Bank of New York Mellon (NYSE:BK) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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Summary
Bank of New York Mellon Corp reported a strong financial performance in Q1 2026, with earnings per share of $2.24, up 42% year-over-year, and record revenue of $5.4 billion, up 13%.
The company highlighted strategic initiatives, including significant investments in AI and technology, with over 200 AI solutions developed, and emphasized its role as a trusted provider in global financial markets.
Future outlook is positive with raised total revenue growth guidance for 2026 to approximately 6% year-over-year, driven by strong client engagement and a diversified business model.
Full Transcript
OPERATOR
Good morning and welcome to the 2026 first 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 Mary Merz, BNY Head of Investor Relations. Please go ahead.
Mary Merz
Thank you operator Good morning, everyone and welcome to our first Quarter Earnings call. I’m here with Robin Vince, our CEO and David McDonagh, our CFO. As always, we will reference the Quarterly Update 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 is available in the Earnings Press Release, Financial Supplement and Quarterly Update Presentation, all of which can be found on the Investor Relations page of our website. Forward looking statements made on this call speak only as of today, April 16, 2026, and will not be updated. With that, I will turn it over to Robin.
Robin Vince (Chief Executive Officer)
Thanks, Mary Good morning everyone and thank you for joining us. I’ll begin with a few broader comments before Dermot takes you through our financial results. Referring to page two of the Quarterly update presentation, BNY has started the year with a strong performance. In the first quarter earnings per share of $2.24 grew 42% year over year both on a reported basis and excluding notable items. Record revenue of $5.4 billion was up 13% year over year reflecting broad based growth across our securities services and market and wealth services businesses. And we delivered over 800 basis points of positive operating leverage while making meaningful investments in new products, capabilities, AI and critically our people and culture. Taken together, this combination of strong top line growth and significant operating leverage resulted in pre tax margin expansion to 37% and improved profitability with a return on tangible common equity of 29% in the quarter. BNY’s position at the heart of global financial markets with platforms across custody, security, settlement, collateral, payments, trading, wealth investments and more supports durable financial performance for our company enabling us to power our clients growth as they navigate an increasingly complex landscape. While the path of global markets is difficult to predict with certainty, what is clear is that the underlying trends higher levels of activity, greater complexity, new technologies and a resulting need for scale, efficiency and connectivity are more relevant than ever for our clients. As I mentioned in my shareholder letter earlier this year, the portfolio of BNY’s businesses is unique, but it is how we are embracing new ways of working, our adoption and integration of new technologies, and our strong culture that allows us to create truly differentiated solutions. Clients are increasingly recognizing the value of holistic solutions that support the full lifecycle of their activity. Whether it is managing liquidity, optimizing collateral, supporting higher trading volumes, or getting ready for the future of financial market infrastructure, our work to operate together as one BNY through both our platform’s operating model and our commercial model better enables us to bring the full breadth of our capabilities together in service of our clients. A good example of this from the first quarter is our work with Allianz Global Investors, one of the world’s leading active asset managers. AGI has selected BNY to support optimizing their investment operating model, leveraging the breadth of our global capabilities. This integrated model will help AGI deliver exceptional experience front to back, while placing AI and modern data infrastructure at the heart of their operations to enhance productivity, enable faster work, clearer insights and better outcomes for their teams and clients alike. In another example, PayPal has selected BNY to provide institutional grade digital asset custody, supporting their digital payments, wallets and financial services for millions of users globally. And just last week, the US Treasury Department announced that they have selected BNY as financial agent for