UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) – July 21, 2015
THE BANK OF NEW YORK MELLON CORPORATION
(Exact name of registrant as specified in its charter)
|
| | | | |
Delaware | 001-35651 | 13-2614959 |
(State or other jurisdiction
of incorporation) | (Commission
File Number) | (I.R.S. Employer Identification No.) |
One Wall Street New York, New York (Address of principal executive offices) | 10286
(Zip code) | |
Registrant’s telephone number, including area code – (212) 495-1784
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On July 21, 2015, The Bank of New York Mellon Corporation (“BNY Mellon”) issued an Earnings Release announcing its financial results for the second quarter of 2015. A copy of the Earnings Release is “furnished” as Exhibit 99.1 to this Current Report on Form 8-K pursuant to General Instruction B.2 of Form 8-K and is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities under that Section. This exhibit shall not be incorporated by reference into any filings BNY Mellon has made or may make under the Securities Act of 1933 (the “Securities Act”) or Exchange Act, except as otherwise expressly stated in such filing.
ITEM 7.01. REGULATION FD DISCLOSURE.
On July 21, 2015, in conjunction with a conference call and webcast regarding BNY Mellon’s financial results, Quarterly Financial Trends, Key Facts and a Second Quarter 2015 Financial Highlights presentation are available on BNY Mellon’s website, www.bnymellon.com. A copy of each of the Quarterly Financial Trends, Key Facts and the Second Quarter 2015 Financial Highlights presentation is “furnished” as Exhibits 99.2, 99.3 and 99.4, respectively, to this Current Report on Form 8-K pursuant to General Instruction B.2 of Form 8-K and is not “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section. These exhibits shall not be incorporated by reference into any filings BNY Mellon has made or may make under the Securities Act or Exchange Act, except as otherwise expressly stated in such filing. The contents of BNY Mellon’s website referenced herein and in the exhibits are not incorporated into this Current Report on Form 8-K.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) EXHIBITS.
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| | | |
Exhibit | | |
Number | | Description |
| | |
99.1 |
| | The Bank of New York Mellon Corporation Earnings Release dated July 21, 2015, announcing financial results for the second quarter of 2015. |
| | |
99.2 |
| | The Bank of New York Mellon Corporation Quarterly Financial Trends dated July 21, 2015, for the second quarter of 2015. |
| | |
99.3 |
| | Key Facts – Second Quarter 2015 dated July 21, 2015. |
| | |
99.4 |
| | Second Quarter 2015 Financial Highlights Presentation dated July 21, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| |
| The Bank of New York Mellon Corporation (Registrant)
|
Date: July 21, 2015 | By: /s/ Craig T. Beazer |
| Name: Craig T. Beazer Title: Secretary |
EXHIBIT INDEX
|
| | |
Number | Description | Method of Filing |
99.1 | Earnings Release dated July 21, 2015. | Furnished herewith
|
99.2 | Quarterly Financial Trends dated July 21, 2015. | Furnished herewith
|
99.3 | Key Facts – Second Quarter 2015 dated July 21, 2015. | Furnished herewith
|
99.4 | Second Quarter 2015 Financial Highlights Presentation dated July 21, 2015. | Furnished herewith
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|
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BNY Mellon 2Q15 Earnings Release |
News Release
|
| |
Contacts: MEDIA: | ANALYSTS: |
Kevin Heine | Valerie Haertel |
(212) 635-1590 | (212) 635-8529 |
kevin.heine@bnymellon.com | valerie.haertel@bnymellon.com |
BNY MELLON REPORTS SECOND QUARTER EARNINGS OF $830 MILLION OR $0.73 PER COMMON SHARE, INCLUDING:
| |
• | $0.03 per common share related to previously announced litigation expense and restructuring charges |
| |
• | Earnings per common share up 24% year-over-year on an adjusted basis (a) |
TOTAL REVENUE INCREASED 4% YEAR-OVER-YEAR
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• | Increased 3% on an adjusted basis (a) |
TOTAL EXPENSE DECREASED 7% YEAR-OVER-YEAR
| |
• | Decreased 1% on an adjusted basis (a) |
GENERATED 460 BASIS POINTS OF POSITIVE OPERATING LEVERAGE YEAR-OVER-YEAR ON AN ADJUSTED BASIS (a)
EXECUTING ON CAPITAL PLAN AND RETURN OF VALUE TO COMMON SHAREHOLDERS
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• | Repurchased 19.4 million common shares for $834 million in the second quarter of 2015 |
| |
• | Return on tangible common equity of 22% in the second quarter of 2015 (b) |
NEW YORK, July 21, 2015 – The Bank of New York Mellon Corporation (“BNY Mellon”) (NYSE: BK) today reported second quarter net income applicable to common shareholders of $830 million, or $0.73 per diluted common share, or $868 million, or $0.77 per diluted common share, adjusted for litigation and restructuring charges. In the second quarter of 2014, net income applicable to common shareholders was $554 million, or $0.48 per diluted common share, or $715 million, or $0.62 per diluted common share, adjusted for the charges related to investment management funds and severance. In the first quarter of 2015, net income applicable to common shareholders was $766 million, or $0.67 per diluted common share. (b)
“Our strong second quarter results demonstrated our execution of our key priorities. We are growing our earnings, investing in next-generation operating platforms and risk management controls, attracting new clients and driving the long-term value of our firm for the benefit of our clients and shareholders,” Gerald L. Hassell, chairman and chief executive officer of BNY Mellon, said.
_________________________________________________________________________________
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(a) | See pages 3-4 for the Non-GAAP adjustments. |
| |
(b) | See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 25 for the reconciliation of these Non-GAAP measures. |
|
|
BNY Mellon 2Q15 Earnings Release |
“The investments we are making in strategic technology platforms and applications are helping our solutions resonate with clients, contributing to our ability to capture new business including a significant middle-office contract to service more than $770 billion in assets for a prominent investment manager. Our costs will increase in the short run as we onboard the new business; however, our platforms are designed to be leveraged by a broader client base, creating shared economies of scale that benefit our clients and drive profitable growth for our shareholders,” Mr. Hassell added.
“Finally, we returned more than $1 billion to our shareholders in the form of dividends and share repurchases during the quarter while achieving a 22 percent return on tangible common equity - further evidence of the strength of our business model,” 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 July 21, 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 July 21, 2015. Replays of the conference call and audio webcast will be available beginning July 21, 2015 at approximately 2 p.m. EDT through August 21, 2015 by dialing (800) 391-9847 (U.S.) or (402) 220-3093 (International). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.
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BNY Mellon 2Q15 Earnings Release |
SECOND QUARTER 2015 FINANCIAL HIGHLIGHTS (a)
(comparisons are 2Q15 vs. 2Q14 unless otherwise stated)
•Earnings
|
| | | | | | | | | | | | | | | | | | | | | |
| Earnings per share | | Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
(in millions, except per share amounts) | 2Q14 |
| | 2Q15 |
| | Inc |
| | 2Q14 |
| | 2Q15 |
| | Inc |
|
GAAP results | $ | 0.48 |
| | $ | 0.73 |
| | | | $ | 554 |
| | $ | 830 |
| |
|
Add: Litigation and restructuring charges | 0.06 |
| | 0.03 |
| | | | 76 |
| | 38 |
| | |
Charge related to investment management funds, net of incentives | 0.07 |
| | N/A |
| | | | 85 |
| | N/A |
| | |
Non-GAAP results | $ | 0.62 |
| (a) | $ | 0.77 |
| (a) | 24 | % | | $ | 715 |
| | $ | 868 |
| | 21 | % |
| |
(a) | Does not foot due to rounding. |
N/A - Not applicable.
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• | Total revenue was $3.9 billion, an increase of 4%. |
- Investment services fees increased 4% reflecting organic growth, primarily in Global Collateral Services and Asset Servicing, higher clearing services revenue, net new business and higher market values, partially offset by the unfavorable impact of a stronger U.S. dollar.
- Investment management and performance fees decreased 1%, or increased 5% on a constant currency basis (Non-GAAP), driven by higher equity market values, the impact of the 1Q15 acquisition of Cutwater Asset Management (“Cutwater”) and strategic initiatives, partially offset by lower performance fees. (a)
- Foreign exchange revenue increased 40% driven by higher volumes and volatility, as well as higher Depositary Receipts-related activity.
- Financing-related fees increased $14 million driven by higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity.
- Investment and other income decreased $38 million driven by lower other revenue, equity investment revenue and asset-related gains, partially offset by higher leasing gains.
- Net interest revenue increased $60 million driven by higher securities and loans due to higher deposits and the shift out of cash, lower interest expense incurred on deposits and the impact of interest rate hedging activities.
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• | The provision for credit losses was a credit of $6 million. |
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• | Noninterest expense was $2.7 billion, a decrease of 7% reflecting lower expenses in all categories, except incentives and business development expense. The decrease primarily reflects the favorable impact of a stronger U.S. dollar and the benefit of the business improvement process which focuses on reducing structural costs. |
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• | Effective tax rate of 23.7%; rate is 1.4% lower due to the income statement presentation of consolidated investment management funds and a benefit related to the separately disclosed litigation expense. |
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• | Assets under custody and/or administration (“AUC/A”) and Assets under management (“AUM”) |
- AUC/A of $28.6 trillion, increased slightly reflecting higher market values and organic growth, partially offset by the unfavorable impact of a stronger U.S. dollar.
-- Estimated new AUC/A wins in Asset Servicing of $1.02 trillion in 2Q15.
- AUM of $1.72 trillion, increased 5% driven by higher market values, net new business and the Cutwater acquisition, partially offset by the unfavorable impact of a stronger U.S. dollar.
-- Net long-term outflows totaled $15 billion in 2Q15 driven by equity, index and fixed income investments, partially offset by liability-driven and alternative investments.
-- Net short-term outflows totaled $11 billion in 2Q15.
•Capital
- Repurchased 19.4 million common shares for $834 million in 2Q15.
- Return on tangible common equity of 22% in 2Q15 (a).
| |
(a) | See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 25 for the reconciliation of Non-GAAP measures. Non-GAAP excludes the gains on the sales of our investment in Wing Hang Bank 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, a charge related to investment management funds, net of incentives, 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.
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BNY Mellon 2Q15 Earnings Release |
FINANCIAL SUMMARY
|
| | | | | | | | | | | | | | | | | | | |
(dollars in millions, except per share amounts; common shares in thousands) | | | | | | 2Q15 vs. |
2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
| 2Q14 | 1Q15 |
Revenue: | | | | | | | |
Fee and other revenue (a) | $ | 2,980 |
| $ | 3,851 |
| $ | 2,935 |
| $ | 3,012 |
| $ | 3,067 |
| 3 | % | 2 | % |
Income from consolidated investment management funds (a) | 46 |
| 39 |
| 42 |
| 52 |
| 40 |
| | |
Net interest revenue | 719 |
| 721 |
| 712 |
| 728 |
| 779 |
| 8 |
| 7 |
|
Total revenue – GAAP (a) | 3,745 |
| 4,611 |
| 3,689 |
| 3,792 |
| 3,886 |
| 4 |
| 2 |
|
Less: Net income attributable to noncontrolling interests related to consolidated investment management funds (a) | 17 |
| 23 |
| 24 |
| 31 |
| 37 |
| | |
Gain on the sale of our investment in Wing Hang | — |
| 490 |
| — |
| — |
| — |
| | |
Gain on the sale of the One Wall Street building | — |
| 346 |
| — |
| — |
| — |
| | |
Total revenue – Non-GAAP (a) | 3,728 |
| 3,752 |
| 3,665 |
| 3,761 |
| 3,849 |
| 3 |
| 2 |
|
Provision for credit losses | (12 | ) | (19 | ) | 1 |
| 2 |
| (6 | ) | | |
Expense: | | | | | | | |
Noninterest expense – GAAP | 2,946 |
| 2,968 |
| 3,524 |
| 2,700 |
| 2,727 |
| (7 | ) | 1 |
|
Less: Amortization of intangible assets | 75 |
| 75 |
| 73 |
| 66 |
| 65 |
| | |
M&I, litigation and restructuring charges | 122 |
| 220 |
| 800 |
| (3 | ) | 59 |
| | |
Charge related to investment management funds, net of incentives | 109 |
| — |
| — |
| — |
| — |
| | |
Total noninterest expense – Non-GAAP | 2,640 |
| 2,673 |
| 2,651 |
| 2,637 |
| 2,603 |
| (1 | ) | (1 | ) |
Income: | | | | | | | |
Income before income taxes (a) | 811 |
| 1,662 |
| 164 |
| 1,090 |
| 1,165 |
| 44 | % | 7 | % |
Provision (benefit) for income taxes | 217 |
| 556 |
| (93 | ) | 280 |
| 276 |
| | |
Net income (a) | $ | 594 |
| $ | 1,106 |
| $ | 257 |
| $ | 810 |
| $ | 889 |
| | |
Net (income) attributable to noncontrolling interests (a)(b) | (17 | ) | (23 | ) | (24 | ) | (31 | ) | (36 | ) | | |
Net income applicable to shareholders of The Bank of New York Mellon Corporation | 577 |
| 1,083 |
| 233 |
| 779 |
| 853 |
| | |
Preferred stock dividends | (23 | ) | (13 | ) | (24 | ) | (13 | ) | (23 | ) | | |
Net income applicable to common shareholders of The Bank of New York Mellon Corporation | $ | 554 |
| $ | 1,070 |
| $ | 209 |
| $ | 766 |
| $ | 830 |
| | |
| | | | | | | |
Key Metrics: | | | | | | | |
Pre-tax operating margin (a)(c) | 22 | % | 36 | % | 4 | % | 29 | % | 30 | % | | |
Non-GAAP (c) | 30 | % | 29 | % | 28 | % | 30 | % | 33 | % | | |
| | | | | | | |
Return on common equity (annualized) (c) | 6.1 | % | 11.6 | % | 2.2 | % | 8.8 | % | 9.4 | % | | |
Non-GAAP (c) | 8.4 | % | 8.5 | % | 7.7 | % | 9.2 | % | 10.3 | % | | |
| | | | | | | |
Return on tangible common equity (annualized) – Non-GAAP (c) | 14.5 | % | 26.2 | % | 5.9 | % | 20.3 | % | 21.5 | % | | |
Non-GAAP adjusted (c) | 18.4 | % | 18.4 | % | 16.3 | % | 20.2 | % | 22.5 | % | | |
| | | | | | | |
Fee revenue as a percentage of total revenue excluding net securities gains (a) | 79 | % | 83 | % | 79 | % | 79 | % | 79 | % | | |
| | | | | | | |
Percentage of non-U.S. total revenue (d) | 38 | % | 43 | % | 35 | % | 36 | % | 36 | % | | |
| | | | | | | |
Average common shares and equivalents outstanding: | | | | | | | |
Basic | 1,133,556 |
| 1,126,946 |
| 1,120,672 |
| 1,118,602 |
| 1,113,790 |
| | |
Diluted | 1,139,800 |
| 1,134,871 |
| 1,129,040 |
| 1,126,306 |
| 1,122,135 |
| | |
| | | | | | | |
Period end: | | | | | | | |
Full-time employees | 51,100 |
| 50,900 |
| 50,300 |
| 50,500 |
| 50,700 |
| | |
Book value per common share – GAAP (c) | $ | 32.49 |
| $ | 32.77 |
| $ | 32.09 |
| $ | 31.89 |
| $ | 32.28 |
| | |
Tangible book value per common share – Non-GAAP (c) | $ | 14.88 |
| $ | 15.30 |
| $ | 14.70 |
| $ | 14.82 |
| $ | 14.86 |
| | |
Cash dividends per common share | $ | 0.17 |
| $ | 0.17 |
| $ | 0.17 |
| $ | 0.17 |
| $ | 0.17 |
| | |
Common dividend payout ratio | 35 | % | 18 | % | 94 | % | 25 | % | 23 | % | | |
Closing stock price per common share | $ | 37.48 |
| $ | 38.73 |
| $ | 40.57 |
| $ | 40.24 |
| $ | 41.97 |
| | |
Market capitalization | $ | 42,412 |
| $ | 43,599 |
| $ | 45,366 |
| $ | 45,130 |
| $ | 46,441 |
| | |
Common shares outstanding | 1,131,596 |
| 1,125,710 |
| 1,118,228 |
| 1,121,512 |
| 1,106,518 |
| | |
| |
(a) | The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). See page 24 for additional information. |
(b) Primarily attributable to noncontrolling interests related to consolidated investment management funds.
| |
(c) | Non-GAAP excludes the gains on the sales of our investment in Wing Hang Bank 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 a charge related to investment management funds, net of incentives. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 25 for the reconciliation of Non-GAAP measures. |
| |
(d) | Includes fee revenue, net interest revenue and income from consolidated investment management funds, net of net income attributable to noncontrolling interests. |
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BNY Mellon 2Q15 Earnings Release |
CONSOLIDATED BUSINESS METRICS
|
| | | | | | | | | | | | | | | | | | | | |
Consolidated business metrics | | | | | | | 2Q15 vs. |
2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
| | 2Q14 | 1Q15 |
Changes in AUM (in billions): (a) | | | | | | | | |
Beginning balance of AUM | $ | 1,620 |
| $ | 1,636 |
| $ | 1,646 |
| $ | 1,710 |
| $ | 1,741 |
| | | |
Net inflows (outflows): | | | | | | | | |
Long-term: | | | | | | | | |
Equity | (4 | ) | (2 | ) | (4 | ) | (6 | ) | (12 | ) | | | |
Fixed income | (1 | ) | — |
| 4 |
| 4 |
| (2 | ) | | | |
Index | 7 |
| (3 | ) | 1 |
| 8 |
| (9 | ) | | | |
Liability-driven investments (b) | (17 | ) | 18 |
| 24 |
| 8 |
| 5 |
| | | |
Alternative investments | 2 |
| — |
| 2 |
| 2 |
| 3 |
| | | |
Total long-term inflows (outflows) | (13 | ) | 13 |
| 27 |
| 16 |
| (15 | ) | | | |
Short term: | | | | | | | | |
Cash | (18 | ) | 19 |
| 5 |
| 1 |
| (11 | ) | | | |
Total net inflows (outflows) | (31 | ) | 32 |
| 32 |
| 17 |
| (26 | ) | | | |
Net market/currency impact/acquisition | 47 |
| (22 | ) | 32 |
| 14 |
| 9 |
| | | |
Ending balance of AUM | $ | 1,636 |
| $ | 1,646 |
| $ | 1,710 |
| $ | 1,741 |
| $ | 1,724 |
| (c) | 5 | % | (1 | )% |
| | | | | | | | |
AUM at period end, by product type: (a) | | | | | | | | |
Equity | 17 | % | 16 | % | 16 | % | 15 | % | 15 | % | | | |
Fixed income | 14 |
| 13 |
| 13 |
| 13 |
| 13 |
| | | |
Index | 21 |
| 21 |
| 21 |
| 22 |
| 21 |
| | | |
Liability-driven investments (b) | 27 |
| 28 |
| 29 |
| 29 |
| 30 |
| | | |
Alternative investments | 4 |
| 4 |
| 4 |
| 4 |
| 4 |
| | | |
Cash | 17 |
| 18 |
| 17 |
| 17 |
| 17 |
| | | |
Total AUM | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | (c) | | |
| | | | | | | | |
Investment Management: | | | | | | | | |
Average loans (in millions) | $ | 10,372 |
| $ | 10,772 |
| $ | 11,124 |
| $ | 11,634 |
| $ | 12,298 |
| | 19 | % | 6 | % |
Average deposits (in millions) | $ | 13,458 |
| $ | 13,764 |
| $ | 14,604 |
| $ | 15,218 |
| $ | 14,640 |
| | 9 | % | (4 | )% |
| | | | | | | | |
Investment Services: | | | | | | | | |
Average loans (in millions) | $ | 33,115 |
| $ | 33,785 |
| $ | 35,448 |
| $ | 37,699 |
| $ | 38,264 |
| | 16 | % | 1 | % |
Average deposits (in millions) | $ | 220,701 |
| $ | 221,734 |
| $ | 228,282 |
| $ | 234,183 |
| $ | 237,193 |
| | 7 | % | 1 | % |
| | | | | | | | |
AUC/A at period end (in trillions) (d) | $ | 28.5 |
| $ | 28.3 |
| $ | 28.5 |
| $ | 28.5 |
| $ | 28.6 |
| (c) | — | % | — | % |
| | | | | | | | |
Market value of securities on loan at period end (in billions) (e) | $ | 280 |
| $ | 282 |
| $ | 289 |
| $ | 291 |
| $ | 283 |
| | 1 | % | (3 | )% |
| | | | | | | | |
Asset servicing: | | | | | | | | |
Estimated new business wins (AUC/A) (in billions) | $ | 130 |
| $ | 115 |
| $ | 130 |
| $ | 131 |
| $ | 1,024 |
| (c) | | |
| | | | | | | | |
Depositary Receipts: | | | | | | | | |
Number of sponsored programs | 1,316 |
| 1,302 |
| 1,279 |
| 1,258 |
| 1,206 |
| | (8 | )% | (4 | )% |
| | | | | | | | |
Clearing services: | | | | | | | | |
Global DARTS volume (in thousands) | 207 |
| 209 |
| 242 |
| 261 |
| 242 |
| | 17 | % | (7 | )% |
Average active clearing accounts (U.S. platform) (in thousands) | 5,752 |
| 5,805 |
| 5,900 |
| 5,979 |
| 6,046 |
| | 5 | % | 1 | % |
Average long-term mutual fund assets (U.S. platform) (in millions) | $ | 433,047 |
| $ | 442,827 |
| $ | 450,305 |
| $ | 456,954 |
| $ | 466,195 |
| | 8 | % | 2 | % |
Average investor margin loans (U.S. platform) (in millions) | $ | 9,236 |
| $ | 9,861 |
| $ | 10,711 |
| $ | 11,232 |
| $ | 11,890 |
| | 29 | % | 6 | % |
| | | | | | | | |
Broker-Dealer: | | | | | | | | |
Average tri-party repo balances (in billions) | $ | 2,022 |
| $ | 2,063 |
| $ | 2,101 |
| $ | 2,153 |
| $ | 2,174 |
| | 8 | % | 1 | % |
| |
(a) | Excludes securities lending cash management assets and assets managed in the Investment Services business. |
| |
(b) | Includes currency overlay assets under management. |
| |
(d) | Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at June 30, 2014 and Sept. 30, 2014 and $1.1 trillion at Dec. 31, 2014, March 31, 2015 and June 30, 2015. |
| |
(e) | 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 $64 billion at June 30, 2014, $65 billion at Sept. 30, 2014 and Dec. 31, 2014, $69 billion at March 31, 2015 and $68 billion at June 30, 2015. |
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|
BNY Mellon 2Q15 Earnings Release |
The following table presents key market metrics at period end and on an average basis.
|
| | | | | | | | | | | | | | | | | | | |
Key market metrics | | | | | | 2Q15 vs. |
| 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
| 2Q14 |
| 1Q15 |
|
S&P 500 Index (a) | 1960 |
| 1972 |
| 2059 |
| 2068 |
| 2063 |
| 5 | % | — | % |
S&P 500 Index – daily average | 1900 |
| 1976 |
| 2009 |
| 2064 |
| 2102 |
| 11 |
| 2 |
|
FTSE 100 Index (a) | 6744 |
| 6623 |
| 6566 |
| 6773 |
| 6521 |
| (3 | ) | (4 | ) |
FTSE 100 Index – daily average | 6764 |
| 6756 |
| 6526 |
| 6793 |
| 6920 |
| 2 |
| 2 |
|
MSCI World Index (a) | 1743 |
| 1698 |
| 1710 |
| 1741 |
| 1736 |
| — |
| — |
|
MSCI World Index – daily average | 1698 |
| 1733 |
| 1695 |
| 1726 |
| 1780 |
| 5 |
| 3 |
|
Barclays Capital Global Aggregate BondSM Index (a)(b) | 376 |
| 361 |
| 357 |
| 348 |
| 342 |
| (9 | ) | (2 | ) |
NYSE and NASDAQ share volume (in billions) | 187 |
| 173 |
| 198 |
| 187 |
| 185 |
| (1 | ) | (1 | ) |
JPMorgan G7 Volatility Index – daily average (c) | 6.22 |
| 6.21 |
| 8.54 |
| 10.40 |
| 10.06 |
| 62 |
| (3 | ) |
Average Fed Funds effective rate | 0.09 | % | 0.09 | % | 0.10 | % | 0.11 | % | 0.13 | % | 4 bps |
| 2 bps |
|
Foreign exchange rates vs. U.S. dollar: | | | | | | | |
British pound - average rate | $ | 1.68 |
| $ | 1.67 |
| $ | 1.58 |
| $ | 1.51 |
| $ | 1.53 |
| (9) | % | 1 | % |
Euro - average rate | 1.37 |
| 1.33 |
| 1.25 |
| 1.13 |
| 1.11 |
| (19 | ) | (2 | ) |
| |
(b) | Unhedged in U.S. dollar terms. |
| |
(c) | The JPMorgan G7 Volatility Index is based on the implied volatility in 3-month currency options. |
bps – basis points.
|
|
BNY Mellon 2Q15 Earnings Release |
FEE AND OTHER REVENUE
|
| | | | | | | | | | | | | | | | | | | |
Fee and other revenue | | | | | | 2Q15 vs. |
(dollars in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
| 2Q14 |
| 1Q15 |
|
Investment services fees: | | | | | | | |
Asset servicing (a) | $ | 1,022 |
| $ | 1,025 |
| $ | 1,019 |
| $ | 1,038 |
| $ | 1,060 |
| 4 | % | 2 | % |
Clearing services | 326 |
| 337 |
| 347 |
| 344 |
| 347 |
| 6 |
| 1 |
|
Issuer services | 231 |
| 315 |
| 193 |
| 232 |
| 234 |
| 1 |
| 1 |
|
Treasury services | 141 |
| 142 |
| 145 |
| 137 |
| 144 |
| 2 |
| 5 |
|
Total investment services fees | 1,720 |
| 1,819 |
| 1,704 |
| 1,751 |
| 1,785 |
| 4 |
| 2 |
|
Investment management and performance fees (b) | 883 |
| 881 |
| 885 |
| 867 |
| 878 |
| (1 | ) | 1 |
|
Foreign exchange and other trading revenue | 130 |
| 153 |
| 151 |
| 229 |
| 187 |
| 44 |
| (18 | ) |
Financing-related fees | 44 |
| 44 |
| 43 |
| 40 |
| 58 |
| 32 |
| 45 |
|
Distribution and servicing | 43 |
| 44 |
| 43 |
| 41 |
| 39 |
| (9 | ) | (5 | ) |
Investment and other income (b) | 142 |
| 890 |
| 78 |
| 60 |
| 104 |
| N/M | N/M |
Total fee revenue (b) | 2,962 |
| 3,831 |
| 2,904 |
| 2,988 |
| 3,051 |
| 3 |
| 2 |
|
Net securities gains | 18 |
| 20 |
| 31 |
| 24 |
| 16 |
| N/M | N/M |
Total fee and other revenue (b) | $ | 2,980 |
| $ | 3,851 |
| $ | 2,935 |
| $ | 3,012 |
| $ | 3,067 |
| 3 | % | 2 | % |
| |
(a) | Asset servicing fees include securities lending revenue of $46 million in 2Q14, $37 million in 3Q14 and 4Q14, $43 million in 1Q15 and $49 million in 2Q15. |
| |
(b) | The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). See page 24 for additional information. |
N/M - Not meaningful.
