January 19, 2011

BNY Mellon Reports Fourth Quarter Continuing EPS of $0.55 Including $0.04 of M&I and Restructuring Expenses


Total Revenue of $3.8 Billion +14% Year-Over-Year, +10% Sequentially

Total Fee Revenue +12% Sequentially

  • Securities Servicing Fees +8%
  • Asset & Wealth Management Fees +15%
  • Foreign Exchange Trading Revenue +29%

Record Levels of Assets Under Management and Assets Under Custody/Administration

Continued Strong Flows in Asset and Wealth Management

  • $15 Billion of Net Flows in 4Q10

Higher Capital Ratios Sequentially

  • Tier 1 13.4% +120 Bps, Tier 1 Common 11.8% +110 Bps

NEW YORK, January 19, 2011 — The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported fourth quarter income from continuing operations applicable to common shareholders of $690 million, or $0.55 per common share, compared with $712 million, or $0.59 per common share, in the fourth quarter of 2009 and $625 million, or $0.51 per common share, in the third quarter of 2010.

"We delivered 12% growth in fee revenue this quarter, reflecting improving markets, the underlying strength of our business model and continued investment in our businesses.  Asset quality was exceptionally strong throughout the year and our regulatory capital ratios grew, reflecting our strong capital generation.  I would like to thank our staff for all that they have accomplished for our clients and shareholders during the past year," said Robert P. Kelly, chairman and chief executive officer of BNY Mellon.

Net income from continuing operations applicable to common shareholders totaled $2.584 billion, or $2.11 per common share, for the full-year 2010 compared to a net loss of $1.097 billion, or $0.93 per common share, for the full-year 2009.  Net income applicable to common shareholders, including discontinued operations, for the full-year 2010 totaled $2.518 billion, or $2.05 per common share, compared to a net loss of $1.367 billion, or $1.16 per common share, for the full-year 2009.

Fourth Quarter Results - Unless otherwise noted, all comments begin with the results of the fourth quarter of 2010 and are compared to the fourth quarter of 2009, all information is reported on a continuing operations basis and sequential growth rates are unannualized.  Please refer to the Quarterly Earnings Review for a detailed review of our businesses.

Total revenue

 

 
 

Reconciliation of total revenue


 

 

 

 

 

4Q10 vs.

 

(dollar amounts in millions)

4Q10


 

3Q10


 

4Q09

3Q10

4Q09

 

Fee and other revenue – GAAP

$2,972


 

$2,668


 

$2,577


 

 
 

Less:  Net securities gains

1


 

6


 

15


 

 
 

     Total fee revenue – GAAP

2,971


 

2,662


 

2,562

12%

16%

 

Income of consolidated asset management funds,  net of noncontrolling interests

45

(a)

49

(a)

-


 

 
 

     Total fee revenue – Non-GAAP

3,016


 

2,711


 

2,562

11%

18%

 

Net interest revenue – GAAP

720


 

718


 

724


 

 
 

 

 

 

 

 

 

 

 
 

     Total revenue excluding net securities gains – Non-GAAP

$3,736

(b)

$3,429

(b)

$3,286

9%

14%

 

 

 

 

 

 

 

 

 
 

     Total revenue – GAAP

$3,751

(b)

$3,423

(b)

$3,301

10%

14%

 

(a) Includes $35 million and $36 million previously reported as asset and wealth management fee revenue and $10 million and $13 million previously reported as investment and other income in the fourth and third quarters of 2010.

 

(b) Total revenue from the Acquisitions (described below) was $253 million in the fourth quarter of 2010 and $237 million in the third quarter of 2010.

 
               


 
  • Record levels of assets under custody and administration and assets under management in the fourth quarter of 2010 reflect the impact of higher equity markets and new business, partially offset by the decline in the fixed income markets and the relative strength of the U.S. dollar.  Assets under custody and administration amounted to $25.0 trillion at Dec. 31, 2010, an increase of 12% compared with the prior year and 2% sequentially.  The increase compared with Dec. 31, 2009 primarily reflects the acquisitions of Global Investment Servicing ("GIS") on July 1, 2010 and BHF Asset Servicing GmbH ("BAS") on Aug. 2, 2010 (collectively, "the Acquisitions").  Assets under management, excluding securities lending assets, amounted to $1.17 trillion at Dec. 31, 2010.  This represents an increase of 5% compared with the prior year and 3% sequentially.
  • Securities servicing fees totaled $1.6 billion, an increase of 29% year-over-year and 8% sequentially.  Both increases reflect higher asset servicing revenue as a result of improved market values and new business, higher issuer services revenue primarily driven by increased depositary receipts revenue and higher clearing services revenue.  The year-over-year results were also positively impacted by the Acquisitions.
  • Asset and wealth management fees were $800 million in the fourth quarter of 2010, up 15% sequentially.  Adjusted for performance fees and income from consolidated asset management funds, net of noncontrolling interests, these fees totaled $762 million, an increase of 11% compared with the prior year period and 6% sequentially (see page 10).  Both increases reflect increased market values and net new business.
  • Foreign exchange and other trading revenue totaled $258 million compared with $246 million in the prior year period and $146 million in the third quarter of 2010.  In the fourth quarter of 2010, foreign exchange revenue totaled $206 million, an increase of 29% sequentially and 2% year-over-year.  The sequential increase was driven by increased volumes, new business and higher volatility.  Other trading revenue was $52 million in the fourth quarter of 2010, an increase of $7 million compared with the fourth quarter of 2009 and $66 million compared with the third quarter of 2010.  The sequential increase was largely driven by an improvement in fixed income and derivatives trading.
  • Investment and Other income totaled $80 million, a decrease of $1 million year-over-year and $17 million sequentially.  The sequential decrease primarily reflects lower foreign currency translation and seed capital revenue, and gains on the sales of assets in the third quarter of 2010.
  • Net interest revenue and the net interest margin (FTE) were $720 million and 1.54% compared with $718 million and 1.67% sequentially.  The sequential increase in net interest revenue was primarily driven by higher average interest-earning assets which resulted from a temporary increase in short-term client deposits during the fourth quarter.  The spike in short-term client deposits negatively impacted the net interest margin by approximately 10 basis points in the fourth quarter of 2010.


