PRNewswire
NEW YORK
(NYSE:BK)
Jul 22, 2009
FEE REVENUE INCREASED 3% SEQUENTIALLY; TOTAL REVENUE STABLE
STRENGTHENED CAPITAL RATIOS Tier 1 12.5% (Ex. TARP), Tier 1 Common 11.1%
NEW YORK, July 22, 2009 — The Bank of New York Mellon Corporation (NYSE: BK) today reported second quarter income from continuing operations applicable to common shareholders of $267 million, or $0.23 per common share, compared with $303 million, or $0.26 per common share, in the second quarter of 2008 and $363 million, or $0.31 per common share, in the first quarter of 2009.
"Overall, revenue has stabilized, we continue to gain market share, remain profitable, and have among the best capital levels in our industry. However, investment losses remain stubbornly high primarily due to continued deterioration in the residential housing market. We will continue to focus on maintaining exceptional client service levels and reducing risk and expenses," said Robert P. Kelly, chairman and chief executive officer of The Bank of New York Mellon Corporation.
On June 30, 2009, we adopted discontinued operations accounting for Mellon United National Bank located in Florida. Accordingly, all income statements in this release have been restated.
Net income applicable to common shareholders, including discontinued operations, totaled $176 million, or $0.15 per common share, in the second quarter of 2009, compared with $309 million, or $0.27 per common share in the second quarter of 2008 and $322 million, or $0.28 per common share in the first quarter of 2009.
Second Quarter Highlights Unless otherwise noted, all comments begin with the results of the second quarter of 2009 and are compared to the second quarter of 2008. Please refer to the Quarterly Earnings Review for detailed business segment information.
Total revenue was $2.957 billion, comprised of $2.257 billion of fee and other revenue and $700 million of net interest revenue. Total revenue included a pre-tax charge for the write-down of investment securities ($256 million) in fee and other revenue.
---------------------------------------------------------------------- Reconciliation of total revenue 2Q09 vs. ------------ (dollar amounts in millions) 2Q09 1Q09 2Q08 2Q08 1Q09 ---------------------------------------------------------------------- Fee and other revenue - GAAP $2,257 $2,136 $2,989 (24)% 6% Investment write-downs 256 295 152 N/M N/M ---------------------------------------------------------------------- Total fee revenue - GAAP 2,513 2,431 3,141 (20) 3 Net interest revenue - GAAP 700 775 388 80 (10) SILO charge - - 377 N/M N/M ---------------------------------------------------------------------- Total revenue excluding investment write-downs and SILO charge - Non-GAAP $3,213 $3,206 $3,906 (18)% -% ---------------------------------------------------------------------- N/M - Not meaningful.
The provision for credit losses was $61 million in the second quarter of 2009 compared with $13 million in the second quarter of 2008 and $59 million in the first quarter of 2009. During the second quarter of 2009, the total allowance for credit losses decreased $33 million as net charge-offs totaled $54 million and $40 million of the allowance for credit losses was transferred to discontinued operations.
Total noninterest expense was $2.383 billion. This compares with total noninterest expense of $2.743 billion in the second quarter of 2008 and $2.280 billion in the first quarter of 2009.
---------------------------------------------------------------------- Reconciliation of noninterest 2Q09 vs. expense ------------ (dollar amounts in millions) 2Q09 1Q09 2Q08 2Q08 1Q09 ---------------------------------------------------------------------- Noninterest expense - GAAP $2,383 $2,280 $2,743 (13)% 5% FDIC special assessment 61 - - N/M N/M M&I expenses 59 68 149 (60) (13) Intangible amortization 108 107 123 (12) 1 ---------------------------------------------------------------------- Total noninterest expense, excluding FDIC special assessment, M&I expenses and intangible amortization - Non-GAAP $2,155 $2,105 $2,471 (13)% 2% ---------------------------------------------------------------------- N/M - Not meaningful.
The effective tax rate, on a continuing operations basis, was 2.2% in the second quarter of 2009. In the second quarter of 2009, the Company recognized $134 million of tax benefits primarily attributable to the final LILO/SILO tax settlement agreement at an amount less than originally recorded. Excluding the impact of the FDIC special assessment, M&I expenses, investment write-downs and the benefit of tax settlements recorded in the second quarter of 2009, the effective tax rate was 32.4% (Non-GAAP) in the second quarter of 2009.
Results in the second quarter of 2009 included an after-tax redemption charge of $196.5 million related to the repurchase of preferred stock issued to the U.S. Treasury as part of the TARP Capital Purchase Program and $39.8 million for the final dividend on the Series B preferred stock. The redemption premium/dividends and the FDIC special assessment decreased EPS by $0.23 per share in the second quarter of 2009.
