January 21, 2016

BNY Mellon Reports Fourth Quarter Earnings Of $637 Million Or $0.57 Per Common Share


NEW YORK, Jan. 21, 2016 /PRNewswire/ ==

GENERATED MORE THAN 300 BASIS POINTS OF POSITIVE OPERATING LEVERAGE YEAR-OVER-YEAR ON AN ADJUSTED BASIS (a)

  • Total revenue up 2% on an adjusted basis (a)
    • Net interest revenue up 7%
  • Total noninterest expense decreased 2% on an adjusted basis (a)

FULL-YEAR 2015 EARNINGS OF $3.1 BILLION OR $2.71 PER COMMON SHARE, OR $2.85 PER COMMON SHARE EXCLUDING NON-OPERATING ITEMS (b)

  • Generated more than 400 basis points of positive operating leverage in 2015 on an adjusted basis (b)
  • Earnings per common share up 19% in 2015 on an adjusted basis (b)

EXECUTING ON CAPITAL PLAN AND RETURN OF VALUE TO COMMON SHAREHOLDERS

  • Repurchased 10.1 million common shares for $431 million in the fourth quarter and 55.6 million common shares for $2.4 billion in full-year 2015
  • Adjusted return on tangible common equity of 19% in the fourth quarter and 21% in full-year 2015 (b)

ACQUIRING SILICON VALLEY WEALTH MANAGER, ATHERTON LANE ADVISERS, WITH $2.7 BILLION OF AUM

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported fourth quarter net income applicable to common shareholders of $637 million, or $0.57 per diluted common share, or $755 million, or $0.68 per diluted common share, adjusted for the impairment charge related to a recent court decision, litigation and restructuring charges.  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 and restructuring charges, offset by the benefit primarily related to a tax carryback claim.  In the third quarter of 2015, net income applicable to common shareholders was $820 million, or $0.74 per diluted common share. (b)

"Our results in 2015 demonstrated that our strategic plan has positioned us well to perform in all operating environments. Even with geopolitical instability, emerging market weakness, higher regulatory compliance requirements and low interest rates, we executed on our strategic priorities and focused on what was within our control. For full-year 2015, our earnings per share increased by 19 percent on an adjusted basis as we generated more than 400 basis points of positive operating leverage and achieved a return on tangible common equity of 21 percent. Importantly, we are on track to achieve our three-year goals," Gerald L. Hassell, chairman and chief executive officer, said. (b)

"In the fourth quarter, we also generated strong positive operating leverage, mainly through our intense focus on our business improvement process, which is creating operating efficiencies for our clients and savings for our shareholders. As we look ahead to 2016, enhancing the client experience continues to be a priority, as we seek to strengthen service quality and productivity by leveraging our investments in industry-leading technologies," Mr. Hassell added.

"Our focus remains on relentlessly delivering value-added solutions, investment excellence and actionable, data-driven insights to our clients and strong returns to our shareholders. I want to thank our clients for their partnership and confidence in us as well as all our team members around the world for rising to the occasion to meet the heightened expectations of ourselves, our clients and our shareholders," Mr. Hassell concluded.

In 2015, net income applicable to common shareholders totaled $3.1 billion, or $2.71 per diluted common share, or $3.2 billion, or $2.85 per diluted common share, adjusted for the impairment charge related to a recent court decision, litigation and restructuring charges.  In 2014, net income applicable to common shareholders totaled $2.5 billion, or $2.15 per diluted common share, or $2.8 billion, or $2.39 per diluted common share, adjusted for litigation and restructuring charges, the charge related to investment management funds, net of incentives, the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, and the benefit primarily related to a tax carryback claim.

(a)   See pages 3-4 for the Non-GAAP adjustments and additional information.
(b)   See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for the reconciliation of these Non-GAAP measures.

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. EST on Jan. 21, 2016.  This conference call and audio webcast will include forward-looking statements and may include other material information. 

Investors and analysts wishing to access the conference call and audio webcast may do so by dialing (877) 397-0291 (U.S.) or (719) 325-2175 (International), and using the passcode: 619690, or by logging on to www.bnymellon.com.  Earnings materials will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EST on Jan. 21, 2016.  Replays of the conference call and audio webcast will be available beginning Jan. 21, 2016 at approximately 2 p.m. EST through Feb. 21, 2016 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 2620345.  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

FOURTH QUARTER 2015 FINANCIAL HIGHLIGHTS (a)
(comparisons are 4Q15 vs. 4Q14 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)

4Q15


 

4Q14


 

Inc


 

4Q15


 

4Q14


 

Inc

GAAP results

$

0.57


 

 

$

0.18


 

 

 

 

$

637


 

 

$

209


 

 

 

Add:  Litigation and restructuring charges

0.01


 

 

0.53


 

 

 

 

12


 

 

608


 

 

 

Impairment charge related to a recent court decision

0.10


 

 

N/A


 

 

 

 

106


 

 

N/A


 

 

 

Less:  Benefit primarily related to a tax carryback claim

N/A


 

 

0.13


 

 

 

 

N/A


 

 

150


 

 

 

Non-GAAP results

$

0.68


 

 

$

0.58


 

 

17

%


 

$

755


 

 

$

667


 

 

13

%

N/A - Not applicable.

  • Total revenue was $3.7 billion, an increase of 1%, or 2% (Non-GAAP).
    • Investment services fees were flat reflecting growth in the Global Collateral Services and Broker-Dealer Services and higher securities lending revenue, offset by lost business in clearing services due to industry consolidations and the unfavorable impact of a stronger U.S. dollar.
    • Investment management and performance fees decreased 2%, or an increase of 1% on a constant currency basis (Non-GAAP), driven by lower money market fee waivers and higher performance fees, partially offset by net outflows and lower market values.
    • Foreign exchange revenue was flat reflecting lower volumes in standing instruction programs and lower volatility, offset by higher volumes in other trading programs and the impact of hedging activity for foreign currency placements.
    • Financing-related fees increased $8 million driven by higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity.
    • Investment and other income increased $15 million driven by the higher other income related to termination fees in our clearing business and seed capital gains, partially offset by lower asset-related gains and lease residual gains.
    • Net interest revenue increased $48 million driven by higher yields, the shift out of cash into securities and loans and lower interest expense on deposits.
  • The provision for credit losses was $163 million reflecting the impairment charge related to a recent court decision.
  • Noninterest expense was $2.7 billion, a decrease of 24%, or 2% (Non-GAAP) excluding litigation and restructuring charges and amortization of intangible assets. Noninterest expense was lower in nearly all categories reflecting the favorable impact of a stronger U.S. dollar, offset by higher compensation and employee benefits expenses. The increase in compensation expenses primarily related to severance in support of our business improvement process. See page 10 for additional information.
  • Generated more than 300 basis points of positive operating leverage year-over-year on an adjusted basis (Non-GAAP).
  • Effective tax rate of 20.1%. The rate is approximately 3% lower primarily due to the impact of the impairment charge and a 2% benefit from a more favorable geographic mix of earnings and higher tax-exempt income.
  • Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
    • AUC/A of $28.9 trillion, increased 1% reflecting net new business, partially offset by the unfavorable impact of a stronger U.S. dollar and lower market values.
      • Estimated new AUC/A wins in Asset Servicing of $49 billion in 4Q15.
    • AUM of $1.63 trillion, decreased 4% reflecting the unfavorable impact of a stronger U.S. dollar, net outflows and lower market values, partially offset by the January 2015 acquisition of Cutwater Asset Management.
      • Net long-term outflows of $11 billion in 4Q15 driven by index and equity investments offset by continued strength in liability-driven investments.
      • Net short-term inflows totaled $2 billion in 4Q15.
  • Capital
    • Repurchased 10.1 million common shares for $431 million in 4Q15 and 55.6 million common shares for $2.4 billion in full-year 2015.
    • Adjusted return on tangible common equity of 19% in 4Q15 and 21% in full-year 2015 (a).

 

(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 net income (loss) attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges, the impairment charge related to a recent court decision 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)


 

 

 

 

 

4Q15 vs.

4Q15

3Q15

2Q15

1Q15

4Q14

3Q15

4Q14

Revenue:


 

 

 

 

 

 

 

Fee and other revenue

$

2,950


 

$

3,053


 

$

3,067


 

$

3,012


 

$

2,935


 

(3)%


 

1

%

Income (loss) from consolidated investment management funds

16


 

(22)


 

40


 

52


 

42


 

 

 

Net interest revenue

760


 

759


 

779


 

728


 

712


 


 

7


 

Total revenue – GAAP

3,726


 

3,790


 

3,886


 

3,792


 

3,689


 

(2)


 

1


 

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

5


 

(5)


 

37


 

31


 

24


 

 

 

Total revenue – Non-GAAP

3,721


 

3,795


 

3,849


 

3,761


 

3,665


 

(2)


 

2


 

Provision for credit losses

163


 

1


 

(6)


 

2


 

1


 

 

 

Expense:


 

 

 

 

 

 

 

Noninterest expense – GAAP

2,692


 

2,680


 

2,727


 

2,700


 

3,524


 


 

(24)


 

Less:  Amortization of intangible assets

64


 

66


 

65


 

66


 

73


 

 

 

M&I, litigation and restructuring charges (recoveries)

18


 

11


 

59


 

(3)


 

800


 

 

 

Total noninterest expense – Non-GAAP

2,610


 

2,603


 

2,603


 

2,637


 

2,651


 


 

(2)


 

Income:


 

 

 

 

 

 

 

Income before income taxes

871


 

1,109


 

1,165


 

1,090


 

164


 

(21)%


 

N/M


 

Provision (benefit) for income taxes

175


 

282


 

276


 

280


 

(93)


 

 

 

Net income

$

696


 

$

827


 

$

889


 

$

810


 

$

257


 

 

 

Net (income) loss attributable to noncontrolling interests (a)

(3)


 

6


 

(36)


 

(31)


 

(24)


 

 

 

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

693


 

833


 

853


 

779


 

233


 

 

 

Preferred stock dividends

(56)


 

(13)


 

(23)


 

(13)


 

(24)


 

 

 

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

$

637


 

$

820


 

$

830


 

$

766


 

$

209


 

 

 

 

 

 

 

 

 

 

 

Operating leverage – Non-GAAP (b)


 

 

 

 

 

(222)

 bps

308

bps


 

 

 

 

 

 

 

 

Key Metrics:


 

 

 

 

 

 

 

Pre-tax operating margin (c)

23

%

29

%

30

%

29

%

4

%


 

 

Non-GAAP (c)

30

%

31

%

33

%

30

%

28

%


 

 

 

 

 

 

 

 

 

 

Return on common equity (annualized) (c)

7.1

%

9.1

%

9.4

%

8.8

%

2.2

%


 

 

Non-GAAP (c)

8.9

%

9.7

%

10.3

%

9.2

%

7.7

%


 

 

 

 

 

 

 

 

 

 

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

16.2

%

20.8

%

21.5

%

20.3

%

5.9

%


 

 

Non-GAAP adjusted (c)

19.0

%

21.0

%

22.5

%

20.2

%

16.3

%


 

 

 

 

 

 

 

 

 

 

