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) October 17, 2012
THE BANK OF NEW YORK MELLON CORPORATION
(Exact name of registrant as specified in charter)
Delaware | 001-35651 | 13-2614959 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
One Wall Street New York, New York |
10286 | |||
(Address of principal executive offices) | (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 October 17, 2012, the Registrant conducted a conference call and webcast with respect to results of operations for third quarter 2012 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 October 17, 2012, 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. |
Exhibits 99.1 and 99.2 to this report contain 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 third quarter 2012 dated October 17, 2012. | |
99.2 | The Bank of New York Mellon Corporation 3Q 2012 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: October 19, 2012 | By: | /s/ Craig T. Beazer | ||
Name: | Craig T. Beazer | |||
Title: | Assistant Secretary |
EXHIBIT INDEX
Number | Description | Method of Filing | ||
99.1 | The Bank of New York Mellon Corporation Quarterly Earnings Review for third quarter 2012 dated October 17, 2012. | Furnished herewith | ||
99.2 | The Bank of New York Mellon Corporation 3Q 2012 Financial Trends. | Furnished herewith |
Exhibit 99.1
Quarterly Earnings Review
October 17, 2012
Table of Contents
Third Quarter 2012 Financial Highlights |
2 | |||
Financial Summary/Key Metrics |
3 | |||
Business Metrics |
4 | |||
Fee and Other Revenue |
6 | |||
Net Interest Revenue |
8 | |||
Noninterest Expense |
9 | |||
Operational Excellence Initiatives Update |
10 | |||
Capital |
11 | |||
Investment Securities Portfolio |
12 | |||
Nonperforming Assets |
13 | |||
Allowance for Credit Losses, Provision and Net Charge-offs |
13 | |||
Review of Businesses |
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Investment Management |
14 | |||
Investment Services |
16 | |||
Other |
18 | |||
Supplemental Information Explanation of Non-GAAP Financial Measures |
19 | |||
Cautionary Statement |
24 |
BNY Mellon 3Q12 Quarterly Earnings Review
THIRD QUARTER 2012 FINANCIAL HIGHLIGHTS
(comparisons are unannualized 3Q12 vs. 2Q12 unless otherwise stated)
| Earnings |
| Earnings per common share was $0.61 in 3Q12 and benefited $0.04 from a lower than expected effective tax rate, compared with $0.39 in 2Q12, which included litigation charges of $0.18. |
| Net income applicable to common shareholders was $720 million, compared with $466 million, which included litigation charges of $212 million. |
| Total revenue of $3.7 billion, up 2%. |
| Fee and other revenue up 2%. |
| Investment services fees increased 1% primarily due to seasonally higher Depositary Receipts revenue, which was partially offset by lower Clearing Services revenue, a seasonal decrease in securities lending revenue and lower Corporate Trust fees. |
| Investment management fees increased 3% driven by higher market values and net new business. |
| Foreign exchange revenue decreased 23% as a result of lower volatility and volumes. |
| Investment and other income increased $76 million primarily as a result of seed capital gains and higher equity investment revenue. |
| Net interest revenue increased 2% reflecting the impact of higher net interest-earning assets driven by higher deposit levels, partially offset by the elimination of interest on European Central Bank deposits. |
| Provision for credit losses was a credit of $5 million primarily resulting from loan sales and repayments. |
| Noninterest expense decreased 11% on a GAAP basis, and was flat excluding amortization of intangible assets, M&I, litigation and restructuring charges and direct expenses related to the Shareowner Services business. |
| The effective tax rate was 23.1% in the third quarter of 2012, which primarily reflects the benefit from completing various tax audits. |
| Assets under custody/administration and Assets under management |
| AUC/A of a record $27.9 trillion, an increase of 3% reflecting higher market values and net new business. |
| New business wins of $522 billion. |
| AUM of a record $1.4 trillion, an increase of 5% driven by higher market values and net inflows. |
| Long-term inflows totaled $9 billion. |
| Short-term inflows totaled $9 billion. |
| Capital |
| Return on tangible common equity Non-GAAP 22%. (a) |
| Repurchased 13.4 million common shares for $288 million. |
| Estimated Basel III Tier 1 common equity ratio Non-GAAP 9.3%. (a) |
(a) | See Supplemental information Explanation of Non-GAAP financial measures beginning on page 19 for GAAP to Non-GAAP reconciliations. |
Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation. Unless otherwise noted, the results for all periods in 2011 include the impact of Shareowner Services. Sequential growth rates are unannualized.
Page - 2
BNY Mellon 3Q12 Quarterly Earnings Review
FINANCIAL SUMMARY
3Q12 vs. | ||||||||||||||||||||||||||||||
(dollars in millions, common shares in thousands) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||||
Revenue: |
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Fee and other revenue |
$ | 2,887 | $ | 2,765 | $ | 2,838 | $ | 2,826 | $ | 2,879 | | % | 2 | % | ||||||||||||||||
Income (loss) from consolidated investment management funds |
32 | (5 | ) | 43 | 57 | 47 | ||||||||||||||||||||||||
Net interest revenue |
775 | 780 | 765 | 734 | 749 | |||||||||||||||||||||||||
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Total revenue GAAP |
3,694 | 3,540 | 3,646 | 3,617 | 3,675 | (1 | ) | 2 | ||||||||||||||||||||||
Less: |
Net income (loss) attributable to noncontrolling interests related to consolidated investment management funds |
13 | (28 | ) | 11 | 29 | 25 | |||||||||||||||||||||||
Fee and other revenue related to Shareowner Services (a) |
44 | 142 | | (3 | ) | | ||||||||||||||||||||||||
Total revenue Non-GAAP |
3,637 | 3,426 | 3,635 | 3,591 | 3,650 | | 2 | |||||||||||||||||||||||
Provision for credit losses |
(22 | ) | 23 | 5 | (19 | ) | (5 | ) | ||||||||||||||||||||||
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Expense: |
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Noninterest expense GAAP |
2,771 | 2,828 | 2,756 | 3,047 | 2,705 | (2 | ) | (11 | ) | |||||||||||||||||||||
Less: |
Amortization of intangible assets |
106 | 106 | 96 | 97 | 95 | ||||||||||||||||||||||||
M&I, litigation and restructuring charges |
92 | 176 | 109 | 378 | 26 | |||||||||||||||||||||||||
Direct expense related to Shareowner Services |
37 | 46 | | | | |||||||||||||||||||||||||
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Total noninterest expense Non-GAAP |
2,536 | 2,500 | 2,551 | 2,572 | 2,584 | 2 | % | | % | |||||||||||||||||||||
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Income: |
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Income before income taxes |
945 | 689 | 885 | 589 | 975 | |||||||||||||||||||||||||
Provision for income taxes |
281 | 211 | 254 | 93 | 225 | |||||||||||||||||||||||||
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Net income |
$ | 664 | $ | 478 | $ | 631 | $ | 496 | $ | 750 | ||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests (b) |
(13 | ) | 27 | (12 | ) | (30 | ) | (25 | ) | |||||||||||||||||||||
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Net income applicable to shareholders of The Bank of New York Mellon Corporation |
651 | 505 | 619 | 466 | 725 | |||||||||||||||||||||||||
Preferred dividends |
| | | | (5 | ) | ||||||||||||||||||||||||
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Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
$ | 651 | $ | 505 | $ | 619 | $ | 466 | $ | 720 | ||||||||||||||||||||
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Key Metrics: |
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Pre-tax operating margin (c) |
26 | % | 19 | % | 24 | % | 16 | % | 27 | % | ||||||||||||||||||||
Non-GAAP adjusted (c) |
31 | % | 28 | % | 30 | % | 29 | % | 29 | % | ||||||||||||||||||||
Return on common equity (annualized) (c) |
7.6 | % | 5.9 | % | 7.4 | % | 5.5 | % | 8.3 | % | ||||||||||||||||||||
Non-GAAP (c) |
9.0 | % | 8.0 | % | 8.9 | % | 8.9 | % | 9.2 | % | ||||||||||||||||||||
Return on tangible common equity (annualized) |
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Non-GAAP (c) |
22.1 | % | 17.7 | % | 21.0 | % | 15.7 | % | 22.1 | % | ||||||||||||||||||||
Non-GAAP adjusted (c) |
23.8 | % | 21.1 | % | 23.0 | % | 22.4 | % | 22.5 | % | ||||||||||||||||||||
Fee revenue as a percentage of total revenue excluding net securities gains (losses) |
78 | % | 78 | % | 78 | % | 78 | % | 78 | % | ||||||||||||||||||||
Percentage of non-U.S. total revenue (d) |
39 | % | 34 | % | 37 | % | 37 | % | 37 | % | ||||||||||||||||||||
Period end: |
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Full-time employees |
49,600 | 48,700 | 47,800 | 48,200 | 48,700 | |||||||||||||||||||||||||
Market capitalization |
$ | 22,543 | $ | 24,085 | $ | 28,780 | $ | 25,929 | $ | 26,434 | ||||||||||||||||||||
Common shares outstanding |
1,212,632 | 1,209,675 | 1,192,716 | 1,181,298 | 1,168,607 | |||||||||||||||||||||||||
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(a) | Results in the fourth quarter of 2011 include a $98 million pre-tax gain on the sale. |
(b) | Includes net income of $13 million in the third quarter of 2011, a net loss of $28 million in the fourth quarter of 2011, net income of $11 million in the first quarter of 2012, net income of $29 million in the second quarter of 2012 and income of $25 million in the third quarter of 2012, respectively, attributable to noncontrolling interests related to consolidated investment management funds. |
(c) | See Supplemental information Explanation of Non-GAAP financial measures beginning on page 19 for GAAP to Non-GAAP reconciliations. |
(d) | Includes fee revenue, net interest revenue and income (loss) from consolidated investment management funds, net of net income (loss) attributable to noncontrolling interests. |
Page - 3
BNY Mellon 3Q12 Quarterly Earnings Review
BUSINESS METRICS
Investment Management metrics | 3Q12 vs. | |||||||||||||||||||||||||||
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | ||||||||||||||||||||||
Changes in market value of assets under management (in billions) (a): |
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Beginning balance |
$ | 1,274 | $ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | ||||||||||||||||||
Net inflows (outflows): |
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Long-term |
4 | 16 | 7 | 26 | 9 | |||||||||||||||||||||||
Money market |
(15 | ) | 7 | (9 | ) | (14 | ) | 9 | ||||||||||||||||||||
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Total net inflows (outflows) |
(11 | ) | 23 | (2 | ) | 12 | 18 | |||||||||||||||||||||
Net market/currency impact |
(65 | ) | 39 | 50 | (21 | ) | 42 | |||||||||||||||||||||
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Ending balance |
$ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | $ | 1,359 | (b) | 13 | % | 5 | % | |||||||||||||
Composition of assets under management at period end (a): |
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Equity securities |
30 | % | 31 | % | 33 | % | 32 | % | 33 | % | ||||||||||||||||||
Fixed income securities |
35 | 35 | 35 | 37 | 37 | |||||||||||||||||||||||
Money market |
27 | 26 | 24 | 23 | 23 | |||||||||||||||||||||||
Alternative investments and overlay |
8 | 8 | 8 | 8 | 7 | |||||||||||||||||||||||
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Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
Wealth management: |
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Average loans (in millions) |
$ | 6,958 | $ | 7,209 | $ | 7,430 | $ | 7,763 | $ | 8,122 | 17 | % | 5 | % | ||||||||||||||
Average deposits (in millions) |
$ | 10,392 | $ | 11,761 | $ | 11,491 | $ | 11,259 | $ | 11,372 | 9 | % | 1 | % | ||||||||||||||
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(a) | Excludes securities lending cash management assets. |
(b) | Preliminary. |
Investment Services metrics | 3Q12 vs. | |||||||||||||||||||||||||||
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | ||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 25.9 | $ | 25.8 | $ | 26.6 | $ | 27.1 | $ | 27.9 | 8 | % | 3 | % | ||||||||||||||
Market value of securities on loan at period-end (in billions) (a) |
$ | 250 | $ | 269 | $ | 265 | $ | 275 | $ | 259 | 4 | % | (6 | )% | ||||||||||||||
Average loans (in millions) |
$ | 22,879 | $ | 26,804 | $ | 25,902 | $ | 24,981 | $ | 24,361 | 6 | % | (2 | )% | ||||||||||||||
Average deposits (in millions) |
$ | 181,848 | $ | 188,539 | $ | 175,055 | $ | 172,435 | $ | 188,036 | 3 | % | 9 | % | ||||||||||||||
Asset servicing: |
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New business wins (AUC) (in billions) |
$ | 96 | $ | 431 | $ | 453 | $ | 314 | $ | 522 | ||||||||||||||||||
Corporate Trust: |
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Total debt serviced (in trillions) |
$ | 11.9 | $ | 11.8 | $ | 11.9 | $ | 11.5 | $ | 11.6 | (3 | )% | 1 | % | ||||||||||||||
Number of deals administered |
134,843 | 133,850 | 133,319 | 133,301 | 131,754 | (2 | )% | (1 | )% | |||||||||||||||||||
Depositary Receipts: |
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Number of sponsored programs |
1,384 | 1,389 | 1,391 | 1,393 | 1,393 | 1 | % | | % | |||||||||||||||||||
Clearing services: |
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DARTS volume (in thousands) |
207.7 | 178.7 | 196.6 | 189.8 | 172.7 | (17 | )% | (9 | )% | |||||||||||||||||||
Average active clearing accounts U.S. (in thousands) |
5,503 | 5,429 | 5,413 | 5,427 | 5,452 | (1 | )% | | % | |||||||||||||||||||
Average long-term mutual fund assets (U.S. platform) (in millions) |
$ | 287,573 | $ | 287,562 | $ | 306,212 | $ | 306,973 | $ | 323,289 | 12 | % | 5 | % | ||||||||||||||
Average margin loans (in millions) |
$ | 7,351 | $ | 7,548 | $ | 7,900 | $ | 8,231 | $ | 7,922 | 8 | % | (4 | )% | ||||||||||||||
Broker-Dealer: |
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Average collateral management balances (in billions) |
$ | 1,872 | $ | 1,866 | $ | 1,929 | $ | 1,997 | $ | 2,009 | 7 | % | 1 | % | ||||||||||||||
Treasury services: |
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Global payments transaction volume (in thousands) |
11,088 | 10,856 | 10,838 | 11,117 | 11,289 | 2 | % | 2 | % |
(a) | Represents the securities on loan managed by the Investment Services business. |
Page - 4
BNY Mellon 3Q12 Quarterly Earnings Review
Market indices | 3Q12 vs. | |||||||||||||||||||||||||||
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | ||||||||||||||||||||||
S&P 500 Index (a) |
1131 | 1258 | 1408 | 1362 | 1441 | 27 | % | 6 | % | |||||||||||||||||||
S&P 500 Index daily average |
1227 | 1224 | 1347 | 1351 | 1400 | 14 | 4 | |||||||||||||||||||||
FTSE 100 Index (a) |
5128 | 5572 | 5768 | 5571 | 5742 | 12 | 3 | |||||||||||||||||||||
FTSE 100 Index daily average |
5470 | 5424 | 5818 | 5555 | 5742 | 5 | 3 | |||||||||||||||||||||
MSCI World Index (a) |
1104 | 1183 | 1312 | 1236 | 1312 | 19 | 6 | |||||||||||||||||||||
MSCI World Index daily average |
1217 | 1169 | 1268 | 1235 | 1273 | 5 | 3 | |||||||||||||||||||||
Barclays Capital Aggregate BondSM Index (a) |
346 | 347 | 351 | 353 | 368 | 6 | 4 | |||||||||||||||||||||
NYSE and NASDAQ share volume (in billions) |
250 | 206 | 186 | 192 | 173 | (31 | ) | (10 | ) | |||||||||||||||||||
JPMorgan G7 Volatility Index daily average (b) |
12.60 | 12.95 | 10.39 | 10.30 | 8.70 | (31 | ) | (16 | ) |
(a) | Period end. |
(b) | The JPMorgan G7 Volatility Index is based on the implied volatility in 3-month currency options. |
Page - 5
BNY Mellon 3Q12 Quarterly Earnings Review
FEE AND OTHER REVENUE
Fee and other revenue (a) | 3Q12 vs. | |||||||||||||||||||||||||||||
(dollars in millions) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||||
Investment services fees: |
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Asset servicing (b) |
$ | 922 | $ | 885 | $ | 943 | $ | 950 | $ | 942 | 2 | % | (1 | )% | ||||||||||||||||
Issuer services |
442 | 287 | 251 | 275 | 311 | N/M | 13 | |||||||||||||||||||||||
Memo: Issuer services excluding Shareowner Services |
400 | 245 | 251 | 275 | 311 | (22 | ) | 13 | ||||||||||||||||||||||
Clearing services |
297 | 278 | 303 | 309 | 287 | (3 | ) | (7 | ) | |||||||||||||||||||||
Treasury services |
133 | 134 | 136 | 134 | 138 | 4 | 3 | |||||||||||||||||||||||
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Total investment services fees |
1,794 | 1,584 | 1,633 | 1,668 | 1,678 | (6 | ) | 1 | ||||||||||||||||||||||
Investment management and performance fees |
729 | 730 | 745 | 797 | 779 | 7 | (2 | ) | ||||||||||||||||||||||
Foreign exchange and other trading revenue |
200 | 228 | 191 | 180 | 182 | (9 | ) | 1 | ||||||||||||||||||||||
Distribution and servicing |
43 | 42 | 46 | 46 | 48 | 12 | 4 | |||||||||||||||||||||||
Financing-related fees |
40 | 38 | 44 | 37 | 46 | 15 | 24 | |||||||||||||||||||||||
Investment and other income |
83 | 146 | 139 | 48 | 124 | N/M | N/M | |||||||||||||||||||||||
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Total fee revenue |
2,889 | 2,768 | 2,798 | 2,776 | 2,857 | (1 | ) | 3 | ||||||||||||||||||||||
Net securities gains (losses) |
(2 | ) | (3 | ) | 40 | 50 | 22 | N/M | N/M | |||||||||||||||||||||
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Total fee and other revenue GAAP |
2,887 | 2,765 | 2,838 | 2,826 | 2,879 | | 2 | |||||||||||||||||||||||
Less: |
Fee and other revenue related to Shareowner Services (c) |
44 | 142 | | (3 | ) | | |||||||||||||||||||||||
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Total fee and other revenue excluding Shareowner Services Non-GAAP |
$ | 2,843 | $ | 2,623 | $ | 2,838 | $ | 2,829 | $ | 2,879 | 1 | % | 2 | % | ||||||||||||||||
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Fee revenue as a percentage of total revenue excluding net securities gains (losses) |
78 | % | 78 | % | 78 | % | 78 | % | 78 | % | ||||||||||||||||||||
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(a) | See Supplemental information Explanation of Non-GAAP financial measures beginning on page 19 for fee and other revenue excluding Shareowner Services Non-GAAP. |
(b) | Asset servicing fees include securities lending revenue of $41 million in the third quarter of 2011, $43 million in the fourth quarter of 2011, $49 million in the first quarter of 2012, $59 million in the second quarter of 2012, $49 million in the third quarter of 2012. |
(c) | The Shareowner Services business was sold on Dec. 31, 2011. Results in the fourth quarter of 2011 include a $98 million pre-tax gain on the sale. |
N/M Not meaningful.
