BNY Mellon Reports First Quarter Earnings Of $804 Million Or $0.73 Per Common Share; Earnings per common share up 9% year-over-year

News provided by

BNY Mellon

Apr 21, 2016, 06:30 ET

NEW YORK, April 21, 2016 /PRNewswire/ --  

GENERATED APPROXIMATELY 250 BASIS POINTS OF POSITIVE OPERATING LEVERAGE YEAR-OVER-YEAR ON AN ADJUSTED BASIS (a)

  • Net interest revenue increased 5% and fee and other revenue decreased 1%
  • Total noninterest expense decreased 3% on a reported and adjusted basis (a)

EXECUTING ON CAPITAL PLAN AND RETURN OF VALUE TO COMMON SHAREHOLDERS

  • Repurchased 16.2 million common shares for $577 million
  • Adjusted return on tangible common equity of 21% (a)
  • Estimated SLR on a fully phased-in basis exceeded 5% (a)

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported first quarter net income applicable to common shareholders of $804 million, or $0.73 per diluted common share, compared with net income applicable to common shareholders of $766 million, or $0.67 per diluted common share in the first quarter of 2015.  In the fourth quarter of 2015, net income applicable to common shareholders was $637 million, or $0.57 per diluted common share, or $755 million, or $0.68 per diluted common share, adjusted for the impairment charge related to a prior court decision, litigation and restructuring charges. (a)

"In challenging market conditions, we generated solid earnings growth as we executed on our strategic priorities.  First quarter earnings per share grew by 9 percent year over year and we generated approximately 250 basis points of positive operating leverage while improving our operating margin to 31 percent," Gerald L. Hassell, chairman and chief executive officer, said.

"We are intently focused on enhancing the client experience and driving further efficiencies. Our business improvement process has enabled funding for important strategic investments for regulatory compliance and risk management excellence, technology and servicing platform improvements and the delivery of new solutions for our clients," Mr. Hassell added.

"We are confident that we are on the right track to achieve our Investor Day targets, delivering value to our clients and our shareholders," Mr. Hassell concluded.

_______________________

(a)

See the "Financial Summary" on page 4 for the Non-GAAP adjustments and additional information related to operating leverage.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 for the tangible common equity ratio reconciliation.  See "Capital and Liquidity" beginning on page 13 for the reconciliation of the estimated SLR on a fully phased-in basis.

CONFERENCE CALL INFORMATION

Gerald L. Hassell, chairman and chief executive officer, and Thomas P. Gibbons, vice chairman and chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on April 21, 2016.  This conference call and audio webcast will include forward-looking statements and may include other material information. 

Investors and analysts wishing to access the conference call and audio webcast may do so by dialing (888) 898-7224 (U.S.) or 913-312-9027 (International), and using the passcode: 619690, or by logging on to www.bnymellon.com.  Earnings materials will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on April 21, 2016.  Replays of the conference call and audio webcast will be available beginning April 21, 2016 at approximately 2 p.m. EDT through May 21, 2016 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 2620345.  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

FIRST QUARTER 2016 FINANCIAL HIGHLIGHTS (a)
(comparisons are 1Q16 vs. 1Q15 unless otherwise stated)

  • Earnings

Earnings per share

Net income applicable to common
shareholders of The Bank of New
York Mellon Corporation

(in millions, except per share amounts)

1Q16

1Q15

Inc

1Q16

1Q15

Inc

GAAP results

$

0.73

$

0.67

9

%

$

804

$

766

5

%

Add:  Litigation and restructuring charges

0.01

—



10

(2)


Non-GAAP results

$

0.74

$

0.67

10

%

$

814

$

764

7

%
  • Total revenue was $3.7 billion, a decrease of 2%, or 1% (Non-GAAP) (a).
    • Investment services fees increased 1% reflecting higher money market fees and net new business partially offset by lower market values and lost business in clearing services.
    • Investment management and performance fees decreased 6%, or 4% on a constant currency basis (Non-GAAP), driven by lower equity market values and net outflows in 2015 (a).
    • Foreign exchange revenue decreased 21% reflecting lower volumes.
    • Financing-related fees increased $14 million driven by higher fees related to secured intraday credit.
    • Investment and other income increased $45 million driven by higher lease-related gains.
    • Net interest revenue increased $38 million driven by higher yields on interest-earning assets, partially offset by higher rates paid on interest-bearing liabilities and the impact of interest rate hedging activities.
            
  • The provision for credit losses was $10 million.
          
  • Noninterest expense was $2.6 billion, a decrease of 3%, on both a reported and adjusted basis (Non-GAAP) (a). The decrease reflects lower expenses in nearly all categories, driven by the favorable impact of a stronger U.S. dollar, lower staff and legal expenses and the benefit of the business improvement process, partially offset by higher distribution and servicing expense.
           
  • Generated approximately 250 basis points of positive operating leverage year-over-year on an adjusted basis (Non-GAAP) (a).
            
  • Effective tax rate of 25.9%.
           
  • Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
    • AUC/A of $29.1 trillion increased 2% reflecting net new business and the favorable impact of a weaker U.S. dollar (principally versus the Euro), partially offset by lower market values.
      • Estimated new AUC/A wins in Asset Servicing of $40 billion in 1Q16.
    • AUM of $1.64 trillion decreased 5% reflecting net outflows primarily in 2015 and the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).
      • Net long-term inflows of $1 billion in 1Q16 were driven by continued strength in liability-driven investments offset by outflows of index and equity investments.
      • Net short-term outflows totaled $9 billion in 1Q16.
              
  • Capital
    • Repurchased 16.2 million common shares for $577 million in 1Q16.
    • Adjusted return on tangible common equity of 21% (Non-GAAP) in 1Q16 (a).
    • Estimated supplementary leverage ratio ("SLR"), on a fully phased-in basis (Non-GAAP), exceeded 5.0% (a).

(a)

See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 for the reconciliation of Non-GAAP measures.  Unless otherwise noted, Non-GAAP excludes net (loss) income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges (recoveries) and the impairment charge related to a prior court decision, if applicable.

Note: Throughout this document, sequential growth rates are unannualized.

FINANCIAL SUMMARY

(dollars in millions, except per share amounts; common shares in thousands)




1Q16 vs.

1Q16

4Q15

3Q15

2Q15

1Q15

4Q15

1Q15

Revenue:






Fee and other revenue

$

2,970

$

2,950

$

3,053

$

3,067

$

3,012

1

%

(1)

%

(Loss) income from consolidated investment management funds

(6)

16

(22)

40

52


Net interest revenue

766

760

759

779

728

1

5

Total revenue – GAAP

3,730

3,726

3,790

3,886

3,792

—

(2)

Less:  Net (loss) income attributable to noncontrolling interests 
     related to consolidated investment management funds

(7)

5

(5)

37

31


Total revenue – Non-GAAP

3,737

3,721

3,795

3,849

3,761

—

(1)

Provision for credit losses

10

163

1

(6)

2


Expense:






Noninterest expense – GAAP

2,629

2,692

2,680

2,727

2,700

(2)

(3)

Less:  Amortization of intangible assets

57

64

66

65

66


M&I, litigation and restructuring charges (recoveries)

17

18

11

59

(3)


Total noninterest expense – Non-GAAP

2,555

2,610

2,603

2,603

2,637

(2)

(3)

Income:






Income before income taxes

1,091

871

1,109

1,165

1,090

25

%

—

%

Provision for income taxes

283

175

282

276

280


Net income

$

808

$

696

$

827

$

889

$

810


Net loss (income) attributable to noncontrolling interests (a)

9

(3)

6

(36)

(31)


Net income applicable to shareholders of The Bank of New 
     York Mellon Corporation

817

693

833

853

779


Preferred stock dividends

(13)

(56)

(13)

(23)

(13)


Net income applicable to common shareholders of The Bank 
     of New York Mellon Corporation

$

804

$

637

$

820

$

830

$

766










Operating leverage – Non-GAAP (b)




254

bps

247

bps








Key Metrics:






Pre-tax operating margin (c)

29

%

23

%

29

%

30

%

29

%

Non-GAAP (c)

31

%

30

%

31

%

33

%

30

%









Return on common equity (annualized) (c)

9.2

%

7.1

%

9.1

%

9.4

%

8.8

%

Non-GAAP (c)

9.7

%

8.9

%

9.7

%

10.3

%

9.2

%









Return on tangible common equity (annualized) – Non-GAAP (c)

20.6

%

16.2

%

20.8

%

21.5

%

20.3

%

Non-GAAP adjusted (c)

20.8

%

19.0

%

21.0

%

22.5

%

20.2

%









Fee revenue as a percentage of total revenue excluding net 
     securities gains

79

%

79

%

80

%

79

%

79

%









Percentage of non-U.S. total revenue (d)

33

%

34

%

37

%

36

%

36

%









Average common shares and equivalents outstanding:






Basic

1,079,641

1,088,880

1,098,003

1,113,790

1,118,602


Diluted

1,085,284

1,096,385

1,105,645

1,122,135

1,126,306










Period end:






Full-time employees

52,100

51,200

51,300

50,700

50,500


Book value per common share – GAAP (c)

$

33.34

$

32.69

$

32.59

$

32.28

$

31.89


Tangible book value per common share – Non-GAAP (c)

$

15.87

$

15.27

$

15.16

$

14.86

$

14.82


Cash dividends per common share

$

0.17

$

0.17

$

0.17

$

0.17

$

0.17


Common dividend payout ratio

23

%

30

%

23

%

23

%

25

%

Closing stock price per common share

$

36.83

$

41.22

$

39.15

$

41.97

$

40.24


Market capitalization

$

39,669

$

44,738

$

42,789

$

46,441

$

45,130


Common shares outstanding

1,077,083

1,085,343

1,092,953

1,106,518

1,121,512




(a)

Primarily attributable to noncontrolling interests related to consolidated investment management funds.

