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

We have from BNY, CEO, Robin Vince. So Robin, first and foremost, thank you so much for being here.

Good to be with you.

I think a year ago, while introducing Robin at the same conference, I had mentioned that BNY was a bit of an under-the-radar turnaround story. Robin joined the bank, I think, in 2020, became CEO in 2022. And the actions that they had instituted, they are going to drive meaningful outperformance, improvement. Clearly, based on conversations we've had with investors, the stock is up about 50% from relative to this time last year, the market has taken notice. So maybe a good place to start, Robin, when we think about how things evolved over the last 12 to 24 months relative to the plan that you had in place when you became CEO.

Great. Again, thanks for having us, Ebrahim. It's good to be here. So let me just very quickly tick back. I won't spend much time on it. But coming into the company, I'd been a long-time client. I grew up at another firm for 25 years, perspective on BNY from the outside, then the opportunity to be inside, but without the burden of being CEO, you get to look around, get a good feel of things. Then, transition, looking at the company through the eyes of a long-time senior leader, quite helpful, and then in the seat. And so right on the first day, we started with the process of saying, let's have a look at everything we've got. Let's re-underwrite the business and brought all of those perspectives to bear and came out with a thesis, which is the company had underperformed its potential, but there was a lot there. We had a great client franchise. We had a great set of businesses. The businesses were pretty adjacent to each other. They had platform-like characteristics, in terms of what they do. Software could be a greater part of the sale over time. There was some diversification, but there could be more. And we looked at that, we said, okay, well, we're going to need some different people to be able to do this, but we don't need different businesses to be able to do this. We're going to need a cultural change. And so, as we looked at it, we said, look, there are 3 pillars of our strategy. One is we need to do a lot more with our clients to really take advantage of the adjacency, number one. Number two, the company just needs to be run better. I mean, it was as simple and clear as that. And even though it's stark to say it, we made that one of our strategic pillars, run our company better because it was clear to us that, that needed to happen. And the third, culture, that went to people. We thought there were a lot of good, but we were way too siloed. So we needed to bring it together. So that was the story, the setup. And what we've been doing in the past 24 months is just executing the heck out of that thesis. And we look at it, obviously, we're pleased with the share price performance. We're pleased with the progress that we've made. We had 6% fee growth last year, which is something that hasn't been seen for a while in our company. We had 9% fee growth in the core platforms segment that we have, Market and Wealth Services. We were very excited about that. And while the fee growth for the whole company was market and organic, the fee growth in our platforms business was sort of much more evenly split between -- even with a leaning towards organic growth as the composition. So we feel like we've rebuilt some of the base. We've put in place the key elements of strategy, and now we're executing. I mean, we look at it, as a leadership team, we think we're just getting started.

It's good to hear. I'd like to come back and double-click on some of those things. But maybe taking a step back from a macro backdrop standpoint, just talk to us what the operating environment feels like. I mean, we got some inflation data this morning. The Fed probably on the sideline for the rest of the year. And then you have a Trump administration, which is viewed as business friendly, and that's the expectation, but we've seen a fair amount of tariff headlines over the last week or two. Frame for us how you see the operating outlook for BNY as you look forward into '25?

