Earnings call: BNY reports solid growth and strategic initiatives

BNY Mellon (NYSE:BK) (BNY) has reported a solid financial performance in its 2024 second quarter earnings call, with notable growth in earnings per share and revenue. CEO Robin Vince highlighted the company's improved earnings per share (EPS), which increased by 16% year-over-year (YoY) to $1.52. Total revenue also rose by 2% YoY to $4.6 billion, driven by a 5% growth in investment services fees and a 16% increase in foreign exchange revenue.

BNY's focus on strategic initiatives, such as capitalizing on its security services and the growth of its wealth advisory platform, Wove, has contributed to this performance. The company also emphasized its commitment to shareholder returns, detailing over $900 million of capital returned to shareholders and a common equity tier 1 (CET1) ratio of 11.4%.

Key Takeaways

• BNY reported a 16% YoY increase in EPS to $1.52 and a 2% rise in total revenue to $4.6 billion.
• Investment services fees grew by 5%, while foreign exchange revenue saw a 16% increase.
• The company achieved a 25% return on tangible common equity and a pre-tax margin of 33%.
• BNY announced rebranding efforts and is focusing on enhancing its security, market, and wealth services.
• Significant mandates have been secured from asset managers, with growing interest in the Wove platform.
• Over $900 million of capital was returned to shareholders, with a total payout ratio of 81%.
• The company expects a 10% YoY decline in net interest income (NII) for the full year 2024 but plans to keep expenses flat.

Company Outlook

• BNY anticipates a quieter third quarter due to seasonality but remains cautiously optimistic about the future.
• The company plans to keep expenses roughly flat and return 100% or more of 2024 earnings to shareholders.
• Growth is expected in the treasury market, with BNY positioned to provide global solutions.

Bearish Highlights

• Net interest income decreased by 6% YoY due to changes in balance sheet mix.
• The decline in the deposit base has impacted NII, attributed to interest-bearing deposits and liquidity-friendly deposits.

Bullish Highlights

• BNY has secured significant mandates and is seeing growth in clearance and collateral management volumes.
• The Pershing business is expected to see an end to client departures by Q3, with resilience in growing the business.

Misses

• The Security Services segment reported flat total revenue YoY, although investment services fees were up by 3%.

Q&A Highlights

• Executives discussed the company's resilience against potential future rate cuts, stating minimal impact is expected.
• The ONE BNY initiative was highlighted, focusing on bundling products and being more client-centric.
• Positive operating leverage is a goal for the year, with BNY deploying liquidity into higher-yielding securities and extending credit.

BNY Mellon's second quarter earnings call showcased a company in the midst of strategic growth and optimization, with a strong focus on client services and shareholder returns. Despite some challenges, the company's executives expressed confidence in their ability to navigate the current financial landscape and continue delivering value.

InvestingPro Insights

BNY Mellon's (BK) recent performance in the second quarter of 2024 is further illuminated by key metrics and insights from InvestingPro. With a market capitalization of $47.74 billion and a price-to-earnings (P/E) ratio that stands at 15.52, the company shows a robust financial stature. The adjusted P/E ratio for the last twelve months as of Q2 2024 is even more attractive at 12.11, suggesting a favorable valuation relative to near-term earnings growth.

InvestingPro Tips indicate that BNY Mellon has maintained a strong track record of dividend growth, raising its dividend for 13 consecutive years, which aligns with the company's commitment to shareholder returns mentioned in the earnings call. Additionally, analysts have revised their earnings upwards for the upcoming period, reflecting a positive sentiment towards the company's future performance.

The company's shares are trading near their 52-week high, with a price percentage of 99.64% of the peak, highlighting investor confidence and the stock's momentum. This is corroborated by a significant one-year price total return of 57.42%, which underscores the company's strong return over the last year.

For readers interested in further insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/BK. And for those looking to delve deeper into these metrics, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

Full transcript - Bk Of Ny (BK) Q2 2024:

Operator: Good morning and welcome to the 2024 Second Quarter Earnings Conference Call hosted by BNY. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference call and webcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without BNY's consent. I will now turn the call over to Marius Merz, BNY Head of Investor Relations. Please go ahead.

Marius Merz: Thank you, Operator. Good morning, everyone, and thank you for joining us. I'm here with Robin Vince, President and Chief Executive Officer, and Dermot McDonogh, our Chief Financial Officer. As always, we will reference our financial highlights presentation, which can be found on the Investor Relations page of our website at bny.com. And I'll note that our remarks will contain forward-looking statements and non-GAAP measures. Actual results may differ materially from those projected in the forward-looking statements. Information about these statements and non-GAAP measures are available in the earnings press release, financial supplement, and financial highlights presentation, all available on the Investor Relations page of our website. Forward-looking statements made on this call speak only as of today, July 12, 2024, and will not be updated. With that, I will turn it over to Robin.

