BANK OF NEW YORK MELLON CORPORATION (THE) NEW YORK, Oct. 19, 2017 /PRNewswire/ --
TOTAL REVENUE OF $4.02 BILLION, INCREASED 2% YEAR-OVER-YEAR
-- Investment management and performance fees increased 5%
-- Investment services fees increased 1%; Asset servicing fees increased 4%
-- Net interest revenue increased 8%
CONTINUED FOCUS ON EXPENSE CONTROL
-- Total noninterest expense up less than 1% year-over-year
EXECUTING ON CAPITAL PLAN AND RETURNING VALUE TO COMMON SHAREHOLDERS
-- Returned over $900 million to shareholders through share repurchases and
dividends
-- Return on common equity of 11%; Return on tangible common equity of 22%
(a)
-- SLR - transitional of 6.3%; SLR - fully phased-in of 6.1% (a)
The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported third quarter net income applicable to common shareholders of $983 million, or $0.94 per diluted common share. Net income applicable to common shareholders was $974 million, or $0.90 per diluted common share, in the third quarter of 2016, and $926 million, or $0.88 per diluted common share, in the second quarter of 2017.
"Since arriving in July, I have been spending time with clients, regulators, business leaders and employees, listening and learning. Based on what I have seen, I like our business model and what we do. While satisfied with our progress, our leadership team is not satisfied with our performance, as we see further opportunities to drive revenue growth and increase our efficiencies. We will do this while maintaining our strong capital position and continuing to deliver high returns to our shareholders," Charles W. Scharf, chief executive officer, said.
"Our third quarter performance was consistent with our expectation and some areas showed reasonable growth, such as asset servicing, clearing services and investment management. Other areas underperformed, such as depositary receipts, which also reduced foreign exchange trading revenue," Mr. Scharf continued.
"We want to be a consistently high-performing company. Our clients and shareholders expect as much. That will require disciplined management and execution. It will also require continued investment in our core technology platform, heightened focus on achieving platform integration and a reduction in the complexity of our operating environment. Client focus is at the core of our culture, and we have a big opportunity to do a better job delivering all of BNY Mellon to our clients," Mr. Scharf concluded.
(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.
THIRD QUARTER 2017 FINANCIAL HIGHLIGHTS (a)
(comparisons are 3Q17 vs. 3Q16, unless otherwise stated)
Earnings
-- Total revenue of $4.0 billion, increased 2%.
-- Investment services fees increased 1% reflecting higher money market
fees, higher equity market values and net new business, partially
offset by a reduced amount of seasonal Depositary Receipts revenue.
-- Investment management and performance fees increased 5% due to
higher equity market values, money market fees and performance fees.
-- Foreign exchange revenue decreased 10% reflecting lower volatility
and lower Depositary Receipt-related foreign exchange activity
offset by higher volumes.
-- Investment and other income decreased $29 million reflecting lower
other income driven by our investments in renewable energy and lower
seed capital gains.
-- Net interest revenue increased 8% driven by higher interest rates,
offset by lower average deposits and loans.
-- The provision for credit losses was a credit of $6 million.
-- Noninterest expense of $2.7 billion, increased less than 1% reflecting
higher software and professional, legal and other purchased services
expenses, partially offset by lower litigation expense and bank
assessment charges.
-- Effective tax rate of 25.4% for 3Q17.
-- Preferred stock dividends of $35 million in 3Q17.
Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
-- Record AUC/A of $32.2 trillion increased 6% reflecting higher market
values, the favorable impact of a weaker U.S. dollar and net new
business.
-- Estimated new AUC/A wins in Asset Servicing of $166 billion in 3Q17.
-- Record AUM of $1.82 trillion increased 6% reflecting higher market
values, net inflows and the favorable impact of a weaker U.S. dollar
(principally versus the British pound).
-- Net long-term inflows of fixed income and multi-asset and
alternative investments were offset by outflows of index, equity and
liability-driven investments in 3Q17.
-- Net short-term inflows of $10 billion in 3Q17 were a result of
increased distribution through our liquidity portals.
Capital and liquidity
-- Repurchased 12 million common shares for $650 million and paid $253
million in dividends to common shareholders.
-- Return on common equity of 11%; Adjusted return on tangible common
equity of 22% (a).
-- SLR - transitional of 6.3%; SLR - fully phased-in of 6.1% (a).
-- Average LCR of 119%.
(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 3Q17 vs.
thousands)
---------
3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
---- ---- ---- ---- ---- ---- ----
Revenue:
Fee and other revenue $3,167 $3,120 $3,018 $2,954 $3,150 2% 1%
Income from consolidated investment management funds 10 10 33 5 17
Net interest revenue 839 826 792 831 774 2 8
-------------------- --- --- --- --- --- --- ---
Total revenue - GAAP 4,016 3,956 3,843 3,790 3,941 2 2
Less: Net income attributable to noncontrolling interests related 3 3 18 4 9
to consolidated investment management funds
-------------------------------------------
Total revenue, as adjusted - Non-GAAP 4,013 3,953 3,825 3,786 3,932 2 2
------------------------------------- ----- ----- ----- ----- ----- --- ---
Provision for credit losses (6) (7) (5) 7 (19)
Expense:
Noninterest expense - GAAP 2,654 2,655 2,642 2,631 2,643 - -
Less: Amortization of intangible assets 52 53 52 60 61
M&I, litigation and restructuring charges 6 12 8 7 18
Total noninterest expense, as adjusted - Non-GAAP 2,596 2,590 2,582 2,564 2,564 - 1
------------------------------------------------- ----- ----- ----- ----- ----- --- ---
Income:
Income before income taxes 1,368 1,308 1,206 1,152 1,317 5% 4%
Provision for income taxes 348 332 269 280 324
-------------------------- --- --- --- --- ---
Net income $1,020 $976 $937 $872 $993
Net (income) attributable to noncontrolling interests (a) (2) (1) (15) (2) (6)
-------------------------------------------------------- --- --- --- --- ---
Net income applicable to shareholders of The Bank of New 1,018 975 922 870 987
York Mellon Corporation
Preferred stock dividends (35) (49) (42) (48) (13)
------------------------- --- --- --- --- ---
Net income applicable to common shareholders of The Bank $983 $926 $880 $822 $974
of New York Mellon Corporation
------------------------------
Operating leverage (b) 156 bps 148 bps
Adjusted operating leverage - Non-GAAP (b)(c) 129 bps 81 bps
Key Metrics:
------------
Pre-tax operating margin (c) 34% 33% 31% 30% 33%
Adjusted pre-tax operating margin - Non-GAAP (c) 35% 35% 33% 32% 35%
Return on common equity (annualized)(c) 10.6% 10.4% 10.2% 9.3% 10.8%
Adjusted return on common equity (annualized) - Non-GAAP (c) 11.0% 10.8% 10.7% 9.8% 11.3%
Return on tangible common equity (annualized) - Non- 21.9% 21.9% 22.2% 20.4% 23.5%
GAAP (c)(d)
Adjusted return on tangible common equity (annualized) - Non- 22.0% 22.1% 22.4% 20.5% 23.6%
GAAP (c)(d)
Fee revenue as a percentage of total revenue 78% 79% 78% 78% 79%
Percentage of non-U.S. total revenue 36% 35% 34% 34% 36%
Average common shares and equivalents outstanding:
Basic 1,035,337 1,035,829 1,041,158 1,050,888 1,062,248
Diluted 1,041,138 1,041,879 1,047,746 1,056,818 1,067,682
Period end:
-----------
Full-time employees 52,900 52,800 52,600 52,000 52,300
Book value per common share - GAAP (d) $36.11 $35.26 $34.23 $33.67 $34.19
Tangible book value per common share - Non-GAAP (d) $18.19 $17.53 $16.65 $16.19 $16.67
Cash dividends per common share $0.24 $0.19 $0.19 $0.19 $0.19
Common dividend payout ratio 26% 22% 23% 25% 21%
Closing stock price per common share $53.02 $51.02 $47.23 $47.38 $39.88
Market capitalization $54,294 $52,712 $49,113 $49,630 $42,167
Common shares outstanding 1,024,022 1,033,156 1,039,877 1,047,488 1,057,337
------------------------- --------- --------- --------- --------- ---------
(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 3Q17 vs.
