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

Good morning. I'm Joe Echevarria. I'm the Chair of the Bank of New York Mellon Corporation's Board of Directors. We are very pleased that you're able to join us this morning for our 2022 Annual Meeting of Stockholders in person. As Chair of the Board of Directors, I'll preside over the meeting. Let me provide an overview of how our meeting will proceed. First, I'll call the meeting to order. Then I'll turn the meeting over to our Chief Executive Officer and my fellow Board member, Todd Gibbons. Todd will make several introductions, go over some of the procedural matters necessary for our corporate record-keeping and introduce the formal business of the agenda, including the four agenda items. He will then pause for questions, open the polls for voting on those 4 items. And after the polls are closed, our Corporate Secretary will report on the voting results. Following that, I'll adjourn the meeting, and Todd and Robin will present an overview of our businesses. Immediately following that brief presentation, Todd and Robin will use the remaining time to take general questions from the stockholders. I now call this meeting to order and turn it over to Todd.

Thank you, Joe, and thanks, everybody. It's great to be in person. It's great to see some old faces again, too. I really appreciate you being here. We appreciate your cooperation and adhering to the enhanced health and safety protocols that we have instituted in connection with this meeting. And it's great, as Joe said, to welcome our stockholders back in person once again. So I'd now like to introduce the other members of our Board of Directors. Unfortunately, Linda Cook couldn't join us today due to an illness, so we send our best wishes to her. As I call each name of the Directors in the room, I would ask the Director to stand and -- but please hold your applause until all of the directors have been introduced. So Amy Gilliland, Jeffrey Goldstein, Guru Gowrappan, Ralph Izzo, Ted Kelly, Sandie O'Connor, Elizabeth Robinson, Sam Scott, Fred Terrell and Al Zollar. Please join me in a round of applause for our Directors. Thank you, guys. Now I'd like to give special thanks to two of our directors, Ted Kelly, and Sam Scott, who are not standing for reelection to the Board, but I'd like to thank them for their many years of service to the corporation. Ted and Sam are our longest-tenured directors, and I speak on behalf of the entire Board and management in expressing our gratitude for their positive influence and innumerable contributions to the Board and the company. Thank you, guys. Also joining us this morning is Robin Vince, our newly appointed President and CEO-Elect. I've enjoyed working with Robin and look forward to working with him further over the coming months of transition into -- as I transition into retirement. Robin will be joining me today, as Joe said, for the brief presentation about our company after the conclusion of the formal business of the meeting. The executive committee is the senior-most management team within the corporation, and it plays a major role in driving our company's success. Several members of our Executive Committee are joining us in the front of the room today. If you could please stand, let's have a round of applause for our executive committee members that are here. In addition, Megan Reardon and Noel Crocker of KPMG LLP, representatives from our independent registered public accountants, are also joining us today. They will be available to take questions during the question-and-answer portion of the meeting. The proxy holders for this meeting are James Killerlane, Zachary Levine and Blair Petrillo. Our Inspectors of Election are Fran Carlucci and Elena Radine. James Killerlane is also acting as Secretary for the annual meeting. Now the following rules have been established to govern the conduct of this meeting. Because this is a meeting of our stockholders, only our stockholders are permitted to vote and ask questions during the annual meeting. You need to have held stock as of the close of business on the record date of February 16, 2022, to vote or ask questions while participating in the annual meeting. Business will be taken up in the order set forth on the agenda, a copy of which is at your seat. Stockholder questions are welcome, but conducting the business set out in the agenda for the benefit of the stockholders will be paramount. Please reserve any questions or comments until the appropriate question-and-answer period. At that time, if you wish to take a question or ask a question or make a comment, please raise your hand and wait to be recognized. When recognized, please step to the nearest microphone, state your name and whether you are a stockholder of record or hold a proxy for another stockholder, then proceed with your question or comment, which should be limited to 3 minutes. The company does not intend to address any questions that are not in accordance with the Annual Meeting Rules of Conduct. If you need to refer to the applicable rules, a copy of them has been provided with the agenda. In the interest of fairness to all stockholders, these rules will be strictly observed. Please note that this meeting is being recorded. However, no one attending is permitted to use any audio recording device. I will now return to the formalities that are necessary for our record keeping. We must ascertain that we have a meeting duly called and organized and that a quorum is present. Will the Corporate Secretary please present his report?

