BNY Mellon Reports Third Quarter Earnings Of $720 Million Or $0.61 Per Common Share

NEW YORK, Oct. 17, 2012 /PRNewswire/ --

  • Including a $0.04 per common share benefit from a lower than expected effective tax rate

INVESTMENT MANAGEMENT FEES UP 7% YEAR-OVER-YEAR

RECORD LEVEL OF ASSETS UNDER MANAGEMENT OF $1.4 TRILLION, UP 13% YEAR-OVER-YEAR, UP 5% SEQUENTIALLY

NET LONG-TERM INFLOWS OF $58 BILLION OVER LAST 12 MONTHS, $9 BILLION IN 3Q12

RECORD LEVEL OF ASSETS UNDER CUSTODY/ADMINISTRATION OF $27.9 TRILLION, UP 8% YEAR-OVER-YEAR, UP 3% SEQUENTIALLY

NONINTEREST EXPENSE DECLINED 2% YEAR-OVER-YEAR

ESTIMATED BASEL III TIER 1 COMMON EQUITY RATIO 9.3% (a)

RETURN ON TANGIBLE COMMON EQUITY 22% (a)

REPURCHASED OVER 13 MILLION COMMON SHARES FOR $288 MILLION IN 3Q12

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported third quarter net income applicable to common shareholders of $720 million, or $0.61 per common share, compared with $651 million, or $0.53 per common share, in the third quarter of 2011 and $466 million, or $0.39 per common share, in the second quarter of 2012. 

"We are pleased to report solid earnings growth this quarter, led by the strength of Investment Management, which recorded its twelfth consecutive quarter of long-term inflows.  New business trends for Asset Servicing were also strong, as we recorded the best quarter in new AUC wins since 2008, a testament to the breadth and quality of our capabilities.  We remain focused on reducing expense growth through our operational excellence initiatives.  During the quarter we completed the client integration for our BHF Asset Servicing acquisition in Germany, an example of our progress in integrating systems and retiring legacy platforms," said Gerald L. Hassell, chairman, president and chief executive officer of BNY Mellon.

"We generated a 22 percent return on tangible equity, continued to return capital to shareholders and improved our capital position, with Basel III Tier I common equity ratio rising to above 9 percent at quarter end, all very positive signs of our business model's strength," added Mr. Hassell.     

________________

(a)   See "Supplemental information – Explanation of Non-GAAP financial measures" on pages 10 through 13 for the calculation of the Non-GAAP measures of the estimated Basel III Tier 1 common equity ratio and the return on tangible common equity. 

Third Quarter Results - 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 all periods in 2011 include the impact of Shareowner Services.

Total revenue












Reconciliation of total revenue




3Q12 vs.


(dollars in millions)                

3Q12    

2Q12

3Q11 

3Q11

2Q12

Fee and other revenue

$ 2,879

$ 2,826

$ 2,887

- %

2 %

Income from consolidated investment management funds   

47

57

32



Net interest revenue         

749

734

775



    Total revenue – GAAP    

3,675

3,617

3,694

(1)

2

Less:  Net income attributable to noncontrolling interests






             related to consolidated investment management funds   

25

29

13



           Fee and other revenue related to Shareowner Services (a)       

-

(3)

44



    Total revenue excluding fee and other revenue related






        to Shareowner Services – Non-GAAP    

$ 3,650

$ 3,591

$ 3,637

-%

2 %

(a)   The Shareowner Services business was sold on Dec. 31, 2011. 






