NEW YORK, July 19, 2018
/PRNewswire/ --
Revenue up
5%
|
|
EPS up
17%
|
|
ROE
11%
ROTCE
23% (a)
|
|
CET1
11.0%
SLR
6.2%
|
The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE:
BK) today reported:
|
|
|
|
2Q18
vs.
|
|
2Q18
|
1Q18
|
2Q17
|
1Q18
|
2Q17
|
Net income applicable
to common shareholders (in millions)
|
$
|
1,055
|
|
$
|
1,135
|
|
$
|
926
|
|
(7)
|
%
|
14
|
%
|
Diluted earnings per
common share
|
$
|
1.03
|
|
$
|
1.10
|
|
$
|
0.88
|
|
(6)
|
%
|
17
|
%
|
Second Quarter
Results
|
|
CEO
Commentary
|
|
|
|
Total revenue of
$4.1 billion, increased 5%
- Fee revenue increased 3%
- Net interest revenue increased 11%
|
|
"While we continued
to benefit from the positive impact of higher interest rates and
equity markets, albeit at a more modest pace than last quarter, we
again saw some underlying franchise growth. Overall, the
company remains strong, with some areas performing better than
others," Charles W. Scharf, chairman and chief executive officer,
said.
"We saw pockets of
strength, in Investment Services, especially where we have
differentiated capabilities such as clearance, collateral
management, tri-party repo and liquidity services. Investment
Management growth moderated as we saw some softness across the
board in our asset flows," Mr. Scharf continued.
"We remain
disciplined and focused on deploying our resources. Currency
translation and real estate costs impacted expense growth by 2
percent and, despite an increase in our investment in technology,
all other expenses were up modestly," Mr. Scharf added.
"Following the
release of our CCAR results, we are now authorized to repurchase
$2.4 billion in common shares by mid-2019, and we increased our
common dividend 17 percent starting this quarter. While we
were not surprised by the outcome given the severity of the
assumptions in this year's test, our expectations for returning
capital to shareholders over time have not changed," Mr. Scharf
also noted.
"We remain focused on
driving organic growth across our businesses. The
opportunities in our new business pipeline are encouraging.
We are confident that we are taking the right actions to realize
them and expect the results to build over time," Mr. Scharf
concluded.
|
Total noninterest
expense of $2.7 billion, increased 3%
- Weaker U.S. dollar and real estate
consolidation increased expenses ~ 2%
- Investments in technology were partially
offset by decreases in other expenses
|
|
Investment
Services
- Total revenue increased 8%
- Income before taxes increased 20%
- Record AUC/A of $33.6 trillion, up 8%
|
|
Investment
Management
- Total revenue increased 3%
- Income before taxes increased 11%
- AUM of $1.8 trillion, up 2%
|
|
Returned $895
million to common shareholders
- Repurchased 12 million common shares for $651
million
- Paid $244 million in dividends to common
shareholders
- Authorized to repurchase $2.4 billion of
common shares through 2Q19 and increased quarterly dividend 17% to
$0.28 per common share in 3Q18
|
|
Investor
Relations: Valerie Haertel (212) 635-8529
|
Media
Relations: Jennifer Hendricks Sullivan (212)
635-1374
|
(a) For
information on this Non-GAAP measure, see "Supplemental information
- Explanation of GAAP and Non-GAAP financial measures" beginning on
page 11.
|
Note: Above
comparisons are 2Q18 vs. 2Q17.
|
CONSOLIDATED SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS
(dollars in
millions, except per share amounts; common shares in
thousands)
|
|
|
|
2Q18
vs.
|
2Q18
|
1Q18
|
2Q17
|
1Q18
|
2Q17
|
Fee
revenue
|
$
|
3,209
|
|
$
|
3,319
|
|
$
|
3,120
|
|
(3)
|
%
|
3
|
%
|
Net securities gains
(losses)
|
1
|
|
(49)
|
|
—
|
|
N/M
|
N/M
|
Fee and other
revenue
|
3,210
|
|
3,270
|
|
3,120
|
|
(2)
|
|
3
|
|
Income (loss) from
consolidated investment management funds
|
12
|
|
(11)
|
|
10
|
|
N/M
|
N/M
|
Net interest
revenue
|
916
|
|
919
|
|
826
|
|
—
|
|
11
|
|
Total
revenue
|
4,138
|
|
4,178
|
|
3,956
|
|
(1)
|
|
5
|
|
Provision for credit
losses
|
(3)
|
|
(5)
|
|
(7)
|
|
N/M
|
N/M
|
Noninterest
expense
|
2,747
|
|
2,739
|
|
2,655
|
|
—
|
|
3
|
|
Income before income
taxes
|
1,394
|
|
1,444
|
|
1,308
|
|
(3)
|
|
7
|
|
Provision for income
taxes
|
286
|
|
282
|
|
332
|
|
1
|
|
(14)
|
|
Net income
|
$
|
1,108
|
|
$
|
1,162
|
|
$
|
976
|
|
(5)
|
%
|
14
|
%
|
Net income applicable
to common shareholders of The Bank of New York Mellon
Corporation
|
$
|
1,055
|
|
$
|
1,135
|
|
$
|
926
|
|
(7)
|
%
|
14
|
%
|
Operating leverage
(a)
|
|
|
|
(125)
|
bps
|
113
|
bps
|
Diluted earnings per
common share
|
$
|
1.03
|
|
$
|
1.10
|
|
$
|
0.88
|
|
(6)
|
%
|
17
|
%
|
Average common shares
and equivalents outstanding - diluted
|
1,014,357
|
|
1,021,731
|
|
1,041,879
|
|
|
|
Pre-tax operating
margin
|
34
|
%
|
35
|
%
|
33
|
%
|
|
|
(a)
Operating leverage is the rate of increase (decrease) in total
revenue less the rate of increase (decrease) in total noninterest
expense.
|
N/M – Not
meaningful.
|
bps – basis
points.
|
KEY DRIVERS (comparisons are 2Q18 vs. 2Q17, unless
otherwise stated)
- Total revenue increased 5% primarily reflecting:
-
- Fee revenue increased 3%, primarily reflecting higher equity
market values, the favorable impact of a weaker U.S. dollar, higher
foreign exchange revenue and growth in collateral management,
partially offset by lease-related gains recorded in 2Q17.
