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BNY Mellon earnings leap

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By Thomas Olson
Wednesday, Oct. 16, 2013, 7:54 a.m.
 

Bank of New York Mellon Corp. reported on Wednesday that quarterly earnings increased 34 percent because of a gain from a favorable tax court ruling and improved market conditions.

The world's largest custody bank earned $949 million, or 82 cents per share, in the July-September period compared with $709 million, or 61 cents per share in the same period a year ago. The earnings equaled 60 cents a share on an operating basis that excludes the tax ruling and beat Wall Street estimates of 58 cents a share.

A U.S. tax court judge decided in late September that while the bank could not claim tax credits from a loan transaction with London-based Barclays Bank plc in 2001 and 2002, BNY Mellon could deduct the undisclosed amount of interest it paid on that loan.

Earnings also benefited from cutting expenses by $170 million on an annualized basis, mainly from enhanced procurement practices and reducing its real estate costs in New York, where the bank is based.

Gerard Cassidy, an analyst at RBC Capital Markets, said he expects the bank will continue to look for expense reductions.

“The challenge for custody banks like them is that the interest rate environment puts pressure on revenue,” he said.

Namely, low rates cut into income from investments and securities lending, and require institutions to waive money market fees for clients.

Still, BNY Mellon received higher revenue from servicing and managing investments for institutions and individuals. Total revenue increased 2.8 percent to $2.96 billion from $2.88 billion.

The bank's assets under management reached a record $1.53 trillion as of Sept. 30 with both market appreciation and a strong inflow of new investments placed with the bank.

In a conference call with analysts, CEO Gerald Hassell said results reflected “solid fee growth.”

Thomas Olson is a Trib Total Media staff writer. He can be reached at 412-320-7854 or tolson@tribweb.com.

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