January 20, 2009

The Bank of New York Mellon Corporation Reports Fourth Quarter Continuing EPS of $0.05


Record Core Revenue; Tier I Capital Strengthened to 13.1%

Continuing EPS reduced by:

- $0.65 per share resulting from securities write-downs primarily due to credit market illiquidity which includes an expected incurred loss of $0.10 per share (loan equivalent); securities continue to pay all principal and interest

- $0.22 per share from: restructuring expense related to previously-announced workforce reduction of $0.09; existing support agreements of $0.08; and merger and integration of $0.05

NEW YORK, January 20, 2009 — The Bank of New York Mellon Corporation today reported fourth quarter income from continuing operations, before an extraordinary item, and after preferred stock dividends, of $53 million, or $0.05 per common share. This compares to income from continuing operations, before an extraordinary item, of $700 million, or $0.61 per common share, in the fourth quarter of 2007 and $305 million, or $0.26 per common share, in the third quarter of 2008. In the fourth quarter of 2008, net income applicable to common stock, including the impact of an extraordinary item, was $28 million, or $0.02 per common share.

"In an extraordinarily challenging year, we generated profits in every quarter, achieved revenue growth of 9%, gained share in our businesses, outperformed on the merger and integration goals and had top-ranked client service globally. As we enter 2009, our business model works and we continue to maintain the capital strength needed in this uncertain market environment. I want to thank all of our employees, as our success is a reflection of their excellent work," said Robert P. Kelly, chairman and chief executive officer of The Bank of New York Mellon.

"Our operating performance during the fourth quarter includes record revenue from our institutional servicing businesses and well-controlled operating expenses. These results were offset by securities write-downs reflecting their deterioration and enormous liquidity discounts for mortgage-backed securities. We believe that the actual incurred loss will ultimately be materially lower based on current assumptions. We should have the opportunity to earn back a substantial portion of the write-downs over the remaining lives of the securities."

Income from continuing operations, before an extraordinary item, and after preferred stock dividends, for the full-year 2008 totaled $1.409 billion, or $1.22 per common share, compared with $2.227 billion, or $2.38 per common share, before an extraordinary item, in 2007. Net income applicable to common stock for the full-year 2008 totaled $1.386 billion, or $1.20 per common share, compared with $2.039 billion, or $2.18 per common share, for full-year 2007.

Fourth Quarter Highlights of The Bank of New York Mellon Corporation (Unless otherwise noted, all comments begin with the results of the fourth quarter of 2008 and are compared to the fourth quarter of 2007). Please refer to the Quarterly Earnings Review for detailed business segment information.

Total revenue was $2.886 billion, comprised of $1.816 billion of fee and other revenue and $1.070 billion of net interest revenue, and included a pre-tax charge for the write-down of certain investment securities ($1.241 billion) in total fee and other revenue.

    -------------------------------------------------------------------------
    Reconciliation of total revenue                               4Q08 vs.
                                                                 ------------
    (dollar amounts in millions)      4Q08     3Q08      4Q07    4Q07    3Q08
    -------------------------------------------------------------------------
    Fee and other revenue            $1,816   $2,923   $3,047   (40)%   (38)%
    Securities write-downs            1,241      162      191    N/M     N/M
    -------------------------------------------------------------------------
      Total fee and other revenue -
       Non-GAAP                       3,057    3,085    3,238    (6)     (1)
    Net interest revenue              1,070      703      752    42      52
    SILO/LILO                             -      112        -    N/M     N/M
    -------------------------------------------------------------------------
      Total net interest revenue
       - Non-GAAP                     1,070      815      752    42      31
    -------------------------------------------------------------------------
      Total revenue, excluding SILO/
       LILO and securities
       write-downs - Non-GAAP        $4,127   $3,900   $3,990     3%      6%
    -------------------------------------------------------------------------
    N/M - Not meaningful.

  • Assets under custody and administration amounted to $20.2 trillion, a decrease of 13% compared with the prior year and a decrease of 10% (unannualized) sequentially, as the impact of new business converted during the fourth quarter was more than offset by lower market values and the impact of a stronger U.S. dollar. Assets under management, excluding securities lending assets, amounted to $928 billion at quarter end. This represents a decrease of 17% compared with the prior year. Sequentially, assets under management decreased 13% (unannualized). Net asset inflows in the fourth quarter totaled $5 billion but were more than offset by lower market values and the impact of a stronger U.S. dollar.
  • Securities servicing fees totaled $1.458 billion, a decrease of 7% on a reported basis and approximately 3% adjusted for the sale of the B-Trade and G-Trade execution businesses in the first quarter of 2008. New client wins in our securities servicing businesses were not sufficient to offset the impact of lower market values, the strong U.S. dollar and lower levels of fixed income issuances globally. Securities servicing fees declined 5% (unannualized) sequentially, primarily driven by the same factors.
  • Asset and wealth management fees totaled $657 million, a decline of 26% compared to the prior year and 17% (unannualized) sequentially reflecting the global weakness in market values, partially offset by net inflows of money market assets over both periods. Performance fees totaled $44 million in the fourth quarter of 2008 compared to $62 million in the prior year and $3 million sequentially.
  • Foreign exchange and other trading activities totaled a record $510 million, an increase of 67% compared with $305 million in the prior year and an increase of 32% (unannualized) compared with $385 million in the third quarter of 2008. The increase compared to both periods reflects the benefit from higher volatility in all major currencies.
  • Net interest revenue (FTE) totaled a record $1.077 billion with a net interest margin of 2.34%. This compares with net interest revenue of $757 million and a net interest margin of 2.16% in the fourth quarter of 2007 and net interest revenue of $820 million and a net interest margin of 2.27% in the third quarter of 2008, excluding the $112 million (pre-tax) SILO charge. The increase in net interest revenue compared with both prior periods primarily reflects a higher level of noninterest-bearing deposits from our institutional clients which resulted in a higher level of interest-earning assets, as well as wider spreads.
  • Securities losses totaled $1.241 billion. This compares with a loss of $191 million in the fourth quarter of 2007 and a loss of $162 million in the third quarter of 2008. The increased level of losses reflects more negative market assumptions relating to the housing industry and the potential for future defaults. The loss reflects the market value of the applicable security which is substantially below the expected loss. Further information on the investment portfolio and the expected loss is detailed on pages 9 and 10.