KEY POINTS
| Asset servicing fees were $942 million, an increase of 2% year-over-year and a decrease of 1% sequentially. The year-over year increase primarily reflects net new business and higher market values and securities lending revenue. The sequential decrease was primarily driven by a seasonal decrease in securities lending revenue, partially offset by net new business and higher market values. |
| Issuer services fees excluding Shareowner Services were $311 million, a decrease of 22% year-over-year and an increase of 13% sequentially. The year-over-year decrease primarily resulted from lower Depositary Receipts revenue driven by lower volumes, and lower Corporate Trust fees reflecting the continued net run-off of structured debt securitizations. The sequential increase resulted from seasonally higher Depositary Receipts revenue, partially offset by lower Corporate Trust fees. |
| Clearing services fees were $287 million, a decrease of 3% year-over-year and 7% sequentially. Both decreases were primarily driven by lower DARTS volume. |
| Investment management and performance fees were $779 million, an increase of 7% year-over-year and a decrease of 2% sequentially. Excluding performance fees, investment management fees increased 7% year-over-year and 3% sequentially. Both increases were driven by higher market values and net new business. |
Page - 6
BNY Mellon 3Q12 Quarterly Earnings Review
| Foreign exchange and other trading revenue |
(dollars in millions) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||
Foreign exchange |
$ | 221 | $ | 183 | $ | 136 | $ | 157 | $ | 121 | ||||||||||
Fixed income |
(21 | ) | 41 | 47 | 16 | 54 | ||||||||||||||
Credit derivatives (Used as economic hedges of loans) |
1 | (2 | ) | (2 | ) | 1 | (1 | ) | ||||||||||||
Other |
(1 | ) | 6 | 10 | 6 | 8 | ||||||||||||||
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Total |
$ | 200 | $ | 228 | $ | 191 | $ | 180 | $ | 182 | ||||||||||
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Foreign exchange and other trading revenue totaled $182 million compared with $200 million in the third quarter of 2011 and $180 million in the second quarter of 2012. In the third quarter of 2012, foreign exchange revenue totaled $121 million, a decrease of 45% year-over-year and 23% sequentially. Both decreases reflect lower volatility and volumes. Other trading revenue was $61 million in the third quarter of 2012 compared with a loss of $21 million in the third quarter of 2011 and revenue of $23 million in the second quarter of 2012. The increases compared with both prior periods reflect improved fixed income trading.
| Investment and other income |
(dollars in millions) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||
Corporate/bank-owned life insurance |
$ | 40 | $ | 35 | $ | 34 | $ | 32 | $ | 41 | ||||||||||
Lease residual gains |
14 | 20 | 34 | 3 | | |||||||||||||||
Seed capital gains (losses) |
(8 | ) | 3 | 24 | | 28 | ||||||||||||||
Expense reimbursements from joint ventures |
11 | 10 | 10 | 9 | 10 | |||||||||||||||
Equity investment revenue (loss) |
12 | 8 | 6 | (5 | ) | 16 | ||||||||||||||
Private equity gains (losses) |
(7 | ) | 3 | 4 | 1 | (1 | ) | |||||||||||||
Asset-related gains (losses) |
28 | 69 | (2 | ) | | 17 | ||||||||||||||
Other income (loss) |
(7 | ) | (2 | ) | 29 | 8 | 13 | |||||||||||||
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Total |
$ | 83 | $ | 146 | $ | 139 | $ | 48 | $ | 124 | ||||||||||
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Investment and other income totaled $124 million compared with $83 million in the third quarter of 2011 and $48 million in the second quarter of 2012. The year-over-year increase primarily resulted from higher seed capital gains. Sequentially, the increase primarily resulted from seed capital gains, higher equity investment revenue and higher asset-related gains.
Page - 7
BNY Mellon 3Q12 Quarterly Earnings Review
NET INTEREST REVENUE
Net interest revenue | 3Q12 vs. | |||||||||||||||||||||||||||
(dollars in millions) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||
Net interest revenue (non-FTE) |
$ | 775 | $ | 780 | $ | 765 | $ | 734 | $ | 749 | (3 | )% | 2 | % | ||||||||||||||
Net interest revenue (FTE) |
782 | 790 | 776 | 747 | 765 | (2 | ) | 2 | ||||||||||||||||||||
Net interest margin (FTE) |
1.30 | % | 1.27 | % | 1.32 | % | 1.25 | % | 1.20 | % | (10 | ) bps | (5 | ) bps | ||||||||||||||
Selected average balances: |
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Cash/interbank investments |
$ | 126,392 | $ | 121,017 | $ | 103,795 | $ | 101,871 | $ | 108,365 | (14 | )% | 6 | % | ||||||||||||||
Trading account securities |
2,509 | 2,490 | 2,519 | 3,033 | 4,431 | 77 | 46 | |||||||||||||||||||||
Securities |
70,863 | 79,981 | 86,808 | 91,859 | 100,004 | 41 | 9 | |||||||||||||||||||||
Loans |
40,489 | 44,236 | 43,209 | 42,992 | 42,428 | 5 | (1 | ) | ||||||||||||||||||||
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Interest-earning assets |
240,253 | 247,724 | 236,331 | 239,755 | 255,228 | 6 | 6 | |||||||||||||||||||||
Interest-bearing deposits |
125,795 | 130,343 | 125,438 | 130,482 | 138,260 | 10 | 6 | |||||||||||||||||||||
Noninterest-bearing deposits |
73,389 | 76,309 | 66,613 | 62,860 | 70,230 | (4 | ) | 12 | ||||||||||||||||||||
Selected average yields/rates: |
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Cash/interbank investments |
0.66 | % | 0.61 | % | 0.64 | % | 0.56 | % | 0.51 | % | ||||||||||||||||||
Trading account securities |
2.62 | 2.94 | 2.78 | 2.57 | 2.40 | |||||||||||||||||||||||
Securities |
2.87 | 2.60 | 2.44 | 2.25 | 2.06 | |||||||||||||||||||||||
Loans |
1.96 | 1.87 | 1.95 | 1.98 | 1.96 | |||||||||||||||||||||||
Interest-earning assets |
1.55 | 1.50 | 1.56 | 1.48 | 1.40 | |||||||||||||||||||||||
Interest-bearing deposits |
0.21 | 0.18 | 0.14 | 0.13 | 0.10 | |||||||||||||||||||||||
Average cash/interbank investments as a percentage of average interest-earning assets |
53 | % | 49 | % | 44 | % | 42 | % | 42 | % | ||||||||||||||||||
Average noninterest-bearing deposits as a percentage of average interest-earning assets |
31 | % | 31 | % | 28 | % | 26 | % | 28 | % |
bps basis points.
FTE fully taxable equivalent.
KEY POINTS
| Net interest revenue totaled $749 million in 3Q12, a decrease of $26 million compared with 3Q11 and an increase of $15 million sequentially. The year-over-year decrease in net interest revenue was primarily driven by lower accretion and the elimination of interest on European Central Bank deposits, partially offset by increased investment in high-quality investment securities. The increase compared with the second quarter of 2012 primarily reflects higher interest-earning assets driven by higher deposit levels, partially offset by the elimination of interest on European Central Bank deposits. |
| The net interest margin (FTE) was 1.20% in 3Q12 compared with 1.30% in 3Q11 and 1.25% in 2Q12. The decreases in net interest margin (FTE) compared with both prior periods primarily reflect lower reinvestment yields, the elimination of interest on European Central Bank deposits, lower accretion and growth in customer deposits. |
Page - 8
BNY Mellon 3Q12 Quarterly Earnings Review
NONINTEREST EXPENSE
Noninterest expense (a) | 3Q12 vs. | |||||||||||||||||||||||||||
(dollars in millions) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||
Staff: |
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Compensation |
$ | 903 | $ | 885 | $ | 861 | $ | 866 | $ | 893 | (1 | )% | 3 | % | ||||||||||||||
Incentives |
328 | 281 | 352 | 311 | 306 | (7 | ) | (2 | ) | |||||||||||||||||||
Employee benefits |
226 | 216 | 240 | 238 | 237 | 5 | | |||||||||||||||||||||
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Total staff |
1,457 | 1,382 | 1,453 | 1,415 | 1,436 | (1 | ) | 1 | ||||||||||||||||||||
Professional, legal and other purchased services |
311 | 322 | 299 | 309 | 292 | (6 | ) | (6 | ) | |||||||||||||||||||
Software and equipment |
193 | 213 | 205 | 209 | 208 | 8 | | |||||||||||||||||||||
Net occupancy |
151 | 159 | 147 | 141 | 149 | (1 | ) | 6 | ||||||||||||||||||||
Distribution and servicing |
100 | 96 | 101 | 103 | 109 | 9 | 6 | |||||||||||||||||||||
Sub-custodian |
80 | 62 | 70 | 70 | 65 | (19 | ) | (7 | ) | |||||||||||||||||||
Business development |
57 | 75 | 56 | 71 | 60 | 5 | (15 | ) | ||||||||||||||||||||
Other |
224 | 237 | 220 | 254 | 265 | 18 | 4 | |||||||||||||||||||||
Amortization of intangible assets |
106 | 106 | 96 | 97 | 95 | (10 | ) | (2 | ) | |||||||||||||||||||
M&I, litigation and restructuring charges |
92 | 176 | 109 | 378 | 26 | N/M | N/M | |||||||||||||||||||||
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Total noninterest expense GAAP |
$ | 2,771 | $ | 2,828 | $ | 2,756 | $ | 3,047 | $ | 2,705 | (2 | )% | (11 | )% | ||||||||||||||
Total staff expense as a percentage of total revenue |
39 | % | 39 | % | 40 | % | 39 | % | 39 | % | ||||||||||||||||||
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Memo: |
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Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and direct expense related to Shareowner Services Non-GAAP |
$ | 2,536 | $ | 2,500 | $ | 2,551 | $ | 2,572 | $ | 2,584 | 2 | % | | % | ||||||||||||||
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(a) | See Supplemental information Explanation of Non-GAAP financial measures beginning on page 19 for noninterest expense excluding the direct expense related to Shareowner Services Non-GAAP. |
N/M Not meaningful.
KEY POINTS
| Total noninterest expense increased 2% excluding amortization of intangible assets, M&I, litigation and restructuring charges and direct expenses related to Shareowner Services (Non-GAAP) compared with the prior year period and was flat sequentially. |
| The year-over-year increase reflects the cost of generating certain tax credits in 3Q12 and the benefit of state investment tax credits recorded in 3Q11. |
| Sequentially, decreases in professional, legal and other purchased services and business development expenses were offset by the annual employee merit increase and support agreement charges. |
Page - 9
BNY Mellon 3Q12 Quarterly Earnings Review
OPERATIONAL EXCELLENCE INITIATIVES UPDATE
Expense initiatives (pre-tax) | Annualized | |||||||||||||||||
Program savings | targeted savings | |||||||||||||||||
(dollar amounts in millions) | 1Q12 | 2Q12 | 3Q12 | through 3Q12 |
by the end of 2012 | |||||||||||||
Business operations |
$ | 45 | $ | 55 | $ | 63 | $ | 163 | $ 225 - $ 240 | |||||||||
Technology |
16 | 21 | 21 | 58 | $ 75 - $ 85 | |||||||||||||
Corporate services |
14 | 18 | 21 | 53 | $ 60 - $ 65 | |||||||||||||
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Gross savings (a) |
75 | 94 | 105 | 274 | $ 360 - $ 390 | |||||||||||||
Less: Incremental program costs (b) |
5 | 23 | 23 | 51 | $ 120 - $ 130 | |||||||||||||
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Net savings (c) |
$ | 70 | $ | 71 | $ | 82 | $ | 223 | $ 240 - $ 260 | |||||||||
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(a) | Represents the estimated annual pre-tax run rate expense savings since program inception in 2011. Total Company actual operating expense may increase or decrease due to other factors. |
(b) | Represents incremental program costs incurred to implement the operational excellence initiatives. These costs will fluctuate by quarter. |
(c) | Net savings cannot be annualized due to the variability of program costs. |
Accomplishments
Through Sept. 30, 2012, we accomplished the following operational excellence initiatives:
Business Operations
| Consolidated Treasury Services functions (e.g., check processing and lockbox operations) in our Pittsburgh Service Center. |
| Continued global footprint positions migration. Lowered operating costs as we began to ramp up the Eastern European Global Delivery Center. |
| Reengineered Dreyfus and Global Fund Accounting operations to reduce headcount. |
| Realized synergies in custody operations and clearing related to the Global Investment Servicing (GIS) acquisition. |
| Completed client conversions related to our BHF Asset Servicing GmbH acquisition. |
Technology
| Migrated GIS systems to BNY Mellon platforms over 95% of the production applications have been successfully migrated as of Sept. 30, 2012. |
| Insourced software engineers to Global Delivery Centers. |
| Standardized infrastructure through server elimination and software rationalization. |
Corporate Services
| Consolidated offices in Los Angeles, New York and EMEA region. |
| Benefited from the enhanced global procurement program. |
Page - 10
BNY Mellon 3Q12 Quarterly Earnings Review
CAPITAL
The following table presents our Basel I Tier 1 common equity generated.
Basel I Tier 1 common equity generation | ||||||||||||||||||||
(dollars in millions) |
3Q11 |
4Q11 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation GAAP |
$651 | $ | 505 | $ | 619 | $ | 466 | $ | 720 | |||||||||||
Add: Amortization of intangible assets, net of tax |
67 | 66 | 61 | 61 | 60 | |||||||||||||||
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Gross Basel I Tier 1 common equity generated |
718 | 571 | 680 | 527 | 780 | |||||||||||||||
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Less capital deployed: |
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Common stock dividends |
160 | 159 | 158 | 156 | 155 | |||||||||||||||
Common stock repurchased |
462 | 69 | 371 | 286 | 288 | |||||||||||||||
Goodwill and intangible assets related to acquisitions/dispositions |
16 | (241 | ) | | | | ||||||||||||||
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Total capital deployed |
638 | (13 | ) | 529 | 442 | 443 | ||||||||||||||
Add: Other |
(43) | (114 | ) | 146 | (53 | ) | 181 | |||||||||||||
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Net Basel I Tier 1 common equity generated |
$37 | $ | 470 | $ | 297 | $ | 32 | $ | 518 | |||||||||||
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We generated $780 million of gross Basel I Tier 1 common equity in the third quarter of 2012.
The following table presents our capital ratios.
Capital ratios |
Sept. 30, 2011 |
June 30, 2012 |
Sept. 30, 2012 (a) |
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Estimated Basel III Tier 1 common equity ratio (b)(c) |
N/A | 8.7 | % | 9.3 | % | |||||||
Basel I Tier 1 common equity to risk-weighted assets ratio Non-GAAP (c) |
12.5 | % | 13.2 | 13.2 | ||||||||
Basel I Tier 1 capital ratio |
14.0 | 14.7 | 15.3 | |||||||||
Basel I Total (Tier 1 plus Tier 2) capital ratio |
16.1 | 16.4 | 16.8 | |||||||||
Basel I leverage capital ratio |
5.1 | 5.5 | 5.6 | |||||||||
BNY Mellon shareholders equity to total assets ratio (c) |
10.5 | 10.5 | 10.7 | |||||||||
BNY Mellon common shareholders equity to total assets ratio (c) |
10.5 | 10.3 | 10.3 | |||||||||
Tangible BNY Mellon common shareholders equity to tangible assets of operations ratio Non-GAAP (c) |
5.9 | 6.1 | 6.3 |
(a) | Preliminary. |
(b) | The estimated Basel III Tier 1 common equity ratios at June 30, 2012 and Sept. 30, 2012 was based on the Notices of Proposed Rulemaking (NPRs) and final market risk rule initially released on June 7, 2012 and published in the Federal Register on Aug. 30, 2012. The estimated Basel III Tier 1 common equity ratio of 6.5% at Sept. 30, 2011 was based on prior Basel III guidance and the proposed market risk rule. |
(c) | See Supplemental information Explanation of Non-GAAP financial measures beginning on page 19 for a calculation of these ratios. |
Our estimated Basel III Tier 1 common equity ratio Non-GAAP was 9.3% at Sept. 30, 2012 compared with 8.7% at June 30, 2012. The increase was primarily due to earnings retention and an increase in the value of the investment portfolio, partially offset by higher risk-weighted assets.
Page - 11
BNY Mellon 3Q12 Quarterly Earnings Review
INVESTMENT SECURITIES PORTFOLIO
At Sept. 30, 2012, the fair value of our investment securities portfolio totaled $103.6 billion. The unrealized pre-tax net gain on our total securities portfolio was $2.5 billion at Sept. 30, 2012 compared with $1.4 billion at June 30, 2012. During the third quarter of 2012, we received $215 million of paydowns and sold approximately $46 million of sub-investment grade securities.
