January 23, 2015

BNY Mellon Reports Fourth Quarter Earnings Of $807 Million Or $0.70 Per Common Share


  

On February 17, 2015, The Bank of New York Mellon Corporation (the “Company”) announced an adjustment to its financial results for the fourth quarter ended December 31, 2014, to include an additional after-tax litigation expense of $598 million in anticipation of the resolution of several previously disclosed matters, including substantially all of the foreign exchange-related actions. The financial impact of the adjustment is not reflected in this document. For further information about the impact of the adjustment, please refer to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 17, 2015.

NEW YORK, Jan. 23, 2015 /PRNewswire/ --

FULL-YEAR 2014 EARNINGS OF $3.1 BILLION OR $2.67 PER COMMON SHARE, INCLUDING $0.28 PER COMMON SHARE FROM NON-OPERATING ITEMS (a)

  • Earnings per common share up 5% in 2014 on an adjusted basis (a)

SIGNIFICANT PROGRESS ON EXPENSE CONTROL

  • Staff expense decreased 7% year-over-year

STRONG CAPITAL GENERATION AND RETURN OF VALUE TO COMMON SHAREHOLDERS

  • Repurchased 11.0 million common shares for $432 million in the fourth quarter and 46.2 million common shares for $1.7 billion in full-year 2014
  • Declared common stock dividend of $0.17 per share in the fourth quarter
  • Return on tangible common equity of 20%, or 16% on an adjusted basis, in the fourth quarter and 20%, or 18% on an adjusted basis, in full-year 2014 (a)

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported fourth quarter net income applicable to common shareholders of $807 million, or $0.70 per diluted common share, or $667 million, or $0.58 per diluted common share, adjusted for the previously disclosed benefit of a tax carryback claim, net of litigation and restructuring charges.  In the fourth quarter of 2013, net income applicable to common shareholders was $513 million, or $0.44 per diluted per common share, or $629 million, or $0.54 per diluted common share, adjusted for a loss on an equity investment.  In the third quarter of 2014, net income applicable to common shareholders was $1.07 billion, or $0.93 per diluted common share, or $734 million, or $0.64 per diluted common share, adjusted for the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, net of litigation and restructuring charges. (a)

"Our fourth quarter and full-year results cap solid performance for our shareholders.  Throughout 2014, we demonstrated our focus on and commitment to controlling expenses to create positive operating leverage, strengthening our capital position, and creating value for our clients and shareholders.  We generated positive operating leverage for the full year - even while absorbing elevated regulatory compliance costs and investing in our business to enhance future growth.  Additionally, 79 percent of our earnings were returned to our shareholders in the form of dividends and share repurchases," said Gerald L. Hassell, chairman and chief executive officer of BNY Mellon.

"Our fourth quarter results also reflect our strong expense discipline and continuing efforts to drive efficiency.  On the revenue front, we were particularly pleased with the strong fourth-quarter performance in clearing services and global collateral services, where we have been focused on broadening our unique suite of solutions for clients," added Mr. Hassell.

"As we look ahead, we remain confident in our ability to execute our strategic priorities, which include increasing revenue, maintaining a strong capital position and delivering value-added solutions to our clients.  We also continue to focus on leveraging technology and operations innovations to drive continuous improvement in productivity and service quality while reducing costs and risk throughout the organization," continued Mr. Hassell.

"I want to thank our employees around the world for their relentless efforts to deliver the solutions, expertise and value that the world's most sophisticated investors rely on to achieve their investment objectives," concluded Mr. Hassell.

In 2014, net income applicable to common shareholders totaled $3.1 billion, or $2.67 per diluted common share, or $2.8 billion, or $2.39 per diluted common share, adjusted for the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, the benefit primarily related to a tax carryback claim, litigation and restructuring charges and the charge related to investment management funds, net of incentives.  In 2013, net income applicable to common shareholders totaled $2.0 billion, or $1.73 per diluted common share, or $2.7 billion, or $2.28 per diluted common share, adjusted for litigation and restructuring charges, the charge related to investment management funds, net of incentives, and the U.S. Tax Court's decisions related to the disallowance of certain foreign tax credits. (a)

(a) See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for the reconciliation of 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. 23, 2015.  This conference call and audio webcast will include forward-looking statements and may include other material information. 

Investors wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (International), and using the passcode: Earnings, or by logging on to www.bnymellon.com.  Earnings materials will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EST on Jan. 23, 2015.  Replays of the conference call and audio webcast will be available beginning Jan. 23, 2015 at approximately 2 p.m. EST through Feb. 23, 2015 by dialing (866) 513-9973 (U.S.) or (203) 369-1999 (International).  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 2014 FINANCIAL HIGHLIGHTS (a)

(comparisons are 4Q14 vs. 4Q13 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)

4Q13

4Q14

Inc(Dec)


 

4Q13

4Q14

Inc(Dec)

GAAP results

$

0.44


 

$

0.70


 

 

 

 

$

513


 

$

807


 

 

 

Add: Litigation and restructuring charges


 

0.01


 

 

 

 

1


 

10


 

 

 

 Loss related to an equity investment

0.10


 


 

 

 

 

115


 


 

 

 

Less: Benefit primarily related to a tax carryback claim


 

0.13


 

 

 

 


 

150


 

 

 

Non-GAAP results

$

0.54


 

$

0.58


 

7

%


 

$

629


 

$

667


 

6

%

  • Total revenue was $3.7 billion, an increase of 2%, or a decline of 3% as adjusted (Non-GAAP).
    • Investment services fees increased 1% reflecting organic growth, net new business offset by lower Depositary Receipts revenue and the unfavorable impact of a stronger U.S. dollar.
    • Investment management and performance fees decreased 2% reflecting the unfavorable impact of a stronger U.S. dollar and lower performance fees, partially offset by higher equity market values.
    • Foreign exchange revenue increased 31% driven by higher volumes and volatility, partially offset by lower Depositary Receipts-related activity.
    • Investment and other income increased $121 million driven by a loss related to an equity investment recorded in 4Q13, partially offset by lower seed capital gains.
    • Net interest revenue decreased 6% reflecting lower asset yields, higher premium amortization on agency mortgage backed securities, lower accretion and the impact of interest rate hedging.
  • The provision for credit losses was $1 million in 4Q14.
  • Noninterest expense decreased 5%.  The decrease reflects lower staff expense, the favorable impact of a stronger U.S. dollar, lower asset-based taxes and business development expense, partially offset by higher professional, legal and other purchased services.
  • Effective tax rate of 9.4%; includes a 16.5% benefit primarily related to the previously disclosed approval of a tax carryback claim and the tax impact of consolidated investment management funds.
  • Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
    • AUC/A of $28.5 trillion, increased 3% primarily reflecting higher market values and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.
      • Estimated new AUC/A wins in Asset Servicing of $130 billion in 4Q14.
    • AUM of a record $1.71 trillion, increased 8% driven by higher equity market values and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.
      • Long-term inflows totaled $27 billion in 4Q14 driven by liability-driven, fixed income and alternative investments.
      • Short-term inflows totaled $5 billion in 4Q14.
  • Capital
    • Repurchased 11.0 million common shares for $432 million in 4Q14 and 46.2 million common shares for $1.7 billion in full-year 2014.
    • Return on tangible common equity of 20%, or 16% as adjusted (Non-GAAP), in 4Q14 and 20%, or 18% as adjusted (Non-GAAP), in full-year 2014 (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 the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, a loss related to an equity investment, M&I, litigation and restructuring charges, a charge (recovery) related to investment management funds, net of incentives, and the benefit primarily related to a tax carryback claim, if applicable.

Note: In the table above and throughout this document, sequential growth rates are unannualized.

FINANCIAL SUMMARY

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


 

 

 

 

 

 

 

 

 

 

4Q14 vs.

4Q13

1Q14

2Q14

3Q14

4Q14

4Q13

3Q14

Revenue:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee and other revenue

$

2,814


 

$

2,883


 

$

2,980


 

$

3,851


 

$

2,935


 

4

%

(24)%


 

Income from consolidated investment management funds

36


 

36


 

46


 

39


 

42


 

 

 

 

 

Net interest revenue

761


 

728


 

719


 

721


 

712


 

 

 

 

 

Total revenue – GAAP

3,611


 

3,647


 

3,745


 

4,611


 

3,689


 

2


 

(20)


 

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

17


 

20


 

17


 

23


 

24


 

 

 

 

 

Gain on the sale of our investment in Wing Hang


 


 


 

490


 


 

 

 

 

 

Gain on the sale of the One Wall Street building


 


 


 

346


 


 

 

 

 

 

Loss related to an equity investment

(175)


 


 


 


 


 

 

 

 

 

Total revenue – Non-GAAP

3,769


 

3,627


 

3,728


 

3,752


 

3,665


 

(3)


 

(2)


 

Provision for credit losses

6


 

(18)


 

(12)


 

(19)


 

1


 

 

 

 

 

Expense:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense – GAAP

2,877


 

2,739


 

2,946


 

2,968


 

2,745


 

(5)


 

(8)


 

Less:  Amortization of intangible assets

82


 

75


 

75


 

75


 

73


 

 

 

 

 

M&I, litigation and restructuring charges

2


 

(12)


 

122


 

220


 

21


 

 

 

 

 

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


 

(5)


 

109


 


 


 

 

 

 

 

Total noninterest expense – Non-GAAP

2,793


 

2,681


 

2,640


 

2,673


 

2,651


 

(5)


 

(1)


 

Income:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

728


 

926


 

811


 

1,662


 

943


 

30

%

N/M

Provision for income taxes

172


 

232


 

217


 

556


 

88


 

 

 

 

 

Net income

$

556


 

$

694


 

$

594


 

$

1,106


 

$

855


 

 

 

 

 

Net (income) attributable to noncontrolling interests (a)

(17)


 

(20)


 

(17)


 

(23)


 

(24)


 

 

 

 

 

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

539


 

674


 

577


 

1,083


 

831


 

 

 

 

 

Preferred stock dividends

(26)


 

(13)


 

(23)


 

(13)


 

(24)


 

 

 

 

 

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

$

513


 

$

661


 

$

554


 

$

1,070


 

$

807


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Metrics:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax operating margin (b)

20

%

25

%

22

%

36

%

26

%


 

 

 

 

Non-GAAP (b)

26

%

27

%

30

%

29

%

28

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on common equity (annualized) (b)

5.7

%

7.4

%

6.1

%

11.6

%

8.7

%


 

 

 

 

Non-GAAP (b)

7.6

%

7.8

%

8.4

%

8.5

%

7.7

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

14.3

%

17.6

%

14.5

%

26.2

%

19.5

%


 

 

 

 

Non-GAAP adjusted (b)

17.2

%

17.3

%

18.4

%

18.4

%

16.3

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

78

%

79

%

79

%

83

%

79

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

39

%

37

%

38

%

43

%

35

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average common shares and equivalents outstanding


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

1,142,861


 

1,138,645


 

1,133,556


 

1,126,946


 

1,120,672


 

 

 

 

 

Diluted

1,147,961


 

1,144,510


 

1,139,800


 

1,134,871


 

1,129,040


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period end:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full-time employees

51,100


 

51,400


 

51,100


 

50,900


 

50,300


 

 

 

 

 

Book value per common share - GAAP (b)

$

31.46


 

$

31.94


 

$

32.49


 

$

32.77


 

$

32.62


 

 

 

 

 

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

$

13.95


 

$

14.48


 

$

14.88


 

$

15.30


 

$

15.23


 

 

 

 

 

Cash dividends per common share

$

0.15


 

$

0.15


 

$

0.17


 

$

0.17


 

$

0.17


 

 

 

 

 

Common dividend payout ratio


 

34

%


 

26

%


 

35

%


 

18

%


 

24

%


 

 

 

 

Closing stock price per common share

$

34.94


 

$

35.29


 

$

37.48


 

$

38.73


 

$

40.57


 

 

 

 

 

Market capitalization

$

39,910


 

$

40,244


 

$

42,412


 

$

43,599


 

$

45,366


 

 

 

 

 

Common shares outstanding

1,142,250


 

1,140,373


 

1,131,596


 

1,125,710


 

1,118,228


 

 

 

 

 

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

CONSOLIDATED BUSINESS METRICS

Consolidated business metrics


 

 

 

 

 

 

 

 

 

 

 

4Q14 vs.