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

79

%

80

%

79

%

79

%

79

%


 

 

 

 

 

 

 

 

 

 

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

34

%

37

%

36

%

36

%

35

%


 

 

 

 

 

 

 

 

 

 

Average common shares and equivalents outstanding:


 

 

 

 

 

 

 

Basic

1,088,880


 

1,098,003


 

1,113,790


 

1,118,602


 

1,120,672


 

 

 

Diluted

1,096,385


 

1,105,645


 

1,122,135


 

1,126,306


 

1,129,040


 

 

 

 

 

 

 

 

 

 

 

Period end:


 

 

 

 

 

 

 

Full-time employees

51,200


 

51,300


 

50,700


 

50,500


 

50,300


 

 

 

Book value per common share – GAAP (c)

$

32.69


 

$

32.59


 

$

32.28


 

$

31.89


 

$

32.09


 

 

 

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

$

15.27


 

$

15.16


 

$

14.86


 

$

14.82


 

$

14.70


 

 

 

Cash dividends per common share

$

0.17


 

$

0.17


 

$

0.17


 

$

0.17


 

$

0.17


 

 

 

Common dividend payout ratio


 

30

%


 

23

%


 

23

%


 

25

%


 

94

%


 

 

Closing stock price per common share

$

41.22


 

$

39.15


 

$

41.97


 

$

40.24


 

$

40.57


 

 

 

Market capitalization

$

44,738


 

$

42,789


 

$

46,441


 

$

45,130


 

$

45,366


 

 

 

Common shares outstanding

1,085,343


 

1,092,953


 

1,106,518


 

1,121,512


 

1,118,228


 

 

 

(a)   Primarily attributable to noncontrolling interests related to consolidated investment management funds.
(b)   Pre-tax operating leverage is the rate of increase in total revenue less the rate of increase in total noninterest expense.  The year-over-year pre-tax operating leverage (Non-GAAP) was based on growth in total revenue, as adjusted (Non-GAAP), of 153 basis points, and a decrease in total noninterest expense, as adjusted (Non-GAAP), of 155 basis points.  The sequential operating leverage (Non-GAAP) was based on decline in total revenue, as adjusted (Non-GAAP), of 195 basis points, and an increase in total noninterest expense, as adjusted (Non-GAAP), of 27 basis points.
(c)    Non-GAAP excludes the net income (loss) attributable to noncontrolling interests related to consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges (recoveries), the impairment charge related to a recent court decision 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.
(d)   Includes fee revenue, net interest revenue and (loss) income from consolidated investment management funds, net of net loss (income) attributable to noncontrolling interests.
N/M – Not meaningful.

CONSOLIDATED BUSINESS METRICS

Consolidated business metrics


 

 

 

 

 

 

4Q15 vs.

4Q15


 

3Q15

2Q15

1Q15

4Q14

3Q15

4Q14

Changes in AUM (in billions): (a)


 

 

 

 

 

 

 

 

Beginning balance of AUM

$

1,625


 

 

$

1,700


 

$

1,717


 

$

1,686


 

$

1,620


 

 

 

Net inflows (outflows):


 

 

 

 

 

 

 

 

Long-term:


 

 

 

 

 

 

 

 

Equity

(9)


 

 

(4)


 

(13)


 

(5)


 

(5)


 

 

 

Fixed income

1


 

 

(3)


 

(2)


 

3


 

4


 

 

 

Index

(16)


 

 

(10)


 

(9)


 

8


 

1


 

 

 

Liability-driven investments (b)

11


 

 

11


 

5


 

8


 

24


 

 

 

Alternative investments

2


 

 

1


 

3


 

1


 

2


 

 

 

Total long-term inflows (outflows)

(11)


 

 

(5)


 

(16)


 

15


 

26


 

 

 

Short term:


 

 

 

 

 

 

 

 

Cash

2


 

 

(10)


 

(11)


 

1


 

6


 

 

 

Total net inflows (outflows)

(9)


 

 

(15)


 

(27)


 

16


 

32


 

 

 

Net market/currency impact/acquisition

9


 

 

(60)


 

10


 

15


 

34


 

 

 

Ending balance of AUM

$

1,625


 

(c)

$

1,625


 

$

1,700


 

$

1,717


 

$

1,686


 

%

(4)%


 

 

 

 

 

 

 

 

 

 

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


 

 

 

 

 

 

 

 

Equity

14

%


 

14

%

15

%

15

%

15

%


 

 

Fixed income

13


 

 

13


 

13


 

12


 

12


 

 

 

Index

20


 

 

20


 

21


 

22


 

21


 

 

 

Liability-driven investments (b)

32


 

 

32


 

30


 

30


 

30


 

 

 

Alternative investments

4


 

 

4


 

4


 

4


 

4


 

 

 

Cash

17


 

 

17


 

17


 

17


 

18


 

 

 

Total AUM

100

%

(c)

100

%

100

%

100

%

100

%


 

 

 

 

 

 

 

 

 

 

 

Investment Management:


 

 

 

 

 

 

 

 

Average loans (in millions)

$

13,447


 

 

$

12,779


 

$

12,298


 

$

11,634


 

$

11,124


 

5

%

21

%

Average deposits (in millions)

$

15,497


 

 

$

15,282


 

$

14,638


 

$

15,217


 

$

14,602


 

1

%

6

%


 

 

 

 

 

 

 

 

 

Investment Services:


 

 

 

 

 

 

 

 

Average loans (in millions)

$

36,960


 

 

$

38,025


 

$

38,264


 

$

37,699


 

$

35,448


 

(3)%


 

4

%

Average deposits (in millions)

$

226,774


 

 

$

230,153


 

$

237,193


 

$

234,183


 

$

228,282


 

(1)%


 

(1)%


 

 

 

 

 

 

 

 

 

 

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

$

28.9


 

(c)

$

28.5


 

$

28.6


 

$

28.5


 

$

28.5


 

1

%

1

%


 

 

 

 

 

 

 

 

 

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

$

277


 

 

$

288


 

$

283


 

$

291


 

$

289


 

(4)%


 

(4)%


 

 

 

 

 

 

 

 

 

 

Asset servicing:


 

 

 

 

 

 

 

 

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

$

49


 

(c)

$

84


 

$

933


 

$

125


 

$

168


 

 

 

 

 

 

 

 

 

 

 

 

Depositary Receipts:


 

 

 

 

 

 

 

 

Number of sponsored programs

1,145


 

 

1,176


 

1,206


 

1,258


 

1,279


 

(3)%


 

(10)%


 

 

 

 

 

 

 

 

 

 

Clearing services:


 

 

 

 

 

 

 

 

Global DARTS volume (in thousands)

230


 

 

246


 

242


 

261


 

242


 

(7)%


 

(5)%


 

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

5,959


 

 

6,107


 

6,046


 

5,979


 

5,900


 

(2)%


 

1

%

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

(in millions)

$

437,260


 

 

$

447,287


 

$

466,195


 

$

456,954


 

$

450,305


 

(2)%


 

(3)%


 

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

$

11,575


 

 

$

11,806


 

$

11,890


 

$

11,232


 

$

10,711


 

(2)%


 

8

%


 

 

 

 

 

 

 

 

 

Broker-Dealer:


 

 

 

 

 

 

 

 

Average tri-party repo balances (in billions)

$

2,153


 

 

$

2,142


 

$

2,174


 

$

2,153


 

$

2,101


 

1

%

2

%

(a)   Excludes securities lending cash management assets and assets managed in the Investment Services business.  In 3Q15, prior period AUM was restated to reflect the reclassification of Meriten from the Investment Management business to the Other segment.
(b)   Includes currency 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 $1.0 trillion at Dec. 31, 2015 and Sept. 30, 2015
and $1.1 trillion at June 30, 2015, March 31, 2015 and Dec. 31, 2014.
(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 $55 billion at Dec. 31, 2015, $61 billion at Sept. 30, 2015
, $68 billion at June 30, 2015, $69 billion at March 31, 2015 and $65 billion at Dec. 31, 2014.

 

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


 

Key market metrics


 

 

 

 

 

4Q15 vs.


 

4Q15

3Q15

2Q15

1Q15

4Q14

3Q15

4Q14

S&P 500 Index (a)

2044


 

1920


 

2063


 

2068


 

2059


 

6

%

(1)%


 

S&P 500 Index – daily average

2052


 

2027


 

2102


 

2064


 

2009


 

1


 

2


 

FTSE 100 Index (a)

6242


 

6062


 

6521


 

6773


 

6566


 

3


 

(5)


 

FTSE 100 Index – daily average

6271


 

6399


 

6920


 

6793


 

6526


 

(2)


 

(4)


 

MSCI World Index (a)

1663


 

1582


 

1736


 

1741


 

1710


 

5


 

(3)


 

MSCI World Index – daily average

1677


 

1691


 

1780


 

1726


 

1695


 

(1)


 

(1)


 

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

342


 

346


 

342


 

348


 

357


 

(1)


 

(4)


 

NYSE and NASDAQ share volume (in billions)

198


 

206


 

185


 

187


 

198


 

(4)


 


 

JPMorgan G7 Volatility Index – daily average (c)

9.49


 

9.93


 

10.06


 

10.40


 

8.54


 

(4)


 

11


 

Average Fed Funds effective rate

0.16

%

0.13

%

0.13

%

0.11

%

0.10

%

3

bps

6

bps

Foreign exchange rates vs. U.S. dollar:


 

 

 

 

 

 

 

British pound - average rate

$

1.52


 

$

1.55


 

$

1.53


 

$

1.51


 

$

1.58


 

(2)%


 

(4)%


 

Euro - average rate

1.10


 

1.11


 

1.11


 

1.13


 

1.25


 

(1)


 

(12)


 

(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


 

 

 

 

 

4Q15 vs.

(dollars in millions)

4Q15

3Q15

2Q15

1Q15

4Q14

3Q15

4Q14

Investment services fees:


 

 

 

 

 

 

 

Asset servicing (a)

$

1,032


 

$

1,057


 

$

1,060


 

$

1,038


 

$

1,019


 

(2)%


 

1%


 

Clearing services

339


 

345


 

347


 

344


 

347


 

(2)


 

(2)


 

Issuer services

199


 

313


 

234


 

232


 

193


 

(36)


 

3


 

Treasury services

137


 

137


 

144


 

137


 

145


 


 

(6)


 

Total investment services fees

1,707


 

1,852


 

1,785


 

1,751


 

1,704


 

(8)


 


 

Investment management and performance fees

864


 

829


 

878


 

867


 

885


 

4


 

(2)


 

Foreign exchange and other trading revenue

173


 

179


 

187


 

229


 

151


 

(3)


 

15


 

Financing-related fees

51


 

71


 

58


 

40


 

43


 

(28)


 

19


 

Distribution and servicing

41


 

41


 

39


 

41


 

43


 


 

(5)


 

Total fee revenue excluding investment and other income

2,836


 

2,972


 

2,947


 

2,928


 

2,826


 

(5)


 


 

Investment and other income

93


 

59


 

104


 

60


 

78


 

58


 

19


 

Total fee revenue

2,929


 

3,031


 

3,051


 

2,988


 

2,904


 

(3)


 

1


 

Net securities gains

21


 

22


 

16


 

24


 

31


 

N/M

N/M

Total fee and other revenue

$

2,950


 

$

3,053


 

$

3,067


 

$

3,012


 

$

2,935


 

(3)%


 

1%


 

(a)   Asset servicing fees include securities lending revenue of $46 million in 4Q15, $38 million in 3Q15, $49 million in 2Q15 and $43 million in 1Q15 and $37 million in 4Q14. 
N/M
Not meaningful.