KEY POINTS
| |
• | Asset servicing fees were $1.1 billion, an increase of 4% year-over-year and 2% sequentially. The year-over-year increase primarily reflects organic growth, due in part to Global Collateral Services, net new business and higher market values, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential increase primarily reflects organic growth and seasonally higher securities lending revenue. |
| |
• | Clearing services fees were $347 million, an increase of 6% year-over-year and 1% sequentially. The year-over-year increase was primarily driven by higher mutual fund and asset-based fees, clearance revenue and custody fees. The sequential increase was primarily driven by two additional trading days in 2Q15. |
| |
• | Issuer services fees were $234 million, an increase of 1% year-over-year and sequentially. Both increases primarily reflect higher Depositary Receipts revenue, partially offset by lower Corporate Trust fees. The year-over-year decrease in Corporate Trust fees primarily reflects the unfavorable impact of a stronger U.S. dollar. |
| |
• | Treasury services fees were $144 million, an increase of 2% year-over-year and 5% sequentially. The year-over-year increase primarily reflects higher payment volumes. The sequential increase primarily reflects three additional business days in 2Q15. |
| |
• | Investment management and performance fees were $878 million, a decrease of 1% year-over-year, or an increase of 5% on a constant currency basis (Non-GAAP). The increase was driven by higher equity market values, the impact of the 1Q15 acquisition of Cutwater and strategic initiatives, partially offset by lower performance fees. Sequentially, investment management and performance fees increased 1% primarily reflecting higher equity market values and higher performance fees. |
|
|
BNY Mellon 2Q15 Earnings Release |
|
| | | | | | | | | | | | | | | | |
• | Foreign exchange and other trading revenue | | | | | |
| (in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
|
| Foreign exchange | $ | 129 |
| $ | 154 |
| $ | 165 |
| $ | 217 |
| $ | 181 |
|
| Other trading revenue (loss): | | | | | |
| Fixed income | (1 | ) | 2 |
| (18 | ) | 11 |
| — |
|
| Equity/other | 2 |
| (3 | ) | 4 |
| 1 |
| 6 |
|
| Total other trading revenue (loss) | 1 |
| (1 | ) | (14 | ) | 12 |
| 6 |
|
| Total foreign exchange and other trading revenue | $ | 130 |
| $ | 153 |
| $ | 151 |
| $ | 229 |
| $ | 187 |
|
Foreign exchange and other trading revenue totaled $187 million in 2Q15 compared with $130 million in 2Q14 and $229 million in 1Q15. In 2Q15, foreign exchange revenue totaled $181 million, an increase of 40% year-over-year and a decrease of 17% sequentially. The year-over-year increase primarily reflects higher volatility and volumes, as well as higher Depositary Receipts-related activity. The sequential decrease primarily reflects the benefit of unusually high volatility in 1Q15.
| |
• | Financing-related fees were $58 million in 2Q15 compared with $44 million in 2Q14 and $40 million in 1Q15. Both increases primarily reflect higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity. |
|
| | | | | | | | | | | | | | | | |
• | Investment and other income (loss) | | | | | |
| (in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
|
| Lease residual gains (losses) | $ | 4 |
| $ | 5 |
| $ | 5 |
| $ | (1 | ) | $ | 54 |
|
| Corporate/bank-owned life insurance | 30 |
| 34 |
| 37 |
| 33 |
| 31 |
|
| Expense reimbursements from joint venture | 15 |
| 13 |
| 15 |
| 14 |
| 17 |
|
| Private equity gains (losses) | (2 | ) | 2 |
| 1 |
| (3 | ) | 3 |
|
| Seed capital gains (losses) (a) | 15 |
| (1 | ) | — |
| 16 |
| 2 |
|
| Asset-related gains | 17 |
| 836 |
| 20 |
| 3 |
| 1 |
|
| Equity investment revenue (loss) | 17 |
| (9 | ) | (5 | ) | (4 | ) | (7 | ) |
| Other income (a) | 46 |
| 10 |
| 5 |
| 2 |
| 3 |
|
| Total investment and other income | $ | 142 |
| $ | 890 |
| $ | 78 |
| $ | 60 |
| $ | 104 |
|
| |
(a) | The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). See page 24 for additional information. |
Investment and other income was $104 million in 2Q15 compared with $142 million in 2Q14 and $60 million in 1Q15. The year-over-year decrease primarily reflects lower other revenue, equity investment revenue and asset-related gains, partially offset by higher lease residual gains. The sequential increase primarily reflects higher lease residual gains, partially offset by lower seed capital gains.
|
|
BNY Mellon 2Q15 Earnings Release |
NET INTEREST REVENUE
|
| | | | | | | | | | | | | | | | | | | |
Net interest revenue | | | | | | 2Q15 vs. |
(dollars in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
| 2Q14 |
| 1Q15 |
|
Net interest revenue (non-FTE) | $ | 719 |
| $ | 721 |
| $ | 712 |
| $ | 728 |
| $ | 779 |
| 8% |
| 7 | % |
Net interest revenue (FTE) – Non-GAAP | 736 |
| 736 |
| 726 |
| 743 |
| 794 |
| 8 |
| 7 |
|
Net interest margin (FTE) | 0.98 | % | 0.94 | % | 0.91 | % | 0.97 | % | 1.00 | % | 2 | bps | 3 | bps |
| | | | | | | |
Selected average balances: | | | | | | | |
Cash/interbank investments | $ | 140,357 |
| $ | 139,278 |
| $ | 140,599 |
| $ | 123,647 |
| $ | 125,640 |
| (10)% |
| 2% |
|
Trading account securities | 5,532 |
| 5,435 |
| 3,922 |
| 3,046 |
| 3,253 |
| (41 | ) | 7 |
|
Securities | 101,420 |
| 112,055 |
| 117,243 |
| 123,476 |
| 128,641 |
| 27 |
| 4 |
|
Loans | 53,449 |
| 54,835 |
| 56,844 |
| 57,935 |
| 61,076 |
| 14 |
| 5 |
|
Interest-earning assets | 300,758 |
| 311,603 |
| 318,608 |
| 308,104 |
| 318,610 |
| 6 |
| 3 |
|
Interest-bearing deposits | 162,674 |
| 164,233 |
| 163,149 |
| 159,520 |
| 170,730 |
| 5 |
| 7 |
|
Noninterest-bearing deposits | 77,820 |
| 82,334 |
| 85,330 |
| 89,592 |
| 84,890 |
| 9 |
| (5 | ) |
| | | | | | | |
Selected average yields/rates: | | | | | | | |
Cash/interbank investments | 0.43 | % | 0.38 | % | 0.31 | % | 0.35 | % | 0.34 | % | | |
Trading account securities | 2.19 |
| 2.36 |
| 2.64 |
| 2.46 |
| 2.63 |
| | |
Securities | 1.68 |
| 1.56 |
| 1.54 |
| 1.55 |
| 1.57 |
| | |
Loans | 1.66 |
| 1.61 |
| 1.58 |
| 1.55 |
| 1.51 |
| | |
Interest-earning assets | 1.10 |
| 1.05 |
| 1.02 |
| 1.07 |
| 1.08 |
| | |
Interest-bearing deposits | 0.06 |
| 0.06 |
| 0.03 |
| 0.04 |
| 0.02 |
| | |
| | | | | | | |
Average cash/interbank investments as a percentage of average interest-earning assets | 47 | % | 45 | % | 44 | % | 40 | % | 39 | % | | |
Average noninterest-bearing deposits as a percentage of average interest-earning assets | 26 | % | 26 | % | 27 | % | 29 | % | 27 | % | | |
FTE – fully taxable equivalent.
bps – basis points.
KEY POINTS
| |
• | Net interest revenue totaled $779 million in 2Q15, an increase of $60 million compared with 2Q14 and an increase of $51 million sequentially. Both increases primarily reflect higher securities and loans due to higher deposits, lower interest expense incurred on deposits, and the impact of interest rate hedging activities. The year-over-year increase also reflects the shift out of cash and into investments in securities and loans, which was partially offset by lower yields on interest-earning assets. |
|
|
BNY Mellon 2Q15 Earnings Release |
NONINTEREST EXPENSE
|
| | | | | | | | | | | | | | | | | | | |
Noninterest expense | | | | | | 2Q15 vs. |
(dollars in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
| 2Q14 |
| 1Q15 |
|
Staff: | | | | | | | |
Compensation | $ | 903 |
| $ | 909 |
| $ | 893 |
| $ | 871 |
| $ | 877 |
| (3 | )% | 1 | % |
Incentives | 313 |
| 340 |
| 319 |
| 425 |
| 349 |
| 12 |
| (18 | ) |
Employee benefits | 223 |
| 228 |
| 206 |
| 189 |
| 208 |
| (7 | ) | 10 |
|
Total staff | 1,439 |
| 1,477 |
| 1,418 |
| 1,485 |
| 1,434 |
| — |
| (3 | ) |
Professional, legal and other purchased services | 314 |
| 323 |
| 390 |
| 302 |
| 299 |
| (5 | ) | (1 | ) |
Software and equipment | 236 |
| 234 |
| 235 |
| 228 |
| 228 |
| (3 | ) | — |
|
Net occupancy | 152 |
| 154 |
| 150 |
| 151 |
| 149 |
| (2 | ) | (1 | ) |
Distribution and servicing | 112 |
| 107 |
| 102 |
| 98 |
| 96 |
| (14 | ) | (2 | ) |
Sub-custodian | 81 |
| 67 |
| 70 |
| 70 |
| 75 |
| (7 | ) | 7 |
|
Business development | 68 |
| 61 |
| 75 |
| 61 |
| 72 |
| 6 |
| 18 |
|
Other | 347 |
| 250 |
| 211 |
| 242 |
| 250 |
| (28 | ) | 3 |
|
Amortization of intangible assets | 75 |
| 75 |
| 73 |
| 66 |
| 65 |
| (13 | ) | (2 | ) |
M&I, litigation and restructuring charges | 122 |
| 220 |
| 800 |
| (3 | ) | 59 |
| N/M | N/M |
Total noninterest expense – GAAP | $ | 2,946 |
| $ | 2,968 |
| $ | 3,524 |
| $ | 2,700 |
| $ | 2,727 |
| (7 | )% | 1 | % |
| | | | | | | |
Total staff expense as a percentage of total revenue | 38 | % | 32 | % | 38 | % | 39 | % | 37 | % | | |
| | | | | | | |
Memo: | | | | | | | |
Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to investment management funds, net of incentives – Non-GAAP | $ | 2,640 |
| $ | 2,673 |
| $ | 2,651 |
| $ | 2,637 |
| $ | 2,603 |
| (1 | )% | (1 | )% |
N/M - Not meaningful.
KEY POINTS
| |
• | Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges, and the charge related to investment management funds, net of incentives (Non-GAAP) decreased 1% year-over-year and sequentially. |
| |
• | The year-over-year decrease reflects lower expenses in all categories, except incentives and business development expense. The lower expenses primarily reflect the favorable impact of a stronger U.S. dollar and the benefit of the business improvement process which focuses on reducing structural costs. |
| |
• | Total staff expense decreased slightly year-over-year primarily reflecting the favorable impact of a stronger U.S. dollar, lower headcount and the impact of curtailing the U.S. pension plan, partially offset by higher incentive expense reflecting better performance. |
| |
• | The sequential decrease primarily reflects lower incentive expense driven by the impact of vesting of long-term stock awards for retirement eligible employees recorded in 1Q15. The decrease was partially offset by higher employee benefits expense reflecting the curtailment gain recorded in 1Q15 and higher business development expenses. |
|
|
BNY Mellon 2Q15 Earnings Release |
INVESTMENT SECURITIES PORTFOLIO
At June 30, 2015, the fair value of our investment securities portfolio totaled $123.0 billion. The net unrealized pre-tax gain on our total securities portfolio was $752 million at June 30, 2015 compared with $1.7 billion at March 31, 2015. The decrease in the net unrealized pre-tax gain was primarily driven by higher market interest rates. At June 30, 2015, the fair value of the held-to-maturity securities totaled $43.4 billion and represented 35% of the fair value of the total investment securities portfolio.
The following table shows the distribution of our investment securities portfolio.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investment securities portfolio
(dollars in millions) | March 31, 2015 |
| | 2Q15 change in unrealized gain (loss) |
| June 30, 2015 | Fair value as a % of amortized cost (a) |
| Unrealized gain (loss) |
| | Ratings |
| | | | BB+ and lower | |
Fair value |
| | Amortized cost |
| Fair value |
| | | AAA/ AA- | A+/ A- | BBB+/ BBB- | Not rated |
Agency RMBS | $ | 51,101 |
| | $ | (431 | ) | $ | 49,983 |
| $ | 50,018 |
| | 100 | % | $ | 35 |
| | 100 | % | — | % | — | % | — | % | — | % |
U.S. Treasury | 28,680 |
| | (183 | ) | 24,139 |
| 24,222 |
| | 100 |
| 83 |
| | 100 |
| — |
| — |
| — |
| — |
|
Sovereign debt/sovereign guaranteed | 18,469 |
| | (142 | ) | 18,466 |
| 18,516 |
| | 100 |
| 50 |
| | 77 |
| 1 |
| 22 |
| — |
| — |
|
Non-agency RMBS (b) | 2,138 |
| | (25 | ) | 1,626 |
| 2,040 |
| | 81 |
| 414 |
| | — |
| 1 |
| 2 |
| 90 |
| 7 |
|
Non-agency RMBS | 1,070 |
| | (1 | ) | 1,007 |
| 1,024 |
| | 94 |
| 17 |
| | 2 |
| 9 |
| 19 |
| 69 |
| 1 |
|
European floating rate notes | 1,723 |
| | (6 | ) | 1,748 |
| 1,737 |
| | 99 |
| (11 | ) | | 71 |
| 22 |
| — |
| 7 |
| — |
|
Commercial MBS | 5,901 |
| | (49 | ) | 5,866 |
| 5,888 |
| | 100 |
| 22 |
| | 94 |
| 5 |
| 1 |
| — |
| — |
|
State and political subdivisions | 5,159 |
| | (29 | ) | 4,492 |
| 4,548 |
| | 101 |
| 56 |
| | 77 |
| 22 |
| — |
| — |
| 1 |
|
Foreign covered bonds | 2,804 |
| | (15 | ) | 2,666 |
| 2,723 |
| | 102 |
| 57 |
| | 100 |
| — |
| — |
| — |
| — |
|
Corporate bonds | 1,745 |
| | (32 | ) | 1,784 |
| 1,802 |
| | 101 |
| 18 |
| | 19 |
| 69 |
| 12 |
| — |
| — |
|
CLO | 2,258 |
| | (4 | ) | 2,241 |
| 2,245 |
| | 100 |
| 4 |
| | 100 |
| — |
| — |
| — |
| — |
|
U.S. Government agencies | 1,554 |
| | (5 | ) | 1,858 |
| 1,856 |
| | 100 |
| (2 | ) | | 100 |
| — |
| — |
| — |
| — |
|
Consumer ABS | 3,400 |
| | (1 | ) | 3,347 |
| 3,348 |
| | 100 |
| 1 |
| | 100 |
| — |
| — |
| — |
| — |
|
Other (c) | 2,890 |
| | (3 | ) | 3,000 |
| 3,008 |
| | 100 |
| 8 |
| | 41 |
| — |
| 55 |
| — |
| 4 |
|
Total investment securities | $ | 128,892 |
| (d) | $ | (926 | ) | $ | 122,223 |
| $ | 122,975 |
| (d) | 100 | % | $ | 752 |
| (d)(e) | 90 | % | 3 | % | 5 | % | 2 | % | — | % |
(a) Amortized cost before impairments.
| |
(b) | These RMBS were included in the former Grantor Trust and were marked-to-market in 2009. We believe these RMBS would receive higher credit ratings if these ratings incorporated, as additional credit enhancements, the difference between the written-down amortized cost and the current face amount of each of these securities. |
| |
(c) | Includes commercial paper with a fair value of $1.6 billion and $1.7 billion and money market funds with a fair value of $814 million and $779 million at March 31, 2015 and June 30, 2015, respectively. |
| |
(d) | Includes net unrealized losses on derivatives hedging securities available-for-sale of $501 million at March 31, 2015 and $71 million at June 30, 2015. |
| |
(e) | Unrealized gains of $740 million at June 30, 2015 related to available-for-sale securities. |
|
|
BNY Mellon 2Q15 Earnings Release |
NONPERFORMING ASSETS
|
| | | | | | | | | |
Nonperforming assets (dollars in millions) | June 30, 2014 |
| March 31, 2015 |
| June 30, 2015 |
|
Loans: | | | |
Other residential mortgages | $ | 105 |
| $ | 111 |
| $ | 110 |
|
Wealth management loans and mortgages | 12 |
| 12 |
| 11 |
|
Commercial real estate | 4 |
| 1 |
| 1 |
|
Commercial | 13 |
| — |
| — |
|
Foreign | 4 |
| — |
| — |
|
Total nonperforming loans | 138 |
| 124 |
| 122 |
|
Other assets owned | 4 |
| 4 |
| 5 |
|
Total nonperforming assets (a) | $ | 142 |
| $ | 128 |
| $ | 127 |
|
Nonperforming assets ratio | 0.24 | % | 0.21 | % | 0.20 | % |
Allowance for loan losses/nonperforming loans | 135.5 |
| 153.2 |
| 150.0 |
|
Total allowance for credit losses/nonperforming loans | 225.4 |
| 228.2 |
| 227.9 |
|
| |
(a) | Loans of consolidated investment management funds are not part of BNY Mellon’s loan portfolio. Included in the loans of consolidated investment management funds are nonperforming loans of $68 million at June 30, 2014. These loans are recorded at fair value and therefore do not impact the provision for credit losses and allowance for loan losses, and accordingly are excluded from the nonperforming assets table above. In 2Q15, BNY Mellon adopted the new accounting guidance included in ASU 2015-02, Consolidations. As a result, we deconsolidated substantially all of the loans of consolidated investment management funds retroactively to Jan. 1, 2015. See page 24 for additional information on the new accounting guidance. |
Nonperforming assets were $127 million at June 30, 2015, a decrease of $1 million compared with $128 million at March 31, 2015.
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS
|
| | | | | | | | | |
Allowance for credit losses, provision and net charge-offs (in millions) | June 30,
2014 |
| March 31, 2015 |
| June 30,
2015 |
|
Allowance for credit losses - beginning of period | $ | 326 |
| $ | 280 |
| $ | 283 |
|
Provision for credit losses | (12 | ) | 2 |
| (6 | ) |
Net (charge-offs) recoveries: | | | |
Financial institutions | — |
| — |
| 1 |
|
Other residential mortgages | (1 | ) | 1 |
| — |
|
Commercial | 1 |
| — |
| — |
|
Wealth management loans and mortgages | (1 | ) | — |
| — |
|
Foreign | (2 | ) | — |
| — |
|
Net (charge-offs) recoveries | (3 | ) | 1 |
| 1 |
|
Allowance for credit losses - end of period | $ | 311 |
| $ | 283 |
| $ | 278 |
|
Allowance for loan losses | $ | 187 |
| $ | 190 |
| $ | 183 |
|
Allowance for lending-related commitments | 124 |
| 93 |
| 95 |
|
The allowance for credit losses was $278 million at June 30, 2015, a decrease of $5 million compared with $283 million at March 31, 2015.
|
|
BNY Mellon 2Q15 Earnings Release |
CAPITAL AND LIQUIDITY
The common equity Tier 1 (“CET1”), Tier 1 and Total risk-based regulatory capital ratios in the first section of the table below are based on Basel III components of capital, as phased-in, and credit risk asset risk-weightings using the U.S. capital rules’ advanced approaches framework (the “Advanced Approach”) as the related risk-weighted assets (“RWA”) were higher when calculated under the Advanced Approach at Dec. 31, 2014, March 31, 2015 and June 30, 2015. Our risk-based capital adequacy is determined using the higher of RWA determined using the Advanced Approach and the U.S. capital rules’ standardized approach (the “Standardized Approach”). The leverage capital ratios are based on Basel III components of capital, as phased-in and quarterly average total assets. Our consolidated capital ratios are shown in the following table.
|
| | | | | | |
Capital ratios | Dec. 31, 2014 |
| March 31, 2015 |
| June 30,
2015 |
|
Consolidated regulatory capital ratios: (a)(b)(c) | | | |
CET1 ratio | 11.2 | % | 10.8 | % | 10.9 | % |
Tier 1 capital ratio | 12.2 |
| 11.7 |
| 12.4 |
|
Total (Tier 1 plus Tier 2) capital ratio | 12.5 |
| 12.0 |
| 12.7 |
|
Leverage capital ratio | 5.6 |
| 5.7 |
| 5.8 |
|
BNY Mellon shareholders’ equity to total assets ratio – GAAP (b)(d) | 9.7 |
| 9.5 |
| 9.7 |
|
BNY Mellon common shareholders’ equity to total assets ratio – GAAP (b)(d) | 9.3 |
| 9.1 |
| 9.0 |
|
BNY Mellon tangible common shareholders’ equity to tangible assets of operations ratio – Non-GAAP (d) | 6.5 |
| 6.0 |
| 6.2 |
|
| | | |
Selected regulatory capital ratios – fully phased-in – Non-GAAP: (a)(b) | | | |
Estimated CET1 ratio: | | | |
Standardized Approach | 10.6 |
| 10.0 |
| 10.0 |
|
Advanced Approach | 9.8 |
| 9.9 |
| 9.9 |
|
Estimated supplementary leverage ratio (“SLR”) | 4.4 |
| 4.6 |
| 4.6 |
|
| |
(a) | Regulatory capital ratios for June 30, 2015 are preliminary. |
| |
(b) | Capital ratios for the first quarter of 2015 were revised to reflect the retrospective application of adopting new accounting guidance in 2Q15 related to Consolidations (ASU 2015-02). As a result of the new accounting guidance, the RWA as of March 31, 2015 decreased $13.3 billion under the Advanced Approach and $7.0 billion under the Standardized Approach. See page 24 for additional information on the new accounting guidance. |
| |
(c) | At Dec. 31, 2014, the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios determined under the transitional Standardized Approach were 15.0%, 16.3% and 16.9%, and were calculated based on Basel III components of capital, as phased-in, and asset risk-weightings using Basel I-based requirements. At March 31, 2015 and June 30, 2015, the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios determined under the transitional Basel III Standardized Approach were 11.2%, 12.2%, and 12.7%, and 11.3%, 12.9% and 13.4%, respectively. Additionally, the capital ratios determined under the transitional Basel III Standardized Approach for March 31, 2015 were revised to reflect the new accounting guidance related to Consolidations. |
| |
(d) | See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 25 for a reconciliation of these ratios. |
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| | | |
Estimated Basel III CET1 generation presented on a fully phased-in basis – Non-GAAP – preliminary | |
(in millions) | 2Q15 |
|
Estimated fully phased-in Basel III CET1 – Non-GAAP – Beginning of period | $ | 16,123 |
|
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP | 830 |
|
Goodwill and intangible assets, net of related deferred tax liabilities | (129 | ) |
Gross Basel III CET1 generated | 701 |
|
Capital deployed: | |
Dividends | (192 | ) |
Common stock repurchased | (834 | ) |
Total capital deployed | (1,026 | ) |
Other comprehensive (loss) | (43 | ) |
Additional paid-in capital (a) | 191 |
|
Other (primarily cash flow hedges) | (15 | ) |
Total other additions | 133 |
|
Net Basel III CET1 generated | (192 | ) |
Estimated fully phased-in Basel III CET1 – Non-GAAP – End of period | $ | 15,931 |
|
(a) Primarily related to stock awards, the exercise of stock options and stock issued for employee benefit plans.
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BNY Mellon 2Q15 Earnings Release |
The table presented below compares the fully phased-in Basel III capital components and ratios to those capital components and ratios determined on a phased-in basis (referred to as the “Transitional Approach”).
|
| | | | | | | |
Basel III capital components and ratios at June 30, 2015 – preliminary | Fully phased-in Basel III - Non-GAAP |
| | Transitional Approach (a) |
|
(dollars in millions) | |
CET1: | | | |
Common shareholders’ equity | $ | 35,718 |
| | $ | 36,253 |
|
Goodwill and intangible assets | (19,277 | ) | | (17,584 | ) |
Net pension fund assets | (109 | ) | | (44 | ) |
Equity method investments | (374 | ) | | (315 | ) |
Deferred tax assets | (18 | ) | | (7 | ) |
Other | (9 | ) | | (5 | ) |
Total CET1 | 15,931 |
| | 18,298 |
|
Other Tier 1 capital: | | | |
Preferred stock | 2,552 |
| | 2,552 |
|
Trust preferred securities | — |
| | 79 |
|
Disallowed deferred tax assets | — |
| | (11 | ) |
Net pension fund assets | — |
| | (65 | ) |
Other | (7 | ) | | (11 | ) |
Total Tier 1 capital | 18,476 |
| | 20,842 |
|
| | | |
Tier 2 capital: | | | |
Trust preferred securities | — |
| | 236 |
|
Subordinated debt | 248 |
| | 248 |
|
Allowance for credit losses | 278 |
| | 278 |
|
Other | (6 | ) | | (7 | ) |
Total Tier 2 capital - Standardized Approach | 520 |
| | 755 |
|
Excess of expected credit losses | 12 |
| | 12 |
|
Less: Allowance for credit losses | 278 |
| | 278 |
|
Total Tier 2 capital - Advanced Approach | $ | 254 |
| | $ | 489 |
|
| | | |
Total capital: | | | |
Standardized Approach | $ | 18,996 |
| | $ | 21,597 |
|
Advanced Approach | $ | 18,730 |
| | $ | 21,331 |
|
| | | |
Risk-weighted assets: | | | |
Standardized Approach | $ | 160,031 |
| | $ | 161,825 |
|
Advanced Approach | $ | 160,505 |
| | $ | 167,562 |
|
| | | |
Standardized Approach: | | | |
Estimated Basel III CET1 ratio | 10.0 | % | | 11.3 | % |
Tier 1 capital ratio | 11.6 |
| | 12.9 |
|
Total (Tier 1 plus Tier 2) capital ratio | 11.9 |
| | 13.4 |
|
| | | |
Advanced Approach: | | | |
Estimated Basel III CET1 ratio | 9.9 | % | | 10.9 | % |
Tier 1 capital ratio | 11.5 |
| | 12.4 |
|
Total (Tier 1 plus Tier 2) capital ratio | 11.7 |
| | 12.7 |
|
(a) Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in 2015 under the U.S. capital rules.
BNY Mellon has presented its estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR based on its interpretation of the U.S. capital rules, which are being gradually phased-in over a multi-year period, and on the application of such rules to BNY Mellon’s businesses as currently conducted. Management views the estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR as key measures in monitoring BNY Mellon’s capital position and progress against future regulatory capital standards. Additionally, the presentation of the estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR are intended to allow investors to compare these ratios with estimates presented by other companies. The estimated fully phased-in Basel III CET1 and other risk-based capital ratios assume all relevant regulatory approvals. The U.S. capital rules require approval by banking regulators of certain models used as part of RWA calculations. If these models are not approved, the estimated fully phased-in Basel III CET1 and other risk-based capital ratios would likely be adversely impacted.
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BNY Mellon 2Q15 Earnings Release |
RWA at Dec. 31, 2014, March 31, 2015 and June 30, 2015 for credit risk under the transitional Advanced Approach do not reflect the use of a simple value-at-risk methodology for repo-style transactions (including agented indemnified securities lending transactions), eligible margin loans, and similar transactions. BNY Mellon has requested written approval to use this methodology.
Our capital and liquidity ratios are necessarily subject to, among other things, BNY Mellon’s further review of applicable rules, anticipated compliance with all necessary enhancements to model calibration, approval by regulators of certain models used as part of RWA calculations, other refinements, further implementation guidance from regulators, market practices and standards and any changes BNY Mellon may make to its businesses. Consequently, our capital and liquidity ratios remain subject to ongoing review and revision and may change based on these factors.
Supplementary Leverage Ratio (“SLR”)
The following table presents the components of our estimated SLR using fully phased-in Basel III components of capital.
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| | | | | | | | | | |
Estimated fully phased-in SLR – Non-GAAP (a) (dollars in millions) | Dec. 31, 2014 |
| March 31,
2015 |
| June 30,
2015 |
| (b) |
Total estimated fully phased-in Basel III CET1 – Non-GAAP | $ | 15,931 |
| $ | 16,123 |
| $ | 15,931 |
| |
Additional Tier 1 capital | 1,550 |
| 1,560 |
| 2,545 |
| |
Total Tier 1 capital | $ | 17,481 |
| $ | 17,683 |
| $ | 18,476 |
| |
| | | | |
Total leverage exposure: | | | | |
Quarterly average total assets (c) | $ | 385,232 |
| $ | 368,411 |
| $ | 378,293 |
| |
Less: Amounts deducted from Tier 1 capital | 19,947 |
| 19,644 |
| 19,779 |
| |
Total on-balance sheet assets, as adjusted (c) | 365,285 |
| 348,767 |
| 358,514 |
| |
Off-balance sheet exposures: | | | | |
Potential future exposure for derivatives contracts (plus certain other items) | 11,376 |
| 9,295 |
| 9,222 |
| |
Repo-style transaction exposures included in SLR | 302 |
| 6,474 |
| 6,589 |
| |
Credit-equivalent amount of other off-balance sheet exposures (less SLR exclusions) | 21,850 |
| 22,046 |
| 27,251 |
| |
Total off-balance sheet exposures | 33,528 |
| 37,815 |
| 43,062 |
| |
Total leverage exposure (c) | $ | 398,813 |
| $ | 386,582 |
| $ | 401,576 |
| |
| | | | |
Estimated fully phased-in SLR – Non-GAAP (c) | 4.4 | % | 4.6 | % | 4.6 | % | |
| |
(a) | The estimated fully phased-in SLR (Non-GAAP) is based on our interpretation of the U.S. capital rules. When the SLR is fully phased-in, we expect to maintain an SLR of over 5%. The minimum required SLR is 3% and there is a 2% buffer, in addition to the minimum, that is applicable to U.S. G-SIBs. |
| |
(b) | June 30, 2015 information is preliminary. |
| |
(c) | The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). |
| |
• | The SLR increased slightly on a sequential basis, as both total Tier 1 capital and total leverage exposure increased. |
| |
• | The increase in total Tier 1 capital was driven by the issuance of preferred stock. |
| |
• | The increase in leverage exposure was driven by: |
| |
• | an increase in average total assets, primarily interest-earning assets, as a result of higher average deposits and securities sold under repurchase agreements. |
| |
• | an increase in the credit equivalent amount of other off-balance sheet exposures primarily from the secured intraday credit provided to dealers in connection with their tri-party repo activity. |
Liquidity Coverage Ratio (“LCR”)
The U.S. LCR rules became effective Jan. 1, 2015 and require BNY Mellon to meet an LCR of 80%, increasing annually by 10% increments until fully phased-in on Jan. 1, 2017, at which time we will be required to meet an LCR of 100%. Our estimated LCR on a consolidated basis is compliant with the fully phased-in requirements of the U.S. LCR as of June 30, 2015 based on our current understanding of the U.S. LCR rules.
