Please stand by. Good morning, and welcome to the 2023 Q1 Earnings Conference Call hosted by BNY Mellon. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference call and webcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without BNY Mellon's consent. I will now turn the call over to Marius Merz, BNY Mellon Head of Investor Relations. Please go ahead.
Thank you, Operator, and good morning, everyone. Welcome to our Q1 2023 Earnings Call. As always, we will reference our financial highlights presentation, which can be found on the investor relations page of our website at bnymellon.com. I'm joined by Robin Vince, President and Chief Executive Officer, and Dermot McDonogh, our Chief Financial Officer. Robin will start with introductory remarks, and Dermot will then take you through the earnings presentation. Following their remarks, there will be a Q&A session. Before we begin, please note that our remarks include forward-looking statements and non-GAAP measures. Information about these statements and non-GAAP measures are available in the earnings press release, financial supplements, and financial highlights presentation, all available on the investor relations page of our website. Forward-looking statements made on this call speak only as of today, April 18, 2023, and will not be updated.
With that, I will turn it over to Robin.
Thank you, Marius. Good morning, everyone. Before I turn the call over to Dermot to review our financial results, I want to provide some broader perspective and an update on how we're serving our clients and stepping up as a firm in this complex environment. Following a relatively benign start to the year, markets were quite unsettled in March when we saw two prominent bank failures in the U.S. and a government-brokered distressed bank takeover in Europe. While things have calmed down somewhat over the past couple of weeks, after over a decade of zero interest rate monetary policies, the risks and uncertainty associated with the fights against inflation, higher interest rates, and quantitative tightening, together with geopolitical tensions remain elevated. Domestically, we continue to march closer to another debt ceiling standoff.
Against this backdrop, it's a healthy reminder that the strength of BNY Mellon's highly liquid, lower credit risk, and well-capitalized balance sheet, in combination with the resilience of our platforms, is the bedrock that supports our client franchise. For nearly 240 years, we've built up a legacy of client and industry trust rooted in our resiliency through good times and bad. Recent weeks have been no different as we've helped our clients to navigate the volatility in markets with our strong balance sheet and broader liquidity solutions. After seeing deposit balances increase following recent market events, we ended the quarter slightly higher than where we started it.
Our broader liquidity platform, which manages over $1.3 trillion worth of cash and other short-term investment options on behalf of our clients, has seen growth across most channels. More broadly, the recent events have led to concern around the health and stability of some banks as they've highlighted the critical importance of robust asset and liability management for all financial services participants. As one of the largest banks in the United States and as a GSIB, we are held and we hold ourselves to a high standard, including stringent capital, liquidity, and stress testing requirements. On capital, unrealized losses related to our available-for-sale investment securities portfolio are already reflected in our capital ratios. We have consistently maintained the majority of our investment securities portfolio as available for sale.
As you will recall, we've had a view for a while now that rates would be a little higher in their terminal rate than the market has been pricing in. Over the last year and a half, we meaningfully reduced the duration and enhanced the risk and liquidity profile of the portfolio. Together, these actions provide us with ample flexibility to adjust to changing market conditions as we move through the year. On liquidity, our robust liquidity management framework includes risk metrics such as concentration limits and daily liquidity stress testing protocols that go beyond regulatory requirements. It is these periods of stress that also showcase our characteristic resilience and the power of our diversified and lower-risk business model.
We primarily serve large institutional clients who collectively maintain substantial deposit balances with us as part of the services we provide to support their business activities, whether that's custody, cash management, clearing, and corporate trust services. As a result, roughly two-thirds of our deposit base is operational and sticky in nature and derives from a diverse set of business lines. As I mentioned earlier, we manage over $1 trillion of cash on behalf of our clients across deposit-money market funds, repos, and securities lending, which allows us to retain a connection to the money when it moves around various short-term investment alternatives. We're also the largest provider of collateral services globally. Our average tri-party balances increased to $5.6 trillion this quarter, which is another example of just how comprehensive our role is in the broader liquidity ecosystem.
Now turning to our financial performance in the quarter. As you can see on page two of our financial highlights presentation, we delivered solid results. We reported earnings per share of $1.12, up 30% year-over-year, or up 20% excluding notable items, primarily in the Q1 of last year. Revenue was up 11% year-over-year. We closely managed expenses up 3% year-over-year. We generated a healthy return on tangible common equity of 20%. Given how in focus capital and liquidity are at the moment, I'll note that our Tier 1 leverage ratio, as well as our liquidity coverage ratio, remains strong and unchanged compared to the prior quarter, well above regulatory requirements and our own management buffers.
Stepping back for a moment, I'm encouraged by the early progress that we are seeing around the company to deliver on the commitments that we made to you back in January. First, we are bending the cost curve. Our Q1 expense growth came in marginally better than our initial internal plan, and we remain firmly committed to cutting our core expense growth by roughly half this year compared to 2022 on a constant currency basis. Second, in line with our outlook for the year, we continued to derive healthy growth in net interest revenue. Third, we delivered positive operating leverage on a year-over-year basis. Fourth, we returned a meaningful amount of capital to our shareholders, including $1.3 billion of common share repurchases.
We've made good initial progress on our plan to return more than 100% of earnings to shareholders in 2023. We currently expect to continue buying back stock, albeit at a slower pace, given the uncertain environment. At the same time, I've made a promise to you to call it as it is when we fall short of our expectations. To be candid, our fees being flat year-over-year was somewhat lackluster. Having said that, there were a number of business highlights this quarter that are designed to help us change this trajectory and drive underlying fee growth over time. I'll call out a few. In asset servicing, the pipeline remains strong and the margin on new deals is improving as we're increasingly holding the line on price to drive more profitable growth in the business.
ETF activity is up across all measures with healthy increases in AUCA, orders, and flows. Wins with alts and in our data platform service business were pleasing to see this quarter. In January, we announced the launch of our outsourced trading business, powered by a platform that already executes more than $1 trillion in volumes annually for our investment management business. This global multi-asset trading service can help clients to reduce their costs and focus on alpha generation. While still early days, we think there is significant opportunity here to offer front office trading capabilities in a trusted, unconflicted way to the market. Pershing brought in a healthy $37 billion of net new assets during the quarter, representing mid-single digit organic growth on an annualized basis. Total revenue was a quarterly record.
As part of BNY Mellon, clients recognize Pershing as a source of strength and stability in the marketplace. In the current environment, clients also appreciate the flexibility and choice of our product offering. Meanwhile, our Pershing X team continues to make great progress as we aim for a broader rollout this summer. Just last week, we announced a collaboration with Snowflake to provide our prospective Pershing X clients with more powerful analytics and faster data management, improving their digital experience so they can operate more efficiently. Clearance and collateral management activity remained elevated given the volatility in the market and as dealers increasingly finance larger inventories via tri-party.