Robin Vince: Thanks, Marius. Good morning, everyone, and thank you for joining us. Before Dermot reviews the financials in greater detail, I'd like to start with a few remarks about our progress in the quarter. In short, we delivered another quarter of improved financial performance with positive operating leverage on the back of solid fee growth and continued expense discipline. And we continued to make tangible progress on our path to be more for our clients, to run our company better, and to power our culture. Last month, we celebrated our company's 240th anniversary with our people and many of our clients. Even with this rich history of operating across four centuries, I believe that our best days remain ahead of us. That bank with around $0.5 million of capital in 1784 today oversees roughly $50 trillion in assets and powers platforms across payments, security, settlement, wealth, investments, collateral, trading, and more for clients in over 100 markets around the world. As the world changes and global financial markets evolve, so do we. Earlier this year, in January, you heard us lay out our strategy, which maps out what we need to get done and how we need to do it. Last month, we introduced changes to our logo and simplified and modernized our company brand to BNY to improve the market's familiarity with who we are and what we do. This rebranding better aligns the perception of our company to the substance of what we're doing to unlock our full potential as one BNY. Now referring to Page 2 of the financial highlights presentation. BNY delivered solid EPS growth as well as pre-tax margin and ROTCE expansion once again on the back of positive operating leverage in the second quarter. Reported earnings per share of $1.52 were up 16% year-over-year. And excluding notable items, earnings per share of $1.51 were up 9%. Total revenue of $4.6 billion was up 2% year-over-year. This included 5% growth in investment services fees led by continued strength in Clearance and Collateral Management, Asset Servicing and Treasury Services, as well as 16% growth in foreign exchange revenue. Net interest income decreased by 6%. Expenses of $3.1 billion was down 1% year-over-year. Excluding notable items, expenses were up 1%, reflecting further investments in our people and technology while we also continued to realize greater efficiencies. Margin was 33%. And in what is seasonally our strongest quarter, we reported a return on tangible common equity of 25%, 24% excluding notable items. These financial results were against the backdrop of a relatively constructive operating environment. The market calling for a gradual and shallow easing of policy rates, inflation pressures easing, and investor confidence growing. On average, equity market values increased, while fixed income markets finished slightly lower compared to the first quarter. A couple of weeks ago, the Federal Reserve released the results of its annual bank stress test, which once again showcased our resilient business model and our strength to support clients through extreme stress scenarios. The test confirmed that our preliminary stress capital buffer requirement remains at the regulatory floor of 2.5%. And we increased our quarterly common dividend by 12% to $0.47 per share starting this quarter. In May, the transition to T+1 settlement in the US, Canadian and Mexican markets represented one of the more significant market structure changes that our industry has seen in a couple of decades. BNY's critical role in the financial system gives us the opportunity to help clients through major shifts like this, further strengthening their trust in us and deepening our relationships with them. By running the company better, we are starting to capitalize on BNY's truly powerful combination of security services, market and wealth services, and our investments and wealth businesses to serve our clients more effectively across the entire financial life cycle. As an example, this past quarter BNY was awarded a significant mandate by a premier global asset manager with over $100 billion in assets under management. We were selected based on our ability to deliver custody, fund servicing, ETF and digital fund services, Treasury Services, and Pershing. Our holistic offering will power their future growth strategy. In another example, AIA, the pan-Asian life insurance group, announced a new collaboration with BNY and BlackRock (NYSE:BLK) as AIA transforms its investment platform. AIA has announced that they will implement BNY's specialized investment operations, data management services, and technology with BlackRock's Aladdin to create a connected and scalable ecosystem to support the company's evolving investment activities. We also continue to be pleased with the growing interest in our wealth advisory platform, Wove. Global Finance recently named Wove as one of the top three global financial innovations as part of its annual Innovators Awards for 2024. At INSITE, Pershing's annual flagship wealth services conference in June, we announced a suite of new solutions on the platform. Wove Investor, a one-stop client portal. Wove Data, a cloud data platform designed for financial professionals at wealth management firms, and Portfolio Solutions, a set of enhancements to the platform that will help advisors move more efficiently from researching investment products, to aligning them to a client's risk objectives and adding them to a portfolio. We also introduced a new ONE BNY offering that enables clients to easily access multiple BNY capabilities, including our managed accounts platform, asset allocation and manager selection, investment management products, customized tax solutions, the interoperable Wove platform for advisors, and custody and clearing services from Pershing. We're a comprehensive unified package leveraging the breadth of BNY to make clients' wealth advisors lives easier. And we have proof points. Example, a fast growing full service regional bank recently selected Pershing to provide custody and clearing services private wealth business. But they are also adopting [Dreyfus Cash Management] (ph), direct indexing, and private banking. As we've said many times, our culture and people are a critical part of being more for our clients and running our company better. We are pleased to see that our actions are enabling us to be a top talent destination for recent graduates and experienced leaders alike. This summer, we're welcoming our largest ever intern and analyst classes, a total of over 3,500 individuals chosen from over 150,000 applications. And we recently announced several new appointments to our leadership team. Shannon Hobbs, our new Chief People Officer joined us in June. Leigh-Ann Russell will join us in September as Chief Information Officer and Global Head of Engineering. Jose Minaya will also join us in September, lead BNY's Investments and Wealth. To wrap up, halfway through the year, we're pleased with the progress that we have made and how it is reflected in both improved financial performance to date as well as our building momentum. One of my favorite quotes comes from Alexander Hamilton, our founder, who famously said that he attributed his success not to genius, but to hard work. We have been hard at work, and we've laid a solid foundation. Our team is in full execution mode and we're starting to demonstrate the power of our franchise and of operating as one BNY for our clients and our shareholders. With that, over to you, Dermot.

