10-QPeriod: Q3 FY2015

Bank of New York Mellon Corp Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 6, 2015For Securities:BKBK-PKBNYBNY-PK

Summary

Bank of New York Mellon Corp. (BK) reported its third-quarter 2015 results, showing a net income applicable to common shareholders of $820 million, or $0.74 per diluted common share. This represents a decrease from the $1.1 billion reported in the prior year quarter, primarily due to the absence of significant gains from asset sales in the prior year. However, the company saw growth in its Investment Services fees, which increased by 2% year-over-year, driven by net new business and organic growth in key areas like Global Collateral Services and Asset Servicing. Despite a slight decrease in Assets Under Management (AUM) sequentially, year-over-year AUM remained flat at $1.63 trillion, supported by higher market values and the Cutwater acquisition. The company also managed its expenses effectively, with a 10% year-over-year decrease in noninterest expense, partly due to a stronger U.S. dollar and cost-reduction initiatives. BNY Mellon's capital position remains strong, with its estimated CET1 ratio (Advanced Approach, fully phased-in) at 9.3%, although down from the prior quarter. The company also announced the relocation of its corporate headquarters and addressed an operational disruption caused by a SunGard system issue, which is now resolved. Overall, the report indicates a solid operational performance with growth in core fee-based businesses, while managing expenses and maintaining a healthy capital base, despite some headwinds from foreign currency fluctuations and market conditions.

Financial Highlights

37 data points
Beta

Revenue

$3.79B

Net Income

$833.00M

21.9% Net Margin

EPS (Diluted)

$0.74

Total Assets

$377.37B

Cash & Equivalents

$8.23B

Free Cash Flow

$1.24B

Financial Statements
Beta
Revenue$3.79B
Interest Expense$79.00M
Net Income$833.00M
EPS (Basic)$0.74
EPS (Diluted)$0.74
Shares Outstanding (Basic)1.10B
Shares Outstanding (Diluted)1.11B

Key Highlights

  • 1Net income applicable to common shareholders was $820 million ($0.74 per diluted share), down from $1.1 billion ($0.93 per diluted share) in Q3 2014, excluding certain gains in the prior year.
  • 2Assets Under Custody/Administration (AUC/A) increased to $28.5 trillion, up from $28.3 trillion year-over-year, driven by net new business, partly offset by a stronger USD and lower equity markets.
  • 3Assets Under Management (AUM) were $1.63 trillion, flat year-over-year, driven by higher market values and acquisitions, offset by a stronger USD.
  • 4Investment services fees increased 2% year-over-year to $1.85 billion, supported by net new business and organic growth in Global Collateral Services, Broker-Dealer Services, and Asset Servicing.
  • 5Investment management and performance fees decreased 6% year-over-year to $829 million, primarily due to lower performance fees and market values, partially offset by the Cutwater acquisition.
  • 6Foreign exchange and other trading revenue increased 17% year-over-year to $179 million, driven by higher volatility and volumes.
  • 7Noninterest expense decreased 10% year-over-year to $2.68 billion, reflecting cost control measures, a stronger U.S. dollar, and reduced legal expenses.

Frequently Asked Questions

The decrease in net income applicable to common shareholders from $1.1 billion in Q3 2014 to $820 million in Q3 2015 was primarily due to the absence of significant gains from the sales of equity investments (Wing Hang) and property (One Wall Street building) that were recognized in the prior year quarter.

Total Assets Under Management (AUM), excluding securities lending cash management assets and assets managed in the Investment Services business, were $1.63 trillion at September 30, 2015, which was flat compared to September 30, 2014. The increase resulted from higher market values, the Cutwater acquisition, and net new business, offset by the unfavorable impact of a stronger U.S. dollar. Sequentially, AUM decreased by 4% due to lower equity market values.

A stronger U.S. dollar had an unfavorable impact on several revenue streams, particularly Investment Management and Performance Fees, and Investment Services fees. However, Foreign exchange and other trading revenue increased by 17% year-over-year, driven by higher volatility and volumes, somewhat offsetting these impacts.

Yes, BNY Mellon reported a 10% year-over-year decrease in total noninterest expense to $2.68 billion. This reduction was attributed to lower expenses across most categories, driven by the favorable impact of a stronger U.S. dollar, reduced legal and consulting expenses, and benefits from a business improvement process focused on cost reduction.