4Q13

1Q14

2Q14

3Q14

4Q14


 

4Q13

3Q14

Changes in AUM (in billions): (a)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance of AUM

$

1,532


 

$

1,583


 

$

1,620


 

$

1,636


 

$

1,646


 

 

 

 

 

 

Net inflows (outflows):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

(5)


 

(1)


 

(4)


 

(2)


 

(4)


 

 

 

 

 

 

Fixed income

5


 


 

(1)


 


 

4


 

 

 

 

 

 

Index

(3)


 


 

7


 

(3)


 

1


 

 

 

 

 

 

Liability-driven investments (b)

4


 

20


 

(17)


 

18


 

24


 

 

 

 

 

 

Alternative investments

1


 

2


 

2


 


 

2


 

 

 

 

 

 

Total long-term inflows (outflows)

2


 

21


 

(13)


 

13


 

27


 

 

 

 

 

 

Short term:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

6


 

(7)


 

(18)


 

19


 

5


 

 

 

 

 

 

Total net inflows (outflows)

8


 

14


 

(31)


 

32


 

32


 

 

 

 

 

 

Net market/currency impact

43


 

23


 

47


 

(22)


 

32


 

 

 

 

 

 

Ending balance of AUM

$

1,583


 

$

1,620


 

$

1,636


 

$

1,646


 

$

1,710


 

(c)

8

%

4

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

17

%

17

%

17

%

16

%

16

%


 

 

 

 

 

Fixed income

14


 

14


 

14


 

13


 

13


 

 

 

 

 

 

Index

20


 

20


 

21


 

21


 

21


 

 

 

 

 

 

Liability-driven investments (b)

26


 

27


 

27


 

28


 

29


 

 

 

 

 

 

Alternative investments

4


 

4


 

4


 

4


 

4


 

 

 

 

 

 

Cash

19


 

18


 

17


 

18


 

17


 

 

 

 

 

 

Total AUM

100

%

100

%

100

%

100

%

100

%

(c)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth management:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans (in millions)

$

9,755


 

$

10,075


 

$

10,372


 

$

10,772


 

$

11,124


 

 

14

%

3

%

Average deposits (in millions)

$

14,161


 

$

14,805


 

$

13,458


 

$

13,764


 

$

14,604


 

 

3

%

6

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Services:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans (in millions)

$

31,211


 

$

31,468


 

$

33,115


 

$

33,785


 

$

35,448


 

 

14

%

5

%

Average deposits (in millions)

$

216,216


 

$

214,947


 

$

220,701


 

$

221,734


 

$

228,282


 

 

6

%

3

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

27.6


 

$

27.9


 

$

28.5


 

$

28.3


 

$

28.5


 

(c)

3

%

1

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

235


 

$

264


 

$

280


 

$

282


 

$

289


 

 

23

%

2

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset servicing:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

123


 

$

161


 

$

130


 

$

115


 

$

130


 

(c)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depositary Receipts:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of sponsored programs

1,335


 

1,332


 

1,316


 

1,302


 

1,279


 

 

(4)%


 

(2)%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clearing services:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global DARTS volume (in thousands)

213


 

230


 

207


 

209


 

242


 

 

14

%

16

%

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

5,643


 

5,695


 

5,752


 

5,805


 

5,900


 

 

5

%

2

%

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

$

401,434


 

$

413,658


 

$

433,047


 

$

442,827


 

$

450,305


 

 

12

%

2

%

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

$

8,848


 

$

8,919


 

$

9,236


 

$

9,861


 

$

10,711


 

 

21

%

9

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broker-Dealer:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average tri-party repo balances (in billions)

$

2,005


 

$

1,983


 

$

2,022


 

$

2,063


 

$

2,101


 

 

5

%

2

%

(a)   Excludes securities lending cash management assets and assets managed in the Investment Services business.
(b)   Includes currency and overlay assets under management.
(c)    Preliminary.
(d)   Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at Dec. 31, 2013, March 31, 2014
, June 30, 2014 and Sept. 30, 2014, and $1.1 trillion at 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, beginning in the fourth quarter of 2013, on behalf of CIBC Mellon clients, which totaled $62 billion at Dec. 31, 2013
, $66 billion at March 31, 2014, $64 billion at June 30, 2014, and $65 billion at Sept. 30, 2014 and Dec. 31, 2014.

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

Key market metrics


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4Q14 vs.

4Q13

1Q14

2Q14

3Q14

4Q14

4Q13

3Q14

S&P 500 Index (a)

1848


 

1872


 

1960


 

1972


 

2059


 

11

%

4

%

S&P 500 Index – daily average

1769


 

1835


 

1900


 

1976


 

2009


 

14


 

2


 

FTSE 100 Index (a)

6749


 

6598


 

6744


 

6623


 

6566


 

(3)


 

(1)


 

FTSE 100 Index – daily average

6612


 

6680


 

6764


 

6756


 

6526


 

(1)


 

(3)


 

MSCI World Index (a)

1661


 

1674


 

1743


 

1698


 

1710


 

3


 

1


 

MSCI World Index – daily average

1602


 

1647


 

1698


 

1733


 

1695


 

6


 

(2)


 

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

354


 

365


 

376


 

361


 

357


 

1


 

(1)


 

NYSE and NASDAQ share volume (in billions)

179


 

196


 

187


 

173


 

198


 

11


 

14


 

JPMorgan G7 Volatility Index – daily average (c)

8.20


 

7.80


 

6.22


 

6.21


 

8.54


 

4


 

38


 

Average Fed Funds effective rate

0.09

%

0.07

%

0.09

%

0.09

%

0.10

%

1

bps

1

bps

(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


 

 

 

 

 

 

 

 

 

 

4Q14 vs.

(dollars in millions)

4Q13

1Q14

2Q14

3Q14

4Q14

4Q13

3Q14

Investment services fees:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset servicing (a)

$

984


 

$

1,009


 

$

1,022


 

$

1,025


 

$

1,019


 

4

%

(1)%


 

Clearing services

324


 

325


 

326


 

337


 

347


 

7


 

3


 

Issuer services

237


 

229


 

231


 

315


 

193


 

(19)


 

(39)


 

Treasury services

137


 

136


 

141


 

142


 

145


 

6


 

2


 

Total investment services fees

1,682


 

1,699


 

1,720


 

1,819


 

1,704


 

1


 

(6)


 

Investment management and performance fees

904


 

843


 

883


 

881


 

885


 

(2)


 


 

Foreign exchange and other trading revenue

146


 

136


 

130


 

153


 

151


 

3


 

(1)


 

Distribution and servicing

43


 

43


 

43


 

44


 

43


 


 

(2)


 

Financing-related fees

43


 

38


 

44


 

44


 

43


 


 

(2)


 

Investment and other income

(43)


 

102


 

142


 

890


 

78


 

N/M

N/M

Total fee revenue

2,775


 

2,861


 

2,962


 

3,831


 

2,904


 

5


 

(24)


 

Net securities gains

39


 

22


 

18


 

20


 

31


 

N/M

N/M

Total fee and other revenue

$

2,814


 

$

2,883


 

$

2,980


 

$

3,851


 

$

2,935


 

4

%

(24)%


 

(a)   Asset servicing fees include securities lending revenue of $31 million in 4Q13, $38 million in 1Q14, $46 million in 2Q14, $37 million in 3Q14 and $37 million in 4Q14.
N/M - Not meaningful.

KEY POINTS

  • Asset servicing fees were $1.0 billion, an increase of 4% year-over-year and a decrease of 1% sequentially. The year-over-year increase primarily reflects organic growth and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential decrease primarily reflects the unfavorable impact of a stronger U.S. dollar, partially offset by net new business.
  • Clearing services fees were $347 million, an increase of 7% year-over-year and 3% sequentially. Both increases were driven by higher clearance revenue reflecting higher DARTS volume. The year-over-year increase also reflects higher mutual fund and asset-based fees.
  • Issuer services fees were $193 million, a decrease of 19% year-over-year and 39% sequentially. The year-over-year decrease reflects lower corporate actions and dividend fees in Depositary Receipts. The sequential decrease is primarily due to seasonality in Depositary Receipts, partially offset by higher Corporate Trust fees.
  • Treasury services fees were $145 million in 4Q14 compared with $137 million in 4Q13 and $142 million in 3Q14. Both increases primarily reflect higher payment volumes.
  • Investment management and performance fees were $885 million, a decrease of 2% year-over-year and up slightly sequentially. Both comparisons reflect the unfavorable impact of a stronger U.S. dollar and higher equity market values. The year-over-year decrease also resulted from lower performance fees. The sequential increase also reflects seasonally higher performance fees and net new business.

 

Foreign exchange and other trading revenue


 

 

 

 

 

 

 

 

 

 

 

(in millions)

4Q13

1Q14

2Q14

3Q14

4Q14


 

Foreign exchange

$

126


 

$

130


 

$

129


 

$

154


 

$

165


 

 

Other trading revenue (loss):


 

 

 

 

 

 

 

 

 

 

 

Fixed income

20


 

1


 

(1)


 

2


 

(18)


 

 

Equity/other


 

5


 

2


 

(3)


 

4


 

 

Total other trading revenue (loss)

20


 

6


 

1


 

(1)


 

(14)


 

 

Total foreign exchange and other trading revenue

$

146


 

$

136


 

$

130


 

$

153


 

$

151


 

Foreign exchange and other trading revenue totaled $151 million in 4Q14 compared with $146 million in 4Q13 and $153 million in 3Q14.  In 4Q14, foreign exchange revenue totaled $165 million, an increase of 31% year-over-year and 7% sequentially.  Both increases reflect higher volumes and volatility, partially offset by lower Depositary Receipts-related activity. 

Other trading loss was $14 million in 4Q14, compared with other trading revenue of $20 million in 4Q13 and other trading loss of $1 million in 3Q14.  Both decreases primarily reflect lower fixed income derivatives trading revenue due to exiting the derivatives sales and trading business and losses on hedging activities within one of the Investment Management boutiques, partially offset by the positive impact of interest rate hedging (which is offset in net interest revenue).


