The Bank of New York Mellon's CEO Presents at Citigroup US Financial Services Conference (Transcript)

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The Bank of New York Mellon Corporation (NYSE:BK)

Citigroup US Financial Services Conference

March 06, 2013 10:35 am ET


Timothy F. Keaney - Vice Chairman and Chief Executive Officer of Investment Services

Thomas P. Gibbons - Vice Chairman and Chief Financial Officer

Timothy F. Keaney

Arjon [ph] , thanks very much and many thanks to our friends and colleagues from Citigroup for having us here today. Todd and I appreciate the opportunity to talk a little bit about our strategy, where we see opportunities for growth. We're going to talk a lot about our operational excellence initiatives. We're going to talk a bit about capital and we're going to talk about, in this environment, where we're focusing our time. I'd urge you to read this at your leisure, please.

And a few starting points. We really like our business model. You're going to hear us, time and time again, talk about the fact that we're an investments company. We service the entire life cycle and we'll talk about what that life cycle is. We help people manage and move their assets and service them as they move them around the world. We are very focused on growing our company, even in today's environment. We see some significant upside potential in certain high-growth areas that Todd and I will be alluding to today.

In a tough revenue environment, it's a reminder that we need to continue to redouble our effort around operational excellence. It means we're taking steps to improve our risk profile, lowering our operational risk, becoming more efficient and we believe we can do that and we'll continue to do that while even improving the client's experience with us and improving on our industry-leading reputation for great client service. Our balance sheet is pristine, it's highly liquid. Todd is going to talk about our focus on capital. We generate a significant amount of capital but we're really deploying it in a very, very disciplined manner. And our businesses have a unique way to work together and I'm going to talk a lot about that, and we believe that the broad solution set that we have will be a key differentiating characteristic for us going forward.

Focusing on product breadth for a minute, and this is an important distinction between ourselves and our traditional trust bank competitors. We talk about product breadth but let me elaborate on what that means, sort of running clockwise around this chart.

We help clients create financial assets, whether it's debt or equity, when they go to the markets, between our Corporate Trust and our Depositary Receipt business. We can clearly facilitate trading and settlement, whether that's cash or securities, we do that through our Broker Dealer Clearance business. We do that through collateral management, which I'm going to spend a few minutes on today. We do it through global markets and we do it through our Treasury services or what we call our payments business.

We also service any asset once it's owned by a client, any security type, no matter where they hold it around the world, we do that of course through our Custody business. And our Investment Management business and our Pershing platforms are a powerful 1-2 punch to distribute not only our own Investment Management products and services but third-party products and services to tens of thousands of investment advisors around the world. This right here on this slide, is a unique business model, it's a company that's built for investors and we know how to service investments, that's what we do.

Our company is singly focused on the investment process. I mentioned managing and servicing assets no matter where they're traded around the world. That said, we're really focused on 2 primary businesses. First, and we would say we're leaders in each and I'll talk a lot more about that both in terms of scale and in quality. But these 2 businesses, the Investment Servicing business, which I run; and the Investment Management business, which is run by a gentleman named Curtis Arledge, generated $13.5 billion in revenue, $3.5 billion in pre-tax income. If we peel back the layer of Investment Services, not only when you -- will you see we're the largest custodian with over $26 trillion in assets, you'll see that we have very important leadership positions in product areas in businesses that are positioned well for growth. The Investment Services business, in 2012, delivered 72% of total corporate revenues and nearly 70% of pre-tax income.

Investment Management has an equally impressive market position. We're ranked #7 globally with $1.4 trillion in assets under management, but one of the things that really makes us unique is we grew this strong position through a unique boutique-led model. It's 16 independent Investment Management boutiques, all with their own mandate; in many cases, some with their own brand. This powerful franchise delivered 28% of revenue in 2012 and 31% of PTI. You'll hear me talk a lot about the fact that these businesses are global in every sense of the word. I'll talk about Investment Services' global position in a minute. But just about 40% of our revenue in the Investment Management business came from outside the U.S.

