0001193125-14-178711.txt : 20140502 0001193125-14-178711.hdr.sgml : 20140502 20140502090206 ACCESSION NUMBER: 0001193125-14-178711 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20140502 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20140502 DATE AS OF CHANGE: 20140502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Bank of New York Mellon Corp CENTRAL INDEX KEY: 0001390777 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35651 FILM NUMBER: 14807094 BUSINESS ADDRESS: STREET 1: ONE WALL STREET, 31ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10286 BUSINESS PHONE: 212-495-1784 MAIL ADDRESS: STREET 1: ONE WALL STREET, 31ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10286 FORMER COMPANY: FORMER CONFORMED NAME: Bank of New York Mellon CORP DATE OF NAME CHANGE: 20070221 8-K 1 d719780d8k.htm FORM 8-K Form 8-K

UNITED STATES

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) – May 2, 2014

THE BANK OF NEW YORK MELLON CORPORATION

(Exact name of registrant as specified in its 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)

Registrant’s 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 8.01. OTHER EVENTS.

On April 22, 2014, The Bank of New York Mellon Corporation (the “Registrant” or “BNY Mellon”) issued an earnings release

announcing its financial results for the first quarter of 2014 (the “Earnings Release”). The Registrant previously furnished the Earnings Release as Exhibit 99.1 to a Current Report on Form 8-K, dated April 22, 2014, pursuant to General Instruction B.2 of Form 8-K. A version of the Earnings Release is filed as Exhibit 99.1 to this report and is incorporated herein by reference. However, the references in the Earnings Release to the Registrant’s website, http://www.bnymellon.com/, shall not be deemed to include the contents of the website in the Earnings Release or in this Form 8-K. The information included herein is to be considered “filed” under the Securities Exchange Act of 1934 and is incorporated by reference into all filings made by the Registrant under the Securities Act of 1933 and the Securities Exchange Act of 1934 that state that this Current Report on Form 8-K is incorporated therein by reference.

On March 31, 2014, BNY International Financing Corp., a subsidiary of BNY Mellon, agreed to sell our equity investment in Wing Hang Bank Limited (“Wing Hang”), which is located in Hong Kong, to Oversea-Chinese Banking Corporation Limited. Our equity investment in Wing Hang had a fair value of $1 billion (book value of $544 million) based on its share price at March 31, 2014. Equity income related to our investment in Wing Hang totaled $95 million in 2013, including $37 million from the sale of a property. The sale is expected to close in the third quarter of 2014.

The information presented in this Current Report on Form 8-K may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which may be expressed in a variety of ways, including the use of future or present tense language, relate to, among other things, the anticipated closing of the Wing Hang transaction. These statements are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon’s control). Factors that could cause BNY Mellon’s results to differ materially can be found in the risk factors set forth in BNY Mellon’s Annual Report on Form 10-K for the year ended December 31, 2013 and its other filings with the Securities and Exchange Commission. All statements in this Current Report on Form 8-K speak only as of May 2, 2014 and BNY Mellon undertakes no obligation to update the information to reflect events or circumstances that arise after that date or reflect the occurrence of unanticipated events, except as required by federal securities laws.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) EXHIBITS.

 

Exhibit
Number		    Description
99.1    The Bank of New York Mellon Corporation Earnings Release dated April 22, 2014, announcing financial results for the first quarter of 2014.

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: May 2, 2014   By:  

/s/ Craig T. Beazer

  Name:   Craig T. Beazer
  Title:   Assistant Secretary

EXHIBIT INDEX

 

Number    Description    Method of Filing  
99.1    Earnings Release dated April 22, 2014.      Filed herewith   
 EX-99.1 2 d719780dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Press Release

 

Contacts:    MEDIA:       ANALYSTS:   
   Kevin Heine       Andy Clark   
   (212) 635-1590       (212) 635-1803   

BNY MELLON REPORTS FIRST QUARTER EARNINGS OF $661 MILLION OR $0.57 PER COMMON SHARE

PRE-TAX EARNINGS UP 12% YEAR-OVER-YEAR

 

  •   INVESTMENT SERVICES FEES UP 3% YEAR-OVER-YEAR

 

  •   Assets under custody and/or administration up 6% year-over-year

 

  •   Asset servicing revenue up 4% year-over-year

 

  •   Clearing services revenue up 7% year-over-year

 

  •   INVESTMENT MANAGEMENT AND PERFORMANCE FEES UP 3% YEAR-OVER-YEAR

 

  •   Assets under management up 14% year-over-year to a record $1.6 trillion

 

  •   Net long-term inflows of $21 billion in the first quarter of 2014

REPURCHASED 11.6 MILLION COMMON SHARES FOR $375 MILLION IN FIRST QUARTER

RETURN ON TANGIBLE COMMON EQUITY OF 18% FOR FIRST QUARTER OF 2014 (a)

AS PREVIOUSLY ANNOUNCED, BOARD APPROVED A COMMON STOCK DIVIDEND INCREASE OF 13% AND THE REPURCHASE OF UP TO $1.74 BILLION OF COMMON STOCK

NEW YORK, April 22, 2014 – The Bank of New York Mellon Corporation (“BNY Mellon”) (NYSE: BK) today reported first quarter net income applicable to common shareholders of $661 million, or $0.57 per diluted common share. In the first quarter of 2013, the company reported a net loss applicable to common shareholders of $266 million, or $0.23 per diluted common share. Excluding the charge related to the U.S. Tax Court’s disallowance of certain foreign tax credits of $854 million, or $0.73 per diluted common share, net income applicable to common shareholders totaled $588 million, or $0.50 per diluted common share, in the first quarter of 2013. Net income applicable to common shareholders was $513 million, or $0.44 per diluted common share, in the fourth quarter of 2013. Excluding the after-tax loss of $115 million, or $0.10 per diluted common share, related to an equity investment, net income applicable to common shareholders totaled $628 million, or $0.54 per diluted common share, in the fourth quarter of 2013. (a)

 

(a) See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 11 for the reconciliation of the Non-GAAP measures.