(b)

Pre-tax operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.  The year-over-year pre-tax operating leverage (Non-GAAP) was based on a decrease in total revenue, as adjusted (Non-GAAP), of 64 basis points, and a decrease in total noninterest expense, as adjusted (Non-GAAP), of 311 basis points.  The sequential operating leverage (Non-GAAP) was based on an increase in total revenue, as adjusted (Non-GAAP), of 43 basis points, and a decrease in total noninterest expense, as adjusted (Non-GAAP), of 211 basis points.

(c)

Non-GAAP excludes the net income (loss) attributable to noncontrolling interests related to consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges (recoveries) and the impairment charge related to a prior court decision, if applicable.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 for the reconciliation of Non-GAAP measures.

(d)

Includes fee revenue, net interest revenue and (loss) income from consolidated investment management funds, net of net loss (income) attributable to noncontrolling interests.

bps - basis points.

CONSOLIDATED BUSINESS METRICS

Consolidated business metrics





1Q16 vs.

1Q16

4Q15

3Q15

2Q15

1Q15

4Q15

1Q15

Changes in AUM (in billions): (a)







Beginning balance of AUM

$

1,625

$

1,625

$

1,700

$

1,717

$

1,686


Net inflows (outflows):







Long-term:







  Equity

(3)

(9)

(4)

(13)

(5)


  Fixed income

—

1

(3)

(2)

3


  Liability-driven investments (b)

14

11

11

5

8


  Alternative investments

1

2

1

3

1


Total long-term active inflows (outflows)

12

5

5

(7)

7


Index

(11)

(16)

(10)

(9)

8


Total long-term inflows (outflows)

1

(11)

(5)

(16)

15


Short term:







  Cash

(9)

2

(10)

(11)

1


Total net inflows (outflows)

(8)

(9)

(15)

(27)

16


Net market/currency impact/acquisition

22

9

(60)

10

15


Ending balance of AUM

$

1,639

(c)

$

1,625

$

1,625

$

1,700

$

1,717

1

%

(5)

%









AUM at period end, by product type: (a)







Equity

14

%

14

%

14

%

15

%

15

%

Fixed income

13

13

13

13

12


Index

19

20

20

21

22


Liability-driven investments (b)

33

32

32

30

30


Alternative investments

4

4

4

4

4


Cash

17

17

17

17

17


Total AUM

100

%

(c)

100

%

100

%

100

%

100

%










Investment Management:







Average loans (in millions)

$

14,275

$

13,447

$

12,779

$

12,298

$

11,634

6

%

23

%

Average deposits (in millions)

$

15,971

$

15,497

$

15,282

$

14,638

$

15,217

3

%

5

%









Investment Services:







Average loans (in millions)

$

45,004

$

45,844

$

46,222

$

45,822

$

45,071

(2)

%

—

%

Average deposits (in millions)

$

215,707

$

229,241

$

232,250

$

238,404

$

235,524

(6)

%

(8)

%









AUC/A at period end (in trillions) (d)

$

29.1

(c)

$

28.9

$

28.5

$

28.6

$

28.5

1

%

2

%









Market value of securities on loan at period end (in billions) (e)

$

300

$

277

$

288

$

283

$

291

8

%

3

%









Asset servicing:







Estimated new business wins (AUC/A) (in billions)

$

40

(c)

$

49

$

84

$

933

$

125











Depositary Receipts:







Number of sponsored programs

1,131

1,145

1,176

1,206

1,258

(1)

%

(10)

%









Clearing services:







Average active clearing accounts (U.S. platform) (in thousands)

5,947

5,959

6,107

6,046

5,979

—

%

(1)

%

Average long-term mutual fund assets (U.S. platform)
     (in millions)

$

415,025

$

437,260

$

447,287

$

466,195

$

456,954

(5)

%

(9)

%

Average investor margin loans (U.S. platform) (in millions)

$

11,063

$

11,575

$

11,806

$

11,890

$

11,232

(4)

%

(2)

%









Broker-Dealer:







Average tri-party repo balances (in billions)

$

2,104

$

2,153

$

2,142

$

2,174

$

2,153

(2)

%

(2)

%


(a)

Excludes securities lending cash management assets and assets managed in the Investment Services business.

(b)

Includes currency overlay assets under management.

(c)

Preliminary.

(d)

Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.1 trillion at March 31, 2016, $1.0 trillion at Dec. 31, 2015 and Sept. 30, 2015 and $1.1 trillion at June 30, 2015 and March 31, 2015.

(e)

Represents the total amount of securities on loan managed by the Investment Services business.  Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $56 billion at March 31, 2016, $55 billion at Dec. 31, 2015, $61 billion at Sept. 30, 2015, $68 billion at June 30, 2015 and $69 billion at March 31, 2015.

The following table presents key market metrics at period end and on an average basis.

Key market metrics




1Q16 vs.

1Q16

4Q15

3Q15

2Q15

1Q15

4Q15

1Q15

S&P 500 Index (a)

2060

2044

1920

2063

2068

1

%

—

%

S&P 500 Index – daily average

1951

2052

2027

2102

2064

(5)

(5)

FTSE 100 Index (a)

6175

6242

6062

6521

6773

(1)

(9)

FTSE 100 Index – daily average

5988

6271

6399

6920

6793

(5)

(12)

MSCI World Index (a)

1648

1663

1582

1736

1741

(1)

(5)

MSCI World Index – daily average

1568

1677

1691

1780

1726

(6)

(9)

Barclays Capital Global Aggregate BondSM Index (a)(b)

368

342

346

342

348

8

6

NYSE and NASDAQ share volume (in billions)

218

198

206

185

187

10

17

JPMorgan G7 Volatility Index – daily average (c)

10.60

9.49

9.93

10.06

10.40

12

2

Average Fed Funds effective rate

0.36

%

0.16

%

0.13

%

0.13

%

0.11

%

20

bps

25

bps

Foreign exchange rates vs. U.S. dollar:






British pound (a)

$

1.44

$

1.48

$

1.52

$

1.57

$

1.48

(3)

%

(3)

%

British pound - average rate

1.43

1.52

1.55

1.53

1.51

(6)

(5)

Euro (a)

1.14

1.09

1.12

1.11

1.07

5

7

Euro - average rate

1.10

1.10

1.11

1.11

1.13

—

(3)




















(a)

Period end.

(b)

Unhedged in U.S. dollar terms.

(c)

The JPMorgan G7 Volatility Index is based on the implied volatility in 3-month currency options.

bps – basis points.

FEE AND OTHER REVENUE

Fee and other revenue




1Q16 vs.

(dollars in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

4Q15

1Q15

Investment services fees:






Asset servicing (a)

$

1,040

$

1,032

$

1,057

$

1,060

$

1,038

1

%

—

%

Clearing services

350

339

345

347

344

3

2

Issuer services

244

199

313

234

232

23

5

Treasury services

131

137

137

144

137

(4)

(4)

Total investment services fees

1,765

1,707

1,852

1,785

1,751

3

1

Investment management and performance fees

812

864

829

878

867

(6)

(6)

Foreign exchange and other trading revenue

175

173

179

187

229

1

(24)

Financing-related fees

54

51

71

58

40

6

35

Distribution and servicing

39

41

41

39

41

(5)

(5)

Total fee revenue excluding investment and other 
     income

2,845

2,836

2,972

2,947

2,928

—

(3)

Investment and other income

105

93

59

104

60

13

75

Total fee revenue

2,950

2,929

3,031

3,051

2,988

1

(1)

Net securities gains

20

21

22

16

24

N/M

N/M

Total fee and other revenue

$

2,970

$

2,950

$

3,053

$

3,067

$

3,012

1

%

(1)

%


(a)

Asset servicing fees include securities lending revenue of $50 million in 1Q16, $46 million in 4Q15, $38 million in 3Q15, $49 million in 2Q15 and $43 million in 1Q15. 

N/M – Not meaningful.

KEY POINTS

  • Asset servicing fees were $1.0 billion, flat year-over-year and an increase of 1% sequentially. Both comparisons primarily reflect net new business and higher securities lending revenue, offset by lower market values. The year-over-year comparison also reflects the unfavorable impact of a stronger U.S. dollar.
          
  • Clearing services fees were $350 million, an increase of 2% year-over-year and 3% sequentially. Both increases primarily reflect higher money market fees, partially offset by the impact of lost business. The sequential increase also reflects higher volumes.
          
  • Issuer services fees were $244 million, an increase of 5% year-over-year and 23% sequentially. Both the year-over-year and sequential increases primarily reflect higher money market fees in Corporate Trust and higher dividend fees in Depositary Receipts.
           
  • Treasury services fees were $131 million, a decrease of 4% both year-over-year and sequentially. Both decreases primarily reflect higher compensating balance credits provided to clients, which shifts revenue from fees to net interest revenue.
            
  • Investment management and performance fees were $812 million, a decrease of 6% year-over-year, or 4% on a constant currency basis (Non-GAAP). Both the year-over-year decrease on a constant currency basis (Non-GAAP) and the sequential decrease of 6% primarily reflect lower equity market values and net outflows in 2015, partially offset by higher money market fees. The sequential decrease also reflects seasonally lower performance fees.

•

Foreign exchange and other trading revenue







(in millions)

1Q16

4Q15

3Q15

2Q15

1Q15



Foreign exchange

$

171

$

165

$

180

$

181

$

217



Other trading revenue (loss)

4

8

(1)

6

12



Total foreign exchange and other trading revenue

$

175

$

173

$

179

$

187

$

229

Foreign exchange and other trading revenue totaled $175 million in 1Q16 compared with $229 million in 1Q15 and $173 million in 4Q15.  In 1Q16, foreign exchange revenue totaled $171 million, a decrease of 21% year-over-year and an increase of 4% sequentially.  The year-over-year decrease primarily reflects lower volumes.  The sequential increase primarily reflects higher volatility, partially offset by the impact of foreign currency hedging activity. Excluding the impact of hedging activity, foreign exchange revenue increased 12% sequentially.

