EFTA00814029.pdf

From: Richard Kahn To: Jeffrey Epstein <[email protected]> Subject: Fwd: BNY Mellon: 3Q16 First Pass: Bringing Home the Bacon in an Expense-led Beat Date: Thu, 20 Oct 2016 17:47:03 +0000 stock trading at 42.17 os of 1:45pm your cost basis on 250,000 shares is 36.31 unrealized gain 1,465,000 Richard Kahn HBRK Associates Inc. 575 Lexington Avenue 4th Floor New York NY 10022 tel fa cel Begin forwarded message: From: "Morgan Stanley" Subject: BNY Mellon: 3Q16 First Pass: Bringing Home the Bacon in an Expense-led Beat Dat AM EDT To: Reply-To: Subscription Notification: October 20 BNY Mellon: 3Q16 First Pass: Bringing Home the Bacon in an Expense-led Beat Betsy L. Graseck, CFA — Morgan Stanley October 20, 2016 12:36 PM GMT Delivering Sustainable Cost Saves:BK delivered a sharp reduction in non-comp expenses dropping the expense ratio 200bps q/q from 69.5% to 67.5%While some of EFTA00814029 the benefit came from a stronger dollar, much of the reduction should be sustainable given management pointing to lower vendor costs and reduced real estate expensesKey question for the call is on the expense ratio... How low can it go? After years of hovering between 70-71%, how much more operating leverage can BK drive beyond the 200 bp today?EPS and stock up on lower expenses3Q16 Eamings:BK reported operating EPS of $0.89 (v. MSe $0.79/cons $0.81) on better expenses of 7c ($2.67Bn v. MSe $2.75Bn), better NIM (1.04% v. MSe 0.96%), and better credit (provision of -$19mn v. MSe +$5mn)Lower expense driven by a stronger dollar, lower software/equipment, legal, occupancy, and business development expenses, partially offset by staff and distribution and servicing expenses Better NIM driven by reinvesting cash into RMBS and other securities, shrinking IEA ($297Bn v. MSe $322Bn) Modest beat on AUC/AUM on stronger market (similar to NTRS yesterday), partially offset by a stronger dollarEstimates likely go up given strong execution on expense and balance sheet strategy. Stock likely trade up Positives:4c beat on NIM on smaller book and higher-yielding asset exposure7c beat on expenseProvision 2c better on net recovery (-$13mn v. MSe +$5mn)Taxes lc better (24.4% v. MSe 25.5%)AUC up 7.0% y/y (MSe +5.6%) and up 3.4% q/q (MSe +2.0%) AUM up 5.5% y/y (MSe 4.4%) and up 3.1% q/q (MSe +2.0%)Negatives:Asset servicing came in weaker than expected ($1.07Bn v. MSe $1.118n)Key Questions for the Call:Updated expense guidance; any fee pressure from prime MMF outflows into Govie MMF? Benefit from higher LIBOR, NIM outlook, Blockchain arms race, asset management boutique expansion plans, exposure to hedge fund underperformance, excess deposit runoff and resultant SLR progressCall Details:Today at 8am eastern. Dial-in: Click here to see the full report. This alert is sent from: Andrew Atlas, You received this because you asked to be alerted to: THE BANK OF NEW YORK MELLON CORPORATION Please contact your FA if you want to unsubscribe from the alerts. Disclosures: Please see the full report for risks, disclosures and other important information. Important disclosures regarding the relationship between the companies that are referenced in Morgan Stanley research and Morgan Stanley Wealth Management research are available on the Morgan Stanley Wealth Management disclosure website at littps://www.morganstanley.convenlineinsearchdisclosures. Morgan Stanley Wealth Management Not Acting as Municipal Advisor Morgan Stanley Wealth Management is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the "Municipal Advisor Rule") and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule. Copyright EFTA00814030 The copyright in materials provided by Morgan Stanley is owned by Morgan Stanley & Co. LLC. Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States. CA 2016 Morgan Stanley Smith Barney LLC. Member SIPC. EFTA00814031