CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
EventDescription:Q12015EarningsCallMarketCapasofEventDate:45.45BPriceasofEventDate:42.305
©2014TheStreet,Inc.Al l R ightsReserved Page1of23
BankofNewYorkMellon(BK)EarningsReport:Q12015ConferenceCallTranscriptThefollowingBankofNewYorkMellonconferencecalltookplaceonApril22,2015,08:00AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
ValerieHaertel;TheBankofNewYorkMellon;GlobalHead-IRGeraldHassell;TheBankofNewYorkMellon;Chairman,CEOToddGibbons;TheBankofNewYorkMellon;ViceChairman,CFOCurtisArledge;TheBankofNewYorkMellon;CEO-InvestmentManagementBrianShea;BankofNewYorkMellon;CEO-InvestmentServices
OtherPart icipants
AshleySerrao;CreditSuisse;AnalystLukeMontgomery;SanfordC.Bernstein;AnalystBrennanHawken;UBS;AnalystAlexBlostein;GoldmanSachs;AnalystBetsyGraseck;MorganStanley;AnalystKenUsdin;Jefferies;AnalystMikeMayo;CLSA;AnalystBrianBedell;DeutscheBank;AnalystGlennSchorr;EvercoreISI;AnalystJimMitchell;BuckinghamResearchGroup;AnalystAdamBeatty;BandofAmerica-MerrillLynch;AnalystGeoffreyElliott;AutonomousResearch;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
Goodmorningladiesandgentlemenandwelcometothefirstquarter2015earningsconferencecallhostedbyBNYMellon.
Atthistimeallparticipantsareinalisten-onlymode.Later,wewillconductaquestionandanswersession.
Pleasenotethatthisconferencecallandwebcastwillberecordedandwillconsistofcopyrightedmaterial.YoumaynotrecordorrebroadcastthesematerialswithoutBNYMellon'sconsent.
IwillnowturnthecallovertoMs.ValerieHaertel.Ms.Haertel,youmaybegin.
Valerie Haertel(GlobalHead-IR):
Thankyou,Wendy.GoodmorningandwelcomeeveryonetoTheBNYMellon'sfirstquarter2015earningsconferencecall.WithustodayareGeraldHassell,ourChairmanandCEO;ToddGibbons,ourCFO;aswellasourexecutivemanagementteam.
Ourfirstquarterearningsmaterialsincludeafinancialhighlightspresentationthatwillbereferredtoin
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
EventDescription:Q12015EarningsCallMarketCapasofEventDate:45.45BPriceasofEventDate:42.305
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thediscussionofourresultsandcanbefoundintheInvestorRelationssectionofourWebsite.
BeforeGeraldandToddbegin,letmetakeamomenttoremindyouthatourremarkstodaymayincludeforward-lookingstatements.Actualresultsmaydiffermateriallyfromthoseindicatedorimpliedbytheforward-lookingstatementsasaresultofvariousfactors.Thesefactorsincludethoseidentifiedinthecautionarystatementintheearningspressrelease,thefinancialhighlightspresentationandthoseidentifiedinthedocumentsfiledwiththeSECthatareavailableonourWebsite,bnymellon.com.
Forward-lookingstatementsonthiscallspeakonlyasoftoday,April22,2015,andwewillnotupdateforward-lookingstatements.
Now,IwouldliketoturnthecallovertoGeraldHassell.Gerald?
GeraldHassell(Chairman,CEO):
Thanks,Valerie,andwelcomeeveryoneandthanksforjoiningusthismorning.Asyoucansee,we'reachievingtheresultsconsistentwiththegoalsthatwesharedonInvestorDay.Forthefirstquarterearningspersharewere$0.67whichwasup18%yearoveryear.
Nowfocusingonouryear-over-yearcomparisonsonanadjustedbasis,totalrevenuewasup4%,totalexpensesweredown2%,sowegeneratedmorethan500basispointsofpositiveoperatingleverage.NowthestrongerU.S.dollarreducedbothourrevenueandexpensesbuthadalimitedeffectonnetincome.AndToddwillcoverthatmoreinamoment.
Ourreturnontangiblecommonequityinthequarterwas20%.Nowwealsoreturnedsignificantvaluetoourshareholdersintheformofdividendsandsharerepurchasesduringthequarter.Simplyputwe'reexecutingagainstourstrategicprioritiesandit'sshowingupinournumbers.
Letmeremindyouofwhatthoseprioritiesareandhowwe'redoingagainstthem.Nowourfirstpriorityisdrivingrevenuegrowth.DuringthequarterrevenueinInvestmentServicesbenefitedfromcontinuedgrowthinbothclearingandglobalcollateralservices.
Aswe'vebeensayingwe'reinvestinginbothoftheseareastodeliverenhancedcapabilitiestoourclients.AcrossInvestmentServicesandinassetservicinginparticularwe'vebeenquitetargetedaboutthebusinesswearetakingonversusgoingaftermarketshare.We'refocusingondeepeningourclientrelationships,deliveringthehighestvaluetoourclientsandgrowingprofitably.
AndIthinkourresultsareshowingjustthat.Nowyoualsorecallthatlatelastyearwecreatedthemarketsgrouptobringtogetherexistingcapabilitiesfromanumberofdifferentareas.We'vebeenrepositioningthebusinessbyexitingvariousactivitiesthatnolongerfitourstrategywhileinvestinginforeignexchange,securitieslending,collateralmanagementsolutionsforourclients.
Nowtheseinitiativesarealreadyimprovingourperformanceandreducingourcosts.Soforexample,ourenhancedelectronicforeignexchangeplatformsarecapturingmoreclientdrivenvolumesandwhenvolatilityincreasesaswesawinthefirstquarterweclearlybenefit.
Sothemarketsgrouphadstrongerforeignexchangeresults,strongercollateralmanagementandsecuritiesfinancingactivitywhilesimultaneouslyexitingderivativepositionsandreducingthecapitalandcostassociatedwithit.GoodoverallresultsthathelpedimprovetheCompany'soperatingmargin.
TurningtoInvestmentManagementtofurtherdiversifyourassetsundermanagement,we'rebuildingoutourretaildistributioncapabilitiesandinvestingandexpandingourwealthmanagementplatform.Theinflowsfromtheseretaildistributioninitiativesareinfactimprovingbutnotyetatthepointofbeingabletooffsettheactiveinstitutionalequityoutflowsthatweandtheentireindustryhavebeenexperiencing.
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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Nowafterquarter-endwereachedanagreementtosellourMeritenboutiquewhichisourGerman-basedboutique.Nowthisispartofourbusinessportfolioreviewprocesstoidentifyopportunitiestobetterredeployourcapital.
ThesalewillallowustofocusonthoseboutiqueswithglobalscalethatmostbenefitfrombeingpartofBNYMellonandwhereweseethegreatestgrowthopportunities.AndweexpectthesaletocloseattheendofthesecondquarterandourInvestmentManagementoperatingmarginshouldimprovewiththisdivestiture.
Ontheinvestmentperformancefront,duringthequarterwestrengthenedourcapabilitiesandtheywererecognizedthroughtworankings.InthefirstquarterasatestamenttoitscontinuedgrowthandsuccesstheDreyfus/StandishGlobalFixedIncomeFundhitthenumberonerankingintheworldbondcategoryforlong-terminvestorsandhasbeenconsistentlyatopperformer.Andourwealthmanagementbusinesswasnamedthe2015TopNationalPrivateAssetManagerandTopPrivateBankOfferingforFamilyOfficesbytheFamilyWealthReport.
Nowoursecondpriorityisexecutingonourbusinessimprovementprocesseswherewehavebeentakingactionfromtoptobottom,transformingourcompanythroughacontinuousimprovementprocess.Itisreducingstructuralcostandriskandimprovingclientproductivityandservicequality.
Nowletmesharesomeexamples.Wearesimplifyingandautomatingourglobalprocesses.Wearecontinuingtooptimizeandstreamlineourtechnologyinfrastructure,particularlyinassetservicing,leveragingacommonarchitecturetoreduceourcostandincreaseouragilitysowearedeliveringnewsolutionstoourclientsevenfaster.
Wementionedlastweekthatwe'resucceedinginreducingourannualinfrastructurespendingandthatcurrenttrendcontinuedinthefirstquarter.We'realsoshrinkingourrealestateportfolioandconsolidatinglocations.Andwe'vebeenabletoacceleratesomeofoureffortswhichallowedustocomeinbetterthanexpectedonournetoccupancyexpenseline.
Nowalsoaspartofourbusinessimprovementprocesswe'reimprovingourreturnontechnologyinvestment.Todaywehavebest-of-breedapplicationsinmostofourimportantbusinessactivitiessuchastri-party,clearing,payments,settlementsandcollateralmanagement.Ourtechnologyiswellregardedbyindustryprofessionalsandweareparticularlyproudofourmostrecentacknowledgments.
OneofwhichwastheAnitaBorgInstituterecentlynamedusastheTopCompanyforWomenTechnologistsforachievingthehighestoverallscoreforallcompaniesevaluated.Thisrecognitionhelpsusattractandretaintoptalentintheindustry.
Ourthirdprioritycentersonbeingastrong,safe,trustedcounterparty.Theresultsofthe2015CCARdemonstratedthatunderseverelyadversescenarioourprojectedminimumTier1commonratioandourcommonequityTier1ratiounderstresswerethemostresilientamongallofthe14advancedapproachbankholdingcompanies.Sowearewell-positionedforallstressscenariosandfeelconfidentthatwecancontinuetoexecuteonourcapitalplansgoingforward.
