Full Transcript: Bank of New York Mellon Q3 2026 Earnings Call
Bank of New York Mellon (NYSE:BNY) reported third-quarter financial results on Thursday. The transcript from the company's third-quarter earnings call has been provided below.
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Summary
Bank of New York Mellon reported strong Q3 2026 results with EPS of $2.34, up 24% year-over-year, and a pre-tax margin of 39%. Total revenue increased by 12% to $5.7 billion.
The company highlighted its strategic initiatives, including advancements in AI and digital assets, with the launch of Global Digital Transfer Agency capabilities and a new pay-to-wallet feature for cross-border payments.
BNY Mellon raised its full-year 2026 outlook, expecting about 500 basis points of positive operating leverage and a 12-13% revenue growth, driven by strong client demand and operational efficiencies.
Operating segments showed significant growth: Securities Services revenue rose 15% year-over-year, and Markets and Wealth Services revenue increased by 12%. Investment and Wealth Management also saw a 4% revenue increase.
Management emphasized AI's role in driving future growth and operational improvements, with over 400 AI solutions in production and plans to extend AI capabilities to clients.
Full Transcript
OPERATOR
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.
Marius, Investor Relations
Thank you, Operator. Good morning everyone. Welcome to our third quarter earnings call. I'm 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 and I'll 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 15, 2026 and will not be updated. With that, I will turn the call over to Robin.
Robin Vince, Chief Executive Officer & Chairman of the Board of Directors
Thank you, Marius, and good morning everyone. I'll 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 29%.
Once again, our growth was broad-based across our business segments, resulting in firmwide 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 management 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 and 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 beLiquid 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 UK-regulated tokenized fund. And BlackRock is using our capabilities for a recently launched tokenized share class of one of their existing money market funds. And 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.
And 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.
Dermot McDonogh, Chief Financial Officer
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.
Firmwide AUCA 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 US dollar. Assets under management of $2.2 trillion were up 2% year over year, primarily driven by higher market values, partially offset by cumulative net outflows and the unfavorable impact of the stronger dollar. Foreign exchange revenue was up 19% 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 4, 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 is 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 AUCA grew by 26% year over year. Alternatives AUCA 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. 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 Treasury accounts, but also reflecting broad-based growth across the business. Total debt serviced grew by 6% year over year to $15.4 trillion at quarter end and in Depository Receipts we have won approximately two thirds of capital raisings 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 and 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 and a pre-tax margin of 36%. On to Markets and Wealth Services on page seven. In our Markets 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 and average daily transaction volumes grew by 10% year over year reflecting higher client activity across both international and US 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 Markets 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 9 shows the results of the other segment. I'll 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 to 13% range, market dependent. And 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 to 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?
OPERATOR
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'll take our first question from Mike Mayo with Wells Fargo Securities.
Mike Mayo, Analyst at Wells Fargo Securities
Hi, I guess this follows on that last comment about, you know, the expense guide being a little bit higher now. How much are you spending on AI? What sort of benefits are you getting from that? What you see as the potential. And Robin, I know you say AI for everyone, AI for everyone, everywhere and in everything. That's a nice kind of high level statement. But you know, how does that actually impact the financials? Or if and when will you actually see it impact the financials? Thank you.
Robin Vince, Chief Executive Officer & Chairman of the Board of Directors
Sure. Mike, good morning. Happy to talk through all of that for a second. So let me just like zoom out for a moment. So we spend $4 billion a year on technology. We have a $13 billion expense base. And so if you just put AI into that context, sort of a few different things. So number one, it's a catalyst for transformational change, frankly, for the world, for all companies and for people. And so we think we're going to be a significant beneficiary of this technology, given the fact that we think it's going to sort of 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're excited about it for obvious reasons. Now it's 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's not going to help the process. And we've been investing in this for, as you know, we've been talking about it for three years, but we've been investing in it for over that.
When we actually think about the inputs and measuring them and the outputs, I sort of break it into two categories. So now I'm 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 don't need false precision around exact perfection. What we really need to understand is are we investing appropriate and are we generating return from that?
And 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're generating return and yes, we want to lean in more. And at the end of the day, the precise measurement, internal transfer pricing, et cetera, isn't super important. So frankly, we don't 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.
