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BNY Mellon (BK) Q4 Earnings Improve on Higher Revenues
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The Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2016 adjusted earnings per share of 77 cents increased 13.2% year over year. However, the figure lagged the Zacks Consensus Estimate of 78 cents.
Results benefitted from an improvement in total revenue along with falling expenses. Also, assets under management (AUM) reflected growth. Further, a decline in provision for credit losses was a positive for the company. However, allowance for loan losses increased during the quarter. Also, a fall in foreign exchange and other trading revenues were the headwinds.
After considering M&I, litigation and restructuring charges, net income applicable to common shareholders for the quarter came in at $822 million, up 29.0% from the prior-year quarter.
The company reported full-year 2016 adjusted earnings per share of $3.17, up 11% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $3.15. Also, net income applicable to common shareholders (GAAP) for 2016 came in at $3.43 billion, up from $3.05 billion recorded in the previous year.
Revenues Improve, Costs Down
Total revenue (non-GAAP) for the quarter increased 2% year over year to $3.79 billion. However, the figure came in below the Zacks Consensus Estimate of $3.86 billion.
For 2016, total revenue came in at $15.23 billion, up 1% year over year. However, the figure missed the Zacks Consensus Estimate of $15.3 billion.
Quarterly net interest revenue, on a fully taxable equivalent basis, was $843 million, up 9% year over year. The rise was driven by higher interest rates, partly offset by lower yielding interest-earning assets.
Additionally, net interest margin grew 18 basis points to 1.17%.
Total fee and other revenues increased marginally from the prior-year quarter to $2.95 billion. An increase in total investment services fees was partially offset by lower investment and other income as well as a fall in foreign exchange and other trading revenue. The quarter also witnessed a fall in net securities gains compared with the prior-year quarter.
Total non-interest expenses (non-GAAP) amounted to $2.56 billion, down 2% year over year. This reflects lower expenses in nearly all categories, except software and equipment, distribution and servicing expense, net occupancy costs and other expenses.
Strong Asset Position
As of Dec 31, 2016, AUM was $1.65 trillion, up 1% year over year. This reflected higher market values, partly offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).
Moreover, assets under custody and administration of $29.9 trillion were up 3% year over year. Higher market values were partially offset by unfavorable impact of a stronger U.S. dollar.
Credit Quality: A Mixed Bag
Non-performing assets declined 63.4% year over year to $107 million. Further, provision for credit losses was $7 million, compared with $163 million in the year-ago quarter.
However, allowance for loan losses increased 7.6% year over year to $169 million.
Capital Ratios Improve
As of Dec 31, 2016, common equity tier-1 ratio (Standardized Basel 3 fully phased-in) came in at 11.3% compared with 10.2% as of Dec 31, 2015. Tangible common equity ratio was 6.7%, up from 6.5% as at Dec 31, 2015.
Share Repurchase
During the reported quarter, BNY Mellon bought back 18.4 million shares for $848 million.
Our Viewpoint
BNY Mellon’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. Also, the company’s cost-saving initiatives have started yielding results and have been constantly supporting profitability. Further, its efficient capital deployment strategies are expected to enhance shareholder value.
However, the effect of stringent regulations and margin pressure remain matters of concern.
Bank Of New York Mellon Corp. Price, Consensus and EPS Surprise
SunTrust Banks, Inc. (STI - Free Report) is slated to announce fourth-quarter 2016 results on Jan 20. Fifth Third Bancorp (FITB - Free Report) is scheduled to announce its results on Jan 24 while State Street Corp. (STT - Free Report) will report on Jan 25.
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BNY Mellon (BK) Q4 Earnings Improve on Higher Revenues
The Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2016 adjusted earnings per share of 77 cents increased 13.2% year over year. However, the figure lagged the Zacks Consensus Estimate of 78 cents.
Results benefitted from an improvement in total revenue along with falling expenses. Also, assets under management (AUM) reflected growth. Further, a decline in provision for credit losses was a positive for the company. However, allowance for loan losses increased during the quarter. Also, a fall in foreign exchange and other trading revenues were the headwinds.
After considering M&I, litigation and restructuring charges, net income applicable to common shareholders for the quarter came in at $822 million, up 29.0% from the prior-year quarter.
The company reported full-year 2016 adjusted earnings per share of $3.17, up 11% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $3.15. Also, net income applicable to common shareholders (GAAP) for 2016 came in at $3.43 billion, up from $3.05 billion recorded in the previous year.
Revenues Improve, Costs Down
Total revenue (non-GAAP) for the quarter increased 2% year over year to $3.79 billion. However, the figure came in below the Zacks Consensus Estimate of $3.86 billion.
For 2016, total revenue came in at $15.23 billion, up 1% year over year. However, the figure missed the Zacks Consensus Estimate of $15.3 billion.
Quarterly net interest revenue, on a fully taxable equivalent basis, was $843 million, up 9% year over year. The rise was driven by higher interest rates, partly offset by lower yielding interest-earning assets.
Additionally, net interest margin grew 18 basis points to 1.17%.
Total fee and other revenues increased marginally from the prior-year quarter to $2.95 billion. An increase in total investment services fees was partially offset by lower investment and other income as well as a fall in foreign exchange and other trading revenue. The quarter also witnessed a fall in net securities gains compared with the prior-year quarter.
Total non-interest expenses (non-GAAP) amounted to $2.56 billion, down 2% year over year. This reflects lower expenses in nearly all categories, except software and equipment, distribution and servicing expense, net occupancy costs and other expenses.
Strong Asset Position
As of Dec 31, 2016, AUM was $1.65 trillion, up 1% year over year. This reflected higher market values, partly offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).
Moreover, assets under custody and administration of $29.9 trillion were up 3% year over year. Higher market values were partially offset by unfavorable impact of a stronger U.S. dollar.
Credit Quality: A Mixed Bag
Non-performing assets declined 63.4% year over year to $107 million. Further, provision for credit losses was $7 million, compared with $163 million in the year-ago quarter.
However, allowance for loan losses increased 7.6% year over year to $169 million.
Capital Ratios Improve
As of Dec 31, 2016, common equity tier-1 ratio (Standardized Basel 3 fully phased-in) came in at 11.3% compared with 10.2% as of Dec 31, 2015. Tangible common equity ratio was 6.7%, up from 6.5% as at Dec 31, 2015.
Share Repurchase
During the reported quarter, BNY Mellon bought back 18.4 million shares for $848 million.
Our Viewpoint
BNY Mellon’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. Also, the company’s cost-saving initiatives have started yielding results and have been constantly supporting profitability. Further, its efficient capital deployment strategies are expected to enhance shareholder value.
However, the effect of stringent regulations and margin pressure remain matters of concern.
Bank Of New York Mellon Corp. Price, Consensus and EPS Surprise
Bank Of New York Mellon Corp. Price, Consensus and EPS Surprise | Bank Of New York Mellon Corp. Quote
Currently, BNY Mellon carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Regional Banks
SunTrust Banks, Inc. (STI - Free Report) is slated to announce fourth-quarter 2016 results on Jan 20. Fifth Third Bancorp (FITB - Free Report) is scheduled to announce its results on Jan 24 while State Street Corp. (STT - Free Report) will report on Jan 25.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>