Nowwealsofullyrecognizetheimportanceofourorganizationtothefinancialmarketplaceandthatourreputationisanassetthatwemustupholdeveryday.Tofurtherprotectandenhanceoursafetyandsoundnessweareinvestingandfocusingoncomplianceriskmanagementandcontrolfunctions.We'verecentlyresolvedsomeveryimportantissuesonthatfrontandtheactionswe'vetakenwillsignificantlyreducetheprobabilityoffutureissues.
Ourfourthpriorityinvolvesgeneratingexcesscapitalanddeployingourcapitaleffectively.Soduringthequarterwerepurchased10.3millionsharesfor$400millionandourcapitalplancallsfortherepurchase
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
EventDescription:Q12015EarningsCallMarketCapasofEventDate:45.45BPriceasofEventDate:42.305
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ofupto$3.1billionofcommonstockoverafive-quarterperiod.
Andfinallyourfifthpriorityistoattractandretaintoptalent.We'vebeenexecutingagainstanintegratedtalentmanagementstrategyacrosstheentireCompanyandhavebeenfocusedondevelopingtalentfromwithinaswellasinfusingexpertisewithkeystrategichiresinareaswherewebenefitfromnewperspectivesandcapabilities.WerecentlypromotedseveralindividualsidentifiedthroughourtalentmanagementprocessthegreaterresponsibilitiesincludingournewlyformedBNYMellontechnologysolutionsgroup,globalfundaccounting,middleofficesolutionsandourEuropeanbank.
AdditionallyweaddedkeyexternaltalentincludinganewchiefauditorandanewBoardmemberwhoisourfourthnewdirectorinlessthanayear.Freshperspectives,ideasandtherightteamcompositionmakeusstronger.
Soinsummarywe'reexecutingagainstourprioritiesandfirmlybelieveweareontracktoachievetheearnings,expenseandoperatingleveragegoalsweoutlinedforyouonInvestorDay.SowiththatletmeturnitovertoTodd.
T oddGibbons (ViceChairman,CFO):
Thanks,Gerald,andgoodmorningeveryone.Mycommentarywillfollowthefinancialhighlightsdocumentandstartwithpage6thatdetailsournon-GAAPoroperatingresultsforthequarter.
AsGeraldnotedEPSwas$0.67.That'sup18%versustheyearago.
Revenueinthefirstquarterwasupapproximately4%yearoveryearand3%sequentiallyreflectinggrowthacrossallofourkeybusinesseswithparticularstrengthinassetservicing,clearingservicesandforeignexchange.Expensesweredown2%yearoveryearand1%sequentiallyasthebusinessimprovementprocesseshelpingtoincreaseefficiencyandreduceourcost.Ourabilitytodriverevenuegrowthincontrolexpensesresultedinalittlemorethan500basispointsofpositiveoperatingleverageyearoveryear.
Nowletmepointoutthatwe'veestimatedthatthestrongerU.S.dollarreducedourrevenuebyapproximately200basispointsanditreducedourexpensesbyapproximately300basispointsandhadaslightlynegativeimpactontotalnetincome.ThebusinessmostimpactedwasInvestmentManagementwhilecurrencyhadlessofanimpactonourInvestmentServicesbusiness'netresults.
We'veaddednewforeignexchangemetricsonpage6ofthenewsreleaseandthat'sgoingtohelpyoucapturetheimpactofthetwocurrencies.Ifyoulookatthatyou'llseethatthepoundwasdownapproximately9%yearoveryearandtheeurowasdown18%.
SoI'lldiscussbrieflytheestimatedimpactofeachofourbusinessunitasIcoverthesegmentresults.Incomebeforetaxeswasup16%yearoveryearand11%sequentially.
Onayear-over-yearbasisourpretaxmarginincreasedapproximately300basispointsto30%andthat'supfrom27%inthefirstquarterof2014.Returnontangiblecommonequitywas20%.
Page7showsthedriversofourInvestmentManagementbusinessthathelpexplainourunderlyingperformance.Wehad7%year-over-yearAUMgrowthand$17billionofnewnetinflowsduringthequarter.YouwillalsonotethatweexperiencednetoutflowsinequitiesinthequarterwhileourLDIbusinesscontinueditsrapidgrowth.
Ourwealthmanagementbusinessalsoisperformingwellbenefitingfromourinvestmentsinpromotingourbrandandtheexpansionofoursalesforce.Averageloansanddepositscontinuedtotrendup.
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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Turningtopage8youcanseeourfinancialresultsforInvestmentManagement.AsIpreviouslynotedInvestmentManagementwasmostimpactedbycurrencytranslationsincewehavealargenumberofourboutiquesoutsideoftheU.S.anditresultsinabout42%ofourrevenueactuallybeingnon-U.S..
FirstquarterInvestmentManagementperformancefeeswere$850million.InvestmentManagementfeeswereup1%yearoveryearor7%onaconstantcurrencybasisreflectingthehigherequitymarketvalues,theimpactoftheCutwateracquisitionandstrategicinitiatives.
Wehadperformancefeesof$15million.Thatcomparesto$20millionintheyear-agoquarter.
OtherRevenuewas$47millioninthefirstquarterupfrom$16millioninthefirstquarteroflastyearand$7millioninthefourthquarter.Bothincreasesprimarilyreflecthigherseedcapitalgains.
Thesequentialincreasealsoreflectsreducedlossesonhedgingactivitieswithinoneoftheboutiques.Netinterestrevenueincreased6%yearoveryearand7%sequentiallyreflectingthehigherloananddepositlevelsmostlyattheprivatebank.Revenuegrowthonayear-over-yearbasiswasup4%inInvestmentManagementbutadjustedforthecurrencytranslationweestimateitwouldhavebeenupabout9%.
Earningswerealsonegativelyimpacted.Incomebeforetaxesexcludingamortizationofintangibleassetswasup6%yearoveryearand7%sequentially.
TurningtoourInvestmentServicesmetricsonpage9youcanseethatassetsundercustodyandadministrationatquarter-endwere$28.5trillion.That'sup2%yearoveryearandthat'sreallydrivenbyhighermarketvalues,netnewbusinessandpartiallyoffsetbythestrongerU.S.dollar.
LinkedquarterAUC/Awasflat;adjustedforcurrencyeffectsyearoveryeargrowthwouldhavebeenroughly5%.Themarketvalueofsecuritiesonloanatperiodendshowedstronggrowthonayear-over-yearbasis.Securitiesonloanwereup10%,theyarenowat$291billionandthat'sduetotheexpansionandthereceiptofsecuritiesaspotentialcollateralaswellastheimpactofnewclientsjoiningourlendingprogramandexistingclientsincreasingtheirlendingactivity.
Averageloansanddepositswerebothupsignificantlyhereaswell.Thekeybroker-dealermetricoftri-partyrepobalancesgrew9%.AllofourclearingmetricsrecordedprettygoodgainswithDARTSvolumesandaveragelong-termmutualfundassetseachshowingdouble-digitgrowth.
Movingontodepositoryreceiptsmetricwe'vehadafocusonexitingsomeofthelowactivityprograms,theonesthatareatthelowerendofourclientbase,aswellasprogramsthatdonotmeetourprofitabilitycriteria.ThiscontinuedwiththeroutineclosureofprogramsduetocorporateactionshasresultedinanetdeclineinthenumberofsponsoredDRprogramsintheportfolio.
Onpage10youcanseedetailedsegmentreportingforInvestmentServices.ThekeyvariancesarereflectedinFeeandOtherRevenueonourconsolidatedresultsonpage11,solet'smovetothatpagewhereyouwillseethatassetservicingfeeswereup3%yearoveryearand2%sequentially.
Theyear-over-yearincreaseprimarilyreflectsnetnewbusinesslargelydrivenbyglobalcollateralservicesandsecuritieslendingaswellastheincreaseinmarketvalues.Thesequentialincreaseprimarilyreflectshigherclientexpensereimbursementsandhighersecurityandlendingrevenueandglobalcollateralservicesfees.Bothincreaseswerepartiallyoffsetbythestrongerdollar.
Clearingfeeswereup6%yearoveryearanddown1%sequentially.Theincreasefromthefirstquarterof2014wasprimarilydrivenbyhighermutualfundandasset-basedfeesandhigherclearancerevenuedrivenbyhigherDARTSvolume.Thesequentialdecreaseprimarilyreflectsfewertradingdaysinthefirstquarter.
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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Issuerservicefeeswereup1%yearoveryearand20%sequentially.BothincreasesreflecthighercorporateactionsandDRs.Additionallycorporatetrustfeesseemtohavestabilized.
Treasuryservicesfeeswereup1%yearoveryearandtheyaredown6%sequentially.Thesequentialdecreaseprimarilyreflectsseasonallylowerpaymentvolumes.FXandothertradingrevenueonaconsolidatedbasiswasup68%yearoveryearanditisup52%sequentially.
Forthislineitemyoucanalsorefertothetableatthetopofpage8inthenewsreleasetoseethedetailsI'mdiscussing.FXrevenueof$217millionwasup67%yearoveryear.That's32%sequentially,reflectinghighervolumesandvolatilityaswellasDRrelatedactivity.
