Gerald Hassell - President, Director, President of The Bank of New York and President of The Mellon Bank N A Andy Clark - Thomas Gibbons - Vice Chairman, Chief Financial Officer and Senior Executive Vice President Robert Kelly - Chairman, Chief Executive Officer, Member of Executive Committee, Chief Executive Officer of The Bank of New York and Chief Executive Officer of Mellon Bank N A

Brian Bedell - ISI Group Inc. Michael Mayo - Deutsche Bank John Stilmar - SunTrust Robinson Humphrey Capital Markets Thomas McCrohan - Janney Montgomery Scott LLC Alexander Blostein - Goldman Sachs Group Inc. Betsy Graseck - Morgan Stanley Kenneth Usdin - Jefferies & Company, Inc. Howard Chen - Crédit Suisse AG Gerard Cassidy - RBC Capital Markets, LLC

Good morning, ladies and gentlemen, and welcome to the Fourth Quarter 2010 Earnings Conference Call hosted by BNY Mellon. [Operator Instructions] I will now turn the call over to Mr. Andy Clark. Mr. Clark, you may begin.

Thanks, Wendy, and welcome, everyone. With us today are Bob Kelly, our Chairman and CEO; Todd Gibbons, our CFO; as well as several members of our executive management team. Before we begin, let me remind you that our remarks today may include forward-looking statements. Actual results may differ materially from those indicated or implied by the forward-looking statements as a result of various factors. These factors include those identified in the cautionary statement on Page 13 of the press release and those identified in our documents filed with the SEC that are available on our website, bnymellon. com. Forward-looking statements in this call speak only as of today, January 19, 2011, and we will not update forward-looking statements. This morning's press release provides the highlights of our results. We also have the Earnings Review document available on our website, which provides a review of the total company and individual businesses. We will be using the Earnings Review document to discuss our results. Now I'd like to turn the call over to Bob. Bob?

Thanks, Andy, and good morning, everyone. Thanks for joining us. Fourth quarter EPS was $0.55 or $690 million, and that includes $0.04 of primarily M&I expense. Total revenue grew 14% year-over-year and 9% versus third quarter. Significantly, 38% of all our revenue came from outside the U.S., which is a new record for us. And to put that into perspective, in 2007, that number was 32%, so we continue to become a more global company. NII was stable. Our growth came from fee revenue, which was 11% during the quarter, our best quarter since the financial crisis began back in 2008. In the 11% growth, there was virtually no impact from acquisitions because they had essentially started at the beginning of the third quarter. So it's organic. Securities servicing fees were up 8% sequentially. Depositary Receipts and clearing had a very strong quarter. Asset Servicing continued to benefit from new business, and assets under custody reached $25 trillion, a new record and up 12% year-over-year. Asset and Wealth Management fees were up 14% over Q3 due to stronger markets, performance fees and long-term flow growth. AUM was up 3% in the quarter to a new high of $1.17 trillion. Foreign exchange trading revenue rebounded up 29% sequentially due to high volumes and volatility. And on the new business front, in Asset and Wealth Management, we had our fifth consecutive quarter of positive long-term asset inflows, which is up $9 billion for the quarter for a total of $48 billion in 2010. We had new Asset Servicing wins of $350 billion in assets under custody. We're seeing a lot of new business opportunities from our acquisitions. Last year, frankly, better than we expected. In fact, a lot of the deals in Asset Servicing and their pipelines are with our GIS acquisition and our new Asset Servicing clients in Germany, which is really encouraging. Our balance sheet has remained what I'd characterize as pristine all year. Provision in the quarter was negative $22 million, identical to the third quarter. Criticized assets were down 32% in the quarter and down 66% for the full year. Our provision for the full year was only $11 million, and we had security gains of $27 million, a significant improvement compared to 2009. I'd like to think we're returning to normal levels there. Expenses were up 8%, a little higher than we'd like, driven by growth, some seasonality and some costs above our typical run rate. Two benefits of our model that provide us with strong capital ratios are, of course, firstly, earnings. They generate us 20% to 25% of our equity base annually, and that would be higher than most financial institutions, we would expect. And we also have a low level of risk-weighted assets. This quarter, we generated $576 million of new Tier 1 common, up 5% from the last quarter, and we continue to invest our assets in high-quality securities and central bank deposits. Tier 1 and Tier 1 common both strengthened over 100 basis points during the quarter. Our priority on the capital front remains to return capital to our shareholders through dividends and stock buybacks. As you would expect, we've submitted our capital plans to our regulators a few weeks ago, and we hope to know within the next few months how we did on the latest stress test and whether we'll get the go-ahead to start executing on it. Given all the capital to generate, with the quality of our assets and the fact that we finished number one in the 2009 stress test, we expect we'll do fine. So to sum up, the story of the quarter is positive momentum that we're carrying into 2011. Markets are stronger. We certainly recorded encouraging revenue growth. We had good growth in our core businesses, and new business trends are improving. Our acquisitions are adding to growth in our pipeline. Our balance sheet is exceptionally strong. We continue to generate significant levels of capital, and we're looking forward to returning some of it to our shareholders this year. And with that, why don't we turn it over to Todd to go through the numbers, and then we'll open it up for questions. Todd?

