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00:00We've talked before about the tech transformation of this business. It seems to be a hallmark of what you've been
00:05trying to do ever since you took over.
00:07It's already starting to show up in the numbers in your bottom line and the top line as well.
00:11When you talk about the further integration of AI and some of these technological tools, what is the primary result
00:18that you want to get out of it?
00:20Sure. Well, first of all, it's great to be with you here at the Milken Institute.
00:24The conference is a great conference, really contributing to the dialogue from all around the world and what's such an
00:30important time to be doing all of that.
00:32So, look, the story of BNY has been of a company that had just fantastic assets, great client franchise, great
00:39businesses and great people.
00:41And we determined that we could just operate them differently and reimagine them to some extent.
00:47And so it hasn't only been about AI. It's also been about how we've organized ourselves internally, culture driven, client
00:54focus, bringing a new commercial model to actually make the business differently.
00:59But now we've got the great gift of doing it in the age of AI, where we've got the superpower
01:04to be able to bring in to the company to turbocharge what it is that we've been doing.
01:09And you're right. We've been making great progress along the way. And now with the gift of AI, we should
01:13be able to make more.
01:14So what are we doing? So we view AI as having three key opportunities for our firm.
01:19First is we can actually take AI to make the products that we make for our clients, the platforms that
01:25we have, our technology and services better for them.
01:28The second thing is to actually help us to run the place better, to be able to have more efficiency,
01:34to be able to create capacity in one place so that we can then take people's time, which is one
01:40of our most valuable assets, to actually deploy into doing new and other things.
01:44And then the third one is there are actually businesses that previously just weren't super economical to actually deliver to
01:51our clients.
01:51And now we have the opportunity to go out and with AI as a benefit to be able to bring
01:57down the cost of delivery of those things a little bit, to be able to explore offering those to clients
02:02as well.
02:02So we're excited about all three vectors.
02:04With regard to your investment that you're making in there, we talk a lot in this program about all the
02:08money the hyperscalers are spending and just large corporations overall.
02:11I think at least publicly you've talked about a $4 billion investment specifically in some of this technology.
02:18Does that need to grow more given how fast this technology is changing?
02:22So we spend about $4 billion a year on technology.
02:26And so for our company, we actually think that's a tremendous amount of spend.
02:30And what I think is going to evolve is more the composition of the spend.
02:34We used to spend it in a certain way.
02:36We used to spend it on vendors.
02:37We used to spend it on our own technology.
02:40And what essentially is happening is now there are more things that we can do for ourselves.
02:44And the cost of actually delivering a solution in the company is going to come down over time.
02:50So the way I think about it is $4 billion is going to be able to do more for us
02:55over time than it has in the past.
02:57And that's why the timing for us just happens to be very fortuitous because we've been reimagining the company.
03:02We've been organizing differently.
03:04We've been organizing ourselves more along platform lines.
03:08And so now the opportunity to bring AI to actually turbocharge the software in terms of the products and services,
03:15it's actually great timing for us.
03:17Now, look, if you step back from the overall story in the United States, you reference the $750 billion or
03:23so of CapEx.
03:25And that really is part of what's happening in the American economy right now.
03:28We're seeing all of this money going into CapEx.
03:30Remember, it's full stack.
03:31So it's everything from real estate, power, chips, everything across the AI spectrum.
03:37And that's creating essentially an investment in manufacturing and in creation and all sorts of engineering jobs in the U
03:46.S.
03:46And then the benefit of that investment is going to accrue to all of us as we get to be
03:51able to deploy AI into our respective businesses.
03:54So it's actually a double boost to the economy, one on the manufacturing and infrastructure side.
04:00And then what will follow will be a further investment into productivity and capacity creation in American business.
04:07Well, when it comes specifically to the investment that you're making in your business in regards to AI, how has
04:13that changed, if at all, the complexion of your workforce?
04:15Because, you know, one of the big existential fears with AI is that, to put it bluntly, it's going to
04:21take all of our jobs.
04:22So, look, it's very hard to look out a super long distance in the future.
04:26Look, the speed of AI, everything is moving so quickly.
04:28It was hard to imagine that we'd be where we are today if you just go back to the moment
04:33of AI sort of popular origin, I'll call it, which is the chat GPT moment at the end of 2022.
04:40So things are moving very quickly.
04:42The power of the models is growing very significantly.
04:44And so it's very hard to put a pin in exactly where we'll be three or five or ten years
04:49from now.
04:50But the way that we think about it is AI is a capacity creator.
04:56It allows us to be able to do more things with the people and the platforms and the client assets
05:05that we already have.
05:06And which company wouldn't like to be able to do more without having to expand your expense base massively?
05:14And so we view ourselves in that position.
05:16We're not we're not AI doom mongers.
05:19We're not all about driving efficiency.
05:22We're driving capacity so that we can essentially do more and we can make our people more productive.
05:28And we think that's a much more practical way to go about it.
05:31So as a result, guess what?
05:33In the past two years, this year included, the past two years, the number of analysts and interns that we've
05:39been bringing in from college is actually up versus where it was a couple of years before.
05:44Because they're coming in with AI skills, they're bringing energy, they're bringing creativity.
05:49And so to be able to have them join the workforce and bring that with them, that just allows us
05:53to do more and go faster.
05:55Well, outside of AI, I do also want to talk about some recent developments for BNY.