- Net interest revenue increased 11% driven by higher interest
rates.
- Noninterest expense increased 3% primarily reflecting
investments in technology, expenses associated with the continued
consolidation of our real estate and the unfavorable impact of a
weaker U.S. dollar, partially offset by decreases in other
expenses.
- Effective tax rate of 20.5%.
Assets under custody and/or administration ("AUC/A") and
Assets under management ("AUM")
- Record assets under custody and/or administration of
$33.6 trillion, up 8%, reflecting
higher market values and business growth.
- Assets under management of $1.8
trillion increased 2%, primarily reflecting higher market
values and the favorable impact of a weaker U.S. dollar
(principally versus the British pound), partially offset by the
divestiture of CenterSquare Investment Management ("CenterSquare"),
net outflows and other changes.
Capital and liquidity
- Repurchased 12 million common shares for $651 million and paid $244
million in dividends to common shareholders.
- Return on common equity ("ROE) of 11%; Return on tangible
common equity ("ROTCE") of 23% (b).
- Common Equity Tier 1 ("CET1") ratio – 11.0%.
- Supplementary leverage ratio ("SLR") – 6.2%.
- Average liquidity coverage ratio ("LCR") – 118%.
(b)
|
See "Supplemental
information – Explanation of GAAP and Non-GAAP financial measures"
beginning on page 11 for the reconciliation.
|
|
Note:
Throughout this document, sequential growth rates are
unannualized.
|
INVESTMENT SERVICES BUSINESS HIGHLIGHTS
(dollars in
millions, unless otherwise noted; not meaningful -
N/M)
|
|
|
|
2Q18
vs.
|
2Q18
|
1Q18
|
2Q17
|
1Q18
|
2Q17
|
Total revenue by line
of business:
|
|
|
|
|
|
Asset
Servicing
|
$
|
1,520
|
|
$
|
1,519
|
|
$
|
1,378
|
|
—
|
%
|
10
|
%
|
Pershing
|
558
|
|
581
|
|
547
|
|
(4)
|
|
2
|
|
Issuer
Services
|
431
|
|
418
|
|
398
|
|
3
|
|
8
|
|
Treasury
Services
|
329
|
|
321
|
|
311
|
|
2
|
|
6
|
|
Clearance and
Collateral Management
|
269
|
|
255
|
|
242
|
|
5
|
|
11
|
|
Total revenue by line
of business
|
3,107
|
|
3,094
|
|
2,876
|
|
—
|
|
8
|
|
Provision for credit
losses
|
1
|
|
(7)
|
|
(3)
|
|
N/M
|
N/M
|
Noninterest
expense
|
1,967
|
|
1,949
|
|
1,927
|
|
1
|
|
2
|
|
Income before
taxes
|
$
|
1,139
|
|
$
|
1,152
|
|
$
|
952
|
|
(1)
|
%
|
20
|
%
|
|
|
|
|
|
|
Pre-tax operating
margin
|
37
|
%
|
37
|
%
|
33
|
%
|
|
|
|
|
|
|
|
|
Foreign exchange
revenue
|
$
|
172
|
|
$
|
169
|
|
$
|
145
|
|
2
|
%
|
19
|
%
|
Securities lending
revenue
|
$
|
55
|
|
$
|
48
|
|
$
|
42
|
|
15
|
%
|
31
|
%
|
|
|
|
|
|
|
Metrics:
|
|
|
|
|
|
Average
loans
|
$
|
38,002
|
|
$
|
39,200
|
|
$
|
40,931
|
|
(3)
|
%
|
(7)
|
%
|
Average
deposits
|
$
|
203,064
|
|
$
|
214,130
|
|
$
|
200,417
|
|
(5)
|
%
|
1
|
%
|
|
|
|
|
|
|
AUC/A at period end
(in trillions) (current period is preliminary)
(a)
|
$
|
33.6
|
|
$
|
33.5
|
|
$
|
31.1
|
|
—
|
%
|
8
|
%
|
Market value of
securities on loan at period end (in billions)
(b)
|
$
|
432
|
|
$
|
436
|
|
$
|
336
|
|
(1)
|
%
|
29
|
%
|
|
|
|
|
|
|
Pershing
|
|
|
|
|
|
Average active
clearing accounts (U.S. platform) (in thousands)
|
6,080
|
|
6,075
|
|
6,159
|
|
—
|
%
|
(1)
|
%
|
Average long-term
mutual fund assets (U.S. platform)
|
$
|
512,645
|
|
$
|
514,542
|
|
$
|
480,532
|
|
—
|
%
|
7
|
%
|
Average investor
margin loans (U.S. platform)
|
$
|
10,772
|
|
$
|
10,930
|
|
$
|
9,812
|
|
(1)
|
%
|
10
|
%
|
|
|
|
|
|
|
Clearance and
Collateral Management
|
|
|
|
|
|
Average tri-party
collateral management balances (in billions)
|
$
|
2,801
|
|
$
|
2,698
|
|
$
|
2,498
|
|
4
|
%
|
12
|
%
|
(a)
|
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 June 30, 2018, $1.3 trillion at
March 31, 2018 and $1.2 trillion at June 30,
2017.
|
(b)
|
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 $70 billion at June 30, 2018,
$73 billion at March 31, 2018 and $66 billion at June 30,
2017.
|
KEY DRIVERS
- Total revenue increased both year-over-year and
sequentially. Net interest revenue increased in most
businesses, primarily driven by higher interest rates. The
drivers of fee revenue by line of business are indicated
below.
