Good morning, ladies and gentlemen and welcome to the Second Quarter 2008 Earnings Conference Call hosted by the Bank of New York Mellon Corporation. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I’ll now turn the call over to Mr. Steve Lackey. Mr. Lackey, you may begin.

Thank you very much, Melissa. Good morning, everyone and thanks for joining us to review the Second Quarter Financial Results for the Bank of New York Mellon Corporation. Before we begin, let me remind you that our remarks may include statements about future expectations, plans and prospects, which are forward-looking statements. The actual results may differ materially from those indicated or implied by the forward-looking statements as a result of various important factors including those identified in our 2007 10-K, our most recent 10-Q and other documents filed with the SEC that are available on our Web site at www.bnymellon.com. Forward-looking statements in this call speak only as of today, July 17, 2008. We will not update forward-looking statements to reflect facts, assumptions, circumstances or events which have changed after they were made. In addition to this morning's press release we also have a supplemental document available on our home page, the quarterly earnings summary which provides a five quarter pro forma combined view of the total company in our six business sectors. Unless otherwise noted all comparisons to the prior year's results reflect this pro forma combined view. Also available on our Web site, are the financial trends, a ten quarter pro forma combined view of the total company in our six business sectors. This morning's call will include comments from Bob Kelly, our CEO and Todd Gibbons, our CFO. In addition, there are several members of our executive management team to address your questions about the performance of our businesses during the quarter. Like to remind you that Todd's remarks will be focused on the information available in our quarterly earnings summary beginning on Page 3. Now I would like to turn the call over to Bob Kelly.

Thank you, Steve and good morning, every one. Thank you very much for joining us. We have most of the executive committee here around the table this morning. Jim and Tim, who head up our Asset Servicing business are actually on the phone, but from Europe, so I'm hoping the (inaudible) quality to be good if they are answering questions. And frankly, I'm on my way to Asia tomorrow morning, it just speaks to what a global company we’ve become here. We continue to be served very well by our focus strategy on managing and servicing assets around the world. Let's start with revenue. If you look at our GAAP numbers, revenue growth was minus 3% year-over-year. But the way I think of it is the underlying growth rate was 12% in a period of very broad equity decline. Included in revenue was the SILO charge of $377 million after-tax, and that we signaled that this was quite possible at our Investor Conference. And from a capital standpoint, this was offset by the sale of the First Business Bank in California which closed on July 1st. It also included the absorption of $152 million in securities losses. This is somewhat higher than we expected, but frankly it now builds in a pretty brutally realistic assumption of 17% further declines in housing prices. On the global side, the expansion continues. Our non-US revenue is now 35% including SILO and that's compared to 33% in Q1 and 31% in Q4, so we are adding a couple of percent per quarter right now, which is really quite extraordinary. Expenses looked pretty good year-over-year, but not on a link quarter basis, and we have already started working on that. If you look to our earnings and to the bottom-line, they were at $771 million…

Thanks, Bob, and good morning. Let me take you through the highlights of the quarter, help you understand where we are with our merger integration milestones, and offer a few thoughts about our outlook for the third quarter. As Bob said, our business model is focused on managing and servicing assets globally, and our revenue continued to benefit from strong, secular trends. Once again, we had a good operating quarter in a difficult environment. Security servicing revenues which include both fee and net interest revenue were up 16% over last year reflecting the benefit of continued new business wins in Asset Servicing, DRs, corporate trust and clearing together with strength and underlining volumes as well as volatility in the markets. Asset and Wealth Management revenues declined by a modest 4% relative to double-digit declines in the global equity markets. Here, we benefited from the strength of money market close and our active global strategies as well as client growth and wealth management, particularly with family office clients. Our treasury services segment continued to benefit from growth in global payments and also the cash management business, so, overall, revenue in our business segments was up 10% and our pre-tax income was up 20%. As Bob mentioned pre-tax margins for the company excluding the SILO charge increased to 34% from 31%, and we continued to improve our corporate risk profile and exit non-core businesses. We’ve also continued to exceed our merger related synergy targets. Now let's get into the numbers. Our continuing earnings per share was $0.67. This excludes the SILO charge of $0.33, and M&I cost of $0.08 and represents 2% growth compared to the second quarter of 2007 even with the impairments in the investment portfolio. If you add back $0.09 for the securities write downs and the cost to…

Thank you. We will now begin the question-and-answer session. (Operator instructions) Our first question comes from Thomas Mccrohan with Janney Montgomery. Please go ahead. Thomas Mccrohan – Janney Montgomery Scott: Hi, everyone. How are you doing, gentlemen?

