BANK OF NEW YORK MELLON CORPORATION (THE) NEW YORK, July 20, 2017 /PRNewswire/ --
TOTAL REVENUE OF $3.96 BILLION, INCREASED 5% YEAR-OVER-YEAR
-- Investment management and performance fees increased 6% on record assets
under management
-- Investment services fees increased 4% on record assets under custody
and/or administration
-- Net interest revenue increased 8%
CONTINUED FOCUS ON EXPENSE CONTROL
-- Total noninterest expense up 1% year-over-year
EXECUTING ON CAPITAL PLAN AND RETURNING VALUE TO COMMON SHAREHOLDERS
-- Returned over $700 million to shareholders through share repurchases and
dividends
-- Return on common equity of 10%; Adjusted return on tangible common
equity of 22% (a)
-- SLR - transitional of 6.2%; SLR - fully phased-in of 6.0% (a)
BOARD APPROVED QUARTERLY COMMON STOCK DIVIDEND INCREASE OF 26% TO $0.24 PER SHARE AND THE REPURCHASE OF UP TO $3.1 BILLION OF COMMON STOCK
The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported second quarter net income applicable to common shareholders of $926 million, or $0.88 per diluted common share. Net income applicable to common shareholders was $825 million, or $0.75 per diluted common share, in the second quarter of 2016, and $880 million, or $0.83 per diluted common share, in the first quarter of 2017.
"During the second quarter, healthy revenue growth in both our investment management and investment services businesses and the more favorable rate environment helped us maintain double-digit earnings per share growth and drive substantial positive operating leverage on a year-over-year basis. We and our clients are just beginning to capitalize on the benefits of our strategy and investments in growth. We have distinctive capabilities in areas such as collateral management solutions, middle-office outsourcing and liability-driven investments, and made an early commitment to delivering an industry-leading digital investment platform. We believe we are well positioned to help our clients meet regulatory requirements and navigate today's financial marketplace while at the same time make it easier for them to access the insights and information they need," Gerald L. Hassell, chairman, said.
"The results of the 2017 annual stress tests proved the resilience of our capital position. Our business model has been consistently generating high levels of capital, enabling us to announce a capital plan that includes share repurchases of up to $3.1 billion and an approximately 26 percent increase in the quarterly dividend," Mr. Hassell concluded.
Charles W. Scharf, chief executive officer, added, "I am excited to join the company and I'm pleased to see Gerald and the team were able to deliver solid results in Gerald's last quarter as CEO. They have generated momentum, and we will work really hard to build on it by continuing to put our clients first and by maintaining our position as a strong, trusted and well-respected partner. We will not waver in our focus on continually becoming more efficient, improving our client experience, and growing our revenues by expanding our already great set of capabilities."
__________________________________________
(a) These measures are considered to be
Non-GAAP. See "Supplemental
information - Explanation of GAAP
and Non-GAAP financial measures"
beginning on page 22 for the
adjusted return on tangible common
equity reconciliation. See
"Capital and Liquidity" beginning
on page 11 for the reconciliation
of the SLR.
SECOND QUARTER 2017 FINANCIAL HIGHLIGHTS (a)
(comparisons are 2Q17 vs. 2Q16, unless otherwise stated)
Earnings
-- Total revenue of $4.0 billion, increased 5%.
-- Investment services fees increased 4% reflecting growth in clearing
services fees, net new business, including collateral management
solutions, and higher equity market values, offset by the
unfavorable impact of a stronger U.S. dollar.
-- Investment management and performance fees increased 6% due to
higher market values, money market fees and performance fees, offset
by the unfavorable impact of a stronger U.S. dollar (principally
versus the British pound). On a constant currency basis, investment
management and performance fees increased 9% (Non-GAAP) (a).
-- Foreign exchange revenue decreased 9% reflecting lower volatility,
offset by higher volumes.
-- Investment and other income increased $48 million driven by
lease-related gains.
-- Net interest revenue increased 8% driven by interest rates and lower
premium amortization, offset by lower interest-earning assets and
higher average long-term debt.
-- The provision for credit losses was a credit of $7 million.
-- Noninterest expense of $2.7 billion, increased 1% reflecting higher
professional, legal and other purchased services (related to regulatory
and compliance costs, including the 2017 resolution plan), software and
litigation expenses, offset by the favorable impact of a stronger U.S.
dollar and lower net occupancy expense.
-- Effective tax rate of 25.4% for 2Q17.
-- Preferred stock dividends of $49 million in 2Q17.
Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
-- Record AUC/A of $31.1 trillion increased 5% reflecting higher market
values.
-- Estimated new AUC/A wins in Asset Servicing of $152 billion in 2Q17.
-- Record AUM of $1.77 trillion increased 6% reflecting higher market
values and net inflows, offset by the unfavorable impact of a stronger
U.S. dollar (principally versus the British pound).
-- Net long-term inflows of $3 billion in 2Q17 reflecting inflows of
liability-driven and fixed income investments, partially offset by
outflows of index investments.
-- Net short-term inflows of $11 billion in 2Q17 were a result of
increased distribution through our liquidity portals.
Capital and liquidity
-- Repurchased 11 million common shares for $506 million and paid $199
million in dividends to common shareholders.
-- Return on common equity of 10%; Adjusted return on tangible common
equity of 22% (a).
-- SLR - transitional of 6.2%; SLR - fully phased-in of 6.0% (a).
-- Average LCR of 116%.
-- Board approved quarterly common stock dividend increase of 26% to $0.24
per share and the repurchase of up to $3.1 billion of common stock,
including the repurchase of $500 million of common stock contingent upon
a preferred stock issuance, over the next four quarters.
(a) See "Supplemental information -
Explanation of GAAP and Non-GAAP
financial measures" beginning on
page 22 for the reconciliation of
Non-GAAP measures. In all
periods presented, Non-GAAP
information excludes the net
income attributable to
noncontrolling interests of
consolidated investment management
funds, amortization of intangible
assets and M&I, litigation and
restructuring charges. See
"Capital and Liquidity" beginning
on page 11 for the reconciliation
of the SLR.
Note: Throughout this document, sequential growth
rates are unannualized.
FINANCIAL SUMMARY
(dollars in millions, except per share amounts; common shares in 2Q17 vs.
thousands)
---------
2Q17 1Q17 4Q16 3Q16 2Q16 1Q17 2Q16
---- ---- ---- ---- ---- ---- ----
Revenue:
Fee and other revenue $3,120 $3,018 $2,954 $3,150 $2,999 3% 4%
Income from consolidated investment management funds 10 33 5 17 10
Net interest revenue 826 792 831 774 767 4 8
-------------------- --- --- --- --- --- --- ---
Total revenue - GAAP 3,956 3,843 3,790 3,941 3,776 3 5
Less: Net income attributable to noncontrolling interests related 3 18 4 9 4
to consolidated investment management funds
-------------------------------------------
Total revenue, as adjusted - Non-GAAP 3,953 3,825 3,786 3,932 3,772 3 5
------------------------------------- ----- ----- ----- ----- ----- --- ---
Provision for credit losses (7) (5) 7 (19) (9)
Expense:
Noninterest expense - GAAP 2,655 2,642 2,631 2,643 2,620 - 1
Less: Amortization of intangible assets 53 52 60 61 59
M&I, litigation and restructuring charges 12 8 7 18 7
Total noninterest expense, as adjusted - Non-GAAP 2,590 2,582 2,564 2,564 2,554 - 1
------------------------------------------------- ----- ----- ----- ----- ----- --- ---
Income:
Income before income taxes 1,308 1,206 1,152 1,317 1,165 8% 12%
Provision for income taxes 332 269 280 324 290
-------------------------- --- --- --- --- ---
Net income $976 $937 $872 $993 $875
Net (income) attributable to noncontrolling interests (a) (1) (15) (2) (6) (2)
-------------------------------------------------------- --- --- --- --- ---
Net income applicable to shareholders of The Bank of New 975 922 870 987 873
York Mellon Corporation
Preferred stock dividends (49) (42) (48) (13) (48)
------------------------- --- --- --- --- ---
Net income applicable to common shareholders of The Bank $926 $880 $822 $974 $825
of New York Mellon Corporation
------------------------------
Operating leverage (b) 245 bps 343 bps
Adjusted operating leverage - Non-GAAP (b)(c) 304 bps 339 bps
Key Metrics:
------------
Pre-tax operating margin (c) 33% 31% 30% 33% 31%
Adjusted pre-tax operating margin - Non-GAAP (c) 35% 33% 32% 35% 33%
Return on common equity (annualized) (c) 10.4% 10.2% 9.3% 10.8% 9.3%
Adjusted return on common equity (annualized) - Non-GAAP (c) 10.8% 10.7% 9.8% 11.3% 9.7%
Return on tangible common equity (annualized) - Non- 21.9% 22.2% 20.4% 23.5% 20.4%
GAAP (c)(d)
Adjusted return on tangible common equity (annualized) - Non-GAAP (c)(d) 22.1% 22.4% 20.5% 23.6% 20.5%
Fee revenue as a percentage of total revenue 79% 78% 78% 79% 79%
Percentage of non-U.S. total revenue 35% 34% 34% 36% 34%
Average common shares and equivalents outstanding:
Basic 1,035,829 1,041,158 1,050,888 1,062,248 1,072,583
Diluted 1,041,879 1,047,746 1,056,818 1,067,682 1,078,271
Period end:
-----------
Full-time employees 52,800 52,600 52,000 52,300 52,200
Book value per common share - GAAP (d) $35.26 $34.23 $33.67 $34.19 $33.72
Tangible book value per common share - Non-GAAP (d) $17.53 $16.65 $16.19 $16.67 $16.25
Cash dividends per common share $0.19 $0.19 $0.19 $0.19 $0.17
Common dividend payout ratio 22% 23% 25% 21% 23%
Closing stock price per common share $51.02 $47.23 $47.38 $39.88 $38.85
Market capitalization $52,712 $49,113 $49,630 $42,167 $41,479
Common shares outstanding 1,033,156 1,039,877 1,047,488 1,057,337 1,067,674
------------------------- --------- --------- --------- --------- ---------
(a) Primarily attributable to noncontrolling interests related to consolidated investment management funds.
