The Bank Of New York Mellon Corporation · NYSE:BNY
The Bank Of New York Mellon — Bank of New York Mellon — Investor Day (March 2018)
155 slides from The Bank Of New York Mellon's investor day presentation, Mar 8, 2018
Slide 1: Investor Day March 8, 2018
Investor Day March 8, 2018 Exhibit 99.1
Slide 2: Forward-looking statements and non-GAAP measures
A number of statements in our presentations, the accompanying slides and the responses to your questions are “forward-looking statements.” Words such as “estimate”, “forecast”, “project”, “anticipate”, “target”, “expect”, “intend”, “continue”, “seek”, “believe”, “plan”, “goal”, “could”, “should”, “m
Slide 3: Investor Day 2018 Agenda
Investor Day 2018 Agenda Start Time End Time Session Speaker 7:15 AM 8:00 AM BREAKFAST / REGISTRATION 8:00 AM 8:05 AM Welcome Valerie Haertel Global Head of Investor Relations 8:05 AM 8:50 AM Opening Remarks/Strategic Overview Charlie Scharf Chairman and Chief Executive Officer 8:50 AM 9:20 AM Firm
Slide 4: Strategic Overview
Investor Day 2018 Strategic Overview Charlie Scharf Chairman and CEO March 8, 2018
Slide 5: Great history and culture; strong and unique franchise
Great history and culture A strong and unique franchise Clear, focused, and financially attractive business model Continued focus on operating leverage Investing for growth by Improving execution Expanding technology-enabled solutions Leveraging all of BNY Mellon
Slide 6: Great history, strong culture and demonstrated ability to change
Great history, strong culture and demonstrated ability to change Proven record and willingness to change and evolve Strong culture Proud Client-driven Low risk tolerance Methodical Objective Intellectually honest Great history Founded in 1784 by Alexander Hamilton First company traded on the NYSE An
Slide 7: Our evolution over time
Our evolution over time Business model Reach Traditional commercial bank Universal bank Services company operating within a bank Local, mostly in New York Expanding internationally Global 1970s 1990s Today Tomorrow Broader Technology-driven Service provider for a digital world
Slide 8: A strong and unique franchise
Great history and culture A strong and unique franchise Clear, focused, and financially attractive business model Continued focus on operating leverage Investing for growth by Improving execution Expanding technology-enabled solutions Leveraging all of BNY Mellon
Slide 9: BNY Mellon today – Investment Services
NOTE: Revenue and pre-tax income metrics for Investment Services reflect year-end December 31, 2017. BNY Mellon today – a services company operating within a bank Asset Servicing Pershing Issuer Services Treasury Services Clearance and Collateral Management Securities Finance Liquidity and FX $11.6B
Slide 10: BNY Mellon today – Investment Management
BNY Mellon today – a services company operating within a bank Asset Management Wealth Management $4.0B Revenue $1.1B Pre-tax Income Investment Management Diversified global asset manager: Broad range of investment strategies 10 specialized managers Leading positions in specialized asset management –
Slide 11: Diversified fee-based businesses
BNY Mellon today – a services company operating within a bank Diversified fee-based businesses Investment Services 74% of Total Revenue $11.6B Revenue $3.8B Pre-tax Income Investment Management 26% of Total Revenue $4.0B Revenue $1.1B Pre-tax Income NOTE: Revenue and pre-tax income metrics for Inves
Slide 12: Scale is a competitive advantage
Scale is a competitive advantage All businesses operate at scale Asset Management Wealth Management #7 Global Asset Manager #10 U.S. Wealth Manager Asset Servicing #1 Global Custodian #1 Securities Lending Pershing #1 U.S. Clearing Firm Issuer Services #1 Depositary Receipts #1 Corporate Trust Treas
Slide 13: Our business is global
Our business is global U.S. $10.0 billion; 64% of total revenue EMEA $4.0 billion; 26% of total revenue APAC $1.0 billion; 6% of total revenue Other $0.6 billion; 4% of total revenue 36% of revenue in 2017 was generated outside of the U.S. Operating in 35 countries… …and more than 100 markets 47% of
Slide 14: Outstanding client franchise
Institutions Asset Managers Financial Services Public/Non-Profits Individuals Corporations Governments Central Banks Family Offices Sovereign Funds Mutual Funds Hedge Funds Private Equity ETFs Banks Broker-Dealers Financial Intermediaries Insurance Companies Investment Advisors Pension Funds Local G
Slide 15: Core custody is an anchor to broader relationships
Diversified fee-based businesses Core custody is an anchor to broader relationships Custody is an anchor solution Number of top 100 custody clients using Number of top 5 custody clients using 4 of 5 3 of 5 5 of 5
Slide 16: Our businesses are naturally multi-product
Our businesses are naturally multi-product Entry points Part of offering Core Custody FX Securities Financing Cash Fund Accounting Collateral Government Clearing Custody Cash Collateral Pershing Custody Loans Cash Wealth Management Investments Cash Loans Investment Management Custody Cash Multi-stra
Slide 17: Our businesses are naturally multi-product
Our businesses are naturally multi-product Entry points Part of offering Core Custody FX Securities Financing Cash Fund Accounting Collateral Government Clearing Custody Cash Collateral Pershing Custody Loans Cash Wealth Management Investments Cash Loans Investment Management Custody Cash Multi-stra
Slide 18: Our businesses are naturally multi-product
Our businesses are naturally multi-product Entry points Part of offering Core Custody FX Securities Financing Cash Fund Accounting Collateral Government Clearing Custody Cash Collateral Pershing Custody Loans Cash Wealth Management Investments Cash Loans Investment Management Custody Cash Multi-stra
