The Bank of New York Mellon Corporation (BNY) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for joining. My name is Rob Wildhack, and I'll be leading our discussion today. I'm delighted that we have Todd Gibbons from Bank of New York Mellon joining us. Todd is a 30-plus year veteran of the company and was named CEO earlier this year. Before we get going, just a few housekeeping items I want to highlight. [Operator Instructions] And please start submitting your questions right away. We want to make sure the conversation focuses on what interests you. Second, we're working with our partner, Procensus, to do live polling of investor views for each company at the SEC. There's a link to access Procensus on the left side of your screen. At the conclusion of today's chat, I'd ask you just to take a minute or 2 to complete the poll. You'll have access to the investment community results as soon as you're done. Finally, if you do experience any technical difficulties during the presentation, please reach out to your salesperson or to our corporate marketing team, and they will help you out. With that, Todd has some prepared remarks to start us off, and I'll now turn it over to him. Todd, please go ahead.

Thanks, Rob, and thanks for the opportunity to be with you this morning, and hello, everyone. Thanks for joining us. This is my first investor conference since being named CEO, and I just want to let you know how proud I am and excited I am to run this great company. I've been with BNY Mellon for over 30 years, and I've participated in an amazing transition of this company. I mean it wasn't that long ago that we were a traditional commercial and retail bank. And now we've transitioned to a broad-based investment services and investment management company with a very low-risk balance sheet. Today, we continue to change. We're transforming our culture as we invest in technology and talent with a simple aim to drive resiliency, increase efficiency and organic growth and deliver more value to our clients over a broader set of their needs. We are a leader in servicing and managing assets. The strategy is clear and consistent, and it's now all about execution. Now BNY Mellon has a differentiated business model from our peers. We're trusted and resilient, not just now, but we have been for many, many years. The service we provide to our clients is vital. For example, we are the sole clearer of U.S. treasuries. We service most of the world's tri-party repo, and we are entrusted with about $36 trillion in assets under custody. We have to be resilient, and we are in serving leading institutions, including 94% of the top 100 banks, 93% of the top investment managers, 86% of the life and health insurance companies and 70% of the Fortune 500 companies. Not only are we an asset servicer and custodian, we also provide data management services at scale. We have over $30 trillion in client assets on our data management platform. In addition to servicing asset managers and the traditional buy side, we're also important provider to sell-side institutions. The combination of our broad service offerings and diverse client base gives us a unique perspective, one that enables us to partner with our clients and build solutions that others simply can't. For example, our clearing platforms provide our clients access to large investor pools, our transfer agency and record-keeping provide valuable information to managers looking to optimize their distribution, our collateral optimization tools help clients manage capital and liquidity. And the combination of our wealth and Pershing businesses give our clients the opportunity to provide both bank and brokerage custody on a single platform. We are building an open platform, and we partner with clients and industry leaders to deliver best-in-class services. Our ability to integrate provides our clients the greatest -- greater choice and flexibility. We have multiple alliances with fintechs so we can connect the best to our clients, and we will continue to do so as we go forward. In addition, we have connected directly to multiple order management systems. Through a single sign-on, clients have the ability to trade with their preferred OMS and look through to their assets on our platforms. With technology evolving so quickly, we think choice is critical. Now since the crisis began, our priorities have been around the well-being of our employees, delivering great client service and maintaining the strength of our balance sheet so we can support our clients in these times when they need us most. Our investment and resiliency over the past few years has truly paid off as about 4% of our employees are working in our offices. The rest are working from home, and the working from home has true -- has proven to be very effective. We've made strong commitments to support our employees during these challenging times. I'm very proud of what they've accomplished these past few months. And I think the combination -- the commitments that we've made have led to an engagement from our employees that I've never seen stronger. We also supported our clients with our balance sheet, in any -- in many instances helped them with their own disaster recovery plans. Our operational resilience and thought leadership allowed us to meaningfully increase client engagement and deepen relationships during this time. The value we provide to our clients is even more important in times like this, and their feedback has been overwhelmingly positive. Comments include the recognition from a mid-office client that they may not have been able to manage the volumes and volatility if they hadn't outsourced to us. Others mentioned we acted with a calm confidence. I believe there's going to be an opportunity for us to help with a broader set of needs going forward. For example, we already had a good pipeline for outsourcing in several of our businesses, and that pipeline is growing. Finally, we work with regulators and the industry to bring our capabilities to help support the markets themselves. For example, we administered the primary dealer credit facility known as PDCF, and that's facilitated dealer inventory financing. We're also administering the new version of TALF. I'm proud that we're able to contribute to the market liquidity and ultimately help stabilize markets. We did it in 2008, and our people were happy to step in and help once again. So what we do is important, and we are continuously improving how we do it. Technology is at the core of our strategic evolution. Over the past couple of years, our tech spend has grown at a compounded rate exceeding 10%. But our overall expenses are flat as we continuously automate and develop additional efficiencies. We expect to largely complete the major investments in our infrastructure this year, but in addition to the platform, we're investing in new capabilities, including data and analytics services for clients, Pershing's advisory platform and wealth management to name just a few. We're also driving greater collaboration between our businesses. There's a lot more that we can deliver with even greater internal connectivity. In addition, we're focused on investments that will drive efficiency to make us stronger in the years to come. All of this results in an enduring lower-risk business model. We've got recurring and stable fee-based revenue streams that will grow as our clients grow. We've got the breadth to develop new capabilities to drive organic growth. We've got a conservative balance sheet, liquid high-quality security portfolio and a lower-risk loan portfolio with limited need for risk-weighted capital to grow. It makes us a very attractive counterparty. Our ongoing expense discipline with opportunity to generate more efficiencies going forward. We've got very high returns on tangible common equity and strong capital generation. So once again, in the face of an extremely challenging environment, the model has been resilient, and we look forward to the opportunities the future will ultimately bring. So with that, Rob, I'm happy to take your questions.

