BANK OF NEW YORK MELLON CORPORATION (THE) 
By NEW YORK, Jan. 18, 2012 /PRNewswire/ --
-- RESTRUCTURING CHARGES RELATED TO EFFICIENCY INITIATIVES OF $0.06 PER
SHARE
-- NONINTEREST EXPENSES INCREASED 2% COMPARED WITH THIRD QUARTER 2011
-- DECREASED 3% EXCLUDING RESTRUCTURING CHARGES AND M&I EXPENSES
-- GENERATED $571 MILLION OF BASEL I TIER 1 COMMON EQUITY IN FOURTH QUARTER
2011
-- BASEL I TIER 1 COMMON EQUITY RATIO 13.4%, UP 90 BASIS POINTS
SEQUENTIALLY
-- RETURN ON TANGIBLE COMMON EQUITY 20% EXCLUDING RESTRUCTURING CHARGES
AND M&I EXPENSES
-- ESTIMATED BASEL III TIER 1 COMMON EQUITY RATIO 7.1%, UP 60 BASIS POINTS
SEQUENTIALLY
The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported fourth quarter net income applicable to common shareholders of $505 million, or $0.42 per common share, compared with $679 million, or $0.54 per common share, in the fourth quarter of 2010 and $651 million, or $0.53 per common share, in the third quarter of 2011.
"I am pleased with the meaningful progress we made in improving our capital position and reducing operating expenses. Our Basel III Tier 1 common equity ratio was 7.1% at the end of the quarter, and we continued to generate strong returns on tangible common equity. It was a challenging revenue quarter, as general uncertainty in the financial markets resulted in lower-than-normal levels of client activity. Our results were also impacted by seasonality in our Depositary Receipts business. We remained focused on driving our operational excellence initiatives and managing our expense base lower to offset weak market conditions," said Gerald L. Hassell, chairman, president and chief executive officer of BNY Mellon.
"I want to thank our 49,000 professionals across the company for their continued commitment to improve our results and help our clients succeed in a difficult global economy," said Mr. Hassell.
Net income applicable to common shareholders totaled $2.516 billion, or $2.03 per common share, for the full-year 2011 compared with $2.518 billion, or $2.05 per common share, for the full-year 2010.
Note: See Supplemental information regarding Non-GAAP measures on pages 9 through 13 for the Tier 1 common equity generated in 4Q11, the Basel I Tier 1 common equity ratio, the estimated Basel III Tier 1 common equity ratio and return on tangible common equity excluding restructuring charges and M&I expenses.
Fourth Quarter Results - Unless otherwise noted, all comments begin with the results of the fourth quarter of 2011 and are compared to the fourth quarter of 2010. The fourth quarter 2010 information is reported on a continuing operations basis and sequential growth rates are unannualized. Please refer to the Quarterly Earnings Review for a detailed review of our businesses.
Total revenue
Reconciliation
of total
revenue 4Q11 vs.
--------
(dollars
in
millions) 4Q11 3Q11 4Q10 4Q10 3Q11
---------- ---- ---- ---- ---- ----
Fee and
other
revenue
- GAAP $2,765 $2,887 $2,972
Less: Net
securities
gains
(losses) (3) (2) 1
----------- --- --- ---
Total fee
revenue
- GAAP 2,768 2,889 2,971 (7)% (4)%
Income of
consolidated
investment
management
funds,
net of
noncontrolling
interests
(a) 23 19 45
Net
interest
revenue
- GAAP 780 775 720 8% 1%
--------- --- --- --- --- ---
Total
revenue
excluding
net
securities
gains
(losses)
- Non-
GAAP $3,571 $3,683 $3,736 (4)% (3)%
Total
revenue
- GAAP $3,540 $3,694 $3,751 (6)% (4)%
-------- ------ ------ ------ --- ---
(a) See the Supplemental information section beginning on
page 9.
-- Assets under custody and administration amounted to $25.8 trillion at
Dec. 31, 2011, an increase of 3% compared with the prior year and flat
sequentially. The increase compared with Dec. 31, 2010 was driven by
net new business. Assets under management, excluding securities lending
assets, amounted to $1.26 trillion at Dec. 31, 2011. This represents an
increase of 8% compared with the prior year and 5% sequentially. The
year-over-year increase primarily reflects net new business. On a
sequential basis, the increase resulted from higher equity markets and
net new business. Long-term inflows totaled $16 billion and short-term
inflows totaled $7 billion. Long-term inflows benefited from fixed
income and equity indexed products.
-- Investment services fees totaled $1.6 billion, a decrease of 8%
year-over-year and 12% sequentially. Both decreases were primarily
driven by seasonally lower Depositary Receipts revenue, lower volumes
and higher money market fee waivers. Adjusted for the seasonal impact of
Depositary receipts revenue, investment services fees decreased 3% both
year-over-year and sequentially.
-- Investment management and performance fees were $730 million, a decrease
of 9% year-over-year and flat sequentially. The year-over-year decrease
was driven by higher money market fee waivers, lower performance fees
and weaker international equity markets, partially offset by net new
business. Sequentially, higher performance fees and net new business
were offset by lower revenue on equity investments and higher money
market fee waivers.