Slide 19: These create unique franchises: cash and liquidity
These create unique franchises NOTE: Other includes Clearance and Collateral Management Cash sources Investments Deposits Solutions Proprietary MMF Non-proprietary MMF Collective funds Foreign interest bearing U.S. interest bearing Non-interest bearing Securities lending cash reinvestment Active acc
Slide 20: Collateral is a unique opportunity
Tri-Party Platform Collateral is a unique opportunity Dealer services Tri-Party Repo Collateral Optimization Committed Facility Term Loans Buy-side services Securities Finance Collateral Mobilization Cleared Repo Peer-to-Peer Repo (DBV-X) BNY Mellon Clients Collateral Management Asset Servicing Pers
Slide 21: Continued focus on operating leverage
Great history and culture Continued focus on operating leverage A strong and unique franchise Clear, focused, and financially attractive business model Investing for growth by Improving execution Expanding technology-enabled solutions Leveraging all of BNY Mellon
Slide 22: Focused on fee-based, recurring revenue
BNY Mellon revenue1 by type Focused on fee-based, recurring revenue ~75% of our revenue is fees Significant percentage of our net interest income is “fee-like” and predictable. The categories include: Operational deposits Low risk loans Broker-Dealer customer payables >80% of our revenue is recurrin
Slide 23: Strong and growing margins
BNY Mellon overall operating margin1 growth (includes intangible amortization) Strong and growing margins +8% +5% Operating margin1 growth by business 1. Represents a non-GAAP measure. See Appendix for a reconciliation. Additional disclosure regarding non-GAAP measures is available in the Corporatio
Slide 24: Consistent EPS growth with high returns
Generating consistent EPS growth with high returns 1. Financial results referenced for the total Corporation are calculated on a non-GAAP operating basis, which excludes merger and integration, litigation and restructuring charges for all periods. Also excluded from 2017 results are the fourth quart
Slide 25: Without taking substantial credit and market risk
Without taking substantial credit and market risk Majority of loans in support of operating businesses <1% trading assets 41% predominately highly rated, liquid assets 39% of assets in cash No meaningful derivatives Cash Loans Securities Trading Securities 2017 Average Interest Earning Assets
Slide 26: Consistently returning majority of capital to shareholders
NOTE: Total capital return may not foot due to rounding. Net income reflects net income applicable to shareholders. 1. Includes common and preferred dividends. Common Dividend Payout Ratio 23% Share Repurchase Payout Ratio 69% Total Payout Ratio 92% Share Repurchases $2.4 $2.4 $2.7 Dividends Paid1 $
Slide 27: Capital return yield example for 2017
Earnings growth and capital generation should continue to drive strong returns – 2017 example NOTE: Capital return yield reflects dividend and share repurchases divided by annualized average market capitalization. 1. Represents a non-GAAP measure. See Appendix for a reconciliation. Additional disclo
Slide 28: Revenue growth rate disappointing but improving
Revenue growth rate disappointing – but improving and majority market-driven Revenue1 Growth 2015-2017 ($B) $ $ $ 2014 Investor Day Targets Flat rate environment Normalized rate environment 3.5%-4.5% 6%-8% Model has embedded leverage 1% increase in revenue growth… 1% …translates to 2-3 percentage po
Slide 29: Investing for growth
Great history and culture Continued focus on operating leverage A strong and unique franchise Investing for growth by Improving execution Expanding technology-enabled solutions Leveraging all of BNY Mellon Clear, focused, and financially attractive business model
Slide 30: Continued focus on operating efficiency
Continued focus on operating efficiency Regulatory expenses grew 24% between 2014 and 2017 Efficiency Increased volumes Operational expenses (8%) Expense1 growth 2014-2017 ($B) Expenses driving margin improvement 1. Reflects a non-GAAP measure. See Appendix for a reconciliation. Additional disclosur
Slide 31: Continuing to focus on operating efficiency
Continuing to focus on operating efficiency Select examples U.S. Transfer Agency Accounting Core Securities Process Volume Expenses Cost Per Transaction -2.6% Volume Expenses Cost Per Transaction -3.7% Volume Expenses Cost Per Transaction 2016-2017 2016-2017 2016-2017 -19.1%
Slide 32: Operating efficiencies
Operating efficiencies So Far Going Forward More organizational streamlining and flattening Operating center consolidation Workflow automation for pricing, accounting, account opening Digital transaction capture (faxes, recons, trades) More self-service (manual file delivery, “hands free” NAV) Integ
Slide 33: Investing for growth
Great history and culture A strong and unique franchise Investing for growth by Improving execution Expanding technology-enabled solutions Leveraging all of BNY Mellon Clear, focused, and financially attractive business model Continued focus on operating leverage
Slide 34: Technology investment increasing
…with an incremental ~$300MM planned Technology investment increasing – a clear priority for success ~$2.4B spent on technology annually… ~75% ~25% ~40% ~60% Operating platform and cybersecurity Development ~$2.4B ~$0.3B ~$2.7B Technology spend going forward ~55% ~45% Operating platform must be a pr
Slide 35: Technology investments cut across time horizons