Dermot McDonogh: Thank you, Robin, and good morning, everyone. Picking up on Page 3 of the presentation, I'll start with our consolidated financial results for the quarter. Total revenue of $4.6 billion was up 2% year-over-year. Fee revenue was up 4%. This includes 5% growth in investment services fees on the back of higher market values, net new business, and higher client activity. Investment management and performance fees were flat. Firm-wide AUC/A of $49.5 trillion were up 6% year-over-year and assets under management of $2 trillion were up 7% year-over-year, primarily reflecting higher market values. Foreign exchange revenue increased by 16%, driven by higher volumes. Investment and other revenue was $169 million in the quarter on the back of strong client activity in our fixed income and equity trading business. And net interest income decreased by 6% year-over-year, primarily reflecting changes in balance sheet mix, partially offset by higher interest rates. Expenses were down 1% year-over-year on a reported basis and up 1% excluding notable items, primarily in the prior year. The increase from higher investments, employee merit increases, and higher revenue related expenses was partially offset by efficiency savings from running our company better. Notable items in the second quarter of this year primarily included an expense benefit from a reduction in the FDIC's special assessment, which was largely offset by severance expense. There was no provision for credit losses in the quarter. As Robin highlighted earlier, we reported earnings per share of $1.52, up 16% year-over-year, a pre-tax margin of 33% and a return on tangible common equity of 25%. Excluding notable items, earnings per share were $1.51, up 9% year-over-year, pre-tax margin was 33% and our return on tangible common equity was 24%. Turning to capital and liquidity on Page 4. Our Tier 1 leverage ratio for the quarter was 5.8%. Average assets increased by 2% sequentially on the back of deposit growth. And Tier 1 capital increased by 1% sequentially, primarily reflecting capital generated through earnings, partially offset by capital returns to common shareholders. Our CET1 ratio at the end of the quarter was 11.4%. The quarter-over-quarter improvement reflects lower risk-weighted assets coming off the temporary increase in risk-weighted assets at the end of the previous quarter, and CET1 capital increased by 2% sequentially. Over the course of the second quarter, we returned over $900 million of capital to our common shareholders, representing a total payout ratio of 81%. Year to date, we returned 107% of earnings to our common shareholders through dividends and buybacks. Turning to liquidity. The consolidated liquidity coverage ratio was 115%, and our consolidated net stable funding ratio was 132%. Next, net interest income and the underlying balance sheet trends on Page 5. Net interest income of over $1 billion was down 6% year-over-year and down 1% quarter-over-quarter. The sequential decrease was primarily driven by changes in balance sheet mix, partially offset by the benefit of reinvesting maturing fixed rate securities in higher yielding alternatives. Average deposit balances increased by 2% sequentially. Interest bearing deposits grew by 3%, and non-interest bearing deposits declined by 2% in the quarter. Average interest-earning assets were up 2% quarter-over-quarter. Our average investment securities portfolio balances increased by 3%, and our cash and reverse repo balances increased by 1%. Average loan balances were up 4%. Turning to our business segments starting on Page 6. Security Services reported total revenue of $2.2 billion, flat year-over-year. Total investment services fees were up 3% year-over-year. In Asset Servicing, investment services fees grew by 4%, primarily reflecting higher market values and net new business. We continue to see strong momentum in ETF servicing with AUC/A of over $2 trillion, up more than 50% year-on-year, and the number of funds serviced up over 20% year-on-year. This growth reflects both higher market values as well as client inflows, which included a large ETF mandate in Ireland from a leading global asset manager. In alternatives, fund launches for the quarter continued their recent activity in private markets. Investment services fees for alternatives were up mid-single-digits, reflecting growth from both new and existing clients. And in Issuer Services, investment services fees were up 1%, reflecting net new business across both Corporate Trust and Depositary Receipts, partially offset by the normalization of elevated fees associated with corporate actions in Depositary Receipts in the second quarter of last year. We're particularly pleased to see the investments and new leaders in our Corporate Trust platform beginning to bear fruit. Against the backdrop of a significant pickup in CLO issuance in recent months, we've been moving up the ranks and improved our market share as trustee for CLOs by about 4 percentage points over the past 12 months to 20% in the second quarter. In the segment, foreign exchange revenue was up 16% year-over-year, and net interest income was down 11%. Expenses of $1.6 billion were down 1% year-over-year, reflecting efficiency savings, partially offset by higher investments, employee merit increases, and higher revenue-related expenses. Pre-tax income was $688 million, a 7% increase year-over-year, and pre-tax margin expanded to 31%. Next, Market and Wealth Services on Page 7. Market and Wealth Services reported total revenue of $1.5 billion, up 6% year-over-year. Total investment services fees were up 7% year-over-year. In Pershing, investment services fees were up 2%, reflecting higher market values and client activity, partially offset by the impact of business lost in the prior year. Net new assets were negative $23 billion for the quarter, reflecting the ongoing deconversion of the before-mentioned lost business. Excluding the deconversion, we saw approximately 2% annualized net new asset growth in the second quarter, and we renewed a multi-year agreement with Osaic, one of the nation's largest providers of wealth management solutions. Pershing has supported Osaic since its founding in 1988, and we are proud to help the company drive its growth strategy for years to come. Client demand for Wove continues to be strong. In the quarter, we signed 12 additional client agreements. The pipeline continues to grow, and we are on track to meet our goal of $30 million to $40 million realized revenue in 2024. In Clearance and Collateral Management, investment services fees were up 15%, primarily reflecting higher collateral management fees and higher clearance volumes. US securities clearance and settlement volumes have remained strong throughout the quarter, supported by a grown market and active trading. And we are excited about the opportunity to do even more for clients. Having realigned Pershing's institutional solutions business to Clearance and Collateral Management, we can offer clients a choice across a continuum of clearance, settlement, and financing solutions for those that sell clear as well as those seeking capital and operational efficiency through outsourcing. This allows us to not only deepen our relationships with clients, but also drive continued revenue growth. And in Treasury Services, investment services fees increased by 10%, primarily reflecting net new business and higher client activity. Net interest income for the segment overall was down 1% year-over-year. Expenses of $833 million were up 5% year-over-year, reflecting higher investments, employee merit increases, and higher revenue related expenses, partially offset by efficiency savings. Pre-tax income was up 8% year-over-year at $704 million, representing a 46% pre-tax margin. Moving on to Investment and Wealth Management on Page 8. Investment and Wealth Management reported total revenue of $821 million, up 1% year-over-year. In our investment management business, revenue was down 1%, reflecting the mix of AUM flows and lower equity investment income and seed capital gains partially offset by higher market values. And in wealth management, revenue increased by 3%, reflecting higher market values, partially offset by changes in product mix. Expenses of $668 million were down 2% year-over-year, primarily reflecting our work to drive efficiency savings and lower revenue related expenses, partially offset by employee merit increases and higher investments. Pre-tax income was $149 million, up 15% year-over-year, representing a pre-tax margin of 18%. As I mentioned earlier, assets under management of $2 trillion increased by 7% year-over-year. In the quarter, while we saw $2 billion of net inflows into long-term active strategies with continued strength in fixed income and LDI, partially offset by net outflows in active equity and multi-asset strategies, we saw $4 billion of net outflows from index strategies and $7 billion of net outflows from short-term strategies. Wealth management client assets of $308 billion increased by 8% year-over-year, reflecting higher market values and cumulative net inflows. Page 9 shows the results of the Other Segment. I'll close with a couple of comments on our outlook for the full year 2024. Starting with NII, I'm pleased to report that the first half of the year came in slightly better than we had expected, as we saw the decline in non-interest-bearing deposits decelerate, and we continue to grow interest-bearing deposits. While we are cautiously optimistic, we remain humble as we head into the seasonally low summer months, and for now we will therefore keep our NII outlook for the full year 2024 unchanged, down 10% year-over-year. Regarding expenses, our goal remains to keep expenses excluding notable items for the full year 2024 roughly flat. As Robin put it earlier, BNY is in execution mode and we're embracing the hard work ahead of us. We continue to expect our effective tax rate for the full year 2024 to be between 23% and 24%. And lastly, we continue to expect to return 100% or more of 2024 earnings to our shareholders through dividends and buybacks. Our Board of Directors declared a 12% increased common dividend for the third quarter, and we plan to continue repurchasing common shares under our existing share repurchase program. As always, we are calibrating the pace of our buybacks, considering various factors such as our capital management targets, the macroeconomic and interest rate environment, as well as the size of our balance sheet. To wrap up, we enter the second half of the year on the back of solid fee growth, a better than expected NII performance to date, and continued expense discipline, which gives us incremental confidence in our ability to drive positive operating leverage in 2024. With that, Operator, can you please open the line for Q&A?

Operator: [Operator Instructions] Our first question is coming from Ken Usdin with Jefferies. Please go ahead.

Ken Usdin: Thank you. Good morning.

Robin Vince: Good morning, Ken.

Ken Usdin: Good morning. Just like to go -- just ask Dermot about that NII humbleness for the second half. Can you just walk us through what the moving pieces would be, including the seasonality that you mentioned and any other things that might have been over-earning in the NII in the first quarter so that you would seemingly in your maintain guide still expect a meaningful ramp down in NII, which I don't think is what seems to be the base case given how well the balance sheet has held up so far, as you pointed out, relative to your expectations? Thanks.

Dermot McDonogh: Thanks for the question, Ken. I guess the best way to answer the question is a little bit to, in some ways, look back at last year where Q1, Q2, typically strong quarters for us. Q3, typically a seasonally lower quarter, summer months, clients taking their foot off the gas in terms of activity, and then we pick back up again in Q4. Now, as you've seen from this quarter's numbers and the first half overall, we're very pleased with the performance. I guess we've outperformed our expectations for the first half, and that's in large part due to underlying activity within our core businesses, and in my remarks, I particularly called out corporate trust, where we saw like elevated activity in the CLO space which in turn drives deposits. So when our core businesses are doing well, which they've all performed well, that has a knock-on impact in the number of deposits that we have And so we outperformed our expectations in the first half. Notwithstanding that, when I look out at the rest of the year and when we gave the guidance of down 10% in January, the market at that time was roughly calling for six rate cuts. Now we're in the middle of the summer. We had a slowdown in inflation print yesterday. Let's see how Jay speaks on Monday and how he guides out of [Jackson Hole] (ph) and into a September potential rate cut. But we kind of take all of those levers and we just kind of say for now, there's no point in me changing guidance to change guidance again in September or October at the next call. So we're cautiously optimistic. I think I used the word last year in March, askew. So we're playing for the best outcome, but we do expect Q3 to be somewhat seasonally quieter. And that's why we didn't change our guidance.

