News Release
BNY MELLON REPORTS THIRD QUARTER 2019 EARNINGS OF
$1.0 BILLION OR $1.07 PER COMMON SHARE
Revenue down 5% | EPS up 1% | ROE 11% | CET1 11.1% | ||||
ROTCE 21% | (a) | SLR 6.1% | |||||
NEW YORK, October 16, 2019 - The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported:
3Q19 vs. | ||||||||
3Q19 | 2Q19 | 3Q18 | 2Q19 | 3Q18 | ||||
Net income applicable to common shareholders (in millions) | $ | 1,002 | $ | 969 | $ | 1,075 | 3% | (7)% |
Diluted earnings per common share | $ | 1.07 | $ | 1.01 | $ | 1.06 | 6% | 1 % |
Third Quarter Results | CEO Commentary | |
Total revenue of $3.9 billion, decreased 5% | "I am privileged and excited to lead this great organization. | |
• Fee revenue decreased 1% | Our focus on strengthening our performance culture, | |
• Net interest revenue decreased 18%, driven by lease- | attracting talent and improving quality and operational | |
related impairment of $70 million; $(0.06) per common | efficiency has enabled us to be a stronger partner to our | |
share | ||
clients. I am proud and thankful for the effort that our | ||
Total noninterest expense of $2.6 billion, decreased 5% | employees put in each and every day to provide an | |
outstanding client experience. We have an ambitious | ||
• Continued investments in technology more than offset by | ||
agenda and I believe that we're absolutely on the right | ||
lower other expenses | ||
• Net reduction of reserves for tax-related exposure of | path," Todd Gibbons, interim Chief Executive Officer, said. | |
certain investment management funds, $0.06 per common | ||
share, and lower litigation, decreased expenses 5% | "We're encouraged by fee growth across many of the | |
Income tax | businesses within Investment Services. Interest rate | |
headwinds and deposit mix continue to challenge net | ||
• Effective tax rate of 19.1%, compared with 16.5% in 3Q18 | interest revenue and Asset Management continues to be | |
Investment Services | negatively impacted by prior-year outflows. We are taking | |
actions to improve performance and we remain focused on | ||
• Total revenue decreased slightly | ||
investing in our future while controlling our overall | ||
• Income before taxes increased 7%, driven by lower | ||
expenses. Our company is well positioned to continue | ||
litigation expense | ||
• AUC/A of $35.8 trillion, increased 4% | returning significant amounts of capital to shareholders," | |
Investment Management | Mr. Gibbons concluded. | |
• Total revenue decreased 12% | ||
• Income before taxes decreased 5%, benefited from the net | ||
reduction of reserves for tax-related exposure of certain | ||
investment management funds | ||
• AUM of $1.9 trillion, increased 3% |
Returned $1.3 billion to common shareholders
- Repurchased 21.3 million common shares for $981 million
- Paid dividends of $294 million to common shareholders
Media Relations: Madelyn McHugh (212) 635-1376 | Investor Relations: Magda Palczynska (212) 635-8529 |
- For information on this Non-GAAP measure, see "Supplemental Information - Explanation of GAAP and Non-GAAP financial measures" on page 8. Note: Above comparisons are 3Q19 vs. 3Q18.
BNY Mellon 3Q19 Earnings Release
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in millions, except per share amounts and unless otherwise noted; not | 3Q19 vs. | |||||||
meaningful - N/M) | 3Q19 | 2Q19 | 3Q18 | |||||
2Q19 | 3Q18 | |||||||
Fee revenue | $ | 3,129 | $ | 3,105 | $ | 3,168 | 1% | (1)% |
Net securities (losses) gains | (1) | 7 | - | N/M | N/M | |||
Total fee and other revenue | 3,128 | 3,112 | 3,168 | 1 | (1) | |||
Income from consolidated investment management funds | 3 | 10 | 10 | N/M | N/M | |||
Net interest revenue | 730 | 802 | 891 | (9) | (18) | |||
Total revenue | 3,861 | 3,924 | 4,069 | (2) | (5) | |||
Provision for credit losses | (16) | (8) | (3) | N/M | N/M | |||
Noninterest expense | 2,590 | 2,647 | 2,738 | (2) | (5) | |||
Income before income taxes | 1,287 | 1,285 | 1,334 | - | (4) | |||
Provision for income taxes | 246 | 264 | 220 | (7) | 12 | |||
Net income | $ | 1,041 | $ | 1,021 | $ | 1,114 | 2% | (7)% |
Net income applicable to common shareholders of The Bank of New York | $ | 1,002 | $ | 969 | $ | 1,075 | 3% | (7)% |
Mellon Corporation | ||||||||
Operating leverage (a) | 54 bps | 30 bps | ||||||
Diluted earnings per common share | $ | 1.07 | $ | 1.01 | $ | 1.06 | 6% | 1% |
Average common shares and equivalents outstanding - diluted (in thousands) | 935,677 | 953,928 | 1,003,665 | |||||
Pre-tax operating margin | 33% | 33% | 33% |
- Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. bps - basis points.