Technology investments cut across time horizons Near-Term Investments Minimize risk as well as increase reliability and quality Longer-Term Investments Strategic investments across all businesses Technology infrastructure Data centers Network architecture Platform consolidation New test environments
Slide 36: Growth related initiatives at different stages
Growth related initiatives at different stages of development 74 new fund launches over last two years Specialty, alternative, passive strategies Investment Services partnership Private Wealth footprint growth Today Tomorrow Continuing technology consolidations Alternative and ETF servicing platform
Slide 37: And we are changing how we do business
And we are changing how we do business Changing culture Changing technology Client driven Solutions-driven Great listeners Great synthesizers Inconsistent and reactive Consistent, quick and proactive Mainframe Distributed Systems Client access to BNY Mellon System-to-system client integration Tick-l
Slide 38: Improved organic growth driven by a series of actions
Improved organic growth will be driven by a series of actions Differentiated operating platforms Consistent solutions oriented client coverage Business by business focus on execution Digital investments Internal capabilities External partners Management focus While we continue focus on operating lev
Slide 39: BNY Mellon Financial Overview
Investor Day 2018 BNY Mellon Financial Overview Michael Santomassimo Chief Financial Officer March 8, 2018
Slide 40: Financial Overview Introduction
BNY Mellon Financial Overview Introduction Dynamic business model delivering long-term value and growth opportunities over time Diversified and stable business mix with high percentage of recurring revenue Lower credit and market risk Strong and liquid balance sheet driven by stable deposits Consist
Slide 41: A dynamic model delivering long-term value
A dynamic model delivering long-term value to clients and shareholders Our investment thesis – delivering consistency over time Strong EPS Growth Industry leader Increasing scale benefits Positive operating leverage Positive capital generation Attractive Business Model Diversified business mix Major
Slide 42: Full range of operational services
Full range of operational services Conduct business, invest and transact in markets around the world Custody Accounting ETF services Middle-office solutions Transfer agency Private equity and real estate funds Broker-dealer and advisor services Pershing prime services Registered investment advisor s
Slide 43: Diversified global asset manager
Diversified global asset manager Offering a broad range of investment strategies from 10 specialized managers Comprehensive wealth management offering Investment Management #7 Asset Manager, by Global Assets Under Management #10 Wealth Manager, by U.S. Client Assets Investment Servicing and Informat
Slide 44: Diversified, recurring revenue stream
Diversified, recurring revenue stream FY17 – Total Operating Revenue1 ($ billions) % Non-U.S. Revenue 61% 9% 39% N/M 45% 36% 45% 36% 75% 21% 4% Total Company $15.8 1% Significant amount of revenue is predictable over time Revenue % Fee Revenue Foreign Exchange and Other Trading Net Interest Revenue
Slide 45: Significant synergies exist across the businesses
Significant synergies exist across the businesses Relationship Synergies >75% of firm revenue from clients served by multiple businesses Dedicated enterprise management to top ~700 clients Cost Synergies >40% of combined technology and operations expense base devoted to services that support multipl
Slide 46: Focused strategy to transform client experience and operating model
Focused strategy to transform the client experience and operating model Investing for the future Enterprise Priorities Collateral, Payments and Liquidity Management Trade Lifecycle Efficiencies Core Custody, Safekeeping & Clearing Next Gen Wealth Management and RIA Technology Operational Optimizatio
Slide 47: Pace of regulatory change slowing
Pace of regulatory change slowing but continued execution is key Regulatory outlook showing modest improvement Capital: Basel III implementation, Leverage ratio, SLR Liquidity: LCR, enhanced standards Recovery & Resolution: Substantial progress in plans Market Reforms: MMF reform, Tri-party repo ref
Slide 48: Lower credit and market risk
Lower credit and market risk ($13B) $291B Average Interest-Earning Assets $4B ($25B) $10B Cash Loans Securities $304B Average yields 1.52% 1.08% Total Trading Securities ($3B) 80% of average interest-earning assets High Quality Securities Portfolio: $118B >90% of securities portfolio rated AAA/AA- ~
Slide 49: Client deposits drive size of balance sheet
Client deposits drive size of balance sheet NOTE: Totals may not foot due to rounding. Other liabilities include payables to customers and broker-dealers, commercial paper, other borrowed funds, trading liabilities, and other noninterest-bearing liabilities. Average Liabilities & Equity – 2014-2017
Slide 50: Business performs well in stress
Business performs well in stress Source: Federal Reserve–Comprehensive Capital Analysis and Review (CCAR). NOTE: U.S. G-SIBs peer group average excludes BK and STT. NTRS is not designated as a U.S. G-SIB. Reduction in Tier 1 Leverage Ratio after Stress (2017 CCAR Severely Adverse Scenario) Significa
Slide 51: Executing since 2014 Investor Day
Executing since 2014 Investor Day 1. Represents a non-GAAP measure. See Appendix for a reconciliation. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations Achieved upper-end of EPS target Rev
Slide 52: Performance versus 2014 Investor Day goals
