01—Abstract
Summary
Summary of the 10-K filed February 28, 2024. Cited figures are marked; the original filing is the authoritative source.
The Bank of New York Mellon Corporation (BK) reported 2023 net income applicable to common shareholders of $3.1 billiona, or $3.87 per diluted share, up from $2.4 billion ($2.90) in 2022.
Results include notable items: the FDIC special assessment (about $632 millionb accrued in Q4 2023, later revised upward by $127 million pre-tax in February 2024), severance, litigation reserves, a fair value reduction in a contingent consideration receivable, and net losses on disposals. Excluding notable items, adjusted EPS was $5.05 (Non-GAAP), up 10% from $4.59. Total revenue rose 7% to $17.5 billion, driven by a 24% increase in net interest revenue to $4.3 billion as higher rates lifted the net interest margin to 1.25%.
Fee and other revenue was roughly flat to slightly up at $13.2 billionc, with fee revenue down 1% as lower FX volatility and AUM mix offset gains in investment services fees. Noninterest expense rose 2% to $13.3 billion. The balance sheet and capital position strengthened.
The CET1 ratio (Advanced Approaches) rose to 11.5% from 11.2%, and the Tier 1 leverage ratio rose to 6.0%. The company returned about $3.9 billiond to shareholders through $2.6 billion of buybacks (55.8 million shares) and $1.3 billion of common dividends, and the quarterly dividend was raised 14% to $0.42 in July 2023. Assets under custody and/or administration reached $47.8 trillion and assets under management reached $2.0 trillion.
Management expects 2024 net interest revenue to decline versus 2023 and noninterest expense to decrease reported, with flat expenses excluding notable items. Key risks include the sensitivity of fee revenue to market activity, rate-driven deposit flows, credit exposure to commercial real estate (provision of $119 million in 2023), and the regulatory environment, including the proposed Basel III endgame revisions and the FDIC special assessment.
02—Key points
Key Highlights
- Diluted EPS of $3.87 (GAAP) rose 33% from $2.90; adjusted diluted EPS excluding notable items was $5.05 (Non-GAAP), up 10% from $4.59.
- Total revenue grew 7% to $17.5 billion, led by net interest revenue up 24% to $4.3 billion as the net interest margin expanded 28 bps to 1.25%.
- Noninterest expense rose 2% to $13.3 billion, including a $632 million FDIC special assessment accrual, later increased by $127 million pre-tax in February 2024.
- Fee revenue declined 1% to $12.9 billion, reflecting lower foreign exchange volatility (FX revenue down 23%), offset by higher investment services fees (up 4%).
- CET1 ratio improved to 11.5% from 11.2%, and the Tier 1 leverage ratio rose to 6.0%; the company remained well capitalized.
- Shareholder returns totaled roughly $3.9 billion in 2023: $2.6 billion of buybacks and $1.3 billion of common dividends, with a 14% dividend increase to $0.42 per quarter.
- Assets under custody and/or administration reached a record $47.8 trillion (up 8%), and assets under management reached $2.0 trillion (up 8%), though AUM had net outflows of $20 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 28, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $17.70B$16.53B | +7.1% |
| Interest Expense | $16.30B$3.61B | +351.1% |
| Net Income | $3.30B$2.56B | +29.2% |
| EPS (Basic) | $3.91$2.89 | +35.3% |
| EPS (Diluted) | $3.89$2.88 | +35.1% |
| Shares Outstanding (Basic) | 784.07M811.07M | −3.3% |
| Shares Outstanding (Diluted) | 787.80M814.79M | −3.3% |
05—Questions
Frequently Asked Questions
Why did reported earnings rise so much while adjusted earnings rose less?
Reported 2023 EPS of $3.87 was depressed by notable items totaling about $1.18 per diluted share, mainly the FDIC special assessment ($0.61), a fair value reduction in a contingent consideration receivable ($0.18), severance ($0.26), and litigation reserves ($0.12). The 2022 base was even more affected by items such as goodwill impairment ($0.82) and a securities repositioning loss ($0.42), which is why reported EPS grew 33% while adjusted EPS grew 10%.
What is the outlook for net interest revenue and expenses in 2024?
Management expects 2024 net interest revenue to decrease compared with 2023, based on market-implied forward rates and the level and mix of client deposits. It expects total noninterest expense to decrease on a reported basis as notable 2023 items (FDIC assessment, severance, litigation) do not recur, and to be flat excluding notable items.
How strong is the company's capital and liquidity position?
The CET1 ratio was 11.5% under the Advanced Approaches, above the minimum with buffers, and the Tier 1 leverage ratio was 6.0%. The average LCR was 117% in Q4 2023, and the average NSFR was 135%. The company's U.S. bank subsidiaries could pay about $1.7 billion of dividends to the parent without regulatory waiver, and the parent held about $3.2 billion of liquid assets at non-bank subsidiaries.
What are the main risks highlighted for investors?
Key risks include dependence on fee-based revenue (74% of total revenue) that falls with weak markets or low client activity; sensitivity of net interest revenue and deposits to interest rate changes; credit exposure to financial institutions, commercial real estate (a $1 billion-scale reserve build in CRE in 2023 drove the provision), and concentrated counterparties; regulatory changes such as the proposed Basel III endgame and G-SIB surcharge revisions; and the FDIC special assessment, which was increased in February 2024. Cybersecurity and operational resilience are also emphasized.
How much has the company returned to shareholders and what constrains future returns?
In 2023 BNY Mellon repurchased 55.8 million shares for $2.6 billion and paid $1.3 billion in common dividends, with a common payout ratio of 41%. A new $5.0 billion repurchase authorization began in January 2023, with $2.4 billion remaining at year-end. Capital return is constrained by Federal Reserve stress capital buffer requirements, TLAC buffers, preferred dividend obligations, and the discretion of the Board.
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