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S&P 500   5,130.95
DOW   38,989.83
QQQ   444.02
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Stock market today: World markets are lower after China unveils 5% economic growth target for 2024
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Closing prices for crude oil, gold and other commodities
S&P 500   5,130.95
DOW   38,989.83
QQQ   444.02
5 Under-the-Radar Artificial Intelligence (AI) Stocks
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How major US stock indexes fared Monday, 3/4/2024
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Ohio foundation begins process to distribute millions in opioid settlement money
Closing prices for crude oil, gold and other commodities

Bank of New York Mellon Q4 2023 Earnings Call Transcript


Listen to Conference Call View Latest SEC 10-K Filing

Participants

Corporate Executives

  • Marius Merz
    Head, Investor Relations
  • Robin Vince
    President & Chief Executive Officer
  • Dermot McDonogh
    Chief Financial Officer

Presentation

Operator

Good morning, and welcome to the 2023 Fourth Quarter Earnings Conference Call hosted by BNY Mellon. [Operator Instructions] Please note that this conference call and webcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without BNY Mellon's consent.

I will now turn the call over to Marius Merz, BNY Mellon Head of Investor Relations. Please go ahead.

Marius Merz
Head, Investor Relations at Bank of New York Mellon

Thank you, operator. Good afternoon, and thank you all for joining us.

I'm here with Robin Vince, President and Chief Executive Officer; and Dermot McDonough, our Chief Financial Officer. As usual, we will reference our financial highlights presentation, which can be found on the Investor Relations page of our website at bnymellon.com.

I'd like to 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 are available in the earnings press release, financial supplement and financial highlights presentation, all available on the Investor Relations page of our website. Forward-looking statements made on this call speak only as of today, January 12, 2024, and will not be updated.

With that, I will turn it over to Robin.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Thank you, Marius. Good afternoon, everyone, and thanks for joining us.

The fourth quarter marked a solid close to a year in which we supported our clients in navigating through a challenging operating environment with geopolitical tensions, macroeconomic uncertainty and evolving monetary policy. We started to show some early evidence that we can deliver higher financial performance in the near and medium term. We clarified our strategic priorities, and we laid a foundation for a multiyear transformation of our company for the long term. With clearer focus on our direction of travel and having restored some confidence in our ability to deliver on our plans, today, we are publishing financial targets for each of our business segments and the firm overall. Dermot will review our fourth quarter financials, the outlook for 2024 and our medium-term financial targets in more detail. But let me first briefly address our performance in 2023.

Referring to Page 2 of the financial highlights presentation, our results for the year not only highlight BNY Mellon's characteristic resilience, but they demonstrate the strength of our execution when we are appropriately organized and focused. On a reported basis, 2023 earnings per share increased by 38% year-over-year. On a core basis excluding notable items, EPS of $5.05 increased by 10% year-over-year. Both pretax margin and return on tangible common equity improved on the back of significant operating leverage. Excluding notable items, we generated approximately 180 basis points of positive operating leverage. ROTCE improved 0.5 percentage point to 21.6%, and pretax margin improved roughly 80 basis points to 30%.

Moving on to Page 3. At the beginning of last year, we communicated 3 financial goals for 2023. First, we expected to generate approximately 20% net interest revenue growth year-over-year. We delivered 24%. Second, we set out to halve our constant currency expense growth rate in 2022 to approximately 4% year-over-year expense growth, excluding notable items in 2023. We delivered 2.7%. And third, we sought to return north of 100% of 2023 earnings to common shareholders through dividends and buybacks. We delivered 123%. Over the course of 2023, we returned $3.9 billion of capital to common shareholders all while having further strengthened our regulatory capital ratios to be well positioned for a wide range of macroeconomic and regulatory outcomes.

Though we are still at the beginning of our transformation journey, our ability this past year, not just to deliver on our commitments but to exceed them, gives us confidence that we can affect meaningful change and consistently improve our financial performance over time. While mindful, there is a lot more work ahead of us. I'm proud of the effort that our people put in over the last 12 months as we embraced a focus on commerciality, accountability and efficiency, which drove these results.

We are committed to improving the firm's financial performance in the near, medium and long term. And we have framed this work for our people with 3 strategic pillars, which we describe on Page 4. Last year, we introduced these 3 pillars to get at the heart of how we operate and who we are day-to-day for our clients, managing their money, moving it and keeping it safe. Pillar number one, be more for our clients; number two, run our company better; and number three, power our culture. They are deliberately simple, and our people are rallying around them. As I've said before, strategy is important but ultimately just a set of words. Actually doing it and how we do it matters a lot.

I'm encouraged by the progress we made in 2023, some of which we highlight on Slide 5. Our global clients across governments, pension funds, mutual funds, unions, endowments, corporations, financial services firms and individuals both trust and want to do more business with us. And our analysis clearly shows there is more for them to do with us as we continue to partner alongside them to help achieve their ambitions. As the global finance system grows and becomes ever more complex, demand for a trusted, resilient partner with the scale to service clients across the entire financial life cycle such as BNY Mellon grows as well.

In 2023, we launched several new solutions that allow us to deepen our relationships with existing clients and to open the door to new ones. Of course, that includes the launch of Wove, Pershing's wealth advisory platform as well as the rollout of our buy-side trading solutions offering. But it goes far beyond these more visible product launches. All of our businesses are bringing new client solutions to the market. Bankify real-time payments on FedNow, white labeling Liquidity Direct, Bondwise, Intraday repo settlement BNY Mellon advisers are all examples. And in 2023, we filed more patent applications than ever before.

At the same time, we have an opportunity to bring more of BNY Mellon to clients who currently use us for just a single service. Last year, we hired our first Chief Commercial Officer as we began to operationalize our 1BNY Mellon initiative across the organization. As part of enhancing the organizational setup and focus of our client coverage organization, we created an integrated team to facilitate multiline of business solutions at scale, and we also formed a coverage practice group to implement consistency in approach and tooling.

Next, while 2023 was a foundational year in what will be a multiyear journey to transform to a more streamlined and effective operating model, we took important steps toward running our company better to improve efficiency, reduce bureaucracy and be more intentional with how we spend so our investments in the business go further. We generate nearly double the amount of efficiency savings versus the prior year, which allowed us to self-fund over $0.5 billion of incremental investments. And we laid the foundation needed to transition to a platform's operating model, including successful pilots in 2 areas of the organization, which were important proof points as we start to unlock the power of our platforms in several phases over the next couple of years.

While we focus on being more for our clients and running our company better, we know none of it can happen without our people, which is why we are powering our culture to make BNY Mellon a place where people are proud to work and excited to grow their careers. We elevated recruitment and retention programs, including welcoming the largest class of campus analysts in BNY Mellon's history, a class double the size of the previous year, and we're going to double it again this year. We launched our BK shares program to grant shares to the 45,000 employees who didn't previously receive stock as part of their compensation to cascade a sense of ownership and accountability across our company. And we rolled out enhanced employee benefits, recognizing value in fostering both a human and high-performing work environment.