1. Adjusted for M&I, litigation and restructuring expenses for all periods as well as the impact of U.S. tax legislation, investment securities losses related to the sale of certain securities, severance and asset impairment charges in 4Q17. Results in 2014 adjusted for the impact of gains related t
Slide 53: 2017 Performance
2017 Reported Operating Adjustments 2017 Operating1 Better/(Worse) vs. 2016 Operating Revenue $15.5 $0.3 $15.8 4% Expense $11.0 ($0.3) $10.6 (2%) Net Income $3.9 ($0.2) $3.8 9% Operating Margin 30% 3% 33% 169bps Tax Rate 10.8% 14% 24.5% 42bps EPS $3.72 ($0.15) $3.57 13% 2017 Performance 1. Reflects
Slide 54: Continued focus on efficiency showing in margin improvement
Continued focus on efficiency showing in margin improvement 1. Represents a non-GAAP measure. See Appendix for a reconciliation. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations Creating o
Slide 55: Maintaining returns and ratios within current ranges
Maintaining returns and ratios within current ranges 1. Includes common and preferred dividends. 2. Represents a non-GAAP measure. See Appendix for a reconciliation. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC, available at www.bnyme
Slide 56: Returns driven by consistent earnings and capital distribution
Returns driven by consistent earnings and execution of capital distribution plan Source: FactSet and Company filings. Gross Reduction in Shares Outstanding (cumulative: 2015-2017) BNY Mellon BNY Mellon vs. Trust Banks Payout Ratios Over Time (2012-2017) 11% 10% BNY Mellon Dividends Share Repurchases
Slide 57: Clear investment priorities and capital deployment
Clear investment priorities and approach to capital deployment NOTE: Subject to regulatory and other approvals. Investment Priorities Dividends and Share Repurchase Goals Investing in our operating platform and organic growth Business line extensions; new products; technology platforms Total payout
Slide 58: Client deposit activity largely as expected
Client deposit activity largely as expected Average BNY Mellon Deposits ($B) Deposits impacted by: Higher rates Reduction in Federal Reserve balance sheet Growth in economic activity Deposit betas will increase as rates rise Noninterest-bearing deposits as a percentage of total deposits likely to fu
Slide 59: 2018 Expense outlook
1. Operating noninterest expense is a non-GAAP measure and excludes litigation and 4Q17 significant items, merger and integration, and restructuring charges. Significant items in 4Q17 include severance, an asset impairment and investment securities losses related to the sale of certain securities. A
Slide 60: First Quarter 2018 outlook
12-14%+ vs. 1Q17 2018 Outlook Net Interest Revenue Investment/Other Income Securities Gains/(Losses) Expense Tax Rate $60-70MM (Expect $40-60MM per quarter) ~($50MM) 4-5% vs. 1Q17 (~2% of growth driven by foreign currency translation) ~19-20% (Expect 21% effective tax rate for 2018) First Quarter 20
Slide 61: 2018 Financial profile
1. Represents non-GAAP measures. See Appendix for reconciliations. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations 2018 Financial profile – excluding real estate charge Revenue Expense Pr
Slide 62: A dynamic model delivering long-term value
A dynamic model delivering long-term value to clients and shareholders 1. ROTCE represents the Return on Tangible Common Equity. This is a non-GAAP measure. See Appendix for reconciliations. Our investment thesis – delivering consistency over time Strong EPS Growth Industry leader Increasing scale b
Slide 63: Investment Management
Mitchell E. Harris CEO, Investment Management Investor Day 2018 Investment Management March 8, 2018
Slide 64: Investment Management – a scaled, global, diversified business
Investment Management – a scaled, global, diversified business 1. As of 4Q17; 2. Pensions & Investments/Willis Towers Watson 2016 data, published October 2017; 3. Pensions & Investments 2016 data, published May 2017; 4. Barron’s Top 40 Wealth Management Firms 2016 data, published September 2017; 5.
Slide 65: Go-to-market through our portfolio of asset and wealth management companies
1. Amherst Capital Management is a majority-owned subsidiary of BNY Mellon, and is minority-owned by Amherst Holdings, LLC; 2. BNY Mellon owns a minority interest in Siguler Guff & Company, LP and certain related entities (including Siguler Guff Advisers, LLC). Go-to-market through our portfolio of
Slide 66: Streamlined business portfolio to drive scale
1. Average AUM represents Investment Management total AUM as of 4Q17 divided by the number of asset management companies; 2. U.S. NewCo refers to Asset Management North America, the legal entity that combined the former Mellon Capital, Standish and The Boston Company businesses. Streamlined our busi
Slide 67: Solid margin and earnings growth since last Investor Day
1. Peers include: BlackRock; Eaton Vance; Franklin Templeton; Invesco; J.P. Morgan Asset Management; Legg Mason; Natixis; Schroders; T. Rowe Price. Peer data sourced from company filings; 2. See appendix for a reconciliation. Peers are presented on the same basis where information is disclosed; 3. N
Slide 68: Continue to deliver strong investment performance
Continue to deliver strong investment performance % of Long-Term Active AUM Ahead of Benchmark 5-Year 2 3-Year 1-Year 2 2 1. As of 4Q17. Includes all discretionary Active AUM. If an account has multiple benchmarks, the benchmark that is most representative of that account’s strategy was used; 2. Mul
Slide 69: Executing strategy within a dynamic operating environment