-
- Asset Servicing - The year-over-year increase primarily
reflects higher net interest revenue, foreign exchange and
securities lending volumes, equity market values and the favorable
impact of a weaker U.S. dollar.
- Pershing - The year-over-year increase primarily reflects
higher net interest revenue and higher fees due to growth in
long-term mutual fund balances, partially offset by the impact of
lost business. The sequential decrease was primarily driven
by lower clearance revenue.
- Issuer Services - Both increases primarily reflect higher net
interest revenue in Corporate Trust and higher Depositary Receipts
revenue.
- Treasury Services - Both increases primarily reflect higher net
interest revenue and payment volumes.
- Clearance and Collateral Management - Both increases primarily
reflect growth in collateral management, higher clearance volumes
and net interest revenue.
- Noninterest expense increased year-over-year primarily driven
by investments in technology and the unfavorable impact of a weaker
U.S. dollar. The sequential increase primarily reflects
investments in technology and business development expenses.
INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS
(dollars in
millions, unless otherwise noted; not meaningful -
N/M)
|
|
|
|
|
2Q18
vs.
|
2Q18
|
1Q18
|
|
2Q17
|
1Q18
|
2Q17
|
Total revenue by line
of business:
|
|
|
|
|
|
|
Asset
Management
|
$
|
702
|
|
$
|
770
|
|
|
$
|
683
|
|
(9)
|
%
|
3
|
%
|
Wealth
Management
|
316
|
|
318
|
|
|
303
|
|
(1)
|
|
4
|
|
Total revenue by line
of business
|
1,018
|
|
1,088
|
|
|
986
|
|
(6)
|
|
3
|
|
Provision for credit
losses
|
2
|
|
2
|
|
|
—
|
|
N/M
|
N/M
|
Noninterest
expense
|
697
|
|
705
|
|
|
698
|
|
(1)
|
|
—
|
|
Income before
taxes
|
$
|
319
|
|
$
|
381
|
|
|
$
|
288
|
|
(16)
|
%
|
11
|
%
|
|
|
|
|
|
|
|
Pre-tax operating
margin
|
31
|
%
|
35
|
%
|
|
29
|
%
|
|
|
Adjusted pre-tax
operating margin – Non-GAAP (a)
|
35
|
%
|
39
|
%
|
|
33
|
%
|
|
|
|
|
|
|
|
|
|
Metrics:
|
|
|
|
|
|
|
Average
loans
|
$
|
16,974
|
|
$
|
16,876
|
|
|
$
|
16,560
|
|
1
|
%
|
3
|
%
|
Average
deposits
|
$
|
14,252
|
|
$
|
13,363
|
|
|
$
|
14,866
|
|
7
|
%
|
(4)
|
%
|
|
|
|
|
|
|
|
Wealth Management
client assets (in billions) (current period is preliminary)
(b)
|
$
|
254
|
|
$
|
246
|
|
|
$
|
239
|
|
3
|
%
|
6
|
%
|
|
|
|
|
|
|
|
Changes in AUM
(in billions) (current period is preliminary):
(c)
|
|
|
|
|
|
|
Beginning balance of
AUM
|
$
|
1,868
|
|
$
|
1,893
|
|
|
$
|
1,727
|
|
|
|
Net (outflows)
inflows:
|
|
|
|
|
|
|
Long-term
strategies:
|
|
|
|
|
|
|
Equity
|
(3)
|
|
—
|
|
|
(2)
|
|
|
|
Fixed
income
|
(4)
|
|
7
|
|
|
2
|
|
|
|
Liability-driven investments, including currency overlay
|
2
|
|
13
|
|
|
15
|
|
|
|
Multi-asset
and alternative investments
|
(3)
|
|
(3)
|
|
|
1
|
|
|
|
Total
long-term active strategies (outflows) inflows
|
(8)
|
|
17
|
|
|
16
|
|
|
|
Index
|
(7)
|
|
(13)
|
|
|
(13)
|
|
|
|
Total long-term
strategies (outflows) inflows
|
(15)
|
|
4
|
|
|
3
|
|
|
|
Short term
strategies:
|
|
|
|
|
|
|
Cash
|
(11)
|
|
(14)
|
|
|
11
|
|
|
|
Total net (outflows)
inflows
|
(26)
|
|
(10)
|
|
|
14
|
|
|
|
Net market
impact
|
17
|
|
(14)
|
|
|
1
|
|
|
|
Net currency
impact
|
(53)
|
|
29
|
|
|
29
|
|
|
|
Divestiture/Other
|
(1)
|
|
(30)
|
|
(d)
|
—
|
|
|
|
Ending balance of
AUM
|
$
|
1,805
|
|
$
|
1,868
|
|
|
$
|
1,771
|
|
(3)%
|
|
2
|
%
|
(a)
|
Net of
distribution and servicing expense. See "Supplemental
information – Explanation of GAAP and Non-GAAP financial measures"
beginning on page 11 for the reconciliation of this Non-GAAP
measure. In 1Q18, the adjusted pre-tax margin – Non-GAAP for
prior periods was restated to include amortization of intangible
assets and the provision for credit losses.
|
(b)
|
Includes AUM and
AUC/A in the Wealth Management business.
|
(c)
|
Excludes
securities lending cash management assets and assets managed in the
Investment Services business.
|
(d)
|
Primarily reflects
a change in methodology beginning in 1Q18 to exclude AUM related to
equity method investments as well as the CenterSquare
divestiture.
|
KEY DRIVERS
- Total revenue increased year-over-year and decreased
sequentially.
-
- Asset Management - The year-over-year increase reflects higher
equity market values and the favorable impact of a weaker U.S.
dollar (principally versus the British pound), partially offset by
the divestiture of CenterSquare and the impact of net
outflows. The sequential decrease primarily reflects lower
performance fees and the gain on the divestiture of CenterSquare
recorded in 1Q18.
- Wealth Management - The year-over-year increase primarily
reflects higher equity market values, partially offset by lower net
interest revenue.
