Bank of New York Mellon : Financial Supplement (PDF)
11/02/2020 | 05:50pm EST
The Bank of New York Mellon Corporation
Financial Supplement
Third Quarter 2020
Table of Contents
Consolidated Results
Page
Consolidated Financial Highlights
3
Condensed Consolidated Income Statement
4
Condensed Consolidated Balance Sheet
5
Fee and Other Revenue
6
Average Balances and Interest Rates
7
Capital and Liquidity
8
Business Segment Results
Investment Services Business
9
Investment and Wealth Management Business
11
AUM by Product, AUM Flows and Wealth Management Client Assets
12
Other Segment
13
Other
Securities Portfolio
14
Allowance for Credit Losses and Nonperforming Assets
15
Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures
16
THE BANK OF NEW YORK MELLON CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(dollars in millions, except per common share amounts, or unless otherwise
3Q20 vs.
YTD20 vs.
noted)
3Q20
2Q20
1Q20
4Q19
3Q19
2Q20
3Q19
YTD20
YTD19
YTD19
Selected income statement data
Fee revenue
$
3,108
$
3,167
$
3,323
$
3,971
$
3,129
(2)%
(1)%
$
9,598
$
9,265
4 %
Net securities gains (losses)
9
9
9
(25)
(1)
N/M
N/M
27
7
N/M
Total fee and other revenue
3,117
3,176
3,332
3,946
3,128
(2)
-
9,625
9,272
4
Income (loss) from consolidated investment management funds
27
54
(38)
17
3
N/M
N/M
43
39
N/M
Net interest revenue
703
780
814
815
730
(10)
(4)
2,297
2,373
(3)
Total revenue
3,847
4,010
4,108
4,778
3,861
(4)
-
11,965
11,684
2
Provision for credit losses
9
143
169
(8)
(16)
N/M
N/M
321
(17)
N/M
Noninterest expense
2,681
2,686
2,712
2,964
2,590
-
4
8,079
7,936
2
Income before income taxes
1,157
1,181
1,227
1,822
1,287
(2)
(10)
3,565
3,765
(5)
Provision for income taxes
213
216
265
373
246
(1)
(13)
694
747
(7)
Net income
$
944
$
965
$
962
$
1,449
$
1,041
(2)%
(9)%
$
2,871
$
3,018
(5)%
Net income applicable to common shareholders of The Bank of New York
$
876
$
901
$
944
$
1,391
$
1,002
(3)%
(13)%
$
2,721
$
2,881
(6)%
Mellon Corporation
Diluted earnings per common share
$
0.98
$
1.01
$
1.05
$
1.52
$
1.07
(3)%
(8)%
$
3.04
$
3.01
1 %
Average common shares and equivalents outstanding - diluted (in thousands)
891,069
890,561
896,689
914,739
935,677
- %
(5)%
892,793
951,876
(6)%
Financial ratios(Returns are annualized)
Pre-tax operating margin
30 %
29 %
30 %
38 %
33 %
30 %
32 %
Return on common equity
8.7 %
9.4 %
10.1 %
14.6 %
10.6 %
9.4 %
10.3 %
Return on tangible common equity - Non-GAAP(a)
16.7 %
18.5 %
20.4 %
29.3 %
21.4 %
18.5 %
21.1 %
Non-U.S. revenue as a percentage of total revenue
37 %
36 %
36 %
31 %
37 %
37 %
36 %
Period end
Assets under custody and/or administration ("AUC/A") (in trillions) (b)
$
38.6
$
37.3
$
35.2
$
37.1
$
35.8
3 %
8 %
Assets under management ("AUM") (in trillions)
$
2.04
$
1.96
$
1.80
$
1.91
$
1.88
4 %
9 %
Full-time employees
48,600
48,300
47,900
48,400
48,700
1 %
- %
Book value per common share
$
45.58
$
44.21
$
42.47
$
42.12
$
40.75
Tangible book value per common share - Non-GAAP(a)
$
24.60
$
23.31
$
21.53
$
21.33
$
20.59
Cash dividends per common share
$
0.31
$
0.31
$
0.31
$
0.31
$
0.31
Common dividend payout ratio
32 %
31 %
30 %
20 %
29 %
Closing stock price per common share
$
34.34
$
38.65
$
33.68
$
50.33
$
45.21
Market capitalization
$ 30,430
$ 34,239
$ 29,822
$ 45,331
$ 41,693
Common shares outstanding (in thousands)
886,136
885,862
885,443
900,683
922,199
Capital ratios at period end(c)
Common Equity Tier 1 ("CET1") ratio
13.0 %
12.6 %
11.3 %
11.5 %
11.1 %
Tier 1 capital ratio
15.7 %
15.4 %
13.5 %
13.7 %
13.2 %
Total capital ratio
16.6 %
16.3 %
14.3 %
14.4 %
14.0 %
Tier 1 leverage ratio
6.5 %
6.2 %
6.0 %
6.6 %
6.5 %
Supplementary leverage ratio ("SLR")
8.5 %
8.2 %
5.6 %
6.1 %
6.0 %
Non-GAAPinformation, for all periods presented, excludes goodwill and intangible assets, net of deferred tax liabilities. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 16 for the reconciliation of Non-GAAP measures.
Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.4 trillion at Sept. 30, 2020, $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.