We continue to see growth from the investments that we've made to increase market connectivity by expanding our tri-party platform into new markets across Asia and EMEA, and into new trade types and collateral pools, reinforcing our role as the only truly global provider of collateral management. Treasury services delivered broad-based client wins across U.S. dollar, digital and FX payments, liquidity and trade finance products, and also saw a nice pickup in account and operational deposit growth towards the end of the quarter. In investment and wealth management, although our investment performance remained solid, AUM flows were mixed, with strength in fixed income and LDI strategies, partly offset by outflows in other long-term strategies. During the quarter, our U.K. investment manager, Newton, launched five FutureLegacy funds. Its first range of risk-rated sustainable multi-asset funds to support growth in the U.K. retirement market.
Back in the U.S., the Dreyfus BOLD share class, which we introduced last year, has now raised over $4 billion in AUM. In summary, over the past few months, I've spoken about our combination of client trust, at scale platforms, client-focused culture, and resilience as a powerful foundation on which we can build. I'm also proud that our culture has been front and center in recent weeks as our people have risen to the occasion, responding commercially and working tirelessly to enable successful outcomes for our clients in these uncertain times. I view this client-first culture as the key to make more out of our diversified portfolio of adjacent businesses. While we are the world's largest custodian and a trust bank, the contributions from clearance and collateral management, Pershing, treasury services, and issuer services are differentiating in our client value proposition.
With that, let me officially welcome Dermot McDonogh to his first earnings call. Dermot, over to you.
Thank you, Robin, for the introduction. Good morning, everyone. It's a privilege to be here. I look forward to working with you all. I'll start on page three of the presentation with some additional details on our consolidated financial results in the Q1 . Total revenue was $4.4 billion, up 11% year-over-year. This reflects fee revenue being flat as headwinds from lower market values, a stronger dollar, the sale of Alcentra, which closed in November last year, were offset by significant improvement in fee waivers and the absence of a notable item last year related to Russia. Firm-wide assets under custody and our administration of $46.6 trillion increased by 2% year-over-year.
Growth from new and existing clients more than offset the stiff headwinds from lower market values and currency translation, a real testament to the strength and diversification of our franchise. Quarter-over-quarter, assets under custody and our administration increased by 5%. Assets under management of $1.9 trillion decreased by 16% year-over-year. Here, the impact of lower market values and the stronger dollar was tempered by cumulative net inflows over the 12 months. Quarter-over-quarter, assets under management increased by 4%. Investment and other revenue was $79 million and included another strong quarter of fixed income trading on the back of elevated volatility and greater demand for U.S. Treasury. Net interest revenue increased by 62% year-over-year, primarily reflecting higher interest rates.
Expenses were up 3%, driven by higher investments and revenue-related expenses, partially offset by efficiency savings and the impact of the sale of Alcentra. The impact of inflation and merit increases were largely offset by the favorable impact of the stronger dollar. Provision for credit losses was $27 million in the quarter, reflecting changes in the macroeconomic forecast. As Robin mentioned earlier, earnings per share were $1.12, up 30% year-over-year, or up 20% excluding notable items, largely in the Q1 of last year. Our reported pre-tax margin was 28%. Our return on tangible common equity was 20%, the highest in three years. Turning to capital and liquidity on page four. Our Tier 1 leverage ratio, which continues to be our binding capital constraint, was 5.8%, essentially flat quarter-over-quarter.
Our CET1 ratio was 11%. The strength of our balance sheet and our healthy earnings generation in the quarter allowed us to return $1.6 billion of capital to our common shareholders, including $1.3 billion of common share repurchases, while maintaining our capital ratios well above regulatory minimum and above our more stringent management targets. Similarly, on liquidity, our liquidity coverage ratio was 118%, also unchanged compared with the prior quarter. The strength of our highly liquid, lower credit risk, and well-capitalized balance sheet is one of the cornerstones of our franchise.
Starting in late 2021 and throughout 2022, we proactively reduced the duration and enhanced the risk and liquidity profile of our investment securities portfolio while consistently keeping over 60% of the book available-for-sale to position ourselves with ample flexibility for changing market and interest rate conditions. Between the beginning of this year and early March, we saw deposit balance decline in line with typical seasonal patterns and in line with our expectations, considering continued central bank tightening by both rate hikes and quantitative tightening. This was followed by a swift increase in deposit balances as clients saw the strength of our balance sheet during the recent turmoil in the banking sector. We entered the quarter with deposit balances up 1% sequentially on a period end basis, but we expect continued moderation of deposit levels in the months ahead.
Moving on to net interest revenue and further details on the underlying balance sheet trends on page five, which I will describe in sequential terms. Net interest revenue of $1.1 billion was up 7% quarter-over-quarter. This sequential increase reflects higher yields on interest-earning assets, partially offset by higher funding costs and the impact of balance sheet size and mix. While it was clearly a very volatile quarter in rates markets, it is worth noting that on average, realized rates were in line with our projections for the quarter. Our outperformance compared to our prior expectations was primarily driven by slightly lower than expected deposit basis. On a quarterly average basis, deposit balances decreased by 3% sequentially.
Non-interest-bearing deposits represented 26% of total deposit balances, which continues to be above our long-term range of 20%-25% based on historical averages in normal interest rate environment. Average interest-earning assets decreased by 1% quarter-over-quarter. Underneath that, cash and reverse repo was flat, loan balances were down 6%, and our investment securities portfolio was flat. Moving on to expenses on page six. Expenses for the quarter were $3.1 billion, up 3% year-over-year. As mentioned earlier, this reflects investments in higher revenue-related expenses, partially offset by efficiency savings and the impact of the sale of Alcentra. The impact of inflation and merit increases was largely offset by the favorable impact of the stronger dollar. Robin has been clear about her determination to bend the cost curve.
We're executing with discipline and urgency. You can see signs of our delivery in our professional, legal, and other purchase services, net occupancy and business development plans. We feel good about our progress in the Q1 and how it positions us for efficiency savings in the coming quarters to help us meet our goals for the year. Turning to our business segments, let's start with security services on page seven. As I discussed the performance of our security services and market and wealth services segments, I will comment on the investment services fees for each line of business described in our earnings press release and the financial supplements. Security services reported total revenue of $2.1 billion, up 19% year-over-year. Fee revenue was up 4%.
Within this, FX revenue was down 6% as the benefit of higher volatility was more than offset by a decline in emerging markets volume. Net interest revenue was up 77%. In asset servicing, investment services fees decreased by 5%. The benefit of lower money market fee waivers and net new business was more than offset by the impact of lower market values, lower client activity, and the stronger dollar. In issuer services, investment services fees increased by 67%. This increase largely reflects the absence of the note realized from last year related to Russia, as well as lower money market fee waivers in corporate trust. Next, market and wealth services on page eight. Market and wealth services reported total revenue of $1.5 billion, up 22% year-over-year. Fee revenue was up 10% and net interest revenue increased by 53%.