 

The provision for credit losses was a credit of $22 million in the fourth quarter of 2010 compared with a charge of $65 million in the fourth quarter of 2009 and a credit of $22 million in the third quarter of 2010.  The credit in the provision in the fourth quarter of 2010 primarily reflects the repayment of a loan to an asset manager that had previously filed for bankruptcy.  The decrease in the provision compared with the fourth quarter of 2009 reflects a reduction in criticized assets.  Criticized assets decreased 32% in the fourth quarter of 2010 and 66% in the full-year 2010.

Total noninterest expense

 

 

 

 

 
 

Reconciliation of noninterest expense


 

 

 

 

 

4Q10 vs.

 

(dollar amounts in millions)

4Q10


 

3Q10


 

4Q09


 

3Q10


 

4Q09

 

Noninterest expense – GAAP

$2,803


 

$2,611


 

$2,564


 

7%


 

9%

 

Less:  Amortization of intangible assets

115


 

111


 

107


 

 

 

 
 

           Restructuring charges

21


 

15


 

139


 

 

 

 
 

           M&I expenses

43


 

56


 

52


 

 

 

 
 

Total noninterest expense – Non-GAAP

$2,624

(a)

$2,429

(a)

$2,266


 

8%


 

16%

 

(a) Noninterest expense from the Acquisitions was $196 million in the fourth quarter of 2010 and $185 million in the third quarter of 2010.

 
                   


 
  • Total noninterest expense (excluding amortization of intangible assets, restructuring charges and M&I expenses) (Non-GAAP) increased 16% compared with the prior year period and 8% sequentially.  The increase compared with the prior year period reflects the impact of the Acquisitions, higher volume driven costs and new business.  The sequential increase includes the impact of higher volume driven costs, seasonality and new business.  In addition, noninterest expense in the fourth quarter of 2010 includes approximately $50 million of expenses primarily related to the full-year impact of adjusting compensation to market levels, the write-off of equipment and the anticipated settlement of a withholding tax matter with the Internal Revenue Service.


 

The effective tax rate on a continuing operations basis was 27.3% in the fourth quarter of 2010, 26.4% in the third quarter of 2010 and 28.3% in full-year 2010.

The unrealized net of tax gain on our total investment securities portfolio was $150 million at Dec. 31, 2010 compared with $311 million at Sept. 30, 2010.  The decline in the valuation of the investment securities portfolio was driven by higher interest rates.


 
 

Capital ratios (a)

Dec. 31,

Sept. 30,

Dec. 31,

 

 

2010

2010

2009

 

Tier 1 capital ratio

13.4%

12.2%

12.1%

 

Total (Tier 1 plus Tier 2) capital ratio

16.4

15.8

16.0

 

Leverage capital ratio

5.8

5.9

6.5

 

Common shareholders' equity to total assets ratio (b)

13.1

12.7

13.7

 

Tangible common shareholders' equity to tangible assets


 

 

 
 

of operations ratio – Non-GAAP (b)

5.8

5.3

5.2

 

Tier 1 common equity to risk-weighted assets ratio (b)

11.8

10.7

10.5

 

(a)  Includes discontinued operations.  Preliminary.

(b)  See the Supplemental information section beginning on page 9 for a calculation of these ratios.


 
 
       


 


 

The increase in the capital ratios sequentially primarily resulted from earnings retention and lower risk-weighted assets.  The increase from Dec. 31, 2009 primarily reflects earnings retention, the third quarter 2010 common equity issuance of $677 million and lower risk-weighted assets, partially offset by the impact of the Acquisitions.

Declaration of quarterly dividend – On Jan. 19, 2011, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.09 per common share.  This cash dividend is payable on Feb. 9, 2011 to shareholders of record as of the close of business on Jan. 31, 2011.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets.  BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team.  It has $25.0 trillion in assets under custody and administration and $1.17 trillion in assets under management, services $12.0 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation.  Additional information is available at www.bnymellon.com.

Supplemental Financial Information

The Quarterly Earnings Review and supplemental financial trends for The Bank of New York Mellon Corporation have been updated through Dec. 31, 2010 and are available at www.bnymellon.com (Investor Relations - Financial Reports).

