October 17, 2014

BNY Mellon Reports Third Quarter Earnings of $1.07 Billion or $0.93 Per Common Share


NEW YORK, Oct. 17, 2014 /PRNewswire/ --

INVESTMENT MANAGEMENT AND PERFORMANCE FEES UP 7% YEAR-OVER-YEAR

  • Assets under management up 7% year-over-year to a record $1.65 trillion

INVESTMENT SERVICES REVENUE UP 5% YEAR-OVER-YEAR

  • Assets under custody and/or administration up 3% year-over-year

CONTINUED PROGRESS ON EXPENSE CONTROL

  • Staff expense decreased 3% year-over-year

REPURCHASED 11.0 MILLION COMMON SHARES FOR $431 MILLION IN THIRD QUARTER

RETURN ON TANGIBLE COMMON EQUITY OF 26%, OR 18% ON AN ADJUSTED BASIS (a)

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported third quarter net income applicable to common shareholders of $1.07 billion, or $0.93 per diluted common share, or $734 million, or $0.64 per diluted common share, adjusted for the previously disclosed gains net of litigation and restructuring charges.  In the third quarter of 2013, net income applicable to common shareholders was $962 million, or $0.82 per diluted common share, or $713 million, or $0.61 per diluted common share, adjusted for the benefit related to certain tax matters net of litigation and restructuring charges.  In the second quarter of 2014, net income applicable to common shareholders was $554 million, or $0.48 per diluted common share, or $715 million, or $0.62 per diluted common share, adjusted for the charge related to investment management funds and severance.  (a)

"We had a strong quarter. We grew Investment Management and Investment Services fees, controlled expenses and executed on our capital plan. During the quarter, we also repositioned the Markets Group, which will improve our operating margin and return on capital. We achieved this despite a challenging environment, demonstrating the resilience of our business model and the exceptional efforts of our employees," said Gerald L. Hassell, chairman and chief executive officer of BNY Mellon.

___________________________

(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. EDT on Oct. 17, 2014.  This conference call and audio webcast will include forward-looking statements and may include other material information.

Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (International), and using the passcode: Earnings, or by logging on to www.bnymellon.com.  Earnings materials will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on Oct. 17, 2014.  Replays of the conference call and audio webcast will be available beginning Oct. 17, 2014 at approximately 2 p.m. EDT through Nov. 17, 2014 by dialing (800) 860-4696 (U.S.) or (203) 369-3836 (International).  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

 

THIRD QUARTER 2014 FINANCIAL HIGHLIGHTS (a)
(comparisons are 3Q14 vs. 3Q13 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)

3Q13

3Q14

Inc(Dec)

 

3Q13

3Q14

Inc(Dec)

GAAP results

$

0.82

 

$

0.93

       

$

962

 

$

1,070

     

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

 

0.27

       

 

315

     

Gain on the sale of the One Wall Street building

 

0.18

       

 

204

     

Add:  Litigation and restructuring charges

0.01

 

0.16

       

12

 

183

     

Benefit related to the disallowance of certain foreign tax credits

(0.22)

 

       

(261)

 

     

Non-GAAP results

$

0.61

 

$

0.64

 

5

%

 

$

713

 

$

734

 

3

%

 

  • Total revenue was $4.6 billion, an increase of 22%, or a decline of 1% as adjusted (Non-GAAP).
    • Investment services fees increased 5% reflecting organic growth, higher market values and net new business.
    • Investment management and performance fees increased 7% reflecting higher equity markets, the impact of a weaker U.S. dollar and higher performance fees.
    • Foreign exchange revenue was flat as higher volumes were offset by lower volatility.
      • Sharp volume gains helped mitigate the 36% year-over-year decline in the G7 Volatility Index.
    • Investment and other income, excluding the previously disclosed gains, decreased $97 million driven by lower equity revenue and seed capital gains.
    • Net interest revenue decreased 7% reflecting lower asset yields and lower accretion, partially offset by higher average interest-earning assets driven by higher deposits.
  • The provision for credit losses was a credit of $19 million in 3Q14.
  • Noninterest expense increased 7%.  Noninterest expense as adjusted (Non-GAAP) remained flat resulting from lower staff expense offset by higher professional, legal and other purchased services, the impact of a weaker U.S. dollar and the annual employee merit increase.
  • Effective tax rate of 33.5%.  The previously disclosed gains, litigation and restructuring charges increased the effective rate 7.1% in 3Q14.
  • Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
    • AUC/A of $28.3 trillion, increased 3% primarily reflecting higher market values.
      • Estimated new AUC/A wins in Asset Servicing of $115 billion in 3Q14.
    • AUM of a record $1.65 trillion, increased 7% driven by higher equity market values and net new business.
      • Long-term inflows totaled $13 billion in 3Q14 driven by liability-driven investments.
      • Short-term inflows totaled $19 billion in 3Q14.
  • Capital
    • Repurchased 11.0 million common shares for $431 million in 3Q14.
    • Return on tangible common equity of 26%, or 18% as adjusted (Non-GAAP).
   

(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 M&I, litigation and restructuring charges, the gain on the sale of our investment in Wing Hang, the gain on the sale of the One Wall Street building, a charge (recovery) related to investment management funds, net of incentives and the benefit related to the disallowance of certain foreign tax credits, if applicable.

 

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

 

FINANCIAL SUMMARY

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

                   

3Q14 vs.

3Q13

4Q13

1Q14

2Q14

3Q14

3Q13

2Q14

Revenue:

                           

Fee and other revenue

$

2,979

 

$

2,814

 

$

2,883

 

$

2,980

 

$

3,851

 

29

%

29

%

Income from consolidated investment management funds

32

 

36

 

36

 

46

 

39

         

Net interest revenue

772

 

761

 

728

 

719

 

721

         

Total revenue – GAAP

3,783

 

3,611

 

3,647

 

3,745

 

4,611

 

22

 

23

 

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

8

 

17

 

20

 

17

 

23

         

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 (pre-tax)

 

(175)

 

 

 

         

Total revenue – Non-GAAP

3,775

 

3,769

 

3,627

 

3,728

 

3,752

 

(1)

 

1

 

Provision for credit losses

2

 

6

 

(18)

 

(12)

 

(19)

         

Expense:

                           

Noninterest expense – GAAP

2,779

 

2,877

 

2,739

 

2,946

 

2,968

 

7

 

1

 

Less:  Amortization of intangible assets

81

 

82

 

75

 

75

 

75

         

M&I, litigation and restructuring charges

16

 

2

 

(12)

 

122

 

220

         

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

 

 

(5)

 

109

 

         

Total noninterest expense – Non-GAAP

2,682

 

2,793

 

2,681

 

2,640

 

2,673

 

 

1

 

Income:

                           

Income before income taxes

1,002

 

728

 

926

 

811

 

1,662

 

N/M

N/M

Provision for income taxes

19

 

172

 

232

 

217

 

556

         

Net income

$

983

 

$

556

 

$

694

 

$

594

 

$

1,106

         

Net (income) attributable to noncontrolling interests (a)

(8)

 

(17)

 

(20)

 

(17)

 

(23)

         

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

975

 

539

 

674

 

577

 

1,083

         

Preferred stock dividends

(13)

 

(26)

 

(13)

 

(23)

 

(13)

         

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

$

962

 

$

513

 

$

661

 

$

554

 

$

1,070

         
                             

Key Metrics:

                           

Pre-tax operating margin (b)

26

%

20

%

25

%

22

%

36

%

       

Non-GAAP (b)

29

%

22

%

27

%

30

%

29

%

       
                             

Return on common equity (annualized) (b)

11.1

%

5.7

%

7.4

%

6.1

%

11.6

%

       

Non-GAAP (b)

8.9

%

6.3

%

7.8

%

8.4

%

8.5

%

       
                             

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

28.3

%

14.3

%

17.6

%

14.5

%

26.2

%

       

Non-GAAP adjusted (b)

21.3

%

14.3

%

17.3

%

18.4

%

18.4

%

       
                             

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

79

%

78

%

79

%

79

%

83

%

       
                             

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

38

%

39

%

37

%

38

%

43

%

       
                             

Average common shares and equivalents outstanding

                           

Basic

1,148,724

 

1,142,861

 

1,138,645

 

1,133,556

 

1,126,946

         

Diluted

1,152,679

 

1,147,961

 

1,144,510

 

1,139,800

 

1,134,871

         
                             

Period end:

                           

Full-time employees

50,800

 

51,100

 

51,400

 

51,100

 

50,900

         

Book value per common share - GAAP (b)

$

30.80

 

$

31.46

 

$

31.94

 

$

32.49

 

$

32.77

         

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

$

13.34

 

$

13.95

 

$

14.48

 

$

14.88

 

$

15.30

         

Cash dividends per common share

$

0.15

 

$

0.15

 

$

0.15

 

$

0.17

 

$

0.17

         

Common dividend payout ratio

18

%

34

%

26

%

35

%

18

%

       

Closing stock price per common share

$

30.19

 

$

34.94

 

$

35.29

 

$

37.48

 

$

38.73

         

Market capitalization

$

34,674

 

$

39,910

 

$

40,244

 

$

42,412

 

$

43,599

         

Common shares outstanding

1,148,522

 

1,142,250

 

1,140,373

 

1,131,596

 

1,125,710

         

(a)

Primarily attributable to noncontrolling interests related to consolidated investment management funds.

(b)

Non-GAAP excludes M&I, litigation and restructuring charges, the gain on the sale of our investment in Wing Hang, the gain on the sale of the One Wall Street building, a charge (recovery) related to investment management funds, net of incentives and the benefit related to the disallowance of certain foreign tax credits, 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

                     

3Q14 vs.

