Positive Long-term Growth Dynamics BK should benefit from the long-term global growth of financial assets, growing diversity of financial instruments, rising regulatory complexity and increasing cross-border activity Global Financial Assets ($tn) CAGR % ( ’ 10 – ’ 20) ( ’ 90 – ’ 10) $1,000 +5% +4% $900 $900 $800 $730 +3% +5% $700 $600 $600 $494 $500 $393 $400 $273 $300 $221 $200 +8% +9% $100 $0 1990 1995 2000 2005 2010 2015 2020 Developing Advanced Source: Bain & Company: A World Awash in Money: Capital Trends Through 2020 Q1 2010 Investor Presentation < 11 >
Conservative Balance Sheet BK ’ s balance sheet is primarily comprised of low-risk, short-duration assets Loan accounts are a small and declining mix of total interest-earning assets Low-yielding cash and interbank investments have accumulated on the balance sheet Mix of Average Interest-Earning Assets 100% 17% 18% 18% 18% 90% 21% 23% 31% 37% 80% 70% 32% 35% 38% 37% 34% 32% 60% 30% 50% 1% 32% 2% 1% 2% 2% 2% 40% 1% 30% 2% 48% 45% 44% 44% 43% 43% 20% 38% 29% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 Cash / interbank investments Trading account securities Securities Loans Source: Company filings Q1 2010 Investor Presentation < 12 >
Conservative Balance Sheet: High-Quality Assets BK ’ s loan portfolio has consistently experienced less charge-offs through a cycle than a typical commercial bank BK ’ s investment securities portfolio primarily consists of high-quality AAA / AA- rated securities Loan Portfolio: Net Charge Off Ratio % 4.0% 3.0% 2.0% 1.0% – 2008 2009 2010 2011 2012 2013 2014 BK BAC WFC JPM Investment Securities Portfolio: Ratings Mix 100% 5% 6% 6% 6% 8% 11% 11% 5% 6% 5% 4% 5% 3% 2% 80% 60% 90% 89% 89% 89% 87% 87% 86% 40% 20% 0% 2008 2009 2010 2011 2012 2013 2014 AAA / AA- A+ / A- Other Source: Company filings, Wall Street research Q1 2010 Investor Presentation < 13 >
Conservative Balance Sheet: Liabilities BK ’ s assets are primarily funded by low-cost custody deposits, a high-quality wholesale funding source that has proven to be stable and predictable Custody deposits are attractive funding sources because they originate from very sticky custody relationships with high switching costs Deposits $400 90% 82% 81% 81% 79% 77% 77% 80% $350 72% 70% Interest-Earning Assets % of Deposits $300 60% 60% $250 $234 $222 Total Deposits 50% $192 $200 $73 $70 40% $160 $58 $141 $150 $132 $35 30% $36 $34 $92 $88 $100 – 20% $161 $22 $152 $134 $125 $104 $50 $98 $92 10% $66 – – 2007 2008 2009 2010 2011 2012 2013 2014 Interest-bearing deposits Noninterest-bearing deposits Deposits / Interest-earning assets Source: Company filings Q1 2010 Investor Presentation < 14 >
Conservative Balance Sheet: Safe Haven BK has experienced deposit inflow surges during market crises because clients view BK ’ s balance sheet as a safe haven September 2001 Attack Lehman Brothers Bankruptcy US Debt Ceiling 2011 US Fiscal Cliff 2012 $250 $223 $218 $208 $199 $207 $192 $200 $169 $140 $145 $150 $132 $120 $100 $61 $57 $54 $53 $50 – 1Q01 2Q01 3Q01 4Q01 3Q08 4Q08 1Q09 2Q09 2Q11 3Q11 4Q11 1Q12 3Q12 4Q12 1Q13 Source: Company filings Q1 2010 Investor Presentation < 15 >
High Capital Ratios BK ’ s Tier 1 capital ratio has approached multi-year highs Tier 1 Capital Ratio 18.5% 16.5% 14.5% 12.5% Consolidation of 10.5% certain investment management funds (1) 8.5% 6.5% 4.5% 2.5% 0.5% 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 (1) Reflects methodology revision implemented in June 30, 2014 that consolidates assets of certain investment management funds in risk-weighted assets. Basel III capital ratios are shown from 1Q14 onwards Q1 2010 Investor Presentation < 16 >
Attractive Balance Sheet: Stress Test Performance BK ’ s business model performs well in government stress tests Source: Federal Reserve March 2015 DFAST Stress Test Q1 2010 Investor Presentation < 17 >
III. The World Has Changed Q1 2010 Investor Presentation < 18 >
Net Interest Margin Pressure BK ’ s earnings are cyclically pressured by decade-low net interest margins due to a prolonged period of low global interest rates and a growing mix of excess deposits on the balance sheet Low global interest rates depress net interest revenue, depress trading volatility, increase money market fee waivers, and depress securities lending spreads Net Interest Margin (FTE) % 2.50% 2.30% 2.10% 1.90% 1.70% 1.50% 1.30% 1.10% 0.90% 0.70% 0.50% 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Source: Company filings Q1 2010 Investor Presentation < 19 >
Net Interest Revenue Upside BK can create $11 - $21 per share of incremental value by 2017 from incremental net interest revenue depending on the pace of short-term interest rate normalization Net Interest Revenue Sensitivity $6,000 $4,884 $5,000 $3,950 Net Interest Revenue $4,000 $2,904 $3,000 $2,000 $1,000 – LQA 2017E 2017E (1) (2) FFER +25bps/qtr (2Q15 - 2017) "Fed Dots" Average NIM % 91 bps 138 bps 170 bps Average Fed Funds Rate % 9 bps 213 bps 302 bps Incremental EPS @ 27% tax rate $0.74 $1.40 (x) P/E 15.0x 15.0x Incremental Value Per Share $11.07 $20.95 Note: Assumes $55bn of excess deposits (midpoint of $40 - $70bn Company guidance) and 3.5% CAGR on normalized interest-earning assets (1) Assumes midpoint of 2014 Investor Day NIM guidance(125bps – 150bps) (2) September 17, 2014 FOMC projection materials. Assumes ~1.7% NIM rate at 3% FFER Q1 2010 Investor Presentation < 20 >
BNY Mellon Has Greater Rates Leverage than State Street Net Interest Revenue Sensitivity Impact on current net interest revenue over the next 12 months based on a quarterly 25 bps increase in global interest rates over the next four quarters (Company internal estimates) + 100bps rate "ramp" $149 $326 LTM Net Interest Revenue (FTE) $2,433 $2,942 % Upside 6.1% 11.1% Source: Company filings Q1 2010 Investor Presentation < 21 >
Securities Lending and FX Volatility Higher interest rates may also potentially drive improvements in securities lending and FX trading revenues Indexed Ted Spread (3 Mo. LIBOR – T. Bills) FX Volatility 25 350 300 20 JPM G7 Volatility Index 250 15 Averages: TED Spread 200 2001 – Present: 42 2001 – 2007: 36 150 10 2009 – Present: 30 100 5 ~25 50 0 0 “ The Fed Funds Rate has a big impact on the TED FX volatility now at all-time lows over the past 20 spread, which has a big impact on our securities years lending activity...when rates eventually go up and As interest rates rise and rate differentials increase, you get back to the more normalized TED spread, customers increase their use of carry trade strategies this will be a much more attractive business � higher FX volumes financially ” - Bob Kelly, CEO, 3/2/10 CLSA Analyst Day Source: Bloomberg, Company transcripts Q1 2010 Investor Presentation < 22 >
Money Market Fee Waivers Higher interest rates will also recover significant money market fee waivers Pre-tax Money Market Fee Waivers Fee Waiver Recovery Source: 4/8/14 Analyst Day, 9/4/14 Barclays Global Financial Services Conference Q1 2010 Investor Presentation < 23 >
A Changing Regulatory Landscape Key Regulations Past Present Future Basel Capital Ratios Stress Testing (CCAR/ DFAST) Dodd-Frank Supplementary Leverage Ratio (SLR) Liquidity Coverage Ratio (LCR) European Market Infrastructure Regulation (EMIR) Volcker Rule Recovery and Resolution Plans Foreign Account Tax Compliance Act (FATCA) Markets in Financial Instruments Directive (MiFID) Target2 Securities (T2S) Alternative Investment Fund Managers Directive (AIFMD) Tri-party Repo Reforms Money Market Fund Reforms Data Management Standards Net Stable Funding Ratio (NSFR) Total Loss Absorbing Capital (TLAC) G-SIB Surcharges Source: Company filings, Industry news, Wall Street research Q1 2010 Investor Presentation < 24 >
