BNY Mellon CEO on Pushing Bank's 240-Year Legacy Forward

240 years now, you haven't been there for the whole 240, but you've been there for quite a while and now you get to sort of helm what is a pretty big milestone. Well, it's great to be with you, Romaine. And you're right, 240 years is a long time. We've operated over 4 centuries of history, particularly New York history, and we're getting together with some clients to actually enjoy that and make sure that we mark the moment. We're actually the oldest operating, longest operating company in New York where the oldest member of the B500 and Fortune 500 and the first stop listed on the New York Stock Exchange. But we're looking forward. So innovation at the end of the day is an important part of the story too. Well, let's talk about that innovation. I mean, you don't get to 240 years by just dumb luck. I mean, even if you go through the list of some of the banks that sort of were born out of the birth of this nation, at least here in the United States and the ones that are still there, I mean, what gets you to another 240, It's not just going to be the same playbook, is it? Well, I think you're exactly right that innovation is at the very heart of that. You only get to be old if you're and if you're innovative focused on your customers. At the end of the day, it's our clients that guide our progress as a company and to operate through all of the different ups and downs that we see. The world wars that have had occurred over our history, the very birth of the Nation, literally the British were leaving just months before the foundation of our company. You have to be resilient, you have to focus on your customers and you have to innovate. When we talk about sort of the next big structural changes that are going to shake up, shake up banking, shake up the finance industry right now, there's a lot of talk about AI. Is that moment here now or is this still something in the future that you're preparing for? Well, the answer is both. It is here. There are opportunities now, but those opportunities are going to get more and more exciting over the coming years. I was actually just back from the West Coast where I spent time with some of the luminaries of the AI industry, really hearing their thoughts and participating with some others in a few different sessions and just trying to peek over the horizon about what's in store. And I think it's going to be very important. I think it's going to create great opportunities for our client facing businesses to be able to do more for our clients. I think it's going to help us to run our company better. And I also think it's going to be something that's going to give benefit to our people to be able to take some of the drudgery out of some aspects of work and actually help them to be able to focus on the things that are going to add the most value. So I think it's it to be honest, it can be a win, win, win, but it's going to take a little bit of time. How far are you along in integrating that into your operations? Well, we started, we we really got into this last year. We have an AI hub. We have leaders who are focused on AI. We have a large team that is really investing in that. We have software that is in market today providing solutions to clients that's powered by AI. And we also have AI that's helping our people to be more efficient and to take some assets aspects of the work and really allow them to channel their enthusiasm into creativity. So it's it's, it's here, but they'll just be more. With regards to the cost benefit of it though, are you able to make those numbers work? Because I know there's been a lot of talk among CEOs about they see the promise of this, but right now the cost, the data collection, the data management and everything that goes into it is still pretty high. It's true you have to be smart about how you invest, but where is that not true in the world that you have to pick your spots and choose where are you actually going to do work yourself? Where are you going to leverage other people's platforms? We're a platforms company. We provide financial platforms that really help make money work across the financial system across the world. So we're consumers in some cases of AI company platforms that are going to help us to be able to go do those things and you got to pick the spot. So we're not in the business of building large language models ourselves. Other people are going to do that. There are several of them that are available. They're getting better and smarter all the time. Just earlier this week we saw and the next step forward in exactly that. But what we're doing is we're taking those platforms, providing the right tailoring for the businesses that we're in and then being able to provide solutions. This is a pretty sprawling company though. I mean you are kind of have your hands in everything so to speak in, in the world of finance here. So where does AI within the company, where does it apply best? I mean you're doing everything from custody and collateral to wealth management and a few other things here. Where does it fall? Well, it's going to cover a whole bunch of different things. So on the client side of the business, we touch 20% of the world's investable assets. And so the data that we have from that that allows us to serve back to our clients great insights, that's that's going to be a ripe vein of opportunity. I think in addition to that, when we just think about the 50,000 people that we have across the world, 40% of our revenues come from outside of the United States. We have the opportunity with our people to really help make their roles more efficient and to be able to focus them on serving our clients. People don't want to spend time necessarily doing some of those internal tasks that are inefficient. And so with AI as their copilot, whether it is in the Microsoft Office suite or whether it is in other parts of the company, everybody gets to have a piece of intelligence as an assistant to them in the future. Now that's not where we are today, but I do think that's where over time we could be. All right, let's talk a little bit more about what's going on today. You just had earnings about a month ago here they please a lot of investors, the turn around that you've been orchestrating there seems to have really taken hold. There's a lot of focus right now on organic growth or investors are focusing on organic growth. How much do you see that organic