Conference Call Data

Robert P. Kelly, chairman and chief executive officer; Gerald L. Hassell, president; and Thomas P. Gibbons, 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. EST on Jan. 19, 2011.  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.  The Earnings Release, together with the Quarterly Earnings Review and supplemental Financial Trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EST on Jan. 19, 2011.  Replays of the conference call and audio webcast will be available beginning Jan. 19, 2011 at approximately 2 p.m. EST through Feb. 1, 2011 by dialing (866) 479-2460 (U.S.) or (203) 369-1535 (International).  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

THE BANK OF NEW YORK MELLON CORPORATION

Financial Highlights

 

 

 

 

 

 

 

 
 

 

Quarter ended

Year ended


 
 

(dollar amounts in millions, except per common share amounts and unless otherwise noted)

Dec. 31,
2010

Sept. 30,
2010

Dec. 31,
2009

Dec. 31,
2010

Dec. 31,
2009


 
 

 
 

Continuing operations


 

 

 

 

 

 
 

Return on common equity (annualized) (a)

8.5%

7.8%

9.8%

8.2%

N/M


 
 

 Non-GAAP adjusted (a)

9.9%

9.2%

10.1%

9.7%

9.3%


 
 

 

 

 

 

 

 

 
 

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

27.5%

26.3%

33.0%

25.7%

N/M


 
 

 Non-GAAP adjusted (a)

29.1%

27.8%

31.1%

27.4%

32.1%


 
 

 

 

 

 

 

 

 
 

Fee and other revenue as a  percentage of total revenue excluding securities gains (losses)


 

 

 

 

 

 
 

79%

78%

78%

77%

78%


 
 

 

 

 

 

 

 

 
 

Annualized fee revenue per employee (based on average headcount)

(in thousands)


 

 

 

 

 

 
 

$ 246

$ 234

$ 242

$ 241

$ 241


 
 

 

 

 

 

 

 

 
 

Percentage of non-U.S. fee, net interest revenue and income of consolidated asset management funds, net of noncontrolling interests


 

 

 

 

 

 
 

 

 

 

 

 

 
 

38%

36%

36%

36%

32%


 
 

 

 

 

 

 

 

 
 

Pre-tax operating margin (a)

26%

24%

20%

27%

N/M


 
 

 Non-GAAP adjusted (a)

30%

30%

29%

32%

31%


 
 

 

 

 

 

 

 

 
 

Net interest margin (FTE)

1.54%

1.67%

1.77%

1.69%

1.82%


 
 

 

 

 

 

 

 

 
 

Selected average balances


 

 

 

 

 

 
 

Interest-earning assets

$187,597

$172,759

$164,075

$172,852

$160,955


 
 

Assets of operations

$241,734

$226,378

$214,205

$224,670

$212,127


 
 

Total assets

$256,409

$240,325

$214,205

$238,025

$212,127


 
 

Interest-bearing deposits

$111,776

$104,033

$  98,404

$104,133

$  98,206


 
 

Noninterest-bearing deposits

$  39,625

$  33,198

$  34,991

$  35,208

$  36,446


 
 

Total The Bank of New York Mellon


 

 

 

 

 

 
 

Corporation shareholders' equity

$  32,379

$  31,868

$  28,843

$  31,361

$  28,476


 
 

 

 

 

 

 

 

 
 

Average common shares and equivalents outstanding (in thousands):


 

 

 

 

 

 
 

 Basic

1,232,568

1,210,534

1,200,359

1,212,630

1,178,907


 
 

 Diluted

1,235,670

1,212,684

1,203,469

1,216,214

1,178,907

(b)

 

 

 

 

 

 

 

 
 

Period-end data


 

 

 

 

 

 
 

Assets under management (in billions)

$  1,172

$  1,141

$  1,115

$  1,172

$  1,115


 
 

Assets under custody and administration (in trillions)

$    25.0

$    24.4

$    22.3

$    25.0

$    22.3


 
 

 Cross-border assets (in trillions)

$      9.2

$      8.8

$      8.8

$      9.2

$      8.8


 
 

Market value of securities on loan (in billions) (c)

$     278

$     279

$     247

$     278

$     247


 
 

 

 

 

 

 

 

 
 

Employees

48,000

47,700

42,200

48,000

42,200


 
 

 

 

 

 

 

 

 
 

Book value per common share – GAAP (a)

$  26.06

$  25.92

$  23.99

$  26.06

$  23.99


 
 

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

$    8.91

$    8.59

$    7.90

$    8.91

$    7.90


 
 

Cash dividends per common share

$    0.09

$    0.09

$    0.09

$    0.36

$    0.51


 
 

Closing common stock price per common share

$  30.20

$  26.13

$  27.97

$  30.20

$  27.97


 
 

Market capitalization

$37,494

$32,413

$33,783

$37,494

$33,783


 
 

(a)  See Supplemental information beginning on page 9 for a calculation of these ratios.

(b)  Diluted earnings per share for the year ended Dec. 31, 2009, was calculated using average basic shares.  Adding back the dilutive shares would be anti-dilutive.

(c)  Represents the securities on loan, both cash and non-cash, managed by the Asset Servicing business.

N/M – Not meaningful.