And for that we've put a lot of precision in because we want to be very, very careful to make sure we're using the right models for right tasks, the routing engines, et cetera. And that's all built into eliza. So there we're very precise and we measure very carefully so that we're making the optimal decision at every moment of consumption of AI intelligence. So that's how I'm thinking about it and we're thinking about it and as a result, we're not breaking it out, but it sort of folds into the inputs across our expense base.
And 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.
Mike Mayo, Analyst at Wells Fargo Securities
So 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. And how are you managing that to become more price effective?
Robin Vince, Chief Executive Officer & Chairman of the Board of Directors
Yeah, the short answer is yes, but the benefits of scale accrue in a few different ways. So 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 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 models against each other and to be able to really use the right model for the job. And 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 6-month-old model or a 12-month-old model.
You don't need a sledgehammer to crack a nut. And 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. And 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 route. 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.
OPERATOR
All right, thank you. We'll take our next question from Ibrahim Poonawalla with Bank of America.
Ibrahim Poonawalla, Analyst at Bank of America
Hey, good morning. Maybe just sticking with AI and the broader sort of all the employees 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?
Robin Vince, Chief Executive Officer & Chairman of the Board of Directors
It's about all three of those. And you happen to have hit on our three AI strategic vectors. And so I'll reframe them for you. The first one is generating internal capacity, and this is a very important word, capacity. Because in some companies they frame AI for themselves—you know, I defer to their expertise for their own environments—as being an efficiency gain. We don't 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're a growth company these days, we've got plenty of things to do.
And so whenever we can generate capacity to provide for that growth without having to grow the expense base, that's phenomenal. We're so lucky to be reinventing AI, reinventing this company and reimagining BNY in this age of AI. So that's capacity and we're very excited about that. What's happened more recently, and as I mentioned, we've got 400 plus AI solutions in production, more recently there's become a tip 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.
And that we think is going to be one that's going to accelerate more from here. And then the third one, which we also have some examples of, although it's very early, is doing new things for clients that we wouldn't 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 didn't make full economic sense in a non-AI world that now might make more economic sense.
So that's the third vector and we actually view the opportunity across all three. It started more in the first, it's evolving more into the second and ultimately we think it'll cross all three.
Ibrahim Poonawalla, Analyst at Bank of America
And maybe just sticking with that—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 like the headlines we read about rogue agents when you're sort of 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, I guess, the frontier models to solve the issues that I guess industry is dealing with?
Robin Vince, Chief Executive Officer & Chairman of the Board of Directors
Sure. I'll give you sort of 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, etc. 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 endurable. 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 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. And 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've got the chassis, the harnesses, the safety protocols where we essentially can build and wrap safety around that frontier capability. Because we've got this: X model wants to make a payment. That's nice.
We don't 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's about scale. That's how we do it: well, deliberately and intensely over time.
OPERATOR
Great, thank you so much. Our next question comes from Brennan Hawken with BMO Capital Markets.
Brennan Hawken, Analyst at BMO Capital Markets
Good morning. Thanks for taking my question. We'd love to hear your updated perspective on the platform operating model. So you guys had a phased rollout and you spoke 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 '27 and through '28?
Dermot McDonogh, Chief Financial Officer
Thanks for the question, Brennan. So, 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 will 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.
So 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 and this year particularly, you're beginning to see the payback and the benefit of those investments.
If you take Security 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 Security Services are then bringing in other platforms to deliver more products from other platforms to the client for. So we kind of think of platform operating model beside the commercial model alongside AI as a very, very compelling strategic opportunity for us in the forward.
So 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.
Brennan Hawken, Analyst at BMO Capital Markets
Thanks for all that color, Dermot. And a bit more mundane question for my follow-up. So 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? And 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. So could you maybe speak about what drove the upside to the prior guide on NII?
Dermot McDonogh, Chief Financial Officer
So yeah, sure. So we talk a lot about narrowing the cone of outcomes and interest rate volatility, plus or minus 50, 100 basis points. We're kind of—we always like to stay close to home, as it were. And 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. And really our NII is really—we don't lead with deposits, we don't lead with pricing 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. And then on the other side of it you see, with the rates backing up, you see a pickup in yield from about 150 to 200 basis points with securities rolling off into higher yields. So that makes sense. We expect to continue into the fourth quarter. We have roughly about $5 billion of securities rolling off per quarter. And we do expect the seasonal pickup—deposits to pick up into Q4 a little bit relative to Q3 as Q4 is quite an active quarter.
So we've seen that in early doors in terms of deposits picking up so far this quarter.