Thanks, Bob, and good morning, everyone. First of all, I'll take a deeper dive into the numbers. My comments, as in the past, will follow the Quarterly Earnings Review beginning on Page 2. On a GAAP basis, earnings for the quarter were $0.55, up 8% versus the third quarter and down 7% versus the year-ago quarter. On an operating basis, after adjusting for $0.04 of M&I and restructuring expense we get to $0.59, and that's up 7% versus both the year ago and the prior quarters. Intangible amortization, which I think is pretty important when you consider the capital generation here, added an additional $0.06. Some highlights on a sequential basis. Total revenue was up 9% on an operating basis. Fee revenue was up 11%, also on an operating basis, reflecting a strong quarter across our Servicing businesses and the largest increase in Asset and Wealth Management fees that we've seen since the merger. Net interest revenue was up slightly, reflecting a temporary spike in client deposits during the quarter. Noninterest expenses, including intangible amortization, restructuring charges and M&I were up 8%, largely a function of higher volume-driven costs and some seasonality. Fourth quarter also included expenses of approximately $50 million that I would characterize as outside our typical run rate. They included the full year impact of adjusting compensation to market levels, equipment write-offs and the anticipated settlement of a withholding tax matter with the IRS. Turning to Page 4 of the review. AUM and AUC reflect higher equity values to new business, offset by a decline in fixed income and the relative strength of the U.S. dollar. Assets under management was up 5% year-over-year, 3% sequentially to a record level of $1.17 trillion, with fourth quarter long-term inflows of $9 billion and short-term inflows of $6 billion, as well as higher market values. In 2010, we had a record $48 billion in long-term flows. Long-term inflows benefited from strengthened institutional fixed income and global equity products and a record level of flows in retail funds in the fourth quarter. AUC was up 12% year-over-year to a record level of $25 trillion, driven by the acquisitions, higher market values and new business. Turning to Page 5 of the Earnings Review, which shows fee growth. Securities Servicing fees were up 8% quarter-over-quarter and up 29% year-over-year. Asset Servicing fees were up 5% sequentially, reflecting higher market values, new business and asset inflows from existing clients. Fees were up 41% year-over-year, driven by the impact of the acquisitions, as well as the factors I just noted. During the quarter, we won an incremental $350 billion in new Asset Servicing business, and the acquisitions are adding significantly to our new business pipeline. Issuer service fees benefited from more typical seasonal pattern. Fee revenue increased 12% sequentially and 11% year-over-year. DR [Depositary Receipts] issuances have exceeded cancellations for seven consecutive quarters, and we saw a particular strength in corporate actions during the fourth quarter. Corporate trust fee revenue was virtually flat sequentially, and it declined relative to last year. While the structured debt market remains weak, an increase in other debt issuance and continuing debt restructuring have increased our pipeline for new business in Corporate Trust. Clearing fees were up 10% sequentially due to increased daily average revenue trades, higher market values and new business. Fees were up 25% year-over-year, reflecting the impact of the GIS acquisition, growth in mutual fund assets and positions, higher market values and new business. I should add that you'll see we had some outsize expense growth in clearing. We've been converting some significant business wins where the expenses are frontloaded. We should start seeing a positive impact to our pretax earnings from these wins in the second quarter. Asset and Wealth Management fees, adjusting for performance fees and income from consolidated asset management funds, were up 6% sequentially and 11% year-over-year, reflecting higher period-end market values in the impact of net new business. In addition, performance fees were strong at $75 million compared to $59 million in the fourth quarter of last year. FX and other trading was up 77% sequentially. FX revenue totaled $206 million, up 29% compared to the third quarter on higher volumes, new business and a little higher volatility. Other trading revenue returned to profitability, generating $52 million versus a negative $14 million last quarter. The increase was largely due to an improvement relative to the past two quarters in fixed income and derivatives trading. Investment and other income was down $17 million sequentially, driven primarily by lower foreign currency translation and seed capital revenue. Turning to Page 6 of the Earnings Review. NIR [net interest revenue] and the related margin continue to be impacted by low, short-term interest rates globally and our risk reduction strategy. The risk reduction strategy is hitting NII, but it is paying dividends as you can see in lower credit charges. NIR was up a bit due to the spike in short-term client deposits. The net interest margin for the quarter was 1.54% compared with 1.67% in the prior quarter. That spike in deposits negatively impacted the margin by approximately 10 basis points. We remain asset sensitive though slightly less so than in prior quarters. We currently estimate an immediate 100 basis points move in the funds rate is worth a little less than $500 million on a pretax basis. Going forward, we expect the net interest margin to be in the range of 1.60% to 1.75%. If rates move up, it should be at the upper end of the range, and if the fund rate continues near zero, it will be at the lower end. In addition, as the balance sheet grows, it will add to NIR, but will negatively impact the net interest margin in the short run. The net unrealized gain in our securities portfolio declined by $267 million, reflecting the higher long-term rates on the agency and treasury securities. On Page 10, you can see that during the quarter, we continued to generate significant capital, with Tier 1 common up $576 million, or as Bob indicated, 5% over the third quarter. As a result of capital growth and lower risk-weighted assets, our key regulatory ratios increased significantly. Tier 1 was up 120 basis points to 13.4%. Tier 1 common increased 110 basis points to 11.8%, and TCE increased 60 basis points to 5.8%. The capital generation and strength of our ratios highlight the way our business model was supposed to work. We benefit from our fee-based revenue and a low-risk asset mix, which is primarily comprised of high-grade securities, central bank deposits, liquid placements and predominantly investment grade loans. We are also very comfortable with our ability to comply with Basel III. We currently expect our Basel III Tier 1 common equity ratio to exceed 7% by year end. The difference here versus Basel I is largely driven by $4 billion of sub-investment grade securitizations, which we marked last year, and we now have a $500 million unrealized gain on them. If we sold those securities, the ratio would be approximately 250 basis points higher. But frankly, we don't need or want to do anything uneconomic. Given our capital generation and the limited need for risk-weighted assets in our business model, we are confident we'll be able to increase our dividend and do buybacks without taking any additional actions. Looking at our loan portfolio. The provision for credit losses was a credit of $22 million, identical to last quarter, which compares to a charge of $65 million in the fourth quarter of 2009. Criticized assets decreased by 32% during the quarter and 66% over the full year. Going forward, we expect the quarterly provision to be in the range of zero to $20 million. The effective tax rate in the third quarter was 27.3%, which compares to 26.4% last quarter and 28.3% for the full year. Our current estimate for the 2011 tax rate is in the range of 30% to 31%. Looking ahead to 2011, let me touch on four key areas: seasonality, revenue, expense and capital. Typically, our second and fourth quarters are sequentially stronger, and we expect this pattern to hold true in 2011. Near term, let me remind you that performance fees and corporate action fees and Depositary Receipts are seasonally highest in the fourth quarter. Looking at the big picture. We carry into the year the momentum of solid improvement in our core businesses. While we're absorbing last year's acquisitions, we'll focus primarily on organic growth, a large percentage of which comes from cross-selling to our existing clients. Over the last three years since our merger, we've had great success in increasing the business line penetration of our top clients through cross-sell, but there's still plenty more for us to do with those relationships. The acquisitions are providing the revenue synergies we anticipated. We are successfully cross-selling our other capabilities to the acquired clients, and we've also gained a number of new capabilities, and we're making nice progress in selling them to the rest of our clients. In addition, we continue to expand our client base globally. Since our merger in 2007, we have increased annual revenue generated from clients out of the U.S. to 36% from 32%, and we expect this trend to continue. We believe we can do better on the expense front by working to bring down the cost of delivering our services, while maintaining our high quality. Actions that we are currently taking include: process re-engineering and automation, rationalizing our systems, reducing occupancy costs, maximizing our purchasing power through supplier consolidation and continuing to shift positions to our lower cost global growth centers. In just two years, we've gone from having 25% of our headcount in growth centers to 30% today, and we'd expect to get 1/3 by the end of next year. As we start realizing these savings, we'll likely reinvest some of it into additional re-engineering efforts. Importantly, we are currently absorbing the upfront cost of these efforts in our current expense base. On the capital front, we look for less M&A activity this year because we expect to have the opportunity to return capital to our shareholders through dividends and stock buybacks. With that, I'll turn it back to Bob.

