10-QPeriod: Q2 FY2014

Bank of New York Mellon Corp Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 11, 2014For Securities:BKBK-PKBNYBNY-PK

Summary

The Bank of New York Mellon Corporation (BK) reported its second quarter 2014 results, showing a net income of $554 million, or $0.48 per diluted share. Excluding specific charges, adjusted net income was $715 million, or $0.62 per diluted share. The company saw significant growth in its assets under custody/administration (AUC/A) and assets under management (AUM), up 9% and 15% year-over-year respectively, driven by higher market values. However, total fee and other revenue decreased by 7% year-over-year, primarily due to a gain on an equity investment in the prior year's quarter and lower foreign exchange trading revenue. Net interest revenue also declined by 5% year-over-year, primarily due to lower yields on investment securities. BNY Mellon continued its strategic initiatives, including the sale of its equity investment in Wing Hang Bank and the sale of its One Wall Street office building, expected to generate significant gains. The company also recorded restructuring charges related to streamlining actions and a charge for administrative errors. Capital ratios remained strong, with estimated CET1 ratios above regulatory requirements.

Financial Highlights

38 data points
Beta

Revenue

$3.73B

Net Income

$577.00M

15.5% Net Margin

EPS (Diluted)

$0.48

Total Assets

$400.74B

Cash & Equivalents

$6.17B

Free Cash Flow

$3.26B

Financial Statements
Beta
Revenue$3.73B
Operating Income$1.25B
Interest Expense$92.00M
Net Income$577.00M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)1.13B
Shares Outstanding (Diluted)1.14B

Key Highlights

  • 1Net income applicable to common shareholders was $554 million, or $0.48 per diluted share.
  • 2Adjusted net income (Non-GAAP), excluding charges, was $715 million, or $0.62 per diluted share.
  • 3Assets under custody/administration (AUC/A) increased 9% year-over-year to $28.5 trillion.
  • 4Assets under management (AUM) increased 15% year-over-year to a record $1.64 trillion.
  • 5Total fee and other revenue decreased 7% year-over-year to $3.0 billion, impacted by prior year equity investment gain and lower FX revenue.
  • 6Net interest revenue decreased 5% year-over-year to $719 million, primarily due to lower yields on investment securities.
  • 7The company repurchased 12.6 million common shares for $431 million.

Frequently Asked Questions

Revenue growth was primarily driven by higher market values leading to increases in asset servicing fees and investment management/performance fees. However, total fee and other revenue saw a year-over-year decrease of 7% due to the absence of a significant equity investment gain recorded in Q2 2013 and lower foreign exchange and other trading revenue. Net interest revenue also declined due to lower yields on investment securities, partially offset by higher average interest-earning assets.

Key events impacting the quarter included the sale of the equity investment in Wing Hang Bank, resulting in an after-tax gain of approximately $315 million. BNY Mellon also recorded a pre-tax charge of $109 million for administrative errors related to offshore tax-exempt funds and a $120 million pre-tax restructuring charge for severance expenses related to streamlining actions. Additionally, the company agreed to sell its One Wall Street office building, expected to result in an after-tax gain of approximately $200 million.

BNY Mellon maintained a strong capital position. Its estimated Common Equity Tier 1 (CET1) ratio calculated under the Standardized Approach was 10.3% and under the Advanced Approach was 10.0% on a fully phased-in basis as of June 30, 2014. Both ratios exceeded regulatory requirements, indicating a well-capitalized status.

BNY Mellon noted that lower yields on investment securities negatively impacted net interest revenue. The company anticipated that in the second half of 2014, it would reduce interbank placement assets and increase its securities portfolio inventory of high-quality liquid assets to mitigate the impact of low reinvestment rates in both the Eurozone and the U.S.