BNY Mellon Reports Second Quarter 2018 Earnings of $1.06 Billion or $1.03 Per Common Share

News provided by

The Bank of New York Mellon Corporation

Jul 19, 2018, 06:30 ET

NEW YORK, July 19, 2018 /PRNewswire/ --

Revenue up 5%

EPS up 17%

ROE  11%

ROTCE  23% (a)

CET1  11.0%

SLR  6.2%

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported:


2Q18 vs.

2Q18

1Q18

2Q17

1Q18

2Q17

Net income applicable to common shareholders (in millions)

$

1,055

$

1,135

$

926

(7)

%

14

%

Diluted earnings per common share

$

1.03

$

1.10

$

0.88

(6)

%

17

%

Second Quarter Results

CEO Commentary



Total revenue of $4.1 billion, increased 5%

  • Fee revenue increased 3%
  • Net interest revenue increased 11%

"While we continued to benefit from the positive impact of higher interest rates and equity markets, albeit at a more modest pace than last quarter, we again saw some underlying franchise growth.  Overall, the company remains strong, with some areas performing better than others," Charles W. Scharf, chairman and chief executive officer, said.

 

"We saw pockets of strength, in Investment Services, especially where we have differentiated capabilities such as clearance, collateral management, tri-party repo and liquidity services.  Investment Management growth moderated as we saw some softness across the board in our asset flows," Mr. Scharf continued.

 

"We remain disciplined and focused on deploying our resources.  Currency translation and real estate costs impacted expense growth by 2 percent and, despite an increase in our investment in technology, all other expenses were up modestly," Mr. Scharf added.

 

"Following the release of our CCAR results, we are now authorized to repurchase $2.4 billion in common shares by mid-2019, and we increased our common dividend 17 percent starting this quarter.  While we were not surprised by the outcome given the severity of the assumptions in this year's test, our expectations for returning capital to shareholders over time have not changed," Mr. Scharf also noted.

 

"We remain focused on driving organic growth across our businesses.  The opportunities in our new business pipeline are encouraging.  We are confident that we are taking the right actions to realize them and expect the results to build over time," Mr. Scharf concluded.

 

Total noninterest expense of $2.7 billion, increased 3%

  • Weaker U.S. dollar and real estate consolidation increased expenses ~ 2%
  • Investments in technology were partially offset by decreases in other expenses

Investment Services

  • Total revenue increased 8%
  • Income before taxes increased 20%
  • Record AUC/A of $33.6 trillion, up 8%

Investment Management

  • Total revenue increased 3%
  • Income before taxes increased 11%
  • AUM of $1.8 trillion, up 2%

Returned $895 million to common shareholders

  • Repurchased 12 million common shares for $651 million
  • Paid $244 million in dividends to common shareholders
  • Authorized to repurchase $2.4 billion of common shares through 2Q19 and increased quarterly dividend 17% to $0.28 per common share in 3Q18

Investor Relations: Valerie Haertel  (212) 635-8529

Media Relations: Jennifer Hendricks Sullivan  (212) 635-1374

(a)  For information on this Non-GAAP measure, see "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 11.

Note:  Above comparisons are 2Q18 vs. 2Q17.

CONSOLIDATED SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS

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


2Q18 vs.

2Q18

1Q18

2Q17

1Q18

2Q17

Fee revenue

$

3,209

$

3,319

$

3,120

(3)

%

3

%

Net securities gains (losses)

1

(49)

—

N/M

N/M

Fee and other revenue

3,210

3,270

3,120

(2)

3

Income (loss) from consolidated investment management funds

12

(11)

10

N/M

N/M

Net interest revenue

916

919

826

—

11

Total revenue

4,138

4,178

3,956

(1)

5

Provision for credit losses

(3)

(5)

(7)

N/M

N/M

Noninterest expense

2,747

2,739

2,655

—

3

Income before income taxes

1,394

1,444

1,308

(3)

7

Provision for income taxes

286

282

332

1

(14)

Net income

$

1,108

$

1,162

$

976

(5)

%

14

%

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

$

1,055

$

1,135

$

926

(7)

%

14

%

Operating leverage (a)


(125)

bps

113

bps

Diluted earnings per common share

$

1.03

$

1.10

$

0.88

(6)

%

17

%

Average common shares and equivalents outstanding - diluted

1,014,357

1,021,731

1,041,879


Pre-tax operating margin

34

%

35

%

33

%

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

N/M – Not meaningful.

bps – basis points.

