The Bank Of New York Mellon Corporation · NYSE:BNY
The Bank Of New York Mellon — Investor Day (March 2018)
139 slides from The Bank Of New York Mellon's investor day presentation, Mar 8, 2018
Slide 1: Investor Day
Investor Day March 8, 2018 0 Information Classification: Confidential
Slide 2: Cautionary Statement
Cautionary Statement • 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”
Slide 3: Investor Day 2018 Agenda
Investor Day 2018 Agenda Start Time End Time Session Speaker 7:15 AM 8:00 AM BREAKFAST/REGISTRATION Welcome Valerie Haertel 8:00 AM 8:05 AM Global Head of Investor Relations Opening Remarks/Strategic Overview Charlie Scharf 8:05 AM 8:50 AM Chairman and Chief Executive Officer Firm Overview Michael S
Slide 4: Strategic Overview
Investor Day 2018 Strategic Overview Charlie Scharf Chairman and Chief Executive Officer March 8, 2018
Slide 5: Great history and culture
Great history and A strong and unique Clear, focused, Continued focus Investing culture franchise and financially on operating for growth by attractive leverage business model • Improving execution • Expanding technology-enabled solutions • Leveraging all of BNY Mellon 4 Investor Day 2018
Slide 6: Great history, strong culture and demonstrated ability to change
Great history, strong culture and demonstrated ability to change Great history Strong culture • Founded in 1784 by Alexander Hamilton • Proud • Methodical • First company traded on the NYSE • Client-driven • Objective • Andrew Mellon – one of the longest serving • Low risk tolerance • Intellectually
Slide 7: Our evolution over time
Our evolution over time 1970s 1990s Today Tomorrow Services company Business Traditional Universal bank operating within model commercial bank a bank Broader Technology-driven Service provider for a digital world Local, mostly Expanding Reach Global in New York internationally 6 Investor Day 2018
Slide 8: A strong and unique franchise
Great history and A strong and Clear, focused, Continued focus Investing culture unique franchise and financially on operating for growth by attractive leverage business model • Improving execution • Expanding technology-enabled solutions • Leveraging all of BNY Mellon 7 Investor Day 2018
Slide 9: BNY Mellon today – a services company operating within a bank
BNY Mellon today – a services company operating within a bank Investment Services Full range of institutional, clearance, cash management $11.6B and global payments services Revenue $33.3 trillion AUC/A Asset Servicing Pershing >$24 trillion assets on data management platform Issuer Services • Servi
Slide 10: BNY Mellon today – a services company operating within a bank
BNY Mellon today – a services company operating within a bank Investment Management Institutional and retail Diversified global investment management $4.0B asset manager: Revenue $1.9 trillion AUM • Broad range of investment 7th largest asset manager strategies $1.3 trillion AUM (institutional) • 10
Slide 11: BNY Mellon today – a services company operating within a bank
BNY Mellon today – a services company operating within a bank $11.6B $4.0B Revenue Revenue Investment Investment Services Management 74% 26% of Total Revenue of Total Revenue $3.8B $1.1B Pre-tax Income Pre-tax Income Diversified fee-based businesses NOTE: Revenue and pre-tax income metrics for Inves
Slide 12: All businesses operate at scale
All businesses operate at scale Investment Investment Services Management • #1 Global Custodian Asset Servicing • #1 Securities Lending Pershing • #1 U.S. Clearing Firm Asset Management • #7 Global Asset Manager • #1 Depositary Receipts Issuer Services • #1 Corporate Trust Wealth Management • #10 U.
Slide 13: Our business is global
Our business is global Global reach U.S. EMEA $4.0 billion; • 36% of revenue in 2017 was $10.0 billion; 64% of total 26% of total APAC generated outside of the U.S. revenue revenue $1.0 billion; 6% of total • Operating in 35 countries… revenue • …and more than 100 markets • 47% of employees are outs
Slide 14: Outstanding client franchise
Outstanding client franchise Institutions Asset Managers Financial Services Public/Non-Profits Individuals Corporations Mutual Funds Banks Pension Funds High-Net-Worth Individuals and Families Governments Hedge Funds Broker-Dealers Local Governments Central Banks Private Equity Financial Intermediar
Slide 15: Core custody is an anchor to broader relationships
Core custody is an anchor to broader relationships Custody is an anchor solution Number of top 100 custody clients using Number of top 5 custody clients using Accounting 95 100 4 of 5 Securities Lending 45 100 3 of 5 FX 73 100 5 of 5 Diversified fee-based businesses 14 Investor Day 2018
Slide 16: Our businesses are naturally multi-product
Our businesses are naturally multi-product Entry Core Custody Government Pershing Wealth Investment Treasury Corporate points Clearing Management Management Services Trust Fund Custody Custody Investments Custody Payments Trustee Services Accounting FX Cash Loans Cash Cash Cash Cash Part of Securiti
Slide 17: These create unique franchises
These create unique franchises Cash and liquidity is a business – enabled by the entire company Cash sources Cash ($B) Investments • Proprietary MMF • Non-proprietary MMF Investment Management 335 • Collective funds Deposits Asset Servicing 240 BNY Mellon • Foreign interest bearing Cash and Liquidit
