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Good morning, and welcome to the 2025 Second Quarter Earnings Conference Call hosted by The Bank of New York Mellon Corporation. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. 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 The Bank of New York Mellon Corporation's consent. I will now turn the call over to Marius Merz, 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 Chief Executive Officer, and Dermot McDonogh, our Chief Financial Officer. We will reference the quarterly update presentation, which can be found on the Investor Relations page of our website at bnymellon.com. I will 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, 2025, and will not be updated. With that, I will turn it over to Robin.

Thanks, Marius. Good morning, everyone. Thank you for joining us. Before Dermot takes you through the financials in greater detail, I'll start with a few summary remarks on our strong performance in the second quarter and a couple of reflections on the first half of the year. Stepping back for a moment to look at the operating environment, we began the quarter in April with elevated market volatility, record U.S. equity trading activity, and increased treasury market volumes. Through the quarter, we saw shifts in global policy with elevated risk from geopolitical tensions and conflicts, as well as uncertainty around trade, fiscal, and other policies. Periods of volatility and active markets give The Bank of New York Mellon Corporation the opportunity to deepen the connection with our clients, helping them grow while navigating an evolving business landscape. Our unique position as a financial services platforms company at the heart of the world's capital markets, combined with our diversified business model, allowed us to once again demonstrate our resilience and commercial strength against this backdrop. Turning to the results of the second quarter and referring to Page 2 of the quarterly update presentation, The Bank of New York Mellon Corporation delivered a strong performance. Earnings per share of $1.93 were up 27% year over year on a reported basis and up 28% excluding notable items. Total revenue was up 9% year over year, and for the first time, exceeded $5 billion in a quarter. In combination with expense growth of 4%, we generated another quarter of significant positive operating leverage, roughly 500 basis points on both the reported and operating basis. And in what is seasonally our strongest quarter, our pretax margin improved to 37%, and our return on tangible common equity improved to 28%. These are clear outputs from our multiyear transformation and robust indicators of The Bank of New York Mellon Corporation's potential. Turning to Page 3, over the past few years, we have been laying the foundations for our future. In our January update, we outlined how The Bank of New York Mellon Corporation is well-positioned to capture market beta and capitalize on evolving market trends as we work hard to generate alpha through the continued transformation of our company. We entered 2025 with good momentum. Midway through the year, we are seeing results from our consistent execution and continuous delivery that add to our confidence for the medium to long term. Our strategy is simple but powerful: to be more for our clients by running our company better, all powered by our culture. I'll briefly touch on each. First, our commercial model enables The Bank of New York Mellon Corporation to be more for our clients, helping them achieve their goals using the full breadth and depth of our platforms. As we mark the model's one-year anniversary, early signs point to the growing effectiveness of our commercial organization, with significant runway ahead. We achieved a second consecutive quarter of record sales. The number of multiproduct relationships continues to grow, and we continue to broaden and deepen our engagement with clients. For example, in June, we expanded our relationship with specialist active UK asset manager, LionTrust. In addition to utilizing our data vault and middle office operating capabilities, LionTrust is fully outsourcing its trading to our buy-side trading solutions team, which delivers 24-hour global trade execution and reaches 100 markets globally across all major asset classes. Another important way for us to be more for our clients is to deliver innovative solutions to the market that come from the powerful combination of capabilities we have at The Bank of New York Mellon Corporation. As I've said before, we're not just in the product sales business; we're in the solutions delivery business. We enjoy a suite of highly adjacent platforms that, when delivered together, create powerful solutions for clients. Our commercial model, combined with our platform's operating model, is intentionally designed to encourage more of this type of innovation. An example of this solutions mindset is our work to build the financial infrastructure of the future by bridging traditional and digital financial ecosystems to enable clients to unlock new capabilities securely and at scale. Early and continuous investments in our digital assets platform have positioned us to meet increasing institutional interest and adoption. Last month, Societe Generale selected The Bank of New York Mellon Corporation to act as reserve custodian for their first USD stablecoin in Europe. And last week, Ripple announced that we will act as primary custodian of Ripple's US stablecoin reserves. Today, we are a leader in servicing the growing stablecoin market, enabling companies to create and use stablecoins by providing wide-ranging services from issuance to ongoing operations. Our advancements in the digital assets ecosystem are just one example of continual innovation, but there are many others. Flexible financing and global clearing, the integration of collateral agency lending in Saudi Arabia, depository receipts in Canada, to name just a few. This is an important theme for us. Not just periodic higher-profile product launches, but product-level micro innovations week by week, month by month that drive our organic growth. Next, on running our company better, with purpose. 2025 will be a milestone year for The Bank of New York Mellon Corporation's transition into our platform's operating model, which realigns how we work and organize ourselves across the entire company. As a reminder, running our company better is not just about expenses. It's about better. Yes, we are driving efficiency, but we're also enabling commercial opportunities, enhancing client journeys, and accelerating speed to market. With more than half of our people at The Bank of New York Mellon Corporation working in the model today, we remain on track to complete our phased transition into the platform's operating model by this time next year. Already, we are starting to see the impact of this new way of working, enabling our people to launch more new solutions, deploy more code releases, and come together better than ever before to support our clients. Finally, on culture. Culture is about generating a collective will to make our company achieve its full potential, harnessing the breadth of our talent to be there for clients and to help the company. This includes so many things, but one part of that enablement is our embrace of AI. It's an exciting moment for AI at The Bank of New York Mellon Corporation. Nearly all of our employees are using our multi-agentic enter AI platform, Eliza, and we have started to introduce digital employees into our workforce. It's early days, but we are beginning to see the benefit of some of these agents and digital employees, and we expect that to accelerate in the quarters and years ahead. To wrap up, against the backdrop of a busy operating environment, our priorities are clear, and we remain relentlessly focused on execution. The Bank of New York Mellon Corporation is showing strong momentum, and we are determined to deliver further value for our clients, our shareholders, and our people. At this midpoint of the year, we are pleased to see the initial work of our multiyear transformation bearing fruit. I'd like to thank our teams around the world for delivering strong results and for their continued commitment to the work ahead. We have a lot of opportunity in front of us, but the strategy to unlock it is working. And with that, over to you, Dermot.

