Delaware | 13-2614959 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
Large accelerated filer [ X ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [ ] |
Class | Outstanding as of | |||
March 31, 2014 | ||||
Common Stock, $0.01 par value | 1,140,372,916 |
Page | |
Part I - Financial Information | |
Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures About Market Risk: | |
Item 1. Financial Statements: | |
Page | |
Notes to Consolidated Financial Statements: | |
Part II - Other Information | |
Quarter ended | ||||||||||||
(dollar amounts in millions, except per share amounts and unless otherwise noted) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | |||||||||
Results applicable to common shareholders of The Bank of New York Mellon Corporation: (a) | ||||||||||||
Net income (loss) | $ | 661 | $ | 513 | $ | (266 | ) | |||||
Basic EPS | 0.57 | 0.44 | (0.23 | ) | ||||||||
Diluted EPS | 0.57 | 0.44 | (0.23 | ) | (b) | |||||||
Fee and other revenue (a) | $ | 2,883 | $ | 2,814 | $ | 2,860 | ||||||
Income from consolidated investment management funds | 36 | 36 | 50 | |||||||||
Net interest revenue | 728 | 761 | 719 | |||||||||
Total revenue (a) | $ | 3,647 | $ | 3,611 | $ | 3,629 | ||||||
Return on common equity (annualized) (a)(c) | 7.4 | % | 5.7 | % | N/M | |||||||
Non-GAAP (a)(c)(d) | 7.9 | % | 6.3 | % | 7.8 | % | ||||||
Return on tangible common equity (annualized) – Non-GAAP (a)(c) | 17.6 | % | 14.3 | % | N/M | |||||||
Non-GAAP adjusted (a)(c)(d) | 17.4 | % | 14.3 | % | 18.5 | % | ||||||
Return on average assets (annualized) (a) | 0.75 | % | 0.57 | % | N/M | |||||||
Fee revenue as a percentage of total revenue excluding net securities gains (a) | 79 | % | 78 | % | 79 | % | ||||||
Annualized fee revenue per employee (based on average headcount) (in thousands) (a) | $ | 226 | $ | 216 | $ | 230 | ||||||
Percentage of non-U.S. total revenue (a)(e) | 37 | % | 39 | % | 35 | % | ||||||
Pre-tax operating margin (a)(c) | 25 | % | 20 | % | 23 | % | ||||||
Non-GAAP (c)(d) | 27 | % | 22 | % | 26 | % | ||||||
Net interest margin (FTE) | 1.05 | % | 1.09 | % | 1.11 | % | ||||||
Assets under management at period end (in billions) (f) | $ | 1,620 | $ | 1,583 | $ | 1,423 | ||||||
Assets under custody and/or administration at period end (in trillions) (g) | $ | 27.9 | $ | 27.6 | $ | 26.3 | ||||||
Market value of securities on loan at period end (in billions) (h) | $ | 264 | $ | 235 | $ | 244 | ||||||
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 | (b) | ||||||||
Capital ratios | ||||||||||||
Estimated common equity Tier 1 ratio (“CET1”), fully phased-in – Non-GAAP: (c)(i)(j) | ||||||||||||
Standardized Approach | 11.1 | % | 10.6 | % | 9.4 | % | ||||||
Advanced Approach | 10.7 | % | 11.3 | % | 9.7 | % | ||||||
CET1 ratio (c)(k) | 15.7 | % | 14.5 | % | 12.2 | % | ||||||
Tier 1 capital ratio (k) | 17.0 | % | (c) | 16.2 | % | 13.6 | % | |||||
Total (Tier 1 plus Tier 2) capital ratio (k) | 17.8 | % | (c) | 17.0 | % | 14.7 | % | |||||
Leverage capital ratio (k) | 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 | % |
Quarter ended | |||||||||||
(dollar amounts in millions, except per share amounts and unless otherwise noted) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||||
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 | |||||
Other information at period end | |||||||||||
Cash dividends per common share | $ | 0.15 | $ | 0.15 | $ | 0.13 | |||||
Common dividend payout ratio | 26 | % | 34 | % | N/M | ||||||
Common dividend yield (annualized) | 1.7 | % | 1.7 | % | 1.9 | % | |||||
Closing common stock price per share | $ | 35.29 | $ | 34.94 | $ | 27.99 | |||||
Market capitalization | $ | 40,244 | $ | 39,910 | $ | 32,487 | |||||
Book value per common share – GAAP (a) (c) | $ | 31.94 | $ | 31.46 | $ | 29.81 | |||||
Tangible book value per common share – Non-GAAP (a) (c) | $ | 14.48 | $ | 13.95 | $ | 12.45 | |||||
Full-time employees | 51,400 | 51,100 | 49,700 | ||||||||
Common share outstanding (in thousands) | 1,140,373 | 1,142,250 | 1,160,647 |
(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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | 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. |
(c) | See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 49 for a reconciliation of these ratios. |
(d) | Non-GAAP excludes merger and integration (“M&I”), litigation, restructuring charges and the charge related to the U.S. Tax Court’s decision to disallow certain foreign tax credits, if applicable. |
(e) | Includes fee revenue, net interest revenue and income of consolidated investment management funds, net of net income attributable to noncontrolling interests. |
(f) | 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. |
(g) | Includes the assets under custody and/or administration (“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. |
(h) | Represents the securities on loan managed by the Investment Services business. Excludes securities for which BNY Mellon acts as an 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. |
(i) | 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 Capital 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. |
(j) | Consistent with historic 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 90 basis points at March 31, 2014. |
(k) | 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 Capital Rules (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, while the CET1 ratio is a Basel I Tier 1 common ratio. |
Part I - Financial Information |
Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures about Market Risk |
• | AUC/A totaled $27.9 trillion at March 31, 2014 compared with $26.3 trillion at March 31, 2013. The year-over-year increase of 6% primarily reflects higher market values. (See the “Investment Services business” beginning on page 19). |
• | Assets under management (“AUM”), excluding securities lending cash management assets and assets managed in the Investment Services business, totaled a record $1.62 trillion at March 31, 2014 compared with $1.42 trillion at March 31, 2013. The year-over-year increase of 14% resulted from higher market values and net new business. (See the “Investment Management business” beginning on page 16). |
• | Investment services fees totaled $1.7 billion, an increase of 3% compared with the first quarter of 2013. The 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. (See the “Investment Services business” beginning on page 19). |
• | Investment management and performance fees totaled $843 million in the first quarter of 2014, an increase of 3% compared with the first quarter of 2013. The increase primarily reflects higher equity market values, net new business and higher performance fees, partially offset by higher money market fee waivers. (See the “Investment Management business” beginning on page 16). |
• | Foreign exchange and other trading revenue totaled $136 million in the first quarter of 2014 compared with $161 million in the first quarter of 2013. Foreign exchange revenue decreased 13% year-over-year primarily driven by lower volatility, partially offset by higher volumes resulting from enhancements to our electronic foreign exchange platform. Other trading revenue decreased year-over-year reflecting lower fixed income trading revenue. (See “Fee and other revenue” beginning on page 7). |
• | Investment and other income totaled $102 million in the first quarter of 2014 compared with $88 million in the first quarter of 2013. The increase primarily reflects higher lease residual gains, partially offset by lower equity investment revenue. (See “Fee and other revenue” beginning on page 7). |
• | Net interest revenue totaled $728 million in the first quarter of 2014 compared with $719 million in the first quarter of 2013. The increase resulted from a change in asset mix and higher average deposits, partially offset by lower yields on investment securities. (See “Net interest revenue” beginning on page 10). |
• | 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 |
• | 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. (See “Asset quality and allowance for credit losses” beginning on page 32). |
• | Noninterest expense totaled $2.7 billion in the first quarter of 2014 compared with $2.8 billion in the first quarter of 2013. The decrease primarily resulted from 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. (See “Noninterest expense” beginning on page 12). |
• | The provision for income taxes of $232 million (25.1% effective tax rate) in the first quarter of 2014 was positively impacted by the change in New York State tax rates enacted on March 31, 2014. (See “Income taxes” on page 13). |
• | At March 31, 2014, our estimated CET1 ratio (Non-GAAP) calculated under the Standardized Approach, and based on our interpretation of the Final Capital Rules, on a fully phased-in basis, was 11.1% compared with 10.6% at Dec. 31, 2013. Our estimated Basel III CET1 ratio (Non-GAAP) calculated under the Advanced Approach, and based on our interpretation of the Final Capital Rules, on a fully phased-in basis, was 10.7% at March 31, 2014, compared with 11.3% at Dec. 31, 2013. (See “Capital” beginning on page 41). |
• | In the first quarter of 2014, we repurchased 11.6 million common shares for a total of $375 million. |
Fee and other revenue | 1Q14 vs. | ||||||||||||
(dollars in millions, unless otherwise noted) | 1Q14 | 4Q13 | 1Q13 | 1Q13 | 4Q13 | ||||||||
Investment services fees: | |||||||||||||
Asset servicing (a) | $ | 1,009 | $ | 984 | $ | 969 | 4 | % | 3 | % | |||
Clearing services | 325 | 324 | 304 | 7 | — | ||||||||
Issuer services | 229 | 237 | 237 | (3 | ) | (3 | ) | ||||||
Treasury services | 136 | 137 | 141 | (4 | ) | (1 | ) | ||||||
Total investment services fees | 1,699 | 1,682 | 1,651 | 3 | 1 | ||||||||
Investment management and performance fees | 843 | 904 | 822 | 3 | (7 | ) | |||||||
Foreign exchange and other trading revenue | 136 | 146 | 161 | (16 | ) | (7 | ) | ||||||
Distribution and servicing | 43 | 43 | 49 | (12 | ) | — | |||||||
Financing-related fees | 38 | 43 | 41 | (7 | ) | (12 | ) | ||||||
Investment and other income (b) | 102 | (43 | ) | 88 | N/M | N/M | |||||||
Total fee revenue (b) | 2,861 | 2,775 | 2,812 | 2 | 3 | ||||||||
Net securities gains | 22 | 39 | 48 | N/M | N/M | ||||||||
Total fee and other revenue (b) | $ | 2,883 | $ | 2,814 | $ | 2,860 | 1 | % | 2 | % | |||
AUM at period end (in billions) (c) | $ | 1,620 | $ | 1,583 | $ | 1,423 | 14 | % | 2 | % | |||
AUC/A at period end (in trillions) (d) | $ | 27.9 | $ | 27.6 | $ | 26.3 | 6 | % | 1 | % |
(a) | Asset servicing fees include securities lending revenue of $38 million in the first quarter of 2014, $31 million in the fourth quarter of 2013 and $39 million in the first quarter of 2013. |
(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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(c) | 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. |
(d) | Includes the AUC/A of CIBC Mellon of $1.2 trillion at March 31, 2014, Dec. 31, 2013 and March 31, 2013. |
• | Asset servicing fees increased 4% year-over-year and 3% (unannualized) sequentially. The year-over-year increase primarily reflects higher market values, net new business and organic growth. The sequential increase primarily reflects organic growth, higher securities lending revenue and net new business. |
• | Clearing services fees increased 7% year-over-year and were unchanged sequentially. The year-over-year increase was driven by higher mutual fund fees, higher asset-based fees and an increase in daily average revenue trades (“DARTS”), partially offset by higher money market fee waivers. Sequentially, higher clearance revenue was primarily offset by fewer trading days in the first quarter of 2014. |
• | Issuer services fees decreased 3% both year-over-year and (unannualized) sequentially. Both decreases reflect the impact of the continued net run-off of high margin structured debt securitizations in Corporate Trust. The year-over-year decrease was partially offset by higher Depositary Receipts revenue driven by corporate actions. We continue to estimate that the net run-off of high margin structured debt securitizations |
• | Treasury services fees decreased 4% year-over-year and 1% (unannualized) sequentially. Both decreases reflect lower cash management fees. |
Foreign exchange and other trading revenue | |||||||||
(in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
Foreign exchange | $ | 130 | $ | 126 | $ | 149 | |||
Other trading revenue: | |||||||||
Fixed income | 1 | 20 | 8 | ||||||
Equity/other | 5 | — | 4 | ||||||
Total other trading revenue | 6 | 20 | 12 | ||||||
Total foreign exchange and other trading revenue | $ | 136 | $ | 146 | $ | 161 |
Investment and other income (loss) | |||||||||
(in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
Lease residual gains | $ | 35 | $ | — | $ | 1 | |||
Corporate/bank-owned life insurance | 30 | 40 | 34 | ||||||
Expense reimbursements from joint venture | 12 | 11 | 11 | ||||||
Seed capital gains | 6 | 20 | 6 | ||||||
Private equity gains (losses) | 5 | 5 | (2 | ) | |||||
Transitional services agreements | — | 2 | 5 | ||||||
Asset-related gains (losses) | (1 | ) | 22 | 7 | |||||
Equity investment revenue (loss) | (2 | ) | (163 | ) | 13 | ||||
Other income (a) | 17 | 20 | 13 | ||||||
Total investment and other income (loss) (a) | $ | 102 | $ | (43 | ) | $ | 88 |
Net interest revenue | 1Q14 | 4Q13 | 1Q13 | 1Q14 vs. | ||||||||||||
(dollars in millions) | 1Q13 | 4Q13 | ||||||||||||||
Net interest revenue (non-FTE) | $ | 728 | $ | 761 | $ | 719 | 1 | % | (4 | )% | ||||||
Tax equivalent adjustment | 16 | 20 | 14 | 14 | (20 | ) | ||||||||||
Net interest revenue (FTE) – Non-GAAP | 744 | 781 | 733 | 2 | % | (5 | )% | |||||||||
Average interest-earning assets | $ | 284,532 | $ | 285,779 | $ | 265,754 | 7 | % | — | % | ||||||
Net interest margin (FTE) | 1.05 | % | 1.09 | % | 1.11 | % | (6) bps | (4) bps |
Average balances and interest rates | Quarter ended | |||||||||||||||||||
March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||||||||||||||
(dollar amounts in millions, presented on an FTE basis) | Average balance | Average rates | Average balance | Average rates | Average balance | Average rates | ||||||||||||||
Assets | ||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||
Interest-bearing deposits with banks (primarily foreign banks) | $ | 41,617 | 0.71 | % | $ | 39,563 | 0.71 | % | $ | 40,967 | 0.70 | % | ||||||||
Interest-bearing deposits held at the Federal Reserve and other central banks | 74,399 | 0.25 | 83,232 | 0.23 | 63,240 | 0.20 | ||||||||||||||
Federal funds sold and securities purchased under resale agreements | 11,118 | 0.61 | 9,403 | 0.61 | 7,478 | 0.54 | ||||||||||||||
Margin loans | 15,840 | 1.07 | 15,224 | 1.08 | 13,346 | 1.17 | ||||||||||||||
Non-margin loans: | ||||||||||||||||||||
Domestic offices | 22,002 | 2.31 | 22,538 | 2.28 | 21,358 | 2.38 | ||||||||||||||
Foreign offices | 13,805 | 1.26 | 13,006 | 1.22 | 11,575 | 1.36 | ||||||||||||||
Total non-margin loans | 35,807 | 1.90 | 35,544 | 1.89 | 32,933 | 2.02 | ||||||||||||||
Securities: | ||||||||||||||||||||
U.S. Government obligations | 17,213 | 1.61 | 13,418 | 1.96 | 18,814 | 1.54 | ||||||||||||||
U.S. Government agency obligations | 42,710 | 1.87 | 43,465 | 2.00 | 42,397 | 1.85 | ||||||||||||||
State and political subdivisions – tax-exempt | 6,691 | 2.50 | 6,757 | 2.76 | 6,194 | 2.38 | ||||||||||||||
Other securities | 33,920 | 1.64 | 33,000 | 1.78 | 34,507 | 2.03 | ||||||||||||||
Trading securities | 5,217 | 2.60 | 6,173 | 2.82 | 5,878 | 2.40 | ||||||||||||||
Total securities | 105,751 | 1.83 | 102,813 | 2.02 | 107,790 | 1.91 | ||||||||||||||
Total interest-earning assets | $ | 284,532 | 1.17 | % | $ | 285,779 | 1.21 | % | $ | 265,754 | 1.26 | % | ||||||||
Allowance for loan losses | (210 | ) | (207 | ) | (264 | ) | ||||||||||||||
Cash and due from banks | 5,886 | 6,623 | 4,534 | |||||||||||||||||
Other assets | 53,430 | 52,434 | 52,137 | |||||||||||||||||
Assets of consolidated investment management funds | 11,354 | 11,506 | 11,503 | |||||||||||||||||
Total assets | $ | 354,992 | $ | 356,135 | $ | 333,664 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||
Money market rate accounts | $ | 5,660 | 0.13 | % | $ | 6,587 | 0.16 | % | $ | 5,716 | 0.25 | % | ||||||||
Savings | 1,034 | 0.25 | 993 | 0.25 | 819 | 0.29 | ||||||||||||||
Demand deposits | 3,673 | 0.08 | 4,455 | 0.07 | 3,062 | 0.07 | ||||||||||||||
Time deposits | 41,544 | 0.04 | 41,523 | 0.04 | 39,091 | 0.05 | ||||||||||||||
Foreign offices | 101,075 | 0.06 | 103,462 | 0.06 | 99,040 | 0.08 | ||||||||||||||
Total interest-bearing deposits | 152,986 | 0.06 | 157,020 | 0.06 | 147,728 | 0.08 | ||||||||||||||
Federal funds purchased and securities sold under repurchase agreements | 14,505 | (0.13 | ) | 13,155 | (0.10 | ) | 9,187 | (0.12 | ) | |||||||||||
Trading liabilities | 1,978 | 1.59 | 2,534 | 1.42 | 2,552 | 1.35 | ||||||||||||||
Other borrowed funds | 1,035 | 0.51 | 1,124 | 0.83 | 1,152 | 0.90 | ||||||||||||||
Commercial paper | 102 | 0.05 | 1,254 | 0.05 | 245 | 0.09 | ||||||||||||||
Payables to customers and broker-dealers | 8,883 | 0.09 | 9,400 | 0.09 | 9,019 | 0.09 | ||||||||||||||
Long-term debt | 20,420 | 1.09 | 19,501 | 1.05 | 18,878 | 1.18 | ||||||||||||||
Total interest-bearing liabilities | $ | 199,909 | 0.17 | % | $ | 203,988 | 0.17 | % | $ | 188,761 | 0.20 | % | ||||||||
Total noninterest-bearing deposits | 81,430 | 79,999 | 70,337 | |||||||||||||||||
Other liabilities | 24,608 | 23,546 | 27,416 | |||||||||||||||||
Liabilities and obligations of consolidated investment management funds | 10,128 | 10,283 | 10,186 | |||||||||||||||||
Total liabilities | 316,075 | 317,816 | 296,700 | |||||||||||||||||
Temporary equity | ||||||||||||||||||||
Redeemable noncontrolling interests | 246 | 224 | 175 | |||||||||||||||||
Permanent equity | ||||||||||||||||||||
Total BNY Mellon shareholders’ equity | 37,851 | 37,260 | 35,966 | |||||||||||||||||
Noncontrolling interests | 820 | 835 | 823 | |||||||||||||||||
Total permanent equity | 38,671 | 38,095 | 36,789 | |||||||||||||||||
Total liabilities, temporary equity and permanent equity | $ | 354,992 | $ | 356,135 | $ | 333,664 | ||||||||||||||
Net interest margin (FTE) | 1.05 | % | 1.09 | % | 1.11 | % |
Note: | Interest and average rates were calculated on a taxable equivalent basis, at tax rates approximating 35%, using dollar amounts in thousands and actual number of days in the year. |
Noninterest expense | 1Q14 vs. | |||||||||||||
(dollars in millions) | 1Q14 | 4Q13 | 1Q13 | 1Q13 | 4Q13 | |||||||||
Staff: | ||||||||||||||
Compensation | $ | 925 | $ | 929 | $ | 885 | 5 | % | — | % | ||||
Incentives | 359 | 343 | 338 | 6 | 5 | |||||||||
Employee benefits | 227 | 250 | 249 | (9 | ) | (9 | ) | |||||||
Total staff | 1,511 | 1,522 | 1,472 | 3 | (1 | ) | ||||||||
Professional, legal and other purchased services | 312 | 344 | 295 | 6 | (9 | ) | ||||||||
Net occupancy | 154 | 154 | 163 | (6 | ) | — | ||||||||
Software | 152 | 152 | 140 | 9 | — | |||||||||
Distribution and servicing | 107 | 110 | 106 | 1 | (3 | ) | ||||||||
Furniture and equipment | 85 | 89 | 88 | (3 | ) | (4 | ) | |||||||
Sub-custodian | 68 | 68 | 64 | 6 | — | |||||||||
Business development | 64 | 96 | 68 | (6 | ) | (33 | ) | |||||||
Other | 223 | 258 | 307 | (27 | ) | (14 | ) | |||||||
Amortization of intangible assets | 75 | 82 | 86 | (13 | ) | (9 | ) | |||||||
M&I, litigation and restructuring charges | (12 | ) | 2 | 39 | N/M | N/M | ||||||||
Total noninterest expense - GAAP | $ | 2,739 | $ | 2,877 | $ | 2,828 | (3 | )% | (5 | )% | ||||
Total staff expense as a percentage of total revenue (a) | 41 | % | 42 | % | 41 | % | ||||||||
Full-time employees at period end | 51,400 | 51,100 | 49,700 | 3 | % | 1 | % | |||||||
Memo: | ||||||||||||||
Total noninterest expense excluding amortization of intangible assets and M&I, litigation and restructuring charges - Non-GAAP | $ | 2,676 | $ | 2,793 | $ | 2,703 | (1 | )% | (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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
Key market metrics | 1Q14 vs. | ||||||||||||||
1Q13 | 2Q13 | 3Q13 | 4Q13 | 1Q14 | 1Q13 | 4Q13 | |||||||||
S&P 500 Index (a) | 1569 | 1606 | 1682 | 1848 | 1872 | 19 | % | 1 | % | ||||||
S&P 500 Index – daily average | 1514 | 1609 | 1675 | 1769 | 1835 | 21 | 4 | ||||||||
FTSE 100 Index (a) | 6412 | 6215 | 6462 | 6749 | 6598 | 3 | (2 | ) | |||||||
FTSE 100 Index – daily average | 6300 | 6438 | 6530 | 6612 | 6680 | 6 | 1 | ||||||||
MSCI World Index (a) | 1435 | 1434 | 1544 | 1661 | 1674 | 17 | 1 | ||||||||
MSCI World Index – daily average | 1405 | 1463 | 1511 | 1602 | 1647 | 17 | 3 | ||||||||
Barclays Capital Global Aggregate BondSM Index (a) (b) | 356 | 343 | 356 | 354 | 365 | 3 | 3 | ||||||||
NYSE and NASDAQ share volume (in billions) | 174 | 186 | 166 | 179 | 196 | 13 | 9 | ||||||||
JPMorgan G7 Volatility Index – daily average (c) | 9.02 | 9.84 | 9.72 | 8.20 | 7.80 | (14 | ) | (5 | ) | ||||||
Average Fed Funds effective rate | 0.14 | % | 0.12 | % | 0.09 | % | 0.09 | % | 0.07 | % | (7) bps | (2) bps |
(a) | Period end. |
(b) | Unhedged in U.S. dollar terms. |
(c) | The JPMorgan G7 Volatility Index is based on the implied volatility in 3-month currency options. |
For the quarter ended March 31, 2014 (dollar amounts in millions) | Investment Management | Investment Services | Other | Consolidated | ||||||||||||
Fee and other revenue | $ | 900 | (a) | $ | 1,887 | $ | 112 | $ | 2,899 | (a) | ||||||
Net interest revenue | 70 | 590 | 68 | 728 | ||||||||||||
Total revenue | 970 | (a) | 2,477 | 180 | 3,627 | (a) | ||||||||||
Provision for credit losses | — | — | (18 | ) | (18 | ) | ||||||||||
Noninterest expense | 724 | 1,821 | 194 | 2,739 | ||||||||||||
Income before taxes | $ | 246 | (a) | $ | 656 | $ | 4 | $ | 906 | (a) | ||||||
Pre-tax operating margin (b) | 25 | % | 26 | % | N/M | 25 | % | |||||||||
Average assets | $ | 39,463 | $ | 258,470 | $ | 57,059 | $ | 354,992 | ||||||||
Excluding amortization of intangible assets: | ||||||||||||||||
Noninterest expense | $ | 693 | $ | 1,777 | $ | 194 | $ | 2,664 | ||||||||
Income before taxes | 277 | (a) | 700 | 4 | 981 | (a) | ||||||||||
Pre-tax operating margin (b) | 29 | % | 28 | % | N/M | 27 | % |
(a) | Both total fee and other revenue and total revenue include income from consolidated investment management funds of $36 million, net of noncontrolling interests of $20 million, for a net impact of $16 million. Income before taxes includes noncontrolling interests of $20 million. |
(b) | Income before taxes divided by total revenue. |
For the quarter ended Dec. 31, 2013 (dollar amounts in millions) | Investment Management | Investment Services | Other | Consolidated | ||||||||||||
Fee and other revenue (a) | $ | 993 | (b) | $ | 1,860 | $ | (20 | ) | $ | 2,833 | (b) | |||||
Net interest revenue | 68 | 610 | 83 | 761 | ||||||||||||
Total revenue (a) | 1,061 | (b) | 2,470 | 63 | 3,594 | (b) | ||||||||||
Provision for credit losses | — | — | 6 | 6 | ||||||||||||
Noninterest expense | 795 | 1,867 | 215 | 2,877 | ||||||||||||
Income (loss) before taxes (a) | $ | 266 | (b) | $ | 603 | $ | (158 | ) | $ | 711 | (b) | |||||
Pre-tax operating margin (a) (c) | 25 | % | 24 | % | N/M | 20 | % | |||||||||
Average assets | $ | 38,796 | $ | 258,294 | $ | 59,045 | $ | 356,135 | ||||||||
Excluding amortization of intangible assets: | ||||||||||||||||
Noninterest expense | $ | 760 | $ | 1,820 | $ | 215 | $ | 2,795 | ||||||||
Income (loss) before taxes (a) | 301 | (b) | 650 | (158 | ) | 793 | (b) | |||||||||
Pre-tax operating margin (a) (c) | 28 | % | 26 | % | N/M | 22 | % |
(a) | Consolidated results and Other segment results have been restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | Both total fee and other revenue and total revenue include income from consolidated investment management funds of $36 million, net of noncontrolling interests of $17 million, for a net impact of $19 million. Income before taxes includes noncontrolling interests of $17 million. |
(c) | Income before taxes divided by total revenue. |
