BNY Mellon Reports First Quarter Earnings of $619 Million or $0.52 Per Share
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 | |||
|
(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 | |||
|
(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 |
$ 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 | |||||
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 (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 (d) Primary differences between Basel I and Basel III include: the determination of credit risk under Basel I uses predetermined risk weights and grade receive a significantly higher risk-weighting under Basel III than Basel I; also, Basel III includes additional adjustments for operational risk, | ||||||
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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