Yes. That's great. And thank you for the remarks. I think it's probably best to start with what's top of mind for everyone, and you did touch on it a little bit, but the current environment is unprecedented. How do you think BNY Mellon is better positioned to weather the situation today compared to past crises?

Yes, it's -- boy, it's a lot different. I was around in 2008. And today, as I look how we came into this, we have a very diversified business model. We are much, much larger than we were, a much larger capital base, extremely liquid and much less credit reliant than we were in 2008. And I'll give you a few statistics. Our balance sheet is remarkably different. In 2007, loans comprised about 1/3 of our interest-earning assets, today, they're about 17%. The securities portfolio is much higher quality than it was in 2008. Back in 2008, we had large exposure to Alt-A securities and mortgage-backed book as well as subprime. So the securities portfolio was a problem. Today, most of that portfolio is in U.S. government and treasuries and agencies securities, nearly all of it's in investment grade. So it's a very different caliber. In the years since 2008, we've actually reduced the credit book. I mean, we're quite judicious about how we allocate credit. It's there to support our clients, but our clients tend to be very high-quality counterparties themselves. And another statistic is our unfunded commitments or our commitment -- our unfunded commitments decreased from -- they're about -- they're less than half of what they were in 2008. So we did see some draws under them, but they're not -- they weren't significant. We also, during that time, restructured the securities lending portfolio completely. It's much lower risk, and it's functioned quite well through this environment. So all in all, a very different and a much stronger balance sheet. And more broadly, we've invested in the infrastructure of the company for the past few years, really focusing on things like resiliency, cyber and also building a global operating model so we could move work from location to location. And that's really served us quite well through this crisis. And another thing that we did, in 2018, we established something that we called our enterprise resiliency office. And it was there to make sure that we had great business continuity and kind of incident management in place. So we didn't have to stand anything else out for this. This is a senior team with a significant number of individuals connected to each of the businesses. So we knew where we stood. Each day, it was reporting into the executive committee, so we could manage very fluidly our response to -- across the company. So a very different place than it was in 2008.