The following table shows the distribution of our investment securities portfolio.
Investment securities portfolio | ||||||||||||||||||||||||||||||||||||||||||||
3Q12 | Fair value | |||||||||||||||||||||||||||||||||||||||||||
June 30, | change in | Sept. 30, 2012 | as a % of | Ratings | ||||||||||||||||||||||||||||||||||||||||
2012 | unrealized | Amortized | Fair | amortized | Unrealized | AAA/ | A+/ | BBB+/ | BB+ and | Not | ||||||||||||||||||||||||||||||||||
(dollars in millions) |
Fair value | gain/(loss) | cost | value | cost(a) | gain/(loss) | AA- | A | BBB- | lower | rated | |||||||||||||||||||||||||||||||||
Agency RMBS |
$ | 39,441 | $ | 321 | $ | 40,298 | $ | 41,462 | 103 | % | $ | 1,164 | 100 | % | | % | | % | | % | | % | ||||||||||||||||||||||
U.S. Treasury securities |
15,073 | 36 | 20,024 | 20,356 | 102 | 332 | 100 | | | | | |||||||||||||||||||||||||||||||||
Sovereign debt/sovereign guaranteed (b) |
8,935 | 16 | 9,529 | 9,698 | 102 | 169 | 100 | | | | | |||||||||||||||||||||||||||||||||
Non-agency RMBS (c) |
3,037 | 285 | 2,623 | 3,200 | 74 | 577 | 1 | | 2 | 97 | | |||||||||||||||||||||||||||||||||
Non-agency RMBS |
1,692 | 119 | 1,813 | 1,724 | 88 | (89 | ) | 13 | 16 | 10 | 61 | | ||||||||||||||||||||||||||||||||
European floating rate notes (d) |
3,896 | 96 | 4,419 | 4,231 | 95 | (188 | ) | 75 | 20 | 2 | 3 | | ||||||||||||||||||||||||||||||||
Commercial MBS |
3,012 | 44 | 2,780 | 2,931 | 105 | 151 | 81 | 17 | 2 | | | |||||||||||||||||||||||||||||||||
State and political subdivisions |
5,684 | 55 | 6,111 | 6,210 | 102 | 99 | 84 | 14 | 1 | | 1 | |||||||||||||||||||||||||||||||||
Foreign covered bonds (e) |
3,928 | 58 | 3,760 | 3,876 | 103 | 116 | 100 | | | | | |||||||||||||||||||||||||||||||||
Corporate bonds |
1,785 | 20 | 1,786 | 1,863 | 104 | 77 | 25 | 65 | 9 | 1 | | |||||||||||||||||||||||||||||||||
CLO |
1,013 | 8 | 1,111 | 1,107 | 100 | (4 | ) | 100 | | | | | ||||||||||||||||||||||||||||||||
U.S. Government agency debt |
1,097 | | 1,055 | 1,086 | 103 | 31 | 100 | | | | | |||||||||||||||||||||||||||||||||
Consumer ABS |
1,060 | 1 | 1,745 | 1,755 | 101 | 10 | 88 | 12 | | | | |||||||||||||||||||||||||||||||||
Other (f) |
3,339 | (11 | ) | 4,092 | 4,135 | 101 | 43 | 42 | 54 | | 1 | 3 | ||||||||||||||||||||||||||||||||
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Total investment securities |
$ | 92,992 | (g) | $ | 1,048 | $ | 101,146 | $103,634 (g) | 101 | % | $ | 2,488 | 89 | % | 6 | % | 1 | % | 4 | % | | % | ||||||||||||||||||||||
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(a) | Amortized cost before impairments. |
(b) | Primarily comprised of exposure to UK, France, Germany and Netherlands. |
(c) | These RMBS were included in the former Grantor Trust and were marked-to-market in 2009. We believe these RMBS would receive higher credit ratings if these ratings incorporated, as additional credit enhancement, the difference between the written-down amortized cost and the current face amount of each of these securities. |
(d) | Includes RMBS, commercial MBS and other securities. Primarily comprised of exposure to UK and Netherlands. |
(e) | Primarily comprised of exposure to Germany, Canada and UK. |
(f) | Includes commercial paper of $2.0 billion and $2.2 billion, fair value, and money market funds of $918 million and $1.6 billion, fair value, at June 30, 2012 and Sept. 30, 2012, respectively. |
(g) | Includes net unrealized losses on derivatives hedging securities available-for-sale of $417 million at June 30, 2012 and $407 million at Sept. 30, 2012. |
Page - 12
BNY Mellon 3Q12 Quarterly Earnings Review
NONPERFORMING ASSETS
Nonperforming assets | Sept. 30, | June 30, | Sept. 30, | |||||||||
(dollars in millions) |
2011 | 2012 | 2012 | |||||||||
Nonperforming loans: |
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Other residential mortgages |
$ | 228 | $ | 177 | $ | 166 | ||||||
Wealth management |
32 | 35 | 33 | |||||||||
Commercial |
21 | 31 | 29 | |||||||||
Commercial real estate |
28 | 30 | 29 | |||||||||
Foreign |
13 | 9 | 9 | |||||||||
Financial institutions |
12 | 3 | 3 | |||||||||
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Total nonperforming loans |
334 | 285 | 269 | |||||||||
Other assets owned |
10 | 9 | 5 | |||||||||
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Total nonperforming assets (a) |
$ | 344 | $ | 294 | $ | 274 | ||||||
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Nonperforming assets ratio |
0.76 | % | 0.65 | % | 0.60 | % | ||||||
Allowance for loan losses/nonperforming loans |
117.4 | 127.0 | 126.0 | |||||||||
Total allowance for credit losses/nonperforming loans |
149.1 | 163.9 | 169.5 | |||||||||
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(a) | Loans of consolidated investment management funds are not part of BNY Mellons loan portfolio. Included in these loans are nonperforming loans of $265 million at Sept. 30, 2011, $155 million at June 30, 2012 and $153 million at Sept. 30, 2012. 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. |
Nonperforming other residential mortgage loans decreased $62 million from Sept. 30, 2011 to $166 million at Sept. 30, 2012. The decrease primarily resulted from paydowns, sales, returns to accrual status and charge-offs.
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS
Allowance for credit losses, provision and net charge-offs | ||||||||||||
(dollars in millions) |
3Q11 | 2Q12 | 3Q12 | |||||||||
Allowance for credit losses beginning of period |
$ | 535 | $ | 494 | $ | 467 | ||||||
Provision for credit losses |
(22 | ) | (19 | ) | (5 | ) | ||||||
Net (charge-offs) recoveries: |
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Other residential mortgages |
(14 | ) | (5 | ) | (1 | ) | ||||||
Financial institutions |
| (4 | ) | (4 | ) | |||||||
Commercial |
(1 | ) | 1 | (1 | ) | |||||||
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Net (charge-offs) recoveries |
(15 | ) | (8 | ) | (6 | ) | ||||||
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Allowance for credit losses end of period |
$ | 498 | $ | 467 | $ | 456 | ||||||
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Allowance for loan losses |
$ | 392 | $ | 362 | $ | 339 | ||||||
Allowance for lending-related commitments |
106 | 105 | 117 | |||||||||
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The provision for credit losses was a credit of $5 million in 3Q12 primarily resulting from loan sales and repayments. The provision for credit losses was a credit of $22 million in 3Q11 and a credit of $19 million in 2Q12.
Page - 13
BNY Mellon 3Q12 Quarterly Earnings Review
REVIEW OF BUSINESSES
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.
3Q12 vs. | ||||||||||||||||||||||||||||
(dollars in millions, unless otherwise noted) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||
Revenue: |
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Investment management fees: |
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Mutual funds |
$ | 263 | $ | 237 | $ | 260 | $ | 270 | $ | 283 | 8 | % | 5 | % | ||||||||||||||
Institutional clients |
311 | 299 | 322 | 321 | 334 | 7 | 4 | |||||||||||||||||||||
Wealth management |
157 | 154 | 157 | 158 | 158 | 1 | | |||||||||||||||||||||
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Investment management fees |
731 | 690 | 739 | 749 | 775 | 6 | 3 | |||||||||||||||||||||
Performance fees |
11 | 47 | 16 | 54 | 10 | (9 | ) | (81 | ) | |||||||||||||||||||
Distribution and servicing |
41 | 41 | 45 | 45 | 47 | 15 | 4 | |||||||||||||||||||||
Other (a) |
(26 | ) | (11 | ) | 52 | 13 | 40 | N/M | N/M | |||||||||||||||||||
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Total fee and other revenue (a) |
757 | 767 | 852 | 861 | 872 | 15 | 1 | |||||||||||||||||||||
Net interest revenue |
51 | 55 | 55 | 52 | 52 | 2 | | |||||||||||||||||||||
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Total revenue |
808 | 822 | 907 | 913 | 924 | 14 | 1 | |||||||||||||||||||||
Provision for credit losses |
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Noninterest expense (ex. amortization of intangible assets) |
622 | 632 | 619 | 642 | 644 | 4 | | |||||||||||||||||||||
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Income before taxes (ex. amortization of intangible assets) |
186 | 190 | 288 | 271 | 280 | 51 | 3 | |||||||||||||||||||||
Amortization of intangible assets |
53 | 53 | 48 | 48 | 48 | (9 | ) | | ||||||||||||||||||||
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Income before taxes |
$ | 133 | $ | 137 | $ | 240 | $ | 223 | $ | 232 | 74 | % | 4 | % | ||||||||||||||
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Pre-tax operating margin |
16 | % | 17 | % | 26 | % | 24 | % | 25 | % | ||||||||||||||||||
Pre-tax operating margin (ex. amortization of intangible assets and net of distribution and servicing expense) (b) |
26 | % | 26 | % | 36 | % | 34 | % | 34 | % | ||||||||||||||||||
Metrics: |
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Changes in market value of assets under management (in billions) (c): |
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Beginning balance |
$ | 1,274 | $ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | ||||||||||||||||||
Net inflows (outflows): |
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Long-term |
4 | 16 | 7 | 26 | 9 | |||||||||||||||||||||||
Money market |
(15 | ) | 7 | (9 | ) | (14 | ) | 9 | ||||||||||||||||||||
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Total net inflows (outflows) |
(11 | ) | 23 | (2 | ) | 12 | 18 | |||||||||||||||||||||
Net market/currency impact |
(65 | ) | 39 | 50 | (21 | ) | 42 | |||||||||||||||||||||
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Ending balance |
$ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | $ | 1,359 | (d) | 13 | % | 5 | % | |||||||||||||
Composition of assets under management at period end (c): |
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Equity securities |
30 | % | 31 | % | 33 | % | 32 | % | 33 | % | ||||||||||||||||||
Fixed income securities |
35 | 35 | 35 | 37 | 37 | |||||||||||||||||||||||
Money market |
27 | 26 | 24 | 23 | 23 | |||||||||||||||||||||||
Alternative investments and overlay |
8 | 8 | 8 | 8 | 7 | |||||||||||||||||||||||
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Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
Wealth management: |
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Average loans |
$ | 6,958 | $ | 7,209 | $ | 7,430 | $ | 7,763 | $ | 8,122 | 17 | % | 5 | % | ||||||||||||||
Average deposits |
$ | 10,392 | $ | 11,761 | $ | 11,491 | $ | 11,259 | $ | 11,372 | 9 | % | 1 | % | ||||||||||||||
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(a) | Total fee and other revenue includes the impact of the consolidated investment management funds. See Supplemental information Explanation of Non-GAAP financial measures beginning on page 19. Additionally, other revenue includes asset servicing and treasury services revenue. |
(b) | Distribution and servicing expense is netted with distribution and servicing revenue for the purpose of this calculation of pre-tax operating margin. Distribution and servicing expense totaled $99 million, $95 million, $100 million, $102 million and $107 million, respectively. |
(c) | Excludes securities lending cash management assets. |
(d) | Preliminary. |
N/M Not meaningful.
Page - 14
BNY Mellon 3Q12 Quarterly Earnings Review
INVESTMENT MANAGEMENT KEY POINTS
| Assets under management were a record of $1.4 trillion at Sept. 30, 2012, an increase of 13% year-over-year and 5% sequentially. Both increases resulted from higher market values and net inflows. |
| Net long-term inflows were $9 billion and short-term inflows were $9 billion in 3Q12. Long-term inflows benefited from fixed income and active equities. |
| Year-over-year, positive operating leverage of 1,000 basis points, or 500 basis points excluding the net impact of seed capital gains. |
| Total revenue was $924 million, an increase of 14% year-over-year and 1% sequentially. Both increases were driven by higher seed capital gains, higher market values and net new business. The sequential increase was partially offset by lower performance fees. |
| Investment management fees were $775 million, an increase of 6% year-over-year and 3% sequentially. Both increases were driven by higher market values and net new business. |
| Other revenue was $40 million in 3Q12 compared with a loss of $26 million in 3Q11 and revenue of $13 million in 2Q12. Both increases primarily reflect higher seed capital gains. |
| Net interest revenue increased 2% year-over-year was unchanged sequentially. The year-over-year increase primarily resulted from higher average loans and deposits partially offset by tighter spreads. |
| Average loans increased 17% year-over-year and 5% sequentially; average deposits increased 9% year-over-year and 1% sequentially. |
| Total noninterest expense (ex. amortization of intangible assets) increased 4% year-over-year and was unchanged sequentially. The year-over-year increase primarily resulted from higher distribution and servicing expense and the annual employee merit increase effective in the third quarter of 2012. |
| 44% non-U.S. revenue in 3Q12 vs. 42% in 3Q11. |
| 3Q12 actions: |
| Announced that the High Yield bond team of Standish Mellon Asset Management Company LLC will become part of Alcentra NY, LLC, effective Jan. 1, 2013, creating a leading investment manager of credit strategies. |
| Acquired the remaining 50% interest in the West LB Mellon Asset Management joint venture, strengthening our presence in Germany. |
| BNY Mellon Emerging Market Debt Fund awarded Emerging Market Debt Fund of the year at Investment Europe Fund Manager of the Year Awards 2012-13 (10/11/12) |
| Insight awarded Fixed Income firm of the Year and LDI firm of the year at Financial News Awards for Excellence in Institutional Asset Management (10/10/12) |
| ARX awarded Active Equity Manager of the Year for third year running by Exame, Brazilian business periodical (published 09/30/12) |
Page - 15
BNY Mellon 3Q12 Quarterly Earnings Review
INVESTMENT SERVICES provides global custody and related services, broker-dealer services, alternative investment services, corporate trust, depositary receipt and clearing services as well as global payment/working capital solutions to global financial institutions.