The unrealized net of tax loss on our securities portfolio was $4.4 billion at June 30, 2009 compared with a net of tax loss of $4.5 billion at March 31, 2009. Further information on the investment portfolio is detailed in the Quarterly Earnings Review on page 9.
On June 30, 2009, the Company submitted to the U.S. Treasury notice of our intention to repurchase the warrant which we issued to the Treasury in connection with the TARP Capital Purchase Program. The Company and the Treasury are currently discussing the terms of the proposed repurchase of the warrant.
------------------------------------------------------------------------- Capital ratios - preliminary (a) June 30, March 31, June 30, 2009 2009 2008 ------------------------------------------------------------------------- Tier 1 capital ratio 12.5% 13.8% (b) 9.3% Tier 1 common equity to risk weighted assets ratio (c) 11.1 10.0 7.9 Total (Tier 1 plus Tier 2) capital ratio 16.0 17.5 12.9 Leverage capital ratio 7.7 7.8 6.4 Common shareholders' equity to assets ratio 13.4 12.5 14.2 Tangible common equity to tangible assets ratio - Non-GAAP (c) 4.8 4.2 4.6 ------------------------------------------------------------------------- (a) Includes discontinued operations. (b) The Tier 1 capital ratio, excluding the TARP preferred stock, was 11.2% at March 31, 2009. (c) See the Supplemental information section beginning on page 9 for a calculation of this ratio.
On June 30, 2009, we adopted discontinued operations accounting for Mellon United National Bank located in Florida. Accordingly, the income statements for all periods in this release have been restated. The restatement resulted in a reduction to previously reported levels of net interest revenue and the net interest margin; a slight reduction in both treasury services and other fee revenue; a reduction in the provision for credit losses; a reduction in noninterest expense and a change in continuing earnings per share.
Also on July 22, 2009, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of 9 cents per common share. This cash dividend is payable on Aug. 11, 2009 to shareholders of record as of the close of business on Aug. 3, 2009.
The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $20.7 trillion in assets under custody and administration, $926 billion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.8 trillion per day. Additional information is available at www.bnymellon.com.
Earnings Release Format
Throughout this Earnings Release, all information is reported on a continuing operations basis unless otherwise noted. Quarterly returns are annualized.
Supplemental Financial Information
The Quarterly Earnings Review and supplemental financial trends for The Bank of New York Mellon Corporation have been updated through June 30, 2009 and are available at www.bnymellon.com (Investor Relations - financial reports). The Quarterly Earnings Review and supplemental financial trends have been restated for discontinued operations.
Conference Call Data
Robert P. Kelly, chairman and chief executive officer; Gerald L. Hassell, president; and Thomas P. Gibbons, chief financial officer, along with other members of executive management from The Bank of New York Mellon Corporation, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on July 22, 2009. This conference call and audio webcast will include forward-looking statements and may include other material information. Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (210) 838-9221 (International) Passcode: Earnings, or by logging on to www.bnymellon.com. The Earnings Release, together with the Quarterly Earnings Review and supplemental financial trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on July 22, 2009. Replays of the conference call and audio webcast will be available beginning July 22, 2009 at approximately 2:00 p.m. EDT through Aug. 5, 2009 by dialing (866) 442-1776 (U.S.) or (203) 369-1076 (International). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.
THE BANK OF NEW YORK MELLON CORPORATION Financial Highlights -------------------------------------------------------------------------- (dollar amounts in millions, except per common share amounts and unless Quarter ended Year to date otherwise noted; ------------------------------ ------------------- common shares in June 30, March 31, June 30, June 30, June 30, thousands) 2009 2009 2008 2009 2008 -------------------------------------------------------------------------- Continuing Operations --------------------- Return on common equity (annualized) - GAAP 4.0% 5.8% 4.3% 4.9% 7.2% Non-GAAP adjusted (a) 6.5% 10.5% 13.2% 8.5% 13.0% Return on tangible common equity (annualized) - Non-GAAP (a) 18.4% 28.8% 18.5% 23.2% 27.5% Non-GAAP adjusted (a) 23.8% 43.9% 45.9% 33.0% 43.1% Fee and other revenue as a percent of total revenue (FTE) 76% 73% 88% 75% 84% Non-GAAP adjusted (a) 78% 76% 80% 77% 80% Annualized fee revenue per employee (based on average headcount) (in thousands) $241 $234 $298 $238 $294 Percent of non-U.S. fee and net interest revenue (FTE) 29% 28% 37%(b) 29% 35%(b) Pre-tax operating margin (FTE) 18% 20% 19% 19% 25% Non-GAAP adjusted (a) 31% 33% 37% 32% 37% Net interest margin (FTE) (c) 1.80% 1.87% 1.11%(b) 1.84% 1.61%(b) Selected average balances: Interest-earning assets (d) $157,265 $167,427 $142,032 $162,318 $142,448 Total assets $208,533 $220,119 $195,997 $214,294 $198,394 Interest-bearing deposits (d) $98,896 $101,983 $93,932 $100,430 $92,969 Noninterest- bearing deposits (d) $32,852 $43,051 $24,300 $37,924 $25,013 Total shareholders' equity $28,934 $27,978 $28,507 $28,458 $29,029 Average common shares and equivalents outstanding: Basic 1,171,081 1,146,070 1,135,153 1,158,649 1,134,710 Diluted 1,174,466 1,146,943 1,142,936 1,160,620 1,143,312 Period-end data --------------- Assets under custody and administration at period end (in trillions) $20.7 $19.5 $23.0 $20.7 $23.0 Cross-border assets at period end (in trillions) $7.8 $7.3 $10.3 $7.8 $10.3 Market value of securities on loan at period end (in billions) (e) $290 $293 $588 $290 $588 Assets under management at period end (in billions) $926 $881 $1,113 $926 $1,113 Employees 41,800 41,700 42,700 41,800 42,700 Book value per common share - GAAP $22.68 $22.03 $24.93 $22.68 $24.93 Tangible book value per common share - Non-GAAP (a) $6.60 $5.48 $7.19 $6.60 $7.19 Dividend per common share $0.09 $0.24 $0.24 $0.33 $0.48 Closing common stock price per common share $29.31 $28.25 $37.83 $29.31 $37.83 Market capitalization $35,255 $32,585 $43,356 $35,255 $43,356 -------------------------------------------------------------------------- (a) See Supplemental information beginning on page 9 for a calculation of these ratios. (b) Excluding the SILO charge, the percent of non-U.S. fee and net interest revenue was 33% for both the quarter and six months ended June 30, 2008, respectively, and the net interest margin was 2.17% and 2.13% for the quarter and six months ended June 30, 2008, respectively. (c) Prior periods calculated on a continuing operations basis even though the balance sheet, in accordance with GAAP, is not restated for discontinued operations. (d) Excludes the impact of discontinued operations. (e) Represents the securities on loan, both cash and non-cash, managed by the Asset Servicing segment. THE BANK OF NEW YORK MELLON CORPORATION Condensed Consolidated Income Statement -------------------------------------------------------------------------- Quarter ended Year to date ---------------------------- ------------------ (in millions, except per June 30, March 31, June 30, June 30, June 30, common share amounts) 2009 2009 2008 2009 2008 Fee and other revenue Securities servicing fees: Asset servicing (a) $671 $609 $873 $1,280 $1,776 Issuer services 372 364 444 736 820 Clearing services 250 253 264 503 527 -------------------------------------------------------------------------- Total securities servicing fees 1,293 1,226 1,581 2,519 3,123 Asset and wealth management fees 637 616 860 1,253 1,722 Foreign exchange and other trading activities 237 307 308 544 567 Treasury services 132 125 129 257 253 Distribution and servicing 107 111 110 218 208 Financing-related fees 54 48 51 102 98 Investment income 44 (17) 74 27 115 Other 9 15 28 24 110 -------------------------------------------------------------------------- Total fee revenue 2,513 2,431 3,141 4,944 6,196 Net securities gains (losses) (256) (295) (152) (551) (225) -------------------------------------------------------------------------- Total fee and other revenue 2,257 2,136 2,989 4,393 5,971 Net interest revenue Interest revenue 845 979 1,065 1,824 2,687 Interest expense 145 204 677 349 1,556 -------------------------------------------------------------------------- Net interest revenue 700 775 388 1,475 1,131 Provision for credit losses 61 59 13 120 27 -------------------------------------------------------------------------- Net interest revenue after provision for credit losses 639 716 375 1,355 1,104 Noninterest expense Staff (b) 1,153 1,169 1,403 2,322 2,761 Professional, legal and other purchased services (b) 237 237 259 474 497 Net occupancy 142 139 138 281 266 Distribution and servicing 106 107 131 213 261 Software 93 81 88 174 167 Sub-custodian and clearing (a) 91 66 93 157 167 Furniture and equipment 76 77 78 153 157 Business development 49 44 75 93 140 Other 263(c) 175 206 438(c) 412 -------------------------------------------------------------------------- Subtotal 2,210 2,095 2,471 4,305 4,828 Amortization of intangible assets 108 107 123 215 242 Restructuring charges 6 10 - 16 - Merger and integration expenses: The Bank of New York Mellon Corporation 59 68 146 127 267 Acquired Corporate Trust Business - - 3 - 8 -------------------------------------------------------------------------- Total noninterest expense 2,383 2,280 2,743 4,663 5,345 -------------------------------------------------------------------------- Income Income from continuing operations before income taxes 513 572 621 1,085 1,730 Provision for income taxes 12 161 312 173 670 -------------------------------------------------------------------------- Income from continuing operations 501 411 309 912 1,060 Discontinued operations: Income (loss) from discontinued operations (144) (65) 14 (209) 20 Provision (benefit) for income taxes (53) (24) 8 (77) 10 -------------------------------------------------------------------------- Income (loss) from discontinued operations, net of tax (91) (41) 6 (132) 10 -------------------------------------------------------------------------- Net income 410 370 315 780 1,070 Net (income) loss attributable to noncontrolling interests, net of tax 2 (1) (6) 1 (15) Redemption charge and preferred dividends (236) (47) - (283) - -------------------------------------------------------------------------- Net income applicable to common shareholders of The Bank