 

Investment and other income (loss)


 

 

 

 

 

 

 

 

 

 

 

(in millions)

4Q13

1Q14

2Q14

3Q14

4Q14


 

Corporate/bank-owned life insurance

$

40


 

$

30


 

$

30


 

$

34


 

$

37


 

 

Asset-related gains (losses)

22


 

(1)


 

17


 

836


 

20


 

 

Expense reimbursements from joint venture

11


 

12


 

15


 

13


 

15


 

 

Lease residual gains


 

35


 

4


 

5


 

5


 

 

Private equity gains (losses)

5


 

5


 

(2)


 

2


 

1


 

 

Transitional service agreements

2


 


 


 


 


 

 

Seed capital gains (losses)

20


 

6


 

15


 

(1)


 


 

 

Equity investment revenue (loss)

(163)


 

(2)


 

17


 

(9)


 

(5)


 

 

Other income

20


 

17


 

46


 

10


 

5


 

 

Total investment and other income (loss)

$

(43)


 

$

102


 

$

142


 

$

890


 

$

78


 

Investment and other income was $78 million in 4Q14 compared with a loss of $43 million in 4Q13 and income of $890 million in 3Q14.  The year-over-year increase primarily reflects a loss related to an equity investment recorded in 4Q13 and lower seed capital gains.  The sequential decrease primarily reflects the gains on the sales of our equity investment in Wing Hang Bank and our One Wall Street building, both recorded in 3Q14.

NET INTEREST REVENUE


 

Net interest revenue


 

 

 

 

 

 

 

 

 

 

4Q14 vs.

(dollars in millions)

4Q13

1Q14

2Q14

3Q14

4Q14

4Q13

3Q14

Net interest revenue (non-FTE)

$

761


 

$

728


 

$

719


 

$

721


 

$

712


 

(6)%


 

(1)%


 

Net interest revenue (FTE) – Non-GAAP

781


 

744


 

736


 

736


 

726


 

(7)


 

(1)


 

Net interest margin (FTE)

1.09

%

1.05

%

0.98

%

0.94

%

0.91

%

(18)

bps

(3)

 bps


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected average balances:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash/interbank investments

$

132,198


 

$

127,134


 

$

140,357


 

$

139,278


 

$

140,599


 

6

%

1

%

Trading account securities

6,173


 

5,217


 

5,532


 

5,435


 

3,922


 

(36)


 

(28)


 

Securities

96,640


 

100,534


 

101,420


 

112,055


 

117,243


 

21


 

5


 

Loans

50,768


 

51,647


 

53,449


 

54,835


 

56,844


 

12


 

4


 

Interest-earning assets

285,779


 

284,532


 

300,758


 

311,603


 

318,608


 

11


 

2


 

Interest-bearing deposits

157,020


 

152,986


 

162,674


 

164,233


 

163,149


 

4


 

(1)


 

Noninterest-bearing deposits

79,999


 

81,430


 

77,820


 

82,334


 

85,330


 

7


 

4


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected average yields/rates:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash/interbank investments

0.40

%

0.43

%

0.43

%

0.38

%

0.31

%


 

 

 

 

Trading account securities

2.82


 

2.60


 

2.19


 

2.36


 

2.64


 

 

 

 

 

Securities

2.02


 

1.79


 

1.68


 

1.56


 

1.54


 

 

 

 

 

Loans

1.64


 

1.65


 

1.66


 

1.61


 

1.58


 

 

 

 

 

Interest-earning assets

1.21


 

1.17


 

1.10


 

1.05


 

1.02


 

 

 

 

 

Interest-bearing deposits

0.06


 

0.06


 

0.06


 

0.06


 

0.03


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

46

%

45

%

47

%

45

%

44

%


 

 

 

 

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

28

%

29

%

26

%

26

%

27

%


 

 

 

 

bps – basis points.
FTE – fully taxable equivalent.

KEY POINTS

  • Net interest revenue totaled $712 million in 4Q14, a decrease of $49 million compared with 4Q13 and $9 million sequentially. 
    • The year-over-year decrease primarily resulted from lower asset yields, higher premium amortization on agency mortgage backed securities, lower accretion and the impact of interest rate hedging (which is primarily offset in foreign exchange and other trading revenue).  The decrease was partially offset by a change in the mix of assets and higher average interest-earning assets driven by higher deposits.
    • The sequential decrease was primarily driven by the impact of interest rate hedging of approximately $13 million (which is primarily offset in foreign exchange and other trading revenue) and lower accretion.
  • In the fourth quarter of 2014, we completed our plan to reduce interbank placement assets and increase our high quality liquid assets in the securities portfolio. 

NONINTEREST EXPENSE

Noninterest expense


 

 

 

 

 

 

 

 

 

 

4Q14 vs.

(dollars in millions)

4Q13

1Q14

2Q14

3Q14

4Q14

4Q13

3Q14

Staff:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation

$

929


 

$

925


 

$

903


 

$

909


 

$

893


 

(4)%


 

(2)%


 

Incentives

343


 

359


 

313


 

340


 

319


 

(7)


 

(6)


 

Employee benefits

250


 

227


 

223


 

228


 

206


 

(18)


 

(10)


 

Total staff

1,522


 

1,511


 

1,439


 

1,477


 

1,418


 

(7)


 

(4)


 

Professional, legal and other purchased services

344


 

312


 

314


 

323


 

390


 

13


 

21


 

Software and equipment

241


 

237


 

236


 

234


 

235


 

(2)


 


 

Net occupancy

154


 

154


 

152


 

154


 

150


 

(3)


 

(3)


 

Distribution and servicing

110


 

107


 

112


 

107


 

102


 

(7)


 

(5)


 

Business development

96


 

64


 

68


 

61


 

75


 

(22)


 

23


 

Sub-custodian

68


 

68


 

81


 

67


 

70


 

3


 

4


 

Other

258


 

223


 

347


 

250


 

211


 

(18)


 

(16)


 

Amortization of intangible assets

82


 

75


 

75


 

75


 

73


 

(11)


 

(3)


 

M&I, litigation and restructuring charges

2


 

(12)


 

122


 

220


 

21


 

N/M

N/M

Total noninterest expense – GAAP

$

2,877


 

$

2,739


 

$

2,946


 

$

2,968


 

$

2,745


 

(5)%


 

(8)%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total staff expense as a percentage of total revenue

42

%

41

%

38

%

32

%

38

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Memo:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

2,793


 

$

2,681


 

$

2,640


 

$

2,673


 

$

2,651


 

(5)%


 

(1)%


 

N/M – Not meaningful.

KEY POINTS

  • Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges, and the charge (recovery) related to investment management funds, net of incentives (Non-GAAP) decreased 5% year-over-year and 1% sequentially. 
    • Both comparisons primarily reflect lower staff expense, the favorable impact of a stronger U.S. dollar and lower asset-based taxes, partially offset by higher professional, legal and other purchased services.
      • The decrease in staff expense primarily reflects lower headcount as a result of streamlining actions, the benefit of replacing technology contractors with permanent staff and lower healthcare costs.
      • The increase in professional, legal and other purchased services was driven by higher expenses related to the implementation of strategic platforms.
    • The year-over-year decrease also reflects lower business development expense as a result of discretionary expense control.
    • The sequential decrease was partially offset by higher business development expense due to seasonality and higher legal fees.

INVESTMENT SECURITIES PORTFOLIO

At Dec. 31, 2014, the fair value of our investment securities portfolio totaled $119.1 billion.  The net unrealized pre-tax gain on our total securities portfolio was $1.3 billion at Dec. 31, 2014 compared with $1.1 billion at Sept. 30, 2014.  The increase in the net unrealized pre-tax gain was primarily driven by a decline in market interest rates.  During 4Q14, we received $115 million of paydowns of sub-investment grade securities and sold $116 million of sub-investment grade available-for-sale securities. 

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


 

Investment securities

portfolio

 

 

(dollars in millions)

Sept. 30,
2014


 

4Q14

change in

unrealized

gain (loss)

Dec. 31, 2014


 

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

$

44,372


 

 

$

229


 

$

46,574


 

$

46,762


 

 

100

%

$

188


 

 

100

%

%

%

%

%

U.S. Treasury

25,449


 

 

13


 

24,639


 

24,857


 

 

101


 

218


 

 

100


 


 


 


 


 

Sovereign debt/sovereign guaranteed

16,627


 

 

43


 

18,093


 

18,253


 

 

101


 

160


 

 

77


 


 

23


 


 


 

Non-agency RMBS (b)

2,449


 

 

(66)


 

1,747


 

2,214


 

 

82


 

467


 

 


 

1


 

1


 

91


 

7


 

Non-agency RMBS

1,170


 

 

(5)


 

1,095


 

1,113


 

 

94


 

18


 

 

1


 

8


 

22


 

68


 

1


 

European floating rate notes

2,296


 

 

(7)


 

1,967


 

1,959


 

 

99


 

(8)


 

 

70


 

23


 


 

7


 


 

Commercial MBS

4,829


 

 

8


 

4,958


 

4,997


 

 

101


 

39


 

 

93


 

6


 

1


 


 


 

State and political subdivisions

5,434


 

 

(13)


 

5,200


 

5,271


 

 

101


 

71


 

 

79


 

20


 


 


 

1


 

Foreign covered bonds

2,949


 

 

(8)


 

2,788


 

2,866


 

 

103


 

78


 

 

100


 


 


 


 


 

Corporate bonds

1,670


 

 

4


 

1,747


 

1,785


 

 

102


 

38


 

 

20


 

66


 

14


 


 


 

CLO

1,971


 

 

(10)


 

2,109


 

2,111


 

 

100


 

2


 

 

100


 


 


 


 


 

U.S. Government agencies

699


 

 

3


 

686


 

684


 

 

100


 

(2)


 

 

100


 


 


 


 


 

Consumer ABS

3,025


 

 

(2)


 

3,241


 

3,240


 

 

100


 

(1)


 

 

99


 

1


 


 


 


 

Other (c)

2,923


 

 

2


 

3,024


 

3,032


 

 

100


 

8


 

 

42


 

52


 


 


 

6


 

Total investment securities

$

115,863


 

(d)

$

191


 

$

117,868


 

$

119,144


 

(d)

100

%

$

1,276


 

(e)

90

%

4

%

4

%

2

%

%

(a)   Amortized cost before impairments.
(b)   These RMBS were included in the former Grantor Trust and were marked-to-market in 2009.  We believe these RMBS would receive higher credit ratings if these ratings incorporated, as additional credit enhancements, the difference between the written-down amortized cost and the current face amount of each of these securities.
(c)    Includes commercial paper with a fair value of $1.6 billion and $1.6 billion and money market funds with a fair value of $789 million and $763 million at Sept. 30, 2014 and Dec. 31, 2014, respectively.
(d)   Includes net unrealized gains on derivatives hedging securities available-for-sale of $137 million at Sept. 30, 2014 and net unrealized losses on derivatives hedging securities available-for-sale of $313 million at Dec. 31, 2014.
(e)    Unrealized gains of $1,082 million at Dec. 31, 2014 related to available-for-sale securities.

