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BNY Mellon's (BK) Q4 Earnings In Line, Expenses Increase
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The Bank of New York Mellon Corporation (BK - Free Report) released its fourth-quarter and full-year 2017 results. Adjusted earnings per share of 91 cents for the quarter came in line with the Zacks Consensus Estimate. The figure reflects improvement of 18.2% from the prior-year quarter tally.
The quarter witnessed improvement in net interest revenues along with provision benefits. Also, assets under management (AUM) reflected growth. However, rise in expenses and lower fee income acted as headwinds. As a result, shares of the company declined nearly 4% in pre-market trading.
After taking into consideration net benefit of 41 cents per share, related to the Tax Act and severance, litigation and other charges of 24 cents per share, net income applicable to common shareholders for the quarter came in at $1.13 billion or $1.08 per share.
For 2017, the company reported net income applicable to common shareholders of $3.92 billion or $3.72 per share, up from $3.43 billion or $3.15 per share registered in 2016.
Revenues Decrease, Costs Rise
Total revenues (GAAP basis) for the quarter decreased 2% year over year to $3.73 billion. The figure includes certain non-recurring items. The Zacks Consensus Estimate for revenues was $3.98 billion.
Total revenues for 2017 were $15.54 billion, up from $15.24 billion registered in 2016. The Zacks Consensus Estimate for revenues was $15.79 billion.
Net interest revenues, on a fully taxable-equivalent basis, were $862 million for the quarter, up 2% year over year. The rise was driven by higher interest rates, partly offset by a fall in average deposits and loans.
However, net interest margin decreased 1 basis points year over year to 1.16%.
Total fee and other revenues decreased nearly 3% from the prior-year quarter to $2.86 billion. The fall was primarily due to lower distribution and servicing fees. Also, the company witnessed investment and other losses of $198 million in the quarter.
Total non-interest expenses (non-GAAP) came in at $2.87 billion, increasing 12% year over year. This reflects an increase in all expense components, except net occupancy costs, business development expenses, bank assessment charges and amortization of intangible assets.
Strong Asset Position
As of Dec 31, 2017, AUM was $1.9 trillion, up 15% year over year. This reflected higher market values, net inflows and the favorable impact of a weaker U.S. dollar (principally versus the British pound).
Moreover, assets under custody and administration of $33.3 trillion were up 11% year over year. Higher market values, favorable impact of a weaker U.S. dollar and net new business largely drove the increase.
Credit Quality Improves
As of Dec 31, 2017, non-performing assets came in at $90 million, down from $107 million registered in the prior-year quarter end. Also, allowance for loan losses decreased 5.9% year over year to $159 million. Provision for credit losses was a benefit of $6 million compared with provision of $7 million in the year-ago quarter.
Capital Position
As of Dec 31, 2017, common equity Tier-1 ratio (Standardized Basel 3 fully phased-in) came in at 11.5% compared with 11.3% as of Dec 31, 2016. Leverage capital ratio was 6.6%, in line with the Dec 31, 2016 figure.
Share Repurchase
During the reported quarter, BNY Mellon bought back 12 million shares for $651 million. In 2017, the company repurchased a total of 55 million shares for $2.7 billion.
Our Viewpoint
BNY Mellon’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. Further, its strong global reach and gradually easing margin pressure are expected to support profitability in the long run.
However, concentration risk arising from significant dependence on fee-based income remains a major concern for the company in the near term.
Bank Of New York Mellon Corporation (The) Price, Consensus and EPS Surprise
Among other major regional banks, SunTrust Banks, Inc. (STI - Free Report) is slated to announce fourth-quarter 2017 results on Jan 19, while State Street Corp. (STT - Free Report) and Fifth Third Bancorp (FITB - Free Report) are slated to come up with their quarterly numbers on Jan 23.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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BNY Mellon's (BK) Q4 Earnings In Line, Expenses Increase
The Bank of New York Mellon Corporation (BK - Free Report) released its fourth-quarter and full-year 2017 results. Adjusted earnings per share of 91 cents for the quarter came in line with the Zacks Consensus Estimate. The figure reflects improvement of 18.2% from the prior-year quarter tally.
The quarter witnessed improvement in net interest revenues along with provision benefits. Also, assets under management (AUM) reflected growth. However, rise in expenses and lower fee income acted as headwinds. As a result, shares of the company declined nearly 4% in pre-market trading.
After taking into consideration net benefit of 41 cents per share, related to the Tax Act and severance, litigation and other charges of 24 cents per share, net income applicable to common shareholders for the quarter came in at $1.13 billion or $1.08 per share.
For 2017, the company reported net income applicable to common shareholders of $3.92 billion or $3.72 per share, up from $3.43 billion or $3.15 per share registered in 2016.
Revenues Decrease, Costs Rise
Total revenues (GAAP basis) for the quarter decreased 2% year over year to $3.73 billion. The figure includes certain non-recurring items. The Zacks Consensus Estimate for revenues was $3.98 billion.
Total revenues for 2017 were $15.54 billion, up from $15.24 billion registered in 2016. The Zacks Consensus Estimate for revenues was $15.79 billion.
Net interest revenues, on a fully taxable-equivalent basis, were $862 million for the quarter, up 2% year over year. The rise was driven by higher interest rates, partly offset by a fall in average deposits and loans.
However, net interest margin decreased 1 basis points year over year to 1.16%.
Total fee and other revenues decreased nearly 3% from the prior-year quarter to $2.86 billion. The fall was primarily due to lower distribution and servicing fees. Also, the company witnessed investment and other losses of $198 million in the quarter.
Total non-interest expenses (non-GAAP) came in at $2.87 billion, increasing 12% year over year. This reflects an increase in all expense components, except net occupancy costs, business development expenses, bank assessment charges and amortization of intangible assets.
Strong Asset Position
As of Dec 31, 2017, AUM was $1.9 trillion, up 15% year over year. This reflected higher market values, net inflows and the favorable impact of a weaker U.S. dollar (principally versus the British pound).
Moreover, assets under custody and administration of $33.3 trillion were up 11% year over year. Higher market values, favorable impact of a weaker U.S. dollar and net new business largely drove the increase.
Credit Quality Improves
As of Dec 31, 2017, non-performing assets came in at $90 million, down from $107 million registered in the prior-year quarter end. Also, allowance for loan losses decreased 5.9% year over year to $159 million. Provision for credit losses was a benefit of $6 million compared with provision of $7 million in the year-ago quarter.
Capital Position
As of Dec 31, 2017, common equity Tier-1 ratio (Standardized Basel 3 fully phased-in) came in at 11.5% compared with 11.3% as of Dec 31, 2016. Leverage capital ratio was 6.6%, in line with the Dec 31, 2016 figure.
Share Repurchase
During the reported quarter, BNY Mellon bought back 12 million shares for $651 million. In 2017, the company repurchased a total of 55 million shares for $2.7 billion.
Our Viewpoint
BNY Mellon’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. Further, its strong global reach and gradually easing margin pressure are expected to support profitability in the long run.
However, concentration risk arising from significant dependence on fee-based income remains a major concern for the company in the near term.
Bank Of New York Mellon Corporation (The) Price, Consensus and EPS Surprise
Bank Of New York Mellon Corporation (The) Price, Consensus and EPS Surprise | Bank Of New York Mellon Corporation (The) Quote
Currently, BNY Mellon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other major regional banks, SunTrust Banks, Inc. (STI - Free Report) is slated to announce fourth-quarter 2017 results on Jan 19, while State Street Corp. (STT - Free Report) and Fifth Third Bancorp (FITB - Free Report) are slated to come up with their quarterly numbers on Jan 23.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>