Executing on our strategy within a dynamic operating environment 1. BCG 2016 data, published July 2017. Traditional Active is equivalent to Core Active as defined by BCG (i.e. includes actively managed domestic Large-Cap Equity, domestic Government and Corporate Debt, Money Market, and Structured pr
Slide 70: Evolve product offering to meet changing client needs
Continue to evolve our product offering to meet changing client needs 1. Launches include new products plus extensions of existing products into new markets. Mergers, closures or repricing data excludes institutional separate accounts. Business Mix Change Driven by Growth in LDI, Multi-Asset and Alt
Slide 71: Expanding passive capabilities
Expanding our passive capabilities with a focus on both “building blocks” for multi-asset solutions and specialty beta products 1. Pensions & Investments data as of June 2017. Peers include: BlackRock; Geode; Invesco; Legal & General; Northern Trust; Nuveen; PGIM; State Street; Vanguard. Expand the
Slide 72: Insight is one of our key engines of growth
Insight is one of our key engines of growth 1. IPE 2016 data published June 2017; 2. Insight is based in the U.K. and its 2014-2017 revenue CAGR in local currency (GBP) was 19%. The 10% CAGR shown on the chart represents Insight’s 2014-2017 revenue growth, as measured in BNY Mellon’s reporting curre
Slide 73: Restructuring U.S. business into a scaled multi-asset manager
1. As of 4Q17; 2. Published November 13, 2017; 3. Published November 14, 2017. Restructuring our U.S. business to create a scaled, relevant multi-asset manager Combined Three Large Businesses in the U.S… U.S. NewCo: A $577B AUM Asset Manager1 Consolidating fundamental, macro and quantitative researc
Slide 74: Differentiated distribution model
Differentiated distribution model to support our businesses 1. Net fee revenue reflects Asset Management’s 4Q17 annualized total fee and other revenue, net of distribution and servicing expense. See appendix for a reconciliation. Multi-Distribution Model % of Asset Management Net Fee Revenue as of 4
Slide 75: Combined Asset and Wealth Management business
Differentiated Business Model Key Benefits of a Combined Asset and Wealth Management Business Strong Wealth Management franchise with a comprehensive offering 1. Barron’s Top 40 Wealth Management Firms 2016 data, published September 2017; 2. As of 4Q17; 3. Represents average 4Q17 balance; 4. Institu
Slide 76: Wealth Management has delivered solid results
…and Solid Performance Relative to Peers Wealth Management has delivered solid results – strategy focused on high-growth markets and segments 1. Companies’ financial filings. Peers include: Bank of America (Global Wealth and Investment Management); J.P. Morgan (Wealth Management), assumes all net in
Slide 77: Leveraging the advantages of being part of BNY Mellon
Leveraging the advantages of being part of BNY Mellon 1. Funds managed by BNY Mellon Investment Management collectively represent a Top 5 client of Asset Servicing on a revenue basis. 2. As of 4Q17 HARNESS SYNERGIES ACROSS BNY MELLON 4 BNY Mellon Investment Management Cash Management Investment Mana
Slide 78: Clear set of priorities for 2018
Clear set of priorities for 2018: Product Strategy: Build on leading positions in LDI, Cash and Private Debt; expand Alternatives and Passive capabilities; complete restructure of U.S. Traditional Active business Distribution: Refresh U.S. intermediary; selective buildout of APAC and Europe; simplif
Slide 79: Pershing
Investor Day 2018 Pershing Lisa Dolly CEO, Pershing March 8, 2018
Slide 80: Pershing is an industry leader serving the world's top clients
Note: As of December 31, 2017. 1InvestmentNews, Top Clearing Firm Ranking, 08/17. Pershing is an industry leader serving the world’s top clients $500B+ Mutual Fund Assets ~1,400 Clients #1 Clearing Firm by Broker-Dealer Clients1 7MM+ Global Investor Accounts Strength, Scale and Stability $1.8T+ Asse
Slide 81: Majority of Pershing revenue is recurring
Majority of Pershing revenue is recurring % of 2017 Revenue Transactional Revenue Asset- and Account- Based Fees Net Interest Revenue Asset- and Account-Based Fees Transactional Revenue Revenue Category Driver Balances Accounts Assets, Services Services Money Market/FDIC Funds Retirement Accounts Cu
Slide 82: Positioning clients for opportunity
Positioning clients for opportunity Remaining relevant to financial intermediaries for almost 80 years Core Clearing and Custody Financial Solutions Technology Platforms Wealth Management Business and Practice Management Thought Leadership Advisor and Marketing Programs Data Analytics Time Deliverin
Slide 83: Pershing's growth by the numbers
Pershing’s growth by the numbers Total Revenue CAGR ($B) Total U.S. Positions CAGR ($MM) U.S. Active Accounts CAGR ($MM) Assets Under Custody and/or Administration CAGR ($T) +4.9% +6.8% +2.0% +7.9%
Slide 84: Connecting product manufacturers and clients
Connecting product manufacturers and clients Clients ~800 Broker-Dealers ~500 Registered Investment Advisors ~100 Hedge / ’40 Act Funds ~100,000 Investment professionals Breadth and Variety of Our Clients Product Manufacturers 800 Fund families 60 Insurance carriers 130 ETF managers 500 Separately m
Slide 85: Comprehensive solutions from BNY Mellon
Comprehensive solutions from BNY Mellon $25B+ cash sweep balances Cash Management Private Banking $5B+ loan facilities $22B assets under bank custody or administration Integrated Custodian Technology 19MM custody sub-accounting positions Asset Servicing ~$50MM in assets already pledged from first cl
Slide 86: Technology as a business enabler
Technology as a business enabler
Slide 87: Delivering integrated proprietary and third-party solutions