KEY DRIVERS (comparisons are 2Q18 vs. 2Q17, unless otherwise stated)

  • Total revenue increased 5% primarily reflecting:
    • Fee revenue increased 3%, primarily reflecting higher equity market values, the favorable impact of a weaker U.S. dollar, higher foreign exchange revenue and growth in collateral management, partially offset by lease-related gains recorded in 2Q17.
    • Net interest revenue increased 11% driven by higher interest rates.
  • Noninterest expense increased 3% primarily reflecting investments in technology, expenses associated with the continued consolidation of our real estate and the unfavorable impact of a weaker U.S. dollar, partially offset by decreases in other expenses.
  • Effective tax rate of 20.5%.

Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")

  • Record assets under custody and/or administration of $33.6 trillion, up 8%, reflecting higher market values and business growth.
  • Assets under management of $1.8 trillion increased 2%, primarily reflecting higher market values and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by the divestiture of CenterSquare Investment Management ("CenterSquare"), net outflows and other changes.

Capital and liquidity

  • Repurchased 12 million common shares for $651 million and paid $244 million in dividends to common shareholders.
  • Return on common equity ("ROE) of 11%; Return on tangible common equity ("ROTCE") of 23% (b).
  • Common Equity Tier 1 ("CET1") ratio – 11.0%.
  • Supplementary leverage ratio ("SLR") – 6.2%.
  • Average liquidity coverage ratio ("LCR") – 118%.

(b)

See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 11 for the reconciliation.

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

INVESTMENT SERVICES BUSINESS HIGHLIGHTS

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


2Q18 vs.

2Q18

1Q18

2Q17

1Q18

2Q17

Total revenue by line of business:




Asset Servicing

$

1,520

$

1,519

$

1,378

—

%

10

%

Pershing

558

581

547

(4)

2

Issuer Services

431

418

398

3

8

Treasury Services

329

321

311

2

6

Clearance and Collateral Management

269

255

242

5

11

Total revenue by line of business

3,107

3,094

2,876

—

8

Provision for credit losses

1

(7)

(3)

N/M

N/M

Noninterest expense

1,967

1,949

1,927

1

2

Income before taxes

$

1,139

$

1,152

$

952

(1)

%

20

%






Pre-tax operating margin

37

%

37

%

33

%







Foreign exchange revenue

$

172

$

169

$

145

2

%

19

%

Securities lending revenue

$

55

$

48

$

42

15

%

31

%






Metrics:




Average loans

$

38,002

$

39,200

$

40,931

(3)

%

(7)

%

Average deposits

$

203,064

$

214,130

$

200,417

(5)

%

1

%






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

$

33.6

$

33.5

$

31.1

—

%

8

%

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

$

432

$

436

$

336

(1)

%

29

%






Pershing




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

6,080

6,075

6,159

—

%

(1)

%

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

$

512,645

$

514,542

$

480,532

—

%

7

%

Average investor margin loans (U.S. platform)

$

10,772

$

10,930

$

9,812

(1)

%

10

%






Clearance and Collateral Management




Average tri-party collateral management balances (in billions)

$

2,801

$

2,698

$

2,498

4

%

12

%

(a) 

Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.4 trillion at June 30, 2018, $1.3 trillion at March 31, 2018 and $1.2 trillion at June 30, 2017.

(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 $70 billion at June 30, 2018, $73 billion at March 31, 2018 and $66 billion at June 30, 2017.