Other trading revenue was $4 million in 1Q16, compared with $12 million in 1Q15 and $8 million in 4Q15.  Both decreases primarily reflect losses on hedging activities in the Investment Management businesses, partially offset by the positive impact of interest rate hedging (which is offset in net interest revenue) and higher fixed income trading revenue.

  • Financing-related fees were $54 million in 1Q16 compared with $40 million in 1Q15 and $51 million in 4Q15. The year-over-year increase primarily reflects higher fees related to secured intraday credit. The sequential increase primarily reflects higher underwriting fees.
            
  • Distribution and servicing fees were $39 million in 1Q16 compared with $41 million in both 1Q15 and 4Q15. Distribution and servicing fees were favorably impacted by higher money market fees, but were more than offset by certain fees paid to introducing brokers.


•

Investment and other income







(in millions)

1Q16

4Q15

3Q15

2Q15

1Q15



Lease-related gains (losses)

$

44

$

(8)

$

—

$

54

$

(1)



Corporate/bank-owned life insurance

31

43

32

31

33



Expense reimbursements from joint venture

17

16

16

17

14



Seed capital gains (a)

11

10

7

2

16



Private equity gains (losses)

2

—

1

3

(3)



Asset-related gains (losses)

—

5

(9)

1

3



Equity investment (losses)

(3)

(2)

(6)

(7)

(4)



Other income

3

29

18

3

2



Total investment and other income

$

105

$

93

$

59

$

104

$

60








(a)

Excludes the gain (loss) on seed capital investments in consolidated investment management funds which are reflected in operations of consolidated investment management funds, net of noncontrolling interests.  The gain (loss) on seed capital investments in consolidated investment management funds was $1 million in 1Q16, $11 million in 4Q15, $(17) million in 3Q15, $3 million in 2Q15 and $21 million in 1Q15.

Investment and other income was $105 million in 1Q16 compared with $60 million in 1Q15 and $93 million in 4Q15.  Both increases primarily reflect higher lease-related gains.  The sequential increase was partially offset by lower other income reflecting the termination fees in our clearing business recorded in 4Q15 and lower income from corporate/bank-owned life insurance.

NET INTEREST REVENUE

Net interest revenue




1Q16 vs.

(dollars in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

4Q15

1Q15

Net interest revenue (non-FTE)

$

766

$

760

$

759

$

779

$

728

1

%

5

%

Net interest revenue (FTE) – Non-GAAP

780

774

773

794

743

1

5

Net interest margin (FTE)

1.01

%

0.99

%

0.98

%

1.00

%

0.97

%

2

bps

4

bps








Selected average balances:






Cash/interbank investments

$

127,624

$

128,328

$

130,090

$

125,626

$

123,647

(1)

%

3

%

Trading account securities

3,320

2,786

2,737

3,253

3,046

19

9

Securities

118,538

119,532

121,188

128,641

123,476

(1)

(4)

Loans

61,196

61,964

61,657

61,076

57,935

(1)

6

Interest-earning assets

310,678

312,610

315,672

318,596

308,104

(1)

1

Interest-bearing deposits

162,017

160,334

169,753

170,716

159,520

1

2

Noninterest-bearing deposits

82,944

85,878

85,046

84,890

89,592

(3)

(7)








Selected average yields/rates:






Cash/interbank investments

0.43

%

0.32

%

0.32

%

0.34

%

0.35

%

Trading account securities

2.16

2.79

2.74

2.63

2.46


Securities

1.61

1.62

1.60

1.57

1.55


Loans

1.76

1.54

1.56

1.51

1.55


Interest-earning assets

1.16

1.08

1.08

1.08

1.07


Interest-bearing deposits

0.04

0.01

0.02

0.02

0.04










Average cash/interbank investments as a 
     percentage of average interest-earning assets

41

%

41

%

41

%

39

%

40

%

Average noninterest-bearing deposits as a 
     percentage of average interest-earning assets

27

%

27

%

27

%

27

%

29

%


FTE – fully taxable equivalent.

bps – basis points.

KEY POINTS

  • Net interest revenue totaled $766 million in 1Q16, an increase of $38 million year-over-year and $6 million sequentially. Both increases primarily reflect higher yields on interest-earning assets, partially offset by higher rates paid on interest-bearing liabilities and the unfavorable impact of interest rate hedging activities (which are primarily offset in foreign exchange and other trading revenue). 
         

NONINTEREST EXPENSE

Noninterest expense




1Q16 vs.

(dollars in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

4Q15

1Q15

Staff

$

1,459

$

1,481

$

1,437

$

1,434

$

1,485

(1)

%

(2)

%

Professional, legal and other purchased services

278

328

301

299

302

(15)

(8)

Software and equipment

219

225

226

228

228

(3)

(4)

Net occupancy

142

148

152

149

151

(4)

(6)

Distribution and servicing

100

92

95

96

98

9

2

Sub-custodian

59

60

65

75

70

(2)

(16)

Business development

57

75

59

72

61

(24)

(7)

Other

241

201

268

250

242

20

—

Amortization of intangible assets

57

64

66

65

66

(11)

(14)

M&I, litigation and restructuring charges (recoveries)

17

18

11

59

(3)

N/M

N/M

Total noninterest expense – GAAP

$

2,629

$

2,692

$

2,680

$

2,727

$

2,700

(2)

%

(3)

%








Total staff expense as a percentage of total revenue

39

%

40

%

38

%

37

%

39

%









Memo:






Total noninterest expense excluding amortization of 
     intangible assets and M&I, litigation and restructuring 
     charges (recoveries) – Non-GAAP

$

2,555

$

2,610

$

2,603

$

2,603

$

2,637

(2)

%

(3)

%

N/M – Not meaningful.

KEY POINTS

  • Total noninterest expense excluding amortization of intangible assets and M&I, litigation and restructuring charges (recoveries) (Non-GAAP) decreased 3% year-over-year and 2% sequentially.
          
  • The year-over-year decrease reflects lower expenses in nearly all categories, primarily driven by the favorable impact of a stronger U.S. dollar, lower staff and legal expenses and the benefit of the business improvement process, partially offset by higher distribution and servicing expense. The savings generated by the business improvement process primarily reflects the benefits of our technology insourcing strategy and the implementation of our global real estate strategy.
             
    • Staff expense decreased year-over-year primarily reflecting lower estimated 2016 incentives and a higher adjustment for the finalization of the annual incentive awards, partially offset by the curtailment gain related to the U.S. pension plan recorded in 1Q15 and higher severance expense in ongoing support of our business improvement process.
              
  • The sequential decrease reflects lower expenses in all categories, except other and distribution and servicing expenses. The decrease in staff expense primarily reflects lower compensation and employee benefits expenses, partially offset by higher incentives, primarily due to the impact of vesting of long-term stock awards for retirement eligible employees. The increase in other expense primarily reflects the adjustments to bank assessment charges recorded in 4Q15. The increase in distribution and servicing expense is due to lower money market fee waivers.

INVESTMENT SECURITIES PORTFOLIO

At March 31, 2016, the fair value of our investment securities portfolio totaled $117.8 billion.  The net unrealized pre-tax gain on our total securities portfolio was $1.2 billion at March 31, 2016 compared with $357 million at Dec. 31, 2015.  The increase in the net unrealized pre-tax gain was primarily driven by a decline in market interest rates.  At March 31, 2016, the fair value of the held-to-maturity securities totaled $42.2 billion and represented 36% of the fair value of the total investment securities portfolio.

The following table shows the distribution of our investment securities portfolio.

Investment securities
     portfolio

 

 

(dollars in millions)

Dec. 31,
2015

1Q16

change in

unrealized

gain (loss)

March 31, 2016

Fair value

as a % of
amortized

cost (a)

Unrealized

gain (loss)

Ratings




BB+

and

lower

 Fair

value

Amortized

cost

Fair

value


AAA/

AA-

A+/

A-

BBB+/

BBB-

Not

rated

Agency RMBS

$

49,464

$

523

$

49,468

$

49,870

101

%

$

402

100

%

—

%

—

%

—

%

—

%

U.S. Treasury

23,920

166

23,803

23,870

100

67

100

—

—

—

—

Sovereign debt/sovereign 
     guaranteed

16,708

106

15,626

15,866

102

240

71

—

28

1

—

Non-agency RMBS (b)

1,789

(43)

1,374

1,685

80

311

—

1

1

90

8

Non-agency RMBS

914

(10)

858

862

93

4

7

4

18

70

1

European floating rate 
     notes

1,345

(7)

1,275

1,244

97

(31)

66

29

5

—

—

Commercial MBS

5,826

62

5,983

6,003

100

20

96

3

1

—

—

State and political 
     subdivisions

4,065

12

3,651

3,740

102

89

80

16

1

—

3

Foreign covered bonds

2,242

(6)

2,244

2,279

102

35

100

—

—

—

—

Corporate bonds

1,752

35

1,690

1,737

103

47

16

68

16

—

—

CLO

2,351

(5)

2,441

2,424

99

(17)

100

—

—

—

—

U.S. Government agencies

1,810

(2)

1,890

1,881

100

(9)

100

—

—

—

—

Consumer ABS

2,893

4

2,420

2,408

99

(12)

100

—

—

—

—

Other (c)

3,700

7

3,840

3,893

101

53

53

—

43

—

4

Total investment 
     securities

$

118,779

(d)

$

842

$

116,563

$

117,762

(d)

100

%

$

1,199

(d)(e)

90

%

2

%

6

%

2

%

—

%


(a)

Amortized cost before impairments.

(b)

These RMBS were included in the former Grantor Trust and were marked-to-market in 2009.  We believe these RMBS would receive higher credit ratings if these ratings incorporated, as additional credit enhancements, the difference between the written-down amortized cost and the current face amount of each of these securities.

(c)

Includes commercial paper with a fair value of $1.9 billion and $1.7 billion and money market funds with a fair value of $886 million and $862 million at Dec. 31, 2015 and March 31, 2016, respectively.

(d)

Includes net unrealized losses on derivatives hedging securities available-for-sale of $292 million at Dec. 31, 2015 and $763 million at March 31, 2016.