(b) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. See "Supplemental information - Explanation of GAAP and Non-GAAP financial
measures" beginning on page 22 for the components of this measure.
(c) Non-GAAP information for all periods presented excludes the net income attributable to noncontrolling interests related to consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges. Non-GAAP information for 3Q16 also excludes a recovery of the previously impaired loan to Sentinel Management Group, Inc. ("Sentinel"). See "Supplemental information - Explanation of GAAP
and Non-GAAP financial measures" beginning on page 22 for the reconciliation of Non-GAAP measures.
(d) Tangible book value per common share - Non-GAAP and tangible common equity exclude goodwill and intangible assets, net of deferred tax liabilities. See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 22 for the reconciliation of Non-GAAP measures.
bps - basis points.
KEY MARKET METRICS
The following table presents key market metrics at period end and on an average basis.
Key market metrics 2Q17 vs.
2Q17 1Q17 4Q16 3Q16 2Q16 1Q17 2Q16
---- ---- ---- ---- ---- ---- ----
S&P 500 Index (a) 2423 2363 2239 2168 2099 3% 15%
S&P 500 Index - daily average 2398 2326 2185 2162 2075 3 16
FTSE 100 Index (a) 7313 7323 7143 6899 6504 - 12
FTSE 100 Index - daily average 7391 7274 6923 6765 6204 2 19
MSCI EAFE (a) 1883 1793 1684 1702 1608 5 17
MSCI EAFE - daily average 1856 1749 1660 1677 1648 6 13
Barclays Capital Global Aggregate BondSM Index (a)(b) 471 459 451 486 482 3 (2)
NYSE and NASDAQ share volume (in billions) 199 186 189 186 203 7 (2)
JPMorgan G7 Volatility Index - daily average (c) 7.98 10.10 10.24 10.19 11.12 (21) (28)
Average interest on excess reserves paid by the Federal Reserve 1.04% 0.79% 0.55% 0.50% 0.50% 25 bps 54 bps
Foreign exchange rates vs. U.S. dollar:
British pound (a) $1.30 $1.25 $1.23 $1.30 $1.34 4% (3)%
British pound - average rate 1.28 1.24 1.24 1.31 1.43 3 (10)
Euro (a) 1.14 1.07 1.05 1.12 1.11 7 3
Euro - average rate 1.10 1.07 1.08 1.12 1.13 3 (3)
------------------- ---- ---- ---- ---- ---- --- ---
(a) Period end.
(b) Unhedged in U.S. dollar
terms.
(c) The JPMorgan G7 Volatility
Index is based on the
implied volatility in
3-month currency options.
bps - basis points.
FEE AND OTHER REVENUE
Fee and other revenue 2Q17 vs.
(dollars in millions) 2Q17 1Q17 4Q16 3Q16 2Q16 1Q17 2Q16
-------------------- ---- ---- ---- ---- ---- ---- ----
Investment services fees:
Asset servicing (a) $1,085 $1,063 $1,068 $1,067 $1,069 2% 1%
Clearing services 394 376 355 349 350 5 13
Issuer services 241 251 211 337 234 (4) 3
Treasury services 140 139 140 137 139 1 1
--- --- --- --- --- --- ---
Total investment services fees 1,860 1,829 1,774 1,890 1,792 2 4
Investment management and performance fees 879 842 848 860 830 4 6
Foreign exchange and other trading revenue 165 164 161 183 182 1 (9)
Financing-related fees 53 55 50 58 57 (4) (7)
Distribution and servicing 41 41 41 43 43 - (5)
Investment and other income 122 77 70 92 74 N/M N/M
--------------------------- --- ---
Total fee revenue 3,120 3,008 2,944 3,126 2,978 4 5
Net securities gains - 10 10 24 21 N/M N/M
-------------------- --- --- --- --- --- --- ---
Total fee and other revenue $3,120 $3,018 $2,954 $3,150 $2,999 3% 4%
--------------------------- ------ ------ ------ ------ ------ --- ---
(a) Asset servicing fees include securities lending revenue of $48 million in 2Q17, $49 million in 1Q17, $54 million in 4Q16, $51 million in 3Q16 and $52 million in
2Q16.
N/M - Not meaningful.
KEY POINTS
-- Asset servicing fees increased 1% year-over-year and 2% sequentially,
primarily reflecting net new business, including growth of collateral
management solutions, and higher equity market values. The
year-over-year increase was partially offset by the unfavorable impact
of a stronger U.S. dollar and the impact of downsizing the retail UK
transfer agency business.
-- Clearing services fees increased 13% year-over-year and 5% sequentially,
primarily driven by higher money market fees and growth in long-term
mutual fund assets.
-- Issuer services fees increased 3% year-over-year and decreased 4%
sequentially. The year-over-year increase primarily reflects higher
Depositary Receipts revenue. The sequential decrease primarily reflects
seasonality in Depositary Receipts revenue.
-- Treasury services fees increased 1% both year-over-year and
sequentially, primarily reflecting higher payment volumes, partially
offset by higher compensating balance credits provided to clients, which
reduces fee revenue and increases net interest revenue.
-- Investment management and performance fees increased 6% year-over-year
and 4% sequentially, primarily reflecting higher market values, money
market fees and performance fees. The year-over-year increase was
partially offset by the unfavorable impact of a stronger U.S. dollar
(principally versus the British pound). On a constant currency basis,
investment management and performance fees increased 9% (Non-GAAP)
year-over-year.
-- Foreign exchange and other trading revenue
(in millions) 2Q17 1Q17 4Q16 3Q16 2Q16
------------ ---- ---- ---- ---- ----
Foreign exchange $151 $154 $175 $175 $166
Other trading revenue (loss) 14 10 (14) 8 16
--------------------------- --- --- --- --- ---
Total foreign exchange and other trading revenue $165 $164 $161 $183 $182
------------------------------------------------ ---- ---- ---- ---- ----
Foreign exchange revenue decreased 9% year-over-year and 2% sequentially, primarily reflecting lower volatility, partially offset by higher volumes.
-- Financing-related fees decreased 7% year-over-year and 4% sequentially,
primarily reflecting lower underwriting fees.
-- Investment and other income
(in millions) 2Q17 1Q17 4Q16 3Q16 2Q16
------------ ---- ---- ---- ---- ----
Lease-related gains (losses) $51 $1 $(6) $ - $ -
Corporate/bank-owned life insurance 43 30 53 34 31
Expense reimbursements from joint venture 17 14 15 18 17
Seed capital gains (a) 10 9 6 16 11
Equity investment income (loss) 7 26 (2) (1) (4)
Asset-related (losses) gains (5) 3 1 8 1
Other (loss) income (1) (6) 3 17 18
--- --- --- --- ---
Total investment and other income $122 $77 $70 $92 $74
--------------------------------- ---- --- --- --- ---
(a) Excludes the gain (loss) on seed capital investments in consolidated investment management funds which are reflected in
operations of consolidated investment management funds, net of noncontrolling interests. The gain on seed capital
investments in consolidated investment management funds was $7 million in 2Q17, $15 million in 1Q17, $1 million in 4Q16,
$8 million in 3Q16 and $6 million in 2Q16.
Both the year-over-year and sequential increases in investment and other income primarily reflect lease-related gains and higher income from corporate/bank-owned life insurance. The year-over-year increase was partially offset by the negative impact of foreign exchange translation and lower other income driven by our investments in renewable energy. The sequential increase was partially offset by a net gain related to an equity investment recorded in 1Q17.
NET INTEREST REVENUE
Net interest revenue 2Q17 vs.
(dollars in millions) 2Q17 1Q17 4Q16 3Q16 2Q16 1Q17 2Q16
-------------------- ---- ---- ---- ---- ---- ---- ----
Net interest revenue - GAAP $826 $792 $831 $774 $767 4% 8%
Tax equivalent adjustment 12 12 12 12 13 N/M N/M
------------------------- --- --- --- --- --- --- ---
Net interest revenue (FTE) - Non-GAAP (a) $838 $804 $843 $786 $780 4% 7%
Net interest margin - GAAP 1.14% 1.13% 1.16% 1.05% 0.97% 1 bps 17 bps
Net interest margin (FTE) - Non-GAAP (a) 1.16% 1.14% 1.17% 1.06% 0.98% 2 bps 18 bps
Selected average balances:
Cash/interbank investments $111,021 $106,069 $104,352 $114,544 $137,995 5% (20)%
Trading account securities 2,455 2,254 2,288 2,176 2,152 9 14
Securities 117,227 114,786 117,660 118,405 118,002 2 (1)
Loans 58,793 60,312 63,647 61,578 60,284 (3) (2)
----- ------ ------ ------ ------ ------ --- ---
Interest-earning assets 289,496 283,421 287,947 296,703 318,433 2 (9)
Interest-bearing deposits 142,336 139,820 145,681 155,109 165,122 2 (14)
Noninterest-bearing deposits 73,886 73,555 82,267 81,619 84,033 - (12)
Long-term debt 27,398 25,882 24,986 23,930 22,838 6 20
Selected average yields/rates: (b)
Cash/interbank investments 0.67% 0.56% 0.47% 0.43% 0.44%
Trading account securities 2.85 3.12 3.17 2.62 2.45
Securities 1.72 1.71 1.67 1.56 1.56
Loans 2.44 2.15 1.92 1.84 1.85
Interest-earning assets 1.47 1.38 1.30 1.19 1.14
Interest-bearing deposits 0.09 0.03 (0.01) (0.02) 0.03
Long-term debt 1.87 1.85 1.36 1.54 1.54
Average cash/interbank investments as a percentage 38% 37% 36% 39% 43%
of average interest-earning assets
Average noninterest-bearing deposits as a percentage 26% 26% 29% 28% 26%
of average interest-earning assets
----------------------------------
(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.
