Bank of New York Mellon owes its size and market-leading position to the 2007 merger between Bank of New York and Mellon Financial. It was roughly a merger of equals, with Bank of New York stronger on asset servicing and Mellon Financial the larger asset manager.
Of course the true size of BoNY exceeds its balance sheet because of the assets it holds for others under its two lines of business. On the asset servicing side, it holds a staggering $27.9 trillion in assets under custody/administration. To put that number into perspective, that's equal to about double the U.S. GDP and half of all U.S. household wealth!
Asset servicing is what BoNY is known for. On a basic level, what BoNY does is hold custody of and keep track of assets for Wall Street. For example, in the mutual fund space, Bank of New York would be the third party actually holding the underlying assets and performing the back office work for the fund company and its shareholders.
BoNY's services run the gamut. If Wall Street does it, BoNY is probably involved behind the scenes. That means that whether you're talking about clearing derivatives trades, supporting debt, equity, and depositary receipt flotations, or outsourcing the treasury function, BoNY is likely helping out. In return for making sure these unglamorous financial operations get done independently and well, BoNY earns fees.
Meanwhile, on the asset management side, BoNY holds $1.4 trillion in assets under management. In addition to offering funds for institutional investors and high-net-worth customers, it also owns the Dreyfus mutual fund family. To put BoNY's $1.4 trillion in context, mutual fund giant Fidelity holds $1.6 trillion.
With such a large existing footprint, the growth opportunities for Bank of New York Mellon lie in taking advantage of its scale advantages, cross-selling to existing customers, and expanding internationally.
Neither Anand nor Matt owns shares of any of the companies mentioned. The Motley Fool has a disclosure policy.