U.S. Markets open in 8 hrs 32 mins

BNY Mellon Reports Second Quarter 2020 Earnings Of $901 Million Or $1.01 Per Common Share

·22 min read

NEW YORK, July 15, 2020 /PRNewswire/ --

Revenue up 2%


EPS flat


ROE 9%

ROTCE 19% (a)


CET1 12.6%

Tier 1 leverage 6.2%

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


2Q20 vs.


2Q20

1Q20

2Q19

1Q20

2Q19

Net income applicable to common shareholders (in millions)

$

901


$

944


$

969


(5)

%

(7)

%

Diluted earnings per common share

$

1.01


$

1.05


$

1.01


(4)

%

%


Second Quarter Results


CEO Commentary




Total revenue of $4.0 billion, increased 2%
• Fee revenue increased 2%
• Net interest revenue decreased 3%

Provision for credit losses of $143 million

Total noninterest expense of $2.7 billion, increased 1%
Continued investments in technology

Investment Services
Total revenue increased 3%
• Fee revenue increased 5%
• Income before taxes decreased 8%
• AUC/A of $37.3 trillion, increased 5%

Investment and Wealth Management
Total revenue decreased 3%
• Income before taxes decreased 15%
• AUM of $2.0 trillion, increased 6%

Capital
CET1 ratio 12.6%; increased ~ 125 bps in 2Q20
• Increased CET1 capital by $1.57 billion
• Tier 1 capital increased $2.55 billion, including
issuance of $1 billion of preferred stock


"For the second quarter, we delivered solid results, with all of our Investment Services businesses demonstrating resilient fee performance. Our EPS of $1.01 was flat year on year despite the impact of the lower interest rate environment and higher allowance for credit losses. We further bolstered our Common Equity Tier 1 ratio to 12.6 percent, and achieved a strong return on tangible common equity of 19 percent," Todd Gibbons, Chief Executive Officer, said.

"We are seeing momentum across most of our businesses as we continue to drive improved performance and capabilities across the company, and as we benefit from higher volumes and volatility versus a year ago," Mr. Gibbons added.

"As we look ahead to the remainder of 2020, downside risks remain from the economic uncertainty and the significant pressure from low interest rates. Despite this, our underlying business remains strong, benefiting from the improving quality and efficiency of our operations and the level of the client experience. This should provide opportunities to deepen our relationships with clients. I remain deeply proud of our 48,000+ employees and how they continue to adapt and deliver great client service during this challenging time," Mr. Gibbons further noted.

"I would be remiss if I didn't reflect on the first half of 2020—a period when we have been faced with the gravity of a global pandemic and with societal unrest spurred by racial injustice. Both have significant implications for how we operate as a business and as a corporate citizen. Our clients, communities and society at large can continue to rely on BNY Mellon to be a trusted steward. We have a relentless ambition to have a more profound impact on the world around us—helping us deliver sustainable long-term value to our shareholders," Mr. Gibbons concluded.

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

Investor Relations: Magda Palczynska (212) 635-8529

(a) For information on this Non-GAAP measure, see "Supplemental Information Explanation of GAAP and Non-GAAP financial measures" on page 8.

Note: Above comparisons are 2Q20 vs. 2Q19.

CONSOLIDATED FINANCIAL HIGHLIGHTS


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

meaningful - N/M)




2Q20 vs.

2Q20

1Q20

2Q19

1Q20

2Q19

Fee revenue

$

3,167


$

3,323


$

3,105


(5)

%

2

%

Net securities gains

9


9


7


N/M


N/M


Total fee and other revenue

3,176


3,332


3,112


(5)


2


Income (loss) from consolidated investment management funds

54


(38)


10


N/M


N/M


Net interest revenue

780


814


802


(4)


(3)


Total revenue

4,010


4,108


3,924


(2)


2


Provision for credit losses

143


169


(8)


N/M


N/M


Noninterest expense

2,686


2,712


2,647


(1)


1


Income before income taxes

1,181


1,227


1,285


(4)


(8)


Provision for income taxes

216


265


264


(18)


(18)


Net income

$

965


$

962


$

1,021


%

(5)

%

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

$

901


$

944


$

969


(5)

%

(7)

%

Operating leverage (a)




(143)

bps

72

bps

Diluted earnings per common share

$

1.01


$

1.05


$

1.01


(4)

%

%

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

890,561


896,689


953,928




Pre-tax operating margin

29

%

30

%

33

%



(a)

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

bps basis points.

