Q3 2023 Bank of New York Mellon Corp Earnings Call

Please standby.

Good morning, and welcome to the 2023 third quarter earnings Conference call hosted by being why Mellon 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 being one.

Mellons consent I will now turn the call over to Marius MRSA being why Mellon head of Investor Relations. Please go ahead.

Yeah.

Good morning.

Thank you all for joining our third quarter earnings call.

As always we will reference on financial highlights presentation, which can be found on the investor Relations page of our website at being women and doesn't call.

I'm joined by Robert <unk>.

President and Chief Executive Officer, and Donald Mcdonald, our Chief Financial Officer.

Robin will start with introductory remarks before them and take you through the earnings presentation.

Following their remarks, there will be a Q&A session.

Before we begin please note that our remarks include forward looking statements and non-GAAP measure.

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 October .

17, 2023, and will not be updated with that I will turn it over to Ron.

Thanks Darius.

Good morning, everyone and thank you for joining us.

Before we get to the earnings call I'd like to address the horrific terrorist attack in Israel and the ongoing conflict in the surrounding region.

Heartbroken as we continue to witness a human tragedy unfolds and I'm immensely grateful and proud of our employees in Israel, who despite everything that they have been going through continued to deliver uninterrupted service to our clients.

Let's go out to colleagues clients and community members in the region.

Now I will share some brief comments about our financial results for the third quarter and will then give a quick overview of some of our strategic priorities.

Then why Mellon delivered solid financial performance and continued progress on the steady transformation of our company.

As you can see on slide two of the financial highlights presentation, we reported earnings per share of a dollar and 22 cents versus 39 cents in the third quarter of last year.

Excluding notable items, which primarily impacted last year's results EPS of a dollar and 27 cents increased.

<unk> increased by 5% year over year.

We generated a return on tangible common equity of 20% on $4 $4 billion of revenue up 2% year over year, and a pretax margin of 29% in the third quarter.

These results once again highlight the efficacy of our prudent and proactive asset and liability management amid a rapidly evolving operating environment.

Net interest revenue was up 10% year over year as we continued to maximize the positive aspects of rising interest rates.

Our strong liquidity position allowed us to reduce our wholesale funding footprint and despite the significant steepening of the curve unrealized losses in our investment securities portfolio remained well contained.

Our 20% return on tangible common equity together with all of these actions allowed us to continue to deliver attractive capital returns to our shareholders. While further strengthening our capital and liquidity ratios to be prepared for a wide range of macroeconomic outcomes.

As I've just rounded out the first 12 months in my seat I'd like to take a step back for a moment and reflect on our work to date and where we're headed.

Through a series of strategic reviews, we have affirmed what we believe to be our key assets.

Number one our client reach and breadth of engagement.

Our top tier clients from all regions of the World was trust and wants to do more business with us.

Number two our collection of market, leading businesses were broad based financial services company with a balance and diversification that makes us stronger and our unique business mix sets us apart from our competitors.

And number three our culture of teamwork.

People are naturally collegial and seek out opportunities to work together to serve our clients and communities.

These assets are hard to replicate and it's rare that they exist together.

But as I have acknowledged before the company's long term financial performance track record hasn't lived up to the quality of this franchise.

As a result, we've committed to drive higher underlying growth consistently deliver positive operating leverage and improve our pre tax margin overtime.

As an important market clarity and focus to help tie together, where we are heading and why we recently communicated three strategic pillars to our employees around the world one be more for our clients to run our company better.

And three power our culture.

These three pillars are not fundamentally changing the businesses. We're in instead they drive it how we operate and who we are day to day for our clients.

As I've said before strategy is important but ultimately just a set of woods actually doing it and how we do it matters a lot.

Well this was just one quarter and what will be a multi year transformation.

I'm optimistic about the steady improvements we are seeing inside of being why Mellon and I want to share with you. Some of this perspective that gives us confidence that we're on the right track with the work that we're doing under each of these pillars.

First I'm encouraged by the pace of progress toward making being why Mellon a better run company.

Our businesses have historically operated largely in silos, we've run somewhat like a corporate conglomerate with a holding company that owns a series of vertically self sufficient subsidiaries. This.

This has led to clunky client journeys wasteful duplication and a lack of joined up thinking.

We have many opportunities to run our company better and more efficiently to reduce bureaucracy, and we need to be smart and disciplined with how we spend so our investments in the business go further.

I've talked to you before about our efficiency initiatives comprising about 1500 ideas developed by those who often see items ripe for improvement most clearly and closely our people.

This program internally, we call. It project catalyst is well underway and we started to see some early benefits in our financial results.

As you May recall in January we set out to essentially hold our expense growth rate this year to roughly 4% growth excluding notable items compared to roughly 8% ex currency in 2022.

We have made good progress against this goal with less than three months left in the year. We are confident that we will outperform our 4% expense growth target for 2023, all while self funding over half a billion dollars of incremental investments this year.

As we've started the budgeting process for 2024, we are determined to bend the cost curve further.

We're now working to adopt our platforms operating model, which will help us to do things in one place do the well and elevate overall execution.

And we are embracing new technologies, so we can be more productive more efficient and focus on growth.

Automation of processes and investment in operations, Digitization and AI across the firm will make it easier for our employees to do their jobs and subsequently channel that energies toward new innovations.

Which brings me to our work toward being more for our clients.

Our financial results in the quarter tell a tale of two cities.

Against the backdrop of seasonally slowest summer months, we once again saw outperformance in some of our differentiating businesses.

Strength in clearance and collateral management continued and we saw healthy underlying growth in pershing as well as solid momentum in asset servicing.

This was offset by continued softness in investment management fees and lower foreign exchange revenue given the subdued market backdrop.

Our path to higher underlying growth is clear in addition to always being on the hunt for new clients, we have to deliver more to our existing clients develop new products and do a better job of connecting the adjacent ones.

Our new Chief commercial officer has hit the ground running as we start operationalize ing, one being why mellon across the organization to sharpen our commercial focus and elevate the client experience across the firm.

At the same time, we're pushing forward with innovative new client solutions that leverage the adjacencies among our businesses.

While still early days initial client wins with our recently launched solutions as well as the quality of our pipelines are encouraging.

<unk> X is new open architecture wealth management platform wove is off to a promising start including a couple of client agreements already signed several prospective clients inactive contracting and a steadily growing pipeline.

As an example, integrity and nationwide insurance and financial services firm with a network of over half a million agents and advisers has selected our <unk> platform to support their wealth management business.

With wove, we're also connecting solutions from a cross spin why Mellon for example, integrity will have access to third party models and institutional grade solutions from our specialist firms in investment management and broker dealer clearing and custody solutions through Pershing.

And another example, pershing expanded their long standing relationship with Lincoln investment as the company transitions the self clearing business onto Pershing's custodial platform and selected woes to provide a suite of technology solutions to its financial professionals.

As we onboard additional clients through the remainder of 2023, we are planning to start disclosing relevant financial information and leading indicators for you all to keep track of loads growth trajectory at the beginning of next year.

We also signed the first external client a leading G. SIB owned European asset manager for our recently launched buy side trading solutions.

Without a doubt we expect tomo prominent solutions like woes and buy side trading to move the needle on growth over time, but we are leaning into innovation to solve the evolving client challenges across all of our businesses.

For example in Treasury services, we were one of the first banks to go live on fed now the federal Reserve's, new instant payment rail.

This allows us to expand our capabilities for corporations nonbank financial institutions, and Fintech and as a service provider, we are helping our financial institutions clients access instant payments remain competitive and provide best in class service for their customers.

As another example, this quarter the business announced the launch of Banca Fi and open banking payment solution that as an alternative to credit or debit cards and third party payment platforms helps organizations receive consumer payments from bank accounts with a seamless user experience and guaranteed settlement.

Let me conclude by saying that we are optimistic about the opportunity in front of us and our strategic objectives for the short medium and long term are clear.

We are innovating and pushing forward on a multiyear growth investments all the while remaining disciplined to deliver positive operating leverage and pretax margin expansion.

As I've said, all along the path to transforming being why mellon into a consistently high performing company will take some time, but for 2023, we are on track to deliver what we said we'd deliver at the beginning of the year, while making steady progress toward our strategic priorities.

I'm proud and appreciative of our People's dedication to be more for our clients run our company better and power our culture collectively to unlock the N y melons potential.

With that over to you dumb it.

Thank you Robin and good morning, everyone.

I will start on page three of the presentation with our consolidated financial results for the third quarter.

Please stand by.

Total revenue of $4 4 billion was up 2% year over year.

Operator: Good morning and welcome to the 2023 third quarter earnings conference call hosted by BNY Mellon. At this time, all participants are in a listen-only mode.

Net interest revenue was up 10% year over year, primarily driven by higher interest rates, partially offset by changes in balance sheet size and mix.

Operator: 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 Mellon's consent.

Fee revenue was flat.

Growth on the back of higher market values, net new business and the favorable impact of a weaker dollar was offset by the central divestiture in the fourth quarter last year, lower foreign exchange revenue and the mix of AUM flows.

Marius Merz: I will now turn the call over to Marius Merz BNY Mellon head of investor relations. Please go ahead. Thank you, operator. Good morning. And thank you all for joining our third quarter earnings call. As always, we will reference our financial highlight presentation, which can be found on the investor relations page of our website at BNYMellon.com. I'm joined by Robin Vince, president and chief executive officer, and Dermot McDonogh, our chief financial officer.

Firm wide assets under custody Slash administration of $45 seven trillion were up 8% year over year, reflecting higher market values client inflows the weaker dollar and net new business.

Marius Merz: Robin will start with introductory remarks before Dermot takes you through the opening. Thank you very much. Following the remarks, there will be a Q&A session. Before we begin, please note that our remarks include forward-looking statements and non-GAAP measures. Information about these statements and non-GAAP measures are available in the own financials, financial supplements, 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, October 17, 2023, and will not be updated. Was that?

Assets under management of $1 eight trillion were up 3% year over year, reflecting the weaker dollar and higher market values, partially offset by the al Central divestiture.

Investment and other revenue was $113 million in the quarter, reflecting continued strength in fixed income trading.

Expenses were down 16% year over year on a reported basis, primarily reflecting the goodwill impairment associated with our investment management reporting units in the third quarter last year.

Excluding notable items expenses were up 3% year over year.

Provision for credit losses remained low at $3 million in the quarter as the impact of reserve builds to reflect continued uncertainty on the outlook for commercial real estate was largely offset by reserve releases related to financial institutions.

Robin Vince: I will turn it over to Ryan. Thanks, Marius.

Robin Vince: Good morning, everyone. And thank you for joining us.

As Robin noted earlier reported earnings per share were $1 22, excluding notable items earnings per share were $1 27, representing 5% growth year over year.

Robin Vince: Before we get to the earnings call, I'd like to address the horrific terrorist attack on Israel and the ongoing conflict in the surrounding region. We have heartbroken as we continue to witness a human tragedy unfold, and I'm immensely grateful and proud of our employees in Israel who despite everything that they have been going through, continue to deliver uninterrupted service to our clients. Our hearts go out to colleagues, clients, and community members in the region.

We delivered positive operating leverage our pre tax margin was 29% and we generated a return on tangible common equity of 20%.

Turning to capital and liquidity on page four.

Consistent with the prior quarter, we returned $450 million of capital to our shareholders through common share repurchases.

Robin Vince: Now I'll share some brief comments about our financial results for the third quarter, and we'll then give a quick overview of some of our strategic priorities. BNY Malland delivered solid financial performance and continued progress on the steady transformation of our company. As you can see on slide two of the financial highlights presentation, we reported earnings per share of $1.22 versus $0.39 in the third quarter of last year, excluding notable items which primarily impacted last year's results.

And we paid approximately $330 million of dividends to our common stockholders, reflecting our previously announced 14% dividend increase which became effective in the third quarter.

Taken together, we returned 82% of earnings to shareholders in the quarter or 107% on a year to date basis.

Our tier one leverage ratio improved sequentially by approximately 40 basis points to six 1%, reflecting a decrease in average assets and an increase in tier one capsule driven by capsule generated through earnings net of capture returned through buybacks and dividends.

Robin Vince: EPS of $1.27 increased by 5% year over year. We generated a return on tangible common equity of 20% on $4.4 billion of revenue, up 2% year over year, and a pre-tax margin of 29% in the third quarter. These results, once again, highlight the efficacy of our prudent and proactive asset and liability management amid a rapidly evolving operating environment. Net interest revenue was up 10% year over year as we continued to maximize the positive aspects of rising interest.

Unrealized losses related to available for sale Securities remained roughly unchanged in the quarter.

The CET one ratio was 11, 4%, representing an approximately 30 basis points improvement compared with the prior quarter.

Reflecting lower risk weighted assets and an increase in CET one capital.

Just like our regulatory capital ratios or liquidity ratios further strengthened in the quarter.

The consolidated liquidity coverage ratio was 121%, a one percentage point improvement compared with the prior quarter.

Robin Vince: Rates. Our strong liquidity position allowed us to reduce our wholesale funding footprint and despite the significant steepening of the curve, unrealized losses in our investment securities portfolio remained well contained. Our 20% return on tangible common equity together with all of these actions allowed us to continue to deliver attractive capital returns to our shareholders while further strengthening our capital and liquidity ratios to be prepared for a wide range of macroeconomic outcomes.

And our consolidated net stable funding ratio was 136% well in excess of the regulatory requirement.

Next on page five net interest revenue and further details on the underlying balance sheet trends, which I will describe in sequential terms.

Net interest revenue of $1 billion was down 8% quarter over quarter, driven by changes in balance sheet size and mix.

She offset by higher interest rates.