Thanks, Todd. Why don't we open up for Q&A right away?

[Operator Instructions] Our first question today is from Alex Blostein with Goldman Sachs. Alexander Blostein - Goldman Sachs Group Inc.: Maybe just to start off with expenses. It seems like the Fee businesses are clearly having a pretty nice momentum here, but the expenses are kind of trickling up with it. So can you maybe talk about x to $50 million one-time number this quarter, do you think this is a decent base we should think about going into next year? Or there's a little bit more you could do to reduce the overall expense number just in terms of dollar amount?

Alex, I'll take that. This is Todd. I think if you look at the volume-related expenses with the business in the fourth quarter and you adjust that accordingly to what you would expect in the first quarter and knock the $50 million out of this, probably a reasonable base for us to get started. We do think there are some things in addition to that, and there were some seasonality to our business development expenses. We tend to have conferences in the fourth quarter. There tends to be a little more traveling that comes on donations and some of our marketing expenses. But I think that's probably a pretty good basis for us to start.

Some of our other revenues are somewhat seasonal, and the Depositary Receipts tend to be strong in the fourth quarter as our performance is as well in Asset Management, but that's not a consideration. Alexander Blostein - Goldman Sachs Group Inc.: And then maybe shifting over to the balance sheet for a second. It looks like the cost of your deposits has been coming up throughout the year. I guess closer to 22 bps at the end of the quarter, it was 16 bps earlier in the year, yet the rates stay low. Can you just give us a little bit more color? I guess, what is going on there? Is it just more competition for deposits? And do you expect that number to sort of continue to go up? And that's baked in, in your 160 to 165 guidance.

Yes, that's more mix, Alex, than it is. So we're seeing an increase in sterling and euro, and sterling and euro rates are a little higher than the dollar rates. So all of that move, I would attribute to just the mix of deposits. Alexander Blostein - Goldman Sachs Group Inc.: Could you just -- a numbers question -- discount accretion in the quarter, benefit to EPS, and what was the impact from the fee waivers in the Money Market business?

Let me start with the accretion. The way we've been looking at it, when we started this net of the assets that we sold back in the third quarter of 2009, the impact is probably in the ballpark of about $70 million, Alex, in the quarter. And your second question on fee waivers, the net impact to them for the fourth quarter was about flat to the third quarter. So we saw it peak in the first two quarters, and we've seen it come down. But if the Fed keeps rates where they are now, I don't think we're going to see any improvement from the waivers where they currently exist.

Our next question is from Betsy Graseck with Morgan Stanley. Betsy Graseck - Morgan Stanley: Bob, a couple of questions on capital. Your common Tier 1 and TCE/TA went up nicely in the quarter. Could you talk about what kind of capital level you think you need to run the business? And how you think about excess capital, which measure is more relevant for you?

I don't see a lot of complexity to it other than there's some moving parts as we slowly shift in and around the world from Basel I to Basel III. So given the quality of the assets we have, we don't have to hold much capital for credit risk. But we do have operational risk, and we do have a little bit of market risk, because of the nature of businesses for you. So we are increasingly thinking about where we're heading from a Basel III standpoint, and it looks like the world is going to read the Basel III, so you're looking at a minimum 7% ratio for Basel III and Tier 1 common, in theory, by the end of 2019, but I'm increasingly seeing a widening gap on how American financial institutions and banks think about that versus the Europeans. Whereas the Europeans want to do it through retained earnings and do it a little bit slower, it feels like the American banks want to do it a little bit faster. There's negative implications where we understand and going below 7% all the rules aren't written yet. So I think most of the banks are going to have to think of a ratio where they can get comfortable where it's somewhat higher than a 7% ratio that you start to drive some problems for yourselves potentially in terms of dividends and buybacks. So I don't know where that's heading yet, Betsy, because we have a lot to learn yet. Is it an 8% number? Maybe. And it's going to take us, I'm guessing a year or two before we really know all the rules. There's a ton of moving parts. What I do know is that if we're above 7% by the end of this year, we're going to be in, well, we already are in very good shape going into this new capital regime. I wish I could be more definitive for you, but I can't. But I would just focus on Basel III increasingly and ask a lot of questions about what are all the ins and outs on those rules over the next year or two. Betsy Graseck - Morgan Stanley: Where do think you are on Basel III right now?

I would say we're a little under 6%, and if we sold that $4 billion in assets, we'd be 8%. Again, it doesn't make economic sense the way Basel works for that, and we don't need the additional capital. So we're going to hold that portfolio because we like it and it's really in the money. Betsy Graseck - Morgan Stanley: And when you said be at around 7% by year end, you're talking 4Q '11.

Yes.

Yes. And there is going to be a transition period and my understanding is that, that's the way that Washington and the regulators are thinking about Basel III versus Basel I. My impression is that the greatest emphasis is on Tier 1 under Basel I and Tier 1 common. But they'll be at least looking at Basel III as part of this process through the spring. Betsy Graseck - Morgan Stanley: And then I would have expected you submitted your capital plan to the regulators. I know we haven't heard back yet, so hard to say. But can you give us a sense as to what you did ask for?

No, I'm sorry. No.

Todd would love to tell you that, but I'm not letting him.

Betsy, one thing I would add. All these numbers that we're quoting you include actions. Betsy Graseck - Morgan Stanley: So you expect to take some actions this year to move you up from under 6% to 7%.

No, we would expect it will take some capital actions, and that's reflected in our estimates to be above 7%. Betsy Graseck - Morgan Stanley: Capital actions meaning. . .

Raise the dividend or do anything else or -- so in other words, we would be above 7% otherwise, so we're saying including our anticipated actions. If they're approved, we'd be in the 7% range by the end of 2011. Betsy Graseck - Morgan Stanley: And then one separate question on the expenses. The $50 million that you talked about that was a little bit of a one timer in the quarter. Can you tell us how much of that was the comp? Because one of the questions I get from people is, well, shouldn't that be in our run rate going forward, even if it is a true up in the quarter, on an annualized basis, should I keep that in the run rate? I'm unclear how much of that $50 million I should put in the run rate.

Yes, about half of that impact, Betsy, was related to comp, and I think the way to think about is that was the catch-up amount rather than the run rate amount. Betsy Graseck - Morgan Stanley: But it should be -- it's catch-up to a new level going forward?

Correct. But it's the previous three quarters impact, if you will, not the fourth quarter impact. Betsy Graseck - Morgan Stanley: So you got to divide by four, not divide by one.

And I want to make sure that we're crystal clear on that capital discussion. We had assumed we'll be over 7%, that is with an increase and assuming that the Fed approves our increase in dividend and buybacks.

Our next question is from Mike Mayo with CLSA. Michael Mayo - Deutsche Bank: You had good revenue growth for the quarter, but assets under custody were only up 2% despite the big market moves. That's not so different than your peers, but I'm just wondering, shouldn't assets under custody be up more, given the appreciation in the markets?

Mike, it's Gerald Hassell. You have to remember about 60% of our assets under custody are fixed income, and with the long rates changing during the quarter, the value of those fixed income securities actually declined. So versus some of our peers may have a higher mix in equities, which would benefit from the market rise. So when you factor that in, we think we're right on line. Michael Mayo - Deutsche Bank: And then as far as the linked-quarter revenue growth, you've talked about a lot of ins and outs. Just conceptually, at the linked-quarter revenue growth, the 9%, how much would you consider seasonal versus kind of a more permanent cyclical pickup versus kind of organic permanent customer improvements?