3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
---- ---- ---- ---- ---- ---- ----
Standard & Poor's ("S&P") 500 Index (a) 2519 2423 2363 2239 2168 4% 16%
S&P 500 Index - daily average 2467 2398 2326 2185 2162 3 14
FTSE 100 Index (a) 7373 7313 7323 7143 6899 1 7
FTSE 100 Index - daily average 7380 7391 7274 6923 6765 - 9
MSCI EAFE (a) 1974 1883 1793 1684 1702 5 16
MSCI EAFE - daily average 1934 1856 1749 1660 1677 4 15
Barclays Capital Global Aggregate BondSM Index (a)(b) 480 471 459 451 486 2 (1)
NYSE and NASDAQ share volume (in billions) 179 199 186 189 186 (10) (4)
JPMorgan G7 Volatility Index - daily average (c) 8.17 7.98 10.10 10.24 10.19 2 (20)
Average interest on excess reserves paid by the Federal Reserve 1.25% 1.04% 0.79% 0.55% 0.50% 21 bps 75 bps
Foreign exchange rates vs. U.S. dollar:
British pound (a) $1.34 $1.30 $1.25 $1.23 $1.30 3% 3%
British pound - average rate 1.31 1.28 1.24 1.24 1.31 2 -
Euro (a) 1.18 1.14 1.07 1.05 1.12 4 5
Euro - average rate 1.17 1.10 1.07 1.08 1.12 6 4
------------------- ---- ---- ---- ---- ---- --- ---
(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 3Q17 vs.
(dollars in millions) 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
-------------------- ---- ---- ---- ---- ---- ---- ----
Investment services fees:
Asset servicing (a) $1,105 $1,085 $1,063 $1,068 $1,067 2% 4%
Clearing services 383 394 376 355 349 (3) 10
Issuer services 288 241 251 211 337 20 (15)
Treasury services 141 140 139 140 137 1 3
--- --- --- --- --- --- ---
Total investment services fees 1,917 1,860 1,829 1,774 1,890 3 1
Investment management and performance fees 901 879 842 848 860 3 5
Foreign exchange and other trading revenue 173 165 164 161 183 5 (5)
Financing-related fees 54 53 55 50 58 2 (7)
Distribution and servicing 40 41 41 41 43 (2) (7)
Investment and other income 63 122 77 70 92 N/M N/M
--------------------------- --- ---
Total fee revenue 3,148 3,120 3,008 2,944 3,126 1 1
Net securities gains 19 - 10 10 24 N/M N/M
-------------------- --- --- --- --- --- --- ---
Total fee and other revenue $3,167 $3,120 $3,018 $2,954 $3,150 2% 1%
--------------------------- ------ ------ ------ ------ ------ --- ---
(a) Asset servicing fees
include securities lending
revenue of $47 million in
3Q17, $48 million in 2Q17,
$49 million in 1Q17,$54
million in 4Q16 and $51
million in 3Q16.
N/M - Not meaningful.
KEY POINTS
-- Asset servicing fees increased 4% year-over-year and 2% sequentially.
The year-over-year increase primarily reflects higher equity market
values and net new business, including growth in collateral management,
partially offset by the impact of downsizing the retail UK transfer
agency business. The sequential increase was primarily driven by the
favorable impact of a weaker U.S. dollar and higher equity market
values.
-- Clearing services fees increased 10% year-over-year and decreased 3%
sequentially. The year-over-year increase primarily reflects higher
money market fees and growth in long-term mutual fund assets. The
sequential decrease primarily reflects lower clearance volumes.
-- Issuer services fees decreased 15% year-over-year primarily reflecting
fewer corporate actions, lost business and lower fees due to a reduction
in shares outstanding in certain Depositary Receipts programs, partially
offset by higher Corporate Trust revenue. The 20% sequential increase
primarily reflects seasonality in Depositary Receipts revenue and higher
Corporate Trust revenue.
-- Treasury services fees increased 3% year-over-year and 1% sequentially,
primarily reflecting higher payment volumes, partially offset by higher
compensating balance credits provided to clients, which reduce fee
revenue and increase net interest revenue.
-- Investment management and performance fees increased 5% year-over-year
and 3% sequentially, primarily reflecting higher equity market values
and money market fees. The year-over-year increase also reflects higher
performance fees. The sequential increase also reflects the favorable
impact of a weaker U.S. dollar. Changes in currency rates had an
insignificant impact on the growth rate of investment management and
performance fees on a year-over-year basis.
-- Foreign exchange and other trading revenue
(in millions) 3Q17 2Q17 1Q17 4Q16 3Q16
------------ ---- ---- ---- ---- ----
Foreign exchange $158 $151 $154 $175 $175
Other trading revenue (loss) 15 14 10 (14) 8
--------------------------- --- --- --- --- ---
Total foreign exchange and other trading revenue $173 $165 $164 $161 $183
------------------------------------------------ ---- ---- ---- ---- ----
Foreign exchange revenue decreased 10% year-over-year and increased 5% sequentially. Year-over-year, lower volatility and lower Depositary Receipt-related foreign exchange activity were partially offset by higher volumes. The sequential increase reflects higher volumes. The year-over-year increase in other trading revenue primarily reflects higher fixed income trading revenue.
-- Financing-related fees decreased 7% year-over-year primarily reflecting
lower syndication fees. The sequential increase of 2% primarily reflects
higher underwriting fees.
-- Investment and other income
(in millions) 3Q17 2Q17 1Q17 4Q16 3Q16
------------ ---- ---- ---- ---- ----
Corporate/bank-owned life insurance $37 $43 $30 $53 $34
Expense reimbursements from joint venture 18 17 14 15 18
Seed capital gains (a) 6 10 9 6 16
Asset-related gains (losses) 1 (5) 3 1 8
Lease-related gains (losses) - 51 1 (6) -
Equity investment income (loss) - 7 26 (2) (1)
Other income (loss) 1 (1) (6) 3 17
--- --- --- --- ---
Total investment and other income $63 $122 $77 $70 $92
--------------------------------- --- ---- --- --- ---
(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
3Q17, $7 million in 2Q17, $15
million in 1Q17, $1 million in
4Q16 and $8 million in 3Q16.
The year-over-year decrease in investment and other income primarily reflects lower other income driven by our investments in renewable energy and lower seed capital gains. The sequential decrease in investment and other income primarily reflects lease-related gains recorded in 2Q17 and lower income from corporate/bank-owned life insurance.
NET INTEREST REVENUE
Net interest revenue 3Q17 vs.
