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Actionable news in BK: BANK OF NEW YORK MELLON CORPORATION,

Bank Of New York Mellon: Basis Points Of Positive Operating Leverage Year-Over-Year On An Adjusted Basis

The following excerpt is from the company's SEC filing.

Total revenue up 1% on an adjusted basis

Net interest revenue up

Total noninterest expense decreased

RESULTS DEMONSTRATE CONTINUING FOCUS ON BUSINESS IMPROVEMENT PROCESS

Enhancing client service delivery

Investing in technology platforms for future revenue growth

Ongoing investments in risk management and regulatory compliance

EXECUTING ON CAPITAL PLAN AND RETURN OF VALUE TO COMMON SHAREHOLDERS

Repurchased

15.8 million

common shares for

$690 million

in the

third quarter of

Return on tangible common equity of < br>
NEW YORK,

October 20, 2015

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

net income applicable to common shareholders of

$820 million

per diluted common share. In the

, net income applicable to common shareholders was

$1.07 billion

per diluted common share, or

$734 million

per diluted common share, adjusted for the gains on sales of our investment in Wing Hang Bank Limited (“Wing Hang”) and the One Wall Street building, net of litigation and restructuring charges. In the

second quarter of

$830 million

per diluted common share, or $868 million, or

per diluted common share, adjusted for litigation and restructuring charges.

“Our third quarter results reflect our focus on delivering significant value to our shareholders in all market environments. We are executing on our strategic priorities, which helped us to generate more than 370 basis points of positive operating leverage year-over-year and to remain on track to achieve the three-year targets we shared on

_________________________________________________________________________________

See pages 3-4 for the Non-GAAP adjustments.

See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page

for the reconciliation of these Non-GAAP measures.

BNY Mellon 3Q15 Earnings Release

Investor Day a year ago. We are enhancing our risk management and regulatory compliance practices, investing in technology platforms for the future and have onboarded employees associated with two strategic relationships while simultaneously controlling expenses,” Gerald L. Hassell, chairman and chief executive officer of BNY Mellon, said.

“Our business improvement process designed to leverage our scale and expertise is succeeding in enhancing service quality, improving productivity, and driving sustainable improvements in our profitability. We are focused on deepening our client relationships through delivery of a superior client experience while maintaining our pricing discipline when competing in the marketplace. This quarter, we completed the move to our new corporate headquarters, ahead of schedule, creating an open environment that supports innovation and collaboration,” Mr. Hassell added.

“We returned more than $875 million to our shareholders in the form of share repurchases and dividends during the quarter while achieving a 21 percent return on tangible common equity,” Mr. Hassell concluded.

CONFERENCE CALL INFORMATION

Gerald L. Hassell, chairman and chief executive officer, and Thomas P. Gibbons, vice chairman and chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on

Oct. 20, 2015

. This conference call and audio webcast will include forward-looking statements and may include other material information.

Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (International), and using the passcode: Earnings, or by logging on to www.bnymellon.com. Earnings materials will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on

. Replays of the conference call and audio webcast will be available beginning

at approximately 2 p.m. EDT through Nov. 20, 2015 by dialing (866) 511-1893 (U.S.) or (203) 369-1948 (International). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

Page -

QUARTER 2015 FINANCIAL HIGHLIGHTS

(comparisons are

unless otherwise stated)

Earnings per share

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

(in millions, except per share amounts)

GAAP results

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

Gain on the sale of the One Wall Street building

Add: Litigation and restructuring charges

Non-GAAP results

Does not foot due to rounding.

N/A - Not applicable.

Total revenue was $

3.8 billion

, a decrease of

, or an increase of

(Non-GAAP), excluding the impact of 3Q14 gains on the sales of our equity investment in Wing Hang and the One Wall Street building.

- Investment services fees increased

reflecting net new business and organic growth, primarily in Global Collateral Services, Broker-Dealer Services and Asset Servicing, and higher clearing services revenue, partially offset by the unfavorable impact of a stronger U.S. dollar.

- Investment management and performance fees decreased

on a constant currency basis (Non-GAAP), driven by lower performance fees, lower equity market values, net outflows and the sale of Meriten Investment Management GmbH (“Meriten”), partially offset by the impact of the 1Q15 acquisition of Cutwater Asset Management (“Cutwater”) and strategic initiatives.

- Foreign exchange revenue increased

driven by higher volatility and volumes.

- Financing-related fees increased $27 million driven by higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity and higher underwriting fees.

- Investment and other income decreased

$831 million

driven by the gains on the sales of our equity investment in Wing Hang and our One Wall Street building, both recorded in

- Net interest revenue increased $38 million driven by higher securities and loans due to higher deposits and a shift out of cash, and lower interest expense incurred on deposits.

