MAXIMIZING
RETURNS AND
CREATING
VALUE
2014 INVESTOR DAY
OCTOBER 28, 2014
0
Cautionary Statement
A number of statements in our presentations, the accompanying slides and the responses to your questions are “forward-looking statements.” These statements relate to, among
other things, The Bank of New York Mellon Corporation’s (the “Corporation”) expectations regarding: our priorities; expense management; positioning for earnings growth;
investments in organic and revenue growth opportunities and optimizing business mix; impact and upside of normalized conditions; run-rate savings of continuous process
improvement; consolidation of operating platforms; return on technology spend; operating leverage; returns on tangible capital; financial priorities; expanding margins; ability and
estimated time to meet liquidity coverage ratio (“LCR”) and other liquidity and capital standards and regulatory requirements; anticipated tactical, deposit base and balance sheet
actions in current and normalized environments; changes in the composition and yield of investment securities in connection with the LCR; target, projected and estimated (in
current and normalized environments) capital ratios, LCR and leverage ratios, net interest margin, return on common equity, return on tangible common equity, deposit levels and
run-off, EPS and revenue growth; capital plans and position, including target total payout ratio, dividends and share repurchases; possible actions to meet the supplementary
leverage ratio requirement and estimated impact to ratio; normalized environment outlook; financial goals in the current environment and normalized environment on an operating
basis; strategic priorities and key initiatives in investment management and margin impact; investment management financial goals in a flat and rising rate environment;
positioning of markets group for outperformance; markets group strategic priorities and impact on growth, profitability and return on capital; estimated revenue contribution by
business line of markets group; markets group revenue growth and operating margin; investment services strategic priorities and transformation process and impact on operating
margins and earnings growth; strategic platform investments and margin impact; investment services fee growth; investment services financial goals in a flat rate and rising rate
environment; strategic priorities in technology; estimated indexed storage demand, demand for computing, infrastructure cost, headcount, application development unit and total
cost and strategic investment as a percentage of portfolio; technology infrastructure and monetizing technology capabilities; and statements regarding the Corporation's
aspirations, as well as the Corporation’s overall plans, strategies, goals, objectives, expectations, estimates, intentions, targets, opportunities and initiatives. These forward-looking
statements are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the
Corporation’s control).
Actual results may differ materially from those expressed or implied as a result of the factors described under “Forward Looking Statements” and “Risk Factors” in the
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013 (the “2013 Annual Report”), and in other filings of the Corporation with the Securities and
Exchange Commission (the “SEC”). Such forward looking statements speak only as of October 28, 2014, and the Corporation undertakes no obligation to update any forward
looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. For additional information regarding the Corporation,
please refer to the Corporation's SEC filings available at www.bnymellon.com/investorrelations.
Non-GAAP Measures: In this presentation we may discuss some non-GAAP adjusted measures in detailing the Corporation’s performance. We believe these measures are
useful to the investment community in analyzing the financial results and trends of ongoing operations. We believe they facilitate comparisons with prior periods and reflect the
principal basis on which our management monitors financial performance. Additional disclosures relating to non-GAAP adjusted measures are contained in the Corporation’s
reports filed with the SEC, including the 2013 Annual Report, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 and the Corporation’s Earnings Release for
the quarter ended September 30, 2014, included as an exhibit to our Current Report on From 8-K filed on October 17, 2014, available at www.bnymellon.com/investorrelations.
1
Agenda
I.
Overview – Gerald Hassell
II.
Investment Management – Curtis Arledge
III.
Markets Group – Kurt Woetzel
IV.
Investment Services – Brian Shea
V.
Client Technology Solutions – Suresh Kumar
VI.
Liquidity, Capital and Financial Outlook – Todd Gibbons
VII. Q&A – Gerald Hassell
i. Appendix
2
Overview
Gerald Hassell
Chief Executive Officer
Investments Company for the World –
Driven by Twin Engines of Growth
4
Taking aggressive steps to address challenges
Starting to show results
Priorities
• Delivering value-added solutions to our clients
• Generating excess capital and deploying it effectively
• Improving financial performance
– Increasing revenue growth rate in all environments
– Delivering strong expense control and operating leverage
– Optimizing business mix
High-value, lower-risk Investments Company
Maximizing Returns and Creating Value
5
Investments Company for the World
Twin Engines of Growth
− Investment Services
− Investment Management
-
Largest investment services provider
Leading market positions in every servicing business
Leading global custodian with $28.3T in AUC/A
$1.65T in AUM – sixth largest global asset manager; one of three largest
asset managers owned by the eight U.S. G-SIB peers
Revenue
- Fee revenue – 83% of total revenue
- Growth with minimal credit risk or need for incremental capital
Expense
- Staffing, real estate footprint, technology, procurement and corporate services
Capital
- Estimated fully phased-in Basel III Common Equity Tier 1 Ratio of 10%1
- Credit ratings ranked among highest in G-SIB peer group
- 2013 total payout ratio of 83% – top quartile versus CCAR Banks
Earnings
- Investing in organic growth
- Aggressively managing costs
- Poised to benefit as markets return to normalized conditions
1 Fully phased-in Advanced Approach at September 30, 2014. This represents a non-GAAP measure. See Appendix for reconciliation. Additional disclosure regarding non-GAAP.
measures is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations.
6
Expertise Across the Investment Lifecycle
Who We Are
Investment Management
Investment Services
Revenue: ~$4.1B
Pre-tax Income: ~$1.1B
Revenue: ~$10.0B Pre-tax Income: ~$2.8B
We deliver expertise at each stage of the investment lifecycle
Assets
Create
Clear & Settle
Distribute
Hold
Trade
Manage
Restructure
Service
NOTE: Financials for Investment Management and Investment Services reflect last twelve months through 9/30/14 and exclude amortization of intangible assets. Revenue and pretax income are
non-GAAP measures. See Appendix for a reconciliation.
7
Expertise Across the Investment Lifecycle
Who We Serve
Investors
Institutions
Corporations
80%
75
66%
76%
50%
50%
of Fortune 500
Companies
Central Banks, whose
assets make up over
90% of global central
bank reserves
of the Top 1,000
Pension and Employee
Benefit Funds
of the Top 100
Endowments
of the Top 200
Life/Health Insurance
Companies
of the Top 50
Universities
NOTE: See additional disclosures in Appendix.
8
Leveraging Investment Management + Investment Services Combination
Investment
Management
+
Investment
Services
Realizing Opportunities
Leveraging broad
and deep client
relationships
Utilizing cross-platform
capabilities
Balance sheet – seed
capital for our funds;
providing trust, safety
and strength
Capitalizing on intellectual
assets – deep insight into
the changing needs of
asset owners and fiduciaries
9
Benchmarking Our Historical Performance
Total Revenue1
Fee Revenue2
Net Interest
Revenue
Expense3
Return on Equity
2011 Investor
Day Targets
2011-2013
CAGR
3 – 5%
2%
- Higher equity markets
2%
- Higher money market fee waivers
- Lower Issuer Services
- Lower volatility
3 – 5%
1 – 3%
2 – 3%
10%
- Lower rates, partially offset by higher
deposits
–
- Revenue mix
- Increased regulatory costs
4%
8.3%
Factors
4
- Lower earnings
- Increased capital requirements
- Tangible capital, +25% 2013 vs. 2011
NOTE: With the exception of Net Interest Revenue, measures are non-GAAP. See Appendix for reconciliations.
1 Total revenue adjusted for sale of Shareowner Services business, the gain and loss related to an equity investment and net income attributable to noncontrolling interest related to consolidated
investment management funds.
2 Fee revenue adjusted for sale of Shareowner Services business, the gain and loss related to an equity investment.
3 Expenses adjusted for sale of Shareowner Services business, amortization of intangible assets, M&I, litigation and restructuring charges and the charge (recovery) related to investment
management funds, net of incentives.
4 Represents Return on Equity for 2013.
10
Strong Capital Generation
Capital Generation
$B
(cumulative: 2011 – 9/30/14)
$14.0
$13.0
$12.0
$9.9
$10.0
$8.0
$7.1
$6.0
$4.0
$3.2
$2.0
2011
2012
2013
9/30/14
11
Strong Capital Return
89%
2014 CCAR Plan Total Payout1
87%
84%
82%
81%
80%
75%
Shareholder Return of Capital
Under 2014 CCAR Plans
73%
69%
68%
62%
50%
49%
48%
49%
46%
38%
61%
40%
32%
34%
50%
61%
63%
63%
24%
26%
22%
55%
15%
14%
28%
38%
24%
19%
19%
34%
25%
18%
31%
29%
28%
26%
23%
26%
32%
15%
14%
BK
NTRS
STT
AXP
DFS
WFC
KEY
COF
USB
FITB
PNC
STI
RF
JPM
BBT
MS
GS
2014 Dividend Payout
3%
3%
C
BAC
2014 Share Repurchase
1 Information regarding our peers’ payout ratios is derived from their public filings; Net Income is based on IBES estimates as of 3/26/14.
12
Driving Efficiency and Creating Value
Realigned organization in June 2014
Rationalizing staffing to drive operating and cost efficiency
- Greater than $100MM expected in annual run-rate savings by 2015
Reducing real estate footprint – sale of One Wall Street results
in a reduction of 750,000 square feet
Continuous
Process
Improvement
Consolidating operating platforms
Increasing return on technology spend
Focusing on discretionary expenses
Optimizing business mix:
- Sold or exited several non-strategic or lower margin businesses
- Conducted extensive review of possible Corporate Trust divestiture
- Sold 20% equity investment in Wing Hang Bank
- Investing in new growth opportunities
13
Substantial Changes to Our Management Team
CEO
CEO – Inv Mgmt
Chief
Financial Officer
CEO – Inv Services
Jun. 2014
President –
Inv Mgmt
Chief Information
Officer
Apr. 2012
President – Markets
Jun. 2014
Head – Client
Service Delivery
Sep. 2014
New to BNY Mellon
President
Dec. 2012
Chief of Staff
Nov. 2011
Chairman – EMEA
General Counsel
Apr. 2014
Chairman – APAC
Chief Human
Resources Officer
Apr. 2014
Chief Risk Officer
Nov. 2014
New in Role
14
Investing in Revenue Growth Opportunities
Leveraging
Investment Services Scale
Electronic
Trading Platforms
Global Collateral
Services
Separately Managed
Accounts Platform
Investment Management
Distribution
APAC
Strategy
15
Improving Financial Performance – Continued Fee Growth
Fee Growth
Investment
Management
Investment
Services
$MM
+3%
$8,000
$6,726
$6,920
Investment Management
AUM, +7%
̶ $23B of net long-term AUM inflows
Early impact of growth initiatives
Higher market values
$6,000
Investment Services
+5%
$4,000
$3,344
$3,511
LTM
9/30/13
LTM
9/30/14
Higher core Asset Servicing, Clearing Services
and Treasury Services fees:
̶ Continued new AUC/A wins
̶ Growth in Global Collateral Services
̶ Increase in long-term mutual fund assets and
clearing accounts
̶ Higher payment volumes
$2,000
$0
LTM
9/30/13
LTM
9/30/14
NOTE: AUM growth 9/30/14 vs. 9/30/13; AUM inflows aggregates net long-term flows over the last twelve months (LTM) through 9/30/14.