(dollars in millions) 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
-------------------- ---- ---- ---- ---- ---- ---- ----
Net interest revenue $839 $826 $792 $831 $774 2% 8%
Tax equivalent adjustment 12 12 12 12 12 N/M N/M
------------------------- --- --- --- --- --- --- ---
Net interest revenue (FTE) - Non-GAAP (a) $851 $838 $804 $843 $786 2% 8%
Net interest margin 1.15% 1.14% 1.13% 1.16% 1.05% 1 bps 10 bps
Net interest margin (FTE) - Non-GAAP (a) 1.16% 1.16% 1.14% 1.17% 1.06% - bps 10 bps
Selected average balances:
Cash/interbank investments $114,449 $111,021 $106,069 $104,352 $114,544 3% - %
Trading account securities 2,359 2,455 2,254 2,288 2,176 (4) 8
Securities 119,089 117,227 114,786 117,660 118,405 2 1
Loans 55,944 58,793 60,312 63,647 61,578 (5) (9)
----- ------ ------ ------ ------ ------ --- ---
Interest-earning assets 291,841 289,496 283,421 287,947 296,703 1 (2)
Interest-bearing deposits 142,490 142,336 139,820 145,681 155,109 - (8)
Noninterest-bearing deposits 70,168 73,886 73,555 82,267 81,619 (5) (14)
Long-term debt 28,138 27,398 25,882 24,986 23,930 3 18
Selected average yields/rates: (b)
Cash/interbank investments 0.84% 0.67% 0.56% 0.47% 0.43%
Trading account securities 2.26 2.85 3.12 3.17 2.62
Securities 1.80 1.72 1.71 1.67 1.56
Loans 2.63 2.44 2.15 1.92 1.84
Interest-earning assets 1.59 1.47 1.38 1.30 1.19
Interest-bearing deposits 0.16 0.09 0.03 (0.01) (0.02)
Long-term debt 2.07 1.87 1.85 1.36 1.54
Average cash/interbank investments as a percentage 39% 38% 37% 36% 39%
of average interest-earning assets
Average noninterest-bearing deposits as a percentage 24% 26% 26% 29% 28%
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 2% sequentially,
primarily reflecting higher interest rates, partially offset by lower
average deposits and loans. The sequential increase also reflects an
additional interest-earning day during the quarter.
NONINTEREST EXPENSE
Noninterest expense 3Q17 vs.
(dollars in millions) 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
-------------------- ---- ---- ---- ---- ---- ---- ----
Staff $1,469 $1,417 $1,472 $1,395 $1,467 4% - %
Professional, legal and other purchased services 305 319 312 325 292 (4) 4
Software and equipment 233 232 223 237 215 - 8
Net occupancy 141 139 136 153 143 1 (1)
Distribution and servicing 109 104 100 98 105 5 4
Sub-custodian 62 65 64 57 59 (5) 5
Bank assessment charges 51 59 57 53 61 (14) (16)
Business development 49 63 51 71 52 (22) (6)
Other 177 192 167 175 170 (8) 4
Amortization of intangible assets 52 53 52 60 61 (2) (15)
M&I, litigation and restructuring charges 6 12 8 7 18 N/M N/M
----------------------------------------- --- --- --- --- --- --- ---
Total noninterest expense - GAAP $2,654 $2,655 $2,642 $2,631 $2,643 - % - %
-------------------------------- ------ ------ ------ ------ ------ --- --- --- ---
Staff expense as a percentage of total revenue 37% 36% 38% 37% 37%
Memo:
-----
Adjusted total noninterest expense excluding amortization $2,596 $2,590 $2,582 $2,564 $2,564 - % 1%
of intangible assets and M&I, litigation and
restructuring charges - Non-GAAP
-------------------------------- ---
N/M - Not meaningful.
KEY POINTS
-- Total noninterest expense increased less than 1% year-over-year and
decreased slightly sequentially. Adjusted total noninterest expense,
excluding amortization of intangible assets and M&I, litigation and
restructuring charges (Non-GAAP), increased 1% year-over-year and
increased less than 1% sequentially.
-- The year-over-year increase primarily reflects higher software and
professional, legal and other purchased services expenses, partially
offset by lower litigation expense and bank assessment charges.
-- Sequentially, higher staff expense was offset by lower other,
professional, legal and other purchases services, and business
development expenses as well as lower bank assessment charges. The
increase in staff expense was primarily driven by higher incentives
expense reflecting stronger performance and the annual employee merit
increase. The decrease in professional, legal and other purchases
services was driven by lower consulting expense related to resolution
planning.
INVESTMENT SECURITIES PORTFOLIO
At Sept. 30, 2017, the fair value of our investment securities portfolio totaled $119.7 billion. The net unrealized pre-tax gain on our total securities portfolio was $257 million at Sept. 30, 2017 compared with a pre-tax gain of $151 million at June 30, 2017. The increase in the net unrealized pre-tax gain was primarily driven by a decrease in long-term interest rates. At Sept. 30, 2017, the fair value of the held-to-maturity securities totaled $39.9 billion and represented 33% of the fair value of the total investment securities portfolio.
The following table shows the distribution of our investment securities portfolio.
Investment securities June 30, 2017 3Q17 Sept. 30, 2017 Fair value Unrealized Ratings (b)
portfolio
change in as a % of gain (loss)
amortized
unrealized
cost (a)
gain (loss)
--- ----------
BB+
and
lower
-----
(dollars in millions) Fair Amortized Fair AAA/ A+/ BBB+/ Not
value cost value AA- A- BBB- rated
--- ----- ---- ----- --- --- ----
Agency RMBS $49,544 $81 $50,121 $49,917 100% $(204) 100% - % - % - % - %
U.S. Treasury 25,325 (5) 25,256 25,159 100 (97) 100 - - - -
Sovereign debt/sovereign 14,025 6 13,951 14,102 101 151 72 6 21 1 -
guaranteed
Non-agency RMBS (c) 1,239 9 885 1,185 84 300 - 1 3 87 9
Non-agency RMBS 627 9 555 594 97 39 7 4 17 71 1
European floating rate 523 (1) 393 387 98 (6) 63 37 - - -
notes
Commercial MBS 10,574 5 11,051 11,033 100 (18) 99 1 - - -
State and political 3,299 1 3,109 3,141 101 32 80 17 - - 3
subdivisions
Foreign covered bonds 2,471 1 2,612 2,626 101 14 100 - - - -
Corporate bonds 1,318 4 1,262 1,275 101 13 17 69 14 - -
CLOs 2,642 1 2,542 2,550 100 8 99 - - 1 -
U.S. Government agencies 2,210 2 2,480 2,496 101 16 100 - - - -
Consumer ABS 1,330 1 1,152 1,157 100 5 89 4 5 2 -
Other (d) 3,758 (8) 4,118 4,122 100 4 81 17 - - 2
----- ---
Total investment $118,885 (e) $106 $119,487 $119,744 (e) 100% $257 (e)(f) 93% 3% 3% 1% - %
securities
----------
(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 $700 million and $700
million and money market funds with
a fair value of $896 million and
$939 million at June 30, 2017 and
Sept. 30, 2017, respectively.
(e) Includes net unrealized losses on
derivatives hedging securities
available-for-sale of $251 million
at June 30, 2017 and $238 million at
Sept. 30, 2017.
(f) Unrealized gains of $324 million at
Sept. 30, 2017 related to available-
for-sale securities, net of hedges.
NONPERFORMING ASSETS
Nonperforming assets Sept. 30, June 30, December 31,
2017 2017 2016
(dollars in millions)
--------------------
Nonperforming loans:
Other residential mortgages $80 $84 $91
Wealth management loans and mortgages 8 10 8
Financial institutions 2 2 -
Lease financing - - 4
Total nonperforming loans 90 96 103
Other assets owned 4 4 4
--- ---
Total nonperforming assets $94 $100 $107
-------------------------- --- ---- ----
Nonperforming assets ratio 0.16% 0.16% 0.17%
Allowance for loan losses/nonperforming loans 178.9 171.9 164.1
Total allowance for credit losses/nonperforming loans 294.4 281.3 272.8
----------------------------------------------------- ----- ----- -----
Nonperforming assets decreased $6 million compared with June 30, 2017 and $13 million compared with Dec. 31, 2016. The decrease compared with June 30, 2017 primarily reflects lower other residential mortgages and wealth management loans and mortgages.