growth rate, the one that you just posted in the most recent quarter continuing through the rest of the year? Well, our team has been laser focused over the past 18 months on helping our firm really be more for our clients and that's the very heart for us of organic growth. We have this incredible franchise around the world. We serve so many clients all around the world in all parts of the financial system and yet we do relatively few things with many of them. So the opportunity to do more of the things that we do, bring more of our platforms to our clients is a very significant opportunity. We have a terrific franchise. And so it's really about approaching it through that lens that creates organic growth. We are excited about the fact that we have really been generating more organic growth and obviously we're hopeful that we'll be able to continue to do that as part of our journey. Geographically, where is most of that growth going to come from is going to be here in the US, North America or Europe, Asia, Middle East, where it's truly around the world. We serve clients all across the globe. Now I do think there's a lot of opportunity in the US right now given everything that's going on in the economy here. But we're also in the import export business of financial services. So we help our international clients access the United States markets and we help our US clients be able to go out and access markets all around the world. Whether it be people who want to bring capital in or who want to be able to go take capital into other parts of the world. We have that knowledge, that expertise and the local on the ground experience to be able to help clients. Are you seeing more demand for that not only just from existing clients but from potentially new clients as well? Well, there's certainly demand in the United States for capital because the the US economy has really surprised many people, I think, with how well it's been doing and there's there's just a lot of interest in participating in this market. And then outside of the US, the world's a pretty complicated space right now. We have wars in different regions. We have complexities on the geopolitics side. And so clients want that expert navigation advice on how to actually go about doing their businesses in the most efficient ways. When you look at some of the disruptions going on out there, geopolitically, the wars disruptions and shipping routes, everything else going on, do you see those as sort of passing things, meaning something that could be resolved within the next couple of years and then we go back to whatever the normal is? Or is this something we're just going to have to live with and adjust to for years to come? Well, here's where I'm going to go back to being 240 years old as a company. I obviously can't look back myself over that whole period of time, but the world is a complicated place and we have had many episodes in history where there have been different things. Tensions that go on can be in politics, it can be in geopolitics. And so I think we should all recognize that we have to be prepared for those types of situations. And we actually think that being resilient and being prepared, it's just part of how you have to operate as a great company these days. With regards to economic conditions both here in the US and abroad. There's been a lot of talk about where the economic cycle is and whether it's going to be favorable to banks. When you look at the economic conditions, you look at the interest rate backdrop, are you comfortable? Well, another way that you get to be old is never by being comfortable, by always challenging yourself. Got to be a little bit skeptical about the world in order to make sure that we're looking around the corners, seeing the risks. This was a lesson that some firms learned the hard way last year when they weren't prepared. So we view being cautious, thoughtful and prepared as an essential part of operating. Now having said all of that, I do think that the US economy has surprised to the upside over the course of the past year or so. We've seen that with inflation being stickier. It's kind of a nice problem to have because it's really been the manifestation of the fact that we're benefiting from a whole bunch of different things in the US right now. We have interest from abroad in terms of investing in the United States. We have a relative abundance of raw materials, not everything, but a lot. We have energy independence, that's a big deal. We certainly saw the examples of that of not having that in Europe over the course of the past couple of years. We have availability of Labor. Those things are contributing to a very significant upside in the US economy. We've had a little bit of industrial policy. We've got the innovation that we just talked about for AI. These things collectively are really creating a pretty powerful economic engine. Now, not everybody has been participated, but for the 60% of Americans who participate in the stock market, there's been a psychological boost there when they see those new highs and that contributes to spending. And there's a circular process here which feeds back to inflation. Do you worry though, that that will contribute to inflation? I mean, we had an interview with Jamie Dimon earlier today and he listed a lot of things you listed as net positives long term, but he raised some issues here about in the short term, whether that makes the feds job more complicated. It for sure makes the job the the job of the Fed more complicated to do it. Just think about all of these things that are acting as stimulus for the economy. We should celebrate that from the perspective of GDP and the US itself doing well. But just the dividends from money market funds, which we talk a lot about, The 6 1/2 trillion, that's worth a percentage point of GDP. The dividend yield from the S&P 500, that's worth a percentage point of GDP. You have this psychological impact of these highs in the stock market that's giving people comfort to go out and to spend. And so these things are making that last mile of inflation sticky. And the feds staying the course and they've said they're going to stay the course until they get the job done. What's the big risk though, that you keep an eye on right now? Well, there are plenty of different ways that that whole if inflation and economy story could not work out Well, I think it's very unlikely that the Fed hikes rates, but it's not