We're going to zero in now on core revenue growth for both Investment Services and Investment Management. Combined, you can see that they're up 1%, despite a very difficult environment; year-on-year, 4%, if you exclude Issuer Services. And we talk about Issuer Services and I'll come back to that in a minute. But there's a very good news story underneath this. And let's look at the individual components. You can see Investment Management up 6%. We've seen good long-term flows in our Investment Management business, it's up 6%. And we have a very good win rate and new business pipeline.

Asset Servicing has benefited from significant new business wins and also from market lift. Last year was one of the best new business years in terms of assets under Custody we've had in some time, where we won just about $1.5 trillion in new assets during the year. We're also generating growth in our Clearing and Treasury fees, largely on higher volumes. Pershing has been winning new business, which has been very positive for Clearing and I'll be talking about Pershing a little bit more in a bit. And growth in Treasury services is really a function of higher global payment activity.

So on the point of Issuer Services, and this is an important point, all the other businesses are growing. Issuer Services, as we talked about before, that includes our Corporate Trust and our Depositary Receipts business, continue to be impacted by weak capital markets, particularly in emerging markets, and it's -- in particular, DRs is an emerging market story. And certainly, for Corporate Trust, it's a lack of substantive structured products coming into the market.

Investment Services generates about 36% of its business outside the U.S., that trend continues to grow. We even see that in terms of the new business pipeline. We feel particularly well positioned to capture the growth opportunities there. We have Investment Services people, experts in our businesses, my business, in 38 markets around the world. I mentioned the fact that if you peel back the Investment Services layer one step, and maybe look beyond the industry-leading position we have in Custody, let's just take a minute and dive a little deeper. In broker-dealer services, we're #1 in U.S. And when I talk a little bit more about broker-dealer services, you'll see that we have an impressive and growing track record in the U.K. and Europe as well.

We're #3 in hedge fund servicing and we have a very good size and scale, I would say, across all of the alternative asset classes in an area where we continue to do well. In Corporate Trust, for the debt business, what just about 1 in 3 debt deals done around the world is done with BNY Mellon as their trustee. And we have a very, very commanding market share in the Depositary Receipts business, about 60% of all Depositary Receipt programs use BNY Mellon as their depositary. It's about 1,400 programs around the world and it's clearly one area where we're held out as an industry leader.

In Clearing, you know us as the #1 firm in the U.S. And again, in terms of Treasury services, that's the U.S. dollar payment flow and multicurrency payment flow. We rank in number -- top 5 in terms of volume of payments. I would say -- it's also fair to say, as you look at competitive threats, the Investment Services business is scale-intensive. You see that in businesses like Clearing and Custody. And it also requires a significant upfront and ongoing investment in technology. These continue to be, from our perspective, huge barriers-to-entry for anyone trying to enter this market.

Okay. I talked about capturing emerging international opportunity is one of the areas we're focused on to drive our organic growth agenda. This chart is illustrative to talk about the benefits of our global growth strategy. Along the x-axis, you see relative maturity of these markets and along the y-axis, you see relative size of these markets.

In our experience over time, is that our product breadth actually allows us to enter these markets very early while their immature and small, and typically, you would see the BNY Mellon flag being planted starting with U.S. dollars, then followed by trade finance and then quickly behind that, mostly around banks and financial institutions and a few corporate issuers, people establishing Depositary Receipt programs to raise the profile of their company.

So then as you move right, as markets grow in size and start to open up allowing cross-border activity, we see immediate opportunities for other businesses like our multicurrency payment capabilities, our Asset Servicing capabilities, more of our Corporate Trust products as products need to be structured and companies go into the global capital markets.