In Pershing, investment services fees were up 15%, primarily driven by the abatement of money market fee waivers, partially offset by lower client activity. Net new assets were a healthy $37 billion in the quarter, and average active clearing accounts were up 6% year-on-year. In treasury services, investment services fees decreased slightly by 1% driven by higher earnings credits on non-interest-bearing deposit balances on the back of higher interest rates, partially offset by lower money market fee waivers and net new business. In clearance and collateral management, investment services fees were up 7%, largely reflecting higher used government clearance volumes amid continued demand for U.S. treasuries. Moving on to investment and wealth management on page nine. Investment and wealth management reported total revenue of $827 million, down 14% year-over-year. Fee revenue was down 15%.
Investment in other revenue was $6 million in the quarter, primarily reflecting C capital gains as opposed to losses in the Q1 of last year. Net interest revenue was down 21% year-over-year. Assets under management of $1.9 trillion decreased by 16% year-over-year. As I mentioned earlier, this decrease largely reflects lower market values and the unfavorable impact of the stronger dollar, partially offset by cumulative net inflows. In the quarter, we saw $5 billion of net inflows into long-term products. We continue to see healthy net inflows into our LDI strategies of $10 billion. We also saw $4 billion of net inflows into our fixed income strategies. In cash, where we expected outflows from a small number of clients, this was offset by healthy inflows on the back of our continued strong investment performance. In investment management, revenue was down 15% year-over-year.
This decrease reflects the impact of the sale of Alcentra, the mix of cumulative net inflows, lower market values, and the stronger dollar, and was partially offset by lower money market fee waivers. In wealth management, revenue was down 12% driven by lower market values and changes in product mix. Client assets of $279 billion were down 9% year-over-year, primarily driven by lower market values. Page 10 shows the results of the other segments. I close with a few comments on how we're currently thinking about our financial outlook for the year, which in short remains basically unchanged. From our earnings call in January, you will recall that based on marks implied forward interest rates at the end of last year, we projected an approximately 20% year-over-year increase in net interest revenue for the full year 23.
As you all know, we continue to see significant volatility in rates. Markets and market-implied forward interest rates currently suggest some meaningful Fed easing relative to the dot plot. We have positioned ourselves for continued interest rate volatility and retain ample flexibility and liquidity to respond to a wide range of outcomes as the ultimate impact of continued tightening remains uncertain. We're off to a good start in the Q1 , and based on March implied forward interest rates at the end of March, we still believe our outlook for 20% year-over-year growth in net interest revenue is realistic, with some skew to the upside. We also still expect expenses excluding loan provisions to be up 4% year-over-year, assuming foreign exchange rates at the end of last year are by approximately 4.5% on a constant currency basis.
As we said on our earnings call in January, we are determined to deliver some positive operating leverage this year. We still expect an effective tax rate in the 21%-22% range. Finally, as we calibrate the amount and pace of our continuing share repurchases in the weeks and months ahead, we will be mindful of the continued uncertainty in the operating environment, especially as it relates to the uncertain path of interest rates. We're planning to maintain our current more conservative capital buffers for the time being. To wrap up, we're pleased with the company's solid financial performance in the Q1 , which amid a challenging operating environment, once again showcased the strength and resilience of our business model.
As we look forward, we're continuing to manage our balance sheet conservatively, and we are confident that we are well-positioned to help our clients navigate the elevated uncertainty in global markets. With that, operator, can you please open the line for Q&A?
Thank you. If you would like to ask a question, please press star one on your telephone keypad. As a reminder, we ask that you please limit yourself to one question and one related follow-up question. Our first question will come from the line of Ken Usdin with Jefferies.
Hey, thanks, guys. Welcome, Dermot. To follow up on your NII, you reiterated 20%, perhaps a little upside. Obviously, with a good start to the year, that implies a sequential slide as the year goes through. Can you just help us understand how that works through in terms of what you're expecting for deposit trends and liability costs as you look through to that?
Okay. Good morning, Ken, thanks for the question. Before I answer, I'd just like to acknowledge Emily, who was the former CFO and has been a tremendous partner with the transition and to the finance team and Investor Relations team who really helped me settle in well. It's a real privilege to be here, and I look forward to working with you all. Onto your specific question around the mix between NII and deposit. Look, back in January, the environment was a little bit different to where it is today. We feel we've had a very good start to NII. We did a lot of scenario analysis in January to come up with that number.
Look, there was a big kind of divergence between the market implied forward curve, which we use to budget and project, where we think NII is versus where the Fed is and the dot plot. If you look at it today, there's a little bit more of a coming together of that. You know, there's more of a market color around higher for longer. We're positioned for that. We feel good about it. As a consequence of that, we've locked in a good quarter, and we feel good about subsequent quarters. Look, the important thing in my remarks was skew to the upside. The range of outcomes is probably more uncertain today than it was in January. We have the debt ceiling to come, geopolitical uncertainty, all the factors that you would know about.
As a consequence, I don't really want to update the guidance, but feel we're solid on 20% with that skew to the upside.
Got it. Great. Just as a follow-up then, you know, just can you maybe just flush out a little bit how you're thinking about how the deposit trends go from here, both in an absolute sense, and then, perhaps, you know, what that mix of DDAs to total looks like from, I think the 26 that you posted this quarter. Thanks.
Sure. If you take a step back on deposits and think about, you know, coming out of the pandemic and as people started to focus on inflation and, you know, having better yield opportunities, and you look at the system in total, you see over the course of the last 15 months across the industry, deposits leaving the system. We're kind of tracking that, and we're the same really as everybody else. We're down 3% in terms of average deposits. Maybe if I double-click on what happened in the quarter a little bit, up to March, we were in line with our forecast, which gave us the 20% year-over-year growth.
We had a blip to the upside, for deposits in the latter part of March as a result of a little bit of the turmoil that happened there. We saw a flight to our balance sheet. People wanted to use our platform. We saw deposits elevate. That's largely moderated, albeit we're a little bit above our forecast. We expect that to moderate further like the rest of the industry in the coming quarters as our clients are sophisticated, and they will look for yield. Look, I'll refer you to Robin's comments in his remarks where he talked about the cash ecosystem, and we touched $1.3 trillion of a cash ecosystem. We want to point them to our products and services. While they may not use our deposit platform, we want them to use other products within our ecosystem.
We feel very good about where our deposit balances are and the trajectory for the rest of the year.
Okay, great. Thanks again, Dermot, and best of luck.
Thank you.
Our next question will come from Steven Chubak with Wolfe Research.
Hi, good morning.
Good morning, Steven.
Wanted to start off with just a question on some of the buyback commentary. We saw a strong capital return in the quarter. You noted plans to temper the pace of buyback. Was hoping to get some more context as to what's informing that decision. If I think about some of the key inputs, the leverage denominator should be shrinking, albeit modestly, given some of the deposit commentary you decided. You've sounded more sanguine on Basel IV. You're less exposed to credit shocks. It just feels like you're better placed than most to continue a healthy pace of buyback. Just wanna understand the decision to retrench a bit in terms of the pace of deployment.
Thanks for the question, Steve, Steven. I wouldn't use the word retrench. I would just go back to January and kind of just reaffirm what we said we'd do, which is return north of 100% of earnings to our shareholders this year. In Q1, it was a total of $1.6 billion, of which $300 million was dividends, $1.3 billion in share repurchases. A good start. March came along, maybe some of it is, you know, me being a freshman CFO and wanting to just slow down the pace a bit to see how the macro environment plays out. There's a lot of uncertainty out there.
I would reiterate, we are going to continue to buy back. We're just going to take it easy now and watch the situation day by day, week by week. If the situation clarifies itself, if we get debt ceiling resolution, you know, there are a lot of things that will play into the next couple of months. We'll watch and see and adjust accordingly.
Just to understand, is it's you're making adjustments, but are you still committed to the 100% payout or north of a 100% payout, at least for the time being?
That's correct, Steven.
Okay, great. Just for my follow-up, on the topic of efficiency, you know, really encouraging to hear that you're doubling the efficiency savings this year. I know you had highlighted that previously. We saw some really nice progress in improving the security services operating margin. You talked about staying disciplined on managing costs there. With the margin there above 25%, how quickly do you think you can get to that 30% margin? Wanted to understand what your plans are for the investment management segment in particular. The pro forma, the Alcentra sale, the margin there is fairly subdued. Just wanted to get some expectation around where you think that margin could potentially traject to over time, what your plans are in terms of efficiency, if there are any for the investment management segment as well.
Okay. There were a few questions there, I'll try and deal with them as best I can. If we kind of zoom out for a second and look at the firm, yeah. A 28% margin with a 20% ROTCE, the highest in three years. Okay, margin good, always want to improve. You double-click into that and you go security services, 26%, going to 30%. The positive in there is Emily was the CFO for a number of years, and now I get to partner with her figuring out how to drive that margin higher. We have a plan. You know, you will have noted that we committed to half the expense growth year-over-year.
We're off to a good start, that segment will be a beneficiary of that. Then you double-click into the next segment, which is markets and wealth services, which is a 48% margin, which, you know, I have no problems as CFO with that. Long may it continue. Then we go into investment and wealth management, which, you know, 11% margin is a bit. You know, to be honest, it's probably a bit disappointing. 18 months ago, that was a 30% margin business, and we don't see any reason why we can't get back there with a lot of hard work. There were quite a number of, you know, headwinds going into that last year. Lower market values, you know, a significant strengthening of the dollar.
Some of our clients, you know, wanted to do a bit of a mix shift from equities to fixed income, and that was going from higher fee to lower fee. The important point that I would draw to you there is the clients stayed in our ecosystem, and that's the key message. Clients are in our ecosystem and just mix shifting, and we're working with our clients to deliver good outcomes for them.
That's great, Dermot. Thank you so much for accommodating the multi-parters and welcome.
Thank you, sir.
Our next question will come from Alex Blostein with Goldman Sachs.
Hey, good morning, everybody. Thanks for the question. I was hoping we could zone in on fees in investment services, particularly within asset servicing and Pershing. At a macro level, it feels like a lot of things have gone your way. Markets were up, activity rates were very strong, particularly in treasuries, money market funds, retail, et cetera. All sort of things in your wheelhouse, yet the revenues in both businesses were down sequentially. Can you just unpack a little what were some of the offsets that drove to disappointment on fees? As you look out, I guess, for the rest of the year, I think on the Q4 call, you guys made comments around just the overall firm-wide fee growth for 2023. Just wondering to get your latest thoughts on that. Thanks.
Hi, Alex. Hope you're well. As a former colleague, I think you were supposed to ask me an easy question, not a hard question. Look, asset servicing, the way I kinda think about asset servicing is. Look, you know, the headline number is 2% down. Yeah. That equates to, you know, a little over $50 million. Yeah. In the context of our quarter, that's a small number. The way I kinda think big picture, again, I've said it in the answer to other questions, did we attract clients to our ecosystem? Yes. Within that is like, how do we derive fee revenue from those clients? Some of it is to do with market levels, some of it is to do with volume, and some of it is other stuff like account opening.
Within that context, you know, we did see a risk-off sentiment from our clients wanting to pause, push stuff out to subsequent quarters. The client volumes were down, and so that really kinda drove the asset servicing side of it. If you kinda look at issuer services, you know, it's a smaller number for us, but that's a seasonal business. Depository receipts is within that, and Q1 is typically a quiet quarter there, and we'll expect that to pick up in Q2 as for dividend season. On the plus side for asset servicing, we had higher market levels, and, you know, we got some fees from that. Overall, I feel good about asset servicing.
We have to work hard on the fee, on the fee outlook, I would say it's not as negative as some commentators would portray the fee outlook to be as I see the situation today. As it goes to Pershing, look, we're very excited about the Pershing business. You'll see from our commentary and our prepared remarks that we had $37 billion onto our system. Robin talked about it in his prepared remarks. We're very excited about Pershing X, the partnership with Snowflake. We're going to do a lot of great stuff in that area, we will tell you about it as the quarters unfold. You know, Pershing and Pershing X is very exciting for us.
Gotcha. Thanks. Maybe as a former colleague, an easier question, on the follow-up. I guess, as you sort of think about the dynamics in the banking space over the last month and a half, and sort of the disruption that that's created and some of the opportunities that you guys might see on the back of it, whether it's retaining some of the deposits that came over or some new areas within the fee side of the equation, where do you think you could lean into most to gain extra share?
Look, you know, Alex, I'll start there. Look, I think the events of March have really shown the importance of asset liability management as a key discipline. Whether you start on the asset side and think about tailoring your liabilities accordingly, or you start on the liability side and make sure that you've got the right duration of assets and the right composition of assets, that to me is lesson number one. I'm sure we'll see a bunch of outcomes from that from policymakers over time as that all gets digested. You know, we're in the preparedness business, not the predicting business, and that goes to everything across the franchise.
We, you know, we positioned ourselves well for this, and we positioned ourselves so that we would be able to deal with lots of different eventualities. Critically to your question, that we could help clients through those various different eventualities. You know, we're proud of the fact that we've served as a little bit of a port in the storm for some of our clients. We've had a lot of net new accounts opened in various angles on the business. I think it's reaffirmed for us, and we've said this before, that resiliency is a commercial attribute. We spend a lot of money on resiliency.
We spend money in terms of making sure that our technology systems are state-of-the-art, all of the investment that we've made over the course of the past few years, our investment in cyber, but it's also investment in the resiliency of our balance sheet. The combination of that allows us to then be able to use times like this, to be able to attract clients to the platform.
Dermot talked about a bit more about that ecosystem, which is another example, which is we've built the businesses over time, and we've lent into investments in those businesses that allow clients to be able to get what they need within our ecosystem, even when they may be a little risk on, they may be a little risk off, they may favor deposits, they may favor a money market fund, they may favor equities, they may favor fixed income. We have all of those cylinders, if you will, to the engine to be able to help our clients. We think that breadth and that diversification of the business, which is built up over a period of time and which we have been leaning into is very, very important. I know we get described as a trust bank.