 

1

First Quarter Results – Sequential growth rates are unannualized. Please refer to the Quarterly Earnings Review for a detailed review of our businesses.

Total revenue

 

Reconciliation of total revenue            1Q14 vs.  
(dollars in millions)    1Q14      4Q13      1Q13      1Q13     4Q13  

Fee and other revenue (a)

    $ 2,883       $ 2,814       $ 2,860         1 %      2 % 

Income from consolidated investment management funds

      36         36         50        

Net interest revenue

      728         761         719                    

Total revenue – GAAP (a)

      3,647         3,611         3,629         —          1   

Add:

  

Loss related to an equity investment (pre-tax)

      —           175         —          

Less:

  

Net income attributable to noncontrolling interests related to consolidated investment management funds

      20         17         16                    

Total revenue – Non-GAAP (a)

    $ 3,627       $ 3,769       $ 3,613         —   %      (4 )% 

 

(a) Prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See page 10 for additional information.

 

  •   Assets under custody and/or administration (“AUC/A”) amounted to $27.9 trillion at March 31, 2014, an increase of 6% compared with the prior year and 1% sequentially. Both increases were primarily driven by higher market values. The sequential increase also reflects net new business. Assets under management (“AUM”) amounted to a record $1.62 trillion at March 31, 2014, an increase of 14% compared with the prior year and 2% sequentially. Both increases resulted from higher market values and net new business. Long-term inflows totaled $21 billion driven by the continued strong flows of liability-driven investments. Short-term outflows totaled $7 billion for the first quarter of 2014.

 

  •   Investment services fees totaled $1.7 billion, an increase of 3% year-over-year and 1% sequentially. The year-over-year increase primarily reflects higher asset servicing fees driven by higher market values, net new business and organic growth, as well as higher clearing services and Depositary Receipts revenue. The sequential increase reflects higher asset servicing fees primarily driven by organic growth, higher securities lending revenue and net new business. Both increases were partially offset by the impact of the continued net run-off of high margin securitizations in Corporate Trust and higher money market fee waivers.

 

  •   Investment management and performance fees were $843 million, an increase of 3% year-over-year and a decrease of 7% sequentially. The year-over-year increase primarily reflects higher equity market values, net new business and higher performance fees, partially offset by higher money market fee waivers. The sequential decrease primarily reflects seasonally lower performance fees and fewer days in the first quarter of 2014.

 

  •   Foreign exchange and other trading revenue totaled $136 million compared with $161 million in the first quarter of 2013 and $146 million in the fourth quarter of 2013. In the first quarter of 2014, foreign exchange revenue totaled $130 million, a decrease of 13% year-over-year and an increase of 3% sequentially. Comparisons with both prior periods were impacted by lower volatility, and higher volumes driven by enhancements to our electronic foreign exchange platform. Other trading revenue was $6 million in the first quarter of 2014 compared with $12 million in the first quarter of 2013 and $20 million in the fourth quarter of 2013. The decrease from both prior periods reflects lower fixed income trading revenue.

 

2

  •   Investment and other income was $102 million in the first quarter of 2014 compared with income of $88 million in the first quarter of 2013 and a loss of $43 million in the fourth quarter of 2013. The year-over-year increase primarily reflects higher leasing gains, partially offset by lower equity investment revenue. The sequential increase primarily reflects a loss related to an equity investment recorded in the fourth quarter of 2013.

 

  •   Net interest revenue and the net interest margin (FTE) were $728 million and 1.05% in the first quarter of 2014 compared with $719 million and 1.11% in the first quarter of 2013 and $761 million and 1.09% in the fourth quarter of 2013. The year-over-year increase in net interest revenue resulted from a change in the asset mix and higher average deposits, partially offset by lower yields on investment securities. The sequential decrease primarily reflects lower yields on investment securities and fewer days in the first quarter of 2014, partially offset by the change in the mix of assets.

 

  •   The net unrealized pre-tax gain on our total investment securities portfolio was $676 million at March 31, 2014 compared with $309 million at Dec. 31, 2013. The increase was primarily driven by the reduction in market interest rates.

The provision for credit losses was a credit of $18 million in the first quarter of 2014 driven by the continued improvement in the credit quality of the loan portfolio. The provision for credit losses was a credit of $24 million in the first quarter of 2013 and a provision of $6 million in the fourth quarter of 2013.

Total noninterest expense

 

Reconciliation of noninterest expense            1Q14 vs.  
(dollars in millions)    1Q14     4Q13      1Q13      1Q13     4Q13  

Noninterest expense – GAAP

    $ 2,739      $ 2,877       $ 2,828         (3 )%      (5 )% 

Less:   Amortization of intangible assets

      75        82         86        

   M&I, litigation and restructuring charges

      (12 )      2         39        

Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges – Non-GAAP

    $ 2,676      $ 2,793       $ 2,703         (1 )%      (4 )% 

 

  •   Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges (Non-GAAP) decreased 1% year-over-year and 4% sequentially. Staff expense decreased sequentially despite the acceleration of the vesting of long-term stock awards for retirement eligible employees, driven by lower pension and compensation expense. Year over year, the decrease in non-staff expense was primarily due to a provision for administrative errors in certain offshore tax-exempt funds and the cost of generating certain tax credits both of which were recorded in the first quarter of 2013.

