BNY Mellon Reports Second Quarter Earnings of $466 Million or $0.39 Per Common Share
NEW YORK, July 18, 2012 /PRNewswire/ --
- INCLUDING THE PREVIOUSLY ANNOUNCED LITIGATION CHARGE OF $0.18
- INVESTMENT MANAGEMENT AND PERFORMANCE FEES +7% AND INVESTMENT SERVICES FEES +2%, SEQUENTIALLY
- NET LONG-TERM INFLOWS IN ASSETS UNDER MANAGEMENT OF $26 BILLION IN 2Q12
- RECORD LEVEL OF ASSETS UNDER CUSTODY/ADMINISTRATION OF $27.1 TRILLION, +2% SEQUENTIALLY
- RETURN ON TANGIBLE COMMON EQUITY 15.7%
- REPURCHASED 12.2 MILLION COMMON SHARES FOR $286 MILLION IN 2Q12
- ESTIMATED BASEL III TIER 1 COMMON EQUITY RATIO 8.7%
The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE:BK) today reported second quarter net income applicable to common shareholders of $466 million, or $0.39 per common share including the previously announced litigation charge of $212 million (after-tax) or $0.18 per common share, compared with $735 million, or $0.59 per common share, in the second quarter of 2011 and $619 million, or $0.52 per common share, in the first quarter of 2012.
"We continue to grow investment management and investment services fees reflecting the strength of our business model. We are delivering on our operational excellence initiatives, investing for future growth and positioning our businesses to deliver the full breadth of our global capabilities. Our strengthened capital positions us as a preferred counterparty, and provides us greater flexibility for ongoing investment while continuing to return capital to shareholders," said Gerald L. Hassell, chairman, president and chief executive officer of BNY Mellon.
"Also in the second quarter, we were able to put significant litigation behind us with no material impact on our capital," added Mr. Hassell.
Note: See "Supplemental information – Explanation of Non-GAAP financial measures" on pages 11 through 13 for the calculation of the Non-GAAP measure of the return on tangible common equity. The estimated Basel III Tier 1 common equity ratio at June 30, 2012 is based on the Notices of Proposed Rulemaking and final market risk rule released on June 7, 2012.
Second Quarter Results - Unless otherwise noted, all comments begin with the results of the second quarter of 2012 and are compared to the second quarter of 2011. Sequential growth rates are unannualized. Please refer to the Quarterly Earnings Review for a detailed review of our businesses. Unless otherwise noted, the results for all periods in 2011 include the impact of Shareowner Services.
| Total revenue |
||||||||||
| Reconciliation of total revenue |
2Q12 vs. |
|||||||||
| (dollars in millions) |
2Q12 |
1Q12 |
2Q11 |
2Q11 |
1Q12 |
|||||
| Fee and other revenue |
$ 2,826 |
$ 2,838 |
$3,056 |
(8) % |
- % |
|||||
| Income (loss) from consolidated investment management funds |
57 |
43 |
63 |
|||||||
| Net interest revenue |
734 |
765 |
731 |
|||||||
| Total revenue – GAAP |
$ 3,617 |
$ 3,646 |
3,850 |
(6) % |
(1) % |
|||||
| Less: Net income (loss) attributable to noncontrolling interests |
||||||||||
| related to consolidated investment management funds |
29 |
11 |
21 |
|||||||
| Fee and other revenue related to Shareowner Services (a) |
(3) |
- |
54 |
|||||||
| Total revenue excluding fee and other revenue related |
||||||||||
| to Shareowner Services – Non-GAAP |
$ 3,591 |
$ 3,635 |
$3,775 |
(5) % |
(1) % |
|||||
| (a) The Shareowner Services business was sold on Dec. 31, 2011. |
||||||||||
- Assets under custody and administration amounted to a record $27.1 trillion at June 30, 2012, an increase of 3% compared with the prior year and 2% sequentially. The increases were driven by net new business, partially offset by lower equity market values. Assets under management amounted to $1.3 trillion at June 30, 2012, an increase of 2% compared with the prior year and a decrease of 1% sequentially. Year-over-year, net inflows were partially offset by lower equity market values. On a sequential basis, the decrease resulted from lower equity market values, partially offset by net inflows. Long-term inflows totaled $26 billion and short-term outflows totaled $14 billion. Long-term inflows benefited from fixed income and equity indexed products.
- Investment services fees totaled $1.7 billion, a decrease of 5% year-over-year and an increase of 2% sequentially. The year-over-year decrease was primarily driven by the impact of the sale of the Shareowner Services business in the fourth quarter of 2011, lower Depositary Receipts revenue and higher money market fee waivers, partially offset by higher Clearing Services fees and net new business. Sequentially, the increase resulted from higher Depositary Receipts revenue, net new business, seasonally higher securities lending revenue and higher Clearing Services fees, partially offset by lower equity market values and transaction volumes.
- Investment management and performance fees were $797 million, an increase of 2% year-over-year and 7% sequentially. Both increases were driven by higher performance fees. Excluding performance fees, investment management fees decreased 2% year-over-year and increased 2% sequentially. The decrease year-over-year was primarily due to lower equity market values, partially offset by net new business. Sequentially, the increase was primarily due to net new business and higher money market fees, partially offset by lower equity market values.
