BNY Mellon Reports First Quarter Earnings of $619 Million or $0.52 Per Share

18 Apr, 2012, 06:30 ET from The Bank of New York Mellon Corporation

NEW YORK, April 18, 2012 /PRNewswire/ -- 

  • RECORD LEVELS OF:
    • ASSETS UNDER MANAGEMENT OF $1.3 TRILLION, +6% YEAR-OVER-YEAR
    • ASSETS UNDER CUSTODY/ADMINISTRATION OF $26.6 TRILLION, +4% YEAR-OVER-YEAR
  • NET INTEREST REVENUE +10% YEAR-OVER-YEAR
  • RETURN ON TANGIBLE COMMON EQUITY 21%
  • REPURCHASED 17.3 MILLION SHARES FOR $371 MILLION IN FIRST QUARTER 2012
  • ESTIMATED BASEL III TIER 1 COMMON EQUITY RATIO 7.6%, +150 BASIS POINTS YEAR-OVER-YEAR

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported first quarter net income applicable to common shareholders of $619 million, or $0.52 per common share, compared with $625 million, or $0.50 per common share, in the first quarter of 2011 and $505 million, or $0.42 per common share, in the fourth quarter of 2011.

"We enjoyed solid sequential growth in investment management and services fees, as we benefited from new business wins and improved equity values.  We are seeing the early results of our operational excellence initiatives as we generated significant positive operating leverage relative to the fourth quarter," said Gerald L. Hassell, chairman, president and chief executive officer of BNY Mellon.

"We are pleased with our performance on the recent regulatory stress test. The results reflect the strength of our business model, the excellent quality of our balance sheet and our continuing ability to return capital to our shareholders while maintaining a very strong capital position," added Mr. Hassell. 

Note:  See "Supplemental information" on pages 9 through 12 for the calculation of the Non-GAAP measures of the return on tangible common equity and the estimated Basel III Tier 1 common equity ratio.

First Quarter Results - Unless otherwise noted, all comments begin with the results of the first quarter of 2012 and are compared to the first quarter of 2011.  Sequential growth rates are unannualized.  Please refer to the Quarterly Earnings Review for a detailed review of our businesses.  Unless otherwise noted, the results for 2011 include the impact of Shareowner Services.

Total revenue 

Reconciliation of total revenue                                                        

1Q12 vs.

(dollars in millions)                                                                     

1Q12

4Q11

1Q11

1Q11

4Q11

Fee and other revenue

$ 2,838

$ 2,765

$ 2,838

-%

3%

Income (loss) of consolidated investment management funds

43

(5)

110

Net interest revenue

765

780

698

10%

(2)%

    Total revenue – GAAP

$ 3,646

$ 3,540

$ 3,646

-%

3%

Less:  Net income (loss) attributable to noncontrolling interests

               related to consolidated investment management funds

11

(28)

44

          Fee and other revenue related to Shareowner Services (a)

-

142

62

    Total revenue excluding fee and other revenue related

        to Shareowner Services – Non-GAAP

$ 3,635

$ 3,426

$ 3,540

3%

6%

(a)   The Shareowner Services business was sold on Dec. 31, 2011.  Results in the fourth quarter of 2011 include a $98 million pre-tax gain on the sale. 