The effective tax rate was 25.1% in the first quarter of 2014 and was positively impacted by the change in New York state tax rates enacted on March 31, 2014.

 

3

Capital ratios    March 31,
2014		     Dec. 31,
2013		     March 31,
2013		  

Regulatory capital ratios: (a)

       

Estimated common equity Tier 1 ratio (“CET1”), fully phased-in – Non-GAAP: (b)(c)

       

Standardized Approach

      11.0 %      10.6 %      9.4 % 

Advanced Approach

      11.0        11.3        9.7   

CET1 ratio (d)

      15.7        14.5 (c)      12.2 (c) 

Tier 1 capital ratio (d)

      17.0        16.2        13.6   

Total (Tier 1 plus Tier 2) capital ratio (d)

      17.8        17.0        14.7   

Leverage capital ratio (d)

      6.1        5.4        5.2   

BNY Mellon shareholders’ equity to total assets ratio (c)

      10.3        10.0        10.0   

BNY Mellon common shareholders’ equity to total assets ratio (c)

      9.9        9.6        9.7   

BNY Mellon tangible common shareholders’ equity to tangible assets of operations ratio – Non-GAAP (c)

      6.6        6.8        5.9   

 

(a) March 31, 2014 regulatory capital ratios are preliminary. At March 31, 2014 and Dec. 31, 2013, the estimated fully phased-in Basel III CET1 ratios are based on our interpretation of the final rules released by the Board of Governors of the Federal Reserve (the “Federal Reserve”) on July 2, 2013 (the “Final Rules”), which will be gradually phased-in over a multi-year period. At March 31, 2013, these ratios were estimated using our interpretation of the Federal Reserve’s Notices of Proposed Rulemaking (“NPRs”) dated June 7, 2012.
(b) Consistent with historical practice, the risk-based capital ratios do not include the impact of the total consolidated assets of certain consolidated investment management funds. If the Company is required to include the net impact of such total consolidated assets, it would decrease the fully phased-in CET1 ratio under the Standardized Approach by approximately 60 basis points and the Advanced Approach by approximately 100 basis points at March 31, 2014.
(c) See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 11 for a reconciliation of these ratios.
(d) At March 31, 2014, the capital ratios are based on Basel III components of capital, as phased-in, and asset risk-weightings using the general risk-based guidelines included in the Final Rule (which for 2014 look to Basel I-based requirements). March 31, 2014 risk-weightings are not based on the Advanced Approach rules. The leverage capital ratio is based on Basel III components of capital, and quarterly average total assets, as phased-in. Periods prior to March 31, 2014 are based on Basel I rules.

Dividends

Common – As previously disclosed on April 7, 2014, The Bank of New York Mellon Corporation announced a 13% increase in the quarterly common stock dividend, from $0.15 per common share to $0.17 per common share. This cash dividend is payable on May 7, 2014 to shareholders of record as of the close of business on April 25, 2014.

Preferred – As previously disclosed on April 7, 2014, The Bank of New York Mellon Corporation also declared the following dividends for the noncumulative perpetual preferred stock, liquidation preference $100,000 per share, for the dividend period ending in June 2014, in each case, payable on June 20, 2014 to holders of record as of the close of business on June 5, 2014:

 

  •   $1,022.22 per share on the Series A Preferred Stock (equivalent to $10.2222 per Normal Preferred Capital Security of Mellon Capital IV, each representing 1/100th interest in a share of Series A Preferred Stock);

 

  •   $1,300.00 per share on the Series C Preferred Stock (equivalent to $0.3250 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock); and

 

  •   $2,250.00 per share on the Series D Preferred Stock (equivalent to $22.5000 per depositary share, each representing a 1/100th interest in a share of the Series D Preferred Stock).

 

4

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of March 31, 2014, BNY Mellon had $27.9 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

Supplemental Financial Information

The Quarterly Earnings Review and Quarterly Financial Trends for The Bank of New York Mellon Corporation have been updated through March 31, 2014 and are available at www.bnymellon.com (Investor Relations – Financial Reports).

Conference Call Information

Gerald L. Hassell, chairman and chief executive officer and Thomas P. Gibbons, vice chairman and chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on April 22, 2014. This conference call and audio webcast will include forward-looking statements and may include other material information.

Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (International), and using the passcode: Earnings, or by logging on to www.bnymellon.com. The Earnings Release, together with the Quarterly Earnings Review and Quarterly Financial Trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on April 22, 2014. Replays of the conference call and audio webcast will be available beginning April 22, 2014 at approximately 2 p.m. EDT through May 21, 2014 by dialing (866) 463-4961 (U.S.) or (203) 369-1399 (International). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

 

5

THE BANK OF NEW YORK MELLON CORPORATION

Financial Highlights

 

(dollar amounts in millions, except per common share

amounts and unless otherwise noted; quarterly

returns are annualized)

    Quarter ended  
  

March 31,

2014

    

Dec. 31,

2013

    

March 31,

2013

  

Return on common equity (a)

      7.4 %      5.7 %      N/M   

Non-GAAP (a)

      7.9 %      6.3 %      7.8 % 

Return on tangible common equity – Non-GAAP (a)

      17.6 %      14.3 %      N/M   

Non-GAAP adjusted (a)

      17.4 %      14.3 %      18.5 % 

Fee revenue as a percentage of total revenue excluding net securities gains (b)

