Bank of New York Mellon : Q4 2022 Earnings Press Release (PDF)

News Release

BNY MELLON REPORTS FOURTH QUARTER 2022 EARNINGS OF

$509 MILLION OR $0.62 PER COMMON SHARE;

$1.1 BILLION OR $1.30 PER SHARE EXCLUDING NOTABLE ITEMS(a)

Revenue down 2%

Adj. Revenue up 9%(a)

EPS down 39%

Adj. EPS up 25%(a)

ROE 6%

ROTCE 12%(a)

Adj. ROE 12%(a)

Adj. ROTCE 24%(a)

CET1 11.2%

Tier 1 leverage 5.8%

CET1 11.2%

Tier 1 leverage 5.8%

NEW YORK, January 13, 2023 - The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported:

							4Q22 vs.
(dollars in millions, except per share amounts)		4Q22		3Q22		4Q21	3Q22	4Q21
Net income applicable to common shareholders	$	509	$	319	$	822	60%	(38)%
Adjusted net income applicable to common shareholders - Non-GAAP (a)	$	1,057	$	983	$	852	8%	24%
Diluted earnings per common share	$	0.62	$	0.39	$	1.01	59%	(39)%
Adjusted diluted earnings per common share - Non-GAAP(a)	$	1.30	$	1.21	$	1.04	7%	25%

Notable items (a)

4Q22 results include $(548) million, or $(0.67) per share, primarily related to a net loss from repositioning the securities portfolio and severance. 4Q21 results include $(30) million, or $(0.04) per share, primarily related to severance.

Fourth Quarter Results

Total revenue of $3.9 billion, decreased 2%; or increased 9% excluding notable items (a)

• Net interest revenue increased 56%
• Fee revenue was flat
• Investment and other revenue in 4Q22 included $449 million net loss from repositioning the securities portfolio

Total noninterest expense of $3.2 billion, increased 8%; or 2% excluding notable items (a)

AUC/A of $44.3 trillion, decreased 5%, primarily market impact AUM of $1.8 trillion, decreased 25%, primarily market impact

Securities Services

• Total revenue increased 18%
• Income before taxes increased 67%
• Pre-taxoperating margin of 27%

Market and Wealth Services

• Total revenue increased 19%
• Income before taxes increased 21%
• Pre-taxoperating margin of 43%

Investment and Wealth Management

• Total revenue decreased 19%
• Income before taxes decreased 55%
• Pre-taxoperating margin of 15%; Adjusted pre-tax operating margin - Non-GAAP of 17% (a)

Capital

• Board of Directors authorized a new common share repurchase program of $5 billion, effective Jan. 1, 2023.

CEO Commentary

Robin Vince, President and Chief Executive Officer, commented, "BNY Mellon delivered solid underlying performance in the fourth quarter. We continued to derive benefit from higher interest rates, and we saw healthy growth across several of our businesses despite the significant downdraft in market levels across global equity and fixed income markets. Our reported results in the quarter also reflect the impact of a number of deliberate actions to improve our revenue growth and efficiency trajectory for 2023 and beyond."

"I am proud of our people, who once again demonstrated BNY Mellon's characteristic resilience and ability to support our clients in a challenging environment, while continuing to execute against our long-term growth initiatives," Mr. Vince added.

"As we enter 2023, we remain focused on growing and deepening our strong client franchise, together with driving greater efficiency in our operating model. I am confident in BNY Mellon's ability to create further value for all our stakeholders in the years ahead," Mr. Vince concluded.

Media Relations: Garrett Marquis [phone]

Investor Relations: Marius Merz [phone]

1. Adjusted results exclude notable items. For information on the Non-GAAP measures, see "Explanation of GAAP and Non-GAAP financial measures" beginning on page 12. Note: Above comparisons are 4Q22 vs. 4Q21, unless otherwise noted.

