Apr 19, 2018
NEW YORK, April 19, 2018 /PRNewswire/ --
Revenue up 9% |
EPS up 33% |
ROE 12% ROTCE 26% (a) |
CET1 10.7% SLR 5.9% |
The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported:
1Q18 vs. | |||||||||||||
1Q18 |
4Q17 |
1Q17 |
4Q17 |
1Q17 | |||||||||
Net income applicable to common shareholders (in millions) |
$ |
1,135 |
$ |
1,126 |
$ |
880 |
1% |
29% | |||||
Diluted earnings per common share |
$ |
1.10 |
$ |
1.08 |
$ |
0.83 |
2% |
33% |
First Quarter Results |
CEO Commentary | |
Total revenue of $4.2 billion, increased 9%
Total noninterest expense of $2.7 billion, increased 4%
Investment Services
Investment Management
Returned approximately $890 million to common
|
"We delivered strong financial results this quarter, with earnings per common share up 33 percent. Earnings grew by 23 percent, excluding the impact of a lower tax rate and our continued capital return through buybacks, each of which contributed approximately 5 percent. Strong equity markets and higher interest rates were important drivers and, while we should remain beneficiaries of strong and growing markets over the long term, we are focused on continuing to increase our organic revenue growth," Charles W. Scharf, chairman and chief executive officer, said.
"Importantly, we saw franchise growth in several parts of the company, including foreign exchange trading, tri-party repo activity, collateral management, securities lending and liquidity services. Average deposit levels were up 6 percent, assets under custody and administration grew 9 percent to a record level, our assets under management saw solid inflows in actively managed strategies, securities on loan increased 39 percent and average long-term mutual fund balances at Pershing increased 12 percent," Mr. Scharf continued.
"While increasing revenue growth and investing significantly in our technology platform remain strategic priorities, we continue to be disciplined across our total expense base and saw minimal growth in total expenses after adjusting for foreign exchange," Mr. Scharf concluded. |
Investor Relations: Valerie Haertel (212) 635-8529 |
Media Relations: Jennifer Hendricks Sullivan (212) 635-1374 |
(a) For information on this Non-GAAP measure, see "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 11. | |
Note: Above comparisons are 1Q18 vs. 1Q17. |
CONSOLIDATED FIRST QUARTER 2018 FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts; common shares in thousands) |
1Q18 vs. | ||||||||||||
1Q18 |
4Q17 |
1Q17 |
4Q17 |
1Q17 | |||||||||
Fee revenue |
$ |
3,319 |
$ |
2,886 |
$ |
3,008 |
15 |
% |
10 |
% | |||
Net securities (losses) gains |
(49) |
(26) |
10 |
N/M |
N/M |
||||||||
Fee and other revenue |
3,270 |
2,860 |
3,018 |
14 |
8 |
||||||||
(Loss) income from consolidated investment management funds |
(11) |
17 |
33 |
N/M |
N/M |
||||||||
Net interest revenue |
919 |
851 |
792 |
8 |
16 |
||||||||
Total revenue |
4,178 |
3,728 |
3,843 |
12 |
9 |
||||||||
Provision for credit losses |
(5) |
(6) |
(5) |
N/M |
N/M |
||||||||
Noninterest expense |
2,739 |
3,006 |
2,642 |
(9) |
4 |
||||||||
Income before income taxes |
1,444 |
728 |
1,206 |
N/M |
20 |
||||||||
Provision (benefit) for income taxes |
282 |
(453) |
269 |
N/M |
5 |
||||||||
Net income |
$ |
1,162 |
$ |
1,181 |
$ |