16
Improving Financial Performance – Continued Expense Control
$MM
Noninterest Expense
- Rationalizing staffing levels
$12,000
- Lower pension expense
Flat
$11,000
$10,772
- Simplifying and automating global processes
$10,787
- Insourcing application development
- Leveraging common architecture
- Consolidating offices and reducing real estate
portfolio
$10,000
- Controlling discretionary expenses
$9,000
- Ongoing pressure from regulatory costs
$8,000
LTM - 9/30/13
LTM - 9/30/14
NOTE: Total noninterest expense is non-GAAP and excludes amortization of intangible assets, M&I, litigation and restructuring charges and the charge (recovery) related to investment
management funds, net of incentives. See Appendix for reconciliations. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC,
available at www.bnymellon.com/investorrelations.
17
Improving Financial Performance – Operating Margin Expansion
Operating Margin1
31%
+78 bps
27%
25.7%
26.4%
23%
19%
15%
LTM - 9/30/13
LTM - 9/30/14
1 Represents a non-GAAP measure. See Appendix for reconciliation. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC,
available at www.bnymellon.com/investorrelations.
18
Generating Strong Shareholder Returns
YTD – 9/30/2014
2013 Total Shareholder
Return
2012 Total Shareholder Return
42%
39%
32%
39%
36%
12%
25%
32%
7%
28%
27%
8%
6%
16%
1%
BNY
BNY
Mellon
Mellon
Trust
Proxy S&P 500
Peers
Peer
Average Median
G-SIB
Peer
Group
BNY
BNY
Mellon
Mellon
Trust
Proxy S&P 500
Peers
Peer
Average Median
G-SIB
Peer
Group
BNY
BNY
Mellon
Mellon
Trust
Peers
Average
Proxy
Peer
Median
S&P 500
G-SIB
Peer
Group
NOTE: G-SIB Peer Group includes: HSBC, JPM, BARC, BNP, C, DBK, BAC, CSGN, GS, ACA, MTU, MS, RBS, UBS, Bank of China, BBVA, ICBC, MFG, NDA,
SAN, GLE, STAN, STT, SMFG, UCG, WFC. Proxy Peers include: BLK, SCHW, BEN, JPM, MS, NTRS, PNC, PRU, STT, USB, WFC.
19
Summary
Creating solutions and value for our clients
Delivering operating leverage
Generating strong returns on tangible capital, enabling
- Investment in our businesses
- Dividend increases
- Share repurchases
Flat
EPS Growth
7–9%
Normalized
12 – 15 % NOTE: Normalized environment represents current market consensus on rates, Flat environment assumes no rate increase from present.
20
Investment
Management
Curtis Arledge
Chief Executive Officer
We are the world’s largest multi-boutique investment manager…
…with the clear advantage of being
connected to the world’s largest
investments company.
22
We are the World’s Largest Multi-Boutique Investment Manager
Our unique business model – and how we execute – maximizes the power of
both focus and scale
We have delivered strong financial results and positioned our business for continued
robust and durable growth
We have four priorities
1.
2.
3.
4.
Investment excellence
Client success
Cutting-edge infrastructure at scale
Harnessing the power of BNY Mellon
Continued successful execution will drive shareholder wealth
23
Strong Financial Results
Pretax Income ($MM)1,3
Net Margin2,3
34%
1,160
+30%
32%
895
2011
+205 bps
2014
2011
2014
1 2014 figures refer to trailing 12 months for the period ending Q3 2014; 2011 figures refer to calendar year 2011. 2 Net margin represents pretax margin adjusted to exclude amortization expense with revenue net of distribution expense. 3 This is a non-GAAP measure. See Appendix for a reconciliation. Additional disclosure regarding this measure and other non-GAAP measures is available in the corporation’s reports filed with the SEC available at www.bnymellon.com/investorrelations.
24
Competitive Margins with Upside from Key Initiatives
Projected Margin Impact of Initiatives2
2013 Pretax Margin1
49%
41% 42%
2013 Peer Average
Pretax Margin: 34%
21%
3.0%
2%
37%
36%
34% 35%
24% 24% 30% 32%
32%
1%
1.0%
0%
(1.0%)
0%
(1%)
(1%)
(2%)
GSAM
AB
LM
JPM SSGA JNS
BK
AMG
IVZ
BEN
BLK
EV TROW
(3.0%)
'12
Pretax Margin
'13
'14
'15
'16
'17
'18
Fee Waiver Adjustment
1 Pretax margins adjusted to exclude amortization expense with revenues net of distribution expense and non-recurring items where applicable and available. Fee Waiver adjustment taken from
company filings where disclosed. Peer Average Pretax margin excludes BNY Mellon. Derived from company filings through year-end 2013 and may not be comparable to BNY Mellon’s calculation.
2 Impact on margins from historical and current initiatives. Note: Figures on this page are non-GAAP numbers. Additional disclosure regarding these measures and other non-GAAP adjusted measures
is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations.
25
Margins and Profit Growth Strong Relative to Business Mix and Volatility
2013 AUM Mix vs. Pretax Margin1,2
Manager
60%
T. Rowe Price
Pretax Margin %
50%
40%
BlackRock
Franklin
BNY Mellon
Eaton Vance
Invesco AMG
JPM
30%
State Street
Legg Mason
20%
Janus
AllianceBernstein
GSAM
10%
Bubble Size:
2011-2013 % Pretax Growth
0%
0%
20%
40%
60%
80%
100%
AllianceBernstein
JPM
BNY Mellon
State Street
GSAM
AMG
T. Rowe Price
Legg Mason
Franklin
BlackRock
Eaton Vance
Invesco
Janus
Ratio of
Pretax Growth /
Equity AUM Mix
1.16
0.93
0.79
0.68
0.57
0.49
0.43
0.33
0.32
0.31
0.11
0.05
0.00
2011-2013
% Pretax
Growth2
46
31
26
42
11
31
33
9
16
18
7
2
0
Equity & 50% Multi-Asset (MA) as % of AUM
1 Adjusted to exclude money market fee waivers for BNY Mellon and all peers, where applicable and disclosed. 2 Figures on this page are non-GAAP numbers. Please see Appendix for reconciliation. Additional disclosure regarding these measures and other non-GAAP adjusted measures is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations.
26
Basic Components of Typical Investment Management Businesses
Investments
Client Coverage
Infrastructure
27
How We Get the Best of Both Focus and Scale
Fixed
Income
MultiStrategy
Equities
Specialists
Cash
Boutique Direct
Central Distribution
Institutional
STANDISH
Retirement
Intermediary
Global
Partnered Sales
Wealth
Management
IM Infrastructure
Investment Services Solutions
28
Market-Leading, Diversified Asset Management Business
Sixth Largest Asset Manager in the World1
Rank Manager
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
BlackRock
Vanguard Group
State Street Global Advisors
Fidelity Investments
J.P. Morgan Asset Management
BNY Mellon
PIMCO
Capital Group
Deutsche Asset & Wealth Mgmt
Prudential Financial
Amundi
Goldman Sachs
Northern Trust Asset Mgmt
Franklin Templeton
Wellington
Highly Diversified Business
AUM ($B)
$4,324
$2,753
$2,345
$2,160
$1,598
$1,583 Up from
th in 2011
11
$1,535
$1,339
$1,289
$1,107
$1,072
$1,042
$884
$879
$834
$177
11%
Active Equity (Int’l.)
$90
5%
Active Equity (U.S.)
$221
13%
Active Fixed
Income
$65
4%
Alternatives
$455
28%
Liability-Driven
investments
31%
18%
20%
$293
$345
18%
Cash
21%
13%
9%
Index
Assets Under Management2 ($B)
(9/30/2014)
5%
4%
Q3 2014 Annualized Fee
Revenue (Non-GAAP)3
1 Pensions and Investments as of December 31, 2013.
2 LDI includes Overlay.
3 Fee Revenue reflects annualized net recurring revenue based on annualizing Q3 2014 Investment management fees and distribution fees, net of distribution expense. Additional disclosure
regarding this measure and other non-GAAP adjusted measures is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations.
29
Proactively Cultivating Our Portfolio of Investment Firms
Picking Winning Companies
Reshaping the Portfolio
IRR of Most Recent Large Acquisitions¹
Restructurings
Standish High Yield
ield
Pareto
Pareto
27%
Insight
CIS Short
Short Duration
Duration
CIS Index
19%
Alcentra
Standish
Mellon Capital
Merite
Meriten
n Structured
Structured Credit
50%
Alcentra
Divestitures / Exits
Newton Private
Private Client
Client
38%
Ankura
Weste
estern
rn2
Blackf
Blackfria
riars
rs
1 Represents estimated internal rate of return of large acquisitions (>$100MM) from acquisition through December 31, 2013.
2 Subject to regulatory approval.
30
Investment Performance
From Conventional Analysis to a Scientific, Client-Objectives Driven Perspective
100%
80%
5 Year Investment Performance
Active Equity Investment Performance¹
% AUM Ahead of Benchmark / Peers
% AUM Ahead of Peers
84%
85%
100%
74%
80%
60%
49%
40%
82%
67%
60%
40%
20%
20%
0%
Total
Active Fixed
Income
Multi-Asset /
Alternative
Active Equity
0%
Sharpe Ratio
Downside
Outperformance
1 Analysis limited to large funds where peer data is readily available.
31
Aligning Our Portfolio with Industry Trends
Regulatory restrictions on
bank lending and portfolio
activities
Expanded need for yield
with less
volatility than
Direct
Lending
equities
Improved access to
BNY
Mellon
alternatives
and Client Needs
Growth in emerging
economies
Diversification
of global
Emerging
Market
portfolio
Private Equity
Rapid growth in passive
investing
Alternatives Diversifier
Return with reduced
exposure
to market
Long/Short
volatility
Enhanced
passive
Smart Beta
investment solutions
Pension de-risking
Stable, higher yielding
assets Farmland
with inflation
Global
protection
Shift to fixed income driven
by demographics and
reduced risk tolerance
Opportunistic
Fixed income returns with
reduced exposure to
Fixed
Income
interest rate
risk
32
Aligning Our Portfolio with Industry Trends
Direct Lending
and Client Needs
Emerging Market
Private Equity
Global Farmland
Smart Beta
Opportunistic
Fixed Income
BNY Mellon
Alternatives Diversifier
Long/Short
33
Distribution Reach: Transforming and Expanding Actions
Balanced Distribution
Core Fee Revenue Q2 2014 by Channel1,2
Re-engineered entire central distribution organization
- Integrated sales, marketing and product development
- Organized by region with sales further organized by channel
51%
Upgrading and adding distribution talent
100%
- New Global Heads for Distribution, Marketing, and Product
- New Regional Heads for Retail, Institutional, and Retirement
- Bolstered sales teams
49%
BoutiqueDirect
Central
Distribution
Total
1 Data shown is Q2 2014 without Wealth Management and cash / money market funds. Revenue is Q2 2014 annualized management fee and distribution / 12-b revenue, net of annualized
distribution expense. Revenue also includes Performance Fees and other revenue on an earned four quarter rolling basis.