(e)

Unrealized gains of $685 million at March 31, 2016 related to available-for-sale securities.

NONPERFORMING ASSETS

Nonperforming assets

(dollars in millions)

March 31,
2016

Dec. 31,
2015

March 31,
2015

Loans:


Financial institutions

$

171

$

171

$

—

Other residential mortgages

99

102

111

Wealth management loans and mortgages

11

11

12

Commercial

5

—

—

Commercial real estate

2

2

1

Total nonperforming loans

288

286

124

Other assets owned

4

6

4

Total nonperforming assets

$

292

$

292

$

128

Nonperforming assets ratio

0.48

%

0.46

%

0.21

%

Allowance for loan losses/nonperforming loans

56.3

54.9

153.2

Total allowance for credit losses/nonperforming loans

99.7

96.2

228.2

Nonperforming assets were $292 million at March 31, 2016, unchanged compared with Dec. 31, 2015.

ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS

Allowance for credit losses, provision and net charge-offs

(in millions)

March 31,
 2016

Dec. 31,
2015

March 31,
 2015

Allowance for credit losses - beginning of period

$

275

$

280

$

280

Provision for credit losses

10

163

2

Net (charge-offs) recoveries:


Financial institutions

—

(170)

—

Other residential mortgages

2

2

1

Net (charge-offs) recoveries

2

(168)

1

Allowance for credit losses - end of period

$

287

$

275

$

283

Allowance for loan losses

$

162

$

157

$

190

Allowance for lending-related commitments

125

118

93

The allowance for credit losses was $287 million at March 31, 2016, an increase of $12 million compared with $275 million at Dec. 31, 2015.  Net recoveries were $2 million in 1Q16 reflected in the other residential mortgage portfolio.

CAPITAL AND LIQUIDITY

The common equity Tier 1 ("CET1"), Tier 1 and Total risk-based regulatory capital ratios in the first section of the table below are based on Basel III components of capital, as phased-in (referred to as "Transitional ratios"), and credit risk asset risk-weightings using the U.S. capital rules' advanced approaches framework (the "Advanced Approach") as the related risk-weighted assets ("RWA") were higher when calculated under the Advanced Approach at March 31, 2016 and Dec. 31, 2015.  Our risk-based capital adequacy is determined using the higher of RWA determined using the Advanced Approach and the U.S. capital rules' standardized approach (the "Standardized Approach").  The leverage capital ratios are based on Basel III components of capital, as phased-in and quarterly average total assets.  The transitional capital ratios for March 31, 2016 were negatively impacted by the additional phase-in requirements for 2016.  Our consolidated capital ratios are shown in the following table. 

Capital ratios

March 31,
 2016

Dec. 31,
2015

Consolidated regulatory capital ratios: (a)(b)

CET1 ratio

10.6

%

10.8

%

Tier 1 capital ratio

12.0

12.3

Total (Tier 1 plus Tier 2) capital ratio

12.2

12.5

Leverage capital ratio

5.9

6.0

BNY Mellon shareholders' equity to total assets ratio – GAAP (c)

10.3

9.7

BNY Mellon common shareholders' equity to total assets ratio – GAAP (c)

9.6

9.0

BNY Mellon tangible common shareholders' equity to tangible assets of operations ratio – Non-GAAP (c)

6.7

6.5



Selected regulatory capital ratios – fully phased-in – Non-GAAP: (a)

Estimated CET1 ratio:

Standardized Approach

11.0

10.2

Advanced Approach

9.8

9.5

Estimated supplementary leverage ratio ("SLR") (d)

5.1

4.9


(a)

Regulatory capital ratios for March 31, 2016 are preliminary.

(b)

At March 31, 2016 and Dec. 31, 2015, the CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios determined under the transitional Basel III Standardized Approach were 11.8%, 13.5% and 13.9%, respectively, and 11.5% ,13.1% and 13.5%, respectively.  

(c)

See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 for a reconciliation of these ratios.

(d)

The estimated SLR on a fully phased-in basis (Non-GAAP) for our largest bank subsidiary, The Bank of New York Mellon, was 5.2% at March 31, 2016 and 4.8% at Dec. 31, 2015.

Estimated Basel III CET1 generation presented on a fully phased-in basis – Non-GAAP – preliminary

(in millions)

1Q16

Estimated fully phased-in Basel III CET1 – Non-GAAP – Beginning of period

$

16,082

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

804

Goodwill and intangible assets, net of related deferred tax liabilities

94

  Gross Basel III CET1 generated

898

Capital deployed:

Dividends

(185)

Common stock repurchased

(577)

  Total capital deployed

(762)

Other comprehensive income

210

Additional paid-in capital (a)

170

Other

5

Total other deductions

385

Net Basel III CET1 generated

521

Estimated fully phased-in Basel III CET1 – Non-GAAP – End of period

$

16,603


(a)

Primarily related to stock awards, the exercise of stock options and stock issued for employee benefit plans.

The table presented below compares the fully phased-in Basel III capital components and ratios to those capital components and ratios determined on a transitional basis.

Basel III capital components and ratios at March 31, 2016 – preliminary

Fully phased-
in Basel III -
Non-GAAP

Transitional
basis (a)

(dollars in millions)

CET1:


Common shareholders' equity

$

35,907

$

36,229

Goodwill and intangible assets

(18,817)

(17,760)

Net pension fund assets

(93)

(56)

Equity method investments

(359)

(324)

Deferred tax assets

(23)

(14)

Other

(12)

(9)

  Total CET1

16,603

18,066

Other Tier 1 capital:


Preferred stock

2,552

2,552

Trust preferred securities

—

—

Disallowed deferred tax assets

—

(9)

Net pension fund assets

—

(37)

Other

(8)

(11)

  Total Tier 1 capital

19,147

20,561




Tier 2 capital:


Trust preferred securities

—

173

Subordinated debt

149

149

Allowance for credit losses

287

287

Other

(1)

(2)

  Total Tier 2 capital - Standardized Approach

435

607

Excess of expected credit losses

39

39

Less: Allowance for credit losses

287

287

 Total Tier 2 capital - Advanced Approach

$

187

$

359




Total capital:


  Standardized Approach

$

19,582

$

21,168

  Advanced Approach

$

19,334

$

20,920




Risk-weighted assets:


  Standardized Approach

$

151,397

$

152,682

  Advanced Approach

$

169,752

$

171,114




Standardized Approach:


Estimated Basel III CET1 ratio

11.0

%

11.8

%

Tier 1 capital ratio

12.6

13.5

Total (Tier 1 plus Tier 2) capital ratio

12.9

13.9




Advanced Approach:


Estimated Basel III CET1 ratio

9.8

%

10.6

%

Tier 1 capital ratio

11.3

12.0

Total (Tier 1 plus Tier 2) capital ratio

11.4

12.2


(a)

Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in 2016 under the U.S. capital rules.

BNY Mellon has presented its estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR based on its interpretation of the U.S. capital rules, which are being gradually phased-in over a multi-year period, and on the application of such rules to BNY Mellon's businesses as currently conducted.  Management views the estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR as key measures in monitoring BNY Mellon's capital position and progress against future regulatory capital standards.  Additionally, the presentation of the estimated fully phased-in Basel III CET1 and other risk-based capital ratios and SLR are intended to allow investors to compare these ratios with estimates presented by other companies.

Our capital and liquidity ratios are necessarily subject to, among other things, BNY Mellon's further review of applicable rules, anticipated compliance with all necessary enhancements to model calibration, approval by regulators of certain models used as part of RWA calculations, other refinements, further implementation guidance from regulators, market practices and standards and any changes BNY Mellon may make to its businesses.  Consequently, our capital and liquidity ratios remain subject to ongoing review and revision and may change based on these factors.

Supplementary Leverage Ratio ("SLR")

The following table presents the components of our estimated SLR using fully phased-in Basel III components of capital.

Estimated fully phased-in SLR – Non-GAAP (a)

(dollars in millions)

March 31,
 2016

(b)

Dec. 31,
 2015

Total estimated fully phased-in Basel III CET1 – Non-GAAP

$

16,603

$

16,082

Additional Tier 1 capital

2,544

2,530

Total Tier 1 capital

$

19,147

$

18,612




Total leverage exposure:


Quarterly average total assets

$

364,554

$

368,590

Less: Amounts deducted from Tier 1 capital

19,304

19,403

Total on-balance sheet assets, as adjusted

345,250

349,187

Off-balance sheet exposures:


Potential future exposure for derivatives contracts (plus certain other items)

5,838

7,158

Repo-style transaction exposures included in SLR

403

440

Credit-equivalent amount of other off-balance sheet exposures (less SLR exclusions)

24,950

26,025

Total off-balance sheet exposures

31,191

33,623

Total leverage exposure

$

376,441

$

382,810








Estimated fully phased-in SLR – Non-GAAP

5.1

%

(c)

4.9

%


(a)

The estimated fully phased-in SLR (Non-GAAP) is based on our interpretation of the U.S. capital rules.  When the SLR is fully phased-in in 2018, we expect to maintain an SLR of over 5%.  The minimum required SLR is 3% and there is a 2% buffer, in addition to the minimum, that is applicable to U.S. G-SIBs. 

(b)

March 31, 2016 information is preliminary.

(c)

The estimated SLR on a fully phased-in basis (Non-GAAP) for our largest bank subsidiary, The Bank of New York Mellon, was 5.2% at March 31, 2016 and 4.8% at Dec. 31, 2015.  At March 31, 2016 and Dec. 31, 2015, total Tier 1 capital was $16,167 million and $15,142 million, respectively, and total leverage exposure was $312,988 million and $316,270 million, respectively, for The Bank of New York Mellon.

Liquidity Coverage Ratio ("LCR")

The U.S. LCR rules became effective Jan. 1, 2015 and currently require BNY Mellon to meet an LCR of 90%, increasing to 100% when fully phased-in on Jan. 1, 2017.  Our estimated LCR on a consolidated basis is compliant with the fully phased-in requirements of the U.S. LCR as of March 31, 2016 based on our understanding of the U.S. LCR rules.  Our consolidated high-quality liquid assets ("HQLA") before haircuts, totaled $202 billion at March 31, 2016, compared with $218 billion at Dec. 31, 2015.

