The Bank of New York Mellon(BK) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - BNY Mellon reported record revenue of $5.1 billion, up 9% year-over-year, with a pre-tax margin improvement to 36% and a return on tangible common equity of 26% [3][14] - Earnings per share reached $1.88, reflecting a 25% increase year-over-year [3][16] - Total assets under custody and administration (AUCA) increased to $57.8 trillion, up 11% year-over-year [14] Business Line Data and Key Metrics Changes - Security Services segment revenue was $2.5 billion, up 11% year-over-year, driven by a 12% increase in investment services fees [18] - Market and Wealth Services segment revenue rose to $1.8 billion, up 14% year-over-year, with net new assets of $3 billion [21] - Investment and Wealth Management segment revenue decreased to $824 million, down 3% year-over-year, with assets under management remaining flat at $2.1 trillion [22][23] Market Data and Key Metrics Changes - The U.S. economy showed resilience despite a cooling labor market and persistent inflation, with equity markets climbing and credit spreads remaining tight [4] - Client balances grew solidly across platforms, with robust trading, clearing, and settlement activity [4] Company Strategy and Development Direction - The company is focused on reimagining BNY Mellon through two core transformation programs: a new commercial model and a platforms operating model [5][10] - The new commercial model aims to deliver integrated solutions and enhance client relationships, with significant wins in asset servicing [6][7] - BNY Mellon is embracing AI, launching the BNY AI Lab in collaboration with Carnegie Mellon University to advance AI research and deployment [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate uncertainties, including geopolitical conditions and trade policies, while continuing to execute on strategic initiatives [4][13] - The company anticipates net interest income for the fourth quarter to be flat sequentially, projecting a full-year increase of 12% year-over-year [25][26] Other Important Information - The company returned approximately $1.2 billion of capital to shareholders, resulting in a 92% total payout ratio year-to-date [17] - The transition to the platforms operating model is over 70% complete, with expectations to realize full benefits by early 2028 [9] Q&A Session Summary Question: How much of this growth year over year would you attribute to actions that you've taken versus just a generally good market backdrop? - Management indicated that the growth is a mix of organic growth, higher market levels, and foreign exchange impacts, with a balanced contribution from each factor [27][29] Question: Can you expand a little bit more about de-risking the balance sheet and how you've changed your approach towards interest rate risk management? - Management highlighted the sophistication in risk management tools and a clean, liquid balance sheet, which has contributed to the strength in net interest income [36][38] Question: What early trends have you seen on the back of M&A, merger arb, IPO activity, and the like? - Management noted that there hasn't been a noticeable change in securities lending related to M&A activity, but they remain focused on the business as the world's largest agency lenders [44][47] Question: Do you think the rise of stablecoins could put pressure on fee rates? - Management views the evolution of money market funds and stablecoins as an opportunity rather than turbulence, emphasizing their broad participation in the money market ecosystem [56][58] Question: Can you help us frame how the multi-line of business solutions compare to previous years? - Management indicated that the trend of cross-selling multi-line solutions is meaningfully higher compared to previous years, reflecting the success of the commercial model [60][63]