By the way, we're proud of the trust that that moniker implies. Remember that our most profitable, highest growth, highest margin segment of market and wealth services contains a set of businesses which you would not find in a trust bank.
Totally agree. All right. Thank you both.
Our next question will come from Brennan Hawken with UBS.
Good morning. Thanks for taking my question. Dermot, welcome to the role. Looking forward to working with you. A question on the NII reiteration, Dermot. Previously, there was an expectation that non-interest-bearing deposits would get back to the historic 20%-25% range. Is that still the case? And can you maybe add a little color on why you think the non-interest-bearing deposits have stayed above that range that we've seen in prior histories? Is there a business mix shift change that has happened or any other structural reason which could cause it?
Thanks for the question, Brennan. Like, the way I kinda think about it again is like, I know I've said it a couple of times, it really is NIBs and BNY Mellon, it really is an ecosystem point that I will start with. You know, clients leave. We don't lead with the deposit product. Clients come to our ecosystem for a range of products, and they leave their cash with us to prosecute that business. You know, I'll pick out three examples, like corporate trust. You know, NIBs stay with us because they have to make coupon payments. Treasury services, clients leave balances with us to offset fees. Asset servicing balances stay with us because of underlying client activity. Our clearance and collateral management business, to mention another one, you know, we have decent NIBs there.
Our businesses are bigger than a few years ago. Balances are bigger, and clients are doing more with us. NIBs are just attractive to the ecosystem. You kind of take a look at history and you do the bottoms-up analysis. Through the last cycle, NIBs did bottom out at the 20% range. Currently, we're at, you know, we're still at around the 26% range. It stayed sticky. I think our reason that you could ascribe to that is clients left cash with us in March because they just wanted to leave and use the safety and resilience of our balance sheet, and just it stayed there.
In our forward outlook, in terms of why we reiterate the 20% guidance with the skew to the upside is we expect that to moderate, not meaningfully, but in line with our projection and the work that we did at the beginning of the year. We feel good about where it is at the moment. We feel good about the forecast, and it's been stickier in the past than we projected it to be, is how I would answer it.
We're not relying on that stickiness. I think that is an important point that Dermot mentions. You know, to the extent that we are, we will harvest the benefits as we have them, but we definitely recognize that they could go down to the prior cycle lows in percentage composition terms, and we're managing ourselves accordingly.
Yep, that's very, very clear. Thanks for all that color. Robin, you actually said it very, very eloquently, resiliency is a commercial attribute. In the past, you've spoken to the embedded position that BK, Bank of New York has as a counterparty. How are you thinking about utilizing that position and that commercial attribute of resiliency in order to drive revenue? Do you have any additional color or commentary that you can provide on how you've been thinking about that?
Sure. Look, we've been quite careful over the course of the events of March, to help our clients, and to welcome clients into the ecosystem. We have not wanted to profit, from the fact that there's been stress in the system. That's obviously, you know, an important line, and we participated, as you know. We were one of the 11 banks that participated in helping, you know, another key participant in the financial system, with a large deposit. We are very cognizant of our role in the system and the responsibility that we have to the system, given the role that we play. At the same time, over time, we do view this resiliency to be a strong, commercial asset.
If you step back from the whole of BNY Mellon, I think of ourselves as sort of offering a couple of things that are really differentiating. One is this 239-year history where we touch 20% of the world's investable assets. We are the world's largest custodian. We are the world's largest collateral manager. We have that $1.3 trillion worth of cash in the ecosystem. We have another $5.5 trillion worth of tri-party. That's $7 trillion in total in that space. Largest depositary receipts firm. Number one in the broker-dealer, Pershing wealth management infrastructure space, et cetera. We have these terrific individual components.
For us, bringing them together, and actually being able to demonstrate to our clients the breadth of the platform with the resiliency that we offer, we think that's a winning combination, and one that over time, as I've talked about before, we don't think we've taken full advantage of. It is telling this story of who we are, our place in the world, the roles that we play, and helping our clients to realize just the breadth of activity that they can actually do with us, and the fact that they can trust and rely on us.
Thanks for that color.
Our next question will come from Mike Mayo with Wells Fargo Securities.
Hey, Dermot.
Hey, Mike.
Well, Hey, well, as you said to me at the annual meeting, it's a new country, new firm, a new job. Just pulling the lens out a little bit-now that I can ask you a question specifically, how do you approach the CFO job? I mean, what skill set do you bring to the position? I know Emily's still there, bigger and better, but how might you look at things a little bit differently? What kind of lens do you use, and what are your kind of objectives, say, over the next several years?
Okay. It's kind of interesting you asked the question, Mike. When Robin and I talked about the opportunity and when I decided to join, I listened to the first earnings call after I'd made the decision to join. Robin, in his first as kind of CEO apparent, he talked about connecting the dots across the enterprise, and he's just answered. In the question he just answered there, he talked about that too. In my prior life, connecting the dots across the enterprise was a thing that I majored on. I also grew up in the financial world, and I intend, hope, and plan to bring financial discipline across the firm. You know, we have a great finance team here at BNY Mellon. I couldn't be prouder of what they do.
You know, so I kinda think about the role in three ways. One is working with all of you, clients, regulators, external stakeholders, really kind of delivering the message of what we're about at BNY Mellon over the next several years. I feel that is very important. Then internally, working with the executive committee and the rest of the leadership of the firm and the finance team to develop really good financial analysis in which we can make good strategic decisions about the way we want to take the firm. That's a lot of work, but the team has already done a good job. Look, you're beginning to see the fruits of this come out in the expense area and other parts.
You know, in terms of my top three priority for this year, it really is about, you know, slowing the expense growth of the firm. We've made a commitment. One quarter in, we're delivering on it. This is not about... I don't think about it in some ways as expense cutting. It's like it's attacking structural expense bases in the firm where we can think. We really fundamentally believe we can do the same thing in just a better way and more efficiently. We want to invest and grow the firm. It's kind of, I think about my expense priority as like, how do I think about run the bank and how do I think about grow the bank?
We really want to take those dollars that we get from efficiency and invest in things like Pershing X and other really key growth initiatives. It's all about financial discipline and giving the team the financial resources they need to grow the firm.
All right. Thank you.
Just managing the balance sheet, which is kind of a thing that we've had to do in the last couple of months quite aggressively.
You know, just one follow-up. Connecting the dots, it makes sense. You and Robin both came from Goldman Sachs, where there's the culture of connecting the dots. It's just the incentive to get people to connect the dots, right? You have, you know, breaking down the barriers, breaking down the silos, don't people just ultimately do what they get paid for? Isn't that like a big, tough task to change the incentive scheme to get people to connect the dots with each other?
If you, if your question is, does it take a lot of work, and is it a big task to run a company differently than it's been run before? The answer is absolutely yes. We have got a leadership team who are very focused on approaching the next decade differently than the last decade. This point of connecting the dots is very important one. Let me give you one example. Dermot was talking about in our Investment Management business, he also mentioned Pershing. Mike, when you look at those two businesses, just interestingly, they couldn't have been run more separately within the ecosystem of BNY Mellon. Investment Management was run as essentially almost a separate company off to the side.
