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MarketScreener Homepage  >  Equities  >  Nyse  >  Bank of New York Mellon (The)    BK

BANK OF NEW YORK MELLON (THE)

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Bank of New York Mellon : Test Earnings Release First Quarter 2019

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04/15/2019 | 05:48pm EDT

News Release

BNY MELLON REPORTS FOURTH QUARTER 2018 EARNINGS OF

$832 MILLION OR $0.84 PER COMMON SHARE

Revenue up 7%;

EPS down 22%;

ROE 9%

CET1 10.6%

down 1% excluding

up 9% excluding

ROTCE 18% (a)

SLR 6.0%

notable items (a)

notable items (a)

NEW YORK, January 16, 2019 - The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported:

4Q18 vs.

4Q18

3Q18

4Q17

3Q18

4Q17

Net income applicable to common shareholders (in millions)

$

832

$

1,075

$

1,126

(23)%

(26)%

Diluted earnings per common share

$

0.84

$

1.06

$

1.08

(21)%

(22)%

Notable Items

CEO Commentary

4Q18 results include $(155) million, or $(0.16) per share, for severance, real estate and litigation, offset by adjustments to estimates for U.S. tax legislation and other changes.

4Q17 results include $181 million, or $0.17 per share, for a net benefit of U.S. tax legislation, offset by severance, litigation and other charges.

Fourth Quarter Results

Total revenue of $4.0 billion, increased 7%; decreased 1% excluding notable items (a)

Fee revenue increased 9%; decreased 1% excluding notable items (a)

Net interest revenue increased 4%

Total noninterest expense of $3.0 billion, decreased 1%

Continued investments in technology more than offset by lower other expenses

Investment Services

Total revenue increased 3%

Income before taxes increased 7%

• Notable items increased income before taxes ~ 9%

AUC/A of $33.1 trillion, decreased 1%

"While our reported earnings per share declined 22 percent, our results in this quarter and the fourth quarter of 2017 included a series of notable items that make comparisons difficult.

Excluding these items, earnings per share grew by 9 percent," Charlie Scharf, chairman and chief executive officer, said.

"The underlying performance of our businesses was mixed as our revenue declined, but we continued to maintain strong expense discipline. In addition, we benefited from a lower tax rate and our ongoing ability to return capital to shareholders through buybacks," Mr. Scharf added.

"Revenue growth in several of our Investment Services businesses was more than offset by lower revenue in our Investment Management business. Our expenses were essentially flat despite a sustained significant increase in technology and infrastructure investments as we remain focused on driving efficiency and maintaining our cost discipline," Mr. Scharf continued.

"We are continuing to return a significant amount of the capital we generate to shareholders. During 2018, we returned $4.3 billion, which includes the incremental $830 million that we announced in December. This represents a payout of just over 100 percent of earnings in 2018," Mr. Scharf also noted.

Investment Management

"As we look forward, we are cautious regarding how the

• Total revenue decreased 8%

economic and market environment will impact our business in

• Income before taxes decreased 11%

2019. We will remain keenly focused on managing our expense

• AUM of $1.7 trillion, decreased 9%

base. Our ongoing drive toward efficiency will allow us to

Repurchased 28.9 million common shares for $1.37 billion,

continue to increase our investment in technology and

including $830 million of incremental buybacks, and paid

infrastructure without meaningfully impacting the total cost

dividends of $278 million to common shareholders

base," Mr. Scharf concluded.

Investor Relations: Scott Freidenrich (212) 815-4008

Media Relations: Jennifer Hendricks Sullivan (212) 635-1374

(a)For information on this Non-GAAP measure, see "Consolidated Financial Highlights" beginning on page 2 and "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 12.

Note: Above comparisons are 4Q18 vs. 4Q17.

BNY Mellon 4Q18 Earnings Release

CONSOLIDATED FINANCIAL HIGHLIGHTS

4Q18

4Q17

4Q18 vs. 4Q17

(in millions, except per share amounts)

Results -

Notable

Results -

Results -

Notable

Results -

GAAP

Non-

GAAP

items (a)

Non-GAAP

GAAP

items (b)

Non-GAAP

GAAP

Fee revenue

$

3,146

$

-

$

3,146

$

2,886

$

(279)

$

3,165

9%

(1)%

Net securities (losses) gains

-

-

-

(26)

(37)

11

N/M

N/M

Total fee and other revenue

3,146

-

3,146

2,860

(316)

3,176

10

(1)

(Loss) income from consolidated

(24)

-

(24)

17

-

17

N/M

N/M

investment management funds

Net interest revenue

885

-

885

851

(4)

855

4

4

Total revenue

4,007

-

4,007

3,728

(320)

4,048

7

(1)

Provision for credit losses

-

-

-

(6)