2 This is a non-GAAP measure. See Appendix for a reconciliation. Additional disclosure regarding this measure and other non-GAAP measures is available in the corporation’s reports filed
with the SEC, available at www.bnymellon.com/investorrelations.
34
Deep Client Base and Diverse Regional Exposure
Sovereign Wealth Fund Managers1
UK Retail Fund Operators²
Rank
1
2
3
4
5
6
7
8
9
10
Rank
1
2
3
4
5
6
7
8
9
10
Manager
State Street
BNY Mellon
BlackRock
Legg Mason
Northern Trust
Goldman Sachs
J.P. Morgan Asset Mgmt
PIMCO
HSBC
Legal & General
AUM ($B)
$274
$103
$94
$90
$77
$47
$42
$31
$28
$27
Manager
Invesco Perpetual
M&G Securities
Threadneedle
BNY Mellon
Schroders
Jupiter
Fidelity
Henderson
Legal & General
St. James’s Place
AUM (£B)
£46
£43
£29
£29
£26
£24
£23
£21
£19
£18
• #1 provider of Liability-Driven Investment
Strategies1
• #9 U.S. Defined Contribution Investment
Only (DCIO) Manager1
• #5 U.S Defined Benefit Manager¹
• #3 European Alternatives UCITS Manager3
• #7 Insurance Manager (Unaffiliated)¹
• #1 Foreign Offshore Manager in Japan4
Diversified Client Base
Client Segments and Regions
Retail Clients
19%
APAC 7%
EMEA
43%
Institutional
Clients
81%
Americas
50%
• #7 U.S. Endowments & Foundations
Manager1
Segment AUM5,6
Region AUM6,7
1 Pensions and Investments as of December 31, 2013. 2 Investment Management Association as of December 31,2013. 3 MondoAlternative as of Q2 2014. 4 Japan Securities Dealer Association.
5 Retail AUM includes Wealth Management; Institutional AUM includes institutional investments in Mutual Funds. 6 Data as of Q3 2014. 7 Region refers to client domicile.
35
Industry Leading Flows
Industry Leading Flows
Flows Across a Variety of Asset Classes
LT Asset Flows: Q1 2011 - Q2 2014 ($B)2
LT Asset Flows: Q1 2011 - Q2 2014 ($B)¹
8
26
JPM
BK
Allianz
BLK
AMG
SSGA
GS
BEN
IVZ
TROW
EV
FII
JNS
LM
AB
(100) (50)
64
242
144
LDI
Index
Active
Alternative
Total
Clarifying the Impact of Success in LDI and Index
All Long-Term
Assets
2011
Mgmt Fee Revenue (MM)³
-
50
100
150
200
250
300
2,454
2Q 2014
Ex. LDI / Index
Total Growth
(Flow + Market)
2Q 2014
2,891 +156
2,735
Avg. AUM (B)4
904
1,303
993
Revenue / AUM (bps)
27.2
22.2
27.5
1 Derived from company filings through 2Q 2014 and may not be comparable to BNY Mellon’s calculation. 2 LDI includes currency and overlay flows. 3 Reflects management fees and distribution fees, net of
distribution expense. 4 Average AUM reflects the average of reported quarter-end AUM.
36
Accelerating Our Connection to Clients With Our Leading
Wealth Management Business
Industry Leader
US
Rank1
1
2
3
4
5
6
7
8
9
10
Manager
Bank of America Global Wealth/ IM
Morgan Stanley Wealth Management
J.P. Morgan
Wells Fargo
UBS Wealth Management
Goldman Sachs
BNY Mellon Wealth Management
Fidelity
Northern Trust
Charles Schwab
Deep Client Relationships
Client
Assets
($B)
$1,082
$937
$625
$495
$403
$235
$201
$187
$186
$175
• 97% retention rate
• 93% more than satisfied
• 94% would refer others
Average Relationship Size ($MM)
$10.5
$5.5
BNY Mellon
Industry
2
1 Barron’s 2014 list of Top U.S. Wealth Managers, Ranked by U.S. assets in relationships of more than $5 million.
2 Cerulli Quantitative Update, High-Net-Worth and Ultra-high-net-worth Markets, 2013.
37
Wealth Management Expanding Sales Force in Key Markets
Presence in Top 25 Markets
$2MM Income-Producing
Households¹
Sales coverage
strong presence
Expansion goal
1 Nielsen 2012; Market size based on number of high net worth households ($2MM+ income-producing assets).
38
Wealth Management Leveraging the Strengths of BNY Mellon
Asset Management
Corporate Cross Referrals
Bringing institutional quality capabilities to Wealth
clients through our investment boutiques
Demonstrated success developing qualified
leads with other businesses
Launched new insurance product
leveraging Dreyfus
Capital Markets
Significant provider of foreign exchange,
derivative strategies and liquidity management
solutions
Investments
Wealth & Estate Planning
Private Banking
Family Office
Trust & Custody
Planned Giving
Pershing
Utilizing platform for self-directed capabilities
Lending to end-clients of Pershing financial
advisor clients
Created industry’s only combined banking
+ brokerage solution
Asset Servicing
Global custody platform serving clients
domestically and internationally
39
Leveraging the Competitive Advantage of Being Part of BNY Mellon
Client Relationships
Cross-Platform Capabilities
Deep client and counterparty relationships with the world’s most sophisticated asset owners, intermediaries, and
fiduciaries delivers:
- Enterprise wide relationships
- Extensive access to investment
decision makers
Drives
revenue
Balance Sheet
Connection to Asset Servicing and Pershing delivers:
- Infrastructure scale benefits to Boutiques and Wealth
Management
- Platform innovations to reach new
Boosts
clients globally e.g., APAC SMA
efficiency and
- Distribution channel access to RIAs
growth
Intellectual Capital
Large balance sheet and strong capital position delivers:
- Seed Capital for our funds
- Perception of trust, stability
and strength
Fosters
innovation
Being part of The Investments Company for the World
delivers:
- Unmatched view of changing market structure - Deep insight into the evolving needs Makes us a
of asset owners and intermediaries
smarter
investment
manager
40
Raising Our Visibility as The Investments Company for the World
Official Investments Company of the
San Francisco 49ers
41
Summary
• Delivered strong financial results and positioned for continued success
• Proactively managing our diverse portfolio of investment capabilities
• Investing in deepening connections to our exceptional client base
• Gaining efficiency and insight from our infrastructure at scale
• Leveraging the clear advantages of being the investors within The Investments Company for the World
42
Investment Management Financial Goals (2015-2017)
Flat
Normalized
Revenue
5–7%
8 – 10 %
Pretax Income
8 – 10 %
12 – 14 %
43
Markets Group
Kurt Woetzel
President
Most comprehensive provider
of securities financing and collateral
management solutions
45
Optimizing our business mix
• Focus on scale, margins and return on capital
• Direct investments in electronic platforms and capital-efficient solutions
Priorities
• Aligning with Investment Services client base
• Extending client relationships
• Providing capital and liquidity solutions
• Eliminating redundant activities
• Revenue growth of 8 to 10% with operating margin of 40+%
Accelerating growth, profitability and returns on capital
46
The Markets Group at a Glance
Delivering integrated solutions, enhancing client performance
What We Offer
Securities Finance
Lend securities, finance collateral, provide liquidity and
transform assets
Collateral Management
Segregate and optimize collateral, manage initial and
variation margin, liquidity services
Foreign Exchange
Currency trading as principal, including spot, swap,
forward, non-deliverable forward products, as well as
currency administration and payments services
2014 Est. Revenue Contribution
Capital
Markets
12%
Foreign
Exchange
42%
Collateral
Management
26%
Securities
Finance
20%
Capital Markets
Fixed income and equity execution, underwriting and
secondary trading
Total Revenue of $1.3B
47
Scale and Experience
21% CAGR
1,000
Our Focus
- 80 of the top 100 alternative managers
- 12 of the top 15 financial market infrastructure providers
- 15 of G-20 Sovereign Funds
Market Metrics ($B)
2Q12
19% CAGR
2Q14
681
Ranking & Awards1
610
2% CAGR
Global Investor/ISF:
First Place
Collateral Management
Fixed Income Lender
Global Custodian:
Roll of Honor
Securities Lending
Collateral Optimization
Global Finance:
Best Forecast
Best FX Research
World’s Best FX Providers
434
38% CAGR
8
267 280
14
Term
Financing
Securities Lending
assets on loan
Collateral
Balances
Gross FX Trading
Volumes
1 See Appendix for additional details regarding these rankings.
48
We are Connected to Investment Services
Driving recurring revenue streams
Asset &
Alternative
Managers
Asset
Owners
Banks /
Broker-Dealers
& Advisors
Corporates /
Issuers
Insurance
Derivatives Margin
Management
Collateral
Management
Collateral
Management
Segregation
Liquidity Services
Foreign
Exchange
& Capital
Markets
Securities
Finance
FX Negotiated
Sales
FX Services
Capital Markets
Securities Lending
Collateral
Financing
NOTE: Asset Owners includes pensions, endowments, foundations and sovereigns.