Regulatory capital ratios for Sept. 30, 2020 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for Sept. 30,2020, June 30, 2020, Dec. 31, 2019 and Sept. 30, 2019, was the Advanced Approaches, and for March 31, 2020 was the Standardized Approach for the CET1 and Tier 1 capital ratios and the Advanced Approaches for the Total capital ratio.
N/M - Not meaningful.
3
THE BANK OF NEW YORK MELLON CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
(dollars in millions, except per share amounts; common shares in
3Q20 vs.
YTD20 vs.
thousands)
3Q20
2Q20
1Q20
4Q19
3Q19
2Q20
3Q19
YTD20
YTD19
YTD19
Revenue
Investment services fees:
Asset servicing fees
$
1,168
$
1,173
$
1,159
$
1,148
$
1,152
- %
1 %
$
3,500
$
3,415
2 %
Clearing services fees
397
431
470
421
419
(8)
(5)
1,298
1,227
6
Issuer services fees
295
277
263
264
324
6
(9)
835
866
(4)
Treasury services fees
152
144
149
147
140
6
9
445
412
8
Total investment services fees
2,012
2,025
2,041
1,980
2,035
(1)
(1)
6,078
5,920
3
Investment management and performance fees
835
786
862
883
832
6
-
2,483
2,506
(1)
Foreign exchange and other trading revenue
137
166
319
168
150
(17)
(9)
622
486
28
Financing-related fees
49
58
59
46
49
(16)
-
166
150
11
Distribution and servicing
29
27
31
34
33
7
(12)
87
95
(8)
Investment and other income
46
105
11
860
30
N/M
N/M
162
108
N/M
Total fee revenue
3,108
3,167
3,323
3,971
3,129
(2)
(1)
9,598
9,265
4
Net securities gains (losses)
9
9
9
(25)
(1)
N/M
N/M
27
7
N/M
Total fee and other revenue
3,117
3,176
3,332
3,946
3,128
(2)
-
9,625
9,272
4
Income (loss) from consolidated investment management funds
27
54
(38)
17
3
N/M
N/M
43
39
N/M
Net interest revenue
703
780
814
815
730
(10)
(4)
2,297
2,373
(3)
Total revenue
3,847
4,010
4,108
4,778
3,861
(4)
-
11,965
11,684
2
Provision for credit losses
9
143
169
(8)
(16)
N/M
N/M
321
(17)
N/M
Noninterest expense
Staff
1,466
1,464
1,482
1,639
1,479
-
(1)
4,412
4,424
-
Professional, legal and other purchased services
355
337
330
367
316
5
12
1,022
978
4
Software and equipment
340
345
326
326
309
(1)
10
1,011
896
13
Net occupancy
136
137
135
151
138
(1)
(1)
408
413
(1)
Sub-custodian and clearing
119
120
105
119
111
(1)
7
344
331
4
Distribution and servicing
85
85
91
92
97
-
(12)
261
282
(7)
Bank assessment charges
30
35
35
32
31
(14)
(3)
100
93
8
Business development
17
20
42
65
47
(15)
(64)
79
148
(47)
Amortization of intangible assets
26
26
26
28
30
-
(13)
78
89
(12)
Other
107
117
140
145
32
(9)
234
364
282
29
Total noninterest expense
2,681
2,686
2,712
2,964
2,590
-
4
8,079
7,936
2
Income before income taxes
1,157
1,181
1,227
1,822
1,287
(2)
(10)
3,565
3,765
(5)
Provision for income taxes
213
216
265
373
246
(1)
(13)
694
747
(7)
Net income
944
965
962
1,449
1,041
(2)
(9)
2,871
3,018
(5)
Net (income) loss attributable to noncontrolling interests
(7)
(15)
18
(9)
(3)
N/M
N/M
(4)
(17)
N/M
Preferred stock dividends
(61)
(49)
(36)
(49)
(36)
N/M
N/M
(146)
(120)
N/M
Net income applicable to common shareholders of The Bank of New York
$
876
$
901
$
944
$
1,391
$
1,002
(3)%
(13)%
$
2,721
$
2,881
(6)%
Mellon Corporation
Average common shares and equivalents outstanding: Basic
889,499
889,020
894,122
911,324
933,264
- %
(5)%
891,050
949,035
(6)%
Diluted
891,069
890,561
896,689
914,739
935,677
- %
(5)%
892,793
951,876
(6)%
Earnings per common share: Basic
$
0.98
$
1.01
$
1.05
$
1.52
$
1.07
(3)%
(8)%
$
3.05
$
3.02
1 %
Diluted
$
0.98
$
1.01
$
1.05
$
1.52
$
1.07
(3)%
(8)%
$
3.04
$
3.01
1 %
N/M - Not meaningful.