Yes, it's great. And maybe at a more personal level, you have the experience of having been at the bank through the financial crisis and for past recessions before that. How do you think that experience has helped prepare you for the CEO role?

Well, thanks for reminding me for how long I've been around. But -- so yes, 2008 was an interesting time. And I think as I certainly learned a lot from it. But as we came into this, I think it helped me identify where the fires were likely to be and also recognize some of the tools that we had in place back then and to reinitiate them. For example, we -- I mentioned the PDCF in my initial remarks, it was -- we made that thing operational in 2 days. And so that gave our dealer community the opportunity quickly to finance inventories that would have been more difficult for them to otherwise do. The other thing that we knew was likely to come as we saw this flight to cash was a surge in our deposits. So we knew where it was likely to come. We had a better understanding of how to manage it, and how to work with our clients to manage that big surge in cash. And it almost retraced exactly what we saw in 2008. In fact, we had built a correlation to the Fed -- to reserves and the Fed balance sheet. And we pretty much knew what was coming at us and how to deal with that. I'd also say that just generally, we're more prepared as was the industry. So the conversations with regulators we knew who to call much more quickly the responsiveness. And I was quite impressed with how the Fed responded through this. It was a -- it was certainly a learning experience that I'll never forget and one that prepared us for what we just went through.

Yes, absolutely. What are the actions or responses that you've seen from your team that have most surprised yourself and management?

Yes. Rob, I wouldn't really say I was surprised. If I was surprised, it was more around the technology and the reliance on broadband, and that all held up as well as it did. I remember early back in March, speaking to our Chief Technologist, Bridget Engle, and questioning what's going to happen to that last mile of broadband when we have so many people working from home. And it's not just people working from home, again, teaching from home, everything else. But she spoke -- and she spoke to the industry leaders and was -- they were quite confident that they're going to be able to support the traffic. So that was a concern and a pleasant surprise. In terms of the employees themselves, I think I was just most impressed with their professionalism. They really stepped up. And if you think about it, not only did they have to deal with the personal issues that they're facing with the crisis. But they also had to deal with an incredible surge in the amount of volumes. In some of our businesses, volumes are 3 or 4x what we had been seeing and had been 2x peaks that we have seen in the past, and volatility was super high. And they were doing that from a new environment as they were working for home. So that was quite impressive. And I was quite pleased with the performance of the technology. Now as we look at it, employees have adapted pretty well to the new environment. We are driving new business, and we'll talk about some of that later. But in asset servicing, the number of wins and the value of those wins are actually up year-to-date. The second quarter has been a pretty good quarter for sales. And we're engaging with our clients almost entirely virtually over the RFP process. So we've gone from beginning to end now and taken on a piece of business. We're having many thousands of calls. Our client engagement statistics have -- and the feedback that we're hearing bear this out, it's been really, really positive. We've -- I'll cite some of the accolades that we've gotten from our clients. But generally, it's across the board, especially in asset servicing, been very, very supportive. Comments like in a chaotic situation, our clients are telling us how comforted and impressed they were with our service and execution throughout this pandemic. We've helped them avert failed settlements over and over. Clients are telling us they couldn't have gotten through this or accomplished what they needed without our support. They're recognizing our ability to keep them informed and provide valuable insights while working remotely. And we've been having twice-weekly calls now with the -- with operations. They've been very effective and something that I think will continue past COVID. It's pretty interesting to see how the information content on these calls have changed. A lot of it's now gone from dealing with the crisis to dealing with how we return to normalcy. From a -- couple of other comments from a systems and technology standpoint, our systems performed very well. Pershing, in particular, managed the March surge in capacity extremely well. While most peers at that point saw some outages, we didn't. The focus on cyber and fraud protection has served us well, and we've been able to maintain that throughout the work-from-home environment. And I think the benefit of scale, the redundant technology, the global operating model that we've got the ability to move work from location to location, give reasons for our clients to take advantage of our resiliency, which would be very hard and costly for them to replicate. So I think that we'll come out of this with opportunity.