Brennan Hawken, Analyst at BMO Capital Markets
Great, thanks for that color.
OPERATOR
We'll take our next question from Alex Blosstein with Goldman Sachs.
Alex Blostein, Analyst at Goldman Sachs
Hey, good morning. Thank you for the question as well. I was hoping to dig into a couple of businesses for you guys. So first I guess clearance collateral management continues to pump really nice growth. It's been a super volatile year obviously in rates markets as well. So curious how you think about the durability of this kind of growth we've seen and 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.
Dermot McDonogh, Chief Financial Officer
So 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. And so 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. And so the more volume and people trading Treasuries and debt issuance, you kind of see that coming onto our platform.
So 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. So it's been nice growth internationally and we expect that to continue also. Just, you know, we've talked about this on prior calls.
Debt issuance globally, more debt issuance equals more activity, more volume. And so we feel good for that platform. And 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. So clients are coming to us for funding needs. We're developing new solutions, different ways of doing things, using new technologies, new products. And so there's a certain element of a halo effect of clients wanting to do more with Bank of New York Mellon in this space.
So we're very pleased where it's at. And it may moderate from time to time from here, but the long term outlook for that platform is particularly good.
Alex Blostein, Analyst at Goldman Sachs
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?
Dermot McDonogh, Chief Financial Officer
Okay, so I don't know the old Pershing business, it is the new Wealth Solutions business. So we're 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 ambitions. 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's kind of a 7% annualized growth rate. We've been asked before on calls, what do we see the medium term outlook for this business.
We kind of said mid single digits of net new assets. So kind of 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're partnering a lot with big RIAs. And as I said in my prepared remarks, we've re-signed several clients to long term contracts. So we like the business. We kind of feel we're a big player in the business.
We have fresh leadership in there, taking a fresh look at things and kind of coming up with different strategies. Also, you may recall from our call in January, we've pushed the acquisition we made a couple of years ago, Archer separately managed accounts. We've moved that over into Wealth Solutions, so we can give a more unified product delivery in separately managed accounts. To your point, we're very active in the long/short tax strategy as well, which is a good product for us, for our clients.
Alex Blostein, Analyst at Goldman Sachs
Great. All right, thanks, Dermot.
OPERATOR
Our next question comes from Ken Usdin with Autonomous Research.
Ken Usdin, Analyst at 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'm doing it right, it implies that fourth quarter fees would be down sequentially from the third. And I'm just wondering, is there any seasonality there or are there any items in the third quarter that might have just been, like, strong because of the environment or, you know, or not, I guess, you know, just in terms of how you're seeing the environment play out?
Dermot McDonogh, Chief Financial Officer
I guess 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're set up for these kind of things and the durability of the revenue stream. So we're kind of just trucking along, executing our strategy. And there's nothing really that I see in Q4 that's outlier relative to Q3. The pipeline is there, the healthy dialogue is there. Actually, I think we're 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.
Ken Usdin, Analyst at Autonomous Research
Yep, thanks. Thanks for that. I appreciate that. And then same point on the expenses. It kind of implies a, you know, 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, you know, pulling forward some investments. But can you just kind of talk us through, you know, fourth quarter seasonality on cost and if you're, in fact, you know, kind of moving some of the investments forward just because you have such a strong revenue base?
Dermot McDonogh, Chief Financial Officer
So 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. So 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.
Ken Usdin, Analyst at Autonomous Research
Right, okay, understood. Thanks again, Dermot.
OPERATOR
Our next question comes from Scott Siefers with TD Cowen Securities.
Scott Siefers, Analyst at TD Cowen Securities
Good 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. You know, 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.
Dermot McDonogh, Chief Financial Officer
So the philosophy for a number of years now is Tier 1 leverage ratio, 5.5% to 6%. We're at the upper end of that range. And so the firm was set up, you know, we run a lot of stress tests, up, down, shocking, making sure that we can deal with a lot of different situations. And so, like, with 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.
You know, year to date, I think it's roughly 86% and 85% of the quarter. So 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.
Scott Siefers, Analyst at TD Cowen Securities
Perfect. All right, thank you very much.
OPERATOR
We'll take our next question from Manan Gosalia with Morgan Stanley.
Manan Gosalia, Analyst at Morgan Stanley
Hey, good morning. On the Issuer Services side, I mean, clearly really strong growth there of over 40% year on year. And I know you noted that there's some pass-through expenses associated with the trust accounts in there, but is this level a good level to grow off of from here and what would the drivers be?
