Financial Astrology of Bank of New York Company, Inc. (The)

FINANCIAL ASTROLOGY

First Trade Date for Bank of New York Company, Inc. (The)

Company Name	First Trade Date (yyyy-mm-dd)
Bank of New York Company, Inc. (The)	1969-12-04

Company Name	Symbol
Bank of New York Company, Inc. (The)	BK
History and Business of Company (this information may include date of incorporation)
The Bank of New York Company, Inc. (NYSE: BK) is a global leader in securities servicing for investors, financial intermediaries and issuers. The Company plays an integral role in the infrastructure of the capital markets, servicing securities in more than 100 markets worldwide. The Company provides services based on leading technology for global corporations, financial institutions, asset managers, governments, non-profit organizations, and individuals. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has a distinguished history of serving clients around the world through its five primary businesses: Securities Servicing and Global Payment Services, Private Client Services and Asset Management, Corporate Banking, Global Market Services, and Retail Banking. The Company has executed a consistent strategy over the past decade by focusing on highly scalable, fee-based securities servicing and fiduciary businesses, with top 3 market share in most of its major product lines. The Company distinguishes itself competitively by offering the broadest array of products and services around the investment lifecycle. These include: advisory and asset management services to support the investment decision; extensive trade execution, clearance and settlement capabilities; custody, securities lending, accounting and administrative services for investment portfolios; and sophisticated risk and performance measurement tools for analyzing portfolios. The Company also provides services for issuers of both equity and debt securities. By providing integrated solutions for clients' needs, the Company strives to be the preferred partner in helping its clients succeed in the world's rapidly evolving financial markets. The Company consistently invests in technology to improve the breadth and quality of its product offerings, and to increase economies of scale. The Company believes the extent to which it is able to invest in technology is a key long-term competitive advantage. The Company also actively pursues strategic acquisitions to expand product offerings and increase market share in its scale businesses. The Company has made over 80 acquisitions since 1995, almost exclusively in its securities servicing and fiduciary businesses. The acquisition of Pershing in 2003 for $2 billion was the largest of these acquisitions. As part of the transformation to a leading securities servicing provider, the Company has also de-emphasized or exited its slower growth traditional banking businesses over the past decade. The Company's more significant actions include selling its credit card business in 1997 and its factoring business in 1999, and most recently, significantly reducing non-financial corporate credit exposures by 44% from December 31, 2000 to December 31, 2003. Capital generated by these actions has been reallocated to the Company's higher growth businesses. The Company's business model is well positioned to benefit from a number of long-term secular trends. These include the growth of worldwide financial assets, globalization of investment activity, structural market changes, and increased outsourcing. These trends benefit the Company by driving higher levels of financial asset trading volume and other transactional activity, as well as higher asset price levels and growth in client assets, all factors by which the Company prices its services. In addition, international markets offer excellent growth opportunities. In 2003, the market environment was mixed, with the equities markets weaker than expected but with the fixed income markets remaining strong. After reaching a low point in the first quarter of 2003, equity price levels and trading volumes began to rebound in the second quarter. However while equity prices continued to grow throughout the year, as evidenced by a 26% increase in the S&P 500 for 2003, trading levels declined slightly, and resulting full year combined share volumes for NYSE and NASDAQ were down 2.5%. Fixed income debt issuance in the private and public sectors, as well as trading volumes, were strong throughout 2003. Given this environment, the Company's equity-linked businesses did not meet expectations, while the fixed-income linked businesses met or exceeded expectations. For the investor services businesses, which service both fixed income and equity assets, the impact of the environment was relatively neutral. Broker-dealer services, which primarily services government securities, benefited from strong trading levels. Execution and clearing services was negatively impacted by the equity trading environment. In issuer services, corporate trust benefited from strong debt issuance, while depositary receipts continued to be negatively impacted by low levels of both foreign equity issuance and cross-border merger and acquisition activity. The Company's asset management business was positively impacted by higher equity prices. The Company's business model was also unfavorably impacted by the low interest rate environment in 2003, which contributed to compression in the net yield on interest earning assets. The Company's business lines generate a significant level of low or no cost deposits, which are invested at lower spreads when rates are low. In addition, the Company has been reducing its corporate loans as part of its strategy to improve its earning risk profile, which further reduces net interest income. The Company continued to take action to offset these factors, by growing its portfolio of very high quality investment securities and by aggressively repricing its funded debt. The difficult equity market and low rate environment have made it challenging for the Company to achieve positive operating leverage (a rate of revenue growth in excess of the rate of expense growth), an integral component of its business model. Other factors adversely impacting operating leverage include increased expense for heightened business continuity requirements following the World Trade Center disaster ("WTC disaster"), rising insurance and medical costs, a lower level of credits from the Company's over-funded pension plan and the implementation of stock option expensing. With the improving environment over the course of 2003, absorption of the aforementioned factors into the expense base and continued focus on expense control, the Company was able to achieve positive operating leverage on a sequential quarter basis for each of the last two quarters of 2003. For 2004, the Company based its budget planning process on expectations for continued gradual improvement in the equity market environment, with asset price levels and trading volumes both growing, albeit at rates below the average expected growth rates for a full business cycle. The Company also expects continued strength in fixed income markets, driven by U.S. government, asset-backed, and municipal financing needs.

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