 
             


 

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement

 

 

Quarter ended

Year ended

 

 

Dec. 31,


 

Sept. 30,


 

Dec. 31,

Dec. 31,


 

Dec. 31,

 

(in millions)

2010


 

2010


 

2009

2010


 

2009

 

Fee and other revenue


 

 

 

 

 

 

 

 
 

Securities servicing fees:


 

 

 

 

 

 

 

 
 

   Asset servicing

$   914


 

$   870


 

$   650

$3,089


 

$2,573

 

   Issuer services

409


 

364


 

368

1,460


 

1,463

 

   Clearing services

278


 

252


 

223

1,005


 

962

 

     Total securities servicing fees

1,601


 

1,486


 

1,241

5,554


 

4,998

 

Asset and wealth management fees

800


 

696


 

746

2,868


 

2,677

 

Foreign exchange and other trading revenue

258


 

146


 

246

886


 

1,036

 

Treasury services

129


 

132


 

134

517


 

519

 

Distribution and servicing

55


 

56


 

57

210


 

326

 

Financing-related fees

48


 

49


 

57

195


 

215

 

Investment and other income

80


 

97


 

81

467


 

337

 

     Total fee revenue

2,971


 

2,662


 

2,562

10,697


 

10,108

 

Net securities gains (losses)

1


 

6


 

15

27


 

(5,369)

 

     Total fee and other revenue

2,972


 

2,668


 

2,577

10,724


 

4,739

 

Operations of consolidated asset management funds


 

 

 

 

 

 

 

 
 

Investment income

176


 

144


 

-

663


 

-

 

Interest of asset management fund note holders

117


 

107


 

-

437


 

-

 

     Income of consolidated asset management funds

59


 

37


 

-

226


 

-

 

Net interest revenue


 

 

 

 

 

 

 

 
 

Interest revenue

913


 

875


 

854

3,533


 

3,507

 

Interest expense

193


 

157


 

130

608


 

592

 

     Net interest revenue

720


 

718


 

724

2,925


 

2,915

 

Provision for credit losses

(22)


 

(22)


 

65

11


 

332

 

Net interest revenue after provision for credit losses

742


 

740


 

659

2,914


 

2,583

 

Noninterest expense


 

 

 

 

 

 

 

 
 

Staff

1,417


 

1,344


 

1,221

5,215


 

4,700

 

Professional, legal and other purchased services

320


 

282


 

278

1,099


 

1,017

 

Software and equipment

207


 

187


 

178

725


 

676

 

Net occupancy

158


 

150


 

141

588


 

564

 

Distribution and servicing

104


 

94


 

91

377


 

393

 

Business development

88


 

63


 

76

271


 

214

 

Sub-custodian

70


 

60


 

55

247


 

203

 

Other

260


 

249


 

226

1,060


 

954

 

     Subtotal

2,624


 

2,429


 

2,266

9,582


 

8,721

 

Amortization of intangible assets

115


 

111


 

107

421


 

426

 

Restructuring charges

21


 

15


 

139

28


 

150

 

Merger and integration expenses

43


 

56


 

52

139


 

233

 

     Total noninterest expense

2,803


 

2,611


 

2,564

10,170


 

9,530

 

Income


 

 

 

 

 

 

 

 
 

Income (loss) from continuing operations before income taxes

970


 

834


 

672

3,694


 

(2,208)

 

Provision (benefit) for income taxes

265


 

220


 

(41)

1,047


 

(1,395)

 

     Net income (loss) from continuing operations

705


 

614


 

713

2,647


 

(813)

 

Discontinued operations:


 

 

 

 

 

 

 

 
 

 (Loss) from discontinued operations

(18)


 

(6)


 

(183)

(110)


 

(421)

 

 Benefit for income taxes

(7)


 

(3)


 

(64)

(44)


 

(151)

 

     Net (loss) from discontinued operations

(11)


 

(3)


 

(119)

(66)


 

(270)

 

     Net income (loss)

694


 

611


 

594

2,581


 

(1,083)

 

Net (income) loss attributable to noncontrolling interests

(15)

(a)

11

(a)

(1)

(63)

(a)

(1)

 

Redemption charge and preferred dividends

-


 

-


 

-

-


 

(283)

 

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


 

 

 

 

 

 

 

 
 

$   679


 

$   622


 

$   593

$2,518


 

$(1,367)

 

(a)  Includes income of $(14) million for the fourth quarter of 2010, a loss of $12 million for the third quarter of 2010, and income of $(59) million for the full year of 2010, related to consolidated asset management funds.

 
                 


 

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement - continued


 
 

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

Quarter ended

Year ended

 

Dec. 31,


 

Sept. 30,

Dec. 31,

Dec. 31,


 

Dec. 31,


 
 

(in dollars)

2010


 

2010

2009

2010


 

2009


 
 

Basic:


 

 

 

 

 

 

 

 
 

 Net income (loss) from continuing operations

$ 0.55


 

$ 0.51

$0.59

$2.11


 

$(0.93)


 
 

 Net loss from discontinued operations

(0.01)


 

-

(0.10)

(0.05)


 

(0.23)


 
 

   Net income (loss) applicable to common stock

$ 0.55

(b)

$ 0.51

$0.49

$2.06


 

$(1.16)


 
 

Diluted:


 

 

 

 

 

 

 

 
 

 Net income (loss) from continuing operations

$ 0.55


 

$ 0.51

$0.59

$2.11


 

$(0.93)


 
 

 Net loss from discontinued operations

(0.01)


 

-

(0.10)

(0.05)


 

(0.23)


 
 

   Net income (loss) applicable to common stock

$ 0.54


 

$ 0.51

$0.49

$2.05

(b)

$(1.16)

(c)

 

(a)  Basic and diluted earnings per share under the two-class method were calculated after deducting earnings allocated to participating securities of $6 million in the fourth quarter of 2010, $5 million in the third quarter of 2010, $6 million in the fourth quarter of 2009, $23 million in the full year 2010 and $ - million in the full year 2009.