We're risk managers at heart. And so that's what you've got to be in any business. You've got to make sure that resilience to different environments. We view resilience as a commercial attribute for our company given what we do. We provide these at-scale platforms, software services capabilities. Our clients build their businesses on our company. So you've got to be resilient to the different environments. And so whether rates up, rates down, it really is not part of our central thesis of managing the company. We've got to be able to cater to all these different environments. Having said that, I think if you zoom out a lot, you look at the current environment and you'd say, gosh, there's a lot to like in it. You've got rates at a pretty reasonable level in the context of long-term history. You've got a growth potential that's clearly there in the U.S. The U.S. got a lot going for it when you look across energy independence, labor availability, you look at, notwithstanding, obviously, some of the debate around immigration. You've also got chips and sort of on the right side of all that technology innovation, all the biggest companies in the world based here. There's a lot to like. And inflation, sure. Is it sticky? We think it is. We think it's sticky in the last mile, probably tricky to get all the way down to 2%, hence, the bit about being on hold. But it's not like we're in a runaway problem. The Fed has done a good job. We had a real supply side problem, then a demand side-driven inflation issue, a bit of transition from one to the other a few years ago. And now it's grinding down, and they're having trouble with that last bit. But why are they having trouble? They're having trouble because the economy has been doing pretty well. That's not a bad reason to have a bit of inflation as long as it's true. And now you've got an incoming administration, inherently pretty pro-growth. We'll see whether the flood-the-zone strategy is able to be successful and doesn't tip into the -- it's a bit chaotic and become ultimately stifling for the business environment. Obviously, we're hoping for that not to be the case, but we'll have to see. But I would say net-net, we're sort of cautiously optimistic about what the future could hold, while at the same time, we're investing in our business to be pretty diverse -- more diversified and resilient to most reasonable business environments.

Got it. I guess the other aspect of this administration, there's this expectation for some improvement in the regulatory backdrop even for the banking industry, moving to something that's more balanced, more predictable. Just talk to us, as you are also the Vice Chair of the Financial Services Forum. As you think about how the changes may impact One BNY? And what are the 2 or 3 big priorities within the FSF as you're advocating for the industry?

Well, first of all, there's a linkage here. And I think the incoming administration definitely sees that, which is to have a thriving economy, which they definitely want, you need to have less red tape and bureaucracy and things gumming up the system. And you also need to have a great capital markets and a vibrant capital markets to be able to fuel and fund that growth. That's going to be true for all of the things that need to be built out in infrastructure and other investment capabilities. It's going to need financing, you need capital markets. And so the effort to try to de-gunk the bureaucracy a little bit and to be able to fundamentally invest in capital markets availability, those are 2 tailwinds. We view those as tailwinds to collectively the financial services industry. Now we'll have to see how all of that gets prioritized associated with what are going to be the administration's ability to focus on all of these different things at the same time. But I would also say we think that the progress that's been made in regulation over the course of the past 15 years has actually been net-net good for the banking system. Are there a few things we'd quibble with? Of course, you're always going to have differences of opinions. And that's what the FSF is trying to do, which is to make sure that we can parse out the things that are actually stifling for good activity versus the things that are pretty healthy. The fact that there's good levels of capital in the system, liquidity, stuff like that, that's made the system safer. It's made big banks safer. We saw the effect of that in the spring of 2023, where the big banks were a source of strength. We had inflows because we were a source of strength for the system. And I think that's a good thing. So this is not a question of like rolling back to 15 years ago and saying, we can declare victory on all the progress. Enough with the another thing, another thing, another thing. That's not the world we're in. Let's leverage the strength of the banking system and the strength of capital markets to power the economy forward. I think that's the message from FSF.

That's helpful. I guess maybe shifting to the strategic actions at BNY. You mentioned -- and you've talked about this many, many times, de-siloing. Explain to us, I mean, it sounds a very simplistic concept. Why has this not been done over the last 5, 10, 15 years? So one, just tell us what you're trying to achieve, where you are in the process? And what's the runway? Are we in the early innings, mid-innings, late innings of the improved efficiencies and productivity you expect out of it?