Yes, that's great. In the first quarter, you benefited from the spike in volatility across several business lines. Volatility, down from those peaks, but it's still elevated from January and February as well as 2019 levels, and talk to us a bit about how you're seeing that played out in your business?

Yes. So I think that's right. We saw that very sharp spike in surge in volatility in late March. And as we look across our business, a couple of observations. Transaction volumes and deposit levels are down but still elevated from where they were, say, in February or even last year, but nowhere near the surge volumes that we saw in the first quarter. FX volatility, which plays an important part in our trading operation, that's retraced most of the spike that we saw, but it's still meaningfully higher than what we saw last year, but not at the level that we saw anywhere near the level in the -- at the end of March. Pershing where we saw transaction volumes extraordinarily high on their broker-dealer clients and advisory clients, they've -- they're still probably above-average, but they've kind of retraced substantially as well. On the payment side, we're not as retail-oriented there. That's mostly commercial payments. A lot of it related to trade. There was a big spike, pretty much related to the security settlement and portfolio activity that we saw in March, and that we expected to be very short term. What we're seeing now is that's a little bit softer as we -- as you might expect, just with the softness in global trade. So it's interesting from April to May, we've actually seen it increase a little bit, but it's going to be down year-over-year. In our Corporate Trust business, we've seen a substantial amount of new issuances as everybody is aware of the massive amount of investment-grade issuance. And we are the trustee and benefit from some of that. We're not seeing anywhere near the structured note issuance that we had seen, and that was an area where we're picking up market share. But until we see things settle down a little bit, we think that, that will probably be a bit soft. And of course, a bit of a positive, a nice surprise is strength of these equity markets, and that will obviously help a number of our fee businesses in the second quarter. So most of the items are about as we had expected to play themselves out as difficult as it was to predict, but we thought there would be some movement back to normalcy, and that's what we're seeing.

Got it. Irrespective of volatility, are there any other businesses where you're seeing pockets of opportunity or where you're seeing some headwinds?

Yes. So in terms of opportunities, I mentioned, we are the sole clearer of U.S. government treasury securities. And one interesting -- one industry that's growing is U.S. government debt. And so we are seeing the benefit of that. And that's probably where even trading has remained quite active. So the volume of trades was probably up 50% to 75%, somewhere in that ballpark during the spike in activity in the third quarter. That's persisted and the auctions and the -- have increased substantially as the treasury has stepped in to support markets and support the economy. So we're seeing pretty strong activity in clearing and collateral management. So that's the clearing component of it. The collateral management component of it is doing quite well. It's been growing. It grew sharply right around the crisis, and it actually saw a transition from lower quality collateral to higher-quality collateral as lenders of cash wanted higher quality collateral, and wanted to take less risk. That subsided a little bit. So that's retrenched a little bit more back to the levels that we saw prior to this. But it's been on a decent growth path, growing something like 7%, and probably would expect it to continue -- gave back a little bit of that spike. I think in asset servicing, we're seeing nice opportunities, more managers are thinking about outsourcing. We're having a lot more discussions. We've also got some capabilities around TA, transfer agency, and fund accounting that makes it a little bit unique. And also what we're doing in our data capabilities. So I mentioned that we've got $30 trillion of data assets under management, and that's creating a lot of opportunity for us to generate some data analytics that is grabbing some attention. And one area we believe will generate growth is in the mid-office. We're already installing a number of significant mid-office clients and the pipeline there is getting bigger. And I think there will be more interest just having gone through what we did and the challenges that clients faced. So on the treasury services side, I talked a little bit about the volumes, but there -- the good news here is we are seeing some continued increase in deposits. So I did say that deposit levels for overall have scaled back, still elevated but scaled back. And treasury services, we've intentionally been on a campaign to build our relationships and the deposits that come along with those relationships. And that's been pretty steady. And I think we'll discuss Pershing with some opportunities there, we'll discuss a little bit later. So across all of our investment services businesses, I'd say that there are some interesting pockets of opportunities. The headwinds really come down to interest rates. And so interest rates will impact us in a number of ways, net interest income, which we've talked about and we've given some indication around that as well as fee waivers on money market mutual funds in a couple of our businesses. So I think that's going to be the primary challenge.