REVIEW OF BUSINESSES

Segment results are subject to reclassification whenever improvements are made in the measurement principles or when organizational changes are made.  In the first quarter of 2016, we reclassified the results of the credit-related activities to the Investment Services segment from the Other segment.  This reclassification reflects our strategy to provide credit services to our Investment Services clients and did not impact the consolidated results.  Also, concurrent with this reclassification, the provision for credit losses associated with the respective credit portfolios is now reflected in each business segment.  All prior periods have been restated.

Beginning in the first quarter of 2016, we revised the net interest revenue for our business to reflect adjustments to our transfer pricing methodology to better reflect the value of certain deposits.  Also beginning in the first quarter of 2016, we refined the expense allocation process for indirect expenses to simplify the expenses recorded in the Other segment to include only expenses not directly attributable to the Investment Management and Investment Services operations.  These changes did not impact the consolidated results.

INVESTMENT MANAGEMENT provides investment management services to institutional and retail investors, as well as investment management, wealth and estate planning and private banking solutions to high net worth individuals and families, and foundations and endowments.

(dollars in millions, unless otherwise noted)





1Q16 vs.

1Q16

4Q15

3Q15

2Q15

1Q15

4Q15

1Q15

Revenue:







Investment management fees:







  Mutual funds

$

300

$

294

$

301

$

312

$

301

2

%

—

%

  Institutional clients

334

350

347

363

365

(5)

(8)

  Wealth management

152

155

156

160

159

(2)

(4)

    Investment management fees

786

799

804

835

825

(2)

(5)

Performance fees

11

55

7

20

15

N/M

(27)

    Investment management and performance fees

797

854

811

855

840

(7)

(5)

Distribution and servicing

46

39

37

38

38

18

21

Other (a)

(31)

22

(5)

17

41

N/M

N/M

    Total fee and other revenue (a)

812

915

843

910

919

(11)

(12)

Net interest revenue

83

84

83

77

75

(1)

11

    Total revenue

895

999

926

987

994

(10)

(10)

Noninterest expense (ex. amortization of intangible assets)

660

689

665

700

708

(4)

(7)

  Income before taxes (ex. provision for credit losses and 
     amortization of intangible assets)

235

310

261

287

286

(24)

(18)

Provision for credit losses

(1)

(4)

1

3

(1)

N/M

N/M

Amortization of intangible assets

19

24

24

25

24

(21)

(21)

  Income before taxes

$

217

$

290

$

236

$

259

$

263

(25)

%

(17)

%









Pre-tax operating margin

24

%

29

%

25

%

26

%

26

%

Adjusted pre-tax operating margin (b)

30

%

36

%

34

%

34

%

34

%










Changes in AUM (in billions): (c)







Beginning balance of AUM

$

1,625

$

1,625

$

1,700

$

1,717

$

1,686


Net inflows (outflows):







Long-term:







  Equity

(3)

(9)

(4)

(13)

(5)


  Fixed income

—

1

(3)

(2)

3


  Liability-driven investments (d)

14

11

11

5

8


  Alternative investments

1

2

1

3

1


  Total long-term active inflows (outflows)

12

5

5

(7)

7


  Index

(11)

(16)

(10)

(9)

8


  Total long-term inflows (outflows)

1

(11)

(5)

(16)

15


Short term:







  Cash

(9)

2

(10)

(11)

1


  Total net (outflows) inflows

(8)

(9)

(15)

(27)

16


Net market/currency impact/acquisition

22

9

(60)

10

15


  Ending balance of AUM

$

1,639

(e)

$

1,625

$

1,625

$

1,700

$

1,717

1

%

(5)

%









AUM at period end, by product type: (c)







Equity

14

%

14

%

14

%

15

%

15

%

Fixed income

13

13

13

13

12


Index

19

20

20

21

22


Liability-driven investments (d)

33

32

32

30

30


Alternative investments

4

4

4

4

4


Cash

17

17

17

17

17


    Total AUM

100

%

(e)

100

%

100

%

100

%

100

%










Average balances:







Average loans

$

14,275

$

13,447

$

12,779

$

12,298

$

11,634

6

%

23

%

Average deposits

$

15,971

$

15,497

$

15,282

$

14,638

$

15,217

3

%

5

%


(a)

Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 for the reconciliation of Non-GAAP measures.  Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other trading revenue and investment and other income.

(b)

Excludes the net negative impact of money market fee waivers, amortization of intangible assets and provision for credit losses and is net of distribution and servicing expense.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 25 for the reconciliation of this Non-GAAP measure.

(c)

Excludes securities lending cash management assets and assets managed in the Investment Services business.

(d)

Includes currency overlay assets under management.

(e)

Preliminary.

N/M – Not meaningful.

INVESTMENT MANAGEMENT KEY POINTS

  • Assets under management were $1.64 trillion at March 31, 2016, a decrease of 5% year-over-year and an increase of 1% sequentially. The year-over-year decrease primarily reflects net outflows primarily in 2015 and the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).
          
    • Net long-term inflows of $1 billion in 1Q16 were driven by continued strength in liability-driven investments offset by outflows of index and equity investments.
              
    • Net short-term outflows were $9 billion in 1Q16.
                
  • Income before taxes, excluding provision for credit losses and amortization of intangible assets, totaled $235 million in 1Q16, a decrease of 18% year-over-year and 24% sequentially.
           
  • Total revenue was $895 million, a decrease of 10% year-over-year and 10% sequentially.
             
    • 40% non-U.S. revenue in 1Q16 vs. 41% in 1Q15.
               
  • Investment management fees were $786 million, a decrease of 5% year-over-year, or 3% on a constant currency basis (Non-GAAP). Both the year-over-year decrease on a constant currency basis (Non-GAAP) and the 2% sequential decrease primarily reflect lower equity market values and net outflows in 2015, partially offset by higher money market fees.
            
  • Performance fees were $11 million in 1Q16 compared with $15 million in 1Q15 and $55 million in 4Q15. The sequential decrease was driven by seasonality. 
            
  • Distribution and servicing fees were $46 million in 1Q16 compared with $38 million in 1Q15 and $39 million in 4Q15. Both increases primarily reflect higher money market fees.
              
  • Other losses were $31 million in 1Q16 compared with other revenue of $41 million in 1Q15 and other revenue of $22 million in 4Q15. Both decreases primarily reflect lower seed capital gains, losses on hedging activities and increased payments to Investment Services related to higher money market fees.
              
  • Net interest revenue increased 11% year-over-year and decreased 1% sequentially. Both comparisons primarily reflect record average loans and deposits, partially offset by the impact of changes in the internal crediting rates for deposits beginning in 1Q16.
               
    • Average loans increased 23% year-over-year and 6% sequentially; average deposits increased 5% year-over-year and 3% sequentially.
              
  • Total noninterest expense (excluding amortization of intangible assets) decreased 7% year-over-year and 4% sequentially. Both decreases primarily reflect lower incentive and business development expenses and a lower indirect expense allocation beginning in 1Q16, partially offset by higher distribution and servicing expense driven by lower money market fee waivers. The year-over-year decrease also reflects the favorable impact of a stronger U.S. dollar.

INVESTMENT SERVICES provides global custody and related services, broker-dealer services, global collateral services, corporate trust, depositary receipt and clearing services as well as global payment/working capital solutions to global financial institutions and credit-related activities.  In the first quarter of 2016, we reclassified the results of the credit-related activities to the Investment Services segment from the Other segment.  All prior periods have been restated.

(dollars in millions, unless otherwise noted)





1Q16 vs.

1Q16

4Q15

3Q15

2Q15

1Q15

4Q15

1Q15

Revenue:







Investment services fees:







  Asset servicing

$

1,016

$

1,009

$

1,034

$

1,038

$

1,017

1

%

—

%

  Clearing services

348

337

345

346

342

3

2

  Issuer services

244

199

312

234

231

23

6

  Treasury services

129

135

135

141

135

(4)

(4)

  Total investment services fees

1,737

1,680

1,826

1,759

1,725

3

1

Foreign exchange and other trading revenue

168

150

179

181

212

12

(21)

Other (a)

125

127

129

117

92

(2)

36

  Total fee and other revenue

2,030

1,957

2,134

2,057

2,029

4

—

Net interest revenue

679

664

662

667

629

2

8

  Total revenue

2,709

2,621

2,796

2,724

2,658

3

2

Noninterest expense (ex. amortization of intangible assets)

1,770

1,791

1,853

1,874

1,822

(1)

(3)

  Income before taxes (ex. provision for credit losses and 
     amortization of intangible assets)

939

830

943

850

836

13

12

Provision for credit losses

14

8

7

6

7

N/M

N/M

Amortization of intangible assets

38

40

41

40

41

(5)

(7)

  Income before taxes

$

887

$

782

$

895

$

804

$

788

13

%

13

%









Pre-tax operating margin

33

%

30

%

32

%

30

%

30

%

Pre-tax operating margin (ex. provision for credit losses and 
     amortization of intangible assets)

35

%

32

%

34

%

31

%

31

%










Investment services fees as a percentage of noninterest 
     expense (b)

99

%

95

%

99

%

97

%

95

%










Securities lending revenue

$

42

$

39

$

33

$

43

$

38

8

%

11

%









Metrics:







Average loans

$

45,004

$

45,844

$

46,222

$

45,822

$

45,071

(2)

%

—

%

Average deposits

$

215,707

$

229,241

$

232,250

$

238,404

$

235,524

(6)

%

(8)

%









AUC/A at period end (in trillions) (c)

$

29.1

(d)

$

28.9

$

28.5

$

28.6

$

28.5

1

%

2

%

Market value of securities on loan at period end
     (in billions) (e)

$

300

$

277

$

288

$

283

$

291

8

%

3

%









Asset servicing:







Estimated new business wins (AUC/A) (in billions)

$

40

(d)

$

49

$

84

$

933

$

125











Depositary Receipts:







Number of sponsored programs

1,131

1,145

1,176

1,206

1,258

(1)

%

(10)

%









Clearing services:







Average active clearing accounts (U.S. platform)
     (in thousands)

5,947

5,959

6,107

6,046

5,979

—

%

(1)

%

Average long-term mutual fund assets (U.S. platform)

$

415,025

$

437,260

$

447,287

$

466,195

$

456,954

(5)

%

(9)

%

Average investor margin loans (U.S. platform)

$

11,063

$

11,575

$

11,806

$

11,890

$

11,232

(4)

%

(2)

%









Broker-Dealer:







Average tri-party repo balances (in billions)

$

2,104

$

2,153

$

2,142

$

2,174

$

2,153

(2)

%

(2)

%


(a)

Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue and investment and other income.

