The Bank of New York Mellon(BK) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Earnings per share (EPS) for Q3 2023 was $1.22, compared to $0.39 in Q3 2022, with an adjusted EPS of $1.27 reflecting a 5% year-over-year increase [5][22] - Return on tangible common equity was 20% on $4.4 billion of revenue, up 2% year-over-year, with a pre-tax margin of 29% [5][22] - Net interest revenue increased by 10% year-over-year, driven by rising interest rates [6][20] Business Line Data and Key Metrics Changes - Security Services reported total revenue of $2.1 billion, up 1% year-over-year, with net interest revenue up 12% [27] - Market and Wealth Services total revenue was $1.4 billion, up 6% year-over-year, with investment services fees up 2% [29] - Investment and Wealth Management reported total revenue of $827 million, down 4% year-over-year, with net interest revenue declining by 33% [32] Market Data and Key Metrics Changes - Firm-wide assets under custody/administration reached $45.7 trillion, up 8% year-over-year, while assets under management increased by 3% to $1.8 trillion [21] - The number of funds serviced on the platform continued to grow, with ETFs assets under custody/administration up over 20% year-over-year [28] Company Strategy and Development Direction - The company is focused on three strategic pillars: enhancing client service, improving operational efficiency, and fostering a collaborative culture [8][19] - A commitment to drive higher underlying growth and improve pre-tax margins over time has been established [8][19] - The company is adopting a platform operating model to reduce silos and improve client experiences [63][64] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's strategic objectives and the potential for revenue growth through innovation and efficiency improvements [19][35] - The company is on track to deliver a 20% growth in net interest revenue for the full year 2023, despite a challenging operating environment [34][40] - Management acknowledged the need for continued discipline in managing expenses while investing in growth opportunities [50][52] Other Important Information - The company returned $450 million to shareholders through share repurchases and paid approximately $330 million in dividends, reflecting a 14% dividend increase [22][23] - The Tier 1 leverage ratio improved to 6.1%, and the CET1 ratio was 11.4%, indicating strengthened capital ratios [23] Q&A Session Summary Question: NII outlook and deposit trajectory - Management reaffirmed guidance for 20% NII growth for the year, noting a slowdown in deposit decline and a modest pickup in September and October [38][40] Question: Expense outlook and flexibility - Management emphasized the importance of bending the cost curve and expressed confidence in achieving a growth rate closer to 3% for expenses in 2023 [42][44] Question: Confidence in deposit stability - Management highlighted the diversified nature of the deposit base and expressed confidence in the stability of deposits moving forward [46][48] Question: Capital and buyback strategy - Management indicated that buybacks would remain consistent with previous quarters, with a cautious approach due to market volatility [71][72] Question: Growth in clearance and collateral management - Management noted that growth in this segment was driven by market volatility and treasury issuance, with expectations for continued growth [74]