- Foreign exchange and other trading revenue totaled $180 million compared with $222 million in the second quarter of 2011 and $191 million in the first quarter of 2012. In the second quarter of 2012, foreign exchange revenue totaled $157 million, a decrease of 15% year-over-year and an increase of 15% sequentially. The year-over-year decrease reflects lower volatility and volumes, while the sequential increase primarily resulted from higher volumes. Other trading revenue was $23 million in the second quarter of 2012 compared with $38 million in the second quarter of 2011 and $55 million in the first quarter of 2012. Both decreases were primarily driven by lower fixed income trading.
- Investment and other income totaled $48 million compared with $145 million in the second quarter of 2011 and $139 million in the first quarter of 2012. The year-over-year decrease primarily resulted from lower asset-related gains and equity investment revenue. Sequentially, the decline primarily resulted from lower leasing gains, seed capital gains and equity investment revenue.
- Net interest revenue and thenet interest margin (FTE) were$734 million and 1.25% compared with $731 million and 1.41% in the second quarter of 2011 and $765 million and 1.32% in the first quarter of 2012. The year-over-year increase in net interest revenue was primarily driven by higher average client deposits, increased investment in high quality investment securities and higher loan levels, partially offset by narrower spreads and lower accretion. Compared with the first quarter of 2012, net interest revenue was adversely impacted by narrower spreads and lower accretion. Average noninterest-bearing client deposits increased $20 billion, or 46%, compared with 2Q11 and decreased $4 billion, or 6%, compared with 1Q12.
The year-over-year decrease in the net interest margin (FTE) was primarily driven by increased client deposits which were invested in lower-yielding assets reflecting the current market environment. The sequential decrease in the net interest margin (FTE) reflects the impact of narrower spreads and lower accretion.
The provision for credit losses was a credit of $19 million in the second quarter of 2012 primarily resulting from a decline in the expected loss related to a broker-dealer customer that previously filed for bankruptcy, as well as improvements in the mortgage portfolio. There was no provision in the second quarter of 2011 and a provision of $5 million in the first quarter of 2012.
| Total noninterest expense |
||||||
| Reconciliation of noninterest expense |
2Q12 vs. |
|||||
| (dollars in millions) |
2Q12 |
1Q12 |
2Q11 |
2Q11 |
1Q12 |
|
| Noninterest expense – GAAP |
$ 3,047 |
$ 2,756 |
$ 2,816 |
8 % |
11 % |
|
| Less: Amortization of intangible assets |
97 |
96 |
108 |
|||
| M&I, litigation and restructuring charges |
378 |
109 |
63 |
|||
| Noninterest expense related to Shareowner Services (a) |
- |
- |
47 |
|||
| Total noninterest expense excluding amortization of intangible |
||||||
| assets, M&I, litigation and restructuring charges and direct |
||||||
| expense related to Shareowner Services – Non-GAAP |
$ 2,572 |
$ 2,551 |
$ 2,598 |
(1)% |
1 % |
|
| (a) Reflects direct expenses related to the Shareowner Services business sold on Dec. 31, 2011. |
||||||
- Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and direct expenses related to Shareowner Services – Non-GAAP decreased 1% compared with the prior year period, reflecting the impact of our operational excellence initiatives, and increased 1% sequentially. Sequentially, noninterest expenses increased slightly primarily due to the costs of certain tax credits, higher business development expenses and a deposit levy imposed on Belgium banks, including our Belgium bank subsidiary, largely offset by lower staff expense.
The effective tax rate was 15.8% in the second quarter of 2012 and includes a reduction in the tax rate of approximately 9% related to the litigation charge. The operating tax rate – Non-GAAP in the second quarter of 2012 was 26.1% and includes an increased benefit of certain tax credits. The effective tax rate was 26.9% in the second quarter of 2011 and 28.7% in the first quarter of 2012. See "Supplemental information – Explanation of Non-GAAP financial measures" beginning on page 11 for additional information.
The unrealized pre-tax gain on our total investment securities portfolio was $1.4 billion at June 30, 2012 compared with $1.2 billion at March 31, 2012. The increase in the valuation of the investment securities portfolio primarily reflects a decline in market interest rates.
| Capital ratios |
June 30, |
March 31, |
June 30, |
| 2012 (a) |
2012 |
2011 |
|
| Estimated Basel III Tier 1 common equity ratio (b) (c) |
8.7 % |
N/A |
N/A |
| Basel I Tier 1 common equity to risk-weighted assets ratio – Non-GAAP (c) |
13.2 |
13.9 % |
12.6 % |
| Basel I Tier 1 capital ratio |
14.7 |
15.6 |
14.1 |
| Basel I Total (Tier 1 plus Tier 2) capital ratio |
16.4 |
17.5 |
16.7 |
| Basel I leverage capital ratio |
5.5 |
5.6 |
5.8 |
| BNY Mellon shareholders' equity to total assets ratio (d) |
10.5 |
11.3 |
11.1 |
| BNY Mellon common shareholders' equity to total assets ratio (d) |
10.3 |
11.3 |
11.1 |
| Tangible common shareholders' equity to tangible assets of operations ratio – Non-GAAP (d) |
6.1 |
6.5 |
6.0 |
| (a) Preliminary. |
|||
| (b) The estimated Basel III Tier 1 common equity ratio at June 30, 2012 is based on the Notices of Proposed Rulemaking ("NPRs") and final market risk rule released on June 7, 2012. The estimated Basel III Tier 1 common equity ratios of 7.6% at March 31, 2012 and 6.5% at June 30, 2011 were based on prior Basel III guidance and the proposed market risk rule. |
|||
| (c) See "Capital" on page 10 for a calculation of these ratios. |
|||
| (d) See "Supplemental information – Explanation of Non-GAAP financial measures" beginning on page 11 for a calculation of these ratios. |
|||
We generated $527 million of gross Basel I Tier 1 common equity in the second quarter of 2012.