KEY DRIVERS

  • Total revenue increased both year-over-year and sequentially.  Net interest revenue increased in most businesses, primarily driven by higher interest rates.  The drivers of fee revenue by line of business are indicated below.
    • Asset Servicing - The year-over-year increase primarily reflects higher net interest revenue, foreign exchange and securities lending volumes, equity market values and the favorable impact of a weaker U.S. dollar.
    • Pershing - The year-over-year increase primarily reflects higher net interest revenue and higher fees due to growth in long-term mutual fund balances, partially offset by the impact of lost business.  The sequential decrease was primarily driven by lower clearance revenue.
    • Issuer Services - Both increases primarily reflect higher net interest revenue in Corporate Trust and higher Depositary Receipts revenue.
    • Treasury Services - Both increases primarily reflect higher net interest revenue and payment volumes.
    • Clearance and Collateral Management - Both increases primarily reflect growth in collateral management, higher clearance volumes and net interest revenue.
  • Noninterest expense increased year-over-year primarily driven by investments in technology and the unfavorable impact of a weaker U.S. dollar.  The sequential increase primarily reflects investments in technology and business development expenses.

INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS

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



2Q18 vs.

2Q18

1Q18

2Q17

1Q18

2Q17

Total revenue by line of business:





Asset Management

$

702

$

770

$

683

(9)

%

3

%

Wealth Management

316

318

303

(1)

4

Total revenue by line of business

1,018

1,088

986

(6)

3

Provision for credit losses

2

2

—

N/M

N/M

Noninterest expense

697

705

698

(1)

—

Income before taxes

$

319

$

381

$

288

(16)

%

11

%







Pre-tax operating margin

31

%

35

%

29

%

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

35

%

39

%

33

%








Metrics:





Average loans

$

16,974

$

16,876

$

16,560

1

%

3

%

Average deposits

$

14,252

$

13,363

$

14,866

7

%

(4)

%







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

$

254

$

246

$

239

3

%

6

%







Changes in AUM (in billions) (current period is preliminary): (c)





Beginning balance of AUM

$

1,868

$

1,893

$

1,727


Net (outflows) inflows:





Long-term strategies:





  Equity

(3)

—

(2)


  Fixed income

(4)

7

2


  Liability-driven investments, including currency overlay

2

13

15


  Multi-asset and alternative investments

(3)

(3)

1


  Total long-term active strategies (outflows) inflows

(8)

17

16


Index

(7)

(13)

(13)


Total long-term strategies (outflows) inflows

(15)

4

3


Short term strategies:





  Cash

(11)

(14)

11


Total net (outflows) inflows

(26)

(10)

14


Net market impact

17

(14)

1


Net currency impact

(53)

29

29


Divestiture/Other

(1)

(30)

(d)

—


Ending balance of AUM

$

1,805

$

1,868

$

1,771

(3)%

2

%

(a) 

Net of distribution and servicing expense.  See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 11 for the reconciliation of this Non-GAAP measure.  In 1Q18, the adjusted pre-tax margin – Non-GAAP for prior periods was restated to include amortization of intangible assets and the provision for credit losses.

(b) 

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

(c)

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

(d)

Primarily reflects a change in methodology beginning in 1Q18 to exclude AUM related to equity method investments as well as the CenterSquare divestiture.

KEY DRIVERS

  • Total revenue increased year-over-year and decreased sequentially.
    • Asset Management - The year-over-year increase reflects higher equity market values and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by the divestiture of CenterSquare and the impact of net outflows.  The sequential decrease primarily reflects lower performance fees and the gain on the divestiture of CenterSquare recorded in 1Q18.
    • Wealth Management - The year-over-year increase primarily reflects higher equity market values, partially offset by lower net interest revenue.

OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, business exits and other corporate revenue and expense items.