  • Assets under custody and administration amounted to a record $26.6 trillion at March 31, 2012, an increase of 4% compared with the prior year and 3% sequentially.  The increases were driven by net new business and higher market values.  Assets under management, excluding securities lending assets, amounted to a record $1.3 trillion at March 31, 2012.  This represents an increase of 6% compared with the prior year and 4% sequentially.  The year-over-year increase primarily reflects net new business and higher market values.  On a sequential basis, the increase resulted from higher market values.  Long-term inflows totaled $7 billion and short-term outflows totaled $9 billion.  Long-term inflows benefited from fixed income and active equity assets.
  • Investment services fees totaled $1.6 billion, a decrease of 4% year-over-year and an increase of 3% sequentially.  The year-over-year decrease was primarily driven by the impact of the sale of the Shareowner Services business in the fourth quarter of 2011, partially offset by higher Asset Servicing and Clearing services fees.  Sequentially, the increase resulted from improved market values, higher volumes and net new business, partially offset by the impact of the sale of the Shareowner Services business.
  • Investment management and performance fees were $745 million, a decrease of 2% year-over-year and an increase of 2% sequentially.  The year-over-year decrease was driven by higher money market fee waivers, partially offset by net new business.  Sequentially, the increase primarily resulted from higher market values, lower money market fee waivers and net new business, partially offset by seasonally lower performance fees.
  • Foreign exchange and other trading revenue totaled $191 million compared with $198 million in the first quarter of 2011 and $228 million in the fourth quarter of 2011.  In the first quarter of 2012, foreign exchange revenue totaled $136 million, a decrease of 21% year-over-year and 26% sequentially.  The year-over-year decrease reflects lower volumes and volatility, while sequentially, volumes were unchanged and volatility decreased 20%.  Other trading revenue was $55 million in the first quarter of 2012 compared with $25 million in the first quarter of 2011 and $45 million in the fourth quarter of 2011.  Both increases were primarily driven by higher fixed income trading.
  • Investment and other income totaled $139 million compared with $81 million in the first quarter of 2011 and $146 million in the fourth quarter of 2011.  The year-over-year increase primarily resulted from higher leasing and seed capital gains. Sequentially, the decline primarily resulted from the $98 million pre-tax gain on the sale of the Shareowner Services business recorded in the fourth quarter of 2011, partially offset by higher leasing and seed capital gains in the first quarter of 2012. 
  • Net interest revenue and the net interest margin (FTE) were $765 million and 1.32% compared with $698 million and 1.49% in the first quarter of 2011 and $780 million and 1.27% in the fourth quarter of 2011.  The year-over-year increase in net interest revenue of 10% was primarily driven by higher average client deposits, increased investment in high quality investment securities and higher loan levels, partially offset by narrower spreads and lower accretion.  The sequential decrease in net interest revenue was primarily driven by lower average client deposits and lower accretion, partially offset by increased investments in high quality investment securities.  Average noninterest-bearing client deposits increased $28 billion, or 73%, compared with the first quarter of 2011 and decreased $10 billion, or 13%, compared with the fourth quarter of 2011.  The year-over-year decrease in the net interest margin (FTE) was primarily driven by increased client deposits nearly half of which were invested in liquid, lower-yielding assets.  The sequential increase in the net interest margin (FTE) reflects increased investments in high quality investment securities and a decrease in lower yielding interest-bearing deposits with banks.

The provision for credit losses was $5 million in the first quarter of 2012 compared with $23 million in the fourth quarter of 2011 and no provision in the first quarter of 2011. 

Total noninterest expense

Reconciliation of noninterest expense                                                                                                                       

   1Q12 vs.

(dollars  in millions)                                                                           

1Q12

4Q11

1Q11

1Q11

4Q11

Noninterest expense – GAAP                                                         

$ 2,756

$ 2,828

$ 2,697

2%

(3)%

Less:  Amortization of intangible assets                                                  

96

106

108

           Restructuring charges                                                                    

(9)

107

(6)

           M&I expenses                                                                              

18

32

17

           Noninterest expense related to Shareowner Services (a)                 

-

46

46

    Total noninterest expense excluding amortization of   

        intangible assets, restructuring charges, M&I expenses,   

        and direct expense related to Shareowner  

        Services – Non-GAAP                                                           

$ 2,651

$ 2,537

$ 2,532

5%

4%

(a) Reflects direct expenses related to the Shareowner Services business sold on Dec. 31, 2011.

  • Total noninterest expense excluding amortization of intangible assets, restructuring charges, merger and integration ("M&I") expenses and direct expense related to Shareowner Services – Non-GAAP increased 5% compared with the prior year period and 4% sequentially.  Both increases primarily reflect higher litigation and legal expenses, as well as higher incentive expense due to the vesting of long-term stock awards for retirement eligible employees and higher pension expense.  Sequentially, we are beginning to realize the results of our operational excellence initiatives as business development, professional and other purchased services, compensation, net occupancy and software and equipment expenses decreased.

