SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 19, 2011
THE BANK OF NEW YORK MELLON CORPORATION
(Exact name of registrant as specified in charter)
Delaware | 000-52710 | 13-2614959 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
One Wall Street New York, New York (Address of principal executive offices) |
10286 (Zip code) |
Registrants telephone number, including area code (212) 495-1784
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. | RESULTS OF OPERATIONS AND FINANCIAL CONDITION. |
On July 19, 2011, the Registrant conducted a conference call and webcast with respect to results of operations for the second quarter 2011 for The Bank of New York Mellon Corporation. In conjunction with the conference call and webcast, the Registrant made available on its website, beginning on July 19, 2011, a Quarterly Earnings Review and Financial Trends information. The Quarterly Earnings Review is included as Exhibit 99.1 to this report and the Financial Trends information is included as Exhibit 99.2 to this report. Both exhibits are furnished pursuant to General Instruction B.2. of Form 8-K and are not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not incorporated by reference into any filings the Registrant has made or may make under the Securities Act of 1933. |
ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS. |
Exhibit 99.1 and 99.2 to this report contains information which may be considered to constitute non-GAAP financial measures as defined in Item 10 of Regulation S-K. The Registrants management believes that these measures are useful to the investment community in analyzing the financial results and trends of ongoing operations. Management believes that they facilitate comparisons with prior periods and reflect the principal basis on which management monitors financial performance. Management also believes this presentation allows investors to more appropriately evaluate the impact of revenues from both taxable and tax-exempt sources. |
(d) | EXHIBITS. |
Exhibit Number |
Description | |
99.1 | The Bank of New York Mellon Corporation Quarterly Earnings Review for second quarter 2011 dated July 19, 2011. | |
99.2 | The Bank of New York Mellon Corporation 2Q 2011 Financial Trends. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
The Bank of New York Mellon Corporation (Registrant) | ||||||||
Date: July 22, 2011 | By: | /s/Arlie R. Nogay | ||||||
Name: | Arlie R. Nogay | |||||||
Title: | Corporate Secretary |
EXHIBIT INDEX
Number |
Description | Method of Filing | ||
99.1 |
The Bank of New York Mellon Corporation Quarterly Earnings Review for second quarter 2011 dated July 19, 2011. | Furnished herewith | ||
99.2 |
The Bank of New York Mellon Corporation 2Q 2011 Financial Trends | Furnished herewith |
Exhibit 99.1
Quarterly Earnings Review
July 19, 2011
Table of Contents
Second Quarter 2011 Financial Highlights |
2 | |||
Financial Summary/Key Metrics |
3 | |||
Business Metrics |
4 | |||
Fee and Other Revenue |
6 | |||
Net Interest Revenue |
8 | |||
Noninterest Expense |
9 | |||
Capital |
10 | |||
Investment Securities Portfolio |
11 | |||
Nonperforming Assets |
12 | |||
Allowance for Credit Losses, Provision and Net Charge-offs |
12 | |||
Review of Businesses |
12 | |||
Investment Management |
13 | |||
Investment Services |
15 | |||
Other |
17 | |||
Supplemental Information Explanation of Non-GAAP Financial Measures |
18 | |||
Cautionary Statement |
22 |
BNY Mellon 1Q11 Quarterly Earnings Review
SECOND QUARTER 2011 FINANCIAL HIGHLIGHTS
Net income
from continuing operations (a) |
EPS from continuing operations (a) (b) | |||||||||||||||||||||||||||||||
(in millions) | 2Q11 vs. | |||||||||||||||||||||||||||||||
2Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | |||||||||||||||||||||||||
Earnings: |
||||||||||||||||||||||||||||||||
Continuing operations GAAP |
$ | 668 | $ | 625 | $ | 735 | $ | 0.55 | $ | 0.50 | $ | 0.59 | 7 | % | 18 | % | ||||||||||||||||
Non-GAAP adjustments (a) |
| 6 | | | | | ||||||||||||||||||||||||||
Subtotal Non-GAAP operating basis |
668 | 631 | 735 | 0.55 | 0.50 | 0.59 | 7 | % | 18 | % | ||||||||||||||||||||||
Intangible amortization |
60 | 68 | 68 | 0.05 | 0.05 | 0.05 | ||||||||||||||||||||||||||
Continuing operations Non-GAAP |
$ | 728 | $ | 699 | $ | 803 | $ | 0.60 | $ | 0.55 | $ | 0.64 | 7 | % | 16 | % | ||||||||||||||||
Net income applicable to common shareholders GAAP |
$ | 658 | $ | 625 | $ | 735 | $ | 0.54 | $ | 0.50 | $ | 0.59 | 9 | % | 18 | % | ||||||||||||||||
KEY POINTS (comparisons are unannualized 2Q11 vs. 2Q10 unless otherwise stated)
| Earnings |
- | Total revenue of $3.9 billion +15%. |
- | Investment services fees +27% benefiting from the impact of the Acquisitions, net new business and higher Depositary Receipts and securities lending revenue. |
- | Investment management fees +14% benefiting from higher market values and net new business. |
- | Net interest revenue increased 1% driven by growth in client deposits and the purchase of high quality securities. |
- | Net securities gains of $48 million primarily resulted from the sale of long dated U.S. Treasury and agency securities. |
- | Noninterest expense +21% (Non-GAAP) reflecting the impact of the Acquisitions and higher litigation/legal expenses. (c) |
- | Effective tax rate of 26.9%; 30.0% adjusted for the impact of consolidated investment management funds. (a) |
| AUC/A and AUM |
- | Record levels of AUC/A and AUM in 2Q11 reflecting improved market values and net new business |
- | AUC/A of $26.3 trillion, + 21%. |
- | AUM of $1.3 trillion, + 22%. |
- | Long-term inflows of $32 billion in 2Q11. |
- | Short-term outflows of $1 billion in 2Q11. |
| Capital |
- | Generated $803 million of Basel I Tier 1 common equity in 2Q11. (a) |
- | Estimated Basel III Tier 1 common equity ratio (Non-GAAP) increased approximately 45 basis points from March 31, 2011, to 6.6%. |
- | Tier 1 common ratio 12.6% and return on Tier 1 common 23%. (a) |
- | Repurchased 9.8 million common shares in 2Q11. |
- | Announced agreement to sell our Shareowner Services business. |
(a) | See Supplemental information beginning on page 18 for GAAP to Non-GAAP reconciliations. |
(b) | Diluted earnings per share is determined based on the net income reported on the income statement less earnings allocated to participating securities of $7 million in the second quarter of 2010, $6 million in the first quarter of 2011 and $8 million in the second quarter of 2011, and the excess of redeemable value over the fair value of noncontrolling interests of $million in the second quarter of 2010, $6 million in the first quarter of 2011 and $million in the second quarter of 2011. |
(c) | Total noninterest expense on a GAAP basis is presented on page 3. |
Page - 2
BNY Mellon 1Q11 Quarterly Earnings Review
FINANCIAL SUMMARY
(dollar amounts in millions, non-FTE basis unless otherwise noted; common shares in thousands) |
2Q11 vs. | |||||||||||||||||||||||||||
2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | ||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||
Fee and other revenue GAAP |
$ | 2,555 | $ | 2,668 | $ | 2,972 | $ | 2,838 | $ | 3,056 | ||||||||||||||||||
Less: Net securities gains |
13 | 6 | 1 | 5 | 48 | |||||||||||||||||||||||
Total fee revenue GAAP |
2,542 | 2,662 | 2,971 | 2,833 | 3,008 | 18 | % | 6 | % | |||||||||||||||||||
Income of consolidated investment management funds, net of noncontrolling interests (a) |
32 | 49 | 45 | 66 | 42 | |||||||||||||||||||||||
Net interest revenue GAAP |
722 | 718 | 720 | 698 | 731 | 1 | 5 | |||||||||||||||||||||
Total revenue excluding net securities gains Non-GAAP |
3,296 | 3,429 | (b) | 3,736 | (b) | 3,597 | (b) | 3,781 | (b) | 15 | 5 | |||||||||||||||||
Total revenue GAAP |
3,342 | 3,423 | 3,751 | 3,646 | 3,850 | 15 | 6 | |||||||||||||||||||||
Provision for credit losses |
20 | (22 | ) | (22 | ) | | | |||||||||||||||||||||
Expense: |
||||||||||||||||||||||||||||
Noninterest expense GAAP |
2,316 | 2,611 | 2,803 | 2,697 | 2,816 | 22 | 4 | |||||||||||||||||||||
Less: Amortization of intangible assets |
98 | 111 | 115 | 108 | 108 | |||||||||||||||||||||||
Restructuring charges |
(15 | ) | 15 | 21 | (6 | ) | (7 | ) | ||||||||||||||||||||
M&I expenses |
14 | 56 | 43 | 17 | 25 | |||||||||||||||||||||||
Total noninterest expense Non-GAAP |
2,219 | 2,429 | (b) | 2,624 | (b) | 2,578 | (b) | 2,690 | (b) | 21 | 4 | |||||||||||||||||
Income: |
||||||||||||||||||||||||||||
Income from continuing operations before income taxes |
1,006 | 834 | 970 | 949 | 1,034 | |||||||||||||||||||||||
Provision for income taxes |
304 | 220 | 265 | 279 | 277 | |||||||||||||||||||||||
Income from continuing operations |
$ | 702 | $ | 614 | $ | 705 | $ | 670 | $ | 757 | 8 | % | 13 | % | ||||||||||||||
Net (income) loss attributable to noncontrolling interests (a) |
(34 | ) | 11 | (15 | ) | (45 | ) | (22 | ) | |||||||||||||||||||
Net income from continuing operations |
668 | 625 | 690 | 625 | 735 | |||||||||||||||||||||||
Net loss from discontinued operations |
(10 | ) | (3 | ) | (11 | ) | | | ||||||||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
$ | 658 | $ | 622 | $ | 679 | $ | 625 | $ | 735 | ||||||||||||||||||
Key Metrics (c): |
||||||||||||||||||||||||||||
Pre-tax operating margin GAAP (d) |
30 | % | 24 | % | 26 | % | 26 | % | 27 | % | ||||||||||||||||||
Non-GAAP adjusted (d) |
32 | % | 30 | % | 30 | % | 28 | % | 29 | % | ||||||||||||||||||
Return on common equity (annualized) GAAP (d) |
8.8 | % | 7.8 | % | 8.5 | % | 7.7 | % | 8.8 | % | ||||||||||||||||||
Return on tangible common equity (annualized) Non-GAAP (d) |
25.7 | % | 26.3 | % | 27.5 | % | 24.3 | % | 26.3 | % | ||||||||||||||||||
Fee revenue as a percentage of total revenue excluding net securities gains |
76 | % | 78 | % | 79 | % | 78 | % | 79 | % | ||||||||||||||||||
Percentage of non-U.S. total revenue |
35 | % | 36 | % | 38 | % | 37 | % | 37 | % | ||||||||||||||||||
Period end: |
||||||||||||||||||||||||||||
Employees |
42,700 | 47,700 | 48,000 | 48,400 | 48,900 | |||||||||||||||||||||||
Market capitalization |
$ | 29,975 | $ | 32,413 | $ | 37,494 | $ | 37,090 | $ | 31,582 | ||||||||||||||||||
Common shares outstanding |
1,214,042 | 1,240,454 | 1,241,530 | 1,241,724 | 1,232,691 |
(a) | Includes income of $33 million in the second quarter of 2010, loss of $12 million in the third quarter of 2010, income of $14 million in the fourth quarter of 2010, income of $44 million in the first quarter of 2011 and income of $21 million in the second quarter of 2011, of noncontrolling interests related to consolidated investment management funds, respectively. |
(b) | Includes total revenue of $237 million in the third quarter of 2010, $253 million in the fourth quarter of 2010, $270 million in the first quarter of 2011 and $274 million in the second quarter of 2011, and noninterest expense of $185 million in the third quarter of 2010, $196 million in the fourth quarter of 2010, $203 million in the first quarter of 2011 and $210 million in the second quarter of 2011 from the GIS and BAS acquisitions (collectively, the Acquisitions). |
(c) | Key metrics for all periods in 2010 are presented on a continuing operations basis. |
(d) | See Supplemental information beginning on page 18 for GAAP to Non-GAAP reconciliations. |
N/A | Not applicable. |
Page - 3
BNY Mellon 2Q11 Quarterly Earnings Review
BUSINESS METRICS
Investment Management metrics | 2Q11 vs. | |||||||||||||||||||||||||||
2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | ||||||||||||||||||||||
Changes in market value of assets under management (in billions): |
||||||||||||||||||||||||||||
Beginning balance |
$ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | ||||||||||||||||||
Net inflows: |
||||||||||||||||||||||||||||
Long-term |
12 | 11 | 9 | 31 | 32 | |||||||||||||||||||||||
Money market |
(17 | ) | 18 | 6 | (5 | ) | (1 | ) | ||||||||||||||||||||
Total net inflows |
(5 | ) | 29 | 15 | 26 | 31 | ||||||||||||||||||||||
Net market/currency impact |
(53 | ) | 65 | 16 | 31 | 14 | ||||||||||||||||||||||
Ending balance (b) |
$ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | (a) | 22 | % | 4 | % | |||||||||||||
Composition of assets under management at period end (b): |
||||||||||||||||||||||||||||
Equity |
30 | % | 31 | % | 32 | % | 34 | % | 34 | % | ||||||||||||||||||
Money market |
30 | 29 | 29 | 27 | 26 | |||||||||||||||||||||||
Fixed income |
30 | 30 | 29 | 30 | 31 | |||||||||||||||||||||||
Alternative investments and overlay |
10 | 10 | 10 | 9 | 9 | |||||||||||||||||||||||
Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
Wealth management: |
||||||||||||||||||||||||||||
Average loans (in millions) |
$ | 6,350 | $ | 6,520 | $ | 6,668 | $ | 6,825 | $ | 6,884 | 8 | % | 1 | % | ||||||||||||||
Average deposits (in millions) |
$ | 8,018 | $ | 8,455 | $ | 9,140 | $ | 9,272 | $ | 8,996 | 12 | % | (3 | )% |
(a) | Preliminary. |
(b) | Excludes securities lending cash management assets. |
Investment Services metrics | 2Q11 vs. | |||||||||||||||||||||||||||
2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | ||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | 21 | % | 3 | % | ||||||||||||||
Market value of securities on loan at period-end (in billions) (a) |
$ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | 10 | % | (2 | )% | ||||||||||||||
Average loans (in millions) |
$ | 17,053 | $ | 17,941 | $ | 19,053 | $ | 20,554 | $ | 22,891 | 34 | % | 11 | % | ||||||||||||||
Average deposits (in millions) |
$ | 121,468 | $ | 123,212 | $ | 136,060 | $ | 141,115 | $ | 154,771 | 27 | % | 10 | % | ||||||||||||||
Asset servicing: |
||||||||||||||||||||||||||||
New business wins (in billions) |
$ | 419 | $ | 480 | $ | 350 | $ | 496 | $ | 196 | ||||||||||||||||||
Corporate Trust: |
||||||||||||||||||||||||||||
Total debt serviced (in trillions) |
$ | 11.6 | $ | 12.0 | $ | 12.0 | $ | 11.9 | $ | 11.8 | 2 | % | (1 | )% | ||||||||||||||
Number of deals administered |
140,551 | 135,613 | 138,067 | 133,416 | 133,262 | (5 | )% | | % | |||||||||||||||||||
Depositary Receipts: |
||||||||||||||||||||||||||||
Number of sponsored programs |
1,341 | 1,346 | 1,359 | 1,367 | 1,386 | 3 | % | 1 | % | |||||||||||||||||||
Clearing services: |
||||||||||||||||||||||||||||
DARTS volume (in thousands) |
198.4 | 161.4 | 185.5 | 207.2 | 196.5 | (1 | )% | (5 | )% | |||||||||||||||||||
Average active clearing accounts (in thousands) |
4,896 | 4,929 | 4,967 | 5,289 | 5,486 | 12 | % | 4 | % | |||||||||||||||||||
Average long-term mutual fund assets (U.S. platform) (in millions) |
$ | 229,714 | $ | 243,573 | $ | 264,076 | $ | 287,682 | $ | 306,193 | 33 | % | 6 | % | ||||||||||||||
Average margin loans (in millions) |
$ | 5,775 | $ | 6,261 | $ | 6,281 | $ | 6,978 | $ | 7,506 | 30 | % | 8 | % | ||||||||||||||
Broker-Dealer: |
||||||||||||||||||||||||||||
Average collateral management balances (in billions) |
$ | 1,565 | $ | 1,632 | $ | 1,794 | $ | 1,806 | $ | 1,845 | 18 | % | 2 | % | ||||||||||||||
Treasury services: |
||||||||||||||||||||||||||||
Global payments transaction volume (in thousands) |
10,678 | 10,847 | 11,042 | 10,587 | 10,762 | 1 | % | 2 | % |
(a) | Represents the securities on loan managed by the Investment Services business. |
Page - 4
BNY Mellon 2Q11 Quarterly Earnings Review
Market indices | 2Q11 vs. | |||||||||||||||||||||||||||
2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | ||||||||||||||||||||||
S&P 500 Index (a) |
1031 | 1141 | 1258 | 1326 | 1321 | 28 | % | | % | |||||||||||||||||||
S&P 500 Index daily average |
1135 | 1095 | 1204 | 1302 | 1318 | 16 | 1 | |||||||||||||||||||||
FTSE 100 Index (a) |
4917 | 5549 | 5900 | 5909 | 5946 | 21 | 1 | |||||||||||||||||||||
FTSE 100 Index-daily average |
5361 | 5312 | 5760 | 5945 | 5906 | 10 | (1 | ) | ||||||||||||||||||||
Barclays Capital Aggregate BondSM Index (a) |
299 | 329 | 323 | 328 | 341 | 14 | 4 | |||||||||||||||||||||
MSCI EAFE® Index (a) |
1348 | 1561 | 1658 | 1703 | 1708 | 27 | | |||||||||||||||||||||
NYSE and NASDAQ Share Volume (in billions) |
299 | 233 | 219 | 225 | 209 | (30 | ) | (7 | ) |
(a) | Period end. |
Page - 5
BNY Mellon 2Q11 Quarterly Earnings Review
FEE AND OTHER REVENUE
Fee and other revenue | 2Q11 vs. | |||||||||||||||||||||||||||
(dollar amounts in millions) | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | |||||||||||||||||||||
Investment services fees: |
||||||||||||||||||||||||||||
Asset servicing (b) |
$ | 668 | $ | 870 | $ | 914 | $ | 923 | $ | 980 | 47 | % | 6 | % | ||||||||||||||
Issuer services |
354 | 364 | 409 | 351 | 365 | 3 | 4 | |||||||||||||||||||||
Clearing services |
245 | 252 | 278 | 292 | 292 | 19 | | |||||||||||||||||||||
Treasury services |
125 | 132 | 129 | 128 | 127 | 2 | (1 | ) | ||||||||||||||||||||
Total investment services fees |
1,392 | 1,618 | 1,730 | 1,694 | 1,764 | 27 | 4 | |||||||||||||||||||||
Investment management and performance fees |
686 | 696 | 800 | 764 | 779 | 14 | 2 | |||||||||||||||||||||
Foreign exchange and other trading revenue |
220 | 146 | 258 | 198 | 222 | 1 | 12 | |||||||||||||||||||||
Distribution and servicing |
51 | 56 | 55 | 53 | 49 | (4 | ) | (8 | ) | |||||||||||||||||||
Financing-related fees |
48 | 49 | 48 | 43 | 49 | 2 | 14 | |||||||||||||||||||||
Investment and other income |
145 | 97 | 80 | 81 | 145 | | N/M | |||||||||||||||||||||
Total fee revenue |
2,542 | 2,662 | 2,971 | 2,833 | 3,008 | 18 | 6 | |||||||||||||||||||||
Net securities gains |
13 | 6 | 1 | 5 | 48 | N/M | N/M | |||||||||||||||||||||
Total fee and other revenue |
$ | 2,555 | $ | 2,668 | (a) | $ | 2,972 | (a) | $ | 2,838 | (a) | $ | 3,056 | (a) | 20 | % | 8 | % | ||||||||||
Fee revenue as a percentage of total revenue excluding net securities gains |
76 | % | 78 | % | 79 | % | 78 | % | 79 | % |
(a) | Total fee revenue from the Acquisitions was $234 million in the third quarter of 2010, $246 million in the fourth quarter of 2010 and $261 million in both the first and second quarters of 2011. |
(b) | Asset servicing fees include securities lending revenue of $46 million in the second quarter of 2010, $37 million in the third quarter of 2010, $38 million in the fourth quarter of 2010, $37 million in the first quarter of 2011 and $62 million in the second quarter of 2011. |
N/M Not meaningful.
