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Analyzing Bank of New York Mellon’s Segmental Performance

Rebecca Keats

Bank of New York Mellon's 4Q15 Earnings Beat Estimates

(Continued from Prior Part)

BNY Mellon’s segments

Bank of New York Mellon (BK) operates under two primary business segments in the United States (SPY):

  • The Investment Services segment provides custody and related services, broker-dealer services, collateral services, and clearing services, among others.
  • The Investment Management segment provides institutional and retail clients with wealth and estate planning and private banking solutions.

Earnings for the Investment Services segment

During the fourth quarter, revenues from the Investment Services business increased by 3% to $2.6 billion. The Investment Services segment’s fees were flat at $1.7 billion on a YoY (year-over-year) basis. Asset-servicing fees increased to $1.0 billion during the quarter, reflecting organic growth in global collateral services, broker-dealer services, and securities lending revenue. Net interest revenues increased to $632 million compared to last year due to higher internal crediting rates for the deposits. Non-interest expenses declined slightly to $1.8 billion reflecting lower litigation and consulting expenses.

Earnings for the Investment Management segment

In 4Q15, Bank of New York Mellon’s Investment Management segment generated revenues of $1.0 billion—2% higher than in 4Q14. The decline is a reflection of the negative impact of a stronger dollar, net outflows, and low equity market values. Assets under management were $1.6 trillion, 4% lower on a YoY basis. Long-term outflows were $11 billion due to equity, index, and fixed income investments, while short-term outflows were $2 billion.

The Investment Management segment’s fees came in at $799 million, 3% lower on a YoY basis. This reflected the impact of lower equity market values and net outflows.

BNY Mellon has agreed to acquire the assets of Menlo Park, California-based Atherton Lane Advisers. This would add $2.7 billion in assets under management and approximately 700 high-net-worth clients.

Bank of New York Mellon constitutes 8.5% of the Financial Select Sector SPDR Fund (XLF). Peers like Northern Trust Corporation (NTRS) and State Street Corporation (STT) have weights of 0.53% and 0.73%, respectively, in XLF.

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