OTHER SEGMENT primarily includes leasing operations,
certain corporate treasury activities, derivatives, business exits
and other corporate revenue and expense items.
|
|
|
|
(in
millions)
|
2Q18
|
1Q18
|
2Q17
|
Fee
revenue
|
$
|
40
|
|
$
|
57
|
|
$
|
113
|
|
Net securities gains
(losses)
|
1
|
|
(49)
|
|
—
|
|
Total fee and other
revenue
|
41
|
|
8
|
|
113
|
|
Net interest
(expense)
|
(35)
|
|
(1)
|
|
(22)
|
|
Total
revenue
|
6
|
|
7
|
|
91
|
|
Provision for credit
losses
|
(6)
|
|
—
|
|
(4)
|
|
Noninterest
expense
|
81
|
|
87
|
|
28
|
|
(Loss) income before
taxes
|
$
|
(69)
|
|
$
|
(80)
|
|
$
|
67
|
|
KEY DRIVERS
- Fee revenue decreased year-over-year primarily reflecting the
lease-related gains recorded in 2Q17 and lower income from
corporate/bank-owned life insurance. The sequential decrease
primarily reflects lower asset-related gains.
- Net interest expense increased year-over-year and sequentially
primarily resulting from corporate treasury activity.
- Both comparisons of noninterest expense were impacted by
investments in technology and expenses associated with the
continued consolidation of our real estate.
CAPITAL AND LIQUIDITY
Our consolidated capital and liquidity ratios are shown in the
following table.
Capital and
liquidity ratios
|
June 30,
2018
|
|
March 31,
2018
|
|
Dec. 31
2017
|
|
Consolidated
regulatory capital ratios: (a)(b)
|
|
|
|
CET1 ratio
|
11.0
|
%
|
10.7
|
%
|
10.3
|
%
|
Tier 1 capital
ratio
|
13.1
|
%
|
12.7
|
%
|
12.3
|
%
|
Total capital
ratio
|
13.9
|
%
|
13.4
|
%
|
13.0
|
%
|
Tier 1 leverage
ratio
|
6.7
|
%
|
6.5
|
%
|
6.4
|
%
|
SLR
|
6.2
|
%
|
5.9
|
%
|
5.9
|
%
|
BNY Mellon
shareholders' equity to total assets ratio
|
11.8
|
%
|
11.2
|
%
|
11.1
|
%
|
BNY Mellon common
shareholders' equity to total assets ratio
|
10.8
|
%
|
10.2
|
%
|
10.1
|
%
|
|
|
|
|
Average
LCR
|
118
|
%
|
116
|
%
|
118
|
%
|
|
|
|
|
Book value per common
share (c)
|
$
|
37.97
|
|
$
|
37.78
|
|
$
|
37.21
|
|
Tangible book value
per common share – Non-GAAP (c)
|
$
|
19.00
|
|
$
|
18.78
|
|
$
|
18.24
|
|
Cash dividends per
common share
|
$
|
0.24
|
|
$
|
0.24
|
|
$
|
0.24
|
|
Common dividend
payout ratio
|
23
|
%
|
22
|
%
|
22
|
%
|
Closing stock price
per common share
|
$
|
53.93
|
|
$
|
51.53
|
|
$
|
53.86
|
|
Market capitalization
(in millions)
|
$
|
53,927
|
|
$
|
52,080
|
|
$
|
54,584
|
|
Common shares
outstanding (in thousands)
|
999,945
|
|
1,010,676
|
|
1,013,442
|
|
(a)
|
Regulatory capital
ratios for June 30, 2018 are preliminary. For our CET1,
Tier 1 capital and Total capital ratios, our effective capital
ratios under the U.S. capital rules are the lower of the ratios as
calculated under the Standardized and Advanced Approaches, which
for the periods noted above was the Advanced
Approaches.
|
(b)
|
Regulatory capital
ratios for Dec. 31, 2017 are presented on a fully phased-in
basis. On a transitional basis at Dec. 31, 2017, the CET1
ratio was 10.7%, the Tier 1 capital ratio was 12.7%, the Total
capital ratio was 13.4%, the Tier 1 leverage ratio was 6.6% and the
SLR was 6.1%.
|
(c)
|
Tangible book
value per common share – Non-GAAP excludes goodwill and
intangible assets, net of deferred tax liabilities. See
"Supplemental information – Explanation of GAAP and Non-GAAP
financial measures" beginning on page 11 for the reconciliation of
this Non-GAAP measure.
|
KEY POINTS
- CET1 capital totaled $18.4
billion at June 30, 2018, an increase of $52 million compared with March 31,
2018. The increase primarily reflects capital generated
through earnings, partially offset by capital deployed through
common stock repurchased and payments of dividends, as well as
foreign currency translation adjustments.
NET INTEREST REVENUE
Net interest
revenue
|
|
|
|
2Q18
vs.