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS
Allowance for credit losses, provision and net recoveries Sept. 30, June 30, Sept. 30,
2017 2017 2016
(in millions)
------------
Allowance for credit losses - beginning of period $270 $276 $280
Provision for credit losses (6) (7) (19)
Net recoveries:
Other residential mortgages 1 1 -
Financial institutions - - 13
---------------------- --- --- ---
Net recoveries 1 1 13
-------------- --- --- ---
Allowance for credit losses - end of period $265 $270 $274
------------------------------------------- ---- ---- ----
Allowance for loan losses $161 $165 $148
Allowance for lending-related commitments 104 105 126
----------------------------------------- --- --- ---
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 Sept. 30, June 30, December 31,
2017 2017 2016
--- ---- ---- ----
Consolidated regulatory capital ratios: (a)
Standardized Approach:
CET1 ratio 12.3% 12.0% 12.3%
Tier 1 capital ratio 14.6 14.3 14.5
Total (Tier 1 plus Tier 2) capital ratio 15.6 14.8 15.2
Advanced Approach:
CET1 ratio 11.1 10.8 10.6
Tier 1 capital ratio 13.2 12.9 12.6
Total (Tier 1 plus Tier 2) capital ratio 14.0 13.2 13.0
Leverage capital ratio (b) 6.8 6.7 6.6
Supplementary leverage ratio ("SLR") 6.3 6.2 6.0
----------------------------------- --- --- ---
BNY Mellon shareholders' equity to total assets ratio 11.4 11.3 11.6
BNY Mellon common shareholders' equity to total assets ratio 10.4 10.3 10.6
Selected regulatory capital ratios - fully phased-in - Non-GAAP: (a)(c)
CET1 ratio:
Standardized Approach 11.9% 11.5% 11.3%
Advanced Approach 10.7 10.4 9.7
SLR 6.1 6.0 5.6
--- --- --- ---
(a) Regulatory capital ratios for
Sept. 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 3Q17 - preliminary Transitional Fully
basis (b) phased-in -
Non-GAAP (c)
-----------
(in millions)
CET1 - Beginning of period $18,371 $17,629
Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP 983 983
Goodwill and intangible assets, net of related deferred tax liabilities (33) (26)
----------------------------------------------------------------------- ---
Gross CET1 generated 950 957
Capital deployed:
Dividends (253) (253)
Common stock repurchased (650) (650)
------------------------ ---- ----
Total capital deployed (903) (903)
Other comprehensive income 306 312
Additional paid-in capital (a) 156 156
Other (10) (10)
Total other additions 452 458
--------------------- --- ---
Net CET1 generated 499 512
--- ---
CET1 - End of period $18,870 $18,141
-------------------- ------- -------
(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 Sept. 30, 2017 (a) June 30, 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 $37,195 $36,981 $36,652 $36,432 $35,794 $35,269
Goodwill and intangible assets (17,876) (18,351) (17,843) (18,325) (17,314) (18,312)
Net pension fund assets (72) (90) (72) (90) (55) (90)
Equity method investments (334) (348) (325) (340) (313) (344)
Deferred tax assets (31) (39) (30) (37) (19) (32)
Other (12) (12) (11) (11) - (1)
----- --- --- --- --- --- ---
Total CET1 18,870 18,141 18,371 17,629 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 (19) - (18) - (36) -
Other (34) (34) (24) (24) (121) (121)
----- --- --- --- --- ---- ----
Total Tier 1 capital 22,351 21,649 21,864 21,147 21,465 19,911
Tier 2 capital:
Subordinated debt 1,300 1,250 550 550 550 550
Allowance for credit losses 265 265 270 270 281 281
Trust preferred securities - - - - 148 -
Other (7) (7) (7) (7) (12) (11)
----- --- --- --- --- --- ---
Total Tier 2 capital - Standardized Approach 1,558 1,508 813 813 967 820
Excess of expected credit losses 49 49 59 59 50 50
Less: Allowance for credit losses 265 265 270 270 281 281
--------------------------------- --- --- --- --- --- ---
Total Tier 2 capital - Advanced Approach $1,342 $1,292 $602 $602 $736 $589
---------------------------------------- ------ ------ ---- ---- ---- ----
Total capital:
Standardized Approach $23,909 $23,157 $22,677 $21,960 $22,432 $20,731
Advanced Approach $23,693 $22,941 $22,466 $21,749 $22,201 $20,500
Risk-weighted assets:
Standardized Approach $153,063 $152,564 $153,179 $152,645 $147,671 $146,475
Advanced Approach $169,794 $169,265 $170,043 $169,478 $170,495 $169,227
Standardized Approach:
CET1 ratio 12.3% 11.9% 12.0% 11.5% 12.3% 11.3%
Tier 1 capital ratio 14.6 14.2 14.3 13.9 14.5 13.6
Total (Tier 1 plus Tier 2) capital ratio 15.6 15.2 14.8 14.4 15.2 14.2
Advanced Approach:
CET1 ratio 11.1% 10.7% 10.8% 10.4% 10.6% 9.7%
Tier 1 capital ratio 13.2 12.8 12.9 12.5 12.6 11.8
Total (Tier 1 plus Tier 2) capital ratio 14.0 13.6 13.2 12.8 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 Sept. 30, 2017 (a) June 30, 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 $22,351 $21,649 $21,864 $21,147 $21,465 $19,911
Total leverage exposure:
Quarterly average total assets $345,709 $345,709 $342,515 $342,515 $344,142 $344,142
Less: Amounts deducted from Tier 1 capital 18,148 18,856 18,092 18,810 17,333 18,887
------------------------------------------ ------ ------ ------ ------ ------ ------
Total on-balance sheet assets, as adjusted 327,561 326,853 324,423 323,705 326,809 325,255
Off-balance sheet exposures:
Potential future exposure for derivative 6,209 6,209 6,014 6,014 6,021 6,021
contracts (plus certain other items)
Repo-style transaction exposures 1,034 1,034 631 631 533 533
Credit-equivalent amount of other off-balance 21,954 21,954 22,098 22,098 23,274 23,274
sheet exposures (less SLR exclusions)
Total off-balance sheet exposures 29,197 29,197 28,743 28,743 29,828 29,828
------ ------
Total leverage exposure $356,758 $356,050 $353,166 $352,448 $356,637 $355,083
----------------------- -------- -------- -------- -------- -------- --------
SLR - Consolidated (c) 6.3% 6.1% 6.2% 6.0% 6.0% 5.6%
The Bank of New York Mellon, our largest
bank subsidiary:
Tier 1 capital $20,718 $19,955 $19,897 $19,125 $19,011 $17,708
Total leverage exposure $292,859 $292,513 $286,983 $286,634 $291,022 $290,230
SLR - The Bank of New York Mellon (c) 7.1% 6.8% 6.9% 6.7% 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 119% for 3Q17. High-quality liquid assets ("HQLA"), before haircuts and trapped liquidity, totaled $175 billion at Sept. 30, 2017 and averaged $162 billion for 3Q17.
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) 3Q17 vs.
