April 22, 2015

BNY Mellon Reports First Quarter Earnings Of $766 Million Or $0.67 Per Common Share


NEW YORK, April 22, 2015 /PRNewswire/ --

  • Earnings per common share up 18% year-over-year

TOTAL REVENUE INCREASED 6% YEAR-OVER-YEAR

  • Increased 4% on an adjusted basis (a)

TOTAL EXPENSE DECREASED 1% YEAR-OVER-YEAR

  • Decreased 2% on an adjusted basis (a)

GENERATED OVER 500 BASIS POINTS OF POSITIVE OPERATING LEVERAGE YEAR-OVER-YEAR ON AN ADJUSTED BASIS (a)

EXECUTING ON CAPITAL PLAN AND RETURN OF VALUE TO COMMON SHAREHOLDERS

  • Repurchased 10.3 million common shares for $400 million in the first quarter of 2015
  • Return on tangible common equity of 20% in the first quarter of 2015 (b)

AS PREVIOUSLY ANNOUNCED, BOARD APPROVED THE REPURCHASE OF UP TO $3.1 BILLION OF COMMON STOCK

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported first quarter net income applicable to common shareholders of $766 million, or $0.67 per diluted common share.  In the first quarter of 2014, net income applicable to common shareholders was $661 million, or $0.57 per diluted per common share.  In the fourth quarter of 2014, net income applicable to common shareholders was $209 million, or $0.18 per diluted common share, or $667 million, or $0.58 per diluted common share, adjusted for litigation expense, restructuring charges and the benefit of a tax carryback claim. (b)

"Our first quarter results reflect continued progress in executing on our strategic priorities.  Earnings per share growth was driven by higher revenues across all of our businesses, our success in holding our expenses in check and generating positive operating leverage.  We also returned significant value to our shareholders in the form of share repurchases and dividends, while increasing our return on equity," said Gerald L. Hassell, chairman and chief executive officer of BNY Mellon.

(a)   See page 4 for the Non-GAAP adjustments.
(b)   See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for the reconciliation of these Non-GAAP measures.

"In Investment Services, growth in clearing and global collateral management was particularly noteworthy during the quarter where we have been investing to deliver enhanced capabilities to our clients.  In Investment Management, our investments in the expansion of Wealth Management are paying off as we extend our brand, expand our presence in high-value U.S. markets, and connect our private banking solutions to Pershing clients.  We also saw solid long-term flows into various strategies including alternatives," added Mr. Hassell.

"Our business improvement process is streamlining our organization, utilizing technology to increase efficiency and reducing our structural costs as we stay focused on achieving our Investor Day goals," concluded Mr. Hassell.

CONFERENCE CALL INFORMATION

Gerald L. Hassell, chairman and chief executive officer and Thomas P. Gibbons, vice chairman and chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on April 22, 2015.  This conference call and audio webcast will include forward-looking statements and may include other material information. 

Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (International), and using the passcode: Earnings, or by logging on to www.bnymellon.com.  Earnings materials will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on April 22, 2015.  Replays of the conference call and audio webcast will be available beginning April 22, 2015 at approximately 2 p.m. EDT through May 22, 2015 by dialing (888) 568-0407 (U.S.) or (402) 530-7943 (International).  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.


FIRST QUARTER 2015 FINANCIAL HIGHLIGHTS (a)
(comparisons are 1Q15 vs. 1Q14 unless otherwise stated)

  • Earnings

Earnings per share


Net income applicable to

common shareholders of The

Bank of New York Mellon

Corporation

(in millions, except per share amounts)

1Q14

1Q15

Inc(Dec)


1Q14

1Q15

Inc(Dec)

GAAP results

$

0.57


$

0.67


18

%


$

661


$

766


16

%



















  • Total revenue was $3.9 billion, an increase of 6%.
    • Investment services fees increased 3% reflecting net new business, largely driven by Global Collateral Services and securities lending, and higher market values, partially offset by the unfavorable impact of a stronger U.S. dollar.
    • Investment management and performance fees increased 1%, or 6% on a constant currency basis (Non-GAAP), driven by higher equity market values, the impact of the Cutwater Asset Management ("Cutwater") acquisition and strategic initiatives, partially offset by lower performance fees. (a)
    • Foreign exchange revenue increased 67% driven by higher volumes and volatility, as well as higher Depositary Receipts-related activity.
    • Investment and other income decreased $39 million driven by lower lease residual gains.
    • Net interest revenue was unchanged as an increase in deposits drove the growth in our securities portfolio and offset the impact of lower yields.
  • The provision for credit losses was $2 million.
  • Noninterest expense was $2.7 billion, a decrease of 1% reflecting lower expenses in all categories, except sub-custodian which is volume-related and other expense which includes the impact of the new EU Single Resolution Fund.
  • Effective tax rate of 24.4%; includes a 2.0% benefit related to the tax impact of consolidated investment management funds.
  • Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
  • AUC/A of $28.5 trillion, increased 2% primarily reflecting higher market values and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.
    • Estimated new AUC/A wins in Asset Servicing of $131 billion.
  • AUM of a record $1.74 trillion, increased 7% driven by higher equity market values, the Cutwater acquisition and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.
    • Long-term inflows totaled $16 billion driven by liability-driven, index and fixed income investments.
    • Short-term inflows totaled $1 billion.
  • Capital
    • Repurchased 10.3 million common shares for $400 million in 1Q15.
    • Return on tangible common equity of 20% in 1Q15 (a).
    • As previously announced, the board approved the repurchase of up to $3.1 billion of common stock over a 5-quarter periodCommon stock repurchases of $700 million are contingent on a prior issuance of $1 billion of qualifying preferred stock.

(a)  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for the reconciliation of Non-GAAP measures.  Non-GAAP excludes the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, amortization of intangible assets, M&I, litigation and restructuring charges, a charge (recovery) related to investment management funds, net of incentives, and the benefit primarily related to a tax carryback claim, if applicable.
Note: In the table above and throughout this document, sequential growth rates are unannualized.

FINANCIAL SUMMARY

(dollars in millions, except per share amounts; common shares in thousands)






1Q15 vs.

1Q14

2Q14

3Q14

4Q14

1Q15

1Q14

4Q14

Revenue:








Fee and other revenue

$

2,883


$

2,980


$

3,851


$

2,935


$

3,002


4

%

2

%

Income from consolidated investment management funds

36


46


39


42


121




Net interest revenue

728


719


721


712


728




Total revenue – GAAP

3,647


3,745


4,611


3,689


3,851


6


4


Less:  Net income attributable to noncontrolling interests related to consolidated investment management funds

20


17


23


24


90




Gain on the sale of our investment in Wing Hang



490






Gain on the sale of the One Wall Street building



346






Total revenue – Non-GAAP

3,627


3,728


3,752


3,665


3,761


4


3


Provision for credit losses

(18)


(12)


(19)


1


2




Expense:








Noninterest expense – GAAP

2,739


2,946


2,968


3,524


2,700


(1)


(23)


Less:  Amortization of intangible assets

75


75


75


73


66




M&I, litigation and restructuring charges

(12)


122


220


800


(3)




Charge (recovery) related to investment management funds, net of incentives

(5)


109







Total noninterest expense – Non-GAAP

2,681


2,640


2,673


2,651


2,637


(2)


(1)


Income:








Income before income taxes

926


811


1,662


164


1,149


24

%

N/M

Provision (benefit) for income taxes

232


217


556


(93)


280




Net income

$

694


$

594


$

1,106


$

257


$

869




Net (income) attributable to noncontrolling interests (a)

(20)


(17)


(23)


(24)


(90)




  Net income applicable to shareholders of The Bank of New York Mellon Corporation

674


577


1,083


233


779




Preferred stock dividends

(13)


(23)


(13)


(24)


(13)




Net income applicable to common shareholders of The Bank of New York Mellon Corporation

$

661


$

554


$

1,070


$

209


$

766












Key Metrics:








Pre-tax operating margin (b)

25

%

22

%

36

%

4

%

30

%



Non-GAAP (b)

27

%

30

%

29

%

28

%

30

%











Return on common equity (annualized) (b)

7.4

%

6.1

%

11.6

%

2.2

%

8.8

%



Non-GAAP (b)

7.8

%

8.4

%

8.5

%

7.7

%

9.2

%











Return on tangible common equity (annualized) – Non-GAAP (b)

17.6

%

14.5

%

26.2

%

5.9

%

20.3

%



Non-GAAP adjusted (b)

17.3

%

18.4

%

18.4

%

16.3

%

20.2

%











Fee revenue as a percentage of total revenue excluding net securities gains

79

%

79

%

83

%

79

%

78

%











Percentage of non-U.S. total revenue (c)

37

%

38

%

43

%

35

%

36

%











Average common shares and equivalents outstanding:








Basic

1,138,645


1,133,556


1,126,946


1,120,672


1,118,602




Diluted

1,144,510


1,139,800


1,134,871


1,129,040


1,126,306












Period end:








Full-time employees

51,400


51,100


50,900


50,300


50,500




Book value per common share – GAAP (b)

$

31.94


$

32.49


$

32.77


$

32.09


$

31.89




Tangible book value per common share – Non-GAAP (b)

$

14.48


$

14.88


$

15.30


$

14.70


$

14.82




Cash dividends per common share

$

0.15


$

0.17


$

0.17


$

0.17


$

0.17




Common dividend payout ratio

26

%

35

%

18

%

94

%

25

%



Closing stock price per common share

$

35.29


$

37.48


$

38.73


$

40.57


$

40.24




Market capitalization

$

40,244


$

42,412


$

43,599


$

45,366


$

45,130




Common shares outstanding

1,140,373


1,131,596


1,125,710


1,118,228


1,121,512




(a)   Primarily attributable to noncontrolling interests related to consolidated investment management funds.
(b)   Non-GAAP excludes the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, amortization of intangible assets, M&I, litigation and restructuring charges, a charge (recovery) related to investment management funds, net of incentives, and the benefit primarily related to a tax carryback claim, if applicable.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for the reconciliation of Non-GAAP measures.
(c)    Includes fee revenue, net interest revenue and income from consolidated investment management funds, net of net income attributable to noncontrolling interests.
N/M - Not meaningful.