For sure, the early innings. So that's the punchline is we're just getting started with this thing. And in fact, a lot of the work that we put in place really has not yet had enough time to be able to bear fruit. We have high confidence that it will. But if you think about what we did as the core leadership team starting a couple of years ago is we identified what are the things that we need to do, recognizing some of them were fairly short-term actions that could start to have some short-term payback and other things which we had to get after immediately, even though they wouldn't have payback until the medium term and some things for the long term. So let me break it down a little bit. We did this big initiative around saving by making smarter choices on our spend. We call it Project Catalyst. It was 1,500 ideas generated by our people, and that generated about $1 billion of run rate benefit. 2025 will be the first year where we have the full effect of that $1 billion of savings. We got a little bit in '23, it's how we bent the expense curve. We got more of it in '24, how we bent it some more. And in '25, we're getting the full benefit of it. So we did that work in 2022, to be able to generate those benefits. But simultaneously, we were designing our Platforms Operating Model, which is a very important part of our transformation, and that's just now starting to go into effect, but the value of that hasn't really been felt yet. We also started in 2023, a big push on AI. We've had no value from it yet, but we absolutely know that there's a lot of value to come from that. And so that's an example of a longer-term thing that we started work. So we simultaneously worked on things with this concept of there would be a choreography of how the expenses and the revenues would fit in. I think you can argue if anything, we front-loaded some of the expenses, notwithstanding the fact that we bent the expense curve. But this concept of coming together and de-siloing is at the very heart of the revenue and expense strategy. You can make a very good argument for silos, conglomerate style, in businesses that own wildly different activities. I look at Berkshire Hathaway, there's arguably very little synergy between their different components, and they run them as distinct businesses for a whole set of perfectly good reasons. Those would be really bad reasons to run BNY that way. Yet we've allowed ourselves to be run that way. And I think that's a strategic mistake for a company like ours where we're not a retail bank, we're not an investment bank. We're a set of highly related adjacent businesses, many of which have significant platforms like characteristics. So the opportunity to take those and to generate more sales from across the business, more solutions instead of just individual sales, that's going to be one of the key pillars on which the success has been built. And we started to see results. In 2024, clients who bought from 3 or more lines of business, that was up 30% last year. And that's still just in the, what we call, 1.0 of the One BNY effort, which is encouraging referrals, encouraging joint sales, good, but the next step of that is bundling, and the next step of that is solutions that cut across different products from the company. And so there's a curve of maturity associated with One BNY, which is sort of version 1.0, moving to 2.0 and then in the future 3.0. And so that's another example of like just getting started. And then the One BNY and de-siloing, if you will, on the expense side is doing things once, doing them consistently and doing them well. We onboarded in every bit of the company separately. If you were a client of business A and you turned up a business B and you said, hey, can we do some more business. We'd say, hey, can we have a second copy of your passport please? Of course, it was creating barriers to doing new business, and it was inefficient. So you get rid of that type of bureaucracy and waste in the company. You can do things once, you can do them well, you can do them consistently, you speed up revenue and you reduce expenses. That's what our Platforms Operating Model business change is about and it's hard. We've only got 30% of the people operating in the model, and most of them are newly in the model. But the people who piloted that a couple of years ago, 18 months ago, we already see the speed up in their efficiency and their client revenue penetration.

So maybe if we can spend some time on the platform model. I think you expect to have about 85% of employees.

87% by the end of the year.

87% by the end of the year. So one, deconstruct that a little bit for me. It sounds like a fancy word, platform. You hear that in the context of tech companies. Is that just a fancy way of saying they're cross-selling more? Or is there more to platforming beyond just trying to cross-selling products?