The effective tax rate was 28.7% in the first quarter of 2012, compared with 29.3% in the first quarter of 2011 and 30.6% in the fourth quarter of 2011. 

The unrealized pre-tax gain on our total investment securities portfolio was $1.2 billion at March 31, 2012 compared with $793 million at Dec. 31, 2011.  The increase in the valuation of the investment securities portfolio was driven by higher asset-backed securities prices.

Capital ratios                                                                                                                            

March 31,

Dec. 31,

March 31,

2012 (a)

2011

2011

Estimated Basel III Tier 1 common equity ratio – Non-GAAP (b)(c)                                                    

7.6 %

7.1 %

6.1 %

Basel I Tier 1 common equity to risk-weighted assets ratio – Non-GAAP (c)                                     

13.9

13.4

12.4

Basel I Tier 1 capital ratio                                                                                                                     

15.6

15.0

14.0

Basel I Total (Tier 1 plus Tier 2) capital ratio                                                                                       

17.5

17.0

16.8

Basel I leverage capital ratio                                                                                                                   

5.6

5.2

6.1

BNY Mellon shareholders' equity to total assets ratio (c)                                                                    

11.3

10.3

12.5

Tangible common shareholders' equity to tangible assets of operations ratio – Non-GAAP (c)            

6.5

6.4

5.9

(a)   Preliminary. 

(b)   Our estimated Basel III Tier 1 common equity ratio – Non-GAAP reflects our current interpretation of the Basel III rules.  Our estimated Basel III Tier 1         common equity ratio could change in the future as the U.S. regulatory agencies implement Basel III or if our businesses change. 

(c)   See "Supplemental information" beginning on page 9 for a calculation of these ratios. 

We generated $680 million of gross Basel I Tier 1 common equity in the first quarter of 2012.

Our estimated Basel III Tier 1 common equity ratio – Non-GAAP was 7.6% at March 31, 2012 compared with 7.1% at Dec. 31, 2011 and 6.1% at March 31, 2011.  The sequential improvement in the ratio was driven by an increase in the value of our investment securities portfolio, earnings retention and lower risk-weighted assets, partially offset by share repurchases.

Quarterly dividend – On April 18, 2012, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.13 per common share.  This cash dividend is payable on May 8, 2012 to shareholders of record as of the close of business on April 30, 2012.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets.  BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team.  It has $26.6 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation.  Additional information is available on www.bnymellon.com or follow us on Twitter @BNYMellon.

Supplemental Financial Information

The Quarterly Earnings Review and Supplemental Financial Trends for The Bank of New York Mellon Corporation have been updated through March 31, 2012 and are available at www.bnymellon.com (Investor Relations - Financial Reports).

Conference Call Data

Gerald L. Hassell, chairman, president and chief executive officer and Thomas P. Gibbons, vice chairman and chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on April 18, 2012.  This conference call and audio webcast will include forward-looking statements and may include other material information. 

Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (international), and using the passcode: Earnings, or by logging on to www.bnymellon.com.  The Earnings Release, together with the Quarterly Earnings Review and Supplemental Financial Trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on April 18, 2012.  Replays of the conference call and audio webcast will be available beginning April 18, 2012 at approximately 2 p.m. EDT through Wednesday, May 2, 2012 by dialing (888) 554-3823 (U.S.) or (203) 369-3738 (international).  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

THE BANK OF NEW YORK MELLON CORPORATION 

Financial Highlights 

  Quarter ended

March 31,

Dec. 31,

March 31,

(dollars in millions, except per common share amounts and unless otherwise noted)             

2012

2011

2011

Return on common equity (annualized) (a)

7.4 %

5.9 %

7.7 %

    Non-GAAP adjusted (a)

8.2

7.7

8.6

Return on tangible common equity (annualized) – Non-GAAP (a)                                               

21.0 %

17.7 %

24.3 %

    Non-GAAP adjusted (a)

21.2

20.4

24.4

Fee revenue as a percentage of total revenue excluding net securities gains (losses)

78 %

78 %

78 %

Annualized fee revenue per employee (based on average headcount) (in thousands)