4
THE BANK OF NEW YORK MELLON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
2020
2019
(in millions)
Sept. 30
June 30
March 31
Dec. 31
Sept. 30
Assets
Cash and due from banks
$
4,104
$
4,776
$
5,091
$
4,830
$
6,718
Interest-bearing deposits with the Federal Reserve and other central banks
106,185
112,728
146,535
95,042
73,811
Interest-bearing deposits with banks
19,027
18,045
22,672
14,811
15,417
Federal funds sold and securities purchased under resale agreements
29,647
36,638
27,363
30,182
43,723
Securities
155,339
154,682
139,273
123,033
122,340
Trading assets
13,074
14,150
12,918
13,571
10,180
Loans
55,491
55,397
62,368
54,953
54,881
Allowance for loan losses
(325)
(302)
(140)
(122)
(127)
Net loans
55,166
55,095
62,228
54,831
54,754
Premises and equipment
3,617
3,598
3,514
3,625
3,149
Accrued interest receivable
489
540
576
624
596
Goodwill
17,357
17,253
17,240
17,386
17,248
Intangible assets
3,026
3,045
3,070
3,107
3,124
Other assets
20,779
21,306
27,446
20,221
21,727
Subtotal assets of operations
427,810
441,856
467,926
381,263
372,787
Assets of consolidated investment management funds, at fair value
588
460
229
245
381
Total assets
$
428,398
$
442,316
$
468,155
$
381,508
$
373,168
Liabilities
Deposits
$
296,312
$
305,470
$
336,717
$
259,466
$
249,660
Federal funds purchased and securities sold under repurchase agreements
15,907
14,512
13,128
11,401
11,796
Trading liabilities
6,084
5,595
6,625
4,841
4,756
Payables to customers and broker-dealers
23,514
25,012
24,016
18,758
18,364
Commercial paper
671
665
1,121
3,959
3,538
Other borrowed funds
420
1,628
1,544
599
820
Accrued taxes and other expenses
5,347
5,029
4,705
5,642
5,081
Other liabilities
8,671
12,869
11,425
7,612
9,796
Long-term debt
26,121
27,566
27,494
27,501
27,872
Subtotal liabilities of operations
383,047
398,346
426,775
339,779
331,683
Liabilities of consolidated investment management funds, at fair value
4
4
1
1
15
Total liabilities
383,051
398,350
426,776
339,780
331,698
Temporary equity
Redeemable noncontrolling interests
179
157
140
143
147
Permanent equity
Preferred stock
4,532
4,532
3,542
3,542
3,542
Common stock
14
14
14
14
14
Additional paid-in capital
27,741
27,702
27,644
27,515
27,471
Retained earnings
33,821
33,224
32,601
31,894
30,789
Accumulated other comprehensive loss, net of tax
(1,359)
(1,943)
(2,827)
(2,638)
(2,893)
Less: Treasury stock, at cost
(19,832)
(19,832)
(19,829)
(18,844)
(17,803)
Total The Bank of New York Mellon Corporation shareholders' equity
44,917
43,697
41,145
41,483
41,120
Nonredeemable noncontrolling interests of consolidated investment management funds
251
112
94
102
203
Total permanent equity
45,168
43,809
41,239
41,585
41,323
Total liabilities, temporary equity and permanent equity
$
428,398
$
442,316
$
468,155
$
381,508
$
373,168
5
THE BANK OF NEW YORK MELLON CORPORATION
FEE AND OTHER REVENUE
3Q20 vs.
YTD20 vs.
(dollars in millions)
3Q20
2Q20
1Q20
4Q19
3Q19
2Q20
3Q19
YTD20
YTD19
YTD19
Investment services fees:
Asset servicing fees (a)
$
1,128
$
1,117
$
1,108
$
1,104
$
1,109
1 %
2 %
$
3,353
$
3,280
2 %
Securities lending revenue
40
56
51
44
43
(29)
(7)
147
135
9
Clearing services fees (b)
397
431
470
421
419
(8)
(5)
1,298
1,227
6
Issuer services fees
295
277
263
264
324
6
(9)
835
866
(4)
Treasury services fees
152
144
149
147
140
6
9
445
412
8
Total investment services fees
2,012
2,025
2,041
1,980
2,035
(1)
(1)
6,078
5,920
3
Investment management and performance fees (c):
Investment management fees
828
781
812
835
830
6
-
2,421
2,471
(2)
Performance fees
7
5
50
48
2
N/M
N/M
62
35
77
Total investment management and performance fees (d)
835
786
862
883
832
6
-
2,483
2,506
(1)
Foreign exchange and other trading revenue:
Foreign exchange
151
174
253
138
129
(13)
17
578
439
32
Other trading (loss) revenue
(14)
(8)
66
30
21
N/M
N/M
44
47
N/M
Total foreign exchange and other trading revenue
137
166
319
168
150
(17)
(9)
622
486
28
Financing-related fees
49
58
59
46
49
(16)
-
166
150
11
Distribution and servicing
29
27
31
34
33
7
(12)
87
95
(8)
Investment and other income:
Corporate/bank-owned life insurance
33
36
36
43
33
N/M
N/M
105
95
N/M
Expense reimbursements from joint venture
23
19
21
20
21
N/M
N/M
63
59
N/M
Asset-related gains
4
3
4
815
2
N/M
N/M
11
4
N/M
Seed capital gains (losses) (c)
9
23
(31)
4
-
N/M
N/M
1
10
N/M
Other (loss) income
(23)
24
(19)
(22)
(26)
N/M
N/M
(18)
(60)
N/M
Total investment and other income (c)
46
105
11
860
30
N/M
N/M
162
108
N/M
Total fee revenue
3,108
3,167
3,323
3,971
3,129
(2)
(1)
9,598
9,265
4
Net securities gains (losses)
9
9
9
(25)
(1)
N/M
N/M
27
7
N/M
Total fee and other revenue
$
3,117
$
3,176
$
3,332
$
3,946
$
3,128
(2)%
- %
$
9,625
$
9,272
4 %
Asset servicing fees include the fees from the Clearance and Collateral Management business.