Othertradingrevenuewas$12millionandthatcompareswithrevenueof$6millionintheyear-agoquarterandalossof$14millioninthefourthquarter.Bothincreasesreflecthigherfixedincometradingrevenues.Thesequentialincreasealsoreflectsreducedlossesfromthehedgingactivitybyoneofourinvestmentboutiques.
Investmentandotherincomeof$63millionwas$39millionloweryearoveryearandthatwasdrivenbylowerleasinggains.OnefinalimpactonthecurrencyimpactonourInvestmentServicesbusiness,whilelessimpactthanweseeinInvestmentManagementweestimatethatbothrevenuesandexpenseswouldhavebeenuproughly2%onaconstantcurrencybasis,wouldhavebeenupbyanadditional2%onaconstantcurrencybasis.Pretaxincomewasnotmeaningfullyimpacted.
Turningtonetinterestrevenueonpage12ofthefinancialhighlightsyou'llseethatNIRonafullytaxequivalentbasiswasunchangedversustheyear-agoquarterandup2%fromthefourthquarter.Yearoveryeartheincreaseindepositsdrovegrowthinoursecuritiesportfolioandoffsettheimpactofloweryields.
Thesequentialimprovementreflectsthebenefitofputtingmorecashtoworkasyoucanseeinloansandsecuritieswhichalsoincreasedourmarginforthefirsttimeinyears.Thenetinterestmarginforthequarterwas97basispoints,8lowerthantheyearagoand6fromthesequentialquarter.
Onpage13you'llseethatnoninterestexpensedecreasedby2%yearoveryearand1%sequentially.Theyear-over-yeardecreasereflectslowerexpensesinallcategoriesexceptthesubcustodianexpensewhichisvolumerelatedandotherexpense.AndIshouldpointoutthatotherexpenseincludestheimpactofthenewEuropeanUnionSingleResolutionFundaswe'reaccruingourestimatedannualcontributionrequirement.
Thelowerexpensesprimarilyreflectthefavorableimpactofthestrongerdollarandwe'reseeingtheimpactofourbusinessimprovementprocesshereaswell.Totalstaffexpensedecreased2%yearoveryear.Asyoumighthaveseeninourannualreportweelectedtofreezethedefinedbenefitplanandwereplaceditwithadefinedcontributionplan.
Inthefirstquarterwerecognizeda$30millionbenefitrelatedtothecurtailmentofthedefinedbenefitplan.Forthefull-yearweexpecttohaveapositivebenefittotheDDplanitselfresultingina$10millionnetcreditandthatincludesthecurtailmentgainwejustreceived.
Inadditionweexpecttohaveabout$12millionofadditionalexpenseinthebackhalfoftheyearfortheparticipantsthatwereformerlyinthedefinedbenefitplan.Asaresultyoucanexpectbenefitstoincreaseabout$30millioninthesecondquarter.
Ourheadcountwas900loweryearoveryear.Therewasasequentialincreaseof200.ThatreflectstheonboardingofemployeesrelatedtotheJanuaryCutwateracquisition,theliftoutoftheDeutscheBankprivateequityandrealestateadministrationbusinessandnewhirestosupportseverallargeclient
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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onboardinginitiatives.
Thedecreaseintotalstaffexpensewaspartiallyoffsetbyhigherincentivesreflectingbetterperformanceaswellasaloweradjustmentrelatedtofinalizationoftheannualincentiveawardsandtheimpactoflong-termstockawardsvestingforretirementeligibleemployees.Bothoftheselasttwoitemstypicallyoccurinthefirstquarter.
Asareminder,thefirstquarterusuallyhasaspikerelatedtolong-termawardsandwewouldexpectincentivestodeclineinthesecondquarterbysomewhereinthevicinityof$65millionbasedonperformance.OnourlastearningscallItoldyouthatouroccupancycostsshouldriserelatedtothesaleofOneWallStreetaswemoveintoournewfacilitywhichwouldresultindoublerentin2015.Thisincreasewasnotreflectedinthefirstquarterbecauseitwasoffsetbytheoutsourcingofmaintenancecosts,astrongerdollarandthesublettingofsomevacantspace.
Forthefull-yearwestillexpectoccupancycoststoincreaseaswe'vepreviouslyindicatedaswetakefurtheractionsinourrealestateportfolio.
Turningtocapitalonpage14withrespecttoourcapitalratiosthisquarterthefullyphased-incommonequityTier1ratioundertheadvancedapproachdeclinedfrom9.8%to9.1%andthatwasdrivenbyanincreaseinrisk-weightedassetsprimarilyrelatedtooperationalrisk.Nowaswe'vehighlightedinpreviousperiodsouroperationalriskmodelisimpactedbyextralossesincurredbyotherfinancialinstitutions.
Thisquarteronenotableexternallossinthepaymentspaceflowedthroughourmodelandaddedapproximately$11billionofrisk-weightedassetsandthereforenegativelyimpactedourratio.Imightwanttoaddhereandletyouknowthatinthesecondquarterweexpecttohaveabenefittoourrisk-weightedassetsaswebelievewewillbedeconsolidatingmanyofourinvestmentmanagementfundsasweintendtobeanearlyadopteroftherecentlyissuedconsolidatedaccountingstandard.
Soweeffectivelyexpecttoreversetheimpactofwhatwesawinthefirstquarter.Ourestimatedsupplementalleverageratioincreasedto4.5%aswegeneratedcapitalandreducedtheaveragebalancesheetsizeslightly.OurestimatedLCRisalreadyover100%andcompliantwiththefullyphased-inrequirementswhichis80%andwillstepupto100%overthenextcoupleofyears.
Nowafewfinalnotesaboutthequarter.Asyou'llseeinourrelease,oureffectivetaxratewas24.4%butthatincludes2%benefitrelatedtoincomewiththevariableinterestentitieswhichifyouincludeditinthein-line--excuseme,ifyouincludedthatinournumbersourtaxratewouldbeinlinewiththeguidanceofabout26%soIthinkthat'stheappropriatewaytolookatit.
I'llalsopointoutthatwehaveincreasedourtax-advantagedinvestmentsincludingenergycreditswhicharenowhavingtheeffectofreducingourtaxratingbutalsoreducingourpretaxincomeandthereforeouroperatingmargin.Soifweweretogrossuptherevenuefromthetaxcreditsandreporttheimpactonthetaxequivalentbasis,ourpretaxincomewouldhavebeenhigherbyabout$64millionandouroperatingmarginwouldhaveincreasedbyapproximately120basispoints.
Wehaveelectedtodisclosethisimpactinafootnoteonpage25ofournewsreleaseratherthanincludeitinourfinancials.Butwethinkitisimportantaswemaketheseinvestmentsandyouseeareductioninsomeofthepretax.
Alsointheearningsreleaseonpage11aresomeinvestmentsecuritiesportfoliohighlights.Youwillseethatthenetunrealizedgainonourportfoliowas$1.7billionatquarter-end.That'supfrom$1.3billionattheendofDecember.
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
EventDescription:Q12015EarningsCallMarketCapasofEventDate:45.45BPriceasofEventDate:42.305
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Duringthequarterwetransferred$11.6billionofavailable-for-salesecuritiestoheld-to-maturitysecuritiesandwealsopurchasedadditionalheld-to-maturitysecuritiesduringthequarter.Ourstrategyisdesignedtoreducethevolatilityofourcapitalaccountfrominterestratefluctuations.
NowI'dliketodiscussafewpointstofactorintoyourthinkingaboutthesecondquarterandtheyearaswelookahead.Netinterestrevenueisexpectedtobeslightlyhigherinthesecondquarterascomparedtothefirstquarterof2015aswebenefitfromthechangeintheassetmixanddaycount.Wewouldexpectincentivestodeclineinthesecondquarterfromthefirstquarterastheydidlastyear.
WeexpectInvestmentManagementtocontinuetobeimpactedbythestrengthoftheU.S.dollarduetoitsnon-U.S.presencewhiletheimpactoftheoverallCompanyisexpectedtobenominal.Theeffectivetaxrateisexpectedtobeintherangeof25%to26%andweanticipateproceedingwithourcapitalplansubjecttomarketconditionsandanyotherfactors.
TosummarizeweareachievingresultsconsistentwiththegoalswesharedatInvestmentDay,executingagainstourstrategicprioritiesandontracktocontinuetohitourInvestorDaytargets.
WiththatletmehanditbacktoGerald.
GeraldHassell(Chairman,CEO):
Thanks,ToddandWendyIthinkwecanopenitupforquestions.
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions)
AshleySerrao,CreditSuisse.
AshleySerrao (Analyst-CreditSuisse):
Goodmorning.Gerald,atwo-partquestiononheadcount.OneIwashopingyoucouldhelpmejustreconcileyourcommentaryfromtheshareholdermeetingwhereyounotedthattheCompanylookedgoodonarevenueperemployeemetricbutthenatthesametimeyou'vereducedheadcountbyover1,000positionsoverthecourseoflastyear.Andtwo,aswethinkaboutthepotentialforyoutoleveragetechnologyacrossthefranchisewhyshouldn'tthisdeclineinheadcountcontinue?
GeraldHassell(Chairman,CEO):
Wellasyouknowlastyearwetookincreasinglyaggressiveactionontheheadcountsideandwereabletogetsomestructuralchangestoourheadcount.Wesawactuallyacontinuedpositivetrendinthefirstquarterofthisyearexceptforthefactwe'veacquiredacoupleofpiecesofbusinessandwe'vebeenbuildingoutsomecapabilitiesforsomenewclientsincertainkeyareas.