      79 %      78 %      79 % 

Annualized fee revenue per employee (based on average headcount) (b) (in thousands)

    $ 226      $ 216      $ 230   

Percentage of non-U.S. total revenue (c)

      37 %      39 %      35 % 

Pre-tax operating margin (a)(b)

      25 %      20 %      23 % 

Non-GAAP (a)

      27 %      22 %      26 % 

Net interest margin (FTE)

      1.05 %      1.09 %      1.11 % 

Selected average balances:

       

Interest-earning assets

    $ 284,532      $ 285,779      $ 265,754   

Assets of operations

    $ 343,638      $ 344,629      $ 322,161   

Total assets

    $ 354,992      $ 356,135      $ 333,664   

Interest-bearing deposits

    $ 152,986      $ 157,020      $ 147,728   

Noninterest-bearing deposits

    $ 81,430      $ 79,999      $ 70,337   

Preferred stock

    $ 1,562      $ 1,562      $ 1,068   

Total The Bank of New York Mellon Corporation common shareholders’ equity

    $ 36,289      $ 35,698      $ 34,898   

Average common shares and equivalents outstanding (in thousands):

       

Basic

      1,138,645        1,142,861        1,158,819   

Diluted

      1,144,510        1,147,961        1,158,819   

Period-end data:

       

Assets under management (in billions) (d)

    $ 1,620 (e)    $ 1,583      $ 1,423   

Assets under custody and/or administration (in trillions) (f)

    $ 27.9 (e)    $ 27.6      $ 26.3   

Market value of securities on loan (in billions) (g)

    $ 264      $ 235      $ 244   

Full-time employees

      51,400        51,100        49,700   

Book value per common share – GAAP (a)(b)

    $ 31.94      $ 31.46      $ 29.81   

Tangible book value per common share – Non-GAAP (a)(b)

    $ 14.48      $ 13.95      $ 12.45   

Cash dividends per common share

    $ 0.15      $ 0.15      $ 0.13   

Common dividend payout ratio

      26 %      34 %      N/M   

Closing stock price per common share

    $ 35.29      $ 34.94      $ 27.99   

Market capitalization

    $ 40,244      $ 39,910      $ 32,487   

 

(a) Non-GAAP excludes M&I, litigation and restructuring charges and the impact of the U.S. Tax Court’s disallowance of certain foreign tax credits, if applicable. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 11 for a reconciliation of the Non-GAAP measures.
(b) Prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See page 10 for additional information.
(c) Includes fee revenue, net interest revenue and income from consolidated investment management funds, net of net income attributable to noncontrolling interests.
(d) Excludes securities lending cash management assets and assets managed in the Investment Services business. Also excludes assets under management related to Newton’s private client business that was sold in September 2013.
(e) Preliminary.
(f) Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at March 31, 2014, Dec. 31, 2013 and March 31, 2013.
(g) Represents the total amount of securities on loan managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent, beginning in the fourth quarter of 2013, on behalf of CIBC Mellon clients, which totaled $66 billion at March 31, 2014 and $62 billion at Dec. 31, 2013.

N/M – Not meaningful.

 

6

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement

 

(in millions)    Quarter ended  
  

March 31,

2014

    

Dec. 31,

2013

    

March 31,

2013

  

Fee and other revenue

       

Investment services fees:

       

Asset servicing

    $ 1,009      $ 984      $ 969   

Clearing services

      325        324        304   

Issuer services

      229        237        237   

Treasury services

      136        137        141   

Total investment services fees

      1,699        1,682        1,651   

Investment management and performance fees

      843        904        822   

Foreign exchange and other trading revenue

      136        146        161   

Distribution and servicing

      43        43        49   

Financing-related fees

      38        43        41   

Investment and other income (a)

      102        (43 )      88   

Total fee revenue (a)

      2,861        2,775        2,812   

Net securities gains

      22        39        48   

Total fee and other revenue (a)

      2,883        2,814        2,860   

Operations of consolidated investment management funds

       

Investment income

      138        109        146   

Interest of investment management fund note holders

      102        73        96   

Income from consolidated investment management funds

      36        36        50   

Net interest revenue

       

Interest revenue

      812        846        815   

Interest expense

      84        85        96   

Net interest revenue

      728        761        719   

Provision for credit losses

      (18 )      6        (24 ) 

Net interest revenue after provision for credit losses

      746        755        743   

Noninterest expense

       

Staff

      1,511        1,522        1,472   

Professional, legal and other purchased services

      312        344        295   

Software and equipment

      237        241        228   

Net occupancy

      154        154        163   

Distribution and servicing

      107        110        106   

Sub-custodian

      68        68        64   

Business development

      64        96        68   

Other

      223        258        307   

Amortization of intangible assets

      75        82        86   

Merger and integration, litigation and restructuring charges

      (12 )      2        39   

Total noninterest expense

      2,739        2,877        2,828   

Income

       

Income before income taxes (a)

      926        728        825   

Provision for income taxes (a)

      232        172        1,062   

Net income (loss) (a)

      694        556        (237 ) 

Net (income) attributable to noncontrolling interests (includes $(20), $(17) and $(16) related to consolidated investment management funds, respectively)

      (20 )      (17 )      (16 ) 

Net income (loss) applicable to shareholders of The Bank of New York Mellon Corporation (a)

      674        539        (253 ) 

Preferred stock dividends

      (13 )      (26 )      (13 ) 

Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation (a)

    $ 661      $ 513      $ (266 ) 

 

(a) Prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See page 10 for additional information.

