BNY Mellon, MS Talk Q1'22 Waivers
Bank of New York Mellon hosted its Q1'22 Earnings Call yesterday, and briefly discussed bank deposits and money fund fee waivers. CEO Todd Gibbons comments, "We also continued building momentum as a leader in digital assets, having been selected by Circle as primary custodian for the USD coin reserves." CFO Emily Portney tells us, "Money market fee waivers, net of distribution and servicing expense were $199 million in the quarter, an improvement of $44 million compared to the prior quarter. This reflects the benefit of higher average short-term interest rates partially offset by higher money market fund balances. Once again, our growth in money market fund balances meaningfully outpaced the industry. Together, the impact of lower waivers and higher balances drove a sequential increase in pre-tax income of close to $60 million. On a year-over-year basis, fee waivers had a de minimis impact to our fee revenue.... Net interest revenue was up 19%, reflecting higher interest rates as well as higher deposits and loan balances." During the Q&A, Portney says, "We would expect deposit probably run off maybe about 10% over the course of this year.... Just as a reminder, our deposit base is largely institutional NIBs [noninterest bearing accounts]. Part of the growth you've seen has been in NIBs, so we expect that to kind of normalize to over time. The other thing I would mention is that as we see deposit runoff, we also could see a migration to money market funds. And if that does indeed happen, then obviously, that could be a nice tailwind for us as well.... Specifically on waivers, we do see the Fed raising rates by 50 basis points in May, as I think we are all kind of expecting. Obviously, that will be a nice uptick in terms of recouping waivers and it's to the tune of, call it, like $100 million or so is what I ... would estimate it." Late last week, Morgan Stanley also reported earnings and hosted its Q1 earnings call. CEO James Gorman comments, "We saw our first rate hike in the year in the first quarter, and with our strong and growing deposit base, this will have a near immediate economic impact to our business." CFO Sharon Yeshaya explains, "Deposits increased $6 billion in the quarter to $352 billion. The average rate on deposits declined to 9 basis points.... Net interest income was $1.5 billion.... Back in January, we indicated that the fourth quarter NII was a reasonable base to inform 2022 and that we would expect $500 million of incremental NII on the back of rising rates. Due to the further moves in rate expectations since January, we should see this benefit at least double if the forward curve and our modeled assumptions are realized over the remaining nine months of the year." Asked about money fund waivers, she adds, "So our money market guidance we gave you was about plus $200 million and we stand by plus $200 million ... for the full year. It's really based on two factors that are contributing into that. One is the balances, as well as the industry and the waivers, how quickly those waivers roll off. So we are -- $200 million for the remainder of the year for the increase for Investment Management."