ClearlyourgoalaspartofourbusinessimprovementprocessistodrivedownthelaborcomponentofourCompanyandusetechnologyasastrategicasset.Sooneofourgoalsistogettherevenueperemployeeup,theemployeeexpensedownandusetechnologyasastrategicassettogetthere.Sothat'sclearlypartofourplanistoreducethatemployeeheadcountperrevenue.
AshleySerrao (Analyst-CreditSuisse):
Great.Andmyfollow-upisforTodd.Onthebalancesheetandreinvestmentofcashhowmuchmorerunwaydoyouhavethereandthencanyougiveusasenseofthedurationandreinvestmentyields
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here?Thankyou.
T oddGibbons (ViceChairman,CFO):
Sure,Ashley.Whydon'twestartwithduration.Sowhatwe'veeffectivelydoneiswe'vegotabouthalfofthedurationoftheportfolioorcallithalfoftheratesensitivityoftheportfolioandtheheld-to-maturityandabouthalfintheavailable-for-saleaccountandthedurationofthetotalportfolioisprobablyaround2.5.
Sowe'vesoftenedthe--dampenedthevolatilityprettysubstantiallytoourOCImovementsininterestrates.Westillarestructuredtoseesomeprettysignificantbenefitfromariseininterestrates.Soifwewantedtoandournetinterestincomeaswellwithsomefeewaiversinotherpartsofourportfolio.Soifwewantedtowecouldprobablycontinuetoincreasetheportfolioabit.
LCRisnotnecessarilyalimitingfactorherebecausewecanincreasethedurationofourHQLAassetswhichiseffectivelywhatwe'vedonehere.SoIwouldsaythereisalittlebitofroomthere,Ashley,butnotalot.
AshleySerrao (Analyst-CreditSuisse):
Great,thanksfortakingmyquestionsandcongratsonthestrongquarter.
Operator :
LukeMontgomery,BernsteinResearch.
LukeMontgomery(Analyst-SanfordC.Bernstein):
Goodmorning,guys.Justanotherstabattheheadcountquestion.Investorsareclaimingthatyourfirmhastoomanyemployeesrelativetocomparablepeersandthedifferenceisn'texplainedbybusinessmix.
Ithink,though,ifyouadjustforthesalegainsyouhadlastyearitlookslikethecomptorevenueratiohasbeentrackingjustacouplepercentagepointshigherthanyourclosestpeers.Somaybethere'salittleworktodothere,youacknowledgetheplan.
ButIthinkthesensiblequestioniswhetherthereareunderlyingexplanationslikelower-costoffshoresupportoroutsourcingbyothersthatyoudon'tdo,maybelaborintensityofthebusinessesyouhadthattheydon't.SoIjustwantedtogiveyouanopportunitytospeaktothat.
GeraldHassell(Chairman,CEO):
Luke,thanks.There'sacoupleofthingsthatyoushouldfactorintoyourthinkingonacomparablebasis.Onewe'vebeeninsourcingourapplicationdeveloperswhereothershavebeeneitheroutsourcingitormoderatingitbutwe'reactuallygettingmorecapacityforlessdollarsinourtechnologyapplicationsbyinsourcingthosecapabilitiesandwelaidoutsomeofthosenumbersforyoulastweekandinpriorweeks.
ThesecondissueiswedointernallytransferagencybusinessesbothintheU.S.andinEuropewhereasourprincipalcompetitoractuallydoesitthroughajointventureoroutsourcesit.Transferagencyservicesareverylabor-intensiveandthereforeifyouweretocombinetheoutsourcingorjointventurearrangementwithourcompetitoryou'dprobablyfindalargerheadcountonapercentagebasisthanwemayexperience.
Lastbutnotleastwedohavethingslikecorporatetrustandclearingservices,treasuryservicesthatsomeofourcompetitorsdonothave.Theydohavealaborcomponentassociatedwithitbuttheyarealsogoodoperatingmarginbusinesses.SoIthinkthat'swherethecomparablebasisstartstobringinto
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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questiontheheadcountversusrevenues.
That'swhywe'refocusedontherevenueperemployeeandIthinkwecompareveryfavorablytootherinstitutions.OurgoalisstilltoimproveinthatcategoryandourgoalistostillimprovetheoperatingleverageofourCompany.That'swhatwelaidoutatInvestorDay,that'swhatwe'recommittedtodelivering.
LukeMontgomery(Analyst-SanfordC.Bernstein):
Great,thanksforthat.Andthenasafollow-upIwonderifyoumighttakeastabatbreakingoutemployeesbybusinessormaybeconsideraddingsomedisclosuretothatinthefuture?
GeraldHassell(Chairman,CEO):
Okay,we'llgiveitsomethought.Thanks.
LukeMontgomery(Analyst-SanfordC.Bernstein):
Allright.Thankyouverymuch.
Operator :
BrennanHawken,UBS.
BrennanHawken (Analyst-UBS):
Goodmorning.AquickquestiononFX.
Prettysolidthisquarter,nicebouncebackfromlastquarter.WasDRswitchingtoatailwindherethisquarterorwasthatneutralanddidsomeoftheadjustmentsthatyoumadetothatbusinessthatyoureferenceinyourpreparedremarkshelptomakethat--helptoimpactthatrevenuelineherethisquarter?
T oddGibbons (ViceChairman,CFO):
Youhadacoupleofquestionsthere,Brennan.IntermsofDRs,DRswerealittlestrongerinthefirstquarterandsomeofthatwastimingfromthingsthatwe'veseeninthefourthquarter.
SowedidgetabenefitofthatandtherearesomeFXrelatedtocorporateactionsinDRsandsowedidgetapickupthere.ThensomeoftheFXwassubstantialincreasesinvolumeswhichissomewhatmarketrelatedaswellasustryingtocaptureonthesystemsmoreofthevolumes.ThentheremainderofthepickupwasmarketdrivenwithsomeoftheeventsintheSwissinthehighervolatilitythatwesawinthefirstquarter.
BrennanHawken (Analyst-UBS):
Okay,thanksforthat.ThenIknowyoureferencedthatyouexpectassetmanagementmarginstoimproveontheGermandivestiturebutisitpossibletoquantifytheimpacttothemarginsthere?
GeraldHassell(Chairman,CEO):
Curtis,doyouwantto--
CurtisArledge (CEO-InvestmentManagement):
Themarinebusinesswasnotahugecontributortoouroverallpretaxandwasamodestcontributortobothrevenuesandexpenses.Butthestrategyaroundourdivestitureendedupbeingthatwereallydo
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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havestrongfixedincomecapabilitiesinEuropeandotherboutiquesandthebusinessdidn'tdriveasignificantamountofpretaxsuchthatitmadesensetocontinuetohaveasmuchofanofferinginGermanyaswehadthere.Soit'snotgoingtobeadramaticimpactonmarginsbutabsolutelypositive.
BrennanHawken (Analyst-UBS):
Okay,thanksverymuch.
Operator :
AlexBlostein,GoldmanSachs.
AlexBlostein (Analyst-GoldmanSachs):
Great,goodmorningeveryone.Todd,aquestionforyouonthebalancesheet,actuallyacouplequestionsthere.SoyourcommentearlieraroundputtingsomeoftheexcesscashtoworkIwaswonderingifyouguyscouldquantifythat.
WeobviouslyseethemixofthebalancesheetmovingoutofthecashandcashsittingattheFedintosecuritiesportfolio.HowmuchIguessoftheexcessdepositsyouguyscouldconsidermovingovertime?AndshouldweIguesstakethatmaybeasasignofconfidencethatyouguysarestartingtoseesomeofthatnonoperationalcash,youknowbecomingoperationalinyourviewandthat'swhyyou'redoingthat?
T oddGibbons (ViceChairman,CFO):
Yes,IthinkAthere'sgreaterclarityorthereisperfectclaritynowaroundthe--Ishouldn'tcallitperfect.There'sbetterclarityaroundtheLCR,Alex,whichgivesussomeconfidenceinhowtheHCMaccountwouldbetradedundertheLCR.
Sowehaveputprudencylimitsaroundhowfarwewouldgowiththat.SoifyoucanseeinthequarterIthinkcashdeclinedbyaboutthesizeoftheincreaseinthesecuritiesportfolio.Wedohaveaverystablecoredepositbase,wellinexcessoftheamountofcashthatweorsecuritiesthatwehaveinthehigh-qualityliquidassetsthatareintheHTMaccount.
Thereisprobablyalittlebitmoreroomforthat.Ithinkmostofwhatyou'llseeusdonowisworkonboththeassetsinthenon-HQLAtoseeifwecanbumpuptheyieldsalittlebitandtheassetsintheHQLAwiththesamepush.
Butwe'restickingwe'reat97basispointsofNIM.Ourguidancewas95to100inazerorateenvironmentandI'mgoingtotrytostickwiththat,Alex.Ithinkthat'sprobablythebestestimateofwherewe'regoingtobe.
AlexBlostein (Analyst-GoldmanSachs):
Gotyou.Andthenafollow-uponjusttheoverallsizeofthebalancesheet.
