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# The Bank of New York Mellon Corporation (BNY) — Company Narrative, FY26Q2 ## Business *Source: Form 10-K for fiscal 2025 (year ended December 31, 2025), accession 0001390777-26-000033. Items 1A, 7 and 8 of that 10-K are incorporated from BNY's 2025 Annual Report, filed in the same accession as Exhibit 13.* BNY is a custody bank and financial-markets infrastructure provider. It holds, administers, moves and finances other institutions' securities and cash, and it manages money. Its clients are asset owners, asset managers, broker-dealers, banks, corporations and governments. BNY says it serves over 90% of Fortune 100 companies, nearly all of the top 100 banks globally and over 90% of the top 100 pension plans. At December 31, 2025 it had $59.3 trillion of assets under custody and/or administration (AUC/A) and $2.2 trillion of assets under management (AUM). Most revenue is fees. Fee revenue was 72% of 2025 total revenue of $20.1 billion. Fees are priced on assets held or administered, transaction and settlement volumes, securities-lending activity and assets managed. Most of the rest is net interest income ($4.9 billion in 2025). BNY earns it by investing client deposits ($332 billion at year-end 2025) in central-bank balances, a large securities portfolio and a loan book that is mostly margin, financial-institution and wealth-client lending. International clients produced 35% of 2025 revenue. About 60% of the company's employees work outside the U.S., and the full-time headcount was about 48,100 at year-end 2025. BNY reports three principal business segments plus an Other segment (2025 figures): - **Securities Services** — revenue $9.73 billion, pre-tax income $3.22 billion, 33% pre-tax margin, AUC/A $43.0 trillion. - *Asset Servicing* ($7.52 billion revenue): global custody, fund accounting and administration, ETF servicing, transfer agency, front-to-back outsourcing, data and analytics, digital-asset custody, foreign exchange, and securities lending and financing. Its agency lending program services a lendable pool of about $6.1 trillion in 35 markets. - *Issuer Services* ($2.21 billion revenue): Corporate Trust (trustee, paying agent and related services for debt issuers) and Depositary Receipts (1,614 programs at year-end). - **Market and Wealth Services** — revenue $7.00 billion, pre-tax income $3.42 billion, 49% pre-tax margin. - *Pershing* ($2.93 billion revenue): clearing, custody, execution and technology for broker-dealers, wealth managers and RIAs. The line was renamed Wealth Solutions in 2026. - *Payments and Trade* ($2.00 billion revenue, formerly Treasury Services): global payments, liquidity management and trade finance. - *Clearance and Collateral Management* ($2.07 billion revenue): BNY is the primary provider of U.S. government securities clearance and a global tri-party repo collateral agent. Average collateral balances were $7.1 trillion in 2025. - **Investment and Wealth Management** — revenue $3.26 billion, pre-tax income $543 million, 17% pre-tax margin, AUM $2.18 trillion. - *Investment Management* ($2.20 billion revenue) is a multi-asset manager with a global distribution platform and specialist firms: BNY Investments Dreyfus (liquidity), BNY Investments Mellon (index), Insight Investment (fixed income), BNY Investments Newton (equity and multi-asset), Walter Scott (equity) and ARX (Brazilian equity). It also owns a noncontrolling stake in Siguler Guff. - *Wealth Management* ($1.06 billion revenue) serves individuals, families and institutions and had $350 billion of client assets. - **Other** — corporate treasury and the securities portfolio, tax-credit and other corporate investments, corporate/bank-owned life insurance, derivatives and other trading, and certain business exits. It had a 2025 pre-tax loss of $162 million. **Corporate and regulatory structure.** The parent is a Delaware bank holding company and financial holding company headquartered in New York. Its two principal U.S. banks are: - The Bank of New York Mellon, a New York state-chartered bank that houses Securities Services, Payments and Trade, and Clearance and Collateral Management. - BNY Mellon, N.A., which houses Wealth Management and part of Pershing. The Bank of New York Mellon SA/NV in Brussels is the main continental European bank. BNY is a U.S. global systemically important bank, with a G-SIB capital surcharge of 1.5%. Its main foreign-currency exposures are the British pound and the euro. The common stock is listed on the NYSE. The ticker appears as BK on the fiscal 2025 10-K cover and as BNY on the June 2026 10-Q cover. **Competition.