Bank of New York Mellon is managing expectations about its financial performance in 2024, while simultaneously assuring investors that its profitability will improve significantly over the next three to five years, as President and CEO Robin Vince continues to reshape the company.
The New York-based custody bank reported net income of $300 million during the fourth quarter, which was down 45% from the same period a year earlier. The results were hurt by
During BNY Mellon's earnings call on Friday, company executives and analysts moved beyond the fourth-quarter results to focus on the company's outlook for 2024 and beyond. Vince, who became CEO in August 2022, said that last year the firm "laid a foundation for a multi-year transformation."
"Though we are still at the beginning of our transformation journey, our ability this past year, not just to deliver on our commitments but to exceed them, gives us confidence that we can affect meaningful change and consistently improve our financial performance over time," Vince said.
In 2024, BNY Mellon expects its earnings to be affected by both positive and negative factors. On the bullish side, the company anticipates that its fee revenue will rise, though it did not specify by how much.
The firm is also projecting that expenses, excluding notable items, will be roughly flat from 2023.
Holding the line on expenses continues to be important in 2024. Amid anticipation that the company's deposit margins will compress and that there will be modest run-off in its deposit volumes, BNY Mellon is forecasting a year-over-year decline in net interest revenue of approximately 10%.
BNY Mellon executives hope that investors will look not only at 2024, but will look ahead to the next several years. On Friday, they laid out a series of financial targets for the medium term, which they defined as the next three to five years.
One target is to achieve a return on tangible common equity of at least 23%. That performance metric landed between 20.2% and 22.6% during the first three quarters of last year before falling to 5.6% in the fourth quarter.
"In publishing our medium-term financial targets, together with our most important strategic priorities and the actions that will help us achieve them," Chief Financial Officer Dermot McDonogh told analysts, "we are providing transparency to allow you all to track our progress. And we are confident that we will deliver."
One way that BNY Mellon hopes to improve its financial performance over the medium term is by harnessing artificial intelligence. Last year, the bank set up an AI Hub, where engineers are working to build out capabilities.
"We actually have a piece of software today that is creating predictions for clients in our treasuries business," Vince said on Friday. "That was a very early AI implementation that we made, and it's actually a piece of software that we currently earn some revenue on."
Vince also spoke about ways that AI can be used to make BNY Mellon's operations more efficient.
"In one particular case, it's helping our research team get a march on the day," he said. "So rather than getting up at four in the morning to write research, they get up at six in the morning to write research. Because the AI has given them a rough draft to start with and served up a bunch of data for them."
Shares in BNY Mellon closed up 4% on Friday at $54.85.
