Good morning, and welcome to the 2026 third quarter earnings conference call hosted by BNY. 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's consent. I will now turn the call over to Marius Merz, BNY Head of Investor Relations. Please go ahead.
Thank you, operator. Good morning, everyone. Welcome to our third quarter earnings call. I am here with Robin Vince, our CEO, and Dermot McDonogh, our CFO. As always, we will reference the quarterly update presentation, which can be found on the investor relations page of our website at bny.com. I will note that our remarks will contain forward-looking statements and non-GAAP measures. Actual results may differ materially from those projected in the forward-looking statements. Information about these statements and non-GAAP measures is available in the earnings press release, financial supplement, and quarterly update presentation, all of which can be found on the investor relations page of our website. Forward-looking statements made on this call speak only as of today, October 15th, 2026, and will not be updated. With that, I will turn the call over to Robin.
Thank you, Marius, and good morning, everyone. I will start with an overview of BNY's performance in the third quarter, and then Dermot will walk you through our financial results and outlook in greater detail. Referring to page two of the quarterly update presentation, BNY delivered strong results in the third quarter. Earnings per share of $2.34 grew by 24% year-over-year at a very solid pre-tax margin of 39%, and with a strong return on tangible common equity of 29%. Once again, our growth was broad-based across our business segments, resulting in firm-wide revenue of $5.7 billion, up 12% year-over-year, generating approximately 390 basis points of positive operating leverage in the quarter, demonstrating the scalability of our business as well as our continued work to enable greater productivity.
As another signal to the diversification and resilience of our business model, we delivered these results against the backdrop of an overall constructive but uneven operating environment in the third quarter. Equity markets remained strong, supported by corporate earnings growth, as well as continued investments in AI capabilities and related infrastructure. At the same time, persistent inflation, a sharp repricing in interest rates, geopolitical tensions, and trade uncertainty contributed to volatility in fixed income markets and rotations across equity markets. Turning to our business performance. As many of you know, over the past few years, we have changed how BNY works. With two key building blocks for the reimagination of our company in place, the platform operating model, and our commercial model, we are able to operate with greater connectivity and deliver greater value to our clients. Our commercial results in the third quarter reinforce our progress.
Client demand continued to grow, with strong sales and pipelines across products, client segments, and regions, as well as larger, more comprehensive wins. As a result, the third quarter was our 15th consecutive quarter of year-over-year sales growth, with new mandates deepening existing relationships from digital native clients like Revolut to established institutions such as ING that are finding more ways to work with BNY in more places across more products. This continued momentum is driving higher organic growth and enabling an even more resilient and vibrant business built to support our clients with excellence through economic and market cycles. Changing how we worked was a prerequisite, but innovation is an increasingly important element of the BNY story.
With everyone in the company now working in our new operating models, our focus has shifted to realizing the benefits with product, engineering, operations, and commercial teams coming together to develop more integrated and innovative solutions and deliver them for clients at greater speed and scale. At its heart, BNY powers markets and advances the global financial system. We have done this over the entire history of the United States. BNY supports the entire capital markets life cycle, from managing assets and collateral to servicing them and moving money. We view some of the current inflection points in market structure and technology as opportunities. As markets evolve, we have the vantage point and positioning to connect our capabilities in new ways, helping clients to adapt to changing market structures and pursue growth on infrastructure that they already trust. Several launches illustrate what that can look like.
In July, we announced the launch of our global Digital Transfer Agency capabilities, which extend our leading position in traditional fund servicing to the on-chain world, enabling a unified client servicing experience and ultimately growth into new asset classes and technologies. In the spirit of build it once, use it many, enabled by BNY Digital TA, we ourselves now offer a new digitally native money market fund through BNY Dreyfus with our new BLIQUID tokens representing shares in the fund on-chain. Baillie Gifford co-designed its recent on-chain offering with us and has already launched a fully native U.K.-regulated tokenized fund, and BlackRock is using our capabilities for a recently launched tokenized share class of one of their existing money market funds.
Just last month, our payments and trade business launched a new Pay-to-Wallet capability that allows banks to send cross-border payments directly from bank accounts to participating retail digital wallets using the payment messages and correspondent banking infrastructure from us that they already rely on. This gives banks another way to reach customers who use digital wallets and grow their cross-border payments businesses on BNY's global payments platform. Our thesis in digital assets remains simple: innovate the capabilities and act as a partner to our clients as we help them bridge to the digital world. On a related note, we couldn't have picked a better time to reimagine BNY than in this age of AI. We have said it consistently. At BNY, AI is for everyone, everywhere, and everything. So we are embedding AI in every aspect of our business.
That's why we've built our enterprise AI platform, Eliza, and invested in our people so we can develop capabilities, govern them consistently, and put them to work at scale. Over the past quarter, we've continued to move AI deeper into the processes that run our company. By deeply understanding our activity, including process steps, system interactions, workflow patterns, and more, Eliza is helping our teams reimagine how work gets done. In fact, over time, we see an opportunity to extend these AI capabilities to our clients to help them solve similar challenges and optimize workflows end-to-end. This work ultimately creates more capacity for our teams to better serve our clients and earn BNY a greater role in client relationships through improved features and capabilities. We are also pairing our ambition with the governance and accountability needed to scale AI responsibly.