NONPERFORMING ASSETS

Nonperforming assets

(dollars in millions)

Dec. 31,
2013

Sept. 30,
2014

Dec. 31,
2014

Loans:


 

 

 

 

 

 

Other residential mortgages

$

117


 

$

113


 

$

112


 

Commercial

15


 

13


 


 

Wealth management loans and mortgages

11


 

13


 

12


 

Foreign

6


 


 


 

Commercial real estate

4


 

4


 

1


 

Financial institutions


 


 


 

Total nonperforming loans

153


 

143


 

125


 

Other assets owned

3


 

4


 

3


 

Total nonperforming assets (a)

$

156


 

$

147


 

$

128


 

Nonperforming assets ratio

0.30

%

0.26

%

0.22

%

Allowance for loan losses/nonperforming loans

137.3


 

133.6


 

152.8


 

Total allowance for credit losses/nonperforming loans

224.8


 

201.4


 

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 $16 million at Dec. 31, 2013, $79 million at Sept. 30, 2014 and $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.

Nonperforming assets were $128 million at Dec. 31, 2014, a decrease of $19 million from $147 million at Sept. 30, 2014.  The decrease primarily resulted from repayments in the commercial and other residential mortgage portfolios and charges-offs in the commercial real estate portfolio.

ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS


 

Allowance for credit losses, provision and net charge-offs

(in millions)

Dec. 31,
 2013

Sept. 30,
2014

Dec. 31,
 2014

Allowance for credit losses - beginning of period

$

339


 

$

311


 

$

288


 

Provision for credit losses

6


 

(19)


 

1


 

Net (charge-offs) recoveries:


 

 

 

 

 

 

Commercial

(1)


 

(4)


 

(8)


 

Commercial real estate


 


 

(2)


 

Foreign

(3)


 

(1)


 


 

Wealth management loans and mortgages


 


 


 

Other residential mortgages


 

1


 


 

Financial institutions

3


 


 

1


 

Net (charge-offs)

(1)


 

(4)


 

(9)


 

Allowance for credit losses - end of period

$

344


 

$

288


 

$

280


 

Allowance for loan losses

$

210


 

$

191


 

$

191


 

Allowance for lending-related commitments

134


 

97


 

89


 

The allowance for credit losses was $280 million at Dec. 31, 2014, a decrease of $8 million compared with $288 million at Sept. 30, 2014.  The decrease primarily reflects charge-offs in the commercial loan portfolio.

CAPITAL

Our consolidated capital ratios are shown in the following table.  At Sept. 30, 2014 and Dec. 31, 2014, the common equity Tier 1 ("CET1"), Tier 1 and Total risk-based regulatory capital ratios are based on Basel III components of capital, as phased-in, and credit risk asset risk-weightings using the Advanced Approach framework under the final rules released by the Board of Governors of the Federal Reserve System (the "Federal Reserve") on July 2, 2013 (the "Final Capital Rules").  The leverage capital ratios for Sept. 30, 2014 and Dec. 31, 2014 are based on Basel III components of capital and quarterly average total assets, as phased-in.  The risk-based and leverage capital ratios for Dec. 31, 2013 are based on Basel I rules (including Basel I Tier 1 common in the case of the CET1 ratio).

Capital ratios

Dec. 31,
 2013


 

Sept. 30,
2014


 

Dec. 31,
 2014


 

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


 

 

 

 

 

 

 

 

 

CET1 ratio

14.5

%

(d)

11.4

%


 

11.6

%


 

Tier 1 capital ratio

16.2


 

 

12.3


 

 

12.6


 

 

Total (Tier 1 plus Tier 2) capital ratio

17.0


 

 

12.7


 

 

12.8


 

 

Leverage capital ratio

5.4


 

 

5.8


 

 

5.7


 

 

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

10.0


 

 

10.0


 

 

9.9


 

 

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

9.6


 

 

9.5


 

 

9.5


 

 

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

6.8


 

 

6.5


 

 

6.7


 

 

 

 

 

 

 

 

 

 

 

 

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


 

 

 

 

 

 

 

 

 

Estimated CET1 ratio:


 

 

 

 

 

 

 

 

 

Standardized Approach

10.6


 

 

10.8


 

 

10.8


 

 

Advanced Approach

11.3


 

 

10.2


 

 

10.2


 

 

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

N/A


 

4.6


 

 

4.5


 

 

(a)   Dec. 31, 2014 consolidated regulatory capital ratios are preliminary.  See "Capital Ratios" beginning on page 29 for more detail.
(b)   Risk-based capital ratios at Sept. 30, 2014 and Dec. 31, 2014 include the net impact of including the total consolidated assets of certain consolidated investment management funds in risk-weighted assets.  These assets were not included in the Dec. 31, 2013 risk-based ratios.  The leverage capital ratio was not impacted. 
(c)    The transitional Standardized Approach risk-based capital ratios (which represent the Collins Floor comparison) of the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios were 15.1%, 16.3% and 17.0%, respectively, at Sept. 30, 2014 and 15.5%, 16.8% and 17.4%, respectively, at Dec. 31, 2014, and are calculated based on Basel III components of capital, as phased-in, and asset risk-weightings using the general risk-based guidelines included in the Final Capital Rules (which for 2014 look to Basel I-based requirements). 
(d)   See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for a reconciliation of these ratios.
(e)    The estimated fully phased-in SLR as of Sept. 30, 2014 and Dec. 31, 2014 is based on our interpretation of the Final Capital Rules, as supplemented by the Federal Reserve's final rules on the SLR.  When fully phased-in, we expect to maintain an SLR of over 5%, 3% attributable to the minimum required SLR, and greater than 2% attributable to a buffer applicable to U.S. G-SIBs. 
N/A – Not available.


 

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


 

 

 

 

(in millions)

4Q14

YTD14

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

$

16,720


 

$

14,810


 

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

807


 

3,092


 

Goodwill and intangible assets, net of related deferred tax liabilities

220


 

491


 

Gross Basel III CET1 generated

1,027


 

3,583


 

Capital deployed:


 

 

 

 

Dividends

(195)


 

(762)


 

Common stock repurchased

(432)


 

(1,669)


 

Total capital deployed

(627)


 

(2,431)


 

Other comprehensive (loss)

(718)


 

(742)


 

Additional paid-in capital (a)

127


 

624


 

Other


 

56


 

Total other additions (deductions)

(591)


 

(62)


 

Net Basel III CET1 generated

(191)


 

1,090


 

Other (primarily net pension fund assets)


 

629


 

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

$

16,529


 

$

16,529


 

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

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


 

Basel III capital components and ratios at Dec. 31, 2014 – preliminary

Fully
phased-in
Basel III


 

 

 

Transitional
Approach


 

 

Adjustments (a)


 

(dollars in millions)


 

CET1:


 

 

 

 

 

 

 

 

Common shareholders' equity

$

36,477


 

$

447


 

(b)

$

36,924


 

 

Goodwill and intangible assets

(19,440)


 

2,329


 

(c)

(17,111)


 

 

Net pension fund assets

(87)


 

70


 

(d)

(17)


 

 

Equity method investments

(401)


 

87


 

(c)

(314)


 

 

Deferred tax assets

(18)


 

14


 

(d)

(4)


 

 

Other

(2)


 

6


 

(e)

4


 

 

Total CET1

16,529


 

2,953


 

 

19,482


 

 

Other Tier 1 capital:


 

 

 

 

 

 

 

 

Preferred stock

1,562


 


 

 

1,562


 

 

Trust preferred securities


 

156


 

(f)

156


 

 

Disallowed deferred tax assets


 

(14)


 

(d)

(14)


 

 

Net pension fund assets


 

(69)


 

(d)

(69)


 

 

Other

(12)


 

(5)


 

 

(17)


 

 

Total Tier 1 capital

18,079


 

3,021


 

 

21,100


 

 

 

 

 

 

 

 

 

 

 

Tier 2 capital:


 

 

 

 

 

 

 

 

Trust preferred securities


 

156


 

(f)

156


 

 

Subordinated debt

298


 


 

 

298


 

 

Allowance for credit losses

280


 


 

 

280


 

 

Other

(11)


 


 

 

(11)


 

 

Total Tier 2 capital - Standardized Approach

567


 

156


 

 

723


 

 

Excess of expected credit losses

24


 

(11)


 

 

13


 

 

Less: Allowance for credit losses

280


 


 

 

280


 

 

Total Tier 2 capital - Advanced Approach

$

311


 

$

145


 

 

$

456


 

 

 

 

 

 

 

 

 

 

 

Total capital:


 

 

 

 

 

 

 

 

Standardized Approach

$

18,646


 

$

3,177


 

 

$

21,823


 

 

Advanced Approach

$

18,390


 

$

3,166


 

 

$

21,556


 

 

 

 

 

 

 

 

 

 

 

Risk-weighted assets:


 

 

 

 

 

 

 

 

Standardized Approach

$

152,512


 

$

(26,950)


 

 

$

125,562


 

 

Advanced Approach

$

162,030


 

$

5,998


 

 

$

168,028


 

 

 

 

 

 

 

 

 

 

 

Standardized Approach:


 

 

 

 

 

 

 

 

Estimated Basel III CET1 ratio

10.8

%


 

 

 

15.5

%


 

Tier 1 capital ratio

11.9


 

 

 

 

16.8


 

 

Total (Tier 1 plus Tier 2) capital ratio

12.2


 

 

 

 

17.4


 

 

 

 

 

 

 

 

 

 

 

Advanced Approach:


 

 

 

 

 

 

 

 

Estimated Basel III CET1 ratio

10.2

%


 

 

 

11.6

%


 

Tier 1 capital ratio

11.2


 

 

 

 

12.6


 

 

Total (Tier 1 plus Tier 2) capital ratio

11.3


 

 

 

 

12.8


 

 

(a)   Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in 2014 under the Final Capital Rules.
(b)   Represents the portion of accumulated other comprehensive (income) loss excluded from common shareholders' equity.
(c)    Represents intangible assets, other than goodwill, net of the corresponding deferred tax liabilities.
(d)   Represents the deduction for net pension fund assets and disallowed deferred tax assets in CET1 and Tier 1 capital.
(e)    Represents the transitional adjustments related to cash flow hedges and debit valuation adjustment.
(f)        During 2014, 50% of outstanding trust preferred securities are included in Tier 1 capital and 50% in Tier 2 capital.

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)


 

 

 

 

 

 

 

 

 

 

 

4Q14 vs.