KEY POINTS
| Asset servicing fees The year-over-year increase was primarily driven by the impact of the Acquisitions, higher market values, net new business and higher securities lending revenue due to higher loan balances and spreads. The sequential increase reflects seasonally higher securities lending revenue and net new business. |
| Issuer services fees The year-over-year increase reflects higher Depositary Receipts revenue driven by higher corporate actions and services fees, partially offset by lower Shareowner Services and Corporate Trust revenue. The sequential increase reflects seasonally higher Depositary Receipts revenue, partially offset by lower Shareowner Services and Corporate Trust revenue. |
| Clearing services fees The year-over-year increase reflects the impact of the GIS acquisition, growth in mutual fund assets and positions and new business, partially offset by lower transaction volumes and higher money market fee waivers. Sequentially, the impact of higher mutual fund positions was offset by lower transaction volumes and higher money market fee waivers. |
| Investment management and performance fees totaled $779 million in the second quarter of 2011, an increase of 14% year-over-year and 2% (unannualized) sequentially. The year-over-year increase reflects higher market values and net new business. The sequential increase primarily reflects net new business. Both the year-over-year and sequential increases were partially offset by higher money market fee waivers. |
Foreign exchange and other trading revenue (in millions) |
2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | |||||||||||||||
Foreign exchange |
$ | 246 | $ | 160 | $ | 206 | $ | 173 | $ | 184 | ||||||||||
Fixed income |
(32 | ) | (7 | ) | 39 | 17 | 28 | |||||||||||||
Credit derivatives (Used as economic hedges of loans) |
4 | (6 | ) | (3 | ) | (1 | ) | (1 | ) | |||||||||||
Other |
2 | (1 | ) | 16 | 9 | 11 | ||||||||||||||
Total |
$ | 220 | $ | 146 | $ | 258 | $ | 198 | $ | 222 |
Page - 6
BNY Mellon 2Q11 Quarterly Earnings Review
Foreign exchange and other trading revenue totaled $222 million compared with $220 million in the second quarter of 2010 and $198 million in the first quarter of 2011. In the second quarter of 2011, foreign exchange revenue totaled $184 million, a decrease of 25% year-over-year and an increase of 6% (unannualized) sequentially. The year-over-year decrease reflects lower volatility partially offset by higher volumes. The increase sequentially primarily reflects higher volatility. Other trading revenue was $38 million in the second quarter of 2011, an increase of $64 million compared with the second quarter of 2010 and $13 million compared with the first quarter of 2011. Both increases were driven by higher fixed income trading revenue. Additionally, the second quarter of 2010 included negative credit valuation adjustments (CVA) related to derivatives.
| Investment and other income totaled $145 million compared with $145 million in the prior year period and $81 million in the first quarter of 2011. The $64 million increase sequentially primarily reflects gains related to loans held-for-sale retained from a previously divested banking subsidiary. Year-over-year, the loan gains and higher seed capital and private equity investment revenue were offset by lower foreign currency translation and leasing gains. |
| Net securities gains of $48 million primarily resulted from the sale of longer dated U.S. Treasury and agency securities. |
Page - 7
BNY Mellon 2Q11 Quarterly Earnings Review
NET INTEREST REVENUE
Net interest revenue | 2Q11 vs. | |||||||||||||||||||||||||||
(dollar amounts in millions) | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | |||||||||||||||||||||
Net interest revenue (non-FTE) |
$ | 722 | $ | 718 | $ | 720 | $ | 698 | $ | 731 | 1 | % | 5 | % | ||||||||||||||
Net interest revenue (FTE) |
727 | 723 | 724 | 702 | 737 | 1 | 5 | |||||||||||||||||||||
Net interest margin (FTE) |
1.74 | % | 1.67 | % | 1.54 | % | 1.49 | % | 1.41 | % | (33 | ) bps | (8 | ) bps | ||||||||||||||
Selected average balances: |
||||||||||||||||||||||||||||
Cash/interbank investments |
$ | 73,673 | $ | 74,803 | $ | 82,000 | $ | 82,524 | $ | 97,946 | 33 | % | 19 | % | ||||||||||||||
Trading account securities |
2,752 | 3,194 | 2,698 | 3,698 | 2,877 | 5 | (22 | ) | ||||||||||||||||||||
Securities |
54,030 | 57,993 | 65,370 | 65,397 | 68,782 | 27 | 5 | |||||||||||||||||||||
Loans |
36,664 | 36,769 | 37,529 | 38,566 | 40,328 | 10 | 5 | |||||||||||||||||||||
Interest-earning assets |
167,119 | 172,759 | 187,597 | 190,185 | 209,933 | 26 | 10 | |||||||||||||||||||||
Interest-bearing deposits |
99,963 | 104,033 | 111,776 | 116,515 | 125,958 | 26 | 8 | |||||||||||||||||||||
Noninterest-bearing deposits |
34,628 | 33,198 | 39,625 | 38,616 | 43,038 | 24 | 11 | |||||||||||||||||||||
Selected average yields/rates: |
||||||||||||||||||||||||||||
Cash/interbank investments |
0.82 | % | 0.83 | % | 0.98 | % | 0.83 | % | 0.88 | % | ||||||||||||||||||
Trading account securities |
2.62 | 2.57 | 3.02 | 2.44 | 2.44 | |||||||||||||||||||||||
Securities |
3.62 | 3.41 | 3.02 | 2.96 | 2.89 | |||||||||||||||||||||||
Loans |
2.30 | 2.23 | 2.12 | 2.08 | 2.02 | |||||||||||||||||||||||
Interest-earning assets |
2.08 | 2.03 | 1.95 | 1.85 | 1.78 | |||||||||||||||||||||||
Interest-bearing deposits |
0.17 | 0.19 | 0.22 | 0.23 | 0.34 | |||||||||||||||||||||||
Average cash/interbank investments as a percentage of average interest-earning assets |
44 | % | 43 | % | 44 | % | 43 | % | 47 | % | ||||||||||||||||||
Average noninterest-bearing deposits as a percentage of average interest-earning assets |
21 | % | 19 | % | 21 | % | 20 | % | 21 | % |
bps basis points.
FTE fully taxable equivalent.
KEY POINTS
| Net interest revenue totaled $731 million in 2Q11, an increase of $9 million compared with 2Q10 and $33 million sequentially. Both increases were primarily driven by growth in client deposits and the purchase of high quality securities, partially offset by lower spreads resulting from the continued impact of the low rate environment. |
| The net interest margin (FTE) was 1.41% in 2Q11, compared with 1.74% in 2Q10 and 1.49% in 1Q11. The decline from both prior periods primarily reflects tighter spreads. |
Page - 8
BNY Mellon 2Q11 Quarterly Earnings Review
NONINTEREST EXPENSE
Noninterest expense | 2Q10 |
3Q10 |
4Q10 |
1Q11 |
2Q11 |
2Q11 vs. | ||||||||||||||||||||||
(dollar amounts in millions) | 2Q10 | 1Q11 | ||||||||||||||||||||||||||
Staff: |
||||||||||||||||||||||||||||
Compensation |
$ | 763 | $ | 850 | $ | 871 | $ | 876 | $ | 903 | 18 | % | 3 | % | ||||||||||||||
Incentives |
272 | 289 | 348 | 325 | 328 | 21 | 1 | |||||||||||||||||||||
Employee benefits |
199 | 205 | 198 | 223 | 232 | 17 | 4 | |||||||||||||||||||||
Total staff |
1,234 | 1,344 | 1,417 | 1,424 | 1,463 | 19 | 3 | |||||||||||||||||||||
Professional, legal and other purchased services |
256 | 282 | 320 | 283 | 301 | 18 | 6 | |||||||||||||||||||||
Software and equipment |
162 | 187 | 207 | 206 | 203 | 25 | (1 | ) | ||||||||||||||||||||
Net occupancy |
143 | 150 | 158 | 153 | 161 | 13 | 5 | |||||||||||||||||||||
Distribution and servicing |
90 | 94 | 104 | 111 | 109 | 21 | (2 | ) | ||||||||||||||||||||
Sub-custodian |
65 | 60 | 70 | 68 | 88 | 35 | 29 | |||||||||||||||||||||
Business development |
68 | 63 | 88 | 56 | 73 | 7 | 30 | |||||||||||||||||||||
Other |
201 | 249 | 260 | 277 | 292 | 45 | 5 | |||||||||||||||||||||
Subtotal |
2,219 | 2,429 | (a) | 2,624 | (a) | 2,578 | (a) | 2,690 | (a) | 21 | 4 | |||||||||||||||||
Amortization of intangible assets |
98 | 111 | 115 | 108 | 108 | 10 | | |||||||||||||||||||||
Restructuring charges |
(15 | ) | 15 | 21 | (6 | ) | (7 | ) | N/M | N/M | ||||||||||||||||||
M&I expenses |
14 | 56 | 43 | 17 | 25 | 79 | 47 | |||||||||||||||||||||
Total noninterest expense |
$ | 2,316 | $ | 2,611 | $ | 2,803 | $ | 2,697 | $ | 2,816 | 22 | % | 4 | % | ||||||||||||||
Total staff expense as a percentage of total revenue |
37 | % | 39 | % | 38 | % | 39 | % | 38 | % |
(a) | Noninterest expense from the Acquisitions was $185 million in the third quarter of 2010, $196 million in the fourth quarter of 2010, $203 million in the first quarter of 2011 and $210 million in the second quarter of 2011. |
N/M Not meaningful.
KEY POINTS
| Total noninterest expense (excluding amortization of intangible assets, restructuring charges and merger and integration (M&I) expenses) (Non-GAAP) increased 21% compared with the prior year period, primarily driven by the impact of the Acquisitions and higher litigation/legal expenses. The year-over-year increase, excluding the impact of the Acquisitions, was 12%. Both the year-over-year and sequential increases reflect the impact of the annual employee merit increase in the second quarter of 2011, as well as higher volume-related and business development expenses. The increase in other expenses in the second quarter of 2011 primarily resulted from a first quarter increase in the value of collateral related to customer support agreements. |
Page - 9
BNY Mellon 2Q11 Quarterly Earnings Review
CAPITAL
Tier 1 common capital generation | 2Q10 |
3Q10 |
4Q10 |
1Q11 |
2Q11 |
|||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation GAAP |
$ | 658 | $ | 622 | $ | 679 | $ | 625 | $ | 735 | ||||||||||
Add: Intangible amortization |
60 | 70 | 72 | 68 | 68 | |||||||||||||||
Gross Tier 1 common equity generated |
718 | 692 | 751 | 693 | 803 | |||||||||||||||
Less: Dividends |
110 | 110 | 112 | 111 | 162 | |||||||||||||||
Common stock repurchases |
| | | 32 | 272 | |||||||||||||||
Goodwill & intangible assets related to the Acquisitions |
| 2,283 | | | | |||||||||||||||
Capital deployed |
110 | 2,393 | 112 | 143 | 434 | |||||||||||||||
Add: Other |
(173 | ) | 853 | (a) | (64 | ) | 246 | 141 | ||||||||||||
Net Tier 1 common equity generated |
$ | 435 | $ | (848 | ) | $ | 575 | $ | 796 | $ | 510 |
(a) | Includes common stock issued during the third quarter of 2010. |
Capital ratios | June 30, 2010 |
March 31, 2011 |
June 30, 2011 (a) |
|||||||||
Estimated Basel III Tier 1 common equity ratio Non-GAAP (b) |
N/A | 6.1 | % | 6.6 | % | |||||||
Tier 1 common equity to risk-weighted assets ratio Non-GAAP (c) (d) |
11.9 | % | 12.4 | 12.6 | ||||||||
Tier 1 capital ratio (c) |
13.5 | 14.0 | 14.1 | |||||||||
Total (Tier 1 plus Tier 2) capital ratio (c) |
17.2 | 16.8 | 16.7 | |||||||||
Leverage capital ratio (c) |
6.6 | 6.1 | 5.8 | |||||||||
Common shareholders equity to total assets ratio (d) |
12.9 | 12.5 | 11.1 | |||||||||
Tangible common shareholders equity to tangible assets of operations ratio Non-GAAP (d) |
6.3 | 5.9 | 6.0 |
(a) | Preliminary. |
(b) | Our estimated Basel III Tier 1 common equity ratio(Non-GAAP) reflects our current interpretation of the Basel III rules. Our estimated Basel III Tier 1 common equity ratio could change in the future as the U.S. regulatory agencies implement Basel III or if our businesses change. |
(c) | On a regulatory basis as determined under Basel 1 guidelines. |
(d) | See the Supplemental information section beginning on page 18 for a calculation of these ratios. |
N/A | Not applicable. |
We generated $803 million of Basel I Tier 1 common equity in 2Q11, primarily driven by earnings retention.
In 2Q11, we increased our Basel III Tier 1 common equity ratio by approximately 45 basis points, reflecting our strong capital generation and improving risk-weighted assets mix. Given the strength of our balance sheet and ability to rapidly grow capital, we do not anticipate accelerating our timeline to meet the proposed Basel III capital guidelines.
Page - 10
BNY Mellon 2Q11 Quarterly Earnings Review
INVESTMENT SECURITIES PORTFOLIO
At June 30, 2011, the fair value of our investment securities portfolio totaled $68.6 billion. The unrealized pre-tax net gain on our total securities portfolio was $770 million at June 30, 2011 compared with a pre-tax net gain of $569 million at March 31, 2011 and an unrealized pre-tax net gain of $292 million at June 30, 2010. Total paydowns of sub-investment grade securities were approximately $330 million in the second quarter of 2011. The investment securities previously included in the former Grantor Trust were marked down to approximately 60% of face value in 2009. At June 30, 2011, these securities were trading above adjusted amortized cost with a total unrealized pre-tax gain of $601 million. Reflecting improved performance, the commercial mortgage-backed and credit card securities were moved out of the Watch list in the second quarter of 2011.
The following table shows the distribution of our investment securities portfolio.