(b)  Does not foot due to rounding.

(c)  Diluted earnings per share for the year ended Dec. 31, 2009, was calculated using average basic shares.  Adding back the dilutive shares would be anti-dilutive.

 
                 


 

 
 

Reconciliation of net income (loss) from continuing operations applicable to the common shareholders of The Bank of New York Mellon Corporation

(in millions)

Quarter ended


 

 
 

Year ended

 

Dec. 31,
2010

Sept. 30,
2010

Dec. 31,
2009

Dec. 31,
2010

Dec. 31,
2009

 

Net income (loss) from continuing operations

$ 705

$ 614

$ 713

$2,647

$(813)

 

Net (income) loss attributable to noncontrolling interests

(15)

11

(1)

(63)

(1)

 

Redemption charge and preferred dividends

-

-

-

-

(283)

 

Net income (loss) from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation

690

625

712

2,584

(1,097)

 

Net loss from discontinued operations

(11)

(3)

(119)

(66)

(270)

 

 Net income (loss) applicable to the common shareholders of The Bank of New York Mellon Corporation


 

 

 

 

 
 

$ 679

$ 622

$ 593

$2,518

$(1,367)

 

 

 

 

 

 

 
 
           


 

Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.

THE BANK OF NEW YORK MELLON CORPORATION
Consolidated Balance Sheet


 
 

(dollar amounts in millions, except per share amounts)

Dec. 31,
2010

Sept. 30,
2010

Dec. 31,
2009

 

Assets


 

 

 
 

Cash and due from:


 

 

 
 

 Banks

$3,675

$3,693

$3,732

 

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

18,549

15,765

7,362

 

Interest-bearing deposits with banks

50,200

60,293

56,302

 

Federal funds sold and securities purchased under resale agreements

5,169

4,735

3,535

 

Securities:


 

 

 
 

 Held-to-maturity (fair value of $3,657, $3,867 and $4,240)

3,655

3,862

4,417

 

 Available-for-sale (includes $483, $481 and $- previously securitized)

62,652

58,238

51,632

 

   Total securities

66,307

62,100

56,049

 

Trading assets

6,276

9,860

6,001

 

Loans

37,808

37,867

36,689

 

Allowance for loan losses

(498)

(534)

(503)

 

   Net loans

37,310

37,333

36,186

 

Premises and equipment

1,693

1,677

1,602

 

Accrued interest receivable

508

580

639

 

Goodwill

18,042

18,073

16,249

 

Intangible assets

5,696

5,818

5,588

 

Other assets

18,790

19,315

16,737

 

Assets of discontinued operations

278

310

2,242

 

   Subtotal assets of operations

232,493

239,552

212,224

 

Assets of consolidated asset management funds, at fair value:


 

 

 
 

 Trading assets

14,121

14,149

-

 

 Other assets

645

456

-

 

   Subtotal assets of consolidated asset management funds, at fair value

14,766

14,605

-

 

     Total assets

$247,259

$254,157

$212,224

 

Liabilities


 

 

 
 

Deposits:


 

 

 
 

 Noninterest-bearing (principally domestic offices)

$38,703

$37,247

$33,477

 

 Interest-bearing deposits in domestic offices

37,937

35,141

32,944

 

 Interest-bearing deposits in foreign offices

68,699

76,593

68,629

 

   Total deposits

145,339

148,981

135,050

 

Federal funds purchased and securities sold under repurchase agreements

5,602

3,301

3,348

 

Trading liabilities

6,911

10,102

6,396

 

Payables to customers and broker-dealers

9,962

10,895

10,721

 

Commercial paper

10

9

12

 

Other borrowed funds

2,858

2,220

477

 

Accrued taxes and other expenses

6,164

5,540

4,484

 

Other liabilities (including allowance for lending related commitments of $73, $74 and $125)

7,176

10,100

3,891

 

Long-term debt

16,517

16,720

17,234

 

Liabilities of discontinued operations

-

-

1,608

 

   Subtotal liabilities of operations

200,539

207,868

183,221

 

Liabilities of consolidated asset management funds, at fair value:


 

 

 
 

 Trading liabilities

13,561

13,397

-

 

 Other liabilities

2

1

-

 

   Subtotal liabilities of consolidated asset management funds, at fair value

13,563

13,398

-

 

     Total liabilities

214,102

221,266

183,221

 

Temporary equity


 

 

 
 

Redeemable noncontrolling interests

92

41

-

 

Permanent equity


 

 

 
 

Common stock-par value $0.01 per common share; authorized 3,500,000,000 common shares; issued 1,244,608,989, 1,243,448,825 and 1,208,861,641 common shares

12

12

12

 

