BNY posts rare $269 million quarterly loss
By Thomas Olson
Published: Wednesday, April 17, 2013, 7:59 a.m.
The Bank of New York Mellon Corp. likely will bounce back from the unusual quarterly loss it posted on Wednesday.
The bank posted a loss of $269 million for the January-March quarter, its first quarterly loss in nearly four years.
Analysts said BNY Mellon, the world's largest custodian of investment assets, will tamp down expenses and realize higher profits when interest rates eventually rise.
“Low interest rates are the challenge for commercial banks and custody banks, but mostly for custody banks,” said Gerard Cassidy with RBC Capital Markets in Portland, Maine.
Custody banks derive profits from much shorter-term rates than commercial banks with their years-long loans. When interest rates rise, custody banks benefit sooner than do commercial banks, which must wait longer for loans to run off.
Cassidy said he expects BNY Mellon to concentrate on cost reductions to boost profits.
“We remain focused on our key priorities: investing in our businesses to drive organic growth and sustainable shareholder value, controlling discretionary expenses, maintaining a strong balance sheet and returning capital to shareholders,” CEO Gerald Hassell said in a statement.
BNY Mellon incurred an $854 million earnings charge after the Internal Revenue Service successfully challenged in tax court foreign tax credits the bank claimed.
The bank earned $617 million in the year earlier.
On a per share basis, the loss equaled 23 cents, compared with a profit of 52 cents.
“Everybody knew about it, but it doesn't reflect on ongoing earnings,” said Marty Mosby, an analyst at Guggenheim Partners in Memphis.
BNY Mellon reported higher revenue from investment services and asset management, which was offset by higher expenses and the charge from the U.S. Tax Court ruling in February. The bank said it would challenge the decision, which involved credits it claimed in 2001 and 2002.
BNY Mellon lost $2.46 billion in the July-September 2009 quarter, following major losses on securities during the height of the financial crisis.
The bank said assets under management reached a record $1.4 trillion as of March 31. Assets under custody or administration increased 2 percent to $26.3 trillion.
Thomas Olson is a Trib Total Media staff writer. Reach him at 412-320-7854.
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