$ 233

$ 223

$ 238

Percentage of non-U.S. revenue (b)

37 %

34 %

37 %

Pre-tax operating margin (a)

24 %

19 %

26 %

    Non-GAAP adjusted (a)

27 %

27 %

28 %

Net interest margin (FTE)

1.32 %

1.27 %

1.49 %

Selected average balances

Interest-earning assets                                                                                                                   

$236,331

$247,724

$190,179

Assets of operations                                                                                                                       

$289,900

$304,235

$243,356

Total assets                                                                                                                                      

$301,344

$316,074

$257,698

Interest-bearing deposits                                                                                                               

$125,438

$130,343

$116,515

Noninterest-bearing deposits                                                                                                        

$  66,613

$  76,309

$  38,616

Total The Bank of New York Mellon Corporation shareholders' equity                             

$  33,718

$  33,761

$  32,827

Average common shares and equivalents outstanding (in thousands):

    Basic

1,193,931

1,204,994

1,234,076

    Diluted

1,195,558

1,205,586

1,238,284

Period-end data

Market value of assets under management (in billions)                                                        

$    1,308

$    1,260

$    1,229

Market value of assets under custody and administration (in trillions)                              

$      26.6

$      25.8

$      25.5

    Market value of cross-border assets (in trillions)                                                                 

$      10.4

$        9.7

$        9.9

Market value of securities on loan (in billions) (c)                                                                   

$       265

$       269

$       278

Full-time employees

47,800

48,700

48,400

Book value per common share – GAAP (a)                                                                              

$    28.51

$    27.62

$    26.78

Tangible book value per common share – Non-GAAP (a)                                                     

$    11.17

$    10.57

$      9.67

Cash dividends per common share

$      0.13

$      0.13

$      0.09

Common dividend payout ratio

25 %

31 %

18 %

Closing common stock price per common share                                                                      

$    24.13

$    19.91

$    29.87

Market capitalization

$  28,780

$  24,085

$  37,090

(a)   See "Supplemental information" beginning on page 9 for a calculation of these ratios.  

(b)   Includes fee revenue, net interest revenue and income (loss) of consolidated investment management funds, net of net income (loss) attributable to         noncontrolling interests.  

(c)   Represents the securities on loan managed by the Investment Services business. 

 

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement

Quarter ended

March 31,

Dec. 31,

March 31,

(dollars in millions)

2012

2011

2011

Fee and other revenue

Investment services fees:

Asset servicing

$ 943

$  885

$ 917

Issuer services

251

287

351

Clearing services

303

278

292

Treasury services

136

134

134

Total investment services fees

1,633

1,584

1,694

Investment management and performance fees

745

730

764

Foreign exchange and other trading revenue

191

228

198

Distribution and servicing

46

42

53

Financing-related fees

44

38

43

Investment and other income

139

146

81

Total fee revenue

2,798

2,768

2,833

Net securities gains (losses)

40

(3)

5

Total fee and other revenue

2,838

2,765

2,838

Operations of consolidated investment management funds

Investment income

153

108

222

Interest of investment management fund note holders

110

113

112

Income (loss) from consolidated investment management funds

43

(5)

110

Net interest revenue

Interest revenue

912

925

848

Interest expense

147

145

150

Net interest revenue

765

780

698

Provision for credit losses

5

23

-

Net interest revenue after provision for credit losses

760

757

698

Noninterest expense

Staff

1,453

1,382

1,424

Professional, legal and other purchased services

299

322

283

Software and equipment

205

213

206

Net occupancy

147

159

153

Distribution and servicing

101

96

111

Sub-custodian

70

62

68

Business development

56

75

56

Other

320

274

277

Subtotal

2,651

2,583

2,578

Amortization of intangible assets

96

106

108

Restructuring charges

(9)

107

(6)

Merger and integration expenses

18

32

17

Total noninterest expense

2,756

2,828

2,697

Income

Income before income taxes

885

689

949

Provision for income taxes

254

211

279

Net income

631

478

670

Net (income) loss attributable to noncontrolling interests (includes $(11), $28 and

   $(44) related to consolidated investment management funds)

(12)