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BNY Mellon 2Q15 Earnings Release |
INVESTMENT MANAGEMENT provides investment management services to institutional and retail investors, as well as investment management, wealth and estate planning and private banking solutions to high net worth individuals and families, and foundations and endowments.
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| | | | | | | | | | | | | | | | | | | | |
(dollars in millions, unless otherwise noted) | | | | | | | 2Q15 vs. |
2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
| | 2Q14 | 1Q15 |
Revenue: | | | | | | | | |
Investment management fees: | | | | | | | | |
Mutual funds | $ | 311 |
| $ | 315 |
| $ | 306 |
| $ | 301 |
| $ | 307 |
| | (1 | )% | 2 | % |
Institutional clients | 385 |
| 382 |
| 375 |
| 376 |
| 376 |
| | (2 | ) | — |
|
Wealth management | 156 |
| 158 |
| 157 |
| 158 |
| 161 |
| | 3 |
| 2 |
|
Investment management fees | 852 |
| 855 |
| 838 |
| 835 |
| 844 |
| | (1 | ) | 1 |
|
Performance fees | 29 |
| 22 |
| 44 |
| 15 |
| 20 |
| | (31 | ) | N/M |
Investment management and performance fees | 881 |
| 877 |
| 882 |
| 850 |
| 864 |
| | (2 | ) | 2 |
|
Distribution and servicing | 41 |
| 41 |
| 40 |
| 39 |
| 37 |
| | (10 | ) | (5 | ) |
Other (a) | 48 |
| 16 |
| 7 |
| 47 |
| 25 |
| | N/M | N/M |
Total fee and other revenue (a) | 970 |
| 934 |
| 929 |
| 936 |
| 926 |
| | (5 | ) | (1 | ) |
Net interest revenue | 66 |
| 69 |
| 69 |
| 74 |
| 78 |
| | 18 |
| 5 |
|
Total revenue | 1,036 |
| 1,003 |
| 998 |
| 1,010 |
| 1,004 |
| | (3 | ) | (1 | ) |
Noninterest expense (ex. amortization of intangible assets and the charge related to investment management funds, net of incentives) | 725 |
| 727 |
| 729 |
| 721 |
| 714 |
| | (2 | ) | (1 | ) |
Income before taxes (ex. amortization of intangible assets and the charge related to investment management funds, net of incentives) | 311 |
| 276 |
| 269 |
| 289 |
| 290 |
| | (7 | ) | — |
|
Amortization of intangible assets | 31 |
| 31 |
| 30 |
| 25 |
| 25 |
| | (19 | ) | — |
|
Charge related to investment management funds, net of incentives | 109 |
| — |
| — |
| — |
| — |
| | N/M | N/M |
Income before taxes | $ | 171 |
| $ | 245 |
| $ | 239 |
| $ | 264 |
| $ | 265 |
| | 55 | % | — | % |
| | | | | | | | |
Pre-tax operating margin | 16 | % | 24 | % | 24 | % | 26 | % | 26 | % | | | |
Adjusted pre-tax operating margin (b) | 36 | % | 33 | % | 32 | % | 34 | % | 34 | % | | | |
| | | | | | | | |
Changes in AUM (in billions): (c) | | | | | | | | |
Beginning balance of AUM | $ | 1,620 |
| $ | 1,636 |
| $ | 1,646 |
| $ | 1,710 |
| $ | 1,741 |
| | | |
Net inflows (outflows): | | | | | | | | |
Long-term: | | | | | | | | |
Equity | (4 | ) | (2 | ) | (4 | ) | (6 | ) | (12 | ) | | | |
Fixed income | (1 | ) | — |
| 4 |
| 4 |
| (2 | ) | | | |
Index | 7 |
| (3 | ) | 1 |
| 8 |
| (9 | ) | | | |
Liability-driven investments (d) | (17 | ) | 18 |
| 24 |
| 8 |
| 5 |
| | | |
Alternative investments | 2 |
| — |
| 2 |
| 2 |
| 3 |
| | | |
Total long-term inflows (outflows) | (13 | ) | 13 |
| 27 |
| 16 |
| (15 | ) | | | |
Short term: | | | | | | | | |
Cash | (18 | ) | 19 |
| 5 |
| 1 |
| (11 | ) | | | |
Total net inflows (outflows) | (31 | ) | 32 |
| 32 |
| 17 |
| (26 | ) | | | |
Net market/currency impact/acquisition | 47 |
| (22 | ) | 32 |
| 14 |
| 9 |
| | | |
Ending balance of AUM | $ | 1,636 |
| $ | 1,646 |
| $ | 1,710 |
| $ | 1,741 |
| $ | 1,724 |
| (e) | 5 | % | (1 | )% |
| | | | | | | | |
AUM at period end, by product type: (c) | | | | | | | | |
Equity | 17 | % | 16 | % | 16 | % | 15 | % | 15 | % | |
| |
Fixed income | 14 |
| 13 |
| 13 |
| 13 |
| 13 |
| |
| |
Index | 21 |
| 21 |
| 21 |
| 22 |
| 21 |
| |
| |
Liability-driven investments (d) | 27 |
| 28 |
| 29 |
| 29 |
| 30 |
| |
| |
Alternative investments | 4 |
| 4 |
| 4 |
| 4 |
| 4 |
| |
| |
Cash | 17 |
| 18 |
| 17 |
| 17 |
| 17 |
| |
| |
Total AUM | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | (e) |
| |
| | | | | | | | |
Average balances: | | | | | | | | |
Average loans | $ | 10,372 |
| $ | 10,772 |
| $ | 11,124 |
| $ | 11,634 |
| $ | 12,298 |
| | 19 | % | 6 | % |
Average deposits | $ | 13,458 |
| $ | 13,764 |
| $ | 14,604 |
| $ | 15,218 |
| $ | 14,640 |
| | 9 | % | (4 | )% |
| |
(a) | Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 25 for the reconciliation of Non-GAAP measures. Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other trading revenue and investment and other income. |
| |
(b) | Excludes the net negative impact of money market fee waivers, amortization of intangible assets and the charge related to investment management funds, net of incentives, and is net of distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 25 for the reconciliation of this Non-GAAP measure. |
| |
(c) | Excludes securities lending cash management assets and assets managed in the Investment Services business. |
| |
(d) | Includes currency overlay assets under management. |
N/M – Not meaningful.
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BNY Mellon 2Q15 Earnings Release |
INVESTMENT MANAGEMENT KEY POINTS
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• | Assets under management were $1.72 trillion at June 30, 2015, an increase of 5% year-over-year and a decrease of 1% sequentially. The year-over-year increase primarily resulted from higher market values, net new business and the Cutwater acquisition, partially offset by the unfavorable impact of a stronger U.S. dollar. |
| |
• | Net long-term outflows were $15 billion in 2Q15 driven by equity, index and fixed income investments, partially offset by liability-driven and alternative investments. |
| |
• | Net short-term outflows were $11 billion in 2Q15. |
| |
• | Income before taxes excluding amortization of intangible assets and the charge related to investment management funds, net of incentives decreased 7% year-over-year and increased slightly on a sequential basis. |
| |
• | Total revenue was $1.0 billion, a decrease of 3% year-over-year and 1% sequentially. The year-over-year decrease primarily reflects the unfavorable impact of a stronger U.S. dollar and lower performance fees, partially offset by the impact of the 1Q15 acquisition of Cutwater and strategic initiatives. Both decreases also reflect lower seed capital gains, partially offset by higher equity market values. |
| |
• | 43% non-U.S. revenue in 2Q15 vs. 45% in 2Q14. |
| |
• | Investment management fees were $844 million, a decrease of 1% year-over-year, or an increase of 5% on a constant currency basis (Non-GAAP). The increase was primarily driven by higher equity market values, the impact of the 1Q15 acquisition of Cutwater and strategic initiatives. Sequentially, investment management fees increased 1% reflecting higher equity market values. |
| |
• | Performance fees were $20 million in 2Q15 compared with $29 million in 2Q14 and $15 million in 1Q15. |
| |
• | Other revenue was $25 million in 2Q15 compared with $48 million in 2Q14 and $47 million in 1Q15. Both decreases primarily reflect lower seed capital gains, partially offset by gains on hedging activities within a boutique. |
| |
• | Net interest revenue increased 18% year-over-year and 5% sequentially. Both increases primarily reflect higher loan levels. The year-over-year increase also reflects higher average deposits. |
| |
• | Average loans increased 19% year-over-year and 6% sequentially; average deposits increased 9% year-over-year and decreased 4% sequentially. |
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• | Total noninterest expense (excluding amortization of intangible assets and the charge related to investment management funds, net of incentives) decreased 2% year-over-year and 1% sequentially. The year-over-year decrease primarily reflects the favorable impact of a stronger U.S. dollar and lower distribution and servicing expense, partially offset by the impact of the Cutwater acquisition and investments in strategic initiatives. The sequential decrease primarily reflects lower incentive expense. |
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BNY Mellon 2Q15 Earnings Release |
INVESTMENT SERVICES provides global custody and related services, broker-dealer services, global collateral services, corporate trust, depositary receipt and clearing services as well as global payment/working capital solutions to global financial institutions.
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(dollars in millions, unless otherwise noted) | | | | | | | 2Q15 vs. |
2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
| | 2Q14 |
| 1Q15 |
|
Revenue: | | | | | | | | |
Investment services fees: | | | | | | | | |
Asset servicing | $ | 993 |
| $ | 998 |
| $ | 992 |
| $ | 1,013 |
| $ | 1,035 |
| | 4 | % | 2 | % |
Clearing services | 324 |
| 336 |
| 346 |
| 342 |
| 346 |
| | 7 |
| 1 |
|
Issuer services | 231 |
| 314 |
| 193 |
| 231 |
| 234 |
| | 1 |
| 1 |
|
Treasury services | 140 |
| 139 |
| 142 |
| 135 |
| 141 |
| | 1 |
| 4 |
|
Total investment services fees | 1,688 |
| 1,787 |
| 1,673 |
| 1,721 |
| 1,756 |
| | 4 |
| 2 |
|
Foreign exchange and other trading revenue | 145 |
| 159 |
| 165 |
| 209 |
| 179 |
| | 23 |
| (14 | ) |
Other (a) | 87 |
| 59 |
| 69 |
| 63 |
| 85 |
| | (2 | ) | 35 |
|
Total fee and other revenue | 1,920 |
| 2,005 |
| 1,907 |
| 1,993 |
| 2,020 |
| | 5 |
| 1 |
|
Net interest revenue | 593 |
| 583 |
| 574 |
| 600 |
| 635 |
| | 7 |
| 6 |
|
Total revenue | 2,513 |
| 2,588 |
| 2,481 |
| 2,593 |
| 2,655 |
| | 6 |
| 2 |
|
Noninterest expense (ex. amortization of intangible assets) | 1,824 |
| 1,835 |
| 2,512 |
| 1,797 |
| 1,841 |
| | 1 |
| 2 |
|
Income (loss) before taxes (ex. amortization of intangible assets) | 689 |
| 753 |
| (31 | ) | 796 |
| 814 |
| | 18 |
| 2 |
|
Amortization of intangible assets | 44 |
| 44 |
| 43 |
| 41 |
| 40 |
| | (9 | ) | (2 | ) |
Income (loss) before taxes | $ | 645 |
| $ | 709 |
| $ | (74 | ) | $ | 755 |
| $ | 774 |
| | 20 | % | 3 | % |
| | | | | | | | |
Pre-tax operating margin | 26 | % | 27 | % | (3 | )% | 29 | % | 29 | % | | | |
Pre-tax operating margin (ex. amortization of intangible assets) | 27 | % | 29 | % | (1 | )% | 31 | % | 31 | % | | | |
| | | | | | | | |
Investment services fees as a percentage of noninterest expense (b) | 93 | % | 100 | % | 92 | % | 96 | % | 98 | % | | | |
| | | | | | | | |
Securities lending revenue | $ | 35 |
| $ | 27 |
| $ | 28 |
| $ | 34 |
| $ | 40 |
| | 14 | % | 18 | % |
| | | | | | | | |
Metrics: | | | | | | | | |
Average loans | $ | 33,115 |
| $ | 33,785 |
| $ | 35,448 |
| $ | 37,699 |
| $ | 38,264 |
| | 16 | % | 1 | % |
Average deposits | $ | 220,701 |
| $ | 221,734 |
| $ | 228,282 |
| $ | 234,183 |
| $ | 237,193 |
| | 7 | % | 1 | % |
| | | | | | | | |
AUC/A at period end (in trillions) (c) | $ | 28.5 |
| $ | 28.3 |
| $ | 28.5 |
| $ | 28.5 |
| $ | 28.6 |
| (d) | — | % | — | % |
Market value of securities on loan at period end (in billions) (e) | $ | 280 |
| $ | 282 |
| $ | 289 |
| $ | 291 |
| $ | 283 |
| | 1 | % | (3 | )% |
| | | | | | | | |
Asset servicing: | | | | | | | | |
Estimated new business wins (AUC/A) (in billions) | $ | 130 |
| $ | 115 |
| $ | 130 |
| $ | 131 |
| $ | 1,024 |
| (d) | | |
| | | | | | | | |
Depositary Receipts: | | | | | | | | |
Number of sponsored programs | 1,316 |
| 1,302 |
| 1,279 |
| 1,258 |
| 1,206 |
| | (8 | )% | (4 | )% |
| | | | | | | | |
Clearing services: | | | | | | | | |
Global DARTS volume (in thousands) | 207 |
| 209 |
| 242 |
| 261 |
| 242 |
| | 17 | % | (7 | )% |
Average active clearing accounts (U.S. platform) (in thousands) | 5,752 |
| 5,805 |
| 5,900 |
| 5,979 |
| 6,046 |
| | 5 | % | 1 | % |
Average long-term mutual fund assets (U.S. platform) | $ | 433,047 |
| $ | 442,827 |
| $ | 450,305 |
| $ | 456,954 |
| $ | 466,195 |
| | 8 | % | 2 | % |
Average investor margin loans (U.S. platform) | $ | 9,236 |
| $ | 9,861 |
| $ | 10,711 |
| $ | 11,232 |
| $ | 11,890 |
| | 29 | % | 6 | % |
| | | | | | | | |
Broker-Dealer: | | | | | | | | |
Average tri-party repo balances (in billions) | $ | 2,022 |
| $ | 2,063 |
| $ | 2,101 |
| $ | 2,153 |
| $ | 2,174 |
| | 8 | % | 1 | % |
| |
(a) | Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue, and investment and other income. |
| |
(b) | Noninterest expense excludes amortization of intangible assets and litigation expense. |
| |
(c) | Includes the AUC/A of CIBC Mellon of $1.2 trillion at June 30, 2014 and Sept. 30, 2014 and $1.1 trillion at Dec. 31, 2014, March 31, 2015 and June 30, 2015. |
| |
(e) | 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 $64 billion at June 30, 2014, $65 billion at Sept. 30, 2014 and Dec. 31, 2014, $69 billion at March 31, 2015 and $68 billion at June 30, 2015. |
|
|
BNY Mellon 2Q15 Earnings Release |
INVESTMENT SERVICES KEY POINTS
| |
• | Income before taxes excluding amortization of intangible assets totaled $814 million, an increase of 18% year-over-year. |
| |
• | The pre-tax operating margin excluding amortization of intangible assets was 31% in 2Q15 and the investment services fees as a percentage of noninterest expense was 98% in 2Q15, reflecting the continued focus on driving operating leverage. |
| |
• | Investment services fees totaled $1.8 billion, an increase of 4% year-over-year and 2% sequentially. |
| |
• | Asset servicing fees (global custody, broker-dealer services and global collateral services) were $1.04 billion in 2Q15 compared with $993 million in 2Q14 and $1.01 billion in 1Q15. The year-over-year increase primarily reflects organic growth, due in part to Global Collateral Services, net new business and higher market values, partially offset by the unfavorable impact of a stronger U.S. dollar. The sequential increase primarily reflects organic growth and seasonally higher securities lending revenue. |
-- Estimated new business wins (AUC/A) in Asset Servicing of $1.02 trillion in 2Q15.
| |
• | Clearing services fees were $346 million in 2Q15 compared with $324 million in 2Q14 and $342 million in 1Q15. The year-over-year increase was primarily driven by higher mutual fund and asset-based fees, clearance revenue and custody fees. The sequential increase was primarily driven by two additional trading days in 2Q15. |
| |
• | Issuer services fees (Corporate Trust and Depositary Receipts) were $234 million in 2Q15 compared with $231 million in both 2Q14 and 1Q15. Both increases primarily reflect higher Depositary Receipts revenue, partially offset by lower Corporate Trust fees. The year-over-year decrease in Corporate Trust fees primarily reflects the unfavorable impact of a stronger U.S. dollar. |
| |
• | Treasury services fees were $141 million in 2Q15 compared with $140 million in 2Q14 and $135 million in 1Q15. The year-over-year increase primarily reflects higher payment volumes. The sequential increase primarily reflects three additional business days in 2Q15. |
| |
• | Foreign exchange and other trading revenue was $179 million in 2Q15 compared with $145 million in 2Q14 and $209 million in 1Q15. The year-over-year increase primarily reflects higher volatility and volumes, as well as higher Depositary Receipts-related activity. The sequential decrease primarily reflects the benefit of unusually high volatility in 1Q15. |
| |
• | Net interest revenue was $635 million in 2Q15 compared with $593 million in 2Q14 and $600 million in 1Q15. Both increases primarily reflect higher average deposits and higher internal crediting rates for deposits. |
| |
• | Noninterest expense (excluding amortization of intangible assets) was $1.84 billion in 2Q15 compared with $1.82 billion in 2Q14 and $1.80 billion in 1Q15. The year-over-year increase reflects higher litigation expense, partially offset by lower consulting expense and the favorable impact of a stronger U.S. dollar. The sequential increase primarily reflects higher litigation expense. |
|
|
BNY Mellon 2Q15 Earnings Release |
OTHER SEGMENT primarily includes credit-related activities, leasing operations, corporate treasury activities, global markets and institutional banking services, business exits, M&I expenses and other corporate revenue and expense items.
|
| | | | | | | | | | | | | | | |
| | | | | |
(dollars in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
|
Revenue: | | | | | |
Fee and other revenue | $ | 119 |
| $ | 928 |
| $ | 117 |
| $ | 104 |
| $ | 124 |
|
Net interest revenue | 60 |
| 69 |
| 69 |
| 54 |
| 66 |
|
Total revenue | 179 |
| 997 |
| 186 |
| 158 |
| 190 |
|
Provision for credit losses | (12 | ) | (19 | ) | 1 |
| 2 |
| (6 | ) |
Noninterest expense (ex. M&I and restructuring charges) | 93 |
| 274 |
| 210 |
| 120 |
| 98 |
|
Income (loss) before taxes (ex. M&I and restructuring charges) | 98 |
| 742 |
| (25 | ) | 36 |
| 98 |
|
M&I and restructuring charges (recoveries) | 120 |
| 57 |
| — |
| (4 | ) | 8 |
|
Income (loss) before taxes | $ | (22 | ) | $ | 685 |
| $ | (25 | ) | $ | 40 |
| $ | 90 |
|
| | | | | |
Average loans and leases | $ | 9,962 |
| $ | 10,278 |
| $ | 10,272 |
| $ | 8,602 |
| $ | 10,515 |
|
KEY POINTS
| |
• | Total fee and other revenue increased $5 million compared with 2Q14 and $20 million compared with 1Q15. Both increases primarily reflect higher leasing gains. The year-over-year increase also reflected higher other trading revenue, which was more than offset by lower other revenue. The sequential increase was partially offset by lower other trading revenue and net securities gains. |
| |
• | Net interest revenue increased $6 million compared with 2Q14 and $12 million compared with 1Q15. Both increases primarily reflect higher interest-earning assets, partially offset by higher internal crediting rates to the business for deposits. |
| |
• | Noninterest expense (excluding M&I and restructuring charges) increased $5 million compared with 2Q14 and decreased $22 million compared with 1Q15. The year-over-year increase primarily reflects higher corporate donations. The sequential decrease was driven by lower incentive expense driven by the impact of vesting of long-term stock awards for retirement eligible employees recorded in 1Q15, partially offset by higher employee benefits expense reflecting the curtailment gain also recorded in 1Q15. |
|
|
BNY Mellon 2Q15 Earnings Release |
THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement
|
| | | | | | | | | | | | | | | | |
(in millions) | Quarter ended | | Year-to-date |
June 30, 2015 |
| March 31, 2015 |
| June 30, 2014 |
| | June 30, 2015 |
| June 30, 2014 |
|
|
Fee and other revenue | | | | | | |
Investment services fees: | | | | | | |
Asset servicing | $ | 1,060 |
| $ | 1,038 |
| $ | 1,022 |
| | $ | 2,098 |
| $ | 2,031 |
|
Clearing services | 347 |
| 344 |
| 326 |
| | 691 |
| 651 |
|
Issuer services | 234 |
| 232 |
| 231 |
| | 466 |
| 460 |
|
Treasury services | 144 |
| 137 |
| 141 |
| | 281 |
| 277 |
|
Total investment services fees | 1,785 |
| 1,751 |
| 1,720 |
| | 3,536 |
| 3,419 |
|
Investment management and performance fees (a) | 878 |
| 867 |
| 883 |
| | 1,745 |
| 1,726 |
|
Foreign exchange and other trading revenue | 187 |
| 229 |
| 130 |
| | 416 |
| 266 |
|
Financing-related fees | 58 |
| 40 |
| 44 |
| | 98 |
| 82 |
|
Distribution and servicing | 39 |
| 41 |
| 43 |
| | 80 |
| 86 |
|
Investment and other income (a) | 104 |
| 60 |
| 142 |
| | 164 |
| 244 |
|
Total fee revenue (a) | 3,051 |
| 2,988 |
| 2,962 |
| | 6,039 |
| 5,823 |
|
Net securities gains | 16 |
| 24 |
| 18 |
| | 40 |
| 40 |
|
Total fee and other revenue (a) | 3,067 |
| 3,012 |
| 2,980 |
| | 6,079 |
| 5,863 |
|
Operations of consolidated investment management funds | | | | | | |
Investment income (a) | 46 |
| 56 |
| 141 |
| | 102 |
| 279 |
|
Interest of investment management fund note holders (a) | 6 |
| 4 |
| 95 |
| | 10 |
| 197 |
|
Income from consolidated investment management funds (a) | 40 |
| 52 |
| 46 |
| | 92 |
| 82 |
|
Net interest revenue | | | | | | |
Interest revenue | 847 |
| 807 |
| 811 |
| | 1,654 |
| 1,623 |
|
Interest expense | 68 |
| 79 |
| 92 |
| | 147 |
| 176 |
|
Net interest revenue | 779 |
| 728 |
| 719 |
| | 1,507 |
| 1,447 |
|
Provision for credit losses | (6 | ) | 2 |
| (12 | ) | | (4 | ) | (30 | ) |
Net interest revenue after provision for credit losses | 785 |
| 726 |
| 731 |
| | 1,511 |
| 1,477 |
|
Noninterest expense | | | | | | |
Staff | 1,434 |
| 1,485 |
| 1,439 |
| | 2,919 |
| 2,950 |
|
Professional, legal and other purchased services | 299 |
| 302 |
| 314 |
| | 601 |
| 626 |
|
Software and equipment | 228 |
| 228 |
| 236 |
| | 456 |
| 473 |
|
Net occupancy | 149 |
| 151 |
| 152 |
| | 300 |
| 306 |
|
Distribution and servicing | 96 |
| 98 |
| 112 |
| | 194 |
| 219 |
|
Sub-custodian | 75 |
| 70 |
| 81 |
| | 145 |
| 149 |
|
Business development | 72 |
| 61 |
| 68 |
| | 133 |
| 132 |
|
Other | 250 |
| 242 |
| 347 |
| | 492 |
| 570 |
|
Amortization of intangible assets | 65 |
| 66 |
| 75 |
| | 131 |
| 150 |
|
Merger and integration, litigation and restructuring charges | 59 |
| (3 | ) | 122 |
| | 56 |
| 110 |
|
Total noninterest expense | 2,727 |
| 2,700 |
| 2,946 |
| | 5,427 |
| 5,685 |
|
Income | | | | | | |
Income before income taxes (a) | 1,165 |
| 1,090 |
| 811 |
| | 2,255 |
| 1,737 |
|
Provision for income taxes | 276 |
| 280 |
| 217 |
| | 556 |
| 449 |
|
Net income (a) | 889 |
| 810 |
| 594 |
| | 1,699 |
| 1,288 |
|
Net (income) attributable to noncontrolling interests (includes $(37), $(31), $(17), $(68) and $(37) related to consolidated investment management funds, respectively) (a) | (36 | ) | (31 | ) | (17 | ) | | (67 | ) | (37 | ) |
Net income applicable to shareholders of The Bank of New York Mellon Corporation | 853 |
| 779 |
| 577 |
| | 1,632 |
| 1,251 |
|
Preferred stock dividends | (23 | ) | (13 | ) | (23 | ) | | (36 | ) | (36 | ) |
Net income applicable to common shareholders of The Bank of New York Mellon Corporation | $ | 830 |
| $ | 766 |
| $ | 554 |
| | $ | 1,596 |
| $ | 1,215 |
|
| |
(a) | The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). See page 24 for additional information. |
|
|
BNY Mellon 2Q15 Earnings Release |
THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement - continued
|
| | | | | | | | | | | | | | | | |
Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation (in millions) | Quarter ended | | Year-to-date |
|
June 30, 2015 |
| March 31, 2015 |
| June 30, 2014 |
| | June 30, 2015 |
| June 30, 2014 |
|
Net income applicable to common shareholders of The Bank of New York Mellon Corporation | $ | 830 |
| $ | 766 |
| $ | 554 |
| | $ | 1,596 |
| $ | 1,215 |
|
Less: Earnings allocated to participating securities | 9 |
| 12 |
| 10 |
| | 24 |
| 23 |
|
Net income applicable to the common shareholders of The Bank of New York Mellon Corporation after required adjustments for the calculation of basic and diluted earnings per common share | $ | 821 |
| $ | 754 |
| $ | 544 |
|
| $ | 1,572 |
| $ | 1,192 |
|
|
| | | | | | | | | | | |
Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation (in thousands) | Quarter ended | | Year-to-date |
June 30, 2015 |
| March 31, 2015 |
| June 30, 2014 |
| | June 30, 2015 |
| June 30, 2014 |
|
Basic | 1,113,790 |
| 1,118,602 |
| 1,133,556 |
| | 1,116,183 |
| 1,136,086 |
|
Diluted | 1,122,135 |
| 1,126,306 |
| 1,139,800 |
| | 1,124,154 |
| 1,141,948 |
|
|
| | | | | | | | | | | | | | | | |
Earnings per share applicable to the common shareholders of The Bank of New York Mellon Corporation (in dollars) | Quarter ended | | Year-to-date |
June 30, 2015 |
| March 31, 2015 |
| June 30, 2014 |
| | June 30, 2015 |
| June 30, 2014 |
|
Basic | $ | 0.74 |
| $ | 0.67 |
| $ | 0.48 |
| | $ | 1.41 |
| $ | 1.05 |
|
Diluted | $ | 0.73 |
| $ | 0.67 |
| $ | 0.48 |
| | $ | 1.40 |
| $ | 1.04 |
|
|
|
BNY Mellon 2Q15 Earnings Release |
THE BANK OF NEW YORK MELLON CORPORATION
Consolidated Balance Sheet
|
| | | | | | | | | | |
| | (dollars in millions, except per share amounts) | June 30, 2015 |
| March 31, 2015 |
| Dec. 31, 2014 |
|
| |
| | Assets | | | |
| | Cash and due from: | | | |
| | Banks | $ | 8,354 |
| $ | 7,167 |
| $ | 6,970 |
|
| | Interest-bearing deposits with the Federal Reserve and other central banks | 104,407 |
| 89,704 |
| 96,682 |
|
| | Interest-bearing deposits with banks | 19,179 |
| 18,937 |
| 19,495 |
|
| | Federal funds sold and securities purchased under resale agreements | 23,930 |
| 28,268 |
| 20,302 |
|
| | Securities: | | | |
| | Held-to-maturity (fair value of $43,438, $41,676 and $21,127) | 43,426 |
| 41,237 |
| 20,933 |
|
| | Available-for-sale | 79,608 |
| 87,717 |
| 98,330 |
|
| | Total securities | 123,034 |
| 128,954 |
| 119,263 |
|
| | Trading assets | 7,568 |
| 9,505 |
| 9,881 |
|
| | Loans | 63,138 |
| 62,326 |
| 59,132 |
|
| | Allowance for loan losses | (183 | ) | (190 | ) | (191 | ) |
| | Net loans | 62,955 |
| 62,136 |
| 58,941 |
|
| | Premises and equipment | 1,412 |
| 1,410 |
| 1,394 |
|
| | Accrued interest receivable | 574 |
| 557 |
| 607 |
|
| | Goodwill | 17,807 |
| 17,663 |
| 17,869 |
|
| | Intangible assets | 4,000 |
| 4,047 |
| 4,127 |
|
| | Other assets (a) | 21,074 |
| 22,308 |
| 20,490 |
|
| | Subtotal assets of operations (a) | 394,294 |
| 390,656 |
| 376,021 |
|
| | Assets of consolidated investment management funds, at fair value: | | | |
| | Trading assets (a) | 2,012 |
| 1,496 |
| 8,678 |
|
| | Other assets (a) | 219 |
| 185 |
| 604 |
|
| | Subtotal assets of consolidated investment management funds, at fair value (a) | 2,231 |
| 1,681 |
| 9,282 |
|
| | Total assets (a) | $ | 396,525 |
| $ | 392,337 |
| $ | 385,303 |
|
| | Liabilities | | | |
| | Deposits: | | | |
| | Noninterest-bearing (principally U.S. offices) | $ | 114,810 |
| $ | 111,622 |
| $ | 104,240 |
|
| | Interest-bearing deposits in U.S. offices | 58,312 |
| 60,624 |
| 53,236 |
|
| | Interest-bearing deposits in Non-U.S. offices | 112,579 |
| 109,013 |
| 108,393 |
|
| | Total deposits | 285,701 |
| 281,259 |
| 265,869 |
|
| | Federal funds purchased and securities sold under repurchase agreements | 10,020 |
| 7,919 |
| 11,469 |
|
| | Trading liabilities | 5,418 |
| 7,342 |
| 7,434 |
|
| | Payables to customers and broker-dealers | 22,050 |
| 21,959 |
| 21,181 |
|
| | Commercial paper | — |
| — |
| — |
|
| | Other borrowed funds | 706 |
| 869 |
| 786 |
|
| | Accrued taxes and other expenses | 6,522 |
| 6,258 |
| 6,903 |
|
| | Other liabilities (includes allowance for lending-related commitments of $95, $93 and $89) | 5,427 |
| 7,581 |
| 5,025 |
|
| | Long-term debt | 20,375 |
| 20,401 |
| 20,264 |
|
| | Subtotal liabilities of operations | 356,219 |
| 353,588 |
| 338,931 |
|
| | Liabilities of consolidated investment management funds, at fair value: | | | |
| | Trading liabilities (a) | 770 |
| 264 |
| 7,660 |
|
| | Other liabilities (a) | 112 |
| 106 |
| 9 |
|
| | Subtotal liabilities of consolidated investment management funds, at fair value (a) | 882 |
| 370 |
| 7,669 |
|
| | Total liabilities (a) | 357,101 |
| 353,958 |
| 346,600 |
|
| | Temporary equity | | | |
| | Redeemable noncontrolling interests | 244 |
| 215 |
| 229 |
|
| | Permanent equity | | | |
| | Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 25,826, 15,826 and 15,826 shares | 2,552 |
| 1,562 |
| 1,562 |
|
| | Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,308,181,033, 1,303,799,499 and 1,290,222,821 shares | 13 |
| 13 |
| 13 |
|
| | Additional paid-in capital | 25,078 |
| 24,887 |
| 24,626 |
|
| | Retained earnings | 18,895 |
| 18,257 |
| 17,683 |
|
| | Accumulated other comprehensive loss, net of tax | (2,225 | ) | (2,182 | ) | (1,634 | ) |
| | Less: Treasury stock of 201,663,375, 182,287,827 and 171,995,262 common shares, at cost | (6,043 | ) | (5,209 | ) | (4,809 | ) |
| | Total The Bank of New York Mellon Corporation shareholders’ equity | 38,270 |
| 37,328 |
| 37,441 |
|
| | Nonredeemable noncontrolling interests of consolidated investment management funds (a) | 910 |
| 836 |
| 1,033 |
|
| | Total permanent equity (a) | 39,180 |
| 38,164 |
| 38,474 |
|
| | Total liabilities, temporary equity and permanent equity (a) | $ | 396,525 |
| $ | 392,337 |
| $ | 385,303 |
|
| |
(a) | The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). See page 24 for additional information. |
|
|
BNY Mellon 2Q15 Earnings Release |
IMPACT OF ADOPTING NEW ACCOUNTING GUIDANCE
In 2Q15, BNY Mellon elected to early adopt the new accounting guidance included in Accounting Standards Update (“ASU”) 2015-02, “Amendments to the Consolidation Analysis,” an amendment to ASC 810, Consolidation, retroactively to Jan. 1, 2015. As a result, we restated the first quarter 2015 financial statements.