of New York Mellon Corporation $176 $322 $309 $498 $1,055 -------------------------------------------------------------------------- (a) In the second quarter of 2009, global sub-custodian out-of-pocket expense related to client reimbursements was reclassified from sub-custodian expense to asset servicing revenue. This reclassification was $- million in the first quarter of 2009, $10 million in the second quarter of 2008 and $14 million in the first six months of 2008. (b) In the second quarter of 2009, certain temporary/consulting expenses were reclassified from professional, legal and other purchased services to staff expense. The reclassification totaled $24 million in the first quarter of 2009, $19 million in the second quarter of 2008 and $32 million in the first six months of 2008. (c) Includes the FDIC special assessment of $61 million recorded in the second quarter of 2009. THE BANK OF NEW YORK MELLON CORPORATION Condensed Consolidated Income Statement - continued -------------------------------------------------------------------------- Quarter ended Year to date ----------------------------- ------------------ (in millions, except June 30, March 31, June 30, June 30, June 30, per common share amounts) 2009 2009 2008 2009 2008 -------------------------------------------------------------------------- Earnings per share attributable to the common shareholders of The Bank of New York Mellon Corporation: Basic: Income from continuing operations $0.23 $0.31 $0.26 $0.54 $0.91 Income (loss) from discontinued operations, net of tax (0.08) (0.04) - (0.11) 0.01 -------------------------------------------------------------------------- Net income applicable to common stock $0.15 $0.28(a) $0.27(a) $0.43 $0.92 -------------------------------------------------------------------------- Diluted: Income from continuing operations $0.23 $0.31 $0.26 $0.54 $0.91 Income (loss) from discontinued operations, net of tax (0.08) (0.04) - (0.11) 0.01 -------------------------------------------------------------------------- Net income applicable to common stock $0.15 $0.28(a) $0.27(a) $0.43 $0.92 -------------------------------------------------------------------------- (a)Does not foot due to rounding. -------------------------------------------------------------------------- Reconciliation of net income from continuing operations attributable to the common shareholders of The Quarter ended Year to date Bank of New York Mellon ----------------------------- ------------------ Corporation: June 30, March 31, June 30, June 30, June 30, (in millions) 2009 2009 2008 2009 2008 -------------------------------------------------------------------------- Income from continuing operations $501 $411 $309 $912 $1,060 Net (income) loss attributable to noncontrolling interests, net of tax 2 (1) (6) 1 (15) Redemption charge and preferred dividends (236) (47) - (283) - -------------------------------------------------------------------------- Income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation, net of tax 267 363 303 630 1,045 Income (loss) from discontinued operations, net of tax (91) (41) 6 (132) 10 -------------------------------------------------------------------------- Net income applicable to the common shareholders of The Bank of New York Mellon Corporation $176 $322 $309 $498 $1,055 -------------------------------------------------------------------------- THE BANK OF NEW YORK MELLON CORPORATION Consolidated Balance Sheet ----------------------------------------------------------------------- (dollar amounts in millions, except per June 30, Dec. 31, share amounts) 2009 2008 ----------------------------------------------------------------------- Assets Cash and due from: Banks $3,783 $4,881 Federal Reserve and other central banks (includes $16,438 and $53,270 of interest-bearing deposits) 16,494 53,278 Other short-term investments - U.S. government-backed commercial paper, at fair value - 5,629 Interest-bearing deposits with banks 43,369 39,126 Federal funds sold and securities purchased under resale agreements 3,688 2,000 Securities: Held-to-maturity (fair value of $6,105 and $6,333) 6,812 7,371 Available-for-sale 42,126 32,064 ----------------------------------------------------------------------- Total securities 48,938 39,435 Trading assets 7,611 11,102 Loans 38,234 43,394 Allowance for loan losses (434) (415) ----------------------------------------------------------------------- Net loans 37,800 42,979 Premises and equipment 1,685 1,686 Accrued interest receivable 529 619 Goodwill 16,040 15,898 Intangible assets 5,677 5,856 Other assets 15,261 15,023 Assets of discontinued operations 2,137 - ----------------------------------------------------------------------- Total assets $203,012 $237,512 ----------------------------------------------------------------------- Liabilities Deposits: Noninterest-bearing (principally domestic offices) $36,055 $55,816 Interest-bearing deposits in domestic offices 24,633 32,386 Interest-bearing deposits in foreign offices 69,901 71,471 ----------------------------------------------------------------------- Total deposits 130,589 159,673 Borrowing from Federal Reserve related to asset-backed commercial paper, at fair value - 5,591 Federal funds purchased and securities sold under repurchase agreements 2,058 1,372 Trading liabilities 6,889 8,085 Payables to customers and broker-dealers 8,492 9,274 Commercial paper 272 138 Other