49
Forces at Play Driving Changes in the Business Model & Creating Opportunities
Forces
Dodd-Frank /
EMIR
Implications
BNY Mellon Opportunities
- Limits large counterparty exposure
- Segregating client assets
- Demand for collateral transformation
- Promoting collateral efficiency
- Increases collateral needs for cleared &
un-cleared trades
- Providing another highly-rated counterparty
- Expanding services to market utilities
- Requires central clearing of OTC securities
- Introduces CCPs as asset gatherers
Regulation
Transparency
in Execution
- Encouraging use of bank-prime model
Basel III
- Creates capital constraints for dealers
Volcker Rule
- Restricts U.S. banks from making proprietary
investments that do not benefit clients
- Moving clients into bank financing model
- Spread compression
- Post-trade pricing analytics
- Limits the provisioning of liquidity
- Electronic trading and broad inventory
of FX products
Transparency
/MiFID
- Providing balance sheet efficient products
50
Client Example of Value Creation
Situation
Alternative Manager client experienced rapid growth and outpaced original prime brokerage service offering
Collaboration and expertise enabled BNY Mellon to create a unique solution for this client
Leveraged Capabilities
Incremental client use of services
Asset
Servicing
Prime
Services
Markets Group
Collateral
Management
Securities
Finance
Capital
Markets
Unique banking, brokerage and collateral capabilities
Client Benefits
Combined prime brokerage, banking and collateral capabilities to improve performance of the fund
Result &
Approach
BNY Mellon Benefits
Leverages scalable technology and unique operational capabilities to generate profitable growth
Enhanced performance for the alternative manager
51
Summary
Priorities
• Aligning with Investment Services client base
• Extending client relationships
• Providing capital and liquidity solutions
• Eliminating redundant activities
• Revenue growth of 8 to 10% with operating margin of 40+%
Enhance profitability and return on capital
52
Investment Services
Brian Shea
Chief Executive Officer
We are the world’s largest
investment servicer,
connected to the world’s largest investments company.
54
Improving client solutions, enhancing operating margins and
accelerating earnings growth
Priorities
• Extending our leadership positions in each business
• Leveraging entire BNY Mellon franchise to expand relationships
• Investing in strategic platforms for high-growth markets
• Increasing return on existing technology investment
• Complying with new regulatory requirements
• Delivering consistent profitable growth
Continuously improve productivity and reduce structural costs
55
Global Leadership in Investment Services
BNY Mellon Investment Services1
Asset Servicing
Leading global custodian
and alternatives administrator
Corporate Trust
#1 global service provider
U.S. Government Clearing
#1 (U.S.), growing globally
Depositary Receipts
#1 global provider
Clearing Services
#1 clearing firm
(U.S., U.K., Ireland and Australia)
Strategic Goals
Treasury Services
Top 5 in U.S.D. payments
- Highest value provider
- Industry service quality and
productivity leader
- Industry technology leadership
Markets and Collateral Services
Client Service Delivery
Client Technology Solutions
1 See Appendix for additional details regarding these rankings.
56
Diverse Revenue Streams Reduce Earnings Volatility
Shifting Future Revenue Mix Toward Recurring Fees
Recurring Fees
-
Percentage of Revenue (2013) *
Account-based
Position-based Asset Levels
Balance-based Technology-based Transactional Fees
- Market Volumes
- Volatility Interest or Spread Driven
- Interest Rates
- Capital / Liquidity
26%
38%
Recurring
Fees
Interest or
Spread
Driven
36%
Transactional
Fees
* Estimated.
57
Revenue Mix has Shifted
Asset Servicing, Clearing and
Treasury Services Fees
Issuer Services, FX, NII, Other Revenue
(4.1%)
CAGR
+3.3%
CAGR
55%
51%
49%
45%
2011
2013
2011
2013
NOTE: Represents percentages of total revenue for the Investment Services segment.
58
Actions Yielding Results 2011-2013 CAGR
LTM 9/30/14
1.8%
1.5%
1.5%
0.1%
Investment Services
Fee and Other Revenue
Investment Services
Fee to Expense
Coverage Ratio
Total
Noninterest
Expense
Investment Services
Fee and Other Revenue
Total
Noninterest
Expense
2012
2013
LTM 9/30/14
93%
93%
94%
NOTE: Coverage ratio excludes amortization of intangibles and litigation.
59
Delivering Client Solutions, Creating Growth
Growth Opportunities and Strategies
Asset
Servicing
-
Fund manager middle-office services
Insurance accounting, middle-office services
Alt. investment manager capabilities
Risk aggregation, managed account solutions
Eagle technology capabilities
Clearing
Services
-
Self-clearing broker-dealer
RIA custody
Prime brokerage and custody
Multi-custodial technology capabilities
Private banking solutions for intermediaries
Corporate
Trust
- Collateralized loan administration/servicing
- Reinsurance, collateral services for insurers
- U.S. Government entity technology solutions
Depositary
Receipts
Treasury
Services
U.S. Gov’t
Clearing
- Tax reclaim services
- Emerging market growth
- Enhanced global payment capabilities
- Global trade and supply chain finance
- Corp. treasury management solutions
-
U.S. Government clearance
U.S. Tri-party repo solutions
Global collateral growth
Collateral optimization technology
60
Diverse Client Base of Industry Leaders
Investment Managers
(Traditional/Alternative)
Asset Owners
Insurers
Banks, Broker-Dealers
and Advisors
Corporate / Issuers
61
Leveraging BNY Mellon Franchise to Serve Clients and Shareholders
Building Enterprise Client
Relationships
Leveraging Investment Management
and Investment Services
Cross-Investment Services
Solutions
Highly overlapping client base
- Asset owners
Asset owner platform access
- Money fund/cash management
Mutual fund sub-accounting
- Asset managers
- Mutual fund supermarket
- Sovereign wealth funds
- No-transaction-fee mutual funds
- Broker-dealer and advisors (retail
intermediary distribution strategy)
- Alternative investments
Over 75% of top 100 clients have
enterprise relationships
Private banking solutions
Clearance, settlement, custody
and treasury services
Prime brokerage and prime custody
Custodial and brokerage
securities lending
Bank and brokerage custody
Shared technology solutions
Separately managed accounts
Core fund services
62
Strategic Platform Investments in High Growth Markets
Market Opportunity1
Global Private
Wealth
Core Principles
- $50T in global high net worth assets, growing at ~7%
- Scalable, global solutions
Anchor clients
Fund Manager
Middle-Office
Services
Hedge Fund
Middle-Office
Services
Alternative
Investment
Services
- $2T AUM potentially in play for middle-office services
- Variable cost middle office operations and technology
Scalable platform
solutions
- $2.5T in global alternative assets, growing at 6%
- Shift to alternatives
- Multi-asset class, full lifecycle solutions
- $3T in real estate and private equity assets,
expanding at 10%
- Highly complex servicing needs
Cross-business solutions
Shared economies of
scale for all clients
63
Strategic Platform Investments in High Growth Markets
Margin Impact
Global Private
Wealth
Estimated Incremental Margin Contribution from
Strategic Platform Investments1
Fund Manager
Middle-Office
Services
1.3%
Hedge Fund
Middle-Office
Services
2015
Scalable platform
solutions
Shared economies of
scale for all clients
(1.3%)
2014
Anchor clients
Cross-business solutions
(0.1%)
(1.1%)
Alternative
Investment
Services
Core Principles
2016
2017
1 Incremental margin impact is estimated assuming flat rate environment.
64
Global Regulatory Change Impacts Costs and Creates Opportunity
Select U.S. Regulations:
Select European Regulations:
-
-
Comprehensive Capital Analysis and Review
Stress Testing (CCAR/DFAST)
Total Loss Absorbing Capacity
Supplementary Leverage Ratio
Liquidity Coverage Ratio
Tri-Party Repo Reform
Net Stable Funding Ratio
Recovery and Resolution Plans
FATCA
Cost Basis Reporting
Alternative Investment Fund Managers Directive
European Market Infrastructure Regulation
Data Management Standards
Securities Finance Reform
Target2 Securities
Markets in Financial Instruments Directive
Central Securities Depository Regulation
Financial Transaction Tax
Bank Levies
65
Transformation Process Drives Productivity for Clients and Shareholders
Transforming for Success Process
Business
Excellence
Continuous
Process
Improvement
Provides Funding for:
$500MM+
Corporate
Services
Client Tech
Solutions
Excellence
-
Revenue growth initiatives
Expense reduction initiatives
Regulatory change
Improved operating margin
NOTE: Enterprise expense savings in relation to estimated expenses through 2017.
66
Actions to Drive Value for Clients and Shareholders
Business Excellence
Continuous Process Improvement
Maximizing business
performance
Improving our client and employee
productivity and quality, reducing risk and cost
Managing the portfolio,
expenses and processes
Business
Excellence
Continuous
Process
Improvement
Creating cross-business value
Corporate Services
Consolidating offices and reducing
real estate portfolio
Corporate
Services
Client Tech
Solutions
Excellence
Driving global process ownership
Re-engineering and automating manual
processes
Client Technology Solutions Excellence
Insourcing application development
Enabling location strategy
Simplifying infrastructure, rationalizing
business applications
Vendor management
Driving higher return on technology investment
67
Business Excellence
Optimizing Our Business Mix
Portfolio Review Considerations
Recent Divestitures and Exits
– Sub-scale
– Not profitable
– Shareowner services
– Non-scalable
– Capital intensive
– Sourcenet
– Low margin
– Low growth
– Adversely impacted by
regulatory change or
market factors
– Corporate Trust Japan
– Corporate Trust Mexico
– U.S. derivatives clearing/
futures clearing merchant
– German derivatives
clearing
– Transition management
– Derivatives sales and
trading
68
Continuous Process Improvement Improves Margin and Creates Investment Capacity
Levers for Continuous Improvement
Global Process
Ownership
Driving Business Outcomes
- Global Process Ownership of 40 core processes
Digital Pulse
- Increasing straight through processing rates
- Simplifying and standardizing platforms
Process Automation /
Re-engineering
Centers of Excellence
- Re-engineering and process automation
- Expanding Centers of Excellence
Platform Consolidation
Location Strategy
- Balancing regional / global workforce
- Aligning global business process and real estate
Continuously improving client and employee productivity while reducing risk and cost 69
Corporate Services
Aligning Service Providers to Support Our Strategy
Real Estate Strategy
- Facilities management
outsourcing
- Real estate plans aligned
with business strategy
- Fewer and more efficient
locations
Vendor Spend
- Data providers
- Sub-custody
relationships
- Professional and
consulting engagements
Business Partner Efficiency
Corporate Overhead
- Efficiently comply with
regulatory requirements
- Discretionary expense
management
- Automate support
functions
- Manage business
demand
- Technology vendor costs
70
Client Technology Solutions Excellence
Premium Services
Platform Integration
Core Simplification
Deliver High-Value Technology Solutions
Generate Recurring Fee Revenue
Extend Platforms beyond Custody, Clearing, Core Processing
Integrate Solutions across the Investments Lifecycle
Leverage Core Platform
Recover Costs for Existing Services
Shift Investment from Tactical to Strategic
Value
Creation
Retire/Consolidate Applications
Insource: Develop Talent,
Retain Business Knowledge
Delivering a high return on technology investment
71
Summary
Goals
1. Highest Value Provider
2. Industry Service Quality and Productivity Leader
3. Industry Technology Leadership
Growth Priorities
Performance Priorities
- Extend leadership in each business
- Embrace regulatory change
- Deliver cross-business client solutions
- Manage the business portfolio
- Strategic platform investments in high growth markets
- Strengthen continuous improvement culture
- Increase return on technology investment
- Reduce structural costs
- Drive technology solutions revenue
- Deliver consistent profitable growth
Continuously improve productivity and reduce structural costs
72
Investment Services Financial Goals (2015-2017)
Flat
Normalized
Revenue
3–4%
4–6%
Pretax Income
4–6%
10 – 12 %
NOTE: Excludes intangible amortization.