I'll take a stab at that, Mike. I would say that a fair amount of the performance fees are, obviously, seasonal. So they were $77 million for the quarter, and you might -- we typically get some, but not at that level and other quarters during the course of the year. DRs were up quite a bit. So I would say those were probably the two heaviest seasonal actions that we saw. So I think you can put it into $100 million to $150 million. Michael Mayo - Deutsche Bank: And then lastly, the mortgage putback issue, where you guys are somewhat in the middle, the Kathy Patrick group, with all the investors that are trying to get you, the trustee, to potentially take some action. Can you give us an update on that? And what are the possible scenarios after this current period runs its course, I guess, at the end of this month?

Well, sure. I don't think anything has changed from what we have indicated previously, Mike. I think the good news is that the parties there are talking to each other on a direct basis, and I would suspect they'll work something out. But once again, if they don't, the role that we play here is basically ministerial. So right now, we're very comfortable with our position, and we don't really see this as being an issue. Michael Mayo - Deutsche Bank: You think they might work it out? I don't know if you can give any color on that. And then, if they don't work it out, my understanding, and correct me if I'm wrong, there could be a scenario where the servicer is fired and you become the servicer. This is not something we see too often, but can you simply elaborate on that?

Yes, I think in terms of working, I can't really speculate on how those negotiations are going because we really not a party to them. In terms of how it ultimately could play out, there is an extremely unlikely probability that we would ever end up in the servicing position. In the case of a default, we do take on a prudent man role, but we think that there are other much more reasonable outcomes than that. Michael Mayo - Deutsche Bank: We have the two extremes, then either they work it out, or you just said extremely likely you become the servicer. What are some middle ground possibilities?

Most likely, it wouldn't be in the interest of the holders of the bonds to try to move the servicer midstream like this. And most likely, we would probably increase our oversight of the servicer. Michael Mayo - Deutsche Bank: And when you say increase oversight of the servicer, what does that mean?

We would review a little more carefully what they're doing.

They were paid for that incrementally.

So, Mike, we just don't see this as a significant risk at this time.

Our next question is from Howard Chen with Credit Suisse. Howard Chen - Crédit Suisse AG: How much risk-weighted asset inflation and mitigating actions are you embedding specifically in your assumptions?

We're embedding zero mitigating actions in those assumptions. If you think through it, the biggest driver, like we said, is that $4 billion of securities. Well, we see about a 20% to 25% pay down annually in those securities anyway, so they naturally kind of burn off. If we wanted to take some other actions, there's a lot of other things that we could do, Howard. We just don't feel compelled to do it at this point. Howard Chen - Crédit Suisse AG: And then I know there are a lot of ebbs and flows, and we still don't have full clarity on Basel III, but I guess I'm a little surprised that you seem really comfortable in restoring the dividend and buying back stock with where the pro forma ratios are now. I mean, I don't know if I'm getting the right impression, or do you have any thoughts in terms of just -- what's giving you that confidence level?

Well, it would be a couple of things. First of all, the test is a Basel I test, and as you can see where we are, we perform extremely well. Number two, our business model does not rely on risk-weighted assets to generate income. So we can demonstrate a plan to have a very high Basel III ratio well before it goes into implementation comfortably, while taking actions.

The other thing I'd add to it, Howard, is there aren't a lot of balance sheets out there that you could stress and see essentially almost no impact from a stress scenario. And when you're generating 20% to 25% of new equity every year, that's a lot of capital generation, unlike most of our peers, because we are a capital-light model. It's just fundamentally a different model than most banks that rely upon their balance sheets. Howard Chen - Crédit Suisse AG: I guess in my mind, one of the worries would be that Basel III or whatever the new regulation is, it's a bit more of a blunt instrument, right? But it's good to hear that there is differentiation in terms of your mind and that's resonating with regulators. I guess my last question, I know you had a bankruptcy recovery this quarter, but just wondering how you're thinking in general about asset quality and the loan portfolio. Do you see more opportunities to bleed reserves? Or is it something that you'd like to kind of grow into from here?

Well, we're very comfortable with our loan portfolio. I mean, we've indicated that we would expect the provision to be zero to 20%. We've seen a very large decline in criticized assets over the course of the year. We've done, the team has done a great job cleaning it up, and we think we're in a very good position; the best we've been in many, many years.

Our next question is from Brian Bedell with ISI Group. Brian Bedell - ISI Group Inc.: Just to go back to the Basel III announcement, so if you had a 9.5% pro forma with the securities sale, I guess wouldn't that extra 2.5% give you a great deal of extra buyback capacity? And maybe just talk about how you think about 7% versus the 9.5% and the extra buyback capacity that you would have if you sold those securities.

Brian, I think that's a great way of looking at it. You can kind of think we're warehousing a lot of capital in that portfolio and if it makes more sense for us to do something with that capital versus holding it, we will, and that's exactly how we would look at it. Brian Bedell - ISI Group Inc.: You prefer to play it flexibly. If the Fed wants you to raise that you could just sell securities and then. . .

Yes. We don't want to be forced to do something uneconomic. The portfolio does a nice job of hedging our interest rate risk as we've indicated in the past. It's got a high yield on it, and it's relatively safe because we've markets well below its current market value at this point in time. So if it makes more sense for us, like with anything, if we can deploy our capital more efficiently elsewhere, we'll do it. Brian Bedell - ISI Group Inc.: And then what is the operational component increase to the risk-weighted assets pro forma with Basel III?

