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The Bank of New York-Mellon Corporation (BK - Free Report) reported a positive earnings surprise of 7.6% in fourth-quarter 2018. Adjusted earnings per share of 99 cents surpassed the Zacks Consensus Estimate of 92 cents. The figure reflects an improvement of 8.8% from the prior-year quarter.
Results benefited from an improvement in net interest revenues, while rise in expenses acted as a headwind.
After considering non-recurring items, net income applicable to common shareholders for the quarter under review was $832 million, down from $1.1 billion recorded in the prior-year quarter.
Adjusted earnings per share for 2018 increased 9% year over year to $4.21. Net income available to common shareholders was $4.1 billion or $4.04 per share compared with $3.9 billion or $3.72 per share recorded in 2017.
Revenues Decline, Costs Remain Stable
Total revenues (GAAP basis) for the reported quarter declined 7.5% year over year to $4 billion.
For 2018, total revenues (GAAP basis) increased 5% year over year to $12.8 billion. Net interest revenues, on a fully taxable-equivalent basis (non GAAP basis), were $889 million, up 3% year over year. The upside was primarily driven by higher interest rates and absence of lease related adjustment recorded in the prior-year quarter, partly offset by lower non-interest bearing deposits.
Also, net interest margin expanded 8 basis points year over year to 1.24%.
Total fee and other revenues (non-GAAP basis) declined 1% year over year to $3.15 billion. Increase in investment services fees, foreign exchange and other trading revenues was offset by lower Investment management and performance fees, and financing-related fees, along with reduced investment and other income.
Total non-interest expenses were $2.98 billion, down marginally year over year. This reflects a decrease in all expense components, except for professional, legal and other purchased services, software and equipment, net occupancy, sub-custodian and clearing.
Dismal Asset Position
As of Dec 31, 2018, AUM was $1.7 trillion, down 9.9% year over year. This reflects lower market values, net outflows, divestiture of CenterSquare Investment Management (CenterSquare) and unfavorable impact of a stronger U.S. dollar.
Moreover, assets under custody and administration of $33.1 trillion decreased 1% year over year, reflecting lower market values and unfavorable impact of a strong U.S. dollar.
Credit Quality Improves
As of Dec 31, 2018, non-performing assets were $79 million, down from $90 million registered at the end of the prior-year quarter. In addition, allowance for loan losses decreased 13% year over year to $140 million. There was no provision for credit losses in the quarter under review compared to a benefit of $6 million in the year-ago quarter.
Capital Position
As of Dec 31, 2018, common equity Tier 1 ratio was 10.6% compared with 10.3% as of Dec 31, 2017. Tier 1 Leverage ratio was 6.6%, up from 6.4% registered as of Dec 31, 2017.
Share Repurchase
During the quarter, BNY Mellon bought back 28.9 million shares for $137 million. Further, it paid dividends worth $278 million to common shareholders.
Our Viewpoint
BNY Mellon’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. In addition, the company’s strong global reach and improving net interest margin will likely support profitability over the long run.
However, concentration risk, rising from significant dependence on fee-based income, remains a major near-term concern.
The Bank of New York-Mellon Price, Consensus and EPS Surprise
Among other banks, FB Financial Corp. (FBK - Free Report) is scheduled to release its quarterly results on Jan 22, Community Bank System (CBU - Free Report) on Jan 23, while Atlantic Capital Bancshares will report earnings on Jan 31.
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Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
BNY-Mellon (BK) Q4 Earnings Beat Estimates, Revenues Decline
The Bank of New York-Mellon Corporation (BK - Free Report) reported a positive earnings surprise of 7.6% in fourth-quarter 2018. Adjusted earnings per share of 99 cents surpassed the Zacks Consensus Estimate of 92 cents. The figure reflects an improvement of 8.8% from the prior-year quarter.
Results benefited from an improvement in net interest revenues, while rise in expenses acted as a headwind.
After considering non-recurring items, net income applicable to common shareholders for the quarter under review was $832 million, down from $1.1 billion recorded in the prior-year quarter.
Adjusted earnings per share for 2018 increased 9% year over year to $4.21. Net income available to common shareholders was $4.1 billion or $4.04 per share compared with $3.9 billion or $3.72 per share recorded in 2017.
Revenues Decline, Costs Remain Stable
Total revenues (GAAP basis) for the reported quarter declined 7.5% year over year to $4 billion.
For 2018, total revenues (GAAP basis) increased 5% year over year to $12.8 billion. Net interest revenues, on a fully taxable-equivalent basis (non GAAP basis), were $889 million, up 3% year over year. The upside was primarily driven by higher interest rates and absence of lease related adjustment recorded in the prior-year quarter, partly offset by lower non-interest bearing deposits.
Also, net interest margin expanded 8 basis points year over year to 1.24%.
Total fee and other revenues (non-GAAP basis) declined 1% year over year to $3.15 billion. Increase in investment services fees, foreign exchange and other trading revenues was offset by lower Investment management and performance fees, and financing-related fees, along with reduced investment and other income.
Total non-interest expenses were $2.98 billion, down marginally year over year. This reflects a decrease in all expense components, except for professional, legal and other purchased services, software and equipment, net occupancy, sub-custodian and clearing.
Dismal Asset Position
As of Dec 31, 2018, AUM was $1.7 trillion, down 9.9% year over year. This reflects lower market values, net outflows, divestiture of CenterSquare Investment Management (CenterSquare) and unfavorable impact of a stronger U.S. dollar.
Moreover, assets under custody and administration of $33.1 trillion decreased 1% year over year, reflecting lower market values and unfavorable impact of a strong U.S. dollar.
Credit Quality Improves
As of Dec 31, 2018, non-performing assets were $79 million, down from $90 million registered at the end of the prior-year quarter. In addition, allowance for loan losses decreased 13% year over year to $140 million. There was no provision for credit losses in the quarter under review compared to a benefit of $6 million in the year-ago quarter.
Capital Position
As of Dec 31, 2018, common equity Tier 1 ratio was 10.6% compared with 10.3% as of Dec 31, 2017. Tier 1 Leverage ratio was 6.6%, up from 6.4% registered as of Dec 31, 2017.
Share Repurchase
During the quarter, BNY Mellon bought back 28.9 million shares for $137 million. Further, it paid dividends worth $278 million to common shareholders.
Our Viewpoint
BNY Mellon’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. In addition, the company’s strong global reach and improving net interest margin will likely support profitability over the long run.
However, concentration risk, rising from significant dependence on fee-based income, remains a major near-term concern.
The Bank of New York-Mellon Price, Consensus and EPS Surprise
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise | 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.
Earnings Release Schedule of Other Banks
Among other banks, FB Financial Corp. (FBK - Free Report) is scheduled to release its quarterly results on Jan 22, Community Bank System (CBU - Free Report) on Jan 23, while Atlantic Capital Bancshares will report earnings on Jan 31.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>