CONSOLIDATED BUSINESS METRICS

Consolidated business metrics







1Q15 vs.

1Q14

2Q14

3Q14

4Q14

1Q15


1Q14

4Q14

Changes in AUM (in billions): (a)









Beginning balance of AUM

$

1,583


$

1,620


$

1,636


$

1,646


$

1,710





Net inflows (outflows):









Long-term:









Equity

(1)


(4)


(2)


(4)


(6)





Fixed income


(1)



4


4





Index


7


(3)


1


8





Liability-driven investments (b)

20


(17)


18


24


8





Alternative investments

2


2



2


2





Total long-term inflows (outflows)

21


(13)


13


27


16





Short term:









Cash

(7)


(18)


19


5


1





Total net inflows (outflows)

14


(31)


32


32


17





Net market/currency impact/acquisition

23


47


(22)


32


14





Ending balance of AUM

$

1,620


$

1,636


$

1,646


$

1,710


$

1,741


(c)

7

%

2

%










AUM at period end, by product type: (a)









Equity

17

%

17

%

16

%

16

%

15

%




Fixed income

14


14


13


13


13





Index

20


21


21


21


22





Liability-driven investments (b)

27


27


28


29


29





Alternative investments

4


4


4


4


4





Cash

18


17


18


17


17





Total AUM

100

%

100

%

100

%

100

%

100

%

(c)












Wealth management:









Average loans (in millions)

$

10,075


$

10,372


$

10,772


$

11,124


$

11,634



15

%

5

%

Average deposits (in millions)

$

14,805


$

13,458


$

13,764


$

14,604


$

15,218



3

%

4

%










Investment Services:









Average loans (in millions)

$

31,468


$

33,115


$

33,785


$

35,448


$

37,699



20

%

6

%

Average deposits (in millions)

$

214,947


$

220,701


$

221,734


$

228,282


$

234,183



9

%

3

%










AUC/A at period end (in trillions) (d)

$

27.9


$

28.5


$

28.3


$

28.5


$

28.5


(c)

2

%

%










Market value of securities on loan at period end (in billions) (e)

$

264


$

280


$

282


$

289


$

291



10

%

1

%










Asset servicing:









Estimated new business wins (AUC/A) (in billions)

$

161


$

130


$

115


$

130


$

131


(c)












Depositary Receipts:









Number of sponsored programs

1,332


1,316


1,302


1,279


1,258



(6)%


(2)%











Clearing services:









Global DARTS volume (in thousands)

230


207


209


242


261



13

%

8

%

Average active clearing accounts (U.S. platform) (in thousands)

5,695


5,752


5,805


5,900


5,979



5

%

1

%

Average long-term mutual fund assets (U.S. platform) (in millions)

$

413,658


$

433,047


$

442,827


$

450,305


$

456,954



10

%

1

%

Average investor margin loans (U.S. platform) (in millions)

$

8,919


$

9,236


$

9,861


$

10,711


$

11,232



26

%

5

%










Broker-Dealer:









Average tri-party repo balances (in billions)

$

1,983


$

2,022


$

2,063


$

2,101


$

2,153



9

%

2

%

(a)   Excludes securities lending cash management assets and assets managed in the Investment Services business.
(b)   Includes currency and overlay assets under management.
(c)    Preliminary.
(d)   Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at March 31, 2014, June 30, 2014 and Sept. 30, 2014 and $1.1 trillion at Dec. 31, 2014 and March 31, 2015.
(e)    Represents the total amount of securities on loan managed by the Investment Services business.  Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $66 billion at March 31, 2014, $64 billion at June 30, 2014, $65 billion at Sept. 30, 2014 and Dec. 31, 2014, and $69 billion at March 31, 2015.

The following table presents key market metrics at period end and on an average basis.

Key market metrics






1Q15 vs.


1Q14

2Q14

3Q14

4Q14

1Q15

1Q14

4Q14

S&P 500 Index (a)

1872


1960


1972


2059


2068


10

%

%

S&P 500 Index – daily average

1835


1900


1976


2009


2064


12


3


FTSE 100 Index (a)

6598


6744


6623


6566


6773


3


3


FTSE 100 Index – daily average

6680


6764


6756


6526


6793


2


4


MSCI World Index (a)

1674


1743


1698


1710


1741


4


2


MSCI World Index – daily average

1647


1698


1733


1695


1726


5


2


Barclays Capital Global Aggregate BondSM Index (a)(b)

365


376


361


357


348


(5)


(3)


NYSE and NASDAQ share volume (in billions)

196


187


173


198


187


(5)


(6)


JPMorgan G7 Volatility Index – daily average (c)

7.80


6.22


6.21


8.54


10.40


33


22


Average Fed Funds effective rate

0.07

%

0.09

%

0.09

%

0.10

%

0.11

%

4

bps

1

bps

Foreign exchange rates vs. U.S. dollar:








British pound - average rate

$

1.66


$

1.68


$

1.67


$

1.58


$

1.51


(9)%


(4)%


Euro - average rate

1.37


1.37


1.33


1.25


1.13


(18)


(10)






















(a)     Period end.
(b)     Unhedged in U.S. dollar terms.
(c)     The JPMorgan G7 Volatility Index is based on the implied volatility in 3-month currency options.
bps basis points.

FEE AND OTHER REVENUE

Fee and other revenue






1Q15 vs.

(dollars in millions)

1Q14

2Q14

3Q14

4Q14

1Q15

1Q14

4Q14

Investment services fees:








Asset servicing (a)

$

1,009


$

1,022


$

1,025


$

1,019


$

1,038


3

%

2

%

Clearing services

325


326


337


347


344


6


(1)


Issuer services

229


231


315


193


232


1


20


Treasury services

136


141


142


145


137


1


(6)


Total investment services fees

1,699


1,720


1,819


1,704


1,751


3


3


Investment management and performance fees

843


883


881


885


854


1


(4)


Foreign exchange and other trading revenue

136


130


153


151


229


68


52


Distribution and servicing

43


43


44


43


41


(5)


(5)


Financing-related fees

38


44


44


43


40


5


(7)


Investment and other income

102


142


890


78


63


N/M

N/M

Total fee revenue

2,861


2,962


3,831


2,904


2,978


4


3


Net securities gains

22


18


20


31


24


N/M

N/M

Total fee and other revenue

$

2,883


$

2,980


$

3,851


$

2,935


$

3,002


4

%

2

%

(a)   Asset servicing fees include securities lending revenue of $38 million in 1Q14, $46 million in 2Q14, $37 million in 3Q14, $37 million in 4Q14 and $43 million in 1Q15.
N/M - Not meaningful.

KEY POINTS

  • Asset servicing fees were $1.0 billion, an increase of 3% year-over-year and 2% sequentially. The year-over-year increase primarily reflects net new business, largely driven by Global Collateral Services and securities lending, and market values. The sequential increase primarily reflects higher client expense reimbursements, securities lending revenue and Global Collateral Services fees. Both increases were partially offset by the unfavorable impact of a stronger U.S. dollar.
  • Clearing services fees were $344 million, an increase of 6% year-over-year and a decrease of 1% sequentially. The year-over-year increase was primarily driven by higher mutual fund and asset-based fees and higher clearance revenue driven by higher DARTS volume. The sequential decrease was primarily driven by fewer trading days in 1Q15.
  • Issuer services fees were $232 million, an increase of 1% year-over-year and 20% sequentially. Both increases reflect higher corporate actions in Depositary Receipts, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential increase also reflects higher Corporate Trust fees.
  • Treasury services fees were $137 million, an increase of 1% year-over-year and a decrease of 6% sequentially. The sequential decrease primarily reflects seasonally lower payment volumes.
  • Investment management and performance fees were $854 million, an increase of 1% year-over-year, or 6% on a constant currency basis (Non-GAAP), driven by higher equity market values, the impact of the Cutwater acquisition and strategic initiatives, partially offset by lower performance fees. Sequentially, investment management and performance fees decreased 4% primarily reflecting seasonally lower performance fees, fewer days in 1Q15 and the unfavorable impact of a stronger U.S. dollar, partially offset by the impact of the Cutwater acquisition.

Foreign exchange and other trading revenue







(in millions)

1Q14

2Q14

3Q14

4Q14

1Q15


Foreign exchange

$

130


$

129


$

154


$

165


$

217



Other trading revenue (loss):







Fixed income

1


(1)


2


(18)


11



Equity/other

5


2


(3)


4


1



Total other trading revenue (loss)

6


1


(1)


(14)


12



Total foreign exchange and other trading revenue

$

136


$

130


$

153


$

151


$

229


Foreign exchange and other trading revenue totaled $229 million in 1Q15 compared with $136 million in 1Q14 and $151 million in 4Q14.  In 1Q15, foreign exchange revenue totaled $217 million, an increase of 67% year-over-year and 32% sequentially.  Both increases reflect higher volumes and volatility, as well as higher Depositary Receipts-related activity.