This ASU eliminated the indefinite deferral of ASU 2010-10 “Amendments for Certain Investment Funds” for asset management funds with characteristics of an investment company and also eliminated the presumption that a general partner should consolidate a general partnership. Entities that comply with or operate in accordance with the requirements that are similar to those of Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds are excluded from the scope of the ASU. This ASU also changed the consolidation analysis, particularly when a reporting entity has fee arrangements that meet certain requirements and related party relationships.
The table below presents the impact of this new accounting guidance on our previously reported income statement.
|
| | | | | | | | | | | |
Income statement for quarter ended March 31, 2015 (unaudited) | As previously reported | | Adjustments | | As revised |
(in millions, except per share amounts) | | |
Fee and other revenue | | | | | |
Investment management and performance fees | $ | 854 |
| | $ | 13 |
| | $ | 867 |
|
Investment and other income | 63 |
| | (3 | ) | | 60 |
|
Total fee revenue | 2,978 |
| | 10 |
| | 2,988 |
|
Total fee and other revenue | 3,002 |
| | 10 |
| | 3,012 |
|
Operations of consolidated investment management funds | | |
|
| | |
Investment income | 189 |
| | (133 | ) | | 56 |
|
Interest of investment management fund note holders | 68 |
| | (64 | ) | | 4 |
|
Income from consolidated investment management funds | 121 |
| | (69 | ) | | 52 |
|
Income | | | | | |
Income before income taxes | 1,149 |
| | (59 | ) | | 1,090 |
|
Net income | 869 |
| | (59 | ) | | 810 |
|
Net (income) attributable to noncontrolling interests | (90 | ) | | 59 |
| | (31 | ) |
Net income applicable to common shareholders of The Bank of New York Mellon Corporation | 766 |
| | — |
| | 766 |
|
Diluted earnings per share | 0.67 |
| | — |
| | 0.67 |
|
The table below presents the impact of this new accounting guidance on our previously reported balance sheet.
|
| | | | | | | | | | | |
Balance sheet at March 31, 2015 (unaudited) | As previously reported | | Adjustments | | As revised |
(in millions) | | |
Assets | | | | | |
Other assets | $ | 22,315 |
| | $ | (7 | ) | | $ | 22,308 |
|
Subtotal assets of operations | 390,663 |
| | (7 | ) | | 390,656 |
|
Assets of consolidated investment management funds, at fair value: | | |
|
| | |
Trading assets | 7,852 |
| | (6,356 | ) | | 1,496 |
|
Other assets | 573 |
| | (388 | ) | | 185 |
|
Subtotal assets of consolidated investment management funds, at fair value | 8,425 |
| | (6,744 | ) | | 1,681 |
|
Total assets | 399,088 |
| | (6,751 | ) | | 392,337 |
|
Liabilities and Equity | | |
|
| | |
Liabilities of consolidated investment management funds, at fair value: | | |
|
| | |
Trading liabilities | 6,584 |
| | (6,320 | ) | | 264 |
|
Other liabilities | 36 |
| | 70 |
| | 106 |
|
Subtotal liabilities of consolidated investment management funds, at fair value | 6,620 |
| | (6,250 | ) | | 370 |
|
Total liabilities | 360,208 |
| | (6,250 | ) | | 353,958 |
|
Nonredeemable noncontrolling interests of consolidated investment management funds | 1,337 |
| | (501 | ) | | 836 |
|
Total permanent equity | 38,665 |
| | (501 | ) | | 38,164 |
|
Total liabilities, temporary equity and permanent equity | 399,088 |
| | (6,751 | ) | | 392,337 |
|
|
|
BNY Mellon 2Q15 Earnings Release |
SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based on fully phased-in Basel III CET1 and other risk-based capital ratios, SLR and tangible common shareholders’ equity. BNY Mellon believes that the Basel III CET1 and other risk-based capital ratios on a fully phased-in basis, the SLR on a fully phased-in basis and the ratio of tangible common shareholders’ equity to tangible assets of operations are measures of capital strength that provide additional useful information to investors, supplementing the capital ratios which are, or were, required by regulatory authorities. The tangible common shareholders’ equity ratio includes changes in investment securities valuations which are reflected in total shareholders’ equity. In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its reconciliation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes and the assets of consolidated investment management funds to which BNY Mellon has limited economic exposure. Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of those assets that can generate income. BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of tangible assets in relation to shares of common stock outstanding.
BNY Mellon has presented revenue measures which exclude the effect of noncontrolling interests related to consolidated investment management funds, a gain on the sale of our investment in Wing Hang Bank and a gain on the sale of the One Wall Street building; and expense measures which exclude M&I expenses, litigation charges, restructuring charges, amortization of intangible assets and the charge related to investment management funds, net of incentives. Earnings per share, return on equity measures and operating margin measures, which exclude some or all of these items, are also presented. Return on equity measures also exclude the benefit primarily related to a tax carryback claim. Operating margin measures may also exclude amortization of intangible assets and the net negative impact of money market fee waivers, net of distribution and servicing expense. BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons, which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon’s control. The excluded items, in general, relate to certain charges as a result of prior transactions. M&I expenses primarily relate to acquisitions and generally continue for approximately three years after the transaction. Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees. Restructuring charges relate to our streamlining actions, Operational Excellence Initiatives and migrating positions to Global Delivery Centers. Excluding these charges mentioned above permits investors to view expenses on a basis consistent with how management views the business.
The presentation of revenue growth on a constant currency basis permits investors to assess the significance of changes in foreign currency exchange rates. Growth rates on a constant currency basis were determined by applying the current period foreign currency exchange rates to the prior period revenue. BNY Mellon believes that this presentation, as a supplement to GAAP information, gives investors a clearer picture of the related revenue results without the variability caused by fluctuations in foreign currency exchange rates.
The presentation of income from consolidated investment management funds, net of net income attributable to noncontrolling interests related to the consolidation of certain investment management funds permits investors to view revenue on a basis consistent with how management views the business. BNY Mellon believes that these presentations, as a supplement to GAAP information, give investors a clearer picture of the results of its primary businesses.
In this Earnings Release, the net interest margin is presented on an FTE basis. We believe that this presentation provides comparability 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. Each of these measures as
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BNY Mellon 2Q15 Earnings Release |
described above is used by management to monitor financial performance, both on a company-wide and on a business-level basis.
The following table presents the reconciliation of the pre-tax operating margin ratio.
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| | | | | | | | | | | | | | | | | |
Reconciliation of income before income taxes – pre-tax operating margin | | | | | | | |
(dollars in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| | 2Q15 |
| |
Income before income taxes – GAAP | $ | 811 |
| $ | 1,662 |
| $ | 164 |
| $ | 1,090 |
| | $ | 1,165 |
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Less: Net income attributable to noncontrolling interests of consolidated investment management funds | 17 |
| 23 |
| 24 |
| 31 |
| | 37 |
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Gain on the sale of our investment in Wing Hang Bank | — |
| 490 |
| — |
| — |
| | — |
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Gain on the sale of the One Wall Street building | — |
| 346 |
| — |
| — |
| | — |
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Add: Amortization of intangible assets | 75 |
| 75 |
| 73 |
| 66 |
| | 65 |
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M&I, litigation and restructuring charges | 122 |
| 220 |
| 800 |
| (3 | ) | | 59 |
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Charge related to investment management funds, net of incentives | 109 |
| — |
| — |
| — |
| | — |
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Income before income taxes, as adjusted – Non-GAAP (a) | $ | 1,100 |
| $ | 1,098 |
| $ | 1,013 |
| $ | 1,122 |
| | $ | 1,252 |
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| | | | | | | |
Fee and other revenue – GAAP | $ | 2,980 |
| $ | 3,851 |
| $ | 2,935 |
| $ | 3,012 |
| | $ | 3,067 |
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Income from consolidated investment management funds – GAAP | 46 |
| 39 |
| 42 |
| 52 |
| | 40 |
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Net interest revenue – GAAP | 719 |
| 721 |
| 712 |
| 728 |
| | 779 |
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Total revenue – GAAP | 3,745 |
| 4,611 |
| 3,689 |
| 3,792 |
| | 3,886 |
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Less: Net income attributable to noncontrolling interests of consolidated investment management funds | 17 |
| 23 |
| 24 |
| 31 |
| | 37 |
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Gain on the sale of our investment in Wing Hang Bank | — |
| 490 |
| — |
| — |
| | — |
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Gain on the sale of the One Wall Street building | — |
| 346 |
| — |
| — |
| | — |
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Total revenue, as adjusted – Non-GAAP (a) | $ | 3,728 |
| $ | 3,752 |
| $ | 3,665 |
| $ | 3,761 |
| | $ | 3,849 |
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Pre-tax operating margin (b) | 22 | % | 36 | % | 4 | % | 29 | % | (c) | 30 | % | (c) |
Pre-tax operating margin – Non-GAAP (a)(b) | 30 | % | 29 | % | 28 | % | 30 | % | (c) | 33 | % | (c) |
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(a) | Non-GAAP excludes net income attributable to noncontrolling interests of consolidated investment management funds, the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, amortization of intangible assets, M&I, litigation and restructuring charges, and a charge related to investment management funds, net of incentives, if applicable. |
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(b) | Income before taxes divided by total revenue. |
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(c) | Our GAAP earnings include tax-advantaged investments such as low income housing, renewable energy, bank-owned life insurance and tax-exempt securities. The benefits of these investments are primarily reflected in tax expense. If reported on a tax-equivalent basis these investments would increase revenue and income before taxes by $64 million and $52 million for 1Q15 and 2Q15 and would increase our pre-tax operating margin by approximately 1.2% and 0.9%, respectively. |
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BNY Mellon 2Q15 Earnings Release |
The following table presents the reconciliation of the returns on common equity and tangible common equity.
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| | | | | | | | | | | | | | | |
Return on common equity and tangible common equity | | | | | |
(dollars in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
|
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP | $ | 554 |
| $ | 1,070 |
| $ | 209 |
| $ | 766 |
| $ | 830 |
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Add: Amortization of intangible assets, net of tax | 49 |
| 49 |
| 47 |
| 43 |
| 44 |
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Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP | 603 |
| 1,119 |
| 256 |
| 809 |
| 874 |
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Less: Gain on the sale of our investment in Wing Hang Bank | — |
| 315 |
| — |
| — |
| — |
|
Gain on the sale of the One Wall Street building
| — |
| 204 |
| — |
| — |
| — |
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Benefit primarily related to a tax carryback claim | — |
| — |
| 150 |
| — |
| — |
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Add: M&I, litigation and restructuring charges | 76 |
| 183 |
| 608 |
| (2 | ) | 38 |
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Charge related to investment management funds, net of incentives | 85 |
| — |
| — |
| — |
| — |
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Net income applicable to common shareholders of The Bank of New York Mellon Corporation, as adjusted – Non-GAAP (a) | $ | 764 |
| $ | 783 |
| $ | 714 |
| $ | 807 |
| $ | 912 |
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Average common shareholders’ equity | $ | 36,565 |
| $ | 36,751 |
| $ | 36,859 |
| $ | 35,486 |
| $ | 35,516 |
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Less: Average goodwill | 18,149 |
| 18,109 |
| 17,924 |
| 17,756 |
| 17,752 |
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Average intangible assets | 4,354 |
| 4,274 |
| 4,174 |
| 4,088 |
| 4,031 |
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Add: Deferred tax liability – tax deductible goodwill (b) | 1,338 |
| 1,317 |
| 1,340 |
| 1,362 |
| 1,351 |
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Deferred tax liability – intangible assets (b) | 1,247 |
| 1,230 |
| 1,216 |
| 1,200 |
| 1,179 |
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Average tangible common shareholders’ equity – Non-GAAP | $ | 16,647 |
| $ | 16,915 |
| $ | 17,317 |
| $ | 16,204 |
| $ | 16,263 |
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Return on common equity – GAAP (c) | 6.1 | % | 11.6 | % | 2.2 | % | 8.8 | % | 9.4 | % |
Return on common equity – Non-GAAP (a)(c) | 8.4 | % | 8.5 | % | 7.7 | % | 9.2 | % | 10.3 | % |
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Return on tangible common equity – Non-GAAP (a)(c) | 14.5 | % | 26.2 | % | 5.9 | % | 20.3 | % | 21.5 | % |
Return on tangible common equity – Non-GAAP adjusted (a)(c) | 18.4 | % | 18.4 | % | 16.3 | % | 20.2 | % | 22.5 | % |
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(a) | Non-GAAP excludes amortization of intangible assets, the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, the benefit primarily related to a tax carryback claim, M&I, litigation and restructuring charges, and a charge related to investment management funds, net of incentives, if applicable. |
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(b) | Deferred tax liabilities are based on fully phased-in Basel III rules. |
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BNY Mellon 2Q15 Earnings Release |
The following table presents the reconciliation of the equity to assets ratio and book value per common share.
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Equity to assets and book value per common share | June 30, 2014 |
| Sept. 30, 2014 |
| Dec. 31, 2014 |
| March 31, 2015 |
| June 30, 2015 |
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(dollars in millions, unless otherwise noted) |
BNY Mellon shareholders’ equity at period end – GAAP | $ | 38,326 |
| $ | 38,451 |
| $ | 37,441 |
| $ | 37,328 |
| $ | 38,270 |
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Less: Preferred stock | 1,562 |
| 1,562 |
| 1,562 |
| 1,562 |
| 2,552 |
|
BNY Mellon common shareholders’ equity at period end – GAAP | 36,764 |
| 36,889 |
| 35,879 |
| 35,766 |
| 35,718 |
|
Less: Goodwill | 18,196 |
| 17,992 |
| 17,869 |
| 17,663 |
| 17,807 |
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Intangible assets | 4,314 |
| 4,215 |
| 4,127 |
| 4,047 |
| 4,000 |
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Add: Deferred tax liability – tax deductible goodwill (a) | 1,338 |
| 1,317 |
| 1,340 |
| 1,362 |
| 1,351 |
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Deferred tax liability – intangible assets (a) | 1,247 |
| 1,230 |
| 1,216 |
| 1,200 |
| 1,179 |
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BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP | $ | 16,839 |
| $ | 17,229 |
| $ | 16,439 |
| $ | 16,618 |
| $ | 16,441 |
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Total assets at period end – GAAP | $ | 400,740 |
| $ | 386,296 |
| $ | 385,303 |
| $ | 392,337 |
| $ | 396,525 |
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Less: Assets of consolidated investment management funds | 10,428 |
| 9,562 |
| 9,282 |
| 1,681 |
| 2,231 |
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Subtotal assets of operations – Non-GAAP | 390,312 |
| 376,734 |
| 376,021 |
| 390,656 |
| 394,294 |
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Less: Goodwill | 18,196 |
| 17,992 |
| 17,869 |
| 17,663 |
| 17,807 |
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Intangible assets | 4,314 |
| 4,215 |
| 4,127 |
| 4,047 |
| 4,000 |
|
Cash on deposit with the Federal Reserve and other central banks (b) | 104,916 |
| 90,978 |
| 99,901 |
| 93,044 |
| 107,899 |
|
Tangible total assets of operations at period end – Non-GAAP | $ | 262,886 |
| $ | 263,549 |
| $ | 254,124 |
| $ | 275,902 |
| $ | 264,588 |
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BNY Mellon shareholders’ equity to total assets ratio – GAAP | 9.6 | % | 10.0 | % | 9.7 | % | 9.5 | % | 9.7 | % |
BNY Mellon common shareholders’ equity to total assets ratio – GAAP | 9.2 | % | 9.5 | % | 9.3 | % | 9.1 | % | 9.0 | % |
BNY Mellon tangible common shareholders’ equity to tangible assets of operations ratio – Non-GAAP | 6.4 | % | 6.5 | % | 6.5 | % | 6.0 | % | 6.2 | % |
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Period-end common shares outstanding (in thousands) | 1,131,596 |
| 1,125,710 |
| 1,118,228 |
| 1,121,512 |
| 1,106,518 |
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Book value per common share – GAAP | $ | 32.49 |
| $ | 32.77 |
| $ | 32.09 |
| $ | 31.89 |
| $ | 32.28 |
|
Tangible book value per common share – Non-GAAP | $ | 14.88 |
| $ | 15.30 |
| $ | 14.70 |
| $ | 14.82 |
| $ | 14.86 |
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(a) | Deferred tax liabilities are based on fully phased-in Basel III rules. |
(b) Assigned a zero percent risk-weighting by the regulators.
The following table presents income from consolidated investment management funds, net of noncontrolling interests.
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Income from consolidated investment management funds, net of noncontrolling interests | | |
(in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
|
Income from consolidated investment management funds | $ | 46 |
| $ | 39 |
| $ | 42 |
| $ | 52 |
| $ | 40 |
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Less: Net income attributable to noncontrolling interests of consolidated investment management funds | 17 |
| 23 |
| 24 |
| 31 |
| 37 |
|
Income from consolidated investment management funds, net of noncontrolling interests | $ | 29 |
| $ | 16 |
| $ | 18 |
| $ | 21 |
| $ | 3 |
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The following table presents the impact of changes in foreign currency exchange rates on our consolidated investment management and performance fees.
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Investment management and performance fees - Consolidated | | | 2Q15 vs. |
|
(dollars in millions) | 2Q14 |
| 2Q15 |
| 2Q14 |
|
Investment management and performance fees - GAAP | $ | 883 |
| $ | 878 |
| (1 | )% |
Impact of changes in foreign currency exchange rates | (45 | ) | — |
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Investment management and performance fees, as adjusted - Non-GAAP | $ | 838 |
| $ | 878 |
| 5 | % |
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BNY Mellon 2Q15 Earnings Release |
The following table presents the revenue line items in the Investment Management business impacted by the consolidated investment management funds.
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Income from consolidated investment management funds, net of noncontrolling interests - Investment Management business | | | | | |
(in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
|
Investment management fees | $ | 18 |
| $ | 15 |
| $ | 15 |
| $ | 1 |
| $ | 4 |
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Other (Investment income) | 11 |
| 1 |
| 3 |
| 20 |
| (1 | ) |
Income from consolidated investment management funds, net of noncontrolling interests | $ | 29 |
| $ | 16 |
| $ | 18 |
| $ | 21 |
| $ | 3 |
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The following table presents the impact of changes in foreign currency exchange rates on investment management fees reported in the Investment Management segment.
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Investment management fees - Investment Management business | | | 2Q15 vs. |
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(dollars in millions) | 2Q14 |
| 2Q15 |
| 2Q14 |
|
Investment management fees – GAAP | $ | 852 |
| $ | 844 |
| (1 | )% |
Impact of changes in foreign currency exchange rates | (45 | ) | — |
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Investment management fees, as adjusted – Non-GAAP | $ | 807 |
| $ | 844 |
| 5 | % |
The following table presents the reconciliation of the pre-tax operating margin for the Investment Management business.
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Pre-tax operating margin - Investment Management business | | | | | |
(dollars in millions) | 2Q14 |
| 3Q14 |
| 4Q14 |
| 1Q15 |
| 2Q15 |
|
Income before income taxes – GAAP | $ | 171 |
| $ | 245 |
| $ | 239 |
| $ | 264 |
| $ | 265 |
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Add: Amortization of intangible assets | 31 |
| 31 |
| 30 |
| 25 |
| 25 |
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Money market fee waivers | 28 |
| 29 |
| 34 |
| 34 |
| 29 |
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Charge related to investment management funds, net of incentives | 109 |
| — |
| — |
| — |
| — |
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Income before income taxes excluding amortization of intangible assets, money market fee waivers and the charge related to investment management funds, net of incentives – Non-GAAP | $ | 339 |
| $ | 305 |
| $ | 303 |
| $ | 323 |
| $ | 319 |
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Total revenue – GAAP | $ | 1,036 |
| $ | 1,003 |
| $ | 998 |
| $ | 1,010 |
| $ | 1,004 |
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Less: Distribution and servicing expense | 111 |
| 105 |
| 102 |
| 97 |
| 95 |
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Money market fee waivers benefiting distribution and servicing expense | 37 |
| 38 |
| 36 |
| 38 |
| 37 |
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Add: Money market fee waivers impacting total revenue | 65 |
| 67 |
| 70 |
| 72 |
| 66 |
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Total revenue net of distribution and servicing expense and excluding money market fee waivers – Non-GAAP | $ | 953 |
| $ | 927 |
| $ | 930 |
| $ | 947 |
| $ | 938 |
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Pre-tax operating margin (a) | 16 | % | 24 | % | 24 | % | 26 | % | 26 | % |
Pre-tax operating margin excluding amortization of intangible assets, money market fee waivers, the charge related to investment management funds, net of incentives and net of distribution and servicing expense – Non-GAAP (a) | 36 | % | 33 | % | 32 | % | 34 | % | 34 | % |
(a) Income before taxes divided by total revenue.
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BNY Mellon 2Q15 Earnings Release |
DIVIDENDS
Common – On July 21, 2015, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.17 per common share. This cash dividend is payable on Aug. 13, 2015 to shareholders of record as of the close of business on Aug. 3, 2015.
Preferred – On July 21, 2015, The Bank of New York Mellon Corporation also declared the following dividends for the noncumulative perpetual preferred stock, liquidation preference $100,000 per share, for the dividend period ending in Sept. 2015, in each case payable on Sept. 21, 2015 to holders of record as of the close of business on Sept. 5, 2015:
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• | $1,011.11 per share on the Series A Preferred Stock (equivalent to $10.1111 per Normal Preferred Capital Security of Mellon Capital IV, each representing 1/100th interest in a share of Series A Preferred Stock); and |
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• | $1,300.00 per share on the Series C Preferred Stock (equivalent to $0.3250 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock). |
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 management and investment services in 35 countries and more than 100 markets. As of June 30, 2015, BNY Mellon had $28.6 trillion in assets under custody and/or administration, and $1.7 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.
CAUTIONARY STATEMENT
A number of statements (i) in this Earnings Release, (ii) in our presentations and (iii) 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 our estimated capital ratios and expectations relating to those ratios, preliminary business metrics and statements regarding our capital plans; strategic priorities; initiatives in Investment Services and Investment Management; and our business improvement process. 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”, “target”, “expect”, “intend”, “continue”, “seek”, “believe”, “plan”, “goal”, “could”, “should”, “may”, “will”, “strategy”, “opportunities”, “trends” and words of similar meaning signify forward-looking statements. These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation 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 these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon’s Annual Report on Form 10-K for the year ended Dec. 31, 2014 and BNY Mellon’s other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Release speak only as of July 21, 2015, 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.