Sothisisthefirstdeclineinaverageearningassetsofthissizewe'veseenfromyouguysinawhile.JustcuriousIguesswhereisthedeclineindepositscomingfrom,whatkindofclientbaseisthatandwhereisitgoingjusttogetsomebettersenseofthemovingpiecesthere.
T oddGibbons (ViceChairman,CFO):
Itisnot--asyoulookintothedetailsAlexyouwillseeit'snotinourdepositbase.Ourdepositbasewasaboutflattoupslightly.Whereyouseeitisinotherborrowedfundsandoccasionallywedoput
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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securitiesoutonrepoandwe'lltakeadvantageofsomeinterestearningopportunities.
Therewerelessofthemsowebroughtdownthebalancesheetby$10billion.Sothatwasself-inducedbyourtreasuryteam.
AlexBlostein (Analyst-GoldmanSachs):
Gotyou.Great,thankssomuch.
Operator :
BetsyGraseck,MorganStanley.
BetsyGraseck(Analyst-MorganStanley):
Hi,goodmorning.Coupleofquestions.OneonjustonSLR.
Youmadealittlebitofprogressthisquarter,justwantedtounderstandhowmuchofabenefitdoconsolidationofthoseinvestmentsyoumentionedearlierweregoingtohave?Ifyoucouldrefreshourmemoryonthataswellasopportunitytoimprovemaybesoonerratherthanlaterwithprefissuance.
GeraldHassell(Chairman,CEO):
Goahead.
T oddGibbons (ViceChairman,CFO):
Intermsofthedeconsolidationwethinkit'sprobablyintheballparkofabout2%oftheassets,soifit's2%we'vegota4.5%ratio.Youcandothearithmetic,about9or10morebasispointsthere,Betsy.
It'snotahugemoverbuteverylittlebithelpsandthere'sobviouslythere'snocosttodoingthat.AswedisclosedinourCCARwearegivingsomeconsiderationtodoingapreferredandpreferredcouldbeanadditionalacheapersourceofcapitalobviouslythencommonanditmaybesomethingthatwecoulddoonourpathtocomplianceifwefeltitwasappropriate,basedonwhatweseehappeningtothedepositbase.
Thedepositbaseisrelativelystable.Itmightbeupalittlebitwhatwithsincetheendofquantitativeeasing.ButIthinkthere'sgoingtobesomeshiftingaroundandthefutureofthedepositbaseisgoingtobeafunctionofhowtheFedactuallyconductsitsmonetarypolicy.
BetsyGraseck(Analyst-MorganStanley):
Okay,andthenjustseparatelyonclearingwehadheardfromJPthatthingsgettougherthere'sthepossibilitytheymightfadetheclearingbusiness.Howdothinkaboutthat?
Howdoyouthinkaboutthefutureofclearing?Isthereanyeffortstopotentiallyputclearingintoasharedentityindustrysharedentity?
GeraldHassell(Chairman,CEO):
Whydon'ttakepartofitandthenI'llturnitovertoBrianShea.SoBetsyasyouknowwehavetwoformsofclearingbusinesses.
Oneistheinstitutionalside,thebrokerdealerclearancebusinesswherewehaveaverysignificantmarketshare.It'salwaysbeenthebasisforsomeofourtri-partycollateralmanagementcapabilities.It'sallowedustobuildourcollateralmanagementandenhanceitonaglobalbasissoit'sbeenacore
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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businessforusandit'sadifferentiatorforusinthemarketplace.
AsyoumayknowtheFederalReserveisourclientinthatspaceaswellonthereverserepoprogramsoweseeitasanimportantactivity.We'remindfulofthefactthatcentralclearinghousesandothermarketparticipantswanttoutilitizesomeofthoseactivitiesbuttodayit'sagoodearnerforus.We'reinvestinginitandit'sallowingustobringtomarketnewcapabilities.
Atourotherclearingbusinesswhichisreallyafinancialadvisorysolutionsplatform,i.e.,Pershing,weseethatasanincrediblystrategicassetfortheCompanygrowingvery,verynicely.Wealthmanagers,privatebanks,advisorsaroundtheworldwanttoutilizethatplatformtoservetheendinvestor.That'sastrategicgrowthassetofourCompanyandBrianyoumaywanttoaddsometoit.
BrianShea(CEO-InvestmentServices):
Ithinkyou'vedidaterrificjob,Gerald.Nothingtoadd.
GeraldHassell(Chairman,CEO):
Okay.
BetsyGraseck(Analyst-MorganStanley):
Okay,thanks.
Operator :
KenUsdin,Jefferies.
KenUsdin (Analyst-Jefferies):
Thanks,goodmorningguys.Hey,Iwaswonderingifyoucouldtalkaboutwe'vegottentothepointwhereitseemslikewemayhaveseenthatturninprofessional,legalandotherservices,youguyshavetakencareofabunchofthelitigationandI'mjustwonderingifyoucangiveusalineofsightthere.That'sbeenthesecondbiggestcategory,that'sbeenapressureonearningsforquiteawhile.
Areweataninflectionpointthere?Areyouatthepointwhereyoucanatleastfeelconfidentthatwe'vepeakedorarestartingtoturndown?
GeraldHassell(Chairman,CEO):
Yes,Ithink,Ken,thereareacoupleofitemsthere.Alotofourpurchasedservicesarethingslikedatasourcesandinformationthatweusetorunourbusiness.Ourprocurementactivitiesareactuallyhelpingusdrivesomeofthoseservicesdown.Wethinkthereactuallyisalittlebitmoreroomthere.
Intermsofthemanagementconsultingandsomeoftheconsultingexpensesthatweareincurringrelatedtosomeofourmajorplatforminitiatives,thosewillprobablyberunningattheratethatwe'reseeingnoworintheballpark.Therewasquiteaspikeinthefourthquarter.Wewouldn'texpectthattorecur,buttheycouldbeinthesamelevelthattheyareattoday.
Legalisalittlebitearlytocall.Thereshouldbeapiecedividendwithoursettlement,sowemightseesomebenefitoutofthatforsomeofourlitigationdefenseswhichalsofallonthatline.SoIthinkintheshort-term,I'dlookforittostaydownatthislevelthatwesawitcomefrom,comedownfrominthefourthquarter.Theremightbesomeroomgoingout,butatthispointIdon'tthinkI'dreallygiveguidancetoabignumberyet.
KenUsdin (Analyst-Jefferies):
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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Okay.Andmysecondquestion,maybeoneforCurtisjuston,intheInvestmentManagementbusiness,Todd,hearingyourpointsontheeffectofFX.Butthegrowthratesevenadjustedforthethreeindividualinvestmentmanagementlinesaresomewhatsubdued,meaningitimpliesthatthefeecapturerateslookliketheyarestillundersomepressurewithyourmixingstillintoLDIandoutofactiveequity.
Justwonderingifyoucanshedsomeadditionallightonjustcontinuedoptimizationthereandwhatshouldweexpectasfarastheoutlookforfeecapture?
CurtisArledge (CEO-InvestmentManagement):
Yes,sofeecapturewhenyoublendassetswehavefeesthatareverydifferentineachassetclassandsowhatwehaveseenisthefeecapturedeclinesreallyhavebeenaresultofthesuccessofourrapidlygrowingLDIbusiness.SoLDI,againtheU.S.LDIandEuropeanUKspecificallyLDIbusinessesaresomewhatdifferent.ThebiggestpartofourLDIbusinessisintheUKandEuropethroughInsightandtheyhavecontinuedtogarnerassetsaspensionplansarederisking.
Thebusinessthatbusinessisactuallyquiteactivebusiness.You'retryingnotjusttomanageagainstaninterestrateliabilitybutalsoaninflationliability.
Theyearnbothbasefeesandperformancefees.Sowhentheyperformwelltheirfeerealizationisactuallymeaningfullyhigherbutagainwhat'shappeningonthetotalfeecaptureisthatthedeclines,wecoveredthisatInvestorDayyoumayremember,Ken,thatitreallyhasalottodowiththefactthatourLDIbusinessisgrowingsorapidly.Butagainit'snotapassivebusiness,it'sverymuchanactivebusinessandmuchofourperformancefeesoverthepastmanyquartershavebeenfromourLDIbusiness.
KenUsdin (Analyst-Jefferies):
Okay,thankyouguys.
Operator :
MikeMayo,CLSA.
MikeMayo (Analyst-CLSA):
Hi.Ihaveonequestionwiththreeparts.AttheannualmeetingnewDirectorEdGardensaidthatBankofNewYorkisfocusedonbeingbest-in-classineverythingwedo.
Sofirstareyoubenchmarkingversusbest-in-class?Second,whatisthebest-in-classnumberforROTCEandthemarginsforInvestmentManagementandInvestmentServices?Andthirdwhenyoulookatbest-in-classwouldn'titbemoreappropriateinsteadoflookingatrevenueperemployeetolookatnetincomeperemployeeandonthatmeasureitseemslikeyourankbelowpeer?Thanks.
GeraldHassell(Chairman,CEO):
Thanks,Mike.Wecertainlyaspiretobebest-in-classineverythingwedoandtoberecognizedastheindustryleaderintheareasweoperatein.
Wedometricourselvesagainstavarietyofdifferentinstitutionsandavarietyofdifferentmetricstotrytoachievethosegoals.We'vechallengedourteamsacrosstheCompanytoaspiretothosemetrics.