Good morning, Tom. Thomas Mccrohan – Janney Montgomery Scott: Good morning. What assumption, Todd, are baked into your, particularly with impairment charges, possible future impairment charges? What assumptions on impairment charges are kind of baked into your forward-looking comment at the bank is in a position to generate or bill tangible capital by 25 to 30 basis points over the next several quarters?

Tom, there is a couple of points there, number one, the impairment charges actually don't have a capital implication, because this portfolio is run through other OCI, so, we are already taking any market value reductions as a hit to the capital. Thomas Mccrohan – Janney Montgomery Scott: Okay, great. Can we assume that these impairment charges are kind of behind you now given the aggressive assumptions you made on housing price declines in the next two years?

I’d like to think that, I’ve to admit, it’s pretty hard to predict this with any real precision. One I give a little more color on what we did is we don't think you can really use historical loss experience to project future losses in this environment. These times are unprecedented. We are reaching out to is looking at Street research as well as market prices to indicate where we think losses could possibly go, and that’s significantly exceeding historical experience. So that’s why it’s really based we run our cash flow models we’re basing it on those market assumptions. Now, in order for us to take additional impairments, our assumptions, they’re going to have to get worse. So, we’ve laid out what we’ve told you our assumptions were for the future of home prices. The other thing that could happen is your actual experience could worsen than the severe estimates that we've got. So of course it's possible we could take more, we are pleased that we are in the AAA tranches and have good structural protections, so we feel pretty good about it. Thomas Mccrohan – Janney Montgomery Scott: Fair enough.

And Tom, it's Bob. I totally agree with (inaudible). We are in this bizarre period of something that none of us have experienced before. The article in the week up sample the Baron's article was pretty interesting saying there is aspects of the housing situation that maybe has turned, who knows? And we'll just have to see what happens here over the next 6-12 months. Thomas Mccrohan – Janney Montgomery Scott: Okay, and it's kind of looked through all the various second quarter nonrecurring charges and results are pretty strong, both in relative and absolute basis, but there is a slight distraction, I'm sure you are hearing a lot about on this Russian Federation lawsuit, I had a conference call last night, Bob, do you have any reaction to points that were made last night conference call?

It's a little bit of background for people. Some of you may have heard that the plaintiffs held the call last night. Obviously, it was time to coincide with the earnings call today. It's kind of the bottom-line. It was nothing new on the call. I didn't listen in on it, but a few of our people did, it is simply part of our plaintiff's ongoing campaign to try to pressure the company to get a big settlement as quickly as possible so they can move on to something else. And as I said to you the last couple of times we were together, the plaintiffs would turn up the noise at some point, in this case, on the public relations front, and they continue to try to do it. The question probably on some of your minds might be, why not settle the case. And the fact is we have always been willing to engage in some kind of reasonable discussions with authorized representatives of the customs services to resolve the matter. We’ve never taken anything off the table, and we’ve never received a legitimate settlement offer. Now, I want to put this behind us as much as you do. But the solution has to make sense. We’re really confident in our defenses. There are substantial, well-established laws in place to protect our assets around the world.. We are really confident, an adverse decision would not be enforceable in the U.S., wouldn't be enforceable in the UK or in fact, in any other country where we have significant assets. We have consistently said that we’ve been prepared for an adverse decision and given the irregularities of this particular court we wouldn't be surprised if it happened. But as you know, we have been a partner to Russia, we have been a partner to Russian business and we have been a partner for a long time. We intend to continue to support our clients there and frankly, this case is absolutely not in the best interest of Russia. So, it is what it is, and we have been saying it for some months now that this is what these guys would try to do. And I think we are doing absolutely the right thing for our shareholders and for our clients. Thomas Mccrohan – Janney Montgomery Scott: Okay. Thank you.

Okay.

Thank you. Our next question comes from Glenn Schorr with UBS. Please go ahead. Glenn Schorr – UBS: Hi, thanks. Todd, maybe just a few follow-ups on the securities in the investment portfolio. One on the Alt-A side, following these marks, you gave us the CDOs are at 24% of part, can we get that for where the Alt-A portfolios and can you comment anything about vintages of when these were originated?

Yeah, if you actually look at the earnings summary, you will be able to compute where we are carrying them versus the fair value. And if my memory serves me right it’s about $0.80. What is your second question, Glenn? Glenn Schorr – UBS: Something about vintages when originated.

