EFTA00814123.pdf

From: Richard Kahn • To: Jeffrey Epstein <[email protected]> Subject: Fwd: BNY Mellon: Bringing Home the Bacon in an Expense-Led Beat; EW Date: Fri, 21 Oct 2016 13:28:48 +0000 Richard Kahn HBRK Associates Inc. 575 Lexington Avenue 4th Floor New York, NY 10022 tel fax cell Begin forwarded message: From: "Morgan Stanley" <[email protected]> Subject: BNY Mellon: Bringing Home the Bacon in an Expense-Led Beat; EW Date: October 21, 2016 at 9:24:32 AM EDT To: <F > Reply-To: <mswmir-cie-feedbackOmorganstanley.com> WEALTH MANAGEMENT Subscription Notification: October 21 BNY Mellon: Bringing Home the Bacon in an Expense-Led Beat; EW Betsy L. Graseck, CFA — Morgan Stanley October 21, 2016 1:22 PM GMT BK delivered its 7th straight beat on expense management. Consistent performance on expenses key to upgrade to Equal-weight. Raising price target to $45 from $41 with higher EPS estimate (2017 EPS up 7%) on better expense outlook. Sustainable Cost Saves Drives our Estimates Higher: BK's investment spend in technology is driving the bus on operating leverage. We have been saying that consistent expense execution is key to upgrading BK to Equal-weight. After years of EFTA00814123 hovering in the 70-71% expense ratio, the magnitude of this quarter's operating leverage, coupled with execution consistency, not only drives up our EPS and price target, but also improves the risk-reward. Together these are driving us to upgrade BK to Equal-weight from Underweight. BK delivered a sharp reduction in non-comp expenses dropping the expense ratio 200bps q/q from 69.5% to 67.5%.-100bps of the benefit came from a stronger dollar (large expense base in Sterling), and —100bps came from lower vendor costs and reduced real estate expenses, which should be sustainable.One of the questions on the call is how far management can continue to drive operating leverage. Management believes 1-2% annually in the next few years (MSe 1%). There is room for upside to our EPS if BK delivers at the high end of its operating leverage guidance. BK has rearchitected its systems to enable a more comprehensive user interface with faster development times and more efficient delivery. CEO spoke at length on the call about its advancement in robotics (to speed up routine processes), distributed ledger (for its broker/dealer clearing system) and its 8 innovation centers. For more details on BK's technology investments, see our August 25, 2016 note on Welcome to The Nexen App Store. 3Q16 Earnings: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 driv 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 Intr.:ilwww.morganstanlev.com/onlineiresearchdisclosures. 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 I 5B 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 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. EFTA00814124  O 2016 Morgan Stanley Smith Barney LLC. Member SIPC. 2. EFTA00814125