I'll wrap up where I began. We remain confident in the strength of our culture, our strategy and our ability to execute to help us unlock value for our clients, our shareholders and our people. 2023 was an important year in which we assembled more of the team that can deliver on what is needed, and we got ourselves pointed in the right direction for what we need to achieve. But it was also a year where being humble and resilient mattered. While we have a lot of work ahead of us, what has started as a theory and a belief now has early proof points, and we can see the possibility of what we can achieve. We have an ambitious agenda as we move forward, but I continue to be optimistic about the opportunity ahead.

With that, I'll turn it over to Dermot.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

Thank you, Robin, and good afternoon, everyone.

I'm picking up on Page 6 of the presentation with our consolidated financials for the fourth quarter. And as Robin noted, I'm also going to speak to our 2024 outlook and medium-term targets, including how we are going to execute on our goals. For the fourth quarter, our reported results reflect several notable items. Approximately $750 million of noninterest expense is related to the FDIC special assessment, severance and litigation reserves. And we had $150 million reduction in investment and other revenue primarily related to a fair value adjustment of a contingent consideration receivable.

Total revenue of $4.3 billion was up 10% year-over-year or up 2% excluding notable items. Total fee revenue was flat, reflecting 3% growth in investment services fees, which was offset by a 5% decline in Investment Management and performance fees and a 25% decline in foreign exchange revenue. Investment and other revenue was a negative $4 million in the quarter, reflecting the fair value adjustment that I mentioned before. Net interest revenue was up 4% year-over-year primarily reflecting higher interest rates, partially offset by changes in balance sheet size and mix.

Expenses were up 20% year-over-year on a reported basis, primarily reflecting the FDIC special assessment. Excluding notable items, expenses were up 4%, reflecting higher investments and the impact of a weaker dollar as well as inflation, partially offset by savings. Provision for credit losses was $84 million primarily driven by reserve builds for commercial real estate exposure.

Reported earnings per share for the fourth quarter were $0.33, pretax margin was 8%, and return on tangible common equity was 6%. Excluding notable items, earnings per share were $1.28, pretax margin was 28%, and return on tangible common equity was 21%.

Turning to capital and liquidity on Page 7. Our Tier 1 leverage ratio of 6% remained largely unchanged, down 8 basis points to be precise compared to the prior quarter. Tier 1 capital remained essentially flat at $23.1 billion as the impacts of capital distributions to common shareholders and our redemption of $500 million preferred stock were offset by an improvement in AOCI and capital generation through earnings. Average assets increased by 1% sequentially, primarily reflecting deposit inflows in the fourth quarter. Our CET1 ratio was 11.6%, which represents a 20 basis point improvement compared with the prior quarter.

CET1 capital was up 3% sequentially, primarily reflecting capital generation through earnings and the improvement in AOCI, partially offset by the impact of capital distributions to common shareholders. Risk-weighted assets increased by 1%. Consistent with the prior quarter, we returned $450 million of capital to our common shareholders through share repurchases, and we paid approximately $330 million of common stock dividends in the fourth quarter. The consolidated liquidity coverage ratio was 117%, a 4 percentage point sequential decrease, primarily reflecting deposit inflows in the quarter, which are considered nonoperational until they are seasoned under our operational deposit model. And our consolidated net stable funding ratio remained roughly unchanged at 135%.

Next, on Page 8, net interest revenue and additional details on the underlying balance sheet trends. Net interest revenue was $1.1 billion was up 4% year-over-year and up 8% quarter-over-quarter. The sequential increase was primarily driven by balance sheet growth and changes in balance sheet mix. Total deposits averaged $273 billion in the fourth quarter, up 4% sequentially, a strong finish to the year. Interest-bearing deposits were up 5%, and noninterest-bearing deposits remained flat. Interestingly, since August, we've seen 4 consecutive months of growth in average total deposit balances.

Our team is highly engaged with our clients, and we're encouraged by the demand we've been seeing for our on-balance sheet liquidity solutions. While we are pleased with this stabilization, we remain vigilant preparing for a variety of different outcomes and financial conditions in 2024. On the asset side, average interest-earning assets increased by 2% quarter-over-quarter. This includes cash and reverse repo up 5% and loan balances up 3%. The size of our investment securities portfolio decreased by 3% sequentially.

Moving to our business segments, starting with Securities Services on Page 9. Securities Services reported total revenue of $2.2 billion, flat year-over-year. Investment services fees were up 1% year-over-year. In Asset Servicing, investment services fees were flat as the positive impact of higher market levels, net new business and the weaker dollar was offset by lower client activity. We ended the year on a high note with our strongest sales quarter of 2023, including wins in the Middle East, new mandates from several midsized investment managers and expanded mandates from some of our largest existing clients. And we saw continued strength in our ETF servicing business, where another quarter of strong net inflows capped a year of above-market growth.

Within Issuer Services, investment services fees were up 5%, reflecting healthy new business and higher client activity. Foreign exchange revenue was down 21% year-over-year on the back of lower volatility and lower volumes. And net interest revenue was down 3% year-over-year. Expenses of $1.7 billion were up 5% year-over-year, reflecting higher investments and higher revenue-related expenses as well as inflation, partially offset by efficiency savings. Pretax income was approximately $460 million, representing a 21% pretax margin.

Next, Market and Wealth Services on Page 10. This segment reported total revenue of $1.5 billion, up 7% year-over-year. Total investment services fees were up 6% year-over-year. In Pershing, investment services fees were up 1%, reflecting higher equity market values and higher client activity, partially offset by the impact of expected lost business. Net new assets were negative $4 billion for the quarter, also reflecting this expected loss business. In Treasury Services, investment services fees increased by 5%, primarily reflecting higher client activity, partially offset by higher earnings credits for noninterest-bearing deposit balances.

In Clearance and Collateral Management, investment services fees were up 16%, reflecting broad-based strength across Clearance and Collateral Management both in the US and internationally. Net interest revenue increased by 10% year-over-year. Expenses of approximately $840 million were up 7% year-over-year, reflecting higher investments and inflation, partially offset by efficiency savings. Pretax income was approximately $630 million, representing a 42% pretax margin.

Turning to Investment and Wealth Management on Page 11. Investment and Wealth Management reported total revenue of $676 million, down 18% year-over-year. In Investment Management, revenue was down 26%, reflecting the fair value adjustment of the receivable and the impact of the prior year divestiture as well as the mix of AUM flows, partially offset by higher market values, seed capital gains and the weaker dollar. In our Wealth Management business, revenue decreased by 3% driven by changes in product mix, partially offset by higher market values. Expenses of approximately $680 million were down 2% year-over-year, primarily reflecting efficiency savings and the impact of the divestiture in 2022, partially offset by higher investments, inflation and the unfavorable impact of the weaker dollar.

