Bank of New York Mellon : 2022 Annual Report - Financial Section

Exhibit 13.1

FINANCIAL SECTION

THE BANK OF NEW YORK MELLON CORPORATION

2022 Annual Report

Table of Contents

	Page
Financial Summary	2
Management's Discussion and Analysis of
Financial Condition and Results of Operations:
Results of Operations:	3
General
Overview	3
Key 2022 events	3
Summary of financial highlights	4
Fee and other revenue	6
Net interest revenue	9
Noninterest expense	12
Income taxes	12
Review of business segments	13
International operations	21
Critical accounting estimates	23
Consolidated balance sheet review	27
Liquidity and dividends	36
Capital	40
Trading activities and risk management	45
Asset/liability management	47
Risk Management	49
Supervision and Regulation	56
Other Matters	73
Risk Factors	74
Recent Accounting Developments	103
Supplemental Information (unaudited):
Explanation of GAAP and Non-GAAP financial
measures (unaudited)	104
Rate/volume analysis (unaudited)	109
Forward-looking Statements	110
Glossary	112
Report of Management on Internal Control Over	113
Financial Reporting
Report of Independent Registered Public	114
Accounting Firm

	Page
Financial Statements:	116
Consolidated Income Statement
Consolidated Comprehensive Income Statement	118
Consolidated Balance Sheet	119
Consolidated Statement of Cash Flows	120
Consolidated Statement of Changes in Equity	121
Notes to Consolidated Financial Statements:
Note 1 - Summary of significant accounting and
reporting policies	123
Note 2 - Accounting changes and new accounting
guidance	135
Note 3 - Acquisitions and dispositions	135
Note 4 - Securities	136
Note 5 - Loans and asset quality	141
Note 6 - Leasing	146
Note 7 - Goodwill and intangible assets	148
Note 8 - Other assets	150
Note 9 - Deposits	151
Note 10 - Contract revenue	151
Note 11 - Net interest revenue	153
Note 12 - Income taxes	154
Note 13 - Long-term debt	155
Note 14 - Variable interest entities	155
Note 15 - Shareholders' equity	156
Note 16 - Other comprehensive income (loss)	160
Note 17 - Stock-based compensation	161
Note 18 - Employee benefit plans	162
Note 19 - Company financial information (Parent
Corporation)	168
Note 20 - Fair value measurement	171
Note 21 - Fair value option	179
Note 22 - Commitments and contingent liabilities	180
Note 23 - Derivative instruments	185
Note 24 - Business segments	191
Note 25 - International operations	194
Note 26 - Supplemental information to the
Consolidated Statement of Cash Flows	195
Report of Independent Registered Public
Accounting Firm	196
Directors, Executive Committee and Other
Executive Officers	201
Performance Graph	202

The Bank of New York Mellon Corporation (and its subsidiaries)

Financial Summary

(dollars in millions, except per share amounts and unless otherwise noted)		2022		2021		2020
Selected income statement information:	$	12,873
Fee and other revenue	$	13,313	$	12,831
Net interest revenue		3,504		2,618		2,977
Total revenue		16,377		15,931		15,808
Provision for credit losses		39		(231)		336
Noninterest expense		13,010		11,514		11,004
Income before income taxes		3,328		4,648		4,468
Provision for income taxes		768		877		842
Net income		2,560		3,771		3,626
Net loss (income) attributable to noncontrolling interests related to consolidated investment		13		(12)		(9)
management funds
Preferred stock dividends		(211)		(207)		(194)
Net income applicable to common shareholders of The Bank of New York	$	2,362	$	3,552	$	3,423
Mellon Corporation
Earnings per share applicable to common shareholders of The Bank of New York
Mellon Corporation:	$	2.91
Basic	$	4.17	$	3.84
Diluted	$	2.90	$	4.14	$	3.83
Average common shares and equivalents outstanding (in thousands):		811,068
Basic			851,905		890,839
Diluted		814,795		856,359		892,514
At Dec. 31	$	44.3
Assets under custody and/or administration ("AUC/A") (in trillions) (a)	$	46.7	$	41.1
Assets under management ("AUM") (in billions) (b)		1,836		2,434		2,211
Selected ratios:		6.5%
Return on common equity			8.9%		8.7%
Return on tangible common equity - Non-GAAP(c)		13.4		17.1		17.0
Pre-tax operating margin		20		29		28
Net interest margin		0.97		0.68		0.84
Cash dividends per common share	$	1.42	$	1.30	$	1.24
Common dividend payout ratio		49%		32%		33%
Common dividend yield		3.1%		2.2%		2.9%
At Dec. 31	$	45.52
Closing stock price per common share	$	58.08	$	42.44
Market capitalization	$	36,800	$	46,705	$	37,634
Book value per common share	$	44.40	$	47.50	$	46.53
Tangible book value per common share - Non-GAAP(c)	$	23.11	$	24.31	$	25.44
Full-time employees		51,700		49,100		48,500
Common shares outstanding (in thousands)		808,445		804,145		886,764
Regulatory capital ratios (d)		11.2%
Common Equity Tier 1 ("CET1") ratio			11.2%		13.1%
Tier 1 capital ratio		14.1		14.0		15.8
Total capital ratio		14.9		14.9		16.7
Tier 1 leverage ratio		5.8		5.5		6.3
Supplementary leverage ratio ("SLR") (e)		6.8		6.6		8.6

1. Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management lines of business. Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5 trillion at Dec. 31, 2022, $1.7 trillion at Dec. 31, 2021 and $1.5 trillion at Dec. 31, 2020.
2. Excludes assets managed outside of the Investment and Wealth Management business segment.
3. Return on tangible common equity and tangible book value per common share, both Non-GAAP measures, exclude goodwill and intangible assets, net of deferred tax liabilities. See "Supplemental Information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 104 for the reconciliation of these Non-GAAP measures.
4. For our CET1, Tier 1 and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches. For additional information on our regulatory capital ratios, see "Capital" beginning on page 40.
5. The consolidated SLR at Dec. 31, 2020 reflects the temporary exclusion of U.S. Treasury securities from total leverage exposure which increased our consolidated SLR by 72 basis points. The temporary exclusion ceased to apply beginning April 1, 2021.

2 BNY Mellon

Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations

General

In this Annual Report, 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.

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

The Bank of New

York Mellon

Corporation

The following should be read in conjunction with the Consolidated Financial Statements included in this report. BNY Mellon's actual results of future operations may differ from those estimated or anticipated in certain forward-looking statements contained herein due to the factors described under the headings "Forward-looking Statements" and "Risk Factors," both of which investors should read.

Securities

Services

Asset

Servicing

Issuer

Services

Market and Wealth

Services

Pershing

Treasury

Services

Clearance and

Collateral

Management

Investment and

Wealth Management

Investment

Management

Wealth

Management

Certain business terms used in this Annual Report are defined in the Glossary.

This Annual Report generally discusses 2022 and 2021 items and comparisons between 2022 and 2021. Discussions of 2020 items and comparisons between 2021 and 2020 that are not included in this Annual Report can be found in our 2021 Annual Report, which was filed as an exhibit to our Form 10-K for the year ended Dec. 31, 2021.

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 dedicated to helping its clients manage and service their financial assets throughout the investment life cycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment and wealth management and investment services in 35 countries.

BNY Mellon has three business segments, Securities Services, Market and Wealth Services and Investment and Wealth 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.

For additional information on our business segments, see "Review of business segments" and Note 24 of the Notes to Consolidated Financial Statements.

Key 2022 events

Alcentra

On Nov. 1, 2022, we completed the sale of BNY Alcentra Group Holdings, Inc. (together with its subsidiaries, "Alcentra"). At Oct. 31, 2022, Alcentra had $32 billion in AUM concentrated in senior secured loans, high yield bonds, private credit, structured credit, special situations and multi-strategy credit strategies.

Repositioning the securities portfolio

In the fourth quarter of 2022, we took actions to reposition the securities portfolio to improve the trajectory of our net interest revenue. We sold approximately $3 billion of longer-dated lower yielding municipal and corporate bonds. These securities were replaced with significantly higher yielding securities. As a result of the repositioning, we recorded net securities losses of $449 million (pre-tax) in investment and other revenue.

Goodwill impairment

In the third quarter of 2022, we recorded a $680 million impairment of the goodwill associated with the Investment Management reporting unit, which

BNY Mellon 3

Results of Operations (continued)

was driven by lower market values and a higher discount rate. This goodwill impairment represents a non-cash charge and did not affect BNY Mellon's liquidity position, tangible common equity or regulatory capital ratios. See "Critical accounting estimates" for additional information.

Leadership succession

In March 2022, Todd Gibbons announced his decision to retire as Chief Executive Officer ("CEO") and member of the Board of Directors effective Aug. 31, 2022. The Board of Directors appointed Robin Vince to the position of President and CEO after Mr. Gibbons retired. Since 2020, Mr. Vince had served as Vice Chair of BNY Mellon and CEO of Global Market Infrastructure, which includes BNY Mellon's Pershing, Treasury Services, and Clearance and Collateral Management lines of business, as well as Markets & Execution Services.

Dermot McDonogh joined BNY Mellon on Nov. 1, 2022, and effective Feb. 1, 2023, succeeded Emily Portney as the Chief Financial Officer ("CFO"). Ms. Portney served as the CFO since July 19, 2020, and has assumed a new position leading the Company's Asset Servicing business.