4Q13

1Q14

2Q14

3Q14

4Q14


 

4Q13

3Q14

Revenue:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

$

303


 

$

299


 

$

311


 

$

315


 

$

306


 

 

1

%

(3)%


 

Institutional clients

385


 

372


 

385


 

382


 

375


 

 

(3)


 

(2)


 

Wealth management

149


 

153


 

156


 

158


 

157


 

 

5


 

(1)


 

Investment management fees

837


 

824


 

852


 

855


 

838


 

 


 

(2)


 

Performance fees

72


 

20


 

29


 

22


 

44


 

 

N/M

N/M

Investment management and performance fees

909


 

844


 

881


 

877


 

882


 

 

(3)


 

1


 

Distribution and servicing

41


 

40


 

41


 

41


 

40


 

 

(2)


 

(2)


 

Other (a)

43


 

16


 

48


 

16


 

7


 

 

N/M

N/M

Total fee and other revenue (a)

993


 

900


 

970


 

934


 

929


 

 

(6)


 

(1)


 

Net interest revenue

68


 

70


 

66


 

69


 

69


 

 

1


 


 

Total revenue

1,061


 

970


 

1,036


 

1,003


 

998


 

 

(6)


 


 

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

760


 

698


 

725


 

727


 

721


 

 

(5)


 

(1)


 

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

301


 

272


 

311


 

276


 

277


 

 

(8)


 


 

Amortization of intangible assets

35


 

31


 

31


 

31


 

30


 

 

(14)


 

(3)


 

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


 

(5)


 

109


 


 


 

 

N/M

N/M

Income before taxes

$

266


 

$

246


 

$

171


 

$

245


 

$

247


 

 

(7)%


 

1

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax operating margin

25

%

25

%

16

%

24

%

25

%


 

 

 

 

 

Adjusted pre-tax operating margin (b)

34

%

34

%

36

%

33

%

33

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in AUM (in billions): (c)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance of AUM

$

1,532


 

$

1,583


 

$

1,620


 

$

1,636


 

$

1,646


 

 

 

 

 

 

Net inflows (outflows):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

(5)


 

(1)


 

(4)


 

(2)


 

(4)


 

 

 

 

 

 

Fixed income

5


 


 

(1)


 


 

4


 

 

 

 

 

 

Index

(3)


 


 

7


 

(3)


 

1


 

 

 

 

 

 

Liability-driven investments (d)

4


 

20


 

(17)


 

18


 

24


 

 

 

 

 

 

Alternative investments

1


 

2


 

2


 


 

2


 

 

 

 

 

 

Total long-term inflows (outflows)

2


 

21


 

(13)


 

13


 

27


 

 

 

 

 

 

Short term:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

6


 

(7)


 

(18)


 

19


 

5


 

 

 

 

 

 

Total net inflows (outflows)

8


 

14


 

(31)


 

32


 

32


 

 

 

 

 

 

Net market/currency impact

43


 

23


 

47


 

(22)


 

32


 

 

 

 

 

 

Ending balance of AUM

$

1,583


 

$

1,620


 

$

1,636


 

$

1,646


 

$

1,710


 

(e)

8

%

4

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

17

%

17

%

17

%

16

%

16

%


 

 

 

 

 

Fixed income

14


 

14


 

14


 

13


 

13


 

 

 

 

 

 

Index

20


 

20


 

21


 

21


 

21


 

 

 

 

 

 

Liability-driven investments (d)

26


 

27


 

27


 

28


 

29


 

 

 

 

 

 

Alternative investments

4


 

4


 

4


 

4


 

4


 

 

 

 

 

 

Cash

19


 

18


 

17


 

18


 

17


 

 

 

 

 

 

Total AUM

100

%

100

%

100

%

100

%

100

%

(e)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth management:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans

$

9,755


 

$

10,075


 

$

10,372


 

$

10,772


 

$

11,124


 

 

14

%

3

%

Average deposits

$

14,161


 

$

14,805


 

$

13,458


 

$

13,764


 

$

14,604


 

 

3

%

6

%

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

INVESTMENT MANAGEMENT KEY POINTS

  • Assets under management were a record $1.71 trillion at Dec. 31, 2014, an increase of 8% year-over-year and 4% sequentially. Both increases primarily resulted from higher equity market values and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.
    • Net long-term inflows were $27 billion in 4Q14 driven by liability-driven, fixed income and alternative investments. Short-term inflows were $5 billion in 4Q14.
  • Income before taxes excluding amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives decreased 8% year-over-year and was essentially unchanged sequentially. Both comparisons reflect the unfavorable impact of a stronger U.S. dollar.
  • Total revenue was $998 million, a decrease of 6% year-over-year and down slightly sequentially. Both decreases reflect the unfavorable impact of a stronger U.S. dollar and lower other revenue. The year-over-year decrease also reflects lower performance fees, partially offset by higher equity market values. The sequential decrease was partially offset by seasonally higher performance fees.
  • Investment management fees were $838 million, essentially unchanged year-over-year and a decrease of 2% sequentially. Both comparisons reflect the unfavorable impact of a stronger U.S. dollar. The year-over-year comparison also reflects higher equity market values. The sequential decrease was partially offset by net new business and higher equity market values.
  • Performance fees were $44 million in 4Q14 compared with $72 million in 4Q13 and $22 million in 3Q14. The sequential increase was driven by seasonality.
  • Other revenue was $7 million in 4Q14 compared with $43 million in 4Q13 and $16 million in 3Q14. Both decreases primarily reflects lower other trading revenue related to losses on hedging activities within a boutique. The year-over-year decrease also reflects lower seed capital gains.
  • Net interest revenue increased 1% year-over-year and was unchanged sequentially. The year-over-year increase primarily reflects higher loan and deposit levels. Sequentially, higher loan and deposit levels were partially offset by lower deposit spreads.
    • Average loans increased 14% year-over-year and 3% sequentially; average deposits increased 3% year-over-year and 6% sequentially.
  • Total noninterest expense (excluding amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives) decreased 5% year-over-year and 1% sequentially. Both decreases reflect the favorable impact of a stronger U.S. dollar. The year-over-year decrease also reflects lower incentive and distribution and servicing expenses. The sequential decrease was partially offset by higher incentive expense driven by seasonally higher performance fees.
  • 44% non-U.S. revenue in 4Q14 vs. 47% in 4Q13.
  • Insight Investment was named European Fixed Income Manager of the Year at the 2014 Professional Pensions Investment Awards and winner of Strategy & Tactics: Liability-Driven Investing at the 2014 aiCIO Awards. The Boston Company's U.S. Small Cap Opportunistic Equity Strategy was winner of the "Best of the Best" 10 Year Performance Award by Asia Asset Management.

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


 

(dollar amounts in millions, unless otherwise noted)


 

 

 

 

 

 

 

 

 

 

 

4Q14 vs.

4Q13

1Q14

2Q14

3Q14

4Q14


 

4Q13

3Q14

Revenue:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment services fees:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset servicing

$

957


 

$

985


 

$

993


 

$

998


 

$

992


 

 

4

%

(1)%


 

Clearing services

322


 

323


 

324


 

336


 

346


 

 

7


 

3


 

Issuer services

236


 

228


 

231


 

314


 

193


 

 

(18)


 

(39)


 

Treasury services

137


 

134


 

140


 

139


 

142


 

 

4


 

2


 

Total investment services fees

1,652


 

1,670


 

1,688


 

1,787


 

1,673


 

 

1


 

(6)


 

Foreign exchange and other trading revenue

150


 

158


 

145


 

159


 

165


 

 

10


 

4


 

Other (a)

58


 

59


 

87


 

59


 

69


 

 

19


 

17


 

Total fee and other revenue (a)

1,860


 

1,887


 

1,920


 

2,005


 

1,907


 

 

3


 

(5)


 

Net interest revenue

610


 

590


 

593


 

583


 

574


 

 

(6)


 

(2)


 

Total revenue

2,470


 

2,477


 

2,513


 

2,588


 

2,481


 

 


 

(4)


 

Noninterest expense (ex. amortization of intangible assets)

1,822


 

1,778


 

1,824


 

1,835


 

1,828


 

 


 


 

Income before taxes (ex. amortization of intangible assets)

648


 

699


 

689


 

753


 

653


 

 

1


 

(13)


 

Amortization of intangible assets

47


 

44


 

44


 

44


 

43


 

 

(9)


 

(2)


 

Income before taxes

$

601


 

$

655


 

$

645


 

$

709


 

$

610


 

 

1

%

(14)%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax operating margin

24

%

26

%

26

%

27

%

25

%


 

 

 

 

 

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

26

%

28

%

27

%

29

%

26

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

90

%

93

%

93

%

100

%

92

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities lending revenue

$

21


 

$

30


 

$

35


 

$

27


 

$

28


 

 

33

%

4

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metrics:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans

$

31,211


 

$

31,468


 

$

33,115


 

$

33,785


 

$

35,448


 

 

14

%

5

%

Average deposits

$

216,216


 

$

214,947


 

$

220,701


 

$

221,734


 

$

228,282


 

 

6

%

3

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

27.6


 

$

27.9


 

$

28.5


 

$

28.3


 

$

28.5


 

(d)

3

%

1

%

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

$

235


 

$

264


 

$

280


 

$

282


 

$

289


 

 

23

%

2

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset servicing:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

123


 

$

161


 

$

130


 

$

115


 

$

130


 

(d)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depositary Receipts:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of sponsored programs

1,335


 

1,332


 

1,316


 

1,302


 

1,279


 

 

(4)%


 

(2)%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clearing services:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global DARTS volume (in thousands)

213


 

230


 

207


 

209


 

242


 

 

14

%

16

%

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

5,643


 

5,695


 

5,752


 

5,805


 

5,900


 

 

5

%

2

%

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

$

401,434


 

$

413,658


 

$

433,047


 

$

442,827


 

$

450,305


 

 

12

%

2

%

Average investor margin loans (U.S. platform)

$

8,848


 

$

8,919


 

$

9,236


 

$

9,861


 

$

10,711


 

 

21

%

9

%


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broker-Dealer:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average tri-party repo balances (in billions)

$

2,005


 

$

1,983


 

$

2,022


 

$

2,063


 

$

2,101


 

 

5

%

2

%

(a)   Total fee and other revenue includes investment management fees and distribution and servicing revenue.
(b)   Noninterest expense excludes amortization of intangible assets and litigation expense.
(c)    Includes the AUC/A of CIBC Mellon of $1.2 trillion at Dec. 31, 2013, March 31, 2014
, June 30, 2014 and Sept. 30, 2014, and $1.1 trillion at 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, beginning in the fourth quarter of 2013, on behalf of CIBC Mellon clients, which totaled $62 billion at Dec. 31, 2013
, $66 billion at March 31, 2014, $64 billion at June 30, 2014, and $65 billion at Sept. 30, 2014 and Dec. 31, 2014.