KEY DRIVERS (comparisons are 3Q19 vs. 3Q18, unless otherwise stated)
- Total revenue decreased 5% primarily reflecting:
- Fee revenue decreased 1% primarily reflecting the cumulative AUM outflows since 3Q18, lower performance fees and the unfavorable impact of a stronger U.S. dollar, partially offset by higher fees in Issuer Services and Clearance and Collateral Management and higher client assets and volumes in Pershing.
- Net interest revenue decreased 18% primarily reflecting the lease-related impairment of $70 million, higher interest-bearing deposit and funding costs and lower noninterest-bearing deposit balances, partially offset by the benefit of higher rates earned on interest-earning assets. The lease-related impairment decreased net interest revenue 8%. Sequentially, nearly all of the 9% decrease in net interest revenue was driven by the lease-related impairment.
- Provision for credit losses was a credit of $16 million, due in part from the sale of the loans related to a California utility company that filed for bankruptcy.
- Noninterest expense decreased 5%. Nearly all of the decrease was driven by the reduction of previously established reserves for potential tax-related exposure of certain investment management funds that we manage, net of staff expense, and lower litigation expense. The remaining slight decrease primarily reflects the continued investments in technology, which were more than offset by lower other expenses and the favorable impact of a stronger U.S. dollar.
- Effective tax rate of 19.1% compared with 16.5% in 3Q18, which was impacted by adjustments to the provisional estimates for U.S. tax legislation and other changes.
Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
- AUC/A of $35.8 trillion, increased 4%, primarily reflecting higher market values and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.
- AUM of $1.9 trillion, increased 3%, primarily reflecting higher market values, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound) and net outflows.
Capital and liquidity
- Repurchased 21.3 million common shares for $981 million and paid $294 million in dividends to common shareholders.
- Return on common equity ("ROE") of 11%; Return on tangible common equity ("ROTCE") of 21% (a).
- Common Equity Tier 1 ("CET1") ratio - 11.1%.
- Supplementary leverage ratio ("SLR") - 6.1%.
- Average liquidity coverage ratio ("LCR") - 117%.
- Total Loss Absorbing Capacity ("TLAC") ratios exceed minimum requirements.
- See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" on page 8 for additional information. Note: Throughout this document, sequential growth rates are unannualized.
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BNY Mellon 3Q19 Earnings Release
INVESTMENT SERVICES BUSINESS HIGHLIGHTS
(dollars in millions, unless otherwise noted; not meaningful - N/M) | 3Q19 | 2Q19 | 3Q18 | 3Q19 vs. | ||||
2Q19 | 3Q18 | |||||||
Total revenue by line of business: | $ | 1,405 | 1 % | (4)% | ||||
Asset Servicing | $ | 1,391 | $ | 1,458 | ||||
Pershing | 568 | 564 | 558 | 1 | 2 | |||
Issuer Services | 466 | 446 | 453 | 4 | 3 | |||
Treasury Services | 312 | 317 | 324 | (2) | (4) | |||
Clearance and Collateral Management | 293 | 284 | 264 | 3 | 11 | |||
Total revenue by line of business | 3,044 | 3,002 | 3,057 | 1 | - | |||
Provision for credit losses | (15) | (4) | 1 | N/M | N/M | |||
Noninterest expense | 1,965 | 1,954 | 2,030 | 1 | (3) | |||
Income before taxes | $ | 1,094 | $ | 1,052 | $ | 1,026 | 4 % | 7 % |
Pre-tax operating margin | 36% | 35% | 34% | |||||
Foreign exchange and other trading revenue | $ | 160 | $ | 153 | $ | 161 | 5 % | (1)% |
Securities lending revenue | $ | 39 | $ | 40 | $ | 52 | (3)% | (25)% |
Metrics: | $ | 32,758 | 1 % | (7)% | ||||
Average loans | $ | 32,287 | $ | 35,044 | ||||
Average deposits | $ | 208,044 | $ | 201,146 | $ | 192,741 | 3 % | 8 % |
AUC/A at period end (in trillions) (current period is preliminary) (a) | $ | 35.8 | $ | 35.5 | $ | 34.5 | 1 % | 4 % |
Market value of securities on loan at period end (in billions) (b) | $ | 362 | $ | 369 | $ | 415 | (2)% | (13)% |
- Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.4 trillion at Sept. 30, 2019, June 30, 2019 and Sept. 30, 2018.
- Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $66 billion at Sept. 30, 2019, $64 billion at June 30, 2019 and $69 billion at Sept. 30, 2018.