For the quarter ended March 31, 2013 (dollar amounts in millions) | Investment Management | Investment Services | Other | Consolidated | ||||||||||||
Fee and other revenue (a) | $ | 881 | (b) | $ | 1,861 | $ | 152 | $ | 2,894 | (b) | ||||||
Net interest revenue | 62 | 653 | 4 | 719 | ||||||||||||
Total revenue (a) | 943 | (b) | 2,514 | 156 | 3,613 | (b) | ||||||||||
Provision for credit losses | — | 1 | (25 | ) | (24 | ) | ||||||||||
Noninterest expense | 737 | 1,840 | 251 | 2,828 | ||||||||||||
Income (loss) before taxes (a) | $ | 206 | (b) | $ | 673 | $ | (70 | ) | $ | 809 | (b) | |||||
Pre-tax operating margin (a) (c) | 22 | % | 27 | % | N/M | 22 | % | |||||||||
Average assets | $ | 38,743 | $ | 240,187 | $ | 54,734 | $ | 333,664 | ||||||||
Excluding amortization of intangible assets: | ||||||||||||||||
Noninterest expense | $ | 698 | $ | 1,793 | $ | 251 | $ | 2,742 | ||||||||
Income (loss) before taxes | 245 | (b) | 720 | (70 | ) | 895 | (b) | |||||||||
Pre-tax operating margin (a) (c) | 26 | % | 29 | % | N/M | 25 | % |
(a) | Consolidated results and Other segment results have been restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | Both total fee and other revenue and total revenue include income from consolidated investment management funds of $50 million, net of noncontrolling interests of $16 million, for a net impact of $34 million. Income before taxes includes noncontrolling interests of $16 million. |
(c) | Income before taxes divided by total revenue. |
(dollar amounts in millions) | 1Q14 vs. | |||||||||||||||||||
1Q13 | 2Q13 | 3Q13 | 4Q13 | 1Q14 | 1Q13 | 4Q13 | ||||||||||||||
Revenue: | ||||||||||||||||||||
Investment management fees: | ||||||||||||||||||||
Mutual funds | $ | 299 | $ | 299 | $ | 293 | $ | 303 | $ | 299 | — | % | (1 | )% | ||||||
Institutional clients | 360 | 366 | 367 | 385 | 372 | 3 | (3 | ) | ||||||||||||
Wealth management | 143 | 146 | 145 | 149 | 153 | 7 | 3 | |||||||||||||
Investment management fees | 802 | 811 | 805 | 837 | 824 | 3 | (2 | ) | ||||||||||||
Performance fees | 15 | 33 | 10 | 72 | 20 | 33 | N/M | |||||||||||||
Investment management and performance fees | 817 | 844 | 815 | 909 | 844 | 3 | (7 | ) | ||||||||||||
Distribution and servicing | 46 | 44 | 41 | 41 | 40 | (13 | ) | (2 | ) | |||||||||||
Other (a) | 18 | 24 | 26 | 43 | 16 | N/M | N/M | |||||||||||||
Total fee and other revenue (a) | 881 | 912 | 882 | 993 | 900 | 2 | (9 | ) | ||||||||||||
Net interest revenue | 62 | 63 | 67 | 68 | 70 | 13 | 3 | |||||||||||||
Total revenue | 943 | 975 | 949 | 1,061 | 970 | 3 | (9 | ) | ||||||||||||
Noninterest expense (ex. amortization of intangible assets) | 698 | 665 | 689 | 760 | 693 | (1 | ) | (9 | ) | |||||||||||
Income before taxes (ex. amortization of intangible assets) | 245 | 310 | 260 | 301 | 277 | 13 | (8 | ) | ||||||||||||
Amortization of intangible assets | 39 | 39 | 35 | 35 | 31 | (21 | ) | (11 | ) | |||||||||||
Income before taxes | $ | 206 | $ | 271 | $ | 225 | $ | 266 | $ | 246 | 19 | % | (8 | )% | ||||||
Pre-tax operating margin | 22 | % | 28 | % | 24 | % | 25 | % | 25 | % | ||||||||||
Adjusted pre-tax operating margin (a) | 31 | % | 37 | % | 33 | % | 34 | % | 35 | % | ||||||||||
Wealth management: | ||||||||||||||||||||
Average loans | $ | 8,972 | $ | 9,253 | $ | 9,453 | $ | 9,755 | $ | 10,075 | 12 | % | 3 | % | ||||||
Average deposits | $ | 13,646 | $ | 13,306 | $ | 13,898 | $ | 14,161 | $ | 14,805 | 8 | % | 5 | % |
(a) | Total fee and other revenue includes the impact of the consolidated investment management funds. Adjusted pre-tax operating margin includes the pro forma impact of money market fee waivers, is net of distribution and servicing expense and excludes amortization of intangible assets. See “Supplemental information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 49 for the reconciliation of Non-GAAP measures. |
AUM trends (a) | 1Q14 vs. | ||||||||||||||||||||||
(dollar amounts in billions) | 1Q13 | 2Q13 | 3Q13 | 4Q13 | 1Q14 | 1Q13 | 4Q13 | ||||||||||||||||
AUM at period end, by product type: | |||||||||||||||||||||||
Equity | $ | 246 | $ | 242 | $ | 266 | $ | 276 | $ | 277 | 13 | % | — | % | |||||||||
Fixed income | 216 | 218 | 215 | 220 | 224 | 4 | 2 | ||||||||||||||||
Index | 272 | 280 | 303 | 323 | 328 | 21 | 2 | ||||||||||||||||
Liability-driven investments (b) | 348 | 347 | 394 | 403 | 436 | 25 | 8 | ||||||||||||||||
Alternative investments | 63 | 63 | 62 | 62 | 63 | — | 2 | ||||||||||||||||
Cash | 278 | 277 | 292 | 299 | 292 | 5 | (2 | ) | |||||||||||||||
Total AUM | $ | 1,423 | $ | 1,427 | $ | 1,532 | $ | 1,583 | $ | 1,620 | 14 | % | 2 | % | |||||||||
AUM at period end, by client type: | |||||||||||||||||||||||
Institutional | $ | 939 | $ | 968 | $ | 1,041 | $ | 1,072 | $ | 1,118 | 19 | % | 4 | % | |||||||||
Mutual funds | 405 | 378 | 407 | 425 | 415 | 2 | (2 | ) | |||||||||||||||
Private client | 79 | 81 | 84 | 86 | 87 | 10 | 1 | ||||||||||||||||
Total AUM | $ | 1,423 | $ | 1,427 | $ | 1,532 | $ | 1,583 | $ | 1,620 | 14 | % | 2 | % | |||||||||
Changes in AUM: | |||||||||||||||||||||||
Beginning balance of AUM | $ | 1,380 | $ | 1,423 | $ | 1,427 | $ | 1,532 | $ | 1,583 | |||||||||||||
Net inflows (outflows): | |||||||||||||||||||||||
Long-term: | |||||||||||||||||||||||
Equity | 1 | 1 | 3 | (5 | ) | (1 | ) | ||||||||||||||||
Fixed income | 5 | 2 | (1 | ) | 5 | — | |||||||||||||||||
Index | 12 | 8 | 2 | (3 | ) | — | |||||||||||||||||
Liability-driven investments (b) | 22 | 11 | 27 | 4 | 20 | ||||||||||||||||||
Alternative investments | — | (1 | ) | 1 | 1 | 2 | |||||||||||||||||
Total long-term inflows (outflows) | 40 | 21 | 32 | 2 | 21 | ||||||||||||||||||
Short term: | |||||||||||||||||||||||
Cash | (13 | ) | (1 | ) | 13 | 6 | (7 | ) | |||||||||||||||
Total net inflows (outflows) | 27 | 20 | 45 | 8 | 14 | ||||||||||||||||||
Net market/currency impact | 16 | (16 | ) | 60 | 43 | 23 | |||||||||||||||||
Ending balance of AUM | $ | 1,423 | $ | 1,427 | $ | 1,532 | $ | 1,583 | $ | 1,620 | 14 | % | 2 | % |
(a) | 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. |
(b) | Includes currency and overlay assets under management. |
(dollar amounts in millions, unless otherwise noted) | 1Q14 vs. | |||||||||||||||||||
1Q13 | 2Q13 | 3Q13 | 4Q13 | 1Q14 | 1Q13 | 4Q13 | ||||||||||||||
Revenue: | ||||||||||||||||||||
Investment services fees: | ||||||||||||||||||||
Asset servicing | $ | 943 | $ | 961 | $ | 939 | $ | 957 | $ | 985 | 4 | % | 3 | % | ||||||
Clearing services | 302 | 320 | 314 | 322 | 323 | 7 | — | |||||||||||||
Issuer services | 236 | 294 | 321 | 236 | 228 | (3 | ) | (3 | ) | |||||||||||
Treasury services | 137 | 135 | 135 | 137 | 134 | (2 | ) | (2 | ) | |||||||||||
Total investment services fees | 1,618 | 1,710 | 1,709 | 1,652 | 1,670 | 3 | 1 | |||||||||||||
Foreign exchange and other trading revenue | 173 | 193 | 177 | 150 | 158 | (9 | ) | 5 | ||||||||||||
Other (a) | 70 | 67 | 63 | 58 | 59 | (16 | ) | 2 | ||||||||||||
Total fee and other revenue (a) | 1,861 | 1,970 | 1,949 | 1,860 | 1,887 | 1 | 1 | |||||||||||||
Net interest revenue | 653 | 633 | 619 | 610 | 590 | (10 | ) | (3 | ) | |||||||||||
Total revenue | 2,514 | 2,603 | 2,568 | 2,470 | 2,477 | (1 | ) | — | ||||||||||||
Provision for credit losses | 1 | — | — | — | — | N/M | N/M | |||||||||||||
Noninterest expense (ex. amortization of intangible assets) | 1,793 | 1,825 | 1,764 | 1,820 | 1,777 | (1 | ) | (2 | ) | |||||||||||
Income before taxes (ex. amortization of intangible assets) | 720 | 778 | 804 | 650 | 700 | (3 | ) | 8 | ||||||||||||
Amortization of intangible assets | 47 | 54 | 46 | 47 | 44 | (6 | ) | (6 | ) | |||||||||||
Income before taxes | $ | 673 | $ | 724 | $ | 758 | $ | 603 | $ | 656 | (3 | )% | 9 | % | ||||||
Pre-tax operating margin | 27 | % | 28 | % | 30 | % | 24 | % | 26 | % | ||||||||||
Pre-tax operating margin (ex. amortization of intangible assets) | 29 | % | 30 | % | 31 | % | 26 | % | 28 | % | ||||||||||
Investment services fees as a percentage of noninterest expense (b) | 92 | % | 94 | % | 97 | % | 90 | % | 93 | % | ||||||||||
Securities lending revenue | $ | 31 | $ | 39 | $ | 26 | $ | 21 | $ | 30 | (3 | )% | 43 | % | ||||||
Metrics: | ||||||||||||||||||||
Average loans | $ | 26,697 | $ | 27,814 | $ | 27,865 | $ | 31,211 | $ | 31,468 | 18 | % | 1 | % | ||||||
Average deposits | $ | 200,222 | $ | 204,499 | $ | 206,068 | $ | 216,216 | $ | 214,947 | 7 | % | (1 | )% | ||||||
AUC/A at period end (in trillions) (c) | $ | 26.3 | $ | 26.2 | $ | 27.4 | $ | 27.6 | $ | 27.9 | 6 | % | 1 | % | ||||||
Market value of securities on loan at period end (in billions) (d) | $ | 244 | $ | 255 | $ | 255 | $ | 235 | $ | 264 | 8 | % | 12 | % | ||||||
Asset servicing: | ||||||||||||||||||||
Estimated new business wins (AUC/A) (in billions) | $ | 205 | $ | 201 | $ | 110 | $ | 123 | $ | 161 | ||||||||||
Depositary Receipts: | ||||||||||||||||||||
Number of sponsored programs | 1,359 | 1,349 | 1,350 | 1,335 | 1,332 | (2 | )% | — | % | |||||||||||
Clearing services: | ||||||||||||||||||||
Global DARTS volume (in thousands) (e) | 213 | 217 | 212 | 213 | 230 | 8 | % | 8 | % | |||||||||||
Average active clearing accounts (U.S. platform) (in thousands) | 5,552 | 5,591 | 5,622 | 5,643 | 5,695 | 3 | % | 1 | % | |||||||||||
Average long-term mutual fund assets (U.S. platform) | $ | 357,647 | $ | 371,196 | $ | 377,131 | $ | 401,434 | $ | 413,658 | 16 | % | 3 | % | ||||||
Average investor margin loans (U.S. platform) | $ | 8,212 | $ | 8,235 | $ | 8,845 | $ | 8,848 | $ | 8,919 | 9 | % | 1 | % | ||||||
Broker-Dealer: | ||||||||||||||||||||
Average tri-party repo balances (in billions) | $ | 2,070 | $ | 2,037 | $ | 1,952 | $ | 2,005 | $ | 1,983 | (4 | )% | (1 | )% |
(a) | Total fee and other revenue includes investment management fees and distribution and servicing revenue. |
(b) | Noninterest expense excludes amortization of intangible assets and litigation expense. |
(c) | Includes the AUC/A of CIBC Mellon of $1.2 trillion at March 31, 2013, $1.1 trillion at June 30, 2013 and $1.2 trillion at Sept. 30, 2013 , Dec. 31, 2013 and March 31, 2014. |
(d) | 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 $62 billion at Dec. 31, 2013 and $66 billion at March 31, 2014. |
(e) | Represents DARTS occurring in our Clearing Services business only. |
• | Asset servicing fees (global custody, broker-dealer services and global collateral services) were $985 million in the first quarter of 2014 |
• | Clearing services fees were $323 million in the first quarter of 2014 compared with $302 million in the first quarter of 2013 and $322 million in the fourth quarter of 2013. The year-over-year increase was driven by higher mutual fund fees, higher asset-based fees and an increase in DARTS, partially offset by higher money market fee waivers. Sequentially, higher clearance revenue was primarily offset by fewer trading days in the first quarter of 2014. |
• | Issuer services fees (Corporate Trust and Depositary Receipts) were $228 million in the first quarter of 2014, compared with $236 million in both the first quarter of 2013 and the fourth quarter of 2013. Both decreases reflect the impact of the continued net run-off of high margin structured debt securitizations in Corporate Trust. The year-over-year decrease was partially offset by higher Depositary Receipts revenue driven by corporate actions. |
• | Treasury services fees were $134 million in the first quarter of 2014 compared with $137 million in both the first quarter of 2013 and the fourth quarter of 2013. Both decreases primarily reflect lower cash management fees. |
(dollars in millions) | 1Q13 | 2Q13 | 3Q13 | 4Q13 | 1Q14 | ||||||||||
Revenue: | |||||||||||||||
Fee and other revenue (a) | $ | 152 | $ | 347 | $ | 172 | $ | (20 | ) | $ | 112 | ||||
Net interest revenue | 4 | 61 | 86 | 83 | 68 | ||||||||||
Total revenue (a) | 156 | 408 | 258 | 63 | 180 | ||||||||||
Provision for credit losses | (25 | ) | (19 | ) | 2 | 6 | (18 | ) | |||||||
Noninterest expense | 251 | 239 | 245 | 215 | 194 | ||||||||||
Income (loss) before taxes (a) | $ | (70 | ) | $ | 188 | $ | 11 | $ | (158 | ) | $ | 4 | |||
Average loans and leases | $ | 10,610 | $ | 10,846 | $ | 10,938 | $ | 9,802 | $ | 10,104 |
(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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
Critical policy | Reference |
Allowance for loan losses and allowance for lending-related commitments | 2013 Annual Report, pages 34 - 36. This policy is also disclosed in the “Asset quality and allowance for credit losses” section of this Form 10-Q. |
Fair value of financial instruments and derivatives | 2013 Annual Report, pages 36 and 37. |
OTTI | 2013 Annual Report, pages 37 and 38. |
Goodwill and other intangibles | 2013 Annual Report, pages 38 and 39. |
Pension accounting | 2013 Annual Report, pages 39 and 40. |
On- and off-balance sheet exposure at March 31, 2014 | |||||||||||||||
(in millions) | Ireland | Italy | Spain | Total | |||||||||||
On-balance sheet exposure | |||||||||||||||
Gross: | |||||||||||||||
Deposits with banks (primarily interest-bearing) (a) | $ | 121 | $ | 373 | $ | 248 | $ | 742 | |||||||
Investment securities (primarily European Floating Rate Notes and sovereign debt) (b) | 162 | 457 | 483 | 1,102 | |||||||||||
Loans and leases (c) | 242 | 6 | 1 | 249 | |||||||||||
Trading assets (d) | 57 | 27 | 17 | 101 | |||||||||||
Total gross on-balance sheet exposure | 582 | 863 | 749 | 2,194 | |||||||||||
Less: | |||||||||||||||
Collateral | 76 | 27 | 17 | 120 | |||||||||||
Guarantees | — | 2 | 1 | 3 | |||||||||||
Total collateral and guarantees | 76 | 29 | 18 | 123 | |||||||||||
Total net on-balance sheet exposure | $ | 506 | $ | 834 | $ | 731 | $ | 2,071 | |||||||
Off-balance sheet exposure | |||||||||||||||
Gross: | |||||||||||||||
Lending-related commitments (e) | $ | 107 | $ | — | $ | — | $ | 107 | |||||||
Letters of credit (f) | 62 | 3 | 13 | 78 | |||||||||||
Total gross off-balance sheet exposure | 169 | 3 | 13 | 185 | |||||||||||
Less: | |||||||||||||||
Collateral | 67 | — | 13 | 80 | |||||||||||
Total net off-balance sheet exposure | $ | 102 | $ | 3 | $ | — | $ | 105 | |||||||
Total exposure: | |||||||||||||||
Total gross on- and off-balance sheet exposure | $ | 751 | $ | 866 | $ | 762 | $ | 2,379 | |||||||
Less: Total collateral and guarantees | 143 | 29 | 31 | 203 | |||||||||||
Total net on- and off-balance sheet exposure | $ | 608 | $ | 837 | $ | 731 | $ | 2,176 |
(a) | Interest-bearing deposits with banks represent a $100 million placement with an Irish subsidiary of a UK holding company, a $100 million placement with a financial institution in Italy, $248 million of placements with financial institutions in Spain and $294 million of nostro accounts related to our custody activities located in Italy, Spain and Ireland. |
(b) | Represents $162 million, fair value, of residential mortgage-backed securities located in Ireland and Italy, $887 million, fair value, of sovereign debt located in Spain and Italy and $53 million, fair value, of corporate bonds located in Ireland, Italy and Spain. The investment securities were 86% investment grade. |
(c) | Loans and leases include $171 million of overdrafts primarily to Irish-domiciled investment funds resulting from our custody business, a $71 million commercial lease to a company located in Ireland, which was fully collateralized by U.S. Treasuries, $4 million of overdrafts to a financial institution located in Italy and $3 million of leases to airline manufacturing companies located in Italy and Spain, which are under joint and several guarantee arrangements with guarantors outside of the Eurozone. There is no impairment associated with these loans and leases. Overdrafts occur on a daily basis in our Investment Services businesses and are generally repaid within two business days. |
(d) | Trading assets represent over-the-counter mark-to-market on foreign exchange and interest rate receivables, net of master netting agreements. Trading assets include $57 million of receivables primarily due from Irish-domiciled investment funds and $44 million of receivables primarily due from financial institutions in Italy and Spain. Cash collateral on the trading assets totaled $5 million in Ireland, $27 million in Italy and $4 million in Spain. Additionally, trading assets in Spain were collateralized by $13 million of U.S. Treasuries. |
(e) | Lending-related commitments include $75 million to an insurance company, collateralized by $10 million of marketable securities, and $32 million to a manufacturing company located in Ireland. |
(f) | Represents $60 million of letters of credit extended to an insurance company in Ireland, collateralized by $57 million of marketable securities, a $2 million letter of credit to an oil and gas company in Ireland, a $3 million letter of credit extended to a financial institution in Italy and a $13 million letter of credit extended to an insurance company in Spain, fully collateralized by marketable securities. Risk participations with GIIPS counterparties are excluded. |
On- and off-balance sheet exposure at Dec. 31, 2013 | |||||||||||||||
(in millions) | Ireland | Italy | Spain | Total | |||||||||||
On-balance sheet exposure | |||||||||||||||
Gross: | |||||||||||||||
Deposits with banks (primarily interest-bearing) (a) | $ | 100 | $ | 217 | $ | 375 | $ | 692 | |||||||
Investment securities (primarily European Floating Rate Notes and sovereign debt) (b) | 165 | 279 | 137 | 581 | |||||||||||
Loans and leases (c) | 267 | 3 | 1 | 271 | |||||||||||
Trading assets (d) | 62 | 35 | 18 | 115 | |||||||||||
Total gross on-balance sheet exposure | 594 | 534 | 531 | 1,659 | |||||||||||
Less: | |||||||||||||||
Collateral | 87 | 30 | 18 | 135 | |||||||||||
Guarantees | — | 2 | 1 | 3 | |||||||||||
Total collateral and guarantees | 87 | 32 | 19 | 138 | |||||||||||
Total net on-balance sheet exposure | $ | 507 | $ | 502 | $ | 512 | $ | 1,521 | |||||||
Off-balance sheet exposure | |||||||||||||||
Gross: | |||||||||||||||
Lending-related commitments (e) | $ | 70 | $ | — | $ | — | $ | 70 | |||||||
Letters of credit (f) | 115 | 3 | 13 | 131 | |||||||||||
Total gross off-balance sheet exposure | 185 | 3 | 13 | 201 | |||||||||||
Less: | |||||||||||||||
Collateral | 68 | — | 13 | 81 | |||||||||||
Total net off-balance sheet exposure | $ | 117 | $ | 3 | $ | — | $ | 120 | |||||||
Total exposure: | |||||||||||||||
Total gross on- and off-balance sheet exposure | $ | 779 | $ | 537 | $ | 544 | $ | 1,860 | |||||||
Less: Total collateral and guarantees | 155 | 32 | 32 | 219 | |||||||||||
Total net on- and off-balance sheet exposure | $ | 624 | $ | 505 | $ | 512 | $ | 1,641 |
(a) | Interest-bearing deposits with banks represent a $99 million placement with an Irish subsidiary of a UK holding company, a $100 million placement with a financial institution in Italy, $350 million of placements with financial institutions in Spain and $143 million of nostro accounts related to our custody activities located in Italy, Spain and Ireland. |
(b) | Represents $257 million, fair value, of residential mortgage-backed securities located in Ireland and Italy, $308 million, fair value, of sovereign debt located in Spain and Italy, and $16 million, fair value, of asset-backed collateralized loan obligations (“CLOs”) located in Ireland. The investment securities were 74% investment grade. |
(c) | Loans and leases include $184 million of overdrafts primarily to Irish-domiciled investment funds resulting from our custody business, a $70 million commercial lease to a company located in Ireland, which was fully collateralized by U.S. Treasuries, $13 million of loans to financial institutions located in Ireland, which were collateralized by $12 million of marketable securities, $1 million of overdrafts to a financial institution located in Italy and $3 million of leases to airline manufacturing companies located in Italy and Spain, which are under joint and several guarantee arrangements with guarantors outside of the Eurozone. There is no impairment associated with these loans and leases. Overdrafts occur on a daily basis in our Investment Services businesses and are generally repaid within two business days. |
(d) | Trading assets represent over-the-counter mark-to-market on foreign exchange and interest rate receivables, net of master netting agreements. Trading assets include $62 million of receivables primarily due from Irish-domiciled investment funds and $53 million of receivables primarily due from financial institutions in Italy and Spain. Cash collateral on the trading assets totaled $5 million in Ireland, $30 million in Italy and $5 million in Spain. Trading assets located in Spain are also collateralized by $13 million of U.S. Treasuries. |
(e) | Lending-related commitments include $70 million to an insurance company, collateralized by $3 million of marketable securities. |
(f) | Represents $65 million of letters of credit extended to an insurance company in Ireland, fully collateralized by marketable securities, a $48 million letter of credit to a financial institution in Ireland, a $2 million letter of credit to an oil and gas company in Ireland, a $3 million letter of credit extended to a financial institution in Italy and a $13 million letter of credit extended to an insurance company in Spain, fully collateralized by marketable securities. |
Investment securities portfolio (dollars in millions) | Dec. 31, 2013 | 1Q14 change in unrealized gain/(loss) | March 31, 2014 | Fair value as a % of amortized cost (a) | Unrealized gain/(loss) | Ratings | |||||||||||||||||||||||
BB+ and lower | |||||||||||||||||||||||||||||
Fair value | Amortized cost | Fair value | AAA/ AA- | A+/ A- | BBB+/ BBB- | Not rated | |||||||||||||||||||||||
Agency RMBS | $ | 39,673 | $ | 178 | $ | 39,424 | $ | 39,143 | 99 | % | $ | (281 | ) | 100 | % | — | % | — | % | — | % | — | % | ||||||
U.S. Treasury | 16,827 | 20 | 17,139 | 17,299 | 101 | 160 | 100 | — | — | — | — | ||||||||||||||||||
Sovereign debt/sovereign guaranteed (b) | 12,028 | 29 | 12,802 | 12,856 | 100 | 54 | 92 | — | 8 | — | — | ||||||||||||||||||
Non-agency RMBS (c) | 2,695 | 8 | 2,065 | 2,637 | 80 | 572 | — | 1 | 2 | 93 | 4 | ||||||||||||||||||
Non-agency RMBS | 1,335 | 11 | 1,275 | 1,287 | 93 | 12 | 1 | 11 | 22 | 65 | 1 | ||||||||||||||||||
European floating rate notes (d) | 2,878 | 25 | 2,599 | 2,580 | 99 | (19 | ) | 72 | 22 | — | 6 | — | |||||||||||||||||
Commercial MBS | 4,064 | 17 | 4,139 | 4,168 | 101 | 29 | 92 | 7 | 1 | — | — | ||||||||||||||||||
State and political subdivisions | 6,718 | 55 | 6,670 | 6,693 | 100 | 23 | 79 | 19 | 1 | — | 1 | ||||||||||||||||||
Foreign covered bonds (e) | 2,872 | 7 | 2,635 | 2,716 | 103 | 81 | 100 | — | — | — | — | ||||||||||||||||||
Corporate bonds | 1,815 | 16 | 1,758 | 1,781 | 101 | 23 | 21 | 66 | 13 | — | — | ||||||||||||||||||
CLO | 1,496 | 1 | 1,379 | 1,391 | 101 | 12 | 100 | — | — | — | — | ||||||||||||||||||
U.S. Government agency debt | 1,354 | (4 | ) | 865 | 859 | 99 | (6 | ) | 100 | — | — | — | — | ||||||||||||||||
Consumer ABS | 2,891 | 5 | 3,362 | 3,364 | 100 | 2 | 98 | 2 | — | — | — | ||||||||||||||||||
Other (f) | 2,784 | (1 | ) | 2,908 | 2,922 | 100 | 14 | 36 | 57 | — | — | 7 | |||||||||||||||||
Total investment securities | $ | 99,430 | (g) | $ | 367 | $ | 99,020 | $ | 99,696 | (g) | 99 | % | $ | 676 | 89 | % | 5 | % | 2 | % | 3 | % | 1 | % |
(a) | Amortized cost before impairments. |
(b) | Primarily comprised of exposure to UK, Germany, France 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 Canada, UK and Netherlands. |
(f) | Includes commercial paper of $1.7 billion and $1.7 billion, fair value, and money market funds of $938 million and $849 million, fair value, at Dec. 31, 2013 and March 31, 2014, respectively. |
(g) | Includes net unrealized gains on derivatives hedging securities available-for-sale of $678 million at Dec. 31, 2013 and $388 million at March 31, 2014. |
Net premium amortization and discount accretion of investment securities (a) | |||||||||||||||
(dollars in millions) | 1Q13 | 2Q13 | 3Q13 | 4Q13 | 1Q14 | ||||||||||
Amortizable purchase premium (net of discount) relating to investment securities: | |||||||||||||||