(b)

Noninterest expense excludes amortization of intangible assets and litigation expense.

(c)

Includes the AUC/A of CIBC Mellon of $1.1 trillion at March 31, 2016, $1.0 trillion at Dec. 31, 2015 and Sept. 30, 2015 and $1.1 trillion at June 30, 2015 and March 31, 2015.

(d)

Preliminary.

(e)

Represents the total amount of securities on loan managed by the Investment Services business.  Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $56 billion at March 31, 2016, $55 billion at Dec. 31, 2015, $61 billion at Sept. 30, 2015, $68 billion at June 30, 2015 and $69 billion at March 31, 2015.

N/M - Not meaningful.

INVESTMENT SERVICES KEY POINTS

  • Income before taxes, excluding the provision for credit losses and amortization of intangible assets, totaled $939 million in 1Q16.
           
    • The pre-tax operating margin, excluding the provision for credit losses and amortization of intangible assets, was 35% in 1Q16 and the investment services fees as a percentage of noninterest expense was 99% in 1Q16, reflecting the continued focus on the business improvement process to drive operating leverage.
                
  • Investment services fees were $1.7 billion, an increase of 1% year-over-year and 3% sequentially.
             
    • Asset servicing fees (global custody, broker-dealer services and global collateral services) were $1.016 billion in 1Q16 compared with $1.017 billion in 1Q15 and $1.009 billion in 4Q15. Both comparisons primarily reflect net new business and higher securities lending revenue, offset by lower market values. The year-over-year comparison also reflects the unfavorable impact of a stronger U.S. dollar.
              
      • Estimated new business wins (AUC/A) in Asset Servicing of $40 billion in 1Q16.
                
    • Clearing services fees were $348 million in 1Q16 compared with $342 million in 1Q15 and $337 million in 4Q15. Both increases primarily reflect higher money market fees, partially offset by the impact of lost business. The sequential increase also reflects higher volumes.
              
    • Issuer services fees (Corporate Trust and Depositary Receipts) were $244 million in 1Q16 compared with $231 million in 1Q15 and $199 million in 4Q15. Both the year-over-year and sequential increases primarily reflect higher money market fees in Corporate Trust and higher dividend fees in Depositary Receipts.
              
    • Treasury services fees were $129 million in 1Q16 compared with $135 million in 1Q15 and $135 million in 4Q15. Both decreases primarily reflect higher compensating balance credits provided to clients, which shifts revenue from fees to net interest revenue.
              
  • Foreign exchange and other trading revenue was $168 million in 1Q16 compared with $212 million in 1Q15 and $150 million in 4Q15. The year-over-year decrease primarily reflects lower volumes. The sequential increase primarily reflects higher volatility.
            
  • Other revenue was $125 million in 1Q16 compared with $92 million in 1Q15 and $127 million in 4Q15. The year-over-year increase primarily reflects higher financing related fees. The sequential decrease primarily reflects termination fees in clearing service recorded in 4Q15. Both comparisons also reflect increased payment from Investment Management related to higher money market fees, partially offset by certain fees paid to introducing brokers.
              
  • Net interest revenue was $679 million in 1Q16 compared with $629 million in 1Q15 and $664 million in 4Q15. Both increases primarily reflect the impact of changes in the internal crediting rates for deposits beginning in 1Q16, partially offset by lower average loans and deposits.
             
  • Noninterest expense (excluding amortization of intangible assets) was $1.77 billion in 1Q16 compared with $1.82 billion in 1Q15 and $1.79 billion in 4Q15. Both decreases primarily reflect lower staff and professional, legal and other purchased services expenses. The year-over-year decrease was partially offset by higher litigation expense. The sequential decrease was partially offset by an adjustment to bank assessment charges recorded in 4Q15.

OTHER SEGMENT primarily includes leasing operations, corporate treasury activities, derivatives, global markets and institutional banking services, business exits and other corporate revenue and expense items.  In the first quarter of 2016, we reclassified the results of the credit-related activities from the Other segment to the Investment Services segment.  All prior periods have been restated.




(dollars in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

Revenue:




Fee and other revenue

$

129

$

89

$

59

$

103

$

85

Net interest revenue

4

12

14

35

24

  Total revenue

133

101

73

138

109

Noninterest expense (ex. amortization of intangible assets and restructuring 
     (recoveries) charges)

141

150

97

79

108

  (Loss) income before taxes (ex. amortization of intangible assets and 
     restructuring charges (recoveries))

(8)

(49)

(24)

59

1

Provision for credit losses

(3)

159

(7)

(15)

(4)

Amortization of intangible assets

—

—

1

—

1

Restructuring (recoveries) charges

(1)

(4)

(2)

8

(4)

  (Loss) income before taxes

$

(4)

$

(204)

$

(16)

$

66

$

8






Average loans and leases

$

1,917

$

2,673

$

2,656

$

2,956

$

1,230

KEY POINTS

  • Total fee and other revenue increased $44 million compared with 1Q15 and $40 million compared with 4Q15. Both increases primarily reflect lease-related gains. The sequential increase is partially offset by lower income from corporate/bank-owned life insurance.
             
  • Net interest revenue decreased $20 million compared with 1Q15 and $8 million compared with 4Q15. Both decreases primarily reflect the impact of changes in the internal crediting rates to the businesses for deposits beginning in 1Q16.
            
  • The provision for credit losses was a credit of $3 million in 1Q16. The provision for credit losses of $159 million in 4Q15 reflects the impairment charge recorded in 4Q15 related to a court decision.
             
  • Noninterest expense, excluding amortization of intangible assets and restructuring (recoveries) charges, increased $33 million compared with 1Q15 and decreased $9 million compared with 4Q15. The year-over-year increase primarily reflects the curtailment gain related to the U.S. pension plan recorded in 1Q15. The sequential decrease primarily reflects the adjustment to employee benefits expense recorded in 4Q15 driven by updated information received from an administrator of our health care benefits. Both comparisons also reflect higher severance expense recorded in 1Q16 in ongoing support of our business improvement process.

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement


(in millions)

Quarter ended

March 31,
2016

Dec. 31,
2015

March 31,
2015


Fee and other revenue



Investment services fees:



Asset servicing

$

1,040

$

1,032

$

1,038

Clearing services

350

339

344

Issuer services

244

199

232

Treasury services

131

137

137

  Total investment services fees

1,765

1,707

1,751

Investment management and performance fees

812

864

867

Foreign exchange and other trading revenue

175

173

229

Financing-related fees

54

51

40

Distribution and servicing

39

41

41

Investment and other income

105

93

60

  Total fee revenue

2,950

2,929

2,988

Net securities gains

20

21

24

  Total fee and other revenue

2,970

2,950

3,012

Operations of consolidated investment management funds



Investment (loss) income

(3)

19

56

Interest of investment management fund note holders

3

3

4

  (Loss) income from consolidated investment management funds

(6)

16

52

Net interest revenue



Interest revenue

883

834

807

Interest expense

117

74

79

  Net interest revenue

766

760

728

Provision for credit losses

10

163

2

  Net interest revenue after provision for credit losses

756

597

726

Noninterest expense



Staff

1,459

1,481

1,485

Professional, legal and other purchased services

278

328

302

Software and equipment

219

225

228

Net occupancy

142

148

151

Distribution and servicing

100

92

98

Sub-custodian

59

60

70

Business development

57

75

61

Other

241

201

242

Amortization of intangible assets

57

64

66

M&I, litigation and restructuring charges (recoveries)

17

18

(3)

  Total noninterest expense

2,629

2,692

2,700

Income



Income before income taxes

1,091

871

1,090

Provision for income taxes

283

175

280

  Net income

808

696

810

Net loss (income) attributable to noncontrolling interests (includes $7, $(5) and $(31) related to 
     consolidated investment management funds, respectively)

9

(3)

(31)

  Net income applicable to shareholders of The Bank of New York Mellon Corporation

817

693

779

Preferred stock dividends

(13)

(56)

(13)

  Net income applicable to common shareholders of The Bank of New York Mellon Corporation

$

804

$

637

$

766

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement - continued


Net income applicable to common shareholders of The Bank of New York Mellon Corporation 
     used for the earnings per share calculation

Quarter ended

March 31,
2016

Dec. 31,
2015

March 31,
2015

(in millions)

Net income applicable to common shareholders of The Bank of New York Mellon Corporation

$

804

$

637

$

766

Less:  Earnings allocated to participating securities

11

9

12

Net income applicable to the common shareholders of The Bank of New York Mellon Corporation 
     after required adjustments for the calculation of basic and diluted earnings per common share

$

793

$

628

$

754




Average common shares and equivalents outstanding of The Bank of New York Mellon 
     Corporation

Quarter ended

March 31,
2016

Dec. 31,
2015

March 31,
2015

(in thousands)

Basic

1,079,641

1,088,880

1,118,602

Diluted

1,085,284

1,096,385

1,126,306




Earnings per share applicable to the common shareholders of The Bank of New York Mellon 
     Corporation

Quarter ended

March 31,
2016

Dec. 31,
2015

March 31,
2015

(in dollars)