Our estimated Basel III Tier 1 common equity ratio was 8.7% at June 30, 2012 based on the NPRs and final market risk rule. The increase in the ratio from 7.6% at March 31, 2012, which was calculated under prior Basel III guidance and the proposed market risk rule, was primarily due to the reduction in risk-weighted assets related to the treatment of sub-investment grade securities. This benefit was partially offset by the treatment of investment grade securitizations and financial institution exposure, as well as balance sheet growth in the second quarter.
Dividends – On July 18, 2012, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.13 per common share. This cash dividend is payable on Aug. 7, 2012 to shareholders of record as of the close of business on July 30, 2012. On July 18, 2012, The Bank of New York Mellon Corporation also declared a dividend for the period from June 20, 2012 through Sept. 19, 2012 of $1,000 per share on the Series A Noncumulative Perpetual Preferred Stock (liquidation preference of $100,000 per share) ("the Series A Preferred Stock"), payable on Sept. 20, 2012. All of the outstanding shares of the Series A Preferred Stock are owned by Mellon Capital IV, which will pass through the Sept. 20, 2012 dividend on the Series A Preferred Stock to the holders of record as of the close of business on Sept. 5, 2012 of its Normal Preferred Capital Securities.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $27.1 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.5 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available on www.bnymellon.com or follow us on Twitter@BNYMellon.
Supplemental Financial Information
The Quarterly Earnings Review and Supplemental Financial Trends for The Bank of New York Mellon Corporation have been updated through June 30, 2012 and are available at www.bnymellon.com (Investor Relations - Financial Reports).
Conference Call Data
Gerald L. Hassell, chairman, president 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 July 18, 2012. This conference call and audio webcast will include forward-looking statements and may include other material information.
Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (International), and using the passcode: Earnings, or by logging on to www.bnymellon.com. The Earnings Release, together with the Quarterly Earnings Review and Supplemental Financial Trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on July 18, 2012. Replays of the conference call and audio webcast will be available beginning July 18, 2012 at approximately 2 p.m. EDT through Wednesday, Aug. 1, 2012 by dialing (866) 376-2451 (U.S.) or (203) 369- 0301 (International). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.
| THE BANK OF NEW YORK MELLON CORPORATION |
|||||
| Financial Highlights |
|||||
| Quarter ended |
Year-to-date |
||||
| (dollar amounts in millions, except per common |
June 30, |
March 31, |
June 30, |
June 30, |
June 30, |
| share amounts and unless otherwise noted) |
2012 |
2012 |
2011 |
2012 |
2011 |
| Return on common equity (annualized) (a) |
5.5 % |
7.4 % |
8.8 % |
6.4 % |
8.3 % |
| Non-GAAP adjusted (a) |
8.9 % |
8.9 % |
10.1 % |
8.9 % |
9.6 % |
| Return on tangible common equity (annualized) |
|||||
| Non-GAAP (a) |
15.7 % |
21.0 % |
26.3 % |
18.3 % |
25.3 % |
| Non-GAAP adjusted(a) |
22.4 % |
23.0 % |
27.6 % |
22.7 % |
26.6 % |
| Fee revenue as a percentage of total revenue |
|||||
| excluding net securities gains (losses) |
78 % |
78 % |
79 % |
78 % |
78 % |
| Annualized fee revenue per employee |
|||||
| (based on average headcount) (in thousands) |
$ 233 |
$ 233 |
$ 248 |
$ 233 |
$ 243 |
| Percentage of non-U.S. revenue (b) |
37 % |
37 % |
37 % |
37 % |
37 % |
| Pre-tax operating margin (a) |
16 % |
24 % |
27 % |
20 % |
26 % |
| Non-GAAP adjusted (a) |
29 % |
30 % |
31 % |
29 % |
30 % |
| Net interest margin (FTE) |
1.25 % |
1.32 % |
1.41 % |
1.28 % |
1.43 % |
| Selected average balances |
|||||
| Interest-earning assets |
$239,755 |
$236,331 |
$209,923 |
$238,042 |
$200,105 |
| Assets of operations |
$293,718 |
$289,900 |
$264,254 |
$291,808 |
$253,863 |
| Total assets |
$305,002 |
$301,344 |
$278,480 |
$303,172 |
$268,147 |
| Interest-bearing deposits |
$130,482 |
$125,438 |
$125,958 |
$127,959 |
$121,263 |
| Noninterest-bearing deposits |
$ 62,860 |
$ 66,613 |
$ 43,038 |
$ 64,737 |
$ 40,839 |
| Preferred stock |
$ 60 |
$ - |
$ - |
$ 30 |
$ - |
| Total The Bank of New York Mellon |
|||||
| Corporation common shareholders' equity |
$ 34,123 |
$ 33,718 |
$ 33,464 |
$ 33,920 |
$ 33,147 |
| Average common shares and equivalents |
|||||