And then finally, continuing to move to the right as markets truly open up and become cross-border, currency markets open up. Literarily, all of our products and services can be deployed in that -- in those markets, including in some cases our private bank and absolutely our asset management capabilities. What you don't see written on this slide is that we've been in every one of these markets for 90 years or more as a company. We know them well, we raise our profiles quite high in these markets and as these markets mature, we end up knowing them well, we know the regulators well and it creates a natural opportunity to leverage the breadth of our product that I talked about earlier.

The ultimate goal, however, you'll going to hear Todd and I and several of my business colleagues from time to time talk about going loco local. What that means is rather than pursuing the 15% to 20% of flow that goes out of one country and gets invested abroad, there are certain markets, like the U.S., like the U.K., like Ireland, where we go loco local to service the 80% of the assets that don't move outside that country. And we've done that very selectively and very precisely as markets move to the right on this slide. And the 2 most recent examples are Germany and Brazil, where we now are delivering the full value chain and competing with local indigenous players to serve not just the 15% to 20% that goes cross-border but to serve the 80% that stays in-country. That is a powerful 1-2 punch for us and in many ways, as we deploy our products and services in these markets, becomes a turbocharger for growth for us.

We also think one of the greatest assets of our organization is our absolutely fantastic client franchise. As you can see on the right-hand side of this slide, this is a client base any competitor would covet. The other thing you would see is these industries are going through enormous change and consolidation. We're trying to make sure we spend -- not trying, we are spending more of our time with those that we think are going to be winners in consolidated industries.

Post the credit crisis, it's probably fair to say, every one of our largest clients, whether they're a bank, a fund manager, an insurance company, a broker-dealer, they're transforming their business model. How they make money over the next 5 years will look nothing like how they made money in the last 5 years. Different products, different geographies. In short, and by the way also a big challenge is complying with regulations, and then we're going to talk about that in a minute.

So they need to turn to players like BNY Mellon to help partner with them to change their business model. But the challenge they're giving our industry and us, is they say, you need to think very differently about how you face-off against us. We want to talk to people from BNY Mellon that understand their segment. They want to talk to BNY Mellon people that have a deep understanding of their strategy and how it's unique and what their pain points are and how they are transforming their business models. They want to deal with individuals that have global responsibility for their account, no matter where they are around the world.

They want to know that these individuals can amass all the depth of product expertise to harness them and focus on helping clients solve their challenges and problems, and they want you to bring a solutions orientation. So they don't want you -- as much as we get excited talking about custody and payments and collateral, they want people that can understand the banking or funds management industry and then go work with all the tools we have at our disposal to create solutions that help clients solve their problems. That is a seminal shift. That's a huge channel for our industry and the people that get it right -- and we think we will be one of them -- will have the keys to success.

I would just make the point, we're doing all of these things and we're spending a lot more time with the players that are going to play key roles changing the landscape in these industries and actually developing joint account plans. We call them "The Joint Agreement on the Roadpath to Growth" so we can actually visualize with our client on how we see our relationship taking shape over time. Just in the 2.5 years we've been -- we have shifted our coverage model, almost 50% of all new business we did in 2012 was from clients where we've intensified our focus and calling effort.

We hear from our clients that our products and services are particularly well received. Again, against the backdrop of they want us to change the way we cover them as a client. Our coverage model is now designed to position ourselves to partner with our clients as I just talked about. We continue to spend more time with the winners in consolidating industries. We hear, time and time again, our clients, particularly the financial institutions, want to do more business with fewer providers because it makes life easier for them, they get a better value proposition, and they can simplify and derisk their own operations in doing so.

But more importantly, we continue to invest in a few areas -- I want to talk about them briefly -- in areas that will position us even stronger in each of these important market segments. Collateral Services, which is a theme you're going to hear a little bit more about from me in just a moment. Derivatives360, which is a set of services from trade capture, to segregation of collateral, to execution, to margining, to making sure clients are collateralized properly, to comprehensive reporting. That full suite of services we call Derivatives360. It's a service we offer to our asset owners and to asset managers, where we have their middle or back office; it's very well received.