Pretax income was a loss of $5 million. Excluding the impact of notable items, pretax income of $151 million increased 1% year-over-year and represented an 18% pretax margin. Assets under management of $2 trillion increased by 8% year-over-year, reflecting higher market values and the weaker dollar, partially offset by cumulative net outflows. In the quarter, we saw $7 billion of net inflows into short-term strategies and $4 billion of net inflows into long-term active strategies, while we saw $10 billion of net outflows for index strategies. Wealth Management client assets of $312 billion increased by 16% year-over-year, reflecting higher equity market values and cumulative net inflows.

Page 12 shows the results of the Other segment. Total revenue improved year-over-year, primarily reflecting the absence of a net loss from repositioning the securities portfolio recorded in fourth quarter of 2022 and expenses of $693 million included $505 million related to the FDIC special assessment.

Having reviewed our results, I will now turn to Page 14 and our current outlook for 2024. We're entering the year on a strong footing, and we set ourselves up determined to at least break even from an operating leverage perspective. Considering our healthy pipeline across the businesses, we expect fee revenue growth to turn positive in 2024. With regards to net interest revenue, our expectation for an approximately 10% decrease year-over-year is based on the assumption of market-implied forward interest rates, and we assume ongoing quantitative tightening puts further downward pressure on deposit balances.

We intend to keep expenses excluding multiple items roughly flat in 2024. And finally, with regard to capital management, we expect to return north of 100% of 2024 earnings to common shareholders through dividends and buybacks. As Robin discussed earlier, 2023 was a foundational year for us. We took decisive actions to demonstrate some early evidence of our ability to deliver stronger financial performance. And importantly, we've developed a clear road map for our multiyear transformation. Over the next couple of slides, we'll provide you our medium-term financial targets for the firm and some of the most impactful actions we're taking to keep delivering on our goals.

Page 15 summarizes our consolidated targets. It is our goal to improve the firm's pretax margin to 33% and our ROTCE to 23% over the medium term while maintaining a strong balance sheet. I'll double-click on our business segments in a moment, but along our 3 strategic pillars, there are a number of teams that transcend our lines of business and segments. Robin mentioned several of these when he talked about our progress in '23. So I'll highlight just a few of them. The first is our enhanced commercial model. We're driving a new culture of commerciality to deliver all of BNY Mellon in a unified front to facilitate deeper client relationships with solutions from across the firm.

With our clients at the center, our model is led by client coverage teams with clear accountability to retain business, expand revenue into new areas and drive client satisfaction. Our new sales operations and enablement organization, the client coverage practice, will make it easier for our clients to do more business with BNY Mellon and create consistent commercial roles, tools and support internally for an enhanced and more efficient sales experience. And what we call integrated solutions represent a new, more focused approach to assembling components from multiple client platforms into repeatable go-to-market capabilities that span across our lines of business, driving better value for our clients and higher profitable growth.

The second one I'd like to highlight is our transition to our platform's operating model. By grouping similar activities together into logical platforms and uniting related capabilities, we are enabling the streamlining of internal processes to drive higher efficiency and further enhance resiliency and risk management. Our model is based on 2 types of platforms: client platforms will own the delivery of a commercial solution to our external clients, while enterprise platforms will own the delivery of internal services.

Over the past few months, we've developed a detailed implementation approach, and our transition into this new model will be gradual and deliberate, starting with the first implementation wave this spring. And the third is our culture. People come to BNY Mellon to make an impact on global financial markets. While we focus on driving growth and running our company better, none of it can happen without our people. That's why we're making meaningful investments, including an enhanced learning, development and feedback to foster exciting careers.

Moving to our segments, starting with Securities Services on Page 16. Here, we are reiterating our existing 30% pretax margin target. Over the past 24 months, we've improved the margin from 21% in 2021 to 25% in 2023. We're pleased with the performance of the business over the past 2 years, but we appreciate that the path from 25% to 30% will be the harder yards. First of all, we're firmly focused on driving down the cost to serve. We have and we continue to make significant investments in uplifting several platforms that support core services, including fund accounting, tax services, corporate actions and loan administration.

Additionally, we continue going after inefficient processes. Over the past couple of years, we cataloged all of these processes and we've made some good progress in our digitization efforts, but there's more work to do. We're also taking a more strategic approach to deepening client relationships going forward. Using enhanced tools to better understand client behavior, quality of service, economics and revenue opportunities, we are expanding wallet share and improving client profitability. Last but not least, we're pursuing several opportunities to drive an acceleration of underlying growth.

On the back of our investments over the years, we have become a premier provider of ETF servicing globally, and we expect to maintain our strong momentum through continued innovation. Similarly, in private markets, another one of the fastest-growing market segments, we've established a strong market position with more room to expand our capability set.

Moving on to MarkETF and Wealth Services on Page 17. As you can see on the left side of the page, this segment has a good track record of solid growth and attractive margins. Our focus here is to accelerate growth through deliberate investments without compromising profitability. I'll start with Pershing, our company's second largest line of business. As the number 1 clearing firm for broker-dealers and a top 3 RIA custodian, Pershing benefits from a strong position in one of the fastest-growing segments in financial services, i.e. the US wealth market. Notwithstanding near-term headwinds from the events of 2023, we are confident that our investments in the core platforms and client experience will drive further market share gains in the attractive market segment of the growing $1 billion-plus RIAs and hybrid broker-dealers.

And our Wove platform continues to gain momentum. As we're capturing business from existing clients and new opportunities to deliver the platform, data and investment solutions, we're currently projecting $30 million to $40 million of incremental revenue from Wove in 2024. In Treasury Services, we're benefiting from a strong position with financial institutions, and we're one of the top 5 US dollar payments tiers in the world. Leveraging this strong position, we're selectively expanding our reach by targeting new clients, geographic and product segments. For example, we've been adding bankers to drive growth with e-commerce and NBFI clients, and the completion of multiyear uplift of our payments platform is expected to drive an increase to our Swift market share through growth in several geographies.

Additionally, by joining forces with our markets business, which provides FX solutions in over 100 currencies, Treasury Services will enhance the FX capabilities that it can provide its clients. Rounding out the segment, Clearance and Collateral Management. As a primary provider of settlement for all US government securities trades and the largest global collateral manager in the world, we have a special role in financial markets and we're taking this role very seriously. No doubt this business grows as markets grow, but we're not resting on our position. Our Clearance and Collateral Management business is one of the most innovative in the company. And so we're confident that this business can maintain its healthy growth trajectory by continuously launching new flexible collateral management solutions that position our clients to meet their growing liquidity needs and by continuing to increase collateral mobility and optimization across global client venues.