Yeah, many of these vintages do date pre the '06, and the vintages that were originated that we invested in '06 and '07 tended to have the greater credit support to them. So, much higher levels of credit enhancement. Glenn Schorr – UBS: Okay. I appreciated that. And then on going off memory, but in the queue, I think I remember seeing commercial real estate exposure, little more than $3 billion on the loan side, and another $5 billion on exposure, could you just give qualitative comments? I mean I see in the table where you have the CMBS marked, but just qualitative comments on where you see commercial real estate land shaping up and what those $5 billion of commitments are and what if any of its been pulled down and when you think it could be?

Okay. Most of our commercial real estate is related to the leading developers here in New York City, and that portfolio continues to perform very well. We've got very good LTVs there, very good cash flows, and we are not seeing any unusual behavior there, frankly at all. Maybe one or two little bumps in some of the boroughs. We did, as I mentioned, we did see an increase in MPAs out of our Florida bank. Those guys have been pretty good lenders over the years, they have avoided a lot of the pitfalls, but just the noise in Florida, we think there are going to be a couple of MPAs down there. We don't see significant losses though. Glenn Schorr – UBS: And is still a $5 billion number or has that started to become actual commitments?

I think you are looking at a combination of funded and unfunded commitments. So that would be total commitments…. Glenn Schorr – UBS: Oh I got it.

5 billion, Glenn, this is Gerald, the $5 billion is not on top with the outstanding. Glenn Schorr – UBS: (inaudible) close if I got you.

Right. Glenn Schorr – UBS: Okay. Alright, I appreciate that. Thanks, guys.

Thank you, Glenn.

Thank you. Our next question comes from Brian Foran with Goldman Sachs. Please go ahead. Brian Foran – Goldman Sachs: Hi, guys, thanks.

Hi, Brian. Brian Foran – Goldman Sachs: I guess over the past couple of quarters we have seen core EPS come in pretty good and GAAP stated EPS be a little bit lower, well, obviously lower than core EPS and appreciating that the number of different issues we’re kind of working through, how far out do you think you look before those two numbers start converging?

Well, first of all, when you are looking at your, I think the way to look at EPS is that the core, for this core of the $0.76, there are three adjustments that we had to one, one was clearly a one-time tax adjustment. The second was the impairments, and the third was M&I charges. We anticipate having M&I charges out to 2010. So, unfortunately you are going to see that adjustment, Brian, out to that point.

What I would say is well on that, Brian, just on that issue is let's bear in mind that the IRR on this merger is extraordinarily high and the risk perimeters are coming down massively every quarter. So, on a risk adjustment basis and on a nominal basis (inaudible) charges are really worth it to our shareholders. Brian Foran – Goldman Sachs: Okay. Thanks, guys.

Our next question comes from Mike Mayo with Deutsche Bank. Mike Mayo – Deutsche Bank: Hi, can you help me with expenses? We can strip out some of the one-time items and link quarter operating leverage seems flat to maybe negative and we can disagree about some of the parts, but just seems like expenses could be better relative to revenue. So, I guess the question is can you remind us how much the merger savings you achieved versus your target? I guess you are running parallel systems when that ends, and when we see kind of a better improvement in expense control?

Well, let me start. And what I say is Todd will go through the details on this. But, I agree with you. They are higher than we would have liked on a link quarter basis, there are some special stuff in there, and we have already engaged the team here on working on that so that we are all over that issue now. But, Todd?

Yeah, in the quarter, we did see about $13 million in synergies and we are right now on kind of the steeper part of the synergy curve, Mike. We mentioned some of the one-time on a sequential basis in the first quarter you had the rebate, here we had the pretty significant expenses associated with the lost tapes. We also had, our business development expenses were pretty high. We had a number of client conferences obviously to generate new business. And we also incurred an impairment charge and software. There are a lot of little, kind of one-time items. I don't know I call one-time or the items like that, which we really don't see recurring, so the combination of some additional expense control and just burning some of this out of the run rate we would expect to see some improvement in the third quarter. Mike Mayo – Deutsche Bank: Well, I didn't have the business development costs and the impairment charge on software, how much were those two?

The combination of those two were nearly $20 million. Mike Mayo – Deutsche Bank: $20 million? So, all else equal. Should we see expenses $20 million lower given the absence of those next quarter?

In my remarks, I said I thought we would actually see non-recurring stuff of about 30 to 40 in the third quarter. Mike Mayo – Deutsche Bank: Okay. This is an aberration in terms of expense control in the second quarter?

I would say that's true. Mike Mayo – Deutsche Bank: Okay. So that should help. The margin was up, what’s the outlook there?

In terms of the…? Mike Mayo – Deutsche Bank: Just the net interest margin of 11 basis points.

That was largely driven by the spreads on the investment portfolio. Mike Mayo – Deutsche Bank: So do you think that kind of stays flattish or…?