Trump Accounts, the US Government’s Investment Savings Initiative for children. Aimed at building a strong financial foundation for for our next generation. BNY will manage the national infrastructure for the program and collaborate with Robinhood, which will provide brokerage and initial trustee services. These examples illustrate our strategic evolution toward deeper integration between our products delivered with the technology and scale of BNY’s differentiated platforms. Over the next phase of BNY’s transformation. One of the most significant enablers of being more for our clients and running our company better is AI, and so we felt that this was an opportune time to spotlight how we are going about AI at BNY. Turning to slide 3 of the presentation as a reminder, our work to set the foundation for reimagining our company has included intentional and consistent investments in AI AI over the past several years, we took a very deliberate approach to AI through the lens of integration, adoption and importantly our people and culture. We embraced a platform’s approach to embedding AI across the company, creating our AI hub in 2023 so we could develop the enterprise capabilities, strong governance framework and training to empower every employee to embrace AI. More than two years Ago, in collaboration with Nvidia, BNY became the first global bank to Deploy a DGX SuperPod and in the same year we launched Eliza, BNY’s AI platform outlined on page four. Our vision for AI at BNY is that it is for everyone, everywhere and everything. As is the case with many things, the key to making it work is culture. We took a people first approach over the last year we focused on broad adoption. We made eliza available to 100% of our employees and supported advanced learning and development through a series of training programs. This approach to enterprise wide enablement has already allowed us to develop more than 200 AI solutions and to introduce digital employees multi agentic solutions that operate alongside human colleagues. In 2026 we are doubling down on depth, moving from AI point solutions to using AI to enhance end to end processes, reducing manual touch points, improving cycle times, strengthening control outcomes and to build more connected intelligence by linking data, workflows and expertise to enhance the service and value propos for our clients. On page five we show just some of the initial outputs, tangible results of AI enablement and impact across improved business and operating performance, driving greater efficiency and product innovation. None of these metrics individually show a complete picture of AI at bny, but taken together they show something important that we are systematically embedding AI in our workflows across the entire company. Already, AI is helping us increase the pace at which we innovate our technology, accelerate onboarding, improve client service and streamline processes. And in combination with our broader efforts to run our company better, AI is starting to contribute to the improved financial performance trajectory at the bottom of the page. Building on our deliberate strategy and the solid foundation we’ve laid over the past several years, we’re confident that AI will enable us to evolve our business model and enhance how we deliver for clients. Our commitment not just to deep AI enablement, but the full reimagination of our company, combined with the role that we play in global financial market infrastructure, the breadth of our businesses and our trusted and deep client relationships together represents a powerful competitive advantage. Taking a Step back and Reflecting on the Operating Environment While AI was an ever present theme in markets over the past few months, the first quarter also presented a dynamic market backdrop. Significant volatility was driven by shifting expectations for the paths of growth, inflation and interest rates amid geopolitical conflicts and evolving policy outlooks. Within this constantly changing environment, our diversified business model combined with our strong balance sheet allows BNY to serve as a pillar of strength for our clients and for global markets. Before I hand it over to Dermot. I want to take a moment to recognize our employees around the world for rising to the challenge to execute on our long term plan to unlock BNY’s full potential for our clients and shareholders. We’ve had a strong start to the year supported by increasing client engagement and continued progress on our strategic priorities. I’d like to thank our clients for their trust, our employees for their commitment and hard work, and our shareholders for their continued support. And with that over to you Dermot.