| outstanding (in thousands): |
|||||
| Basic |
1,181,350 |
1,193,931 |
1,230,406 |
1,187,649 |
1,232,232 |
| Diluted |
1,182,985 |
1,195,558 |
1,233,710 |
1,189,264 |
1,236,016 |
| Period-end data |
|||||
| Market value of assets under management (in billions) |
$ 1,299 |
$ 1,308 |
$ 1,274 |
$ 1,299 |
$ 1,274 |
| Market value of assets under custody and administration (in trillions) |
$ 27.1 |
$ 26.6 |
$ 26.3 |
$ 27.1 |
$ 26.3 |
| Market value of cross-border assets (in trillions) |
$ 9.9 |
$ 10.4 |
$ 10.1 |
$ 9.9 |
$ 10.1 |
| Market value of securities on loan (in billions) (c) |
$ 275 |
$ 265 |
$ 273 |
$ 275 |
$ 273 |
| Full-time employees |
48,200 |
47,800 |
48,900 |
48,200 |
48,900 |
| Book value per common share – GAAP (a) |
$ 28.81 |
$ 28.51 |
$ 27.46 |
$ 28.81 |
$ 27.46 |
| Tangible book value per common share – Non-GAAP (a) |
$ 11.47 |
$ 11.17 |
$ 10.28 |
$ 11.47 |
$ 10.28 |
| Cash dividends per common share |
$ 0.13 |
$ 0.13 |
$ 0.13 |
$ 0.26 |
$ 0.22 |
| Common dividend payout ratio |
33 % |
25 % |
22 % |
29 % |
20 % |
| Closing common stock price per common share |
$ 21.95 |
$ 24.13 |
$ 25.62 |
$ 21.95 |
$ 25.62 |
| Market capitalization |
$ 25,929 |
$ 28,780 |
$ 31,582 |
$ 25,929 |
$ 31,582 |
| (a) See "Supplemental information – Explanation of Non-GAAP financial measures" beginning on page 11 for a calculation of these ratios. |
|||||
| (b) Includes fee revenue, net interest revenue and income (loss) from consolidated investment management funds, net of net income (loss) attributable to noncontrolling interests. |
|||||
| (c) Represents the securities on loan managed by the Investment Services business. |
|||||
| THE BANK OF NEW YORK MELLON CORPORATION |
||||||
| Condensed Consolidated Income Statement |
||||||
| Quarter ended |
Year-to-date |
|||||
| June 30, |
March 31, |
June 30, |
June 30, |
June 30, |
||
| (dollars in millions) |
2012 |
2012 |
2011 |
2012 |
2011 |
|
| Fee and other revenue |
||||||
| Investment services fees |
||||||
| Asset servicing |
$ 950 |
$ 943 |
$ 973 |
$ 1,893 |
$ 1,890 |
|
| Issuer services |
275 |
251 |
365 |
526 |
716 |
|
| Clearing services |
309 |
303 |
292 |
612 |
584 |
|
| Treasury services |
134 |
136 |
134 |
270 |
268 |
|
| Total investment services fees |
1,668 |
1,633 |
1,764 |
3,301 |
3,458 |
|
| Investment management and performance fees |
797 |
745 |
779 |
1,542 |
1,543 |
|
| Foreign exchange and other trading revenue |
180 |
191 |
222 |
371 |
420 |
|
| Distribution and servicing |
46 |
46 |
49 |
92 |
102 |
|
| Financing-related fees |
37 |
44 |
49 |
81 |
92 |
|
| Investment and other income |
48 |
139 |
145 |
187 |
226 |
|
| Total fee revenue |
2,776 |
2,798 |
3,008 |
5,574 |
5,841 |
|
| Net securities gains (losses) |
50 |
40 |
48 |
90 |
53 |
|
| Total fee and other revenue |
2,826 |
2,838 |
3,056 |
5,664 |
5,894 |
|
| Operations of consolidated investment management funds |
||||||
| Investment income |
152 |
153 |
171 |
305 |
393 |
|
| Interest of investment management fund note holders |
95 |
110 |
108 |
205 |
220 |
|
| Income (loss) from consolidated investment management funds |
57 |
43 |
63 |
100 |
173 |
|
| Net interest revenue |
||||||
| Interest revenue |
875 |
912 |
887 |
1,787 |
1,735 |
|
| Interest expense |
141 |
147 |
156 |
288 |
306 |
|
| Net interest revenue |
734 |
765 |
731 |
1,499 |
1,429 |
|
| Provision for credit losses |
(19) |
5 |
- |
(14) |
- |
|
| Net interest revenue after provision for credit losses |
753 |
760 |
731 |
1,513 |
1,429 |
|
| Noninterest expense |
||||||
| Staff |
1,415 |
1,453 |
1,463 |
2,868 |
2,887 |
|
| Professional, legal and other purchased services |
309 |
299 |
301 |
608 |
584 |
|
| Software and equipment |
209 |
205 |
203 |
414 |
409 |
|
| Net occupancy |
141 |
147 |
161 |
288 |
314 |
|
| Distribution and servicing |
103 |
101 |
109 |
204 |
220 |
|
| Sub-custodian |
70 |
70 |
88 |
140 |
156 |
|
| Business development |
71 |
56 |
73 |
127 |
129 |
|
| Other |
254 |
220 |
247 |
474 |
476 |
|
| Amortization of intangible assets |
97 |
96 |
108 |
193 |
216 |
|
| Merger and integration, litigation and restructuring charges |
378 |
109 |
63 |
487 |
122 |
|
| Total noninterest expense |
3,047 |
2,756 |
2,816 |
5,803 |
5,513 |
|
| Income |
||||||
| Income before income taxes |
589 |
885 |
1,034 |
1,474 |
1,983 |
|
| Provision for income taxes |
93 |
254 |
277 |
347 |
556 |
|
| Net income |
496 |
631 |
757 |
1,127 |
1,427 |
|
| Net (income) loss attributable to noncontrolling interests (includes $(29), $(11), $(21), $(40) and $(65) related to consolidated investment management funds, respectively) |
(30) |
(12) |
(22) |
(42) |
(67) |
|