Robin Vince: As I've just rounded out the first 12 months in my seat, I'd like to take a step back for a moment and reflect on our work to date and where we're headed. Through a series of strategic reviews, we have affirmed what we believe to be our key assets. Number one, our client reach and breadth of engagement. Our top tier clients from all regions of the world both trust and want to do more business with us.

As we expected temporary deposits related to the debt ceiling impasse in the second quarter left in July and along with seasonally lower balances in August average deposits for the quarter decreased by 5% sequentially.

Robin Vince: Number two, our collection of market leading businesses. We're a broad-based financial services company with a balanced and diversification that makes us stronger and our unique business mix sets us apart from our competitors. And number three, our culture of teamwork. Our people are naturally collegial and seek out opportunities to work together to serve our clients and communities. These assets are hard to replicate and it's rare that they exist together.

In line with our expectations interest bearing deposits were down 3%.

And noninterest bearing deposits were down 16%.

You will remember from prior earnings calls that we expected noninterest bearing deposits to moderate to approximately 20% of total deposits in the second half of this year, which is consistent with our deposit mix in the third quarter.

Following seasonal trough in August we saw the anticipated pickup in monthly average balances in September and again, some modest growth in the first two weeks of October .

Average interest, earning assets were down by 6% quarter over quarter.

This reflects a reduction in cash and reverse repo by 11%.

Robin Vince: But as I have acknowledged before, the company's long-term financial performance track record hasn't lived up to the quality of this franchise. As a result, we've committed to drive higher underlying growth, consistently deliver positive operating leverage and improve our pre-tax margin over time.

While we actively reduced wholesale funding.

Our investment Securities portfolio was down 4%.

And loan balances were up 1%.

Moving to expenses on page six.

Expenses for the quarter were down 16% year over year on a reported basis and up 3% excluding notable items.

Robin Vince: As an important mark of clarity and focus to help tie together where we are heading and why, we recently communicated three strategic pillars to our employees around the world. One, be more for our clients. Two, run our company better. And three, power our culture. These three pillars are not fundamentally changing the businesses we're in. Instead, they drive at how we operate and who we are day-to-day for our clients. As I've said before, strategy is important, but ultimately just a set of words. Actually doing it and how we do it matters a lot.

This year over year increase was driven by higher investments and revenue related expenses, the unfavorable impact of the weaker dollar as well as inflation, partially offset by efficiency savings and the <unk> divestiture.

I'll talk more about our outlook for expenses in a moment, but as Robin mentioned earlier. It is worth highlighting that for 2023, we're expecting to fully self fund over half a billion dollars of incremental investments through efficiency savings.

Turning to our business segments, starting with security services on page seven.

As I discuss the performance of our security services and marketing while service segment I will comment on the investment services fees for each line of business described in our earnings press release and the financial supplement.

Robin Vince: Well, this was just one quarter in what will be a multi-year transformation. I'm optimistic about the steady improvements we are seeing inside of BNY Mallon.

Securities Services reported total revenue of $2 1 billion.

Robin Vince: And I want to share with you some of this perspective that gives us confidence that we're on the right track with the work that we are doing under each of these pillars. First, I'm encouraged by the pace of progress toward making BNY Mallon a better run company. Our businesses have historically operated largely in silos. We've run somewhat like a corporate conglomerate, with a holding company that owns a series of vertically self-sufficient and subsidiaries.

Up 1% year over year.

The revenue was flat.

2% growth in investment services fees was offset by a 19% decline in foreign exchange revenue on the back of lower volatility in volumes.

Net interest revenue was up 12%.

In asset servicing investment services fees were up 3% driven by higher market values healthy net new business and a weaker dollar partially offset by lower client transaction activity.

Robin Vince: This has led to clunky, client journeys, wasteful duplication and a lack of joined up thinking. We have many opportunities to run our company better and more efficiently to reduce bureaucracy and we need to be smart and disciplined with how we spend so our investments in the business go further. I've talked to you before about our efficiency initiative comprising about 1500 ideas developed by those who often see items ripe for improvement most as clearly and closely our people.

The strength of our balance sheet as well as the stability breadth and depth of our solutions remain clear differentiators that position us well with clients confronted with a persistently challenging market environment and an evolving competitive landscape.

For example, ETF assets under custody Slash administration were up over 20% year over year and the number of funds surface to on our platform continued to grow at a healthy clip.

Robin Vince: This program internally we call it project catalyst is well underway and we started to see some early benefits in our financial results. As you may recall in January we set out to essentially have our expense growth rate this year to roughly 4% growth excluding notable items compared to roughly 8% ex-currency in 2022. We have made good progress against this goal. With less than three months left in the year we are confident that we will outperform our 4% expense growth target for 2023 all while self funding over half a billion dollars of incremental investments this year.

And all of <unk> assets under custody Slash administration and related investment services fees. Both grew in the mid single digit percentage range. Despite the number of fund launches having slowed significantly over the past year.

Within issuer services investment services fees were down 2%.

Growth from net new business in corporate trust was more than offset by the absence of fees from elevated depositary receipt cancellation activity in the third quarter of last year.

Next <unk>.

Marketing <unk> services on page eight.

<unk> services reported total revenue of $1 4 billion up 6% year over year.

Robin Vince: As we've started the budgeting process for 2024 we are determined to bend the cost curve further. We're now working to adopt a platforms operating model which will help us to do things in one place do them well and elevate overall execution and we're embracing new technologies so we can be more productive more efficient and focused on growth.

Revenue was up 5% and net interest revenue increased by 6%.

In Pershing investment services fees were up 2%, reflecting higher fees on sweep balances, partially offset by the impact of lost business and lower transaction volumes consistent with the decline in U S equity exchange volumes.

Robin Vince: Automation of processes and investment in operations digitization and AI across the firm will make it easier for our employees to do their jobs and subsequently channel their energies toward new innovations which brings me to our work toward being more for our clients. Our financial results in the quarter tell a tale of two cities against the backdrop of seasonally slower summer months we once again saw out to performance in some of our differentiating businesses.

Despite the continued headwind from the ongoing de conversion of the regional bank client highlights is in the second quarter Pershing saw $23 billion of net new assets on the platform this quarter.

Reflecting positive momentum in the underlying business.

As Robin mentioned earlier, the momentum around World is building with both new and existing clients.

While at the same time ongoing investments in the core Pershing platform to enhance advisor experience and lead with innovative solutions have positioned us well to capitalize on the heightened pace of change and the RIAA community and.

Robin Vince: Strength in clearance and collateral management continued and we saw healthy underlying growth in posing as well as solid momentum in asset servicing. This was offset by continued softness in investment management fees and lower foreign exchange revenue given the subdued market backdrop. Our path to higher underlying growth is clear in addition to always being on hunt for new clients we have to deliver more to our existing clients develop new products and do a better job at connecting the adjacent ones.

Treasury services investment services fees decreased by 1% as growth from higher client activity was offset by higher earnings credits for noninterest bearing deposit balances.

In clearance and collateral management investment services fees were up 16%.

<unk> broad based growth across U S and international clearance and collateral management.

In particular, we saw strength in domestic clearance volumes, reflecting elevated volatility and U S. Treasury issuance activity and continued migration from the fed reverse repo facility to traditional Tri Party collateral management balances.

Robin Vince: Our new chief commercial officer has hit the ground running as we start operationalizing one BNY melon across the organization to sharpen our commercial focus and elevate the client experience across the firm. At the same time we're pushing forward with innovative new client solutions that leverage the adjacencies among our businesses. While still early days initial client wins with our recently launched solutions as well as the quality of our pipelines are encouraged. Purging X's new Open Architecture Wealth Management platform, Wove, is off to a promising start, including a couple of client agreements already signed, several prospective clients in active contracting, and a steadily growing pipeline.

Recent macro trends, including heightened volatility and uncertainty associated with monetary policy and bank regulatory capital requirements as well as the recent consolidation in the banking sector further reinforced the value of our Tri Party collateral management services.

In addition to expanding our platform both in the U S and internationally, we continue to innovate new solutions for our clients to better utilize their collateral.

Turning to investment and wealth management on page nine.

Investments in wealth management reported total revenue of $827 million down 4% year over year.

Fee revenue was down 2% and net interest revenue declined 33% year over year.

Robin Vince: As an example, integrity and nationwide insurance and financial services firm with a network of over half a million agents and advisors has selected our Wove platform to support their wealth management business. With Wove, we are also connecting solutions from a cross-been Y-Mellon. For example, integrity will have access to third-party models and institutional grade solutions from our specialist firms in investment management, and broker dealer clearing and custody solutions through purging. In another example, purging expanded their long-standing relationship with Lincoln Investment as the company transitions their self-clearing business on purging's custodial platform and selected Wove to provide a suite of technology solutions to its financial professionals.

Assets under management of $1 eight trillion dollars increased by 3% year over year.

As I mentioned earlier this increase reflects the weaker dollar and higher market values, partially offset by the <unk> divestiture.

In the quarter, we saw $15 billion of net outflows from long term strategies, driven by client de risking and rebalancing.

And $7 billion of net inflows into short term strategies led by our drivers money market Fund complex.

In investment management revenue was down 4% year over year, primarily reflecting the al central divestiture and the mix of AUM flows parks.

Partially offset by higher performance fees as well as the impact of higher market values and the weaker dollar.

And our wealth management business revenue decreased by 5% driven by lower net interest revenue and changes in product mix, partially offset by higher market values.

Robin Vince: As we onboard additional clients through the remainder of 2023, we are planning to start disclosing relevant financial information and leading indicators for you all to keep track of Wove's growth trajectory at the beginning of next year.

Client assets of 292 billion increased by 14% year over year, reflecting higher equity market values and cumulative net inflows.

Robin Vince: We also signed the first external client, a leading GSIB-owned European asset manager for our recently launched Bicide Trading Solutions. Without a doubt, we expect our more prominent solutions like Wove and Bicide Trading to move the needle on growth over time, but we are leaning into innovation to solve evolving client challenges across all of our businesses. For example, in Treasury Services, we were one of the first banks to go live on FedNow, the Federal Reserve's new instant payment rail.

Page 10 shows the results of the other segments.

I will close with our current outlook for the rest of the year.

Based on market implied forward interest rates at the end of last month, our net interest revenue outlook for the full year 2003 remains unchanged for 20% growth year over year.

Moving to expenses.

We are making good progress on bending the cost curve, while protecting our important investments to accelerate growth and deliver superior client experiences, where we sit today I am confident that we will outperform the target of 4% expense growth. Excluding notable items that we communicated in January and we remain determined to drive that.

Robin Vince: This allows us to expand our capabilities for corporations, non-bank financial institutions and fintechs, and as a service provider, we are helping our financial institutions clients access instant payments, remain competitive, and provide best-in-class service for their customers. As another example, this quarter, the business announced the launch of Bankify, an open banking payment solution that as an alternative to credit or debit cards and third-party payment platforms helps organizations receive consumer payments from bank accounts with a seamless user experience and guaranteed settlement.

Growth rates down to 3% for the full year 2003.

This reflects our expectation for a sequential step up in expenses, excluding notable items in the fourth quarter with seasonally higher business development expenses as well as discrete increases for professional services and occupancy.

And finally, we expect to continue stock buybacks as a pace consistent with the second and third quarter.

Robin Vince: Let me conclude by saying that we are optimistic about the opportunity in front of us and our strategic objectives for the short, medium and long term are clear. We are innovating and pushing forward on our multi-year growth investments all the while remaining disciplined to deliver positive operating leverage and pre-tax margin expansion. As I've said all along, the path to transforming BNY-Mellen into a consistently high-performing company will take some time. But for 2023, we are on track to deliver what we said we deliver at the beginning of the year while making steady progress toward our strategic priorities.

This is in line with our full year outlook to return, 100% of earnings or more to shareholders over the course of 'twenty three while maintaining our strong capital ratios mindful of the significant uncertainties relating to the operating environment.

In conclusion, our financial results this quarter highlight the effectiveness of our balance sheet management and tangible progress on our journey towards higher operational efficiency and scalability.

While we have more work to do our teams around the world are embracing change and our pace of bringing innovative new client solutions to the market gives us confidence that revenue growth will follow over time.

With that operator can you. Please open the line for Q&A.

Robin Vince: I'm proud and appreciative of our people's dedication, so be more for our clients, run our company better, and power our culture, collectively to unlock BNY Mellon's potential.

Yeah.

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. Our first question comes from the line of Stephen Ju back with Wolfe Research. Please go ahead.

Dermot McDonogh: With that, over to you, Dermot. Thank you, Robin, and good morning, everyone. I will start on page three of the presentation with our consolidation financial results for the third quarter.

Hey, good morning.

So good morning, Steven.

Wanted to start off with a question on the NII outlook I was hoping you could just give some thoughts on the deposit trajectory if rates are higher for longer and the fed continues to engage in Q T and given we're at that 20% lower bound for N B's, where you expect that to ultimately settle out as a <unk>.

Dermot McDonogh: Total 32% year over year. Net interest revenue was up 10% year over year, primarily driven by higher interest rates, partially offset by changes in balance sheet size and mix. The revenue was flat. Wrote on the back of higher market values, net new business, and the favorable impact of a weaker dollar was offset by the out-centred investor in the fourth quarter last year, lower change revenue and the mix of AUM flows. Burm white assets under custody slash administration of $45.7 trillion were up 8% year over year, reflecting higher market values, client inflows, the weaker dollar and net new business.

Our signage or deposits.

Sure Stephen I'll take that and good morning. So.

I guess the way I'd like to answer the question is just to kind of start with January .

There, we kind of gave the guidance to the market at 20% NII growth for the year.

And we have been consistent with us on the call. Since then and we reconfirm that guidance today for 20% for the full year.