Key Business Model Implications New Regulations Key Implications Supplementary Leverage Higher capital retention, “ low risk ” assets need to generate Ratio (SLR) higher returns, trading book contraction, deposit reduction and management, higher compliance costs, Liquidity Coverage Ratio Lower NIM yields, reallocation of balance sheet towards (LCR) HQLA, reduced appetite for non-operational deposits, liability optimization, higher compliance costs Stress-Testing (CCAR / DFAST) Regulatory scrutiny of capital return policies, higher capital ratios, tighter risk management practices, higher compliance costs Basel III Higher capital ratios, more onerous capital definitions and risk- weightings, less leverage, capital penalties for size, complexity and interconnectedness Tri-party Repo Reform Lower intraday credit risk, higher compliance costs Resolution Plans Higher compliance costs Reduced Size & More Capital & Higher Compliance Lower Market, Credit Complexity Reduced Leverage Expenses & Operational Risk Source: Company filings, Industry news, Wall Street research Q1 2010 Investor Presentation < 25 >
Rising Capital and Liquidity Requirements By 2019 CET1 SLR LCR 15.0% 8.0% 150% 125% 12.0% 6.0% 109% 6.0% Well-Capitalized 100% 9.8% 1.0% Buffer 100% 9.0% 8.5% 4.4% 0.5% US G-SIB (1) B3 G-SIB 1.0% Enhanced SLR 75% Surcharge (2) 4.0% 2.0% Buffer Capital 6.0% 2.5% Cons. Buffer 50% 2.0% 3.0% SLR 3.0% 25% B3 Minimum 4.5% Minimum – – – (3) BK @ 4Q14 Projected BK Projected BK @ 4Q14 Projected Regulatory Regulatory Regulatory Source: Wall Street research, Company filings (1) Potential US G-SIB surcharge of up to 2%. Estimated 0.5% US surcharge for BK per Citigroup 12/8/14 (2) B3 potential G-SIB surcharge of 1% - 3.5%. Estimated 1% surcharge for BK per Financial Stability Board (3) Per 10/28/14 Investor Day Q1 2010 Investor Presentation < 26 >
Key Business Model Implications Whether or not the rate / volatility environment ever returns to historical levels, the new regulatory world requires BNY Mellon to reconsider many aspects of the Company: Client Selection & Business Lines Geographical Mix Economics Deposit & Liability Asset Mix Labor Mix Structure Q1 2010 Investor Presentation < 27 >
IV. Poor Management Through A Changing Environment Q1 2010 Investor Presentation < 28 >
2007 Mellon Merger Has Failed to Deliver on Promises Q1 2010 Investor Presentation < 29 >
2007 Mellon Merger Has Failed to Deliver on Promise In its 12/4/2006 presentation on the merger with Mellon Financial (Mellon M&A Presentation), BK outlined a path towards $3.38 in cash EPS by 2009 BK only achieved $2.56 of cash EPS in 2014 (24% below 2009 targets, 5 years later) 12/4/06 Mellon M&A Presentation – EPS Targets Source: Mellon M&A presentation 12/4/2006 Q1 2010 Investor Presentation < 30 >
Dubious Claimed Merger Synergies BK claims it achieved $850mm of expense synergies and $325 - $425mm of revenue synergies from the Mellon merger (claiming that it even exceeded its initial goals) Despite claimed synergies, revenue growth has been tepid and actual expenses have significantly outgrown revenues Claimed synergies are dubious, as gross expenses would have massively outgrown revenues without synergy benefits 2007 Mellon Merger Targets FY2007 – FY2014 Total Growth % Core (1) 4% Revenues 6% ∆ Actual Results Core 10% (2) Expenses – 4% 8% 12% 16% 20% 24% Core 2% (1) Revenues 15% ∆ Without “ Alleged ” Core Synergies (3) 17% (2) Expenses – 4% 8% 12% 16% 20% 24% Mellon merger synergies are unobservable based on post-merger results Source: M&A presentation 12/4/2006, Company presentation 11/11/08, 10K 2014 (1) “ Core revenue ” adjusts for non-operating items such as securities gains (losses), FTE adjustments, discount accretion, earnings attributable to non-controlling interests of consolidated investment management funds and one-time gains / losses on asset sales (per BNY Mellon 10/28/14 Investor Day methodology) (2) Core expenses adjusted for intangible amortization, M&I, litigation and restructuring charges, support agreement charges, and charges related to investment management funds (3) Assumes $850mm of cost synergies and $375mm of revenue synergies Q1 2010 Investor Presentation < 31 >
Noninterest Expense Has Grown Unsustainably Margins have deteriorated as noninterest expense has grown rapidly against stagnant fee revenue Noninterest Expense % of Fee Revenue (1) 95% 93% 92% 91% 90% 89% 88% 87% 85% 80% 77% 75% 70% 2008A 2009A 2010A 2011A 2012A 2013A 2014A Source: Company filings (1) Noninterest expense excludes amortization of intangible assets, merger & integration charges, litigation and restructuring charges, support agreement charges, charges related to investment management funds (2) Fee revenue excludes non-recurring asset-related gains Q1 2010 Investor Presentation < 32 >
Unabated Headcount Growth Headcount has grown disproportionately versus revenues since the Mellon merger (22% total growth in headcount vs. 4% total growth in “ Core ” Revenue) “ Core ” Revenue (2) ($bn) Total Headcount $16.0 55,000 50,300 $15.0 50,000 $14.6 $14.0 $14.0 45,000 41,200 $13.0 40,000 $12.0 35,000 $11.0 30,000 $10.0 25,000 (1) 2007 2014 2007 2014 Source: Company filings, Marcato estimates (1) 2007 includes annualized impact of Mellon Financial (2) “ Core revenue ” adjusts for non-operating items such as securities gains (losses), FTE adjustments, discount accretion, earnings attributable to non-controlling interests of consolidated investment management funds and one-time gains / losses on asset sales (per BNY Mellon 10/28/14 Investor Day methodology) Q1 2010 Investor Presentation < 33 >
Technology Fragmentation Is A Key Source of Excess Costs Major Redundancies - Back office headcount Two Custody Five Accounting - Systems maintenance Platforms Platforms - Application development - Reporting costs “ One of the things that is really setting us apart [from our competitors] post-transformation is the fact that we do have one global platform...When we spend dollars to build the future functionality, we do it once. And then we leverage it across the world. If you have six accounting platforms and you were doing a regulatory change six times, that ’ s 1/6 the IT efficiency ” - Gunjan Kedia, State Street EVP, 2/25/15 “ And I think I ’ ve mentioned about the challenges with the merger & acquisitions is we have so many different fragmented technology in various businesses and various products...I think the nature of the acquisitions have resulted in lots of fragmentation of technology ” - Suresh Kumar, BNY Mellon CTO, 3/13/13 “ The traditional approach for any of these acquisitions is steeped in the thesis that you ’ ll see more synergies the more simplified your back end, and the more common systems you share, especially those that benefit from scale. That ’ s been time-tested in the trust banking business ” - Tim Keaney, Former BNY Mellon CEO Investment Services, 2010 (1) Source: Company filings, Company transcript, HBS Case Study (1) Harvard Business School Case Study: “ Merger of Equals: The Integration of Mellon Financial and The Bank of New York ” Q1 2010 Investor Presentation < 34 >
