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Bank of New York Mellon Corp 8-K Report, Financial Results (Jan 12, 2024)

Reports
Earnings & Results·Regulation FD·Exhibits & Filings
Filing Date
Filed January 12, 2024
Period End
January 12, 2024
In the record · 2016–202610-K1110-Q328-K189

BK filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 189 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Aug ’22Aug ’22
  2. Leadership change8-K · Oct ’26Oct ’26

01—Abstract

Summary

Summary of the 8-K filed January 12, 2024. Cited figures are marked; the original filing is the authoritative source.

BNY Mellon's Q4 2023 results, released January 12, 2024, showed headline earnings that were heavily distorted by notable items.

GAAP diluted EPS fell 47% year-over-year to $0.33a, while adjusted EPS (excluding notable items) rose 1% to $1.28 versus Q3 2023's $1.27 and was down 2% from $1.30 in Q4 2022. Total revenue rose 10% to $4.3 billion, but only about 2% excluding notable items. Noninterest expense rose 20% to $3.9 billion, driven by a $505 million FDIC special assessment, $200 million in severance, and $47 million in litigation reserves.

The $150 millionb reduction in investment revenue, tied to a fair value write-down of a contingent consideration receivable from a prior divestiture, also weighed on results. Reported pre-tax operating margin was 8%, compared with 28% excluding notable items, and GAAP ROTCE was 5.6%, compared with 20.9% adjusted. For the full year 2023, GAAP EPS rose 38% to $4.00 and adjusted EPS rose 10% to $5.05.

Total revenue grew 7% to $17.5 billionc, led by a 24% increase in net interest revenue to $4.3 billion, while fee revenue slipped 1%. Full-year noninterest expense rose 1% to $13.2 billion, or 3% excluding notable items. Management said it returned $3.9 billion to common shareholders, equal to 123% of earnings, and ended the year with a CET1 ratio of 11.6%, up from 11.2%, and a Tier 1 leverage ratio of 6.0%.

Looking ahead, management guided to 2024 net interest revenue down about 10% year-over-year, from $4.3 billiond, and flat noninterest expense of about $12.3 billion excluding notable items. It expects fee revenue to rise, with operating leverage of at least zero, and a total payout ratio of at least 100%. Medium-term targets are a pre-tax margin of at least 33%, ROTCE of at least 23%, a Tier 1 leverage ratio of 5.5% to 6%, and a CET1 ratio of about 11%.

These targets are described as 3 to 5 year goals. The 8-K itself is a furnishing filing: the earnings release and financial supplement are incorporated by reference, and the earnings release's CEO-commentary and forward-looking sections are excluded from Section 18 liability.

02—Key points

Key Highlights

  1. GAAP diluted EPS was $0.33, down 47% year-over-year, while adjusted EPS was $1.28, up 1% sequentially and down 2% year-over-year.
  2. Total revenue rose 10% to $4.3 billion (about 2% excluding notable items), and net interest revenue grew 4% year-over-year to $1.1 billion.
  3. Noninterest expense increased 20% to $3.9 billion, including a $505 million FDIC special assessment, $200 million in severance, and $47 million in litigation reserves.
  4. Full-year 2023 GAAP EPS rose 38% to $4.00 and adjusted EPS rose 10% to $5.05; full-year revenue grew 7% to $17.5 billion, with net interest revenue up 24%.
  5. Capital strengthened: CET1 ratio rose to 11.6% from 11.2%, Tier 1 leverage to 6.0%, and $3.9 billion was returned to common shareholders in 2023 (123% of earnings).
  6. 2024 guidance calls for net interest revenue down about 10% and flat expenses of about $12.3 billion, with fee revenue expected to increase.
  7. Medium-term targets were set at a pre-tax margin of at least 33%, ROTCE of at least 23%, a Tier 1 leverage ratio of 5.5% to 6%, and a CET1 ratio of about 11%.

03—Questions

Frequently Asked Questions

  1. Why did reported earnings fall so sharply in Q4 2023 if the underlying business looked stable?

    The decline was driven mainly by notable items. The FDIC special assessment, severance, and litigation reserves added roughly $752 million to noninterest expense, and a $150 million fair value write-down on a contingent consideration receivable from a prior divestiture reduced investment revenue. Excluding these items, EPS was $1.28, roughly flat with the prior quarter and down 2% year-over-year.

  2. What does the 2024 outlook imply for BNY Mellon's earnings trajectory?

    Management expects net interest revenue to fall about 10% from $4.3 billion, reflecting deposit margin compression, modest deposit run-off, and quantitative tightening. Expenses excluding notable items are guided flat at about $12.3 billion, and fee revenue is expected to grow, with operating leverage of at least zero. Net interest revenue is therefore the main headwind, and the outlook depends on market-implied forward rates as of year-end 2023.

  3. How strong is BNY Mellon's capital position and shareholder return profile?

    The CET1 ratio rose to 11.6% from 11.2% a year earlier, and the Tier 1 leverage ratio reached 6.0%. The company returned $3.9 billion to common shareholders in 2023, equal to 123% of earnings, including $1.3 billion in dividends and $2.6 billion in buybacks. Management targets a total payout ratio of at least 100% in 2024, and the Q4 dividend was $0.42 per share.

  4. What are the key risks or caveats investors should note from this filing?

    Several figures are preliminary, including period-end AUC/A and AUM and the regulatory capital ratios for December 31, 2023, which may change when the 10-K is filed. Many headline figures are non-GAAP and exclude notable items, so GAAP results should be weighed alongside them. Management also cites risks including elevated inflation and interest rates, potential recessions, Middle East hostilities, and the execution of its strategic initiatives.

04—Continue

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