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

BANK OF NEW YORK MELLON CORPORATION (THE)

(BK)
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BANK OF NEW YORK MELLON : s 2. and 3. Management's Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures about Market Risk (form 10-Q)

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08/06/2020 | 06:39am EDT

General


In this Quarterly Report on Form 10-Q, references to "our," "we," "us," "BNY
Mellon," the "Company" and similar terms refer to The Bank of New York Mellon
Corporation and its consolidated subsidiaries. The term "Parent" refers to The
Bank of New York Mellon Corporation but not its subsidiaries.

Certain business terms used in this report are defined in the Glossary included
in our Annual Report on Form 10-K for the year ended Dec. 31, 2019 ("2019 Annual
Report").

The following should be read in conjunction with the Consolidated Financial Statements included in this report. Investors should also read the sections titled "Forward-looking Statements" and "Risk Factors."

Overview


Established in 1784 by Alexander Hamilton, we were the first company listed on
the New York Stock Exchange (NYSE: BK). With a history of more than 235 years,
BNY Mellon is a global company that manages and services assets for financial
institutions, corporations and individual investors in 35 countries.

BNY Mellon has two business segments, Investment Services and Investment and
Wealth Management (formerly Investment Management), which offer a comprehensive
set of capabilities and deep expertise across the investment lifecycle, enabling
the Company to provide solutions to buy-side and sell-side market participants,
as well as leading institutional and wealth management clients globally.


The diagram below presents our two business segments and lines of business, with the remaining operations in the Other segment.

[[Image Removed: businesseschart2q20.jpg]]

Key second quarter 2020 and subsequent events

Emily Portney named Chief Financial Officer


In July 2020, Emily Portney was appointed Chief Financial Officer, succeeding
Michael P. Santomassimo, and joined the Company's Executive Committee. Ms.
Portney previously led the client management, sales and services teams for the
Asset Servicing business globally and oversaw the Americas region for the Asset
Servicing business. She has also previously held senior financial roles.

CCAR and common stock repurchases


In March 2020, we and the other members of the Financial Services Forum
announced the temporary suspension of share repurchases until the end of the
second quarter of 2020 to preserve capital and liquidity in order to further the
objective of using capital and liquidity to support clients and customers.


4 BNY Mellon
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On June 25, 2020, the Federal Reserve released the results of its annual stress
tests for 2020 and additional sensitivity analyses that the Federal Reserve
conducted in light of the coronavirus pandemic. The Federal Reserve also
notified BNY Mellon that its stress capital buffer ("SCB") requirement will be
2.5%, which equals the regulatory floor. The SCB will be effective on Oct. 1,
2020.

The Federal Reserve also announced that it has required participating
Comprehensive Capital Analysis and Review ("CCAR") firms, including us, to
update and resubmit their capital plans and that, as a result, unless otherwise
approved by the Federal Reserve, participating firms would not be permitted,
during the third quarter of 2020, to conduct open market common stock
repurchases, to increase their common stock dividends or to pay common stock
dividends that exceed average net income for the preceding four quarters. The
Federal Reserve also stated that it may extend these limitations
quarter-by-quarter.

Highlights of second quarter 2020 results


Net income applicable to common shareholders was $901 million, or $1.01 per
diluted common share, in the second quarter of 2020. Net income applicable to
common shareholders was $969 million, or $1.01 per diluted common share, in the
second quarter of 2019. The highlights below are based on the second quarter of
2020 compared with the second quarter of 2019, unless otherwise noted.

• Total revenue of $4.0 billion increased 2% primarily reflecting:

• Fee revenue increased 2% primarily reflecting higher fees in Pershing and

       Asset Servicing, partially offset by money market fee waivers, lower
       investment management fees and the unfavorable impact of a stronger U.S.
       dollar. (See "Fee and other revenue" beginning on page 7.)

• Net interest revenue decreased 3% primarily reflecting lower interest

rates on interest-earning assets, partially offset by the benefit of lower

       deposit and funding rates and higher deposits, securities portfolio and
       loans. (See "Net interest revenue" on page 10.)

• Provision for credit losses was $143 million primarily reflecting increased

downgrades and the continuation of the challenging




macroeconomic outlook. (See "Consolidated balance sheet review - Allowance for
credit losses" beginning on page 29.)
•   Noninterest expense increased 1% primarily reflecting the continued

investments in technology and higher staff and pension expenses, partially

offset by lower business development (travel and marketing) expense and the

favorable impact of a stronger U.S. dollar. (See "Noninterest expense" on

page 13.)

• Effective tax rate of 18.3%. (See "Income taxes" on page 13.)

Capital and liquidity

• CET1 ratio was 12.6% under the Advanced Approaches at June 30, 2020, compared

with 11.3% under the Standardized Approach at March 31, 2020. The increase in

the CET1 ratio primarily reflects capital generated through earnings and

unrealized gains on assets available-for-sale, partially offset by capital

deployed through dividend payments. (See "Capital" beginning on page 37.)

• Tier 1 capital increased $2.55 billion, including the issuance of $1 billion

of preferred stock. (See "Capital" beginning on page 37.)

Highlights of our principal businesses


Investment Services
• Total revenue increased 3%.


• Fee revenue increased 5%.

• Income before income taxes decreased 8%.

• AUC/A of $37.3 trillion, increased 5%, primarily reflecting higher client

   inflows, market values and net new business, partially offset by the
   unfavorable impact of a stronger U.S. dollar.



Investment and Wealth Management
• Total revenue decreased 3%.


• Income before income taxes decreased 15%.

• AUM of $2.0 trillion, increased 6%, primarily reflecting higher market values

and net inflows, partially offset by the unfavorable impact of a stronger U.S.

dollar (principally versus the British pound).

See "Review of businesses" and Note 19 of the Notes to Consolidated Financial Statements for additional information on our businesses.



                                                                    BNY Mellon 5
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Impact of coronavirus pandemic on our business

The coronavirus pandemic has had a significant effect on the global macroeconomic environment. The following discusses the areas of our business that have been impacted and could continue to be impacted by the current environment.

At the end of June 2020, approximately 95% of our employees continued to work from home and be fully operational with minimal disruption to servicing our clients. However, our continued reliance on work-from-home arrangements may result in increased operational risks.


Market volatility associated with the performance of global equity and fixed
income markets and lower interest rates has had, and may continue to have, a
considerable impact on all of our businesses. Our lower-risk diversified
fee-based business model benefits from heightened volatility and a
flight-to-quality on a relative basis compared with other credit-focused
financial institutions.

Our Investment Services businesses were favorably impacted by higher client
volumes in the first and second quarters of 2020 compared with the prior year.
The significant increases in market volatility also resulted in increased client
activity in foreign exchange, and higher asset servicing, clearing services in
Pershing, as well as clearance and collateral management fee revenue. However,
the heightened volumes and volatility were lower in the second quarter compared
with the first quarter of 2020.

This volatility coupled with the interest rate environment also led to an
increase in deposit levels from the prior year as our clients increased the
levels of cash placed with us. This favorably impacted net interest revenue.
However, the low interest rate environment has begun to more than offset that
benefit and is expected to continue to reduce our net interest revenue and
margin.

Given the recent levels of short-term interest rates, money market mutual funds
have begun to waive fees, which reduced fee revenue in the second quarter of
2020. See further discussion of money market fee waivers in "Fee and other
revenue."


As discussed above under "Key second quarter 2020 and subsequent events," we and
the other members of the Financial Services Forum announced in March 2020 that
we would suspend share repurchases through the second quarter of 2020.
Additionally, in connection with the Federal Reserve's release of the CCAR
results in June 2020, BNY Mellon announced that it will not conduct open market
common stock repurchases in the third quarter of 2020, as required of all
participating CCAR firms, and will continue the current quarterly common stock
dividend of $0.31 per share. See "Recent regulatory developments" for additional
information related to the 2020 CCAR results.

The significant changes in market values during 2020 have impacted revenue
related to seed capital investments (net of hedges) in our Investment and Wealth
Management business, which benefited the second quarter of 2020 and negatively
impacted the first quarter of 2020. Also, in the second quarter, the Investment
and Wealth Management business was negatively impacted by higher money market
fee waivers.

During the first quarter of 2020, we purchased $2.2 billion of commercial paper
and certificates of deposit ("CDs") from affiliated money market mutual funds in
order to provide liquidity support to the funds. We also purchased $650 million
in the first quarter of 2020 and $1.1 billion in the second quarter of 2020 of
commercial paper and CDs from third-party money market mutual funds and funded
this purchase through the Federal Reserve Bank of Boston's Money Market Mutual
Fund Liquidity Facility ("MMLF") program. See "Recent regulatory developments"
in the First Quarter 2020 Form 10-Q for additional information on the MMLF.

The need to apply macroeconomic forecasting in the current environment in
conjunction with the new expected credit loss accounting guidance has resulted
in and may continue to result in heightened levels of credit loss provisioning.
The continuing effects of the pandemic could also result in increased credit
losses and charge offs.

In addition, a prolonged economic downturn may result in other asset write-downs
and impairments, including, but not limited to, equity investments, goodwill and
intangibles.



6 BNY Mellon
--------------------------------------------------------------------------------

It is difficult to forecast the impact of the coronavirus, together with related
public health measures, on our results with certainty because so much depends on
how the health crisis evolves, its impact on the global economy as well as
actions taken by central banks and governments to support the economy.

The current macroeconomic environment has also resulted in responses by governmental and regulatory bodies. See "Recent regulatory developments" for additional information on legislative and regulatory


developments in response to the coronavirus pandemic.
For further discussion of the current and potential impact of the coronavirus
pandemic see Item 1A. Risk Factors "The coronavirus pandemic is adversely
affecting us and creates significant risks and uncertainties for our business,
and the ultimate impact of the pandemic on us will depend on future
developments, which are highly uncertain and cannot be predicted."

Fee and other revenue


Fee and other revenue                                                                              YTD20
                                                                2Q20 vs.                              vs.
(dollars in millions, unless
otherwise noted)                  2Q20      1Q20      2Q19   1Q20    2Q19        YTD20     YTD19   YTD19
Investment services fees:
Asset servicing fees (a)       $ 1,173$ 1,159$ 1,141      1  %    3  %   $ 2,332$ 2,263       3  %
Clearing services fees (b)         431       470       410     (8 )     5          901       808      12
Issuer services fees               277       263       291      5      (5 )        540       542       -
Treasury services fees             144       149       140     (3 )     3          293       272       8
Total investment services fees   2,025     2,041     1,982     (1 )     2        4,066     3,885       5
Investment management and
performance fees                   786       862       833     (9 )    (6 )      1,648     1,674      (2 )
Foreign exchange and other
trading revenue                    166       319       166    (48 )     -          485       336      44
Financing-related fees              58        59        50     (2 )    16          117       101      16
Distribution and servicing          27        31        31    (13 )   (13 )         58        62      (6 )
Investment and other income        105        11        43     N/M     N/M         116        78     N/M
Total fee revenue                3,167     3,323     3,105     (5 )     2        6,490     6,136       6
Net securities gains                 9         9         7     N/M     N/M 

18 8 N/M Total fee and other revenue $ 3,176$ 3,332$ 3,112 (5 )% 2 % $ 6,508$ 6,144 6 %


Fee revenue as a percentage of
total revenue                       79 %      81 %      79 %                        80 %      78 %

AUC/A at period end (in
trillions) (c)                 $  37.3$  35.2$  35.5      6  %    5  %   $  37.3$  35.5       5  %
AUM at period end (in
billions) (d)                  $ 1,961$ 1,796$ 1,843      9  %    6  %   $ 1,961$ 1,843       6  %

(a) Asset servicing fees include the fees from the Clearance and Collateral

Management business and also include securities lending revenue of $56

million in the second quarter of 2020, $51 million in the first quarter of

2020, $44 million in the second quarter of 2019, $107 million in the first

six months of 2020 and $92 million in the first six months of 2019.

(b) Clearing services fees are almost entirely earned by our Pershing business.

(c) Consists of AUC/A primarily from the Asset Servicing business and, to a

lesser extent, the Clearance and Collateral Management, Issuer Services,

Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon

of $1.3 trillion at June 30, 2020, $1.2 trillion at March 31, 2020 and $1.4

trillion at June 30, 2019.

(d) Excludes securities lending cash management assets and assets managed in the

Investment Services business.

N/M - Not meaningful.



Fee and other revenue increased 2% compared with the second quarter of 2019 and
decreased 5% compared with the first quarter of 2020. The increase compared with
the second quarter of 2019 primarily reflects higher investment and other
income, asset servicing fees and clearing services fees, partially offset by
lower investment management and performance fees. The decrease compared with the
first quarter of 2020 primarily reflects lower foreign exchange and other
trading revenue, investment management and performance fees and clearing

services fees, partially offset by higher investment and other income.

Money market fee waivers


Given the recent levels of short-term interest rates, money market mutual fund
fees and other similar fees have begun to be waived to protect investors from
negative returns. The fee waivers are initially primarily impacting clearing
services fees in Pershing, and to a lesser extent revenue in our other


                                                                    BNY Mellon 7
--------------------------------------------------------------------------------

businesses including investment management fees and distribution and servicing
revenue in Investment Management (formerly Asset Management) and fees in other
Investment Services businesses, but also result in lower distribution and
servicing expense. Money market fee waivers are highly sensitive to changes in
short-term interest rates and are difficult to predict, but are expected to grow
over the coming quarters.

The following table presents the impact of money market fee waivers on our
consolidated fee revenue, net of distribution and servicing expense. A majority
of the money market fee waivers were driven by low short-term interest rates. An
increase in money market balances in the second quarter 2020 compared with the
first quarter 2020 resulted in an approximate $50 million increase in total fee
and other revenue which partially offset the increase in money market fee
waivers.

Money market fee waivers
(in millions)                                2Q20    1Q20
Investment services fees:
Clearing services fees                      $ (50 )$  (9 )
Issuer services fees                           (1 )     -
Treasury services fees                         (2 )     -
Total investment services fees                (53 )    (9 )

Investment management and performance fees (30 ) (14 ) Distribution and servicing revenue

             (3 )     -
Total fee and other revenue                   (86 )   (23 )

Less: Distribution and servicing expense 7 - Net impact of money market fee waivers $ (79 )$ (23 )


Impact to revenue by line of business:
Asset Servicing                             $  (1 ) $   -
Pershing                                      (60 )    (9 )
Issuer Services                                (1 )     -
Investment Management                         (24 )   (14 )

Total impact to revenue by line of business $ (86 )$ (23 )

Note: The line of business revenue for management reporting purposes reflects the impact of revenue transferred between the businesses.