  • Assets under custody and administration amounted to a record $27.9 trillion at Sept. 30, 2012, an increase of 8% compared with the prior year and 3% sequentially.  The increases were driven by higher market values and net new business.  Assets under management amounted to a record $1.4 trillion at Sept. 30, 2012, an increase of 13% compared with the prior year and 5% sequentially.  Both increases resulted from higher market values and net inflows.  Long-term inflows totaled $9 billion and short-term inflows totaled $9 billion for the third quarter of 2012.  Long-term inflows benefited from fixed income and active equities.
  • Investment services fees totaled $1.7 billion, a decrease of 6% year-over-year and an increase of 1% sequentially.  The year-over-year decrease was primarily driven by lower Depositary Receipts revenue, the impact of the sale of the Shareowner Services business in the fourth quarter of 2011 and lower Corporate Trust fees, partially offset by higher asset servicing and securities lending revenue.  Sequentially, the increase resulted from seasonally higher Depositary Receipts revenue, which was partially offset by lower Clearing Services revenue, a seasonal decrease in securities lending revenue and lower Corporate Trust fees.
  • Investment management and performance fees were $779 million, an increase of 7% year-over-year and a decrease of 2% sequentially.  Excluding performance fees, investment management fees increased 7% year-over-year and 3% sequentially.  Both increases were driven by higher market values and net new business. 
  • Foreign exchange and other trading revenue totaled $182 million compared with $200 million in the third quarter of 2011 and $180 million in the second quarter of 2012.  In the third quarter of 2012, foreign exchange revenue totaled $121 million, a decrease of 45% year-over-year and 23% sequentially.  Both decreases reflect lower volatility and volumes.  Other trading revenue was $61 million in the third quarter of 2012 compared with a loss of $21 million in the third quarter of 2011 and revenue of $23 million in the second quarter of 2012.  The increases compared with both prior periods reflect improved fixed income trading.
  • Investment and other income totaled $124 million compared with $83 million in the third quarter of 2011 and $48 million in the second quarter of 2012.  The year-over-year increase primarily resulted from higher seed capital gains.  Sequentially, the increase primarily resulted from seed capital gains and higher equity investment revenue.
  • Net interest revenue and the net interest margin (FTE) were $749 million and 1.20% compared with $775 million and 1.30% in the third quarter of 2011 and $734 million and 1.25% in the second quarter of 2012.  The year-over-year decrease in net interest revenue was primarily driven by lower accretion and the elimination of interest on European Central Bank deposits, partially offset by increased investment in high-quality investment securities.  The increase in net interest revenue compared with the second quarter of 2012 primarily reflects higher average interest-earning assets driven by higher deposit levels, partially offset by the elimination of interest on European Central Bank deposits. 

    The decreases in net interest margin (FTE) compared with both prior periods primarily reflect lower reinvestment yields, the elimination of interest on European Central Bank deposits, lower accretion and growth in customer deposits.

The provision for credit losses was a credit of $5 million in the third quarter of 2012 primarily resulting from loan sales and repayments.  The provision for credit losses was a credit of $22 million in the third quarter of 2011 and a credit of $19 million in the second quarter of 2012.


Total noninterest expense










Reconciliation of noninterest expense




3Q12 vs. 

(dollars  in millions)          

 3Q12

2Q12

     3Q11

3Q11

2Q12

Noninterest expense – GAAP   

$ 2,705

$ 3,047

$ 2,771

(2) %

(11) %

Less: Amortization of intangible assets

95

97

106



M&I, litigation and restructuring charges

26

378

92



Noninterest expense related to Shareowner Services (a)

-

-

37



Total noninterest expense excluding amortization of intangible
assets, M&I, litigation and restructuring charges and direct
 expense related to Shareowner Services – Non-GAAP 











$ 2,584

$ 2,572

$ 2,536

2%

-  %

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


  • Total noninterest expense increased 2% excluding amortization of intangible assets,M&I, litigation and restructuring charges and direct expenses related to Shareowner Services (Non-GAAP) compared with the prior year period and was flat sequentially.  The year-over-year increase primarily reflects the cost of generating certain tax credits in 3Q12 and the benefit of state investment tax credits recorded in 3Q11.

The effective tax rate was 23.1% in the third quarter of 2012, which primarily reflects the benefit from completing various tax audits.  Earnings per common share in the third quarter of 2012 benefited $0.04 as a result of the lower than expected effective tax rate.

