The Bank of New York Mellon Corporation Q2 FY2025 earnings call

Strong Second Quarter Performance: The Bank of New York Mellon Corporation delivered a strong second quarter. Earnings per share were $1.93, up 27% year over year on a reported basis and 28% excluding notable items. Total revenue was up 9% year over year, exceeding $5 billion for the first time. With expense growth of 4%, significant positive operating leverage was generated. Pretax margin improved to 37% and return on tangible common equity was 28%. Multiyear Transformation: The commercial model, marking one year anniversary, showed growing effectiveness with record sales and increasing multiproduct relationships. Solutions delivery through innovative offerings like digital assets platform, e.g., acting as reserve custodian for stablecoins. The platform's operating model transition, with over half of people in the model, expecting full transition by next year. AI adoption with nearly all employees using Eliza platform, starting to see benefits. Financials Details: Total revenue was $5 billion, up 9%; fee revenue was up 7%; firm-wide AUCA was $55.8 trillion, up 13%; assets under management were $2.1 trillion, up 3%; net interest income was up 17%; provision for credit losses was a benefit of $17 million; expenses were $3.2 billion, up 4%.

Security Services: Total revenue was $2.5 billion, up 10% year over year. Investment services fees were up 10% year over year. Asset servicing investment services fees grew by 7%, and issuer services investment services fees were up 17%. Foreign exchange revenue was up 22% year over year. Net interest income was up 13% year over year. Segment expenses were up 4% year over year. Pretax income was $867 million, up 26% year over year, with a pretax margin of 35%. Markets and Wealth Services: Total revenue was $1.7 billion, up 13% year over year. Investment services fees were up 9% year over year. Pershing investment services fees were up 8%, clearance and collateral management investment services fees were up 14%, and treasury services investment services fees were up 3%. Net interest income was up 21% year over year. Segment expenses were up 8% year over year. Pretax income was $851 million, up 21% year over year, with a pretax margin of 49%. Investment and Wealth Management: Total revenue was $801 million, down 2% year over year. Investment management fees were down 1% year over year. Segment expenses were down 2% year over year. Pretax income was $148 million, down 1% year over year, with a pretax margin of 19%. Other Segment: Sequential decrease in revenue primarily reflected net losses from investment securities activity, while sequential decrease in expenses reflected lower litigation reserves and severance.

Full-year 2025 net interest income is expected to be up high single-digit percentage points year over year. Solid fee revenue growth is expected, market dependent. Expenses excluding notable items are expected to be up approximately 3% year over year. The effective tax rate is expected to be in the 22%-23% range, approximately 23% for the second half. The plan is to return roughly 100% plus or minus of 2025 earnings through common dividends and buybacks.

Geopolitical tensions and conflicts, uncertainty around trade, fiscal, and other policies. Market volatility and active trading could impact results. Integration challenges with platform's operating model and potential M&A activities.

Q: About capital deployment and M&A, A: Robin Vince mentions focus on organic growth, M&A as a tool if it makes sense, with a high bar for M&A.

Q: On fee side performance, A: Dermot McDonogh talks about fee growth, commercial model, platform's operating model, and AI impact.

Q: On AI and operating leverage, A: Robin Vince discusses AI as top-line and expense story, unlocking capacity, early signs of benefits.

Q: On acquisitions, A: Robin Vince talks about capability buys like Archer, potential for bolt-on acquisitions fitting into platform's operating model.

Q: On deposits and balance sheet, A: Dermot McDonogh talks about deposit growth, corporate trust driving deposits, Q3 comps.

Q: On investment management improvement, A: Dermot McDonogh and Robin Vince talk about Jose leading the business, cross-selling, product shaping.

Q: On negative pricing, A: Dermot McDonogh says broadly flat across firm, improved from three years ago.