** BNY competes with other custody and trust banks, clearing firms, asset and wealth managers, broker-dealers and technology and fintech providers. Competition turns on service, execution, capital, product range, technology and price. The company names stablecoin issuers and other non-bank entrants as emerging competitors in clearing, settlement and payments. **Strategy.** Management is moving the company to a "platforms operating model" and a new commercial organization, and it is investing in AI (its Eliza platform and "digital employees") and digital-asset services. According to the January 13, 2026 quarterly update furnished on Form 8-K (accession 0001390777-26-000004, Exhibit 99.3): - More than 70% of employees were working in the platforms model at year-end 2025. - 2025 brought about $550 million of efficiency savings and about $500 million of incremental investment. ## Risk factors *Source: "Risk Factors" in the 2025 Annual Report (Exhibit 13 to the fiscal 2025 Form 10-K, accession 0001390777-26-000033), unless otherwise noted.* - **Operational and technology failure.** BNY processes very large daily volumes of complex transactions across many parties, jurisdictions and systems, and some steps are still manual. - Errors, outages or third-party and vendor failures can cause losses and regulatory sanctions, and can spread into wider market disruption. The company says it has experienced operational errors and disruptions before. - Assets moved in error, particularly digital assets, may be impossible to retrieve. - When BNY acts as an EEA depositary, it can be liable to restore client assets lost by a sub-custodian. It sometimes accepts similar liability by contract elsewhere. - **Cybersecurity and AI.** BNY expects continued cyberattacks, including attacks on downstream vendors and deepfake-enabled social engineering, and an incident may go undetected for an extended period. Its AI use, including "digital employees," brings model, control and accountability risks. Falling behind competitors in AI is also a stated risk. - **Fee dependence.** About 72% of 2025 revenue was fee-based and tied to market values, transaction volumes, cross-border activity, securities lending and issuance. - Weak or volatile markets reduce these fees. - Clients and regulation keep shifting assets toward lower-fee products, which pressures investment management fees and, increasingly, servicing fees. - Lower Investment Management revenue can trigger goodwill impairment, and BNY has taken such charges in the past (see Current quarter for the 2026 interim test). - **Interest rates and deposits.** - *Higher rates* can push deposits out or shift them from noninterest-bearing to interest-bearing accounts, raise funding costs and enlarge unrealized losses on available-for-sale securities, which reduces CET1 capital. - *Lower rates or a flat or inverted curve* compress the net interest margin and can force money-market fee waivers. - *"Flight to safety" episodes* swell deposits that BNY parks in low-yielding liquid assets. This hurts net interest income and leverage-based capital ratios. - **Securities-portfolio concentration.** Investment securities were about 32% of total assets at year-end 2025, a higher share than at many large U.S. banks. - About 68% of the portfolio is available-for-sale, so mark-to-market changes flow into CET1. - The held-to-maturity book limits BNY's flexibility to sell. - The portfolio carried a net unrealized loss, including hedges, of $3.0 billion at year-end 2025. - **Counterparty and credit concentration.** - The largest exposures are to financial institutions, clearinghouses and sovereigns. - BNY extends intraday credit and settlement overdrafts. - It indemnifies securities-lending clients against borrower default. - Clearinghouse memberships can require it to cover other members' defaults. - It keeps cash with sub-custodians in emerging markets. - The $9.9 billion commercial real estate book is concentrated: New York metro 33%, REITs and real estate operating companies 31%. - **Liquidity.** Client deposits are the core funding base, and most of them are uninsured. Uninsured U.S.-office deposits were $185.9 billion at year-end 2025. A real or perceived loss of confidence, amplified by social media, could drive outflows and force BNY to sell assets or use costlier funding. - **Capital, regulation and resolution.** - BNY must keep "well capitalized" and "well managed" status, and it is subject to the stress capital buffer, TLAC, LCR and NSFR rules, Basel III revisions and resolution planning. Any of these can limit dividends and buybacks. - The parent is a non-operating holding company. It depends on dividends from its subsidiaries and on credit lines from its intermediate holding company (IHC), and those lines terminate automatically if resolution becomes imminent. - Under the single-point-of-entry resolution strategy, losses would fall on the parent's shareholders and unsecured creditors. - **Strategic execution.