Release Date: October 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of New York Mellon Corp (BK, Financial) reported strong third-quarter results with a 22% year-over-year increase in earnings per share, reaching $1.50.
- Total revenue increased by 5% year over year to $4.6 billion, driven by broad-based revenue growth across all business segments.
- Assets under custody and/or administration surpassed $50 trillion for the first time, highlighting BK's market-leading position.
- The company announced the planned acquisition of Archer, which is expected to enhance BK's asset servicing capabilities and expand distribution for its investments business.
- BK's liquidity ecosystem reached an all-time high of over $1.5 trillion, reflecting strong client cash across various investment alternatives.
Negative Points
- Provision for credit losses was $23 million, primarily due to reserve builds related to commercial real estate exposure.
- Net new assets in Pershing were negative $22 billion for the quarter, reflecting ongoing deconversion of lost business from the prior year.
- Investment management and performance fees saw only a 2% increase, partially offset by the mix of AUM flows and lower performance fees.
- Expenses, excluding notable items, increased by 1% year over year, driven by higher investments in employee merit increases.
- The depository receipts business continues to face challenges, with a decline in the number of sponsored programs.
Q & A Highlights
Q: How much of the ETF servicing growth was due to the BlackRock business, and is the revenue from that fully realized?
A: Dermot Mcdonogh, CFO, explained that while he couldn't discuss specifics about individual clients, the ETF market is growing, and BNY Mellon is a key player. The revenue from recent ETF growth is not fully realized yet, as onboarding is done in phases, so some revenue is still to come.
Q: Could you discuss the deposit beta experienced with the first rate cut and the potential for deposit growth as rates decline?
A: Dermot Mcdonogh noted that the first rate cut was fully passed on, and while it's too early to predict deposit growth due to the Fed's easing cycle, BNY Mellon has maintained strong deposit levels. He expects balances to moderate slightly but sees no significant changes currently.
Q: How much of BNY Mellon's recent success is due to market conditions versus strategic initiatives?
A: Robin Vince, CEO, emphasized that while market conditions have been favorable, BNY Mellon's growth is also due to strategic initiatives like the 1BNY approach, which focuses on providing holistic solutions to clients. The company has seen growth across all business segments and is leveraging its platform model to drive further growth.
Q: Can you elaborate on the impact of the commercial lift-off initiative and the enterprise approach on revenue growth?
A: Dermot Mcdonogh highlighted that the commercial lift-off initiative, led by Cathinka Wahlstrom, has organized BNY Mellon's client coverage to deliver holistic solutions. This approach is expected to drive revenue growth as clients increasingly buy multiple services from BNY Mellon.
Q: How does BNY Mellon view its capital allocation strategy, particularly regarding M&A and stock buybacks?
A: Robin Vince stated that BNY Mellon is opportunistic with M&A, focusing on bolt-on acquisitions like Archer that align with strategic priorities. The company aims to return 100% or more of earnings to shareholders through dividends and buybacks, maintaining a strong capital position while investing in growth opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
