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

Good morning, and welcome to the 2026 Second Quarter Earnings Conference Call hosted by BNY. [Operator Instructions] Please note that this conference call and webcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without BNY's consent. I will now turn the call over to Marius Merz, BNY, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone. Welcome to our second quarter earnings call. I'm here with Robin Vince, our CEO; and Dermot McDonogh, our CFO. As always, we will reference the quarterly update presentation, which can be found on the Investor Relations page of our website at bnie.com. And I'll note that our remarks will contain forward-looking statements and non-GAAP measures. Actual results may differ materially from those projected in the forward-looking statements. Information about these statements and non-GAAP measures is available in the earnings press release, financial supplement and quarterly update presentation, all of which can be found on the Investor Relations page of our website. Forward-looking statements made on this call speak only as of today, July 15, 2026, and will not be updated. With that, I will turn it over to Robin.

Thanks, Marius. Good morning, everyone, and thank you for joining us. I'll begin with a few comments on our performance in the second quarter and our progress over the first half of the year before Dermot takes you through our financials in greater detail and provide you with our updated financial outlook. Referring to Page 2 of the quarterly update presentation. BNY delivered another strong performance in the second quarter. Earnings per share of $2.45 increased by 27% year-over-year. We grew total revenue by 13% year-over-year to a record $5.7 billion, reflecting broad-based growth across our businesses, and we generated approximately 600 basis points of positive operating leverage. Taken together, we expanded pretax margin to 40% and return on tangible common equity to 31%. Reflecting on the operating environment, the second quarter presented a dynamic backdrop for global markets. Amid geopolitical tensions, elevated energy prices and continued uncertainty around inflation, interest rates and fiscal policy, the fundamental drivers of capital markets remained broadly constructive. Corporate earnings were resilient. Investment in AI infrastructure continued at a significant pace, and labor markets held up despite some signs of moderation. BNY is built for this type of environment, our diversified set of businesses operate across the breadth of capital markets, benefiting from the higher levels of market activity and strong client engagement. Taking a step back, our work over the past several years was about laying the foundation for the multiyear reimagination of our company to create a more diverse, durable and growthier set of businesses that serve our clients in more innovative ways. At the beginning of our transformation, we set out to do 3 things, which I'll briefly recap, starting with the most important culture. Revitalizing our leadership team, breaking down silos and encouraging our people to act as owners has resulted in our teams working more effectively together with a common purpose of making BNY better every day. Second, we fundamentally reimagined how we operate inside the company. No more silos and islands of isolation, but a re-architecting that realigns BNY across client and enterprise platforms. This led to our new operating model, which is now fully activated. And lastly, we said we had to go to market in a new way to make it easier for our clients to do more with us, a powerful value proposition for them and a meaningful revenue opportunity for us. This led to our new commercial model now in place for 2 years and driving good momentum. As we get properly underway in Phase 2 of our work, we have clear signals that our strategy is working. Now we need to capitalize on this foundational work, increasing our focus on innovation both in new technologies like artificial intelligence and digital assets and in continued product innovation across our businesses. In short, we have a lot to do. But as I visit our teams around the world and hear from our clients, I'm energized by the feedback and the opportunity. With this in mind, we wanted to share some more specifics on our progress in our midyear business update on Page 3. First, on the commercial side. Momentum matters, deepening relationships and partnering more closely with our clients remains one of our greatest opportunities. With our commercial model in place, we now have a clearer view of the white space opportunity ahead of us. As we sharpen our go-to-market strategy, we are starting to see the benefits. Broader relationships, larger mandates and more integrated solutions built on capabilities that BNY is uniquely positioned to deliver as a seamless package. The second quarter was our 14th consecutive quarter of year-over-year sales growth. So far this year, we've had 2 consecutive record sales quarters. The average deal size is up by more than 20% year-over-year, and approximately 10% of deals are with clients that are entirely new to BNY. Our wins in the second quarter demonstrate, for example, how BNY is helping market participants prepare for expanded clearing for U.S. treasuries, supporting growth of ETFs in Europe, delivering integrated solutions for asset owners and enabling digital asset capabilities for asset managers. The common thread is not any one product