INVESTMENT SERVICES KEY POINTS

  • Investment services fees totaled $1.7 billion, an increase of 1% year-over-year and a decrease of 6% sequentially.
    • Asset servicing fees (global custody, broker-dealer services and global collateral services) were $992 million in 4Q14 compared with $957 million in 4Q13 and $998 million in 3Q14. The year-over-year increase primarily reflects organic growth and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential decrease primarily reflects the unfavorable impact of a stronger U.S. dollar, partially offset by net new business.
      • Estimated new business wins (AUC/A) in Asset Servicing of $130 billion in 4Q14.
    • Clearing services fees were $346 million in 4Q14 compared with $322 million in 4Q13 and $336 million in 3Q14. Both increases were driven by higher clearance revenue reflecting higher DARTS volume. The year-over-year increase also reflects higher mutual fund and asset-based fees.
    • Issuer services fees (Corporate Trust and Depositary Receipts) were $193 million in 4Q14 compared with $236 million in 4Q13 and $314 million in 3Q14. The year-over-year decrease reflects lower corporate actions and dividend fees in Depositary Receipts. The sequential decrease is primarily due to seasonality in Depositary Receipts, partially offset by higher Corporate Trust fees.
    • Treasury services fees were $142 million in 4Q14 compared with $137 million in 4Q13 and $139 million in 3Q14. Both increases primarily reflect higher payment volumes.
  • Foreign exchange and other trading revenue was $165 million in 4Q14 compared with $150 million in 4Q13 and $159 million in 3Q14. Both increases primarily reflect higher volume and volatility, partially offset by lower Depositary Receipts-related activity.
  • Net interest revenue was $574 million in 4Q14 compared with $610 million in 4Q13 and $583 million in 3Q14. Both decreases primarily reflects lower yields, partially offset by higher average loans and deposits.
  • Noninterest expense (excluding amortization of intangible assets) was $1.828 billion in 4Q14 compared with $1.822 billion in 4Q13 and $1.835 billion in 3Q14. Both comparisons primarily reflect higher professional, legal and other purchased services expense, primarily driven by increased expenses related to the implementation of strategic platforms, partially offset by lower staff expense and the favorable impact of a stronger U.S. dollar. The year-over-year increase also reflects higher litigation expense offset by efficiency initiatives. The sequential decrease also reflects lower litigation 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)

4Q13

1Q14

2Q14

3Q14

4Q14

Revenue:


 

 

 

 

 

 

 

 

 

 

Fee and other revenue

$

(20)


 

$

112


 

$

119


 

$

928


 

$

117


 

Net interest revenue

83


 

68


 

60


 

69


 

69


 

Total revenue

63


 

180


 

179


 

997


 

186


 

Provision for credit losses

6


 

(18)


 

(12)


 

(19)


 

1


 

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

200


 

193


 

93


 

274


 

123


 

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

(143)


 

5


 

98


 

742


 

62


 

M&I and restructuring charges

13


 


 

120


 

57


 


 

Income (loss) before taxes

$

(156)


 

$

5


 

$

(22)


 

$

685


 

$

62


 

 

 

 

 

 

 

 

 

 

 

 

Average loans and leases

$

9,802


 

$

10,104


 

$

9,962


 

$

10,278


 

$

10,272


 

KEY POINTS

  • Total fee and other revenue increased $137 million compared with 4Q13 and decreased $811 million compared with 3Q14. The year-over-year increase primarily reflects the loss related to an equity investment recorded in 4Q13. The sequential decrease primarily reflects the gain on the sale of our investment in Wing Hang Bank and the gain on the sale of the One Wall Street building both recorded in 3Q14.
  • Noninterest expense (excluding M&I and restructuring charges) decreased $77 million compared with 4Q13 and $151 million compared with 3Q14. Both decreases primarily reflect lower staff expenses. The sequential decrease also reflects lower litigation expense, partially offset by 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,
2014

Sept. 30,

2014

Dec. 31, 2013


 

Dec. 31,
2014

Dec. 31,
2013


 

 

 

Fee and other revenue


 

 

 

 

 

 

 

 

 

 

 

 

Investment services fees:


 

 

 

 

 

 

 

 

 

 

 

 

Asset servicing

$

1,019


 

$

1,025


 

$

984


 

 

$

4,075


 

$

3,905


 

 

Clearing services

347


 

337


 

324


 

 

1,335


 

1,264


 

 

Issuer services

193


 

315


 

237


 

 

968


 

1,090


 

 

Treasury services

145


 

142


 

137


 

 

564


 

554


 

 

Total investment services fees

1,704


 

1,819


 

1,682


 

 

6,942


 

6,813


 

 

Investment management and performance fees

885


 

881


 

904


 

 

3,492


 

3,395


 

 

Foreign exchange and other trading revenue

151


 

153


 

146


 

 

570


 

674


 

 

Distribution and servicing

43


 

44


 

43


 

 

173


 

180


 

 

Financing-related fees

43


 

44


 

43


 

 

169


 

172


 

 

Investment and other income (a)

78


 

890


 

(43)


 

 

1,212


 

481


 

 

Total fee revenue (a)

2,904


 

3,831


 

2,775


 

 

12,558


 

11,715


 

 

Net securities gains

31


 

20


 

39


 

 

91


 

141


 

 

Total fee and other revenue (a)

2,935


 

3,851


 

2,814


 

 

12,649


 

11,856


 

 

Operations of consolidated investment management funds


 

 

 

 

 

 

 

 

 

 

 

 

Investment income

101


 

123


 

109


 

 

503


 

548


 

 

Interest of investment management fund note holders

59


 

84


 

73


 

 

340


 

365


 

 

Income from consolidated investment management funds

42


 

39


 

36


 

 

163


 

183


 

 

Net interest revenue


 

 

 

 

 

 

 

 

 

 

 

 

Interest revenue

802


 

809


 

846


 

 

3,234


 

3,352


 

 

Interest expense

90


 

88


 

85


 

 

354


 

343


 

 

Net interest revenue

712


 

721


 

761


 

 

2,880


 

3,009


 

 

Provision for credit losses

1


 

(19)


 

6


 

 

(48)


 

(35)


 

 

Net interest revenue after provision for credit losses

711


 

740


 

755


 

 

2,928


 

3,044


 

 

Noninterest expense


 

 

 

 

 

 

 

 

 

 

 

 

Staff

1,418


 

1,477


 

1,522


 

 

5,845


 

6,019


 

 

Professional, legal and other purchased services

390


 

323


 

344


 

 

1,339


 

1,252


 

 

Software and equipment

235


 

234


 

241


 

 

942


 

933


 

 

Net occupancy

150


 

154


 

154


 

 

610


 

629


 

 

Distribution and servicing

102


 

107


 

110


 

 

428


 

435


 

 

Sub-custodian

70


 

67


 

68


 

 

286


 

280


 

 

Business development

75


 

61


 

96


 

 

268


 

317


 

 

Other

211


 

250


 

258


 

 

1,031


 

1,029


 

 

Amortization of intangible assets

73


 

75


 

82


 

 

298


 

342


 

 

Merger and integration, litigation and restructuring charges

21


 

220


 

2


 

 

351


 

70


 

 

Total noninterest expense

2,745


 

2,968


 

2,877


 

 

11,398


 

11,306


 

 

Income


 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes (a)

943


 

1,662


 

728


 

 

4,342


 

3,777


 

 

Provision for income taxes (a)

88


 

556


 

172


 

 

1,093


 

1,592


 

 

Net income (a)

855


 

1,106


 

556


 

 

3,249


 

2,185


 

 

Net (income) attributable to noncontrolling interests (includes $(24), $(23), $(17), $(84) and $(80) related to consolidated investment management funds, respectively)

(24)


 

(23)


 

(17)


 

 

(84)


 

(81)


 

 

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

831


 

1,083


 

539


 

 

3,165


 

2,104


 

 

Preferred stock dividends

(24)


 

(13)


 

(26)


 

 

(73)


 

(64)


 

 

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

$

807


 

$

1,070


 

$

513


 

 

$

3,092


 

$

2,040


 

 

(a)   Results for the full-year 2013 were restated to reflect the retrospective application of adopting new accounting guidance in the first quarter of 2014 related to our investments in qualified affordable housing projects (ASU 2014-01).  See page 23 for additional information.

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, 2014

Sept. 30, 2014

Dec. 31, 2013


 

Dec. 31,
2014

Dec. 31,
2013

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

$

807


 

$

1,070


 

$

513


 

 

$

3,092


 

$

2,040


 

Less:  Earnings allocated to participating securities (a)

14


 

20


 

10


 

 

54


 

37


 

Change in the excess of redeemable value over the fair value of noncontrolling interests

N/A      

N/A      


 

 

N/A      

1


 

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 (a)

$

793


 

$

1,050


 

$

503


 

 

$

3,038


 

$

2,002


 

(a)   Results for the full-year 2013 were restated to reflect the retrospective application of adopting new accounting guidance in the first quarter of 2014 related to our investments in qualified affordable housing projects (ASU 2014-01).   See page 23 for additional information.
N/A – Not applicable.

Average common shares and equivalents outstanding

of The Bank of New York Mellon Corporation

(in thousands)

Quarter ended


 

Year-to-date

Dec. 31,
2014

Sept. 30,
2014

Dec. 31,
2013


 

Dec. 31,
2014

Dec. 31,
2013

Basic

1,120,672


 

1,126,946


 

1,142,861


 

 

1,129,897


 

1,150,689


 

Diluted

1,129,040


 

1,134,871


 

1,147,961


 

 

1,137,480


 

1,154,441


 

 

Earnings per share applicable to the common

shareholders of The Bank of New York Mellon Corporation (a)

(in dollars)

Quarter ended


 

Year-to-date

Dec. 31,
2014

Sept. 30,
2014

Dec. 31,
2013


 

Dec. 31,
2014

Dec. 31,
2013

Basic

$

0.71


 

$

0.93


 

$

0.44


 

 

$

2.69


 

$

1.74


 

Diluted

$

0.70


 

$

0.93


 

$

0.44


 

 

$

2.67


 

$

1.73


 

(a)   Results for the full-year 2013 were restated to reflect the retrospective application of adopting new accounting guidance in the first quarter of 2014 related to our investments in qualified affordable housing projects (ASU 2014-01).   See page 23 for additional information.

THE BANK OF NEW YORK MELLON CORPORATION
Consolidated Balance Sheet

(dollars in millions, except per share amounts)

Dec. 31,
2014

Sept. 30,
2014

Dec. 31,
2013


 

 

Assets


 

 

 

 

 

 

 

Cash and due from:


 

 

 

 

 

 

 

Banks

$

6,970


 

$

6,410


 

$

6,460


 

 

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

96,682


 

92,317


 

104,359


 

 

Interest-bearing deposits with banks

19,495


 

30,341


 

35,300


 

 

Federal funds sold and securities purchased under resale agreements

20,302


 

17,375


 

9,161


 

 

Securities:


 

 

 

 

 

 

 

Held-to-maturity (fair value of $21,127, $20,167 and $19,443)

20,933


 

20,137


 

19,743


 

 

Available-for-sale

98,330


 

95,559


 

79,309


 

 

Total securities

119,263


 

115,696


 

99,052


 

 

Trading assets

9,881


 

11,613


 

12,098


 

 

Loans

59,132


 

57,527


 

51,657


 

 

Allowance for loan losses

(191)


 

(191)


 

(210)


 

 

Net loans

58,941


 

57,336


 

51,447


 

 

Premises and equipment

1,394


 

1,351


 

1,655


 

 

Accrued interest receivable

607


 

565


 

621


 

 

Goodwill

17,869


 

17,992


 

18,073


 

 

Intangible assets

4,127


 

4,215


 

4,452


 

 

Other assets

20,490


 

21,523


 

20,566


 

 

Subtotal assets of operations

376,021


 

376,734


 

363,244


 

 

Assets of consolidated investment management funds, at fair value:


 

 

 

 

 

 

 

Trading assets

8,678


 

8,823


 

10,397


 

 

Other assets

604


 

739


 

875


 

 

Subtotal assets of consolidated investment management funds, at fair value

9,282


 

9,562


 

11,272


 

 

Total assets

$

385,303


 

$

386,296


 

$

374,516


 

 

Liabilities


 

 

 

 

 

 

 

Deposits:


 

 

 

 

 

 

 

Noninterest-bearing (principally U.S. offices)

$

104,240


 

$

101,105


 

$

95,475


 

 

Interest-bearing deposits in U.S. offices

53,236


 

56,740


 

56,640


 

 

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

108,393


 

107,051


 

109,014


 

 

Total deposits

265,869


 

264,896


 

261,129


 

 

Federal funds purchased and securities sold under repurchase agreements

11,469


 