Yes, yes. Maybe sticking with the core business. It sounds like the current environment is serving as a catalyst for clients to accelerate outsourcing decisions. Tell us what the pipeline looks like there? And then maybe a little bit more detail on how you've been able to pitch new business and onboard new wins, given restrictions around being in person and in office, things like that?

Yes. So I'd say the pipelines, both Pershing and Asset Servicing are pretty strong. I would say, the sales process is -- there are fewer clients than I would have thought that are deferring things, deferring this -- the process. Most of them, they may have deferred it for a brief period of time, but they're getting back into it. And it's -- we're really starting to operate at BAU virtually as much as we can. I think the onboarding will be a bit slower than it would've been. But I think the sales process will continue. So it's just about the installation of the wins will probably be a little slower. And that's kind of a double edge because there was some off-boarding too. So there are some benefits to us as well. So that's going to probably be a relatively neutral to slightly negative event for us that the onboarding will likely be deferred a bit.

Got it. Got it. Maybe to dig in on Pershing a little bit. That had a -- you mentioned a good first quarter, some volatility linked benefit there. Tell us a bit more about the near-term trends and the longer-term opportunity for Pershing right now?

Yes. So Pershing benefited from a very large spike in activity. So some of its fees are transaction based. So it did get that benefit. And as I mentioned, as we go into the second quarter that very sharp increase has tapered off a bit. So we -- it's still elevated, but not where it was. It also has the headwind of -- and prominently the headwind of interest rates because it will be waiving fees on money market mutual funds that it would have typically been paid for. That aside, the underlying equity that the building for, what I'd say, the core growth in the business looks pretty good. We've got quite a few new clients coming on board that will -- and they're moving forward with onboarding. We continue to invest in the advisory space, especially for the billion-plus type of corporate advisers. And so we see opportunity there, and that pipeline is growing. There are more opportunities now for these broker-dealers that don't want to self clear that are outsourcing to us. And one area, I'd also say is there's an opportunity for more institutional activity, not just the retail activity. So even some fairly sizable broker-dealers are finding it more effective to outsource. So it's obviously going to have some revenue headwinds due to rates. But the core value of the franchise continues to grow as we build it. And as we find more pockets of assets that we'll want to transition on to Pershing's platform.

Got it. Got it. And then just lastly on the revenue lines here. Clearance and Collateral Management, that had a nice first quarter as well. How have things trended in that business more recently?

Well, and when I -- Clearance and Collateral Management is really 2 activities. It's the -- it's clearing of U.S. treasury securities and us acting as an agent on tri-party repo. So we have well over $3 trillion of assets where we serve as that agent. The clearance component of it has -- is doing nicely. It continues to be active. Transaction volumes are high. And the additional debt issuance of the U.S. government is supporting it. So it continues on a very positive trend line. The actual outstandings and the collateral management are down slightly from the surge that they saw. But I think they'll continue to grow at the 7% type of clip that we had been seeing. And, I mean, the world is more and more dependent on unsecured lending, and we see that trends continuing. The opportunities for it, as we look out, they're interesting, we're making big investments in our collateral management system. And basically, what we're doing is we're making them interoperable, which will give our clients the ability to transact on our books much, much more efficiently, use their collateral more efficiently, and as a result, we think there will be opportunity for us to pick up some market share. And the other area where we're looking at for a couple of other areas here for potential growth. One is some of the applications that we're developing to help our clients optimize their collateral, get the most out of it, whether it's for liquidity or funding needs or just cost. We're looking at porting that over to our -- porting that over to the buy side as well. So that's got a potential for us as we go forward. Rob, my screen just went down, so I'm just going to take a second to bring it back up, if you don't mind.

No problem. We can hear you fine, too.

Okay. Okay. I'm back. Sorry about that.

