01—Abstract
Summary
Summary of the 10-K filed February 25, 2022. Cited figures are marked; the original filing is the authoritative source.
The Bank of New York Mellon (BK) closed 2021 with $46.7 trilliona in assets under custody and/or administration (up 14%) and $2.4 trillion in assets under management (up 10%), driven by net client inflows and higher market values.
Net income applicable to common shareholders was $3.55 billionb, or $4.14 per diluted share, versus $3.83 in 2020. Fee revenue rose 4% to $13.0 billion and fee revenue excluding money market fee waivers rose 9%, but net interest revenue fell 12% to $2.6 billion as net interest margin compressed to 0.68% from 0.84%, and noninterest expense rose 5% to $11.5 billion. Capital was returned aggressively: BNY Mellon repurchased 89.7 million common shares for $4.6 billion in 2021 and raised the quarterly dividend from $0.31 to $0.34.
A new $6.0 billionc repurchase authorization runs through the fourth quarter of 2022. The CET1 ratio (Standardized Approach) fell to 11.2% from 13.1%, reflecting buybacks, unrealized securities losses, and higher risk-weighted assets, though the firm remained well capitalized. Management expects net interest revenue and fee-waiver recovery to improve in 2022 as short-term rates rise, while noninterest expense is expected to increase.
For investors, the key tensions are margin pressure from low rates and a shrinking balance sheet (deposits fell 6% to $319.7 billiond) against strong fee-driven growth in custody and asset management. The firm's revenue is about 81% fee-based, which helps offset rate sensitivity, but the securities portfolio (about 36% of assets) and the reliance on market levels remain important risk factors.
02—Key points
Key Highlights
- AUC/A rose 14% to $46.7 trillion and AUM rose 10% to $2.4 trillion at Dec. 31, 2021, reflecting net inflows and higher market values.
- Diluted EPS was $4.14 in 2021 versus $3.83 in 2020; net income applicable to common shareholders was $3.55 billion.
- Net interest revenue fell 12% to $2.6 billion and net interest margin declined to 0.68% from 0.84%, driven by lower interest rates.
- Fee revenue grew 4% to $13.0 billion (up 9% excluding money market fee waivers), led by investment services fees (+3%) and investment management fees (+7%).
- Returned $4.6 billion via share repurchases (89.7 million shares at $50.91 average) and raised the quarterly dividend 10% to $0.34; new $6.0 billion buyback runs through Q4 2022.
- CET1 ratio declined to 11.2% (Standardized) from 13.1%, though all bank subsidiaries remained well capitalized.
- Noninterest expense rose 5% to $11.5 billion on growth investments and higher revenue-related costs; management expects further expense growth in 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 25, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $15.93B$15.81B | +0.8% |
| Interest Expense | $227.00M$1.13B | −79.9% |
| Net Income | $3.76B$3.62B | +3.9% |
| EPS (Basic) | $4.17$3.84 | +8.6% |
| EPS (Diluted) | $4.14$3.83 | +8.1% |
| Shares Outstanding (Basic) | 851.90M890.84M | −4.4% |
| Shares Outstanding (Diluted) | 856.36M892.51M | −4.1% |
05—Questions
Frequently Asked Questions
How did BNY Mellon's profitability change in 2021?
Net income applicable to common shareholders rose to $3.55 billion from $3.42 billion, and diluted EPS increased to $4.14 from $3.83. Return on common equity improved to 8.9% from 8.7%, and return on tangible common equity was 17.1%. Growth in fee revenue more than offset lower net interest revenue, though higher expenses limited the gain.
Why did net interest revenue decline, and will it recover?
Net interest revenue fell 12% to $2.6 billion because short-term rates stayed near zero, lowering yields on interest-earning assets. Management expects net interest revenue to increase in 2022 as short-term rates rise, though the outcome depends on deposit mix and the yield curve. Rate sensitivity is substantial: a 100 basis point instantaneous rise would raise net interest revenue by about $688 million under the modeled scenario.
What are money market fee waivers and how much do they affect results?
Money market mutual fund fees are being waived to prevent negative fund returns in the low-rate environment. Net fee waivers reduced 2021 revenue by $916 million, up from $337 million in 2020. Management expects to recover a majority of these waivers in 2022 if forward rates and balances hold, but the amount is highly sensitive to short-term rates.
Is BNY Mellon's capital position still strong after the share buybacks?
Yes. The CET1 ratio was 11.2% under the Standardized Approach, above the 8.5% requirement including buffers, and the Tier 1 leverage ratio was 5.5%. The firm and its U.S. bank subsidiaries were classified as well capitalized at year-end. The decline from 13.1% reflected buybacks, unrealized securities losses, dividends, and higher risk-weighted assets, partly offset by earnings.
06—Continue