Ken Usdin: Okay, and then just can you -- that follow up, just on the size of the deposit, so you're just expecting the size of the deposit base to decline or is it the mix or just trying to understand what pieces of it would revert given that seasonality?

Dermot McDonogh: So when I think about deposits, I kind of -- I think there are three components to it. One is interest bearing deposits where we outperformed plan, NIBs where we outperformed plan. And so pleased with that, but that really reflects clients showing up in a different way with us and we showing up in a different way with clients. So, good. And then the third thing, and I've talked about this a number of times on previous calls, really the strength of the collaboration and teamwork between our treasurer, our CIO, and our global liquidity solutions platform, where we think about liquidity as a $1.4 trillion ecosystem. And we've been very much in offense mode this quarter. And our GLS team has really shown up in a positive way. And we've really managed to gather good, liquidity-friendly deposits, which is kind of fueling the growth of our balance sheet, and that's allowed us to do more loans. So I think in terms of specifically to your question, it's both, I think the overall balance will come down, and as a consequence, I would expect NIBs from here to grind a little bit lower, which is the main driver of the NII change.

Ken Usdin: Right. Okay. Thank you.

Operator: Our next question is coming from Glenn Schorr with Evercore ISI. Please go ahead.

Glenn Schorr: Hi. Thanks very much.

Robin Vince: Hey, Glenn.

Glenn Schorr: You alluded to the -- hello. You alluded to the higher Clearance and Collateral Management, higher clearance volumes. I'm just curious if you can parse out how much of that is just clients being more active during a more active second quarter versus winning new business and organic growth. It just might help for the thoughts on the go forward and how to model? Thanks.

Dermot McDonogh: Thanks, Glenn. I think it's a combination of both. So, clients are for sure doing more. Rate volatility in Q2 was there for all to see. So as a consequence, more activity in the treasury market, more treasury issuance and which feeds volumes. So, overall, very healthy volumes, and we have a high-margin scaled business, which the platform was able to benefit from that increased level of activity. Also, I think as we did last year, we continue to innovate for clients in the domestic market. And as we said on our January call, the international business is also a key growth opportunity for us and our teams are innovating and developing new products and solutions for our clients internationally. And so I think it's a combination of all the factors that we've talked about on previous calls, kind of showed up as a nice tailwind for us this quarter. And for Clearance and Collateral Management, I think I do expect that trend to continue in the near term.

Glenn Schorr: Thanks, Dermot. You piqued my interest. In the opening remarks, you all talked about T+1 coming in into the market and that helping -- you helping -- help clients. I'm curious now that it's built, now that it's in the run rate, just a couple of quickies of, is there a cost runoff now or is that not big enough? Does T+1 come with lower spread for you, but does it free up capital with more frequent settlement? I'm just curious what the net impact of it all is.

Dermot McDonogh: Hey, Glenn, I would describe it in terms of like the raw P&L impact, which is sort of the second part of your question, is really pretty de minimis. We spent a bunch of time preparing for this over the course of the past couple of years. So it wasn't like there was some big hump in the cost curve in order to really do it. We sort of worked the process over time. But for us, I think the biggest opportunity associated with T+1 is whenever there's a market inflection like this, and this was one of the most significant ones, but we're looking ahead to treasury clearing is another good example of something like that, it gives us the opportunity get closer to our clients. It creates uncertainty for our clients. How is it going to work and they need help navigating it. And so the combination of uncertainty and a need for assistance is really the macro opportunity for us. And we've leant into that. We'll continue leaning into those types of market changes, again, with treasury clearing being another good example. And I would say overall, these types of changes create things that create more efficiency in the market, things that can reduce risk in the market, things that improve efficiency. Sure, they do sometimes call on more of our products and solutions, which, of course, is great, but it's also just a good thing for the market to improve the effectiveness and efficiency of market operation. And I think over time, we're also a beneficiary of that.

Glenn Schorr: Okay, great. Thank you.

Operator: Our next question is coming from Ebrahim Poonawala with Bank of America. Please go ahead.

Ebrahim Poonawala: [Technical Difficulty]

Robin Vince: Good morning, Ebrahim.

Ebrahim Poonawala: Maybe just one follow-up, Dermot, for you on NII. I guess in response to Ken's question, you talked about Fed policy and that having an impact. Remind us the positioning of the balance sheet if the Fed does decide to cut rates come September and we get 100, 150 bps of cuts? Remind us how the balance sheet will behave, how we should think about NII in that backdrop?

Dermot McDonogh: So, thanks for the question. So I will kind of give a couple of different perspectives on that is, one, cumulative betas are roughly unchanged quarter-over-quarter, which feels like I really believe our book to be fairly priced. As you will remember, our book is largely institutional. We pass on the rates and so cumulative betas are in good shape. So for the dollar portfolio, roughly low 80s, 80 range. And then for euros and sterling we’re in the high 50s, low 60s. And so we kind of do a range of scenarios and at the beginning of the year, we're positioned roughly -- we're roughly flat. So if Chairman Powell cuts in September and then cuts again, I guess, which is the general view of the market, we're kind of basically NII, okay, it doesn't really impact the book that much. So for small moves, we're well positioned in terms of expectation.

Ebrahim Poonawala: Understood. And separately, I guess, maybe Robin, for you just in terms of the fee revenue momentum that you talked about at Pershing and elsewhere, just give us a sense around what the drivers we should be thinking as we think about sort of the medium-term outlook on fee revenue outside of just pure markets activity that could drive fees in a world where NII might be stable to lower as we think about sort of momentum on the positive outlook.

Robin Vince: Sure. Revenue growth in any given year is somewhat market-dependent because, of course, interest rates, equity fixed income markets, volumes volatility, that stuff all moves around, but our strategy has been, of course, to fuel the organic growth of the company, but also to try to position our businesses to be able to respond as well as they can to growth tailwinds that exist just in markets. And so in answer to Ken -- the question earlier on around the treasury market, we've positioned that business to be able to benefit from what we think is a secular growth in activity in the US treasury market. So that's a place where we're benefiting, yes, from the market, we’re also benefiting from the investments that Dermot detailed. And as we go through what's next for our fee growth, we talked a lot about our ONE BNY campaign quarters ago. And we talked last quarter and in January about the fact that we're sort of operationalizing more and more what started off as a movement of ONE BNY into referrals, into new targets, into our commercial model and our Chief Commercial Officer joining and really then getting into the client coverage, the practices, the integrated solutions, which we talked about in our prepared remarks, the fact that we can now bundle individual products into true solutions for clients. So there are a lot of levers on the fee growth, and we've been working very methodically through our plan to build momentum in that space, but also to position the business to be able to take advantage of macro things going on in the market.

Ebrahim Poonawala: Got it. Thank you.

Robin Vince: Thank you.

Operator: Our next question is coming from Steven Chubak with Wolfe Research. Please go ahead.

Steven Chubak: Hi. Good morning, Robin and good morning, Dermot.

Robin Vince: Good morning, Steven.

Steven Chubak: So I guess I wanted to build on that earlier line of questioning, but really focusing more on repo activity. It's been a big area of investor focus. You've certainly benefited from recent strength on the repo side. And I was hoping you could potentially quantify the benefit year-on-year from elevated repo activity and just longer term, like, how you're thinking about the durability of the recent repo strength? And what are some of the factors supporting that view?