Other trading revenue was $12 million in 1Q15, compared with other trading revenue of $6 million in 1Q14 and other trading loss of $14 million in 4Q14.  Both increases primarily reflect higher fixed income trading revenue.  The sequential increase also reflects reduced losses on hedging activities within an Investment Management boutique.


Investment and other income (loss)







(in millions)

1Q14

2Q14

3Q14

4Q14

1Q15


Corporate/bank-owned life insurance

$

30


$

30


$

34


$

37


$

33



Seed capital gains (losses)

6


15


(1)



15



Expense reimbursements from joint venture

12


15


13


15


14



Asset-related gains (losses)

(1)


17


836


20


3



Lease residual gains (losses)

35


4


5


5


(1)



Private equity gains (losses)

5


(2)


2


1


(3)



Equity investment revenue (loss)

(2)


17


(9)


(5)


(4)



Other income

17


46


10


5


6



Total investment and other income

$

102


$

142


$

890


$

78


$

63


Investment and other income was $63 million in 1Q15 compared with $102 million in 1Q14 and $78 million in 4Q14.  The year-over-year decrease primarily reflects lower lease residual gains.  The sequential decrease primarily reflects lower asset-related gains.

NET INTEREST REVENUE


Net interest revenue






1Q15 vs.

(dollars in millions)

1Q14

2Q14

3Q14

4Q14

1Q15

1Q14

4Q14

Net interest revenue (non-FTE)

$

728


$

719


$

721


$

712


$

728


%

2

%

Net interest revenue (FTE) – Non-GAAP

744


736


736


726


743



2


Net interest margin (FTE)

1.05

%

0.98

%

0.94

%

0.91

%

0.97

%

(8)

 bps

6

bps









Selected average balances:








Cash/interbank investments

$

127,134


$

140,357


$

139,278


$

140,599


$

123,642


(3)%


(12)%


Trading account securities

5,217


5,532


5,435


3,922


3,046


(42)


(22)


Securities

100,534


101,420


112,055


117,243


123,476


23


5


Loans

51,647


53,449


54,835


56,844


57,935


12


2


Interest-earning assets

284,532


300,758


311,603


318,608


308,099


8


(3)


Interest-bearing deposits

152,986


162,674


164,233


163,149


159,520


4


(2)


Noninterest-bearing deposits

81,430


77,820


82,334


85,330


89,592


10


5










Selected average yields/rates:








Cash/interbank investments

0.43

%

0.43

%

0.38

%

0.31

%

0.35

%



Trading account securities

2.60


2.19


2.36


2.64


2.46




Securities

1.79


1.68


1.56


1.54


1.55




Loans

1.65


1.66


1.61


1.58


1.55




Interest-earning assets

1.17


1.10


1.05


1.02


1.07




Interest-bearing deposits

0.06


0.06


0.06


0.03


0.04












Average cash/interbank investments as a percentage of average interest-earning assets

45

%

47

%

45

%

44

%

40

%



Average noninterest-bearing deposits as a percentage of average interest-earning assets

29

%

26

%

26

%

27

%

29

%



bps – basis points.
FTE – fully taxable equivalent.

KEY POINTS

  • Net interest revenue totaled $728 million in 1Q15, unchanged compared with 1Q14 and an increase of $16 million sequentially. 
    • Year-over-year, the increase in deposits drove the growth in our securities portfolio and offset the impact of lower yields.
  • The sequential increase was primarily driven by a change in the mix of assets, partially offset by fewer days in 1Q15.  Lower hedging losses in 1Q15 were primarily offset by lower accretion and higher amortization.

NONINTEREST EXPENSE

Noninterest expense






1Q15 vs.

(dollars in millions)

1Q14

2Q14

3Q14

4Q14

1Q15

1Q14

4Q14

Staff:








Compensation

$

925


$

903


$

909


$

893


$

871


(6)%


(2)%


Incentives

359


313


340


319


425


18

%

33

%

Employee benefits

227


223


228


206


189


(17)%


(8)%


Total staff

1,511


1,439


1,477


1,418


1,485


(2)%


5

%

Professional, legal and other purchased services

312


314


323


390


302


(3)


(23)


Software and equipment

237


236


234


235


228


(4)


(3)


Net occupancy

154


152


154


150


151


(2)


1


Distribution and servicing

107


112


107


102


98


(8)


(4)


Sub-custodian

68


81


67


70


70


3



Business development

64


68


61


75


61


(5)


(19)


Other

223


347


250


211


242


9


15


Amortization of intangible assets

75


75


75


73


66


(12)


(10)


M&I, litigation and restructuring charges

(12)


122


220


800


(3)


N/M

N/M

Total noninterest expense – GAAP

$

2,739


$

2,946


$

2,968


$

3,524


$

2,700


(1)%


(23)%










Total staff expense as a percentage of total revenue

41

%

38

%

32

%

38

%

39

%











Memo:








Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge (recovery) related to investment management funds, net of incentives – Non-GAAP

$

2,681


$

2,640


$

2,673


$

2,651


$

2,637


(2)%


(1)%


N/M - Not meaningful.

KEY POINTS

  • Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges, and the charge (recovery) related to investment management funds, net of incentives (Non-GAAP) decreased 2% year-over-year and 1% sequentially. 
  • The year-over-year decrease reflects lower expenses in all categories, except sub-custodian which is volume-related and other expense which includes the impact of the new EU Single Resolution Fund.  These lower expenses primarily reflect the favorable impact of a stronger U.S. dollar and the benefit of the business improvement process which focuses on reducing structural costs. 
  • Total staff expense decreased 2% year-over-year primarily reflecting the favorable impact of a stronger U.S. dollar, the curtailment gain related to the U.S. pension plan and lower headcount.  The decrease was partially offset by higher incentive expense reflecting better performance, a lower adjustment for the finalization of the annual incentive awards and the impact of vesting of long-term stock awards for retirement eligible employees.

INVESTMENT SECURITIES PORTFOLIO

At March 31, 2015, the fair value of our investment securities portfolio totaled $128.9 billion.  The net unrealized pre-tax gain on our total securities portfolio was $1.7 billion at March 31, 2015 compared with $1.3 billion at Dec. 31, 2014.  The increase in the net unrealized pre-tax gain was primarily driven by a decline in market interest rates.  In 1Q15, Agency MBS, sovereign debt and U.S. Treasury securities with an aggregate amortized cost and fair value of $11.6 billion were transferred from available-for-sale securities to held-to-maturity securities.  Also in 1Q15, we continued to purchase held-to-maturity securities.  At March 31, 2015 and Dec. 31, 2014, the fair value of the held-to-maturity securities totaled $41.7 billion and $21.1 billion, respectively, and represented 32% and 18% of the fair value of the total investment securities portfolio, respectively.

The following table shows the distribution of our investment securities portfolio.



Investment securities

portfolio

(dollars in millions)

December 31, 2014


1Q15

change in

unrealized

gain (loss)

March 31, 2015

Fair value

as a % of amortized

cost (a)

Unrealized

gain (loss)


Ratings





BB+

and

lower


 Fair

value


Amortized

cost

Fair

value



AAA/

AA-

A+/

A-

BBB+/

BBB-

Not

rated

Agency RMBS

$

46,762



$

278


$

50,635


$

51,101



101

%

$

466



100

%

%

%

%

%

U.S. Treasury

24,857



48


28,414


28,680



101


266



100






Sovereign debt/sovereign guaranteed

18,253



29


18,064


18,253



101


189



78


1


21




Non-agency RMBS (b)

2,214



(28)


1,699


2,138



81


439




1


1


91


7


Non-agency RMBS

1,113




1,052


1,070



94


18



1


8


21


69


1


European floating rate notes

1,959



3


1,728


1,723



99


(5)



71


22



7



Commercial MBS

4,997



32


5,830


5,901



101


71



94


5


1




State and political subdivisions

5,271



14


5,074


5,159



102


85



79


20




1


Foreign covered bonds

2,866



(6)


2,732


2,804



103


72



100






Corporate bonds

1,785



12


1,695


1,745



103


50



21


67


12




CLO

2,111



6


2,250


2,258



100


8



100






U.S. Government agencies

684



5


1,551


1,554



100


3



100






Consumer ABS

3,240



3


3,398


3,400



100


2



99


1





Other (c)

3,032



6


3,092


3,106



100


14



44



50



6


Total investment securities

$

119,144


(d)

$

402


$

127,214


$

128,892


(d)

101

%

$

1,678


(e)

91

%

2

%

5

%

2

%

%

(a)   Amortized cost before impairments.
(b)   These RMBS were included in the former Grantor Trust and were marked-to-market in 2009.  We believe these RMBS would receive higher credit ratings if these ratings incorporated, as additional credit enhancements, the difference between the written-down amortized cost and the current face amount of each of these securities.
(c)    Includes commercial paper with a fair value of $1.6 billion and $1.6 billion and money market funds with a fair value of $763 million and $814 million at Dec. 31, 2014 and March 31, 2015, respectively.
(d)   Includes net unrealized losses on derivatives hedging securities available-for-sale of $313 million at Dec. 31, 2014 and $501 million at March 31, 2015.
(e)    Unrealized gains of $1,239 million at March 31, 2015 related to available-for-sale securities.