KEY DRIVERS (comparisons are 2Q20 vs. 2Q19, unless otherwise stated)

  • Total revenue increased 2% primarily reflecting:

  • Provision for credit losses of $143 million primarily reflecting increased downgrades and the continuation of the challenging macroeconomic outlook.

  • Noninterest expense increased 1% primarily reflecting the continued investments in technology and higher staff and pension expenses, partially offset by lower business development (travel and marketing) expense and the favorable impact of a stronger U.S. dollar.

  • Effective tax rate of 18.3%.

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

  • AUC/A of $37.3 trillion, increased 5%, primarily reflecting higher client inflows, market values and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.

  • AUM of $2.0 trillion, increased 6%, primarily reflecting higher market values and net inflows, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).

Capital and liquidity

  • Open market share repurchases temporarily suspended for 2Q20 and 3Q20.

  • Paid $278 million in dividends to common shareholders.

  • Return on common equity ("ROE") of 9%; Return on tangible common equity ("ROTCE") of 19% (a).

  • Common Equity Tier 1 ("CET1") ratio – 12.6%.

  • Tier 1 leverage ratio – 6.2%.

  • Supplementary leverage ratio ("SLR") – 8.2% (b).

  • Average liquidity coverage ratio ("LCR") – 112%.

  • Total Loss Absorbing Capacity ("TLAC") ratios exceed minimum requirements.


(a)

See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 8 for additional information.

(b)

See "Capital and Liquidity" on page 6 for additional information.

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

INVESTMENT SERVICES BUSINESS HIGHLIGHTS


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




2Q20 vs.

2Q20

1Q20

2Q19

1Q20

2Q19

Total revenue by line of business:






Asset Servicing

$

1,463


$

1,531


$

1,397


(4)

%

5

%

Pershing

578


653


572


(11)


1


Issuer Services

431


419


446


3


(3)


Treasury Services

340


339


317



7


Clearance and Collateral Management

295


300


284


(2)


4


Total revenue by line of business

3,107


3,242


3,016


(4)


3


Provision for credit losses

145


149


(4)


N/M


N/M


Noninterest expense

1,989


1,987


1,963



1


Income before taxes

$

973


$

1,106


$

1,057


(12)

%

(8)

%







Pre-tax operating margin

31

%

34

%

35

%









Foreign exchange and other trading revenue

$

178


$

261


$

153


(32)

%

16

%

Securities lending revenue

$

51


$

46


$

40


11

%

28

%







Metrics:






Average loans

$

43,113


$

41,789


$

36,404


3

%

18

%

Average deposits

$

268,467


$

242,187


$

201,146


11

%

33

%







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

$

37.3


$

35.2


$

35.5


6

%

5

%

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

$

384


$

389


$

369


(1)

%

4

%

(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 $1.3 trillion at June 30, 2020, $1.2 trillion at March 31, 2020 and $1.4 trillion at June 30, 2019.

(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 $62 billion at June 30, 2020, $59 billion
at March 31, 2020 and $64 billion at June 30, 2019.

KEY DRIVERS


  • The drivers of the total revenue variances by line of business are indicated below.

INVESTMENT AND WEALTH MANAGEMENT BUSINESS HIGHLIGHTS

(formerly Investment Management business)


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




2Q20 vs.

