01—Abstract
Summary
Summary of the 8-K filed April 16, 2024. Cited figures are marked; the original filing is the authoritative source.
BNY Mellon (BK) reported first-quarter 2024 results on April 16, 2024, with diluted EPS of $1.25a (GAAP), up 11% year-over-year, or $1.29 excluding notable items (up 14%).
Total revenue rose 3% year-over-year to $4.5 billionb, driven by an 8% increase in investment services fees (Asset Servicing, Issuer Services, and Clearance and Collateral Management), which more than offset a 14% decline in foreign exchange revenue and an 8% decline in net interest income. Noninterest expense rose 2% to $3.2 billion (1% excluding notable items), producing positive operating leverage and expanded pre-tax margin (29%, or 30% adjusted) and ROTCE (20.7%, or 21.3% adjusted). Balance sheet and capital metrics were stable but showed some pressure.
Average deposits grew 2% year-over-year to $279 billionc, while the CET1 ratio fell to 10.8% from 11.5% at year-end 2023, reflecting higher risk-weighted assets and capital returns. Total capital return was $1.3 billion, including $988 million of share repurchases, producing a 138% year-to-date total payout ratio, which exceeds earnings. The board authorized a new $6 billion share repurchase program.
Provision for credit losses was $27 milliond, driven by commercial real estate reserve increases. For investors, the quarter shows early progress on BNY Mellon's growth and efficiency initiatives, with double-digit EPS growth and margin expansion.
The key watch items are the declining net interest income, the shrinking CET1 ratio given aggressive buybacks, and the reliance on market-value-driven fee growth. The 8-K itself only furnishes the earnings release, financial supplement, and presentation as exhibits and contains no new forward guidance beyond the qualitative outlook in the release.
02—Key points
Key Highlights
- Diluted EPS of $1.25 (GAAP), up 11% YoY; $1.29 adjusted for notable items, up 14% YoY
- Total revenue of $4.5 billion, up 3% YoY, led by 8% growth in investment services fees
- Noninterest expense up 2% YoY to $3.2 billion (up 1% excluding notable items), generating positive operating leverage
- Pre-tax operating margin of 29% (30% adjusted) and ROTCE of 20.7% (21.3% adjusted)
- CET1 ratio declined to 10.8% from 11.5% at Dec. 31, 2023, reflecting buybacks and higher risk-weighted assets
- Returned $1.3 billion to common shareholders; total payout ratio of 138% year-to-date; new $6 billion buyback authorized
- Net interest income fell 8% YoY to $1.04 billion and net interest margin fell to 1.19% from 1.29%
03—Questions
Frequently Asked Questions
Did BNY Mellon beat or miss expectations this quarter?
The 8-K filing itself contains no consensus estimates, so it cannot be determined from this document alone. The company reported double-digit EPS growth and margin expansion, but the filing does not compare results with analyst forecasts.
Why did reported EPS differ from adjusted EPS?
GAAP diluted EPS was $1.25 and adjusted EPS was $1.29. The $0.04 difference reflects severance expense of $36 million in the quarter, along with a small litigation reserve charge. Management presents the adjusted figure to show results excluding these notable items.
Is the capital return sustainable given the falling CET1 ratio?
The 138% total payout ratio year-to-date means capital returned exceeded earnings in the quarter. The CET1 ratio fell 70 basis points to 10.8%, so continued buybacks at this pace would further reduce capital. Investors should watch whether management moderates repurchases or relies on earnings growth to rebuild the ratio.
What is driving the decline in net interest income?
Net interest income fell 8% year-over-year to $1.04 billion, primarily due to changes in balance sheet mix, partially offset by higher interest rates. Net interest margin dropped to 1.19% from 1.29%. This is a headwind to revenue that the fee-based businesses must offset.
Are there credit quality concerns?
The provision for credit losses was $27 million, driven mainly by reserve increases related to commercial real estate exposure. The allowance for loan losses rose to $322 million from $303 million at year-end, and nonperforming assets increased to $278 million from $237 million. These levels are modest but are worth monitoring.
04—Continue