The provision for credit losses was $60 million in the fourth quarter of 2008 compared with $20 million in the fourth quarter of 2007 and $30 million in the third quarter of 2008. During the fourth quarter of 2008, the total allowance for credit losses increased by $35 million and net charge-offs totaled $25 million.

Total noninterest expense was $2.875 billion. This compares to noninterest expense of $2.752 billion in the fourth quarter of 2007 and $3.332 billion in the third quarter of 2008.

    ----------------------------------------------------------------------
    Reconciliation of noninterest expense                     4Q08 vs.
    (dollar amounts                                        ---------------
    in millions)             4Q08      3Q08      4Q07      4Q07      3Q08
    ----------------------------------------------------------------------
    Noninterest expense    $2,875    $3,332    $2,752        4%      (14)%
    Restructuring charge      181         -         -       N/M       N/M
    Support agreement
     charges                  163       726         3       N/M       N/M
    ----------------------------------------------------------------------
      Subtotal              2,531     2,606     2,749       (8)%      (3)%
    M&I expense                97       111       124      (22)      (13)
    Intangible amortization   116       120       131      (11)       (3)
    ----------------------------------------------------------------------
      Total noninterest
       expense, excluding
       the restructuring
       charge, support
       agreement charges,
       M&I expenses and
       intangible
       amortization -
       Non-GAAP            $2,318    $2,375    $2,494       (7)%      (2)%
    ----------------------------------------------------------------------
    N/M - Not meaningful

  • Total noninterest expense (excluding the restructuring charge, support agreement charges, M&I and intangible amortization) decreased 7% compared with the prior year and 2% sequentially. The decline in total expense compared with both periods reflects lower staff expense resulting from the ongoing benefit of merger-related expense synergies, lower incentive compensation in the third and fourth quarters, a stronger U.S. dollar and well-controlled non-staff expenses.
  • As a result of our previously announced global workforce reduction, we recorded a restructuring charge of $181 million in the fourth quarter of 2008. Further information on the restructuring charge is on page 10. This program is expected to result in annualized savings of $160-170 million. An additional related charge of approximately $20-25 million, pre-tax, will be incurred during the first half of 2009.
  • On an operating basis we generated significant positive operating leverage compared to both periods (1000 bps and 800 bps, respectively).

Results for the fourth quarter of 2008 include an income tax benefit of $135 million. Excluding the impact of securities losses, the restructuring charge, support agreement charges, and M&I expenses the effective tax rate was 32.6% in the fourth quarter of 2008.

The balance sheet at the end of the fourth quarter of 2008 totaled $237 billion compared to $198 billion at Dec. 31, 2007 and $268 billion at Sept. 30, 2008. We continued to benefit from an above trend level of client deposits, particularly noninterest-bearing client deposits. In addition, at year end we maintained $53 billion in deposits with the Federal Reserve.

The unrealized net of tax loss on our securities portfolio was $ 4.1 billion at Dec. 31, 2008 compared with $2.8 billion at Sept. 30, 2008. The increase primarily resulted from wider credit spreads.

The capital ratios at Dec. 31, 2008 compared to Sept. 30, 2008 reflect the benefit we received from the $3 billion of Series B preferred stock issued to the U.S. Treasury in October of 2008 and a lower level of risk adjusted assets.

    ------------------------------------------------------------------------
    Capital Ratios                                     Quarter ended
                                              ------------------------------
                                              Dec. 31,   Sept. 30,  Dec. 31,
                                                2008        2008      2007
    ------------------------------------------------------------------------
    Tier I capital ratio                        13.1%(a)     9.3%      9.3%
    Total (Tier I plus Tier II) capital ratio   16.8(a)     12.8      13.2
    Leverage capital ratio                       6.9         6.5       6.5
    Shareholders' equity to assets ratio        11.8        10.3      14.9
    Tangible common equity to assets ratio(b)    3.8(c)      3.9(c)    5.2
      Adjusted tangible common equity to assets
       ratio(d)                                  4.5         4.2       5.3
    ------------------------------------------------------------------------
    (a) Preliminary.
    (b) Common equity less goodwill and intangible assets, adjusted for
        deferred tax liabilities associated with non-tax deductible
        identifiable intangible assets and tax deductible goodwill, divided
        by total assets less goodwill and intangible assets.
    (c) Assets were adjusted for the deposits maintained with the Federal
        Reserve of $53.3 billion and $37.9 billion, and other short-term
        investments - U.S. government-backed commercial paper of $5.6
        billion and $10.9 billion at Dec. 31, 2008 and Sept. 30, 2008,
        respectively.  Both of these sets of assets have been assigned a zero
        risk-weighting by the regulators.
    (d) Certain rating agencies include a portion of the Series B preferred
        stock and trust preferred securities when assessing the capital
        strength of the Company.  Accordingly, we calculated the adjusted
        tangible common equity to assets ratio by using tangible common
        equity as defined in (b) above, plus a portion of the Series B
        preferred and trust preferred securities divided by assets as
        defined in (c) above.

On Jan. 13, 2009, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of 24 cents per common share. This cash dividend is payable on Feb. 3, 2009 to shareholders of record as of the close of business on Jan. 23, 2009. The Company anticipates that future quarterly dividend declarations will be timed to correspond with the announcement of quarterly earnings.

The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $20.2 trillion in assets under custody and administration, $928 billion in assets under management and services more than $11 trillion in outstanding debt. Additional information is available at www.bnymellon.com.