or solution. It is that by bringing together BNY's platforms, we can more effectively solve challenges for our clients and drive higher and more durable growth for our company. Next, on our platform operating model. This was more than a reorganization. It is a better way of working, one that allows us to move faster, collaborate better, innovate more consistently and ultimately deliver more for our clients. In the second quarter, we completed the transition and have now shifted our focus from implementation to realizing the benefits of this new operating model over the next several years. We are already seeing some early progress. We're now able to move more nimbly, bringing product, technology, operations and commercial teams together to build more integrated solutions and respond more quickly and comprehensively as client needs evolve. Given the breadth of our businesses and supported by our operating and commercial models, BNY has an incredible advantage in innovating new ways to solve emerging client needs from across our platforms. A good example of this from the second quarter is our work with the U.S. Treasury Department as the financial agent for Trump accounts, which we are supporting with capabilities from across BNY. We can also see that several innovative products launched over the past few years, for example, buy-side trading solutions, Collateral One, BoroPlus, have become compelling contributors to revenue today. Another component of innovation is linked to the shift toward an always-on financial ecosystem. Payments, liquidity, collateral, digital assets and securities markets are becoming more interconnected, creating demand for infrastructure that operates with greater speed, certainty and resilience. We believe this represents one of the defining opportunities for financial services over the next decade and it is an area where BNY is well positioned to lead. In the second quarter, we announced our expanded relationship with Circle bringing together institutional digital asset custody with mint and burn capabilities for U.S. DC within a single operating model. This builds on our role as custodian of U.S. DC reserves and enables clients to move more seamlessly between traditional cash and blockchain-based networks through infrastructure that combines institutional-grade governance, operational resilience and scale. We expect this will be a recurring theme as we continue to invest in the infrastructure that we believe will support the future of financial markets. Whether through real-time payments, tokenized assets, collateral mobility or digital cash, our objective is the same, to help clients connect traditional and digital financial ecosystems in ways that improve efficiency, expand optionality and support growth through trust and resiliency, which brings me to AI. Over the past 6 months, the conversation around AI has reflected a wide range of sentiment. Excitement about what the technology can unlock, urgency as companies move to deploy it and skepticism about whether the level of investment will translate into real outcomes. Business leaders are looking at how to measure returns, manage risk and turn AI from experimentation into durable value. At BNY, we continue to view AI as one of the most important long-term opportunities for our company and for society more broadly. Over the past few years, we've invested in the enterprise capabilities governance and talent to allow us to embed AI across the company in ways that strengthen how we innovate, how we operate and ultimately, how we deliver for clients. We are now starting to see AI create value across 3 dimensions. First, AI is helping us to run the company better by embedding new capabilities into our end-to-end workflows and enabling our people to work more productively. This creates capacity. It would be a mistake to think about this capacity as just an efficiency creator. We also see it as an enabler for growth and for our broader strategy. Second, AI is helping us build better products and deliver better experiences for our clients. And third, we believe AI can expand the perimeter for BNY by allowing us to bring new capabilities to market through our platforms, our data and our expertise. It is early days across all 3 dimensions, but we are starting to see AI create a tangible and measurable impact across the entire client life cycle. Some examples of which we shared with you in our presentation last quarter. As these capabilities continue to evolve, we believe AI can become an increasingly important source of differentiation and long-term value creation for our clients, our people and our shareholders. Looking back on the first half of the year, we are encouraged by our progress. Across the company, we are seeing the capabilities we are building translate into better outcomes for our clients, and stronger performance for our shareholders with our people at the heart of this progress. The way BNY works today is fundamentally different than it was just a few years ago, and our stronger culture of collaboration, ownership and innovation is helping us to deliver faster and more consistently for our clients and more effectively as one company. To conclude, we're entering the second half of the year with strong momentum. The trends that are reshaping financial markets, greater activity, increasing complexity, new technologies and demand for trusted partners play to BNY strengths and give us confidence that our strategy is the right one. With that, over to you, Dom.