-

(6)

N/M

N/M

Noninterest expense

2,987

269

2,718

3,006

282

2,724

(1)

-

Income (loss) before income taxes

1,020

(269)

1,289

728

(602)

1,330

40

(3)

Provision (benefit) for income taxes

150

(114)

264

(453)

(783)

330

N/M

(20)

Net income (loss)

$

870

$

(155)

$

1,025

$

1,181

$

181

$

1,000

(26)%

3%

Net income (loss) applicable to

common shareholders of The Bank

$

832

$

(155)

$

987

$

1,126

$

181

$

945

(26)%

4%

of New York Mellon Corporation

Operating leverage (c)

811 bps

(79) bps

Diluted earnings per common share

$

0.84

$

(0.16)

$

0.99 (d)

$

1.08

$

0.17

$

0.91

(22)%

9%

Average common shares and equivalents

988,650

1,030,404

outstanding - diluted

Pre-tax operating margin

25%

32%

20%

33%

(a)Includes adjustments to provisional estimates for U.S. tax legislation and other changes, severance, expenses associated with consolidating real estate and litigation expense.

(b)Includes the estimated net benefit of U.S. tax legislation, severance, litigation expense, an asset impairment and investment securities losses related to the sale of certain securities.

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

(d)Does not foot due to rounding.

N/M - Not meaningful.

KEY DRIVERS (comparisons are 4Q18 vs. 4Q17, unless otherwise stated)

Total revenue increased 7%, or decreased 1% excluding the notable items (a), reflecting:

Fee revenue increased 9% primarily reflecting the notable items recorded in 4Q17. Excluding the notable items, fee revenue decreased 1% (a) primarily reflecting lower investment management fees and investment and other income, partially offset by higher corporate actions in Issuer Services and growth in clearance and collateral management.

Net interest revenue increased 4% primarily driven by higher rates and a lease-related adjustment recorded in 4Q17, partially offset by lower noninterest-bearing deposits.

Noninterest expense decreased 1% primarily reflecting investments in technology, which were more than offset by lower other expenses. The impact of the notable items in both periods was substantially the same.

Effective tax rate of 14.7%. The impact of notable items decreased the effective rate by approximately 6%.

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

AUC/A of $33.1 trillion, decreased 1%, primarily reflecting lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by net new business.

AUM of $1.7 trillion decreased 9%, primarily reflecting the unfavorable impact of a stronger U.S. dollar (principally versus the British pound), lower market values, net outflows, the divestiture of CenterSquare Investment Management ("CenterSquare") and other changes.

Capital and liquidity

Repurchased 28.9 million common shares for $1.37 billion and paid $278 million in dividends to common shareholders.

Return on common equity ("ROE") of 9%; Return on tangible common equity ("ROTCE") of 18% (a).

Common Equity Tier 1 ("CET1") ratio - 10.6%.

Supplementary leverage ratio ("SLR") - 6.0%.

Average liquidity coverage ratio ("LCR") - 118%.

(a)See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 12 for additional information. Note: Throughout this document, sequential growth rates are unannualized.

Page - 2

BNY Mellon 4Q18 Earnings Release

FULL-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS

2018

2017

2018 vs. 2017

(in millions, except per share amounts)

Results -

Notable

Results -

Results -

Notable

Results -

GAAP

Non-

GAAP

items (a)

Non-GAAP

GAAP

items (b)

Non-GAAP

GAAP

Fee revenue

$

12,842

$

(13)

$

12,855

$

12,162

$

(279)

$

12,441

6%

3%

Net securities (losses) gains

(48)

-

(48)

3

(37)

40

N/M

N/M

Total fee and other revenue

12,794

(13)

12,807

12,165

(316)

12,481

5

3

(Loss) income from consolidated

(13)

-

(13)

70

-

70

N/M

N/M

investment management funds

Net interest revenue

3,611

-

3,611

3,308

(4)

3,312

9

9

Total revenue

16,392

(13)

16,405

15,543

(320)

15,863

5

3

Provision for credit losses

(11)

-

(11)

(24)

-

(24)

N/M

N/M

Noninterest expense

11,211

343

10,868

10,957

309

10,648

2

2

Income before income taxes

5,192

(356)

5,548

4,610

(629)

5,239

13

6

Provision (benefit) for income taxes

938

(188)

1,126

496

(789)

1,285

N/M

(12)

Net income (loss)

$

4,254

$

(168)

$

4,422

$

4,114

$

160

$

3,954

3%

12%

Net income (loss) applicable to

common shareholders of The Bank

$

4,097

$

(168)

$

4,265

$

3,915

$

160

$

3,755

5%

14%

of New York Mellon Corporation

Operating leverage (c)

314 bps

135 bps

Diluted earnings per common share

$

4.04

$

(0.17)

$

4.21

$

3.72

$

0.15

$

3.57

9%

18%

Average common shares and equivalents

1,007,141

1,040,290

outstanding - diluted

Pre-tax operating margin

32%

34%

30%

33%

(a)Includes adjustments to provisional estimates for U.S. tax legislation and other changes, severance, expenses associated with consolidating real estate and litigation expense, each recorded in 4Q18. Also includes expenses associated with consolidating real estate recorded in 2Q18 and adjustments to provisional estimates for U.S. tax legislation and other changes and litigation expense, both recorded in 3Q18.

