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 |
|||||
|
$ 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 |
84,540 |
78,467 |
|
Total securities |
103,850 |
93,334 |
81,988 |
|
Trading assets |
9,190 |
6,909 |
7,861 |
|
Loans |
45,889 |
45,431 |
43,979 |
|
Allowance for loan losses |
(339) |
(362) |
(394) |
|
Net loans |
45,550 |
45,069 |
43,585 |
|
Premises and equipment |
1,690 |
1,711 |
1,681 |
|
Accrued interest receivable |
545 |
628 |
660 |
|
Goodwill |
17,984 |
17,909 |
17,904 |
|
Intangible assets |
4,882 |
4,962 |
5,152 |
|
Other assets |
20,444 |
19,755 |
19,839 |
|
Subtotal assets of operations |
328,575 |
319,328 |
313,919 |
|
Assets of consolidated investment management funds, at fair value: |
|||
|
Trading assets |
10,821 |
10,399 |
10,751 |
|
Other assets |
548 |
556 |
596 |
|
Subtotal assets of consolidated investment management funds, at fair value |
11,369 |
10,955 |
11,347 |
|
Total assets |
$ 339,944 |
$ 330,283 |
$ 325,266 |
|
Liabilities |
|||
|
Deposits: |
|||
|
Noninterest-bearing (principally U.S. offices) |
$ 78,790 |
$ 76,933 |
$ 95,335 |
|
Interest-bearing deposits in U.S. offices |
44,843 |
49,956 |
41,231 |
|
Interest-bearing deposits in Non-U.S. offices |
99,316 |
94,255 |
82,528 |
|
Total deposits |
222,949 |
221,144 |
219,094 |
|
Federal funds purchased and securities sold under repurchase agreements |
12,450 |
9,162 |
6,267 |
|
Trading liabilities |
7,754 |
6,940 |
8,071 |
|
Payables to customers and broker-dealers |
13,675 |
13,305 |
12,671 |
|
Commercial paper |
1,278 |
1,564 |
10 |
|
Other borrowed funds |
1,139 |
1,374 |
2,174 |
|
Accrued taxes and other expenses |
6,590 |
5,969 |
6,235 |
|
Other liabilities (includes allowance for lending-related commitments of $117, $105 and $103) |
7,408 |
6,114 |
6,525 |
|
Long-term debt |
19,516 |
19,536 |
19,933 |
|
Subtotal liabilities of operations |
292,759 |
285,108 |
280,980 |
|
Liabilities of consolidated investment management funds, at fair value: |
|||
|
Trading liabilities |
10,018 |
9,752 |
10,053 |
|
Other liabilities |
28 |
38 |
32 |
|
Subtotal liabilities of consolidated investment management funds, at fair value |
10,046 |
9,790 |
10,085 |
|
Total liabilities |
302,805 |
294,898 |
291,065 |
|
Temporary equity |
|||
|
Redeemable noncontrolling interests |
140 |
130 |
114 |
|
Permanent equity |
|||
|
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 10,501, 5,001 and - shares |
1,036 |
500 |
- |
|
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,252,278,284, 1,251,527,230 and 1,249,061,305 shares |
13 |
12 |
12 |
|
Additional paid-in capital |
23,429 |
23,366 |
23,185 |
|
Retained earnings |
14,153 |
13,588 |
12,812 |
|
Accumulated other comprehensive loss, net of tax |
(471) |
(1,280) |
(1,627) |
|
Less: Treasury stock of 83,671,325, 70,229,278 and 39,386,698 common shares, at cost |
(1,942) |
(1,653) |
(965) |
|
Total The Bank of New York Mellon Corporation shareholders' equity |
36,218 |
34,533 |
33,417 |
|
Non-redeemable noncontrolling interests of consolidated investment management funds |
781 |
722 |
670 |
|
Total permanent equity |
36,999 |
35,255 |
34,087 |
|
Total liabilities, temporary equity and permanent equity |
$ 339,944 |
$ 330,283 |
$ 325,266 |
|
Capital | |||
|
The following table presents our Basel I Tier 1 common equity generated. | |||
|
Basel I Tier 1 common equity generation |
|||
|
(in millions) |
3Q12 |
2Q12 |
3Q11 |
|
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP |
$ 720 |
$ 466 |
$ 651 |
|
Add: Amortization of intangible assets, net of tax |
60 |
61 |
67 |
|
Gross Basel I Tier 1 common equity generated |
780 |
527 |
718 |
|
Less capital deployed: |
|||
|
Common stock dividends |
155 |
156 |
160 |
|
Common stock repurchased |
288 |
286 |
462 |
|
Goodwill and intangible assets related to acquisitions/dispositions |
- |
- |
16 |
|
Total capital deployed |