-- Foreign exchange and other trading revenue totaled $228 million compared
with $258 million in the fourth quarter of 2010 and $200 million in the
third quarter of 2011. In the fourth quarter of 2011, foreign exchange
revenue totaled $183 million, a decrease of 11% year-over-year and 17%
sequentially. Both decreases resulted from lower volumes. The
year-over-year decrease was partially offset by higher volatility, while
sequentially, volatility decreased. Other trading revenue was $45
million in the fourth quarter of 2011 compared with revenue of $52
million in the fourth quarter of 2010 and a loss of $21 million in the
third quarter of 2011. The sequential increase was primarily driven by
a lower credit valuation adjustment.
-- Investment and other income totaled $146 million compared with $80
million in the prior year period and $83 million in the third quarter of
2011. The increases compared with both prior periods primarily resulted
from a pre-tax gain of $98 million (after-tax gain of $4 million) on the
sale of the Shareowner Services business, partially offset by a $30
million write-down of an equity investment.
-- Net interest revenue and the net interest margin (FTE) were $780 million
and 1.27% compared with $775 million and 1.30% sequentially. The
changes in net interest revenue and the net interest margin (FTE) were
primarily driven by growth in client deposits which were placed with
central banks. Average noninterest-bearing client deposits increased $3
billion, or 4%, compared with the third quarter of 2011.
The provision for credit losses was $23 million in the fourth quarter of 2011 compared with a credit of $22 million in both the fourth quarter of 2010 and the third quarter of 2011. The provision in the fourth quarter of 2011 primarily resulted from a broker-dealer customer that filed for bankruptcy in the fourth quarter of 2011.
Total noninterest expense
Reconciliation of
noninterest expense 4Q11 vs.
--------
(dollar amounts in millions) 4Q11 3Q11 4Q10 4Q10 3Q11
---------------------------- ---- ---- ---- ---- ----
Noninterest expense - GAAP $2,828 $2,771 $2,803 1% 2%
Less: Restructuring charges 107 (5) 21
M&I expenses 32 17 43
------------ --- --- ---
Total noninterest expense
excluding restructuring
charges and M&I expenses -
Non-GAAP 2,689 2,759 2,739 (2) (3)
Less: Amortization of
intangible assets 106 106 115
--------------------- --- --- ---
Total noninterest expense
excluding restructuring
charges, M&I expenses and
amortization of intangible
assets - Non-GAAP $2,583 $2,653 $2,624 (2)% (3)%
--------------------------- ------ ------ ------ --- ---
-- Total noninterest expense (excluding restructuring charges, merger and
integration ("M&I") expenses and amortization of intangible assets)
(Non-GAAP) decreased 2% compared with the prior year period and 3%
sequentially. The year-over-year decrease reflects lower staff expense
partially offset by higher litigation expense. The sequential decrease
primarily resulted from lower staff expense reflecting lower incentive
expense and a decline in headcount, as well as lower litigation expense
and lower volume-driven expenses, partially offset by higher software
and equipment, business development and professional, legal and other
purchased services expenses.
-- The fourth quarter of 2011 results include a restructuring charge of
$107 million, or $0.06 per diluted common share related to
efficiency initiatives to transform operations, technology and
corporate services.
The effective tax rate was 30.6% in the fourth quarter of 2011, compared with 27.3% on a continuing operations basis in the fourth quarter of 2010, and 29.7% in the third quarter of 2011. The effective tax rate in the fourth quarter of 2011 was negatively impacted by non-tax deductible goodwill associated with the disposition of Shareowner Services which was largely offset by a more favorable mix of foreign and domestic income.
The unrealized net of tax gain on our total investment securities portfolio was $420 million at Dec. 31, 2011 compared with $461 million at Sept. 30, 2011. The decrease in the valuation of the investment securities portfolio was driven by a lower valuation of non-agency residential mortgage-backed securities.
Capital ratios Dec. 31, Sept. 30, Dec. 31,
2011 (a) 2011 2010
-------- ---- ----
Estimated Basel III Tier 1
common equity ratio - Non-
GAAP (b)(c) 7.1% 6.5% N/A
Basel I Tier 1 common equity
to risk-weighted assets
ratio - Non-GAAP (c) 13.4 12.5 11.8%
Basel I Tier 1 capital ratio 15.0 14.0 13.4
Basel I total (Tier 1 plus
Tier 2) capital ratio 17.0 16.1 16.3
Basel I leverage capital
ratio 5.2 5.1 5.8
Common shareholders' equity
to total assets ratio (c) 10.3 10.5 13.1
Tangible common shareholders'
equity to tangible assets of
operations ratio - Non-GAAP
(c) 6.4 5.9 5.8
----------------------------- --- --- ---
(a)Preliminary.
(b) Our estimated Basel III Tier 1 common equity ratio (Non-
GAAP) reflects our current interpretation of the Basel III
rules. Our estimated Basel III Tier 1 common equity ratio
could change in the future as the U.S. regulatory agencies
implement Basel III or if our businesses change.
(c) See the Supplemental information section beginning on page
9 for a calculation of these ratios.
N/A - Not applicable.
We generated $571 million of Basel I Tier 1 common equity in the fourth quarter of 2011, primarily driven by earnings retention.