937 |
(2) |
% |
24 |
% | |||
Net income applicable to common shareholders of The Bank of New York Mellon |
$ |
1,135 |
$ |
1,126 |
$ |
880 |
1 |
% |
29 |
% | |||
Operating leverage (a) |
N/M |
505 |
bps | ||||||||||
Diluted earnings per common share |
$ |
1.10 |
$ |
1.08 |
$ |
0.83 |
2 |
% |
33 |
% | |||
Average common shares and equivalents outstanding - diluted |
1,021,731 |
1,030,404 |
1,047,746 |
||||||||||
Pre-tax operating margin |
35 |
% |
20 |
% |
31 |
% |
|||||||
(a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. | |||||||||||||
N/M – Not meaningful. | |||||||||||||
bps – basis points. |
KEY DRIVERS (comparisons are 1Q18 vs. 1Q17, unless otherwise stated)
Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")
Capital and liquidity
(b) See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 11 for the reconciliation. |
Note: Throughout this document, sequential growth rates are unannualized. |
INVESTMENT SERVICES BUSINESS HIGHLIGHTS
(dollars in millions, unless otherwise noted; not meaningful - N/M) |
1Q18 vs. | ||||||||||||
1Q18 |
4Q17 |
1Q17 |
4Q17 |
1Q17 | |||||||||
Total revenue by line of business: (a) |
|||||||||||||
Asset Servicing |
$ |
1,519 |
$ |
1,459 |
$ |
1,346 |
4 |
% |
13 |
% | |||
Pershing |
581 |
569 |
522 |
2 |
11 |
||||||||
Issuer Services |
418 |
352 |
396 |
19 |
6 |
||||||||
Treasury Services |
321 |
322 |
302 |
— |
6 |
||||||||
Clearance and Collateral Management |
255 |
252 |
225 |
1 |
13 |
||||||||
Total revenue by line of business |
3,094 |
2,954 |
2,791 |
5 |
11 |
||||||||
Provision for credit losses |
(7) |
(2) |
— |
N/M |
N/M |
||||||||
Noninterest expense |
1,949 |
2,097 |
1,849 |
(7) |
5 |
||||||||
Income before taxes |
$ |
1,152 |
$ |
859 |
$ |
942 |
34 |
% |
22 |
% | |||
Pre-tax operating margin |
37 |
% |
29 |
% |
34 |
% |
|||||||
Foreign exchange revenue |
$ |
169 |
$ |
168 |
$ |
153 |
1 |
% |
10 |
% | |||
Securities lending revenue |
$ |
48 |
$ |
45 |
$ |
40 |
7 |
% |
20 |
% | |||
Metrics: |
|||||||||||||
Average loans |
$ |
39,200 |
$ |
38,845 |
$ |
42,818 |
1 |
% |
(8) |
% | |||
Average deposits |
$ |
214,130 |
$ |
204,680 |
$ |
197,690 |
5 |
% |
8 |
% | |||
AUC/A at period end (in trillions) (current period is preliminary) (b) |
$ |
33.5 |
$ |
33.3 |
$ |
30.6 |
1 |
% |
9 |
% | |||
Market value of securities on loan at period end (in billions) (c) |
$ |
436 |
$ |
408 |
$ |
314 |
7 |
% |
39 |
% | |||
Pershing |
|||||||||||||
Average active clearing accounts (U.S. platform) (in thousands) |
6,075 |
6,126 |
6,058 |
(1) |
% |
— |
% | ||||||
Average long-term mutual fund assets (U.S. platform) |
$ |
514,542 |
$ |
508,873 |
$ |
460,977 |
1 |
% |
12 |
% | |||
Average investor margin loans (U.S. platform) |
$ |
10,930 |
$ |
9,822 |
$ |
10,740 |
11 |
% |
2 |
% | |||
Clearance and Collateral Management |
|||||||||||||
Average tri-party repo balances (in billions) |
$ |
2,698 |
$ |
2,606 |
$ |
2,373 |
4 |
% |
14 |
% |
(a) |
See "Change in Presentation" on page 13 for additional information on the Investment Services business. |
(b) |
Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank |
(c) |
Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. |
KEY DRIVERS
INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS
(dollars in millions, unless otherwise noted; not meaningful - N/M) |