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The Bank of New York Mellon Corporation |
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Quarterly Financial Trends |
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July 21, 2015 |
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Table of Contents | | |
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Consolidated Results | | Page(s) |
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Consolidated Corporate Earnings - Quarterly Trend | | 3 |
Fee and Other Revenue | | 4 |
Average Balances and Interest Rates | | 5-6 |
Noninterest Expense | | 7 |
Assets Under Management, Custody and/or Administration and Securities Lending; Key Market Metrics | | 8 |
Assets Under Management Net Flows | | 9 |
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Business Segment Results | | |
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Investment Management Business - Quarterly Trend | | 10 |
Investment Services Business - Quarterly Trend | | 11 |
Other Segment - Quarterly Trend | | 12 |
Full Year Trends | | 13 |
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Nonperforming Assets | | 14 |
Allowance for Credit Losses, Provision and Net Charge-offs | | 15 |
Notes | | 16 |
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THE BANK OF NEW YORK MELLON CORPORATION - CONSOLIDATED CORPORATE EARNINGS - 10 Quarter Trend |
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| | 2013 | | 2014 | | 2015 | |
(dollar amounts in millions unless otherwise noted) | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | |
Revenue: | | | | | | | | | | | | | | | | | | | | | |
Investment services fees | | | | | | | | | | | | | | | | | | | | | |
Asset servicing | | $ | 969 |
| | $ | 988 |
| | $ | 964 |
| | $ | 984 |
| | $ | 1,009 |
| | $ | 1,022 |
| | $ | 1,025 |
| | $ | 1,019 |
| | $ | 1,038 |
| | $ | 1,060 |
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Issuer services | | 237 |
| | 294 |
| | 322 |
| | 237 |
| | 229 |
| | 231 |
| | 315 |
| | 193 |
| | 232 |
| | 234 |
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Clearing services | | 304 |
| | 321 |
| | 315 |
| | 324 |
| | 325 |
| | 326 |
| | 337 |
| | 347 |
| | 344 |
| | 347 |
| |
Treasury services | | 141 |
| | 139 |
| | 137 |
| | 137 |
| | 136 |
| | 141 |
| | 142 |
| | 145 |
| | 137 |
| | 144 |
| |
Total investment services fees | | 1,651 |
| | 1,742 |
| | 1,738 |
| | 1,682 |
| | 1,699 |
| | 1,720 |
| | 1,819 |
| | 1,704 |
| | 1,751 |
| | 1,785 |
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Investment management and performance fees (a) | | 822 |
| | 848 |
| | 821 |
| | 904 |
| | 843 |
| | 883 |
| | 881 |
| | 885 |
| | 867 |
| | 878 |
| |
Foreign exchange & other trading revenue | | 161 |
| | 207 |
| | 160 |
| | 146 |
| | 136 |
| | 130 |
| | 153 |
| | 151 |
| | 229 |
| | 187 |
| |
Distribution and servicing | | 49 |
| | 45 |
| | 43 |
| | 43 |
| | 43 |
| | 43 |
| | 44 |
| | 43 |
| | 41 |
| | 39 |
| |
Financing-related fees | | 41 |
| | 44 |
| | 44 |
| | 43 |
| | 38 |
| | 44 |
| | 44 |
| | 43 |
| | 40 |
| | 58 |
| |
Investment and other income (a)(b) | | 88 |
| | 285 |
| | 151 |
| | (43 | ) | | 102 |
| | 142 |
| | 890 |
| | 78 |
| | 60 |
| | 104 |
| |
Total fee revenue (a)(b) | | 2,812 |
| | 3,171 |
| | 2,957 |
| | 2,775 |
| | 2,861 |
| | 2,962 |
| | 3,831 |
| | 2,904 |
| | 2,988 |
| | 3,051 |
| |
Net securities gains (losses) | | 48 |
| | 32 |
| | 22 |
| | 39 |
| | 22 |
| | 18 |
| | 20 |
| | 31 |
| | 24 |
| | 16 |
| |
Total fee and other revenue (a)(b) | | 2,860 |
| | 3,203 |
| | 2,979 |
| | 2,814 |
| | 2,883 |
| | 2,980 |
| | 3,851 |
| | 2,935 |
| | 3,012 |
| | 3,067 |
| |
Income (loss) of consolidated investment management funds (a) | | 50 |
| | 65 |
| | 32 |
| | 36 |
| | 36 |
| | 46 |
| | 39 |
| | 42 |
| | 52 |
| | 40 |
| |
Net interest revenue | | 719 |
| | 757 |
| | 772 |
| | 761 |
| | 728 |
| | 719 |
| | 721 |
| | 712 |
| | 728 |
| | 779 |
| |
Total revenue (a)(b) | | 3,629 |
| | 4,025 |
| | 3,783 |
| | 3,611 |
| | 3,647 |
| | 3,745 |
| | 4,611 |
| | 3,689 |
| | 3,792 |
| | 3,886 |
| |
Provision for credit losses | | (24 | ) | | (19 | ) | | 2 |
| | 6 |
| | (18 | ) | | (12 | ) | | (19 | ) | | 1 |
| | 2 |
| | (6 | ) | |
Noninterest expenses | | 2,703 |
| | 2,716 |
| | 2,682 |
| | 2,793 |
| | 2,676 |
| | 2,749 |
| | 2,673 |
| | 2,651 |
| | 2,637 |
| | 2,603 |
| |
Amortization of intangible assets | | 86 |
| | 93 |
| | 81 |
| | 82 |
| | 75 |
| | 75 |
| | 75 |
| | 73 |
| | 66 |
| | 65 |
| |
Merger & integration, litigation and restructuring charges | | 39 |
| | 13 |
| | 16 |
| | 2 |
| | (12 | ) | | 122 |
| | 220 |
| | 800 |
| | (3 | ) | | 59 |
| |
Total noninterest expense | | 2,828 |
| | 2,822 |
| | 2,779 |
| | 2,877 |
| | 2,739 |
| | 2,946 |
| | 2,968 |
| | 3,524 |
| | 2,700 |
| | 2,727 |
| |
Income (loss) from continuing operations before taxes (b) | | 825 |
| | 1,222 |
| | 1,002 |
| | 728 |
| | 926 |
| | 811 |
| | 1,662 |
| | 164 |
| | 1,090 |
| | 1,165 |
| |
Provision for income taxes (b) | | 1,062 |
| | 339 |
| | 19 |
| | 172 |
| | 232 |
| | 217 |
| | 556 |
| | (93 | ) | | 280 |
| | 276 |
| |
Net income (loss) from continuing operations (b) | | (237 | ) | | 883 |
| | 983 |
| | 556 |
| | 694 |
| | 594 |
| | 1,106 |
| | 257 |
| | 810 |
| | 889 |
| |
Net income (loss) attributable to noncontrolling interest (a)(c) | | (16 | ) | | (40 | ) | | (8 | ) | | (17 | ) | | (20 | ) | | (17 | ) | | (23 | ) | | (24 | ) | | (31 | ) | | (36 | ) | |
Preferred stock dividends | | (13 | ) | | (12 | ) | | (13 | ) | | (26 | ) | | (13 | ) | | (23 | ) | | (13 | ) | | (24 | ) | | (13 | ) | | (23 | ) | |
Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation (b) | | (266 | ) | | 831 |
| | 962 |
| | 513 |
| | 661 |
| | 554 |
| | 1,070 |
| | $ | 209 |
| | $ | 766 |
| | 830 |
| |
Earnings per share (b)(d) | | $ | (0.23 | ) | | $ | 0.71 |
| | $ | 0.82 |
| | $ | 0.44 |
| | $ | 0.57 |
| | $ | 0.48 |
| | $ | 0.93 |
| | $ | 0.18 |
| | $ | 0.67 |
| | $ | 0.73 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Pre-tax operating margin - GAAP (a) | | 23 | % | | 30 | % | | 26 | % | | 20 | % | | 25 | % | | 22 | % | | 36 | % | | 4 | % | | 29 | % | | 30 | % | |
Non-GAAP (a)(e) | | 27 | % | | 28 | % | | 29 | % | | 26 | % | | 27 | % | | 30 | % | | 29 | % | | 28 | % | | 30 | % | | 33 | % | |
Return on common equity (annualized) - GAAP | | N/M |
| | 9.7 | % | | 11.1 | % | | 5.7 | % | | 7.4 | % | | 6.1 | % | | 11.6 | % | | 2.2 | % | | 8.8 | % | | 9.4 | % | |
Return on tangible common equity (annualized) - Non-GAAP | | N/M |
| | 25.0 | % | | 28.3 | % | | 14.3 | % | | 17.6 | % | | 14.5 | % | | 26.2 | % | | 5.9 | % | | 20.3 | % | | 21.5 | % | |
Percent of non-US total revenue (f) | | 35 | % | | 36 | % | | 38 | % | | 39 | % | | 37 | % | | 38 | % | | 43 | % | | 35 | % | | 36 | % | | 36 | % | |
(a) The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). For additional information, see page 24 of the Quarterly Earnings Release dated July 21, 2015, for the second quarter of 2015 (the "Quarterly Earnings Release"), furnished as an exhibit to the Current Report on Form 8-K to which these Quarterly Financial Trends are furnished as an exhibit. | |
(b) In the 1st quarter 2014, prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). | |
(c) Primarily attributable to noncontrolling interests related to consolidated investment management funds. | |
(d) The 1st quarter 2013 includes a $0.73 charge related to the disallowance of certain foreign tax credits. The 2nd quarter 2013 includes a $0.09 gain related to an equity investment. The 3rd quarter 2013 includes a $0.22 benefit related to the U.S. Tax Court's partial reconsideration of a tax decision disallowing certain foreign tax credits. The 4th quarter 2013 includes a $0.10 loss related to an equity investment. The 2nd quarter 2014 includes a $0.14 charge related to severance and certain investment management funds. The 3rd quarter 2014 includes a $0.27 gain related to the sale of an investment in Wing Hang Bank, $0.18 related to a gain on the sale of the One Wall Street building and a $0.16 charge related to litigation and restructuring. The 4th quarter 2014 includes a $0.13 benefit primarily related to a tax carryback claim, and a $0.53 charge related to litigation and restructuring. The 2nd quarter 2015 includes a $0.03 charge related to litigation and restructuring. | |
(e) Non-GAAP excludes gain (loss) related to equity investment, net income attributable to noncontrolling interests of consolidated investment management funds, the gains on the sales of our investment in Wing Hang Bank and the One Wall Street building, M&I, litigation and restructuring charges, a charge (recovery) related to investment management funds, net of incentives, amortization of intangible assets, and the benefit primarily related to a tax carryback claim, if applicable. See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 of the Quarterly Earnings Release. | |
(f) Includes fee revenue, net interest revenue and income from consolidated investment management funds, net of net income attributable to noncontrolling interests. | |
Note: See pages 4 through 7 for additional details of revenue/expense items impacting consolidated results. | |
N/M - Not meaningful | |
THE BANK OF NEW YORK MELLON CORPORATION
FEE AND OTHER REVENUE - 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2014 | | 2015 | |
(dollar amounts in millions unless otherwise noted) | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | |
Investment services fees: | | | | | | | | | | | | | | | | | | | | |
Asset servicing | $ | 930 |
| | $ | 938 |
| | $ | 929 |
| | $ | 953 |
| | $ | 971 |
| | $ | 976 |
| | $ | 988 |
| | $ | 982 |
| | $ | 995 |
| | $ | 1,011 |
| |
Securities lending | 39 |
| | 50 |
| | 35 |
| | 31 |
| | 38 |
| | 46 |
| | 37 |
| | 37 |
| | 43 |
| | 49 |
| |
Issuer services | 237 |
| | 294 |
| | 322 |
| | 237 |
| | 229 |
| | 231 |
| | 315 |
| | 193 |
| | 232 |
| | 234 |
| |
Clearing services | 304 |
| | 321 |
| | 315 |
| | 324 |
| | 325 |
| | 326 |
| | 337 |
| | 347 |
| | 344 |
| | 347 |
| |
Treasury services | 141 |
| | 139 |
| | 137 |
| | 137 |
| | 136 |
| | 141 |
| | 142 |
| | 145 |
| | 137 |
| | 144 |
| |
Total investment services fees | 1,651 |
| | 1,742 |
| | 1,738 |
| | 1,682 |
| | 1,699 |
| | 1,720 |
| | 1,819 |
| | 1,704 |
| | 1,751 |
| | 1,785 |
| |
Investment management and performance fees (a) | 822 |
| | 848 |
| | 821 |
| | 904 |
| | 843 |
| | 883 |
| | 881 |
| | 885 |
| | 867 |
| | 878 |
| |
Foreign exchange and other trading revenue | 161 |
| | 207 |
| | 160 |
| | 146 |
| | 136 |
| | 130 |
| | 153 |
| | 151 |
| | 229 |
| | 187 |
| |
Distribution and servicing | 49 |
| | 45 |
| | 43 |
| | 43 |
| | 43 |
| | 43 |
| | 44 |
| | 43 |
| | 41 |
| | 39 |
| |
Financing-related fees | 41 |
| | 44 |
| | 44 |
| | 43 |
| | 38 |
| | 44 |
| | 44 |
| | 43 |
| | 40 |
| | 58 |
| |
Investment and other income (a) | 88 |
| | 285 |
| | 151 |
| | (43 | ) | | 102 |
| | 142 |
| | 890 |
| | 78 |
| | 60 |
| | 104 |
| |
Total fee revenue (a) | $ | 2,812 |
| | $ | 3,171 |
| | $ | 2,957 |
| | $ | 2,775 |
| | $ | 2,861 |
| | $ | 2,962 |
| | $ | 3,831 |
| | 2,904 |
| | 2,988 |
| | 3,051 |
| |
Net securities gains | 48 |
| | 32 |
| | 22 |
| | 39 |
| | 22 |
| | 18 |
| | 20 |
| | 31 |
| | 24 |
| | 16 |
| |
Total fee and other revenue (a) | $ | 2,860 |
| | $ | 3,203 |
| | $ | 2,979 |
| | $ | 2,814 |
| | $ | 2,883 |
| | $ | 2,980 |
| | $ | 3,851 |
| | $ | 2,935 |
| | $ | 3,012 |
| | $ | 3,067 |
| |
Fee revenue as a percentage of total revenue - excluding net securities gains | 79 | % | | 79 | % | | 79 | % | | 78 | % | | 79 | % | | 79 | % | | 83 | % | | 79 | % | | 79 | % | | 79 | % | |
| | | | | | | | | | | | | | | | | | | | |
(a) The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). See page 24 of the Quarterly Earnings Release for additional information. |
THE BANK OF NEW YORK MELLON CORPORATION
Average Balances and Interest Rates
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2014 |
(dollar amounts in millions) | March 31 | | June 30 | | September 30 | | December 31 | | March 31 |
| Average
balance | Average
rate | | Average
balance | Average
rate | | Average
balance | Average
rate | | Average
balance | Average
rate | | Average
balance | Average
rate |
Assets | | | |
Interest-earning assets: | | | | | | | | | | | | | | |
Interest-bearing deposits with banks (primarily foreign) | $ | 40,967 |
| 0.70 | % | | $ | 42,772 |
| 0.64 | % | | $ | 41,597 |
| 0.66 | % | | $ | 39,563 |
| 0.71 | % | | $ | 41,617 |
| 0.71 | % |
Interest-bearing deposits with Federal Reserve & other central banks | 63,240 |
| 0.20 |
| | 55,911 |
| 0.22 |
| | 65,704 |
| 0.23 |
| | 83,232 |
| 0.23 |
| | 74,399 |
| 0.25 |
|
Federal funds sold and securities purchased under resale agreements | 7,478 |
| 0.54 |
| | 7,878 |
| 0.52 |
| | 8,864 |
| 0.56 |
| | 9,403 |
| 0.61 |
| | 11,118 |
| 0.61 |
|
Margin loans | 13,346 |
| 1.17 |
| | 13,906 |
| 1.14 |
| | 14,653 |
| 1.10 |
| | 15,224 |
| 1.08 |
| | 15,840 |
| 1.07 |
|
Non-margin loans: | | | | | | | | | | | | | | |
Domestic offices | 21,358 |
| 2.38 |
| | 21,689 |
| 2.40 |
| | 21,378 |
| 2.40 |
| | 22,538 |
| 2.28 |
| | 22,002 |
| 2.31 |
|
Foreign offices | 11,575 |
| 1.36 |
| | 12,318 |
| 1.32 |
| | 12,225 |
| 1.31 |
| | 13,006 |
| 1.22 |
| | 13,805 |
| 1.26 |
|
Total non-margin loans | 32,933 |
| 2.02 |
| | 34,007 |
| 2.01 |
| | 33,603 |
| 2.01 |
| | 35,544 |
| 1.89 |
| | 35,807 |
| 1.90 |
|
Securities | | | | | | | | | | | | | | |
U.S. government obligations | 18,814 |
| 1.54 |
| | 19,887 |
| 1.62 |
| | 16,540 |
| 1.76 |
| | 13,418 |
| 1.96 |
| | 17,213 |
| 1.61 |
|
U.S. government agency obligations | 42,397 |
| 1.85 |
| | 47,631 |
| 1.80 |
| | 45,745 |
| 2.02 |
| | 43,465 |
| 2.00 |
| | 42,710 |
| 1.87 |
|
Obligations of states and political subdivisions | 6,194 |
| 2.38 |
| | 6,377 |
| 2.26 |
| | 6,518 |
| 2.47 |
| | 6,757 |
| 2.76 |
| | 6,691 |
| 2.50 |
|
Other securities | 34,507 |
| 2.03 |
| | 33,243 |
| 1.93 |
| | 32,403 |
| 1.92 |
| | 33,000 |
| 1.78 |
| | 33,920 |
| 1.64 |
|
Trading securities | 5,878 |
| 2.40 |
| | 6,869 |
| 2.33 |
| | 5,523 |
| 2.83 |
| | 6,173 |
| 2.82 |
| | 5,217 |
| 2.60 |
|
Total securities | 107,790 |
| 1.91 |
| | 114,007 |
| 1.86 |
| | 106,729 |
| 2.02 |
| | 102,813 |
| 1.97 |
| | 105,751 |
| 1.83 |
|
Total interest-earning assets | 265,754 |
| 1.26 |
| | 268,481 |
| 1.27 |
| | 271,150 |
| 1.28 |
| | 285,779 |
| 1.21 |
| | 284,532 |
| 1.17 |
|
Allowance for loan losses | (264 | ) | | | (237 | ) | | | (212 | ) | | | (207 | ) | | | (210 | ) | |
Cash and due from banks | 4,534 |
| | | 5,060 |
| | | 6,400 |
| | | 6,623 |
| | | 5,886 |
| |
Other assets | 52,137 |
| | | 52,627 |
| | | 52,549 |
| | | 52,434 |
| | | 53,430 |
| |
Total Asset Consol VIE FAS 167 | 11,503 |
| | | 11,524 |
| | | 11,863 |
| | | 11,506 |
| | | 11,354 |
| |
Total Assets | $ | 333,664 |
| | | $ | 337,455 |
| | | $ | 341,750 |
| | | $ | 356,135 |
| | | $ | 354,992 |
| |
| | | | | | | | | | | | | | |
Liabilities and total equity | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | |
Money market rate accounts and demand deposit accounts | $ | 8,778 |
| 0.19 | % | | $ | 8,183 |
| 0.22 | % | | $ | 8,626 |
| 0.16 | % | | $ | 11,042 |
| 0.12 | % | | $ | 9,333 |
| 0.11 | % |
Savings | 819 |
| 0.29 |
| | 897 |
| 0.24 |
| | 1,015 |
| 0.25 |
| | 993 |
| 0.25 |
| | 1,034 |
| 0.25 |
|
Other time deposits | 39,091 |
| 0.05 |
| | 41,706 |
| 0.04 |
| | 41,546 |
| 0.04 |
| | 41,523 |
| 0.04 |
| | 41,544 |
| 0.04 |
|
Foreign offices | 99,040 |
| 0.08 |
| | 100,433 |
| 0.07 |
| | 102,360 |
| 0.07 |
| | 103,462 |
| 0.06 |
| | 101,075 |
| 0.06 |
|
Total interest-bearing deposits | 147,728 |
| 0.08 |
| | 151,219 |
| 0.07 |
| | 153,547 |
| 0.06 |
| | 157,020 |
| 0.06 |
| | 152,986 |
| 0.06 |
|
Federal funds purchased and securities sold under repurchase agreements | 9,187 |
| (0.12 | ) | | 9,206 |
| (0.28 | ) | | 12,164 |
| (0.12 | ) | | 13,155 |
| (0.10 | ) | | 14,505 |
| (0.13 | ) |
Trading Liabilities | 2,552 |
| 1.35 |
| | 3,036 |
| 1.40 |
| | 2,325 |
| 1.69 |
| | 2,534 |
| 1.42 |
| | 1,978 |
| 1.59 |
|
Other borrowed funds | 1,397 |
| 0.76 |
| | 1,443 |
| 0.19 |
| | 2,233 |
| 0.19 |
| | 2,378 |
| 0.42 |
| | 1,137 |
| 0.47 |
|
Payables to customers and broker-dealers | 9,019 |
| 0.09 |
| | 9,073 |
| 0.08 |
| | 8,659 |
| 0.09 |
| | 9,400 |
| 0.09 |
| | 8,883 |
| 0.09 |
|
Long-term debt | 18,878 |
| 1.18 |
| | 19,002 |
| 0.94 |
| | 19,025 |
| 1.00 |
| | 19,501 |
| 1.05 |
| | 20,420 |
| 1.09 |
|
Total interest-bearing liabilities | 188,761 |
| 0.20 |
| | 192,979 |
| 0.16 |
| | 197,953 |
| 0.16 |
| | 203,988 |
| 0.17 |
| | 199,909 |
| 0.17 |
|
Total noninterest-bearing deposits | 70,337 |
| | | 70,648 |
| | | 72,075 |
| | | 79,999 |
| | | 81,430 |
| |
Other liabilities | 27,416 |
| | | 26,779 |
| | | 24,380 |
| | | 23,546 |
| | | 24,608 |
| |
VIE Liabilities & Obligations FAS 167 | 10,186 |
| | | 10,242 |
| | | 10,466 |
| | | 10,283 |
| | | 10,128 |
| |
Total Shareholders' Equity | 35,966 |
| | | 35,817 |
| | | 35,826 |
| | | 37,260 |
| | | 37,851 |
| |
Noncontrolling interest | 998 |
| | | 990 |
| | | 1,050 |
| | | 1,059 |
| | | 1,066 |
| |
Total liabilities and shareholders' equity | $ | 333,664 |
| | | $ | 337,455 |
| | | $ | 341,750 |
| | | $ | 356,135 |
| | | $ | 354,992 |
| |
Net interest margin - Taxable equivalent basis | | 1.11 | % | | | 1.15 | % | | | 1.16 | % | | | 1.09 | % | | | 1.05 | % |
Note: Interest and average rates were calculated on a taxable equivalent basis, at tax rates of approximately 35%, using dollar amounts in thousands and the actual number of days in the year.
THE BANK OF NEW YORK MELLON CORPORATION
Average Balances and Interest Rates (continued)
. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2015 |
(dollar amounts in millions) | June 30 | | September 30 | | December 31 | | March 31 | | June 30 |
| Average
balance | Average
rate | | Average
balance | Average
rate | | Average
balance | Average
rate | | Average
balance | Average
rate | | Average
balance | Average
rate |
Assets | | | | |
Interest-earning assets: | | | | | | | | | | | | | | |
Interest-bearing deposits with banks (primarily foreign) | $ | 41,424 |
| 0.74 | % | | $ | 34,882 |
| 0.66 | % | | $ | 24,623 |
| 0.49 | % | | $ | 22,071 |
| 0.56 | % | | $ | 20,235 |
| 0.56 | % |
Interest-bearing deposits with Federal Reserve & other central banks | 85,546 |
| 0.26 |
| | 88,713 |
| 0.23 |
| | 97,440 |
| 0.22 |
| | 81,160 |
| 0.23 |
| | 81,860 |
| 0.21 |
|
Federal funds sold and securities purchased under resale agreements | 13,387 |
| 0.58 |
| | 15,683 |
| 0.61 |
| | 18,536 |
| 0.56 |
| | 20,416 |
| 0.59 |
| | 23,545 |
| 0.61 |
|
Margin loans | 17,050 |
| 1.05 |
| | 18,108 |
| 1.04 |
| | 18,897 |
| 1.01 |
| | 20,051 |
| 1.00 |
| | 20,467 |
| 1.01 |
|
Non-margin loans: | | | | | | | | | | | | | | |
Domestic offices | 22,566 |
| 2.30 |
| | 23,826 |
| 2.20 |
| | 25,103 |
| 2.20 |
| | 25,256 |
| 2.14 |
| | 26,716 |
| 2.06 |
|
Foreign offices | 13,833 |
| 1.34 |
| | 12,901 |
| 1.30 |
| | 12,844 |
| 1.21 |
| | 12,628 |
| 1.24 |
| | 13,893 |
| 1.19 |
|
Total non-margin loans | 36,399 |
| 1.94 |
| | 36,727 |
| 1.88 |
| | 37,947 |
| 1.86 |
| | 37,884 |
| 1.84 |
| | 40,609 |
| 1.77 |
|
Securities | | | | | | | | | | | | | | |
U.S. government obligations | 17,462 |
| 1.63 |
| | 23,067 |
| 1.38 |
| | 24,331 |
| 1.48 |
| | 27,454 |
| 1.38 |
| | 28,331 |
| 1.42 |
|
U.S. government agency obligations | 43,167 |
| 1.67 |
| | 46,186 |
| 1.67 |
| | 49,106 |
| 1.70 |
| | 52,744 |
| 1.68 |
| | 56,332 |
| 1.77 |
|
Obligations of states and political subdivisions | 6,473 |
| 2.58 |
| | 5,830 |
| 2.54 |
| | 5,305 |
| 2.61 |
| | 5,213 |
| 2.64 |
| | 5,021 |
| 2.67 |
|
Other securities | 34,318 |
| 1.55 |
| | 36,972 |
| 1.37 |
| | 38,501 |
| 1.23 |
| | 38,065 |
| 1.33 |
| | 38,957 |
| 1.24 |
|
Trading securities | 5,532 |
| 2.19 |
| | 5,435 |
| 2.36 |
| | 3,922 |
| 2.64 |
| | 3,046 |
| 2.46 |
| | 3,253 |
| 2.63 |
|
Total securities | 106,952 |
| 1.71 |
| | 117,490 |
| 1.59 |
| | 121,165 |
| 1.58 |
| | 126,522 |
| 1.57 |
| | 131,894 |
| 1.59 |
|
Total interest-earning assets | 300,758 |
| 1.10 |
| | 311,603 |
| 1.05 |
| | 318,608 |
| 1.02 |
| | 308,104 |
| 1.07 |
| | 318,610 |
| 1.08 |
|
Allowance for loan losses | (197 | ) | | | (187 | ) | | | (186 | ) | | | (191 | ) | | | (190 | ) | |
Cash and due from banks | 5,064 |
| | | 6,225 |
| | | 4,715 |
| | | 6,204 |
| | | 6,785 |
| |
Other assets (a) | 52,182 |
| | | 52,526 |
| | | 52,472 |
| | | 51,966 |
| | | 50,808 |
| |
Total Asset Consol VIE FAS 167 (a) | 11,405 |
| | | 10,242 |
| | | 9,623 |
| | | 2,328 |
| | | 2,280 |
| |
Total Assets (a) | $ | 369,212 |
| | | $ | 380,409 |
| | | $ | 385,232 |
| | | $ | 368,411 |
| | | $ | 378,293 |
| |
| | | | | | | | | | | | | | |
Liabilities and total equity | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | |
Money market rate accounts and demand deposit accounts | $ | 7,583 |
| 0.13 | % | | 7,886 |
| 0.14 | % | | 8,869 |
| 0.12 | % | | 10,021 |
| 0.12 | % | | 10,322 |
| 0.13 | % |
Savings | 1,185 |
| 0.27 |
| | 1,258 |
| 0.28 |
| | 1,262 |
| 0.30 |
| | 1,429 |
| 0.30 |
| | 1,326 |
| 0.27 |
|
Other time deposits | 42,824 |
| 0.04 |
| | 41,248 |
| 0.04 |
| | 41,507 |
| 0.04 |
| | 43,259 |
| 0.04 |
| | 46,807 |
| 0.03 |
|
Foreign offices | 111,082 |
| 0.06 |
| | 113,841 |
| 0.05 |
| | 111,511 |
| 0.02 |
| | 104,811 |
| 0.03 |
| | 112,275 |
| — |
|
Total interest-bearing deposits | 162,674 |
| 0.06 |
| | 164,233 |
| 0.06 |
| | 163,149 |
| 0.03 |
| | 159,520 |
| 0.04 |
| | 170,730 |
| 0.02 |
|
Federal funds purchased and securities sold under repurchase agreements | 19,030 |
| (0.05 | ) | | 20,620 |
| (0.07 | ) | | 20,285 |
| (0.05 | ) | | 13,877 |
| (0.09 | ) | | 16,732 |
| (0.02 | ) |
Trading Liabilities | 2,993 |
| 0.97 |
| | 2,806 |
| 0.84 |
| | 1,024 |
| 1.44 |
| | 795 |
| 1.07 |
| | 632 |
| 1.84 |
|
Other borrowed funds | 3,242 |
| 0.23 |
| | 4,587 |
| 0.15 |
| | 5,270 |
| 0.25 |
| | 2,108 |
| 0.50 |
| | 3,795 |
| 0.37 |
|
Payables to customers and broker-dealers | 8,916 |
| 0.09 |
| | 9,705 |
| 0.10 |
| | 10,484 |
| 0.08 |
| | 10,932 |
| 0.07 |
| | 11,234 |
| 0.07 |
|
Long-term debt | 20,361 |
| 1.16 |
| | 20,429 |
| 1.12 |
| | 21,187 |
| 1.27 |
| | 20,199 |
| 1.21 |
| | 20,625 |
| 0.99 |
|
Total interest-bearing liabilities | 217,216 |
| 0.17 |
| | 222,380 |
| 0.16 |
| | $ | 221,399 |
| 0.16 | % | | $ | 207,431 |
| 0.15 |
| | $ | 223,748 |
| 0.12 |
|
Total noninterest-bearing deposits | 77,820 |
| | | 82,334 |
| | | 85,330 |
| | | 89,592 |
| | | 84,890 |
| |
Other liabilities | 24,854 |
| | | 27,369 |
| | | 30,743 |
| | | 32,341 |
| | | 29,840 |
| |
VIE Liabilities & Obligations FAS 167 (a) | 10,180 |
| | | 8,879 |
| | | 8,101 |
| | | 1,004 |
| | | 857 |
| |
Total Shareholders' Equity | 38,127 |
| | | 38,313 |
| | | 38,421 |
| | | 37,048 |
| | | 37,829 |
| |
Noncontrolling interest (a) | 1,015 |
| | | 1,134 |
| | | 1,238 |
| | | 995 |
| | | 1,129 |
| |
Total liabilities and shareholders' equity (a) | $ | 369,212 |
| | | $ | 380,409 |
| | | $ | 385,232 |
| | | $ | 368,411 |
| | | $ | 378,293 |
| |
Net interest margin - Taxable equivalent basis | | 0.98 | % | | | 0.94 | % | | | 0.91 | % | | | 0.97 | % | | | 1.00 | % |
(a) The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). For additional information, see page 24 of the Quarterly Earnings Release dated July 21, 2015, for the second quarter of 2015 (the "Quarterly Earnings Release"), furnished as an exhibit to the Current Report on Form 8-K to which these Quarterly Financial Trends are furnished as an exhibit. |
Note: Interest and average rates were calculated on a taxable equivalent basis, at tax rates of approximately 35%, using dollar amounts in thousands and the actual number of days in the year.