27

(45)

Net income applicable to common shareholders of The Bank of New York           Mellon Corporation

$ 619

$ 505

$ 625

 

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement - continued

Reconciliation of net income to the net income applicable to the common

Quarter ended

    shareholders of The Bank of New York Mellon Corporation

March 31,

Dec. 31,

March 31,

(dollars in millions)

2012

2011

2011

Net income

$ 631

$ 478

$ 670

Net (income) loss attributable to noncontrolling interests

(12)

27

(45)

Net income applicable to common shareholders of The Bank of New York Mellon Corporation

619

505

625

Less:  Earnings allocated to participating securities

8

6

6

           Change in the excess of redeemable value over the fair value of noncontrolling interests

(6)

(1)

6

Net income applicable to the common shareholders of The Bank of New York Mellon Corporation after required adjustments for the calculation of basic and diluted earnings per share

$ 617

$ 500

$ 613

Earnings per common share applicable to the common shareholders

Quarter ended

    of The Bank of New York Mellon Corporation (a)

March 31,

Dec. 31,

March 31,

(in dollars)

2012

2011

2011

Basic

$ 0.52

$ 0.42

$ 0.50

Diluted

$ 0.52

$ 0.42

$ 0.50

(a)   Basic and diluted earnings per share under the two-class method are determined on the net income reported on the income statement less earnings        allocated to participating securities and the change in the excess of redeemable value over the fair value of noncontrolling interests.

Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.

THE BANK OF NEW YORK MELLON CORPORATION

Consolidated Balance Sheet

March 31,

Dec. 31,

(dollars in millions, except per share amounts)

2012

2011

Assets

Cash and due from:

Banks

$    4,333

$    4,175

Interest-bearing deposits with the Federal Reserve and other central banks

62,030

90,243

Interest-bearing deposits with banks

34,854

36,321

Federal funds sold and securities purchased under resale agreements

5,437

4,510

Securities:

Held-to-maturity (fair value of $4,849 and $3,540)

4,819

3,521

Available-for-sale

83,374

78,467

Total securities

88,193

81,988

Trading assets

6,250

7,861

Loans

43,028

43,979

Allowance for loan losses

(386)

(394)

Net loans

42,642

43,585

Premises and equipment

1,715

1,681

Accrued interest receivable

599

660

Goodwill

18,002

17,904

Intangible assets

5,072

5,152

Other assets

19,433

19,839

Subtotal assets of operations

288,560

313,919

Assets of consolidated investment management funds, at fair value:

Trading assets

11,079

10,751

Other assets

530

596

Subtotal assets of consolidated investment management funds, at fair value

11,609

11,347

Total assets

$ 300,169

$ 325,266

Liabilities

Deposits:

Noninterest-bearing (principally U.S. offices)

$65,027

$ 95,335

Interest-bearing deposits in U.S. offices

38,608

41,231

Interest-bearing deposits in Non-U.S. offices

88,827

82,528

Total deposits

192,462

219,094

Federal funds purchased and securities sold under repurchase agreements

8,285

6,267

Trading liabilities

6,636

8,071

Payables to customers and broker-dealers

12,959

12,671

Commercial paper

1,070

10

Other borrowed funds

2,062

2,174

Accrued taxes and other expenses

5,819

6,235

Other liabilities (includes allowance for lending-related commitments of $108 and $103)

5,383

6,525

Long-term debt

20,336

19,933

Subtotal liabilities of operations

255,012

280,980

Liabilities of consolidated investment management funds, at fair value:

Trading liabilities

10,290

10,053

Other liabilities

38

32

Subtotal liabilities of consolidated investment management funds, at fair value

10,328

10,085

Total liabilities

265,340

291,065

Temporary equity

Redeemable noncontrolling interests

120

114

Permanent equity

Common stock – par value $0.01 per common share; authorized 3,500,000,000 common shares;

issued 1,250,564,475 and 1,249,061,305 common shares

12

12

Additional paid-in capital

23,304

23,185

Retained earnings

13,277

12,812

Accumulated other comprehensive loss, net of tax

(1,229)

(1,627)