Clearing services fees are almost entirely earned by our Pershing business.
Excludes seed capital gains (losses) related to consolidated investment management funds, which are reflected in operations of consolidated investment management funds.
On a constant currency basis (Non-GAAP), investment management and performance fees decreased 1% compared with 3Q19. See "Supplemental Information - Explanation of GAAP and Non- GAAP Financial Measures" beginning on page 16 for the reconciliation of this Non-GAAP measure.
N/M - Not meaningful.
6
THE BANK OF NEW YORK MELLON CORPORATION
AVERAGE BALANCES AND INTEREST RATES
3Q20
2Q20
1Q20
4Q19
3Q19
Average
Average
Average
Average
Average
Average
Average
Average
Average
Average
(dollars in millions; average rates are annualized)
balance
rate
balance
rate
balance
rate
balance
rate
balance
rate
Assets
Interest-earning assets:
Interest-bearing deposits with the Federal Reserve and other central banks
$
90,670
(0.04)%
$
94,229
(0.03)%
$
80,403
0.39 %
$
61,627
0.60 %
$
60,030
0.67 %
Interest-bearing deposits with banks (primarily foreign banks)
19,202
0.42
21,093
0.76
17,081
1.37
15,788
1.63
15,324
1.89
Federal funds sold and securities purchased under resale agreements (a)
30,342
0.63
30,265
0.82
34,109
4.67
38,846
4.62
40,816
6.42
Margin loans
12,870
1.24
12,791
1.28
12,984
2.69
11,609
3.25
10,303
4.02
Non-margin loans:
Domestic offices
30,053
2.12
31,185
2.21
31,720
3.02
29,690
3.36
29,285
2.75
(b)
Foreign offices
10,693
1.45
12,743
1.84
11,170
2.55
11,418
2.70
11,247
2.97
Total non-margin loans
40,746
1.94
43,928
2.10
42,890
2.89
41,108
3.18
40,532
2.81
(b)
Securities:
U.S. government obligations
30,073
1.36
27,901
1.52
23,175
1.87
18,444
2.08
19,315
2.11
U.S. government agency obligations
78,300
1.68
74,583
1.92
69,046
2.32
67,494
2.36
67,235
2.49
State and political subdivisions (c)
1,500
2.51
1,025
2.98
1,033
3.06
1,134
3.03
1,217
3.05
Other securities (c)
46,719
0.59
45,511
0.82
36,375
0.95
35,242
1.64
33,729
1.75
Trading securities (c)
7,212
0.91
6,236
1.13
6,840
2.36
6,695
2.41
5,653
2.80
Total securities (c)
163,804
1.28
155,256
1.50
136,469
1.88
129,009
2.13
127,149
2.25
Total interest-earning assets (c)
$
357,634
0.92 %
$
357,562
1.06 %
$
323,936
1.95 %
$
297,987
2.30 %
$
294,154
2.63 %
(b)
Noninterest-earning assets
57,231
57,797
61,342
56,354
56,525
Total assets
$
414,865
$
415,359
$
385,278
$
354,341
$
350,679
Liabilities and equity
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic offices
$
102,767
(0.01)%
$
102,135
0.06 %
$
99,915
0.69 %
$
87,162
0.98 %
$
82,663
1.28 %
Foreign offices
108,733
(0.09)
108,508
(0.12)
97,717
0.29
95,262
0.49
94,738
0.71
Total interest-bearing deposits
211,500
(0.05)
210,643
(0.03)
197,632
0.49
182,424
0.73
177,401
0.98
Federal funds purchased and securities sold under repurchase
16,850
0.13
14,209
0.03
13,919
7.96
12,668
9.11
13,432
13.08
agreements (a)
Trading liabilities
2,692
0.30
1,974
0.39
1,626
1.61
1,504
2.25
1,371
2.33
Other borrowed funds
873
1.40
2,272
1.30
719
2.27
709
2.83
1,148
3.24
Commercial paper
2,274
0.09
191
1.02
1,581
1.56
1,792
1.66
3,796
2.26
Payables to customers and broker-dealers
18,501
(0.01)
18,742
(0.01)
16,386
0.73
15,178
1.07
15,440
1.52
Long-term debt
26,511
2.01
28,122
2.42
27,231
2.83
28,117
3.09
28,386
3.24
Total interest-bearing liabilities
$
279,201
0.16 %
$
276,153
0.24 %
$
259,094
1.17 %
$
242,392
1.48 %
$
240,974
1.99 %
Total noninterest-bearing deposits
67,610
72,411
60,577
49,632
49,027
Other noninterest-bearing liabilities
23,393
24,121
24,229
20,681
19,280
Total The Bank of New York Mellon Corporation shareholders' equity
44,456
42,486
41,206
41,384
41,139
Noncontrolling interests
205
188
172
252
259
Total liabilities and equity
$
414,865
$
415,359
$
385,278
$
354,341
$
350,679
Net interest margin
0.79 %
0.88 %
1.01 %
1.09 %
0.99 %
(b)
Net interest margin (FTE) - Non-GAAP(d)
0.79 %
0.88 %
1.01 %
1.09 %
1.00 %
(b)
Includes the average impact of offsetting under enforceable netting agreements of approximately $43 billion for 3Q20, $67 billion for 2Q20, $80 billion for 1Q20, $60 billion for 4Q19 and $68 billion for 3Q19. 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 3Q20 and 2Q20, 1.39% for 1Q20, 1.82% for 4Q19 and 2.42% for 3Q19. 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 0.04% for 3Q20, 0.00% for 2Q20, 1.18% for 1Q20, 1.59% for 4Q19 and 2.17% for 3Q19. 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.
