01—Abstract
Summary
Summary of the 8-K filed July 12, 2024. Cited figures are marked; the original filing is the authoritative source.
BNY (The Bank of New York Mellon Corporation) reported second-quarter 2024 results that showed improved profitability and positive operating leverage.
GAAP diluted EPS was $1.52a, up 16% year-over-year, or $1.51 excluding notable items (up 9%). Total revenue rose 2% to $4.6 billion, driven by a 4% increase in fee revenue to $3.4 billion, with higher market values, net new business and foreign exchange revenue. Net interest income fell 6% to $1.03 billion on balance sheet mix changes, and noninterest expense declined 1% to $3.1 billion, aided by efficiency savings and a lower FDIC special assessment.
Pre-tax operating margin reached 33%b and ROTCE was 24.6%. Capital strength improved. The CET1 ratio rose to 11.4% from 10.8% in the prior quarter, while the Tier 1 leverage ratio was 5.8%, down 6 bps sequentially.
BNY returned $923 millionc to common shareholders in the quarter, including $322 million in dividends and $601 million in buybacks. Management also raised the quarterly common dividend 12% to $0.47 per share, effective in 3Q24, following the Federal Reserve's 2024 stress test. Year-to-date total payout ratio was 107%.
Assets under custody and/or administration reached $49.5 trilliond and assets under management $2.0 trillion, both up year-over-year on higher market values. Average deposits grew 3% year-over-year to $285 billion. The filing is largely a Regulation FD and earnings disclosure; it contains no material transaction or other event, and investors will want to watch the net interest margin compression, the 107% payout ratio and the pace of fee growth in future quarters.
02—Key points
Key Highlights
- GAAP diluted EPS of $1.52, up 16% YoY (adjusted EPS $1.51, up 9%); total revenue of $4.6 billion, up 2% YoY.
- Fee revenue rose 4% YoY to $3.4 billion, led by Investment services fees (up 5%) and foreign exchange revenue (up 16%); pre-tax operating margin of 33%.
- Net interest income fell 6% YoY to $1.03 billion, with net interest margin down to 1.15% from 1.20% a year earlier.
- Noninterest expense fell 1% YoY to $3.07 billion; excluding notable items it rose 1%, and a lower FDIC special assessment helped the GAAP figure.
- CET1 ratio improved to 11.4% (from 10.8% in 1Q24), while Tier 1 leverage ratio was 5.8%; average LCR of 115% and NSFR of 132%.
- Quarterly common dividend raised 12% to $0.47 per share starting 3Q24; $923 million returned to shareholders in 2Q24, with a 107% year-to-date total payout ratio.
- AUC/A reached $49.5 trillion (up 6% YoY) and AUM reached $2.0 trillion (up 7% YoY), largely on higher market values.
03—Questions
Frequently Asked Questions
Did BNY beat its earnings in the second quarter of 2024?
The filing does not include analyst consensus estimates, so a beat or miss cannot be determined from it. On an absolute basis, GAAP EPS of $1.52 rose 16% YoY, and adjusted EPS of $1.51 rose 9%, indicating solid year-over-year growth.
Why did net interest income decline despite higher interest rates?
Management attributed the 6% YoY decline in net interest income to changes in balance sheet mix, partially offset by higher interest rates. Net interest margin fell to 1.15% from 1.20% a year earlier, and sequentially it declined from 1.19%, reflecting mix shifts rather than rate effects alone.
Is the dividend increase sustainable given the 107% year-to-date payout ratio?
The year-to-date payout ratio of 107% means capital returns exceeded earnings over the first half, largely due to buybacks of $988 million in 1Q24 and $601 million in 2Q24. The 12% dividend increase to $0.47 per quarter is modest in dollar terms, and buyback pace is the more flexible lever. Investors should monitor future payout ratios and capital ratios as the company's capital plan evolves.
What drove the year-over-year improvement in fee revenue?
Total fee revenue rose 4% YoY, primarily reflecting higher market values, net new business, higher foreign exchange revenue and client activity, partially offset by the mix of AUM flows. Investment services fees grew 5%, and foreign exchange revenue rose 16%, while investment management and performance fees were flat.
What should investors watch in future quarters?
Key items include net interest income trends as the balance sheet mix evolves, expense discipline and efficiency savings, the sustainability of capital returns above earnings, and whether fee growth continues in the high single digits. Market values will also significantly affect AUM, AUC/A and fee revenue. The preliminary June 30 metrics and regulatory capital ratios may still change in the 10-Q.
04—Continue