 

7

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement - continued

 

Net income (loss) applicable to common shareholders of The

    Bank of New York Mellon Corporation used for the

    earnings per share calculation

(in millions)

    Quarter ended  
  

March 31,

2014

     

Dec. 31,

2013

     

March 31,

2013

  

Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation (a)

    $ 661       $ 513       $ (266 ) 

Less:   Earnings allocated to participating securities

      13         10         2   

    Change in the excess of redeemable value over the fair value of noncontrolling

        interests

      N/A         —           1   

Net income (loss) applicable to the common shareholders of The Bank of New York Mellon Corporation after required adjustments for the calculation of basic and diluted earnings per common share (a)

    $ 648       $ 503       $ (269 ) 

 

(a) Prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See page 10 for additional information.

N/A – Not applicable.

 

Earnings (loss) per share applicable to the common
    shareholders of The Bank of New York Mellon
    Corporation (a)(b)

(in dollars)

    Quarter ended  
  

March 31,

2014

     

Dec. 31,

2013

     

March 31,

2013

  

Basic

    $ 0.57       $ 0.44       $ (0.23 ) 

Diluted

    $ 0.57       $ 0.44       $ (0.23 ) 

 

(a) Diluted earnings per share for the three months ended March 31, 2013 was calculated using average basic shares. Adding back the dilutive shares would result in anti-dilution.
(b) Prior periods were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See page 10 for additional information.

 

8

THE BANK OF NEW YORK MELLON CORPORATION

Consolidated Balance Sheet

 

(dollars in millions, except per share amounts)   

March 31,

2014

    

Dec. 31,

2013

  

Assets

     

Cash and due from:

     

Banks

    $ 6,092      $ 6,460   

Interest-bearing deposits with the Federal Reserve and other central banks

      82,602        104,359   

Interest-bearing deposits with banks

      42,795        35,300   

Federal funds sold and securities purchased under resale agreements

      12,223        9,161   

Securities:

     

Held-to-maturity (fair value of $19,092 and $19,443)

      19,226        19,743   

Available-for-sale

      80,216        79,309   

Total securities

      99,442        99,052   

Trading assets

      10,832        12,098   

Loans

      54,036        51,657   

Allowance for loan losses

      (198 )      (210 ) 

Net loans

      53,838        51,447   

Premises and equipment

      1,613        1,655   

Accrued interest receivable

      533        621   

Goodwill

      18,100        18,073   

Intangible assets

      4,380        4,452   

Other assets (a)

      24,340        20,566   

Subtotal assets of operations (a)

      356,790        363,244   

Assets of consolidated investment management funds, at fair value:

     

Trading assets

      10,260        10,397   

Other assets

      1,191        875   

Subtotal assets of consolidated investment management funds, at fair value

      11,451        11,272   

Total assets (a)

    $ 368,241      $ 374,516   

Liabilities

     

Deposits:

     

Noninterest-bearing (principally U.S. offices)

    $ 89,051      $ 95,475   

Interest-bearing deposits in U.S. offices

      52,825        56,640   

Interest-bearing deposits in Non-U.S. offices

      110,351        109,014   

Total deposits

      252,227        261,129   

Federal funds purchased and securities sold under repurchase agreements

      9,935        9,648   

Trading liabilities

      6,540        6,945   

Payables to customers and broker-dealers

      16,822        15,707   

Commercial paper

      27        96   

Other borrowed funds

      1,305        663   

Accrued taxes and other expenses (a)

      6,271        6,996   

Other liabilities (includes allowance for lending-related commitments of $128 and $134) (a)

      5,371        4,827   

Long-term debt

      20,616        19,864   

Subtotal liabilities of operations (a)

      319,114        325,875   

Liabilities of consolidated investment management funds, at fair value:

     

Trading liabilities

      10,002        10,085   

Other liabilities

      156        46   

Subtotal liabilities of consolidated investment management funds, at fair value

      10,158        10,131   

Total liabilities (a)

      329,272        336,006   

Temporary equity

     

Redeemable noncontrolling interests

      212        230   

Permanent equity

     

Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 15,826 and 15,826 shares

      1,562        1,562   

Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,277,739,777 and 1,268,036,220 shares

      13        13   

Additional paid-in capital

      24,176        24,002   

Retained earnings (a)

      16,439        15,952   

Accumulated other comprehensive loss, net of tax

      (689 )      (892 ) 

Less:   Treasury stock of 137,366,861 and 125,786,430 common shares, at cost

      (3,515 )      (3,140 ) 

Total The Bank of New York Mellon Corporation shareholders’ equity (a)

      37,986        37,497   

Nonredeemable noncontrolling interests of consolidated investment management funds

      771        783   

Total permanent equity (a)

      38,757        38,280   

Total liabilities, temporary equity and permanent equity (a)

    $ 368,241      $ 374,516   

 

(a) Prior period balances were restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See page 10 for additional information.

 

9

Impact of Adopting New Accounting Guidance

In the first quarter of 2014, BNY Mellon elected to early adopt the new accounting guidance included in Accounting Standards Update (“ASU”) 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects - a Consensus of the FASB Emerging Issues Task Force.” This ASU allows companies that invest in qualified affordable housing projects to elect the proportional amortization method of accounting for these investments, if certain conditions are met. In the first quarter of 2014, we restated the prior period financial statements to reflect the impact of the retrospective application of the new accounting guidance.

The table below presents the impact of the new accounting guidance on our previously reported earnings (loss) per share applicable to the common shareholders.