** - The benefits expected from the platforms operating model may not arrive, or may arrive late. - New products may underperform, including real-time payments, collateral platforms, the Wove wealth platform and digital assets. - Acquisitions, dispositions and joint ventures carry integration and earn-out risk. - **Litigation and sanctions.** *(Status per the Q2 2026 Form 10-Q, accession 0001390777-26-000086, Note 15.)* - *Russia.* BNY is defending lawsuits in Russia seeking assets blocked by international sanctions. A Russian court entered a judgment on September 11, 2025 in a $251 million claim brought by Russia's Deputy Prosecutor General over funds of a Sberbank subsidiary seized in Ukraine; BNY has appealed. Separately, a bailiff is seeking to collect part of a $513 million Sberbank judgment from BNY. - *Brazil.* Proceedings continue against BNY entities in Brazil over losses of the Postalis pension fund, including a July 2025 Brazilian Federal Court of Accounts (TCU) decision finding joint and several liability for about $185 million, which is under administrative appeal. - *Pershing.* The SEC is inquiring into Pershing LLC's compliance with Rule 15c3-3, the customer protection rule. - **Other.** - Reputational harm. - Geopolitical, climate and pandemic events. - Conflicting sustainability expectations across jurisdictions, including enforcement scrutiny of sustainability-related investing. - Tax-law changes and challenges, including recapture of tax credits. - Changes in accounting standards. ## Management's discussion and analysis — fiscal 2025 *Source: MD&A in the 2025 Annual Report (Exhibit 13 to the fiscal 2025 Form 10-K, accession 0001390777-26-000033).* **Results.** - **Revenue:** total revenue rose 8% to $20.08 billion. - Fee revenue rose 6% to $14.38 billion, on net new business, higher client activity, higher market values and a weaker U.S. dollar, partly offset by the mix of AUM flows. Investment services fees rose 8% to $10.21 billion. Investment management and performance fees fell 2% to $3.09 billion, reflecting flow mix and a reclassification of about $80 million of rebates out of expense. Foreign exchange revenue rose 3% to $706 million. - Investment and other revenue was $757 million, versus $687 million, helped by disposal gains. - Net interest income rose 15% to $4.94 billion as maturing securities were reinvested at higher yields and the balance sheet grew, partly offset by deposit margin compression. The net interest margin widened to 1.33% from 1.22%. - **Credit:** the provision for credit losses was a $32 million benefit, driven by improvement in commercial real estate exposure and the macroeconomic forecast. - **Expense:** noninterest expense rose 3% to $13.05 billion. Investment, merit increases, revenue-related costs and the weaker dollar were partly offset by efficiency savings. Staff expense was flat at $7.16 billion, while full-time headcount fell 7% to about 48,100. - **Earnings:** pre-tax income was $7.06 billion, a 35% pre-tax margin, versus 31% in 2024. The effective tax rate was 20.9%. Net income applicable to common shareholders was $5.31 billion, or $7.40 per diluted share, versus $4.34 billion and $5.80 in 2024. Excluding notable items, it was $5.4 billion, or $7.50 per diluted share (non-GAAP), versus $6.03. Notable items were disposal gains, severance, litigation reserves and FDIC special-assessment adjustments. - **Returns:** ROE was 13.9% and return on tangible common equity (ROTCE) was 26.1% (non-GAAP), versus 11.9% and 22.8% in 2024. - **Client assets:** AUC/A rose 14% to $59.3 trillion on client inflows, market levels and currency. AUM rose 7% to $2.18 trillion despite $37 billion of net outflows. Long-term strategies lost $93 billion, led by index ($49 billion), liability-driven investments ($37 billion) and equity ($18 billion). Cash strategies took in $56 billion. **Segments.** - **Securities Services:** revenue up 9%, pre-tax income up 26%. Asset Servicing grew on net interest income, client activity, market levels and net new business. Issuer Services grew 8% on Depositary Receipts. Management notes that the industry shift toward lower-fee products pressures servicing fees but creates outsourcing demand. - **Market and Wealth Services:** revenue up 12%, pre-tax income up 18%. Payments and Trade rose 15% on net interest income and new business. Clearance and Collateral Management rose 13% on higher collateral balances and clearance volumes. Pershing rose 9%, with U.S. net new assets of $55 billion. - **Investment and Wealth Management:** revenue down 4% and pre-tax income down 10%, on flow mix and the rebate reclassification. Wealth Management revenue was flat. **Balance sheet.