It’s probably peaked, Mike. A combination of a couple of things happened in the quarter. We still seem to be benefiting a little bit from the Fed ease. You are seeing our assets go down in yield slower than and basically what our deposits go down. So we are still seeing some benefit from that, but you are also seeing and part of this is related to the OCI, just as the investment portfolio goes down in value, its yield increases. Mike Mayo – Deutsche Bank: Okay. And OCI since quarter-end, I mean, it’s pretty good your unrealized securities losses you had a flat $1.8 billion, even though like non-agent CMBF declined so much in value. But, since quarter end that gone down more?

It has gone down a little bit more probably on a tax adjusted basis. We looked at a Tuesday night, it would have been down about $100 million. Mike Mayo – Deutsche Bank: Okay, it’s not too much. And last question, the pipeline of business, some are say they are winning from other big players, are you going through a merger, is your pipeline going down at all?

Well, we, Jim, it is a good question, Mike. Jim and Tim, were either of them on the phone like to comment on that a little bit?

Yeah. Sure. Mike, it's Tim Keaney here. I would say the pipeline is quite strong. If you looked at it, it would be down slightly sequentially. But up in about 11 or 12% year-on-year. Batting average is still pretty strong kind of well north of 60%. And we are seeing a much larger amount of opportunities and also a concentration of several very large outsourcing opportunities. So overall we are quite happy and it's very consistent with the new business results we saw in the first quarter. Mike Mayo – Deutsche Bank: Up 11% year-over-year, is that apples-to-apples or is that include the benefit to the acquisition?

I would say that's apples-to-apples. Mike Mayo – Deutsche Bank: Okay. All right. Thank you.

We should probably highlight a couple of the other businesses too. Karen?

Yeah. All of the Issuer Services businesses look good in terms of great healthy pipeline, global corporate trust and DRs particularly, and on our Treasury Services side, the cash, particularly global payments, credit advice healthy pipeline.

Dave, you had a nice quarter.

I would say the same thing. Our pipelines are probably the strongest that ever been. Especially, as Todd had already mentioned the family office business and the short-term pipeline over the next couple of quarters looks especially strong. I would say real slight to quality right now in any kind of difficult times in the high net worth side, so we are feeling good about that. Mike Mayo – Deutsche Bank: And who are you getting that from? We heard that yesterday from Northern, too. I guess you’re not winning from each other. Who are you winning from?

Well, there is a very small group of capable providers in the family office side right now and clients are especially drawn to a trust company status as opposed to perhaps a brokerage status for protection of their assets. So I would say the competition is very small and where it's coming from would be those other players. Mike Mayo – Deutsche Bank: Thank you.

And Brian, any thoughts on Pershing? I know you have been booking a lot of new business?

Mike Mayo – Deutsche Bank: Great.

And this is Ron O'Hanley, maybe I'll just finish this on Asset Management. The pipeline continues to grow for us. I think that the only possible negative which the industry is seeing is that decisions are taking longer, particularly as pension funds are seeing changes in their funding status. So, albeit, decisions are taking longer, we got a bigger pipeline so we expect to see growth. Mike Mayo – Deutsche Bank: Thank you.

Thanks, Mike.

Thank you. Our next question comes from Vivek Juneja with J.P. Morgan. Please go ahead. Vivek Juneja – J.P. Morgan: Hi, couple of questions. I guess one is a comment given that Russian lawsuit call last night and the fact that they refuse to answer the questions about who is really benefiting from these payouts or whatever they are expecting from this, you may not be able to comment, but I would help that the Feds or some other authorities get engaged in figuring out who is the potential beneficiaries are, rarely get, even that they kept changing their answers about whether they were approaching you for a settlement and not on what the amounts are, there were way too many inconsistencies which just raises a lot of questions about the real motivations here.

Well, thanks, Vivek. I did read your, the piece you put out this morning, and you raised some great issues. I don't think people should assume that the government isn't doing anything to help us. On the other hand though, I can't speak on their behalf. So what I would say is if you have questions or thoughts or concerns which could be legitimate, I would encourage you to contact people you referred to, and that’s really all I can say. Vivek Juneja – J.P. Morgan: Turning to a couple of business issues, Ron O'Hanley, the long-term asset outflows that you are seeing from the team that left, when do you think we should be able to be done with that?