06:00You know, you think about the introduction of Trump accounts.
06:03I know that BNY was selected as one of the financial agents there.
06:07And I wonder, you know, how that came together.
06:09You know, is that something that you had to lobby for or just walk us through that process?
06:14Sure.
06:15Well, let's just start with the origin story.
06:17This has been a real bipartisan effort in Congress and with people, Brad Gersner, Michael Dell, really the original ideas
06:26of bringing this whole thing to life.
06:27And then what the administration has done, and I applaud this piece of public policy.
06:31And I really applaud the leadership of the Department of Treasury and the administration in really getting this into the
06:37bill and then actually bringing it to fruition.
06:41And so what is it now?
06:42It's a pathway for every child in America to be able to have a stake in the country.
06:48And so, yes, the $1,000 grant, but the matching is just as important that companies like ours, and we
06:54are doing matching for every child of one of our employees born who applies for the government grant can also
07:00get matching from us.
07:02And then you have philanthropists like Michael and Susan Dell coming into the mix and all across the country.
07:07And so what collectively we're doing is we're building a pathway for kids to be able to have a nest
07:14egg, an amount of money which in 20, 30, 40 years from now is going to be very meaningful for
07:20them and is going to be able to have them be part of the American dream.
07:24What better place to be talking about it than here at the Milken Institute?
07:27Because enabling people to participate in the American dream is an incredibly important part of what this country should be
07:34all about.
07:35Well, let's use that as a segue.
07:37I do want to talk a little bit about your wealth business and just some of the rebrand that we've
07:41seen with regards to Pershing and this sort of wealth solutions moniker that is now over that.
07:46Is this sort of an indication that you are pushing deeper into the wealth management space?
07:52So we have two wealth businesses at BNY.
07:54We have our classic wealth management business, which is $350 billion assets under management and custody for our clients.
08:04And then we also have a wealth solutions business, which is known as Pershing.
08:09That's the brand that it's operated under for a long time.
08:11And that business is $3 trillion worth of wealth assets, which we provide a whole variety of different services to
08:18our clients.
08:19And so if you're a registered investment advisor or if you're a broker dealer, our ability to help you with
08:25access to product, asset management product, including now alternative product, private market product, and then the software and the services
08:33and the tools that you need to be able to run your business.
08:37And so that's what the Pershing classic business actually is.
08:39And both businesses are exciting to us.
08:42And obviously, it's an important and growing market.
08:44Well, is this going to transform BNY?
08:46I mean, I know at the heart you are still a custody bank, and that is the lion's share of
08:50what you do.
08:51But are you going to get to a point where you're going to have to start evaluating the performance of
08:55your business based on investment returns as that wealth business grows?
08:59Well, we have already started to think about it differently.
09:02Our custody business, you know, we've been we are the world's largest custodian.
09:06We've been in that business for a long time.
09:07We're a trust bank.
09:08Those are all great attributes, great brands.
09:11We're about infrastructure.
09:12We're about enabling infrastructure, the transformation into the world of digital assets over time, providing the import-export of financial
09:20rails, both here in the U.S., but also elsewhere.
09:23Those are core businesses for us.
09:24But increasingly, now about two-thirds of our pre-tax income comes from other businesses that wouldn't traditionally be thought
09:32of as trust bank businesses.
09:33So if a trust bank business is custody, wealth management, and asset management, then our platforms businesses, clearing and the
09:42services we provide globally and clearing, including U.S. Treasuries, collateral management, our purging business that we just talked about.
09:49We're the world's largest corporate trustee.
09:51Right.
09:52We're our depository receipts business.
09:53We make $3 trillion of payments every day in our payments platform.
09:56So you look across those businesses and those businesses, which in this prior quarter we had a 50 percent margin
10:02on, and those things represent collectively about two-thirds of the pre-tax income of the company these days.
10:08So, yes, BNY has been transforming, and now AI should be helping us over time to turbocharge that transformation.
10:14Well, when it comes to digital assets specifically and the work that you're doing there from different angles, I do
10:20wonder, is that about bringing new clients into BNY, or is that in service of demands from your existing clients?
10:28I have to imagine it's a combination of both, but what broadly are you seeing?
10:33Well, Katie, you're exactly right.
10:34It is both, and so we see ourselves as a little bit of a bridge between these two worlds.
10:39We've invested in digital assets, and we have a lot of clients who are very interested in being able to
10:45use us and connect to us in the digital asset sphere specifically, new digital asset economy clients.
10:51But they also need some of our traditional services, so they want to be able to have custody.
10:57If you're a stablecoin operator, we provide services to stablecoin operators.
11:02Guess what?
11:02They need custody for their treasuries.
11:04They need to be able to have asset management for their treasuries.
11:06They may need fund administration services.
11:08They may need payment services on ramps and off ramps.
11:11So we provide that bridge.
11:13And then if you're a traditional client and you want to participate in digital assets, then maybe you need tokenization
11:20help.
11:20Maybe you run a money market fund and you want to be able to have a new share class for
11:25the digital asset version of your money market fund.
11:28Or maybe, as we just announced with Morgan Stanley a couple of weeks ago, with supporting their ETF and their
11:34Bitcoin aspirations for an ETF.
11:36And so, again, it can be the traditional clients looking to move some of their business or dip their toe
11:43in the water of the digital asset world and also vice versa.
11:46So the coming together of both is quite an exciting place to be.
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