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
$ 466 |
$ 619 |
$ 735 |
$ 1,085 |
$ 1,360 |
|
| THE BANK OF NEW YORK MELLON CORPORATION |
|||||||
| Condensed Consolidated Income Statement - continued |
|||||||
| Reconciliation of net income to the net income applicable to the common shareholders of The Bank of New York Mellon Corporation |
Quarter ended |
Year-to-date |
|||||
| June 30, |
March 31, |
June 30, |
June 30, |
June 30, |
|||
| (dollars in millions) |
2012 |
2012 |
2011 |
2012 |
2011 |
||
| Net income |
$ 496 |
$ 631 |
$ 757 |
$ 1,127 |
$ 1,427 |
||
| Net (income) loss attributable to noncontrolling interests |
(30) |
(12) |
(22) |
(42) |
(67) |
||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
466 |
619 |
735 |
1,085 |
1,360 |
||
| Less: Earnings allocated to participating securities |
7 |
8 |
8 |
15 |
14 |
||
| Change in the excess of redeemable value over the fair value of noncontrolling interests |
1 |
(6) |
- |
(5) |
6 |
||
| 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 |
$ 458 |
$ 617 |
$ 727 |
$ 1,075 |
$ 1,340 |
||
| Earnings per common share applicable to the common shareholders of The Bank of New York Mellon Corporation |
Quarter ended |
Year-to-date |
||||
| June 30, |
March 31, |
June 30, |
June 30, |
June 30, |
||
| (dollars in millions) |
2012 |
2012 |
2011 |
2012 |
2011 |
|
| Basic |
$0.39 |
$ 0.52 |
$ 0.59 |
$0.91 |
$ 1.09 |
|
| Diluted |
$0.39 |
$ 0.52 |
$ 0.59 |
$0.90 |
$ 1.08 |
|
Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.
| THE BANK OF NEW YORK MELLON CORPORATION |
|||
| Consolidated Balance Sheet |
|||
| June 30, |
March 31, |
Dec. 31, |
|
| (dollars in millions, except per share amounts) |
2012 |
2012 |
2011 |
| Assets |
|||
| Cash and due from: |
|||
| Banks |
$ 4,522 |
$ 4,333 |
$ 4,175 |
| Interest-bearing deposits with the Federal Reserve and other central banks |
76,243 |
62,030 |
90,243 |
| Interest-bearing deposits with banks |
39,743 |
34,854 |
36,321 |
| Federal funds sold and securities purchased under resale agreements |
8,543 |
5,437 |
4,510 |
| Securities: |
|||
| Held-to-maturity (fair value of $8,869, $4,849, and $3,540) |
8,794 |
4,819 |
3,521 |
| Available-for-sale |
84,540 |
83,374 |
78,467 |
| Total securities |
93,334 |
88,193 |
81,988 |
| Trading assets |
6,909 |
6,250 |
7,861 |
| Loans |
45,431 |
43,028 |
43,979 |
| Allowance for loan losses |
(362) |
(386) |
(394) |
| Net loans |
45,069 |
42,642 |
43,585 |
| Premises and equipment |
1,711 |
1,715 |
1,681 |
| Accrued interest receivable |
628 |
599 |
660 |
| Goodwill |
17,909 |
18,002 |
17,904 |
| Intangible assets |
4,962 |
5,072 |
5,152 |
| Other assets |
19,755 |
19,433 |
19,839 |
| Subtotal assets of operations |
319,328 |
288,560 |
313,919 |
| Assets of consolidated investment management funds, at fair value: |
|||
| Trading assets |
10,399 |
11,079 |
10,751 |
| Other assets |
556 |
530 |
596 |
| Subtotal assets of consolidated investment management funds, at fair value |
10,955 |
11,609 |
11,347 |
| Total assets |
$ 330,283 |
$ 300,169 |
$ 325,266 |
| Liabilities |
|||
| Deposits: |
|||
| Noninterest-bearing (principally U.S. offices) |
$ 76,933 |
$ 65,027 |
$ 95,335 |
| Interest-bearing deposits in U.S. offices |
49,956 |
38,608 |
41,231 |
| Interest-bearing deposits in Non-U.S. offices |
94,255 |
88,827 |
82,528 |
| Total deposits |
221,144 |
192,462 |
219,094 |
| Federal funds purchased and securities sold under repurchase agreements |
9,162 |
8,285 |
6,267 |
| Trading liabilities |
6,940 |
6,636 |
8,071 |
| Payables to customers and broker-dealers |
13,305 |
12,959 |
12,671 |
| Commercial paper |
1,564 |
1,070 |
10 |
| Other borrowed funds |
1,374 |
2,062 |
2,174 |
| Accrued taxes and other expenses |
5,969 |
5,819 |
6,235 |
| Other liabilities (includes allowance for lending-related commitments of $105, $108 and $103) |
6,114 |
5,383 |
6,525 |
| Long-term debt |
19,536 |
20,336 |
19,933 |
| Subtotal liabilities of operations |
285,108 |
255,012 |
280,980 |
| Liabilities of consolidated investment management funds, at fair value: |
|||
| Trading liabilities |
9,752 |
10,290 |
10,053 |
| Other liabilities |
38 |
38 |
32 |
| Subtotal liabilities of consolidated investment management funds, at fair value |
9,790 |
10,328 |
10,085 |
| Total liabilities |
294,898 |
265,340 |
291,065 |
| Temporary equity |
|||
| Redeemable noncontrolling interests |
130 |
120 |
114 |
| Permanent equity |
|||
| Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 5,001, - and - shares |
500 |
- |
- |
| Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,251,527,230, 1,250,564,475 and 1,249,061,305 shares |
12 |
12 |
12 |