KEY POINTS

  • Asset servicing fees were $1.0 billion, an increase of 1% year-over-year and a decrease of 2% sequentially. The year-over-year increase primarily reflects growth in the Global Collateral Services and Broker-Dealer Services and higher securities lending revenue, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential decrease primarily reflects lower client activity.
  • Clearing services fees were $339 million, a decrease of 2% both year-over-year and sequentially. Both decreases primarily reflect lost business due to industry consolidations.
  • Issuer services fees were $199 million, an increase of 3% year-over-year and a decrease of 36% sequentially. The year-over-year increase primarily reflects net new business and lower money market fee waivers in Corporate Trust, partially offset by the unfavorable impact of a stronger U.S. dollar in Corporate Trust. The sequential decrease primarily reflects seasonality in Depositary Receipts.
  • Treasury services fees were $137 million, a decrease of 6% year-over-year and flat sequentially. The year-over-year decrease primarily reflects higher compensating balance credits provided to clients and lower volumes.
  • Investment management and performance fees were $864 million, a decrease of 2% year-over-year, or an increase of 1% on a constant currency basis (Non-GAAP). On a constant currency basis (Non-GAAP), investment management and performance fees primarily reflect lower money market fee waivers and higher performance fees, partially offset by net outflows and lower market values. Sequentially, investment management and performance fees increased 4% primarily reflecting higher performance fees, lower money market fee waivers and higher equity market values, partially offset by net outflows.

 


 

Foreign exchange and other trading revenue


 

 

 

 

 

 

(in millions)

4Q15

3Q15

2Q15

1Q15

4Q14


 

Foreign exchange

$

165


 

$

180


 

$

181


 

$

217


 

$

165


 

 

Other trading revenue (loss)

8


 

(1)


 

6


 

12


 

(14)


 

 

Total foreign exchange and other trading revenue

$

173


 

$

179


 

$

187


 

$

229


 

$

151


 

 

Foreign exchange and other trading revenue totaled $173 million in 4Q15 compared with $151 million in 4Q14 and $179 million in 3Q15.  In 4Q15, foreign exchange revenue totaled $165 million, flat year-over-year and a decrease of 8% sequentially.  Year-over-year, lower volumes in standing instruction programs and lower volatility were offset by higher volumes in the other trading programs and the impact of hedging activity for foreign currency placements.  The sequential decrease primarily reflects lower volumes and volatility and lower Depositary Receipts-related activity, partially offset by the impact of hedging activity for foreign currency placements.

Other trading revenue was $8 million in 4Q15, compared with an other trading loss of $14 million in 4Q14 and an other trading loss of $1 million in 3Q15.  The year-over-year increase primarily reflects the losses on hedging activities within one of the Investment Management boutiques recorded in 4Q14.

  • Financing-related fees were $51 million in 4Q15 compared with $43 million in 4Q14 and $71 million in 3Q15. The year-over-year increase primarily reflects higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity. The sequential decrease primarily reflects lower underwriting fees.

 


 

Investment and other income


 

 

 

 

 

 

(in millions)

4Q15

3Q15

2Q15

1Q15

4Q14


 

Corporate/bank-owned life insurance

$

43


 

$

32


 

$

31


 

$

33


 

$

37


 

 

Expense reimbursements from joint venture

16


 

16


 

17


 

14


 

15


 

 

Seed capital gains (a)

10


 

7


 

2


 

16


 


 

 

Asset-related gains (losses)

5


 

(9)


 

1


 

3


 

20


 

 

Private equity gains (losses)


 

1


 

3


 

(3)


 

1


 

 

Equity investment (losses)

(2)


 

(6)


 

(7)


 

(4)


 

(5)


 

 

Lease residual gains (losses)

(8)


 


 

54


 

(1)


 

5


 

 

Other income

29


 

18


 

3


 

2


 

5


 

 

Total investment and other income

$

93


 

$

59


 

$

104


 

$

60


 

$

78


 

 

(a)   Excludes the gain (loss) on seed capital investments in consolidated investment management funds which are reflected in operations of consolidated investment management funds, net of noncontrolling interests.  The gain (loss) on seed capital investments in consolidated investment management funds was $11 million in 4Q15, $(17) million in 3Q15, $3 million in 2Q15, $21 million in 1Q15 and $18 million in 4Q14.

Investment and other income was $93 million in 4Q15 compared with $78 million in 4Q14 and $59 million in 3Q15.  The year-over-year increase primarily reflects higher other income related to termination fees in our clearing business and seed capital gains, partially offset by lower asset-related gains and lease residual losses.  The sequential increase primarily reflects higher asset-related gains, income from corporate/bank owned life insurance and other income related to termination fees in our clearing business, partially offset by lease residual losses.

 

NET INTEREST REVENUE


 

Net interest revenue


 

 

 

 

 

4Q15 vs.

(dollars in millions)

4Q15

3Q15

2Q15

1Q15

4Q14

3Q15

4Q14

Net interest revenue (non-FTE)

$

760


 

$

759


 

$

779


 

$

728


 

$

712


 

%

7%


 

Net interest revenue (FTE) – Non-GAAP

774


 

773


 

794


 

743


 

726


 


 

7


 

Net interest margin (FTE)

0.99

%

0.98

%

1.00

%

0.97

%

0.91

%

1

bps

8 bps


 

 

 

 

 

 

 

 

 

Selected average balances:


 

 

 

 

 

 

 

Cash/interbank investments

$

128,328


 

$

130,090


 

$

125,626


 

$

123,647


 

$

140,599


 

(1)%


 

(9)%


 

Trading account securities

2,786


 

2,737


 

3,253


 

3,046


 

3,922


 

2


 

(29)


 

Securities

119,532


 

121,188


 

128,641


 

123,476


 

117,243


 

(1)


 

2


 

Loans

61,964


 

61,657


 

61,076


 

57,935


 

56,844


 


 

9


 

Interest-earning assets

312,610


 

315,672


 

318,596


 

308,104


 

318,608


 

(1)


 

(2)


 

Interest-bearing deposits

160,334


 

169,753


 

170,716


 

159,520


 

163,149


 

(6)


 

(2)


 

Noninterest-bearing deposits

85,878


 

85,046


 

84,890


 

89,592


 

85,330


 

1


 

1


 

 

 

 

 

 

 

 

 

Selected average yields/rates:


 

 

 

 

 

 

 

Cash/interbank investments

0.32%


 

0.32%


 

0.34%


 

0.35%


 

0.31%


 

 

 

Trading account securities

2.79


 

2.74


 

2.63


 

2.46


 

2.64


 

 

 

Securities

1.62


 

1.60


 

1.57


 

1.55


 

1.54


 

 

 

Loans

1.54


 

1.56


 

1.51


 

1.55


 

1.58


 

 

 

Interest-earning assets

1.08


 

1.08


 

1.08


 

1.07


 

1.02


 

 

 

Interest-bearing deposits

0.01


 

0.02


 

0.02


 

0.04


 

0.03


 

 

 

 

 

 

 

 

 

 

 

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

41%


 

41%


 

39%


 

40%


 

44%


 

 

 

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

27%


 

27%


 

27%


 

29%


 

27%


 

 

 

FTE – fully taxable equivalent.
bps – basis points.

KEY POINTS

  • Net interest revenue totaled $760 million in 4Q15, an increase of $48 million year-over year and $1 million sequentially. The year-over-year increase primarily reflects higher yields, the shift out of cash into securities and loans and lower interest expense on deposits. The sequential increase primarily reflects higher yields, offset by lower accretion.

 

NONINTEREST EXPENSE

 

Noninterest expense


 

 

 

 

 

4Q15 vs.

(dollars in millions)

4Q15

3Q15

2Q15

1Q15

4Q14

3Q15

4Q14

Staff:


 

 

 

 

 

 

 

Compensation

$

927


 

$

905


 

$

877


 

$

871


 

$

893


 

2%


 

4%


 

Incentives

315


 

326


 

349


 

425


 

319


 

(3)


 

(1)


 

Employee benefits

239


 

206


 

208


 

189


 

206


 

16


 

16


 

Total staff

1,481


 

1,437


 

1,434


 

1,485


 

1,418


 

3


 

4


 

Professional, legal and other purchased services

328


 

301


 

299


 

302


 

390


 

9


 

(16)


 

Software and equipment

225


 

226


 

228


 

228


 

235


 


 

(4)


 

Net occupancy

148


 

152


 

149


 

151


 

150


 

(3)


 

(1)


 

Distribution and servicing

92


 

95


 

96


 

98


 

102


 

(3)


 

(10)


 

Sub-custodian

60


 

65


 

75


 

70


 

70


 

(8)


 

(14)


 

Business development

75


 

59


 

72


 

61


 

75


 

27


 


 

Other

201


 

268


 

250


 

242


 

211


 

(25)


 

(5)


 

Amortization of intangible assets

64


 

66


 

65


 

66


 

73


 

(3)


 

(12)


 

M&I, litigation and restructuring charges

18


 

11


 

59


 

(3)


 

800


 

N/M

N/M

Total noninterest expense – GAAP

$

2,692


 

$

2,680


 

$

2,727


 

$

2,700


 

$

3,524


 

—%


 

(24)%


 

 

 

 

 

 

 

 

 

Total staff expense as a percentage of total revenue

40

%

38

%

37

%

39

%

38

%


 

 

 

 

 

 

 

 

 

 

Memo:


 

 

 

 

 

 

 

Total noninterest expense excluding amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP

$

2,610


 

$

2,603


 

$

2,603


 

$

2,637


 

$

2,651


 

—%


 

(2)%


 

N/M Not meaningful.

 

KEY POINTS

  • Total noninterest expense excluding amortization of intangible assets and M&I, litigation and restructuring charges (Non-GAAP) decreased 2% year-over-year and was flat sequentially.
  • The year-over-year decrease reflects lower expenses in all categories, except compensation and employee benefits expenses. The lower expenses primarily reflect the favorable impact of a stronger U.S. dollar and lower professional, legal and other purchased services and other expenses.
    • Compensation expense increased year-over-year primarily reflecting severance expense of approximately $55 million recorded in 4Q15 in ongoing support of our business improvement process.
    • Employee benefits expense increased as a result of an adjustment of approximately $30 million related to updated information received from an administrator of our health care benefits, partially offset by the impact of curtailing the U.S. pension plan.
    • Other expense decreased primarily reflecting approximately $35 million of adjustments to bank assessment charges, partially offset by higher asset-based taxes.
  • The sequential increase reflects higher staff expense primarily reflecting the factors mentioned above, and higher professional, legal and other purchased services and business development expenses, partially offset by lower other expense, as described above.