(in millions)

2Q18

1Q18

2Q17

Fee revenue

$

40

$

57

$

113

Net securities gains (losses)

1

(49)

—

Total fee and other revenue

41

8

113

Net interest (expense)

(35)

(1)

(22)

Total revenue

6

7

91

Provision for credit losses

(6)

—

(4)

Noninterest expense

81

87

28

(Loss) income before taxes

$

(69)

$

(80)

$

67

KEY DRIVERS

  • Fee revenue decreased year-over-year primarily reflecting the lease-related gains recorded in 2Q17 and lower income from corporate/bank-owned life insurance.  The sequential decrease primarily reflects lower asset-related gains.
  • Net interest expense increased year-over-year and sequentially primarily resulting from corporate treasury activity.
  • Both comparisons of noninterest expense were impacted by investments in technology and expenses associated with the continued consolidation of our real estate.

CAPITAL AND LIQUIDITY

Our consolidated capital and liquidity ratios are shown in the following table.

Capital and liquidity ratios

June 30,
2018

March 31,
2018

Dec. 31 
2017

Consolidated regulatory capital ratios: (a)(b)


CET1 ratio

11.0

%

10.7

%

10.3

%

Tier 1 capital ratio

13.1

%

12.7

%

12.3

%

Total capital ratio

13.9

%

13.4

%

13.0

%

Tier 1 leverage ratio

6.7

%

6.5

%

6.4

%

SLR

6.2

%

5.9

%

5.9

%

BNY Mellon shareholders' equity to total assets ratio

11.8

%

11.2

%

11.1

%

BNY Mellon common shareholders' equity to total assets ratio

10.8

%

10.2

%

10.1

%




Average LCR

118

%

116

%

118

%




Book value per common share (c)

$

37.97

$

37.78

$

37.21

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

$

19.00

$

18.78

$

18.24

Cash dividends per common share

$

0.24

$

0.24

$

0.24

Common dividend payout ratio

23

%

22

%

22

%

Closing stock price per common share

$

53.93

$

51.53

$

53.86

Market capitalization (in millions)

$

53,927

$

52,080

$

54,584

Common shares outstanding (in thousands)

999,945

1,010,676

1,013,442

(a)

Regulatory capital ratios for June 30, 2018 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)

Regulatory capital ratios for Dec. 31, 2017 are presented on a fully phased-in basis.  On a transitional basis at Dec. 31, 2017, the CET1 ratio was 10.7%, the Tier 1 capital ratio was 12.7%, the Total capital ratio was 13.4%, the Tier 1 leverage ratio was 6.6% and the SLR was 6.1%.

(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" beginning on page 11 for the reconciliation of this Non-GAAP measure.

KEY POINTS

  • CET1 capital totaled $18.4 billion at June 30, 2018, an increase of $52 million compared with March 31, 2018.  The increase primarily reflects capital generated through earnings, partially offset by capital deployed through common stock repurchased and payments of dividends, as well as foreign currency translation adjustments.

NET INTEREST REVENUE

Net interest revenue


2Q18 vs.

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

2Q18

1Q18

2Q17

1Q18

2Q17

Net interest revenue

$

916

$

919

$

826

—

%

11

%

Add: Tax equivalent adjustment

5

6

12

N/M

N/M

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

$

921

$

925

$

838

—

%

10

%






Net interest margin

1.26

%

1.22

%

1.14

%

4

bps

12

bps

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

1.26

%

1.23

%

1.16

%

3

bps

10

bps






Selected average balances:




Cash/interbank investments

$

113,475

$

120,821

$

111,021

(6)%

2

%

Trading account securities

3,784

4,183

2,455

(10)

54

Securities

117,761

118,459

117,227

(1)

—

Loans

57,066

58,606

58,793

(3)

(3)

Interest-earning assets

292,086

302,069

289,496

(3)

1

Interest-bearing deposits

152,799

155,704

142,336

(2)

7

Federal funds purchased and securities sold under repurchase agreements

18,146

18,963

17,970

(4)

1

Long-term debt

28,349

28,407

27,398

—

3

Other interest-bearing liabilities

23,815

23,920

25,233

—

(6)