Slide 18: Collateral is a unique opportunity
Collateral is a unique opportunity BNY Mellon Clients Asset Servicing Government Securities Clearing Pershing Securities Lending Collateral Management Dealer services Buy-side services • Tri-Party Repo • Securities Finance Cash & • Collateral Optimization Collateral • Collateral Mobilization • Commi
Slide 19: Clear, focused, and financially attractive
Great history and A strong and unique Clear, focused, Continued focus Investing culture franchise and financially on operating for growth by attractive leverage business model • Improving execution • Expanding technology-enabled solutions • Leveraging all of BNY Mellon 18 Investor Day 2018
Slide 20: Focused on fee-based, recurring revenue
Focused on fee-based, recurring revenue BNY Mellon revenue1 by type Fee Revenue $11.9 • ~75% of our revenue is fees • Significant percentage of our net interest income is “fee-like” and predictable Net Interest Revenue $3.3 The categories include: − Operational deposits Foreign Exchange $0.7 − Low r
Slide 21: Strong and growing margins
Strong and growing margins BNY Mellon overall operating margin1 growth (includes intangible amortization) Operating margin1 growth by business 35% 27% +8% 33% 31% Investment 29% 26% Services 2014 2017 33% 28% +5% Investment 2014 2015 2016 2017 Management Adjusted pre-tax operating margin 2014 2017 1
Slide 22: Generating consistent EPS growth with high returns
Generating consistent EPS growth with high returns Operating earnings per share1 Adjusted return on tangible common equity1 $3.57 23.0% $3.17 $2.85 21.4% 20.7% 2015 2016 2017 2015 2016 2017 1. Financial results referenced for the total Corporation are calculated on a non-GAAP operating basis, which
Slide 23: Without taking substantial credit and market risk
Without taking substantial credit and market risk Loans Majority of loans in support of operating businesses Trading Securities <1% trading assets Securities 41% predominantly highly rated, liquid assets 39% of assets in cash Cash No meaningful derivatives 2017 Interest 2017 Average Earning Assets 2
Slide 24: Consistently returning majority of generated capital to shareholders
Consistently returning majority of generated capital to shareholders Payout of net income ($B) 2017 Capital return payout ratios $4.1 $3.5 $3.2 Common Dividend Payout Ratio 23% Total $3.8 $3.2 $3.3 Capital Share Repurchase Payout Ratio 69% Return 2015 2016 2017 Total Payout Ratio 92% Share $2.4 $2.4
Slide 25: Earnings growth and capital generation should continue to drive strong returns
Earnings growth and capital generation should continue to drive strong returns – 2017 example Common stock capital return yield Common Dividend Yield 1.7% Share Repurchase Yield 5.2% Net Income1 Growth After Tax: 9% Total Capital Return Yield 6.9% NOTE: Capital return yield reflects dividend and sha
Slide 26: Revenue growth rate disappointing – but improving and majority market-driven
Revenue growth rate disappointing – but improving and majority market-driven 2014 Investor Day targets Revenue1 growth 2015-2017 ($B) Flat rate 3.5%-4.5% environment +4% $15.8 Normalized rate 6%-8% environment +1% $15.2 $15.1 Model has embedded leverage 1% 2-3 1% increase …translates to in revenue 2
Slide 27: Continued focus on operating leverage
Great history and A strong and unique Clear, focused, Continued focus Investing culture franchise and financially on operating for growth by attractive leverage business model • Improving execution • Expanding technology-enabled solutions • Leveraging all of BNY Mellon 26 Investor Day 2018
Slide 28: Continued focus on operating efficiency
Continued focus on operating efficiency Expense1 growth 2014-2017 ($B) -1% $11.0 $10.7 $10.5 $10.6 • Regulatory expenses grew 24% between 2014 and 2017 All Other Expenses • Efficiency – Increased volumes Operational Expense – Operational expenses (8%) Technology Expense 2014 2015 2016 2017 Expenses
Slide 29: Continuing to focus on operating efficiency
Continuing to focus on operating efficiency Select examples U.S. Transfer Agency Accounting Core Securities Process 2016-2017 2016-2017 2016-2017 Cost Per Transaction Cost Per Transaction Cost Per Transaction -19.1% -2.6% -3.7% 4.6% 4.0% Expenses 2.5% Expenses 0.1% Volume Volume -0.2% Volume Expense
Slide 30: 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”
Slide 31: Investing for growth
Great history and A strong and unique Clear, focused, Continued focus Investing culture franchise and financially on operating for growth by attractive leverage business model • Improving execution • Expanding technology-enabled solutions • Leveraging all of BNY Mellon 30 Investor Day 2018
Slide 32: Technology investment increasing – a clear priority for success
Technology investment increasing – a clear priority for success ~$2.4B spent on …with an incremental Technology spend technology annually… ~$300MM planned going forward ~25% Development ~60% ~55% ~75% Operating platform ~40% ~45% and cybersecurity ~$2.4B ~$0.3B ~$2.7B Operating platform must be a pr
Slide 33: Technology investments cut across time horizons
Technology investments cut across time horizons Near-Term Investments Longer-Term Investments Minimize risk as well as increase Strategic investments across reliability and quality all businesses • Technology infrastructure • Pershing Advisor Artificial Intelligence Platform ̶ Data centers • Digital