INVESTMENT SECURITIES PORTFOLIO

At Dec. 31, 2015, the fair value of our investment securities portfolio totaled $118.8 billion.  The net unrealized pre-tax gain on our total securities portfolio was $357 million at Dec. 31, 2015 compared with $1.05 billion at Sept. 30, 2015.  The decrease in the net unrealized pre-tax gain was primarily driven by the increase in interest rates.  At Dec. 31, 2015, the fair value of the held-to-maturity securities totaled $43.2 billion and represented 36% of the fair value of the total investment securities portfolio.

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


 

Investment securities
   portfolio

 

 

  (dollars in millions)

Sept. 30, 2015


 

4Q15

change in

unrealized

gain (loss)

Dec. 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

$

49,850


 

 

$

(408)


 

$

49,585


 

$

49,464


 

 

100

%

$

(121)


 

 

100

%

%

%

%

%

U.S. Treasury

23,642


 

 

(193)


 

24,019


 

23,920


 

 

100


 

(99)


 

 

100


 


 


 


 


 

Sovereign debt/sovereign guaranteed

17,674


 

 

5


 

16,574


 

16,708


 

 

101


 

134


 

 

75


 


 

25


 


 


 

Non-agency RMBS (b)

1,938


 

 

(36)


 

1,435


 

1,789


 

 

81


 

354


 

 


 

1


 

1


 

90


 

8


 

Non-agency RMBS

973


 

 

(4)


 

900


 

914


 

 

94


 

14


 

 

7


 

5


 

18


 

69


 

1


 

European floating rate notes

1,634


 

 

2


 

1,369


 

1,345


 

 

98


 

(24)


 

 

68


 

27


 

5


 


 


 

Commercial MBS

5,730


 

 

(57)


 

5,868


 

5,826


 

 

99


 

(42)


 

 

95


 

4


 

1


 


 


 

State and political subdivisions

4,334


 

 

1


 

3,988


 

4,065


 

 

102


 

77


 

 

80


 

17


 


 


 

3


 

Foreign covered bonds

2,379


 

 

(9)


 

2,201


 

2,242


 

 

102


 

41


 

 

100


 


 


 


 


 

Corporate bonds

1,822


 

 

(8)


 

1,740


 

1,752


 

 

101


 

12


 

 

21


 

66


 

13


 


 


 

CLO

2,291


 

 

(6)


 

2,363


 

2,351


 

 

99


 

(12)


 

 

100


 


 


 


 


 

U.S. Government agencies

1,572


 

 

(10)


 

1,817


 

1,810


 

 

100


 

(7)


 

 

100


 


 


 


 


 

Consumer ABS

3,129


 

 

(7)


 

2,909


 

2,893


 

 

99


 

(16)


 

 

100


 


 


 


 


 

Other (c)

3,055


 

 

38


 

3,654


 

3,700


 

 

101


 

46


 

 

45


 


 

51


 


 

4


 

Total investment securities

$

120,023


 

(d)

$

(692)


 

$

118,422


 

$

118,779


 

(d)

100

%

$

357


 

(d)(e)

90

%

2

%

6

%

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 $1.5 billion and $1.9 billion and money market funds with a fair value of $770 million and $886 million at Sept. 30, 2015 and Dec. 31, 2015, respectively.
(d)   Includes net unrealized losses on derivatives hedging securities available-for-sale of $417 million at Sept. 30, 2015 and $292 million at Dec. 31, 2015.
(e)    Unrealized gains of $465 million at Dec. 31, 2015 related to available-for-sale securities.

 

NONPERFORMING ASSETS

Nonperforming assets

(dollars in millions)

Dec.31, 

2015

Sept. 30,

2015

Dec. 31,

2014

Loans:


 

 

 

Financial institutions

$

171


 

$


 

$


 

Other residential mortgages

102


 

103


 

112


 

Wealth management loans and mortgages

11


 

12


 

12


 

Commercial real estate

2


 

1


 

1


 

Total nonperforming loans

286


 

116


 

125


 

Other assets owned

6


 

7


 

3


 

Total nonperforming assets (a)

$

292


 

$

123


 

$

128


 

Nonperforming assets ratio

0.46

%

0.20

%

0.22

%

Allowance for loan losses/nonperforming loans

54.9


 

156.0


 

152.8


 

Total allowance for credit losses/nonperforming loans

96.2


 

241.4


 

224.0


 

(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 $53 million at Dec. 31, 2014.  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.  In 2Q15, BNY Mellon adopted the new accounting guidance included in ASU 2015-02, Consolidations.  As a result, we deconsolidated substantially all of the loans of consolidated investment management funds retroactively to Jan. 1, 2015.

Nonperforming assets were $292 million at Dec. 31, 2015, an increase of $169 million compared with $123 million at Sept. 30, 2015.  The increase in nonperforming loans in the financial institutions portfolio is related to a recent court decision.

 

ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS


 


 

Allowance for credit losses, provision and net charge-offs

(in millions)

Dec. 31,
 2015

Sept. 30,

2015

Dec. 31,
 2014

Allowance for credit losses - beginning of period

$

280


 

$

278


 

$

288


 

Provision for credit losses

163


 

1


 

1


 

Net (charge-offs) recoveries:


 

 

 

Financial institutions

(170)


 


 

1


 

Other residential mortgages

2


 

1


 


 

Commercial


 


 

(8)


 

Commercial real estate


 


 

(2)


 

Net (charge-offs) recoveries

(168)


 

1


 

(9)


 

Allowance for credit losses - end of period

$

275


 

$

280


 

$

280


 

Allowance for loan losses

$

157


 

$

181


 

$

191


 

Allowance for lending-related commitments

118


 

99


 

89


 

The allowance for credit losses was $275 million at Dec. 31, 2015, a decrease of $5 million compared with $280 million at Sept. 30, 2015.  Net charge-offs were $168 million in 4Q15, primarily reflecting the impairment charge related to a recent court decision recorded in the financial institutions portfolio.

 

CAPITAL AND LIQUIDITY

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 U.S. capital rules' advanced approaches framework (the "Advanced Approach") as the related risk-weighted assets ("RWA") were higher when calculated under the Advanced Approach at Dec. 31, 2015, Sept. 30, 2015 and Dec. 31, 2014.  Our risk-based capital adequacy is determined using the higher of RWA determined using the Advanced Approach and the U.S. capital rules' standardized approach (the "Standardized Approach").  The leverage capital ratios are based on Basel III components of capital, as phased-in and quarterly average total assets.  Our consolidated capital ratios are shown in the following table. 

Capital ratios

Dec. 31,
 2015

Sept. 30, 2015

Dec. 31, 2014

Consolidated regulatory capital ratios: (a)(b)


 

 

 

CET1 ratio

10.8

%

10.5

%

11.2

%

Tier 1 capital ratio

12.3


 

11.9


 

12.2


 

Total (Tier 1 plus Tier 2) capital ratio

12.5


 

12.2


 

12.5


 

Leverage capital ratio

5.9


 

5.9


 

5.6


 

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

9.7


 

10.1


 

9.7


 

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

9.0


 

9.4


 

9.3


 

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

6.5


 

6.2


 

6.5


 

 

 

 

 

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


 

 

 

Estimated CET1 ratio:


 

 

 

Standardized Approach

10.3


 

9.9


 

10.6


 

Advanced Approach

9.5


 

9.3


 

9.8


 

Estimated supplementary leverage ratio ("SLR") (d)

4.9


 

4.8


 

4.4


 

(a)   Regulatory capital ratios for Dec. 31, 2015 are preliminary.
(b)   At Dec. 31, 2015 and Sept. 30, 2015, the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios determined under the transitional Basel III Standardized Approach were 11.6%, 13.2% and 13.6%, and 11.2%, 12.7%, and 13.1%, respectively.  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.
(c)    See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for a reconciliation of these ratios.
(d)   The estimated SLR on a fully phased-in basis (Non-GAAP) for our largest bank subsidiary, The Bank of New York Mellon, was 4.8% at Dec. 31, 2015 and 4.6% at Sept. 30, 2015

 

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


 

(in millions)

4Q15

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

$

16,077


 

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

637


 

Goodwill and intangible assets, net of related deferred tax liabilities

139


 

Gross Basel III CET1 generated

776


 

Capital deployed:


 

Dividends

(188)


 

Common stock repurchased

(431)


 

Total capital deployed

(619)


 

Other comprehensive (loss)

(245)


 

Additional paid-in capital (a)

94


 

Other

(1)


 

Total other deductions

(152)


 

Net Basel III CET1 generated

5


 

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

$

16,082


 

(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 capital components and ratios determined on a phased-in basis (referred to as the "Transitional Approach").


 

Basel III capital components and ratios at Dec. 31, 2015 – preliminary

Fully phased-

in Basel III -

Non-GAAP


 

Transitional

Approach (a)

(dollars in millions)


 

CET1:


 

 

 

Common shareholders' equity

$

35,485


 

 

$

36,067


 

Goodwill and intangible assets

(18,911)


 

 

(17,295)


 

Net pension fund assets

(116)


 

 

(46)


 

Equity method investments

(347)


 

 

(296)


 

Deferred tax assets

(20)


 

 

(8)


 

Other

(9)


 

 

(5)


 

Total CET1

16,082


 

 

18,417


 

Other Tier 1 capital:


 

 

 

Preferred stock

2,552


 

 

2,552


 

Trust preferred securities


 

 

74


 

Disallowed deferred tax assets


 

 

(12)


 

Net pension fund assets


 

 

(70)


 

Other

(22)


 

 

(25)


 

Total Tier 1 capital

18,612


 

 

20,936


 

 

 

 

 

Tier 2 capital:


 

 

 

Trust preferred securities


 

 

222


 

Subordinated debt

149


 

 

149


 

Allowance for credit losses

275


 

 

275


 

Other

(12)


 

 

(12)


 

Total Tier 2 capital - Standardized Approach

412


 

 

634


 

Excess of expected credit losses

19


 

 

19


 

Less: Allowance for credit losses

275


 

 

275


 

Total Tier 2 capital - Advanced Approach

$

156


 

 

$

378


 

 

 

 

 

Total capital:


 

 

 

Standardized Approach

$

19,024


 

 

$

21,570


 

Advanced Approach

$

18,768


 

 

$

21,314


 

 

 

 

 

Risk-weighted assets:


 

 

 

Standardized Approach

$

156,428


 

 

$

158,273


 

Advanced Approach

$

168,703


 

 

$

170,578


 

 

 

 

 

Standardized Approach:


 

 

 

Estimated Basel III CET1 ratio

10.3

%


 

11.6

%

Tier 1 capital ratio

11.9


 

 

13.2


 

Total (Tier 1 plus Tier 2) capital ratio

12.2


 

 

13.6


 

 

 

 

 

Advanced Approach:


 

 

 

Estimated Basel III CET1 ratio

9.5

%


 

10.8

%

Tier 1 capital ratio

11.0


 

 

12.3


 

Total (Tier 1 plus Tier 2) capital ratio

11.1


 

 

12.5


 

(a)   Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in 2015 under the U.S. 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 U.S. capital rules, which are being gradually phased-in over a multi-year period, 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 for certain periods assume certain regulatory approvals.  The U.S. capital rules require approval by banking regulators of certain models used as part of RWA 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.