Dermot McDonogh, Chief Financial Officer
So 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 subsectors, 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. And then you have Depositary Receipts, which is somewhat of a seasonal business with Q2 being the outlier due to dividends.
But our Q3 was good as well and we've managed to win quite a good number of mandates in the APAC region, which I kind of alluded to in my prepared remarks. And the last comment I would say is our proud participation in trust accounts, and that is where that shows up. And while we don't disclose, you know, specific numbers, there is the gross up of revenue and expenses there with the pass-through, et cetera, et cetera. And so overall that is quite a good segment, strong segment, and we like what we have and we will look to continue to grow.
Manan Gosalia, Analyst at Morgan Stanley
Got it. And then you spoke about deposits, but if you can drill into non-interest-bearing deposits a little bit here. So, you know, 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?
Dermot McDonogh, Chief Financial Officer
So we don't, look, 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 going into Q4. In Q3, NIBs did adjust seasonally but were a little bit better than expected relative to the seasonal decline. So feel good about that. And really you have to remember that the deposit base is a result of clients doing more with us.
So when you, just to your earlier question on Corporate Trust, we have a lot of kind of natural deposits with that as clients kind of place cash with us to service their debt. And so 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.
Manan Gosalia, Analyst at Morgan Stanley
Got it. Thank you.
OPERATOR
We'll take our next question from David Smith with Truist Securities.
David Smith, Analyst at Truist Securities
Hi, good morning.
Dermot McDonogh, Chief Financial Officer
Morning David.
David Smith, Analyst at Truist Securities
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 benefit you saw in the third quarter and then any expectations for 4Q given the strong pipeline you mentioned? Thank you.
Dermot McDonogh, Chief Financial Officer
So 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 0 in organic growth in 22 and 23, 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 and a half for the first half of this year.
And I just say that the long term momentum, the 2026 momentum, continues.
David Smith, Analyst at Truist Securities
Okay, so you expect further momentum through 26 into 2027, even if it's maybe a little bit lumpy on a quarterly basis. Is that fair?
Dermot McDonogh, Chief Financial Officer
I'm not going to guide to the extrapolation. We feel good about where we were in the first half and I will say that our momentum in 2026 has sort of continued to be good. The growth, organic growth has continued to be good. There's no shock factor in the third quarter.
OPERATOR
Our next question comes from Glenn Shore with Evercore ISI.
Glenn Shore, Analyst at Evercore ISI
Hi, thanks very much. Just circling back on the RIA custody business. It's kind of interesting that a business like that would get an influx of two or three really big new competitors or, well, well-funded competitors. But I also know that these are long-dated, established relationships and business doesn't change that often. So maybe you could talk a little bit towards the investments you're making, what you think you have to do going forward to keep growing that business.
Because I think when you see the influx of competition, you get, ah, and you start thinking pricing is going to come under pressure. But maybe you could just kind of talk to what you're seeing and how we should think about it. Thanks.
Dermot McDonogh, Chief Financial Officer
So maybe I'll start. But one thing I would say is, Wealth Solutions, the platform which used to be known as Pershing, has become much, much closer to Bank of New York Mellon. And so when we have clients of Wealth Solutions, they're also clients of the firm. And I would say over the last couple of years, we've been able to offer more products from the broader Bank of New York Mellon family than we've ever done before. And so clients are coming to us because we're also a bank and we can do lending and we can do different things.
And so the relationship is not with Pershing as in the old days, it's now with Bank of New York Mellon and the platform as well. I think that's 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. And as I said in my answer to the last question, $4 trillion of AUCA. And 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, 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.
Robin Vince, Chief Executive Officer & Chairman of the Board of Directors
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, but the evolution of what clients want, an open architecture solution, the ability to bring strong capabilities, the fact that it isn't 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's sort of moving in our direction because it's at the right time.
Given the evolution of Bank of New York Mellon, given our platform and commercial models, unlocking the whole firm to deliver to any client of the firm, that's a good trend for us in this business. And it's not by coincidence that we've 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." And now when I speak to those same clients, they say to me, oh please, Bank of New York Mellon, 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 access to the rest of the company. We don't just want the traditional services from Pershing, we want the full breadth of Bank of New York Mellon delivered through Wealth Solutions.