In fact, the actual asset outflows moderated significantly in the second quarter. What you are seeing of course is the full year kind of revenue impact of prior quarter asset outflows, but because the performance is actually strong and strengthening, the asset outflows have decreased. So, we got one more quarter to go to get through to the full year impact of this, but the Boston Company is in great shape. Investment performance is strong and getting stronger. So you'll see the financial impact for another quarter, but the asset impact is largely done. Vivek Juneja – J.P. Morgan: Okay. And on Securities Servicing, if I strip out the set landing, if you look at the link quarter three comparisons, they were just a tad down. Can you talk a little bit about how much, I recognize this is not for Ron, but whether it's for Gerald or Tim or Jim, how much is that is market related versus what’s going on in terms of business flows, et cetera?

This is Jim. Your question, was it securities lending or. Vivek Juneja – J.P. Morgan: , :

Okay. Yes, you are right. It was an offset of converting in $588 billion of new assets in year to date, and that was offset by the market value decline. Vivek Juneja – J.P. Morgan: Okay. And so as we look out over the next sort of second half on Securities Servicing, based on what you are seeing in terms of new business flows, how should we think of what the outlook looks for that?

As we talked about pipelines and Tim mentioned the substantial win rate we have had where we won 1 trillion of new assets year to date, as I said we converted in the first half of the year, $588 billion, so you can see that, not only from prior quarters, but just this year there is some assets to be converted, so we would expect that the flow through on the trust fee end related line items such as foreign exchange and securities lending as well as increased deposits on the NRR side. Vivek Juneja – J.P. Morgan: Okay. Thanks. Ron O’Hanley: Hey, Vivek, it's Ron O'Hanley again. I should just add something on your long-term asset question. Half of what is in the second quarter for long-term net out flows actually relates to one client. It was an account we done as an accommodation to a client with less than a basis points. Unfortunately for us the client has restructured the portfolio, so put that number in context there, half of it is just a very unusual assignment that we’re happy to not be part of anymore, in fact, restructuring over time is going to benefit us. Vivek Juneja – J.P. Morgan: Okay. Great. Thanks.

Thanks, Vivek.

Your next question comes from Ken Usdin with Banc of America. Please go ahead. Kenneth Usdin – Banc of America: Yeah, hi, good morning.

Hi, Ken. Kenneth Usdin – Banc of America: Bob, just a couple questions on the merger update again. You’d given us some good updates at the analysts meeting. And I was just wondering the revenue synergies you really just kind of list out on an annual basis I’m wondering if you can touch on, A, just kind of how that kind of has built up in the numbers already and how it intends to? And then, second 13 million more of expense synergies this quarter still kind of puts you already on a run rate ahead of your annual target for this year so I am just wondering if you can also remind us about next major integration as far as when we should start to see some of those chunkier cost savings come through?

Sure. On the revenue side, we’re tracking it pretty closely and regularly. And why don't have Gerald talk to that a little bit?

Ken, I think a good example on the revenue synergy side would be an area like foreign exchange where the combined book continues to perform very well, and I would suggest we maybe out performing our peers in some of the categories because of the revenue synergy associated with combining the books. That's a great example where we are pulling through, they just showing up in existing revenues, how those synergies are coming together. Some of the other revenue synergies are around the asset gathering capabilities, some of which are showing up in Pershing's numbers, some of which are showing up in Asset Management numbers. So we are tracking it, we are on or ahead of schedule of what we updated you on in the investor conference and feel very good about the continued opportunities going forward.

Todd, or Steve or Don, any thoughts on the expense side, or on upcoming events?

This is Steve Elliott. We do have two key events happening here in the second half of the year over Labor Day weekend. We have the private wealth accounting to custody conversions coming into play for the Legacy of the NY clients. And then over Columbus Day weekend we got a major data center conversion from Pittsburgh to our other primary data site. Each one of those obviously has synergies associated with it, the GLC and the run rate plus remember the major conversions we just did over July 1st with respect to getting the banks together to see the follow-on impact of expense synergies there, so we are tracking right along, and this is kind of a steady march, if you will, as we look into balance this year as well as through 2009.

And Ken, I think overall, we continue to be confident in the expense synergies that we up at the investor conference and will continue to meet those numbers as we presented them to you. So, we are right on track. And I think you are implying, should we raise them again, and I think we have already indicated a very nice raise in those expense synergies and we are right on track with them. Kenneth Usdin – Banc of America: Okay. As a second question if we pull back to a bigger picture company perspective, a good revenue quarter but with a disappointing expense base, you’ve talked to the concept of Asset Servicing, over earning and Asset Management under earning, but relative to peers, you kind of come in line with expectations and some of the other peers have beaten with forward estimates moving more upward, can you just talk to, give us some perspective on any thoughts to both the revenue lines kind of all aligning the right way, vis-a-vis the expenses as far as that kind of built-in hedge which you kind of have in the model?

