Bank Of New York Mellon Corporation (The) (BK)

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The Bank of New York Mellon Corporation (BK)

Citigroup US Financial Services Conference

March 06, 2013 10:35 am ET


Timothy F. Keaney - Vice Chairman and Chief Executive Officer of Investment Services

Thomas P. Gibbons - Vice Chairman and Chief Financial Officer


Timothy F. Keaney

Arjon [ph] , thanks very much and many thanks to our friends and colleagues from Citigroup for having us here today. Todd and I appreciate the opportunity to talk a little bit about our strategy, where we see opportunities for growth. We're going to talk a lot about our operational excellence initiatives. We're going to talk a bit about capital and we're going to talk about, in this environment, where we're focusing our time. I'd urge you to read this at your leisure, please.

And a few starting points. We really like our business model. You're going to hear us, time and time again, talk about the fact that we're an investments company. We service the entire life cycle and we'll talk about what that life cycle is. We help people manage and move their assets and service them as they move them around the world. We are very focused on growing our company, even in today's environment. We see some significant upside potential in certain high-growth areas that Todd and I will be alluding to today.

In a tough revenue environment, it's a reminder that we need to continue to redouble our effort around operational excellence. It means we're taking steps to improve our risk profile, lowering our operational risk, becoming more efficient and we believe we can do that and we'll continue to do that while even improving the client's experience with us and improving on our industry-leading reputation for great client service. Our balance sheet is pristine, it's highly liquid. Todd is going to talk about our focus on capital. We generate a significant amount of capital but we're really deploying it in a very, very disciplined manner. And our businesses have a unique way to work together and I'm going to talk a lot about that, and we believe that the broad solution set that we have will be a key differentiating characteristic for us going forward.

Focusing on product breadth for a minute, and this is an important distinction between ourselves and our traditional trust bank competitors. We talk about product breadth but let me elaborate on what that means, sort of running clockwise around this chart.

We help clients create financial assets, whether it's debt or equity, when they go to the markets, between our Corporate Trust and our Depositary Receipt business. We can clearly facilitate trading and settlement, whether that's cash or securities, we do that through our Broker Dealer Clearance business. We do that through collateral management, which I'm going to spend a few minutes on today. We do it through global markets and we do it through our Treasury services or what we call our payments business.

We also service any asset once it's owned by a client, any security type, no matter where they hold it around the world, we do that of course through our Custody business. And our Investment Management business and our Pershing platforms are a powerful 1-2 punch to distribute not only our own Investment Management products and services but third-party products and services to tens of thousands of investment advisors around the world. This right here on this slide, is a unique business model, it's a company that's built for investors and we know how to service investments, that's what we do.

Our company is singly focused on the investment process. I mentioned managing and servicing assets no matter where they're traded around the world. That said, we're really focused on 2 primary businesses. First, and we would say we're leaders in each and I'll talk a lot more about that both in terms of scale and in quality. But these 2 businesses, the Investment Servicing business, which I run; and the Investment Management business, which is run by a gentleman named Curtis Arledge, generated $13.5 billion in revenue, $3.5 billion in pre-tax income. If we peel back the layer of Investment Services, not only when you -- will you see we're the largest custodian with over $26 trillion in assets, you'll see that we have very important leadership positions in product areas in businesses that are positioned well for growth. The Investment Services business, in 2012, delivered 72% of total corporate revenues and nearly 70% of pre-tax income.

Investment Management has an equally impressive market position. We're ranked #7 globally with $1.4 trillion in assets under management, but one of the things that really makes us unique is we grew this strong position through a unique boutique-led model. It's 16 independent Investment Management boutiques, all with their own mandate; in many cases, some with their own brand. This powerful franchise delivered 28% of revenue in 2012 and 31% of PTI. You'll hear me talk a lot about the fact that these businesses are global in every sense of the word. I'll talk about Investment Services' global position in a minute. But just about 40% of our revenue in the Investment Management business came from outside the U.S.

We're going to zero in now on core revenue growth for both Investment Services and Investment Management. Combined, you can see that they're up 1%, despite a very difficult environment; year-on-year, 4%, if you exclude Issuer Services. And we talk about Issuer Services and I'll come back to that in a minute. But there's a very good news story underneath this. And let's look at the individual components. You can see Investment Management up 6%. We've seen good long-term flows in our Investment Management business, it's up 6%. And we have a very good win rate and new business pipeline.

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