443 |
442 |
638 |
|
Add: Other |
181 |
(53) |
(43) |
|
Net Basel I Tier 1 common equity generated |
$ 518 |
$ 32 |
$ 37 |
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 Basel I Tier 1 common equity to risk-weighted assets excludes preferred stock, as well as the trust preferred securities which will be phased out of Basel I Tier 1 regulatory capital beginning in 2013. Unlike the Basel I 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. 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. Additionally, 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 noncontrolling interests related to consolidated investment management funds and other revenue related to the Shareowner Services business, which was sold on Dec. 31, 2011, and expense measures which exclude M&I expenses, litigation charges, restructuring charges, amortization of intangible assets and direct expenses related to the Shareowner Services business. 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. 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. Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees. Restructuring charges relate to our operational excellence initiatives and migrating positions to global delivery centers. Excluding these charges permits investors to view expenses on a basis consistent with how management views the business. BNY Mellon also presents revenue and noninterest expense results relating to the Shareowner Services business so that an investor may compare those results with other periods, which do not include the Shareowner Services 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.
The following table presents investment management fees net of performance fees.
|
Investment management and performance fees |
3Q12 vs. | ||||
|
(dollars in millions) |
3Q12 |
2Q12 |
3Q11 |
3Q11 |
2Q12 |
|
Investment management and performance fees |
$ 779 |
$ 797 |
$ 729 |
7% |
(2)% |
|
Less: Performance fees |
10 |
54 |
11 |
N/M |
N/M |
|
Investment management fees |
$ 769 |
$ 743 |
$ 718 |
7% |
3% |
|
N/M – Not meaningful. | |||||
The following table presents the calculation of the return on common equity and the return on tangible common equity.
|
Return on common equity and tangible common equity |
|||||
|
(dollars in millions) |
3Q12 |
2Q12 |
3Q11 |
YTD12 |
YTD11 |
|
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP |
$ 720 |
$ 466 |
$ 651 |
$ 1,805 |
$ 2,011 |
|
Add: Amortization of intangible assets, net of tax |
60 |
61 |
67 |
182 |
203 |
|
Net income applicable to common shareholders of The Bank of |
780 |
527 |
718 |
1,987 |
2,214 |
|
Add: M&I, litigation and restructuring charges |
18 |
225 |
55 |
308 |
130 |
|
Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of |
$ 798 |
$ 752 |
$ 773 |
$ 2,295 |
$ 2,344 |
|
Average common shareholders' equity |
$ 34,522 |
$ 34,123 |
$ 34,008 |
$ 34,123 |
$ 33,437 |
|
Less: Average goodwill |
17,918 |
17,941 |
18,156 |
17,941 |
18,157 |
|
Average intangible assets |
4,926 |
5,024 |
5,453 |
5,023 |
5,554 |
|
Add: Deferred tax liability – tax deductible goodwill |
1,057 |
982 |
915 |
1,057 |
915 |
|
Deferred tax liability – non-tax deductible intangible assets |
1,339 |
1,400 |
1,604 |
1,339 |
1,604 |
|
Average tangible common shareholders' equity – Non-GAAP |
$ 14,074 |
$ 13,540 |
$ 12,918 |
$ 13,555 |
$ 12,245 |
|
Return on common equity – GAAP (a) |
8.3% |
5.5% |
7.6% |
7.1% |
8.0% |
|
Return on common equity excluding amortization of intangible charges – Non-GAAP (a) |
9.2% |
8.9% |
9.0% |
9.0% |
9.4% |
|
Return on tangible common equity – Non-GAAP (a) |
22.1% |
15.7% |
22.1% |
19.6% |
24.2% |
|
Return on tangible common equity excluding M&I, litigation and |
22.5% |
22.4% |
23.8% |
22.6% |
25.6% |
|
(a) Annualized. | |||||
The following table presents the calculation of the equity to assets ratio and book value per common share.