Costly M&A Activity BK ’ s heavy cost structure reflects the significant M&A activity the Company has undertaken over the years 2007 Global Securities Services 2008 2009 Portsmouth Financial Systems 2010 BHF Asset Servicing 2011 Broker-Dealer 2012 2013 2014 Mellon Financial has not been fully integrated seven years after the acquisition Source: Company filings, CapitalIQ Note: Cutwater Asset Management acquisition announced in October 2014 and closed in January 2015 Q1 2010 Investor Presentation < 35 >
Gerald Hassell ’ s 2011 Investor Day Targets Have Failed to Materialize Q1 2010 Investor Presentation < 36 >
Missed EPS Targets: 2011 Investor Day In BK ’ s 11/14/11 Investor Day, CEO Gerald Hassell provided a roadmap for 7 – 11% EPS growth between 2011 and 2014 BK fell significantly short of even the low-end of its 2014 EPS targets 2011 Investor Day Earnings Roadmap Cash EPS Bridge to 2011 Investor Day Target $3.50 $3.31 $2.96 $3.00 $2.52 $2.49 $2.50 $2.42 $2.00 '14A '14A $2.56 $2.56 $1.50 $1.00 2011A 2012A 2013A 2014 (@7%) 2014 (@11%) Source: BNY Mellon Investor Day 11/14/11 Q1 2010 Investor Presentation < 37 >
Missed ROE Targets: 2011 Investor Day In BK ’ s 11/14/11 Investor Day, BK Management also targeted a 10% ROE by FY14 BK fell significantly short of this 10% ROE target in 2014 ROE has deteriorated significantly since 2011 BK Return on Equity % (1) 10.5% 10.0% 9.5% ROE 9.0% Gap 9.0% 8.8% 8.5% 8.3% 8.1% 8.0% 7.5% 7.0% 2011 2012 2013 2014 (1) Reflects Company-reported non-GAAP ROE Q1 2010 Investor Presentation < 38 >
BNY Mellon Has Underperformed State Street on Key Targets While BK ’ s results have significantly deteriorated, State Street ’ s results have significantly improved Indexed EPS Growth (1) Return on Equity (2) 150 12.0% 132 11.0% 125 10.5% 118 10.3% 10.0% 106 105 9.8% 10.0% 104 103 100 100 100 9.0% 8.8% 9.0% 8.3% 8.1% 75 8.0% 50 7.0% 2011 2012 2013 2014 2011 2012 2013 2014 BK STT (1) Adjusted for amortization of intangibles, acquisition and restructuring costs and other one-time items (2) Reflects State Street ROE adjusted for extraordinary losses and BK non-GAAP ROE % Q1 2010 Investor Presentation < 39 >
Flat EPS Growth Despite Certain Beneficial Market Tailwinds “ Using the S&P 500 Index as a proxy for the global equity markets, we estimate that a 100-point change in the value of the S&P 500 Index, sustained for one year, would impact... ” ─ “ ...fully diluted earnings per common share by $0.03 to $0.05 ” (BK 2011 Annual Report) ─ “ ...fully diluted earnings per common share by $0.03 to $0.05 ” (BK 2012 Annual Report) ─ “ ...fully diluted earnings per common share by $0.02 to $0.04 ” (BK 2013 Annual Report) ─ “ ...fully diluted earnings per common share by $0.02 to $0.04 ” (BK 2014 Annual Report) Indexed Growth (FY2011 = 100): BK EPS Growth vs. Market Indices Growth 160 152 150 140 134 130 120 118 110 107 106 100 90 2011 2012 2013 2014 S&P 500 Index MSCI World Index FTSE 100 Index Barclays Capital Global Aggregate Bond Index BNY Mellon LTM EPS Source: Company filings Note: Equity market indices represent daily averages over time series. Bond index represents period-ends over time series Q1 2010 Investor Presentation < 40 >
Unobservable “ Cost Reductions ” Margins have deteriorated despite “ Operational Excellence Initiatives ” , where BK laid out savings targets of $650 - $700mm by 2015 BK claims that has significantly exceeded its targets through 2013 but there is no observable evidence in support of this claim 2011 Operational Excellence Targets Source: BNY Mellon 10K 2013 Q1 2010 Investor Presentation < 41 >
Expense Growth Does Not Show Evidence of Initiatives Claimed cost savings imply gross expenses between 2011 and 2013 would have grown by $1.2bn (or ~12%) if management did not execute its “ Operational Excellence ” initiatives and achieve M&A synergies Revenue has barely grown over the same time period 2011 – 2014 Total Growth % 15% 12% 11% Total Growth (2011 - 2014) 7% 5% 3% 2% (2) (3) (1) (1%) Revenue Expenses, net Expenses, gross Source: Company filings (1) Adjusted for sale of Shareowner Services sale in 2011, gain/loss related to equity investments, and net income attributable to noncontrolling interest related to consolidated investment management funds (per BNY 10/28/14 Investor Day pg. 10) (2) Adjusted for sale of Shareowner Services sale in 2011, amortization of intangible assets, M&I, litigation and restructuring charges and charges related to investment management funds (3) Net expenses adjusted for $636 of “ Operational Excellence ” savings and claimed GIS acquisition expense synergies (2011 = $72mm, 2014 = $120mm) Q1 2010 Investor Presentation < 42 >
Bloated Employee Base Headcount disproportionate to that of comparable companies ■ Combinations of similar sized investment managers and investment servicers would imply meaningfully lower headcount levels ■ Headcount discrepancy not bridgeable by BK ’ s Corporate Trust or Pershing business units Total Employees Investment Investment Managers 60,000 Servicers Implied Headcount (Asset Manager + Asset Servicer) 50,300 50,000 Asset Managers Capital JPM Vanguard BLK BEN Group GIM (2) PIMCO 40,000 JPM Servicers Total Employees 41,200 39,200 36,266 34,000 32,700 29,490 Asset (1) (TSS) STT 41,670 39,670 36,736 34,470 33,170 29,960 30,000 27,470 ~27,000 (IS) 20,000 ~14,200 12,200 9,266 10,000 ~7,000 6,264 5,870 5,700 3,100 ~2,500 2,490 1,435 – BK STT JPM Vanguard BLK BEN Capital Group IVZ TROW JPM LM STT PIMCO FII (1) (Inv. Serv.) (TSS) (Global Inv. Mgmt.) (Inv. Mgmt.) AUC/A ($tn) $29 $28 $21 AUM ($bn) $1,710 $3,100 $4,652 $898 $1,147 $792 $747 $1,744 $709 $2,480 $1,680 $363 Source: Company filings, Marcato estimates (1) JPM ’ s Treasury & Securities Services division (2) JPM ’ s Global Investment Management division Q1 2010 Investor Presentation < 43 >
Employee Inefficiency BK ’ s ever-deepening gap of core revenues / average employee in comparison to State Street show significant increasing employee inefficiency Core Revenue / Average Employee (1) $0.400 $0.370 Core Revenue / Average Employee ($bn) $0.340 $0.310 $0.280 $0.250 2009 2010 2011 2012 2013 2014 BK STT Source: Company filings (1) “ Core revenue ” adjusts for non-operating items such as securities gains (losses), FTE adjustments, discount accretion, earnings attributable to non-controlling interests of consolidated investment management funds and one-time gains / losses on asset sales (per BNY Mellon 10/28/14 Investor Day methodology). BNY Mellon adjusted for sale of Shareowner Services and acquisitions of PNC GIS and BHF Asset Servicing Q1 2010 Investor Presentation < 44 >
Relative Headcount Trajectory While macroeconomic factors and regulatory compliance have pressured headcount and costs for all G-SIB banks, BK has responded least forcefully to headcount Indexed Headcount 110% 105% 104% 103% 100% Indexed Headcount 96% 95% 94% 93% 90% 85% 80% 78% 75% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 (1) BNY Mellon State Street JP Morgan (CIB = TSS + IB) Bank of America Goldman Sachs Citigroup Source: Company filings (1) CIB represents JP Morgan ’ s Corporate and Investment Bank, which includes the results of Investment Banking and Treasury & Securities Services segments Q1 2010 Investor Presentation < 45 >
