Bank of New York Mellon
Company Overview
Bank of New York Mellon is the world's largest custodian bank and one of the largest investment servicing companies globally, managing trillion-dollar flows in securities settlement, custody, and asset servicing. Berkshire held a BNY Mellon position for several years, attracted by its dominant market position in a fee-based, capital-light business.
Investment Story
Investment thesis. BNY Mellon's core custody and clearing business processes a significant fraction of the world's daily securities transactions — safeguarding assets, settling trades, and providing reporting to institutional investors globally. This business has characteristics Buffett values: essential service with high switching costs, scale-based competitive advantage, fee income growing automatically as assets under custody grow, and minimal credit risk.
The scale moat. Custody banking requires massive technology investment to settle millions of transactions daily across dozens of countries and currencies. The per-transaction cost of this infrastructure declines as volume grows — creating enormous scale advantages for the two or three players (BNY Mellon, State Street, JPMorgan) large enough to service the world's largest institutional investors. New entrants face both the capital cost of building the infrastructure and the trust deficit that prevents institutions from entrusting their assets to unproven custodians.
Buffett's Own Words
At least five authorities - the SEC, the Federal Reserve Bank of New York, the U.S. Treasury, the U.S. Attorney for the Southern District of New York, and the Antitrust Division of the Department of Justice - had important concerns about Salomon. If we were to resolve our problems in a coordinated and prompt manner, we needed a lawyer with exceptional legal, business and human skills. Ron had them all. Acquisitions Of all our activities at Berkshire, the most exhilarating for Charlie and me is the acquisitio
Corporation . . . . . . . . . . . . . . . . . 6.8 5,007 20,664 53,307,534 The Bank of New York Mellon Corporation . . . . . . 5.3 2,230 2,871 225,000,000 BYD Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 1,961 6,789,054 Charter Communications, Inc. . . . . . . . . . . . . . . . . . 2.8 1,210 2,281 400,000,000 The Coca-Cola Company . . . . . . . . . . . . . . . . . . . . . 9.4 1,299 18,352 53,110,395 Delta Airlines Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 2,219 2,974 44,527,1
*The Bank of New York Mellon Corp. . . . . . . . . . . 8.8 3,860 3,977 6,789,054 Charter Communications, Inc. . . . . . . . . . . . . . . . . 3.0 1,210 1,935 400,000,000 The Coca-Cola Company . . . . . . . . . . . . . . . . . . . . 9.4 1,299 18,940 65,535,000 Delta Air Lines, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 9.6 2,860 3,270 18,784,698 The Goldman Sachs Group, Inc. . . . . . . . . . . . . . . 4.9 2,380 3,138 50,661,394 JPMorgan Chase & Co. . . . . . . . . . . . . . . . . . . . . . 1.5 5,605 4,946 *
American Express 18.7% $ 261 $ 998 Apple 5.7% 2,519 Bank of America 10.7% 2,167 Bank of New York Mellon 9.0% Coca-Cola 9.3% Delta Airlines 11.0% J.P. Morgan Chase 1.9% Moody’s 13.1% U.S. Bancorp 9.7% Wells Fargo 8.4% Total $3,798 $8,332 (1) Based on current annual rate. (2) Based on 2019 earnings minus common and preferred dividends paid. Obviously, the realized gains we will eventually record from partially owning each of these companies will not neatly correspond to “our” share of their retained earnings. Sometim
The Bank of New York Mellon Corp. . . . . . . . . . . . 7.5 2,918 2,837 225,000,000 BYD Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 5,897 5,213,461 Charter Communications, Inc. . . . . . . . . . . . . . . . . . 2.7 3,449 48,498,965 Chevron Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2.5 4,024 4,096 400,000,000 The Coca-Cola Company . . . . . . . . . . . . . . . . . . . . . 9.3 1,299 21,936 52,975,000 General Motors Company . . . . . . . . . . . . . . . . . . . . 3.7 1,61
Investment Lessons
Custody banking's scale advantages are structurally durable. The global securities settlement business is a technology infrastructure play: whoever has the most efficient infrastructure at the most global scale wins the largest institutional clients, who in turn generate the volume that further reduces per-unit costs. This virtuous cycle makes BNY Mellon's competitive position self-reinforcing in exactly the way Buffett's moat framework predicts.