10-QPeriod: Q2 FY2012

Bank of New York Mellon Corp Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 8, 2012For Securities:BKBK-PKBNYBNY-PK

Summary

The Bank of New York Mellon Corporation (BK) reported net income applicable to common shareholders of $466 million, or $0.39 per diluted share, for the second quarter of 2012. This figure includes a significant litigation charge of $212 million after-tax ($0.18 per share). Excluding this charge, the company's performance reflects a challenging operating environment. Total revenue declined year-over-year, primarily driven by lower fee and other revenue, particularly within Investment Services fees and Foreign exchange and other trading revenue. Net interest revenue saw a slight increase year-over-year, but the net interest margin continued to compress. Despite a record $27.1 trillion in assets under custody and administration, the company navigated market pressures, including lower equity market values and increased client deposits invested in lower-yielding assets. Capital ratios remain robust, with an estimated Basel III Tier 1 common equity ratio of 8.7% at quarter-end.

Financial Highlights

38 data points
Beta

Revenue

$3.59B

Net Income

$466.00M

13.0% Net Margin

EPS (Diluted)

$0.39

Total Assets

$330.28B

Cash & Equivalents

$4.52B

Free Cash Flow

$113.00M

Financial Statements
Beta
Revenue$3.59B
Operating Income$1.08B
Interest Expense$141.00M
Net Income$466.00M
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)1.18B
Shares Outstanding (Diluted)1.18B

Key Highlights

  • 1Net income applicable to common shareholders was $466 million ($0.39 per diluted share), impacted by a $212 million after-tax litigation charge.
  • 2Total revenue decreased 6% year-over-year to $3.6 billion, primarily due to a 8% decline in fee and other revenue.
  • 3Assets under custody and administration (AUC) reached a record $27.1 trillion, up 3% year-over-year, driven by net new business.
  • 4Assets under management (AUM) were $1.30 trillion, up 2% year-over-year, reflecting net inflows partially offset by lower equity market values.
  • 5Net interest revenue increased slightly to $734 million year-over-year, but the net interest margin (FTE) decreased to 1.25% from 1.41% in the prior year period.
  • 6Noninterest expense increased 8% year-over-year to $3.0 billion, primarily due to the litigation charge.
  • 7The company's estimated Basel III Tier 1 common equity ratio was 8.7% at June 30, 2012, an increase from the previous quarter.

Frequently Asked Questions

The primary driver for the year-over-year decrease in net income was a significant litigation charge of $212 million after-tax, related to losses from investing securities lending collateral in Sigma Finance Inc. Without this charge, net income would have been higher.

Assets under custody and administration (AUC) reached a record $27.1 trillion, showing growth from the prior year. Assets under management (AUM) also grew slightly year-over-year, supported by net inflows, though lower equity market values had a dampening effect.

The net interest margin (FTE) compressed year-over-year to 1.25% from 1.41%. This compression was primarily attributed to increased client deposits being invested in lower-yielding assets, reflecting the prevailing market environment. The company also noted a potential negative impact on net interest revenue from the European Central Bank's interest rate cut.

Total noninterest expense increased year-over-year due to the litigation charge. However, excluding this charge, the company is implementing operational excellence initiatives aimed at expense reduction. These initiatives are on track to achieve significant annualized pre-tax savings.