Question-and-Answer Session
Operator
Thank you. (Operator instructions) Our first question today is from Mike Mayo. You may ask your question and please state your company name.
Mike Mayo – CLSA
Yes, Mike Mayo with CLSA. Hi Bob.
Bob Kelly
Hi, Mike.
Mike Mayo – CLSA
When it comes to the expense reduction, that is good news, and I guess it stems from the merger savings, but my question is, given the revenue environment and the decline in revenues, how much more leverage do you have to reduce expenses so as to prevent negative operating leverage?
Bob Kelly
Yes, it is a good question. The revenue obviously was our primary issue in the quarter, and we worked pretty hard on the expense side, and what I would say is our expense reductions are firstly sustainable and largely permanent, and repeatable. And also I want to say that. So in other words it is not any one time stuff in there. It is a combination of the restructuring that we did in the fourth quarter, and you don't see the full run rate of that. But it is there. In merger saves [ph], we are being tougher on compensation, quite frankly on bonus type schemes, and we have other programs that are underway. So what I would say is that at the top of the house [ph], there are other things that we can do. The only thing that I'm going to be careful of though is that we are not going to impact quality or level of service in the company. We want to continue to gain market share throughout this process, but I do want to emphasize we have more flexibility from here if we need to.
Mike Mayo – CLSA
As a follow-up, what percent of the expenses are variable versus fixed. I know that in your Legacy Bank in New York the number is, if I'm correct, it is supposed to look 80% or so, and at Mellon, I thought it was more variable. So, what percentage of expenses are variable and what are some additional levers you have, and additional compensations should revenues continue to decline?
Bob Kelly
Well, I will let toward handle that. But let us remember that all expenses over the medium term are variable.
Mike Mayo – CLSA
In the long run?
Bob Kelly
Todd.
Todd Gibbons
Obviously Mike, the largest expense that we have is compensation expense, and with the actions that we took in the fourth quarter, and the synergies that we're going to continue to grind out of the company, I think we will continue to do better there. We are seeing opportunities to improve operating efficiencies as well. We are creating utilities that a number of our businesses can use, and I think it will increase efficiency and lower cost. We are also running a little hot on our consulting expenses right now, and I think we're starting to see that fade down a little bit from where we were in the fourth quarter, but I think there is more room for us there. But most of the leverage comes with how we're doing in the incentive side, and that is relative – it is all related to revenue across the company.
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