Disproportionately High Professional Fee & Outside Service Expense While choices around insourcing vs. outsourcing impact headcount comparisons, BK also spends the greatest % of revenues on professional and outside service fees compared to other custody, asset management and G-SIB peers ■ BK ’ s professional, legal and outside services expense has grown by over 10% since 2011 2014 Professional & Outside Service Fees % of Revenues 10.0% 9.0% 9.0% 8.2% 8.0% 7.0% 6.0% 5.0% 4.3% 4.0% 2.9% 3.0% 2.6% 2.0% 1.1% 1.0% – BK JPM STT BAC GS BLK Source: Company filings Q1 2010 Investor Presentation < 46 >
BK ’ s Margins Have Deteriorated While State Street ’ s Margins Have Improved BNY Mellon went from a 2%+ margin surplus versus State Street to a 5% margin deficit LTM Core Pre-Tax Margin % (1) 35.0% 33.0% +2% 31.0% -5% -3% 29.0% 27.0% 25.0% 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 BK STT Source: Company filings (1) Adjusts revenue for net securities gains, accretable discount, FTE adjustments, other gains/losses on asset sales, net income attributable to noncontrolling interests in consolidated investment management funds. Adjusts expenses for amortization of intangible assets, M&I, litigation & restructuring charges, net charge related to investment management funds, and other one-time charge. BK margins also adjusted for sale of Shareowner Services and GIS / BHF acquisitions Q1 2010 Investor Presentation < 47 >
Persistent Underperformance on Key Business Metrics Q1 2010 Investor Presentation < 48 >
Key Revenue Drivers Are Decelerating Under Current Management Investment Servicing LTM Gross New Business Wins ($bn) $1,900 $1,700 $1,720 $1,500 $1,294 $1,479 $1,300 $1,138 $1,219 $1,226 $1,415 $1,133 $1,141 $1,167 $1,231 $1,284 $1,273 $1,348 $1,176 $1,031 $1,118 $1,100 $1,201 $1,216 $1,125 $900 $1,016 $982 $639 $700 $706 $536 $524 $529 $595 $500 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 BK STT Investment Management LTM Long-Term Net Inflows ($bn) $120 $107 $100 $95 $89 $84 $83 $80 $76 $76 $60 $59 $58 $56 $53 $48 $42 $40 $23 $20 – 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Source: Company filings Q1 2010 Investor Presentation < 49 >
BK Has Lost Custody Market Share Under Current Management BK tells investors to not “ get overly concerned about that new business win rate because less of the business is geared to AUC ” (1) and argues that there has been a “ real shift in non- AUC/A types of businesses ” (2) Management pronouncements may help explain inferior AUC/A growth rates but do not explain inferior asset servicing revenue growth rates Asset Servicing Fee Growth % (1) 18% 17% 16% 14% 12% 11% 10% 8% 6% 4% 2% – 1 2 (1) LTM 3Q11 – FY14 total growth. Reflects BK ’ s reported asset servicing fees less securities lending revenues within Investment Services segment. Reflects STT ’ s reported servicing fee revenues which excludes securities finance revenues Q1 2010 Investor Presentation < 50 >
BK Has Lost Custody Market Share Under Current Management: Total Custody Assets BNY Mellon is about to be surpassed as the world ’ s largest global custodian Indexed Custody Asset Growth (3Q11 = 100%) 150% 143% 140% 131% 130% 130% 126% 120% 115% 110% 100% 90% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 BK STT NTRS JPM C Source: Company filings Q1 2010 Investor Presentation < 51 >
BK Has Lost Custody Market Share Under Current Management : Equity Assets BNY Mellon is about to be surpassed as the world ’ s largest global custodian Indexed Equity Custody Growth (3Q11 = 100%) 170% 160% 152% 152% 150% 148% 144% 140% 130% 120% 110% 100% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 BK STT NTRS JPM Source: Company filings, Wall Street estimates, Marcato estimates Q1 2010 Investor Presentation < 52 >
BK Has Lost Custody Market Share Under Current Management : Fixed Income Assets BNY Mellon is about to be surpassed as the world ’ s largest global custodian Indexed Fixed Income Custody Growth (3Q11 = 100%) 150% 139% 140% 130% 120% 113% 110% 105% 103% 100% 90% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 BK STT NTRS JPM Source: Company filings, Wall Street estimates, Marcato estimates Q1 2010 Investor Presentation < 53 >
Net Interest Revenue Is Under-earning Due to Excess Accumulation of Low-Yielding Cash / Interbank Investments (cont ’ d) Net Interest Margin % (FY14) (1) 1.20% 1.16% 1.15% 1.08% 1.10% 1.05% 1.00% 0.97% 0.95% 0.90% 1 2 3 Cash / Interbank Investments % of Interest-Earning Assets (FY14) 50.0% 45.0% 40.0% 33.6% 28.4% 30.0% 20.0% 10.0% – 1 2 3 Source: Company filings (1) Fully-taxed equivalent Q1 2010 Investor Presentation < 54 >
BNY Mellon Has Consistently Returned Less Capital to Shareholders Than State Street Total Capital Return (% of Average Quarterly Market Capitalization) 3.50% 2.97% 3.00% 2.88% 2.82% 2.44% 2.50% 2.22% 2.20% 1.91% 2.00% 1.82% 1.83% 1.79% 1.79% 1.70% 1.69% 1.59% 1.52% 1.45% 1.42% 1.42% 1.50% 1.33% 1.26% 1.14% 1.00% 0.84% 0.50% – 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 BK STT Source: Company filings, CapitalIQ Note: Capital return = share repurchases + dividends Q1 2010 Investor Presentation < 55 >
V. No New Ideas For A Better Future Q1 2010 Investor Presentation < 56 >
“ New ” Strategy – No New Ideas 11/14/11 Investor Day 12/11/13 GS Conference 10/28/14 Investor Day ( “ Flat ” ) CEO Gerald Hassell: “ It ’ s part of our goals that if we get a 4%, 5% revenue growth in a range, we should be able to produce positive operating leverage ” CFO Todd Gibbons: “ Our core fee business has been growing at about the 3% to 5% range...on the lower end of that, to generate positive operating leverage...is going to be challenging ” Revenue 3 – 5% 3 – 5% 3.5% – 4.5% CAGR Expense 2 – 3% ~3 – 4 % ~4% (1) CAGR EPS 7 – 11% 7 – 9% CAGR Despite rhetoric about “ moving faster and with a greater sense of speed and urgency ” , new targets imply business as usual Source: 11/14/11 Investor Day, 12/11/13 GS Conference, 10/28/14 Investor Day (1) Per Marcato estimates, see slide 62 Q1 2010 Investor Presentation < 57 >
No New Ideas Return on Tangible Equity (non-GAAP) 30% 30% 25% 25% 25% 25% 22% 22% 20 - 22% 20 - 22% 20% 20% 20% 20% 17 -19% 17 -19% 18% 18% 15% 15% 10% 10% 2011 2011 2012 2012 2013 2013 9/30/14 2014 2017 2017 2017 2017 Flat Flat Normalized Normalized New guidance demonstrates little commitment to restoring or improving returns on tangible equity, even in a normal interest rate environment Source: 10/28/14 Investor Day Q1 2010 Investor Presentation < 58 >
Technology “ Efficiencies ” Are Unobservable Highly touted technology efficiencies (reduced infrastructure spend, reduced application development costs) are unobservable in key expense lines Software and professional service expenses have risen 10 – 18% since 2012 Stated Efficiencies Indexed Expense $ 120 118 114 115 110 110 105 102 100 100 100 95 90 85 80 2012 2013 2014 Software Professional, Legal and Other Purchased Services Source: 10/28/14 Investor Day, Company filings Q1 2010 Investor Presentation < 59 >
Lack of Accountability on “ Operating Leverage ” Management claims to be focused on operating leverage but offers no consistent benchmark to be held accountable against Management has re-defined “ operating leverage ” three times in the past year Operating Leverage Adjustments 2Q14 3Q14 2014 Earnings Earnings Investor Day � � � GAAP revenue � � � (-/+) Gain (loss) on assets / investments � � � (-) Investment and other income � � � (-/+) Net securities gains (losses) � � � (-) Minority interest of cons. inv. mgmt. funds � � � (-) Accretable discount � � � (+) Fully-taxed equivalent adjustment Adj. Revenue � � � GAAP Expenses � � � (-) M&I, restructuring � � � (-) Amortization � � � (-) Charge related to i-mgmt funds Adj. Expenses Source: Company transcripts, 2Q14 Earnings Release, 3Q14 Earnings Release, 10/28/14 Investor Day Q1 2010 Investor Presentation < 60 >