Foreign exchange. We've talked about before, we have significant upside. We're investing in our foreign exchange products. We're making them more electronified. We're delivering better streaming prices to our traders so that they can get better share of wallet. We're improving our standing instruction program, we're enhancing our session range program, all of which suggest to us we should be capturing greater volumes over time.

We're making a huge investment in outsourcing. Investment managers, particularly alternative asset managers, are outsourcing at an unprecedented pace. They're doing so strategically. It's no longer -- they want us to take their mess for less. It's much more strategic about being able to deploy products more quickly, assimilate acquisitions, comply with a myriad of regulations and drive down their unit cost. So more of going from a fixed cost to a variable cost model. We've made enormous investments in some proprietary technology we have called the Eagle. It's data warehouse technology, valuations and performance and risk, very highly integrated with our derivatives capabilities and it's the key reason why we won the Bridgewater mandate, which we're very, very excited about. So we feel great about the outsourcing space.

And finally, Pershing. Savings rates are actually going up around the world, even here in the United States, we're saving more. So what's happening now is there's a groundswell of opportunity by companies around the world like ours that want to capture that share of wallet. The fact is they need a technology and infrastructure partner that understands their business, that can offer a highly integrated portal, open architecture, it will have -- it has compliance logic built in it, it has direct market access, it has all the tools that a private banker or a broker need to manage their client base and grab more share of our individual wallets. That's an area that we're really excited about. It's a sweet spot for us and it's an area we can continue to invest in. So I would have said, we already were well positioned. But as you can see, we're making selective and very clear bets on key segments and key products to even enhance our leading position.

Our industry whines a lot about regulation and the cost of complying with regulation. It's also creating opportunities. And I'll take just a minute to talk about Dodd-Frank and its cousin in Europe called EMIR. We have already an existing great platform around collateral today. You know we hold $2 trillion in assets today and $1.4 trillion in our tri-party program in U.S., about $600 billion outside. We have significant market share there. We also hold $35 billion in collateral relating specifically to that Derivatives360 product that I talked about. We have a wonderful portal sitting on the desktop of clients with a wide range of overnight investment funds choices, where clients are using the portal to reinvest collateral, that has about $130 billion on it.

We have a top 2 securities lending program, which is helping clients and will help clients transform their collateral. And I'll talk about that in a minute. We have about $300 billion out on loan. But more importantly, is the fact that we are the largest custodian of U.S. Treasury securities in the world, and those will be the securities people want to post as collateral as more and more volumes are driven to Central Securities Depositories.

I would be remiss if I didn't say we also have $26 trillion in assets under custody with a huge asset owner and huge client management -- client franchise that are a natural client base for this product. And we are delighted around the fact that we got approval in December to be a Central Securities Depository in Europe. I'll loop back to that in a minute.

So very quickly, what do we do in collateral? It's really simple. We hold the assets, generally segregate it in the individual client's account, not in the broker's account. We also have to aggregate all their positions around the world so clients can see where their collateral is around the world, even if it's not being held with us. You need to manage the inventory process because clients aren't buy and hold, generally; they're trading their securities around the world, so you need to make sure that the collateral moves as appropriate.

And then of course, there's financing and transforming collateral. I don't know if it's $2 trillion more in collateral the industry is going to need, that's roughly what the industry pundits say, but more importantly, the people that are going to need to post collateral don't have the right collateral to post today and there's ways we can use our security lending program to effect that or we could actually help finance that collateral ourselves.

So we're often asked, Todd and I, what does that really mean? Is it a needle mover? I suspect it's probably quite large, but given the fact that there's still a lot of unanswered questions around this regulation and the pace of its implementation is still a little bit unclear, it's hard to tell you exactly when we'll start to see that rolling through the P&L. Some of it is today, but there's no doubt in our minds that this is a significant opportunity for us.