Thank you, Todd. I will now proceed with my report on the formalities of the meeting. I have in my possession a copy of the notice of this meeting, together with affidavits showing that the notice, the proxy statement and the annual report were mailed on March 1, 2022, to stockholders of record as of the close of business on February 16, 2022, which is the record date for determining persons entitled to vote at this meeting. In addition, I have in my possession the oaths subscribed to by the Inspectors of Election. I also have in my possession certified lists of the stockholders of the corporation as of the close of business on February 16, 2022. A copy of the list of stockholders entitled to vote at this meeting has been opened for inspection by any stockholder desiring to do so for at least 10 days prior to the meeting during normal business hours at the corporation's offices at 240 Greenwich Street, New York, New York. As of the close of business on February 16, 2022, there were 807,106,234 shares of common stock outstanding with each share being entitled to one vote per share. The number of shares necessary for a quorum is a majority of the shares outstanding on the record date. The number of votes for which proxies have been received to date total approximately 90.36% of the total eligible votes. Accordingly, a quorum is present and the meeting is duly constituted. Votes represented by proxies received this morning as well as those to be voted in person will be included in the inspector's report, which will be filed in the records of the meeting. That concludes my report on the formalities of the meeting, Todd.

Thank you, Jim. The meeting is now duly called and organized and a quorum is present. I will now proceed with the business of the meeting. I have moved all of the management proposals set forth in the proxy statement. We will take questions on the proposals after all of them have been presented. The first proposal for stockholder consideration is election of the slate of 11 directors nominated in accordance with the bylaws as set forth in the proxy statement. The second proposal for stockholder consideration is an advisory vote for the approval of the 2021 compensation of our named executive officers as disclosed in our proxy statement. The third proposal for stockholder consideration is the ratification of the appointment of KPMG LLP as the corporation's independent auditor for 2022. And the fourth proposal for stockholder consideration is a stockholder proposal regarding the stockholder right to call a special meeting. The proposal is set out in detail on page 86 of the proxy statement. Can we please play the audio recording that Mr. Chevedden has submitted?

Hello. This is Jim McRitchie presenting for Ken Steiner. Proposal #4, special shareholder meeting improvement. Shareholders ask our Board to take the steps necessary to give owners a combined 10% of our outstanding common stock the power to call a special shareholder meeting. It's important to vote for this proposal because we have a useless right to act by written consent. Management made a rule that it would be mandatory to have the backing of 20% of all shares to simply ask for a record date to start the written consent process. Why would any group of shareholders who own 20% of our company ask management for a record date when the same group could compel management to hold a special shareholder meeting? There appears to have been an evil genius at the Bank of New York Mellon in 2019 that gave us this useless version of written consent. They make a mockery of genuine shareholder engagement. We gave 41% support to a 2021 shareholder proposal to reform that useless right to act by written consent in spite a full-blown opposition by management. 41% may actually have been a majority of shares voted by those with access to independent proxy voting advice by those not forced to rely on biased management recommendations. Since management is opposed to giving shareholders a useful right to act by written consent, shareholders need a more workable right to call a special meeting. And management has less reason to resist a special shareholder meeting because online means give management more control. A more reasonable threshold to call a special shareholder meeting would be to make shareholder engagement at 10% instead of 20%. If we change the threshold to that level, management will think twice about enacting insincere corporate governance measures. That right could also incentivize directors to improve. Chairman Echevarria and Mr. Scott received up to 14 times the negative votes of other directors at our 2021 meeting. To make up for our lack of a real right to act by written consent, we need the right of 10% of shares to call for a special shareholder meeting. Please vote yes, special shareholder meeting improvement, proposal #4. Thank you.

Thank you. I will now take any questions or comments regarding any of the foregoing proposals. Please hold any questions of a general nature such as those related to our business or financial performance until the appropriate question-and-answer period at the end of the brief business overview that I will present after -- with Robin after the formal business of the meeting is completed. Only questions related to the proposal as presented -- the proposals as presented will be addressed at this time. Mike?

My name is Mike Mayo, I'm a sell-side Wall Street analyst. I own 2 shares of stock. So I have a ticket of admission to annual meetings such as this. I have full and fair access to talk with management, so I've not been shut out or anything like that. But I'd like talking to the overseers of management, especially given the number of changes in CEO. So my first question is on Item #1, the election of the Directors. I guess I have a good part and a bad part of this question. The good part is how is the Board -- it seems like the Board is different from 5 years ago, given that 7 out of 11 directors are new since 2019. So it seems like a change for the positive. So maybe the Chairman, Joe, if you're able to answer this question, I know I've been here before. So it seemed like you try to really create positive change. The negative part of this question, why should we elect the Board again is why all these changes in the CEO. You're going to have Robin start in August, he'll be the fourth CEO in 5 years. And why didn't you just name Robin 2 years ago, Joe and the rest of the Board. And what changes are you hoping to see from Robin that you weren't getting from Todd or what nuanced changes might you have?

Joe, you want to take those?

Sure. For Mike, right? Okay. Perfect. Mike, good to see you. I'm just going to stand up because I'm short and challenged. I want to make sure everybody can see me. So keep me honest on the question so I don't forget them because you went through them rather quickly...

But first the positive. You've changed the...