Next, Investment and Wealth Management on Page 18. The Investment and Wealth Management reported a pretax margin of 12% for the full year 2023 or 17% excluding notable items. Our plan is to improve the segment margin to 25% or higher over the medium term on the back of a combination of growth and efficiency initiatives. First, we're unlocking BNY Mellon's distribution power for the benefit of our investment firms and our clients. Most importantly, we're in the process of creating a firm-wide distribution platform that combines in-house products with offerings from select third-party managers to provide best-in-class solutions.

Additionally, we're making enhancements to how we're offering Dreyfus cash products across our enterprise-wide open architecture liquidity ecosystem to improve visibility, and hence, platform share. Second, we're expanding our products and solutions with a focus on scaling our investment capabilities across Investment Management, Wealth Management and Pershing. And third, we're driving efficiency and scale by realizing the benefits as multiyear infrastructure investment programs are nearing completion and by better leveraging the enterprise to transform fragmented and subscale support activities into scaled enterprise platforms.

Moving on to our capital management philosophy on Page 19. BNY Mellon benefits from a capital-light business model that allows us to drive organic growth while typically returning nearly 100% of earnings to our common shareholders over time. Over the past 10 years, the firm grew dividends per share at an 11% CAGR and returned almost 100% of earnings to shareholders through a combination of dividends and buybacks. Our philosophy for capital deployment and capital distribution remains unchanged. We've entered the year with strong capital ratios at or above our management target of approximately 5.5% to 6% Tier 1 leverage and approximately 11% CET1. And assuming interest rates follow market-implied forwards, we expect to generate additional excess capital from the unrealized loss related to AFS securities pulling to par over time.

Wrapping up on Page 20. Over the past year, we conducted thorough strategic reviews, we developed detailed business and financial plans, and we've taken the first steps on what will be a multiyear transformation of our company. Our business plans drive as achieving what we laid out across our 3 strategic pillars: being more for our clients, run our company better and power our culture. And our financial plans aim to improve the firm's pretax margin to 33% and our ROTCE to 23% over the medium term while maintaining a strong balance sheet. In publishing our medium-term financial targets, together with our most important strategic priorities and the actions that will help us achieve them, we are providing transparency to allow you all to track our progress, and we are confident that we will deliver. We are excited about the work ahead of us, and today is an important milestone for our team. Now for those of you who are still with us, we promised to let you start your long weekend soon.

With that, operator, can you please open the line for questions?


Questions and Answers

Operator

[Operator Instructions] Our first question comes from the line of Brennan Hawken with UBS. Please go ahead.

Brennan Hawken
Analyst at UBS Group

Good afternoon. Thanks for taking my question and thanks for all the detail that you provided in the deck on the targets. Really very, very helpful, very, very thoughtful. I'd love to start there. So it seems as though you guys see a really strong pretax margin enhancement opportunity. Where do you expect that you're going to see the results of that opportunity come through first? And while I appreciate that the targets are over a 3- to 5-year period, is the profile of the improvement that you expect likely to look straight line? Or is there going to be sort of a more parabolic curve resulting in more of a back-end weighting? Thanks.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

Hi Brennan, this is Dermot. I'll start off. So the way I kind of think about it is if you take the comments that both Robin and I have prepared, and we've just laid out over the last 30 to 35 minutes, you can see truly that 2023 was a foundational year. We did a lot of kind of exploratory work, detailed planning. We've made a bunch of investments, both which will drive efficiency and which will drive growth. We've talked a lot over the last few quarters about Wove, which we launched last June.

And in my prepared remarks, I talked about $30 million to $40 million of revenue this year. So I would say we're making investments in all of our segments, and you can also see it in Investment and Wealth Management, where we are beginning to see green shoots. And you can see we're making a lot of investments in our security and services businesses modernizing our platforms. So I would say you're going to see it quarter-by-quarter. And I think over time, as you get to know Robin and myself, you'll see us do it and then talk about it rather than preannounce it and then do it. So in execution mode, and we will deliver, but you're going to see this happen quarter-by-quarter.

Brennan Hawken
Analyst at UBS Group

Okay. Thank you very much for that color. I appreciate it. The environment is rather different from the last time we spoke. We've seen an indication of a Fed pivot. Everyone is now expecting a far more short order rate -- policy rates to be declining. And so we saw an uplift -- even though there was only a little bit of averaging in of policy rate a little higher this quarter, we did see an uptick in -- on the deposit cost side. So what drove that? And then how should we be thinking about the mechanics of the lower policy rate and how that might flow through on the deposit side? And what's captured in your NII outlook for 2024. A few questions in there. Sorry, Dermot.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

Yes, I was going to say for a follow-on question, that was special, yes.

Brennan Hawken
Analyst at UBS Group

Got my money's worth.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

Yes. So hopefully, others won't have to ask the same question again. So look, if you go back 12 months, when we gave our 20% guidance for 2023, there was a disconnect between what the market thought was going to happen in '23 and what the Fed thought was going to happen in '23. The market was calling for rate cuts in June of '23, and the Fed wasn't. We guided 20%. The year at out very, very differently to what everybody thought was going to happen. And we ended up with a 24% year. To one of your questions where -- why did deposit costs go up, I think our NIM for Q4 was in the 1.26% range, and that really is balances rolling off and new balances coming on at market rates.

And we ran strong to the tape in -- we ran strong to the tape at the year-end. And look, I have to say how we did on deposits in Q4 was a little bit of a 1BNY Mellon effort between lines of business, our deposit team, our Treasurer and our CIO book. So we feel very good about how we finished the year, and we outperformed $1.1 billion of revenue. So all in all, we feel very good about that. This year, again, I think the Fed and the markets are a little bit at odds. We had a Fed commentator talk a couple of days ago about March being too early.

Notwithstanding that, the market thinks there's an 80% probability of a rate cut happening in March. So we're neutrally positioned in the outlook for '24. On balance, if the rates happen, and 6 cuts happen this year, we might expect balances to go up. If it's higher for longer, we expect people to optimize and we say continued outflow of deposits. But we start the year strong with $273 billion of average deposits in Q4. We feel good about our NIM for 2024. So we feel we're set up nicely, but the balance comes, we think, down 10% for '24.

Brennan Hawken
Analyst at UBS Group

Okay. Thanks for taking my questions and thanks for the patience with multiparter.

Operator

Our next question comes from the line of Mike Mayo with Wells Fargo Securities. Please go ahead. Mr. Mayo, your line is unmuted. Please go ahead. Check your mute button.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Mike, we can't hear you. So we'll come back to you, maybe have an issue connecting.

Mike Mayo
Analyst at Wells Fargo Securities

Actually, I'm here. Hey, can you hear me now?

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Yes, just in the nick of time.

Mike Mayo
Analyst at Wells Fargo Securities

Okay. Just made it. So let me see if I did okay in my math in school. So in 2024, you're guiding for flat expenses, flat or higher operating leverage, NII down 10%. That implies fees up 3%. So did I do my math correctly? And if I did it correctly, why only up 3%?