Balance at period end | $ | 2,685 | $ | 2,720 | $ | 2,519 | $ | 2,377 | $ | 2,236 | |||||
Estimated average life remaining at period end (in years) | 4.6 | 5.1 | 5.2 | 5.2 | 5.0 | ||||||||||
Amortization | $ | 164 | $ | 172 | $ | 147 | $ | 142 | $ | 145 | |||||
Accretable discount related to the restructuring of the investment securities portfolio: | |||||||||||||||
Balance at period end | $ | 789 | $ | 743 | $ | 675 | $ | 642 | $ | 534 | |||||
Estimated average life remaining at period end (in years) | 5.6 | 6.0 | 6.1 | 6.0 | 6.3 | ||||||||||
Accretion | $ | 57 | $ | 54 | $ | 55 | $ | 52 | $ | 46 |
(a) | Amortization of purchase premium decreases net interest revenue while accretion of discount increases net interest revenue. Both were recorded on a level yield basis. |
Net securities gains (losses) | |||||||||
(in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
U.S. Treasury | $ | 10 | $ | 11 | $ | (4 | ) | ||
U.S. Government agency debt | 7 | — | — | ||||||
Commercial MBS | — | 1 | 8 | ||||||
Foreign covered bonds | — | — | 8 | ||||||
State and political subdivisions | (1 | ) | 13 | — | |||||
European floating rate notes | (1 | ) | 11 | 4 | |||||
Non-agency RMBS | (2 | ) | 2 | 4 | |||||
Other | 9 | 1 | 28 | ||||||
Total net securities gains | $ | 22 | $ | 39 | $ | 48 |
European floating rate notes at March 31, 2014 (a) | |||||||||||
(in millions) | RMBS | Other | Total fair value | ||||||||
United Kingdom | $ | 1,573 | $ | 112 | $ | 1,685 | |||||
Netherlands | 653 | 43 | 696 | ||||||||
Ireland | 159 | — | 159 | ||||||||
Other | 40 | — | 40 | ||||||||
Total fair value | $ | 2,425 | $ | 155 | $ | 2,580 |
(a) | 72% of these securities are in the AAA to AA- ratings category. |
Total exposure – consolidated | March 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
(in billions) | Loans | Unfunded commitments | Total exposure | Loans | Unfunded commitments | Total exposure | |||||||||||||
Non-margin loans: | |||||||||||||||||||
Financial institutions | $ | 13.6 | $ | 17.6 | $ | 31.2 | $ | 14.4 | $ | 17.0 | $ | 31.4 | |||||||
Commercial | 2.0 | 19.3 | 21.3 | 1.6 | 19.5 | 21.1 | |||||||||||||
Subtotal institutional | 15.6 | 36.9 | 52.5 | 16.0 | 36.5 | 52.5 | |||||||||||||
Wealth management loans and mortgages | 10.0 | 1.5 | 11.5 | 9.8 | 1.7 | 11.5 | |||||||||||||
Commercial real estate | 2.1 | 2.3 | 4.4 | 2.0 | 2.4 | 4.4 | |||||||||||||
Lease financings | 2.2 | — | 2.2 | 2.3 | — | 2.3 | |||||||||||||
Other residential mortgages | 1.3 | — | 1.3 | 1.4 | — | 1.4 | |||||||||||||
Overdrafts | 5.6 | — | 5.6 | 3.7 | — | 3.7 | |||||||||||||
Other | 0.8 | — | 0.8 | 0.8 | — | 0.8 | |||||||||||||
Subtotal non-margin loans | 37.6 | 40.7 | 78.3 | 36.0 | 40.6 | 76.6 | |||||||||||||
Margin loans | 16.4 | 1.4 | 17.8 | 15.7 | 0.5 | 16.2 | |||||||||||||
Total | $ | 54.0 | $ | 42.1 | $ | 96.1 | $ | 51.7 | $ | 41.1 | $ | 92.8 |
Financial institutions portfolio exposure (dollar amounts in billions) | March 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||||||
Loans | Unfunded commitments | Total exposure | % Inv. grade | % due <1 yr | Loans | Unfunded commitments | Total exposure | ||||||||||||||||||||||
Banks | $ | 8.6 | $ | 2.1 | $ | 10.7 | 87 | % | 90 | % | $ | 9.4 | $ | 2.3 | $ | 11.7 | |||||||||||||
Asset managers | 1.1 | 4.7 | 5.8 | 98 | 81 | 1.4 | 4.1 | 5.5 | |||||||||||||||||||||
Securities industry | 3.2 | 2.5 | 5.7 | 94 | 97 | 2.9 | 2.0 | 4.9 | |||||||||||||||||||||
Insurance | 0.1 | 4.2 | 4.3 | 99 | 22 | 0.1 | 4.3 | 4.4 | |||||||||||||||||||||
Government | 0.3 | 3.1 | 3.4 | 97 | 25 | 0.4 | 3.2 | 3.6 | |||||||||||||||||||||
Other | 0.3 | 1.0 | 1.3 | 93 | 42 | 0.2 | 1.1 | 1.3 | |||||||||||||||||||||
Total | $ | 13.6 | $ | 17.6 | $ | 31.2 | 94 | % | 71 | % | $ | 14.4 | $ | 17.0 | $ | 31.4 |
Commercial portfolio exposure | March 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||||||
(dollar amounts in billions) | Loans | Unfunded commitments | Total exposure | % Inv. grade | % due <1 yr | Loans | Unfunded commitments | Total exposure | |||||||||||||||||||||
Services and other | $ | 0.8 | $ | 6.2 | $ | 7.0 | 94 | % | 19 | % | $ | 0.6 | $ | 6.0 | $ | 6.6 | |||||||||||||
Energy and utilities | 0.7 | 5.8 | 6.5 | 99 | 16 | 0.7 | 5.9 | 6.6 | |||||||||||||||||||||
Manufacturing | 0.3 | 5.7 | 6.0 | 90 | 11 | 0.2 | 5.9 | 6.1 | |||||||||||||||||||||
Media and telecom | 0.2 | 1.6 | 1.8 | 94 | 6 | 0.1 | 1.7 | 1.8 | |||||||||||||||||||||
Total | $ | 2.0 | $ | 19.3 | $ | 21.3 | 94 | % | 15 | % | $ | 1.6 | $ | 19.5 | $ | 21.1 |
Percentage of the portfolios that are investment grade | ||||||||||
March 31, 2013 | June 30, 2013 | Sept. 30, 2013 | Dec. 31, 2013 | March 31, 2014 | ||||||
Financial institutions | 93 | % | 93 | % | 92 | % | 93 | % | 94 | % |
Commercial | 94 | % | 94 | % | 94 | % | 94 | % | 94 | % |
Allowance for credit losses activity (dollar amounts in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
Margin loans | $ | 16,430 | $ | 15,652 | $ | 13,242 | |||
Non-margin loans | 37,606 | 36,005 | 35,982 | ||||||
Total loans | $ | 54,036 | $ | 51,657 | $ | 49,224 | |||
Beginning balance of allowance for credit losses | $ | 344 | $ | 339 | $ | 387 | |||
Provision for credit losses | (18 | ) | 6 | (24 | ) | ||||
Net (charge-offs): | |||||||||
Financial institutions | — | 3 | — | ||||||
Foreign | — | (3 | ) | — | |||||
Commercial | — | (1 | ) | (2 | ) | ||||
Other residential mortgages | — | — | (3 | ) | |||||
Net (charge-offs) | — | (1 | ) | (5 | ) | ||||
Ending balance of allowance for credit losses | $ | 326 | $ | 344 | $ | 358 | |||
Allowance for loan losses | $ | 198 | $ | 210 | $ | 237 | |||
Allowance for lending-related commitments | 128 | 134 | 121 | ||||||
Allowance for loan losses as a percentage of total loans | 0.37 | % | 0.41 | % | 0.48 | % | |||
Allowance for loan losses as a percentage of non-margin loans | 0.53 | 0.58 | 0.66 | ||||||
Total allowance for credit losses as a percentage of total loans | 0.60 | 0.67 | 0.73 | ||||||
Total allowance for credit losses as a percentage of non-margin loans | 0.87 | 0.96 | 0.99 |
• | an allowance for impaired credits of $1 million or greater; |
• | an allowance for higher risk-rated credits and pass-rated credits; and |
• | an allowance for residential mortgage loans. |
• | Nonperforming loans to total non-margin loans; |
• | Criticized assets to total loans and lending-related commitments; |
• | Ratings volatility; |
• | Borrower concentration; and |
• | Significant concentration in high risk industries. |
• | U.S. non-investment grade default rate; |
• | Unemployment rate; and |
• | Change in real GDP (quarter over quarter). |
Allocation of Allowance | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | |||
Commercial | 24 | % | 24 | % | 27 | % |
Other residential mortgages | 15 | 16 | 23 | |||
Foreign | 15 | 16 | 13 | |||
Financial institutions | 15 | 14 | 9 | |||
Commercial real estate | 13 | 12 | 9 | |||
Lease financing | 11 | 11 | 11 | |||
Wealth management (a) | 7 | 7 | 8 | |||
100 | % | 100 | % | 100 | % |
(a) | Includes the allowance for wealth management mortgages. |
Nonperforming assets (dollars in millions) | March 31, 2014 | Dec. 31, 2013 | ||||
Loans: | ||||||
Other residential mortgages | $ | 107 | $ | 117 | ||
Commercial | 13 | 15 | ||||
Wealth management loans and mortgages | 12 | 11 | ||||
Foreign | 7 | 6 | ||||
Commercial real estate | 4 | 4 | ||||
Total nonperforming loans | 143 | 153 | ||||
Other assets owned | 3 | 3 | ||||
Total nonperforming assets (a) | $ | 146 | $ | 156 | ||
Nonperforming assets ratio | 0.27 | % | 0.30 | % | ||
Nonperforming assets ratio, excluding margin loans | 0.4 | 0.4 | ||||
Allowance for loan losses/nonperforming loans | 138.5 | 137.3 | ||||
Allowance for loan losses/nonperforming assets | 135.6 | 134.6 | ||||
Total allowance for credit losses/nonperforming loans | 228.0 | 224.8 | ||||
Total allowance for credit losses/nonperforming assets | 223.3 | 220.5 |
(a) | Loans of consolidated investment management funds are not part of BNY Mellon’s loan portfolio. Included in the loans of consolidated investment management funds are nonperforming loans of $74 million at March 31, 2014 and $16 million at Dec. 31, 2013. 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 assets activity (in millions) | March 31, 2014 | Dec. 31, 2013 | ||||
Balance at beginning of period | $ | 156 | $ | 172 | ||
Additions | 9 | 7 | ||||
Return to accrual status | (9 | ) | (9 | ) | ||
Charge-offs | (1 | ) | (5 | ) | ||
Paydowns/sales | (8 | ) | (7 | ) | ||
Transferred to other assets owned | (1 | ) | (2 | ) | ||
Balance at end of period | $ | 146 | $ | 156 |
Federal funds purchased and securities sold under repurchase agreements | |||||||||
Quarter ended | |||||||||
(dollar amounts in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
Maximum daily balance during the quarter | $ | 21,089 | $ | 23,022 | $ | 22,123 | |||
Average daily balance | $ | 14,505 | $ | 13,155 | $ | 9,187 | |||
Weighted-average rate during the quarter | (0.13 | )% | (0.10 | )% | (0.12 | )% | |||
Ending balance | $ | 9,935 | $ | 9,648 | $ | 8,602 | |||
Weighted-average rate at period end | (0.14 | )% | (0.11 | )% | (0.19 | )% |
Payables to customers and broker-dealers | |||||||||
Quarter ended | |||||||||
(dollar amounts in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
Maximum daily balance during the quarter | $ | 17,961 | $ | 17,290 | $ | 16,027 | |||
Average daily balance (a) | $ | 16,276 | $ | 15,964 | $ | 15,026 | |||
Weighted-average rate during the quarter | 0.09 | % | 0.09 | % | 0.09 | % | |||
Ending balance | $ | 16,822 | $ | 15,707 | $ | 14,986 | |||
Weighted-average rate at period end | 0.10 | % | 0.07 | % | 0.10 | % |
(a) | The weighted-average rate is calculated based on, and is applied to, the average interest-bearing payables to customers and broker-dealers, which were $8,883 million in the first quarter of 2014, $9,400 million in the fourth quarter of 2013 and $9,019 million in the first quarter of 2013. |
Commercial paper | Quarter ended | ||||||||
(dollar amounts in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
Maximum daily balance during the quarter | $ | 1,697 | $ | 4,827 | $ | 1,428 | |||
Average daily balance | $ | 102 | $ | 1,254 | $ | 245 | |||
Weighted-average rate during the quarter | 0.05 | % | 0.05 | % | 0.09 | % | |||
Ending balance | $ | 27 | $ | 96 | $ | 78 | |||
Weighted-average rate at period end | 0.02 | % | 0.03 | % | 0.03 | % |
Other borrowed funds | Quarter ended | ||||||||
(dollar amounts in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
Maximum daily balance during the quarter | $ | 2,000 | $ | 7,383 | $ | 2,514 | |||
Average daily balance | $ | 1,035 | $ | 1,124 | $ | 1,152 | |||
Weighted-average rate during the quarter | 0.51 | % | 0.83 | % | 0.90 | % | |||
Ending balance | $ | 1,305 | $ | 663 | $ | 789 | |||
Weighted-average rate at period end | 0.34 | % | 0.81 | % | 1.37 | % |
Available and liquid funds | March 31, 2014 | Dec. 31, 2013 | Average | |||||||||||||
(in millions) | 1Q14 | 4Q13 | 1Q13 | |||||||||||||
Available funds: | ||||||||||||||||
Liquid funds: | ||||||||||||||||
Interest-bearing deposits with banks | $ | 42,795 | $ | 35,300 | $ | 41,617 | $ | 39,563 | $ | 40,967 | ||||||
Federal funds sold and securities purchased under resale agreements | 12,223 | 9,161 | 11,118 | 9,403 | 7,478 | |||||||||||
Total liquid funds | 55,018 | 44,461 | 52,735 | 48,966 | 48,445 | |||||||||||
Cash and due from banks | 6,092 | 6,460 | 5,886 | 6,623 | 4,534 | |||||||||||
Interest-bearing deposits with the Federal Reserve and other central banks | 82,602 | 104,359 | 74,399 | 83,232 | 63,240 | |||||||||||
Total available funds | $ | 143,712 | $ | 155,280 | $ | 133,020 | $ | 138,821 | $ | 116,219 | ||||||
Total available funds as a percentage of total assets | 39 | % | 41 | % | 37 | % | 39 | % | 35 | % |
• | cash on hand; |
• | dividends from its subsidiaries; |
• | access to the commercial paper market; and |
• | access to the debt and equity markets. |
Credit ratings | |||||
Moody’s | S&P | Fitch | DBRS | ||
Parent: | |||||
Long-term senior debt | A1 | A+ | AA- | AA (low) | |
Subordinated debt | A2 | A | A+ | A (high) | |
Preferred stock | Baa2 | BBB | BBB | A (low) | |
Trust-preferred securities | A3 | BBB | BBB+ | A (high) | |
Short-term debt | P1 | A-1 | F1+ | R-1 (middle) | |
Outlook - Parent: | Stable | Negative | Stable | Stable | |
The Bank of New York Mellon: | |||||
Long-term senior debt | Aa2 | AA- | AA- | AA | |
Long-term deposits | Aa2 | AA- | AA | AA | |
Short-term deposits | P1 | A-1+ | F1+ | R-1 (high) | |
BNY Mellon, N.A.: | |||||
Long-term senior debt | Aa2 | AA- | AA- | (a) | AA |
Long-term deposits | Aa2 | AA- | AA | AA | |
Short-term deposits | P1 | A-1+ | F1+ | R-1 (high) | |
Outlook - Banks: | Stable | Stable | Stable | Stable |
(a) | Represents senior debt issuer default rating. |
Debt issuances | Quarter ended | ||
(in millions) | March 31, 2014 | ||
Senior medium-term notes: | |||
2.2% senior medium-term notes due 2019 | $ | 500 | |
3.65% senior medium-term notes due 2024 | 750 | ||
3-month LIBOR + 50 bps senior medium-term notes due 2019 | 200 | ||
Total debt issuances | $ | 1,450 |
Capital data (dollar amounts in millions except per share amounts; common shares in thousands) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||||
Average common equity to average assets | 10.2 | % | 10.0 | % | 10.5 | % | |||||
At period end: | |||||||||||
BNY Mellon shareholders’ equity to total assets ratio (a) | 10.3 | % | 10.0 | % | 10.0 | % | |||||
BNY Mellon common shareholders’ equity to total assets ratio (a) | 9.9 | % | 9.6 | % | 9.7 | % | |||||
BNY Mellon tangible common shareholders’ equity to tangible assets of operations ratio – Non-GAAP (a) | 6.6 | % | 6.8 | % | 5.9 | % | |||||
Total BNY Mellon shareholders’ equity – GAAP | $ | 37,986 | $ | 37,497 | $ | 35,672 | |||||
Total BNY Mellon common shareholders’ equity – GAAP | $ | 36,424 | $ | 35,935 | $ | 34,604 | |||||
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a) | $ | 16,509 | $ | 15,934 | $ | 14,451 | |||||
Book value per common share – GAAP (a) | $ | 31.94 | $ | 31.46 | $ | 29.81 | |||||
Tangible book value per common share – Non-GAAP (a) | $ | 14.48 | $ | 13.95 | $ | 12.45 | |||||
Closing common stock price per share | $ | 35.29 | $ | 34.94 | $ | 27.99 | |||||
Market capitalization | $ | 40,244 | $ | 39,910 | $ | 32,487 | |||||
Common shares outstanding | 1,140,373 | 1,142,250 | 1,160,647 | ||||||||
Cash dividends per common share | $ | 0.15 | $ | 0.15 | $ | 0.13 | |||||
Common dividend payout ratio | 26 | % | 34 | % | N/M | ||||||
Common dividend yield (annualized) | 1.7 | % | 1.7 | % | 1.9 | % |
(a) | See “Supplemental information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 49 for a reconciliation of GAAP to non-GAAP. |
Consolidated and largest bank subsidiary capital ratios | Well capitalized | Adequately capitalized | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||||
Consolidated capital ratios: | |||||||||||||
Estimated common equity Tier 1 ratio (“CET1”), fully phased-in – Non-GAAP: (a)(b)(c) | |||||||||||||
Standardized Approach | (d) | (d) | 11.1 | % | 10.6 | % | 9.4 | % | |||||
Advanced Approach | (d) | (d) | 10.7 | % | 11.3 | % | 9.7 | % | |||||
CET1 ratio (e) | N/A | 4% | 15.7 | % | (c) | 14.5 | % | (c) | 12.2 | % | (c) | ||
Tier 1 capital ratio (e) | 6 | % | 5.5% | 17.0 | % | (c) | 16.2 | % | 13.6 | % | |||
Total (Tier 1 plus Tier 2) capital ratio (e) | 10 | % | 8% | 17.8 | % | (c) | 17.0 | % | 14.7 | % | |||
Leverage capital ratio (e) | N/A | 4% | 6.1 | % | 5.4 | % | 5.2 | % | |||||
The Bank of New York Mellon capital ratios: | |||||||||||||
Tier 1 capital ratio (e) | 6 | % | 4% | 15.9 | % | 14.6 | % | 13.0 | % | ||||
Total (Tier 1 plus Tier 2) capital ratio (e) | 10 | % | 8% | 16.6 | % | 15.1 | % | 13.6 | % | ||||
Leverage capital ratio (e) | 5 | % | 3-4% | (f) | 5.6 | % | 5.3 | % | 5.2 | % |
(a) | 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 Capital Rules released by the Federal Reserve on July 2, 2013, which will be gradually phased-in over a multi-year period. 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 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 90 basis points at March 31, 2014. |
(c) | See “Supplemental Information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 49 for a reconciliation of these ratios. |
(d) | On a fully phased-in basis, we expect to satisfy a minimum Basel III CET1 ratio of at least 7%, 4.5% attributable to a minimum CET1 ratio and 2.5% attributable to a capital conservation buffer (expected to rise to 8%, assuming an additional G-SIB buffer of 1%). |
(e) | 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 Capital Rules (which for 2014 look to Basel I-based requirements). March 31, 2014 risk-weightings are not based on the Advanced Approach rules. The leverage 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, while the CET1 ratio is a Basel I Tier 1 common ratio. |
(f) | The minimum leverage ratio for state member banks is 3% or 4%, depending on factors specified in regulations. |
CET1 generation presented on a fully phased-in basis - Non-GAAP | Quarter ended | ||||||
(in millions) | March 31, 2014 | Dec. 31, 2013 | |||||
Estimated CET1 - Beginning of period balance | $ | 14,810 | $ | 14,643 | |||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP | 661 | 513 | |||||
Goodwill and intangible assets, net of related deferred tax liabilities | 17 | 35 | |||||
Gross CET1 generated | 678 | 548 | |||||
Capital deployed: | |||||||
Dividends | (174 | ) | (176 | ) | |||
Common stock repurchased | (375 | ) | (321 | ) | |||
Total capital deployed | (549 | ) | (497 | ) | |||
Other comprehensive income (loss): | |||||||
Foreign currency translation | 34 | 93 | |||||
Unrealized gain (loss) on assets available-for-sale | 149 | (100 | ) | ||||
Pension liabilities | 19 | 449 | |||||
Unrealized gain on cash flow hedges | 1 | 5 | |||||
Total other comprehensive income (loss) | 203 | 447 | |||||
Additional paid-in capital (a) | 174 | 99 | |||||
Other additions (deductions): | |||||||
Net pension fund assets | 609 | (434 | ) | ||||
Deferred tax assets | 31 | (23 | ) | ||||
Cash flow hedges | (1 | ) | (5 | ) | |||
Embedded goodwill | 12 | 41 | |||||
Investment in unconsolidated subsidiaries | 7 | (7 | ) | ||||
Other (b) | (23 | ) | (2 | ) | |||
Total other additions (deductions) | 635 | (430 | ) | ||||
Net CET1 generated | 1,141 | 167 | |||||
CET1 - End of period balance - Non-GAAP | $ | 15,951 | $ | 14,810 |
(a) | Primarily related to employee stock options and awards and employee benefit plan contributions. |
(b) | Includes the restatement of retained earnings due to the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). |
Components of Basel I Tier 1 and total risk-based capital (a) (in millions) | Dec. 31, 2013 | March 31, 2013 | ||||
Tier 1 capital: | ||||||
Common shareholders’ equity | $ | 35,959 | $ | 34,622 | ||
Preferred stock | 1,562 | 1,068 | ||||
Trust preferred securities | 330 | 603 | ||||
Adjustments for: | ||||||
Goodwill and other intangibles (b) | (20,001 | ) | (20,153 | ) | ||
Pensions/cash flow hedges | 891 | 1,410 | ||||
Securities valuation allowance | (387 | ) | (1,314 | ) | ||
Merchant banking investments | (19 | ) | (17 | ) | ||
Total Tier 1 capital | 18,335 | 16,219 | ||||
Tier 2 capital: | ||||||
Qualifying unrealized gains on equity securities | 1 | 4 | ||||
Qualifying subordinated debt | 550 | 922 | ||||
Qualifying allowance for credit losses | 344 | 358 | ||||
Total Tier 2 capital | 895 | 1,284 | ||||
Total risk-based capital | $ | 19,230 | $ | 17,503 | ||
Total risk-weighted assets | $ | 113,322 | $ | 119,382 | ||
Average assets for leverage capital purposes | $ | 336,787 | $ | 313,482 |
(a) | On a regulatory basis as determined under Basel I rules. |
(b) | Reduced by deferred tax liabilities associated with non-tax deductible identifiable intangible assets of $1,222 million at Dec. 31, 2013 and $1,293 million at March 31, 2013 and deferred tax liabilities associated with tax deductible goodwill of $1,302 million at Dec. 31, 2013 and $1,170 million at March 31, 2013. |
Capital above thresholds at March 31, 2014 (in millions) | Consolidated | The Bank of New York Mellon | |||||
CET1 | $ | 14,092 | $ | 10,564 | |||
Tier 1 capital | 13,308 | 9,335 | |||||
Total capital | 9,419 | 6,154 | |||||
Leverage | 3,682 | 1,591 |
Potential impact to capital ratios at March 31, 2014 | ||||
Increase or decrease of | ||||
(basis points) | $100 million in common equity | $1 billion in risk-weighted assets/quarterly average assets (a) | ||
Transitional capital rules: | ||||
CET1 | 8 | bps | 13 | bps |
Tier 1 capital | 8 | 14 | ||
Total capital | 8 | 15 | ||
Leverage | 3 | 2 | ||
Basel III - fully phased-in | ||||
Estimated CET1 ratio - Non-GAAP: | ||||
Standardized Approach | 7 | bps | 8 | bps |
Advanced Approach | 7 | 7 |
(a) | Quarterly average assets are determined under the Final Capital Rules. |
VaR (a) | 1st Quarter 2014 | March 31, 2014 | ||||||||||
(in millions) | Average | Minimum | Maximum | |||||||||
Interest rate | $ | 8.5 | $ | 6.5 | $ | 13.4 | $ | 9.0 | ||||
Foreign exchange | 1.1 | 0.5 | 1.8 | 1.2 | ||||||||
Equity | 2.3 | 1.3 | 4.0 | 1.9 | ||||||||
Diversification | (2.9 | ) | N/M | N/M | (3.3 | ) | ||||||
Overall portfolio | 9.0 | 6.9 | 13.0 | 8.8 |
VaR (a) | 4th Quarter 2013 | Dec. 31, 2013 | ||||||||||
(in millions) | Average | Minimum | Maximum | |||||||||
Interest rate | $ | 10.5 | $ | 7.5 | $ | 13.6 | $ | 7.7 | ||||
Foreign exchange | 1.0 | 0.4 | 2.4 | 0.6 | ||||||||
Equity | 2.7 | 2.2 | 3.9 | 2.3 | ||||||||
Diversification | (3.2 | ) | N/M | N/M | (2.4 | ) | ||||||
Overall portfolio | 11.0 | 8.1 | 13.6 | 8.2 |
VaR (a) | 1st Quarter 2013 | March 31, 2013 | ||||||||||
(in millions) | Average | Minimum | Maximum | |||||||||
Interest rate | $ | 11.3 | $ | 8.6 | $ | 14.8 | $ | 12.4 | ||||
Foreign exchange | 1.0 | 0.5 | 2.0 | 0.9 | ||||||||
Equity | 1.9 | 1.1 | 3.9 | 3.1 | ||||||||
Diversification | (2.6 | ) | N/M | N/M | (3.4 | ) | ||||||
Overall portfolio | 11.6 | 8.8 | 14.8 | 13.0 |
(a) | VaR figures do not reflect the impact of credit valuation adjustment (“CVA”) guidance in Accounting Standards Codification (“ASC”) 820. This is consistent with the regulatory treatment. VaR exposure does not include the impact of the Company’s consolidated investment management funds and seed capital investments. |
Distribution of trading revenues (losses) (a) | ||||||||||
(dollar amounts in millions) | Quarter ended | |||||||||
March 31, 2013 | June 30, 2013 | Sept. 30, 2013 | Dec. 31, 2013 | March 31, 2014 | ||||||
Revenue range: | Number of days | |||||||||
Less than $(2.5) | — | — | — | — | — | |||||
$(2.5) - $0 | 4 | 1 | 3 | 6 | 9 | |||||
$0 - $2.5 | 24 | 27 | 30 | 30 | 25 | |||||
$2.5 - $5.0 | 32 | 24 | 27 | 24 | 24 | |||||
More than $5.0 | 1 | 12 | 4 | 2 | 3 |
(a) | The distribution of trading revenues (losses) for the quarter ended March 31, 2013 does not reflect the impact of the CVA and corresponding hedge and overnight index swap (“OIS”) curve discounting. |
Foreign exchange and other trading counterparty risk rating profile (a) | ||||||||||
Quarter ended | ||||||||||
March 31, 2013 | June 30, 2013 | Sept. 30, 2013 | Dec. 31, 2013 | March 31, 2014 | ||||||
Rating: | ||||||||||
AAA to AA- | 37 | % | 41 | % | 35 | % | 32 | % | 41 | % |
A+ to A- | 40 | 38 | 43 | 47 | 38 | |||||
BBB+ to BBB- | 19 | 17 | 16 | 16 | 16 | |||||
Non-investment grade (BB+ and lower) | 4 | 4 | 6 | 5 | 5 | |||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
(a) | Represents credit rating agency equivalent of internal credit ratings. |
Estimated changes in net interest revenue | |||||||||||||||||||
(dollars in millions) | March 31, 2013 | June 30, 2013 | Sept. 30, 2013 | Dec. 31, 2013 | March 31, 2014 | ||||||||||||||
up 200 bps parallel rate ramp vs. baseline (a) | $ | 351 | $ | 402 | $ | 617 | $ | 677 | $ | 447 | |||||||||
up 100 bps parallel rate ramp vs. baseline (a) | 311 | 324 | 387 | 466 | 376 | ||||||||||||||
Long-term up 50 bps, short-term unchanged (b) | 142 | 130 | 174 | 44 | 50 | ||||||||||||||
