Bank of New York Mellon Corp Q4 2024 Earnings Call Transcript

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

Question: Ebrahim Poonawala - BofA Securities, Inc. - Analyst : Hey, good afternoon.

Question: Ebrahim Poonawala - BofA Securities, Inc. - Analyst : Hey, Robin. I guess, first question, and it's with the lens of I'm trying to hit your pre-tax margin ROE targets on an adjusted basis this year. I guess, I understand it's equal to or greater than -- but I'm trying to get a sense of the resiliency of these numbers as we think about -- I mean, you've done a great job executing over the last year or two of what the runway is, and is it reasonable for us to assume that those pre-tax margins being higher than where you are today is actually achievable, assuming no big market shock? So maybe if you want to, at a very high level, address that, Robin, and then I can follow up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 5:00PM, BK.N - Q4 2024 Bank of New York Mellon Corp Earnings Call

Question: Ebrahim Poonawala - BofA Securities, Inc. - Analyst : Understood. And I guess if I look at slide 5 and just this whole conversation around 80% of employees being on the platform model by end of 2025, if you could address that in two ways in terms of, does that result in a lot more resilience to your fee revenue growth relative to whatever may happen to markets? One, the resiliency that provides in terms of the synergies you're getting from moving to that model. And again, as that flows through in terms of these targets, could you actually do much better than where we've been for the last few quarters on the back of the -- and maybe that's the '26 event, but I'm just wondering if the platform allows for more resilient fee growth and actually an improvement relative to where we are on margins and ROE?

Question: Ebrahim Poonawala - BofA Securities, Inc. - Analyst : Got it. And that's a great slide, the slide 27, so good job. Thank you.

Question: Betsy Graseck - Morgan Stanley & Co. LLC - Analyst : Hi, just two things. One, just to wrap up on that last topic, given that '23, '24, you got to 25% of the folks in the operating model, the platform model, and in '25 you're putting on an incremental 60%, I get that the benefits of all of this is multi-year. But that's a step up in the percentage of employees that are going to be joining the platform in '25. So should we expect that operating leverage will also increase given this large slug of folks coming in in '25?

Question: Betsy Graseck - Morgan Stanley & Co. LLC - Analyst : Yes, it just feels like going from 25% to 60% to 80% in one year should, over time, bump up that operating leverage rate. Anyway, that's okay. All right, thank you so much. Appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 5:00PM, BK.N - Q4 2024 Bank of New York Mellon Corp Earnings Call

Question: Brennan Hawken - UBS Equities LLC - Analyst : Sorry, had the mute button pressed. Okay, thanks for taking my questions. So we saw a really solid rebound in net new assets at Pershing this quarter. So curious if you could maybe compare and contrast how that would look like for net new assets in prior quarters, ex the offboarding, which we were dealing with. And Robin, I believe you spoke to ultra-high net worth as like a client segment driving -- or a wealth strata driving some of this. But could you speak to maybe what type of firms are driving this growth? Is it RIAs? Is it broker-dealers? Any particular sources of strength? Thanks.

Question: Brennan Hawken - UBS Equities LLC - Analyst : Great. Thanks for that color. That's helpful. And then shifting gears a bit on the NII expectations, certainly, outlook looks better this year than it did a year ago. Could you maybe help us understand what you would think the trajectory would look like? Do you still think you're largely rate neutral? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 5:00PM, BK.N - Q4 2024 Bank of New York Mellon Corp Earnings Call Should that cadence be largely stable? And you made a reference to changes in the deposit mix. Are there any notable shifts in deposit mix that you're assuming as you model out the year?

Question: Brennan Hawken - UBS Equities LLC - Analyst : Thanks for that color.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Hi. I'm torn on this financial services platform company transformation. On the one hand, I guess it's great if everyone's on the same platform. You can have the One BNY. On the other hand, it just seems like a lot of work to go from 25% employees to 80%. It looks like you're ripping the guts out of the company. Maybe you have to run parallel systems. Maybe you have training. When you add it all together, in the short term, are you guiding for positive fee operating leverage in 2025? I mean, when you're going through a transformation like this, it's tough to show any positive operating leverage, so I get that. And then what are you really playing for in the end? I mean, I get One BNY, I get one platform. It's just a little too conceptual. Could you just put a little more meat on the bones? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 5:00PM, BK.N - Q4 2024 Bank of New York Mellon Corp Earnings Call

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : And do you have an example outside the banking industry software as a service? I mean, when I hang out with my tech colleagues, they'll use phrases like you're using. Is there any example or maybe another bank somewhere else around the world or a fintech or -- this is something brand new.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : And then last follow up, tech spending, '24 compared to '25. And do you feel better, worse, the same about your AI efforts?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Got it. All right, thank you.