THE BANK OF NEW YORK MELLON CORPORATION
NONINTEREST EXPENSE - 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | 2015 |
(dollar amounts in millions) | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr |
Staff: | | | | | | | | | | | | | | | | | | | | |
Compensation | | $ | 885 |
| | $ | 891 |
| | $ | 915 |
| | $ | 929 |
| | $ | 925 |
| | $ | 903 |
| | $ | 909 |
| | $ | 893 |
| | $ | 871 |
| | $ | 877 |
|
Incentives | | 338 |
| | 364 |
| | 339 |
| | 343 |
| | 359 |
| | 313 |
| | 340 |
| | 319 |
| | 425 |
| | 349 |
|
Employee benefits | | 249 |
| | 254 |
| | 262 |
| | 250 |
| | 227 |
| | 223 |
| | 228 |
| | 206 |
| | 189 |
| | 208 |
|
Total staff | | 1,472 |
| | 1,509 |
| | 1,516 |
| | 1,522 |
| | 1,511 |
| | 1,439 |
| | 1,477 |
| | 1,418 |
| | 1,485 |
| | 1,434 |
|
Professional, legal and other purchased services | | 295 |
| | 317 |
| | 296 |
| | 344 |
| | 312 |
| | 314 |
| | 323 |
| | 390 |
| | 302 |
| | 299 |
|
Software and equipment | | 228 |
| | 238 |
| | 226 |
| | 241 |
| | 237 |
| | 236 |
| | 234 |
| | 235 |
| | 228 |
| | 228 |
|
Net occupancy | | 163 |
| | 159 |
| | 153 |
| | 154 |
| | 154 |
| | 152 |
| | 154 |
| | 150 |
| | 151 |
| | 149 |
|
Distribution and servicing | | 106 |
| | 111 |
| | 108 |
| | 110 |
| | 107 |
| | 112 |
| | 107 |
| | 102 |
| | 98 |
| | 96 |
|
Business development | | 68 |
| | 90 |
| | 63 |
| | 96 |
| | 64 |
| | 68 |
| | 61 |
| | 75 |
| | 61 |
| | 72 |
|
Sub-custodian | | 64 |
| | 77 |
| | 71 |
| | 68 |
| | 68 |
| | 81 |
| | 67 |
| | 70 |
| | 70 |
| | 75 |
|
Other | | 307 |
| | 215 |
| | 249 |
| | 258 |
| | 223 |
| | 347 |
| | 250 |
| | 211 |
| | 242 |
| | 250 |
|
Amortization of intangible assets | | 86 |
| | 93 |
| | 81 |
| | 82 |
| | 75 |
| | 75 |
| | 75 |
| | 73 |
| | 66 |
| | 65 |
|
Merger & integration, litigation and restructuring charges | | 39 |
| | 13 |
| | 16 |
| | 2 |
| | (12 | ) | | 122 |
| | 220 |
| | 800 |
| | (3 | ) | | 59 |
|
Total noninterest expense | | $ | 2,828 |
| | $ | 2,822 |
| | $ | 2,779 |
| | $ | 2,877 |
| | $ | 2,739 |
| | $ | 2,946 |
| | $ | 2,968 |
| | $ | 3,524 |
| | $ | 2,700 |
| | $ | 2,727 |
|
| | | | | | | | | | | | | | | | | | | | |
Memo: | | | | | | | | | | | | | | | | | | | | |
Total noninterest expense excluding M&I, litigation, restructuring, amortization of intangible assets and the charge (recovery) related to investment management funds, net of incentives - Non-GAAP | | $ | 2,664 |
| | $ | 2,743 |
| | $ | 2,682 |
| | $ | 2,793 |
| | $ | 2,681 |
| | $ | 2,640 |
| | $ | 2,673 |
| | $ | 2,651 |
| | $ | 2,637 |
| | $ | 2,603 |
|
| | | | | | | | | | | | | | | | | | | | |
Full-time employees at period-end | | 49,700 |
| | 49,800 |
| | 50,800 |
| | 51,100 |
| | 51,400 |
| | 51,100 |
| | 50,900 |
| | 50,300 |
| | 50,500 |
| | 50,700 |
|
THE BANK OF NEW YORK MELLON CORPORATION
ASSETS UNDER MANAGEMENT, CUSTODY AND/OR ADMINISTRATION AND SECURITIES LENDING - 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | 2015 | |
(dollar amounts in billions unless otherwise noted) | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | |
Assets under management at period-end: (a) | | | | | | | | | | | | | | | | | | | | | |
Institutional | | $ | 939 |
| | $ | 968 |
| | $ | 1,041 |
| | $ | 1,072 |
| | $ | 1,118 |
| | $ | 1,109 |
| | $ | 1,131 |
| | $ | 1,187 |
| | $ | 1,210 |
| | $ | 1,185 |
| |
Mutual Funds | | 405 |
| | 378 |
| | 407 |
| | 425 |
| | 415 |
| | 440 |
| | 430 |
| | 438 |
| | 445 |
| | 454 |
| |
Private Client | | 79 |
| | 81 |
| | 84 |
| | 86 |
| | 87 |
| | 87 |
| | 85 |
| | 85 |
| | 86 |
| | 85 |
| |
Assets under management | | $ | 1,423 |
| | $ | 1,427 |
| | $ | 1,532 |
| | $ | 1,583 |
| | $ | 1,620 |
| | $ | 1,636 |
| | $ | 1,646 |
| | $ | 1,710 |
| | $ | 1,741 |
| | $ | 1,724 |
| (b) |
| | | | | | | | | | | | | | | | | | | | | |
AUM at period-end, by product type: (a) | | | | | | | | | | | | | | | | | | | | | |
Equity | | 17 | % | | 17 | % | | 17 | % | | 17 | % | | 17 | % | | 17 | % | | 16 | % | | 16 | % | | 15 | % | | 15 | % | |
Fixed income | | 15 |
| | 15 |
| | 14 |
| | 14 |
| | 14 |
| | 14 |
| | 13 |
| | 13 |
| | 13 |
| | 13 |
| |
Index | | 19 |
| | 20 |
| | 20 |
| | 20 |
| | 20 |
| | 21 |
| | 21 |
| | 21 |
| | 22 |
| | 21 |
| |
Liability-driven investments (c) | | 25 |
| | 25 |
| | 26 |
| | 26 |
| | 27 |
| | 27 |
| | 28 |
| | 29 |
| | 29 |
| | 30 |
| |
Alternative investments | | 4 |
| | 4 |
| | 4 |
| | 4 |
| | 4 |
| | 4 |
| | 4 |
| | 4 |
| | 4 |
| | 4 |
| |
Cash | | 20 |
| | 19 |
| | 19 |
| | 19 |
| | 18 |
| | 17 |
| | 18 |
| | 17 |
| | 17 |
| | 17 |
| |
Total AUM | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | (b) |
| | | | | | | | | | | | | | | | | | | | | |
Assets under custody and/or administration at period-end (in trillions) (d) | | $ | 26.3 |
| | $ | 26.2 |
| | $ | 27.4 |
| | $ | 27.6 |
| | $ | 27.9 |
| | $ | 28.5 |
| | $ | 28.3 |
| | $ | 28.5 |
| | $ | 28.5 |
| | $ | 28.6 |
| (b) |
Market value of securities on loan at period-end (e) | | $ | 244 |
| | $ | 255 |
| | $ | 255 |
| | $ | 235 |
| | $ | 264 |
| | $ | 280 |
| | $ | 282 |
| | $ | 289 |
| | $ | 291 |
| | $ | 283 |
| |
Key Market Metrics | | | | | | | | | | | | | | | | | | | | | |
S&P 500 Index (f) | | 1569 |
| | 1606 |
| | 1682 |
| | 1848 |
| | 1872 |
| | 1960 |
| | 1972 |
| | 2059 |
| | 2068 |
| | 2063 |
| |
S&P 500 Index - daily average | | 1514 |
| | 1609 |
| | 1675 |
| | 1769 |
| | 1835 |
| | 1900 |
| | 1976 |
| | 2009 |
| | 2064 |
| | 2102 |
| |
FTSE 100 Index (f) | | 6412 |
| | 6215 |
| | 6462 |
| | 6749 |
| | 6598 |
| | 6744 |
| | 6623 |
| | 6566 |
| | 6773 |
| | 6521 |
| |
FTSE 100 Index-daily average | | 6300 |
| | 6438 |
| | 6530 |
| | 6612 |
| | 6680 |
| | 6764 |
| | 6756 |
| | 6526 |
| | 6793 |
| | 6920 |
| |
MSCI World Index (f) | | 1435 |
| | 1434 |
| | 1544 |
| | 1661 |
| | 1674 |
| | 1743 |
| | 1698 |
| | 1710 |
| | 1741 |
| | 1736 |
| |
MSCI World Index-daily average | | 1405 |
| | 1463 |
| | 1511 |
| | 1602 |
| | 1647 |
| | 1698 |
| | 1733 |
| | 1695 |
| | 1726 |
| | 1780 |
| |
Barclays Capital Global Aggregate BondSM Index (f)(g) | | 356 |
| | 343 |
| | 356 |
| | 354 |
| | 365 |
| | 376 |
| | 361 |
| | 357 |
| | 348 |
| | 342 |
| |
NYSE & NASDAQ Share Volume (in billions) | | 174 |
| | 186 |
| | 166 |
| | 179 |
| | 196 |
| | 187 |
| | 173 |
| | 198 |
| | 187 |
| | 185 |
| |
JP Morgan G7 Volatility Index - daily average (h) | | 9.02 |
| | 9.84 |
| | 9.72 |
| | 8.20 |
| | 7.80 |
| | 6.22 |
| | 6.21 |
| | 8.54 |
| | 10.40 |
| | 10.06 |
| |
Average Fed Funds effective rate | | 0.14 | % | | 0.12 | % | | 0.09 | % | | 0.09 | % | | 0.07 | % | | 0.09 | % | | 0.09 | % | | 0.10 | % | | 0.11 | % | | 0.13 | % | |
Foreign exchange rates vs. U.S. dollar: | | | | | | | | | | | | | | | | | | | | | |
British pound - average rate | | $1.55 | | $1.54 | | $1.55 | | $1.62 | | $1.66 | | $1.68 | | $1.67 | | $1.58 | | $1.51 | | $1.53 | |
Euro - average rate | | 1.32 | | 1.31 | | 1.32 | | 1.36 | | 1.37 | | 1.37 | | 1.33 | | 1.25 | | 1.13 |
| | 1.11 |
| |
(a) Excludes securities lending cash management assets and assets managed in the Investment Services business. Also excludes assets under management related to Newton's private client business that was sold in September 2013. |
(b) Preliminary. |
(c) Includes currency overlay assets under management. |
(d) Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at March 31, 2013, $1.1 trillion at June 30, 2013, $1.2 trillion at Sept. 30, 2013, Dec. 31, 2013, March 31, 2014, June 30, 2014 and Sept. 30, 2014, and $1.1 trillion at Dec. 31, 2014, March 31, 2015, and June 30, 2015. |
(e) Represents the total amount of securities on loan managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent, beginning in the fourth quarter of 2013, on behalf of CIBC Mellon clients, which totaled $62 billion at Dec. 31, 2013, $66 billion at March 31, 2014, $64 billion at June 30, 2014, $65 billion at Sept. 30, 2014 and Dec. 31, 2014, $69 billion at March 31, 2015, and $68 billion at June 30, 2015. |
(f) Period end. |
(g) Unhedged in U.S. dollar terms. |
(h) The JP Morgan G7 Volatility Index is based on the implied volatility in 3-month currency options. |
THE BANK OF NEW YORK MELLON CORPORATION
ASSETS UNDER MANAGEMENT NET FLOWS - 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | 2015 | |
(dollar amounts in billions) | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | |
| | | | | | | | | | | | | | | | | | | | | |
Assets under management at beginning of period (a) | | $ | 1,380 |
| | $ | 1,423 |
| | $ | 1,427 |
| | $ | 1,532 |
| | $ | 1,583 |
| | $ | 1,620 |
| | 1,636 |
| | $ | 1,646 |
| | $ | 1,710 |
| | $ | 1,741 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Net inflows (outflows): | | | | | | | | | | | | | | | | | | | | | |
Long-term: | | | | | | | | | | | | | | | | | | | | | |
Equity | | 1 |
| | 1 |
| | 3 |
| | (5 | ) | | (1 | ) | | (4 | ) | | (2 | ) | | (4 | ) | | (6 | ) | | (12 | ) | |
Fixed income | | 5 |
| | 2 |
| | (1 | ) | | 5 |
| | — |
| | (1 | ) | | — |
| | 4 |
| | 4 |
| | (2 | ) | |
Index | | 12 |
| | 8 |
| | 2 |
| | (3 | ) | | — |
| | 7 |
| | (3 | ) | | 1 |
| | 8 |
| | (9 | ) | |
Liability-driven investments (b) | | 22 |
| | 11 |
| | 27 |
| | 4 |
| | 20 |
| | (17 | ) | | 18 |
| | 24 |
| | 8 |
| | 5 |
| |
Alternative investments | | — |
| | (1 | ) | | 1 |
| | 1 |
| | 2 |
| | 2 |
| | — |
| | 2 |
| | 2 |
| | 3 |
| |
Total long-term inflows (outflows) | | 40 |
| | 21 |
| | 32 |
| | 2 |
| | 21 |
| | (13 | ) | | 13 |
| | 27 |
| | 16 |
| | (15 | ) | |
Short-term: | | | | | | | | | | | | | | | | | | | | | |
Cash | | (13 | ) | | (1 | ) | | 13 |
| | 6 |
| | (7 | ) | | (18 | ) | | 19 |
| | 5 |
| | 1 |
| | (11 | ) | |
Total net inflows (outflows) | | 27 |
| | 20 |
| | 45 |
| | 8 |
| | 14 |
| | (31 | ) | | 32 |
| | 32 |
| | 17 |
| | (26 | ) | |
| | | | | | | | | | | | | | | | | | | | | |
Net market / currency impact / acquisition | | 16 |
| | (16 | ) | | 60 |
| | 43 |
| | 23 |
| | 47 |
| | (22 | ) | | 32 |
| | 14 |
| | 9 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Assets under management at end of period (a) | | $ | 1,423 |
| | $ | 1,427 |
| | $ | 1,532 |
| | $ | 1,583 |
| | $ | 1,620 |
| | $ | 1,636 |
| | $ | 1,646 |
|
| $ | 1,710 |
| | $ | 1,741 |
| | $ | 1,724 |
| (c) |
| | | | | | | | | | | | | | | | | | | | | |
(a) Excludes securities lending cash management assets and assets managed in the Investment Services business. Also excludes assets under management related to Newton's private client business that was sold in September 2013. | |
(b) Includes currency overlay assets under management. | |
(c) Preliminary. | |
| | | | | | | | | | | | | | | | | | | | | |
THE BANK OF NEW YORK MELLON CORPORATION
INVESTMENT MANAGEMENT BUSINESS - 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | 2015 | |
(dollar amounts in millions unless otherwise noted) | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | |
Revenue: | | | | | | | | | | | | | | | | | | | | | |
Investment management fees: | | | | | | | | | | | | | | | | | | | | | |
Mutual funds | | $ | 299 |
| | $ | 299 |
| | $ | 293 |
| | $ | 303 |
| | $ | 299 |
| | $ | 311 |
| | $ | 315 |
| | $ | 306 |
| | $ | 301 |
| | $ | 307 |
| |
Institutional clients | | 360 |
| | 366 |
| | 367 |
| | 385 |
| | 372 |
| | 385 |
| | 382 |
| | 375 |
| | 376 |
| | 376 |
| |
Wealth management | | 143 |
| | 146 |
| | 145 |
| | 149 |
| | 153 |
| | 156 |
| | 158 |
| | 157 |
| | 158 |
| | 161 |
| |
Total investment management fees | | 802 |
| | 811 |
| | 805 |
| | 837 |
| | 824 |
| | 852 |
| | 855 |
| | 838 |
| | 835 |
| | 844 |
| |
Performance fees | | 15 |
| | 33 |
| | 10 |
| | 72 |
| | 20 |
| | 29 |
| | 22 |
| | 44 |
| | 15 |
| | 20 |
| |
Investment management and performance fees | | 817 |
| | 844 |
| | 815 |
| | 909 |
| | 844 |
| | 881 |
| | 877 |
| | 882 |
| | 850 |
| | 864 |
| |
Distribution and servicing | | 46 |
| | 44 |
| | 41 |
| | 41 |
| | 40 |
| | 41 |
| | 41 |
| | 40 |
| | 39 |
| | 37 |
| |
Other (a) | | 18 |
| | 24 |
| | 26 |
| | 43 |
| | 16 |
| | 48 |
| | 16 |
| | 7 |
| | 47 |
| | 25 |
| |
Total fee and other revenue (a) | | 881 |
| | 912 |
| | 882 |
| | 993 |
| | 900 |
| | 970 |
| | 934 |
| | 929 |
| | 936 |
| | 926 |
| |
Net interest revenue | | 62 |
| | 63 |
| | 67 |
| | 68 |
| | 70 |
| | 66 |
| | 69 |
| | 69 |
| | 74 |
| | 78 |
| |
Total revenue | | 943 |
| | 975 |
| | 949 |
| | 1,061 |
| | 970 |
| | 1,036 |
| | 1,003 |
| | 998 |
| | 1,010 |
| | 1,004 |
| |
Noninterest expense (ex. intangible amortization and the charge (recovery) related to investment management funds, net of incentives) | | 659 |
| | 692 |
| | 689 |
| | 760 |
| | 698 |
| | 725 |
| | 727 |
| | 729 |
| | 721 |
| | 714 |
| |
Income before taxes (ex. intangible amortization and the charge (recovery) related to investment management funds) | | 284 |
| | 283 |
| | 260 |
| | 301 |
| | 272 |
| | 311 |
| | 276 |
| | 269 |
| | 289 |
| | 290 |
| |
Charge (recovery) related to investment management funds, net of incentives | | 39 |
| | (27 | ) | | — |
| | — |
| | (5 | ) | | 109 |
| | — |
| | — |
| | — |
| | — |
| |
Amortization of intangible assets | | 39 |
| | 39 |
| | 35 |
| | 35 |
| | 31 |
| | 31 |
| | 31 |
| | 30 |
| | 25 |
| | 25 |
| |
Income before taxes | | $ | 206 |
| | $ | 271 |
| | $ | 225 |
| | $ | 266 |
| | $ | 246 |
| | $ | 171 |
| | $ | 245 |
| | $ | 239 |
| | $ | 264 |
| | $ | 265 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Average assets | | $ | 38,743 |
| | $ | 37,953 |
| | $ | 38,690 |
| | $ | 38,796 |
| | $ | 39,463 |
| | $ | 37,750 |
| | $ | 36,670 |
| | $ | 37,286 |
| | $ | 31,017 |
| | $ | 30,512 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Assets under management at period-end (in billions) (b) | | $ | 1,423 |
| | $ | 1,427 |
| | $ | 1,532 |
| | $ | 1,583 |
| | $ | 1,620 |
| | $ | 1,636 |
| | $ | 1,646 |
| | $ | 1,710 |
| | $ | 1,741 |
| | $ | 1,724 |
| (c) |
| | | | | | | | | | | | | | | | | | | | | |
Pre-tax operating margin | | 22 | % | | 28 | % | | 24 | % | | 25 | % | | 25 | % | | 16 | % | | 24 | % | | 24 | % | | 26 | % | | 26 | % | |
Adjusted pre-tax operating margin (d) | | 35 | % | | 34 | % | | 33 | % | | 34 | % | | 34 | % | | 36 | % | | 33 | % | | 32 | % | | 34 | % | | 34 | % | |
| | | | | | | | | | | | | | | | | | | | | |
(a) Total fee and other revenue includes the impact of the consolidated investment management funds. See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 of the Quarterly Earnings Release for the reconciliation of Non-GAAP measures. Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other trading revenue and investment and other income. | |
(b) Excludes securities lending cash management assets and assets managed in the Investment Services business. Also excludes assets under management related to Newton's private client business that was sold in September 2013. | |
(c) Preliminary. | |
(d) Excludes the net negative impact of money market fee waivers, amortization of intangible assets and the charge (recovery) related to investment management funds net of incentives, and is net of distribution and servicing expense. See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 of the Quarterly Earnings Release for the reconciliation of Non-GAAP measures. | |
THE BANK OF NEW YORK MELLON CORPORATION
INVESTMENT SERVICES BUSINESS - 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | 2015 | |
(dollar amounts in millions unless otherwise noted) | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | |
Revenue: | | | | | | | | | | | | | | | | | | | | | |
Investment services fees | | | | | | | | | | | | | | | | | | | | | |
Asset servicing fees - ex. securities lending | | $ | 912 |
| | $ | 922 |
| | $ | 913 |
| | $ | 936 |
| | $ | 955 |
| | $ | 958 |
| | $ | 971 |
| | $ | 964 |
| | $ | 979 |
| | $ | 995 |
| |
Securities lending revenue | | 31 |
| | 39 |
| | 26 |
| | 21 |
| | 30 |
| | 35 |
| | 27 |
| | 28 |
| | 34 |
| | 40 |
| |
Issuer services | | 236 |
| | 294 |
| | 321 |
| | 236 |
| | 228 |
| | 231 |
| | 314 |
| | 193 |
| | 231 |
| | 234 |
| |
Clearing services | | 302 |
| | 320 |
| | 314 |
| | 322 |
| | 323 |
| | 324 |
| | 336 |
| | 346 |
| | 342 |
| | 346 |
| |
Treasury services | | 137 |
| | 135 |
| | 135 |
| | 137 |
| | 134 |
| | 140 |
| | 139 |
| | 142 |
| | 135 |
| | 141 |
| |
Total investment services fees | | 1,618 |
| | 1,710 |
| | 1,709 |
| | 1,652 |
| | 1,670 |
| | 1,688 |
| | 1,787 |
| | 1,673 |
| | 1,721 |
| | 1,756 |
| |
Foreign Exchange and other trading revenue | | 173 |
| | 193 |
| | 177 |
| | 150 |
| | 158 |
| | 145 |
| | 159 |
| | 165 |
| | 209 |
| | 179 |
| |
Other (a) | | 70 |
| | 67 |
| | 63 |
| | 58 |
| | 59 |
| | 87 |
| | 59 |
| | 69 |
| | 63 |
| | 85 |
| |
Total fee and other revenue | | 1,861 |
| | 1,970 |
| | 1,949 |
| | 1,860 |
| | 1,887 |
| | 1,920 |
| | 2,005 |
| | 1,907 |
| | 1,993 |
| | 2,020 |
| |
Net interest revenue | | 653 |
| | 633 |
| | 619 |
| | 610 |
| | 590 |
| | 593 |
| | 583 |
| | 574 |
| | 600 |
| | 635 |
| |
Total revenue | | 2,514 |
| | 2,603 |
| | 2,568 |
| | 2,470 |
| | 2,477 |
| | 2,513 |
| | 2,588 |
| | 2,481 |
| | 2,593 |
| | 2,655 |
| |
Provision for credit losses | | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Noninterest expenses (ex. intangible amortization) | | 1,796 |
| | 1,825 |
| | 1,765 |
| | 1,822 |
| | 1,778 |
| | 1,824 |
| | 1,835 |
| | 2,512 |
| | 1,797 |
| | 1,841 |
| |
Income before taxes (ex. intangible amortization) | | 717 |
| | 778 |
| | 803 |
| | 648 |
| | 699 |
| | 689 |
| | 753 |
| | (31 | ) | | 796 |
| | 814 |
| |
Amortization of intangible assets | | 47 |
| | 54 |
| | 46 |
| | 47 |
| | 44 |
| | 44 |
| | 44 |
| | 43 |
| | 41 |
| | 40 |
| |
Income before taxes | | $ | 670 |
| | $ | 724 |
| | $ | 757 |
| | $ | 601 |
| | $ | 655 |
| | $ | 645 |
| | $ | 709 |
| | $ | (74 | ) | | $ | 755 |
| | $ | 774 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Average loans | | $ | 26,697 |
| | $ | 27,814 |
| | $ | 27,865 |
| | $ | 31,211 |
| | $ | 31,468 |
| | $ | 33,115 |
| | $ | 33,785 |
| | $ | 35,448 |
| | $ | 37,699 |
| | $ | 38,264 |
| |
Average assets | | $ | 240,187 |
| | $ | 244,802 |
| | $ | 246,252 |
| | $ | 258,294 |
| | $ | 258,470 |
| | $ | 264,221 |
| | $ | 266,455 |
| | $ | 276,586 |
| | $ | 284,978 |
| | $ | 290,102 |
| |
Average deposits | | $ | 200,222 |
| | $ | 204,499 |
| | $ | 206,068 |
| | $ | 216,216 |
| | $ | 214,947 |
| | $ | 220,701 |
| | $ | 221,734 |
| | $ | 228,282 |
| | $ | 234,183 |
| | $ | 237,193 |
| |
| | | | | | | | | | | | | | | | | | | | | |
Pre-tax operating margin | | 27 | % | | 28 | % | | 29 | % | | 24 | % | | 26 | % | | 26 | % | | 27 | % | | (3 | )% | | 29 | % | | 29 | % | |
Pre-tax operating margin (ex. intangible amortization) | | 29 | % | | 30 | % | | 31 | % | | 26 | % | | 28 | % | | 27 | % | | 29 | % | | (1 | )% | | 31 | % | | 31 | % | |
| | | | | | | | | | | | | | | | | | | | | |
Investment services fees as a percentage of noninterest expense (b) | | 92 | % | | 94 | % | | 97 | % | | 90 | % | | 93 | % | | 93 | % | | 100 | % | | 92 | % | | 96 | % | | 98 | % | |
| | | | | | | | | | | | | | | | | | | | | |
Assets under custody and/or administration at period-end (in trillions) (c) | | $ | 26.3 |
| | $ | 26.2 |
| | $ | 27.4 |
| | $ | 27.6 |
| | $ | 27.9 |
| | $ | 28.5 |
| | $ | 28.3 |
| | $ | 28.5 |
| | $ | 28.5 |
| | $ | 28.6 |
| (d) |
| | | | | | | | | | | | | | | | | | | | | |
Market value of securities on loan at period-end (in billions) (e) | | $ | 244 |
| | $ | 255 |
| | $ | 255 |
| | $ | 235 |
| | $ | 264 |
| | $ | 280 |
| | $ | 282 |
| | $ | 289 |
| | $ | 291 |
| | $ | 283 |
| |
| | | | | | | | | | | | | | | | | | | | | |
(a) Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue, and investment and other income. | |
(b) Noninterest expense excludes amortization of intangible assets and litigation expense. | |
(c) Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at March 31, 2013, $1.1 trillion at June 30, 2013, $1.2 trillion at Sept. 30, 2013, Dec. 31, 2013, March 31, 2014, June 30, 2014 and Sept. 30, 2014, and $1.1 trillion at Dec. 31, 2014, March 31, 2015, and June 30, 2015. | |
(d) Preliminary. | |
(e) Represents the total amount of securities on loan managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent, beginning in the fourth quarter of 2013, on behalf of CIBC Mellon clients, which totaled $62 billion at Dec. 31, 2013, $66 billion at March 31, 2014, $64 billion at June 30, 2014, $65 billion at Sept. 30, 2014 and Dec. 31, 2014, $69 billion at March 31, 2015, and $68 billion at June 30, 2015. | |
THE BANK OF NEW YORK MELLON
OTHER SEGMENT- 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 (a) | | 2014 | | 2015 |
(dollar amounts in millions) | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr | | 3rd Qtr | | 4th Qtr | | 1st Qtr | | 2nd Qtr |
| | | | | | | | | | | | | | | | | | | | |
Revenue: | | | | | | | | | | | | | | | | | | | | |
Fee and other revenue (a) | | $ | 152 |
| | $ | 347 |
| | $ | 172 |
| | $ | (20 | ) | | $ | 112 |
| | $ | 119 |
| | $ | 928 |
| | $ | 117 |
| | $ | 104 |
| | $ | 124 |
|
Net interest revenue | | 4 |
| | 61 |
| | 86 |
| | 83 |
| | 68 |
| | 60 |
| | 69 |
| | 69 |
| | 54 |
| | 66 |
|
Total revenue (a) | | 156 |
| | 408 |
| | 258 |
| | 63 |
| | 180 |
| | 179 |
| | 997 |
| | 186 |
| | 158 |
| | 190 |
|
Provision for credit loss | | (25 | ) | | (19 | ) | | 2 |
| | 6 |
| | (18 | ) | | (12 | ) | | (19 | ) | | 1 |
| | 2 |
| | (6 | ) |
Noninterest expense (ex. M&I and restructuring charges) | | 243 |
| | 236 |
| | 230 |
| | 200 |
| | 193 |
| | 93 |
| | 274 |
| | 210 |
| | 120 |
| | 98 |
|
Income (loss) before taxes (ex. M&I and restructuring charges) (a) | | $ | (62 | ) | | $ | 191 |
| | $ | 26 |
| | $ | (143 | ) | | $ | 5 |
| | $ | 98 |
| | $ | 742 |
| | $ | (25 | ) | | $ | 36 |
| | $ | 98 |
|
M&I and restructuring charges | | 5 |
| | 3 |
| | 14 |
| | 13 |
| | — |
| | 120 |
| | 57 |
| | — |
| | (4 | ) | | 8 |
|
Income (loss) before taxes (a) | | $ | (67 | ) | | $ | 188 |
| | $ | 12 |
| | $ | (156 | ) | | $ | 5 |
| | $ | (22 | ) | | $ | 685 |
| | $ | (25 | ) | | $ | 40 |
| | $ | 90 |
|
| | | | | | | | | | | | | | | | | | | |
|
Average loans and leases | | $ | 10,610 |
| | $ | 10,846 |
| | $ | 10,938 |
| | $ | 9,802 |
| | $ | 10,104 |
| | $ | 9,962 |
| | $ | 10,278 |
| | $ | 10,272 |
| | $ | 8,602 |
| | $ | 10,515 |
|
Average assets | | $ | 54,734 |
| | $ | 54,700 |
| | $ | 56,808 |
| | $ | 59,045 |
| | $ | 57,059 |
| | $ | 67,241 |
| | $ | 77,284 |
| | $ | 71,359 |
| | $ | 52,416 |
| | $ | 57,679 |
|
| | | | | | | | | | | | | | | | | | | | |
(a) In the first quarter of 2014, prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). |