Dermot McDonogh: Thanks for the question, Steven. So I would say in terms of year-on-year activity, it's not a kind of a -- cleared repo is not a game changer for us in terms of the overall year-on-year NII story. It's about -- overall in its totality, it makes up about 5% of our NII today. I think I would just echo our follow-on from Robin's answer to the last question in terms of it's a product. Clients want us we're meeting them where they want to be, we're innovating. This come under the $1.4 trillion liquidity ecosystem. Laide runs that business, does a terrific job for us in the clear repo business specifically, we're a top three provider. And so we have a large installed client base who are looking for products and we can meet them with our cleared repo product. And so it's just another tool in our toolbox. And I would say, again, we're positioned, we're investing, we're a scale player and we can provide automated solutions for our clients. So I do expect that business to continue to grow, but in terms of the year-over-year to your specific question, it's not a material driver of the year-over-year change.

Robin Vince: Steven, I would add one thing to it, which is just remember that in the context of our business, we're really the only global solution provider in the space because we're scaled in Asia, we're scaled in Europe, we’re scaled in the United States. And in a world where folks are looking at repo as a collateral tool and an investment tool, the opportunity to be able to help clients navigate the whole world in this product, provide the seamless connectivity between repo and margin and collateral management the connectivity to other things that we do, there's a real appeal, to use Dermot's phrase again about meeting clients where they are. There's a real appeal here for clients in terms of the breadth of what we can offer, but also the innovation that he referred to earlier on in the call where we're creating these new solutions. And so this is another example, along with the US treasury market, but there are so many others in our business of saying there's a macro evolution going on, and we have the opportunity to participate in that as long as we're front-footed with clients and as long as we're innovating.

Steven Chubak: Thanks for all that color. And just for my follow-up on the Pershing business. I know that the core underlying strength has been obscure to some degree by some large client departures. I was hoping you can give some perspective on what some of the core organic growth trends look like in that business? What the pipeline looks like in that business given some of the recent excitement of our Wove platform and the offering? And have we lapped those headwinds at this point, or is there still some remaining pressure on the come?

Dermot McDonogh: Okay. So I would say nobody is happier to see the ongoing deconversion of the clients to come to an end. So we expect that to be fully out of the portfolio by Q3. As I've said on previous calls, we believe in our ability to earn our way through that deconversion. It happens in life. And so I think the team has been very resilient in terms of earning their way through it and growing. In my prepared remarks, I talked about the re-sign of Osaic on a several year contract. So we're very pleased about that. You take a step back and you look at where we were 12 months ago, we just came off the INSITE conference in Florida where we announced Wove, 12 months later we've announced a new suite of products to support the Wove. We have signed 21 clients so far this year for Wove. The momentum is building, the clients like us. We -- I kind of reiterated my guidance on prepared remarks about the $30 million to $40 million of revenue for this year. And then just I'll remind you that we're a $3 trillion player in the wealth tech space, number one with broker-dealers, top three with RIAs. And in previous quarters, I've kind of guided mid-single-digits of underlying core growth through the cycle. We continue to believe that, notwithstanding on any given quarter, it may be slower or better. But we believe we're in good shape, and there is good momentum in what is a very, very large market, and in which we're a very big player.

Steven Chubak: Very helpful color. Thanks so much for taking my questions.

Robin Vince: Thanks, Steve.

Operator: Our next question is coming from Brennan Hawken with UBS. Your line is open. Please go ahead.

Brennan Hawken: Good morning Robin and Dermot. Thanks for taking my questions. So we saw the ECB cut rates this quarter. And while I know euro is in a huge exposure for you in terms of your deposit base, curious about what impact you saw that on your deposit costs in that currency. And maybe how does that experience and the market reaction inform your expectations for beta and customer behavior around rate cuts in other currencies? Thanks.

Dermot McDonogh: So I would say, overall, euros is roughly 10% of the total portfolio. To -- in answer to the earlier question, I think where we feel very well positioned for the range of outcomes that the forward curve is implying in euros, sterling and dollars, we prepare for it. We talk about it a lot. And so I kind of feel like the way the CIO book is currently set up, where we still have a reasonable amount of securities rolling off into higher-yielding assets. So I just feel like the combination of where our deposit book is in terms of our betas to reiterate again for dollars, low 80s sterling and euros high 60s. And the CIO book kind of still room to grow. And so on rate cuts in terms of how we kind of position the book, we're broadly symmetric in terms of -- on the rate cut side. So I think Chairman Powell has done a job of telegraphing to the market how he wants to do it. So I don't think it's going to be a volatile move in rates when it happens. So he's allowed us time to position and manage and get into the right place. So I think overall, I feel very good about where we're at.

Brennan Hawken: Yeah. But what I was asking -- I appreciate that. What I was trying to understand was the actual experience with -- in the actual marketplace beyond like the expectation. Did the 50% to 60% beta, I think you said in euros, did that hold when the cut went through? And did you actually experience that?

Dermot McDonogh: So specifically, yes, we did experience that, and it held up. It behaved as expected.

Brennan Hawken: Excellent. Thank you for that, Dermot. I appreciate that. Issuer Services very solid. You flagged some CLO trustee gains on the back of a market that's seen solid volume. Could you help us understand maybe how much of the strength and the growth that you saw in that line was attributed to that, which I assume would be in the in the Corporate Trust business and then maybe how to think about the Depositary Receipt fees, just so we're thinking about the right way to baseline and move forward with our models?

Dermot McDonogh: For sure. Look, Corporate Trust, I think, is, for us, a good opportunity, a very good opportunity. I actually talked about it at some length at the RBC Conference in March when I was chatting with Gerard Cassidy. And I think over the last number of years, Corporate Trust for BNY is a business that's been underinvested in both technology and leadership. And in both Robin and I’s prepared remarks, we did emphasize leadership has been a continuous change for us. And we've made a very -- couple of very important hires over the last 12 months in Corporate Trust, and we have new leadership overseeing the business. And it's that investment and in technology, products, leadership that is showing up. And specifically, we've doubled our activity in CLOs over the last 12 months. We've improved our market share. And as Robin said, a couple -- in an answer to another question, we really want to position Corporate Trust as a business that really can take the advantage of scale, a lot of manual processes, a lot of room for AI, a lot of room for digitization and we can improve the operating leverage of that business. We can improve how we show up for clients, client service. So we feel like in Corporate Trust specifically, we have a lot to play for. Depositary Receipts, we have good market share. We punch above us and we expect that to continue.

Brennan Hawken: Thank you for taking my questions.

Robin Vince: Thanks, Brennan.

Operator: Our next question is coming from Betsy Graseck with Morgan Stanley. Please go ahead.

Betsy Graseck: Hi, good morning.

Robin Vince: Morning, Betsy.

Betsy Graseck: Two quick questions. One, just to wrap up a little bit on the T+1 discussion earlier. Could you give us a sense of how much did T+1 drive sequential revenue growth this quarter? And can you give us a sense as to if there's enough revenue growth you're expecting from this to impact the expense ratio since you've already made the investment? And then I have a follow-up on Wove. Thanks.

