with NII guide of down 10% having trouble getting there. Just to confirm, it sounds like Dermot what you're saying is it's really almost totally a deposit driven guide on a seasonal basis. And I just wanted to sort of confirm that, given how you've outlined the balance sheet sensitivity to different rate scenarios. It is pretty strong. Of course, you have the benefit of securities portfolio reinvestments. Those are really simply just seasonal deposit dynamic. And then if you can just talk about how NIB is factored into that seasonal deposit dynamic and then of course, to move into next year, in 1Q seasonally, of course, that we should be back positive again. And I just want to confirm that. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 12, 2024 / 1:30PM, BK.N - Q2 2024 Bank of New York Mellon Corp Earnings Call

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Alright. Okay. Fair enough. And then maybe just back to the operating leverage dynamic, and this can be for both Dermot and Robin. Obviously, you're starting up really well with like 100 basis points plus of positive operating leverage. As we move into the second half, not with us standing market movements that would obviously influence to fee revenue dynamics. But given the traction that you're showing sequentially in Europe in your core business growth, in core business sales and I guess the fact that you made these investments already. So I just wanted to get a sense of whether you feel like you're able to scale those investments in the second half. And, you know, obviously with your flat operating expense guidance, it would seem that's the case. If the revenue does turn out to be better than expected from a organic growth perspective, would we see the expense base creep up a little bit, notwithstanding, of course, of course, you still generate positive leverage.

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Okay. That's great color. Thank you so much.

Question: Rajiv Bhatia - Morningstar, Inc. - Analyst : Yeah, there is some progress on Investment and Wealth Management margin in the quarter. I guess my question is are your margins different on the asset management side of the business versus the wealth management side? And do you have a time line for getting back to that 25% plus margin?

Question: Rajiv Bhatia - Morningstar, Inc. - Analyst : Got it, thanks. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 12, 2024 / 1:30PM, BK.N - Q2 2024 Bank of New York Mellon Corp Earnings Call