Long-term down 50 bps, short-term unchanged (b) | (114 | ) | (123 | ) | (144 | ) | (47 | ) | (46 | ) |
(a) | In the parallel rate ramp, both short-term and long-term rates move in four equal quarterly increments. |
(b) | Long-term is equal to or greater than one year. |
• | Monetary policy; |
• | Global economic uncertainty; |
• | Our ratings relative to other financial institutions’ ratings; and |
• | Money market mutual fund and other regulatory reform. |
Reconciliation of net income and diluted EPS - GAAP to Non-GAAP | 4Q13 | 1Q13 | |||||||||||
(in millions, except per share amounts) | 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 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 |
Reconciliation of income before income taxes – 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. |
Effective tax rate | |||
(dollars in millions) | 1Q13 | ||
Provision for income taxes | $ | 1,062 | |
Less: Charge related to the disallowance of certain foreign tax credits | 854 | ||
Provision for income taxes – Non-GAAP | $ | 208 | |
Income before taxes | $ | 825 | |
Effective tax rate – GAAP | 128.7 | % | |
Effective tax rate – Operating basis – Non-GAAP | 25.2 | % |
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. |
Equity to assets and book value per common share | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
(dollars in millions, unless otherwise noted) | |||||||||
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 | ||||||
BNY Mellon tangible 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 percentage risk-weighting by the regulators. |
Income from consolidated investment management funds, net of noncontrolling interests (in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
Income from consolidated investment management funds | $ | 36 | $ | 36 | $ | 50 | |||
Less: Net income attributable to noncontrolling interests of consolidated investment management funds | 20 | 17 | 16 | ||||||
Income from consolidated investment management funds, net of noncontrolling interests | $ | 16 | $ | 19 | $ | 34 |
Income from consolidated investment management funds, net of noncontrolling interests (in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
Investment management fees | $ | 18 | $ | 20 | $ | 20 | |||
Other (Investment income) | (2 | ) | (1 | ) | 14 | ||||
Income from consolidated investment management funds, net of noncontrolling interests | $ | 16 | $ | 19 | $ | 34 |
Investment management and performance fees | 1Q14 vs. | ||||||||||||
(dollars in millions) | 1Q14 | 4Q13 | 1Q13 | 1Q13 | 4Q13 | ||||||||
Investment management and performance fees – GAAP | $ | 843 | $ | 904 | $ | 822 | 3 | % | (7 | )% | |||
Add: Money market fee waivers | 81 | 78 | 56 | ||||||||||
Investment management and performance fees excluding money market fee waivers – Non-GAAP | $ | 924 | $ | 982 | $ | 878 | 5 | % | (6 | )% |
Pre-tax operating margin - Investment Management business (dollars in millions) | 1Q13 | 2Q13 | 3Q13 | 4Q13 | 1Q14 | ||||||||||
Income before income taxes – GAAP | $ | 206 | $ | 271 | $ | 225 | $ | 266 | $ | 246 | |||||
Add: Amortization of intangible assets | 39 | 39 | 35 | 35 | 31 | ||||||||||
Money market fee waivers | 21 | 24 | 30 | 33 | 35 | ||||||||||
Income before income taxes excluding amortization of intangible assets and money market fee waivers – Non-GAAP | $ | 266 | $ | 334 | $ | 290 | $ | 334 | $ | 312 | |||||
Total revenue – GAAP | $ | 943 | $ | 975 | $ | 949 | $ | 1,061 | $ | 970 | |||||
Less: Distribution and servicing expense | 104 | 110 | 107 | 108 | 106 | ||||||||||
Money market fee waivers benefiting distribution and servicing expense | 36 | 35 | 38 | 38 | 38 | ||||||||||
Add: Money market fee waivers impacting total revenue | 57 | 59 | 68 | 71 | 73 | ||||||||||
Total revenue net of distribution and servicing expense and excluding money market fee waivers – Non-GAAP | $ | 860 | $ | 889 | $ | 872 | $ | 986 | $ | 899 | |||||
Pre-tax operating margin (a) | 22 | % | 28 | % | 24 | % | 25 | % | 25 | % | |||||
Pre-tax operating margin, excluding amortization of intangible assets and money market fee waivers and net of distribution and servicing expense – Non-GAAP (a) | 31 | % | 37 | % | 33 | % | 34 | % | 35 | % |
(a) | Income before taxes divided by total revenue. |
Basel I Tier 1 common ratio (dollars in millions) | Dec. 31, 2013 | March 31, 2013 | ||||
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 Tier 1 common ratio – Non-GAAP | 14.5 | % | 12.2 | % |
Basel III capital components and ratios at March 31, 2014 | Fully phased-in Basel III | Transitional Standardized Approach | ||||||||
Transition adjustments (a) | ||||||||||
(dollars in millions) | ||||||||||
CET1: | ||||||||||
Common equity | $ | 36,424 | $ | 275 | (b) | $ | 36,699 | |||
Goodwill and intangible assets | (19,915 | ) | 2,496 | (c) | (17,419 | ) | ||||
Net pension fund assets | (104 | ) | 83 | (d) | (21 | ) | ||||
Equity method investments | (426 | ) | 102 | (c) | (324 | ) | ||||
Deferred tax assets | (18 | ) | 15 | (d) | (3 | ) | ||||
Other | (10 | ) | — | (10 | ) | |||||
Total CET1 | 15,951 | 2,971 | 18,922 | |||||||
Other Tier 1 capital - Standardized Approach: | ||||||||||
Preferred stock | 1,562 | — | 1,562 | |||||||
Trust-preferred securities | — | 167 | (e) | 167 | ||||||
Disallowed deferred tax assets | — | (15 | ) | (d) | (15 | ) | ||||
Net pension fund assets | — | (83 | ) | (d) | (83 | ) | ||||
Total Tier 1 capital | 17,513 | 3,040 | 20,553 | |||||||
Tier 2 capital - Standardized Approach: | ||||||||||
Trust-preferred securities | — | 166 | (e) | 166 | ||||||
Subordinated debt | 448 | — | 448 | |||||||
Allowance for loan losses | 326 | — | 326 | |||||||
Total Tier 2 capital | 774 | 166 | 940 | |||||||
Total capital - Standardized Approach | $ | 18,287 | $ | 3,206 | $ | 21,493 | ||||
Risk-weighted assets - Standardized Approach | $ | 143,882 | $ | (23,136 | ) | (f) | $ | 120,746 | ||
Risk-weighted assets - Advanced Approach | 148,736 | N/A | N/A | |||||||
Standardized Approach: | ||||||||||
Estimated Basel III CET1 ratio | 11.1 | % | 15.7 | % | ||||||
Tier 1 capital ratio | 12.2 | 17.0 | ||||||||
Total (Tier 1 plus Tier 2) capital ratio | 12.7 | 17.8 | ||||||||
Advanced Approach: | ||||||||||
Estimated Basel III CET1 ratio | 10.7 | % | N/A |
(a) | Transition adjustments required in 2014 under the Final Capital Rules. |
(b) | Represents the portion of accumulated other comprehensive (income) loss excluded from common equity. |
(c) | Represents intangible assets, other than goodwill, net of the corresponding deferred tax liabilities. |
(d) | Represents the deduction for net pension fund assets and disallowed deferred tax assets in CET1 and Tier 1 capital. |
(e) | During 2014, 50% of outstanding trust preferred securities are included in Tier 1 capital and 50% in Tier 2 capital. |
(f) | Following are the primary differences between risk-weighted assets determined under fully phased-in Basel III-Standardized Approach and Basel I. 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 fully phased-in Basel III, the Standardized Approach uses 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 fully phased-in Basel III than Basel I, and fully phased-in 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. In 2014, risk-weighted assets include transition adjustments for intangible assets, other than goodwill, and significant investments in unconsolidated financial institutions. |
Estimated fully phased-in Basel III CET1 ratio – Non-GAAP (a) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
(dollars in millions) | |||||||||
Total Tier 1 capital | $ | 20,553 | $ | 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 | — | 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) | $ | 120,746 | $ | 113,322 | $ | 119,382 | |||
Add: Adjustments (c) | 23,136 | 26,543 | 26,898 | ||||||
Total estimated fully phased-in Basel III risk-weighted assets | $ | 143,882 | $ | 139,865 | $ | 146,280 | |||
Estimated fully phased-in Basel III CET1 ratio – Non-GAAP | 11.1 | % | 10.6 | % | 9.4 | % | |||
Under the Advanced Approach: | |||||||||
Total risk-weighted assets – Basel I (b) | $ | 120,746 | $ | 113,322 | $ | 119,382 | |||
Add: Adjustments (c) | 27,990 | 17,527 | 22,798 | ||||||
Total estimated fully phased-in Basel III risk-weighted assets | $ | 148,736 | $ | 130,849 | $ | 142,180 | |||
Estimated fully phased-in Basel III CET1 ratio – Non-GAAP | 10.7 | % | 11.3 | % | 9.7 | % |
(a) | 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 Capital 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 NPRs dated June 7, 2012. |
(b) | Consistent with historic 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 90 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. |
• | Limits exposures between a banking organization and a single counterparty or a group of connected counterparties to 25% of Tier 1 capital; |
• | Limits exposures between G-SIBs to 15% of Tier 1 capital; |
• | Excludes intraday interbank exposures and sovereign and central bank exposures; and |
• | Allows banking organizations to use risk-based capital measurements for securities financing transactions (e.g., value-at-risk) until the Basel Committee finalizes a revised exposure measurement methodology. |
• | All of our SEC filings, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports, SEC Forms 3, 4 and 5 and any proxy statement mailed in connection with the solicitation of proxies; |
• | Financial statements and footnotes prepared using Extensible Business Reporting Language (“XBRL”); |
• | Our Earnings Release, Quarterly Earnings Review, Quarterly Financial Trends and selected management conference calls and presentations; |
• | Other regulatory disclosures, including: Basel II.5 Market Risk Disclosures; Basel II Pillar 3 Disclosures; Federal Financial Institutions Examination Council - Consolidated Reports of Condition and Income for a Bank With Domestic and Foreign Offices; Consolidated Financial Statements for Bank Holding Companies; and the Dodd-Frank Act Stress Test Results for BNY Mellon and The Bank of New York Mellon; and |
• | Our Corporate Governance Guidelines, Directors Code of Conduct and the Charters of the Audit, Corporate Governance and Nominating, Corporate Social Responsibility, Human Resources and Compensation, Risk and Technology Committees of our Board of Directors. |
Item 1. Financial Statements |
The Bank of New York Mellon Corporation (and its subsidiaries) |
Quarter ended | |||||||||||
(in millions) | 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 — including other-than-temporary impairment | 23 | 39 | 48 | ||||||||
Noncredit-related gains on securities not expected to be sold (recognized in other comprehensive income) | 1 | — | — | ||||||||
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 | ||||||||
Net occupancy | 154 | 154 | 163 | ||||||||
Software | 152 | 152 | 140 | ||||||||
Distribution and servicing | 107 | 110 | 106 | ||||||||
Furniture and equipment | 85 | 89 | 88 | ||||||||
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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
The Bank of New York Mellon Corporation (and its subsidiaries) |
Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation | Quarter ended | ||||||||||
(in millions) | 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 (a) | 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 | ) |
Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation | Quarter ended | |||||||
(in thousands) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | |||||
Basic | 1,138,645 | 1,142,861 | 1,158,819 | |||||
Common stock equivalents | 20,435 | 19,311 | — | |||||
Less: Participating securities | (14,570 | ) | (14,211 | ) | — | |||
Diluted (b) | 1,144,510 | 1,147,961 | 1,158,819 | |||||
Anti-dilutive securities (c) | 47,997 | 52,792 | 81,659 |
Earnings (loss) per share applicable to the common shareholders of The Bank of New York Mellon Corporation (a) (d) | Quarter ended | ||||||||||
(in dollars) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||||
Basic | $ | 0.57 | $ | 0.44 | $ | (0.23 | ) | ||||
Diluted (b) | $ | 0.57 | $ | 0.44 | $ | (0.23 | ) |
(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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | 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. |
(c) | Represents stock options, restricted stock, restricted stock units and participating securities outstanding but not included in the computation of diluted average common shares because their effect would be anti-dilutive. |
(d) | Basic and diluted earnings per share under the two-class method are determined on the net income applicable to common shareholders of The Bank of New York Mellon Corporation reported on the income statement less earnings allocated to participating securities, and the change in the excess of redeemable value over the fair value of noncontrolling interests, if applicable. |
The Bank of New York Mellon Corporation (and its subsidiaries) |
Quarter ended | |||||||||||
(in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||||
Net income (loss) (a) | $ | 694 | $ | 556 | $ | (237 | ) | ||||
Other comprehensive income (loss), net of tax: | |||||||||||
Foreign currency translation adjustments | 37 | 111 | (309 | ) | |||||||
Unrealized gain (loss) on assets available-for-sale: | |||||||||||
Unrealized gain (loss) arising during the period | 162 | (75 | ) | (6 | ) | ||||||
Reclassification adjustment | (13 | ) | (25 | ) | (30 | ) | |||||
Total unrealized gain (loss) on assets available-for-sale | 149 | (100 | ) | (36 | ) | ||||||
Defined benefit plans: | |||||||||||
Prior service cost arising during the period | — | (1 | ) | — | |||||||
Net loss arising during the period | — | 429 | — | ||||||||
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost | 19 | 21 | 43 | ||||||||
Total defined benefit plans | 19 | 449 | 43 | ||||||||
Net unrealized gain on cash flow hedges | 1 | 5 | 1 | ||||||||
Total other comprehensive income (loss), net of tax (b) | 206 | 465 | (301 | ) | |||||||
Net (income) attributable to noncontrolling interests | (20 | ) | (17 | ) | (16 | ) | |||||
Other comprehensive (income) loss attributable to noncontrolling interests | (3 | ) | (18 | ) | 29 | ||||||
Net comprehensive income (loss) | $ | 877 | $ | 986 | $ | (525 | ) |
(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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | Other comprehensive income (loss) attributable to The Bank of New York Mellon Corporation shareholders was $203 million for the quarter ended March 31, 2014, $447 million for the quarter ended Dec. 31, 2013 and $(272) million for the quarter ended March 31, 2013. |
The Bank of New York Mellon Corporation (and its subsidiaries) |
March 31, | Dec. 31, | ||||||
(dollars in millions, except per share amounts) | 2014 | 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 (includes $1,755 and $1,728, at fair value) (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 (including allowance for lending-related commitments of $128 and $134, also includes $395 and $503, at fair value) (a) | 5,371 | 4,827 | |||||
Long-term debt (includes $329 and $321, at fair value) | 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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
The Bank of New York Mellon Corporation (and its subsidiaries) |
Three months ended March 31, | |||||||
(in millions) | 2014 | 2013 | |||||
Operating activities | |||||||
Net income (loss) (a) | $ | 694 | $ | (237 | ) | ||
Net (income) attributable to noncontrolling interests | (20 | ) | (16 | ) | |||
Net income (loss) applicable to shareholders of The Bank of New York Mellon Corporation | 674 | (253 | ) | ||||
Adjustments to reconcile net income to net cash (used for) provided by operating activities: | |||||||
Provision for credit losses | (18 | ) | (24 | ) | |||
Pension plan contributions | (12 | ) | (15 | ) | |||
Depreciation and amortization | 333 | 333 | |||||
Deferred tax (benefit) expense (a) | (52 | ) | 153 | ||||
Net securities (gains) and venture capital (income) | (27 | ) | (45 | ) | |||
Change in trading activities | 229 | (2,256 | ) | ||||
Change in accruals and other, net (a) | (2,182 | ) | (637 | ) | |||
Net cash (used for) operating activities | (1,055 | ) | (2,744 | ) | |||
Investing activities | |||||||
Change in interest-bearing deposits with banks | (7,633 | ) | 3,260 | ||||
Change in interest-bearing deposits with the Federal Reserve and other central banks | 21,757 | 11,985 | |||||
Purchases of securities held-to-maturity | (4 | ) | (1,425 | ) | |||
Paydowns of securities held-to-maturity | 415 | 327 | |||||
Maturities of securities held-to-maturity | 8 | 16 | |||||
Purchases of securities available-for-sale | (12,499 | ) | (10,486 | ) | |||
Sales of securities available-for-sale | 8,091 | 3,817 | |||||
Paydowns of securities available-for-sale | 1,755 | 2,450 | |||||
Maturities of securities available-for-sale | 1,362 | 954 | |||||
Net change in loans | (2,539 | ) | (2,651 | ) | |||
Sales of loans and other real estate | 204 | 24 | |||||
Change in federal funds sold and securities purchased under resale agreements | (3,062 | ) | (411 | ) | |||
Change in seed capital investments | (176 | ) | (20 | ) | |||
Purchases of premises and equipment/capitalized software | (201 | ) | (126 | ) | |||
Acquisitions, net of cash | (1 | ) | (4 | ) | |||
Other, net | (76 | ) | (449 | ) | |||
Net cash provided by investing activities | 7,401 | 7,261 | |||||
Financing activities | |||||||
Change in deposits | (8,910 | ) | (5,080 | ) | |||
Change in federal funds purchased and securities sold under repurchase agreements | 287 | 1,175 | |||||
Change in payables to customers and broker-dealers | 1,115 | (1,109 | ) | ||||
Change in other borrowed funds | 642 | (577 | ) | ||||
Change in commercial paper | (69 | ) | (260 | ) | |||
Net proceeds from the issuance of long-term debt | 1,445 | 1,497 | |||||
Repayments of long-term debt | (704 | ) | (43 | ) | |||
Proceeds from the exercise of stock options | 51 | 111 | |||||
Issuance of common stock | 6 | 6 | |||||
Treasury stock acquired | (375 | ) | (252 | ) | |||
Common cash dividends paid | (173 | ) | (153 | ) | |||
Preferred cash dividends paid | (13 | ) | (13 | ) | |||
Other, net | (19 | ) | (57 | ) | |||
Net cash (used for) financing activities | (6,717 | ) | (4,755 | ) | |||
Effect of exchange rate changes on cash | 3 | (49 | ) | ||||
Change in cash and due from banks | |||||||
Change in cash and due from banks | (368 | ) | (287 | ) | |||
Cash and due from banks at beginning of period | 6,460 | 4,727 | |||||
Cash and due from banks at end of period | $ | 6,092 | $ | 4,440 | |||
Supplemental disclosures | |||||||
Interest paid | $ | 97 | $ | 95 | |||
Income taxes paid | 74 | 64 | |||||
Income taxes refunded | 5 | 6 |
(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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
The Bank of New York Mellon Corporation (and its subsidiaries) |
The Bank of New York Mellon Corporation shareholders | Non- redeemable noncontrolling interests of consolidated investment management funds | Total permanent equity | Redeemable non- controlling interests/ temporary equity | |||||||||||||||||||||||||
(in millions, except per share amounts) | Preferred stock | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss), net of tax | Treasury stock | ||||||||||||||||||||||
Balance at Dec. 31, 2013 (a) | $ | 1,562 | $ | 13 | $ | 24,002 | $ | 15,952 | $ | (892 | ) | $ | (3,140 | ) | $ | 783 | $ | 38,280 | (b) | $ | 230 | |||||||
Shares issued to shareholders of noncontrolling interests | — | — | — | — | — | — | — | — | 15 | |||||||||||||||||||
Redemption of subsidiary shares from noncontrolling interests | — | — | — | — | — | — | — | — | (53 | ) | ||||||||||||||||||
Other net changes in noncontrolling interests | — | — | 10 | — | — | — | (33 | ) | (23 | ) | 18 | |||||||||||||||||
Net income | — | — | — | 674 | — | — | 20 | 694 | — | |||||||||||||||||||
Other comprehensive income | — | — | — | — | 203 | — | 1 | 204 | 2 | |||||||||||||||||||
Dividends: | ||||||||||||||||||||||||||||
Common stock at $0.15 per share | — | — | — | (174 | ) | — | — | — | (174 | ) | — | |||||||||||||||||
Preferred stock | — | — | — | (13 | ) | — | — | — | (13 | ) | — | |||||||||||||||||
Repurchase of common stock | — | — | — | — | — | (375 | ) | — | (375 | ) | — | |||||||||||||||||
Common stock issued under: | ||||||||||||||||||||||||||||
Employee benefit plans | — | — | 7 | — | — | — | — | 7 | — | |||||||||||||||||||
Direct stock purchase and dividend reinvestment plan | — | — | 5 | — | — | — | — | 5 | — | |||||||||||||||||||
Stock awards and options exercised | — | — | 152 | — | — | — | — | 152 | — | |||||||||||||||||||
Balance at March 31, 2014 | $ | 1,562 | $ | 13 | $ | 24,176 | $ | 16,439 | $ | (689 | ) | $ | (3,515 | ) | $ | 771 | $ | 38,757 | (b) | $ | 212 |
(a) | Retained earnings was restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $35,935 million at Dec. 31, 2013 and $36,424 million at March 31, 2014. |
Notes to Consolidated Financial Statements |
Notes to Consolidated Financial Statements (continued) |
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 | ) |
Income Statement | As previously reported | Adjustments | 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 | ) |
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 |
Notes to Consolidated Financial Statements (continued) |
Securities at March 31, 2014 | Amortized cost | Gross unrealized | Fair value | ||||||||||
(in millions) | Gains | Losses | |||||||||||
Available-for-sale: | |||||||||||||
U.S. Treasury | $ | 13,814 | $ | 94 | $ | 336 | $ | 13,572 | |||||
U.S. Government agencies | 446 | 7 | 4 | 449 | |||||||||
State and political subdivisions | 6,630 | 79 | 57 | 6,652 | |||||||||
Agency RMBS | 25,277 | 290 | 482 | 25,085 | |||||||||
Non-agency RMBS | 1,097 | 43 | 39 | 1,101 | |||||||||
Other RMBS | 2,076 | 47 | 39 | 2,084 | |||||||||
Commercial MBS | 2,144 | 59 | 18 | 2,185 | |||||||||
Agency commercial MBS | 2,078 | 7 | 22 | 2,063 | |||||||||
Asset-backed CLOs | 1,438 | 11 | — | 1,449 | |||||||||
Other asset-backed securities | 3,362 | 8 | 6 | 3,364 | |||||||||
Foreign covered bonds | 2,635 | 81 | — | 2,716 | |||||||||
Corporate bonds | 1,758 | 38 | 15 | 1,781 | |||||||||
Other debt securities | 14,109 | 112 | 9 | 14,212 | (a) | ||||||||
Equity securities | 16 | 1 | — | 17 | |||||||||
Money market funds | 849 | — | — | 849 | |||||||||
Non-agency RMBS (b) | 2,065 | 575 | 3 | 2,637 | |||||||||
Total securities available-for-sale | 79,794 | 1,452 | 1,030 | 80,216 | |||||||||
Held-to-maturity: | |||||||||||||
U.S. Treasury | 3,325 | 22 | 55 | 3,292 | |||||||||
U.S. Government agencies | 419 | — | 9 | 410 | |||||||||
State and political subdivisions | 40 | 1 | — | 41 | |||||||||
Agency RMBS | 14,147 | 71 | 160 | 14,058 | |||||||||
Non-agency RMBS | 178 | 10 | 2 | 186 | |||||||||
Other RMBS | 381 | 3 | 19 | 365 | |||||||||
Commercial MBS | 16 | — | — | 16 | |||||||||
Other securities | 720 | 4 | — | 724 | |||||||||
Total securities held-to-maturity | 19,226 | 111 | 245 | 19,092 | |||||||||
Total securities | $ | 99,020 | $ | 1,563 | $ | 1,275 | $ | 99,308 |
(a) | Includes $12.2 billion, at fair value, of government-sponsored and guaranteed entities, and sovereign debt. |
(b) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
Notes to Consolidated Financial Statements (continued) |
Securities at Dec. 31, 2013 | Amortized cost | Gross unrealized | Fair value | ||||||||||
(in millions) | Gains | Losses | |||||||||||
Available-for-sale: | |||||||||||||
U.S. Treasury | $ | 13,363 | $ | 94 | $ | 605 | $ | 12,852 | |||||
U.S. Government agencies | 937 | 16 | 5 | 948 | |||||||||
State and political subdivisions | 6,706 | 60 | 92 | 6,674 | |||||||||
Agency RMBS | 25,564 | 307 | 550 | 25,321 | |||||||||
Non-agency RMBS | 1,148 | 44 | 50 | 1,142 | |||||||||
Other RMBS | 2,299 | 43 | 57 | 2,285 | |||||||||
Commercial MBS | 2,324 | 60 | 27 | 2,357 | |||||||||
Agency commercial MBS | 1,822 | 1 | 34 | 1,789 | |||||||||
Asset-backed CLOs | 1,551 | 11 | — | 1,562 | |||||||||
