BNY Mellon Reports Fourth Quarter 2020 Earnings Of $702 Million Or $0.79 Per Common Share, Includes $0.18 Per Share Negative Impact Of Notable Items

Revenue down 20% (a)

EPS down 48% (a)

ROE  7%

ROTCE  13% (b)

(a)   Excluding notable items, revenue down 2% and EPS down 5%.  See note (b).

4Q20 vs.

4Q20

3Q20

4Q19

3Q20

Net income applicable to common shareholders (in millions)

$

702

$

876

$

1,391

(20)

%

(50)

%

Net income applicable to common shareholders, excluding notable items (in millions)
– Non-GAAP (b)

$

861

$

876

$

931

(2)

%

(8)

%

Diluted earnings per common share

$

0.79

$

0.98

$

1.52

(19)

%

(48)

%

Diluted earnings per common share, excluding notable items – Non-GAAP (b)

$

0.96

$

0.98

$

1.01

(2)

%

(5)

%

Notable items

CEO Commentary

4Q20 results include $(159) million, or $(0.18) per share, for litigation, severance, losses on business sales and real estate charges.

"During 2020, our business and operational resilience, enhanced by our technology and digital capabilities, enabled us to rapidly support our clients, employees and the financial system through immense stress and volatility.  At the same time, we continued to advance our strategic priorities and longer-term growth agenda across all of our businesses.  The investments we've made over the past several years, especially in technology and operations, served us and our clients well amid some difficult circumstances, and I want to thank our employees for their extraordinary efforts in supporting our clients during an unprecedented year," Todd Gibbons, Chief Executive Officer, said.
 
"Full-year EPS was $3.83, down from $4.51, reflecting the impact of notable items.  On an operating basis EPS was flat at $4.01, despite the impact of credit provisions, lower interest rates and associated money market fee waivers," Mr. Gibbons added.
 
"While the full-year impact of low interest rates will be a significant headwind in 2021, we ended the year with momentum in our core franchise.  We feel good about our business model and the power of the open architecture platforms and solutions we provide to help our clients grow their businesses.  Our enterprise is incredibly strong and interconnected and our breadth of services and capabilities is unrivalled within our peer group, positioning us well for future growth.  We have one of the industry's best client rosters and a highly motivated group of talented employees executing our strategy, which is centered on driving growth and creating value for our clients, scaling and digitizing our operating model, and fostering a high-performance culture that is focused on delivering excellent client service in new and innovative ways," Mr. Gibbons further noted. 
 
"The combination of our capital generation, revenue growth and good cost control gives us the ability to drive meaningful EPS growth over time," Mr. Gibbons concluded.

4Q19 results include $460 million, or $0.50 per share, for the gain on sale of an equity investment, offset by severance, net securities losses and litigation.

Fourth Quarter Results

Total revenue of $3.8 billion, decreased 20%; 2% excluding notable items (b)

• Fee revenue decreased 22%; increased 1% excluding notable items (b)
• Money market fee waivers decreased fee revenue by 4%
• Net interest revenue decreased 17%

Provision for credit losses of $15 million

Total noninterest expense of $2.9 billion, decreased 1%; 1% excluding notable items (b) 

Investment Services

• Total revenue decreased 4%
• Income before taxes decreased 17%
• AUC/A of $41.1 trillion, increased 11%

Investment and Wealth Management

• Total revenue increased 2%
• Income before taxes increased 30%
• AUM of $2.2 trillion, increased 15%

Media Relations: Madelyn McHugh (212) 635-1376

Investor Relations: Magda Palczynska  (212) 635-8529

(b)  For information on this Non-GAAP measure and full-year diluted operating earnings per share, see "Supplemental Information – Explanation of GAAP and Non-GAAP financial measures" on page 10.

Note:  Above comparisons are 4Q20 vs. 4Q19, unless otherwise noted.

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except per share amounts and unless otherwise noted; not meaningful - N/M)

4Q20 vs.