Glenn Shore, Analyst at Evercore ISI
Good perspective. Maybe that's a good lead into the quickie follow-up ahead. So 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? And you know, I don't want to fully tie it to the tier one leverage decline in the quarter because I think this is coming at pretty low RWA to securitize 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.
Dermot McDonogh, Chief Financial Officer
So I think you, I hate to take a short answer to that, Glenn, but you answered the question. It's predominantly in our secured finance, but in short duration, fully collateralized, not using significant amount of risk-weighted assets and just supporting the client franchise. So you've got, you hit the nail on the head.
Glenn Shore, Analyst at Evercore ISI
Oh, all good. We can move on then. Thank you.
OPERATOR
Our final question comes from Gerard Cassidy with RBC.
Gerard Cassidy, Analyst at RBC Capital Markets
Hi, Robin and Dermot. 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?
Dermot McDonogh, Chief Financial Officer
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. And so all of that activity brings deposits onto the platform. And so we've grown deposits year over year. So I would say that's important point number one. And point number two is, and also the mix between IBs and NIBs has held in well and that's benefited us.
And then on the other side of the ledger, it's the yield pickup going from about 150 basis points to 200 basis points. And so 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 reinvested at higher yields.
Gerard Cassidy, Analyst at RBC Capital Markets
Very good. And then just speaking about rates and not asking for a forecast for 27, can you just paint the interest rate environment that's most ideal for the NII as we go forward into 27 again?
Dermot McDonogh, Chief Financial Officer
So the way my short answer to that is we try to narrow the cone of outcomes on interest rates. And so up or down 100 basis points, like there's been quite a move over the last several quarters, particularly the last quarter, and so we're largely immunized from that. So 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're in good shape.
Gerard Cassidy, Analyst at RBC Capital Markets
Very good, thank you very much.
OPERATOR
And our last question comes from Steven Tubach with Wolfe Research.
Steven Tubach, Analyst at Wolfe Research
Hi, good morning. I should say good afternoon now, Robin and Dermot, but thanks for squeezing me in here. It's much appreciated. I was hoping to drill down into the Security Services segment. Robin, when you started on the transformation journey, you highlighted Security Services as an area where you were much more focused on driving efficiency versus necessarily having the growth mindset that you are at least outlining for Market and Wealth Services.
In particular, you've been quite successful improving the margin in that segment the last three years within Security 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're starting to see a pretty healthy ramp in investment and was hoping you'd speak to whether you're pivoting to more of a growth mindset now that you're operating at full efficiency.
And where do you see the most compelling growth opportunities within the segment? Where are those incremental dollars being deployed?
Robin Vince, Chief Executive Officer & Chairman of the Board of Directors
Well, again, a little bit like one of the earlier questions, you sort of answer the question along the way. That's 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 started to realize that potential. It was an expense self-help story in part. But you're right, we've done a lot of the foundational work and it's 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. And as you pointed out, that's starting to show through the top-line story of the segment.
And so 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 and it's also broad based inside the whole story. Now there was a seasonally strong quarter in depository receipts in the second quarter. There's always a little bit of quarter-by-quarter story associated with it.
But you're right, we see white space in this segment and there's lots of types of white space for this. There's connecting more things from around the firm. There's going into new regions. You remember earlier in the year we announced a very important win in Germany. That's 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 asset transfer agency that I mentioned in my prepared remarks, that's essentially a capability add that's in the segment.
And then of course you have all of the capital markets growth, including the manufacturing of fixed income growth and the market trends that we've talked about as well. So we've done the work, we've repositioned the business and the team's doing a fabulous job to now really attack the opportunity and we think that that's the path that we're now going to be on.
Dermot McDonogh, Chief Financial Officer
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 and the team has got its ability and its belief back in its right to win. And it's been a story of leadership and execution. It's been fantastic.
Steven Tubach, Analyst at Wolfe Research
Really great color. Thanks so much for squeezing me in here.
OPERATOR
And with that, 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.
Robin Vince, Chief Executive Officer & Chairman of the Board of Directors
Thank you, operator, and thanks everyone for your time today. We appreciate your interest in Bank of New York Mellon. Please reach out to Marius and the IR team if you have any follow-up questions. Be well.
OPERATOR
This does conclude today's conference and webcast. A replay of this conference call and webcast will be available on the Bank of New York Mellon Investor Relations website at 3:00 pm Eastern Time today. Have a great day.
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