--------------------------------------------
3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
---- ---- ---- ---- ---- ---- ----
Revenue:
Investment management fees:
Mutual funds $332 $314 $299 $297 $309 6% 7%
Institutional clients 367 362 348 340 362 1 1
Wealth management 172 169 167 164 166 2 4
----------------- --- --- --- --- --- --- ---
Investment management fees (a) 871 845 814 801 837 3 4
Performance fees 15 17 12 32 8 N/M 88
--- --- ---
Investment management and performance fees 886 862 826 833 845 3 5
Distribution and servicing 51 53 52 48 49 (4) 4
Other (a) (19) (16) (1) (1) (18) N/M N/M
-------- --- --- --- --- ---
Total fee and other revenue (a) 918 899 877 880 876 2 5
Net interest revenue 82 87 86 80 82 (6) -
-------------------- --- --- --- --- --- --- ---
Total revenue 1,000 986 963 960 958 1 4
Provision for credit losses (2) - 3 6 - N/M N/M
Noninterest expense (ex. amortization of intangible assets) 687 683 668 672 680 1 1
Amortization of intangible assets 15 15 15 22 22 - (32)
--------------------------------- --- --- --- --- --- --- ---
Total noninterest expense 702 698 683 694 702 1 -
------------------------- --- --- --- --- --- --- ---
Income before taxes $300 $288 $277 $260 $256 4% 17%
------------------- ---- ---- ---- ---- ---- --- ---
Income before taxes (ex. amortization of intangible $315 $303 $292 $282 $278 4% 13%
assets) - Non-GAAP
------------------
Pre-tax operating margin 30% 29% 29% 27% 27%
Adjusted pre-tax operating margin - Non-GAAP (b) 35% 34% 34% 33% 33%
Changes in AUM (in billions): (c)
Beginning balance of AUM $1,771 $1,727 $1,648 $1,715 $1,664
Net inflows (outflows):
Long-term strategies:
Equity (2) (2) (4) (5) (6)
Fixed income 4 2 2 (1) (1)
Liability-driven investments (d) (2) 15 14 (7) 4
Multi-asset and alternative investments 3 1 2 3 7
--------------------------------------- --- --- --- --- ---
Total long-term active strategies inflows (outflows) 3 16 14 (10) 4
Index (3) (13) - (1) (3)
Total long-term strategies inflows (outflows) - 3 14 (11) 1
Short term strategies:
Cash 10 11 13 (3) (1)
---- --- --- --- --- ---
Total net inflows (outflows) 10 14 27 (14) -
Net market impact/other 17 1 41 (11) 80
Net currency impact 26 29 11 (42) (29)
------------------- --- --- --- --- ---
Ending balance of AUM $1,824 (e) $1,771 $1,727 $1,648 $1,715 3% 6%
AUM at period end, by product type: (c)
Equity 9% 9% 9% 9% 9%
Fixed income 11 11 11 11 11
Index 18 18 19 19 18
Liability-driven investments (d) 35 35 34 34 35
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 $16,724 $16,560 $16,153 $15,673 $15,308 1% 9%
Average deposits $12,374 $14,866 $15,781 $15,511 $15,600 (17)% (21)%
---------------- ------- ------- ------- ------- ------- ---- ----
(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 $300 million in 3Q17, an increase of 17%
year-over-year and 4% sequentially. Income before taxes, excluding
amortization of intangible assets (Non-GAAP), totaled $315 million in
3Q17, an increase of 13% year-over-year and 4% sequentially.
-- Pre-tax operating margin of 30% in 3Q17 increased 329 bps
year-over-year and 75 bps sequentially.
-- Adjusted pre-tax operating margin (Non-GAAP) of 35% in 3Q17
increased 265 bps year-over-year and 90 bps sequentially.
-- Total revenue was $1.0 billion, an increase of 4% year-over-year and 1%
sequentially, primarily reflecting higher investment management and
performance fees.
-- 41% non-U.S. revenue in 3Q17 and 40% in 3Q16.
-- Investment management fees increased 4% year-over-year and 3%
sequentially, primarily reflecting higher equity market values and money
market fees. The sequential increase also reflects the favorable impact
of a weaker U.S. dollar.
-- Net long-term inflows of fixed income and multi-asset and
alternative investments were offset by outflows of index, equity and
liability-driven investments in 3Q17.
-- Net short-term inflows of $10 billion in 3Q17 were a result of
increased distribution through our liquidity portals.
-- Other revenue declined year-over-year primarily reflecting higher
payments to Investment Services related to higher money market fees.
-- Net interest revenue was unchanged year-over-year and decreased 6%
sequentially. The sequential decrease primarily reflects lower average
deposits.
-- Average loans increased 9% year-over-year and 1% sequentially.
-- Average deposits decreased 21% year-over-year and 17% sequentially.
-- Total noninterest expense (excluding amortization of intangible assets)
increased 1% year-over-year, primarily reflecting higher other and
distribution and servicing expenses, partially offset by lower severance
expense. The 1% sequential increase primarily reflects higher
distribution and servicing expense.
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) 3Q17 vs.
--------------------------------------------
3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16
---- ---- ---- ---- ---- ---- ----
Revenue:
Investment services fees:
Asset servicing $1,081 $1,061 $1,038 $1,043 $1,039 2% 4%
Clearing services 381 393 375 354 347 (3) 10
Issuer services 288 241 250 211 336 20 (14)
Treasury services 141 139 139 139 136 1 4
--- --- --- --- --- --- ---
Total investment services fees 1,891 1,834 1,802 1,747 1,858 3 2
Foreign exchange and other trading revenue 154 145 153 157 177 6 (13)
Other (a) 142 136 129 128 148 4 (4)
--- --- --- --- --- --- ---
Total fee and other revenue 2,187 2,115 2,084 2,032 2,183 3 -
Net interest revenue 777 761 707 713 715 2 9
--- --- --- --- --- --- ---
Total revenue 2,964 2,876 2,791 2,745 2,898 3 2
Provision for credit losses (2) (3) - - 1 N/M N/M
Noninterest expense (ex. amortization of intangible assets) 1,837 1,889 1,812 1,786 1,812 (3) 1
Amortization of intangible assets 37 38 37 38 39 (3) (5)
--------------------------------- --- --- --- --- --- --- ---
Total noninterest expense 1,874 1,927 1,849 1,824 1,851 (3) 1
------------------------- ----- ----- ----- ----- ----- --- ---
Income before taxes $1,092 $952 $942 $921 $1,046 15% 4%
------ ---- ---- ---- ------ --- ---
Income before taxes (ex. amortization of intangible $1,129 $990 $979 $959 $1,085 14% 4%
assets) - Non-GAAP
------------------
Pre-tax operating margin 37% 33% 34% 34% 36%
Adjusted pre-tax operating margin (ex. provision for credit 38% 34% 35% 35% 37%
losses and amortization of intangible assets) - Non-GAAP
Investment services fees as a percentage of noninterest 103% 97% 99% 98% 103%
expense (ex. amortization of intangible assets)
Securities lending revenue $41 $42 $40 $44 $42 (2)% (2)%
Metrics:
--------
Average loans $38,038 $40,931 $42,818 $45,832 $44,329 (7)% (14)%
Average deposits $198,299 $200,417 $197,690 $213,531 $220,316 (1)% (10)%
AUC/A at period end (in trillions) (b) $32.2 (c) $31.1 $30.6 $29.9 $30.5 4% 6%
Market value of securities on loan at period end $382 $336 $314 $296 $288 14% 33%
(in billions) (d)
Asset servicing:
----------------
Estimated new business wins (AUC/A) (in billions) $166 (c) $152 $109 $141 $150
Clearing services:
------------------
Average active clearing accounts (U.S. platform) 6,203 6,159 6,058 5,960 5,942 1% 4%
(in thousands)
Average long-term mutual fund assets (U.S. platform) $500,998 $480,532 $460,977 $438,460 $443,112 4% 13%
Average investor margin loans (U.S. platform) $8,886 $9,812 $10,740 $10,562 $10,834 (9)% (18)%
Depositary Receipts:
--------------------
Number of sponsored programs 938 1,025 1,050 1,062 1,094 (8)% (14)%
Broker-Dealer:
--------------
Average tri-party repo balances (in billions) $2,534 $2,498 $2,373 $2,307 $2,212 1% 15%
-------------------------------------------- ------ ------ ------ ------ ------ --- ---
(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
$1.3 trillion at Sept. 30, 2017
and $1.2 trillion at June 30,
2017, March 31, 2017,Dec. 31,
2016 and Sept. 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
$68 billion at Sept. 30, 2017,
$66 billion at June 30, 2017,
$65 billion at March 31, 2017,
$63 billion at Dec. 31, 2016 and
$64 billion at Sept. 30, 2016.
