Results Diverge at 2 Big Trust Concerns -- WSJ
July 21 2017 - 03:02AM
Dow Jones News
By Justin Baer
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 21, 2017).
Bank of New York Mellon Corp. on Thursday posted a quarterly
profit that beat estimates, renewing investor attention on a
disappointing second quarter for rival Northern Trust Corp.
The shares of Northern Trust tumbled 8% on Wednesday and were
down an additional 2% Thursday morning following a disclosure of
profit that was below analysts' expectations. Bank of New York
Mellon's shares rose 2% Thursday morning.
A key difference between the two trust banks: How each navigated
the rise in short-term interest rates in the U.S. The U.S. Federal
Reserve raised the benchmark federal-funds rate in March, and again
in June.
BNY Mellon's net interest revenue rose 4% to $826 million from
the first quarter. At Northern Trust, revenue on interest fell 7%
from the same period.
Northern Trust attributed the decline to a drop in U.S. deposits
and an increase in those from the U.K. and Europe, where lending
rates have remained at historic lows. The shift in mix squeezed
interest margins at the firm.
BNY Mellon has a smaller wealth-management business, whose
clients tend to move their deposits more quickly than large
institutions, said longtime finance chief Todd Gibbons in an
interview Thursday. Contractual obligations with some of those
clients limited defections even as rates rose, he said.
Bank of New York's net income rose to $926 million, or 88 cents
a share, in the second quarter from $825 million, or 75 cents, a
year earlier. Analysts had predicted per-share profit of 84 cents a
share.
Fees from investment services, the bank's core custody business,
rose 4% to $1.86 billion. Money-management fees climbed 6% to $879
million.
The results were the last for Gerald Hassell as BNY Mellon's
chairman and chief executive. Mr. Hassell, who turns 66 this year,
on Monday ceded his post to Charles Scharf, the former CEO of
payments giant Visa Inc. Mr. Hassell has spent more than four
decades at the bank.
"Charlie is the right guy, and people are excited about
Charlie," Mr. Gibbons said, adding, "They will miss Gerald. There's
a touch of apprehension, but also excitement. A little new blood
can be a good thing."
Write to Justin Baer at justin.baer@wsj.com
(END) Dow Jones Newswires
July 21, 2017 02:47 ET (06:47 GMT)
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