Assuming quarter-end money market balances, we expect the impact from fee
waivers, net of lower distribution and servicing expense, to increase in the
third quarter of 2020 by approximately $30 million to $45 million and to
increase an incremental $25 million in the fourth quarter of 2020, for a full
run rate of approximately $135 million to $150 million. This impact may be
partially offset depending on the levels of money market balances.


Investment services fees


Investment services fees increased 2% compared with the second quarter of 2019
and decreased 1% compared with the first quarter of 2020 reflecting the
following:
•   Asset servicing fees increased 3% compared with the second quarter of 2019

and 1% compared with the first quarter of 2020. Both increases primarily

reflect higher volumes from existing clients.

• Clearing services fees increased 5% compared with the second quarter of 2019

and decreased 8% compared with the first quarter of 2020. The increase

compared with the second quarter of 2019 primarily reflects higher money

market balances and clearing volumes, partially offset by the impact of

rate-driven money market fee waivers. The decrease compared with the first

quarter of 2020 primarily reflects the impact of rate-driven money market fee

waivers and lower clearing volumes, partially offset by higher money market

balances.

• Issuer services fees decreased 5% compared with the second quarter of 2019

and increased 5% compared with the first quarter of 2020. The decrease

compared with the second quarter of 2019 primarily reflects lower Depositary

Receipts and Corporate Trust fees. The increase compared with the first

quarter of 2020 primarily reflects higher Depositary Receipts fees.

Treasury services fees increased 3% compared with the second quarter of 2019

and decreased 3% compared with the first quarter of 2020. The increase

compared with the second quarter of 2019 primarily reflects higher liquidity

fees. The decrease compared with the first quarter of 2020 primarily reflects

lower payment volumes and other fees.

See the "Investment Services business" in "Review of businesses" for additional details.

Investment management and performance fees


Investment management and performance fees decreased 6% compared with the second
quarter of 2019 and 9% compared with the first quarter of 2020. The decrease
compared with the second quarter of 2019 primarily reflects money market fee
waivers, the unfavorable change in the mix of AUM since the second quarter of
2019 and the unfavorable impact of


8 BNY Mellon
--------------------------------------------------------------------------------

a stronger U.S. dollar (principally versus the British pound). The decrease
compared with the first quarter of 2020 primarily reflects the timing of
performance fees and money market fee waivers. On a constant currency basis
(Non-GAAP), investment management and performance fees decreased 5% compared
with the second quarter of 2019. Performance fees were $5 million in the second
quarter of 2020, $2 million in the second quarter of 2019 and $50 million in the
first quarter of 2020.

AUM was $2.0 trillion at June 30, 2020, an increase of 6% compared with June 30,
2019, primarily reflecting higher market values and net inflows, partially
offset by the unfavorable impact of a stronger U.S. dollar (principally versus
the British pound).

See "Investment and Wealth Management business" in "Review of businesses" for additional details regarding the drivers of investment management and performance fees, AUM and AUM flows.

Foreign exchange and other trading revenue


Foreign exchange and other trading revenue
(in millions)                                     2Q20    1Q20   2Q19   YTD20   YTD19
Foreign exchange                                 $ 174$ 253$ 150$  427$  310
Other trading (loss) revenue                        (8 )    66     16     

58 26 Total foreign exchange and other trading revenue $ 166$ 319$ 166$ 485$ 336

Foreign exchange and other trading revenue was unchanged compared with the second quarter of 2019 and decreased 48% compared with the first quarter of 2020.


Foreign exchange revenue is primarily driven by the volume of client
transactions and the spread realized on these transactions, both of which are
impacted by market volatility, and the impact of foreign currency hedging
activities. In the second quarter of 2020, foreign exchange revenue totaled $174
million, an increase of 16% compared with the second quarter of 2019 and a
decrease of 31% compared with the first quarter of 2020. The increase compared
with the second quarter of 2019 reflects higher volatility partially offset by
the negative impact of foreign currency translation hedging (mostly offset in
investment and other income). The decrease compared with the first quarter of
2020 reflects lower volumes and volatility and the negative impact of

foreign currency translation hedging. Foreign exchange revenue is primarily reported in the Investment Services business and, to a lesser extent, the Investment and Wealth Management business and the Other segment.


Other trading losses totaled $8 million in the second quarter of 2020 compared
with other trading revenue of $16 million in the second quarter of 2019 and
other trading revenue of $66 million in the first quarter of 2020. Both
decreases primarily reflect the impact of Investment Management seed capital
hedging activities. Other trading revenue is reported in all three business
segments.

Investment and other income

The following table provides the components of investment and other income.


Investment and other income
(in millions)                              2Q20   1Q20    2Q19    YTD20     

YTD19

Corporate/bank-owned life insurance $ 36$ 36$ 32$ 72 $

62

Expense reimbursements from joint venture 19 21 19 40

38

Asset-related gains                           3      4       1        7     

2

Seed capital gains (losses) (a)              23    (31 )     8       (8 )   

10

Other income (loss)                          24    (19 )   (17 )      5       (34 )
Total investment and other income         $ 105$  11$  43$  116   $ 

78

(a) Excludes seed capital gains related to consolidated investment management

    funds, which are reflected in operations of consolidated investment
    management funds.



Investment and other income increased compared with both the second quarter of 2019 and first quarter of 2020. Both increases primarily reflect equity investment gains, including seed capital investments, foreign currency translation gains and a one-time fee in the Asset Servicing business. The increase compared with the first quarter of 2020 was partially offset by a one-time fee in the Pershing business recorded in the first quarter of 2020.

Year-to-date 2020 compared with year-to-date 2019


Fee and other revenue increased 6% compared with the first six months of 2019,
primarily reflecting higher foreign exchange and other trading revenue, clearing
services fees, asset servicing fees and investment and other income. The 44%
increase in foreign exchange and other trading revenue primarily reflects higher
volatility and volumes. The 12% increase in clearing services fees primarily
reflects


                                                                    BNY Mellon 9
--------------------------------------------------------------------------------

higher transaction fees and money market balances, partially offset by money
market fee waivers. The 3% increase in asset servicing fees primarily reflects
higher volumes from existing clients. The increase in

investment and other income revenue primarily reflects one-time fees in the Pershing and Asset Servicing businesses.


Net interest revenue

Net interest revenue                                                                                            YTD20
                                                                     2Q20 vs.                                       vs.
(dollars in millions)          2Q20        1Q20        2Q19    1Q20        2Q19             YTD20       YTD19   YTD19
Net interest revenue -
GAAP                      $     780$     814$     802      (4 )%       (3 )%      $   1,594$   1,643      (3 )%
Add: Tax equivalent
adjustment                        2           2           4       N/M         N/M               4           8       N/M
Net interest revenue
(FTE) -
Non-GAAP (a)              $     782$     816$     806      (4 )%       (3 )%      $   1,598$   1,651      (3 )%

Average interest-earning
assets                    $ 357,562$ 323,936$ 287,417      10  %      

24 % $ 340,749$ 284,816 20 %

Net interest margin -
GAAP                           0.88 %      1.01 %      1.12 %   (13 ) bps   (24 ) bps        0.94 %      1.16 %   (22 ) bps
Net interest margin (FTE)
-
Non-GAAP (a)                   0.88 %      1.01 %      1.12 %   (13 ) bps   (24 ) bps        0.94 %      1.16 %   (22 ) 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.


N/M - Not meaningful.
bps - basis points.


Net interest revenue decreased 3% compared with the second quarter of 2019 and
4% compared with the first quarter of 2020. The decrease compared with the
second quarter of 2019 primarily reflects lower interest rates on
interest-earning assets, partially offset by the benefit of lower deposit and
funding rates and higher deposits, securities portfolio and loans. The decrease
compared with the first quarter of 2020 was primarily driven by lower interest
rates on interest-earning assets. This was partially offset by the benefit of
lower deposit and funding rates, higher securities portfolio and the impact of
hedging activities (primarily offset in foreign exchange and other trading
revenue).

Net interest margin decreased 24 basis points compared with the second quarter of 2019 and 13 basis points compared with the first quarter of 2020. Both decreases primarily reflect lower asset yields and higher interest-earning assets, partially offset by lower deposit rates.


Average interest-earning assets of $358 billion in the second quarter of 2020
increased 24% compared with the second quarter of 2019 and 10% compared with the
first quarter of 2020. Both increases primarily reflect higher interest-bearing
deposits with the Federal Reserve and other central banks and securities
portfolio.


Average non-U.S. dollar deposits comprised approximately 25% of our average total deposits in the second quarter of 2020. Approximately 40% of the average non-U.S. dollar deposits in the second quarter of 2020 were euro denominated.

Net interest revenue in future quarters will depend on the level and mix of client deposits, deposit rates, as well as the level and shape of the yield curve, which may result in lower yields on interest-earning assets.

Year-to-date 2020 compared with year-to-date 2019


Net interest revenue decreased 3% compared with the first six months of 2019,
primarily driven by lower interest rates on interest-earning assets, partially
offset by the benefit of lower deposit and funding rates and higher deposits,
securities portfolio and loans. The decrease in net interest margin primarily
reflects lower asset yields and higher interest-earning assets, partially offset
by lower deposit and funding rates and higher deposits and securities portfolio.

Average interest-earning assets of $341 billion in the first six months of 2020
increased 20% compared with the first six months of 2019. The increase primarily
reflects higher interest-bearing deposits with the Federal Reserve and other
central banks, securities portfolio and loans.



10 BNY Mellon
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Average balances and interest
rates                                                                       

Quarter ended

                                          June 30, 2020                        March 31, 2020                        June 30, 2019
(dollars in millions; average     Average               Average        Average                Average        Average                Average
rates annualized)                 balance    Interest     rates        balance     Interest     rates        balance     Interest     rates
Assets
Interest-earning assets:
Interest-bearing deposits with
the Federal Reserve and other
central banks                   $  94,229$      (7 )   (0.03 )%   $  

80,403 $ 80 0.39 % $ 61,756$ 113 0.72 % Interest-bearing deposits with banks (primarily foreign banks) 21,093 40 0.76 17,081

           58      1.37         13,666           64      1.87
Federal funds sold and
securities purchased under
resale agreements (a)              30,265          61      0.82         34,109          396      4.67         38,038          568      5.99
Margin loans                       12,791          40      1.28         12,984           87      2.69         10,920          119      4.36
Non-margin loans:
Domestic offices                   31,185         172      2.21         31,720          238      3.02         29,492          284      3.86
Foreign offices                    12,743          58      1.84         11,170           71      2.55          9,961           81      3.29
Total non-margin loans             43,928         230      2.10         42,890          309      2.89         39,453          365      3.71
Securities:
U.S. government obligations        27,901         105      1.52         23,175          108      1.87         18,870          103      2.19
U.S. government agency
obligations                        74,583         358      1.92         69,046          400      2.32         66,445          428      2.58
State and political
subdivisions (b)                    1,025           7      2.98          1,033            8      3.06          1,735           13      2.89
Other securities (b)               45,511          93      0.82         36,375           86      0.95         30,770          157      2.04
Trading securities (b)              6,236          18      1.13          6,840           40      2.36          5,764           39      2.72
Total securities (b)              155,256         581      1.50        

136,469 642 1.88 123,584 740 2.40 Total interest-earning assets (b)

                             $ 357,562$     945      1.06  %   $ 323,936$    1,572      1.95 %   $  287,417$    1,969      2.74 %
Noninterest-earning assets         57,797                               61,342                                54,967
Total assets                    $ 415,359$ 385,278$  342,384
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic offices                $ 102,135$      15      0.06  %   $  

99,915 $ 170 0.69 % $ 74,180$ 251 1.36 % Foreign offices

                   108,508         (32 )   (0.12 )       97,717           70      0.29         93,365          181      0.78
Total interest-bearing deposits   210,643         (17 )   (0.03 )      197,632          240      0.49        167,545          432      1.04
Federal funds purchased and
securities sold under
repurchase agreements (a)          14,209           1      0.03         

13,919 275 7.96 11,809 372 12.64 Trading liabilities

                 1,974           2      0.39          1,626            7      1.61          1,735           11      2.47
Other borrowed funds                2,272           7      1.30            719            4      2.27          2,455           20      3.36
Commercial paper                      191           1      1.02          1,581            6      1.56          2,957           18      2.43
Payables to customers and
broker-dealers                     18,742          (1 )   (0.01 )       16,386           30      0.73         15,666           69      1.76
Long-term debt                     28,122         170      2.42         27,231          194      2.83         27,681          241      3.45
Total interest-bearing
liabilities                     $ 276,153$     163      0.24  %   $ 259,094$      756      1.17 %   $  229,848$    1,163      2.03 %
Total noninterest-bearing
deposits                           72,411                               60,577                                52,956
Other noninterest-bearing
liabilities                        24,121                               24,229                                18,362
Total liabilities                 372,685                              343,900                               301,166
Temporary equity
Redeemable noncontrolling
interests                              74                                   66                                    53
Permanent equity
Total The Bank of New York
Mellon Corporation
shareholders' equity               42,486                               41,206                                41,029
Noncontrolling interests              114                                  106                                   136
Total permanent equity             42,600                               41,312                                41,165
Total liabilities, temporary
equity and permanent equity     $ 415,359$ 385,278$  342,384
Net interest revenue (FTE) -
Non-GAAP (c)                                $     782$      816$      806
Net interest margin (FTE) -
Non-GAAP (b)(c)                                            0.88  %                               1.01 %                                1.12 %
Less: Tax equivalent adjustment
(b)                                                 2                                     2                                     4
Net interest revenue - GAAP                 $     780$      814$      802
Net interest margin - GAAP                                 0.88  %                               1.01 %                                1.12 %

(a) Includes the average impact of offsetting under enforceable netting

agreements of approximately $67 billion for the second quarter of 2020, $80

billion for the first quarter of 2020 and $51 billion for the second quarter

of 2019. On a Non-GAAP basis, excluding the impact of offsetting, the yield

on federal funds sold and securities purchased under resale agreements would

have been 0.26% for the second quarter of 2020, 1.39% for the first quarter

of 2020 and 2.57% for the second quarter of 2019. On a Non-GAAP basis,

excluding the impact of offsetting, the rate on federal funds purchased and

securities sold under repurchase agreements would have been 0.00% for the

second quarter of 2020, 1.18% for the first quarter of 2020 and 2.39% for the

second quarter of 2019. We believe providing the rates excluding the impact

of netting is useful to investors as it is more reflective of the actual

rates earned and paid.

(b) Average rates were calculated on an FTE basis, at tax rates of approximately

21%.



(c) See "Net interest revenue" on page 10 for a reconciliation of this Non-GAAP
    measure.