Interest-bearing liabilities

223,109

226,994

212,937

(2)

5

Noninterest-bearing deposits

64,768

71,005

73,886

(9)

(12)






Selected average yields/rates: (b)




Cash/interbank investments

1.48

%

1.13

%

0.67

%

Trading account securities

3.10

2.62

2.85


Securities

2.16

2.03

1.72


Loans

3.32

2.90

2.44


Interest-earning assets

2.14

1.85

1.47








Interest-bearing deposits

0.45

0.30

0.09


Federal funds purchased and securities sold under repurchase agreements

3.48

2.29

0.84


Long-term debt

3.06

2.49

1.87


Other interest-bearing liabilities

1.47

1.04

0.41


Interest-bearing liabilities

1.14

0.82

0.42








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

39

%

40

%

38

%

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

22

%

24

%

26

%

(a)

Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income which allows for comparisons 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.

(b)

Yields/rates include the impact of interest rate hedging activities.

bps – basis points.

KEY DRIVERS

  • Net interest revenue increased year-over-year, primarily reflecting higher interest rates.  The sequential decrease was primarily driven by lower deposits, partially offset by higher interest rates.

NONINTEREST EXPENSE

Noninterest expense


2Q18 vs.

(dollars in millions)

2Q18

1Q18

2Q17

1Q18

2Q17

Staff

$

1,489

$

1,576

$

1,432

(6)%

4

%

Professional, legal and other purchased services

328

291

319

13

3

Software and equipment

266

234

232

14

15

Net occupancy

156

139

140

12

11

Sub-custodian and clearing

110

119

108

(8)

2

Distribution and servicing

106

106

104

—

2

Business development

62

51

63

22

(2)

Bank assessment charges

47

52

59

(10)

(20)

Amortization of intangible assets

48

49

53

(2)

(9)

Other

135

122

145

11

(7)

Total noninterest expense

$

2,747

$

2,739

$

2,655

—

%

3

%

KEY DRIVERS

  • The year-over-year increase in total noninterest expense primarily reflects investments in technology, which impacted staff, professional, legal and other purchased services and software and equipment expenses.  The-year-over-year increase also reflects the unfavorable impact of a weaker U.S. dollar and expenses associated with the continued consolidation of our real estate. 
  • The sequential increase in total noninterest expense primarily reflects investments in technology and expenses associated with the continued consolidation of our real estate.  These expenses were partially offset by lower staff expense, primarily driven by the impact of vesting of long-term stock awards for retirement eligible employees recorded in 1Q18, and the favorable impact of a stronger U.S. dollar.
  • The total cost of relocating our corporate headquarters is estimated to be $75 million, of which $12 million was recorded in 2Q18.  We expect to record the remaining expense in 4Q18.

THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement


(in millions)

Quarter ended

Year-to-date

June 30,
2018

March 31,
2018

June 30,
2017

June 30,
2018

June 30,
2017


Fee and other revenue






Investment services fees:






Asset servicing

$

1,157

$

1,168

$

1,085

$

2,325

$

2,148

Clearing services

392

414

394

806

770

Issuer services

266

260

241

526

492

Treasury services

140

138

140

278

279

Total investment services fees

1,955

1,980

1,860

3,935

3,689

Investment management and performance fees

910

960

879

1,870

1,721

Foreign exchange and other trading revenue

187

209

165

396

329

Financing-related fees

53

52

53

105

108

Distribution and servicing

34

36

41

70

82

Investment and other income

70

82

122

152

199

Total fee revenue

3,209

3,319

3,120

6,528

6,128

Net securities gains (losses)

1

(49)

—

(48)

10

Total fee and other revenue

3,210

3,270

3,120

6,480

6,138

Operations of consolidated investment management funds






Investment income (loss)

13

(11)

10

2

47

Interest of investment management fund note holders

1

—

—

1

4

Income (loss) from consolidated investment management funds

12

(11)