Last month, we opened the BNY AI lab at Carnegie Mellon University, advancing research on topics like verifying AI-generated code and evaluating agents for use in critical systems. All of this reflects our broader approach to AI, moving with ambition, intensity, and discipline, all with the objective of running BNY better to drive enhanced commercial, operational, and financial performance. I'll conclude by summarizing where I see our company at this point in time. Our performance in the third quarter demonstrates what this team and this BNY are all about. Deliberate, innovative, and never satisfied. Our work to enable higher performance, greater connectivity between our platforms, and more seamless delivery of holistic solutions from across BNY to our clients continues, and we can already see that these foundational investments have laid the groundwork for our further growth.
With our resilient and trusted platforms deeply embedded in workflows and the breadth of capital markets worldwide, BNY's diversified businesses enable our clients to adapt and thrive. All of this laid against the secular trend of financial markets growing, deepening, and evolving. Collectively, this allows us to go after the white space across products, client segments, and regions better than ever before, creating value for our clients and shareholders. Put simply, we remain excited and energized by our momentum and the opportunity ahead. With that, I'll turn it over to Dermot.
Thank you, Robin, and good morning, everyone. I'll start with our consolidated financial results for the third quarter on page three of the presentation. Total revenue of $5.7 billion was up 12% year-over-year. Fee revenue was also up 12%. That included 15% growth in Investment Services fees, reflecting net new business, higher client activity, and higher market values. Investment Management and Performance fees were up 3%, primarily driven by higher market values, partially offset by the mix of AUM flows. Firm-wide AUC/A of $63.4 trillion were up 10% year-over-year. This increase was primarily driven by higher market values, net client inflows, and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar. Assets under management of $2.2 trillion were up 2% year-over-year, primarily driven by high year-over-year, reflecting higher client volumes supported by continuous product innovation.
Investment and other revenue was $175 million in the quarter. Net interest income was up 15% year-over-year, primarily driven by reinvestment of investment securities at higher yields, as well as balance sheet growth, partially offset by deposit margin compression. The provision for credit losses was negligible in the quarter. Expenses of $3.5 billion were up 8% year-over-year, both on a reported basis and excluding notable items. More than three-quarters of the increase represents revenue related expenses. The remainder reflects higher investments, partially offset by efficiency savings. Taken together, we reported earnings per share of $2.34, up 24% year-over-year. Excluding the impact of notable items, earnings per share were $2.37, also up 24%. On the back of approximately 390 basis points of positive operating leverage, pre-tax margin expanded to 39% and return on tangible common equity was 29%.
Turning to capital and liquidity on page four. Our Tier 1 leverage ratio for the third quarter was 5.7%, down 24 basis points sequentially. Tier 1 capital decreased by $1.1 billion, primarily driven by capital returns through common stock repurchases and dividends, a decline in accumulated other comprehensive income, and a preferred stock redemption net of issuance, partially offset by capital generated through earnings. Average assets were approximately flat sequentially. Our CET1 ratio was 10.9%, down 6 basis points quarter-over-quarter. Over the course of the third quarter, we returned approximately $1.4 billion of capital to our common shareholders, resulting in an 85% total payout ratio in the quarter. Next, net interest income and balance sheet trends on page five. Net interest income of $1.4 billion was up 15% year-over-year and down 2% quarter-over-quarter.
I talked about the drivers for the year-over-year increase earlier. Sequentially, the decrease was primarily driven by seasonally lower deposit balances in the third quarter, partially offset by reinvestment of investment securities at higher yields. Average deposit balances decreased by 1% sequentially, including a 1% decrease in interest-bearing deposits and a 3% decrease in non-interest-bearing deposits. Average interest-earning assets were flat sequentially. Turning to our business segments starting on page six. Securities Services reported total revenue of $2.8 billion, up 15% year-over-year. Total investment services fees were up 19%. In Asset Servicing, investment services fees increased by 12%, reflecting higher client activity, net new business, and higher market values. ETF Servicing AUC/A grew by 26% year-over-year. Alternatives AUC/A grew by 14%, and across both segments, we are well-positioned to win new funds as they come to market.
This past quarter, we were pleased to onboard Aviva Investors to our middle office solutions platform as we near the completion of implementing a fully integrated operating model for them. Meanwhile, sales momentum continued with a good mix of larger transformational mandates, as well as numerous tactical wins supporting the durability of organic growth in this business. In Issuer Services, investment services fees were up 43%, primarily driven by higher corporate trust fees, notably including fees accounting for pass-through expenses associated with our role as financial agent for Trump Accounts, but also reflecting broad-based growth across the business. Total debt service grew by 6% year-over-year to $15.4 trillion at quarter end. In Depositary Receipts, we have won approximately 2/3 of capital raising year-to-date, and investment services fees in the quarter grew by double digits year-over-year.
For the segment overall, foreign exchange revenue was up 20% year-over-year on the back of higher client volumes. Net interest income was up 14% year-over-year. Segment expenses of $1.8 billion were up 10% year-over-year, primarily driven by higher revenue related expenses and investments, partially offset by efficiency savings and lower severance expenses. Securities Services reported pre-tax income of $1 billion, up 24% year-over-year, at a pre-tax margin of 36%. On to Market and Wealth Services on page seven. In our Market and Wealth Services segment, we reported total revenue of $2 billion, up 12% year-over-year. Total investment services fees were up 10%. In Wealth Solutions, investment services fees were up 7%, reflecting higher market values and client activity, as well as net new business.
