By Saabira Chaudhuri
Bank of New York Mellon Corp. said it plans to sell its
headquarters by the third quarter and possibly move its base out of
the city where it was founded in 1784.
As part of its first-quarter earnings announcement, the company
said it plans to move to a new headquarters, likely in New York
City or New Jersey within two years.
Meanwhile, the trust bank said it swung to a first-quarter
profit as it benefited from a comparison with a year-earlier period
weighed down by a large one-time charge. The company's shares rose
0.4 % in afternoon trading.
BNY Mellon posted a profit of $661 million compared with a loss
of $266 million in the first quarter of 2013. Per-share
earnings--which include preferred dividends--were 57 cents, higher
than the 53 cents expected by analysts polled by Thomson
Reuters.
Revenue rose by less than 1% to $3.65 billion. Analysts had
expected revenue of $3.73 billion.
BNY Mellon continued to be hit by low interest rates, forcing
the trust bank to again waive fees on money-market mutual funds. In
response to the sluggish environment, trust banks have been focused
on tightening expenses.
As part of that push, BNY Mellon on Tuesday gave more detail
about its plans to sell the building where its headquarters resided
since 1998: One Wall Street in lower Manhattan.
BNY Mellon expects the sale of the building, and any associated
gain, to occur in the second or third quarter. The sale will lead
to a net reduction of about 700,000 square feet in New York
City.
The company currently houses 1,700 of its 51,100 employees at
the building, with others located at a second office building about
a half-mile away. Current BNY Mellon employees in One Wall Street
ultimately are expected to relocate to other offices in lower
Manhattan or Jersey City, N.J., according to a person familiar with
the matter.
The bank plans to lease its headquarters for a short time after
selling it, so it can move gradually to a new location. The bank
hasn't decided on a new location.
The bank's chief financial officer Todd Gibbons, said in an
interview with The Wall Street Journal that the value of the
property has gone up substantially. "We expect to get a very strong
bid," said Mr. Gibbons.
He added that BNY Mellon plans to move to a new, more modern and
efficient location. The firm's current building at One Wall Street
is older and would be better as a residential or retail space, Mr.
Gibbons said.
Already, BNY Mellon reported its noninterest expense dropped
3.1% from a year earlier to $2.74 billion, driven by reductions in
expenses for occupancy and amortization among other items. "We're
taking aggressive action in virtually every expense category," said
Gerald Hassell, the company's chairman and chief executive.
He said BNY Mellon's regulatory and compliance costs have "risen
substantially and continue to be high," but also noted that "we are
beginning to gain more clarity on the new rules," which should lead
the rate of expense growth to slow.
BNY Mellon's investment services fees were up 2.9%, driven by
strength in asset servicing. Investment management and performance
fees were up 2.6%, or 5% excluding the impact of money market fee
waivers.
But foreign-exchange and so-called "other" trading revenue
tumbled 16% to $136 million. BNY Mellon said it saw lower
volatility during the quarter as well as lower fixed-income trading
revenue. "While expense control is a positive, environmental
revenue headwinds seem relentless," said Sandler O'Neill analyst
Jeff Harte, noting that BNY Mellon's revenue was 3% below his
expectations.
Mr. Gibbons said BNY Mellon will likely reposition some of its
assets in light of new regulation. He said securities like
commercial mortgage backed securities will become more attractive
for BNY Mellon to hold, while other high-quality asset backed
securities will be less so.
The trust bank's net interest margin--a key measure of lending
profitability--narrowed to 1.05% from 1.11% a year earlier. "We're
seeing a lot of deposits that we can't really use," said Mr.
Gibbons, noting that he expects the net interest margin to stay
around the current level until interest rates rise.
Michael Calia contributed to this article
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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