Less:  Treasury stock of 57,848,021 and 39,386,698 common shares, at cost

(1,364)

(965)

Total The Bank of New York Mellon Corporation shareholders' equity

34,000

33,417

Non-redeemable noncontrolling interests of consolidated investment management funds

709

670

Total permanent equity

34,709

34,087

Total liabilities, temporary equity and permanent equity

$ 300,169

$ 325,266

Supplemental information – Explanation of Non-GAAP financial measures

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based upon tangible common shareholders' equity.  BNY Mellon believes that the ratio of Tier 1 common equity to risk-weighted assets and the ratio of tangible common shareholders' equity to tangible assets of operations are measures of capital strength that provide additional useful information to investors, supplementing the Tier 1 and Total capital ratios which are utilized by regulatory authorities.  The ratio of Tier 1 common equity to risk-weighted assets excludes trust preferred securities, which will be phased out of Tier 1 regulatory capital beginning in 2013.  Unlike the Tier 1 and Total capital ratios, the tangible common shareholders' equity ratio fully incorporates those changes in investment securities valuations which are reflected in total shareholders' equity.  In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes.  Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of BNY Mellon's performance in reference to those assets which are productive in generating income.  BNY Mellon has presented its estimated Basel III Tier 1 common equity ratio on a basis that is representative of how it currently understands the Basel III rules.  Management views the Basel III Tier 1 common equity ratio as a key measure in monitoring BNY Mellon's capital position.  Additionally, the presentation of the Basel III Tier 1 common equity ratio allows investors to compare BNY Mellon's Basel III Tier 1 common equity ratio with estimates presented by other companies.

BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding.  BNY Mellon has presented revenue measures which exclude the effect of net securities gains (losses) and noncontrolling interests related to consolidated investment management funds; and expense measures which exclude restructuring charges, M&I expenses and amortization of intangible assets.  Return on equity measures and operating margin measures, which exclude some or all of these items, are also presented.  BNY Mellon believes that these measures are useful to investors because they permit a focus on period to period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon's control.  The excluded items in general relate to certain ongoing charges as a result of prior transactions, or where we have incurred charges unrelated to operational initiatives.  M&I expenses primarily relate to the acquisitions of Global Investment Servicing on July 1, 2010 and BHF Asset Servicing GmbH on Aug. 2, 2010.  M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration.  BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased.  Future periods will not reflect such M&I expenses, and thus may be more easily compared with our current results if M&I expenses are excluded.  With regards to the exclusion of net securities gains (losses), BNY Mellon's primary businesses are Investment Management and Investment Services.  The management of these businesses is evaluated on the basis of the ability of these businesses to generate fee and net interest revenue and to control expenses, and not on the results of BNY Mellon's investment securities portfolio.  The investment securities portfolio is managed within the Other segment.  The primary objective of the investment securities portfolio is to generate net interest revenue from the liquidity generated by BNY Mellon's processing businesses.  BNY Mellon does not generally originate or trade the securities in the investment securities portfolio.  Restructuring charges relate to our operational excellence initiatives and migrating positions to global growth centers.  Excluding these charges permits investors to view expense on a basis consistent with how management views the business. 

In this Earnings Release, the net interest margin is presented on an FTE basis.  We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice.  The adjustment to an FTE basis has no impact on net income. 

Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and business-level basis.

Return on common equity and tangible common equity

(dollars in millions)

1Q12

4Q11

1Q11

Net income applicable to common shareholders of The Bank of New York Mellon

  Corporation – GAAP

$ 619

$ 505

$ 625

Add:  Amortization of intangible assets, net of tax

61

66

68

Net income applicable to common shareholders of The Bank of New York Mellon

  Corporation excluding amortization of intangible assets – Non-GAAP                     

680

571

693

Less:  Net securities gains (losses)

N/A

N/A

3

Add:  Restructuring charges

(6)

67

(5)

