Bank of New York Mellon (BNY) Q2 FY26 earnings call: guidance and Q&A

Why is the updated full-year guidance lower than the strong Q2 performance, considering Q3 is seasonally slower and there might be tough comps for NII and Issuer Services?

Q2 was exceptionally strong due to market conditions, and Q3 is typically the slowest quarter. The guidance incorporates a conservative bias, assuming current market levels and interest rates. Q3 NII will face a tough year-over-year comparison due to idiosyncratic events in the prior year.

“typically, the second quarter is our strongest quarter and this particular quarter had a unique set of circumstances around it in terms of the constructed backdrop, the flows in the markets, et cetera. And is seasonally the slowest quarter.”

asked by Kenneth Usdin · answered by Robin Vince

Given that the company is already exceeding its medium-term pretax margin target of 38% (currently 40%) and ROTCE (currently 31%), what is the future destination for profitability, especially with AI initiatives still in early stages?

The initial targets were significant improvements and are viewed as milestones, not endpoints, for a 3-5 year cycle. The company's ambition is to always outperform, and strong Q2 client engagement provides optimism for achieving and exceeding these targets sustainably over time.

“we kind of view these medium-term targets as 5 -- 3 to 5 years through the cycle and as milestones and not end points and it's not really the limit of our ambition.”

asked by Alexander Blostein · answered by Dermot McDonogh

How will deposit betas perform in the U.S. and internationally if there are rate hikes, given the current environment and BNY Mellon's NII sensitivity?

BNY Mellon focuses on narrowing the cone of outcomes for rate sensitivity. Deposit betas are expected to be largely in line with the last cycle: 80% for USD and 60-70% for EUR/GBP. The portfolio is predominantly dollar-denominated (75%).

“As it relates to betas, we think it will be largely in line with the last cycle, and that was 80% for dollars and 60% -- 60% to 70% for euros and sterling.”

asked by Alexander Blostein · answered by Dermot McDonogh

How do AI and digital assets contribute to the bottom line (productivity/new opportunities), and what are the risks to the custody business model from on-chain migration and tokenization?

AI acts as a capacity creator, driving positive operating leverage by improving efficiency and freeing up resources for client service and innovation. Digital assets are part of a broader 'always-on' financial ecosystem transformation, where BNY Mellon acts as a bridge between traditional and new capabilities. Disintermediation is avoided by investing and participating in new technologies.

“The way one gets disintermediated is when you don't invest, when you don't participate in the new thing, but we're leaning into the new thing and participating in that fully.”

asked by Ebrahim Poonawala · answered by Robin Vince

With headcount down 7% year-over-year and revenues up, how much has AI contributed to increased revenues per employee, and can specific financial benefits (expense savings or revenue gains) from AI be quantified?

BNY Mellon's operating model shift, beyond AI, has fundamentally changed productivity. AI, while a small part of the $4 billion engineering budget, is deeply embedded, with ~40% of software now AI-written. Headcount is an output of business strategy, not a target. AI creates capacity, which can be deployed for efficiency or growth, making it hard to isolate specific financial benefits, but the company confirms a return on investment.

“our engineers at BNY roughly 40% of the software written is now written using AI, you can see it's coming -- it's going broad and is also going deep into the enterprise.”

asked by Michael Mayo · answered by Dermot McDonogh

Historically, efficiency gains in custody banks led to pricing pressure. Is this still the case, or does BNY Mellon's differentiated offerings allow for better pricing retention?

Pricing pressure exists in competitive markets, but it's less common than in the past. Clients are willing to pay for differentiated service. BNY Mellon's ability to combine diverse capabilities and deliver unique solutions adds value, allowing for different conversations beyond just price. Organic fee growth from flat to 4.5% over three years reflects success in managing this dynamic.

“what our clients are recognizing from us is our ability to add real value to their businesses and their operating models. And price is always important, we have to be competitive on price. But our clients are starting to come to us because they're actually our ability to bring different things together across the firm and actually deliver solutions for them are actually different and unique.”

asked by Brennan Hawken · answered by Robin Vince

Are there secondary benefits or opportunities to grow revenues from winning the U.S. Treasury Department's 'Trump accounts' mandate?

Yes, there are two vectors. Firstly, other governments globally are inquiring about this public policy, which BNY Mellon is happy to share, seeing it as good for society and BNY. Secondly, it serves as a proof point for BNY Mellon's ability to integrate diverse capabilities into novel solutions, demonstrating a powerful vector for future business.

“our ability to bring these pieces together and deliver a solution that one couldn't previously have ever found on the product shelf of BNY and say, we can do that because of the fact that we've got the culture, the platform model and the commercial model to knit them together and deliver a great outcome”

asked by Gerard Cassidy · answered by Robin Vince