2Q20

1Q20

2Q19

1Q20

2Q19

Total revenue by line of business:






Investment Management (formerly Asset Management)

$

621


$

620


$

622


%

%

Wealth Management

265


278


291


(5)


(9)


Total revenue by line of business

886


898


913


(1)


(3)


Provision for credit losses

7


9


(2)


N/M

N/M

Noninterest expense

658


695


655


(5)



Income before taxes

$

221


$

194


$

260


14

%

(15)

%







Pre-tax operating margin

25

%

22

%

29

%



Adjusted pre-tax operating margin – Non-GAAP (a)

28

%

24

%

32

%









Metrics:






Average loans

$

11,791


$

12,124


$

12,205


(3)

%

(3)

%

Average deposits

$

17,491


$

16,144


$

14,615


8

%

20

%







AUM (in billions) (current period is preliminary) (b)

$

1,961


$

1,796


$

1,843


9

%

6

%

Wealth Management client assets (in billions) (current period is preliminary) (c)

$

254


$

236


$

257


8

%

(1)

%

(a)

Net of distribution and servicing expense. See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 8
for information on this Non-GAAP measure.

(b)

Excludes securities lending cash management assets and assets managed in the Investment Services business.

(c)

Includes AUM and AUC/A in the Wealth Management business.

KEY DRIVERS

  • The drivers of the total revenue variances by line of business are indicated below.

  • Noninterest expense increased slightly year-over-year primarily reflecting higher continued investments in technology. The sequential decrease primarily reflects lower staff and other expenses.

OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, business exits and other corporate revenue and expense items.





(in millions)

2Q20

1Q20

2Q19

Fee revenue

$

29


$

21


$

24


Net securities gains

9


9


7


Total fee and other revenue

38


30


31


Net interest (expense)

(36)


(44)


(40)


Total revenue (loss)

2


(14)


(9)


Provision for credit losses

(9)


11


(2)


Noninterest expense

39


30


29


(Loss) before taxes

$

(28)


$

(55)


$

(36)


KEY DRIVERS

  • Fee revenue, net securities gains and net interest expense include corporate treasury and other investment activity, including hedging activity which offsets between fee revenue and net interest expense. Fee revenue increased year-over-year and sequentially primarily reflecting higher equity investment income, partially offset by sequentially lower foreign currency translation gains. Net interest expense decreased year-over-year and sequentially primarily reflecting corporate treasury activity.

  • Noninterest expense increased year-over-year and sequentially primarily reflecting higher staff expense.

CAPITAL AND LIQUIDITY


Capital and liquidity ratios

June 30,
2020

March 31,
2020

December 31,
2019

Consolidated regulatory capital ratios: (a)




CET1 ratio

12.6

%

11.3

%

11.5

%

Tier 1 capital ratio

15.4


13.5


13.7


Total capital ratio

16.3


14.3


14.4


Tier 1 leverage ratio

6.2


6.0


6.6


SLR

8.2


5.6


6.1


BNY Mellon shareholders' equity to total assets ratio

9.9

%

8.8

%

10.9

%

BNY Mellon common shareholders' equity to total assets ratio

8.9

%

8.0

%

9.9

%





Average LCR

112

%

115

%

120

%





Book value per common share

$

44.21


$

42.47


$

42.12


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

$

23.31


$

21.53


$

21.33


Common shares outstanding (in thousands)

885,862


885,443


900,683


(a)

Regulatory capital ratios for June 30, 2020 are preliminary. For our CET1, Tier 1 capital and Total capital
ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the
Standardized and Advanced Approaches, which for June 30, 2020 and Dec. 31, 2019, was the Advanced
Approaches, and for March 31, 2020 was the Standardized Approach for the CET1 and Tier 1 capital ratios
and the Advanced Approaches for the Total capital ratio.

(b)

Tangible book value per common shareNon-GAAP excludes goodwill and intangible assets, net of deferred
tax liabilities. See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on
page 8 for information on this Non-GAAP measure.

  • CET1 capital totaled $20.0 billion at June 30, 2020, an increase of $1.57 billion compared with March 31, 2020. The increase primarily reflects capital generated through earnings and unrealized gains on securities available-for-sale, partially offset by capital deployed through dividend payments.

  • The SLR reflects the application of a new rule effective April 1, 2020 to exclude certain central bank placements as well as the temporary exclusion of U.S. Treasury securities from the leverage exposure used in the SLR calculation. The temporary exclusion of U.S. Treasury securities from the SLR's leverage exposure increased our SLR by 40 basis points.