73
Client Technology
Solutions
Suresh Kumar
Chief Information Officer
Leading financial services
technology company
75
Accelerating technology development to enable client solutions
Priorities
• Simplifying our technology offerings and driving higher returns
- Consolidating operations into Global Delivery Centers to reduce complexity and
costs
• Getting more out of infrastructure and application development spend
• Shifting our investment from tactical to strategic
- Enhancing client experience
- Expanding common architecture
- Providing tools to help clients and employees work smarter
- Leveraging Big Data
- Extending and monetizing technology platforms and solutions
Doing more for less
76
Driving Higher Return on Infrastructure Investment
In an Era of Increasing Demand for Technology Services...
Demand for Computing
(Indexed # of server instances)
Storage Demand
(Indexed petabytes)
48%
12%
148
109
112
127
100
100
2012
2013
2014 Est.
2012
2013
2014 Est.
77
Driving Higher Return on Infrastructure Investment
Annual Infrastructure Spend Reduction
(Indexed $)
(6%)
100
- Enhancing service levels
- Modernizing infrastructure
- Managing technology risk
98
94
2012
2013
2014 Est.
78
Insourcing Application Development
Application Development Resources
(Indexed Headcount)
8%
108
108
- Enhancing capacity and shifting demand
toward internal resources
- Greater flexibility and control over
resource deployment
100
- Training our team to leverage common
component-based architecture
- Accelerating time to market by optimizing
software development processes
- Powering innovation and creating
intellectual capital by owning our domain
knowledge
Employees
Vendor
2012
2013
2014 Est.
79
Reducing Application Development Cost
Application Development
Total Cost
(Indexed $)
Application Development Unit Cost
(Indexed $/Resource)
- Enhancing talent pipeline through campus
recruiting and establishing innovation centers
(1%)
100
100
99
99
(6%)
96
94
- Improving productivity by defining
performance-based outcomes
- Increasing reusability of development
components by leveraging common
architecture
2012
2013
2014 Est.
2012
2013
2014 Est.
NOTE: Includes Employees, Professional & Purchased Services Expenses.
80
Shifting from Tactical Expense to Strategic Investments
Shifting Technology Investments
Select Strategic Investments
Strategic Investments as % of Portfolio
100%
Tactical
Digitizing BNY Mellon:
Powering the world’s investments through our private cloud, BXP
(BNY Mellon Extreme Platform)
2
Strategic
Digital Pulse:
Achieving excellence through
data-driven insights
3
Technology-Driven Business Solutions:
Eagle, Albridge, HedgeMark
1
80%
60%
40%
20%
0%
Q1
Q2
2013
Q3
Q4
Q1
Q2
Q3
2014
NOTE: Strategic Investments includes projects focused on strategic architecture and growth, strategic client commitments, solution development and transformation and efficiency programs.
81
1
Simplifying Our Technology: Digitizing BNY Mellon
Benefits
Common Portals
BNY Mellon
Connect
Client Service
Delivery
Digital
Workplace
APIs1
Marketplace
Application Development & Data Management
Common Services
Data Services
Business Services
Data Center as a Service
Standardize
Virtualize
- Enhanced client and employee experience
- Strengthen service levels at lower cost
- Consolidated number of applications
- Access to 3rd party solutions
- Using Cloud and Virtualization
for faster time to market
Cloud enable
- Leveraged Big Data to generate insights
Our platform as a service, BXP, ties these layers together and enables us to capture the benefits of our architecture
1 API: Application Programming Interface
82
1 Simplifying Our Technology: Digitizing BNY Mellon
Deploying BXP, our Platform as a Service – Simplifying
infrastructure and providing capacity on demand at a lower cost
Decreasing Time to Market
(Indexed time to provision server)
Reducing Total Cost of Ownership
(Indexed cost per CPU core)
68%
90+%
Non-BXP
Leverage and protect
existing investments
BXP
Simplify environment,
consolidate applications
Non-BXP
BXP
Improve responsiveness
to changing needs and markets
83
1 Simplifying Our Technology: Digitizing BNY Mellon
1
Client Experience Continues to Strengthen
Users Satisfied
Client Experience Index
+5%
+7%
Net Promoter Score
Registered Users
+9 pts
+82%
SOURCE: Client surveys
1 Improvement observed in past 12 months.
84
2
Digital Pulse: Working Smarter Through Evidence-Based Decision Making
Business
Agility
Evidence Based Management Culture
Strategic Experiments
Business Intelligence and Analytics
Performance Measurement
Customer Segmentation
Mass Communication
Process Optimization
A-B Testing
Disciplined Process Culture
Common Processes
Component Reuse
Single Face to Customers
Straight-Through-Processing
Scalability
Culture of Heroics
Task Automation
Efficiency
IT Solutions
Digitized
Platforms
Working
Smarter
SOURCE: Dr. Jeanne W. Ross, Center for Information Systems Research (CISR), MIT Sloan School of Management, 2013.
85
2
Digital Pulse: Our Big Data Ecosystem
Business
Events
Internet
of Things
1
Intelligent
Dashboards
Virtual
Sensor
Visualizations
Capture
3
Predictive
Analytics
Analyze
Big Data
2
4
Store
Act
Plug
and Play
Single Version
of Truth
Alerts
Operations
Optimization
Intelligent
Workflow
86
2
Digital Pulse: Leveraging Big Data for Continuous Improvement
Digital Pulse is our proprietary Big Data analytics platform, enabling us to generate actionable
insights to improve processes and business performance
Makes analytics accessible
Outcomes
Empowers employees
with real-time insight
- Improves client experience
- Reduces structural costs
Identifies waste
Digital
Pulse
- Increases client and product profitability
- Reduces risk
Creates analytics platform
that works across enterprise
- Improves service level management
Leverages Cloud, Big Data and
Internet of Things
87
Technology Drives Our Business
3
Delivering leading platforms
- Leading custody platform
- Provides fund administration capabilities to majority of the market
- Largest wealth management platform with 600+ retail websites
Providing clients access to third-party offerings
- Empowering clients to access a broad range of market leading solutions
- 250+ integrated partners provide solutions on our platform
Maximizing return on technology investments
- Revenue from targeted business solutions, consulting and outsourcing services
-
Enabling clients to leverage our scale to ‘variablize’ and reduce costs
88
Come See Our Technology at Work
Visit the Technology Expo
89
Liquidity, Capital and
Financial Outlook
Todd Gibbons
Chief Financial Officer
BNY Mellon’s business model, generating
recurring fees and significant capital with
low credit risk.
91
Financial priorities
• Maintaining a strong balance sheet: excellent credit quality, significant liquidity
and strong capital
• Complying with new liquidity standards and optimizing net interest margin
• Complying with new capital standards and deploying excess capital effectively
• Managing ongoing regulatory requirements
• Growing EPS and return on tangible common equity
Expanding operating margins and driving earnings growth
92
Balance Sheet – Excellent Asset Quality
Nonperforming Assets
($MM)
Risk-Weighted Assets as a Percentage of Balance Sheet Assets
(%)
$400
$341
$300
$200
$147
52%
$100
43%
$0
12/31/11
12/31/11
9/30/14
Risk-Weighted Assets
9/30/14
Provision for Credit Losses ($MM)
2011
$1
2012
($80)
2013
($35)
YTD-9/30/14
($49)
93
Managing to Final Liquidity Coverage Ratio Rule
On Track to Meet Requirements
Requires sufficient high quality liquid assets (“HQLA”) to offset regulatory-defined stressed net outflows over a 30-day liquidity
horizon
U.S. banks with >$250B in
assets subject to full U.S.
LCR starting in 20151
̶ LCR rules were finalized
in Sept. 2014
Stressed outflow assumptions for each deposit type based on
regulatory definitions
- Higher outflow assumptions for certain deposits make
them less valuable
80% ratio required by Jan. 2015 and 100% by Jan. 2017
Restructuring deposit base to maximize value
Optimizing balance sheet to comply and generate earnings in
both flat and normalized rate environments
1 Also includes banks with >$10B of international exposure. Other >$50B banks required to comply with modified LCR by 2016.
94
Managing to Final Liquidity Coverage Ratio Rule – Current
Regulatory and Internal Models Guide Investment Options
Funding Sources – Stable Funding
per LCR
Yes
Invest in Non-HQLA
Invest in HQLA
LCR Short-Term Funding: $151B
LCR Stable Funding: $167B
- Non-Core Deposits
- Other Cash Outflows
- Core Deposits
- Long-Term Debt & Equity
Assets: $154B (Yield: 150 bps)
- Securities
- Interbank Placements
No
- Loans
- Munis
- Commitment Outflows
Assets: $164B (Yield: 70 bps)
- Qualifying Sovereigns
- Central Banks
Estimated LCR
- Agencies
- Other HQLA
100+%
(as of 9/30/14)1
NOTE: For illustrative purposes only. Both assets and liabilities are net of non-interest earning assets; yields are approximate. Estimated LCR is based on our interpretation of the final U.S. LCR
rules published on Sept. 3, 2014 and on the application of these rules to BNY Mellon’s businesses as currently conducted. These ratios are necessarily subject to, among other things, our ongoing
review of the applicable rules, further implementation guidance from regulators, the development of market practices and standards and any changes BNY Mellon may make to its businesses.
Consequently, these ratios remain subject to ongoing review and revision and may change based on these or other factors.
1 LCR is a non-GAAP measure calculated by dividing HQLA assets by net cash outflows over a 30-day hypothetical liquidity stress scenario.
95
Managing to Final Liquidity Coverage Ratio Rule – Flat Environment
Portfolios Designed to Meet Liquidity, Capital and Interest Rate Risk Management Requirements
HQLA Assets - $164B
LCR Runoff Funding - $151B
Non-HQLA Assets - $154B
LCR Stable Funding - $167B
Total Yield
Total Yield
Fixed
Securities
Mortgages
Loans
Floating
Securities
Loans
Interbank Placements
3.1%
1.0%
Fixed
Treasuries / Qualifying
Sovereigns
Agency RMBS / Debentures
Qualifying Corporates
1.2%
Floating
Federal Reserve Deposits
EUR Central Bank Deposits
GBP Central Bank Deposits
JPY Central Bank Deposits
0.25%
(0.20%)
0.50%
0.10%
Yield Subtotal
Yield
1.4%
Yield
0.20%
0.7%
NIM (as of 9/30/14) 94 bps
NOTE: Yields are approximate; EUR central bank deposit rate is as of 9/4/2014.