|
(dollars in
millions; not meaningful - N/M)
|
2Q18
|
1Q18
|
2Q17
|
1Q18
|
2Q17
|
Net interest
revenue
|
$
|
916
|
|
$
|
919
|
|
$
|
826
|
|
—
|
%
|
11
|
%
|
Add: Tax equivalent
adjustment
|
5
|
|
6
|
|
12
|
|
N/M
|
N/M
|
Net interest revenue,
on a fully taxable equivalent ("FTE")
basis – Non-GAAP
(a)
|
$
|
921
|
|
$
|
925
|
|
$
|
838
|
|
—
|
%
|
10
|
%
|
|
|
|
|
|
|
Net interest
margin
|
1.26
|
%
|
1.22
|
%
|
1.14
|
%
|
4
|
bps
|
12
|
bps
|
Net interest margin
(FTE) – Non-GAAP (a)
|
1.26
|
%
|
1.23
|
%
|
1.16
|
%
|
3
|
bps
|
10
|
bps
|
|
|
|
|
|
|
Selected average
balances:
|
|
|
|
|
|
Cash/interbank
investments
|
$
|
113,475
|
|
$
|
120,821
|
|
$
|
111,021
|
|
(6)%
|
|
2
|
%
|
Trading account
securities
|
3,784
|
|
4,183
|
|
2,455
|
|
(10)
|
|
54
|
|
Securities
|
117,761
|
|
118,459
|
|
117,227
|
|
(1)
|
|
—
|
|
Loans
|
57,066
|
|
58,606
|
|
58,793
|
|
(3)
|
|
(3)
|
|
Interest-earning
assets
|
292,086
|
|
302,069
|
|
289,496
|
|
(3)
|
|
1
|
|
Interest-bearing
deposits
|
152,799
|
|
155,704
|
|
142,336
|
|
(2)
|
|
7
|
|
Federal funds
purchased and securities sold under repurchase
agreements
|
18,146
|
|
18,963
|
|
17,970
|
|
(4)
|
|
1
|
|
Long-term
debt
|
28,349
|
|
28,407
|
|
27,398
|
|
—
|
|
3
|
|
Other
interest-bearing liabilities
|
23,815
|
|
23,920
|
|
25,233
|
|
—
|
|
(6)
|
|
Interest-bearing
liabilities
|
223,109
|
|
226,994
|
|
212,937
|
|
(2)
|
|
5
|
|
Noninterest-bearing
deposits
|
64,768
|
|
71,005
|
|
73,886
|
|
(9)
|
|
(12)
|
|
|
|
|
|
|
|
Selected average
yields/rates: (b)
|
|
|
|
|
|
Cash/interbank
investments
|
1.48
|
%
|
1.13
|
%
|
0.67
|
%
|
|
|
Trading account
securities
|
3.10
|
|
2.62
|
|
2.85
|
|
|
|
Securities
|
2.16
|
|
2.03
|
|
1.72
|
|
|
|
Loans
|
3.32
|
|
2.90
|
|
2.44
|
|
|
|
Interest-earning
assets
|
2.14
|
|
1.85
|
|
1.47
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits
|
0.45
|
|
0.30
|
|
0.09
|
|
|
|
Federal funds
purchased and securities sold under repurchase
agreements
|
3.48
|
|
2.29
|
|
0.84
|
|
|
|
Long-term
debt
|
3.06
|
|
2.49
|
|
1.87
|
|
|
|
Other
interest-bearing liabilities
|
1.47
|
|
1.04
|
|
0.41
|
|
|
|
Interest-bearing
liabilities
|
1.14
|
|
0.82
|
|
0.42
|
|
|
|
|
|
|
|
|
|
Average
cash/interbank investments as a percentage of average
interest-earning
assets
|
39
|
%
|
40
|
%
|
38
|
%
|
|
|
Average
noninterest-bearing deposits as a percentage of average
interest-earning
assets
|
22
|
%
|
24
|
%
|
26
|
%
|
|
|
(a)
|
Net interest
revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP
include the tax equivalent adjustments on tax-exempt income which
allows for comparisons of amounts arising from both taxable and
tax-exempt sources and is consistent with industry practice.
The adjustment to an FTE basis has no impact on net
income.
|
(b)
|
Yields/rates
include the impact of interest rate hedging
activities.
|
bps – basis
points.
|
KEY DRIVERS
- Net interest revenue increased year-over-year, primarily
reflecting higher interest rates. The sequential decrease was
primarily driven by lower deposits, partially offset by higher
interest rates.
NONINTEREST EXPENSE
Noninterest
expense
|
|
|
|
2Q18
vs.
|
(dollars in
millions)
|
2Q18
|
1Q18
|
2Q17
|
1Q18
|
2Q17
|
Staff
|
$
|
1,489
|
|
$
|
1,576
|
|
$
|
1,432
|
|
(6)%
|
|
4
|
%
|
Professional, legal
and other purchased services
|
328
|
|
291
|
|
319
|
|
13
|
|
3
|
|
Software and
equipment
|
266
|
|
234
|
|
232
|
|
14
|
|
15
|
|
Net
occupancy
|
156
|
|
139
|
|
140
|
|
12
|
|
11
|
|
Sub-custodian and
clearing
|
110
|
|
119
|
|
108
|
|
(8)
|
|
2
|
|
Distribution and
servicing
|
106
|
|
106
|
|
104
|
|
—
|
|
2
|
|
Business
development
|
62
|
|
51
|
|
63
|
|
22
|
|
(2)
|
|
Bank assessment
charges
|
47
|
|
52
|
|
59
|
|
(10)
|
|
(20)
|
|
Amortization of
intangible assets
|
48
|
|
49
|
|
53
|
|
(2)
|
|
(9)
|
|
Other
|
135
|
|
122
|
|
145
|
|
11
|
|
(7)
|
|
Total noninterest
expense
|
$
|
2,747
|
|
$
|
2,739
|
|
$
|
2,655
|
|
—
|
%
|
3
|
%
|
KEY DRIVERS
- The year-over-year increase in total noninterest expense
primarily reflects investments in technology, which impacted staff,
professional, legal and other purchased services and software and
equipment expenses. The-year-over-year increase also reflects
the unfavorable impact of a weaker U.S. dollar and expenses
associated with the continued consolidation of our real
estate.
- The sequential increase in total noninterest expense primarily
reflects investments in technology and expenses associated with the
continued consolidation of our real estate. These expenses
were partially offset by lower staff expense, primarily driven by
the impact of vesting of long-term stock awards for retirement
eligible employees recorded in 1Q18, and the favorable impact of a
stronger U.S. dollar.
- The total cost of relocating our corporate headquarters is
estimated to be $75 million, of which
$12 million was recorded in
2Q18. We expect to record the remaining expense in 4Q18.
THE BANK OF NEW
YORK MELLON CORPORATION
Condensed Consolidated Income Statement
|
|
|
|
(in
millions)
|
Quarter
ended
|
|
Year-to-date
|
|
June 30,
2018
|
|
March 31,
2018
|
|
June 30,
2017
|
|
|
June 30,
2018
|
|
June 30,
2017
|
|
|
|
Fee and other
revenue
|
|
|
|
|
|
|
|
Investment services
fees:
|
|
|
|
|
|
|
|
Asset
servicing
|
$
|
1,157
|
|
$
|
1,168
|
|
$
|
1,085
|
|
|
$
|
2,325
|
|
$
|
2,148
|
|
|
Clearing
services
|
392
|
|
414
|
|
394
|
|
|
806
|
|
770
|
|
|
Issuer
services
|
266
|
|
260
|
|
241
|
|
|
526
|
|
492
|
|
|
Treasury
services
|
140
|
|
138
|
|
140
|
|
|
278
|
|
279
|
|
|
Total investment
services fees
|
1,955
|
|
1,980
|
|
1,860
|
|
|
3,935
|
|
3,689
|
|
|
Investment management
and performance fees
|
910
|
|
960
|
|
879
|
|
|
1,870
|
|
1,721
|
|
|
Foreign exchange and
other trading revenue
|
187
|
|
209
|
|
165
|
|
|
396
|
|
329
|
|
|
Financing-related
fees
|
53
|
|
52
|
|
53
|
|
|
105
|
|
108
|
|
|
Distribution and
servicing
|
34
|
|
36
|
|
41
|
|
|
70
|
|
82
|
|
|
Investment and other
income
|
70
|
|
82
|
|
122
|
|
|
152
|
|
199
|
|
|
Total fee
revenue
|
3,209
|
|
3,319
|
|
3,120
|
|
|
6,528
|
|
6,128
|
|
|
Net securities gains
(losses)
|
1
|
|
(49)
|
|
—
|
|
|
(48)
|
|
10
|
|
|
Total fee and other
revenue
|
3,210
|
|
3,270
|
|
3,120
|
|
|
6,480
|
|
6,138
|
|
|
Operations of
consolidated investment management funds
|
|
|
|
|
|
|
|
Investment income
(loss)
|
13
|
|
(11)
|
|
10
|
|
|
2
|
|
47
|
|
|
Interest of
investment management fund note holders
|
1
|
|
—
|
|
—
|
|
|
1
|
|
4
|
|
|
Income (loss) from
consolidated investment management funds
|
12
|
|
(11)
|
|
10
|
|
|
1
|
|
43
|
|
|
Net interest
revenue
|
|
|
|
|
|
|
|
Interest
revenue
|
1,553
|
|
1,381
|
|
1,052
|
|
|
2,934
|
|
2,012
|
|
|
Interest
expense
|
637
|
|
462
|
|
226
|
|
|
1,099
|
|
394
|
|
|
Net interest
revenue
|
916
|
|
919
|
|
826
|
|
|
1,835
|
|
1,618
|
|
|
Total
revenue
|
4,138
|
|
4,178
|
|
3,956
|
|
|
8,316
|
|
7,799
|
|
|
Provision for
credit losses
|
(3)
|
|
(5)
|
|
(7)
|
|
|
(8)
|
|
(12)
|
|
|
Noninterest
expense
|
|
|
|
|
|
|
|
Staff
(a)
|
1,489
|
|
1,576
|
|
1,432
|
|
|
3,065
|
|
2,920
|
|
|
Professional, legal
and other purchased services
|
328
|
|
291
|
|
319
|
|
|
619
|
|
632
|
|
|
Software and
equipment
|
266
|
|
234
|
|
232
|
|
|
500
|
|
455
|
|
|
Net
occupancy
|
156
|
|
139
|
|
140
|
|
|
295
|
|
276
|
|
|
Sub-custodian and
clearing (b)
|
110
|
|
119
|
|
108
|
|
|
229
|
|
211
|
|
|
Distribution and
servicing
|
106
|
|
106
|
|
104
|
|
|
212
|
|
204
|
|
|
Business
development
|
62
|
|
51
|
|
63
|
|
|
113
|
|
114
|
|
|
Bank assessment
charges
|
47
|
|
52
|
|
59
|
|
|
99
|
|
116
|
|
|
Amortization of
intangible assets
|
48
|
|
49
|
|
53
|
|
|
97
|
|
105
|
|
|
Other
(a)(b)(c)
|
135
|
|
122
|
|
145
|
|
|
257
|
|
264
|
|
|
Total noninterest
expense
|
2,747
|
|
2,739
|
|
2,655
|
|
|
5,486
|
|
5,297
|
|
|
Income
|
|
|
|
|
|
|
|
Income before income
taxes
|
1,394
|
|
1,444
|
|
1,308
|
|
|
2,838
|
|
2,514
|
|
|
Provision for income
taxes
|
286
|
|
282
|
|
332
|
|
|
568
|
|
601
|
|
|
Net income
|
1,108
|
|
1,162
|
|
976
|
|
|
2,270
|
|
1,913
|
|
|
Net (income) loss
attributable to noncontrolling interests (includes $(7), $11,
$(3),
$4 and $(21) related to consolidated investment management
funds, respectively)
|
(5)
|
|
9
|
|
(1)
|
|
|
4
|
|
(16)
|
|
|
Net income applicable
to shareholders of The Bank of New York Mellon
Corporation
|
1,103
|
|
1,171
|
|
975
|
|
|
2,274
|
|
1,897
|
|
|
Preferred stock
dividends
|
(48)
|
|
(36)
|
|
(49)
|
|
|
(84)
|
|
(91)
|
|
|
Net income applicable
to common shareholders of The Bank of New York
Mellon Corporation
|
$
|
1,055
|
|
$
|
1,135
|
|
$
|
926
|
|
|
$
|
2,190
|
|
$
|
1,806
|
|
|
(a)
|
In 1Q18, we
adopted new accounting guidance included in ASU 2017-07,
Compensation-Retirement Benefits - Improving the Presentation of
Net Periodic Pension Cost and Net Periodic Postretirement Benefit
Cost, which required the reclassification of the components of
pension and other post-retirement costs, other than the service
cost component. As a result, staff expense increased and
other expense decreased. Prior periods have been
reclassified.