|
Equity to assets and book value per common share |
Sept. 30, |
June 30, |
Sept. 30, |
|
(dollars in millions, unless otherwise noted) |
2012 |
2012 |
2011 |
|
BNY Mellon shareholders' equity at period end – GAAP |
$ 36,218 |
$ 34,533 |
$33,695 |
|
Less: Preferred stock |
1,036 |
500 |
- |
|
BNY Mellon common shareholders' equity at period end – GAAP |
35,182 |
34,033 |
33,695 |
|
Less: Goodwill |
17,984 |
17,909 |
18,045 |
|
Intangible assets |
4,882 |
4,962 |
5,380 |
|
Add: Deferred tax liability – tax deductible goodwill |
1,057 |
982 |
915 |
|
Deferred tax liability – non-tax deductible intangible assets |
1,339 |
1,400 |
1,604 |
|
Tangible BNY Mellon common shareholders' equity at period end – Non-GAAP |
$ 14,712 |
$ 13,544 |
$ 12,789 |
|
Total assets at period end – GAAP |
$ 339,944 |
$ 330,283 |
322,187 |
|
Less: Assets of consolidated investment management funds |
11,369 |
10,955 |
12,063 |
|
Subtotal assets of operations – Non-GAAP |
328,575 |
319,328 |
310,124 |
|
Less: Goodwill |
17,984 |
17,909 |
18,045 |
|
Intangible assets |
4,882 |
4,962 |
5,380 |
|
Cash on deposit with the Federal Reserve and other central banks (a) |
73,037 |
72,838 |
68,293 |
|
Tangible total assets of operations at period end – Non-GAAP |
$ 232,672 |
$ 223,619 |
$ 218,406 |
|
BNY Mellon shareholders' equity to total assets – GAAP |
10.7% |
10.5% |
10.5% |
|
BNY Mellon common shareholders' equity to total assets – GAAP |
10.3% |
10.3% |
10.5% |
|
Tangible BNY Mellon common shareholders' equity to tangible assets of operations – Non-GAAP |
6.3% |
6.1% |
5.9% |
|
Period-end common shares outstanding (in thousands) |
1,168,607 |
1,181,298 |
1,212,632 |
|
Book value per common share |
$ 30.11 |
$ 28.81 |
$ 27.79 |
|
Tangible book value per common share – Non-GAAP |
$ 12.59 |
$ 11.47 |
$ 10.55 |
|
(a) Assigned a zero percent risk weighting by the regulators. |
The following table presents the calculation of the pre-tax operating margin ratio.
Pre-tax operating margin (dollars in millions) |
3Q12 |
2Q12 |
3Q11 |
YTD12 |
YTD11 |
|
Income before income taxes – GAAP |
$ 975 |
$ 589 |
$ 945 |
$ 2,449 |
$ 2,928 |
|
Less: Net income (loss) attributable to noncontrolling interests of consolidated investment management funds |
25 |
29 |
13 |
65 |
78 |
|
Add: Amortization of intangible assets |
95 |
97 |
106 |
288 |
322 |
|
M&I, litigation and restructuring charges |
26 |
378 |
92 |
513 |
214 |
|
Income before income taxes excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP |
$ 1,071 |
$ 1,035 |
$ 1,130 |
$ 3,185 |
$ 3,386 |
|
Fee and other revenue – GAAP |
$ 2,879 |
$ 2,826 |
$ 2,887 |
$ 8,543 |
$ 8,781 |
|
Income from consolidated investment management funds – GAAP |
47 |
57 |
32 |
147 |
205 |
|
Net interest revenue – GAAP |
749 |
734 |
775 |
2,248 |
2,204 |
|
Total revenue – GAAP |
3,675 |
3,617 |
3,694 |
10,938 |
11,190 |
|
Less: Net income (loss) attributable to noncontrolling interests of consolidated investment management funds |
25 |
29 |
13 |
65 |
78 |
|
Total revenue excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds – Non-GAAP |
$ 3,650 |
$ 3,588 |
$ 3,681 |
$ 10,873 |
$ 11,112 |
|
Pre-tax operating margin (a) |
27% |
16% |
26% |
22% |
26% |
|
Pre-tax operating margin excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP (a) |
29% |
29% |
31% |
29% |
30% |
|
(a) Income before taxes divided by total revenue. | |||||
The following table presents the calculation of our Basel I Tier 1 common equity ratio – Non-GAAP.