FTE - fully taxable equivalent.
N/M - Not meaningful.
bps - basis points.
KEY POINTS
-- Net interest revenue increased 8% year-over-year and 4% sequentially,
primarily reflecting higher interest rates. The year-over-year increase
also reflects lower premium amortization, partially offset by lower
interest-earning assets and higher average long-term debt. The
sequential increase also reflects an additional interest-earning day and
higher interest-earning assets.
NONINTEREST EXPENSE
Noninterest expense 2Q17 vs.
(dollars in millions) 2Q17 1Q17 4Q16 3Q16 2Q16 1Q17 2Q16
-------------------- ---- ---- ---- ---- ---- ---- ----
Staff $1,417 $1,472 $1,395 $1,467 $1,412 (4)% - %
Professional, legal and other purchased services 319 312 325 292 290 2 10
Software and equipment 232 223 237 215 223 4 4
Net occupancy 139 136 153 143 152 2 (9)
Distribution and servicing 104 100 98 105 102 4 2
Sub-custodian 65 64 57 59 70 2 (7)
Bank assessment charges 59 57 53 61 52 4 13
Business development 63 51 71 52 65 24 (3)
Other 192 167 175 170 188 15 2
Amortization of intangible assets 53 52 60 61 59 2 (10)
M&I, litigation and restructuring charges 12 8 7 18 7 N/M N/M
----------------------------------------- --- --- --- --- --- --- ---
Total noninterest expense - GAAP $2,655 $2,642 $2,631 $2,643 $2,620 - % 1%
Staff expense as a percentage of total revenue 36% 38% 37% 37% 37%
Memo:
-----
Total noninterest expense excluding amortization of $2,590 $2,582 $2,564 $2,564 $2,554 - % 1%
intangible assets and M&I, litigation and restructuring
charges - Non-GAAP
------------------
N/M - Not meaningful.
KEY POINTS
-- Total noninterest expense increased 1% year-over-year and less than 1%
sequentially. Total noninterest expense, excluding amortization of
intangible assets and M&I, litigation and restructuring charges
(Non-GAAP), increased 1% year-over-year and less than 1% sequentially.
-- The year-over-year increase primarily reflects higher professional,
legal and other purchased services, software and litigation expenses,
partially offset by the favorable impact of a stronger U.S. dollar and
lower net occupancy expense. The increase in professional, legal and
other purchased services primarily reflects expenses related to
regulatory and compliance costs, including the 2017 resolution plan.
Net occupancy expense decreased as we continued to benefit from the
savings generated by the business improvement process.
-- Sequentially, lower staff expense was primarily offset by higher other,
business development and software expenses. The decrease in staff
expense was primarily driven by the impact of vesting of long-term stock
awards for retirement eligible employees recorded in 1Q17.
INVESTMENT SECURITIES PORTFOLIO
At June 30, 2017, the fair value of our investment securities portfolio totaled $118.9 billion. The net unrealized pre-tax gain on our total securities portfolio was $151 million at June 30, 2017 compared with a pre-tax loss of $23 million at March 31, 2017. The improvement in the net unrealized pre-tax gain was primarily driven by a decrease in market interest rates. At June 30, 2017, the fair value of the held-to-maturity securities totaled $40.9 billion and represented 34% of the fair value of the total investment securities portfolio.
The following table shows the distribution of our investment securities portfolio.
Investment securities March 31, 2017 2Q17 June 30, 2017 Fair value Unrealized Ratings (b)
portfolio
change in as a % of gain (loss)
amortized
unrealized
cost (a)
gain (loss)
(dollars in millions)
--------------------
BB+
and
lower
-----
Fair Amortized Fair AAA/ A+/ BBB+/ Not
value cost value AA- A- BBB- rated
----- ---- ----- --- --- ---- -----
Agency RMBS $47,680 $79 $49,829 $49,544 99% $(285) 100% - % - % - % - %
U.S. Treasury 26,149 47 25,417 25,325 100 (92) 100 - - - -
Sovereign debt/sovereign guaranteed 13,885 (14) 13,880 14,025 101 145 74 6 19 1 -
Non-agency RMBS (c) 1,298 9 948 1,239 82 291 - 1 3 87 9
Non-agency RMBS 670 8 597 627 96 30 7 4 15 73 1
European floating rate notes 639 3 528 523 98 (5) 70 30 - - -
Commercial MBS 8,796 20 10,597 10,574 100 (23) 99 1 - - -
State and political subdivisions 3,322 21 3,268 3,299 101 31 81 16 - - 3
Foreign covered bonds 2,144 (4) 2,458 2,471 101 13 100 - - - -
Corporate bonds 1,366 4 1,309 1,318 101 9 17 70 13 - -
CLOs 2,569 (1) 2,635 2,642 100 7 99 - - - 1
U.S. Government agencies 1,985 - 2,196 2,210 101 14 100 - - - -
Consumer ABS 1,456 2 1,326 1,330 100 4 90 4 4 2 -
Other (d) 3,553 - 3,746 3,758 100 12 79 19 - - 2
----- ---
Total investment securities $115,512 (e) $174 $118,734 $118,885 (e) 100% $151 (e)(f) 93% 3% 3% 1% - %
--------------------------- -------- --- ---- -------- -------- --- --- ---- ----- --- --- --- --- --- ---
(a) Amortized cost before impairments.
(b) Represents ratings by S&P, or the equivalent.
(c) These RMBS were included in the former Grantor Trust and were marked-to-market in 2009. We believe these RMBS would receive higher credit ratings if these ratings incorporated, as additional credit enhancements, the
difference between the written-down amortized cost and the current face amount of each of these securities.
(d) Includes commercial paper with a fair value of $701 million and $700 million and money market funds with a fair value of $853 million and $896 million at March 31, 2017 and June 30, 2017, respectively.
(e) Includes net unrealized losses on derivatives hedging securities available-for-sale of $134 million at March 31, 2017 and $251 million at June 30, 2017.
(f) Unrealized gains of $275 million at June 30, 2017 related to available-for-sale securities, net of hedges.
NONPERFORMING ASSETS
Nonperforming assets June 30, March 31, December 31,
2017 2017 2016
(dollars in millions)
--------------------
Nonperforming loans:
Other residential mortgages $84 $88 $91
Wealth management loans and mortgages 10 10 8
Financial institutions 2 - -
Lease financing - - 4
Total nonperforming loans 96 98 103
Other assets owned 4 9 4
--- ---
Total nonperforming assets $100 $107 $107
-------------------------- ---- ---- ----
Nonperforming assets ratio 0.16% 0.18% 0.17%
Allowance for loan losses/nonperforming loans 171.9 167.3 164.1
Total allowance for credit losses/nonperforming loans 281.3 281.6 272.8
----------------------------------------------------- ----- ----- -----
Nonperforming assets decreased $7 million compared with March 31, 2017 and Dec. 31, 2016. The decrease compared with March 31, 2017 primarily reflects lower other assets owned and other residential mortgages.
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS
Allowance for credit losses, provision and net charge-offs June 30, March 31, June 30,
2017 2017 2016
(in millions)
------------
Allowance for credit losses - beginning of period $276 $281 $287
Provision for credit losses (7) (5) (9)
Net recoveries (charge-offs):
Other residential mortgages 1 - 1
Foreign - - 1
------- --- --- ---
Net recoveries (charge-offs) 1 - 2
--------------------------- --- --- ---
Allowance for credit losses - end of period $270 $276 $280
------------------------------------------- ---- ---- ----
Allowance for loan losses $165 $164 $158
Allowance for lending-related commitments 105 112 122
----------------------------------------- --- --- ---
CAPITAL AND LIQUIDITY
Our consolidated capital ratios are shown in the following table. The common equity Tier 1 ("CET1"), Tier 1 and Total risk-based regulatory capital ratios in the first section of the table below are based on Basel III components of capital, as phased-in (referred to as "Transitional ratios").
Capital ratios June 30, March 31, December 31,
2017 2017 2016
--- ---- ---- ----
Consolidated regulatory capital ratios: (a)
Standardized Approach:
CET1 ratio 11.8% 12.0% 12.3%
Tier 1 capital ratio 14.1 14.4 14.5
Total (Tier 1 plus Tier 2) capital ratio 14.6 14.9 15.2
Advanced Approach:
CET1 ratio 10.8 10.4 10.6
Tier 1 capital ratio 12.8 12.5 12.6
Total (Tier 1 plus Tier 2) capital ratio 13.2 12.8 13.0
Leverage capital ratio (b) 6.7 6.6 6.6
Supplementary leverage ratio ("SLR") 6.2 6.1 6.0
----------------------------------- --- --- ---
BNY Mellon shareholders' equity to total assets ratio 11.3 11.6 11.6
BNY Mellon common shareholders' equity to total assets ratio 10.3 10.5 10.6
Selected regulatory capital ratios - fully phased-in - Non-GAAP: (a)(c)
CET1 ratio:
Standardized Approach 11.4% 11.5% 11.3%
Advanced Approach 10.4 10.0 9.7
SLR 6.0 5.9 5.6
--- --- --- ---
(a) Regulatory capital ratios for
June 30, 2017 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.