Dermot
Thank you Robin and good morning everyone. I’ll pick up on page six of the presentation with our consolidated financial results for the first quarter. Total revenue of $5.4 billion was up 13% year over year. Fee revenue was up 11%. This included 10% growth in investment services fees reflecting higher client activity, net new business and higher market values. Investment management and performance fees were up 6%, primarily driven by higher market values and a favorable impact of a weaker US dollar, partially offset by the impact of the mix of AUM flows. While not on the page, I will note that firm wide AUCA of $59.4 trillion increased by 12% year over year. This reflects net client inflows, higher market values and the favorable impact of the weaker dollar. Assets under management of $2.1 trillion were up 6%, primarily driven by higher market values and the weaker dollar partially offset by cumulative net outflows. Foreign Exchange revenue was up 49% year over year on the back of higher volumes resulting from elevated market activity and supported by new products and capabilities. Investment and Other revenue was $271 million in the quarter, including approximately $135 million of investment related gains and $50 million of net securities losses. Net interest income increased by 18% year over year, primarily driven by continued reinvestment of investment securities at higher yields and balance sheet growth partially offset by deposit margin. Compression expenses of $3.4 billion were up 5% year over year, both on a reported basis and excluding notable items. This was primarily driven by our commitment to higher investments in our businesses, higher revenue related expenses, the unfavorable impact of the weaker dollar and employee merit increases partially offset by continued efficiency savings. Provision for credit losses was a benefit of $7 million in the quarter, primarily driven by improvements in commercial real estate exposure, partially offset by changes in macroeconomic and other factors. On the back of significant positive operating leverage of 833 basis points, pre tax margin expanded to 37% and return on tangible common equity was 29%. Taken together, we reported earnings per share of $2.24, up 42% year over year on to Capital and Liquidity on page 7, our Tier 1 leverage ratio for the quarter was 6% flat. Sequentially, Tier 1 capital increased by $532 million, primarily driven by preferred stock issuance and earnings retention, partially offset by a net decrease in accumulated other comprehensive income. Average assets increased by 2% on the back of deposit growth. Our CET1 ratio at the end of the quarter was 11%, down 89 basis points sequentially as CET1 capital remained approximately flat. This decrease was primarily driven by higher risk weighted assets, reflecting a single day increase in overnight loan balances on the last day of the quarter along with higher client activity in agency securities lending and foreign exchange. Over the course of the first quarter we returned $1.4 billion of capital to our shareholders representing a total payout ratio of 87%, and our board of directors authorized a new $10 billion share repurchase program. Our consolidated liquidity coverage ratio and net stable funding ratio were at 111 and 131% respectively. Turning to net interest income and balance sheet Trends on page 8, net interest income of $1.4 billion was up 18% year over year and up 2% quarter over quarter. Like the year over year increase described earlier, the sequential increase was primarily driven by the continued reinvestment of investment securities at higher yields and and balance sheet growth partially offset by deposit margin compression. Average deposit balances increased by 3% sequentially reflecting 2% growth in interest bearing and 6% growth in non interest bearing deposits and average interest earning assets were up 2% quarter over quarter. Cash and reverse repo balances were flat. Loans increased by 6% and investment securities portfolio balances increased by 2%. Turning to our business segments starting on page nine, security services reported a total revenue of $2.7 billion, up 17% year over year. Total investment services fees were up 10% in asset servicing. Investment services fees grew by 11% reflecting higher market values and broad based client activity. ETF AUCA were up 33% year over year on the back of higher market values, client inflows and net new business and our alternatives Auca were up 20%. I want to highlight that consistent with our strategy to deliver the breadth of BNY to our clients, over 50% of the clients that awarded asset servicing new business in the first quarter also awarded new business to at least one of our other lines of business in issuer services. Investment services fees were up 4% reflecting growth in both corporate trust and depository receipts. I’ll note that for the first time in our history, corporate trust reached $15 trillion of total debt serviced and we’re particularly pleased with our continued market share gains in CLO servicing. Once again, the breadth of our capabilities is a powerful differentiator. Our clients clearly recognize the superior value proposition of a single provider for corporate trust, asset servicing, collateral, liquidity solutions and more in Security services. Overall foreign Exchange revenue was up 44% year over year reflecting higher client volumes. Net interest income for the segment was up 20% year over year. Segment expenses of $1.6 billion were up 5% year over year, primarily driven by higher investments and revenue related expenses. The unfavorable impact of the weaker dollar and employee merit increases partially offset by efficiency savings Security Services reported pre tax income of $1 billion, a 46% increase year over year and a pre tax margin of 39%. Investment related gains added 3 percentage points to pre tax margin in the quarter. Next Market and Wealth Services on page 10 market and wealth services reported total revenue of $1.9 