Note: Pershing has over 400 third-party solutions including those providing market data and analytics. The above are examples specific to technology integration. Trademark(s) belong to their respective owners. Delivering integrated proprietary and third-party solutions Wealth Planning Client Onboard
Slide 88: Navigating a shifting landscape to deliver value to clients
Navigating a shifting landscape to deliver value to clients Capitalizing on trends to evolve our strategy… …and deliver value Next Generation Wealth Management Platform e-Delivery Client Onboarding Capabilities API Capabilities Enterprise Forms and Customized Letter Solutions Third-Party Investment
Slide 89: Summary
Summary Unique set of capabilities More than a clearing firm A platform of size and scale Powered by structural change Diversified revenue streams not dependent on trade volumes 88 Investor Day 2018
Slide 90: We'll be returning shortly
We’ll be returning shortly Investor Day 2018
Slide 91: Asset Servicing
Investor Day 2018 Asset Servicing Hani Kablawi CEO, Asset Servicing March 8, 2018
Slide 92: Leading global asset servicer
Leading global asset servicer 83 Investment Managers Scale Global reach Diverse client segments Pensions/Pension Administrators 47 Hedge Funds 16 7 % of Total Revenue 2017 $33.3T Assets under custody and/or administration 88MM Settlements processed per year $1.1T Cash managed and serviced across BNY
Slide 93: Breadth and depth of capabilities
Breadth and depth of capabilities, many profitable solutions Asset Servicing Client Chief Investment Officer Head of Distribution Chief Operating Officer Chief Technology/ Data Officer Chief Risk Officer I Need… Performance I Need… Growth I Need… Efficiency Transfer Agency Middle Office Outsourcing
Slide 94: Highly predictable revenue
Highly predictable revenue – expanding client relationships from the core Deposit and loan balances Spreads on FX, Sec Lending and other markets revenues Transactional fees from client volumes Asset based fees on market value Structural fees on accounts Custody Cash FX Lending Collateral Management
Slide 95: Performance since 2014 Investor Day
Performance since 2014 Investor Day Drivers of performance Exited lower margin, lower-return businesses Leveraged talent in lower cost locations Significantly advanced our platform consolidation strategy Improved client profitability and new business discipline Increased operating capacity while red
Slide 96: Evolving client needs while fee pressure continues
Demographics Evolving client needs while fee pressure continues Substantial change on multiple dimensions Financial Sector Regulation Low Yield Environment Technology Lower than normal rates create return challenges Accelerating innovation changes the investment process Increasing compliance costs a
Slide 97: Focus going forward
Focus going forward Competing more effectively in the core business Custody, Fund Administration, Investor Solutions 1 Creating markets capabilities that enhance client outcomes Trading, financing, collateral, liquidity 4 Automate by enhancing workflow, increasing digital intake of data, and deployi
Slide 98: Competing more effectively in the core business
Competing more effectively in the core business 1 Enhancements to the core… …are improving our competitive position… …resulting in wins Efficiency Quality Client Experience Preferred partner – scale and capability Substantial number of large deals have come to market in recent years New outsourcing
Slide 99: Serving faster-growing Alternative and ETF managers
1. National Council of Real Estate Investment Fiduciaries (NCREIF), the European Association for Investors in Non-Listed Real Estate Vehicles (INREV), and the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV) Annual Fund Manager Survey Report and 2017E based on 2016 AUM adju
Slide 100: Delivering industry-leading data management solutions
16 of 25 largest Global Asset Managers2 Well-established offering >$24T utilizing BNY Mellon’s Eagle Data Management capabilities Delivering industry-leading data management solutions Overview Eagle was founded in 1989; acquired by Mellon Financial in 20011 Data Management solutions for largest Asse
Slide 101: Creating markets capabilities that enhance client outcomes
Creating markets capabilities that enhance client outcomes 4 Increased buy-side peer-to-peer financing demand for collateral as dealers reduce balance sheets Growing demand for sourcing cash as eligible collateral for margin trades Buy-side firms seek to enhance yields Increased appetite for direct
Slide 102: Strong market position serving distributors
Strong market position serving distributors Synergies with Pershing create competitive advantage Subaccounting Accounts Transfer Agency Accounts Helping our clients service their investor base 5 BNY Mellon is the largest subaccounting provider Our opportunities 1. Subaccounting is increasingly impor
Slide 103: Positioned for growth
Positioned for growth Investment management, cash and passive capabilities Markets for trading, financing, collateral, liquidity High quality, low risk balance sheet Pershing capabilities for advisors and investors Enterprise synergies Trust and scale Breadth and depth of services and solutions Clie
Slide 104: Delivering Differentiated Solutions to Clients
Investor Day 2018 Delivering Differentiated Solutions to Clients Todd Gibbons CEO, Clearing, Markets & Client Management March 8, 2018
Slide 105: Delivering broad servicing capabilities to our clients
Key Points: Service capital market participants, not just investors Multiple foundational products offering alternative relationship entry points Breadth enables greater expertise, deeper client relationships and more high-value services BNY Mellon Model Clients Served Investment Management Asset Se