Other asset-backed securities | 2,894 | 6 | 9 | 2,891 | |||||||||
Foreign covered bonds | 2,798 | 73 | — | 2,871 | |||||||||
Corporate bonds | 1,808 | 32 | 25 | 1,815 | |||||||||
Other debt securities | 13,077 | 91 | 18 | 13,150 | (a) | ||||||||
Equity securities | 18 | 1 | — | 19 | |||||||||
Money market funds | 938 | — | — | 938 | |||||||||
Non-agency RMBS (b) | 2,131 | 567 | 3 | 2,695 | |||||||||
Total securities available-for-sale | 79,378 | 1,406 | 1,475 | 79,309 | |||||||||
Held-to-maturity: | |||||||||||||
U.S. Treasury | 3,324 | 28 | 84 | 3,268 | |||||||||
U.S. Government agencies | 419 | — | 13 | 406 | |||||||||
State and political subdivisions | 44 | — | — | 44 | |||||||||
Agency RMBS | 14,568 | 20 | 236 | 14,352 | |||||||||
Non-agency RMBS | 186 | 10 | 3 | 193 | |||||||||
Other RMBS | 466 | 3 | 20 | 449 | |||||||||
Commercial MBS | 16 | 1 | — | 17 | |||||||||
Other securities | 720 | — | 6 | 714 | |||||||||
Total securities held-to-maturity | 19,743 | 62 | 362 | 19,443 | |||||||||
Total securities | $ | 99,121 | $ | 1,468 | $ | 1,837 | $ | 98,752 |
(a) | Includes $11.4 billion, at fair value, of government-sponsored and guaranteed entities, and sovereign debt. |
(b) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
Net securities gains (losses) | |||||||||
(in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
Realized gross gains | $ | 30 | $ | 49 | $ | 57 | |||
Realized gross losses | (3 | ) | — | (5 | ) | ||||
Recognized gross impairments | (5 | ) | (10 | ) | (4 | ) | |||
Total net securities gains | $ | 22 | $ | 39 | $ | 48 |
Notes to Consolidated Financial Statements (continued) |
Temporarily impaired securities at March 31, 2014 | Less than 12 months | 12 months or more | Total | ||||||||||||||||||||
(in millions) | Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||
Available-for-sale: | |||||||||||||||||||||||
U.S. Treasury | $ | 8,750 | $ | 336 | $ | — | $ | — | $ | 8,750 | $ | 336 | |||||||||||
U.S. Government agencies | 98 | 4 | — | — | 98 | 4 | |||||||||||||||||
State and political subdivisions | 1,875 | 51 | 131 | 6 | 2,006 | 57 | |||||||||||||||||
Agency RMBS | 12,657 | 169 | 76 | 313 | 12,733 | 482 | |||||||||||||||||
Non-agency RMBS | 22 | 1 | 556 | 38 | 578 | 39 | |||||||||||||||||
Other RMBS | 80 | 12 | 504 | 27 | 584 | 39 | |||||||||||||||||
Commercial MBS | 455 | 13 | 155 | 5 | 610 | 18 | |||||||||||||||||
Agency commercial MBS | 1,364 | 22 | — | — | 1,364 | 22 | |||||||||||||||||
Other asset-backed securities | 1,181 | 6 | 35 | — | 1,216 | 6 | |||||||||||||||||
Corporate bonds | 313 | 15 | — | — | 313 | 15 | |||||||||||||||||
Other debt securities | 1,531 | 9 | — | — | 1,531 | 9 | |||||||||||||||||
Non-agency RMBS (a) | 36 | 1 | 21 | 2 | 57 | 3 | |||||||||||||||||
Total securities available-for-sale | $ | 28,362 | $ | 639 | $ | 1,478 | $ | 391 | $ | 29,840 | $ | 1,030 | |||||||||||
Held-to-maturity: | |||||||||||||||||||||||
U.S. Treasury | $ | 2,301 | $ | 55 | $ | — | $ | — | $ | 2,301 | $ | 55 | |||||||||||
U.S. Government agencies | 410 | 9 | — | — | 410 | 9 | |||||||||||||||||
Agency RMBS | 7,885 | 160 | — | — | 7,885 | 160 | |||||||||||||||||
Non-agency RMBS | 11 | — | 36 | 2 | 47 | 2 | |||||||||||||||||
Other RMBS | — | — | 256 | 19 | 256 | 19 | |||||||||||||||||
Total securities held-to-maturity | $ | 10,607 | $ | 224 | $ | 292 | $ | 21 | $ | 10,899 | $ | 245 | |||||||||||
Total temporarily impaired securities | $ | 38,969 | $ | 863 | $ | 1,770 | $ | 412 | $ | 40,739 | $ | 1,275 |
(a) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
Temporarily impaired securities at Dec. 31, 2013 | Less than 12 months | 12 months or more | Total | ||||||||||||||||||||
(in millions) | Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||
Available-for-sale: | |||||||||||||||||||||||
U.S. Treasury | $ | 7,719 | $ | 605 | $ | — | $ | — | $ | 7,719 | $ | 605 | |||||||||||
U.S. Government agencies | 97 | 5 | — | — | 97 | 5 | |||||||||||||||||
State and political subdivisions | 2,374 | 55 | 222 | 37 | 2,596 | 92 | |||||||||||||||||
Agency RMBS | 12,011 | 226 | 83 | 324 | 12,094 | 550 | |||||||||||||||||
Non-agency RMBS | 102 | 7 | 592 | 43 | 694 | 50 | |||||||||||||||||
Other RMBS | 93 | 14 | 614 | 43 | 707 | 57 | |||||||||||||||||
Commercial MBS | 517 | 21 | 174 | 6 | 691 | 27 | |||||||||||||||||
Agency commercial MBS | 1,390 | 34 | — | — | 1,390 | 34 | |||||||||||||||||
Other asset-backed securities | 1,529 | 9 | 38 | — | 1,567 | 9 | |||||||||||||||||
Corporate bonds | 612 | 25 | — | — | 612 | 25 | |||||||||||||||||
Other debt securities | 2,976 | 18 | — | — | 2,976 | 18 | |||||||||||||||||
Non-agency RMBS (a) | 59 | 1 | 22 | 2 | 81 | 3 | |||||||||||||||||
Total securities available-for-sale | $ | 29,479 | $ | 1,020 | $ | 1,745 | $ | 455 | $ | 31,224 | $ | 1,475 | |||||||||||
Held-to-maturity: | |||||||||||||||||||||||
U.S. Treasury | $ | 2,278 | $ | 84 | $ | — | $ | — | $ | 2,278 | $ | 84 | |||||||||||
U.S. Government agencies | 406 | 13 | — | — | 406 | 13 | |||||||||||||||||
Agency RMBS | 12,639 | 236 | — | — | 12,639 | 236 | |||||||||||||||||
Non-agency RMBS | 10 | — | 65 | 3 | 75 | 3 | |||||||||||||||||
Other RMBS | — | — | 261 | 20 | 261 | 20 | |||||||||||||||||
Other securities | 641 | 6 | — | — | 641 | 6 | |||||||||||||||||
Total securities held-to-maturity | $ | 15,974 | $ | 339 | $ | 326 | $ | 23 | $ | 16,300 | $ | 362 | |||||||||||
Total temporarily impaired securities | $ | 45,453 | $ | 1,359 | $ | 2,071 | $ | 478 | $ | 47,524 | $ | 1,837 |
(a) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
Notes to Consolidated Financial Statements (continued) |
Maturity distribution and yield on investment securities at March 31, 2014 | U.S. Treasury | U.S. Government agencies | State and political subdivisions | Other bonds, notes and debentures | Mortgage/ asset-backed and equity securities | ||||||||||||||||||||||||||||
(dollars in millions) | Amount | Yield (a) | Amount | Yield (a) | Amount | Yield (a) | Amount | Yield (a) | Amount | Yield (a) | Total | ||||||||||||||||||||||
Securities available-for-sale: | |||||||||||||||||||||||||||||||||
One year or less | $ | 387 | 0.47 | % | $ | 171 | 1.64 | % | $ | 514 | 1.54 | % | $ | 6,357 | 1.00 | % | $ | — | — | % | $ | 7,429 | |||||||||||
Over 1 through 5 years | 7,991 | 0.68 | 180 | 2.06 | 3,208 | 1.98 | 9,914 | 1.19 | — | — | 21,293 | ||||||||||||||||||||||
Over 5 through 10 years | 1,313 | 2.85 | 98 | 1.49 | 2,561 | 3.41 | 2,432 | 2.42 | — | — | 6,404 | ||||||||||||||||||||||
Over 10 years | 3,881 | 3.12 | — | — | 369 | 3.41 | 6 | 2.82 | — | — | 4,256 | ||||||||||||||||||||||
Mortgage-backed securities | — | — | — | — | — | — | — | — | 35,155 | 2.43 | 35,155 | ||||||||||||||||||||||
Asset-backed securities | — | — | — | — | — | — | — | — | 4,813 | 1.09 | 4,813 | ||||||||||||||||||||||
Equity securities (b) | — | — | — | — | — | — | — | — | 866 | — | 866 | ||||||||||||||||||||||
Total | $ | 13,572 | 1.58 | % | $ | 449 | 1.78 | % | $ | 6,652 | 2.57 | % | $ | 18,709 | 1.29 | % | $ | 40,834 | 2.22 | % | $ | 80,216 | |||||||||||
Securities held-to-maturity: | |||||||||||||||||||||||||||||||||
One year or less | $ | — | — | % | $ | — | — | % | $ | 1 | 4.00 | % | $ | 3 | 0.14 | % | $ | — | — | % | $ | 4 | |||||||||||
Over 1 through 5 years | 2,429 | 1.22 | 308 | 1.18 | — | — | 717 | 0.54 | — | — | 3,454 | ||||||||||||||||||||||
Over 5 through 10 years | 896 | 2.24 | 111 | 1.61 | 16 | 6.82 | — | — | — | — | 1,023 | ||||||||||||||||||||||
Over 10 years | — | — | — | — | 23 | 4.86 | — | — | — | — | 23 | ||||||||||||||||||||||
Mortgage-backed securities | — | — | — | — | — | — | — | — | 14,722 | 2.70 | 14,722 | ||||||||||||||||||||||
Total | $ | 3,325 | 1.49 | % | $ | 419 | 1.29 | % | $ | 40 | 5.61 | % | $ | 720 | 0.54 | % | $ | 14,722 | 2.70 | % | $ | 19,226 |
(a) | Yields are based upon the amortized cost of securities. |
(b) | Includes money market funds. |
• | Default rate - the number of mortgage loans expected to go into default over the life of the transaction, which is driven by the roll rate of loans in each performance bucket that will ultimately migrate to default; and |
• | Severity - the loss expected to be realized when a loan defaults. |
Projected weighted-average default rates and loss severities | |||||||||||
March 31, 2014 | Dec. 31, 2013 | ||||||||||
Default rate | Severity | Default rate | Severity | ||||||||
Alt-A | 40 | % | 58 | % | 40 | % | 57 | % | |||
Subprime | 58 | % | 74 | % | 58 | % | 71 | % | |||
Prime | 24 | % | 42 | % | 22 | % | 42 | % |
Notes to Consolidated Financial Statements (continued) |
Net securities gains (losses) | |||||||||
(in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
U.S. Treasury | $ | 10 | $ | 11 | $ | (4 | ) | ||
U.S. Government agency debt | 7 | — | — | ||||||
Commercial MBS | — | 1 | 8 | ||||||
Foreign covered bonds | — | — | 8 | ||||||
State and political subdivisions | (1 | ) | 13 | — | |||||
European floating rate notes | (1 | ) | 11 | 4 | |||||
Non-agency RMBS | (2 | ) | 2 | 4 | |||||
Other | 9 | 1 | 28 | ||||||
Total net securities gains | $ | 22 | $ | 39 | $ | 48 |
Debt securities credit loss roll forward | ||||||
(in millions) | 1Q14 | 1Q13 | ||||
Beginning balance as of Jan. 1 | $ | 119 | $ | 288 | ||
Add: Initial OTTI credit losses | 2 | — | ||||
Subsequent OTTI credit losses | 3 | 4 | ||||
Less: Realized losses for securities sold | 18 | 118 | ||||
Ending balance as of March 31 | $ | 106 | $ | 174 |
Loans | March 31, 2014 | Dec. 31, 2013 | |||||
(in millions) | |||||||
Domestic: | |||||||
Financial institutions | $ | 4,492 | $ | 4,511 | |||
Commercial | 1,754 | 1,534 | |||||
Wealth management loans and mortgages | 9,922 | 9,743 | |||||
Commercial real estate | 2,128 | 2,001 | |||||
Lease financings (a) | 1,308 | 1,322 | |||||
Other residential mortgages | 1,346 | 1,385 | |||||
Overdrafts | 1,078 | 1,314 | |||||
Other | 788 | 768 | |||||
Margin loans | 16,430 | 15,652 | |||||
Total domestic | 39,246 | 38,230 | |||||
Foreign: | |||||||
Financial institutions | 9,084 | 9,848 | |||||
Commercial | 205 | 113 | |||||
Wealth management loans and mortgages | 82 | 75 | |||||
Commercial real estate | 17 | 9 | |||||
Lease financings (a) | 860 | 945 | |||||
Other (primarily overdrafts) | 4,542 | 2,437 | |||||
Total foreign | 14,790 | 13,427 | |||||
Total loans | $ | 54,036 | $ | 51,657 |
(a) | Net of unearned income on domestic and foreign lease financings of $934 million at March 31, 2014 and $1,020 million at Dec. 31, 2013. |
Notes to Consolidated Financial Statements (continued) |
Allowance for credit losses activity for the quarter ended March 31, 2014 | Wealth management loans and mortgages | Other residential mortgages | ||||||||||||||||||||||||||
(in millions) | Commercial | Commercial real estate | Financial institutions | Lease financings | All Other | Foreign | Total | |||||||||||||||||||||
Beginning balance | $ | 83 | $ | 41 | $ | 49 | $ | 37 | $ | 24 | $ | 54 | $ | — | $ | 56 | $ | 344 | ||||||||||
Charge-offs | — | — | — | — | — | (1 | ) | — | — | (1 | ) | |||||||||||||||||
Recoveries | — | — | — | — | — | 1 | — | — | 1 | |||||||||||||||||||
Net (charge-offs) recoveries | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Provision | (4 | ) | 1 | (1 | ) | (2 | ) | (1 | ) | (4 | ) | — | (7 | ) | (18 | ) | ||||||||||||
Ending balance | $ | 79 | $ | 42 | $ | 48 | $ | 35 | $ | 23 | $ | 50 | $ | — | $ | 49 | $ | 326 | ||||||||||
Allowance for: | ||||||||||||||||||||||||||||
Loan losses | $ | 20 | $ | 23 | $ | 9 | $ | 35 | $ | 18 | $ | 50 | $ | — | $ | 43 | $ | 198 | ||||||||||
Lending-related commitments | 59 | 19 | 39 | — | 5 | — | — | 6 | 128 | |||||||||||||||||||
Individually evaluated for impairment: | ||||||||||||||||||||||||||||
Loan balance | $ | 13 | $ | 3 | $ | — | $ | — | $ | 10 | $ | — | $ | — | $ | 7 | $ | 33 | ||||||||||
Allowance for loan losses | 3 | 1 | — | — | 2 | — | — | 2 | 8 | |||||||||||||||||||
Collectively evaluated for impairment: | ||||||||||||||||||||||||||||
Loan balance | $ | 1,741 | $ | 2,125 | $ | 4,492 | $ | 1,308 | $ | 9,912 | $ | 1,346 | $ | 18,296 | (a) | $ | 14,783 | $ | 54,003 | |||||||||
Allowance for loan losses | 17 | 22 | 9 | 35 | 16 | 50 | — | 41 | 190 |
(a) | Includes $1,078 million of domestic overdrafts, $16,430 million of margin loans and $788 million of other loans at March 31, 2014. |
Allowance for credit losses activity for the quarter ended Dec. 31, 2013 | Wealth management loans and mortgages | Other residential mortgages | ||||||||||||||||||||||||||
(in millions) | Commercial | Commercial real estate | Financial institutions | Lease financings | All Other | Foreign | Total | |||||||||||||||||||||
Beginning balance | $ | 91 | $ | 32 | $ | 41 | $ | 39 | $ | 18 | $ | 70 | $ | — | $ | 48 | $ | 339 | ||||||||||
Charge-offs | (1 | ) | — | — | — | — | (2 | ) | — | (3 | ) | (6 | ) | |||||||||||||||
Recoveries | — | — | 3 | — | — | 2 | — | — | 5 | |||||||||||||||||||
Net (charge-offs) recoveries | (1 | ) | — | 3 | — | — | — | — | (3 | ) | (1 | ) | ||||||||||||||||
Provision | (7 | ) | 9 | 5 | (2 | ) | 6 | (16 | ) | — | 11 | 6 | ||||||||||||||||
Ending balance | $ | 83 | $ | 41 | $ | 49 | $ | 37 | $ | 24 | $ | 54 | $ | — | $ | 56 | $ | 344 | ||||||||||
Allowance for: | ||||||||||||||||||||||||||||
Loan losses | $ | 21 | $ | 21 | $ | 10 | $ | 37 | $ | 19 | $ | 54 | $ | — | $ | 48 | $ | 210 | ||||||||||
Lending-related commitments | 62 | 20 | 39 | — | 5 | — | — | 8 | 134 | |||||||||||||||||||
Individually evaluated for impairment: | ||||||||||||||||||||||||||||
Loan balance | $ | 15 | $ | 3 | $ | — | $ | — | $ | 12 | $ | — | $ | — | $ | 6 | $ | 36 | ||||||||||
Allowance for loan losses | 2 | 1 | — | — | 3 | — | — | 1 | 7 | |||||||||||||||||||
Collectively evaluated for impairment: | ||||||||||||||||||||||||||||
Loan balance | $ | 1,519 | $ | 1,998 | $ | 4,511 | $ | 1,322 | $ | 9,731 | $ | 1,385 | $ | 17,734 | (a) | $ | 13,421 | $ | 51,621 | |||||||||
Allowance for loan losses | 19 | 20 | 10 | 37 | 16 | 54 | — | 47 | 203 |
(a) | Includes $1,314 million of domestic overdrafts, $15,652 million of margin loans and $768 million of other loans at Dec. 31, 2013. |
Notes to Consolidated Financial Statements (continued) |
Allowance for credit losses activity for the quarter ended March 31, 2013 | Wealth management loans and mortgages | Other residential mortgages | All Other | Foreign | Total | |||||||||||||||||||||||
(in millions) | Commercial | Commercial real estate | Financial institutions | Lease financings | ||||||||||||||||||||||||
Beginning balance | $ | 104 | $ | 30 | $ | 36 | $ | 49 | $ | 30 | $ | 88 | $ | 2 | $ | 48 | $ | 387 | ||||||||||
Charge-offs | (2 | ) | — | — | — | — | (3 | ) | — | — | (5 | ) | ||||||||||||||||
Recoveries | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Net (charge-offs) | (2 | ) | — | — | — | — | (3 | ) | — | — | (5 | ) | ||||||||||||||||
Provision | (5 | ) | 1 | (3 | ) | (10 | ) | (1 | ) | (4 | ) | — | (2 | ) | (24 | ) | ||||||||||||
Ending balance | $ | 97 | $ | 31 | $ | 33 | $ | 39 | $ | 29 | $ | 81 | $ | 2 | $ | 46 | $ | 358 | ||||||||||
Allowance for: | ||||||||||||||||||||||||||||
Loan losses | $ | 22 | $ | 19 | $ | 11 | $ | 39 | $ | 25 | $ | 81 | $ | 2 | $ | 38 | $ | 237 | ||||||||||
Lending-related commitments | 75 | 12 | 22 | — | 4 | — | — | 8 | 121 | |||||||||||||||||||
Individually evaluated for impairment: | ||||||||||||||||||||||||||||
Loan balance | $ | 54 | $ | 16 | $ | 3 | $ | — | $ | 31 | $ | — | $ | — | $ | 9 | $ | 113 | ||||||||||
Allowance for loan losses | 7 | 1 | — | — | 7 | — | — | 5 | 20 | |||||||||||||||||||
Collectively evaluated for impairment: | ||||||||||||||||||||||||||||
Loan balance | $ | 1,297 | $ | 1,806 | $ | 4,917 | $ | 1,295 | $ | 8,888 | $ | 1,570 | $ | 16,658 | (a) | $ | 12,680 | $ | 49,111 | |||||||||
Allowance for loan losses | 15 | 18 | 11 | 39 | 18 | 81 | 2 | 33 | 217 |
(a) | Includes $2,772 million of domestic overdrafts, $13,242 million of margin loans and $644 million of other loans at March 31, 2013. |
Nonperforming assets | March 31, 2014 | Dec. 31, 2013 | |||||
(in millions) | |||||||
Nonperforming loans: | |||||||
Other residential mortgages | $ | 107 | $ | 117 | |||
Commercial | 13 | 15 | |||||
Wealth management loans and mortgages | 12 | 11 | |||||
Foreign | 7 | 6 | |||||
Commercial real estate | 4 | 4 | |||||
Total nonperforming loans | 143 | 153 | |||||
Other assets owned | 3 | 3 | |||||
Total nonperforming assets (a) | $ | 146 | $ | 156 |
(a) | Loans of consolidated investment management funds are not part of BNY Mellon’s loan portfolio. Included in the loans of consolidated investment management funds are nonperforming loans of $74 million at March 31, 2014 and $16 million at Dec. 31, 2013. 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. |
Lost interest | |||||||||
(in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
Amount by which interest income recognized on nonperforming loans exceeded reversals | $ | — | $ | 1 | $ | 1 | |||
Amount by which interest income would have increased if nonperforming loans at period-end had been performing for the entire period | $ | 2 | $ | 2 | $ | 3 |
Notes to Consolidated Financial Statements (continued) |
Impaired loans | Quarter ended | ||||||||||||||||||||||
March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | |||||||||||||||||||||
(in millions) | Average recorded investment | Interest income recognized | Average recorded investment | Interest income recognized | Average recorded investment | Interest income recognized | |||||||||||||||||
Impaired loans with an allowance: | |||||||||||||||||||||||
Commercial | $ | 14 | $ | — | $ | 15 | $ | — | $ | 56 | $ | 1 | |||||||||||
Commercial real estate | 3 | — | 2 | — | 9 | — | |||||||||||||||||
Financial institutions | — | — | — | — | 1 | — | |||||||||||||||||
Wealth management loans and mortgages | 9 | — | 10 | — | 27 | — | |||||||||||||||||
Foreign | 6 | — | 7 | — | 9 | — | |||||||||||||||||
Total impaired loans with an allowance | 32 | — | 34 | — | 102 | 1 | |||||||||||||||||
Impaired loans without an allowance: | |||||||||||||||||||||||
Commercial | — | — | — | — | — | — | |||||||||||||||||
Commercial real estate | 1 | — | 1 | — | 8 | — | |||||||||||||||||
Financial institutions | — | — | 1 | — | 1 | — | |||||||||||||||||
Wealth management loans and mortgages | 2 | — | 3 | — | 4 | — | |||||||||||||||||
Total impaired loans without an allowance (a) | 3 | — | 5 | — | 13 | — | |||||||||||||||||
Total impaired loans | $ | 35 | $ | — | $ | 39 | $ | — | $ | 115 | $ | 1 |
(a) | When the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan, then the loan does not require an allowance under the accounting standard related to impaired loans. |
Impaired loans | March 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||
(in millions) | Recorded investment | Unpaid principal balance | Related allowance (a) | Recorded investment | Unpaid principal balance | Related allowance (a) | |||||||||||||||||
Impaired loans with an allowance: | |||||||||||||||||||||||
Commercial | $ | 13 | $ | 13 | $ | 3 | $ | 15 | $ | 20 | $ | 2 | |||||||||||
Commercial real estate | 2 | 3 | 1 | 2 | 4 | 1 | |||||||||||||||||
Financial institutions | — | — | — | — | — | — | |||||||||||||||||
Wealth management loans and mortgages | 9 | 9 | 2 | 9 | 9 | 3 | |||||||||||||||||
Foreign | 7 | 11 | 2 | 6 | 17 | 1 | |||||||||||||||||
Total impaired loans with an allowance | 31 | 36 | 8 | 32 | 50 | 7 | |||||||||||||||||
Impaired loans without an allowance: | |||||||||||||||||||||||
Commercial real estate | 1 | 2 | N/A | 1 | 1 | N/A | |||||||||||||||||
Financial institutions | — | — | N/A | — | — | N/A | |||||||||||||||||
Wealth management loans and mortgages | 1 | 1 | N/A | 3 | 3 | N/A | |||||||||||||||||
Total impaired loans without an allowance (b) | 2 | 3 | N/A | 4 | 4 | N/A | |||||||||||||||||
Total impaired loans (c) | $ | 33 | $ | 39 | $ | 8 | $ | 36 | $ | 54 | $ | 7 |
(a) | The allowance for impaired loans is included in the allowance for loan losses. |
(b) | When the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan, then the loan does not require an allowance under the accounting standard related to impaired loans. |
(c) | Excludes an aggregate of less than $1 million of impaired loans in amounts individually less than $1 million at both March 31, 2014 and Dec. 31, 2013. The allowance for loan loss associated with these loans totaled less than $1 million at both March 31, 2014 and Dec. 31, 2013. |
Notes to Consolidated Financial Statements (continued) |
Past due loans and still accruing interest | March 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||
Days past due | Total past due | Days past due | Total past due | ||||||||||||||||||||||
(in millions) | 30-59 | 60-89 | >90 | 30-59 | 60-89 | >90 | |||||||||||||||||||
Domestic: | |||||||||||||||||||||||||
Financial institutions (a) | $ | — | $ | — | $ | 312 | $ | 312 | $ | 37 | $ | — | $ | — | $ | 37 | |||||||||
Wealth management loans and mortgages | 57 | — | 1 | 58 | 45 | 3 | 1 | 49 | |||||||||||||||||
Commercial real estate | 42 | — | — | 42 | 22 | 2 | — | 24 | |||||||||||||||||
Other residential mortgages | 15 | 5 | 7 | 27 | 32 | 6 | 6 | 44 | |||||||||||||||||
Total domestic | 114 | 5 | 320 | 439 | 136 | 11 | 7 | 154 | |||||||||||||||||
Foreign | — | — | — | — | — | — | — | — | |||||||||||||||||
Total past due loans | $ | 114 | $ | 5 | $ | 320 | $ | 439 | $ | 136 | $ | 11 | $ | 7 | $ | 154 |
(a) | Past due loans at March 31, 2014 include a loan to an asset manager, Sentinel Management Group, Inc. (“Sentinel”), which was reestablished as a fully collateralized performing loan in the first quarter of 2014. |
TDRs | 1Q14 | 4Q13 | 1Q13 | |||||||||||||||||||||||||||||
Outstanding recorded investment | Outstanding recorded investment | Outstanding recorded investment | ||||||||||||||||||||||||||||||
(dollars in millions) | Number of contracts | Pre-modification | Post-modification | Number of contracts | Pre-modification | Post-modification | Number of contracts | Pre-modification | Post-modification | |||||||||||||||||||||||
Other residential mortgages | 31 | $ | 5 | $ | 5 | 30 | $ | 6 | $ | 8 | 31 | $ | 5 | $ | 6 | |||||||||||||||||
Foreign | 1 | 5 | 4 | — | — | — | — | — | — | |||||||||||||||||||||||
Total TDRs | 32 | $ | 10 | $ | 9 | 30 | $ | 6 | $ | 8 | 31 | $ | 5 | $ | 6 |
Notes to Consolidated Financial Statements (continued) |
Commercial loan portfolio – Credit risk profile by creditworthiness category | |||||||||||||||||||||||
Commercial | Commercial real estate | Financial institutions | |||||||||||||||||||||
(in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2014 | Dec. 31, 2013 | March 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Investment grade | $ | 1,630 | $ | 1,323 | $ | 1,518 | $ | 1,444 | $ | 11,961 | $ | 12,598 | |||||||||||
Non-investment grade | 329 | 324 | 627 | 566 | 1,615 | 1,761 | |||||||||||||||||
Total | $ | 1,959 | $ | 1,647 | $ | 2,145 | $ | 2,010 | $ | 13,576 | $ | 14,359 |
Wealth management loans and mortgages – Credit risk profile by internally assigned grade | |||||||
(in millions) | March 31, 2014 | Dec. 31, 2013 | |||||
Wealth management loans: | |||||||
Investment grade | $ | 5,009 | $ | 4,920 | |||
Non-investment grade | 67 | 64 | |||||
Wealth management mortgages | 4,928 | 4,834 | |||||
Total | $ | 10,004 | $ | 9,818 |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Goodwill by business (in millions) | Investment Management | Investment Services | Other | Consolidated | |||||||||||
Balance at Dec. 31, 2013 | $ | 9,473 | $ | 8,550 | $ | 50 | $ | 18,073 | |||||||
Foreign exchange translation | 20 | 7 | — | 27 | |||||||||||
Balance at March 31, 2014 | $ | 9,493 | $ | 8,557 | $ | 50 | $ | 18,100 |
Goodwill by business (in millions) | Investment Management | (a) | Investment Services | Other | (a) | Consolidated | |||||||||
Balance at Dec. 31, 2012 | $ | 9,440 | $ | 8,517 | $ | 118 | $ | 18,075 | |||||||
Foreign exchange translation | (104 | ) | (51 | ) | (4 | ) | (159 | ) | |||||||
Other (b) | 4 | — | — | 4 | |||||||||||
Balance at March 31, 2013 | $ | 9,340 | $ | 8,466 | $ | 114 | $ | 17,920 |
(a) | Includes the reclassification of goodwill associated with the Newton Private Clients business from Investment Management to the Other segment. |