Slide 34: Growth related initiatives at different stages of development
Growth related initiatives at different stages of development Today Tomorrow • 74 new fund launches over last two years • Passive/factor-based, multi-asset solutions Investment • Specialty, alternative, passive strategies • Advanced analytics Management • Investment Services partnership • Grow restr
Slide 35: And we are changing how we do business
And we are changing how we do business Client-driven Solutions-driven Changing culture Great listeners Great synthesizers Inconsistent and reactive Consistent, quick and proactive Gateway Client access to BNY Mellon Distributed APIs System-to-system client integration Mainframe SM Changing Systems D
Slide 36: Improved organic growth will be 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 • No silver bullet • Business by business focus on execution • Long sales cycles • Digital investments • Look for gradual and steady improvements ̶ Inter
Slide 37: BNY Mellon Financial Overview
Investor Day 2018 BNY Mellon Financial Overview Michael Santomassimo Chief Financial Officer March 8, 2018
Slide 38: Introduction
Introduction BNY Mellon Financial Overview Attractive • Dynamic business model delivering long-term value and growth opportunities over time business model • Diversified and stable business mix with high percentage of recurring revenue • Lower credit and market risk Lower • Strong and liquid balance
Slide 39: Our investment thesis – delivering consistency over time
Our investment thesis – delivering consistency over time A dynamic model delivering long-term value to clients and shareholders Attractive High Risk-Adjusted Business Model Returns Strong EPS Growth • Diversified business mix • Lower credit risk business model • Industry leader • Majority of revenue
Slide 40: Investment Services
Investment Services Broad set of capabilities Clearance Investment Asset Pershing and Collateral Services Servicing Management • Custody • Broker-dealer and advisor services • U.S. government clearing • Accounting • Pershing prime services • Global collateral management • ETF services • Registered i
Slide 41: Investment Management
Investment Management Investment Management Asset Wealth Management Management #7 #10 Asset Manager, Wealth Manager, Diversified global by Global Assets by U.S. Client Assets Under Management asset manager Offering a broad range of investment strategies from 10 specialized 1 Investment managers Weal
Slide 42: Diversified, recurring revenue stream
Diversified, recurring revenue stream Significant amount of revenue is predictable over time FY17 – Total Operating Revenue1 % Non-U.S. Revenue ($ billions) Asset Management 61% Wealth Management 1% Asset Servicing 39% Pershing 9% Issuer Services 45% Treasury Services 45% Clearance and Clearance and
Slide 43: Significant synergies exist across the businesses
Significant synergies exist across the businesses Serving common clients and delivering complementary capabilities • Cash $100B AUM swept by Investment Services • Mortgage capability for Pershing clients Asset Management • “Top 5” Asset Servicing client Wealth Management • Over $2B in Wealth Manag
Slide 44: Investing for the future
Investing for the future Focused strategy to transform the client experience and operating model Enterprise Priorities Illustrative Examples Operational Optimization Automation/ • Auto custody limits • Optical character recognition Machine Learning • Failure Forecasting • Intelligent matching and ro
Slide 45: Regulatory outlook showing modest improvement
Regulatory outlook showing modest improvement Pace of regulatory change slowing but continued execution is key Progress Since 2014 Current Focus • Pace of U.S. regulatory change slowed • Implementation of EU regulations; well-positioned for Brexit • Assisting clients with MiFID implications • Regula
Slide 46: Lower credit and market risk
Lower credit and market risk Average Interest-Earning Assets High Quality Securities Portfolio: $118B >90% of securities portfolio rated AAA/AA- ($13B) Total $304B ~75% are U.S. treasury, agency and $291B sovereign securities 1.08% 1.52% Loans 18% $4B High Quality Loan Portfolio: $58B 20% Trading 2%
Slide 47: Client deposits drive size of balance sheet
Client deposits drive size of balance sheet Average Liabilities and Equity – 2014-2017 Deposits by Business – 2017 Deposits by Type – 2017 ($29B) $373B Corporate Trust Other $344B Wealth and Treasury 10% 7% Management Services Shareholders’ 12% Equity 5% 14% Other 12% 6% Liabilities 5% 8% Long-Term
Slide 48: Business performs well in stress
Business performs well in stress Reduction in Tier 1 Leverage Ratio after Stress (2017 CCAR Severely Adverse Scenario) Significantly less impact on capital ratios than other G-SIBs 42% 38% 21% 23% BNY BNY Northern State U.S. G-SIBs Mellon Mellon Trust Street Average Source: Federal Reserve–Comprehen
Slide 49: Executing since 2014 Investor Day
Executing since 2014 Investor Day • Achieved upper end of EPS target Financial Performance • Revenue growth below target range; focused on organic growth • Generated positive operating leverage of ~300 bps • Exceeded operating margin goals Operational Improvements • Drove operational efficiency gain
Slide 50: Reasonable execution versus 2014 Investor Day goals