Earnings Release Format

Throughout this earnings release, all information is reported on a continuing operations basis unless otherwise noted. Quarterly returns are annualized. Certain amounts are presented on an FTE basis. We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income. Where financial measures are presented excluding certain specified amounts, we believe the presentation enhances investor understanding of period-to-period results.

Supplemental Financial Information

The Quarterly Earnings Review and supplemental financial trends for The Bank of New York Mellon Corporation have been updated through Dec. 31, 2008 and are available at www.bnymellon.com (Investor Relations - financial reports).

Conference Call Data

Robert P. Kelly, chairman and chief executive officer; Gerald L. Hassell, president; and Thomas P. Gibbons, chief financial officer, along with other members of executive management from The Bank of New York Mellon Corporation, will host a conference call and simultaneous live audio webcast at 5 p.m. EST on Jan. 20, 2009. 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 (210) 838-9221 (International) Passcode: Earnings, or by logging on to www.bnymellon.com. The earnings release, together with the Quarterly Earnings Review, will be available at www.bnymellon.com beginning at approximately 4:30 p.m. EST on Jan. 20, 2009. Replays of the conference call and audio webcast will be available beginning Jan. 20, 2009 at approximately 9 p.m. EST through Feb. 3, 2009 by dialing (866) 442-1776 (U.S.) or (203) 369-1076 (International). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

                          THE BANK OF NEW YORK MELLON CORPORATION
                                   Financial Highlights
    ----------------------------------------------------------------------
                                                      Quarter ended
                                              ----------------------------

    (dollar amounts in millions, except per
     common share amounts and unless
     otherwise noted; common shares in         Dec. 31,  Sept. 30,  Dec. 31,
     thousands)                                  2008      2008      2007
    ----------------------------------------------------------------------
    Return on tangible common equity:
      GAAP-before extraordinary (loss)            6.7%     19.0%     33.0%
      Non-GAAP adjusted (b)                      61.5%     50.4%     40.8%

    Return on common equity:
      GAAP - before extraordinary (loss)          0.8%      4.3%      9.5%
      Non-GAAP adjusted (c)                      16.9%     14.3%     13.1%

    Fee and other revenue as a percentage of
     total revenue (FTE)                           63%       81%       80%
      Excluding securities write-downs and
       SILO/LILO charges                           74%       79%       81%

    Annualized fee revenue per employee (based
     on average headcount) (in thousands)        $282      $285      $309

    Non-U.S. percent of revenue, excluding
     the SILO/LILO charges and securities
     write-downs (FTE)                             31%       32%       32%

    Pre-tax operating margin (FTE):
      GAAP                                         (1)%       8%       27%
      Non-GAAP adjusted (c)                        43%       39%       37%

    Net interest margin (FTE)                    2.34%     1.96%(d)  2.16%

    Selected average balances:
      Interest-earning assets                $183,876  $144,290  $140,622
      Total assets                           $243,956  $198,827  $192,987
      Interest-bearing deposits               $96,575   $86,853   $86,278
      Noninterest-bearing deposits            $52,274   $33,462   $28,449
      Shareholders' equity                    $28,771   $27,996   $29,136

    Average common shares and equivalents
     outstanding:
       Basic                                1,144,839 1,143,445 1,133,804
       Diluted                              1,150,753 1,151,469 1,148,176

    Period-end data
    Assets under custody and administration
     (in trillions)                             $20.2     $22.4     $23.1
       Cross-border assets (in trillions)        $7.5     $ 8.9     $10.0
    Market value of securities on loan
     (in billions)                               $341      $470      $633
    Assets under management (in billions)        $928    $1,067    $1,121

    Employees                                  42,900    43,200    42,500

    Book value per common share                $22.00    $23.97    $25.66
    Tangible book value per common share        $5.18     $6.65     $8.00
    Dividends per common share                  $0.24     $0.24     $0.24
    Closing common stock price per common
     share                                     $28.33    $32.58    $48.76
    Market capitalization                     $32,536   $37,388   $55,878



                                                            Year ended
    (dollar amounts in millions, except per             ------------------
     common share amounts and unless                     Dec. 31,  Dec. 31,
     otherwise noted; common shares in
     thousands)                                           2008     2007(a)
    ----------------------------------------------------------------------

    Return on tangible common equity:
      GAAP-before extraordinary (loss)                     20.7%     29.5%
      Non-GAAP adjusted (b)                                48.9%     33.8%

    Return on common equity:
      GAAP - before extraordinary (loss)                    5.0%     11.0%
      Non-GAAP adjusted (c)                                14.3%     13.8%

    Fee and other revenue as a percentage of total
     revenue (FTE)                                           78%       80%
       Excluding securities write-downs and SILO/LILO
        charges                                              78%       80%

    Annualized fee revenue per employee (based
      on average headcount) (in thousands)                 $287      $289

    Non-U.S. percent of revenue, excluding the SILO/LILO
     charges and securities write-downs (FTE)                32%       32%

    Pre-tax operating margin (FTE):
      GAAP                                                   15%       29%
      Non-GAAP adjusted (c)                                  39%       36%

    Net interest margin (FTE)                              1.92%(d)  2.08%

    Selected average balances:
      Interest-earning assets                          $154,438  $111,174
      Total assets                                     $209,956  $148,642
      Interest-bearing deposits                         $92,768   $66,315
      Noninterest-bearing deposits                      $34,247   $21,677
      Shareholders' equity                              $28,704   $20,234

    Average common shares and equivalents outstanding:
      Basic                                           1,142,239   923,199
      Diluted                                         1,152,085   934,704

    Period-end data
    Assets under custody and administration
     (in trillions)                                       $20.2     $23.1
      Cross-border assets (in trillions)                   $7.5    $ 10.0
    Market value of securities on loan (in billions)       $341      $633
    Assets under management (in billions)                  $928    $1,121

    Employees                                            42,900    42,500

    Book value per common share                          $22.00    $25.66
    Tangible book value per common share                  $5.18     $8.00
    Dividends per common share                            $0.96     $0.95
    Closing common stock price per common share          $28.33    $48.76
    Market capitalization                               $32,536   $55,878
    ----------------------------------------------------------------------
    (a)  Results for the full-year ended Dec. 31, 2007 include six months of
         The Bank of New York Mellon Corporation and six months of legacy The
         Bank of New York Company, Inc.
    (b)  Calculated excluding M&I expenses, the SILO/LILO/tax settlements,
         support agreement charges, restructuring charges and securities
         write-downs.
    (c)  Calculated excluding M&I expenses, the SILO/LILO/tax settlements,
         support agreement charges, restructuring charges, securities
         write-downs and intangible amortization expenses.
    (d)  Excluding the SILO/LILO charges, net interest margin was 2.27% and
         2.24% for the third quarter and full-year 2008.



