By Chelsey Dulaney And Daniel Huang
Bank of New York Mellon Corp. posted a stronger-than-expected
profit in its first quarter, boosted by higher revenue and lower
expenses.
BNY Mellon, which acts as an investment manager while
safeguarding trillions of dollars for money managers and other
clients, has faced pressure in recent months from investors who
criticized it as slow to change and in need of a retrenchment.
Growth in the bank's assets servicing and management business
helped drive increased fee revenue in the most recent quarter.
BNY Mellon posted a profit of $779 million, up from $674 million
in the prior-year period. On a per-share basis, which excludes
preferred dividends, earnings rose to 67 cents from 57 cents a year
ago.
Revenue grew 5.6% to $3.85 billion.
Analysts had projected 59 cents a share in earnings and $3.75
billion in revenue, according to Thomson Reuters.
"Earnings per share growth was driven by higher revenues across
all of our businesses [and] our success in holding our expenses in
check," said Chairman and Chief Executive Gerald Hassell in a
statement. Shares of BNY Mellon edged up 0.5% in morning
trading.
Fee and other revenue grew 4.1% to $3 billion, amid a 68% surge
in foreign exchange and other trading revenue. Investment services
fees grew 3%, while investment management and performance fees grew
1% to $854 million, both affected negatively by a stronger
dollar.
Assets under management ballooned to a record $1.74 trillion, a
7% increase from the same period a year ago, lifted by strong
performance in the market and the acquisition of fixed-income shop
Cutwater Asset Management in January. Assets under custody or
administration increased 2% to $28.5 trillion.
BNY Mellon said its net interest margin, a measure of lending
profitability, edged down to 0.97% from 1.05% in the same period a
year ago.
While investors "would like to see better revenue trends, you
can see the groundwork being laid and expense trends are
encouraging," said Evercore Partners Inc. analyst Glenn Schorr in a
note.
Amid a broad push to control costs, BNY Mellon reduced head
count by around 900 employees in the year ended March 31 and
brought a number of its application development initiatives
in-house.
The change in head count came "largely from structuring and
streamlining the organization, not just within lower-level ranks
but even in senior-level jobs," said Chief Financial Officer Todd
Gibbons in an interview. Also affecting the numbers has been a push
to use more in-house application developers, Mr. Gibbons said,
which increases head count but results in a lower salary expense
because the employees are less costly than contractors.
Noninterest expense was down 1% from a year earlier to $2.7
billion, helped by lower distribution and servicing expenses,
business development costs and the favorable impact from a stronger
dollar.
BNY Mellon reached a $714 million settlement with regulators in
March to resolve allegations of overcharging on currency
transactions. The bank had revised its 2014 fourth-quarter earnings
in February to include an additional litigation expense of $598
million. Certain related private lawsuits are ongoing.
Rival State Street Corp., which also has pending currency
claims, will report earnings on Friday.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Daniel
Huang at daniel.huang3@wsj.com
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