Well, let me start on that. It's a good question. We are a lot bigger than our peers. We have a lot more business lines than our peers. And when you look at us we are in more complex play. The advantage of us is we are a lot more diversified and therefore in stressful periods we are more stable. The downside is we are a little harder to understand, because we have more business lines. I was pretty encouraged to see what we seen here is that Asset Servicing is continuing to probably over perform versus what we would have expected a year ago. Market stress has been attractive to us in a number of places, particularly in Asset Servicing, although it's been a hit in the Asset Management business, and that business has slowed down from that perspective and it’s not unlike most of the Asset Management players around. At some point, people are going to get pretty tired of keeping assets in really short, low risk type products and duration has to extend here at some point. It’s just hard to predict when it’s going to occur, but our expectation is it will. And if you look at corporate trust, it's been, we signal certainly in the second half of last year that the US operation was slowing down, but it's been great to see how international operations have been terrific. DRs have been extremely impressive around the world and our Treasury Services and Clearing businesses have been pretty good as well. So really, from my perspective the only issue at this point is the market reality in Asset Management. That’s kind of the major issue. And there is nothing we can do about that even though we are in alpha play versus index play, we’re still correlated to market levels. Certainly, when you look at US equities versus historic norms, the global markets are a lot more attractive today than they were a pretty short time ago.

And then Ken on the expense side, I think as Todd said in his comments, we had a number of expenses in the second quarter that we do not expect to reoccur in the third quarter. So, none of us want to call them one timers, there are issues that we simply to pass the deal with, but we do not expect them to reoccur in the third quarter and into the future. So we are very, very attentive to the expense lines as well to get that positive operating leverage that we have articulated to you in the past. Kenneth Usdin – Banc of America: Okay, thanks. I appreciate that color.

Thanks.

Thank you. Our next question comes from Mark Fitzgibbon with Sandler O'Neill & Partners. Mark Fitzgibbon – Sandler O'Neill & Partners: . :

Hi. Mark Fitzgibbon – Sandler O'Neill & Partners: I noticed over the last several quarters since the closing of the merger head count has been steadily rising, I think it’s up above 7% since the closing of the merger and total number of employees in the second quarter were up by another 500. When do you think we will start to see some of the synergies from the merger and can you give us a sense for where we should look for that head count number to trend over time?

Yeah, Mark, I'll take it. It's Todd Gibbons. Almost all of the head count increases that you are seeing are really related to growth in our Asset Servicing businesses. And I'll let Jim and Tim speak to that in a moment. But we are on track to manage to the numbers that we’ve given to you. So I think any growth that you are seeing is just the growth in the underlying businesses and I don't know Jim or Tim if you want to add something to that?

Yeah, Todd, it's Tim here. One of the things you just have to remember is you are also seeing the growth in head count due to the acquisition of the ABN AMRO-Mellon joint venture and Jim and I both talked about the very strong new business momentum we have. Just as reminder it’s not uncommon to see some of these expenses in advance of the new business conversions because we have been winning business so steadily and I just remind you that we are still to convert almost $500 billion in assets, so I think you are seeing some of that playing out in the head count numbers. Mark Fitzgibbon – Sandler O'Neill & Partners: Okay. And then secondly, maybe for you as well, Tim. Are you hearing from clients if they are concerned at all about this Russian litigation? Is it having any impact on your ability to generate new business? Are people concerned about it?

No, I'll be honest in terms of new business it’s never come up, not an issue.

Clients are very supportive of us, including in Russia. Mark Fitzgibbon – Sandler O'Neill & Partners: Okay.

And by the way, just on the head count side as well…. Ron O’Hanley: Mark, Ron O'Hanley. The other thing in that head count number is Brazil. Two things in Brazil. One was the ARX acquisition and second, we have taken on a very large outsourcing deal down there which has brought on some administrative and clerical people.

And the other just kind of thing I would say, Mark is we continue to shift people to different locations that either have lower costs or better operating environment, for example in Pittsburgh, the staffing is way up in Pittsburgh, and but what it means is that as you are shifting resources and shifting activities you tend to have double staffing for a while. And I think there is a real impact that way. So I wouldn't worry about it. Because in the end what you are going to end up with just a better client service and lower overall cost base and lower turn over of people. Mark Fitzgibbon – Sandler O'Neill & Partners: Okay. And then is the non first business divestiture or sale reflected in the employee numbers for the quarter?

Probably would be, yes. Should be. Mark Fitzgibbon – Sandler O'Neill & Partners: And then lastly, is there any plans to raise capital borrowing the need, if you did an acquisition or something, would you contemplate raising some additional equity if the opportunity presented itself?