Well, the reason why you don't hear it from a lot of banks or big classic historical financial services businesses is because it doesn't fit them because they're not platforms companies. You actually have to be a product-led platform-like company to be able to think that a Platforms Operating Model makes sense to you. If you try to do it in an investment bank or just somebody who's just a big asset manager or maybe even just even big asset servicing, I'm not sure it fits because you don't have a lot of different things. But when you have a lot of different businesses that exhibit technology platform like characteristics where you have significant market share, where software is an important part of the sale along with the services, where you're providing literally a technology product solution that is something that a client would plug into and leverage at massive scale. Tick through our businesses, Collateral Management, largest in the world; Securities Lending, largest in the world; Liquidity Services, a $1.6 trillion ecosystem associated with cash, world's largest Issuer Services firm, the world's largest custodian. There's a lot of platforms in there that truly have these characteristics. So we looked at it and we said, okay, what are we? We think, and if you look at our biggest segment in dollar profit terms, Market and Wealth Services, which is really our biggest platform segment. And then you look at inside it, it's the fastest growing and it's got the highest margin, 45%. What are the characteristics of those types of businesses? They are, we believe, platform-like businesses. Therefore, actually do run yourself. We don't want to run yourself in traditional silos that are weird front-to-back constructions that are suited for a different type of business. We said, you've got to have an operating model that suits the business types that you have. And so that was the determination that we made and the Platforms Operating Model then just becomes how do we restructure the company to be operating consistent with the way that we think the nature of our business is. And so what that means in practice is our businesses become client platforms. In the technology world, you call those products. We call them client platforms for a few reasons, but essentially, that's what they are, led by product managers who are thinking about features, innovation, speed, growth, all of those things. And then a series of enterprise platforms like client onboarding, like call centers, all the enablement things that all of the products need to be able to actually use. Those you want to do them at scale, you want to be focused on efficiency. You want people whose skill set is to make them better and better and better every day. What are the big leaps forward in efficiency, consistency, quality, and all of those things. So by clarifying how we're organizing, we get to have the right people in the right seats. We get to have the right purpose. We understand what's good overlap versus not good overlap. We get to be able to have missions and OKRs really associated with driving the business forward. And we think that it will help us go faster on revenue and go more efficient on expenses. And the early, early returns are that that's exactly the case because we piloted some things. We were very careful about it. It's a big change for the company. And you can only do this, by the way, I think, if you've got a pretty long-range view. If you're looking at a company and you're taking a 3- or 4-year view, there's no way you're going to do this. It's a lot of work. You got to spend some money. You're throwing the pieces up in the air, and it's just -- life's too short. It's just hard. But if you're taking a longer-term view and you're saying, hey, we're going to leave the company just fundamentally different than we found it, you're prepared to do that because you can see the medium and long-term value of doing it. And so that's what we're determined to do. We started on the journey about 3 years ago thinking, 2 years ago was experimenting, a year ago was starting and now this is our biggest delivery year. But most of the value of this comes when you're operating in the mode. The transformation itself doesn't give you a lot of value. But when you've got a person, as we do now, who's in charge of all 8 call centers that we have that support our various different businesses, they look at it and they say, well, that's a mess. I got 8 call centers. I got all these different systems. I got these processes. It just doesn't make any sense. Why would I run it this way? Exactly right. You shouldn't. You're in charge of the problem. We'll help you and support you in rationalizing. And the value of that rationalization will be felt in year plus 1, plus 2, plus 3, when they've actually done the work. So that's the way that we think about it. And we have a lot of conviction, and we have a lot of early proof points that there's real value associated with this. But it's a medium- term play.

Got it. I guess from the outside looking in, just when I put the way you talked about de-siloing and then platforming together, I mean, I know you have strategic targets out there, it seems like this could be a much more profitable bank even relative to what you're targeting today. Is that unreasonable? Like what am I missing when we think about it that way?

Well, we put out our medium-term targets. We're a year into it. Before we did it, people were saying, gosh, it would be great to have some medium-term targets. And we thought, well, that's good financial discipline. We should do it. So we put out some medium-term targets. Now we're a year in and people are saying, gosh, can you do more? Well, okay, that's a nice conversation to be having a year in. But first, let's get to that point, let's make it sustainable. We've said we don't think it's just a point in time. We'd like to be able to achieve that through the cycle. And as you pointed out and as the facts bear out, we're very much on the way to that target. One of the things that we gave medium-term outlook on a few years back, even before we brought our firm-wide targets out was the march to getting our Securities Services segment back to a decent margin. It had been low. We hit 29% last year. We have a target of 30%. When we look at that, that's doing well. We've made a lot of progress on ROTCE. We've made good progress on company-wide margin. And we've said we've got a North Star of positive operating leverage, and we think we can continue to drive that. And if you just do the math on medium-term operating leverage and you do it over a period of time, then obviously, we have more ambition over time, even, than our medium-term targets, at least in our minds. But we are, you said at the beginning, under the radar screen. We are doing a deliberate sequential turnaround of our company, building blocks one at a time. We don't need to get ahead of ourselves and sort of imagine too much too far into the future, but I think in our management team's eyes, yes, we are building ourselves towards a very fundamentally different company than the one we inherited.

