BNY Mellon Reports First Quarter 2019 Earnings Of $910 Million Or $0.94 Per Common Share

PR Newswire

NEW YORK, April 17, 2019

NEW YORK, April 17, 2019 /PRNewswire/ --

Revenue down 7%


EPS down 15%


ROE  10%

ROTCE  21% (a)


CET1  11.0%

SLR  6.3%

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported:




1Q19 vs.


1Q19

4Q18

1Q18

4Q18

1Q18

Net income applicable to common shareholders (in millions)

$

910


$

832


$

1,135


9%


(20)%


Diluted earnings per common share

$

0.94


$

0.84


$

1.10


12%


(15)%





First Quarter Results


CEO Commentary

Total revenue of $3.9 billion, decreased 7%

  •  Fee revenue decreased 9%
  •  Net interest revenue decreased 8%

Total noninterest expense of $2.7 billion, decreased 1%

  • Continued investments in technology more than offset
    by lower other expenses

 

Investment Services

  • Total revenue decreased 5%
  • Income before taxes decreased 16%
  • AUC/A of $34.5 trillion, increased 3%

 

Investment Management

  • Total revenue decreased 14%
  • Income before taxes decreased 29%
  • AUM of $1.8 trillion, decreased 1%

 

Returned $825 million to common shareholders

  • Repurchased 10.5 million common shares for $555 million
  • Paid dividends of $270 million to common shareholders

 

"Our performance this quarter was mixed. Several of our fee-based metrics in Investment Services were consistent with recent results, while we experienced weakness in Investment Management and net interest income.  The year-over-year declines in revenue and earnings per share were primarily driven by the changing mix and cost of our deposits and the impact of the prior year asset management outflows.  The impact of divestitures, asset gains and the particularly strong markets and deposit balances in last year's first quarter also made the year-over-year comparison more difficult. Our overall expenses remained well controlled while we continued to increase our investment in technology and infrastructure," Charlie Scharf, chairman and chief executive officer, said.

"While the current expectations for the yield curve will likely negatively impact our revenue growth for the next several quarters, we will remain disciplined on expenses and continue to build out capabilities, which should eventually enable stronger growth. The strategic alliance that we announced with BlackRock Solutions is an example as common clients can immediately gain value. We have said we will work with third parties to more closely integrate the front-to-back operating model, and this is one meaningful example of how we will use our data and tools to benefit our clients, working on our own solutions and with third parties," Mr. Scharf added.

"During the quarter, we generated more than $900 million of earnings and continued to return a significant portion of that to our shareholders. Our capital remains strong with a CET1 ratio of 11 percent. We are progressing on our priorities and remain confident in our future," Mr. Scharf concluded.


Investor Relations: Magda Palczynska  (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" on page 8.

Note:  Above comparisons are 1Q19 vs. 1Q18.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except per share amounts and unless otherwise noted; not
meaningful - N/M)




1Q19 vs.

1Q19

4Q18 (a)

1Q18

4Q18

1Q18

Fee revenue

$

3,031


$

3,146


$

3,319


(4)

%

(9)

%

Net securities gains (losses)

1



(49)


N/M

N/M

Total fee and other revenue

3,032


3,146


3,270


(4)


(7)


Income (loss) from consolidated investment management funds

26


(24)


(11)


N/M

N/M

Net interest revenue

841


885


919


(5)


(8)


Total revenue

3,899


4,007


4,178


(3)


(7)


Provision for credit losses

7



(5)


N/M

N/M

Noninterest expense

2,699


2,987


2,739


(10)


(1)


Income before income taxes

1,193


1,020


1,444


17


(17)


Provision for income taxes

237


150


282


58


(16)


Net income

$

956


$

870


$

1,162


10

%

(18)

%

Net income applicable to common shareholders of The Bank of New York Mellon Corporation

$

910


$

832


$

1,135


9

%

(20)

%

Operating leverage (b)




694

bps

(522)

 bps

Diluted earnings per common share

$

0.94


$

0.84


$

1.10


12

%

(15)

%

Average common shares and equivalents outstanding - diluted (in thousands)

965,960


988,650


1,021,731




Pre-tax operating margin

31

%

25

%

35

%



(a)

Includes a net charge of $155 million, or $(0.16) per diluted common share, related to severance, expenses associated with consolidating real estate and litigation expense, partially offset by adjustments to provisional estimates for U.S. tax legislation and other changes.

(b)

Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.

KEY DRIVERS (comparisons are 1Q19 vs. 1Q18, unless otherwise stated)

Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")

Capital and liquidity

 


(a)   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.

 

INVESTMENT SERVICES BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)




1Q19 vs.