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

So Mike, it's Robin. We're not going to quibble with your math or with your English comprehension either from our commentary. You've gotten right what we said. We've intentionally not guided on fees because of the nature of the year, and we recognize that there are a lot of different inputs to that. So we recognize that the year can, in fact, turn out in various different ways. We feel committed to the flat to plus on the operating leverage that we've committed to. And we've guided to how we think the other things are going to play out. And so that was quite deliberate, and we're focusing you on the things that we've talked about. But obviously, from a math point of view, we understand how the math works.

Mike Mayo
Analyst at Wells Fargo Securities

The more important question would just be your medium-term target to take your returns to 23%, up from 21% last year or, I guess, 21.5% or so this past year. How do you define the medium term? And for that 150 basis point increase from here, how would you segment that, like efficiency, revenue, buybacks or some other way just to give us like a simple waterfall chart in words?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So the way I would think about it, Mike, is not to give you a kind of a weak answer, it really is all of the above. And if you think about fee revenue, we're very focused on higher organic growth. And we said about that and we've made a lot of mention about the Chief Commercial Officer, 1BNY Mellon and kind of just generally de-siloing the organization. We really feel optimistic about being able to deliver over time higher organic growth. Also in 2023, FX volumes around the world and volatility was lower. And so we expect FX revenue that to normalize, which give us a boost. And look, we kind of -- we're optimistic about where equity markets are going to go. And so in our plans, we have mid-single-digit equity market appreciation to support that fee revenue growth.

On expenses, look, I think 2023 was a year where we got 50-plus thousand employees on the same page as how Robin and I think about and the management team think about running our company better. We don't talk about cost cutting or head count layoffs. We talk about what are the things that we need to do to run this company better. And I think we have 50,000 people aligned with us now. And I feel very optimistic through all the projects that we have underway to digitize the firm, automate processes, deliver more for our clients. So everything will feed together, and we'll do a lot at the same time. And with all of that, we'll be able to buy back more stock, which will drive us to that higher ROTCE and pretax margin that you talked about.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

And Mike, I'll just add one thing to that, which is we talked at the beginning of 2023, and you pressed us on this and rightly so in 2023, about the fact that we hadn't before managed to tell the improved expense story that we think we actually ended up telling on -- in 2023. And that was an important focus. We also recognized that we were likely to have a good NII year, and we took the opportunity of those 2 things to be able to invest for future fee growth. And we never thought 2023 was likely to be a very strong fee year because the fees take time to be able to generate the return from the investment that we're putting into it through the various different things that Dermot just detailed.

And so we've set ourselves up, we think, to now be able to really leverage those investments. And that's a '24, '25, '26 story. Now of course, we'll stay focused on NII. We'll Absolutely stay focused on efficiencies and expenses. We think AI will play a story in that over time, probably not a short-term story but more of a medium-term story. And that's how the whole thing comes together from an operating leverage point of view. So the way we got there in '23 is probably going to be different than the way we'll get there in '24. We're trying to point you to that through the disclosures.

Mike Mayo
Analyst at Wells Fargo Securities

Thank you.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Thank you.

Operator

Our next question comes from the line of Brian Bedell with Deutsche Bank. Please go ahead.

Brian Bedell
Analyst at Deutsche Bank Aktiengesellschaft

Great. Thanks. Good afternoon, folks. Thanks for taking my questions. Again, also, thanks for all the detail around the businesses and long-term outlook as well. If I can focus on Slide 16 in the securities servicing goals there. How do you think about -- in terms of automating the processes those first 2 boxes that drive the cost to serve down and then the second one on deepening client relationships, how do you think about the effect of digitizing and automating these processes and whether sort of matching that against to what extent you can actually enhance the revenue profile as well? Are you favoring lowering the cost and not so much enhancing the revenue profile by digitizing the services? Or is there 2 parts of that where you can also improve the servicing quality?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

Okay. So here's how I would answer that, Brian. So we've -- and I said in my prepared remarks, we've made a lot of -- through last year and this year in the budget process, we have made a lot of investments in our foundational infrastructure that supports the Asset Servicing business. And so that's going to result in greater automation and a better client experience. We hired a new Head of Operations last year, and he's made a tremendous impact and spending a lot of time with our clients through understanding client behaviors where they're able to explain to us what they need, and we can then figure out how to change our processes to be more automated to deliver their solutions. So we've made a lot of good progress there. So through driving down the cost to serve, we're going to give better client experience, which will then ultimately lead to enhanced revenue and enhanced client experience because the clients will be happy with us.

The other thing I would say is, for Asset Servicing specifically, we had our strongest sales quarter in 2023. We come into 2024 with a very healthy uninstalled book of business. And we feel very good about the mandates we won in Q4, and we feel very good about the pipeline coming into 2024. So I feel very, very good about all the leadership changes that we've made in Asset Servicing over the last 12 months, the hires we've made and the impact that they've made since they've joined. And then within the other part of Securities Services, Corporate Trust and Depository Receipts, we're making significant investments in Corporate Trust this year to do a lot more digitization and a lot more automation so we can scale the business and drive that margin higher.

Brian Bedell
Analyst at Deutsche Bank Aktiengesellschaft

That's a great color. And then just a follow-on on the balance sheet deposit beta, the Fed cuts. And maybe if you can also comment on international cuts from the Bank of England and ECB. How are you viewing your deposit beta on the downside? Do you think within your guidance, are you able to move that down commensurately? Or is there a significant lag? And does that differ between the US and Europe?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So just to kind of give you a general framework, nothing really has much changed quarter-over-quarter. The dollar book, which is roughly 75% of the overall portfolio, has an 80% beta. As I've said many times, we have sophisticated clients. They're with us for not just deposits but for a variety of goods and services, which feeds the stickiness of our overall deposits being 2/3 operational. So that's a good story. We passed on the price as I've said. We -- it will grind a little bit higher from here, but I think I feel pretty good about the dollar book and where that's at. And then euros and sterling, which make up the balance, are in the 55 to 65 beta range. And so as the rate -- as the Fed kind of ultimately will pivot and rates will come down, we do expect that to follow symmetrically and so go down the same way it came up. So that's how I would view that.

Brian Bedell
Analyst at Deutsche Bank Aktiengesellschaft

Great. Thank you.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Thanks, Brian.

Operator

Our next question comes from the line of Ebrahim Poonawala with Bank of America. Please go ahead.

Ebrahim Poonawala
Analyst at Bank of America

Hey, good afternoon.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Hey Ebrahim.