Great.

So anyways, talking about so the opportunity to port some of the optimization services to our buy-side clients. We're starting to have some conversations there. We've -- and another thing that we're looking at, if you look at repo, it's still, even though, it's -- the tri-party repo is a very big market. Bilateral. I mean, going without a tri-party agent is 75% of the market. So there's opportunity for us to either gain some of that market or provide services to that market, which we think will make it more efficient.

Great. Just want to remind our listeners, we do have some questions on Pigeonhole here, but the link to vote or submit your own questions on the left side of your screen, the most popular one is the balance sheet, which we will certainly get to. But I do want to transition to expenses. You updated your outlook for expenses to be flat this year. Which areas are you most focused on? And where do you have the most opportunity to be more efficient?

Yes. As we look out, we see -- and it's interesting, this environment actually will make us think about things a little bit differently, too. But most of the opportunity for us, we think, is -- we have opportunity across the board, but we still have a lot of opportunity to automate our operations. We still -- it's still heavily reliant on large headcount. And we've got about 100 programs that we've that we've outlined, some of them required technology to automate. The benefit of that is not just that we'd become more efficient. We'll also improve the client experience and actually improve the control as well. So it's -- there's multiple benefits to it. And we think -- and that's why on the earnings call, we said we're committed to maintaining that spend. I mean, it's been effective. If you think about it, we've been investing substantially in technology. We increased that spend substantially over the past 3 years or so. But if you look at our total costs, they're basically flat. So as we reinvest that in making ourselves more efficient, I'd like to continue to do that. As we look out in the short term, obviously, we're -- we did announce that there would be no additional layoffs in 2020. So in order to manage and make sure that costs are flat to down, we're being disciplined around hiring. We're obviously focused on any procurement. Business development, as you might expect, we're not spending a lot on travel right now, and I wouldn't expect that for a while or entertainment. And we're prioritizing out anything that's not really key to us right now. But we do want to continue the investments that are going to lead to initiatives to make us more efficient.

Yes. And looking out longer term, does the -- the current pandemic shift, in any way, your priorities with respect to cost-cutting or investment?

Kind of the way I look at it, it's going to force us to think through some other alternatives that we may not have considered before the pandemic. So I'm kind of looking just as a few more arrows in the quiver. When we look at disaster recovery and the amount that we've spent on it, the amount of space that we've maintained, we have been bringing that down and trying to be more efficient with that, but I think we're going to have opportunity there. You and I were chatting before we started on this call about what travel is going to look like. Listen, I'm a believer that travel is and meeting clients face-to-face and having business relationships is that have in-person meetings is absolutely critical. But probably not to the anywhere near the extent that we've done. And these tools are effective. And so there's no reason you can't -- we can't take advantage of this and manage our travel and entertainment expenses quite a bit differently than we had in the past. I think real estate, we're going to have to take a look at this. And the work from home is clearly going to be something we're going to practice. And we did practice it in the past, but never to the extent that we've obviously done it now. We've taken buildings out or half a building out and had them work from home, but now that we've practiced it, we're going to -- we'll maintain that and probably encourage some level of -- percentage of our employees, whether it's rotational or not to be -- to consider this and what does that ultimately do to our real estate footprint, what opportunity is there. So I think that'll force us to give consideration to more that we might be able to do there. I think the other thing I would say is it's also given us an opportunity to identify where we need to do some things around automation. There's still -- and basically, the industry still relies on paper. There's still physical securities. Transfer agency still has checks and for subscriptions that come in black box and other things. And even document custody and stuff like that. So we think there's going to be an opportunity to work with the regulators probably to eliminate more and more of the paper, which was, by the way, the most challenging thing to deal with through this particular crisis.

Yes. That's really helpful.