Calculation of Basel I Tier 1 common equity to risk-weighted assets ratio – Non-GAAP |
Sept. 30, |
June 30, |
Sept. 30, |
|
(dollars in millions) |
2012(a) |
2012 |
2011 |
|
Total Tier 1 capital – Basel I |
$ 16,785 |
$ 15,722 |
$ 14,920 |
|
Less: Trust preferred securities |
1,173 |
1,164 |
1,660 |
|
Preferred stock |
1,036 |
500 |
- |
|
Total Tier 1 common equity |
$ 14,576 |
$ 14,058 |
13,260 |
|
Total risk-weighted assets – Basel I |
$ 110,005 |
$ 106,764 |
106,256 |
|
Basel I Tier 1 common equity to risk-weighted assets ratio – Non-GAAP |
13.2% |
13.2% |
12.5% |
|
(a) Preliminary. |
The following table presents the calculation of our estimated Basel III Tier 1 common equity ratio – Non-GAAP on a fully-phased in basis.
Estimated Basel III Tier 1 common equity ratio – Non-GAAP (a) |
Sept. 30, |
June 30, |
Sept. 30, |
|
(dollars in millions) |
2012(b) |
2012 |
2011 |
|
Total Tier 1 capital – Basel I |
$ 16,785 |
$ 15,722 |
$ 14,920 |
|
Less: Trust preferred securities |
1,173 |
1,164 |
1,660 |
|
Preferred stock |
1,036 |
500 |
- |
|
Adjustments related to available-for-sale securities and pension liabilities included in accumulated other comprehensive income (c) |
(136) |
513 |
470 |
|
Adjustments related to equity method investments (c) |
571 |
558 |
590 |
|
Deferred tax assets |
46 |
46 |
- |
|
Net pension fund assets (c) |
43 |
43 |
493 |
|
Other |
3 |
2 |
26 |
|
Total estimated Basel III Tier 1 common equity |
$ 14,049 |
$ 12,896 |
$ 11,681 |
|
Total risk-weighted assets – Basel I |
$ 110,005 |
$ 106,764 |
$ 106,256 |
|
Add: Adjustments (d) |
41,678 |
41,493 |
74,224 |
|
Total estimated Basel III risk-weighted assets (e) |
$ 151,683 |
$ 148,257 |
$ 180,480 |
|
Estimated Basel III Tier 1 common equity ratio – Non-GAAP |
9.3% |
8.7% |
6.5% |
|
(a) The estimated Basel III Tier 1 common equity ratios at Sept. 30, 2012 and June 30, 2012 were based on the 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 at Sept. 30, 2011 was based on our interpretation of prior Basel III guidance and the proposed market risk rule. | |||
|
(b) Preliminary. | |||
|
(c) The NPRs and prior Basel III guidance do not add back to capital the adjustment to other comprehensive income that Basel I makes for pension liabilities and available-for-sale securities. Also, under the NPRs and prior Basel III guidance, pension assets recorded on the balance sheet and adjustments related to equity method investments are a deduction from capital. | |||
|
(d) Primary differences between risk-weighted assets determined under Basel I compared with the NPRs and prior Basel III guidance include: the determination of credit risk under Basel I uses predetermined risk weights and asset classes, while the NPRs use, in addition to the broader range of predetermined risk weights and asset classes, an investment grade standard. Securitization exposure receives a higher risk-weighting under the NPRs and prior Basel III guidance than Basel I; also, the NPRs and prior Basel III guidance includes additional adjustments for operational risk, market risk, counterparty credit risk and equity exposures. | |||
|
(e) Calculated on an Advanced Approaches basis, as amended by Basel III. | |||
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 estimated capital ratios and our ability to reduce expense growth through our operational excellence initiatives. 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, 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 Oct. 17, 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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