The unrealized pre-tax gain on our total investment securities portfolio was $2.5 billion at Sept. 30, 2012 compared with $1.4 billion at June 30, 2012.  The increase in the valuation of the investment securities portfolio primarily reflects a decline in interest rates and improved credit spreads.





Capital ratios

Sept. 30,

June 30,

Sept. 30,


2012(a)

2012

2011

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

9.3%

8.7%

N/A

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

13.2

13.2

12.5%

Basel I Tier 1 capital ratio

15.3

14.7

14.0

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

16.8

16.4

16.1

Basel I leverage capital ratio

5.6

5.5

5.1

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

10.7

10.5

10.5

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

10.3

10.3

10.5

Tangible BNY Mellon common shareholders' equity to tangible




assets of operations ratio – Non-GAAP (c)

6.3

6.1

5.9

(a) Preliminary.

(b) The estimated Basel III Tier 1 common equity ratio at Sept. 30, 2012 and June 30, 2012 is based on the Notices of Proposed Rulemaking ("NPRs") and final market risk rule initially released on June 7, 2012 and published in the Federal Register on Aug. 30, 2012.  The estimated Basel III Tier 1 common equity ratio of 6.5% at Sept. 30, 2011 is based on prior Basel III guidance and the proposed market risk rule.

(c) See "Supplemental information – Explanation of Non-GAAP financial measures" beginning on page 10 for a calculation of these ratios.


We generated $780 million of gross Basel I Tier 1 common equity in the third quarter of 2012. 

Our estimated Basel III Tier 1 common equity ratio was 9.3% at Sept. 30, 2012 compared with 8.7% at June 30, 2012.  The increase was primarily due to earnings retention and an increase in the value of the investment portfolio, partially offset by higher risk-weighted assets. 

Dividends (common) – On Oct. 17, 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 Nov. 6, 2012 to shareholders of record as of the close of business on Oct. 29, 2012. 

Dividends (preferred) – On Oct. 17, 2012, The Bank of New York Mellon Corporation also declared dividends for the dividend period ending in December 2012 of $1,011.11 per share on the Series A Noncumulative Perpetual Preferred Stock, liquidation preference of $100,000 per share (the "Series A Preferred Stock") (equivalent to $10.11 per Normal Preferred Capital Security of Mellon Capital IV, referred to below, each representing 1/100th interest in a share of Series A Preferred Stock), and $1,314.44 per share on the Series C Noncumulative Perpetual Preferred Stock, liquidation preference of $100,000 per share (the "Series C Preferred Stock") (equivalent to $0.33 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock (the "Depositary Shares")), payable on Dec. 20, 2012 to holders of record as of the close of business on Dec. 5, 2012.  All of the outstanding shares of the Series A Preferred Stock are owned by Mellon Capital IV, which will pass through the December dividend on the Series A Preferred Stock to the holders of record, as of the close of business on Dec. 5, 2012, of its Normal Preferred Capital Securities.  All of the outstanding shares of the Series C Preferred Stock are held by the depositary of the Depositary Shares, which will pass through the applicable portion of the December dividend on the Series C Preferred Stock to the holders of record, as of the close of business on Dec. 5, 2012, of the Depositary Shares.

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 $27.9 trillion in assets under custody and administration and $1.4 trillion in assets under management, services $11.6 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 Sept. 30, 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 Oct. 17, 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 Oct. 17, 2012.  Replays of the conference call and audio webcast will be available beginning Oct. 17, 2012 at approximately 2 p.m. EDT through Oct. 31, 2012 by dialing (888) 566-0103 (U.S.) or (402) 998- 0958 (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


Year-to-date

(dollar amounts in millions, except per common        

Sept. 30,

June 30,

Sept. 30,


Sept. 30,

Sept. 30,

share amounts and unless otherwise noted)   