Reasonable execution versus 2014 Investor Day goals CAGR Growth Investor Day Goals 2015-2017 (as published in 2014) Operating Results1 Normalized Revenue 6-8% 2% Total Company Expense N/A (1%) EPS 12-15% 14% Revenue 8-10% 1% Investment Management Pre-tax Income 12-14% 3% Revenue 4-6% 4% Investment S
Slide 51: 2017 Performance
2017 Performance 2017 Operating 2017 Better/(Worse) Reported Adjustments Operating1 vs. 2016 Operating $ in billions, except EPS Revenue $15.5 $0.3 $15.8 4% $10.4 Expense $11.0 ($0.3) $10.6 Ex. Intangible (2%) amortization Net Income $3.9 ($0.2) $3.8 9% 34% Operating Margin 30% 3% 33% Ex. Intangible
Slide 52: Continued focus on efficiency showing in margin improvement
Continued focus on efficiency showing in margin improvement Creating ongoing capacity to invest while delivering operating leverage Adjusted Pre-tax Operating Margin1 (Including Intangible Amortization) Operating Efficiency Gains 2015-2017 33% • Optimizing geographic footprint • Organizational strea
Slide 53: Returning significant capital while improving key ratios
Returning significant capital while improving key ratios Maintaining returns and ratios within current ranges Capital Deployment1 ($B) SLR2 – Fully Phased-In (Non-GAAP) (Cumulative 2015-2017) 5.9% 5.6% Retention 17% 4.9% Regulatory ($2.0B) Minimum with Buffer Share 2015 2016 2017 Dividends Repurchas
Slide 54: Returns driven by consistent earnings and execution of capital distribution plan
Returns driven by consistent earnings and execution of capital distribution plan Gross Reduction in Shares Outstanding BNY Mellon vs. Trust Banks Payout Ratios Over Time (cumulative: 2015-2017) (2012-2017) 2015 2016 2017 98% 102% 16% 84% 93% 92% BNY Mellon 73% 5% 11% 10% 3% 5% 4% 4% 84% 103% 98% 88%
Slide 55: Clear investment priorities and approach to capital deployment
Clear investment priorities and approach to capital deployment Dividends and Investment Priorities Share Repurchase Goals Investing in our operating platform and organic growth Business line extensions; new products; technology platforms Total payout ratio of ~100%+ Acquisition strategy • Dividends:
Slide 56: Client deposit activity largely as expected
Client deposit activity largely as expected Deposit volatility and NIM expansion with higher interest rates $350 Average BNY Mellon Deposits ($B) 2.00% Expectations Going Forward 1.80% $300 • Deposits impacted by: 1.60% $250 1.36% ‒ Higher rates 1.40% 1.21% ‒ Reduction in Federal Reserve 1.13% 1.15%
Slide 57: 2018 Expense outlook
2018 Expense outlook Operating ~3% Expense ~1%+ $11.0B (5%) ~1.5% ~$300MM <1% $10.6B 2017 Adjustments 2017 Incremental All Other FX 2018 Real Estate 2018 Reported Operating1 2018 Technology Expense Translation Operating Charges Projected Expense Investment Growth (Offset in Expense Revenue) Expense
Slide 58: 2018 Outlook
2018 Outlook First Quarter 2018 – Operating1 Net Interest 12-14%+ vs. 1Q17 Revenue Investment/Other $60-70MM Income (Expect $40-60MM per quarter) Securities ~($50MM) Gains/(Losses) 4-5% vs. 1Q17 Expense (~2% of growth driven by foreign currency translation) ~19-20% Tax Rate (Expect 21% effective tax
Slide 59: 2018 Financial profile – excluding real estate charge
2018 Financial profile – excluding real estate charge 20171 . FX Impact . 2018 Revenue 4% • Continued reasonable operating Increases both revenue and expense performance based on 2017 growth rates earnings of $3.57 Expense 2% • Operating results will include – $50MM investment portfolio Pre-tax Inco
Slide 60: Our investment thesis – delivering consistency over time
Our investment thesis – delivering consistency over time A dynamic model delivering long-term value to clients and shareholders Attractive High Risk-Adjusted Business Model Returns Strong EPS Growth • Diversified business mix • Lower credit risk business model • Industry leader • Majority of revenue
Slide 61: Investment Management
Investor Day 2018 Investment Management Mitchell E. Harris Chief Executive Officer, Investment Management March 8, 2018
Slide 62: Investment Management – a scaled, global, diversified business
Investment Management – a scaled, global, diversified business Scaled Diversified Product Offering % of Assets Under Management by Asset Class, 4Q17 $1.9T #7 #1 47% Assets Under Asset Manager, Manager of Management1 by Global Assets LDI Assets3 34% Under Management2 19% #10 #4 #5 Wealth Manager, Ins
Slide 63: Go-to-market through our portfolio of asset/wealth management companies
Go-to-market through our portfolio of asset/wealth management companies – our model has a number of advantages Our Model Benefits… Asset Management Companies Distribution • Broad selection of investment solutions Asset …For Clients Multi- Fixed Alternatives/ Cash Passive Equity Management • Flexible
Slide 64: Streamlined our business portfolio to drive scale
Streamlined our business portfolio to drive scale and better serve our clients – today, six asset management companies comprise ~94% of our business Focused the Portfolio Six At-Scale Companies 2007 2017 Company AUM ($B) % of Total AUM Leader in global Fixed Income, risk management solutions and $79
Slide 65: Solid margin and earnings growth since our last Investor Day
Solid margin and earnings growth since our last Investor Day Our Financial Performance Our Business Exposure 3.5% 2.5% 2.1% 1.2% 0.9% 31% Net Margin Equity Growth1 -0.2% Exposure 2014-2017 Active Equity AUM Change % -3.3% as Percent of Total 9% -4.9% -4.9% AUM, 2017 -6.1% Peer 1 BNYM Peer 2 Peer 3 P