Net new assets were $48 billion in the quarter, representing an annualized growth rate of 7%, reflecting inflows from existing and new clients. Wealth Solutions continued to win new logos and signed multi-year contract renewals with a number of significant clients in the quarter. In Clearance and Collateral Management, investment services fees were up 17%, reflecting broad-based growth in collateral management balances and clearance volumes. Average collateral balances grew by 14% year-over-year to $8.3 trillion, reflecting growth from both existing and new clients. Average daily transaction volumes grew by 10% year-over-year, reflecting higher client activity across both international and U.S. platforms. In payments and trade, investment services fees were up 8%, reflecting net new business. This solid performance is supported by new client wins, higher payment volumes, and growth in our cash management and liquidity solutions.
Net interest income for the segment was up 16% year-over-year. Segment expenses of $963 million were up 6% year-over-year, primarily driven by higher revenue related expenses and investments, partially offset by efficiency savings. Taken together, our Market and Wealth Services segment reported pre-tax income of $1 billion, up 17% year-over-year, and a pre-tax margin of 51%. Turning to Investment and Wealth Management on page eight. Investment and Wealth Management reported total revenue of $857 million, up 4% year-over-year. Investment management fees were up 3%, primarily driven by higher market values, partially offset by the mix of AUM flows. Segment expenses of $655 million were up 2% year-over-year, primarily driven by higher revenue related expenses and investments, partially offset by efficiency savings.
Investment and Wealth Management reported pre-tax income of $205 million, up 11% year-over-year, and the pre-tax margin improved to 24%. As I mentioned earlier, assets under management of $2.2 trillion were up 2% year-over-year. In the third quarter, we saw $6 billion of net inflows in long-term active strategies, $4 billion of net inflows in index, and $22 billion of net outflows in cash. Wealth management client assets of $354 billion increased by 2% year-over-year, primarily driven by higher market values, partially offset by cumulative net outflows. Page nine shows the results of the other segment. I will close with an update on our financial outlook for the year.
On the back of another strong performance in the third quarter, and with only 2.5 months left in the year, we are once again raising our outlook for growth and operating leverage in 2026. We now expect to generate nearly 500 basis points of positive operating leverage in 2026, up from 400 basis points just three months ago, and clearly up from the slightly over 100 basis points we guided to at the beginning of the year. This reflects our current expectation for full year 2026 total revenue growth, excluding notable items, to land somewhere around the middle of a 12%-13% range, market dependent. That includes our current expectation for full year 2026 net interest income to be up 15% year-over-year. Accordingly, we expect higher revenue related expenses associated with this approximately 200 basis point improvement in revenue growth.
Therefore, we are increasing our expectation for full year 2026 expense growth, excluding notable items, by 100 basis points to somewhere around the middle of a 7%-8% range. As usual, our central case assumes current market implied forward interest rates and that the operating environment remains broadly constructive. To wrap up, we are encouraged by our performance in the third quarter and the underlying momentum across our businesses. While we remain mindful of the dynamic operating environment, we continue to see our investments and execution translate into stronger client engagement, growth across our platforms, and greater scalability. With that, operator, can you please open the line for questions?
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. We will take our first question from Mike Mayo with Wells Fargo Securities.
Hi. I guess this follows on that last comment about the expense guide being a little bit higher. How much are you spending on AI? What sort of benefits are you getting from that? What do you see as the potential? Robin, I know you say AI for everyone, everywhere, and in everything. That is a nice kind of high level statement. How does that actually impact the financials? If and when will you actually see it impact the financials? Thank you.
Sure, Mike. Good morning. Happy to talk through all of that for a second. Let me just zoom out for a moment. We spend $4 billion a year on technology. We have a $13 billion expense base. If you just put AI into that context, a few different things. Number one, it is a catalyst for transformational change, frankly, for the world, for all companies, and for people.
We think we are going to be a significant beneficiary of this technology, given the fact that we think it is going to sweep over our business in a positive way, give us the opportunity to reduce friction, improve outcomes, create capacity internally, and frankly, deliver for clients. We are excited about it for obvious reasons. It is moving very rapidly. We think adoption and integration ultimately can become limiting factors, which is why we have focused so much on our platform and this cultural philosophy which you just quoted, to really make sure that we are a fertile ground for adoption because if people have shields up, walls up, that is not going to help the process.
We have been investing in this for, as you know, we have been talking about it for three years, but we have been investing in it for over that. When we actually think about the inputs and measuring them and the outputs, I break it into two categories. Now we are really going to get to the heart of the answer to your question. The first thing that matters when we measure how much we spend, and we think about how much we spend, is are we spending too much or too little? We do not need false precision around exact perfection. What we really need to understand is, are we investing appropriately and are we generating return from that? If the answer is yes, then we need to understand, should we carry on and lean in more?
The answer to the question is yes, we are generating return, and yes, we want to lean in more. At the end of the day, the precise measurement, internal transfer pricing, et cetera, is not super important. Frankly, we do not spend calories worrying about that as an input. The second thing that matters a lot is good FinOps, financial operations, managing the token cost, et cetera. For that, we have put a lot of precision in because we want to be very careful to make sure we are using the right models for the right tasks, the routing engines, et cetera.