On a related topic, I mentioned the CSD. In December, we got approval in Europe to be a CSD. There are a few of them, there's 27 CSDs in Europe, that's a space that's consolidating quite quickly. CSD 101 is CSDs perform basically 3 simple functions: The actual issuance of security and all the stuff you need to do when there's a new issue in Europe, before it starts to trade. It sounds easy but when you get into the details, it's pretty complex and it requires very sophisticated technology to handle that part of the process. We're one of the only players in the world that offer this, what's called, the notary function. All the stuff you do before something trades. And then the other bit the notary does, is it makes sure that share issue equals what's held in all the underlying individual investors' accounts.

Settlement, straightforward, delivery versus payment and safekeeping, which is making sure you handle corporate actions and make sure all the rights and entitlements of any security that's listed through the CSD get passed on to the ultimate investors. So that's CSD 101.

Our unique value proposition, as I mentioned, is we're the only CSD, including the 27 that are there, that does this entire value chain. It has interesting capabilities going forward, so any issuer that wants to issue an equity or debt instrument can do that with us through our CSD. People that want to list ETFs or other closed-end securities can do so. What's interesting is we could offer, if it's a BNY Mellon client on both sides of that trade, instant settlement, because we have the cash and the securities in-house.

Europe's a changing landscape. You probably hear things like AIFMD and Target2-Securities. I just leave you with one thought, that this gives us incredible flexibility as the landscape in Europe takes shape. We use subcustodians extensively in Europe. Being a CSD, we could do more of that Asset Servicing ourselves. AIFMD is changing the liability profile of this business. One could argue, it makes the business more risky. It also gives us an ability to charge more for what we do. But most importantly, back to collateral, post-T2S in 2015, that's central bank money settlement, you need to be a licensed CSD in that space to plug in to the T2S environment. We are the only one of our traditional trust bank competitors that have a CSD license. We think not only does it give us flexibility, it allows us to go from strength to strength. It's not a needle mover in terms of EPS today, but I think this becomes a much more part of -- much more important part of our agenda over the next 3 years.

So in 2012, I received the mandate to run Investment Services. I would say heretofore, it's been a collection of independently-managed businesses with their own CEOs, sales organizations, relationship management, client service, middle office and in most cases, back office operations and technology.

My job is to eliminate the boundaries we've set up between these businesses because we serve common clients. So I can tell you, there's 3 priorities for me -- that Todd and I and Gerald talk about. One, organize the front office to be leaner, client segment focused and bring more of that solutions' orientation that has proven to be a positive for us so far.

Enhancing the client experience, number two. Take -- having clients have fewer points of contact, having clients service -- develop a service methodology and operations platform to serve the whole of that client and finally, employ new and exciting technologies to serve our clients better.

The third is drive operational efficiency and reduce risk. Across this entire landscape now, we can employ best practice, core process reengineering on a wide range and a greater landscape. You'll hear a lot more about a gentleman named Brian Shea, who runs technology and operations. He's now head of that function. We appointed him in December. You can see us moving a lot more to the middle, taking advantage of our scale, eliminating duplicate technology and core process reengineering and best practices across a boarder platform. Todd and I are excited about it. On the right side of this page, we just list some of the areas that the team is already going to work on.

And to wrap up for me before I turn it to Todd, we like our business mix. It's diversified. It's diversified across the businesses. It's diversified geographically. We like that. We enjoy important leadership positions in size and quality. I do think we will benefit, long term, from structural changes, whether it's companies -- countries maturing left or right, back on my geographic slide, or whether it's the changing regulatory landscape. I think they all play to our strengths. We hold out as an endearing value the breadth of our product capabilities and that ability to solution with clients to help them solve their problems and we need to keep putting people in front of our clients that bring that solution orientation to life. And we will absolutely bring a culture of continuous focus on quality and cost improvement. Those are the things you can expect from us.