3Q13

4Q13

1Q14

2Q14

3Q14

 

3Q13

2Q14

Changes in AUM (in billions): (a)

                             

Beginning balance of AUM

$

1,427

 

$

1,532

 

$

1,583

 

$

1,620

 

$

1,636

           

Net inflows (outflows):

                             

Long-term:

                             

Equity

3

 

(5)

 

(1)

 

(4)

 

(2)

           

Fixed income

(1)

 

5

 

 

(1)

 

           

Index

2

 

(3)

 

 

7

 

(3)

           

Liability-driven investments (b)

27

 

4

 

20

 

(17)

 

18

           

Alternative investments

1

 

1

 

2

 

2

 

           

Total long-term inflows (outflows)

32

 

2

 

21

 

(13)

 

13

           

Short term:

                             

Cash

13

 

6

 

(7)

 

(18)

 

19

           

Total net inflows (outflows)

45

 

8

 

14

 

(31)

 

32

           

Net market/currency impact

60

 

43

 

23

 

47

 

(22)

           

Ending balance of AUM

$

1,532

 

$

1,583

 

$

1,620

 

$

1,636

 

$

1,646

 

(c)

7

%

1

%

                               

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

                             

Equity

17

%

17

%

17

%

17

%

16

%

         

Fixed income

14

 

14

 

14

 

14

 

13

           

Index

20

 

20

 

20

 

21

 

21

           

Liability-driven investments (b)

26

 

26

 

27

 

27

 

28

           

Alternative investments

4

 

4

 

4

 

4

 

4

           

Cash

19

 

19

 

18

 

17

 

18

           

Total AUM

100

%

100

%

100

%

100

%

100

%

(c)

       
                               

Wealth management:

                             

Average loans (in millions)

$

9,453

 

$

9,755

 

$

10,075

 

$

10,372

 

$

10,772

   

14

%

4

%

Average deposits (in millions)

$

13,898

 

$

14,161

 

$

14,805

 

$

13,458

 

$

13,764

   

(1)

%

2

%

                               

Investment Services:

                             

Average loans (in millions)

$

27,865

 

$

31,211

 

$

31,468

 

$

33,115

 

$

33,785

   

21

%

2

%

Average deposits (in millions)

$

206,068

 

$

216,216

 

$

214,947

 

$

220,701

 

$

221,734

   

8

%

%

                               

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

$

27.4

 

$

27.6

 

$

27.9

 

$

28.5

 

$

28.3

 

(c)

3

%

(1)

%

                               

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

$

255

 

$

235

 

$

264

 

$

280

 

$

282

   

11

%

1

%

                               

Asset servicing:

                             

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

$

110

 

$

123

 

$

161

 

$

130

 

$

115

 

(c)

       
                               

Depositary Receipts:

                             

Number of sponsored programs

1,350

 

1,335

 

1,332

 

1,316

 

1,302

   

(4)

%

(1)

%

                               

Clearing services:

                             

Global DARTS volume (in thousands)

212

 

213

 

230

 

207

 

209

   

(1)

%

1

%

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

5,622

 

5,643

 

5,695

 

5,752

 

5,805

   

3

%

1

%

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

$

377,131

 

$

401,434

 

$

413,658

 

$

433,047

 

$

442,827

   

17

%

2

%

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

$

8,845

 

$

8,848

 

$

8,919

 

$

9,236

 

$

9,861

   

11

%

7

%

                               

Broker-Dealer:

                             

Average tri-party repo balances (in billions)

$

1,952

 

$

2,005

 

$

1,983

 

$

2,022

 

$

2,063

   

6

%

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 Sept. 30, 2013, Dec. 31, 2013, March 31, 2014, June 30, 2014 and Sept. 30, 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.

 

 

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

 

Key market metrics

                           
                   

3Q14 vs.

3Q13

4Q13

1Q14

2Q14

3Q14

3Q13

2Q14

S&P 500 Index (a)

1682

 

1848

 

1872

 

1960

 

1972

 

17

%

1

%

S&P 500 Index – daily average

1675

 

1769

 

1835

 

1900

 

1976

 

18

 

4

 

FTSE 100 Index (a)

6462

 

6749

 

6598

 

6744

 

6623

 

2

 

(2)

 

FTSE 100 Index – daily average

6530

 

6612

 

6680

 

6764

 

6756

 

3

 

 

MSCI World Index (a)

1544

 

1661

 

1674

 

1743

 

1698

 

10

 

(3)

 

MSCI World Index – daily average

1511

 

1602

 

1647

 

1698

 

1733

 

15

 

2

 

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

356

 

354

 

365

 

376

 

361

 

1

 

(4)

 

NYSE and NASDAQ share volume (in billions)

166

 

179

 

196

 

187

 

173

 

4

 

(7)

 

JPMorgan G7 Volatility Index – daily average (c)

9.72

 

8.20

 

7.80

 

6.22

 

6.21

 

(36)

 

 

Average Fed Funds effective rate

0.09

%

0.09

%

0.07

%

0.09

%

0.09

%

bps

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

                   

3Q14 vs.

(dollars in millions)

3Q13

4Q13

1Q14

2Q14

3Q14

3Q13

2Q14

Investment services fees:

                           

Asset servicing (a)

$

964

 

$

984

 

$

1,009

 

$

1,022

 

$

1,025

 

6

%

%

Clearing services

315

 

324

 

325

 

326

 

337

 

7

 

3

 

Issuer services

322

 

237

 

229

 

231

 

315

 

(2)

 

36

 

Treasury services

137

 

137

 

136

 

141

 

142

 

4

 

1

 

Total investment services fees

1,738

 

1,682

 

1,699

 

1,720

 

1,819

 

5

 

6

 

Investment management and performance fees

821

 

904

 

843

 

883

 

881

 

7

 

 

Foreign exchange and other trading revenue

160

 

146

 

136

 

130

 

153

 

(4)

 

18

 

Distribution and servicing

43

 

43

 

43

 

43

 

44

 

2

 

2

 

Financing-related fees

44

 

43

 

38

 

44

 

44

 

 

 

Investment and other income

151

 

(43)

 

102

 

142

 

890

 

N/M

N/M

Total fee revenue

2,957

 

2,775

 

2,861

 

2,962

 

3,831

 

30

 

29

 

Net securities gains

22

 

39

 

22

 

18

 

20

 

N/M

N/M

Total fee and other revenue – GAAP

$

2,979

 

$

2,814

 

$

2,883

 

$

2,980

 

$

3,851

 

29

%

29

%

(a) 

Asset servicing fees include securities lending revenue of $35 million in 3Q13, $31 million in 4Q13, $38 million in 1Q14, $46 million in 2Q14 and $37 million in 3Q14.

N/M - Not meaningful.

 

 

KEY POINTS

  • Asset servicing fees were $1.0 billion, an increase of 6% year-over-year and a slight increase sequentially.  The year-over-year increase primarily reflects organic growth, higher market values, net new business and higher collateral management fees in Global Collateral Services.  The sequential increase primarily reflects organic growth, partially offset by seasonally lower securities lending revenue.
  • Clearing services fees were $337 million, an increase of 7% year-over-year and 3% sequentially.  Both increases were driven by growth in clearing accounts and mutual fund positions, and higher asset levels. The sequential increase also reflects higher DARTS volume.
  • Issuer services fees were $315 million, a decrease of 2% year-over-year and an increase of 36% sequentially.  The year-over-year decrease reflects lower Corporate Trust fees, partially offset by new business in Depositary Receipts.  The sequential increase is primarily due to seasonally higher dividend fees and new business in Depositary Receipts, partially offset by lower Corporate Trust fees.
  • Treasury services fees were $142 million in 3Q14 compared with $137 million in 3Q13 and $141 million in 2Q14. The year-over-year increase primarily reflects higher payment volumes.
  • Investment management and performance fees were $881 million, an increase of 7% year-over-year and a slight decrease sequentially.  The year-over-year increase primarily resulted from higher equity markets, the impact of a weaker U.S. dollar and higher performance fees.  The sequential decrease was primarily driven by seasonally lower performance fees and the impact of a stronger U.S. dollar.

 

 

Foreign exchange and other trading revenue

                   
 

(in millions)

3Q13

4Q13

1Q14

2Q14

3Q14

 

Foreign exchange

$

154

 

$

126

 

$

130

 

$

129

 

$

154

 
 

Other trading revenue (loss):

                   
 

Fixed income

(2)

 

20

 

1

 

(1)

 

2

 
 

Equity/other

8

 

 

5

 

2

 

(3)

 
 

Total other trading revenue (loss)

6

 

20

 

6

 

1

 

(1)

 
 

Total foreign exchange and other trading revenue

$

160

 

$

146

 

$

136

 

$

130

 

$

153

 

 

Foreign exchange and other trading revenue totaled $153 million in 3Q14 compared with $160 million in 3Q13 and $130 million in 2Q14.  In 3Q14, foreign exchange revenue totaled $154 million, unchanged year-over-year and up 19% sequentially.  Year-over-year, higher volumes offset lower volatility.  The sequential increase reflects higher volumes.

Other trading loss was $1 million in 3Q14, compared with other trading revenue of $6 million in 3Q13 and other trading revenue of $1 million in 2Q14.  Both decreases primarily reflect lower derivatives trading revenue.