That is all built into Eliza. So there we are very precise and we measure very carefully so that we are making the optimal decision at every moment of consumption of AI intelligence. That is how I am thinking about it and we are thinking about it. As a result, we're not breaking it out, but it sort of folds into the inputs across our expense base. Frankly, we think it could be counterproductive to break it out and to start obsessing about it publicly and even within the company as an input.
One follow-up as it relates to token costs, and this gets to the benefits of scale. Are there benefits to scale when you're purchasing tokens? At the enterprise level, do you get kind of discounts or something versus a smaller player that's trying to use AI tokens? How are you managing that to become more price-effective?
Yeah. The short answer is yes, but the benefits of scale accrue in a few different ways. First of all, yes, if you've got a good relationship with the providers of this intelligence, and in fact, frankly, more of a partnership mentality, which we have with several of the labs, where we're actually giving them ideas, collaborating with them, helping them with product development in some cases. That sets the scene for better commercial arrangements, and that's for sure. You can only really do those things if you have the scale and frankly, the R&D capability to be able to be effective in that regard. The second thing that matters for price a lot is to be able to put the models against each other and to be able to really use the right model for the job.
That isn't just in terms of one lab versus another. It's labs versus the appropriate open source potentially. It might be using a six-month-old model or a 12-month-old model. You don't need a sledgehammer to crack a nut. The routing logic built into that is very important. Now, you can't do that unless you actually have a chassis, a harness to be able to manage that. That's where the investment in Eliza, we think is very important.
Because if you're just natively operating through the front door of one of the lab's ecosystems, you can't do that type of routing. You actually need to have a layer that all of your agents operate in, all of your people operate through in order to manage that. And so that's a very important part of essentially managing tokenomics, and you've got to have scale to be able to make that type of investment.
All right. Thank you.
We'll take our next question from Ebrahim Poonawala with Bank of America.
Line is open. Hey, good morning.
Morning.
Maybe just sticking with AI and the broader sort of all the employees that are on the platform now. As we look forward over the next year or two, how should we think about the benefit of the platform and add to that any AI-related productivity gains? Is it a client wallet share opportunity? Does it open up new revenue pools? Or is it mostly about more capacity, more efficient employee base?
It is about all three of those, and you happen to have hit on our three AI strategic vectors. I will reframe them for you. The first one is generating internal capacity. It is a very important word, capacity, because in some companies, they frame AI for themselves, I defer to their expertise for their own environments as being an efficiency gain. We do not think about it that way. We think about it as a capacity generator. If we can free up our people to be able to do more things, we are a growth company these days. We have got plenty of things to do. Whenever we can generate capacity to provide for that growth without having to grow the expense base, that is phenomenal. We are so lucky to be reinventing AI, reinventing this company and reimagining BNY in this age of AI.
That is capacity, and we are very excited about that. What has happened more recently, as I mentioned, we have got 400+ AI solutions in production. More recently, there has become a tilt of some of those towards the second category, which is creating improvements in products, features, and actually doing things that are helping our products deliver better for customers. That, we think, is going to be one that is going to accelerate more from here. Then the third one, which we also have some examples of, although it is very early, is doing new things for clients that we would not previously have done without AI.
So actually applying our AI across ourselves and our clients on an end-to-end basis, or delivering certain solutions that just did not make full economic sense in a non-AI world that now might make more economic sense. That is the third vector, and we actually view the opportunity across all three. It started more in the first, it is evolving more into the second, and ultimately, we think it will cross all three.
And maybe just sticking with that, I mean, you obviously have a unique lens, both in terms of how front-footed you've been on AI deployment, your seat as part of the OpenAI board, Robin. Just talk to us, one, how do you protect against the headlines we read about rogue agents when you're all signs go in terms of deploying AI internally. So one, how do you protect against rogue agents? And as we think about the debate around open weight models versus the closed ones, is there one way to think about it, given you said that you don't need the, I guess, the frontier models to solve the issues that the industry is dealing with? Thanks.
Sure. I'll give you three parts to that. So number one, if you just step back from the current debate about speeding up, slowing down, pacing the frontier and all of that, there are three sciences in AI these days. One is the frontier model science itself, new models, more capabilities, more better intelligence, et cetera. That one's obviously talked about a lot. But the second and the third are very important, and they haven't really been as much a part of the mainstream conversation, although, of course, you hear about them. The second science is the science of alignment and making sure basically that the models do what we would want them to do, behave as humans would like them to. And this is a science that needs more investment and frankly needs to catch up with the science of the model frontier.
And you're seeing the labs starting to really invest in that. You're seeing some of the hardware companies talk about it more as well. Jensen's talked about it in the context of NVIDIA. Some of that alignment might need to be built into the hardware chipset in order to make it fully enduring. And then the third science is the science of observability. You want to know what the models are actually thinking and doing, and that science has also lagged and also needs to catch up with the frontier. So I view the safety package of alignment and observability needing to catch up with the frontier. That's important investment, and it has to happen. The second frame that you mentioned is open source. Open source essentially means open weight, which means user customization, which is terrific and powerful. We do it.