| Additional paid-in capital |
23,366 |
23,304 |
23,185 |
| Retained earnings |
13,588 |
13,277 |
12,812 |
| Accumulated other comprehensive loss, net of tax |
(1,280) |
(1,229) |
(1,627) |
| Less: Treasury stock of 70,229,278, 57,848,021 and 39,386,698 common shares, at cost |
(1,653) |
(1,364) |
(965) |
| Total The Bank of New York Mellon Corporation shareholders' equity |
34,533 |
34,000 |
33,417 |
| Non-redeemable noncontrolling interests of consolidated investment management funds |
722 |
709 |
670 |
| Total permanent equity |
35,255 |
34,709 |
34,087 |
| Total liabilities, temporary equity and permanent equity |
$ 330,283 |
$ 300,169 |
$ 325,266 |
| Capital |
|||
| The following table presents our Basel I Tier 1 common equity generated. |
|||
| Basel I Tier 1 common equity generation |
|||
| (dollars in millions) |
2Q12 |
1Q12 |
2Q11 |
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP |
$ 466 |
$ 619 |
$ 735 |
| Add: Amortization of intangible assets, net of tax |
61 |
61 |
68 |
| Gross Basel I Tier 1 common equity generated |
527 |
680 |
803 |
| Less capital deployed: |
|||
| Common stock dividends |
156 |
158 |
163 |
| Common stock repurchased |
286 |
371 |
272 |
| Total capital deployed |
442 |
529 |
435 |
| Add: Other |
(53) |
146 |
139 |
| Net Basel I Tier 1 common equity generated |
$ 32 |
$ 297 |
$ 507 |
| The following table presents the calculation of our Basel I Tier 1 common equity ratio. |
|||
| Calculation of Basel I Tier 1 common equity to risk-weighted assets ratio – Non-GAAP |
June 30, |
March 31, |
June 30, |
| (dollars in millions) |
2012(a) |
2012 |
2011 |
| Total Tier 1 capital – Basel I |
$ 15,722 |
$ 15,695 |
$ 14,892 |
| Less: Trust preferred securities |
1,164 |
1,669 |
1,669 |
| Preferred stock |
500 |
- |
- |
| Total Tier 1 common equity |
$ 14,058 |
$ 14,026 |
$ 13,223 |
| Total risk-weighted assets – Basel I |
$ 106,790 |
$ 100,763 |
$ 105,316 |
| Basel I Tier 1 common equity to risk-weighted assets ratio |
13.2% |
13.9% |
12.6% |
| (a) Preliminary. |
|||
| The following table presents the calculation of our estimated Basel III Tier 1 common equity ratio on a fully-phased in basis. |
|||
| Estimated Basel III Tier 1 common equity ratio (a) |
June 30, |
March 31, |
June 30, |
| (dollars in millions) |
2012(b) |
2012 |
2011 |
| Total Tier 1 capital – Basel I |
$ 15,722 |
$ 15,695 |
$ 14,892 |
| Less: Trust preferred securities |
1,164 |
1,669 |
1,669 |
| Preferred stock |
500 |
- |
- |
| Adjustments related to available-for-sale securities and pension liabilities included in accumulated other comprehensive income (c) |
513 |
700 |
551 |
| Adjustments related to equity method investments (c) |
558 |
571 |
578 |
| Deferred tax assets |
46 |
- |
- |
| Net pension fund assets (c) |
43 |
100 |
542 |
| Other |
2 |
(2) |
(4) |
| Total estimated Basel III Tier 1 common equity |
$ 12,896 |
$ 12,657 |
$ 11,556 |
| Total risk-weighted assets – Basel I |
$ 106,790 |
$ 100,763 |
$ 105,316 |
| Add: Adjustments (d) |
41,467 |
65,997 |
71,965 |
| Total estimated Basel III risk-weighted assets |
$ 148,257 |
$ 166,760 |
$ 177,281 |
| Estimated Basel III Tier 1 common equity ratio |
8.7% |
7.6% |
6.5% |
| (a) The estimated Basel III Tier 1 common equity ratio at June 30, 2012 is based on the NPRs and final market risk rule released on June 7, 2012. The estimated Basel III Tier 1 common equity ratios at March 31, 2012 and June 30, 2011 were based on our interpretation of prior Basel III guidance and the proposed market risk rule. |
|||
| (b) Preliminary. |
|||
| (c) The NPRs and prior Basel III guidance do not add back to capital the adjustment to other comprehensive income that Basel I makes for pension liabilities and available-for-sale securities. Also, under the NPRs and prior Basel III guidance, pension assets recorded on the balance sheet and adjustments related to equity method investments are a deduction from capital. |
|||
| (d) Primary differences between risk-weighted assets determined under Basel I compared with the NPRs and prior Basel III guidance include: the determination of credit risk under Basel I uses predetermined risk weights and asset classes, while the NPRs use an investment grade standard and internal risk models. Securitization exposure receives a higher risk-weighting under the NPRs and prior Basel III guidance than Basel I; also, the NPRs and prior Basel III guidance includes additional adjustments for operational risk, market risk, counterparty credit risk and equity exposures. |
|||
Supplemental information – Explanation of Non-GAAP financial measures
BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based upon tangible common shareholders' equity. 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 BNY Mellon's performance in reference to those assets which are productive in generating income. The tangible common shareholders' equity 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 calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes. BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding.
BNY Mellon has presented revenue measures which exclude the effect of and noncontrolling interests related to consolidated investment management funds and other revenue related to the Shareowner Services business, which was sold on Dec. 31, 2011; and expense measures which exclude M&I expenses, litigation charges, restructuring charges, amortization of intangible assets and direct expenses related to the Shareowner Services business. Return on equity measures and operating margin measures, which exclude some or all of these items, are also presented. 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 ongoing charges as a result of prior transactions or where we have incurred charges. M&I expenses primarily relate to the acquisitions of Global Investment Servicing on July 1, 2010 and BHF Asset Servicing GmbH on Aug. 2, 2010. M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased. Future periods will not reflect such M&I expenses, and thus may be more easily compared with our current results if M&I expenses are excluded. 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 operational excellence initiatives and migrating positions to global delivery centers. Excluding these charges permits investors to view expense on a basis consistent with how management views the business. BNY Mellon also presents revenue and noninterest expense results relating to the Shareowner Services business so that an investor may compare those results with other periods, which do not include the Shareowner Services business.
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 business-level basis.
The following table presents a reconciliation of the tax rate from an effective rate to an operating rate for the second quarter of 2012.
| Reconciliation of effective tax rate |
2Q12 |
| Effective tax rate – GAAP |
15.8% |
| Tax reduction related to litigation charge |
8.7 |
| Other |
1.6 |
| Effective tax rate – Operating basis – Non-GAAP |
26.1% |
The following table presents investment management fees net of performance fees.
| Investment management and performance fees |
2Q12 vs. |
||||
| (dollars in millions) |
2Q12 |
1Q12 |
2Q11 |
2Q11 |
1Q12 |
| Investment management and performance fees |
$ 797 |
$ 745 |
$ 779 |
2% |
7% |
| Less: Performance fees |
54 |
16 |
18 |
N/M |
N/M |
| Investment management fees |
$ 743 |
$ 729 |
$ 761 |
(2)% |
2% |
The following table presents the calculation of the return on common equity and the return on tangible common equity.
| Return on common equity and tangible common equity |
|||||
| (dollars in millions) |
2Q12 |
1Q12 |
2Q11 |
YTD12 |
YTD11 |
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP |
$ 466 |
$ 619 |
$ 735 |
$ 1,085 |
$ 1,360 |
| Add: Amortization of intangible assets, net of tax |
61 |
61 |
68 |
122 |
136 |
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP |
527 |
680 |
803 |
1,207 |
1,496 |
| Add: M&I, litigation and restructuring charges |
225 |
65 |
41 |
290 |
75 |
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP |
$ 752 |
$ 745 |
$ 844 |
$ 1,497 |
$ 1,571 |
| Average common shareholders' equity |
$ 34,123 |
$ 33,718 |
$ 33,464 |
$ 33,920 |
$ 33,147 |
| Less: Average goodwill |
17,941 |
17,962 |
18,193 |
17,951 |
18,157 |
| Average intangible assets |
5,024 |
5,121 |
5,547 |
5,073 |
5,605 |
| Add: Deferred tax liability – tax deductible goodwill |
982 |
972 |
895 |
982 |
895 |
| Deferred tax liability – non-tax deductible intangible assets |
1,400 |
1,428 |
1,630 |
1,400 |
1,630 |
| Average tangible common shareholders' equity – Non-GAAP |
$ 13,540 |
$ 13,035 |
$ 12,249 |
$ 13,278 |
$ 11,910 |
| Return on common equity – GAAP (a) |
5.5% |
7.4% |
8.8% |
6.4% |
8.3% |
| Return on common equity excluding amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP (a) |
8.9% |
8.9% |
10.1% |
8.9% |
9.6% |
| Return on tangible common equity – Non-GAAP (a) |
15.7% |
21.0% |
26.3% |
18.3% |
25.3% |
| Return on tangible common equity excluding M&I, litigation and restructuring charges – Non-GAAP (a) |
22.4% |
23.0% |
27.6% |
22.7% |
26.6% |
| (a) Annualized. |
|||||
The following table presents the calculation of the equity to assets ratio and book value per common share.
