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BNY Mellon (BK) Q1 Earnings Lag Estimates as Revenues Fall

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The Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2019 earnings per share of 94 cents lagged the Zacks Consensus Estimate of 96 cents. Moreover, the figure reflects a decline of 15% from the prior-year quarter.

Results were adversely impacted by a decline in revenues. Moreover, a fall in assets under management (AUM) hurt results. Higher provision for credit losses was another negative for the company. However, lower expenses supported results to some extent.

Net income applicable to common shareholders for the quarter under review was $910 million, down from $1.1 billion recorded in the prior-year quarter.

Revenues Decline, Costs Drop

Total revenues (GAAP basis), excluding income from consolidated investment management funds declined nearly 8% year over year to $3.87 billion. The figure missed the Zacks Consensus Estimate of $3.99 billion.

Net interest revenues, on a fully taxable-equivalent basis (non-GAAP basis), were $845 million, down 9% year over year. This decline was due to lower non-interest bearing deposits and loan balances, and higher deposit rates, partly offset by higher asset yields.

Also, non-GAAP net interest margin (FTE basis) contracted 3 basis points year over year to 1.20%.

Total fee and other revenues declined 7% year over year to $3.03 billion. This decrease was due to a fall in all components of fee revenues.

Total non-interest expenses were $2.70 billion, down nearly 1% year over year. This reflects a decrease in all expense components, except for professional, legal, and other purchased services, software and equipment, and other expenses.

Mixed Asset Position

As of Mar 31, 2019, AUM was $1.8 trillion, down 1% year over year. This reflects net outflows and the unfavorable impact of a stronger U.S. dollar, partly offset by higher market value.

However, assets under custody and/or administration of $34.5 trillion increased 3% year over year, reflecting higher market values and net new businesses, partly offset by the unfavorable impact of a stronger U.S. dollar.

Credit Quality: Mixed Bag

As of Mar 31, 2019, non-performing assets were $174 million, up from $85 million registered at the end of the prior-year quarter. Provision for credit losses during the quarter under review was $7 million against a benefit of $5 million in the year-ago quarter. However, allowance for loan losses decreased 6% year over year to $146 million.

Capital Position Improves

As of Mar 31, 2019, common equity Tier 1 ratio was 11% compared with 10.7% as of Mar 31, 2018. Tier 1 Leverage ratio was 6.8%, up from 6.5% registered as of Mar 31, 2018.

Capital Deployment Update

During the first quarter, BNY Mellon bought back 10.5 million shares for $555 million. Further, it paid dividends worth $270 million to common shareholders.

Our Viewpoint

The company’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. In addition, its 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.

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 Schedule of Other Banks

Among other banks, FB Financial Corp. (FBK - Free Report) and Community Bank System (CBU - Free Report) are scheduled to release quarterly results on Apr 22 while Atlantic Capital Bancshares (ACBI - Free Report) will report earnings on Apr 25.

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