Investment securities portfolio | ||||||||||||||||||||||||||||||||||||||||||||
March 31, 2011 |
2Q11 change in unrealized gain/ (loss) |
June 30, 2011 | Fair |
Unrealized gain/(loss) |
Ratings | |||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) | Fair value | Amortized cost |
Fair value |
AAA/ AA- |
A+/A- | BBB+/ BBB- |
BB+ and lower |
Not rated |
||||||||||||||||||||||||||||||||||||
Watch list: (b) |
||||||||||||||||||||||||||||||||||||||||||||
European floating rate notes (c) |
$ | 4,628 | $ | 52 | $ | 4,674 | $ | 4,334 | 92 | % | $ | (340 | ) | 82 | % | 16 | % | 2 | % | | % | | % | |||||||||||||||||||||
Non-agency RMBS |
2,428 | (48 | ) | 2,509 | 2,237 | 82 | (272 | ) | 21 | 14 | 13 | 52 | | |||||||||||||||||||||||||||||||
Other |
341 | 2 | 274 | 312 | 47 | 38 | 3 | 1 | 21 | 20 | 55 | |||||||||||||||||||||||||||||||||
Total Watch list (b) |
7,397 | 6 | 7,457 | 6,883 | 85 | (574 | ) | 59 | 15 | 6 | 18 | 2 | ||||||||||||||||||||||||||||||||
Agency RMBS |
19,227 | 182 | 18,767 | 19,282 | 103 | 515 | 100 | | | | | |||||||||||||||||||||||||||||||||
Sovereign debt/ |
9,683 | 23 | 10,536 | 10,581 | 100 | 45 | 100 | | | | | |||||||||||||||||||||||||||||||||
U.S. Treasury securities |
13,618 | 174 | 13,187 | 13,296 | 101 | 109 | 100 | | | | | |||||||||||||||||||||||||||||||||
Non-agency RMBS (e) |
4,383 | (222 | ) | 3,409 | 4,010 | 71 | 601 | 2 | 1 | 3 | 94 | | ||||||||||||||||||||||||||||||||
Foreign covered bonds (f) |
3,087 | 24 | 2,976 | 2,965 | 100 | (11 | ) | 100 | | | | | ||||||||||||||||||||||||||||||||
FDIC-insured debt |
2,497 | (7 | ) | 2,193 | 2,223 | 101 | 30 | 100 | | | | | ||||||||||||||||||||||||||||||||
Commercial MBS |
2,131 | (2 | ) | 2,063 | 2,119 | 103 | 56 | 89 | 8 | 3 | | | ||||||||||||||||||||||||||||||||
CLO |
254 | (5 | ) | 1,144 | 1,139 | 100 | (5 | ) | 83 | 17 | | | | |||||||||||||||||||||||||||||||
U.S. Government agency debt |
1,017 | 18 | 1,099 | 1,111 | 101 | 12 | 100 | | | | | |||||||||||||||||||||||||||||||||
Credit cards |
442 | | 475 | 480 | 100 | 5 | 11 | 87 | 2 | | | |||||||||||||||||||||||||||||||||
Other |
2,665 | 10 | 4,526 | 4,513 | 100 | (13 | ) | 59 | 25 | 4 | 1 | 11 | ||||||||||||||||||||||||||||||||
Total investment securities |
$ | 66,401 | (g) | $ | 201 | $ | 67,832 | $ | 68,602 | (g) | 97 | % | $ | 770 | 87 | % | 4 | % | 1 | % | 7 | % | 1 | % |
(a) | Amortized cost before impairments. |
(b) | The Watch list includes those securities we view as having a higher risk of impairment charges. |
(c) | Includes RMBS, commercial MBS, and other securities. Primarily UK and Netherlands exposure. |
(d) | Primarily UK, Germany, France and Netherlands exposure. There was no exposure to Portugal, Ireland, Italy, Greece and Spain at March 31, 2011 and June 30, 2011. |
(e) | These RMBS were previously 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 enhancement, the difference between the written-down amortized cost and the current face amount of each of these securities. |
(f) | Germany and Canada exposure. |
(g) | Includes net unrealized gains on derivatives hedging securities available-for-sale of $92 million at March 31, 2011 and $37 million at June 30, 2011. |
Page - 11
BNY Mellon 2Q11 Quarterly Earnings Review
NONPERFORMING ASSETS
Nonperforming assets (dollar amounts in millions) |
June 30, 2010 |
March 31, 2011 |
June 30, 2011 |
|||||||||
Loans: |
||||||||||||
Other residential mortgages |
$ | 229 | $ | 245 | $ | 236 | ||||||
Wealth management |
62 | 56 | 31 | |||||||||
Commercial |
40 | 32 | 31 | |||||||||
Commercial real estate |
49 | 36 | 28 | |||||||||
Foreign |
7 | 7 | 13 | |||||||||
Financial institutions |
13 | 4 | 4 | |||||||||
Total nonperforming loans |
400 | 380 | 343 | |||||||||
Other assets owned |
6 | 6 | 8 | |||||||||
Total nonperforming assets (a) |
$ | 406 | $ | 386 | $ | 351 | ||||||
Nonperforming assets ratio |
1.1 | % | 1.0 | % | 1.0 | % | ||||||
Allowance for loan losses/nonperforming loans |
135.5 | 122.9 | 128.6 | |||||||||
Total allowance for credit losses/nonperforming loans |
161.3 | 145.8 | 156.0 |
(a) | Loans of consolidated investment management funds are not part of BNY Mellons loan portfolio. Included in these loans are nonperforming loans of $131 million at June 30, 2010, $239 million at March 31, 2011 and $216 million at June 30, 2011. These loans are recorded at fair value and therefore do not impact the provision for credit losses and allowance for loan losses, and accordingly are excluded from the nonperforming assets table above. |
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS
Allowance for credit losses, provision and net charge-offs (in millions) |
2Q10 | 1Q11 | 2Q11 | |||||||||
Allowance for credit losses beginning of period |
$ | 638 | $ | 571 | $ | 554 | ||||||
Provision for credit losses |
20 | | | |||||||||
Net (charge-offs) recoveries: |
||||||||||||
Other residential mortgages |
(10 | ) | (16 | ) | (9 | ) | ||||||
Foreign |
| | (6 | ) | ||||||||
Commercial |
| 1 | (3 | ) | ||||||||
Commercial real estate |
(1 | ) | (3 | ) | (1 | ) | ||||||
Financial institutions |
(1 | ) | 1 | | ||||||||
Wealth Management |
(1 | ) | | | ||||||||
Total net (charge-offs) recoveries |
(13 | ) | (17 | ) | (19 | ) | ||||||
Allowance for credit losses end of period |
$ | 645 | $ | 554 | $ | 535 | ||||||
Allowance for loan losses |
$ | 542 | $ | 467 | $ | 441 | ||||||
Allowance for unfunded commitments |
103 | 87 | 94 |
There was no provision for credit losses in the second quarter of 2011, compared with a charge of $20 million in the second quarter of 2010 and no provision in the first quarter of 2011. During the second quarter of 2011, the total allowance for credit losses decreased $19 million driven by net charge-offs.
REVIEW OF BUSINESSES
In the first quarter of 2011, BNY Mellon realigned its internal reporting structure and business presentation to focus on its two principal businesses, Investment Management and Investment Services. Also in the first quarter of 2011, we revised the net interest revenue for our businesses to reflect a new approach which adjusts our transfer pricing methodology to better reflect the value of certain domestic deposits. All prior period business results were restated. There was no impact to the consolidated results.
Page - 12
BNY Mellon 2Q11 Quarterly Earnings Review
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)
2Q11 vs. | ||||||||||||||||||||||||||||
(dollar amounts in millions, unless otherwise noted) |
2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | |||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||
Investment management and performance fees: |
||||||||||||||||||||||||||||
Mutual funds |
$ | 254 | $ | 270 | $ | 293 | $ | 283 | $ | 290 | 14 | % | 2 | % | ||||||||||||||
Institutional clients |
279 | 282 | 300 | 319 | 319 | 14 | | |||||||||||||||||||||
Wealth management |
153 | 154 | 157 | 164 | 163 | 7 | (1 | ) | ||||||||||||||||||||
Performance fees |
19 | 16 | 75 | 17 | 18 | (5 | ) | 6 | ||||||||||||||||||||
Total investment management and performance fees |
705 | 722 | 825 | 783 | 790 | 12 | 1 | |||||||||||||||||||||
Distribution and servicing |
49 | 53 | 52 | 51 | 48 | (2 | ) | (6 | ) | |||||||||||||||||||
Other (a) |
13 | 18 | 22 | 36 | 27 | N/M | (25 | ) | ||||||||||||||||||||
Total fee and other revenue (a) |
767 | 793 | 899 | 870 | 865 | 13 | (1 | ) | ||||||||||||||||||||
Net interest revenue |
53 | 50 | 50 | 53 | 47 | (11 | ) | (11 | ) | |||||||||||||||||||
Total revenue |
820 | 843 | 949 | 923 | 912 | 11 | (1 | ) | ||||||||||||||||||||
Provision for credit losses |
1 | | 2 | | 1 | N/M | N/M | |||||||||||||||||||||
Noninterest expense (ex. amortization of intangible assets) |
596 | 624 | 667 | 630 | 643 | 8 | 2 | |||||||||||||||||||||
Income before taxes (ex. amortization of intangible assets) |
223 | 219 | 280 | 293 | 268 | 20 | (9 | ) | ||||||||||||||||||||
Amortization of intangible assets |
59 | 59 | 61 | 55 | 53 | (10 | ) | (4 | ) | |||||||||||||||||||
Income before taxes |
$ | 164 | $ | 160 | $ | 219 | $ | 238 | $ | 215 | 31 | % | (10 | )% | ||||||||||||||
Pre-tax operating margin |
20 | % | 19 | % | 23 | % | 26 | % | 24 | % | ||||||||||||||||||
Pre-tax operating margin (ex. amortization of intangible |
31 | % | 29 | % | 33 | % | 36 | % | 33 | % | ||||||||||||||||||
Metrics: |
||||||||||||||||||||||||||||
Changes in market value of assets under management (in billions): |
||||||||||||||||||||||||||||
Beginning balance |
$ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | ||||||||||||||||||
Net inflows: |
||||||||||||||||||||||||||||
Long-term |
12 | 11 | 9 | 31 | 32 | |||||||||||||||||||||||
Money market |
(17 | ) | 18 | 6 | (5 | ) | (1 | ) | ||||||||||||||||||||
Total net inflows |
(5 | ) | 29 | 15 | 26 | 31 | ||||||||||||||||||||||
Net market/currency impact |
(53 | ) | 65 | 16 | 31 | 14 | ||||||||||||||||||||||
Ending balance (d) |
$ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | (c) | 22 | % | 4 | % | |||||||||||||
Composition of assets under management at period end (d): |
||||||||||||||||||||||||||||
Equity |
30 | % | 31 | % | 32 | % | 34 | % | 34 | % | ||||||||||||||||||
Money market |
30 | 29 | 29 | 27 | 26 | |||||||||||||||||||||||
Fixed income |
30 | 30 | 29 | 30 | 31 | |||||||||||||||||||||||
Alternative investments and overlay |
10 | 10 | 10 | 9 | 9 | |||||||||||||||||||||||
Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
Wealth management: |
||||||||||||||||||||||||||||
Average loans |
$ | 6,350 | $ | 6,520 | $ | 6,668 | $ | 6,825 | $ | 6,884 | 8 | % | 1 | % | ||||||||||||||
Average deposits |
$ | 8,018 | $ | 8,455 | $ | 9,140 | $ | 9,272 | $ | 8,996 | 12 | % | (3 | )% |
(a) | Total fee and other revenue includes the impact of the consolidated investment management funds. See Supplemental information beginning on page 18. Additionally, other revenue includes asset servicing, clearing services and treasury services revenue. |
(b) | Distribution and servicing expense is netted with the distribution and servicing revenue for the purpose of this calculation of pre-tax operating margin. Distribution and servicing expense totaled $90 million, $94 million, $104 million, $110 million and $108 million, respectively. |
(c) | Preliminary. |
(d) | Excludes securities lending cash management assets. |
N/M Not meaningful.
Page - 13
BNY Mellon 2Q11 Quarterly Earnings Review
INVESTMENT MANAGEMENT KEY POINTS
| Investment Management results reflect the benefit of net new business in the investment management boutiques and wealth management platform, higher equity values (year-over-year), improved investment performance, and the adverse impact of the low interest rate environment. |
| Assets under management were a record $1.3 trillion at June 30, 2011, up 22% year-over-year and 4% sequentially. The year-over-year increase reflects improved markets values and net new business. The sequential increase primarily reflects net new business. |
- | Net long-term inflows were $32 billion and short-term outflows were $1 billion in 2Q11. Long-term inflows benefited from strength in fixed income and equity indexed products. |
| Investment management and performance fees were up 12% year-over-year and 1% (unannualized) sequentially. The year-over-year increase primarily reflects higher market values and net new business. The sequential increase primarily reflects net new business. Increases in both periods were partially offset by higher money market fee waivers. |
| Net interest revenue decreased 11% year-over-year and 11% (unannualized) sequentially. The year-over-year decrease primarily resulted from low interest rates, partially offset by higher average loans and deposits. The sequential decrease primarily resulted from the consolidation of certain assets. |
- | Average loans increased 8% year-over-year and 1% sequentially; average deposits increased 12% year-over-year and decreased 3% sequentially. |
| Total noninterest expense (ex. amortization of intangible assets) increased 8% year-over-year and 2% (unannualized) sequentially. The year-over-year and sequential increases primarily resulted from higher incentives, driven by new business, and the annual employee merit increase in 2Q11. The year-over-year increase also reflects higher distribution and servicing expenses. |
| Generated 300 basis points of positive operating leverage year-over-year, excluding amortization of intangible assets. |
| 41% non-U.S. revenue in 2Q11 vs. 38% in 2Q10. |
Page - 14
BNY Mellon 2Q11 Quarterly Earnings Review
INVESTMENT SERVICES (provides global custody and related services, broker-dealer services, alternative investment services, corporate trust, depositary receipt and shareowner services, as well as clearing services and global payment/working capital solutions to global financial institutions)
(dollar amounts in millions, unless otherwise noted) |
2Q11 vs. | |||||||||||||||||||||||||||
2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | ||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||
Investment services fees: |
||||||||||||||||||||||||||||
Asset servicing |
$ | 627 | $ | 845 | $ | 888 | $ | 897 | $ | 950 | 52 | % | 6 | % | ||||||||||||||
Issuer services |
354 | 364 | 409 | 351 | 365 | 3 | 4 | |||||||||||||||||||||
Clearing services |
240 | 250 | 276 | 290 | 290 | 21 | | |||||||||||||||||||||
Treasury services |
124 | 131 | 128 | 127 | 127 | 2 | | |||||||||||||||||||||
Total investment services fees |
1,345 | 1,590 | 1,701 | 1,665 | 1,732 | 29 | 4 | |||||||||||||||||||||
Foreign exchange and other trading revenue |
249 | 185 | 227 | 208 | 202 | (19 | ) | (3 | ) | |||||||||||||||||||
Other (a) |
120 | 90 | 82 | 77 | 84 | (30 | ) | 9 | ||||||||||||||||||||
Total fee and other revenue (a) |
1,714 | 1,865 | 2,010 | 1,950 | 2,018 | 18 | 3 | |||||||||||||||||||||
Net interest revenue |
608 | 589 | 598 | 639 | 666 | 10 | 4 | |||||||||||||||||||||
Total revenue (b) |
2,322 | 2,454 | 2,608 | 2,589 | 2,684 | 16 | 4 | |||||||||||||||||||||
Noninterest expense (ex. amortization of intangible assets) (c) |
1,521 | 1,630 | 1,759 | 1,763 | 1,837 | 21 | 4 | |||||||||||||||||||||
Income before taxes (ex. amortization of intangible assets) |
801 | 824 | 849 | 826 | 847 | 6 | 3 | |||||||||||||||||||||
Amortization of intangible assets |
39 | 52 | 53 | 53 | 54 | 38 | 2 | |||||||||||||||||||||
Income before taxes |
$ | 762 | $ | 772 | $ | 796 | $ | 773 | $ | 793 | 4 | % | 3 | % | ||||||||||||||
Pre-tax operating margin |
33 | % | 31 | % | 31 | % | 30 | % | 30 | % | ||||||||||||||||||
Pre-tax operating margin (ex. amortization of intangible assets) |
34 | % | 34 | % | 33 | % | 32 | % | 32 | % | ||||||||||||||||||
Investment services fees as a percentage of noninterest expense (ex. amortization of intangible assets) |
88 | % | 98 | % | 97 | % | 94 | % | 94 | % | ||||||||||||||||||
Metrics: |
||||||||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | 21 | % | 3 | % | ||||||||||||||
Market value of securities on loan at period-end (in billions) (d) |
$ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | 10 | % | (2 | )% | ||||||||||||||
Securities lending revenue |
$ | 30 | $ | 26 | $ | 27 | $ | 27 | $ | 52 | 73 | % | 93 | % | ||||||||||||||
Average loans |
$ | 17,053 | $ | 17,941 | $ | 19,053 | $ | 20,554 | $ | 22,891 | 34 | % | 11 | % | ||||||||||||||
Average deposits |
$ | 121,468 | $ | 123,212 | $ | 136,060 | $ | 141,115 | $ | 154,771 | 27 | % | 10 | % | ||||||||||||||
Asset servicing: |
||||||||||||||||||||||||||||
New business wins (in billions) |
$ | 419 | $ | 480 | $ | 350 | $ | 496 | $ | 196 | ||||||||||||||||||
Corporate Trust: |
||||||||||||||||||||||||||||
Total debt serviced (in trillions) |
$ | 11.6 | $ | 12.0 | $ | 12.0 | $ | 11.9 | $ | 11.8 | 2 | % | (1 | )% | ||||||||||||||
Number of deals administered |
140,551 | 135,613 | 138,067 | 133,416 | 133,262 | (5 | )% | | % | |||||||||||||||||||
Depositary Receipts: |
||||||||||||||||||||||||||||
Number of sponsored programs |
1,341 | 1,346 | 1,359 | 1,367 | 1,386 | 3 | % | 1 | % | |||||||||||||||||||
Clearing services: |
||||||||||||||||||||||||||||
DARTS volume (in thousands) |
198.4 | 161.4 | 185.5 | 207.2 | 196.5 | (1 | )% | (5 | )% | |||||||||||||||||||
Average active clearing accounts (in thousands) |
4,896 | 4,929 | 4,967 | 5,289 | 5,486 | 12 | % | 4 | % | |||||||||||||||||||
Average long-term mutual fund assets (U.S. platform) |
$ | 229,714 | $ | 243,573 | $ | 264,076 | $ | 287,682 | $ | 306,193 | 33 | % | 6 | % | ||||||||||||||
Average margin loans |
$ | 5,775 | $ | 6,261 | $ | 6,281 | $ | 6,978 | $ | 7,506 | 30 | % | 8 | % | ||||||||||||||
Broker-Dealer: |
||||||||||||||||||||||||||||
Average collateral management balances (in billions) |
$ | 1,565 | $ | 1,632 | $ | 1,794 | $ | 1,806 | $ | 1,845 | 18 | % | 2 | % | ||||||||||||||
Treasury services: |
||||||||||||||||||||||||||||
Global payments transaction volume (in thousands) |
10,678 | 10,847 | 11,042 | 10,587 | 10,762 | 1 | % | 2 | % |
(a) | Total fee and other revenue includes investment management fees and distribution and servicing revenue. |
(b) | Total revenue from the Acquisitions was $237 million in the third quarter of 2010, $253 million in the fourth quarter of 2010, $270 million in the first quarter of 2011 and $274 million in the second quarter of 2011. |
(c) | Noninterest expense from the Acquisitions was $185 million in the third quarter of 2010, $196 million in the fourth quarter of 2010, $203 million in the first quarter of 2011 and $210 million in the second quarter of 2011. |
(d) | Represents the securities on loan managed by the Investment Services business. |
Page - 15
BNY Mellon 2Q11 Quarterly Earnings Review
INVESTMENT SERVICES KEY POINTS