RWA at Dec. 31, 2014, for credit risk under the estimated fully phased-in Advanced Approach, reflects 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.  The estimated fully phased-in Advanced Approach RWA at Dec. 31, 2015 and Sept. 30, 2015 no longer assumes the use of 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 RWA 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 estimated SLR using fully phased-in Basel III components of capital.

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

(dollars in millions)

Dec. 31,
 2015

(b)

Sept. 30,

2015


 

Dec. 31,
 2014

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

$

16,082


 

 

$

16,077


 

 

$

15,931


 

Additional Tier 1 capital

2,530


 

 

2,528


 

 

1,550


 

Total Tier 1 capital

$

18,612


 

 

$

18,605


 

 

$

17,481


 

 

 

 

 

 

 

Total leverage exposure:


 

 

 

 

 

Quarterly average total assets

$

368,590


 

 

$

373,453


 

 

$

385,232


 

Less: Amounts deducted from Tier 1 capital

19,403


 

 

19,532


 

 

19,947


 

Total on-balance sheet assets, as adjusted

349,187


 

 

353,921


 

 

365,285


 

Off-balance sheet exposures:


 

 

 

 

 

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

7,358


 

 

8,358


 

 

11,376


 

Repo-style transaction exposures included in SLR

440


 

 

362


 

 

302


 

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

26,224


 

 

27,482


 

 

21,850


 

Total off-balance sheet exposures

34,022


 

 

36,202


 

 

33,528


 

Total leverage exposure

$

383,209


 

 

$

390,123


 

 

$

398,813


 

 

 

 

 

 

 

Estimated fully phased-in SLR – Non-GAAP

4.9

%

(c)

4.8

%

(c)

4.4

%

(a)   The estimated fully phased-in SLR (Non-GAAP) is based on our interpretation of the U.S. capital rules.  When the SLR is fully phased-in, we expect to maintain an SLR of over 5%.  The minimum required SLR is 3% and there is a 2% buffer, in addition to the minimum, that is applicable to U.S. G-SIBs. 
(b)   Dec. 31, 2015 information is preliminary.
(c)    The estimated SLR on a fully phased-in basis (Non-GAAP) for our largest bank subsidiary, The Bank of New York Mellon, was 4.8% at Dec. 31, 2015 and 4.6% at Sept. 30, 2015.  At Dec. 31, 2015 and Sept. 30, 2015, total Tier 1 capital was $15,142 million and $14,882 million, respectively, and total leverage exposure was $316,268 million and $322,531 million, respectively, for The Bank of New York Mellon.

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 Dec. 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)


 

 

 

 

 

 

4Q15 vs.

4Q15


 

3Q15

2Q15

1Q15

4Q14

3Q15

4Q14

Revenue:


 

 

 

 

 

 

 

 

Investment management fees:


 

 

 

 

 

 

 

 

Mutual funds

$

294


 

 

$

301


 

$

312


 

$

301


 

$

306


 

(2)%


 

(4)%


 

Institutional clients

350


 

 

347


 

363


 

365


 

364


 

1


 

(4)


 

Wealth management

155


 

 

156


 

160


 

159


 

157


 

(1)


 

(1)


 

Investment management fees

799


 

 

804


 

835


 

825


 

827


 

(1)


 

(3)


 

Performance fees

55


 

 

7


 

20


 

15


 

40


 

N/M

38


 

Investment management and performance fees

854


 

 

811


 

855


 

840


 

867


 

5


 

(1)


 

Distribution and servicing

39


 

 

37


 

38


 

38


 

39


 

5


 


 

Other (a)

25


 

 

(2)


 

20


 

45


 

6


 

N/M

N/M

Total fee and other revenue (a)

918


 

 

846


 

913


 

923


 

912


 

9


 

1


 

Net interest revenue

84


 

 

83


 

78


 

74


 

69


 

1


 

22


 

Total revenue

1,002


 

 

929


 

991


 

997


 

981


 

8


 

2


 

Noninterest expense (ex. amortization of intangible assets)

691


 

 

668


 

703


 

710


 

716


 

3


 

(3)


 

Income before taxes (ex. amortization of intangible assets)

311


 

 

261


 

288


 

287


 

265


 

19


 

17


 

Amortization of intangible assets

24


 

 

24


 

25


 

24


 

29


 


 

(17)


 

Income before taxes

$

287


 

 

$

237


 

$

263


 

$

263


 

$

236


 

21

%

22

%


 

 

 

 

 

 

 

 

 

Pre-tax operating margin

29

%


 

26

%

27

%

26

%

24

%


 

 

Adjusted pre-tax operating margin (b)

36

%


 

34

%

34

%

34

%

33

%


 

 

 

 

 

 

 

 

 

 

 

Changes in AUM (in billions): (c)


 

 

 

 

 

 

 

 

Beginning balance of AUM

$

1,625


 

 

$

1,700


 

$

1,717


 

$

1,686


 

$

1,620


 

 

 

Net inflows (outflows):


 

 

 

 

 

 

 

 

Long-term:


 

 

 

 

 

 

 

 

Equity

(9)


 

 

(4)


 

(13)


 

(5)


 

(5)


 

 

 

Fixed income

1


 

 

(3)


 

(2)


 

3


 

4


 

 

 

Index

(16)


 

 

(10)


 

(9)


 

8


 

1


 

 

 

Liability-driven investments (d)

11


 

 

11


 

5


 

8


 

24


 

 

 

Alternative investments

2


 

 

1


 

3


 

1


 

2


 

 

 

Total long-term inflows (outflows)

(11)


 

 

(5)


 

(16)


 

15


 

26


 

 

 

Short term:


 

 

 

 

 

 

 

 

Cash

2


 

 

(10)


 

(11)


 

1


 

6


 

 

 

Total net inflows (outflows)

(9)


 

 

(15)


 

(27)


 

16


 

32


 

 

 

Net market/currency impact/acquisition

9


 

 

(60)


 

10


 

15


 

34


 

 

 

Ending balance of AUM

$

1,625


 

(e)

$

1,625


 

$

1,700


 

$

1,717


 

$

1,686


 

%

(4)%


 

 

 

 

 

 

 

 

 

 

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


 

 

 

 

 

 

 

 

Equity

14

%


 

14

%

15

%

15

%

15

%


 

 

Fixed income

13


 

 

13


 

13


 

12


 

12


 

 

 

Index

20


 

 

20


 

21


 

22


 

21


 

 

 

Liability-driven investments (d)

32


 

 

32


 

30


 

30


 

30


 

 

 

Alternative investments

4


 

 

4


 

4


 

4


 

4


 

 

 

Cash

17


 

 

17


 

17


 

17


 

18


 

 

 

Total AUM

100

%

(e)

100

%

100

%

100

%

100

%


 

 

 

 

 

 

 

 

 

 

 

Average balances:


 

 

 

 

 

 

 

 

Average loans

$

13,447


 

 

$

12,779


 

$

12,298


 

$

11,634


 

$

11,124


 

5

%

21

%

Average deposits

$

15,497


 

 

$

15,282


 

$

14,638


 

$

15,217


 

$

14,602


 

1

%

6

%

(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 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 this Non-GAAP measure.
(c)    Excludes securities lending cash management assets and assets managed in the Investment Services business.  In 3Q15, prior period AUM was restated to reflect the reclassification of Meriten from the Investment Management business to the Other segment.
(d)   Includes currency overlay assets under management.
(e)    Preliminary.
N/M – Not meaningful.

INVESTMENT MANAGEMENT KEY POINTS


 

  • Assets under management were $1.63 trillion at Dec. 31, 2015, a decrease of 4% year-over-year and flat sequentially. Both comparisons reflect the unfavorable impact of a stronger U.S. dollar. The year-over-year decrease also reflects net outflows and lower market values, partially offset by the January 2015 acquisition of Cutwater Asset Management. Sequentially, higher market values were partially offset by net outflows.
    • Net long-term outflows of $11 billion in 4Q15 driven by index and equity investments offset by continued strength in liability-driven investments.
    • Net short-term inflows were $2 billion in 4Q15.
  • Income before taxes excluding amortization of intangible assets totaled $311 million in 4Q15, an increase of 17% year-over-year and 19% sequentially. 
  • Total revenue was $1.0 billion, an increase of 2% year-over-year and 8% sequentially. Both increases primarily reflect seasonally higher performance fees and seed capital gains. The year-over-year increase also reflects higher net interest revenue and higher other trading revenue related to losses on hedging activities within a boutique recorded in 4Q14, partially offset by the unfavorable impact of a stronger U.S. dollar.
    • 42% non-U.S. revenue in 4Q15 vs. 43% in 4Q14.
  • Investment management fees were $799 million, a decrease of 3% year-over-year, or flat on a constant currency basis (Non-GAAP). On a constant currency basis (Non-GAAP), investment management fees primarily reflect net outflows and lower market values, offset by lower money market fee waivers and the impact of strategic initiatives. Sequentially, investment management fees decreased 1% primarily reflecting net outflows, partially offset by lower money market fee waivers and higher equity market values.
  • Performance fees were $55 million in 4Q15 compared with $40 million in 4Q14 and $7 million in 3Q15. The sequential increase was driven by seasonality.
  • Other revenue was $25 million in 4Q15 compared with $6 million in 4Q14 and other losses of $2 million in 3Q15. Both increases primarily reflect higher seed capital gains. The year-over-year comparison also reflects higher other trading revenue related to losses on hedging activities within a boutique recorded in 4Q14.
  • Net interest revenue increased 22% year-over-year and 1% sequentially. Both increases primarily reflect record high average loans and deposits and higher internal crediting rates for deposits.
    • Average loans increased 21% year-over-year and 5% sequentially; average deposits increased 6% year-over-year and 1% sequentially.
  • Total noninterest expense (excluding amortization of intangible assets) decreased 3% year-over-year and increased 3% sequentially. The year-over-year decrease primarily reflects the favorable impact of a stronger U.S. dollar, lower incentives and distribution and servicing expenses and the business improvement process, partially offset by strategic initiatives. The sequential increase primarily reflects higher incentive expense driven by seasonally higher performance fees.
  • BNY Mellon has signed a definitive agreement to acquire the assets of Menlo Park, CA-based Atherton Lane Advisers, LLC. With approximately $2.7 billion in assets under management, Atherton is one of Silicon Valley's premier independent investment managers serving approximately 700 high net-worth clients.

 

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.


 

(dollars in millions, unless otherwise noted)


 

 

 

 

 

 

4Q15 vs.