Lack of Accountability on “ Operating Leverage ” Less than 2 weeks apart, Management showed two different methodologies to showcase the best version of “ operating leverage ” and “ margin improvement ” to investors Method 1 (1) : 3Q14 Earnings (10/17/14) Method 2 (2) : 2014 Investor Day (10/28/14) “ This is one of our real focuses, delivering positive operating leverage and improving the operating margins of our “ Our operating leverage was up 245 basis Commentary company...And so you can see over the last points year-over-year... ” (Todd Gibbons) 12 months, the operating margin has in fact, improved by 78 bps across the firm ” (Gerald Hassell) 3Q14 vs. 3Q13 Results LTM 3Q14 vs. LTM 3Q13 Results As presented As presented 3.00% 1.20% 107 bps 245 bps 2.50% 1.00% 78 bps 77 bps 176 bps 2.00% 0.80% 58 bps 1.50% 0.60% Results 1.00% 0.40% 0.50% 0.20% 14 bps 10 bps – – Operating Leverage Margin Expansion Operating Leverage Margin Expansion Method 1 Method 2 Source: 10/28/14 Investor Day, Marcato estimates (1) Method 1: Adjusted revenue defined as GAAP revenue – investment and other income – net securities gains – minority interest. Adjusted expenses defined as GAAP expenses – M&I and restructuring charges – amortization of intangibles – charges related to investment management funds (2) Method 2: Adjusted revenue defined as GAAP revenue – gains (losses) on assets and investments – net securities gains – minority interest – accretable discount + fully-taxed equivalent. Adjusted expenses defined as GAAP expenses – M&I and restructuring charges – amortization of intangibles – charges related to investment management funds Q1 2010 Investor Presentation < 61 >
Guidance Implies Virtually No Operating Leverage on a “ Core Margin ” Basis '14A - '17E Key Management Guidance Drivers 2014A 2015E 2016E 2017E CAGR 4% Revenue Growth 4% Revenue $14,856 $15,450 $16,068 $16,711 8% EPS Growth % growth 4% 4% 4% 70% Buyback Ratio ~$600mm of share dilution per annum (-) Accretable discount (163) (145) (120) (100) (-) Net securities gains (91) (91) (91) (91) (+) FTE 62 62 62 62 (-) Minority interest (84) (70) (70) (70) Core Revenue $14,580 $15,206 $15,849 $16,512 4% Where is the operating % growth 4% 4% 4% leverage? Core Expense (implied) ($10,645) ($10,991) ($11,451) ($11,924) 4% % growth 3% 4% 4% Core Pretax Income $3,935 $4,215 $4,398 $4,588 5% (+) Accretable discount 163 145 120 100 (+) Net securities gains 91 91 91 91 (-) FTE (62) (62) (62) (62) (+) Minority interest 84 70 70 70 (+/-) Provision for credit losses 48 (10) (10) (10) (10%) (-) Intangible amortization (298) (268) (240) (216) Pretax Income $3,961 $4,181 $4,367 $4,561 5% (-) Taxes @ 27% (1,038) (1,129) (1,179) (1,231) Net Income $2,923 $3,052 $3,188 $3,329 4% (-) Minority interest (84) (70) (70) (70) (-) Preferred dividends (73) (73) (73) (73) (-) Participating securities (43) (43) (43) (43) Net Income to common $2,723 $2,866 $3,002 $3,143 5% (3%) (/) FD shares outstanding 1,137 1,109 1,075 1,042 Diluted EPS $2.39 $2.59 $2.79 $3.02 8% % growth 8% 8% 8% Source: 10/28/14 Investor Day, Marcato estimates Q1 2010 Investor Presentation < 62 >
Expense Growth Assumptions Are Unrealistic Higher expense growth in “ flat scenario ” than “ normalized scenario ” ? Investment Services Segment: 2014A 2015E 2016E 2017E CAGR "FLAT SCENARIO": Revenue $ 10,059 $ 10,411 $ 10,775 $ 11,153 3.5% Pretax Income (excl. intangible amort., M&I, litigation & restructuring) $ 3,063 $ 3,216 $ 3,377 $ 3,546 5.0% Implied Pretax Expenses $ 6,996 $ 7,195 $ 7,398 $ 7,607 2.8% "NORMALIZED SCENARIO": Revenue $ 10,059 $ 10,562 $ 11,090 $ 11,645 5.0% Pretax Income (excl. intangible amort., M&I, litigation & restructuring) $ 3,063 $ 3,400 $ 3,774 $ 4,189 11.0% Implied Pretax Expenses $ 6,996 $ 7,162 $ 7,316 $ 7,455 2.1% Source: 10/28/14 Investor Day, Marcato estimates Q1 2010 Investor Presentation < 63 >
Questionable Expense Allocation To Meet Segment Targets Guidance implies ~$250mm of incremental excess expenses will be allocated into the “ Other ” segment “ Other ” has historically been a bucket for excess expenses Whose bonus is tied to “ Other ” expenses? Illustrative Income Statement (Flat Environment) '14E - '17E 2014A 2015E 2016E 2017E CAGR (1) PTI @ 8.0% EPS CAGR $3,961 $4,167 $4,353 $4,546 5% (-) M&I, restructuring and legal (1,130) (450) (450) (450) – – – (-) i-mgmt. fund charges (104) – – – (+) FX litigation charge 779 (+) Intangible amortization 298 268 240 216 Pretax Income (ex. amort) $3,804 $3,985 $4,143 $4,312 4% 9% (-) Investment Management PTI ($1,116) ($1,216) ($1,326) ($1,445) % growth 9% 9% 9% Segment guidance 5% (-) Investment Services PTI ($2,794) ($2,934) ($3,080) ($3,234) Segment guidance % growth 5% 5% 5% Other PTI ($106) ($165) ($264) ($368) 51% % growth 55% 60% 40% Source: 10/28/14 Investor Day, Bloomberg consensus estimates, Marcato estimates, Management guidance (1) See page 62 for implied PTI at 8% EPS CAGR Q1 2010 Investor Presentation < 64 >
Speculative Investments in “ Growth ” Initiatives BK will incur hundreds of millions of dollars of expenses to pursue strategic investments that will only become accretive to earnings in 2017 and 2018 Investment Management Investment Servicing Source: 10/28/14 Investor Day Q1 2010 Investor Presentation < 65 >
Speculative Investments in “ Growth ” Initiatives (cont ’ d) Strategic investments are unlikely to reach breakeven until at least 2019, assuming Management does not underperform on its current plan as it has in the past Pre-Tax Impact of “ Initiatives ” 2013 2014 2015 2016 2017 2018 2019 – Investment Management Initiatives ($36) ($74) ($39) $44 $94 $99 Strategic Platform Investments (120) (111) (135) (11) 145 150 155 Total Investments ($156) ($185) ($175) ($11) $189 $244 $255 Cumulative Investment in “ Initiatives ” $200 $100 – 2013 2014 2015 2016 2017 2018 2019 ($100) ($200) ($300) ($400) ($500) ($600) Source: 10/28/14 Investor Day, 1/17/14 4Q13 Earnings Day Transcript, Marcato estimates Note: 2013 total investment based on management commentary that 1 – 2% of 2013 expense growth was due to reinvestment in growth initiatives Q1 2010 Investor Presentation < 66 >
Investments in “ Growth ” Initiatives – Where ’ s the Growth? Despite a commitment to “ investments ” , Management does not appear equally committed to “ growth ” BK ’ s normalized revenue growth targets are well below State Street ’ s Revenue growth disparity is striking because: 1. BK has greater interest rate sensitivity than State Street 2. BK derives a greater mix of revenue from faster-growing asset management business lines 3. BK has greater breadth of capabilities that should drive superior growth from cross-selling (State Street targets 4 – 5% revenue CAGR from cross-selling (1) ) Long-term Guidance: Normalized Organic Revenue Growth 12% 7% - 10% 6% - 8% 9% 6% 3% 0% BK STT Source: 10/28/14 Investor Day (1) Per State Street 2/17/14 Investor & Analyst Forum. Reflects revenue growth targets attributable to cross-selling to existing clients Q1 2010 Investor Presentation < 67 >
