BNY's chief financial officer says the bank's next growth phase rests on selling more services to existing clients and expanding its use of artificial intelligence. Dermot McDonogh raised the company's expense-growth outlook to 6%-7% while pointing to a 4.5% organic growth rate and cross-selling gains in the first half of the year.
BNY (NYSE:BNY) Chief Financial Officer Dermot McDonogh told an investor conference that the bank's progress has come from expense discipline, a revamped commercial model and a cultural shift toward being more ambitious and client-focused, according to MarketBeat. He said BNY has now reported 14 consecutive quarters of sales growth.
Cross-selling remains a large untapped opportunity
McDonogh said only one client currently buys from all eight of BNY's business lines. However, the number of clients using three or more lines has increased more than 60% over the past several years, while new logos made up 10% of total sales both last year and this year. Organic growth rose from roughly flat in 2022 to 4.5% in the first half of the current year, though McDonogh said BNY has not yet reached a steady-state growth rate.
According to MarketBeat: "It's been about the culture which has driven everything else," McDonogh said, adding that employees now have greater confidence in the firm's long-term opportunities.
Expense outlook rises on AI and data spending
BNY raised its expense-growth outlook to 6% to 7% from 4%, which McDonogh attributed to revenue-related expenses, costs tied to Trump Accounts and additional investment in data, AI and other initiatives. Even so, he said BNY still expects 400 basis points of positive operating leverage for the year, up from its initial 100-basis-point expectation. The company spends about $4 billion annually on engineering and has built an AI platform called Eliza, which McDonogh said is meant to support client delivery and product development rather than mainly cut headcount.
Margin targets already exceeded
BNY's medium-term targets call for a 38% pre-tax margin and 28% return on tangible common equity. McDonogh said the company reported a 39% pre-tax margin and 30% ROTCE in the first half, calling the targets milestones rather than endpoints. He added that approximately 75% of the company's revenue entering 2027 is expected to be recurring, supported by long-duration client mandates, though deposits, interest rates and market conditions remain sources of uncertainty.
Source: MarketBeat
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