(b)Includes the estimated net benefit of U.S. tax legislation, severance, an asset impairment and investment securities losses related to the sale of certain securities, each recorded in 4Q17, and litigation expense recorded in 2017.

(c)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.

KEY DRIVERS (comparisons are 2018 vs. 2017)

Total revenue of $16.4 billion, increased 5%.

Fee revenue increased 6%, primarily reflecting the notable items recorded in 4Q17. Excluding the notable items, fee revenue increased 3% (a), primarily reflecting growth in collateral management and higher Depositary Receipts revenue and investment management and performance fees.

Net interest revenue increased 9% driven by higher rates.

Noninterest expense increased 2%, primarily driven by investments in technology, expenses associated with consolidating real estate and the unfavorable impact of a weaker U.S. dollar, partially offset by lower bank assessment charges.

Effective tax rate of 18.1%. The impact of notable items decreased the effective rate by approximately 2%.

Repurchased 63.7 million common shares for $3.3 billion and paid $1.1 billion in dividends to common shareholders.

(a)See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 12 for additional information. Note: Throughout this document, sequential growth rates are unannualized.

IMPACT OF NOTABLE ITEMS ON BUSINESS SEGMENTS

Notable items by business

4Q18

4Q17

segment

Investment

Investment

Other

Total

Investment

Investment

Other

Total

(dollars in millions)

Management

Services

Management

Services

Fee and other revenue

$

- $

- $

- $

-

$

-

$

-

$

(316)

$

(316)

Net interest revenue

-

-

-

-

-

-

(4)

(4)

Total revenue

-

-

-

-

-

-

(320)

(320)

Total noninterest expense

28

110

131

269

30

199

(a)

53 (a)

282

Income before taxes

$

(28)

$

(110)

$

(131)

$

(269)

$

(30)

$

(199)

$

(373)

$

(602)

(a)The impact on noninterest expense from the notable items reported in 4Q17 was adjusted in 4Q18 for Investment Services and Other with no impact to the reported segment results or in total.

Page - 3

BNY Mellon 4Q18 Earnings Release

INVESTMENT SERVICES BUSINESS HIGHLIGHTS

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

4Q18

4Q18 vs.

3Q18

4Q17

3Q18

4Q17

Total revenue by line of business:

$

1,435

(2)%

(2)%

Asset Servicing

$

1,458

$

1,459

Pershing

558

558

569

-

(2)

Issuer Services

441

453

352

(3)

25

Treasury Services

328

324

322

1

2

Clearance and Collateral Management

278

264

252

5

10

Total revenue by line of business

3,040

3,057

2,954

(1)

3

Provision for credit losses

6

1

(2)

N/M

N/M

Noninterest expense

2,112

2,030

2,097

4

1

Income before taxes

$

922

$

1,026

$

859

(10)%

7 %

Pre-tax operating margin

30%

34%

29%

Foreign exchange and other trading revenue

$

163

$

161

$

168

1 %

(3)%

Securities lending revenue

$

43

$

52

$

45

(17)%

(4)%

Metrics:

$

35,540

1 %

(9)%

Average loans

$

35,044

$

38,845

Average deposits

$

203,416

$

192,741

$

204,680

6 %

(1)%

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

$

33.1

$

34.5

$

33.3

(4)%

(1)%

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

$

373

$

415

$

408

(10)%

(9)%

Pershing

6,125

- %

- %

Average active clearing accounts (U.S. platform) (in thousands)

6,108

6,126

Average long-term mutual fund assets (U.S. platform)

$

489,491

$

527,336

$

508,873

(7)%

(4)%

Average investor margin loans (U.S. platform)

$

10,921

$

10,696

$

9,822

2 %

11 %

Clearance and Collateral Management

$

3,181

6 %

22 %

Average tri-party collateral management balances (in billions)

$

2,995

$

2,606

(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 $1.2 trillion at Dec. 31, 2018, $1.4 trillion at Sept. 30, 2018 and $1.3 trillion at Dec. 31, 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 $58 billion at Dec. 31, 2018, $69 billion at Sept. 30, 2018 and $71 billion at Dec. 31, 2017.