NONPERFORMING ASSETS

Nonperforming assets

(dollars in millions)

March 31,

2014

December 31,

2014

March 31,

2015

Loans:




Other residential mortgages

$

107


$

112


$

111


Commercial

13




Wealth management loans and mortgages

12


12


12


Foreign

7




Commercial real estate

4


1


1


Total nonperforming loans

143


125


124


Other assets owned

3


3


4


Total nonperforming assets (a)

$

146


$

128


$

128


Nonperforming assets ratio

0.27

%

0.22

%

0.21

%

Allowance for loan losses/nonperforming loans

138.5


152.8


153.2


Total allowance for credit losses/nonperforming loans

228.0


224.0


228.2


(a)   Loans of consolidated investment management funds are not part of BNY Mellon's loan portfolio.  Included in the loans of consolidated investment management funds are nonperforming loans of $74 million at March 31, 2014, $53 million at Dec. 31, 2014 and $73 million at March 31, 2015.  These loans are recorded at fair value and therefore do not impact the provision for credit losses and allowance for loan losses, and accordingly are excluded from the nonperforming assets table above.

Nonperforming assets were $128 million at March 31, 2015 unchanged from Dec. 31, 2014.

ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS


Allowance for credit losses, provision and net charge-offs

(in millions)

March 31,
 2014

December 31,

2014

March 31,
 2015

Allowance for credit losses - beginning of period

$

344


$

288


$

280


Provision for credit losses

(18)


1


2


Net (charge-offs) recoveries:




Other residential mortgages



1


Commercial


(8)



Commercial real estate


(2)



Financial institutions


1



Net (charge-offs) recoveries


(9)


1


Allowance for credit losses - end of period

$

326


$

280


$

283


Allowance for loan losses

$

198


$

191


$

190


Allowance for lending-related commitments

128


89


93


The allowance for credit losses was $283 million at March 31, 2015, an increase of $3 million compared with $280 million at Dec. 31, 2014.

CAPITAL

Our consolidated capital ratios are shown in the following table.  In 1Q15, we implemented the Basel III Standardized Approach under the final rules released by the Board of Governors of the Federal Reserve System (the "Federal Reserve") on July 2, 2013 (the "Final Capital Rules").  The Standardized Approach replaced the Basel I-based calculation of risk-weighted assets ("RWA") with a revised methodology using a broader array of more risk sensitive risk-weighting categories.  Our risk-based capital adequacy is determined using the higher of RWA determined using the Standardized Approach and Advanced Approach.  The common equity Tier 1 ("CET1"), Tier 1 and Total risk-based regulatory capital ratios in the first section of the table below are based on Basel III components of capital, as phased-in, and credit risk asset risk-weightings using the Advanced Approach framework under the Final Capital Rules as the related RWA were higher under the Advanced Approach at both Dec. 31, 2014 and March 31, 2015.  The Advanced Approach ratios were impacted by increases in operational risk RWA.  The transitional capital ratios were negatively impacted by the phase-in requirements for 2015.  The leverage capital ratios are based on Basel III components of capital and quarterly average total assets, as phased-in.

Capital ratios

December 31, 2014

March 31,
 2015

Consolidated regulatory capital ratios: (a)(b)(c)



CET1 ratio

11.2

%

10.0

%

Tier 1 capital ratio

12.2


10.8


Total (Tier 1 plus Tier 2) capital ratio

12.5


11.1


Leverage capital ratio

5.6


5.6


BNY Mellon shareholders' equity to total assets ratio – GAAP (d)

9.7


9.4


BNY Mellon common shareholders' equity to total assets ratio – GAAP (d)

9.3


9.0


BNY Mellon tangible common shareholders' equity to tangible assets of operations ratio – Non-GAAP (d)

6.5


6.0





Selected regulatory capital ratios – fully phased-in – Non-GAAP: (a)(b)



Estimated CET1 ratio:



Standardized Approach

10.6


9.5


Advanced Approach

9.8


9.1


Estimated supplementary leverage ratio ("SLR")

4.4


4.5


(a)   Regulatory capital ratios for March 31, 2015 are preliminary.
(b)   Risk-based capital ratios at Dec. 31, 2014 and March 31, 2015 include the net impact of the total consolidated assets of certain consolidated investment management funds in risk-weighted assets.
(c)    At Dec. 31, 2014, the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios determined under the transitional Standardized Approach were 15.0%, 16.3% and 16.9%, and were calculated based on Basel III components of capital, as phased-in, and asset risk-weightings using Basel I-based requirements.  At March 31, 2015, the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios determined under the transitional Basel III Standardized Approach were 10.7%, 11.6% and 12.0%.
(d)   See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for a reconciliation of these ratios.


Estimated Basel III CET1 generation presented on a fully phased-in basis – Non-GAAP – preliminary


(in millions)

1Q15


Estimated fully phased-in Basel III CET1 – Non-GAAP – Beginning of period

$

15,931


Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

766


Goodwill and intangible assets, net of related deferred tax liabilities

292


Gross Basel III CET1 generated

1,058


Capital deployed:


Dividends

(192)


Common stock repurchased

(400)


Total capital deployed

(592)


Other comprehensive (loss)

(548)


Additional paid-in capital (a)

261


Other (primarily embedded goodwill)

13


Total other (deductions)

(274)


Net Basel III CET1 generated

192


Estimated fully phased-in Basel III CET1 – Non-GAAP – End of period

$

16,123


(a)   Primarily related to stock awards, the exercise of stock options and stock issued for employee benefit plans.

The table presented below compares the fully phased-in Basel III capital components and ratios to those amounts determined under the currently effective rules using the transitional phase-in requirements.


Basel III capital components and ratios at March 31, 2015 preliminary

Fully phased-

in Basel III


Transitional

Approach (a)

(dollars in millions)


CET1:




Common shareholders' equity

$

35,766



$

36,092


Goodwill and intangible assets

(19,148)



(17,440)


Net pension fund assets

(105)



(42)


Equity method investments

(375)



(315)


Deferred tax assets

(16)



(7)


Other

1



5


Total CET1

16,123



18,293


Other Tier 1 capital:




Preferred stock

1,562



1,562


Trust preferred securities



74


Disallowed deferred tax assets



(9)


Net pension fund assets



(63)


Other

(2)



(5)


Total Tier 1 capital

17,683



19,852






Tier 2 capital:




Trust preferred securities



223


Subordinated debt

298



298


Allowance for credit losses

283



283


Other

(1)



(1)


Total Tier 2 capital - Standardized Approach

580



803


Excess of expected credit losses

28



17


Less: Allowance for credit losses

283



283


Total Tier 2 capital - Advanced Approach

$

325



$

537






Total capital:




Standardized Approach

$

18,263



$

20,655


Advanced Approach

$

18,008



$

20,389






Risk-weighted assets:




Standardized Approach

$

169,673



$

171,491


Advanced Approach

$

176,680



$

183,134






Standardized Approach:




Estimated Basel III CET1 ratio

9.5

%


10.7

%

Tier 1 capital ratio

10.4



11.6


Total (Tier 1 plus Tier 2) capital ratio

10.8



12.0






Advanced Approach:




Estimated Basel III CET1 ratio

9.1

%


10.0

%

Tier 1 capital ratio

10.0



10.8


Total (Tier 1 plus Tier 2) capital ratio

10.2



11.1


(a)   Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in 2015 under the Final Capital Rules.

BNY Mellon has presented its estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR based on its interpretation of the Final Capital Rules, which are being gradually phased-in over a multi-year period, as supplemented by the Federal Reserve's final rules concerning the SLR published on Sept. 3, 2014, and on the application of such rules to BNY Mellon's businesses as currently conducted.  Management views the estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR as key measures in monitoring BNY Mellon's capital position and progress against future regulatory capital standards.  Additionally, the presentation of the estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR are intended to allow investors to compare these ratios with estimates presented by other companies.  The estimated fully phased-in Basel III CET1 and other risk-based capital ratios assume all relevant regulatory approvals.  The Final Capital Rules require approval by banking regulators of certain models used as part of risk-weighted asset calculations.  If these models are not approved, the estimated fully phased-in Basel III CET1 and other risk-based capital ratios would likely be adversely impacted.

Risk-weighted assets at Dec. 31, 2014 and March 31, 2015 for credit risk under the transitional Advanced Approach do not reflect the use of a simple value-at-risk methodology for repo-style transactions (including agented indemnified securities lending transactions), eligible margin loans, and similar transactions.  BNY Mellon has requested written approval to use this methodology.

Our capital and liquidity ratios are necessarily subject to, among other things, BNY Mellon's further review of applicable rules, anticipated compliance with all necessary enhancements to model calibration, approval by regulators of certain models used as part of risk-weighted asset calculations, other refinements, further implementation guidance from regulators, market practices and standards and any changes BNY Mellon may make to its businesses.  Consequently, our capital and liquidity ratios remain subject to ongoing review and revision and may change based on these factors.

Supplementary Leverage Ratio ("SLR")

The following table presents the components of our fully phased-in estimated SLR.