M&I expenses

12

21

11

Net income applicable to common shareholders of The Bank of New York Mellon

  Corporation excluding amortization of intangible assets, net securities gains

  (losses), restructuring charges and M&I expenses – Non-GAAP

$ 686

$ 659

$ 696

Average common shareholders' equity

$ 33,718

$ 33,761

$ 32,827

Less:  Average goodwill

17,962

18,044

18,121

Average intangible assets

5,121

5,333

5,664

Add:  Deferred tax liability – tax deductible goodwill

972

967

862

Deferred tax liability – non-tax deductible intangible assets

1,428

1,459

1,658

Average tangible common shareholders' equity – Non-GAAP

$ 13,035

$ 12,810

$ 11,562

Return on common equity – GAAP (a)

7.4%

5.9%

7.7%

Return on common equity excluding amortization of intangible assets, net securities gains (losses), restructuring charges and M&I expenses – Non-GAAP (a)

8.2%

7.7%

8.6%

Return on tangible common equity – Non-GAAP (a)

21.0%

17.7%

24.3%

Return on tangible common equity excluding net securities gains (losses), restructuring charges and M&I expenses – Non-GAAP (a)

21.2%

20.4%

24.4%

(a)   Annualized.

N/A – Not applicable.

 

Reconciliation of income before income taxes – pre-tax operating margin

(dollars in millions)

1Q12

4Q11

1Q11

Income before income taxes – GAAP

$ 885

$ 689

$ 949

Less:  Net income (loss) attributable to noncontrolling interests of consolidated investment management funds

11

(28)

44

Add:  Amortization of intangible assets

96

106

108

Restructuring charges

(9)

107

(6)

M&I expenses

18

32

17

Income before income taxes excluding net income (loss) attributable to

  noncontrolling interests of consolidated investment management funds, amortization

  of intangible assets, restructuring charges and M&I expenses – Non-GAAP

$ 979

$ 962

$ 1,024

Fee and other revenue – GAAP

$ 2,838

$ 2,765

$ 2,838

Income of consolidated investment management funds – GAAP

43

(5)

110

Net interest revenue – GAAP

765

780

698

Total revenue – GAAP

3,646

3,540

3,646

Less:  Net income (loss) attributable to noncontrolling interests of consolidated investment management funds

11

(28)

44

Total revenue excluding net income (loss) attributable to noncontrolling interests of

  consolidated investment management funds – Non-GAAP

$ 3,635

$ 3,568

$ 3,602

Pre-tax operating margin (a)

24%

19%

26%

Pre-tax operating margin excluding net income (loss) attributable to noncontrolling

  interests of consolidated investment management funds, amortization of intangible

  assets, restructuring charges and M&I expenses – Non-GAAP (a)

27%

27%

28%

(a)   Income before taxes divided by total revenue.

 

Equity to assets and book value per common share

March 31,

Dec. 31,

March 31,

(dollars in millions, unless otherwise noted)

2012

2011

2011

BNY Mellon shareholders' equity at period end – GAAP

$  34,000

$  33,417

$  33,258

Less:  Goodwill

18,002

17,904

18,156

Intangible assets

5,072

5,152

5,617

Add:  Deferred tax liability – tax deductible goodwill

972

967

862

Deferred tax liability – non-tax deductible intangible assets

1,428

1,459

1,658

Tangible BNY Mellon shareholders' equity at period end – Non-GAAP

$  13,326

$  12,787

$  12,005

Total assets at period end – GAAP

$300,169

$325,266

$266,444

Less:  Assets of consolidated investment management funds

11,609

11,347

14,699

Subtotal assets of operations – Non-GAAP

288,560

313,919

251,745

Less:  Goodwill

18,002

17,904

18,156

Intangible assets

5,072

5,152

5,617

Cash on deposit with the Federal Reserve and other central banks (a)

61,992

90,230

24,613

Tangible total assets of operations at period end – Non-GAAP

$203,494

$200,633

$203,359

BNY Mellon shareholders' equity to total assets – GAAP

11.3%

10.3%

12.5%

Tangible BNY Mellon shareholders' equity to tangible assets of

  operations – Non-GAAP

6.5%

6.4%

5.9%

Period end common shares outstanding (in thousands)

1,192,716

1,209,675

1,241,724

Book value per common share

$    28.51

$    27.62

$    26.78

Tangible book value per common share – Non-GAAP

$    11.17

$    10.57

$      9.67

(a)   Assigned a zero percent risk-weighting by the regulators.