Got it. I guess maybe talking a little bit about the businesses, starting with Securities Services. Just talk about when you think about the growth opportunity ahead for that business, how are you thinking about adding investment dollars versus trying to achieve efficiencies and making that business more profitable?

So, this is the sequencing that Dermot, who is our CFO, who's been on this journey right from the beginning, really is helping to orchestrate these different sequencing components. Because, as I mentioned earlier on, we invested and spent time right at the beginning on things that we thought would have some immediate value. Let's just get after that straight away. And that's how we bent the expense curve. But we also want to invest for the medium and the long term simultaneously. And so sequencing this, so we're not a firm which is telling you a hockey stick story, which is, on, it's going to be terrible for the next 5 years and at some point, will emerge from the clouds. We're not telling you that story. We're telling the story of deliberate execution all the way through, which is going to build on itself, and that's how we're thinking about it. So the answer to your question is different by segment, as you suggested. In Securities Services, we had a real operating expense problem, and we had a bit of a growth problem. So we needed to attack those in about that proportionality of significant focus on one and a bit of focus on the other. The good news is we've made a lot of progress on both and evidenced by the margin improvement. But we have real more room to go here because we're very pleased with the organic growth of 6%. It was equivalent to the company-wide number in terms of 6% fee growth last year, of which about 1/3 was organic growth, which is up from where it had been before on a consistent basis. 2/3 was the market. The market was helping us. But that's okay. We're in a business. We're happy to have a bit of tailwind from the market. And in the meantime, how do we build the organic growth to have and the diversification in the platform, more software, more other things, transaction volume. So we're not just beholden to the levels of asset values. And so that will be an important piece of growth. But there, the focus has, I would say, been 2/3 on reducing the cost to serve and maybe 1/3 in terms of true investments as opposed to in Market and Wealth Services segment, where, from my point of view, we look at it and we say 45% margin, let's just do more. And we don't need to improve that margin. We don't want it to go over 50%. I just want to grow the revenue. So there, we're disproportionately investing in growth, and you can see that in the numbers because the fee growth number for that segment last year was 9%. And so there, you're seeing the benefit of our disproportionate focus on growth. Now having said that, it still gets the benefit of all the platforming we're doing across the company. The investments we're doing broadly benefit that segment. And then in our Investment and Wealth business, that's a place where we viewed it as a little bit more of a turnaround from a margin point of view. We've made some good steps, and this is about returning it back to where it has historically operated. We've installed new leadership in that group and really somebody who has a very fundamental view not as a stand-alone asset manager or wealth manager buying, but as one that can benefit from this platform capabilities of BNY way more powerful and capable. I mean, our Wealth business doesn't use Pershing. Well, that's weird because we have $3 trillion worth of assets servicing other RIAs and broker-dealers in the Wealth business. I got to ask that question, does that really make sense? It doesn't use our own Treasury Services business, our Transaction Banking business. We provide checking, debit, bill pay, all of those services to other wealth managers and not to our own? Okay, so there's clearly runway associated with cost to serve in those businesses. And then there's growth and distribution capability because the overlap with the rest of our platforms has been siloed and so it hasn't been executed that way. So we needed new leadership. We needed a transformation to come and attack that opportunity. But across every one of these 3 segments, there's work to do and investments that we've curated for the particular opportunity.