Noninterest expense was

$2.7 billion

(Non-GAAP) excluding litigation and restructuring charges. Noninterest expense was lower in nearly all categories, reflecting the favorable impact of a stronger U.S. dollar and the benefit of the business improvement process which focuses on reducing structural costs.

Generated more than

basis points of positive operating leverage year-over-year on an adjusted basis.

Effective tax rate of

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

- AUC/A of

$28.5 trillion

, increased

reflecting net new business, partially offset by the unfavorable impact of a stronger U.S. dollar and lower equity market values.

-- Estimated new AUC/A wins in Asset Servicing of

$84 billion

- AUM of

$1.63 trillion

, flat reflecting

higher market values, the Cutwater acquisition and net new business

-- Net long-term outflows totaled

$5 billion

index, equity and fixed income investments, partially offset by liability-driven and alternative investments.

-- Net short-term outflows totaled

$10 billion

Capital

- Repurchased

- Return on tangible common equity of

for the reconciliation of Non-GAAP measures. Non-GAAP excludes the gains on the sales of our investment in Wing Hang and the One Wall Street building, net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges, and the benefit primarily related to a tax carryback claim, if applicable.

Note: In the table above and throughout this document, sequential growth rates are unannualized.

FINANCIAL SUMMARY

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

3Q15 vs.

Revenue:

Fee and other revenue

(Loss) income from consolidated investment management funds

Total revenue – GAAP

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

Total revenue – Non-GAAP

Provision for credit losses

Expense:

Noninterest expense – GAAP

Less: Amortization of intangible assets

M&I, litigation and restructuring charges (recoveries)

Total noninterest expense – Non-GAAP

Income:

Income before income taxes

Provision (benefit) for income taxes

Net loss (income) attributable to noncontrolling interests

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

Preferred stock dividends

Key Metrics:

Pre-tax operating margin

Return on common equity

(annualized)

– Non-GAAP

Non-GAAP adjusted

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

Percentage of non-U.S. total revenue

Average common shares and equivalents outstanding:

1,098,003

1,113,790

1,118,602

1,120,672

1,126,946

Diluted

1,105,645

1,122,135

1,126,306

1,129,040

1,134,871

Period end:

Full-time employees

51,300

50,700

50,500

50,300

50,900

Book value per common share – GAAP

Tangible book value per common share – Non-GAAP

Cash dividends per common share

Common dividend payout ratio

Closing stock price per common share

Market capitalization

42,789

46,441

45,130

45,366

43,599

Common shares outstanding

1,092,953

1,106,518

1,121,512

1,118,228

1,125,710

(a) Primarily attributable to noncontrolling interests related to consolidated investment management funds.

Non-GAAP excludes the gains on the sales of our investment in Wing Hang and the One Wall Street building, net (loss) income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges (recoveries). See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page

Includes fee revenue, net interest revenue and (loss) income from consolidated investment management funds, net of net loss (income) attributable to noncontrolling interests.

N/M – Not meaningful.

CONSOLIDATED BUSINESS METRICS

Consolidated business metrics

Changes in AUM

(in billions)

Beginning balance of AUM

Net inflows (outflows):

Long-term:

Equity

Fixed income

Liability-driven investments

Alternative investments

Total long-term inflows (outflows)

Short term:

Total net inflows (outflows)

Net market/currency impact/acquisition

Ending balance of AUM

AUM at period end, by product type:

Equity

Fixed income

Index

Alternative investments

Total AUM

Investment Management:

Average loans

(in millions)

12,779

12,298

11,634

11,124

10,772

Average deposits

15,282

14,638

15,217

14,602

13,762

Investment Services:

38,025

38,264

37,699

35,448

33,785

230,153

237,193

234,183

228,282

221,734

AUC/A at period end

(in trillions) (d)

Market value of securities on loan at period end

(in billions) (e)

Asset servicing:

Estimated new business wins (AUC/A)

(in billions) (f)

Depositary Receipts:

Number of sponsored programs

Clearing services:

Global DARTS volume

(in thousands)

Average active clearing accounts (U.S. platform)

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

447,287

466,195

456,954

450,305

442,827

Average investor margin loans (U.S. platform)

11,806

11,890

11,232

10,711

Broker-Dealer:

Average tri-party repo balances

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

In 3Q15, prior period AUM was restated to reflect the reclassification of Meriten from the Investment Management business to the Other segment.

Includes currency overlay assets under management.

Preliminary.

Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of

$1.0 trillion

Sept. 30, 2015

$1.1 trillion

June 30, 2015

Dec. 31, 2014

$1.2 trillion

Sept. 30, 2014

Represents the total amount of securities on loan managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled

$61 billion

$68 billion

$69 billion

$65 billion

Beginning with 3Q15, estimated new business wins are determined based on finalization of the contract as compared to the prior methodology of receipt of a mandate. Prior periods have been restated for comparative purposes.

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

Key market metrics

S&P 500 Index

S&P 500 Index – daily average

FTSE 100 Index

FTSE 100 Index – daily average

MSCI World Index

MSCI World Index – daily average

Barclays Capital Global Aggregate Bond

Index

(a)(b)

NYSE and NASDAQ share volume

JPMorgan G7 Volatility Index – daily average

Average Fed Funds effective rate

Foreign exchange rates vs. U.S. dollar:

British pound - average rate

Euro - average rate

Period end.

Unhedged in U.S. dollar terms.

The JPMorgan G7 Volatility Index is based on the implied volatility in 3-month currency options.

basis points.

FEE AND OTHER REVENUE

(dollars in millions)

Investment services fees:

Asset servicing

Issuer services

Treasury services

Total investment services fees

Foreign exchange and other trading revenue

Distribution and servicing

Total fee revenue excluding investment and other income

Net securities gains

Total fee and other revenue

Asset servicing fees include securities lending revenue of

$49 million

$43 million

$37 million

in both

KEY POINTS

Asset servicing fees were

$1.1 billion

, an increase of

year-over-year and flat sequentially.

The year-over-year increase primarily reflects organic growth in the Global Collateral Services, Broker-Dealer Services and Asset Servicing businesses, and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.

Sequentially, organic growth and net new business were offset by lower securities lending revenue and lower market values.

Clearing services fees were

$345 million

year-over-year and a decrease of

The year-over-year increase was primarily driven by higher mutual fund and asset-based fees.

Issuer services fees were

$313 million

year-over-year and an increase of

The year-over-year decrease primarily reflects lower fees in Depositary Receipts and the unfavorable impact of a stronger U.S. dollar in Corporate Trust, partially offset by net new business in Corporate Trust.

The sequential increase primarily reflects seasonally higher fees in Depositary Receipts.

Treasury services fees were

$137 million

Both decreases primarily reflect lower payment volumes.

Investment management and performance fees were

$829 million

both year-over-year and sequentially. On a constant currency basis (Non-GAAP), investment management and performance fees decreased

year-over-year, primarily driven by lower performance fees, lower equity market values and net outflows, partially offset by the impact of the 1Q15 acquisition of Cutwater and strategic initiatives. Sequentially, investment management and performance fees decreased

primarily reflecting lower equity market values, net outflows and seasonally lower performance fees. Both decreases also reflect the sale of Meriten in July 2015.

Other trading revenue (loss)

Total foreign exchange and other trading revenue

Foreign exchange and other trading revenue totaled

$179 million

compared with

$153 million

$187 million

, foreign exchange revenue totaled

$180 million

The year-over-year increase primarily reflects higher volatility and volumes.

Financing-related fees were

$71 million

$44 million

$58 million

. The year-over-year increase primarily reflects higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity. Both increases also reflect higher underwriting fees.

Investment and other income (loss)

Corporate/bank-owned life insurance

Expense reimbursements from joint venture

Seed capital gains (losses)

Private equity gains (losses)

Lease residual gains (losses)

Equity investment revenue (loss)

Asset-related gains (losses)

Other income

Total investment and other income

Does not include the gain (loss) on seed capital investments in consolidated investment management funds which are reflected in operations of consolidated investment management funds, net of noncontrolling interests.

Investment and other income was

$59 million

$890 million

$104 million

. The year-over-year decrease primarily reflects the gains on the sales of our equity investment in Wing Hang and our One Wall Street building, both recorded in

. The sequential decrease primarily reflects lower leasing gains.

NET INTEREST REVENUE

Net interest revenue (non-FTE)

Net interest revenue (FTE) – Non-GAAP

Net interest margin (FTE)

Selected average balances:

Cash/interbank investments

130,090

125,626

123,647

140,599

139,278

Trading account securities

121,188

128,641

123,476

117,243

112,055

61,657

61,076

57,935

56,844

54,835

Interest-earning assets

315,672

318,596

308,104

318,608

311,603

Interest-bearing deposits

169,753

170,716

159,520

163,149

164,233

Noninterest-bearing deposits

85,046

84,890

89,592

85,330

82,334

Selected average yields/rates:

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

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

FTE – fully taxable equivalent.

bps – basis points.

Net interest revenue totaled

$759 million

$20 million

sequentially. The year-over-year...


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