                     THE BANK OF NEW YORK MELLON CORPORATION
                     Condensed Consolidated Income Statement

    ------------------------------------------------------------------------
    (in millions,                 Quarter ended              Year ended
    except per             -----------------------------  ------------------
    common share           Dec. 31,  Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
    amounts)                 2008       2008      2007      2008    2007 (a)
    ------------------------------------------------------------------------
    Fee and other revenue
    Securities servicing
     fees:
      Asset servicing        $782       $803      $812    $3,348    $2,353
      Issuer services         388        477       438     1,685     1,560
      Clearing and execution
       services               288        262       314     1,087     1,192
    ------------------------------------------------------------------------
        Total securities
         servicing fees     1,458      1,542     1,564     6,120     5,105
    Asset and wealth
     management fees          657        792       887     3,135     2,060
    Performance fees           44          3        62        83        93
    Foreign exchange and
     other trading
     activities               510        385       305     1,462       786
    Treasury services         134        130       121       518       348
    Distribution and
     servicing                106        107       113       421       212
    Financing-related fees     45         45        52       188       216
    Investment income          27         17        52       112       149
    Other                      76         64        82       290       266
    ------------------------------------------------------------------------
        Total fee revenue   3,057      3,085     3,238    12,329     9,235
    Securities gains
     (losses)              (1,241)      (162)     (191)   (1,628)     (201)
    ------------------------------------------------------------------------
        Total fee and
         other revenue      1,816      2,923     3,047    10,701     9,034
    ------------------------------------------------------------------------
    Net interest revenue
    Interest revenue        1,551      1,339     1,789     5,638     5,751
    Interest expense          481        636     1,037     2,687     3,451
    ------------------------------------------------------------------------
        Net interest
         revenue            1,070        703       752     2,951     2,300
    Provision for credit
     losses                    60         30        20       131       (10)
    ------------------------------------------------------------------------
        Net interest
         revenue after
         provision for
         credit losses      1,010        673       732     2,820     2,310
    ------------------------------------------------------------------------
    Noninterest expense
    Staff                   1,154      1,218     1,365     5,115     4,120
    Professional, legal
     and other purchased
     services                 307        287       272     1,126       781
    Net occupancy             143        164       145       575       449
    Distribution and
     servicing                123        133       133       517       268
    Software                   86         78        78       331       280
    Furniture and equipment    86         80        82       324       267
    Sub-custodian and
     clearing                  80         80       115       313       383
    Business development       76         62        72       279       190
    Other                     426(b)     999(b)    235     1,856(b)    658
    ------------------------------------------------------------------------
        Subtotal            2,481      3,101     2,497    10,436     7,396
    Amortization of
     intangible assets        116        120       131       482       319
    Restructuring charge      181          -         -       181         -
    Merger and integration
     expenses:
      The Bank of New York
       Mellon Corporation      97        107       111       471       355
      Acquired Corporate
       Trust Business           -          4        13        12        49
    ------------------------------------------------------------------------
        Total noninterest
         expense            2,875      3,332     2,752    11,582     8,119
    ------------------------------------------------------------------------
    Income
    Income (loss) from
     continuing operations
     before income taxes      (49)       264     1,027     1,939     3,225
    Provision (benefit)
     for income taxes        (135)       (41)      327       497       998
    ------------------------------------------------------------------------
        Income from
         continuing
         operations            86        305       700     1,442     2,227
    Discontinued
     operations:
      Income (loss) from
       discontinued
       operations               2         (2)       (2)       11       (16)
      Provision (benefit)
       for income taxes         1          -        (2)        8        (8)
    ------------------------------------------------------------------------
        Income (loss) from
         discontinued
         operations, net
         of tax                 1         (2)        -         3        (8)
    ------------------------------------------------------------------------
        Income before
         extraordinary
         (loss) and
         preferred
         dividends             87        303       700     1,445     2,219
    Extraordinary (loss)
     on consolidation of
     commercial paper
     conduits, net of tax     (26)         -      (180)      (26)     (180)
    ------------------------------------------------------------------------
        Net income             61        303       520     1,419     2,039
    Preferred dividends       (33)         -         -       (33)        -
    ------------------------------------------------------------------------
        Net income
         applicable to
         common stock         $28       $303      $520    $1,386    $2,039
    ------------------------------------------------------------------------
    Earnings per common
     share
    Basic:
      Income from
       continuing
       operations           $0.05      $0.27     $0.62     $1.23     $2.41
      Income (loss)
       from discontinued
       operations, net
       of tax                   -          -         -         -     (0.01)
    ------------------------------------------------------------------------
        Income before
         extraordinary
         (loss)              0.05       0.27      0.62      1.23      2.40
      Extraordinary
       (loss), net of
       tax                  (0.02)         -     (0.16)    (0.02)    (0.19)
    ------------------------------------------------------------------------
        Net income
         applicable to
         common stock       $0.02(c)   $0.27     $0.46     $1.21     $2.21
    Diluted:
      Income from
       continuing
       operations           $0.05      $0.26     $0.61     $1.22     $2.38
      Income (loss)
       from discontinued
       operations, net
       of tax                   -          -         -         -     (0.01)
    ------------------------------------------------------------------------
        Income before
         extraordinary
         (loss)              0.05       0.26      0.61     $1.22      2.37
      Extraordinary
       (loss), net of
       tax                  (0.02)         -     (0.16)    (0.02)    (0.19)
    ------------------------------------------------------------------------
        Net income
         applicable to
         common stock       $0.02(c)   $0.26     $0.45     $1.20     $2.18
    ------------------------------------------------------------------------
    (a) Results for the full year ended Dec. 31, 2007 include six months of
        The Bank of New York Mellon Corporation and six months of legacy The
        Bank of New York Company, Inc.
    (b) Includes the support agreement charges of $163 million in 4Q08, $726
        million in 3Q08 and $894 million in full year ended Dec. 31, 2008.
    (c) Does not foot due to rounding.