Slide 66: Continue to deliver strong investment performance
Continue to deliver strong investment performance % of Long-Term Active AUM Ahead of Benchmark 1-Year 3-Year 5-Year 97% 98% 96% 93% 93% 90% 86% 89% 84% 77% 72% 68% 53% 46% 43% BNY Mellon1 Equity Fixed Multi-Asset LDI Total Equity Fixed Multi-Asset LDI Total Equity Fixed Multi-Asset LDI Total Income
Slide 67: Executing on our strategy within a dynamic operating environment
Executing on our strategy within a dynamic operating environment Dynamic Operating Environment Strategy for Growth 1 Continue pivoting product strategy to anticipate client demand Product Barbell • Build on leading positions in LDI, Cash, Private Debt Low Yield Environment Since 2008, Industry Tradi
Slide 68: Continue to evolve our product offering to meet changing client needs
1 CONTINUE PIVOTING PRODUCT STRATEGY TO ANTICIPATE CLIENT DEMAND Continue to evolve our product offering to meet changing client needs Business Mix Change Driven by Growth in LDI, Multi-Asset and Alternatives; Outflows in Active Equity and Index Actively Repositioning our Product Portfolio Assets Un
Slide 69: Expanding our passive capabilities
1 CONTINUE PIVOTING PRODUCT STRATEGY TO ANTICIPATE CLIENT DEMAND Expanding our passive capabilities with a focus on both “building blocks” for multi-asset solutions and specialty beta products 6th Largest Index Manager Our Strategy Top Index Managers ($B)1 • Expand the range of Passive/Factor-based
Slide 70: Insight is one of our key engines of growth
1 CONTINUE PIVOTING PRODUCT STRATEGY TO ANTICIPATE CLIENT DEMAND Insight is one of our key engines of growth Continue Building on Our Growth Momentum $791B • Founded in 2002, with offices in London, New York, Sydney $565B Liability Driven A Leading 75% • Second largest U.K. asset manager1 Assets Und
Slide 71: Restructuring our U.S. business to create a scaled, relevant multi-asset manager
1 CONTINUE PIVOTING PRODUCT STRATEGY TO ANTICIPATE CLIENT DEMAND Restructuring our U.S. business to create a scaled, relevant multi-asset manager Combined Three Large …Now Executing on Businesses in the U.S… …In Order to… a Strategy for Growth U.S. NewCo: A $577B AUM Asset Manager1 • Consolidating f
Slide 72: Differentiated distribution model to support our businesses
2 LEVERAGE OUR MULTI-DISTRIBUTION MODEL TO EXTEND OUR REACH Differentiated distribution model to support our businesses Multi-Distribution Model Key Roles Current Focus % of Asset Management Net Fee Revenue as of 4Q171 Asset Management • Expand product vehicle offerings Global Company Direct • Clari
Slide 73: Strong Wealth Management franchise with a comprehensive offering
3 EXPAND WEALTH MANAGEMENT’S REACH Strong Wealth Management franchise with a comprehensive offering A Premier Wealth Key Benefits of a Combined Asset Management Franchise Differentiated Business Model and Wealth Management Business #10 Wealth Manager, Comprehensive Wealth Offering Benefits to Asset
Slide 74: Wealth Management has delivered solid results
3 EXPAND WEALTH MANAGEMENT’S REACH Wealth Management has delivered solid results – strategy focused on high-growth markets and segments …and Solid Performance Consistent Pre-tax Income Growth… Relative to Peers Growth Strategy Pre-tax Income 2014-2017 Fee Revenue CAGR vs. Peers1 Increase sales cover
Slide 75: Leveraging the advantages of being part of BNY Mellon
4 HARNESS SYNERGIES ACROSS BNY MELLON Leveraging the advantages of being part of BNY Mellon Connections Between Investment Management and the Rest of BNY Mellon Asset Servicing Enterprise Relationships • Investment Management is a • Partnership across BNY Mellon to Top 5 client of Asset Servicing1 s
Slide 76: Recap – Strategic focus in key areas to drive business performance
Recap – Strategic focus in key areas to drive business performance • Proven ability to execute and maintain relentless cost discipline • Understand the changing macro environment and anticipating shifting client needs Clear set of priorities for 2018: 1 Product Strategy: Build on leading positions i
Slide 77: Pershing
Investor Day 2018 Pershing Lisa Dolly Chief Executive Officer, Pershing March 8, 2018
Slide 78: Pershing is an industry leader serving the world's top clients
Pershing is an industry leader serving the world’s top clients Strength, Scale and Stability #1 $1.8T+ $500B+ Clearing Firm by Assets Under Custody Mutual Fund Broker-Dealer Clients1 and/or Administration Assets 7MM+ 49MM ~1,400 Global Investor Accounts Securities Positions Clients 21MM Mutual Fund
Slide 79: Majority of Pershing revenue is recurring
Majority of Pershing revenue is recurring % of 2017 Revenue Revenue Category Driver Transactional Revenue Clearance Trades Trading Trades 19% Transactional Net Interest Revenue Revenue Interest Balances 19% Asset- and Account-Based Fees 62% Net Interest Asset- and Account- Positions Revenue Based Fe
Slide 80: Positioning clients for opportunity
Positioning clients for opportunity Remaining relevant to financial intermediaries for almost 80 years Delivering ONGOING Increased Value SUCCESS to Clients • Business and Practice Management Value • Thought Leadership • Advisor and Marketing Programs • Financial Solutions • Data Analytics • Technol
Slide 81: Pershing's growth by the numbers
