10-QPeriod: Q1 FY2020

Bank of New York Mellon Corp Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:BKBK-PKBNYBNY-PK

Summary

In the first quarter of 2020, BNY Mellon reported net income applicable to common shareholders of $944 million, or $1.05 per diluted common share, an increase from $910 million, or $0.94 per diluted common share, in the same period last year. Total revenue rose by 5% to $4.1 billion, primarily driven by a 10% increase in fee revenue, which benefited from higher foreign exchange and other trading revenue, as well as increased transaction volumes in Investment Services. However, net interest revenue decreased by 3%, largely due to lower interest rates. The company also recorded a higher provision for credit losses of $169 million, reflecting the macroeconomic environment and the adoption of the CECL accounting standard. Key events during the quarter included the appointment of Todd Gibbons as CEO and the temporary suspension of share buybacks in response to the COVID-19 pandemic. The company successfully transitioned approximately 95% of its employees to remote work arrangements with minimal disruption. Despite market volatility, BNY Mellon's diversified fee-based business model provided resilience, with Investment Services showing strong revenue growth, while Investment Management experienced a revenue decline. BNY Mellon maintained strong capital and liquidity positions, with a CET1 ratio of 11.3% at the end of the quarter. The company returned capital to shareholders through $985 million in share repurchases and $282 million in dividends, with repurchases completed before the suspension announcement.

Financial Highlights

36 data points
Beta

Net Income

$980.00M

EPS (Diluted)

$1.05

Total Assets

$468.15B

Cash & Equivalents

$9.80B

Free Cash Flow

-$1.95B

Financial Statements
Beta
Interest Expense$756.00M
Net Income$980.00M
EPS (Basic)$1.05
EPS (Diluted)$1.05
Shares Outstanding (Basic)894.12M
Shares Outstanding (Diluted)896.69M

Key Highlights

  • 1Net income applicable to common shareholders increased by 3.7% year-over-year to $944 million, with diluted EPS of $1.05.
  • 2Total revenue grew by 5% to $4.1 billion, driven by a 10% increase in fee revenue, largely due to higher foreign exchange and other trading revenue and increased transaction volumes in Investment Services.
  • 3Investment Services revenue increased by 9%, with income before taxes up 13%, reflecting strong performance in asset servicing and clearing services.
  • 4Investment Management revenue decreased by 4%, and income before taxes fell by 27%, impacted by lower market values and unfavorable foreign exchange rates.
  • 5Provision for credit losses increased significantly to $169 million, primarily due to the macroeconomic environment and the adoption of the CECL accounting standard.
  • 6The company temporarily suspended share buybacks in March 2020 to preserve capital and liquidity amid the COVID-19 pandemic.
  • 7BNY Mellon maintained a strong CET1 ratio of 11.3% (Standardized Approach) at the end of the quarter, demonstrating robust capital adequacy.

Frequently Asked Questions

BNY Mellon reported a year-over-year increase in net income applicable to common shareholders to $944 million ($1.05 per diluted share) from $910 million ($0.94 per diluted share). Total revenue increased by 5% to $4.1 billion, driven by growth in fee revenue, particularly from foreign exchange and trading activities within its Investment Services segment. However, net interest revenue declined by 3% due to lower interest rates.

The pandemic led to increased market volatility and lower interest rates, which favorably impacted transaction volumes in Investment Services but negatively affected Investment Management revenues and net interest margins. The company significantly increased its provision for credit losses ($169 million) reflecting the uncertain macroeconomic environment. In response, BNY Mellon temporarily suspended share buybacks to preserve capital and liquidity.

BNY Mellon's Investment Services segment showed strong performance with total revenue up 9% and income before taxes up 13%, benefiting from higher client volumes and trading activity. The Investment Management segment experienced a 4% decrease in total revenue and a 27% drop in income before taxes, primarily due to lower market values impacting fees and a stronger U.S. dollar affecting reported results.

The company maintained a strong capital position, with a Common Equity Tier 1 (CET1) ratio of 11.3% under the Standardized Approach at March 31, 2020. Liquidity was also robust, with total available funds increasing to $201.7 billion from $144.9 billion at the end of the previous quarter, largely due to higher deposits. The company also repurchased $985 million in common shares and paid $282 million in dividends during the quarter.