10

1

43

Net interest revenue






Interest revenue

1,553

1,381

1,052

2,934

2,012

Interest expense

637

462

226

1,099

394

Net interest revenue

916

919

826

1,835

1,618

Total revenue

4,138

4,178

3,956

8,316

7,799

Provision for credit losses

(3)

(5)

(7)

(8)

(12)

Noninterest expense






Staff (a)

1,489

1,576

1,432

3,065

2,920

Professional, legal and other purchased services

328

291

319

619

632

Software and equipment

266

234

232

500

455

Net occupancy

156

139

140

295

276

Sub-custodian and clearing (b)

110

119

108

229

211

Distribution and servicing

106

106

104

212

204

Business development

62

51

63

113

114

Bank assessment charges

47

52

59

99

116

Amortization of intangible assets

48

49

53

97

105

Other (a)(b)(c)

135

122

145

257

264

Total noninterest expense

2,747

2,739

2,655

5,486

5,297

Income






Income before income taxes

1,394

1,444

1,308

2,838

2,514

Provision for income taxes

286

282

332

568

601

Net income

1,108

1,162

976

2,270

1,913

Net (income) loss attributable to noncontrolling interests (includes $(7), $11, $(3),
  $4 and $(21) related to consolidated investment management funds, respectively)

(5)

9

(1)

4

(16)

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

1,103

1,171

975

2,274

1,897

Preferred stock dividends

(48)

(36)

(49)

(84)

(91)

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

$

1,055

$

1,135

$

926

$

2,190

$

1,806

(a) 

In 1Q18, we adopted new accounting guidance included in ASU 2017-07, Compensation-Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which required the reclassification of the components of pension and other post-retirement costs, other than the service cost component.  As a result, staff expense increased and other expense decreased.  Prior periods have been reclassified.

(b)

Beginning in 1Q18, clearing expense, which was previously included in other expense, was included with sub-custodian expense.  Prior periods have been reclassified.

(c)

Beginning in 1Q18, M&I, litigation and restructuring charges are no longer separately disclosed.  Expenses previously reported in this line have been reclassified to existing expense categories, primarily other expense.

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

Year-to-date

June 30,
2018

March 31,
2018

June 30,
2017

June 30,
2018

June 30,
2017

(in millions)

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

$

1,055

$

1,135

$

926

$

2,190

$

1,806

Less:  Earnings allocated to participating securities

7

8

13

15

27

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

$

1,048

$

1,127

$

913

$

2,175

$

1,779

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

Quarter ended

Year-to-date

June 30,
2018

March 31,
2018

June 30,
2017

June 30,
2018

June 30,
2017

(in thousands)

Basic

1,010,179

1,016,797

1,035,829

1,013,507

1,038,479

Diluted

1,014,357

1,021,731

1,041,879

1,018,020

1,044,809

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

Quarter ended

Year-to-date

June 30,
2018

March 31,
2018

June 30,
2017

June 30,
2018

June 30,
2017

(in dollars)

Basic

$

1.04

$

1.11

$

0.88

$

2.15

$

1.71

Diluted

$

1.03

$

1.10

$

0.88

$

2.14

$

1.70

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

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures on a tangible basis, as a supplement to GAAP information.  Tangible common shareholders' equity excludes goodwill and intangible assets, net of deferred tax liabilities.  BNY Mellon believes that the return on tangible common equity measure is an additional useful 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 the operating margin for the Investment Management business net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds.  BNY Mellon believes that this measure is useful when evaluating the performance of the Investment Management business relative to industry competitors.