We use open source models as part of our ecosystem, so we're using the right tool for the job. But open weight means that the users can essentially, certainly a sophisticated user, can take off some of that safety package that I was just talking about. So we need to be very thoughtful about that in the future, because if you have very powerful frontier-capable models that have open weights, it does mean that bad actors can essentially adjust them so that they would behave maybe in a manner differently to the way that we would like them to behave. And then the third question, which is how all of that applies to our environment, which is essentially what you asked, that's where the power of Eliza comes in.
Because we have got the chassis, the harnesses, the safety protocols, where we essentially can build and wrap safety around that frontier capability because we have got this extra layer. We also have the benefit of all of our existing controls. We do not make payments at BNY without a lot of validation. The fact that an AI model wants to make a payment, that is nice. We do not fully trust even people to do things solely by themselves. We have maker-checker processes. We have challenger processes. AI can operate the same way. So having the chassis, the safety harnesses wrapped around AI at the platform level, again, back to Mike's question, some of that investment is about scale. That is how we do it well, deliberately, and intensely over time.
Great. Thank you so much.
Our next question comes from Brennan Hawken with BMO Capital Markets.
Good morning. Thanks for taking my question. Would love to hear your updated perspective on the platform operating model. So you guys had a phased rollout, and you have spoken in the past about 12 to 18 months of seasoning that new users need to maximize the model. How tangible should we expect the benefits to unit cost reduction or cross-selling or other metrics to impact ultimately BNY's results as we enter into 2027 and through 2028?
Thanks for the question, Brennan. As we've said, we're fully live in the model now. 100% of the firm is active in the platform operating model. It's been a long journey, and I would congratulate everybody at BNY to kind of make it a reality. It was a very big undertaking, a very important strategic initiative for the last four years. But now we're actually in the model, and we talked over the last several quarters about de-siloing the firm, putting like capabilities into similar platforms.
Now we can really feel like going forward, the platform operating model is set up to deliver more value to clients, and you're beginning to see that the commercial model, alongside the platform operating model, is delivering the growth that's resulting in that 15 consecutive quarters of year-over-year sales growth that Robin alluded to in his prepared remarks. Also, I would draw attention to the fact that over the last few years, and I say it every quarter in my prepared remarks, we've harvested efficiency gains that we've reinvested in the business. This year particularly, you're beginning to see the payback and the benefit of those investments.
If you take Securities Services, that segment that has a margin of 36% this quarter, that's as a result of moving into the model, investment in strategic technology, delivering more for clients, delivering more mandates that Securities Services are then bringing in other platforms to deliver more products from other platforms to the clients. We kind of think of platform operating model beside the commercial model, alongside AI, is a very compelling strategic opportunity for us in the forward. We're very excited about the platform and where it is now, and how we can grow the firm from here with that in place.
Thanks for all that color, Dermot. A bit more mundane question for my follow-up. Deposit trends were a bit stronger than we had expected. Can you speak to quarter-to-date trends and what you're thinking for the fourth quarter? Also, you took up the NII guide. We've certainly seen rates back up, but in the past, you've spoken to less rate sensitivity. Could you maybe speak about what drove the upside to the prior guide on NII?
Sure. We talk a lot about narrowing the cone of outcomes and interest rate volatility, ± 50-100 basis points. We always like to stay close to home, as it were. That's been a strategic philosophy of ours over the last few years, and we feel very comfortable with where we're at in that. Our NII is, we don't lead with deposits, we don't lead with pricing. It's as a result of client activity coming to our platforms for other products that leave cash with us to service those activities.
In Q3, you kind of saw a seasonal dip as expected. Then on the other side of it, with the rates backing up, you see a pickup in yield from about 150- 200 basis points with securities rolling off into higher yields. That mix we expect to continue into the fourth quarter. We have roughly about $5 billion of securities rolling off per quarter. We do expect the seasonal pickup to deposits to pick up into Q4 a little bit relative to Q3, as Q4 is quite an active quarter. We've seen that in early doors in terms of deposits picking up so far this quarter.
Great. Thanks for that color.
We'll take our next question from Alex Blostein with Goldman Sachs.
Hey, good morning. Thank you for the questions. I was hoping to dig into a couple of businesses for you guys. First, I guess Clearance and Collateral Management continues to pop really nice growth. It's been a super volatile year, obviously in rates markets as well. Curious how you think about the durability of this kind of growth we've seen. Then more near term, as we move closer to mandatory Treasury clearing, what are the puts and takes, both kind of near term impact on that business and a bit longer term?
The last question first, central clearing. We believe we're going to earn our way through that, and so far we've seen that because you see more volume on the platform as a result of the initiative. Actually, we don't see that in the near term, medium term, long term as a particular headwind. Also, a lot of rate volatility this year, but that has encouraged a lot of volume. The more volume and people trading Treasuries and debt issuance, you kind of see that coming onto our platform. We're very pleased with the volume that has supported the platform this year. Then you have the mix of international and domestic.
International is something that we've talked about for several quarters, and we made some strategic investments in the platform internationally, and we're beginning to see clients come to us and do more activity with us. It's been nice growth internationally, and we expect that to continue. Also, we've talked about this on prior calls, debt issuance globally, more debt issuance equals more activity, more volume. We feel good for that platform. The last thing I would say on the collateral side, people are always looking for funding. $8.3 trillion of balances on the collateral platform. It's a record for us.
Clients are coming to us for funding needs. We're developing new solutions, different ways of doing things, using new technologies, new products. There's a certain element of a halo effect of clients wanting to do more with BNY in this space. We're very pleased where it's at. It may moderate from time to time from here, but the long-term outlook for that platform is particularly good.