Thank you, Robin, and good morning, everyone. I'm starting with our consolidated financials for the second quarter on Page 4 of the presentation. Total revenue of $5.7 billion was up 13% year-over-year. Fee revenue was up 11%. That included 13% growth in investment services fees, reflecting net new business, higher client activity and higher market values. Investment management and performance fees were up 5% primarily driven by higher market values, partially offset by the mix of AUM flows. Firm-wide AUCA of $62.6 trillion were up 12% year-over-year. This increase was primarily driven by higher market values and net client inflows, partially offset by the unfavorable impact of a stronger U.S. dollar. Assets under management of $2.2 trillion were up 6% year-over-year, primarily driven by higher market values, partially offset by the impact of the stronger dollar and cumulative net outflows. Foreign exchange revenue was up 8% year-over-year on the back of higher client volumes, partially offset by the impact of corporate treasury activity. Investment and other revenue was $216 million in the quarter. And net interest income was up 20% year-over-year, primarily driven by reinvestment of investment securities at higher yields and balance sheet growth, partially offset by deposit margin compression. Provision for credit losses was a benefit of $8 million in the quarter, reflecting improvements in commercial real estate exposure, where we now have 0 nonperforming assets. Expenses of $3.4 billion were up 7% year-over-year, both on a reported basis and excluding notable items. 3/4 of the increase represents revenue-related expenses. The remaining 1/4 reflects higher investments and employee salary increases, partially offset by efficiency savings. Taken together, we reported earnings per share of $2.45, up 27% year-over-year. Excluding the impact of notable items, earnings per share were essentially the same at $2.46 also up 27%. And on the back of approximately 600 basis points of positive operating leverage, we reported a pretax margin of 40% and a return on tangible common equity of 31%. Turning to capital and liquidity on Page 5. We continue to operate from a position of strong capital and liquidity, supporting our clients with a resilient balance sheet. Our Tier 1 leverage ratio was 5.9%, down 7 basis points sequentially. Tier 1 capital decreased by $133 million, primarily driven by a redemption of preferred stock partially offset by capital generated through earnings net of capital returned to our common shareholders. Average assets increased by 1% sequentially. Our CET1 ratio at the end of the quarter was 11% essentially unchanged from the prior quarter. CET1 capital increased by $447 million, primarily driven by capital generated through earnings partially offset by capital returns through common stock repurchases and dividends. Risk-weighted assets increased by 2% sequentially. Over the course of the second quarter, we returned approximately $1.5 billion of capital to our common shareholders, which brings us to $2.8 billion of capital return for the first half of the year, representing an 87% total payout ratio year-to-date. And as previously announced, we increased our quarterly common stock dividend by 19% to $0.63 per share effective this quarter. Our balance sheet remains high quality and highly liquid. The consolidated liquidity coverage ratio was 111%, and the net stable funding ratio was 130%. Next, net interest income and balance sheet trends on Page 6. Net interest income of $1.4 billion was up 20% year-over-year and up 6% quarter-over-quarter. I talked about the drivers for the year-over-year increase earlier. Sequentially, growth primarily reflects the reinvestment of investment securities at higher yields and changes in balance sheet size and mix. Average deposit balances moderated by 1% sequentially. Noninterest-bearing deposits remained flat and interest-bearing deposits decreased by 2%. Average interest-earning assets were flat sequentially. Underneath, cash and reverse repo balances decreased by 3%. Investment securities balances increased by 2% and loans increased by 6%, primarily driven by growth in securities finance. Turning to our business segments, starting on Page 7. Securities Services reported total revenue of $2.8 billion, up 15% year-over-year. Total investment services fees were also up 15%. In Asset Servicing, Investment Services fees grew by 12%, reflecting higher client activity and market values. ETF AUCA reached $4.4 trillion, up 35% year-over-year. And in alternatives, AUCA grew by 17% year-over-year. The number of fund launches accelerated in the quarter, and we saw an uptick in new business wins. In Asset Servicing, overall, once again, more than half of the clients that awarded Asset Servicing new business in the quarter also awarded new business to at least one of our other lines of business, demonstrating the efficacy of our commercial model in action. In Issuer Services, Investment Services fees were up 23% primarily driven by higher corporate trust fees. This reflects the public sector mandate Robin mentioned earlier as well as broad-based growth. Amid active CLO markets, we maintained our #2 position while growing our market share by 200 basis points year-over-year. And in conventional debt servicing, we maintained our #1 position, growing our market share by 400 basis points year-over-year. It is worth noting that the sequential increase in issuer services, investment services fees reflects seasonal depository receipts client activity as well as net new business across Corporate Trust and depository receipts. For