Bank Of New York Mellon Corp (BK) — Q1 2025 Earnings Call Transcript

Thank you, operator. Good morning, everyone, and welcome to our first-quarter earnings call. I'm joined by Robin Vince, our President and Chief Executive Officer; and Dermot McDonogh, our Chief Financial Officer. As always, we will reference our quarterly update presentation, which can be found on the Investor Relations page of our website at bny.com. I'll note that our remarks will contain forward-looking statements and non-GAAP measures. Actual results may differ materially from those projected in the forward-looking statements. Information about these statements and non-GAAP measures is available in the earnings press release, financial supplement and quarterly update presentation, all of which can be found on the Investor Relations page of our website. Forward-looking statements made on this call speak only as of today, April 11, 2025, and will not be updated. With that, I will turn it over to Robin.

Thanks, Marius. Good morning, everyone. Thank you for joining us. I'd like to start with a few broader comments before Dermot takes you through the financial results for the quarter. Reflecting on the operating environment, while there were clear signs of optimism at the beginning of the year, we have now seen a rapid and significant reversal of sentiment, driven by uncertainty about trade and fiscal policies, which added to existing tail risks, including a variety of geopolitical tensions and conflicts. Last week's tariff announcements were clearly part of a broader strategy and an effort to reset trade relations between the US and the rest of the world. This is an attempt at a very fundamental change. And while last week's announcements provided an initial baseline, we should expect that negotiations will take time, and it is likely that a clear final picture won't be reached for a while, a view reaffirmed by Wednesday's news on a three-month pause and the market volatility we saw again yesterday. The read-through of this uncertainty into both capital markets and the real economy creates elevated risks in the near and medium term. In times like this, being positioned conservatively with balance sheet strength and operational resilience allows us to remain focused on serving our clients and continuing to execute on the ongoing transformation of BNY into a more platforms-oriented company. Turning to the quarter and referring to Page 2 of the quarterly update presentation. We delivered a very solid financial performance in the first quarter. Earnings per share of $1.58 were up 26% year-over-year on a reported basis and up 22% excluding notable items. Total revenue of $4.8 billion was up 6% year-over-year. Expenses around the company remained well-controlled, up 2% year-over-year. Taken together, we delivered another quarter of meaningful positive operating leverage, 346 basis points on a reported basis and 261 basis points excluding notable items. Our pretax margin improved to 32%, and our return on tangible common equity improved to 24%. As I've noted before, BNY plays a central role in global markets, powering our clients with platforms across custody, security settlement, collateral payments, trading, wealth investments and more in over 100 markets around the world. Notwithstanding the current environment, we continue to see a meaningful opportunity from our work to better align ourselves as an integrated financial services platforms company. Our transformation strategy includes both a new commercial coverage approach and our strategic platforms operating model, which together are designed to enhance the client experience and enable greater agility. The execution of this strategy is a significant exercise in change management, which requires hard work and takes time, but our teams around the world have embraced the opportunity, and we are making progress. This past quarter marked the first anniversary since we started the phased transition into our new operating model. And just one year in, we have more than half of BNY working in this new way. Already, we are starting to see how this transformation can drive top line growth with greater scalability. For instance, over the past year, our trade finance team is processing trade loans 60% faster. Our enterprise onboarding team is also working faster while seeing a more than 30% increase in onboarding volume. And our payments team has tripled the number of currencies we offer our bank clients to support consumer activity. Complementing our platform work and building on the momentum with which we entered the year, our new commercial coverage model is proving increasingly effective in enabling more integrated client solutions from across the entire company. The first three months of the year represented our strongest sales quarter on record. The number of clients who bought from three or more lines of business has increased by 40% over the past two years, and we continue to see outsized sales growth with those multiline of business clients. In just one example, a large privately held multinational company where BNY has acted as custodian for the pension plan and corporate cash portfolio, where we provide corporate trust and debt capital market services and we provide wealth management to the company's senior executives, we recently expanded our relationship to also include supporting the company's collateral needs and managing short-term cash through our LiquidityDirect platform. As I've said before, effectively cross-selling the breadth of our platforms in this way and at scale represents the single most compelling growth opportunity for our company. As an institution with a long history of innovation, we have not forgotten that delivering new solutions is another important way for us to be more for our clients and to drive top line growth. We recently welcomed Carolyn Weinberg to the company as a member of the Executive Committee. She is now our Chief Product and Innovation Officer. Many people across our organization are focused on innovating new capabilities, instant payments, digital assets, wealth tech, private markets, collateral, liquidity, all examples of domains where we are innovating. The addition of Carolyn in this new role will increase our leadership bandwidth to drive innovative new commercial opportunities and find new ways to leverage our platforms and data for client solutions. While on the topic of innovation, I also want to take a moment to specifically call out the opportunity we see from AI at BNY. We've been taking a platform-based approach to AI capabilities, building and deploying solutions at scale with resilient, responsible guardrails throughout. We believe that our AI platform is going to be an important advantage for us as a large language model agnostic design, leveraging frontier models from multiple leading providers. To that end, in the first quarter, we announced a multiyear agreement with OpenAI, giving BNY access to cutting-edge tools and working with OpenAI to advance AI use cases in financial services. Over 80% of our employees have completed the prerequisite training to access Eliza, our AI platform, and more than 8,000 of them are already experimenting with personal AI agents honing the skills they need to use AI effectively. To date, we have deployed more than 40 AI solutions into production with a significant additional number at various stages of building and testing. Collectively, we expect these to drive productivity gains, improved risk management and to provide meaningful leverage to our people in the future. We strongly believe that by empowering our people with AI to do what we do better every day, we will harness great benefits over the coming years. Before I hand the call over to Dermot, I want to close where I began. While the outlook for the operating environment has become more uncertain, we are prepared for a wide range of macroeconomic and market scenarios. Our ongoing work to operate BNY as a more platforms-oriented company, combined with our highly capitalized, liquid and lower credit risk balance sheet positions us to manage dynamically and act as a source of strength as we support our clients in navigating the current environment. I'd like to thank our people around the world for bringing intensity and excellence to drive us forward as one BNY. And with that, over to you, Dermot.