4Q20

3Q20

4Q19

3Q20

4Q19

$

3,116

$

3,108

$

3,971

—

%

(22)

%

Net securities gains (losses)

6

9

(25)

N/M

N/M

Total fee and other revenue

3,122

3,117

3,946

—

(21)

Income from consolidated investment management funds

41

27

17

N/M

N/M

Net interest revenue

680

703

815

(3)

(17)

Total revenue

3,843

3,847

4,778

—

(20)

Provision for credit losses

15

9

(8)

N/M

N/M

Noninterest expense

2,925

2,681

2,964

9

(1)

Income before income taxes

903

1,157

1,822

(22)

(50)

Provision for income taxes

148

213

373

(31)

(60)

Net income

$

755

$

944

$

1,449

(20)

%

(48)

%

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

$

702

$

876

$

1,391

(20)

%

(50)

%

Operating leverage (a)

(921)

 bps

(1,825)

bps

Diluted earnings per common share

$

0.79

$

0.98

$

1.52

(19)

%

(48)

%

Average common shares and equivalents outstanding - diluted (in thousands)

891,846

891,069

914,739

Pre-tax operating margin

24

%

30

%

38

%

Non-GAAP measures, excluding notable items (b):

Fee revenue – Non-GAAP

$

3,177

$

3,108

$

3,156

2

%

1

%

Net securities gains (losses) – Non-GAAP

6

9

—

N/M

N/M

Total revenue – Non-GAAP

3,904

3,847

3,988

1

(2)

Noninterest expense – Non-GAAP

2,760

2,681

2,778

3

(1)

Income before income taxes – Non-GAAP

1,129

1,157

1,218

(2)

(7)

Provision for income taxes – Non-GAAP

215

213

229

1

(6)

Net income – Non-GAAP

914

944

989

(3)

(8)

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

861

876

931

(2)

(8)

Operating leverage – Non-GAAP (a)

(146)

bps

(146)

bps

Diluted earnings per common share – Non-GAAP

$

0.96

$

0.98

$

1.01

(2)

%

(5)

%

Pre-tax operating margin – Non-GAAP

29

%

30

%

31

%

(a)  

Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.

(b)  

Notable items in 4Q20 include litigation expense, severance, losses on business sales and real estate charges.  Notable items in 4Q19 include a gain on sale of an equity investment, severance, net securities losses and litigation expense.  There were no notable items in 3Q20.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for additional information.

bps – basis points.

(a) 

  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for additional information.

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

(a) 

  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for additional information.

(b) 

  See "Capital and Liquidity" on page 8 for additional information.

FULL-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS

2020

2019

2019

Fee revenue

$

12,714

$

13,236

(4)

%

Net securities gains (losses)

33

(18)

N/M

Total fee and other revenue

12,747

13,218

(4)

Income from consolidated investment management funds

84

56

N/M

Net interest revenue

2,977

3,188

(7)

Total revenue

15,808

16,462

(4)

Provision for credit losses

336

(25)

N/M

Noninterest expense

11,004

10,900

1

Income before income taxes

4,468

5,587

(20)

Provision for income taxes

842

1,120

(25)

Net income

$

3,626

$

4,467

(19)

%

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

$

3,423

$

4,272

(20)

%

Operating leverage (a)

(493)

bps

Diluted earnings per common share

$

3.83

$

4.51

(15)

%

Average common shares and equivalents outstanding - diluted (in thousands)

892,514

943,109

Pre-tax operating margin

28

%

34

%

Non-GAAP measures, excluding notable items (b):

Fee revenue – Non-GAAP

$

12,775

$

12,421

3

%

Net securities gains – Non-GAAP

33

7

N/M

Net interest revenue – Non-GAAP

2,977

3,258

(9)

Total revenue – Non-GAAP

15,869

15,742

1

Noninterest expense – Non-GAAP

10,839

10,787

—

Income before income taxes – Non-GAAP

4,694

4,980

(6)

Provision for income taxes – Non-GAAP

909

980

(7)

Net income – Non-GAAP

3,785

4,000

(5)

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

3,582

3,805

(6)

Operating leverage – Non-GAAP (a)

32

bps

Diluted earnings per common share – Non-GAAP

$

4.01

$

4.02

—

%

Pre-tax operating margin – Non-GAAP

30

%

32

%

(a) 

Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.