Pershing was run essentially as a different separate company off to a different side. We never really explored the opportunities to be able to think about the manufacturing of investment management with the fact that we have, across Pershing and wealth management, a $2.5 trillion distribution base. Now, we're an open architecture firm, and so we aren't distributing all of our manufactured product into our distribution arms, but we have opportunity to explore that, which frankly hasn't been fully explored up until now. Take the adjacency between margin, where we've seen a significant growth for our collateral management business associated with new margin rules of uncleared margin. Exchanges need more efficient margin delivery. Those products are very adjacent to the rest of our collateral management business in tri-party. They're also quite adjacent to our foreign exchange business.
They're quite adjacent to our cash management ecosystem. We have both diversification in the firm, but we also have a lot of natural adjacencies that people haven't explored before. That's the way I think strategically about it. Your question is one of the several pillars of execution, which is: What are the things that we have to do to actually get after that? Some of those things are structural, some of them are incentive-based, some of them are people-based, some of them are organizational-based. We're going to approach all of those different pillars so that we ultimately attack that strategy effectively, and we're very committed to doing it.
Thank you.
Thanks, Mike.
Moving on to Gerard Cassidy with RBC.
Good morning, gentlemen.
Good morning.
Can you share with us, Robin, around the debt ceiling that's coming up for this country, what type of risks there are for your business if a debt ceiling isn't, you know, negotiated effectively by Congress and the President? What kind of risks do you see in just that situation developing, as we go forward?
First of all, you know, we obviously do play an important and somewhat special role as a market infrastructure provider in the space, and we have a good vantage point on the operating of the Treasury market. We don't have a crystal ball, though, obviously, in terms of how debt ceiling is going to get resolved. We do think of the Fed and the Treasury as clients of ours as well, and we want a seamless experience as much as possible for them and also, of course, for our broader client franchise. We're really doing a couple of things. Number one, we think it's our responsibility to the system to lean in to the dialogue that's going on in D.C. in a way that can be helpful.
Doing our bit for raising awareness, sort of educating on various things, you know, debt ceiling, you know, breach is not the same thing as a government shutdown, and making sure that the folks really understand what would happen and some of those consequences. We're spending time there. We obviously spend time with the Fed and the Treasury on the topic, as you would imagine. Internally, really for the benefit of our clients, we're using all of the lessons learned from the past to update our playbooks. We're putting in automation on various different things, and we are organized around being very ready to be able to execute come what may.
Of course, we're gonna take a lot of guidance from the Fed and the Treasury on that as well as we go through it. There are a whole bunch of different things that we are doing. I will also note that in the background, you know, our own iFlow data, which as you know, we have quite good insights into market liquidity. It shows that once again, Treasury market liquidity isn't great. You know, the market's a little bit less supported from foreign buyers. We can see that from our iFlow data, and we all have access to the information on sort of off the run versus on the run bid offers, et cetera.
You know, it's not great from a starting point, which I think is a cautionary tale to the official sector that, you know, we really do want to try to get a good outcome on this thing.
Very good, Robin. Thank you. Dermot, more of a technical question. In your average balance sheet, I think in the supplement, it's page seven, can you share with us why is the Fed Funds sold yield so high? The same thing with the Fed Funds purchased. The yields, you know, 116.3% in the Q1 , and then the Fed Funds sold looks like it's 19.75%. Any particular reason why these seem to be out of line with the rest of the yields in the balance sheet?
Hey, Gerard. I think that's kinda largely a kind of a gross up netting issue. I will get Marius to follow up with you after the call and kinda give you a more detailed explanation.
Okay. Yeah. It just seems very odd to be so high. Okay, I appreciate it. Thank you.
We'll take a question from Brian Bedell with Deutsche Bank.
Great. Thanks. Good morning, folks. Welcome, Dermot. Looking forward to working with you all too. Maybe to the growth outlook for... Can you guys hear me okay?
You were breaking up for a second, Brian . I think you've come back.
Come back. Yeah. I'm on my handset. It's much better than my headset. Okay. Just wanted to come back to the growth in Pershing and asset servicing, the revenue growth. Heard you loud and clear on the drivers for one key. As we think about the trajectory over the course of this year, like, I guess two questions on this. You know, first of all, you know, did you benefit, do you think, from a revenue perspective in those areas on the C side in March versus January, February? Just to get a sense of how volatility can help the revenue picture.
Secondarily, if you can talk about, you know, what you mentioned before in terms of connecting the dots, if you will, you know, how sort of quickly that can work its way into the revenue picture, or is that much more of a longer-term goal? I'll do a follow-up question separately.
Okay. Brian, let me start with Pershing. I would say in both businesses that you asked a question on, Q1 was... Well, it was predominantly a risk off environment. Notwithstanding the risk off environment for Pershing, we attracted $37 billion of new assets onto our system. You know, we're growing organically at a nice clip, which we're very pleased about. I would say Pershing feels good, the outlook feels good, and we're gonna do the launch, official launch of Pershing X in June. The clients that are beta testing that feel good about what they're seeing. We've got the partnership with Snowflake. I would say the outlook for that business overall in terms of o ur continued growth in assets.
As a consequence of that, notwithstanding the risk-off sentiment in Q1, we believe being the number one in the market with broker-dealers and the several million active clearing accounts that we have on the system, we feel pretty good about the future for that one. Asset servicing, I think the way I would kind of think about asset servicing, it's more steady as she goes, yeah. It's a big business. We kind of have a mixture. It's like in the past, people have talked as if it being a fixed income house. I would characterize it, we're both a fixed income house and an equity house. Two-thirds of what comes in is kind of largely fixed income-related, one-third equities. We continue to grow our AUC and our AUM.
Over time, that mix shift between fixed income and equities will either play to our strengths or kind of it'll slow us down a bit. Overall, we feel like it's a steady as she goes environment for asset servicing.
Okay. That's great color. If I could just follow up with the comments you made on the global multi-asset trading capabilities. Similar question there. Is that something more near term or a little bit of a longer term build-out? Is that coming in asset servicing or the FX and then other trading line? If I can sneak in on Pershing X, if you're rolling that out in June, should we expect a revenue ramp contribution in the second half to that or, again, is that more of a longer term build?
I'll start with Pershing X. That is a longer term build. We've talked about the fact that it wasn't gonna meaningfully contribute over the course of the first couple of years since we first talked about that. That's really a 2022, 2023 thing. You should expect essentially nothing from it in that period of time. We'll update as we go past launch. We'll give you some updated view on that, but I view that as being a 2024, 2025, 2026 story overall in terms of in terms of its ramp. Again, you know, we're still in beta testing.