** - Total assets were $472 billion, versus $416 billion. - Deposits rose 15% to $331.9 billion, mainly interest-bearing. Noninterest-bearing deposits were $60.0 billion. - Securities were $150 billion. The net unrealized loss, including hedges, improved to $3.0 billion from $6.2 billion as rates fell. - Loans grew to $81 billion, mainly margin and wealth lending. - Long-term debt was $31.9 billion. - Available liquid funds were $176 billion, or 37% of assets, and the average liquidity coverage ratio (LCR) was 112%. **Capital.** - **Ratios:** the Standardized CET1 ratio rose to 11.9% from 11.2%, the Tier 1 leverage ratio to 6.0% from 5.7%, and the supplementary leverage ratio (SLR) was 6.7%. The stress capital buffer stayed at the 2.5% floor. - **Buybacks:** BNY repurchased 36.8 million shares for $3.5 billion, an average of $96.12 per share. - **Dividends:** the quarterly dividend rose 13% to $0.53 in July 2025, and common and preferred dividends paid totaled $1.7 billion. - **Preferred stock:** BNY issued Series J and Series K in March 2025, redeemed Series G and issued Series L in September 2025. - **Market sensitivity:** management estimates that a 5% move in global equity markets changes fee revenue by less than 1% and diluted EPS by $0.05–$0.08. **Outlook and medium-term targets.** In its January 13, 2026 quarterly update (Form 8-K, accession 0001390777-26-000004, Exhibit 99.3), BNY guided as follows for 2026: - Revenue excluding notable items up about 5% from a 2025 base of $20,028 million. - Expenses excluding notable items up 3–4% from $12,912 million. - More than 100 basis points of operating leverage. It also raised its medium-term (3–5 year) targets, excluding notable items: - Pre-tax margin of about 38%, up from the earlier target of at least 33%. - ROTCE of about 28%, up from at least 23%. Targets of 5.5–6% for the Tier 1 leverage ratio and about 11% for CET1 were left unchanged. ## Current quarter — Q2 2026 (three months ended June 30, 2026) *Source: Form 10-Q for the quarter ended June 30, 2026, accession 0001390777-26-000086, unless otherwise noted. Comparisons are with Q2 2025.* **Results.** - **Revenue:** total revenue rose 13% to $5.70 billion. - Fee revenue rose 11% to $4.04 billion on net new business, market levels and client activity, partly offset by AUM flow mix. Investment services fees rose 13% to $2.91 billion. Foreign exchange revenue rose 8% to $229 million. - Net interest income rose 20% to $1.45 billion as securities were reinvested at higher yields and loans grew, partly offset by deposit margin compression. The net interest margin was 1.45%, up 18 basis points. - **Credit:** the provision for credit losses was an $8 million benefit. - **Expense:** noninterest expense rose 7% to $3.44 billion, mostly revenue-related costs, investment and salary increases, partly offset by efficiency savings. - **Earnings:** the pre-tax margin was 39.8% and the effective tax rate 21.0%. Net income applicable to common shareholders was $1.70 billion, or $2.45 per diluted share, versus $1.93. Excluding notable items (severance and litigation reserves), diluted EPS was $2.46 (non-GAAP). - **Returns:** ROE was 17.2% and ROTCE was 31.3% (non-GAAP). - **First half:** revenue was $11.11 billion and diluted EPS $4.68, versus $3.51. - **Client assets:** AUC/A were $62.6 trillion (up 12%) and AUM $2.23 trillion (up 6%). - **Headcount:** full-time employees fell to 46,500 from 49,900. **Segments.** - **Securities Services:** revenue up 15% to $2.83 billion, pre-tax income up 28% to $1.11 billion, pre-tax margin 39.3%. Asset Servicing rose 14% on net interest income, client activity, market levels and foreign exchange. Issuer Services rose 17% on Corporate Trust. Securities on loan were $645 billion. - **Market and Wealth Services:** revenue up 12% to $1.97 billion, pre-tax income up 21% to $1.02 billion, pre-tax margin 52.0%. Payments and Trade rose 17%, Clearance and Collateral Management 16% and Wealth Solutions 7%. Average segment loans rose 27%, and average collateral balances reached $8.2 trillion. - **Investment and Wealth Management:** revenue up 8% to $863 million, pre-tax income up 23% to $182 million. Wealth Management rose 11%. Quarterly net flows were a $3 billion inflow: $24 billion into cash strategies against $21 billion of long-term outflows, led by liability-driven ($14 billion), index ($9 billion) and equity ($6 billion) strategies. - **Reorganization:** in Q1 2026 the Pershing line was renamed Wealth Solutions, and Managed Accounts Solutions clients moved into it from Asset Servicing. Prior periods were revised. **Goodwill watch-item.