(b)  

Notable items in 2020 include litigation expense, severance, losses on business sales and real estate charges recorded in 4Q20.  Notable items in 2019 include a gain on sale of an equity investment, severance, net securities losses, litigation expense recorded in 4Q19 and a lease-related impairment and a net reduction of reserves for tax-related exposure of certain investment management funds both recorded in 3Q19.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for additional information.

bps – basis points.

INVESTMENT SERVICES BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)

4Q20 vs.

4Q20

3Q20

4Q19

3Q20

4Q19

Total revenue by line of business:

Asset Servicing

$

1,357

$

1,354

$

1,411

—

%

(4)

%

Pershing

563

538

579

5

(3)

Issuer Services

385

435

415

(11)

(7)

Treasury Services

325

323

329

1

(1)

Clearance and Collateral Management

275

277

280

(1)

(2)

Total revenue by line of business

2,905

2,927

3,014

(1)

(4)

Provision for credit losses

31

(10)

(5)

N/M

N/M

Noninterest expense

2,174

2,020

2,179

8

—

Income before taxes

$

700

$

917

$

840

(24)

%

(17)

%

Pre-tax operating margin

24

%

31

%

28

%

Foreign exchange and other trading revenue

$

180

$

146

$

151

23

%

19

%

Securities lending revenue

$

36

$

37

$

40

(3)

%

(10)

%

Metrics:

Average loans

$

41,437

$

40,308

$

38,721

3

%

7

%

Average deposits

$

292,631

$

263,621

$

215,388

11

%

36

%

AUC/A at period end (in trillions) (current period is preliminary) (a)

$

41.1

$

38.6

$

37.1

6

%

11

%

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

$

435

$

378

$

378

15

%

15

%

(a) 

Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses.  Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5 trillion at Dec. 31, 2020, $1.4 trillion at Sept. 30, 2020 and $1.5 trillion at Dec. 31, 2019.

(b)  

Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business.  Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $68 billion at Dec. 31, 2020, $62 billion at Sept. 30, 2020 and $60 billion at Dec. 31, 2019.

(a)  

Notable items in 4Q20 and 4Q19 include severance and litigation expense.  There were no notable items in 3Q20.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for additional information.

INVESTMENT AND WEALTH MANAGEMENT BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)

4Q20 vs.

4Q20

3Q20

4Q19

3Q20

4Q19

Total revenue by line of business:

Investment Management

$

714

$

641

$

692

11

%

3

%

Wealth Management

276

277

279

—

(1)

Total revenue by line of business

990

918

971

8

2

Provision for credit losses

(8)

12

—

N/M

N/M

Noninterest expense

687

661

731

4

(6)

Income before taxes

$

311

$

245

$

240

27

%

30

%

Pre-tax operating margin

32

%

27

%

25

%

Adjusted pre-tax operating margin – Non-GAAP (a)

34

%

29

%

27

%

Metrics:

Average loans

$

11,497

$

11,503

$

12,022

—

%

(4)

%

Average deposits

$

18,144

$

17,570

$

15,195

3

%

19

%

AUM (in billions) (current period is preliminary) (b)

$

2,197

$

2,041

$

1,910

8

%

15

%

Wealth Management client assets (in billions) (current period is preliminary) (c)

$

286

$

265

$

266

8

%

8

%

(a) 

Net of distribution and servicing expense.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for information on this Non-GAAP measure.

(b) 

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

(c)  

Includes AUM and AUC/A in the Wealth Management business.

(a) 

Notable items in 4Q20 include severance and a loss on a business sale.  Notable items in 4Q19 include severance.  There were no notable items in 3Q20.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for additional information.

(in millions)

4Q20

3Q20

4Q19

Fee (loss) revenue

$

(23)

$

11

$

817

Net securities gains (losses)

6

9

(23)

Total fee and other (loss) revenue

(17)

20

794

Net interest (expense)

(40)

(25)

(10)

Total (loss) revenue

(57)

(5)

784

Provision for credit losses

(8)

7

(3)

Noninterest expense

64

—

54

(Loss) income before taxes

$

(113)

$

(12)

$

733

Notable items by business segment (a)

4Q20

4Q19

(in millions)

IS

IWM

Other

Total

IS

IWM

Other

Total

Fee and other revenue

$

—

$

(5)

$

(56)

$

(61)

$

—

$

—

$

790

$

790

Net interest revenue

—

—

—

—

—

—

—

—

Total revenue

—

(5)

(56)

(61)

—

—

790

790

Total noninterest expense

107

11

47

165

119

16

51

186

(Loss) income before taxes

$

(107)

$

(16)

$

(103)

$

(226)

$

(119)

$

(16)

$

739

$

604

(a) 

Notable items in 4Q20 include litigation expense, severance, losses on business sales and real estate charges.  Notable items in 4Q19 include a gain on sale of an equity investment, severance, net securities losses and litigation expense.