 

 

Investment and other income (loss)

                   
 

(in millions)

3Q13

4Q13

1Q14

2Q14

3Q14

 

Asset-related gains (losses)

$

35

 

$

22

 

$

(1)

 

$

17

 

$

836

 
 

Corporate/bank-owned life insurance

38

 

40

 

30

 

30

 

34

 
 

Expense reimbursements from joint venture

12

 

11

 

12

 

15

 

13

 
 

Lease residual gains

7

 

 

35

 

4

 

5

 
 

Private equity gains (losses)

(2)

 

5

 

5

 

(2)

 

2

 
 

Transitional service agreements

 

2

 

 

 

 
 

Seed capital gains (losses)

7

 

20

 

6

 

15

 

(1)

 
 

Equity investment revenue (loss)

48

 

(163)

 

(2)

 

17

 

(9)

 
 

Other income

6

 

20

 

17

 

46

 

10

 
 

Total investment and other income (loss)

$

151

 

$

(43)

 

$

102

 

$

142

 

$

890

 

 

Investment and other income was $890 million in 3Q14 compared with $151 million in 3Q13 and $142 million in 2Q14.  Both increases primarily reflect the gains on the sales of our equity investment in Wing Hang and our One Wall Street office building, partially offset by lower equity investment revenue and seed capital gains.

  • In July 2014, we sold our equity investment in Wing Hang resulting in an after-tax gain of $315 million, or $490 million pre-tax.  Equity investment revenue related to our investment in Wing Hang totaled $20 million through July of 2014 and $95 million in full-year 2013, including $37 million from the sale of a property recorded in 3Q13.
  • In September 2014, we sold the corporate headquarters at One Wall Street resulting in an after-tax gain of $204 million, or $346 million pre-tax.

 

 

NET INTEREST REVENUE

 

Net interest revenue

                   

3Q14 vs.

(dollars in millions)

3Q13

4Q13

1Q14

2Q14

3Q14

3Q13

2Q14

Net interest revenue (non-FTE)

$

772

 

$

761

 

$

728

 

$

719

 

$

721

 

(7)

%

%

Net interest revenue (FTE) – Non-GAAP

787

 

781

 

744

 

736

 

736

 

(6)

 

 

Net interest margin (FTE)

1.16

%

1.09

%

1.05

%

0.98

%

0.94

%

(22)

bps

(4)

bps

                             

Selected average balances:

                           

Cash/interbank investments

$

116,165

 

$

132,198

 

$

127,134

 

$

140,357

 

$

139,278

 

20

%

(1)

%

Trading account securities

5,523

 

6,173

 

5,217

 

5,532

 

5,435

 

(2)

 

(2)

 

Securities

101,206

 

96,640

 

100,534

 

101,420

 

112,055

 

11

 

10

 

Loans

48,256

 

50,768

 

51,647

 

53,449

 

54,835

 

14

 

3

 

Interest-earning assets

271,150

 

285,779

 

284,532

 

300,758

 

311,603

 

15

 

4

 

Interest-bearing deposits

153,547

 

157,020

 

152,986

 

162,674

 

164,233

 

7

 

1

 

Noninterest-bearing deposits

72,075

 

79,999

 

81,430

 

77,820

 

82,334

 

14

 

6

 
                             

Selected average yields/rates:

                           

Cash/interbank investments

0.41

%

0.40

%

0.43

%

0.43

%

0.38

%

       

Trading account securities

2.83

 

2.82

 

2.60

 

2.19

 

2.36

         

Securities

1.98

 

2.02

 

1.79

 

1.68

 

1.56

         

Loans

1.73

 

1.64

 

1.65

 

1.66

 

1.61

         

Interest-earning assets

1.28

 

1.21

 

1.17

 

1.10

 

1.05

         

Interest-bearing deposits

0.06

 

0.06

 

0.06

 

0.06

 

0.06

         
                             

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

43

%

46

%

45

%

47

%

45

%

       

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

27

%

28

%

29

%

26

%

26

%

       

bps – basis points.

FTE – fully taxable equivalent.

 

KEY POINTS

  • Net interest revenue totaled $721 million in 3Q14, a decrease of $51 million compared with 3Q13 and an increase of $2 million sequentially.  The year-over-year decrease primarily resulted from lower asset yields and lower accretion, partially offset by higher average interest-earning assets driven by higher deposits.
  • Euro-denominated deposit liabilities comprised 15% of average deposits in 3Q14 and 16% of average deposits in 2Q14.
  • In the fourth quarter of 2014, we are continuing to reduce our interbank placement assets and increasing our high quality liquid assets in the securities portfolio.  The anticipated revenue as a result of these tactical actions should mitigate the impact on our net interest revenue as a result of:
    • the European Central Bank's reduction in their deposit rate to negative, and the resulting impact on lower reinvestment rates across the euro yield curve; as well as,
    • prolonged low reinvestment rates in the U.S.

 

 

NONINTEREST EXPENSE

Noninterest expense

                   

3Q14 vs.

(dollars in millions)

3Q13

4Q13

1Q14

2Q14

3Q14

3Q13

2Q14

Staff:

                           

Compensation

$

915

 

$

929

 

$

925

 

$

903

 

$

909

 

(1)

%

1

%

Incentives

339

 

343

 

359

 

313

 

340

 

 

9

 

Employee benefits

262

 

250

 

227

 

223

 

228

 

(13)

 

2

 

Total staff

1,516

 

1,522

 

1,511

 

1,439

 

1,477

 

(3)

 

3

 

Professional, legal and other purchased services

296

 

344

 

312

 

314

 

323

 

9

 

3

 

Software and equipment

226

 

241

 

237

 

236

 

234

 

4

 

(1)

 

Net occupancy

153

 

154

 

154

 

152

 

154

 

1

 

1

 

Distribution and servicing

108

 

110

 

107

 

112

 

107

 

(1)

 

(4)

 

Sub-custodian

71

 

68

 

68

 

81

 

67

 

(6)

 

(17)

 

Business development

63

 

96

 

64

 

68

 

61

 

(3)

 

(10)

 

Other

249

 

258

 

223

 

347

 

250

 

 

(28)

 

Amortization of intangible assets

81

 

82

 

75

 

75

 

75

 

(7)

 

 

M&I, litigation and restructuring charges

16

 

2

 

(12)

 

122

 

220

 

N/M

N/M

      Total noninterest expense – GAAP

$

2,779

 

$

2,877

 

$

2,739

 

$

2,946

 

$

2,968

 

7

%

1

%

                             

Total staff expense as a percentage of total revenue

40

%

42

%

41

%

38

%

32

%

       
                             

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

$

2,682

 

$

2,793

 

$

2,681

 

$

2,640

 

$

2,673

 

%

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 (Non-GAAP) decreased slightly year-over-year and increased 1% sequentially.
    • Year-over-year, staff expense decreased driven by lower pension expense, the benefit of replacing technology contractors with permanent staff and the impact of streamlining actions. The decrease was offset by higher professional, legal and other purchased services, the impact of a weaker U.S. dollar and the annual employee merit increase.
    • The sequential increase primarily reflects the incentive adjustment recorded in 2Q14 related to investment management funds, the impact of the annual employee merit increase and higher professional, legal and other purchased services expenses, partially offset by streamlining actions and lower sub-custodian expense.

INVESTMENT SECURITIES PORTFOLIO

At Sept. 30, 2014, the fair value of our investment securities portfolio totaled $115.9 billion.  The net unrealized pre-tax gain on our total securities portfolio was $1.1 billion at Sept. 30, 2014 compared with $1.2 billion at June 30, 2014.  The decrease in the net unrealized pre-tax gain was primarily driven by the increase in market interest rates.  During 3Q14, we received $134 million of paydowns of sub-investment grade securities and sold $24 million of sub-investment grade securities.

In 3Q14, we increased our level of Agency RMBS, U.S. Treasury and sovereign debt/sovereign guaranteed investment securities as we continued to reduce our interbank placement assets and increase our high quality liquid assets.

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

 

Investment

securities portfolio

 

 

 

(dollars in millions)

June 30, 2014

 

3Q14

change in

unrealized

gain (loss)

Sept. 30, 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

$

41,552

   

$

(100)

 

$

44,413

 

$

44,372

   

100

%

$

(41)

   

100

%

%

%

%

%

U.S. Treasury

18,791

   

(18)

 

25,244

 

25,449

   

101

 

205

   

100

 

 

 

 

 

Sovereign debt/sovereign guaranteed

14,812

   

41

 

16,510

 

16,627

   

101

 

117

   

87

 

 

13

 

 

 

Non-agency RMBS (b)

2,574

   

(31)

 

1,916

 

2,449

   

81

 

533

   

 

1

 

1

 

90

 

8

 

Non-agency RMBS

1,227

   

3

 

1,147

 

1,170

   

94

 

23

   

1

 

9

 

23

 

66

 

1

 

European floating rate  notes 

2,525

   

9

 

2,297

 

2,296

   

100

 

(1)

   

72

 

22

 

 

6

 

 

Commercial MBS

4,397

   

(28)

 

4,798

 

4,829

   

101

 

31

   

93

 

6

 

1

 

 

 

State and political subdivisions

6,253

   

13

 

5,350

 

5,434

   

102

 

84

   

79

 

20

 

 

 

1

 

Foreign covered bonds

2,788

   

(3)

 

2,863

 

2,949

   

103

 

86

   

100

 

 

 

 

 

Corporate bonds

1,693

   

(5)

 

1,636

 

1,670

   

102

 

34

   

21

 

65

 

14

 

 

 

CLO

1,455

   

(1)

 

1,959

 

1,971

   

101

 

12

   

100

 

 

 

 

 

U.S. Government agencies

787

   

(3)

 

704

 

699

   

99

 

(5)

   

100

 

 

 

 

 

Consumer ABS

3,278

   

(3)

 

3,024

 

3,025

   

100

 

1

   

99

 

1

 

 

 

 

Other (c)

2,980

   

(3)

 

2,917

 

2,923

   

100

 

6

   

40

 

53

 

 

 

7

 

Total investment securities

$

105,112

 

(d)

$

(129)

 

$

114,778

 

$

115,863

 

(d)

100

%

$

1,085

 

(e)

90

%

4

%

2

%

3

%

1

%

(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 of $1.7 billion and $1.6 billion, fair value, and money market funds of $810 million and $789 million, fair value, at June 30, 2014 and Sept. 30, 2014, respectively.