Thank you, Robin, and good morning, everyone. I'm starting with our consolidated financial results for the second quarter on page four of the presentation. Total revenue of $5 billion was up 9% year over year. Fee revenue was up 7%. That included 9% growth in investment services fees from our security services and marketing and wealth services segments, driven by net new business, client activity, and higher market values. Investment management and performance fees were flat. Growth from higher market values and the impact of a weaker US dollar was offset by the mix of AUM flows and the adjustment for certain rebates that we discussed on our last earnings call. While not on the page, I will note that firm-wide AUCA of $55.8 trillion was up 13% year over year, reflecting client inflows, higher market values, and the impact of the weaker dollar. Assets under management of $2.1 trillion were up 3% year over year, reflecting higher market values and the impact of the weaker dollar partially offset by cumulative net outflows. Foreign exchange revenue was up 16% year over year on the back of elevated volatility and higher volumes, partially offset by the impact of corporate treasury activity. Investment and other revenue was $184 million, including $35 million of net losses from investment security sales, partially offset by favorable capital and other investments results. Net interest income was up 17% year over year, driven by continued reinvestment of maturing investment securities at higher yields as well as balance sheet growth, partially offset by changes in deposit mix. Provision for credit losses was a benefit of $17 million in the quarter, driven by property-specific reserve releases in our commercial real estate portfolio. Expenses of $3.2 billion were up 4% year over year both on a reported basis and excluding notable items. The variance excluding notable items reflects higher investments, employee merit increases, higher revenue-related expenses, and the unfavorable impact of the weaker dollar, partially offset by efficiency savings. Taken together, we reported earnings per share of $1.93 on a reported basis, up 27% year over year. Excluding the impact of notable items, earnings per share were $1.94, up 28% year over year. Our pretax margin was 37%, and our return on tangible common equity was 28% in the quarter. Turning to capital and liquidity on page five. At the end of June, the Federal Reserve released the results of its 2025 bank stress test, which once again underscored The Bank of New York Mellon Corporation's resilient business model and our strong balance sheet. The results also confirmed that our stress capsule buffer remains unchanged at the regulatory floor of 2.5%. With regards to our second quarter results, our Tier 1 leverage ratio was 6.1%, down 17 basis points sequentially. The Tier 1 capital increased by $689 million, primarily reflecting capital generated through earnings and a net increase in accumulated other comprehensive income, partially offset by capital returns through common stock repurchases and dividends. Average assets increased primarily driven by deposit growth. Our CET1 ratio at the end of the quarter was 11.5%, unchanged from the prior quarter. Over the course of the second quarter, we returned $1.2 billion of capital to our common shareholders, resulting in a 92% total payout ratio year to date. With regards to liquidity, the consolidated liquidity coverage ratio was 112%, down four percentage points sequentially, reflecting elevated deposit balances which were largely non-operational in early parts of the quarter. The consolidated net stable funding ratio was 131%, down one percentage point sequentially. Next, net interest income and balance sheet trends on page six. Consistent with the backdrop of elevated volatility and active trading in capital markets, we saw clients seek the strength of The Bank of New York Mellon Corporation's balance sheet and leverage our platforms for execution and settlement. Net interest income of $1.2 billion was up 17% year over year and up 4% quarter over quarter. Both the year over year and sequential increase primarily reflect continued reinvestment of maturing investment securities at higher yields as well as balance sheet growth, partially offset by changes in deposit mix. Average deposit balances grew by 6% sequentially, non-interest-bearing deposits grew by 3% in the quarter, and interest-bearing deposits grew by 7%. Accordingly, average interest-earning assets increased by 6% sequentially. Cash and reverse repo balances increased by 9%, investment securities balances increased by 4%, and loans increased by 2%. Turning to our business segments starting on page seven. Security Services reported total revenue of $2.5 billion, up 10% year over year. Total investment services fees were up 10% year over year. In asset servicing, investment services fees grew by 7%, reflecting higher market values and client activity. And in issuer services, investment services fees were up 17%, driven by exceptionally strong client activity in our depository receipts business. In this segment, foreign exchange revenue was up 22% year over year on the back of elevated volatility and higher volumes. Net interest income for the segment was up 13% year over year. Segment expenses of $1.6 billion were up 4% year over year, driven by higher investments, employee merit increases, revenue-related expenses, and the unfavorable impact of the weaker dollar, partially offset by efficiency savings. Security services reported pretax income of $867 million, up 26% year over year, and a pretax margin of 35%. Onto Markets and Wealth Services on page eight. In our Markets and Wealth Services segment, we reported total revenue of $1.7 billion, up 13% year over year. Total investment services fees were up 9% year over year. In Pershing, investment services fees were up 8%, reflecting client activity and higher market values. Net new assets were a negative $10 billion in the quarter, reflecting the deconversion of a client that was acquired by a self-clearing competitor. In clearance and collateral management, investment services fees were up 14%, driven by broad-based growth in collateral balances and clearance volumes. And in treasury services, investment services fees were up 3%, reflecting net new business. Net interest income for the segment was up 21% year over year. Segment expenses of $897 million were up 8% year over year, driven by higher investments and litigation reserves, employee merit increases, and higher revenue-related expenses, partially offset by efficiency savings. Taken together, our Markets and Wealth Services segment reported pretax income of $851 million, up 21% year over year, and a pretax margin of 49%. Turning to Investment and Wealth Management on page nine. Our Investment and Wealth Management segment reported total revenue of $801 million, down 2% year over year. Investment management fees were down 1% year over year, driven by the mix of AUM flows and the adjustment for certain rebates, partially offset by higher market values and the favorable impact of the weaker dollar. Segment expenses of $653 million were down 2% year over year, driven by lower revenue-related expenses and efficiency savings, partially offset by higher severance expense and the unfavorable impact of the weaker dollar. Investment and Wealth Management reported pretax income of $148 million, down 1% year over year, and a pretax margin of 19%. As I described earlier, assets under management of $2.1 trillion were up 3% year over year. In the second quarter, we saw $17 billion of net outflows driven by index multi-asset and equity strategies, partially offset by net inflows into cash and fixed income strategies. Wealth management client assets of $339 billion increased by 10% year over year, largely driven by higher market values. Page ten shows the results of the other segment. For this segment, I'll just note that the sequential decrease in revenue primarily reflects the net losses from investment securities activity I mentioned earlier, while the sequential decrease in expenses reflects lower litigation reserves and severance. Turning to page eleven, I'll close with a midyear update of the financial outlook for 2025 that we provided on our earnings call in January. As you can see on the slide, The Bank of New York Mellon Corporation is entering the second half of the year with great momentum amid elevated geopolitical and policy uncertainty. Based on where we sit today, looking out to the balance of the year, we now expect full-year 2025 net interest income to be up high single-digit percentage points year over year. And we continue to expect solid fee revenue growth in 2025, of course, market dependent. We now expect expenses excluding notable items for the year to be up approximately 3% year over year. We continue to expect our effective tax rate for the full year to be in the 22% to 23% range. Considering our 21% tax rate in the first half, that means approximately 23% for the second half of the year. And we continue to expect to return roughly 100% plus or minus of 2025 earnings through common dividends and buybacks. Following the release of the Federal Reserve's annual bank stress test, our Board of Directors declared a 13% increase of our quarterly common stock dividend, and we plan to continue repurchasing common shares under our existing share repurchase program. As always, we consider macroeconomic and interest rate environments, balance sheet growth, and many other factors with a conservative bias in managing the pace of our buybacks. To wrap up, The Bank of New York Mellon Corporation posted very strong results, demonstrating the impact of consistent execution and delivery amid a complex but yet for us constructive operating environment. Momentum of our multiyear transformation continues to build, and progress to date gives us incremental confidence in our great potential for the medium and long term.