 

Earnings (loss) per share applicable to the common

shareholders of The Bank of New York Mellon Corporation

    As previously reported     As revised  
(in dollars)    4Q13      1Q13     4Q13      1Q13  

Basic

    $ 0.44       $ (0.23 )    $ 0.44       $ (0.23 ) 

Diluted

    $ 0.44       $ (0.23 )    $ 0.44       $ (0.23 ) 

The table below presents the impact of this new accounting guidance on our previously reported income statements.

 

Income statement    As previously
reported		     Adjustment      As revised  
(in millions)    4Q13     1Q13     4Q13      1Q13      4Q13     1Q13  

Investment and other income

    $ (60 )    $ 72      $ 17       $ 16       $ (43 )    $ 88   

Total fee revenue

      2,758        2,796        17         16         2,775        2,812   

Total fee and other revenue

      2,797        2,844        17         16         2,814        2,860   

Income before income taxes

      711        809        17         16         728        825   

Provision for income taxes

      155        1,046        17         16         172        1,062   

Net income (loss)

      556        (237 )      —           —           556        (237 ) 

Net income (loss) applicable to shareholders of The Bank of New York Mellon Corporation

      539        (253 )      —           —           539        (253 ) 

Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation

      513        (266 )      —           —           513        (266 ) 

The table below presents the impact of this new accounting guidance on our previously reported balance sheet.

 

Balance sheet at Dec. 31, 2013

(in millions)

   

As previously

reported

      Adjustment     As revised  

Other assets

    $ 20,360       $ 206      $ 20,566   

Total assets of operations

      363,038         206        363,244   

Total assets

      374,310         206        374,516   

Accrued taxes and other expenses

      6,985         11        6,996   

Other liabilities

      4,608         219        4,827   

Total liabilities of operations

      325,645         230        325,875   

Total liabilities

      335,776         230        336,006   

Retained earnings

      15,976         (24 )      15,952   

The Bank of New York Mellon Corporation shareholders’ equity

      37,521         (24 )      37,497   

Permanent equity

      38,304         (24 )      38,280   

Total liabilities, temporary equity and permanent equity

      374,310         206        374,516   

 

10

The table below presents the impact of this new accounting guidance on our previously reported consolidated ratios and other measures.

 

Consolidated ratios and other measures    As previously reported     As revised  
(in dollars unless otherwise noted)    4Q13     1Q13     4Q13     1Q13  

Fee revenue as a percentage of total revenue excluding net securities gains

      78 %      78 %      78 %      79 % 

Annualized fee revenue per employee (based on average headcount) (in thousands)

    $ 215      $ 229      $ 216      $ 230   

Pre-tax operating margin – GAAP

      20 %      22 %      20 %      23 % 

Book value per common share – GAAP

    $ 31.48      $ 29.83      $ 31.46      $ 29.81   

Tangible book value per common share – Non-GAAP

    $ 13.97      $ 12.47      $ 13.95      $ 12.45   

Supplemental information – Explanation of GAAP and Non-GAAP financial measures

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based upon fully phased-in Basel III CET1, Basel I Tier 1 common equity and tangible common shareholders’ equity. BNY Mellon believes that the Basel III CET1 ratio on a fully phased-in basis, the ratio of Basel I 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 capital ratios which are, or were, utilized by regulatory authorities. The tangible common shareholders’ equity ratio includes changes in investment securities valuations which are reflected in total shareholders’ equity. In addition, this ratio is expressed as a percentage of the actual book value of assets, 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 Mellon’s performance in reference to those assets which are productive in generating income. 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 its estimated fully phased-in Basel III CET1 ratios based on its interpretation of the Final Rules released by the Federal Reserve on July 2, 2013, and on the application of such rules to BNY Mellon’s businesses as currently conducted. The estimated fully phased-in Basel III CET1 ratio is necessarily subject to, among other things, BNY Mellon’s further review of the Final Rules, anticipated compliance with all necessary enhancements to model calibration, and other refinements, further implementation guidance from regulators and any changes BNY Mellon may make to its businesses. Consequently, BNY Mellon’s estimated fully phased-in Basel III CET1 ratio may change based on these factors. Management views the estimated fully phased-in Basel III CET1 ratio as a key measure in monitoring BNY Mellon’s capital position and progress against future regulatory capital standards. Additionally, the presentation of the estimated fully phased-in Basel III CET1 ratio is intended to allow investors to compare BNY Mellon’s estimated fully phased-in Basel III CET1 ratio with estimates presented by other companies.

BNY Mellon has presented revenue measures which exclude the effect of noncontrolling interests related to consolidated investment management funds and a loss related to an equity investment; and expense measures which exclude M&I expenses, litigation charges, restructuring charges and amortization of intangible assets. Earnings per share, return on equity measures and operating margin measures, which exclude some or all of these items, are also presented. Return on equity and earnings per share measures also exclude the charge related to the disallowance of certain foreign tax credits. BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon’s control. The excluded items, in general, relate to certain ongoing charges as a result of prior transactions or where we have incurred charges. M&I expenses primarily relate to the acquisitions of Global Investment Servicing on July 1, 2010 and BHF Asset Servicing GmbH on Aug. 2, 2010. M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon’s business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased. Future periods will not reflect such M&I expenses, and thus may be more easily compared with our current results if

 

11

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.

In this Earnings Release, the net interest margin is presented on an FTE basis. We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income. Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and business-level basis.

The following tables present the reconciliation of net income and diluted earnings per common share.