impossible because if we continue to have a real head of steam around inflation then they'd have to contemplate that. It's also possible that we wouldn't get any rate cuts. Markets are in fact projecting those in for this year, a couple of them, but it's possible that we don't get any and I don't think you can take those things for granted. So maybe the biggest risk is just being complacent and being lulled into a sense of certain things being inevitable that frankly we should just always be reunderwriting all the ways that the world can go wrong. When we talk about regulation of your sector, there's been a lot of talk about the Basil three end game which has been you know what, 10 years in the making right now, age. Do you think we're towards the end of that, that we actually will see a final rule sometime soon? And if so, do you think you're going to be comfortable Bank of New York Mellon is going to be comfortable with that rule? Well, just I think this is an important place to just step back for a second and reflect that. Certainly for the largest banks in the United States, the 8G Sibs of which we are one, they have performed incredibly well through the period of COVID, through all the events in the smaller and medium banks that occurred last year. And so we've got to be laser focused as a financial services community on making sure that the rules are essentially on point for any issues that we happen to have. And it hasn't been an issue for the G SIB. So I'm hoping that all of the feedback the policy makers got around Basel 3 end game is something that they're going to take note of and come out with a better proposal, whether it is that they're going to adjust the existing one or make a RE proposal. Those are obviously the decisions for them. But I'm very heartened by the fact that I think there's been a lot of listening that's been going on. Do you think more banks should be under that G SIB umbrella? Basically more banks considered to be systemically important. I think one of the things that's very good about the US financial system is that we've created a mechanism in the rules to be able to allow for medium, small and very small banks, community banks to be able to thrive. And clearly if you're a very small community bank with less than a billion dollars in assets, you're not going to thrive if you have G SIB level capital requirements and liquidity requirements. And it's entirely appropriate that it should not be A1 size fits all approach. But I do think we should also recognize that there's been great work that's been done by policymakers over the course of the past 15 years and it's worked for the largest banks and our largest banks support the US economy all around the world. We're part of creating great capital markets. Great capital markets create great economies, great economies enable great GDP and that lifts people up. And we shouldn't lose sight of the fact that our big banks have been part of that story. I don't think anyone thinks the big banks are going to be really be hurt by this. They may have to make adjustments, but you know the BNY Mellons and the JP Morgans will be OK. Those second tier banks, the mid sized banks and the smaller banks, we're seeing a lot of consolidation in that space, partly because of Basel 3, but partly because of some other issues as well. Do you think we're going to continue to see consolidation? The idea that if you're a smaller midsize spank, you need to scale up and you need to do it inorganically? Well, smaller and mid sized banks need to be focused on their customers and their markets. And certainly it's possible that in some cases they view scale as an advantage for them. It very specific to the individual situation of a firm. What we also see is and we serve many of these banks ourselves, the ability to provide platforms to them that makes running their business more efficient because they can run on the platforms that we as a company provide. That is also an important evolution that's going on right now in financial services. It's rentable scale, if you will because of all the investments that we've put into resiliency and our platforms and then we make them available for others to run their businesses on. Do you feel any need to do M&A yourself? We've set on M&A. We're actually very comfortable that the near term opportunity for us is just doing a terrific job running our business and serving our clients. And maybe there'll be opportunities to to purchase particular capabilities or things that will help us to go faster on our journey. But transformational M&A is not high on the priority list right now. All right, Robin, I want to go back a little bit here, June 9th, all the way back to the late 1700s, basically the founding of what would become a BNY Mellon. It goes to this idea of having that type of history but also staying relevant. And I'm curious as to how you market this bank, how you pitch this bank, how you present this bank in a way that is modern in nature, but at the same time still retaining that link to such a rich history. Well, modern is about innovation. And so let me start there. We're the first bank in the United States to make real time payments on the real time payment rails, one of the first banks to participate in the new Fed now system as well. We were the first bank to install one of the new AI super pods from NVIDIA. In fact, we were the first bank to actually do that. So there's so many aspects, technology and innovation, product development, things that we develop. We we applied for more patterns than we ever had before last year. And so those things are about the innovation and the forward-looking. But you're right, there's something about the history which makes for a little bit of a greater purpose for our institution than some others. We serve and touch 20% of all investable assets around the world. We support the US Treasury market. We settle $12 trillion of U.S. Treasuries. And so when people come into our offices and they see our command center, which is showing that $50 trillion worth of activity all around the world in digital form. But then they also look back and they can see America's first bond, US warrant #1, which was a loan from the Bank of New York to the nation right after the signing of the Constitution. There's something about that which is maybe just a little bit more purposeful. And our people take a lot of pride in that.

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