| Investment Services results reflect the impact of the Acquisitions (year-over-year), net new business, improved market values and seasonality (sequentially) |
| Investment services fees totaled $1.7 billion, an increase of 29% year-over-year and 4% (unannualized) sequentially. |
- | Asset servicing revenue (global custody, broker-dealer services and alternative investment services) was $950 million in 2Q11 compared with $897 million in 1Q11 and $627 million in 2Q10. The year-over-year increase was primarily driven by the impact of the Acquisitions, higher market values, net new business and higher securities lending revenue due to higher loan balances and spreads. The sequential increase reflects seasonally higher securities lending revenue and net new business. |
- | Issuer services revenue (corporate trust, depositary receipts and shareowner services) was $365 million in 2Q11 compared with $351 million in 1Q11 and $354 million in 2Q10. The year-over-year increase reflects higher Depositary Receipts revenue driven by higher corporate actions and services fees, partially offset by lower Shareowner Services and Corporate Trust revenue. The sequential increase reflects seasonally higher Depositary Receipts revenue, partially offset by lower Shareowner Services and Corporate Trust revenue. |
- | Clearing services revenue (Pershing) was $290 million in 2Q11 compared with $290 million in 1Q11 and $240 million in 2Q10. The year-over-year increase reflects the impact of the GIS acquisition, growth in mutual fund assets and positions and new business, partially offset by lower transaction volumes and higher money market fee waivers. Sequentially, the impact of higher mutual fund positions was offset by lower transaction volumes and higher money market fee waivers. |
| Foreign exchange and other trading revenue decreased 19% year-over-year and 3% (unannualized) sequentially. The year-over-year decrease reflects lower volatility, partially offset by higher volumes. The sequential decrease reflects slightly lower volumes. |
| Net interest revenue was $666 million in 2Q11 compared with $639 million in 1Q11 and $608 million in 2Q10. Both increases reflect higher average deposits partially offset by lower spreads. |
| Noninterest expense (excluding amortization of intangible assets) increased 21% year-over-year and 4% (unannualized) sequentially. The year-over-year increase primarily reflects the impact of the Acquisitions. Both increases resulted from net new business, higher litigation/legal expenses, higher volume-driven expenses and the annual employee merit increase in 2Q11. |
| 38% non-U.S. revenue in 2Q11 vs. 36% in 2Q10. |
Page - 16
BNY Mellon 2Q11 Quarterly Earnings Review
OTHER SEGMENT (primarily includes credit-related services, the leasing portfolio, corporate treasury activities, business exits, M&I expenses and other corporate revenue and expense items)
(dollar amounts in millions) | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | |||||||||||||||
Revenue: |
||||||||||||||||||||
Fee and other revenue |
$ | 106 | $ | 59 | $ | 108 | $ | 84 | $ | 215 | ||||||||||
Net interest revenue |
61 | 79 | 72 | 6 | 18 | |||||||||||||||
Total revenue |
167 | 138 | 180 | 90 | 233 | |||||||||||||||
Provision for credit losses |
19 | (22 | ) | (24 | ) | | (1 | ) | ||||||||||||
Noninterest expense (ex. amortization of intangible assets, restructuring charges and M&I expenses) |
102 | 175 | 198 | 185 | 210 | |||||||||||||||
Income (loss) before taxes (ex. amortization of intangible assets, restructuring charges and M&I expenses) |
46 | (15 | ) | 6 | (95 | ) | 24 | |||||||||||||
Amortization of intangible assets |
| | 1 | | 1 | |||||||||||||||
Restructuring charges |
(15 | ) | 15 | 21 | (6 | ) | (7 | ) | ||||||||||||
M&I expenses |
14 | 56 | 43 | 17 | 25 | |||||||||||||||
Income (loss) before taxes |
$ | 47 | $ | (86 | ) | $ | (59 | ) | $ | (106 | ) | $ | 5 | |||||||
Average loans and leases |
$ | 13,261 | $ | 12,308 | $ | 11,808 | $ | 11,187 | $ | 10,553 | ||||||||||
Average deposits |
$ | 5,105 | $ | 5,564 | $ | 6,201 | $ | 4,744 | $ | 5,229 |
KEY POINTS
| Total fee and other revenue increased $109 million compared to 2Q10 and $131 million compared to 1Q11. Both increases reflect gains related to loans retained from a previously divested banking subsidiary, net securities gains primarily from the sale of long dated U.S Treasury and agency securities and higher fixed income and derivative trading revenue. |
| The year-over-year decline in net interest revenue reflects a reduction in the net interest margin resulting from the continued impact of the low interest rate environment as well as lower average loan and lease balances resulting from our credit strategy to reduce targeted risk exposure. The sequential increase in net interest revenue reflects higher average deposits. |
| Noninterest expense (excluding amortization of intangible assets, restructuring charges and M&I expenses) increased $108 million compared to 2Q10 and $25 million sequentially. The year-over-year increase reflects higher compensation and litigation expenses. The increase sequentially primarily reflects higher litigation and business development expenses. |
Page - 17
BNY Mellon 2Q11 Quarterly Earnings Review
SUPPLEMENTAL INFORMATION EXPLANATION OF NON-GAAP FINANCIAL MEASURES
BNY Mellon has included in this Earnings Review certain Non-GAAP financial measures based upon tangible common shareholders equity. BNY Mellon believes that the ratio of tangible common shareholders equity to tangible assets of operations is a measure of capital strength that provides additional useful information to investors, supplementing the Tier 1 and Total capital ratios which are utilized by regulatory authorities. Unlike the Tier 1 and Total capital ratios, the tangible common shareholders equity ratio fully incorporates those 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, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes. This ratio is also informative to investors in BNY Mellons common stock because, unlike the Tier 1 capital ratio, it excludes trust preferred securities issued by BNY Mellon. Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of BNY Mellons performance in reference to those assets which are productive in generating income. BNY Mellon has presented its Basel III Tier 1 common equity ratio on a basis that is representative of how it currently understands the Basel III rules. Management views the Basel III Tier 1 common equity ratio as a key measure in monitoring BNY Mellons capital position. Additionally, the presentation of the Basel III tier 1 common equity ratio permits investors the ability to compare BNY Mellons Basel III Tier 1 common equity ratio with estimates presented by other companies.
BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding. BNY Mellon has presented revenue measures which exclude the effect of net securities gains; and expense measures which exclude restructuring charges, M&I expenses and amortization of intangible assets expenses. Operating margin measures, which exclude some or all of these items, are also presented. Operating margin measures also exclude noncontrolling interests related to consolidated investment management funds. 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 Mellons control. The excluded items in general relate to situations where accounting rules require certain ongoing charges as a result of prior transactions, or where we have incurred charges unrelated to operational initiatives. M&I expenses primarily relate to the Acquisitions in 2010 and the merger with Mellon Financial Corporation in 2007. M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellons business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased, typically after approximately three years. Future periods will not reflect such M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded. With regards to the exclusion of net securities gains, BNY Mellons primary businesses are Investment Management and Investment Services. The management of these businesses is evaluated on the basis of the ability of these businesses to generate fee and net interest revenue and to control expenses, and not on the results of BNY Mellons investment securities portfolio. The investment securities portfolio is managed within the Other segment. The primary objective of the investment securities portfolio is to generate net interest revenue from the liquidity generated by BNY Mellons processing businesses. BNY Mellon does not generally originate or trade the securities in the investment securities portfolio. The presentation of income of consolidated investment management funds, net of noncontrolling interest related to the consolidation of certain investment management funds permits investors to view revenue on a basis consistent with how management views the business. Restructuring charges relate to migrating positions to global growth centers and the elimination of certain positions. Excluding these charges permits investors to view expenses 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.
In this Earnings Review, certain amounts are presented on an FTE basis. We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income.
Page - 18
BNY Mellon 2Q11 Quarterly Earnings Review
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.
Reconciliation of net income and EPS GAAP to Non-GAAP | 2Q10 | 1Q11 | 2Q11 | |||||||||||||||||||||
(in millions, except per common share amounts) | Net income |
EPS (a) | Net income |
EPS (a) | Net income |
EPS (a) | ||||||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation GAAP Diluted EPS basis (a) |
$ | 658 | $ | 0.54 | $ | 625 | $ | 0.50 | $ | 735 | $ | 0.59 | ||||||||||||
Loss from discontinued operations |
(10 | ) | (0.01 | ) | | | | | ||||||||||||||||
Continuing operations GAAP |
668 | 0.55 | 625 | 0.50 | 735 | 0.59 | ||||||||||||||||||
Add: Restructuring charges |
(9 | ) | N/A | (5 | ) | N/A | N/A | N/A | ||||||||||||||||
M&I expenses |
9 | N/A | 11 | N/A | N/A | N/A | ||||||||||||||||||
Net income from continuing operations applicable to common shareholders excluding restructuring charges, and M&I expenses Non-GAAP |
668 | 0.55 | 631 | 0.50 | 735 | 0.59 | ||||||||||||||||||
Add: Amortization of intangible assets |
60 | 0.05 | 68 | 0.05 | 68 | 0.05 | ||||||||||||||||||
Net income from continuing operations applicable to common shareholders excluding restructuring charges, M&I expenses and amortization of intangible assets Non-GAAP |
$ | 728 | $ | 0.60 | $ | 699 | $ | 0.55 | $ | 803 | $ | 0.64 |
(a) | Diluted earnings per share are determined based on the net income reported on the income statement less earnings allocated to participating securities of $7 million in the second quarter of 2010, $6 million in the first quarter of 2011 and $8 million in the second quarter of 2011, and the excess of redeemable value over the fair value of noncontrolling interests of $million in the second quarter of 2010, $6 million in the first quarter of 2011 and $million in the second quarter of 2011. |
N/A | Not applicable. |
Reconciliation of income from continuing operations before income taxes pre-tax operating margin | ||||||||||||||||||||
(dollars in millions) | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 2Q11 | |||||||||||||||
Income from continuing operations before income taxes GAAP |
$ | 1,006 | $ | 834 | $ | 970 | $ | 949 | $ | 1,034 | ||||||||||
Less: Net securities gains |
13 | 6 | 1 | 5 | 48 | |||||||||||||||
Noncontrolling interests of consolidated investment management funds |
33 | (12 | ) | 14 | 44 | 21 | ||||||||||||||
Add: Amortization of intangible assets |
98 | 111 | 115 | 108 | 108 | |||||||||||||||
Restructuring charges |
(15 | ) | 15 | 21 | (6 | ) | (7 | ) | ||||||||||||
M&I expenses |
14 | 56 | 43 | 17 | 25 | |||||||||||||||
Income from continuing operations before income taxes excluding net securities gains, noncontrolling interests of consolidated investment management funds, amortization of intangible assets, restructuring charges and M&I expenses Non-GAAP |
$ | 1,057 | $ | 1,022 | $ | 1,134 | $ | 1,019 | $ | 1,091 | ||||||||||
Fee and other revenue GAAP |
$ | 2,555 | $ | 2,668 | $ | 2,972 | $ | 2,838 | $ | 3,056 | ||||||||||
Income of consolidated investment management funds GAAP |
65 | 37 | 59 | 110 | 63 | |||||||||||||||
Net interest revenue GAAP |
722 | 718 | 720 | 698 | 731 | |||||||||||||||
Total revenue GAAP |
3,342 | 3,423 | 3,751 | 3,646 | 3,850 | |||||||||||||||
Less: Net securities gains |
13 | 6 | 1 | 5 | 48 | |||||||||||||||
Noncontrolling interests of consolidated investment management funds | 33 | (12 | ) | 14 | 44 | 21 | ||||||||||||||
Total revenue excluding net securities gains and noncontrolling interests of consolidated investment management funds Non-GAAP |
$ | 3,296 | $ | 3,429 | $ | 3,736 | $ | 3,597 | $ | 3,781 | ||||||||||
Pre-tax operating margin (a) |
30 | % | 24 | % | 26 | % | 26 | % | 27 | % | ||||||||||
Pre-tax operating margin excluding net securities gains, noncontrolling interests of consolidated investment management funds, amortization of intangible assets, restructuring charges and M&I expenses Non-GAAP (a) |
32 | % | 30 | % | 30 | % | 28 | % | 29 | % |
(a) | Income before taxes divided by total revenue. |
Page - 19
BNY Mellon 2Q11 Quarterly Earnings Review
Return on common equity and tangible common equity (dollars in millions) |
2Q10 (a) | 3Q10 (a) | 4Q10 (a) | 1Q11 | 2Q11 | |||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation GAAP |
$ | 658 | $ | 622 | $ | 679 | $ | 625 | $ | 735 | ||||||||||
Less: Loss from discontinued operations, net of tax |
(10 | ) | (3 | ) | (11 | ) | | | ||||||||||||
Net income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation |
668 | 625 | 690 | 625 | 735 | |||||||||||||||
Add: Amortization of intangible assets |
60 | 70 | 72 | 68 | 68 | |||||||||||||||
Net income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets Non-GAAP |
$ | 728 | $ | 695 | $ | 762 | $ | 693 | $ | 803 | ||||||||||
Average common shareholders equity |
$ | 30,462 | $ | 31,868 | $ | 32,379 | $ | 32,827 | $ | 33,464 | ||||||||||
Less: Average goodwill |
16,073 | 17,798 | 18,073 | 18,121 | 18,193 | |||||||||||||||
Average intangible assets |
5,421 | 5,956 | 5,761 | 5,664 | 5,547 | |||||||||||||||
Add: Deferred tax liability tax deductible goodwill |
746 | 763 | 816 | 862 | 895 | |||||||||||||||
Deferred tax liability non-tax deductible intangible assets |
1,649 | 1,634 | 1,625 | 1,658 | 1,630 | |||||||||||||||
Average tangible common shareholders equity Non-GAAP |
$ | 11,363 | $ | 10,511 | $ | 10,986 | $ | 11,562 | $ | 12,249 | ||||||||||
Return on common equity GAAP (b) |
8.8 | % | 7.8 | % | 8.5 | % | 7.7 | % | 8.8 | % | ||||||||||
Return on tangible common equity Non-GAAP (b) |
25.7 | % | 26.3 | % | 27.5 | % | 24.3 | % | 26.3 | % |
(a) | Presented on a continuing operations basis. |
(b) | Annualized. |
Equity to assets and book value per common share (dollars in millions, unless otherwise noted) |
June 30, 2010 |
March 31, 2011 |
June 30, 2011 |
|||||||||
Common shareholders equity at period end GAAP |
$ | 30,396 | $ | 33,258 | $ | 33,851 | ||||||
Less: Goodwill |
16,106 | 18,156 | 18,191 | |||||||||
Intangible assets |
5,354 | 5,617 | 5,514 | |||||||||
Add: Deferred tax liability tax deductible goodwill |
746 | 862 | 895 | |||||||||
Deferred tax liability non-tax deductible intangible assets |
1,649 | 1,658 | 1,630 | |||||||||
Tangible common shareholders equity at period end Non-GAAP |
$ | 11,331 | $ | 12,005 | $ | 12,671 | ||||||
Total assets at period end GAAP |
$ | 235,693 | $ | 266,444 | $ | 304,706 | ||||||
Less: Assets of consolidated investment management funds |
13,260 | 14,699 | 13,533 | |||||||||
Subtotal assets of operations Non-GAAP |
222,433 | 251,745 | 291,173 | |||||||||
Less: Goodwill |
16,106 | 18,156 | 18,191 | |||||||||
Intangible assets |
5,354 | 5,617 | 5,514 | |||||||||
Cash on deposit with the Federal Reserve and other central banks (a) |
21,548 | 24,613 | 56,478 | |||||||||
Tangible assets of operations at period end Non-GAAP |
$ | 179,425 | $ | 203,359 | $ | 210,990 | ||||||
Common shareholders equity to total assets GAAP |
12.9 | % | 12.5 | % | 11.1 | % | ||||||
Tangible common shareholders equity to tangible assets of operations Non-GAAP |
6.3 | % | 5.9 | % | 6.0 | % | ||||||
Period end common shares outstanding (in thousands) |
1,214,042 | 1,241,724 | 1,232,691 | |||||||||
Book value per common share |
$ | 25.04 | $ | 26.78 | $ | 27.46 | ||||||
Tangible book value per common share Non-GAAP |
$ | 9.33 | $ | 9.67 | $ | 10.28 |
(a) | Assigned a zero percent risk weighting by the regulators. |
Page - 20
BNY Mellon 2Q11 Quarterly Earnings Review
Calculation of Tier 1 common equity to risk-weighted assets ratio (a) (dollars in millions) |
June 30, 2010 |
March 31, 2011 |
June 30, 2011 (b) |
|||||||||
Total Tier 1 capital |
$ | 13,857 | $ | 14,403 | $ | 14,896 | ||||||
Less: Trust preferred securities |
1,663 | 1,686 | 1,669 | |||||||||
Total Tier 1 common equity |
$ | 12,194 | $ | 12,717 | $ | 13,227 | ||||||
Total risk-weighted assets |
$ | 102,807 | $ | 102,887 | $ | 105,407 | ||||||
Tier 1 common equity to risk-weighted assets ratio |
11.9 | % | 12.4 | % | 12.6 | % |
(a) | On a regulatory basis using Tier 1 capital as determined under Basel I guidelines. |
(b) | Preliminary. |
Return on Tier 1 common equity (dollars in millions) |
1Q11 | 2Q11 | ||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
$ | 625 | $ | 735 | ||||
Average Tier 1 common equity |
$ | 12,319 | $ | 12,972 | ||||
Return on Tier 1 common equity (a) |
21 | % | 23 | % |
(a) | Annualized. |
The following table presents investment management fee revenue excluding performance fees.