NET INTEREST REVENUE


Net interest revenue




2Q20 vs.

(dollars in millions; not meaningful - N/M)

2Q20

1Q20

2Q19

1Q20

2Q19

Net interest revenue

$

780


$

814


$

802


(4)

%

(3)

%

Add: Tax equivalent adjustment

2


2


4


N/M

N/M

Net interest revenue, on a fully taxable equivalent ("FTE") basis – Non-GAAP (a)

$

782


$

816


$

806


(4)

%

(3)

%







Net interest margin

0.88

%

1.01

%

1.12

%

(13)

bps

(24)

bps

Net interest margin (FTE) – Non-GAAP (a)

0.88

%

1.01

%

1.12

%

(13)

bps

(24)

bps

(a)

Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income.
See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 8 for information on this Non-GAAP measure.

bps – basis points.

Net interest revenue decreased year-over-year, primarily reflecting lower interest rates on interest-earning assets, partially offset by the benefit of lower deposit and funding rates and higher deposits, securities portfolio and loans.

Sequentially, the decrease was primarily driven by lower interest rates on interest-earning assets. This was partially offset by the benefit of lower deposit and funding rates, higher securities portfolio and the impact of hedging activities (primarily offset in foreign exchange and other trading revenue).

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement


(in millions)

Quarter ended


Year-to-date


June 30,
2020

March 31,
2020

June 30,
2019


June 30,
2020

June 30,
2019



Fee and other revenue








Investment services fees:








Asset servicing fees

$

1,173


$

1,159


$

1,141



$

2,332


$

2,263



Clearing services fees

431


470


410



901


808



Issuer services fees

277


263


291



540


542



Treasury services fees

144


149


140



293


272



Total investment services fees

2,025


2,041


1,982



4,066


3,885



Investment management and performance fees

786


862


833



1,648


1,674



Foreign exchange and other trading revenue

166


319


166



485


336



Financing-related fees

58


59


50



117


101



Distribution and servicing

27


31


31



58


62



Investment and other income

105


11


43



116


78



Total fee revenue

3,167


3,323


3,105



6,490


6,136



Net securities gains

9


9


7



18


8



Total fee and other revenue

3,176


3,332


3,112



6,508


6,144



Operations of consolidated investment management funds








Investment income (loss)

54


(38)


10



16


36



Interest of investment management fund note holders








Income (loss) from consolidated investment management funds

54


(38)


10



16


36



Net interest revenue








Interest revenue

943


1,570


1,965



2,513


3,885



Interest expense

163


756


1,163



919


2,242



Net interest revenue

780


814


802



1,594


1,643



Total revenue

4,010


4,108


3,924



8,118


7,823



Provision for credit losses

143


169


(8)



312


(1)



Noninterest expense








Staff

1,464


1,482


1,421



2,946


2,945



Software and equipment

345


326


304



671


587



Professional, legal and other purchased services

337


330


337



667


662



Net occupancy

137


135


138



272


275



Sub-custodian and clearing

120


105


115



225


220



Distribution and servicing

85


91


94



176


185



Bank assessment charges

35


35


31



70


62



Business development

20


42


56



62


101



Amortization of intangible assets

26


26


30



52


59



Other

117


140


121



257


250



Total noninterest expense

2,686


2,712


2,647



5,398


5,346



Income








Income before income taxes

1,181


1,227


1,285



2,408


2,478



Provision for income taxes

216


265


264



481


501



Net income

965


962


1,021



1,927


1,977



Net (income) loss attributable to noncontrolling interests (includes $(15), $18,
$(4), $3 and $(14) related to consolidated investment management funds,
respectively)

(15)


18


(4)



3


(14)



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

950


980


1,017



1,930


1,963



Preferred stock dividends

(49)


(36)


(48)



(85)


(84)



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

$

901


$

944


$

969



$

1,845


$

1,879








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

Quarter ended


Year-to-date


June 30,
2020

March 31,
2020

June 30,
2019


June 30,
2020

June 30,
2019


(in dollars)


Basic

$

1.01


$

1.05


$

1.01



$

2.06


$

1.95



Diluted

$

1.01


$

1.05


$

1.01



$

2.06


$

1.95



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

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures on a tangible basis as a supplement to GAAP information, which exclude goodwill and intangible assets, net of deferred tax liabilities. We believe that the return on tangible common equity is additional useful information for investors because it presents a measure of those assets that can generate income, and the tangible book value per common share is additional useful information because it presents the level of tangible assets in relation to shares of common stock outstanding.