Our estimated Basel III Tier 1 common equity ratio (Non-GAAP) was 7.1% at Dec. 31, 2011 compared with 6.5% at Sept. 30, 2011. The improvement in the ratio was driven by lower risk-weighted assets and a reduction in goodwill and intangible assets.
Quarterly dividend - On Jan. 18, 2012, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.13 per common share. This cash dividend is payable on Feb. 7, 2012 to shareholders of record as of the close of business on Jan. 30, 2012.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $25.8 trillion in assets under custody and administration and $1.26 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available at www.bnymellon.com and through Twitter@bnymellon.
Supplemental Financial Information
The Quarterly Earnings Review and Supplemental Financial Trends for The Bank of New York Mellon Corporation have been updated through Dec. 31, 2011 and are available at www.bnymellon.com (Investor Relations - Financial Reports).
Conference Call Data
Gerald L. Hassell, chairman, president and chief executive officer and Thomas P. Gibbons, vice chairman and chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EST on Jan. 18, 2012. This conference call and audio webcast will include forward-looking statements and may include other material information.
Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (international), and using the passcode: Earnings, or by logging on to www.bnymellon.com. The Earnings Release, together with the Quarterly Earnings Review and Supplemental Financial Trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EST on Jan. 18, 2012. Replays of the conference call and audio webcast will be available beginning Jan. 18, 2012 at approximately 2 p.m. EST through Wednesday, Feb. 1, 2012 by dialing (866) 490-2547 (U.S.) or (203) 369-1702 (international). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.
THE BANK OF NEW YORK MELLON CORPORATION
Financial Highlights
Quarter ended Year ended
------------- ----------
(dollars
in
millions,
except
per
common
share
amounts
and
unless
otherwise
noted) Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2011 2011 2010(a) 2011 2010(a)
Return
on
common
equity
(annualized)
(b) 5.9% 7.6% 8.5% 7.5% 8.3%
Non-
GAAP
adjusted
(b) 7.7 8.5 9.9 8.6 9.8
Return
on
tangible
common
equity
(annualized)
-
Non-
GAAP
(b) 17.7% 22.1% 27.5% 22.6% 26.3%
Non-
GAAP
adjusted
(b) 20.4 22.3 29.1 23.5 28.0
Fee
revenue
as
a
percentage
of
total
revenue
excluding
net
securities
gains
(losses) 78% 78% 79% 78% 78%
Annualized fee
revenue per
employee
(based
on
average
headcount)
(in
thousands) $223 $233 $246 $237 $241
Percentage
of
non-
U.S.
total
revenue
(c) 34% 39% 38% 37% 36%
Pre-
tax
operating
margin
(b) 19% 26% 26% 25% 27%
Non-
GAAP
adjusted
(b) 27% 29% 30% 28% 32%
Net
interest
margin
(FTE) 1.27% 1.30% 1.54% 1.36% 1.70%
Selected
average
balances
Interest-
earning
assets $247,732 $240,253 $187,597 $222,233 $172,792
Assets
of
operations $304,235 $298,325 $241,734 $277,766 $224,484
Total
assets $316,074 $311,463 $256,409 $291,145 $237,839
Interest-
bearing
deposits $130,343 $125,795 $111,776 $124,695 $104,229
Noninterest-
bearing
deposits $76,309 $73,389 $39,625 $57,984 $35,208
Total
The
Bank
of
New
York
Mellon
Corporation
shareholders'
equity $33,761 $34,008 $32,379 $33,519 $31,100
Average common
shares and
equivalents
outstanding
(in
thousands):
Basic 1,204,994 1,214,126 1,232,568 1,220,804 1,212,630
Diluted 1,205,586 1,215,527 1,235,670 1,223,026 1,216,214
Period-end data
Assets
under
management
(in
billions) $1,260 $1,198 $1,172 $1,260 $1,172
Assets
under
custody
and
administration
(in
trillions) $25.8 $25.9 $25.0 $25.8 $25.0
Cross-
border
assets
(in
trillions) $9.7 $9.6 $9.2 $9.7 $9.2
Market
value
of
securities
on
loan
(in
billions)
(d) $269 $250 $278 $269 $278
Employees 48,700 49,600 48,000 48,700 48,000
Book
value
per
common
share
-
GAAP
(b) $27.62 $27.79 $26.06 $27.62 $26.06
Tangible
book
value
per
common
share
-
Non-
GAAP
(b) $10.57 $10.55 $8.91 $10.57 $8.91
Cash
dividends
per
common
share $0.13 $0.13 $0.09 $0.48 $0.36
Dividend
payout
ratio 31% 25% 17% 24% 18%
Closing
common
stock
price
per
common
share $19.91 $18.59 $30.20 $19.91 $30.20
Market
capitalization $24,085 $22,543 $37,494 $24,085 $37,494
-------------- ------- ------- ------- ------- -------
(a) Presented on a continuing operations basis.
(b) See Supplemental information beginning on page 9 for a
calculation of these ratios.
(c) Includes fee revenue, net interest revenue and income
of consolidated investment management funds, net of
noncontrolling interests.
(d) Represents the securities on loan managed by the
Investment Services business.
THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement
Quarter ended Year ended
------------- ----------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31
(in
millions) 2011 2011 2010(a) 2011 2010(a)
---------- ---- ---- ------- ---- -------
Fee
and
other
revenue
Investment
services
fees:
Asset
servicing $885 $922 $908 $3,697 $3,076
Issuer
services 287 442 409 1,445 1,460
Clearing
services 278 297 278 1,159 1,005
Treasury
services 134 133 135 535 530
-------- --- --- --- --- ---
Total
investment
services
fees 1,584 1,794 1,730 6,836 6,071
Investment
management
and
performance
fees 730 729 800 3,002 2,868
Foreign
exchange
and
other
trading
revenue 228 200 258 848 886
Distribution
and
servicing 42 43 55 187 210
Financing-
related
fees 38 40 48 170 195
Investment
and
other
income 146 83 80 455 467
---------- --- --- --- --- ---
Total
fee
revenue 2,768 2,889 2,971 11,498 10,697
Net
securities
gains
(losses) (3) (2) 1 48 27
----------- --- --- --- --- ---
Total
fee
and
other
revenue 2,765 2,887 2,972 11,546 10,724
Operations
of
consolidated
investment
management
funds
Investment
income 108 169 176 670 663
Interest
of
investment
management
fund
note
holders 113 137 117 470 437
---------- --- --- --- --- ---
Income
(loss)
from
consolidated
investment
management
funds (5) 32 59 200 226
Net
interest
revenue
Interest
revenue 925 928 892 3,588 3,470
Interest
expense 145 153 172 604 545
-------- --- --- --- --- ---
Net
interest
revenue 780 775 720 2,984 2,925
Provision
for
credit
losses 23 (22) (22) 1 11
--------- --- --- --- --- ---
Net
interest
revenue
after
provision
for
credit
losses 757 797 742 2,983 2,914
Noninterest
expense
Staff 1,382 1,457 1,417 5,726 5,215
Professional,
legal
and
other
purchased
services 322 311 320 1,217 1,099
Software
and
equipment 213 193 207 815 725
Net
occupancy 159 151 158 624 588
Distribution
and
servicing 96 100 104 416 377
Sub-
custodian 62 80 70 298 247
Business
development 75 57 88 261 271
Other 274 304 260 1,147 1,060
----- --- --- --- ----- -----
Subtotal 2,583 2,653 2,624 10,504 9,582
Amortization
of
intangible
assets 106 106 115 428 421
Restructuring
charges 107 (5) 21 89 28
Merger
and
integration
expenses 32 17 43 91 139
----------- --- --- --- --- ---
Total
noninterest
expense 2,828 2,771 2,803 11,112 10,170
----------- ----- ----- ----- ------ ------
Income
Income
from
continuing
operations
before
income
taxes 689 945 970 3,617 3,694
Provision
for
income
taxes 211 281 265 1,048 1,047
--------- --- --- --- ----- -----
Net
income
from
continuing
operations 478 664 705 2,569 2,647
Discontinued
operations:
Loss
from
discontinued
operations - - (18) - (110)
Benefit
for
income
taxes - - (7) - (44)
------- --- --- --- --- ---
Net
loss
from
discontinued
operations - - (11) - (66)
------------- --- --- --- --- ---
Net
income 478 664 694 2,569 2,581
Net
(income)
loss
attributable
to
noncontrolling
interests
(includes
$28,
$(13),
$(14),
$(50)
and
$(59)
related
to
consolidated
investment
management
funds) 27 (13) (15) (53) (63)
Net
income
applicable
to
common
shareholders
of
The
Bank
of
New
York
Mellon
Corporation $505 $651 $679 $2,516 $2,518
------------- ---- ---- ---- ------ ------
(a) In the first quarter of 2011, BNY Mellon realigned
its internal reporting structure. See our Form 10-Q
for the quarter ended March 31, 2011.
THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement - continued
Reconciliation of
net income from
continuing
operations to the
net income
applicable to the
common shareholders
of The Bank of New
York Mellon
Corporation Quarter ended Year ended
------------- ----------
Dec. Sept. Dec. Dec. Dec.
31, 30, 31, 31, 31,
(in millions) 2011 2011 2010 2011 2010
------------- ---- ---- ---- ---- ----
Net income from
continuing
operations $478 $664 $705 $2,569 $2,647
Net (income) loss
attributable to
noncontrolling
interests 27 (13) (15) (53) (63)
----------------- --- --- --- --- ---
Net income from
continuing
operations
applicable to
common shareholders
of The Bank of New
York Mellon
Corporation 505 651 690 2,516 2,584
Net loss from
discontinued
operations - - (11) - (66)
------------- --- --- --- --- ---
Net income
applicable to
common shareholders
of The Bank of New
York Mellon
Corporation 505 651 679 2,516 2,518
Less: Earnings
allocated to
participating
securities 6 7 6 27 23
Excess of redeemable
value over the fair
value of
noncontrolling
interests (1) 4 - 9 -
-------------------- --- --- --- --- ---
Net income
applicable to the
common shareholders
of The Bank of New
York Mellon
Corporation after
required
adjustments for the
calculation of
basic and diluted
earnings per share $500 $640 $673 $2,480 $2,495
-------------------- ---- ---- ---- ------ ------
Earnings per
common share
applicable
to common
shareholders
of The Bank
of New York
Mellon
Corporation
(a) Quarter ended Year ended
------------- ----------
Dec. Sept. Dec. Dec.
