By Liz Moyer
Bank of New York Mellon Corp. (BK) said Friday it will take a
$350 million pretax charge in the second quarter, mostly to settle
a lawsuit by investors who accused it of putting them in a risky
debt security that collapsed during the financial crisis.
The settlement, which needs court approval, concerns the
late-2008 collapse of a $27 billion structured investment vehicle
called Sigma Finance Corp.
Investors in a securities-lending program run by Bank of New
York, led by Oklahoma's state insurance fund, filed a class-action
suit in federal court in Oklahoma in 2008. The securities-lending
program put the investors' cash collateral in Sigma, according to
the suit.
J.P. Morgan Chase & Co. (JPM) agreed to settle a similar
Sigma-related class-action lawsuit in March for $150 million. It
didn't admit wrongdoing. A federal judge in Manhattan approved the
settlement in June.
Bank of New York said in a statement Friday that the
second-quarter charge includes an expected payment of $280 million
to settle the Sigma lawsuit, as well as additional litigation
charges.
Gerald Hassell, the bank's chairman and chief executive, said in
a statement, "We are putting this litigation behind us, with no
significant impact on our capital position, while continuing to
make headway on other matters." The bank didn't admit to any
wrongdoing related to the matter.
Bank of New York also disclosed it estimates new Basel III
capital rules will increase its Basel III tier-one common-equity
ratio by more than one percentage point. That ratio was 7.6% at the
end of March. The increase in the ratio is due to estimated
reductions in risk-weighted assets in the bank's securities
portfolio.
Analysts polled by Thomson Reuters expect Bank of New York to
post second-quarter net income of $638 million, or 54 cents a
share. It is scheduled to report July 18.
Bank of New York shares traded lower Friday, down 17 cents, or
0.8%, to $21.80, amid a broad selloff in financial stocks.
Write to Liz Moyer at liz.moyer@dowjones.com