Forthepublicconsumptionwegiveyoubroadmetrics.It'stoughtogiveyoueverysinglemetricthatweareoperatingtheCompanywithinandsothingslikefeetoexpenseratioacrossInvestmentServicesweseecontinuousimprovementthere.Therevenueperemployeeisadmittedlyabroadmetricbutit'sanindicativemetricofoneofthethingswe'retryingtoworktowards.
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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Welookatclientsurveys,clientsatisfactionsurveys.Wemeasurethose.Thosethatwesharedwithyouattheshareholdermeetinglastweekareextremelyhighscores.
Wewanttogetto100%.I'mnotsurewe'llevergettherebutthosearesomeofthethingswe'retryingtoworktowards,thingslikestraight-throughprocessingrates,accuracyratesareallthingsthatwemeasureinInvestmentServices.
OntheInvestmentManagementsidewelookattheinvestmentperformanceoftheboutiquesandtheassetclassesversustheirfeerealization.SowehavealotofmetricsacrosstheCompanywherewe'reaspiringtobethebestineverythingwedo.
Willwealwaysgetthere?Itwillbeachallengetogetthereineverysinglecategorybutthat'scertainlyouraspiration.
MikeMayo (Analyst-CLSA):
Onefollow-upthenbecauselastweekyoudidmentiontherevenueperemployeeandaftergettingbacktomydeskandlookingatnetincomeperemployeeyoudidn'tlookquiteasgoodorunderperformedpeer.SowhyisrevenueperemployeetherightmetrictolookatinsteadofnetincomeperemployeeandalsowhenyousellyourGermanboutiquewillthathelpthatmetricandcanyouelaborateonthatsalebecausethatseemsnew?
T oddGibbons (ViceChairman,CFO):
Mike,whetherit'srevenueperemployeeornetincomeperemployeeIthinktheyareametric.ButIthinkthemetricultimatelythatyouneedtofollowiswhatishappeningtoouroperatingmarginandhowareweperformingbecauseifweinsourceoroutsourcewhicheverwayyougothere'sgoodreasonsforonecompanytodoitonewayversusanotherdoingitanotherway.
Ultimatelyit'sgottodroptothebottomline.AndIthinkwhatyou'veseeninourperformancethisquartera300basispointincreaseinouroperatingmarginisprettysubstantialandwecontinuetofocusondrivingthemargin.
Wethinkthestrategiesultimatelywillpayoff.Wethinktheinsourcingofourapplicationdevelopersnotonlydowehavetheintellectualpropertyclosetoourclientswhichcanmakeusthebest-in-classintermsofprovidingtechnologysolutionswealsohaveitatalowercostbecauseweownitandthat'sbeingreflectedinourtechnologycostswhicharedeclining.
SoIthinkthat'showultimatelyyouhavetomeasureusbecauseit'sjusttoohardtotellexactlywhat'sgoingonwithheadcountandhowpeoplecomputeitandwhetherthey'vegotcontractorsinversusfull-timeemployeesandsoforth.IntermsofMeritenI'llturnitovertoCurtis.
CurtisArledge (CEO-InvestmentManagement):
Yes,thanksTodd.OnethingIwouldwanttomakesurethatwehighlightisthatweinadditiontosellingMeritenwealsoacquiredCutwater.Thereisactuallyanetreductioninstaffasaresultofthatbutit'snotgoingtomeaningfullychangeanyofthemetricsthatyou'relookingat,Mike.
Sothatreallywasastrategicrepositioningofourportfolio.AgainwehadmorefixedincomecapabilityinEuropethanwefeltlikeweneededandwealsowanttogrowInsight'sterrificLDIcapabilitiesintheU.S..
SopartneringthemwithanexcellentfirmatCutwaterreallywaswethoughtafantasticmove.SoIjustwanttomakesurewecapturebothofthose.
T oddGibbons (ViceChairman,CFO):
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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YesandIthinkMeritenispartbyitselfit'snotgoingtomovetheneedlealot.Butasweporeovertheportfolio,aswechangeourderivativesbusiness,aswestreamlineourcapitalmarketsactivities,asweexitedthefuturesclearingmargin,asweexitedtwocorporatetrustactivitiesinJapanandMexico,nowthrowMeritenintothat,aswecontinuetoporeoverwhatmakessenseinaggregatetheyarestartingtomovetheneedle.
MikeMayo (Analyst-CLSA):
Allright.Thankyou.
Operator :
BrianBedell,DeutscheBank
BrianBedell(Analyst-DeutscheBank):
Hi,goodmorningfolks.Maybejustfollowingalongthatpathontheactualcostsavesfromstrategicactionsandmaybeifyoucanjustupdateusontheaggregatelevelofcostsavesonayear-over-yearbasisthatyouexpectfromconsolidatingsomeofthebackofficeplatformsinassetservicinglikemovingtotheoneplatformincustody?
BrianShea(CEO-InvestmentServices):
SoBrian,thisisBrianShea.WecontinuetodriveforwardwithourbusinessimprovementprocesswhichyouknowistransformingforsuccessandasGeraldmentionedearlierwe'regoingacrosstheboard.
SofromabusinessexcellenceperspectiveToddjusttalkedaboutthebusinessportfolioreviewactions.Meritenwasthelatestinaseries.Wecontinuetodrivemoreleverageacrossthefranchiseintermsofenterpriseteamwork.
We'reexecutingonagloballocationstrategytorepositionpeopletolowercostlocations.We'vetalkedabouttheinsourcingoftechnologydevelopmentwhichnotonlyimprovesourspeedtomarketandintellectualcapitalleveragebutitalsoreducesourcostandreducesourdependencyoncontractorsandtheconsultants.
Wearemovingforwardwithplatformconsolidations.Inthelatestquarterorinthelastmonthwe'vecompletedthefinalstageofourcorporatetrustreplatformingtoourtargetplatformandthatwillenableustoretireanotherlargehistoricallegacyplatformoftheCompany.Sothere'slotsgoingonbutthekeymessageI'dsayisone,wegaveyouatargetatInvestorDay.
We'regoingtomeetthattargetandwe'reontracktomeetthattarget.Andtheworkthatwe'redoingisnotone-timecostdriven,it'ssustainablecontinuousimprovement.Andsowebelievewecancontinuetodriveimprovementinthisprocessoverthelongterm.
GeraldHassell(Chairman,CEO):
AndBrian,Iwouldjustaddthatwe'velearnedthelessonofannouncingabigprogramandthendeliveringontheprogram.Andunlessitshowsupintheoperatingmarginandtheoperatingleverageitdoesn'tcountandit'sshowingupintheoperatingleverageandintheoperatingmargin.Soourmarginwentupby300basispointsfromthefirstquarteroflastyear.
OurfeetoexpenseratiohasimprovedinInvestmentServicesandweproducedover500basispointsofoperatingleverage.Thosearethefacts.
T oddGibbons (ViceChairman,CFO):
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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AndIwouldaddtothat,Brian,alltheactionsthatwe'retakingtostreamlinetheorganizationandthetransformationthatBrianjusttalkedaboutmakeusalittlesimpler,alittlelessrisky.Buttherearealsocontinuetobesignificantregulatoryrequirementsforus,theresolutionplanning,meetingsomeofthedatarequirementsthataresubstantial.Sotheregulatorscontinuetoincreasethebarandweneedtobepreparedtobeabletofundthoseinvestmentsandsomeofthiswilldroptothebottomlineandsomeofitwillenableustofundtheincreasingdemandsfromtheregulators.
BrianBedell(Analyst-DeutscheBank):
Right.Sothatremainsthewildcardontheregulatoryfrontfromanexpenseperspectiveitsoundslike.
T oddGibbons (ViceChairman,CFO):
Yesitdoes.
BrianBedell(Analyst-DeutscheBank):
AndthenjusttofollowupthismightbetooearlytotrytofigurebutyoutalkedalittlebitabouttheNEXENplatformattheshareholdermeeting.Maybeifyoucouldisthereawaytoquantifythecompetitiveadvantagesyouthinkyouwillbeabletogetfromthatfromnewproductrollout,someoftheinternalsourcingthatyoujustmentionedsayoveratwo-orthree-yearperiodfromarevenueperspective?
T oddGibbons (ViceChairman,CFO):
Iwouldn'twanttogiveyouaspecificrevenuetargetbutIcansaythatwe'recommittedtobetheinvestmentindustrytechnologyleader.Partoftheinsourcingstrategythatwementionedisnotjustaroundbeingmorecost-effective,it'sabouttransferringdomainbusinessknowledgeintothetechnologydevelopmentteaminawaythatcreatesacompetitiveadvantage.NEXENwillbeavisiblemanifestationofthattoourclients.
It'sthesortofnext-generationtechnologyplatformthat'sgoingtoallowustoconnectthevariousapplicationsacrossthevariousbusinessesanddeliveramoreseamlessandstate-of-the-artintuitiveplatformtoBNYMellon'sclients.Itisbasedonasecurecloud-based,privatecloud-basedplatformwhichacceleratesourspeedtomarketfornewcapabilitiesandactuallyreducesourcostofinfrastructure.
IthasanEPImarketplaceessentiallyallowingseamlessintegrationwithourclientsandsowe'llbeaneasierfirmtodobusinesswithandintegratewithfromatechnologyperspective.Itwillbecompletelymobileinawaythatwedeliver,soanymobiledeviceanywhereanytimepeoplewillabletoconnectthroughNEXEN.