They're all positive, Mike. When you ask a question, it's positive. First question, on the Board constitution. So there's some significance to 2019 as you note, obviously. So from my perspective, I think the Board's perspective, and they're all sitting here and they can chime in as they like. A couple of natural retirements happened. We had a very tenured board, as you know, dating back to the merger. So we had a multitude of natural retirements. We had a couple of circumstances where we had Board members and/or move into other Boards or into a management position of -- in our sector. So that created some retirements. So the number of individuals is really driven by an appropriate refreshment of the Board. And we were very purposeful in how we pursued that refreshment. I'm kind of looking around the room and I'll make sure I got this right. One of the things we wanted to do was we were looking for sitting CEOs or Presidents that had real operating experience of a large-scale public company that was regulated or comfortable with dealing with the federal government. I'm looking at Ralph Izzo as one of the individuals we brought, Amy's here from General Dynamics. That's how we wound up there. We also wanted to upgrade our talent around tech, both infrastructure and digital. I'm looking around. I see Guru and Al is somewhere in the room, that's 4 because it's 6 of 10. I know it's 7 of 11, but I'm taking the CEO out of the mix. It's the independent Directors, right? And the last 2, we're looking for somebody who had capital markets experience. That became Fred. And lastly, we were looking for someone that had global regulatory risk policy but also had operating experience, and that became Sandie. And so while, yes, you're right, 6 of 10, it's a refreshment, I think it's an appropriate refreshment. So we've now taken our board from very tenured to newer, as you described, but we've also created a Board that is highly diverse, gender, race, ethnicity, but of skills. So I feel really good. I think the Board feel really good about where we are. And we're pausing now because we have a CEO-Elect in place. And to your very point, this is our -- I believe this is only the second time the Directors have met in person, meeting in February and today. So we've created virtual camaraderie. Now we're going to create some in-person camaraderie. So that's the first part of your question. Did I get that part? Okay. Second part was the I think the CEO. I think the CEO was a little bit more nuanced. You did the math appropriately. So your math is accurate. But I think we've been on a 3-year leadership development and succession journey. And I put leadership in development along with succession because that's part of the responsibility. And what do I mean by 3 years? 2019, I can still remember where I was, Mike. It was the last week of September. It might have been the 25th, 26th or 27th of 2019, and we got a call from our then sitting CEO, who said he was leaving to take another position. Charlie left to take another position as you're well aware of. That was not something that was planned. He was only 2 years into the tenure, and so we immediately had our emergency succession planning in place. Within, I think, about 4 hours, we reset the CEO with Todd. We reset the governance of the Board because we had a playbook on what to do in that circumstance. It also set us on a path of beginning a succession process that was unplanned for. So that was a seminal event. I think you'd agree with that, Mike. 105 days later, and I mean 105 days later, the first reported case of COVID in the United States of America. By March of 2020, virtually every state in the United States not only has a COVID case, but has COVID deaths. In April of 2020, the then President of the United States declares a national state of emergency. And as a New Yorker, everything shuts down. So at that time, in April of 2020, not only were we trying to stabilize for a departing CEO. We were embarking on what today has become a pandemic, as all of us know. Those are two seminal events to navigate. And so we made a conscious choice that very month, what would put us in the best position as a company to be successful? The answer was obvious. We needed to make Todd Interim to CEO. But when we did that, you may think of that as a choice. We thought of that as a bridge to the future. And the succession process continued. We gave Todd to a bunch of to-dos. One of the to-dos was stabilize from the abrupt departure of our CEO. Oh, by the way, there's a global pandemic. We need you to navigate that. And while you're at it, enhance the strategy that exists. And oh, by the way, make sure we have an orderly succession process. So when the bridge to the future is built and we start walking that bridge, we've got choices internally and, if we choose externally, to be an orderly succession process. And we'll know when the time is right. And we, as a collective, including Todd, decided that now is the time. So that was a collective decision of all of us. I hope that answers your question, Mike. That's how we did it. We didn't do the math in 4, 5 years. We did the math in a 3-year orderly succession process, but I think we all feel very comfortable with. I want to take this moment if you won't mind, Mike. I want to thank Todd. I've known Todd since he was the CFO. He took -- he stepped in, in September. He stepped in at the face of a global pandemic. He hired Robin Vince and began a succession process along with terrific internal candidates we had. He did everything we asked of him and then some. So Todd, I want to personally thank you. Anything else?

No, I think that provides more clarity that -- so Todd was a bridge to the future, and it sounds like you think he was a successful bridge to the future, if I'm hearing you correctly. But the next part of this though, for the investors of BNY Mellon today, there's been ups and downs, as you know, and I've covered the company for over 2 decades. Why Robin? What should be the next phase of BNY Mellon under Robin? What do you expect as an overseer of management?

Overseer. I don't like that term, overseer.

As Chairperson.

Non-Executive Chair. How's that?

Non-Executive Chair, but the buck stops with you in overseeing management.

Indeed, indeed.

So what would you like to see from Robin and the rest of the management team, August forward?