96
Managing to Final Liquidity Coverage Ratio Rule
Tactical Actions We are Taking
Assets
Allocating a portion of interbank placements to HQLA
Reducing low-yielding non-HQLA
- Munis, ABS, low-yielding loans
Increasing high-yielding non-HQLA
- CLOs, mortgage loans, leveraged loans
Liabilities
Increasing HQLA duration
Adjusting EUR deposit rates downward
Optimizing composition of deposit base
97
Our Deposit Base has Strong Sensitivity to Monetary Policy and Rates $300
We expect $40 - $70B of deposit runoff in normalized environment
BNY Mellon Deposits ($B)
$250
$200
$150
Acutal
BK Deposits
Deposits
Actual BK
$100
Model Predicted Deposits
$7,700
1.7%
$8,000
2.0%
$8,600
2.2%
$9,400
2.3%
$10,000
2.4%
Total deposits ($B) at
U.S. banks and BK
Market Share
$50
$0
1Q10
1Q10
1Q111Q11
1Q121Q12
1Q131Q13
1Q141Q14
1Q151Q15
1Q161Q16
1Q171Q17
NOTE: Actual results may vary materially. Please refer to the cautionary statement.
98
Managing to Final Liquidity Coverage Ratio Rule
Tactical Actions We are Taking
Assets
Allocating a portion of interbank placements to HQLA
Reducing low-yielding non-HQLA
̶ Munis, ABS, low-yielding loans
Increasing high-yielding non-HQLA
Adjusting EUR deposit rates downward
Optimizing composition of deposit base
NIM
Flat Environment*
̶ CLOs, mortgage loans, leveraged loans
Increasing HQLA duration
Liabilities
LCR 100+%
Expected
deposit run-off
in normalized
environment
95 – 100 bps
Normalized Environment
125 – 150 bps
NOTE: For illustrative purposes only. Both assets and liabilities are net of non-interest earning assets; yields are approximate. Estimated LCR is based on our interpretation of the final U.S. LCR
rules published on Sept. 3, 2014 and on the application of these rules to BNY Mellon’s businesses as currently conducted. These ratios are necessarily subject to, among other things, our ongoing
review of the applicable rules, further implementation guidance from regulators, the development of market practices and standards and any changes BNY Mellon may make to its businesses.
Consequently, these ratios remain subject to ongoing review and revision and may change based on these or other factors. LCR is a non-GAAP measure.
*Includes 4Q14 Planned Actions
99
Strong Capital Generation: Disciplined Deployment
$B
Gross Capital Generation
Capital Deployment
(cumulative: 2011 – 9/30/14)
(cumulative: 2011 – 9/30/14)
$14.0
$13.0
$12.0
$9.9
$10.0
$8.0
Retention
47%
($6.1B)
$7.1
Share
Repurchases
33%
($4.3B)
$6.0
$4.0
$3.2
Dividends
20%
($2.5B)
$2.0
2011
2012
2013
9/30/14
100
Operating Environment and Regulatory Requirements
Have Impacted Return on Capital
30%
25%
Return on Tangible Common Equity (%) — non-GAAP (adjusted)1
ROTCE – Est. 2017
Flat Environment
17 – 19%
25%
22%
Normalized
Environment
20%
20%
20 – 22%
15%
15%
14%
14%
Return on Tangible Common
Equity (%)
Peer Median: Return on
Tangible Common Equity (%)
10%
2011
2012
2013
NOTE: Peer data obtained from SNL Financial. For 9/30/14, Peer Median ROTCE data unavailable. See Appendix for Peer Group. Actual results may vary materially. Please refer to the
cautionary statement
1 Represents a non-GAAP measure. See Appendix for reconciliation. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC,
available at www.bnymellon.com/investorrelations.
101
Strong Capital Position – Well Positioned for Stress Scenarios
Least
Impact
Most
Impact
Impact of March 2014 DFAST Stress Test Severely
Adverse Scenario on Basel I Tier 1 Common Ratio
AXP
BK
BK
BBT
STI
USB
PNC
NTRS
FITB
DFS
ALLY
KEY
RF
COM
STT
WFC
MTB
UNB
BBVA
RBS
BMO
HBAN
JPM
COF
BAC
C
SC
MS
ZB
GS
HSBC
0%
2%
4%
6%
8%
10%
SOURCE: Federal Reserve – Dodd-Frank Act Stress Test (DFAST) 2014: Supervisory Stress Test Methodology and Results. See Appendix for additional detail.
102
Common Shares Outstanding Below Pre-Crisis Level
BK
BK
Common Share Count Change
Since Pre-Crisis1
GS
ICBC
BoC
STT
JPM
Mitsubishi
BNP
CSGN
NDA SEK
WFC
ACA
BBVA
HSBA
STAN
Sumitomo
SocGen
MS
UBS
Santander
Mizuho
BAC
BARC
DB
UniCredit
C
RBS
0.0 %
910%
100.0 %
200.0 %
300.0 %
400.0 %
500.0 %
600.0 %
1 Represents G-SIBs: Pre-crisis defined as of 9/30/07, share count as of 6/30/07 in cases where data undisclosed as of 9/30/07; current data as of 9/3/14; SNL Financial (share count data). 103
Disciplined Capital Deployment
Dividends & Share Repurchase Goals
Total payout ratio of ~80 – 100%
- Dividends: ~25 – 30%
Investment Goals
Focused on organic growth
- Business line extensions; new products;
technology platforms
- Share repurchases: 55 – 70%
Acquisitions must fill a gap and enhance
our core strategy
Investments in organic growth and acquisitions
must exceed financial hurdles
- IRR well in excess of cost of capital
Generating capital of ~$560-$740MM* p.a.
at a 100% payout ratio
Projected returns must exceed that
of repurchasing shares
NOTE: Assumes regulatory and other approvals.
* Range based on annual intangible amortization (net of tax) and employee equity benefit plans between 2011-2013.
104
Complying with Regulatory Capital Requirements
Estimates
BHC Estimated Fully Phased-in Basel III Common Equity Tier 1
Regulatory
Minimum1
9/30/142
Standardized Approach3
8%
10.8%
Advanced Approach3
8%
10.0%
2015 - 2017
11 – 12%
Estimated Supplementary Leverage Ratio
Holding Company3
Regulatory
Minimum4
9/30/142
Flat
Environment
Normalized
Environment
>5%
4.6%
5 – 6%
6 – 7%
1 Including buffers and surcharges, on a fully phased-in basis we may be subject to a CET1 standard of 8%, including a minimum of 4.5%, a capital conservation buffer of 2.5% and a G-SIB
surcharge of 1%.
2 Preliminary.
3 These represent non-GAAP measures. See Appendix for reconciliations. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC,
available at www.bnymellon.com/investorrelations.
4 Reflects a 3% minimum and a >2% buffer. Actual results may vary materially. Please refer to the cautionary statement.
105
Path to SLR Compliance
20 to 110 bps
70 to
80 bps
25 to
35 bps
10 to
15 bps
5 to
10 bps
Reduce Matched
Book
Potential VIE
Deconsolidation
Trading Book
Contraction
6% - 7%
4.6%
Estimated
9/30/14 *
Deposits
Reduction
Capital
Retention
12/31/17
Other potential incremental actions include preferred stock issuance, lowering
deposit pricing and reducing unfunded commitments
NOTE: Represents Bank Holding Company. Actual results may vary materially. Please refer to the cautionary statement.
* This represents a non-GAAP measure. See Appendix for a reconciliation. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the
SEC, available at www.bnymellon.com/investorrelations.
106
Normalized Environment Outlook: 2015 Through 2017
External Assumptions
2015-2017 Outlook
Market Values
Equities
+4-5% annually
Interest Rates
Fed Funds
(2Q15 –
2017)
+20-30 bps/qtr
Treasuries
2-Year
10-Year
+10-30 bps/qtr
+10-20 bps/qtr
Volatility1
Internal Assumptions
Expenses
2015-2017 Outlook
Core
Expense Base
Impacted by revenue mix
Higher occupancy costs in
2015
Regulatory
Cost
Increasing in absolute terms;
rate of growth slowing
Pension
Higher in 2015
Provision
Annual loan loss provision of
$10-$30MM
Tax Rate
27%
+10-20%
Market Volumes
In line with GDP
Geopolitical
In line with current state
Other
1 Uses CBOE volatility index as a proxy. Actual results may vary materially. Please refer to the cautionary statement.
107
Regulatory Change Drives Costs, Capital and Liquidity Requirements
Selected Regulatory Change Initiatives Data Management Standards
Liquidity Coverage Ratio
Tri-Party Repo Reform
Money Market Fund Reform
Recovery and Resolution Plans Supplementary Leverage Ratio
Volcker Rule
Pending
Current Focus
Today
Net Stable Funding Ratio
Bank Levies
Financial Transaction Tax
Total Loss Absorbing Capacity
108
Financial Goals – Operating Basis: 2015 Through 2017
Flat
Normalized
Revenue Growth
3.5 – 4.5%
EPS Growth
7 – 9%
6 – 8%
12 – 15%
Return on Tangible Common Equity
17 – 19%
20% – 22%
Assumptions
NIM: 95 - 100 bps
NIM: 125 - 150 bps
Operating margin: 28 – 30%
Operating margin: 30 – 32%
Environment: no deterioration in volatility,
volume, short-term interest rates
100% payout ratio
Execution on expense and revenue initiatives
Equity market, +5% p.a.
Reasonable regulatory outcomes
Deposits, money market balances and fee waivers recovery as modeled
NOTE: Financial projections are reflected on a non-GAAP basis - excludes merger and integration, restructuring and litigation expenses and other non-recurring items. Represent non-GAAP
measures. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. Actual results
may vary materially, Please refer to the cautionary statement.