Ithastheequivalentofanappstorewhichmeansthatwe'regoingtobeabletoeasilyintegratethird-partyprovidersofchoiceintotheplatformsothatwereduceourclients'vendormanagementandintegrationcost.Andultimatelyitwillbethedeliveryvehicleforourbigdatasolutionswhichwe'realreadydevelopinganddeliveringtoclientsintheareaofliquiditymanagement,collateralmanagementbutwillallowustodeliverinsightstoourclients.
Sowe'rerollingthisoutinternallyinthebeginningthisquarterandwewillstartrollingitouttocustomersinthesecondhalfoftheyearforselectedbusinesses.Andoverthecourseof2016we'llrollitoutmorebroadlytothebroaderclientbase.Ihopethathelps.
BrianBedell(Analyst-DeutscheBank):
Yes,that'sgoodcolor.Thankyou.
Operator :
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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GlennSchorr,EvercoreISI.
GlennSchorr (Analyst-EvercoreISI):
Hi,thanksverymuch.Questioninmoneymarketland,I'mcuriousifyoufeellikeyouhavetheproductofferingsetwhereyouwantedtobeaswetransitionnextyear?Andwhatkindofsensitivitiesyouthinkyou'relookingatintermsofclientbalancemigrationprimefundstotreasuryfundsandwhatkindoffeegiveupandfeewaivergiveupthatwe'rethinkinggetsrecapturedthatmightnotbebasedonhowclientsmigrate?
CurtisArledge (CEO-InvestmentManagement):
Hey,Glenn,it'sCurtis.LetmegiveyoutheviewfromtheInvestmentManagementperspectiveandthenmaybeToddorBriancantalkaboutitontheotherside.Sofirstofallyouareseeingpeoplerepositiontheirmoneymarketofferingsaswegetclosertonextyear'sfloating-rateNAVforinstitutionalprimefundsandwe'veactuallybeenspendingalotoftimeonthataswellandsonotreadytoannounceanythingjustyetbutIthinkit'sfairtosaythattheindustrywillpositionitselfforwhatwedobelievewillbeashiftinassets.
TherearealotofpeoplewhocurrentlyinstitutionalclientsthatusefixedNAVprimefundsthatwillnotbeabletohavethembeinafloatingstatus.Soweknowassetsarelikelytomove.WecontinuouslysurveyourclientsandnotjustacrossInvestmentManagementbutthewholeCompany.
We'reobviouslyaverylargeplayerhereandwedobelievethatbetweenthethirdand50%ofclientswillshifttotreasuryfunds.Andsotoansweryourquestionaboutwhatthatmeansfromafeewaiverperspectiveit'sverysignificantwhereinterestratesarewhenthatoccurs.FeewaiversaremorechallengingintreasuryfundssoifinOctober2016interestrateshaven'tmovedtherewillbeanegativeimpactfromfeewaiversfromthatactivity.
Oneoftheotherthingsthatissomewhatoffsettingto,though,andyou'veseensomebanksbeginasSLRishavinganimpactchangingtheirviewsondeposits.Sowehaveabsolutelyseenhedgefundsandotherclientswhowouldhaveleftdepositsonbankbalancesheetsmovethosetwomoneymarketfunds.
Andsowe'reactuallyinthefirstquarteracrossourplatformandwithintheInvestmentManagementwesawbalancesremainrelativelystable.Theseasonalitywouldhavesuggestedthattheywouldhavebeendownsomewhat,sothere'sagrowthinmoneymarketfundsoccurringasaresultofregulation,sothere'ssomecountervailingforcesatplayhere.
T oddGibbons (ViceChairman,CFO):
SoIthink,Glenn,fortheCompanyasawholethatifinterestratesweretostayatzeroandyoudidseeamovementfromprimeagainwhatCurtisjustindicatedisthemovementyou'reseeingintotreasuryfundsisnotnecessarilycomingfromprimerightnowit'scomingfrombankdeposits.Butintheeventaswemoveforwardwithmoneymarketfundreformwewouldexpectprimetogomoretowardtreasury.
Andifinterestratesstayedatzerothatwouldbeanegativeforusbecausethere'sloweryieldintreasuryandthereforetherearegoingtobeamodestincreaseinfeewaiversasaresultofthat.Ifinterestratesnormalizethentherecoverytrackoffeewaiverswouldbeaswe'vedescribed.
GlennSchorr (Analyst-EvercoreISI):
Gotit.Okay,Iappreciateit.Andthenjustonelittlecatchuponoccupancycost.
Youmentionedthatwecouldn'tseethedoubleoccupancycostinfirstquarter.Ijustwanttomakesure
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
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theyweretherebuttheywereoffsettingitemsbecauseIjustwanttomakesurewe'remodelingsecond,thirdandfourthquartercorrectly.
T oddGibbons (ViceChairman,CFO):
Yes,letmeclarifythatandmakeitabsolutelyclear.Soyes,wearepayingthedoublerent.Wehadalittlebenefitfromcurrencytranslation.
Wealsohadalittlebenefitfromouroutsourcingofmaintenancewhichfallsthroughthatoccupancyexpenseline.Andinadditionsomeofthecostsassociatedwiththemovehavenotbeenreflectedinthatline.
SoIthinkthebestguidanceIcouldgivewehadindicatedthatwethoughtthelinewouldbeupabout$30millionforthefull-year.It'sprobablybesttothinkofitataboutthatamount.
GlennSchorr (Analyst-EvercoreISI):
Okay,Iappreciateit.Thankyou.
Operator :
JimMitchell,BuckinghamResearch.
JimMitchell(Analyst-BuckinghamResearchGroup):
Yes,goodmorning.Maybejustaquickfollow-uponthedepositdiscussion.Obviouslygivenleverageconstraintsacrosstheindustryit'ssortofadifficultproblemforeverybody.
Howdowethinkaboutitlongterm?Isitmoreofthathey,wecan'treallytellourclientswhattodobecausewedon'twanttoloserelationshipsandpushdepositsdownlikeaJPMorganandlongertermtheeconomicswithhigherratesyoukindofgettoacrossoverpointwhereyouactuallyearnyourcostofcapitalonthosedeposits?
Isthatsortofthestrategythatoristheresomethingmoreproactiveyoucandotopushdownleverageandmoveintomoneymarkets?Justwonderingifthere'sanykindofconstraintsonmoneymarketsforalotofcorporatetreasurersiftheyhaveariskofbeinglockedupfor30daysandthingslikethat?
GeraldHassell(Chairman,CEO):
Wellwhydon'tIstartandI'llturnitovertoTodd.One,it'saverydynamicsituation.Assupplementalleveragephasesinandweworkourwaytowardsitobviouslythelevelofthebalancesheetbecomesincreasinglymoreimportant.
We'dliketoearnsomemoneyonthosedepositsintheshortrun.We'rewatchingourdepositbaseandourclientactivity.Weclearlywanttotrytodrivethedepositbasetowardsoperationaldepositswhichhaveamorefavorabletreatment.
We'reeducatingallofourteamsaroundtheCompanyaroundclientactivitywhetherit'soperationaldepositsornotandthereforethevalueassociatedwiththem.Thathelpsusengagewithourclientsbetterandreallydrivebetteroutcomesforourclientsandourselves.
Soit'saverydynamicsituation.We'reveryengagedwithourclientsonit.Wherewethinkit'sappropriateaswe'vedoneinEuropewherewe'rechargingfordepositswearebutwe'remodelingthisandwatchingitverycarefully.
T oddGibbons (ViceChairman,CFO):
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
EventDescription:Q12015EarningsCallMarketCapasofEventDate:45.45BPriceasofEventDate:42.305
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Yes,Jim,Iwouldjustaddtothatthatit'shardtopredicthowdepositsaregoingtomoveuntilyouareclearaboutwhattheFedmonetarypolicyisgoingtobe.Soiftheyaredrainedinatraditionalwaywhichwouldbethroughreverserepothenwewouldthinkdepositswouldrunoffanditwouldbepricebased.
Anotheralternativeisliterallyjusttopricethem.Sotherearegoingtobenonoperationaldepositswhichmeantheyaren'tveryattractiveundertheLCRandIthinkbankswillbenotwillingtopayalotforthemespeciallyiftheyaresomewhatconstrainedbytheSLRratio.
Intheeventthatinterestratesriseandthosedepositswanttostickwithinstitutionsthatareverystronginstitutions,therewillbeacrossoverat60or70basispointsthatlooksprettyattractiveasareturnoncapitalevenjustleavingitattheFedareas.Sotheremightbeapointwhereyou'dprobablyraisesomepreferredorcapitaljusttokeepthebalancesheet,keepthemonthebalancesheetandmakeavery--actuallyazeroriskreturnbutadecentreturnonregulatorycapital.
JimMitchell(Analyst-BuckinghamResearchGroup):
Okay,thanksforthat.That'sveryhelpful.Thenmaybeaquickieonthenetsharecount.
Ithinkyoulastyear'sbuybacknetofemployeestockissuancewasaboutIguess35%,40%dilution.Isthatthewaytothinkaboutitgoingforwardorshouldwethinkabouttheemployeeissuanceismoreofafixedcostandasthebuybackincreasesthenetsharecountreductionimproves?
T oddGibbons (ViceChairman,CFO):
It'srelativelystablesoyou'llseealittlebitofahigheroneasthebuybackincreasesbutnotalot.Soyoushouldstillthinkinthesametermsthatyoujustmentionedthattherewillbeshareissuancewiththeemployees,inthatkindofaballpark.