(d)

Includes net unrealized gains on derivatives hedging securities available-for-sale of $213 million at June 30, 2014 and $137 million at Sept. 30, 2014.

(e)

Unrealized gains of $1,055 million at Sept. 30, 2014 related to available-for-sale securities.

 

 

 

NONPERFORMING ASSETS

Nonperforming assets

(dollars in millions)

Sept. 30, 2013

June 30, 2014

Sept. 30, 2014

Loans:

           

Other residential mortgages

$

128

 

$

105

 

$

113

 

Commercial

15

 

13

 

13

 

Wealth management loans and mortgages

12

 

12

 

13

 

Foreign

9

 

4

 

 

Commercial real estate

4

 

4

 

4

 

Financial institutions

1

 

 

 

Total nonperforming loans

169

 

138

 

143

 

Other assets owned

3

 

4

 

4

 

Total nonperforming assets (a)

$

172

 

$

142

 

$

147

 

Nonperforming assets ratio

0.34

%

0.24

%

0.26

%

Allowance for loan losses/nonperforming loans

121.9

 

135.5

 

133.6

 

Total allowance for credit losses/nonperforming loans

200.6

 

225.4

 

201.4

 

(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 $31 million at Sept. 30, 2013, $68 million at June 30, 2014 and $79 million at Sept. 30, 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 $147 million at Sept. 30, 2014, an increase of $5 million from $142 million at June 30, 2014.  The increase primarily resulted from additions in the other residential mortgage loan portfolio which were partially offset by sales in the foreign and other residential mortgage loan portfolios.

 

ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS

 

Allowance for credit losses, provision and net charge-offs

(in millions)

Sept. 30, 2013

June 30, 2014

Sept. 30, 2014

Allowance for credit losses - beginning of period

$

337

 

$

326

 

$

311

 

Provision for credit losses

2

 

(12)

 

(19)

 

Net (charge-offs) recoveries:

           

Foreign

1

 

(2)

 

(1)

 

Wealth management loans and mortgages

 

(1)

 

 

Other residential mortgages

 

(1)

 

1

 

Commercial

(1)

 

1

 

(4)

 

Net (charge-offs)

 

(3)

 

(4)

 

Allowance for credit losses - end of period

$

339

 

$

311

 

$

288

 

Allowance for loan losses

$

206

 

$

187

 

$

191

 

Allowance for lending-related commitments

133

 

124

 

97

 

The provision for credit losses was a credit of $19 million in 3Q14 driven by the continued improvement in the credit quality of the loan portfolio.  The provision for credit losses was $2 million in 3Q13 and a credit of $12 million in 2Q14.

 

CAPITAL                            

Our consolidated capital ratios are shown in the following table.  At June 30, 2014 and Sept. 30, 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, with asset risk-weightings using the Advanced Approach framework.  The leverage capital ratios are based on Basel III components of capital and quarterly average total assets, as phased-in.  The capital ratios for Sept. 30, 2013 are based on Basel I rules (including Basel I Tier 1 common in the case of the CET1 ratio).

Capital ratios

Sept. 30, 2013

 

June 30, 2014

 

Sept. 30, 2014

 

Regulatory capital ratios: (a)(b)(c)

                 

CET1 ratio

14.2

%

(d)

11.4

%

 

11.4

%

 

Tier 1 capital ratio

15.8

   

12.4

   

12.4

   

Total (Tier 1 plus Tier 2) capital ratio

16.8

   

12.8

   

12.7

   

Leverage capital ratio

5.6

   

5.9

   

5.8

   

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

9.9

   

9.6

   

10.0

   

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

9.5

   

9.2

   

9.5

   

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

6.3

   

6.4

   

6.5

   
                   

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

                 

Estimated CET1:

                 

Standardized Approach

10.1

   

10.3

   

10.8

   

Advanced Approach

11.1

   

10.0

   

10.0

   
                   

Estimated Supplementary leverage ratio ("SLR") (f)

N/A

 

4.7

   

4.6

   

(a)

Sept. 30, 2014 regulatory capital ratios are preliminary.  See "Capital Ratios" beginning on page 28 for more detail.

(b)

Beginning with June 30, 2014, risk-based capital ratios 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 prior periods.  The leverage ratio was not affected.

(c)

The Collins Floor comparison of the CET1, Tier 1 and Total risk-based regulatory capital ratios which is 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 rules released by the Board of Governors of the Federal Reserve System (the "Federal Reserve") on July 2, 2013 (the "Final Capital Rules") (which for 2014 look to Basel I-based requirements) were 14.3%, 15.5% and 16.2%, respectively, at June 30, 2014 and 15.1%, 16.3% and 17.0%, respectively, at Sept. 30, 2014.

(d)

See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 24 for a reconciliation of these ratios.

(e)

Information for the period ended Sept. 30, 2013 was 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.

(f)

The estimated fully phased-in SLR as of June 30, 2014 is based on our interpretation of the Final Capital Rules, as supplemented by the Notice of Proposed Rulemaking released in April 2014 concerning the SLR, except that off-balance sheet exposures included in total leverage exposure reflect the end of period measures, rather than a daily average.  The estimated fully phased-in SLR as of Sept. 30, 2014 is based on our interpretation of the Final Capital Rules, as supplemented by the Federal Reserve's final rules on the SLR.  On a fully phased-in basis, we expect to satisfy a minimum SLR of over 5%, 3% attributable to a regulatory minimum SLR, and greater than 2% attributable to a buffer applicable to U.S. G-SIBs.

N/A – Not available

 

 

 

 

 

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

   

(in millions)

3Q14

Estimated Basel III CET1 - Beginning of period balance

$

16,277

 

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

1,070

 

Goodwill and intangible assets, net of related deferred tax liabilities

265

 

Gross Basel III CET1 generated

1,335

 

Capital deployed:

   

Dividends

(196)

 

Common stock repurchased

(431)

 

Total capital deployed

(627)

 

Other comprehensive (loss)

(514)

 

Additional paid-in capital (a)

196

 

Other (primarily embedded goodwill)

53

 

Total other (deductions)

(265)

 

Net Basel III CET1 generated

443

 

Basel III CET1 - End of period balance - Non-GAAP

$

16,720

 

(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 Sept. 30, 2014 - preliminary

Fully phased-in Basel III

     

Transitional Approach

 
 

Adjustments (a)

 

(dollars in millions)

 

CET1:

               

Common equity

$

36,889

 

$

97

 

(b)

$

36,986

   

Goodwill and intangible assets

(19,660)

 

2,388

 

(c)

(17,272)

   

Net pension fund assets

(106)

 

85

 

(d)

(21)

   

Equity method investments

(383)

 

92

 

(c)

(291)

   

Deferred tax assets

(17)

 

14

 

(d)

(3)

   

Other

(3)

 

4

 

(e)

1

   

  Total CET1

16,720

 

2,680

   

19,400

   

Other Tier 1 capital:

               

Preferred stock

1,562

 

   

1,562

   

Trust preferred securities

 

162

 

(f)

162

   

Disallowed deferred tax assets

 

(14)

 

(d)

(14)

   

Net pension fund assets

 

(85)

 

(d)

(85)

   

Other

(2)

 

(4)

   

(6)

   

  Total Tier 1 capital

18,280

 

2,739

   

21,019

   
                 

Tier 2 capital:

               

Trust preferred securities

 

162

 

(f)

162

   

Subordinated debt

397

 

   

397

   

Allowance for credit losses

288

 

   

288

   

Other

(1)

 

   

(1)

   

  Total Tier 2 capital - Standardized Approach

684

 

162

   

846

   

Excess of expected credit losses

38

 

   

38

   

Less: Allowance for credit losses

288

 

   

288

   

  Total Tier 2 capital - Advanced Approach

$

434

 

$

162

   

$

596

   

Total capital - Standardized Approach

$

18,964

 

$

2,901

   

$

21,865

   

Total capital - Advanced Approach

$

18,714

 

$

2,901

   

$

21,615

   
                 

Risk-weighted assets - Standardized Approach

$

154,298

 

$

(25,516)

   

$

128,782

   

Risk-weighted assets - Advanced Approach

$

167,933

 

$

2,192

   

$

170,125

   
                 

Standardized Approach:

               

Estimated Basel III CET1 ratio

10.8

%

     

15.1

%

 

Tier 1 capital ratio

11.8

       

16.3

   

Total (Tier 1 plus Tier 2) capital ratio

12.3

       

17.0

   
                 

Advanced Approach:

               

Estimated Basel III CET1 ratio

10.0

%

     

11.4

%

 

Tier 1 capital ratio

10.9

       

12.4

   

Total (Tier 1 plus Tier 2) capital ratio

11.1

       

12.7

   

(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 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 transitional adjustments related to cash flow hedges.

(f)

During 2014, 50% of outstanding trust preferred securities are included in Tier 1 capital and 50% in Tier 2 capital.

 

REVIEW OF BUSINESSES

Business results are subject to reclassification when organizational changes are made or whenever improvements are made in the measurement principles.  The reclassifications did not impact the consolidated results.  All prior periods have been restated.

 

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)

                     

3Q14 vs.

