Optimizing technology is the key element that has allowed Bank of New York Mellon Corp. to reduce expenses at a rate greater than many of its peers, executives said.
Speaking May 31 at the Deutsche Bank Global Financial Services Investor Conference, Chairman and CEO Gerald Hassell, along with other executives, discussed ways the company is cutting costs and growing revenue. Hassell said in a post-financial-crisis world, where financial institutions have been affected by "lower-than-normal global economic growth rates, lower-than-normal interest rates, higher global regulatory change cost and higher compliance costs in a political upheaval," digitization has helped the company to offset regulatory costs and fund growth.
The company has reduced its expense base by 2% per year over the last three years, a Deutsche Bank analyst said. In the first quarter of 2017, non-interest expenses increased by less than 1% year over year, which management attributed to the cost of compliance and higher staff costs.
Investment Services CEO Brian Shea said the company has about 220 robotic automation tools in production, up from 150 at the end of 2016. NEXEN, the company's technology platform, is driving efficiency for the company and drastically improving customer experience, he said.
"We've now automated the process robotics and something that would take humans a couple of weeks to get done, we can get done to automation in a very short period of time," Shea said.
Vice Chairman and CFO Thomas Gibbons added that technology and infrastructure costs for the company are flat, while capacity is up.
"I think we're just scratching the surface there," Gibbons said. "I think there's more we can do. And in some targeted processes, we can see taking out as much as 20% to 25% of the expenses."
"[It's] not just finance. It's risk, it's compliance, it's HR," he added. "So, the power of the technology is coming through and it's coming to downstream inside the organization quite a bit."
Hassell said he feels better about long-term growth prospects because the "environment is starting to improve."
"We've really adapted a sort of continuous improvement culture approach which is not going to end," Hassell said. And so it's been a key — in a lower-revenue-growth environment, which the whole industry has been in — we've been able to outperform by getting a higher return on all of our existing investments in client service delivery, in technology, in vendor management, in the way we manage real estate and reduce the real estate portfolio."
Shea added that the company continues to review its underperforming portfolios, and that there is "plenty of room" to create a higher return on its existing investments without charging clients more.
"We still have more business continuity space than we think we need long term," Shea said. "We still have probably more data centers than we need in a world where we now have a hybrid cloud infrastructure. We still have more physical locations than we probably need over time, and we're executing a virtual desktop strategy that enables much more flexible working arrangements internally."