Dermot McDonogh: Assets under management of $1.8 trillion were up 3% year over year, reflecting the weaker dollar and higher market values, partially offset by the out-centred investor. Investments in other revenue was $113 million in the quarter, reflecting continued strength in 16-com trading. Expenses were down 16% year over year on a reported basis, primarily reflecting the goodwill impairment associated with our investment management reporting units in the third quarter last year. Excluding noticeable items, expenses were up 3% year over year.

Now the World has kind of played a different hand to us over the course of the year. Since January we had the bank turmoil in March and we had the debt ceiling and pass over the summer and clients use us as the portion of the storm during that time, and we kind of saw surges in deposits.

And so that benefits us now over the course of the summer we see those deposits leave and we feel we've reached an inflection point of puts and takes between the natural organic flow versus our kind of surge deposits, leaving so we feel the pace of.

Dermot McDonogh: Provision for credit losses remained low at $3 million in the quarter, as the impact of reserve bills to reflect continued uncertainty on the outlook for commercial real estate was largely offset by reserve releases related financial institutions. As Robin noted earlier, reported earnings per share were $1.22, excluding those basins, earnings per share were $1.27, representing 5% growth year over year. We delivered positive operating leverage. Our pre-tax margin was 29%, and we generated a return on tangible common equity of 20%.

<unk> has slowed we feel like we hit the trough in August and we've seen modest pickup in deposits in September and into October . So overall dash and when you take the asset side of the balance sheet and how liquid we are on the asset side and how that's rolling down you might want to know with us.

As the as the balance sheet continues to roll down we have a yield pickup of two to 300 basis points, which kind of gives us a lot of kind of confidence in our.

And our estimate for the year and outlook into 'twenty four as it relates to NII, because we always said that it was going to be 25% to 20% through the cycle. The trough happened to happen during the summer months.

Dermot McDonogh: Turning to capital and liquidity on page 4. Consistent with the prior quarter, we returned $450 million of capital to our shareholders through common share repurchases, and we paid approximately $330 million of dividends to our common stock holders, reflecting our previously announced 14% dividend increase, which became effective in the third quarter. Taken together, we returned 82% of earnings to shareholders in the quarter, are 107% on the year-to-date basis. Our tier 1 leverage ratio improves sequentially by approximately 40 basis points to 6.1%, reflecting a decrease in average assets and an increase in tier 1 capital, driven by capital generated through earnings, net of capital returns through buybacks and dividends. On realized losses related to available 100% of securities remained roughly on-chain. [inaudible] compared with the prior quarter, and our consolidated net stable funding ratio was 136%, well in excess of the regulatory requirement.

And has stayed in the 20% ZIP code. So we feel overall pretty good about <unk> as a percentage of total deposits being in the 20% range.

Very helpful and just for my follow up on the expense outlook, you've spoken about the commitment to improve operating margins you cited a number of efforts robyn to deliver efficiencies across the platform.

As we look out to next year, given a lower NII exit rate relative to the first half for you and for some of your industry peers wanted to get a sense as to how much flexibility is embedded in your expense plans and your ability to drive expenses lower potentially in a more challenging revenue backdrop.

Steven.

I'll start.

So.

Look.

We've said on every call this year that bending the cost curve is a very important strategic objective for the firm and we're attacking structural expenses in a number of different ways.

And that's just continuous execution day in day out blocking and tackling.

The result of all that blocking and tackling has caused us to outperform to 4% guidance that we gave in January and we're determined to push that number to closer to 3%.

But we don't believe to work is over this year and we're now in the middle of budget season.

Dermot McDonogh: Next, on page 5, net interest revenue and further details on the underlying balance sheet trends, which I will describe in sequential terms. Net interest revenue of $1 billion was down 8% quarter over quarter, driven by changes in balance sheet size and mix, partially offset by higher interest rates. As we expected, temporary deposits related to the debt ceiling impasse in the second quarter left in July, and along with seasonally low balances in August, average deposits for the quarter decreased by 5% sequentially.

And we are determined to bend the cost curve into next year.

And to continue to deliver that positive operating leverage and we kind of go out as in a number of different ways rationalizing vendors rationalizing locations.

Remixing, our kind of head count and how we hire this year was our biggest campus class ever double last year and we've continued to build on that so there are lots of things happening underneath the hood that gave us a high degree of confidence that we'd be able to continue to bend the cost curve into 'twenty four.

Dermot McDonogh: In line with our expectations, interest bearing deposits were down 3%, and non-interest bearing deposits were down 16%. You will remember from prior earnings calls that we expected non-interest bearing deposits to moderate to approximately 20% of total deposits in the second half of this year, which is consistent with our deposit mix in the third quarter. Following seasonal trusts in August, we saw the anticipated pickup in monthly average balances in September, and again some modest growth in the first two weeks of October.

<unk>.

Very helpful. Thanks, so much for taking my questions.

Our next question comes from the line of Ebrahim <unk> with Bank of America. Please go ahead.

Good morning.

Just maybe to.

Following up on that.

Discussion around deposits I think Dermot.

Use that works off multiple times can you just give us a sense of need obviously you call declined this year in terms of how things have played out.

Dermot McDonogh: Average interest earning assets were down by 6% quarter over quarter. This reflects a reduction in cash and reverse repo by 11%, while we actively reduced wholesale funding. Our investment security portfolio was down 4%, and loan balances were up 1%.

But just give us a sense of is it about the mix of the granularity of your deposits are the client behavior that you're seeing that gives you confidence that this 20% of what you saw in August towards the draw.

And.

If we are in a period to next year or is it there are no rate cuts, it's higher for longer like where does the negative surprise come from if any.

Dermot McDonogh: Moving to expenses on page 6. Expenses for the quarter were down 16% year over year on a reported basis, and up 3% excluding notable items. This year-over-year increase was driven by higher investments and revenue-relations expenses, the unfavorable impact of the weaker dollar, as well as inflation, partially upset by efficiency savings and the health center divestiture. I'll talk more about our outlook for expenses in a moment, but as Robin mentioned earlier, it is worth highlighting that for 2023, we're expecting to fully sell fund over half a billion dollars of incremental investments through efficiency savings.

Thanks for the question so.

This has been a journey for the last.

15 months, we took a view at the beginning of last year that the.

The fed was going to.

Hi, quite significantly and to position, we positioned the balance sheet in a way to do that and so when we kind of talk about deposit I think it's very important to look at both sides of the balance sheet at the same time in terms of how we're positioned on the asset side we.

A lot of we have a lot of the balance sheet and cash which benefits from the higher interest rates.

Dermot McDonogh: Turning to our business segments, starting with security services on page 7. As I discussed the performance of our security services and marks and wealth service segments, I will comment on the investment services fees for each line of business described in our earnings press release and financial supplements, dollars of 1% year over year. The revenue was flat. 2% growth in investment services fees was offset by a 19% decline in foreign exchange revenue on the back of lower volatility and volumes.

Our fixed rate securities are going to roll down over over the next you know a decent amount of our fixed securities I think it's a quarter or year roll down over the next couple of years.

So and that gets us a pickup of two to 300 basis points and at the beginning of the year. We did forecast a kind of mid single digits is kind in deposits.

And that kind of bottoms up analysis and also it's important to remember that.

<unk> of BMO, Maryland, nachos with us for deposits that they come into our ecosystem and just remember it's a $1 three trillion cash ecosystem that we have and they come in for a variety of different reasons. It's a portfolio of businesses that give us our deposit makeup. So when we look at it.

Dermot McDonogh: Net interest revenue was up 12%. In asset servicing, investment services fees were up 3% driven by higher market values, healthy net new business, and a weaker dollar, partially upset by lower client transaction activity. The strength of our balance sheet as well as the stability, breadth, and depth of our solutions remained clear differentiators that position as well with clients, confronted with a persistently challenging marks environment and an evolving competitive landscape. For example, ETF assets under custody slash administration were up over 20% year over year and the number of funds serviced on our platform continued to grow at a healthy clip. In all, assets under custody slash administration and related investment services fees both grew in the mid-single digit percentage range despite the number of fund launches having slowed significantly over the past year.

Portfolio level, we get a lot of confidence around the stability of the deposit base and look there are lots of gives and takes this year through the bank turmoil in March and the debt ceiling impasse, which benefited us and that's kind of moderate as and those deposits have left for a higher yielding opportunities while we.

Feel like the summer slowdown seasonal slowdown that we experienced in August and the conversations that we have in talking to our deposit team. We feel very good about where we are on the deposit balance now and to pick up that happened in September and October and that kind of gives us the confidence to say here today that 20% NII is a good number.

Which I think should be good for you guys to know that we've been consistent in our approach over the whole year.

Dermot McDonogh: Within issuer services, investment services fees were down 2%. Growth from net new business and corporate trust was more than offset by the absence of fees from elevated depository receipt cancellation activity in the third quarter of last year.

Okay. That's helpful. Thank you and I guess, maybe if I heard you correctly I think you mentioned half a billion dollars of investments with self funded that's about 4% of your expense base.

Is that half a billion.

Dermot McDonogh: Next, market and wealth services on page 8. Market and wealth services reported total revenue of $1.4 billion, up 6% year over year. The revenue was up 5%, and net interest revenue increased by 6%. In purging, investment services fees were up 2% reflecting higher fees on sweet balances, partially upset by the impact of loss business and lower transaction volumes consistent with the decline in US equity exchange volumes. Despite the continued headwind from the ongoing deconversion of the regional bank client highlights it in the second quarter, purging saw $23 billion of net new assets under platform discordor, reflecting positive momentum in the underlying business.

I'm just wondering the relevance of that number is that something that we should think about is the go forward sort of incremental investment spend that you need to self fund to efficiencies as weak from the outside to figure out what expense growth could look like next year. Just if you could contextualize that half a billion in investments and what that means going forward.

So the way I kind of think about that and the message that I would like to give you his.

It gives a message of discipline and as we.

Half the growth race, we're going towards 3% and within that 3% growth. We've had the financial discipline to be able to self fund.

$5 billion of investments that we would we are confident that we'll deliver.

Further efficiency in years ahead.

Dermot McDonogh: As Robin mentioned earlier, the momentum around world is building with both new and existing clients. While at the same time, ongoing investments in the core purging platform to enhance advisor experience and lead with innovative solutions have positioned as well to capitalize on the heightened pace of change in the RIA community. In Treasury services, investment services fees decreased by 1%, as growth from higher client activity was offset by higher earnings credits for non-intersparing deposit balances.

And revenue opportunities. So it's both kind of powering the topline and automating and driving further efficiency and we will look to continue to do that.

Into the budget season, this year and next year.

And like this year.

We doubled the efficiency saves that we have typically achieved in past years and thats both bottoms up.

I think we both mentioned in our prepared remarks, the cashless project that we were roughly 40% the way through and were doing real work day in day out that is driving that expense growth down and it's kind of delivering opportunities for us that we would harvest in the quarters to come Ebrahim I'd add just a couple of things to that one.

Dermot McDonogh: When clearance and collateral management investment services fees were up 16%, reflecting growth-based growth across US and international clearance and collateral management. In particular, we saw strength in domestic clearance volumes, reflecting elevated volatility and US treasury issuance activity, and continued migration from the Fed's reverse repo facility to traditional tri-party collateral management balances. Recent macro trends, including heightened volatility and certainty associated with monetary policy and banks' regulatory capsule requirements, as well as the recent consolidation in the banks.

We've been very deliberate about not cutting our way to glory.

But rather working the problem at a pretty fundamental level. So that we can both manage our expenses for the necessary operating leverage which we want to achieve but also sowing the seeds for future efficiencies and future fee growth and so that's really.

The way in which we're thinking about it.

Dermot McDonogh: Working Director, further reinforce the value of our Tri-Party Collateral Management Services. In addition to expanding our platform both in the US and internationally, we continue to innovate new solutions for our clients to better utilize their collateral.

Got it thank you.

Our next question comes from the line of Ken <unk> with Jefferies. Please go ahead.

Hey, Thanks, Good morning, just one more follow up so yes, it's a it's great to see the 20% for the year reiterated and obviously as discussed that implies a lower fourth quarter exit, but I wonder if more importantly understand the moving parts from there.

Dermot McDonogh: Turning to investment and wealth management on page 9. Investment and wealth management reported total revenue of $827 million, down 4% year over year. The revenue was down 2% and net interest revenue declined 33% year over year. Acid Thunder Management of $1.8 trillion increased by 3% year over year. As I mentioned earlier, this increase reflects the weaker dollar and higher market values partially offset by the out-centred divestiture. In the quarter, we saw $15 billion of net outflows from long-term strategies driven by clienty risking and rebalancing and $7 billion of net inflows into short-term strategies led by our driver's money market fund complex.

At what point can you see that stability going forward in terms of some of the things on the front book side, helping versus where deposit costs could continue to go up just trying to understand if we're at a <unk>.

Stable DDA is can you can you see or past the early next year to get that NII stable and just let me start there.

So I don't really want to give guidance for next year today can we will do that and.

In January you know I've got a lots of questions about that at Barclays as well.

So I kind of feel good about the 20%.

Dermot McDonogh: In investment management revenue was down 4% year over year, primarily reflecting the out-centred divestiture and the mix of AUM flows, partially offset by higher performance fees as well as the impact of higher market values and the weaker dollar. In our wealth management business, revenue decreased by 5% driven by lower net interest revenue and changes in product mix partially offset by higher market values. Client assets of $292 billion increased by 14% year over year, affecting higher equity market values and cumulative net inflows.

I feel good about the deposit pipeline that we have we've talked on previous earning calls about our strategic pivot a couple of years ago, where we centralized all our deposit businesses in one area and so I feel very good about how we're managing the deposits how we're pricing the deposits.

Dermot McDonogh: H10 shows the results of the other segments.