1Q18 vs. | |||||||||||||
1Q18 |
4Q17 |
1Q17 |
4Q17 |
1Q17 | ||||||||||
Total revenue by line of business: (a) |
||||||||||||||
Asset Management |
$ |
770 |
$ |
738 |
$ |
661 |
4 |
% |
16 |
% | ||||
Wealth Management |
318 |
310 |
302 |
3 |
5 |
|||||||||
Total revenue by line of business |
1,088 |
1,048 |
963 |
4 |
13 |
|||||||||
Provision for credit losses |
2 |
1 |
3 |
N/M |
N/M |
|||||||||
Noninterest expense |
705 |
771 |
683 |
(9) |
3 |
|||||||||
Income before taxes |
$ |
381 |
$ |
276 |
$ |
277 |
38 |
% |
38 |
% | ||||
Pre-tax operating margin |
35 |
% |
26 |
% |
29 |
% |
||||||||
Adjusted pre-tax operating margin – Non-GAAP (b) |
39 |
% |
29 |
% |
32 |
% |
||||||||
Metrics: |
||||||||||||||
Average loans |
$ |
16,876 |
$ |
16,813 |
$ |
16,153 |
— |
% |
4 |
% | ||||
Average deposits |
$ |
13,363 |
$ |
11,633 |
$ |
15,781 |
15 |
% |
(15) |
% | ||||
Wealth Management client assets (in billions) (current period is preliminary) (c) |
$ |
246 |
$ |
251 |
$ |
236 |
(2) |
% |
4 |
% | ||||
Changes in AUM (in billions) (current period is preliminary): (d) |
||||||||||||||
Beginning balance of AUM |
$ |
1,893 |
$ |
1,824 |
$ |
1,648 |
||||||||
Net inflows (outflows): |
||||||||||||||
Long-term strategies: |
||||||||||||||
Equity |
— |
(6) |
(4) |
|||||||||||
Fixed income |
7 |
(2) |
2 |
|||||||||||
Liability-driven investments, including currency overlay |
13 |
23 |
14 |
|||||||||||
Multi-asset and alternative investments |
(3) |
2 |
2 |
|||||||||||
Total long-term active strategies inflows |
17 |
17 |
14 |
|||||||||||
Index |
(13) |
(1) |
— |
|||||||||||
Total long-term strategies inflows |
4 |
16 |
14 |
|||||||||||
Short term strategies: |
||||||||||||||
Cash |
(14) |
(4) |
13 |
|||||||||||
Total net (outflows) inflows |
(10) |
12 |
27 |
|||||||||||
Net market impact |
(14) |
47 |
41 |
|||||||||||
Net currency impact |
29 |
10 |
11 |
|||||||||||
Divestiture/Other (e) |
(30) |
— |
— |
|||||||||||
Ending balance of AUM |
$ |
1,868 |
$ |
1,893 |
$ |
1,727 |
(1) |
% |
8 |
% |
(a) |
See "Change in Presentation" on page 13 for additional information on the Investment Management business. |
(b) |
Net of distribution and servicing expense. See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on |
(c) |
Includes AUM and AUC/A in the Wealth Management business. |
(d) |
Excludes securities lending cash management assets and assets managed in the Investment Services business. |
(e) |
Primarily reflects a change in methodology beginning in 1Q18 to exclude AUM related to equity method investments as well as the CenterSquare divestiture. |
KEY DRIVERS
OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, business exits and other corporate revenue and expense items.
(in millions) |
1Q18 |
4Q17 |
1Q17 | ||||||
Fee revenue |
$ |
57 |
$ |
(221) |
$ |
62 |
|||
Net securities (losses) gains |
(49) |
(26) |
10 |
||||||
Total fee and other revenue (loss) |
8 |
(247) |
72 |
||||||
Net interest (expense) |
(1) |
(36) |
(1) |
||||||
Total revenue (loss) |
7 |
(283) |
71 |
||||||
Provision for credit losses |
— |
(5) |
(8) |
||||||
Noninterest expense |
87 |
135 |
107 |
||||||
(Loss) before taxes |
$ |
(80) |
$ |
(413) |
$ |
(28) |
KEY DRIVERS
CAPITAL AND LIQUIDITY
Our consolidated capital and liquidity ratios are shown in the following table.