Pershing’s growth by the numbers Total Revenue CAGR ($B) Total U.S. Positions CAGR ($MM) +4.9% +6.8% 2.1 49 1.7 35 2012 2017 2012 2017 U.S. Active Accounts CAGR ($MM) Assets Under Custody and/or Administration CAGR ($T) +2.0% +7.9% 6.1 1.8 5.5 1.2 2012 2017 2012 2017 80 Investor Day 2018
Slide 82: Connecting product manufacturers and clients
Connecting product manufacturers and clients Clients Product Manufacturers Breadth and Variety of Depth and Choice Our Clients Across Our Platform ~800 Broker-Dealers 800 Fund families Mutually Beneficial ~500 Registered 60 Insurance carriers Investment Advisors Relationships with Solution Providers
Slide 83: Comprehensive solutions from BNY Mellon
Comprehensive solutions from BNY Mellon Private Banking $5B+ loan facilities Cash Management $25B+ cash sweep balances Asset Servicing 19MM custody subaccounting positions Integrated Custodian Technology $22B assets under bank custody or administration Integrated Collateral Management ~$50MM in asse
Slide 84: Technology as a business enabler
Technology as a business enabler 83 Investor Day 2018
Slide 85: Delivering integrated proprietary and third-party solutions
Delivering integrated proprietary and third-party solutions Prospecting Proposal, Model Aggregation/ Wealth Client Trade/Order and Client Management Portfolio Digital Advice Planning Onboarding Management Relationship and Performance Analytics Note: Pershing has over 400 third-party solutions includ
Slide 86: 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 e-Delivery Global Growth of Platform High-Net-Worth Investors Client Onboarding API Capabilities Capabilities Shift from Commission to Fees
Slide 87: Summary
Summary More than Unique a clearing firm set of capabilities A platform of size Powered by and scale structural change Diversified revenue streams not dependent on trade volumes 86 Investor Day 2018
Slide 88: We'll be returning shortly
Investor Day 2018 We’ll be returning shortly
Slide 89: Asset Servicing
Investor Day 2018 Asset Servicing Hani Kablawi Chief Executive Officer, Global Asset Servicing and Chairman, EMEA March 8, 2018
Slide 90: Leading global asset servicer
Leading global asset servicer Scale Global reach % of Total Revenue 2017 $33.3T 88MM 61% Assets under custody Settlements processed and/or administration per year 28% 11% $1.1T ~8MM North America EMEA Rest of World Cash managed and NAVs serviced across in 2017 BNY Mellon Diverse client segments Inve
Slide 91: Breadth and depth of capabilities, many profitable solutions
Breadth and depth of capabilities, many profitable solutions Asset Servicing Client Chief Chief Chief Chief Head of Risk Operating Technology/ Investment Distribution Officer Officer Data Officer Officer I Need… I Need… I Need… I Need… Controls Efficiency Performance Growth Regulatory Control Fund P
Slide 92: Highly predictable revenue – expanding client relationships from the core
Highly predictable revenue – expanding client relationships from the core Majority of revenue from fees Sample solutions Value-chain Core Collateral Examples of Optimization Middle Office Net Interest Deposit and loan balances Components 23% Income Collateral Management FX and Other 9% Trading Fees
Slide 93: Performance since 2014 Investor Day
Performance since 2014 Investor Day Drivers of performance Outcomes • Exited lower margin, lower return businesses • Leveraged talent in lower cost locations Strengthened • Significantly advanced our platform consolidation strategy Pre-tax 633 bps1 core and Margin expanded • Improved client profitab
Slide 94: Evolving client needs while fee pressure continues
Evolving client needs while fee pressure continues Substantial change on multiple dimensions Clients increasingly demand Low Yield Lower than normal rates create Digital Solutions Environment return challenges Accelerating innovation Technology changes the investment process Cost Efficiency Financia
Slide 95: Focus going forward
Focus going forward Maintain expanded margins and focus on accelerating fee growth • Automate by enhancing workflow, increasing digital intake of data, and deploying machine learning Continuing to strengthen our core • Provide operational transparency and improve operational efficiency • Continually
Slide 96: Competing more effectively in the core business
1 Competing more effectively in the core business Enhancements to the core… …are improving our competitive position… …resulting in wins Efficiency • Preferred partner – scale and capability • Significant wins in 2017 • Substantial number of large deals have • $575B in new AUC/A in 4Q17 come to marke
Slide 97: Serving faster-growing Alternative and ETF managers
2 Serving faster-growing Alternative and ETF managers Growing assets Outsourcing trend Capitalizing on the opportunity Strong and growing position Industry AUM, 2013-17 CAGR1 Real Estate 7 • Accelerate global expansion $3.1T / 12.8% • Leverage scale to adjacent client segments of top 20 Real Estat
Slide 98: Delivering industry-leading data management solutions
3 Delivering industry-leading data management solutions Overview Well-established offering Central to what we do • Eagle was founded in 1989; acquired >$24T • Widely used to support key by Mellon Financial in 20011 Asset Servicing clients across utilizing BNY Mellon’s Eagle the Asset Manager, Asset
Slide 99: Creating markets capabilities that enhance client outcomes