Yes, kind of the way I look at that, Brian, is there are two components and the core -- if you shift the investment portfolio, or those sub-investment grade securities out, there's a benefit to the credit side that's reasonably meaningful and it offsets about 2/3 of the impact of operational risks. So the net-net, that's probably about 10% or 15%. Brian Bedell - ISI Group Inc.: Operational?

The increased impact under Basel III versus Basel I. Operational risk for us will be higher than 15% total. It will probably be in the 20% to 25%, maybe even 30%.

So the net changed in risk-weighted assets, credit versus operational. Brian Bedell - ISI Group Inc.: And then just let's talk about the expense structure. Obviously, you guys have been pretty advanced in re-engineering for a long time. When do you think we get to a state where the re-engineering savings and other cost initiatives will accrue more to the bottom line, so that you'll be at a point where you're not reinvesting in those new initiatives?

I guess I'll take that one, too. I'm actually going to back up to the last point, too, Brian. Just I do want to make one comment here. We're talking about these Basel III capital models, and frankly, the Fed needs to approve your capital models, and none of these models have yet been approved for us or for anybody else that I'm aware of. So there's a lot of assumptions going into these. We think they're reasonable estimates, but there are a lot of assumptions. In terms of the run rate, this would be the first year if we didn't reinvest that I think we could go into a positive run rate, especially on the global footprint. So we are starting to see -- could be as high as say, 1% of our expenses, that we could reduce if we didn't reinvest some of that in our re-engineering efforts. It is our intent to reinvest a meaningful amount of that in our re-engineering efforts, and Bob, I don't know.

Yes, what I'd add to that, Brian, is we've been doing this for three or four years. We are constantly re-engineering how we conduct our business to drive efficiencies. To date, our re-engineering costs are higher than the savings. But of course, every year the savings get higher, so the run rate's higher. Frankly, we're going to continue investing in re-engineering, and I think that's the right thing to do for our businesses and for the shareholders. We have some big buckets that we have opportunities in, whether it's in our IT platforms or operational platforms in terms of reducing the number of systems we have. We still have too many locations around the world, and we tend to be in fairly expensive locations. In some cases, our procurement costs are too high. I could go on, but we're going to continue investing and I think there are more expense opportunities in our company to not only run more efficiently, but it also reduces risk and reduces complexity in our company. And all of those things were I think are attractive and important and frankly, I look to each one of our businesses, as well as staff areas to think every year about incrementally, what are they going to be doing to become more efficient than the prior year. And we don't just look at it in terms of the next quarter or the rest of the year. We look at it as a multiyear program, and we're becoming very disciplined about this, and we're going to continue this process. Brian Bedell - ISI Group Inc.: And just one last one, maybe on the PNC GIS platform, maybe if you could talk about what you're thinking, to what degree you'll migrate clients to that platform or actually reconstruct your mutual fund servicing platform between like BBK and GIS's.

Sure, Brian. It's Gerald. Yes, we're going through that process right now. There are certain elements that came with the acquisition that, for example, on the transfer agency, we're going to continue to use the existing transfer agency platform that PNC built out. We're winning some new business on that platform. Many parts of the acquisition have already been split into our three business units: Asset Servicing, our AIS, Alternative Investment Services and the third part went over to Pershing. We're going through the rationalization process of those platforms, and it's well underway. We feel very good about how the integration is going. In fact, about 10% of the new business that we've won in Asset Servicing came because of the fact that we had those increased capabilities from the GIS and BHF acquisitions. So we feel very good about how this is integrating.

Our next question is from Gerard Cassidy with RBC. Gerard Cassidy - RBC Capital Markets, LLC: Question coming back to the stress test that you've submitted your data for. I just want to make sure I heard you correctly. You said that the stress test will be using Basel I numbers to determine whether you can increase your dividend or do a buyback.

Yes, the stress test was presented. It was tested around Basel I, and we also would have presented a plan on how we're going to ultimately meet Basel III. But all of the information that I have received, the regulators have been unequivocal that this test is a Basel I test. Gerard Cassidy - RBC Capital Markets, LLC: And if I recall correctly, would you say that the Tier 1 common ratio on the Basel I, though it was never officially determined, is about 4%. Is that right?

No, what we said earlier on the call? Gerard Cassidy - RBC Capital Markets, LLC: No, under Basel I, we never really had a Tier 1 common ratio officially defined. We had Tier 1 of 6%, but we all imputed it was a 4% Tier 1 common ratio under Basel I. Is that a fair statement to say that's the numbers they're using under Basel I?

It is. I mean, it's fair to consider it to be a bit of a discount. I think it's a little more than what they're actually looking at, though. Gerard Cassidy - RBC Capital Markets, LLC: In terms of a dividend payout ratio, where do you guys -- where would you like to see your dividend payout ratio? Not necessarily suggesting it's going to get there in the first announcement, but where's the ultimate dividend payout ratio that you guys like to get to?

Historically, we've probably been in the 30% to 40% range, Gerard. That's probably a little bit high for a company like ours with some continued growth prospects and also the desire to do some buybacks as well. So I would suspect we'll be in the 20% to 30% range. Gerard Cassidy - RBC Capital Markets, LLC: And do you know, with your conversations with the regulators, are they going to be looking at current level of earnings for, let's say, 2011 versus maybe more normalized earnings in '12 or '13 for determining where dividend payout ratios can go?

