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BNY Mellon (BK) Stock Up on Q3 Earnings Beat, Revenues Rise Y/Y
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Bank of New York Mellon Corporation’s (BK - Free Report) third-quarter 2022 adjusted earnings of $1.21 per share surpassed the Zacks Consensus Estimate of $1.10. The bottom line represents a rise of 11% from the prior-year quarter.
Shares of BK gained 4.9% 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. However, asset balances witnessed a decline, which was a negative. Also, higher expenses hurt the results to some extent.
Net income applicable to common shareholders (GAAP basis) was $319 million or 39 cents per share, down from $881 million or $1.04 per share recorded in the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues grew 6% year over year to $4.28 billion. The top line outpaced the Zacks Consensus Estimate of $4.18 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $929 million, up 44.3% year over year. The rise reflected higher interest rates on interest-earning assets, partially offset by higher funding expenses and lower interest-earning assets.
The net interest margin (FTE basis) expanded 37 basis points (bps) year over year to 1.05%.
Total fee and other revenues declined 1.2% to $3.35 billion. The decline was due to a fall in investment management and performance fees, financing-related fees, and investment and other revenues.
Total non-interest expenses (GAAP basis) were $3.68 billion, up 26.1% year over year. The rise was due to an increase in almost all cost components, except for sub-custodian and clearing costs, costs related to the amortization of intangible assets, and other expenses.
Asset Balances Decline
As of Sep 30, 2022, assets under management were $1.78 trillion, down 22.9% 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 $42.2 trillion declined 6.8%, 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 Improves
Allowance for loan losses, as a percentage of total loans, was 0.23%, down 13 bps from the prior-year quarter.
In the reported quarter, the company recorded provision benefits of $30 million compared with $45 million in the year-ago quarter. As of Sep 30, 2022, non-performing assets were $107 million, down 1% year over year.
Capital Position Deteriorates
As of Sep 30, 2022, the common equity Tier 1 ratio was 10.1%, down from 11.8% as of Sep 30, 2021. Tier 1 leverage ratio was 5.4%, down from 5.7% as of Sep 30, 2021.
Our Take
Higher interest rates, BNY Mellon’s global footprint and a strong balance sheet position are likely to keep supporting revenue growth in the near term. However, concentration risks, arising from significant dependence on fee-based revenues, are major concerns. Recessionary fears are expected to put additional pressure on the company's asset values (which witnessed a decline in the third quarter).
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise
Higher loan balance, rising rates and solid markets performance drove JPMorgan’s (JPM - Free Report) third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents of net investment securities losses in the Corporate segment.
As expected, the performance of JPM’s investment banking business was hugely disappointing. In the quarter, operating expenses recorded a rise. Nevertheless, higher interest rates and a solid rise in loan balance aided the bank’s net interest income.
U.S. Bancorp (USB - Free Report) reported third-quarter 2022 earnings per share (excluding merger and integration-related charges) of $1.18, which beat the Zacks Consensus Estimate of 1.17 per share. In the prior-year quarter, the company reported earnings of $1.30 per share.
USB’s results were primarily aided by increased net interest income, supported by higher interest rates and loan growth. However, a decline in non-interest income and higher expenses were the undermining factors.
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BNY Mellon (BK) Stock Up on Q3 Earnings Beat, Revenues Rise Y/Y
Bank of New York Mellon Corporation’s (BK - Free Report) third-quarter 2022 adjusted earnings of $1.21 per share surpassed the Zacks Consensus Estimate of $1.10. The bottom line represents a rise of 11% from the prior-year quarter.
Shares of BK gained 4.9% 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. However, asset balances witnessed a decline, which was a negative. Also, higher expenses hurt the results to some extent.
Net income applicable to common shareholders (GAAP basis) was $319 million or 39 cents per share, down from $881 million or $1.04 per share recorded in the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues grew 6% year over year to $4.28 billion. The top line outpaced the Zacks Consensus Estimate of $4.18 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $929 million, up 44.3% year over year. The rise reflected higher interest rates on interest-earning assets, partially offset by higher funding expenses and lower interest-earning assets.
The net interest margin (FTE basis) expanded 37 basis points (bps) year over year to 1.05%.
Total fee and other revenues declined 1.2% to $3.35 billion. The decline was due to a fall in investment management and performance fees, financing-related fees, and investment and other revenues.
Total non-interest expenses (GAAP basis) were $3.68 billion, up 26.1% year over year. The rise was due to an increase in almost all cost components, except for sub-custodian and clearing costs, costs related to the amortization of intangible assets, and other expenses.
Asset Balances Decline
As of Sep 30, 2022, assets under management were $1.78 trillion, down 22.9% 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 $42.2 trillion declined 6.8%, 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 Improves
Allowance for loan losses, as a percentage of total loans, was 0.23%, down 13 bps from the prior-year quarter.
In the reported quarter, the company recorded provision benefits of $30 million compared with $45 million in the year-ago quarter. As of Sep 30, 2022, non-performing assets were $107 million, down 1% year over year.
Capital Position Deteriorates
As of Sep 30, 2022, the common equity Tier 1 ratio was 10.1%, down from 11.8% as of Sep 30, 2021. Tier 1 leverage ratio was 5.4%, down from 5.7% as of Sep 30, 2021.
Our Take
Higher interest rates, BNY Mellon’s global footprint and a strong balance sheet position are likely to keep supporting revenue growth in the near term. However, concentration risks, arising from significant dependence on fee-based revenues, are major concerns. Recessionary fears are expected to put additional pressure on the company's asset values (which witnessed a decline in the third 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Higher loan balance, rising rates and solid markets performance drove JPMorgan’s (JPM - Free Report) third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents of net investment securities losses in the Corporate segment.
As expected, the performance of JPM’s investment banking business was hugely disappointing. In the quarter, operating expenses recorded a rise. Nevertheless, higher interest rates and a solid rise in loan balance aided the bank’s net interest income.
U.S. Bancorp (USB - Free Report) reported third-quarter 2022 earnings per share (excluding merger and integration-related charges) of $1.18, which beat the Zacks Consensus Estimate of 1.17 per share. In the prior-year quarter, the company reported earnings of $1.30 per share.
USB’s results were primarily aided by increased net interest income, supported by higher interest rates and loan growth. However, a decline in non-interest income and higher expenses were the undermining factors.