Yep. All right. Loud and clear. Second question is around Wealth Solutions, the old Pershing business. Growth has obviously been pretty good, but partially held by both markets and just the level of client activity. Curious if you can zone in on how you think about improving NNA growth in this business, and to what extent do you think some of the capacity constraints at other large RIA custodians on the long short tax aware strategies could help you bring in incremental business as you help potentially fill that void?
Okay. I do not know, the old Pershing business, it is the new Wealth Solutions business. We are very proud of that business. Nearly $4 trillion of assets under custody. We have a right to play. We have a right to win. We have strategic ambition. First of all, I would like to kudos to the team for a really strong quarter in this space, $48 billion of net new assets. That is a 7% annualized growth rate. We have been asked before on calls, what do we see the medium-term outlook for this business? We said mid-single digits of net new assets. So feel good about that. New clients, I think if I remember correctly, we signed roughly seven new logos onto the platform this quarter. So clients are coming to us. They like what we have to offer, and so we are partnering a lot with big RIAs.
As I said in my prepared remarks, we signed several clients to long-term contracts. So we like the business. We feel we are a big player in the business. We have fresh leadership in there, taking a fresh look at things and coming up with different strategies. Also, you may recall from our call in January, we have pushed the acquisition we made a couple of years ago, Archer Separately Managed Accounts. We have moved that over into Wealth Solutions so we can give a more unified product delivery in separately managed accounts. To your point, we are very active in the long short tax strategy as well, which is a good product for us, for our clients.
Great. All right. Thanks, Dermot.
Our next question comes from Ken Usdin with Autonomous Research.
Hey, thanks. Good morning. Dermot, just wondering two things on the guide and the outlook. If I just do the implied math for the fourth quarter, if I am doing it right, it implies that fourth quarter fees would be down sequentially from the third, and I am just wondering, is there any seasonality there, or are there any items in the third quarter that might have just been strong because of the environment or not, I guess, just in terms of how you are seeing the environment play out. Thanks.
Robin said in his prepared remarks, we have a healthy pipeline. We come into Q4 on the back of a strong Q3. Clearly, there is a lot of volatility in the markets, but as Robin has said, we are set up for these kinds of things and the durability of the revenue stream. So we are kind of just trucking along, executing our strategy, and there is nothing really that I see in Q4 that is outlier relative to Q3. The pipeline is there. The healthy dialogue is there. Actually, I think we are kind of flattish, not down, but I would say overall, we go into the last two and a half months of the year feeling very good about where the overall firm is and where our businesses are operating, and that gave us the confidence to update our guide as I gave in my prepared remarks.
Yeah. Thanks for that. I appreciate that. On the expenses, it kind of implies a typical year-end step-up in the fourth quarter, and you have so much room in the operating leverage, it would make all the sense in the world if you are, in fact, pulling forward some investments. But can you just kind of talk us through fourth quarter seasonality on cost and if you are, in fact, kind of help moving some of the investments forward just because you have such a strong revenue base? Thanks.
I don't believe we're pulling forward. It's typically seasonal. There are a few idiosyncratic items that happen in the fourth quarter, and then there's some things around compensation matters. One-off stuff, some vendor-related stuff. There are three or four things that are in there. None of them meaningful in itself, but when you add it up, it kind of gives that uptick. But it wouldn't be a place where you would start your jumping-off point for next year.
Right. Okay. Understood. Thanks again, Dermot.
Our next question comes from Scott Siefers with TD Cowen Securities.
Morning, everybody. Thank you for taking the question. I think only one left for me. I was hoping you could speak a little to capital management priorities from here. Capital levels remain very strong. You all have such strong internal generation rates. But the ratios have inched down a bit and you've been very active on repurchase. Just curious as to how you're thinking about the balance from here.
The philosophy for a number of years now is Tier 1 leverage ratio of 5.5%-6%. We are at the upper end of that range. The firm was set up. We run a lot of stress tests up, down, shocking, making sure that we can deal with a lot of different situations. This backup in rates, we were able to take it entirely in our stride. Look, most of our peers and ourselves took a bit of a mark to market in the AOCI book, but that was entirely within our comfort zone, and we were able to continue our buybacks at a very healthy clip. Year-to-date, I think it is roughly 86% and 85% for the quarter. Everything is in line with our capital management philosophy, and we feel good about where the firm is in terms of capital positioning and liquidity as we go into Q4.
Perfect. All right. Thank you very much.
We will take our next question from Manan Gosalia with Morgan Stanley.
Hey, good morning. On the Issuer Services side, clearly really strong growth there of over 40% year-on-year. I know you noted that there is some pass-through expenses associated with the Trump Accounts in there. Is this level a good level to grow off of from here, and what would the drivers be?
I think there are three aspects to it. Within Issuer Services, you have corporate trust, where we're servicing roughly $15 trillion of debt, and as debt issuance has been growing. Within those sub-sectors, we have market-leading positions. So feel very good about, A, the investments that we've made in corporate trust over the last couple of years, and B, the client dialogue and the client engagement. So business is in good shape. Then you have Depositary Receipts, which is somewhat of a seasonal business, with Q2 being the outlier due to dividends.