Slide 106: Building enduring relationships with our top clients
Building valuable and enduring relationships with our top clients Global Client Management consists of teams of senior bankers with deep industry expertise in our client segments Global footprint with executives positioned in every client region GCM Clients account for approximately 50% of revenue E
Slide 107: Breadth of top client relationships
Asset Servicing Clearance and Collateral Management Pershing Treasury Services Markets Issuer Services Investment Management Banks, Broker-Dealers, Advisors 67% 32% 31% 86% 65% 60% 32% Corporates, Governments, Not for Profits 76% 3% 1% 53% 80% 79% 52% Insurance 87% 2% 40% 72% 82% 88% 70% Investment
Slide 108: Case Studies
Identify Needs Solve Problems Build Enduring Relationships Case Studies
Slide 109: Client Solution – Regional Institutional Broker/Dealer
Client Solution – Regional Institutional Broker/Dealer
Slide 110: Client Solution – Regional Institutional Broker/Dealer
Client Solution – Regional Institutional Broker/Dealer
Slide 111: Client Solution – Regional Institutional Broker/Dealer
Client Solution – Regional Institutional Broker/Dealer
Slide 112: Client Solution – Regional Institutional Broker/Dealer
Client Solution – Regional Institutional Broker/Dealer
Slide 113: Client Solution – Large Asset Manager
Client Solution – Large Asset Manager
Slide 114: Client Solution – Large Asset Manager
Client Solution – Large Asset Manager
Slide 115: Client Solution – Large Asset Manager
Client Solution – Large Asset Manager
Slide 116: Client Solution – Large Insurance Client
Client Solution – Large Insurance Client
Slide 117: Client Solution – Large Insurance Client
Client Solution – Large Insurance Client
Slide 118: Client Solution – Large Insurance Client
Client Solution – Large Insurance Client
Slide 119: Client Solution – Large Insurance Client
Client Solution – Large Insurance Client
Slide 120: Client Solution – Large Insurance Client
Client Solution – Large Insurance Client
Slide 121: BNY Mellon Differentiators – Large Insurance Client
BNY Mellon Differentiators Client Solution – Large Insurance Client
Slide 122: Client Solution – Universal Bank
Client Solution – Universal Bank
Slide 123: Client Solution – Universal Bank
Client Solution – Universal Bank
Slide 124: Client Solution – Universal Bank
Client Solution – Universal Bank
Slide 125: Client Solution – Universal Bank
Client Solution – Universal Bank
Slide 126: Client Solution – Universal Bank
Client Solution – Universal Bank
Slide 127: Client Solution – Universal Bank
Client Solution – Universal Bank
Slide 128: BNY Mellon Differentiators – Universal Bank
BNY Mellon Differentiators Client Solution – Universal Bank
Slide 129: Key takeaways
Deep Client Relationships Distinctive Model Sustainable Growth = 124 Investor Day 2018 Key takeaways =
Slide 130: Closing and Outlook
Investor Day 2018 Closing and Outlook Charlie Scharf Chairman and CEO March 8, 2018
Slide 131: 2019 Financial growth and margin profile
2019 Financial growth and margin profile Revenue Expense EPS Operating Margin Equity Markets grow ~5% from year-end 2018 Assumptions: 4% 2% 12.6% 32.9% 20171 . Continued normalization of interest rates 2019 . Low- to mid- double digit ~75-100bps from 2018, (excluding 2018 real estate charge) Growth
Slide 132: Revenue growth rates are differentiated across businesses
2017 Revenue growth rates are differentiated across businesses Pershing Treasury Services Clearance and Collateral Management Wealth Management Corporate Trust FY2017 (est.) 4Q17 (est.) 10% 14% 9% 8% 8% 7% 8% 7% 6% 6% 6% 10% 2% 7% (18%) (50%) (34%) (49%) 4% 7% Asset Servicing Depositary Receipts Ass
Slide 133: Sources of increased revenue growth by business
Sources of increased revenue growth – different by business Corporate Trust – Increase Salesforce, relationships, expanded products Depository Receipts – Focus on profitability not growth Expanded client technology platform, RIA platform Real-time payments Collateral management Securities Finance, e
Slide 134: Key messages
Key messages Strong and unique franchise Clear, defined and financially attractive business model Will maintain our risk profile Will maintain our shareholder friendly capital return (subject to approvals) Focus on continuing to improve performance Expect to continue investing while increasing opera
Slide 135: Q&A
Q&A Investor Day 2018 134 Investor Day 2018
Slide 136: Appendix
Appendix > BNY MELLON
Slide 137: Financial profile – revenue and expense growth reconciliation
Financial profile – revenue & expense growth reconciliation ($MM) Growth vs. 2016 2016 2017 Fee and other revenue–GAAP $12,073 $12,165 Income from consolidated investment management funds–GAAP 26 70 Net interest revenue–GAAP 3,138 3,308 Total Revenue–GAAP $15,237 $15,543 2.0% Net income attributable
Slide 138: Financial profile – net income and EPS growth reconciliation
Financial profile – net income & EPS growth reconciliation Reconciliation of net income ($MM) and diluted EPS 2016 2017 ($MM, except per share amounts) Net Income Diluted EPS Net Income Diluted EPS Net income applicable to common shareholders–GAAP $3,425 $3.15 $3,915 $3.72 Impact of M&I, litigation
Slide 139: Total revenue and noninterest expense reconciliation
Total revenue & noninterest expense reconciliation ($MM) 2014 2015 2016 2017 Fee and other revenue–GAAP $12,649 $12,082 $12,073 $12,165 Income from consolidated investment management funds–GAAP 163 86 26 70 Net interest revenue–GAAP 2,880 3,026 3,138 3,308 Total Revenue–GAAP $15,692 $15,194 $15,237