Estimated fully phased-in SLR – Non-GAAP (a)

(dollars in millions)

December 31,
 2014


March 31,
 2015

(b)

Total estimated fully phased-in Basel III CET1 – Non-GAAP

$

15,931


$

16,123



Additional Tier 1 capital

1,550


1,560



Total Tier 1 capital

$

17,481


$

17,683







Total leverage exposure:




Quarterly average total assets

$

385,232


$

374,890



Less: Amounts deducted from Tier 1 capital

19,947


19,643



Total on-balance sheet assets, as adjusted

365,285


355,247



Off-balance sheet exposures:




Potential future exposure for derivatives contracts (plus certain other items)

11,376


9,295



Repo-style transaction exposures included in SLR

302


6,474



Credit-equivalent amount of other off-balance sheet exposures (less SLR exclusions)

21,850


22,046



Total off-balance sheet exposures

33,528


37,815



Total leverage exposure

$

398,813


$

393,062







Estimated fully phased-in SLR – Non-GAAP

4.4

%

4.5

%


(a)   The estimated fully phased-in SLR is based on our interpretation of the Final Capital Rules, as supplemented by the Federal Reserve's final rules on the SLR.  When fully phased-in, we expect to maintain an SLR of over 5%, 3% attributable to the minimum required SLR, and greater than 2% attributable to a buffer applicable to U.S. G-SIBs. 
(b)   March 31, 2015 information is preliminary.

Liquidity Coverage Ratio ("LCR")

The U.S. LCR rules became effective Jan. 1, 2015 and require BNY Mellon to meet an LCR of 80%, increasing annually by 10% increments until fully phased-in on Jan. 1, 2017, at which time we will be required to meet an LCR of 100%.  Our estimated LCR on a consolidated basis is compliant with the fully phased-in requirements of the U.S. LCR as of March 31, 2015 based on our current understanding of the U.S. LCR rules.

INVESTMENT MANAGEMENT provides investment management services to institutional and retail investors, as well as investment management, wealth and estate planning and private banking solutions to high net worth individuals and families, and foundations and endowments.


(dollars in millions, unless otherwise noted)







1Q15 vs.

1Q14

2Q14

3Q14

4Q14

1Q15


1Q14

4Q14

Revenue:









Investment management fees:









Mutual funds

$

299


$

311


$

315


$

306


$

301



1

%

(2)%


Institutional clients

372


385


382


375


376



1



Wealth management

153


156


158


157


158



3


1


Investment management fees

824


852


855


838


835



1



Performance fees

20


29


22


44


15



(25)


N/M

Investment management and performance fees

844


881


877


882


850



1


(4)


Distribution and servicing

40


41


41


40


39



(3)


(3)


Other (a)

16


48


16


7


47



N/M

N/M

Total fee and other revenue (a)

900


970


934


929


936



4


1


Net interest revenue

70


66


69


69


74



6


7


Total revenue

970


1,036


1,003


998


1,010



4


1


Noninterest expense (ex. amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives)

698


725


727


729


721



3


(1)


Income before taxes (ex. amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives)

272


311


276


269


289



6


7


Amortization of intangible assets

31


31


31


30


25



(19)


(17)


Charge (recovery) related to investment management funds, net of incentives

(5)


109






N/M

N/M

Income before taxes

$

246


$

171


$

245


$

239


$

264



7

%

10

%










Pre-tax operating margin

25

%

16

%

24

%

24

%

26

%




Adjusted pre-tax operating margin (b)

34

%

36

%

33

%

32

%

34

%













Changes in AUM (in billions): (c)









Beginning balance of AUM

$

1,583


$

1,620


$

1,636


$

1,646


$

1,710





Net inflows (outflows):









Long-term:









Equity

(1)


(4)


(2)


(4)


(6)





Fixed income


(1)



4


4





Index


7


(3)


1


8





Liability-driven investments (d)

20


(17)


18


24


8





Alternative investments

2


2



2


2





Total long-term inflows (outflows)

21


(13)


13


27


16





Short term:









Cash

(7)


(18)


19


5


1





Total net inflows (outflows)

14


(31)


32


32


17





Net market/currency impact/acquisition

23


47


(22)


32


14





Ending balance of AUM

$

1,620


$

1,636


$

1,646


$

1,710


$

1,741


(e)

7

%

2

%










AUM at period end, by product type: (c)









Equity

17

%

17

%

16

%

16

%

15

%




Fixed income

14


14


13


13


13





Index

20


21


21


21


22





Liability-driven investments (d)

27


27


28


29


29





Alternative investments

4


4


4


4


4





Cash

18


17


18


17


17





Total AUM

100

%

100

%

100

%

100

%

100

%

(e)












Wealth management:









Average loans

$

10,075


$

10,372


$

10,772


$

11,124


$

11,634



15

%

5

%

Average deposits

$

14,805


$

13,458


$

13,764


$

14,604


$

15,218



3

%

4

%

(a)   Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for the reconciliation of Non-GAAP measures.  Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other trading revenue and investment and other income.
(b)   Excludes the net negative impact of money market fee waivers, amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives, and is net of distribution and servicing expense.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for the reconciliation of Non-GAAP measures.
(c)    Excludes securities lending cash management assets and assets managed in the Investment Services business.
(d)   Includes currency and overlay assets under management.
(e)    Preliminary.
N/M – Not meaningful.

INVESTMENT MANAGEMENT KEY POINTS

  • Assets under management were a record $1.74 trillion at March 31, 2015, an increase of 7% year-over-year and 2% sequentially. Both increases primarily resulted from higher equity market values, the Cutwater acquisition and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.
    • Net long-term inflows were $16 billion in 1Q15 driven by liability-driven, index and fixed income investments. Short-term inflows were $1 billion in 1Q15.
  • Income before taxes excluding amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives increased 6% year-over-year and 7% sequentially.
  • Total revenue was $1.0 billion, an increase of 4% year-over-year and 1% sequentially. The year-over-year increase primarily reflects higher equity market values and seed capital gains, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential increase primarily reflects higher seed capital gains and reduced trading losses, partially offset by seasonally lower performance fees.
    • 42% non-U.S. revenue in 1Q15 vs. 45% in 1Q14.
  • Investment management fees were $835 million, an increase of 1% year-over-year, or 7% on a constant currency basis (Non-GAAP), driven by higher equity market values, the impact of the Cutwater acquisition and strategic initiatives. Sequentially, investment management fees decreased slightly reflecting fewer days in 1Q15 and the unfavorable impact of a stronger U.S. dollar, partially offset by the impact of the Cutwater acquisition.
  • Performance fees were $15 million in 1Q15 compared with $20 million in 1Q14 and $44 million in 4Q14. The sequential decrease was driven by seasonality.
  • Other revenue was $47 million in 1Q15 compared with $16 million in 1Q14 and $7 million in 4Q14. Both increases primarily reflect higher seed capital gains. The sequential increase also reflects reduced losses on hedging activities within a boutique.
  • Net interest revenue increased 6% year-over-year and 7% sequentially. Both increases primarily reflect higher loan and deposit levels.
    • Average loans increased 15% year-over-year and 5% sequentially; average deposits increased 3% year-over-year and 4% sequentially.
  • Total noninterest expense (excluding amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives) increased 3% year-over-year and decreased 1% sequentially. The year-over-year increase reflects higher compensation and purchased services expenses resulting from the Cutwater acquisition and investments in strategic initiatives and higher incentive expense. The sequential decrease primarily reflects lower litigation, legal and distribution and servicing expenses, partially offset by higher incentive expense and the impact of the Cutwater acquisition. Both comparisons reflect the favorable impact of a stronger U.S. dollar.
  • In 1Q15, the Dreyfus/Standish Global Fixed Income Fund hit the #1 ranking in U.S. News' World Bond category for long-term investors and has been consistently in the top three since.  
  • The Wealth Management business was named the 2015 top National Private Asset Manager and top Private Bank Offering for Family Offices by the Family Wealth Report.

INVESTMENT SERVICES provides global custody and related services, broker-dealer services, global collateral services, corporate trust, depositary receipt and clearing services as well as global payment/working capital solutions to global financial institutions.


(dollar amounts in millions, unless otherwise noted)







1Q15 vs.