1Q19

4Q18

1Q18

4Q18

1Q18

Total revenue by line of business:






Asset Servicing

$

1,407


$

1,435


$

1,519


(2)

%

(7)

%

Pershing

554


558


581


(1)


(5)


Issuer Services

396


441


418


(10)


(5)


Treasury Services

317


328


321


(3)


(1)


Clearance and Collateral Management

276


278


255


(1)


8


Total revenue by line of business

2,950


3,040


3,094


(3)


(5)


Provision for credit losses

8


6


(7)


N/M

N/M

Noninterest expense

1,969


2,112


1,949


(7)


1


Income before taxes

$

973


$

922


$

1,152


6

%

(16)

%







Pre-tax operating margin

33

%

30

%

37

%









Foreign exchange and other trading revenue

$

157


$

163


$

169


(4)

%

(7)

%

Securities lending revenue

$

44


$

43


$

48


2

%

(8)

%







Metrics:






Average loans

$

33,171


$

35,540


$

39,200


(7)

%

(15)

%

Average deposits

$

195,082


$

203,416


$

214,130


(4)

%

(9)

%







AUC/A at period end (in trillions) (current period is preliminary) (a)

$

34.5


$

33.1


$

33.5


4

%

3

%

Market value of securities on loan at period end (in billions) (b)

$

377


$

373


$

436


1

%

(14)

%

(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 $1.3 trillion at March 31, 2019, $1.2 trillion at Dec. 31, 2018 and $1.3 trillion at March 31, 2018.

(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 $62 billion at March 31, 2019, $58 billion at Dec. 31, 2018 and $73 billion at March 31, 2018.

KEY DRIVERS

 

INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)




1Q19 vs.

1Q19

4Q18

1Q18

4Q18

1Q18

Total revenue by line of business:






Asset Management

$

637


$

660


$

770


(3)

%

(17)

%

Wealth Management

302


303


318



(5)


Total revenue by line of business

939


963


1,088


(2)


(14)


Provision for credit losses

1


1


2


N/M

N/M

Noninterest expense

669


715


705


(6)


(5)


Income before taxes

$

269


$

247


$

381


9

%

(29)

%







Pre-tax operating margin

29

%

26

%

35

%



Adjusted pre-tax operating margin – Non-GAAP (a)

32

%

29

%

39

%









Metrics:






Average loans

$

16,403


$

16,485


$

16,876


%

(3)

%

Average deposits

$

15,815


$

14,893


$

13,363


6

%

18

%







AUM (in billions) (current period is preliminary) (b)

$

1,841


$

1,722


$

1,868


7

%

(1)

%

Wealth Management client assets (in billions) (current period is preliminary) (c)

$

253


$

239


$

255


6

%

(1)

%

(a)

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.

(b)

Excludes securities lending cash management assets and assets managed in the Investment Services business.

(c)

Includes AUM and AUC/A in the Wealth Management business.  The 1Q18 amount was revised to include additional AUC/A.

KEY DRIVERS

 

OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, business exits and other corporate revenue and expense items.





(in millions)

1Q19

4Q18

1Q18

Fee revenue

$

29


$

29


$

57


Net securities gains (losses)

1



(49)


Total fee and other revenue

30


29


8


Net interest (expense)

(30)


(15)


(1)


Total revenue


14


7


Provision for credit losses

(2)


(7)



Noninterest expense

61


160


87


(Loss) before taxes

$

(59)


$

(139)


$

(80)


KEY DRIVERS

 

CAPITAL AND LIQUIDITY

Our consolidated capital and liquidity ratios are shown in the following table.


Capital and liquidity ratios

March 31,
2019

December 31,
2018

Consolidated regulatory capital ratios: (a)



CET1 ratio

11.0

%

10.7

%

Tier 1 capital ratio

13.1


12.8


Total capital ratio

13.9


13.6


Tier 1 leverage ratio

6.8


6.6


SLR

6.3


6.0


BNY Mellon shareholders' equity to total assets ratio

11.9

%

11.2

%

BNY Mellon common shareholders' equity to total assets ratio

10.9

%

10.2

%




Average LCR

118

%

118

%




Book value per common share (b)

$

39.36


$

38.63


Tangible book value per common share – Non-GAAP (b)

$

19.74


$

19.04


Common shares outstanding (in thousands)

957,517


960,426


(a)

Regulatory capital ratios for March 31, 2019 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)

Tangible book value per common shareNon-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 8 for information on this Non-GAAP measure.

CET1 capital totaled $18.2 billion at March 31, 2019, an increase of $590 million compared with Dec. 31, 2018.  The increase primarily reflects capital generated through earnings, the unrealized gain in our investment securities portfolio and additional paid-in capital resulting from stock awards, partially offset by capital deployed through common stock repurchased and dividends paid.

