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BNY Mellon (BK) Stock Up on Q2 Earnings Beat, Revenues Rise Y/Y
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Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2022 adjusted earnings of $1.15 per share surpassed the Zacks Consensus Estimate of $1.12. The bottom line represents a rise of 1.8% from the prior-year quarter.
Shares of BK gained 1.5% in pre-market trading on better-than-expected earnings. The full-day trading session will display a clearer picture.
Results have been aided by a rise in net interest revenues and fee revenues. However, asset balances witnessed a decline, which was a negative. Also, higher expenses have hurt results to some extent.
Net income applicable to common shareholders (GAAP basis) was $835 million or $1.03 per share, down from $991 million or $1.13 per share recorded in the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues grew 7.4% year over year to $4.25 billion. The top line outpaced the Zacks Consensus Estimate of $4.18 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $827 million, up 27.6% year over year. The rise reflected higher interest rates on interest-earning assets and a change in asset mix, partly offset by higher funding expenses and declining interest-earning assets.
The net interest margin (FTE basis) expanded 22 basis points (bps) year over year to 0.89%.
Total fee and other revenues increased 3.5% to $3.43 billion. The rise was driven by an increase in almost all components of fee revenues, except for investment management and performance fees, financing-related fees, and investment and other revenues.
Total non-interest expenses (GAAP basis) were $3.11 billion, up 12% year over year. The rise was due to an increase in almost all cost components, except for sub-custodian and clearing costs, and costs related to the amortization of intangible assets.
Asset Balances Decline
As of Jun 30, 2022, assets under management were $1.94 trillion, down 16.4% year over year. The decline was due to lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by net inflows.
Assets under custody and/or administration of $43 trillion declined 4.4%, primarily reflecting lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by client inflows and net new business.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percentage of total loans, was 0.26%, down 16 bps from the prior-year quarter.
However, in the reported quarter, the company recorded provision for credit losses of $47 million against a provision benefit of $86 million in the year-ago quarter. As of Jun 30, 2022, non-performing assets were $114 million, up 26.7% year over year.
Capital Ratios Deteriorate
As of Jun 30, 2022, common equity Tier 1 ratio was 10.0%, down from 12.6% as of Jun 30, 2021. Tier 1 leverage ratio was 5.2%, down from 6.0% as of Jun 30, 2021.
Dividend Hike
Concurrently, the company’s board of directors announced a quarterly common stock dividend of 37 cents per share, representing a hike of 8.8% from the prior payout. The dividend will be paid out on Aug 5 to shareholders of record as of Jul 25.
Our Take
Concentration risk arising from significant dependence on fee-based revenues is a major concern for BNY Mellon. Also, bearish market sentiments and recessionary fears are expected to further put pressure on the company's asset values (which witnessed a decline in the second quarter).
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise
Higher reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) second-quarter 2022 earnings of $2.76 per share, which missed the Zacks Consensus Estimate of $2.85. The reported quarter’s results included a net credit reserve build of $428 million.
Higher interest rates and a solid rise in loan balances aided JPM’s net interest income. Operating expenses recorded a year-over-year rise.
First Republic Bank’s second-quarter 2022 earnings per share of $2.16 surpassed the Zacks Consensus Estimate of $2.05. Additionally, the bottom line improved 10.8% from the year-ago quarter.
FRC’s results were supported by an increase in net interest income and non-interest income. The company’s capital position was strong in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.
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BNY Mellon (BK) Stock Up on Q2 Earnings Beat, Revenues Rise Y/Y
Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2022 adjusted earnings of $1.15 per share surpassed the Zacks Consensus Estimate of $1.12. The bottom line represents a rise of 1.8% from the prior-year quarter.
Shares of BK gained 1.5% in pre-market trading on better-than-expected earnings. The full-day trading session will display a clearer picture.
Results have been aided by a rise in net interest revenues and fee revenues. However, asset balances witnessed a decline, which was a negative. Also, higher expenses have hurt results to some extent.
Net income applicable to common shareholders (GAAP basis) was $835 million or $1.03 per share, down from $991 million or $1.13 per share recorded in the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues grew 7.4% year over year to $4.25 billion. The top line outpaced the Zacks Consensus Estimate of $4.18 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $827 million, up 27.6% year over year. The rise reflected higher interest rates on interest-earning assets and a change in asset mix, partly offset by higher funding expenses and declining interest-earning assets.
The net interest margin (FTE basis) expanded 22 basis points (bps) year over year to 0.89%.
Total fee and other revenues increased 3.5% to $3.43 billion. The rise was driven by an increase in almost all components of fee revenues, except for investment management and performance fees, financing-related fees, and investment and other revenues.
Total non-interest expenses (GAAP basis) were $3.11 billion, up 12% year over year. The rise was due to an increase in almost all cost components, except for sub-custodian and clearing costs, and costs related to the amortization of intangible assets.
Asset Balances Decline
As of Jun 30, 2022, assets under management were $1.94 trillion, down 16.4% year over year. The decline was due to lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by net inflows.
Assets under custody and/or administration of $43 trillion declined 4.4%, primarily reflecting lower market values and the unfavorable impact of a stronger U.S. dollar, partially offset by client inflows and net new business.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percentage of total loans, was 0.26%, down 16 bps from the prior-year quarter.
However, in the reported quarter, the company recorded provision for credit losses of $47 million against a provision benefit of $86 million in the year-ago quarter. As of Jun 30, 2022, non-performing assets were $114 million, up 26.7% year over year.
Capital Ratios Deteriorate
As of Jun 30, 2022, common equity Tier 1 ratio was 10.0%, down from 12.6% as of Jun 30, 2021. Tier 1 leverage ratio was 5.2%, down from 6.0% as of Jun 30, 2021.
Dividend Hike
Concurrently, the company’s board of directors announced a quarterly common stock dividend of 37 cents per share, representing a hike of 8.8% from the prior payout. The dividend will be paid out on Aug 5 to shareholders of record as of Jul 25.
Our Take
Concentration risk arising from significant dependence on fee-based revenues is a major concern for BNY Mellon. Also, bearish market sentiments and recessionary fears are expected to further put pressure on the company's asset values (which witnessed a decline in the second quarter).
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Higher reserve build and a decline in investment banking fees affected JPMorgan’s (JPM - Free Report) second-quarter 2022 earnings of $2.76 per share, which missed the Zacks Consensus Estimate of $2.85. The reported quarter’s results included a net credit reserve build of $428 million.
Higher interest rates and a solid rise in loan balances aided JPM’s net interest income. Operating expenses recorded a year-over-year rise.
First Republic Bank’s second-quarter 2022 earnings per share of $2.16 surpassed the Zacks Consensus Estimate of $2.05. Additionally, the bottom line improved 10.8% from the year-ago quarter.
FRC’s results were supported by an increase in net interest income and non-interest income. The company’s capital position was strong in the quarter. Yet, higher expenses and elevated provision for credit losses were the offsetting factors.