                          THE BANK OF NEW YORK MELLON CORPORATION
                                Consolidated Balance Sheet

    -------------------------------------------------------------------------
    (dollar amounts in millions, except per common       Dec. 31,    Dec. 31,
     share amounts)                                        2008        2007
    -------------------------------------------------------------------------
    Assets
    Cash and due:
      Banks                                               $4,881      $6,555
      Federal Reserve Bank                                53,278          80
    Other short-term investment - U.S. government-backed
     commercial paper, at fair value                       5,629           -
    Interest-bearing deposits with banks                  39,126      34,312
    Federal funds sold and securities purchased under
     resale agreements                                     2,000       9,108
    Securities:
      Held-to-maturity (fair value of $6,333 and $2,171)   7,371       2,180
      Available-for-sale                                  32,064      46,518
    -------------------------------------------------------------------------
        Total securities                                  39,435      48,698
    Trading assets                                        11,102       6,420
    Loans                                                 43,394      50,931
    Allowance for loan losses                               (415)       (327)
    -------------------------------------------------------------------------
        Net loans                                         42,979      50,604
    Premises and equipment                                 1,686       1,731
    Accrued interest receivable                              619         739
    Goodwill                                              15,898      16,331
    Intangible assets                                      5,856       6,402
    Other assets                                          14,520      16,676
    -------------------------------------------------------------------------
          Total assets                                  $237,009    $197,656
    -------------------------------------------------------------------------

    Liabilities
    Deposits:
      Noninterest-bearing (principally domestic
       offices)                                          $55,816     $32,372
      Interest-bearing deposits in domestic offices       32,386      21,082
      Interest-bearing deposits in foreign offices        71,471      64,671
    -------------------------------------------------------------------------
        Total deposits                                   159,673     118,125
    Borrowing from Federal Reserve related to asset-
     backed commercial paper, at fair value                5,591           -
    Federal funds purchased and securities sold under
     repurchase agreements                                 1,372       2,193
    Trading liabilities                                    8,085       4,577
    Payables to customers and broker-dealers               9,274       7,578
    Commercial paper                                         138       4,079
    Other borrowed funds                                     755       1,840
    Accrued taxes and other expenses                       3,779       8,101
    Other liabilities (including allowance for lending
     related commitments of $114 and $167)                 4,427       4,887
    Long-term debt                                        15,865      16,873
    -------------------------------------------------------------------------
        Total liabilities                                208,959     168,253
    -------------------------------------------------------------------------
    Shareholders' equity
    Preferred stock - par value $1,000 per share;
     authorized 100,000,000  shares; issued 3,000,000
     shares                                                2,786           -
    Common equity:
    Common stock-par value $0.01 per common share;
     authorized 3,500,000,000 common shares; issued
     1,148,507,561 and 1,146,896,177 common shares            11          11
    Additional paid-in capital                            20,432      19,990
    Retained earnings                                     10,250      10,015
    Accumulated other comprehensive loss, net of tax      (5,426)       (574)
    Less:  Treasury stock of 40,262 and 912,896 common
     shares, at cost                                          (3)        (39)
    -------------------------------------------------------------------------
        Total common equity                               25,264      29,403
    -------------------------------------------------------------------------
        Total shareholders' equity                        28,050      29,403
    -------------------------------------------------------------------------
          Total liabilities and shareholders' equity    $237,009    $197,656
    -------------------------------------------------------------------------

Investment Securities Portfolio

At Dec. 31, 2008, our investment securities portfolio totaled $39.4 billion. The unrealized net of tax loss on our total securities portfolio was $4.1 billion at Dec. 31, 2008. The unrealized net of tax loss at Sept. 30, 2008 was $2.8 billion. The increase compared to the prior quarter was primarily driven by wider credit spreads.

The following table provides the detail of our total securities portfolio.

    -----------------------------------------------------------------------
    Securities portfolio
    Dec. 31, 2008
                                                                Quarter
                                        Fair Value  Portfolio   to-date
                                        as % of     Aggregate   Change in
    (dollar amounts    Amortized  Fair  Amortized   Unrealized  Unrealized
     in millions)      Cost       Value Cost(a)     Gain/(Loss) Gain/(Loss)
    -----------------------------------------------------------------------

    Alt-A MBS          $7,499   $4,735      53%      $(2,764)    $(425)
    Prime/Other MBS     6,785    5,004      74        (1,781)   (1,069)
    Subprime MBS        1,578      987      60          (591)     (191)
    Commercial MBS      2,846    2,137      75          (709)     (514)
    ABS CDOs               35       19       5           (16)      (13)
    Credit cards          747      524      67          (223)     (154)
    Trust preferred
     securities           100       41      32           (59)      (20)
    Home equity lines
     of credit            558      334      46          (224)      (40)
    SIV securities        126      109      49           (17)      (17)
    Other                 396      261      59          (135)      (61)
                       ------   ------                 ------    ------
        Watch list     20,670   14,151      62        (6,519)   (2,504)
    Agencies           11,561   11,621     101            60       169
    European floating
     rate notes         7,582    6,411      85        (1,171)     (698)
    Other               6,160    6,214     101            54       109
                       ======   ======                 =====     =====
    -----------------------------------------------------------------------
      Total           $45,973  $38,397      80%      $(7,576)  $(2,924)
    -----------------------------------------------------------------------