We'll take our first question from Ebrahim Poonawala with Bank of America. Please go ahead.

Thanks. Good morning.

Morning, Ebrahim.

Maybe, Robin, for you, I saw the call in terms of the transformation efforts, digital assets, AI just sounds like significant runway on all things organic. But address for us how you're thinking about capital deployment relative to where the stock's trading at today, and I'm sure this is not news to you in terms of news around The Bank of New York Mellon Corporation pursuing a merger with a competitor. Your interview in Barron. So give us a sense of when we think about capital deployment as shareholders, how should we think what the priority is outside of funding the business? Be it buybacks versus M&A? Thanks.

Sure. So look, you know, the beginning point of what you said is actually the most important thing. We have got strong momentum. We really see the pathway to be able to generate value over the medium and long term. Obviously, you're seeing some of the early signs of that, and we're pleased with it. And that is our biggest focus because at the end of the day, the top of the capital waterfall is that ability to invest in the business. Now look. The good news is that we're a pretty capital-light business. You can see it in the 28% ROTCE that we generated in the quarter. We're pleased with that. That's another sign of the transition and transformation of the company towards this more platforms orientation because that is the sort of feature that you'd expect of a company in terms of the direction of travel that we've got going. Now in terms of the sort of the inorganic stuff, look, our broad approach hasn't changed, which is M&A done well can be a powerful tool in the toolkit. It's not accustomed to comment on any specific rumor or speculation, but I think we demonstrated last year with the Archer acquisition that we've got the ability to make M&A work for us in a sensible way. Having said that, I just really want to underscore this point. It's a very high bar for us for M&A, especially a larger transaction. It would have to make a ton of sense. We'd need to have a lot of conviction and execution. We're focused on ongoing alignment with our strategic priorities. Strong cultural fit matters, and, of course, the financials really have to work. And our M&A story is a two-sided story as well because you saw that last year. We bought Archer, but we sold our corporate trust Canada business. So the punchline I'll leave you with is we are focused on our organic growth. That is working. We are beginning the process of a multiyear journey on that. And we're going to be open because we should be open to sensible things inorganically if they make sense, but I'll underline again if they make sense.

That's very clear. Thank you. And I guess maybe just following up on that. You referenced the 27% ROTCE this quarter. I get it's a seasonally strong quarter. But as we think about again relative to new investors trying to put money to work in the stock, if, structurally, based on all the work you've done so far over the last few years, and where things are going, is it safe for investors, shareholders, the street to assume that this is becoming a high twenties low C institution, which should then support a very different multiple than we've been used to for the last several years. Thanks.

So look, I'll blend sort of two things together here. One is the broader medium-term targets as we think about them. We have not put a ceiling on any of our medium-term targets. We viewed them as milestones on a longer journey. At the time that we first communicated them, you know, people understandably thought about them as ambitious based on where we had been in the past. But we are on a journey here, and we are making important steps forward. And so on ROTCE specifically, we don't see a ceiling on that number. Because as a more platforms-oriented company, remember, NII is only 25% of our revenues, view that as broadly for the balance sheet, which means three-quarters of our business is largely a pretty capital-light business. That's driving forward in terms of fee growth. And so I would just look generally at our medium-term targets. I would throw ROTCE, your question, into that as well. And say, we have a lot of ambition. We think we're relatively early in our journey. And we're absolutely going to be moving the bar higher on ourselves, which frankly we do every single day in terms of how we run the company.

Perfect. Thank you, Robert.

Thanks. We'll move to our next question from Ken Usdin with Autonomous Research. Your line is now open.

Hey. Good morning, everyone. I wanted to ask about just the evolution of, as the year goes on, of just overall top of the house performance. Because, obviously, you're taking up your NII guide, but NII is only 25% of revenues. And while the cost guide is up, I think it maybe misses the point that on the fee side, your guide is only just for year over year, and here we are plus 6% in the second quarter and plus 7% for the year to date. So I'm just wondering on the fee side, are fees better than your original expectations too? And is that informing as much as the NII upside, you know, the slight drip up on the overall cost guide as the total is coming in better?