the segment overall, foreign exchange revenue was up 16% year-over-year, reflecting higher client volumes and net interest income was up 16% year-over-year. Segment expenses of $1.7 billion were up 7% year-over-year, primarily driven by higher revenue-related expenses and investments as well as salary increases, partially offset by efficiency savings. Security Services reported pretax income of $1.1 billion, up 28% year-over-year and a pretax margin of 39% on to Market and Wealth Services on Page 8. In our Market and Wealth Services segment, we reported total revenue of $2 billion, up 12% year-over-year. Total Investment Services fees were up 10%. In Wealth Solutions, Investment Services fees were up 5%, reflecting higher market values and client activity. Net new assets were $25 billion in the quarter, representing an annualized growth rate of 4%. In the second quarter, Wealth Solutions signed a multiyear contract renewal with Cetera, one of the largest wealth management firms in the U.S. and a long-standing partner. We are pleased to continue supporting them as they innovate, grow and capitalize on evolving market opportunities. In Clearance and Collateral Management, investment services fees were up 18%, reflecting broad-based growth in collateral balances and clearance volumes. In this business, we continue to see very strong momentum with average collateral balances of $8.2 trillion, up 16% year-over-year and double-digit year-over-year growth in average daily clearing volumes. Amid a supportive market backdrop, including strong money market fund flows, growing dealer balance sheets and higher equity market values, we've been successful in developing innovative solutions that bring together capabilities from across BNY to support our clients' growth. And in payments and trade investment services fees were up 7%, reflecting net new business. We are seeing solid growth in international payments and continue innovating new capabilities for our clients. For example, last month, we introduced 24/7 U.S. dollar book transfers which allow clients to access U.S. dollar payments on weekends and U.S. holidays. And over the last 3 months, we tripled the number of currencies available for same-day FX wire settlement coverage. In Markets and Wealth Services overall, net interest income was up 21% year-over-year. Segment expenses of $948 million were up 4% year-over-year, primarily driven by higher investments and revenue-related expenses as well as salary increases, partially offset by efficiency savings and the absence of prior year litigation reserves. Taken together, our Market and Wealth Services segment reported pretax income of $1 billion, up 21% year-over-year and a pretax margin of 52%. Turning to Investment and Wealth Management on Page 9. Our Investment and Wealth Management segment reported total revenue of $863 million, up 8% year-over-year. Investment management fees were up 6%, primarily driven by higher market values, partially offset by the mix of AUM flows. Segment expenses of $686 million were up 5% year-over-year primarily driven by higher revenue-related expenses and investments as well as salary increases, partially offset by efficiency savings. Investment and Wealth Management reported pretax income of $182 million, up 23% year-over-year and a pretax margin of 21%. As I described earlier, assets under management of $2.2 trillion were up 6% year-over-year. In the second quarter, we saw $3 billion of net inflows, primarily driven by cash and fixed income strategies, partially offset by net outflows in LDI index and equity strategies. Wealth Management client assets of $348 billion increased by 3% year-over-year, primarily driven by higher market values, partially offset by cumulative net outflows. Page 10 shows the results of the Other segment. Turning to Page 11. I'll close with a midyear update of the financial outlook for 2026 that we first provided on our earnings call in January. Our strong performance over the past 6 months and the underlying momentum with which we entered the second half of the year, gives us confidence to significantly increase our outlook for growth and operating leverage in 2026. While we remain mindful of the environment and constantly prepare for a wide range of scenarios, our central case for the balance of the year assumes current market implied forward interest rates and that the operating environment remains broadly constructive while we anticipate historically observed seasonal patterns in client activity. With that, we are increasing our outlook for total revenue, excluding notable items in 2026 to up 10% to 11% year-over-year of course, market dependent. And that includes our current expectation for full year 2026 net interest income to be up 12% to 13% year-over-year. Accordingly, we now expect expenses, excluding notable items for the year to be up 6% to 7% year-over-year, primarily reflecting higher revenue-related expenses. Taken together, that means we now expect to deliver approximately 400 basis points of positive operating leverage in 2026. And for the sake of completeness, we continue to expect a quarterly tax rate of approximately 23% for the remaining 2 quarters this year. To wrap up, B&I delivered strong financial results in the second quarter, but more importantly, our underlying business flywheel is gathering momentum. Our investments and execution are yielding increasingly scalable platforms better client experiences and more innovative solutions that are allowing us to deepen existing relationships and attract more new clients to BNY. With that, operator, can you please open the line for questions.

