Bank of New York Mellon Corp Q3 2024 Earnings Call Transcript

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

Question: Brennan Hawken - UBS Equities - Analyst : Good morning. Thanks for taking my questions. You flagged some of the ETF wins that you had on the servicing side. So curious about that. Number one, how much of that was the BlackRock business that you've won? And has the revenue from that win that they win fully turned on? And did those dynamics have something -- or like is the fee rate lower because fees in asset servicing were up about 5%, but AUC 16%? And I know sometimes the ETF fee rates are a little lower, so curious to flesh that out a bit. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 3:00PM, BK.N - Q3 2024 Bank of New York Mellon Corp Earnings Call

Question: Brennan Hawken - UBS Equities - Analyst : Okay. Thanks for that. Maybe if I could word it a little differently. The strong ETF growth that you have seen this quarter, is the revenue fully reflected this quarter? Or is some of those wins still have some revenue ramp to come?

Question: Brennan Hawken - UBS Equities - Analyst : Excellent. Thanks for that, Dermot. Thank you also for the update on NII, encouraging to see things working better. Could you speak to the deposit beta that you experienced with the first rate cut? And given that we're seeing rates coming down now, is it reasonable to think that deposits could begin to grow from here?

Question: Brennan Hawken - UBS Equities - Analyst : Great. Thank you for taking my questions.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Hey. How are you doing?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Good. Look, I'm just -- that's a big number, the $50 trillion of AUC, a nice round number. You did be factual that you beat expectations for the quarter and the year so far, as you highlighted. I'm just trying to figure out how much of this is lucky versus being smart? And I imagine it's a bit of both, but the lucky part is record stock market volatility, trading, some other factors in the market that have gone your way. And I don't feel like we have enough information on your client growth, the underlying client growth, the most repeatable part of the company. So could you give us some color on -- whether it's growth in clients or maybe it's revenues per client or maybe it's products per client or all those adjacent businesses that you talk about -- how you're managing the company better versus simply a better environment to operate in?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : All right. Well, that was very comprehensive. Just last follow-up. Are you implying -- and by the way, on all the metrics again, the client growth numbers are what -- and thanks for pulling back the layers of the onion there, but always like even more layers. Never enough for us, but in terms of growth in clients and more specifics going down the line. But the expense is clearly, Dermot, the flat expenses. That's very clear on that part of it. Are you implying even lower expenses in the fourth quarter based on your new guide today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 3:00PM, BK.N - Q3 2024 Bank of New York Mellon Corp Earnings Call

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : All right. Thank you.

Question: Brian Bedell - Deutsche Bank - Analyst : Great. Thanks. Thanks. Good morning, folks. Thanks for taking my questions. Maybe just on -- just sticking with the revenue dynamic, the -- talking about the opportunity, the commercial lift off and the enterprise approach. The early traction that you're getting, I think you referenced some clients now doing multiple services. Can you talk a little bit more about how you think that might impact the revenue growth trajectory? And then also just if you can just reconfirm the general revenue delta to equity markets. I think it was like 10% equity market moves can have a impact of about 1% revenue. So I just wanted to break apart those two dynamics, just really showing that you're actually generating this revenue growth aside from markets.

Question: Brian Bedell - Deutsche Bank - Analyst : Great. That's helpful. I'll get back in the queue for another question.

Question: Alex Blostein - Goldman Sachs - Analyst : Thanks. Good morning, guys. So maybe just wrapping some of the comments you made around fee and a bigger picture question. When you guys think about a number of different growth areas, you outlined some of the specifics, and obviously, the approach to cross-selling has taken a whole different attorney here. So when you use them out and you look at the business holistically, how do you think about the organic fee growth that the enterprise can generate over time?

Question: Alex Blostein - Goldman Sachs - Analyst : Yeah. No, fair enough. I appreciate all that. Smaller tactical question for you guys. So the repo activity continue to be quite elevated, and you mentioned that in your prepared remarks as well. Is it possible to help size how much repo contributed across the enterprise? It hits you in a couple of different ways. Obviously, there's the NII benefit and there's some fee benefits. So as you think about the more normalized level of reproductivity versus what you saw in the quarter, how big of a contributor was that in totality? And as you look forward, given changes in monetary policy expectations, but also some of the client behavior that you mentioned earlier, how sustainable do you ultimately think this more elevated pace of activity in this market?