You know.

We're a little bit different to other institutions and that we have our clients are sophisticated so.

Cumulative betas are not materially changed from last quarter. They are in the 80% ZIP code and we've passed on the rates. So I think it's important to note that there's no material pricing lag to catch up here and so we kind of feel.

Dermot McDonogh: I will close with our current outlook for the rest of the year. Based on Mark's implied forward interest rates at the end of last month, our net interest revenue outlook for the full year 23 remains unchanged for 20% growth year over year. Moving to expenses, we are making good progress on bending the cost curve by protecting our important investments to accelerate growth and deliver superior client experiences, where we sit today, I am confident that we will outperform the target of 4% expense growth, excluding those basins that we communicate in January and we remain determined to drive that growth rate down to 3% for the full year 23.

The absolute level of deposits is pretty good we feel very good about our outlook for the rest of the year, but look the world is very uncertain and who knows what comes tomorrow and for Nick for 24, like we will give you more detailed guidance.

Dermot McDonogh: This reflects our expectation for a sequential step up in expenses, excluding noticeable items in the fourth quarter, with seasonally higher business development expenses, as well as discreet increases for professional services and occupancy. And finally, we expect to continue stock buybacks as it pays consistent with the second and third quarter. This is in line with our full year outlook to return 100% of earnings or more to shareholders over the course of 23, while maintaining our strong capture ratios, mindful of the significant uncertainties relating to the operating environments.

In January but I feel I feel I feel pretty good about where we are today, yes, and Ken I'll, just I'll just add to that just to draw your attention to really emphasize two things number one is when we started off the year. When we gave the guidance of 20% for NII growth over the course of the year clearly the year has turned out differently, but I.

Think the power of the global liquidity solutions team that we've put together has really been able to prove our ability to be agile in this space sort of a little bit irrespective of the environment I don't want to be complacent with that comment because clearly the world can change, but we saw a lot of things over the course of the first.

Three quarters of the year I think the team has done a very good job.

Adapting to those and maintaining the consistency and Youll remember.

Dummies comments earlier in the year, which is we thought NII because we're hanging in a little higher than we would've expected them to be and we've always expected them essentially to come down to this level just happened a little later than we thought but obviously, we'd be fine with that and then the second comment is remembering the inputs in terms of the diversification.

Dermot McDonogh: In conclusion, our financial results this quarter highlight the effectiveness of our balance sheet management and tangible progress on our journey towards higher operational efficiency and scale. Ability. While we have more work to do, our teams around the world are embracing change and our pace of bringing innovative new client solutions to the markers gives us confidence that revenue growth will follow over time.

<unk> done it said it earlier, but it really is critical to our deposit franchise. We've got the issuer services business with corporate trust, which drives on one set of inputs to that deposit algorithm, we've got our clearing and collateral management business, which has a different set of drivers we got our treasury services business, which has yet a different set of drivers.

Operator: With that operator, can you please open the line for Q&A? 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.

Course, we have our asset servicing business as well so that breadth and diversification just creates for different outcomes and I think <unk> seen that over the course of this year. So we're not sitting here today, giving guidance for next year, but the fourth quarter NII is probably a pretty decent place to start as you think about the world.

Steven Chubak: Our first question comes from the line of Steven Chubak with Wolf Research. Please go ahead. Hey, good morning. Good morning, Steven. One of the start off with a question on the NII Outlook was hoping you could just give some thoughts on the positive trajectory if rates are higher for longer and the Fed continues to engage in QT. And given we're at that 20% lower bound for NIVs, where you expect that to ultimately settle out as a percentage of deposits? Sure, Steven, I'll take that and good morning.

Okay got it thank you and.

Just one question on <unk>, it's great to see the wave start and the good. Good commentary you have about the momentum just wondering we know that there was that going to be a client de conversion.

You are coming out of that as well, we see that in the third quarter result, or is that still a pending yet you yet to happen.

So we expect that to happen over over several quarters.

<unk>.

I think the important point so it happened over both quarters I think second quarter was a little bit more than the third quarter, but we do expect that to work its way through over the next several quarters.

Dermot McDonogh: So I guess the way I'd like to answer the question is just to kind of start with January, where we kind of gave the guidance to the market of 20% NII growth for the year. And we've been consistent with that on the call since then. And we reconfirmed that guidance today for 20% for the full year. Now, the world have kind of played a different hand to us over the course of the year since January.

The important point I'd leave you with on Pershing in addition to the Wolf.

<unk> is the fact that we added $23 billion of net new assets in the quarter and the underlying strength of the business and our ability to provide solutions to our clients in that space is really really terrific to see.

Dermot McDonogh: We had the bank turmoil in March and we had the debt ceiling in pass over the summer. And, you know, clients used us as the porch in the storm during that time and we kind of saw surges in deposits and so that benefited us. Now, over the course of the summer, we see those deposits leave and we feel we've reached an inflection point of puts and takes between the natural organic flow versus our kind of surge deposits leaving.

Yes, that's what I'm, hoping for that you can offset that with the organic growth that's what I'm getting at yes.

We believe we have the confidence to earn our way out of that over the next several quarters.

Okay got it thank you.

Our next question comes from the line of Mike Mayo with Wells Fargo Securities. Please go ahead.

Hi.

Dermot McDonogh: So we feel the pace of decline has slowed. We feel like we hit the tross in August and we've seen modest pickup in deposits in September and into October. So overall that and when you take the asset side of the balance sheet and how liquid we are on the asset side and how that's rolling down, you might want to know that as the balance sheet continues to roll down, we have a yield pickup of two to 300 basis points, which kind of gives us a lot of kind of confidence in our estimate for the year and outlook into 24.

I think you guys have been pushing for stronger fee growth and that's a slog, but.

In the meantime, you're certainly bending the cost curve as you say.

I guess, Rob into your opening comment about a conglomerate with a bunch of silos.

Breaking those down certainly or it's a key to growing revenues faster how can you actually implement horizontal integration among these.

Eric businesses.

By breaking down their salaries like or do you have any proof points or evidence now or is this more like a three to five year plan.

Sure Mike.

So look at this this approach of <unk>. The company is clearly one of our critical.

Dermot McDonogh: As it relates to NIBs, we always said that it was going to be 25 to 20% through the cycle. The tross happened to happen during the summer months and has stayed in the 20% zip code. So we feel overall pretty good about NIBs as a percentage of total deposits being in the 20% range.

Pillows and we've put that under the heading of run the company better in terms of our internal conversations so.

Steven Chubak: Very helpful.

There are many things that we're doing.

We're really looking at what is it that we do across the company, where we have like capabilities. So we have some examples of that on the business side. A recent example is we had institutional clearing and settlement that we actually did not pershing business, but we also have an institutional clearing product in our clearance and collateral management business. So.

Dermot McDonogh: And just from my follow up on the expense outlook, you've spoken about the commitment to improve operating margins. You've said a number of efforts rob in to deliver efficiencies across the platform, as we look out to next year, given a lower NII exit rate relative to the first half for you and for some of your industry peers want to get a sense of how much flexibility is embedded in your expense plans and your ability to drive expenses lower potentially in a more challenging revenue backdrop.

We've moved the piece from Pershing into our clearance and collateral management business. So now it's all together and I could give you five other examples that are just like that of us rearranging pieces on the business front and inside the company to be able to be more joined up in terms of how we approach clients and so that is essentially.

Really truly making sure that we have consistent.

Dermot McDonogh: Steven, I'll start. So look, we've said on every call this year that bending the cost curve is a very important strategic objective for the firm and we're attacking structure expenses in a number of different ways and, you know, that's just continuous execution day in day out blocking and tackling the result of all that blocking. And tackling has caused us to outperform the 4% guidance that we gave in January and were determined to push that number to closer to 3%.

Client facing platforms in terms of how we're doing business than on the supporting side of the organization and if you think about our company a little bit like a platform business. We have all these worlds leading platforms the largest security lending.

Company in the world the largest collateral manager largest asset servicing custodian with AUC et cetera et cetera, what we hadn't done is adapted the way we run the company to actually look like that so we've decided to adopt this more platforms like operating model, where we're taking things that we in terms of the supply.

Dermot McDonogh: But we don't believe the work is over this year and we're now in the middle of budget season and we are determined to bend the cost curve into next year and continue to deliver that positive operating leverage and we kind of go at it in a number of different ways. Rationalizing vendors, rationalizing locations, remixing our kind of head count and how we hire this year was our biggest campus class ever double last year and we continue to build on that. So there are a lot of things happening underneath the hood that give us a high degree of confidence that would be able to continue to bend the cost curve into 24 and beyond.

Port that we provide for all businesses and reducing that duplication. So I'll give you. An example on the call center side, we used to have seven call centers. Those seven call centers were each essentially providing a service to their respective businesses now we're moving at the beginning but moving towards a single.

Steven Chubak: Very helpful there, man. Thanks so much for taking my questions.

Consistent contact center that can provide the service to all seven of those businesses and frankly do it in a better cheaper way, which is providing more capability to our clients, even though the difference in the wood call Center contact center, because there's a client benefit associated with that so look we're at the beginning of this thing.

But we think our platform is operating model is very fit for purpose for our company and it should really simplify how we work improved the client experience and employ our own employees and we've got other proof points, we talked about deposits Dermot was describing the better outcomes that we think we've had as a result of implementing global liquidity solutions that is.

Ibrahim Poonawala: Our next question comes from the line of Ibrahim Punewala with Bank of America. Please go ahead. Good morning. I'll just maybe to follow up on the discussion around deposit. I think there might you use the words of multiple times. Just give us a sense of need. Obviously you you've called it right there fear in terms of how things have played out. But just give us a sense of is it about the mix or the granularity of your deposit or the client behavior that you've seen that gives you confidence that this 20% or what you saw in August was a draw. And if you are in the period to next year visit there are no rate cuts. It's higher for longer. Like where does the negative surprise come from if any?

Consistent deposit approach across the company, we've got K y C. As an example, as well we used to do <unk> in each of our businesses, we're bringing that together to have a K Y C platform. So there are a lot of proof points that we've got in various stages of development here. In addition to the actual pilots that we did specifically for our platforms operating model.

So when you add it all together you said next year you expect to have positive operating leverage is that in aggregate positive fee operating leverage.

How can you have such costs so at this stage.

So so look we're committed to positive operating leverage over time and I don't want my second year as CEO to be one where we have negative operating leverage. So we are focused on positive operating leverage next year, that's aggregate operating leverage once youre question and one of the reasons why we.

Dermot McDonogh: Thanks for the question. So look, this has been a journey for the last 15 months. We took a view at the beginning of last year that the Fed was going to hike quite significantly and the position we position the balance sheet in a way to do that. And so when we kind of talk about deposit, I think it's very important to look at both sides of the balance sheet at the same time in terms of how we're positioned on the asset side.

We have confidence in that is because we've been investing on both the revenue side.

And on the expense side in the short medium and long term perspective done. We just went through a few things that we've done specifically for 2023, but the platform is conversation and the answer I. Just gave to you that's an investment in medium and long term efficiencies and we haven't seen any of the benefit of that really yet.

Dermot McDonogh: We have a lot of we have a lot of the balance sheet in cash, which benefits from the higher interest rates. Our fixed rate securities are going to roll down over the next, you know, a decent amount of the fixed securities, I think at the quarter a year, roll down over the next couple of years. So, and that gets us a pickup of two to three hundred basis points. And at the beginning of the year, we did forecast a kind of mid-single digit decline in deposits.

And the same thing's true on the revenue side some of the shorter term things that we've done at the enthusiasm around one being why mellon the referrals that we've had across the business we've talked about that in prior quarters, but now we're moving to the medium and longer term benefits, which are really getting the benefit of our chief commercial officer and her approach to operationalize and <unk>.

That's a more medium term.

Dermot McDonogh: And that kind of bottoms up analysis. And also it's important to remember that clients of BNY Mellon are not just with us for deposits, they come into our ecosystem and just remember it's a 1.3 trillion cash ecosystem that we have. And they come in for a variety of different reasons. It's a portfolio of businesses that give us our deposit makeup. So, when we look at a portfolio level, we get a lot of confidence around the stability of the deposit base.

<unk> opportunity and then long term really harnessing the benefits of these product investments that we've made with things like wove in buy side trading so he's been seeding on the revenue side and the expense side short medium and long term as we as we try to manage for this operating leverage over time.

Okay. Thank you.

Our next question comes from the line of Alex Blaustein with Goldman Sachs. Please go ahead.

Dermot McDonogh: And look, there are a lot of gifts and takes this year through the bank turmoil and March and the debt ceiling impasse, which benefited us. And that's kind of moderators and those deposits that have left for higher yielding opportunities. But we feel like the summer slowdown, the season of slowdown that we experienced in August and the conversations that we have and talking to our deposit team.

Hey, good morning, guys. Thanks for the question.

Maybe shift gears, a little bit I was hoping to spend a minute on capital.

You see the capital ratios build over the course of the quarter. So I guess as you're thinking on the buyback on a forward basis, given that it's been a little bit lighter over the last couple of quarters. How are you thinking about that over the next 12 months and maybe just as a reminder, in terms of how much capital do you expect to accrete back to <unk>.

Dermot McDonogh: We feel very good about where we are on the deposit balance now and the pickup that's happened in September and October. And that kind of gives us a confidence to say here today that 20% NII is a good number, which I think should be good for you guys to know that we've been consistent in our approach over the whole year. That's helpful. Thank you. And I guess maybe if I heard you correctly, I think you mentioned half a billion dollars of investments are self funded.

Capital ratios from securities maturing over the next call it six quarters or so.

Okay.

So I'll take that one Alex good morning, So I would say.