Investment management and performance fee revenue | 2Q11 vs. | |||||||||||||||||||
(dollars in millions) | 2Q10 | 1Q11 | 2Q11 | 2Q10 | 1Q11 | |||||||||||||||
Investment management and performance fee revenue |
$ | 686 | $ | 764 | $ | 779 | 14 | % | 2 | % | ||||||||||
Less: Performance fees |
19 | 17 | 18 | |||||||||||||||||
Investment management fee revenue excluding performance fees |
$ | 667 | $ | 747 | $ | 761 | 14 | % | 2 | % |
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) |
2Q10 | 1Q11 | 2Q11 | |||||||||
Operations of consolidated investment management funds |
$ | 65 | $ | 110 | $ | 63 | ||||||
Less: Noncontrolling interests of consolidated investment management funds |
33 | 44 | 21 | |||||||||
Income from consolidated investment management funds, net of noncontrolling interests |
$ | 32 | $ | 66 | $ | 42 |
Page - 21
BNY Mellon 2Q11 Quarterly Earnings Review
Reconciliation of effective tax rate | 2Q10 (a) | 1Q11 | 2Q11 | |||||||||
Effective tax rate GAAP |
30.2 | % | 29.3 | % | 26.9 | % | ||||||
Consolidated investment management funds |
1.0 | 1.3 | 2.6 | |||||||||
Other |
(0.4 | ) | (0.4 | ) | 0.5 | |||||||
Effective tax rate operating basis Non-GAAP |
30.8 | % | 30.2 | % | 30.0 | % |
(a) | Presented on a continuing operations basis. |
Cautionary Statement
A number of statements (i) in this Quarterly Earnings Review, (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 statements made regarding our estimates of our Basel III Tier 1 common equity ratio, as well as our plans to meet proposed Basel III capital guidelines. These statements may be expressed in a variety of ways, including the use of future or present tense language. 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 Review, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellons 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 Mellons Annual Report on Form 10-K for the year ended Dec. 31, 2010 and BNY Mellons other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Review speak only as of July 19, 2011, 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.
Page - 22
Exhibit 99.2
THE BANK OF NEW YORK MELLON CORPORATION
Financial Trends
Notes:
The following transactions/changes have impacted the reporting of our results:
In the first quarter of 2011, we realigned our internal reporting structure and business presentation to focus on two principal businesses, Investment Management and Investment Services. Investment Management includes the former Asset Management and Wealth Management businesses. Investment Services includes the former Asset Servicing, Issuer Services and Clearing Services businesses as well as the Cash Management business previously included in the Treasury Services business. The credit-related activities previously included in Treasury Services business, are now included in the Other segment. Accordingly, the income statement has been changed to reflect this realignment. Investment management and performance fees consist of the former asset and wealth management fee revenue and Investment services fees consist of the former securities servicing fees, including asset servicing, issuer services, clearing services, as well as treasury services fee revenue. All prior periods have been reclassified. The reclassifications did not affect the results of operations.
In the first quarter of 2011, we revised the net interest revenue for our businesses to reflect a new approach to transfer pricing domestic deposits. All prior period business results have been restated to reflect this revision. The revision did not impact consolidated results.
On July 1, 2010 and August 2, 2010 we completed the acquisitions of Global Investment Servicing (GIS) and BHF Asset Servicing GmbH (BAS). The financial results for GIS are included in the Investment Services and Other businesses. The financial results for BAS are included in the Investment Services business.
On Jan. 1, 2010, we adopted SFAS No. 167, Amendments to FASB Interpretation No. 46 (R). Certain asset management funds and seed capital investments are now disclosed separately on our balance sheet and securitizations are included in available for sale securities. The income statement separately discloses the operations of consolidated asset management funds and the net income attributable to noncontrolling interests of consolidated asset management funds; previously these were disclosed as asset and wealth management revenue and investment and other income.
On November 2, 2009, we completed the acquisition of Insight Asset Management (Insight) based in London. The financial results for Insight are included in the Investment Management business.
On January 1, 2009, we adopted FAS 160, which resulted in a reclassification of minority interest to equity from other liabilities on the balance sheet and to noncontrolling interest from other expense on the income statement.
The following items have impacted the comparability of our results:
Results for the first quarter of 2010 include a charge related to special litigation reserves.
Investment Securities Portfolio restructuring/Investment Write-downs Impacted total revenue levels in the full year of 2008 and full year of 2009.
The TARP preferred dividends and related redemption premium impacted the fourth quarter of 2008 and the first and second quarters of 2009.
The FDIC Special Assessment of all depository institutions impacted the second quarter of 2009.
Global efficiency restructuring charges Recorded charges in the fourth quarters of 2008 and 2009 and third quarter of 2010.
All of these items are detailed in the trends that follow.
Summations may not equal due to rounding. As a result of this rounding convention, immaterial differences may exist between the business trends data versus business data on the Form 10-K for the year ended December 31, 2010.
Certain reclassifications have been made to prior periods to place them on a basis comparable with the current periods presentation.
Discontinued Operations Accounting:
The income/(loss) and average assets from discontinued operations accounting have not been allocated to any business.
Average Assets:
In businesses where average deposits are greater than average loans, average assets include an allocation of investment securities equal to the difference. Consolidated average assets include average assets of discontinued operations.
Return on Common and Tangible Common Equity/Pretax Operating Margin:
Ratios are presented for continuing operations basis only. Quarterly return on common and tangible common equity ratios are annualized.
Non-GAAP Measures:
Certain Non-GAAP measures are included in the following schedules. These measures are used by management to monitor financial performance, both on a company-wide and on a business basis. These Non-GAAP measures impact certain revenue/expense categories, percentages and ratios by the exclusion and/or adjustment of items listed above and described in footnotes. For further information, see Non-GAAP Financial Measures and Supplemental Information Explanation of Non-GAAP Financial Measures in The Bank of New York Mellon Corporation Quarterly Earnings Review dated July 19, 2011, furnished as an exhibit to the Report on Form 8-K to which these Financial Trends are furnished as an exhibit.
Page 1 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS - 10 Quarter Trend
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions unless otherwise |
1st Qtr | 2nd Qtr (a) | 3rd Qtr (b) | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||||||||||
Investment services fees |
||||||||||||||||||||||||||||||||||||||||
Asset servicing |
$ | 609 | $ | 671 | $ | 643 | $ | 650 | $ | 637 | $ | 668 | $ | 870 | $ | 914 | $ | 923 | $ | 980 | ||||||||||||||||||||
Issuer services |
364 | 372 | 359 | 368 | 333 | 354 | 364 | 409 | 351 | 365 | ||||||||||||||||||||||||||||||
Clearing services |
253 | 250 | 236 | 223 | 230 | 245 | 252 | 278 | 292 | 292 | ||||||||||||||||||||||||||||||
Treasury services |
125 | 132 | 128 | 134 | 131 | 125 | 132 | 129 | 128 | 127 | ||||||||||||||||||||||||||||||
Total investment services fees |
1,351 | 1,425 | 1,366 | 1,375 | 1,331 | 1,392 | 1,618 | 1,730 | 1,694 | 1,764 | ||||||||||||||||||||||||||||||
Investment management and performance fees |
622 | 645 | 664 | 746 | 686 | 686 | 696 | 800 | 764 | 779 | ||||||||||||||||||||||||||||||
Foreign exchange & other trading revenue |
307 | 237 | 246 | 246 | 262 | 220 | 146 | 258 | 198 | 222 | ||||||||||||||||||||||||||||||
Distribution and servicing |
101 | 95 | 73 | 57 | 48 | 51 | 56 | 55 | 53 | 49 | ||||||||||||||||||||||||||||||
Financing-related fees |
48 | 54 | 56 | 57 | 50 | 48 | 49 | 48 | 43 | 49 | ||||||||||||||||||||||||||||||
Investment and other income |
(2 | ) | 53 | 205 | 81 | 145 | 145 | 97 | 80 | 81 | 145 | |||||||||||||||||||||||||||||
Total fee revenue |
2,427 | 2,509 | 2,610 | 2,562 | 2,522 | 2,542 | 2,662 | 2,971 | 2,833 | 3,008 | ||||||||||||||||||||||||||||||
Net Securities gains (losses) |
(295 | ) | (256 | ) | (4,833 | ) | 15 | 7 | 13 | 6 | 1 | 5 | 48 | |||||||||||||||||||||||||||
Total fee and other revenue |
2,132 | 2,253 | (2,223 | ) | 2,577 | 2,529 | 2,555 | 2,668 | 2,972 | 2,838 | 3,056 | |||||||||||||||||||||||||||||
Income of consolidated investment management funds |
| | | | 65 | 65 | 37 | 59 | 110 | 63 | ||||||||||||||||||||||||||||||
Net interest revenue |
775 | 700 | 716 | 724 | 765 | 722 | 718 | 720 | 698 | 731 | ||||||||||||||||||||||||||||||
Total revenue |
2,907 | 2,953 | (1,507 | ) | 3,301 | 3,359 | 3,342 | 3,423 | 3,751 | 3,646 | 3,850 | |||||||||||||||||||||||||||||
Provision for credit losses |
59 | 61 | 147 | 65 | 35 | 20 | (22 | ) | (22 | ) | | | ||||||||||||||||||||||||||||
Noninterest expenses |
2,091 | 2,145 | 2,158 | 2,266 | 2,146 | 2,219 | 2,429 | 2,624 | 2,578 | 2,690 | ||||||||||||||||||||||||||||||
Special Litigation Reserves |
N/A | N/A | N/A | N/A | 164 | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||
FDIC special assessment |
| 61 | | | | | | | | | ||||||||||||||||||||||||||||||
Amortization of intangible assets |
107 | 108 | 104 | 107 | 97 | 98 | 111 | 115 | 108 | 108 | ||||||||||||||||||||||||||||||
Restructuring charges |
10 | 6 | (5 | ) | 139 | 7 | (15 | ) | 15 | 21 | (6 | ) | (7 | ) | ||||||||||||||||||||||||||
Merger & integration expense |
68 | 59 | 54 | 52 | 26 | 14 | 56 | 43 | 17 | 25 | ||||||||||||||||||||||||||||||
Total noninterest expense |
2,276 | 2,379 | 2,311 | 2,564 | 2,440 | 2,316 | 2,611 | 2,803 | 2,697 | 2,816 | ||||||||||||||||||||||||||||||
Income/ (loss) from continuing operations before taxes |
572 | 513 | (3,965 | ) | 672 | 884 | 1,006 | 834 | 970 | 949 | 1,034 | |||||||||||||||||||||||||||||
Income taxes |
161 | 12 | (1,527 | ) | (41 | ) | 258 | 304 | 220 | 265 | 279 | 277 | ||||||||||||||||||||||||||||
Income/ (loss) from continuing operations |
411 | 501 | (2,438 | ) | 713 | 626 | 702 | 614 | 705 | 670 | 757 | |||||||||||||||||||||||||||||
Income/ (loss) from discontinued operations, net of tax |
(41 | ) | (91 | ) | (19 | ) | (119 | ) | (42 | ) | (10 | ) | (3 | ) | (11 | ) | | | ||||||||||||||||||||||
Net income attributable to noncontrolling interest |
(1 | ) | 2 | (1 | ) | (1 | ) | (25 | ) (f) | (34 | ) (f) | 11 | (f) | (15 | ) (f) | (45 | ) (f) | (22 | ) (f) | |||||||||||||||||||||
Redemption charge and preferred dividends |
(47 | ) | (236 | ) | | | | | | | | | ||||||||||||||||||||||||||||
Net income/ (loss) applicable to shareholders of The Bank of New York Mellon Corporation |
$ | 322 | $ | 176 | $ | (2,458 | ) | $ | 593 | $ | 559 | $ | 658 | $ | 622 | $ | 679 | $ | 625 | $ | 735 | |||||||||||||||||||
EPS from continuing operations |
$ | 0.31 | $ | 0.23 | $ | (2.04 | ) | $ | 0.59 | $ | 0.49 | $ | 0.55 | $ | 0.51 | $ | 0.55 | $ | 0.50 | $ | 0.59 | |||||||||||||||||||
EPS from continuing operations - Non-GAAP (c) |
$ | 0.56 | $ | 0.51 | $ | 0.54 | $ | 0.55 | $ | 0.59 | $ | 0.55 | $ | 0.55 | $ | 0.59 | $ | 0.50 | $ | 0.60 | ||||||||||||||||||||
Market value of assets under management at period-end (in billions) |
$ | 881 | $ | 926 | $ | 966 | $ | 1,115 | $ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | ||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 19.5 | $ | 20.7 | $ | 22.1 | $ | 22.3 | $ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | ||||||||||||||||||||
Market value of securities on loan at period-end (in billions) |
$ | 293 | $ | 290 | $ | 299 | $ | 247 | $ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | ||||||||||||||||||||
Pre-tax operating margin |
||||||||||||||||||||||||||||||||||||||||
GAAP-before extraordinary (loss) |
20 | % | 17 | % | N/M | 20 | % | 26 | % | 30 | % | 24 | % | 26 | % | 26 | % | 27 | % | |||||||||||||||||||||
Non-GAAP adjusted (d) |
33 | % | 31 | % | 31 | % | 29 | % | 34 | % | 32 | % | 30 | % | 30 | % | 28 | % | 29 | % | ||||||||||||||||||||
Return on tangible common equity (annualized): |
||||||||||||||||||||||||||||||||||||||||
Non-GAAP-before extraordinary (loss) |
28.8 | % | 18.4 | % | N/M | 33.0 | % | 25.8 | % | 25.7 | % | 26.3 | % | 27.5 | % | 24.3 | % | 26.3 | % | |||||||||||||||||||||
Return on common equity (annualized) |
||||||||||||||||||||||||||||||||||||||||
GAAP-before extraordinary (loss) |
5.8 | % | 4.0 | % | N/M | 9.8 | % | 8.2 | % | 8.8 | % | 7.8 | % | 8.5 | % | 7.7 | % | 8.8 | % | |||||||||||||||||||||
Percent of non-US fee and net interest revenue - GAAP |
31 | % | 32 | % | N/M | 36 | % | 34 | % | 35 | % | 36 | % | 38 | % | 36 | % | 37 | % | |||||||||||||||||||||
Percent of non-US fee and net interest revenue - Non-GAAP (e) |
29 | % | 31 | % | 31 | % | 36 | % | 35 | % | 35 | % | 36 | % | 38 | % | 37 | % | 37 | % |
(a) | The second quarter of 2009 contains $134 million of tax benefits related to the final LILO/SILO tax settlement. |
(b) | The third quarter of 2009 includes a $4.8 billion pretax charge related to investment securities portfolio restructuring. |
(c) | Calculated excluding investment securities losses, TARP redemption premium/dividend, FDIC special assessment, SILO/LILO/tax settlements, M&I expenses, restructuring charges, benefit of tax settlements and tax discrete benefits and 1st quarter 2010 special litigation reserves. |
(d) | Calculated excluding investment securities losses, asset-based taxes, FDIC special assessment, M&I expenses, restructuring charges, intangible amortization, 1st quarter 2010 special litigation reserves, 1st, 2nd, 3rd and 4th quarters 2010 and 1st, 2nd quarters of 2011 noncontrolling interests of consolidated asset management funds. |
(e) | Calculated excluding net securities gains (losses) and including noncontrolling interest related to consolidated asset management funds. |
(f) | Includes income of ($24) million for the first quarter of 2010, income of ($33) million for the second quarter of 2010, loss of $12 million for the third quarter of 2010, income of ($14) million for the fourth quarter of 2010, income of ($44) million for the first quarter of 2011 and income of ($21) million for the second quarter of 2011 related to consolidated asset management funds. |
Note: | See pages 3 through 6 for additional details of revenue/expense items impacting continuing operations. |
Page 2 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS - 10 Quarter Trend
FEE AND OTHER REVENUE