3Q12 vs. | ||||||||||||||||||||||||||||
(dollars in millions, unless otherwise noted) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||
Revenue: |
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Investment services fees: |
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Asset servicing |
$ | 894 | $ | 858 | $ | 915 | $ | 920 | $ | 912 | 2 | % | (1 | )% | ||||||||||||||
Issuer services |
401 | 245 | 251 | 275 | 310 | (23 | ) | 13 | ||||||||||||||||||||
Clearing services |
297 | 278 | 303 | 309 | 287 | (3 | ) | (7 | ) | |||||||||||||||||||
Treasury services |
132 | 133 | 136 | 132 | 135 | 2 | 2 | |||||||||||||||||||||
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Total investment services fees |
1,724 | 1,514 | 1,605 | 1,636 | 1,644 | (5 | ) | | ||||||||||||||||||||
Foreign exchange and other trading revenue |
236 | 196 | 176 | 179 | 158 | (33 | ) | (12 | ) | |||||||||||||||||||
Other (a) |
68 | 71 | 71 | 66 | 77 | 13 | 17 | |||||||||||||||||||||
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Total fee and other revenue (a) |
2,028 | 1,781 | 1,852 | 1,881 | 1,879 | (7 | ) | | ||||||||||||||||||||
Net interest revenue |
661 | 634 | 642 | 607 | 608 | (8 | ) | | ||||||||||||||||||||
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Total revenue |
2,689 | 2,415 | 2,494 | 2,488 | 2,487 | (8 | ) | | ||||||||||||||||||||
Provision for credit losses |
| | 16 | (14 | ) | (4 | ) | N/M | N/M | |||||||||||||||||||
Noninterest expense (ex. amortization of intangible assets) |
1,849 | 1,706 | 1,779 | 2,097 | 1,735 | (6 | ) | (17 | ) | |||||||||||||||||||
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Income before taxes (ex. amortization of intangible assets) |
840 | 709 | 699 | 405 | 756 | (10 | ) | 87 | ||||||||||||||||||||
Amortization of intangible assets |
49 | 50 | 48 | 49 | 47 | (4 | ) | (4 | ) | |||||||||||||||||||
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Income before taxes |
$ | 791 | $ | 659 | $ | 651 | $ | 356 | $ | 709 | (10 | )% | 99 | % | ||||||||||||||
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Pre-tax operating margin |
29 | % | 27 | % | 26 | % | 14 | % | 29 | % | ||||||||||||||||||
Pre-tax operating margin (ex. amortization of intangible assets) |
31 | % | 29 | % | 28 | % | 16 | % | 30 | % | ||||||||||||||||||
Investment services fees as a percentage of noninterest expense (b) |
98 | % | 90 | % | 94 | % | 94 | % | 96 | % | ||||||||||||||||||
Securities lending revenue |
$ | 32 | $ | 35 | $ | 39 | $ | 48 | $ | 37 | 16 | % | (23 | )% | ||||||||||||||
Metrics: |
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Market value of assets under custody and administration at period-end (in trillions) |
$ | 25.9 | $ | 25.8 | $ | 26.6 | $ | 27.1 | $ | 27.9 | 8 | % | 3 | % | ||||||||||||||
Market value of securities on loan at period-end (in billions) (c) |
$ | 250 | $ | 269 | $ | 265 | $ | 275 | $ | 259 | 4 | % | (6 | )% | ||||||||||||||
Average loans |
$ | 22,879 | $ | 26,804 | $ | 25,902 | $ | 24,981 | $ | 24,361 | 6 | % | (2 | )% | ||||||||||||||
Average deposits |
$ | 181,848 | $ | 188,539 | $ | 175,055 | $ | 172,435 | $ | 188,036 | 3 | % | 9 | % | ||||||||||||||
Asset servicing: |
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New business wins (AUC) (in billions) |
$ | 96 | $ | 431 | $ | 453 | $ | 314 | $ | 522 | ||||||||||||||||||
Corporate Trust: |
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Total debt serviced (in trillions) |
$ | 11.9 | $ | 11.8 | $ | 11.9 | $ | 11.5 | $ | 11.6 | (3 | )% | 1 | % | ||||||||||||||
Number of deals administered |
134,843 | 133,850 | 133,319 | 133,301 | 131,754 | (2 | )% | (1 | )% | |||||||||||||||||||
Depositary Receipts: |
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Number of sponsored programs |
1,384 | 1,389 | 1,391 | 1,393 | 1,393 | 1 | % | | % | |||||||||||||||||||
Clearing services: |
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DARTS volume (in thousands) |
207.7 | 178.7 | 196.6 | 189.8 | 172.7 | (17 | )% | (9 | )% | |||||||||||||||||||
Average active clearing accounts U.S. (in thousands) |
5,503 | 5,429 | 5,413 | 5,427 | 5,452 | (1 | )% | | % | |||||||||||||||||||
Average long-term mutual fund assets (U.S. platform) |
$ | 287,573 | $ | 287,562 | $ | 306,212 | $ | 306,973 | $ | 323,289 | 12 | % | 5 | % | ||||||||||||||
Average margin loans |
$ | 7,351 | $ | 7,548 | $ | 7,900 | $ | 8,231 | $ | 7,922 | 8 | % | (4 | )% | ||||||||||||||
Broker-Dealer: |
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Average collateral management balances (in billions) |
$ | 1,872 | $ | 1,866 | $ | 1,929 | $ | 1,997 | $ | 2,009 | 7 | % | 1 | % | ||||||||||||||
Treasury services: |
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Global payments transaction volume (in thousands) |
11,088 | 10,856 | 10,838 | 11,117 | 11,289 | 2 | % | 2 | % | |||||||||||||||||||
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(a) | Total fee and other revenue includes investment management fees and distribution and servicing revenue. |
(b) | Noninterest expense excludes amortization of intangible assets, support agreement charges and litigation expense. |
(c) | Represents the securities on loan managed by the Investment Services business. |
Page - 16
BNY Mellon 3Q12 Quarterly Earnings Review
INVESTMENT SERVICES KEY POINTS
| Investment services fees totaled $1.6 billion, a decrease of 5% year-over-year and unchanged sequentially. |
| Asset servicing fees (global custody, broker-dealer services and alternative investment services) were $912 million in 3Q12 compared with $894 million in 3Q11 and $920 million in 2Q12. The year-over-year increase primarily reflects net new business and higher market values and securities lending revenue. The sequential decrease was primarily driven by a seasonal decrease in securities lending revenue, partially offset by net new business and higher market values. |
| New business wins (AUC) of $522 billion in 3Q12. |
| Issuer services fees (Corporate Trust and Depositary Receipts) were $310 million in 3Q12 compared with $401 million in 3Q11 and $275 million in 2Q12. The year-over-year decrease primarily resulted from lower Depositary Receipts revenue driven by lower volumes, and lower Corporate Trust fees reflecting the continued net run-off of structured debt securitizations. The increase sequentially resulted from seasonally higher Depositary Receipts revenue, partially offset by lower Corporate Trust fees. |
| Clearing services fees (Pershing) were $287 million in 3Q12 compared with $297 million in 3Q11 and $309 million in 2Q12. Both decreases were primarily driven by lower DARTS volume. |
| Foreign exchange and other trading revenue was $158 million in 3Q12 compared with $236 million in 3Q11 and $179 million in 2Q12. Both decreases reflect lower volatility and volumes. |
| Net interest revenue was $608 million in 3Q12 compared with $661 million in 3Q11 and $607 million in 2Q12. The year-over-year decrease reflects lower yields, partially offset by higher average deposits. |
| The provision for credit losses was a credit of $4 million in 3Q12 primarily resulting from loan sales. |
| Noninterest expense (excluding amortization of intangible assets) was $1.7 billion in 3Q12 compared with $1.8 billion in 3Q11 and $2.1 billion in 2Q12. Both decreases primarily reflect lower litigation expense and continued expense control. |
| 37% non-U.S. revenue in 3Q12 vs. 40% in 3Q11. |
Page - 17
BNY Mellon 3Q12 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. Results in 2011 include the Shareowner Services business.
(dollars in millions) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||
Revenue: |
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Fee and other revenue |
$ | 121 | $ | 240 | $ | 166 | $ | 112 | $ | 150 | ||||||||||
Net interest revenue |
63 | 91 | 68 | 75 | 89 | |||||||||||||||
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Total revenue |
184 | 331 | 234 | 187 | 239 | |||||||||||||||
Provision for credit losses |
(22 | ) | 23 | (11 | ) | (5 | ) | (1 | ) | |||||||||||
Noninterest expense (ex. amortization of intangible assets, M&I and restructuring charges) |
182 | 245 | 253 | 189 | 218 | |||||||||||||||
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Income (loss) before taxes (ex. amortization of intangible assets, M&I and restructuring charges) |
24 | 63 | (8 | ) | 3 | 22 | ||||||||||||||
Amortization of intangible assets |
4 | 3 | | | | |||||||||||||||
M&I and restructuring charges |
12 | 139 | 9 | 22 | 13 | |||||||||||||||
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Income (loss) before taxes |
$ | 8 | $ | (79 | ) | $ | (17 | ) | $ | (19 | ) | $ | 9 | |||||||
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Average loans and leases |
$ | 10,652 | $ | 10,223 | $ | 9,877 | $ | 10,248 | $ | 9,945 | ||||||||||
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KEY POINTS
| Total fee and other revenue increased $29 million compared with 3Q11 and $38 million compared with 2Q12. The year-over year increase reflects improved fixed income trading and higher net securities gains, partially offset by the impact of the sale of the Shareowner Service business in 4Q11. The sequential increase was driven by higher equity investment revenue, improved fixed income trading and higher asset-related gains, partially offset by lower net securities gains. |
| Noninterest expense (excluding amortization of intangible assets and M&I and restructuring charges) increased $36 million compared with 3Q11 and $29 million compared with 2Q12. The increase compared with 3Q11 resulted from the cost of generating certain tax credits in 3Q12 and the benefit of state investment tax credits recorded in 3Q11 and higher equipment and software expense, partially offset by the impact of the sale of the Shareowner Services business. The increase compared with 2Q12 primarily reflects higher staff expense. |
Page - 18
BNY Mellon 3Q12 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 Tier 1 common equity to risk-weighted assets and the ratio of tangible common shareholders equity to tangible assets of operations are measures of capital strength that provide additional useful information to investors, supplementing the Tier 1 and Total capital ratios which are utilized by regulatory authorities. The ratio of Basel I Tier 1 common equity to risk-weighted assets excludes preferred stock, as well as the trust preferred securities which will be phased out of Basel I Tier 1 regulatory capital beginning in 2013. Unlike the Basel I 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. 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 estimated 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. The presentation of the Basel III Tier 1 common equity ratio allows investors to compare BNY Mellons Basel III Tier 1 common equity ratio with estimates presented by other companies. Additionally, 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 noncontrolling interests related to consolidated investment management funds and other revenue related to the Shareowner Services business, which was sold on Dec. 31, 2011; and expense measures which exclude M&I expenses, litigation charges, restructuring charges, amortization of intangible assets and direct expenses related to the Shareowner Services business. Return on equity measures and operating margin measures, which exclude some or all of these items, are also presented. BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellons control. The excluded items in general relate to certain ongoing charges as a result of prior transactions or where we have incurred charges. M&I expenses primarily relate to the acquisitions of Global Investment Servicing on July 1, 2010 and BHF Asset Servicing GmbH on Aug. 2, 2010. M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellons business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased. Future periods will not reflect such M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded. Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees. Restructuring charges relate to our operational excellence initiatives and migrating positions to global delivery centers. Excluding these charges permits investors to view expenses on a basis consistent with how management views the business. BNY Mellon also presents revenue and noninterest expense results relating to the Shareowner Services business so that an investor may compare those results with other periods, which do not include the Shareowner Services business.
The presentation of income (loss) from consolidated investment management funds, net of net income (loss) attributable to noncontrolling interest related to the consolidation of certain investment management funds permits investors to view revenue on a basis consistent with prior periods. 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, the net interest margin is presented on an FTE basis. We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice.
Page - 19
BNY Mellon 3Q12 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.
The following table presents the calculation of the pre-tax operating margin ratio.
Pre-tax operating margin | ||||||||||||||||||||
(dollars in millions) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||
Income before income taxes GAAP |
$ | 945 | $ | 689 | $ | 885 | $ | 589 | $ | 975 | ||||||||||
Less: Net income (loss) attributable to noncontrolling interests of consolidated investment management funds |
13 | (28 | ) | 11 | 29 | 25 | ||||||||||||||
Add: Amortization of intangible assets |
106 | 106 | 96 | 97 | 95 | |||||||||||||||
M&I, litigation and restructuring charges |
92 | 176 | 109 | 378 | 26 | |||||||||||||||
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Income before income taxes excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges Non-GAAP |
$ | 1,130 | $ | 999 | $ | 1,079 | $ | 1,035 | $ | 1,071 | ||||||||||
Fee and other revenue GAAP |
$ | 2,887 | $ | 2,765 | $ | 2,838 | $ | 2,826 | $ | 2,879 | ||||||||||
Income (loss) from consolidated investment management funds GAAP |
32 | (5 | ) | 43 | 57 | 47 | ||||||||||||||
Net interest revenue GAAP |
775 | 780 | 765 | 734 | 749 | |||||||||||||||
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|
|||||||||||
Total revenue GAAP |
3,694 | 3,540 | 3,646 | 3,617 | 3,675 | |||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests of consolidated investment management funds |
13 | (28 | ) | 11 | 29 | 25 | ||||||||||||||
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|||||||||||
Total revenue excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds Non-GAAP |
$ | 3,681 | $ | 3,568 | $ | 3,635 | $ | 3,588 | $ | 3,650 | ||||||||||
Pre-tax operating margin (a) |
26 | % | 19 | % | 24 | % | 16 | % | 27 | % | ||||||||||
Pre-tax operating margin excluding net income (loss) attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges Non-GAAP (a) |
31 | % | 28 | % | 30 | % | 29 | % | 29 | % | ||||||||||
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(a) | Income before taxes divided by total revenue. |
Page - 20
BNY Mellon 3Q12 Quarterly Earnings Review
The following table presents the calculation of the return on common equity and the return on tangible common equity.
Return on common equity and tangible common equity | ||||||||||||||||||||
(dollars in millions) | 3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation GAAP |
$ | 651 | $ | 505 | $ | 619 | $ | 466 | $ | 720 | ||||||||||
Add: Amortization of intangible assets, net of tax |
67 | 66 | 61 | 61 | 60 | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets Non-GAAP |
718 | 571 | 680 | 527 | 780 | |||||||||||||||
Add: M&I, litigation and restructuring charges |
55 | 110 | 65 | 225 | 18 | |||||||||||||||
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|
|
|
|
|||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets and M&I, litigation and restructuring charges Non-GAAP |
$ | 773 | $ | 681 | $ | 745 | $ | 752 | $ | 798 | ||||||||||
Average common shareholders equity |
$ | 34,008 | $ | 33,761 | $ | 33,718 | $ | 34,123 | $ | 34,522 | ||||||||||
Less: Average goodwill |
18,156 | 18,044 | 17,962 | 17,941 | 17,918 | |||||||||||||||
Average intangible assets |
5,453 | 5,333 | 5,121 | 5,024 | 4,926 | |||||||||||||||
Add: Deferred tax liability tax deductible goodwill |
915 | 967 | 972 | 982 | 1,057 | |||||||||||||||
Deferred tax liability non-tax deductible intangible assets |
1,604 | 1,459 | 1,428 | 1,400 | 1,339 | |||||||||||||||
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|||||||||||
Average tangible common shareholders equity Non-GAAP |
$ | 12,918 | $ | 12,810 | $ | 13,035 | $ | 13,540 | $ | 14,074 | ||||||||||
Return on common equity GAAP (a) |
7.6 | % | 5.9 | % | 7.4 | % | 5.5 | % | 8.3 | % | ||||||||||
Return on common equity excluding amortization of intangible assets and M&I, litigation and restructuring charges Non-GAAP (a) |
9.0 | % | 8.0 | % | 8.9 | % | 8.9 | % | 9.2 | % | ||||||||||
Return on tangible common equity Non-GAAP (a) |
22.1 | % | 17.7 | % | 21.0 | % | 15.7 | % | 22.1 | % | ||||||||||
Return on tangible common equity excluding M&I, litigation and restructuring charges Non-GAAP (a) |
23.8 | % | 21.1 | % | 23.0 | % | 22.4 | % | 22.5 | % | ||||||||||
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(a) | Annualized. |
Page - 21
BNY Mellon 3Q12 Quarterly Earnings Review
The following table presents the calculation of the equity to assets ratio and book value per common share.
Equity to assets and book value per common share (dollars in millions, unless otherwise noted) |
Sept. 30, 2011 |
June 30, 2012 |
Sept. 30, 2012 |
|||||||||
BNY Mellon shareholders equity at period end GAAP |
$ | 33,695 | $ | 34,533 | $ | 36,218 | ||||||
Less: Preferred stock |
| 500 | 1,036 | |||||||||
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|||||||
BNY Mellon common shareholders equity at period-end GAAP |
33,695 | 34,033 | 35,182 | |||||||||
Less: Goodwill |
18,045 | 17,909 | 17,984 | |||||||||
Intangible assets |
5,380 | 4,962 | 4,882 | |||||||||
Add: Deferred tax liability tax deductible goodwill |
915 | 982 | 1,057 | |||||||||
Deferred tax liability non-tax deductible intangible assets |
1,604 | 1,400 | 1,339 | |||||||||
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|||||||
Tangible BNY Mellon common shareholders equity at period end Non-GAAP |
$ | 12,789 | $ | 13,544 | $ | 14,712 | ||||||
Total assets at period end GAAP |
$ | 322,187 | $ | 330,283 | $ | 339,944 | ||||||
Less: Assets of consolidated investment management funds |
12,063 | 10,955 | 11,369 | |||||||||
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|||||||
Subtotal assets of operations Non-GAAP |
310,124 | 319,328 | 328,575 | |||||||||
Less: Goodwill |
18,045 | 17,909 | 17,984 | |||||||||
Intangible assets |
5,380 | 4,962 | 4,882 | |||||||||
Cash on deposit with the Federal Reserve and other central banks (a) |
68,293 | 72,838 | 73,037 | |||||||||
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|||||||
Tangible total assets of operations at period end Non-GAAP |
$ | 218,406 | $ | 223,619 | $ | 232,672 | ||||||
BNY Mellon shareholders equity to total assets GAAP |
10.5 | % | 10.5 | % | 10.7 | % | ||||||
BNY Mellon common shareholders equity to total assets GAAP |
10.5 | % | 10.3 | % | 10.3 | % | ||||||
Tangible BNY Mellon common shareholders equity to tangible assets of operations Non-GAAP |
5.9 | % | 6.1 | % | 6.3 | % | ||||||
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(a) | Assigned a zero percent risk-weighting by the regulators. |
The following table presents income from consolidated investment management funds, net of noncontrolling interests.
Income from consolidated investment management funds, net of noncontrolling interests | ||||||||||||||||||||
(dollars in millions) | 3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||
Income (loss) from consolidated investment management funds |
$ | 32 | $ | (5 | ) | $ | 43 | $ | 57 | $ | 47 | |||||||||
Less: Net income (loss) attributable to noncontrolling interests of consolidated investment management funds |
13 | (28 | ) | 11 | 29 | 25 | ||||||||||||||
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Income from consolidated investment management funds, net of noncontrolling interests |
$ | 19 | $ | 23 | $ | 32 | $ | 28 | $ | 22 | ||||||||||
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The following table presents the line items in the Investment Management business impacted by the consolidated investment management funds.
Income from consolidated investment management funds, net of noncontrolling interests | ||||||||||||||||||||
(dollars in millions) | 3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||
Investment management and performance fees |
$ | 27 | $ | 20 | $ | 22 | $ | 20 | $ | 20 | ||||||||||
Other (Investment income) |
(8 | ) | 3 | 10 | 8 | 2 | ||||||||||||||
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Income from consolidated investment management funds, net of noncontrolling interests |
$ | 19 | $ | 23 | $ | 32 | $ | 28 | $ | 22 | ||||||||||
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The following table presents investment management fees net of performance fees.
Investment management and performance fees | 3Q12 vs. | |||||||||||||||||||||||||||
(dollars in millions) |
3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||
Investment management and performance fees |
$ | 729 | $ | 730 | $ | 745 | $ | 797 | $ | 779 | 7 | % | (2 | )% | ||||||||||||||
Less: Performance fees |
11 | 47 | 16 | 54 | 10 | N/M | N/M | |||||||||||||||||||||
Investment management fees |
$ | 718 | $ | 683 | $ | 729 | $ | 743 | $ | 769 | 7 | % | 3 | % |
N/M Not meaningful.
Page - 22
BNY Mellon 3Q12 Quarterly Earnings Review
The following tables present fee and other revenue and noninterest expense excluding Shareowner Services.