(b) The leverage capital ratio is
based on Tier 1 capital, as
phased-in and quarterly average
total assets.
(c) Estimated.
CET1 generation in 2Q17 - preliminary Transitional Fully
basis (b) phased-in -
Non-GAAP (c)
-----------
(in millions)
CET1 - Beginning of period $17,606 $16,835
Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP 926 926
Goodwill and intangible assets, net of related deferred tax liabilities (47) (40)
----------------------------------------------------------------------- --- ---
Gross CET1 generated 879 886
Capital deployed:
Dividends (199) (199)
Common stock repurchased (506) (506)
------------------------ ---- ----
Total capital deployed (705) (705)
Other comprehensive income 410 431
Additional paid-in capital (a) 184 184
Other (3) (2)
Total other additions 591 613
--------------------- --- ---
Net CET1 generated 765 794
--- ---
CET1 - End of period $18,371 $17,629
-------------------- ------- -------
(a) Primarily related to stock
awards, the exercise of stock
options and stock issued for
employee benefit plans.
(b) Reflects transitional
adjustments to CET1 required
under the U.S. capital rules.
(c) Estimated.
The table presented below compares the fully phased-in Basel III capital components and risk-based ratios to those capital components and ratios determined on a transitional basis.
Basel III capital components and ratios June 30, 2017 (a) March 31, 2017 December 31, 2016
-------------- -----------------
(dollars in millions) Transitional Fully Transitional Fully Transitional Fully
basis (b) phased-in -
Non-GAAP (c) basis (b) phased-in - basis (b) phased-in -
Non-GAAP (c) Non-GAAP (c)
--- ----------- -----------
CET1:
Common shareholders' equity $36,652 $36,432 $35,837 $35,596 35,794 35,269
Goodwill and intangible assets (17,843) (18,326) (17,796) (18,286) (17,314) (18,312)
Net pension fund assets (72) (90) (72) (90) (55) (90)
Equity method investments (325) (339) (326) (341) (313) (344)
Deferred tax assets (29) (37) (27) (34) (19) (32)
Other (12) (11) (10) (10) - (1)
----- --- --- --- --- --- ---
Total CET1 18,371 17,629 17,606 16,835 18,093 16,490
Other Tier 1 capital:
Preferred stock 3,542 3,542 3,542 3,542 3,542 3,542
Deferred tax assets (8) - (7) - (13) -
Net pension fund assets (18) - (18) - (36) -
Other (18) (19) (14) (14) (121) (121)
----- --- --- --- --- ---- ----
Total Tier 1 capital 21,869 21,152 21,109 20,363 21,465 19,911
Tier 2 capital:
Trust preferred securities - - - - 148 -
Subordinated debt 550 550 550 550 550 550
Allowance for credit losses 270 270 276 276 281 281
Other (2) (2) (2) (2) (12) (11)
----- --- --- --- --- --- ---
Total Tier 2 capital - Standardized Approach 818 818 824 824 967 820
Excess of expected credit losses 55 55 51 51 50 50
Less: Allowance for credit losses 270 270 276 276 281 281
--------------------------------- --- --- --- --- --- ---
Total Tier 2 capital - Advanced Approach $603 $603 $599 $599 $736 $589
---------------------------------------- ---- ---- ---- ---- ---- ----
Total capital:
Standardized Approach $22,687 $21,970 $21,933 $21,187 $22,432 $20,731
Advanced Approach $22,472 $21,755 $21,708 $20,962 $22,201 $20,500
Risk-weighted assets:
Standardized Approach $155,313 $154,779 $146,747 $146,122 $147,671 $146,475
Advanced Approach $170,445 $169,879 $169,195 $168,534 $170,495 $169,227
Standardized Approach:
CET1 ratio 11.8% 11.4% 12.0% 11.5% 12.3% 11.3%
Tier 1 capital ratio 14.1 13.7 14.4 13.9 14.5 13.6
Total (Tier 1 plus Tier 2) capital ratio 14.6 14.2 14.9 14.5 15.2 14.2
Advanced Approach:
CET1 ratio 10.8% 10.4% 10.4% 10.0% 10.6% 9.7%
Tier 1 capital ratio 12.8 12.5 12.5 12.1 12.6 11.8
Total (Tier 1 plus Tier 2) capital ratio 13.2 12.8 12.8 12.4 13.0 12.1
---------------------------------------- ---- ---- ---- ---- ---- ----
(a) Preliminary.
(b) Reflects transitional
adjustments to CET1, Tier 1
capital and Tier 2 capital
required under the U.S.
capital rules.
(c) Estimated.
BNY Mellon has presented its estimated fully phased-in CET1 and other risk-based capital ratios and the fully phased-in SLR based on its interpretation of the U.S. capital rules, which are being gradually phased-in over a multi-year period, and on the application of such rules to BNY Mellon's businesses as currently conducted. Management views the estimated fully phased-in CET1 and other risk-based capital ratios and fully phased-in SLR as key measures in monitoring BNY Mellon's capital position and progress against future regulatory capital standards. Additionally, the presentation of the estimated fully phased-in CET1 and other risk-based capital ratios and fully phased-in SLR are intended to allow investors to compare these ratios with estimates presented by other companies.
Our capital and liquidity ratios are necessarily subject to, among other things, BNY Mellon's further review of applicable rules, anticipated compliance with all necessary enhancements to model calibration, approval by regulators of certain models used as part of RWA calculations, other refinements, further implementation guidance from regulators, market practices and standards and any changes BNY Mellon may make to its businesses. Consequently, our capital and liquidity ratios remain subject to ongoing review and revision and may change based on these factors.
Supplementary Leverage Ratio
The following table presents the SLR on both the transitional and fully phased-in Basel III basis for BNY Mellon and our largest bank subsidiary, The Bank of New York Mellon.
SLR June 30, 2017 (a) March 31, 2017 December 31, 2016
(dollars in millions) Transitional Fully Transitional Fully Transitional Fully
basis phased-in - basis phased-in - basis
Non-GAAP (b) Non-GAAP (b) phased-in -
Non-GAAP (b)
--- -----------
Consolidated:
Tier 1 capital $21,869 $21,152 $21,109 $20,363 $21,465 $19,911
Total leverage exposure:
Quarterly average total assets $342,515 $342,515 $336,200 $336,200 $344,142 $344,142
Less: Amounts deducted from Tier 1 capital 18,070 18,809 18,016 18,763 17,333 18,887
------------------------------------------ ------ ------ ------ ------ ------ ------
Total on-balance sheet assets 324,445 323,706 318,184 317,437 326,809 325,255
Off-balance sheet exposures:
Potential future exposure for derivative 6,013 6,013 5,898 5,898 6,021 6,021
contracts (plus certain other items)
Repo-style transaction exposures 598 598 536 536 533 533
Credit-equivalent amount of other off-balance 22,092 22,092 22,901 22,901 23,274 23,274
sheet exposures (less SLR exclusions)
Total off-balance sheet exposures 28,703 28,703 29,335 29,335 29,828 29,828
------ ------
Total leverage exposure $353,148 $352,409 $347,519 $346,772 $356,637 $355,083
SLR - Consolidated (c) 6.2% 6.0% 6.1% 5.9% 6.0% 5.6%
The Bank of New York Mellon, our largest
bank subsidiary:
Tier 1 capital $19,897 $19,125 $19,320 $18,523 $19,011 $17,708
Total leverage exposure $286,972 $286,604 $281,114 $280,741 $291,022 $290,230
SLR - The Bank of New York Mellon (c) 6.9% 6.7% 6.9% 6.6% 6.5% 6.1%
------------------------------------ --- --- --- --- --- ---
(a) Preliminary.
(b) Estimated.
(c) The estimated fully phased-in
SLR (Non-GAAP) is based on our
interpretation of the U.S.
capital rules. When the SLR is
fully phased-in in 2018 as a
required minimum ratio, we
expect to maintain an SLR of
over 5%. The minimum required
SLR is 3% and there is a 2%
buffer, in addition to the
minimum, that is applicable to
U.S. G-SIBs. The insured
depository institution
subsidiaries of the U.S. G-
SIBs, including those of BNY
Mellon, must maintain a 6% SLR
to be considered "well
capitalized."
Liquidity Coverage Ratio ("LCR")
The U.S. LCR rules became fully phased-in on Jan. 1, 2017 and require BNY Mellon to meet an LCR of 100%. On a consolidated basis, our average LCR was 116% for 2Q17. High-quality liquid assets ("HQLA"), before haircuts and trapped liquidity, totaled $174 billion at June 30, 2017 and averaged $166 billion for 2Q17.
INVESTMENT MANAGEMENT provides investment management services to institutional and retail investors, as well as investment management, wealth and estate planning and private banking solutions to high net worth individuals and families, and foundations and endowments.
(dollars in millions, unless otherwise noted) 2Q17 vs.