 

Reconciliation of net income and diluted EPS – GAAP to Non-GAAP

(in millions, except per common share amounts)

    4Q13      1Q13  
   Net
income		      Diluted
EPS		      Net
Income		     Diluted
EPS		  

Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

    $ 513       $ 0.44       $ (266 )    $ (0.23 ) 

Loss related to an equity investment (after-tax)

      115         0.10         N/A        N/A   

Charge related to the U.S. Tax Court’s partial reconsideration of a tax decision disallowing certain foreign tax credits

      N/A         N/A         854        0.73   

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP

    $ 628       $ 0.54       $ 588      $ 0.50   

N/A – Not applicable.

The following table presents the reconciliation of the pre-tax operating margin ratio.

 

Pre-tax operating margin

(dollars in millions)

    1Q14     4Q13     1Q13  

Income before income taxes – GAAP

    $ 926      $ 728      $ 825   

Less:   Net income attributable to noncontrolling interests of

                consolidated investment management funds

      20        17        16   

Add:   Amortization of intangible assets

      75        82        86   

   M&I, litigation and restructuring charges

      (12 )      2        39   

Income before income taxes excluding net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP

    $ 969      $ 795      $ 934   

Fee and other revenue – GAAP

    $ 2,883      $ 2,814      $ 2,860   

Income from consolidated investment management funds – GAAP

      36        36        50   

Net interest revenue – GAAP

      728        761        719   

Total revenue – GAAP

      3,647        3,611        3,629   

Less:   Net income attributable to noncontrolling interests of

                consolidated investment management funds

      20        17        16   

Total revenue excluding net income attributable to noncontrolling interests of consolidated investment management funds – Non-GAAP

    $ 3,627      $ 3,594      $ 3,613   

Pre-tax operating margin (a)

      25 %      20 %      23 % 

Pre-tax operating margin excluding net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP (a)

      27 %      22 %      26 % 

 

(a) Income before taxes divided by total revenue.

 

12

The following table presents the reconciliation of the returns on common equity and tangible common equity.

 

Return on common equity and tangible common equity

(dollars in millions)

    1Q14     4Q13     1Q13  

Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

    $ 661      $ 513      $ (266 ) 

Add:   Amortization of intangible assets, net of tax

      49        53        56   

Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP

      710        566        (210 ) 

Add:   M&I, litigation and restructuring charges

      (7 )      1        24   

    Charge related to the disallowance of certain foreign tax credits

     —          —          854   

Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to the disallowance of certain foreign tax credits – Non-GAAP

    $ 703      $ 567      $ 668   

Average common shareholders’ equity

    $ 36,289      $ 35,698      $ 34,898   

Less: Average goodwill

      18,072        18,026        17,993   

         Average intangible assets

      4,422        4,491        4,758   

Add: Deferred tax liability – tax deductible goodwill (a)

      1,306        1,302        1,170   

 Deferred tax liability – intangible assets (a)

      1,259        1,222        1,293   

Average tangible common shareholders’ equity – Non-GAAP

    $ 16,360      $ 15,705      $ 14,610   

Return on common equity – GAAP (b)

      7.4 %      5.7 %      N/M   

Return on common equity excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to the disallowance of certain foreign tax credits – Non-GAAP (b)

      7.9 %      6.3 %      7.8 % 

Return on tangible common equity – Non-GAAP (b)

      17.6 %      14.3 %      N/M   

Return on tangible common equity excluding M&I, litigation and restructuring charges and the charge related to the disallowance of certain foreign tax credits – Non-GAAP (b)

      17.4 %      14.3 %      18.5 % 

 

(a) Deferred tax liabilities are based on fully phased-in Basel III rules. First quarter of 2014 includes deferred tax liabilities on tax deductible intangible assets permitted under Basel III rules.
(b) Annualized.

N/M – Not meaningful.

The following table presents the reconciliation 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)

    March 31,
2014		    

Dec. 31,

2013

     March 31,
2013		  

BNY Mellon shareholders’ equity at period end – GAAP

    $ 37,986      $ 37,497      $ 35,672   

Less:   Preferred stock

      1,562        1,562        1,068   

BNY Mellon common shareholders’ equity at period end – GAAP

      36,424        35,935        34,604   

Less:   Goodwill

      18,100        18,073        17,920   

   Intangible assets

      4,380        4,452        4,696   

Add:   Deferred tax liability – tax deductible goodwill (a)

      1,306        1,302        1,170   

   Deferred tax liability – intangible assets (a)

      1,259        1,222        1,293   

Tangible BNY Mellon common shareholders’ equity at period end – Non-GAAP

    $ 16,509      $ 15,934      $ 14,451   

Total assets at period end – GAAP

    $ 368,241      $ 374,516      $ 356,146   

Less:   Assets of consolidated investment management funds

      11,451        11,272        11,236   

Subtotal assets of operations – Non-GAAP

      356,790        363,244        344,910   

Less:   Goodwill

      18,100        18,073        17,920   

   Intangible assets

      4,380        4,452        4,696   

   Cash on deposit with the Federal Reserve and other
    central banks (b)

      83,736        105,384        78,059   

Tangible total assets of operations at period end –
Non-GAAP

    $ 250,574      $ 235,335      $ 244,235   

BNY Mellon shareholders’ equity to total assets – GAAP

      10.3 %      10.0 %      10.0 % 

BNY Mellon common shareholders’ equity to total assets – GAAP

      9.9 %      9.6 %      9.7 % 

BNY Mellon tangible common shareholders’ equity to tangible assets of operations – Non-GAAP

      6.6 %      6.8 %      5.9 % 

Period-end common shares outstanding (in thousands)

      1,140,373        1,142,250        1,160,647   

Book value per common share

    $ 31.94      $ 31.46      $ 29.81   

Tangible book value per common share – Non-GAAP

    $ 14.48      $ 13.95      $ 12.45   

 

(a) Deferred tax liabilities are based on fully phased-in Basel III rules. First quarter of 2014 includes deferred tax liabilities on tax deductible intangible assets permitted under Basel III rules.
(b) Assigned a zero percent risk-weighting by the regulators.