|
(b)
|
Beginning in 1Q18,
clearing expense, which was previously included in other expense,
was included with sub-custodian expense. Prior periods have
been reclassified.
|
(c)
|
Beginning in 1Q18,
M&I, litigation and restructuring charges are no longer
separately disclosed. Expenses previously reported in this
line have been reclassified to existing expense categories,
primarily other expense.
|
THE BANK OF NEW
YORK MELLON CORPORATION
Condensed
Consolidated Income Statement - continued
|
|
Net income
applicable to common shareholders of The Bank of New York
Mellon Corporation used for the earnings per share
calculation
|
Quarter
ended
|
|
Year-to-date
|
June 30,
2018
|
|
March 31,
2018
|
|
June 30,
2017
|
|
|
June 30,
2018
|
|
June 30,
2017
|
|
(in
millions)
|
Net income applicable
to common shareholders of The Bank of New York Mellon
Corporation
|
$
|
1,055
|
|
$
|
1,135
|
|
$
|
926
|
|
|
$
|
2,190
|
|
$
|
1,806
|
|
Less: Earnings
allocated to participating securities
|
7
|
|
8
|
|
13
|
|
|
15
|
|
27
|
|
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 common share
|
$
|
1,048
|
|
$
|
1,127
|
|
$
|
913
|
|
|
$
|
2,175
|
|
$
|
1,779
|
|
Average common
shares and equivalents outstanding of The Bank of New
York Mellon Corporation
|
Quarter
ended
|
|
Year-to-date
|
June 30,
2018
|
|
March 31,
2018
|
|
June 30,
2017
|
|
|
June 30,
2018
|
|
June 30,
2017
|
|
(in
thousands)
|
Basic
|
1,010,179
|
|
1,016,797
|
|
1,035,829
|
|
|
1,013,507
|
|
1,038,479
|
|
Diluted
|
1,014,357
|
|
1,021,731
|
|
1,041,879
|
|
|
1,018,020
|
|
1,044,809
|
|
Earnings per share
applicable to the common shareholders of The Bank of
New York Mellon Corporation
|
Quarter
ended
|
|
Year-to-date
|
June 30,
2018
|
|
March 31,
2018
|
|
June 30,
2017
|
|
|
June 30,
2018
|
|
June 30,
2017
|
|
(in
dollars)
|
Basic
|
$
|
1.04
|
|
$
|
1.11
|
|
$
|
0.88
|
|
|
$
|
2.15
|
|
$
|
1.71
|
|
Diluted
|
$
|
1.03
|
|
$
|
1.10
|
|
$
|
0.88
|
|
|
$
|
2.14
|
|
$
|
1.70
|
|
SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP
FINANCIAL MEASURES
BNY Mellon has included in this Earnings Release certain
Non-GAAP financial measures on a tangible basis, as a supplement to
GAAP information. Tangible common shareholders' equity
excludes goodwill and intangible assets, net of deferred tax
liabilities. BNY Mellon believes that the return on tangible
common equity measure is an additional useful measure for investors
because it presents a measure of those assets that can generate
income. BNY Mellon has provided a measure of tangible book
value per common share, which it believes provides additional
useful information as to the level of tangible assets in relation
to shares of common stock outstanding.
BNY Mellon has presented the operating margin for the Investment
Management business net of distribution and servicing expense that
was passed to third parties who distribute or service our managed
funds. BNY Mellon believes that this measure is useful when
evaluating the performance of the Investment Management business
relative to industry competitors.
The following table presents the reconciliation of the return on
common equity and tangible common equity.
Return on common
equity and tangible common equity reconciliation
|
|
|
|
(dollars in
millions)
|
2Q18
|
1Q18
|
2Q17
|
Net income applicable
to common shareholders of The Bank of New York Mellon Corporation –
GAAP
|
$
|
1,055
|
|
$
|
1,135
|
|
$
|
926
|
|
Add:
Amortization of intangible assets
|
48
|
|
49
|
|
53
|
|
Less: Tax
impact of amortization of intangible assets
|
11
|
|
12
|
|
19
|
|
Adjusted net income
applicable to common shareholders of The Bank of New York Mellon
Corporation, excluding amortization of intangible assets –
Non-GAAP
|
$
|
1,092
|
|
$
|
1,172
|
|
$
|
960
|
|
|
|
|
|
Average common
shareholders' equity
|
$
|
37,750
|
|
$
|
37,593
|
|
$
|
35,862
|
|
Less: Average goodwill
|
17,505
|
|
17,581
|
|
17,408
|
|
Average
intangible assets
|
3,341
|
|
3,397
|
|
3,532
|
|
Add: Deferred tax liability –
tax deductible goodwill (a)
|
1,054
|
|
1,042
|
|
1,542
|
|
Deferred tax
liability – intangible assets (a)
|
709
|
|
716
|
|
1,095
|
|
Average tangible
common shareholders' equity – Non-GAAP
|
$
|
18,667
|
|
$
|
18,373
|
|
$
|
17,559
|
|
|
|
|
|
Return on common
equity (annualized) – GAAP
|
11.2
|
%
|
12.2
|
%
|
10.4
|
%
|
Return on tangible
common equity (annualized) – Non-GAAP
|
23.5
|
%
|
25.9
|
%
|
21.9
|
%
|
(a)
|
Deferred tax
liabilities for 2Q17 are based on fully phased-in U.S. capital
rules.
|
The following table presents the reconciliation of the book
value and tangible book value per common share.