Capital and liquidity ratios |
March 31, |
Dec. 31, | ||||
Consolidated regulatory capital ratios: (a)(b) |
||||||
CET1 ratio |
10.7 |
% |
10.3 |
% | ||
Tier 1 capital ratio |
12.7 |
12.3 |
||||
Total capital ratio |
13.5 |
13.0 |
||||
Tier 1 leverage ratio |
6.5 |
6.4 |
||||
SLR |
5.9 |
5.9 |
||||
BNY Mellon shareholders' equity to total assets ratio |
11.2 |
11.1 |
||||
BNY Mellon common shareholders' equity to total assets ratio |
10.2 |
10.1 |
||||
Average liquidity coverage ratio ("LCR") |
116 |
% |
118 |
% | ||
Book value per common share (c) |
$ |
37.78 |
$ |
37.21 |
||
Tangible book value per common share – Non-GAAP (c) |
$ |
18.78 |
$ |
18.24 |
||
Cash dividends per common share |
$ |
0.24 |
$ |
0.24 |
||
Common dividend payout ratio |
22 |
% |
22 |
% | ||
Closing stock price per common share |
$ |
51.53 |
$ |
53.86 |
||
Market capitalization (in millions) |
$ |
52,080 |
$ |
54,584 |
||
Common shares outstanding (in thousands) |
1,010,676 |
1,013,442 |
(a) |
Regulatory capital ratios for March 31, 2018 are preliminary. For our CET1, Tier 1 capital and |
(b) |
Regulatory capital ratios for Dec. 31, 2017 are presented on a fully phased-in basis. On a |
(c) |
Tangible book value per common share – Non-GAAP excludes goodwill and intangible assets, |
KEY POINTS
NET INTEREST REVENUE
Net interest revenue |
1Q18 vs. | ||||||||||||
(dollars in millions; not meaningful - N/M) |
1Q18 |
4Q17 |
1Q17 |
4Q17 |
1Q17 | ||||||||
Net interest revenue |
$ |
919 |
$ |
851 |
$ |
792 |
8 |
% |
16 |
% | |||
Add: Tax equivalent adjustment |
6 |
11 |
12 |
N/M |
N/M |
||||||||
Net interest revenue, on a fully taxable equivalent ("FTE") basis – Non-GAAP (a) |
$ |
925 |
$ |
862 |
$ |
804 |
7 |
% |
15 |
% | |||
Net interest margin |
1.22 |
% |
1.14 |
% |
1.13 |
% |
8 |
bps |
9 |
bps | |||
Net interest margin (FTE) – Non-GAAP (a) |
1.23 |
% |
1.16 |
% |
1.14 |
% |
7 |
bps |
9 |
bps | |||
Selected average balances: |
|||||||||||||
Cash/interbank investments |
$ |
120,821 |
$ |
117,446 |
$ |
106,069 |
3 |
% |
14 |
% | |||
Trading account securities |
4,183 |
2,723 |
2,254 |
54 |
86 |
||||||||
Securities |
118,459 |
120,225 |
114,786 |
(1) |
3 |
||||||||
Loans |
58,606 |
56,772 |
60,312 |
3 |
(3) |
||||||||
Interest-earning assets |
302,069 |
297,166 |
283,421 |
2 |
7 |
||||||||
Interest-bearing deposits |
155,704 |
147,763 |
139,820 |
5 |
11 |
||||||||
Federal funds purchased and securities sold under repurchase agreements |
18,963 |
20,211 |
18,995 |
(6) |
— |
||||||||
Long-term debt |
28,407 |
28,245 |
25,882 |
1 |
10 |
||||||||
Other interest-bearing liabilities |
23,920 |
26,086 |
22,855 |
(8) |
5 |
||||||||
Interest-bearing liabilities |
226,994 |
222,305 |
207,552 |
2 |
9 |
||||||||
Noninterest-bearing deposits |
71,005 |
69,111 |
73,555 |
3 |
(3) |
||||||||
Selected average yields/rates: (b) |
|||||||||||||
Cash/interbank investments |
1.13 |
% |
0.98 |
% |
0.56 |
% |
|||||||
Trading account securities |
2.62 |
2.02 |
3.12 |
||||||||||
Securities |
2.03 |
1.85 |
1.71 |
||||||||||
Loans |
2.90 |
2.60 |
2.15 |
||||||||||
Interest-earning assets |
1.85 |
1.65 |
1.38 |
||||||||||
Interest-bearing deposits |
0.30 |
0.17 |
0.03 |
||||||||||
Federal funds purchased and securities sold under repurchase agreements |
2.29 |
1.83 |
0.51 |
||||||||||
Long-term debt |
2.49 |
2.29 |
1.85 |
||||||||||
Other interest-bearing liabilities |
1.04 |
0.71 |
0.28 |
||||||||||
Interest-bearing liabilities |
0.82 |
0.65 |
0.33 |
||||||||||
Average cash/interbank investments as a percentage of average interest-earning assets |
40 |
% |
40 |
% |
37 |
% |
|||||||
Average noninterest-bearing deposits as a percentage of average interest-earning assets |
24 |
% |
23 |
% |
26 |
% |
(a) |
Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income which allows for |
(b) |
Yields/rates include the impact of interest rate hedging activities. |
bps – basis points. |
KEY DRIVERS
NONINTEREST EXPENSE
Noninterest expense |
1Q18 vs. | ||||||||||||
(dollars in millions) |
1Q18 |
4Q17 |
1Q17 |
4Q17 |