Let me add one more point to that, too, Rob. I think the other thing that we've seen is a much more adoption of digital tools. And every firm has talked about how they're going to digitize over the next 3 years, well, I'll tell you what, the acceleration of digitization and people and our clients is that becoming aware of some of the tools that we've had and picked up dramatically over that. See even on the wealth side, but also in the asset servicing side and taking advantage of our portals and electronic communication and delivery of reports and other things. And having gone through the shared experience, I think something that we might have accomplished in 3 years, we're going to do in one. So I think it's another fallout from this.

Yes, that's great. Looking at Pigeonhole, our most popular question is on the balance sheet. And you talked about how challenging the rate environment is today. The flip side, as you do have the benefit of some higher deposit balances, what kind of opportunities do you have on the NIR side to deploy those incremental balances?

Yes. So we have increased our securities portfolio over the past months, 6 months or so. And as the -- as some of these balances deposit -- and so we do believe that there will be a level of these deposits that are not just surge deposits but are operational. And as they season, we will get the opportunity to put some of that to work not only in high-quality liquid assets. But in some other high-quality assets, but not just governments and agencies. And given the higher level of spreads that we're seeing in the market, I mean, they've contracted, obviously, from the peaks, but they're still a lot higher than they were. There will be a little bit of room to invest and generate some return in this environment, but it's going to be -- it's still going to be a challenge.

Is there any update -- you guys gave some -- you gave an outlook for the second quarter on your first quarter call. Is there any update to how you're thinking about NII in the second quarter that you'd want to provide today?

Well, sure. So as we look at the balance sheet, I would say, the deposit levels are probably a bit higher than we had anticipated. One of the key short-term things that we mentioned to keep an eye on is where LIBOR was. So LIBOR levels came down substantially, 40 to 60 basis so probably a little bit more than the forward curve was indicating at the time, which is where we gave our guidance. And so we -- the combination, I think, there's some pluses and some minuses, I think we had guided to somewhere like 2 -- minus 2% to minus 5% from Q1. I would say we still see ourselves in that kind of a range.

And on the outlook, any other updates you want to provide now that we're basically 2 months through the quarter?

Well, I think the other guidance we gave was around fee waivers. And I'd still say we're probably close to the range that we had given, although, it's -- things are moving quickly, and it's still a little early to be able to tell. I mean, I think we talked about all the other items, and you can kind of factor that into your models in terms of where volumes are, where the activity levels are, what's retraced. You can factor the FX volatility that we've seen in the markets. So I think we don't typically give any more guidance than that, but I think that's pretty indicative of where we think things are. And as you know, as we look back to the earnings call, as wild as things were, things have played out -- and as uncertain as they were, they pretty much played out according to what we had indicated.

Great. I'm going to turn to an audience question here. How could BNY Mellon potentially adapt its business model in the event that interest rates are permanently depressed at current levels as they seem to be in Europe and Japan?

Yes. So let's suppose they go negative. And in some ways, for us, we believe negative interest rates could be a positive for us. And typically, what we'll have is a -- oftentimes we'll have contractual relationships where we agreed to a spread, but it's difficult to put that spread on when you're -- and go negative. But if the base rate goes negative, as it has in Europe, we've been able to move with that. So you haven't seen that on the retail side, but you have seen that on the institutional side. And we'd be very much -- we're very inclined to move forward and adapt that so we can generate -- it would actually be, we believe, a positive to our NIR if we saw that happen. The other thing, and we were here before and through 2008, well beyond it when interest rates went to 0, and we were able to still maintain pretty decent margins and deal with some of the pricing considerations. But ultimately, I can't see that as a permanent thing. We want to maintain the optionality that we have in the balance sheet while still being profitable even at these levels.

Got it. Got it. One subject we haven't really touched on yet is capital. You're through the 2020 CCAR process. Talk to us a bit about how you're feeling about the process and your thoughts on capital return over the next several quarters here?