Yes. So I won't get into what we want to see. I'll let Robin and the team talk about what they want to do in the future. I'll just tell you this. That succession process was orderly, thorough and appropriate, and it was clear in our mind who the next CEO should be, the skills and competencies. And I'll let the team talk about what they expect to happen down the road, and then we'll get into a conversation about what we expect in the future because it's a little premature for me to be speaking to that in this forum.

Okay. So if there's just one priority, though, for the firm, BNY Mellon, again, for the shareholders.

Create shareholder value.

And creating shareholder value through...

Create shareholder value, Mike.

Through? Give me something here because it's been a rough road over a decade, as you know.

Well, I don't know if I agree it's been a rough road. It's been a lot of challenges, but a lot of interest. I will just tell you this, we're ultimately convinced that the decisions that the Board has reached, along with Todd and the team, positions us terrifically for the future against us, the competitor set in that which we face in the future market, Mike.

Okay. I have more questions for the -- I have another item question. I have more general session, but if someone else has a question...

Any other questions before Mike probably has another one? If not -- can I just follow up on that a little bit, too?

Of course.

I've been -- I've known Robin for a long time, and Robin has just an extraordinary background. He was Chief Risk Officer of Goldman Sachs. He was the Treasurer of the firm. And when I think about how important the treasury function in our operation, I knew that was a skill set that would be very valuable to us. He had run a capital markets and trading, especially in the cash side of it. We're in the middle of cash globally. So very skilled for that. And he also ran a 9,000-person operations unit. So it was an incredible combination of skills that I thought would be ideal for our firm. And I recruited him -- I just had the good fortune that he had decided to retire from Goldman at the time. We made some significant changes that I'm quite proud of on the executive committee, and they've turned out quite well. And I recruited Robin to take the position that I had been in. I knew that was going to provide us with, amongst other talented executives of this company, a succession plan going forward. And as Robin became, I thought, ready now, it gave me the opportunity to make the decision to retire, which I wanted to do. That's how we did it.

Thank you. That's it. If there's someone else with a question, I'll step back.

Okay. Mike, you're up.

Okay. Let's move ahead to Item #4. Joe, with your -- I'm sorry, Item #3, ratification of KPMG as an auditor. Joe, with your background, I mean this is a real question for you guys. It's a question for the industry, too. KPMG has been the auditor for 50 years. Under what circumstances would the Board change the auditor?

Let me start it and then you can take it. So -- yes. So I should add that at the time of the merger with Bank of New York and Mellon, so when Bank of New York acquired Mellon, Bank of New York's auditor was Ernst & Young and Mellon's auditor at the time was KPMG. We went through a formal process at that time to make the decision who would be the succeeding auditor, and we ultimately chose, as it turns out, KPMG. We go through an annual process, as you might expect, to ensure independence, to ensure that we appreciate the team and the competency of the team that is dedicated to us. And you might remember that a few years back, the partner in charge changes every 5 years. So although it's a single firm, it's an aggregation of a tremendous amount of individuals, and those individuals are constantly changing and updating and maintaining their independence. And so the audit team will take a look on an annual basis. And if we think it's appropriate to make a change, there will be no hesitancy to do that. Fred, I don't know if you have anything to add.

Mike, only to say -- I won't have much to add except that we take very seriously our independence. We take this decision to choose KPMG very seriously. It is coin of the realm. It's a decision that's made very thoughtfully on behalf of our shareholders to make sure that we get the right amount of information and guidance from KPMG, but we maintain a level of independence so we can make the right decisions on behalf of shareholders. And I think that's what we've done appropriately.

Right. That's all my -- I have general session questions, but that's all I have for the...

We suspected you might. We'll see you back in a few minutes. Any other questions on the proposals? If not, thank you. I now call for the vote. At this time, ballots will be distributed to those persons who are stockholders who have not already voted or who may wish to change their previously cast vote. Please note that any stockholder who has sent in a proxy card or voted by Internet or telephone does not need to execute a ballot unless you wish to change your vote. If you have a legal proxy issued by your broker, please hand it in with your ballot. If you would like a ballot, please raise your hand and a ballot will be distributed to you. The polls are now open and will remain open until voting has been completed. So Rich, the pressure is on you. [Voting]

Thank you. Please collect the ballots, which I think we have got them all, and I will declare the polls now closed. Are there any registered stockholders who have not turned in the ballots? If so, please raise your hand. Okay? I see none. I hereby declare that the polls are closed on all matters being voted upon by stockholders and ask the Inspectors of Election to tabulate the vote. And we will report on the results of the voting shortly. In the meantime, I think we've got a brief video we'd like to share with you. [Presentation]

Okay. Jim, could you give us the preliminary voting results?

