Bank of New York Mellon Profit Up on Lowered Expenses
July 21 2016 - 8:30AM
Dow Jones News
Bank of New York Mellon Corp. said profit increased in its
latest quarter due to lower expenses, but revenue and assets under
management both declined.
As a custody bank, BNY Mellon derives much of its business from
serving trillions in assets for money managers and other clients,
in addition to managing clients' investments.
The bank saw assets under management decline during the period.
The stronger dollar, especially against the British pound, has
weighed on Bank of New York because the bank does substantial
business in Europe. Assets under management stood at $1.66 trillion
at the end of the quarter, down 2.1% from a year earlier but up
1.5% from the fourth quarter.
In addition to adverse exchange rates, the decline in assets
under management from a year earlier was due to net outflows that
were partially offset by higher market values, the bank said.
The company reported $5 billion in net long-term outflows during
the quarter, hurt by index investments which were partially offset
by the strength in liability-driven investments. Net short-term
inflows were $4 billion.
Fee revenue, which makes up more than three-quarters of the
bank's total revenue, fell 2.2% to $3 billion from a year prior as
a drop in foreign exchange revenue and outflows were partially
offset by higher money market fees and the impact of the an
acquisition.
Net interest revenue fell 1.5% from a year earlier to $767
million, hurt by interest rate hedging activities and higher
premium amortization adjustments related to the decrease in
interest rates.
The bank's net interest margin, a key measure of lending
profitability, fell to 0.98% from 1.00% a year earlier and 1.01% in
the first quarter. Banks including Bank of New York have been
hoping the Federal Reserve's move in December to raise interest
rates would help increase lending profitability.
For the quarter, Bank of New York reported a profit of $873
million, up from $853 million a year earlier. Per-share earnings
rose to 75 cents from 73 cents.
Excluding litigation and restructuring charges, adjusted
earnings per share was 76 cents.
Total revenue decreased 2.8% to $3.78 billion. Analysts polled
by Thomson Reuters predicted 75 cents in adjusted earnings per
share on $3.79 billion in revenue.
Bank of New York said it reduced its reserve for potential
credit losses by $9 million in the second quarter. It reduced its
reserve by $6 million in the same quarter a year earlier. It added
$163 million in the fourth quarter due to an impairment charge
resulting from a court decision.
Expenses fell 3.9% as the stronger U.S. dollar helped decrease
expenses across the board and lower staff and legal costs.
Shares in the company, down 1.7% in the past three months, were
inactive premarket.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
July 21, 2016 08:15 ET (12:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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