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Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
Results have been aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues have hurt the results to some extent.
Net income applicable to common shareholders (GAAP basis) was $509 million or 62 cents per share, down from $822 million or $1.01 per share recorded in the year-ago quarter. Our estimate for net income was $852.2 million.
For 2022, adjusted earnings of $4.59 per share surpassed the Zacks Consensus Estimate of $4.41. The bottom line reflects a rise of 8.3% from the prior-year period. Our estimate for earnings was $4.31. Net income applicable to common shareholders (GAAP basis) was $2.36 billion or $2.90 per share, down from $3.55 billion or $4.14 per share recorded in the year-ago period. Our estimate for 2022 net income was $2.71 billion.
Revenues Decline, Expenses Rise
Quarterly total revenues declined 2.4% year over year to $3.92 billion. The top line missed the Zacks Consensus Estimate of $4.29 billion. Our estimate for revenues was $4.14 billion.
For 2022, revenues were $16.38 billion, up 2.8% year over year. The top line, however, missed the Zacks Consensus Estimate of $16.75 billion.
Quarterly net interest revenues, on a fully taxable-equivalent (FTE) basis, were $1.06 billion, up 55.4% year over year. The rise reflected higher interest rates on interest-earning assets, partially offset by higher funding expenses.
The net interest margin (FTE basis) expanded 48 basis points (bps) year over year to 1.19%.
Total fee and other revenues declined 14.3% to $2.86 billion. The decline was due to a fall in investment management and performance fees, foreign exchange revenues, financing-related fees, and investment and other revenues. Our estimate for the same was $3.19 billion.
Total non-interest expenses (GAAP basis) were $3.21 billion, up 8.3% year over year. The rise was due to an increase in almost all cost components, except for sub-custodian and clearing costs, bank assessment charges, costs related to the amortization of intangible assets, and other expenses. Our estimate for expenses was $3.02 billion.
Asset Balances Decline
As of Dec 31, 2022, assets under management were $1.84 trillion, down 25% year over year. The decline was due to lower market values, the unfavorable impact of a stronger U.S. dollar and the divestiture of Alcentra, partially offset by net inflows. Our estimate for AUM was $2.12 trillion.
Assets under custody and/or administration of $44.3 trillion declined 5%, 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: Mixed Bag
Allowance for loan losses, as a percentage of total loans, was 0.27%, down 2 bps from the prior-year quarter. As of Dec 31, 2022, non-performing assets were $109 million, down 9.2% year over year.
In the reported quarter, the company recorded provision for credit losses of $20 million against a provision benefit of $17 million in the year-ago quarter. We projected provisions of $4.5 million for the fourth quarter.
Capital Position Decent
As of Dec 31, 2022, the common equity Tier 1 ratio was 11.2%, unchanged from the Dec 31, 2021 level. Tier 1 leverage ratio was 5.8%, up from 5.5% as of Dec 31, 2021.
Our Take
Higher interest rates, BNY Mellon’s global footprint and a strong balance sheet position are likely to keep supporting its revenue growth in the near term. 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
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BNY Mellon's (BK) Q4 Earnings Beat Despite Lower Revenues
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
Results have been aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues have hurt the results to some extent.
Net income applicable to common shareholders (GAAP basis) was $509 million or 62 cents per share, down from $822 million or $1.01 per share recorded in the year-ago quarter. Our estimate for net income was $852.2 million.
For 2022, adjusted earnings of $4.59 per share surpassed the Zacks Consensus Estimate of $4.41. The bottom line reflects a rise of 8.3% from the prior-year period. Our estimate for earnings was $4.31. Net income applicable to common shareholders (GAAP basis) was $2.36 billion or $2.90 per share, down from $3.55 billion or $4.14 per share recorded in the year-ago period. Our estimate for 2022 net income was $2.71 billion.
Revenues Decline, Expenses Rise
Quarterly total revenues declined 2.4% year over year to $3.92 billion. The top line missed the Zacks Consensus Estimate of $4.29 billion. Our estimate for revenues was $4.14 billion.
For 2022, revenues were $16.38 billion, up 2.8% year over year. The top line, however, missed the Zacks Consensus Estimate of $16.75 billion.
Quarterly net interest revenues, on a fully taxable-equivalent (FTE) basis, were $1.06 billion, up 55.4% year over year. The rise reflected higher interest rates on interest-earning assets, partially offset by higher funding expenses.
The net interest margin (FTE basis) expanded 48 basis points (bps) year over year to 1.19%.
Total fee and other revenues declined 14.3% to $2.86 billion. The decline was due to a fall in investment management and performance fees, foreign exchange revenues, financing-related fees, and investment and other revenues. Our estimate for the same was $3.19 billion.
Total non-interest expenses (GAAP basis) were $3.21 billion, up 8.3% year over year. The rise was due to an increase in almost all cost components, except for sub-custodian and clearing costs, bank assessment charges, costs related to the amortization of intangible assets, and other expenses. Our estimate for expenses was $3.02 billion.
Asset Balances Decline
As of Dec 31, 2022, assets under management were $1.84 trillion, down 25% year over year. The decline was due to lower market values, the unfavorable impact of a stronger U.S. dollar and the divestiture of Alcentra, partially offset by net inflows. Our estimate for AUM was $2.12 trillion.
Assets under custody and/or administration of $44.3 trillion declined 5%, 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: Mixed Bag
Allowance for loan losses, as a percentage of total loans, was 0.27%, down 2 bps from the prior-year quarter. As of Dec 31, 2022, non-performing assets were $109 million, down 9.2% year over year.
In the reported quarter, the company recorded provision for credit losses of $20 million against a provision benefit of $17 million in the year-ago quarter. We projected provisions of $4.5 million for the fourth quarter.
Capital Position Decent
As of Dec 31, 2022, the common equity Tier 1 ratio was 11.2%, unchanged from the Dec 31, 2021 level. Tier 1 leverage ratio was 5.8%, up from 5.5% as of Dec 31, 2021.
Our Take
Higher interest rates, BNY Mellon’s global footprint and a strong balance sheet position are likely to keep supporting its revenue growth in the near term. 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.
Earnings Release Dates of Other Banks
We now look forward to the earnings release of Hancock Whitney (HWC - Free Report) and Bank OZK (OZK - Free Report) .
HWC is slated to release fourth-quarter numbers on Jan 17 and OZK will release quarterly results on Jan 19.