|
THE BANK OF NEW YORK MELLON CORPORATION
BUSINESSES
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Investment Management | | Investment Services | | Other | | Consolidated Results | |
(dollar amounts in millions unless otherwise noted) | | 2014 | | 2013 | | 2012 | | 2014 | | 2013 | | 2012 | | 2014 | | 2013 | | 2012 | | 2014 | | 2013 | | 2012 | |
Revenue: | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Investment services fees | | | | | | | | | | | | | | | | | | | | | | | | | |
Asset servicing | | $ | 106 |
| | $ | 104 |
| | $ | 117 |
| | $ | 3,968 |
| | $ | 3,800 |
| | $ | 3,663 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | 4,075 |
| | $ | 3,905 |
| | $ | 3,780 |
| |
Issuer services | | — |
| | — |
| | — |
| | 966 |
| | 1,087 |
| | 1,049 |
| | 2 |
| | 3 |
| | 3 |
| | 968 |
| | 1,090 |
| | 1,052 |
| |
Clearing services | | — |
| | — |
| | — |
| | 1,329 |
| | 1,258 |
| | 1,183 |
| | 6 |
| | 6 |
| | 10 |
| | 1,335 |
| | 1,264 |
| | 1,193 |
| |
Treasury services | | 9 |
| | 2 |
| | 2 |
| | 555 |
| | 544 |
| | 527 |
| | — |
| | 8 |
| | 20 |
| | 564 |
| | 554 |
| | 549 |
| |
Total investment services fees | | 115 |
| | 106 |
| | 119 |
| | 6,818 |
| | 6,689 |
| | 6,422 |
| | 9 |
| | 18 |
| | 33 |
| | 6,942 |
| | 6,813 |
| | 6,574 |
| |
Investment management fees | | 3,369 |
| | 3,255 |
| | 3,016 |
| | 74 |
| | 63 |
| | 66 |
| | — |
| | 27 |
| | 37 |
| | 3,443 |
| | 3,345 |
| | 3,119 |
| |
Performance fees | | 115 |
| | 130 |
| | 137 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | 115 |
| | 130 |
| | 136 |
| |
Foreign exchange and other trading revenue | | (23 | ) | | 8 |
| | 9 |
| | 627 |
| | 693 |
| | 628 |
| | (34 | ) | | (27 | ) | | 55 |
| | 570 |
| | 674 |
| | 692 |
| |
Distribution and servicing | | 162 |
| | 172 |
| | 187 |
| | 11 |
| | 8 |
| | 5 |
| | — |
| | — |
| | — |
| | 173 |
| | 180 |
| | 192 |
| |
Financing-related fees | | 1 |
| | 5 |
| | 6 |
| | 50 |
| | 44 |
| | 42 |
| | 118 |
| | 123 |
| | 124 |
| | 169 |
| | 172 |
| | 172 |
| |
Investment and other income | | (7 | ) | | (14 | ) | | (9 | ) | | 139 |
| | 142 |
| | 171 |
| | 1,093 |
| (a) | 376 |
| (a) | 352 |
| (a) | 1,225 |
| (a) | 504 |
| (a) | 514 |
| (a) |
Total fee revenue | | 3,732 |
| | 3,662 |
| | 3,465 |
| | 7,719 |
| | 7,639 |
| | 7,334 |
| | 1,186 |
| (a) | 517 |
| (a) | 600 |
| (a) | 12,637 |
| (a)(b) | 11,818 |
| (a)(b) | 11,399 |
| (a)(b) |
Net securities gains (losses) | | 1 |
| | 6 |
| | (1 | ) | | — |
| | 1 |
| | 11 |
| | 90 |
| | 134 |
| | 152 |
| | 91 |
| | 141 |
| | 162 |
| |
Total fee and other revenue | | 3,733 |
| | 3,668 |
| | 3,464 |
| | 7,719 |
| | 7,640 |
| | 7,345 |
| | 1,276 |
| (a) | 651 |
| (a) | 752 |
| (a) | 12,728 |
| (a)(b) | 11,959 |
| (a)(b) | 11,561 |
| (a)(b) |
Net interest revenue (expense) | | 274 |
| | 260 |
| | 214 |
| | 2,340 |
| | 2,515 |
| | 2,439 |
| | 266 |
| | 234 |
| | 320 |
| | 2,880 |
| | 3,009 |
| | 2,973 |
| |
Total revenue | | 4,007 |
| | 3,928 |
| | 3,678 |
| | 10,059 |
| | 10,155 |
| | 9,784 |
| | 1,542 |
| (a) | 885 |
| (a) | 1,072 |
| (a) | 15,608 |
| (a) | 14,968 |
| (a) | 14,534 |
| (a) |
Provision for credit losses | | — |
| | — |
| | — |
| | — |
| | 1 |
| | (3 | ) | | (48 | ) | | (36 | ) | | (77 | ) | | (48 | ) | | (35 | ) | | (80 | ) | |
Noninterest expenses (ex. intangible amortization) (f) | | 2,983 |
| | 2,812 |
| | 2,590 |
| | 7,949 |
| | 7,208 |
| | 7,368 |
| | 947 |
| | 944 |
| | 991 |
| | 11,879 |
| | 10,964 |
| | 10,949 |
| |
Income (loss) before taxes (ex. intangible amortization) | | 1,024 |
| | 1,116 |
| | 1,088 |
| | 2,110 |
| | 2,946 |
| | 2,419 |
| | 643 |
| (a) | (23 | ) | (a) | 158 |
| (a) | 3,777 |
| (a)(b) | 4,039 |
| (a)(b) | 3,665 |
| (a)(b) |
Amortization of intangible assets | | 123 |
| | 148 |
| | 192 |
| | 175 |
| | 194 |
| | 192 |
| | — |
| | — |
| | — |
| | 298 |
| | 342 |
| | 384 |
| |
Income (loss) before taxes and noncontrolling interest | | $ | 901 |
| | $ | 968 |
| | $ | 896 |
| | $ | 1,935 |
| | $ | 2,752 |
| | $ | 2,227 |
| | $ | 643 |
| (a) | $ | (23 | ) | (a) | $ | 158 |
| (a) | $ | 3,479 |
| (a)(b) | $ | 3,697 |
| (a)(b) | $ | 3,281 |
| (a)(b) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Average loans | | $ | 10,589 |
| | $ | 9,361 |
| | $ | 7,950 |
| | $ | 33,466 |
| | $ | 28,407 |
| | $ | 25,503 |
| | $ | 10,155 |
| | $ | 10,548 |
| | $ | 9,607 |
| | $ | 54,210 |
| | $ | 48,316 |
| | $ | 43,060 |
| |
Average assets | | $ | 37,783 |
| | $ | 38,546 |
| | $ | 36,120 |
| | $ | 266,483 |
| | $ | 247,430 |
| | $ | 223,233 |
| | $ | 68,300 |
| | $ | 56,335 |
| | $ | 56,028 |
| | $ | 372,566 |
| | $ | 342,311 |
| | $ | 315,381 |
| |
Average deposits | | $ | 14,156 |
| | $ | 13,755 |
| | $ | 11,311 |
| | $ | 221,453 |
| | $ | 206,793 |
| | $ | 185,441 |
| | $ | 6,930 |
| | $ | 5,148 |
| | $ | 7,458 |
| | $ | 242,539 |
| | $ | 225,696 |
| | $ | 204,210 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Assets under management at period-end (in billions) (c) | | $ | 1,710 |
| | $ | 1,583 |
| | $ | 1,380 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,710 |
| | $ | 1,583 |
| | $ | 1,380 |
| |
Assets under custody and/or administration at period-end (in trillions) (d) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 28.5 |
| | $ | 27.6 |
| | $ | 26.3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 28.5 |
| | $ | 27.6 |
| | $ | 26.3 |
| |
Market value of securities on loan at period-end (in billions) (e) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 289 |
| | $ | 235 |
| | $ | 237 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 289 |
| | $ | 235 |
| | $ | 237 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Pre-tax operating margin - GAAP | | 22 | % | | 25 | % | | 24 | % | | 19 | % | | 27 | % | | 23 | % | | N/M |
| | N/M |
| | N/M |
| | 22 | % | | 25 | % | | 23 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Memo: | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities Lending Revenue | |
| |
| |
| |
| |
| |
| |
| |
| |
| | $ | 158 |
| | $ | 155 |
| | $ | 198 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
(a) In the first quarter of 2014, prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). |
(b) Total fee and other revenue and income before taxes for the years 2012, 2013 and 2014 include income from consolidated investment management funds of $189 million, $183 million and $163 million, respectively, net of income attributable to noncontrolling interests of $76 million, $80 million and $84 million respectively. The net of these income statement line items of $113 million, $103 million and $79 million, respectively, are included above in fee and other revenue. |
(c) Excludes securities lending cash management assets and assets managed in the Investment Services business. Also excludes assets under management related to Newton's private client business that was sold in September 2013. |
(d) Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.1 trillion at Dec. 31, 2012, $1.2 trillion at Dec. 31, 2013 and $1.1 trillion at Dec. 31, 2014. |
(e) Represents the total amount of securities on loan managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent, beginning in the fourth quarter of 2013, on behalf of CIBC Mellon clients, which totaled $62 billion at Dec. 31, 2013 and $65 billion at Dec. 31, 2014. |
(f) The second quarter of 2012 includes a charge related to the settlement of the Sigma class action lawsuit. |
Note: See pages 10 through 12 for businesses results. |
N/M - Not meaningful |
THE BANK OF NEW YORK MELLON CORPORATION
NONPERFORMING ASSETS - 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | 2015 |
(dollar amounts in millions) | | Mar 31 | | Jun 30 | | Sep 30 | | Dec 31 | | Mar 31 | | Jun 30 | | Sep 30 | | Dec 31 | | Mar 31 | | Jun 30 |
| | | | | | | | | | | | | | | | | | | | |
Nonperforming loans: | | | | | | | | | | | | | | | | | | | | |
Other residential mortgages | | $ | 148 |
| | $ | 135 |
| | $ | 128 |
| | $ | 117 |
| | $ | 107 |
| | $ | 105 |
| | $ | 113 |
| | $ | 112 |
| | $ | 111 |
| | $ | 110 |
|
Wealth management loans and mortgages | | 30 |
| | 13 |
| | 12 |
| | 11 |
| | 12 |
| | 12 |
| | 13 |
| | 12 |
| | 12 |
| | 11 |
|
Commercial real estate | | 17 |
| | 18 |
| | 4 |
| | 4 |
| | 4 |
| | 4 |
| | 4 |
| | 1 |
| | 1 |
| | 1 |
|
Commercial | | 24 |
| | 24 |
| | 15 |
| | 15 |
| | 13 |
| | 13 |
| | 13 |
| | — |
| | — |
| | — |
|
Foreign | | 9 |
| | 9 |
| | 9 |
| | 6 |
| | 7 |
| | 4 |
| | — |
| | — |
| | — |
| | — |
|
Financial institutions | | 3 |
| | 2 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | |
Total nonperforming loans | | 231 |
| | 201 |
| | 169 |
| | 153 |
| | 143 |
| | 138 |
| | 143 |
| | 125 |
| | 124 |
| | 122 |
|
Other assets owned | | 3 |
| | 3 |
| | 3 |
| | 3 |
| | 3 |
| | 4 |
| | 4 |
| | 3 |
| | 4 |
| | 5 |
|
| | | | | | | | | | | | | | | | | | | | |
Total nonperforming assets (a) | | $ | 234 |
| | $ | 204 |
| | $ | 172 |
| | $ | 156 |
| | $ | 146 |
| | $ | 142 |
| | $ | 147 |
| | $ | 128 |
| | $ | 128 |
| | $ | 127 |
|
| | | | | | | | | | | | | | | | | | | |
|
Nonperforming assets ratio | | 0.48 | % | | 0.41 | % | | 0.34 | % | | 0.30 | % | | 0.27 | % | | 0.24 | % | | 0.26 | % | | 0.22 | % | | 0.21 | % | | 0.20 | % |
Nonperforming assets ratio excluding margin loans | | 0.65 | % | | 0.57 | % | | 0.49 | % | | 0.43 | % | | 0.39 | % | | 0.34 | % | | 0.37 | % | | 0.33 | % | | 0.30 | % | | 0.30 | % |
| | | | | | | | | | | | | | | | | | | |
|
Allowance for loan losses/nonperforming loans | | 102.6 |
| | 105.5 |
| | 121.9 |
| | 137.3 |
| | 138.5 |
| | 135.5 |
| | 133.6 |
| | 152.8 |
| | 153.2 |
| | 150.0 |
|
Allowance for loan losses/nonperforming assets | | 101.3 |
| | 103.9 |
| | 119.8 |
| | 134.6 |
| | 135.6 |
| | 131.7 |
| | 129.9 |
| | 149.2 |
| | 148.4 |
| | 144.1 |
|
Total allowance for credit losses/nonperforming loans | | 155.0 |
| | 167.7 |
| | 200.6 |
| | 224.8 |
| | 228.0 |
| | 225.4 |
| | 201.4 |
| | 224.0 |
| | 228.2 |
| | 227.9 |
|
Total allowance for credit losses/nonperforming assets | | 153.0 |
| | 165.2 |
| | 197.1 |
| | 220.5 |
| | 221.8 |
| | 219.0 |
| | 195.9 |
| | 218.8 |
| | 221.1 |
| | 218.9 |
|
| | | | | | | | | | | | | | | | | | | | |
(a) Loans of consolidated investment management funds are not part of BNY Mellon's loan portfolio. Included in the loans of consolidated investment management funds are nonperforming loans for the 1st through 4th quarters of 2013 of $161 million, $44 million, $31 million, and $16 million, respectively, for the 1st through 4th quarters of 2014 of $74 million, $68 million, $79 million, and $53 million, respectively. These loans are recorded at fair value and therefore do not impact the provision for credit losses and allowance for loan losses, and accordingly are excluded from the nonperforming assets table above. In 2Q15, BNY Mellon adopted the new accounting guidance included in ASU 2015-02, Consolidations. As a result, we deconsolidated substantially all of the loans of consolidated investment management funds retroactively to Jan. 1, 2015. See page 24 in the Quarterly Earnings Release for additional information on the new accounting guidance. |
THE BANK OF NEW YORK MELLON CORPORATION
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS - 10 Quarter Trend
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | 2015 |
(dollar amounts in millions) | | Mar 31 | | Jun 30 | | Sep 30 | | Dec 31 | | Mar 31 | | Jun 30 | | Sep 30 | | Dec 31 | | Mar 31 | | Jun 30 |
| | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses | | $ | 266 |
| | $ | 237 |
| | $ | 212 |
| | $ | 206 |
| | $ | 210 |
| | $ | 198 |
| | $ | 187 |
| | $ | 191 |
| | $ | 191 |
| | $ | 190 |
|
Allowance for lending-related commitments | | 121 |
| | 121 |
| | 125 |
| | 133 |
| | 134 |
| | 128 |
| | 124 |
| | 97 |
| | 89 |
| | 93 |
|
Allowance for credit losses - beginning of period | | 387 |
| | 358 |
| | 337 |
| | 339 |
| | 344 |
| | 326 |
| | 311 |
| | 288 |
| | 280 |
| | 283 |
|
| | | | | | | | | | | | | | | | | | | | |
Net (charge-offs) | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | (5 | ) | | (3 | ) | | (2 | ) | | (6 | ) | | (1 | ) | | (4 | ) | | (5 | ) | | (10 | ) | | — |
| | — |
|
Recoveries | | — |
| | 1 |
| | 2 |
| | 5 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
Total Net (charge-offs) | | (5 | ) | | (2 | ) | | — |
| | (1 | ) | | — |
| | (3 | ) | | (4 | ) | | (9 | ) | | 1 |
| | 1 |
|
| | | | | | | | | | | | | | | | | | | | |
Provision for credit losses | | (24 | ) | | (19 | ) | | 2 |
| | 6 |
| | (18 | ) | | (12 | ) | | (19 | ) | | 1 |
| | 2 |
| | (6 | ) |
| | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses - end of period | | 358 |
| | 337 |
| | 339 |
| | 344 |
| | 326 |
| | 311 |
| | 288 |
| | 280 |
| | 283 |
| | 278 |
|
Allowance for loan losses | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 237 |
| | $ | 212 |
| | $ | 206 |
| | $ | 210 |
| | $ | 198 |
| | $ | 187 |
| | $ | 191 |
| | $ | 191 |
| | $ | 190 |
| | $ | 183 |
|
Allowance for lending-related commitments | | 121 |
| | 125 |
| | 133 |
| | 134 |
| | 128 |
| | 124 |
| | 97 |
| | 89 |
| | 93 |
| | 95 |
|
Allowance for credit losses - end of period | | 358 |
| | 337 |
| | 339 |
| | 344 |
| | 326 |
| | 311 |
| | 288 |
| | 280 |
| | 283 |
| | 278 |
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses as a percentage of total loans | | 0.48 | % | | 0.42 | % | | 0.41 | % | | 0.41 | % | | 0.37 | % | | 0.32 | % | | 0.33 | % | | 0.32 | % | | 0.31 | % | | 0.29 | % |
THE BANK OF NEW YORK MELLON CORPORATION
Quarterly Financial Trends
July 21, 2015
|
|
Notes: |
The following transactions/changes have impacted the reporting of our results: |
|
The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). See page 24 of the Quarterly Earnings Release for more information. |
|
In the first quarter of 2014, prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). |
|
In the first quarter of 2014, results of Newton's private client business were reclassified from the Investment Management business to the Other segment. Newton's private client business was sold in September 2013. |
|
Restructuring charges in the second quarter of 2014 represent corporate initiatives and were recorded in the Other segment. In the fourth quarter of 2013, restructuring charges were recorded in the businesses. Prior to the fourth quarter of 2013, all restructuring charges were reported in the Other segment. |
|
In the first quarter of 2013, incentive expense related to restricted stock and certain corporate overhead charges were allocated to Investment Management and Investment Services businesses which were previously included in the Other segment. All prior periods were restated to reflect these changes. |
|
Certain immaterial reclassifications/revisions have been made to prior periods to place them on a basis comparable with the current period's presentation. |
|
In businesses where average deposits are greater than average loans, average assets include an allocation of investment securities equal to the difference. |
|
Quarterly return on common and tangible common equity ratios are annualized. |
|
Non-GAAP Measures: |
Certain Non-GAAP measures are included in this document. These measures are used by management to monitor financial performance, both on a company-wide and on a business basis. These Non-GAAP measures relate to certain revenue/expense categories, percentages and ratios as described in footnotes. For further information, see 'Supplemental information -- Explanation of GAAP and Non-GAAP Financial Measures' in the Quarterly Earnings Release. Summations may not equal due to rounding. As a result of our rounding convention and reclassifications noted above, differences may exist between the business trends data versus business data in the Form 10-K for the year ended December 31, 2014 or other reports filed with the SEC. |
July 21, 2015
KEY FACTS – Second Quarter 2015
Delivering for Shareholders
|
| | | |
Total Shareholder Return | 2013 | 2014 | YTD 6/30/15 |
BNY Mellon | 38.6% | 18.3% | 4.4% |
11-Member Peer Group Median (a) | 38.9% | 13.8% | 0.7% |
S&P 500 Financials | 35.6% | 15.2% | (0.4)% |
S&P 500 Index | 32.4% | 13.7% | 1.2% |
|
| |
Strategic Priorities to Drive Growth |
Driving Revenue Growth | • Delivered revenue growth across our businesses • Continued growth in Clearing and Global Collateral Services |
Business Improvement Process | • Continued expense control • Positive results reflect benefits in areas where we have been investing in enhanced capabilities for our clients • Divesting Meriten investment manager |
Being a Strong, Safe, Trusted Counterparty | • Strong liquidity and improving capital positions |
Generating Excess Capital and Deploying Capital Effectively | • Executing on capital plan and returning value to shareholders o More than $1B returned in share repurchases and dividends |
Attracting and Retaining Top Talent | • Further improving expertise in Investment Services and Client Technology Solutions |
Positive Growth Trends
| |
• | Total revenue in 2Q15 increased 3% year-over-year, as adjusted (b) |
| |
• | Continued fee income growth |
| |
◦ | Investment Management and performance fees decreased 1% year-over-year, or increased 5% on a constant currency basis, as adjusted (b) |
| |
◦ | Investment Services fees increased 4% year-over-year |
| |
• | Combination of Investment Management and Investment Services positions us well for future growth |
Expense Control and Significant Positive Operating Leverage
| |
• | Continued progress on expense control in 2Q15 |
| |
◦ | Expenses in 2Q15 decreased 1% year-over-year, as adjusted (b) |
| |
• | Generated more than 460 basis points of positive operating leverage, as adjusted (b) |
Continued AUM and AUC/A Growth (c)
| |
• | AUM up 5% in 2Q15 versus 2Q14 |
| |
◦ | $15 billion of net long-term AUM outflows in 2Q15 |
| |
• | AUC/A increased slightly in 2Q15 versus 2Q14 |
| |
◦ | $1.02 trillion of estimated new business wins in 2Q15 |
Managing Technology as a Strategic Asset
| |
• | Optimizing our infrastructure to create efficiencies and cost savings |
| |
• | Insourcing application development to retain talent and expertise |
| |
• | Shifting our investments from tactical to strategic, enhancing client experience |
| |
• | Digitizing BNY Mellon: BNY Mellon Extreme Platform (BXP); Digital Pulse |
| |
• | Extending technology solutions leadership: Eagle, Albridge, HedgeMark, NetX360 |
| |
• | Deploying NEXEN: Our next generation, intelligent and secure, open-architecture platform |
Initiatives to Streamline Organization and Drive Growth
|
| |
Revenue initiatives | Expense Initiatives |
o Entered significant strategic partnership in Asset Servicing | o Exited Central Securities Depository |
o Extending private banking solutions to Pershing clients | o Exiting U.K.Transfer Agency retail business |
o Created direct lending capability through investment management | o Exited separately managed accounts solutions business in Asia |
o Created dedicated technology solutions unit to increase return on technology investment | o Exited Transition Management and derivatives clearing (U.S. & Europe) |
o Created the Markets Group | o Sold One Wall Street Headquarters |
| |
• | Numerous ongoing initiatives focused on: Portfolio Review; Operations and Technology Enhancements; Real Estate & Procurement; and Process Improvement |
Continued Capital Generation and Returning Value to Shareholders
| |
• | Capital generation and strong liquidity position |
| |
• | Key capital ratios continue to improve, ending 2Q15 with an estimated common equity tier 1 ratio, fully phased-in (Non-GAAP) under the Advanced Approach of 9.9% (b) |
| |
• | Compliant with estimated U.S. LCR1: >100% (current requirement is 80%) |
| |
• | 2015 Capital Plan: repurchase up to $3.1 billion in common stock and maintain strong dividend payout ratio |
| |
◦ | Repurchased 19.4 million common shares for $834 million in 2Q15 |
| |
• | Delivered return on tangible common equity of 22% in 2Q15 (b) |
| |
• | Post financial crisis, our capital generation enabled us to more than double tangible capital |
Financial Goals2 -- Operating Basis: 2015 Through 2017
|
| | |
| Flat | Normalizing |
Revenue Growth3 | 3.5 - 4.5% | 6 - 8% |
EPS Growth3 | 7 - 9% | 12 - 15% |
Return on Tangible Common Equity | 17 - 19% | 20 - 22% |
Assumptions | • NIM: 95 - 100 bps • Operating margin: 28 - 30% • Environment: no deterioration in volatility, volume, short-term interest rates | • NIM: 125 - 150 bps • Operating margin: 30 - 32% |
| 100% payout ratio Execution on expense and revenue initiatives Equity market, +5% p.a. Reasonable regulatory outcomes Deposits, money market balances and fee waivers recovery as modeled |
AUM = Assets Under Management; AUC/A = Assets Under Custody/Administration
| |
(a) | For information about our 11-Member Peer Group, see page 46 of our Proxy Statement dated |
March 13, 2015.
| |
(b) | This fact sheet includes Non-GAAP measures. These measures are used by management to monitor financial performance and capital adequacy and BNY Mellon believes they are useful to investors in analyzing financial results and trends of ongoing operations because they permit a focus on period-to-period comparisons, which relate to the ability of BNY Mellon to enhance revenue and limit expenses in circumstances where such matters are within BNY Mellon's control. For a reconciliation of these measures and further information, see “Supplemental information – Explanation of GAAP and Non-GAAP Financial Measures” in BNY Mellon’s Quarterly Earnings Release dated July 21, 2015, filed as an exhibit to the Current Report on Form 8-K to which this fact sheet is furnished as an exhibit. |
1 Estimated U.S. Liquidity Coverage Ratio (LCR) is compliant with the fully-phased in requirements as
of June 30, 2015 based on our current understanding of the U.S. LCR rules.
| |
2 | Additional information regarding Financial Goals is available in the company’s 2014 Investor Day presentation available at www.bnymellon.com/investorrelations. |
3 Represents compound annual growth rates (CAGR).
NOTE: Normalizing environment represents market consensus on rates; Flat environment assumes no rate increase from present. Financial projections are reflected on a non-GAAP basis - excludes merger and integration, restructuring and litigation expenses, and other non-recurring items. Additional disclosure regarding non-GAAP measures is available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. Actual results may vary materially.