We feel, you know, quite enthusiastic about the client response to the product, but I'm gonna reserve judgment until we start signing contracts and we're launched live in the market on that. In terms of outsourced trading, this is something that we've launched, and we made the public launch during the quarter, hence we've made the comment. This is a very medium, long term opportunity. You know, we've talked before about the fact that as a firm, we are very interested in crawling up the value chain of the various different businesses that we do in asset servicing.
You know, once upon a time, it was custody, and then middle office got added, and now data solutions get added, and integration and these various different components that create a broader solution set for investment management and asset owner clients. Now we're adding to that and saying, "Hey, there's not actually a ton of alpha for an asset owner or investment manager, particularly one that is managing in the tens or hundreds of billions of dollars of AUM. There's not a lot of alpha associated with execution. The alpha is in portfolio construction, asset selection, but the actual buy-sell action isn't." In fact, it's not great scale because clients often need desks in multiple locations. If they're a multi-asset asset manager, they need lots of different specializations when it comes to the execution. We have all of that.
We've executed $1 trillion or so a year of exactly that type of broad-based asset management execution for our own investment management firm. Now we've turned that into a platform that can operate not only for ourselves, but also operate for clients. We're externalizing an existing at scale platform, which is fully capable across products. We're externalizing that now for clients and saying, "Hey, there's no real alpha for you associated with your own trade execution. Let us take it off your hands." I view this in a way, as an extension of what we already do in foreign exchange, where we do exactly that on a range of different execution bases for our clients in foreign exchange. This is something that we know how to do and something that we already do.
We're externalizing it, and I view it as quite an exciting evolution, but it's a very medium, long-term thing as part of our overall journey on fee growth over time.
Yep. No, that's very interesting. Looking forward to hearing a lot more about that in the future. Thanks.
Our next question will come from Rob Wildhack with Autonomous Research.
Morning, guys. You called out the strong pipeline in asset servicing while holding the line on price. I wanted to unpack that a little more. First, how does the current backlog and velocity of new business compare to past periods? Second, given that you're being disciplined on price, what are the common elements that you think are driving your success here? Thanks.
You know, this is part of our overall March to 30% margin in the security services business, Rob. When we look at that, Dermot's talked a little bit about the focus on the expense line. That's important, and it goes a little bit hand in hand here. If you look at our margin last year of 20% and now 26%, you know, depending on last year or this year's stat. If you just take this year's stat, we should be putting 4x as much energy into the expense line as the revenue line in order to be able to get the same net effect at the bottom line. We're doing that.
On the revenue line as well as driving new activities, this discipline point, you know, pricing pressure is a normal part of this business. As we look back and we review certain deals that have been struck over the course of the past few years, going back, in some cases, going back several years, I think we did win in some cases on price. We look at, we now have new capabilities about reviewing the margin on a deal-by-deal level. When we look at some of those deals, we're pretty disappointed. That's causing us to engage with those clients and talk to them about the other things that we would like to do for them that help us to be able to broadly improve the margin at a client level.
In some cases, there have been deals, and I'm thinking of one example in my mind of a client who came, and they had a real expectation about pricing at a certain level. We were like, "We're just not going to do the business at that level." We negotiated, and we substantially increased the price to a level which we thought was appropriate for the actual business involved. Look, I don't know about the past, how that would've happened, but if I look at the history of deals that we've actually got on the platform, my guess is that that behavior is not something that would have occurred before, and therefore it's yielded a different outcome.
This focus on the true cost to serve and then the standardization that needs to be done across the platforms that will improve, and in fact, reduce over time the cost to serve. Even the same piece of business can be more profitable, not only because we're pressuring on price, but also because we're making it cheaper to actually execute that business. The trick will be doing both.
Yeah. Look, the point I would add in there, having the growth rates and becoming more efficient as a company. All the work that we do on expenses and efficiency management feeds into that discussion as well. You kind of have to join the expense narrative, again with the pricing good business narrative to get the complete picture.
Thanks a lot, guys. Dermot, welcome to the role.
Thank you, sir.
We'll take a question from Vivek Juneja with JPMorgan.
Hi, thanks for taking my questions.
Hey, Vivek.
Hi. A couple of clarifications. The deposit inflows in March that you were talking about, which businesses did you see that in?
I would say, broadly speaking, we saw it across the ecosystem. The point to point was up 1%. We finished the quarter on a period end basis at $281 billion. Our average for the quarter was, I think, roughly $277 billion. There was no one business. It really was broadly spread. I guess the important point that I would, I would call out here is we made a strategic decision about 15 months ago to kind of centralize how we think about deposits into one platform. We kind of think of deposits as a platform as well as a product. We have very, very good client connectivity and engagement. When we talk about deposits, we talk about it across the system, and that will echo Robin's point about connecting the firm, de-siloing different businesses.
We think of deposits as an enterprise effort, and that's how it came together for us in the quarter.
Thanks. The flip side, during this turmoil in March, there was a lot of inflows into money market funds. When I look at your cash AUM, for the quarter, it shows no inflows. Any color on why you didn't benefit in that business also? Because you've historically been a big player in there.
Yeah, like I think, historically, I would say, and continue to be a very big player in that. You know, our performance in our Dreyfus cash business has been excellent and continues to be excellent this year. The simple answer to that question is, we had some. You know, we knew in January we were going to have some known outflows, so we were projecting to be slightly down in Q1. With the inflows as a result of what happened in March, that got us back to flat. Overall, I think the average balances were higher, but on a period-to-period basis, we're flat. We continue to feel very good about the business and more importantly, performance. In this business, performance matters, so we expect that will. You know, you'll see better balances going forward.
The outflows that you're talking about in January, what was driving that? Is that pricing? Is that something else? You know, what drives that?
It was clients wanting to do something else with their cash. They told us that they were doing it. It was in our forecast at the time. We knew it was going to happen. There was no specific reason.
I'll just add on to that. I think this quarter was a little idiosyncratic in a couple of different ways. You know, last year, we outgrew the market in the Dreyfus money market platform. Sort of two other observations. There's a little bit of composition that you have to look at under the hood on these institutional money market funds in terms of where the money's coming from. Was it really coming from sort of mega individual ultra-high net worth, or was it coming from actual institutional flows? I think you have to look a little bit at that on a money market fund by money market fund basis as well.
As Dermot pointed out, the broader, our broader connectivity to money market funds goes beyond our own money market fund. We have this market-leading LiquidityDirect product. Even when money goes to other money market funds. We are benefiting from that because we have this connectivity, and so we are a very large source of inflows to some of those other money market funds that you've seen growing. Again, this is the benefit of the ecosystem. It might be on our balance sheet, it might be on our money market fund, it might be in someone else's money market fund. It might be that we're selling Treasury bills to clients, but all of those things are in the mix, as is the repo and Fed's reverse repo facility.
Thank you. We'll take a question from Rajiv Bhatia with Morningstar.
Good morning. You know, thinking about operational interest-bearing deposits versus non-operational interest-bearing deposits, how much does the rate you pay differ between those two buckets?