    Securities portfolio
    Dec. 31, 2008
                                     Life-to-date/
    (dollar amounts                  Impairment            Ratings
     in millions)                      Charge(b)   ----------------------
                                                    AAA   AA    A   Other
    ----------------------------------------------------------------------

    Alt-A MBS                         $ 1,397       53%   12%   12%   23%
    Prime/Other MBS                        15       75    11     7     7
    Subprime MBS                           68       22    55    16     7
    Commercial MBS                         22       98     1     -     1
    ABS CDOs                              326       30     1     -    69
    Credit cards                           35        -     6    94     -
    Trust preferred
     securities                            28        -    68     -    32
    Home equity lines
     of credit                            173        -    23     1    76
    SIV securities                         95       40    11    13    36
    Other                                  46        8     7     5    80
                                        -----
        Watch list                      2,205       62    13    11    14
    Agencies                                -      100     -     -     -
    European floating
     rate notes                             -       98     2     -     -
    Other                                   -       72     7     6    15
                                        =====
    ---------------------------------------------------------------------
      Total                            $2,205(b)    81%    6%    5%    8%
    ---------------------------------------------------------------------

    (a)  Amortized cost before impairments.
    (b)  Life-to-date impairment charges include $301 million associated
         with the consolidation of Three Rivers Funding Corporation in
         December 2007 and $45 million associated with the consolidation of
         Old Slip Funding in December 2008.
    Note: The "Watch list" includes those securities we view as having a
          higher risk of additional impairment charges.

Since the end of the third quarter, the housing market indicators and the broader economy have deteriorated significantly. Therefore, in the fourth quarter of 2008, we adjusted our modeling assumptions to reflect this further deterioration. Accordingly, we changed the modeling assumptions on all Residential Mortgage-Backed Securities ("RMBS") with the primary changes being on the default rates. In addition, to properly reflect the declining value of homes in the current foreclosure environment, we adjusted our RMBS loss severity assumptions to decrease the amount we expect to receive to cover the value of the original loan. As a result of these adjustments to our assumptions, a larger number of securities (primarily Alt-A) generated an expected loss and consequently, we recorded an impairment charge and wrote down to current market value those securities, resulting in a $1.2 billion pre-tax securities loss comprised of the following:

    ----------------------------------------------------------------------
    Securities portfolio losses               4Q08             4Q08
                                              Expected         Securities
    (in millions)                             Incurred Loss    Write-downs
    ----------------------------------------------------------------------
    Alt-A securities                             $124            $1,135
    ABS CDOs                                        6                 6
    Home equity line of credit                     14                36
    SIV securities                                 44                44
    Trust preferred securities                      1                 1
    Other                                          19                19
    ----------------------------------------------------------------------
      Total                                      $208            $1,241
    ----------------------------------------------------------------------

At Dec. 31, 2008, the expected incurred loss included in securities write-downs recorded in the fourth quarter of 2008 is estimated to be $208 million. The difference between the expected loss and the total impairment charges incurred during the fourth quarter of 2008 is largely driven by the market illiquidity relating to mortgage-backed securities. The underlying market discount rate rose throughout 2008, particularly during the fourth quarter, and accounted for the gap between the expected loss and the impairment charges. The expected loss to be incurred is determined based on a projected principal write-down of a mortgage-backed security that occurs when the losses on the underlying mortgage pool are expected to be large enough to cause a reduction in the total contractual amount of principal that we are entitled to receive pursuant to the terms of the security.

At the time of purchase, the Alt-A portfolio's weighted-average FICO score was 715 and its weighted-average LTV was 74%. Approximately 50% of the total portfolio is supported by better-performing fixed-rate collateral. Finally, the portfolio's weighted-average current credit enhancement is approximately 13%. The unrealized loss on the Alt-A portfolio at Dec. 31, 2008 was $2.8 billion.

The home equity lines of credit ("HELOC") securities are tested for impairment based on the quality of the underlying security and the condition of the monoline insurer providing credit support. Securities were deemed impaired if we expected they would not be repaid in full without the support of the insurer and the insurer was rated below investment grade. The securities write-downs in the fourth quarter of 2008 related to HELOC securities resulted from both a deterioration of specific securities combined with weak credit support due to below investment grade ratings of certain bond insurers.

Restructuring Charge

In November 2008, the Company announced that due to weakness in the global economy it would reduce its workforce by approximately 4%, or 1,800 positions. The goals of this workforce reduction are to reduce expense growth and further improve the efficiency of the organization. This program is expected to result in annualized savings of $160-170 million.

In December 2008, the Company recorded a pre-tax restructuring charge of $181 million or $0.09 per common share. This charge was comprised of $166 million for severance costs, $9 million of expense from stock-based award acceleration, $5 million of other compensation costs and $1 million of non-personnel expenses directly related to the workforce reduction. The restructuring charge is recorded as a separate line on the income statement. The Company also expects to record an additional related charge of approximately $20-25 million, pre-tax, of restructuring expense in the first half of 2009, primarily related to severance and accruals for vacant space.

Extraordinary Loss on Consolidation of Commercial Paper Conduit

On Dec. 30, 2008, we voluntarily called the first loss notes of Old Slip Funding LLC ("Old Slip"), making us the primary beneficiary and triggering the consolidation of Old Slip (approximately $125 million in assets). The consolidation resulted in the recognition of an extraordinary loss (non-cash accounting charge) of $26 million after tax, or $0.02 per common share, representing the current mark-to-market discount from par associated with spread-widening for the assets in Old Slip.