                                                                   BNY Mellon 11
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Average balances and interest rates                                        

Year-to-date

                                                        June 30, 2020                         June 30, 2019
(dollars in millions; average rates             Average                Average        Average                Average
annualized)                                     balance     Interest     rates        balance     Interest     rates
Assets
Interest-earning assets:
Interest-bearing deposits with the Federal
Reserve and other central banks              $   87,316$       73      0.16 %   $   62,665$      252      0.80 %
Interest-bearing deposits with banks
(primarily foreign banks)                        19,087           98      1.03         13,761          127      1.86
Federal funds sold and securities purchased
under resale agreements (a)                      32,187          457      2.86         33,528        1,042      6.26
Margin loans                                     12,887          127      1.99         11,790          254      4.35
Non-margin loans:
Domestic offices                                 31,453          410      2.62         28,838          553      3.85
Foreign offices                                  11,956          129      2.17         10,235          167      3.30
Total non-margin loans                           43,409          539      2.49         39,073          720      3.71
Securities:
U.S. government obligations                      25,538          213      1.68         21,220          232      2.21
U.S. government agency obligations               71,815          758      2.11         65,660          855      2.60
State and political subdivisions (b)              1,029           15      3.02          1,969           28      2.80
Other securities (b)                             40,943          179      0.88         29,715          308      2.08
Trading securities (b)                            6,538           58      1.77          5,435           75      2.81
Total securities (b)                            145,863        1,223      1.68        123,999        1,498      2.42
Total interest-earning assets (b)            $  340,749$    2,517      1.48 %   $  284,816$    3,893      2.75 %
Noninterest-earning assets                       59,569                                54,476
Total assets                                 $  400,318$  339,292
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic offices                             $  101,025$      185      0.37 %   $   72,381$      475      1.32 %
Foreign offices                                 103,113           38      0.07         91,353          348      0.77
Total interest-bearing deposits                 204,138          223      0.22        163,734          823      1.01
Federal funds purchased and securities sold
under repurchase agreements (a)                  14,064          276      3.95         11,865          703     11.95
Trading liabilities                               1,800            9      0.94          1,521           18      2.37
Other borrowed funds                              1,495           11      1.53          2,878           44      3.08
Commercial paper                                    886            7      1.50          2,171           26      2.43
Payables to customers and broker-dealers         17,564           29      0.33         15,887          139      1.76
Long-term debt                                   27,677          364      2.62         27,966          489      3.48
Total interest-bearing liabilities           $  267,624$      919      0.69 %   $  226,022$    2,242      2.00 %
Total noninterest-bearing deposits               66,494                                53,765
Other noninterest-bearing liabilities            24,174                                18,494
Total liabilities                               358,292                     

298,281

Temporary equity
Redeemable noncontrolling interests                  70                                    65
Permanent equity
Total The Bank of New York Mellon
Corporation shareholders' equity                 41,846                                40,829
Noncontrolling interests                            110                                   117
Total permanent equity                           41,956                                40,946
Total liabilities, temporary equity and
permanent equity                             $  400,318$  339,292
Net interest revenue (FTE) - Non-GAAP (c)                 $    1,598$    1,651
Net interest margin (FTE) - Non-GAAP (b)(c)                               0.94 %                                1.16 %
Less: Tax equivalent adjustment (b)                                4                                     8
Net interest revenue - GAAP                               $    1,594$    1,643
Net interest margin - GAAP                                                0.94 %                                1.16 %


(a) Includes the average impact of offsetting under enforceable netting

agreements of approximately $73 billion for the first six months of 2020 and

$47 billion for the first six months of 2019. On a Non-GAAP basis, excluding

the impact of offsetting, the yield on federal funds sold and securities

purchased under resale agreements would have been 0.87% for the first six

months of 2020 and 2.59% for the first six months of 2019. On a Non-GAAP

basis, excluding the impact of offsetting, the rate on federal funds

purchased and securities sold under repurchase agreements would have been

0.64% for the first six months of 2020 and 2.39% for the first six months of

2019. We believe providing the rates excluding the impact of netting is

useful to investors as it is more reflective of the actual rates earned and

paid.

(b) Average rates were calculated on an FTE basis, at tax rates of approximately

21%.

(c) See "Net interest revenue" on page 10 for a reconciliation of this Non-GAAP

    measure.







12 BNY Mellon
--------------------------------------------------------------------------------
Noninterest expense

Noninterest expense                                                                                  YTD20
                                                                  2Q20 vs.                             vs.
(dollars in millions)               2Q20      1Q20      2Q19   1Q20    2Q19        YTD20     YTD19   YTD19
Staff                            $ 1,464$ 1,482$ 1,421     (1 )%    3  %   $ 2,946$ 2,945       -  %
Software and equipment               345       326       304      6      13          671       587      14
Professional, legal and other
purchased services                   337       330       337      2       -          667       662       1
Net occupancy                        137       135       138      1      (1 )        272       275      (1 )
Sub-custodian and clearing           120       105       115     14       4          225       220       2
Distribution and servicing            85        91        94     (7 )   (10 )        176       185      (5 )
Bank assessment charges               35        35        31      -      13           70        62      13
Business development                  20        42        56    (52 )   (64 )         62       101     (39 )
Amortization of intangible
assets                                26        26        30      -     (13 )         52        59     (12 )
Other                                117       140       121    (16 )    (3 )        257       250       3
Total noninterest expense        $ 2,686$ 2,712$ 2,647     (1 )%    1  %   $ 5,398$ 5,346       1  %

Full-time employees at period
end                               48,300    47,900    49,100      1  %   (2 )%




Total noninterest expense increased 1% compared with the second quarter of 2019
and decreased 1% compared with the first quarter of 2020. The increase compared
with the second quarter of 2019 primarily reflects the continued investments in
technology and higher staff and pension expenses, partially offset by lower
business development (travel and marketing) expense and the favorable impact of
a stronger U.S. dollar. The investments in technology are included in staff,
software and equipment, and professional, legal and other purchased services
expenses. The decrease compared with the first quarter of 2020 primarily
reflects lower other and business development (travel and marketing) expenses
and the favorable impact of a stronger U.S. dollar, partially offset by higher
software and equipment and sub-custodian and clearing expenses.

Our investments in technology infrastructure and platforms are expected to
continue. As a result, we expect to incur higher technology-related expenses in
2020 than in 2019 and higher pension expense as a result of a lower expected
rate of return on plan assets. These increases are expected to be offset by
decreases in other expenses as we continue to manage overall expenses.


Year-to-date 2020 compared with year-to-date 2019


Noninterest expense increased 1% compared with the first six months of 2019,
primarily reflecting the continued investments in technology and higher software
and equipment, staff and pension expenses, partially offset by the favorable
impact of a stronger U.S. dollar and lower business development (travel and
marketing) expense.

Income taxes


BNY Mellon recorded an income tax provision of $216 million (18.3% effective tax
rate) in the second quarter of 2020, $264 million (20.5% effective tax rate) in
the second quarter of 2019 and $265 million (21.6% effective tax rate) in the
first quarter of 2020. For additional information, see Note 11 of the Notes to
Consolidated Financial Statements.



                                                                   BNY Mellon 13
--------------------------------------------------------------------------------

Review of businesses


We have an internal information system that produces performance data along
product and service lines for our two principal businesses, Investment Services
and Investment and Wealth Management (formerly Investment Management), and the
Other segment.

Business accounting principles


Our business data has been determined on an internal management basis of
accounting, rather than the generally accepted accounting principles used for
consolidated financial reporting. These measurement principles are designed so
that reported results of the businesses will track their economic performance.

For information on the accounting principles of our businesses, see Note 19 of
the Notes to Consolidated Financial Statements. For information on the primary
products and services in each line of business, the primary types of revenue by
business and how our businesses are presented and analyzed, see Note 24 of the
Notes to Consolidated Financial Statements in our 2019 Annual Report.

Business results are subject to reclassification when organizational changes are
made. There were no significant organizational changes in the second quarter of
2020. The results are also subject to refinements in revenue and expense
allocation methodologies, which are typically reflected on a prospective basis.

In the first quarter of 2020, we reclassified the results of certain services
provided between the segments from noninterest expense to fee and other revenue.
This activity is offset in the Other segment and relates to services that are
also provided to third parties and provides consistency with the reporting of
the revenues. This adjustment had no impact on income before taxes of the
businesses. Also in the first quarter of 2020, we reclassified the results
related to certain lending activities from the Wealth Management business to the
Pershing business. These loans were originated by the Wealth Management business
as a service to Pershing clients. This resulted in an increase in total revenue,
noninterest expense and income before taxes in the Pershing business and
corresponding decrease in the Wealth Management business. Prior periods were
restated in the first quarter of 2020 for both reclassifications.

The results of our businesses may be influenced by client and other activities
that vary by quarter. In the first quarter, staff expense typically increases
reflecting the vesting of long-term stock awards for retirement-eligible
employees. In the third quarter, volume-related fees may decline due to reduced
client activity. In the third quarter, staff expense typically increases
reflecting the annual employee merit increase. In the fourth quarter, we
typically incur higher business development and marketing expenses; however,
2020 is expected to be different given the impact of the coronavirus pandemic.
In our Investment and Wealth Management business, performance fees are typically
higher in the fourth and first quarters, as those quarters represent the end of
the measurement period for many of the performance fee-eligible relationships.

The results of our businesses may also be impacted by the translation of
financial results denominated in foreign currencies to the U.S. dollar. We are
primarily impacted by activities denominated in the British pound and the euro.
On a consolidated basis and in our Investment Services business, we typically
have more foreign currency-denominated expenses than revenues. However, our
Investment and Wealth Management business typically has more foreign
currency-denominated revenues than expenses. Overall, currency fluctuations
impact the year-over-year growth rate in the Investment and Wealth Management
business more than the Investment Services business. However, currency
fluctuations, in isolation, are not expected to significantly impact net income
on a consolidated basis.

Fee revenue in Investment and Wealth Management, and to a lesser extent in Investment Services, is impacted by the value of market indices. At June 30, 2020, we estimate that a 5% change in global equity markets, spread evenly throughout the year, would impact fee revenue by less than 1% and diluted earnings per common share by $0.03 to $0.06.

See Note 19 of the Notes to Consolidated Financial Statements for the consolidating schedules which show the contribution of our businesses to our overall profitability.




14 BNY Mellon
--------------------------------------------------------------------------------
Investment Services business

                                                                                                                              YTD20
                                                                                       2Q20 vs.                                  vs.

(dollars in millions) 2Q20 1Q20 4Q19 3Q19

  2Q19   1Q20    2Q19          YTD20       YTD19   YTD19
Revenue:
Investment services
fees:
Asset servicing fees
(a)                     $   1,164$   1,147$   1,138$   1,138$   1,126      1  %    3  %   $   2,311$   2,237       3  %
Clearing services fees
(b)                           431         470         421         419         411     (8 )     5            901         809      11
Issuer services fees          277         263         264         324         291      5      (5 )          540         542       -
Treasury services fees        144         149         147         139         140     (3 )     3            293         272       8
Total investment
services fees               2,016       2,029       1,970       2,020       1,968     (1 )     2          4,045       3,860       5
Foreign exchange and
other trading revenue         178         261         151         160         153    (32 )    16            439         310      42
Other (c)                     145         146         115         116         112     (1 )    29            291         224      30
Total fee and other
revenue                     2,339       2,436       2,236       2,296       

2,233 (4 ) 5 4,775 4,394 9 Net interest revenue 768 806 778 761

783 (5 ) (2 ) 1,574 1,587 (1 ) Total revenue

               3,107       3,242       3,014       3,057       3,016     (4 )     3          6,349       5,981       6
Provision for credit
losses                        145         149          (5 )       (15 )        (4 )   N/M     N/M           294           4     N/M
Noninterest expense
(excluding amortization
of intangible assets)       1,971       1,969       2,160       1,952       1,943      -       1          3,940       3,904       1
Amortization of
intangible assets              18          18          19          21          20      -     (10 )           36          40     (10 )
Total noninterest
expense                     1,989       1,987       2,179       1,973       1,963      -       1          3,976       3,944       1
Income before income
taxes                   $     973$   1,106$     840$   1,099$   1,057    (12 )%   (8 )%   $   2,079$   2,033       2  %

Pre-tax operating
margin                         31 %        34 %        28 %        36 %        35 %                          33 %        34 %

Securities lending      $      51$      46$      40$      39$      40$      97$      84
revenue                                                                               11  %   28  %                              15  %

Total revenue by line
of business:
Asset Servicing         $   1,463$   1,531$   1,411$   1,411$   1,397     (4 )%    5  %   $   2,994$   2,812       6  %
Pershing                      578         653         579         575         572    (11 )     1          1,231       1,133       9
Issuer Services               431         419         415         466         446      3      (3 )          850         842       1
Treasury Services             340         339         329         312         317      -       7            679         634       7
Clearance and
Collateral Management         295         300         280         293         284     (2 )     4            595         560       6
Total revenue by line
of business             $   3,107$   3,242$   3,014$   3,057$   3,016     (4 )%    3  %   $   6,349$   5,981       6  %

Average balances:
Average loans           $  43,113$  41,789$  38,721$  37,005$  36,404      3  %   18  %   $  42,451$  36,818      15  %
Average deposits        $ 268,467$ 242,187$ 215,388$ 208,044$ 201,146     11  %   33  %   $ 255,327$ 198,131      29  %

(a) Asset servicing fees include the fees from the Clearance and Collateral

Management business.

(b) Clearing services fees are almost entirely earned by our Pershing business.

(c) Other revenue includes investment management and performance fees,

financing-related fees, distribution and servicing revenue, securities gains

and losses and investment and other income.


N/M - Not meaningful.


                                                                   BNY Mellon 15
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Investment Services business metrics
(dollars in millions, unless otherwise                                                                2Q20 vs.
noted)                                      2Q20        1Q20        4Q19        3Q19        2Q19   1Q20    2Q19
AUC/A at period end (in trillions) (a) $    37.3$    35.2$    37.1$    35.8$    35.5      6  %    5  %
Market value of securities on loan at
period end (in billions) (b)           $     384$     389$     378

$ 362$ 369 (1 )% 4 %

Pershing:

Net new assets (U.S. platform) (in
billions) (c)                          $      11$      31$      33$      19$      21     N/M     N/M
Average active clearing accounts (U.S.
platform) (in thousands)                   6,507       6,437       6,340       6,283       6,254      1  %    4  %
Average long-term mutual fund assets
(U.S. platform)                        $ 547,579$ 549,206$ 573,475$ 547,522$ 532,384      -  %    3  %
Average investor margin loans (U.S.
platform)                              $   9,235$   9,419$   9,420

$ 9,222$ 9,440 (2 )% (2 )%


Clearance and Collateral Management:
Average tri-party collateral
management balances (in billions)      $   3,573$   3,724$   3,562$   3,550$   3,400     (4 )%    5  %


(a) Consists of AUC/A primarily from the Asset Servicing business and, to a

lesser extent, the Clearance and Collateral Management, Issuer Services and

Pershing businesses. Includes the AUC/A of CIBC Mellon of $1.3 trillion at

June 30, 2020, $1.2 trillion at March 31, 2020, $1.5 trillion at Dec. 31,

2019 and $1.4 trillion at Sept. 30, 2019 and June 30, 2019.