109
Q&A
Summary
• Creating solutions and value for our clients
• Driving profitable revenue growth
• Delivering operating leverage
• Generating strong returns on tangible capital, enabling
- Investment in our businesses
- Dividend increases
- Share repurchases
Flat
EPS Growth
7 – 9 %
Normalized
12 – 15 % 111
Appendix
Investment Management
Major Contributor to Our Strong Capital Position
Financial Implications of Potential Separation
Capital
Earnings
Price / Earnings
Impact
Potential
Valuation Impact
RemainCo’s spot and stress capital position is weaker post-separation
- Asset Management - spin requires debt to fund a repatriation of
capital to RemainCo
- RemainCo - issue stock or reduce future capital payout to
neutralize impact on capital
Negative
Cost of additional debt
Loss of synergies between businesses
Asset Management would face public company costs
Negative
Currently, no material multiple differentiation
Neutral
114
G-SIB, CCAR and Corporate Peer Groups
CCAR Banks
G-SIB Members
11-Member
Corporate Peer Group
BNY Mellon
Bank of China
BNY Mellon
PNC Financial Services
BlackRock
Bank of America
Banco Bilbao Vizcaya Argentaria
Northern Trust
SunTrust Banks
Charles Schwab
Barclays
BNP Paribas
State Street
Regions Financial
Corporation
Franklin Resources
Citigroup
Credit Suisse
American Express
JP Morgan Chase
JP Morgan Chase
Goldman Sachs
Credit Agricole
Discover Financial
BB&T
Morgan Stanley
HSBC
Deutsche Bank
Wells Fargo
Goldman Sachs
Northern Trust
JP Morgan Chase
Industrial and Commercial Bank
of China
KeyBank
Morgan Stanley
PNC Financial Services
Capital One
Citigroup
Prudential Financial
U.S. Bancorp
Bank of America
State Street
Morgan Stanley
Royal Bank of Scotland
Mitsubishi UFJ FG
Mizuho FG
Fifth Third Bank
Standard Chartered
U.S. Bancorp
Nordea
Wells Fargo
State Street
Santander
UBS
Societe Generale
Wells Fargo
Sumitomo Mitsui
Unicredit Group
115
Estimated Fully Phased-In Basel III CET1 Ratio - Non-GAAP1
($MM)
Total Tier 1 capital
9/30/14
$
21,019
Adjustments to determine estimated fully phased-in Basel III CET1:
Deferred tax liability – tax deductible intangible assets
Intangible deduction
Preferred stock
Trust preferred securities
Other comprehensive income (loss) and net pension fund assets:
Securities available-for-sale
Pension liabilities
Net pension fund assets
—
(2,388)
(1,562)
(162)
578
(675)
—
Total other comprehensive income (loss) and net pension fund assets
(97)
Equity method investments
(92)
—
Deferred tax assets
Other
Total estimated fully phased-in Basel III CET1
2
$
16,720
$
154,298
Under the Standardized Approach:
Estimated fully phased-in Basel III risk-weighted assets
Estimated fully phased-in Basel III CET1 ratio – Non-GAAP2
Under the Advanced Approach:
Estimated fully phased-in Basel III risk-weighted assets
10.8%
$
167,933
Estimated fully phased-in Basel III CET1 ratio – Non-GAAP2
10.0%
1 Sept. 30, 2014 information is preliminary.
2 Beginning with June 30, 2014, risk-based capital ratios include the net impact of including the total consolidated assets of certain consolidated investment management funds in
risk-weighted assets. These assets were not included in prior periods.
116
Business – Revenue and Pretax Income
Revenue
($MM)
Investment Management
Investment Services
Pretax Income
($MM)
Investment Management
Investment Services
4Q13
1Q14
2Q14
LTM
9/30/14
3Q14
$ 1,061
$ 970
$ 1,036
$ 1,003
$ 4,070
2,470
2,477
2,513
2,588
10,048
4Q13
1Q14
2Q14
LTM
9/30/14
3Q14
$ 301
$ 277
$ 202
$ 276
$ 1,056
648
699
689
753
2,789
NOTE: Pretax metrics for Investment Services and Investment Management exclude the impact of intangible amortization.
117
Disclosures
All statistics are global and represent the minimum number of BNY Mellon client relationships in each category.
• Fortune 500 (as of 12/31/13)
// Fortune magazine, May 2013; Global 500 data
• Central Banks (as of June 2013)
// CIA World Factbook, IMF, annual reports
• Pensions & EB Funds (as of 2/26/14)
// Reprinted with permission of Pensions & Investments, Copyright 2013 // Metric is Plan Assets, millions (converted in thousands) • Endowments (as of 2/26/14)
// Reprinted with permission of NACUBO, Copyright 2013 // Metric is Total Market Value of Endowments, in thousands, as of
FYE 2011
// Data source used by P&I Magazine
• Life & Health Insurance Companies (as of 2/26/14)
// Reprinted with permission of A.M. Best Company, Inc., Copyright 2013 // Metric is 2012 Total Admitted Assets, in thousands
• QS World Universities Top 50 (of 400 listed) (as of 12/31/2013)
// www.topuniversities.com/university-rankings/world-university-rankings/2013
118
Historical Performance – Growth Rates
2011
2013
14,798
15,048
50
80
302
-
-
9
Total Revenue – Non-GAAP
$14,446
$14,959
Fee Revenue – GAAP
$11,566
$11,715
302
-
-
9
($MM)
Total Revenue - GAAP
Less: Net income attributable to noncontrolling interests
related to consolidated investment management
funds
Impact of Shareowner Services
Net gain related to an equity investment
Less: Impact of Shareowner Services
Net gain related to an equity investment
2011-2013
CAGR
Net income applicable to common shareholders of The
Bank of New York Mellon Corporation – GAAP
Add: Amortization of intangible assets, net of tax
Net income applicable to common shareholders of The
Bank of New York Mellon Corporation excluding
amortization of intangible assets – Non-GAAP
2%
Add: M&I, litigation and restructuring charges
Net charge related to the disallowance of certain foreign
tax credits
Fee Revenue – Non-GAAP
$11,264
$11,706
2%
Net interest revenue – (GAAP)
$2,984
$3,009
0%
Noninterest expense- GAAP
Less: Intangible amortization (excludes impact of
Shareowner Services for 2011)
M&I, litigation & restructuring
$11,112
$11,306
415
342
390
70
189
-
Impact of Shareowner Services
Net charge related to investment management funds,
net of incentives
Noninterest expense– Non-GAAP
-
12
$10,118
$10,882
($MM)
2013
$2,040
220
2,260
45
593
Net charge related to investment management funds,
net of incentives
9
Net income applicable to common shareholders of The
Bank of New York Mellon Corporation, as adjusted – Non­
GAAP1
$2,907
Average common shareholders’ equity
$34,832
Return on common equity – Non-GAAP1
8.3%
4%
1 Non-GAAP excludes M&I, litigation and restructuring charges, the net charge related to the disallowance of certain foreign tax credits and the net charge related to investment management funds, net of
incentives, if applicable.
119
Noninterest Expense – Non-GAAP
($MM)
4Q13
Total noninterest expense – GAAP
1Q14
2Q14
3Q14
LTM 9/30/14
$2,877
$2,739
$2,946
$2,968
$11,530
82
75
75
75
307
M&I, litigation and restructuring charges
2
(12)
122
220
332
Charge (recovery) related to investment management funds, net
of incentives
-
(5)
109
-
104
$2,793
$2,681
$2,640
$2,673
$10,787
Less: Amortization of intangible assets
Total noninterest expense excluding amortization of intangible assets,
M&I, litigation and restructuring charges and the charge related to
investment management funds, net of incentives – Non-GAAP
($MM)
Total noninterest expense – GAAP
Less: Amortization of intangible assets
M&I, litigation and restructuring charges
Charge (recovery) related to investment management funds, net
of incentives
Total noninterest expense excluding amortization of intangible assets,
M&I, litigation and restructuring charges and the charge related to
investment management funds, net of incentives – Non-GAAP
4Q12
1Q13
2Q13
3Q13
LTM 9/30/13
$2,825
$2,828
$2,822
$2,779
$11,254
96
86
93
81
356
46
39
13
16
114
-
39
(27)
-
12
$2,683
$2,664
$2,743
$2,682
$10,772
120
Operating Margin – Non-GAAP
LTM 9/30/13
LTM 9/30/14
$15,070
$15,614
Net securities gains (losses)
(152)
(99)
Loss (gain) on equity investments & asset sales
(184)
175
Accretable discount
(226)
(179)
Earnings attributable to non-controlling interest
(75)
(77)
58
68
Gain on the sale of our investment in Wing Hang
-
(490)
Gain on the sale of the One Wall Street building
-
(346)
Core Revenue
$14,491
$14,666
Total Expense – GAAP
$11,254
$11,530
Amortization of intangible assets
(356)
(307)
M&I, litigation & restructuring
(114)
(332)
Net charge related to investment management funds, net of incentives
(12)
(104)
Core Expense
$10,772
$10,787
Core Pretax Income
$3,719
$3,879
Core Pretax Margin
25.7%
26.4%
($MM)
Total Revenue - GAAP
FTE adjustment
121
Disclosures
Broker-Dealer Services: #1 (U.S.), growing globally
Leading provider of U.S. Government securities clearance services
Source: Federal Reserve Bank of New York - Fedwire Securities High Volume Customer Report,
March 2013
Alternative Investment Services: #3 fund administrator
Based on single manager funds and funds of hedge fund assets under administration combined.
Source: HFMWeek 20th Biannual AuA Survey - June 2013
Corporate Trust: #1 Global Corporate Trust Service Provider
Source: Thomson Reuters and Dealogic, first quarter, 2013
Depositary Receipts: #1 in market share (~60%)
Leader in sponsored global depositary receipts programs
Source: BNY Mellon. Data as of December 31, 2013
Pershing: #1 U.S. clearing firm
Pershing LLC., ranked by number of broker-dealer customers
Source: Investment News, 2012
Treasury Services: Top 5 in U.S.D. payments
Fifth largest participant in CHIPS funds transfer volume
Fifth largest Fedwire payment processor
Source: CHIPS High Volume Customer Report, June 2013 and Fedwire High Volume Customer
Report, June 2013
Asset Management
Sixth largest global asset manager
Source: Pensions & Investments, December 2013
Wealth Management
Seventh largest U.S. wealth manager
Source: Barron’s, Sept 2013
Collateral Management (2014) & Fixed Income Lender (2014) – First Place
Source Global Investor/ISF
Securities Lending (2013) and Collateral Optimization (2014) – Roll of Honor
Source: Global Custodian
Best Forecast, Best FX Research and World’s Best FX Provider (2014)
Source: Global Finance
122
Pretax Operating Margin – Investment Management
($MM)
2011
2013
LTM
9/30/14
Income before income taxes – GAAP
$682
$968
$928
Add: Amortization of intangible assets
213
148
128
Money market fee waivers
94
108
125
-
12
104
$989
$1,236
$1,285
$3,396
$3,928
$4,070
412
429
430
148
147
151
242
255
276
$3,078
$3,607
$3,765
32%
34%
34%
Net charge related to investment management funds, net of incentives
Income before income taxes excluding amortization of intangible assets, money market fee waivers and the charge related
to investment management funds, net of incentives – Non-GAAP
Total revenue – GAAP
Less: Distribution and servicing expense
Money market fee waivers benefiting distribution and servicing expense
Add: Money market fee waivers impacting total revenue
Total revenue net of distribution and servicing expense and excluding money market fee waivers - Non-GAAP
Pre-tax operating margin excluding amortization of intangible assets, money market fee waivers, the charge related to
investment management funds, net of incentives and net of distribution and servicing expense – Non-GAAP1