Additional paid-in capital

22,885

22,808

21,917

 

Retained earnings

10,898

10,386

8,912

 

Accumulated other comprehensive loss, net of tax

(1,355)

(969)

(1,835)

 

Less:  Treasury stock of 3,078,794, 2,994,416 and 1,026,927 common shares, at cost

(86)

(84)

(29)

 

   Total The Bank of New York Mellon Corporation shareholders' equity

32,354

32,153

28,977

 

Nonredeemable noncontrolling interests

12

20

26

 

Nonredeemable noncontrolling interests of consolidated asset management funds

699

677

-

 

   Total permanent equity

33,065

32,850

29,003

 

   Total liabilities, temporary equity and permanent equity

$247,259

$254,157

$212,224

 
       


 

Discontinued operations

On Jan. 15, 2010, BNY Mellon sold Mellon United National Bank ("MUNB"), a national bank subsidiary located in Florida.  We have applied discontinued operations accounting to this business.  The income statements for all periods in this Earnings Release are presented on a continuing operations basis.  In the fourth quarter of 2010, we recorded an after-tax loss on discontinued operations of $11 million, primarily reflecting lower of cost or market write-downs on the retained MUNB loans held for sale.

Consolidated net income (loss) applicable to common shareholders, including discontinued operations

Net income applicable to common shareholders, including discontinued operations, totaled $679 million, or $0.54 per common share in the fourth quarter of 2010, compared with $593 million, or $0.49 per common share, in the fourth quarter of 2009 and net income of $622 million, or $0.51 per common share, in the third quarter of 2010.

Supplemental information – Explanation of Non-GAAP financial measures

BNY Mellon has included in this release certain Non-GAAP financial measures based upon tangible common shareholders' equity.  BNY Mellon believes that the ratio of tangible common shareholders' equity to tangible assets of operations is a measure of capital strength that provides additional useful information to investors, supplementing the Tier 1 capital ratio which is utilized by regulatory authorities.  Unlike the Tier 1 capital ratio, the tangible common shareholders' equity ratio fully incorporates those 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 calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes.  This ratio is also informative to investors in BNY Mellon's common stock because, unlike the Tier 1 capital ratio, it excludes trust preferred securities issued by BNY Mellon.  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 BNY Mellon's performance in reference to those assets which are productive in generating 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 such assets in relation to shares of common stock outstanding.  BNY Mellon has presented revenue measures which exclude the effect of net securities gains (losses) and noncontrolling interests related to consolidated asset management funds; and expense measures which exclude special litigation reserves taken in the first quarter of 2010, the FDIC special assessment, restructuring charges, M&I expenses and amortization of intangible assets expenses; and measures which utilize net income excluding tax items such as benefit of tax settlements.  Return on equity measures and operating margin measures which exclude some or all of these items are also presented.  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 situations where accounting rules require certain ongoing charges as a result of prior transactions, or where valuation or other accounting/regulatory requirements require charges unrelated to operational initiatives.  M&I expenses primarily relate to the Acquisitions which were consummated in the third quarter of 2010 and the merger with Mellon Financial Corporation in 2007.  M&I expenses generally continue for approximately three years after the transaction, and can vary on a year-to-year basis depending on the stage of the integration.  BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased, typically after approximately three years.  Future periods will not reflect such M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded.  With regards to the exclusion of net securities gains (losses), BNY Mellon's primary businesses are Asset and Wealth Management and Institutional Services.  The management of these businesses is evaluated on the basis of the ability of these businesses to generate fee and net interest revenue and to control expenses, and not on the results of BNY Mellon's investment securities portfolio.  The investment securities portfolio is managed within the Other group of businesses.  The primary objective of the investment securities portfolio is to generate net interest revenue from the liquidity generated by BNY Mellon's processing businesses.  BNY Mellon does not generally originate or trade the securities in the investment securities portfolio.  With regards to higher yields related to the restructured investment securities portfolio, client deposits serve as the primary funding source for our investment securities portfolio and we typically allocate all interest revenue to the businesses generating the deposits.  Accordingly, the higher yield related to the restructured investment securities portfolio has been included in the results of our businesses.  Restructuring charges relate to migrating positions to global growth centers and the elimination of certain positions.

Excluding the benefit of tax settlements permits investors to calculate the tax impact of BNY Mellon's primary businesses.  The presentation of financial measures excluding special litigation reserves in the first quarter of 2010 provides investors with the ability to view performance metrics on the basis that management views results.  The presentation of income of consolidated asset management funds, net of noncontrolling interests related to the consolidation of certain asset management funds, permits investors to view revenue on a basis consistent with prior periods.  BNY Mellon believes that these presentations, as a supplement to GAAP information, gives investors a clearer picture of the results of its primary businesses.  

In this Earnings Release, certain amounts are 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 business-level basis.