Deja Vu All Over Again Natural organic growth and announced “ Transformation Process ” , “ Initiatives ” and “ Strategic Platform ” investments should imply higher EPS growth than guidance.... ...unless the collective financial impact of actions (yet again) do not drop to the bottom line, just as with Management ’ s “ Operational Excellence ” program launched in 2011 $6,000 $3,961 @ 3.5% CAGR (1) $5,500 $431 2014 PTI drag of $185mm 2017 PTI benefit of $189mm Pg. 25, 64 – 2014 Investor Day $82 $5,000 $374 At least $500mm Pg. 66 – 2014 Investor Day $4,561 $500 $4,500 ($787) $3,961 “ Incremental regulatory costs ” $4,000 vs. Buffer for poor Management execution? $3,500 $3,000 2014 PTI "Transformation "Initiatives", Incremental Organic growth @ [Gap] 2017 Implied PTI @ Process" "Strategic Platform" amortization of 3.5% CAGR, 8% EPS CAGR intangibles constant margin Source: 10/28/14 Investor Day, Marcato estimates (1) Assumes low-end of consolidated revenue growth guidance of 3.5% - 4.5% in “ flat scenario ” Q1 2010 Investor Presentation < 68 >
Conclusion 1. This Management team has failed to address the chronic underperformance of the Company 2. This Management team has responded to its challenges with a victim mentality – blaming the external environment while failing to control expenses or hold market share 3. New forecasts show no evidence of promised IT or expense efficiency performance 4. Management ’ s business plan shows inability to identify new business growth or opportunities created by new regulatory environment Q1 2010 Investor Presentation < 69 >
VI. Case Study: JPM 2015 Investor Day Q1 2010 Investor Presentation < 70 >
Case Study: JP Morgan Chase ’ s 2015 Investor Day Revenue / Expense Growth Trends (Index) JP Morgan has delivered faster revenue growth and deeper expense reductions than BNY Mellon in key investment services business lines Treasury Services (1) Treasury Services Indexed to 2012 1 + 5% Revenue 1 1 1 1 1 2012 2013 2014 Asset Servicing (1) 1 Indexed to 2012 + 8% Custody and Fund Services Revenue 1 1 1 2012 2013 2014 Investment Services Noninterest Expense 1 Indexed to 2012 Actual + 7% Adjusted (2) 1 + 2% 1 1 1 2012 2013 2014 Source: 2/24/15 JP Morgan Investor Day, Company filings (1) Excludes impact of net interest revenue (not disclosed by business line. Consolidated investment Services net interest revenue is down 4% from 2012 to 2014) (2) Adjusted for M&I and restructuring charges Q1 2010 Investor Presentation < 71 >
Case Study: JP Morgan Chase ’ s 2015 Investor Day BNY Mellon has allowed expenses to grow significantly faster (in both $ and %) than JP Morgan ’ s entire Corporate & Investment Banking segment (which comprises JP Morgan ’ s investment services business) ■ Control, legal expenses and regulatory fees alone do not explain or justify BNY Mellon ’ s dramatic increase in costs. Investors would need to believe that BNY Mellon experienced more absolute dollar headwinds than a peer that generates >2x in revenue and operates in business lines with greater regulatory and legal scrutiny Corporate & Investment Bank – Expense Trend Noninterest Expense (1) UNLIKELY $2,573 $12,177 $2.6bn – more $ headwind (controls, legal, regulatory, etc.) than JPM CIB?? $385 $10,379 $10,170 ($123) ($120) ($176) $104 ($636) 2010 Shareowner GIS, BHF PF 2010 Amort. Cost Operational Fund charges ∆ (Implied) 2014 2010A – 2014A Services sale M&A Intangible Synergies Excellence (4) (2) (3) $ Net Expense ∆ (5) ~$400mm ~$1.8bn (5) % Net Expense ∆ ~2% ~17% Source: 2/24/15 JP Morgan Investor Day, Company filings (1) Reflects unadjusted total noninterest expense to provide comparability with JPM expense analysis (2) Adjusts for estimated annualized costs on acquired businesses. PNC GIS and BHF Asset Servicing acquired mid-year 2010. Per 2/2/10 PNC M&A investor presentation, PNC GIS generated $910mm of revenue with 18% pretax margins. BHF expenses estimated by relative transaction value to PNC GIS acquisition (3) Per 2/20/10 PNC M&A investor presentation (4) Completed savings from initiatives as of 2013, excludes any additional initiatives achieved in 2014 (5) Change from PF 2010 expense base Q1 2010 Investor Presentation < 72 >
Case Study: JP Morgan Chase ’ s 2015 Investor Day JP Morgan is targeting significant net cost reductions in its Corporate & Investment Banking division between now and 2017 (versus significant expense growth for BNY Mellon) “ Every single number that is here is attached to a name and to a particular action. So this is not aspirational at all, just to be clear ” (Daniel Pinto, JP Morgan CEO – Corporate & Investment Bank, 2/24/15 Analyst Day) JP Morgan Corporate & Investment Bank – 2017 Expense Targets (1) 2014A – 2017E $ Net Expense ∆ -$2.8bn +$1.3bn % Net Expense ∆ -12% +12% Source: 2/24/15 JP Morgan Investor Day, Company filings (1) Implied expense growth based on flat interest rate scenario Q1 2010 Investor Presentation < 73 >
Case Study: JP Morgan Chase ’ s 2015 Investor Day All the efficiency opportunities available to JP Morgan Chase for achieving net cost reductions are equally available to BNY Mellon AVAILABLE TO BNY MELLON? Corporate & Investment Bank – Expense Initiatives � � � � � � � � � � No Secret Playbook: better results come down to Management ’ s intent and capacity to EXECUTE Source: 2/24/15 JP Morgan Investor Day, Company filings Q1 2010 Investor Presentation < 74 >
Case Study: JP Morgan Chase ’ s 2015 Investor Day Within asset management, JP Morgan has delivered stronger historical results and laid out more ambitious 2 – 3 year financial targets Actual Results Medium-term Targets CAGR (2) J.P. ~12% Revenue Morgan Chase Pretax ~20% Income CAGR (3) 2014 momentum 2009 – 2014 CAGR 8% - 10% Revenue BNY LT AUM +11% (-1% ∆ ) +13% (-1% ∆ ) Mellon Revenue +1% (-4% ∆ ) +5% (-3% ∆ ) Pretax 12% - 14% Pretax Income (1) -1% (-6% ∆ ) +6% (-2% ∆ ) Income Pretax margin (1) 28% (-1% ∆ ) 28% (-1% ∆ ) Source: 2/24/15 JP Morgan Investor Day, 10/28/14 BNY Mellon Investor Day, Company filings (1) Adjusted for amortization of intangibles (2) Based on 2015 Investor Day targets of $15bn of revenue and $5bn of pretax income by 2016 (3) Based on 2015-2017 financial goals under “ normalized ” rates Q1 2010 Investor Presentation < 75 >
Case Study: JP Morgan Chase ’ s 2015 Investor Day Within asset management, JP Morgan is delivering strong actual margins for shareholders, as opposed to adjusted, “ pro-forma ” illustrative margins that do not ultimately create shareholder value Presented pre-tax margins are adjusted for: ? Distribution and servicing expense (real) ? Money market fee waivers (real) � Amortization of intangible assets Source: 2/24/15 JP Morgan Investor Day, Company filings Q1 2010 Investor Presentation < 76 >
VII. Maximizing Value: Bold Action and New Ideas Q1 2010 Investor Presentation < 77 >
A. Common Sense Principles Q1 2010 Investor Presentation < 78 >
Common Sense Principles The principles that will rejuvenate BNY Mellon are common sense: Vision A vision for the business. Clearly stated and compelling Competitive A sustainable competitive advantage that forms the foundation of Advantage the vision Clear Metrics Metrics must be aspirational, transparent and achievable First Class A first class management team that is unified, stable and of the Management highest ethical standard A fervent commitment to execution. The CEO must move the Execution organization to deliver Q1 2010 Investor Presentation < 79 >