Question: Alex Blostein - Goldman Sachs - Analyst : Yeah, that's a helpful framework to discuss it this way. Yeah. Thank you, both.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Hi, Dermot. Hi, Robin. Robin, can you give us some thoughts with -- obviously, you talked a little bit about the acquisition you accomplished in this quarter -- what your outlook is for -- you're obviously at very strong capital levels. Your stock has moved very nicely this year, and you get a better currency. What the outlook is for just other types of acquisitions, if there are some that could be complementary to what you're currently doing?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Very good. Thanks for the answer. And then just a quick follow-up, Dermot. You gave us that sensitivity analysis about a gradual 5% change in the equity markets and fixed income and the impact it would have on revenue. Was that for up markets, meaning if the gradual increase was 5% up? Does that also reflect down market, if markets were down 5%? That's the impact we would expect to see.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Okay, great. Thank you.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : Hey. Good morning.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : I have a follow-up with some of your responses, I think. I guess, depending how -- maybe starting with this capital allocation, so how'd your response to Gerard's question around M&A and such. But just talk to us how you think about -- when we think about the valuation of the stock on price to earnings, price to tangible book. At the same time, this year has been pretty good market backdrop wise. And as an investor shareholder, you care about ROE resiliency of these firms. So one maybe, Robin or Dermot, talk to us about your comfort around ROE resiliency? If the market backdrop is unfavorable, what's the flex in the system? And given where things stand today, like how do you think about the stock valuation versus the commitment to return 100%-plus buybacks and dividends? Thank you.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : Appreciate that. And if I can sneak one quick more follow-up, Dermot, I think you mentioned fourth quarter NII slightly lower than 3Q. We've seen a few rate cuts in Europe, in the US now in September. Is it fair to assume that absent a dramatic change in rates, this $1 billion in quarterly NII is where we are bouncing around at the bottom? And then if deposit growth picks up, QT stops, that it should go off that base? Or am I missing something?

Question: Ebrahim Poonawala - BofA Global Research - Analyst : That's helpful. Thank you so much.

Question: Betsy Graseck - Morgan Stanley - Analyst : Hi. Good afternoon.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay, two quick questions. One is on the buyback question. And I know you said, look, you're very accretive on earnings accretion. You don't need a lot of capital for the business model, of course, as we know. And you're above your target CET1 of 11%. And Tier 1 leverage target, 5.5% to 6%, you're at the high end of that range. And so when we think about the 100%-plus, how should we think about the plus part of the 100%-plus? Because it feels like totally 100% makes sense, but there's room to bring these to optimize the capital structure more. So I'm thinking about -- I'm wondering what time frame are we talking about to optimize your capital structure, do you feel?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. Got it. And then the other question. You mentioned one-third of BNY is now on the platform model. And are you taking 100% of the firm there? And just wondering about implications for the runway for efficiency improvements as you execute on that? Thanks.

Question: Betsy Graseck - Morgan Stanley - Analyst : Got it. All right. Thanks so much. Appreciate it.

Question: Glenn Schorr - EVERCORE ISI - Analyst : Just one wrap up for me. Dermot, I love you pointed out the 5% revenue growth, flattish expenses lead to 20% earnings growth. That is the power of the BK model. If you look just -- I know it's just one quarter, but if you look at the sequential numbers, the story changed a little bit with everything about flat and earnings down a little bit. I'm just -- all I'm asking is, does that inform us in any way of how we're looking at as we roll into '25? A lot of your business metrics and balance and client wins are up. So my gut is now, but I just want to see from that perspective. How you feel about that?

Question: Glenn Schorr - EVERCORE ISI - Analyst : All right. Awesome. Thank you.

Question: Rajiv Bhatia - Morningstar - Analyst : Yeah, just a quick one for me, I guess, on the depository receipts business. And I appreciate it's a small business, but the number of sponsored programs continue to decline. Is that something we should continue to expect to decline? And is it competitive takeaways or something else that's driving that? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 11, 2024 / 3:00PM, BK.N - Q3 2024 Bank of New York Mellon Corp Earnings Call

Question: Rajiv Bhatia - Morningstar - Analyst : Got it. Thank you.

Question: James Mitchell - Seaport Global Securities LLC - Analyst : My questions have all been asked and answered. Thanks.

Question: Brian Bedell - Deutsche Bank - Analyst : Oh great. Thanks for taking my follow up. Just one more on the margins, mostly at your 33% target in most areas. So as you generate more sales from moving to the platform model and as we move into, say, next year or beyond, I guess, what's the view on spending some of that and investing in the business versus actually potentially generating margins well above 33%?

Question: Brian Bedell - Deutsche Bank - Analyst : That's great color. Thank you very much.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : With all this talk of the transitioning of the employees, I guess, half the employees to the new platform over the next one to two years, how much do you see AI playing a role? And can you give any metrics? I mean keeping expenses flat, I don't know how much you're still investing in AI. When Emily presented at the Boston Bank Conference last November, it seemed like BNY was all in for AI. It was one of the most bullish cases made. Yet you've heard out in the broader world, sometimes you have hit, sometimes you have misses. So where -- how does AI relate to the whole platform strategy? And how committed are you to AI? And do you have any numbers that you can give us, some concrete metrics? Thanks.

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