BNY Sees Cross-Selling and AI Investments Fueling Its Next Growth Phase

BNY’s next growth phase centers on cross-selling and organic expansion. Only one client currently uses all eight business lines, while clients using at least three lines have increased more than 60%; organic growth reached 4.5% in the first half of the year. The company is increasing investments in AI, data and technology while maintaining an expense-growth outlook of 6%–7%. BNY aims to use its AI platform, Eliza, to improve client delivery, develop products and increase operational capacity rather than primarily reduce headcount. BNY continues to target a 38% pre-tax margin and 28% return on tangible common equity, having exceeded both measures in the first half. Management expects roughly 75% of revenue entering 2027 to be recurring, though deposits, interest rates and market conditions remain sources of uncertainty.

Bank of New York Mellon NYSE: BNY Chief Financial Officer Dermot McDonogh said the company’s recent progress has been driven by expense discipline, a revamped commercial model and a cultural shift aimed at making the firm more ambitious and client-focused. Speaking at an investor conference, McDonogh said BNY’s early efforts under Chairman and CEO Robin Vince centered on establishing credibility with investors through clear financial commitments. He cited 2023 measures including expense growth moving from 8% to 2.7%, buybacks exceeding 100%, and net interest income growth that finished above the company’s guidance.

“It’s been about the culture which has driven everything else,” McDonogh said, adding that the company has sought to give employees greater confidence in the firm’s long-term opportunities.

Commercial growth and cross-selling opportunity McDonogh said BNY is now focused less on a “transformation” and more on executing its strategy through client service, product development, innovation, digital capabilities and artificial intelligence. The company has reported 14 consecutive quarters of sales growth, he said. A key opportunity remains expanding relationships with existing clients.McDonogh said only one client currently purchases services from all eight of BNY’s business lines. He said the company has reported a more than 60% increase in clients using three or more business lines over the past several years, while new logos represented 10% of total sales last year and again this year.McDonogh described organic growth as an outcome of winning new clients, cross-selling to existing customers and introducing new products rather than a fixed target. He noted that organic growth rose from roughly flat in 2022 to 4.5% in the first half of the current year. While he said growth could move higher in constructive markets, he added that BNY has not yet reached a steady-state growth rate. Rather than framing the company’s strategy as taking share from competitors, McDonogh said BNY seeks to earn client trust and move relationships from a vendor model to a partnership model. He said the company is examining opportunities by product and geography through work led by its chief strategy officer.

Outlook, deposits and expenses McDonogh said BNY maintained the updated top-line outlook it provided following the second quarter. He said the third quarter was slower than the second quarter, which he characterized as the firm’s strongest seasonal quarter. Capital markets and volumes remained strong and picked up in September, he said, while deposits were slower during the third quarter. He also pointed to uncertainty surrounding interest rates, markets and upcoming midterm elections.