N/M - Not meaningful.
INVESTMENT SERVICES KEY POINTS
-- Income before taxes totaled $1.09 billion in 3Q17. Income before taxes,
excluding amortization of intangible assets (Non-GAAP), totaled $1.13
billion in 3Q17.
-- The pre-tax operating margin was 37% in 3Q17. The pre-tax operating
margin, excluding the provision for credit losses and amortization
of intangible assets (Non-GAAP), was 38% in 3Q17.
-- Investment services fees as a percentage of noninterest expense
(excluding amortization of intangible assets) was 103% in 3Q17.
-- Investment services fees increased 2% year-over-year and 3%
sequentially.
-- Asset servicing fees increased 4% year-over-year and 2%
sequentially. The year-over-year increase primarily reflects higher
equity market values and net new business, including growth in
collateral management, partially offset by the impact of downsizing
the retail UK transfer agency business. The sequential increase was
primarily driven by the favorable impact of a weaker U.S. dollar and
higher equity market values.
-- Clearing services fees increased 10% year-over-year primarily driven
by higher money market fees and growth in long-term mutual fund
assets. The 3% sequential decrease primarily reflects lower
clearance volumes.
-- Issuer services fees decreased 14% year-over-year and increased 20%
sequentially. The year-over-year decrease primarily reflects fewer
corporate actions, lost business and lower fees due to a reduction
in shares outstanding in certain Depositary Receipts programs,
partially offset by higher Corporate Trust revenue. The sequential
increase primarily reflects seasonality in Depositary Receipts
revenue and higher Corporate Trust revenue.
-- Treasury services fees increased 4% year-over-year and 1%
sequentially, primarily reflecting higher payment volumes, partially
offset by higher compensating balance credits provided to clients,
which reduce fee revenue and increase net interest revenue.
-- Foreign exchange and other trading revenue decreased 13% year-over-year
and increased 6% sequentially. Year-over year, lower volatility and
lower Depositary Receipt-related foreign exchange activity were
partially offset by higher volumes. The sequential increase reflects
higher volumes.
-- Other revenue decreased 4% year-over-year and increased 4% sequentially.
The year-over-year results include termination fees related to the
clearing services business recorded in 3Q16. Both comparisons reflect
higher payments from Investment Management related to higher money
market fees.
-- Net interest revenue increased 9% year-over-year primarily reflecting
the impact of the higher interest rates, partially offset by lower
deposits and loans. The 2% sequential increase primarily reflects higher
rates.
-- Noninterest expense (excluding amortization of intangible assets)
increased 1% year-over-year, primarily reflecting additional technology
related-costs, partially offset by lower staff expense. The 3%
sequential decrease primarily reflects lower consulting expense,
volume-related clearing and sub-custodian expenses and lower business
development.
OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, global markets, business exits and other corporate revenue and expense items.
(in millions) 3Q17 2Q17 1Q17 4Q16 3Q16
------------ ---- ---- ---- ---- ----
Revenue:
Fee and other revenue $69 $113 $72 $42 $100
Net interest (expense) revenue (20) (22) (1) 38 (23)
------------------------------ --- --- --- --- ---
Total revenue 49 91 71 80 77
Provision for credit losses (2) (4) (8) 1 (20)
Noninterest expense (ex. M&I and restructuring charges) 77 28 106 108 88
M&I and restructuring charges - - 1 2 -
----------------------------- --- --- --- --- ---
Total noninterest expense 77 28 107 110 88
------------------------- --- --- --- --- ---
(Loss) income before taxes $(26) $67 $(28) $(31) $9
---- --- ---- ---- ---
(Loss) income before taxes (ex. M&I and restructuring charges) - Non- $(26) $67 $(27) $(29) $9
GAAP
----
Average loans and leases $1,182 $1,302 $1,341 $2,142 $1,941
------------------------ ------ ------ ------ ------ ------
KEY POINTS
-- Total fee and other revenue decreased $31 million compared with 3Q16 and
$44 million compared with 2Q17. The year-over-year decrease primarily
reflects lower other income, driven by our investments in renewable
energy, and lower asset-related and net securities gains. The sequential
decrease primarily reflects lease-related gains recorded in 2Q17 and
lower income from corporate/bank-owned life insurance, partially offset
by higher net securities gains.
-- Net interest revenue increased $3 million compared with 3Q16 and $2
million compared with 2Q17, primarily reflecting higher interest rates.
-- Noninterest expense (excluding M&I and restructuring charges) decreased
$11 million compared with 3Q16 and increased $49 million compared with
2Q17. The year-over-year decrease was primarily driven by lower
litigation and other expenses. The sequential increase was primarily
driven by higher staff expense resulting from a methodology change in
2Q17 for allocating employee benefits expense to the business segments
with no impact to consolidated results. The sequential increase was
partially offset by lower other and professional, legal and other
purchased services expenses.
THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement
(in millions) Quarter ended Year-to-date
------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2017 2017 2016 2017 2016
---- ---- ---- ---- ----
Fee and other revenue
Investment services fees:
Asset servicing $1,105 $1,085 $1,067 $3,253 $3,176
Clearing services 383 394 349 1,153 1,049
Issuer services 288 241 337 780 815
Treasury services 141 140 137 420 407
----------------- --- --- --- --- ---
Total investment services fees 1,917 1,860 1,890 5,606 5,447
Investment management and performance fees 901 879 860 2,622 2,502
Foreign exchange and other trading revenue 173 165 183 502 540
Financing-related fees 54 53 58 162 169
Distribution and servicing 40 41 43 122 125
Investment and other income 63 122 92 262 271
--------------------------- --- --- --- --- ---
Total fee revenue 3,148 3,120 3,126 9,276 9,054
Net securities gains 19 - 24 29 65
-------------------- --- --- --- --- ---
Total fee and other revenue 3,167 3,120 3,150 9,305 9,119
Operations of consolidated investment management funds
Investment income 10 10 20 57 27
Interest of investment management fund note holders - - 3 4 6
--------------------------------------------------- --- --- --- --- ---
Income from consolidated investment management funds 10 10 17 53 21
Net interest revenue
Interest revenue 1,151 1,052 874 3,163 2,647
Interest expense 312 226 100 706 340
---------------- --- --- --- --- ---
Net interest revenue 839 826 774 2,457 2,307
--------------------
Total revenue 4,016 3,956 3,941 11,815 11,447
Provision for credit losses (6) (7) (19) (18) (18)
Noninterest expense
Staff 1,469 1,417 1,467 4,358 4,338
Professional, legal and other purchased services 305 319 292 936 860
Software and equipment 233 232 215 688 657
Net occupancy 141 139 143 416 437
Distribution and servicing 109 104 105 313 307
Sub-custodian 62 65 59 191 188
Bank assessment charges (a) 51 59 61 167 166
Business development 49 63 52 163 174
Other (a) 177 192 170 536 546
Amortization of intangible assets 52 53 61 157 177
M&I, litigation and restructuring charges 6 12 18 26 42
--- --- ---
Total noninterest expense 2,654 2,655 2,643 7,951 7,892
------------------------- ----- ----- ----- ----- -----
Income
Income before income taxes 1,368 1,308 1,317 3,882 3,573
Provision for income taxes 348 332 324 949 897
-------------------------- --- --- --- --- ---
Net income 1,020 976 993 2,933 2,676
Net (income) loss attributable to noncontrolling interests (includes $(3), (2) (1) (6) (18) 1
$(3), $(9), $(24) and $(6) related to consolidated investment management
funds, respectively)
-------------------
Net income applicable to shareholders of The Bank of New York Mellon 1,018 975 987 2,915 2,677
Corporation
Preferred stock dividends (35) (49) (13) (126) (74)
------------------------- --- --- --- ---- ---
Net income applicable to common shareholders of The Bank of New $983 $926 $974 $2,789 $2,603
York 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
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2017 2017 2016 2017 2016
(in millions)
Net income applicable to common shareholders of The Bank of New York $983 $926 $974 $2,789 $2,603
Mellon Corporation
Less: Earnings allocated to participating securities (a) 8 13 15 35 39
Net income applicable to the common shareholders of The Bank of New $975 $913 $959 $2,754 $2,564
York Mellon Corporation after required adjustments for the calculation of
basic and diluted earnings per common share
-------------------------------------------
(a) Beginning in 3Q17, vested stock
awards to retirement eligible
employees are included in common
shares outstanding for earnings
per share purposes. This change
increased both average basic and
average diluted shares outstanding
by approximately 6 million and
reduced earnings allocated to
participating securities by $6
million for the quarter, which
resulted in a de minimis impact to
both basic and diluted earnings
per share.