Includes the impact of the lease-related impairment of $70 million in 3Q19. On a Non-GAAP basis, excluding the lease-related impairment, the yield on non-margin loans in domestic offices would have been 3.70%, the yield on total non-margin loans would have been 3.50%, the yield on total interest-earning assets would have been 2.72% and the net interest margin and the net interest margin (FTE) - Non-GAAP would have been 1.09% in 3Q19.
Average rates were calculated on an FTE basis, at tax rates of approximately 21%.
See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 16 for the reconciliation of this Non-GAAP measure.
7
THE BANK OF NEW YORK MELLON CORPORATION
CAPITAL AND LIQUIDITY
2020
2019
(dollars in millions)
Sept. 30
June 30
March 31
Dec. 31
Sept. 30
Consolidated regulatory capital ratios (a)
Standardized Approach:
CET1 capital
$
21,171
$
20,035
$
18,465
$
18,540
$
18,196
Tier 1 capital
25,614
24,478
21,933
21,996
21,677
Total capital
27,331
26,183
23,494
23,449
23,145
Risk-weighted assets
156,741
157,290
163,006
148,695
148,399
CET1 ratio
13.5 %
12.7 %
11.3 %
12.5 %
12.3 %
Tier 1 capital ratio
16.3
15.6
13.5
14.8
14.6
Total capital ratio
17.4
16.6
14.4
15.8
15.6
Advanced Approaches:
CET1 capital
$
21,171
$
20,035
$
18,465
$
18,540
$
18,196
Tier 1 capital
25,614
24,478
21,933
21,996
21,677
Total capital
27,095
25,937
23,281
23,233
22,921
Risk-weighted assets
163,136
159,340
162,561
160,898
164,172
CET1 ratio
13.0 %
12.6 %
11.4 %
11.5 %
11.1 %
Tier 1 capital ratio
15.7
15.4
13.5
13.7
13.2
Total capital ratio
16.6
16.3
14.3
14.4
14.0
Tier 1 leverage ratio
6.5 %
6.2 %
6.0 %
6.6 %
6.5 %
SLR:
Leverage exposure
$
300,105 (b)
$
297,300
(b)
$
392,807
$
362,452
$
359,023
SLR
8.5 % (b)
8.2 % (b)
5.6 %
6.1 %
6.0 %
Average liquidity coverage ratio
111 %
112 %
115 %
120 %
117 %
Regulatory capital ratios for Sept. 30, 2020 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for Sept. 30, 2020, June 30, 2020, Dec. 31, 2019 and Sept. 30, 2019, was the Advanced Approaches, and for March 31, 2020 was the Standardized Approach for the CET1 and Tier 1 capital ratios and the Advanced Approaches for the Total capital ratio.
Reflects the application of a new rule effective April 1, 2020 to exclude certain central bank placements. Also effective on April 1, 2020 was the temporary exclusion of U.S. Treasury securities from the leverage exposure used in the SLR calculation which increased our consolidated SLR by 78 basis points at Sept. 30, 2020 and 40 basis points at June 30, 2020.
Noninterest expense (ex. amortization of intangible assets)
2,002
1,971
1,969
2,160
1,952
2
3
5,942
5,856
1
Amortization of intangible assets
18
18
18
19
21
-
(14)
54
61
(11)
Total noninterest expense
2,020
1,989
1,987
2,179
1,973
2
2
5,996
5,917
1
Income before taxes
$
917
$
973
$
1,106
$
840
$
1,099
(6)%
(17)%
$
2,996
$
3,132
(4)%
Pre-tax operating margin
31 %
31 %
34 %
28 %
36 %
32 %
35 %
Total revenue by line of business:
Asset Servicing
$
1,354
$
1,463
$
1,531
$
1,411
$
1,411
(7)%
(4)%
$
4,348
$
4,223
3 %
Pershing
538
578
653
579
575
(7)
(6)
1,769
1,708
4
Issuer Services
435
431
419
415
466
1
(7)
1,285
1,308
(2)
Treasury Services
323
340
339
329
312
(5)
4
1,002
946
6
Clearance and Collateral Management
277
295
300
280
293
(6)
(5)
872
853
2
Total revenue by line of business
$
2,927
$
3,107
$
3,242
$
3,014
$
3,057
(6)%
(4)%
$
9,276
$
9,038
3 %
Asset servicing fees include the fees from the Clearance and Collateral Management business.
Clearing services fees are almost entirely earned by our Pershing business.
Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue, securities gains and losses and investment and other income. N/M - Not meaningful.
9
THE BANK OF NEW YORK MELLON CORPORATION
INVESTMENT SERVICES BUSINESS
3Q20 vs.
YTD20 vs.