Fee and other revenue excluding Shareowner Services | 3Q12 vs. | |||||||||||||||||||||||||||
(dollars in millions) | 3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||
Investment services fees: |
||||||||||||||||||||||||||||
Asset servicing |
$ | 922 | $ | 885 | $ | 943 | $ | 950 | $ | 942 | 2 | % | (1 | )% | ||||||||||||||
Issuer services |
400 | 245 | 251 | 275 | 311 | (22 | ) | 13 | ||||||||||||||||||||
Clearing services |
297 | 278 | 303 | 309 | 287 | (3 | ) | (7 | ) | |||||||||||||||||||
Treasury services |
133 | 134 | 136 | 134 | 138 | 4 | 3 | |||||||||||||||||||||
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Total investment services fees |
1,752 | 1,542 | 1,633 | 1,668 | 1,678 | (4 | ) | 1 | ||||||||||||||||||||
Investment management and performance fees |
729 | 730 | 745 | 797 | 779 | 7 | (2 | ) | ||||||||||||||||||||
Foreign exchange and other trading revenue |
200 | 227 | 191 | 180 | 182 | (9 | ) | 1 | ||||||||||||||||||||
Distribution and servicing |
43 | 42 | 46 | 46 | 48 | 12 | 4 | |||||||||||||||||||||
Financing-related fees |
38 | 37 | 44 | 37 | 46 | 21 | 24 | |||||||||||||||||||||
Investment and other income |
83 | 48 | 139 | 51 | 124 | N/M | N/M | |||||||||||||||||||||
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Total fee revenue |
2,845 | 2,626 | 2,798 | 2,779 | 2,857 | | 3 | |||||||||||||||||||||
Net securities gains (losses) |
(2 | ) | (3 | ) | 40 | 50 | 22 | N/M | N/M | |||||||||||||||||||
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Total fee and other revenue |
$ | 2,843 | $ | 2,623 | $ | 2,838 | $ | 2,829 | $ | 2,879 | 1 | % | 2 | % | ||||||||||||||
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Noninterest expense excluding Shareowner Services | 3Q12 vs. | |||||||||||||||||||||||||||
(dollars in millions) | 3Q11 | 4Q11 | 1Q12 | 2Q12 | 3Q12 | 3Q11 | 2Q12 | |||||||||||||||||||||
Staff: |
||||||||||||||||||||||||||||
Compensation |
$ | 889 | $ | 871 | $ | 861 | $ | 866 | $ | 893 | | % | 3 | % | ||||||||||||||
Incentives |
327 | 278 | 352 | 311 | 306 | (6 | ) | (2 | ) | |||||||||||||||||||
Employee benefits |
222 | 213 | 240 | 238 | 237 | 7 | | |||||||||||||||||||||
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Total staff |
1,438 | 1,362 | 1,453 | 1,415 | 1,436 | | 1 | |||||||||||||||||||||
Professional, legal and other purchased services |
300 | 310 | 299 | 309 | 292 | (3 | ) | (6 | ) | |||||||||||||||||||
Software and equipment |
189 | 208 | 205 | 209 | 208 | 10 | | |||||||||||||||||||||
Net occupancy |
149 | 156 | 147 | 141 | 149 | | 6 | |||||||||||||||||||||
Distribution and servicing |
100 | 96 | 101 | 103 | 109 | 9 | 6 | |||||||||||||||||||||
Sub-custodian |
80 | 62 | 70 | 70 | 65 | (19 | ) | (7 | ) | |||||||||||||||||||
Business development |
57 | 74 | 56 | 71 | 60 | 5 | (15 | ) | ||||||||||||||||||||
Other |
223 | 232 | 220 | 254 | 265 | 19 | 4 | |||||||||||||||||||||
Amortization of intangible assets |
103 | 103 | 96 | 97 | 95 | (8 | ) | (2 | ) | |||||||||||||||||||
M&I, litigation and restructuring charges |
92 | 176 | 109 | 378 | 26 | N/M | N/M | |||||||||||||||||||||
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Total noninterest expense |
$ | 2,731 | $ | 2,779 | $ | 2,756 | $ | 3,047 | $ | 2,705 | (1 | )% | (11 | )% | ||||||||||||||
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The following table presents the calculation of our Basel I Tier 1 common equity ratio Non-GAAP.
Calculation of Basel I Tier 1 common equity to risk-weighted assets ratio Non-GAAP | Sept. 30, | June 30, | Sept. 30, | |||||||||
(dollars in millions) |
2011 | 2012 | 2012 (a) | |||||||||
Total Tier 1 capital Basel I |
$ | 14,920 | $ | 15,722 | $ | 16,785 | ||||||
Less: Trust preferred securities |
1,660 | 1,164 | 1,173 | |||||||||
Preferred stock |
| 500 | 1,036 | |||||||||
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|||||||
Total Tier 1 common equity |
13,260 | $ | 14,058 | $ | 14,576 | |||||||
Total risk-weighted assets Basel I |
$ | 106,256 | $ | 106,764 | $ | 110,005 | ||||||
Basel I Tier 1 common equity to risk-weighted assets ratio Non-GAAP |
12.5 | % | 13.2 | % | 13.2 | % | ||||||
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(a) Preliminary.
Page - 23
BNY Mellon 3Q12 Quarterly Earnings Review
The following table presents the calculation of our estimated Basel III Tier 1 common equity ratio on a fully-phased-in basis.
Estimated Basel III Tier 1 common equity ratio Non-GAAP (a) | Sept. 30, | June 30, | Sept. 30, | |||||||||
(dollars in millions) | 2011 | 2012 | 2012 (b) | |||||||||
Total Tier 1 capital Basel I |
$ | 14,920 | $ | 15,722 | $ | 16,785 | ||||||
Less: Trust preferred securities |
1,660 | 1,164 | 1,173 | |||||||||
Preferred stock |
| 500 | 1,036 | |||||||||
Adjustments related to available-for-sale securities and pension liabilities included in accumulated other comprehensive income (c) |
470 | 513 | (136 | ) | ||||||||
Adjustments related to equity method investments (c) |
590 | 558 | 571 | |||||||||
Deferred tax assets |
| 46 | 46 | |||||||||
Net pensions fund assets (c) |
493 | 43 | 43 | |||||||||
Other |
26 | 2 | 3 | |||||||||
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Total estimated Basel III Tier 1 common equity |
$ | 11,681 | $ | 12,896 | $ | 14,049 | ||||||
Total risk-weighted assets Basel I |
$ | 106,256 | $ | 106,764 | $ | 110,005 | ||||||
Add: Adjustments (d) |
74,224 | 41,493 | 41,678 | |||||||||
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|||||||
Total estimated Basel III risk-weighted assets (e) |
$ | 180,840 | $ | 148,257 | $ | 151,683 | ||||||
Estimated Basel III Tier 1 common equity ratio Non-GAAP |
6.5 | % | 8.7 | % | 9.3 | % | ||||||
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(a) | The estimated Basel III Tier 1 common equity ratios at June 30, 2012 and Sept. 30, 2012 were based on the NPRs and final market risk rule initially released on June 7, 2012 and published in the Federal Register on Aug. 30, 2012. The estimated Basel III Tier 1 common equity ratio at Sept. 30, 2011 was based on prior Basel III guidance and the proposed market risk rule. |
(b) | Preliminary. |
(c) | The NPRs and prior Basel III guidance do not add back to capital the adjustment to other comprehensive income that Basel I makes for pension liabilities and available-for-sale securities. Also, under the NPRs and prior Basel III guidance, pension assets recorded on the balance sheet and adjustments related to equity method investments are a deduction from capital. |
(d) | Primary differences between risk-weighted assets determined under Basel I compared with the NPRs and prior Basel III guidance include: the determination of credit risk under Basel I uses predetermined risk weights and asset classes, while the NPRs use, in addition to the broader range of predetermined risk weights and asset classes, an investment grade standard. Securitization exposure receives a higher risk-weighting under the NPRs and prior Basel III guidance than Basel I; also, the NPRs and prior Basel III guidance includes additional adjustments for operational risk, market risk, counterparty credit risk and equity exposures. |
(e) | Calculated on an Advanced Approaches basis, as amended by Basel III. |
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 estimated capital ratios and our operational excellence initiatives, including targeted savings by the end of 2012. 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, BNY Mellons Annual Report on Form 10-K for the year ended Dec. 31, 2011 and BNY Mellons other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Review speak only as of Oct. 17, 2012, and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
Page - 24
Exhibit 99.2
THE BANK OF NEW YORK MELLON CORPORATION
Financial Trends
Notes:
The following transactions/changes have impacted the reporting of our results:
On December 31, 2011, BNY Mellon sold its Shareowner Services business. In the first quarter of 2012, we reclassified the results of the Shareowner Services business from the Investment Services business to the Other segment. The reclassification did not impact the consolidated results. All prior periods have been restated.
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 January 1, 2010, we adopted SFAS No. 167, Amendments to FASB Interpretation No. 46 (R). Certain investment management funds are 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 investment management funds; previously these were disclosed as investment management and performance fees revenue and investment and other income.
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.
Expense efficiency restructuring charges - Recorded charges in 2010 and 2011
All of these items are detailed in the trends that follow.
Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period's 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 October 17, 2012, furnished as an exhibit to the Report on Form 8-K to which these Financial Trends are furnished as an exhibit.
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, 2011 or other reports filed with the SEC.
Page 1 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS - 11 Quarter Trend
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(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 | 3rd Qtr | |||||||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||||||||||||||
Investment services fees |
||||||||||||||||||||||||||||||||||||||||||||
Asset servicing |
$ | 637 | $ | 668 | $ | 863 | $ | 908 | $ | 917 | $ | 973 | $ | 922 | $ | 885 | $ | 943 | $ | 950 | $ | 942 | ||||||||||||||||||||||
Issuer services |
333 | 354 | 364 | 409 | 351 | 365 | 442 | 287 | 251 | 275 | 311 | |||||||||||||||||||||||||||||||||
Clearing services |
230 | 245 | 252 | 278 | 292 | 292 | 297 | 278 | 303 | 309 | 287 | |||||||||||||||||||||||||||||||||
Treasury services |
131 | 125 | 139 | 135 | 134 | 134 | 133 | 134 | 136 | 134 | 138 | |||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||
Total investment services fees |
1,331 | 1,392 | 1,618 | 1,730 | 1,694 | 1,764 | 1,794 | 1,584 | 1,633 | 1,668 | 1,678 | |||||||||||||||||||||||||||||||||
Investment management and performance fees |
686 | 686 | 696 | 800 | 764 | 779 | 729 | 730 | 745 | 797 | 779 | |||||||||||||||||||||||||||||||||
Foreign exchange & other trading revenue |
262 | 220 | 146 | 258 | 198 | 222 | 200 | 228 | 191 | 180 | 182 | |||||||||||||||||||||||||||||||||
Distribution and servicing |
48 | 51 | 56 | 55 | 53 | 49 | 43 | 42 | 46 | 46 | 48 | |||||||||||||||||||||||||||||||||
Financing-related fees |
50 | 48 | 49 | 48 | 43 | 49 | 40 | 38 | 44 | 37 | 46 | |||||||||||||||||||||||||||||||||
Investment and other income |
145 | 145 | 97 | 79 | 81 | 145 | 83 | 146 | 139 | 48 | 124 | |||||||||||||||||||||||||||||||||
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Total fee revenue |
2,522 | 2,542 | 2,662 | 2,970 | 2,833 | 3,008 | 2,889 | 2,768 | 2,798 | 2,776 | 2,857 | |||||||||||||||||||||||||||||||||
Net Securities gains (losses) |
7 | 13 | 6 | 1 | 5 | 48 | (2 | ) | (3 | ) | 40 | 50 | 22 | |||||||||||||||||||||||||||||||
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Total fee and other revenue |
2,529 | 2,555 | 2,668 | 2,971 | 2,838 | 3,056 | 2,887 | 2,765 | 2,838 | 2,826 | 2,879 | |||||||||||||||||||||||||||||||||
Income of consolidated investment management funds |
65 | 65 | 37 | 59 | 110 | 63 | 32 | (5 | ) | 43 | 57 | 47 | ||||||||||||||||||||||||||||||||
Net interest revenue |
765 | 722 | 718 | 720 | 698 | 731 | 775 | 780 | 765 | 734 | 749 | |||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||
Total revenue |
3,359 | 3,342 | 3,423 | 3,750 | 3,646 | 3,850 | 3,694 | 3,540 | 3,646 | 3,617 | 3,675 | |||||||||||||||||||||||||||||||||
Provision for credit losses |
35 | 20 | (22 | ) | (22 | ) | | | (22 | ) | 23 | 5 | (19 | ) | (5 | ) | ||||||||||||||||||||||||||||
Noninterest expenses |
2,310 | 2,219 | 2,429 | 2,624 | 2,578 | 2,645 | 2,573 | 2,546 | 2,551 | 2,572 | 2,584 | |||||||||||||||||||||||||||||||||
Amortization of intangible assets |
97 | 98 | 111 | 115 | 108 | 108 | 106 | 106 | 96 | 97 | 95 | |||||||||||||||||||||||||||||||||
Merger & integration, litigation and restructuring charges (a) |
33 | (1 | ) | 71 | 64 | 11 | 63 | 92 | 176 | 109 | 378 | 26 | ||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||
Total noninterest expense |
2,440 | 2,316 | 2,611 | 2,803 | 2,697 | 2,816 | 2,771 | 2,828 | 2,756 | 3,047 | 2,705 | |||||||||||||||||||||||||||||||||
Income/ (loss) from continuing operations before taxes |
884 | 1,006 | 834 | 969 | 949 | 1,034 | 945 | 689 | 885 | 589 | 975 | |||||||||||||||||||||||||||||||||
Income taxes |
258 | 304 | 220 | 265 | 279 | 277 | 281 | 211 | 254 | 93 | 225 | |||||||||||||||||||||||||||||||||
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Income/ (loss) from continuing operations |
626 | 702 | 614 | 704 | 670 | 757 | 664 | 478 | 631 | 496 | 750 | |||||||||||||||||||||||||||||||||
Income/ (loss) from discontinued operations, net of tax |
(42 | ) | (10 | ) | (3 | ) | (11 | ) | | | | | | | | |||||||||||||||||||||||||||||
Net income attributable to noncontrolling interest |
(25 | ) | (34 | ) | 11 | (15 | ) | (45 | ) | (22 | ) | (13 | ) | 27 | (12 | ) | (30 | ) | (25 | ) | ||||||||||||||||||||||||
Preferred dividends |
| | | | | | | | | | (5 | ) | ||||||||||||||||||||||||||||||||
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Net income/ (loss) applicable to shareholders of The Bank of New York Mellon Corporation |
$ | 559 | $ | 658 | $ | 622 | $ | 678 | $ | 625 | $ | 735 | $ | 651 | $ | 505 | $ | 619 | $ | 466 | $ | 720 | ||||||||||||||||||||||
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EPS from continuing operations (b) |
$ | 0.49 | $ | 0.55 | $ | 0.51 | $ | 0.55 | $ | 0.50 | $ | 0.59 | $ | 0.53 | $ | 0.42 | $ | 0.52 | $ | 0.39 | $ | 0.61 | ||||||||||||||||||||||
Market value of assets under management at period-end (in billions) |
$ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | $ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | $ | 1,359 | ||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | $ | 25.9 | $ | 25.8 | $ | 26.6 | $ | 27.1 | $ | 27.9 | ||||||||||||||||||||||
Market value of securities on loan at period-end (in billions) |
$ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | $ | 250 | $ | 269 | $ | 265 | $ | 275 | $ | 259 | ||||||||||||||||||||||
Pre-tax operating margin |
||||||||||||||||||||||||||||||||||||||||||||
GAAP |
26 | % | 30 | % | 24 | % | 26 | % | 26 | % | 27 | % | 26 | % | 19 | % | 24 | % | 16 | % | 27 | % | ||||||||||||||||||||||
Non-GAAP adjusted (c) |
30 | % | 32 | % | 30 | % | 30 | % | 28 | % | 31 | % | 31 | % | 28 | % | 30 | % | 29 | % | 29 | % | ||||||||||||||||||||||
Return on common equity (annualized) |
||||||||||||||||||||||||||||||||||||||||||||
GAAP |
8.2 | % | 8.8 | % | 7.8 | % | 8.5 | % | 7.7 | % | 8.8 | % | 7.6 | % | 5.9 | % | 7.4 | % | 5.5 | % | 8.3 | % | ||||||||||||||||||||||
Return on tangible common equity (annualized): |
||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP |
25.8 | % | 25.7 | % | 26.3 | % | 27.5 | % | 24.3 | % | 26.3 | % | 22.1 | % | 17.7 | % | 21.0 | % | 15.7 | % | 22.1 | % | ||||||||||||||||||||||
Percent of non-US fee and net interest revenue - GAAP |
34 | % | 35 | % | 36 | % | 38 | % | 36 | % | 37 | % | 39 | % | 34 | % | 36 | % | 37 | % | 37 | % | ||||||||||||||||||||||
Percent of non-US fee and net interest revenue - Non-GAAP (d) |
35 | % | 35 | % | 36 | % | 38 | % | 37 | % | 37 | % | 39 | % | 34 | % | 37 | % | 37 | % | 37 | % |
