10-QPeriod: Q2 FY2016

Bank of New York Mellon Corp Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 8, 2016For Securities:BKBK-PKBNYBNY-PK

Summary

Bank of New York Mellon Corp. (BK) reported its second quarter 2016 financial results, demonstrating resilience and a commitment to shareholder returns amidst a dynamic market. The company received no objection from the Federal Reserve for its 2016 capital plan, enabling significant shareholder return initiatives, including a substantial common stock repurchase program and an increase in the quarterly cash dividend. Financially, BK's Assets Under Custody/Administration (AUC/A) grew 3% year-over-year to $29.5 trillion, reflecting new business and market value increases. However, Assets Under Management (AUM) saw a slight 2% decrease to $1.66 trillion, impacted by net outflows and a stronger U.S. dollar. Fee and other revenue remained relatively stable year-over-year, with investment services fees showing a slight increase, while investment management and performance fees declined due to outflows and currency impacts. Net interest revenue saw a slight decrease year-over-year, primarily due to hedging activities and premium amortization. Noninterest expense was managed effectively, decreasing 4% year-over-year, driven by cost efficiencies and a stronger U.S. dollar, though the company anticipates increased expenses related to risk management and regulatory compliance. Capital ratios remained robust, with the CET1 ratio under the Advanced Approach at 10.2%. The company's proactive capital management, including the issuance of preferred stock and share repurchases, signals confidence in its financial strength and a strategy focused on enhancing shareholder value.

Financial Highlights

38 data points
Beta

Revenue

$3.77B

Net Income

$873.00M

23.1% Net Margin

EPS (Diluted)

$0.75

Total Assets

$372.35B

Cash & Equivalents

$5.81B

Free Cash Flow

-$533.00M

Financial Statements
Beta
Revenue$3.77B
Interest Expense$123.00M
Net Income$873.00M
EPS (Basic)$0.76
EPS (Diluted)$0.75
Shares Outstanding (Basic)1.07B
Shares Outstanding (Diluted)1.08B

Key Highlights

  • 1BNY Mellon received no objection from the Federal Reserve on its 2016 capital plan, signaling strong capital management and regulatory confidence.
  • 2Approved a significant share repurchase program of up to $2.14 billion and increased the common stock dividend by 12% to $0.19 per share.
  • 3Assets Under Custody/Administration (AUC/A) increased by 3% to $29.5 trillion, indicating growth in core servicing business.
  • 4Assets Under Management (AUM) decreased by 2% to $1.66 trillion, primarily due to net outflows and foreign currency translation effects.
  • 5Investment Services fees showed a slight increase year-over-year, while Investment Management and Performance Fees decreased by 5%, impacted by outflows and a stronger U.S. dollar.
  • 6Noninterest expense decreased by 4% year-over-year, reflecting successful cost management initiatives and operational efficiencies.
  • 7The company's CET1 ratio under the Advanced Approach stood at 10.2%, demonstrating solid capital adequacy.

Frequently Asked Questions

The 2% decrease in AUM to $1.66 trillion was primarily driven by net outflows, particularly in 2015, and the unfavorable impact of a stronger U.S. dollar against currencies like the British pound. Higher market values partially offset these factors.

BNY Mellon reported a 4% year-over-year decrease in noninterest expense to $2.62 billion. This reduction was largely due to lower expenses across various categories, including staff, litigation, and legal costs, benefiting from a stronger U.S. dollar and ongoing business improvement processes. However, the company anticipates increased expenses related to risk management and regulatory compliance.

BNY Mellon's 2016 capital plan, approved by the Federal Reserve, allows for significant shareholder returns. This includes a repurchase program of up to $2.14 billion of common stock and a 12% increase in the quarterly cash dividend on common stock, from $0.17 to $0.19 per share.

Net interest revenue was $767 million, a decrease of $12 million compared to the second quarter of 2015. This decline was primarily attributed to the negative impact of interest rate hedging activities and higher premium amortization due to decreasing interest rates. The net interest margin (FTE) was 0.98% compared to 1.00% in the prior year's second quarter.