1 Income before taxes divided by total revenue.
123
Pretax Income Growth – Non-GAAP – Investment Management
($MM)
2011
2013
LTM 9/30/14
Income before income taxes – GAAP
$682
$968
$928
Add: Amortization of intangible assets
213
148
128
-
12
104
$895
$1,128
$1,160
Charge (recovery) related to investment management funds, net
of incentives
Income before income taxes excluding amortization of intangible
assets and the charge related to investment management funds, net of
incentives – Non-GAAP
2013 vs 2011
Growth Rate
LTM 9/30/14
vs 2011
Growth Rate
26%
30%
124
Return on Tangible Common Equity – Non-GAAP
($MM)
2011
2012
2013
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP
$2,510
$2,419
$2,040
Add: Amortization of intangible assets, net of tax
Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding
amortization of intangible assets – Non-GAAP
269
247
220
2,779
2,666
2,260
-
-
-
-
-
-
240
339
45
Net charge related to the disallowance of certain foreign tax credits
-
-
593
Net charge related to investment management funds, net of incentives
-
12
9
Net income applicable to common shareholders of The Bank of New York Mellon Corporation, as adjusted
– Non-GAAP2
$3,019
$3,017
$2,907
Average common shareholders’ equity
$33,519
$34,333
$34,832
Less: Average goodwill
18,129
17,967
17,988
5,498
4,982
4,619
Add: Deferred tax liability – tax deductible goodwill1
967
1,130
1,302
Deferred tax liability – intangible assets1
1,459
1,310
1,222
$12,318
$13,824
$14,749
24.5%
21.8%
19.7%
Less: Gain on the sale of investment in Wing Hang
Gain on the sale of the One Wall Street building
Add: M&I, litigation and restructuring charges
Average intangible Assets
Average tangible common shareholders’ equity
Return on tangible common equity – Non-GAAP adjusted2
1 Deferred tax liabilities are based on fully phased-in Basel III rules.
2 Non-GAAP excludes M&I, litigation and restructuring charges, the net charge related to investment management funds, net of incentives and the net charge related to the disallowance of
certain foreign tax credits, where applicable.
125
Dodd-Frank Act Stress Test – Severely Adverse Scenario
Bank Holding Company
American Express Company
BNY Mellon
BB&T Corporation
SunTrust Banks
U.S. Bancorp
PNC Financial Services Group
Northern Trust Corporation
Discover Financial Services
Fifth Third Bancorp
Ally Financial
KeyCorp
Regions Financial Corporation
Comerica Incorporated
State Street Corporation
Wells Fargo & Company
M&T Bank Corporation
UnionBanCal Corporation
BBVA Compass Bancshares
RBS Citizens Financial Group
BMO Financial Corp.
Huntington Bancshares Incorporated
JPMorgan Chase & Co.
Capital One Financial Corporation
Bank of America Corporation
Citigroup
Santander Holdings USA
Morgan Stanley
Zions Bancorporation
Goldman Sachs Group
HSBC North America Holdings
Ticker/
Identifier
AXP
BK
BBT
STI
USB
PNC
NTRS
DFS
FITB
ALLY
KEY
RF
CMA
STT
WFC
MTB
UNB
BBVA
RBS
BMO
HBAN
JPM
COF
BAC
C
SC
MS
ZB
GS
HSBC
Tier 1 Common Ratio (%)
Actual Q3 2013
Ending
Minimum
12.8
14.1
9.4
9.9
9.3
10.3
13.1
14.7
9.9
7.9
11.2
11.0
10.7
15.5
10.6
9.1
11.1
11.6
13.9
10.8
10.9
10.5
12.7
11.1
12.7
13.7
12.6
10.5
14.2
14.7
14.0
16.1
8.4
9.0
8.3
9.0
11.7
13.7
8.4
6.3
9.3
9.0
8.6
14.7
8.2
6.2
8.1
8.5
10.7
7.6
7.4
6.7
7.8
6.0
7.2
7.3
7.6
3.6
9.2
6.6
12.1
13.1
8.4
8.8
8.2
9.0
11.7
13.2
8.4
6.3
9.2
8.9
8.6
13.3
8.2
6.2
8.1
8.5
10.7
7.6
7.4
6.3
7.8
5.9
7.2
7.3
6.1
3.6
6.9
6.6
Stress
Impact
0.7
1.0
1.0
1.1
1.1
1.3
1.4
1.5
1.5
1.6
2.0
2.1
2.1
2.2
2.4
2.9
3.0
3.1
3.2
3.2
3.5
4.2
4.9
5.2
5.5
6.4
6.5
6.9
7.3
8.1
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Estimated SLR – Non-GAAP
Estimated SLR - Non-GAAP1
($MM)
Total CET1 - fully phased-in
9/30/14
$
1,560
Additional Tier 1 capital
Total Tier 1 capital
16,720
$
18,280
Total leverage exposure:
380,409
Quarterly average total assets
Less: Amounts deducted from Tier 1 capital
20,166
Total on-balance sheet assets, as adjusted
360,243
Off-balance sheet exposures:
11,694
Potential future exposure for derivatives contracts (plus certain other items)
—
Repo-style transaction exposures included in SLR
21,924
Credit-equivalent amount other off-balance sheet exposures (less SLR exclusions)
33,618
Total off-balance sheet exposures
Total leverage exposure
Estimated SLR
$
393,861
4.6%
1 The estimated fully phased-in SLR as of Sept. 30, 2014 is based on our interpretation of the Final Capital Rules, as supplemented by the Federal Reserve’s final rules on the SLR. On a
fully phased-in basis, we expect to satisfy a minimum SLR of over 5%, 3% attributable to a regulatory minimum SLR, and greater than 2% attributable to a buffer applicable to U.S. G-SIBs.
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Disclosures
IMPORTANT INFORMATION
 BNY Mellon Investment Management is one of the world’s leading investment management organizations and one of the top U.S. wealth managers,
encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is
the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its
various subsidiaries generally. Products and services may be provided under various brand names and in various countries by subsidiaries, affiliates and
joint ventures of The Bank of New York Mellon Corporation where authorized and regulated as required within each jurisdiction.
 Products or services described herein are provided by BNY Mellon, its subsidiaries, affiliates or related companies and may be provided in various
countries by one or more of these companies where authorized and regulated as required within each jurisdiction. Certain investment vehicles may only
be offered through regulated entities or licensed individuals, such as a bank, a broker-dealer or an insurance company. However, this material is not
intended, nor should be construed, as an offer or solicitation of services or products or an endorsement thereof in any jurisdiction or in any circumstance
that is otherwise unlawful or unauthorized. The investment products and services mentioned here are not insured by the FDIC (or any other state
or federal agency), are not deposits of or guaranteed by any bank and may lose value.
 This material is not intended as an offer to sell or a solicitation of an offer to buy any security, and it is not provided as a sales or advertising
communication and does not constitute investment advice. MBSC Securities Corporation, a registered broker-dealer, FINRA member and wholly owned
subsidiary of BNY Mellon, has entered into agreements to offer securities in the U.S. on behalf of certain BNY Mellon Investment Management firms.
 Securities in Canada are offered through BNY Mellon Asset Management Canada Ltd., registered as a Portfolio Manager and Exempt Market Dealer in all
provinces and territories of Canada, and as an Investment Fund Manager and Commodity Trading Manager in Ontario.
 The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When
you sell your investment you may get back less than you originally invested.
 Rankings include assets managed by BNY Mellon’s investment boutiques and BNY Mellon Wealth Management. Each ranking may not include the same
mix of firms.
 Alcentra Limited, Insight Investment Management Limited, Newton Capital Management Limited, Newton Investment Management Limited and Walter
Scott & Partners Limited are authorized and regulated by the Financial Conduct Authority. The registered address for Alcentra Limited is 10 Gresham
Street, London, EC2V7JD, England. The registered address for Insight Investment and Newton is BNY Mellon Centre, 160 Queen Victoria Street, London,
EC4V 4LA, England. The registered address for Walter Scott is One Charlotte Square, Edinburgh, EH2 4DR, Scotland.
 The Alcentra Group refers to the affiliated companies Alcentra, Ltd. and Alcentra NY, LLC. AUM includes assets managed by both companies.
 BNY Mellon Cash Investment Strategies (CIS) is a division of The Dreyfus Corporation.
128
Disclosures
 Insight Investment Management Limited and Meriten Investment Management GmbH do not offer services in the U.S. This presentation does not constitute
an offer to sell, or a solicitation of an offer to purchase, any of the firms’ services or funds to any U.S. investor, or where otherwise unlawful.
 BNY Mellon owns 90% of The Boston Company Asset Management, LLC and the remainder is owned by employees of the firm.
 BNY Mellon owns a 19.9% minority interest in The Hamon Investment Group Pte Limited, the parent company of Blackfriars Asset Management Limited and
Hamon Asian Advisors Limited which both offer investment services in the U.S.
 Insight investment's assets under management are represented by the value of cash securities and other economic exposure managed for clients. Services
offered in the U.S., Canada and Australia by Pareto Investment Management Limited under the Insight Pareto brand.
 Meriten Investment Management GmbH does not offer services in the U.S It was formerly known as WestLB Mellon Asset Management KAG mbH.
 The Newton Group (“Newton”) is comprised of the following affiliated companies: Newton Investment Management Limited, Newton Capital Management
Limited (NCM Ltd) and Newton Capital Management LLC (NCM LLC). NCM LLC personnel are supervised persons of NCM Ltd and NCM LLC does not
provide investment advice, all of which is conducted by NCM Ltd. Only NCM LLC and NCM Ltd offer services in the U.S. AUM for the Newton Group include
assets managed by all of these companies (except NCM LLC).
 BNY Mellon owns a 20% interest in Siguler Guff & Company, LP and certain related entities (including Siguler Guff Advisers, LLC).
 Securities transactions are effected, where required, only through registered broker-dealers. Pershing is the umbrella name for Pershing LLC (member
FINRA, SIPC and NYSE), Pershing Advisor Solutions (member FINRA and SIPC), Pershing Prime Services (a service of Pershing LLC), Pershing Limited
(UK), Pershing Securities Limited, Pershing Securities International Limited (Ireland), Pershing (Channel Islands) Limited, Pershing Securities Canada Limited,
Pershing Securities Singapore Private Limited and Pershing Securities Australia Pty. Ltd. SIPC protects securities in customer accounts of its members up to
$500,000 in securities (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org. SIPC does not protect
against loss due to market fluctuation. SIPC protection is not the same as, and should not be confused with, FDIC insurance. Investment products (other than
deposit products) referenced in this brochure (including money market funds) are not insured by the FDIC (or any other state or federal agency), are not
deposits of or guaranteed by BNY Mellon or any bank or non-bank subsidiary thereof, and are subject to investment risk, including the loss of principal amount
invested.
129