(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 June 30, 2020, $59 billion at March 31,

2020, $60 billion at Dec. 31, 2019, $66 billion at Sept. 30, 2019 and $64

billion at June 30, 2019.

(c) Net new assets represent net flows of assets (e.g., net cash deposits and net

securities transfers) in customer accounts in Pershing LLC, a U.S.

    broker-dealer.


N/M - Not meaningful.


Business description

BNY Mellon Investment Services provides business services and technology
solutions to entities including financial institutions, corporations,
foundations and endowments, public funds and government agencies. Our lines of
business include: Asset Servicing, Pershing, Issuer Services, Treasury Services
and Clearance and Collateral Management. For information on the drivers of the
Investment Services fee revenue, see Note 10 of the Notes to Consolidated
Financial Statements in our 2019 Annual Report.

We are one of the leading global investment services providers with $37.3 trillion of AUC/A at June 30, 2020.


The Asset Servicing business provides a comprehensive suite of solutions. As one
of the largest global custody and fund accounting providers and a trusted
partner, we offer services for the safekeeping of assets in capital markets
globally as well as alternative investment and structured product strategies. We
provide custody and foreign exchange services, support exchange-traded funds and
unit investment trusts and provide our clients outsourcing capabilities. Our
robust digital and data offerings enable us to provide fully integrated
technology solutions for our clients. We deliver securities lending and
financing solutions on both an agency and principal basis. Our agency securities
lending program is one of the largest lenders of U.S. and non-U.S. securities,
servicing a lendable asset pool of

approximately $4.0 trillion in 34 separate markets. Our market-leading liquidity
services portal enables cash investments for institutional clients and includes
fund research and analytics.

Pershing provides execution, clearing, custody, business and technology solutions, delivering dependable operational support to broker-dealers, wealth managers and registered investment advisors (RIAs) globally.


The Issuer Services business includes Corporate Trust and Depositary Receipts.
Our Corporate Trust business delivers a full range of issuer and related
investor services, including trustee, paying agency, fiduciary, escrow and other
financial services. We are a leading provider to the debt capital markets,
providing customized and market-driven solutions to investors, bondholders and
lenders. Our Depositary Receipts business drives global investing by providing
servicing and value-added solutions that enable, facilitate and enhance
cross-border trading, clearing, settlement and ownership. We are one of the
largest providers of depositary receipts services in the world, partnering with
leading companies from more than 50 countries.

Our Treasury Services business provides global payments, liquidity management and trade finance services for financial institutions, corporations and the public sector.




16 BNY Mellon
--------------------------------------------------------------------------------

Our Clearance and Collateral Management business clears and settles equity and
fixed-income transactions globally and serves as custodian for tri-party repo
collateral worldwide. We are the primary provider of U.S. government securities
clearance and a provider of non-U.S. government securities clearance. Our
collateral services include collateral management, administration and
segregation. We offer innovative solutions and industry expertise which help
financial institutions and institutional investors with their liquidity,
financing, risk and balance sheet challenges. We are a leading provider of
tri-party collateral management services with an average of $3.6 trillion
serviced globally including approximately $2.6 trillion of the U.S. tri-party
repo market.

Review of financial results

AUC/A of $37.3 trillion increased 5% compared with June 30, 2019, primarily
reflecting higher client inflows, market values and net new business, partially
offset by the unfavorable impact of a stronger U.S. dollar. AUC/A consisted of
33% equity securities and 67% fixed-income securities at June 30, 2020 and 35%
equity securities and 65% fixed-income securities at June 30, 2019.

Total revenue of $3.1 billion increased 3% compared with the second quarter of
2019 and decreased 4% compared with the first quarter of 2020. The drivers of
total revenue by line of business are indicated below.

Asset Servicing revenue of $1.5 billion increased 5% compared with the second
quarter of 2019 and decreased 4% compared with the first quarter of 2020. The
increase compared with the second quarter of 2019 reflects higher foreign
exchange and other trading revenue, partially offset by lower net interest
revenue. The decrease compared with the first quarter of 2020 reflects lower
foreign exchange and other trading revenue and net interest revenue. Total
revenue in the second quarter of 2020 also benefited from higher volumes from
existing clients and a one-time fee.

Pershing revenue of $578 million increased 1% compared with the second quarter
of 2019 and decreased 11% compared with the first quarter of 2020. The increase
compared with the second quarter of 2019 primarily reflects higher money market
balances and clearing volumes, partially offset by the impact of rate-driven
money market fee waivers. The

decrease compared with the first quarter of 2020 primarily reflects the impact
of rate-driven money market fee waivers, a one-time fee recorded in the first
quarter of 2020 and lower clearing volumes, partially offset by higher money
market balances.

Issuer Services revenue of $431 million decreased 3% compared with the second
quarter of 2019 and increased 3% compared with the first quarter of 2020. The
decrease compared with the second quarter of 2019 reflects lower Depositary
Receipts and Corporate Trust fees. The increase compared with the first quarter
of 2020 primarily reflects higher Depositary Receipts fees.

Treasury Services revenue of $340 million increased 7% compared with the second
quarter of 2019 and increased slightly compared with the first quarter of 2020.
The increase compared with the second quarter of 2019 primarily reflects higher
net interest revenue driven by deposit growth and higher fees.

Clearance and Collateral Management revenue of $295 million increased 4%
compared with the second quarter of 2019 and decreased 2% compared with the
first quarter of 2020. The increase compared with the second quarter of 2019
primarily reflects higher net interest revenue and growth in collateral
management and clearance volumes, mostly from non-U.S. clients. The decrease
compared with the first quarter of 2020 primarily reflects lower collateral
management fees.

Market and regulatory trends are driving investable assets toward lower fee
asset management products at reduced margins for our clients. These dynamics are
also negatively impacting our investment services fees. However, at the same
time, these trends are providing additional outsourcing opportunities as clients
and other market participants seek to comply with regulations and reduce their
operating costs.

The provision for credit losses of $145 million in the second quarter of 2020
primarily reflects increased downgrades and the continuation of the challenging
macroeconomic outlook.

Noninterest expense of $2.0 billion increased 1% compared with the second quarter of 2019 and slightly compared with the first quarter of 2020. The increase compared with the second quarter of 2019 was primarily driven by continued investments in technology, partially offset by lower business development and staff expenses. The slight increase compared with the first quarter of 2020 reflects



                                                                   BNY Mellon 17
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continued investments in technology, offset by lower staff expense.

Year-to-date 2020 compared with year-to-date 2019


Total revenue of $6.3 billion increased 6% compared with the first six months of
2019. Asset Servicing revenue of $3.0 billion increased 6%, primarily reflecting
higher foreign exchange and other trading revenue and higher volumes from
existing clients, partially offset by lower net interest revenue. Pershing
revenue of $1.2 billion increased 9%, primarily reflecting higher clearing
volumes and money market balances, partially offset by the impact of rate-driven
money market fee waivers.

Issuer Services revenue of $850 million increased 1%, primarily reflecting
higher Depositary Receipts and Corporate Trust fees. Treasury Services revenue
of $679 million increased 7%, primarily reflecting higher fees and net interest
revenue. Clearance and Collateral Management revenue of $595 million increased
6%, primarily reflecting growth in collateral management and clearance volumes
and higher net interest revenue.

Noninterest expense of $4.0 billion increased 1% compared with the first six
months of 2019 primarily reflecting continued investments in technology,
partially offset by lower business development (travel and marketing) and staff
expenses.


Investment and Wealth Management business (formerly Investment Management
business)

                                                                                                                      YTD20
                                                                                 2Q20 vs.                                vs.
(dollars in millions)      2Q20       1Q20       4Q19       3Q19       2Q19   1Q20    2Q19         YTD20      YTD19   YTD19
Revenue:
Investment management
fees (a)               $    782$    812$    836$    830$    831     (4 )%   (6 )%   $  1,594$  1,641      (3 )%
Performance fees              5         50         48          2          2    N/M     150            55         33      67
Investment management
and performance fees
(b)                         787        862        884        832        833     (9 )    (6 )       1,649      1,674      (1 )
Distribution and
servicing                    34         43         44         45         44    (21 )   (23 )          77         89     (13 )
Other (a)                    17        (59 )       (4 )      (39 )      (23 )  N/M     N/M           (42 )      (40 )   N/M
Total fee and other
revenue (a)                 838        846        924        838        854     (1 )    (2 )       1,684      1,723      (2 )
Net interest revenue         48         52         47         49         59     (8 )   (19 )         100        126     (21 )
Total revenue               886        898        971        887        913     (1 )    (3 )       1,784      1,849      (4 )
Provision for credit
losses                        7          9          -          -         (2 )  N/M     N/M            16         (1 )   N/M
Noninterest expense
(excluding
amortization of
intangible assets)          650        687        722        582        646     (5 )     1         1,337      1,306       2
Amortization of
intangible assets             8          8          9         10          9      -     (11 )          16         18     (11 )
Total noninterest
expense                     658        695        731        592        655     (5 )     -         1,353      1,324       2
Income before income
taxes                  $    221$    194$    240$    295$    260     14  %  (15 )%   $    415$    526     (21 )%

Pre-tax operating
margin                       25 %       22 %       25 %       33 %       29 %                         23 %       28 %
Adjusted pre-tax
operating margin -
Non-GAAP (c)                 28 %       24 %       27 %       37 %       32 %                         26 %       32 %

Total revenue by line
of business:
Investment Management
(formerly Asset
Management)            $    621$    620$    692$    608$    622      -  %    -  %   $  1,241$  1,262      (2 )%
Wealth Management           265        278        279        279        291     (5 )    (9 )         543        587      (7 )
Total revenue by line
of business            $    886$    898$    971$    887$    913     (1 )%   (3 )%   $  1,784$  1,849      (4 )%

Average balances:
Average loans          $ 11,791$ 12,124$ 12,022$ 12,013$ 12,205     (3 )%   (3 )%   $ 11,958$ 12,271      (3 )%
Average deposits       $ 17,491$ 16,144$ 15,195$ 14,083$ 14,615      8  %   20  %   $ 16,817$ 15,211      11  %

(a) Total fee and other revenue includes the impact of the consolidated

investment management funds, net of noncontrolling interests. Additionally,

other revenue includes asset servicing fees, treasury services fees, foreign

exchange and other trading revenue and investment and other income.

(b) On a constant currency basis, investment management and performance fees

    decreased 4% (Non-GAAP) compared with the second quarter of 2019. See
    "Supplemental information - Explanation of GAAP and Non-GAAP financial
    measures" beginning on page 45 for the reconciliation of this Non-GAAP
    measure.

(c) Net of distribution and servicing expense. See "Supplemental information -

Explanation of GAAP and Non-GAAP financial measures" beginning on page 45 for

the reconciliation of this Non-GAAP measure.


N/M - Not meaningful.


18 BNY Mellon
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AUM trends                                                                                  2Q20 vs.
(dollars in billions)                     2Q20      1Q20      4Q19      3Q19      2Q19   1Q20   2Q19
AUM at period end, by product type:
(a)
Equity                                 $   141$   120$   154$   147$   152     18 %   (7 )%
Fixed income                               224       211       224       211       209      6      7
Index                                      333       274       339       321       322     22      3
Liability-driven investments               752       705       728       742       709      7      6
Multi-asset and alternative
investments                                185       171       192       182       184      8      1
Cash                                       326       315       273       278       267      3     22
Total AUM by product type              $ 1,961$ 1,796$ 1,910$ 1,881$ 1,843      9 %    6  %

Changes in AUM: (a)
Beginning balance of AUM               $ 1,796$ 1,910$ 1,881$ 1,843$ 1,841
Net inflows (outflows):
Long-term strategies:
Equity                                      (2 )      (2 )      (6 )      (4 )      (2 )
Fixed income                                 4         -         5         2        (4 )
Liability-driven investments                (2 )      (5 )      (3 )      (4 )       1
Multi-asset and alternative
investments                                  -        (1 )       3        (1 )       1
Total long-term active strategies
(outflows)                                   -        (8 )      (1 )      (7 )      (4 )
Index                                        9         3        (5 )      (3 )     (22 )
Total long-term strategies inflows
(outflows)                                   9        (5 )      (6 )     (10 )     (26 )
Short-term strategies:
Cash                                        11        43        (7 )      11         2
Total net inflows (outflows)                20        38       (13 )       1       (24 )
Net market impact                          143       (91 )     (20 )      66        42
Net currency impact                          2       (61 )      62       (29 )     (16 )
Ending balance of AUM                  $ 1,961$ 1,796$ 1,910$ 1,881$ 1,843      9 %    6  %

Wealth Management client assets (b) $ 254$ 236$ 266$ 259$ 257 8 % (1 )%



(a)  Excludes securities lending cash management assets and assets managed in
the Investment Services business.
(b)  Includes AUM and AUC/A in the Wealth Management business.


Business description


Our Investment and Wealth Management business consists of two lines of business,
Investment Management and Wealth Management. Our investment firms deliver a
highly diversified portfolio of investment strategies independently, and through
our global distribution network, to institutional and retail clients globally.
BNY Mellon Wealth Management provides investment management, custody, wealth and
estate planning and private banking services. See pages 16 and 17 of our 2019
Annual Report for additional information on our Investment and Wealth Management
business.

Review of financial results


AUM increased 6% compared with June 30, 2019 primarily reflecting higher market
values and net inflows, partially offset by the unfavorable impact of a stronger
U.S. dollar (principally versus the British pound).


Net long-term strategy inflows were $9 billion in the second quarter of 2020,
primarily resulting from inflows of index funds. Short-term strategy inflows
were $11 billion in the second quarter of 2020. Market and regulatory trends
have resulted in increased demand for lower fee asset management products and
for performance-based fees.

Total revenue of $886 million decreased 3% compared with the second quarter of 2019 and 1% compared with the first quarter of 2020.


