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BNY Mellon Banks on Scale and Diversification

We see pockets of growth for the world's largest custodian.

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With more than $38 trillion in assets under custody or administration, Bank of New York Mellon (BK) is the largest custodian in the world. While core custody can be an undifferentiated offering, scale and the stickiness of clients have helped the firm generate double-digit returns on tangible equity.

BNY Mellon’s investment services segment is much more than asset servicing. Within this segment, the company offers issuers services that include corporate trustee and depositary receipts such as ADRs. Though it’s the largest provider of depositary receipts, BNY Mellon has lost ground to competitors. Its clearance and collateral management (about 7% of revenue) is unique in that it is the sole provider of triparty repos for U.S. government securities. Pershing, acquired in 2003, provides broker/dealer clearing and RIA custody services and has been a bright spot for BNY Mellon. We expect Pershing to continue to benefit from the secular growth of registered investment advisors.

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Rajiv Bhatia does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.