Book value and
tangible book value per common share reconciliation
|
June 30,
2018
|
|
March 31,
2018
|
|
Dec. 31,
2017
|
|
(dollars in
millions except common shares)
|
BNY Mellon
shareholders' equity at period end – GAAP
|
$
|
41,505
|
|
$
|
41,728
|
|
$
|
41,251
|
|
Less: Preferred
stock
|
3,542
|
|
3,542
|
|
3,542
|
|
BNY Mellon common
shareholders' equity at period end – GAAP
|
37,963
|
|
38,186
|
|
37,709
|
|
Less:
Goodwill
|
17,418
|
|
17,596
|
|
17,564
|
|
Intangible
assets
|
3,308
|
|
3,370
|
|
3,411
|
|
Add: Deferred tax liability –
tax deductible goodwill (a)
|
1,054
|
|
1,042
|
|
1,034
|
|
Deferred tax
liability – intangible assets (a)
|
709
|
|
716
|
|
718
|
|
BNY Mellon tangible
common shareholders' equity at period end – Non-GAAP
|
$
|
19,000
|
|
$
|
18,978
|
|
$
|
18,486
|
|
|
|
|
|
Period-end common
shares outstanding (in thousands)
|
999,945
|
|
1,010,676
|
|
1,013,442
|
|
|
|
|
|
Book value per common
share – GAAP
|
$
|
37.97
|
|
$
|
37.78
|
|
$
|
37.21
|
|
Tangible book value
per common share – Non-GAAP
|
$
|
19.00
|
|
$
|
18.78
|
|
$
|
18.24
|
|
(a)
|
Deferred tax
liabilities for 2Q17 are based on fully phased-in U.S. capital
rules.
|
The following table presents the reconciliation of the pre-tax
operating margin for the Investment Management business.
Pre-tax operating
margin reconciliation - Investment Management
business
|
|
|
|
(dollars in
millions)
|
2Q18
|
1Q18
|
2Q17
|
Income before income
taxes – GAAP
|
$
|
319
|
|
$
|
381
|
|
$
|
288
|
|
|
|
|
|
Total revenue –
GAAP
|
$
|
1,018
|
|
$
|
1,088
|
|
$
|
986
|
|
Less:
Distribution and servicing expense
|
103
|
|
110
|
|
104
|
|
Adjusted total revenue,
net of distribution and servicing expense – Non-GAAP
|
$
|
915
|
|
$
|
978
|
|
$
|
882
|
|
|
|
|
|
Pre-tax operating
margin – GAAP (a)
|
31
|
%
|
35
|
%
|
29
|
%
|
Adjusted pre-tax
operating margin, net of distribution and servicing expense –
Non-GAAP (a)
|
35
|
%
|
39
|
%
|
33
|
%
|
(a)
|
Income before
taxes divided by total revenue.
|
CAUTIONARY STATEMENT
A number of statements (i) in this Earnings Release, (ii) in our
presentations and (iii) in the responses to questions on our
conference call discussing our quarterly results and other public
events may contain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 including
our capital plans, strategic priorities, financial goals, driving
organic growth, expenses associated with the consolidation of our
real estate and the timing of such expenses, business
opportunities, preliminary business metrics and regulatory capital
ratios and statements regarding our aspirations, as well as our
overall plans, strategies, goals, objectives, expectations,
outlooks, estimates, intentions, targets, opportunities, focus and
initiatives. These statements may be expressed in a variety
of ways, including the use of future or present tense
language. Words such as "estimate," "forecast," "project,"
"anticipate," "likely," "target," "expect," "intend," "continue,"
"seek," "believe," "plan," "goal," "could," "should," "would,"
"may," "might," "will," "strategy," "synergies," "opportunities,"
"trends," "future" and words of similar meaning signify
forward-looking statements. These statements and other
forward-looking statements contained in other public disclosures of
The Bank of New York Mellon Corporation 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). Actual results may differ materially from
those expressed or implied as a result of these risks and
uncertainties, including, but not limited to, the risk factors and
other uncertainties set forth in BNY Mellon's Annual Report on Form
10-K for the year ended Dec. 31, 2017
and BNY Mellon's other filings with the Securities and Exchange
Commission. All forward-looking statements in this Earnings
Release speak only as of July 19, 2018, 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.
ABOUT BNY MELLON
BNY Mellon is a global investments company dedicated to helping
its clients manage and service their financial assets throughout
the investment lifecycle. Whether providing financial
services for institutions, corporations or individual investors,
BNY Mellon delivers informed investment management and investment
services in 35 countries. As of June 30, 2018, BNY
Mellon had $33.6 trillion in assets
under custody and/or administration, and $1.8 trillion in assets under management.
BNY Mellon can act as a single point of contact for clients looking
to create, trade, hold, manage, service, distribute or restructure
investments. BNY Mellon is the corporate brand of The Bank of
New York Mellon Corporation (NYSE: BK). Additional
information is available on www.bnymellon.com. Follow us on
Twitter @BNYMellon or visit our newsroom at
www.bnymellon.com/newsroom for the latest company news.
CONFERENCE CALL INFORMATION
Charles W. Scharf, Chairman and
Chief Executive Officer, and Michael P.
Santomassimo, Chief Financial Officer, will host a
conference call and simultaneous live audio webcast at 8:00 a.m. EDT on July 19, 2018. This
conference call and audio webcast will include forward-looking
statements and may include other material information.
Investors and analysts wishing to access the conference call and
audio webcast may do so by dialing (800) 390-5696 (U.S.) or
(720) 452-9082 (International), and using the passcode: 678511, or
by logging onto www.bnymellon.com/investorrelations. Earnings
materials will be available at www.bnymellon.com/investorrelations
beginning at approximately 6:30 a.m.
EDT on July 19, 2018. Replays of the conference
call and audio webcast will be available beginning July 19,
2018 at approximately 2 p.m. EDT
through Aug. 19, 2018 by dialing
(888) 203-1112 (U.S.) or (719) 457-0820 (International),
and using the passcode: 4968536. The archived version of the
conference call and audio webcast will also be available at
www.bnymellon.com/investorrelations for the same time period.
View original
content:http://www.prnewswire.com/news-releases/bny-mellon-reports-second-quarter-2018-earnings-of-1-06-billion-or-1-03-per-common-share-300683556.html
SOURCE The Bank of New York Mellon Corporation