BlackRock New York Municipal Income Trust Q3 FY2026 earnings call

Financial Performance:

• Delivered strong results with earnings per share of $2.34, a 24% year-over-year increase.
• Achieved approximately 390 basis points of positive operating leverage in the quarter.
• Pre-tax margin expanded to 39%, and return on tangible common equity reached 29%.
• Assets under custody (AUCA) grew to $63.4 trillion, up 10% year-over-year.

Operational Highlights & Strategic Initiatives:

• Maintained 15 consecutive quarters of year-over-year sales growth, demonstrating business resilience.
• Deepened relationships with digital native clients like Revolut and established institutions such as ING.
• Launched global digital transfer agency capabilities, extending fund servicing to on-chain assets.
• Partnered with BlackRock and Bailey Gifford on tokenized fund offerings.
• Introduced pay-to-wallet capability for cross-border payments to retail digital wallets.
• Embedded AI across the enterprise via the ELIZA platform, aiming to generate capacity rather than just efficiency gains.
• Opened the BNY AI Lab at Carnegie Mellon University to advance research on AI verification and governance.
• Successfully implemented the new platform operating model across 100% of the firm.

Security Services reported total revenue of $2.8 billion, up 15% year-over-year, with a pre-tax income of $1 billion and a pre-tax margin of 36%. Market and Wealth Services reported total revenue of $2 billion, up 12% year-over-year, with a pre-tax income of $1 billion and a pre-tax margin of 51%. Investment and Wealth Management reported total revenue of $857 million, up 4% year-over-year, with a pre-tax income of $205 million and an improved pre-tax margin of 24%. The firm's consolidated total revenue was $5.7 billion, representing broad-based growth across all segments.

• Raised full-year 2026 positive operating leverage expectation to nearly 500 basis points, up from 400 basis points previously and significantly higher than the initial guidance of slightly over 100 basis points.
• Expects full-year 2026 total revenue growth (excluding notable items) to land around the middle of a 12% to 13% range, dependent on market conditions.
• Anticipates full-year 2026 net interest income to be up 15% year-over-year.
• Increased full-year 2026 expense growth expectation (excluding notable items) by 100 basis points to the middle of a 7% to 8% range, reflecting higher revenue-related expenses associated with the improved revenue growth trajectory.

• Persistent inflation, sharp repricing in interest rates, geopolitical tensions, and trade uncertainty contribute to volatility in fixed income and equity markets.
• Risks associated with AI deployment include potential 'rogue agents' and the need for robust alignment and observability sciences to ensure models behave as intended.
• Security concerns regarding open-weight models, where sophisticated users or bad actors might adjust safety protocols.
• Seasonal fluctuations in deposit balances, particularly in the third quarter, though expected to pick up in Q4.
• Foreign exchange headwinds from a stronger U.S. dollar impacting AUCA and AUM figures.

Q: Mike Mayo asked about AI spending and financial impact. Robin Vince explained that while they spend $4B annually on tech, AI is viewed as a capacity generator rather than just an efficiency tool. They do not break out specific AI costs publicly to avoid distraction, focusing instead on FinOps precision within their platform (ELIZA) to optimize token usage. Scale provides advantages through better commercial partnerships with labs and the ability to route tasks to the most cost-effective models, including open-source options.

A: Robin emphasized that AI adoption requires cultural buy-in and is measured by return on investment rather than precise input tracking. The company leverages its scale to negotiate better terms with AI providers and uses sophisticated routing logic to balance cost and performance, ensuring optimal consumption of AI intelligence without needing to disclose granular spending details.

Q: Ibrahim Poonawalla inquired about AI benefits and safety against rogue agents. Robin Vince outlined three strategic vectors: generating internal capacity, improving product features, and creating new end-to-end client solutions. Regarding safety, he highlighted the importance of 'alignment' and 'observability' sciences to complement frontier models. He noted that open-weight models carry risks if safety packages are removed, but BNY mitigates this through strict governance, maker-checker processes, and the ELIZA platform's built-in safety harnesses.

A: Robin stressed that BNY treats AI as a growth enabler by freeing up employee capacity for expansion activities. To protect against risks, they rely on rigorous validation processes similar to human workflows, ensuring that even AI-driven actions undergo necessary checks. This approach allows them to safely deploy AI across critical systems while maintaining control over model behavior and output integrity.

Q: Brendan Hawkin asked about the platform operating model's impact on unit costs and cross-selling. Dermot McDonogh confirmed the model is fully live, driving 15 quarters of growth. He noted that efficiency gains harvested over years are now paying off, particularly in Security Services, which saw margin expansion to 36%. The combination of the platform model and AI creates compelling opportunities for cross-selling and deeper client engagement.

A: Dermot explained that the successful implementation of the new operating model has allowed the firm to deliver more integrated solutions, boosting organic growth. The synergy between the platform structure and AI initiatives is beginning to yield tangible results, enabling the firm to win larger mandates and expand wallet share by offering a broader suite of products from various BNY platforms to existing clients.

Q: Alex Blastein sought insights on Clearance Collateral Management durability and Wealth Solutions NNA growth. Dermot stated that rate volatility has driven volume to record levels ($8.3T collateral balances), supporting long-term growth despite central clearing headwinds. For Wealth Solutions, he highlighted strong net new asset inflows ($48B) and strategic wins, noting that the integration with the broader BNY brand enhances competitiveness against new entrants by offering lending and banking services alongside custody.

A: Dermot affirmed that the collateral platform's growth is durable, fueled by both international expansion and debt issuance activity. In Wealth Solutions, the shift from the standalone Pershing brand to the unified BNY Wealth Solutions platform has strengthened client retention and acquisition. The ability to provide comprehensive financial services, supported by AI-driven innovations, positions BNY favorably against competitors entering the RIA custody space.

Q: Stephen Tubach questioned whether Security Services is pivoting to a growth mindset after achieving efficiency targets. Robin Vince agreed, stating that having met margin milestones (now at 36%), the segment is expanding into white spaces like digital assets and new regions (e.g., Germany). He emphasized that the foundational work allows the team to attack growth opportunities broadly, moving beyond cost optimization to top-line expansion through innovation and cross-platform connectivity.

A: Robin detailed how Security Services has evolved from a cost-reduction focus to a growth-oriented strategy. The segment is leveraging its operational excellence to enter new markets and offer innovative solutions like tokenized transfer agencies. This pivot is supported by strong leadership and execution, allowing the business to capitalize on secular trends in capital markets and digital asset adoption, thereby driving sustainable revenue growth.