Investment Management revenue of $621 million decreased slightly compared with
the second quarter of 2019 and increased slightly compared with the first
quarter of 2020. The decrease compared with the second quarter of 2019 primarily
reflects the unfavorable change in the mix of AUM since the second quarter of
2019 and the impact of money market fee waivers, partially offset by equity
investment gains (net of hedges), including seed capital. The increase compared
with the first quarter of 2020 primarily reflects equity investment gains (net
of hedges), including seed capital, partially offset


                                                                   BNY Mellon 19
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by the timing of performance fees and the impact of money market fee waivers.


Wealth Management revenue of $265 million decreased 9% compared with the second
quarter of 2019 and 5% compared with the first quarter of 2020. Both decreases
primarily reflect lower net interest revenue and a shift within portfolios to
lower fee asset classes.

Revenue generated in the Investment and Wealth Management business included 40%
from non-U.S. sources in the second quarter of 2020, compared with 38% in the
second quarter of 2019 and 42% in the first quarter of 2020.

Noninterest expense of $658 million increased slightly compared with the second
quarter of 2019 and decreased 5% compared with the first quarter of 2020. The
increase compared with the second quarter of 2019 primarily reflects higher
continued investments in technology. The decrease compared with the first
quarter of 2020 primarily reflects lower staff and other expenses.

Year-to-date 2020 compared with year-to-date 2019


Total revenue of $1.8 billion decreased 4% compared with the first six months of
2019. Investment Management revenue of $1.2 billion decreased 2% primarily
reflecting an unfavorable change in the mix of AUM, equity investment losses
(net of hedges), including seed capital, and the impact of fee waivers,
partially offset by higher performance fees and market values. Wealth Management
revenue of $543 million decreased 7% reflecting lower net interest revenue.

Noninterest expense of $1.4 billion increased 2% compared with the first six
months of 2019, primarily reflecting higher professional, legal and other
purchased services expense and higher investments in technology, partially
offset by the favorable impact of a stronger U.S. dollar (principally versus the
British pound).


Other segment


(in millions)                         2Q20      1Q20      4Q19      3Q19      2Q19     YTD20     YTD19
Fee revenue (loss)                 $    29$    21$   817$    (5 )$    24$    50$    41
Net securities gains (losses)            9         9       (23 )      (1 )       7        18         8
Total fee and other revenue (loss)      38        30       794        (6 )      31        68        49
Net interest (expense)                 (36 )     (44 )     (10 )     (80 )     (40 )     (80 )     (70 )
Total revenue (loss)                     2       (14 )     784       (86 )      (9 )     (12 )     (21 )
Provision for credit losses             (9 )      11        (3 )      (1 )      (2 )       2        (4 )
Noninterest expense                     39        30        54        25   

29 69 78 (Loss) income before income taxes $ (28 )$ (55 )$ 733$ (110 )$ (36 )$ (83 )$ (95 )


Average loans and leases           $ 1,815$ 1,961$ 1,974$ 1,817

$ 1,764$ 1,887$ 1,774

See page 18 of our 2019 Annual Report for additional information on the Other segment.


Review of financial results

Fee revenue, net securities gains (losses) and net interest expense include corporate treasury and other investment activity, including hedging activity which offsets between fee revenue and net interest expense.

Fee revenue increased $5 million compared with the second quarter of 2019 and $8 million compared with the first quarter of 2020, primarily reflecting higher

equity investment income, partially offset by sequentially lower foreign currency translation gains.

Net interest expense decreased $4 million compared with the second quarter of 2019 and $8 million compared with the first quarter of 2020, primarily reflecting corporate treasury activity.


Noninterest expense increased $10 million compared with the second quarter of
2019 and $9 million compared to the first quarter of 2020, primarily reflecting
higher staff expense.



20 BNY Mellon
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Year-to-date 2020 compared with year-to-date 2019

Losses before taxes decreased $12 million compared with the first six months of 2019. Total loss decreased $9 million, primarily reflecting higher foreign currency translation gains and net securities gains, partially offset by corporate treasury activity.

Critical accounting estimates


Our significant accounting policies are described in Note 1 of the Notes to
Consolidated Financial Statements in our 2019 Annual Report and in Note 2 of the
Notes to Consolidated Financial Statements in this Form 10-Q. Our critical
accounting estimates are those related to the allowance for credit losses, fair
value of financial instruments and derivatives, goodwill and other intangibles
and litigation and regulatory contingencies, as referenced below.

Critical accounting estimates        Reference
Allowance for credit losses          First quarter 2020 Form 10-Q, pages 19-20.
Fair value of financial instruments  2019 Annual Report, pages 23-24.
and derivatives
Goodwill and other intangibles       2019 Annual Report, pages 24-25 and First
                                     quarter 2020 Form 10-Q, pages 20-21. Also,
                                     see below.
Litigation and regulatory            "Legal proceedings" in Note 18 of the Notes
contingencies                        to Consolidated Financial Statements.



Goodwill and other intangible assets

BNY Mellon's business segments include six reporting units for which goodwill impairment testing is performed on an annual basis. The Investment Services segment is comprised of four reporting units and the Investment and Wealth Management segment is comprised of two reporting units.


In the second quarter of 2020, we performed our annual goodwill impairment test
on all six reporting units using an income approach to estimate fair values of
each reporting unit. Estimated cash flows used in the income approach were based
on management's projections as of March 31, 2020. The discount rate applied to
these cash flows was 10% and incorporated a 7% market equity risk premium.
Estimated cash flows extend far into the future, and, by their nature, are
difficult to estimate over such an extended time frame.


As a result of the annual goodwill impairment test of the six reporting units,
no goodwill impairment was recognized. The fair values of five of the Company's
reporting units were substantially in excess of the respective reporting units'
carrying value. The Investment Management (formerly Asset Management) reporting
unit, with $7.2 billion of allocated goodwill, which is one of the two reporting
units in the Investment and Wealth Management segment, exceeded its carrying
value by approximately 5%. For the Investment Management reporting unit, in the
future, small changes in the assumptions, such as changes in the level of AUM
and operating margin, could produce a non-cash goodwill impairment. See
"Critical accounting estimates" in our 2019 Annual Report for additional
information on the annual goodwill impairment test.

As of June 30, 2020, if the discount rate applied to the estimated cash flows
was increased or decreased by 25 basis points, the fair value of the Investment
Management reporting unit would decrease or increase by 4%, respectively.
Similarly, if the long-term growth rate was increased or decreased by 10 basis
points, the fair value of the Investment Management reporting unit would
increase or decrease by approximately 1%, respectively.

Consolidated balance sheet review


One of our key risk management objectives is to maintain a balance sheet that
remains strong throughout market cycles to meet the expectations of our major
stakeholders, including our shareholders, clients, creditors and regulators.

We also seek to undertake overall liquidity risk, including intraday liquidity
risk, that stays within our risk appetite. The objective of our balance sheet
management strategy is to maintain a balance sheet that is characterized by
strong liquidity and asset quality, ready access to external funding sources at
competitive rates and a strong capital structure that supports our risk-taking
activities and is adequate to absorb potential losses. In managing the balance
sheet, appropriate consideration is given to balancing the competing needs of
maintaining sufficient levels of liquidity and complying with applicable
regulations and supervisory expectations while optimizing profitability.

At June 30, 2020, total assets were $442 billion, compared with $382 billion at Dec. 31, 2019. The increase in total assets was primarily driven by higher



                                                                   BNY Mellon 21
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securities and interest-bearing deposits with the Federal Reserve and other
central banks, resulting from significant deposit inflows. Deposits totaled $305
billion at June 30, 2020, compared with $259 billion at Dec. 31, 2019. The
increase reflects the current macroeconomic environment. Total interest-bearing
deposits as a percentage of total interest-earning assets were 59% at June 30,
2020 and 62% at Dec. 31, 2019. The higher level of client deposits received in
the first six months of 2020 was primarily placed in the securities portfolio or
with the Federal Reserve and other central banks.

At June 30, 2020, available funds totaled $172 billion which include cash and
due from banks, interest-bearing deposits with the Federal Reserve and other
central banks, interest-bearing deposits with banks and federal funds sold and
securities purchased under resale agreements. This compares with available funds
of $145 billion at Dec. 31, 2019. Total available funds as a percentage of total
assets were 39% at June 30, 2020 and 38% at Dec. 31, 2019. For additional
information on our available funds, see "Liquidity and dividends."

Securities were $155 billion, or 35% of total assets, at June 30, 2020, compared
with $123 billion, or 32% of total assets, at Dec. 31, 2019. The increase in
securities primarily reflects investments in U.S.Treasury securities, agency
residential mortgage-backed securities ("RMBS"), sovereign debt/sovereign
guaranteed securities, commercial paper/CDs and an increase in unrealized
pre-tax gain. For additional information on our securities portfolio, see
"Securities" and Note 4 of the Notes to Consolidated Financial Statements.

Loans were $55.4 billion, or 13% of total assets, at June 30, 2020, compared with $55.0 billion, or 14% of total assets, at Dec. 31, 2019. The increase was

primarily driven by higher overdrafts and higher loans in the commercial portfolio, partially offset by lower loans in the financial institutions portfolio. For additional information on our loan portfolio, see "Loans" and Note 5 of the Notes to Consolidated Financial Statements.


Long-term debt totaled $27.6 billion at June 30, 2020 and $27.5 billion at Dec.
31, 2019. Issuances of $2.25 billion and an increase in the fair value of hedged
long-term debt were partially offset by maturities and a redemption. For
additional information on long-term debt, see "Liquidity and dividends."

The Bank of New York Mellon Corporation total shareholders' equity increased to $43.7 billion at June 30, 2020 from $41.5 billion at Dec. 31, 2019. For additional information, see "Capital."

Country risk exposure


The following table presents BNY Mellon's top 10 exposures by country (excluding
the U.S.) as of June 30, 2020, as well as certain countries with higher-risk
profiles, and is presented on an internal risk management basis. We monitor our
exposure to these and other countries as part of our internal country risk
management process.

The country risk exposure below reflects the Company's risk to an immediate
default of the counterparty or obligor based on the country of residence of the
entity which incurs the liability. If there is credit risk mitigation, the
country of residence of the entity providing the risk mitigation is the country
of risk. The country of risk for securities is generally based on the domicile
of the issuer of the security.



22 BNY Mellon
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Country risk exposure at
June 30, 2020                  Interest-bearing deposits
(in billions)                Central banks             Banks       Lending (a)       Securities (b)       Other (c)       Total exposure
Top 10 country exposure:
United Kingdom ("UK")     $           15.0         $     0.5     $         1.4     $            5.6     $       2.3     $           24.8
Germany                               16.7               0.7               0.7                  4.3             0.3                 22.7
Japan                                 19.2               0.9               0.2                  0.7             0.1                 21.1
Canada                                   -               2.3               0.2                  4.4             0.9                  7.8
Belgium                                5.9               0.5               0.2                  0.5               -                  7.1
China                                    -               2.9               1.5                    -             0.1                  4.5
France                                   -               0.1                 -                  3.1             0.3                  3.5
Ireland                                0.7               0.1               0.3                  0.7             1.5                  3.3
Luxembourg                             0.8                 -               0.1                  0.1             1.8                  2.8
Spain                                    -               0.2                 -                  2.4             0.1                  2.7
Total Top 10 country
exposure                  $           58.3         $     8.2     $         4.6     $           21.8     $       7.4     $          100.3   (d)

Select country exposure:
Italy                     $            0.1         $     0.4     $           -     $            1.1     $         -     $            1.6
Brazil                                   -                 -               1.2                  0.1             0.1                  1.4
Total select country
exposure                  $            0.1         $     0.4     $         1.2     $            1.2     $       0.1     $            3.0

(a) Lending includes loans, acceptances, issued letters of credit, net of

participations, and lending-related commitments.

(b) Securities include both the available-for-sale and held-to-maturity

portfolios.

(c) Other exposures include over-the-counter ("OTC") derivative and securities

financing transactions, net of collateral.

(d) The top 10 country exposures comprise approximately 80% of our total non-U.S.

    exposure.




Based on our internal country risk management process at June 30, 2020, our
largest country risk exposure was to the UK, which withdrew from the European
Union ("EU") on Jan. 31, 2020. For additional information, see "Other Matters -
UK's Withdrawal from the EU ("Brexit")" and "Risk Factors - The UK's withdrawal
from the EU may have negative effects on global economic conditions, global
financial markets, and our business and results of operations" both included in
our 2019 Annual Report.

Events in recent years have resulted in increased focus on Italy and Brazil. The
country risk exposure to Italy primarily consists of investment grade sovereign
debt. The country risk exposure to Brazil

is primarily short-term trade finance loans extended to large financial institutions. We also have operations in Brazil providing investment services and investment management services.

Securities


In the discussion of our securities portfolio, we have included certain credit
ratings information because the information can indicate the degree of credit
risk to which we are exposed. Significant changes in ratings classifications for
our securities portfolio could indicate increased credit risk for us and could
be accompanied by a reduction in the fair value of our securities portfolio.



                                                                   BNY Mellon 23
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The following table shows the distribution of our total securities portfolio.

Securities
portfolio
                                                                                       Fair                                          Ratings (b)
                     March 31,                2Q20                                    value
                          2020           change in        June 30, 2020           as a % of                                               BB+
(dollars in               Fair          unrealized    Amortized        Fair       amortized      Unrealized           AAA/   A+/  BBB+/   and    A1+/A2 &   Not
millions)                value         gain (loss)         cost       value        cost (a)     gain (loss)           AA-    A-    BBB-  lower    SP-1+    rated
Agency RMBS         $   57,074       $         455   $   58,874$  60,401             103 % $       1,527           100 %   - %    - %    - %     - %       - %
U.S. Treasury           24,825                 (31 )     28,224      28,651             102             427           100     -      -      -       -         -
Sovereign
debt/sovereign
guaranteed (c)          13,833                  47       16,698      16,868             101             170            75     6     18      1       -         -
Agency commercial
mortgage-backed
securities ("MBS")      11,416                 159       11,339      11,731             103             392           100     -      -      -       -         -
Foreign covered
bonds (d)                5,349                  62        5,548       5,598             101              50           100     -      -      -       -         -
Supranational            4,339                  27        5,434       5,484             101              50           100     -      -      -       -         -
U.S. government
agencies                 3,346                  29        4,984       5,056             101              72           100     -      -      -       -         -
Collateralized loan
obligations
("CLOs")                 4,098                 149        4,526       4,432              98             (94 )          99     -      -      -       -         1
Foreign government
agencies (e)             2,761                  14        3,536       3,575             101              39            95     5      -      -       -         -
Commercial
paper/CDs                3,465                   5        3,386       3,392             100               6             -     -      -      -     100         -
Other asset-backed
securities ("ABS")       2,220                  56        2,724       2,743             101              19            99     -      1      -       -         -
Non-agency
commercial MBS           2,446                 140        2,517       2,602             103              85           100     -      -      -       -         -
Non-agency RMBS (f)      1,548                  66        1,537       1,672             109             135            50     8      2     24       -        16
State and political
subdivisions             1,001                  12        1,166       1,196             103              30            76    22      -      -       1         1
Corporate bonds            818                  28          789         831             105              42            19    68     13      -       -         -
Other                        1                   -            1           1             100               -             -     -      -      -       -       100
Total securities    $  138,540   (g) $       1,218$  151,283$ 154,233   (g)       102 % $       2,950   (g)(h)   94 %   2 %    2 %    - %     2 %       - %

(a) Amortized cost reflects historical impairments.