(a) | 2010 and 1st quarter 2011 exclude litigation expense. For those periods, litigation expense is included in Noninterest expenses. |
(b) | Includes $0.08 and $0.18 of litigation expense for 1st quarter 2010 and 2nd quarter 2012, respectively. |
(c) | Calculated excluding M&I expenses, restructuring charges, litigation expense, and noncontrolling interest related to consolidated asset management funds. 2010 and 1st quarter 2011 calculations include litigation expense. |
(d) | Calculated excluding net securities gains (losses) and including noncontrolling interest 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 -11 Quarter Trend
FEE AND OTHER REVENUE
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(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 | 3rd Qtr | |||||||||||||||||||||||||||||||||
Investment services fees |
||||||||||||||||||||||||||||||||||||||||||||
Asset servicing |
$ | 608 | $ | 622 | $ | 826 | $ | 870 | $ | 880 | $ | 911 | $ | 881 | $ | 842 | $ | 894 | $ | 891 | $ | 893 | ||||||||||||||||||||||
Securities lending |
29 | 46 | 37 | 38 | 37 | 62 | 41 | 43 | 49 | 59 | 49 | |||||||||||||||||||||||||||||||||
Issuer services |
333 | 354 | 364 | 409 | 351 | 365 | 442 | 287 | 251 | 275 | 311 | |||||||||||||||||||||||||||||||||
Memo: Issuer Services excluding Shareowner Services |
283 | 298 | 318 | 360 | 292 | 314 | 400 | 245 | 251 | 275 | 311 | |||||||||||||||||||||||||||||||||
Clearing services |
230 | 245 | 252 | 278 | 292 | 292 | 297 | 278 | 303 | 309 | 287 | |||||||||||||||||||||||||||||||||
Treasury services |
131 | 125 | 139 | 135 | 134 | 134 | 133 | 134 | 136 | 134 | 138 | |||||||||||||||||||||||||||||||||
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Total investment services fees |
1,331 | 1,392 | 1,618 | 1,730 | 1,694 | 1,764 | 1,794 | 1,584 | 1,633 | 1,668 | 1,678 | |||||||||||||||||||||||||||||||||
Investment management and performance fees |
686 | 686 | 696 | 800 | 764 | 779 | 729 | 730 | 745 | 797 | 779 | |||||||||||||||||||||||||||||||||
Foreign exchange & other trading revenue |
262 | 220 | 146 | 258 | 198 | 222 | 200 | 228 | 191 | 180 | 182 | |||||||||||||||||||||||||||||||||
Distribution and servicing |
48 | 51 | 56 | 55 | 53 | 49 | 43 | 42 | 46 | 46 | 48 | |||||||||||||||||||||||||||||||||
Financing-related fees |
50 | 48 | 49 | 48 | 43 | 49 | 40 | 38 | 44 | 37 | 46 | |||||||||||||||||||||||||||||||||
Investment and other income |
145 | 145 | 97 | 79 | 81 | 145 | 83 | 146 | 139 | 48 | 124 | |||||||||||||||||||||||||||||||||
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Total fee revenue |
2,522 | 2,542 | 2,662 | 2,970 | 2,833 | 3,008 | 2,889 | 2,768 | 2,798 | 2,776 | 2,857 | |||||||||||||||||||||||||||||||||
Net securities gains (losses) |
7 | 13 | 6 | 1 | 5 | 48 | (2 | ) | (3 | ) | 40 | 50 | 22 | |||||||||||||||||||||||||||||||
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Total fee and other revenue - GAAP (a) |
2,529 | 2,555 | 2,668 | 2,971 | 2,838 | 3,056 | 2,887 | 2,765 | 2,838 | 2,826 | 2,879 | |||||||||||||||||||||||||||||||||
Less: Fee and Other revenue related to Shareowner Services |
54 | 58 | 47 | 52 | 62 | 54 | 44 | 142 | | (3 | ) | | ||||||||||||||||||||||||||||||||
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Total fee and other revenue ex Shareowner Services - Non-GAAP |
2,475 | 2,497 | 2,621 | 2,919 | 2,776 | 3,002 | 2,843 | 2,623 | 2,838 | 2,829 | 2,879 | |||||||||||||||||||||||||||||||||
Fee and other revenue as a percentage of total revenue - Non-GAAP (b) |
75 | % | 76 | % | 78 | % | 79 | % | 78 | % | 79 | % | 78 | % | 78 | % | 78 | % | 78 | % | 78 | % | ||||||||||||||||||||||
Market value of assets under management at period-end (in billions) |
$ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | $ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | $ | 1,359 | ||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | $ | 25.9 | $ | 25.8 | $ | 26.6 | $ | 27.1 | $ | 27.9 | ||||||||||||||||||||||
Market value of securities on loan at period-end (in billions) |
$ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | $ | 250 | $ | 269 | $ | 265 | $ | 275 | $ | 259 | ||||||||||||||||||||||
S&P 500 Index - period-end |
1169 | 1031 | 1141 | 1258 | 1326 | 1321 | 1131 | 1258 | 1408 | 1362 | 1441 | |||||||||||||||||||||||||||||||||
S&P 500 Index - daily average |
1123 | 1135 | 1095 | 1204 | 1302 | 1318 | 1227 | 1224 | 1347 | 1351 | 1400 |
(a) | The GIS and BAS acquisitions were completed on July 1, 2010 and August 2, 2010, respectively. The Shareowner Services business was sold on December 31, 2011. |
(b) | Excludes net securities gains/(losses). |
Page 3 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS
Average Balances and Interest Rates
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 | 0.83 | % | $ | 59,660 | 0.81 | % | $ | 57,637 | 0.90 | % | $ | 59,291 | 0.98 | % | ||||||||||||||||
Interest-bearing deposits with Federal Reserve & other essential banks |
9,813 | 0.40 | 16,787 | 0.32 | 20,367 | 0.32 | 34,068 | 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 | 7,484 | 1.48 | 9,508 | 1.34 | ||||||||||||||||||||||||
Non-margin loans: |
||||||||||||||||||||||||||||||||
Domestic offices |
21,072 | 2.74 | 21,754 | 2.55 | 21,856 | 2.57 | 21,093 | 2.54 | ||||||||||||||||||||||||
Foreign offices |
9,428 | 1.61 | 9,486 | 1.53 | 9,226 | 1.44 | 9,727 | 1.53 | ||||||||||||||||||||||||
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Total non-margin loans |
30,500 | 2.39 | 31,240 | 2.24 | 31,082 | 2.22 | 30,820 | 2.23 | ||||||||||||||||||||||||
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 | 5.32 | ||||||||||||||||||||||||
Other securities |
30,075 | 3.86 | 31,987 | 3.55 | 31,770 | 3.43 | 33,045 | 3.25 | ||||||||||||||||||||||||
Trading securities |
3,194 | 2.57 | 2,698 | 3.02 | 3,698 | 2.44 | 2,877 | 2.44 | ||||||||||||||||||||||||
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Total securities |
61,187 | 3.36 | 68,068 | 3.02 | 69,095 | 2.96 | 71,659 | 2.87 | ||||||||||||||||||||||||
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|
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Total interest-earning assets |
172,759 | 1.99 | 187,597 | 1.90 | 190,179 | 1.80 | 209,923 | 1.70 | ||||||||||||||||||||||||
Allowance for credit losses |
(538 | ) | (530 | ) | (494 | ) | (463 | ) | ||||||||||||||||||||||||
Cash and due from banks |
3,903 | 4,224 | 4,094 | 4,335 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
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Total Assets |
$ | 240,325 | $ | 256,409 | $ | 257,698 | $ | 278,480 | ||||||||||||||||||||||||
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Liabilities and total equity |
||||||||||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||||||||||
Money market rate accounts |
$ | 4,466 | 0.52 | % | $ | 6,296 | 0.40 | % | $ | 5,417 | 0.38 | % | $ | 4,029 | 0.41 | % | ||||||||||||||||
Savings |
1,316 | 0.31 | 1,352 | 0.26 | 1,518 | 0.12 | 1,561 | 0.12 | ||||||||||||||||||||||||
Demand Deposits |
73 | 0.96 | 81 | 0.97 | 82 | 0.86 | 85 | 0.91 | ||||||||||||||||||||||||
Other time deposits |
27,654 | 0.08 | 29,287 | 0.08 | 32,119 | 0.10 | 34,853 | 0.09 | ||||||||||||||||||||||||
Foreign offices |
70,524 | 0.13 | 74,760 | 0.14 | 77,379 | 0.19 | 85,430 | 0.26 | ||||||||||||||||||||||||
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|
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Total interest-bearing deposits |
104,033 | 0.13 | 111,776 | 0.14 | 116,515 | 0.17 | 125,958 | 0.22 | ||||||||||||||||||||||||
Federal funds purchased and securities under repurchase agreements |
5,984 | 0.09 | 7,256 | 2.13 | 5,172 | 0.07 | 10,894 | 0.06 | ||||||||||||||||||||||||
Trading Liabilities |
1,961 | 2.51 | 1,704 | 2.06 | 2,764 | 1.86 | 1,524 | 2.35 | ||||||||||||||||||||||||
Other borrowed funds |
2,068 | 0.85 | 1,999 | 0.80 | 1,821 | 1.61 | 1,877 | 0.99 | ||||||||||||||||||||||||
Payables to customers and broker-dealers |
6,910 | 0.08 | 5,878 | 0.11 | 6,701 | 0.10 | 6,843 | 0.09 | ||||||||||||||||||||||||
Long-term debt |
16,798 | 2.04 | 16,624 | 1.87 | 17,014 | 1.87 | 17,380 | 1.63 | ||||||||||||||||||||||||
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Total interest-bearing liabilities |
137,754 | 0.41 | 145,237 | 0.47 | 149,987 | 0.40 | 164,476 | 0.38 | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
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Total liabilities and shareholders equity |
$ | 240,325 | $ | 256,409 | $ | 257,698 | $ | 278,480 | ||||||||||||||||||||||||
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Net interest margin - Taxable equivalent basis |
1.67 | % | 1.54 | % | 1.49 | % | 1.41 | % | ||||||||||||||||||||||||
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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.
Page 4 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS
Average Balances and Interest Rates (continued)
Quarter Ended | ||||||||||||||||||||||||||||||||||||||||
September 30, 2011 | December 31, 2011 | March 31, 2012 | June 30, 2012 | September 30, 2012 | ||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) |
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) |
$ | 60,412 | 1.00 | % | $ | 43,628 | 1.08 | % | $ | 35,095 | 1.30 | % | $ | 38,474 | 0.98 | % | $ | 41,201 | 0.96 | % | ||||||||||||||||||||
Interest-bearing deposits with Federal Reserve & other essential banks |
61,115 | 0.31 | 72,118 | 0.32 | 63,525 | 0.27 | 57,904 | 0.27 | 61,849 | 0.21 | ||||||||||||||||||||||||||||||
Other Short Term Investment (FRB) |
| | | | | | | | | | ||||||||||||||||||||||||||||||
Federal funds sold and securities under resale agreements |
4,865 | 0.71 | 5,271 | 0.64 | 5,174 | 0.73 | 5,493 | 0.62 | 5,315 | 0.64 | ||||||||||||||||||||||||||||||
Margin loans |
9,379 | 1.34 | 11,886 | 1.26 | 12,901 | 1.29 | 13,331 | 1.27 | 13,033 | 1.30 | ||||||||||||||||||||||||||||||
Non-margin loans: |
||||||||||||||||||||||||||||||||||||||||
Domestic offices |
21,583 | 2.43 | 21,794 | 2.37 | 20,128 | 2.46 | 19,663 | 2.52 | 18,821 | 2.62 | ||||||||||||||||||||||||||||||
Foreign offices |
9,527 | 1.52 | 10,556 | 1.54 | 10,180 | 1.77 | 9,998 | 1.86 | 10,574 | 1.61 | ||||||||||||||||||||||||||||||
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|
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Total non-margin loans |
31,110 | 2.15 | 32,350 | 2.10 | 30,308 | 2.23 | 29,661 | 2.30 | 29,395 | 2.26 | ||||||||||||||||||||||||||||||
Securities |
||||||||||||||||||||||||||||||||||||||||
U.S. government obligations |
14,079 | 1.57 | 18,693 | 1.45 | 17,268 | 1.56 | 15,387 | 1.65 | 18,917 | 1.39 | ||||||||||||||||||||||||||||||
U.S. government agency obligations |
20,998 | 2.93 | 25,006 | 2.58 | 32,347 | 2.44 | 39,070 | 2.23 | 41,430 | 1.94 | ||||||||||||||||||||||||||||||
Obligations of states and political subdivisions |
1,611 | 4.13 | 2,452 | 3.47 | 3,354 | 2.97 | 4,777 | 2.65 | 5,933 | 2.57 | ||||||||||||||||||||||||||||||
Other securities |
34,175 | 3.30 | 33,830 | 3.19 | 33,839 | 2.84 | 32,625 | 2.51 | 33,724 | 2.51 | ||||||||||||||||||||||||||||||
Trading securities |
2,509 | 2.62 | 2,490 | 2.94 | 2,520 | 2.78 | 3,033 | 2.57 | 4,431 | 2.40 | ||||||||||||||||||||||||||||||
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|
|
|
|
|||||||||||||||||||||||||||||||
Total securities |
73,372 | 2.87 | 82,471 | 2.60 | 89,328 | 2.44 | 94,892 | 2.25 | 104,435 | 2.06 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total interest-earning assets |
240,253 | 1.55 | 247,724 | 1.50 | 236,331 | 1.56 | 239,755 | 1.48 | 255,228 | 1.40 | ||||||||||||||||||||||||||||||
Allowance for credit losses |
(437 | ) | (384 | ) | (392 | ) | (382 | ) | (361 | ) | ||||||||||||||||||||||||||||||
Cash and due from banks |
5,204 | 4,695 | 4,271 | 4,412 | 4,277 | |||||||||||||||||||||||||||||||||||
Other assets |
53,305 | 52,200 | 49,690 | 49,933 | 48,775 | |||||||||||||||||||||||||||||||||||
Discontinued Operations |
| | | | | |||||||||||||||||||||||||||||||||||
Total Asset Consol VIE FAS 167 |
13,138 | 11,839 | 11,444 | 11,284 | 10,995 | |||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total Assets |
$ | 311,463 | $ | 316,074 | $ | 301,344 | $ | 305,002 | $ | 318,914 | ||||||||||||||||||||||||||||||
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|
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Liabilities and total equity |
||||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||||||||||||||||||
Money market rate accounts |
$ | 4,532 | 0.35 | % | $ | 4,666 | 0.27 | $ | 4,299 | 0.27 | $ | 8,236 | 0.24 | $ | 9,004 | 0.16 | ||||||||||||||||||||||||
Savings |
1,613 | 0.12 | 1,080 | 0.15 | 704 | 0.10 | 702 | 0.13 | 730 | 0.17 | ||||||||||||||||||||||||||||||
Demand Deposits |
79 | 0.82 | 83 | 0.77 | 147 | 0.36 | 185 | 0.32 | 720 | 1.06 | ||||||||||||||||||||||||||||||
Other time deposits |
35,991 | 0.07 | 36,020 | 0.07 | 33,618 | 0.08 | 33,180 | 0.11 | 34,193 | 0.07 | ||||||||||||||||||||||||||||||
Foreign offices |
83,580 | 0.26 | 88,494 | 0.22 | 86,670 | 0.15 | 88,179 | 0.13 | 93,613 | 0.10 | ||||||||||||||||||||||||||||||
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Total interest-bearing deposits |
125,795 | 0.21 | 130,343 | 0.18 | 125,438 | 0.14 | 130,482 | 0.13 | 138,260 | 0.10 | ||||||||||||||||||||||||||||||
Federal funds purchased and securities under repurchase agreements |
10,164 | 0.03 | 8,008 | (0.07 | ) | 8,584 | (0.02 | ) | 11,254 | 0.01 | 10,092 | (0.06 | ) | |||||||||||||||||||||||||||
Trading Liabilities |
1,911 | 1.25 | 1,225 | 1.62 | 1,153 | 1.55 | 1,256 | 1.87 | 1,397 | 1.87 | ||||||||||||||||||||||||||||||
Other borrowed funds |
2,256 | 0.77 | 2,159 | 0.93 | 2,579 | 0.79 | 2,550 | 0.99 | 1,855 | 0.72 | ||||||||||||||||||||||||||||||
Payables to customers and broker-dealers |
7,692 | 0.10 | 8,023 | 0.08 | 7,555 | 0.11 | 7,895 | 0.10 | 8,141 | 0.10 | ||||||||||||||||||||||||||||||
Long-term debt |
18,256 | 1.60 | 19,546 | 1.55 | 20,538 | 1.79 | 20,084 | 1.67 | 19,535 | 1.66 | ||||||||||||||||||||||||||||||
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|
|
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Total interest-bearing liabilities |
166,074 | 0.37 | 169,304 | 0.34 | 165,847 | 0.34 | 173,521 | 0.32 | 179,280 | 0.28 | ||||||||||||||||||||||||||||||
Total noninterest-bearing deposits |
73,389 | 76,309 | 66,613 | 62,860 | 70,230 | |||||||||||||||||||||||||||||||||||
Other liabilities |
25,462 | 25,433 | 24,248 | 23,588 | 23,712 | |||||||||||||||||||||||||||||||||||
Discontinued Operations |
| | | | | |||||||||||||||||||||||||||||||||||
VIE Liabilities & Obligations FAS 167 |
11,728 | 10,516 | 10,159 | 10,072 | 9,686 | |||||||||||||||||||||||||||||||||||
Total Shareholders Equity |
34,008 | 33,761 | 33,718 | 34,123 | 34,522 | |||||||||||||||||||||||||||||||||||
Noncontrolling interest |
802 | 752 | 759 | 838 | 1,484 | |||||||||||||||||||||||||||||||||||
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|
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|
|
|
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|
|
|||||||||||||||||||||||||||||||
Total liabilities and total equity |
$ | 311,463 | $ | 316,074 | $ | 301,344 | $ | 305,002 | $ | 318,914 | ||||||||||||||||||||||||||||||
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Net interest margin - Taxable equivalent basis |
1.30 | % | 1.27 | % | 1.32 | % | 1.25 | % | 1.20 | % | ||||||||||||||||||||||||||||||
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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.