billion, up 11% year over year. Total investment services fees were up 10% during the quarter. We formed our Wealth Solutions business by realigning Archer’s managed accounts solutions from asset servicing to pershing. This integration further strengthens our capabilities to serve wealth advisors by adding Archer’s market leading distribution and managed accounts expertise to deliver fully integrated end to end solutions across the entire wealth ecosystem. In Wealth Solutions Investment services fees were up 6% reflecting higher market values and client activity. Net new assets were $22 billion in the quarter representing an annualized growth rate of 3% and AUCA of $3.3 trillion were up 14% year over year in clearance and collateral management. Investment services fees increased by 19% reflecting broad based growth in collateral balances and clearance volumes. Average collateral balances of $7.8 trillion increased by 18% year over year reflecting higher market activity and growth on the back of a robust environment for financing with U.S. treasury securities, strong money market fund balances and increasing client demand for non cash collateral ahead of the central clearing mandate for US Treasuries. We are engaging with central counterparties and our clients and we’re delivering innovative solutions from across BNY that help them find new ways to access the market clear transactions and manage collateral and margin. In the quarter we also saw strong growth in clearing volumes reflecting net new business wins particularly in international clearance and from expanding wallet share with existing clients. Doing more with BNY in our payments and trade business. Investment services fees were up 5% primarily reflecting net New business payments and Trade delivered another solid quarter with continued sales momentum including numerous multi line of business wins particularly with FX and global liquidity solutions. Net interest income for the Segment overall was up 15% year over year. Segment expenses of $937 million were up 6% year over year, primarily driven by higher investments, employee merit increases, higher revenue related expenses and the unfavorable impact of the weaker dollar partially offset by efficiency savings. Taken together, our Market and Wealth Services segment reported pre tax income of $961 million up 18% year over year and a pre tax margin of 51%. Turning to investment and wealth management on page 11, investment and wealth management reported total revenue of $825 million up 6% year over year. Investment management and performance fees were up 6% primarily driven by higher market values and the favourable impact of the weaker dollar partially offset by the impact of the mix of AUM flows. Segment expenses of $726 million were up 2% year over year primarily driven by the weaker dollar, employee merit increases and higher investments partially offset by efficiency savings. Investment and Wealth Management reported pre tax income of $90 million up 43% year over year and a pre tax margin of 11% versus 8% in the prior year quarter. As I mentioned earlier, assets under management of $2.1 trillion increased by 6% year over year in the first quarter. Long term active flows were flat reflecting net inflows into fixed income and LDI strategies and net outflows from equity strategies. We saw $10 billion of net outflows from cash and $7 billion net outflows from Index Strategies Wealth Management. Client assets of $339 billion increased by 4% year over year reflecting higher market values. Page 12 shows the results of the other segment. I’ll close with an update on our financial outlook for the year. In light of our strong performance in the first quarter, we are raising our outlook for total revenue excluding notable items for the full year 2026 and now expect approximately 6% year over year growth. That includes our expectation for full year 2026 net interest income to be up approximately 10% year over year. We expect full year 2026 expense growth excluding notable items to be at the top of the 3 to 4% year over year growth rate range that we provided in January and we continue to expect a quarterly tax rate of approximately 23% for the remaining quarters this year. I want to leave you with three important points. First, we delivered a strong financial performance in the first quarter and continue to serve as a pillar of strength for our clients amid a dynamic market environment. Second, the combination of our unique portfolio of businesses, our role in global financial market infrastructure, our deep and trusted client relationships, our diversified business model and the strength of our balance sheet represents an exceptional client value proposition and a powerful competitive advantage. And finally, what truly differentiates BNY today is our ability to mobilise all of the above for the benefit of our clients and shareholders. With that operator, can you please open the line for Q and A?
OPERATOR
If you would like to ask a question, please press Star one on your telephone keypad. As a reminder, we ask that you please limit yourself to one question and one related follow up question. We’ll take our first question from Brennan Hawken with BMO Capital Markets.
Brennan Hawken (Analyst at BMO Capital Markets)
Good morning. Thanks for taking my questions. I’ll just start with deposits. So the deposit trends were stronger than expected. Was hoping maybe you could speak to quarter to date trends around betas specifically for the euro and Pound deposit betas. Given we’ve got hikes now in the forward curve, how should we be thinking about the betas for those currencies? Thanks.
Dermot
Okay, thanks for the question, Brennan. Let me start with overall balances and trends. As you will recall from our call on January 13, we finished last year with strong momentum on deposits. With the macro uncertainty and just how the events of the quarter played out, we saw clients holding higher levels of liquidity. And …
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