Thank you, Robin, and good morning, everyone. I'm starting with our consolidated financial results for the quarter on Page 3 of the presentation. Total revenue of $4.8 billion was up 6% year-over-year. And excluding notable items, total revenue was up 5%. Fee revenue was up 3%. That included 6% growth in investment services fees in our Securities Services and Market and Wealth Services segments, driven by net new business and higher market values. Investment management and performance fees were down 5%, driven by the mix of AUM flows and an adjustment for certain rebates, partially offset by higher market values. While not on the page, I will note that firm-wide AUC/A of $53.1 trillion were up 9% year-over-year, reflecting client inflows, higher market values and net new business. And assets under management of $2 trillion were flat year-over-year as higher market values were offset by cumulative net outflows. Foreign exchange revenue was up 3% year-over-year, driven by higher spreads on the back of higher volatility. Investment and other revenue was $230 million, which included a $40 million disposal gain, a notable item in the quarter. Net interest income was up 11% year-over-year, driven by the reinvestment of maturing investment securities at higher yields, partially offset by changes in deposit mix. Provision for credit losses was $18 million in the quarter, reflecting reserve increases relating to commercial real estate exposure. Expenses of $3.3 billion were up 2% year-over-year, driven by higher investments and employee merit increases, partially offset by efficiency savings. Taken together, we reported earnings per share of $1.58 on both a reported and on an operating basis. Excluding the impact of notable items, earnings per share were up 22% year-over-year. Our pretax margin was 32%, and our return on tangible common equity was 24% in the quarter. Turning to capital and liquidity on Page 4. Our Tier 1 leverage ratio for the quarter was 6.2%. The sequential increase reflects capital generated through earnings, preferred stock issuance, and improved accumulated other comprehensive income, partially offset by capital distributed through common stock repurchases and dividends. Our CET1 ratio at the end of the quarter was 11.5%. The sequential increase reflects the aforementioned increase in capital, partially offset by higher risk-weighted assets. Over the course of the first quarter, we returned approximately $1.1 billion of capital to our common shareholders, representing a 95% total payout ratio year-to-date. With regards to liquidity, the consolidated liquidity coverage ratio was 116% and the consolidated net stable funding ratio was 132%. Next, net interest income and balance sheet trends on Page 5. Net interest income of $1.2 billion was up 11% year-over-year and down 3% quarter-over-quarter. The sequential decrease reflects changes in balance sheet size and mix, partially offset by the continued reinvestment of maturing investment securities at higher yields. Average interest-earning assets decreased by 1% sequentially, including lower cash and reverse repo balances, partially offset by higher investment securities and loan balances. Average deposit balances also decreased by 1% sequentially, reflecting lower noninterest-bearing balances compared to the seasonally strong fourth quarter. Average interest-bearing deposit balances remained flat. Turning to our business segments, starting on Page 6. Securities Services reported total revenue of $2.3 billion, up 8% year-over-year. Total investment services fees were up 4% year-over-year. In Asset Servicing, investment services fees grew by 5%, reflecting higher market values and net new business. And in Issuer Services, investment services fees were up 2%, driven by net new business in Corporate Trust. In this segment, foreign exchange revenue was up 10% year-over-year, driven by higher spreads on the back of higher volatility. Investment and other revenue of $140 million in the quarter included the $40 million disposal gain that I mentioned earlier. Net interest income for the segment was up 8% year-over-year. Segment expenses of $1.6 billion were up 3% year-over-year, driven by higher investments, revenue-related