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions unless otherwise noted) |
1st Qtr | 2nd Qtr | 3rd Qtr (a) | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Investment services fees |
||||||||||||||||||||||||||||||||||||||||
Asset servicing |
$ | 519 | $ | 574 | $ | 600 | $ | 621 | $ | 608 | $ | 622 | $ | 832 | $ | 877 | $ | 887 | $ | 919 | ||||||||||||||||||||
Securities lending |
90 | 97 | 43 | 29 | 29 | 46 | 38 | 37 | 36 | 61 | ||||||||||||||||||||||||||||||
Issuer services |
364 | 372 | 359 | 368 | 333 | 354 | 364 | 409 | 351 | 365 | ||||||||||||||||||||||||||||||
Clearing services |
253 | 250 | 236 | 223 | 230 | 245 | 252 | 278 | 292 | 292 | ||||||||||||||||||||||||||||||
Treasury services |
125 | 132 | 128 | 134 | 131 | 125 | 132 | 129 | 128 | 127 | ||||||||||||||||||||||||||||||
Total investment services fees |
1,351 | 1,425 | 1,366 | 1,375 | 1,331 | 1,392 | 1,618 | 1,730 | 1,694 | 1,764 | ||||||||||||||||||||||||||||||
Investment management and performance fees |
622 | 645 | 664 | 746 | 686 | 686 | 696 | 800 | 764 | 779 | ||||||||||||||||||||||||||||||
Foreign exchange & other trading revenue |
307 | 237 | 246 | 246 | 262 | 220 | 146 | 258 | 198 | 222 | ||||||||||||||||||||||||||||||
Distribution and servicing |
101 | 95 | 73 | 57 | 48 | 51 | 56 | 55 | 53 | 49 | ||||||||||||||||||||||||||||||
Financing-related fees |
48 | 54 | 56 | 57 | 50 | 48 | 49 | 48 | 43 | 49 | ||||||||||||||||||||||||||||||
Investment and other income |
(2 | ) | 53 | 205 | 81 | 145 | 145 | 97 | 80 | 81 | 145 | |||||||||||||||||||||||||||||
Total fee revenue |
2,427 | 2,509 | 2,610 | 2,562 | 2,522 | 2,542 | 2,662 | 2,971 | 2,833 | 3,008 | ||||||||||||||||||||||||||||||
Income of consolidated asset management funds, net of noncontrolling interest |
| | | | 41 | (c) | 32 | (c) | 49 | (c) | 45 | (c) | 66 | (c) | 42 | (c) | ||||||||||||||||||||||||
Total fee revenue - Non-GAAP |
2,427 | 2,509 | 2,610 | 2,562 | 2,563 | 2,574 | 2,711 | (d) | 3,016 | (d) | 2,899 | (d) | 3,050 | (d) | ||||||||||||||||||||||||||
Net securities gains (losses) |
(295 | ) | (256 | ) | (4,833 | ) | 15 | 7 | 13 | 6 | 1 | 5 | 48 | |||||||||||||||||||||||||||
Total fee and other revenue - Non-GAAP |
2,132 | 2,253 | (2,223 | ) | 2,577 | 2,570 | 2,587 | 2,717 | 3,017 | 2,904 | 3,098 | |||||||||||||||||||||||||||||
Fee and other revenue as a percentage of total revenue - Non-GAAP (b) |
76 | % | 78 | % | 78 | % | 78 | % | 75 | % | 76 | % | 78 | % | 79 | % | 78 | % | 79 | % | ||||||||||||||||||||
Market value of assets under management at period-end (in billions) |
$ | 881 | $ | 926 | $ | 966 | $ | 1,115 | $ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | ||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 19.5 | $ | 20.7 | $ | 22.1 | $ | 22.3 | $ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | ||||||||||||||||||||
Market value of securities on loan at period-end (in billions) |
$ | 293 | $ | 290 | $ | 299 | $ | 247 | $ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | ||||||||||||||||||||
S&P 500 Index - period-end |
798 | 919 | 1057 | 1115 | 1169 | 1031 | 1141 | 1258 | 1326 | 1321 | ||||||||||||||||||||||||||||||
S&P 500 Index - daily average |
809 | 891 | 995 | 1088 | 1123 | 1135 | 1095 | 1204 | 1302 | 1318 |
(a) | The third quarter of 2009 includes a $4.8 billion charge related to investment securities portfolio restructuring. |
(b) | Excludes net securities gains/(losses). |
(c) | Includes $25 million, $29 million, $36 million, $35 million, $31 million and $29 million previously included in investment management and performance fees and $16 million, $3 million, $13 million, $10 million, $35 million and $13 million previously included in investment and other income for the first, second, third and fourth quarters of 2010 and first and second quarters of 2011, respectively. |
(d) | Total fee revenue from the GIS/BAS acquisitions was $234 million in the third quarter of 2010, $246 million in the fourth quarter of 2010 and $261 million in both the first and second quarters of 2011. |
Page 3 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS
Average Balances and Interest Rates
Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2009 |
June 30, 2009 |
September 30, 2009 |
December 31, 2009 |
March 31, 2010 |
June 30, 2010 |
|||||||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) |
Average balance |
Average rates |
Average balance |
Average rates |
Average balance |
Average rates |
Average balance |
Average rates |
Average balance |
Average rates |
Average balance |
Average rates |
||||||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits with banks (primarily foreign) |
$ | 56,505 | 1.56 | % | $ | 56,917 | 1.18 | % | $ | 54,343 | 1.08 | % | $ | 55,467 | 1.09 | % | $ | 55,800 | 1.03 | % | $ | 50,741 | 1.01 | % | ||||||||||||||||||||||||
Interest-bearing deposits with Federal Reserve bank |
23,192 | 0.37 | 6,338 | 0.37 | 6,976 | 0.32 | 11,430 | 0.32 | 12,129 | 0.33 | 18,280 | 0.34 | ||||||||||||||||||||||||||||||||||||
Other Short Term Investment (FRB) |
1,269 | 3.15 | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Federal funds sold and securities under resale agreements |
2,310 | 0.81 | 2,899 | 1.29 | 3,443 | 1.19 | 4,276 | 0.65 | 3,859 | 0.71 | 4,652 | 0.66 | ||||||||||||||||||||||||||||||||||||
Margin loans |
4,219 | 1.63 | 4,134 | 1.62 | 4,335 | 1.55 | 4,665 | 1.55 | 5,241 | 1.49 | 5,786 | 1.49 | ||||||||||||||||||||||||||||||||||||
Non-margin loans: |
||||||||||||||||||||||||||||||||||||||||||||||||
Domestic offices |
21,630 | 2.91 | 20,740 | 3.18 | 19,412 | 3.22 | 20,212 | 2.89 | 19,510 | 3.12 | 20,750 | 2.89 | ||||||||||||||||||||||||||||||||||||
Foreign offices |
13,109 | 2.56 | 12,155 | 2.21 | 10,788 | 1.99 | 10,362 | 1.75 | 9,463 | 1.62 | 10,128 | 1.53 | ||||||||||||||||||||||||||||||||||||
Total non-margin loans |
34,739 | 2.78 | 32,895 | 2.82 | 30,200 | 2.78 | 30,574 | 2.51 | 28,973 | 2.63 | 30,878 | 2.45 | ||||||||||||||||||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||||||||||||||||||
U.S. government obligations |
787 | 2.50 | 1,679 | 1.67 | 4,605 | 1.45 | 5,729 | 1.44 | 6,600 | 1.40 | 6,162 | 1.46 | ||||||||||||||||||||||||||||||||||||
U.S. government agency obligations |
12,063 | 3.71 | 14,748 | 3.74 | 17,635 | 3.79 | 19,530 | 3.59 | 19,429 | 3.58 | 19,629 | 3.48 | ||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions |
767 | 6.71 | 710 | 6.92 | 639 | 7.30 | 607 | 7.35 | 670 | 6.37 | 638 | 6.56 | ||||||||||||||||||||||||||||||||||||
Other securities |
29,848 | 4.47 | 34,766 | 2.85 | 31,010 | 3.04 | 29,707 | 3.49 | 28,653 | 4.20 | 27,601 | 4.14 | ||||||||||||||||||||||||||||||||||||
Trading securities |
1,728 | 2.86 | 2,179 | 2.50 | 1,973 | 2.30 | 2,090 | 2.53 | 2,075 | 2.49 | 2,752 | 2.62 | ||||||||||||||||||||||||||||||||||||
Total securities |
45,193 | 4.22 | 54,082 | 3.10 | 55,862 | 3.16 | 57,663 | 3.32 | 57,427 | 3.63 | 56,782 | 3.58 | ||||||||||||||||||||||||||||||||||||
Total interest-earning assets |
167,427 | 2.37 | 157,265 | 2.16 | 155,159 | 2.14 | 164,075 | 2.09 | 163,429 | 2.18 | 167,119 | 2.08 | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses |
(378 | ) | (426 | ) | (425 | ) | (448 | ) | (502 | ) | (517 | ) | ||||||||||||||||||||||||||||||||||||
Cash and due from banks |
4,824 | 3,412 | 3,247 | 3,104 | 3,514 | 3,673 | ||||||||||||||||||||||||||||||||||||||||||
Other assets |
45,880 | 45,975 | 45,728 | 45,481 | 45,346 | 46,266 | ||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations |
2,366 | 2,307 | 2,077 | 1,993 | 898 | 260 | ||||||||||||||||||||||||||||||||||||||||||
Total Asset Consol VIE FAS 167 |
| | | | 12,730 | 12,040 | ||||||||||||||||||||||||||||||||||||||||||
Total Assets |
$ | 220,119 | $ | 208,533 | $ | 205,786 | $ | 214,205 | $ | 225,415 | $ | 228,841 | ||||||||||||||||||||||||||||||||||||
Liabilities and total equity |
||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||||||||||||||||||||||||||
Money market rate accounts |
$ | 2,057 | 0.23 | % | $ | 2,387 | 0.41 | % | $ | 2,569 | 0.37 | % | $ | 3,384 | 0.26 | % | $ | 3,164 | 0.43 | % | $ | 3,892 | 0.48 | % | ||||||||||||||||||||||||
Savings |
1,165 | 0.61 | 1,070 | 0.44 | 1,115 | 0.32 | 1,196 | 0.49 | 1,372 | 0.27 | 1,389 | 0.27 | ||||||||||||||||||||||||||||||||||||
Certificates of deposit of $100,000 & over |
1,479 | 1.11 | 942 | 1.00 | 847 | 0.62 | 589 | 0.32 | 648 | 0.25 | 332 | 0.16 | ||||||||||||||||||||||||||||||||||||
Other time deposits |
22,080 | 0.20 | 20,840 | 0.14 | 19,306 | 0.14 | 21,550 | 0.13 | 23,801 | 0.09 | 26,289 | 0.08 | ||||||||||||||||||||||||||||||||||||
Foreign offices |
75,202 | 0.31 | 73,657 | 0.14 | 69,795 | 0.08 | 71,685 | 0.10 | 72,049 | 0.16 | 68,061 | 0.19 | ||||||||||||||||||||||||||||||||||||
Total interest-bearing deposits |
101,983 | 0.30 | 98,896 | 0.16 | 93,632 | 0.11 | 98,404 | 0.12 | 101,034 | 0.16 | 99,963 | 0.17 | ||||||||||||||||||||||||||||||||||||
Federal funds purchased and securities under repurchase agreements |
1,839 | 0.09 | 2,485 | (0.46 | ) | 3,075 | 0.20 | 3,361 | 0.14 | 3,697 | 0.07 | 4,441 | 0.19 | |||||||||||||||||||||||||||||||||||
Other borrowed funds |
3,785 | 1.57 | 2,756 | 1.04 | 2,286 | 1.49 | 2,618 | 1.86 | 2,805 | 1.97 | 4,223 | 2.08 | ||||||||||||||||||||||||||||||||||||
Borrowings from FRB Related to ABCP |
1,269 | 2.25 | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Payables to customers and broker-dealers |
3,797 | 0.20 | 4,901 | 0.13 | 5,844 | 0.10 | 6,476 | 0.07 | 6,372 | 0.08 | 6,596 | 0.09 | ||||||||||||||||||||||||||||||||||||
Long-term debt |
15,493 | 2.72 | 16,793 | 2.35 | 17,393 | 1.74 | 17,863 | 1.89 | 16,808 | 1.50 | 16,462 | 1.75 | ||||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities |
128,166 | 0.64 | 125,831 | 0.46 | 122,230 | 0.37 | 128,722 | 0.40 | 130,716 | 0.36 | 131,685 | 0.43 | ||||||||||||||||||||||||||||||||||||
Total noninterest-bearing deposits |
43,051 | 32,852 | 34,920 | 34,991 | 33,330 | 34,628 | ||||||||||||||||||||||||||||||||||||||||||
Other liabilities |
18,523 | 18,578 | 18,386 | 19,633 | 18,420 | 20,042 | ||||||||||||||||||||||||||||||||||||||||||
` |
2,366 | 2,307 | 2,077 | 1,993 | 898 | 260 | ||||||||||||||||||||||||||||||||||||||||||
VIE Liabilities & Obligations FAS 167 |
| | | | 11,540 | 11,046 | ||||||||||||||||||||||||||||||||||||||||||
Total Shareholders Equity |
27,978 | 28,934 | 28,144 | 28,843 | 29,715 | 30,434 | ||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest |
35 | 31 | 29 | 23 | 796 | 746 | ||||||||||||||||||||||||||||||||||||||||||
Total liabilities and shareholders equity |
$ | 220,119 | $ | 208,533 | $ | 205,786 | $ | 214,205 | $ | 225,415 | $ | 228,841 | ||||||||||||||||||||||||||||||||||||
Net interest margin - Taxable equivalent basis |
1.87 | % | 1.80 | % | 1.85 | % | 1.77 | % | 1.89 | % | 1.74 | % | ||||||||||||||||||||||||||||||||||||
Net interest margin excluding the SILO/LILO charge - Non-GAAP |
Note: | Interest and average rates were calculated on a taxable equivalent basis, at tax rates of approximately 35%, using dollar amounts in thousands and the actual number of days in the year. In the second quarter of 2011, certain Money market rate accounts were reclassified to Other time deposits. All prior periods have been restated. |
Page 4 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS
Average Balances and Interest Rates (continued)
Quarter Ended | ||||||||||||||||||||||||||||||||
September 30, 2010 |
December 31, 2010 |
March 31, 2011 |
June 30, 2011 |
|||||||||||||||||||||||||||||
(dollar amounts in millions) |
Average balance |
Average rates |
Average balance |
Average rates |
Average balance |
Average rates |
Average balance |
Average rates |
||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||||||||||
Interest-bearing deposits with banks (primarily foreign) |
$ | 60,431 | 0.93 | % | $ | 59,660 | 0.96 | % | $ | 57,637 | 1.03 | % | $ | 59,291 | 1.24 | % | ||||||||||||||||
Interest-bearing deposits with Federal Reserve bank |
9,813 | 0.40 | 16,787 | 0.32 | 20,373 | 0.32 | 34,078 | 0.32 | ||||||||||||||||||||||||
Other Short Term Investment (FRB) |
| | | | | | | | ||||||||||||||||||||||||
Federal funds sold and securities under resale agreements |
4,559 | 0.46 | 5,553 | 3.15 | 4,514 | 0.50 | 4,577 | 0.46 | ||||||||||||||||||||||||
Margin loans |
6,269 | 1.47 | 6,289 | 1.55 | 6,984 | 1.48 | 7,508 | 1.40 | ||||||||||||||||||||||||
Non-margin loans: |
||||||||||||||||||||||||||||||||
Domestic offices |
21,110 | 2.74 | 21,780 | 2.55 | 22,391 | 2.52 | 23,113 | 2.42 | ||||||||||||||||||||||||
Foreign offices |
9,390 | 1.61 | 9,460 | 1.53 | 9,191 | 1.44 | 9,707 | 1.53 | ||||||||||||||||||||||||
Total non-margin loans |
30,500 | 2.39 | 31,240 | 2.24 | 31,582 | 2.21 | 32,820 | 2.16 | ||||||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||
U.S. government obligations |
7,229 | 1.63 | 11,390 | 1.51 | 12,849 | 1.61 | 14,337 | 1.63 | ||||||||||||||||||||||||
U.S. government agency obligations |
20,074 | 3.29 | 21,406 | 2.95 | 20,221 | 2.98 | 20,466 | 3.09 | ||||||||||||||||||||||||
Obligations of states and political subdivisions |
615 | 6.43 | 587 | 6.53 | 557 | 6.37 | 934 | 5.30 | ||||||||||||||||||||||||
Other securities |
30,075 | 3.86 | 31,987 | 3.55 | 31,770 | 3.43 | 33,045 | 3.24 | ||||||||||||||||||||||||
Trading securities |
3,194 | 2.57 | 2,698 | 3.02 | 3,698 | 2.44 | 2,877 | 2.44 | ||||||||||||||||||||||||
Total securities |
61,187 | 3.36 | 68,068 | 3.02 | 69,095 | 2.93 | 71,659 | 2.87 | ||||||||||||||||||||||||
Total interest-earning assets |
172,759 | 2.03 | 187,597 | 1.95 | 190,185 | 1.85 | 209,933 | 1.78 | ||||||||||||||||||||||||
Allowance for credit losses |
(538 | ) | (530 | ) | (494 | ) | (463 | ) | ||||||||||||||||||||||||
Cash and due from banks |
3,903 | 4,224 | 4,088 | 4,325 | ||||||||||||||||||||||||||||
Other assets |
50,007 | 50,220 | 49,577 | 50,459 | ||||||||||||||||||||||||||||
Discontinued Operations |
247 | 223 | | | ||||||||||||||||||||||||||||
Total Asset Consol VIE FAS 167 |
13,947 | 14,675 | 14,342 | 14,226 | ||||||||||||||||||||||||||||
Total Assets |
$ | 240,325 | $ | 256,409 | $ | 257,698 | $ | 278,480 | ||||||||||||||||||||||||
Liabilities and total equity |
||||||||||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||||||||||
Money market rate accounts |
$ | 4,466 | 0.52 | % | $ | 6,296 | 0.41 | % | $ | 5,417 | 0.38 | % | $ | 4,029 | 0.41 | % | ||||||||||||||||
Savings |
1,389 | 0.26 | 1,433 | 0.22 | 1,600 | 0.16 | 1,646 | 0.16 | ||||||||||||||||||||||||
Certificates of deposit of $100,000 & over |
214 | 0.11 | 285 | 0.08 | 296 | 0.06 | 369 | 0.05 | ||||||||||||||||||||||||
Other time deposits |
27,440 | 0.07 | 29,002 | 0.07 | 31,823 | 0.09 | 34,484 | 0.08 | ||||||||||||||||||||||||
Foreign offices |
70,524 | 0.22 | 74,760 | 0.26 | 77,379 | 0.29 | 85,430 | 0.44 | ||||||||||||||||||||||||
Total interest-bearing deposits |
104,033 | 0.19 | 111,776 | 0.22 | 116,515 | 0.23 | 125,958 | 0.34 | ||||||||||||||||||||||||
Federal funds purchased and securities under repurchase agreements |
5,984 | 0.09 | 7,256 | 2.13 | 5,172 | 0.07 | 10,894 | 0.06 | ||||||||||||||||||||||||
Other borrowed funds |
4,029 | 1.66 | 3,703 | 1.36 | 4,585 | 1.92 | 3,401 | 1.57 | ||||||||||||||||||||||||
Borrowings from FRB Related to ABCP |
| | | | | | | | ||||||||||||||||||||||||
Payables to customers and broker-dealers |
