BNY raises its 2026 revenue forecast again, and its cost forecast with it

Revenue keeps running ahead of the plan

BNY raised its outlook for 2026 again on 15 October. At the start of the year it expected revenue, excluding what it calls notable items such as severance costs and disposal gains, to grow about 5%, and costs 3% to 4%. By July those had become 10% to 11% and 6% to 7%. Now Dermot McDonogh, the finance chief, expects revenue growth "somewhere around the middle of a 12% to 13% range" and costs around the middle of 7% to 8%. He said that "with only 2.5 months left in the year, we are once again raising our outlook".

The third quarter shows why. Revenue rose 12% to $5.7 billion and earnings per share 24% to $2.34. About 72% of revenue is fees: for looking after $63.4 trillion of clients' assets, clearing trades, moving payments and managing money. Fees rose 12%, which BNY put down to new business, busier clients and higher market values. Most of the rest is net interest income, earned on the cash clients leave with the bank. It rose 15%, mainly because maturing bonds are being reinvested at higher yields and the balance sheet grew.

Not all of it is markets. Robin Vince, the chief executive, said new-business sales grew from a year earlier for the 15th quarter running. Organic fee growth, the part that comes from new business and busier existing clients, went from zero in 2022 and 2023 to about 4.5% in the first half of 2026. BNY does not report it quarterly; Vince said organic growth "has continued to be good" and that "There's no shock factor in the third quarter."

Costs are rising with the business

The cost forecast rose by a point because, McDonogh said, BNY expects "higher revenue-related expenses associated with this approximately 200 basis point improvement in revenue growth". Expenses rose 8% in the quarter, after about 6% in the first half. More than three-quarters of the increase was revenue-related, he said, and the rest was investment net of efficiency savings. Revenue growth still beat cost growth by 389 basis points, or 353 excluding notable items, against 606 in the second quarter.

One fast-growing line swells both sides. Issuer Services fees, for servicing bonds and depositary receipts, rose 43% and supplied nearly a third of the bank's fee growth. McDonogh said they include "fees accounting for pass-through expenses associated with our role as financial agent for Trump accounts", which gross up revenue and expenses alike. BNY does not disclose the amount.

Mike Mayo of Wells Fargo asked how much BNY spends on artificial intelligence. Vince gave the context, "$4 billion a year on technology" within "a $13 billion expense base", but would not break AI out: "we think it could be counterproductive to break it out".

The finance chief calls the year-end cost bump seasonal

One analyst did the arithmetic on the new ranges. Ken Usdin of Autonomous Research said that, if his sums were right, they implied lower fees than in the third quarter and "a typical year-end step-up" in costs, and asked whether BNY was pulling investment forward. On fees, McDonogh said he saw nothing in the fourth quarter that set it apart from the third: "Actually, I think we're kind of flattish, not down."

On costs he was as direct: "So like I don't believe we're pulling forward. It's typically seasonal." He pointed to three or four items, among them one-off compensation matters and vendor costs, "none of them meaningful in itself", and said the resulting uptick "wouldn't be a place where you would start your jumping off point for next year".

Interest income should keep growing, more slowly

Net interest income was $1,423 million, 15% more than a year earlier but 2% less than in the second quarter, as deposits fell back seasonally. "In Q3, you kind of saw a seasonal dip as expected," McDonogh said, adding that deposits had picked up early in the fourth quarter. BNY now expects net interest income to rise 15% for the year. It grew 17.8% in the first nine months, so the forecast points to a fourth quarter of roughly $1.45 billion, a single-digit rise on a year earlier.

The bond portfolio does the steady work. "We have roughly about $5 billion of securities rolling off per quarter," McDonogh said, and Vince expects reinvestment at higher yields to continue "for the next several quarters".