Bank of New York Mellon Corp.'s (BK) second-quarter profit fell
37% as the trust bank saw a litigation-related charge weigh down
its bottom line and revenue decreased.
Trust banks act as custodians and servicers for corporations and
Wall Street, leaving results heavily tied to market actions. Bank
of New York Mellon, like other financial firms, recently has been
pressured by historically low interest rates and soft trading
volumes.
Bank of New York Mellon earlier this month said it would take a
$350 million pretax charge in the second quarter, mostly to settle
a lawsuit by investors who accused the bank of putting them in a
risky debt security that collapsed during the financial crisis. The
settlement concerns the late-2008 collapse of a $27 billion
structured investment vehicle called Sigma Finance Corp.
For the second quarter, Bank of New York Mellon posted earnings
of $466 million, or 39 cents a share, down from year-earlier
earnings of $735 million, or 59 cents a share. The most-recent
quarter included a litigation-related charge of $212 million, or 18
cents a share. Revenue fell 6.1% to $3.62 billion.
Analysts surveyed by Thomson Reuters recently expected per-share
profit of 53 cents on revenue of $3.62 billion.
Total fee revenue fell 7.7% to $2.78 billion.
The provision for credit losses was a credit of $19 million,
mostly resulting from a decline in the expected loss related to a
broker-dealer customer that filed for bankruptcy as well as
improvements in the mortgage portfolio. There was a $5 million
provision in the first quarter and no provision a year ago.
Assets under management, excluding securities lending assets,
rose 2% to $1.3 trillion as of the end of the quarter, while assets
under custody and administration increased 3% to $27.1
trillion.
Rival trust bank State Street Corp. (STT) on Tuesday reported
its second-quarter earnings fell 4.5% as the company posted higher
costs for one-time items and lower revenue. J.P. Morgan Chase &
Co. (JPM) last week posted better-than-expected results at its
trust business, which was viewed as a positive sign for trust banks
such as Bank of New York Mellon, State Street and Northern Trust
Corp. (NTRS), which is expected to report second-quarter financial
results later Wednesday.
Shares closed Tuesday at $21.72 and were inactive in premarket
trade. The stock is up 9.1% so far this year.
Write to Victoria Stilwell at Victoria.Stilwell@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires