While embedding AI 'everywhere,' BNY won't disclose costs

• Key insight: BNY, which has leaned heavily into AI in recent years, was reluctant Thursday to say how much it's spending on the technology.
  
• What's at stake: Analysts and industry observers are looking for proof that banks' investments in AI will pay off in the form of financial gains.
  

The Bank of New York Mellon said Thursday that it's embedding artificial intelligence into every corner of its business. What it didn't say is how much money it's spending on AI.
Analysts attempted to extract those details during the custody bank's third-quarter earnings call, but BNY CEO Robin Vince didn't provide a dollar figure. Instead, he talked about the rationale for investing in AI — saying it offers the opportunity to improve outcomes, create capacity and deliver for clients — and arguing that the dollars being spent are generating returns.

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The sidestep was hardly surprising. As banks have implemented AI capabilities across their platforms, bank executives have largely deflected analysts' questions about AI-related expenses and returns on investments, saying it's too early in the cycle to provide concrete numbers.

Industry observers have been trying to get a handle on the amount of money that banks are pouring into AI, and whether the investments are producing gains. At BNY, "the answer to the question is yes, we're generating returns, and yes, we want to lean in more," Vince said during the call.

Of BNY's annual $13 billion expense base, about $4 billion is spent on technology, Vince said. 

Regarding the cost of AI specifically, "we're not breaking it out, but it sort of folds into the inputs across our expense base," Vince said. "And frankly, we think it could be counterproductive to break it out and to start obsessing about it publicly and even within the company as an input."

During the bank's second-quarter call in July, Chief Financial Officer Dermot McDonogh offered a slightly meatier response to a question about AI spending. 

"Within the context of $4 billion, AI spend is quite de minimis and quite modest and appropriate for the strategy we have in place," he said at the time.

BNY has championed AI for years. A year ago, it said it had 117 AI solutions in production. That number is now at "400-plus," Vince said Thursday. The bank views AI as a way to increase capacity within its workforce, freeing people up to take care of other tasks, not as a way to reduce headcount, he added.

"We've got plenty of things to do, and so whenever we can generate capacity to provide for that growth without having to grow the expense base, that's phenomenal," Vince said.

Vince's comments followed another strong quarter for the $484 billion-asset bank. It reported firmwide revenues of $5.7 billion, an increase of 12% year over year. Earnings per share totaled $2.34, beating the $2.27 consensus estimate of analysts who were polled by S&P Capital IQ. 

Net income came in at $1.7 billion, up 16% compared with the year-ago quarter. Net interest income rose 15%, primarily as a result of reinvestment of investment securities at higher yields along with balance sheet growth. The increase was partly offset by deposit margin compression. 

Noninterest expenses rose 8% compared with the prior-year quarter to $3.5 billion as of Sept. 30. The company's results included $1 million in provisions for credit losses. The latest return on tangible common equity was 29%, exceeding the medium-term target of 28% that BNY set in January.

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Against the backdrop of positive results, BNY once again made upward revisions to its financial outlook for the year. It now expects 2026 revenue to increase 12%-13%, excluding notable items. It had most recently expected revenue to grow 10%-11% from the prior year. Meanwhile, it expects full-year net interest income to rise 15%, a sharp increase from the 10% previously projected.

BNY also expects expenses to rise between 7%-8% year over year, excluding notable items, mostly as a result of higher revenues. In July, it said full-year expenses were expected to rise 6%-7%, excluding notable items.

During the quarter, BNY repurchased $937 million of common shares and paid out $436 billion in dividends.