1Q17 | ||||||||
Staff (a) |
$ |
1,576 |
$ |
1,628 |
$ |
1,488 |
(3) |
% |
6 |
% | |||
Professional, legal and other purchased services |
291 |
339 |
313 |
(14) |
(7) |
||||||||
Software and equipment |
234 |
297 |
223 |
(21) |
5 |
||||||||
Net occupancy |
139 |
153 |
136 |
(9) |
2 |
||||||||
Sub-custodian and clearing (b) |
119 |
102 |
103 |
17 |
16 |
||||||||
Distribution and servicing |
106 |
106 |
100 |
— |
6 |
||||||||
Bank assessment charges |
52 |
53 |
57 |
(2) |
(9) |
||||||||
Business development |
51 |
66 |
51 |
(23) |
— |
||||||||
Amortization of intangible assets |
49 |
52 |
52 |
(6) |
(6) |
||||||||
Other (a)(b)(c) |
122 |
210 |
119 |
(42) |
3 |
||||||||
Total noninterest expense |
$ |
2,739 |
$ |
3,006 |
$ |
2,642 |
(9) |
% |
4 |
% |
(a) |
In 1Q18, we adopted new accounting guidance included in ASU 2017-07, Compensation-Retirement |
(b) |
Beginning in 1Q18, clearing expense, which was previously included in other expense, was included |
(c) |
Beginning in 1Q18, merger and integration ("M&I"), litigation and restructuring charges are no longer |
KEY DRIVERS
THE BANK OF NEW YORK MELLON CORPORATION Condensed Consolidated Income Statement | ||||||||||
Quarter ended |
||||||||||
(in millions) |
March 31, |
Dec. 31, |
March 31, |
|||||||
Fee and other revenue |
||||||||||
Investment services fees: |
||||||||||
Asset servicing |
$ |
1,168 |
$ |
1,130 |
$ |
1,063 |
||||
Clearing services |
414 |
400 |
376 |
|||||||
Issuer services |
260 |
197 |
251 |
|||||||
Treasury services |
138 |
137 |
139 |
|||||||
Total investment services fees |
1,980 |
1,864 |
1,829 |
|||||||
Investment management and performance fees |
960 |
962 |
842 |
|||||||
Foreign exchange and other trading revenue |
209 |
166 |
164 |
|||||||
Financing-related fees |
52 |
54 |
55 |
|||||||
Distribution and servicing |
36 |
38 |
41 |
|||||||
Investment and other income (loss) |
82 |
(198) |
77 |
|||||||
Total fee revenue |
3,319 |
2,886 |
3,008 |
|||||||
Net securities (losses) gains |
(49) |
(26) |
10 |
|||||||
Total fee and other revenue |
3,270 |
2,860 |
3,018 |
|||||||
Operations of consolidated investment management funds |
||||||||||
Investment (loss) income |
(11) |
17 |
37 |
|||||||
Interest of investment management fund note holders |
— |
— |
4 |
|||||||
(Loss) income from consolidated investment management funds |
(11) |
17 |
33 |
|||||||
Net interest revenue |
||||||||||
Interest revenue |
1,381 |
1,219 |
960 |
|||||||
Interest expense |
462 |
368 |
168 |
|||||||
Net interest revenue |
919 |
851 |
792 |
|||||||
Total revenue |
4,178 |
3,728 |
3,843 |
|||||||
Provision for credit losses |
(5) |
(6) |
(5) |
|||||||
Noninterest expense |
||||||||||
Staff (a) |
1,576 |
1,628 |
1,488 |
|||||||
Professional, legal and other purchased services |
291 |
339 |
313 |
|||||||
Software and equipment |
234 |
297 |
223 |
|||||||
Net occupancy |
139 |
153 |
136 |
|||||||
Sub-custodian and clearing (b) |
119 |
102 |
103 |
|||||||
Distribution and servicing |
106 |
106 |
100 |
|||||||
Bank assessment charges |
52 |
53 |
57 |
|||||||
Business development |
51 |
66 |
51 |
|||||||
Amortization of intangible assets |
49 |
52 |
52 |
|||||||
Other (a)(b)(c) |
122 |
210 |
119 |
|||||||
Total noninterest expense |
2,739 |
3,006 |
2,642 |
|||||||
Income |
||||||||||
Income before income taxes |
1,444 |
728 |
1,206 |
|||||||
Provision (benefit) for income taxes |
282 |
(453) |
269 |
|||||||
Net income |
1,162 |
1,181 |
937 |
|||||||
Net loss (income) attributable to noncontrolling interests (includes $11, $(9) and $(18) related to consolidated |
9 |
(6) |
(15) |
|||||||
Net income applicable to shareholders of The Bank of New York Mellon Corporation |
1,171 |
1,175 |
922 |
|||||||
Preferred stock dividends |
(36) |
(49) |
(42) |
|||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
$ |
1,135 |
$ |
1,126 |
$ |
880 |
(a) |
In 1Q18, we adopted new accounting guidance included in ASU 2017-07, Compensation-Retirement Benefits - Improving the |
(b) |