borrowed funds 1,345 755 Accrued taxes and other expenses 2,790 4,052 Other liabilities (including allowance for lending related commitments of $92 and $114) 4,303 4,618 Long-term debt 17,363 15,865 Liabilities of discontinued operations 1,607 - ----------------------------------------------------------------------- Total liabilities 175,708 209,423 Equity Preferred stock - par value $0.01 per share; authorized 100,000,000 shares; issued - shares and 3,000,000 shares - 2,786 Common stock - par value $0.01 per common share; authorized 3,500,000,000 common shares; issued 1,203,651,558 and 1,148,507,561 common shares 12 11 Additional paid-in capital 21,867 20,432 Retained earnings 11,028 10,250 Accumulated other comprehensive loss, net of tax (5,608) (5,426) Less: Treasury stock of 823,823 and 40,262 common shares, at cost (23) (3) ----------------------------------------------------------------------- Total The Bank of New York Mellon Corporation shareholders' equity 27,276 28,050 Noncontrolling interest 28 39 ----------------------------------------------------------------------- Total equity 27,304 28,089 ----------------------------------------------------------------------- Total liabilities and equity $203,012 $237,512 -----------------------------------------------------------------------
Discontinued operations
On June 30, 2009, we adopted discontinued operations accounting for Mellon United National Bank located in Florida. It was determined that this business no longer fits our strategic focus on our asset management and securities servicing businesses. The business was formerly included in the Other segment. In the second quarter of 2009, we recorded an after-tax loss on discontinued operation of $91 million primarily related to the write-down of goodwill and an increase in the provision for credit losses. The after-tax loss of $41 million in the first quarter of 2009 primarily resulted from a goodwill impairment charge.
The income statements for all periods in this Earnings Release have been restated. The restatement resulted in a reduction to previously reported levels of net interest revenue and the net interest margin; a slight reduction in both treasury services and other fee revenue; a reduction in the provision for credit losses; a reduction in noninterest expense; and a change in continuing earnings per share.
Supplemental information - Explanation of Non-GAAP financial measures
The Company has included in this release certain Non-GAAP financial measures based upon tangible common shareholders' equity. The Company believes that the ratio of tangible common shareholders' equity to tangible assets is a measure of capital strength that adds additional useful information to investors supplementing the Tier 1 capital ratio which is utilized by regulatory authorities. Unlike the Tier 1 ratio, the tangible common shareholders' equity ratio fully incorporates those changes in securities valuations which are reflected in shareholders' equity. In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although the Company in its calculation has excluded certain assets which are given a zero percent risk weighting for regulatory purposes. This ratio is also informative to investors in the Company's common stock because, unlike the Tier 1 capital ratio, it excludes preferred stock and trust preferred securities issued by the Company. Further, the Company believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liability, is a useful additional measure for investors because it presents a measure of the Company's performance in reference to those assets which are productive in generating income.
The Company has also provided a measure of tangible book value per share which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding. The Company has presented revenue measures which exclude the effect of investment write-downs and a SILO charge; expense measures which exclude an FDIC special assessment, M&I expenses and intangible amortization expenses; and measures which utilize net income excluding tax items such as the benefit of tax settlements. Return on equity measures and operating margin measures which exclude some or all of these items are also presented. The Company believes that these measures are useful to investors because they permit a focus on period to period comparisons which relate to the ability of the Company to enhance revenues and limit expenses in circumstances where such matters are within the Company's control. The excluded items in general relate to situations where accounting rules require certain ongoing charges as a result of prior transactions, or where valuation or other accounting/regulatory requirements require charges unrelated to operational initiatives. The SILO charge relates to a one-time settlement with the IRS of tax structured lease transactions in 2008. We also present earnings information including the TARP dividend and redemption premium, so as to provide investors with a better understanding of operational results. In this earnings release, certain amounts are presented on an FTE basis. We believe that this presentation provides comparability of amounts arising from both taxable and tax exempt sources, and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income.
Each of these measures as described above is used by management to monitor financial performance, both on a Company-wide and on a business segment basis.