6,910 | 0.08 | 5,878 | 0.11 | 6,701 | 0.10 | 6,843 | 0.08 | ||||||||||||||||||||||||
Long-term debt |
16,798 | 2.04 | 16,624 | 1.87 | 17,014 | 1.87 | 17,380 | 1.63 | ||||||||||||||||||||||||
Total interest-bearing liabilities |
137,754 | 0.45 | 145,237 | 0.53 | 149,987 | 0.45 | 164,476 | 0.47 | ||||||||||||||||||||||||
Total noninterest-bearing deposits |
33,198 | 39,625 | 38,616 | 43,038 | ||||||||||||||||||||||||||||
Other liabilities |
23,770 | 24,740 | 22,350 | 23,694 | ||||||||||||||||||||||||||||
Discontinued Operations |
247 | 223 | | | ||||||||||||||||||||||||||||
VIE Liabilities & Obligations FAS 167 |
12,778 | 13,481 | 13,114 | 12,966 | ||||||||||||||||||||||||||||
Total Shareholders' Equity |
31,868 | 32,379 | 32,827 | 33,464 | ||||||||||||||||||||||||||||
Noncontrolling interest |
710 | 724 | 804 | 842 | ||||||||||||||||||||||||||||
Total liabilities and total equity |
$ | 240,325 | $ | 256,409 | $ | 257,698 | $ | 278,480 | ||||||||||||||||||||||||
Net interest margin - Taxable equivalent basis |
1.67 | % | 1.54 | % | 1.49 | % | 1.41 | % | ||||||||||||||||||||||||
Net interest margin excluding the SILO/LILO charge -Non-GAAP |
Note: | Interest and average rates were calculated on a taxable equivalent basis, at tax rates of approximately 35%, using dollar amounts in thousands and the actual number of days in the year. In the second quarter of 2011, certain Money market rate accounts were reclassified to Other time deposits. All prior periods have been restated. |
Page 5 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS - 10 Quarter Trend
NONINTEREST EXPENSE
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Staff: |
||||||||||||||||||||||||||||||||||||||||
Compensation |
$ | 732 | $ | 740 | $ | 747 | $ | 766 | $ | 753 | $ | 763 | $ | 850 | $ | 871 | $ | 876 | $ | 903 | ||||||||||||||||||||
Incentives |
247 | 241 | 242 | 266 | 284 | 272 | 289 | 348 | 325 | 328 | ||||||||||||||||||||||||||||||
Employee benefits |
190 | 172 | 168 | 189 | 183 | 199 | 205 | 198 | 223 | 232 | ||||||||||||||||||||||||||||||
Total staff |
1,169 | 1,153 | 1,157 | 1,221 | 1,220 | 1,234 | 1,344 | 1,417 | 1,424 | 1,463 | ||||||||||||||||||||||||||||||
Professional, legal and other purchased services |
237 | 237 | 265 | 278 | 241 | 256 | 282 | 320 | 283 | 301 | ||||||||||||||||||||||||||||||
Software and equipment |
158 | 169 | 171 | 178 | 169 | 162 | 187 | 207 | 206 | 203 | ||||||||||||||||||||||||||||||
Net occupancy |
139 | 142 | 142 | 141 | 137 | 143 | 150 | 158 | 153 | 161 | ||||||||||||||||||||||||||||||
Distribution and servicing |
103 | 102 | 97 | 91 | 89 | 90 | 94 | 104 | 111 | 109 | ||||||||||||||||||||||||||||||
Sub-custodian |
39 | 60 | 49 | 55 | 52 | 65 | 60 | 70 | 68 | 88 | ||||||||||||||||||||||||||||||
Business development |
44 | 49 | 45 | 76 | 52 | 68 | 63 | 88 | 56 | 73 | ||||||||||||||||||||||||||||||
Other |
202 | 233 | 232 | 226 | 186 | 201 | 249 | 260 | 277 | 292 | ||||||||||||||||||||||||||||||
Subtotal |
$ | 2,091 | $ | 2,145 | $ | 2,158 | $ | 2,266 | $ | 2,146 | $ | 2,219 | $ | 2,429 | (b) | $ | 2,624 | (b) | $ | 2,578 | (b) | $ | 2,690 | (b) | ||||||||||||||||
Special Litigation Reserves |
N/A | N/A | N/A | N/A | 164 | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||
FDIC special assessment |
| 61 | | | | | | | | | ||||||||||||||||||||||||||||||
Amortization of intangible assets |
107 | 108 | 104 | 107 | 97 | 98 | 111 | 115 | 108 | 108 | ||||||||||||||||||||||||||||||
Restructuring charges |
10 | 6 | (5 | ) | 139 | 7 | (15 | ) | 15 | 21 | (6 | ) | (7 | ) | ||||||||||||||||||||||||||
Merger & integration expense |
68 | 59 | 54 | 52 | 26 | 14 | 56 | 43 | 17 | 25 | ||||||||||||||||||||||||||||||
Total noninterest expense |
$ | 2,276 | $ | 2,379 | $ | 2,311 | $ | 2,564 | $ | 2,440 | $ | 2,316 | $ | 2,611 | $ | 2,803 | $ | 2,697 | $ | 2,816 | ||||||||||||||||||||
Employees at period-end (a) |
41,700 | 41,800 | 42,000 | 42,200 | 42,300 | 42,700 | 47,700 | 48,000 | 48,400 | 48,900 |
(a) | Represents full time employees. |
(b) | Noninterest expense from the GIS/BAS acquisitions was $185 million in the third quarter of 2010, $196 million in the fourth quarter of 2010, $203 million in the first quarter of 2011 and $210 million in the second quarter of 2011. |
Page 6 of 14
THE BANK OF NEW YORK MELLON CORPORATION
ASSETS UNDER MANAGEMENT/ CUSTODY AND ADMINISTRATION / SECURITIES LENDING - 10 Quarter Trend
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in billions unless otherwise noted) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Market value of assets under management at period-end (in billions) |
||||||||||||||||||||||||||||||||||||||||
Institutional |
$ | 394 | $ | 425 | $ | 461 | $ | 611 | $ | 620 | $ | 595 | $ | 639 | $ | 639 | $ | 701 | $ | 733 | ||||||||||||||||||||
Mutual Funds |
413 | 421 | 421 | 416 | 396 | 370 | 418 | 454 | 451 | 462 | ||||||||||||||||||||||||||||||
Private Client |
74 | 80 | 84 | 88 | 89 | 82 | 84 | 79 | 77 | 79 | ||||||||||||||||||||||||||||||
Total market value of assets under management |
881 | 926 | 966 | 1,115 | 1,105 | 1,047 | 1,141 | 1,172 | 1,229 | 1,274 | ||||||||||||||||||||||||||||||
Composition of assets under management at period-end |
||||||||||||||||||||||||||||||||||||||||
Equity |
29 | % | 30 | % | 32 | % | 30 | % | 31 | % | 30 | % | 31 | % | 32 | % | 34 | % | 34 | % | ||||||||||||||||||||
Money Market |
44 | % | 43 | % | 39 | % | 32 | % | 30 | % | 30 | % | 29 | % | 29 | % | 27 | % | 26 | % | ||||||||||||||||||||
Fixed Income |
17 | % | 17 | % | 18 | % | 27 | % | 28 | % | 30 | % | 30 | % | 29 | % | 30 | % | 31 | % | ||||||||||||||||||||
Alternative investments and overlay |
10 | % | 10 | % | 11 | % | 11 | % | 11 | % | 10 | % | 10 | % | 10 | % | 9 | % | 9 | % | ||||||||||||||||||||
Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 19.5 | $ | 20.7 | $ | 22.1 | $ | 22.3 | $ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | ||||||||||||||||||||
Market value of securities on loan at period-end |
$ | 293 | $ | 290 | $ | 299 | $ | 247 | $ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | ||||||||||||||||||||
Market Indices |
||||||||||||||||||||||||||||||||||||||||
S&P 500 Index (a) |
798 | 919 | 1057 | 1115 | 1169 | 1031 | 1141 | 1258 | 1326 | 1321 | ||||||||||||||||||||||||||||||
S&P 500 Indexdaily average |
809 | 891 | 995 | 1088 | 1123 | 1135 | 1095 | 1204 | 1302 | 1318 | ||||||||||||||||||||||||||||||
FTSE 100 Index (a) |
3926 | 4249 | 5134 | 5413 | 5680 | 4917 | 5549 | 5900 | 5909 | 5946 | ||||||||||||||||||||||||||||||
FTSE 100 Index-daily average |
4040 | 4258 | 4708 | 5235 | 5431 | 5361 | 5312 | 5760 | 5945 | 5906 | ||||||||||||||||||||||||||||||
Barclays Capital Aggregate Bond Index (a) |
262 | 280 | 304 | 301 | 300 | 299 | 329 | 323 | 328 | 341 | ||||||||||||||||||||||||||||||
MSCI EAFE Index (a) |
1056 | 1307 | 1553 | 1581 | 1584 | 1348 | 1561 | 1658 | 1703 | 1708 | ||||||||||||||||||||||||||||||
NTSE & NASDAQ Share Volume (in billions) |
297 | 303 | 270 | 243 | 246 | 299 | 233 | 219 | 225 | 209 |
(a) | Period end |
Page 7 of 14
THE BANK OF NEW YORK MELLON CORPORATION
ASSETS UNDER MANAGEMENT NET FLOWS 10 Quarter Trend
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in billions) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Market value of assets under management at beginning of period |
$ | 928 | $ | 881 | $ | 926 | $ | 966 | $ | 1,115 | $ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | ||||||||||||||||||||
Net Flows |
||||||||||||||||||||||||||||||||||||||||
Long-term |
(1 | ) | (17 | ) | (2 | ) | 14 | 16 | 12 | 11 | 9 | 31 | 32 | |||||||||||||||||||||||||||
Money market |
(11 | ) | (2 | ) | (14 | ) | (22 | ) | (25 | ) | (17 | ) | 18 | 6 | (5 | ) | (1 | ) | ||||||||||||||||||||||
Total net inflows |
(12 | ) | (19 | ) | (16 | ) | (8 | ) | (9 | ) | (5 | ) | 29 | 15 | 26 | 31 | ||||||||||||||||||||||||
Net Market and currency impact/other |
(35 | ) | 64 | 56 | 10 | (1 | ) | (53 | ) | 65 | 16 | 31 | 14 | |||||||||||||||||||||||||||
Acquisitions |
| | | 147 | (a) | | | | | | | |||||||||||||||||||||||||||||
Market value of assets under management |
||||||||||||||||||||||||||||||||||||||||
at end of period |
$ | 881 | $ | 926 | $ | 966 | $ | 1,115 | $ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 |
(a) | Represents acquisitions of Insight ($139 billion) and 20% interest in Siguler Guff ($8 billion). |
Page 8 of 14
THE BANK OF NEW YORK MELLON CORPORATION
BUSINESSES
INVESTMENT MANAGEMENT 10 Quarter Trend
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions unless |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr (a) | 1st Qtr (a), (b) | 2nd Qtr (a), (b) | 3rd Qtr (a), (b) | 4th Qtr (a), (b) | 1st Qtr (a), (b) | 2nd Qtr (a), (b) | ||||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||||||||||
Investment management: |
||||||||||||||||||||||||||||||||||||||||
Mutual funds |
267 | 271 | 283 | 277 | 249 | 254 | 270 | 293 | 283 | 290 | ||||||||||||||||||||||||||||||
Institutional clients |
198 | 191 | 216 | 242 | 280 | 279 | 282 | 300 | 319 | 319 | ||||||||||||||||||||||||||||||
Wealth management fees |
139 | 146 | 153 | 158 | 159 | 153 | 154 | 157 | 164 | 163 | ||||||||||||||||||||||||||||||
Performance fees |
7 | 26 | 1 | 59 | 13 | 19 | 16 | 75 | 17 | 18 | ||||||||||||||||||||||||||||||
Total investment management revenue |
611 | 634 | 653 | 736 | 701 | 705 | 722 | 825 | 783 | 790 | ||||||||||||||||||||||||||||||
Distribution and servicing |
81 | 79 | 64 | 55 | 47 | 49 | 53 | 52 | 51 | 48 | ||||||||||||||||||||||||||||||
Other fee revenue (c) |
(76 | ) | (47 | ) | 12 | 23 | 27 | 13 | 18 | 22 | 36 | 27 | ||||||||||||||||||||||||||||
Total fee and other revenue |
616 | 666 | 729 | 814 | 775 | 767 | 793 | 899 | 870 | 865 | ||||||||||||||||||||||||||||||
Net interest revenue |
72 | 62 | 58 | 50 | 52 | 53 | 50 | 50 | 53 | 47 | ||||||||||||||||||||||||||||||
Total revenue |
688 | 728 | 787 | 864 | 827 | 820 | 843 | 949 | 923 | 912 | ||||||||||||||||||||||||||||||
Provision for credit losses |
| | | 1 | | 1 | | 2 | | 1 | ||||||||||||||||||||||||||||||
Noninterest expenses (ex. intangible amortization) |
524 | 551 | 573 | 587 | 569 | 596 | 624 | 667 | 630 | 643 | ||||||||||||||||||||||||||||||
Income before taxes (ex. intangible amortization) |
164 | 177 | 214 | 276 | 258 | 223 | 219 | 280 | 293 | 268 | ||||||||||||||||||||||||||||||
Amortization of intangible assets |
67 | 66 | 64 | 67 | 58 | 59 | 59 | 61 | 55 | 53 | ||||||||||||||||||||||||||||||
Income before taxes |
97 | 111 | 150 | 209 | 200 | 164 | 160 | 219 | 238 | 215 | ||||||||||||||||||||||||||||||
Average assets |
$ | 22,274 | $ | 21,536 | $ | 21,546 | $ | 22,009 | $ | 33,805 | $ | 33,944 | $ | 36,197 | $ | 37,648 | $ | 37,318 | $ | 36,742 | ||||||||||||||||||||
Market value of assets under management at period-end (in billions) |
$ | 881 | $ | 926 | $ | 966 | $ | 1,115 | $ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | ||||||||||||||||||||
Pre-tax operating margin |
||||||||||||||||||||||||||||||||||||||||
GAAP |
14 | % | 15 | % | 19 | % | 24 | % | 24 | % | 20 | % | 19 | % | 23 | % | 26 | % | 24 | % | ||||||||||||||||||||
Non-GAAP (ex. intangible amortization and net distribution and servicing expense) (d) |
28 | % | 28 | % | 31 | % | 36 | % | 35 | % | 31 | % | 29 | % | 33 | % | 36 | % | 33 | % |
(a) | Insight Investment Management acquisition closed November 2, 2009. |
(b) | Total fee and other revenue for the first, second, third and fourth quarters of 2010 and the first and second quarters of 2011 includes income from consolidated asset management funds of $65 million, $65 million, $37 million, $59 million, $110 million and $63 million, respectively, and net income attributable to noncontrolling interest of $24 million, $33 million, ($12) million, $14 million, $44 million and $21 million, respectively. The net of these income statement line items is included above in institutional client revenue of $25 million, $29 million, $36 million, $33 million, $31 million and $29 million respectively, and other revenue of $16 million, $3 million, $13 million, $10 million, $35 million and $13 million, respectively, and performance fees of $2 million for the fourth quarter of 2010. |
(c) | Includes investment write-downs of $34 million and $45 million in the first and second quarters of 2009. |
(d) | Distribution and servicing expense totaled for 2009 $103, $102, $96, and $92, respectively, for 2010 $88 million, $90 million, $94 million, and $104 million, respectively, for 2011 $110 million, and $108 million, respectively. |
Page 9 of 14
THE BANK OF NEW YORK MELLON CORPORATION
BUSINESSES
INVESTMENT SERVICES - 10 Quarter Trend
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions unless otherwise noted) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||||||||||
Investment services fees |
||||||||||||||||||||||||||||||||||||||||
Asset servicing fees - ex. securities lending (a) |
506 | 557 | 581 | 595 | 583 | 597 | 819 | 861 | 870 | 898 | ||||||||||||||||||||||||||||||
Securities lending revenue |
79 | 86 | 32 | 25 | 24 | 30 | 26 | 27 | 27 | 52 | ||||||||||||||||||||||||||||||
Issuer services |
364 | 373 | 359 | 367 | 333 | 354 | 364 | 409 | 351 | 365 | ||||||||||||||||||||||||||||||
Clearing services |
249 | 248 | 232 | 219 | 227 | 240 | 250 | 276 | 290 | 290 | ||||||||||||||||||||||||||||||
Treasury services |
124 | 130 | 128 | 133 | 130 | 124 | 131 | 128 | 127 | 127 | ||||||||||||||||||||||||||||||
Total investment services fees |
1,322 | 1,394 | 1,332 | 1,339 | 1,297 | 1,345 | 1,590 | 1,701 | 1,665 | 1,732 | ||||||||||||||||||||||||||||||
Foreign Exchange and other trading revenue |
289 | 287 | 242 | 241 | 221 | 249 | 185 | 227 | 208 | 202 | ||||||||||||||||||||||||||||||
Other fee revenue (b) |
120 | 124 | 115 | 82 | 72 | 120 | 90 | 82 | 77 | 84 | ||||||||||||||||||||||||||||||
Total fee and other revenue (b) |
1,731 | 1,805 | 1,689 | 1,662 | 1,590 | 1,714 | 1,865 | 2,010 | 1,950 | 2,018 | ||||||||||||||||||||||||||||||
Net interest revenue |
643 | 595 | 559 | 552 | 653 | 608 | 589 | 598 | 639 | 666 | ||||||||||||||||||||||||||||||
Total revenue (c) |
2,374 | 2,400 | 2,248 | 2,214 | 2,243 | 2,322 | 2,454 | 2,608 | 2,589 | 2,684 | ||||||||||||||||||||||||||||||
Provision for credit losses |
| | | | | | | | | | ||||||||||||||||||||||||||||||
Noninterest expenses (ex. intangible amortization) (d) |
1,408 | 1,417 | 1,422 | 1,489 | 1,419 | 1,521 | 1,630 | 1,759 | 1,763 | 1,837 | ||||||||||||||||||||||||||||||
Income before taxes (ex. intangible amortization) |
966 | 983 | 826 | 725 | 824 | 801 | 824 | 849 | 826 | 847 | ||||||||||||||||||||||||||||||
Amortization of intangible assets |
40 | 43 | 39 | 39 | 38 | 39 | 52 | 53 | 53 | 54 | ||||||||||||||||||||||||||||||
Income before taxes |
926 | 940 | 787 | 686 | 786 | 762 | 772 | 796 | 773 | 793 | ||||||||||||||||||||||||||||||
Average loans |
$ | 15,193 | $ | 13,639 | $ | 12,449 | $ | 13,766 | $ | 14,273 | $ | 17,053 | $ | 17,941 | $ | 19,053 | $ | 20,554 | $ | 22,891 | ||||||||||||||||||||
Average assets |
$ | 157,011 | $ | 146,407 | $ | 144,734 | $ | 153,476 | $ | 153,666 | $ | 153,836 | $ | 158,837 | $ | 174,815 | $ | 178,718 | $ | 193,498 | ||||||||||||||||||||
Average deposits |
$ | 126,250 | $ | 117,639 | $ | 115,071 | $ | 120,652 | $ | 122,350 | $ | 121,468 | $ | 123,212 | $ | 136,060 | $ | 141,115 | $ | 154,771 | ||||||||||||||||||||