Basic

$

0.73

$

0.58

$

0.67

Diluted

$

0.73

$

0.57

$

0.67


THE BANK OF NEW YORK MELLON CORPORATION

Consolidated Balance Sheet

(dollars in millions, except per share amounts)

March 31,
2016

Dec. 31,
2015


Assets


Cash and due from:


Banks

$

3,928

$

6,537

Interest-bearing deposits with the Federal Reserve and other central banks

96,426

113,203

Interest-bearing deposits with banks

14,662

15,146

Federal funds sold and securities purchased under resale agreements

26,904

24,373

Securities:


Held-to-maturity (fair value of $42,231 and $43,204)

41,717

43,312

Available-for-sale

76,294

75,867

  Total securities

118,011

119,179

Trading assets

6,526

7,368

Loans

61,661

63,703

Allowance for loan losses

(162)

(157)

  Net loans

61,499

63,546

Premises and equipment

1,377

1,379

Accrued interest receivable

545

562

Goodwill

17,604

17,618

Intangible assets

3,781

3,842

Other assets

20,307

19,626

  Subtotal assets of operations

371,570

392,379

Assets of consolidated investment management funds, at fair value:


Trading assets

1,186

1,228

Other assets

114

173

  Subtotal assets of consolidated investment management funds, at fair value

1,300

1,401

Total assets

$

372,870

$

393,780

Liabilities


Deposits:


Noninterest-bearing (principally U.S. offices)

$

93,005

$

96,277

Interest-bearing deposits in U.S. offices

52,124

51,704

Interest-bearing deposits in Non-U.S. offices

112,213

131,629

  Total deposits

257,342

279,610

Federal funds purchased and securities sold under repurchase agreements

14,803

15,002

Trading liabilities

5,283

4,501

Payables to customers and broker-dealers

22,008

21,900

Other borrowed funds

828

523

Accrued taxes and other expenses

5,288

5,986

Other liabilities (includes allowance for lending-related commitments of $125 and $118)

6,093

5,490

Long-term debt

21,686

21,547

  Subtotal liabilities of operations

333,331

354,559

Liabilities of consolidated investment management funds, at fair value:


Trading liabilities

245

229

Other liabilities

9

17

  Subtotal liabilities of consolidated investment management funds, at fair value

254

246

Total liabilities

333,585

354,805

Temporary equity


Redeemable noncontrolling interests

169

200

Permanent equity


Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 25,826 and 25,826 shares

2,552

2,552

Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,320,883,792 and 
     1,312,941,113 shares

13

13

Additional paid-in capital

25,432

25,262

Retained earnings

20,593

19,974

Accumulated other comprehensive loss, net of tax

(2,390)

(2,600)

Less:  Treasury stock of 243,801,160 and 227,598,128 common shares, at cost

(7,741)

(7,164)

  Total The Bank of New York Mellon Corporation shareholders' equity

38,459

38,037

Nonredeemable noncontrolling interests of consolidated investment management funds

657

738

  Total permanent equity

39,116

38,775

  Total liabilities, temporary equity and permanent equity

$

372,870

$

393,780

SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based on fully phased-in Basel III CET1 and other risk-based capital ratios, SLR and tangible common shareholders' equity.  BNY Mellon believes that the Basel III CET1 and other risk-based capital ratios on a fully phased-in basis, the SLR on a fully phased-in basis and the ratio of tangible common shareholders' equity to tangible assets of operations are measures of capital strength that provide additional useful information to investors, supplementing the capital ratios which are, or were, required by regulatory authorities.  The tangible common shareholders' equity ratio includes changes in investment securities valuations which are reflected in total shareholders' equity.  In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its reconciliation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes and the assets of consolidated investment management funds to which BNY Mellon has limited economic exposure.  Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of those assets that can generate income.  BNY Mellon has provided a measure of tangible book value per common share, which it believes provides additional useful information as to the level of tangible assets in relation to shares of common stock outstanding.

BNY Mellon has presented revenue measures which exclude the effect of noncontrolling interests related to consolidated investment management funds, and expense measures which exclude M&I, litigation and restructuring charges (recoveries) and amortization of intangible assets.  Earnings per share, return on equity, operating leverage and operating margin measures, which exclude some or all of these items, as well as the impairment charge related to a prior court decision, are also presented.  Operating margin measures may also exclude amortization of intangible assets and the net negative impact of money market fee waivers, net of distribution and servicing expense.  BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons, which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon's control.  The excluded items, in general, relate to certain charges as a result of prior transactions.  M&I expenses primarily relate to acquisitions and generally continue for approximately three years after the transaction.  Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees.  Restructuring charges relate to our streamlining actions, Operational Excellence Initiatives and migrating positions to Global Delivery Centers.  Excluding these charges mentioned above permits investors to view expenses on a basis consistent with how management views the business.

The presentation of revenue growth on a constant currency basis permits investors to assess the significance of changes in foreign currency exchange rates.  Growth rates on a constant currency basis were determined by applying the current period foreign currency exchange rates to the prior period revenue.  BNY Mellon believes that this presentation, as a supplement to GAAP information, gives investors a clearer picture of the related revenue results without the variability caused by fluctuations in foreign currency exchange rates.

The presentation of income (loss) from consolidated investment management funds, net of net income (loss) attributable to noncontrolling interests related to the consolidation of certain investment management funds permits investors to view revenue on a basis consistent with how management views the business.  BNY Mellon believes that these presentations, as a supplement to GAAP information, give investors a clearer picture of the results of its primary businesses.

In this Earnings Release, the net interest margin is presented on an FTE basis.  We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice.  The adjustment to an FTE basis has no impact on net income.  Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and on a business-level basis.

The following table presents the reconciliation of diluted earnings per share and the net income applicable to common shareholders of The Bank of New York Mellon Corporation.

Reconciliation of net income and diluted EPS – GAAP to Non-GAAP

4Q15

(in millions, except per share amounts)

Diluted EPS

Net income

Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP

$

0.57

$

637

Add:  Litigation and restructuring charges
          Impairment charge related to a prior court decision

0.01

12

0.10

106

Non-GAAP results

$

0.68

$

755

The following table presents the reconciliation of the pre-tax operating margin ratio.

Reconciliation of income before income taxes – pre-tax operating margin




(dollars in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

Income before income taxes – GAAP

$

1,091

$

871

$

1,109

$

1,165

$

1,090

Less:  Net (loss) income attributable to noncontrolling interests of 
           consolidated investment management funds

(7)

5

(5)

37

31

Add:  Amortization of intangible assets

57

64

66

65

66

M&I, litigation and restructuring charges (recoveries)

17

18

11

59

(3)

Impairment charge related to a prior court decision

—

170

—

—

—

Income before income taxes, as adjusted – Non-GAAP (a)

$

1,172

$

1,118

$

1,191

$

1,252

$

1,122






Fee and other revenue – GAAP

$

2,970

$

2,950

$

3,053

$

3,067

$

3,012

(Loss) income from consolidated investment management funds – GAAP

(6)

16

(22)

40

52

Net interest revenue – GAAP

766

760

759

779

728

Total revenue – GAAP

3,730

3,726

3,790

3,886

3,792

Less:  Net (loss) income attributable to noncontrolling interests of 
               consolidated investment management funds

(7)

5

(5)

37

31

Total revenue, as adjusted – Non-GAAP (a)

$

3,737

$

3,721

$

3,795

$

3,849

$

3,761






Pre-tax operating margin (b)(c)

29

%

23

%

29

%

30

%

29

%

Pre-tax operating margin – Non-GAAP (a)(b)(c)

31

%

30

%

31

%

33

%

30

%


(a)

Non-GAAP excludes net (loss) income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges (recoveries) and the impairment charge related to a prior court decision, if applicable.

(b)

Income before taxes divided by total revenue.

(c)

Our GAAP earnings include tax-advantaged investments such as low income housing, renewable energy, bank-owned life insurance and tax-exempt securities.  The benefits of these investments are primarily reflected in tax expense.  If reported on a tax-equivalent basis these investments would increase revenue and income before taxes by $77 million for 1Q16, $73 million for 4Q15, $53 million for 3Q15, $52 million for 2Q15 and $64 million for 1Q15 and would increase our pre-tax operating margin by approximately 1.4% for 1Q16, 1.5% for 4Q15, 1.0% for 3Q15, 0.9% for 2Q15 and 1.2% for 1Q15.

The following table presents the reconciliation of the pre-tax operating leverage.

Pre-tax operating leverage

1Q16 vs.

(dollars in millions)

1Q16

1Q15

1Q15

Total revenue - GAAP

$

3,730

$

3,792

Less:  Net (loss) income attributable to noncontrolling interests of consolidated investment 
     management funds

(7)

31

      Total revenue, as adjusted - Non-GAAP

$

3,737

$

3,761

(0.64)

%




Total noninterest expense - GAAP

$

2,629

$

2,700

Less:  Amortization of intangible assets
           M&I, litigation and restructuring charges (recoveries)

57

66

17

(3)

      Total noninterest expense, as adjusted - Non-GAAP

$

2,555

$

2,637

(3.11)

%




      Pre-tax operating leverage, as adjusted - Non-GAAP (a)(b)

247

bps


(a)

Pre-tax operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.

(b)

Non-GAAP adjustments include amortization of intangible assets and M&I, litigation and restructuring charges (recoveries), if applicable.

bps - basis points.

The following table presents the reconciliation of the returns on common equity and tangible common equity.