expenses, and employee merit increases, partially offset by efficiency savings. Securities Services reported pretax income of $708 million, up 20% year-over-year and a pretax margin of 31%. On to Market and Wealth Services on Page 7. In our Market and Wealth Services segment, we reported total revenue of $1.7 billion, up 11% year-over-year. Total investment services fees were up 8% year-over-year. In Pershing, investment services fees were up 4%, driven by higher market values and net new business. Net new assets were $11 billion in the quarter, and we started off the year with a meaningful renewal from Cambridge Investment Research, a long-time client and a growing independent firm. In Clearance and Collateral Management, investment services fees were up 10%, driven by broad-based growth in clearance volumes and collateral balances. And in Treasury Services, investment services fees were up 14%, driven by net new business. Net interest income for the segment overall was up 17% year-over-year. Segment expenses of $866 million were up 4% year-over-year, driven by higher investments and employee merit increases, partially offset by efficiency savings. Taken together, our Market and Wealth Services segment reported pretax income of $816 million, up 20% year-over-year and a pretax margin of 48%. Turning to Investment and Wealth Management on Page 8. Our Investment and Wealth Management segment reported total revenue of $779 million, down 8% year-over-year. Investment management fees were down 4% year-over-year, driven by the mix of AUM flows and the adjustment for certain rebates, partially offset by higher market values. Segment expenses of $714 million were down 4% year-over-year, driven by lower revenue-related expenses and efficiency savings, partially offset by higher investments. Investment and Wealth Management reported pretax income of $63 million, down 41% year-over-year and a pretax margin of 8%. As I described earlier, assets under management of $2 trillion were flat year-over-year. In the first quarter, we saw $18 billion of net outflows driven by index cash, equity and multi-asset strategies, partially offset by net inflows into fixed income and LDI strategies. Wealth Management client assets of $327 billion increased by 6% year-over-year, driven by higher market values and cumulative net inflows. Page 9 shows the results of the Other segment. I'll just note that in this segment, the sequential improvement in both revenue and expenses reflects the absence of net losses on sales of securities recorded in the fourth quarter as well as lower severance expense in the first quarter. I'll close with a few comments on the financial guidance for 2025 that we provided on our earnings call in January. While it is clear that the outlook for the operating environment has become more uncertain, our financial guidance and with it our determination to drive positive operating leverage in a wide range of scenarios remains unchanged. That means we continue to expect full-year 2025 NII to be up mid-single-digit percentage points year-over-year. We continue to expect some fee revenue growth, of course, market dependent. And we continue to expect approximately 1% to 2% year-over-year growth in expenses, excluding notable items. We also continue to expect our effective tax rate for the full year 2025 to be in the 22% to 23% range. Considering our 20% tax rate in the first quarter, that means approximately 23% to 24% for each of the remaining three quarters of the year. And we continue to expect to return approximately 100% plus or minus of 2025 earnings over the course of the year. I'll repeat what I said in January. We continuously manage the pace of our buybacks, considering macroeconomic and interest rate environment, balance sheet growth and many other factors with a conservative bias. To wrap up, BNY posted another set of solid results in the first quarter, which demonstrates our consistent execution and delivery. On the back of our strong balance sheet, we are focused on supporting our clients in navigating the crosscurrents of this uncertain operating environment, all the while continuing to drive at unlocking the opportunity embedded in our company.