I will now turn the podium over to Todd to talk about operational excellence and further how we expect to leverage our strengths. Todd, over to you.

Thomas P. Gibbons

Thanks, Tim, and thanks, Arjon [ph], for hosting us this morning. And thanks, everyone, for attending. I know the weather is a little foul. Tim noted the momentum that we have in our operational excellence program. And so we talk about the savings in the $650 million to $700 million range by 2015. But as we -- there's more to it. I mean, we're looking to reduce the complexity of our technology and operations to improve efficiency. And it's also going to reduce operational risk and help the quality of the service that we deliver to our clients.

So let me talk a little bit now about how we are driving operational excellence to support our objectives and the priorities from a cost, productivity, quality, client satisfaction and control point of view. There's 3 actual main drivers of it and 3 main components: People, as always, are critically important. We've got to have the right people, the right skills, there has to be the underlying training so they can adjust to markets and they've got to be up for the task and actually also be in the right places.

Technology is also an important, it's a strategic advantage for us. We've made some very significant investments as you know. And we're working continuously in part of the slide that Tim just showed you, showed the opportunity to develop more common platforms, use common architecture, more straight-through processing. And as we do that, it really changes the underlying operations and help to simplify them and lower their cost and actually, make them more efficient as well.

And finally, we've deployed a disciplined financial management framework around all of this. So we have the discipline to measure and monitor and manage the investments that we make as well as our expenses so that we can look to do more for less. Of course, the benefits are derived and shared across all 3 of our key constituents. Our clients get a better service, they get better quality. Our employees, through increased opportunities and also the engagement and what Tim pointed out, this culture of driving continuous improvement is very attractive. And finally, we improve our -- we help our shareholders by increasing shareholder value.

So we made some pretty good progress so far, so let me highlight some of the accomplishments that we've got here to date. Since the inception of the operational excellence program, a little over 1 year ago, through the year end 2012, we have achieved net savings of over $300 million. This was ahead of our $240 million to $260 million that we had targeted -- frankly, because some of the expenses were a little bit less than what we had anticipated. So far, we're on course to meet our 2013 objective that we've laid out for you, that was for $400 million to $430 million in targeted cumulative net savings or what we would expect to be about $100 million to $130 million incrementally on a year-over-year basis. So this increment is a bit less than what we built -- what we did last year. But it will help to partially offset some of the increased regulatory cost that we see, as well as the embedded inflation.

Qualitatively, among the other things that we have achieved, the following -- a list, a number of accompaniments. We've continued the global footprint position migrations into our global delivery centers and that's lowering our operating cost and giving us scale in those locations. We've reengineered both Dreyfus and our global fund accounting operations and reduced the headcount required there. We realized synergies by integrating our Custody and Clearing operations related to the GIS acquisition. We migrated the GIS systems to BNY Mellon platforms and so as of year end, 100% of those production applications have successfully migrated. We've standardized the infrastructure by elimination of servers, as well as improving the rationalization around our software and we've also done a lot around real estate. So we've consolidated, especially in our high-cost regions though, we've reduced real estate by 565,000 square feet in the New York Metropolitan area, as well as Los Angeles and some of the expensive regions in Europe.

Let's spend a moment to give you our thoughts around the operating environment for the first quarter versus where we were in the fourth quarter. In our volume-related businesses, we are seeing a little bit of a mix here, I would call it roughly neutral or probably -- maybe slightly better than what we saw in the fourth quarter. As you're well aware, equity valuations have been very strong both domestically and internationally, and that's a nice tailwind.

We have some seasonal impact this quarter. If you recall performance fees, we typically benefit from performance fees in the fourth quarter and would expect them to be lower in the first quarter.