For the next quarter, no really change in the buyback, it's going to be consistent with the last couple of quarters.

Dermot McDonogh: That's about 4% of your expense base. Is that half a billion? I'm just wondering the relevance of that number. Is that something that we should think about if it go forward sort of incremental investment spend that you need to self fund to efficiencies as weak from the outside. Try to figure out what expense growth could look like next year. Just if you could contextualize that half a billion in investments and what that means going forward.

Going back to one of them.

Three things that we set in January buybacks was one of those and we are committed to buying back a 100% more of earnings of our returning 100% more of earnings to our shareholders over the course of the year.

We're on track to do that I would say you know as we look out in the world today, it's very different to where it was in January .

You know you still have the kind of huge volatility in the rate environment like it was 100 basis points in Q3 the.

Dermot McDonogh: So the way I kind of think about that and the message that I would like to give you is it gives a message of discipline in that we've half the growth rate we're going towards 3%. And within that 3% growth, we've had the financial discipline to be able to self fund a half a billion dollars of investments that we will we are confident that will deliver further efficiency in years ahead and revenue opportunities.

The geopolitics of very uncertain at the moment, So and then and then last but not least you've kind of got Basel, III and advocacy and what's going to happen. There. So there are lots of things to be worried about and at this stage, we'd rather be on the cautious end of things and see no real need to change our stance on buybacks.

In the short term.

As it relates to your specific question, we have about $2 billion to $3 billion of unrealized unrealized losses in our <unk> portfolio, and we expect about a half of that to come back into capital.

Dermot McDonogh: So it's both kind of powering the top line and automating and driving further efficiency and we look to continue to do that. You know, into the budget season this year and next year. And like this year, you know, we doubled the efficiency saves that we have a typically achieved in past years and that's both bottoms up. I think we both have mentioned this in our prepared remarks, the cashless project that we we're roughly 40% the way through and you know, we're doing real work day in day out that is driving that expense growth down.

Over the next over the next 12 months, so from where we sit here today, we continue to build capital we feel very good about our capture position ratios are healthy liquidity is healthy.

And at the right time, we've communicated a change in stance on that but for now steady as she goes.

Alright, Thanks for that and then there is one business that I was hoping to kind of double click into which is clearance and collateral management.

Robin Vince: And it's kind of delivering opportunities for us that we will harvest in the quarters to come. Ibrahim, I'd add just a couple of things to that one. We've been very deliberate about not cutting our way to glory, but rather working the problem at a pretty fundamental level so that we can both manage our expenses for the necessary operating leverage, which we want to achieve. But also sowing the seeds for future efficiencies and future fee growth.

We're seeing really good growth there for the last several quarters now I think it's up 11% year to date versus last year can you maybe on how help us unpack some of the sources of that growth between sort of what's been really market and maybe somewhat elevated volumes given everything that's been going on in treasuries.

Versus more kind of baseline growth in that business as we're sort of thinking about the building off of this baseline. Thanks.

So look at CCM clearance and collateral management very big business.

Robin Vince: And so that's really the way in which we're thinking about it. Thank you both.

For Us I would say a couple of things lots of volatility in the market this year.

Ken Usdin: Our next question comes from the line of Ken Usdin with Jeffries. Please go ahead. Hey thanks. Good morning. Just one more follow up. So yes, it's it's it's great to see the 20% for the year reiterated and obviously has discussed that implies a lower fourth quarter exit, but I wonder more importantly understand the moving parts from there. And you know what point can you see that?

Significant volumes lots of treasury issuance all of that is kind of.

That helps that business.

I think we continue to innovate as well internationally and so we spend a lot of time on the road where clients overseas because of our strength in the U S. We feel that we have a lot of value to add in the international space and so we kind of look to build our international business from here.

Dermot McDonogh: That stability going forward in terms of some of the things, you know, on the front book side helping versus where deposit costs could continue to go up, you know, just trying to understand if we're at a stable DDAs, can you can you see a path the early next year to get that NII point, you know, stable and just let me start there. So I don't really want to give guidance for next year today, Ken, we will do that in in January, you know, I got a lot of questions about that at Barclays as well.

I think in the.

In the medium term, we still see that business continuing to grow given the level of treasury issuance and what's happening in the market. So we kind of feel good about the underlying growth.

So a lot of people in my pink of it as a kind of steady steady Eddie type business, but I have to say the amount of innovation that we do under the hood in terms of serving our clients.

Needs with new new solutions, and how they can optimize their respective balance sheets and fund. It on our platform is very very pleasing to see so we feel very good about the state of the business and the trajectory from here.

Dermot McDonogh: So I kind of feel good about the 20% I feel good about the deposit pipeline that we have we've talked on previous earning calls about our strategic pivot a couple of years ago where we centralized all our deposit businesses in one area. And so I feel very good about how we're managing the deposits how we're pricing the deposits, you know, we're a little bit different to other institutions in that we have our clients are sophisticated.

Alrighty, thanks very much.

Thank you.

Our next question comes from the line of Brennan Hawken with UBS. Please go ahead.

Good morning, Thank you for taking my questions.

On Pershing.

Yeah.

I'm curious if you could maybe give a little color on what drove the strength in Pershing revenues I know you flagged higher fees on sweep balances, but we're seeing other wealth management firms.

Dermot McDonogh: So, you know cumulative basis are, you know, not materially changed from last quarter, they're in the 80% zip code and we've passed on the rate. So I think it's important to note that there's no material pricing lag to catch up here. And so we kind of feel the absolute level of deposits is pretty good. We feel very good about our outlook for the rest of the year. But look, the world is very uncertain and who knows what comes tomorrow and, you know, for next for 24 like we'll give you more detailed guidance in January. But I feel I feel I feel pretty good about where we are today.

Flagging headwinds there so curious about whether or not you can provide some color on that and what's driving the resilience for Pershing and then.

I know that it's going to be several quarters before we see the decommissioning that you referenced.

Any sense you can give for size of that headwind that we should expect thanks.

Okay.

So on the last question first we don't really give specific guidance on you know the <unk> conversions, but look as I've said on an earlier question we feel the.

Robin Vince: Yeah, and Ken, I'll just add to that just to draw your attention to really emphasize two things. Number one is when we started off the year and we gave the guidance of 20% for NII growth over the course of the year clearly the years turned out differently. But I think the power of the global liquidity solutions team that we've put together has really been able to prove our ability to be agile in this space.

The underlying strength of the business, you're always going to take your lumps and things that happened that you wouldn't expect to happen and we feel we have the ability and the confidence in the people and the strategy and the products to earn our way out of that so Pershing has a very you know it's a very strong business for us it's in our most profitable segment markets.

Robin Vince: Sort of a little bit irrespective of the environment. I don't want to be complacent with that comment because clearly the world can change. But we saw a lot of things over the course of the first three quarters of the year. I think the team's done a very good job adapting to those and maintaining the consistency. And you'll remember Dermott's comments earlier in the year, which is we thought NIBs were hanging in a little higher than we would have expected them to be. And we've always expected them essentially to come down to this level. It just happened a little later than we thought, but obviously we've been fine with that.

In wealth solutions, and we feel very good about the margin of that segment on a purging in particular, just kind of double clicking on your on your original question. You know there are many things that make up <unk>.

Make up the fees that are coming into perishing their transactional which is kind of correlated to U S exchange volumes asset base based on equity market levels and balance based and so again when you take the kind of portfolio approach that we have with our business and the different composition of the fees and then the.

Robin Vince: And then the second comment is remembering the inputs in terms of the diversification. Dermott said it earlier, but it really is critical to our deposits franchise. We've got the issue of services business with corporate trust, which drives on one set of inputs to their deposit algorithm. We've got a clearing and collateral management business, which has a different set of drivers. We've got our treasury services business, which has yet a different set of drivers. And of course, we have our asset servicing business as well. So that breadth and diversification just creates for different outcomes. And I think you've seen that over the course of this year.

It's clients that we're onboarding that kind of that leads you to a nice good fee outcome for the business overall and so you know look.

Pershing is market, leading where number one of our broker dealers were very important to the RIAA community. We have a lot of excitement in the marketplace around our wolf product and so we have that is attracting new clients to our system as well as existing clients, who are excited about that product and that gives us belief that by adding to our.

Existing platform, new products would be able to be a more meaningful player than we are today and Brennan I would just add one thing you used the term underlying momentum I think and it's very true in the business.

Ken Usdin: So we're not sitting here today giving guidance for next year. But the fourth quarter NII is probably a pretty decent place to start as you think about the world. Okay, got it, thank you.

We'd been on this call maybe a year ago.

Some of them would probably have asked me did I think that we could compete with the self clearing.

Ken Usdin: And just one question on Pershing is great to see the wave start and the good commentary you have about the momentum. Just wondering, we know that there was going to be a client deconversion, you know, coming out of that as well. Did we see that in the third quarter result? Or is that still a pending yet to yet to happen? So we expect that to happen over over several quarters at Cannes.

James is that we're going I remember we had these conversations about the puts and takes of the various different flows in the market or is this this quarter, we announced Lincoln who was self clearing joining our platform because they just see the benefits of the economies of scale that we can provide the capabilities that we have and then of course with an eye to work.

<unk> and the opportunity to be able to really provide that advise a set of solutions in the same way as the classic Pershing platform provides the investor set of solutions. So we feel quite good about the feedback that we're getting and remember as well that we have this relatively unconfirmed <unk> business model.

Ken Usdin: I think the important point, so it happened over both quarters. I think second quarter was a little bit more than the third quarter, but we do expect that to work its way through over the next several quarters.

Robin Vince: I think the important point I'd leave you with on Pershing in addition to the wall of development is the fact that we add a 23 billion dollars of net new assets in the quarter and the underlying strength of the business. And our ability to provide solutions to our clients in that space is really, really terrific to see. Yeah, and that's what I'm hoping for that you can offset that with the organic growth that's what I'm getting at. Yeah, we believe we have the confidence to earn our way out of that over the next several quarters. Okay, got it.

In terms of the fact that we're not running our own a large RIAA salesforce next to our business and we think that some of our clients really appreciate that.

Yes, that's that's all very helpful color. Thank you for that.

Robin Vince: Thank you.

I'd like to ask ask a follow up question on the noninterest bearing so you've flagged that there was some growth quarter to date is it possible to quantify or give us a rough idea about what kind of growth we'd be talking about and are you also seeing a corresponding growth in the overall deposit base along with the trend in the <unk>.

Mike Mayo: Our next question comes from a line of Mike Mayo with Wells Fargo Securities. Please go ahead. Hi, I think you guys have been pushing for stronger fee growth, and that's a slog. But, you know, in the meantime, you're certainly bending the cost curve, as you say. I guess Robin to your opening comment about a conglomer with a bunch of silos and breaking those down. Certainly, it's a key to growing revenues faster.

So I think I used the words modest in my prepared remarks for.

September off the seasonal lows and I also used the word inflection point with the puts and takes between.

The level of activity as a result of March end and the debt ceiling impasse, we kind of feel we've kind of reached a more natural level for deposits and if you kind of go back to the remarks in January we kind of went.

Robin Vince: How can you actually implement horizontal integration among the disparate businesses and by breaking down those showers? Do you have any proof points or evidence now or is this more like a three to five year plan? Sure, Mike. So, look, this, this approach of deciloing the company is clearly one of our critical pillars, and we put that under the heading of run the company better in terms of our internal conversations. And so there are many things that we're doing.

The decline in the deposit base.

Kind of mid single digits from where we were.

At the beginning of the year and so that's really largely how its played out with albeit a different zigzag to what we thought was going to be.

At the beginning of the year and look the important thing to walk away from the call where it is we feel confident with the outlook and the guidance that we're giving today of 20% and that's made up of a ton of different factors both on the deposit side and on the repricing on the asset side.

Robin Vince: We're really looking at what is it that we do across the company where we have like capabilities. So, we have some examples of that on the business side. A recent example is we had institutional clearing and settlement that we actually did in our purging business, but we also have an institutional clearing product in our clearance and collateral management business. So we've moved the piece from purging into our clearance and collateral management business.

So we kind of think of the two as very joined up on interlinked and don't really want to get into specific numbers, but we feel pretty good about where we're at.

Okay and are those trends applying to both the broad deposit base as well as Nanobees just.

Yeah, I think its face it's fair to say that yeah.

Robin Vince: So now it's all together. And I could give you five other examples that are just like that of us rearranging pieces on the business front end inside the company to be able to be more joined up in terms of how we approach clients. And so that is essentially truly making sure that we have consistent but client-facing platforms in terms of how we're doing business.

Excellent. Thank you.

Okay.

Thank you. Our next question comes from the line of Rob <unk> with Autonomous Research. Please go ahead.

Good morning, guys I appreciate the update on the strategic priorities I am curious on the do more for clients front. How is the progress you've made and are making their manifested itself. So far are you seeing an uptick in <unk>.

Robin Vince: Then on the supporting side of the organization. And if you think about our company a little bit like a platform's business, we have all these world leading platforms, the largest security lending company in the world, the largest collateral manager, the largest asset servicing custodian with AUC et cetera et cetera. What we hadn't done is adapted the way we run the company to actually look like that. So we've decided to adopt this more platforms like operating model where we're taking things that we in terms of the support that we provide for our businesses and reducing that duplication.

Organic growth new business wins or anything like that and then the obvious follow on from there as when do you think that we could expect to see that progress manifests itself in <unk>.

<unk> revenue revenue growth or operating leverage more broadly thanks.

Yes, it's a it's an important question Rob so the way that we have laid out a be more for our clients is internally is in a few different threads. So the first is delivering more to existing clients and you've heard from us before on this so many of our clients have a single business relationship with us.

