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BNY Mellon (BK) Q1 Earnings Top Estimates, Revenues Down Y/Y
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Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2021 earnings per share of 97 cents surpassed the Zacks Consensus Estimate of 87 cents. However, the figure represents a decline of 7.6% from the prior-year quarter’s level.
In the reported quarter, the company recorded a provision benefit, which was a major positive. Also, growth in asset balances was a tailwind. However, a decline in revenues and higher expenses were the undermining factors.
Net income applicable to common shareholders was $858 million, down from $944 million recorded in the prior-year quarter.
Revenues Decline, Expenses Rise
Total revenues declined 4.6% year over year to $3.92 billion. However, the figure surpassed the Zacks Consensus Estimate of $3.84 billion.
Net interest revenues, on a fully taxable-equivalent basis (non-GAAP basis), were $658 million, down 19.4% year over year. The decline was due to lower interest rates on interest-earning assets, partially offset by benefits from low deposit and funding rates, higher deposits and a larger securities portfolio.
Non-GAAP net interest margin (FTE basis) contracted 34 basis points (bps) year over year to 0.67%.
Total fee and other revenues declined marginally year over year to $3.27 billion. The fall was due to a decline in investment and other income, foreign exchange revenues, financing-related fees, and distribution and servicing fees.
Total non-interest expenses were $2.85 billion, up 5.1% from the prior-year quarter. The rise was due to an increase in staff expenses, software and equipment costs, costs related to professional, legal and other purchased services, sub-custodian and clearing costs, and other expenses.
Asset Position Strong
As of Mar 31, 2021, assets under management (AUM) were $2.2 trillion, up 22.8% year over year. The rise was mainly driven by higher market values, the favorable impact of a weaker U.S. dollar and net inflows.
Assets under custody and/or administration of $41.7 trillion grew 18.5% year over year, reflecting higher market values, net new business and the favorable impact of a weaker U.S. dollar.
Credit Quality: A Mixed Bag
As of Mar 31, 2021, non-performing assets were $112 million, up 27.3% year over year. Also, allowance for loan losses — as a percentage of total loans — was 0.54%, up 32 bps from the prior-year quarter.
However, in the reported quarter, the company recorded a provision benefit of $83 million against provision for credit losses of $169 million in the year-ago quarter.
Capital Ratios Worsen
As of Mar 31, 2021, common equity Tier 1 ratio was 12.6% compared with 13.1% on Dec 31, 2020. Tier 1 Leverage ratio was 5.8%, down from 6.3% on Dec 31, 2020.
Our Viewpoint
BNY Mellon’s global reach, strong balance sheet position and a solid AUM balance will go a long way in supporting profitability. However, near-zero interest rates will likely continue to hurt margins in the near term.
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise
KeyCorp (KEY - Free Report) is scheduled to release results on Apr 20. SVB Financial Group and East West Bancorp (EWBC - Free Report) are scheduled to announce quarterly numbers on Apr 22.
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The only question is “Will you get into the right stocks early when their growth potential is greatest?”
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BNY Mellon (BK) Q1 Earnings Top Estimates, Revenues Down Y/Y
Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2021 earnings per share of 97 cents surpassed the Zacks Consensus Estimate of 87 cents. However, the figure represents a decline of 7.6% from the prior-year quarter’s level.
In the reported quarter, the company recorded a provision benefit, which was a major positive. Also, growth in asset balances was a tailwind. However, a decline in revenues and higher expenses were the undermining factors.
Net income applicable to common shareholders was $858 million, down from $944 million recorded in the prior-year quarter.
Revenues Decline, Expenses Rise
Total revenues declined 4.6% year over year to $3.92 billion. However, the figure surpassed the Zacks Consensus Estimate of $3.84 billion.
Net interest revenues, on a fully taxable-equivalent basis (non-GAAP basis), were $658 million, down 19.4% year over year. The decline was due to lower interest rates on interest-earning assets, partially offset by benefits from low deposit and funding rates, higher deposits and a larger securities portfolio.
Non-GAAP net interest margin (FTE basis) contracted 34 basis points (bps) year over year to 0.67%.
Total fee and other revenues declined marginally year over year to $3.27 billion. The fall was due to a decline in investment and other income, foreign exchange revenues, financing-related fees, and distribution and servicing fees.
Total non-interest expenses were $2.85 billion, up 5.1% from the prior-year quarter. The rise was due to an increase in staff expenses, software and equipment costs, costs related to professional, legal and other purchased services, sub-custodian and clearing costs, and other expenses.
Asset Position Strong
As of Mar 31, 2021, assets under management (AUM) were $2.2 trillion, up 22.8% year over year. The rise was mainly driven by higher market values, the favorable impact of a weaker U.S. dollar and net inflows.
Assets under custody and/or administration of $41.7 trillion grew 18.5% year over year, reflecting higher market values, net new business and the favorable impact of a weaker U.S. dollar.
Credit Quality: A Mixed Bag
As of Mar 31, 2021, non-performing assets were $112 million, up 27.3% year over year. Also, allowance for loan losses — as a percentage of total loans — was 0.54%, up 32 bps from the prior-year quarter.
However, in the reported quarter, the company recorded a provision benefit of $83 million against provision for credit losses of $169 million in the year-ago quarter.
Capital Ratios Worsen
As of Mar 31, 2021, common equity Tier 1 ratio was 12.6% compared with 13.1% on Dec 31, 2020. Tier 1 Leverage ratio was 5.8%, down from 6.3% on Dec 31, 2020.
Our Viewpoint
BNY Mellon’s global reach, strong balance sheet position and a solid AUM balance will go a long way in supporting profitability. However, near-zero interest rates will likely continue to hurt margins in the near term.
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise
The Bank of New York Mellon Corporation price-consensus-eps-surprise-chart | The Bank of New York Mellon Corporation 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.
Earnings Schedule of Other Banks
KeyCorp (KEY - Free Report) is scheduled to release results on Apr 20. SVB Financial Group and East West Bancorp (EWBC - Free Report) are scheduled to announce quarterly numbers on Apr 22.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>