3Q13

4Q13

1Q14

2Q14

3Q14

 

3Q13

2Q14

Revenue:

                             

Investment management fees:

                             

Mutual funds

$

293

 

$

303

 

$

299

 

$

311

 

$

315

   

8

%

1

%

Institutional clients

367

 

385

 

372

 

385

 

382

   

4

 

(1)

 

Wealth management

145

 

149

 

153

 

156

 

158

   

9

 

1

 

Investment management fees

805

 

837

 

824

 

852

 

855

   

6

 

 

Performance fees

10

 

72

 

20

 

29

 

22

   

N/M

N/M

Investment management and performance fees

815

 

909

 

844

 

881

 

877

   

8

 

 

Distribution and servicing

41

 

41

 

40

 

41

 

41

   

 

 

Other (a)

26

 

43

 

16

 

48

 

16

   

N/M

N/M

Total fee and other revenue (a)

882

 

993

 

900

 

970

 

934

   

6

 

(4)

 

Net interest revenue

67

 

68

 

70

 

66

 

69

   

3

 

5

 

Total revenue

949

 

1,061

 

970

 

1,036

 

1,003

   

6

 

(3)

 

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

689

 

760

 

698

 

725

 

727

   

6

 

 

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

260

 

301

 

272

 

311

 

276

   

6

 

(11)

 

Amortization of intangible assets

35

 

35

 

31

 

31

 

31

   

(11)

 

 

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

 

 

(5)

 

109

 

   

N/M

N/M

Income before taxes

$

225

 

$

266

 

$

246

 

$

171

 

$

245

   

9

%

43

%

                               

Pre-tax operating margin

24

%

25

%

25

%

16

%

24

%

         

Adjusted pre-tax operating margin (b)

33

%

34

%

34

%

36

%

33

%

         
                               

Changes in AUM (in billions): (c)

                             

Beginning balance of AUM

$

1,427

 

$

1,532

 

$

1,583

 

$

1,620

 

$

1,636

           

Net inflows (outflows):

                             

Long-term:

                             

Equity

3

 

(5)

 

(1)

 

(4)

 

(2)

           

Fixed income

(1)

 

5

 

 

(1)

 

           

Index

2

 

(3)

 

 

7

 

(3)

           

Liability-driven investments (d)

27

 

4

 

20

 

(17)

 

18

           

Alternative investments

1

 

1

 

2

 

2

 

           

Total long-term inflows (outflows)

32

 

2

 

21

 

(13)

 

13

           

Short term:

                             

Cash

13

 

6

 

(7)

 

(18)

 

19

           

Total net inflows (outflows)

45

 

8

 

14

 

(31)

 

32

           

Net market/currency impact

60

 

43

 

23

 

47

 

(22)

           

Ending balance of AUM

$

1,532

 

$

1,583

 

$

1,620

 

$

1,636

 

$

1,646

 

(e)

7

%

1

%

                               

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

                             

Equity

17

%

17

%

17

%

17

%

16

%

         

Fixed income

14

 

14

 

14

 

14

 

13

           

Index

20

 

20

 

20

 

21

 

21

           

Liability-driven investments (d)

26

 

26

 

27

 

27

 

28

           

Alternative investments

4

 

4

 

4

 

4

 

4

           

Cash

19

 

19

 

18

 

17

 

18

           

Total AUM

100

%

100

%

100

%

100

%

100

%

(e)

       
                               

Wealth management:

                             

Average loans

$

9,453

 

$

9,755

 

$

10,075

 

$

10,372

 

$

10,772

   

14

%

4

%

Average deposits

$

13,898

 

$

14,161

 

$

14,805

 

$

13,458

 

$

13,764

   

(1)

%

2

%

(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 $1.65 trillion at Sept. 30, 2014, an increase of 7% year-over-year and 1% sequentially.  The year-over-year increase primarily resulted from higher equity market values and net new business.  The sequential increase primarily reflects net new business.
    • Net long-term inflows were $13 billion in 3Q14 driven by liability-driven investments.  Short-term inflows were $19 billion in 3Q14.
  • Income before taxes excluding amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives increased 6% year-over-year and decreased 11% sequentially.
  • Total revenue was $1.0 billion, an increase of 6% year-over-year and a decrease of 3% sequentially.  Both comparisons were impacted by higher equity markets and lower seed capital gains.  The year-over-year increase also reflects the impact of a weaker U.S. dollar and higher performance fees.  The sequential decrease also reflects lower performance fees and the impact of a stronger U.S. dollar.
  • Investment management fees were $855 million, an increase of 6% year-over-year and a slight increase  sequentially.  Both increases primarily resulted from higher equity markets.  The year-over-year increase also reflects the impact of a weaker U.S. dollar.  The sequential increase was partially offset by the impact of a stronger U.S. dollar.
  • Performance fees were $22 million in 3Q14 compared with $10 million in 3Q13 and $29 million in 2Q14.  The year-over-year increase primarily reflects strong performance of liability-driven investments.  The sequential decrease was due to seasonality.
  • Net interest revenue increased 3% year-over-year and 5% sequentially.  Both increases primarily reflect higher average loans.  The year-over-year increase was partially offset by lower average deposits.  The sequential increase also reflects higher average deposits.
    • Average loans increased 14% year-over-year and 4% sequentially; average deposits decreased 1% year-over-year and increased 2% sequentially.
  • Total noninterest expense (ex. amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives) increased 6% year-over-year and increased slightly sequentially.  The year-over-year increase primarily reflects the impact of a weaker U.S. dollar and higher staff and business development expenses resulting from investments in strategic initiatives.
  • 44% non-U.S. revenue in 3Q14 vs. 44% in 3Q13.
  • Insight Investment was named LDI Manager of the Year for the fifth consecutive year at Financial News Awards for Excellence in Institutional Asset Management and was named the Overall Defined Benefit Manager of the Year 2014 by Mallowstreet.

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)

                     

3Q14 vs.

3Q13

4Q13

1Q14

2Q14

3Q14

 

3Q13

2Q14

Revenue:

                             

Investment services fees:

                             

Asset servicing

$

939

 

$

957

 

$

985

 

$

993

 

$

998

   

6

%

1

%

Clearing services

314

 

322

 

323

 

324

 

336

   

7

 

4

 

Issuer services

321

 

236

 

228

 

231

 

314

   

(2)

 

36

 

Treasury services

135

 

137

 

134

 

140

 

139

   

3

 

(1)

 

Total investment services fees

1,709

 

1,652

 

1,670

 

1,688

 

1,787

   

5

 

6

 

Foreign exchange and other trading revenue

177

 

150

 

158

 

145

 

159

   

(10)

 

10

 

Other (a)

63

 

58

 

59

 

87

 

59

   

(6)

 

(32)

 

Total fee and other revenue (a)

1,949

 

1,860

 

1,887

 

1,920

 

2,005

   

3

 

4

 

Net interest revenue

619

 

610

 

590

 

593

 

583

   

(6)

 

(2)

 

Total revenue

2,568

 

2,470

 

2,477

 

2,513

 

2,588

   

1

 

3

 

Noninterest expense (ex. amortization of intangible assets)

1,765

 

1,822

 

1,778

 

1,824

 

1,835

   

4

 

1

 

Income before taxes (ex. amortization of intangible assets)

803

 

648

 

699

 

689

 

753

   

(6)

 

9

 

Amortization of intangible assets

46

 

47

 

44

 

44

 

44

   

(4)

 

 

Income before taxes

$

757

 

$

601

 

$

655

 

$

645

 

$

709

   

(6)

%

10

%

                               

Pre-tax operating margin

29

%

24

%

26

%

26

%

27

%

         

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

31

%

26

%

28

%

27

%

29

%

         
                               

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

97

%

90

%

93

%

93

%

100

%

         
                               

Securities lending revenue

$

26

 

$

21

 

$

30

 

$

35

 

$

27

   

4

%

(23)

%

                               

Metrics:

                             

Average loans

$

27,865

 

$

31,211

 

$

31,468

 

$

33,115

 

$

33,785

   

21

%

2

%

Average deposits

$

206,068

 

$

216,216

 

$

214,947

 

$

220,701

 

$

221,734

   

8

%

%

                               

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

$

27.4

 

$

27.6

 

$

27.9

 

$

28.5

 

$

28.3

 

(d)

3

%

(1)

%

Market value of securities on loan at period

end (in billions) (e)

$

255

 

$

235

 

$

264

 

$

280

 

$

282

   

11

%

1

%

                               

Asset servicing:

                             

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

$

110

 

$

123

 

$

161

 

$

130

 

$

115

 

(d)

       
                               

Depositary Receipts:

                             

Number of sponsored programs

1,350

 

1,335

 

1,332

 

1,316

 

1,302

   

(4)

%

(1)

%

                               

Clearing services:

                             

Global DARTS volume (in thousands)

212

 

213

 

230

 

207

 

209

   

(1)

%

1

%

Average active clearing accounts

(U.S. platform) (in thousands)

5,622

 

5,643

 

5,695

 

5,752

 

5,805

   

3

%

1

%

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

$

377,131

 

$

401,434

 

$

413,658

 

$

433,047

 

$

442,827

   

17

%

2

%

Average investor margin loans (U.S. platform)

$

8,845

 

$

8,848

 

$

8,919

 

$

9,236

 

$

9,861

   

11

%

7

%

                               

Broker-Dealer:

                             

Average tri-party repo balances (in billions)

$

1,952

 

$

2,005

 

$

1,983

 

$

2,022

 

$

2,063

   

6

%

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 Sept. 30, 2013, Dec. 31, 2013, March 31, 2014, June 30, 2014 and Sept. 30, 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.

N/M – Not meaningful.