** BNY ran an interim goodwill test in Q2 2026 on the Investment Management reporting unit, which carries $6.3 billion of goodwill. The unit's fair value exceeded its carrying value by only about 6%, using a 10% discount rate. A 25 basis point change in the discount rate moves fair value by about 5%. No impairment was recorded. The other six reporting units passed the annual test with substantial headroom. **Balance sheet.** Versus December 31, 2025: - Total assets reached $525 billion. - Period-end deposits were $370.5 billion, up 12%, led by noninterest-bearing balances. Average deposits were $314 billion. - Loans were $89 billion and investment securities $156 billion. - Higher rates widened the portfolio's net unrealized loss, including hedges, to $3.6 billion from $3.0 billion. The after-tax available-for-sale loss in accumulated other comprehensive income was $532 million, versus $241 million. - Commercial real estate exposure was $10.1 billion and the allowance for credit losses $339 million. - Long-term debt was $30.4 billion, after $4.2 billion of maturities and redemptions against $3.1 billion of issuance. Another $1.3 billion matures in the rest of 2026. **Capital and returns.** - **Ratios:** the Standardized CET1 ratio was 11.0%, down from 11.9% at year-end on buybacks, dividends and higher risk-weighted assets. The Tier 1 leverage ratio was 5.9%, the SLR 6.3%, the average LCR 111% and the net stable funding ratio (NSFR) 130%. - **Rule changes:** BNY adopted the enhanced supplementary leverage ratio rule on April 1, 2026. In February 2026 the Federal Reserve indicated BNY's stress capital buffer will stay at 2.5% through September 30, 2027. - **Capital returned:** BNY returned $1.5 billion to common shareholders in the quarter, including $1.1 billion of buybacks (8.0 million shares at $137.62). First-half buybacks totaled $2.1 billion (16.3 million shares at $128.20). - **New authorization:** in April 2026 BNY announced a new $10.0 billion buyback authorization. It adds to whatever capacity remained under the April 2024 program, which had $814 million left at March 31, 2026. - **Preferred stock:** BNY issued $500 million of Series M preferred (5.625%) in March 2026 and redeemed all Series H preferred in June 2026. **Updated 2026 outlook.** In its July 15, 2026 quarterly update (Form 8-K, accession 0001390777-26-000071, Exhibit 99.3), BNY raised its 2026 guidance, excluding notable items: - Revenue now expected to rise 10–11% (previously about 5%). - Expenses now expected to rise 6–7% (previously 3–4%). - Operating leverage about 400 basis points (previously more than 100). The guidance assumes market-implied forward rates as of June 30, 2026 and flat markets in the second half. Management said it completed the activation phase of the platforms operating model in Q2 2026 and is tracking toward about $500 million of incremental investment and about $450 million of efficiency savings in 2026. ## Subsequent events *Events after June 30, 2026. Sources: the Q2 2026 Form 10-Q (accession 0001390777-26-000086, filed July 31, 2026) and the Forms 8-K cited.* - **Dividend increase.** In July 2026 the board approved a 19% increase in the quarterly common dividend, from $0.53 to $0.63 per share, payable August 7, 2026. - **Series N preferred issuance.** In July 2026 BNY issued 500,000 depositary shares, each representing a 1/100th interest in a share of Series N Noncumulative Perpetual Preferred Stock. That is 5,000 preferred shares with a $100,000 liquidation preference each, or $500 million in aggregate. Dividends accrue at 6.150% until September 20, 2031, then reset to the five-year Treasury rate plus 1.868%. The underwriting agreement was signed July 16, 2026 (Form 8-K, accession 0001193125-26-314242). - **$2.5 billion senior notes.** On August 12, 2026 BNY issued $2.5 billion of Series J senior medium-term notes (Form 8-K, accession 0001193125-26-347061): - $300 million floating-rate callable notes due 2030. - $1.2 billion 4.755% fixed-to-floating callable notes due 2030. - $1.0 billion 5.182% fixed-to-floating callable notes due 2034. - **Series F preferred redemption.** BNY redeemed all 10,000 shares of its 4.625% Series F Noncumulative Perpetual Preferred Stock, represented by 1,000,000 depositary shares, at $1,000 per depositary share ($1.0 billion of liquidation preference). The redemption was announced August 20, 2026 and completed on the September 20, 2026 dividend date, with payment on September 21 (Forms 8-K, accessions 0001193125-26-358252 and 0001390777-26-000097). - **No deals disclosed.** Neither the 10-Q nor any Form 8-K filed through September 22, 2026 discloses an acquisition, divestiture or material litigation outcome after June 30, 2026.