Our Q3 was good as well, and we've managed to win quite a good number of mandates in the APAC region, which I alluded to in my prepared remarks. The last comment I would say is our proud participation in Trump Accounts, and that is where that shows up. While we don't disclose specific numbers, there is the gross up of revenue and expenses there with the pass-through, et cetera. Overall, that is quite a good segment, strong segment, and we like what we have, and we will look to continue to grow it.
Got it. Then you spoke about deposits, but if you can drill into non-interest-bearing deposits a little bit here. As rates rise, can we still expect NIB to stay at high teens as a percentage of deposits, and can we still expect that to grow?
We don't guide on the specifics of IBs or NIBs. I think we have grown deposits 26% over 25%. We feel good where our current level is, and as I said in answer to another question, we've seen an uptick in it going into Q4. In Q3, NIBs, it did adjust seasonally, but we're a little bit better than expected relative to the seasonal decline, so feel good about that. Really, you have to remember that the deposit base is a result of clients doing more with us. Just to your earlier question on corporate trust, we have a lot of kind of natural deposits with that as clients place cash with us to service their debt. When you take into account the whole ecosystem, we feel very good about our ability to grow deposits from here in line with the overall growth of the business.
Got it. Thank you.
We'll take our next question from David Smith with Truist Securities.
Hi, good morning.
Morning, David.
It's nice to see the long stretch continued year-on-year sales growth. How is organic fee growth trending against the 4.5% mark that you saw in the first half? Clearly, there was a trickier backdrop in September during the quarter, but how would you frame the organic growth against the 12% total fee growth, including market benefits you saw in the third quarter? Any expectations for 4Q, given the strong pipeline you mentioned? Thank you.
Organic growth is sort of a I'll call it the longer-term story for us, is how we look at it. We just don't report it on a quarterly basis. We don't guide to it on a quarterly basis. It's really the long-term trend that we think is the focus area in terms of the progress of the company. You'll remember we were at zero in organic growth in 2022 and 2023, 2% in 2024. We increased that by 50%, from 2% to 3% in 2025, and then we increased it by 50% again, from 3% to 4.5% for the first half of this year. I just say that the long-term momentum, the 2026 momentum continues.
Okay. So you expect further momentum through 2026 into 2027, even if it's maybe a little bit lumpy on a quarterly basis. Is that fair?
I'm not going to guide to the extrapolation. We feel good about where we were in the first half, and I'll say that our momentum in 2026 has sort of continued to be good. The organic growth has continued to be good. There's no shock factor in the third quarter.
Got it. Thanks.
Our next question comes from Glenn Schorr with Evercore ISI.
Hi, thanks very much. Just circling back on the RIA custody biz. It is kind of interesting that a business like that would get an influx of two or three really big new competitors or well-funded competitors. I also know that these are long-dated, established relationships and business does not change that often. Maybe you could talk a little bit towards the investments you are making, what you think you have to do going forward to keep growing that business. I think when you see the influx of competition, you go, "Aah!" You start thinking pricing is going to come under pressure. Maybe you could just talk to what you are seeing and how we should think about it. Thanks.
Maybe I will start. One thing I would say is, Wealth Solutions, the platform, which used to be known as Pershing, has become much, much closer to BNY. When we have clients of Wealth Solutions, they are also clients of the firm. I would say over the last couple of years, we have been able to offer more products from the broader BNY family than we have ever done before. Clients are coming to us because we are also a bank, and we can do lending and we can do different things. It is the relationship is not with Pershing, as in the old days, it is now with BNY and the platform is Wealth Solutions. I think that is important fact number one.
Important fact number two is we have nearly 1,500 clients, nearly 9 million investor accounts, and we do over 2 million trades per day with those clients. As I said in my answer to the last question, $4 trillion of AUC/A. When you take Robin's answer to the first couple of questions on the call about our AI strategy and our AI vision, we believe that just with traditional technological investment and bringing AI to the fore, we can develop new products and new ways of doing things for that community that will allow us to be very competitive relative to competition coming in. As I always say, we love competition because it makes us stronger and it makes us better, and we feel like we have a really strong base from which to move forward from.
Let me just add to it briefly, which is, I just want to underline, this has always been a competitive industry and always been a competitive business. The evolution of what clients want, an open architecture solution, the ability to bring strong capabilities, the fact that it is not just a custody clearing business, but is evolving into also being able to connect with asset management and with banking and the AI capabilities that Dermot mentioned. It is sort of moving in our direction because it is at the right time, given the evolution of BNY, given our platform and commercial models, unlocking the whole firm to deliver to any client of the firm. That is a good trend for us in this business, and it is not by coincidence that we have been evolving the name.
In fact, interestingly, when I used to talk to clients of Pershing three years ago, they would say, "Oh, please, the Pershing brand is really strong. Please keep the brand." Now when I speak to those same clients, they say to me, "Oh, please, BNY, it's a much more useful brand for us running our businesses when we're talking to clients because of the power and strength of that brand, and we want to access the rest of the company. We don't just want the traditional services from Pershing. We want the full breadth of BNY delivered through Wealth Solutions.
Good perspective. Maybe that's a good lead into the quickie follow-up I had was, average loans are up 19%. How much of that is coming through some of your other platforms and where you're extending balance sheet to help? I don't want to fully tie it to the Tier 1 leverage decline in the quarter because I think this is coming at pretty low RWA to securitized loans, but I'm putting words in your mouth, so maybe just talk to us where the 19% average loan growth is coming from and the density of them. Thank you.