Dermot McDonogh: Hi, Betsy, it's Dermot. So the point I would make about T+1 is not so much a revenue or expense topic. It really is -- it speaks to resilience as a commercial attribute kind of point that we make on behalf of BNY in terms of it's been a large-scale infrastructure change that's been coming to the markets over the last couple of years. And as we are a key player in the financial market infrastructure, it's very important that we execute that to an A+ standard. And what I would say is BNY has shown up for clients and delivering an A+ execution of a very big project. It's not really about revenue or expenses, it’s really about delivering a complicated change project for our clients and the ecosystem at large. That's really, I think, the point we're trying to make on T+1.

Betsy Graseck: Okay. Yeah, I just think if you're in a better spot than others, you could pick up some incremental share on the back of that, but that's maybe a couple of conference calls from here. All right. Then separately on Wove, I know you mentioned that you added new clients to Wove. I just wanted to understand, is this new clients of the firm or this is clients who had been yours for a while and they moved to Wove?

Dermot McDonogh: So I would say it's both. And so I guess the questions that we've had on previous calls, Betsy, are we cannibalizing existing clients? And the answer to that is most definitely no. And I think it speaks to the point of us innovating. Wove is a very big investment for us in terms of technology over multiple years. Existing clients like the fact that we're willing to put money to work for them and give them better solutions and as a consequence of that, we had over 1,500 people show up to Wove in Florida last year, in Nashville this year. And for those that are there, there's real excitement. And as Robin said in his prepared remarks, it's winning awards. So there's a flywheel effect of, BNY is showing up in the wealth tech space and delivering new solutions for us, we want to see what they have to do. So the network effect of that shouldn't be underestimated.

Robin Vince: Betsy, let me double-click on it for one second as well because when we started on the Wove journey, and we announced it, as Dermot said, last year, it was initially really focused on that singular KPI of making advisors' lives easier. And so it was a technology front end that went from wealth planning and help clients with wealth planning all the way through to portfolio construction and then getting into market. Now what's evolved since then and what we talked a lot about this year, one year later in the Wove journey was the fact that now we have the opportunity to link all of these other BNY capabilities to be able to deliver to our Pershing and Wove clients. So you can be a clearing and custody client of Pershing, you can be an adviser taking advantage of that initial set of tooling from Wove, but what you can now also do is you can have that ability to manage and aggregate data, including across multiple custodians. We can connect you to models in the investment management space. By the way, we can fulfill those models because we've got active equity and indexing and all these capabilities that come from BNY investments. And so Wove is becoming a bit more of a delivery vehicle for the various capabilities of the firm and it's also opening the aperture of how clients of Pershing think about us in terms of our ability to solve other problems for them, banking-as-a-service which is a Treasury Services business. But we stimulate the conversation for that because people see us as being more than what we used to be in Pershing. We also, to your question, are attracting people who don't necessarily need the clearing and custody service, but who want to take advantage of these other components, which is why Dermot said both because it's both and delivering the breadth of ONE BNY.

Betsy Graseck: Thanks, Robin.

Robin Vince: Thank you, Betsy.

Operator: Our next question is coming from Mike Mayo with Wells Fargo Securities. Please go ahead.

Mike Mayo: Hi. Could you put a little more meat on the bones for the ONE BNY initiative in terms of products for customers where you're talking about more bundled solutions. Thematically, I understand it. And I guess you're having higher core servicing fees, but connecting from the higher core servicing fees from the high level, let's bundle, let's have everyone work together. I'm just trying to connect the dots a little more.

Robin Vince: Understood, Mike. And you'd asked me a question, it’s probably about more than a year ago now, where you had essentially challenged the fact that in order for something like ONE BNY to be successful, it can't just be hearts and minds, it's got to be deeply operationalized. And we talked at that time about some of our future ambitions for how to really bring it home. So the way that I would now answer your question is, we are rallying around the three strategic pillars that Dermot and I both have talked about a bunch, and this is about being more for our clients. And that's not just words anymore. It's not just a movement. It's just appealing to our people to be able to do -- to be client-obsessed. It's about elevating the effectiveness of our sales organization and the process driving client service differently than we used to. It's about the innovative new products, as we were just talking about Wove, that's a good example. We are being more for clients in that example. And we are also delivering the whole of the company. So it is a great ONE BNY example. Pershing, which used to be somewhat off to the side in the company a few years back, now very much at the heart and benefiting from that integration with all of the other capabilities that we have. And then you hit on a critical word, which is solutions, because that next journey to use the term that Dermot used earlier on of meeting our clients where they are, it's not just about us selling a bunch of great products and client platforms to our clients, it's about the fact that when we look at the challenges that our clients have, they actually need things that cut across multiple parts of our company. And rather than going in disconnected and showing them individually and trying to have them piece it all together, we can now show up and we can actually show them these solutions which bring all the componentry together to solve their needs. And both Dermot and I talked a bit about that in our prepared remarks, and that's the next level of the maturity of that ONE BNY work that we're really doing. That's [involving] (ph) from an initiative and hearts and minds to making everything that we're doing in our commercial organization, the sales practices, the sales targets, the way that we're bringing people together, the account management process, the client service, the digital delivery of tooling and the way that we're thinking about everything that equips our salespeople to be effective across training, we're bringing all of those things together and maturing our commercial model. And over time, we think there's a lot of value both in the process and in what we're actually delivering to clients.

Mike Mayo: And so when you wrap it all up, I mean, what wallet share do you have per customer today? Where was it a few years ago? Where do you hope that to go just in terms of a ZIP code of expectations?

Robin Vince: Got it. I think some of those metrics as we think about ways in which to show you that story more over time, some of those metrics will be in our future. Right now, I'm going to point you to two things. There are a whole bunch of inputs. I described a bunch of them. And I think over the course of the past couple of years, we've been trying to really show the key inputs, which we think are the leading indicators for performance. And then you have to actually look at the fee growth result, and you saw that in the first quarter. You've seen that in the second quarter, and that's some of the output. But the story that Dermot and I are trying to describe is a story of a maturing of a process, but with still a distance to go and opportunity ahead.

Dermot McDonogh: Mike, just to put a metric on us, it's just to give an indication because we need to mature the metrics as we proceduralize all the strategic comments that Robin has just outlined. Year-over-year, the amount of business that we've won that touches more than one line of business has increased by a third of albeit a very low base. So I wouldn't draw too much into the metric, but just the fact that we are showing up in a different way and clients are buying products and services from more than one line of business because we can deliver integrated solutions. And that's the key that over time, we'll be able to track that and communicate that in a more objective way as that strategy takes root.

Mike Mayo: Understood. So when all said and done, core servicing fees over time, whether it's aspiration or a specific target, where should core servicing fee growth be?

Robin Vince: My answer to that, which I recognize is a little bit unsatisfying, is we're going to keep pointing you back to the positive operating leverage, which is really how we're focusing for our own growth. We think that each quarter, each year has a different composition to it, but higher fee growth over time is a very important part of that combination of solutions. But any individual quarter or a year is going to have a different composition. We're controlling the things that we can control, albeit we're stoking the engine for growth of organic fees over time.