4 Creating markets capabilities that enhance client outcomes Integrated markets solutions for our clients Cash and Trading/Execution Securities Finance Peer-to-Peer Lending Collateral Management Credit Intermediation Liquidity Buy-side need for collateral services increasing We are uniquely position
Slide 100: Helping our clients service their investor base
5 Helping our clients service their investor base Capturing shift of investor positions from BNY Mellon is the largest investment managers to distributors subaccounting provider Our opportunities Third-Party Subaccounting Third-Party Subaccounting Market Share2 and Transfer Agency Account Volumes1 (
Slide 101: Positioned for growth
Positioned for growth Why clients have chosen us Enterprise synergies Focus going forward Efficient operating platform Trust and scale Investment Management, cash and passive capabilities 1 Competing more effectively Breadth and depth of services and solutions Markets for trading, 2 Alternatives and
Slide 102: Delivering Differentiated Solutions to Clients
Investor Day 2018 Delivering Differentiated Solutions to Clients Todd Gibbons Chief Executive Officer, Clearing, Markets and Global Client Management March 8, 2018
Slide 103: Delivering broad servicing capabilities to our clients
Delivering broad servicing capabilities to our clients Clients Served Investment Management Traditional Trust Bank Model Universal Bank Model Asset Servicing Investors Intermediaries Issuers Markets BNY Mellon Model (Securities Lending and FX) Key Points: Treasury Services • Service capital market p
Slide 104: Building valuable and enduring relationships with our top clients
Building valuable and enduring relationships with our top clients Global Client Management (GCM) consists of teams of senior bankers with deep industry expertise in our client segments Represent long-term relationships with significant upside GCM Clients Offer buy- and sell-side clients account for
Slide 105: Deepening client relationships by connecting clients to our company
Deepening client relationships by connecting clients to our company Breadth of Top Client Relationships Asset Clearance and Collateral Treasury Issuer Investment Pershing Markets Servicing Management Services Services Management Banks, Broker-Dealers, 67% 32% 31% 86% 65% 60% 32% Advisors Client Segm
Slide 106: Case Studies
Case Studies 1. Identify Needs 2. Solve Problems 3. Build Enduring Relationships 105 Investor Day 2018
Slide 107: Client Solution – Regional Institutional Broker/Dealer
Client Solution – Regional Institutional Broker/Dealer 106 Investor Day 2018
Slide 108: Client Solution – Large Asset Manager
Client Solution – Large Asset Manager 107 Investor Day 2018
Slide 109: Client Solution – Large Insurance Client
Client Solution – Large Insurance Client 108 Investor Day 2018
Slide 110: Client Solution – Large Insurance Client
Client Solution – Large Insurance Client BNY Mellon Differentiators 109 Investor Day 2018
Slide 111: Client Solution – Universal Bank
Client Solution – Universal Bank 110 Investor Day 2018
Slide 112: Client Solution – Universal Bank
Client Solution – Universal Bank BNY Mellon Differentiators 111 Investor Day 2018
Slide 113: Key takeaways
Key takeaways Distinctive Deep Client Sustainable Model = Relationships = Growth 112 Investor Day 2018
Slide 114: Closing and Outlook
Investor Day 2018 Closing and Outlook Charlie Scharf Chairman and Chief Executive Officer March 8, 2018
Slide 115: 2019 Financial growth and margin profile
2019 Financial growth and margin profile 20171 . 2019 . Revenue 4% Growth rate slightly up vs. 2017 Expense 2% Growth rate slightly up vs. 2017 EPS 12.6% Low- to mid-double digit ~75-100bps from 2018 Operating Margin 32.9% (excluding 2018 real estate charge) Assumptions: Equity markets grow ~5% from
Slide 116: 2017 Revenue growth rates are differentiated across businesses
2017 Revenue growth rates are differentiated across businesses % of Total FY2017 (est.) 4Q17 (est.) Revenue Stronger Pershing 10% 14% Treasury Services 9% 8% 35% Clearance and 8% 7% Collateral Management Wealth Management 8% 7% Corporate Trust 6% 6% 2pt increase = Asset Management 6% 10% 61% 1.2% ch
Slide 117: Sources of increased revenue growth – different by business
Sources of increased revenue growth – different by business • Core custody and accounting growth: Improving win rates, reducing attrition • Real Estate, Hedge Fund, Private Equity and ETF solutions Asset Servicing • Data Management solutions for buy-side • Relationship expansion with high-value mark
Slide 118: 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 incr
Slide 119: Q&A
Ka BNY MELLON Investor Day 2018 Q&A
Slide 120: Appendix
Appendix 119 Investor Day 2018
Slide 121: Financial profile – revenue and expense growth reconciliation
Financial profile – revenue and expense growth reconciliation Growth ($MM) 2016 2017 vs. 2016 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 $15,543 2.0% Net income attributab
Slide 122: Financial profile – net income and EPS growth reconciliation
Financial profile – net income and EPS growth reconciliation Reconciliation of net income ($MM) and diluted EPS 2016 2017 Net Diluted Net Diluted ($MM, except per share amounts) Income EPS Income EPS Net income applicable to common shareholders–GAAP $3,425 $3.15 $3,915 $3.72 Impact of M&I, litigatio
Slide 123: Total revenue and noninterest expense reconciliation
