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BNY Mellon Reports Fourth Quarter 2019 Earnings Of $1.4 Billion Or $1.52 Per Common Share, Includes $0.50 Per Share Positive Impact Of Notable Items

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NEW YORK, Jan. 16, 2020 /PRNewswire/ --

Revenue up 19% (a)


EPS up 81% (a)


ROE  15%

ROTCE  29% (b)


CET1  11.5%

SLR  6.1%

(a)   Excluding notable items, revenue down slightly and EPS up 2% (b).

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported:


4Q19 vs.


4Q19

3Q19

4Q18

3Q19

4Q18

Net income applicable to common shareholders (in millions)

$

1,391

$

1,002

$

832

39

%

67

%

Diluted earnings per common share

$

1.52

$

1.07

$

0.84

42

%

81

%


Notable Items  


CEO Commentary  




4Q19 results include $460 million, or $0.50 per share, for the gain on sale of an equity investment, offset by severance, net securities losses and litigation.

 

4Q18 results include $(155) million, or $(0.16) per share, for severance, real estate and litigation, offset by adjustments to estimates for U.S. tax legislation and other changes.


"In 2019, we continued to build the foundation for growth and the fourth quarter showed progress toward this goal.  We recently announced additional partnerships that further our efforts to provide best-in-class services to our clients by opening our platform and combining our capabilities with industry leaders and innovative fintechs.  Expenses continued to be well managed as our investments to drive operating efficiencies are bearing fruit.  Although we increased our technology spend by nearly 10 percent for the year, overall expenses were down.  Additionally, we continue to deliver strong capital returns to shareholders, returning $4.4 billion in 2019 through share buybacks and dividends.  In 2020, we plan to continue investing in technology to further enhance service quality, launch new capabilities, drive additional efficiencies and improve resiliency," Todd Gibbons, interim Chief Executive Officer, said.

 

"We are also pleased to see that the efforts to drive operating excellence are not only reducing costs, but enhancing quality, as measured by many of our clients.  This helped deliver fee growth in many of the services businesses.  Although we continue to be negatively impacted by lower rates, a flat yield curve and low foreign exchange volatility, we remain intensely focused on carefully managing costs and driving organic revenue growth," Mr. Gibbons concluded.






Fourth Quarter Results  




Total revenue of $4.8 billion, increased 19%; decreased slightly excluding notable items (b)


  • Fee revenue increased 26%; nearly all of the increase driven by the gain on sale of an equity investment
  • Net interest revenue decreased 8%



Total noninterest expense of $3.0 billion, decreased 1%; increased 2% excluding notable items (b)

  • Continued investments in technology



Investment Services

  • Total revenue decreased 2%
  • Income before taxes decreased 9%
  • AUC/A of $37.1 trillion, increased 12%



Investment Management

  • Total revenue increased 1%
  • Income before taxes decreased 1%
  • AUM of $1.9 trillion, increased 11%

Repurchased 22.2 million common shares for $1.04 billion, and paid dividends of $286 million to common shareholders.




Media Relations: Jennifer Hendricks Sullivan (212) 635-1374

Investor Relations: Magda Palczynska  (212) 635-8529  

(b)  For information on this Non-GAAP measure, see "Supplemental Information Explanation of GAAP and Non-GAAP financial measures" on page 9.

Note:  Above comparisons are 4Q19 vs. 4Q18.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except per share amounts and unless otherwise noted; not

meaningful - N/M)

4Q19


4Q18


4Q19 vs. 4Q18

Results -

GAAP

Notable

items (a)

Results -

Non-GAAP


Results -

GAAP

Notable

items (b)

Results -

Non-GAAP


GAAP

Non-

GAAP

Fee revenue

$

3,971


$

815


$

3,156



$

3,146


$


$

3,146



26

%

%

Net securities (losses)

(25)


(25)








N/M

N/M

Total fee and other revenue

3,946


790


3,156



3,146



3,146



25



Income (loss) from consolidated investment management funds

17



17



(24)



(24)



N/M

N/M

Net interest revenue

815



815



885



885



(8)


(8)


Total revenue

4,778


790


3,988



4,007



4,007



19



Provision for credit losses

(8)



(8)







N/M

N/M

Noninterest expense

2,964


186


2,778



2,987


269


2,718



(1)


2


Income (loss) before income taxes

1,822


604


1,218



1,020


(269)


1,289



79


(6)


Provision (benefit) for income taxes

373


144


229



150


(114)


264



149


(13)


Net income (loss)

$

1,449


$

460


$

989



$

870


$

(155)


$

1,025



67

%

(4)

%

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

$

1,391


$

460


$

931



$

832


$

(155)


$

987



67

%

(6)

%

Operating leverage (c)









2,001

bps

(268)

 bps

Diluted earnings per common share

$

1.52


$

0.50


$

1.01


(d)

$

0.84


$

(0.16)


$

0.99


(d)

81

%

2

%

Average common shares and equivalents outstanding - diluted (in thousands)

914,739





988,650







Pre-tax operating margin

38

%


31

%


25

%


32

%






(a)

Includes a gain on sale of an equity investment, severance, net securities losses and litigation expense.

(b)

Includes adjustments to provisional estimates for U.S. tax legislation and other changes, severance, expenses associated with consolidating real estate and litigation expense.

(c)

Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.

(d)

Does not foot due to rounding.

bps basis points.

 

KEY DRIVERS (comparisons are 4Q19 vs. 4Q18, unless otherwise stated)

  • Total revenue increased 19%, or decreased slightly excluding the notable items (a), primarily reflecting:
  • Noninterest expense decreased 1%, or increased 2% excluding notable items (a). The increase primarily reflects the continued investments in technology.
  • Effective tax rate of 20.5%.

Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")

  • AUC/A of $37.1 trillion, increased 12%, primarily reflecting higher market values and client inflows.
  • AUM of $1.9 trillion, increased 11%, primarily reflecting higher market values and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by net outflows.

Capital and liquidity

  • Repurchased 22.2 million common shares for $1.04 billion and paid $286 million in dividends to common shareholders.
  • Return on common equity ("ROE") of 15%; Return on tangible common equity ("ROTCE") of 29% (a).
  • Common Equity Tier 1 ("CET1") ratio – 11.5%.
  • Supplementary leverage ratio ("SLR") – 6.1%.
  • Average liquidity coverage ratio ("LCR") – 120%.
  • Total Loss Absorbing Capacity ("TLAC") ratios exceed minimum requirements.

(a)

See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 9 for additional information.

Note:  Throughout this document, sequential growth rates are unannualized.

 

FULL-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except per share amounts and unless otherwise noted; not meaningful - N/M)

2019


2018


2019 vs. 2018

Results -

GAAP

Notable

items (a)

Results -

Non-GAAP


Results -

GAAP

Notable

items (b)

Results -

Non-GAAP


GAAP

Non-

GAAP

Fee revenue

$

13,236


$

815


$

12,421



$

12,842


$

(13)


$

12,855



3

%

(3)

%

Net securities (losses) gains

(18)


(25)


7



(48)



(48)



N/M

N/M

Total fee and other revenue (loss)

13,218


790


12,428



12,794


(13)


12,807



3


(3)


Income (loss) from consolidated investment management funds

56



56



(13)



(13)



N/M

N/M

Net interest revenue (expense)

3,188


(70)


3,258



3,611



3,611



(12)


(10)


Total revenue (loss)

16,462


720


15,742



16,392


(13)


16,405




(4)


Provision for credit losses

(25)



(25)



(11)



(11)



N/M

N/M

Noninterest expense

10,900


113


10,787



11,211


343


10,868



(3)


(1)


Income (loss) before income taxes

5,587


607


4,980



5,192


(356)


5,548



8


(10)


Provision (benefit) for income taxes

1,120


140


980



938


(188)


1,126



19


(13)


Net income (loss)

$

4,467


$

467


$

4,000



$

4,254


$

(168)


$

4,422



5

%

(10)

%

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

$

4,272


$

467


$

3,805



$

4,097


$

(168)


$

4,265



4

%

(11)

%

Operating leverage (c)









320

bps

(330)

bps

Diluted earnings per common share

$

4.51


$

0.49


$

4.02



$

4.04


$

(0.17)


$

4.21



12

%

(5)

%

Average common shares and equivalents outstanding - diluted (in thousands)

943,109





1,007,141







Pre-tax operating margin

34

%


32

%


32

%


34

%




(a)

Includes a gain on sale of an equity investment, severance, net securities losses and litigation expense recorded in 4Q19.  Also includes a lease-related impairment and a net reduction of reserves for tax-related exposure of certain investment management funds recorded in 3Q19.

(b)

Includes adjustments to provisional estimates for U.S. tax legislation and other changes, severance, expenses associated with consolidating real estate and litigation expense, each recorded in 4Q18.  Also includes expenses associated with consolidating real estate recorded in 2Q18 and adjustments to provisional estimates for U.S. tax legislation and other changes and litigation expense, both recorded in 3Q18.

(c)

Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.

bps basis points.


Note:  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 9 for additional information.

 

INVESTMENT SERVICES BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)




4Q19 vs.

4Q19


3Q19


4Q18


3Q19

4Q18

Total revenue by line of business:






Asset Servicing

$

1,397


$

1,405


$

1,435


(1)

%

(3)

%

Pershing

570


568


558



2


Issuer Services

415


466


441


(11)


(6)


Treasury Services

329


312


328


5



Clearance and Collateral Management

280


293


278


(4)


1


Total revenue by line of business

2,991


3,044


3,040


(2)


(2)


Provision for credit losses

(5)


(15)


6


N/M

N/M

Noninterest expense

2,161


1,965


2,112


10


2


Income before taxes

$

835


$

1,094


$

922


(24)

%

(9)

%







Pre-tax operating margin

28

%

36

%

30

%









Foreign exchange and other trading revenue

$

151


$

160


$

163


(6)

%

(7)

%

Securities lending revenue

$

40


$

39


$

43


3

%

(7)

%







Metrics:






Average loans

$

34,238


$

32,758


$

35,540


5

%

(4)

%

Average deposits

$

215,388


$

208,044


$

203,416


4

%

6

%







AUC/A at period end (in trillions) (current period is preliminary) (a)

$

37.1


$

35.8


$

33.1


4

%

12

%

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

$

378


$

362


$

373


4

%

1

%

(a)

Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5 trillion at Dec. 31, 2019, $1.4 trillion at Sept. 30, 2019 and $1.2 trillion at Dec. 31, 2018.

(b)

Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business.  Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $60 billion at Dec. 31, 2019, $66 billion at Sept. 30, 2019 and $58 billion at Dec. 31, 2018.

KEY DRIVERS

  • The drivers of the total revenue variances by line of business are indicated below.
  • Noninterest expense increased year-over-year primarily driven by continued investments in technology. The sequential increase primarily reflects higher severance expense, continued investments in technology and higher litigation expense.

 

 INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS  

(dollars in millions, unless otherwise noted; not meaningful - N/M)




4Q19 vs.

4Q19


3Q19


4Q18


3Q19

4Q18

Total revenue by line of business:






Asset Management

$

688


$

605


$

660


14

%

4

%

Wealth Management

287


285


303


1


(5)


Total revenue by line of business

975


890


963


10


1


Provision for credit losses



1


N/M

N/M

Noninterest expense

730


590


715


24


2


Income before taxes

$