10-QPeriod: Q3 FY2019

Bank of New York Mellon Corp Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 7, 2019For Securities:BKBK-PKBNYBNY-PK

Summary

The Bank of New York Mellon Corporation (BK) reported its third-quarter 2019 financial results, showing a net income applicable to common shareholders of $1.0 billion, or $1.07 per diluted share, a slight decrease from the prior year's $1.08 billion, or $1.06 per diluted share. Total revenue declined by 5% to $3.9 billion, primarily driven by a 1% decrease in fee revenue and a significant 18% drop in net interest revenue. The decline in net interest revenue was notably impacted by a $70 million lease-related impairment. Despite the revenue pressures, BNY Mellon demonstrated effective expense management, with noninterest expense decreasing by 5% to $2.6 billion, largely due to a reduction in reserves for tax-related exposures and lower litigation expenses. The company also maintained a strong capital position, with a CET1 ratio of 11.1% under the Advanced Approaches, consistent with the previous quarter. During the period, BNY Mellon returned capital to shareholders through $981 million in common stock repurchases and $294 million in dividends.

Financial Highlights

36 data points
Beta

Net Income

$1.04B

EPS (Diluted)

$1.07

Total Assets

$373.17B

Cash & Equivalents

$8.99B

Free Cash Flow

$4.69B

Financial Statements
Beta
Interest Expense$1.21B
Net Income$1.04B
EPS (Basic)$1.07
EPS (Diluted)$1.07
Shares Outstanding (Basic)933.26M
Shares Outstanding (Diluted)935.68M

Key Highlights

  • 1Net income applicable to common shareholders was $1.0 billion ($1.07 per diluted share) for Q3 2019, compared to $1.08 billion ($1.06 per diluted share) in Q3 2018.
  • 2Total revenue decreased 5% to $3.9 billion, driven by a 1% decline in fee revenue and an 18% decrease in net interest revenue.
  • 3Net interest revenue was significantly impacted by an 8% reduction from a $70 million lease-related impairment.
  • 4Noninterest expense decreased 5% to $2.6 billion, primarily due to reduced reserves for tax-related exposure and lower litigation expenses.
  • 5The Common Equity Tier 1 (CET1) ratio remained strong at 11.1% (Advanced Approaches) as of September 30, 2019.
  • 6BNY Mellon repurchased $981 million of common stock and paid $294 million in dividends during the quarter, demonstrating capital return to shareholders.
  • 7The company announced a definitive agreement to sell its interest in Promontory Interfinancial Network, LLC, expecting an after-tax gain of approximately $600 million upon closing in Q4 2019.

Frequently Asked Questions

The decrease in net interest revenue was primarily driven by a $70 million lease-related impairment, higher interest-bearing deposit and funding costs, and lower noninterest-bearing deposit balances. The lease-related impairment alone decreased net interest revenue by 8% compared to the prior year.

BNY Mellon effectively managed its expenses, with total noninterest expense decreasing by 5% to $2.6 billion. This reduction was mainly due to a decrease in previously established reserves for tax-related exposure of certain investment management funds, lower litigation expenses, and the favorable impact of a stronger U.S. dollar, partially offset by continued investments in technology.

Todd Gibbons' appointment as interim CEO, following his extensive experience within BNY Mellon in leadership roles across risk, finance, and business operations, including a nine-year tenure as CFO, suggests a focus on stability and experienced leadership during a transition period.

BNY Mellon expects to record an after-tax gain of approximately $600 million upon the closing of the sale of its interest in Promontory Interfinancial Network, LLC, which is anticipated in the fourth quarter of 2019.