It's hard to say how I'm feeling about the process. We'll get the results back, I guess, in some time in June, and I can give you much greater clarity around those feelings. But in terms of the process and kind of the changes to the process. So we submitted this right in the middle of the crisis. But just generally, just pulling back a little bit when you look at our business model and you look at how we performed through severely adverse tests in the past, we don't draw down huge amounts of capital just because of the nature of our portfolios and everything that we've talked about. So I think that's a pretty good indicator. The other thing, I actually -- the move to the stressed capital buffer provides a level of flexibility that's going to be interesting to us. And so I actually am welcoming that. Because what it means is we're going to be able to manage our capital with a little more flexibility. And so in the past, we submitted a plan, we were going to get quarterly -- take quarterly actions. You kind of use it or lose it or then you have to halt, resubmit whole another plan, and it was a very cumbersome process. Here, we're going to be able to just make sure that we're meeting our requirements and basically do a quarterly process to review where we are and act on it. So it's -- even if we do delay a buyback, it's a timing issue. It's not a loss. So in that sense, I'm looking forward to the flexibility that this is going to provide us.

That's great. I'll take one more audience question. Are you part of the RFP process on a major block of ETF assets currently being serviced by a competitor?

No comment.

I didn't think so. All right. We're getting towards the end of the session here. I'll ask one kind of thematic question to wrap it up, considering that this is the Strategic Decisions Conference. Tell us where you see the business heading over the next 3 to 5 years? And as newly appointed CEO, what are your strategic priorities to get there?

Yes. So let me start with the kind of the strategy, and then I'll roll into where I kind of see that going over that kind of a time period. Because I don't think our strategy is complicated. We've got a very resilient business model. And I mentioned it can grow without putting on a massive amount of risk-weighted assets. And if anything, the environment has reinforced and probably increase the demand for what we do. And so there are really kind of 3 things that I'm focused on. One is that we use our scale and breadth to build solutions in some instances, ones that only that we can do. So there are some opportunities for new revenue streams in asset services, and we've been talking about data and analytics. And as we go through our strategic thinking. In fact, we're taking our strategy session with the Board at this upcoming meeting, I'm looking forward to what we might be able to do with something like that. And there's also adjacencies that we have to help drive some organic growth. And we only talked about those things like collateral management. So connecting ourselves and providing solutions, especially ones that we can differentiate. The second focus is going to be around our continuous investment in technology to create efficiencies and also improve control and also improve the -- which ultimately leads to greater client experience. I mean, retention of clients is so important and the quality of the service that we're providing has improved dramatically. The scorecards our clients keep on us in many instances, our largest, most sophisticated clients are rating us at the very top. And that's a move because of our focus on this improved client experience. But I mentioned, we've got multiple efficiency programs in place that we're going to execute against. And things like automating the net asset value productions. We're going to make this stuff better, faster and, frankly, less expensive to do. And finally, so the investment in technology, the development of the new solutions, and finally, is to evolve our culture, our organization and our -- and really the talent. The way I'm kind of thinking of it is in some of the moves that I've made, I'm actually very pleased with how they're working out, our Head of Asset Servicing, who was Head of Digital, he's got a very strong technology background. He's been around the custody business for quite a few number of years. And I think pulling the 2 together is doing just what I hoped it would do in terms of building out our product capabilities. And I think I'll know that we've got it right when it will be difficult to tell with the -- when the CEO is talking technology and the CIO is talking strategy. That's when I know that we'll have that culture right. So although we kind of face the headwinds of today's rate environment, and we've talked about that the -- I think the underlying business model is sound, it's well positioned. And given the capital generation that we've got, the limited need for risk-weighted assets, it's a powerful model that I think will, through the cycle, sustain a continuous EPS growth and meaningful EPS growth. And that's the plan.

Absolutely. That's really great. We are at the end of the session, so we'll wrap it up there. I'd like to thank Todd and the entire BNY Mellon team for their participation today. To our clients and attendees, thank you as well. As a reminder, we're doing live polling with our partner Procensus. If you want to take a moment and click the Procensus link on the left side of your screen now, should see a window open up with a short poll. It'll only take you about 60 seconds, and again, you'll be able to get real-time tracking of the results and investor sentiment. Thanks, again, everyone, and have a great day.

Thanks, Rob.

Yes. Thank you.

And thanks, everybody.