1Q14

2Q14

3Q14

4Q14

1Q15


1Q14

4Q14

Revenue:









Investment services fees:









Asset servicing

$

985


$

993


$

998


$

992


$

1,013



3

%

2

%

Clearing services

323


324


336


346


342



6


(1)


Issuer services

228


231


314


193


231



1


20


Treasury services

134


140


139


142


135



1


(5)


Total investment services fees

1,670


1,688


1,787


1,673


1,721



3


3


Foreign exchange and other trading revenue

158


145


159


165


209



32


27


Other (a)

59


87


59


69


63



7


(9)


Total fee and other revenue (a)

1,887


1,920


2,005


1,907


1,993



6


5


Net interest revenue

590


593


583


574


600



2


5


Total revenue

2,477


2,513


2,588


2,481


2,593



5


5


Noninterest expense (ex. amortization of intangible assets)

1,778


1,824


1,835


2,512


1,797



1


(28)


Income (loss) before taxes (ex. amortization of intangible assets)

699


689


753


(31)


796



14


N/M

Amortization of intangible assets

44


44


44


43


41



(7)


(5)


Income (loss) before taxes

$

655


$

645


$

709


$

(74)


$

755



15

%

N/M










Pre-tax operating margin

26

%

26

%

27

%

(3)%


29

%




Pre-tax operating margin (ex. amortization of intangible assets)

28

%

27

%

29

%

(1)%


31

%













Investment services fees as a percentage of noninterest expense (b)

93

%

93

%

100

%

92

%

96

%













Securities lending revenue

$

30


$

35


$

27


$

28


$

34



13

%

21

%










Metrics:









Average loans

$

31,468


$

33,115


$

33,785


$

35,448


$

37,699



20

%

6

%

Average deposits

$

214,947


$

220,701


$

221,734


$

228,282


$

234,183



9

%

3

%










AUC/A at period end (in trillions) (c)

$

27.9


$

28.5


$

28.3


$

28.5


$

28.5


(d)

2

%

%

Market value of securities on loan at period end

(in billions) (e)

$

264


$

280


$

282


$

289


$

291



10

%

1

%










Asset servicing:









Estimated new business wins (AUC/A) (in billions)

$

161


$

130


$

115


$

130


$

131


(d)












Depositary Receipts:









Number of sponsored programs

1,332


1,316


1,302


1,279


1,258



(6)%


(2)%











Clearing services:









Global DARTS volume (in thousands)

230


207


209


242


261



13

%

8

%

Average active clearing accounts

(U.S. platform) (in thousands)

5,695


5,752


5,805


5,900


5,979



5

%

1

%

Average long-term mutual fund assets (U.S. platform)

$

413,658


$

433,047


$

442,827


$

450,305


$

456,954



10

%

1

%

Average investor margin loans (U.S. platform)

$

8,919


$

9,236


$

9,861


$

10,711


$

11,232



26

%

5

%










Broker-Dealer:









Average tri-party repo balances (in billions)

$

1,983


$

2,022


$

2,063


$

2,101


$

2,153



9

%

2

%

(a)   Total fee and other revenue includes investment management fees and distribution and servicing revenue.
(b)   Noninterest expense excludes amortization of intangible assets and litigation expense.
(c)    Includes the AUC/A of CIBC Mellon of $1.2 trillion at March 31, 2014, June 30, 2014 and Sept. 30, 2014 and $1.1 trillion at Dec. 31, 2014 and March 31, 2015.
(d)   Preliminary.
(e)    Represents the total amount of securities on loan managed by the Investment Services business.  Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $66 billion at March 31, 2014, $64 billion at June 30, 2014, $65 billion at Sept. 30, 2014 and Dec. 31, 2014, and $69 billion at March 31, 2015.
N/M - Not meaningful.

INVESTMENT SERVICES KEY POINTS

  • Income before taxes excluding amortization of intangible assets totaled $796 million, an increase of 14% year-over-year.
    • The pre-tax operating margin excluding amortization of intangible assets was 31% in 1Q15 and the investment services fees as a percentage of noninterest expense was 96% in 1Q15, both improving approximately 250 basis points year-over-year.
  • Investment services fees totaled $1.7 billion, an increase of 3% both year-over-year and sequentially.
    • Asset servicing fees (global custody, broker-dealer services and global collateral services) were $1.0 billion in 1Q15 compared with $985 million in 1Q14 and $992 million in 4Q14. The year-over-year increase primarily reflects net new business, largely driven by Global Collateral Services and securities lending, and market values. The sequential increase primarily reflects higher client expense reimbursements, securities lending revenue and Global Collateral Services fees. Both increases were partially offset by the unfavorable impact of a stronger U.S. dollar.
      • Estimated new business wins (AUC/A) in Asset Servicing of $131 billion in 1Q15.
    • Clearing services fees were $342 million in 1Q15 compared with $323 million in 1Q14 and $346 million in 4Q14. The year-over-year increase was primarily driven by higher mutual fund and asset-based fees and higher clearance revenue driven by higher DARTS volume. The sequential decrease primarily reflects fewer trading days in 1Q15.
    • Issuer services fees (Corporate Trust and Depositary Receipts) were $231 million in 1Q15 compared with $228 million in 1Q14 and $193 million in 4Q14. Both increases reflect higher corporate actions in Depositary Receipts, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential increase also reflects higher Corporate Trust fees.
    • Treasury services fees were $135 million in 1Q15 compared with $134 million in 1Q14 and $142 million in 4Q14. The sequential decrease primarily reflects seasonally lower payment volumes.
  • Foreign exchange and other trading revenue was $209 million in 1Q15 compared with $158 million in 1Q14 and $165 million in 4Q14. Both increases primarily reflect higher volume and volatility, as well as higher Depositary Receipts-related activity.
  • Net interest revenue was $600 million in 1Q15 compared with $590 million in 1Q14 and $574 million in 4Q14. Both increases primarily reflect higher average loans and deposits. The sequential increase also reflects higher internal crediting rates for deposits.
  • Noninterest expense (excluding amortization of intangible assets) was $1.80 billion in 1Q15 compared with $1.78 billion in 1Q14 and $2.51 billion in 4Q14. Both comparisons reflect higher incentive expense and the impact of the new EU Single Resolution Fund, partially offset by lower compensation expense and the favorable impact of a stronger U.S. dollar. The sequential decrease primarily reflects lower litigation and professional, legal and other purchased services expenses.
  • Pershing Advisor Solutions won the Private Banking - Innovation Award at the 2015 Private Asset Management (PAM) awards, hosted by Private Asset magazine.
  • Anita Borg Institute names BNY Mellon top company for women technologists for achieving the highest overall score of all companies evaluated.

OTHER SEGMENT primarily includes credit-related activities, leasing operations, corporate treasury activities, global markets and institutional banking services, business exits, M&I expenses and other corporate revenue and expense items.







(dollars in millions)

1Q14

2Q14

3Q14

4Q14

1Q15

Revenue:






Fee and other revenue

$

112


$

119


$

928


$

117


$

104


Net interest revenue

68


60


69


69


54


Total revenue

180


179


997


186


158


Provision for credit losses

(18)


(12)


(19)


1


2


Noninterest expense (ex. M&I and restructuring charges)

193


93


274


210


120


Income (loss) before taxes (ex. M&I and restructuring charges)

5


98


742


(25)


36


M&I and restructuring charges


120


57



(4)


Income (loss) before taxes

$

5


$

(22)


$

685


$

(25)


$

40








Average loans and leases

$

10,104


$

9,962


$

10,278


$

10,272


$

8,602


KEY POINTS

  • Total fee and other revenue decreased $8 million compared with 1Q14 and $13 million compared with 4Q14.  The year-over-year decrease primarily reflects lower leasing gains.  The sequential decrease primarily reflects lower asset-related gains and net securities gains.  Both decreases were partially offset by higher other trading revenue.
  • Net interest revenue decreased $14 million compared with 1Q14 and $15 million compared with 4Q14.  Both decreases reflect higher internal crediting rates to the businesses for deposits.
  • Noninterest expense (excluding M&I and restructuring charges) decreased $73 million compared with 1Q14 and $90 million compared with 4Q14.  The year-over-year decrease primarily reflects the curtailment gain related to the U.S. pension plan, partially offset by higher incentives reflecting better performance, a lower adjustment for the finalization of the annual incentive awards and the impact of vesting of long-term stock awards for retirement eligible employees.  The sequential decrease was driven by lower litigation expense and lower pension expense.

THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement

(in millions)

Quarter ended


March 31,

2015

Dec. 31,

2014

March 31, 2014



Fee and other revenue





Investment services fees:





Asset servicing

$

1,038


$

1,019


$

1,009



Clearing services

344


347


325



Issuer services

232


193


229



Treasury services

137


145


136



Total investment services fees

1,751


1,704


1,699



Investment management and performance fees

854


885


843



Foreign exchange and other trading revenue

229


151


136



Distribution and servicing

41


43


43



Financing-related fees

40


43


38



Investment and other income

63


78


102



Total fee revenue

2,978


2,904


2,861



Net securities gains

24


31


22



Total fee and other revenue

3,002


2,935


2,883



Operations of consolidated investment management funds





Investment income

189


101


138



Interest of investment management fund note holders

68


59


102



Income from consolidated investment management funds

121


42


36



Net interest revenue





Interest revenue

807


802


812



Interest expense

79


90


84



Net interest revenue

728


712


728



Provision for credit losses

2


1


(18)



Net interest revenue after provision for credit losses

726


711


746



Noninterest expense





Staff

1,485


1,418


1,511



Professional, legal and other purchased services

302


390


312



Software and equipment

228


235


237



Net occupancy

151


150


154



Distribution and servicing

98


102


107



Sub-custodian

70


70


68



Business development

61


75


64



Other

242


211


223



Amortization of intangible assets

66


73


75



Merger and integration, litigation and restructuring charges

(3)


800


(12)



Total noninterest expense

2,700


3,524


2,739



Income





Income before income taxes

1,149


164


926



Provision (benefit) for income taxes

280


(93)


232



Net income

869


257


694



Net (income) attributable to noncontrolling interests (includes $(90), $(24) and $(20) related to consolidated investment management funds, respectively)

(90)


(24)


(20)



Net income applicable to shareholders of The Bank of New York Mellon Corporation

779


233


674



Preferred stock dividends

(13)


(24)


(13)



Net income applicable to common shareholders of The Bank of New York Mellon Corporation

$

766


$

209


$

661



 

THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement - continued

Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation

(in millions)

Quarter ended

March 31, 2015

Dec. 31, 2014

March 31, 2014

Net income applicable to common shareholders of The Bank of New York Mellon Corporation

