Back to top

BNY Mellon (BK) Q2 Earnings In Line With Estimates, Costs Up

Read MoreHide Full Article

The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2018 earnings per share of $1.03 was in-line with the Zacks Consensus Estimate. The figure reflects an improvement of 17% from the prior-year quarter.

Results benefited from an improvement in revenues along with provision benefits. Also, assets under management (AUM) reflected growth. However, rise in expenses acted as a headwind.

Net income applicable to common shareholders for the quarter under review was $1.06 billion, up from $926 million recorded in the prior-year quarter.

Revenues Improve, Costs Rise

Total revenues (GAAP basis) for the reported quarter increased 5% year over year to $4.14 billion.

Net interest revenues, on a fully taxable-equivalent basis, were $921 million, up 10% year over year. The rise was primarily driven by higher interest rates.

Also, net interest margin increased 10 basis points year over year to 1.26%.

Total fee and other revenues increased 3% from the prior-year quarter to $3.21 billion. The rise was driven by an increase in investment services fees, investment management and performance fees, and foreign exchange and other trading revenues.

Total non-interest expenses were $2.75 billion, increasing 3% year over year. This reflects an increase in all expense components, except for bank assessment charges, amortization of intangible assets, business development costs and other expenses.

Strong Asset Position

As of Jun 30, 2018, AUM was $1.8 trillion, up nearly 2% year over year. This reflected higher market values and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partly offset by the sale of CenterSquare Investment Management, net outflows and some other changes.

Moreover, assets under custody and administration of $33.6 trillion were up 8% year over year. Higher market values and business growth largely drove the increase.

Credit Quality Improves

As of Jun 30, 2018, non-performing assets were $82 million, down from $100 million registered in the prior-year quarter end. Moreover, allowance for loan losses decreased 12% year over year to $145 million. Provision for credit losses was a benefit of $3 million compared with a benefit of $7 million in the year-ago quarter.

Capital Position

As of Jun 30, 2018, common equity Tier 1 ratio (Standardized Basel 3 fully phased-in) was 12.0% compared with 11.5% as of Jun 30, 2017. Tier 1 Leverage ratio (Advanced approach) was 6.7%, up from 6.5% registered as of Jun 30, 2017.

Share Repurchase

During the reported quarter, BNY Mellon bought back 12 million shares for $651 million.

Our Viewpoint

BNY Mellon’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. Further, its strong global reach and gradually easing margin pressure are expected to support profitability in the long run.

However, concentration risk, arising from significant dependence on fee-based income, remains a major concern for the company in the near term.

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.

Among the other major regional banks, Bank of America’s (BAC - Free Report) second-quarter 2018 earnings of 63 cents per share handily outpaced the Zacks Consensus Estimate of 57 cents. Also, the figure was 43% higher than the prior-year quarter.

SunTrust Banks, Inc. (STI - Free Report) and State Street Corp. (STT - Free Report) are slated to announce second-quarter 2018 results on Jul 20.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Published in