Hey, Ken. I'll start with that. Look, the way I kind of think about the firm is I start with overall positive operating leverage. And I guess a key message I would leave you there both on operating and reported basis I think it was roughly 500 basis points of operating leverage. And so since Robin took over as CEO, we've kind of made the positive operating leverage our North Star. And so consistently delivering that to the market has been our kind of core strategy around how we think about the financials. So you have three components to that. You've got fees. You've got NII, and you've got expenses. And you'll see from the financials, revenue up 9%, expenses up 4%, you know, delivering that positive operating leverage within the revenue. You've got fees. You've got NII, really solid performance on NII, which gives us comfort around for the balance of the year. Giving a higher guide to kind of high single digits. And on the revenue side, I think the strength in fees really underscores the commercial model that we launched about a year ago, two consecutive quarters of kind of record sales, notwithstanding that, the second quarter is a seasonally strong quarter, so we would expect strong fee strong sales. But that was on the back of a Q1. And we see going into Q3, although it is a kind of seasonally slower quarter for us, given the vacations, etcetera, we see kind of strong momentum continuing. So you see a picture on page three of the midyear update where we kind of show you a little pictorial about how we think about organic growth, and we have high conviction around that beginning to build and grow.

And, Ken, let me just build on a couple of things that Dermot said. So first of all, yes, it was a constructive environment in the second quarter, but I'll bring you back to our comments in January when we talked about the various different things that drive our business. We've been intentionally repositioning the company gradually to be able to take advantage of more different types of environment. So I think the punchline is, well, there are always amazing environments that you could have for a business or potentially environments which just don't have any element of being particularly constructive. We think we're broadening out the probabilities of any given environment as actually working reasonably well for us because equity markets up, fixed income markets up, equity volumes up, fixed income volumes up, transaction volumes and GDP up, issuance up, asset management activity, wealth management activity. There are a lot of cylinders in this particular engine. And so the second quarter was constructive, but we have been positioning the company to be able to take advantage of more and more environments as constructive. And I think that plus the point that Dermot made around our commercial model, is allowing us to grind organic growth higher. So we want to take advantage of the beta. We want to be able to participate in whatever the quarter happens to bring, but this constant focus on alpha generation in terms of how we're running the company and positioning the company is an important part of the story. And we do think that this is a quarter where you're starting to see that. But, again, the early innings point that Dermot and I have made many times before, there's a lot of runway here in our estimation.

Understood. That's great color, and I do like that upper right chart on page three. Just one thing on the environment then. Can you you've talked previously about just the stickiness of deposits and obviously that's informing the better than expected NII outlook. Does anything change in the environment to that point? Because I think Robin will bring back in your point about, like, you know, tools in the kit and arsenal to just continue to add deposits, but maybe you can just help us understand the environment.

So I think point number one here that I would make, Ken, is as a matter of strategy, we don't really lead with deposits. So when you see deposits being a little bit higher, the mix of IB and IB a little bit higher, it really speaks to the breadth and the depth of the franchise and doing more with clients. And doing more with clients kind of attracts deposits. And specifically around the second quarter, in our corporate trust business, we had higher levels of activity, and we were able to kind of help clients with unique specific situations that attracted deposits into the system, particularly on the NIB side, and that was able for us to kind of have a good NII print this quarter. And when we look out for the balance of the year and run our various scenarios, we really have reduced the tails with respect to interest rate sensitivity, and that was really on the back of a ton of work done towards the back end of last year when the Fed made the pivot after Jackson Hole around the forward rate curve. And so that gives us now a lot of confidence to be able to kind of provide that higher NII growth against what is a constructive backdrop for us.

Thanks very much, guys.

Our next question comes from Glenn Schorr with Evercore ISI. Your line is now open.

Hi, thanks very much. With so much going well, forgive me, I'm going to pick on the one area that wasn't as good as everything else in investment management. So fees down a little bit. Flows out, margins down, you know, in that nineteen range. So despite the good market. So the question is, if we step back a little bit, we talk can we talk a little bit about what investments you're making to improve the business and, like, what's high on your to-do list to help you know, drive better performance as we move forward in investment management? Thanks.

Thanks for the question, Glenn. I would say investment number one was Robin appointing Jose as the leader of that business, and he started last September. And you can see, you know, between first quarter where we had a margin of eight percent to this quarter where we're about nineteen percent, you can see that step up in margin, and you can see Jose is beginning to work the opportunity and making some decisions to right-size it from an efficiency standpoint, and I'm very pleased with what Jose has done. What I also think he's doing very, very effectively and, look, both Robin and myself will have talked about this on prior quarters, the one BNY approach in terms of de-siloing the firm you kind of have to go that extra mile as it relates to our investment and wealth management strategy and bringing the boutique closer to the firm. And I think Jose sees a lot of opportunity for us to cross-sell within the firm, both within our asset servicing business and within our Pershing business. So bringing the strength of our manufacturing capabilities to our Pershing clients and our asset servicing clients is a kind of a key forward strategy that we can see we can do well at. And also bringing in leadership and product development. So I think you're going to see more positive stories coming from this particular segment, whereas as with all transformations, it takes a little bit of time, and Jose is getting that time to make the decisions that he needs to.

And, Glenn, let me just build on one particular point that Dermot just made. You know, one of Jose's early observations about the business was we have a terrific, to use Dermot's term, manufacturing base. If you look under the hood of our $2.1 trillion of AUM, you have some real market-leading franchises. We have Insight, which is number one in its market. That's a trillion dollars of it right there. You have Walter Scott, which is a terrific, long-only, long-dated, equity manager. You have a terrific business in the form of Dreyfus, money markets. And we have in Mellon, a direct indexer that's capable of being able to create products that our asset servicing clients are very interested in. Obviously, it also has a lot of relevance for the $3 trillion of wealth distribution that we have in Pershing. So you think about the manufacturing base, let's give ourselves a check that we have a pretty good set of businesses that are actually performing pretty well. On the distribution, if we didn't have The Bank of New York Mellon Corporation, then you could look at asset management, and you could say there are a lot of parallels with other midsized to large asset managers, and the question of wow. This investment manager at The Bank of New York Mellon Corporation is one of the reasons why I joined The Bank of New York Mellon Corporation. Because there's all of this distribution potential, but we just haven't fully unlocked it. Okay. So then what sits in the middle? And that's the word that Dermot used, product, where if you take a metaphor for this for a second, imagine that you were a Coke or a Pepsi and you were making a beverage and you had to concentrate and you have all of this terrific distribution because you can sell in restaurants, you can sell in grocery stores, you can sell in a corner store as well. But in the middle of that is a critical point of product, which is, are you taking the manufacturing base that you have and making cans when you want to sell it in the corner store. Because if you put bottles of concentrate in the corner store, it's not going to help you. But when you're delivering to a large fast-food outlet, there you want to be able to deliver the concentrate. Canned is not as useful. So this piece in the middle, this product shaping, that leverages the manufacturing base with an eye on the distribution channels that you have available to you is critical, and I think we haven't done as good a job on that as we could. And so that's a very big focus for us, and we think that when you take all of those things together, we think there's an interesting pathway here.