Average common shares and equivalents outstanding of The Bank of Quarter ended Year-to-date
New York Mellon Corporation (a)
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2017 2017 2016 2017 2016
(in thousands)
Basic 1,035,337 1,035,829 1,062,248 1,037,431 1,071,457
Diluted 1,041,138 1,041,879 1,067,682 1,043,585 1,077,150
------- --------- --------- --------- --------- ---------
(a) Beginning in 3Q17, vested stock
awards to retirement eligible
employees are included in common
shares outstanding for earnings per
share purposes. This change
increased both average basic and
average diluted shares outstanding
by approximately 6 million and
reduced earnings allocated to
participating securities by $6
million for the quarter, which
resulted in a de minimis impact to
both basic and diluted earnings per
share.
Earnings per share applicable to the common shareholders of The Bank Quarter ended Year-to-date
of New York Mellon Corporation
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2017 2017 2016 2017 2016
(in dollars)
Basic $0.94 $0.88 $0.90 $2.66 $2.39
Diluted $0.94 $0.88 $0.90 $2.64 $2.38
------- ----- ----- ----- ----- -----
THE BANK OF NEW YORK MELLON CORPORATION
Consolidated Balance Sheet
(dollars in millions, except per share amounts) Sept. 30, June 30, December 31,
2017 2017 2016
--- ---- ---- ----
Assets
Cash and due from:
Banks $5,557 $4,725 $4,822
Interest-bearing deposits with the Federal Reserve and other central banks 75,808 74,130 58,041
Interest-bearing deposits with banks 15,256 13,601 15,086
Federal funds sold and securities purchased under resale agreements 27,883 27,440 25,801
Securities:
Held-to-maturity (fair value of $39,928, $40,862 and $40,669) 39,995 40,986 40,905
Available-for-sale 80,054 78,274 73,822
------------------ ------ ------
Total securities 120,049 119,260 114,727
Trading assets 4,666 5,279 5,733
Loans 59,068 61,673 64,458
Allowance for loan losses (161) (165) (169)
------------------------- ---- ----
Net loans 58,907 61,508 64,289
Premises and equipment 1,631 1,640 1,303
Accrued interest receivable 547 567 568
Goodwill 17,543 17,457 17,316
Intangible assets 3,461 3,506 3,598
Other assets 22,287 25,000 20,954
------------ ------ ------
Subtotal assets of operations 353,595 354,113 332,238
Assets of consolidated investment management funds, at fair value 802 702 1,231
Total assets $354,397 $354,815 $333,469
------------ -------- -------- --------
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices) $80,380 $89,063 $78,342
Interest-bearing deposits in U.S. offices 46,023 48,798 52,049
Interest-bearing deposits in Non-U.S. offices 104,593 97,816 91,099
--------------------------------------------- ------- ------
Total deposits 230,996 235,677 221,490
Federal funds purchased and securities sold under repurchase agreements 10,314 10,934 9,989
Trading liabilities 3,253 4,100 4,389
Payables to customers and broker-dealers 21,176 21,622 20,987
Commercial paper 2,501 876 -
Other borrowed funds 3,353 1,338 754
Accrued taxes and other expenses 6,070 5,670 5,867
Other liabilities (includes allowance for lending-related commitments of $104, $105 and $112) 7,195 6,379 5,635
Long-term debt 28,408 27,699 24,463
-------------- ------ ------
Subtotal liabilities of operations 313,266 314,295 293,574
Liabilities of consolidated investment management funds, at fair value 27 22 315
Total liabilities 313,293 314,317 293,889
Temporary equity
Redeemable noncontrolling interests 197 181 151
Permanent equity
Preferred stock - par value $0.01 per share; authorized 100,000,000 shares; issued 35,826, 35,826 and 3,542 3,542 3,542
35,826 shares
Common stock - par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,352,363,932, 14 13 13
1,349,181,914 and 1,333,706,427 shares
Additional paid-in capital 26,588 26,432 25,962
Retained earnings 24,757 24,027 22,621
Accumulated other comprehensive loss, net of tax (2,781) (3,093) (3,765)
Less: Treasury stock of 328,341,579, 316,025,713 and 286,218,126 common shares, at cost (11,597) (10,947) (9,562)
---------------------------------------------------------------------------------------- ------- ------
Total The Bank of New York Mellon Corporation shareholders' equity 40,523 39,974 38,811
Nonredeemable noncontrolling interests of consolidated investment management funds 384 343 618
---------------------------------------------------------------------------------- --- ---
Total permanent equity 40,907 40,317 39,429
---------------------- ------ ------ ------
Total liabilities, temporary equity and permanent equity $354,397 $354,815 $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 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) 3Q17 2Q17 1Q17 4Q16 3Q16
-------------------- ---- ---- ---- ---- ----
Income before income taxes - GAAP $1,368 $1,308 $1,206 $1,152 $1,317
Less: Net income attributable to noncontrolling interests of consolidated 3 3 18 4 9
investment management funds
Add: Amortization of intangible assets 52 53 52 60 61
M&I, litigation and restructuring charges 6 12 8 7 18
Recovery related to Sentinel - - - - (13)
--- --- --- ---
Income before income taxes, as adjusted - Non-GAAP (a) $1,423 $1,370 $1,248 $1,215 $1,374
Fee and other revenue - GAAP $3,167 $3,120 $3,018 $2,954 $3,150
Income from consolidated investment management funds - GAAP 10 10 33 5 17
Net interest revenue - GAAP 839 826 792 831 774
--------------------------- --- --- --- --- ---
Total revenue - GAAP 4,016 3,956 3,843 3,790 3,941
Less: Net income attributable to noncontrolling interests of consolidated 3 3 18 4 9
investment management funds
Total revenue, as adjusted - Non-GAAP (a) $4,013 $3,953 $3,825 $3,786 $3,932
Pre-tax operating margin - GAAP (b)(c) 34% 33% 31% 30% 33%
Adjusted pre-tax operating margin - Non-GAAP (a)(b)(c) 35% 35% 33% 32% 35%
----------------------------------------------------- --- --- --- --- ---
(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,
corporate/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 $102 million for 3Q17, $106
million for 2Q17, $101 million for
1Q17, $92 million for 4Q16 and $74
million for 3Q16 and would increase
our pre-tax operating margin by
approximately 1.6% for 3Q17, 1.8% for
2Q17 and 1Q17, 1.7% for 4Q16 and
1.2% for 3Q16.
The following table presents the reconciliation of the operating leverage.
Operating leverage 3Q17 vs.