Hey, Robin, Dermot, good morning. Another really good quarter in terms of the NII generation and good deposits. I know you guys have talked about how deposit stability is important to NII generation. I know it's early in the year, and we have all this uncertainty. Obviously, a better start than the run rate guide would imply. But just wondering just what you think about just the world of deposits? Do you see any benefits in an uncertain world in terms of flows like to safety and just how we should think about some of the moving parts going forward? Thanks.

Thanks for the question. Look, Q1 as it relates to deposits was right in line with our expectations in terms of balance and mix shift. Q4 is seasonally a strong quarter for us as it relates to overall balances. So we saw some of that moderate in Q1. Now with the elevated uncertainty and volatility in the markets over the last couple of weeks, we have seen a little pickup in deposits overall, but not in a meaningful way that we would have seen two years ago in the regional bank crisis. So we haven't yet seen that kind of port in the storm flight to quality, but people know the strength of our balance sheet and the strength of our liquidity and capital. So we have seen a little bit of a tick up, but not in a way that we saw two years ago.

Okay. So we'll just see if that holds up and go from there. Just bigger picture about just the environment we're in. You have a lot of different businesses, and this is a type of environment where we see a lot of activity potential, I guess, and it was notable to see FX a little softer. But I was just wondering how do you guys see this world in terms of just businesses that either get more active or potentially less active based on how clients act and where you expect to see kind of money flows as you could think about how past cycles would be referenced to this one? Thanks.

Yeah, Ken, I'll take that one. So I think it's fair to see the phases of these types of events to sort of split into two. So there's one, which tends to be a little bit more frenzied activity in the marketplace. That's what we've been seeing over the course of the past 10 days or so in terms of activity. And so that does give rise to higher volumes. And we're seeing that across our platforms for sure. Now we're not a huge trading firm like some others out there, but we see it in terms of high counts on clearing volumes, in terms of activity on liquidity platforms, collateral activity, all the places where you'd expect it to be where we're really capturing the fact that market volumes are up. And to Dermot's point earlier on about liquidity, the reason why we probably haven't seen a big flight into us at this point is because a lot of the activity has been de-levering by people who've been raising cash to pay back lines, not raising cash just to have more dry powder on the sidelines. It hasn't yet been as much long-only liquidation, which tends to raise cash and that cash often ends up on our balance sheet. So it's sort of a little bit of a phasing thing. And then what can happen, and we'll have to see if that does happen. But as things calm down, at some point, it causes CEOs and leadership teams to reflect on how do they want to think about the strategic consequences for their business. And that's where our rentable scale and our platforms and the fact that we have all of these broad capabilities built on this sort of rock-solid foundation, that's what allows us to then capture potential follow-on opportunities where people say, you know what, there are things I used to do for myself that I'd now rather someone like BNY does for me using their platforms. And so that's how I think about the world right now.

And, Ken, to clarify, you mentioned that foreign exchange softness has increased by 3% year-over-year. The figures we provided are the overall company numbers. When we look more closely at our markets business, we saw a solid year-over-year increase. On the other hand, our corporate treasury department is managing foreign exchange placements, which is reflected in net interest income. Therefore, you are seeing an overall company perspective rather than a specific market perspective, and our market performance year-over-year has been strong.

Hey, good morning. Thank you for the question as well. Maybe starting with a bit of a strategic question also, just kind of thinking about the position of the bank, obviously, very strong capital base, lots of liquidity at times of uncertainty and dislocation, there might be some interesting inorganic opportunities that may come up time and again. How are you thinking about that? Maybe it's too early, but just want to get your sense for appetite for M&A if something compelling comes along and if there are areas of particular interest where inorganic growth might make sense?

Thank you, Alex. We are carefully assessing opportunities, which is not just a temporary focus but part of the ongoing efforts of our management team over the past 2.5 years. We believe we have a lot of aspects under control regarding the better operation of the company. You can observe our progress on the sales front, our execution platforms, and our innovation. We will consistently be exploring ways to enhance our platform because we believe it's our responsibility to shareholders. What remains unchanged is our commitment to maintaining strong discipline in acquisitions. We must ensure alignment with our priorities, cultural fit, and attractive financial returns. Opportunities can arise during times like these, and we will approach them thoughtfully. Our experience with the Archer acquisition, which was a smaller capability purchase, has prepared us for this. We're currently enhancing our internal processes to evaluate, acquire, and integrate new opportunities effectively. Lastly, our platform's operating model significantly boosts our ability to integrate new initiatives by providing us with a clear internal roadmap for integration.