4Q15


 

3Q15

2Q15

1Q15

4Q14

3Q15

4Q14

Revenue:


 

 

 

 

 

 

 

 

Investment services fees:


 

 

 

 

 

 

 

 

Asset servicing

$

1,005


 

 

$

1,031


 

$

1,035


 

$

1,013


 

$

992


 

(3)%


 

1

%

Clearing services

337


 

 

345


 

346


 

342


 

346


 

(2)


 

(3)


 

Issuer services

199


 

 

312


 

234


 

231


 

193


 

(36)


 

3


 

Treasury services

135


 

 

135


 

141


 

135


 

142


 


 

(5)


 

Total investment services fees

1,676


 

 

1,823


 

1,756


 

1,721


 

1,673


 

(8)


 


 

Foreign exchange and other trading revenue

148


 

 

177


 

179


 

209


 

165


 

(16)


 

(10)


 

Other (a)

102


 

 

87


 

85


 

63


 

70


 

17


 

46


 

Total fee and other revenue

1,926


 

 

2,087


 

2,020


 

1,993


 

1,908


 

(8)


 

1


 

Net interest revenue

632


 

 

628


 

636


 

599


 

573


 

1


 

10


 

Total revenue

2,558


 

 

2,715


 

2,656


 

2,592


 

2,481


 

(6)


 

3


 

Noninterest expense (ex. amortization of intangible assets)

1,765


 

 

1,822


 

1,840


 

1,794


 

2,509


 

(3)


 

(30)


 

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

793


 

 

893


 

816


 

798


 

(28)


 

(11)


 

N/M

Amortization of intangible assets

40


 

 

41


 

40


 

41


 

43


 

(2)


 

(7)


 

Income (loss) before taxes

$

753


 

 

$

852


 

$

776


 

$

757


 

$

(71)


 

(12)%


 

N/M


 

 

 

 

 

 

 

 

 

Pre-tax operating margin

29

%


 

31

%

29

%

29

%

(3)%


 

 

 

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

31

%


 

33

%

31

%

31

%

(1)%


 

 

 

 

 

 

 

 

 

 

 

 

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

96

%


 

101

%

98

%

96

%

93

%


 

 

 

 

 

 

 

 

 

 

 

Securities lending revenue

$

36


 

 

$

30


 

$

40


 

$

34


 

$

28


 

20

%

29

%


 

 

 

 

 

 

 

 

 

Metrics:


 

 

 

 

 

 

 

 

Average loans

$

36,960


 

 

$

38,025


 

$

38,264


 

$

37,699


 

$

35,448


 

(3)%


 

4

%

Average deposits

$

226,774


 

 

$

230,153


 

$

237,193


 

$

234,183


 

$

228,282


 

(1)%


 

(1)%


 

 

 

 

 

 

 

 

 

 

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

$

28.9


 

(d)

$

28.5


 

$

28.6


 

$

28.5


 

$

28.5


 

1

%

1

%

Market value of securities on loan at period end

(in billions) (e)

$

277


 

 

$

288


 

$

283


 

$

291


 

$

289


 

(4)%


 

(4)%


 

 

 

 

 

 

 

 

 

 

Asset servicing:


 

 

 

 

 

 

 

 

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

$

49


 

(d)

$

84


 

$

933


 

$

125


 

$

168


 

 

 

 

 

 

 

 

 

 

 

 

Depositary Receipts:


 

 

 

 

 

 

 

 

Number of sponsored programs

1,145


 

 

1,176


 

1,206


 

1,258


 

1,279


 

(3)%


 

(10)%


 

 

 

 

 

 

 

 

 

 

Clearing services:


 

 

 

 

 

 

 

 

Global DARTS volume (in thousands)

230


 

 

246


 

242


 

261


 

242


 

(7)%


 

(5)%


 

Average active clearing accounts (U.S. platform)

(in thousands)

5,959


 

 

6,107


 

6,046


 

5,979


 

5,900


 

(2)%


 

1

%

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

$

437,260


 

 

$

447,287


 

$

466,195


 

$

456,954


 

$

450,305


 

(2)%


 

(3)%


 

Average investor margin loans (U.S. platform)

$

11,575


 

 

$

11,806


 

$

11,890


 

$

11,232


 

$

10,711


 

(2)%


 

8

%


 

 

 

 

 

 

 

 

 

Broker-Dealer:


 

 

 

 

 

 

 

 

Average tri-party repo balances (in billions)

$

2,153


 

 

$

2,142


 

$

2,174


 

$

2,153


 

$

2,101


 

1

%

2

%

(a)   Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue and investment and other income.
(b)   Noninterest expense excludes amortization of intangible assets and litigation expense.
(c)    Includes the AUC/A of CIBC Mellon of $1.0 trillion at Dec. 31, 2015 and
Sept. 30, 2015 and $1.1 trillion at June 30, 2015, March 31, 2015 and Dec. 31, 2014.
(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 $55 billion at Dec. 31, 2015
, $61 billion at Sept. 30, 2015, $68 billion at June 30, 2015, $69 billion at March 31, 2015 and $65 billion at Dec. 31, 2014.
N/M – Not meaningful.

INVESTMENT SERVICES KEY POINTS

  • Income before taxes excluding amortization of intangible assets totaled $793 million in 4Q15.
    • The pre-tax operating margin excluding amortization of intangible assets was 31% in 4Q15 and the investment services fees as a percentage of noninterest expense was 96% in 4Q15, reflecting the continued focus on the business improvement process to drive operating leverage.
  • Investment services fees were $1.7 billion, flat year-over-year and a decrease of 8% sequentially.
    • Asset servicing fees (global custody, broker-dealer services and global collateral services) were $1.01 billion in 4Q15 compared with $992 million in 4Q14 and $1.03 billion in 3Q15. The year-over-year increase primarily reflects growth in the Global Collateral Services and Broker-Dealer Services and higher securities lending revenue, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential decrease primarily reflects lower client activity.
      • Estimated new business wins (AUC/A) in Asset Servicing of $49 billion in 4Q15.
    • Clearing services fees were $337 million in 4Q15 compared with $346 million in 4Q14 and $345 million in 3Q15. Both decreases primarily reflect lost business due to industry consolidations.
    • Issuer services fees (Corporate Trust and Depositary Receipts) were $199 million in 4Q15 compared with $193 million in 4Q14 and $312 million in 3Q15. The year-over-year increase primarily reflects net new business and lower money market fee waivers in Corporate Trust, partially offset by the unfavorable impact of a stronger U.S. dollar in Corporate Trust. The sequential decrease primarily reflects seasonality in Depositary Receipts.
    • Treasury services fees were $135 million in 4Q15 compared with $142 million in 4Q14 and $135 million in 3Q15. The year-over-year decrease primarily reflects higher compensating balance credits provided to clients and lower volumes.
  • Foreign exchange and other trading revenue was $148 million in 4Q15 compared with $165 million in 4Q14 and $177 million in 3Q15. The year-over-year decrease primarily reflects lower volumes in standing instruction programs and lower volatility, partially offset by higher volumes in other trading programs. The sequential decrease primarily reflects lower volumes and volatility and lower Depositary Receipts-related activity.
  • Other revenue was $102 million in 4Q15 compared with $70 million in 4Q14 and $87 million in 3Q15. Both increases primarily relate to termination fees in our clearing services business.
  • Net interest revenue was $632 million in 4Q15 compared with $573 million in 4Q14 and $628 million in 3Q15. Both increases primarily reflect higher internal crediting rates for deposits, partially offset by lower average deposits.
  • Noninterest expense (excluding amortization of intangible assets) was $1.77 billion in 4Q15 compared with $2.51 billion in 4Q14 and $1.82 billion in 3Q15. The year-over-year decrease primarily reflects lower litigation and consulting expenses, an adjustment to bank assessment charges and the favorable impact of a stronger U.S. dollar, partially offset by higher staff expense. The sequential decrease primarily reflects an adjustment to bank assessment charges, partially offset by higher staff expense.

 

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)

4Q15

3Q15

2Q15

1Q15

4Q14

Revenue:


 

 

 

 

 

Fee and other revenue

$

117


 

$

103


 

$

137


 

$

117


 

$

133


 

Net interest revenue

44


 

48


 

65


 

55


 

70


 

Total revenue

161


 

151


 

202


 

172


 

203


 

Provision for credit losses

163


 

1


 

(6)


 

2


 

1


 

Noninterest expense (ex. amortization of intangible assets, M&I and restructuring charges (recoveries))

174


 

125


 

110


 

134


 

226


 

(Loss) income before taxes (ex. amortization of intangible assets, M&I and restructuring charges (recoveries))

(176)


 

25


 

98


 

36


 

(24)


 

Amortization of intangible assets


 

1


 


 

1


 

1


 

M&I and restructuring charges (recoveries)

(4)


 

(2)


 

8


 

(4)


 


 

(Loss) income before taxes

$

(172)


 

$

26


 

$

90


 

$

39


 

$

(25)


 

 

 

 

 

 

 

Average loans and leases

$

11,557


 

$

10,853


 

$

10,514


 

$

8,602


 

$

10,272


 

KEY POINTS

  • Total fee and other revenue decreased $16 million compared with 4Q14 and increased $14 million compared with 3Q15. The year-over-year decrease primarily reflects lower asset-related gains, lease residual gains, the impact of the July 2015 sale of Meriten Investment Management GmbH and lower securities gains, partially offset by the impact of hedging activity for foreign currency placements. The sequential increase primarily reflects higher asset-related gains, income from corporate/bank-owned life insurance and the impact of hedging activity for foreign currency placements, partially offset by lower underwriting fees.
  • Net interest revenue decreased $26 million compared with 4Q14 and $4 million compared with 3Q15. Both decreases primarily reflect higher internal crediting rates to the businesses for deposits, partially offset by higher average loans and leases.
  • The provision for credit losses was $163 million in 4Q15 reflecting the impairment charge related to a recent court decision.
  • Noninterest expense, excluding amortization of intangible assets, M&I and restructuring charges (recoveries), decreased $52 million compared with 4Q14 and increased $49 million compared with 3Q15. Both comparisons were impacted by higher employee benefits expense primarily reflecting updated information received from an administrator of our health care benefits. The year-over-year decrease primarily reflects lower litigation and the impact of curtailing the U.S. pension plan. The sequential increase also reflects higher professional, legal and other purchased services.