And just maybe talk about in terms of the Market and Wealth Services business. You made some investments, and we think about the acquisition of Archer last year or scaling the ETF business. Wove, as it pertains to Wealth Management, just tell us from a growth standpoint, what are the 2 or 3 things that are underway? And you mentioned the 9% fee growth last year. How sustainable is that based on the investments you made?

Well, Wove is a great example. So Wove, we gave guidance on that revenue for last year. We basically are in that ZIP code. We've got a sense of the exit rate coming into this year. This is an example of a large investment, which we thought was very, very targeted to be adjacent to and get leverage from the rest of our Pershing platform. Our Pershing platform is really catered to the investor side of the Wealth business as opposed to the wealth advisor side, giving them leverage and tools to be a platform to make them more efficient. And so that was a complementary investment. We were very deliberate about it. We're very excited about this because what I think a lot of folks have missed associated with Wove is it isn't just that it provides a set of services to advisers. It's also a delivery vehicle for other parts of BNY. So, we're in the ETF creation business. Guess what, Wove is a delivery vehicle for that. We're in the indexing -- custom index business. We're in the Treasury Services. It's a delivery vehicle for that. So it is a platform which does a series of things, but it can also be a One BNY example of how do you actually go to market with a wealth manager for some of the other capabilities of BNY. And I think that's one of the things that's exciting about it over time. So that's one example. You're right, Archer was an example of a gap. I'm sure you'll ask me about M&A and capital management at some point. And so, if I go to Archer as an example of -- we looked at a gap in capabilities, we are huge -- the world's largest custodian. We're huge in capabilities in mutual fund servicing and ETF servicing. We're the largest third-party ETF servicer in the world. What's the next wrapper, if you think about those as wrappers, mutual funds, ETFs? The next one is separately managed accounts, been going that way a long time for institutional. What about retail? Archer, leading software provider in the retail separately managed account. There's a gap, could have spent money built into it to the point about where we're going to do our investment dollars. We want the expert in it. Let's hire a team and a platform and an established franchise, which is going to be amazing, just plug the gap. They came in, great cultural fit, great technology, integration, buy it once, use it across Asset Servicing, use it across Pershing, use it across Investment Management. So, we'll be agile in terms of where should we spend versus where should we acquire when it comes to a capability or something that's going to allow us to go faster in the journey. Now note, although Archer was across all 3 segments, it provides leverage to all 3 because all 3 of our segments needed that capability. And in the case of Wove, it's back to what I said, disproportionate investments into Market and Wealth Services because it is the most profitable, the fastest-growing and the highest margin.

Got it. You brought up capital. So BNY is a very high profitability bank running a relatively asset-light model, I would say. Talk to us in terms of when you think about the amount of capital generation at the bank, remind us of the sort of stack ranking of priorities and how you think about deploying that capital?

So, the balance sheet for us is very important that we have a balance sheet, our ability to do some lending, to be a safe home for deposits for clients is valuable to us. We own good NII associated with it, but it is not the reason for our being. The reason for our being are the services that we provide. And so, it is not a strategy for us to grow our balance sheet. We'll have it operate in a way that makes sense very deliberately, but growth of our balance sheet is not a direct strategy. It's more of an output of everything else that we're doing. You're right. We are a capital-light business. We are very capital generative. And so every year, that serves up the question for us of what are we going to do with our capital. We gave guidance on that in the past couple of years. We've done it again this year. And essentially, that's a capital return message. But with the caveat, and this is what we executed last year, we gave the guidance and we made an acquisition, and we hit our guidance is that there will be things along the way that would make sense to us. Big transformational mergers, sound complicated. We've got so much opportunity in the company, super exciting. Got to be responsible, look at things that come along as they do. But we are squarely focused on where can we get more scale in a way that will help us to grow faster, more capabilities that will help us to grow faster and be more effective. We're not looking for a massive distraction because maybe if you didn't have a great set of businesses or you're backed into a corner strategically, you have to think like that. But we just have such a conviction around the franchise, the businesses and the team's ability to execute, particularly with this de-siloing thing in mind that we just think there's a lot of growth inherent in the business today.