Yes, I don't think, this is a confidential exam. We're really not privy to disclose some of that information, Gerard. Gerard Cassidy - RBC Capital Markets, LLC: In regards to Basel III where you guys pointed out that if you were to sell the securities that bring down that ratio it would boost the ratio by about 250 basis points. What's the bleed rate, if you will, where those securities will eventually just pay off, so that you will capture that 250 basis points? Is that over a three-year period or a five-year period?

Well, yes, I think the way to look at it is, it's about 20% to 25% per annum. So if you got 25%, you can figure we hit 50 basis points or roughly.

These are good assets. And do remember that's $4 billion in assets and $4 billion in capital, which is kind of astonishing.

Our next question is from Tom McCrohan with Janney. Thomas McCrohan - Janney Montgomery Scott LLC: Do you expect to hear from the Fed on this current stress test by the end of March? That's kind of the expectation I'm hearing.

Tom, we don't know, and I would hope to hear sometime this spring. It's a complicated process. It was in '09. I'm sure it's still complicated, and we have a lot of regulators, and I'm sure it won't just be one that’ll have input, it'll be multiple inputs. So we may get fortunate, but I'll think of it in terms of the first half type event. Thomas McCrohan - Janney Montgomery Scott LLC: And then interest margins, you didn't give a specific guidance, but it sounded like you were guiding us to just 1.54% by 10 basis points. So should we be thinking about a run rate of about 1.64%?

Yes, let me explain to you what we did there. If you look at the quarter, we had a pop for a good part of the quarter of about $15 billion, Tom, in interest earning assets. It was really driven by our deposit base. There wasn't much we could do with that, but leave it in very short-term instruments or even at the Fed. On our $720 million, that earned us about $6 million. So we would have been at $714 million, and then if you net that out, you're right. The net interest margin would have been about 1.64%. And that's probably a pretty good basis to start pulling into next year. Thomas McCrohan - Janney Montgomery Scott LLC: These pop-in deposits, Todd, it was interest-bearing, I assume?

It was a mix. Thomas McCrohan - Janney Montgomery Scott LLC: And the new business pipeline, can you just give us a feel for the $350 billion of assets under custody that was won during the quarter? Geographies, type of firms, what kind of revenue yield, any type of color on that would be helpful.

Sure. Tom, it's Gerald again, the pipeline and certainly in Asset Servicing has grown quite significantly from quarter-to-quarter, mainly from financial institutions looking to lower their cost base and outsource services. More than 50% of it comes from outside the U.S. The vast majority is financial institutions of one sort or another, including asset managers. So the pipeline has grown quite significantly. Time will tell how long it will take for them to make decisions. We still have about $500 billion of assets under custody to convert from prior wins. So we see some good momentum going into this year from both the pipeline and the conversions of business won.

Our next question is from Ken Usdin with Jefferies. Kenneth Usdin - Jefferies & Company, Inc.: Just a little more flesh out on the net interest income and net interest margin. Todd, you mentioned that the approximate accretion in the quarter was $70 million net. I was wondering if first, you can just give us the gross number compared to the. . .

Yes, Ken, I think it's a little over $90 million. Kenneth Usdin - Jefferies & Company, Inc.: So that compares to the $112 million from last quarter?

Yes. Kenneth Usdin - Jefferies & Company, Inc.: And then can you also just level-set us then on what the expectation is for 2011?

I think it'll continue to ease -- in terms of the accretion? Kenneth Usdin - Jefferies & Company, Inc.: Yes.

Yes, I would expect to see it kind of at a 10% type of decreasing. Kenneth Usdin - Jefferies & Company, Inc.: From the $90 million run rated or from the. . .

Yes, so if we're at $90 million -- I think we might even be in mid-90s off of that run rate. It’ll probably come off about 10% of that. Kenneth Usdin - Jefferies & Company, Inc.: And then how much is left in that? Like, so how many years of re-accretion is there left? And then does it -- I will let you answer that and then I will come back.

It can go on. Most of it's going to go away in three or four years, but it really depends on the performance of the underlying securities. So if they continue to do well, there could be more there. Kenneth Usdin - Jefferies & Company, Inc.: And then would you expect in the outyears it also continues to -- like is it kind of a descending amortization schedule, that if it's down 10%-ish off of the current run rate in '11, then it kind of also drips in the future? Or is it more steady-state until it. . .

Yes, just as the prepayments come, as the maturities come down, we get prepayments and we get actual payments of principal. We will see the accretion come down as well. Kenneth Usdin - Jefferies & Company, Inc.: Bob, you mentioned at a couple of recent conferences that you thought that M&A might be a lesser priority in 2011. And I was just wondering if you can flush out that thought process. Is it either because -- are there fewer opportunities, or because you're focused on integrating? Is it because -- your capital plan? What are you seeing as far as that interest level and also landscape?

Well, it's a good point. Last year was quite exceptional in that we did four acquisitions really, and three of them had to do with sellers who were either distressed or wanted to raise capital reasonably quickly in our space. We have a lot of integration activity to get done this year, and we're going to be focused on that because we are pretty busy last year. The other reason was, and over the last year or two, we never really had an opportunity to raise dividend or buyback stock. So I would say that the combination of integration activity that we have underway, and now the new capital opportunity this year has kind of changed our priority year-over-year. And I, frankly, am not seeing any noticeable activity on the M&A front. Maybe others are, but certainly our team has not.