(dollars in millions, unless otherwise noted)
3Q20
2Q20
1Q20
4Q19
3Q19
2Q20
3Q19
YTD20
YTD19
YTD19
Average loans
$
40,308
$
43,113
$
41,789
$
38,721
$
37,005
(7)%
9 %
$
41,731
$
36,881
13 %
Average assets
$
329,324
$
335,288
$
304,089
$
278,098
$
269,926
(2)%
22 %
$
322,924
$
263,631
22 %
Average deposits
$
263,621
$
268,467
$
242,187
$
215,388
$
208,044
(2)%
27 %
$
258,112
$
201,472
28 %
AUC/A at period end (in trillions) (a)(b)
$
38.6
$
37.3
$
35.2
$
37.1
$
35.8
3 %
8 %
Market value of securities on loan at period end (in billions) (c)
$
378
$
384
$
389
$
378
$
362
(2)%
4 %
Pershing
Net new assets (U.S. platform) (in billions) (d)
$
12
$
11
$
31
$
33
$
19
N/M
N/M
Average active clearing accounts (U.S. platform) (in thousands)
6,556
6,507
6,437
6,340
6,283
1 %
4 %
Average long-term mutual fund assets (U.S. platform)
$
597,312
$
547,579
$
549,206
$
573,475
$
547,522
9 %
9 %
Average investor margin loans (U.S. platform)
$
9,350
$
9,235
$
9,419
$
9,420
$
9,222
1 %
1 %
Clearance and Collateral Management
Average tri-party collateral management balances (in billions)
$
3,417
$
3,573
$
3,724
$
3,562
$
3,550
(4)%
(4)%
Sept. 30, 2020 information is preliminary.
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 $1.4 trillion at Sept. 30, 2020, $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.
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 Sept. 30, 2020 and June 30, 2020, $59 billion at March 31, 2020, $60 billion at Dec. 31, 2019 and $66 billion at Sept. 30, 2019.
Net new assets represents 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.
10
THE BANK OF NEW YORK MELLON CORPORATION
INVESTMENT AND WEALTH MANAGEMENT BUSINESS
3Q20 vs.
YTD20 vs.
(dollars in millions)
3Q20
2Q20
1Q20
4Q19
3Q19
2Q20
3Q19
YTD20
YTD19
YTD19
Revenue:
Investment management fees (a)
$
828
$
782
$
812
$
836
$
830
6 %
- %
$
2,422
$
2,471
(2)%
Performance fees
7
5
50
48
2
N/M
N/M
62
35
77
Investment management and performance fees (b)
835
787
862
884
832
6
-
2,484
2,506
(1)
Distribution and servicing
31
34
43
44
45
(9)
(31)
108
134
(19)
Other (a)
5
17
(59)
(4)
(39)
N/M
N/M
(37)
(79)
N/M
Total fee and other revenue (a)
871
838
846
924
838
4
4
2,555
2,561
-
Net interest revenue
47
48
52
47
49
(2)
(4)
147
175
(16)
Total revenue
918
886
898
971
887
4
3
2,702
2,736
(1)
Provision for credit losses
12
7
9
-
-
N/M
N/M
28
(1)
N/M
Noninterest expense (ex. amortization of intangible assets)
653
650
687
722
582
-
12
1,990
1,888
5
Amortization of intangible assets
8
8
8
9
10
-
(20)
24
28
(14)
Total noninterest expense
661
658
695
731
592
-
12
2,014
1,916
5
Income before taxes
$
245
$
221
$
194
$
240
$
295
11 %
(17)%
$
660
$
821
(20)%
Pre-tax operating margin
27 %
25 %
22 %
25 %
33 %
24 %
30 %
Adjusted pre-tax operating margin - Non-GAAP(c)
29 %
28 %
24 %
27 %
37 %
27 %
33 %
Total revenue by line of business:
Investment Management
$
641
$
621
$
620
$
692
$
608
3 %
5 %
$
1,882
$
1,870
1 %
Wealth Management
277
265
278
279
279
5
(1)
820
866
(5)
Total revenue by line of business
$
918
$
886
$
898
$
971
$
887
4 %
3 %
$
2,702
$
2,736
(1)%
Average loans
$
11,503
$
11,791
$
12,124
$
12,022
$
12,013
(2)%
(4)%
$
11,805
$
12,184
(3)%
Average assets
$
30,160
$
30,327
$
30,543
$
28,481
$
27,840
(1)%
8 %
$
30,343
$
29,815
2 %
Average deposits
$
17,570
$
17,491
$
16,144
$
15,195
$
14,083
- %
25 %
$
17,070
$
14,831
15 %
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.
On a constant currency basis (Non-GAAP), investment management and performance fees decreased 1% compared with 3Q19. See "Supplemental Information - Explanation of GAAP and Non- GAAP Financial Measures" beginning on page 16 for the reconciliation of this Non-GAAP measure.
Net of distribution and servicing expense. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 16 for the reconciliation of this Non-GAAP measure.
N/M - Not meaningful.
11
THE BANK OF NEW YORK MELLON CORPORATION
AUM BY PRODUCT, AUM FLOWS AND WEALTH MANAGEMENT CLIENT ASSETS
3Q20 vs.