31, 30, 31, 31, Dec. 31,
(in dollars) 2011 2011 2010 2011 2010
------------ ---- ---- ---- ---- ----
Basic:
Net income
from
continuing
operations $0.42 $0.53 $0.55 $2.03 $2.11
Net loss from
discontinued
operations - - (0.01) - (0.05)
------------- --- --- ----- --- -----
Net income
applicable
to common
stock $0.42 $0.53 $0.55 (b) $2.03 $2.06
Diluted:
Net income
from
continuing
operations $0.42 $0.53 $0.55 $2.03 $2.11
Net loss from
discontinued
operations - - (0.01) - (0.05)
------------- --- --- ----- --- -----
Net income
applicable
to common
stock $0.42 $0.53 $0.54 $2.03 $2.05 (b)
----------- ----- ----- ----- ----- ---------
(a) Basic and diluted earnings per share under the two-
class method are determined on the net income reported on
the income statement less earnings allocated to
participating securities, and the excess of redeemable
value over the fair value of noncontrolling interests.
(b) Does not foot due to rounding.
Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.
THE BANK OF NEW YORK MELLON CORPORATION
Consolidated Balance Sheet
Sept.
Dec. 31, 30, Dec. 31,
(dollars in millions, except per
share amounts) 2011 2011 2010
-------------------------------- ---- ---- ----
Assets
Cash and due from:
Banks $4,175 $6,691 $3,675
Interest-bearing deposits with
the Federal Reserve and other
central banks 90,243 68,290 18,549
Interest-bearing deposits with
banks 36,321 52,465 50,200
Federal funds sold and securities
purchased under resale agreements 4,510 4,642 5,169
Securities:
Held-to-maturity (fair value of
$3,540, $4,037 and $3,657) 3,521 4,013 3,655
Available-for-sale 78,467 72,572 62,652
------------------ ------ ------ ------
Total securities 81,988 76,585 66,307
Trading assets 7,861 9,625 6,276
Loans 43,979 45,312 37,808
Allowance for loan losses (394) (392) (498)
------------------------- ---- ---- ----
Net loans 43,585 44,920 37,310
Premises and equipment 1,681 1,705 1,693
Accrued interest receivable 660 645 508
Goodwill 17,904 18,045 18,042
Intangible assets 5,152 5,380 5,696
Other assets 19,839 21,131 18,790
Assets of discontinued operations - - 278
--------------------------------- --- --- ---
Subtotal assets of operations 313,919 310,124 232,493
Assets of consolidated investment
management funds, at fair value:
Trading assets 10,751 11,419 14,121
Other assets 596 644 645
------------ --- --- ---
Subtotal assets of consolidated
investment management funds, at
fair value 11,347 12,063 14,766
-------------------------------- ------ ------ ------
Total assets $325,266 $322,187 $247,259
------------ -------- -------- --------
Liabilities
Deposits:
Noninterest-bearing (principally
U.S. offices) $95,335 $81,821 $38,703
Interest-bearing deposits in U.S.
offices 41,231 41,882 37,937
Interest-bearing deposits in Non-
U.S. offices 82,528 87,187 68,699
--------------------------------- ------ ------ ------
Total deposits 219,094 210,890 145,339
Federal funds purchased and
securities sold under repurchase
agreements 6,267 6,768 5,602
Trading liabilities 8,071 7,960 6,911
Payables to customers and broker-
dealers 12,671 13,097 9,962
Commercial paper 10 44 10
Other borrowed funds 2,174 4,561 2,858
Accrued taxes and other expenses 6,235 6,324 6,164
Other liabilities (includes
allowance for lending related
commitments of $103, $106 and
$73) 6,525 7,964 7,176
Long-term debt 19,933 19,399 16,517
-------------- ------ ------ ------
Subtotal liabilities of operations 280,980 277,007 200,539
Liabilities of consolidated
investment management funds, at
fair value:
Trading liabilities 10,053 10,626 13,561
Other liabilities 32 25 2
----------------- --- --- ---
Subtotal liabilities of
consolidated investment
management funds, at fair value 10,085 10,651 13,563
-------------------------------- ------ ------ ------
Total liabilities 291,065 287,658 214,102
Temporary equity
Redeemable noncontrolling interest 114 124 92
Permanent equity
Common stock - par value $0.01 per
common share; authorized
3,500,000,000 common shares;
Issued 1,249,061,305,
1,248,378,937 and 1,244,608,989
common shares 12 12 12
Additional paid-in capital 23,185 23,117 22,885
Retained earnings 12,812 12,464 10,898
Accumulated other comprehensive
loss, net of tax (1,627) (1,004) (1,355)
Less: Treasury stock of
39,386,698, 35,746,824 and
3,078,794 common shares, at cost (965) (894) (86)
--------------------------------- ---- ---- ---
Total The Bank of New York Mellon
Corporation shareholders' equity 33,417 33,695 32,354
Non-redeemable noncontrolling
interests - - 12
Non-redeemable noncontrolling
interests of consolidated
investment management funds 670 710 699
----------------------------- --- --- ---
Total permanent equity 34,087 34,405 33,065
---------------------- ------ ------ ------
Total liabilities, temporary
equity and permanent equity $325,266 $322,187 $247,259
---------------------------- -------- -------- --------
Supplemental information - Explanation of Non-GAAP financial measures
BNY Mellon has included in this press release certain Non-GAAP financial measures based upon tangible common shareholders' equity. BNY Mellon believes that the ratio of Tier 1 common equity to risk-weighted assets and the ratio of tangible common shareholders' equity to tangible assets of operations are measures of capital strength that provide additional useful information to investors, supplementing the Tier 1 and Total capital ratios which are utilized by regulatory authorities. The ratio of Tier 1 common equity to risk-weighted assets excludes trust preferred securities, which will be phased out as Tier 1 regulatory capital beginning in 2013. Unlike the Tier 1 and Total capital ratios, the tangible common shareholders' equity ratio fully incorporates those changes in investment securities valuations which are reflected in total shareholders' equity. In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes. Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of BNY Mellon's performance in reference to those assets which are productive in generating income. BNY Mellon has presented its estimated Basel III Tier 1 common equity ratio on a basis that is representative of how it currently understands the Basel III rules. Management views the Basel III Tier 1 common equity ratio as a key measure in monitoring BNY Mellon's capital position. Additionally, the presentation of the Basel III Tier 1 common equity ratio allows investors to compare BNY Mellon's Basel III Tier 1 common equity ratio with estimates presented by other companies.
BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding. BNY Mellon has presented revenue measures which exclude the effect of net securities gains (losses); and expense measures which exclude special litigation reserves taken in the first quarter of 2010, restructuring charges, M&I expenses and amortization of intangible assets expenses. Operating margin measures, which exclude some or all of these items, are also presented. Operating margin measures also exclude noncontrolling interests related to consolidated investment management funds. BNY Mellon believes that these measures are useful to investors because they permit a focus on period to period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon's control. The excluded items in general relate to situations where accounting rules require certain ongoing charges as a result of prior transactions, or where we have incurred charges unrelated to operational initiatives. M&I expenses primarily relate to the acquisitions of Global Investment Servicing on July 1, 2010 and BHF Asset Servicing GmbH on Aug. 2, 2010 and the merger with Mellon Financial Corporation in 2007. M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased, typically after approximately three years. Future periods will not reflect such M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded. With regards to the exclusion of net securities gains (losses), BNY Mellon's primary businesses are Investment Management and Investment Services. The management of these businesses is evaluated on the basis of the ability of these businesses to generate fee and net interest revenue and to control expenses, and not on the results of BNY Mellon's investment securities portfolio. The investment securities portfolio is managed within the Other segment. The primary objective of the investment securities portfolio is to generate net interest revenue from the liquidity generated by BNY Mellon's processing businesses. BNY Mellon does not generally originate or trade the securities in the investment securities portfolio.
The presentation of financial measures excluding special litigation reserves taken in the first quarter of 2010 provides investors the ability to view performance metrics on the basis that management views results. The presentation of income of consolidated investment management funds, net of noncontrolling interest related to the consolidation of certain investment management funds, permits investors to view revenue on a basis consistent with how management views the business. Restructuring charges relate to our operational efficiency initiatives and migrating positions to global growth centers. Excluding these charges permits investors to view expenses on a basis consistent with how management views the business. BNY Mellon believes that these presentations, as a supplement to GAAP information, give investors a clearer picture of the results of its primary businesses.
In this Earnings Release, the net interest margin is presented on an FTE basis. We believe that this presentation provides comparability of amounts arising from both taxable and tax exempt sources, and is consistent with industry practice.
Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and business-level basis.
Reconciliation of income from continuing operations
before income taxes - pre-tax operating margin
(dollars in
millions) 4Q11 3Q11 4Q10 2011 2010
----------- ---- ---- ---- ---- ----
Income from
continuing
operations
before income
taxes - GAAP $689 $945 $970 $3,617 $3,694
Less: Net
securities
gains
(losses) (3) (2) 1 48 27
Noncontrolling
interests of
consolidated
investment
management
funds (28) 13 14 50 59
Add:
Amortization
of intangible
assets 106 106 115 428 421
Restructuring
charges 107 (5) 21 89 28
M&I expenses 32 17 43 91 139
Special
litigation
reserves N/A N/A N/A N/A 164
----------- --- --- --- --- ---
Income from
continuing
operations
before income
taxes
excluding net
securities
gains
(losses),
noncontrolling
interests of
consolidated
investment
management
funds,
amortization
of intangible
assets,
restructuring
charges, M&I
expenses and
special
litigation
reserves -
Non-GAAP $965 $1,052 $1,134 $4,127 $4,360
Fee and other
revenue -
GAAP $2,765 $2,887 $2,972 $11,546 $10,724
Income of
consolidated
investment
management
funds - GAAP (5) 32 59 200 226
Net interest
revenue -
GAAP 780 775 720 2,984 2,925
------------ --- --- --- ----- -----
Total revenue
- GAAP 3,540 3,694 3,751 14,730 13,875
Less: Net
securities
gains
(losses) (3) (2) 1 48 27
Noncontrolling
interests of
consolidated
investment
management
funds (28) 13 14 50 59
-------------- --- --- --- --- ---
Total revenue
excluding net
securities
gains
(losses) and
noncontrolling
interests of
consolidated
investment
management
funds - Non-
GAAP $3,571 $3,683 $3,736 $14,632 $13,789
Pre-tax
operating
margin (a) 19% 26% 26% 25% 27%
Pre-tax
operating
margin
excluding net
securities
gains
(losses),
noncontrolling
interests of
consolidated
investment
management
funds,
amortization
of intangible
assets,
restructuring
charges, M&I
expenses and
special
litigation
reserves -
Non-GAAP (a) 27% 29% 30% 28% 32%
--------------- --- --- --- --- ---
(a) Income before taxes divided by total revenue.