------------------------------------------------------------------------- Reconciliation of net income and EPS - 2Q09 1Q09 2Q08 GAAP to Non-GAAP ------------ ------------ ------------ (in millions, except per Net Net Net common share amounts) income EPS income EPS income EPS ------------------------------------------------------------------------- Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP $176 $0.15 $322 $0.28 $309 $0.27 Discontinued operations income (loss) (91) (0.08) (41) (0.04) 6 - ------------------------------------------------------------------------- Continuing operations - GAAP 267 0.23 363 0.31(a) 303 0.26(a) TARP redemption premium/dividend 236 0.20 47 0.04 - - FDIC special assessment 36 0.03 - - - - ---- ----- ---- ----- ---- ----- Subtotal 272 0.23 47 0.04 - - M&I expenses 36 0.03 41 0.04 89 0.08 Investment write-downs 161 0.14 183 0.16 91 0.08 Benefit of tax settlements (134) (0.11) - - - - SILO charge - - - - 380 0.33 ---- ----- ---- ----- ---- ----- Subtotal 63 0.05(a) 224 0.20 560 0.49 ------------------------------------------------------------------------- Net income from continuing operations applicable to common shareholders excluding the TARP redemption premium/dividend, FDIC special assessment, M&I expenses, investment write-downs, benefit of tax settlements and SILO charge - Non-GAAP 602 0.51 634 0.55 863 0.75 Intangible amortization 67 0.06 66 0.06 75 0.07 ------------------------------------------------------------------------- Net income from continuing operations applicable to common shareholders excluding the TARP redemption premium/dividend, FDIC special assessment, M&I expenses, investment write-downs, benefit of tax settlements, SILO charge and intangible amortization - Non-GAAP $669 $0.57 $700 0.61 $938 0.82 ------------------------------------------------------------------------- (a) Does not foot due to rounding. ------------------------------------------------------------------------- Reconciliation of fee and other revenue as percent of total revenue (FTE) (dollars in millions) 2Q09 1Q09 2Q08 ------------------------------------------------------------------------- Fee and other revenue - GAAP $2,257 $2,136 $2,989 Add: FTE increment - Fee revenue 8 8 11 ------------------------------------------------------------------------- Total fee and other revenue (FTE) 2,265 2,144 3,000 Add: Investment write-downs 256 295 152 ------------------------------------------------------------------------- Fee and other revenue excluding investment write-downs- Non-GAAP 2,521 2,439 3,152 Net interest revenue - GAAP 700 775 388 Add: FTE increment - Net interest revenue 4 4 4 ------------------------------------------------------------------------- Net interest revenue (FTE) 704 779 392 Add: SILO charge - - 377 ------------------------------------------------------------------------- Net interest revenue (FTE) excluding SILO charge - Non-GAAP 704 779 769 ------------------------------------------------------------------------- Total revenue (FTE) $2,969 $2,923 $3,392 Total revenue (FTE) excluding investment write-downs and SILO charge - Non-GAAP $3,225 $3,218 $3,921 Fee and other revenue as a percentage of total revenue (FTE) 76% 73% 88% Fee and other revenue as a percentage of total revenue excluding investment write-downs and SILO charge - Non-GAAP 78% 76% 80% ------------------------------------------------------------------------- ---------------------------------------------------------------------- Reconciliation of fee and other revenue as percent of total revenue (FTE) (dollars in millions) YTD09 YTD08 ---------------------------------------------------------------------- Fee and other revenue - GAAP $4,393 $5,971 Add: FTE increment - Fee revenue 16 20 ---------------------------------------------------------------------- Total fee and other revenue (FTE) 4,409 5,991 Add: Investment write-downs 551 225 ---------------------------------------------------------------------- Fee and other revenue excluding investment write-downs- Non-GAAP 4,960 6,216 Net interest revenue - GAAP 1,475 1,131 Add: FTE increment - Net interest revenue 8 10 ---------------------------------------------------------------------- Net interest revenue (FTE) 1,483 1,141 Add: SILO charge - 377 ---------------------------------------------------------------------- Net interest revenue (FTE) excluding SILO charge - Non-GAAP 1,483 1,518 ---------------------------------------------------------------------- Total revenue (FTE) $5,892 $7,132 Total revenue (FTE) excluding investment write-downs and SILO charge - Non-GAAP $6,443 $7,734 Fee and other revenue as a percentage of total revenue (FTE) 75% 84% Fee and other revenue as a percentage of total revenue excluding investment write-downs and SILO charge - Non-GAAP 77% 80% ---------------------------------------------------------------------- ------------------------------------------------------------------------- Reconciliation of income from continuing operations before income taxes - pre-tax operating margin (FTE) (dollars in millions) 2Q09 1Q09 2Q08 ------------------------------------------------------------------------- Income from continuing operations before income taxes - GAAP $513 $572 $621 FTE increment 12 12 15 ------------------------------------------------------------------------- Income from continuing operations before