The Bank of New York Mellon 10-Kyear ended 2024-12-31

Executive Summary

BNY earns fees and interest by safeguarding, administering and managing assets, processing payments and clearing trades for financial institutions, corporations and wealthy clients. It is concentrating on technology-enabled services and a platforms operating model, aiming to serve more client needs while making operations more efficient. In FY2024, stronger markets, new business and client activity supported growth across all three principal segments, while lower special-assessment costs amplified earnings growth. Outsourcing and collateral services offer growth opportunities, but investment-management outflows and more expensive deposit funding show that rising client asset values do not automatically translate into stronger revenue. For investors, the question is whether BNY can sustain underlying profit improvement after unusually favorable expense comparisons fade.

What's Happening in the Business

BNY’s strongest operating momentum came from investment services. Asset Servicing benefited from market appreciation, new business and greater client activity; Treasury Services added business and payment activity; and Clearance and Collateral Management earned more from collateral fees and clearance volumes. Clients’ need to reduce operating costs and meet regulatory requirements creates outsourcing opportunities, even as migration toward lower-fee investment products pressures service pricing.

BNY is investing in technology while pursuing efficiency savings. Its platforms transition seeks greater scale across services, and the acquisition of Archer on 11/1/2024 added technology-enabled managed-account capabilities for asset and wealth managers within Securities Services. Software and equipment expense increased 8% to $1.96B, illustrating that efficiency efforts are funding investment rather than simply reducing spending.

Investment and Wealth Management recovered only part of its previous decline: revenue remained below FY2022. Assets under management increased 3% to $2.03T, supported by $69B of market appreciation rather than positive net flows. Long-term strategies lost $52B, partly offset by $45B entering cash products; this mix matters because cash generally earns lower percentage fees than active equity and alternative strategies.

Management expects net interest income to increase in FY2025, based on market-implied rates at year-end, and expenses to rise slightly as investment and revenue-related costs exceed efficiency savings.

Key Financial Highlights

FY2024 comparisons are against FY2023; prior periods reflect retrospective adoption of renewable-energy investment accounting.

Segment results use BNY’s internal management basis.

• Investment-services drivers: Fees reached $9.42B, +6.5%; assets under custody and/or administration grew 9% to $52.1T. Asset Servicing revenue was $6.87B, +3.9%, while Clearance and Collateral Management contributed $1.84B, +14%.
• Earnings quality: The Federal Deposit Insurance Corporation special assessment produced a $63M expense reduction vs a $632M charge. Corporate and other expenses consequently fell to $254M from $956M, explaining much of the improvement outside the principal segments.
• Investment management recovery: Segment investment and other revenue turned positive at $50M vs $(102)M, principally reflecting the prior-year reduction in a receivable tied to a business sale; management and performance fees rose only 3%.
• Capital returns: Repurchases totaled $3.06B vs $2.60B; common and preferred dividends were $1.54B vs $1.49B. Shares outstanding fell 5.5%, net of issuance. The consistently measured Standardized common equity Tier 1 ratio declined to 11.2% from 11.9%, still above its 8.5% requirement.

Risk Assessment

• Processing and cybersecurity: BNY’s custody, payment and settlement infrastructure handles interconnected client transactions, so system failures, cyberattacks or vendor outages could create losses and disrupt market services.
• Deposit funding: Dependence on institutional client deposits exposes funding costs and liquidity to client activity and withdrawals; average noninterest-bearing deposits declined 16%.
• Investment Management valuation: The reporting unit carries $6.0B of goodwill with estimated fair value only ≈11% above carrying value, leaving earnings vulnerable to impairment if flows, margins or valuation assumptions deteriorate.
• Commercial real estate: Property lending generated $82M of charge-offs, and lower nonperforming balances partly reflected write-offs rather than borrower recovery.
• Legal exposure: Reasonably possible losses could reach $690M above related accruals; unapproved-communications and Pershing compliance matters also leave ongoing regulatory exposure.

What to Watch

• Collateral services: Revenue grew 14% despite lower average tri-party collateral balances; continued fee and clearance growth would support the opportunity, while weakening activity would challenge it.
• Pershing retention: U.S. platform net new assets were $(6)B vs $22B following departure of previously lost business; positive flows would signal stabilization, while further departures would undermine growth.
• Investment-management demand: Net flows were $(7)B; renewed long-term inflows would strengthen fee growth, while continued cash-heavy inflows could leave revenue dependent on markets.
• Platforms execution: Underlying expenses rose modestly while revenue grew; subsequent filings should show whether efficiency savings support investment and wider margins, or whether transition costs consume the benefits.