Thanks for all that. Maybe I could do a tiny follow-up on the previous question. And forgive me if you said it, but the fee revenue was up 5% for the first half, and the guide is still, quote, up on the year. Markets are higher. Despite this investment management, it feels like deliberately conservative, which I'm cool with. I just curious on how we square the up five for the first half. Markets are trending well. Your momentum's good. Why wouldn't the fee outlook be better? I know I asked you that last quarter and you outperformed.

So the way I would answer it is it's like, there are a lot of factors that go into the fee. A lot of external factors that we don't necessarily control. Very market-dependent, we kind of go back to the foundational building blocks of the platform operating model and the commercial model, which is, you know, it's still only a year old, but it is working. You can see it. Have higher conviction about our ability to drive organic fee growth from here. But you know, and we've changed a lot over the last three years, Glenn, about the transparency of our numbers and how we give you a lot more than we did three years ago. So I think as we get more conviction and as we get more kind of sales telemetry around us, we'll give you more guidance as we feel comfortable. But for now, I think the momentum is there. The upward trajectory is there, but we're not ready to yet guide on specific around fees. And the third quarter is usually a seasonally slower quarter, and Q2 is a seasonally strong quarter. So it's important to be balanced in that as well.

Fair enough. Thanks for all that.

Thanks, Glenn.

We'll move to our next question from Betsy Graseck with Morgan Stanley. Please go ahead.

Hi. Good morning, Robin. Good morning, Dermot. Good morning, Ben. I wanted to dig in a little bit on the AI commentary that you had, Robin. And starting off, the operating leverage is just so strong, almost double what consensus had baked in for you and really terrific results here. I wanted to understand your comments on AI as it relates to the forward look because you indicated that nearly all your employees are using the Eliza, you know, AI platform. And you're starting to you're beginning to see the benefit of this. I mean, is it the benefit from AI at a level that we can see in these operating leverage results? And maybe you could help us understand, is this more revenues or expenses?

Sure. Well, thanks for your comments about positive operating leverage as Dermot and I both said over time, Betsy, that is a great North Star. And going back to Glenn's question at the end, there, you know, one of the reasons why we've been always a little reluctant to guide on all of the elements underneath the hood of positive operating leverage is we recognize the composition in any quarter or any year could be a little different, and we don't want to create ceilings for ourselves. Positive operating leverage, and we see a ton of pathway. And when you go under the hood, one of the reasons why over the past three years, we've really focused on showing you all the inputs to what we're doing is because we recognize that the timing of exact when each of these strategies starts to really hit varies a little bit. And so we've got several things driving the positive operating leverage. We've got a commercial engine which is starting to now make a meaningful contribution. Output evidence, you can see it in the record sales quarters that we had in the first and second quarter. The platform's operating model, we knew there would be a longer lead time to that. We started work on it three years ago, and now it's starting to come into its own, but it's still very early days because only less than ten percent of our people have been in the model for at least a year. And as we indicated, in our prepared remarks, we see the actual value really starting to shine through in platforms operating model after we've had people in the model for about that period of time. So that is still to come, a little bit of it now, most of it twenty-six, twenty-seven, twenty-eight, and beyond. The next layer is the heart of your question, which is AI. We view AI as a top-line story and an expense story because what we're really doing is we're unlocking capacity in the company, and we want to then be able to use that capacity to do other higher-value things. That's why we've been encouraging all of our people to participate in AI because we view our AI solutions, which we put on the page three again, demonstrating the inputs today and then we'll show you the outputs over time. We see those as being able to be very helpful as two will be our digital employees as essentially companions and leverage for our people to be able to go faster and create capacity for themselves they can reinvest in doing new things, pushing forward with clients, more time in the day, all of the above. So our excitement about AI is a very medium to long-term excitement, but we've invested heavily early on in the psychology of it in the company so that we have AI for everyone everywhere, for everything. And that's really how we think about AI. So it's early days. There's not a ton in the P&L right now. To your point with net investment, but we are starting to see the early signs of what we think will be an acceleration twenty-six, twenty-seven, twenty-eight, twenty-nine, beyond.

Thank you.

We'll take our next question from Mike Mayo with Wells Fargo Securities.

Hi. No good deed goes unpunished. I know you talked about organic growth and you could make that you could make that one of your punch lines, Mike. You could I know you've trademarked the world's worst oligopoly, but that one you could put it could put in trademark as well. And BNY not your parents' bank? Look. I'm the first to say you've optimized much better than I had expected these last two years. And, but yeah. And you have these very high returns as but the organic growth and you do it correctly x markets, x currency, x deals, whether it's two percent or three percent, is still not great in the scheme of, you know, the overall world. And, I know you want that growth to be better. And I know you said you had record sales, but it's the growth is still the growth. It hasn't changed that much at an organic level. And I know you guys have thought about this, but know, to the degree you sacrifice the very high returns, reinvest for better growth, than what the company's had so fast. Five, ten, twenty years. Right? And so I where do you stand in that trade-off? Of maybe having lower returns or maybe not raising your return targets and reinvesting more for growth and where should that organic growth be in your perfect world the way you define it?