Robin Vince: So I'll give you an example on the call center side. We used to have seven call centers. Those seven call centers were each essentially providing a service to their respective businesses. Now we're moving at the beginning but moving towards a single consistent contact center that can provide the service to all seven of those businesses and frankly do it in a better, cheaper way which is providing more capability to our clients. Even note the difference in the word call center versus contact center because there's a client benefit associated with that.

Single product single solution and so we just have the opportunity frankly to have them be able to do more things with us by connecting the dots and offering more to our current clients I'll give you a stylized example, so if you are an asset servicing clients today, you probably do some securities lending with US you may or may not do some foreign exchange.

With us if you do those two products with US why wouldn't you do some margin segregation with us if you do margin segregation with us youre in a collateral ecosystem why wouldn't you do more collateral management with us if youre in that ecosystem you are starting to touch the cash ecosystem and so why wouldn't you also be open to some of the cash <unk>.

Robin Vince: So look, we're at the beginning of this thing. But we think a platform's operating model is very fit for purpose for our company and it should really simplify how we work improve the client experience and employ our employees and we've got other proof points. We talked about deposits. Dermot was describing the better outcomes that we think we've had as a result of implementing global liquidity solutions. That is a consistent deposit approach across the company.

Quiddity related solutions, we have and if you were touching that youre adjacent to Treasury services and so why wouldn't you also be interested in some of our treasury services products and so that's exactly the fact that we haven't done that is the ultimate manifestation of the problem with silos for a company like ours, because our business is all pretty adjacent to each.

Robin Vince: We've got KYC as an example as well. We used to do KYC in each of our businesses. We're bringing that together to have a KYC platform. So there are a lot of proof points that we've got in various stages of development here. In addition to the actual pilots that we did specifically for a platform's operating model. So when you add it all together, you said next year you expect to have positive offering leverage, is that an aggregate or positive fee offering leverage and how can you have such costs at the stage?

So that is a very important focus it is the top priority of our new Chief commercial officer to really drive the operationalization of making all of that a reality as opposed to just to sort of an internal call to action in the company. The second thread is developing new.

Products and connecting adjacent products, so that and different in the first example.

Two things, which are inextricably related to each other could potentially be sold as a solution. If you look elsewhere in the technology industry. There are often multiple pieces of software that are bundled into one aggregate solution, which is actually what clients buy we haven't done as much of that because our products have been strewn.

Robin Vince: So look, we're committed to positive operating leverage over time, and I don't want my second year as CEO to be one where we have negative operating leverage. So we are focused on positive operating leverage next year, that's aggregate operating leverage to answer your question. And one of the reasons why we have confidence in that is because we've been investing on both the revenue side and on the expense side in the short, medium and long term perspective.

Across the company and their respective silos, so by being able to look more horizontal play we get to be able to gather up the products and think about the world a little bit more along the lines of solutions and you've seen us do that with some of our asset servicing clients more recently, where we've done these big up more bundled deals and there are more opportunities for that and then.

Robin Vince: Dermot just went through a few things that we've done specifically for 2023, but the platforms conversation and the answer I just gave to you, that's an investment in medium and long term efficiencies. And we haven't seen any of the benefit of that really yet. And the same things true on the revenue side, some of the shorter term things that we've done are the enthusiasm around one BNY Mellon, the referrals that we've had across the business, we've talked about that in prior quarters, but now we're moving to the medium and longer term benefits, which are really getting the benefit of our chief commercial officer and her approach to operationalizing one BNY Mellon, that's a more medium term opportunity.

Third opportunity is to just win more market share and brand new clients now to be fair. We do know a lot of the clients that are out there in the world, 90% plus of Fortune 100 companies, 97% of global banks. So that's not the biggest opportunity of all of them, but we want to be in the hunting business as well and so we'll go find those clients that we don't.

Currently do business with and actually engage them as well. So there are a lot of threads under that whole umbrella of being more for clients.

Robin Vince: And then long term really harnessing the benefits of these product investments that we've made with things like woven by side trading. So we've been seeding on the revenue side and the expense side, short, medium and long term as we try to manage for this operating leverage over time. Okay, thank you.

Alright, thank you.

Thanks, Rob.

Our next question comes from the line of Gerard Cassidy with RBC. Please go ahead.

Thank you Hi, Robyn in Germany.

Robyn Hey, John can you expand upon your comments about fed now you touched on it how you want on the early adopters who are in the test phase and just.

Alexander Blostein: Our next question comes from the line of Alex Blasphine with Goldman Sachs.

Implications are one cisco's alive throughout the system.

Alexander Blostein: Please go ahead. Okay, good morning guys. Thanks for the question. Maybe Shiv Gears a little bit.

So immediate payments are one of those disruption opportunities that don't come along that often in the overall ecosystem and you have to remember that the U S is actually less advanced in some respects in terms of the the speed and the efficiency of payments versus.

Alexander Blostein: I was hoping to spend a minute on capital. Next you see the capital ratios build over the course of the quarter. So I guess as you're thinking on the buy back on the forward basis given that's been a little bit lighter over the last couple of quarters, how are you thinking about that over the next 12 months and maybe just a reminder in terms of how much capital you expect to to a crede back to your capital ratios from securities maturing over the next, call it, you know, six quarters or so.

Other large countries around the world and so we look at this as saying well we have a large installed client base, that's pretty rooted in some of the classic payment methods.

Alexander Blostein: So I'll take that one Alex and good morning. So I would say for the next quarter, no really change in the buy back. It's going to be consistent with the last couple of quarters. Going back to one of the three things that we said in January, buybacks was one of those and we committed to buying back a hundred percent more of earnings of returning a hundred percent more of earnings to our shareholders over the course of the year and we're on track to do that.

We are a large check clara where large payments provide a.

And we also have a pretty unconfirmed acted approach because we're not really in the credit card business, which creates a little bit of fee disruption risk. If you are in that business to embracing instant payments and so we identified this some years ago that this would be an opportunity that we would want to participate more in.

And that's exactly what we've been doing so we've been live on the clearinghouse rails for a while we're now live on the fed now service those were essentially competitor instant payment services to each other.

Alexander Blostein: I would say, you know, as we look out on the world today, it's very different to where it was in January. You know, you still have the kind of huge volatility in the race environment, like it was a hundred basis points in Q3, the geopolitics are very uncertain at the moment. So and then last but not least, you've kind of got basil tree and advocacy and what's going to happen there. So there are a lot of things to be worried about.

But now we are going to be focused as I think the rest of the industry will be on the network effect, that's going to be required to really adopt these instant payment rails and so we're a provider to small and mid sized banks, helping them to access the rails. We think there are a bunch of things that you can do with these new routes that you couldnt do with some of the <unk>.

<unk> request for payment is a great example of the opportunity to really deliver E billing instant requests for payments that can be met with instant perfectly timed payments. There's a lot of control. There is also some security opportunities you know who wants to give their bank account in a b a number out and that credit.

Alexander Blostein: And at this stage, we'd rather be on the cautious end of things and see no real need to change our stance on buybacks in the short term. As it relates to your specific question, you know, we have about 2.3 billion dollars of unrealized losses in our AFS portfolio. And we expect about a half of that to come back into capital over the next 12 months. So from where we sit here today, we continue to build capital. And we feel very good about our capital position ratios are healthy, liquidity is healthy. And at the right time, you know, we communicate a change in stance on that. But for now, steady as she goes.

Dermot McDonogh: Great, thanks for that.

Card number out.

When youre dealing with various billing based solutions and so operationalized all of that with our clients as important we just launched bank if I as I mentioned in my prepared remarks that allows consumers to be able to use these rails are little bit more efficiently and so look it's early days initial disruption and I don't want to call exactly how and when it's going to occur.

But we feel over time. This is a good new technology and as we do see more network effect. These use cases start to go live it provides a lot of client value and so at the end of the day I think that client value is going to win out and we want to help them to do that.

Dermot McDonogh: And then there's one business that I was hoping to do kind of double click into which is clearance and collateral management. We've seen really good girl there for the last several quarters now. I think it's up 11% year to date versus last year.

Great and then Jeremy you touched on with the deposits the challenges the banking system faced earlier this year and bank of New York was looked at as a safe Haven in some people's minds in your deposits reflected that as you pointed out.

Dermot McDonogh: Can you maybe on help help us unpack some of the sources of that growth between sort of what's been really market and maybe somewhat elevated volumes given everything that's been going on in treasuries versus more kind of baseline growth in dead businesses or sort of thinking about the building off of this baseline. Thanks.

Can you share with us if Q T space.

With the fed through the end of next year, what kind of impact are you guys thinking that that could have on deposits throughout 2024. Thank you.

Dermot McDonogh: So look, you know, CCM, clearance and collateral management, very big business for us. I would say a couple of things, lots of volatility in the market this year, significant volumes, lots of treasury issuance. All of that is kind of helps that business. I think we continue to innovate as well internationally. And so we spend a lot of time on the road with clients overseas because of our strength in the US, we feel we have a lot of value to add in the international space.

So.

I think it's a bit too early for me to kind of give you a guidance for 'twenty four on that but like as I said earlier, we kind of feel we've reached a more kind of normalized level given what happened in March and then the debt ceiling and who kind of knows what's gone.

To happen from here.

But our balance sheet is positioned for higher for longer.

Dermot McDonogh: And so we kind of look to build our international business from here. I think in the in the medium term, we kind of still see that business continuing to grow given that the level of treasury issuance and what's happening in the market. So we kind of feel good about the underlying growth. Also, a lot of people might think of it as a kind of steady, steady, steady type business, but I have to say the amount of innovation that we do under the hood in terms of serving our clients needs with new solutions and how they can optimize their respective balance sheets and fund it on our platform is very, very pleasing to see. So we feel very good about the state of the business and and trajectory from here.

A lot of the balance sheet in cash.

Our fixed income securities are going to roll off a quarter a year over the next few years and a pickup in yield from that is about two to 300 basis points. So when we look at the balance sheet.

Together, we kind of feel very good about our NII for the next while January would it be when we'd give you more detailed guidance for how we think about it for 24, but our deposit base and how our clients are in the ecosystem and look if they're not with us for deposits, we want them to be in our drive.

As money market fund complex and B kind of using our products and services. So we don't want to lose the cash we can put the cash into other products. So I think we feel very good about where the deposit franchise is now we feel very good about the pipeline of activity that's coming our way.

Dermot McDonogh: All righty. Thanks very much. Thank you.

Brennan Hawken: Our next question comes from a line of Brennan Hawking with UBS. Please go ahead. Good morning. Thank you for taking my questions.

But who knows and we are prepared and risk managed to a higher for longer continued qt et cetera, et cetera, et cetera, and Gerard I, just just to add one point to that when it comes to the rates markets.

Brennan Hawken: Love to start on Pershing. And curious if you could maybe give a little color on what drove the strength in Pershing revenues. I know you flagged higher fees on sweep balances, but you know we're seeing other wealth management firms flagging headwinds there. So curious about whether or not you can provide some color on that and what's driving the resilience for Pershing. And then I know that it's going to be several quarters before we see the decommissioning that you referenced any any sense you can give for size of that headwind that we should expect.

Avoided trying to have a crystal ball on exactly what it is going to that's going to happen. We said, we think resilience as a commercial attribute for US you highlighted the benefit of that resilience that we saw earlier on in the year as clients really came to us as a safe refuge and obviously, we're very happy to help.

With that but that also means that we have views about what might happen. We have views about how we position our balance sheet, but ultimately we are positioning to be able to deal with any of these eventualities. You know I was at I was sat on a trading desk for the first 10 years of my career and the current level of 10 year rate is kind of at the bottom end of the range over that period of time. So there's.

Brennan Hawken: Thanks. So on the last question first, we don't really give specific guidance on you know the de conversions, but look, as I said, on an earlier question, we feel the underlying strength of the business, you're always going to take your lumps and things that happen that you wouldn't expect to happen. And we feel we have the ability and the confidence and the people and the strategy and the products to earn our way out of that.

Absolutely no reason why the curve cant move further from here, it's moved 100 basis points since mid July at the 10 year point and so we are positioning ourselves to be able to be adaptable to however, the world is going to unfold in Dummitt commented on that when it came to our capital ratios earlier on.

Brennan Hawken: So Pershing is a very, you know, it's a very strong business for us. It's in our most profitable segment markets and wealth solutions. And we feel very good about the margin of that segment on that purging in particular. Just kind of double clicking on your original question, you know, there are many things that make up make up the fees that are coming into purging their transactional, which is kind of correlated to us exchange volumes, asset based based on equity market levels and balance based.

There are some things that have played out exactly as we saw on the things that have played out a little differently I think the treasury has done a very good job in coordinating with the fed as they have ramped up the issuance of bills in particular and that has worked very gracefully with the roll down of essentially a trillion dollars at this point of the <unk>.

So the interplay between reserves between RFP between the the very high levels of issuance coming out of the Treasury. These are all significant inputs and our data shows us that theres actually been less foreign buying in the treasury market over the course of this year and so there's going to be a supply and demand dynamic that's going to occur further out.

Brennan Hawken: And so again, when you take the kind of portfolio approach that we have with our business and the different composition of the fees and then the amount of clients that we're onboarding, it kind of that leads you to a nice good fee outcome for the business overall. And so, you know, look, purging is market leading. We're number one with broker dealers. We're very important to the RIA community. We have a lot of excitement in the marketplace around our wolf product.

The curve, which I don't think anybody can predict we certainly have to be ready for the different ways that could play out.

Great. Thank you very much.

Our next question comes from the line of Brian Bedell with Deutsche Bank. Please go ahead.