(dollars in billions)
3Q20
2Q20
1Q20
4Q19
3Q19
2Q20
3Q19
AUM by product type (a)(b)
Equity
$
149
$
141
$
120
$
154
$
147
6 %
1 %
Fixed income
241
224
211
224
211
8
14
Index
350
333
274
339
321
5
9
Liability-driven investments
788
752
705
728
742
5
6
Multi-asset and alternative investments
193
185
171
192
182
4
6
Cash
320
326
315
273
278
(2)
15
Total AUM by product type
$
2,041
$
1,961
$
1,796
$
1,910
$
1,881
4 %
9 %
Changes in AUM (a)(b)
Beginning balance of AUM
$
1,961
$
1,796
$
1,910
$
1,881
$
1,843
Net inflows (outflows):
Long-term strategies:
Equity
(4)
(2)
(2)
(6)
(4)
Fixed income
1
4
-
5
2
Liability-driven investments
14
(2)
(5)
(3)
(4)
Multi-asset and alternative investments
(3)
-
(1)
3
(1)
Total long-term active strategies inflows (outflows)
8
-
(8)
(1)
(7)
Index
(3)
9
3
(5)
(3)
Total long-term strategies inflows (outflows)
5
9
(5)
(6)
(10)
Short-term strategies:
Cash
(10)
11
43
(7)
11
Total net (outflows) inflows
(5)
20
38
(13)
1
Net market impact
41
143
(91)
(20)
66
Net currency impact
44
2
(61)
62
(29)
Ending balance of AUM
$
2,041
$
1,961
$
1,796
$
1,910
$
1,881
4 %
9 %
Wealth Management client assets (a)(c)
$
265
$
254
$
236
$
266
$
259
4 %
2 %
Sept. 30, 2020 information is preliminary.
Excludes securities lending cash management assets and assets managed in the Investment Services business.
Includes AUM and AUC/A in the Wealth Management business.
12
THE BANK OF NEW YORK MELLON CORPORATION
OTHER SEGMENT
(in millions)
3Q20
2Q20
1Q20
4Q19
3Q19
YTD20
YTD19
Fee revenue (loss)
$
11
$
29
$
21
$
817
(a)
$
(5)
$
61
$
36
Net securities gains (losses)
9
9
9
(23)
(1)
27
7
Total fee and other revenue (loss)
20
38
30
794
(6)
88
43
Net interest (expense)
(25)
(36)
(44)
(10)
(80)
(105)
(150)
Total (loss) revenue
(5)
2
(14)
784
(86)
(17)
(107)
Provision for credit losses
7
(9)
11
(3)
(1)
9
(5)
Noninterest expense
-
39
30
54
25
69
103
(Loss) income before taxes
$
(12)
$
(28)
$
(55)
$
733
$
(110)
$
(95)
$
(205)
Average loans and leases
$
1,805
$
1,815
$
1,961
$
1,974
$
1,817
$
1,861
$
1,789
Average assets
$
55,381
$
49,744
$
50,646
$
47,762
$
52,913
$
51,936
$
49,683
(a) Includes a gain on sale of an equity investment.
13
THE BANK OF NEW YORK MELLON CORPORATION
SECURITIES PORTFOLIO
June 30,
3Q20
Sept. 30, 2020
Fair value
Ratings (c)
2020
change in
as a % of
A1+/
unrealized
Amortized
amortized Unrealized
% Floating
AAA/
A+/
BBB+/
BB+ and
A2 &
Not
(dollars in millions)
Fair value
Fair value
gain (loss)
cost
cost (a)
gain (loss)
rate (b)
AA-
A-
BBB-
lower
SP-1+
rated
Agency RMBS
$
60,401
$
47
$
61,348
$
62,922
103 % $
1,574
16 %
100 %
- %
- %
- %
- %
- %
U.S. Treasury
28,651
83
26,454
26,964
102
510
42
100
-
-
-
-
-
Sovereign debt/sovereign
16,868
8
14,908
15,086
101
178
10
67
7
25
1
-
-
guaranteed
Agency commercial MBS
11,731
45
11,340
11,777
104
437
32
100
-
-
-
-
-
Supranational
5,484
5
7,121
7,176
101
55
46
100
-
-
-
-
-
Foreign covered bonds
5,598
14
5,777
5,841
101
64
35
99
1
-
-
-
-
U.S. government agencies
5,056
8
5,566
5,646
101
80
21
100
-
-
-
-
-
CLOs
4,432
44
4,707
4,657
99
(50)
100
99
-
-
-
-
1
Foreign government
3,575
4
3,924
3,967
101
43
29
94
6
-
-
-
-
agencies
Other asset-backed
2,743
8
2,903
2,930
101
27
25
99
-
-
1
-
-
securities
Non-agency commercial
2,602
34
2,565
2,684
105
119
23
100
-
-
-
-
-
MBS
Non-agency RMBS (d)
1,672
14
1,864
2,013
108
149
55
60
5
2
20
-
13
State and political
1,196
(1)
1,676
1,705
102
29
1
83
13
3
-
-
1
subdivisions
Corporate bonds
831
-
988
1,030
104
42
-
19
64
17
-
-
-
Commercial paper and
certificates of deposits
3,392
(4)
650
652
100
2
55
-
-
-
-
100
-
(e)(f)
Other
1
-
1
1
100
-
-
-
-
-
-
-
100
Total securities
$
154,233 (g)
$
309
$
151,792
$
155,051
(g)(h)
102 % $
3,259
(g)(i)
27 %
95 %
2 %
3 %
- %
- %
- %
Amortized cost reflects historical impairments.
Includes the impact of hedges.
Represents ratings by S&P, or the equivalent.
Includes RMBS that were included in the former Grantor Trust of $538 million at June 30, 2020 and $512 million at Sept. 30, 2020.
Includes amounts purchased from affiliated money market funds of $1,853 million at June 30, 2020 and $357 million at Sept. 30, 2020.