--------------------------------------------
2Q17 1Q17 4Q16 3Q16 2Q16 1Q17 2Q16
---- ---- ---- ---- ---- ---- ----
Revenue:
Investment management fees:
Mutual funds $314 $299 $297 $309 $304 5% 3%
Institutional clients 362 348 340 362 344 4 5
Wealth management 169 167 164 166 160 1 6
----------------- --- --- --- --- --- --- ---
Investment management fees (a) 845 814 801 837 808 4 5
Performance fees 17 12 32 8 9 N/M N/M
--- --- --- ---
Investment management and performance fees 862 826 833 845 817 4 6
Distribution and servicing 53 52 48 49 49 2 8
Other (a) (16) (1) (1) (18) (10) N/M N/M
-------- --- --- --- --- ---
Total fee and other revenue (a) 899 877 880 876 856 3 5
Net interest revenue 87 86 80 82 82 1 6
-------------------- --- --- --- --- --- --- ---
Total revenue 986 963 960 958 938 2 5
Provision for credit losses - 3 6 - 1 N/M N/M
Noninterest expense (ex. amortization of intangible assets) 683 668 672 680 684 2 -
Amortization of intangible assets 15 15 22 22 19 - (21)
--------------------------------- --- --- --- --- --- --- ---
Total noninterest expense 698 683 694 702 703 2 (1)
------------------------- --- --- --- --- --- --- ---
Income before taxes $288 $277 $260 $256 $234 4% 23%
------------------- ---- ---- ---- ---- ---- --- ---
Income before taxes (ex. amortization of intangible $303 $292 $282 $278 $253 4% 20%
assets) - Non-GAAP
------------------
Pre-tax operating margin 29% 29% 27% 27% 25%
Adjusted pre-tax operating margin - Non-GAAP (b) 34% 34% 33% 33% 30%
Changes in AUM (in billions): (c)
Beginning balance of AUM $1,727 $1,648 $1,715 $1,664 $1,639
Net inflows (outflows):
Long-term strategies:
Equity (2) (4) (5) (6) (2)
Fixed income 2 2 (1) (1) (3)
Liability-driven investments (d) 15 14 (7) 4 15
Multi-asset and alternative investments 1 2 3 7 2
--------------------------------------- --- --- --- --- ---
Total long-term active strategies inflows (outflows) 16 14 (10) 4 12
Index (13) - (1) (3) (17)
Total long-term strategies inflows (outflows) 3 14 (11) 1 (5)
Short term strategies:
Cash 11 13 (3) (1) 4
---- --- --- --- --- ---
Total net inflows (outflows) 14 27 (14) - (1)
Net market impact/other 1 41 (11) 80 71
Net currency impact 29 11 (42) (29) (47)
Acquisition - - - - 2
--- --- --- --- ---
Ending balance of AUM $1,771 (e) $1,727 $1,648 $1,715 $1,664 3% 6%
AUM at period end, by product type: (c)
Equity 9% 9% 9% 9% 9%
Fixed income 11 11 11 11 12
Index 18 19 19 18 18
Liability-driven investments (d) 35 34 34 35 34
Multi-asset and alternative investments 11 11 11 11 11
Cash 16 16 16 16 16
--- --- --- --- ---
Total AUM 100% (e) 100% 100% 100% 100%
Average balances:
Average loans $16,560 $16,153 $15,673 $15,308 $14,795 3% 12%
Average deposits $14,866 $15,781 $15,511 $15,600 $15,518 (6)% (4)%
---------------- ------- ------- ------- ------- ------- --- ---
(a) Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. See page 25 for a breakdown of the revenue line items in the
Investment Management business impacted by the consolidated investment management funds. Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other
trading revenue and investment and other income.
(b) Excludes amortization of intangible assets, provision for credit losses and distribution and servicing expense. See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 22 for the reconciliation of this Non-GAAP measure.
(c) Excludes securities lending cash management assets and assets managed in the Investment Services business.
(d) Includes currency overlay assets under management.
(e) Preliminary.
N/M - Not meaningful.
INVESTMENT MANAGEMENT KEY POINTS
-- Income before taxes totaled $288 million in 2Q17, an increase of 23%
year-over-year and 4% sequentially. Income before taxes, excluding
amortization of intangible assets (Non-GAAP), totaled $303 million in
2Q17, an increase of 20% year-over-year and 4% sequentially.
-- Pre-tax operating margin of 29% in 2Q17 increased 438 bps
year-over-year and 48 bps sequentially.
-- Adjusted pre-tax operating margin (Non-GAAP) of 34% in 2Q17
increased 397 bps year-over-year and 11 bps sequentially.
-- Total revenue was $986 million, an increase of 5% year-over-year
primarily reflecting higher market values, performance fees and net
interest revenue. The sequential increase of 2% primarily reflects
higher market values and performance fees, partially offset by lower
seed capital gains.
-- 40% non-U.S. revenue in 2Q17 and 2Q16.
-- Investment management fees increased 5% year-over-year and 4%
sequentially, primarily reflecting higher market values and money market
fees. The year-over-year increase was partially offset by the
unfavorable impact of a stronger U.S. dollar (principally versus the
British pound). On a constant currency basis, investment management
fees increased 8% (Non-GAAP) year-over-year.
-- Net long-term inflows of $3 billion in 2Q17 reflect inflows of
liability-driven and fixed income investments, partially offset by
outflows of index investments.
-- Net short-term inflows of $11 billion in 2Q17 were a result of
increased distribution through our liquidity portals.
-- Performance fees increased year-over-year primarily reflecting
liability-driven investment strategies.
-- Other revenue declined year-over-year primarily reflecting higher
payments to Investment Services related to higher money market fees.
The sequential decline in other revenue was driven by lower seed capital
gains.
-- Net interest revenue increased 6% year-over-year and 1% sequentially,
primarily reflecting higher interest rates on lower average deposit
levels.
-- Average loans increased 12% year-over-year and 3% sequentially.
Record average loans were driven by extending banking solutions to
high net worth clients.
-- Average deposits decreased 4% year-over-year and 6% sequentially.
-- Total noninterest expense (excluding amortization of intangible assets)
decreased slightly year-over-year, primarily reflecting the favorable
impact of a stronger U.S. dollar (principally versus the British pound)
and lower professional, legal and other purchased services, partially
offset by higher incentive expense. The 2% sequential increase
primarily reflects higher business development and distribution and
servicing expenses.
INVESTMENT SERVICES provides business and technology solutions to financial institutions, corporations, public funds and government agencies, including: asset servicing (custody, foreign exchange, fund services, broker-dealer services, securities finance, collateral and liquidity services), clearing services, issuer services (depositary receipts and corporate trust) and treasury services (global payments, trade finance and cash management).
(dollars in millions, unless otherwise noted) 2Q17 vs.
--------------------------------------------
2Q17 1Q17 4Q16 3Q16 2Q16 1Q17 2Q16
---- ---- ---- ---- ---- ---- ----
Revenue:
Investment services fees:
Asset servicing $1,061 $1,038 $1,043 $1,039 $1,043 2% 2%
Clearing services 393 375 354 347 350 5 12
Issuer services 241 250 211 336 233 (4) 3
Treasury services 139 139 139 136 137 - 1
--- --- --- --- --- --- ---
Total investment services fees 1,834 1,802 1,747 1,858 1,763 2 4
Foreign exchange and other trading revenue 145 153 157 177 161 (5) (10)
Other (a) 136 129 128 148 130 5 5
--- --- --- --- --- --- ---
Total fee and other revenue 2,115 2,084 2,032 2,183 2,054 1 3
Net interest revenue 761 707 713 715 690 8 10
--- --- --- --- --- --- ---
Total revenue 2,876 2,791 2,745 2,898 2,744 3 5
Provision for credit losses (3) - - 1 (7) N/M N/M
Noninterest expense (ex. amortization of intangible assets) 1,889 1,812 1,786 1,812 1,819 4 4
Amortization of intangible assets 38 37 38 39 40 3 (5)
--------------------------------- --- --- --- --- --- --- ---
Total noninterest expense 1,927 1,849 1,824 1,851 1,859 4 4
------------------------- ----- ----- ----- ----- ----- --- ---
Income before taxes $952 $942 $921 $1,046 $892 1% 7%
---- ---- ---- ------ ---- --- ---
Income before taxes (ex. amortization of intangible $990 $979 $959 $1,085 $932 1% 6%
assets) - Non-GAAP
------------------
Pre-tax operating margin 33% 34% 34% 36% 33%
Adjusted pre-tax operating margin (ex. provision for credit 34% 35% 35% 37% 34%
losses and amortization of intangible assets) - Non-GAAP
Investment services fees as a percentage of noninterest 97% 99% 98% 103% 97%
expense (ex. amortization of intangible assets)
Securities lending revenue $42 $40 $44 $42 $42 5% - %
Metrics:
--------
Average loans $40,931 $42,818 $45,832 $44,329 $43,786 (4)% (7)%
Average deposits $200,417 $197,690 $213,531 $220,316 $221,998 1% (10)%
AUC/A at period end (in trillions) (b) $31.1 (c) $30.6 $29.9 $30.5 $29.5 2% 5%
Market value of securities on loan at period end $336 $314 $296 $288 $278 7% 21%
(in billions) (d)
Asset servicing:
----------------
Estimated new business wins (AUC/A) (in billions) $152 (c) $109 $141 $150 $167
Depositary Receipts:
--------------------
Number of sponsored programs 1,025 1,050 1,062 1,094 1,112 (2)% (8)%
Clearing services:
------------------
Average active clearing accounts (U.S. platform) 6,159 6,058 5,960 5,942 5,946 2% 4%
(in thousands)
Average long-term mutual fund assets (U.S. platform) $480,532 $460,977 $438,460 $443,112 $431,150 4% 11%
Average investor margin loans (U.S. platform) $9,812 $10,740 $10,562 $10,834 $10,633 (9)% (8)%
Broker-Dealer:
--------------
Average tri-party repo balances (in billions) $2,498 $2,373 $2,307 $2,212 $2,108 5% 19%
-------------------------------------------- ------ ------ ------ ------ ------ --- ---
(a) Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue and investment and other income.