FX revenue is benefiting a bit from -- we have seen a little bit of increased volatility from the very depressed levels that we saw in the fourth quarter. In terms of interest rate, that's been a -- continues to be a bit of a drag, especially on NIR, but as well as on money market funds as fee waivers have increased and securities lending spreads have narrowed a bit. So just to give you an update here, the Fed funds effective for the first couple of months of the quarter is probably down 1 to 2 basis points where it was in the fourth quarter. And LIBOR is down about -- so 1 month LIBOR is on average, down about 1 -- excuse me, about 3 to 4 basis points. So that's a little bit of a drag.

And also I wanted to just update you on a couple of expense items that impact us sequentially. As we've noted in our Annual Report, full year pension expense, because of the significantly-lower discount rates, is expected to be up about $46 million for the full year or about $12 million or so sequentially and per quarter. And the first quarter also has traditional been the quarter where you feel the impact of the acceleration of retiree eligible compensation. So that gets fully expensed if a retiree is eligible for the equity compensation. And we'd estimate the impact to be, on a sequential basis, around $50 million.

Now let's turn to, what I'm sure is on many of your minds, the capital and the CCAR process. First of all, starting on the left hand of the slide, with capital generation, we generated tangible capital of about $2.7 billion in 2012 and at year-end, we had very strong capital ratios. Our estimated Basel III Tier 1 common was 9.8% and our Basel I Tier 1 common was 13.5%. I do want to remind you that we told you earlier, we expect to record a charge in the fourth quarter -- excuse me, in the first quarter, related to a tax charge that is going to have about a 55 basis points negative impact on our Basel III ratio.

Looking over to the right here, we've got a bit of an outline of what's going on in the CCAR process, which I'm sure everybody is focused on the developments expected over the next several days. Tomorrow is a key day. It's one of the important dates in the process. The process started back on January 7 where we delivered our CCAR capital plan to the Fed with our planned actions and what we've requested. Tomorrow, we will sit down with the Fed and they will release the results of the -- of its calculations of the Dodd-Frank Act requirement. And they'll release that after the market closes. So that's where they will disclose their estimates under the severely-adverse stress test for how we would have done. And there's no assumed capital actions in that disclosure.

And they'll also provide the opportunity -- this is the first time that they've done that -- so they'll provide the opportunity between the 7th and the 4th to give you a one-time option to adjust it downward, if you would like to, any of your planned capital actions.

And then the next key date will be March 14. So on March 14, the Fed is expected to release the final CCAR results, so they will go public with those, including whether they object or do not object to our own requested capital actions. And so you can expect to hear from us. We're not going to say anything tomorrow, but you can expect to hear from us very -- around the 14th with what our intentions are.

So to wrap up. The long-term secular trends for our business model continues to be pretty attractive. It's a, as we've mentioned, it's a tough environment, a couple of things looking pretty strong, but low rates, low volatility and for an extended period of time, relatively muted trading volumes, certainly down from where they were even just 1 year ago. And some of the inconsistencies across the market has made us a bit defensive. And in the face of these cyclical challenges, our priorities remain focused around continuing to drive some of the organic fee growth, so we do continue to invest. And as Tim has articulated, around our collateral management, things that we can add and across the seams of our businesses, leveraging our Pershing platform. We're investing in some of the electronic platforms in our global markets as we look to capture more of the order flow. There's a lot of order flow around us. If we capture more than we are today, it can have a nice impact to us. We continue to execute on our operational excellence initiatives that we've laid out for you. And we're maintaining, as we have in the past, a very strong, very liquid balance sheet. So we're controlling what we can control in the environment and focused on delivering some consistent EPS growth.

So with that, we're happy to -- we've got a few minutes to entertain any questions that you might have for me or Tim.

Question-and-Answer Session

Unknown Analyst

Thank you very much, Todd and Tim. Actually, I think if there are no questions in the room, we're actually out of time. And the next session is going to be in the C4 ballroom. So unfortunately, we may have to hold off on questions unless someone has one. Okay, thanks a lot, Bank of New York.

Thomas P. Gibbons

Thanks a lot.

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