(b) Represents ratings by Standard & Poor's ("S&P") or the equivalent.

(c) Primarily consists of exposure to UK, France, Germany, Spain, Italy and

Singapore.

(d) Primarily consists of exposure to Canada, UK, Australia and Norway.

(e) Primarily consists of exposure to Germany, the Netherlands and Sweden.

(f) Includes RMBS that were included in the former Grantor Trust of $535 million

at March 31, 2020 and $538 million at June 30, 2020.

(g) Includes net unrealized losses on derivatives hedging securities

available-for-sale (including terminated hedges) of $1,846 million at

March 31, 2020 and $1,817 million at June 30, 2020.

(h) Includes unrealized gains of $1,582 million at June 30, 2020 related to

    available-for-sale securities, net of hedges.




The fair value of our securities portfolio, including related hedges, was $154.2
billion at June 30, 2020, compared with $122.7 billion at Dec. 31, 2019. The
increase primarily reflects investments in U.S.Treasury securities, agency
RMBS, sovereign debt/ sovereign guaranteed securities, commercial paper/CDs and
an increase in unrealized pre-tax gain. At June 30, 2020, the securities
portfolio, including the impact of interest rate swap hedges, is 74% fixed rate
and 26% floating rate.

Included in the securities portfolio at June 30, 2020 were $1.2 billion of
commercial paper and $697 million of CDs purchased from affiliated money market
mutual funds in order to provide liquidity support to the funds. Additionally,
at June 30, 2020, the securities portfolio included $1.5 billion of commercial
paper and CDs purchased from money market mutual funds managed by third parties
and funded through the MMLF program.

At June 30, 2020, the securities portfolio had a net unrealized gain, including
the impact of related hedges, of $3.0 billion, compared with $796 million at
Dec. 31, 2019. The increase in the net unrealized pre-tax gain was primarily
driven by lower market interest rates.

The unrealized gain (after-tax) on our available-for-sale securities portfolio,
net of hedges, included in accumulated other comprehensive income ("OCI") was
$1.2 billion at June 30, 2020, compared with $361 million at Dec. 31, 2019. The
increase in the unrealized gain, net of tax, was primarily driven by lower
market interest rates.

At June 30, 2020, 94% of the securities in our portfolio were rated AAA/AA-, compared with 95% at Dec. 31, 2019.




24 BNY Mellon
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See Note 4 of the Notes to Consolidated Financial Statements for the pre-tax net securities gains (losses) by security type. See Note 15 of the Notes to

Consolidated Financial Statements for details of securities by level in the fair value hierarchy.


The following table presents the amortizable purchase premium (net of discount)
related to the securities portfolio and accretable discount related to the 2009
restructuring of the securities portfolio.

Net premium amortization and discount
accretion of securities (a)
(dollars in millions)                           2Q20      1Q20      4Q19      3Q19      2Q19
Amortizable purchase premium (net of
discount) relating to securities:
Balance at period end                        $ 1,693$ 1,555$ 1,319$ 1,308$ 1,315
Estimated average life remaining at period
end (in years)                                   3.7       3.8       4.3       4.2       4.5
Amortization                                 $   125$   101$   100$    95$    91
Accretable discount related to the prior
restructuring of the securities portfolio:
Balance at period end                        $   145$   159$   163$   171$   181
Estimated average life remaining at period
end (in years)                                   5.8       6.1       6.3       6.3       6.3
Accretion                                    $    10$    11$    12$    13$    13

(a) Amortization of purchase premium decreases net interest revenue while

    accretion of discount increases net interest revenue. Both were recorded on a
    level yield basis.




Loans

Total exposure -
consolidated                              June 30, 2020                            Dec. 31, 2019
                                             Unfunded        Total                    Unfunded        Total
(in billions)                   Loans     commitments     exposure       Loans     commitments     exposure
Non-margin loans:
Financial institutions       $   10.8$        35.5$     46.3$  12.5$        34.4$     46.9
Commercial                        2.4            11.8         14.2         1.8            12.6         14.4
Subtotal institutional           13.2            47.3         60.5        14.3            47.0         61.3
Wealth management loans and
mortgages                        15.9             0.9         16.8        16.2             0.8         17.0
Commercial real estate            6.2             3.2          9.4         5.6             3.6          9.2
Lease financings                  1.0               -          1.0         1.1               -          1.1
Other residential mortgages       0.5               -          0.5         0.5               -          0.5
Overdrafts                        4.2               -          4.2         2.7               -          2.7
Other                             1.5               -          1.5         1.2               -          1.2
Subtotal non-margin loans        42.5            51.4         93.9        41.6            51.4         93.0
Margin loans                     12.9             0.1         13.0        13.4             0.1         13.5
Total                        $   55.4$        51.5$    106.9$  55.0$        51.5$    106.5





At June 30, 2020, total exposures of $106.9 billion increased slightly compared
with Dec. 31, 2019, primarily reflecting higher overdrafts, partially offset by
lower financial institutions exposure and margin loans.


Our financial institutions and commercial portfolios comprise our largest concentrated risk. These portfolios comprised 57% of our total exposure at June 30, 2020 and 58% at Dec. 31, 2019. Additionally, most of our overdrafts relate to financial institutions.




                                                                   BNY Mellon 25
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Financial institutions

The financial institutions portfolio is shown below.



Financial institutions                        June 30, 2020                                    Dec. 31, 2019
portfolio exposure                     Unfunded        Total   % Inv.    % due                   Unfunded        Total
(dollars in billions)     Loans     commitments     exposure    grade   <1 yr.      Loans     commitments     exposure
Securities industry      $  1.6$        24.5$     26.1       98 %     99 %   $  2.9$        23.4$     26.3
Banks                       7.0             1.1          8.1       82       98        7.4             1.1          8.5
Asset managers              1.3             6.3          7.6       99       84        1.3             6.4          7.7
Insurance                   0.1             2.7          2.8      100       16          -             2.7          2.7
Government                  0.1             0.2          0.3      100       64        0.1             0.3          0.4
Other                       0.7             0.7          1.4       96       55        0.8             0.5          1.3
Total                    $ 10.8$        35.5$     46.3       95 %     90 %   $ 12.5$        34.4$     46.9

The financial institutions portfolio exposure was $46.3 billion at June 30, 2020, a decrease of 1% compared with Dec. 31, 2019, primarily reflecting lower exposure to banks and the securities industry.


Financial institution exposures are high quality, with 95% of the exposures
meeting the investment grade equivalent criteria of our internal credit rating
classification at June 30, 2020. Each customer is assigned an internal credit
rating, which is mapped to an equivalent external rating agency grade based upon
a number of dimensions, which are continually evaluated and may change over
time. For ratings of non-U.S. counterparties, our internal credit rating is
generally capped at a rating equivalent to the sovereign rating of the country
where the counterparty resides, regardless of the internal credit rating
assigned to the counterparty or the underlying collateral.

In addition, 75% of the financial institutions exposure is secured. For example,
securities industry clients and asset managers often borrow against marketable
securities held in custody.

The exposure to financial institutions is generally short-term with 90% of the exposures expiring within one year. At June 30, 2020, 14% of the exposure to

financial institutions had an expiration within 90 days, compared with 18% at Dec. 31, 2019.


At June 30, 2020, the secured intraday credit provided to dealers in connection
with their tri-party repo activity totaled $20.6 billion and was included in the
securities industry portfolio. Dealers secure the outstanding intraday credit
with high-quality liquid collateral having a market value in excess of the
amount of the outstanding credit. Secured intraday credit facilities represent
nearly half of the exposure in the financial institutions portfolio and are
reviewed and reapproved annually.

Our banks exposure primarily relates to our global trade finance. These exposures are short-term in nature, with 98% due in less than one year. The investment grade percentage of our bank exposure was 82% at June 30, 2020, compared with 77% at Dec. 31, 2019. Our non-investment grade exposures are primarily trade finance loans in Brazil.


The asset managers portfolio exposure is high-quality, with 99% of the exposures
meeting our investment grade equivalent ratings criteria as of June 30, 2020.
These exposures are generally short-term liquidity facilities, with the majority
to regulated mutual funds.



26 BNY Mellon
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Commercial

The commercial portfolio is presented below.


Commercial portfolio exposure                      June 30, 2020                                     Dec. 31, 2019
                                             Unfunded        Total   % Inv.    % due                    Unfunded        Total
(dollars in billions)           Loans     commitments     exposure    grade   <1 yr.       Loans     commitments     exposure
Manufacturing                 $   1.1   $         3.5   $      4.6       94 %     15 %   $   0.9   $         4.2   $      5.1
Services and other                1.1             3.3          4.4       94       33         0.6             3.7          4.3
Energy and utilities              0.1             4.1          4.2       89        4         0.3             3.7          4.0
Media and telecom                 0.1             0.9          1.0       93        -           -             1.0          1.0
Total                         $   2.4$        11.8$     14.2       92 %     16 %   $   1.8$        12.6$     14.4

The commercial portfolio exposure was $14.2 billion at June 30, 2020, a decrease of 1% from Dec. 31, 2019, primarily driven by lower manufacturing exposure, partially offset by increased exposure in energy and utilities.


We have $741 million of total direct exposure to the oil and gas industry, most
of which is reflected in the energy and utilities portfolio in the table above.
This exposure is to exploration and production, refining and integrated
companies and was 65% investment grade at June 30, 2020 and 91% at Dec. 31,
2019.

Our credit strategy is to focus on investment grade clients that are active users of our non-credit services. The following table summarizes the percentage of the financial institutions and commercial portfolio exposures that are investment grade.

Percentage of the portfolios that are investment grade

                                                       Quarter ended
                                          March 31,                                       June 30,
                       June 30, 2020           2020   Dec. 31, 2019   Sept. 30, 2019          2019
Financial institutions            95 %           96 %            95 %             95 %          95 %
Commercial                        92 %           94 %            96 %             95 %          95 %




Wealth management loans and mortgages


Our wealth management exposure was $16.8 billion at June 30, 2020, compared with
$17.0 billion at Dec. 31, 2019. Wealth management loans and mortgages primarily
consist of loans to high-net-worth individuals, which are secured by marketable
securities and/or residential property. Wealth management mortgages are
primarily interest-only, adjustable-rate mortgages with a weighted-average
loan-to-value ratio of 62% at origination. Less than 1% of the mortgages were
past due at June 30, 2020.

At June 30, 2020, the wealth management mortgage portfolio consisted of the following geographic concentrations: California - 23%; New York - 17%; Massachusetts - 10%; Florida - 8%; and other - 42%.



                                                                   BNY Mellon 27
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Commercial real estate

The composition of the commercial real estate portfolio by asset class, including percentage secured, is presented below.


Composition of commercial real estate portfolio
by asset class                                       June 30, 2020              Dec. 31, 2019
                                                    Total   Percentage         Total   Percentage
(in billions)                                    exposure      secured      exposure      secured
Office                                          $     3.2           40 %   $     3.1           40 %
Residential                                           3.1           44           3.1           44
Retail                                                1.0            9           1.0            8
Hotels                                                0.6            2           0.6            2
Mixed-use                                             0.6            2           0.6            2
Healthcare                                            0.3            1           0.3            -
Other                                                 0.6            2           0.5            4
Total commercial real estate                    $     9.4           65 %   $     9.2           65 %




Our commercial real estate exposure totaled $9.4 billion at June 30, 2020,
compared with $9.2 billion at Dec. 31, 2019. Our income-producing commercial
real estate facilities are focused on experienced owners and are structured with
moderate leverage based on existing cash flows. Our commercial real estate
lending activities also include construction and renovation facilities. Our
client base consists of experienced developers and long-term holders of real
estate assets. Loans are approved on the basis of existing or projected cash
flows and supported by appraisals and knowledge of local market conditions.
Development loans are structured with moderate leverage, and in many instances,
involve some level of recourse to the developer.

At June 30, 2020, the unsecured portfolio consists of real estate investment
trusts ("REITs") and real estate operating companies, which are both primarily
investment grade.

At June 30, 2020, our commercial real estate portfolio consisted of the following concentrations: New York metro - 41%; REITs and real estate operating companies - 35%; and other - 24%.

Lease financings


The lease financings portfolio exposure totaled $1.0 billion at June 30, 2020
and $1.1 billion at Dec. 31, 2019. At June 30, 2020, approximately 98% of
leasing exposure was investment grade, or investment grade equivalent and
consisted of exposures backed by well-diversified assets, primarily large-ticket
transportation equipment and real estate. The largest component of our lease
residual value exposure is freight-related rail cars. Assets are both domestic
and

foreign-based, with primary concentrations in the U.S. and Germany.

Other residential mortgages


The other residential mortgages portfolio primarily consists of 1-4 family
residential mortgage loans and totaled $450 million at June 30, 2020 and $494
million at Dec. 31, 2019. Included in this portfolio at June 30, 2020 were $81
million of mortgage loans purchased in 2005, 2006 and the first quarter of 2007,
of which 25% of the serviced loan balance was at least 60 days delinquent.

Overdrafts

Overdrafts primarily relate to custody and securities clearance clients and are generally repaid within two business days.

Other loans

Other loans primarily include loans to consumers that are fully collateralized with equities, mutual funds and fixed-income securities.

Margin loans


Margin loan exposure of $13.0 billion at June 30, 2020 and $13.5 billion at Dec.
31, 2019 was collateralized with marketable securities. Borrowers are required
to maintain a daily collateral margin in excess of 100% of the value of the
loan. Margin loans included $3.6 billion at June 30, 2020 and Dec. 31, 2019
related to a term loan program that offers fully collateralized loans to
broker-dealers.


28 BNY Mellon
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Allowance for credit losses

Our credit strategy is to focus on investment grade clients who are active users of our non-credit services. Our primary exposure to the credit risk of a


customer consists of funded loans, unfunded contractual commitments to lend,
standby letters of credit ("SBLC") and overdrafts associated with our custody
and securities clearance businesses.

The following table details changes in our allowance for credit losses.


