By Daniel Huang And Chelsey Dulaney
Bank of New York Mellon Corp. on Tuesday reported a 48% jump in
profit in its second quarter, as the bank logged
better-than-expected revenue growth and kept expenses in check.
For the quarter ended June 30, BNY Mellon posted a profit of
$853 million, up from $577 million in the prior-year period. On a
per-share basis, which excludes preferred dividends, earnings rose
to 73 cents from 48 cents a year ago. Shares traded 2% higher in
morning trading.
Excluding litigation and restructuring expenses, per-share
earnings were 77 cents as revenue increased 3.8% to $3.89 billion.
Analysts had projected 66 cents a share in earnings and $3.82
billion in revenue, according to Thomson Reuters.
Total fee and other revenue increased 2.9% to $3.07 billion on
higher market values and new business, offset by currency impacts.
Foreign-exchange revenue was again a boon for the top line, growing
44% from the prior year to $187 million on higher volumes and
volatility.
BNY Mellon derives a major portion of its business from serving
trillions in assets for money managers and other clients, as well
as managing investments for its clients.
Assets under custody and/or administration edged up to $28.6
trillion, from $28.5 trillion a year ago, while assets under
management grew 5.4% to $1.72 trillion. Clearing services revenue
grew 6.4% to $347 million, while asset servicing revenue ticked up
3.7% to $1.06 billion.
The effects of a stronger dollar reduced revenue but helped keep
expenses down, resulting in a slightly negative net impact on the
trust bank.
BNY Mellon announced plans last fall to cut $500 million in
annual expenses through 2017, pressured by investor demands to
reign in costs and improve the bottom line. Noninterest expense in
the second quarter fell 7.4% to $2.73 billion, helped by the
stronger dollar and cost cuts.
Head count has fallen in recent quarters even as the company has
built out technology capabilities and brought more services
in-house. Separately, BNY Mellon recently brought onboard 225
employees from investment manager T. Rowe in a partnership
announced last month.
In a call with analysts, Chief Executive Gerald L. Hassell said
costs will likely increase in the short run as the bank brings on
new business and navigates "increased regulatory costs that we are
facing in the second half of this year."
In May, the company agreed to pay $180 million to settle a
foreign exchange-related class-action lawsuit, resolving almost all
of its currently pending forex-related actions. The settlement came
two months after the trust bank reached a $714 million settlement
to resolve allegations it overcharged pension funds and other
clients on currency transactions.
The latest quarter included $38 million in litigation and
restructuring charges.
Still ongoing is a Securities and Exchange Commission probe into
whether the bank violated the U.S. Foreign Corrupt Practices Act by
giving internships to relatives of Middle Eastern sovereign-wealth
fund officials. A settlement with the SEC is forthcoming, reported
The Wall Street Journal in April.
Rival State Street Corp. will report earnings on Friday.
Write to Daniel Huang at dan.huang@wsj.com and Chelsey Dulaney
at Chelsey.Dulaney@wsj.com
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