Question: Alex Blostein - The Goldman Sachs Group, Inc. - Analyst : Hey, good afternoon. Thanks for the question. Another one for you guys on operating leverage. So obviously, great progress so far. Hear you loud and clear on 2025 and more importantly beyond. I guess in that context, how important is fee operating leverage to the firm? I know you talked about total, which is right, and NII is a helper in 2025. But for whatever reason, if the fee outlook falls short, how much wiggle room do you guys have against that 1% to 2%? And again, maybe talk about the fee operating leverage as well as a metric that you care about or not. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 5:00PM, BK.N - Q4 2024 Bank of New York Mellon Corp Earnings Call

Question: Alex Blostein - The Goldman Sachs Group, Inc. - Analyst : Got it. All right, super helpful. And then a small, nuanced follow up for you guys just around NII. We've seen stronger results in the repo business for a handful of quarters now, and I think there's still some expectation for that to normalize. But clearly, that hasn't happened yet. So maybe talk a little bit about the factors that contributed to the stronger performance in that part of the model within the quarter but also maybe within the year. What could change that, given where you are in the environment and the outlook? And what do you think is the appropriate run rate, I guess, for that contribution to NII going forward? Thanks.

Question: Alex Blostein - The Goldman Sachs Group, Inc. - Analyst : Okay, thanks very much.

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Great. Good afternoon, folks. Thanks for taking my question, just on a couple of assumptions on the financial outlook for 2025. Maybe just to start with net interest revenue, I appreciate all the commentary you made, Dermot, on the factors on that. It looks like it's more based on the asset and deposit side on mix as opposed to growth in deposits and growth in earning assets. I just want to get your sense of, all else equal, to what extent do you think you can actually grow the deposit base via all the client initiatives you have?

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Okay, great. And then shifting to the fee side, it looks like this guidance is sort of an alpha guide. You talk about the drivers of being higher organic growth as you make progress on the platform strategy, of course, partially mitigated by current currency headwinds. But does this assume generally flat markets? I guess that would be in line with your uncertainty commentary. And then I guess if we do have very strong equity markets, say, if we're up just 10%, what would be the rough delta to revenue on that?

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Okay, fair enough. Thank you.

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Market appreciation, yes. Okay, yes, thank you.

Question: David Smith - Truist Securities Inc. - Analyst : Hi, good afternoon. You mentioned all of your -- hi. You managed to hold your AUCA flat despite a big decline in fixed income markets in the fourth quarter. Can you remind us just how much of that $52.1 trillion might be showing off as a lag and not reflect the full decline in markets we saw later in the quarter? Either way, it seems like inflows to the asset servicing business were really strong in the quarter. Could you comment on the competitive environment that you're seeing there as well, please?

Question: David Smith - Truist Securities Inc. - Analyst : Okay. And then just to clarify, you mentioned $44 billion to $46 billion of NIBs embedded in the outlook. Is that the average for the first quarter or for the full year?

Question: David Smith - Truist Securities Inc. - Analyst : All right. Thank you.

Question: Thomas Leddy - RBC Capital Markets - Analyst : Hi, good afternoon. This is Thomas Leddy standing in for Gerard. Aside from the obvious geopolitical risks we all see in the news, what are the primary risks you guys are monitoring for your businesses?

Question: Thomas Leddy - RBC Capital Markets - Analyst : Got it. That's helpful. Thank you. And sort of sticking to the theme of many crosscurrents, can you give us some color on how increased trading volatility attributed to the dynamic interest rate environment might impact your servicing fee revenue growth?

Question: Thomas Leddy - RBC Capital Markets - Analyst : Thank you. That's helpful. And thank you, guys, for taking my question.

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Great. Thanks for taking my follow ups. Just wanted to circle back on Wove. I think, Dermot, you mentioned -- and maybe I missed this. You said you had a revenue guide. I saw the $75 million of exit and exit rate annualized in '24. Did I miss the actual guide for '25, or is that the offboarding point? And maybe if you could just talk about the general progress at Wove. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 5:00PM, BK.N - Q4 2024 Bank of New York Mellon Corp Earnings Call

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Got it. Then the $60 million to $70 million, is that incremental to the [$30 million] of '24, is that right?

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Got it. Okay, great. Thank you.