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Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2022 earnings of 86 cents per share was in line with the Zacks Consensus Estimate. The bottom line represents a fall of 11.3% from the prior-year quarter. The reported figure includes an 8 cents per share charge related to Russia. Excluding this, adjusted earnings were 94 cents per share.
Results have been aided by a rise in net interest revenues. Growth in asset balances was another tailwind. However, a fall in fee revenues and higher expenses were the undermining factors.
Net income applicable to common shareholders (GAAP basis) was $699 million, down from $858 million recorded in the year-ago quarter.
Revenues Improve Marginally, Expenses Rise
Total revenues grew marginally year over year to $3.93 billion. The top line missed the Zacks Consensus Estimate of $3.96 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $701 million, up 6.5% year over year. The rise reflected higher interest rates on interest-earning assets, a change in asset mix and lower funding expenses, partially offset by declining interest-earning assets.
The net interest margin (FTE basis) expanded 9 basis points (bps) year over year to 0.76%.
Total fee and other revenues declined 1.2% to $3.23 billion. The fall was due to a decline in almost all components of fee revenues, except for investment and other revenues.
Total non-interest expenses (GAAP basis) were $3.01 billion, up 5.4% year over year. The rise was due to an increase in almost all cost components, except for net occupancy expenses, sub-custodian and clearing costs, costs related to the amortization of intangible assets, and other expenses.
Asset Position Strong
As of Mar 31, 2022, assets under management (AUM) were $2.3 trillion, up 2% year over year. The rise was mainly driven by higher market values and net inflows, partially offset by the unfavorable impact of a stronger U.S. dollar.
Assets under custody and/or administration of $45.5 trillion grew 9%, reflecting higher market values, net new business and net client inflows, partially offset by the unfavorable impacts of a stronger U.S. dollar.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percentage of total loans, was 0.25%, down 29 bps from the prior-year quarter.
However, the company recorded provisions for credit losses of $2 million in the reported quarter against a provision benefit of $83 million in the year-ago quarter. As of Mar 31, 2022, non-performing assets were $119 million, up 6.3% year over year.
Capital Ratios Deteriorate
As of Mar 31, 2022, common equity Tier 1 ratio was 10.1%, down from 11.2% as of Dec 31, 2021. Tier 1 leverage ratio was 5.3%, down from 5.5% as of Dec 31, 2021.
Share Repurchase Update
In the reported quarter, BNY Mellon repurchased 1.9 million shares for $118 million.
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. However, concentration risk arising from significant dependence on fee-based revenues is a major concern.
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise
Lower markets revenues, reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) first-quarter 2022 earnings of $2.63 per share, which missed the Zacks Consensus Estimate of $2.73. The reported quarter’s results included net credit reserve build and losses in Credit Adjustments & Other.
JPM’s equity markets revenues and fixed-income markets revenues fell 7% and 1%, respectively, on a year-over-year basis. Equity and debt underwriting fees tanked 78% and 20%, respectively. Then again, advisory fees were a saving grace, rising 18%.
Citigroup Inc.’s (C - Free Report) first-quarter 2022 earnings per share of $2.02 handily outpaced the Zacks Consensus Estimate of $1.74. However, the reported figure declined 44% from the prior-year quarter.
Starting first-quarter 2022, Citigroup removed its Global Consumer Banking segment. The new reporting structure differentiates four core businesses. In the reported quarter, Citigroup’s Treasury and Trade Solutions revenues improved, while Investment Banking revenues declined. A rise in deposit balances was a positive.
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BNY Mellon (BK) Q1 Earnings In Line, Revenues & Costs Rise
Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2022 earnings of 86 cents per share was in line with the Zacks Consensus Estimate. The bottom line represents a fall of 11.3% from the prior-year quarter. The reported figure includes an 8 cents per share charge related to Russia. Excluding this, adjusted earnings were 94 cents per share.
Results have been aided by a rise in net interest revenues. Growth in asset balances was another tailwind. However, a fall in fee revenues and higher expenses were the undermining factors.
Net income applicable to common shareholders (GAAP basis) was $699 million, down from $858 million recorded in the year-ago quarter.
Revenues Improve Marginally, Expenses Rise
Total revenues grew marginally year over year to $3.93 billion. The top line missed the Zacks Consensus Estimate of $3.96 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $701 million, up 6.5% year over year. The rise reflected higher interest rates on interest-earning assets, a change in asset mix and lower funding expenses, partially offset by declining interest-earning assets.
The net interest margin (FTE basis) expanded 9 basis points (bps) year over year to 0.76%.
Total fee and other revenues declined 1.2% to $3.23 billion. The fall was due to a decline in almost all components of fee revenues, except for investment and other revenues.
Total non-interest expenses (GAAP basis) were $3.01 billion, up 5.4% year over year. The rise was due to an increase in almost all cost components, except for net occupancy expenses, sub-custodian and clearing costs, costs related to the amortization of intangible assets, and other expenses.
Asset Position Strong
As of Mar 31, 2022, assets under management (AUM) were $2.3 trillion, up 2% year over year. The rise was mainly driven by higher market values and net inflows, partially offset by the unfavorable impact of a stronger U.S. dollar.
Assets under custody and/or administration of $45.5 trillion grew 9%, reflecting higher market values, net new business and net client inflows, partially offset by the unfavorable impacts of a stronger U.S. dollar.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percentage of total loans, was 0.25%, down 29 bps from the prior-year quarter.
However, the company recorded provisions for credit losses of $2 million in the reported quarter against a provision benefit of $83 million in the year-ago quarter. As of Mar 31, 2022, non-performing assets were $119 million, up 6.3% year over year.
Capital Ratios Deteriorate
As of Mar 31, 2022, common equity Tier 1 ratio was 10.1%, down from 11.2% as of Dec 31, 2021. Tier 1 leverage ratio was 5.3%, down from 5.5% as of Dec 31, 2021.
Share Repurchase Update
In the reported quarter, BNY Mellon repurchased 1.9 million shares for $118 million.
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. However, concentration risk arising from significant dependence on fee-based revenues is a major concern.
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.
Performance of Other Major Banks
Lower markets revenues, reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) first-quarter 2022 earnings of $2.63 per share, which missed the Zacks Consensus Estimate of $2.73. The reported quarter’s results included net credit reserve build and losses in Credit Adjustments & Other.
JPM’s equity markets revenues and fixed-income markets revenues fell 7% and 1%, respectively, on a year-over-year basis. Equity and debt underwriting fees tanked 78% and 20%, respectively. Then again, advisory fees were a saving grace, rising 18%.
Citigroup Inc.’s (C - Free Report) first-quarter 2022 earnings per share of $2.02 handily outpaced the Zacks Consensus Estimate of $1.74. However, the reported figure declined 44% from the prior-year quarter.
Starting first-quarter 2022, Citigroup removed its Global Consumer Banking segment. The new reporting structure differentiates four core businesses. In the reported quarter, Citigroup’s Treasury and Trade Solutions revenues improved, while Investment Banking revenues declined. A rise in deposit balances was a positive.