 

NET INTEREST REVENUE

Net interest revenue




1Q19 vs.

(dollars in millions; not meaningful - N/M)

1Q19

4Q18

1Q18

4Q18

1Q18

Net interest revenue

$

841


$

885


$

919


(5)

%

(8)

%

Add: Tax equivalent adjustment

4


4


6


N/M

N/M

Net interest revenue, on a fully taxable equivalent ("FTE")

basis – Non-GAAP (a)

$

845


$

889


$

925


(5)

%

(9)

%







Net interest margin

1.20

%

1.24

%

1.22

%

(4)

 bps

(2)

bps

Net interest margin (FTE) – Non-GAAP (a)

1.20

%

1.24

%

1.23

%

(4)

 bps

(3)

bps

(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.

bps – basis points.

Net interest revenue decreased year-over-year primarily driven by lower noninterest-bearing deposit and loan balances, higher deposit rates and hedging activities.  The sequential decrease was primarily driven by lower deposit and loan balances, higher deposit rates and hedging activities.  Both decreases were partially offset by the benefit of higher asset yields.  The impact of hedging activities is offset in foreign exchange and other trading revenue.

 

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement

(in millions)

Quarter ended


March 31,
2019

December 31,
2018

March 31,
2018



Fee and other revenue





Investment services fees:





Asset servicing fees

$

1,122


$

1,126


$

1,168



Clearing services fees (a)

398


398


424



Issuer services fees

251


286


260



Treasury services fees

132


139


138



Total investment services fees (a)

1,903


1,949


1,990



Investment management and performance fees (a)

841


884


950



Foreign exchange and other trading revenue

170


181


209



Financing-related fees

51


50


52



Distribution and servicing

31


35


36



Investment and other income

35


47


82



Total fee revenue

3,031


3,146


3,319



Net securities gains (losses)

1



(49)



Total fee and other revenue

3,032


3,146


3,270



Operations of consolidated investment management funds





Investment income (loss)

26


(24)


(11)



Interest of investment management fund note holders





Income (loss) from consolidated investment management funds

26


(24)


(11)



Net interest revenue





Interest revenue

1,920


1,864


1,381



Interest expense

1,079


979


462



Net interest revenue

841


885


919



Total revenue

3,899


4,007


4,178



Provision for credit losses

7



(5)



Noninterest expense





Staff

1,524


1,602


1,576



Professional, legal and other purchased services

325


383


291



Software and equipment

283


300


234



Net occupancy

137


196


139



Sub-custodian and clearing

105


115


119



Distribution and servicing

91


95


106



Business development

45


64


51



Bank assessment charges

31


22


52



Amortization of intangible assets

29


35


49



Other

129


175


122



Total noninterest expense

2,699


2,987


2,739



Income





Income before income taxes

1,193


1,020


1,444



Provision for income taxes

237


150


282



Net income

956


870


1,162



Net (income) loss attributable to noncontrolling interests (includes $(10), $11 and $11 related to consolidated
investment management funds, respectively)

(10)


11


9



Net income applicable to shareholders of The Bank of New York Mellon Corporation

946


881


1,171



Preferred stock dividends

(36)


(49)


(36)



Net income applicable to common shareholders of The Bank of New York Mellon Corporation

$

910


$

832


$

1,135



(a)

In 1Q19, we reclassified certain platform-related fees to clearing services fees from investment management and performance fees.  Prior periods have been reclassified.

 

Earnings per share applicable to the common shareholders of The Bank of New York Mellon
Corporation

Quarter ended


March 31,
2019

December 31,
2018

March 31,
2018


(in dollars)


Basic

$

0.94


$

0.84


$

1.11



Diluted

$

0.94


$

0.84


$

1.10



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 also included 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.

For the reconciliations of these Non-GAAP measures, see "Supplemental information - Explanation of GAAP and Non-GAAP Financial Measures" in the Financial Supplement available at www.bnymellon.com.

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 statements about our capital plans, strategic priorities, financial goals, organic growth and efficiency, investments, capabilities, revenue, expenses, deposits, interest rates and yield curves, taxes, 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, 2018 and BNY Mellon's other filings with the Securities and Exchange Commission.  All forward-looking statements in this Earnings Release speak only as of April 17, 2019, 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 March 31, 2019, BNY Mellon had $34.5 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

Charlie Scharf, Chairman and Chief Executive Officer, and Mike Santomassimo, Chief Financial Officer, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on April 17, 2019.  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: 807070, 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 April 17, 2019.  Replays of the conference call and audio webcast will be available beginning April 17, 2019 at approximately 2 p.m. EDT through May 17, 2019 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 5953533.  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com/investorrelations for the same time period.

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SOURCE BNY Mellon