BK Bank of New York Mellon Corporation

By Lisa Beilfuss 

Bank of New York Mellon Corp. said profit soared in its latest quarter, despite a decline in assets that pressured fee revenue, as the asset-manager came up against a favorable comparison from the year-earlier period.

As a custody bank, BNY Mellon derives a major portion of its business from serving trillions in assets for money managers and other clients, in addition to managing clients' investments.

Amid emerging market weakness, higher regulatory compliance requirements and low interest rates, the bank saw assets under management decline during the period. The stronger dollar has weighed on Bank of New York, as it does substantial business in Europe. Assets under management stood at $1.63 trillion at the end of December, down 4% from a year earlier and flat from the third quarter.

In addition to adverse exchange rates, the decline from a year earlier was due to net outflows and lower market values, the bank said. The company reported $11 billion in net long-term outflows during the quarter, driven by index and equity products.

Fee revenue, which makes up a big chunk of the bank's top line, was roughly flat, while net interest revenue increased 6.7% from a year earlier to $760 million. That rise helped boost the bank's net interest margin, a key measure of lending profitability, up to 0.99% from 0.97% a year earlier and 0.98% in the third quarter. Banks including Bank of New York have been hoping the Federal Reserve's move in December to raise interest rates would help increase lending profitability.

Overall, Bank of New York reported a profit of $693 million, up from $233 million a year earlier. Per-share earnings rose to 57 cents from 18 cents. The year-earlier period included 53 cents in litigation and restructuring charges, partially offset by a tax benefit.

Excluding a previously disclosed charge stemming from a recent court decision, among other items, earnings per share increased to 68 cents from 58 cents. Revenue inched up 1.5% to $3.72 billion. Analysts predicted 64 cents in adjusted earnings per share on $3.75 billion in revenue, according to Thomson Reuters.

Bank of New York said it set aside $163 million in the fourth quarter to cover potential credit losses, up from $1 million a year earlier. Many lenders have been raising loss provisions as the rout in energy markets threatens some loans from the oil patch, but for Bank of New York the increase was a result of an impairment charge resulting from the aforementioned court decision.

Shares in the company, down 14% since the start of the year, were inactive premarket.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

January 21, 2016 07:50 ET (12:50 GMT)

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