Vision 1. BNY Mellon will be the bank for the world ’ s asset managers ■ Custody ■ Investment Services ■ Financing ■ Risk Management 2. BNY Mellon will be a leader in Wealth Management ■ Intermediate between the best active managers in the world and high net worth clients ■ Provide the best, low cost beta investment products for clients 3. BNY Mellon will excel in managing the most efficient balance sheet in the industry ■ Balancing return, with risk, with regulatory requirements ■ Far more complex in the post-crises world 4. BNY Mellon must win the technology race in finance ■ Creativity, innovation, and production per technologist must be the best in the industry ■ Use technology to capitalize on scale 5. BNY Mellon must be the market ’ s safe harbor Q1 2010 Investor Presentation < 80 >
Sustainable Competitive Advantage How BNY Mellon Will Win: Low-Cost BNY Mellon must deliver the lowest cost platform for the Structure asset management business BNY Mellon must provide asset managers with an Integrated integrated platform that leverages scale and breadth of Solutions product; deliver the whole offering Global BNY Mellon must maximize its global footprint Presence Q1 2010 Investor Presentation < 81 >
Clear Metrics Management must establish Clear Metrics that are within Management ’ s control Operating Targeted operating margins of 35%+ Margins Returns on Targeted ROE at 10%+ Equity Target highest headcount productivity in the industry. Headcount Start with a 10% - 20% headcount reduction Q1 2010 Investor Presentation < 82 >
Execution Goals must be clear and measurable Clear Targets Hold people accountable to meet these goals Systematic Measurement Follow-up to measure progress and identify weakness Continuous Complete tasks and finish projects Review Tie completion back to metrics Rewards & Consequences Q1 2010 Investor Presentation < 83 >
B. Business Opportunities Q1 2010 Investor Presentation < 84 >
1. Reconsider Value Proposition to Customers Be the “ Bank to the Buyside ” by providing full-service outsourced functions that help buy-side clients manage new regulatory, liquidity and financing regulations Expand service potential for the “ middle ” and “ front ” offices, where new regulations and complexities are driving demand for a variety of value-added services that trust banks are uniquely positioned to provide • State Street is the market leader and BNY Mellon remains a follower in the middle and front offices Integrate “ front ” and “ back ” office offerings to drive better client solutions and stickier relationships Asset Manager Needs Custody Back Fund accounting & administration Office Foreign exchange Treasury & cash management Portfolio accounting Full-Service Risk management Middle Performance analytics Office Valuation Trade and settlement activity Real-time, detailed data analytics Front Risk platforms Office Clearing platforms Compliance platforms Q1 2010 Investor Presentation < 85 >
1. Reconsider Value Proposition to Customers (cont ’ d) Reconsider fee schedule and structure to earn appropriate margin for services and ROE Investment Services Margins Investment Services ROE (Implied) (1) 35% 30% 30% Illustrative Investment Services ROE % Consolidated ROE 8.0% 8.5% 9.0% 9.5% 10.0% 8.6% 25% Investment Mgmt. 15.0% 6.9% 7.4% 8.0% 8.5% 9.0% 17.5% 6.8% 7.3% 7.8% 8.3% 8.8% 20% 6.7% 7.2% 7.6% 8.1% 8.6% 20.0% ROE 22.5% 6.6% 7.1% 7.5% 8.0% 8.5% 6.5% 7.0% 7.4% 7.9% 8.4% 25.0% 15% 27.5% 6.5% 6.9% 7.4% 7.8% 8.3% 6.4% 6.9% 7.3% 7.8% 8.2% 30.0% 9% 10% 5% – Adj. PBT Margin Adj. PBT Margin (Reported) (ex. Net Interest Revenue) Without the subsidy from net interest revenues, Investment Services is unlikely earnings its cost of capital BNY Mellon earns much thinner margins for the valuable services (~10% cost of equity) it provides Source: Company filings (1) BNY Mellon does not provide segment ROE. Investment Services ROE implied by assigning Investment Management a peer-level ROE and backing in from the consolidated ROE. Ignores Other segment for illustrative purposes Q1 2010 Investor Presentation < 86 >
1. Reconsider Value Proposition to Customers (cont ’ d) Seize fast-growing, higher-margin markets within asset management, such as non-US, global ETFs and alternatives Projected Long-Term Nominal Growth (1) 25% Future Growth Markets 15-20% 15-20% 20% Revenue targets of 3 – 4% CAGR in Investment Services do not reflect ability to capture the long-term growth 15% prospects of underlying markets 12% Legacy BK Markets 10% 8-9% 5-6% 4-5% 5% 5% 5% 3-4% 0% BK 2017 Targets US Insurance US Endowments US Foundations US Retirement Global Market US Alternatives Global ETFs Asia-Pacific Market (HF / PE) (1) Bernstein Asset Managers: Manic About Organic Blackbook 1/27/14 Q1 2010 Investor Presentation < 87 >
1. Reconsider Value Proposition to Customers (cont ’ d) ETFs and Alternative Investments are key long-term growth priorities, where significant portions of the servicing functions remain insourced Global ETF Market Global Alternative Investments Market Source: State Street 9/9/14 Barclays Conference Q1 2010 Investor Presentation < 88 >
1. Reconsider Value Proposition to Customers (cont ’ d) Senior leadership should be hands-on and actively focus on cultivating client relationships, and the CEO needs to be active as the face of the firm to clients Lou Gerstner, CEO of IBM (1993 – 2002): “ I announced Operation Bear Hug. Each of the fifty members of the senior management team was to visit a minimum of five of our biggest customers during the next three months. The executives were to listen, to show the customer that we cared, and to implement holding action as appropriate. Each of their direct reports (a total of more than 200 executives) was to do the same. For each Bear Hug visit, I asked that a one- to two-page report be sent to me and anyone else who could solve that customer ’ s problems ” Source: Lou Gerstner “ Who Says Elephants Can ’ t Dance ” Q1 2010 Investor Presentation < 89 >
2. Raise I.T. Effectiveness To Top Company Priority Scalable systems are a critical driver of business value and yet appear antiquated and inefficient to employees, clients and competitors Platforms have yet to be integrated and have been a major source of expense growth An entire new architecture may be necessary Major Redundancies - Back office headcount Two Custody Five Accounting - Systems maintenance Platforms Platforms - Application development - Reporting costs “ Upgrade your tech and bring your business processes and products into the 21st century. The competition is selling cars while BNY is proud of the fact that it sells the cheapest and Employees fastest horse drawn buggy in town. Banking is not a labor intensive business yet BNY has managed to turn it into one via underinvestment in tech and revenue generating professionals ” “ Bank of New York Mellon are letting themselves down with the continuing lack of merger in their systems ” Clients “ BNYM continue to struggle with service differentials driven by their multiple platforms custody and accounting ” “ They ’ re going to get to a point when it becomes hard to catch up with us just because Competitors (1) our future functionality is just 6x faster ” Source: Glassdoor, R&M Global Custody Survey (1) Per Gunjan Kedia, EVP of State Street, 2/25/15 State Street Analyst Day Q1 2010 Investor Presentation < 90 >