 

INVESTMENT SERVICES KEY POINTS

 

  • Investment services fees totaled $1.8 billion, an increase of 5% year-over-year and 6% sequentially.
    • Asset servicing fees (global custody, broker-dealer services and global collateral services) were $998 million in 3Q14 compared with $939 million in 3Q13 and $993 million in 2Q14.  The year-over-year increase primarily reflects organic growth, higher market values, net new business and higher collateral management fees in Global Collateral Services.  The sequential increase primarily reflects organic growth, partially offset by seasonally lower securities lending revenue.
      • Estimated new business wins (AUC/A) in Asset Servicing of $115 billion in 3Q14.
    • Clearing services fees were $336 million in 3Q14 compared with $314 million in 3Q13 and $324 million in 2Q14.  Both increases were driven by growth in clearing accounts and mutual fund positions, and higher asset levels. The sequential increase also reflects higher DARTS volume.
    • Issuer services fees (Corporate Trust and Depositary Receipts) were $314 million in 3Q14 compared with $321 million in 3Q13 and $231 million in 2Q14.  The year-over-year decrease reflects lower Corporate Trust fees, partially offset by new business in Depositary Receipts.  The sequential increase is primarily due to seasonally higher dividend fees and new business in Depositary Receipts, partially offset by lower Corporate Trust fees.
    • Treasury services fees were $139 million in 3Q14 compared with $135 million in 3Q13 and $140 million in 2Q14.  The year-over-year increase primarily reflect higher payment volumes.
  • Foreign exchange and other trading revenue was $159 million in 3Q14 compared with $177 million in 3Q13 and $145 million in 2Q14.  The year-over-year decrease primarily reflect lower volatility, partially offset by higher volumes.  Sequentially, the increase reflects higher volumes.
  • Net interest revenue was $583 million in 3Q14 compared with $619 million in 3Q13 and $593 million in 2Q14.  Both decreases primarily reflects lower yields, partially offset by higher average loans.  The year-over-year decrease was partially offset by higher average deposits.
  • Noninterest expense (excluding amortization of intangible assets) was $1.835 billion in 3Q14 compared with $1.765 billion in 3Q13 and $1.824 billion in 2Q14.  Both increases reflect higher litigation expense.  The year-over-year increase also reflects higher professional and legal expenses, partially offset by lower staff expense.  The sequential increase was partially offset by lower sub-custodian and staff expenses.
    • Investment services fees as a percentage of noninterest expense increased year-over-year reflecting an increase in investment services fees and limited expense growth.
  • 39% non-U.S. revenue in 3Q14 vs. 36% in 3Q13.

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)

3Q13

4Q13

1Q14

2Q14

3Q14

Revenue:

                   

Fee and other revenue

$

172

 

$

(20)

 

$

112

 

$

119

 

$

928

 

Net interest revenue

86

 

83

 

68

 

60

 

69

 

Total revenue

258

 

63

 

180

 

179

 

997

 

Provision for credit losses

2

 

6

 

(18)

 

(12)

 

(19)

 

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

230

 

200

 

193

 

93

 

274

 

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

26

 

(143)

 

5

 

98

 

742

 

M&I and restructuring charges

14

 

13

 

 

120

 

57

 

Income (loss) before taxes

$

12

 

$

(156)

 

$

5

 

$

(22)

 

$

685

 
                     

Average loans and leases

$

10,938

 

$

9,802

 

$

10,104

 

$

9,962

 

$

10,278

 

 

KEY POINTS

  • Total fee and other revenue increased $756 million compared with 3Q13 and increased $809 million compared with 2Q14.  Both increases primarily reflect the gain on the sale of our investment in Wing Hang and the gain on the sale of the One Wall Street building, partially offset by lower equity investment and other income.
  • The provision for credit losses was a credit of $19 million in 3Q14 driven by the continued improvement in the credit quality of the loan portfolio.
  • Noninterest expense (excluding M&I and restructuring charges) increased $44 million compared with 3Q13 and $181 million compared with 2Q14.  Both increases primarily reflect higher litigation expense.  The year-over-year increase was partially offset by lower staff expense.  The sequential increase also reflects higher staff expenses.
  • M&I and restructuring charges recorded in 3Q14 primarily reflects severance expense.

 

 

THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement

(in millions)

Quarter ended

 

Year-to-date

 

Sept. 30,
2014

June 30,
2014

Sept. 30,
2013

 

Sept. 30,
2014

Sept. 30,
2013

 
   

Fee and other revenue

                       

Investment services fees:

                       

Asset servicing

$

1,025

 

$

1,022

 

$

964

   

$

3,056

 

$

2,921

   

Clearing services

337

 

326

 

315

   

988

 

940

   

Issuer services

315

 

231

 

322

   

775

 

853

   

Treasury services

142

 

141

 

137

   

419

 

417

   

Total investment services fees

1,819

 

1,720

 

1,738

   

5,238

 

5,131

   

Investment management and performance fees

881

 

883

 

821

   

2,607

 

2,491

   

Foreign exchange and other trading revenue

153

 

130

 

160

   

419

 

528

   

Distribution and servicing

44

 

43

 

43

   

130

 

137

   

Financing-related fees

44

 

44

 

44

   

126

 

129

   

Investment and other income (a)

890

 

142

 

151

   

1,134

 

524

   

Total fee revenue (a)

3,831

 

2,962

 

2,957

   

9,654

 

8,940

   

Net securities gains

20

 

18

 

22

   

60

 

102

   

Total fee and other revenue (a)

3,851

 

2,980

 

2,979

   

9,714

 

9,042

   

Operations of consolidated investment management funds

                       

Investment income

123

 

141

 

134

   

402

 

439

   

Interest of investment management fund note holders

84

 

95

 

102

   

281

 

292

   

Income from consolidated investment management funds

39

 

46

 

32

   

121

 

147

   

Net interest revenue

                       

Interest revenue

809

 

811

 

855

   

2,432

 

2,506

   

Interest expense

88

 

92

 

83

   

264

 

258

   

Net interest revenue

721

 

719

 

772

   

2,168

 

2,248

   

Provision for credit losses

(19)

 

(12)

 

2

   

(49)

 

(41)

   

Net interest revenue after provision for credit losses

740

 

731

 

770

   

2,217

 

2,289

   

Noninterest expense

                       

Staff

1,477

 

1,439

 

1,516

   

4,427

 

4,497

   

Professional, legal and other purchased services

323

 

314

 

296

   

949

 

908

   

Software and equipment

234

 

236

 

226

   

707

 

692

   

Net occupancy

154

 

152

 

153

   

460

 

475

   

Distribution and servicing

107

 

112

 

108

   

326

 

325

   

Sub-custodian

67

 

81

 

71

   

216

 

212

   

Business development

61

 

68

 

63

   

193

 

221

   

Other

250

 

347

 

249

   

820

 

771

   

Amortization of intangible assets

75

 

75

 

81

   

225

 

260

   

Merger and integration, litigation and restructuring charges

220

 

122

 

16

   

330

 

68

   

Total noninterest expense

2,968

 

2,946

 

2,779

   

8,653

 

8,429

   

Income

                       

Income before income taxes (a)

1,662

 

811

 

1,002

   

3,399

 

3,049

   

Provision for income taxes (a)

556

 

217

 

19

   

1,005

 

1,420

   

Net income (a)

1,106

 

594

 

983

   

2,394

 

1,629

   

Net (income) attributable to noncontrolling interests (includes $(23), $(17), $(8), $(60) and $(63) related to consolidated investment management funds, respectively)

(23)

 

(17)

 

(8)

   

(60)

 

(64)

   

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

1,083

 

577

 

975

   

2,334

 

1,565

   

Preferred stock dividends

(13)

 

(23)

 

(13)

   

(49)

 

(38)

   

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

$

1,070

 

$

554

 

$

962

   

$

2,285

 

$

1,527

   

(a)

Results for the first nine months of 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

Sept. 30, 2014

June 30, 2014

Sept. 30, 2013

 

Sept. 30, 2014

Sept. 30, 2013

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

$

1,070

 

$

554

 

$

962

   

$

2,285

 

$

1,527

 

Less:   Earnings allocated to participating securities (a)

20

 

10

 

18

   

43

 

27

 

      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)

$

1,050

 

$

544

 

$

944

   

$

2,242

 

$

1,499

 

(a)

Results for the first nine months of 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

Sept. 30, 2014

June 30, 2014

Sept. 30, 2013

 

Sept. 30, 2014

Sept. 30, 2013

Basic

1,126,946

 

1,133,556

 

1,148,724

   

1,133,006

 

1,153,327

 

Diluted

1,134,871

 

1,139,800

 

1,152,679

   

1,139,718

 

1,156,951

 

 

 

 

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

(in dollars)

Quarter ended

 

Year-to-date

Sept. 30, 2014

June 30, 2014

Sept. 30, 2013

 

Sept. 30, 2014

Sept. 30, 2013

Basic

$

0.93

 

$

0.48

 

$

0.82

   

$

1.98

 

$

1.30

 

Diluted

$

0.93

 

$

0.48

 

$

0.82

   

$

1.97

 

$

1.30

 

(a)

Results for the first nine months of 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

 

Sept. 30,

June 30,

Dec. 31,

(dollars in millions, except per share amounts)

2014

2014

2013

Assets

           

Cash and due from:

           

Banks

$

6,410

 

$

6,173

 

$

6,460

 

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

92,317

 

105,657

 

104,359

 

Interest-bearing deposits with banks

30,341

 

41,459

 

35,300

 

Federal funds sold and securities purchased under resale agreements

17,375

 

15,062

 

9,161

 

Securities:

           

Held-to-maturity (fair value of $20,167, $19,211 and $19,443)

20,137

 

19,102

 

19,743

 

Available-for-sale

95,559

 

85,688

 

79,309

 

Total securities

115,696

 