I think you, I hate to take the short answer to that, Glenn, but you answered the question. It's predominantly in our secured finance business, short duration, fully collateralized, not using significant amount of risk-weighted assets and just supporting the client franchise. So you hit the nail on the head.
Oh, all good. We can move on then. Thank you.
Our final question comes from Gerard Cassidy with RBC.
Hey, Robin. Hi, Dermot.
Hey, Gerard.
Hi, Gerard.
Can you give us, when you think back to January when you gave us your net interest income forecast, I know you talked about the factors pushing up the net interest income growth in the fourth quarter. But when we turn back the clock to January to today, can you identify the deltas for the much better than expected growth in net interest income that you've achieved this year? Was it primarily better deposit growth from customers, market conditions, but what were some of the key factors?
I would say two things. One is just the overall performance of the firm doing more, like as we highlighted at the first half, 4.5% organic growth. We highlighted a number of transactions in the quarter in both of our prepared remarks. All of that activity brings deposits onto the platform. We've grown deposits year-over-year. I would say that's important point number one. Point number two is and also the mix between IBs and NIBs has held in well, and that's benefited us. On the other side of the ledger, it's the yield pickup going from about 150 basis points to 200 basis points. We expect that to kind of continue for the next several quarters as we reposition the portfolio with roughly $5 billion rolling off each quarter and reinvest it at higher yields.
Very good. Just speaking about rates and not asking for a forecast for 2027, can you just paint the interest rate environment that's most ideal for the NII as we go forward into 2027?
Again, my short answer to that is we try to narrow the cone of outcomes on interest rates. Up or down 100 basis points, there has been quite a move over the last several quarters, over particularly the last quarter. We are largely immunized from that. Look, 10-year goes above 6%, I guess lots of people having different conversations, but we believe where our rates are right now is we are in good shape.
Very good. Thank you very much.
Our last question comes from Steven Chubak with Wolfe Research.
Hi, good morning. I should say good afternoon now, Robin and Dermot, but thanks for squeezing me in here. It is much appreciated. I was hoping to drill down into the Securities Services segment. Robin, when you started on the transformation journey, you highlighted Securities Services as an area where you were much more focused on driving efficiency versus necessarily having the growth mindset that you were at least outlining for Market and Wealth Services in particular. You have been quite successful improving the margin in that segment the last three years within Securities Services, eclipsed your profitability targets while running with a flattish cost base.
As I look at the trend over the last couple of quarters, even adjusting for the impact of Trump Accounts, we are starting to see a pretty healthy ramp in investment. I was hoping you could just speak to whether you are pivoting to more of a growth mindset now that you are operating at full efficiency. Where do you see the most compelling growth opportunities within the segment? Where are those incremental dollars being deployed?
Well, again, a little bit like one of the earlier questions. You sort of answered the question along the way. That is right. I agree with the premise, which is we first set our target to improve pre-tax margin in the segment. If you might remember, it was 21% in 2021, and we said 30% was our milestone. A lot of people told us that that was ambitious at the time. That was when the whole narrative was still centered around Trust Bank and world's worst oligopoly and everything. All fair potentially back at the time. But we saw a lot more potential, and we have started to realize that potential. It was an expense self-help story in part, but you are right, we have done a lot of the foundational work.
It is really a microcosm of the same thesis as the whole company, which is having done the foundational work in operating model and commercial model, we can pivot and are pivoting more to growth. As you pointed out, that is starting to show through the top-line story of the segment. For the quarter, for the segment, 15% total revenue growth, 500 basis points of positive operating leverage, and pre-tax margin expansion to 36% year-on-year, which is obviously a far cry from that milestone because it was originally a milestone. It is also broad-based inside the whole story. Now, there was a seasonally strong quarter in Depositary Receipts in the second quarter. There is always a little bit of quarter-by-quarter story associated with it. But you are right. We see a white space in this segment. There are lots of types of white space for this.
There is connecting more things from around the firm. There is going into new regions. You will remember earlier in the year, we announced a very important win in Germany. That is a good example of us pushing into new regions, which is one of the opportunities for us in white space. There are new solutions. If you think about the Digital Transfer Agency that I mentioned in my prepared remarks, that is essentially a capability add that is in the segment.
Then of course, you have all of the capital markets growth and activity, including the manufacturing of fixed income growth, and the market trends that we have talked about as well. So we have done the work. We have repositioned the business, and the team is doing a fabulous job to now really attack the opportunity. We think that that is the path that we are now going to be on.
Yeah, look, I would say my only comment is a leadership change, talent, and the business was taken back to the studs by that team four years ago and investing in the core and building from the foundations back up. The team has got its ability and its belief back in its right to win. It has been a story of leadership and execution. It has been fantastic.
Oh, really great color. Thanks so much for squeezing me in here.
With that does conclude our question and answer session for today. I would now like to hand the call back over to Robin for any additional or closing remarks.
Thank you, operator. Thanks everyone for your time today. We appreciate your interest in BNY. Please reach out to Marius and the IR team if you have any follow-up questions. Be well.
This does conclude today's conference and webcast. A replay of this conference call and webcast will be available on the bny.com investor relations website at 3:00 P.M. Eastern time today. Have a great day.