Total revenue and noninterest expense reconciliation ($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 $15,23
Slide 124: Income before income taxes – Non-GAAP
Income before income taxes – Non-GAAP Growth ($MM) 2016 2017 vs. 2016 Total Revenue–GAAP $15,237 $15,543 2% Net income attributable to noncontrolling interests of consolidated investment management funds (10) (33) U.S. tax legislation (4Q17) – 283 Other charges (a) – 37 Total Revenue, as adjusted–No
Slide 125: Consolidated operating margin – Non-GAAP
Consolidated operating margin – Non-GAAP ($MM) 2014 2015 2016 2017 Income before income taxes–GAAP $3,563 $4,235 $4,725 $4,610 Less: Net income attributable to noncontrolling interests of consolidated investment management funds 84 68 10 33 Add: Gain on the sale of an investment in Wing Hang (490) –
Slide 126: Investment Management operating margin – Non-GAAP
Investment Management operating margin – Non-GAAP CAGR ($MM) 2014 2017 2014 –2017 Total Revenue–GAAP $3,931 $3,997 1% Less: Distribution and servicing expense 423 422 Adjusted total revenue, net of distribution and servicing expense $3,508 $3,575 Total noninterest expense–GAAP $3,039 $2,854 (2%) Les
Slide 127: Investment Services operating margin – Non-GAAP
Investment Services operating margin – Non-GAAP CAGR ($MM) 2014 2017 2014 –2017 Total Revenue–GAAP $10,350 $11,585 4% Total noninterest expense–GAAP $8,241 $7,747 (2%) Less: Litigation (4Q14) 702 – Other charges–4Q17 severance, litigation and an asset impairment – 233 Adjusted total noninterest expe
Slide 128: Historical performance – revenue and expense growth reconciliation
Historical performance – revenue and expense growth reconciliation CAGR ($MM) 2014 2017 2015–2017 Fee and other revenue–GAAP $12,649 $12,165 Income from consolidated investment management funds–GAAP 163 70 Net interest revenue–GAAP 2,880 3,308 Total Revenue–GAAP $15,692 $15,543 (0%) Net income attri
Slide 129: Historical performance – EPS growth reconciliation
Historical performance – EPS growth reconciliation Reconciliation of net income ($MM) and diluted EPS 2014 2017 Net Diluted Net Diluted ($MM, except per share amounts) Income EPS Income EPS Net income applicable to common shareholders–GAAP $2,494 $2.15 $3,915 $3.72 Gain on the sale of an investment
Slide 130: Supplementary leverage ratio – Non-GAAP
Supplementary leverage ratio – Non-GAAP Fully Phased-In (Estimated) ($MM) 2015 2016 2017 Consolidated: Total Tier 1 capital $18,612 $19,911 $21,339 Total leverage exposure: Quarterly average total assets $368,590 $344,142 $350,786 Less: Amounts deducted from Tier 1 capital 19,403 18,887 19,892 Total
Slide 131: Return on tangible common equity – Non-GAAP
Return on tangible common equity – Non-GAAP ($MM) 2015 2016 2017 Net income applicable to common shareholders of The Bank of New York Mellon Corporation–GAAP $3,053 $3,425 $3,915 Add: Amortization of intangible assets 261 237 209 Less: Tax impact of amortization of intangible assets 89 81 72 Adjuste
Slide 132: Capital generation and deployment
Capital generation and deployment Total ($B) 2015 2016 2017 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 Generation $3
Slide 133: Key regulatory ratios
Key regulatory ratios Regulatory Minimums Regulatory BNY Mellon Actual2 BHC Regulatory Capital Ratios with Buffers as Phased-In Minimums1 2018 2019 2016 2017 Capital conservation buffer (CET1) N/A 1.875% 2.5% 0.625% 1.25% U.S. G-SIB Surcharge (CET1) N/A 1.125% 1.5% 0.375% 0.75% Standardized: CET1 Ra
Slide 134: Comprehensive capital analysis and review – severely adverse scenario
Comprehensive capital analysis and review – severely adverse scenario Ticker/ Tier 1 Leverage Ratio (%) Stress Stress Bank Holding Company Identifier Actual 4Q16 Minimum Impact Impact (%)1 BNY Mellon BK 6.6 5.2 1.4 21% Northern Trust Corporation NTRS 8.0 6.2 1.8 23% U.S. Bancorp USB 9.0 6.5 2.5 28%
Slide 135: Tax rate reconciliation
Tax rate reconciliation Growth ($MM) 2016 2017 vs. 2017 Income Before Income Taxes–GAAP $4,725 $4,610 (2%) Impact of M&I, litigation and restructuring charges 49 106 Impact of tax legislation – 283 Impact of (recovery) impairment charge related to Sentinel (13) – Other charges (a) – 240 Income Befor
Slide 136: Financial reconciliation
Financial reconciliation Pre-tax Operating Margin – Investment Management business ($MM) 2017 2014 2017 vs. 2014 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 – $104 N/M Severance,
Slide 137: Financial reconciliation
Financial reconciliation Net Fee Revenue – Investment Management business Full-Year ($MM) Ann. 12/31/17 2017 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
Slide 138: U.S. G-SIBs and corporate peer groups
U.S. G-SIBs and corporate peer groups 11-Member US G-SIB Members Corporate (Proxy) Peer Group BNY Mellon BlackRock Bank of America Charles Schwab Citigroup Franklin Resources Goldman Sachs JP Morgan Chase JP Morgan Chase Morgan Stanley Morgan Stanley Northern Trust State Street PNC Financial Service
Slide 139: Disclosures
Disclosures • Banks Word-Wide • Broker-Dealers – Banks around the World, Copyright 2017 – Investment News, Crain Communications Inc., • Money Manager (Asset Manager) Copyright 2018 – Pensions & Investments, Copyright 2017 • Pensions and Employee Benefits • Asset Manager Worldwide – Pensions & Invest
The Bank of New York Mellon — Investor Day (March 2018) on 6ix