Ken, I might add that we feel very positive about our own organic growth capabilities and assets in Asset Servicing, but in our Asset Management and our other business units. And so I think it's -- we feel very good about the core organic growth and feel less of a need to turn to M&A.

It's interesting, Ken, you did ask about, Gerald, custody and the pipeline activity. Maybe let's have Curtis just kind of talk to Asset Management and Wealth in terms of pipeline just for a second.

Sure, Bob. We already mentioned that we had our fifth consecutive quarter of long-term positive inflows, and we continue to see our pipelines being very robust. We put them at just over $70 billion today, with about $8 billion of that being high probability, and what is encouraging is that those pipelines are also geared towards products where we generally have higher fee realization. We’ve clearly seen as the market has a shift towards equity products. We don't do a pipeline necessarily for retail flows, but our retail flows have been robust, and we have every reason to believe that they will continue to be. So I would tell you that generally, our pipelines are quite healthy in Asset Management as well.

Our final question today is from John Stilmar with SunTrust. John Stilmar - SunTrust Robinson Humphrey Capital Markets: I guess following up on Ken's previous question with regards to M&A activity, I think you guys have done a really nice job of laying out sort of the transition with capital management, at least in the near term. But as we start looking out longer term, three to five years past the capital management, could you see another round of M&A, that M&A potential? And is that something that you guys have baked into sort of your long-term business plans? Just as you do have capital management, you still are going to be in somewhat of an excess capital position. How do you think about that?

John, it's always difficult to predict the future and it easily is about people who want to divest versus people like us who occasionally want to buy. And I'm not, again, if you look out five years, I'm extremely confident that we can gain market share around the world. We just want to continue adding product and geography as we become more and more global, and we're very focused on that. Most of that activity is organic. Asia Pacific, it's -- really all of our opportunities are organic and we did a number of things that you're probably aware of last year in multiple countries in Asia Pacific to put in the seed capital required to start-up businesses that I think long term are going to be huge winners for our businesses and our shareholders. In Europe, I'm not getting any sense at this point that the bank managements were thinking about our space, either getting bigger in our space or even divesting. I think they're more focused on their core activities than the outlook for the European economy. We continue to invest in Brazil. But again, that's all organic. Long term, you can continue to think that this space will continue to consolidate around the world and the players with scale and multi-currency wide platforms, with multi-product that can produce a lot of solutions for clients as the world gets more complicated and more global, and global financial assets go up. But it's hard to predict the timing of it, John, quite frankly. John Stilmar - SunTrust Robinson Humphrey Capital Markets: And then we have talked obviously a lot and seen your actions in Asia. And you highlighted an interest at least in the growth markets in South America. So as we look back on 2010 and as you look forward to 2011, one, the relative importance that we should think in intermediate term for those markets? And then two, how would you characterize those markets today relative to your expectations going into 2010? Were they better than expected, as expected, or worse than expected?

I continue to be pleasantly shocked at how well the BRICs are doing, particularly the BIC. And Asia Pacific and Brazil are just amazing stories, and the outlook in spite of -- you would expect some volatility at some point in those economies, but it continues to be an astonishingly good story. We're just going to continue to invest as long-term contributors to their societies and their financial markets. It sure feels like Asia Pacific and Brazil are going to grow at twice the rate at least of the U.S. economy, and it kind of feels, at least at this point, that at least in the next few years the U.S. economy will probably outperform the European economy by a bit. I love our business model and the opportunities around the world, and there's a few places that, a few locations around the world where we don't have all our businesses on the ground yet, and our distribution channels I think could be more effective over time as well. Working together and just having better relationships with major retailers and institutional players in some of these other countries. I have been pleasantly surprised over the last two years at how quickly the U.S. financial institutions have returned to health, wrote down assets on their balance sheet, built up capital very rapidly. We are seeing some signs of that in Europe as well, and I certainly feel more optimistic going into 2011 than I did in 2010. I do worry about sovereign risk issues in Europe, and I do worry about state and local governments here in the U.S. and I do worry about deficit. But slowly, slowly, slowly and steadily the economy is improving around the world, which I think is great. John Stilmar - SunTrust Robinson Humphrey Capital Markets: As we look at your diverse platform, what footprint or competency would you -- did you look on with envy that it probably is not a part of Bank of New York today, but you'd like to have as a part of that product suite in the future?

We have talked about that a lot, John, and we at BNY Mellon, we love our platform, and it's basically two businesses: Asset Management and Securities Servicing. There's lots of synergies between them. There's lots of growth opportunities around the world, and it really does play to the long-term secular trends of a lot more financial assets around the planet and greater globalization as the economies continue to interlink with each other. This is a great play, and I can't think easily of a platform of our scale that can outperform us over time. Well, I think that's all the time we have for today. I wanted to thank you all for joining the call and of course if you have any questions, please make sure you get back to Andy and the IR team. And all the best for 2011. Thank you.

Thank you. If there are any additional questions or comments, you may contact Mr. Andy Clark at (212) 635-1803. Thank you, ladies and gentlemen. This concludes today's conference call.