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

Return on common equity and tangible common equity reconciliation


(dollars in millions)

2Q18

1Q18

2Q17

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

$

1,055

$

1,135

$

926

Add:   Amortization of intangible assets

48

49

53

Less:  Tax impact of amortization of intangible assets

11

12

19

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

$

1,092

$

1,172

$

960




Average common shareholders' equity

$

37,750

$

37,593

$

35,862

Less:    Average goodwill

17,505

17,581

17,408

 Average intangible assets

3,341

3,397

3,532

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

1,054

1,042

1,542

 Deferred tax liability – intangible assets (a)

709

716

1,095

Average tangible common shareholders' equity – Non-GAAP

$

18,667

$

18,373

$

17,559




Return on common equity (annualized) – GAAP

11.2

%

12.2

%

10.4

%

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

23.5

%

25.9

%

21.9

%

(a)

Deferred tax liabilities for 2Q17 are based on fully phased-in U.S. capital rules.

The following table presents the reconciliation of the book value and tangible book value per common share.

Book value and tangible book value per common share reconciliation

June 30,
2018

March 31,
2018

Dec. 31,
2017

(dollars in millions except common shares)

BNY Mellon shareholders' equity at period end – GAAP

$

41,505

$

41,728

$

41,251

Less:  Preferred stock

3,542

3,542

3,542

BNY Mellon common shareholders' equity at period end – GAAP

37,963

38,186

37,709

Less:  Goodwill

17,418

17,596

17,564

       Intangible assets

3,308

3,370

3,411

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

1,054

1,042

1,034

  Deferred tax liability – intangible assets (a)

709

716

718

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

$

19,000

$

18,978

$

18,486




Period-end common shares outstanding (in thousands)

999,945

1,010,676

1,013,442




Book value per common share – GAAP

$

37.97

$

37.78

$

37.21

Tangible book value per common share – Non-GAAP

$

19.00

$

18.78

$

18.24

(a)

Deferred tax liabilities for 2Q17 are based on fully phased-in U.S. capital rules.

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

Pre-tax operating margin reconciliation - Investment Management business


(dollars in millions)

2Q18

1Q18

2Q17

Income before income taxes – GAAP

$

319

$

381

$

288




Total revenue – GAAP

$

1,018

$

1,088

$

986

Less:  Distribution and servicing expense

103

110

104

Adjusted total revenue, net of distribution and servicing expense – Non-GAAP

$

915

$

978

$

882




Pre-tax operating margin – GAAP (a)

31

%

35

%

29

%

Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)

35

%

39

%

33

%

(a)

Income before taxes divided by total revenue.

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 capital plans, strategic priorities, financial goals, driving organic growth, expenses associated with the consolidation of our real estate and the timing of such expenses, business opportunities, preliminary business metrics and regulatory capital ratios and statements regarding our aspirations, as well as our overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities, focus and initiatives.  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," "likely," "target," "expect," "intend," "continue," "seek," "believe," "plan," "goal," "could," "should," "would," "may," "might," "will," "strategy," "synergies," "opportunities," "trends," "future" 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, 2017 and BNY Mellon's other filings with the Securities and Exchange Commission.  All forward-looking statements in this Earnings Release speak only as of July 19, 2018, 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.

ABOUT BNY MELLON

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.  As of June 30, 2018, BNY Mellon had $33.6 trillion in assets under custody and/or administration, and $1.8 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.

CONFERENCE CALL INFORMATION

Charles W. Scharf, Chairman and Chief Executive Officer, and Michael P. Santomassimo, Chief Financial Officer, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on July 19, 2018.  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 (800) 390-5696 (U.S.) or (720) 452-9082 (International), and using the passcode: 678511, or by logging onto www.bnymellon.com/investorrelations.  Earnings materials will be available at www.bnymellon.com/investorrelations beginning at approximately 6:30 a.m. EDT on July 19, 2018.  Replays of the conference call and audio webcast will be available beginning July 19, 2018 at approximately 2 p.m. EDT through Aug. 19, 2018 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 4968536.  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com/investorrelations for the same time period.

SOURCE The Bank of New York Mellon Corporation

Related Links

http://www.bnymellon.com

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

icon3
440k+
Newsrooms &
Influencers
icon1
9k+
Digital Media
Outlets
icon2
270k+
Journalists
Opted In
GET STARTED