 

13

The following table presents the reconciliation of our estimated fully phased-in Basel III CET1 ratio under the Standardized Approach and Advanced Approach.

 

Estimated fully phased-in Basel III CET1 ratio – Non-GAAP (a)

(dollars in millions)

    March 31,
2014		     Dec. 31,
2013		     March 31,
2013		  

Total Tier 1 capital

    $ 20,561      $ 18,335      $ 16,219   

Adjustments to determine estimated fully phased-in Basel III CET1:

       

Deferred tax liability – tax deductible intangible assets

      —          70        78   

Intangible deduction

      (2,496 )      —          —     

Preferred stock

      (1,562 )      (1,562 )      (1,068 ) 

Trust preferred securities

      (167 )      (330 )      (603 ) 

Other comprehensive income (loss) and net pension fund assets:

       

Securities available-for-sale

      430        387        1,314   

Pension liabilities

      (705 )      (900 )      (1,410 ) 

Net pension fund assets

      —          (713 )      (258 ) 

Total other comprehensive income (loss) and net pension fund assets

      (275 )      (1,226 )      (354 ) 

Equity method investments

      (102 )      (445 )      (488 ) 

Deferred tax assets

      —          (49 )      (52 ) 

Other

      (8 )      17        17   

Total estimated fully phased-in Basel III CET1

    $ 15,951      $ 14,810      $ 13,749   

Under the Standardized Approach:

       

Total risk-weighted assets – Basel I (b)

    $ 120,728      $ 113,322      $ 119,382   

Add:   Adjustments (c)

      24,416        26,543        26,898   

Total estimated fully phased-in Basel III risk-weighted assets

    $ 145,144      $ 139,865      $ 146,280   

Estimated fully phased-in Basel III CET1 ratio – Non-GAAP

      11.0 %      10.6 %      9.4 % 

Under the Advanced Approach:

       

Total risk-weighted assets – Basel I (b)

    $ 120,728      $ 113,322      $ 119,382   

Add: Adjustments (c)

     24,815        17,527        22,798   

Total estimated fully phased-in Basel III risk-weighted assets

    $ 145,543      $ 130,849      $ 142,180   

Estimated fully phased-in Basel III CET1 ratio – Non-GAAP

      11.0 %      11.3 %      9.7 % 

 

(a) March 31, 2014 information is preliminary. At March 31, 2014 and Dec. 31, 2013, the estimated fully phased-in Basel III CET1 ratios are based on our interpretation of the Final Rules. At March 31, 2013, these ratios were estimated using our interpretation of the NPRs dated June 7, 2012.
(b) Consistent with historic practice, the risk-based capital ratios do not include the impact of certain consolidated investment management funds, and do not include the impact of BNY Mellon’s actual contractual exposure to these vehicles. If the Company is required to include the net impact of such total consolidated assets, it would decrease the fully phased-in CET1 ratio under the Standardized Approach by approximately 60 basis points and the fully phased-in CET1 ratio under the Advanced Approach by approximately 100 basis points at March 31, 2014.
(c) Following are the primary differences between risk-weighted assets determined under Basel I and Basel III. Credit risk is determined under Basel I using predetermined risk-weights and asset classes and relies in part on the use of external credit ratings. Under Basel III both the Standardized and Advanced Approaches use a broader range of predetermined risk-weights and asset classes and certain alternatives to external credit ratings. Securitization exposure receives a higher risk-weighting under Basel III than Basel I, and Basel III includes additional adjustments for market risk, counterparty credit risk and equity exposures. Additionally, the Standardized Approach eliminates the use of the VaR approach for determining risk-weighted assets on certain repo-style transactions. Risk-weighted assets calculated under the Advanced Approach also include the use of internal credit models and parameters as well as an adjustment for operational risk. In 2014, risk-weighted assets include transition adjustments for intangible assets, other than goodwill, and significant investments in unconsolidated financial institutions.

The following table presents the reconciliation of our Basel I CET1 ratio.

 

Basel I CET1 ratio

(dollars in millions)

    Dec. 31,
2013		     March 31,
2013		  

Total Tier 1 capital – Basel I

    $ 18,335      $ 16,219   

Less:   Trust preferred securities

      330        603   

    Preferred stock

      1,562        1,068   

Total Tier 1 common equity

    $ 16,443      $ 14,548   

Total risk-weighted assets – Basel I

    $ 113,322      $ 119,382   

Basel I CET1 ratio – Non-GAAP

      14.5 %      12.2 % 

 

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Cautionary Statement

The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including our estimated capital ratios and expectations relating to those ratios, preliminary business metrics and statements made regarding the growing contribution from our Global Collateral Services and electronic foreign exchange initiatives, capital plan, focus on actively realigning the business model, controlling expenses and generating strong returns on tangible common equity. These statements, which may be expressed in a variety of ways, include the use of future or present tense language. These statements and other forward-looking statements contained in other public disclosures of BNY Mellon which make reference to the cautionary factors described in this Earnings Release, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon’s control). Factors that could cause BNY Mellon’s results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon’s Annual Report on Form 10-K for the year ended Dec. 31, 2013 and its other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Release speak only as of April 22, 2014 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.

 

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