Page 5 of 14
THE BANK OF NEW YORK MELLON CORPORATION
CONTINUING OPERATIONS - 11 Quarter Trend
NONINTEREST EXPENSE
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | |||||||||||||||||||||||||||||||||
Staff: |
||||||||||||||||||||||||||||||||||||||||||||
Compensation |
$ | 753 | $ | 763 | $ | 850 | $ | 871 | $ | 876 | $ | 903 | $ | 903 | $ | 885 | $ | 861 | $ | 866 | $ | 893 | ||||||||||||||||||||||
Incentives |
284 | 272 | 289 | 348 | 325 | 328 | 328 | 281 | 352 | 311 | 306 | |||||||||||||||||||||||||||||||||
Employee benefits |
183 | 199 | 205 | 198 | 223 | 232 | 226 | 216 | 240 | 238 | 237 | |||||||||||||||||||||||||||||||||
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Total staff |
1,220 | 1,234 | 1,344 | 1,417 | 1,424 | 1,463 | 1,457 | 1,382 | 1,453 | 1,415 | 1,436 | |||||||||||||||||||||||||||||||||
Professional, legal and other purchased services |
241 | 256 | 282 | 320 | 283 | 301 | 311 | 322 | 299 | 309 | 292 | |||||||||||||||||||||||||||||||||
Software and equipment |
169 | 162 | 187 | 207 | 206 | 203 | 193 | 213 | 205 | 209 | 208 | |||||||||||||||||||||||||||||||||
Net occupancy |
137 | 143 | 150 | 158 | 153 | 161 | 151 | 159 | 147 | 141 | 149 | |||||||||||||||||||||||||||||||||
Distribution and servicing |
89 | 90 | 94 | 104 | 111 | 109 | 100 | 96 | 101 | 103 | 109 | |||||||||||||||||||||||||||||||||
Sub-custodian |
52 | 65 | 60 | 70 | 68 | 88 | 80 | 62 | 70 | 70 | 65 | |||||||||||||||||||||||||||||||||
Business development |
52 | 68 | 63 | 88 | 56 | 73 | 57 | 75 | 56 | 71 | 60 | |||||||||||||||||||||||||||||||||
Other |
350 | 201 | 249 | 260 | 277 | 247 | 224 | 237 | 220 | 254 | 265 | |||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||
Subtotal (a) |
$ | 2,310 | $ | 2,219 | $ | 2,429 | $ | 2,624 | $ | 2,578 | $ | 2,645 | $ | 2,573 | $ | 2,546 | $ | 2,551 | $ | 2,572 | $ | 2,584 | ||||||||||||||||||||||
Amortization of intangible assets |
97 | 98 | 111 | 115 | 108 | 108 | 106 | 106 | 96 | 97 | 95 | |||||||||||||||||||||||||||||||||
Merger & integration, litigation and restructuring charges (b) |
33 | (1 | ) | 71 | 64 | 11 | 63 | 92 | 176 | 109 | 378 | 26 | ||||||||||||||||||||||||||||||||
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Total noninterest expense |
$ | 2,440 | $ | 2,316 | $ | 2,611 | $ | 2,803 | $ | 2,697 | $ | 2,816 | $ | 2,771 | $ | 2,828 | $ | 2,756 | $ | 3,047 | $ | 2,705 | ||||||||||||||||||||||
Memo: |
||||||||||||||||||||||||||||||||||||||||||||
Total noninterest expense excluding M&I, restructuring, litigation, amortization of intangible and direct expense related to Shareowner Services -Non-GAAP (b) |
$ | 2,263 | $ | 2,170 | $ | 2,387 | $ | 2,574 | $ | 2,532 | $ | 2,598 | $ | 2,536 | $ | 2,500 | $ | 2,551 | $ | 2,572 | $ | 2,584 | ||||||||||||||||||||||
Full Time Employees at period-end (c) |
42,300 | 42,700 | 47,700 | 48,000 | 48,400 | 48,900 | 49,600 | 48,700 | 47,800 | 48,200 | 48,700 |
(a) | The GIS and BAS acquisitions were completed on July 1, 2010 and August 2, 2010, respectively. The Shareowner Services business was sold on December 31, 2011. |
(b) | 2010 and 1st quarter 2011 exclude litigation expense. For those periods, litigation expense is included in "Other". |
(c) | Represents full time employees. |
Page 6 of 14
THE BANK OF NEW YORK MELLON CORPORATION
ASSETS UNDER MANAGEMENT/ CUSTODY AND ADMINISTRATION / SECURITIES LENDING - 11 Quarter Trend
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(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 | 3rd Qtr | |||||||||||||||||||||||||||||||||
Market value of assets under management at period-end (in billions) |
||||||||||||||||||||||||||||||||||||||||||||
Institutional |
$ | 620 | $ | 595 | $ | 639 | $ | 639 | $ | 701 | $ | 733 | $ | 719 | $ | 757 | $ | 829 | $ | 835 | $ | 882 | ||||||||||||||||||||||
Mutual Funds |
396 | 370 | 418 | 454 | 451 | 462 | 406 | 427 | 404 | 388 | 398 | |||||||||||||||||||||||||||||||||
Private Client |
89 | 82 | 84 | 79 | 77 | 79 | 73 | 76 | 75 | 76 | 79 | |||||||||||||||||||||||||||||||||
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Total market value of assets under management (a) |
1,105 | 1,047 | 1,141 | 1,172 | 1,229 | 1,274 | 1,198 | 1,260 | 1,308 | 1,299 | 1,359 | |||||||||||||||||||||||||||||||||
Composition of assets under management at period-end |
||||||||||||||||||||||||||||||||||||||||||||
Equity |
31 | % | 30 | % | 31 | % | 32 | % | 34 | % | 34 | % | 30 | % | 31 | % | 33 | % | 32 | % | 33 | % | ||||||||||||||||||||||
Fixed Income |
28 | % | 30 | % | 30 | % | 29 | % | 30 | % | 31 | % | 35 | % | 35 | % | 35 | % | 37 | % | 37 | % | ||||||||||||||||||||||
Money Market |
30 | % | 30 | % | 29 | % | 29 | % | 27 | % | 26 | % | 27 | % | 26 | % | 24 | % | 23 | % | 23 | % | ||||||||||||||||||||||
Alternative investments and overlay |
11 | % | 10 | % | 10 | % | 10 | % | 9 | % | 9 | % | 8 | % | 8 | % | 8 | % | 8 | % | 7 | % | ||||||||||||||||||||||
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Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | $ | 25.9 | $ | 25.8 | $ | 26.6 | $ | 27.1 | $ | 27.9 | ||||||||||||||||||||||
Market value of securities on loan at period-end (b) |
$ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | $ | 250 | $ | 269 | $ | 265 | $ | 275 | $ | 259 | ||||||||||||||||||||||
Market Indices |
||||||||||||||||||||||||||||||||||||||||||||
S&P 500 Index (c) |
1169 | 1031 | 1141 | 1258 | 1326 | 1321 | 1131 | 1258 | 1408 | 1362 | 1441 | |||||||||||||||||||||||||||||||||
S&P 500 Index -daily average |
1123 | 1135 | 1095 | 1204 | 1302 | 1318 | 1227 | 1224 | 1347 | 1351 | 1400 | |||||||||||||||||||||||||||||||||
FTSE 100 Index (c) |
5680 | 4917 | 5549 | 5900 | 5909 | 5946 | 5128 | 5572 | 5768 | 5571 | 5742 | |||||||||||||||||||||||||||||||||
FTSE 100 Index-daily average |
5431 | 5361 | 5312 | 5760 | 5945 | 5906 | 5470 | 5424 | 5818 | 5555 | 5742 | |||||||||||||||||||||||||||||||||
MSCI World Index (c) |
1201 | 1041 | 1179 | 1280 | 1335 | 1331 | 1104 | 1183 | 1312 | 1236 | 1312 | |||||||||||||||||||||||||||||||||
MSCI World Index |
1162 | 1139 | 1120 | 1235 | 1319 | 1332 | 1217 | 1169 | 1268 | 1235 | 1273 | |||||||||||||||||||||||||||||||||
Barclays Capital Aggregate Bond Index (c) |
300 | 299 | 329 | 323 | 328 | 341 | 346 | 347 | 351 | 353 | 368 | |||||||||||||||||||||||||||||||||
NYSE & NASDAQ Share Volume (in billions) |
246 | 299 | 233 | 219 | 225 | 213 | 250 | 206 | 186 | 192 | 173 | |||||||||||||||||||||||||||||||||
JP Morgan G7 Currency Volatility Index - daily average (d) |
11.93 | 12.92 | 12.07 | 12.46 | 11.07 | 11.21 | 12.60 | 12.95 | 10.39 | 10.30 | 8.70 |
(a) | Excludes securities lending cash management assets. |
(b) | Represents the securities on loan managed by the Investment Services business. |
(c) | Period end. |
(d) | The JP Morgan G7 Volatility Index is based on the implied volatility in 3-month currency options. |
Page 7 of 14
THE BANK OF NEW YORK MELLON CORPORATION
ASSETS UNDER MANAGEMENT NET FLOWS - 11 Quarter Trend
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(dollar amounts in billions ) | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | |||||||||||||||||||||||||||||||||
Market value of assets under management at beginning of period |
$ | 1,115 | $ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | $ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | ||||||||||||||||||||||
Net Flows |
||||||||||||||||||||||||||||||||||||||||||||
Long-term |
16 | 12 | 11 | 9 | 31 | 32 | 4 | 16 | 7 | 26 | 9 | |||||||||||||||||||||||||||||||||
Money market |
(25 | ) | (17 | ) | 18 | 6 | (5 | ) | (1 | ) | (15 | ) | 7 | (9 | ) | (14 | ) | 9 | ||||||||||||||||||||||||||
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Total net flows |
(9 | ) | (5 | ) | 29 | 15 | 26 | 31 | (11 | ) | 23 | (2 | ) | 12 | 18 | |||||||||||||||||||||||||||||
Net Market and currency impact/other |
(1 | ) | (53 | ) | 65 | 16 | 31 | 14 | (65 | ) | 39 | 50 | (21 | ) | 42 | |||||||||||||||||||||||||||||
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Market value of assets under management at end of period (a) |
$ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | $ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | $ | 1,359 |
(a) | Excludes securities lending cash management assets. |
Page 8 of 14
THE BANK OF NEW YORK MELLON CORPORATION
BUSINESSES
INVESTMENT MANAGEMENT - 11 Quarter Trend
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(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 | 3rd Qtr | |||||||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||||||||||||||
Investment management: |
||||||||||||||||||||||||||||||||||||||||||||
Mutual funds |
249 | 254 | 270 | 293 | 283 | 290 | 263 | 237 | 260 | 270 | 283 | |||||||||||||||||||||||||||||||||
Institutional clients |
280 | 279 | 282 | 300 | 319 | 319 | 311 | 299 | 322 | 321 | 334 | |||||||||||||||||||||||||||||||||
Wealth management fees |
159 | 153 | 153 | 157 | 164 | 163 | 157 | 154 | 157 | 158 | 158 | |||||||||||||||||||||||||||||||||
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Investment management fees |
688 | 686 | 705 | 750 | 766 | 772 | 731 | 690 | 739 | 749 | 775 | |||||||||||||||||||||||||||||||||
Performance fees |
13 | 18 | 16 | 75 | 17 | 18 | 11 | 47 | 16 | 54 | 10 | |||||||||||||||||||||||||||||||||
Distribution and servicing |
47 | 49 | 53 | 52 | 51 | 48 | 41 | 41 | 45 | 45 | 47 | |||||||||||||||||||||||||||||||||
Other (a) |
8 | (5 | ) | 15 | 17 | 34 | 24 | (26 | ) | (11 | ) | 52 | 13 | 40 | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||
Total fee and other revenue |
756 | 748 | 789 | 894 | 868 | 862 | 757 | 767 | 852 | 861 | 872 | |||||||||||||||||||||||||||||||||
Net interest revenue |
51 | 52 | 50 | 50 | 52 | 48 | 51 | 55 | 55 | 52 | 52 | |||||||||||||||||||||||||||||||||
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Total revenue |
807 | 800 | 839 | 944 | 920 | 910 | 808 | 822 | 907 | 913 | 924 | |||||||||||||||||||||||||||||||||
Provision for credit losses |
| | 1 | 2 | | 1 | | | | | | |||||||||||||||||||||||||||||||||
Noninterest expenses (ex. intangible amortization) |
554 | 582 | 621 | 664 | 627 | 641 | 622 | 632 | 619 | 642 | 644 | |||||||||||||||||||||||||||||||||
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Income before taxes (ex. intangible amortization) |
253 | 218 | 217 | 278 | 293 | 268 | 186 | 190 | 288 | 271 | 280 | |||||||||||||||||||||||||||||||||
Amortization of intangible assets |
59 | 59 | 58 | 61 | 55 | 53 | 53 | 53 | 48 | 48 | 48 | |||||||||||||||||||||||||||||||||
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Income before taxes |
194 | 159 | 159 | 217 | 238 | 215 | 133 | 137 | 240 | 223 | 232 | |||||||||||||||||||||||||||||||||
Average assets |
$ | 33,797 | $ | 33,938 | $ | 36,194 | $ | 37,645 | $ | 37,315 | $ | 36,741 | $ | 36,949 | $ | 37,163 | $ | 36,475 | $ | 35,970 | $ | 35,775 | ||||||||||||||||||||||
Market value of assets under management at period-end (in billions) (b) |
$ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | $ | 1,274 | $ | 1,198 | $ | 1,260 | $ | 1,308 | $ | 1,299 | $ | 1,359 | ||||||||||||||||||||||
Pre-tax operating margin |
||||||||||||||||||||||||||||||||||||||||||||
GAAP |
24 | % | 20 | % | 19 | % | 23 | % | 26 | % | 24 | % | 16 | % | 17 | % | 26 | % | 24 | % | 25 | % | ||||||||||||||||||||||
Non-GAAP (ex. intangible amortization and net distribution and servicing expense) (c) |
35 | % | 31 | % | 29 | % | 33 | % | 36 | % | 33 | % | 26 | % | 26 | % | 36 | % | 34 | % | 34 | % |
(a) | Other revenue includes asset servicing and treasury services revenue. |
(b) | Excludes securities lending cash management assets. |
(c) | Distribution and servicing expense totaled $88 million, $90 million, $94 million, and $104 million, respectively, for the quarters of 2010 and $110 million, $108 million, $99 million and $95 million, respectively, for the quarters of 2011 and $100 million, $102 million and $107 million for the quarters of 2012. |
Page 9 of 14
THE BANK OF NEW YORK MELLON CORPORATION
BUSINESSES
INVESTMENT SERVICES - 11 Quarter Trend
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(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 | 3rd Qtr | |||||||||||||||||||||||||||||||||
Revenue: |
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Investment services fees |
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Asset servicing fees - ex. securities lending |
597 | 609 | 814 | 855 | 863 | 891 | 862 | 823 | 876 | 872 | 875 | |||||||||||||||||||||||||||||||||
Securities lending revenue |
24 | 30 | 26 | 26 | 27 | 52 | 32 | 35 | 39 | 48 | 37 | |||||||||||||||||||||||||||||||||
Issuer services |
283 | 298 | 318 | 360 | 292 | 314 | 401 | 245 | 251 | 275 | 310 | |||||||||||||||||||||||||||||||||
Clearing services |
230 | 245 | 252 | 278 | 292 | 292 | 297 | 278 | 303 | 309 | 287 | |||||||||||||||||||||||||||||||||
Treasury services |
130 | 124 | 138 | 134 | 133 | 134 | 132 | 133 | 136 | 132 | 135 | |||||||||||||||||||||||||||||||||
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Total investment services fees |
1,264 | 1,306 | 1,548 | 1,653 | 1,607 | 1,683 | 1,724 | 1,514 | 1,605 | 1,636 | 1,644 | |||||||||||||||||||||||||||||||||
Foreign Exchange and other trading revenue |
210 | 245 | 174 | 226 | 209 | 203 | 236 | 196 | 176 | 179 | 158 | |||||||||||||||||||||||||||||||||
Other (a) |
64 | 118 | 87 | 77 | 73 | 81 | 68 | 71 | 71 | 66 | 77 | |||||||||||||||||||||||||||||||||
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Total fee and other revenue (a) |
1,538 | 1,669 | 1,809 | 1,956 | 1,889 | 1,967 | 2,028 | 1,781 | 1,852 | 1,881 | 1,879 | |||||||||||||||||||||||||||||||||
Net interest revenue |
629 | 587 | 568 | 578 | 621 | 649 | 661 | 634 | 642 | 607 | 608 | |||||||||||||||||||||||||||||||||
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Total revenue (b) |
2,167 | 2,256 | 2,377 | 2,534 | 2,510 | 2,616 | 2,689 | 2,415 | 2,494 | 2,488 | 2,487 | |||||||||||||||||||||||||||||||||
Provision for credit losses |
| | | | | | | | 16 | (14 | ) | (4 | ) | |||||||||||||||||||||||||||||||
Noninterest expenses (ex. intangible amortization) (b) |
1,364 | 1,465 | 1,570 | 1,692 | 1,702 | 1,777 | 1,849 | 1,706 | 1,779 | 2,097 | 1,735 | |||||||||||||||||||||||||||||||||
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Income before taxes (ex. intangible amortization) |
803 | 791 | 807 | 842 | 808 | 839 | 840 | 709 | 699 | 405 | 756 | |||||||||||||||||||||||||||||||||
Amortization of intangible assets |
35 | 35 | 48 | 51 | 50 | 50 | 49 | 50 | 48 | 49 | 47 | |||||||||||||||||||||||||||||||||
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Income before taxes |
768 | 756 | 759 | 791 | 758 | 789 | 791 | 659 | 651 | 356 | 709 | |||||||||||||||||||||||||||||||||
Average loans |
$ | 14,273 | $ | 17,053 | $ | 17,941 | $ | 19,053 | $ | 20,554 | $ | 22,891 | $ | 22,879 | $ | 26,804 | $ | 25,902 | $ | 24,981 | $ | 24,361 | ||||||||||||||||||||||
Average assets |
$ | 150,828 | $ | 151,917 | $ | 158,110 | $ | 173,606 | $ | 176,162 | $ | 191,756 | $ | 220,930 | $ | 228,668 | $ | 214,135 | $ | 209,454 | $ | 224,289 | ||||||||||||||||||||||
Average deposits |
$ | 120,322 | $ | 120,394 | $ | 123,298 | $ | 135,711 | $ | 139,342 | $ | 153,863 | $ | 181,848 | $ | 188,539 | $ | 175,055 | $ | 172,435 | $ | 188,036 | ||||||||||||||||||||||
Pre-tax operating margin |
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GAAP |
35 | % | 34 | % | 32 | % | 31 | % | 30 | % | 30 | % | 29 | % | 27 | % | 26 | % | 14 | % | 29 | % | ||||||||||||||||||||||
Non-GAAP adjusted (excluding intangible amortization) |
37 | % | 35 | % | 34 | % | 33 | % | 32 | % | 32 | % | 31 | % | 29 | % | 28 | % | 16 | % | 30 | % | ||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | $ | 26.3 | $ | 25.9 | $ | 25.8 | $ | 26.6 | $ | 27.1 | $ | 27.9 | ||||||||||||||||||||||
Market value of securities on loan at period-end (in billions) (c) |
$ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | $ | 273 | $ | 250 | $ | 269 | $ | 265 | $ | 275 | $ | 259 |
Note: On December 31, 2011, BNY Mellon sold its Shareowner Services business. In the first quarter of 2012, we reclassified the results of the Shareowner Services business from the Investment Services business to the Other segment. The reclassification did not impact the consolidated results. All prior periods have been restated.