Beginning in 1Q18, clearing expense, which was previously included in other expense, was included with sub-custodian expense. |
(c) |
Beginning in 1Q18, M&I, litigation and restructuring charges are no longer separately disclosed. Expenses previously reported |
THE BANK OF NEW YORK MELLON CORPORATION Condensed Consolidated Income Statement - continued | ||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
Quarter ended |
|||||||||
used for the earnings per share calculation |
March 31, |
Dec. 31, |
March 31, |
|||||||
(in millions) |
2018 |
2017 |
2017 |
|||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
$ |
1,135 |
$ |
1,126 |
$ |
880 |
||||
Less: Earnings allocated to participating securities |
8 |
8 |
14 |
|||||||
Net income applicable to the common shareholders of The Bank of New York Mellon Corporation after |
$ |
1,127 |
$ |
1,118 |
$ |
866 |
||||
Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation |
Quarter ended |
|||||||||
March 31, |
Dec. 31, |
March 31, |
||||||||
(in thousands) |
2018 |
2017 |
2017 |
|||||||
Basic |
1,016,797 |
1,024,828 |
1,041,158 |
|||||||
Diluted |
1,021,731 |
1,030,404 |
1,047,746 |
|||||||
Earnings per share applicable to the common shareholders of The Bank of New York Mellon |
Quarter ended |
|||||||||
Corporation |
March 31, |
Dec. 31, |
March 31, |
|||||||
(in dollars) |
2018 |
2017 |
2017 |
|||||||
Basic |
$ |
1.11 |
$ |
1.09 |
$ |
0.83 |
||||
Diluted |
$ |
1.10 |
$ |
1.08 |
$ |
0.83 |
SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||
BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures on a tangible basis, as a supplement to GAAP information. Tangible common shareholders' equity excludes goodwill and intangible assets, net of deferred tax liabilities. BNY Mellon believes that the return on tangible common equity measure is an additional useful measure for investors because it presents a measure of those assets that can generate income. BNY Mellon has provided a measure of tangible book value per common share, which it believes provides additional useful information as to the level of tangible assets in relation to shares of common stock outstanding. | |||||||||
BNY Mellon has presented the operating margin for the Investment Management business net of distribution and servicing expense that is passed to third parties who distribute or service our managed funds. BNY Mellon believes that this measure is useful when evaluating the business's performance relative to industry competitors. | |||||||||
The following table presents the reconciliation of the return on common equity and tangible common equity. | |||||||||
Return on common equity and tangible common equity reconciliation |
|||||||||
(dollars in millions) |
1Q18 |
4Q17 |
1Q17 | ||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP |
$ |
1,135 |
$ |
1,126 |
$ |
880 |
|||
Add: Amortization of intangible assets |
49 |
52 |
52 |
||||||
Less: Tax impact of amortization of intangible assets |
12 |
18 |
18 |
||||||
Adjusted net income applicable to common shareholders of The Bank of New York Mellon |
$ |
1,172 |
$ |
1,160 |
$ |
914 |
|||
Average common shareholders' equity |
$ |
37,593 |
$ |
36,952 |
$ |
34,965 |
|||
Less: Average goodwill |
17,581 |
17,518 |
17,338 |
||||||
Average intangible assets |
3,397 |
3,437 |
3,578 |
||||||
Add: Deferred tax liability – tax deductible goodwill (a) |
1,042 |
1,034 |
1,518 |
||||||
Deferred tax liability – intangible assets (a) |
716 |
718 |
1,100 |
||||||
Average tangible common shareholders' equity – Non-GAAP |
$ |
18,373 |
$ |
17,749 |
$ |
16,667 |
|||
Return on common equity (annualized) – GAAP |
12.2 |
% |
12.1 |
% |
10.2 |
% | |||
Return on tangible common equity (annualized) – Non-GAAP |
25.9 |
% |
25.9 |
% |
22.2 |
% | |||
(a) Deferred tax liabilities, for the prior periods, are based on fully phased-in U.S. capital rules. | |||||||||
The following table presents the reconciliation of the book value and tangible book value per common share. | |||||||||
Book value and tangible book value per common share reconciliation |