Slide 140: Income before income taxes – Non-GAAP
Income before income taxes—Non-GAAP ($MM) Growth 2016 2017 vs. 2016 Total Revenue–GAAP $15,237 $15,543 2% Net income attributable to noncontrolling interests of consolidated investment management funds (10) (33) U.S. tax legislation (4Q17) – 283 Other charges (a) – 37 Total Revenue, as adjusted–Non-
Slide 141: Consolidated operating margin – Non-GAAP
NOTE: Pre-tax operating margin reflects income before taxes divided by total revenue. (a) Other charges impacting total revenue include investment securities losses related to the sale of certain securities recorded in the fourth quarter of 2017. Other charges impacting income before taxes include s
Slide 142: Investment Management operating margin – Non-GAAP
NOTE: Pre-tax operating margin reflects income before taxes divided by total revenue. Investment Management operating margin–Non-GAAP ($MM) 2014 2017 CAGR 2014 –2017 Total Revenue–GAAP $3,931 $3,997 1% Less: Distribution and servicing expense 423 422 Adjusted total revenue, net of distribution and s
Slide 143: Investment Services operating margin – Non-GAAP
NOTE: Pre-tax operating margin reflects income before taxes divided by total revenue. Investment Services operating margin–Non-GAAP ($MM) 2014 2017 CAGR 2014 –2017 Total Revenue–GAAP $10,350 $11,585 4% Total noninterest expense–GAAP $8,241 $7,747 (2%) Less: Litigation (4Q14) 702 – Other charges–4Q17
Slide 144: Historical performance – revenue and expense growth reconciliation
(a) Other charges impacting total revenue include investment securities losses related to the sale of certain securities recorded in the fourth quarter of 2017. Other charges impacting total noninterest expense include severance and an asset impairment both recorded in the fourth quarter of 2017. Hi
Slide 145: Historical performance – EPS growth reconciliation
NOTE: Total EPS may not foot due to rounding. Historical performance – EPS growth reconciliation Reconciliation of net income ($MM) and diluted EPS 2014 2017 ($MM, except per share amounts) Net Income Diluted EPS Net Income Diluted EPS Net income applicable to common shareholders–GAAP $2,494 $2.15 $
Slide 146: Supplementary leverage ratio – Non-GAAP
(a) The estimated fully phased-in SLR (Non-GAAP) is based on our interpretation of the U.S. capital rules. The minimum required SLR is 3% and there is a 2% buffer, in addition to the minimum, that is applicable to U.S. G-SIBs. The insured depository institution subsidiaries of the U.S. G-SIBs, inclu
Slide 147: Return on tangible common equity reconciliation
(a) Other charges include severance, an asset impairment and investment securities losses related to the sale of certain securities all recorded in the fourth quarter of 2017. (b) Non-GAAP information for all periods presented excludes amortization of intangible assets and M&I, litigation and restru
Slide 148: Capital generation and deployment
NOTE: Totals may not foot due to rounding. ($B) 2015 2016 2017 Total 2015–2017 Net Income Applicable to Shareholders $3.2 $3.5 $4.1 $10.8 Other Comprehensive Income (1.0) (1.2) 1.4 (0.7) Share Issuances (Benefit Plans) 0.6 0.7 0.7 2.0 Change in Goodwill and Intangibles 0.5 0.6 (0.9) 0.2 Capital Gene
Slide 149: Key regulatory ratios
1. Reflects regulatory minimums for well capitalized. 2. Reflects ratios as of year-end. Key regulatory ratios BHC Regulatory Capital Ratios Regulatory Minimums1 Regulatory Minimums with Buffers as Phased-In BK Actual2 2018 2019 2016 2017 Capital conservation buffer (CET1) N/A 1.875% 2.5% 0.625% 1.2
Slide 150: Stress impact on Tier 1 leverage ratio by bank
Bank Holding Company Ticker/ Identifier Tier 1 Leverage Ratio (%) Stress Impact Stress Impact (%)1 Actual 4Q16 Minimum BNY Mellon BK 6.6 5.2 1.4 21% Northern Trust Corporation NTRS 8.0 6.2 1.8 23% U.S. Bancorp USB 9.0 6.5 2.5 28% Wells Fargo & Company WFC 8.9 6.3 2.6 29% Capital One Financial Corpor
Slide 151: Tax rate reconciliation
Tax rate reconciliation ($MM) 2016 2017 Growth vs. 2017 Income Before Income Taxes–GAAP $4,725 $4,610 (2%) Impact of M&I, litigation and restructuring charges 49 106 Impact of tax legislation – 283 Impact of (recovery) impairment charge related to Sentinel (13) – Other charges (a) – 240 Income Befor
Slide 152: Pre-tax operating margin – Investment Management business
Financial reconciliation Pre-tax Operating Margin – Investment Management business 2017 2014 2017 vs. 2014 ($MM) Income before taxes - GAAP $1,141 $892 27.9% Add: Amortization of intangible assets $60 $118 (49.6%) Charge related to investment management funds, net of incentives – $104 N/M Severance,
Slide 153: Net Fee Revenue – Investment Management business
Net Fee Revenue – Investment Management business Ann. 12/31/17 Full-Year 2017 (dollars in millions) Total fee and other revenue $3,760 $3,668 Less: Distribution and servicing expense $420 $422 Adjusted fee and other revenue, net of distribution and servicing expense – Non-GAAP $3,340 $3,246 Asset Ma
Slide 154: U.S. G-SIBs and corporate peer groups
U.S. G-SIBs and corporate peer groups US G-SIB Members BNY Mellon Bank of America Citigroup Goldman Sachs JP Morgan Chase Morgan Stanley State Street Wells Fargo 11-Member Corporate (Proxy) Peer Group BlackRock Charles Schwab Franklin Resources JP Morgan Chase Morgan Stanley Northern Trust PNC Finan
Slide 155: Disclosures
Disclosures • Banks Word-Wide – Banks around the World, Copyright 2017 • Money Manager (Asset Manager) – Pensions & Investments, Copyright 2017 • Asset Manager Worldwide – Willis Towers Watson, Copyright 2017 • Institutional Money Manager – Pensions & Investments, Copyright 2017 • Manager of LDI Ass