(b) | Other changes in goodwill include purchase price adjustments and certain other reclassifications. |
Intangible assets – net carrying amount by business (in millions) | Investment Management | Investment Services | Other | Consolidated | |||||||||||
Balance at Dec. 31, 2013 | $ | 2,065 | $ | 1,538 | $ | 849 | $ | 4,452 | |||||||
Amortization | (31 | ) | (44 | ) | — | (75 | ) | ||||||||
Foreign exchange translation | 3 | — | — | 3 | |||||||||||
Balance at March 31, 2014 | $ | 2,037 | $ | 1,494 | $ | 849 | $ | 4,380 |
Intangible assets – net carrying amount by business (in millions) | Investment Management | (a) | Investment Services | Other | (a) | Consolidated | |||||||||
Balance at Dec. 31, 2012 | $ | 2,220 | $ | 1,732 | $ | 857 | $ | 4,809 | |||||||
Amortization | (39 | ) | (47 | ) | — | (86 | ) | ||||||||
Foreign exchange translation | (23 | ) | (3 | ) | (1 | ) | (27 | ) | |||||||
Balance at March 31, 2013 | $ | 2,158 | $ | 1,682 | $ | 856 | $ | 4,696 |
(a) | Includes the reclassification of intangible assets associated with the Newton Private Clients business from Investment Management to the Other segment. |
Notes to Consolidated Financial Statements (continued) |
Intangible assets | March 31, 2014 | Dec. 31, 2013 | ||||||||||||
(in millions) | Gross carrying amount | Accumulated amortization | Net carrying amount | Remaining weighted- average amortization period | Net carrying amount | |||||||||
Subject to amortization: | ||||||||||||||
Customer relationships—Investment Management | $ | 2,053 | $ | (1,488 | ) | $ | 565 | 11 years | $ | 594 | ||||
Customer contracts—Investment Services | 2,351 | (1,244 | ) | 1,107 | 11 years | 1,150 | ||||||||
Other | 83 | (63 | ) | 20 | 4 years | 16 | ||||||||
Total subject to amortization | 4,487 | (2,795 | ) | 1,692 | 11 years | 1,760 | ||||||||
Not subject to amortization: (a) | ||||||||||||||
Trade name | 1,363 | N/A | 1,363 | N/A | 1,369 | |||||||||
Customer relationships | 1,325 | N/A | 1,325 | N/A | 1,323 | |||||||||
Total not subject to amortization | 2,688 | N/A | 2,688 | N/A | 2,692 | |||||||||
Total intangible assets | $ | 7,175 | $ | (2,795 | ) | $ | 4,380 | N/A | $ | 4,452 |
(a) | Intangible assets not subject to amortization have an indefinite life. |
For the year ended Dec. 31, | Estimated amortization expense (in millions) | |||
2014 | $ | 304 | ||
2015 | 270 | |||
2016 | 242 | |||
2017 | 217 | |||
2018 | 182 |
Other assets | March 31, | Dec. 31, | |||||
(in millions) | 2014 | 2013 | |||||
Accounts receivable | $ | 6,124 | $ | 3,616 | |||
Corporate/bank owned life insurance | 4,509 | 4,482 | |||||
Equity in joint venture and other investments (a)(b) | 3,238 | 3,220 | |||||
Income taxes receivable (b) | 2,311 | 2,499 | |||||
Fails to deliver | 2,256 | 864 | |||||
Software | 1,272 | 1,251 | |||||
Prepaid pension assets | 1,254 | 1,209 | |||||
Fair value of hedging derivatives | 1,000 | 1,282 | |||||
Prepaid expenses | 511 | 451 | |||||
Due from customers on acceptances | 244 | 379 | |||||
Other | 1,621 | 1,313 | |||||
Total other assets (b) | $ | 24,340 | $ | 20,566 |
(a) | Includes Federal Reserve Bank stock of $441 million at both March 31, 2014 and Dec. 31, 2013. |
(b) | Prior period was restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See Note 2 of the Notes to Consolidated Financial Statements for additional information. |
Notes to Consolidated Financial Statements (continued) |
Seed capital and private equity investments valued using NAV | |||||||||||||||||||
March 31, 2014 | Dec. 31, 2013 | ||||||||||||||||||
(dollar amounts in millions) | Fair value | Unfunded commitments | Redemption frequency | Redemption notice period | Fair value | Unfunded commitments | Redemption frequency | Redemption notice period | |||||||||||
Seed capital and other funds (a) | $ | 332 | $ | 12 | Monthly-yearly | 3-45 days | $ | 275 | $ | 23 | Monthly-yearly | 3-45 days | |||||||
Private equity funds (b) | 86 | 29 | N/A | N/A | 86 | 31 | N/A | N/A | |||||||||||
Total | $ | 418 | $ | 41 | $ | 361 | $ | 54 |
(a) | Other funds include various market neutral, leveraged loans, hedge funds, real estate and structured credit funds. Redemption notice periods vary by fund. |
(b) | Private equity funds primarily include numerous venture capital funds that invest in various sectors of the economy. Private equity funds do not have redemption rights. Distributions from such funds will be received as the underlying investments in the funds are liquidated. |
Net interest revenue | Quarter ended | ||||||||
(in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
Interest revenue | |||||||||
Non-margin loans | $ | 169 | $ | 169 | $ | 165 | |||
Margin loans | 42 | 41 | 38 | ||||||
Securities: | |||||||||
Taxable | 405 | 428 | 441 | ||||||
Exempt from federal income taxes | 27 | 31 | 24 | ||||||
Total securities | 432 | 459 | 465 | ||||||
Deposits with banks | 73 | 70 | 71 | ||||||
Deposits with the Federal Reserve and other central banks | 46 | 49 | 31 | ||||||
Federal funds sold and securities purchased under resale agreements | 17 | 14 | 10 | ||||||
Trading assets | 33 | 44 | 35 | ||||||
Total interest revenue | 812 | 846 | 815 | ||||||
Interest expense | |||||||||
Deposits | 22 | 22 | 30 | ||||||
Federal funds purchased and securities sold under repurchase agreements | (4 | ) | (3 | ) | (3 | ) | |||
Trading liabilities | 8 | 9 | 9 | ||||||
Other borrowed funds | 1 | 3 | 2 | ||||||
Customer payables | 2 | 2 | 2 | ||||||
Long-term debt | 55 | 52 | 56 | ||||||
Total interest expense | 84 | 85 | 96 | ||||||
Net interest revenue | $ | 728 | $ | 761 | $ | 719 |
Notes to Consolidated Financial Statements (continued) |
Net periodic benefit cost (credit) | Quarter ended | |||||||||||||||||||
March 31, 2014 | March 31, 2013 | |||||||||||||||||||
(in millions) | Domestic pension benefits | Foreign pension benefits | Health care benefits | Domestic pension benefits | Foreign pension benefits | Health care benefits | ||||||||||||||
Service cost | $ | 14 | $ | 9 | $ | 1 | $ | 16 | $ | 9 | $ | 1 | ||||||||
Interest cost | 45 | 11 | 3 | 43 | 10 | 2 | ||||||||||||||
Expected return on assets | (79 | ) | (15 | ) | (2 | ) | (73 | ) | (12 | ) | (2 | ) | ||||||||
Other | 28 | 4 | — | 47 | 4 | 1 | ||||||||||||||
Net periodic benefit cost | $ | 8 | $ | 9 | $ | 2 | $ | 33 | $ | 11 | $ | 2 |
Notes to Consolidated Financial Statements (continued) |
Operational Excellence Initiatives 2011 – restructuring reserve activity | |||||||||
(in millions) | Severance | Other | Total | ||||||
Original restructuring charge | $ | 78 | $ | 29 | $ | 107 | |||
Net additional charges (net recovery/gain) | 100 | (57 | ) | 43 | |||||
Utilization | (98 | ) | 28 | (70 | ) | ||||
Balance at Dec. 31, 2013 | 80 | — | 80 | ||||||
Net additional charges | — | — | — | ||||||
Utilization | (16 | ) | — | (16 | ) | ||||
Balance at March 31, 2014 | $ | 64 | $ | — | $ | 64 |
Operational Excellence Initiatives 2011 – restructuring charge (recovery) by business | Total charges since inception | |||||||||
(in millions) | 1Q14 | 4Q13 | ||||||||
Investment Management | $ | — | $ | 6 | $ | 52 | ||||
Investment Services | — | 5 | 85 | |||||||
Other segment (including Business Partners) | — | 12 | 13 | |||||||
Total restructuring charge (recovery) | $ | — | $ | 23 | $ | 150 |
Effective tax rate | Three months ended | |||
March 31, 2014 | March 31, 2013 | |||
Federal rate | 35.0 | % | 35.0 | % |
State and local income taxes, net of federal income tax benefit | (0.7 | ) | 1.7 | |
Tax-exempt income | (2.8 | ) | (3.0 | ) |
Foreign operations | (4.6 | ) | (4.9 | ) |
Tax credits | (0.8 | ) | (4.1 | ) |
Tax litigation | — | 103.5 | ||
Other – net | (1.0 | ) | 0.5 | |
Effective tax rate | 25.1 | % | 128.7 | % |
Notes to Consolidated Financial Statements (continued) |
Investments consolidated under ASC 810 and ASU 2009-17 at March 31, 2014 | |||||||||
(in millions) | Investment Management funds | Securitizations | Total consolidated investments | ||||||
Available-for-sale | $ | — | $ | 492 | $ | 492 | |||
Trading assets | 10,260 | — | 10,260 | ||||||
Other assets | 1,191 | — | 1,191 | ||||||
Total assets | $ | 11,451 | $ | 492 | $ | 11,943 | |||
Trading liabilities | $ | 10,002 | $ | — | $ | 10,002 | |||
Other liabilities | 156 | 445 | 601 | ||||||
Total liabilities | $ | 10,158 | $ | 445 | $ | 10,603 | |||
Nonredeemable noncontrolling interests | $ | 771 | $ | — | $ | 771 |
Investments consolidated under ASC 810 and ASU 2009-17 at Dec. 31, 2013 | |||||||||
(in millions) | Investment Management funds | Securitizations | Total consolidated investments | ||||||
Available-for-sale | $ | — | $ | 487 | $ | 487 | |||
Trading assets | 10,397 | — | 10,397 | ||||||
Other assets | 875 | — | 875 | ||||||
Total assets | $ | 11,272 | $ | 487 | $ | 11,759 | |||
Trading liabilities | $ | 10,085 | $ | — | $ | 10,085 | |||
Other liabilities | 46 | 438 | 484 | ||||||
Total liabilities | $ | 10,131 | $ | 438 | $ | 10,569 | |||
Nonredeemable noncontrolling interests | $ | 783 | $ | — | $ | 783 |
Notes to Consolidated Financial Statements (continued) |
Non-consolidated VIEs at March 31, 2014 | Maximum loss exposure | ||||||||
(in millions) | Assets | Liabilities | |||||||
Other | $ | 130 | $ | — | $ | 130 |
Non-consolidated VIEs at Dec. 31, 2013 | Maximum loss exposure | ||||||||
(in millions) | Assets | Liabilities | |||||||
Other | $ | 134 | $ | — | $ | 134 |
Preferred stock summary | Liquidation preference per share (in dollars) | Total shares issued and outstanding | ||||||||||||||||
Carrying value (a) | ||||||||||||||||||
(dollars in millions, unless otherwise noted) | Per annum dividend rate | March 31, 2014 | Dec. 31, 2013 | March 31, 2014 | Dec. 31, 2013 | |||||||||||||
Series A | Noncumulative Perpetual Preferred Stock | Greater of (i) three-month LIBOR plus 0.565% for the related distribution period; or (ii) 4.000% | $ | 100,000 | 5,001 | 5,001 | $ | 500 | $ | 500 | ||||||||
Series C | Noncumulative Perpetual Preferred Stock | 5.2 | % | $ | 100,000 | 5,825 | 5,825 | 568 | 568 | |||||||||
Series D | Noncumulative Perpetual Preferred Stock | 4.50% commencing Dec. 20, 2013 to but excluding June 20, 2023, then a floating rate equal to the three-month LIBOR plus 2.46% | $ | 100,000 | 5,000 | 5,000 | 494 | 494 | ||||||||||
Total | 15,826 | 15,826 | $ | 1,562 | $ | 1,562 |
(a) | The carrying value of the Series C and Series D preferred stock is recorded net of issuance costs. |
Notes to Consolidated Financial Statements (continued) |
Preferred stock dividends (a) | Dividend paid per share (in dollars) | ||||||
Declaration date | Record date | Payment date | |||||
Series A (b) | Jan. 17, 2014 | March 5, 2014 | March 20, 2014 | $ | 10.0000 | ||
Oct. 16, 2013 | Dec. 5, 2013 | Dec. 20, 2013 | 10.1111 | ||||
July 17, 2013 | Sept. 5, 2013 | Sept. 20, 2013 | 10.2222 | ||||
April 9, 2013 | June 5, 2013 | June 20, 2013 | 10.2222 | ||||
Jan. 16, 2013 | March 5, 2013 | March 20, 2013 | 10.0000 | ||||
Series C (c) | Jan. 17, 2014 | March 5, 2014 | March 20, 2014 | $ | 0.3250 | ||
Oct. 16, 2013 | Dec. 5, 2013 | Dec. 20, 2013 | 0.3250 | ||||
July 17, 2013 | Sept. 5, 2013 | Sept. 20, 2013 | 0.3250 | ||||
April 9, 2013 | June 5, 2013 | June 20, 2013 | 0.3250 | ||||
Jan. 16, 2013 | March 5, 2013 | March 20, 2013 | 0.3250 | ||||
Series D (d) | Oct. 16, 2013 | Dec. 5, 2013 | Dec. 20, 2013 | $ | 26.6250 |
(a) | Dividends are noncumulative. |
(b) | Dividend per Normal Preferred Capital Security of Mellon Capital IV, each representing 1/100th interest in a share of Series A preferred stock. |
(c) | Dividend per depositary share, each representing a 1/4,000th interest in a share of Series C preferred stock. |
(d) | Dividend per depository share, each representing a 1/100th interest in a share of Series D preferred stock. |
Notes to Consolidated Financial Statements (continued) |
Components of other comprehensive income (loss) | |||||||||||||||||||||||||||||
Quarter ended | |||||||||||||||||||||||||||||
March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | |||||||||||||||||||||||||||
(in millions) | Pre-tax amount | Tax (expense) benefit | After-tax amount | Pre-tax amount | Tax (expense) benefit | After-tax amount | Pre-tax amount | Tax (expense) benefit | After-tax amount | ||||||||||||||||||||
Foreign currency translation: | |||||||||||||||||||||||||||||
Foreign currency translation adjustments arising during the period | $ | 24 | $ | 13 | $ | 37 | $ | 73 | $ | 38 | $ | 111 | $ | (229 | ) | $ | (80 | ) | $ | (309 | ) | ||||||||
Total foreign currency translation | 24 | 13 | 37 | 73 | 38 | 111 | (229 | ) | (80 | ) | (309 | ) | |||||||||||||||||
Unrealized gain (loss) on assets available-for-sale: | |||||||||||||||||||||||||||||
Unrealized gain (loss) arising during period | 250 | (88 | ) | 162 | (130 | ) | 55 | (75 | ) | (9 | ) | 3 | (6 | ) | |||||||||||||||
Reclassification adjustment (a) | (22 | ) | 9 | (13 | ) | (39 | ) | 14 | (25 | ) | (48 | ) | 18 | (30 | ) | ||||||||||||||
Net unrealized gain (loss) on assets available-for-sale | 228 | (79 | ) | 149 | (169 | ) | 69 | (100 | ) | (57 | ) | 21 | (36 | ) | |||||||||||||||
Defined benefit plans: | |||||||||||||||||||||||||||||
Prior service cost arising during the period | — | — | — | (2 | ) | 1 | (1 | ) | — | — | — | ||||||||||||||||||
Net (gain) loss arising during the period | — | — | — | 732 | (303 | ) | 429 | — | — | — | |||||||||||||||||||
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost (a) | 30 | (11 | ) | 19 | 38 | (17 | ) | 21 | 68 | (25 | ) | 43 | |||||||||||||||||
Total defined benefit plans | 30 | (11 | ) | 19 | 768 | (319 | ) | 449 | 68 | (25 | ) | 43 | |||||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||||||||||||||
Unrealized hedge gain (loss) arising during period | 6 | — | 6 | 9 | (3 | ) | 6 | 171 | (70 | ) | 101 | ||||||||||||||||||
Reclassification adjustment (a) | (4 | ) | (1 | ) | (5 | ) | (1 | ) | — | (1 | ) | (170 | ) | 70 | (100 | ) | |||||||||||||
Net unrealized gain (loss) on cash flow hedges | 2 | (1 | ) | 1 | 8 | (3 | ) | 5 | 1 | — | 1 | ||||||||||||||||||
Total other comprehensive income (loss) | $ | 284 | $ | (78 | ) | $ | 206 | $ | 680 | $ | (215 | ) | $ | 465 | $ | (217 | ) | $ | (84 | ) | $ | (301 | ) |
(a) | The reclassification adjustment related to the unrealized gain (loss) on assets available-for-sale is recorded as net securities gains on the Consolidated Income Statement. The amortization of prior service credit, net loss and initial obligation included in net periodic benefit cost is recorded as staff expense on the Consolidated Income Statement. See Note 17 of the Notes to Consolidated Financial Statements for the location of the reclassification adjustment related to cash flow hedges on the Consolidated Income Statement. |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Assets measured at fair value on a recurring basis at March 31, 2014 | |||||||||||||||
(dollar amounts in millions) | Level 1 | Level 2 | Level 3 | Netting (a) | Total carrying value | ||||||||||
Available-for-sale securities: | |||||||||||||||
U.S. Treasury | $ | 13,572 | $ | — | $ | — | $ | — | $ | 13,572 | |||||
U.S. Government agencies | — | 449 | — | — | 449 | ||||||||||
Sovereign debt | 150 | 12,031 | — | — | 12,181 | ||||||||||
State and political subdivisions (b) | — | 6,641 | 11 | — | 6,652 | ||||||||||
Agency RMBS | — | 25,085 | — | — | 25,085 | ||||||||||
Non-agency RMBS | — | 1,101 | — | — | 1,101 | ||||||||||
Other RMBS | — | 2,084 | — | — | 2,084 | ||||||||||
Commercial MBS | — | 2,185 | — | — | 2,185 | ||||||||||
Agency commercial MBS | — | 2,063 | — | — | 2,063 | ||||||||||
Asset-backed CLOs | — | 1,449 | — | — | 1,449 | ||||||||||
Other asset-backed securities | — | 3,364 | — | — | 3,364 | ||||||||||
Equity securities | 17 | — | — | — | 17 | ||||||||||
Money market funds (b) | 849 | — | — | — | 849 | ||||||||||
Corporate bonds | — | 1,781 | — | — | 1,781 | ||||||||||
Other debt securities | — | 2,031 | — | — | 2,031 | ||||||||||
Foreign covered bonds | 2,091 | 625 | — | — | 2,716 | ||||||||||
Non-agency RMBS (c) | — | 2,637 | — | — | 2,637 | ||||||||||
Total available-for-sale securities | 16,679 | 63,526 | 11 | — | 80,216 | ||||||||||
Trading assets: | |||||||||||||||
Debt and equity instruments (b) | 4,867 | 3,095 | 1 | — | 7,963 | ||||||||||
Derivative assets not designated as hedging: | |||||||||||||||
Interest rate | 3 | 14,484 | 5 | (12,810 | ) | 1,682 | |||||||||
Foreign exchange | — | 2,208 | 1 | (1,363 | ) | 846 | |||||||||
Equity | 188 | 368 | 13 | (228 | ) | 341 | |||||||||
Total derivative assets not designated as hedging | 191 | 17,060 | 19 | (14,401 | ) | 2,869 | |||||||||
Total trading assets | 5,058 | 20,155 | 20 | (14,401 | ) | 10,832 | |||||||||
Other assets: | |||||||||||||||
Derivative assets designated as hedging: | |||||||||||||||
Interest rate | — | 945 | — | — | 945 | ||||||||||
Foreign exchange | — | 60 | — | — | 60 | ||||||||||
Total - derivative assets designated as hedging | — | 1,005 | — | — | 1,005 | ||||||||||
Other assets (d) | 148 | 492 | 110 | — | 750 | ||||||||||
Total other assets | 148 | 1,497 | 110 | — | 1,755 | ||||||||||
Subtotal assets of operations at fair value | 21,885 | 85,178 | 141 | (14,401 | ) | 92,803 | |||||||||
Percentage of assets prior to netting | 20 | % | 80 | % | — | % | |||||||||
Assets of consolidated investment management funds: | |||||||||||||||
Trading assets | 226 | 10,034 | — | — | 10,260 | ||||||||||
Other assets | 1,049 | 142 | — | — | 1,191 | ||||||||||
Total assets of consolidated investment management funds | 1,275 | 10,176 | — | — | 11,451 | ||||||||||
Total assets | $ | 23,160 | $ | 95,354 | $ | 141 | $ | (14,401 | ) | $ | 104,254 | ||||
Percentage of assets prior to netting | 20 | % | 80 | % | — | % |
Notes to Consolidated Financial Statements (continued) |
Liabilities measured at fair value on a recurring basis at March 31, 2014 | |||||||||||||||
(dollar amounts in millions) | Level 1 | Level 2 | Level 3 | Netting (a) | Total carrying value | ||||||||||
Trading liabilities: | |||||||||||||||
Debt and equity instruments | $ | 1,819 | $ | 651 | $ | — | $ | — | $ | 2,470 | |||||
Derivative liabilities not designated as hedging: | |||||||||||||||
Interest rate | 8 | 15,014 | 36 | (12,404 | ) | 2,654 | |||||||||
Foreign exchange | — | 2,066 | — | (1,218 | ) | 848 | |||||||||
Equity and other contracts | 100 | 697 | 5 | (234 | ) | 568 | |||||||||
Total derivative liabilities not designated as hedging | 108 | 17,777 | 41 | (13,856 | ) | 4,070 | |||||||||
Total trading liabilities | 1,927 | 18,428 | 41 | (13,856 | ) | 6,540 | |||||||||
Long-term debt (b) | — | 329 | — | — | 329 | ||||||||||
Other liabilities - derivative liabilities designated as hedging: | |||||||||||||||
Interest rate | — | 172 | — | — | 172 | ||||||||||
Foreign exchange | — | 223 | — | — | 223 | ||||||||||
Total other liabilities - derivative liabilities | — | 395 | — | — | 395 | ||||||||||
Subtotal liabilities of operations at fair value | 1,927 | 19,152 | 41 | (13,856 | ) | 7,264 | |||||||||
Percentage of liabilities prior to netting | 9 | % | 91 | % | — | % | |||||||||
Liabilities of consolidated investment management funds: | |||||||||||||||
Trading liabilities | 147 | 9,855 | — | — | 10,002 | ||||||||||
Other liabilities | — | 156 | — | — | 156 | ||||||||||
Total liabilities of consolidated investment management funds | 147 | 10,011 | — | — | 10,158 | ||||||||||
Total liabilities | $ | 2,074 | $ | 29,163 | $ | 41 | $ | (13,856 | ) | $ | 17,422 | ||||
Percentage of liabilities prior to netting | 7 | % | 93 | % | — | % |
(a) | ASC 815 permits the netting of derivative receivables and derivative payables under legally enforceable master netting agreements and permits the netting of cash collateral. Netting is applicable to derivatives not designated as hedging instruments included in trading assets or trading liabilities, and derivatives designated as hedging instruments included in other assets or other liabilities. Netting is allocated to the derivative products based on the net fair value of each product. |
(b) | Includes certain interests in securitizations. |
(c) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
(d) | Includes private equity investments and seed capital. |
Notes to Consolidated Financial Statements (continued) |
Assets measured at fair value on a recurring basis at Dec. 31, 2013 | |||||||||||||||
(dollar amounts in millions) | Level 1 | Level 2 | Level 3 | Netting (a) | Total carrying value | ||||||||||
Available-for-sale securities: | |||||||||||||||
U.S. Treasury | $ | 12,852 | $ | — | $ | — | $ | — | $ | 12,852 | |||||
U.S. Government agencies | — | 948 | — | — | 948 | ||||||||||
Sovereign debt | 40 | 11,314 | — | — | 11,354 | ||||||||||
State and political subdivisions (b) | — | 6,663 | 11 | — | 6,674 | ||||||||||
Agency RMBS | — | 25,321 | — | — | 25,321 | ||||||||||
Non-agency RMBS | — | 1,142 | — | — | 1,142 | ||||||||||
Other RMBS | — | 2,285 | — | — | 2,285 | ||||||||||
Commercial MBS | — | 2,357 | — | — | 2,357 | ||||||||||
Agency commercial MBS | — | 1,789 | — | — | 1,789 | ||||||||||
Asset-backed CLOs | — | 1,562 | — | — | 1,562 | ||||||||||
Other asset-backed securities | — | 2,891 | — | — | 2,891 | ||||||||||
Equity securities | 19 | — | — | — | 19 | ||||||||||
Money market funds (b) | 938 | — | — | — | 938 | ||||||||||
Corporate bonds | — | 1,815 | — | — | 1,815 | ||||||||||
Other debt securities | — | 1,796 | — | — | 1,796 | ||||||||||
Foreign covered bonds | 2,238 | 633 | — | — | 2,871 | ||||||||||
Non-agency RMBS (c) | — | 2,695 | — | — | 2,695 | ||||||||||
Total available-for-sale securities | 16,087 | 63,211 | 11 | — | 79,309 | ||||||||||
Trading assets: | |||||||||||||||
Debt and equity instruments (b) | 4,559 | 4,338 | 1 | — | 8,898 | ||||||||||
Derivative assets not designated as hedging: | |||||||||||||||
Interest rate | 4 | 14,702 | 6 | (13,231 | ) | 1,481 | |||||||||
Foreign exchange | — | 3,609 | 1 | (2,294 | ) | 1,316 | |||||||||
Equity | 274 | 395 | 15 | (281 | ) | 403 | |||||||||
Total derivative assets not designated as hedging | 278 | 18,706 | 22 | (15,806 | ) | 3,200 | |||||||||
Total trading assets | 4,837 | 23,044 | 23 | (15,806 | ) | 12,098 | |||||||||
Other assets: | |||||||||||||||
Derivative assets designated as hedging: | |||||||||||||||
Interest rate | — | 1,206 | — | — | 1,206 | ||||||||||
Foreign exchange | — | 76 | — | — | 76 | ||||||||||
Total - derivative assets designated as hedging | — | 1,282 | — | — | 1,282 | ||||||||||
Other assets (d) | 148 | 193 | 105 | — | 446 | ||||||||||
Total other assets | 148 | 1,475 | 105 | — | 1,728 | ||||||||||
Subtotal assets of operations at fair value | 21,072 | 87,730 | 139 | (15,806 | ) | 93,135 | |||||||||
Percentage of assets prior to netting | 19 | % | 81 | % | — | % | |||||||||
Assets of consolidated investment management funds: | |||||||||||||||
Trading assets | 61 | 10,336 | — | — | 10,397 | ||||||||||
Other assets | 739 | 136 | — | — | 875 | ||||||||||
Total assets of consolidated investment management funds | 800 | 10,472 | — | — | 11,272 | ||||||||||
Total assets | $ | 21,872 | $ | 98,202 | $ | 139 | $ | (15,806 | ) | $ | 104,407 | ||||
Percentage of assets prior to netting | 18 | % | 82 | % | — | % |
Notes to Consolidated Financial Statements (continued) |
Liabilities measured at fair value on a recurring basis at Dec. 31, 2013 | |||||||||||||||
(dollar amounts in millions) | Level 1 | Level 2 | Level 3 | Netting (a) | Total carrying value | ||||||||||
Trading liabilities: | |||||||||||||||
Debt and equity instruments | $ | 1,030 | $ | 585 | $ | — | $ | — | $ | 1,615 | |||||
Derivative liabilities not designated as hedging: | |||||||||||||||
Interest rate | 3 | 15,178 | 31 | (12,429 | ) | 2,783 | |||||||||
Foreign exchange | — | 3,536 | — | (1,711 | ) | 1,825 | |||||||||
Equity and other contracts | 214 | 745 | 44 | (281 | ) | 722 | |||||||||
Total derivative liabilities not designated as hedging | 217 | 19,459 | 75 | (14,421 | ) | 5,330 | |||||||||
Total trading liabilities | 1,247 | 20,044 | 75 | (14,421 | ) | 6,945 | |||||||||
Long-term debt (b) | — | 321 | — | — | 321 | ||||||||||