KEY DRIVERS

Total revenue increased year-over-year and decreased sequentially. Net interest revenue increased year-over-year 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 decrease primarily reflects lower client assets and activity and the unfavorable impact of a stronger U.S. dollar, partially offset by higher net interest revenue. The sequential decrease primarily reflects lower client assets and activity including securities lending, partially offset by higher net interest revenue driven by higher deposit balances.

Pershing - The year-over-year decrease primarily reflects the previously disclosed lost business, partially offset by higher clearance volumes and net interest revenue.

Issuer Services - The year-over-year increase primarily reflects higher Depositary Receipts revenue driven by corporate actions and higher volumes and a smaller volume increase in Corporate Trust. The sequential decrease primarily reflects seasonality in Depositary Receipts.

Treasury Services - Both increases primarily reflect higher payment volumes and net interest revenue.

Clearance and Collateral Management - Both increases primarily reflect growth in clearance and collateral management and higher net interest revenue.

Noninterest expense increased year-over-year primarily driven by investments in technology, partially offset by the impact of notable items. The sequential increase primarily reflects higher severance expense and investments in technology.

Page - 4

BNY Mellon 4Q18 Earnings Release

INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS

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

4Q18

4Q18 vs.

3Q18

4Q17

3Q18

4Q17

Total revenue by line of business:

$

660

(6)%

(11)%

Asset Management

$

704

$

738

Wealth Management

303

311

310

(3)

(2)

Total revenue by line of business

963

1,015

1,048

(5)

(8)

Provision for credit losses

1

(2)

1

N/M

N/M

Noninterest expense

715

701

771

2

(7)

Income before taxes

$

247

$

316

$

276

(22)%

(11)%

Pre-tax operating margin

26%

31%

26%

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

29%

35%

29%

Metrics:

$

16,485

(2)%

(2)%

Average loans

$

16,763

$

16,813

Average deposits

$

14,893

$

14,634

$

11,633

2 %

28 %

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

$

239

$

261

$

251

(8)%

(5)%

Changes in AUM (in billions) (current period is preliminary) (c)

$

1,828

Beginning balance of AUM

$

1,805

$

1,824

Net (outflows) inflows:

Long-term strategies:

(8)

(2)

(6)

Equity

Fixed income

(1)

2

(2)

Liability-driven investments

14

16

23

Multi-asset and alternative investments

(2)

2

2

Total long-term active strategies inflows

3

18

17

Index

(11)

(3)

(1)

Total long-term strategies (outflows) inflows

(8)

15

16

Short term strategies:

(10)

(4)

Cash

-

Total net (outflows) inflows

(18)

15

12

Net market impact

(69)

18

47

Net currency impact

(19)

(10)

10

Ending balance of AUM

$

1,722

$

1,828

$

1,893

(6)%

(9)%

(a)Net of distribution and servicing expense. See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 12 for the reconciliation of this Non-GAAP measure. In 1Q18, the adjusted pre-tax operating 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.

KEY DRIVERS

Total revenue decreased year-over-year and sequentially.

Asset Management - The year-over-year decrease primarily reflects the impact of net outflows, lower equity markets and the divestiture of CenterSquare. The sequential decrease primarily reflects lower equity markets, partially offset by seasonally higher performance fees. Both decreases also reflect the unfavorable impact of a stronger U.S. dollar (principally versus the British Pound).

Wealth Management - Both decreases primarily reflect lower equity markets and net interest revenue.

Noninterest expense decreased year-over-year primarily reflecting lower incentive expense and the divestiture of CenterSquare. The sequential increase was primarily driven by higher severance.

Page - 5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

The Bank of New York Mellon Corporation published this content on 15 April 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 15 April 2019 21:47:08 UTC

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Financials (USD)
Sales 2019 15 705 M
EBIT 2019 4 713 M
Net income 2019 3 732 M
Debt 2019 32 319 M
Yield 2019 2,57%
P/E ratio 2019 11,5x
P/E ratio 2020 10,7x
EV / Sales2019 4,78x
EV / Sales2020 4,71x
Capitalization 42 674 M
Chart BANK OF NEW YORK MELLON (THE)
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Bank of New York Mellon (The) Technical Analysis Chart | MarketScreener
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Technical analysis trends BANK OF NEW YORK MELLON (T
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TrendsBullishBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 22
Average target price 47,43  $
Last Close Price 45,27  $
Spread / Highest target 25,9%
Spread / Average Target 4,76%
Spread / Lowest Target -9,43%
EPS Revisions
Managers
NameTitle
Charles William Scharf Chairman & Chief Executive Officer
Lester J. Owens Head-Operations & Senior Executive VP
Michael Santomassimo Chief Financial Officer
Bridget E. Engle Chief Information Officer & Senior Executive VP
Sabet Elias Chief Technology Officer
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