9,687


 

9,648


 

 

Trading liabilities

7,434


 

7,734


 

6,945


 

 

Payables to customers and broker-dealers

21,181


 

20,155


 

15,707


 

 

Commercial paper


 


 

96


 

 

Other borrowed funds

786


 

852


 

663


 

 

Accrued taxes and other expenses

6,305


 

6,482


 

6,996


 

 

Other liabilities (includes allowance for lending-related commitments of $89, $97 and $134)

5,025


 

7,169


 

4,827


 

 

Long-term debt

20,264


 

21,583


 

19,864


 

 

Subtotal liabilities of operations

338,333


 

338,558


 

325,875


 

 

Liabilities of consolidated investment management funds, at fair value:


 

 

 

 

 

 

 

Trading liabilities

7,660


 

8,130


 

10,085


 

 

Other liabilities

9


 

10


 

46


 

 

Subtotal liabilities of consolidated investment management funds, at fair value

7,669


 

8,140


 

10,131


 

 

Total liabilities

346,002


 

346,698


 

336,006


 

 

Temporary equity


 

 

 

 

 

 

 

Redeemable noncontrolling interests

229


 

246


 

230


 

 

Permanent equity


 

 

 

 

 

 

 

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

1,562


 

1,562


 

1,562


 

 

Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,290,222,821, 1,286,670,537 and 1,268,036,220 shares

13


 

13


 

13


 

 

Additional paid-in capital

24,626


 

24,499


 

24,002


 

 

Retained earnings

18,281


 

17,670


 

15,952


 

 

Accumulated other comprehensive loss, net of tax

(1,634)


 

(916)


 

(892)


 

 

Less:  Treasury stock of 171,995,262, 160,960,855 and 125,786,430 common shares, at cost

(4,809)


 

(4,377)


 

(3,140)


 

 

Total The Bank of New York Mellon Corporation shareholders' equity

38,039


 

38,451


 

37,497


 

 

Nonredeemable noncontrolling interests of consolidated investment management funds

1,033


 

901


 

783


 

 

Total permanent equity

39,072


 

39,352


 

38,280


 

 

Total liabilities, temporary equity and permanent equity

$

385,303


 

$

386,296


 

$

374,516


 

 

Impact of Adopting New Accounting Guidance

In the first quarter of 2014, BNY Mellon elected to early adopt the new accounting guidance included in Accounting Standards Update ("ASU") 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects - a Consensus of the FASB Emerging Issues Task Force."  This ASU allows companies that invest in qualified affordable housing projects to elect the proportional amortization method of accounting for these investments, if certain conditions are met.  In the first quarter of 2014, we restated the prior period financial statements to reflect the impact of the retrospective application of the new accounting guidance.

The table below presents the impact of the new accounting guidance on our previously reported earnings per share applicable to the common shareholders.


 

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

As previously reported

As revised

(in dollars)

4Q13

YTD13

4Q13

YTD13

Basic

$

0.44


 

$

1.75


 

$

0.44


 

$

1.74


 

Diluted

$

0.44


 

$

1.74


 

$

0.44


 

$

1.73


 

The table below presents the impact of this new accounting guidance on our previously reported income statements.


 

Income statement

As previously reported

Adjustments

As revised

(in millions)

4Q13

YTD13

4Q13

YTD13

4Q13

YTD13

Investment and other income (loss)

$

(60)


 

$

416


 

$

17


 

$

65


 

$

(43)


 

$

481


 

Total fee revenue

2,758


 

11,650


 

17


 

65


 

2,775


 

11,715


 

Total fee and other revenue

2,797


 

11,791


 

17


 

65


 

2,814


 

11,856


 

Income before income taxes

711


 

3,712


 

17


 

65


 

728


 

3,777


 

Provision for income taxes

155


 

1,520


 

17


 

72


 

172


 

1,592


 

Net income (loss)

556


 

2,192


 


 

(7)


 

556


 

2,185


 

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

539


 

2,111


 


 

(7)


 

539


 

2,104


 

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

513


 

2,047


 


 

(7)


 

513


 

2,040


 

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

BNY Mellon has presented revenue measures which exclude the effect of noncontrolling interests related to consolidated investment management funds, a gain on the sale of our investment in Wing Hang Bank, a gain on the sale of the One Wall Street building, and a loss related to an equity investment; and expense measures which exclude M&I expenses, litigation charges, restructuring charges, amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives.  Earnings per share, return on equity measures and operating margin measures, which exclude some or all of these items, are also presented.  Earnings per share and return on equity measures also exclude the tax benefit primarily related to a tax carryback claim and the net charge related to the disallowance of certain foreign tax credits.  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 ongoing charges as a result of prior transactions or where we have incurred charges.  M&I expenses primarily relate to acquisitions and generally continue for approximately three years after the transaction.  M&I expenses can vary on a year-to-year basis depending on the stage of the integration.  BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased.  Future periods will not reflect such M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded.  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 permits investors to view expenses on a basis consistent with how management views the business.

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

In this Earnings Release, the net interest margin is presented on an FTE basis.  We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice.  The adjustment to an FTE basis has no impact on net income.  Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and on a business-level basis.

The following tables present the reconciliation of net income and diluted earnings per common share.

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

4Q13


 

3Q14


 

4Q14


 

Net

Diluted


 

Net

Diluted


 

Net

Diluted

(in millions, except per common share amounts)

income

EPS


 

income

EPS


 

income

EPS

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

$

513


 

$

0.44


 

 

$

1,070


 

$

0.93


 

 

$

807


 

$

0.70


 

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


 


 

 

315


 

0.27


 

 


 


 

Gain on the sale of the One Wall Street building


 


 

 

204


 

0.18


 

 


 


 

Benefit primarily related to a tax carryback claim


 


 

 


 


 

 

150


 

0.13


 

Add:   Litigation and restructuring charges

1


 


 

 

183


 

0.16


 

 

10


 

0.01


 

Loss related to an equity investment

115


 

0.10


 

 


 


 

 


 


 

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

$

629


 

$

0.54


 

 

$

734


 

$

0.64


 

 

$

667


 

$

0.58


 

 

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

YTD13


 

YTD14


 

Net

Diluted


 

Net

Diluted

(in millions, except per common share amounts)

income

EPS


 

income

EPS

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

Corporation – GAAP

$

2,040


 

$

1.73


 

 

$

3,092


 

$

2.67


 

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


 


 

 

315


 

0.27


 

Gain on the sale of the One Wall Street building


 


 

 

204


 

0.18


 

Benefit primarily related to a tax carryback claim


 


 

 

150


 

0.13


 

Add:   Litigation and restructuring charges

45


 

0.04


 

 

262


 

0.23


 

Charge related to investment management funds, net of incentives

9


 

0.01


 

 

81


 

0.07


 

Net charge related to the disallowance of certain foreign tax credits

593


 

0.50


 

 


 


 

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

$

2,687


 

$

2.28


 

 

$

2,766


 

$

2.39


 

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)

4Q13

1Q14

2Q14

3Q14

4Q14

Income before income taxes – GAAP

$

728


 

$

926


 

$

811


 

$

1,662


 

$

943


 

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

17


 

20


 

17


 

23


 

24


 

Gain on the sale of our investment in Wing Hang Bank


 


 


 

490


 


 

Gain on the sale of the One Wall Street building


 


 


 

346


 


 

Add:  Amortization of intangible assets

82


 

75


 

75


 

75


 

73


 

M&I, litigation and restructuring charges

2


 

(12)


 

122


 

220


 

21


 

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


 

(5)


 

109


 


 


 

Loss related to an equity investment

175


 


 


 


 


 

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

$

970


 

$

964


 

$

1,100


 

$

1,098


 

$

1,013


 

 

 

 

 

 

 

 

 

 

 

 

Fee and other revenue – GAAP

$

2,814


 

$

2,883


 

$

2,980


 

$

3,851


 

$

2,935


 

Income from consolidated investment management funds – GAAP

36


 

36


 

46


 

39


 

42


 

Net interest revenue – GAAP

761


 

728


 

719


 

721


 

712


 

Total revenue – GAAP

3,611


 

3,647


 

3,745


 

4,611


 

3,689


 

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

17


 

20


 

17


 

23


 

24


 

Gain on the sale of our investment in Wing Hang Bank


 


 


 

490


 


 

Gain on the sale of the One Wall Street building


 


 


 

346


 


 

Add: Loss related to an equity investment


 

175


 

 


 

 


 

 


 

 


 

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

$

3,769


 

$

3,627


 

$

3,728


 

$

3,752


 

$

3,665


 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax operating margin (a)

20

%

25

%

22

%

36

%

26

%

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

26

%

27

%

30

%

29

%

28

%

(a)   Income before taxes divided by total revenue.
(b)   Non-GAAP excludes net income attributable to noncontrolling interests of consolidated investment management funds, the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, M&I, litigation and restructuring charges, a charge (recovery) related to investment management funds, net of incentives, and a loss on an equity investment, 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)

4Q13

1Q14

2Q14

3Q14

4Q14

YTD14

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

$

513


 

$

661


 

$

554


 

$

1,070


 

$

807


 

$

3,092


 

Add:  Amortization of intangible assets, net of tax

53


 

49


 

49


 

49


 

47


 

194


 

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

566


 

710


 

603


 

1,119


 

854


 

3,286


 

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


 


 


 

315


 


 

315


 

Gain on the sale of the One Wall Street building


 


 


 

204


 


 

204


 

Benefit primarily related to a tax carryback claim


 


 


 


 

150


 

150


 

Add:  M&I, litigation and restructuring charges

1


 

(7)


 

76


 

183


 

10


 

262


 

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


 

(4)


 

85


 


 


 

81


 

Loss on an equity investment

115


 


 


 


 


 


 

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

$

682


 

$

699


 

$

764


 

$

783


 

$

714


 

$

2,960


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average common shareholders' equity

$

35,698


 

$

36,289


 

$

36,565


 

$

36,751


 

$

36,872


 

$

36,621


 

Less:  Average goodwill

18,026


 

18,072


 

18,149


 

18,109


 

17,924


 

18,063


 

Average intangible assets

4,491


 

4,422


 

4,354


 

4,274


 

4,174


 

4,305


 

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

1,302


 

1,306


 

1,338


 

1,317


 

1,340


 

1,340


 

Deferred tax liability – intangible assets (a)

1,222


 

1,259


 

1,247


 

1,230


 

1,216


 

1,216


 

Average tangible common shareholders' equity – Non-GAAP

$

15,705


 

$

16,360


 

$

16,647


 

$

16,915


 

$

17,330


 

$

16,809


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on common equity – GAAP (c)

5.7

%

7.4

%

6.1

%

11.6

%

8.7

%

8.4

%

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

7.6

%

7.8

%

8.4

%

8.5

%

7.7

%

8.1

%


 

 

 

 

 

 

 

 

 

 

 

 

 

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

14.3

%

17.6

%

14.5

%

26.2

%

19.5

%

19.5

%

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

17.2

%

17.3

%

18.4

%

18.4

%

16.3

%

17.6

%

(a)   Deferred tax liabilities are based on fully phased-in Basel III rules.  The quarters and full-year of 2014 include deferred tax liabilities on tax deductible intangible assets permitted under Basel III rules.
(b)   Non-GAAP excludes the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, the benefit primarily related to a tax carryback claim, M&I, litigation and restructuring charges, a charge (recovery) related to investment management funds, net of incentives, and a loss of an equity investment, if applicable.
(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,
2013