And on that, if you can follow up, one, so you talked about Archer. Are there many more Archers out there? And are there product gaps that are identified at the bank where you're like, okay, we can do a lot of these over the next few years?

We have a process for that. We call it our strategic business reviews. It's really an extension of what we did right at the beginning of the work we went through at that time, every business, how we executed it, who was doing it. We re-underwrote everything, as I said. Now we've turned that into a business-as-usual format. So we take businesses sequentially in turn, take market segments. We take sectors and things going on in the world, and we put them through the same discipline. Our strategy team leads the effort. We bring in a business, if you will, for the proctology exam, and we get a set of leaders around it who are going to be probe and ask all the questions, all the uncomfortable things around where is the gap in the strategy? What are we missing? What could be something that we would regret 5 years from now if we didn't do? So that's our strategic business review process. We do it for functions. We do it for sectors, et cetera, et cetera. And out of that, it causes us to make sure that we're really examining the question that you asked. So that's our process. That's where Archer came from. The team came and it was very clear. They self-identified that they had a gap and that gap turned into a mission, which turned into a target, which turned into an acquisition. And we went through that whole process inside of 12 months from identifying the gap to closing the transaction was an inside of 12-month period of time. We'll do that on everything all the time. I'd like to think that we're actually pretty complete, but what are the megatrends? And this is what we put out in our most recent earnings, we put out this concept of the alpha and beta of the company. There were these big trends in the world, public to private. We got to get that right. And interesting, it's not just public to private, it's public to private and the convergence of public and private, which is equally important, I think. There's the whole world of what's going on in AI. There's a list of them. And so we view the company's job as let's position ourselves as best we can to take advantage of classic beta in the market, right? Markets get bigger, capital markets grow, markets over longer periods of time go up, increase market opportunity, great. We need to do that. But by the way, diversify. More software, more transactions, not just about asset values up and down. We don't want to have to reexamine ourselves just because the stock market goes down 20%. We are much more diversified. Same thing with NII, shrink the NII as a percentage of the company because we want the fees to grow even faster. All of that stuff we're thinking about. The second bucket is what we've called the megatrends, which we've said is part of beta as well. These big long-term shifts that are occurring. Are we well positioned to be on the winning side of that. We did a great job, mutual funds to ETFs. We've done a good job, public to private. We're much more penetrated in the private markets than most people realize because we touch them in our liquidity platform. We touch them in our collateral platform. We touch them in our securitization and Issuer Services platform. We touch them in our classic Asset Servicing custody platform. We touch them in our fund administration platform. We touch them in our asset management platform. We touch them on our Pershing platform. We're touching them everywhere. And so how do we wrap ourselves with this One BNY mentality around the relationship and say, what else can we do and how do we evolve? But we're very introspective on that question. AI, massive opportunity. It's not that it's a gap, something we started in earnest in 2023, but that's an example of another of these megatrends. You got to be on the right side of it. And then there's the pure alpha. Alpha associated with if we get those first 2 things right, how do we generate those incremental capabilities, those incremental products and adjacent features to products that are going to speed our growth. That's what Wove is as an example. Wove was a deliberate identification of that pure alpha by the company. Yes, associated with the megatrend, but it was alpha to be able to benefit from it.

That's helpful. On capital, just one more. When we think about capital return via buybacks, just give us your philosophy around how you think about returning capital versus operating with excess for a given period of time. And I'm not saying it is, but how sensitive is buybacks to where you think the stock is trading, stock valuation?