Income from consolidated asset management funds,
net of noncontrolling interests

 

(in millions)

4Q10

3Q10

4Q09

2010

2009

 

Operations of consolidated asset management funds

$ 59

$ 37

$ -

$ 226

$ -

 

Less:  Noncontrolling interests of consolidated asset management funds

14

(12)

-

59

-

 

   Income from consolidated   asset management funds, net of noncontrolling interests


 

 

 

 

 
 

$ 45

$ 49

$ -

$ 167

$ -

 

 

 

 

 

 

 
 
           


 

Income from consolidated asset management funds, net of
noncontrolling interests – previously disclosed as

 

(in millions)

4Q10

3Q10

4Q09

2010

2009


 
 

Asset and wealth management revenue

$ 35

$ 36

$ -

$ 125

$ -


 
 

Investment and other income

10

13

-

42

-


 
 

   Total

$ 45

$ 49

$ -

$ 167

$ -


 
 
             


 

Asset servicing revenue

 

(in millions)

4Q10

3Q10

4Q09

 

Asset servicing revenue

$914

$ 870

$ 650

 

Less:  Securities lending fee revenue

37

38

29

 

 Asset servicing revenue excluding
securities lending fee revenue

$877

$ 832

$ 621

 

 

 

 

 
 
       


 

 
 

Asset and wealth management fee revenue


 

 

 

4Q10 vs.

 

(dollars in millions)

4Q10

3Q10

4Q09

4Q09

3Q10

 

Asset and wealth management fee revenue

$800

$ 696

$ 746

7%

15%

 

Less:  Performance fees

73

16

59


 

 
 

Add:  Revenue from consolidated asset management funds, net of noncontrolling interests


 

 

 

 

 
 

35

36

-


 

 
 

 Asset and wealth management fee revenue excluding performance fees


 

 

 

 

 
 

$ 762

$ 716

$ 687

11%

6%

 
           


 



 


 
 

Reconciliation of income (loss) from continuing operations before income taxes – pre-tax operating margin


 

 

 

 

 
 

(dollars in millions)

4Q10

3Q10

4Q09

2010

2009

 

Income (loss) from continuing operations before income taxes – GAAP

$ 970

$ 834

$672

$3,694

$(2,208)

 

Less:  Net securities gains (losses)

1

6

15

27

(5,369)

 

         Noncontrolling interests of consolidated asset management funds

14

(12)

-

59

-

 

Add:  Special litigation reserves

N/A

N/A

N/A

164

N/A

 

        FDIC special assessment

-

-

-

-

61

 

        Asset-based taxes

-

-

-

-

20

 

        Restructuring charges

21

15

139

28

150

 

        M&I expenses

43

56

52

139

233

 

        Amortization of intangible assets

115

111

107

421

426

 

Income (loss) from continuing operations before income taxes excluding net securities gains (losses), noncontrolling interests of consolidated asset management funds, special litigation reserves, FDIC special assessment, asset-based taxes, restructuring charges, M&I expenses and amortization of intangible assets – Non-GAAP

$1,134

$1,022

$ 955

$4,360

$4,051

 

 

 

 

 

 

 
 

Fee and other revenue – GAAP

$2,972

$2,668

$2,577

$10,724

$4,739

 

Income of consolidated asset management funds – GAAP

59

37

-

226

-

 

Net interest revenue – GAAP

720

718

724

2,925

2,915

 

 Total revenue – GAAP

3,751

3,423

3,301

13,875

7,654

 

 Less:  Net securities gains (losses)

1

6

15

27

(5,369)

 

            Noncontrolling interests of consolidated asset management funds

14

(12)

-

59

-

 

 Total revenue excluding net securities gains (losses) and noncontrolling interests of consolidated asset management funds – Non-GAAP


 

 

 

 

 
 

 

 

 

 

 
 

$3,736

$3,429

$3,286

$13,789

$13,023

 

 

 

 

 

 

 
 

Pre-tax operating margin (a)

26%

24%

20%

27%

N/M

 

Pre-tax operating margin excluding net securities gains (losses), noncontrolling interests of consolidated asset management funds, special litigation reserves, FDIC special assessment, asset-based taxes, restructuring charges, M&I expenses and amortization of intangible assets – Non-GAAP (a)


 

 

 

 

 
 

 

 

 

 

 
 

 

 

 

 

 
 

 

 

 

 

 
 

30%

30%

29%

32%

31%

 

(a) Income (loss) before taxes divided by total revenue.

N/A – Not applicable.

N/M – Not meaningful.

 
           


 

 
 

Return on common equity and tangible common equity – continuing operations


 

 

 

 

 
 

(dollars in millions)

4Q10

3Q10

4Q09

2010

2009

 

Net income (loss) applicable to common shareholders of


 

 

 

 

 
 

The Bank of New York Mellon Corporation - GAAP

$ 679

$ 622

$ 593

$2,518

$(1,367)

 

Less:  Loss from discontinued operations, net of tax

(11)

(3)

(119)

(66)

(270)

 

 Net income (loss) from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation

690

625

712

2,584

(1,097)

 

Add: Amortization of intangible assets

72

70

66

264

265

 

 Net income (loss) from continuing operations applicable


 

 

 

 

 
 

  to common shareholders of The Bank of New York


 

 

 

 

 
 

  Mellon Corporation excluding amortization of


 

 

 

 

 
 

  intangible assets – Non-GAAP

762

695

778

2,848

(832)

 

Less:  Net securities gains (losses)

-

4

31

17

(3,360)

 

Add: Special litigation reserves

N/A

N/A

N/A

98

N/A

 

  FDIC special assessment

-

-

-

-

36

 

  Restructuring charges

15

8

86

19

94

 