Got you. Thanks. And then my follow-up is actually double-clicking into your earlier response to Ken's question around deposits. So up a little, not a ton so far in April. Can you comment also on the mix between interest-bearing and noninterest-bearing in April? And then ultimately, as you sort of think about a more normalized percentage of noninterest-bearing deposits, you guys are at 17%, I think now, even pre-COVID, so kind of before the spike in industry-wide liquidity, you guys were running north of 20%. How do you think about that sort of run rate mix going forward in more sort of uncertain environment? And if, in fact, you enter in a recession, what would that likely look like?

There were many questions in that follow-up, Alex. Regarding net interest income, we are confident in our guidance of 5%. This confidence stems from the strong partnership between the CIO, Treasurer, and our deposit desk that we discussed in previous calls. Our actions from last summer, particularly after Jackson Hole, helped position the firm for net interest income in 2025. On the asset side, as interest rates have risen, there has been some cash sorting as clients seek optimized yields. We don’t prioritize deposits; clients engage with us for various services, which naturally leads to deposits that can convert into operational deposits. Concerning our total deposits, the $281 billion figure has seen a slight increase this quarter, which is typical given that Q4 is usually our strongest for deposits, while Q1 tends to be lower, and Q3 is a seasonal low. We do not anticipate any changes to our overall deposit mix for the rest of the year, which bolsters our confidence in our guidance.

Hey. My first question is about your revenues being up 5% year-over-year while your headcount is down 2%. You have set higher expectations for yourself, but I've noticed that non-compensation expenses are increasing in mid-single digits year-over-year. I'm curious about how long that might trend and the effect on revenues from the decrease in noninterest-bearing deposits. Is this temporary or is it mainly due to the macro environment? Thanks.

So, look, Mike, I think our ability to deliver positive operating leverage through the cycle is the North Star. And I think this is the fifth quarter that we've delivered consistent positive operating leverage. And hopefully, you are beginning to give us credit for being a financially disciplined, well-run company where we have got our expenses under control over the last couple of years, while at the same time, making investments in the strategies that are powering our top line growth and our efficiency growth. And so you're beginning to see those investments paying off. And I'm pleased that you highlighted the headcount number, which just generally means that we're able to do more with less in a digitally empowered way. And as Robin mentioned in his prepared remarks, we still haven't really unlocked the power of AI.

And then the noninterest-bearing deposit question, which might not be answerable, but just any thoughts there?

Noninterest-bearing deposits are approximately where we expected them to be, and we don't anticipate significant changes, which supports our guidance. Net interest income is influenced by our asset management and our projections for deposit mix and levels. At the end of the year, we assessed around 35 different scenarios, a process we repeated in Q1, allowing us to minimize the risk in our expectations for net interest income. For instance, if the Federal Reserve were to reduce rates by 50 basis points tomorrow, we don't believe it would significantly affect our net interest income outlook for the remainder of the year.

Sure. I appreciate you bringing up challenging questions. I'll address both points. First, the recent survey data shows a decline in confidence, which isn't surprising given the uncertain environment that CEOs are facing. This uncertainty makes it difficult to commit to long-term investments, like building factories or initiating new projects. On the consumer side, there are valid concerns about rising prices and the potential for a recession. These factors contribute to a decline in consumer confidence. I believe there are many reasons to expect that confidence will remain low. Previously, I mentioned that at some point, reality and sentiment must align. If this uncertainty persists, it’s more likely that the reality will bring sentiment down rather than an increase in confidence lifting reality up. Given the pause on tariffs and the lack of a clear outlook, I think we should approach the economy's progression over the next six to nine months with some pessimism. I hope I'm wrong, but each day of uncertainty adds negative weight to the situation. On the second question that you asked internationally, look, we are a global firm. 40% of our revenues come from outside of the US. But we're also a firm that provides really critical services to our clients. And so clients always have choices, and we have to earn their business every single day with how we behave and how our platforms operate. But it is this combination of having this reputation of being trusted, having this rock-solid underpinning, which creates this port in a storm capability plus the fact that we do things that are really important. Clearing treasuries for most people is not an optional activity. Having access to a global collateral platform that lets your business operate more effectively, maintaining your access to the rails of the financial system, those are very, very core significant things. And so I'd like to think the combination of the trust, the reputation and then the day-to-day operation will cause our clients to continue to see value with us. But obviously, that's something that we'll have to see how it evolves.

Hey, good morning. I guess maybe, Robin, just to that last point, Dermot and Robin, you mentioned the clearing of treasuries. You have a very deep understanding of the market infrastructure. There's obviously concerns around the treasury market, what's happening, whether the Fed needs to intervene. Just give us a sort of a preview into what you've seen over the last few days. Are things working as smoothly as you would expect and what the risk looks like there or the need for a Fed intervention?

Sure. I would break down the treasury market into a few parts. The system's infrastructure is performing well, and we are experiencing high volumes. Everything is functioning properly, and we have a good understanding of it. There was a slight issue in the three-year auction, which was widely reported earlier in the week, but we had a strong 10-year auction and long bond auction afterward. What’s changed, and this isn't limited to treasuries, is that the depth at the top of the order book has decreased, leading to wider bid-offer spreads. The volume of risk that can be traded at the top of the book is now much smaller, requiring movement deeper into the book to handle larger blocks of risk. This situation is occurring in both the treasury and equity markets. We’ve also noticed typical dislocations, such as differences between ETF NAVs and their underlying securities, which indicate people trying to shift large amounts of risk, affecting liquidity. The Fed will make their own choices on this matter, but historically, they tend to intervene only when markets become fundamentally dysfunctional or very dislocated, making it difficult to transfer risk and disrupting the market’s proper functioning. This week, we haven't observed that; markets are operating well, albeit with reduced liquidity, which means people must pay more to execute their trades. That’s the key distinction I want to highlight. We don't view it as a significant revenue source in the short term, but we consider digital assets a long-term opportunity, whether through creating new products or packaging existing ones. Our focus is on managing assets within our custody business, which is the largest globally with $53 trillion. If new assets emerge, we want to ensure we can manage them effectively. Additionally, we believe that tokenization and employing technology to enhance asset movement efficiency will ultimately benefit us in the long run. And so being able to do sort of transitions between the fiat currency world and the chain world seems to be a sensible place for us to play. It's great to see that legislation proceeding. But then behind it is also a market structure bill. And that would set really the rules of the road, the terms of engagement for how different participants can participate in digital assets. And I think the very helpful thing from this administration has been to sort of create more of this level playing field and say it's a new technology. We don't want anybody to be disadvantaged. We want everybody to be able to participate and let's do what the US is so good at, which is innovate and define global standards.

Hi, good morning. A couple of questions on NII. First, it looks like NII from repo and Fed funds increased again this quarter. Do you see this sustaining? Is there like an expectation for a meaningful drop off? Just help us frame that. And then secondly, your deposit beta was really high, around 90% again this quarter. Obviously, it's a very fluid rate backdrop. But based on what you're seeing, when might this start to level off since I think last cycle, your beta was around 75% or 80% for the cumulative cycle?

Thank you for the question. On the repo side, our net interest income was higher than we anticipated. We have made significant investments in this area over the past few years, and we consider it a vital part of our business in terms of serving our clients and providing products. However, in the grand scheme of our overall net interest income, it represents only about 5%. The business has performed well, with higher balances, although spreads are slightly tighter. There are some ups and downs, but overall, it remains a small part of our total net interest income. Regarding the beta question, we have addressed this in several calls recently. We work with a sophisticated client base and adjust our rates accordingly. Our betas have generally been high, between the low to mid-80s, which is where we expect to be. The marginal beta is around 100%, and if rates were to decrease, we anticipate the betas would perform similarly on the way up. That's our perspective on the matter.

I think it's fair to say that deposits have become somewhat more stable over time, but we shouldn't overlook the current environment, particularly the stress we've observed in recent weeks. People are quick to react, especially regarding interest rates and their investment strategies. There seems to be a consistent trend across all our businesses, where clients are likely to maintain their relationship with us and continue to engage with our various offerings. This reflects an interesting aspect of our ecosystem.

A couple of questions. One, just on the Treasury Direct Express program that's moving over to your platform. I just want to confirm that already started and wanted to get a sense as to anything you can share on how we should expect that's going to roll through and impact, if at all, visible P&L?