income taxes (FTE) 525 584 636 FDIC special assessment 61 - - M&I expenses 59 68 149 Investment write-downs 256 295 152 SILO charge - - 377 Intangible amortization 108 107 123 ------------------------------------------------------------------------- Income from continuing operations before income taxes (FTE) excluding FDIC special assessment, M&I expenses, investment write-downs, SILO charge and intangible amortization - Non-GAAP $1,009 $1,054 $1,437 Fee and other revenue - GAAP $2,257 $2,136 $2,989 Add: FTE increment - Fee revenue 8 8 11 Net interest revenue - GAAP 700 775 388 Add: FTE increment - Net interest revenue 4 4 4 ------------------------------------------------------------------------- Total revenue (FTE) - Non-GAAP 2,969 2,923 3,392 Add: Investment write-downs 256 295 152 SILO charge - - 377 ------------------------------------------------------------------------- Total revenue (FTE) excluding investment write-downs and SILO charge - Non-GAAP $3,225 $3,218 $3,921 Pre-tax operating margin (FTE) (a) 18% 20% 19% Pre-tax operating margin (FTE) excluding FDIC special assessment, M&I expenses, investment write-downs, SILO charge, and intangible amortization - Non-GAAP (a) 31% 33% 37% ------------------------------------------------------------------------- (a) Income before taxes divided by total revenue (FTE). ---------------------------------------------------------------------- Reconciliation of income from continuing operations before income taxes - pre-tax operating margin (FTE) (dollars in millions) YTD09 YTD08 ---------------------------------------------------------------------- Income from continuing operations before income taxes - GAAP $1,085 $1,730 FTE increment 24 30 ---------------------------------------------------------------------- Income from continuing operations before income taxes (FTE) 1,109 1,760 FDIC special assessment 61 - M&I expenses 127 275 Investment write-downs 551 225 SILO charge - 377 Intangible amortization 215 242 ---------------------------------------------------------------------- Income from continuing operations before income taxes (FTE) excluding FDIC special assessment, M&I expenses, investment write-downs, SILO charge and intangible amortization - Non-GAAP $2,063 $2,879 Fee and other revenue - GAAP $4,393 $5,971 Add: FTE increment - Fee revenue 16 20 Net interest revenue - GAAP 1,475 1,131 Add: FTE increment - Net interest revenue 8 10 ---------------------------------------------------------------------- Total revenue (FTE) - Non-GAAP 5,892 7,132 Add: Investment write-downs 551 225 SILO charge - 377 ---------------------------------------------------------------------- Total revenue (FTE) excluding investment write-downs and SILO charge - Non-GAAP $6,443 $7,734 Pre-tax operating margin (FTE) (a) 19% 25% Pre-tax operating margin (FTE) excluding FDIC special assessment, M&I expenses, investment write-downs, SILO charge and intangible amortization - Non-GAAP (a) 32% 37% ---------------------------------------------------------------------- (a) Income before taxes divided by total revenue (FTE). ------------------------------------------------------------------------- Return on common equity and tangible common equity - continuing operations (dollars in millions) 2Q09 1Q09 2Q08 ------------------------------------------------------------------------- Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP $176 $322 $309 Discontinued operations income (loss), net of tax (91) (41) 6 ------------------------------------------------------------------------- Net income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation 267 363 303 Add: Intangible amortization 67 66 75 ------------------------------------------------------------------------- Net income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation excluding intangible amortization - Non-GAAP 334 429 378 Add: FDIC special assessment 36 - - M&I expenses 36 41 89 Investment write-downs 161 183 91 Benefit of tax settlements (134) - - SILO charge - - 380 ------------------------------------------------------------------------- Net income from continuing operations excluding FDIC special assessment, M&I expenses, investment write-downs, benefit of tax settlements, SILO charge and intangible amortization- Non-GAAP $433 $653 $938 Average common shareholders' equity $26,566 $25,189 $28,507 Less: Average goodwill 15,989 15,837 16,758 Average intangible assets 5,673 5,752 6,042 Add: Deferred tax liability - tax deductible goodwill 643 624 548 Deferred tax liability - non-tax deductible intangible assets 1,743 1,808 1,959 ------------------------------------------------------------------------- Average tangible common shareholders' equity - Non-GAAP $7,290 $6,032 $8,214 Return on common equity - GAAP (a) 4.0% 5.8% 4.3% Return on common equity excluding FDIC special assessment, M&I expenses, investment write-downs, benefit of tax settlements, SILO charge and intangible amortization - Non-GAAP (a) 6.5% 10.5% 13.2% Return on tangible common equity - Non-GAAP (a) 18.4% 28.8% 18.5% Return on tangible common equity excluding FDIC special assessment, M&I expenses, investment write-downs, benefit of tax settlements and SILO charge - Non-GAAP (a) 23.8% 43.9% 45.9% ------------------------------------------------------------------------- (a) Annualized. ---------------------------------------------------------------------- Return