Brennan Hawken: And so we have that attracting new clients to our system, as well as existing clients who are excited about that product. And that gives us believe that by adding to our existing platform, new products will be able to be a more meaningful player than we are today. And Brenner, I just add one thing, use the term underlying momentum, I think. And it's very true in the business. You know, if we've been on this call maybe a year ago, someone would probably have asked me, did I think that we could compete with the self clearing changes that we're going, I remember we had these conversations about the puts and tapes of the various different flows in the market.

Great. Thanks, Good morning, guys. Thanks for taking my question.

Let me just a nuance on the net interest revenue by segments. So just the security services versus the market in wealth segment. It looks like there was more pressure on the security service business.

And versus the second quarter, just wondering if that is more of the.

Well in <unk> that you referenced Germany.

In August and if you think that might just normalize as we move into the fourth quarter.

Brennan Hawken: There's this quarter we announced, Lincoln, who was self clearing, joining our platform because they just see the benefits of the economies of scale that we can provide, the capabilities that we have. And then of course, with an eye to woe and the opportunity to be able to really provide that advisor set of solutions in the same way as the classic purging platform provides the investor set of solutions. So we feel quite good about the feedback that we're getting and remember as well that we have this relatively uncomflicted business model in terms of the fact that we're not running our own large RIA sales force next to our business. And we think that some of our clients really appreciate that. Yep, that's all very helpful color. Thank you for that.

And I guess and or are you doing things.

Internally in terms of the growth initiatives that you just talked about Rob on a couple of answers ago.

That might accelerate the NII or in that segment much more rapidly over time.

Yes.

Yeah.

So let me deal with the first question.

I would say there is nothing really.

Noticeable underneath the hood that is nuanced that ours is different by different segments like if you think about asset servicing.

Our issue of services as a segment is made up of three businesses asset servicing depositary receipts and corporate Trust corporate trust as a business tends to attract a higher level of in Ibs.

Dermot McDonogh: And then I'd like to ask a follow-up question on the non-interest bearing. So you flagged that there was some growth quarter to date. Is it possible to quantify or give us a rough idea about what kind of growth we'd be talking about? And are you also seeing corresponding growth in the overall deposit base along with trend in the NIPs? Thanks. So I think I used the word modest in my prepared remarks for September of the seasonal lows.

Due to the nature of that business Q3 would've been a seasonally.

Quieter period for that business.

Debt issuance activity was more muted so that was that would explain a little bit of vas from asset servicing out, let's just say.

Like how clients are behaving with us at the moment in the ecosystem.

I wouldn't really call anything out that is kind of noticeably different and we kind of think about are our deposits as one platform kind of centrally managed.

Dermot McDonogh: And I also use the word inflection points with the puts and takes between the level of activity as a result of March and the debt ceiling impasse. We kind of feel we've kind of reached a more natural level for deposits. And if you kind of go back to the remarks in January, we kind of went, you know, decline in the deposit base. Of kind of mid-single digits from where we were at the beginning of the year.

Under one under one roof and that's how we kind of managers.

Okay, Great and then just.

Maybe just to follow up on the actually on the other.

Investment and other revenue on there is one area that's been growing quite nicely sequentially for now three straight quarters. It's the other trading revenue line.

Dermot McDonogh: And so that's really largely how it played out with all be as a different zigzag to what we thought was going to be at the beginning of the year. And look, the important thing to walk away from the call with is we feel confident with the outlook and the guidance that we're given today of 20%. And that's made up of a ton of different factors both on the deposit side and on the reprising on the asset side.

And the size of that is now.

With this type of growth for the next two or three quarters, you'll be approaching your FX trading revenue. So just wonder if you talk about the drivers of that and weather.

You see that type of growth.

Paths continuing.

So look the key feature of that business. This quarter as it has been all of this year really has been the strength of our fixed income trading you do have a little bit of a fee capture gains in there as well, but it's predominantly the fixed income.

Dermot McDonogh: So we kind of think of the two as very joined up and interlinked and don't really want to get into specific numbers, but we feel pretty good about where we're at. Okay, and are those trends applying to both the broad deposit base as well as the NIBs just. Yeah, I think it's fair to say that. Yeah, great.

Trading.

So we feel very good advisors in the overall scheme of the quarter and the results. It's a small number in the big scheme of things, but we like what we have there.

Dermot McDonogh: Excellent. Thank you.

Okay, great great. Thanks, very much.

Thanks, Brian .

Our next question comes from the line of Glenn Schorr with Evercore ISI. Please go ahead.

Rob Wildhack: Our next question comes from the line of Rob Wildhack with autonomous research. Please go ahead. Good morning, guys. I appreciate the update on the strategic priorities. I'm curious on the do more for clients front. How is the progress you've made and are making their manifested itself so far. Are you seeing an uptick in organic growth, new business wins, anything like that. And then the obvious follow on from there is when do you think that we could expect to see that progress manifest itself? Well, there's he revenue revenue growth or operating leverage more broadly. Thanks. Yeah, it's it's it's an important question, Rob.

Hi, Thanks, so much.

And I think Glenn touched on this hello.

I know we've touched on this throughout the questions. So you can be brief but I wanted to put it in a different package. So not lost on you we've seen a lesser ability to predict or control client behavior from some of the peers when it comes to all things deposits.

And so I didn't know if there's a way to give it the attribution but.

Is there is it all related to your business mix. Some client base do you think you are.

Holiday deposit efforts have actually moved the needle.

Just trying to get inside your confidence.

As to what we've seen elsewhere and I don't know how much of that as well.

Rob Wildhack: So the way that we have laid out be more for our clients is internally is in a few different threads. So the first is delivering more to existing clients. And you've heard from us before on this so many of our clients have a single business relationship with us, a single product, single solution. And so we just have the opportunity, frankly, to have them be able to do more things with us by connecting the dots and offering more to our current clients.

Depletion of nonoperating balances anyway sitting now you know most of what's left is operating so thanks, a lot sorry for that.

So so.

I'll give you two dimension to that answered land one is.

We have a portfolio of businesses that attract both interest bearing and noninterest bearing deposits.

Rob Wildhack: I'll give you a stylized example. So if you're an asset servicing client today, you probably do some securities lending with us. You may or may not do some foreign exchange with us. If you do those two products with us, why wouldn't you do some margin segregation with us? If you do margin segregation with us, you're in our collateral ecosystem, why wouldn't you do more collateral management with us? If you're in that ecosystem, you're starting to touch the cash ecosystem.

Corporate Trust Treasury services asset servicing clearance and collateral management being being the primary ones.

They all have different characteristics are awesome.

And they do things in slightly different ways. So it kind of gives you a portfolio effect. So that you feel like you have a diversified deposit platform I think that's important point number one important point number two is <unk>.

Rob Wildhack: And so why wouldn't you also be open to some of the cash liquidity related solutions we have? And if you're touching that, you're adjacent to treasury services. And so why wouldn't you also be interested in some of our treasury services products? And so that's exactly the fact that we haven't done that is the ultimate manifestation of the problem with silos for a company like ours because our businesses are pretty adjacent to each other.

How we manage and priced the deposits.

If you came to be and why men on three years ago, you would have all of those deposits in different lines of business that would've all having with our clients separately. It would've all priced their deposit separately and you would have ended up with suboptimal outcomes. When you aggregate that up for them to be in my view and why Mellon standpoint now.

We've got global liquidity solutions, it's one team interfaces with each of the lines of the businesses, what we priced consistently we manage consistently and we have a pipeline that we think of as one firm I think you add all that together you get the won't be and why meta in effect you get the strategy effect and you get a line of business effect.

Rob Wildhack: So that is a very important focus. It is the top priority of our new chief commercial officer to really drive the operationalization of making all of that a reality as opposed to just a sort of an internal call to action in the company. The second thread is developing new products and connecting adjacent products so that different than the first example so that two things which are inextricably related to each other could potentially be sold as a solution.

And that gives us confidence that we have a good handle on our deposit franchise and where we want to be from here.

Thank you that was about looking for.

Rob Wildhack: If you look elsewhere in the technology industry, there are often multiple pieces of software that are bundled into one aggregate solution which is actually what clients buy. We haven't done as much of that because our products have been strewn across the company and their respective silos. So by being able to look more horizontally, we get to be able to gather up the products and think about the world a little bit more along the lines of solutions.

Our next question comes from the line of Rajeev <unk> with Morningstar. Please go ahead.

Alright, good morning.

Following up on the on the deposit conversation I mean by my side.

Ladies and your deposit beta rose quite a bit in the quarter I guess can you comment on what your U S dollar versus non U S. Dollar deposit betas were in the quarter and then how does your deposit beta.

Rob Wildhack: And you've seen us do that with some of our asset service and clients more recently where we've done these bigger more bundled deals and there are more opportunities for that. And then the third opportunity is to just win more market share and brand new clients. Now to be fair, we do know a lot of the clients that are out there in the world, 90% plus a fortune 100 companies, 97% of global banks.

<unk> your line.

Uh huh.

Uh huh.

Payment.

So thanks.

Thanks for the question I guess.

75% of our book is.

Daughters 10.

10 euro roughly.

Sterling and the rest other as it relates to bases I kind of think of us as in cumulative basic terms the cumulative beta of our of our dollar book is around 80%, which I think I said earlier and that Hasnt materially changed.

Rob Wildhack: So that's not the biggest opportunity of all of them but we want to be in the hunting business as well. And so we'll go find those clients that we don't currently do business with and actually engage them as well. So there are a lot of threads under that whole umbrella of being more for clients. Thanks, Rob.

Quarter over quarter.

Sterling and euros or about 50%, 60%, respectively give or take a little bit.

And so we kind of feel as it relates to passing on the pricing.

Gerard Cassidy: Our next question comes from the line of Gerard Cassidy with RBC.

Gerard Cassidy: Please go ahead. Thank you.

The clients that we have are sophisticated has largely passed onto prices as they come through.

Dermot McDonogh: Hi, Robin. Robin, can you expand upon your comments about Fed now? You touched on it, how you were one of the early adopters who were in the test phase. And just implications are once this goes live throughout the system. So immediate payments are one of those disruption opportunities that don't come along that often in the overall ecosystem. And you have to remember that the US is actually less advanced in some respects in terms of the speed and the efficiency of payments versus some other large countries around the world.

And you know it.

It may grind, a little bit higher from here, but overall, we feel pretty good about where the book is where it's priced you may see some modest catch ups and lags here or there, but overall, we think it's it's where it should be given what's happened in the market.

Alright, and then Mike your deposit beta of biologic lines of business.

Okay.

I don't have that level of detail with me. So we can follow up with you offline.

Great. Thank you.

Yeah.

Dermot McDonogh: And so we look at this as saying, well, we have a large installed client base that's pretty rooted in some of the classic payment methods. We are a large check clearer. We're a large payments provider. And we also have a pretty unconflicted approach because we're not really in the credit card business, which creates a little bit of fee disruption risk if you are in that business to embracing instant payments. And so we identified this some years ago that this would be an opportunity that we would want to participate more in.

Our next question comes from the line of Jim Mitchell with Seaport Global. Please go ahead.

Hey, good morning.

Just a question you guys have had a lot of success in improving the organic growth in things like Pershing collateral management.

But investment management has been sort of left out of that discussion.

Long term flows outside of a little liability management have been negative last year. So do you see your organic growth opportunity. There are you investing in that business and how do you improve that organic growth from here.

Dermot McDonogh: And that's exactly what we've been doing. So we've been live on the clearinghouse rails for a while. We're now live on the Fed now service. Those are essentially competitor instant payment services to each other. But now we are going to be focused, as I think the rest of the industry will be on the network effect that's going to be required to really adopt these instant payment rails. And so we're a provider to small and mid-sized banks helping them to access the rails.

Thanks for the question Jim look we said.

A couple of calls ago that you know where the margin of that business is at the moment, where we are.

We feel we have work to do we're not happy with us.

There are a bunch of things that have happened last year that are feeding into this year that have caused a kind of a remixing by our clients out of you know.

Active strategies into passive which are lower fee paying out of equities into fixed income. So they are there are there is rebalancing going on under the Hood and we're kind of attacking as in a number of different ways, one being kind of getting after a structural expense inefficiencies and we've talked a lot about that today and that's that this segment is.

Dermot McDonogh: We think there are a bunch of things that you can do with these new rails that you couldn't do with some of the old rails. Request for payment is a great example. The opportunity to really deliver e-billing instant requests for payments that can be met with instant perfectly timed payments. There's a lot of control there. There's also some security opportunities. You know, who wants to give their bank account an ABA number out and their credit card number out, you know, when you're dealing with various billing based solutions.

No different to that so we're attacking it there we're rolling out new products and.

That's going to take time to build AUM, but do that in a first class way, we kind of think organic growth will come on the back of that.

Dermot McDonogh: And so operationalizing all of that with our clients is important. We just launched bankifiers. I mentioned in my prepared remarks that allows consumers to be able to use these rails a little bit more efficiently. And so look, it's early days in this disruption. And I don't want to call exactly how and when it's going to occur. But we feel over time this is a good new technology. And as we do see more network effect and these use cases start to go live, it provides a lot of client value. And so at the end of the day, I think that client value is going to win out and we want to help them to do that.

Robin Vince: Great.

Inside of <unk> Mellon, we have a very kind of powerful distribution platform. So we're very focused on kind of really energizing the distribution platform to support our kind of boutique asset managers and we've made some leadership changes there this year and we're going to begin to see the fruits of that in the coming quarters.

We're kind of growing assets and a number of different ways and some of the some of the asset management boutiques are performing very well and we're very happy with them and some of them have work to do and we're very focused on us and we're not sitting idle waiting wishing it to happen we're active in trying to make it happen.

Dermot McDonogh: And then Dermott, you touched on with deposits. The challenges the banking system says earlier in this year and Bank of New York was looked at as a safe haven in some people's minds and your deposits have reflected that as you pointed out. Can you share with us if QT stays, you know, with the said through the end of next year, what kind of impact are you guys thinking that that could have on deposits throughout 2024?