March 31, |
December 31, |
March 31, |
||||||
(dollars in millions except common shares) |
2018 |
2017 |
2017 |
||||||
BNY Mellon shareholders' equity at period end – GAAP |
$ |
41,728 |
$ |
41,251 |
$ |
39,138 |
|||
Less: Preferred stock |
3,542 |
3,542 |
3,542 |
||||||
BNY Mellon common shareholders' equity at period end – GAAP |
38,186 |
37,709 |
35,596 |
||||||
Less: Goodwill |
17,596 |
17,564 |
17,355 |
||||||
Intangible assets |
3,370 |
3,411 |
3,549 |
||||||
Add: Deferred tax liability – tax deductible goodwill (a) |
1,042 |
1,034 |
1,518 |
||||||
Deferred tax liability – intangible assets (a) |
716 |
718 |
1,100 |
||||||
BNY Mellon tangible common shareholders' equity at period end – Non-GAAP |
$ |
18,978 |
$ |
18,486 |
$ |
17,310 |
|||
Period-end common shares outstanding (in thousands) |
1,010,676 |
1,013,442 |
1,039,877 |
||||||
Book value per common share – GAAP |
$ |
37.78 |
$ |
37.21 |
$ |
34.23 |
|||
Tangible book value per common share – Non-GAAP |
$ |
18.78 |
$ |
18.24 |
$ |
16.65 |
|||
(a) Deferred tax liabilities, for the prior periods, are based on fully phased-in U.S. capital rules. |
The following table presents the reconciliation of the pre-tax operating margin for the Investment Management business. | |||||||||
Pre-tax operating margin reconciliation - Investment Management business |
|||||||||
(dollars in millions) |
1Q18 |
4Q17 |
1Q17 | ||||||
Income before income taxes – GAAP |
$ |
381 |
$ |
276 |
$ |
277 |
|||
Total revenue – GAAP |
$ |
1,088 |
$ |
1,048 |
$ |
963 |
|||
Less: Distribution and servicing expense |
110 |
107 |
101 |
||||||
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP |
$ |
978 |
$ |
941 |
$ |
862 |
|||
Pre-tax operating margin – GAAP (a) |
35 |
% |
26 |
% |
29 |
% | |||
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a) |
39 |
% |
29 |
% |
32 |
% | |||
(a) Income before taxes divided by total revenue. |
The following table presents the impact of U.S. tax legislation and other charges recorded in 4Q17. | ||||||||
Amounts included in 4Q17 results |
||||||||
(dollars in millions except earnings per share) |
U.S. tax |
Other |
(a) |
|||||
Fee and other revenue |
$ |
(279) |
$ |
(37) |
||||
Income from consolidated investment management funds |
— |
— |
||||||
Net interest revenue |
(4) |
— |
||||||
Total revenue |
(283) |
(37) |
||||||
Provision for credit losses |
— |
— |
||||||
Total noninterest expense |
— |
282 |
||||||
Income before taxes |
(283) |
(319) |
||||||
(Benefit) provision for income taxes |
(710) |
(73) |
||||||
Net income |
$ |
427 |
$ |
(246) |
||||
Diluted earnings per common share |
$ |
0.41 |
$ |
(0.24) |
||||
(a) Other charges include severance, litigation, an asset impairment and investment securities losses related to the sale of certain securities. |
CHANGE IN PRESENTATION | ||||
In 1Q18, we began presenting total revenue for each of the primary lines of business in our two principal businesses. The table below summarizes the products and services in each line of business and the primary types of revenue generated. BNY Mellon believes that the updated presentation provides investors a clearer picture of our business results and permits investors to view revenue on a basis consistent with management. | ||||
Investment Services business | ||||
Lines of business |
Primary products and services |
Primary types of revenue | ||
Asset Servicing |
Custody, accounting, ETF services, middle-office solutions, transfer agency, services for private equity and real estate funds, foreign exchange, securities lending, liquidity/lending services, prime brokerage and data analytics |
- Asset servicing fees (includes securities lending revenue) - Foreign exchange revenue - Net interest revenue - Financing-related fees | ||
Pershing |
Clearing and custody, investment, wealth and retirement solutions, technology and enterprise data management, trading services and prime brokerage |
- Clearing services fees - Net interest revenue
| ||
Issuer Services |