Includes amounts funded by borrowings from the Federal Reserve Bank under its Money Market Mutual Fund Liquidity Facility program of $1,539 million at June 30, 2020 and $295 million at Sept. 30, 2020.
Includes net unrealized losses on derivatives hedging securities available-for-sale (including terminated hedges) of $1,817 million at June 30, 2020 and $1,650 million at Sept. 30, 2020.
The fair value of available-for-sale securities totaled $107,593 million at Sept. 30, 2020, net of hedges, or 69% of the fair value of the securities portfolio, net of hedges. The fair value of the held-to- maturity securities totaled $47,458 million at Sept. 30, 2020, or 31% of the fair value of the securities portfolio, net of hedges.
Includes unrealized gains of $1,897 million at Sept. 30, 2020 related to available-for-sale securities, net of hedges, and $1,362 million related to held-to-maturity securities.
Note: The amortizable purchase premium (net of discount) relating to securities was $1,917 million at Sept. 30, 2020 and the 3Q20 amortization of that purchase premium was $152 million in 3Q20.
14
THE BANK OF NEW YORK MELLON CORPORATION
ALLOWANCE FOR CREDIT LOSSES AND NONPERFORMING ASSETS
2020
2019
(dollars in millions)
Sept. 30
June 30
March 31
Dec. 31
Sept. 30
Allowance for credit losses - beginning of period:
Allowance for loan losses
$
302
$
140
$
122
$
127
$
146
Allowance for lending-related commitments
152
148
94
97
95
Allowance for other financial instruments
21
(a)
41
(a)
N/A
N/A
N/A
Allowance for credit losses - beginning of period
$
475
$
329
$
216
$
224
$
241
Impact of adopting ASU2016-13, Financial Instruments - Credit Losses: Measurement of Credit
N/A
N/A
(55)
(b)
N/A
N/A
Losses on Financial Instruments, effective Jan. 1, 2020
Net recoveries (charge-offs):
Charge-offs
-
-
(1)
(1)
(1)
Recoveries
2
3
-
1
-
Total net recoveries (charge-offs)
2
3
(1)
-
(1)
Provision for credit losses
9
(b)
143
(b)
169
(b)
(8)
(16)
Allowance for credit losses - end of period
$
486
$
475
$
329
$
216
$
224
Allowance for credit losses - end of period:
Allowance for loan losses
$
325
$
302
$
140
$
122
$
127
Allowance for lending-related commitments
135
152
148
94
97
Allowance for other financial instruments
26
(a)
21
(a)
41
(a)
N/A
N/A
Allowance for credit losses - end of period
$
486
$
475
$
329
$
216
$
224
Allowance for loan losses as a percentage of total loans
0.59 %
0.55 %
0.22 %
0.22 %
0.23 %
Nonperforming assets
$
84
$
88
$
88
$
89
$
88
Includes allowance for credit losses on federal funds sold and securities purchased under resale agreements, available-for-sale securities, accounts receivable, cash and due from banks and interest-bearing deposits with banks.
Includes all instruments within the scope of ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.
N/A - Not applicable.
15
THE BANK OF NEW YORK MELLON CORPORATION
SUPPLEMENTAL INFORMATION - EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
BNY Mellon has included in this Financial Supplement certain Non-GAAP financial measures on a tangible basis as a supplement to GAAP information, which exclude goodwill and intangible assets, net of deferred tax liabilities. We believe that the return on tangible common equity is additional useful information for investors because it presents a measure of those assets that can generate income, and the tangible book value per common share is additional useful information because it presents the level of tangible assets in relation to shares of common stock outstanding.
Net interest revenue, on a fully taxable equivalent ("FTE") basis - Non-GAAP and net interest margin (FTE) - Non-GAAP and other FTE measures include the tax equivalent adjustments on tax-exempt income which allows for the comparison 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.
BNY Mellon has also included the adjusted pre-tax operating margin - Non-GAAP, which is the pre-tax operating margin for the Investment and Wealth Management business net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds. We believe that this measure is useful when evaluating the performance of the Investment and Wealth Management business relative to industry competitors.
The presentation of the growth rates of investment management and performance fees on a constant currency basis permits investors to assess the significance of changes in foreign currency exchange rates. Growth rates on a constant currency basis were determined by applying the current period foreign currency exchange rates to the prior period revenue. We believe that this presentation, as a supplement to GAAP information, gives investors a clearer picture of the related revenue results without the variability caused by fluctuations in foreign currency exchange rates.
Notes:
Certain immaterial reclassifications/revisions have been made to prior periods to place them on a basis comparable with the current period's presentation.
In businesses where average deposits are greater than average loans, average assets include an allocation of investment securities equal to the difference.
Return on common and tangible common equity ratios are annualized.
Return on common equity and tangible common equity reconciliation
(dollars in millions)
3Q20
2Q20
1Q20
4Q19
3Q19
YTD20
YTD19
Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP
$
876
$
901
$
944
$
1,391
$
1,002
$
2,721
$
2,881
Add: Amortization of intangible assets
26
26
26
28
30
78
89
Less: Tax impact of amortization of intangible assets
7
6
6
7
7
19
21
Adjusted net income applicable to common shareholders of The Bank of New York Mellon
$
895
$
921
$
964
$
1,412
$
1,025
$
2,780
$
2,949
Corporation, excluding amortization of intangible assets - Non-GAAP
The Bank of New York Mellon Corporation published this content on 15 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 November 2020 22:49:04 UTC
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