The first thing with capital is we want to just have enough to be able to not have to worry too much about what's going on in the environment. So you know what, 10-year rates go up 50 basis points, down 50 basis points, up 100, down 100. I don't want to care. And so we run ourselves in a conservative way because the world we live in is that those things happen. And we see other people who try to manage it right up to the edge and boom, the rates go up a little bit, and they're like, "I don't want to have to spend any time on those things, and I'm willing to pay the price." Because our ROTCE, 23% unchanged, we're okay to pay the price for being resilient and a little conservative. And as Dermot said, we guided this year that we'll be at the top end of our capital range because we just think that's the environment that we're in. So that's number one. Number two is if we need the capital to go invest in the business, we will. But as you point out, we're capital light. And then number three, we'll return. So that's the waterfall in terms of how it works, and that's how we run the waterfall in the past 2 years. And we think that, that's a sensible way, at least where we stand today to carry on running it.

Got it. Two more in the few minutes we have. One, just talking to folks in D.C. in the policy circuit, crypto is a big priority for this administration and it feels like we might see some legislation. We might see the regulators come up with the framework around how the banking industry can deal with crypto. Just give us a sense of what does that mean for BNY? What do you need to see from the regulatory standpoint? And is there a real business opportunity there?

So, from a regulatory standpoint, clarity, leaning in a little bit, level playing field. We don't want to see a difference between banks and nonbanks. That's not super helpful. Let everybody understand the rules of the game, set the parameters, let's go play the game. And if we have that, we think we'll play the game well. Tokenized assets, we think, is interesting. It's always been about the tech for us. Distributed ledger, the ability to run processes on a blockchain, smart contracts on top of everything. That's pretty cool. We think there's a lot of runway, particularly for hard to manage assets, commodities, loans, who wants to have to deal with depositary receipts associated with -- like in warehouse depositary receipts. It's a mess. So, let's not do that. Let's use a better rails. We're crypto native. We can custody Bitcoin today. SEC decided that it didn't really want anybody in the regulated space to do that. That's now out of the way. The other regulators have got to create some clarity, but we're ready to go and, in fact, are doing a bunch of things associated with tokenization around the world. We think it's interesting. Is it the most important thing that's going on in the world? Maybe not, but it's an important thing, and we're participating in it.

And I guess one last one. You mentioned AI. BNY, again, feels like a very process-heavy firm. Talk to us in terms of just -- you've seen the banking industry and technology has always played a role in driving productivity. One, is AI one of the many things we've seen? Or is it something much larger and more impactful? And how quickly can we see that impact when we think about just the bottom line impact for your ROE, earnings outlook, et cetera?

I think it's larger and more impactful. I think it's medium term. I don't think it's a 2025 story of financial output, and it probably will be a little bit in '26. But in '27, '28, '29, '30, this is when I talk about the sequencing. And maybe sometimes of this, you just have to be -- things have to fall into place, and sometimes you make your own luck. But if you want the story of the past couple of years around how we've been able to generate the operating leverage, it's really by making these decisions about running the company better and setting ourselves up for the medium-term Platforms Operating Model, growth efficiency, et cetera. You want the story of what the subsequent few years can be. AI is massively powerful for us. Now that's all beyond the sort of immediate horizon that we look at from a financial returns point of view and a target's point of view. But if you're asking how we're investing, we're investing on the basis of the fact that it could be very exciting. And I think the other industries, we spent a lot of time learning. We've got deep partnerships. We've built ourselves platforms and capabilities. We're in the process of onboarding digital employee agents. Digital employees, basically a super-agent that has a manager. And these are concepts that are within 2025. And when you think about how far they can go in a company like ours, the answer is probably quite a long way. So, it's too early to put parameters and quantification around that. But yes, I think it's a big deal, and I think it will be very transformational in a very positive way. Now we're investing according to our pillars. So, I want to be very clear about this. There are client opportunities here. There are better features, better capability to do the One BNY stuff. There's opportunity associated with running the company better and tighter in efficiencies. And there's opportunity from a culture point of view to be able to give leverage to our people. So that's how we're thinking about it, and it's not today in terms of its output to the bottom line, but I do think it will be in the future, a very important component.

Robin, thank you so much.

It's great to be with you. Thank you.