Ebrahim Poonawala
Analyst at Bank of America

I had a favoring question just around looking at your medium-term targets. And I heard what you said in response to Mike's question on the fee revenue guide for this year. But when I looked at your strategic targets, I guess it's deliberate that we don't have a revenue growth number in there or a revenue growth target. And I'm just wondering, is that due to the macro or your view on the business, where you don't have a line of sight around being able to sustain a certain level of revenue growth? And I asked this because I think that's probably the toughest part of the BTA investment story is what's the sustainable level of revenue growth. You gave a lot of details around products and businesses, but would love to hear in terms of how you think one should think about baseline revenue growth in more or less normal macro environment over the coming years.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

Okay. Thanks for the question, Ebrahim. So I've been here 14 months now. So I'll give you my perspective, right, in terms of my history and I've studied the firm and how -- we've accomplished over the last 12 months and how I see the future. So over the past years, BNY Mellon has delivered organic growth north of 2%, but it hasn't done it in a consistent fashion. And so we want to be able to talk to you in a consistent manner, and we'll give you guidance -- we want to know that when we give guidance, you believe that we're going to do it. So for '24, we think we're going to turn positive on fee growth. We feel set the firm up. But we don't want to kind of give out guidance that has not got a track record of success. And so I've kind of said this in answer to some other questions.

Asset Servicing, we feel like we have strong momentum. We feel we're making the right investments to power that business forward. And that will -- it's our biggest business. And so we feel like pretax margin is going to go up as a result of efficiency and fee growth. And then if you take Market and Wealth Services, our most profitable segment, Clearance and Collateral Management, Treasury Services and Pershing, all have mid-40s pretax margin and all have good opportunities for growth. But then again, fee growth is a little bit dependent on the market, and a big part of it is what happens to the market. And that guides us to be a little bit more cautious with giving you guidance overall on fee growth. But each of our businesses in terms of the underlying fundamentals, we feel very, very good about.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Ebrahim, I'll just add to that. And we debated this a lot about the fact that you don't have the dollar output guidance on fees. And so as a result, what we've been trying to do is really make sure that we're communicating to you on all of the inputs to that. But as Dermot said, there is both a market impact potential. We'll have to see how the markets evolve. And there's a bit of a portfolio effect, which is we've really invested in a lot of different places. We have good confidence around the fact that several of those are going to yield something in 2024 and then hopefully continue to yield more in 2025.

But it's hard for us to be able to know exactly what's going to hit and exactly when it's going to hit. So we've got a confidence on a portfolio basis around those investments, but we don't have the absolute line of sight that makes us comfortable to tell you the exit number in the exact quarter that it's actually going to hit. And so all we can do is show you the inputs and now point to a year of track record in 2023 around the fact that we have, in fact, made progress on the things that we said we were committed to make progress on.

Ebrahim Poonawala
Analyst at Bank of America

That's helpful. Good color. Thank you. And just a separate question. I mean I'm sure most investors like the fact that you're going to be buying back stock. But when you think about -- given the sort of run in the stock valuation-wise, is there any sensitivity to where you probably don't want to be leaning into buybacks? And secondly, are there other good uses of capital, one of them being inorganic M&A-driven growth? Or is that just off the table right now?

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

So you're right that we have an implied waterfall of how we think about our capital. And the first is to be able to invest it profitably well in the business. And then towards the bottom of that waterfall is if we have surplus capital after we taking those things into account, we want to return it to our shareholders, and that's what we've been doing. And so that waterfall hasn't changed in how we think about it. Now in terms of M&A, right now, we're focused on what we have and how we think that we can improve it. That's really been the story. Dermot really made the point around running our company better.

And we think that there's so much opportunity in the franchise to be able to run ourselves better and have the growth that we haven't wanted to distract ourselves with M&A. Now we have a high bar. We've had a high bar. We continue to have a high bar, but we are keeping our eyes open. And I think that's the right thing to do, particularly for things that would help us to accelerate our delivery. We're not looking at transformation, we're not looking at big pivots, but we are always interested in things that can, in their own way, speed us on the journey that we've laid out to you.

Ebrahim Poonawala
Analyst at Bank of America

Got it. Thank you for taking my questions.

Operator

Our next question comes from the line of Ken Usdin with Jefferies. Please go ahead.

Ken Usdin
Analyst at Jefferies Financial Group

Thanks. Good afternoon. So last year, you guys did a really good job setting a hittable bar on that NII point that you made earlier, and we ended up seeing a nice increase to NII to the end of the year up to $1.1 billion. So I'm just wondering, given that you're still setting a new bar to down 10%, which implies definitely like a settling down from the $1.1 billion, I'm wondering to the prior conversation on rates, just can you help us understand like the cadence of that, the direction of travel and then with regards to the rates forecast you're building in, like when that settles back down and starts to bottom? Thanks.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

New yearly guidance, I'm not too sure I really want to commit to quarterly guidance. Deposit levels, we finished the year strong. That was a variety of factors. As I said in my prepared remarks, we had 4 months of consecutive growth. I talked at Barclays in September, I talked at Goldman in December. We feel very good about the deposit franchise. We feel very good about what clients are doing with us. And so we bank it as it comes. But when I sit back and I look out at the macro, and this is what we said this time last year, we expected deposits to go down by mid- to high single digits. And it'd ultimately be -- it was down 4% for us. That's the trajectory I expect to happen this year. And so I don't have a particular magic ball on what's going to happen quarter-by-quarter. So I would just take the down 10% and divide it by 4 for your model and just see where that gets you.

Ken Usdin
Analyst at Jefferies Financial Group

Okay. Got it. And then as a corollary to that, your comments on the movement to a flattish expense base from a successful plus 3% last year is a meaningful move. And I know it fits to that point we just ended on, which it still incorporates a down 10% NII. Presuming we get past this point and NII does get stable and/or the fee income starts to grow, I presume you're not trying to point us to a flattish expense trajectory for the longer-term future. But guide -- maybe you can talk us to how you will manage that positive operating leverage gap and -- relative to needed investments and then the margin targets you just gave us to in terms of how you kind of deal with volatility of the macro environment while getting to that point of seeing those margin target improvements.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

So Ken, it's Robin. I'll start off. Dermot might want to add something. Look, I think about this at a fairly high level of us being focused on positive operating leverage, at least until the point that we get to the sort of margin targets that we're talking about, and there's a little bit of work between here and there. And we also recognize that each year is going to have unique factors. And so the year in which we have a fairly significant NII jump of the 24% is going to create different conditions that allowed us to have a fee year which was fine but not growing in a meaningful way. And that allowed for some headroom on expenses, which was -- which is something that we've used in order to be able to make investments.