Mike Mayo: Got it. Thank you.

Robin Vince: Thank you.

Operator: Our next question is coming from Alex Blostein with Goldman Sachs. Please go ahead.

Alex Blostein: Hi, good morning. Thanks for squeezing me in on this. I wanted to touch on expenses and operating leverage. So, expenses up a little bit year-to-date year-over-year. It sounds like you guys are still targeting flat expenses for the year despite the fact that revenues are obviously shaking out a little bit better than you hoped. So maybe kind of walk us through where you see the flex in the expense base to keep it kind of at that flattish run rate. But I guess more importantly, you guys had a target for pre-tax margin to be at 33% plus recently. You're doing 33% this quarter and obviously you don't want to get too carried away with a single quarter, but it feels like you have an ability to reset the bar. So maybe talk a little bit about what that plus within the 33% could look like a couple of years out?

Dermot McDonogh: Thanks, Alex. So I guess I would start with the margin part of this. We need to consistently do it. And so one quarter doesn't a medium-term target make. So I'm very pleased that we've done this, but now I want to see it next quarter, the following quarter, the following quarter. So, execution is key. And just showing up in a very disciplined way every day is really important to delivering out that. We don't want to be known as a one-hit wonder. So while I'm pleased that we've managed to do it, I want to see it repeated on a consistent basis. So that's what I would say on margin. On expenses, you and I talked in Madrid a few weeks back at your conference. And I kind of said a little bit like we're in the ZIP code of flat for the year. It's all about running the company better. It's very important that we have 53,000 people wrapped around the same aspiration that we as a leadership team have and everybody is focused on doing it. So there is a real momentum on running the company better, which is the input to how we show up with expenses were being where they are as opposed to a top-down approach. So very different cultural experience within the firm in terms of how we're doing it. And the reason why we're a little bit above trend in the first couple of quarters this year is what I said to you at the conference is revenue-related expenses. And so I kind of anchor that in overall where we are for positive operating leverage in the year. And in my remarks, I kind of said I feel optimistic about delivering positive operating leverage for the year, which in a down 10% NII environment, BNY hasn't really executed to that level before. And so -- and also, Q2 is a seasonally strong quarter for us, which would feed the margin of 33%. So I feel good about expenses. I feel good about flat, notwithstanding there's pressure to that from a revenue-related expense part, but we're very determined to deliver positive operating leverage to our shareholders this year.

Alex Blostein: Excellent. Great. Well, my second quick question around the balance sheet. There's a lot of discussion around deposits, but I wanted to zone in on the asset side of the balance sheet for a second. We've seen pretty nice growth from you guys in both the securities portfolio and loans sequentially. So could you just spend a minute on sort of the sources where you're investing and then your outlook in maybe deploying some of the liquidity that seems to be perhaps a bit more sticky into both loan growth and securities?

Dermot McDonogh: So yeah, look, very -- feel very proud of the CIO book team, what they've accomplished over the last couple of years, which is really from Q3 of '22. It really has been just a terrific collaboration with inside the firm. And we're deploying where we think we can see opportunity. Our CIO likes to use the word nibbling, and so we're kind of seeing where the next leg is, and we're deploying where we think we can see opportunity to continue to grow NII. So it's opportunistic at the moment, but we feel overall very good about that aspect of us. We're still rolling off the book into higher-yielding securities. We're picking up to 200 basis points, and so that's feeding NII. And then on loan growth, I think the GLS team is doing a really good job of getting very liquidity-friendly deposits, which allows us to extend credit to our clients. And I think we're showing up in a different way to our clients who are important to us and extending our balance sheet to them as they look to buy products in more than one line of business. So where we need the balance sheet to support business activities, that's what we're doing. And it's a kind of a -- it's a strategic tool in our kit for doing that.

Alex Blostein: Awesome. Thanks very much.

Operator: Our next question is coming from Gerard Cassidy with RBC. Please go ahead.

Gerard Cassidy: Good morning, Dermot. Good morning, Robin.

Robin Vince: Morning, Gerard.

Gerard Cassidy: Dermot, can you share with us, now that we're entering into a phase with monetary policy of quantitative tightening easing up a bit, you guys obviously have been through QE, you've seen the initial stages of QT, do you have any thoughts on how this could affect your balance sheet over the next 12 to 18 months? Have you guys done any type of modeling to see what kind of effect the QT as it shrinks could have on your balance sheet?

Dermot McDonogh: So, we do a lot of work on that, Gerard. And look, CCAR forces us to do that work as well. And so rates up, rates down, quantitative tightening, quantitative easening. We look at it every which way to Sunday. But the thing that I would kind of remind you and everybody who's listening in is our balance sheet is one of our strengths. In -- this time last year, in Q1 of last year, we kind of -- we called our balance sheet a port in a storm for our clients and you see that fly to quality. So we're kind of very proud of our balance sheet. It's vanilla, it's liquid, it stands stress tests and it allows us to be there for our clients. So it's kind of -- it's short in duration. We repositioned it going into the higher-for-longer rate environment. As you will remember in Q4 of '22, we repositioned it. And so we've taken a lot of proactive steps to make our balance sheet durable and liquid and to withstand a wide range of scenarios.

Robin Vince: And, Gerard, I'm just going to add that it's easy to think that just because at this very moment in time, we're looking out, there seems to be some greater consensus than we've had for a little while around what might happen with the Fed in the fall across September and the balance of the year. It's easy to think somehow that the range of risks has somehow narrowed as a result of that. But there's still a lot of uncertainty in the world. We've got all bunch of other types of geopolitical risks out in the world. We're sort of continuing to grind through elections that we've talked about through the course of the year. There are all sorts of other things happening. We've still got wars going on. And so our approach to all of these questions, and Dermot really made the point, is to be prepared for all the different types of outcomes that are possible. And so you can see us, we run conservative on liquidity, we run conservative on capital. You can see it in our ratios that we talked about and that Dermot outlined in his prepared remarks. And that's a very important anchor point for us so that we can be agile according to however things play out because the one thing we can be absolutely sure of is they won't play out exactly the way anybody expects.

Gerard Cassidy: Very good. And then just as a follow-up, Robin, you talked about the new business wins in the quarter, and you talked about ONE BNY as well. It appears that you're having success in chipping down or breaking down some of the silos that many organizations always struggle with. Can you share with us some of the tools you're using to break those silos? And how -- I would assume you're not 100% complete breaking them all down, but how far along are you in actually breaking them down?