Return on common equity and tangible common equity




(dollars in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

Net income applicable to common shareholders of The Bank of New York 
     Mellon Corporation – GAAP

$

804

$

637

$

820

$

830

$

766

Add:  Amortization of intangible assets, net of tax

37

42

43

44

43

  Net income applicable to common shareholders of The Bank of New 
     York Mellon Corporation excluding amortization of intangible
     assets – Non-GAAP

841

679

863

874

809

Add:  M&I, litigation and restructuring charges (recoveries)
          Impairment charge related to a prior court decision

11

12

8

38

(2)

—

106

—

—

—

  Net income applicable to common shareholders of The Bank of New 
     York Mellon Corporation, as adjusted – Non-GAAP (a)

$

852

$

797

$

871

$

912

$

807






Average common shareholders' equity

$

35,252

$

35,664

$

35,588

$

35,516

$

35,486

Less:  Average goodwill

17,562

17,673

17,742

17,752

17,756

Average intangible assets

3,812

3,887

3,962

4,031

4,088

Add:   Deferred tax liability – tax deductible goodwill (b)

1,428

1,401

1,379

1,351

1,362

Deferred tax liability – intangible assets (b)

1,140

1,148

1,164

1,179

1,200

Average tangible common shareholders' equity – Non-GAAP

$

16,446

$

16,653

$

16,427

$

16,263

$

16,204






Return on common equity – GAAP (c)

9.2

%

7.1

%

9.1

%

9.4

%

8.8

%

Return on common equity – Non-GAAP (a)(c)

9.7

%

8.9

%

9.7

%

10.3

%

9.2

%






Return on tangible common equity – Non-GAAP (c)

20.6

%

16.2

%

20.8

%

21.5

%

20.3

%

Return on tangible common equity – Non-GAAP adjusted (a)(c)

20.8

%

19.0

%

21.0

%

22.5

%

20.2

%


(a)

Non-GAAP excludes amortization of intangible assets, net of tax, M&I, litigation and restructuring charges (recoveries) and the impairment charge related to a prior court decision, if applicable.

(b)

Deferred tax liabilities are based on fully phased-in Basel III rules.

(c)

Annualized.

The following table presents the reconciliation of the equity to assets ratio and book value per common share.

Equity to assets and book value per common share

March 31,
2016

Dec. 31,
2015

Sept. 30,
2015

June 30,
2015

March 31,
2015

(dollars in millions, unless otherwise noted)

BNY Mellon shareholders' equity at period end – GAAP

$

38,459

$

38,037

$

38,170

$

38,270

$

37,328

Less:  Preferred stock

2,552

2,552

2,552

2,552

1,562

   BNY Mellon common shareholders' equity at period end – GAAP

35,907

35,485

35,618

35,718

35,766

Less:  Goodwill
           Intangible assets

17,604

17,618

17,679

17,807

17,663

3,781

3,842

3,914

4,000

4,047

Add:  Deferred tax liability – tax deductible goodwill (a)
          Deferred tax liability – intangible assets (a)

1,428

1,401

1,379

1,351

1,362

1,140

1,148

1,164

1,179

1,200

   BNY Mellon tangible common shareholders' equity at period end – 
     Non-GAAP

$

17,090

$

16,574

$

16,568

$

16,441

$

16,618






Total assets at period end – GAAP

$

372,870

$

393,780

$

377,371

$

395,254

$

392,337

Less:  Assets of consolidated investment management funds

1,300

1,401

2,297

2,231

1,681

   Subtotal assets of operations – Non-GAAP

371,570

392,379

375,074

393,023

390,656

Less:  Goodwill
           Intangible assets
           Cash on deposit with the Federal Reserve and other central 
               banks (b)

17,604

17,618

17,679

17,807

17,663

3,781

3,842

3,914

4,000

4,047

96,421

116,211

86,426

106,628

93,044

Tangible total assets of operations at period end – Non-GAAP

$

253,764

$

254,708

$

267,055

$

264,588

$

275,902






BNY Mellon shareholders' equity to total assets ratio – GAAP

10.3

%

9.7

%

10.1

%

9.7

%

9.5

%

BNY Mellon common shareholders' equity to total assets ratio – 
     GAAP

9.6

%

9.0

%

9.4

%

9.0

%

9.1

%

BNY Mellon tangible common shareholders' equity to tangible assets 
     of operations ratio – Non-GAAP

6.7

%

6.5

%

6.2

%

6.2

%

6.0

%






Period-end common shares outstanding (in thousands)

1,077,083

1,085,343

1,092,953

1,106,518

1,121,512






Book value per common share – GAAP

$

33.34

$

32.69

$

32.59

$

32.28

$

31.89

Tangible book value per common share – Non-GAAP

$

15.87

$

15.27

$

15.16

$

14.86

$

14.82


(a)

Deferred tax liabilities are based on fully phased-in Basel III rules.

(b)

Assigned a zero percent risk-weighting by the regulators.

The following table presents income from consolidated investment management funds, net of noncontrolling interests.

Income (loss) from consolidated investment management funds, net of noncontrolling interests

(in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

(Loss) income from consolidated investment management funds

$

(6)

$

16

$

(22)

$

40

$

52

Less:  Net (loss) income attributable to noncontrolling interests of consolidated 
              investment management funds

(7)

5

(5)

37

31

Income (loss) from consolidated investment management funds, net of 
     noncontrolling interests

$

1

$

11

$

(17)

$

3

$

21

The following table presents the impact of changes in foreign currency exchange rates on our consolidated investment management and performance fees.

Investment management and performance fees – Consolidated

1Q16 vs.

(dollars in millions)

1Q16

1Q15

1Q15

Investment management and performance fees – GAAP

$

812

$

867

(6)

%

Impact of changes in foreign currency exchange rates

—

(18)

Investment management and performance fees, as adjusted – Non-GAAP

$

812

$

849

(4)

%

The following table presents the revenue line items in the Investment Management business impacted by the consolidated investment management funds.

Income (loss) from consolidated investment management funds, net of 
     noncontrolling interests - Investment Management business




(in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

Investment management fees

$

2

$

7

$

3

$

4

$

1

Other (Investment income (loss))

(1)

4

(20)

(1)

20

Income (loss) from consolidated investment management funds, net of 
     noncontrolling interests

$

1

$

11

$

(17)

$

3

$

21

The following table presents the impact of changes in foreign currency exchange rates on investment management fees reported in the Investment Management segment.

Investment management fees - Investment Management business

1Q16 vs.

(dollars in millions)

1Q16

1Q15

1Q15

Investment management fees – GAAP

$

786

$

825

(5)

%

Impact of changes in foreign currency exchange rates

—

(18)

Investment management fees, as adjusted – Non-GAAP

$

786

$

807

(3)

%

The following table presents the reconciliation of the pre-tax operating margin for the Investment Management business.

Pre-tax operating margin - Investment Management business




(dollars in millions)

1Q16

4Q15

3Q15

2Q15

1Q15

Income before income taxes – GAAP

$

217

$

290

$

236

$

259

$

263

Add:  Amortization of intangible assets

19

24

24

25

24

          Provision for credit losses

(1)

(4)

1

3

(1)

          Money market fee waivers

9

23

28

29

33

Income before income taxes excluding amortization of intangible assets, 
     provision for credit losses and money market fee waivers – Non-GAAP

$

244

$

333

$

289

$

316

$

319






Total revenue – GAAP

$

895

$

999

$

926

$

987

$

994

Less:  Distribution and servicing expense

100

92

94

95

97

           Money market fee waivers benefiting distribution and servicing expense

23

27

35

37

38

Add:   Money market fee waivers impacting total revenue

32

50

63

66

71

Total revenue net of distribution and servicing expense
     and excluding money market fee waivers – Non-GAAP

$

804

$

930

$

860

$

921

$

930






Pre-tax operating margin (a)

24

%

29

%

25

%

26

%

26

%

Pre-tax operating margin excluding amortization of intangible assets, provision for 
     credit losses, money market fee waivers and net of distribution and servicing 
     expense – Non-GAAP (a)

30

%

36

%

34

%

34

%

34

%


(a)

Income before taxes divided by total revenue.

DIVIDENDS

Common – On April 21, 2016, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.17 per common share.  This cash dividend is payable on May 13, 2016 to shareholders of record as of the close of business on May 3, 2016. 

Preferred – On April 21, 2016, The Bank of New York Mellon Corporation also declared the following dividends for the noncumulative perpetual preferred stock, liquidation preference $100,000 per share, for the dividend period ending in June 2016, in each case payable on June 20, 2016 to holders of record as of the close of business on June 5, 2016:

  • $1,011.11 per share on the Series A Preferred Stock (equivalent to $10.1111 per Normal Preferred Capital Security of Mellon Capital IV, each representing a 1/100th interest in a share of the Series A Preferred Stock);
  • $1,300.00 per share on the Series C Preferred Stock (equivalent to $0.3250 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock);
  • $2,250.00 per share on the Series D Preferred Stock (equivalent to $22.50 per depositary share, each representing a 1/100th interest in a share of the Series D Preferred Stock); and
  • $2,475.00 per share on the Series E Preferred Stock (equivalent to $24.75 per depositary share, each representing a 1/100th interest in a share of the Series E Preferred Stock).

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle.  Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets.  As of March 31, 2016, BNY Mellon had $29.1 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management.  BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available on www.bnymellon.com.  Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.

CAUTIONARY STATEMENT

A number of statements (i) in this Earnings Release, (ii) in our presentations and (iii) in the responses to questions on our conference call discussing our quarterly results and other public events may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 including our estimated capital ratios and expectations relating to those ratios, preliminary business metrics and statements regarding enhancing the client experience, driving efficiencies, strategic priorities, capital plans, investor day goals and our business improvement process.  These statements may be expressed in a variety of ways, including the use of future or present tense language.  Words such as "estimate", "forecast", "project", "anticipate", "target", "expect", "intend", "continue", "seek", "believe", "plan", "goal", "could", "should", "may", "will", "strategy", "opportunities", "trends" and words of similar meaning signify forward-looking statements.  These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation which make reference to the cautionary factors described in this Earnings Release are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control).  Actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2015 and BNY Mellon's other filings with the Securities and Exchange Commission.  All forward-looking statements in this Earnings Release speak only as of April 21, 2016, and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

Contacts: 

MEDIA:
Kevin Heine
(212) 635-1590
[email protected]

ANALYSTS:
Valerie Haertel
(212) 635-8529
[email protected]

SOURCE BNY Mellon

Related Links

http://www.bnymellon.com

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