2. Raise I.T. Effectiveness To Top Company Priority (cont ’ d) BNY Mellon ’ s current model emphasizes labor over technology and automation However, investing in automation is a long-term competitive necessity for BNY Mellon to mitigate risk and improve client services More investments in automation to reduce manual process may be useful but should take place only after legacy IT systems are re-architected Labor Technology Long-term Expense Growth Inflationary Deflationary Innovation Potential & Medium High Velocity Scalability Not Scalable Scalable High Medium Operational Risk (Human Error) (Straight-Through Processing) Q1 2010 Investor Presentation < 91 >
2. Raise I.T. Effectiveness To Top Company Priority (cont ’ d) Invest in I.T. to drive speed, accuracy and transparency BNY Mellon ’ s antiquated I.T. systems and manual processes results in an unbalanced mix of spending on labor over technology and innovation Staff Expense / Information Technology Expense (FY14) 10.0x 9.4x 9.0x 8.0x 1x reduction = ~0.40 of 7.0x potential incremental EPS (1) 6.0x 5.0x 4.2x 4.0x 3.0x 2.0x 1.0x – Source: Company filings (1) At constant $620mm of software expense Q1 2010 Investor Presentation < 92 >
2. Raise I.T. Effectiveness To Top Company Priority (cont ’ d) I.T. TRANSFORMATION BUSINESS IMPACT Strategy � Compensation Expense � Applications � Headcount � Cloud-Enabled Apps � Software Expense � Data Centers � Purchased Services � Shared Services � Returns � ERP Systems � Speed & Transparency � Custody Platforms � Operational Risk � Set Explicit Targets... How many systems today? How many in the future? Q1 2010 Investor Presentation < 93 >
3. Aggressive Headcount Reduction Initiative Headcount disproportionate to that of comparable companies ■ Combinations of similar sized investment managers and investment servicers would imply meaningfully lower headcount levels ■ Headcount discrepancy not bridgeable by BK ’ s Corporate Trust or Pershing business units Total Employees Investment Investment Managers 60,000 Servicers Implied Headcount (Asset Manager + Asset Servicer) 50,300 50,000 Asset Managers Capital JPM Vanguard BLK BEN Group GIM (2) PIMCO 40,000 JPM Servicers Total Employees 41,200 39,200 36,266 34,000 32,700 29,490 Asset (TSS) STT 41,670 39,670 36,736 34,470 33,170 29,960 30,000 27,470 ~27,000 (IS) 20,000 ~14,200 12,200 9,266 10,000 ~7,000 6,264 5,870 5,700 3,100 ~2,500 2,490 1,435 – BK STT JPM Vanguard BLK BEN Capital Group IVZ TROW JPM LM STT PIMCO FII (1) (Inv. Serv.) (TSS) (Global Inv. Mgmt.) (Inv. Mgmt.) AUC/A ($tn) $29 $28 $21 AUM ($bn) $1,710 $3,100 $4,652 $898 $1,147 $792 $747 $1,744 $709 $2,480 $1,680 $363 Source: Company filings, Marcato estimates (1) JPM ’ s Treasury & Securities Services division (2) JPM ’ s Global Investment Management division Q1 2010 Investor Presentation < 94 >
3. Aggressive Headcount Reduction Initiative Business model requires scalability, efficiency, accuracy, data capture and data security. Manual human processes are an impediment to all of these things BK needs better people, not more people Total Headcount Trajectory Relative Headcount to Benchmark (1) 52,000 55,000 51,100 50,300 50,300 50,000 49,500 50,000 48,700 48,000 48,000 ∆ ~10,000 45,000 46,000 ~40,000 40,000 44,000 42,500 42,200 35,000 42,000 40,000 30,000 2008 2009 2010 2011 2012 2013 2014 BK Benchmarking Target (1) Reference page 94 for analytical support Q1 2010 Investor Presentation < 95 >
3. Aggressive Headcount Reduction Initiative (cont ’ d) Successful restructuring precedents support a strategy of targeted, impactful headcount reductions Headcount Restructuring in Historical Perspective Starting Net Headcount % Period Company Headcount (est.) Reductions (est.) Reduction (Yrs.) Date Historical Restructurings 38.9% Apple 10,896 4,238 ~ 2 1997 - 1998 35.4% Xerox 94,600 33,500 ~ 4 2000 - 2003 32.5% Credit Suisse First Boston 27,547 8,959 ~ 2 2002 - 2003 27.1% IBM 301,542 81,703 ~ 2 1993 - 1994 24.0% Merck 100,000 24,000 ~ 4 2010 - 2013 22.2% Starbucks 176,000 39,000 ~ 2 2008 - 2010 19.5% Heinz 41,000 8,000 ~ 2 2006 - 2007 16.1% Legg Mason 3,550 571 ~ 2 2011 - 2012 12.1% Lockheed Martin 140,000 17,000 ~ 2 2010 - 2011 Current Restructurings 30.8% Canadian Pacific 19,500 6,000 N/A 2012 - 2016E 26.9% Barclays (Investment Bank) 26,000 7,000 N/A 2014E - TBU 16.2% Bank of America 284,000 46,000 N/A 2010 - TBU 14.1% Microsoft 128,000 18,000 N/A 2014E - TBU 13.8% UBS 62,628 8,628 ~ 3 2013 - 2015E 12.4% Hewlett Packard 331,800 41,000 ~ 3 2012 - 2014E 12.5% Valeant 18,000 2,250 N/A 2013 - TBU 9.9% Royal Bank of Scotland 141,000 14,000 ~ 4 2015 - 2019 Source: Company filings, Company news Q1 2010 Investor Presentation < 96 >
3. Aggressive Headcount Reduction Initiative (cont ’ d) OPERATIONAL SIMPLIFICATION BUSINESS IMPACT � Deliver services to clients at a + Reduce headcount to reach world-class levels fundamentally lower cost point and with greater service + Eliminate multiple layers of reliability management and bureaucracy � Drive greater volumes through + Invest in world-class more highly-scaled platforms technology and automation � Profitably compete for more + Re-engineer business business with a lower cost processes to improve costs, structure; deliver greater speed and transparency revenue growth � Improve returns on equity Q1 2010 Investor Presentation < 97 >
3. Aggressive Headcount Reduction Initiative (cont ’ d) Lou Gerstner, CEO of IBM (1993 – 2002): “’ If we have too many people, let ’ s right-size fast; let ’ s get it done by the end of the third quarter. ’ I explained that what I meant by right-size is straightforward: ‘ We have to benchmark our costs versus our competitors and then achieve best-in-class status ’ . I also remarked that we had to stop saying that IBM didn ’ t lay off people ” “ I ’ ve had a lot of experience turning around troubled companies, and one of the first things I learned was that whatever hard or painful things you have to do, do them quickly and make sure everyone knows what you are doing and why. Whether dwelling on a problem, hiding a problem or dribbling out partial solutions to a problem while you wait for a high tide to raise your boat – dithering and delay almost always compound a negative situation. I believe in getting the problem behind me quickly and moving on ” Source: Lou Gerstner “ Who Says Elephants Can ’ t Dance ” Q1 2010 Investor Presentation < 98 >
4. Reposition Asset Management The Index / ETF industry represents a highly compelling long-term growth opportunity for asset management ETFs & Index Funds Total AUM ($tn) High-Quality Growth Pathway Long runway for ETF growth supported by deepening Bernstein estimates Index & ETF AUM will grow by 4x adoption within new and existing client segments, over the next decade financial products, and geographies $15.0 $12.5 $11.1 $10.0 $2.6 $3.0 $3.3 $3.8 $4.3 $4.9 $5.5 $6.3 $7.1 $8.0 $8.9 $10.0 $5.0 – '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 Index Mutual Funds ETFs BlackRock estimates the global ETF industry will grow by 11% CAGR into 2017, expanding by $3.6tn Source: Bernstein Asset Managers: Manic About Organic Blackbook 1/27/14, Blackrock 6/17/14 Analyst Day, WisdomTree Investments 11/20/14 Analyst Presentation Q1 2010 Investor Presentation < 99 >
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