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BNY Mellon (BK) Q4 Earnings Beat, Revenues & Costs Rise Y/Y

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Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2021 adjusted earnings of $1.04 per share surpassed the Zacks Consensus Estimate of $1.02. The bottom line represents a rise of 8.3% from the prior-year quarter.

Results were aided by provision benefits and a rise in fee income. Growth in asset balances was another tailwind. However, a marginal fall in net interest income and higher expenses were the undermining factors.
 
Net income applicable to common shareholders (GAAP basis) was $822 million or $1.01 per share, up from $702 million or 79 cents per share recorded in the year-ago quarter.

For 2021, earnings per share (GAAP basis) of $4.14 increased 8% from 2020. The Zacks Consensus Estimate for earnings was $4.17 per share. Net income applicable to common shareholders was $3.55 billion, up 4% year over year.

Revenues Improve, Expenses Rise

Total quarterly revenues grew 4% year over year to $4.02 billion. The top line outpaced the Zacks Consensus Estimate of $3.98 billion.

For 2021, revenues were $15.93 billion, up 1% year over year. The top line outpaced the Zacks Consensus Estimate of $15.90 billion.

Quarterly net interest revenues, on a fully taxable-equivalent (FTE) basis, were $681 million, down marginally year over year. The fall was mainly due to lower interest rates on interest-earning assets and the impact of hedging activities, partially offset by benefits from low deposit and funding rates, and higher deposit and loan balances.

The net interest margin (FTE basis) contracted 1 basis point (bp) year over year to 0.71%.

Total fee and other revenues rose 6% to $3.34 billion. The rise was driven by an increase in almost all components of fee revenues, except for distribution and servicing fees.

Money market fee waivers were $278 million, up 87% year over year. Fee revenues (excluding money market fee waivers) increased 8%.

Total non-interest expenses (GAAP basis) were $2.97 billion, up 1% year over year. The rise was due to an increase in almost all cost components, except for net occupancy expenses, costs related to amortization of intangible assets, distribution and servicing costs, and other expenses. Excluding notable items, non-interest expenses increased 6%.

Asset Position Strong

As of Dec 31, 2021, assets under management (AUM) were $2.4 trillion, up 10% year over year. The rise was mainly driven by higher market values and net inflows.

Assets under custody and/or administration of $46.7 trillion grew 14%, reflecting higher market values and net client inflows, partially offset by the unfavorable impact of a stronger U.S. dollar.

Credit Quality Improves

Allowance for loan losses as a percentage of total loans was 0.29%, down 34 bps from the prior-year quarter. In the reported quarter, the company recorded a provision benefit of $17 million against a provision for credit losses of $15 million in the year-ago quarter.

As of Dec 31, 2021, non-performing assets were $78 million, down 12% year over year.

Capital Ratios Deteriorate

As of Dec 31, 2021, common equity Tier 1 ratio was 11.1%, down from 13.1% in the prior-year quarter. Tier 1 Leverage ratio was 5.5%, down from 6.3% on Dec 30, 2021.

Share Repurchase Update

In the reported quarter, BNY Mellon repurchased 22 million shares for $1.2 billion.

Our Take

BNY Mellon’s global reach, strong balance sheet position and solid AUM balance will go a long way in supporting financials. Moreover, the company’s prudent expense-management initiatives will likely support the bottom line to some extent.

Currently, BNY Mellon sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Major Banks

Robust advisory business, reserve releases and a rise in loan demand drove JPMorgan’s (JPM - Free Report) fourth-quarter 2021 earnings of $3.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.01. Results included net credit reserve releases. Excluding this, earnings were $2.86 per share.

JPM’s equity markets revenues and fixed-income markets revenues fell 2% and 16%, respectively, on a year-over-year basis. Total markets revenues of $5.3 billion declined 11%. While lower rates continued to hurt JPMorgan’s interest income, it was more than offset by a rise in loan balances.

First Republic Bank’s (FRC - Free Report) fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter.

For FRC, its quarterly results were supported by an increase in net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 handily outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting as well as growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.