Now 2024 is a different year. It's got a different composition. But every one of the years that we face has each of these inputs. It has fees, it has NII and it has expenses. And we're trying to be very purposeful around solving for operating leverage in the context of the year that we actually are faced with. And we think that that's the right thing to do, recognizing that markets move around. And each year brings -- serves us something different. We manage what's in our control.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So Ken, I'll go a little bit off script here. It's a bit of a cultural moment for us on just expense management, financial discipline, running our company better. I talked with one of the executive committee yesterday and he said, Dermot, you have a very high bar for yourself on flat expenses for 2024. And I said, no, we have a high bar, we as a firm. And that's down to all of us. And we talked to our managing director population earlier today, and we're all in it together about running our company better. And I think that's an important culture pivot that we've managed to achieve over the last 12 months.

Ken Usdin
Analyst at Jefferies Financial Group

Yes, got it. Thank you guys. Appreciate it.

Operator

Our next question comes from the line of Glenn Schorr with Evercore ISI. Please go ahead.

Glenn Schorr
Analyst at Evercore ISI

Thanks very much. So just one big question, if I could. So I think you've been talking about getting clients to do more business with Bank of New York Mellon, which -- and you're executing on getting them better and you invested a lot. I did hear you today talk about improve the service and then clients will consolidate business. So my question is, high level, it feels -- it's natural and it feels like it's working, but you're putting a lot of effort and expense at improving and modernizing and digitizing your businesses that actually haven't been growing as much and/or need to modernize more and have lower margins to improve them. But is there any thought towards maybe you're supposed to put capital towards actually your highest profitable business and ones that grow? It's a question on, do you need the whole portfolio basically?

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Yes. So the short answer to your question, Glenn, is yes, we do. And as Dermot has laid out and we've laid out in the materials particularly, there is a subtly different flavor to the investments that we are making in each of our segments. And so in the Securities Services segment, our focus is on the efficiency and cost to serve as well as growth. We haven't ignored growth. But we recognize that making sure that our margin in that business continues to improve will allow us to be even more competitive. Because we're the world's largest custodian, we want the benefits of our scale to fully translate into our pricing with customers and the service that we can provide. So it's got a tilt towards efficiency in that business.

And there's a lot of digitization that can be brought to bear there. We are excited about the medium-term potential of AI. We're excited about the shorter-term benefits of our new leadership team in operations, and the things that Emily and her team are working on are really targeted to that. But we haven't forgotten about growth in the space. And that's why Dermot mentioned, we actually had our best sales quarter at the end of last year in that business. Now you're right, in our Market and Wealth Services business, which has a margin that, frankly, we're quite happy with, and you haven't heard us talk about growing that margin. We really want to grow that business at that margin, and that's our focus there. So that's really where our drive, drive, drive around more revenues, a lot of our investments around our new business. That's where we built Wove is in that business.

Dermot talked about the Clearance and Collateral Management business, where we've had very significant growth over the course of this year. He talked about the investments that we're making in our Treasury Services business as well, where we've got -- so that's where we are really wanting to try to grow the overall revenue. And then in our Investment and Wealth Management business, where we've had higher margin before and now we've been subject, of course, to the more difficult market environment, that's driven it down. But that's a place where we'd like to return to our prior margins.

A little bit of market would help on that but also some of the structural changes that we've been making, the new product launches that we've been doing, the opportunity to make Investment Management part of BNY Mellon as opposed to just a separate piece, not availing itself of the $2.5 trillion-plus of distribution we have, which at the end of the day, was completely orphaned previously from the $2 trillion worth of manufacturing. So the way in which we're solving the problem varies according to the segment.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

And what I would add there, Glenn, is -- it's in my remarks, but we invested $0.5 billion last year in things that we wanted to do that was going to grow the company while keeping our expense growth rate at 2.7%. So we're very disciplined about what we want to do, getting value for money, while at the same time, manage the expense base of the firm.

Glenn Schorr
Analyst at Evercore ISI

Thanks so much for all that.

Operator

Our next question comes from the line of Manan Gosalia with Morgan Stanley. Please go ahead.

Manan Gosalia
Analyst at Morgan Stanley

Hey, good afternoon. Can you talk about your assumptions around QT in your NII guide? And are you assuming it continues at the current rate? So if the Fed does slow and does end QT early, would that be a big benefit to your deposit growth and to NII?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So our NII guidance is based on market-implied forward rates at the end of the year with QT continuing. And so with QT continuing, we expect deposits to roll off. If QT were to change, then obviously, we would revisit and see what the benefits of that would be and run our models again and then we will come and talk to you. But that is not our base case QT ending anytime soon.

Manan Gosalia
Analyst at Morgan Stanley

But on a net basis, that should help the noninterest-bearing deposit balances?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

It should help, yes. But I couldn't give you a sensitivity to it here today, and it's not our base case.

Manan Gosalia
Analyst at Morgan Stanley

Got it. Okay. Great. And then if you could help us with how we should think about the securities book with 6 rate cuts? Is there still a large chunk of the securities book that still reprices higher even if we get 6 cuts?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So Q4 -- I'll start with Q4. As you will see in the financial supplement, the securities book rolled down by about $4 billion largely deployed into cash and some mortgages, et cetera. And we had a yield pickup there of about 300 basis points. In 2024, we expect the yield pickup from the roll-down to be about 150 to 200 basis points, so rolling off at about 3% into current market rates. It's very liquid, quite like shortened duration. So overall, we feel good about the outlook for the book in 2024.

Manan Gosalia
Analyst at Morgan Stanley

Great. Thank you.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Thanks, Manan.

Operator

Our next question comes from the line of Gerard Cassidy with RBC. Please go ahead.

Gerard Cassidy
Analyst at RBC

Good afternoon, Robin and Dermott.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Hey Gerard.

Gerard Cassidy
Analyst at RBC

Dermot, I know you touched on this with the net interest revenue already in terms of your expectations for 2024 being down 10% following, I think, the forward curve, correct me if I'm wrong there. If the forward curve is incorrect currently 6 rate cuts and it comes in closer to 2 or 3 for the year, how does that affect that 10% guidance?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So I would say the theoretical answer to that is you're higher for longer. And so therefore, people will continue to optimize their deposits into higher-yielding assets. So you could see the base case, you could see balances run off more. But we've kind of analyzed this top-down, bottom-up left to right. And so the best guidance we give you is 10%. But if it transpired to be a different number, obviously, the NII number would be different.

Gerard Cassidy
Analyst at RBC

Sure. No, understood. Okay. Thank you. And maybe, Robin -- and I apologize if you guys already talked about this or it's in the deck. Your new business wins this quarter, what was the dollar amount of that? And what's the installed base that you have for next year?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So we don't give specific guidance on the installed base or backlogs. But I would say, look, I said it in an answer to an earlier question and it's in my prepared remarks, we had -- Q4 sales was our strongest of '23. We won mandates in the Middle East, asset managers, largest clients giving us more business. So look, we feel very good about what we accomplished in Asset Servicing in '23, and the team feel very kind of buildup about '24 and what the opportunities are in front of them.

Gerard Cassidy
Analyst at RBC

Good. Okay, I appreciate it. Thank you.