I don’t think the profit and loss will be apparent in terms of size or irregularities. We are very pleased to have secured the business. Honestly, this highlights the strength of our platform operating model and our ability to collaborate effectively to win that mandate. This serves as a positive indication that we are progressing well with our treasury service model. We anticipate achieving a ramp-up in the latter part of this year. However, in terms of impacting the firm's revenues, this represents just another satisfied client choosing to work with BNY, and it will contribute to our run rate in the latter part of this year. Therefore, it will be reflected in the full year numbers next year.

Okay. And then as I'm looking at the deposit in the SKU NIB IB, I thought in the past NIB were thinking that might move down towards $44 billion. And is that the case still or not? And if that changed, why?

So we're a little bit higher than that. And so our current beliefs are that it's going to roughly hang into the ZIP code that it's currently in, may moderate a little bit from here due to some cash sorting. But we don't expect any meaningful change on it, and that kind of feeds the 5% guide.

So we were just trying to emphasize that our work has really focused on getting the leverage in the system, and that means continuing to push on the smart management of balance sheets to be able to try and optimize us, which Schuldan emphasized earlier. Solid course on it, so that's not something that we would waiver from our guide at all. And that was a deliberate strategy because we really wanted to eliminate the risk associated with 2025. The team worked on this last year, as net interest income is a valuable contribution to our firm and is part of our overall operating leverage. As Dermot mentioned earlier, positive operating leverage is our primary goal, and we also have other levers, such as fees. The market is variable, but keep in mind that our fees are not solely dependent on the market; they also rely on volume and activity levels. Wove is a software sale as well. Additionally, we have the critical lever of expenses, which Dermot and I have both noted, as we have been investing significantly. I believe the total gross of savings and investments is larger and fits within the 1% to 2% guidance that Dermot provided. This indicates that we have options available if necessary. Positive operating leverage is crucial. Net interest income is certainly strong, but the focus is more on the other factors.

Good afternoon. Dermot, could you share your thoughts on the immunization strategy you mentioned, and Robin, you briefly discussed it last year after Jackson Hole in relation to this year's NII. Would you consider implementing something like that for 2026 as the year unfolds, or was that strategy just a one-time approach?

No, absolutely, we are very focused on 2026. We are actively working on it. We are always monitoring the markets and looking for ways to optimize our balance sheet. The collaboration within our internal team, which we refer to as the tripod, is very strong. I believe we will have a positive outlook for 2026 when we discuss it.

So our expectations have really reinforced that, so we feel good about it. We want to amp it up and we've practiced some of this as well with the RFI piece as Stef mentioned earlier on as we’ve continuously looked at how we optimize effectively through that.

I was looking for a summary number, just a conceptual idea of your expectations since you're discussing various revenue growth initiatives, products, platforms, processes, and team dynamics, while also mentioning clients that are engaging across multiple lines of business. However, you also noted there are some uncertainties related to market conditions. My goal is to gather insights for our earnings models not just for the upcoming quarter, but for the next three to five years. The key question is what should be the core organic growth rate moving forward and what has it been historically? Thank you.

I think that discussion can happen offline when you visit, Mike. Each day, my focus is on achieving consistent positive operating leverage throughout the economic cycle, which involves fees, net interest income, and how we manage our expenses. Regarding fees, they come from several factors like balances and volume, among others. I feel much more confident now than I did two years ago about our capability to innovate, execute well, and enhance our services for our existing clients while also attracting new ones. This is an ongoing journey for us, and we are committed to maintaining a high standard of execution. We are optimistic about our ability to achieve positive operating leverage in both favorable and challenging times.

And, Mike, I'd like to add that if you look at the bigger picture, I want to remind you of one key number before sharing a broader perspective. Specifically, two-thirds of our 6% fee growth in 2024 resulted from market and currency factors, while a third came from organic growth. That's an improvement compared to the previous year, and we are definitely focused on increasing that further. Our goal is to ensure we have the right inputs and that we are taking the right actions to make this growth feasible and achievable. So we have this breadth. And then the question is, can you actually operationalize the joining of these things together? And then do you have innovation? And so we think we're actually attacking the problem through all of those dimensions. And if we do that, we do it consistently and deliberately and relentlessly, then we think we will win. And that's what we're doing.

Thank you, operator. And thanks, everyone, for your interest in BNY. Please reach out to Marius and the IR team if you have any follow-up questions. Be well, and good luck out there.