$

766


$

209


$

661


Less:  Earnings allocated to participating securities

12


4


13


Net income applicable to the common shareholders of The Bank of New York Mellon Corporation after required adjustments for the calculation of basic and diluted earnings per common share

$

754


$

205


$

648


 

Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation

(in thousands)

Quarter ended

March 31, 2015

Dec. 31, 2014

March 31, 2014

Basic

1,118,602


1,120,672


1,138,645


Diluted

1,126,306


1,129,040


1,144,510


 

Earnings per share applicable to the common shareholders of The Bank of New York Mellon Corporation

(in dollars)

Quarter ended

March 31, 2015

Dec. 31, 2014

March 31, 2014

Basic

$

0.67


$

0.18


$

0.57


Diluted

$

0.67


$

0.18


$

0.57


 

THE BANK OF NEW YORK MELLON CORPORATION
Consolidated Balance Sheet

(dollars in millions, except per share amounts)

March 31,

2015

December 31, 2014



Assets




Cash and due from:




Banks

$

7,167


$

6,970



Interest-bearing deposits with the Federal Reserve and other central banks

89,704


96,682



Interest-bearing deposits with banks

18,937


19,495



Federal funds sold and securities purchased under resale agreements

28,268


20,302



Securities:




Held-to-maturity (fair value of $41,676 and $21,127)

41,237


20,933



Available-for-sale

87,717


98,330



Total securities

128,954


119,263



Trading assets

9,505


9,881



Loans

62,326


59,132



Allowance for loan losses

(190)


(191)



Net loans

62,136


58,941



Premises and equipment

1,410


1,394



Accrued interest receivable

557


607



Goodwill

17,663


17,869



Intangible assets

4,047


4,127



Other assets

22,315


20,490



Subtotal assets of operations

390,663


376,021



Assets of consolidated investment management funds, at fair value:




Trading assets

7,852


8,678



Other assets

573


604



Subtotal assets of consolidated investment management funds, at fair value

8,425


9,282



Total assets

$

399,088


$

385,303



Liabilities




Deposits:




Noninterest-bearing (principally U.S. offices)

$

111,622


$

104,240



Interest-bearing deposits in U.S. offices

60,624


53,236



Interest-bearing deposits in Non-U.S. offices

109,013


108,393



Total deposits

281,259


265,869



Federal funds purchased and securities sold under repurchase agreements

7,919


11,469



Trading liabilities

7,342


7,434



Payables to customers and broker-dealers

21,959


21,181



Commercial paper




Other borrowed funds

869


786



Accrued taxes and other expenses

6,258


6,903



Other liabilities (includes allowance for lending-related commitments of $93 and $89)

7,581


5,025



Long-term debt

20,401


20,264



Subtotal liabilities of operations

353,588


338,931



Liabilities of consolidated investment management funds, at fair value:




Trading liabilities

6,584


7,660



Other liabilities

36


9



Subtotal liabilities of consolidated investment management funds, at fair value

6,620


7,669



Total liabilities

360,208


346,600



Temporary equity




Redeemable noncontrolling interests

215


229



Permanent equity




Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 15,826 and 15,826 shares

1,562


1,562



Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,303,799,499 and 1,290,222,821 shares

13


13



Additional paid-in capital

24,887


24,626



Retained earnings

18,257


17,683



Accumulated other comprehensive loss, net of tax

(2,182)


(1,634)



Less:  Treasury stock of 182,287,827 and 171,995,262 common shares, at cost

(5,209)


(4,809)



Total The Bank of New York Mellon Corporation shareholders' equity

37,328


37,441



Nonredeemable noncontrolling interests of consolidated investment management funds

1,337


1,033



Total permanent equity

38,665


38,474



Total liabilities, temporary equity and permanent equity

$

399,088


$

385,303



SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based on fully phased-in Basel III CET1 and other risk-based capital ratios, SLR and tangible common shareholders' equity.  BNY Mellon believes that the Basel III CET1 and other risk-based capital ratios on a fully phased-in basis, the SLR on a fully phased-in basis and the ratio of tangible common shareholders' equity to tangible assets of operations are measures of capital strength that provide additional useful information to investors, supplementing the capital ratios which are, or were, utilized by regulatory authorities.  The tangible common shareholders' equity ratio includes changes in investment securities valuations which are reflected in total shareholders' equity.  In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its reconciliation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes and the assets of consolidated investment management funds to which BNY Mellon has limited economic exposure.  Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of those assets that can generate income.  BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of tangible assets in relation to shares of common stock outstanding.

BNY Mellon has presented revenue measures which exclude the effect of noncontrolling interests related to consolidated investment management funds, a gain on the sale of our investment in Wing Hang Bank and a gain on the sale of the One Wall Street building; and expense measures which exclude M&I expenses, litigation charges, restructuring charges, amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives.  Earnings per share, return on equity measures and operating margin measures, which exclude some or all of these items, are also presented.  Earnings per share and return on equity measures also exclude the benefit primarily related to a tax carryback claim.  Operating margin measures may also exclude amortization of intangible assets and the net negative impact of money market fee waivers, net of distribution and servicing expense.  BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons, which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon's control.  The excluded items, in general, relate to certain charges as a result of prior transactions.  M&I expenses primarily relate to acquisitions and generally continue for approximately three years after the transaction.  Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees.  Restructuring charges relate to our streamlining actions, Operational Excellence Initiatives and migrating positions to Global Delivery Centers.  Excluding these charges mentioned above permits investors to view expenses on a basis consistent with how management views the business.

The presentation of revenue growth 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.  BNY Mellon believes 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.

The presentation of income from consolidated investment management funds, net of net income attributable to noncontrolling interests related to the consolidation of certain investment management funds permits investors to view revenue on a basis consistent with how management views the business.  BNY Mellon believes that these presentations, as a supplement to GAAP information, give investors a clearer picture of the results of its primary businesses.

In this Earnings Release, the net interest margin is presented on an FTE basis.  We believe that this presentation provides comparability 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.  Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and on a business-level basis.

The following table presents the reconciliation of net income and diluted earnings per common share.



Reconciliation of net income and diluted EPS – GAAP to Non-GAAP

4Q14


Net

Diluted

(in millions, except per common share amounts)

income

EPS

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

$

209


$

0.18


Less:  Benefit primarily related to a tax carryback claim

150


0.13


Add:   Litigation and restructuring charges

608


0.53


Net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP

$

667


$

0.58


The following table presents the reconciliation of the pre-tax operating margin ratio.

Reconciliation of income before income taxes – pre-tax operating margin







(dollars in millions)

1Q14

2Q14

3Q14

4Q14

1Q15


Income before income taxes – GAAP

$

926


$

811


$

1,662


$

164


$

1,149



Less:  Net income attributable to noncontrolling interests of consolidated investment management funds

20


17


23


24


90



Gain on the sale of our investment in Wing Hang Bank



490





Gain on the sale of the One Wall Street building



346





Add:  Amortization of intangible assets

75


75


75


73


66



M&I, litigation and restructuring charges

(12)


122


220


800


(3)



Charge (recovery) related to investment management funds, net of incentives

(5)


109






Income before income taxes, as adjusted – Non-GAAP (a)

$

964


$

1,100


$

1,098


$

1,013


$

1,122










Fee and other revenue – GAAP

$

2,883


$

2,980


$

3,851


$

2,935


$

3,002



Income from consolidated investment management funds – GAAP

36


46


39


42


121



Net interest revenue – GAAP

728


719


721


712


728



Total revenue – GAAP

3,647


3,745


4,611


3,689


3,851



Less:  Net income attributable to noncontrolling interests of consolidated investment management funds

20


17


23


24


90



Gain on the sale of our investment in Wing Hang Bank



490





Gain on the sale of the One Wall Street building



346





Total revenue, as adjusted – Non-GAAP (a)

$

3,627


$

3,728


$

3,752


$

3,665


$

3,761










Pre-tax operating margin (b)

25

%

22

%

36

%

4

%

30

%

(c)

Pre-tax operating margin – Non-GAAP (a)(b)

27

%

30

%

29

%

28

%

30

%

(c)

(a)   Non-GAAP excludes net income attributable to noncontrolling interests of consolidated investment management funds, the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, amortization of intangible assets, M&I, litigation and restructuring charges, and a charge (recovery) related to investment management funds, net of incentives, if applicable.
(b)   Income before taxes divided by total revenue.
(c)    Our GAAP earnings include tax-advantaged investments such as low income housing, renewable energy, bank-owned life insurance and tax-exempt securities.  The benefits of these investments are primarily reflected in tax expense.  If reported on a tax-equivalent basis these investments would increase revenue and income before taxes by $64 million for 1Q15 and would increase our pre-tax operating margin by approximately 1.2%.

The following table presents the reconciliation of the returns on common equity and tangible common equity.