Allowance for credit losses activity         June 30,                              Dec. 31,    June 30,
(dollars in millions)                            2020        March 31, 2020            2019        2019
Beginning balance of allowance for credit
losses                                      $     329       $           216       $     224$     248
Impact of adopting ASU 2016-13                    N/A                   (55 ) (a)       N/A         N/A
Provision for credit losses                       143                   169   (a)        (8 )        (8 )
Net recoveries (charge-offs):
Loans:
Other residential mortgages                         3                     -               -           2
Wealth management loans and mortgages               -                     -               -          (1 )
Other financial instruments                         -                    (1 )           N/A         N/A
Net recoveries (charge-offs)                        3                    (1 )             -           1
Ending balance of allowance for credit
losses                                      $     475       $           329 

$ 216$ 241


Allowance for loan losses                   $     302       $           140       $     122$     146
Allowance for lending-related commitments         152                   148              94          95
Allowance for financial instruments                21   (b)              41   (b)       N/A         N/A
Total allowance for credit losses           $     475       $           329       $     216$     241

Non-margin loans                            $  42,488$        49,253$  41,567$  41,794
Margin loans                                   12,909                13,115          13,386      10,602
Total loans                                 $  55,397$        62,368$  54,953$  52,396
Allowance for loan losses as a percentage
of total loans                                   0.55 %                0.22 %          0.22 %      0.28 %
Allowance for loan losses as a percentage
of non-margin loans                              0.71                  0.28            0.29        0.35
Allowance for loan losses and
lending-related commitments as a percentage
of total loans                                   0.82                  0.46            0.39        0.46
Allowance for loan losses and
lending-related commitments as a percentage
of non-margin loans                              1.07                  0.58            0.52        0.58


(a) In the first quarter of 2020, we adopted new accounting guidance included in

ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit

Losses On Financial Instruments, on a prospective basis. See Note 2 of the

    Notes to Consolidated Financial Statement for additional information.
    Includes the reclassification of credit-related reserves on accounts
    receivable of $4 million.

(b) Includes allowance for credit losses on federal funds sold and securities

purchased under resale agreements, available-for-sale securities,

held-to-maturity securities, accounts receivable, cash and due from banks and

interest-bearing deposits with banks.

N/A - Not applicable.

The provision for credit losses was $143 million in the second quarter of 2020, primarily driven by our commercial real estate portfolio and reflecting increased downgrades and the continuation of the challenging macroeconomic outlook.


We had $12.9 billion of secured margin loans on our balance sheet at June 30,
2020 compared with $13.4 billion at Dec. 31, 2019. We have rarely suffered a
loss on these types of loans. As a result, we believe that the ratio of
allowance for loan losses and lending-related commitments as a percentage of
non-margin loans is a more appropriate metric to measure the adequacy of the
reserve.


Reverse repurchase agreements at June 30, 2020 were fully secured with high
quality collateral. As a result, there was no allowance for credit losses
related to these assets at June 30, 2020. This compares to an $18 million
allowance at March 31, 2020. The decrease is driven by a reduction in exposure
and improvement in collateral liquidity and values related to reverse repurchase
agreements collateralized by non-agency debt securities.

The allowance for loan losses and allowance for lending-related commitments represent management's estimate of lifetime expected losses in our credit portfolio. This evaluation process is subject to numerous estimates and judgments. To the extent actual results differ from forecasts or



                                                                   BNY Mellon 29
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management's judgment, the allowance for credit losses may be greater or less than future charge-offs.

Based on an evaluation of the allowance for credit losses as discussed in "Critical accounting estimates" and Note 2 of the Notes to Consolidated Financial Statements, we have allocated our allowance for loans and lending-related commitments as presented below.

Allocation of allowance for

loan losses and

  lending-related commitments June 30, 2020   March 31, 2020   (a)   Dec. 31, 2019   June 30, 2019
  Commercial real estate                 81 %             72 %                  35 %            30 %
  Commercial                              9                9                    28              32
  Foreign                                 -                -   (b)              11              13
  Financial institutions                  4                6                     9               9
  Wealth management (c)                   2                3                     9               8
  Other residential mortgages             3                5                     6               6
  Lease financings                        1                5                     2               2
  Total                                 100 %            100 %                 100 %           100 %

(a) In the first quarter of 2020, we adopted new accounting guidance included in

ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit

Losses on Financial Instruments, on a prospective basis. See Note 2 of the

Notes to Consolidated Financial Statement for additional information.

(b) The allowance related to foreign exposure has been reclassified to the

respective classes of financing receivables.

(c) Includes the allowance for credit losses on wealth management mortgages.

The allocation of the allowance for credit losses is inherently judgmental, and the entire allowance for credit losses is available to absorb credit losses regardless of the nature of the losses.


Our allowance for credit losses is sensitive to a number of inputs, most notably
the credit ratings assigned to each borrower as well as macroeconomic forecast
assumptions that are incorporated in our estimate of credit losses through the
expected life of the loan portfolio. Thus, as the macroeconomic environment and
related forecasts change, the allowance for credit losses may change materially.
The following sensitivity analyses do not represent management's expectations of
the deterioration of our portfolios or the economic environment, but are
provided as hypothetical scenarios to assess the sensitivity of the allowance
for credit losses to changes in key inputs. If each credit were rated one grade
better, the allowance would have decreased by $125 million, and if each credit
were rated one grade worse, the allowance would have increased by $202 million.
Our multi-scenario based macroeconomic forecast used in determining the June 30,
2020

allowance for credit losses consisted of three recessionary scenarios, each of
varying severity and duration. The baseline scenario reflects moderate recovery
across most key variables, whereas the upside scenario is principally a V-shaped
recovery, and the downside scenario is reflective of W-shaped recovery in GDP
and unemployment and deeper reductions in asset prices compared to the baseline.
We placed the most weight on our baseline scenario, with the remaining weighting
resulting in slightly more weight placed on the downside scenario than the
upside scenario. From a sensitivity perspective, at June 30, 2020, if we had
applied 100% weighting to the downside scenario, the allowance for credit losses
would have been approximately $245 million higher.

Nonperforming assets

The table below presents our nonperforming assets.

Nonperforming assets                                                           Dec. 31, 2019
(dollars in millions)                                      June 30, 2020
Nonperforming loans:
Other residential mortgages                          $                58   $              62
Wealth management loans and mortgages                                 28                  24
Total nonperforming loans                                             86                  86
Other assets owned                                                     2                   3
Total nonperforming assets                           $                88   $              89
Nonperforming assets ratio                                          0.16 %              0.16 %
Nonperforming assets ratio,
excluding margin loans                                              0.21                0.21
Allowance for loan losses/nonperforming loans (a)                  351.2               141.9
Allowance for loan losses/nonperforming assets (a)                 343.2               137.1
Allowance for loan losses and lending-related
commitments/nonperforming loans (a)(b)                             527.9               251.2
Allowance for loan losses and lending-related
commitments/nonperforming assets (a)(b)                            515.9               242.7


(a) In the first quarter of 2020, we adopted new accounting guidance included in

ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit

Losses on Financial Instruments, on a prospective basis. See Note 2 of the

Notes to Consolidated Financial Statement for additional information.

(b) Total allowance for credit losses includes both the allowance for credit

    losses on loans and lending-related commitments.




Lost interest

Interest revenue would have increased by $1 million in the second quarter of
2020 and first quarter of 2020, $4 million in the second quarter of 2019, $3
million in the first six months of 2020 and $7 million in the first six months
of 2019, if nonperforming


30 BNY Mellon
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loans at period-end had been performing for the entire respective periods.

Loan modifications


Due to the coronavirus pandemic, there have been two forms of relief provided
for classifying loans as troubled debt restructurings ("TDRs"): The Coronavirus
Aid, Relief, and Economic Security Act (the "CARES Act") and the Interagency
Guidance. See Note 2 of the Notes to Consolidated Financial Statements for
additional details on this guidance. Financial institutions may account for
eligible loan modifications either under the CARES Act or the Interagency
Guidance and we have elected to apply both, as applicable, in providing
borrowers with loan modification relief in response to the coronavirus pandemic.
We modified loans totaling $282 million in the second quarter of 2020 by
providing short-term loan payment forbearances or modified principal and/or
interest payments. We did not identify these modifications as TDRs. These loans
were primarily residential mortgage and commercial real estate loans. During the
loan modification period, these loans are not reported as nonperforming or past
due. We modified other residential mortgage loans totaling less than $1 million
in both the second quarter of 2019 and first quarter of 2020.

Deposits


Increased volatility coupled with the interest rate environment led to an
increase in deposit levels as our clients increased the levels of cash placed
with us. Total deposits were $305.5 billion at June 30, 2020, an increase of
18%, compared with $259.5 billion at Dec. 31, 2019.

Noninterest-bearing deposits were $78.1 billion at June 30, 2020 compared with
$57.6 billion at Dec. 31, 2019. Interest-bearing deposits were $227.4 billion at
June 30, 2020 compared with $201.9 billion at Dec. 31, 2019. See "Impact of
coronavirus pandemic on our business" for additional information.

Short-term borrowings

We fund ourselves primarily through deposits and, to a lesser extent, other short-term borrowings and long-term debt. Short-term borrowings consist of federal funds purchased and securities sold under repurchase agreements, payables to customers and broker-

dealers, commercial paper and other borrowed funds. Certain short-term borrowings, for example, securities sold under repurchase agreements, require the delivery of securities as collateral.

Information related to federal funds purchased and securities sold under repurchase agreements is presented below.


Federal funds purchased and securities sold under
repurchase agreements
                                                         Quarter ended
(dollars in millions)                   June 30, 2020    March 31, 2020     June 30, 2019
Maximum month-end balance during the
quarter                              $         14,512   $        16,644   $ 

12,127

Average daily balance (a)            $         14,209   $        13,919   $ 

11,809

Weighted-average rate during the
quarter (a)                                      0.03 %            7.96 %           12.64 %
Ending balance (b)                   $         14,512   $        13,128   $ 

11,757

Weighted-average rate at period end
(b)                                              0.00 %            3.93 %   

14.43 %

(a) Includes the average impact of offsetting under enforceable netting

agreements of $66,606 million in the second quarter of 2020, $80,216 million

in the first quarter of 2020 and $50,710 million in the second quarter of

2019. On a Non-GAAP basis, excluding the impact of offsetting, the

weighted-average rates would have been 0.00% for the second quarter of 2020,

1.18% for the first quarter of 2020 and 2.39% for the second quarter of 2019.

We believe providing the rates excluding the impact of netting is useful to

investors as it is more reflective of the actual rates paid.

(b) Includes the impact of offsetting under enforceable netting agreements of

    $48,615 million at June 30, 2020, $80,203 million at March 31, 2020 and
    $78,433 million at June 30, 2019.




Fluctuations of federal funds purchased and securities sold under repurchase
agreements reflect changes in overnight borrowing opportunities. The decreases
in the weighted-average rates compared with June 30, 2019 and March 31, 2020
primarily reflect lower interest rates and repurchase agreement activity with
the Fixed Income Clearing Corporation ("FICC"), where we record interest expense
gross, but the ending and average balances reflect the impact of offsetting
under enforceable netting agreements. This activity primarily relates to
government securities collateralized resale and repurchase agreements executed
with clients that are novated to and settle with the FICC.



                                                                   BNY Mellon 31
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Information related to payables to customers and broker-dealers is presented below.

Payables to customers and broker-dealers

                                                          Quarter ended
(dollars in millions)                   June 30, 2020     March 31, 2020     June 30, 2019
Maximum month-end balance during the
quarter                              $         25,012    $        24,016$        19,149
Average daily balance (a)            $         23,944    $        20,629$        18,679
Weighted-average rate during the
quarter (a)                                     (0.01 )%            0.73 %            1.76 %
Ending balance                       $         25,012    $        24,016$        18,946
Weighted-average rate at period end             (0.01 )%            0.28 %  

1.73 %

(a) The weighted-average rate is calculated based on, and is applied to, the

average interest-bearing payables to customers and broker-dealers, which were

$18,742 million in the second quarter of 2020, $16,386 million in the first

    quarter of 2020 and $15,666 million in the second quarter of 2019.



Payables to customers and broker-dealers represent funds awaiting re-investment and short sale proceeds payable on demand. Payables to customers and broker-dealers are driven by customer trading activity and market volatility.

Information related to commercial paper is presented below.

Commercial paper

                                                           Quarter ended
(dollars in millions)                     June 30, 2020     March 31, 2020      June 30, 2019
Maximum month-end balance during the
quarter                              $              665   $          3,379   $          8,894
Average daily balance                $              191   $          1,581   $          2,957
Weighted-average rate during the
quarter                                            1.02 %             1.56 %             2.43 %
Ending balance                       $              665   $          1,121   $          8,894
Weighted-average rate at period end                0.02 %             1.57 %             2.35 %




The Bank of New York Mellon issues commercial paper that matures within 397 days
from the date of issue and is not redeemable prior to maturity or subject to
voluntary prepayment. The fluctuations in the commercial paper balances
primarily reflect funding of investments in short-term assets.


Information related to other borrowed funds is presented below.

Other borrowed funds

                                                           Quarter ended
(dollars in millions)                    June 30, 2020     March 31, 2020      June 30, 2019
Maximum month-end balance during the
quarter                              $           2,451   $          1,544   $          2,732
Average daily balance                $           2,272   $            719   $          2,455
Weighted-average rate during the
quarter                                           1.30 %             2.27 %             3.36 %
Ending balance                       $           1,628   $          1,544   $          1,921
Weighted-average rate at period end               1.37 %             2.01 %             3.84 %




Other borrowed funds primarily include borrowings from the Federal Home Loan
Bank, the Federal Reserve Bank of Boston under the MMLF program, overdrafts of
sub-custodian account balances in our Investment Services businesses, finance
lease liabilities and borrowings under lines of credit by our Pershing
subsidiaries. Overdrafts typically relate to timing differences for settlements.
The decrease in other borrowed funds compared with June 30, 2019 primarily
reflects a decrease in borrowings from the Federal Home Loan Bank, partially
offset by borrowings from the Federal Reserve Bank of Boston under the MMLF
program. The increase in other borrowed funds compared with March 31, 2020
primarily reflects higher borrowings from the Federal Reserve Bank of Boston
under the MMLF program, partially offset by lower overdrafts of sub-custodian
account balances in our Investment Services businesses and borrowings from the
Federal Home Loan Bank.