Sure. So several things here, Mike. So one of the reasons why we put that chart, the top right corner of page three, was to illustrate the fact that organic growth has been growing. I hear your point about three versus two, but three is still fifty percent more than two. And significantly up from where it has been in the past. But a few other points to note. Our growth in the past generally has been quite subject to markets. And so we are very happy to take advantage of constructive backdrops. And as I answered in a prior question, we're trying to position the company to take advantage of more types of backdrops so that we can be less handed our results by the market conditions and more in charge of our own destiny. That's a very deliberate strategy, and we feel like we're making some progress on that. So that's sort of the next observation. The next thing under the hood is what are the prerequisites for the real type of organic growth that you're talking about that you've challenged us on understandably and rightly so over the course of the past two or three years. And this is where we really feel like we've set the table for the future. And to your point about how we think about investing versus harvesting, we've been very clear on this. We are taking a decade view of the transformation of The Bank of New York Mellon Corporation, and we're pleased where we are close to three years in, but we are far from done because much of what we have done has actually been investing for the future, and we're in the very early stages of seeing that being harvested. We talked about the commercial model. We talked about the platform's operating model. We talked about AI, which is part of the growth story as well as it is on the expenses. But let me just come back to the key elements of what we've got. We've got a diversified set of platforms. That is, yes, helping us to be more diversified in different environments, but it is also allowing us to better position to capitalize on these market trends and to generate alpha because it's less one business going to market by itself. It's more what's the synergy between the component parts. You know, a client who custodies with us who also does treasury clearing with us, who also does collateral management with us is going to be able to get better outcomes over time because of the fact that all of those things can just be book entry for us within our ecosystem. That allows us to move to 24-hour. That allows us to think and embrace digital assets maybe in a different way than somebody else can. And you're starting to see the early signs of these platforms coming together to show something where the sum is more than the individual parts, and that's what our commercial model is actually about. So we're investing in these micro innovations, the bigger things, the synergies between the platforms. We've positioned people behind this. We've positioned culture behind this, and we're organizing the company behind this. And we think it is starting to show, but we absolutely agree with you that there should be more a lot more gas in the tank here.

Hey, Mike. I would add just a couple of more points as well. One is, you know, you ask the question sometimes about negative pricing. We just we haven't seen it this quarter, which really kind of goes to the efficiency point about us being able to reduce our cost to serve, which is able to help us drive the organic growth because we're able to compete more effectively to win our share of business. So that would be point number one. Point number two, to Robin's points about the commercial model, now we're in the early stages of a product model. Which is joining with the commercial model, and that's been led by Carolyn Weinberg, where she's able to see in between the scenes of our various businesses to create new products that clients want. So lots of opportunity to come there. And the third point I would make is when you look at the firm overall and you have to think about the enterprise, it's a 37% pretax margin. Diversified business model. And so when you look at IWM, which is now hovering around the 19%, it's upside from here for their enterprise as we resume that path towards 25% which is going to further fuel organic growth at the enterprise level.

And I guess just one more follow-up on the talk about acquisitions, and I heard you, it can be a powerful tool if it made sense. You're not going to do anything stupid. I hear you. As you've gone and the art of what's possible. Since you are talking about a different type of not your parents' The Bank of New York Mellon Corporation because you are more diverse in terms of your offerings. What's the realm of possibilities for acquisition? Clearly, traditional trust businesses or sub-businesses are always possible. Going back to the big merger. But what other areas would you consider maybe buying?

So it's an important question, Mike. Again, you know, focus our primary focus is on driving the growth. But there are many different pathways on this thing. So we, you know, two or three years ago, we said there's absolutely no way that we're going to make any acquisitions. Then we sort of warmed up to the idea of capability buys, which is how I would frame Archer. And that really does check the box of helping us to go faster, to derisk because we could buy versus having to build ourselves. And we're seeing the early signs of that output. Great client feedback. The integration's been going well. New client wins as a result of it. So I still think that that is the most likely path for us when it comes to M&A helping us to go faster? And I'm going to guess, but it doesn't have to be this way. That those types of things are generally more likely to be in the bits of the business which are a little bit more platform-like. Although it's interesting that Archer was a buy once use across the firm type of acquisition. So that's our expectation for the primary focus. Because the bar for larger transactions is super high, we'd have to have a lot of conviction in the execution of something like that because clearly, they could be quite complicated. And there, you could make a case elsewhere in some of the other segments that maybe there would be the opportunity to have even more scale. Because if you're a scale player, and you've got a platforms operating model-like organization, the thesis would be that you could bolt on more activity onto your existing chassis, and there would be a lot of scalability associated with that. So that's a fine thesis and something that we certainly keep in mind. As well. But, you know, as now we have close to two-thirds of the company in platform-like businesses either in MWS or in our issuer services business, you know, when you look at MWS alone, it's a 49% margin. You know, we've got choices in this space. But we're not going to let those choices get distracting for us. We are focused on building our company, to your favorite term, the organic way, and then we'll just be opportunistic and disciplined on external related stuff.

Message heard. Thank you.

We'll take our next question from Alex Blostein with Goldman Sachs. Your line is now open.

Thank you. Good morning for the question. Thank you. Busy morning. So I had a couple of questions for you guys around the new business, upper opportunities. I know you mentioned a couple of things around the digital assets and just kind of tokenized environment, which obviously continues to be quite dynamic. Was hoping you could build on that a little more. Obviously, there's a lot of debates in the financial services industry today, perhaps more so on the stock than the past in terms of what what's a risk versus what's an opportunity. So when you think about where The Bank of New York Mellon Corporation sits in that realm, where do you see both risk to, you know, the existing business and some of the new revenue opportunities that could come out of this?

Sure. Thanks, Alex. Look, net net, we see these advancements providing more opportunities than risks, but you're right. There are things on both sides of the ledger. If you just go back and just think about industries and big changes in technology that happen over time, they create disruption. And what disruption does is it allows for a little bit of a reorganization sometimes of the ecosystem. And it's our observation that companies that have a lot of forward-thinking innovation that push forward take advantage of that as opposed to sticking their heads in the sand, tend to be winners. Now we have many specific valuable attributes that help us make us a great partner to these digital assets firms. And that's one of the reasons why we've been so engaged in the space for several years because initially, it had been about providing our traditional banking services to those digital asset companies. We serve many of them. With our traditional banking services. Then it's been about helping with the on-ramps, off-ramps between that traditional banking world and the on-chain world. And in the future, we think it's also going to be about more activity on-chain. We are live with Bitcoin custody today. We do it natively, and we can help clients. There's more stuff in the world. We want to we're in the business of looking after stuff as one of our businesses, and we're happy to do that. But we're also in the payments business. Again, there's synergy between our platforms. We're also in the issuer services corporate trustee business. There's synergy. We're in the NAV business. That's relevant. Synergy. Distribution business, relevant. Money market fund business, relevant. And so when you take all of these things together, we're a terrific partner for some of these clients because we can do a lot of different things with a trusted brand that actually helps them to feel good. So, look, Stablecoins particularly, it's obviously one of the topics of the day, and we're very active in that space. And that's the reason why we mentioned a couple of those recent examples, but there are many more in our prepared remarks.