We don't disclose the exact rates on the different components. Let me just sort of broadly talk to you about the deposits, Rajiv, 'cause I think this is quite important. First of all, to me, the decision tree is not insured versus uninsured. That's a convenience. It's sort of a retail expression. It's a shorthand that gets used in the market. The ultimate decision tree is whether deposits are stable and sticky or whether they're not. Insured is just one lens of that, and that lens is a bit more relevant to retail than institutional. By the way, even within insured, not all deposits are equally sticky, right? Because you've got checking, you've got high yield savings.
You're gonna have different outcomes for these, whether they're true operational accounts, even on the retail side. There are other types of sticky and stable. For us, you know, two-thirds of our deposits in the first quarter are operational across our portfolio of businesses. Those are, as Dermot McDonogh said earlier on, those are required in order to be able to provide clients with those operational services. It's diversified across our portfolio. Right? You've got custody, cash management, clearing, corporate trust. There are a bunch of different sort of business cylinders that give rise in that, in that operational cash engine. You know, we obviously spend a lot of time and effort modeling all of these types of things and sort of. And we've seen that that has really proven to be stable over multiple cycles.
That's sort of why we focus so much on operational. For non-operational deposits, look, there's a little bit there associated with we don't expect them to leave, but we plan for them to be able to leave at obviously at a much, much higher rate than we would think about that on the operational side, 'cause we just think that's good asset liability management.
Okay. Just one follow-up. In your prepared remarks, you mentioned that wealth management revenues were down in part due to changes in product mix. Can you expand on what that is and whether you expect that to continue?
I think that just goes back to the point of the risk off sentiment in that we saw in Q1, and people just wanting to, A, not do activity and move from fixed income product to equity product. Normal behavior, nothing out of the ordinary that I would call out. Totally expected, just us working with the clients to deliver the risk appetite that they wanted to have for that quarter. You know, the turmoil of March is kind of, you would say for now, may have abated, and we may see a change in client behavior. Back when they took these actions in March, you know, we didn't know how long we were going to be in this situation for. It's behavior that we expected to see, and it's kind of I would view it as normal BAU.
All right. Thank you.
Thanks, Rajiv.
Thank you. Our last question will come from Betsy Graseck with Morgan Stanley. Please go ahead.
Oh, hi. Good morning.
Hey, Betsy. Good morning.
Okay. Just a couple of things. One, on the MMF discussion that you just had with, Vivek. You also benefited from MMF through your custody platform as well, right? 'Cause you custody a lot of MMF stuff here.
Yeah. That's right. It's another touch point with money market funds on the asset servicing side.
Right. Okay. That helped the deposits, I'm guessing. My question really has to do with your role as a global payment provider. One of the top, obviously, I think you're involved in the FedNow pilot. I just wanted to get a sense as to how you're thinking about how FedNow is integrated within your global payments platform, get an update on the BNY Mellon digital asset platform, is there anything that's going on within crypto that would have you lean in or out? You know, kind of three legs of that question. Thanks.
Okay. Let me start with real time. We are part of the FedNow test. I think actually might have been the first bank to start testing on it. We were the first bank to do a test on The Clearing House real-time payment rails. Look, you know, overall, when I step back from real-time payments, if I use that as the generic term that would cover both FedNow and The Clearing House, you know, it is a couple of things. It is a new payment rail, I think that represents an interesting disruption, and we would like to participate in that disruption, which is one of the reasons why we've been leaning in. I think there's a bunch of opportunities for clients there.
Quicker, cheaper, more control over the payments. That's a good thing. Saves them dollars and ultimately is quite helpful for the industry's carbon footprint as well because it's really a check. Should be over time a check eradicator. There's a lot of sort of carbon footprint and ESG more broadly in the handling of checks. That would be a good thing. You know, we've got the opportunity to be part of that disruption because of our existing Treasury services business. And we see that also as part of a broader solution set because wrapped up in real-time payments, there's payment validation, there's fraud protection. There are other data services, and we find ourselves selling that bundle more often than not when we sell RTP.
I think we have a position, you sort of framed it, you know, in terms of FedNow, but we have a position in terms of real-time payments and payments more broadly as a pretty unconflicted provider. As you said, we're a very large provider, but that unconflicted nature means that whether you're a fintech, whether you're a small or a medium-sized regional bank, whether you're a foreign bank, we're not threatening as a set of rails to plug into, and that makes us pretty appealing as a partner. Look, this is a multi-year endeavor. We're pleased with the traction. We've done a bunch of stuff and we're playing it forward. Obviously the story is gonna be inextricably linked to seeing all of this take hold in the U.S.
The other key question for you that you asked, Betsy, was on digital assets. Look, I haven't changed my point of view here at all. I view it as a completely different thing than real-time payments. In fact, in digital assets, some people do conflate the two and view things like coins and central bank digital currencies as solutions to problems which I would actually argue that real-time payments might be a better solution for. There is a little bit of overlap, but I do favor real-time payments more broadly on the question of how to speed up payment rails and payment processes in the United States to make them more efficient. On digital assets, we think this is about the tech.
We've believed in the fact that distributed ledger technology, smart contracts that you can build on top of it have good opportunity over time. That's a many years, maybe several decades evolution. It's still early. Hasn't really been proven. I think we'll see opportunities to have more efficiency, easier handling of certain asset types. Think about things that aren't as standardized today, so they're messy in the financial services system, like real estate and loans. Probably speed up settlement there on tokenization as a sort of as a new form of handling assets. We like all of those concepts. In terms of the actual cryptos, we said all along we're gonna be incredibly slow. We'll crawl before we walk, before we run on digital assets broadly. Cryptos are, you know, it's something that we've gone except slowly on.
I'm sorry, you broke up at the end. On crypto, you mentioned...
We've gone exceptionally slowly.
Yeah. Just 'cause of all the infrastructure that you have, I would think you would be an attractive place for crypto deposits. I'm wondering if that's something that you would agree with or not.
I don't particularly agree with that, no. I understand that there are other firms who've over time made it part of their business model to really attract a ton of cash in that space. We do not view ourselves as a crypto bank. We have a variety of clients. We have some clients who touch the digital assets ecosystem, but that's not been a business strategy of ours to grow that aggressively.
Just lastly on FedNow, it launches in the next quarter or so. Is that accurate, and is there a meaningful impact? Or is this as you mentioned, a really long runway to have an impact on your revenues? Thanks.
It's a longer runway. You have to get confirmation from the Fed about their exact launch plans 'cause it has evolved a little bit. It's a long runway, and it isn't so much FedNow as real-time payments, of which FedNow is one provider.
Okay, super. Thank you so much. Appreciate it.
No problem.
Thank you. With that does conclude our question and answer session for today. I would now like to hand the call back over to Robin with any additional or closing remarks.
Thank you very much, operator. Thank you everyone for your interest in BNY Mellon. If you have any follow-up questions, please reach out to Marius and the IR team, and we wish you well.
Well, thank you. This does conclude today's conference and webcast. A replay of this conference call and webcast will be available on the BNY Mellon Investor Relations website at 2:00 P.M. Eastern Standard Time today.