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BNY Mellon (BK) Beats on Q2 Earnings as Revenues Increase Y/Y
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Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2023 adjusted earnings of $1.38 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 20% from the prior-year quarter.
Results have been primarily aided by a rise in net interest revenues and marginally lower expenses. A decline in provisions was another positive. However, the assets under management (AUM) balance witnessed a decline, which, along with lower fee revenues, hurt the results to some extent.
Net income applicable to common shareholders (GAAP basis) was $1.03 billion or $1.30 per share, up from the $835 million or $1.03 per share recorded in the year-ago quarter. Our estimate for net income was $968.3 million.
Revenues Improve, Expenses Decline Marginally
Total revenues increased 5% year over year to $4.45 billion. The top line surpassed the Zacks Consensus Estimate of $4.38 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $1.10 billion, up 33% year over year. The rise reflected higher interest rates, partially offset by changes in the balance sheet size and mix.
The net interest margin (FTE basis) expanded 31 basis points (bps) year over year to 1.20%. Our estimate for NIM was 1.22%.
Total fee and other revenues declined 2% year over year to $3.35 billion. The fall was due to a decline in investment management and performance fees, and foreign exchange revenues. Our estimate for the same was $3.30 billion.
Total non-interest expenses (GAAP basis) were $3.11 billion, declining marginally year over year. Almost all cost components increased, except for costs related to professional, legal and other purchased services, net occupancy expenses, sub-custodian and clearing charges, costs related to amortization of intangible assets, and other expenses. Our estimate for expenses was $3.08 billion.
Asset Balances Mixed
As of Jun 30, 2023, AUM was $1.91 trillion, down 2% year over year. The decline was due to lower market values, driven by the year-over-year decrease in the U.K. fixed-income markets and the divestiture of Alcentra, partially offset by net inflows and the favorable impact of a weaker U.S. dollar. Our estimate for AUM was $2 trillion.
Assets under custody and/or administration of $46.9 trillion increased 9% year over year, primarily reflecting higher market values, client inflows and net new business.
Credit Quality: A Mixed Bag
In the second quarter, the allowance for loan losses, as a percentage of total loans, was 0.30%, up 4 bps from the prior-year quarter.
However, the company recorded a provision for credit losses of $5 million, down significantly from the $47 million reported in the year-ago quarter. We projected provisions of $8 million. As of Jun 30, 2023, non-performing assets were $88 million, down 23% year over year.
Capital Position Improves
As of Jun 30, 2023, the common equity Tier 1 ratio was 11.1%, up from 10% as of the Jun 30, 2022 level. The Tier 1 leverage ratio was 5.7%, up from 5.2% as of Jun 30, 2022.
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 concerning.
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 outpaced the Zacks Consensus Estimate of $1.31.
Citigroup witnessed a decline in revenues due to lower revenues in the Institutional Clients Group. Higher cost of credit was another spoilsport. Nonetheless, higher revenues in the Personal Banking and Wealth Management segments were positives for C.
State Street’s (STT - Free Report) second-quarter 2023 earnings of $2.17 per share surpassed the Zacks Consensus Estimate of $2.08. The bottom line was 13.6% higher than the prior-year level.
STT’s results were primarily aided by an increase in net interest revenues and fee revenues. Also, the net interest margin improved year over year on higher rates. The company recorded a provision benefit in the quarter under review, which was another positive. However, higher expenses hurt STT’s results to some extent.
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BNY Mellon (BK) Beats on Q2 Earnings as Revenues Increase Y/Y
Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2023 adjusted earnings of $1.38 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 20% from the prior-year quarter.
Results have been primarily aided by a rise in net interest revenues and marginally lower expenses. A decline in provisions was another positive. However, the assets under management (AUM) balance witnessed a decline, which, along with lower fee revenues, hurt the results to some extent.
Net income applicable to common shareholders (GAAP basis) was $1.03 billion or $1.30 per share, up from the $835 million or $1.03 per share recorded in the year-ago quarter. Our estimate for net income was $968.3 million.
Revenues Improve, Expenses Decline Marginally
Total revenues increased 5% year over year to $4.45 billion. The top line surpassed the Zacks Consensus Estimate of $4.38 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $1.10 billion, up 33% year over year. The rise reflected higher interest rates, partially offset by changes in the balance sheet size and mix.
The net interest margin (FTE basis) expanded 31 basis points (bps) year over year to 1.20%. Our estimate for NIM was 1.22%.
Total fee and other revenues declined 2% year over year to $3.35 billion. The fall was due to a decline in investment management and performance fees, and foreign exchange revenues. Our estimate for the same was $3.30 billion.
Total non-interest expenses (GAAP basis) were $3.11 billion, declining marginally year over year. Almost all cost components increased, except for costs related to professional, legal and other purchased services, net occupancy expenses, sub-custodian and clearing charges, costs related to amortization of intangible assets, and other expenses. Our estimate for expenses was $3.08 billion.
Asset Balances Mixed
As of Jun 30, 2023, AUM was $1.91 trillion, down 2% year over year. The decline was due to lower market values, driven by the year-over-year decrease in the U.K. fixed-income markets and the divestiture of Alcentra, partially offset by net inflows and the favorable impact of a weaker U.S. dollar. Our estimate for AUM was $2 trillion.
Assets under custody and/or administration of $46.9 trillion increased 9% year over year, primarily reflecting higher market values, client inflows and net new business.
Credit Quality: A Mixed Bag
In the second quarter, the allowance for loan losses, as a percentage of total loans, was 0.30%, up 4 bps from the prior-year quarter.
However, the company recorded a provision for credit losses of $5 million, down significantly from the $47 million reported in the year-ago quarter. We projected provisions of $8 million. As of Jun 30, 2023, non-performing assets were $88 million, down 23% year over year.
Capital Position Improves
As of Jun 30, 2023, the common equity Tier 1 ratio was 11.1%, up from 10% as of the Jun 30, 2022 level. The Tier 1 leverage ratio was 5.7%, up from 5.2% as of Jun 30, 2022.
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 concerning.
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 Banks
Citigroup Inc.’s (C - Free Report) second-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.37 outpaced the Zacks Consensus Estimate of $1.31.
Citigroup witnessed a decline in revenues due to lower revenues in the Institutional Clients Group. Higher cost of credit was another spoilsport. Nonetheless, higher revenues in the Personal Banking and Wealth Management segments were positives for C.
State Street’s (STT - Free Report) second-quarter 2023 earnings of $2.17 per share surpassed the Zacks Consensus Estimate of $2.08. The bottom line was 13.6% higher than the prior-year level.
STT’s results were primarily aided by an increase in net interest revenues and fee revenues. Also, the net interest margin improved year over year on higher rates. The company recorded a provision benefit in the quarter under review, which was another positive. However, higher expenses hurt STT’s results to some extent.