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Bank of New York Mellon Corp 8-K Report, Corporate Update (Jun 28, 2021)

Filed June 28, 2021For Securities:BKBK-PKBNYBNY-PK

Summary

The Bank of New York Mellon Corporation (BK) announced a significant update regarding its capital return strategy following notification from the Federal Reserve. The Federal Reserve has indicated that BK's Stress Capital Buffer (SCB) requirement will remain at the regulatory minimum of 2.5% effective October 1, 2021. Concurrently, the Federal Reserve's temporary restrictions on capital distributions for large banks will conclude after June 30, 2021, providing BK with greater flexibility. In response to this enhanced flexibility and its stable capital position, BK plans to substantially increase its shareholder returns. The company intends to raise its quarterly common stock dividend from $0.31 to $0.34 per share, commencing as early as Q3 2021, subject to Board approval. Furthermore, the Board has approved a new share repurchase program authorizing up to $6.0 billion in common stock buybacks, to be executed throughout Q3 2021 and Q4 2022. This new repurchase authorization supersedes all prior plans.

Key Highlights

  • 1Federal Reserve confirms BK's Stress Capital Buffer (SCB) requirement remains at the regulatory minimum of 2.5% from October 1, 2021.
  • 2Federal Reserve's restrictions on capital distributions for large banks will end after June 30, 2021.
  • 3BK intends to increase its quarterly common stock dividend from $0.31 to $0.34 per share, starting as early as Q3 2021.
  • 4Board of Directors approved a new share repurchase program of up to $6.0 billion.
  • 5Share repurchases are authorized to begin in Q3 2021 and continue through Q4 2022.
  • 6This new repurchase program replaces all previous authorization plans.
  • 7Company anticipates its final SCB will be confirmed by the Federal Reserve later in 2021.

Frequently Asked Questions

The Federal Reserve notified BK that its SCB requirement will remain at 2.5%, which is the regulatory minimum. This indicates the Federal Reserve's confidence in BK's capital resilience. Coupled with the lifting of capital distribution restrictions, this provides BK with greater operational and financial flexibility.

BK plans to significantly increase shareholder returns through two primary avenues: a dividend increase and a substantial share repurchase program. The quarterly dividend is expected to rise from $0.31 to $0.34 per share, and up to $6.0 billion of common stock will be repurchased between Q3 2021 and Q4 2022.

The Board of Directors has approved a new share repurchase program authorizing up to $6.0 billion of BK's common stock. These repurchases are expected to begin in the third quarter of 2021 and continue through the fourth quarter of 2022. This new authorization replaces any previously approved repurchase plans.

Yes, the increase in the quarterly dividend is subject to approval by BK's Board of Directors. The timing, manner, and amount of share repurchases are subject to various factors, including the Company's capital position and prevailing market conditions. The company also notes that its final SCB will be confirmed later in 2021.