Money market fee waivers

(in millions)

4Q20

3Q20

2Q20

1Q20

YTD20

Investment services fees:

Asset servicing fees

$

(13)

$

(1)

$

—

$

—

$

(14)

Clearing services fees

(64)

(57)

(50)

(9)

(180)

Issuer services fees

(6)

(1)

(1)

—

(8)

Treasury services fees

(2)

(3)

(2)

—

(7)

Total investment services fees

(85)

(62)

(53)

(9)

(209)

Investment management and performance fees

(56)

(42)

(30)

(14)

(142)

Distribution and servicing revenue

(8)

(6)

(3)

—

(17)

Total fee and other revenue

(149)

(110)

(86)

(23)

(368)

Less: Distribution and servicing expense

15

9

7

—

31

Net impact of money market fee waivers

$

(134)

$

(101)

$

(79)

$

(23)

$

(337)

Impact to revenue by line of business (a):

Asset Servicing

$

(13)

$

(4)

$

(1)

$

—

$

(18)

Pershing

(85)

(73)

(60)

(9)

(227)

Issuer Services

(10)

(2)

(1)

—

(13)

Treasury Services

(5)

(1)

—

—

(6)

Investment Management

(34)

(28)

(24)

(14)

(100)

Wealth Management

(2)

(2)

—

—

(4)

Total impact to revenue by line of business

$

(149)

$

(110)

$

(86)

$

(23)

$

(368)

(a) 

The line of business revenue for management reporting purposes reflects the impact of revenue transferred between the businesses.

CAPITAL AND LIQUIDITY

Capital and liquidity ratios

Dec. 31,
2020

Sept. 30,
2020

Dec. 31,
2019

Consolidated regulatory capital ratios: (a)

CET1 ratio

13.1

%

13.0

%

11.5

%

Tier 1 capital ratio

15.8

15.7

13.7

Total capital ratio

16.7

16.6

14.4

Tier 1 leverage ratio

6.3

6.5

6.6

SLR

8.6

(b)

8.5

(b)

6.1

BNY Mellon shareholders' equity to total assets ratio

9.8

%

10.5

%

10.9

%

BNY Mellon common shareholders' equity to total assets ratio

8.8

%

9.4

%

9.9

%

Average LCR

110

%

111

%

120

%

Book value per common share

$

46.53

$

45.58

$

42.12

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

$

25.44

$

24.60

$

21.33

Common shares outstanding (in thousands)

886,764

886,136

900,683

(a)  

Regulatory capital ratios for Dec. 31, 2020 are preliminary.  For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for the periods noted above was the Advanced Approaches.

(b)  

Reflects the application of a rule effective April 1, 2020 to exclude certain central bank placements.  Also effective on April 1, 2020 was the temporary exclusion of U.S. Treasury securities from the leverage exposure used in the SLR calculation which increased our consolidated SLR by 72 basis points at Dec. 31, 2020 and 78 basis points at Sept. 30, 2020.

(c)  

Tangible book value per common share – Non-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for information on this Non-GAAP measure.

NET INTEREST REVENUE

Net interest revenue

4Q20 vs.

(dollars in millions; not meaningful - N/M)

4Q20

3Q20

4Q19

3Q20

4Q19

Net interest revenue

$

680

$

703

$

815

(3)

%

(17)

%

Add: Tax equivalent adjustment

3

2

2

N/M

N/M

Net interest revenue, on a fully taxable equivalent ("FTE") basis – Non-GAAP (a)

$

683

$

705

$

817

(3)

%

(16)

%

Net interest margin

0.72

%

0.79

%

1.09

%

(7)

 bps

(37)

 bps

Net interest margin (FTE) – Non-GAAP (a)

0.72

%

0.79

%

1.09

%

(7)

 bps

(37)

 bps

(a)  

Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" on page 10 for information on this Non-GAAP measure.

bps – basis points.