Alright, that's it from me thanks.

Yeah.

And our final question comes from the line of Mike Mayo with Wells Fargo Securities. Please go ahead.

Hi.

Follow up.

Giving a lot of <unk>.

<unk> I know you have to execute but you say youre paying the cost curve NII.

Dermot McDonogh: Thank you. So I think it's a bit too early for me, Gerard, to kind of give you guidance for 24 on that. But like as I said earlier, we kind of feel we've reached a more kind of normalized level given what happened in March and then the dead ceiling and who kind of knows what's going to happen from here. But our balance sheet is positioned for higher for longer. We have a lot of the balance sheet in cash.

Are you pretty well the way you are positioning for range Youre investing for growth you're shooting for positive operating leverage next year. So it's now all sounds pretty good.

When you think about the risk.

To the company over the next year what are the main risks that come to mind that you think you can.

Need to pay a little extra attention to whether it's macro or micro.

So I'll just start Mike with with the way that you set up the initial part of the question you're right. We are optimistic about the potential that we have in the company and the opportunities that our franchise and our businesses afford US now we haven't lived up to that.

Dermot McDonogh: Our fixed income securities are going to roll off a quarter a year over the next few years. And the pickup in yield from that is about two to 300 basis points. So when we look at the balance sheet together, we kind of feel very good about our NII for the, you know, the next while January will be when we give you more detailed guidance for how we think about it for 24, but our deposit base and how our clients are in the ecosystem.

Dermot McDonogh: And look, if they're not with us for deposits, we want them to be in our driver's money market fund complex and be kind of using our products and services. So we don't want to lose the cash. We can put the cash into other products. So I think we should very good about where the deposit franchise is now. We feel very good about the pipeline of activity that's coming our way. But, you know, who knows, and we are prepared and risk managed to a higher for longer continued QT, et cetera, et cetera, et cetera.

Tangible but the reason why you detect the optimism I think in a way that we talk about it is because we do have an inherent optimism that this is absolutely a doable proposition to unlock that potential now it's a ton of work as Dummitt just said in answer to a different question when.

Not going to wish all way there and maybe that's one of the things that we've really doubled down on now as a leadership team is that we have to work the problem and we have to work the problem through all of these different angles in order to really be able to unlock the potential and as I said in my prepared remarks, there's a cultural.

Change that we need to create in the company to take what is otherwise been a great culture, but take it to the next level power. It forward that really allows us to <unk> silo and operate more broadly across the board and you and I just talked about that a few minutes ago, we have to execute to get it done so of course that it follows from there.

Dermot McDonogh: And Gerard, I just just add one point to that when it comes to the rates markets, you know, we've avoided trying to have a crystal ball on exactly what it is going to happen. We said, we think resilience is a commercial attribute for us. You highlighted the benefit of that resilience that we saw earlier on in the year as clients really came to us as a safe refuge. And obviously we were very happy to help them with that, but that also means that we have views about what might happen.

That.

Really evolving the culture to <unk> silo and to move towards this platform mindset and getting things done and execution are critical to us unlocking our potential than the biggest risks in the company in some respects from an internal point of view become not doing those things. So we are laser focused on doing those things.

Dermot McDonogh: We have views about how we position our balance sheet, but ultimately we are positioning to be able to deal with any of these eventualities. You know, I was, I was sat on a trading desk for the first 10 years of my career. And the current level of 10 year rates is kind of at the bottom end of the range over that period of time. So there's absolutely no reason why the curve can't move further from here.

Tracking those things and as a leadership team really coming together to make sure that we're holding each other to account for the respective parts that everybody in the leadership team of the company plays in moving that forward. So that's the reason for the optimism, but also the reason for the constant humility associated with the fact that.

Dermot McDonogh: It's moved 100 basis points since mid July at the 10 year point. And so we are positioning ourselves to be able to be adaptable to however the world is going to unfold and don't comment it on that when it came to our capital ratios earlier on. Now there are some things that are played out exactly as we saw other things that are played out a little differently. I think the Treasury has done a very good job in coordinating with the Fed as they have ramped up the issuance of bills in particular.

Execution is going to get the job done now in terms of the outside world. There's clearly a ton going on in the world. We've got geopolitical tensions through a continuum all the way to war in many regions of the World right. Now we have all of the uncertainty still of rates and inflation in the economy here in the U S that.

Uncertainties is the ever present, cyber risk, which we always take very seriously and those things are always collectively on our minds, we don't pretend to predict exactly how things are going to occur we try to prepare for them as best we possibly can recognizing that that's what our clients need from us as.

Dermot McDonogh: And that has worked very gracefully with the roll down of essentially a trillion dollars at this point of the RRP. So the interplay between reserves between RRP, between the very high levels of issuance coming out of the Treasury. These are all significant inputs. And our data shows us that there's actually been less foreign buying in the Treasury market over the course of this year. And so there's going to be a supply and demand dynamic that's going to occur further out the curve, which I don't think anybody can predict.

Dermot McDonogh: Great.

Brian Bedell: Thank you very much.

We help them to adapt to this environment and that we manage through it so that that's sort of the way that I think about both the internal and external answer to your question.

Okay. Thank you.

Thank you Mike.

And with that that does conclude our question and answer session for today I would now like to hand, the call back over to Robyn with any additional or closing remarks.

Brian Bedell: Our next question comes from the line of Brian Bedell with Deutsche Bank. Please go ahead. Great. Thanks. Go on, guys. Thanks for taking my question. Let me just a nuance on the net interest revenue by segments.

Thank you operator, and thank you everyone for your interest in being why Mellon today. If you have any follow up questions. Please reach out to Marius and the IR team B well.

Thank you. This does conclude today's conference and webcast a replay of this conference call and webcast will be available on the <unk> Mellon Investor Relations website at two P. M. Eastern standard time today have a great day.

Dermot McDonogh: They're just the security services versus the market and while segment, it looked like there was more pressure on the security service, business, NII and University versus the second quarter, is wondering if that is more of the low NNIBs that you reference, Dermot in August. And if you think that might just normalize as a move into the fourth quarter, I guess, and or are you doing things internally in terms of the growth initiatives that you just talked about, Rob, and a couple answers ago that might accelerate the NIA are in that segment. You're much more rapidly over time.

Yes.

Yes.

Sure.

Dermot McDonogh: So let me deal with you the first question. So I would say there is nothing really noticeable underneath the hood that is new on that is different by different segments. Like if you think about asset servicing. Our issue of services as a segment made up of three businesses, asset servicing, deposit through your seats and corporate trust. Corporate trust as a business tends to attract a higher level of NIBs due to the nature of that business.

Yeah.

Dermot McDonogh: Q3 would have been a seasonally, you know, quieter period for that business. Because debt issues activity was more muted. So that was that would explain a little bit of that asset servicing. It's just like how clients are behaving with us at the moment in the ecosystem, but I wouldn't really call anything out that is kind of noticeably different. And we can't kind of think about our deposits as one platform kind of centrally managed under one under one roof. And that's how we kind of manages. Great.

Dermot McDonogh: And then just maybe just to follow up on the actually and the other investment and other revenue on there's one area there that's been growing quite nicely sequentially for now three straight quarters. That's the other trading revenue line. And you know, the size of that is now, you know, to continue with this type of growth. The next two or three quarters, you'll be approaching your your effects trading revenues. Just wonder if you talk about the drivers of that and whether you know, you see that type of growth path continuing.

Dermot McDonogh: So look at the key feature of that business, this quarter has has been all of this year really has been the strength of our six income trading. You do have a little bit of sea capsule gains in there as well. But you know, it's predominantly the six income trading. So we should very good about this in the overall kind of scheme of the quarter and the results. It's a small number in the big scheme of things, but we like what we have there. Great. Thanks very much. Thanks, Brian.

Glenn Schorr: Our next question comes from the line of Glenn Schorr with Evercore ISI. Please go ahead. Hi, thanks so much.

Glenn Schorr: And I know we've touched on this throughout the question so you can be brief, but I want to put in a different package. So not lost on you. We've seen a lesser ability to predict our control client behaviors from some of the peers when it comes to all things deposits. And so I didn't know if there's a way to give it the attribution, but is there, is it all related to your business mix and client base?

Glenn Schorr: Do you think your consolidated deposit efforts have actually moved the needle? I'm just trying to get inside your confidence relative to what we've seen elsewhere. And I don't know how much of that is the completion of non-adfering balances anyway. So now you know most of what's left is operating. So thanks a lot. Sorry for repetitive.

Glenn Schorr: So I will give you two dimensions to that answer, Glenn. One is we have a portfolio of the businesses that attract both, you know, intersparing and non-intersparing deposits, corporate trust, treasury services, asset servicing, clearance and collateral management being the primary ones. They all have different characteristics about them and they do things in slightly different ways. So it kind of gives you a portfolio effect so that you feel like you have a diversified deposit platform.

Glenn Schorr: I think that's important point number one. Important point number two is how we manage and price the deposits. If you came to all of those deposits in different lines of business, they would have all handled their clients separately. They would have all priced at deposit separately and you would have ended up with sub-optimal outcomes when you aggregate that up from the BNY Mellon standpoint. Now we've got global liquidity solutions. It's one team interfaces with each of the line of the businesses but we price consistently, we manage consistently and we have a pipeline that we think of as one firm.

Glenn Schorr: I think you add all that together. You get the one BNY Mellon effect, you get the strategy effect and you get the line of business effect and that gives us confidence that we have a good handle on our deposit franchise and where we want to be from here. I get that with the buzz looking for.

Rajiv Bhatia: Our next question comes from the line of Rajeev Batia with Morningstar.

Rajiv Bhatia: Please go ahead. Great.

Rajiv Bhatia: Good morning. Just following up on the deposit conversation. I mean by my calculations, your deposit data rose quite a bit in the quarter. I guess can you comment on what your US dollar versus non-US dollar deposit data is worth in the quarter and then how do your deposit data differ across your line of businesses such as asset servicing, issuer servicing, person and payment? Thanks for the question. I guess 75% of our book is $10, roughly 10 euro, roughly 10 sterling and the rest other.

Rajiv Bhatia: As it relates to Batia's, I kind of think of buzz as in cumulative basis terms. The cumulative basis of our dollar book is around 80% which I think I said earlier and that hasn't materially changed quarter over quarter. Sterling and euros are about 50%, 60% respectively give or take a little bit and so we kind of feel as it relates to passing on the pricing, the clients that we have are sophisticated largely passed on the prices as they come through and you know it may grind a little bit higher from here but overall we feel pretty good about where the book is, where the price you may see some modest catch ups and lags here or there but overall we think it's where it should be given what's happened in the market.

Rajiv Bhatia: Great. And then like your deposit data, if I like lines of business. I don't have that level of detail with me, so we can follow up with you offline. All right. Great.

Jim Mitchell: Thank you.

Jim Mitchell: Our next question comes from the line of Jim Mitchell with Seaport Global. Please go ahead. Hey, good morning. Just a question. You guys have had a lot of success in improving the organic growth and things like purchasing, collateral management. But investment management has been sort of left out of that discussion. You know, long-term flows outside of a little liability management have been negative last year. So, you know, do you see organic growth opportunity there? Are you investing in that business and how do you improve that organic growth from here?

Jim Mitchell: Thanks for the question, Jim. Look, we said on a couple of calls ago that, you know, where the margin of that business is at the moment, we feel we have work to do. We're not happy with it. You know, there are a bunch of things that have happened last year that are feeding into this year that have caused a kind of remixing by our clients out of, you know, active strategies into passive, which are lower fee paying, out of equities into fixed income.

Jim Mitchell: So, there are there's rebalancing going on onto the hood and we're kind of attacking it in a number of different ways. One being kind of getting after structure and expense inefficiencies. And we've talked a lot about that today and that's that this segment is no different to that. So, we're attacking it there. We're rolling out new products and, you know, that's going to take time to build AUM but, you know, do that in the first class way.

Jim Mitchell: We kind of think organic growth will come on the back of that. Inside of BNY-Mellon, we have a very kind of powerful distribution platform. So, we're very focused on kind of really energizing the distribution platform to support our kind of boutique asset managers and we've made some leadership changes there this year and we're going to begin to see the fruits of that in the coming quarters. So, we're kind of going at it in a number of different ways and, you know, some of the some of the asset management boutiques are performing very well and we're very happy with them and some of them have worked to do and we're very focused on it and we're not sitting idle waiting, wishing it to happen. We're active in trying to make it happen.

Jim Mitchell: All right, that's it for me. Thanks.

Mike Mayo: And our final question comes from the line of Mike Mayo with Wells Fargo Securities.

Mike Mayo: Please go ahead. Hi, this has a follow-up. You've been giving a lot of optimism. I know you have to execute, but you said you're paying the cost curve and II should, you know, do pretty well the way your position for rates, your investing for growth, your shooting for positive leverage next year. So, it's, you know, all sounds, you know, pretty good.

Robin Vince: When you think about the risk to the company over the next year, what are the main risks that come to mind that you think you need to pay a little extra attention to, whether it's macro or my- Micro. So I'll just start Mike with the way that you set up the initial part of the question. You're right. We are optimistic about the potential that we have in the company and the opportunities that are franchise and our businesses afford us. Now we haven't lived up to that potential. But the reason why you detect the optimism I think in the way that we talk about it is because we do have an inherent optimism.

Unknown Attendee: [inaudible] Thank you.

Operator: This does conclude today's conference and webcast.

Operator: A replay of this conference call and webcast will be available on the BNY Mellon Investor Relations website at 2pm Eastern Standard Time today.

Operator: Have a great day.