Sept. 30,
2014

Dec. 31,
2014

(dollars in millions, unless otherwise noted)

BNY Mellon shareholders' equity at period end – GAAP

$

37,497


 

$

38,451


 

$

38,039


 

Less:  Preferred stock

1,562


 

1,562


 

1,562


 

BNY Mellon common shareholders' equity at period end – GAAP

35,935


 

36,889


 

36,477


 

Less:  Goodwill

18,073


 

17,992


 

17,869


 

Intangible assets

4,452


 

4,215


 

4,127


 

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

1,302


 

1,317


 

1,340


 

Deferred tax liability – intangible assets (a)

1,222


 

1,230


 

1,216


 

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

$

15,934


 

$

17,229


 

$

17,037


 

 

 

 

 

 

 

 

Total assets at period end – GAAP

$

374,516


 

$

386,296


 

$

385,303


 

Less:  Assets of consolidated investment management funds

11,272


 

9,562


 

9,282


 

Subtotal assets of operations – Non-GAAP

363,244


 

376,734


 

376,021


 

Less:  Goodwill

18,073


 

17,992


 

17,869


 

Intangible assets

4,452


 

4,215


 

4,127


 

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

105,384


 

90,978


 

99,901


 

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

$

235,335


 

$

263,549


 

$

254,124


 

 

 

 

 

 

 

 

BNY Mellon shareholders' equity to total assets – GAAP

10.0

%

10.0

%

9.9

%

BNY Mellon common shareholders' equity to total assets – GAAP

9.6

%

9.5

%

9.5

%

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

6.8

%

6.5

%

6.7

%


 

 

 

 

 

 

 

Period-end common shares outstanding (in thousands)

1,142,250


 

1,125,710


 

1,118,228


 

 

 

 

 

 

 

 

Book value per common share – GAAP

$

31.46


 

$

32.77


 

$

32.62


 

Tangible book value per common share – Non-GAAP

$

13.95


 

$

15.30


 

$

15.23


 

(a)   Deferred tax liabilities are based on fully phased-in Basel III rules.  The quarters of 2014 include deferred tax liabilities on tax deductible intangible assets permitted under 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)

4Q13

1Q14

2Q14

3Q14

4Q14

Income from consolidated investment management funds

$

36


 

$

36


 

$

46


 

$

39


 

$

42


 

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

17


 

20


 

17


 

23


 

24


 

Income from consolidated investment management funds, net of noncontrolling interests

$

19


 

$

16


 

$

29


 

$

16


 

$

18


 

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

Income from consolidated investment management funds, net of noncontrolling interests


 

 

(in millions)

4Q13

1Q14

2Q14

3Q14

4Q14

Investment management fees

$

20


 

$

18


 

$

18


 

$

15


 

$

15


 

Other (Investment income)

(1)


 

(2)


 

11


 

1


 

3


 

Income from consolidated investment management funds, net of controlling interests

$

19


 

$

16


 

$

29


 

$

16


 

$

18


 

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)

4Q13

1Q14

2Q14

3Q14

4Q14

Income before income taxes – GAAP

$

266


 

$

246


 

$

171


 

$

245


 

$

247


 

Add:  Amortization of intangible assets

35


 

31


 

31


 

31


 

30


 

Money market fee waivers

33


 

35


 

28


 

29


 

34


 

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


 

(5)


 

109


 


 


 

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

$

334


 

$

307


 

$

339


 

$

305


 

$

311


 

 

 

 

 

 

 

 

 

 

 

 

Total revenue – GAAP

$

1,061


 

$

970


 

$

1,036


 

$

1,003


 

$

998


 

Less:  Distribution and servicing expense

108


 

106


 

111


 

105


 

102


 

Money market fee waivers benefiting distribution and servicing expense

38


 

38


 

37


 

38


 

36


 

Add:  Money market fee waivers impacting total revenue

71


 

73


 

65


 

67


 

70


 

Total revenue net of distribution and servicing expense
and excluding money market fee waivers – Non-GAAP

$

986


 

$

899


 

$

953


 

$

927


 

$

930


 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax operating margin (a)

25

%

25

%

16

%

24

%

25

%

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

34

%

34

%

36

%

33

%

33

%

(a)   Income before taxes divided by total revenue.

Capital Ratios

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

Risk-weighted assets at Sept. 30, 2014 and Dec. 31, 2014 for credit risk under the transitional Advanced Approach do not reflect the use of a simple value-at-risk methodology for repo-style transactions (including agented indemnified securities lending transactions), eligible margin loans, and similar transactions.  BNY Mellon has requested written approval to use this methodology.

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

The following are the primary differences between risk-weighted assets determined under fully phased-in Basel III-Standardized Approach and Basel I.  Credit risk is determined under Basel I using predetermined risk-weights and asset classes and relies in part on the use of external credit ratings.  Under fully phased-in Basel III, the Standardized Approach uses a broader range of predetermined risk-weights and asset classes and certain alternatives to external credit ratings.  Securitization exposure receives a higher risk-weighting under fully phased-in Basel III than Basel I, and fully phased-in Basel III includes additional adjustments for market risk, counterparty credit risk and equity exposures.  Additionally, the Standardized Approach eliminates the use of the VaR approach, whereas the Advanced Approach permits the VaR approach but requires certain model qualifications and approvals, for determining risk-weighted assets on certain repo-style transactions.  In 2014, Standardized Approach and Advanced Approach risk-weighted assets include transitional adjustments for intangible assets, other than goodwill, and equity exposure.

The following table presents the reconciliation of our estimated fully phased-in Basel III CET1 ratio under the Standardized Approach and Advanced Approach.

Estimated fully phased-in Basel III CET1 ratio – Non-GAAP (a)

Dec. 31,
 2013

Sept. 30,
2014

Dec. 31,
 2014

(dollars in millions)

Total Tier 1 capital (b)

$

18,335


 

$

21,015


 

$

21,100


 

Adjustments to determine estimated fully phased-in Basel III CET1:


 

 

 

 

 

 

Deferred tax liability – tax deductible intangible assets

70


 


 


 

Intangible deduction


 

(2,388)


 

(2,329)


 

Preferred stock

(1,562)


 

(1,562)


 

(1,562)


 

Trust preferred securities

(330)


 

(162)


 

(156)


 

Other comprehensive income (loss) and net pension fund assets:


 

 

 

 

 

 

Securities available-for-sale

387


 

578


 

594


 

Pension liabilities

(900)


 

(675)


 

(1,041)


 

Net pension fund assets

(713)


 


 


 

Total other comprehensive income (loss) and net pension fund assets

(1,226)


 

(97)


 

(447)


 

Equity method investments

(445)


 

(92)


 

(87)


 

Deferred tax assets

(49)


 


 


 

Other

17


 

6


 

10


 

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

$

14,810


 

$

16,720


 

$

16,529


 

 

 

 

 

 

 

 

Under the Standardized Approach:


 

 

 

 

 

 

Estimated fully phased-in Basel III risk-weighted assets – Non-GAAP

$

139,865


 

$

154,272


 

$

152,512


 

 

 

 

 

 

 

 

Estimated fully phased-in Basel III CET1 ratio – Non-GAAP (c)

10.6

%

10.8

%

10.8

%


 

 

 

 

 

 

 

Under the Advanced Approach:


 

 

 

 

 

 

Estimated fully phased-in Basel III risk-weighted assets – Non-GAAP

$

130,849


 

$

164,088


 

$

162,030


 

 

 

 

 

 

 

 

Estimated fully phased-in Basel III CET1 ratio – Non-GAAP (c)

11.3

%

10.2

%

10.2

%

(a)   Dec. 31, 2014 information is preliminary.
(b)   Tier 1 capital at Dec. 31, 2013 is based on Basel I rules.  Tier 1 capital at Sept. 30, 2014 and Dec.31, 2014 are based on Basel III rules, as phased-in.
(c)    Risk-based capital ratios at Sept. 30, 2014 and Dec. 31, 2014 include the net impact of including the total consolidated assets of certain consolidated investment management funds in risk-weighted assets.  These assets were not included in the Dec. 31, 2013 risk-based ratios.

The following table presents the reconciliation of our Basel I CET1 ratio.

Basel I CET1 ratio

(dollars in millions)

Dec. 31,
 2013

Total Tier 1 capital – Basel I

$

18,335


 

Less:    Trust preferred securities

330


 

Preferred stock

1,562


 

Total CET1 – Basel I

$

16,443


 

 

 

 

Total risk-weighted assets – Basel I

$

113,322


 

 

 

 

Basel I CET1 ratio – Non-GAAP

14.5

%

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

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

(dollars in millions)

Sept. 30,
2014

Dec. 31,
 2014

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

$

16,720


 

$

16,529


 

Additional Tier 1 capital

1,556


 

1,550


 

Total Tier 1 capital

$

18,276


 

$

18,079


 

 

 

 

 

 

Total leverage exposure:


 

 

 

 

Quarterly average total assets

$

380,409


 

$

385,232


 

Less: Amounts deducted from Tier 1 capital

20,166


 

19,947


 

Total on-balance sheet assets, as adjusted

360,243


 

365,285


 

Off-balance sheet exposures:


 

 

 

 

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

11,694


 

11,021


 

Repo-style transaction exposures included in SLR


 


 

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

21,924


 

21,913


 

Total off-balance sheet exposures

33,618


 

32,934


 

Total leverage exposure

$

393,861


 

$

398,219


 

 

 

 

 

 

Estimated fully phased-in SLR – Non-GAAP

4.6

%

4.5

%

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

DIVIDENDS

Common – On Jan. 23, 2015, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.17 per common share.  This cash dividend is payable on Feb. 13, 2015 to shareholders of record as of the close of business on Feb. 3, 2015. 

Preferred – On Jan. 23, 2015, The Bank of New York Mellon Corporation also declared the following dividends for the noncumulative perpetual preferred stock, liquidation preference $100,000 per share, for the dividend period ending in March 2015, in each case, payable on March 20, 2015 to holders of record as of the close of business on March 5, 2015:

  • $977.78 per share on the Series A Preferred Stock (equivalent to $9.7778 per Normal Preferred Capital Security of Mellon Capital IV, each representing 1/100th interest in a share of 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, 2014, BNY Mellon had $28.5 trillion in assets under custody and/or administration, and $1.7 trillion in assets under management.  BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

SUPPLEMENTAL FINANCIAL INFORMATION

The Quarterly Financial Trends for The Bank of New York Mellon Corporation has been updated through Dec. 31, 2014 and is available at www.bnymellon.com (Investor Relations - Financial Reports).

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 made regarding our ability to execute on strategic priorities and drive further efficiencies and cost savings.  These statements may be expressed in a variety of ways, including the use of future or present tense language.  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, 2013 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. 23, 2015, and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

Contacts: MEDIA:

ANALYSTS:

Kevin Heine

Valerie Haertel

(212) 635-1590

(212) 635-8529

kevin.heine@bnymellon.com

valerie.haertel@bnymellon.com

 

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SOURCE The Bank of New York Mellon Corporation