Thank you, Todd. I will now proceed with my preliminary report on the vote. The Inspectors of Election have counted the votes cast and have submitted their preliminary report. There were 729,366,548 shares voted, equal to 90.36% of the common shares outstanding. Actual vote totals for each agenda item will be posted on our website, www.bnymellon.com, and reported on the current report on Form 8-K filed with the SEC. As to the election of Directors, of the total votes cast, each Director received between 96.78% and 99.25% of the For votes. As to the advisory resolution to approve the 2021 compensation of our named executive officers, approximately 96.06% of the votes cast were voted in favor of such resolution. As to the ratification of the appointment of KPMG as independent auditor for 2022, approximately 98.52% of the votes cast were voted in favor of such proposal. And fourth, as to the stockholder proposal regarding stockholder right to call a special meeting, approximately 38.1% of the votes cast were voted in favor of such proposal. That concludes my report on the voting results.

Thank you, Jim, and I hereby declare that the slate of 11 directors has been elected. I hereby declare that the advisory resolution on executive compensation has been approved. I hereby declare that the appointment of KPMG as the corporation's independent auditor for 2022 has been ratified, and I hereby declare that the proposal regarding the stockholder right to call a special meeting has not been approved. I now turn the meeting back to the Chair.

Thank you, Todd. So that concludes the formal business for which this meeting was called. Since I'm aware of no other business, I will now entertain a motion to conclude the meeting. Is there a second?

Second.

All in favor?

Aye.

Aye.

The 2022 Annual Meeting of the Stockholders of the Bank of New York Mellon Corporation is hereby adjourned. As I mentioned earlier, Todd and Robin will now present a short business overview presentation and comment on the business of our company and take any and all questions you may have. With that, I'll turn it over to Robin and Todd.

Thank you, Joe. And before we begin, please note that our remarks include forward-looking statements and some non-GAAP measures. Information about these statements and measures are available in the presentation deck, which is available on the Investor Relations page of our website, which is www.bnymellon.com. Starting on Slide 2 of the presentation. As you can see, BNY Mellon plays a critical role as a central orchestrator within the financial ecosystem. And across all of our businesses, we touch in excess of 20% of the world's investable assets. And so when you look at the power of the franchise, we're the world's largest custodian with $47 trillion in assets under custody or administration. We clear about $10 trillion worth of securities every day. We are the #1 provider of collateral services, and that's a $5 trillion platform. We process over $2 trillion of U.S. dollar payments daily. And on top of that, we manage over $2 trillion of AUM. We operate in 35 countries across 100 markets. We maintain leadership positions across most of our businesses and we're very expansive of our -- we're very proud of our expansive client list, comprising most global leaders in their respective industries. Our deep client relationships, our unique view across the financial industry allow us to reach deep into their day-to-day operations and give us the breadth and insights that others can't replicate. And so it's kind of cliche, but it's very true. We grow as they grow. A few years ago, with a new leadership team in place and renewed clarity of purpose, we activated a compelling agenda for transformation and growth. We began to see some early benefits of that in 2020, and I'm pleased to report that again in 2021. We continue to make significant process in executing against this agenda resulting in some more meaningful organic growth. So the combination of our exceptional franchise, disciplined execution against our strategy and our inherently lower risk capital-light business model gives us great confidence in our ability to drive meaningful long-term shareholder value for years to come. If we turn to Slide 3 and take a closer look at our business. Last year, we began reporting our financial performance along 3 segments rather than 2. We disaggregated our Investment Services segment into Security Servicing (sic) [ Securities Services ], which you see on the left, and Market and Wealth Services in the middle. And our Investment and Management (sic) [ Wealth Management ] segments remained unchanged. The new segments align closer to how we manage the firm, and this new segmentation further highlights the breadth of our businesses, which is a true competitive differentiator and it enables you to track our performance against our strategic priorities at a more granular level. Now Securities Services includes our market-leading Asset Servicing and Issuer Services business. It's our largest segment by revenue, having generated in excess of $7 billion in revenue in 2021, and that's about 45% of the total firm. And it's about 33% of our pretax income. We're intentionally focused now on enhancing the profitability in this segment in the coming years. We've developed an ambitious but realistic plan to improve the 21% reported pretax operating margin that we saw in 2021 to over 30% in the next few years with about half of the improvement expected to come from higher interest rates and the other half from an improved revenue mix as well as further efficiencies. In the middle of the slide is Market and Wealth Services, which is our most profitable segment. In 2021, this segment generated revenues of almost $5 billion or about 30% of the total firm, and more than $2 billion of pretax income, representing nearly half of the firm's total pretax income. The segment is a significant differentiator, especially compared to our closest peers. Pershing, Clearance and Collateral Management and Treasury Services are deeply interconnected with our other businesses. For example, Pershing is a valuable platform for our asset manager customers, including many of our very large enterprise clients. They use it to reach both advisers and investors making investment decisions, so a very powerful tool for our clients. Wealth is one of the fastest-growing segments in financial services and we are well positioned to benefit from the secular growth trends that we're seeing there. Finally, to the right side of our slide, our Investment and Wealth Management business generated a quarter of revenue and a quarter of pretax income for the company in 2021. We are a top 10 global asset manager and a top 10 U.S. private bank. The business saw healthy fee growth in 2021 driven primarily by higher market levels, but we continue to deliver against our growth initiatives. And I'm especially pleased with the traction that we've seen in Wealth Management. Slide 4 summarizes our strategic priorities and how we've been executing against each of them. Our intense focus on execution has resulted in a solid and improved performance in 2021, and it's also positioning us to drive sustainably higher organic growth as we look forward. As a firm, we delivered 2% plus organic growth in 2021. That's up from about 1% in 2020. And frankly, there was a little organic growth in the year before that. But perhaps even more exciting, in 2021, we announced numerous industry-leading innovative products and services, especially in the areas of digital assets, real-time payments, collateral management and financial advisory solutions. That's what we're calling Pershing X. We also launched ONE BNY Mellon to strengthen enterprise-wide collaboration and deliver more holistic solutions for our clients that frankly only we can provide against those 3 segments that we described. And we're not just investing in growth. We're also investing in efficiency. In 2021, we generated approximately $300 million of efficiency savings across the company. And we drove higher productivity in operations, and we think we can do more in 2022 as we continue to scale and digitize our operating model. We also sold certain subscale lower-growth businesses in Pershing and Wealth Management and streamlined our investment firms offering in Investment Management. And then finally, we continue to foster a high-performance culture that attracts a diverse and talented workforce. If we move on to capital returns on Slide 5. On this slide, you can see our continued return of capital to our shareholders. Down in the lower right block there, you can see that over the last 10 years, we've returned close to 100% of our earnings between dividends and buybacks. In 2021, we again generated significant capital. And when the Fed ended their restrictions on share buybacks and dividend increases at the end of June, we accelerated our return of excess capital to shareholders. In July, we increased our quarterly dividend by 10% to $0.34 per share. And in the second half of the year, we repurchased $3.2 billion of common stock. Overall, we've returned $5.7 billion of capital, which was 160% of earnings to our shareholders. Now Slide 6 summarizes our capital and liquidity position. One of the benefits of our model is it does not require a lot of capital for growth. And so despite the meaningful return of capital to shareholders, we ended the year with healthy buffers against all of our regulatory minimum and liquidity ratio requirements, and we continue to receive among the highest credit ratings in the world from the rating agencies. I'll now turn it over to Robin to make a few closing remarks. Robin?