JimMitchell(Analyst-BuckinghamResearchGroup):
Okay,great.Thanksalot.
Operator :
AdamBeatty,BankofAmericaMerrillLynch.
AdamBeatty(Analyst-BandofAmerica-MerrillLynch):
Thankyouandgoodmorning.AcoupleofquestionsonInvestmentManagement.Specificallyonthemulti-affiliatemodelIappreciateyourcommentssofaronMeritenandCutwaterandInsight.
Justmorebroadlyacrosstheaffiliateportfolio,isthereadditionalstreamliningthatyou'rethinkingabout?Aretherecapabilitiesthatyou'relookingtoaddormaybesomeaffiliatesthataresubscale?
Justmorebroadlyhowareyouthinkingabouttheaffiliateportfolio?Thanks.
T oddGibbons (ViceChairman,CFO):
Yes,sooneofthethingsthatweannouncedrecentlywastheformationofactuallyanewinvestmentboutiquefromstartwiththestateofTexasasacornerstoneinvestor.WeactuallylaunchedafirmcalledAmherstCapitalandit'sdesignedinmanywaystobenefitfromalotofregulatorychangesthatwe'retalkingaboutwherebanksarehavingtoholdmorecapital.
Muchofthechangesinrealestatefinancehavebeenimpactedbythatandsothatboutiquewillactuallymanagefundsinrealestatefinanceasaresultofthischange.Sothat'sanexampleofthekindofthingwherewearecontinuouslylookingforplaceswherewebelieveourclientscanearnsomevery
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
EventDescription:Q12015EarningsCallMarketCapasofEventDate:45.45BPriceasofEventDate:42.305
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attractivereturnsrelativetotheirliabilitiesandrelativetotheirneeds.Andsoonewaythatwemanageourportfolioisbystartingnewthings,launchingnewthingsanditwasagreatthingtohaveaverywell-known,sizableinstitutionalclientlaunchthatwithus.
OntheotherhandtheMeritensaleverymuchwaslookingatourportfolioandseeingthegreatgrowththatwe'veseenfromotherinvestmentfirmsinourmixsobothInsight,Standish,Alcentra,NewtonevenhassomeverygoodEuropeanfixedincomecapabilities.Sowhenwefeellikeourcapabilitiesgettothepointthatthereisamoreattractiveownerofthefirmwehavesoldit.Inthepastwe'veclosedfirmsthatbecamesubscaleordidn'tdelivertheinvestmentperformance.
We'realwayslookingtofindthoseinvestmentcapabilitiesthatwethinkareexcellentthatfitneedsthatwethinkourclientshaveandthatareinlinewithmarkettrendssuchastheoneIdescribearoundAmherst.It'sacontinuousprocess.Iwilltellyouthatwearenottradersofourinvestmentboutiques.
Iwanttomakesurethatwedon'tsendthatmessagebecausethetruthofthematteriswearetryingtohaveaninvestmentlineupthatsatisfiesthecompletesolutionforourvastglobalclientbase.AndagaintheMeritenenterprisebyitselfisnotacorestrategyofourstosellfirmsbutreallyjustmakemoresensetodosomethingdifferent.TheCutwateracquisitionagainexpandingpensionderiskingcapabilitiesintotheU.S.isamajormarkettrendandthat'swhywemadethatacquisition.
AdamBeatty(Analyst-BandofAmerica-MerrillLynch):
Makessense.Thankyouforthecolor.
Thenjustturningtotheequitycapabilitywhichstandsoutalittlebitfromanotherwisestrongfranchiseonthosetermsarethereproductgapsthatmaybeyou'relookingtofill?Isitaquestionofcurrentproductsmaybebeingout-of-favorormainlyaperformanceissue?Iknowyou'vedonesomeworkondistributionandhowisthatcomingtofruition?
CurtisArledge (CEO-InvestmentManagement):
Yes,sothanksforthatquestion.It'sagoodone.Againmostoftheassetsundermanagementthatwehavearewithinstitutionalclientswhoareverydisciplinedaroundrebalancing.
Andsoasequitymarketshaveperformedwelltheclientbasethatwehaveisverythoughtfulaboutmanagingtheiroverallassetallocation.Andsorebalancinghasabsolutelybeenabigpartofthetrendsweseenotjustthisquarterbutinpreviousquarters.
Welookacrosstheindustryandsomeofwhatweseeinretirementchannelsandintheretailchannelstherehasbeenlessvolatility.Thereareabsolutelyinflowsintosomeequityproductsandalotoftheinvestmentwe'vebeenmakinginourwealthmanagementbusinessandinourU.S.retailintermediarybusinesshavebeenaroundbeingabletocapturethoseflows.AndjustyearoveryearIcantellyouU.S.retailacrossallproductshadaveryniceuptickabout60%increaseinsalesandourwealthmanagementbusinessesalsoshowingsomeverynicegrowth.
Inactiveequitywehaveseensomeimpactattheinstitutionallevelwhereclientshavemovedfromactivetopassive.I'dtellyouthataboutathirdofwhatwe'veseeninourbusinessthisquarterwasamovefromactivetopassivesothat'sadynamicatplayaswell.
AdamBeatty(Analyst-BandofAmerica-MerrillLynch):
That'sveryhelpful.Thankyoufortakingmyquestions.
Operator :
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
EventDescription:Q12015EarningsCallMarketCapasofEventDate:45.45BPriceasofEventDate:42.305
©2014TheStreet,Inc.Al l R ightsReserved Page22of23
GeoffreyElliott,AutonomousResearch.
Geof f reyElliott (Analyst-AutonomousResearch):
Goodmorning,thankyoufortakingthequestion.AttheInvestorDayyoutalkedabout11%to12%rangefortheBaselIIITier1commonratio.
Clearlyevenwiththereversaloftheoperationalriskhereyou'regoingtobeabitbelowthat.Areyoustillthinkingaboutthat11%to12%rangeastherightnumberordoyouthinkitisshifteddown?
T oddGibbons (ViceChairman,CFO):
No,Geoff,IthinkasIhadmentionedinmypreparedremarkstheimpactoftheincreaseintheoperationalriskcapitalwillbeoffsetbythedeconsolidationofcertainassetsaswebelievewe'regoingtobeanearlyadopteroftheconsolidationstandard.Sothatwillbringusbackclosertothe10%rangeandthentherewillbesomenaturalaccretionofcapitalaswebothincreaseourSLRrequirement.
Andwe'dliketobeaboutIthinkbeingoptimalisbeingabout2Xsoifwehave5.5%ofSLRbasedcapital,leveragecapitalthatwouldprobablyputusataboutan11%orsoforourcommonequityTier1.SoI'dstillkeepitprettyclosetotherangeof11%to12%.
Geof f reyElliott (Analyst-AutonomousResearch):
Andthenjustaquickquestiononthenumbers.Therewasabigincreaseinnon-controllinginterestto$90millionandtherewasalsoabigstepupintheincomefromconsolidatedinvestmentmanagementfunds.ItsoundedlikeyouweresayingtherewassomesortofhedgingeffectthatdrovethatbutIjustwantedtomakesureIunderstoodwhatwasgoingon.
T oddGibbons (ViceChairman,CFO):
Yes,thisrefersbacktotheconsolidationofthevariableinterestentitiesthatwewerejusttalkingaboutforthebalancesheet.Soeffectivelywhathappenswherewehaveasmallinterestinafundwehavetoconsolidatetheentirefund.Andasweconsolidatethatwerecognizetherevenuenotonlyofourownsmallinterestbutofourclients.
Thenwetakethat--sointhefirstquarteritdidverywellsoitwentupsubstantiallyandourclientssawmuchmoreintheformofrevenuethanwetypicallyseen.Andifyougothroughthebalancesheetyou'llseethereisadeductiononanafter-taxbasisofthatminorityinterest.
Sowhatitlookslikeiswehavealargepretaxincomeandthereforehaveaverylowtaxrateandthat'snot--ourincomedoesn'tgetincludedinthetaxratebutineffectit'sbestjusttotakethewaywereportournumbersonanadjustedbasis,that'swhywedidn'tsayourrevenuegrew6%whichiswhattheGAAPnumberwas.
Itactuallygrew4%becausewetooktheclientrevenueoutoftherevenueline.
Asweadoptthenewstandardwe'llgetalotlessnoisefromthatbecauseitwilleliminatemostofwhatyouseecomingthroughthere.
Geof f reyElliott (Analyst-AutonomousResearch):
Great,thankyouverymuch.
GeraldHassell(Chairman,CEO):
Okay,thankyouverymucheveryoneandwereallyappreciateyoudialingin.Ifyouhavefurther
CompanyName:Bankof NewYorkMellonCorpCompanyTicker:BKSector:FinancialIndustry:FinancialServices
EventDescription:Q12015EarningsCallMarketCapasofEventDate:45.45BPriceasofEventDate:42.305
©2014TheStreet,Inc.Al l R ightsReserved Page23of23
questionspleasegiveValerieHaertelacall.Andwelookforwardtocatchingupwithyousoon.
Operator :
Thankyou.IfthereareanyadditionalquestionsorcommentsyoumaycontactMs.ValerieHaertelat212-635-8529.Thankyou.
Ladiesandgentlemen,thisconcludestoday'sconferencecall.
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