2012

2012

2011


2012

2011

Return on common equity (annualized) (a)    

8.3 %

5.5 %

7.6 %


7.1 %

8.0 %

    Non-GAAP adjusted (a)  

9.2 %

8.9 %

9.0 %


9.0 %

9.4 %








Return on tangible common equity (annualized)


    Non-GAAP (a)   

22.1 %

15.7 %

22.1 %


19.6 %

24.2 %

    Non-GAAP adjusted (a)  

22.5 %

22.4 %

23.8 %


22.6 %

25.6 %



Fee revenue as a percentage of total revenue


  excluding net securities gains (losses)   

78 %

78 %

78 %


78 %

78%



Annualized fee revenue per employee


  (based on average headcount) (in thousands)    

$ 235

$ 233

$ 233


$ 233

$ 240



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

37 %

37 %

39 %


37 %

38 %



Pre-tax operating margin (a)     

27 %

16 %

26 %


22 %

26 %

    Non-GAAP adjusted (a)   

29 %

29 %

31 %


29 %

30 %



Net interest margin (FTE)   

1.20 %

1.25 %

1.30 %


1.25 %

1.39 %



Selected average balances:


Interest-earning assets  

$255,228

$239,755

$240,253


$243,814

$213,636

Assets of operations   

$307,919

$293,718

$298,325


$297,219

$268,847

Total assets    

$318,914

$305,002

$311,463


$308,459

$282,745

Interest-bearing deposits 

$138,260

$130,482

$125,795


$131,418

$122,790

Noninterest-bearing deposits  

$  70,230

$  62,860

$  73,389


$  66,581

$  51,808

Preferred stock  

$       611

$         60

$            -


$       225

$            -

Total The Bank of New York Mellon


  Corporation common shareholders' equity 

$  34,522

$  34,123

$  34,008


$  34,123

$  33,437



Average common shares and equivalents


  outstanding (in thousands):


    Basic  

1,169,674

1,181,350

1,214,126


1,181,614

1,226,132

    Diluted     

1,171,534

1,182,985

1,215,527


1,183,309

1,229,042



Period-end data:


Market value of assets under management (in billions) 

$    1,359

$    1,299

$    1,198


$    1,359

$    1,198

Market value of assets under custody and


  administration (in trillions)  

$      27.9

$      27.1

$      25.9


$      27.9

$      25.9

Market value of cross-border assets (in trillions)   

$      10.1

$        9.9

$        9.6


$      10.1

$        9.6

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

$       259

$       275

$       250


$       259

$       250



Full-time employees     

48,700

48,200

49,600


48,700

49,600

Book value per common share – GAAP (a)    

$    30.11

$    28.81

$    27.79


$    30.11

$    27.79

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

$    12.59

$    11.47

$    10.55


$    12.59

$    10.55

Cash dividends per common share  

$      0.13

$      0.13

$      0.13


$      0.39

$      0.35

Common dividend payout ratio       

21 %

33 %

25 %


26 %

22 %

Closing common stock price per common share     

$    22.62

$    21.95

$    18.59


$    22.62

$    18.59

Market capitalization      

$  26,434

$  25,929

$  22,543


$  26,434

$  22,543

(a) See "Supplemental information – Explanation of Non-GAAP financial measures" beginning on page 10 for a calculation of these ratios.

(b) Includes fee revenue, net interest revenue and income (loss) from 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


Year-to-date


Sept. 30,

June 30,

Sept. 30,


Sept. 30,

Sept. 30,

(in millions)

2012

2012

2011


2012

2011

Fee and other revenue







Investment services fees:







Asset servicing

$ 942

$ 950

$ 922


$ 2,835

$ 2,812

Issuer services

311

275

442


837

1,158

Clearing services

287

309

297


899

881

Treasury services

138

134

133


408

401

Total investment services fees

1,678

1,668

1,794


4,979

5,252

Investment management and performance fees

779

797

729


2,321

2,272

Foreign exchange and other trading revenue

182

180

200


553

620

Distribution and servicing

48

46

43


140

145

Financing-related fees

46

37

40


127

132

Investment and other income

124

48

83


311

309

Total fee revenue

2,857

2,776

2,889


8,431

8,730

Net securities gains (losses)

22

50

(2)


112

51

Total fee and other revenue

2,879

2,826

2,887


8,543

8,781

Operations of consolidated investment management funds







Investment income

151

152

169


456

562

Interest of investment management fund note holders

104

95

137


309

357

Income (loss) from consolidated investment management funds

47

57

32


147

205

Net interest revenue







Interest revenue

877

875

928


2,664

2,663

Interest expense

128

141

153


416

459

Net interest revenue

749

734

775


2,248

2,204

Provision for credit losses

(5)

(19)

(22)


(19)

(22)

Net interest revenue after provision for credit losses

754

753

797


2,267

2,226

Noninterest expense







Staff

1,436

1,415

1,457


4,304

4,344

Professional, legal and other purchased services

292

309

311


900

895

Software and equipment

208

209

193


622

602

Net occupancy

149

141

151


437

465

Distribution and servicing

109

103

100


313

320

Sub-custodian

65

70

80


205

236

Business development

60

71

57


187

186

Other

265

254

224


739

700

Amortization of intangible assets

95

97

106


288

322

Merger and integration, litigation and restructuring charges

26

378

92


513

214

Total noninterest expense

2,705

3,047

2,771


8,508

8,284

Income







Income before income taxes

975

589

945


2,449

2,928

Provision for income taxes

225

93

281


572

837

Net income

750

496

664


1,877

2,091

Net (income) loss attributable to noncontrolling interests (includes $(25), $(29), $(13), $(65) and $(78) related to consolidated investment management funds, respectively)

(25)

(30)

(13)


(67)

(80)

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

725

466

651


1,810

2,011

Preferred dividends

(5)

-

-


(5)

-

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

$ 720

$ 466

$ 651


$ 1,805

$ 2,011


 

 

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement - continued


Reconciliation of net income to the net income applicable to the common shareholders of The Bank of New York Mellon Corporation

Quarter ended


Year-to-date


Sept. 30,

June 30,

Sept. 30,


Sept. 30,

Sept. 30,

(in millions)

2012

2012

2011


2012

2011

Net income

$ 750

$ 496

$ 664


$ 1,877

$ 2,091

Net (income) loss attributable to noncontrolling interests

(25)

(30)

(13)


(67)

(80)

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

725

466

651


1,810

2,011

Preferred dividends

(5)

-

-


(5)

-

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

720

466

651


1,805

2,011

Less:  Earnings allocated to participating securities

11

7

7


26

21

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

-

1

4


(5)

10

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 common share

$ 709

$ 458

$ 640


$ 1,784

$ 1,980





 

 

Earnings per common share applicable to the common shareholders of The Bank of New York Mellon Corporation

Quarter ended


Year-to-date


Sept. 30,

June 30,

Sept. 30,


Sept. 30,

Sept. 30,

(in dollars)

2012

2012

2011


2012

2011

Basic

$ 0.61

$ 0.39

$ 0.53


$ 1.51

$ 1.61

Diluted

$ 0.61

$ 0.39

$ 0.53


$ 1.51

$ 1.61

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



Sept. 30,

June 30,

Dec. 31,

(dollars in millions, except per share amounts)

2012

2012

2011

Assets




Cash and due from:




Banks

$   4,991

$    4,522

$    4,175

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

73,118

76,243

90,243

Interest-bearing deposits with banks

40,578

39,743

36,321

Federal funds sold and securities purchased under resale agreements

5,753

8,543

4,510

Securities:




Held-to-maturity (fair value of $8,893, $8,869 and $3,540)

8,702

8,794

3,521

Available-for-sale

95,148