(b) Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at June 30, 2017, March 31, 2017,
Dec. 31, 2016 and Sept. 30, 2016 and $1.1 trillion at June 30, 2016.
(c) Preliminary.
(d) 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 $66 billion at June 30, 2017, $65 billion at March 31, 2017, $63 billion at Dec. 31, 2016, $64 billion at Sept. 30, 2016 and $56 billion at June 30, 2016.
N/M - Not meaningful.
INVESTMENT SERVICES KEY POINTS
-- Income before taxes totaled $952 million in 2Q17. Income before taxes,
excluding amortization of intangible assets (Non-GAAP), totaled $990
million in 2Q17.
-- The pre-tax operating margin was 33% in 2Q17. The pre-tax operating
margin, excluding the provision for credit losses and amortization
of intangible assets (Non-GAAP), was 34% in 2Q17.
-- Investment services fees as a percentage of noninterest expense
(excluding amortization of intangible assets) was 97% in 2Q17.
-- Investment services fees increased 4% year-over-year and 2%
sequentially.
-- Asset servicing fees increased 2% year-over-year and sequentially,
primarily reflecting net new business, including growth of
collateral management solutions, and higher equity market values.
The year-over-year increase was partially offset by the unfavorable
impact of a stronger U.S. dollar and the impact of downsizing the
retail UK transfer agency business.
-- Clearing services fees increased 12% year-over-year and 5%
sequentially, primarily driven by higher money market fees and
growth in long-term mutual fund assets.
-- Issuer services fees increased 3% year-over-year, primarily
reflecting higher Depositary Receipts revenue. The 4% sequential
decrease primarily reflects seasonality in Depositary Receipts
revenue.
-- Treasury services fees increased 1% year-over-year, primarily
reflecting higher payment volumes, partially offset by higher
compensating balance credits provided to clients, which reduces fee
revenue and increases net interest revenue.
-- Foreign exchange and other trading revenue decreased 10% year-over-year
and 5% sequentially, primarily reflecting lower volatility, partially
offset by higher volumes.
-- Other revenue increased 5% both year-over-year and sequentially,
primarily reflecting higher payments from Investment Management related
to higher money market fees, partially offset by certain fees paid to
introducing brokers.
-- Net interest revenue increased 10% year-over-year primarily reflecting
the impact of the higher interest rates, partially offset by lower
deposits. The 8% sequential increase primarily reflects higher rates.
-- Noninterest expense (excluding amortization of intangible assets)
increased 4% year-over-year, primarily reflecting higher expenses from
regulatory and compliance costs and additional technology investments,
partially offset by the favorable impact of a stronger U.S. dollar. The
4% sequential increase primarily reflects additional technology
investments, the unfavorable impact of a weaker U.S. dollar, higher
business development expense and increased volume-related clearing and
sub-custodian expenses.
OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, global markets, business exits and other corporate revenue and expense items.
(in millions) 2Q17 1Q17 4Q16 3Q16 2Q16
------------ ---- ---- ---- ---- ----
Revenue:
Fee and other revenue $113 $72 $42 $100 $95
Net interest (expense) revenue (22) (1) 38 (23) (5)
------------------------------ --- --- --- --- ---
Total revenue 91 71 80 77 90
Provision for credit losses (4) (8) 1 (20) (3)
Noninterest expense (ex. M&I and restructuring charges) 28 106 108 88 53
M&I and restructuring charges - 1 2 - 3
----------------------------- --- --- --- --- ---
Total noninterest expense 28 107 110 88 56
------------------------- --- --- --- --- ---
Income (loss) before taxes $67 $(28) $(31) $9 $37
--- ---- ---- --- ---
Income (loss) before taxes (ex. M&I and restructuring charges) - Non-GAAP $67 $(27) $(29) $9 $40
------------------------------------------------------------------------- --- ---- ---- --- ---
Average loans and leases $1,302 $1,341 $2,142 $1,941 $1,703
------------------------ ------ ------ ------ ------ ------
KEY POINTS
-- Total fee and other revenue increased $18 million compared with 2Q16 and
$41 million compared with 1Q17. Both increases primarily reflect
lease-related gains and higher income from corporate/bank-owned life
insurance. The year-over-year increase was partially offset by the
negative impact of foreign exchange translation and lower other income
driven by our investments in renewable energy. The sequential increase
was partially offset by a net gain related to an equity investment
recorded in 1Q17.
-- Net interest revenue decreased $17 million compared with 2Q16 and $21
million compared with 1Q17. Both decreases primarily reflect the impact
of higher crediting rates to the businesses.
-- Noninterest expense (excluding M&I and restructuring charges) decreased
$25 million compared with 2Q16 and $78 million compared with 1Q17. Both
decreases are primarily driven by lower staff expense.
THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement
(in millions) Quarter ended Year-to-date
------------ ------------
June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Fee and other revenue
Investment services fees:
Asset servicing $1,085 $1,063 $1,069 $2,148 $2,109
Clearing services 394 376 350 770 700
Issuer services 241 251 234 492 478
Treasury services 140 139 139 279 270
----------------- --- --- --- --- ---
Total investment services fees 1,860 1,829 1,792 3,689 3,557
Investment management and performance fees 879 842 830 1,721 1,642
Foreign exchange and other trading revenue 165 164 182 329 357
Financing-related fees 53 55 57 108 111
Distribution and servicing 41 41 43 82 82
Investment and other income 122 77 74 199 179
--------------------------- --- --- --- --- ---
Total fee revenue 3,120 3,008 2,978 6,128 5,928
Net securities gains - 10 21 10 41
-------------------- --- --- --- --- ---
Total fee and other revenue 3,120 3,018 2,999 6,138 5,969
Operations of consolidated investment management funds
Investment income 10 37 10 47 7
Interest of investment management fund note holders - 4 - 4 3
--------------------------------------------------- --- --- --- --- ---
Income from consolidated investment management funds 10 33 10 43 4
Net interest revenue
Interest revenue 1,052 960 890 2,012 1,773
Interest expense 226 168 123 394 240
---------------- --- --- --- --- ---
Net interest revenue 826 792 767 1,618 1,533
--------------------
Total revenue 3,956 3,843 3,776 7,799 7,506
Provision for credit losses (7) (5) (9) (12) 1
Noninterest expense
Staff 1,417 1,472 1,412 2,889 2,871
Professional, legal and other purchased services 319 312 290 631 568
Software and equipment 232 223 223 455 442
Net occupancy 139 136 152 275 294
Distribution and servicing 104 100 102 204 202
Sub-custodian 65 64 70 129 129
Bank assessment charges (a) 59 57 52 116 105
Business development 63 51 65 114 122
Other (a) 192 167 188 359 376
Amortization of intangible assets 53 52 59 105 116
M&I, litigation and restructuring charges 12 8 7 20 24
--- --- ---
Total noninterest expense 2,655 2,642 2,620 5,297 5,249
------------------------- ----- ----- ----- ----- -----
Income
Income before income taxes 1,308 1,206 1,165 2,514 2,256
Provision for income taxes 332 269 290 601 573
-------------------------- --- --- --- --- ---
Net income 976 937 875 1,913 1,683
Net (income) loss attributable to noncontrolling interests (includes $(3), (1) (15) (2) (16) 7
$(18),$(4), $(21) and $3 related to consolidated investment management
funds, respectively)
-------------------
Net income applicable to shareholders of The Bank of New York Mellon 975 922 873 1,897 1,690
Corporation
Preferred stock dividends (49) (42) (48) (91) (61)
------------------------- --- --- --- --- ---
Net income applicable to common shareholders of The Bank of New York $926 $880 $825 $1,806 $1,629
Mellon Corporation
------------------
(a) In the first quarter of 2017, we began disclosing bank assessment charges on a quarterly basis. The bank assessment charges were previously included in 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 Quarter ended Year-to-date
York Mellon Corporation used for the earnings per share calculation
June 30, March 31, June 30, June 30, June 30,
2017 2017 2016 2017 2016
(in millions)
Net income applicable to common shareholders of The Bank of New York $926 $880 $825 $1,806 $1,629
Mellon Corporation
Less: Earnings allocated to participating securities 13 14 13 27 24
Net income applicable to the common shareholders of The Bank of New $913 $866 $812 $1,779 $1,605
York Mellon Corporation after required adjustments for the calculation of
basic and diluted earnings per common share
-------------------------------------------
Average common shares and equivalents outstanding of The Bank of New Quarter ended Year-to-date
York Mellon Corporation
June 30, 2017 March 31,
2017 June 30, 2016 June 30, 2017 June 30, 2016
(in thousands)
Basic 1,035,829 1,041,158 1,072,583 1,038,479 1,076,112
Diluted 1,041,879 1,047,746 1,078,271 1,044,809 1,081,847
------- --------- --------- --------- --------- ---------
Earnings per share applicable to the common shareholders of The Bank of New Quarter ended Year-to-date
York Mellon Corporation
June 30, 2017 March 31,
2017 June 30, 2016 June 30, 2017 June 30, 2016
(in dollars)
Basic $0.88 $0.83 $0.76 $1.71 $1.49
Diluted $0.88 $0.83 $0.75 $1.70 $1.48
------- ----- ----- ----- ----- -----
THE BANK OF NEW YORK MELLON CORPORATION
Consolidated Balance Sheet
(dollars in
millions,
except per
share
amounts) June 30, March 31, December 31,
2017 2017 2016
--- ---- ---- ----
Assets
Cash and due
from:
Banks $4,725 $5,366 $4,822
Interest-
bearing
deposits with
the Federal
Reserve and
other central
banks 74,130 65,086 58,041
Interest-
bearing
deposits with
banks 13,601 14,554 15,086
Federal funds
sold and
securities
purchased
under resale
agreements 27,440 25,776 25,801
Securities:
Held-to-
maturity
(fair value
of $40,862,
$40,066 and
$40,669) 40,986 40,254 40,905
Available-
for-sale 78,274 75,580 73,822
---------- ------ ------
Total
securities 119,260 115,834 114,727
Trading assets 5,279 4,912 5,733
Loans 61,673 60,868 64,458
Allowance for
loan losses (165) (164) (169)
------------- ---- ----
Net loans 61,508 60,704 64,289
Premises and
equipment 1,640 1,307 1,303
Accrued
interest
receivable 567 551 568
Goodwill 17,457 17,355 17,316
Intangible
assets 3,506 3,549 3,598
Other assets 25,000 21,515 20,954
------------ ------ ------
Subtotal
assets of
operations 354,113 336,509 332,238
Assets of
consolidated
investment
management
funds, at
fair value 702 1,027 1,231
----- -----
Total assets $354,815 $337,536 $333,469
------------ -------- -------- --------
Liabilities
Deposits:
Noninterest-
bearing
(principally
U.S. offices) $89,063 $79,771 $78,342
Interest-
bearing
deposits in
U.S. offices 48,798 50,991 52,049
Interest-
bearing
deposits in
Non-U.S.