 

THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement

(in millions)

Quarter ended


 

Year-to-date


 

Dec. 31, 

2015

Sept. 30,
2015

Dec. 31,

2014


 

Dec. 31, 

2015

Dec. 31,

2014


 

 

 

Fee and other revenue


 

 

 

 

 

 

 

Investment services fees:


 

 

 

 

 

 

 

Asset servicing

$

1,032


 

$

1,057


 

$

1,019


 

 

$

4,187


 

$

4,075


 

 

Clearing services

339


 

345


 

347


 

 

1,375


 

1,335


 

 

Issuer services

199


 

313


 

193


 

 

978


 

968


 

 

Treasury services

137


 

137


 

145


 

 

555


 

564


 

 

Total investment services fees

1,707


 

1,852


 

1,704


 

 

7,095


 

6,942


 

 

Investment management and performance fees

864


 

829


 

885


 

 

3,438


 

3,492


 

 

Foreign exchange and other trading revenue

173


 

179


 

151


 

 

768


 

570


 

 

Financing-related fees

51


 

71


 

43


 

 

220


 

169


 

 

Distribution and servicing

41


 

41


 

43


 

 

162


 

173


 

 

Investment and other income

93


 

59


 

78


 

 

316


 

1,212


 

 

Total fee revenue

2,929


 

3,031


 

2,904


 

 

11,999


 

12,558


 

 

Net securities gains

21


 

22


 

31


 

 

83


 

91


 

 

Total fee and other revenue

2,950


 

3,053


 

2,935


 

 

12,082


 

12,649


 

 

Operations of consolidated investment management funds


 

 

 

 

 

 

 

Investment income (loss)

19


 

(6)


 

101


 

 

115


 

503


 

 

Interest of investment management fund note holders

3


 

16


 

59


 

 

29


 

340


 

 

Income (loss) from consolidated investment management funds

16


 

(22)


 

42


 

 

86


 

163


 

 

Net interest revenue


 

 

 

 

 

 

 

Interest revenue

834


 

838


 

802


 

 

3,326


 

3,234


 

 

Interest expense

74


 

79


 

90


 

 

300


 

354


 

 

Net interest revenue

760


 

759


 

712


 

 

3,026


 

2,880


 

 

Provision for credit losses

163


 

1


 

1


 

 

160


 

(48)


 

 

Net interest revenue after provision for credit losses

597


 

758


 

711


 

 

2,866


 

2,928


 

 

Noninterest expense


 

 

 

 

 

 

 

Staff

1,481


 

1,437


 

1,418


 

 

5,837


 

5,845


 

 

Professional, legal and other purchased services

328


 

301


 

390


 

 

1,230


 

1,339


 

 

Software and equipment

225


 

226


 

235


 

 

907


 

942


 

 

Net occupancy

148


 

152


 

150


 

 

600


 

610


 

 

Distribution and servicing

92


 

95


 

102


 

 

381


 

428


 

 

Sub-custodian

60


 

65


 

70


 

 

270


 

286


 

 

Business development

75


 

59


 

75


 

 

267


 

268


 

 

Other

201


 

268


 

211


 

 

961


 

1,031


 

 

Amortization of intangible assets

64


 

66


 

73


 

 

261


 

298


 

 

Merger and integration, litigation and restructuring charges

18


 

11


 

800


 

 

85


 

1,130


 

 

Total noninterest expense

2,692


 

2,680


 

3,524


 

 

10,799


 

12,177


 

 

Income


 

 

 

 

 

 

 

Income before income taxes

871


 

1,109


 

164


 

 

4,235


 

3,563


 

 

Provision for income taxes

175


 

282


 

(93)


 

 

1,013


 

912


 

 

Net income

696


 

827


 

257


 

 

3,222


 

2,651


 

 

Net (income) loss attributable to noncontrolling interests (includes $(5), $5, $(24), $(68) and $(84) related to consolidated investment management funds, respectively)

(3)


 

6


 

(24)


 

 

(64)


 

(84)


 

 

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

693


 

833


 

233


 

 

3,158


 

2,567


 

 

Preferred stock dividends

(56)


 

(13)


 

(24)


 

 

(105)


 

(73)


 

 

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

$

637


 

$

820


 

$

209


 

 

$

3,053


 

$

2,494


 

 

 

 

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


 

Year-to-date


 

 

 

Dec. 31, 2015

Sept. 30, 2015

Dec. 31, 2014


 

Dec. 31, 2015

Dec. 31, 2014


 

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

$

637


 

$

820


 

$

209


 

 

$

3,053


 

$

2,494


 

 

Less:  Earnings allocated to participating securities

9


 

6


 

4


 

 

43


 

43


 

 

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

$

628


 

$

814


 

$

205


 

 

$

3,010


 

$

2,451


 

 

 

 

Average common shares and equivalents outstanding of The Bank 

 of New York Mellon Corporation

(in thousands)

Quarter ended


 

Year-to-date

Dec. 31, 2015

Sept. 30, 2015

Dec. 31, 2014


 

Dec. 31, 2015

Dec. 31, 2014

Basic

1,088,880


 

1,098,003


 

1,120,672


 

 

1,104,719


 

1,129,897


 

Diluted

1,096,385


 

1,105,645


 

1,129,040


 

 

1,112,511


 

1,137,480


 

 

 

Earnings per share applicable to the common shareholders of The 

 Bank of New York Mellon Corporation

(in dollars)

Quarter ended


 

Year-to-date

Dec. 31, 2015

Sept. 30, 2015

Dec. 31, 2014


 

Dec. 31, 2015

Dec. 31, 2014

Basic

$

0.58


 

$

0.74


 

$

0.18


 

 

$

2.73


 

$

2.17


 

Diluted

$

0.57


 

$

0.74


 

$

0.18


 

 

$

2.71


 

$

2.15


 

 

 


 

THE BANK OF NEW YORK MELLON CORPORATION
Consolidated Balance Sheet

 

(dollars in millions, except per share amounts)

Dec. 31, 

2015

Sept. 30,

2015

Dec. 31,

2014


 

 

Assets


 

 

 

 

Cash and due from:


 

 

 

 

Banks

$

6,537


 

$

8,234


 

$

6,970


 

 

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

113,203


 

82,426


 

96,682


 

 

Interest-bearing deposits with banks

15,146


 

20,002


 

19,495


 

 

Federal funds sold and securities purchased under resale agreements

24,373


 

28,901


 

20,302


 

 

Securities:


 

 

 

 

Held-to-maturity (fair value of $43,204, $43,758 and $21,127)

43,312


 

43,423


 

20,933


 

 

Available-for-sale

75,867


 

76,682


 

98,330


 

 

Total securities

119,179


 

120,105


 

119,263


 

 

Trading assets

7,368


 

6,645


 

9,881


 

 

Loans

63,703


 

63,309


 

59,132


 

 

Allowance for loan losses

(157)


 

(181)


 

(191)


 

 

Net loans

63,546


 

63,128


 

58,941


 

 

Premises and equipment

1,379


 

1,361


 

1,394


 

 

Accrued interest receivable

562


 

530


 

607


 

 

Goodwill

17,618


 

17,679


 

17,869


 

 

Intangible assets

3,842


 

3,914


 

4,127


 

 

Other assets

19,626


 

22,149


 

20,490


 

 

Subtotal assets of operations

392,379


 

375,074


 

376,021


 

 

Assets of consolidated investment management funds, at fair value:


 

 

 

 

Trading assets

1,228


 

2,087


 

8,678


 

 

Other assets

173


 

210


 

604


 

 

Subtotal assets of consolidated investment management funds, at fair value

1,401


 

2,297


 

9,282


 

 

Total assets

$

393,780


 

$

377,371


 

$

385,303


 

 

Liabilities


 

 

 

 

Deposits:


 

 

 

 

Noninterest-bearing (principally U.S. offices)

$

96,277


 

$

101,111


 

$

104,240


 

 

Interest-bearing deposits in U.S. offices

51,704


 

54,073


 

53,236


 

 

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

131,629


 

111,584


 

108,393


 

 

Total deposits

279,610


 

266,768


 

265,869


 

 

Federal funds purchased and securities sold under repurchase agreements

15,002


 

8,824


 

11,469


 

 

Trading liabilities

4,501


 

4,756


 

7,434


 

 

Payables to customers and broker-dealers

21,900


 

22,236


 

21,181


 

 

Other borrowed funds

523


 

648


 

786


 

 

Accrued taxes and other expenses

5,986


 

6,457


 

6,903


 

 

Other liabilities (includes allowance for lending-related commitments of $118, $99 and $89)

5,490


 

5,890


 

5,025


 

 

Long-term debt

21,547


 

21,430


 

20,264


 

 

Subtotal liabilities of operations

354,559


 

337,009


 

338,931


 

 

Liabilities of consolidated investment management funds, at fair value:


 

 

 

 

Trading liabilities

229


 

1,072


 

7,660


 

 

Other liabilities

17


 

91


 

9


 

 

Subtotal liabilities of consolidated investment management funds, at fair value

246


 

1,163


 

7,669


 

 

Total liabilities

354,805


 

338,172


 

346,600


 

 

Temporary equity


 

 

 

 

Redeemable noncontrolling interests

200


 

247


 

229


 

 

Permanent equity


 

 

 

 

Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 25,826, 25,826 and 15,826 shares

2,552


 

2,552


 

1,562


 

 

Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,312,941,113, 1,310,436,554 and 1,290,222,821 shares

13


 

13


 

13


 

 

Additional paid-in capital

25,262


 

25,168


 

24,626


 

 

Retained earnings

19,974


 

19,525


 

17,683


 

 

Accumulated other comprehensive loss, net of tax

(2,600)


 

(2,355)


 

(1,634)


 

 

Less:  Treasury stock of 227,598,128, 217,483,962 and 171,995,262 common shares, at cost

(7,164)


 

(6,733)


 

(4,809)


 

 

Total The Bank of New York Mellon Corporation shareholders' equity

38,037


 

38,170


 

37,441


 

 

Nonredeemable noncontrolling interests of consolidated investment management funds

738


 

782


 

1,033


 

 

Total permanent equity

38,775


 

38,952


 

38,474


 

 

Total liabilities, temporary equity and permanent equity

$

393,780


 

$

377,371


 

$

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, required 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 common 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 and a gain on the sale of the One Wall Street building; and expense measures which exclude M&I expenses, litigation charges, restructuring charges and amortization of intangible assets.  Earnings per share, return on equity measures and operating margin measures, which exclude some or all of these items, as well as the impairment charge related to a recent court decision, 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.

 

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

Net income


 

Diluted EPS


 

 

 

 

 

 

 

 

 

 

(in millions, except per common share amounts)

YTD15

YTD14


 

YTD15

YTD14


 

Inc

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

Corporation – GAAP

$

3,053


 

$

2,494


 

 

$

2.71


 

$

2.15


 

 

 

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

N/A


 

315


 

 

N/A


 

0.27


 

 

 

Gain on the sale of the One Wall Street building

N/A


 

204


 

 

N/A


 

0.18


 

 

 

Benefit primarily related to a tax carryback claim

N/A


 

150


 

 

N/A


 

0.13


 

 

 

Add:   Litigation and restructuring charges

56


 

860


 

 

0.05


 

0.74


 

 

 

Impairment charge related to a recent court decision

106


 

N/A


 

 

0.09


 

N/A


 

 

 

Charge related to investment management funds, net of incentives

N/A


 

81


 

 

N/A


 

0.07


 

 

 

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

$

3,215


 

$

2,766


 

 

$

2.85


 

$

2.39


 

(a)

19

%

(a)   Does not foot due to rounding.
N/A - Not applicable.