 

Basel I Tier 1 common equity generation

(dollars in millions)

1Q12

4Q11

1Q11

Net income applicable to common shareholders of The Bank of New York

  Mellon Corporation – GAAP

$ 619

$ 505

$ 625

Add:  Amortization of intangible assets, net of tax

61

66

68

Gross Basel I Tier 1 common equity generated

680

571

693

Less capital deployed:

Dividends

158

159

111

Common stock repurchases

371

69

32

Goodwill and intangible assets related to acquisitions/dispositions

-

(241)

12

Total capital deployed

529

(13)

155

Add:  Other

146

(114)

257

Net Basel I Tier 1 common equity generated

$ 297

$ 470

$ 795

 

Calculation of Basel I Tier 1 common equity to risk-weighted assets ratio

March 31,

Dec. 31,

March 31,

(dollars in millions)

2012 (a)

2011

2011

Total Tier 1 capital – Basel I

$   15,696

$   15,389

$   14,402

Less:  Trust preferred securities

1,669

1,659

1,686

Total Tier 1 common equity

$   14,027

$   13,730

$   12,716

Total risk-weighted assets – Basel I

$ 100,785

$ 102,255

$ 102,887

Basel I Tier 1 common equity to risk-weighted assets ratio

13.9%

13.4%

12.4%

(a)   Preliminary.

The following table presents the calculation of our estimated Basel III Tier 1 common equity ratio on a fully-phased in basis.

Estimated Basel III Tier 1 common equity ratio – Non-GAAP (a)

March 31,

Dec. 31,

March 31,

(dollars in millions)

2012 (b)

2011

2011

Total Tier 1 capital – Basel I

$   15,696

$   15,389

$   14,402

Less:  Trust preferred securities

1,669

1,659

1,686

Adjustments related to available-for-sale securities and pension liabilities

  included in accumulated other comprehensive income (c)

701

944

729

Adjustments related to equity method investments (c)

571

555

524

Net pension fund assets (c)

100

90

409

Other

(2)

(3)

-

Total estimated Basel III Tier 1 common equity

$12,657

$   12,144

$   11,054

Total risk-weighted assets – Basel I

$ 100,785

$ 102,255

$ 102,887

Add:  Adjustments (d)

65,889

67,813

77,199

Total estimated Basel III risk-weighted assets

$ 166,674

$ 170,068

$ 180,086

Estimated Basel III Tier 1 common equity ratio – Non-GAAP

7.6%

7.1%

6.1%

(a)   Our estimated Basel III Tier 1 common equity ratio – Non-GAAP reflects our current interpretation of the Basel III rules.  Our estimated Basel III Tier 1         common equity ratio could change in the near future as the U.S. regulatory agencies implement Basel III or if our businesses change.

(b)   Preliminary.

(c)   Basel III does not add back to capital the adjustment to other comprehensive income that Basel I and Basel II make for pension liabilities and         available-for-sale securities.  Also, under Basel III, pension assets recorded on the balance sheet and adjustments related to equity method        investments are a deduction from capital.

(d)  Primary differences between Basel I and Basel III include:  the determination of credit risk under Basel I uses predetermined risk weights and       asset classes, while under Basel III includes borrower credit ratings and internal risk models;  the treatment of securitizations that fall below investment

      grade receive a significantly higher risk-weighting under Basel III than Basel I; also, Basel III includes additional adjustments for operational risk,       market risk, counterparty credit risk and equity exposures.

 

Cautionary Statement

The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including statements made regarding our operational excellence initiatives and our ability to return capital to shareholders.  These statements, which may be expressed in a variety of ways, include the use of future or present tense language.  These statements and other forward-looking statements contained in other public disclosures of BNY Mellon which make reference to the cautionary factors described in this Earnings Release, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control).  Factors that could cause BNY Mellon's results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2011 and its other filings with the Securities and Exchange Commission.  All forward-looking statements in this Earnings Release speak only as of April 18, 2012 and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

SOURCE The Bank of New York Mellon Corporation



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