104,790

 

99,052

 

Trading assets

11,613

 

10,856

 

12,098

 

Loans

57,527

 

59,248

 

51,657

 

Allowance for loan losses

(191)

 

(187)

 

(210)

 

Net loans

57,336

 

59,061

 

51,447

 

Premises and equipment

1,351

 

1,590

 

1,655

 

Accrued interest receivable

565

 

624

 

621

 

Goodwill

17,992

 

18,196

 

18,073

 

Intangible assets

4,215

 

4,314

 

4,452

 

Other assets

21,523

 

22,530

 

20,566

 

Subtotal assets of operations

376,734

 

390,312

 

363,244

 

Assets of consolidated investment management funds, at fair value:

           

Trading assets

8,823

 

9,402

 

10,397

 

Other assets

739

 

1,026

 

875

 

Subtotal assets of consolidated investment management funds, at fair value

9,562

 

10,428

 

11,272

 

Total assets

$

386,296

 

$

400,740

 

$

374,516

 

Liabilities

           

Deposits:

           

Noninterest-bearing (principally U.S. offices)

$

101,105

 

$

109,570

 

$

95,475

 

Interest-bearing deposits in U.S. offices

56,740

 

52,954

 

56,640

 

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

107,051

 

119,915

 

109,014

 

Total deposits

264,896

 

282,439

 

261,129

 

Federal funds purchased and securities sold under repurchase agreements

9,687

 

10,301

 

9,648

 

Trading liabilities

7,734

 

6,844

 

6,945

 

Payables to customers and broker-dealers

20,155

 

17,242

 

15,707

 

Commercial paper

 

27

 

96

 

Other borrowed funds

852

 

1,458

 

663

 

Accrued taxes and other expenses

6,482

 

6,433

 

6,996

 

Other liabilities (includes allowance for lending-related commitments of $97, $124 and $134)

7,169

 

7,066

 

4,827

 

Long-term debt

21,583

 

20,327

 

19,864

 

Subtotal liabilities of operations

338,558

 

352,137

 

325,875

 

Liabilities of consolidated investment management funds, at fair value:

           

Trading liabilities

8,130

 

9,123

 

10,085

 

Other liabilities

10

 

6

 

46

 

Subtotal liabilities of consolidated investment management funds, at fair value

8,140

 

9,129

 

10,131

 

Total liabilities

346,698

 

361,266

 

336,006

 

Temporary equity

           

Redeemable noncontrolling interests

246

 

239

 

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 1,286,670,537, 1,281,585,137 and 1,268,036,220 shares

13

 

13

 

13

 

Additional paid-in capital

24,499

 

24,303

 

24,002

 

Retained earnings

17,670

 

16,796

 

15,952

 

Accumulated other comprehensive loss, net of tax

(916)

 

(402)

 

(892)

 

Less:  Treasury stock of 160,960,855, 149,988,907 and 125,786,430 common shares, at cost

(4,377)

 

(3,946)

 

(3,140)

 

Total The Bank of New York Mellon Corporation shareholders' equity

38,451

 

38,326

 

37,497

 

Nonredeemable noncontrolling interests of consolidated investment management funds

901

 

909

 

783

 

Total permanent equity

39,352

 

39,235

 

38,280

 

Total liabilities, temporary equity and permanent equity

$

386,296

 

$

400,740

 

$

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)

3Q13

 

YTD13

 

3Q13

 

YTD13

Basic

$

0.83

   

$

1.31

   

$

0.82

   

$

1.30

 

Diluted

$

0.82

   

$

1.30

   

$

0.82

   

$

1.30

 

 

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)

3Q13

 

YTD13

 

3Q13

 

YTD13

 

3Q13

 

YTD13

Investment and other income

$

135

   

$

476

   

$

16

   

$

48

   

$

151

   

$

524

 

Total fee revenue

2,941

   

8,892

   

16

   

48

   

2,957

   

8,940

 

Total fee and other revenue

2,963

   

8,994

   

16

   

48

   

2,979

   

9,042

 

Income before income taxes

986

   

3,001

   

16

   

48

   

1,002

   

3,049

 

Provision (benefit) for income taxes

(2)

   

1,365

   

21

   

55

   

19

   

1,420

 

Net income (loss)

988

   

1,636

   

(5)

   

(7)

   

983

   

1,629

 

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

980

   

1,572

   

(5)

   

(7)

   

975

   

1,565

 

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

967

   

1,534

   

(5)

   

(7)

   

962

   

1,527

 

 

 

The table below presents the impact of this new accounting guidance on our previously reported consolidated ratios and other measures.

Consolidated ratios and other measures

As previously reported

 

As revised

(in dollars unless otherwise noted)

 

3Q13

   

3Q13

Return on common equity

 

11.2

%

   

11.1

%

Return on tangible common equity – Non-GAAP

 

28.4

%

   

28.3

%

Return on tangible common equity – Non-GAAP adjusted

 

21.5

%

   

21.3

%

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

 

6.4

%

   

6.3

%

Book value per common share – GAAP

 

$

30.82

     

$

30.80

 

Tangible book value per common share – Non-GAAP

 

$

13.36

     

$

13.34

 

 

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

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based upon fully phased-in Basel III CET1, SLR, Basel I CET1 and tangible common shareholders' equity.  BNY Mellon believes that the Basel III CET1 ratio 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 BNY Mellon's performance in reference to those assets that can generate income.  BNY Mellon has provided a measure of tangible book value per share, which it believes 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, 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 benefit 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 the acquisitions of Global Investment Servicing on July 1, 2010 and BHF Asset Servicing GmbH on Aug. 2, 2010.  M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration.  BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased.  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 table presents the reconciliation of net income and diluted earnings per common share.

 

 

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

3Q13

 

2Q14

 

3Q14

 

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

$

962

 

$

0.82

   

$

554

 

$

0.48

   

$

1,070

 

$

0.93

 

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

 

   

 

   

315

 

0.27

 

Gain on the sale of the One Wall Street building

 

   

 

   

204

 

0.18

 

Add:  Litigation and restructuring charges

12

 

0.01

   

76

 

0.06

   

183

 

0.16

 

Charge related to investment management funds, net of incentives

 

   

85

 

0.07

   

 

 

Benefit related to the disallowance of certain foreign tax credits

(261)

 

(0.22)

   

 

   

 

 

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

$

713

 

$

0.61

   

$

715

 

$

0.62

 

(a)

$

734

 

$

0.64

 

(a)

Does not foot due to rounding.

 

 

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)

3Q13

4Q13

1Q14

2Q14

3Q14

Income before income taxes – GAAP

$

1,002

 

$

728

 

$

926

 

$

811

 

$

1,662

 

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

8

 

17

 

20

 

17

 

23

 

Gain on the sale of our investment in Wing Hang

 

 

 

 

490

 

Gain on the sale of the One Wall Street building

 

 

 

 

346

 

Add:  Amortization of intangible assets

81

 

82

 

75

 

75

 

75

 

M&I, litigation and restructuring charges

16

 

2

 

(12)

 

122

 

220

 

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

 

 

(5)

 

109

 

 

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

$

1,091

 

$

795

 

$

964

 

$

1,100

 

$

1,098

 
                     

Fee and other revenue – GAAP

$

2,979

 

$

2,814

 

$

2,883

 

$

2,980

 

$

3,851

 

Income from consolidated investment management funds – GAAP

32

 

36

 

36

 

46

 

39

 

Net interest revenue – GAAP

772

 

761

 

728

 

719

 

721

 

Total revenue – GAAP

3,783

 

3,611

 

3,647

 

3,745

 

4,611

 

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

8

 

17

 

20

 

17

 

23

 

Gain on the sale of our investment in Wing Hang

 

 

 

 

490

 

Gain on the sale of the One Wall Street building

 

 

 

 

346

 

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

$

3,775

 

$

3,594

 

$

3,627

 

$

3,728

 

$

3,752

 
                     

Pre-tax operating margin (a)

26

%

20

%

25

%

22

%

36

%

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

29

%

22

%

27

%

30

%

29

%

(a)

Income before taxes divided by total revenue.

(b)

Non-GAAP excludes M&I, litigation and restructuring charges, the gain on the sale of our investment in Wing Hang, the gain on the sale of the One Wall Street building, a charge (recovery) related to investment management funds, net of incentives and net income attributable to noncontrolling interests of consolidated investment management funds, 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)

3Q13

4Q13

1Q14

2Q14

3Q14

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

$

962

 

$

513

 

$

661

 

$

554

 

$

1,070

 

Add:  Amortization of intangible assets, net of tax

52

 

53

 

49

 

49

 

49

 

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

1,014

 

566

 

710

 

603

 

1,119

 

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

 

 

 

 

315

 

Gain on the sale of the One Wall Street building

 

 

 

 

204

 

Add:  M&I, litigation and restructuring charges

12

 

1

 

(7)

 

76

 

183

 

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

 

 

(4)

 

85

 

 

Benefit related to the disallowance of certain foreign tax credits

(261)

 

 

 

 

 

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

$

765

 

$

567

 

$

699

 

$

764

 

$

783

 
                     

Average common shareholders' equity

$

34,264

 

$

35,698

 

$

36,289

 

$

36,565

 

$

36,751

 

Less:  Average goodwill

17,975

 

18,026

 

18,072

 

18,149

 

18,109

 

Average intangible assets

4,569

 

4,491

 

4,422

 

4,354

 

4,274

 

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

1,262

 

1,302

 

1,306

 

1,338

 

1,317

 

Deferred tax liability – intangible assets (a)

1,242

 

1,222

 

1,259

 

1,247

 

1,230

 

Average tangible common shareholders' equity – Non-GAAP

$

14,224

 