N/A - Not applicable.
Return on common equity and tangible common equity
(dollars in
millions) 4Q11 3Q11 4Q10(a) 2011 2010(a)
----------- ---- ---- ------- ---- -------
Net income
applicable to
common
shareholders of
The Bank of New
York Mellon
Corporation -
GAAP $505 $651 $679 $2,516 $2,518
Less: Net loss
from discontinued
operations - - (11) - (66)
------------------ --- --- --- --- ---
Net income from
continuing
operations
applicable to
common
shareholders of
The Bank of New
York Mellon
Corporation 505 651 690 2,516 2,584
Add: Amortization
of intangible
assets, net of
tax 66 67 72 269 264
----------------- --- --- --- --- ---
Net income from
continuing
operations
applicable to
common
shareholders of
The Bank of New
York Mellon
Corporation
excluding
amortization of
intangible assets
- Non-GAAP 571 718 762 2,785 2,848
Less: Net
securities gains
(losses) N/A N/A N/A 3 17
Add: Special
litigation
reserves N/A N/A N/A N/A 98
Restructuring
charges 67 (3) 15 54 19
M&I expenses 21 11 29 59 91
------------ --- --- --- --- ---
Net income from
continuing
operations
applicable to
common
shareholders of
The Bank of New
York Mellon
Corporation
excluding
amortization of
intangible
assets, net
securities gains
(losses), special
litigation
reserves,
restructuring
charges and M&I
expenses - Non-
GAAP $659 $726 $806 $2,895 $3,039
Average common
shareholders'
equity $33,761 $34,008 $32,379 $33,519 $31,100
Less: Average
goodwill 18,044 18,156 18,073 18,129 17,029
Average intangible
assets 5,333 5,453 5,761 5,498 5,664
Add: Deferred tax
liability - tax
deductible
goodwill 967 915 816 967 816
Deferred tax
liability - non-
tax deductible
intangible assets 1,459 1,604 1,625 1,459 1,625
------------------ ----- ----- ----- ----- -----
Average tangible
common
shareholders'
equity - Non-
GAAP $12,810 $12,918 $10,986 $12,318 $10,848
Return on common
equity - GAAP (b) 5.9% 7.6% 8.5% 7.5% 8.3%
Return on common
equity excluding
amortization of
intangible
assets, net
securities gains
(losses), special
litigation
reserves,
restructuring
charges and M&I
expenses - Non-
GAAP (b) 7.7% 8.5% 9.9% 8.6% 9.8%
Return on tangible
common equity -
Non-GAAP (b) 17.7% 22.1% 27.5% 22.6% 26.3%
Return on tangible
common equity
excluding net
securities gains
(losses), special
litigation
reserves,
restructuring
charges and M&I
expenses - Non-
GAAP (b) 20.4% 22.3% 29.1% 23.5% 28.0%
------------------ ---- ---- ---- ---- ----
(a) Presented on a continuing operations basis.
(b) Annualized.
Equity to assets and book Sept.
value per common share Dec. 31, 30, Dec. 31,
(dollars in millions, unless
otherwise noted) 2011 2011 2010
---------------------------- ---- ---- ----
Common shareholders' equity at
period end - GAAP $33,417 $33,695 $32,354
Less: Goodwill 17,904 18,045 18,042
Intangible assets 5,152 5,380 5,696
Add: Deferred tax liability -
tax deductible goodwill 967 915 816
Deferred tax liability - non-
tax deductible intangible
assets 1,459 1,604 1,625
----------------------------- ----- ----- -----
Tangible common shareholders'
equity at period end - Non-
GAAP $12,787 $12,789 $11,057
Total assets at period end -
GAAP $325,266 $322,187 $247,259
Less: Assets of consolidated
investment management funds 11,347 12,063 14,766
---------------------------- ------ ------ ------
Subtotal assets of operations
- Non-GAAP 313,919 310,124 232,493
Less: Goodwill 17,904 18,045 18,042
Intangible assets 5,152 5,380 5,696
Cash on deposit with the
Federal Reserve and other
central banks (a) 90,230 68,293 18,566
-------------------------- ------ ------ ------
Tangible assets of operations
at period end - Non-GAAP $200,633 $218,406 $190,189
Common shareholders' equity to
total assets - GAAP 10.3% 10.5% 13.1%
Tangible common shareholders'
equity to tangible assets of
operations - Non-GAAP 6.4% 5.9% 5.8%
Period end common shares
outstanding (in thousands) 1,209,675 1,212,632 1,241,530
Book value per common share $27.62 $27.79 $26.06
Tangible book value per common
share - Non-GAAP $10.57 $10.55 $8.91
------------------------------ ------ ------ -----
(a) Assigned a zero percent risk-weighting by the
regulators.