Pre-tax operating margin |
||||||||||||||||||||||||||||||||||||||||
GAAP |
39 | % | 39 | % | 35 | % | 31 | % | 35 | % | 33 | % | 31 | % | 31 | % | 30 | % | 30 | % | ||||||||||||||||||||
Non-GAAP adjusted (excluding intangible amortization) |
41 | % | 41 | % | 37 | % | 33 | % | 37 | % | 34 | % | 34 | % | 33 | % | 32 | % | 32 | % | ||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 19.5 | $ | 20.7 | $ | 22.1 | $ | 22.3 | $ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | ||||||||||||||||||||
Market value of securities on loan at period-end (in billions) (a) |
$ | 293 | $ | 290 | $ | 299 | $ | 247 | $ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 |
(a) | Represents the total amount of securities on loan (both cash and non-cash) managed by the Investment Services business. |
(b) | Total fee and other revenue includes investment management fees and distribution and servicing revenue. |
(c) | Total revenue from the Acquisitions was $237 million in the third quarter of 2010, $253 million in the fourth quarter, $270 million in first quarter of 2011 and $274 million in the second quarter of 2011. |
(d) | Noninterest expense from the Acquisitions was $185 million in the third quarter of 2010, $196 million in the fourth quarter of 2010, $203 million in the first quarter of 2011 and $210 million in the second quarter of 2011. |
Page 10 of 14
THE BANK OF NEW YORK MELLON CORPORATION
BUSINESSES
OTHER10 Quarter Trend
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions unless otherwise noted) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr (b) | 1st Qtr (c) | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||||||||||
Fee and other revenue (a) |
(215 | ) | (218 | ) | (4,641 | ) | 101 | 205 | 106 | 59 | 108 | 84 | 215 | |||||||||||||||||||||||||||
Net interest revenue |
60 | 43 | 99 | 122 | 60 | 61 | 79 | 72 | 6 | 18 | ||||||||||||||||||||||||||||||
Total revenue |
(155 | ) | (175 | ) | (4,542 | ) | 223 | 265 | 167 | 138 | 180 | 90 | 233 | |||||||||||||||||||||||||||
Provision for credit losses |
59 | 61 | 147 | 64 | 35 | 19 | (22 | ) | (24 | ) | | (1 | ) | |||||||||||||||||||||||||||
Noninterest expenses (ex. FDIC special assessment, special litigation reserves, intangible amortization, M&I expenses and restructuring charges) |
159 | 177 | 163 | 190 | 158 | 102 | 175 | 198 | 185 | 210 | ||||||||||||||||||||||||||||||
Income before taxes and extraordinary (loss) (ex. FDIC special assessment, special litigation reserves, intangible amortization, M&I expenses and restructuring charges) |
(373 | ) | (413 | ) | (4,852 | ) | (31 | ) | 72 | 46 | (15 | ) | 6 | (95 | ) | 24 | ||||||||||||||||||||||||
Amortization of intangible assets |
| (1 | ) | 1 | 1 | 1 | | | 1 | | 1 | |||||||||||||||||||||||||||||
Special Litigation Reserves |
N/A | N/A | N/A | N/A | 164 | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||
FDIC special assessment |
| 61 | | | | | | | | | ||||||||||||||||||||||||||||||
Restructuring charges |
10 | 6 | (5 | ) | 139 | 7 | (15 | ) | 15 | 21 | (6 | ) | (7 | ) | ||||||||||||||||||||||||||
Merger & integration expenses |
68 | 59 | 54 | 52 | 26 | 14 | 56 | 43 | 17 | 25 | ||||||||||||||||||||||||||||||
Income before taxes and extraordinary (loss) |
(451 | ) | (538 | ) | (4,902 | ) | (223 | ) | (126 | ) | 47 | (86 | ) | (59 | ) | (106 | ) | 5 | ||||||||||||||||||||||
Average loans |
$ | 18,377 | $ | 17,707 | $ | 16,076 | $ | 15,282 | $ | 13,639 | $ | 13,261 | $ | 12,308 | $ | 11,808 | $ | 11,187 | $ | 10,553 | ||||||||||||||||||||
Average assets |
$ | 38,468 | $ | 38,283 | $ | 37,429 | $ | 36,727 | $ | 37,046 | $ | 40,801 | $ | 45,044 | $ | 43,723 | $ | 41,662 | $ | 48,240 | ||||||||||||||||||||
Average deposits |
$ | 11,710 | $ | 7,473 | $ | 6,866 | $ | 5,911 | $ | 4,689 | $ | 5,105 | $ | 5,564 | $ | 6,201 | $ | 4,744 | $ | 5,229 |
(a) | Total fee and other revenue includes investment write-downs of $316 million, $209 million and $4.8 billion in the first, second and third quarters of 2009. |
(b) | The fourth quarter of 2009 includes a pretax global efficiency restructuring charge of $139 million. |
(c) | The first quarter of 2010 includes a $164 million pretax charge related to special litigation reserves. |
Page 11 of 14
THE BANK OF NEW YORK MELLON CORPORATION
BUSINESSES
Investment Management | Investment Services | Other | Consolidated Results | |||||||||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions unless otherwise noted) |
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 (b) | 2009 | 2008 | ||||||||||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||||||||||||||||||
Investment services fees |
||||||||||||||||||||||||||||||||||||||||||||||||
Asset servicing |
122 | 113 | 152 | 2,967 | 2,461 | 3,241 | | (1 | ) | (23 | ) | 3,089 | 2,573 | 3,370 | ||||||||||||||||||||||||||||||||||
Issuer services |
| | | 1,460 | 1,463 | 1,685 | | | | 1,460 | 1,463 | 1,685 | ||||||||||||||||||||||||||||||||||||
Clearing services |
12 | 12 | 13 | 993 | 948 | 1,040 | | 2 | 12 | 1,005 | 962 | 1,065 | ||||||||||||||||||||||||||||||||||||
Treasury services |
3 | 3 | 3 | 513 | 515 | 509 | 1 | 1 | 2 | 517 | 519 | 514 | ||||||||||||||||||||||||||||||||||||
Total investment services fees |
137 | 128 | 168 | 5,933 | 5,387 | 6,475 | 1 | 2 | (9 | ) | 6,071 | 5,517 | 6,634 | |||||||||||||||||||||||||||||||||||
Investment management fees |
2,830 | 2,541 | 3,073 | 36 | 30 | 42 | 4 | 13 | 20 | 2,870 | 2,584 | 3,135 | ||||||||||||||||||||||||||||||||||||
Performance fees |
123 | 93 | 83 | | | | | | | 123 | 93 | 83 | ||||||||||||||||||||||||||||||||||||
Foreign exchange and other trading revenue |
26 | 28 | 35 | 882 | 1,059 | 1,301 | (22 | ) | (51 | ) | 126 | 886 | 1,036 | 1,462 | ||||||||||||||||||||||||||||||||||
Distribution and servicing |
201 | 279 | 375 | 8 | 54 | 49 | 1 | (7 | ) | (3 | ) | 210 | 326 | 421 | ||||||||||||||||||||||||||||||||||
Financing-related fees |
7 | 10 | 14 | 52 | 49 | 55 | 136 | 156 | 117 | 195 | 215 | 186 | ||||||||||||||||||||||||||||||||||||
Investment and other income |
(102 | ) | (178 | ) | (251 | ) | 268 | 308 | 314 | 343 | 207 | 358 | 509 | 337 | 421 | |||||||||||||||||||||||||||||||||
Total fee revenue |
3,222 | 2,901 | 3,497 | 7,179 | 6,887 | 8,236 | 463 | 320 | 609 | 10,864 | 10,108 | 12,342 | ||||||||||||||||||||||||||||||||||||
Net Securities gains (losses) |
12 | (76 | ) | (78 | ) | | | (11 | ) | 15 | (5,293 | ) | (1,539 | ) | 27 | (5,369 | ) | (1,628 | ) | |||||||||||||||||||||||||||||
Total fee and other revenue |
3,234 | 2,825 | 3,419 | 7,179 | 6,887 | 8,225 | 478 | (4,973 | ) | (930 | ) | 10,891 | 4,739 | 10,714 | ||||||||||||||||||||||||||||||||||
Net interest revenue (expense) |
205 | 242 | 283 | 2,448 | 2,349 | 2,600 | 272 | 324 | (24 | ) | 2,925 | 2,915 | 2,859 | |||||||||||||||||||||||||||||||||||
Total revenue |
3,439 | 3,067 | 3,702 | 9,627 | 9,236 | 10,825 | 750 | (4,649 | ) | (954 | ) | 13,816 | 7,654 | 13,573 | ||||||||||||||||||||||||||||||||||
Provision for credit losses |
3 | 1 | | | | | 8 | 331 | 104 | 11 | 332 | 104 | ||||||||||||||||||||||||||||||||||||
Noninterest expenses (ex. M&I expenses and intangible amortization) |
2,456 | 2,235 | 2,971 | 6,329 | 5,736 | 6,822 | 825 | 900 | 774 | 9,610 | 8,871 | 10,567 | ||||||||||||||||||||||||||||||||||||
Income before taxes and extraordinary (loss) (ex. M&I expenses and intangible amortization) |
980 | 831 | 731 | 3,298 | 3,500 | 4,003 | (83 | ) | (5,880 | ) | (1,832 | ) | 4,195 | (1,549 | ) | 2,902 | ||||||||||||||||||||||||||||||||
Amortization of intangible assets |
237 | 264 | 308 | 182 | 161 | 158 | 2 | 1 | 7 | 421 | 426 | 473 | ||||||||||||||||||||||||||||||||||||
Merger & integration expense |
| | | | | | 139 | 233 | 483 | 139 | 233 | 483 | ||||||||||||||||||||||||||||||||||||
Income before taxes, noncontrolling interest and extraordinary (loss) |
743 | 567 | 423 | 3,116 | 3,339 | 3,845 | (224 | ) | (6,114 | ) | (2,322 | ) | 3,635 | (2,208 | ) | 1,946 | ||||||||||||||||||||||||||||||||
Average loans |
$ | 6,461 | $ | 5,821 | $ | 4,939 | $ | 17,096 | $ | 13,754 | $ | 21,380 | $ | 12,748 | $ | 16,849 | $ | 20,287 | $ | 36,305 | $ | 36,424 | $ | 46,606 | ||||||||||||||||||||||||
Average assets |
$ | 35,411 | $ | 21,840 | $ | 23,087 | $ | 160,343 | $ | 150,382 | $ | 131,086 | $ | 41,682 | $ | 37,717 | $ | 53,343 | $ | 237,436 | $ | 209,939 | $ | 207,516 | ||||||||||||||||||||||||
Average deposits |
$ | 8,240 | $ | 6,788 | $ | 7,684 | $ | 125,803 | $ | 119,874 | $ | 102,285 | $ | 5,395 | $ | 7,990 | $ | 15,670 | $ | 139,438 | $ | 134,652 | $ | 125,639 | ||||||||||||||||||||||||
Market value of assets under management at period-end |
$ | 1,172 | $ | 1,115 | $ | 928 | $ | | $ | | $ | | $ | | $ | | $ | | $ | 1,172 | $ | 1,115 | $ | 928 | ||||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | | $ | | $ | | $ | 25.0 | $ | 22.3 | $ | 20.2 | $ | | $ | | $ | | $ | 25.0 | $ | 22.3 | $ | 20.2 | ||||||||||||||||||||||||
Market value of securities on loan at period-end (in billions) |
$ | | $ | | $ | | $ | | $ | 247 | $ | 326 | $ | | $ | | $ | | $ | | $ | 247 | $ | 326 | ||||||||||||||||||||||||
Pre-tax operating marginGAAP |
22 | % | 18 | % | 11 | % | 32 | % | 36 | % | 36 | % | n/m | n/m | 243 | % | 26 | % | n/m | 14 | % | |||||||||||||||||||||||||||
Pre-tax operating margin (ex. intangible amortization)Non-GAAP |
28 | % | 27 | % | 20 | % | 34 | % | 38 | % | 37 | % | n/m | n/m | 243 | % | 29 | % | n/m | 18 | % | |||||||||||||||||||||||||||
Pre-tax operating marginNon-GAAP (a) |
29 | % | 30 | % | 30 | % | 34 | % | 42 | % | 42 | % | n/m | n/m | n/m | 32 | % | 31 | % | 39 | % | |||||||||||||||||||||||||||
Memo: |
||||||||||||||||||||||||||||||||||||||||||||||||
Securities Lending Revenue |
150 | 259 | 789 |
(a) | Excludes M&I expenses, tax settlements, support agreement charges, restructuring charges, special litigation, investment write-downs and intangible amortization expense. |
(b) | Total fee and other revenue and income before taxes for the year 2010 included income from consolidated asset management funds of $226 million net a loss attributable to noncontrolling interests of $59 million. The net of these income statement line items of $167 million is included above in fee and other revenue. |
n/mnot meaningful
Note: See pages 9-11 for details of revenue/expense items impacting respective business results.
Page 12 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS - 10 Quarter Trend
NONPERFORMING ASSETS
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Loans: |
||||||||||||||||||||||||||||||||||||||||
Other residential mortgages |
$ | 143 | $ | 163 | $ | 183 | $ | 190 | $ | 204 | $ | 229 | $ | 238 | $ | 244 | $ | 245 | $ | 236 | ||||||||||||||||||||
Wealth Management |
6 | 63 | 58 | 58 | 58 | 62 | 66 | 59 | 56 | 31 | ||||||||||||||||||||||||||||||
Commercial real estate |
197 | 63 | 63 | 61 | 50 | 49 | 39 | 44 | 36 | 28 | ||||||||||||||||||||||||||||||
Commercial |
34 | 43 | 71 | 65 | 40 | 40 | 35 | 34 | 32 | 31 | ||||||||||||||||||||||||||||||
Foreign |
2 | 1 | | | 7 | 7 | 7 | 7 | 7 | 13 | ||||||||||||||||||||||||||||||
Financial Institutions |
30 | 39 | 180 | 172 | 95 | 13 | 9 | 5 | 4 | 4 | ||||||||||||||||||||||||||||||
Total nonperforming loans |
412 | 372 | 555 | 546 | 454 | 400 | 394 | 393 | 380 | 343 | ||||||||||||||||||||||||||||||
Other assets owned |
9 | 6 | 5 | 4 | 5 | 6 | 7 | 6 | 6 | 8 | ||||||||||||||||||||||||||||||
Total nonperforming assets (a) |
$ | 421 | $ | 378 | $ | 560 | $ | 550 | $ | 459 | $ | 406 | $ | 401 | $ | 399 | $ | 386 | $ | 351 | ||||||||||||||||||||
Nonperforming assets ratio |
1.0 | % | 1.0 | % | 1.5 | % | 1.5 | % | 1.4 | % | 1.1 | % | 1.1 | % | 1.1 | % | 1.0 | % | 1.0 | % | ||||||||||||||||||||
Allowance for loan losses/nonperforming loans |
114.1 | 116.7 | 82.2 | 92.1 | 114.5 | 135.5 | 135.5 | 126.7 | 122.9 | 128.6 | ||||||||||||||||||||||||||||||
Allowance for loan losses/nonperforming assets |
111.6 | 114.8 | 81.4 | 91.5 | 113.3 | 133.5 | 133.2 | 124.8 | 121.0 | 125.6 | ||||||||||||||||||||||||||||||
Total allowance for credit losses/nonperforming loans |
135.7 | 141.4 | 107.4 | 115.0 | 140.5 | 161.3 | 154.3 | 145.3 | 145.8 | 156.0 | ||||||||||||||||||||||||||||||
Total allowance for credit losses/nonperforming assets |
132.8 | 139.2 | 106.4 | 114.2 | 139.0 | 158.9 | 151.6 | 143.1 | 143.5 | 152.4 |
(a) | Loans of consolidated investment management funds are not part of BNY Mellon's loan portfolio. Included in these loans are nonperforming loans for the 1st, 2nd, 3rd and 4th quarters of 2010 of $150 million, $131 million, $231 million and $218 million, respectively, and for 1st and 2nd quarters of 2011 of $239 million and $216 million, respectively. These loans are recorded at fair value and therefore do not impact the provision for credit losses and allowance for loan losses, and accordingly are excluded from the nonperforming assets table above. |
Page 13 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS - 10 Quarter Trend
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS
2009 | 2010 | 2011 | ||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | ||||||||||||||||||||||||||||||
Allowance for credit losses: |
||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses |
$ | 415 | $ | 470 | $ | 434 | $ | 456 | $ | 503 | $ | 520 | $ | 542 | $ | 534 | $ | 498 | $ | 467 | ||||||||||||||||||||
Allowance for lending-related commitments |
114 | 89 | 92 | 140 | 125 | 118 | 103 | 74 | 73 | 87 | ||||||||||||||||||||||||||||||
Allowance at beginning of period |
529 | 559 | 526 | 596 | 628 | 638 | 645 | 608 | 571 | 554 | ||||||||||||||||||||||||||||||
Net (charge-offs)/recoveries |
||||||||||||||||||||||||||||||||||||||||
Charge-offs |
(51 | ) | (54 | ) | (77 | ) | (33 | ) | (37 | ) | (14 | ) | (17 | ) | (17 | ) | (19 | ) | (21 | ) | ||||||||||||||||||||
Recoveries |
1 | | | | 12 | 1 | 2 | 2 | 2 | 2 | ||||||||||||||||||||||||||||||
Total Net (charge-offs)/recoveries |
(50 | ) | (54 | ) | (77 | ) | (33 | ) | (25 | ) | (13 | ) | (15 | ) | (15 | ) | (17 | ) | (19 | ) | ||||||||||||||||||||
Provision for credit losses (a) |
59 | 61 | 147 | 65 | 35 | 20 | (22 | ) | (22 | ) | | | ||||||||||||||||||||||||||||
Impact of Merger |
| | | | | | | | | | ||||||||||||||||||||||||||||||
Transfer to Discontinued Operations |
21 | (40 | ) | | | | | | | | | |||||||||||||||||||||||||||||
Sale of Mellon 1st Business Bank |
| | | | | | | | | | ||||||||||||||||||||||||||||||
SFAS 159 Adoption |
| | | | | | | | | | ||||||||||||||||||||||||||||||
Allowance at end of period |
559 | 526 | 596 | 628 | 638 | 645 | 608 | 571 | 554 | 535 | ||||||||||||||||||||||||||||||
Allowance for loan losses |
$ | 470 | $ | 434 | $ | 456 | $ | 503 | $ | 520 | $ | 542 | $ | 534 | $ | 498 | $ | 467 | $ | 441 | ||||||||||||||||||||
Allowance for lending related-commitments |
89 | 92 | 140 | 125 | 118 | 103 | 74 | 73 | 87 | 94 | ||||||||||||||||||||||||||||||
Allowance at end of period (a) |
559 | 526 | 596 | 628 | 638 | 645 | 608 | 571 | 554 | 535 | ||||||||||||||||||||||||||||||
Allowance for loan losses as a percentage of total loans (b) |
1.13 | % | 1.14 | % | 1.26 | % | 1.37 | % | 1.54 | % | 1.46 | % | 1.41 | % | 1.32 | % | 1.17 | % | 1.05 | % |
(a) | The allowance and provision for credit losses for the first quarter 2009 exclude discontinued operations. |
(b) | Excluding purchase accounting adjustments. |
Page 14 of 14