(dollars in millions) 3Q17 2Q17 3Q16 2Q17 3Q16
-------------------- ---- ---- ---- ---- ----
Total revenue - GAAP $4,016 $3,956 $3,941 1.52% 1.90%
Less: Net income attributable to noncontrolling interests of consolidated 3 3 9
investment management funds
Total revenue, as adjusted - Non-GAAP $4,013 $3,953 $3,932 1.52% 2.06%
Total noninterest expense - GAAP $2,654 $2,655 $2,643 (0.04)% 0.42%
Less: Amortization of intangible assets 52 53 61
M&I, litigation and restructuring charges 6 12 18
Total noninterest expense, as adjusted - Non-GAAP $2,596 $2,590 $2,564 0.23% 1.25%
Operating leverage - GAAP (a) 156 bps 148 bps
Adjusted operating leverage - Non-GAAP (a)(b) 129 bps 81 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) 3Q17 2Q17 1Q17 4Q16 3Q16
-------------------- ---- ---- ---- ---- ----
Net income applicable to common shareholders of The Bank of New York $983 $926 $880 $822 $974
Mellon Corporation - GAAP
Add: Amortization of intangible assets 52 53 52 60 61
Less: Tax impact of amortization of intangible assets 17 19 18 19 21
------------------------------------------------------
Adjusted net income applicable to common shareholders of The Bank of 1,018 960 914 863 1,014
New York Mellon Corporation excluding amortization of intangible
assets - Non-GAAP
Add: M&I, litigation and restructuring charges 6 12 8 7 18
Recovery related to Sentinel - - - - (13)
Less: Tax impact of M&I, litigation and restructuring charges - 3 2 3 5
Tax impact of recovery related to Sentinel - - - - (5)
------------------------------------------ --- --- --- --- ---
Adjusted net income applicable to common shareholders of The Bank of $1,024 $969 $920 $867 $1,019
New York Mellon Corporation, as adjusted - Non-GAAP (a)
Average common shareholders' equity $36,780 $35,862 $34,965 $35,171 $35,767
Less: Average goodwill 17,497 17,408 17,338 17,344 17,463
Average intangible assets 3,487 3,532 3,578 3,638 3,711
Add: Deferred tax liability - tax deductible goodwill (b) 1,561 1,542 1,518 1,497 1,477
Deferred tax liability - intangible assets (b) 1,092 1,095 1,100 1,105 1,116
--------------------------------------------- ----- ----- ----- ----- -----
Average tangible common shareholders' equity - Non-GAAP $18,449 $17,559 $16,667 $16,791 $17,186
Return on common equity - GAAP (c) 10.6% 10.4% 10.2% 9.3% 10.8%
Adjusted return on common equity - Non-GAAP (a)(c) 11.0% 10.8% 10.7% 9.8% 11.3%
Return on tangible common equity - Non-GAAP (c) 21.9% 21.9% 22.2% 20.4% 23.5%
Adjusted return on tangible common equity - Non-GAAP (a)(c) 22.0% 22.1% 22.4% 20.5% 23.6%
---------------------------------------------------------- ---- ---- ---- ---- ----
(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 Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2017 2017 2017 2016 2016
---- ---- ---- ----
(dollars in millions, unless otherwise noted)
--------------------------------------------
BNY Mellon shareholders' equity at period end - GAAP $40,523 $39,974 $39,138 $38,811 $39,695
Less: Preferred stock 3,542 3,542 3,542 3,542 3,542
---------------------- ----- ----- ----- ----- -----
BNY Mellon common shareholders' equity at period end - GAAP 36,981 36,432 35,596 35,269 36,153
Less: Goodwill 17,543 17,457 17,355 17,316 17,449
Intangible assets 3,461 3,506 3,549 3,598 3,671
Add: Deferred tax liability - tax deductible goodwill (a) 1,561 1,542 1,518 1,497 1,477
Deferred tax liability - intangible assets (a) 1,092 1,095 1,100 1,105 1,116
--------------------------------------------- ----- ----- ----- ----- -----
BNY Mellon tangible common shareholders' equity at period $18,630 $18,106 $17,310 $16,957 $17,626
end - Non-GAAP
Period-end common shares outstanding (in thousands) 1,024,022 1,033,156 1,039,877 1,047,488 1,057,337
Book value per common share - GAAP $36.11 $35.26 $34.23 $33.67 $34.19
Tangible book value per common share - Non-GAAP $18.19 $17.53 $16.65 $16.19 $16.67
----------------------------------------------- ------ ------ ------ ------ ------
(a) Deferred tax liabilities
are based on fully
phased-in Basel III
capital rules.
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) 3Q17 2Q17 1Q17 4Q16 3Q16
------------ ---- ---- ---- ---- ----
Income from consolidated investment management funds $10 $10 $33 $5 $17
Less: Net income attributable to noncontrolling interests of consolidated investment 3 3 18 4 9
management funds
Income from consolidated investment management funds, net of noncontrolling $7 $7 $15 $1 $8
interests
---------
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) 3Q17 2Q17 1Q17 4Q16 3Q16
------------ ---- ---- ---- ---- ----
Investment management fees $1 $2 $2 $4 $2
Other (Investment income (loss)) 6 5 13 (3) 6
------------------------------- --- --- --- --- ---
Income from consolidated investment management funds, net of noncontrolling $7 $7 $15 $1 $8
interests
---------
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) 3Q17 2Q17 1Q17 4Q16 3Q16
-------------------- ---- ---- ---- ---- ----
Income before income taxes - GAAP $300 $288 $277 $260 $256
Add: Amortization of intangible assets 15 15 15 22 22
Provision for credit losses (2) - 3 6 -
--------------------------- --- --- --- --- ---
Adjusted income before income taxes, excluding amortization of intangible assets $313 $303 $295 $288 $278
and provision for credit losses - Non-GAAP
Total revenue - GAAP $1,000 $986 $963 $960 $958
Less: Distribution and servicing expense 110 104 101 98 104
----------------------------------------- --- --- --- --- ---
Adjusted total revenue, net of distribution and servicing expense - Non-GAAP $890 $882 $862 $862 $854
Pre-tax operating margin - GAAP (a) 30% 29% 29% 27% 27%
Adjusted pre-tax operating margin, excluding amortization of intangible assets, 35% 34% 34% 33% 33%
provision for credit losses and distribution and servicing expense - Non-GAAP (a)
--------------------------------------------------------------------------------
(a) Income before taxes
divided by total
revenue.
DIVIDENDS
Common - On Oct. 19, 2017, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.24 per share. This cash dividend is payable on Nov. 9, 2017 to shareholders of record as of the close of business on Oct. 31, 2017.
Preferred - On Oct. 19, 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 December 2017, in each case payable on Dec. 20, 2017 to holders of record as of the close of business on Dec. 5, 2017:
-- $1,011.11 per share on the Series A Preferred Stock (equivalent to
$10.1111 per Normal Preferred Capital Security of Mellon Capital IV,
each representing a 1/100th interest in a share of the Series A
Preferred Stock);
-- $1,300.00 per share on the Series C Preferred Stock (equivalent to
$0.3250 per depositary share, each representing a 1/4,000th interest in
a share of the Series C Preferred Stock);
-- $2,250.00 per share on the Series D Preferred Stock (equivalent to
$22.5000 per depositary share, each representing a 1/100th interest in a
share of the Series D Preferred Stock); and
-- $2,475.00 per share on the Series E Preferred Stock (equivalent to
$24.7500 per depositary share, each representing a 1/100th interest in a
share of the Series E 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 goals, growth, investments 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 Reports on Form 10-Q for the periods ended March 31, 2017 and June 30, 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 Oct. 19, 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 Sept. 30, 2017, BNY Mellon had $32.2 trillion in assets under custody and/or administration, and $1.8 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.
CONFERENCE CALL INFORMATION
Charles W. Scharf, chief executive officer, and Thomas P. Gibbons, vice chairman and chief financial 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 Oct. 19, 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 Oct. 19, 2017. Replays of the conference call and audio webcast will be available beginning Oct. 19, 2017 at approximately 2 p.m. EDT through Nov. 19, 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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SOURCE BNY Mellon