 

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)

4Q15


 

3Q15


 

2Q15


 

1Q15


 

4Q14

Income before income taxes – GAAP

$

871


 

 

$

1,109


 

 

$

1,165


 

 

$

1,090


 

 

$

164


 

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

5


 

 

(5)


 

 

37


 

 

31


 

 

24


 

Add:  Amortization of intangible assets

64


 

 

66


 

 

65


 

 

66


 

 

73


 

M&I, litigation and restructuring charges (recoveries)

18


 

 

11


 

 

59


 

 

(3)


 

 

800


 

 Impairment charge related to a recent court decision

170


 

 


 

 


 

 


 

 


 

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

$

1,118


 

 

$

1,191


 

 

$

1,252


 

 

$

1,122


 

 

$

1,013


 

 

 

 

 

 

 

 

 

 

 

Fee and other revenue – GAAP

$

2,950


 

 

$

3,053


 

 

$

3,067


 

 

$

3,012


 

 

$

2,935


 

Income (loss) from consolidated investment management funds – GAAP

16


 

 

(22)


 

 

40


 

 

52


 

 

42


 

Net interest revenue – GAAP

760


 

 

759


 

 

779


 

 

728


 

 

712


 

Total revenue – GAAP

3,726


 

 

3,790


 

 

3,886


 

 

3,792


 

 

3,689


 

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

5


 

 

(5)


 

 

37


 

 

31


 

 

24


 

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

$

3,721


 

 

$

3,795


 

 

$

3,849


 

 

$

3,761


 

 

$

3,665


 

 

 

 

 

 

 

 

 

 

 

Pre-tax operating margin (b)

23

%

(c)

29

%

(c)

30

%

(c)

29

%

(c)

4

%

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

30

%

(c)

31

%

(c)

33

%

(c)

30

%

(c)

28

%

(a)   Non-GAAP excludes net income (loss) attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges (recoveries), and the impairment charge related to a recent court decision, 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 $73 million for 4Q15, $53 million for 3Q15, $52 million for 2Q15 and $64 million for 1Q15 and would increase our pre-tax operating margin by approximately 1.5% for 4Q15, 1.0% for 3Q15, 0.9% for 2Q15 and 1.2% for 1Q15.

 

Pre-tax operating leverage


 

 

YTD15 vs.

(dollars in millions)

YTD15

YTD14

YTD14

Total revenue - GAAP

$

15,194


 

$

15,692


 

 

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

68


 

84


 

 

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

$

15,126


 

$

14,772


 

2.40

%


 

 

 

 

Total noninterest expense - GAAP

$

10,799


 

$

12,177


 

 

Less:  Amortization of intangible assets

261


 

298


 

 

M&I, litigation and restructuring charges

85


 

1,130


 

 

Charge related to investment management funds, net of incentives


 

104


 

 

Total noninterest expense, as adjusted - Non-GAAP

$

10,453


 

$

10,645


 

(1.80)

%


 

 

 

 

Pre-tax operating leverage, as adjusted - Non-GAAP (a)(b)


 

 

420

bps

(a)   Pre-tax operating leverage is the rate of increase in total revenue less the rate of increase in total noninterest expense.
(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 and the charge related to investment management funds, net of incentives, if applicable.

 

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)

4Q15

3Q15

2Q15

1Q15

4Q14

YTD15

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

$

637


 

$

820


 

$

830


 

$

766


 

$

209


 

$

3,053


 

Add:  Amortization of intangible assets, net of tax

42


 

43


 

44


 

43


 

47


 

172


 

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

679


 

863


 

874


 

809


 

256


 

3,225


 

Less:  Benefit primarily related to a tax carryback claim


 


 


 


 

150


 


 

Add:  M&I, litigation and restructuring charges (recoveries)

12


 

8


 

38


 

(2)


 

608


 

56


 

 Impairment charge related to a recent court decision

106


 


 


 


 


 

106


 

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

$

797


 

$

871


 

$

912


 

$

807


 

$

714


 

$

3,387


 

 

 

 

 

 

 

 

Average common shareholders' equity

$

35,664


 

$

35,588


 

$

35,516


 

$

35,486


 

$

36,859


 

$

35,564


 

Less:  Average goodwill

17,673


 

17,742


 

17,752


 

17,756


 

17,924


 

17,731


 

Average intangible assets

3,887


 

3,962


 

4,031


 

4,088


 

4,174


 

3,992


 

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

1,401


 

1,379


 

1,351


 

1,362


 

1,340


 

1,401


 

Deferred tax liability – intangible assets (b)

1,148


 

1,164


 

1,179


 

1,200


 

1,216


 

1,148


 

Average tangible common shareholders' equity – Non-GAAP

$

16,653


 

$

16,427


 

$

16,263


 

$

16,204


 

$

17,317


 

$

16,390


 

 

 

 

 

 

 

 

Return on common equity – GAAP (c)

7.1

%

9.1

%

9.4

%

8.8

%

2.2

%

8.6

%

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

8.9

%

9.7

%

10.3

%

9.2

%

7.7

%

9.5

%


 

 

 

 

 

 

 

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

16.2

%

20.8

%

21.5

%

20.3

%

5.9

%

19.7

%

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

19.0

%

21.0

%

22.5

%

20.2

%

16.3

%

20.7

%

(a)   Non-GAAP excludes amortization of intangible assets, net of tax, the benefit primarily related to a tax carryback claim, M&I, litigation and restructuring charges (recoveries) and the impairment charge related to a recent court decision, 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

Dec. 31, 

2015

Sept. 30,

2015

June 30,

2015

March 31,

2015

Dec. 31,

2014

(dollars in millions, unless otherwise noted)

BNY Mellon shareholders' equity at period end – GAAP

$

38,037


 

$

38,170


 

$

38,270


 

$

37,328


 

$

37,441


 

Less:  Preferred stock

2,552


 

2,552


 

2,552


 

1,562


 

1,562


 

BNY Mellon common shareholders' equity at period end – GAAP

35,485


 

35,618


 

35,718


 

35,766


 

35,879


 

Less:  Goodwill

17,618


 

17,679


 

17,807


 

17,663


 

17,869


 

Intangible assets

3,842


 

3,914


 

4,000


 

4,047


 

4,127


 

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

1,401


 

1,379


 

1,351


 

1,362


 

1,340


 

Deferred tax liability – intangible assets (a)

1,148


 

1,164


 

1,179


 

1,200


 

1,216


 

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

$

16,574


 

$

16,568


 

$

16,441


 

$

16,618


 

$

16,439


 

 

 

 

 

 

 

Total assets at period end – GAAP

$

393,780


 

$

377,371


 

$

395,254


 

$

392,337


 

$

385,303


 

Less:  Assets of consolidated investment management funds

1,401


 

2,297


 

2,231


 

1,681


 

9,282


 

Subtotal assets of operations – Non-GAAP

392,379


 

375,074


 

393,023


 

390,656


 

376,021


 

Less:  Goodwill

17,618


 

17,679


 

17,807


 

17,663


 

17,869


 

Intangible assets

3,842


 

3,914


 

4,000


 

4,047


 

4,127


 

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

116,211


 

86,426


 

106,628


 

93,044


 

99,901


 

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

$

254,708


 

$

267,055


 

$

264,588


 

$

275,902


 

$

254,124


 

 

 

 

 

 

 

BNY Mellon shareholders' equity to total assets ratio – GAAP

9.7

%

10.1

%

9.7

%

9.5

%

9.7

%

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

9.0

%

9.4

%

9.0

%

9.1

%

9.3

%

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

6.5

%

6.2

%

6.2

%

6.0

%

6.5

%


 

 

 

 

 

 

Period-end common shares outstanding (in thousands)

1,085,343


 

1,092,953


 

1,106,518


 

1,121,512


 

1,118,228


 

 

 

 

 

 

 

Book value per common share – GAAP

$

32.69


 

$

32.59


 

$

32.28


 

$

31.89


 

$

32.09


 

Tangible book value per common share – Non-GAAP

$

15.27


 

$

15.16


 

$

14.86


 

$

14.82


 

$

14.70


 

(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)

4Q15

3Q15

2Q15

1Q15

4Q14

Income (loss) from consolidated investment management funds

$

16


 

$

(22)


 

$

40


 

$

52


 

$

42


 

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

5


 

(5)


 

37


 

31


 

24


 

Income (loss) from consolidated investment management funds, net of noncontrolling interests

$

11


 

$

(17)


 

$

3


 

$

21


 

$

18


 

 

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


 

 

4Q15 vs.

(dollars in millions)

4Q15

4Q14

4Q14

Investment management and performance fees – GAAP

$

864


 

885


 

(2)%


 

Impact of changes in foreign currency exchange rates


 

(27)


 

 

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

$

864


 

$

858


 

1

%


 

 

 

 

 

 

 

 

 

 

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

Income (loss) from consolidated investment management funds, net of

 noncontrolling interests - Investment Management business


 

 

 

 

 

(in millions)

4Q15

3Q15

2Q15

1Q15

4Q14

Investment management fees

$

7


 

$

3


 

$

4


 

$

1


 

$

15


 

Other (Investment income (loss))

4


 

(20)


 

(1)


 

20


 

3


 

Income (loss) from consolidated investment management funds, net of noncontrolling interests

$

11


 

$

(17)


 

$

3


 

$

21


 

$

18


 

 

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


 

 

4Q15 vs.

(dollars in millions)

4Q15

4Q14

4Q14

Investment management fees – GAAP

$

799


 

$

827


 

(3)

%

Impact of changes in foreign currency exchange rates


 

(24)


 

 

Investment management fees, as adjusted – Non-GAAP

$

799


 

$

803


 

%

 

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)

4Q15

3Q15

2Q15

1Q15

4Q14

Income before income taxes – GAAP

$

287


 

$

237


 

$

263


 

$

263


 

$

236


 

Add:  Amortization of intangible assets

24


 

24


 

25


 

24


 

29


 

Money market fee waivers

23


 

28


 

29


 

33


 

33


 

Income before income taxes excluding amortization of intangible assets and money market fee waivers – Non-GAAP

$

334


 

$

289


 

$

317


 

$

320


 

$

298


 

 

 

 

 

 

 

Total revenue – GAAP

$

1,002


 

$

929


 

$

991


 

$

997


 

$

981


 

Less:  Distribution and servicing expense

92


 

94


 

95


 

97


 

101


 

Money market fee waivers benefiting distribution and servicing expense

27


 

35


 

37


 

38


 

37


 

Add:  Money market fee waivers impacting total revenue

50


 

63


 

66


 

71


 

70


 

Total revenue net of distribution and servicing expense

and excluding money market fee waivers – Non-GAAP

$

933


 

$

863


 

$

925


 

$

933


 

$

913


 

 

 

 

 

 

 

Pre-tax operating margin (a)

29

%

26

%

27

%

26

%

24

%

Pre-tax operating margin excluding amortization of intangible assets, money market fee waivers and net of distribution and servicing expense – Non-GAAP (a)

36

%

34

%

34

%

34

%

33

%

(a)   Income before taxes divided by total revenue.

 

DIVIDENDS

Common – On Jan. 21, 2016, 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 Feb. 12, 2016 to shareholders of record as of the close of business on Feb. 2, 2016. 

Preferred – On Jan. 21, 2016, 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 March 2016, in each case payable on March 21, 2016 to holders of record as of the close of business on March 5, 2016:

  • $1,011.11 per share on the Series A Preferred Stock (equivalent to $10.1111 per Normal Preferred Capital Security of Mellon Capital IV, each representing a 1/100th interest in a share of the Series A Preferred Stock); and
  • $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).

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 Dec. 31, 2015, BNY Mellon had $28.9 trillion in assets under custody and/or administration, and $1.6 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.  Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.

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 acquisition of Atherton, enhancing the client experience, our focus on delivering value-added solutions, investment excellence and actionable, data-driven insights, capital plans, strategic priorities and our business improvement process.  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 Jan. 21, 2016, 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