KEY DRIVERS
- The drivers of the total revenue variances by line of business are indicated below.
- Asset Servicing - The year-over-year decrease primarily reflects lower client activity, securities lending revenue and net interest revenue and the unfavorable impact of a stronger U.S. dollar. The sequential increase primarily reflects higher foreign exchange and other trading revenue.
- Pershing - Both increases primarily reflect growth in client assets and accounts. The year-over-year increase was partially offset by lower net interest revenue.
- Issuer Services - Both increases primarily reflect higher Depositary Receipts revenue, partially offset by lower net interest revenue in Corporate Trust. The year-over-year increase also reflects higher volumes in Corporate Trust.
- Treasury Services - Both decreases primarily reflect lower net interest revenue.
- Clearance and Collateral Management - Both increases primarily reflect growth in clearance volumes and collateral management from new business. The year-over-year increase was partially offset by lower net interest revenue.
- Noninterest expense decreased year-over-year primarily driven by lower litigation and staff expenses. The sequential increase primarily reflects higher staff expense.
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BNY Mellon 3Q19 Earnings Release
INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS
(dollars in millions, unless otherwise noted; not meaningful - N/M) | 3Q19 | 2Q19 | 3Q18 | 3Q19 vs. | ||||
2Q19 | 3Q18 | |||||||
Total revenue by line of business: | $ | 605 | (2)% | (14)% | ||||
Asset Management | $ | 618 | $ | 704 | ||||
Wealth Management | 285 | 299 | 311 | (5) | (8) | |||
Total revenue by line of business | 890 | 917 | 1,015 | (3) | (12) | |||
Provision for credit losses | - | (2) | (2) | N/M | N/M | |||
Noninterest expense | 590 | 654 | 701 | (10) | (16) | |||
Income before taxes | $ | 300 | $ | 265 | $ | 316 | 13 % | (5)% |
Pre-tax operating margin | 34% | 29% | 31% | |||||
Adjusted pre-tax operating margin - Non-GAAP(a) | 38% | 32% | 35% | |||||
Metrics: | $ | 16,260 | - % | (3)% | ||||
Average loans | $ | 16,322 | $ | 16,763 | ||||
Average deposits | $ | 14,083 | $ | 14,615 | $ | 14,634 | (4)% | (4)% |
AUM (in billions) (current period is preliminary) (b) | $ | 1,881 | $ | 1,843 | $ | 1,828 | 2 % | 3 % |
Wealth Management client assets (in billions) (current period is preliminary) (c) | $ | 259 | $ | 257 | $ | 261 | 1 % | (1)% |
- Net of distribution and servicing expense. See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" on page 8 for information on this Non-GAAP measure.
- Excludes securities lending cash management assets and assets managed in the Investment Services business.
- Includes AUM and AUC/A in the Wealth Management business.
KEY DRIVERS
- The drivers of the total revenue variances by line of business are indicated below.
- Asset Management - The year-over-year decrease primarily reflects the cumulative AUM outflows since 3Q18, lower performance fees, the impact of hedging activities and the unfavorable impact of a stronger U.S. dollar (principally versus the British pound), partially offset by higher market values. The sequential decrease primarily reflects the impact of hedging activities and the unfavorable impact of a stronger U.S. dollar, partially offset by higher market values.
- Wealth Management - Both decreases primarily reflect lower net interest revenue, partially offset by higher market values.
- Noninterest expense decreased year-over-year and sequentially primarily reflecting the net reduction of the reserves for tax-related exposure of certain investment management funds and the favorable impact of a stronger U.S. dollar. The year-over-year decrease also reflects lower staff expense. The sequential decrease was partially offset by higher distribution and servicing expenses.
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BNY Mellon 3Q19 Earnings Release
OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, business exits and other corporate revenue and expense items.
(in millions) | 3Q19 | 2Q19 | 3Q18 | |||
Fee revenue | $ | 5 | $ | 34 | $ | 7 |
Net securities (losses) gains | (1) | 7 | - | |||
Total fee and other revenue | 4 | 41 | 7 | |||
Net interest (expense) | (80) | (40) | (13) | |||
Total (loss) revenue | (76) | 1 | (6) | |||
Provision for credit losses | (1) | (2) | (2) | |||
Noninterest expense | 35 | 39 | 6 | |||
(Loss) before taxes | $ | (110) | $ | (36) | $ | (10) |
KEY DRIVERS
- Fee revenue, net securities (losses) gains and net interest expense include corporate treasury and other investment activity, including hedging activity which offsets between fee revenue and net interest expense. Total revenue decreased and net interest expense increased year-over-year and sequentially primarily reflecting the lease-related impairment and corporate treasury activity.
- Noninterest expense increased year-over-year primarily reflecting higher staff expense.
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The Bank of New York Mellon Corporation published this content on 16 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 October 2019 10:37:06 UTC