But, Alex, what I would say is don't lose also that's all great stuff, but don't lose sight of our core businesses that are market-leading that are growing share because the market is growing. So growing the pie with existing clients in our core businesses is also happening and very important.

Yep. That's totally fair. Dermot, we want for you on just the balance sheet dynamic and deposits. You know, I know you mentioned you guys don't lead with deposits. That'll make sense. But when we look at the trajectory deposit base for the last couple of quarters, obviously much more stable, and nice to see the non-interest-bearing deposits improving here as well. So as you look out into the back half and ultimately, you know, where we are in July, maybe give us a sense where interest deposits in particular sit. And as we think about the forward, which businesses tend to drive those for you guys as sort of think about the trajectory beyond twenty-five?

So it was a strong quarter. I expect the balances to moderate into Q3. You might remember Q3 of last year was a strong quarter for us in terms of NII. So Q3 is a tough comp. So and deposits we expect to moderate at the seasonal slowdown. And so the diversity of the NIB across the franchise is particularly pleasing. But corporate trust is a highlight. And because of the breadth and the depth and the market shares that we have in that business, we do attract a lot of cash into the system by virtue of increased client activity. So Corporate Trust in Q2 was a notable highlight, particularly around escrow as a result of increased M&A activity. So but I would expect that to moderate a little bit in Q3 and pick up again in Q4. But overall, I feel pretty convicted around the high mid-single digits NII growth for the year.

Alrighty. Thanks so much.

We'll take our next question from Brian Bedell with Deutsche Bank.

Oh, great. Thanks. Good morning, folks. Maybe two separate questions on the platforms operating model. So first one, maybe for you, Dermot. Focusing on the cost reduction element as we've, you know, we have another fifty percent to migrate over the next call it, twelve months. And I know, obviously, expense guidance went up a little bit, which makes complete sense given the, you know, stronger revenue growth environment and all the dynamic budgeting aspect that you've talked about. But on the cost reduction side from that conversion on the platform's operating model, and how should we think about framing that as a positive contributor to the expense story for the rest of this year in twenty-six?

So I do go back to a little bit, Brian, what Robin said earlier about, you know, fifty percent of the people are in the model. We've done three waves over the last fifteen months. The maturity level between wave one and wave three is quite stark. And what the wave one businesses that went into the model are doing now in terms of one BNY connectivity, automation, you know, dynamic innovation, having an entrepreneurial spirit within their own businesses, it gives me a great sense of pride to actually see it day in, day out. And while your question led with the cost reduction, we really think about it internally about running the company better and creating capacity. And we either deploy that capacity into new investments, new opportunities, or we let it flow through to positive operating leverage. And you can see in Q2 of this year, we kind of gave the market 500 basis points of positive operating leverage. And the platform operating model was a contributor to that. So with fifty percent of the firm in the model and ten percent in it about fifteen months, I would expect the maturity of this to kind of give us a benefit for the next few years. And so it's not for another two years where I would say the firm will be reasonably mature in the model. And it's creating its own flywheel of momentum and innovation. And when you overlay that with the maturity of the commercial model and you overlay that again with what Caroline is doing on the product side, you're going to see the North Star of positive operating leverage be delivered for the foreseeable future. So I'd like, it's all about running the company better, and I don't talk internally about expenses or cost reduction.

Yep. Okay. And then that's great. And then maybe just also on the following question on the platform's operating model. As you think about M&A, maybe just your thoughts around how much the operating model, you know, the platforms operating model, you know, kind of informs your decision about what type of M&A to do? Is it a major or a primary factor in bringing on businesses that you think can fit into that model and therefore you can scale them inorganically? And then I guess is it even possible to do large-scale M&A and, you know, integrate that into this platform? Or do you see, you know, too many disparities with other, you know, large providers that would make that difficult?

Yeah. It's an important question. So look, broadly in the platform's operating model, Dermot touched on the fact that it's a two-sided thing because we're very much looking for it to drive revenue. This interlock between platforms operating model and the commercial model is super important because by having defined our product and client platforms in the way that we have, and then by layering over that, a new go-to-market approach with our commercial model, that's just allowing us to go faster, collaborate more across the platforms, create more solutions, and really create a lot of empowerment to our teams to go and listen to clients, invent new stuff, provide more solutions to them. And, of course, that and just running the company better, more broadly, as Dermot mentioned, those are the reasons why we are doing this. Now it has a nice byproduct, which is it organizes ourselves in a way where our chassis is super well organized and very strong, and we clearly see the benefits of that across the board as we continue to go through the model. And so I think what that will result in is when we talk about some type of bolt-on acquisition and almost irrespective of its size. If it's sort of adding to us in something that we broadly do today or something that essentially speeds us forward in something that we do today, we're able to add it with really without having to take on all of the expenses associated with us because it sort of becomes a bolt-on to a chassis that we have. You could see that with Archer as a good example, which is they are able to do more of what they want to do because they're able to tap into the right additional parts of The Bank of New York Mellon Corporation. The client onboarding capabilities that our client onboarding platform provides to Archer in its acquisition of new clients allows them to go faster. The fact that we've been able to wrap our technology and our AI around that is going to allow them to do more things. And so there's a real you're able to actually achieve an economy of scale and actually add scale to a scale business or go faster in a business where you're adding capability where sometimes that's a theoretical conversation because you look at something and you say, oh, well, you could just you're pretty scaled. You could just add more stuff and it'll scale. But that's not true if you're adding a complicated back end, you know, trying to smash two incompatible things together. And I think that was a lesson that this company learned twenty years ago with the acquisition between or the merger between Mellon and The Bank of New York Mellon Corporation. That was not consolidated properly. So the punchline is the platform's operating model allows us to have a clarity of chassis that I think actually will allow for higher quality integrations in the future if ever we choose to do one.