BNY Mellon 4Q22 Earnings Release

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except per share amounts and unless otherwise noted; not							4Q22 vs.
meaningful - N/M)		4Q22		3Q22		4Q21	3Q22	4Q21
Fee revenue	$	3,222	$	3,236	$	3,231	-%	-%
Investment and other revenue		(360)		117		107	N/M	N/M
Total fee and other revenue		2,862		3,353		3,338	(15)	(14)
Net interest revenue		1,056		926		677	14	56
Total revenue		3,918		4,279		4,015	(8)	(2)
Provision for credit losses		20		(30)		(17)	N/M	N/M
Noninterest expense		3,213		3,679		2,967	(13)	8
Income before taxes		685		630		1,065	9	(36)
Provision for income taxes		142		242		196	(41)	(28)
Net income	$	543	$	388	$	869	40%	(38)%
Net income applicable to common shareholders of The Bank of New York	$	509	$	319	$	822	60%	(38)%
Mellon Corporation
Operating leverage (a)							423 bps	(1,071) bps
Diluted earnings per common share	$	0.62	$	0.39	$	1.01	59%	(39)%
Average common shares and equivalents outstanding - diluted (in thousands)	815,846		814,516		817,345
Pre-tax operating margin		17%		15%		27%
Non-GAAP measures, excluding notable items: (b)	$	4,378					3%	9%
Adjusted total revenue	$	4,242	$	4,015
Adjusted noninterest expense	$	3,000	$	2,965	$	2,930	1%	2%
Adjusted operating leverage (a)							203 bps	665 bps
Adjusted diluted earnings per common share	$	1.30	$	1.21	$	1.04	7%	25%
Adjusted pre-tax operating margin		31%		31%		27%

1. Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.
2. See "Notable items by business segment" beginning on page 8 for additional information on the notable items. Also see "Explanation of GAAP and Non-GAAP financial measures" beginning on page 12.

bps - basis points.

KEY DRIVERS (comparisons are 4Q22 vs. 4Q21, unless otherwise stated)

Total revenue decreased 2%, primarily reflecting:

• • Fee revenue was flat, primarily reflecting lower market values and the unfavorable impact of a stronger U.S. dollar, offset by lower money market fee waivers.
  • Investment and other revenue decreased primarily reflecting the $449 million net loss from repositioning the securities portfolio.
  • Net interest revenue increased 56%, primarily reflecting higher interest rates on interest-earning assets, partially offset by higher funding expense.
• Provision for credit losses was $20 million, primarily reflecting changes in the macroeconomic forecast.
• Noninterest expense increased 8%, primarily reflecting higher severance expense. Excluding notable items, noninterest expense increased 2% (a), 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 the favorable impact of a stronger U.S. dollar.
• Effective tax rate of 20.7%, or 19.7% (a) excluding notable items.

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

• AUC/A of $44.3 trillion, decreased 5%, primarily reflecting lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by client inflows and net new business.
• AUM of $1.8 trillion, decreased 25%, primarily reflecting lower market values, the unfavorable impact of a stronger U.S. dollar and the divestiture of Alcentra, partially offset by net inflows.

Capital and liquidity

• Dividends of $305 million to common shareholders (including dividend-equivalents on share-based awards).
• Return on common equity ("ROE") - 6%; Adjusted ROE - 12% (a).
• Return on tangible common equity ("ROTCE") - 12% (a); Adjusted ROTCE - 24% (a).
• Common Equity Tier 1 ("CET1") ratio - 11.2%.
• Tier 1 leverage ratio - 5.8%.
• Average liquidity coverage ratio ("LCR") - 118%.
• Total Loss Absorbing Capacity ("TLAC") ratios exceed minimum requirements.

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

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BNY Mellon 4Q22 Earnings Release

FULL-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except per share amounts and unless otherwise noted; not meaningful - N/M)					2022 vs.
	2022		2021	2021
Fee revenue	$ 12,955	$	12,977	-%
Investment and other revenue		(82)		336	N/M
Total fee and other revenue		12,873		13,313	(3)
Net interest revenue		3,504		2,618	34
Total revenue		16,377		15,931	3
Provision for credit losses		39		(231)	N/M
Noninterest expense		13,010		11,514	13
Income before taxes		3,328		4,648	(28)
Provision for income taxes		768		877	(12)
Net income	$	2,560	$	3,771	(32)%
Net income applicable to common shareholders of The Bank of New York Mellon Corporation	$	2,362	$	3,552	(34)%
Operating leverage (a)					(1,019) bps
Diluted earnings per common share	$	2.90	$	4.14	(30)%
Average common shares and equivalents outstanding - diluted (in thousands)	814,795		856,359
Pre-tax operating margin		20%		29%
Non-GAAP measures, excluding notable items: (b)	$ 16,888			6%
Adjusted total revenue	$	15,918
Adjusted noninterest expense	$ 11,981	$	11,385	5%
Adjusted operating leverage (a)					86 bps
Adjusted diluted earnings per common share	$	4.59	$	4.24	8%
Adjusted pre-tax operating margin		29%		30%

1. Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.
2. See "Notable items by business segment" beginning on page 8 for additional information on the notable items. Also see "Explanation of GAAP and Non-GAAP financial measures" beginning on page 12.

bps - basis points.

KEY DRIVERS (comparisons are 2022 vs. 2021, unless otherwise stated)

• Total revenue increased 3%, or 6% excluding notable items (a), primarily reflecting:
• • Fee revenue was essentially flat primarily reflecting lower market values, the unfavorable impact of a stronger U.S. dollar and the 1Q22 accelerated amortization of deferred costs for depositary receipts services related to Russia, partially offset by lower money market fee waivers.
  • Investment and other revenue decreased primarily reflecting the 4Q22 net loss from repositioning the securities portfolio.
  • Net interest revenue increased 34% primarily reflecting higher interest rates on interest-earning assets, partially offset by higher funding expense.
• Provision for credit losses was $39 million compared with a benefit of $231 million in 2021. The increase was primarily driven by changes in the macroeconomic forecast.
• Noninterest expense increased 13% primarily reflecting the 3Q22 goodwill impairment in the Investment Management reporting unit and higher severance expense and litigation reserves. Excluding notable items, noninterest expense increased 5% (a), 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.
• Effective tax rate of 23.1%, or 19.1% (a) excluding notable items, primarily goodwill impairment.

Capital and liquidity

• Returned $1.3 billion to common shareholders, including dividends of $1.2 billion (including dividend equivalents on share-based awards) and $124 million of common share repurchases.
• ROE - 7%; Adjusted ROE - 10% (a).
• ROTCE - 13% (a); Adjusted ROTCE - 21% (a).
• Board of Directors authorized a new common share repurchase program of $5 billion, effective Jan. 1, 2023.

(a) See "Explanation of GAAP and Non-GAAP financial measures" beginning on page 12 for additional information.

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BNY Mellon 4Q22 Earnings Release

SECURITIES SERVICES BUSINESS SEGMENT HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)		4Q22		3Q22		4Q21	4Q22 vs.
			3Q22	4Q21
Investment services fees:	$	971					2%	(1)%
Asset Servicing	$	953	$	984
Issuer Services		271		288		253	(6)	7
Total investment services fees		1,242		1,241		1,237	-	-
Foreign exchange revenue		149		132		148	13	1
Other fees (a)		55		52		28	6	96
Total fee revenue		1,446		1,425		1,413	1	2
Investment and other revenue		70		111		53	N/M	N/M
Total fee and other revenue		1,516		1,536		1,466	(1)	3
Net interest revenue		656		538		367	22	79
Total revenue		2,172		2,074		1,833	5	18
Provision for credit losses		11		(6)		(7)	N/M	N/M
Noninterest expense		1,576		1,557		1,490	1	6
Income before taxes	$	585	$	523	$	350	12%	67%
Total revenue by line of business:	$	1,681					5%	15%
Asset Servicing	$	1,596	$	1,456
Issuer Services		491		478		377	3	30
Total revenue by line of business	$	2,172	$	2,074	$	1,833	5%	18%
Pre-tax operating margin		27%		25%		19%
Securities lending revenue (b)	$	50	$	48	$	45	4%	11%
Metrics:	$	11,850					2%	21%
Average loans	$	11,573	$	9,764
Average deposits	$	176,541	$	176,328	$	200,272	-%	(12)%
AUC/A at period end (in trillions) (current period is preliminary) (c)	$	31.4	$	30.0	$	34.6	5%	(9)%
Market value of securities on loan at period end (in billions) (d)	$	449	$	435	$	447	3%	-%

1. Other fees primarily include financing-related fees.
2. Included in investment services fees reported in the Asset Servicing line of business.
3. Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Issuer Services line 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, $1.4 trillion at Sept. 30, 2022 and $1.7 trillion at Dec. 31, 2021.
4. Represents the total amount of securities on loan in our agency securities lending program. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $68 billion at Dec. 31, 2022, $75 billion at Sept. 30, 2022 and $71 billion at Dec. 31, 2021.