Net interest revenue, on a fully taxable equivalent ("FTE") basis – Non-GAAP and net interest margin (FTE) – Non-GAAP and other FTE measures include the tax equivalent adjustments on tax-exempt income which allows for the comparison 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.

BNY Mellon has also included the adjusted pre-tax operating margin – Non-GAAP, which is the pre-tax operating margin for the Investment and Wealth Management business net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds. We believe that this measure is useful when evaluating the performance of the Investment and Wealth Management business relative to industry competitors.

For the reconciliations of these Non-GAAP measures, see "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" in the Financial Supplement available at www.bnymellon.com.

CAUTIONARY STATEMENT

A number of statements (i) in this Earnings Release, (ii) in our Financial Supplement, (iii) in our presentations and (iv) 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 statements about our capital plans, strategic priorities, financial goals, organic growth, performance, organizational quality and efficiency, investments, including in technology and product development, resiliency, capabilities, revenue, net interest revenue, fees, expenses, cost discipline, sustainable growth, company management, deposits, interest rates and yield curves, securities portfolio, taxes, business opportunities, divestments, volatility, preliminary business metrics and regulatory capital ratios and statements regarding our aspirations, as well as our overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities, focus and initiatives, including the potential effects of the coronavirus pandemic on any of the foregoing. These statements may be expressed in a variety of ways, including the use of future or present tense language. Words such as "estimate," "forecast," "project," "anticipate," "likely," "target," "expect," "intend," "continue," "seek," "believe," "plan," "goal," "could," "should," "would," "may," "might," "will," "strategy," "synergies," "opportunities," "trends," "future" and words of similar meaning may signify forward-looking statements. These statements and other forward-looking statements contained in other public disclosures of BNY Mellon 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 a number of factors, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, the Annual Report on Form 10-K for the year ended Dec. 31, 2019 and BNY Mellon's other filings with the Securities and Exchange Commission. Statements about the effects of the current and near-term market and macroeconomic outlook on BNY Mellon, including on its business, operations, financial performance and prospects, may constitute forward-looking statements, and are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond BNY Mellon's control), including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on us, our clients, customers and third parties. Preliminary business metrics and regulatory capital ratios are subject to change, possibly materially, as BNY Mellon completes its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. All forward-looking statements in this Earnings Release speak only as of July 15, 2020, 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.

ABOUT BNY MELLON

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 and wealth management and investment services in 35 countries. As of June 30, 2020, BNY Mellon had $37.3 trillion in assets under custody and/or administration, and $2.0 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. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.

CONFERENCE CALL INFORMATION

Todd Gibbons, Chief Executive Officer, and Mike Santomassimo, Chief Financial Officer, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on July 15, 2020. This conference call and audio webcast will include forward-looking statements and may include other material information.

Investors and analysts wishing to access the conference call and audio webcast may do so by dialing (800) 390-5696 (U.S.) or (720) 452-9082 (International), and using the passcode: 807070, or by logging onto www.bnymellon.com/investorrelations. Earnings materials will be available at www.bnymellon.com/investorrelations beginning at approximately 6:30 a.m. EDT on July 15, 2020. Replays of the conference call and audio webcast will be available beginning July 15, 2020 at approximately 2:00 p.m. EDT through Aug. 14, 2020 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 5375940. The archived version of the conference call and audio webcast will also be available at www.bnymellon.com/investorrelations for the same time period.

Cision
Cision

View original content:http://www.prnewswire.com/news-releases/bny-mellon-reports-second-quarter-2020-earnings-of-901-million-or-1-01-per-common-share-301093780.html

SOURCE BNY Mellon