It should be pretty clear, I think, I'm glad you asked that actually, because I know Steve Lackey gets the question pretty regularly. If you look at our numbers, our generation of capital even with the $150 million of the security losses on a pre-tax basis hold aside SILOs, that was a one-time thing. Our pre-tax earnings were $1.2 billion during the quarter. That’s why we are increasing our capital ratios, we feel pretty comfortable increasing our capital ratios 25 basis points a quarter. Our Tier-1 is extraordinarily strong and our 444 on our total capital ratio is stronger than a lot of banks in America and we have a much, much higher quality balance sheet. So, one of the interesting questions is, what do we do with that capital? We are seeing a few isolated examples at this point of a few things we might be able to acquire, but frankly they are not that big, so we continue to stay very focused on our global growth strategy and getting the merger integration done. There might be a few things we can pick up here and there that involve some small hits to our capital account, but in the end, we are very confident that we are very well capitalized and that capital account should continue to drift northwards. Mark Fitzgibbon – Sandler O'Neill & Partners: Thank you.

Thanks.

Our next question comes from Nancy Bush with NAB Research, LLC. Please go ahead. Nancy Bush – NAB Research: Good morning, guys.

Hi, Nancy. Nancy Bush – NAB Research: Bob, if you would just remind us about your plans for the expansion of the, I guess you would call it PFS business or wealth Management or private banking, could you just refresh us on sort of office expansion plans, et cetera? And I'm hopeful the plans to expand this business are sort of not falling prey to the need to reduce expenses.

No, that's an investment business for us and maybe Dave can update you.

Hi, Nancy, this is David. We do continue to expand, we opened I think as we mentioned a Tampa location here in the last couple of months and we are looking at a couple others in terms of new locations. We have also added I think about 50 client facing people here since the beginning of the year. Most of those are either in sales or the banking side. They do include a couple of lift outs where we have had unique opportunities in different parts of the country. Today, we are at 106 sales people we have stated that goal to try to get that up to about 120 by the end of the year. I think we are on pretty good track to do that. That compares against the number that’s probably in the high 80s here 12 months ago or so, so the short answer is we continue to invest both in people and then selectively in locations as we see them. Nancy Bush – NAB Research: Do you see any new opportunities for locations because of some of the things that are going on in the industry right now? I mean, we are hearing that there is a lot of business, lot of substantial business coming out of some of the quote, "troubled entities" in the industry right now and some of those in the southeast, have you thought about expanding your presence in the southeast as a result of this?

That is one of the locations where you would probably see an inordinate amount of the growth that I already talked about is in the high demographical growth areas. Some of those do have troubled competitors, but the long-term demographics are great. So if you look at the West Coast, you look at the southeast part of the country and then here in New York City, that would be probably the three areas I said are getting the disproportionate amount of the growth and you are right, there is a sort of moving marketplace right now as was the earlier question. So you don't necessarily need to add locations to take advantage of that. We will look at locations where it makes sense but probably more importantly, and more accretive right away is to add talented people.

At some point, we'd love to be in Texas, for example. Nancy Bush – NAB Research: You may get an opportunity. Thanks.

Thank you.

Our next question comes from Brian Bedell with Merrill Lynch. Please go ahead. Brian Bedell – Merrill Lynch: Hi, good morning, guys.

Good morning, Brian. Brian Bedell – Merrill Lynch: Apologize, I missed a little bit of the earlier part of the call, but a couple of things just on the 30 to $40 million expense run rate, which expenses are, which areas of those that you do not expect to recur in 3Q?

Well, there was the expenses associated, Brian, with the lost tapes and providing credit monitoring service to our customers. There was also a spike in business development. Some of that could recur, but some of that we wouldn't expect that it would. We took an impairment on software and there was probably a little noise in the compensation expense as well. Brian Bedell – Merrill Lynch: Okay. And the business development, what was that spike due to?

Largely, we had three large client conferences. Brian Bedell – Merrill Lynch: Okay, all right. And on the commercial real estate exposure you talk about before about 5 billion in total you said?

I believe that’s about the number, yeah, I don't have in front of me Brian Bedell – Merrill Lynch:

It would be, Brian, do you recall exactly what that is maybe?