(a) | Total fee and other revenue includes investment management fees and distribution and servicing revenue. |
(b) | On July 1, 2010 and August 2, 2010 the GIS and BAS acquisitions were completed. |
(c) | Represents the securities on loan managed by the Investment Services business. |
Page 10 of 14
THE BANK OF NEW YORK MELLON CORPORATION
BUSINESSES
OTHER - 11 Quarter Trend
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(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 | 3rd Qtr | |||||||||||||||||||||||||||||||||
Revenue: |
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Fee and other revenue |
276 | 170 | 119 | 166 | 147 | 269 | 121 | 240 | 166 | 112 | 150 | |||||||||||||||||||||||||||||||||
Net interest revenue |
85 | 83 | 100 | 92 | 25 | 34 | 63 | 91 | 68 | 75 | 89 | |||||||||||||||||||||||||||||||||
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Total revenue |
361 | 253 | 219 | 258 | 172 | 303 | 184 | 331 | 234 | 187 | 239 | |||||||||||||||||||||||||||||||||
Provision for credit losses |
35 | 20 | (23 | ) | (24 | ) | | (1 | ) | (22 | ) | 23 | (11 | ) | (5 | ) | (1 | ) | ||||||||||||||||||||||||||
Noninterest expenses (ex. special litigation reserves, intangible amortization, M&I expenses and restructuring charges) |
392 | 172 | 238 | 268 | 249 | 272 | 182 | 245 | 253 | 189 | 218 | |||||||||||||||||||||||||||||||||
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Income before taxes (ex. special litigation reserves, intangible amortization, M&I expenses and restructuring charges) |
(66 | ) | 61 | 4 | 14 | (77 | ) | 32 | 24 | 63 | (8 | ) | 3 | 22 | ||||||||||||||||||||||||||||||
Amortization of intangible assets |
3 | 4 | 5 | 3 | 3 | 5 | 4 | 3 | | | | |||||||||||||||||||||||||||||||||
M&I and restructuring charges |
33 | (1 | ) | 71 | 64 | 11 | 18 | 12 | 139 | 9 | 22 | 13 | ||||||||||||||||||||||||||||||||
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Income before taxes |
(102 | ) | 58 | (72 | ) | (53 | ) | (91 | ) | 9 | 8 | (79 | ) | (17 | ) | (19 | ) | 9 | ||||||||||||||||||||||||||
Average loans and leases |
$ | 13,639 | $ | 13,261 | $ | 12,308 | $ | 11,808 | $ | 11,187 | $ | 10,553 | $ | 10,652 | $ | 10,223 | $ | 9,877 | $ | 10,248 | $ | 9,945 | ||||||||||||||||||||||
Average assets |
$ | 39,892 | $ | 42,726 | $ | 45,774 | $ | 44,936 | $ | 44,221 | $ | 49,983 | $ | 53,584 | $ | 50,243 | $ | 50,734 | $ | 59,578 | $ | 58,850 |
Note: On December 31, 2011, BNY Mellon sold its Shareowner Services business. In the first quarter of 2012, we reclassified the results of the Shareowner Services business from the Investment Services business to the Other segment. The reclassification did not impact the consolidated results. All prior periods have been restated.
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) | 2011 | 2010 | 2009 | 2011 | 2010 | 2009 | 2011 | 2010 | 2009 | 2011 (b) | 2010 (b) | 2009 | ||||||||||||||||||||||||||||||||||||
Revenue: |
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Investment services fees |
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Asset servicing |
112 | 94 | 113 | 3,585 | 2,981 | 2,459 | | 1 | 1 | 3,697 | 3,076 | 2,573 | ||||||||||||||||||||||||||||||||||||
Issuer services |
| | | 1,252 | 1,259 | 1,235 | 193 | 201 | 228 | 1,445 | 1,460 | 1,463 | ||||||||||||||||||||||||||||||||||||
Clearing services |
| | | 1,159 | 1,005 | 958 | | | 4 | 1,159 | 1,005 | 962 | ||||||||||||||||||||||||||||||||||||
Treasury services |
2 | 3 | 3 | 532 | 526 | 515 | 1 | 1 | 1 | 535 | 530 | 519 | ||||||||||||||||||||||||||||||||||||
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Total investment services fees |
114 | 97 | 116 | 6,528 | 5,771 | 5,167 | 194 | 203 | 234 | 6,836 | 6,071 | 5,517 | ||||||||||||||||||||||||||||||||||||
Investment management fees |
2,959 | 2,829 | 2,541 | 53 | 38 | 30 | 3 | 3 | 13 | 3,015 | 2,870 | 2,584 | ||||||||||||||||||||||||||||||||||||
Performance fees |
93 | 122 | 93 | 1 | 1 | | | | | 94 | 123 | 93 | ||||||||||||||||||||||||||||||||||||
Foreign exchange and other trading revenue |
| 10 | 3 | 844 | 855 | 1,081 | 4 | 21 | (48 | ) | 848 | 886 | 1,036 | |||||||||||||||||||||||||||||||||||
Distribution and servicing |
181 | 201 | 279 | 6 | 8 | 54 | | 1 | (7 | ) | 187 | 210 | 326 | |||||||||||||||||||||||||||||||||||
Financing-related fees |
6 | 6 | 10 | 46 | 45 | 49 | 118 | 144 | 156 | 170 | 195 | 215 | ||||||||||||||||||||||||||||||||||||
Investment and other income |
(100 | ) | (90 | ) | (165 | ) | 187 | 254 | 289 | 411 | 344 | 213 | 498 | 508 | 337 | |||||||||||||||||||||||||||||||||
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Total fee revenue |
3,253 | 3,175 | 2,877 | 7,665 | 6,972 | 6,670 | 730 | 716 | 561 | 11,648 | 10,863 | 10,108 | ||||||||||||||||||||||||||||||||||||
Net Securities gains (losses) |
1 | 12 | (76 | ) | | | | 47 | 15 | (5,293 | ) | 48 | 27 | (5,369 | ) | |||||||||||||||||||||||||||||||||
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Total fee and other revenue |
3,254 | 3,187 | 2,801 | 7,665 | 6,972 | 6,670 | 777 | 731 | (4,732 | ) | 11,696 | 10,890 | 4,739 | |||||||||||||||||||||||||||||||||||
Net interest revenue (expense) |
206 | 203 | 242 | 2,565 | 2,362 | 2,242 | 213 | 360 | 431 | 2,984 | 2,925 | 2,915 | ||||||||||||||||||||||||||||||||||||
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Total revenue |
3,460 | 3,390 | 3,043 | 10,230 | 9,334 | 8,912 | 990 | 1,091 | (4,301 | ) | 14,680 | 13,815 | 7,654 | |||||||||||||||||||||||||||||||||||
Provision for credit losses |
1 | 3 | 1 | | | | | 8 | 331 | 1 | 11 | 332 | ||||||||||||||||||||||||||||||||||||
Noninterest expenses (ex. M&I expenses and intangible amortization) |
2,522 | 2,421 | 2,221 | 7,034 | 6,091 | 5,473 | 1,037 | 1,098 | 1,177 | 10,593 | 9,610 | 8,871 | ||||||||||||||||||||||||||||||||||||
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Income before taxes and extraordinary (loss) (ex. M&I expenses and intangible amortization) |
937 | 966 | 821 | 3,196 | 3,243 | 3,439 | (47 | ) | (15 | ) | (5,809 | ) | 4,086 | 4,194 | (1,549 | ) | ||||||||||||||||||||||||||||||||
Amortization of intangible assets |
214 | 237 | 264 | 199 | 169 | 146 | 15 | 15 | 16 | 428 | 421 | 426 | ||||||||||||||||||||||||||||||||||||
Merger & integration expense |
| | | | | | 91 | 139 | 233 | 91 | 139 | 233 | ||||||||||||||||||||||||||||||||||||
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Income before taxes, noncontrolling interest and extraordinary (loss) |
723 | 729 | 557 | 2,997 | 3,074 | 3,293 | (153 | ) | (169 | ) | (6,058 | ) | 3,567 | 3,634 | (2,208 | ) | ||||||||||||||||||||||||||||||||
Average loans |
$ | 6,970 | $ | 6,461 | $ | 5,821 | $ | 23,298 | $ | 17,096 | $ | 13,754 | $ | 10,651 | $ | 12,748 | $ | 16,849 | $ | 40,919 | $ | 36,305 | $ | 36,424 | ||||||||||||||||||||||||
Average assets |
$ | 37,041 | $ | 35,407 | $ | 21,836 | $ | 204,569 | $ | 158,676 | $ | 151,005 | $ | 49,535 | $ | 43,353 | $ | 37,098 | $ | 291,145 | $ | 237,436 | $ | 209,939 | ||||||||||||||||||||||||
Average deposits |
$ | 10,113 | $ | 8,240 | $ | 6,788 | $ | 166,076 | $ | 124,969 | $ | 120,494 | $ | 6,490 | $ | 6,229 | $ | 7,370 | $ | 182,679 | $ | 139,438 | $ | 134,652 | ||||||||||||||||||||||||
Market value of assets under management at period-end (in billions) |
$ | 1,260 | $ | 1,172 | $ | 1,115 | $ | | $ | | $ | | $ | | $ | | $ | | $ | 1,260 | $ | 1,172 | $ | 1,115 | ||||||||||||||||||||||||
Market value of assets under custody and administration at period-end (in trillions) |
$ | | $ | | $ | | $ | 25.8 | $ | 25.0 | $ | 22.3 | $ | | $ | | $ | | $ | 25.8 | $ | 25.0 | $ | 22.3 | ||||||||||||||||||||||||
Market value of securities on loan at period-end (in billions) |
$ | | $ | | $ | | $ | 269 | $ | 278 | $ | 247 | $ | | $ | | $ | | $ | 269 | $ | 278 | $ | 247 | ||||||||||||||||||||||||
Pre-tax operating margin - GAAP |
21 | % | 22 | % | 18 | % | 29 | % | 33 | % | 37 | % | n/m | n/m | n/m | 24 | % | 26 | % | n/m | ||||||||||||||||||||||||||||
Pre-tax operating margin (ex. intangible amortization) - Non-GAAP |
27 | % | 29 | % | 27 | % | 31 | % | 35 | % | 39 | % | n/m | n/m | n/m | 27 | % | 29 | % | n/m | ||||||||||||||||||||||||||||
Pre-tax operating margin - Non-GAAP (a) |
27 | % | 29 | % | 30 | % | 31 | % | 34 | % | 42 | % | n/m | n/m | n/m | 28 | % | 32 | % | 31 | % | |||||||||||||||||||||||||||
Memo: |
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Securities Lending Revenue |
183 | 150 | 259 |
Note: On December 31, 2011, BNY Mellon sold its Shareowner Services business. In the first quarter of 2012, we reclassified the results of the Shareowner Services business from the Investment Services business to the Other segment. The reclassification did not impact the consolidated results. All prior periods have been restated.
(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 years 2010 and 2011 includes income from consolidated investment management funds of $226 million and $200 million, respectively, net of income attributable to noncontrolling interests of $59 million and $50 million, respectively. The net of these income statement line items of $167 million and $150 million, respectively, are included above in fee and other revenue. |
n/m not 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 - 11 Quarter Trend
NONPERFORMING ASSETS
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | |||||||||||||||||||||||||||||||||
Loans: |
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Other residential mortgages |
$ | 204 | $ | 229 | $ | 238 | $ | 244 | $ | 245 | $ | 236 | $ | 228 | $ | 203 | $ | 188 | $ | 177 | $ | 166 | ||||||||||||||||||||||
Wealth Management |
58 | 62 | 66 | 59 | 56 | 31 | 32 | 32 | 35 | 35 | 33 | |||||||||||||||||||||||||||||||||
Commercial real estate |
50 | 49 | 39 | 44 | 36 | 28 | 28 | 40 | 39 | 30 | 29 | |||||||||||||||||||||||||||||||||
Commercial |
40 | 40 | 35 | 34 | 32 | 31 | 21 | 21 | 32 | 31 | 29 | |||||||||||||||||||||||||||||||||
Foreign |
7 | 7 | | 7 | 7 | 13 | 13 | 10 | 10 | 9 | 9 | |||||||||||||||||||||||||||||||||
Financial Institutions |
95 | 13 | 16 | 5 | 4 | 4 | 12 | 23 | 14 | 3 | 3 | |||||||||||||||||||||||||||||||||
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Total nonperforming loans |
454 | 400 | 394 | 393 | 380 | 343 | 334 | 329 | 318 | 285 | 269 | |||||||||||||||||||||||||||||||||
Other assets owned |
5 | 6 | 7 | 6 | 6 | 8 | 10 | 12 | 13 | 9 | 5 | |||||||||||||||||||||||||||||||||
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Total nonperforming assets (a) |
$ | 459 | $ | 406 | $ | 401 | $ | 399 | $ | 386 | $ | 351 | $ | 344 | $ | 341 | $ | 331 | $ | 294 | $ | 274 | ||||||||||||||||||||||
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Nonperforming assets ratio |
1.35 | % | 1.09 | % | 1.06 | % | 1.06 | % | 0.96 | % | 0.83 | % | 0.76 | % | 0.78 | % | 0.77 | % | 0.65 | % | 0.60 | % | ||||||||||||||||||||||
Nonperforming assets ratio excluding margin loans |
1.58 | % | 1.29 | % | 1.26 | % | 1.29 | % | 1.26 | % | 1.08 | % | 0.98 | % | 1.09 | % | 1.11 | % | 0.92 | % | 0.83 | % | ||||||||||||||||||||||
Allowance for loan losses/nonperforming loans |
114.5 | 135.5 | 135.5 | 126.7 | 122.9 | 128.6 | 117.4 | 119.8 | 121.4 | 127.0 | 126.0 | |||||||||||||||||||||||||||||||||
Allowance for loan losses/nonperforming assets |
113.3 | 133.5 | 133.2 | 124.8 | 121.0 | 125.6 | 114.0 | 115.5 | 116.6 | 123.1 | 123.7 | |||||||||||||||||||||||||||||||||
Total allowance for credit losses/nonperforming loans |
140.5 | 161.3 | 154.3 | 145.3 | 145.8 | 156.0 | 149.1 | 151.1 | 155.3 | 163.9 | 169.5 | |||||||||||||||||||||||||||||||||
Total allowance for credit losses/nonperforming assets |
139.0 | 158.9 | 151.6 | 143.1 | 143.5 | 152.4 | 144.8 | 145.7 | 149.2 | 158.8 | 166.4 |
(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, 2nd, 3rd and 4th quarters of 2011 of $239 million, $216 million, $265 million, and $101 million, respectively, and for the 1st, 2nd and 3rd quarters of 2012 $180 million, $155 million and $153 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 - 11 Quarter Trend
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS
2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||||||||||
(dollar amounts in millions) |
1st Qtr |
2nd Qtr |
3rd Qtr |
4th Qtr |
1st Qtr |
2nd Qtr |
3rd Qtr |
4th Qtr |
1st Qtr |
2nd Qtr |
3rd Qtr |
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Allowance for credit losses: |
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Allowance for credit losses |
$ | 503 | $ | 520 | $ | 542 | $ | 534 | $ | 498 | $ | 467 | $ | 441 | $ | 392 | $ | 394 | $ | 386 | $ | 362 | ||||||||||||||||||||||
Allowance for unfunded commitments |
125 | 118 | 103 | 74 | 73 | 87 | 94 | 106 | 103 | 108 | 105 | |||||||||||||||||||||||||||||||||
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Allowance for credit losses beginning of period |
628 | 638 | 645 | 608 | 571 | 554 | 535 | 498 | 497 | 494 | 467 | |||||||||||||||||||||||||||||||||
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Net (charge-offs)/recoveries |
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Charge-offs |
(37 | ) | (14 | ) | (17 | ) | (17 | ) | (19 | ) | (21 | ) | (17 | ) | (25 | ) | (10 | ) | (10 | ) | (8 | ) | ||||||||||||||||||||||
Recoveries |
12 | 1 | 2 | 2 | 2 | 2 | 2 | 1 | 2 | 2 | 2 | |||||||||||||||||||||||||||||||||
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0Total Net (charge-offs)/recoveries |
(25 | ) | (13 | ) | (15 | ) | (15 | ) | (17 | ) | (19 | ) | (15 | ) | (24 | ) | (8 | ) | (8 | ) | (6 | ) | ||||||||||||||||||||||
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Provision for credit losses |
35 | 20 | (22 | ) | (22 | ) | | | (22 | ) | 23 | 5 | (19 | ) | (5 | ) | ||||||||||||||||||||||||||||
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Allowance for credit losses end of period |
638 | 645 | 608 | 571 | 554 | 535 | 498 | 497 | 494 | 467 | 456 | |||||||||||||||||||||||||||||||||
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Allowance for loan losses |
$ | 520 | $ | 542 | $ | 534 | $ | 498 | $ | 467 | $ | 441 | $ | 392 | $ | 394 | $ | 386 | $ | 362 | $ | 339 | ||||||||||||||||||||||
Allowance for unfunded commitments |
118 | 103 | 74 | 73 | 87 | 94 | 106 | 103 | 108 | 105 | 117 | |||||||||||||||||||||||||||||||||
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Allowance for credit losses end of period |
638 | 645 | 608 | 571 | 554 | 535 | 498 | 497 | 494 | 467 | 456 | |||||||||||||||||||||||||||||||||
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Allowance for loan losses as a percentage of total loans |
1.54 | % | 1.46 | % | 1.41 | % | 1.32 | % | 1.17 | % | 1.05 | % | 0.87 | % | 0.90 | % | 0.90 | % | 0.80 | % | 0.74 | % |
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