Corporate Trust (trustee, administration and agency services and reporting and transparency) and Depositary Receipts (issuer services and support for brokers and investors) |
- Issuer services fees - Net interest revenue - Foreign exchange revenue | ||
Treasury Services |
Integrated cash management solutions including payments, foreign exchange, liquidity management, receivables processing and payables management and trade finance and processing |
- Treasury services fees | ||
Clearance and Collateral Management |
U.S. government clearing, global collateral management and tri-party repo |
- Asset servicing fees - Net interest revenue
| ||
Investment Management business | ||||
Lines of business |
Primary products and services |
Primary types of revenue | ||
Asset Management |
Diversified investment management strategies and distribution of investment products |
- Investment management fees - Performance fees - Distribution and servicing fees | ||
Wealth Management |
Investment management, custody, wealth and estate planning and private banking services |
- Investment management fees |
The following updates to our presentations also began in 1Q18. Prior periods have been restated to be on a comparable basis.
CAUTIONARY STATEMENT
A number of statements (i) in this Earnings Release, (ii) in our presentations and (iii) in the responses to questions on our conference call discussing our quarterly results and other public events may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 including our capital plans, strategic priorities, financial goals, client experience, driving revenue growth, preliminary business metrics and statements regarding our aspirations, as well as our overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities, focus and initiatives. These statements may be expressed in a variety of ways, including the use of future or present tense language. Words such as "estimate," "forecast," "project," "anticipate," "likely," "target," "expect," "intend," "continue," "seek," "believe," "plan," "goal," "could," "should," "would," "may," "might," "will," "strategy," "synergies," "opportunities," "trends," "future" and words of similar meaning signify forward-looking statements. These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation which make reference to the cautionary factors described in this Earnings Release are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control). Actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2017 and BNY Mellon's other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Release speak only as of April 19, 2018, and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
ABOUT BNY MELLON
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of March 31, 2018, BNY Mellon had $33.5 trillion in assets under custody and/or administration, and $1.9 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.
CONFERENCE CALL INFORMATION
Charles W. Scharf, chairman and chief executive officer, and Michael P. Santomassimo, chief financial officer, along with other members of the executive management team from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on April 19, 2018. This conference call and audio webcast will include forward-looking statements and may include other material information.
Investors and analysts wishing to access the conference call and audio webcast may do so by dialing (800) 390-5696 (U.S.) or (720) 452-9082 (International), and using the passcode: 678511, or by logging on to www.bnymellon.com/investorrelations. Earnings materials will be available at www.bnymellon.com/investorrelations beginning at approximately 6:30 a.m. EDT on April 19, 2018. Replays of the conference call and audio webcast will be available beginning April 19, 2018 at approximately 2 p.m. EDT through May 19, 2018 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 4968536. The archived version of the conference call and audio webcast will also be available at www.bnymellon.com/investorrelations for the same time period.
SOURCE BNY Mellon