[Operator Instructions] Our first question comes from Ken Usdin with Autonomous Research.

Just a question about the outlook. You mentioned continuing to expect a constructive backdrop. But some of the first half results are already decently above growth rates that you're even giving in is in our updated second half. So I just wanted to ask, like, are there any pieces that you think have tougher comps as we look forward from the second quarter sequentially whether it's deposit levels or issuer services that wouldn't just continue an ongoing growth path from here?

Ken, thanks for the question. Look, so first, I'll make a few points. First thing is, typically, the second quarter is our strongest quarter and this particular quarter had a unique set of circumstances around it in terms of the constructed backdrop, the flows in the markets, et cetera. And is seasonally the slowest quarter. So you've got the best followed by the seasonally adjusted slows. We feel like going into the quarter within the firm, the momentum is strong. The words I use internally is the firm is humming. And so we feel very good about the client dialogue, the engagement, the backlog, but in my comments and how I talked about it, we assume the rate curve stays where it is as of June 30, we know that will change for whatever reason. We assume market levels stay where they were at June 30. We know that will change and so in our updated guide, we've given a range, and we've kind of taken a conservative bias to it because that's how we set up and run the company for through the year, through the cycle durable revenues. I think Q3 specifically, as it relates to NII and deposits year-over-year will be a tough comp because we expect a seasonally slow quarter due to the seasonal slowdown. Last year, that didn't happen due to several idiosyncratic events. So I think that the setup for the quarter, quarter 3 will be pretty good in terms of NII. But last year's quarter is tough to beat.

Right. Okay. Got it. And was there -- just a quick one on issuer as a follow-up. You did mention that, that was strong, especially in Corporate Trust. Was there -- was that just due to the super amount of issuance that we saw on? Is that business just collectively that and ADRs just on a better trajectory than you would have thought given the strength of the environment.

I would say there are 3 things at play there, Ken. One is Corporate Trust. You see in my prepared remarks that we've expanded market share, which is basically the result of multiyear investments that are beginning to bear fruit, which also have helped contribute to the margin going through 50% and so we're very, very pleased about that. Deposit receipts, second quarter is seasonally the strongest quarter and we saw particular -- we saw new client activity coming to the platform. So outperformance there in what is a strong quarter. And then last but not least, that the public mandate that we secured and went live on July 1, otherwise known as the Trump accounts, also shows up in that segment as it relates to top line revenue and expenses.

We'll move next to Alex Blostein with Goldman Sachs.

So a lot still like on multiple fronts here. I wanted to talk about operating leverage for a minute. I think not too long ago, you guys provided updated targets, I think calling for about 38% pretax margin. You're already above that, not just for the first half, but even just kind of taking your full year guide. So as you sort of think about what the destination for profitability could be in the business as a whole over the next couple of years, what could that look like, especially considering that AI initiatives is still probably on the kind of earlier day side. So I appreciate you now I want to put the exact number on that. But as we sort of think about the jumping off point in the trajectory for operating leverage across the business, I guess, acknowledging that you're already at your target would be helpful to understand.

Okay. [ There's lots ] on picking that question, Alex. When I go back to January when we initially laid out the targets, we believe we improved them meaningfully pretax margin and ROTCE by 500 basis points from where they were. So it was a big step change for us as a management team to put that guidance out there. Also, we kind of view these medium-term targets as 5 -- 3 to 5 years through the cycle and as milestones and not end points and it's not really the limit of our ambition. Internally, as a management team, we're always looking to outperform, and we believe the way that -- as Robin said in his prepared remarks, we're built -- we build the company for a wide range of scenarios and to be durable through that. And Q2 was a point in time in that. But you want to be through them sustainably for a period of time to feel like before you would revisit them again. But just remember, it's not the limit of our ambition. And the level of client engagement and all the things around client activity in Q2 give us optimism that through the cycle, we will get to those medium-term targets.