Other liabilities - derivative liabilities designated as hedging: | |||||||||||||||
Interest rate | — | 167 | — | — | 167 | ||||||||||
Foreign exchange | — | 336 | — | — | 336 | ||||||||||
Total other liabilities - derivative liabilities | — | 503 | — | — | 503 | ||||||||||
Subtotal liabilities of operations at fair value | 1,247 | 20,868 | 75 | (14,421 | ) | 7,769 | |||||||||
Percentage of liabilities prior to netting | 6 | % | 94 | % | — | % | |||||||||
Liabilities of consolidated investment management funds: | |||||||||||||||
Trading liabilities | 16 | 10,069 | — | — | 10,085 | ||||||||||
Other liabilities | — | 46 | — | — | 46 | ||||||||||
Total liabilities of consolidated investment management funds | 16 | 10,115 | — | — | 10,131 | ||||||||||
Total liabilities | $ | 1,263 | $ | 30,983 | $ | 75 | $ | (14,421 | ) | $ | 17,900 | ||||
Percentage of liabilities prior to netting | 4 | % | 96 | % | — | % |
(a) | ASC 815 permits the netting of derivative receivables and derivative payables under legally enforceable master netting agreements and permits the netting of cash collateral. Netting is applicable to derivatives not designated as hedging instruments included in trading assets or trading liabilities, and derivatives designated as hedging instruments included in other assets or other liabilities. Netting is allocated to the derivative products based on the net fair value of each product. |
(b) | Includes certain interests in securitizations. |
(c) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
(d) | Includes private equity investments and seed capital. |
Notes to Consolidated Financial Statements (continued) |
Details of certain items measured at fair value on a recurring basis | March 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||
Total carrying value (a) | Ratings | Total carrying value (a) | Ratings | ||||||||||||||||||||||
AAA/ AA- | A+/ A- | BBB+/ BBB- | BB+ and lower | AAA/ AA- | A+/ A- | BBB+/ BBB- | BB+ and lower | ||||||||||||||||||
(dollar amounts in millions) | |||||||||||||||||||||||||
Non-agency RMBS, originated in: | |||||||||||||||||||||||||
2007 | $ | 88 | — | % | — | % | — | % | 100 | % | $ | 90 | — | % | — | % | 41 | % | 59 | % | |||||
2006 | 157 | — | — | — | 100 | 156 | — | — | — | 100 | |||||||||||||||
2005 | 320 | — | 23 | 16 | 61 | 330 | — | 24 | 16 | 60 | |||||||||||||||
2004 and earlier | 536 | 3 | 6 | 30 | 61 | 566 | 3 | 6 | 30 | 61 | |||||||||||||||
Total non-agency RMBS | $ | 1,101 | 1 | % | 10 | % | 19 | % | 70 | % | $ | 1,142 | 1 | % | 10 | % | 23 | % | 66 | % | |||||
Commercial MBS - Domestic, originated in: | |||||||||||||||||||||||||
2009-2014 | $ | 473 | 81 | % | 19 | % | — | % | — | % | $ | 466 | 81 | % | 19 | % | — | % | — | % | |||||
2008 | 22 | 59 | 41 | — | — | 22 | 59 | 41 | — | — | |||||||||||||||
2007 | 413 | 67 | 21 | 12 | — | 457 | 69 | 20 | 11 | — | |||||||||||||||
2006 | 656 | 83 | 17 | — | — | 683 | 84 | 16 | — | — | |||||||||||||||
2005 | 455 | 100 | — | — | — | 486 | 100 | — | — | — | |||||||||||||||
2004 and earlier | 86 | 89 | 11 | — | — | 153 | 93 | 7 | — | — | |||||||||||||||
Total commercial MBS - Domestic | $ | 2,105 | 83 | % | 15 | % | 2 | % | — | % | $ | 2,267 | 84 | % | 14 | % | 2 | % | — | % | |||||
Foreign covered bonds: | |||||||||||||||||||||||||
Canada | $ | 884 | 100 | % | — | % | — | % | — | % | $ | 851 | 100 | % | — | % | — | % | — | % | |||||
United Kingdom | 804 | 100 | — | — | — | 803 | 100 | — | — | — | |||||||||||||||
Netherlands | 273 | 100 | — | — | — | 298 | 100 | — | — | — | |||||||||||||||
Other | 755 | 100 | — | — | — | 919 | 100 | — | — | — | |||||||||||||||
Total foreign covered bonds | $ | 2,716 | 100 | % | — | % | — | % | — | % | $ | 2,871 | 100 | % | — | % | — | % | — | % | |||||
European floating rate notes - available-for-sale: | |||||||||||||||||||||||||
United Kingdom | $ | 1,586 | 83 | % | 17 | % | — | % | — | % | $ | 1,668 | 79 | % | 21 | % | — | % | — | % | |||||
Netherlands | 418 | 99 | — | — | 1 | 434 | 100 | — | — | — | |||||||||||||||
Ireland | 159 | — | — | — | 100 | 165 | 10 | — | — | 90 | |||||||||||||||
Italy | — | — | — | — | — | 104 | — | 100 | — | — | |||||||||||||||
Other | 37 | 96 | 4 | — | — | 42 | 89 | 5 | — | 6 | |||||||||||||||
Total European floating rate notes - available-for-sale | $ | 2,200 | 80 | % | 13 | % | — | % | 7 | % | $ | 2,413 | 75 | % | 19 | % | — | % | 6 | % | |||||
Sovereign debt: | |||||||||||||||||||||||||
United Kingdom | $ | 4,312 | 100 | % | — | % | — | % | — | % | $ | 4,709 | 100 | % | — | % | — | % | — | % | |||||
France | 2,281 | 100 | — | — | — | 1,568 | 100 | — | — | — | |||||||||||||||
Netherlands | 2,029 | 100 | — | — | — | 2,105 | 100 | — | — | — | |||||||||||||||
Germany | 1,709 | 100 | — | — | — | 2,182 | 100 | — | — | — | |||||||||||||||
Spain | 467 | — | — | 100 | — | 137 | — | — | 100 | — | |||||||||||||||
Italy | 420 | — | — | 100 | — | 171 | — | — | 100 | — | |||||||||||||||
Other | 963 | 89 | — | 11 | — | 482 | 100 | — | — | — | |||||||||||||||
Total sovereign debt | $ | 12,181 | 92 | % | — | % | 8 | % | — | % | $ | 11,354 | 97 | % | — | % | 3 | % | — | % | |||||
Non-agency RMBS (b), originated in: | |||||||||||||||||||||||||
2007 | $ | 798 | — | % | — | % | — | % | 100 | % | $ | 812 | — | % | — | % | — | % | 100 | % | |||||
2006 | 756 | — | — | 1 | 99 | 780 | — | — | 1 | 99 | |||||||||||||||
2005 | 839 | — | 3 | 1 | 96 | 854 | — | 3 | — | 97 | |||||||||||||||
2004 and earlier | 244 | — | 4 | 16 | 80 | 249 | — | 4 | 16 | 80 | |||||||||||||||
Total non-agency RMBS (b) | $ | 2,637 | — | % | 1 | % | 2 | % | 97 | % | $ | 2,695 | — | % | 1 | % | 2 | % | 97 | % |
(a) | At March 31, 2014 and Dec. 31, 2013, foreign covered bonds and sovereign debt were included in Level 1 and Level 2 in the valuation hierarchy. All other assets in the table are Level 2 assets in the valuation hierarchy. |
(b) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
Notes to Consolidated Financial Statements (continued) |
Fair value measurements for assets using significant unobservable inputs for the three months ended March 31, 2014 | |||||||||||||||||||
Available-for-sale securities | Trading assets | Total assets of operations | |||||||||||||||||
(in millions) | State and political subdivisions | Debt and equity instruments | Derivative assets | (a) | Other assets | ||||||||||||||
Fair value at Dec. 31, 2013 | $ | 11 | $ | 1 | $ | 22 | $ | 105 | $ | 139 | |||||||||
Transfers out of Level 3 | — | — | (1 | ) | — | (1 | ) | ||||||||||||
Total gains or (losses) for the period: | |||||||||||||||||||
Included in earnings (or changes in net assets) | — | (b) | — | (c) | (2 | ) | (c) | 2 | (d) | — | |||||||||
Purchases and sales: | |||||||||||||||||||
Purchases | — | — | — | 8 | 8 | ||||||||||||||
Sales | — | — | — | (5 | ) | (5 | ) | ||||||||||||
Fair value at March 31, 2014 | $ | 11 | $ | 1 | $ | 19 | $ | 110 | $ | 141 | |||||||||
Change in unrealized gains or (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period | $ | — | $ | (2 | ) | $ | — | $ | (2 | ) |
(a) | Derivative assets are reported on a gross basis. |
(b) | Realized gains (losses) are reported in securities gains (losses). Unrealized gains (losses) are reported in accumulated other comprehensive income (loss) except for the credit portion of OTTI losses which are recorded in securities gains (losses). |
(c) | Reported in foreign exchange and other trading revenue. |
(d) | Reported in investment and other income. |
Fair value measurements for liabilities using significant unobservable inputs for the three months ended March 31, 2014 | |||||||
Trading liabilities | Total liabilities | ||||||
(in millions) | Derivative liabilities | (a) | |||||
Fair value at Dec. 31, 2013 | $ | 75 | $ | 75 | |||
Transfers out of Level 3 | (37 | ) | (37 | ) | |||
Total (gains) or losses for the period: | |||||||
Included in earnings (or changes in net liabilities) | 3 | (b) | 3 | ||||
Fair value at March 31, 2014 | $ | 41 | $ | 41 | |||
Change in unrealized (gains) or losses for the period included in earnings (or changes in net assets) for liabilities held at the end of the reporting period | $ | 3 | $ | 3 |
(a) | Derivative liabilities are reported on a gross basis. |
(b) | Reported in foreign exchange and other trading revenue. |
Notes to Consolidated Financial Statements (continued) |
Fair value measurements for assets using significant unobservable inputs for the three months ended March 31, 2013 | |||||||||||||||||||||||
Available-for-sale securities | Trading assets | Assets of consolidated investment management funds | |||||||||||||||||||||
(in millions) | State and political subdivisions | Debt and equity instruments | Derivative assets | (a) | Other assets | Total assets of operations | |||||||||||||||||
Fair value at Dec. 31, 2012 | $ | 45 | $ | 48 | $ | 58 | $ | 120 | $ | 271 | $ | 44 | |||||||||||
Transfers out of Level 3 | — | — | (5 | ) | — | (5 | ) | — | |||||||||||||||
Total gains or (losses) for the period: | |||||||||||||||||||||||
Included in earnings (or changes in net assets) | (1 | ) | (b) | 3 | (c) | (11 | ) | (c) | (5 | ) | (d) | (14 | ) | — | (e) | ||||||||
Purchases and sales: | |||||||||||||||||||||||
Purchases | — | — | — | 3 | 3 | — | |||||||||||||||||
Sales | — | (40 | ) | — | (6 | ) | (46 | ) | — | ||||||||||||||
Fair value at March 31, 2013 | $ | 44 | $ | 11 | $ | 42 | $ | 112 | $ | 209 | $ | 44 | |||||||||||
Change in unrealized gains or (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period | $ | — | $ | (11 | ) | $ | (2 | ) | $ | (13 | ) | $ | — |
(a) | Derivative assets are reported on a gross basis. |
(b) | Realized gains (losses) are reported in securities gains (losses). Unrealized gains (losses) are reported in accumulated other comprehensive income (loss) except for the credit portion of OTTI losses which are recorded in securities gains (losses). |
(c) | Reported in foreign exchange and other trading revenue. |
(d) | Reported in investment and other income. |
(e) | Reported in income from consolidated investment management funds. |
Fair value measurements for liabilities using significant unobservable inputs for the three months ended March 31, 2013 | |||||||
Trading liabilities | Total liabilities | ||||||
(in millions) | Derivative liabilities | (a) | |||||
Fair value at Dec. 31, 2012 | $ | 224 | $ | 224 | |||
Total (gains) or losses for the period: | |||||||
Included in earnings (or changes in net liabilities) | (56 | ) | (b) | (56 | ) | ||
Settlements | 2 | 2 | |||||
Fair value at March 31, 2013 | $ | 170 | $ | 170 | |||
Change in unrealized (gains) or losses for the period included in earnings (or changes in net assets) for liabilities held at the end of the reporting period | $ | (27 | ) | $ | (27 | ) |
(a) | Derivative liabilities are reported on a gross basis. |
(b) | Reported in foreign exchange and other trading revenue. |
Notes to Consolidated Financial Statements (continued) |
Assets measured at fair value on a nonrecurring basis at March 31, 2014 | Total carrying value | ||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Loans (a) | $ | — | $ | 123 | $ | 7 | $ | 130 | |||||||
Other assets (b) | — | 15 | — | 15 | |||||||||||
Total assets at fair value on a nonrecurring basis | $ | — | $ | 138 | $ | 7 | $ | 145 |
Assets measured at fair value on a nonrecurring basis at Dec. 31, 2013 | Total carrying value | ||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Loans (a) | $ | — | $ | 128 | $ | 9 | $ | 137 | |||||||
Other assets (b) | — | 15 | — | 15 | |||||||||||
Total assets at fair value on a nonrecurring basis | $ | — | $ | 143 | $ | 9 | $ | 152 |
(a) | During the quarters ended March 31, 2014 and Dec. 31, 2013, the fair value of these loans decreased $1 million and $1 million, respectively, based on the fair value of the underlying collateral as allowed by ASC 310, Accounting by Creditors for Impairment of a loan, with an offset to the allowance for credit losses. |
(b) | Includes other assets received in satisfaction of debt and loans held for sale. Loans held for sale are carried on the balance sheet at the lower of cost or market value. |
Quantitative information about Level 3 fair value measurements of assets | ||||||||
(dollars in millions) | Fair value at March 31, 2014 | Valuation techniques | Unobservable input | Range | ||||
Measured on a recurring basis: | ||||||||
Available-for-sale securities: | ||||||||
State and political subdivisions | $ | 11 | Discounted cash flow | Expected credit loss | 4% | |||
Trading assets: | ||||||||
Debt and equity instruments: | ||||||||
Distressed debt | 1 | Discounted cash flow | Expected maturity | 1 - 10 years | ||||
Credit spreads | 126-2,879 bps | |||||||
Derivative assets: | ||||||||
Interest rate: | ||||||||
Structured foreign exchange swaptions | 5 | Option pricing model (a) | Correlation risk | 0%-25% | ||||
Long-term foreign exchange volatility | 10%-17% | |||||||
Foreign exchange contracts: | ||||||||
Long-term foreign exchange options | 1 | Option pricing model (a) | Long-term foreign exchange volatility | 18% | ||||
Equity: | ||||||||
Equity options | 13 | Option pricing model (a) | Long-term equity volatility | 17%-25% | ||||
Measured on a nonrecurring basis: | ||||||||
Loans | 7 | Discounted cash flows | Timing of sale | 0-12 months | ||||
Cap rate | 8% | |||||||
Cost to complete/sell | 0%-30% |
Quantitative information about Level 3 fair value measurements of liabilities | ||||||||
(dollars in millions) | Fair value at March 31, 2014 | Valuation techniques | Unobservable input | Range | ||||
Measured on a recurring basis: | ||||||||
Trading liabilities: | ||||||||
Derivative liabilities: | ||||||||
Interest rate: | ||||||||
Structured foreign exchange swaptions | $ | 36 | Option pricing model (a) | Correlation risk | 0%-25% | |||
Long-term foreign exchange volatility | 10%-17% | |||||||
Equity: | ||||||||
Equity options | 5 | Option pricing model (a) | Long-term equity volatility | 19%-26% |
(a) | The option pricing model uses market inputs such as foreign currency exchange rates, interest rates and volatility to calculate the fair value of the option. |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Summary of financial instruments | March 31, 2014 | ||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total estimated fair value | Carrying amount | ||||||||||||
Assets: | |||||||||||||||||
Interest-bearing deposits with the Federal Reserve and other central banks | $ | — | $ | 82,602 | $ | — | $ | 82,602 | $ | 82,602 | |||||||
Interest-bearing deposits with banks | — | 42,820 | — | 42,820 | 42,795 | ||||||||||||
Federal funds sold and securities purchased under resale agreements | — | 12,223 | — | 12,223 | 12,223 | ||||||||||||
Securities held-to-maturity | 3,292 | 15,800 | — | 19,092 | 19,226 | ||||||||||||
Loans | — | 51,800 | — | 51,800 | 51,670 | ||||||||||||
Other financial assets | 6,092 | 1,046 | — | 7,138 | 7,138 | ||||||||||||
Total | $ | 9,384 | $ | 206,291 | $ | — | $ | 215,675 | $ | 215,654 | |||||||
Liabilities: | |||||||||||||||||
Noninterest-bearing deposits | $ | — | $ | 89,051 | $ | — | $ | 89,051 | $ | 89,051 | |||||||
Interest-bearing deposits | — | 162,611 | — | 162,611 | 163,176 | ||||||||||||
Federal funds purchased and securities sold under repurchase agreements | — | 9,935 | — | 9,935 | 9,935 | ||||||||||||
Payables to customers and broker-dealers | — | 16,822 | — | 16,822 | 16,822 | ||||||||||||
Borrowings | — | 1,479 | — | 1,479 | 1,479 | ||||||||||||
Long-term debt | — | 20,761 | — | 20,761 | 20,287 | ||||||||||||
Total | $ | — | $ | 300,659 | $ | — | $ | 300,659 | $ | 300,750 |
Summary of financial instruments | Dec. 31, 2013 | ||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total estimated fair value | Carrying amount | ||||||||||||
Assets: | |||||||||||||||||
Interest-bearing deposits with the Federal Reserve and other central banks | $ | — | $ | 104,359 | $ | — | $ | 104,359 | $ | 104,359 | |||||||
Interest-bearing deposits with banks | — | 35,323 | — | 35,323 | 35,300 | ||||||||||||
Federal funds sold and securities purchased under resale agreements | — | 9,161 | — | 9,161 | 9,161 | ||||||||||||
Securities held-to-maturity | 3,268 | 16,175 | — | 19,443 | 19,743 | ||||||||||||
Loans | — | 49,316 | — | 49,316 | 49,180 | ||||||||||||
Other financial assets | 6,460 | 1,141 | — | 7,601 | 7,601 | ||||||||||||
Total | $ | 9,728 | $ | 215,475 | $ | — | $ | 225,203 | $ | 225,344 | |||||||
Liabilities: | |||||||||||||||||
Noninterest-bearing deposits | $ | — | $ | 95,475 | $ | — | $ | 95,475 | $ | 95,475 | |||||||
Interest-bearing deposits | — | 165,253 | — | 165,253 | 165,654 | ||||||||||||
Federal funds purchased and securities sold under repurchase agreements | — | 9,648 | — | 9,648 | 9,648 | ||||||||||||
Payables to customers and broker-dealers | — | 15,707 | — | 15,707 | 15,707 | ||||||||||||
Borrowings | — | 919 | — | 919 | 919 | ||||||||||||
Long-term debt | — | 19,965 | — | 19,965 | 19,543 | ||||||||||||
Total | $ | — | $ | 306,967 | $ | — | $ | 306,967 | $ | 306,946 |
Hedged financial instruments | Carrying amount | Notional amount of hedge | Unrealized | ||||||||||||
(in millions) | Gain | (Loss) | |||||||||||||
March 31, 2014 | |||||||||||||||
Interest-bearing deposits with banks | $ | 1,368 | $ | 1,368 | $ | 13 | $ | (22 | ) | ||||||
Securities available-for-sale | 6,328 | 6,774 | 481 | (115 | ) | ||||||||||
Long-term debt | 14,931 | 14,650 | 460 | (57 | ) | ||||||||||
Dec. 31, 2013 | |||||||||||||||
Interest-bearing deposits with banks | $ | 1,396 | $ | 1,396 | $ | 30 | $ | (19 | ) | ||||||
Securities available-for-sale | 5,914 | 6,647 | 721 | (95 | ) | ||||||||||
Long-term debt | 15,036 | 14,755 | 483 | (72 | ) |
Notes to Consolidated Financial Statements (continued) |
Assets and liabilities of consolidated investment management funds, at fair value | ||||||
(in millions) | March 31, 2014 | Dec. 31, 2013 | ||||
Assets of consolidated investment management funds: | ||||||
Trading assets | $ | 10,260 | $ | 10,397 | ||
Other assets | 1,191 | 875 | ||||
Total assets of consolidated investment management funds | $ | 11,451 | $ | 11,272 | ||
Liabilities of consolidated investment management funds: | ||||||
Trading liabilities | $ | 10,002 | $ | 10,085 | ||
Other liabilities | 156 | 46 | ||||
Total liabilities of consolidated investment management funds | $ | 10,158 | $ | 10,131 |
Foreign exchange and other trading revenue | ||||||
Quarter ended | ||||||
(in millions) | March 31, 2014 | March 31, 2013 | ||||
Changes in the fair value of long-term debt (a) | $ | 8 | $ | 4 |
(a) | The change in fair value of the long-term debt is approximately offset by an economic hedge included in foreign exchange and other trading revenue. |
Notes to Consolidated Financial Statements (continued) |
Ineffectiveness | Three months ended | ||||||||
(in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | ||||||
Fair value hedges of securities | $ | (4.9 | ) | $ | 3.7 | $ | 4.6 | ||
Fair value hedges of deposits and long-term debt | (2.8 | ) | (0.1 | ) | (0.3 | ) | |||
Cash flow hedges | 0.1 | — | 0.1 | ||||||
Other (a) | (0.1 | ) | — | (0.1 | ) | ||||
Total | $ | (7.7 | ) | $ | 3.6 | $ | 4.3 |
(a) | Includes ineffectiveness recorded on foreign exchange hedges. |
Notes to Consolidated Financial Statements (continued) |
Impact of derivative instruments on the balance sheet | Notional value | Asset derivatives fair value | Liability derivatives fair value | |||||||||||||||||
(in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2014 | Dec. 31, 2013 | March 31, 2014 | Dec. 31, 2013 | ||||||||||||||
Derivatives designated as hedging instruments (a): | ||||||||||||||||||||
Interest rate contracts | $ | 21,424 | $ | 21,402 | $ | 945 | $ | 1,206 | $ | 172 | $ | 167 | ||||||||
Foreign exchange contracts | 7,863 | 7,382 | 60 | 76 | 223 | 336 | ||||||||||||||
Total derivatives designated as hedging instruments | $ | 1,005 | $ | 1,282 | $ | 395 | $ | 503 | ||||||||||||
Derivatives not designated as hedging instruments (b): | ||||||||||||||||||||
Interest rate contracts | $ | 763,323 | $ | 767,341 | $ | 14,492 | $ | 14,712 | $ | 15,058 | $ | 15,212 | ||||||||
Foreign exchange contracts | 465,202 | 420,142 | 2,209 | 3,610 | 2,066 | 3,536 | ||||||||||||||
Equity contracts | 24,611 | 24,123 | 569 | 684 | 802 | 1,003 | ||||||||||||||
Credit contracts | 51 | 101 | — | — | — | — | ||||||||||||||
Total derivatives not designated as hedging instruments | $ | 17,270 | $ | 19,006 | $ | 17,926 | $ | 19,751 | ||||||||||||
Total derivatives fair value (c) | $ | 18,275 | $ | 20,288 | $ | 18,321 | $ | 20,254 | ||||||||||||
Effect of master netting agreements (d) | (14,401 | ) | (15,806 | ) | (13,856 | ) | (14,421 | ) | ||||||||||||
Fair value after effect of master netting agreements | $ | 3,874 | $ | 4,482 | $ | 4,465 | $ | 5,833 |
(a) | The fair value of asset derivatives and liability derivatives designated as hedging instruments is recorded as other assets and other liabilities, respectively, on the balance sheet. |
(b) | The fair value of asset derivatives and liability derivatives not designated as hedging instruments is recorded as trading assets and trading liabilities, respectively, on the balance sheet. |
(c) | Fair values are on a gross basis, before consideration of master netting agreements, as required by ASC 815. |
(d) | Master netting agreements are reported net of cash collateral received and paid of $1,119 million and $574 million, respectively, at March 31, 2014, and $1,841 million and $456 million, respectively, at Dec. 31, 2013. |
Impact of derivative instruments on the income statement (in millions) | |||||||||||||||||||||||||||
Derivatives in fair value hedging relationships | Location of gain or (loss) recognized in income on derivatives | Gain or (loss) recognized in income on derivatives | Location of gain or(loss) recognized in income on hedged item | Gain or (loss) recognized in hedged item | |||||||||||||||||||||||
1Q14 | 4Q13 | 1Q13 | 1Q14 | 4Q13 | 1Q13 | ||||||||||||||||||||||
Interest rate contracts | Net interest revenue | $ | (285 | ) | $ | 98 | $ | 75 | Net interest revenue | $ | 277 | $ | (94 | ) | $ | (71 | ) |
Derivatives in cash flow hedging relationships | Gain or (loss) recognized in accumulated OCI on derivatives (effective portion) | Location of gain or (loss) reclassified from accumulated OCI into income (effective portion) | Gain or (loss) reclassified from accumulated OCI into income (effective portion) | Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing) | Gain or (loss) recognized in income on derivatives (ineffectiveness portion and amount excluded from effectiveness testing) | ||||||||||||||||||||||||||||
1Q14 | 4Q13 | 1Q13 | 1Q14 | 4Q13 | 1Q13 | 1Q14 | 4Q13 | 1Q13 | |||||||||||||||||||||||||
FX contracts | $ | (1 | ) | $ | (4 | ) | $ | (12 | ) | Net interest revenue | $ | (1 | ) | $ | (4 | ) | $ | (13 | ) | Net interest revenue | $ | — | $ | — | $ | — | |||||||
FX contracts | 3 | 1 | 2 | Other revenue | — | — | — | Other revenue | 0.1 | — | 0.1 | ||||||||||||||||||||||
FX contracts | 3 | 4 | 183 | Trading revenue | 3 | 4 | 183 | Trading revenue | — | — | — | ||||||||||||||||||||||
FX contracts | 1 | 3 | (2 | ) | Salary expense | 2 | 1 | — | Salary expense | — | — | — | |||||||||||||||||||||
Total | $ | 6 | $ | 4 | $ | 171 | $ | 4 | $ | 1 | $ | 170 | $ | 0.1 | $ | — | $ | 0.1 |
Notes to Consolidated Financial Statements (continued) |
Derivatives in net investment hedging relationships | Gain or (loss) recognized in accumulated OCI on derivatives (effective portion) | Location of gain or (loss) reclassified from accumulated OCI into income (effective portion) | Gain or (loss) reclassified from accumulated OCI into income (effective portion) | Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing) | Gain or (loss) recognized in income on derivatives (ineffectiveness portion and amount excluded from effectiveness testing) | ||||||||||||||||||||||||||||
1Q14 | 4Q13 | 1Q13 | 1Q14 | 4Q13 | 1Q13 | 1Q14 | 4Q13 | 1Q13 | |||||||||||||||||||||||||
FX contracts | $ | (16 | ) | $ | (63 | ) | $ | 167 | Net interest revenue | $ | — | $ | — | $ | — | Other revenue | $ | (0.1 | ) | $ | — | $ | (0.1 | ) |