on common equity and tangible common equity - continuing operations (dollars in millions) YTD09 YTD08 ---------------------------------------------------------------------- Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP $498 $1,055 Discontinued operations income (loss), net of tax (132) 10 ---------------------------------------------------------------------- Net income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation 630 1,045 Add: Intangible amortization 133 149 ---------------------------------------------------------------------- Net income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation excluding intangible amortization - Non-GAAP 763 1,194 Add: FDIC special assessment 36 - M&I expenses 77 164 Investment write-downs 344 135 Benefit of tax settlements (134) - SILO charge - 380 ---------------------------------------------------------------------- Net income from continuing operations excluding FDIC special assessment, M&I expenses, investment write-downs, benefit of tax settlements, SILO charge and intangible amortization- Non-GAAP $1,086 $1,873 Average common shareholders' equity $25,881 $29,029 Less: Average goodwill 15,913 16,670 Average intangible assets 5,713 6,134 Add: Deferred tax liability - tax deductible goodwill 643 548 Deferred tax liability - non-tax deductible intangible assets 1,743 1,959 ---------------------------------------------------------------------- Average tangible common shareholders' equity - Non-GAAP $6,641 $8,732 Return on common equity- GAAP (a) 4.9% 7.2% Return on common equity excluding FDIC special assessment, M&I expenses, investment write-downs, benefit of tax settlements, SILO charge and intangible amortization- Non-GAAP (a) 8.5% 13.0% Return on tangible common equity - Non-GAAP (a) 23.2% 27.5% Return on tangible common equity excluding FDIC special assessment, M&I expenses, investment write-downs, benefit of tax settlements and SILO charge - Non-GAAP (a) 33.0% 43.1% ---------------------------------------------------------------------- (a) Annualized. ------------------------------------------------------------------------- Equity to assets and book value per common share (dollars in millions, unless June 30, March 31, June 30, otherwise noted) 2009 2009 2008 ------------------------------------------------------------------------- Common shareholders' equity at period end - GAAP $27,276 $25,415 $28,569 Less: Goodwill 16,040 15,805 16,565 Intangible assets 5,677 5,717 6,273 Add: Deferred tax liability - tax deductible goodwill 643 624 548 Deferred tax liability - non-tax deductible intangible assets 1,743 1,808 1,959 ------------------------------------------------------------------------- Tangible common shareholders' equity at period end - Non-GAAP $7,945 $6,325 $8,238 Total assets at period end - GAAP $203,012 $203,478 $201,225 Less: Goodwill 16,040 15,805 16,565 Intangible assets 5,677 5,717 6,273 Cash on deposit with the Federal Reserve and other central banks (a) 16,458 29,679 - ------------------------------------------------------------------------- Tangible total assets at period end - Non-GAAP $164,837 $152,277 $178,387 Common shareholders' equity to assets - GAAP 13.4% 12.5% 14.2% Tangible common shareholders' equity to tangible assets - Non-GAAP 4.8% 4.2% 4.6% Period end common shares outstanding (in thousands) 1,202,828 1,153,450 1,146,070 Book value per common share $22.68 $22.03 $24.93 Tangible book value per common share - Non-GAAP $6.60 $5.48 $7.19 ------------------------------------------------------------------------- (a) Assigned a zero percent risk weighting by the regulators. ------------------------------------------------------------------------- Calculation of the Tier 1 common equity to risk-weighted assets ratio (a) (dollars in millions) 2Q09 1Q09 2Q08 ------------------------------------------------------------------------- Total Tier 1 capital $15,044 $16,242 $11,354 Less: Series B preferred stock - 2,795 - Trust preferred securities 1,691 1,648 1,733 ------------------------------------------------------------------------- Total Tier 1 common equity $13,353 $11,799 $9,621 Total risk-weighted assets $120,498 $117,412 $121,758 Tier 1 common equity to risk-weighted assets ratio 11.1% 10.0% 7.9% ------------------------------------------------------------------------- (a) On a regulatory basis.
Cautionary Statement
The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which may be expressed in a variety of ways, including the use of future or present tense language, and relate to, among other things, the Company's proposed repurchase of the warrant issued to the U.S. Treasury, the state of the economy, including the residential housing market, our strategic focus with regard to Mellon United National Bank and the Company's ability to manage its business through the global recession. These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation (the "Company") 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 the Company's control). Factors that could cause the Company's results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2008 and the Company's other filings with the Securities and Exchange Commission. All forward-looking statements in this earnings release speak only as of July 22, 2009 and the Company 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.