Thank you very much, Todd. It's a privilege to be here as CEO-Elect of this great firm. As you can see from Todd's update, our business is strong and our focus is clear. Over the course of the 237-year history of our company, BNY Mellon has accumulated a deep reservoir of trust with our clients, and we are very grateful for that. I've heard it firsthand from so many clients since I've joined the company how they trust BNY Mellon not only to serve their businesses but also to be a partner with them as they evolve them. We have leading market positions and we have significance to the financial ecosystems that our businesses operate in. We have global reach and scale, and we have a unique breadth of highly complementary and, as Todd said, interconnected businesses. As Todd mentioned earlier on, we touch in excess of 20% of the world's investable assets. Just think about that stat just for a second and what it means. It is really remarkable. And that incumbency is a very powerful advantage for us. That said, incumbents can lose out if they don't also evolve. And so we're very focused on innovation. Examples include being the first bank in the United States to make a real-time payment, the first bank to do e-billing in the U.S. and the first bank to truly incorporate ESG principles into the repo financing collateral schedules in our Clearance and Collateral Management business. And now we're charting the course to be the first company to bring together the variety of tools and technology solutions that financial advisers in our Wealth Services business currently have to deal with under one seamless platform that is Pershing X. The One BNY Mellon culture is a very important part of enabling these types of innovations as we really connect the dots across our enterprise. And looking forward, we remain deeply committed to our purpose of being a trusted steward for our clients in all of their capital markets activities. And our attractive business model, combined with our laser focus on execution, gives us great confidence to be able to deliver meaningful long-term value to all of you. And with that, Todd and I are happy to take any questions that you might have. I would ask that you please observe the general rules that were described earlier and also ask that you limit yourself to one question at a time so that we may afford the largest number of stockholders an opportunity to ask a question. And questions should be limited to 3 minutes.

Any questions? Seeing Mike only, please, Mike.

I do want to say thank you for having this annual meeting in person. You're 1 of only 2 banks to do so this season. And I hope this remains in person. It's the only chance for many people to ever see the Board of Directors. And so I hope you don't take that away from us, so thank you for doing that. And on another positive note, you were the first bank to mention the impact of Russia on your operations. So what were the considerations by the company in releasing the details about the pivot away from Russia? And what are the limits to a full exit of all custodial duties?