Okay. That's helpful. Well, you're at them. So you guys are there. So on the -- a bit of a nuance question on the rate trajectory, and I understand that you guys are assuming rates will stay at current levels across central banks. But as you think about the probability of rate hikes, whether it's in U.S. or outside the U.S. How do you think deposit betas will perform both in the U.S. and outside the U.S. given this is kind of a bit of a delayed potential kind of rate hiking cycle. So I just want to got a better understanding of the kind of NII and NIM sensitivity in case we get some rate hikes here?

So look, at the start of the year, the environment was calling for rate cuts, now it's calling for rate hikes, one in the U.S. at the end of '26, two in Europe and two in the U.K. And as we've consistently said in terms of our risk management philosophy as it relates to rates itself, we're very focused on narrowing the cone of outcomes. And so we're willing to give up upside so that we limit downside and we can give you kind of reasonably accurate predictions as it relates to interest rate sensitivity to the overall book. As it relates to positives like as we consistently say, we don't lead with deposit or deposit pricing, deposit comes as a result of all the client activity. And that's why we feel like deposits have held in and particularly noninterest-bearing deposits have held in well and that's as a result of all the franchise activity that's happening around the firm across many of our platform businesses. And as it relates to betas, we think it will be largely in line with the last cycle, and that was 80% for dollars and 60% -- 60% to 70% for euros and sterling. And just remember that we're predominantly a dollar book. So it's roughly 75% dollars and the rest split between euros and sterling and then some yen in there as well, but small.

We'll go next to Ebrahim Poonawala with Bank of America.

I wanted to first start with something, I guess, Robin said in his prepared remarks, tied to investments tied to increasing fees, AI, digital assets, if you don't mind just revisiting both the AI piece and digital assets in terms of how we should think about it with regards to moving the needle on the bottom line, either productivity-wise or what you're doing in terms of new opportunities, maybe tied to digital assets? And also maybe it often comes up in terms of the risks to the custody business models because of on-chain migration and tokenization. Maybe address that in terms of how you think about it. And is that truly a risk when we think about some of the revenue streams.

Sure, Ebrahim, I'll take that. So let's start with digital assets, which is the second part of your question. And first of all, I would just say the evolution is actually a click above digital assets. It's really the transformation of financial market infrastructure gradually towards an always-on operating model and digital assets are certainly 1 tool, a very good 1 for being able to enable that, but real-time payments and various other innovations are also true. So I would take the macro view around the always-on operating model. And then within that, we're a digital asset is the best way of actually achieving that. And then within the context of all of that, it's about a transition, and the transition will take a while. It will not be complete. And so for a long period of time, we expect to be in this coexistence world of having these new capabilities with traditional capabilities. And so for us, as a bridge between the old and the new and collectively globally and across these different types of activity like payments, moving, storing, managing all of that we view ourselves as incredibly well positioned to help our clients manage through all of those types of transitions. And so for us, it's about being right around the hoop on all of these types of things, helping clients, whether they be the "new" economy participants who want a bunch of services that we are the leaders in, some of our traditional clients who want us to, frankly, help them hold their hands in some cases around some of that evolution. So I would say it's all of that. And the way one gets disintermediated is when you don't invest, when you don't participate in the new thing, but we're leaning into the new thing and participating in that fully. So we think that, that's kind of how we think about the whole thing. In terms of AI, so I talked about this in terms of being a capacity creator for us. There's no question that it can create additional positive operating leverage over time, but that can come in different forms. And so it can come from doing things with clients from improving the way that we serve our clients and then winning more business for making our products even better as a result of having AI inside them. And also just in terms of freeing up capacity in some parts of the firm in order to be able to deploy into other parts. I'd like to think there will be less of some things that we have to do using manual tooling and traditional tooling and where AI can take the place of that. And that will allow us to be able to have the capacity to, frankly, be able to spend more bandwidth on serving clients in new and innovative ways. And that's how we view it. We see the world, as I mentioned in my prepared remarks, with a ton of white space. And so having capacity is super valuable for us because it actually allows us to put more people and more investment against that white space without having to grow expenses significantly to do it.

And just tied to that as a follow-up. Is it fair to then assume and what you talked about the commercial models in place, the operating model is fully implemented that we should expect a pickup in organic growth as you capture more of that white space beyond any market-driven growth? Like should we have an expectation of just a pretty decent acceleration from where we've already been on the top line growth?