Operator

Our next question comes from the line of Rob Wildhack with Autonomous Research. Please go ahead.

Rob Wildhack
Analyst at Autonomous Research

Hi guys, a couple more on deposits. Dermot, you mentioned a couple of times that you've had 4 straight months of deposit growth to close '23. It seems that a lot of the things that would weigh on deposits in '24 were or already are headwinds in '23. And yet despite that, you've been able to grow deposits. So I'm curious if there's anything else that you think might change or become more of a headwind from the last 1/3 of '23 and into '24 and if there's a possibility or an environment where deposits actually come in better than what's in the guide?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So look, overall, a big part of the deposit base -- our deposit base, too, is NIBs and where that goes. So look, the reality is Q4 was clients and hard work by our team. And it worked out and we outperformed by $100 million, and we take it. But hindsight is everything and it's behind us, so we bank it and we move on. When I sit here today and I sat here last January, '23 didn't turn out the way everybody thought it was going to turn out. And so who knows what's going to happen in 2024. And so there is a lot of uncertainty out there. So I feel very comfortable with the down 10%. And if that changes to the upside, we're going to be the first people to tell you because we would like it to be not that number. We'd like to be -- it to be a better number, but that's the number we give you today.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

And Rob, I'll just add, it's easy to forget, we still got a lot of complexity in the world. As Dermot said earlier on, if QT continues, that's one thing. If QT ends, maybe that's to the plus. You've also had a massive run up in liquidity over the course of the -- in money market funds and other places, you see how that gets put to work or not, as the case may be. Stock market, therefore, becomes a little bit of a wildcard as we see the flow of funds. So still at the complexity of -- we talk about the fact that the Fed might cut in March. The Fed talks about the fact that they might not cut in March. So there's enough variation in the exact way that this is going to play out. And that's why Dermot answered one of the earlier questions in the way that he did around our 10% and the path of it because we just don't have that type of visibility. But we do have the sense that we can kind of work the problem to our current guidance.

Rob Wildhack
Analyst at Autonomous Research

Okay. Thanks. And then I think earlier you mentioned something about deposits that were not yet seasoned or not yet operational. I was just wondering if you could expand on that. What's the criteria for a deposit to be considered operational? And then how long does it take for something like that to play out?

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So that's -- there's a very long answer to that, which we can take you through off-line. But the general sense of to be operational, you have to be doing stuff with us in another line of business and you have to be making payments and you have to be sticky to us as the firm. And over time, then we classify you as operational in nature. And that helps us on the liquidity ratio standpoint. So if you're a relatively new client and you haven't established that track record, then you're considered nonoperational until such time as you meet those criteria. But as I said earlier, 2/3 of our deposits overall are sticky, and that's a good fact.

Rob Wildhack
Analyst at Autonomous Research

Got it. Thank you, guys.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Thanks, Rob.

Operator

Our next question comes from the line of Rajiv Bhatia with Morningstar. Please go ahead.

Rajiv Bhatia
Analyst at Morningstar

Great. Can you comment on the pricing environment within your Securities Services segment? I guess ACA was up 9% against flat fee revenue. So is pricing pressure, would you say, it's stable or would you say it's intensifying? Thanks.

Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon

So I would say it's overall stable, and it's something that we gave a particular focus to last year. And we've gone through it client-by-client, analyzed client profitability, which clients are profitable, which clients aren't, what we can do in terms of cost to serve and how do we price on a marginal basis versus a fully noted basis. So over the last 12 months, we've done a lot of foundational work on how we've become more sophisticated in terms of how we price our business and how we talk to clients vis-a-vis pricing. So I would say stable with a positive momentum to it.

Rajiv Bhatia
Analyst at Morningstar

Great. Thanks.

Operator

Our final question comes from the line of Mike Mayo with Wells Fargo Securities. Please go ahead.

Mike Mayo
Analyst at Wells Fargo Securities

Hi, thanks for the follow-up. At the Boston Bank Conference in November, Emily Portney, the head of your Asset Servicing business, seem very excited about AI and the implications and the implementation of that in the Asset Servicing business. And I'm just wondering if that excitement is shared throughout BNY Mellon and what you see as potential use cases and the ability to go from pilot to production. Is it -- beyond the hype, where is the reality of AI? And any specific numbers of what it might be able to do?

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Yes, Mike. Look, the short answer is, yes, we are excited about AI. We're excited about it. Over the medium term, we stood up in 2023, what we call the AI Hub, where we gathered up a bunch of engineers under sort of top talent leadership to really focus on building out a set of capabilities. They worked with every business and every function in the firm to canvas for use cases. We had hundreds of those. We developed a series of different themes for investment because there's a lot of duplication actually across the different use cases when you think about them on a fundamental functional basis. And then these themes for investment are things that we've actually been investing in. And so we do have things in production.

We actually have a piece of software today that is creating predictions for clients in our treasuries business actually that looks at sales. We've talked about that before. That's a good example. And that was a very early AI implementation that we made, and it's actually a piece of software that we currently earn some revenue on as part of our CCM business. It also contributes more broadly to market stability, and it's a great client service. On the flip side of that, the question is going to be, well, for an organization which has as many processes as we have and people performing processes, there's going to be an opportunity there to create more efficiency. And so we've invested in and are investing in that space as well. We're also investing in the employee experience, the opportunity to have AI do tasks which are mundane or repetitive.

In one particular case, it's helping our research team get a march on the day. So rather than getting up at 4:00 in the morning to write research, they get up at 6:00 in the morning to write research because the AI has given them a rough draft to start with and served up a bunch of data for them. So there are all sorts of different things. Now we haven't put it into numbers, and so it's not directly in our outlooks in terms of the way that we're thinking about it. But it would not surprise me if this is something that over the course of the next decade is going to be able to provide benefit on the top line and the bottom line. And so we're doing exactly what Dermot said before: we're not talking too much up things that we're still working on that we can't give you line of sight into the exact temper, but I'm answering the question because you asked it. But we are excited about this under the hood, for sure.

Mike Mayo
Analyst at Wells Fargo Securities

All right. Thank you.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

You're welcome.

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 with any additional or closing remarks.

Robin Vince
President & Chief Executive Officer at Bank of New York Mellon

Thank you, operator.

I'd like to close by reiterating that 2023 was an important foundational year for us and that the multiyear transformation of a company is off to a good start. As we begin our company's 240th anniversary year, we're excited about the opportunity ahead of us. I'm immensely proud of everything that our people here at BNY Mellon got done over the past 12 months. I'm grateful to our clients who are leaning in to their relationships with BNY Mellon and allowing us the opportunity to serve them in even greater ways. And I appreciate the faith and support that our investors, old and new, have placed in BNY Mellon.

Marius and the IR team stand ready to assist you, should you have any questions. Be well and enjoy the long weekend.

Operator

[Operator Closing Remarks]

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