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement

(in millions)

Quarter ended

Year-to-date

Dec. 31,
2020

Sept. 30,
2020

Dec. 31,
2019

Dec. 31,
2020

Dec. 31,
2019

Fee and other revenue

Investment services fees:

Asset servicing fees

$

1,138

$

1,168

$

1,148

$

4,638

$

4,563

Clearing services fees

418

397

421

1,716

1,648

Issuer services fees

257

295

264

1,092

1,130

Treasury services fees

156

152

147

601

559

Total investment services fees

1,969

2,012

1,980

8,047

7,900

Investment management and performance fees

884

835

883

3,367

3,389

Foreign exchange and other trading revenue

167

137

168

789

654

Financing-related fees

46

49

46

212

196

Distribution and servicing

28

29

34

115

129

Investment and other income

22

46

860

184

968

Total fee revenue

3,116

3,108

3,971

12,714

13,236

Net securities gains (losses)

6

9

(25)

33

(18)

Total fee and other revenue

3,122

3,117

3,946

12,747

13,218

Operations of consolidated investment management funds

Investment income

42

27

17

85

57

Interest of investment management fund note holders

1

—

—

1

1

Income from consolidated investment management funds

41

27

17

84

56

Net interest revenue

Interest revenue

776

820

1,721

4,109

7,548

Interest expense

96

117

906

1,132

4,360

Net interest revenue

680

703

815

2,977

3,188

Total revenue

3,843

3,847

4,778

15,808

16,462

Provision for credit losses

15

9

(8)

336

(25)

Noninterest expense

Staff

1,554

1,466

1,639

5,966

6,063

Professional, legal and other purchased services

381

355

367

1,403

1,345

Software and equipment

359

340

326

1,370

1,222

Net occupancy

173

136

151

581

564

Sub-custodian and clearing

116

119

119

460

450

Distribution and servicing

75

85

92

336

374

Bank assessment charges

24

30

32

124

125

Business development

26

17

65

105

213

Amortization of intangible assets

26

26

28

104

117

Other

191

107

145

555

427

Total noninterest expense

2,925

2,681

2,964

11,004

10,900

Income

Income before income taxes

903

1,157

1,822

4,468

5,587

Provision for income taxes

148

213

373

842

1,120

Net income

755

944

1,449

3,626

4,467

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

(5)

(7)

(9)

(9)

(26)

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

750

937

1,440

3,617

4,441

Preferred stock dividends

(48)

(61)

(49)

(194)

(169)

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

$

702

$

876

$

1,391

$

3,423

$

4,272

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

Quarter ended

Year-to-date

Dec. 31,
2020

Sept. 30,
2020

Dec. 31,
2019

Dec. 31,
2020

Dec. 31,
2019

(in dollars)

Basic

$

0.79

$

0.98

$

1.52

$

3.84

$

4.53

Diluted

$

0.79

$

0.98

$

1.52

$

3.83

$

4.51

Reconciliations of Non-GAAP measures, excluding notable items

4Q20 vs.

(in millions, except per share amounts)

4Q20

4Q19

4Q19

Fee revenue – GAAP

$

3,116

$

3,971

(22)

%

Impact of notable items (a)

(61)

815

Fee revenue – Non-GAAP

$

3,177

$

3,156

1

%

Net securities gains (losses) – GAAP

$

6

$

(25)

N/M

Impact of notable items (a)

—

(25)

Net securities gains – Non-GAAP

$

6

$

—

N/M

Total revenue – GAAP

$

3,843

$

4,778

(20)

%

Impact of notable items (a)

(61)

790

Total revenue – Non-GAAP

$

3,904

$

3,988

(2)

%

Noninterest expense – GAAP

$

2,925

$

2,964

(1)

%

Impact of notable items (a)

165

186

Noninterest expense – Non-GAAP

$

2,760

$

2,778

(1)

%

Income before income taxes – GAAP