| Equity to assets and book value per common share |
June 30, |
March 31, |
June 30, |
| (dollars in millions, unless otherwise noted) |
2012 |
2012 |
2011 |
| BNY Mellon shareholders' equity at period end – GAAP |
$ 34,533 |
$ 34,000 |
$ 33,851 |
| Less: Preferred stock |
500 |
- |
- |
| BNY Mellon common shareholders' equity at period end – GAAP |
34,033 |
34,000 |
33,851 |
| Less: Goodwill |
17,909 |
18,002 |
18,191 |
| Intangible assets |
4,962 |
5,072 |
5,514 |
| Add: Deferred tax liability – tax deductible goodwill |
982 |
972 |
895 |
| Deferred tax liability – non-tax deductible intangible assets |
1,400 |
1,428 |
1,630 |
| Tangible BNY Mellon common shareholders' equity at period end – Non-GAAP |
$ 13,544 |
$ 13,326 |
$ 12,671 |
| Total assets at period end – GAAP |
$ 330,283 |
$ 300,169 |
$ 304,706 |
| Less: Assets of consolidated investment management funds |
10,955 |
11,609 |
13,533 |
| Subtotal assets of operations – Non-GAAP |
319,328 |
288,560 |
291,173 |
| Less: Goodwill |
17,909 |
18,002 |
18,191 |
| Intangible assets |
4,962 |
5,072 |
5,514 |
| Cash on deposit with the Federal Reserve and other central banks (a) |
72,838 |
61,992 |
56,478 |
| Tangible total assets of operations at period end – Non-GAAP |
$ 223,619 |
$ 203,494 |
$ 210,990 |
| BNY Mellon shareholders' equity to total assets – GAAP |
10.5% |
11.3% |
11.1% |
| BNY Mellon common shareholders' equity to total assets – GAAP |
10.3% |
11.3% |
11.1% |
| Tangible BNY Mellon common shareholders' equity to tangible assets of operations – Non-GAAP |
6.1% |
6.5% |
6.0% |
| Period-end common shares outstanding (in thousands) |
1,181,298 |
1,192,716 |
1,232,691 |
| Book value per common share |
$ 28.81 |
$ 28.51 |
$ 27.46 |
| Tangible book value per common share – Non-GAAP |
$ 11.47 |
$ 11.17 |
$ 10.28 |
| (a) Assigned a zero percent risk weighting by the regulators. |
The following table presents the calculation of the pre-tax operating margin ratio.
| Pre-tax operating margin (dollars in millions) |
2Q12 |
1Q12 |
2Q11 |
YTD12 |
YTD11 |
| Income before income taxes – GAAP |
$ 589 |
$ 885 |
$ 1,034 |
$ 1,474 |
$ 1,983 |
| Less: Net income (loss) attributable to noncontrolling interests of consolidated investment management funds |
29 |
11 |
21 |
40 |
65 |
| Add: Amortization of intangible assets |
97 |
96 |
108 |
193 |
216 |
| M&I, litigation and restructuring charges |
378 |
109 |
63 |
487 |
122 |
| Income before income taxes excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP |
$ 1,035 |
$ 1,079 |
$ 1,184 |
$ 2,114 |
$ 2,256 |
| Fee and other revenue – GAAP |
$ 2,826 |
$ 2,838 |
$ 3,056 |
$ 5,664 |
$ 5,894 |
| Income from consolidated investment management funds – GAAP |
57 |
43 |
63 |
100 |
173 |
| Net interest revenue – GAAP |
734 |
765 |
731 |
1,499 |
1,429 |
| Total revenue – GAAP |
3,617 |
3,646 |
3,850 |
7,263 |
7,496 |
| Less: Net income (loss) attributable to noncontrolling interests of consolidated investment management funds |
29 |
11 |
21 |
40 |
65 |
| Total revenue excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds – Non-GAAP |
$ 3,588 |
$ 3,635 |
$ 3,829 |
$ 7,223 |
$ 7,431 |
| Pre-tax operating margin (a) |
16% |
24% |
27% |
20% |
26% |
| Pre-tax operating margin excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP (a) |
29% |
30% |
31% |
29% |
30% |
| (a) Income before taxes divided by total revenue. |
|||||
Cautionary Statement
The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including statements made regarding our estimated capital ratios and our ability to continue to grow investment management and investment services fees, grow in the future, deliver the full breadth of our global capabilities, provide flexibility for ongoing investment and return capital to shareholders. These statements, which may be expressed in a variety of ways, include the use of future or present tense language. These statements and other forward-looking statements contained in other public disclosures of BNY Mellon 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). Factors that could cause BNY Mellon's results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2011 and its other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Release speak only as of July 18, 2012 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.
SOURCE The Bank of New York Mellon Corporation
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