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May 1, 2008updated 04 Apr 2017 3:58pm

BoNYM shows its class

The Bank of New York Mellon Corporation known commonly by the rather awkward acronym of BoNYM is far less clumsy than its sobriquet. It ranks as the worlds largest provider of securities services for institutional investors, overseeing more than $20 trillion of assets, dethroning JPMorgan Chase for the top spot. It is also a top-15 global asset manager and top-ten US asset manager, with more than $1 trillion of client assets.

By PBI Editorial

More than eight years after Mellon Bank rejected an unsolicited bid from the Bank of New York, the two firms have finally come to terms in a merger that has won praise from all corners. The combined group ranks as a top-15 global asset manager with its $20 trillion of client holdings. Charles Davis reports.

The Bank of New York Mellon Corporation – known commonly by the rather awkward acronym of BoNYM – is far less clumsy than its sobriquet. It ranks as the world’s largest provider of securities services for institutional investors, overseeing more than $20 trillion of assets, dethroning JPMorgan Chase for the top spot. It is also a top-15 global asset manager and top-ten US asset manager, with more than $1 trillion of client assets.

In a deal that’s all about size and scope, private banking is a major beneficiary, as BNY Wealth Management, the newly created wealth management unit created as part of the $17.6 billion deal, is using its newly found power to square off with national and international giants.

National brand

Craig Sutherland, vice chairman of BNY Wealth Management, which has $160 billion in client assets, said that the goal is to become a national brand with a national footprint in high net worth markets. “We’re well on our way to being able to reach out anywhere in the United States and service that wealth management client,” Sutherland said.

The deal gives BNY the economies of scale necessary to keep pace with the likes of Merrill Lynch, Northern Trust and another newly formed industry giant, U.S. Trust Bank of America Private Wealth Management.

“When you combine our organisations, you get some real legacy talent and history with each firm, and we really mesh nicely geographically,” Sutherland said. “The Bank of New York brought $60 billion in New York-based private banking assets to a Mellon operation in New York that was under $2 billion, but Mellon brought about $100 billion in assets to the table from other parts of the country, so geographically it’s been a hand-and-glove fit.

“We have a nice presence nationally, but we look at the west as a major growth opportunity, and there are a couple of glaring opportunities in the south-west and mid-west, in places like Texas and Chicago,” he said.

Sutherland said that the deal has BNY thinking internationally as well. Mellon opened an arm of its family office business in London even before the merger, and the combined firm is now in the early stages of building the European family office business through that gateway.

“We see opportunities all over the world,” he said. “We’ll concentrate on Europe, but we are also very interested in Asia down the road as well.”

Bank of New York Mellon currently operates in more than 100 markets in 37 countries. The plan to grow in foreign markets is driven largely by the attractive high growth rates of markets abroad and the highly concentrated state of the US custody business, where Bank of New York Mellon, State Street Corp of Boston and Northern Trust of Chicago are the three main players. All three are looking to grow internationally.

For now, though, most of the focus at BNY is on organic growth. Sutherland said that the wealth management unit will be hiring to augment its sales, banking and portfolio management staff, and the wealth management division plans to announce a marketing and branding campaign in the fourth quarter to include ads aimed at the wealthy.

Comprehensive bank

Sutherland said that the merger creates a truly comprehensive private bank, one that addresses a number of issues that one partner or the other lacked prior to the deal.

For example, he said, Mellon lacked top-shelf real estate offerings, while Bank of New York’s private banking clients enjoyed access to its own real estate investment arm, including Pennsylvania-based Urdang Capital Management. And while both firms have been heavily involved in alternative investments, Bank of New York has Ivy Asset Management as a partner, which brings the Mellon clientele a new set of tools.

Mellon on the fiduciary side has a large non-resident private banking business, which will benefit from the addition of Bank of New York’s offshore trust services. And Mellon’s family-office business, concentrating on families with more than $100 million in investable assets, has been the bank’s fastest-growing business, he said.

Mellon also brings a string of regional wealth management firms it acquired and successfully integrated over the past few years, while the Bank of New York adds Pershing and its separate-account affiliate, Lockwood Advisors.

“It’s a really rich mix, and as we have begun to sit down and talk strategy, we’ve all been delighted at the fit here,” Sutherland said. Size means little to the client and, in fact, the secret lies in remaining high-touch on the client side, he added.

“When they actually touch our organisation, it will feel small to them,” he said. “Relative to scale, the reality is that not so long ago, your average wealth management client had a large-cap US equity portfolio with some bonds thrown in there. Today the exposure is global and the fact of the matter is that if you are going to manage wealth at this level, scale is the way to provide the kind of comprehensive offering that today’s client will demand.”

Acquisition tool

The bank may not be through with growing through acquisition, either. In an interview recently with analysts, ex-Mellon CEO and new BNY Mellon CEO Robert Kelly pointed to the company’s formidable $50 billion market capitalisation as a powerful tool for future acquisitions.

“That provides us with more capital to invest in our company, as well as to do acquisitions,” Kelly said. “If the right opportunity comes along in asset management or asset servicing, we’d look at it.”

The merger will certainly test the market’s appetite for more big deals, with State Street, Citigroup, JPMorgan Chase and Bank of America left to vie for supremacy in US circles.

Sutherland said his focus remains on integration and ensuring that clients are undisturbed by the changes under way.

“ Size doesn’t have any really positive connotation for the client, unless it helps them do more while still feeling small on the service side,” he said. “We are moving very carefully and slowly, to ensure that this deal is done right.”

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