Bank of New York Mellon Corp.'s top executive said bankers wil face "losses and volatility" for at least the next year as the credit crisis continues to play out.
"Housing got us into all of this trouble, and housing is eventually going to get us out of this," Robert P. Kelly, the New York company's chief executive, said Tuesday during its first investor day since Bank of New York Co. bought Mellon Financial Corp. last year. "We have to see this inventory of houses come down and prices decelerate. … Housing will go down in value, but it may take another year to 18 months."
His company remains well positioned for double-digit growth from most of its businesses in the next year, despite economic volatility, he said. It plans to acquire and divest to hone its asset management and servicing businesses.
"These are super-stretched goals, but these are realistic goals," Mr. Kelly said. "We are positioned to outperform. There is great upside for our company as we expand around the world. It is going to be about geography and less about products and services."
The credit crisis is beginning to create opportunities for companies looking to expand globally, he said. "We are beginning to look at this credit crisis in phases," Mr. Kelly said. "In the early months, we saw disbelief and denial. In the second phase, people wanted to raise capital and cut dividends. Now we are seeing a new phase. Predominantly outside of the U.S., we are seeing financial institutions and banks that expect things will be worse and have a willingness to sell noncore businesses. But they are only willing to sell for extraordinary prices, and that isn't something we can play in just yet."
In the next six to 12 months he expects more realistic prices to emerge in foreign markets. "There isn't a lot of activity yet, but people are starting to think differently," he said. "We want to have the capital to partake in this."
Most of Bank of New York Mellon's acquisitions in the past few years have been outside the United States, while most of its sales have been domestic, Mr. Kelly said.
The company, which has $23.1 trillion of assets under custody and $1.1 trillion under management, has started to show its hand on the types of businesses it plans to buy and sell this year. During the first quarter it moved some trading and execution businesses into its BNY ConvergEx, and announced a deal to sell Mellon 1st Business Bank of California, a middle-market bank with branches in Southern California, to U.S. Bancorp. After the deal was announced, David Holst, an executive director of BNY Mellon Wealth Management and the head of BNY Mellon West, said the proceeds would be used to buy wealth management firms in Texas, Arizona, and San Diego.
Mr. Kelly said during the investor day: "There are pieces of our business that don't make sense longer term. We are not afraid of selling things. … We want to make sure [in selling operations] that we don't hurt our other businesses and are at prices that are attractive to our shareholders."
In January the company bought Arx Capital Management, a Rio de Janeiro asset manager, to expand its Brazilian asset management arm, and in April it announced plans to open an office in Hong Kong.
Bruce Van Saun, Bank of New York Mellon's chief financial officer, said it has sold "capital intensive, noncore business" while buying "global, core fee-based" ones.
Mr. Kelly said his company now gets 27% of its revenue from foreign sources. That figure is rising 2 percentage points a year as its assets grow rapidly in Europe, the Middle East, Asia, and Latin America, he said.
When asked about rumors that he might be a candidate for Wachovia Corp.'s top job, Mr. Kelly said: "Unless someone fires me, I am staying where I am. This is an awesome company, and the opportunities are gigantic."