offices 97,816 90,529 91,099
------------ ------ ------
Total deposits 235,677 221,291 221,490
Federal funds
purchased and
securities
sold under
repurchase
agreements 10,934 11,149 9,989
Trading
liabilities 4,100 2,816 4,389
Payables to
customers and
broker-
dealers 21,622 21,306 20,987
Commercial
paper 876 2,543 -
Other borrowed
funds 1,338 1,022 754
Accrued taxes
and other
expenses 5,670 5,290 5,867
Other
liabilities
(includes
allowance for
lending-
related
commitments
of $105, $112
and $112) 6,379 5,733 5,635
Long-term debt 27,699 26,346 24,463
-------------- ------ ------
Subtotal
liabilities
of operations 314,295 297,496 293,574
Liabilities of
consolidated
investment
management
funds, at
fair value 22 209 315
--- ---
Total
liabilities 314,317 297,705 293,889
Temporary
equity
Redeemable
noncontrolling
interests 181 159 151
Permanent
equity
Preferred
stock - par
value $0.01
per share;
authorized
100,000,000
shares;
issued
35,826,
35,826 and
35,826 shares 3,542 3,542 3,542
Common stock -
par value 1,333,706,427
$0.01 per shares
share;
authorized
3,500,000,000
shares;
issued
1,349,181,914,
1,345,247,459
and 13 13 13
Additional
paid-in
capital 26,432 26,248 25,962
Retained
earnings 24,027 23,300 22,621
Accumulated
other
comprehensive
loss, net of
tax (3,093) (3,524) (3,765)
Less:
Treasury
stock of
316,025,713,
305,370,439
and
286,218,126
common
shares, at
cost (10,947) (10,441) (9,562)
------------- ------- ------
Total The Bank
of New York
Mellon
Corporation
shareholders'
equity 39,974 39,138 38,811
Nonredeemable
noncontrolling
interests of
consolidated
investment
management
funds 343 534 618
--------------- --- ---
Total
permanent
equity 40,317 39,672 39,429
---------- ------ ------ ------
Total
liabilities,
temporary
equity and
permanent
equity $354,815 $337,536 $333,469
------------- -------- -------- --------
SUPPLEMENTAL INFORMATION - EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based on estimated fully phased-in CET1 and other risk-based capital ratios, the estimated fully phased-in SLR and tangible common shareholders' equity. BNY Mellon believes that the CET1 and other risk-based capital ratios, on a fully phased-in basis, and the SLR, on a fully phased-in basis, are measures of capital strength that provide additional useful information to investors, supplementing the capital ratios which are, or were, required by regulatory authorities. The tangible common shareholders' equity ratio, which excludes goodwill and intangible assets, net of deferred tax liabilities, includes changes in investment securities valuations which are reflected in total shareholders' equity. In addition, this ratio is expressed as a percentage of the actual book value of assets. 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 revenue measures, which exclude the effect of noncontrolling interests related to consolidated investment management funds, and expense measures, which exclude amortization of intangible assets and M&I, litigation and restructuring charges.
Operating margin, operating leverage and return on equity measures, which exclude some or all of these items, as well as the recovery related to Sentinel, are also presented. Operating margin measures may also exclude the provision for credit losses and distribution and servicing expense. BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons, which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon's control. M&I expenses primarily relate to acquisitions and generally continue for approximately three years after the transaction. Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees. Restructuring charges relate to our streamlining actions and Operational Excellence Initiatives. Excluding the charges mentioned above permits investors to view expenses on a basis consistent with how management views the business.
The presentation of revenue growth on a constant currency basis permits investors to assess the significance of changes in foreign currency exchange rates. Growth rates on a constant currency basis were determined by applying the current period foreign currency exchange rates to the prior period revenue. BNY Mellon believes that this presentation, as a supplement to GAAP information, gives investors a clearer picture of the related revenue results without the variability caused by fluctuations in foreign currency exchange rates.
The presentation of income from consolidated investment management funds, net of net income attributable to noncontrolling interests related to the consolidation of certain investment management funds, permits investors to view revenue on a basis consistent with how management views the business. BNY Mellon believes that these presentations, as a supplement to GAAP information, give investors a clearer picture of the results of its primary businesses.
Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and on a business-level basis.
The following table presents the reconciliation of the pre-tax operating margin ratio.
Reconciliation of income before income taxes - pre-tax operating margin
(dollars in millions) 2Q17 1Q17 4Q16 3Q16 2Q16
-------------------- ---- ---- ---- ---- ----
Income before income taxes - GAAP $1,308 $1,206 $1,152 $1,317 $1,165
Less: Net income attributable to noncontrolling interests of consolidated investment management funds 3 18 4 9 4
Add: Amortization of intangible assets 53 52 60 61 59
M&I, litigation and restructuring charges 12 8 7 18 7
Recovery related to Sentinel - - - (13) -
--- --- --- ---
Income before income taxes, as adjusted - Non-GAAP (a) $1,370 $1,248 $1,215 $1,374 $1,227
Fee and other revenue - GAAP $3,120 $3,018 $2,954 $3,150 $2,999
Income from consolidated investment management funds - GAAP 10 33 5 17 10
Net interest revenue - GAAP 826 792 831 774 767
--------------------------- --- --- --- --- ---
Total revenue - GAAP 3,956 3,843 3,790 3,941 3,776
Less: Net income attributable to noncontrolling interests of consolidated investment management funds 3 18 4 9 4
Total revenue, as adjusted - Non-GAAP (a) $3,953 $3,825 $3,786 $3,932 $3,772
Pre-tax operating margin - GAAP (b)(c) 33% 31% 30% 33% 31%
Adjusted pre-tax operating margin - Non-GAAP (a)(b)(c) 35% 33% 32% 35% 33%
----------------------------------------------------- --- --- --- --- ---
(a) Non-GAAP information for all periods presented excludes net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and
M&I, litigation and restructuring charges. Non-GAAP information for 3Q16 also excludes a recovery of the previously impaired Sentinel loan.
(b) Income before taxes divided by total revenue.
(c) Our GAAP earnings include tax-advantaged investments such as low income housing, renewable energy, bank-owned life insurance and tax-exempt securities. The benefits of these investments are primarily reflected in tax expense. If reported on a tax-equivalent basis, these investments would increase revenue and income before taxes by $106 million for 2Q17, $101 million for 1Q17, $92
million for 4Q16 and $74 million for 3Q16 and 2Q16 and would increase our pre-tax operating margin by approximately 1.8% for 2Q17 and 1Q17, 1.7% for 4Q16, 1.2% for 3Q16 and 1.3% for 2Q16.
The following table presents the reconciliation of the operating leverage.
Operating leverage 2Q17 vs.
(dollars in millions) 2Q17 1Q17 2Q16 1Q17 2Q16
-------------------- ---- ---- ---- ---- ----
Total revenue - GAAP $3,956 $3,843 $3,776 2.94% 4.77%
Less: Net income attributable to noncontrolling interests of consolidated 3 18 4
investment management funds
Total revenue, as adjusted - Non-GAAP $3,953 $3,825 $3,772 3.35% 4.80%
Total noninterest expense - GAAP $2,655 $2,642 $2,620 0.49% 1.34%
Less: Amortization of intangible assets 53 52 59
M&I, litigation and restructuring charges 12 8 7
Total noninterest expense, as adjusted - Non-GAAP $2,590 $2,582 $2,554 0.31% 1.41%
Operating leverage - GAAP (a) 245 bps 343 bps
Adjusted operating leverage - Non-GAAP (a)(b) 304 bps 339 bps
-------------------------------------------- --- --- --- ---
(a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.
(b) Non-GAAP operating leverage for all periods presented excludes net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges.
bps - basis points.
The following table presents the reconciliation of the returns on common equity and tangible common equity.