Yes. So Mike, like everyone, we were impacted and really upset with the events that we've been witnessing in Ukraine over the past almost 2 months now, and we took a number of actions around that. First of all, we took some humanitarian actions. So we did make donations. And we met the -- matched any contributions for our employees. And so we did what we could on the humanitarian side and also, of course, protecting anybody related to it or impacted by it. Secondly, we thought real hard through what was going on with the -- not only with the sanctions but the sanctions that were being imposed on us. And ultimately, Robin and I sat down, and we spent a lot of time thinking through this. And what we did is we ceased our banking (sic) [ new banking ] operations. And our banking operations were really around payments and corporate trust. And so given the risk, given the uncertainty, given the just the AML risks associated with. In addition to that, the operational complexity of operating in this kind of environment, we thought it was appropriate to cease it. We also suspended the purchases for our investment manager of any assets. And you refer to the custody business. And we are a custodian in a couple of forms, one in the traditional asset servicing form, but we're also a depositary receipt bank, which is effectively a form of custody. And in the case of custody, we are doing what we can to help our clients get at their assets. As you probably know, under UCITS in the 40 Act requirements, asset managers are required to -- for those funds to actually hold a custodian. So we serve a very important responsibility for them. So we are doing what we can. If we cannot move or sell or settle assets, we will monitor and do what we can for those clients. And so that will take some time to work through. Are there any other questions? I suspect, Mike, you might have another one. You didn't raise your hand, but...

Transparency, you talked about during the presentation, the transformation that you initiated in the past year or so. And you've had many new initiatives to improve revenue growth over the past 5 years. How can we on the outside evaluate the success or failure of these initiatives? And how much have they contributed to the current revenue? I mean shouldn't there be more and better -- I always want more transparency, but you have a specific endeavor for more revenues. We just kind of want to know what inning you're in and how much it's contributing today?

Sure. It's a fair question. So one of the things we did, Mike, as you saw our resegmentation, so we exposed the segments much more granularly. So I think it's going to help you quite a bit around that. So when we look at the Asset Servicing business and when we talked about the revenue mix, and it's had a significant impact on its margins with the impact of the interest rate movement. We expect to recover about half of that on the way to 30%. We expect to recover about half of that through rising interest rates. And you'll be able to see whether we're recovering -- you just look at our margin, whether we're recovering the other half through the growth opportunities that we've got there. That includes things like digital asset custody. It includes things around -- what we're doing around our new custody platforms, actions that we're taking around fund accounting and so forth, so a significant number of initiatives there. And then we broke -- by breaking out the Market and Wealth Services business, we're giving you -- there are plenty of metrics there, so we're giving a much greater perspective. So you'll be able to see whether Pershing is accumulating assets through its Pershing X operation. That, we think, is going to be a game changer for advisors, and we'll just make the platform. We'll give our clients an ability to make their businesses far more efficient. And then I think the traditional measures that you see in the Investment and Wealth Management space are quite good. That being said, so we do have some targets in place. And I think Robin at some point in the future may add some additional perspective on that when it's appropriate.

Just to add one thing to that, Mike. If you look at the Securities Services business, and Todd said, the 21% margin that we had in that business last year and the drive, and we've declared this in the interest of transparency, our drive to 30% margin there. Again, Todd said, split about 50-50 between the rates and then the revenue and expense side. That's a good example of the type of transparency that we gained from the resegmentation. And it wasn't just resegmentation. It was resegmentation with embedded transparency and then objectives, targets tied to that so that you have the insight into what actually we're trying to drive in that business.

Great. I have one last question unless there's someone else...

All right. So we'll go as quick. Anybody else? If not, Mike?

All right. My last question, I think I hear from you, and you can correct this, Robin, and Todd, I'm sure this is your theme, too. But incumbency with innovation. And with incumbency, with innovation, comes digital transformation. And I do all this work on technology. And I just don't have many concrete metrics for you or for many other banks. And I will just say, one of your peers had a major transformation last decade, and the Lead Director at that peer at the end of that decade, said, "Well, we were surprised about the cost and the complexity and the time to transition to the cloud." And so the Board itself was surprised. I'm talking about State Street in this case, but -- so it's not without precedent where the need for this data is real. So with that big wind-up, my question is pretty simple. What are some concrete examples of where you are on your tech journey? In your CEO letter, Todd, you mentioned digital and data mindset. So just can you put something concrete here, the number of data centers, number of apps, past, present, future where you want to go? You talked about the margin and the improvement. That's a big improvement, 21% to 30%, half of it through noninterest rate measures. So what's some concrete data metrics about your tech journey that you can give us?