Summary of financial highlights

We reported net income applicable to common shareholders of $2.4 billion, or $2.90 per diluted common share, in 2022, including the negative impact of notable items. Notable items in 2022 include goodwill impairment in the Investment Management reporting unit, a net loss from repositioning the securities portfolio, severance expense, litigation reserves, the accelerated amortization of deferred costs for depositary receipts services related to Russia and net gains on disposals (reflected in investment and other revenue). Excluding notable items, net income applicable to common shareholders was $3.7 billion (Non-GAAP), or $4.59 (Non-GAAP) per diluted common share, in 2022. In 2021, net income applicable to common shareholders of BNY Mellon was $3.6 billion, or $4.14 per diluted common share, including the negative impact of notable items. Notable items in 2021 include litigation reserves, severance expense and net gains on disposals (reflected in investment and other revenue). Excluding notable items, net income applicable to common shareholders was $3.6

billion (Non-GAAP), or $4.24 (Non-GAAP) per diluted common share, in 2021.

The highlights below are based on 2022 compared with 2021, unless otherwise noted.

• Total revenue increased 3%, or 6% (Non-GAAP) excluding notable items, primarily reflecting:
• • Fee revenue was essentially flat primarily reflecting lower market values, the unfavorable impact of a stronger U.S. dollar and the accelerated amortization of deferred costs for depositary receipts services related to Russia, partially offset by lower money market fee waivers. (See "Fee and other revenue" beginning on page 6.)
  • Investment and other revenue decreased, primarily reflecting the net loss from repositioning the securities portfolio. (See "Fee and other revenue" beginning on page 6.)
  • Net interest revenue increased 34%, primarily driven by higher interest rates on interest- earning assets, partially offset by higher funding expense. (See "Net interest revenue" beginning on page 9.)
• The provision for credit losses was $39 million compared with a benefit of $231 million. The increase was primarily driven by changes in the macroeconomic environment forecast. (See "Allowance for credit losses" beginning on page 34.)
• Noninterest expense increased 13%, primarily reflecting the goodwill impairment in the Investment Management reporting unit and higher severance expense and litigation reserves. Excluding notable items, noninterest expense increased 5% (Non-GAAP), primarily reflecting higher investments in growth, infrastructure and efficiency initiatives and higher revenue-related expenses, as well as the impact of inflation, partially offset by an approximately 3% favorable impact of a stronger U.S. dollar. (See "Noninterest expense" on page 12.)
• Effective tax rate of 23.1%, or 19.1% excluding notable items (Non-GAAP), primarily goodwill impairment, in 2022. (See "Income taxes" on page 12.)
• Return on common equity ("ROE") was 6.5% for 2022. Excluding notable items, the adjusted ROE was 10.3% (Non-GAAP) for 2022.

4 BNY Mellon

Results of Operations (continued)

• Return on tangible common equity ("ROTCE") was 13.4% (Non-GAAP) for 2022. Excluding notable items, the adjusted ROTCE was 21.0% (Non-GAAP) for 2022.

See "Supplemental Information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 104 for the reconciliation of the Non-GAAP measures.

Metrics

• AUC/A totaled $44.3 trillion at Dec. 31, 2022 compared with $46.7 trillion at Dec. 31, 2021. The 5% decrease primarily reflects lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by client inflows and net new business. (See "Fee and other revenue" beginning on page 6.)
• AUM totaled $1.8 trillion at Dec. 31, 2022 compared with $2.4 trillion at Dec. 31, 2021. The 25% decrease primarily reflects lower market values, the unfavorable impact of a stronger U.S. dollar and the divestiture of Alcentra, partially offset by net inflows. (See "Investment and Wealth Management business segment" beginning on page 18.)

Capital and liquidity

• Our CET1 ratio calculated under the Advanced Approaches was 11.2% at Dec. 31, 2022 and 11.2% under the Standardized Approach at Dec. 31, 2021. This primarily reflects capital generated through earnings, lower risk-weighted assets ("RWAs") and the impact of the Alcentra sale, offset by the net decrease in accumulated other comprehensive income and capital

deployed through dividends. (See "Capital" beginning on page 40.)

• Our Tier 1 leverage ratio was 5.8% at Dec. 31, 2022, compared with 5.5% at Dec. 31, 2021. The increase reflects lower average assets, partially offset by a decrease in capital. (See "Capital" beginning on page 40.)

Highlights of our principal business segments

Securities Services

• Total revenue increased 11%.
• Income before taxes increased 13%.
• Pre-taxoperating margin of 21%.

Market and Wealth Services

• Total revenue increased 11%.
• Income before taxes increased 10%.
• Pre-taxoperating margin of 44%.

Investment and Wealth Management

• Total revenue decreased 12%.
• Income before taxes decreased 96%; or 39% excluding notable items (Non-GAAP).
• Pre-taxoperating margin of 1%; adjusted pre-tax operating margin of 24% excluding notable items (Non-GAAP).

See "Supplemental Information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 104 for the reconciliation of the Non-GAAP measures. See "Review of business segments" and Note 24 of the Notes to Consolidated Financial Statements for additional information on our business segments.

BNY Mellon 5