Yep. Great color. Thank you.

We'll take our next question from David Smith with Truist Securities.

Good morning. So you're pretty clear that, you know, you see further upside on returns and margin from here even with the strong results you've had in this quarter in the first half? Are there areas right now that you feel like you're over-earning? Or would you say that, you know, you're looking to hold or improve profitability across the firm, from these levels right now?

I would say it's a good question, David. How I would answer that is we're trying to get better every day in every business, and a mindset I adopt with everybody that I work with and talk to is one percent improvement every day, be better, run the company better, always be humble. It's all about the client. If you keep the client happy, you're going to win more business. And that really is, I think, our secret sauce. I talked to a couple of people this week who've been at the firm a long time, and I said, what's the difference between The Bank of New York Mellon Corporation today and The Bank of New York Mellon Corporation of ten years ago? And in a word, it was about client centricity. And so we're very focused on putting the client at the heart of everything that we do. And so I wouldn't say that any one business we feel like we've reached max potential because we've invested in a lot. If you kind of take corporate trust two or three years ago, that was a high-performing business from a margin standpoint, but had been neglected for a long time with respect to investments because the margin was good. But now we've kind of decided to invest in the business, and we're growing share. We're doing it at a higher margin than we did before. We're using AI. We have better employee NPS scores. So all in the round, the strategy is working when you look at the three strategic pillars for that particular business. Looked at it objectively three years ago, you would say nothing to do there. We felt like there was a lot to do, and we're making great progress.

David, let me add a couple of things because your question is one of these things that we debate quite a bit internally as a team, and it goes back actually to the very earliest days of us re-underwriting our strategy. At the time, you might remember us saying this, we looked back over the industry, for instance, on annual operating and we say, what does great look like? What are the two best performers in the prior decade from 2012 to 2022? On positive operating leverage and what actually is that number? And the answer well, it was 150 basis points of positive operating leverage on average over the course of that decade. So we said, okay. Well, we think we can be best in class. We think we've got the businesses to do it. Let's shoot for that. And, you know, lo and behold, we've sort of blown that out of the water in 2023 and 2024 and also in the first half of 2025. So it begs the question to ourselves about are we over-earning? How does the environment fit into this? And then we realized, of course, well, we keep talking about being a platforms operating company. We have these great set of businesses. We don't actually think that banks are our pure comp. We think that there's also a comp out there with other platforms companies and other financial services platforms companies who don't happen to exist in bank form. And so when you start to look at the world through those lenses, suddenly, ROTCE you can see a pathway to bigger numbers, and you can see a path to bigger numbers on margin. And we look at those types of comps, and we say, okay. Let us not be satisfied with what we originally thought of as maybe the way that we think about positive operating leverage it's okay to push harder. Having said that, we're constantly wanting to be able to invest. And so to Dermot's point, we're not going to let a pursuit of positive operating leverage cause us somehow to underinvest in the business. We are investing with a decade view first and foremost. But I think it does go to one of the earlier questions, and your point also about our vent ceilings. So I'm sure there will be, but we're not allowing ourselves including not being lulled into a sense of security by achieving our medium-term outlooks and targets, we're not allowing ourselves to think about any ceilings across the business.

So just to push you a little bit on that, you know, if you're not putting any ceilings or, you know, capping yourself on growth on expenses in order to achieve positive operating leverage, you know, why not invest a little bit more than just 3% expense growth, you know, given the strong backdrop you're seeing and strong performance you've shown so far in the first half?

No. It's a good push, and we do challenge ourselves on that question. I think, you know, if you were in our sort of weekly syncs on these types of topics internally, you'd hear Dermot on a regular basis going out to the various different businesses and platforms and say, tell me what you need to invest. Do you need more investment and more expense allocation in order to be able to help you to go faster? And so that is a constant push that we are giving to the businesses. Now having said that, we are mindful of the fact that some of what we do is also dictated by the environment. Maybe less and less over time, but it clearly is still a meaningful backdrop for us. And so we are naturally a little bit conservative in terms of how we think about the year going into it. Because if, for instance, we'd had a much, much tougher backdrop which would not have been impossible in the quarter when you think about what was happening in April, and all of the sort of uncertainties that were in April. We wouldn't have felt comfortable necessarily if we'd had a more negative environment growing our expense guide. So there's a certain amount of agility as opposed to going into the year assuming everything's going to be perfect, betting on a big expense number, and then getting disappointed. That's the old version of The Bank of New York Mellon Corporation. That's not the BNY of today.

Financial discipline is a very important skill and muscle memory that we've developed over the last few years. And we like to think that you have given us some credibility for that. It's not our desire to lose that. So financial discipline is very important to us.

Alright. Thank you.

And our final question comes from the line of Rajiv Bhatia with Morningstar. Your line is now open.

Great. Good morning. I just want to follow up on your remark that you're not seeing negative pricing. Should I interpret that as pricing being flat year over year? Is that on a consolidated basis? So are you seeing the pricing environment differ by LOB?

So I would it's broadly flat across the firm. And significantly improved from three years ago where I would say it was a headwind a few years ago. And I think as a result of all the strategies and initiatives that we talked to you about and that we've talked about today, I would say repricing, if I was to give you a stat, is roughly down about 80% from where it was three years ago. And so overall at the enterprise level, it's flat to slightly positive this year so far.

And does it differ by, like, LOB?

Not really. No. There's no standout really by LOB. I would say it's broadly consistent.

Thank you.

And with that, that does conclude our question and answer session for today. I would now like to hand the call back over to Robin for any additional or closing remarks.

Thank you, operator, and thanks, everybody, for your time today. We appreciate your interest in The Bank of New York Mellon Corporation. If you have any follow-up questions, please reach out to Marius and the IR team. Be well, and enjoy the rest of the summer.