Return on common equity and tangible common equity






(dollars in millions)

1Q14

2Q14

3Q14

4Q14

1Q15

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

$

661


$

554


$

1,070


$

209


$

766


Add:  Amortization of intangible assets, net of tax

49


49


49


47


43


Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP

710


603


1,119


256


809


Less:  Gain on the sale of our investment in Wing Hang Bank



315




Gain on the sale of the One Wall Street building



204




Benefit primarily related to a tax carryback claim




150



Add:  M&I, litigation and restructuring charges

(7)


76


183


608


(2)


Charge (recovery) related to investment management funds, net of incentives

(4)


85





Net income applicable to common shareholders of The Bank of New York Mellon Corporation, as adjusted – Non-GAAP (a)

$

699


$

764


$

783


$

714


$

807








Average common shareholders' equity

$

36,289


$

36,565


$

36,751


$

36,859


$

35,486


Less:  Average goodwill

18,072


18,149


18,109


17,924


17,756


Average intangible assets

4,422


4,354


4,274


4,174


4,088


Add:  Deferred tax liability – tax deductible goodwill (b)

1,306


1,338


1,317


1,340


1,362


Deferred tax liability – intangible assets (b)

1,259


1,247


1,230


1,216


1,200


Average tangible common shareholders' equity – Non-GAAP

$

16,360


$

16,647


$

16,915


$

17,317


$

16,204








Return on common equity – GAAP (c)

7.4

%

6.1

%

11.6

%

2.2

%

8.8

%

Return on common equity – Non-GAAP (a)(c)

7.8

%

8.4

%

8.5

%

7.7

%

9.2

%







Return on tangible common equity – Non-GAAP (a)(c)

17.6

%

14.5

%

26.2

%

5.9

%

20.3

%

Return on tangible common equity – Non-GAAP adjusted (a)(c)

17.3

%

18.4

%

18.4

%

16.3

%

20.2

%

(a)   Non-GAAP excludes amortization of intangible assets, the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, the benefit primarily related to a tax carryback claim, M&I, litigation and restructuring charges, and a charge (recovery) related to investment management funds, net of incentives, if applicable.
(b)   Deferred tax liabilities are based on fully phased-in Basel III rules.
(c)    Annualized.

The following table presents the reconciliation of the equity to assets ratio and book value per common share.

Equity to assets and book value per common share

March 31,

2014

Dec. 31,

2014

March 31,

2015

(dollars in millions, unless otherwise noted)

BNY Mellon shareholders' equity at period end – GAAP

$

37,986


$

37,441


$

37,328


Less:  Preferred stock

1,562


1,562


1,562


BNY Mellon common shareholders' equity at period end – GAAP

36,424


35,879


35,766


Less:  Goodwill

18,100


17,869


17,663


Intangible assets

4,380


4,127


4,047


Add:  Deferred tax liability – tax deductible goodwill (a)

1,306


1,340


1,362


Deferred tax liability – intangible assets (a)

1,259


1,216


1,200


BNY Mellon tangible common shareholders' equity at period end – Non-GAAP

$

16,509


$

16,439


$

16,618






Total assets at period end – GAAP

$

368,241


$

385,303


$

399,088


Less:  Assets of consolidated investment management funds

11,451


9,282


8,425


Subtotal assets of operations – Non-GAAP

356,790


376,021


390,663


Less:  Goodwill

18,100


17,869


17,663


Intangible assets

4,380


4,127


4,047


Cash on deposit with the Federal Reserve and other central banks (b)

83,736


99,901


93,044


Tangible total assets of operations at period end – Non-GAAP

$

250,574


$

254,124


$

275,909






BNY Mellon shareholders' equity to total assets ratio – GAAP

10.3

%

9.7

%

9.4

%

BNY Mellon common shareholders' equity to total assets ratio – GAAP

9.9

%

9.3

%

9.0

%

BNY Mellon tangible common shareholders' equity to tangible assets of operations

ratio – Non-GAAP

6.6

%

6.5

%

6.0

%





Period-end common shares outstanding (in thousands)

1,140,373


1,118,228


1,121,512






Book value per common share – GAAP

$

31.94


$

32.09


$

31.89


Tangible book value per common share – Non-GAAP

$

14.48


$

14.70


$

14.82


(a)   Deferred tax liabilities are based on fully phased-in Basel III rules.
(b)   Assigned a zero percent risk-weighting by the regulators.

The following table presents income from consolidated investment management funds, net of noncontrolling interests.


Income from consolidated investment management funds, net of noncontrolling interests



(in millions)

1Q14

2Q14

3Q14

4Q14

1Q15

Income from consolidated investment management funds

$

36


$

46


$

39


$

42


$

121


Less:  Net income attributable to noncontrolling interests of consolidated investment management funds

20


17


23


24


90


Income from consolidated investment management funds, net of noncontrolling interests

$

16


$

29


$

16


$

18


$

31


The following table presents the impact of changes in foreign currency exchange rates on our consolidated investment management and performance fees.


Investment management and performance fees - Consolidated



1Q15 vs.

(dollars in millions)

1Q14

1Q15

1Q14

Investment management and performance fees - GAAP

$

843


$

854


1

%

Impact of changes in foreign currency exchange rates

(40)




Investment management and performance fees, as adjusted - Non-GAAP

$

803


$

854


6

%

The following table presents the revenue line items in the Investment Management business impacted by the consolidated investment management funds.

Income from consolidated investment management funds, net of noncontrolling interests - Investment Management business






(in millions)

1Q14

2Q14

3Q14

4Q14

1Q15

Investment management fees

$

18


$

18


$

15


$

15


$

14


Other (Investment income)

(2)


11


1


3


17


Income from consolidated investment management funds, net of noncontrolling interests

$

16


$

29


$

16


$

18


$

31


The following table presents the impact of changes in foreign currency exchange rates on investment management fees reported in the Investment Management segment.


Investment management fees - Investment Management business



1Q15 vs.

(dollars in millions)

1Q14

1Q15

1Q14

Investment management fees - GAAP

$

824


$

835


1

%

Impact of changes in foreign currency exchange rates

(40)




Investment management fees, as adjusted - Non-GAAP

$

784


$

835


7

%

The following table presents the reconciliation of the pre-tax operating margin for the Investment Management business.

Pre-tax operating margin - Investment Management business






(dollars in millions)

1Q14

2Q14

3Q14

4Q14

1Q15

Income before income taxes – GAAP

$

246


$

171


$

245


$

239


$

264


Add:  Amortization of intangible assets

31


31


31


30


25


Money market fee waivers

35


28


29


34


34


Charge (recovery) related to investment management funds, net of incentives

(5)


109





Income before income taxes excluding amortization of intangible assets, money market fee waivers and the charge (recovery) related to investment management funds, net of incentives – Non-GAAP

$

307


$

339


$

305


$

303


$

323








Total revenue – GAAP

$

970


$

1,036


$

1,003


$

998


$

1,010


Less:  Distribution and servicing expense

106


111


105


102


97


Money market fee waivers benefiting distribution and servicing expense

38


37


38


36


38


Add:  Money market fee waivers impacting total revenue

73


65


67


70


72


Total revenue net of distribution and servicing expense

and excluding money market fee waivers – Non-GAAP

$

899


$

953


$

927


$

930


$

947








Pre-tax operating margin (a)

25

%

16

%

24

%

24

%

26

%

Pre-tax operating margin excluding amortization of intangible assets, money market fee waivers, the charge (recovery) related to investment management funds, net of incentives and net of distribution and servicing expense – Non-GAAP (a)

34

%

36

%

33

%

32

%

34

%

(a)   Income before taxes divided by total revenue.

DIVIDENDS

Common – On April 22, 2015, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.17 per common share.  This cash dividend is payable on May 14, 2015 to shareholders of record as of the close of business on May 4, 2015. 

Preferred – On April 22, 2015, The Bank of New York Mellon Corporation also declared the following dividends for the noncumulative perpetual preferred stock, liquidation preference $100,000 per share, for the dividend period ending in June 2015, in each case, payable on June 22, 2015 to holders of record as of the close of business on June 5, 2015:

  • $1,044.44 per share on the Series A Preferred Stock (equivalent to $10.4444 per Normal Preferred Capital Security of Mellon Capital IV, each representing 1/100th interest in a share of Series A Preferred Stock);
  • $1,300.00 per share on the Series C Preferred Stock (equivalent to $0.3250 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock); and
  • $2,250.00 per share on the Series D Preferred Stock (equivalent to approximately $22.50 per depositary share, each representing a 1/100th interest in a share of the Series D Preferred Stock).

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle.  Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets.  As of March 31, 2015, BNY Mellon had $28.5 trillion in assets under custody and/or administration, and $1.7 trillion in assets under management.  BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

CAUTIONARY STATEMENT

A number of statements (i) in this Earnings Release, (ii) in our presentations and (iii) in the responses to questions on our conference call discussing our quarterly results and other public events may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 including our estimated capital ratios and expectations relating to those ratios, preliminary business metrics and statements regarding our capital plans; strategic priorities; initiatives in Investment Services and Investment Management; our business improvement process; and investment securities portfolio.  These statements may be expressed in a variety of ways, including the use of future or present tense language.  Words such as "estimate", "forecast", "project", "anticipate", "target", "expect", "intend", "continue", "seek", "believe", "plan", "goal", "could", "should", "may", "will", "strategy", "opportunities", "trends" and words of similar meaning signify forward-looking statements.  These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation which make reference to the cautionary factors described in this Earnings Release are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control).  Actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2014 and BNY Mellon's other filings with the Securities and Exchange Commission.  All forward-looking statements in this Earnings Release speak only as of April 22, 2015, and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

Contacts:

MEDIA:
Kevin Heine
(212) 635-1590
kevin.heine@bnymellon.com

ANALYSTS:
Valerie Haertel
(212) 635-8529
valerie.haertel@bnymellon.com

 

SOURCE BNY Mellon