Ebrahim, it's Dermot. Well, I guess the first thing is we don't expect it to be a lull on day 3 of the cricket match. If you look at the slide where we talk about our midyear business update and where organic fee growth has come relative to 2022. We've gone from flat to the first half of '26 at 4.5%. We're just about to celebrate 2 years of our commercial model. And as Robin said in his prepared remarks that we're now fully active as a whole company in the platform operating model. You've seen 14 consecutive quarters of sales growth and 10% of new logos, which is consistent with last year. So more people like what they're seeing at BNY. I want to come to our firm and do more with us. So I would say the momentum is strong within the firm and the momentum is strong with new logos coming to hear how we can serve them in a differentiated way. And I think as a consequence of that, our ambition is for higher organic growth. When it happens, we don't know, but we believe ultimately, it will come.

Got it. No lull and expecting a post tea, fifth day win. So thank you for that.

We'll go next to Mike Mayo with Wells Fargo Securities.

I guess you talk about AI for everyone, everywhere and everything. And I know that's a thematic approach for the 5-year horizon or so. And we do hear a lot of companies putting an AI wrapper around things that have nothing to do with AI. So with that as a big wind up, your headcount is down 7% year-over-year, while your revenues are up. I'm just wondering how much AI has played a role in your increase in revenues per employee, maybe it's more process-oriented or other technology. And if you can give any financial benefits to of what you're seeing from AI, whether it's the capacity or product or new capabilities.

Mike, it's Dermot here. The first thing I would start with saying is that BNY, I think, is operating in a fundamentally different way than it was just a few short years ago. That's just ex AI. That's just the commercial model, the platform operating model everybody being a shareholder and everybody feeling like owners in the enterprise and wanting the firm to do better for its clients and for shareholders. So a fundamental shift under Robin's leadership over the last few years. Specifically, as it relates to AI, I would say, in the context of our overall engineering budget, which is approximately $4 billion, just remember, we have been on this AI journey and AI strategy since 3.5 years ago when ChatGPT was first launched. So culturally, AI as an individual productivity level is embedded -- are becoming more embedded in our firm. We're all using Elisa planner. We're all becoming more productive. There are lots of things that we're doing day in, day out. that makes us more productive and able to do higher value work. And so within the context of $4 billion, our AI spend is quite de minimis and quite modern and appropriate for the strategy that we have in place. And if you kind of go back and reflect on our disclosure in Q1, you see the captions of innovating, prospecting, onboarding, transacting, streamlining and the fact that our engineers at BNY roughly 40% of the software written is now written using AI, you can see it's coming -- it's going broad and is also going deep into the enterprise. And the last point is really reflecting on your question ray headcount. The headcount is just an output. It's down 7% over the year, but that's as a result of everything. It's not necessarily a head count target that we deploy. It's more like what's our business plan, what's our operating leverage, how do we want to reach that and what are the investments that we need to make in order to do it. So headcount is more the output as opposed to the input. And the last thing I would say is, really, we continue to invest heavily in talent. As Robin has said many times, our early careers class is 3x bigger today than it was 3 years ago. So we're fundamentally investing in the future of BNY through early careers and we're AI optimist and we believe we can use AI to power that growth.

Mike, the fundamental premise of your question around are we getting a return on the investment. The answer to the question is yes, and we feel quite comfortable with that. We don't break out the very specific economic numbers. I recognize folks would like it if we do. But the rigor that we are applying to this is consistent with the rigor that you see elsewhere from us in terms of how we're operating the company. Now for us, we've had a point of view, and you can go back and listen to our transcripts and press interviews, et cetera, for several years. That ultimately, adoption and embedding in a company is going to be the differentiator for many firms on whether or not they're successful with AI. Their technology is already at a level where it can do just incredible things. But the reason why folks, I think, have some angst about traditional companies as opposed to brand-new start-ups is because there is this lingering question around whether or not you can adapt to large enterprise by truly embedding AI throughout. And that's a cultural question, and it's also an operational and organizational question. And so we are quite fortunate and some of this is pure coincidence, but we'll take it that the investment that we've made in our platform operating model the investment that we've made in our commercial model and critically, the investment that we've made in our culture means that we believe we actually have an advantage in terms of embedding and integration of AI into and throughout the firm. And that's what we would expect you to be able to see the outcomes from over the coming years.

And do you have -- and look, it's like you say, the results are what you're managing toward, not the specific AI use case in isolation. But can you put any numbers on the expense savings or revenue gains? And I think on the -- 2 of the largest banks globally have done so far? Or is there a point when you might be able to? Or is this kind of like 1 big to where the AI is part of the to and you can't really completely isolate the benefits?

I think we think about it as a package. And so it's not that we can't identify benefits. We certainly can. It's that we recognize that all of these things coming together are ultimately the success. I'll use capacity as an example because I talked about capacity. When we use AI to create capacity. So we take some functions and process, which previously was heavily people-intensive, and we make it significantly more automated. That's creating capacity. Now then the question is, are there -- is that capacity going towards serving an individual client. Is it going to making a product specifically better? Is it going to improving the client experience? Is it going to doing something else? Or is it creating an efficiency on the expense line. And so that, we deliberately want to be very flexible about that because it's consistent with our strategy for positive operating leverage. You regularly collectively ask us about, well, is it focused more on revenue? Or is it focused more on our answer to the question is always, it's focused on increasing positive operating leverage. That's our North Star. And we're agile in any 1 quarter or a year around whether we are leaning more on 1 level or the other. And so our strategy for AI is kind of similar to that. Now having said that, we gave a bunch of specific numbers in our first quarter earnings when we talked about those in April, and you can see some of the stats which we view as the inputs to ultimately the fundamental bottom line impact of AI. And we will, from time to time, talk more about those. But actually, across all of them, they're actually increasing up and to the right versus what we showed you in the first quarter.

We will go next to Brennan Hawken with BMO Capital.

I'd actually love to follow up on Mike's question right there. So I was looking at a similar trend with headcount as he said, down 7% year-over-year. Interestingly, when you calculate comp expense as a percentage of headcount -- or sorry, comp expense per head, that's up 8 over that same period. If you go back to the point in time when headcount peaks down 13, but comp expense per employee up 17, right? So there's a really interesting dynamic happening here. Obviously, there's inflation, which is a factor. But can you talk about incentives and how you've changed compensation structures and incentives within the organization. It kind of gets, Robin, what you spoke to with culture and how you're changing the commercial biases of the organization? And if you have any stats on incentive and how that breaks down as a percentage of comp across the organization for people now versus previous?

Sure. I might skip that last a little bit, given that we have tens of thousands of our employees listening on the call, I haven't going to break out comp by levels in that way. But let me -- but let me address the heart of your question because it's an important one, Brennan. And actually, we showed some of this again in the first quarter earnings release when we talked about revenue per employee and pretax income per employee. And if you remember back to those charts, which showed our progression on those 2 metrics, essentially tracking the growth in margin and the growth in return on tangible common equity, you can see that we are getting more out of our platform. And we are generating more revenue, our clients are coming to us and all of that is showing up in those outcomes per employee. Now we have been very deliberate about workforce management. We've been repositioning the company, the repositioning the talent and everything and I talked about this in my prepared remarks with our leadership team as we've refreshed the leadership team over the past few years, the same thing has been true through the ranks of the company. We've got more dynamic leaders. We've got more dynamic folks who are investing in innovation, who are really covering our clients in a fundamentally different way. We're invested in career growth. We're invested in skills. We're leaning into AI for everybody in terms of how our people can actually use it and the skills that they have to be able to operate, whether it's here or elsewhere. So all of that is actually allowing us to drive up compensation per employee, and we're very happy to do it because our people are such an important part of the contribution, but we can afford to do it because collectively, we're managing the workforce better. And so that's sort of the recipe of the whole thing for us.

Great. Robin, I appreciate it. And one other question I have a little bit on a high level. So the results have been really impressive. It's been very thematic throughout the call today. One thing that a lot of investors come back to, which is more about really the history of this sort of sub industry within the custody banks is around pricing pressure, which has been pretty consistent. And historically, when there's been efficiencies generated, they've been sort of shared with customers via pricing and then shareholders via profit margin. What are you seeing in the market today as these tools increase the efficiency and allow for firms to deliver more effective results. Are you seeing still pricing pressure? Or is there a wider divergences in between the different offerings that can allow for you to hold on to that pricing better than historically?