01—Abstract
Summary
Summary of the 8-K filed October 11, 2024. Cited figures are marked; the original filing is the authoritative source.
Bank of New York Mellon (BK) reported third-quarter 2024 results on October 11, 2024, with diluted EPS of $1.50a (up 22% year-over-year) and $1.52 excluding notable items (up 20%).
Total revenue rose 5% year-over-year to $4.6 billionb, driven by fee revenue growth of 5% from higher market values, net new business and foreign exchange revenue, plus net interest income up 3%. Noninterest expense was flat at $3.1 billion, yielding a 33% pre-tax operating margin and a 22.8% return on tangible common equity (23.2% excluding notable items). Assets under custody and/or administration exceeded $50 trillion for the first time, reaching $52.1 trillion (up 14% year-over-year), and assets under management reached $2.1 trillion (up 18%).
Capital and balance sheet metrics strengthened. The CET1 ratio rose to 11.9% from 11.4% in the prior quarter, and the Tier 1 leverage ratio reached 6.0%. Average deposits were $285 billionc, up 9% year-over-year but flat sequentially.
BNY returned $1,078 milliond to common shareholders, including $725 million of buybacks, though the year-to-date total payout ratio of 103% exceeds earnings for the period. Management also announced the planned acquisition of Archer, a managed-account technology provider, and launched Alts Bridge to broaden investor access to alternatives. The quarter was not without pressure points.
Provision for credit losses was $23 million, driven by commercial real estate reserve increases, and the effective tax rate was 22.0%. Net income applicable to common shareholders declined 3% sequentially, and Issuer Services revenue fell 11% quarter over quarter. Investors will watch whether the platforms operating model translates into sustained operating leverage and whether the Archer acquisition closes as planned.
02—Key points
Key Highlights
- Diluted EPS of $1.50, up 22% year-over-year; $1.52 adjusted (excluding notable items), up 20%
- Total revenue of $4.6 billion, up 5% year-over-year; fee revenue up 5% on higher market values, net new business and FX
- Noninterest expense flat at $3.1 billion year-over-year; up 1% excluding notable items; pre-tax margin of 33%
- AUC/A reached a record $52.1 trillion (up 14% YoY) and AUM reached $2.1 trillion (up 18% YoY)
- CET1 ratio of 11.9% (up from 11.4% QoQ) and Tier 1 leverage ratio of 6.0%
- Returned $1,078 million to common shareholders ($353 million dividends, $725 million buybacks); YTD total payout ratio of 103%
- Announced planned acquisition of Archer to serve the managed account ecosystem; launched Alts Bridge
03—Questions
Frequently Asked Questions
How did BNY's third-quarter 2024 earnings compare with prior periods?
Diluted EPS was $1.50, up 22% from $1.23 in 3Q23 and down 1% from $1.52 in 2Q24. Excluding notable items, adjusted EPS was $1.52, up 20% year-over-year. Net income applicable to common shareholders was $1.11 billion, up 16% year-over-year but down 3% sequentially.
What drove revenue growth and were there any headwinds?
Total revenue rose 5% year-over-year to $4.6 billion, led by higher market values, net new business, foreign exchange revenue (up 14%) and net interest income (up 3%). Headwinds included a $23 million provision for credit losses tied to commercial real estate exposure and an 11% sequential decline in Issuer Services revenue, reflecting lower Depositary Receipts activity.
How is BNY's capital position and shareholder return?
The CET1 ratio improved to 11.9% from 11.4% in 2Q24, and the Tier 1 leverage ratio was 6.0%. BNY returned $1.08 billion in the quarter, including $725 million in buybacks. The year-to-date payout ratio of 103% means shareholder returns slightly exceeded year-to-date earnings, so investors may watch how capital deployment is balanced against growth investment and the pending Archer acquisition.
What is the significance of the Archer acquisition and Alts Bridge?
BNY announced a planned acquisition of Archer, which would deliver an enterprise solution to clients in the fast-growing managed account ecosystem. The filing notes the deal may not close in a timely manner or at all, and its benefits may not be fully realized. Alts Bridge was introduced to broaden investor access to alternative investments. Management frames both as part of its strategy to be more for its clients.
What do the filing's disclosures mean for investors regarding non-GAAP measures?
BNY reports adjusted figures excluding notable items such as severance, litigation reserves, the FDIC special assessment and a disposal gain. The adjustments are modest this quarter: adjusted EPS of $1.52 versus GAAP EPS of $1.50, and adjusted ROTCE of 23.2% versus 22.8% GAAP. Investors should review the reconciliations in Exhibit 99.1 and Exhibit 99.2, since these measures are not GAAP substitutes.
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