Foreign exchange and other trading revenue | |||||||||
(in millions) | 1Q14 | 4Q13 | 1Q13 | ||||||
Foreign exchange | $ | 130 | $ | 126 | $ | 149 | |||
Other trading revenue: | |||||||||
Fixed income | 1 | 20 | 8 | ||||||
Equity/other | 5 | — | 4 | ||||||
Total other trading revenue | 6 | 20 | 12 | ||||||
Total | $ | 136 | $ | 146 | $ | 161 |
Notes to Consolidated Financial Statements (continued) |
If The Bank of New York Mellon’s rating was changed to (Moody’s/S&P) | Potential close-out exposures (fair value) (a) | |||
A3/A- | $ | 28 | million | |
Baa2/BBB | $ | 670 | million | |
Bal/BB+ | $ | 1,862 | million |
(a) | The amounts represent potential total close-out values if The Bank of New York Mellon’s rating were to immediately drop to the indicated levels. |
Offsetting of financial assets and derivative assets | |||||||||||||||||||||
March 31, 2014 | Dec. 31, 2013 | ||||||||||||||||||||
(in millions) | Gross assets recognized | Offset in the balance sheet | (a) | Net assets recognized | Gross assets recognized | Offset in the balance sheet | (a) | Net assets recognized | |||||||||||||
Derivatives subject to netting arrangements: | |||||||||||||||||||||
Interest rate contracts | $ | 14,285 | $ | 12,810 | $ | 1,475 | $ | 14,798 | $ | 13,231 | $ | 1,567 | |||||||||
Foreign exchange contracts | 1,594 | 1,363 | 231 | 2,778 | 2,294 | 484 | |||||||||||||||
Equity and other contracts | 468 | 228 | 240 | 607 | 281 | 326 | |||||||||||||||
Total derivatives subject to netting arrangements | 16,347 | 14,401 | 1,946 | 18,183 | 15,806 | 2,377 | |||||||||||||||
Total derivatives not subject to netting arrangements | 1,928 | — | 1,928 | 2,105 | — | 2,105 | |||||||||||||||
Total derivatives | 18,275 | 14,401 | 3,874 | 20,288 | 15,806 | 4,482 | |||||||||||||||
Reverse repurchase agreements | 13,394 | 1,238 | (b) | 12,156 | 10,180 | 1,096 | (b) | 9,084 | |||||||||||||
Total | $ | 31,669 | $ | 15,639 | $ | 16,030 | $ | 30,468 | $ | 16,902 | $ | 13,566 |
(a) | Includes the effect of netting agreements and net cash collateral paid. The offset related to the over-the-counter derivatives was allocated to the various types of derivatives based on the net positions. |
(b) | Offsetting of reverse repurchase agreements relates to our involvement in the Fixed Income Clearing Corporation, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system. |
Notes to Consolidated Financial Statements (continued) |
Offsetting of financial liabilities and derivative liabilities | |||||||||||||||||||||
March 31, 2014 | Dec. 31, 2013 | ||||||||||||||||||||
(in millions) | Gross liabilities recognized | Offset in the balance sheet | (a) | Net liabilities recognized | Gross liabilities recognized | Offset in the balance sheet | (a) | Net liabilities recognized | |||||||||||||
Derivatives subject to netting arrangements: | |||||||||||||||||||||
Interest rate contracts | $ | 14,741 | $ | 12,404 | $ | 2,337 | $ | 14,914 | $ | 12,429 | $ | 2,485 | |||||||||
Foreign exchange contracts | 1,547 | 1,218 | 329 | 2,292 | 1,711 | 581 | |||||||||||||||
Equity and other contracts | 649 | 234 | 415 | 800 | 281 | 519 | |||||||||||||||
Total derivatives subject to netting arrangements | 16,937 | 13,856 | 3,081 | 18,006 | 14,421 | 3,585 | |||||||||||||||
Total derivatives not subject to netting arrangements | 1,384 | — | 1,384 | 2,248 | — | 2,248 | |||||||||||||||
Total derivatives | 18,321 | 13,856 | 4,465 | 20,254 | 14,421 | 5,833 | |||||||||||||||
Repurchase agreements | 11,130 | 1,238 | (b) | 9,892 | 10,528 | 1,096 | (b) | 9,432 | |||||||||||||
Total | $ | 29,451 | $ | 15,094 | $ | 14,357 | $ | 30,782 | $ | 15,517 | $ | 15,265 |
(a) | Includes the effect of netting agreements and net cash collateral received. The offset related to the over-the-counter derivatives was allocated to the various types of derivatives based on the net positions. |
(b) | Offsetting of repurchase agreements relates to our involvement in the Fixed Income Clearing Corporation, where we settle government securities transactions on a net basis for payment and delivery through the Fedwire system. |
Financial institutions portfolio exposure (in billions) | March 31, 2014 | ||||||||
Loans | Unfunded commitments | Total exposure | |||||||
Banks | $ | 8.6 | $ | 2.1 | $ | 10.7 | |||
Asset managers | 1.1 | 4.7 | 5.8 | ||||||
Securities industry | 3.2 | 2.5 | 5.7 | ||||||
Insurance | 0.1 | 4.2 | 4.3 | ||||||
Government | 0.3 | 3.1 | 3.4 | ||||||
Other | 0.3 | 1.0 | 1.3 | ||||||
Total | $ | 13.6 | $ | 17.6 | $ | 31.2 |
Commercial portfolio exposure (in billions) | March 31, 2014 | ||||||||
Loans | Unfunded commitments | Total exposure | |||||||
Services and other | $ | 0.8 | $ | 6.2 | $ | 7.0 | |||
Energy and utilities | 0.7 | 5.8 | 6.5 | ||||||
Manufacturing | 0.3 | 5.7 | 6.0 | ||||||
Media and telecom | 0.2 | 1.6 | 1.8 | ||||||
Total | $ | 2.0 | $ | 19.3 | $ | 21.3 |
Notes to Consolidated Financial Statements (continued) |
Off-balance sheet credit risks | March 31, | Dec. 31, | ||||
(in millions) | 2014 | 2013 | ||||
Lending commitments (a) | $ | 34,842 | $ | 34,039 | ||
Standby letters of credit (b) | 6,932 | 6,721 | ||||
Commercial letters of credit | 280 | 310 | ||||
Securities lending indemnifications (c) | 276,106 | 244,382 |
(a) | Net of participations totaling $6 million at March 31, 2014 and $6 million at Dec. 31, 2013. |
(b) | Net of participations totaling $688 million at March 31, 2014 and $720 million at Dec. 31, 2013. |
(c) | Excludes the indemnification for securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled $65 billion at March 31, 2014 and $60 billion at Dec. 31, 2013. |
Standby letters of credit | March 31, | Dec. 31, | |||
2014 | 2013 | ||||
Investment grade | 88 | % | 86 | % | |
Non-investment grade | 12 | % | 14 | % |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Notes to Consolidated Financial Statements (continued) |
Business | Primary types of revenue |
Investment Management | Investment management and performance fees from: Mutual funds Institutional clients Private clients High-net-worth individuals and families, endowments and foundations and related entities Distribution and servicing fees |
Investment Services | Asset servicing fees, including institutional trust and custody fees, broker-dealer services, global collateral services and securities lending Issuer services fees, including Corporate Trust and Depositary Receipts Clearing services fees, including broker-dealer services, registered investment advisor services and prime brokerage services Treasury services fees, including global payment services and working capital solutions Foreign exchange |
Other segment | Credit-related activities Leasing operations Corporate treasury activities Global markets and institutional banking services Business exits |
• | Revenue amounts reflect fee and other revenue generated by each business. Fee and other revenue transferred between businesses under revenue transfer agreements is included within other revenue in each business. |
• | Revenues and expenses associated with specific client bases are included in those businesses. For example, foreign exchange activity associated with clients using custody products is allocated to Investment Services. |
• | Net interest revenue is allocated to businesses based on the yields on the assets and liabilities generated by each business. We employ a funds transfer pricing system that matches funds with the specific assets and liabilities of each business based on their interest sensitivity and maturity characteristics. |
• | Incentive expense related to restricted stock and certain corporate overhead charges are allocated to the businesses. |
• | Support and other indirect expenses are allocated to businesses based on internally-developed methodologies. |
• | Recurring FDIC expense is allocated to the businesses based on average deposits generated within each business. |
• | Litigation expense is generally recorded in the business in which the charge occurs. |
• | Management of the investment securities portfolio is a shared service contained in the Other segment. As a result, gains and losses associated with the valuation of the securities portfolio are included in the Other segment. |
• | Client deposits serve as the primary funding source for our investment securities portfolio. We typically allocate all interest revenue to the businesses generating the deposits. Accordingly, accretion related to the portion of the investment securities portfolio restructured in 2009 has been included in the results of the businesses. |
• | M&I expense is a corporate level item and is recorded in the Other segment. |
• | Beginning in the fourth quarter of 2013, restructuring charges were recorded in the businesses. Prior to the fourth quarter of 2013, restructuring charges were reported in the Other segment. |
• | Balance sheet assets and liabilities and their related income or expense are specifically assigned to each business. Businesses with a net liability position have been allocated assets. |
• | Goodwill and intangible assets are reflected within individual businesses. |
Notes to Consolidated Financial Statements (continued) |
For the quarter ended March 31, 2014 (dollar amounts in millions) | Investment Management | Investment Services | Other | Consolidated | ||||||||||||
Fee and other revenue | $ | 900 | (a) | $ | 1,887 | $ | 112 | $ | 2,899 | (a) | ||||||
Net interest revenue | 70 | 590 | 68 | 728 | ||||||||||||
Total revenue | 970 | (a) | 2,477 | 180 | 3,627 | (a) | ||||||||||
Provision for credit losses | — | — | (18 | ) | (18 | ) | ||||||||||
Noninterest expense | 724 | 1,821 | 194 | 2,739 | ||||||||||||
Income before taxes | $ | 246 | (a) | $ | 656 | $ | 4 | $ | 906 | (a) | ||||||
Pre-tax operating margin (b) | 25 | % | 26 | % | N/M | 25 | % | |||||||||
Average assets | $ | 39,463 | $ | 258,470 | $ | 57,059 | $ | 354,992 |
(a) | Both total fee and other revenue and total revenue include income from consolidated investment management funds of $36 million, net of noncontrolling interests of $20 million, for a net impact of $16 million. Income before taxes includes noncontrolling interests of $20 million. |
(b) | Income before taxes divided by total revenue. |
For the quarter ended Dec. 31, 2013 (dollar amounts in millions) | Investment Management | Investment Services | Other | Consolidated | ||||||||||||
Fee and other revenue (a) | $ | 993 | (b) | $ | 1,860 | $ | (20 | ) | $ | 2,833 | (b) | |||||
Net interest revenue | 68 | 610 | 83 | 761 | ||||||||||||
Total revenue (a) | 1,061 | (b) | 2,470 | 63 | 3,594 | (b) | ||||||||||
Provision for credit losses | — | — | 6 | 6 | ||||||||||||
Noninterest expense | 795 | 1,867 | 215 | 2,877 | ||||||||||||
Income (loss) before taxes (a) | $ | 266 | (b) | $ | 603 | $ | (158 | ) | $ | 711 | (b) | |||||
Pre-tax operating margin (a) (c) | 25 | % | 24 | % | N/M | 20 | % | |||||||||
Average assets | $ | 38,796 | $ | 258,294 | $ | 59,045 | $ | 356,135 |
(a) | Consolidated results and Other segment results have been restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | Both total fee and other revenue and total revenue include income from consolidated investment management funds of $36 million, net of noncontrolling interests of $17 million, for a net impact of $19 million. Income before taxes includes noncontrolling interests of $17 million. |
(c) | Income before taxes divided by total revenue. |
For the quarter ended March 31, 2013 (dollar amounts in millions) | Investment Management | Investment Services | Other | Consolidated | ||||||||||||
Fee and other revenue (a) | $ | 881 | (b) | $ | 1,861 | $ | 152 | $ | 2,894 | (b) | ||||||
Net interest revenue | 62 | 653 | 4 | 719 | ||||||||||||
Total revenue (a) | 943 | (b) | 2,514 | 156 | 3,613 | (b) | ||||||||||
Provision for credit losses | — | 1 | (25 | ) | (24 | ) | ||||||||||
Noninterest expense | 737 | 1,840 | 251 | 2,828 | ||||||||||||
Income (loss) before taxes (a) | $ | 206 | (b) | $ | 673 | $ | (70 | ) | $ | 809 | (b) | |||||
Pre-tax operating margin (a) (c) | 22 | % | 27 | % | N/M | 22 | % | |||||||||
Average assets | $ | 38,743 | $ | 240,187 | $ | 54,734 | $ | 333,664 |
(a) | Consolidated results and Other segment results have been restated to reflect the retrospective application of adopting new accounting guidance related to our investments in qualified affordable housing projects (ASU 2014-01). See Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | Both total fee and other revenue and total revenue include income from consolidated investment management funds of $50 million, net of noncontrolling interests of $16 million, for a net impact of $34 million. Income before taxes includes noncontrolling interests of $16 million. |
(c) | Income before taxes divided by total revenue. |
Notes to Consolidated Financial Statements (continued) |
Noncash investing and financing transactions | Three months ended March 31, | |||||
(in millions) | 2014 | 2013 | ||||
Transfers from loans to other assets for other real estate owned (“OREO”) | $ | 1 | $ | 1 | ||
Change in assets of consolidated VIEs | 179 | 245 | ||||
Change in liabilities of consolidated VIEs | 27 | 239 | ||||
Change in noncontrolling interests of consolidated VIEs | 12 | 27 | ||||
Securities not settled | 1,167 | 2,608 |
Item 4. Controls and Procedures |
Forward-looking Statements (continued) |
Forward-looking Statements |
Part II - Other Information |
(c) | The following table discloses repurchases of our common stock made in the first quarter of 2014. All of the Company’s preferred stock outstanding has preference over the Company’s common stock with respect to the payment of dividends. |
Share repurchases - first quarter of 2014 | ||||||||||||||
(dollars in millions, except per share information; common shares in thousands) | Total shares repurchased | Average price per share | Total shares repurchased as part of a publicly announced plan or program | Maximum approximate dollar value of shares that may yet be purchased under the publicly announced plans or programs at March 31, 2014 | ||||||||||
January 2014 | 7,709 | $ | 32.66 | 7,709 | $ | 133 | ||||||||
February 2014 | 2,921 | 31.75 | 2,921 | 40 | ||||||||||
March 2014 | 950 | 32.35 | 950 | 10 | ||||||||||
First quarter of 2014 (a) | 11,580 | $ | 32.41 | 11,580 | $ | 1,740 | (b) |
(a) | Includes 2,980 thousand shares repurchased at a purchase price of $95 million from employees, primarily in connection with the employees’ payment of taxes upon the vesting of restricted stock. The average price per share of open market purchases was $31.75. |
(b) | Represents the maximum value of the shares authorized to be repurchased through the first quarter of 2015, including employee benefit plan repurchases, in connection with the Federal Reserve’s non-objection to our 2014 capital plan. |
THE BANK OF NEW YORK MELLON CORPORATION | |
(Registrant) |
Date: May 9, 2014 | By: | /s/ John A. Park | |
John A. Park | |||
Corporate Controller | |||
(Duly Authorized Officer and | |||
Principal Accounting Officer of | |||
the Registrant) | |||
Index to Exhibits |
Exhibit No. | Description | Method of Filing | ||
2.1 | Amended and Restated Agreement and Plan of Merger, dated as of Dec. 3, 2006, as amended and restated as of Feb. 23, 2007, and as further amended and restated as of March 30, 2007, between The Bank of New York Company, Inc., Mellon Financial Corporation and The Bank of New York Mellon Corporation (the “Company”). | Previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K (File Nos. 000-52710) as filed with the Commission on July 2, 2007, and incorporated herein by reference. | ||
2.2 | Stock Purchase Agreement, dated as of Feb. 1, 2010, by and between The PNC Financial Services Group, Inc. and The Bank of New York Mellon Corporation. | Previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 000-52710) as filed with the Commission on Feb. 3, 2010, and incorporated herein by reference. | ||
3.1 | Restated Certificate of Incorporation of The Bank of New York Mellon Corporation. | Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File Nos. 000-52710) as filed with the Commission on July 2, 2007, and incorporated herein by reference. | ||
3.2 | Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series A Noncumulative Preferred Stock dated June 15, 2007. | Previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 000-52710) as filed with the Commission on July 5, 2007, and incorporated herein by reference. | ||
3.3 | Certificate of Designations of The Bank of New York Mellon Corporation with respect to Series C Noncumulative Perpetual Preferred Stock dated Sept. 13, 2012. | Previously filed as Exhibit 3.2 to the Company’s Registration Statement on Form 8A12B (File No. 001-35651) as filed with the Commission on Sept. 14, 2012, and incorporated herein by reference. | ||
3.4 | Certificate of Designations of The Bank of New York Mellon Corporation with respect to the Series D Noncumulative Perpetual Preferred Stock, dated May 16, 2013. | Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-35651) as filed with the Commission on May 16, 2013, and incorporated herein by reference. | ||
3.5 | Amended and Restated By-Laws of The Bank of New York Mellon Corporation, as amended and restated on Oct. 8, 2013. | Previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-35651) as filed with the Commission on Oct. 8, 2013, and incorporated herein by reference. | ||
4.1 | None of the instruments defining the rights of holders of long-term debt of the Parent or any of its subsidiaries represented long-term debt in excess of 10% of the total assets of the Company as of March 31, 2014. The Company hereby agrees to furnish to the Commission, upon request, a copy of any such instrument. | N/A |
Index to Exhibits (continued) |
Exhibit No. | Description | Method of Filing | ||
10.1 | * | The Amended and Restated Long-Term Incentive Plan of The Bank of New York Mellon Corporation. | Previously filed as Exhibit A to the Company’s definitive proxy statement on Schedule 14A (File No. 001-35651), filed on March 7, 2014 and incorporated herein by reference. | |
12.1 | Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. | Filed herewith. | ||
31.1 | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. | ||
31.2 | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. | ||
32.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Furnished herewith. | ||
32.2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Furnished herewith. | ||
101.INS | XBRL Instance Document. | Filed herewith. | ||
101.SCH | XBRL Taxonomy Extension Schema Document. | Filed herewith. | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | Filed herewith. | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | Filed herewith. | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | Filed herewith. | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | Filed herewith. | ||
* Management contract or compensatory plan, contract or arrangement. |
Quarter ended | ||||||||||||
(dollar amounts in millions) | March 31, 2014 | Dec. 31, 2013 | March 31, 2013 | |||||||||
Earnings | ||||||||||||
Income before income taxes (a) | $ | 926 | $ | 728 | $ | 825 | ||||||
Net (income) attributable to noncontrolling interests | (20 | ) | (17 | ) | (16 | ) | ||||||
Income before income taxes attributable to shareholders of The Bank of New York Mellon Corporation (a) | 906 | 711 | 809 | |||||||||
Fixed charges, excluding interest on deposits | 88 | 91 | 94 | |||||||||
Income before income taxes and fixed charges, excluding interest on deposits applicable to the shareholders of The Bank of New York Mellon Corporation (a) | 994 | 802 | 903 | |||||||||
Interest on deposits | 22 | 22 | 30 | |||||||||
Income before income taxes and fixed charges, including interest on deposits applicable to shareholders of The Bank of New York Mellon Corporation (a) | $ | 1,016 | $ | 824 | $ | 933 | ||||||
Fixed charges | ||||||||||||
Interest expense, excluding interest on deposits | $ | 62 | $ | 63 | $ | 66 | ||||||
One-third net rental expense (b) | 26 | 28 | 28 | |||||||||
Total fixed charges, excluding interest on deposits | 88 | 91 | 94 | |||||||||
Interest on deposits | 22 | 22 | 30 | |||||||||
Total fixed charges, including interests on deposits | $ | 110 | $ | 113 | $ | 124 | ||||||
Preferred stock dividends | $ | 13 | $ | 26 | $ | 13 | ||||||
Total fixed charges and preferred stock dividends, excluding interest on deposits | $ | 101 | $ | 117 | $ | 107 | ||||||
Total fixed charges and preferred stock dividends, including interest on deposits | $ | 123 | $ | 139 | $ | 137 | ||||||
Earnings to fixed charges ratios (a) | ||||||||||||
Excluding interest on deposits | 11.30 | 8.81 | 9.61 | |||||||||
Including interest on deposits | 9.24 | 7.29 | 7.52 | |||||||||
Earnings to fixed charges and preferred stock dividends ratios (a) | ||||||||||||
Excluding interest on deposits | 9.84 | 6.85 | 8.44 | |||||||||
Including interest on deposits | 8.26 | 5.93 | 6.81 |
(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 Note 2 of the Notes to Consolidated Financial Statements for additional information. |
(b) | The proportion deemed representative of the interest factor. |
1. | I have reviewed this quarterly report on Form 10-Q of The Bank of New York Mellon Corporation (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Gerald L. Hassell | |
Name: Gerald L. Hassell | |
Title: Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of The Bank of New York Mellon Corporation (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Thomas P. Gibbons | |
Name: Thomas P. Gibbons | |
Title: Chief Financial Officer |
Dated: May 9, 2014 | /s/ Gerald L. Hassell | |||
Name: | Gerald L. Hassell | |||
Title: | Chief Executive Officer |
Dated: May 9, 2014 | /s/ Thomas P. Gibbons | |||
Name: | Thomas P. Gibbons | |||
Title: | Chief Financial Officer |
Restructuring Charges (Tables) (Operational Efficiency Initiatives 2011)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2014
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Operational Efficiency Initiatives 2011
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Restructuring Cost and Reserve [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity in Restructuring Reserve | The following table presents the activity in the restructuring reserve related to the Operational Excellence Initiatives through March 31, 2014.
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Restructuring Charges by Business Segment | The table below presents the restructuring charge if it had been allocated by business.
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Securities-Net Securities Gains (Losses) (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2014
|
Dec. 31, 2013
|
Mar. 31, 2013
|
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Securities [Abstract] | |||
Realized gross gains | $ 30 | $ 49 | $ 57 |
Realized gross losses | (3) | 0 | (5) |
Recognized gross impairments | (5) | (10) | (4) |
Net securities gains | $ 22 | $ 39 | $ 48 |
Lines of Businesses (Tables)
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Mar. 31, 2014
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contribution of Segments to Overall Profitability | The following consolidating schedules show the contribution of our businesses to our overall profitability.
N/M - Not meaningful.
N/M - Not meaningful.
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Supplemental information to the Consolidated Statement of Cash Flows- Noncash Investing and Financing Transactions that are Not Reflected in Consolidated Statement of Cash Flows (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2014
|
Mar. 31, 2013
|
|
Supplemental Cash Flow Information [Abstract] | ||
Transfers from loans to other assets for other real estate owned (“OREO”) | $ 1 | $ 1 |
Change in assets of consolidated VIEs | 179 | 245 |
Change in liabilities of consolidated VIEs | 27 | 239 |
Change in noncontrolling interests of consolidated VIEs | 12 | 27 |
Securities not settled | $ 1,167 | $ 2,608 |
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