Series B-Perpetual Preferred Stock

On Oct. 28, 2008, we issued $3 billion of securities to the U.S. Department of the Treasury comprised of Series B preferred stock ($2.779 billion) and a warrant for common stock ($221 million) as part of the Troubled Asset Relief Program ("TARP") Capital Purchase Program authorized under the Emergency Economic Stabilization Act. The preferred dividends and the amortization of the discount on the Series B preferred stock reduced net income applicable to common stock by $33 million, or $ 0.03 per common share in the fourth quarter of 2008 and are expected to reduce earnings per share by approximately $0.16 per common share in 2009.

The proceeds from the Series B preferred stock have been utilized to improve the flow of funds in the financial markets. Specifically we have:

  • Purchased mortgage-backed securities and debentures issued by U.S. government-sponsored agencies to support efforts to increase the amount of money available to lend to qualified borrowers in the residential housing market.
  • Purchased securities of other financial institutions, which helps increase the amount of funds available to lend to consumers and businesses.
  • Continued to make loans to other financial institutions through the interbank lending market.

All of these efforts address the need to improve liquidity in the financial system and are consistent with our business model which is focused on institutional clients.

 

    Nonperforming Assets

    -------------------------------------------------------------------------
    Nonperforming assets                              Quarter ended
                                              -------------------------------
                                              Dec. 31,   Sept. 30,   Dec. 31,
    (dollar amounts in millions)                2008        2008       2007
    -------------------------------------------------------------------------
    Loans:
      Commercial real estate                    $126        $118        $40
      Other residential mortgages                 97          75         20
      Commercial                                  60          65         39
      Personal                                     1           -          -
      Foreign                                      -           1         87
    -------------------------------------------------------------------------
        Total nonperforming loans                284         259        186
      Other assets owned                           8           8          4
    -------------------------------------------------------------------------
        Total nonperforming assets              $292        $267       $190
    -------------------------------------------------------------------------
    Nonperforming loans ratio                    0.7%        0.4%       0.4%
    Allowance for loan losses/nonperforming
     loans                                     146.1       140.9      175.8
    Total allowance for credit losses/
     nonperforming loans                       186.3       190.7      265.6
    -------------------------------------------------------------------------


    Allowance for Credit Loss, Provision and Net Charge-offs

    -------------------------------------------------------------------------
    Allowance for credit loss, provision
     and net charge-offs                              Quarter ended
                                              -------------------------------
                                              Dec. 31,   Sept. 30,   Dec. 31,
    (dollar amounts in millions)                2008        2008       2007
    -------------------------------------------------------------------------
    Allowance for credit losses - beginning
     of period                                  $494        $486       $510
    Provision for credit losses                   60          30         20
    Net (charge-offs)/recoveries:
      Commercial                                 (11)         (8)       (17)
      Commercial real estate                      (3)         (2)         -
      Other residential mortgages                (11)         (5)        (1)
      Foreign                                      1          (9)       (18)
      Personal                                    (1)          -          -
      Leasing                                      -           2          -
    -------------------------------------------------------------------------
        Total net (charge-offs)/recoveries       (25)        (22)       (36)
    -------------------------------------------------------------------------
    Allowance for credit losses -
     end of period                              $529        $494       $494
    -------------------------------------------------------------------------
    Allowance for loan losses                   $415        $365       $327
    Allowance for unfunded commitments           114         129        167
    -------------------------------------------------------------------------

Consolidated Net Income Applicable to Common Stock, Including Discontinued Operations

Net income applicable to common stock, including discontinued operations, totaled $28 million, or $0.02 per common share, in the fourth quarter of 2008, compared with $303 million, or $0.26 per common share, in the third quarter of 2008 and $520 million, or $0.45 per common share, in the fourth quarter of 2007.

Supplemental Information - Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance with GAAP. We believe that the supplemental non-GAAP information included in this earnings release is useful to the investment community in analyzing the financial results and trends of our business. This information facilitates comparisons with prior periods and reflects the principal basis on which our management internally monitors financial performance. These items also reflect certain items that are excluded from our segment measures used internally to evaluate segment performance because management does not consider them to be particularly relevant or useful in evaluating the operating performance of our business segments.

    ------------------------------------------------------------------------
    Reconciliation of
    net income and EPS -
    GAAP to Non-GAAP(a)         4Q08              3Q08              4Q07
    (in millions,          -------------    --------------    --------------
    except per common        Net              Net               Net
    share amounts)         income    EPS    income     EPS    income     EPS
    ------------------------------------------------------------------------
    Net income-GAAP          $28   $0.02     $303    $0.26     $520    $0.45
    Discontinued
     operations (income)
     loss                     (1)      -        2        -        -        -
    Extraordinary loss
     on consolidation of
     commercial paper
     conduits, net of
     tax                      26    0.02        -        -      180     0.16
    ------------------------------------------------------------------------
      Continuing
       operations             53    0.05(b)   305     0.26      700     0.61
    M&I expenses              58    0.05       66     0.06       69     0.06
    Restructuring
     charge                  107    0.09        -        -        -        -
    SILO/LILO/tax
     settlements               -       -       30     0.03        -        -
     support agreement
     charges                  97    0.08      433     0.37        2        -
    ------------------------------------------------------------------------
      Continuing
       operations
       excluding M&I
       expenses, the
       restructuring
       charge, SILO/
       LILO/tax
       settlements and
       support agreement
       charges               315    0.27      834     0.72      771     0.67
    Securities
     write-downs             752    0.65       96     0.08      114     0.10
    ------------------------------------------------------------------------
      Continuing
       operations
       excluding M&I
       expenses, the
       restructuring
       charge, SILO/
       LILO/tax
       settlements,
       support agreement
       charges and
       securities
       write-downs         1,067    0.93(b)   930     0.81(b)   885     0.77
    Intangible
     amortization             71    0.06       74     0.06       78     0.07
    ------------------------------------------------------------------------
      Continuing
       operations
       excluding M&I
       expenses, the
       restructuring
       charge, SILO/
       LILO/tax
       settlements,
       support agreement
       charges,
       securities
       write-downs
       and intangible
       amortization       $1,138   $0.99   $1,004    $0.87     $963    $0.84
    ------------------------------------------------------------------------
    (a) Prior period non-GAAP amounts have been adjusted to exclude
        securities write-downs.
    (b) Does not foot due to rounding.