How about I start, Robin, and maybe you can jump in. So we've been through quite a transformation just over the past few years. And so one of the things that we've done is we've rebuilt our entire infrastructure. So we now have 3 core private cloud-based data centers that cover our global applications, and that transition is behind us. So during that period of time, what you've seen is you've seen our technology expenses go up pretty dramatically, probably from about $2.4 billion a few years back. We're going to spend close to $3.5 billion this year on technology. That full run rate of the depreciation on that investment is now in the numbers, and any redundancy costs have actually been reflected and burned through. So that puts us -- we -- on top of that, we do have a number of other data centers, 6 regional data centers. They're there for regional requirements. So many countries require that data be resident in-country. So whether we'd like to have a data center there or not, we really don't have a choice to serve that country. There are a couple of other legacy data centers that come with the acquisitions that we will eventually migrate away. But I think we've made huge progress. And we've built, I think, the platform for future delivery of technology. And that's key. It's also -- not only has it made us more resilient, which has been reflected, it was -- we saw that through the COVID, the spike, where we saw very large spikes in activity, and never once did we have a capacity issue. And we're making -- and we're operating at a much more efficient level. All modern operating systems, which has been very helpful for our cyber defenses. We can patch anything very quickly if there is a vulnerability, which, in a more antiquated environment, we would not have been able to do. And we are now in the process of converting our apps to cloud-enabled. We will (sic ) [ we dispositioned all ] of our distributed applications, which there are a significant number, 25% of them will be sunset this year (sic) [ of those remaining, We have upgraded over 90% of our 1,500 distributed applications to be cloud ready ]. The other 90%, which is about 1,500 apps, are cloud capable now. So we've made significant progress. We've also invested in our mainframes, making them more secure, more resilient. And so I think we've got the platform to do the things that we want to do going forward. And so we've modernized micro services and things like our payment system, our collateral management system, our broker-dealer clearance system are really the, I think, what the future state is. There is still plenty of room for us to use the digitization efforts more. What we can do with AI, we're just, I think, scratching the surface. And as we get more access to the data, I think we'll be able to deliver more. It won't just provide capabilities to our clients. It will actually provide capabilities to us -- for us to improve our processes and efficiencies and scale. So we've built the platform. It's a journey, but I like very much where we're positioned right now.

I was just going to add, Mike, that if you want to look at some of the other investments, a lot of that has been about the scale, the resiliency and the core of the company. But if you look at investments, I mentioned real-time payments is a good example. First bank to make a real-time payment in the United States. First bank to do a test trade with the Fed in the not yet fully operational FedNow real-time space. And we can draw a straight line from those investments and those innovations to the way that we're actually building the business. Because as a bank that doesn't have a credit card franchise, doesn't have a meaningful debit card franchise, doesn't really have that distributed corporate or even retail banking, for us, real-time payments are a way to play a new and differentiated role in a new ecosystem that's evolving in the real-time payment space. So as we invested and innovated using technology in that capability, we see a path to be able to really grow the Treasury Services business that is, in fact, one of the fastest-growing businesses of the bank.

And just my follow-up to this. Since you're talking about the back office and retooling it, and Robin, you're talking more about the front office for growth.

Yin and yang.

When you think about moving along the J curve, investing, your profits go down, you come up the other end. You talked about the increase in tech spending from $2.4 billion up to $3.5 billion. Where do you think you are in that J curve? I mean it sometimes takes a few years to get -- you make the investments, it takes a few years to pay off. You move to the cloud. You still have a lot of stranded costs and that sort of thing. Are you still at the point where you're investing and it's hurting profitability? Or are you at the equal point? Or do you think you're coming up the other side?

I would say that as you see that we saw a little more organic growth, you'll see a little bit of operating leverage. We anticipate you're going to start to see more of that. So I think we're starting to come up the other side on some of the revenue ideas. But I think there are the growth initiatives that we've talked about, but I think there is significantly more there. And I think we're still -- we'll still garner efficiencies. So I think the investment -- the rate of investment will slow down given the considerable investment that we've made over the past few years, but we still see opportunities to invest. So I don't -- and I got to turn this over to Robin. But I think the good news is we see enough opportunities that we still have a prioritization effort to make sure that we're going after the ones that are most -- that provide the greatest opportunity. And we only have so much capability of -- regardless of how much we want to spend and what we're able to drive through the engine. And so -- but I do think we're probably going into the positive part of that J curve. Are there any other questions? If not, I would -- I guess we'll call it a day.

Maybe, Todd, I could -- just to pile on with one thing, Joe mentioned it earlier on. But before we conclude, I just wanted to add my thanks to Todd for his 37 years of service through the firm, which has just really been remarkable and, as Joe mentioned, never more so than during the 2 years that he stepped up to navigate us through the pandemic, which really was a very tumultuous time for the whole industry and for the whole world. And we owe Todd a really great debt of gratitude for that. And I would also just say on a more personal note, I've appreciated Todd's friendship over many, many years, including the time that I've been here at the firm and particularly the camaraderie and partnership, quite frankly, as we are working through our transition, which started a month ago and still has a little ways to run. So on behalf of all of the stockholders of the firm and on behalf of all of the employees of the firm, Todd, thank you very much.

Thanks, Robin. Thank you, everybody, for being here.