  M&I expenses

29

37

33

91

144

 

  Discrete tax benefits / benefit of tax settlements

-

-

(133)

-

(267)

 

Net income from continuing operations excluding amortization of intangible assets, net securities gains (losses), special litigation reserves, FDIC special assessment, restructuring charges, M&I expenses and discrete tax benefit / benefit of tax settlements – Non-GAAP


 

 

 

 

 
 

 

 

 

 

 
 

 

 

 

 

 
 

 

 

 

 

 
 

$ 806

$ 736

$ 733

$  3,039

$  2,535

 

 

 

 

 

 

 
 

Average common shareholders' equity

$32,379

$31,868

$28,843

$31,361

$27,198

 

Less:Average goodwill

18,073

17,798

16,291

17,029

16,042

 

  Average intangible assets

5,761

5,956

5,587

5,678

5,654

 

Add: Deferred tax liability – tax deductible goodwill

816

763

720

816

720

 

  Deferred tax liability – non-tax deductible intangible assets

1,625

1,634

1,680

1,625

1,680

 

Average tangible common shareholders' equity – Non-GAAP

$10,986

$10,511

$9,365

$11,095

$7,902

 

 

 

 

 

 

 
 

Return on common equity– GAAP (a)

8.5%

7.8%

9.8%

8.2%

N/M

 

Return on common equity excluding amortization of intangible assets, net securities gains (losses), special litigation reserves, FDIC special assessment, restructuring charges, M&I expenses and discrete tax benefit / benefit of tax settlements – Non-GAAP (a)

9.9%

9.2%

10.1%

9.7%

9.3%

 

 

 

 

 

 

 
 

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

27.5%

26.3%

33.0%

25.7%

N/M

 

Return on tangible common equity excluding net securities gains (losses), special litigation reserves, FDIC special assessment, restructuring charges, M&I expenses and discrete tax benefits / benefit of tax settlements – Non-GAAP (a)


 

 

 

 

 
 

 

 

 

 

 
 

 

 

 

 

 
 

29.1%

27.8%

31.1%

27.4%

32.1%

 

(a)  Annualized.

N/A – Not applicable.

N/M – Not meaningful.

 
           


 

 
 

Equity to assets and book value per common share

Dec. 31,

Sept. 30,

Dec. 31,

 

(dollars in millions, unless otherwise noted)

2010

2010

2009

 

Common shareholders' equity at period end - GAAP

$  32,354

$  32,153

$  28,977

 

Less:  Goodwill

18,042

18,073

16,249

 

     Intangible assets

5,696

5,818

5,588

 

Add:  Deferred tax liability – tax deductible goodwill

816

763

720

 

     Deferred tax liability – non-tax deductible intangible assets

1,625

1,634

1,680

 

Tangible common shareholders' equity at period end – Non-GAAP

$  11,057

$  10,659

$   9,540

 

 

 

 

 
 

Total assets at period end - GAAP

$247,259

$254,157

$212,224

 

Less:  Assets of consolidated asset management funds

14,766

14,605

-

 

 Subtotal assets of operations – Non-GAAP

232,493

239,552

212,224

 

Less:  Goodwill

18,042

18,073

16,249

 

     Intangible assets

5,696

5,818

5,588

 

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

18,566

15,750

7,375

 

Tangible assets of operations at period end – Non-GAAP

$190,189

$199,911

$183,012

 

 

 

 

 
 

Common shareholders' equity to total assets – GAAP

13.1%

12.7%

13.7%

 

Tangible common shareholders' equity to tangible assets of operations – Non-GAAP

5.8%

5.3%

5.2%

 

 

 

 

 
 

Period end common shares outstanding (in thousands)

1,241,530

1,240,454

1,207,835

 

 

 

 

 
 

Book value per common share

$   26.06

$    25.92

$ 23.99

 

Tangible book value per common share – Non-GAAP

$     8.91

$      8.59

$   7.90

 

(a)  Assigned a zero percent risk weighting by the regulators.


 

 

 
 

 

 

 

 
 
       


 

 
 

Calculation of Tier 1 common equity to risk-weighted assets ratio (a)

Dec. 31,

Sept. 30,

Dec. 31,

 

(dollars in millions)

2010

2010

2009

 

Total Tier 1 capital

$  13,598

$  13,026

$  12,883

 

Less:  Trust preferred securities

1,676

1,680

1,686

 

Total Tier 1 common equity

$  11,922

$  11,346

$  11,197

 

 

 

 

 
 

Total risk-weighted assets

$101,224

$106,362

$106,328

 

 

 

 

 
 

Tier 1 common equity to risk-weighted assets ratio

11.8%

10.7%

10.5%

 

(a)  On a regulatory basis using Tier 1 capital as determined under BASEL I guidelines.

 
       


 

Cautionary Statement

The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements on expectations with respect to settlement with the Internal Revenue Service.  These statements, which may be expressed in a variety of ways, including the use of future or present tense language, relate to, among other things, our ability to meet the proposed new capital standards.  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).  Factors that could cause BNY Mellon's results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2009, BNY Mellon's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 and its other filings with the Securities and Exchange Commission.  All forward-looking statements in this Earnings Release speak only as of Jan. 19, 2011 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.

SOURCE BNY Mellon