$

15,705

 

$

16,360

 

$

16,647

 

$

16,915

 
                     

Return on common equity – GAAP (b)(c)

11.1

%

5.7

%

7.4

%

6.1

%

11.6

%

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

8.9

%

6.3

%

7.8

%

8.4

%

8.5

%

                     

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

28.3

%

14.3

%

17.6

%

14.5

%

26.2

%

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

21.3

%

14.3

%

17.3

%

18.4

%

18.4

%

(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)

Non-GAAP excludes M&I, litigation and restructuring charges, the gain on the sale of our investment in Wing Hang, the gain on the sale of the One Wall Street building, a charge (recovery) related to investment management funds, net of incentives and the benefit related to the disallowance of certain foreign tax credits, 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

Sept. 30, 2013

June 30, 2014

Sept. 30, 2014

(dollars in millions, unless otherwise noted)

BNY Mellon shareholders' equity at period end – GAAP

$

36,935

 

$

38,326

 

$

38,451

 

Less:  Preferred stock

1,562

 

1,562

 

1,562

 

BNY Mellon common shareholders' equity at period end – GAAP

35,373

 

36,764

 

36,889

 

Less:  Goodwill

18,025

 

18,196

 

17,992

 

Intangible assets

4,527

 

4,314

 

4,215

 

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

1,262

 

1,338

 

1,317

 

Deferred tax liability – intangible assets (a)

1,242

 

1,247

 

1,230

 

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

$

15,325

 

$

16,839

 

$

17,229

 
             

Total assets at period end – GAAP

$

372,124

 

$

400,740

 

$

386,296

 

Less:  Assets of consolidated investment management funds

11,691

 

10,428

 

9,562

 

Subtotal assets of operations – Non-GAAP

360,433

 

390,312

 

376,734

 

Less:  Goodwill

18,025

 

18,196

 

17,992

 

Intangible assets

4,527

 

4,314

 

4,215

 

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

96,316

 

104,916

 

90,978

 

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

$

241,565

 

$

262,886

 

$

263,549

 
             

BNY Mellon shareholders' equity to total assets – GAAP

9.9

%

9.6

%

10.0

%

BNY Mellon common shareholders' equity to total assets – GAAP

9.5

%

9.2

%

9.5

%

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

6.3

%

6.4

%

6.5

%

             

Period-end common shares outstanding (in thousands)

1,148,522

 

1,131,596

 

1,125,710

 
             

Book value per common share – GAAP

$

30.80

 

$

32.49

 

$

32.77

 

Tangible book value per common share – Non-GAAP

$

13.34

 

$

14.88

 

$

15.30

 

(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)

3Q13

4Q13

1Q14

2Q14

3Q14

Income from consolidated investment management funds

$

32

 

$

36

 

$

36

 

$

46

 

$

39

 

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

8

 

17

 

20

 

17

 

23

 

Income from consolidated investment management funds, net of noncontrolling interests

$

24

 

$

19

 

$

16

 

$

29

 

$

16

 

 

 

 

 

The following table presents the 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)

3Q13

4Q13

1Q14

2Q14

3Q14

Investment management fees

$

20

 

$

20

 

$

18

 

$

18

 

$

15

 

Other (Investment income)

4

 

(1)

 

(2)

 

11

 

1

 

Income from consolidated investment management funds, net of controlling interests

$

24

 

$

19

 

$

16

 

$

29

 

$

16

 

 

 

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)

3Q13

4Q13

1Q14

2Q14

3Q14

Income before income taxes – GAAP

$

225

 

$

266

 

$

246

 

$

171

 

$

245

 

Add:  Amortization of intangible assets

35

 

35

 

31

 

31

 

31

 

Money market fee waivers

30

 

33

 

35

 

28

 

29

 

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

$

290

 

$

334

 

$

307

 

$

339

 

$

305

 
                     

Total revenue – GAAP

$

949

 

$

1,061

 

$

970

 

$

1,036

 

$

1,003

 

Less:  Distribution and servicing expense

107

 

108

 

106

 

111

 

105

 

Money market fee waivers benefiting distribution and servicing expense

38

 

38

 

38

 

37

 

38

 

Add:  Money market fee waivers impacting total revenue

68

 

71

 

73

 

65

 

67

 

Total revenue net of distribution and servicing expense

and excluding money market fee waivers – Non-GAAP

$

872

 

$

986

 

$

899

 

$

953

 

$

927

 
                     

Pre-tax operating margin (a)

24

%

25

%

25

%

16

%

24

%

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)

33

%

34

%

34

%

36

%

33

%

(a)

Income before taxes divided by total revenue.

 

 

 

Capital Ratios

BNY Mellon has presented its estimated fully phased-in Basel III CET1 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 ratio 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 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 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 ratios would likely be adversely impacted.

Risk-weighted assets at Sept. 30, 2014 and June 30, 2014 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 transition 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)

Sept. 30, 2013

June 30,
 2014

Sept. 30, 2014

(dollars in millions)

Total Tier 1 capital

$

18,074

 

$

20,669

 

$

21,019

 

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

           

Deferred tax liability – tax deductible intangible assets

82

 

 

 

Intangible deduction

 

(2,453)

 

(2,388)

 

Preferred stock

(1,562)

 

(1,562)

 

(1,562)

 

Trust preferred securities

(324)

 

(171)

 

(162)

 

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

           

Securities available-for-sale

487

 

586

 

578

 

Pension liabilities

(1,348)

 

(691)

 

(675)

 

Net pension fund assets

(279)

 

 

 

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

(1,140)

 

(105)

 

(97)

 

Equity method investments

(479)

 

(99)

 

(92)

 

Deferred tax assets

(26)

 

 

 

Other

18

 

(2)

 

2

 

Total estimated fully phased-in Basel III CET1

$

14,643

 

$

16,277

 

$

16,720

 
             

Under the Standardized Approach:

           

Estimated fully phased-in Basel III risk-weighted assets

$

145,589

 

$

158,168

 

$

154,298

 
             

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

10.1

%

10.3

%

10.8

%

             

Under the Advanced Approach:

           

Estimated fully phased-in Basel III risk-weighted assets

$

131,583

 

$

162,072

 

$

167,933

 
             

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

11.1

%

10.0

%

10.0

%

(a)

Sept. 30, 2014 information is preliminary.

(b)

Beginning with June 30, 2014, risk-based capital ratios 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 prior periods.

 

 

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

Basel I CET1 ratio

(dollars in millions)

Sept. 30, 2013

Total Tier 1 capital – Basel I

$

18,074

 

Less:    Trust preferred securities

324

 

Preferred stock

1,562

 

Total CET1 – Basel I

$

16,188

 
     

Total risk-weighted assets – Basel I

$

114,404

 
     

Basel I CET1 ratio – Non-GAAP

14.2

%

 

 

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

Estimated SLR – Non-GAAP (a)

(dollars in millions)

June 30,

2014

 

Sept. 30, 2014

Total CET1 - fully phased-in

$

16,277

 

$

16,720

 

Additional Tier 1 capital

1,562

 

1,560

 

Total Tier 1 capital

$

17,839

 

$

18,280

 
         

Total leverage exposure:

       

Quarterly average total assets

$

369,212

 

$

380,409

 

Less: Amounts deducted from Tier 1 capital

20,480

 

20,166

 

Total on-balance sheet assets, as adjusted

348,732

 

360,243

 

Off-balance sheet exposures:

       

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

11,115

 

11,694

 

Repo-style transaction exposures included in SLR

 

 

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

22,658

 

21,924

 

Total off-balance sheet exposures

33,773

 

33,618

 

Total leverage exposure

$

382,505

 

$

393,861

 
         

Estimated SLR

4.7

%

4.6

%

(a)

The estimated fully phased-in SLR as of June 30, 2014 is based on our interpretation of the Final Capital Rules, as supplemented by the Notice of Proposed Rulemaking released in April 2014 concerning the SLR, except that off-balance sheet exposures included in total leverage exposure reflect the end of period measures, rather than a daily average.  The estimated fully phased-in SLR as of Sept. 30, 2014 is based on our interpretation of the Final Capital Rules, as supplemented by the Federal Reserve's final rules on the SLR.  On a fully phased-in basis, we expect to satisfy a minimum SLR of over 5%, 3% attributable to a regulatory minimum SLR, and greater than 2% attributable to a buffer applicable to U.S. G-SIBs.

 

 

DIVIDENDS

 

Common – On Oct. 17, 2014, 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 Nov. 7, 2014 to shareholders of record as of the close of business on Oct. 28, 2014.

Preferred – On Oct. 17, 2014, 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 December 2014, in each case, payable on Dec. 22, 2014 to holders of record as of the close of business on Dec. 5, 2014:

  • $1,011.11 per share on the Series A Preferred Stock (equivalent to $10.1111 per Normal Preferred Capital Security of Mellon Capital IV, each representing 1/100th interest in a share of Series A Preferred Stock);
  • $1,300.00 per share on the Series C Preferred Stock (equivalent to $0.3250 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock); and
  • $2,250.00 per share on the Series D Preferred Stock (equivalent to approximately $22.50 per depositary share, each representing a 1/100th interest in a share of the Series D Preferred Stock).

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle.  Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets.  As of Sept. 30, 2014, BNY Mellon had $28.3 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management.  BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available on www.bnymellon.com, 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 Sept. 30, 2014 and are 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 margins and return on capital and our plans relating to the securities portfolio and impact on net interest revenue.  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 Oct. 17, 2014, 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

Izzy Dawood

(212) 635-1590

(212) 635-1850

kevin.heine@bnymellon.com

izzy.dawood@bnymellon.com

 

SOURCE BNY Mellon