Basel I Tier 1 common equity generation
(dollars in millions) 4Q11 3Q11 2Q11 1Q11 4Q10
--------------------- ---- ---- ---- ---- ----
Net income applicable to common
shareholders of The Bank of New
York Mellon Corporation - GAAP $505 $651 $735 $625 $679
Add: Amortization of intangible
assets, net of tax 66 67 68 68 72
------------------------------- --- --- --- --- ---
Gross Basel I Tier 1 common
equity generated 571 718 803 693 751
--------------------------- --- --- --- --- ---
Less capital deployed:
Dividends 159 160 162 111 112
Common stock repurchases 69 462 272 32 -
------------------------ --- --- --- --- ---
Total capital deployed 228 622 434 143 112
Add: Other 129 (59) 138 245 (64)
---------- --- --- --- --- ---
Net Basel I Tier 1 common equity
generated $472 $37 $507 $795 $575
-------------------------------- ---- --- ---- ---- ----
Calculation of Basel I Tier 1
common equity to risk-
weighted assets ratio (a) Dec. 31, Sept. 30, Dec. 31,
(dollars in millions) 2011(b) 2011 2010
--------------------- ------- ---- ----
Total Tier 1 capital Basel I $15,389 $14,920 $13,597
Less: Trust preferred
securities 1,657 1,660 1,676
--------------------- ----- ----- -----
Total Tier 1 common equity $13,732 $13,260 $11,921
Total risk-weighted assets
Basel I $102,363 $106,256 $101,407
Basel I Tier 1 common equity
to risk-weighted assets
ratio 13.4% 12.5% 11.8%
---------------------------- ---- ---- ----
(a) The period ended Dec. 31, 2010 includes discontinued
operations.
(b) Preliminary.
The following table presents the calculation of our estimated Basel III Tier 1 common equity ratio on a fully phased-in basis.
Estimated Basel III Tier 1
common equity ratio -
Non-GAAP (a) Dec. 31, Sept. 30,
(dollars in millions) 2011(b) 2011
--------------------- ------- ----
Total Tier 1 capital -
Basel I $15,389 $14,920
Less: Trust preferred
securities 1,657 1,660
Adjustments related to AFS
securities and pension
liabilities included in
AOCI (c) 944 470
Adjustments related to
equity method investments
(c) 555 590
Net pensions fund assets
(c) 90 493
Other (1) 26
----- --- ---
Total estimated Basel III
Tier 1 common equity $12,144 $11,681
Total risk-weighted
assets - Basel I $102,363 $106,256
Add: Adjustments (d) 69,707 74,224
-------------------- ------ ------
Total estimated Basel III
risk-weighted assets $172,070 $180,480
Estimated Basel III Tier 1
common equity ratio (Non-
GAAP) 7.1% 6.5%
-------------------------- --- ---
(a) Our estimated Basel III Tier 1 common equity ratio
(Non-GAAP) reflects our current interpretation of the
Basel III rules. Our estimated Basel III Tier 1 common
equity ratio could change in the near future as the U.S.
regulatory agencies implement Basel III or if our
businesses change.
(b) Preliminary.
(c) Basel III does not add back to capital the adjustment
to other comprehensive income that Basel I and Basel II
make for pension liabilities and available-for-sale
securities. Also, under Basel III, pension assets
recorded on the balance sheet and adjustments related to
equity method investments are a deduction from capital.
(d) Primary differences between Basel I and Basel III
include: the determination of credit risk under Basel I
uses predetermined risk weights and asset classes, while
under Basel III includes borrower credit ratings and
internal risk models; the treatment of securitizations
that fall below investment grade receive a significantly
higher risk weighting under Basel III than Basel I; also,
Basel III includes additional adjustments for operational
risk, market risk, counter party credit risk and equity
exposures.
The following table presents income from consolidated investment management funds, net of noncontrolling interests.
Income from consolidated investment management funds, net of
noncontrolling interests
(in millions) 4Q11 3Q11 4Q10 2011 2010
------------- ---- ---- ---- ---- ----
Income (loss) from
consolidated
investment
management funds $(5) $32 $59 $200 $226
Less: Net income
(loss) attributable
to noncontrolling
interests of
consolidated
investment
management funds (28) 13 14 50 59
-------------------- --- --- --- --- ---
Income from
consolidated
investment
management funds,
net of
noncontrolling
interests $23 $19 $45 $150 $167
------------------ --- --- --- ---- ----
Cautionary Statement
The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which may be expressed in a variety of ways, include the use of future or present tense language. These statements and other forward-looking statements contained in other public disclosures of BNY Mellon which make reference to the cautionary factors described in this Earnings Release, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control). Factors that could cause BNY Mellon's results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2010, our Form 10-Q for the quarter ended Sept. 30, 2011 and its other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Release speak only as of Jan. 18, 2012 and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
SOURCE BNY Mellon