Liquidity and dividends

BNY Mellon defines liquidity as the ability of the Parent and its subsidiaries
to access funding or convert assets to cash quickly and efficiently, or to roll
over or issue new debt, especially during periods of market stress, at a
reasonable cost, and in order to meet its short-term (up to one year)
obligations. Funding liquidity risk is the risk that BNY Mellon cannot meet its
cash and collateral obligations at a reasonable cost for both expected and
unexpected cash flow and collateral needs without adversely affecting daily
operations or our financial condition. Funding liquidity risk can arise from
funding mismatches, market constraints from the inability to convert assets into
cash, the inability to hold or raise


32 BNY Mellon
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cash, low overnight deposits, deposit run-off or contingent liquidity events.


Changes in economic conditions or exposure to credit, market, operational, legal
and reputational risks also can affect BNY Mellon's liquidity risk profile and
are considered in our liquidity risk framework. See "Impact of coronavirus
pandemic on our business" for additional information.

The Parent's policy is to have access to sufficient unencumbered cash and cash
equivalents at each quarter-end to cover maturities and other forecasted debt
redemptions, net interest payments and net tax payments for the following
18-month period, and to provide sufficient collateral to satisfy transactions
subject to Section 23A of the Federal Reserve Act. As of June 30, 2020, the
Parent was in compliance with this policy.

For additional information on our liquidity policy, see "Risk Management - Liquidity Risk" in our 2019 Annual Report.



We monitor and control liquidity exposures and funding needs within and across
significant legal entities, branches, currencies and business lines, taking into
account, among other factors, any applicable restrictions on the transfer of
liquidity among entities.

BNY Mellon also manages potential intraday liquidity risks. We monitor and
manage intraday liquidity against existing and expected intraday liquid
resources (such as cash balances, remaining intraday credit capacity, intraday
contingency funding and available collateral) to enable BNY Mellon to meet its
intraday obligations under normal and reasonably severe stressed conditions.

We define available funds for internal liquidity management purposes as cash and
due from banks, interest-bearing deposits with the Federal Reserve and other
central banks, interest-bearing deposits with banks and federal funds sold and
securities purchased under resale agreements. The following table presents our
total available funds at period end and on an average basis.

Available funds                                                                             Average
(dollars in millions)           June 30, 2020     Dec. 31, 2019        2Q20        1Q20        2Q19       YTD20       YTD19
Cash and due from banks       $         4,776   $         4,830   $   4,102$   4,595$   5,083$   4,348$   4,969
Interest-bearing deposits
with the Federal Reserve and
other central banks                   112,728            95,042      94,229      80,403      61,756      87,316      62,665
Interest-bearing deposits
with banks                             18,045            14,811      21,093      17,081      13,666      19,087      13,761
Federal funds sold and
securities purchased under
resale agreements                      36,638            30,182      30,265      34,109      38,038      32,187      33,528
Total available funds         $       172,187$       144,865$ 149,689$ 136,188$ 118,543$ 142,938$ 114,923
Total available funds as a
percentage of total assets                 39 %              38 %        36 %        35 %        35 %        36 %        34 %




Total available funds were $172.2 billion at June 30, 2020, compared with $144.9 billion at Dec. 31, 2019. The increase was primarily due to higher interest-bearing deposits with the Federal Reserve and other central banks.


Average non-core sources of funds, such as federal funds purchased and
securities sold under repurchase agreements, trading liabilities, commercial
paper and other borrowed funds, were $18.2 billion for the six months ended June
30, 2020 and $18.4 billion for the six months ended June 30, 2019. The decrease
primarily reflects a decrease in other borrowed funds and commercial paper,
partially offset by an increase in federal funds purchased and securities sold
under repurchase agreements.

Average foreign deposits, primarily from our European-based Investment Services
businesses, were $103.1 billion for the six months ended June 30, 2020, compared
with $91.4 billion for the six months ended June 30, 2019. Average
interest-bearing domestic deposits were $101.0 billion for the six months ended
June 30, 2020 and $72.4 billion for the six months ended June 30, 2019. The
increase primarily reflects increased client activity.

Average payables to customers and broker-dealers were $17.6 billion for the six
months ended June 30, 2020 and $15.9 billion for the six months ended June 30,
2019. Payables to customers and broker-dealers are driven by customer trading
activity and market volatility.


                                                                   BNY Mellon 33
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Average long-term debt was $27.7 billion for the six months ended June 30, 2020 and $28.0 billion for six months ended June 30, 2019.

Average noninterest-bearing deposits increased to $66.5 billion for the six months ended June 30, 2020 from $53.8 billion for the six months ended June 30, 2019, primarily reflecting client activity.

A significant reduction in our Investment Services business would reduce our access to deposits. See

"Asset/liability management" for additional factors that could impact our deposit balances.

Sources of liquidity


The Parent's three major sources of liquidity are access to the debt and equity
markets, dividends from its subsidiaries, and cash on hand and cash otherwise
made available in business-as-usual circumstances to the Parent through a
committed credit facility with our intermediate holding company ("IHC").

Our ability to access the capital markets on favorable terms, or at all, is partially dependent on our credit ratings, which are as follows:

Credit ratings at June 30, 2020

                                Moody's        S&P    Fitch           DBRS
Parent:
Long-term senior debt                A1          A      AA-             AA
Subordinated debt                    A2         A-        A       AA (low)
Preferred stock                    Baa1        BBB     BBB+              A
Outlook - Parent                 Stable     Stable   Stable         Stable

The Bank of New York Mellon:
Long-term senior debt               Aa2        AA-       AA      AA (high)
Subordinated debt                    NR          A       NR             NR
Long-term deposits                  Aa1        AA-      AA+      AA (high)
Short-term deposits                  P1       A-1+      F1+     R-1 (high)
Commercial paper                     P1       A-1+      F1+     R-1 (high)

BNY Mellon, N.A.:
Long-term senior debt               Aa2 (a)    AA-      AA  (a)  AA (high)
Long-term deposits                  Aa1        AA-      AA+      AA (high)
Short-term deposits                  P1       A-1+      F1+     R-1 (high)

Outlook - Banks                  Stable     Stable   Stable         Stable

(a) Represents senior debt issuer default rating.

NR - Not rated.



Long-term debt totaled $27.6 billion at June 30, 2020 and $27.5 billion at Dec.
31, 2019. Issuances of $2.25 billion and an increase in the fair value of hedged
long-term debt were partially offset by maturities of $1.75 billion and a
redemption of $1.25 billion. The Parent has $2.2 billion of long-term debt that
will mature in the remainder of 2020.

In July 2020, the Parent redeemed $1.1 billion of 2.6% senior notes due in August 2020 at par plus accrued and unpaid interest.


In May 2020, the Parent issued 1,000,000 depositary shares, each representing a
1/100th interest in a share of the Parent's Series G Noncumulative Perpetual
Preferred Stock (the "Series G Preferred Stock"). The Series G Preferred Stock
has an aggregate

liquidation preference of $1 billion. The Parent will pay dividends on the
Series G Preferred Stock, if declared by its board of directors on each March 20
and September 20, at an annual rate equal to 4.70% from the original issue date
to but excluding, Sept. 20, 2025; and at a floating rate equal to the five-year
treasury rate (as defined in the certificate of designation) on the date that is
three business days prior to the reset date plus 4.358% for each reset period,
from and including Sept. 20, 2025. The floating rate will initially reset on
Sept. 20, 2025 and subsequently on each date falling on the fifth anniversary of
the preceding reset date.

The Bank of New York Mellon may issue notes and CDs. There were no CDs outstanding at June 30, 2020. At Dec. 31, 2019, $1.1 billion of CDs were



34 BNY Mellon
--------------------------------------------------------------------------------

outstanding. At June 30, 2020 and Dec. 31, 2019, $32 million and $1.3 billion, respectively, of notes were outstanding.


The Bank of New York Mellon also issues commercial paper that matures within 397
days from the date of issue and is not redeemable prior to maturity or subject
to voluntary prepayment. The average commercial paper outstanding was $886
million for the six months ended June 30, 2020 and $2.2 billion for the six
months ended June 30, 2019. Commercial paper outstanding was $665 million at
June 30, 2020 and $4.0 billion at Dec. 31, 2019.

Subsequent to June 30, 2020, our U.S. bank subsidiaries could declare dividends
to the Parent of approximately $796 million, without the need for a regulatory
waiver. In addition, at June 30, 2020, non-bank subsidiaries of the Parent had
liquid assets of approximately $1.6 billion. Restrictions on our ability to
obtain funds from our subsidiaries are discussed in more detail in "Supervision
and Regulation - Capital Planning and Stress Testing - Payment of Dividends,
Stock Repurchases and Other Capital Distributions" and in Note 19 of the Notes
to Consolidated Financial Statements in our 2019 Annual Report.

Pershing LLC has uncommitted lines of credit in place for liquidity purposes
which are guaranteed by the Parent. Pershing LLC has three separate uncommitted
lines of credit amounting to $750 million in aggregate. There were no borrowings
under these lines in the second quarter of 2020. Pershing Limited, an indirect
UK-based subsidiary of BNY Mellon, has three separate uncommitted lines of
credit amounting to $350 million in aggregate. Average borrowings under these
lines were $31 million, in aggregate, in the second quarter of 2020.

BNY Mellon Capital Markets, LLC also has an uncommitted line of credit in place
for $100 million for liquidity purposes. There were no borrowings under this
line in the second quarter of 2020.

The double leverage ratio is the ratio of our equity investment in subsidiaries
divided by our consolidated Parent company equity, which includes our
noncumulative perpetual preferred stock. In short, the double leverage ratio
measures the extent to which equity in subsidiaries is financed by Parent
company debt. As the double leverage ratio increases, this can reflect greater
demands on a company's cash flows in order to service interest

payments and debt maturities. BNY Mellon's double leverage ratio is managed in a
range considering the high level of unencumbered available liquid assets held in
its principal subsidiaries (such as central bank deposit placements and
government securities), the Company's cash generating fee-based business model,
with fee revenue representing 79% of total revenue in the second quarter of
2020, and the dividend capacity of our banking subsidiaries. Our double leverage
ratio was 116.6% at June 30, 2020 and 116.9% at Dec. 31, 2019, and within the
range targeted by management.

Uses of funds

The Parent's major uses of funds are repurchases of common stock, payment of
dividends, principal and interest payments on its borrowings, acquisitions and
additional investments in its subsidiaries.

In May 2020, a quarterly cash dividend of $0.31 per common share was paid to common shareholders. Our common stock dividend payout ratio was 31% for the second quarter of 2020.


In March 2020, we and the other members of the Financial Services Forum
announced the temporary suspension of share repurchases until the end of the
second quarter of 2020 to preserve capital and liquidity in order to further the
objective of using capital and liquidity to support clients and customers. In
the second quarter of 2020, we repurchased 61.2 thousand common shares from
employees, primarily in connection with the employees' payment of taxes upon the
vesting of restricted stock, at an average price of $43.59 per common share for
a total cost of $3 million.

In connection with the Federal Reserve's release of the CCAR results in June
2020, BNY Mellon announced that it will not conduct open market common stock
repurchases in the third quarter of 2020 and will resume the common stock
repurchase program as early as possible, depending on factors such as prevailing
market conditions, our outlook for the economic environment, the additional
capital analysis required by the Federal Reserve, and whether the Federal
Reserve keeps the limitations for the third quarter of 2020 in place for
subsequent quarters. The Federal Reserve has announced that it will conduct
additional analysis for all participating CCAR firms, including us, later this
year and will not allow participating firms to make open market common


                                                                   BNY Mellon 35
--------------------------------------------------------------------------------

stock repurchases during the third quarter of 2020. See "Recent regulatory developments" for additional information related to the 2020 CCAR results.

Liquidity coverage ratio ("LCR")


U.S. regulators have established an LCR that requires certain banking
organizations, including BNY Mellon, to maintain a minimum amount of
unencumbered high-quality liquid assets ("HQLA") sufficient to withstand the net
cash outflow under a hypothetical standardized acute liquidity stress scenario
for a 30-day time horizon.

The following table presents BNY Mellon's consolidated HQLA at June 30, 2020, and the average HQLA and average LCR for the second quarter of 2020.

Consolidated HQLA and LCR
(dollars in billions)                   June 30, 2020
Securities (a)                        $           125
Cash (b)                                          107
Total consolidated HQLA (c)           $           232

Total consolidated HQLA - average (c) $           210
Average LCR                                       112 %


(a) Primarily includes securities of U.S. government-sponsored enterprises, U.S.

Treasury, sovereign securities, U.S. agency and investment-grade corporate

debt.

(b) Primarily includes cash on deposit with central banks.

(c) Consolidated HQLA presented before adjustments. After haircuts and the impact

of trapped liquidity, consolidated HQLA totaled $167 billion at June 30, 2020

    and averaged $156 billion for the second quarter of 2020.




BNY Mellon and each of our affected domestic bank subsidiaries were compliant
with the U.S. LCR requirements of at least 100% throughout the second quarter of
2020.

Statement of cash flows

The following summarizes the activity reflected on the consolidated statement of
cash flows. While this information may be helpful to highlight certain macro
trends and business strategies, the cash flow analysis may not be as relevant
when analyzing changes in our

net earnings and net assets. We believe that in addition to the traditional cash
flow analysis, the discussion related to liquidity and dividends and
asset/liability management herein may provide more useful context in evaluating
our liquidity position and related activity.

Net cash provided by operating activities was $5.1 billion in the six months
ended June 30, 2020, compared with net cash used for operating activities of
$2.5 billion in the six months ended June 30, 2019. In the six months ended June
30, 2020, cash flows provided by operations primarily resulted from earnings and
changes in accruals. In the six months ended June 30, 2019, cash flows used for
operations primarily resulted from changes in accruals and trading activities,
partially offset by earnings.

Net cash used for investing activities was $58.7 billion in the six months ended
June 30, 2020, compared with $11.4 billion in the six months ended June 30,
2019. In the six months ended June 30, 2020, net cash used for investing
activities primarily reflects net changes in securities, change in
interest-bearing deposits with the Federal Reserve and other central banks and
changes in federal funds sold and securities purchased under resale agreements.
In the six months ended June 30, 2019, net cash used for investing activities
primarily reflects changes in federal funds sold and securities purchased under
resale agreements, partially offset by changes in loans.

Net cash provided by financing activities was $53.4 billion in the six months
ended June 30, 2020, compared with $13.2 billion in the six months ended June
30, 2019. In the six months ended June 30, 2020, net cash provided by financing
activity reflects changes in deposits and payables to customers and
broker-dealers, partially offset by changes in commercial paper. In the six
months ended June 30, 2019, net cash provided by financing activities primarily
reflects changes in deposits and changes in commercial paper, partially offset
by repayment of long-term debt, changes in federal funds purchased and
securities sold under repurchase agreements and changes in other borrowed funds.

© Edgar Online, source Glimpses

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