KEY DRIVERS

• The drivers of the total revenue variances by line of business are indicated below. Also see page 9 for information related to money market fee waivers.
• • Asset Servicing - The year-over-year increase primarily reflects higher net interest revenue, lower money market fee waivers and higher client activity, partially offset by lower market values and the unfavorable impact of a stronger U.S. dollar. The sequential increase primarily reflects higher net interest revenue, foreign exchange revenue and client activity, partially offset by a 3Q22 disposal gain.
  • Issuer Services - The year-over-year increase primarily reflects higher net interest revenue and lower money market fee waivers. The sequential increase primarily reflects higher net interest revenue, partially offset by lower Depositary Receipts revenue.
• Noninterest expense increased year-over-year, primarily reflecting higher investments in growth, infrastructure and efficiency initiatives, as well as the impact of inflation, partially offset by the favorable impact of a stronger U.S. dollar.

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BNY Mellon 4Q22 Earnings Release

MARKET AND WEALTH SERVICES BUSINESS SEGMENT HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)		4Q22		3Q22		4Q21	4Q22 vs.
			3Q22	4Q21
Investment services fees:	$	502					2%	22%
Pershing	$	494	$	412
Treasury Services		170		173		170	(2)	-
Clearance and Collateral Management		249		239		236	4	6
Total investment services fees		921		906		818	2	13
Foreign exchange revenue		20		20		21	-	(5)
Other fees (a)		47		49		31	(4)	52
Total fee revenue		988		975		870	1	14
Investment and other revenue		15		14		6	N/M	N/M
Total fee and other revenue		1,003		989		876	1	14
Net interest revenue		396		378		297	5	33
Total revenue		1,399		1,367		1,173	2	19
Provision for credit losses		6		(1)		(3)	N/M	N/M
Noninterest expense		785		737		674	7	16
Income before taxes	$	608	$	631	$	502	(4)%	21%
Total revenue by line of business:	$	673					2%	22%
Pershing	$	658	$	553
Treasury Services		382		390		331	(2)	15
Clearance and Collateral Management		344		319		289	8	19
Total revenue by line of business	$	1,399	$	1,367	$	1,173	2%	19%
Pre-tax operating margin		43%		46%		43%
Metrics:	$	39,843					(3)%	(2)%
Average loans	$	40,882	$	40,812
Average deposits	$	86,083	$	90,612	$	100,653	(5)%	(14)%
AUC/A at period end (in trillions) (current period is preliminary) (b)	$	12.7	$	12.0	$	11.8	6%	8%

1. Other fees primarily include financing-related fees.
2. Consists of AUC/A from the Clearance and Collateral Management and Pershing lines of business.

KEY DRIVERS

• The drivers of the total revenue variances by line of business are indicated below. Also see page 9 for information related to money market fee waivers.
• • Pershing - The year-over-year increase primarily reflects lower money market fee waivers, higher fees on sweep balances and higher net interest revenue, partially offset by the impact of prior year lost business and the impact of lower equity markets. The sequential increase primarily reflects higher fees on sweep balances and net interest revenue.
  • Treasury Services - The year-over-year increase primarily reflects higher net interest revenue and lower money market fee waivers.
  • Clearance and Collateral Management - The year-over-year increase primarily reflects higher net interest revenue and U.S. government clearance volumes. The sequential increase primarily reflects higher net interest revenue and clearance volumes.
• Noninterest expense increased year-over-year, primarily reflecting higher investments in growth, infrastructure and efficiency initiatives, as well as the impact of inflation, partially offset by the favorable impact of a stronger U.S. dollar. The sequential increase reflects higher severance expense and litigation reserves.

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