    -------------------------------------------------------------------------
    Reconciliation of net income and              Year-to-date
    EPS - GAAP to Non-GAAP (a)        ---------------------------------------
    (in millions,                       Dec. 31, 2008      Dec. 31, 2007(b)
    except per common                 -----------------   -------------------
    share amounts)                    Net income    EPS   Net income  EPS
    -------------------------------------------------------------------------
    Net income-GAAP                     $1,386     $1.20    $2,039   $2.18
    Discontinued operations
     (income) loss                          (3)        -         8    0.01
    Extraordinary loss on
     consolidation of commercial
     paper conduits, net of tax             26      0.02       180    0.19
    -------------------------------------------------------------------------
      Continuing operations              1,409      1.22     2,227    2.38
    M&I expenses                           288      0.25       238    0.25
    Restructuring charge                   107      0.09         -       -
    SILO/LILO/tax settlements              410      0.36         -       -
    Support agreement charges              533      0.46         2       -
    -------------------------------------------------------------------------
      Continuing operations excluding
       M&I expenses, the restructuring
       charge, SILO/LILO/tax
       settlements and support
       agreement charges                 2,747      2.38     2,467    2.64(c)
    Securities write-downs                 983      0.85       120    0.13
    -------------------------------------------------------------------------
      Continuing operations excluding
       M&I expenses, the restructuring
       charge, SILO/LILO/tax
       settlements, support agreement
       charges and securities
       write-downs                       3,730      3.24(c)  2,587    2.77
    Intangible amortization                297      0.26       197    0.21
    -------------------------------------------------------------------------
      Continuing operations excluding
       M&I expenses, the restructuring
       charge, SILO/LILO/tax
       settlements, support agreement
       charges, securities write-downs
       and intangible amortization      $4,027     $3.50    $2,784   $2.98
    -------------------------------------------------------------------------
    (a) Prior period non-GAAP amounts have been adjusted to exclude
        securities write-downs.
    (b) Results for the year ended Dec. 31, 2007 include six months of The
        Bank of New York Mellon Corporation and six months of legacy The
        Bank of New York Company, Inc.
    (c) Does not foot due to rounding.



    -------------------------------------------------------------------------
    Reconciliation of total revenue                                4Q08 vs.
                                                                -------------
    (dollar amounts in millions)      4Q08     3Q08     4Q07    4Q07    3Q08
    -------------------------------------------------------------------------

    Fee and other revenue           $1,816   $2,923   $3,047    (40)%   (38)%
    Securities write-downs           1,241      162      191     N/M     N/M
    -------------------------------------------------------------------------
      Total fee and other revenue -
       Non-GAAP                      3,057    3,085    3,238     (6)     (1)
    Net interest revenue             1,070      703      752     42      52
    SILO/LILO                            -      112        -     N/M     N/M
    -------------------------------------------------------------------------
      Total net interest revenue -
       Non-GAAP                      1,070      815      752     42      31
    -------------------------------------------------------------------------
      Total revenue, excluding
       SILO/LILO and securities
       write-downs - Non-GAAP       $4,127   $3,900   $3,990      3%      6%
    -------------------------------------------------------------------------

    N/M - Not meaningful.
    ---------------------



    -------------------------------------------------------------------------
    Reconciliation of total revenue(a)         Mellon
                                             Financial     2007
                                            Corporation  Proforma  Percentage
                                              6 months The Bank of   Revenue
                        The Bank of New York    ended   New York     Growth
    (dollar amounts       Mellon Corporation     June    Mellon       on a
                          ------------------      30,  Corporation  Proforma
    in millions)          YTD 2008  YTD 2007     2007   YTD 2007     Basis
    -------------------------------------------------------------------------
    Fee and other revenue  $10,701    $9,034    $2,643   $11,677
    Securities write-downs   1,628       201         -       201
    -------------------------------------------------------------------------
      Total fee and other
       revenue - Non-GAAP   12,329     9,235     2,643    11,878
    Net interest revenue     2,951     2,300       259     2,559
    SILO/LILO                  489         -         -         -
    -------------------------------------------------------------------------
      Total net interest
       revenue - Non-GAAP    3,440     2,300       259     2,559
    -------------------------------------------------------------------------
      Total revenue,
       excluding SILO/LILO
       and securities
       write-downs -
       Non-GAAP            $15,769   $11,535    $2,902   $14,437       9%
    -------------------------------------------------------------------------
    (a) Total full year 2008 non-GAAP revenue for the Bank of New York
        Mellon Corporation compared with proforma full year 2007 total
        non-GAAP revenue.

Cautionary Statement

The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which may be expressed in a variety of ways, including the use of future or present tense language, relate to, among other things, the effectiveness of the Company's business model; expectations with respect to global business environment; actual incurred losses on securities portfolio and the ability to earn back a substantial portion of the write-downs over the remaining lives of the securities; annualized savings from workforce reduction; assumptions with respect to expected loss from securities portfolio; additional restructuring charges; the timing of future quarterly dividend declarations; and the impact of preferred stock dividends and amortization of discount on earnings per share. These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation (the Company) 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 the Company's control). Factors that could cause the Company's results to differ materially from those described in the forward-looking statements can be found in the risk factors and other uncertainties set forth in the Company's annual report on Form 10-K for the year ended Dec. 31, 2007, the Company's quarterly report on Form 10-Q for the quarter ended Sept. 30, 2008 and the Company's other filings with the Securities and Exchange Commission. All forward-looking statements in this earnings release speak only as of Jan. 20, 2009 and the Company 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.