Operator: Our next question comes from the line of Mike Mayo with Wells Fargo Securities. Please go ahead.
Mike Mayo: Hi. I think you guys have been pushing for stronger fee growth, and that’s a slog, but in the meantime, you’re certainly bending the calls curve, as you say. I guess, Robin, to your opening comment about a conglomerate with a bunch of silos and breaking those down, certainly is a key to growing revenues faster. How can you actually implement horizontal integration among these disparate businesses and by breaking down those silos. Like, do you have any proof points or evidence now, or is this more like a three to five year plan?
Robin Vince: Sure, Mike. So look, this approach of de-siloing the company is clearly one of our critical pillars. And we put that under the heading of run the company better in terms of our internal conversations. And so, there are many things that we’re doing. We’re really looking at what is it that we do across the company where we have like capabilities. So we have some examples of that on the business side. A recent example is, we had institutional clearing and settlement that we actually did in our Pershing business, but we also have an institutional clearing product in our clearance and collateral management business. So we’ve moved the piece from Pershing into our clearance and collateral management business, so now it’s all together.
And I could give you five other examples that are just like that of us rearranging pieces on the business front end inside the company to be able to be more joined up in terms of how we approach clients. And so that is essentially truly making sure that we have consistent client-facing platforms in terms of how we’re doing business. Then on the supporting side of the organization, and if you think about our company a little bit like a platforms business, we have all these world-leading platforms, the largest security lending company in the world, the largest collateral manager, the largest asset servicing custodian with AUC, etc, etc. What we hadn’t done is adapted the way we run the company to actually look like that. So we’ve decided to adopt this more platforms like operating model where we’re taking things that we in terms of the support that we provide for our businesses and reducing that duplication.
So I’ll give you an example on the call center side, we used to have seven call centers, those seven call centers were each essentially providing a service to their respective businesses. Now we’re moving at the beginning but moving towards a single consistent contact center that can provide the service to all seven of those businesses and frankly do it in a better, cheaper way which is providing more capability to our clients. Even note the difference in the word call center versus contact center, because there’s a client benefit associated with that. So look, we’re at the beginning of this thing, but we think a platform’s operating model is very fit for purpose for our company, and it should really simplify how we work, improve the client experience, and employ our employees.
And we’ve got other proof points. We talked about deposits. Dermot was describing the better outcomes that we think we’ve had as a result of implementing global liquidity solutions. That is a consistent deposit approach across the company. We’ve got KYC as an example as well. We used to do KYC in each of our businesses. We’re bringing that together to have a KYC platform. So there are a lot of proof points that we’ve got in various stages of development here in addition to the actual pilots that we did, specifically for a platform’s operating model.
Mike Mayo: So when you add it all together you said next year you expect to have positive operating leverage, is that in aggregate or positive fee operating leverage and how can you have such confidence at this stage?
Robin Vince: So look we’re committed to positive operating leverage over time. And I don’t want my second year as CEO to be one where we have negative operating leverage. So we are focused on positive operating leverage next year. That’s aggregate operating leverage to answer your question. And one of the reasons why we have confidence in that is because we’ve been investing on both the revenue side and on the expense side in the short, medium and long-term perspective. Dermot just went through a few things that we’ve done specifically for 2023, but the platform’s conversation and the answer I just gave to you, that’s an investment in medium and long-term efficiencies. And we haven’t seen any of the benefit of that really yet.
And the same thing’s true on the revenue side. Some of the shorter term things that we’ve done are the enthusiasm around one BNY Mellon, the referrals that we’ve had across the business, we’ve talked about that in prior quarters, but now we’re moving to the medium and longer term benefits which are really getting the benefit of our Chief Commercial Officer and her approach to operationalizing one BNY Mellon, that’s a more medium-term opportunity. And then long-term, really harnessing the benefits of these product investments that we’ve made with things like Wove and buy-side trading. So we’ve been seeding on the revenue side and the expense side, short, medium, and long term, as we try to manage for this operating leverage over time.
Mike Mayo: Okay, thank you.
Operator: Our next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.
Alex Blostein: Good morning, guys. Thanks for the question. Maybe shift gears a little bit. I was hoping to spend a minute on capital. Nice to see the capital ratios build over the course of the quarter. So I guess as you’re thinking on the buyback on the forward basis, given that it’s been a little bit lighter over the last couple of quarters, how are you thinking about that over the next 12 months? And maybe just a reminder, in terms of how much capital do you expect to accrete back to your capital ratios from securities maturing over the next, call it, six quarters or so?
Dermot McDonogh: So I’ll take that one, Alex. Good morning. So I would say for the next quarter, no really change in the buyback. It’s going to be consistent with the last couple of quarters. Going back to one of the three things that we said in January, buybacks was one of those and we committed to buying back 100% more of earnings, or returning 100% more of earnings to our shareholders over the course of the year, and we’re on track to do that. I would say, as we look out on the world today, it’s very different to where it was in January. You still have the kind of huge volatility in the rate environment. Like it was 100 basis points in Q3. The geopolitics are very uncertain at the moment. So — and then last but not least, you’ve kind of got Basel 3 and advocacy and what’s going to happen there.
So there are a lot of things to be worried about. And at this stage, we’d rather be on the cautious end of things and see no real need to change our stance on buybacks in the short term. As it relates to your specific question, we have about $2.3 billion of unrealized losses in our AFS portfolio and we expect about a half of that to come back into capital over the next over the next 12 months. So from where we sit here today we continue to build capital, we feel very good about our capital position ratios are healthy, liquidity is healthy and at the right time we’d communicate a change in stance on that, but for now, steady as she goes.
Alex Blostein: Great. Thanks for that. And then there’s one business that I was hoping to kind of double-click into, which is clearance and collateral management. We’ve seen really good growth there for the last several quarters now. I think it’s up 11% year to date versus last year. Can you maybe help us unpack some of the sources of that growth between sort of what’s been really market and maybe somewhat elevated volumes given everything that’s been going on in treasuries versus more kind of baseline growth in those businesses, we’re sort of thinking about the building off of this baseline. Thanks.