Return on common equity and tangible common equity
(dollars in millions) 2Q17 1Q17 4Q16 3Q16 2Q16
-------------------- ---- ---- ---- ---- ----
Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP $926 $880 $822 $974 $825
Add: Amortization of intangible assets 53 52 60 61 59
Less: Tax impact of amortization of intangible assets 19 18 19 21 21
------------------------------------------------------
Net income applicable to common shareholders of The Bank of New York Mellon Corporation 960 914 863 1,014 863
excluding amortization of intangible assets - Non-GAAP
Add: M&I, litigation and restructuring charges 12 8 7 18 7
Recovery related to Sentinel - - - (13) -
Less: Tax impact of M&I, litigation and restructuring charges 3 2 3 5 2
Tax impact of recovery related to Sentinel - - - (5) -
------------------------------------------ --- --- --- --- ---
Net income applicable to common shareholders of The Bank of New York Mellon Corporation, $969 $920 $867 $1,019 $868
as adjusted - Non-GAAP (a)
Average common shareholders' equity $35,862 $34,965 $35,171 $35,767 $35,827
Less: Average goodwill 17,408 17,338 17,344 17,463 17,622
Average intangible assets 3,532 3,578 3,638 3,711 3,789
Add: Deferred tax liability - tax deductible goodwill (b) 1,542 1,518 1,497 1,477 1,452
Deferred tax liability - intangible assets (b) 1,095 1,100 1,105 1,116 1,129
--------------------------------------------- ----- ----- ----- ----- -----
Average tangible common shareholders' equity - Non-GAAP $17,559 $16,667 $16,791 $17,186 $16,997
Return on common equity - GAAP (c) 10.4% 10.2% 9.3% 10.8% 9.3%
Adjusted return on common equity - Non-GAAP (a)(c) 10.8% 10.7% 9.8% 11.3% 9.7%
Return on tangible common equity - Non-GAAP (c) 21.9% 22.2% 20.4% 23.5% 20.4%
Adjusted return on tangible common equity - Non-GAAP (a)(c) 22.1% 22.4% 20.5% 23.6% 20.5%
---------------------------------------------------------- ---- ---- ---- ---- ----
(a) Non-GAAP information for all periods presented excludes amortization of intangible assets and M&I, litigation and restructuring charges. Non-GAAP information for 3Q16 also excludes a recovery of
the previously impaired Sentinel loan.
(b) Deferred tax liabilities are based on fully phased-in Basel III capital rules.
(c) Quarterly returns are annualized.
The following table presents the reconciliation of the book value per common share.
Book value per common share June 30, March 31, Dec. 31, Sept. 30, June 30,
2017 2017 2016 2016 2016
---- ---- ---- ---- ----
(dollars in millions, unless otherwise noted)
--------------------------------------------
BNY Mellon shareholders' equity at period end - GAAP $39,974 $39,138 $38,811 $39,695 $38,559
Less: Preferred stock 3,542 3,542 3,542 3,542 2,552
---------------------- ----- ----- ----- ----- -----
BNY Mellon common shareholders' equity at period end - GAAP 36,432 35,596 35,269 36,153 36,007
Less: Goodwill 17,457 17,355 17,316 17,449 17,501
Intangible assets 3,506 3,549 3,598 3,671 3,738
Add: Deferred tax liability - tax deductible goodwill (a) 1,542 1,518 1,497 1,477 1,452
Deferred tax liability - intangible assets (a) 1,095 1,100 1,105 1,116 1,129
--------------------------------------------- ----- ----- ----- ----- -----
BNY Mellon tangible common shareholders' equity at period $18,106 $17,310 $16,957 $17,626 $17,349
end - Non-GAAP
Period-end common shares outstanding (in thousands) 1,033,156 1,039,877 1,047,488 1,057,337 1,067,674
Book value per common share - GAAP $35.26 $34.23 $33.67 $34.19 $33.72
Tangible book value per common share - Non-GAAP $17.53 $16.65 $16.19 $16.67 $16.25
----------------------------------------------- ------ ------ ------ ------ ------
(a) Deferred tax liabilities
are based on fully
phased-in Basel III
capital rules.
The following table presents the impact of changes in foreign currency exchange rates on our consolidated investment management and performance fees.
Investment management and performance fees - Consolidated 2Q17 vs.
(dollars in millions) 2Q17 2Q16 2Q16
-------------------- ---- ---- ----
Investment management and performance fees - GAAP $879 $830 6%
Impact of changes in foreign currency exchange rates - (26)
Investment management and performance fees, as adjusted - Non-GAAP $879 $804 9%
------------------------------------------------------------------ ---- ---- ---
The following table presents income from consolidated investment management funds, net of noncontrolling interests.
Income from consolidated investment management funds, net of noncontrolling interests
(in millions) 2Q17 1Q17 4Q16 3Q16 2Q16
------------ ---- ---- ---- ---- ----
Income from consolidated investment management funds $10 $33 $5 $17 $10
Less: Net income attributable to noncontrolling interests of consolidated investment management funds 3 18 4 9 4
--- --- --- --- ---
Income from consolidated investment management funds, net of noncontrolling interests $7 $15 $1 $8 $6
------------------------------------------------------------------------------------- --- --- --- --- ---
The following table presents the impact of changes in foreign currency exchange rates on investment management fees reported in the Investment Management business.
Investment management fees - Investment Management business 2Q17 vs.
(dollars in millions) 2Q17 2Q16 2Q16
-------------------- ---- ---- ----
Investment management fees - GAAP $845 $808 5%
Impact of changes in foreign currency exchange rates - (25)
---
Investment management fees, as adjusted - Non-GAAP $845 $783 8%
-------------------------------------------------- ---- ---- ---
The following table presents the revenue line items in the Investment Management business impacted by the consolidated investment management funds.
Income (loss) from consolidated investment management funds, net of noncontrolling interests - Investment Management business
(in millions) 2Q17 1Q17 4Q16 3Q16 2Q16
------------ ---- ---- ---- ---- ----
Investment management fees $2 $2 $4 $2 $3
Other (Investment income (loss)) 5 13 (3) 6 3
------------------------------- --- --- --- --- ---
Income from consolidated investment management funds, net of noncontrolling interests $7 $15 $1 $8 $6
------------------------------------------------------------------------------------- --- --- --- --- ---
The following table presents the reconciliation of the pre-tax operating margin for the Investment Management business.
Pre-tax operating margin - Investment Management business
(dollars in millions) 2Q17 1Q17 4Q16 3Q16 2Q16
-------------------- ---- ---- ---- ---- ----
Income before income taxes - GAAP $288 $277 $260 $256 $234
Add: Amortization of intangible assets 15 15 22 22 19
Provision for credit losses - 3 6 - 1
--------------------------- --- --- --- --- ---
Adjusted income before income taxes, excluding amortization of intangible assets $303 $295 $288 $278 $254
and provision for credit losses - Non-GAAP
Total revenue - GAAP $986 $963 $960 $958 $938
Less: Distribution and servicing expense 104 101 98 104 102
----------------------------------------- --- --- --- --- ---
Adjusted total revenue, net of distribution and servicing expense - Non-GAAP $882 $862 $862 $854 $836
Pre-tax operating margin - GAAP (a) 29% 29% 27% 27% 25%
Adjusted pre-tax operating margin, excluding amortization of intangible assets, 34% 34% 33% 33% 30%
provision for credit losses and distribution and servicing expense - Non-GAAP (a)
--------------------------------------------------------------------------------
(a) Income before taxes
divided by total
revenue.
DIVIDENDS
Common - On July 20, 2017, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.24 per share, an increase from the prior dividend amount of $0.19 per common share. This cash dividend is payable on Aug. 11, 2017 to shareholders of record as of the close of business on Aug. 1, 2017.
Preferred - On July 20, 2017, The Bank of New York Mellon Corporation declared the following dividends for the noncumulative perpetual preferred stock, liquidation preference $100,000 per share, for the dividend period ending in September 2017, in each case payable on Sept. 20, 2017 to holders of record as of the close of business on Sept. 5, 2017:
-- $1,022.22 per share on the Series A Preferred Stock (equivalent to
$10.2222 per Normal Preferred Capital Security of Mellon Capital IV,
each representing a 1/100th interest in a share of the Series A
Preferred Stock);
-- $1,300.00 per share on the Series C Preferred Stock (equivalent to
$0.3250 per depositary share, each representing a 1/4,000th interest in
a share of the Series C Preferred Stock); and
-- $2,312.50 per share on the Series F Preferred Stock (equivalent to
$23.1250 per depositary share, each representing a 1/100th interest in a
share of the Series F Preferred Stock).
CAUTIONARY STATEMENT
A number of statements (i) in this Earnings Release, (ii) in our presentations and (iii) in the responses to questions on our conference call discussing our quarterly results and other public events may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 including our estimated capital ratios and expectations relating to those ratios, preliminary business metrics and statements regarding our strategy, growth, positioning and focus. 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," "may," "will," "strategy," "opportunities," "trends" and words of similar meaning signify forward-looking statements. These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation which make reference to the cautionary factors described in this Earnings Release are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control). Actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2016, the Quarterly Report on Form 10-Q for the period ended March 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 20, 2017, 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 and more than 100 markets. As of June 30, 2017, BNY Mellon had $31.1 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
Gerald L. Hassell, chairman, Thomas P. Gibbons, vice chairman and chief financial officer, and Charles W. Scharf, chief executive officer, along with other members of the executive management team from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on July 20, 2017. 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 (719) 325-2110 (International), and using the passcode: 445371, or by logging on to www.bnymellon.com/investorrelations. Earnings materials will be available at www.bnymellon.com/investorrelations beginning at approximately 6:30 a.m. EDT on July 20, 2017. Replays of the conference call and audio webcast will be available beginning July 20, 2017 at approximately 2 p.m. EDT through Aug. 20, 2017 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 6203153. The archived version of the conference call and audio webcast will also be available at www.bnymellon.com/investorrelations for the same time period.
Media Relations:
Eva Radtke
(212) 635-1504
Investor Relations:
Valerie Haertel
(212) 635-8529
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