This fact sheet may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our estimated capital ratios, preliminary business metrics and our strategic priorities, technology, streamlining initiatives, capital plans and financial goals. These statements, which may be expressed in a variety of ways, include the use of future or present tense language. These statements and other forward-looking statements contained in other public disclosures of BNY Mellon, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon’s control). Factors that could cause BNY Mellon’s results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon’s Annual Report on Form 10-K for the year ended Dec. 31, 2014 and its other filings with the Securities and Exchange Commission. All forward-looking statements in this fact sheet speak only as of July 21, 2015 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.
Additional information about BNY Mellon is available in our annual report on Form 10-K, proxy statement, quarterly reports on Form 10-Q and our current reports on Form 8-K filed with the SEC, available at www.sec.gov.
BNY Mellon Second Quarter 2015 Financial Highlights July 21, 2015
2 Second Quarter 2015 – Financial Highlights Cautionary Statement A number of statements in our presentations, the accompanying slides and the responses to your questions are “forward-looking statements.” Words such as “estimate”, “forecast”, “project”, “anticipate”, “target”, “expect”, “intend”, “continue”, “seek”, “believe”, “plan”, “goal”, “could”, “should”, “may”, “will”, “strategy”, “opportunities”, “trends” and words of similar meaning signify forward-looking statements. These statements relate to, among other things, The Bank of New York Mellon Corporation’s (the “Corporation”) expectations regarding: our capital plans, estimated capital ratios and expectations regarding those ratios; preliminary business metrics; and statements regarding the Corporation's aspirations, as well as the Corporation’s overall plans, strategies, goals, objectives, expectations, estimates, intentions, targets, opportunities and initiatives. These forward-looking statements 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 the Corporation’s control). Actual results may differ materially from those expressed or implied as a result of the factors described under “Forward Looking Statements” and “Risk Factors” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”), and in other filings of the Corporation with the Securities and Exchange Commission (the “SEC”). Such forward-looking statements speak only as of July 21, 2015, and the Corporation 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. Non-GAAP Measures: In this presentation we may discuss some non-GAAP measures in detailing the Corporation’s performance, which exclude certain items or otherwise include components that differ from GAAP. We believe these measures are useful to the investment community in analyzing the financial results and trends of ongoing operations. We believe they facilitate comparisons with prior periods and reflect the principal basis on which our management monitors financial performance. Additional disclosures relating to non-GAAP adjusted measures are contained in the Corporation’s reports filed with the SEC, including the 2014 Annual Report and the Corporation's Earnings Release for the quarter ended June 30, 2015, included as an exhibit to our Current Report on Form 8-K filed on July 21, 2015 (the “Earnings Release”), available at www.bnymellon.com/investorrelations.
3 Second Quarter 2015 – Financial Highlights Second Quarter 2015 Financial Highlights • Earnings per common share of $0.73, including: • $0.03 per common share related to previously announced litigation expense and restructuring charges • Earnings per common share +24% on an adjusted basis1 • Total revenue +4%; +3% on an adjusted basis1 • Total expense (7%); (1%) on an adjusted basis1 • Generated more than 460 bps of positive operating leverage on an adjusted basis1 • Executing on capital plan and return of value to common shareholders • Return on tangible common equity1 of 22% • Repurchased 19.4 million common shares for $834 million in 2Q15 • Issued $1 billion of qualifying preferred stock; authorized to repurchase up to $3.1 billion in common stock through 2Q16 1 Represents a Non-GAAP measure. See Appendix for reconciliations. Additional disclosures regarding these measures and other Non-GAAP adjusted measures are available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. Note: All comparisons are 2Q15 versus 2Q14 unless otherwise stated. bps - basis points
4 Second Quarter 2015 – Financial Highlights Second Quarter 2015 Key Messages • Solid execution of strategic priorities; delivering on our three-year financial goals set at Investor Day • Generated strong operating leverage and improved operating margin by executing on revenue growth initiatives and continued expense control ▪ Fee revenue growth driven by Asset Servicing, especially Global Collateral Services; and Clearing Services; offset by currency translation particularly in Investment Management ▪ Strong contribution from net interest revenue driven by increased securities and loans, and reduced interest expense incurred on deposits • Progress on business improvement process through investments to leverage scale, increase efficiency and effectiveness, and reduce risk and structural costs • Continue to return significant value to shareholders through share repurchases and dividends
5 Second Quarter 2015 – Financial Highlights Second Quarter 2015 Key Performance Drivers • Earnings per common share on an adjusted basis1 of $0.77, +24%, driven by Asset Servicing, especially Global Collateral Services; Clearing Services; market-sensitive revenue and expense control • Investment management and performance fees (1%), or +5% on a constant currency basis (Non-GAAP)1, driven by higher equity market values, the impact of the 1Q15 acquisition of Cutwater and strategic initiatives, partially offset by lower performance fees • Investment services fees +4% reflecting organic growth, especially in Global Collateral Services, higher Clearing Services revenue, net new business and higher market values, partially offset by the unfavorable impact of a stronger U.S. dollar • Market-sensitive revenue driven by volume and volatility • Foreign Exchange +40% driven by higher volumes and volatility, as well as higher Depositary Receipts-related activity • Securities Lending +7% driven by volume • Net interest revenue +$60 million driven by higher securities and loans due to higher deposits and the shift out of cash, lower interest expense incurred on deposits and the impact of interest rate hedging activities • Provision for credit losses was a credit of $6 million in 2Q15 versus a credit of $12 million in 2Q14 • Noninterest expense on an adjusted basis1 (1%) reflecting lower expenses in all categories (except incentives and business development expense), the favorable impact of a stronger U.S. dollar and the benefit of the business improvement process which focuses on reducing structural costs • Effective tax rate of 23.7% in 2Q15; rate is 1.4% lower due to the income statement presentation of consolidated investment management funds and a benefit related to the separately disclosed litigation expense 1 Represents a Non-GAAP measure. See Appendix for reconciliations. Additional disclosures regarding these measures and other Non-GAAP adjusted measures are available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. Note: All comparisons are 2Q15 versus 2Q14 unless otherwise stated.
6 Second Quarter 2015 – Financial Highlights Summary Financial Results for Second Quarter 2015 Growth vs. $ in millions, except per share data 2Q15 1Q15 1 2Q14 2Q14 1Q15 Revenue $ 3,886 $ 3,792 $ 3,745 4 % 2 % Expenses $ 2,727 $ 2,700 $ 2,946 (7 )% 1 % Income before income taxes $ 1,165 $ 1,090 $ 811 44 % 7 % Pre-tax operating margin 30 % 29 % 22 % EPS $ 0.73 $ 0.67 $ 0.48 52 % 9 % Return on Tangible Common Equity2 21.5 % 20.3 % 14.5 % 1 The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). 2 Represents a Non-GAAP measure. See Appendix for reconciliation. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. Note: Provision for credit losses was a credit of $6 million in 2Q15 versus a credit of $12 million in 2Q14 and a provision of $2 million in 1Q15.
7 Second Quarter 2015 – Financial Highlights Summary Financial Results for Second Quarter 2015 (Non-GAAP)1 Growth vs. $ in millions, except per share data 2Q15 1Q15 2 2Q14 2Q14 1Q15 Revenue $ 3,849 $ 3,761 $ 3,728 3% 2 % Expenses $ 2,603 $ 2,637 $ 2,640 (1)% (1 )% Operating leverage 464 bps 363 bps Income before income taxes $ 1,252 $ 1,122 $ 1,100 14 % 12 % Pre-tax operating margin 33 % 30 % 30 % EPS $ 0.77 $ 0.67 $ 0.62 24 % 15 % Return on Tangible Common Equity 22.5 % 20.2 % 18.4 % 1 Represent Non-GAAP measures. See Appendix for reconciliations. Additional disclosures regarding these measures and other Non-GAAP adjusted measures are available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. 2 The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). bps - basis points
8 Second Quarter 2015 – Financial Highlights Fee and Other Revenue (Consolidated) Growth vs. Year-over-Year Drivers ($ in millions) 2Q15 2Q14 1Q15 Investment services fees: Asset Servicing Organic growth and net new business, partially offset by a stronger U.S. dollar Clearing Services Higher mutual fund and asset-based fees, clearance revenue and custody fees Issuer Services Higher Depositary Receipts revenue Treasury Services Higher payment volumes Investment Management and Performance Fees +5% on a constant currency basis (Non-GAAP)3, driven by higher equity market values, strong cumulative long-term flows, the impact of the 1Q15 acquisition of Cutwater and strategic initiatives, partially offset by lower performance fees Foreign Exchange & Other Trading Revenue FX revenue of $181MM, +40%, driven by higher volatility and volumes, as well as higher Depositary Receipts-related activity Financing-related Fees Higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity Asset servicing1 $ 1,060 4 % 2 % Clearing services 347 6 1 Issuer services 234 1 1 Treasury services 144 2 5 Total investment services fees 1,785 4 2 Investment management and performance fees2 878 (1 ) 1 Foreign exchange and other trading revenue 187 44 (18 ) Financing-related fees 58 32 45 Distribution and servicing 39 (9 ) (5 ) Investment and other income2 104 N/M N/M Total fee revenue2 3,051 3 2 Net securities gains 16 N/M N/M Total fee and other revenue2 $ 3,067 3 % 2 % 1 Asset servicing fees include securities lending revenue of $49 million in 2Q15, $46 million in 2Q14, and $43 million in 1Q15. 2 The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). 3 Represents a Non-GAAP measure. See Appendix for reconciliation. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. Note: Please reference earnings release for quarter-over-quarter variance explanations. N/M - not meaningful
9 Second Quarter 2015 – Financial Highlights Investment Management Metrics Change in Assets Under Management (AUM)1 Growth vs. $ in billions 2Q15 LTM 2Q15 2Q14 1Q15 Beginning balance of AUM $1,741 $1,636 Net inflows (outflows): Long-Term: Equity (12 ) (24 ) Fixed income (2 ) 6 Index (9 ) (3 ) Liability-driven investments2 5 55 Alternative investments 3 7 Total long-term inflows (outflows) (15 ) 41 Short-term: Cash (11 ) 14 Total net inflows (outflows) (26 ) 55 Net market/currency impact/acquisition 9 33 Ending balance of AUM3 $1,724 $1,724 5 % (1 )% Average balances: Growth vs. $ in millions 2Q15 2Q14 1Q15 Average loans $ 12,298 19 % 6 % Average deposits $ 14,640 9 % (4 )% 1 Excludes securities lending cash management assets and assets managed in the Investment Services business. 2 Includes currency overlay assets under management. 3 Preliminary.
10 Second Quarter 2015 – Financial Highlights Investment Services Metrics Growth vs. 2Q15 2Q14 1Q15 Assets under custody and/or administration at period end (trillions)1,2 $ 28.6 — % — % Market value of securities on loan at period end (billions)3 $ 283 1 % (3 )% Average loans (millions) $ 38,264 16 % 1 % Average deposits (millions) $ 237,193 7 % 1 % Broker-Dealer Average tri-party repo balances (billions) $ 2,174 8 % 1 % Clearing Services Global DARTS volume (thousands) 242 17 % (7 )% Average active clearing accounts (U.S. platform) (thousands) 6,046 5 % 1 % Average long-term mutual fund assets (U.S. platform) (millions) $ 466,195 8 % 2 % Depositary Receipts Number of sponsored programs 1,206 (8 )% (4 )% 1 Includes the AUC/A of CIBC Mellon of $1.2 trillion at June 30, 2014, $1.1 trillion at March 31, 2015 and $1.1 trillion at June 30, 2015. 2 Preliminary. 3 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 $64 billion at June 30, 2014, $69 billion at March 31, 2015 and $68 billion at June 30, 2015.
11 Second Quarter 2015 – Financial Highlights Net Interest Revenue Growth vs. Year-over-Year Drivers ($ in millions) 2Q15 2Q14 1Q15 Net interest revenue (non-FTE) $ 779 8 % 7 % Net Interest Revenue Higher securities and loans due to increase in deposits and the shift out of cash, lower interest expense incurred on deposits and the impact of interest rate hedging activities, partially offset by: Interest-earning assets yield declined (2) bps Interest-bearing deposits yield declined (4) bps Net interest revenue (FTE) - Non-GAAP 794 8 7 Net interest margin (FTE) 1.00 % 2 bps 3 bps Selected Average Balances: Cash/interbank investments $ 125,640 (10 )% 2 % Trading account securities 3,253 (41 ) 7 Securities 128,641 27 4 Loans 61,076 14 5 Interest-earning assets 318,610 6 3 Interest-bearing deposits 170,730 5 7 Noninterest-bearing deposits 84,890 9 (5 ) Note: Please reference earnings release for quarter-over-quarter variance explanations. FTE – fully taxable equivalent bps – basis points
12 Second Quarter 2015 – Financial Highlights Noninterest Expense Growth vs. Year-over-Year Drivers ($ in millions) 2Q15 2Q14 1Q15 Staff $ 1,434 — % (3 )% Lower expenses in all categories (except business development), the favorable impact of a stronger U.S. dollar and the benefit of the business improvement process which focuses on reducing structural costs Total staff expense decreased slightly primarily reflecting lower headcount, the impact of curtailing the U.S. pension plan and the favorable impact of a stronger U.S. dollar, partially offset by higher performance-driven incentives Professional, legal and other purchased services 299 (5 ) (1 ) Software and equipment 228 (3 ) — Net occupancy 149 (2 ) (1 ) Distribution and servicing 96 (14 ) (2 ) Sub-custodian 75 (7 ) 7 Business development 72 6 18 Other 250 (28 ) 3 Amortization of intangible assets 65 (13 ) (2 ) M&I, litigation and restructuring charges 59 N/M N/M Total noninterest expense – GAAP $ 2,727 (7 )% 1 % Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to investment management funds, net of incentives – Non-GAAP1 $ 2,603 (1 )% (1 )% Full-time employees 50,700 (400) 200 1 Represents a Non-GAAP measure. See Appendix for reconciliation. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. Note: Please reference earnings release for quarter-over-quarter variance explanations. N/M - not meaningful
13 Second Quarter 2015 – Financial Highlights Capital Ratios Highlights 6/30/15 3/31/15 12/31/14 Consolidated regulatory capital ratios:1,2,3 Repurchased 19.4 million common shares for $834 million in 2Q15 In 2Q15, declared a quarterly dividend of $0.17 per common share Issued $1 billion of qualifying preferred stock in 2Q15; authorized to repurchase up to $3.1 billion in common stock through 2Q16 Compliant with U.S. Liquidity Coverage Ratio (LCR)5 CET1 ratio 10.9 % 10.8 % 11.2 % Tier 1 capital ratio 12.4 11.7 12.2 Total (Tier 1 plus Tier 2) capital ratio 12.7 12.0 12.5 Leverage capital ratio 5.8 5.7 5.6 Selected regulatory capital ratios - fully phased-in - Non- GAAP:1,2 Estimated CET1 ratio: Standardized approach 10.0 % 10.0 % 10.6 % Advanced approach 9.9 9.9 9.8 Estimated supplementary leverage ratio ("SLR")4 4.6 % 4.6 % 4.4 % Note: See corresponding footnotes on following slide.
14 Second Quarter 2015 – Financial Highlights Capital Ratio Footnotes 1 June 30, 2015 regulatory capital ratios are preliminary. See the “Capital Ratios” section in the earnings release for additional detail. 2 Capital ratios for the first quarter of 2015 were revised to reflect the retrospective application of adopting new accounting guidance in 2Q15 related to Consolidations (ASU 2015-02). As a result of the new accounting guidance, the risk- weighted assets as of March 31, 2015 decreased $13.3 billion under the Advanced Approach and $7.0 billion under the Standardized Approach. 3 At Dec. 31, 2014, the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios determined under the transitional Standardized Approach were 15.0%, 16.3% and 16.9%, and were calculated based on Basel III components of capital, as phased-in, and asset risk-weightings using Basel I-based requirements. At March 31, 2015 and June 30, 2015, the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios determined under the transitional Basel III Standardized Approach were 11.2%, 12.2%, and 12.7%, and 11.3%, 12.9% and 13.4%, respectively. Additionally, the capital ratios determined under the transitional Basel III Standardized Approach for March 31, 2015 were revised to reflect the new accounting guidance related to Consolidations. 4 Please reference slide 21. See the “Capital Ratios” section in the earnings release for additional detail. 5 The U.S. LCR rules became effective Jan. 1, 2015 and require BNY Mellon to meet an LCR of 80%, increasing annually by 10% increments until fully phased-in on Jan. 1, 2017, at which time we will be required to meet an LCR of 100%. Our estimated LCR on a consolidated basis is compliant with the fully phased-in requirements of the U.S. LCR as of June 30, 2015 based on our current understanding of the U.S. LCR rules.
APPENDIX
16 Second Quarter 2015 – Financial Highlights Investment Management . Growth vs. ($ in millions) 2Q15 2Q14 1Q15 Investment management and performance fees $ 864 (2 )% 2 % Distribution and servicing 37 (10 ) (5 ) Other1 25 N/M N/M Net interest revenue 78 18 5 Total Revenue $ 1,004 (3 )% (1 )% Noninterest expense (ex. amortization of intangible assets and the charge related to investment management funds, net of incentives) $ 714 (2 )% (1 )% Income before taxes (ex. amortization of intangible assets and the charge related to investment management funds, net of incentives) $ 290 (7 )% — % Amortization of intangible assets 25 (19 ) — Charge related to investment management funds, net of incentives — N/M N/M Income before taxes $ 265 55 % — % Pre-tax operating margin 26 % 993 bps 30 bps Adjusted pre-tax operating margin2,3 34 % (152) bps 1 bps 1 Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other trading revenue and investment and other income. 2 Excludes the net negative impact of money market fee waivers, amortization of intangible assets and the charge related to investment management funds, net of incentives, and is net of distribution and servicing expense. 3 Represents a Non-GAAP measure. See Slide 22 for reconciliation. Additional disclosures regarding these measures and other Non-GAAP adjusted measures are available in the Corporation’s reports filed with the SEC, available at www.bnymellon.com/investorrelations. N/M - not meaningful bps – basis points
17 Second Quarter 2015 – Financial Highlights Investment Services Growth vs. ($ in millions) 2Q15 2Q14 1Q15 Investment services fees: Asset servicing $ 1,035 4 % 2 % Clearing services 346 7 1 Issuer services 234 1 1 Treasury services 141 1 4 Total investment services fees $ 1,756 4 2 Foreign exchange and other trading revenue 179 23 (14 ) Other1 85 (2 ) 35 Net interest revenue 635 7 6 Total revenue $ 2,655 6 % 2 % Noninterest expense (ex. amortization of intangible assets) $ 1,841 1 % 2 % Income before taxes (ex. amortization of intangible assets) $ 814 18 % 2 % Amortization of intangible assets 40 (9 ) (2 ) Income before taxes $ 774 20 % 3 % Pre-tax operating margin 29 % 346 bps 1 bps Pre-tax operating margin (ex. amortization of intangible assets) 31 % 323 bps (6) bps Investment services fees as a percentage of noninterest expense2 98 % 552 bps 237 bps 1 Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue, and investment and other income. 2 Noninterest expense excludes amortization of intangible assets and litigation expense. bps – basis points
18 Second Quarter 2015 – Financial Highlights Expense & Pre-Tax Operating Margin - Non-GAAP Reconciliation 2Q15 1Q15 2Q14 ($ in millions) Total revenue – GAAP $ 3,886 $ 3,792 $ 3,745 Less: Net income attributable to noncontrolling interests of consolidated investment management funds 37 31 17 Total revenue, as adjusted – Non-GAAP2 $ 3,849 $ 3,761 $ 3,728 Total noninterest expense – GAAP $ 2,727 $ 2,700 $ 2,946 Less: Amortization of intangible assets 65 66 75 M&I, litigation and restructuring charges 59 (3 ) 122 Charge related to investment management funds, net of incentives — — 109 Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to investment management funds, net of incentives – Non-GAAP2 $ 2,603 $ 2,637 $ 2,640 Provision for credit losses (6 ) 2 (12 ) Income before income taxes, as adjusted – Non-GAAP2 $ 1,252 $ 1,122 $ 1,100 Pre-tax operating margin – Non-GAAP1,2 33 % 3 30 % 3 30 % 1 Income before taxes divided by total revenue. 2 Non-GAAP excludes net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges, and a charge related to investment management funds, net of incentives, if applicable. 3 Our GAAP earnings include tax-advantaged investments such as low income housing, renewable energy, bank-owned life insurance and tax-exempt securities. The benefits of these investments are primarily reflected in tax expense. If reported on a tax-equivalent basis these investments would increase revenue and income before taxes by $64 million and $52 million for 1Q15 and 2Q15 and would increase our pre-tax operating margin by approximately 1.2% and 0.9%, respectively.
19 Second Quarter 2015 – Financial Highlights Return on Tangible Common Equity Reconciliation 2Q15 1Q15 2Q14 ($ in millions) Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP $ 830 $ 766 $ 554 Add: Amortization of intangible assets, net of tax 44 43 49 Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP 874 809 603 Add: M&I, litigation and restructuring charges 38 (2 ) 76 Charge related to investment management funds, net of incentives — — 85 Net income applicable to common shareholders of The Bank of New York Mellon Corporation, as adjusted – Non-GAAP2 $ 912 $ 807 $ 764 Average common shareholders’ equity $ 35,516 $ 35,486 $ 36,565 Less: Average goodwill 17,752 17,756 18,149 Average intangible assets 4,031 4,088 4,354 Add: Deferred tax liability – tax deductible goodwill1 1,351 1,362 1,338 Deferred tax liability – intangible assets1 1,179 1,200 1,247 Average tangible common shareholders’ equity - Non-GAAP $ 16,263 $ 16,204 $ 16,647 Return on tangible common equity – Non-GAAP2,3 21.5 % 20.3 % 14.5 % Return on tangible common equity – Non-GAAP adjusted2,3 22.5 % 20.2 % 18.4 % 1 Deferred tax liabilities are based on fully phased-in Basel III rules. 2 Non-GAAP excludes amortization of intangible assets, the benefit primarily related to a tax carryback claim, M&I, litigation and restructuring charges, and a charge related to investment management funds, net of incentives, if applicable. 3 Annualized.
20 Second Quarter 2015 – Financial Highlights Earnings Per Share & GAAP Revenue Reconciliation Earnings per share Growth vs. ($ in dollars) 2Q15 1Q15 2Q14 2Q14 1Q15 GAAP results $ 0.73 $ 0.67 $ 0.48 Add: Litigation and restructuring charges 0.03 — 0.06 Charge related to investment management funds, net of incentives — — 0.07 Non-GAAP results $ 0.77 1 $ 0.67 $ 0.62 1 24 % 15 % Revenue - GAAP ($ in millions) 2Q15 1Q15 2Q14 Investment services fees: Asset servicing2 $ 1,060 $ 1,038 $ 1,022 Clearing services 347 344 326 Issuer services 234 232 231 Treasury services 144 137 141 Total investment services fees 1,785 1,751 1,720 Investment management and performance fees3 878 867 883 Foreign exchange and other trading revenue 187 229 130 Financing-related fees 58 40 44 Distribution and servicing 39 41 43 Investment and other income3 104 60 142 Total fee revenue3 3,051 2,988 2,962 Net securities gains 16 24 18 Total fee and other revenue3 $ 3,067 $ 3,012 $ 2,980 Income from consolidated investment management funds3 40 52 46 Net interest revenue 779 728 719 Total revenue - GAAP $ 3,886 $ 3,792 $ 3,745 1 Does not foot due to rounding. 2 Asset servicing fees include securities lending revenue of $46 million in 2Q14, $37 million in 3Q14 and 4Q14, $43 million in 1Q15 and $49 million in 2Q15. 3 The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02).
21 Second Quarter 2015 – Financial Highlights Estimated Fully Phased-In SLR1 - Non-GAAP Reconciliation ($ in millions) 6/30/152 3/31/15 12/31/14 Total estimated fully phased-in Basel III CET1 - Non-GAAP $ 15,931 $ 16,123 $ 15,931 Additional Tier 1 capital 2,545 1,560 1,550 Total Tier 1 capital $ 18,476 $ 17,683 $ 17,481 Total leverage exposure: Quarterly average total assets3 $ 378,293 $ 368,411 $ 385,232 Less: Amounts deducted from Tier 1 capital 19,779 19,644 19,947 Total on-balance sheet assets, as adjusted3 358,514 348,767 365,285 Off-balance sheet exposures: Potential future exposure for derivatives contracts (plus certain other items) 9,222 9,295 11,376 Repo-style transaction exposures included in SLR 6,589 6,474 302 Credit-equivalent amount other off-balance sheet exposures (less SLR exclusions) 27,251 22,046 21,850 Total off-balance sheet exposures 43,062 37,815 33,528 Total leverage exposure3 $ 401,576 $ 386,582 $ 398,813 Estimated fully phased-in SLR - Non-GAAP3 4.6 % 4.6 % 4.4 % 1 The estimated fully phased-in SLR (Non-GAAP) is based on our interpretation of the U.S. capital rules. When the SLR is fully phased-in, we expect to maintain an SLR of over 5%. The minimum required SLR is 3% and there is a 2% buffer, in addition to the minimum, that is applicable to U.S. G-SIBs. 2 June 30, 2015 information is preliminary. 3 The first quarter of 2015 was restated to reflect the retrospective application of adopting new accounting guidance related to Consolidations (ASU 2015-02). • The SLR increased slightly on a sequential basis, as both total Tier 1 capital and total leverage exposure increased. • The increase in total Tier 1 capital was driven by the issuance of preferred stock. • The increase in leverage exposure was driven by: • an increase in average total assets, primarily interest-earning assets, as a result of higher average deposits and securities sold under repurchase agreements. • an increase in the credit equivalent amount of other off-balance sheet exposures primarily from the secured intraday credit provided to dealers in connection with their tri-party repo activity.
22 Second Quarter 2015 – Financial Highlights Pre-Tax Operating Margin – Investment Management Reconciliation 2Q15 1Q15 2Q14 ($ in millions) Income before income taxes – GAAP $ 265 $ 264 $ 171 Add: Amortization of intangible assets 25 25 31 Money market fee waivers 29 34 28 Charge related to investment management funds, net of incentives — — 109 Income before income taxes excluding amortization of intangible assets, money market fee waivers and the charge related to investment management funds, net of incentives – Non-GAAP $ 319 $ 323 $ 339 Total revenue – GAAP $ 1,004 $ 1,010 $ 1,036 Less: Distribution and servicing expense 95 97 111 Money market fee waivers benefiting distribution and servicing expense 37 38 37 Add: Money market fee waivers impacting total revenue 66 72 65 Total revenue net of distribution and servicing expense and excluding money market fee waivers - Non- GAAP $ 938 $ 947 $ 953 Pre-tax operating margin1 26 % 26 % 16 % Pre-tax operating margin excluding amortization of intangible assets, money market fee waivers, the charge related to investment management funds, net of incentives and net of distribution and servicing expense – Non-GAAP1 34 % 34 % 36 % 1 Income before taxes divided by total revenue.
23 Second Quarter 2015 – Financial Highlights Investment Management and Performance Fees - Non-GAAP Investment management and performance fees - Consolidated Growth vs. ($ in millions) 2Q15 2Q14 2Q14 Investment management and performance fees - GAAP $ 878 $ 883 (1 )% Impact of changes in foreign currency exchange rates — (45 ) Investment management and performance fees, as adjusted - Non-GAAP $ 878 $ 838 5 % Investment management fees - Investment Management business Growth vs. ($ in millions) 2Q15 2Q14 2Q14 Investment management fees - GAAP $ 844 $ 852 (1 )% Impact of changes in foreign currency exchange rates — (45 ) Investment management fees, as adjusted - Non-GAAP $ 844 $ 807 5 %
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