Robin Vince: Well, the company’s been around for 240 years, and we've acquired a lot of different businesses and companies over time. And so these things do build up over a period of time. But the short answer to your question is, we passionately believe as a whole leadership team that the answer to the question is culture. And so I've said before in a slightly pithy way and quoting other people or sort of paraphrasing them, if you will, that culture eats strategy for breakfast, as it was once famously said by Peter Drucker. And we add to that, execution eats strategy for lunch. That's just a long way of saying that the power our culture pillar, which is one of our three pillars, is the thing that's enabling us to run our company better. And that, in turn, is allowing us to be more for our clients. And so the trick to this for us has been investing in our people. It's been creating the benefits, the experiences, the employee experience, the pride, association with the company, the feedback loop that shows that when we do these things, we get better outcomes for our clients, and that translates into better outcomes in the bottom line. And so there's a flywheel effect here that actually builds on itself. And the spring in the step of our employees is now powering that forward, and that's what gives us confidence that we've really turned the corner on it. People want to throw in with the whole because they see that it's not only better for the company, it's actually better for their business because joining their products with other products around the company is allowing us to be more for clients. And it actually feels good to see the benefits in the ultimate results. So that's, for us, the North Star of how we're doing it. And while we've certainly got a distance to go, the early results have been pretty encouraging.

Gerard Cassidy: Very good. Thank you.

Robin Vince: Thank you.

Operator: Our next question is coming from Brian Bedell with Deutsche Bank. Please go ahead.

Brian Bedell: Great. Thanks. Good morning, guys. Great. Maybe if I could just come back to the -- sticking with the NII guide of down 10%. I'm having trouble getting there. The -- just to confirm, it sounds, Dermot, like what you're saying is it's really almost totally a deposit-driven guide on a seasonal basis. And I just wanted to sort of confirm that given how you've outlined the balance sheet sensitivity to different rate scenarios is pretty strong. And of course, you have the benefit of securities portfolio reinvestment. So is it really simply just the seasonal deposit dynamic? And then if you can just talk about how NIB is factored into that seasonal deposit dynamic. And then, of course, as you move into next year, in 1Q seasonally, of course, that we should be back positive again. I just want to confirm that.

Dermot McDonogh: So, I guess, Brian, in the way you've asked the question, in some ways you've answered the question to yourself. So I will kind of confirm, a, how you're thinking about it in terms of the seasonal decline and it's a deposit story. And I would just kind of reference last year as the guide in terms of, in January of last year, we guided 20% for the year. And then we started out the gates well. And, you as a collective, put pressure on me to change the guidance, which I didn't do. And we ended the year at 24%. And so last year, we used the word skewed to the upside but humble about the fact of what lies in front of us. And I would say the percentages are different this year, the environment is different, but the sentiment is the same. I'm humble about what the outcome could be and uncertainty is -- can be -- is there because, as Robin said, for sure, what we think is going to happen is not going to happen. But I would say we're cautiously optimistic and your point is it is a deposit story. And within the deposit story, it really is the mix between NIBs and IBs.

Brian Bedell: Right. Okay. Yeah. Fair enough there. And then maybe just back to the operating leverage dynamic, and this can be for both Dermot and Robin. Obviously, you're starting off really well with, like, 100 basis points plus of positive operating leverage as we move into the second half, notwithstanding market movements, that would obviously influence the fee revenue dynamic. But given the traction that you're showing sequentially in your core business growth and core business sales and, I guess, the fact that you've made these investments already, so I just wanted to get a sense of whether you feel like you're able to scale those investments in the second half. And obviously, with your flat operating expense guidance, it would seem that's the case. If the revenue does turn out to be better than expected from an organic growth perspective, would we see the expense base creep up a little bit notwithstanding, of course, you'd still generate positive leverage?

Dermot McDonogh: Okay. A lot of questions in that second question. So, I would say, like, when I talk to the teams, right, and this is quite -- you're kind of hitting on a very important point in that I really focus on running the company better, and then we kind of focus on the operating leverage, not expense as a means to an end. And if revenue-related expenses creep up, that we starve businesses of investments to solve for a flat number because that's what we said we were going to do. I think that's quite important. And it's important to get the balance right that investment and running the company better, it kind of is the same thing. And so that's a cultural transformation that's underway with all of our people. And so we really are focused on getting value for money. We spend a lot of money. We spend over $12.5 billion every year. And so we want to get the best value we can for that, and we do that in a number of different ways. So some of the investments that we've made over the last couple of years, we're beginning to see the scale impact in that. And you can see that in our most profitable segment, Market and Wealth Services. It's a mid-40s margin. We continue to invest at the margin, which is what you want to see from us. And we continue to digitize, we continue to automate, we continue to reduce manual process which ultimately will feed into headcount and better quality jobs for our folks and better careers. So, I think over time, if organic growth plays out, it will feed into a better outcome in operating leverage, not us just growing expenses because revenues are better.

Robin Vince: And I just want to draw out one additional thing that Dermot said as well, Brian, which is we have a lot of work to do. There's no question about it. He used the term skew and slightly optimistic, but staying humble when it related to NII. This one is just about a lot of hard work and really focusing on this point about running the company better. But as a double-click into the way that we're thinking about it, if you look at the second quarter, I mean, we've talked a lot about the fact that it's been a seasonally strong quarter. But if you double-click into it, and the Market and Wealth Services point that Dermot just mentioned, that's an investment story because, as we've said, we're in a good spot on the pre-tax margin of that segment. So we just want more that's growth. We don't want to dilute the margin, but we're not trying to save expense dollars there. But in Securities Services and in Investment and Wealth, where we said there is, in fact, a margin journey that we have ahead of us, that's where you can actually see negative expenses in both of those segments for the quarter, which is a sign of the fact that we're both investing but we're doing even more discipline in those businesses. And so that's how the whole thing comes together for the company.

Brian Bedell: Great. That’s great color. Thank you so much.

Operator: And our final question is coming from Rajiv Bhatia with Morningstar. Please go ahead.

Rajiv Bhatia: Yeah. There was some progress on the Investment and Wealth Management margin in the quarter. I guess my quick question is, are your margins different on the asset management side of the business versus the wealth management side? And do you have a timeline for getting back to that 25%-plus margin?

Dermot McDonogh: So I don't think we kind of get into the detail of the split between the two. And so the segment overall, I guess, we've said over the last several quarters, we believe we can go back to the 25% margin over a period of a few years. And, like, just to follow on from Robin's answer to the last question, we've shown, I think, good expense discipline over the last 12 months in terms of, okay, revenues have been a little bit challenged in the segment due to a variety of reasons, and we've taken tough decisions. And so that's allowed us to grow the margin by 200 basis points over the last year, which really is kind of the financial discipline [about it] (ph). And we do believe where we are now with distribution as a platform, very, very strong performance in fixed income and LDI and Insight, that the momentum is there within the segment to grow. And as Robin said, the addition of Jose to the leadership team joining in September, giving his fresh perspective, gives us confidence about what we can do in the future.

Rajiv Bhatia: Got it. Thanks.

Robin Vince: Thanks, Rajiv.

Operator: This concludes today's question-and-answer session. At this time, I will turn the conference back to Robin for additional or closing remarks.

Robin Vince: Thank you, operator, and thanks, everyone, for your time today. We certainly appreciate your interest in BNY. If you have any follow-up questions, please reach out to Marius and the IR team. Be well and enjoy the balance of the summer.

Operator: Thank you. This does conclude today's conference call and webcast. A replay of this conference call and webcast will be available on the BNY Investor Relations website at 2:00 p.m. Eastern Standard Time today. Have a great day.

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