Less than 5%. Brian Bedell – Merrill Lynch: Less than 5%. Okay. Great. And on the question for Ron in the long-term asset flows. You mentioned there was one client that led to the outflows. Can you talk about the inflow side of the business? Where are you seeing net new business mostly within your long-term managers and how do you see the trend over the next couple of quarters there? Ron O’Hanley: The net new is clearly just a lot of cash continuing, a lot of short duration business. Some of that is investor behavioral although that actually, that actually stumbled a bit in the second quarter, what we are enjoying really is just more share from the various Bank of New York Mellon channels, which really is a result of the merger. Secondly the non-US business continues to grow very rapidly for us. We finish the quarter with revenues derived from non-US clients up to 42% of our revenue. That’s up to 39 in our first quarter and 34 same quarter last year. So, those areas we would expect to see continuing into the third quarter. Finally, global equity and international equity, we are just very well-positioned there. We got a very strong product suite there and as equity markets recover, I think that's what will recover first. More and more investors are taking less of a US, non-US, or even a more mid cap, large cap and much more of a global equity view and we got a whole suite of very strong performing products there. Brian Bedell – Merrill Lynch: Is this mostly at Newton or Walter Scott? Ron O’Hanley: It will be Newton, Walter Scott, The Boston Company, Mellon Capital. Brian Bedell – Merrill Lynch: Okay. Great. And then just lastly on the Russia, just on the conference call last night, I think the plaintiff said for a settlement you would have to go through him. Is that true? Or can you go directly to the Russian Government for a settlement? Ron O’Hanley: I think what I said is, we are happy to talk to authorized representatives of the customs service. Those are the people that brought the suit. Brian Bedell – Merrill Lynch: And what you are saying is you can’t do that, you have the power to do that? Ron O’Hanley: I hope. Brian Bedell – Merrill Lynch: Okay. Great. Thank you.

Our next question comes from Robert Lee with KBW. Please go ahead.

Thanks. And thanks to your patience, hard to believe there is too many more questions. And I do apologize, I do have to step off briefly earlier so you may have gone over this. But can you talk about the net interest margin? I guess considering how I think you tend to run a neutral book, it kind of jumped a little bit more than it would have expected, maybe just update us on your expectations there and maybe along with that your kind of rate assumptions built into that?

Sure, Rob. A couple of things. Number one, it’s largely the margin is being driven largely by the higher spreads on the investment portfolio. So that's the number one driver. Number two, even in the money markets and you can see a fair amount of our earnings, interest earning assets our money market instruments, they have done better even though the Fed has eased. So we are getting a little wider spreads on the assets that we have got despite a little bit of a loss of free deposit. So that’s largely what’s driving the margin. I should make a comment that SILOs will have a, and the re-run of the SILOs will have a slightly negative impact to the margin over the next few quarters. So we don't see it coming down dramatically but we would expect it to come down from the current high run rate.

Okay. Thanks. And maybe just one quick follow-up . I think you probably touched on this in some other comments, but granted that the securities lending revenue is up pretty nicely year-over-year, can you maybe just remind us why relative to maybe some of your competitors you tend not to have as much seasonality in Q2, how that business differs a little bit?

I'll make a comment and then Tim or Jim if you want to jump in. We are the largest lender of treasury securities in the world and treasuries are driven by the spread. So if they are in tight demand as they were in the first quarter the spreads were, where we could earn on lending those securities were very wide. It more normalized in the second quarter. And the second quarter tends to be seasonal around equities and the lending of equities. And I would say on a relative basis some of our competitors as a percentage have more equities than they do treasuries.

Okay that's helpful. Thank you.

Melissa we have time for one more question.

Okay. Our next question comes from Gerard Cassidy with RBC Capital Markets. Please go ahead. Gerard Cassidy – RBC Capital Markets: Thank you. Hey, Bob, how are you?

Hey, Gerard, good, thanks. Gerard Cassidy – RBC Capital Markets: Got a question, maybe this could be directed toward, Todd, possibly. But if we move into an environment of higher inflation that was talked about this week by the Fed, how do you guys see that impacting your net interest margin? But also maybe just your business in general sense last 20 or so years has been a disinflationary environment and we may now be heading back into an inflationary environment that we last saw in the 1980s?

Why don't I take the net interest side of that? We actually as we model out our various scenarios for interest rate and interest rate risks, we are pretty well hedged out a year or so. So we don't see too much into sensitivity, but if interest rates were to stay down here at these very low levels it compresses very much what we can do on liabilities. In other words, we can’t earn any more on liabilities when you got a 1 or 2% whole rate, especially on free liabilities, on free deposits. So we would welcome frankly rising interest rates over the next year or two. Gerard Cassidy – RBC Capital Markets: Thanks.

Thanks, Gerard.

Well, thank you, everyone. I appreciate you being on the call this long. We ran a little longer than usual, lots of good questions, I appreciate it. We'll work hard on continuing to build the company for you. Thank you, and have a good day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!