BNY Mellon Reports Fourth Quarter 2018 Earnings Of $832 Million Or $0.84 Per Common Share

Revenue up 7%;
down 1% excluding
notable items (a)

EPS down 22%;

up 9% excluding
notable items (a)

Notable Items

CEO Commentary

4Q18 results include $(155) million, or $(0.16) per share, for severance, real estate and litigation, offset by adjustments to estimates for U.S. tax legislation and other changes.

"While our reported earnings per share declined 22 percent, our
results in this quarter and the fourth quarter of 2017 included a
series of notable items that make comparisons difficult. 
Excluding these items, earnings per share grew by 9 percent,"
Charlie Scharf, chairman and chief executive officer, said.

"The underlying performance of our businesses was mixed as our
revenue declined, but we continued to maintain strong expense
discipline.  In addition, we benefited from a lower tax rate and
our ongoing ability to return capital to shareholders through
buybacks," Mr. Scharf added.

"Revenue growth in several of our Investment Services
businesses was more than offset by lower revenue in our
Investment Management business.  Our expenses were essentially
flat despite a sustained significant increase in technology and
infrastructure investments as we remain focused on driving
efficiency and maintaining our cost discipline," Mr. Scharf
continued.

"We are continuing to return a significant amount of the capital
we generate to shareholders.  During 2018, we returned $4.3
billion, which includes the incremental $830 million that we
announced in December.  This represents a payout of just over
100 percent of earnings in 2018," Mr. Scharf also noted.

"As we look forward, we are cautious regarding how the
economic and market environment will impact our business in
2019.  We will remain keenly focused on managing our expense
base.  Our ongoing drive toward efficiency will allow us to
continue to increase our investment in technology and
infrastructure without meaningfully impacting the total cost
base," Mr. Scharf concluded.

4Q17 results include $181 million, or $0.17 per share, for a net benefit of U.S. tax legislation, offset by severance, litigation and other charges.

Fourth Quarter Results

Total revenue of $4.0 billion, increased 7%; decreased 1% excluding notable items (a)

     ?  Fee revenue increased 9%; decreased 1% excluding 
        notable items (a)

     ?  Net interest revenue increased 4%

Total noninterest expense of $3.0 billion, decreased 1%

     ?  Continued investments in technology more than offset
        by lower other expenses

Investment Services

     ?  Total revenue increased 3%

     ?  Income before taxes increased 7%

        ?  Notable items increased income before taxes ~ 9%

     ?  AUC/A of $33.1 trillion, decreased 1%

Investment Management

     ?  Total revenue decreased 8%

     ?  Income before taxes decreased 11%

     ?  AUM of $1.7 trillion, decreased 9%

Repurchased 28.9 million common shares for $1.37 billion, including $830 million of incremental buybacks, and paid dividends of $278 million to common shareholders

Investor Relations: Scott Freidenrich  (212) 815-4008

Media Relations: Jennifer Hendricks Sullivan  (212) 635-1374

(a)  For information on this Non-GAAP measure, see "Consolidated Financial Highlights" beginning on page 2 and "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 12.

Note:  Above comparisons are 4Q18 vs. 4Q17.

CONSOLIDATED FINANCIAL HIGHLIGHTS

4Q18

4Q17

4Q18 vs. 4Q17

(in millions, except per share amounts)

Results -
GAAP

Notable
items (a)

Results -
Non-GAAP

Results -
GAAP

Notable
items (b)

Results -
Non-GAAP

GAAP

Non-
GAAP

Fee revenue

$

3,146

$

?

$

3,146

$

2,886

$

(279)

$

3,165

9

%

(1)

%

Net securities (losses) gains

?

?

?

(26)

(37)

11

N/M

N/M

Total fee and other revenue

3,146

?

3,146

2,860

(316)

3,176

10

(1)

(Loss) income from consolidated
  investment management funds

(24)

?

(24)

17

?

17

N/M

N/M

885

?

885

851

(4)

855

4

4

Total revenue

4,007

?

4,007

3,728

(320)

4,048

7

(1)

Provision for credit losses

?

?

?

(6)

?

(6)

N/M

N/M

Noninterest expense

2,987

269

2,718

3,006

282

2,724

(1)

?

1,020

(269)

1,289

728

(602)

1,330

40

(3)

Provision (benefit) for income taxes

150

(114)

264

(453)

(783)

330

N/M

(20)

Net income (loss)

$

870

$

(155)

$

1,025

$

1,181

$

181

$

1,000

(26)

%

3

%

$

832

$

(155)

$

987

$

1,126

$

181

$

945

(26)

%

4

%

Operating leverage (c)

811

bps

(79)

 bps

Diluted earnings per common share

$

0.84

$

(0.16)

$

0.99

(d)

$

1.08

$

0.17

$

0.91

(22)

%

9

%

Average common shares and equivalents
  outstanding - diluted

988,650

1,030,404

Pre-tax operating margin

25

%

32

%

20

%

33

%

Note:  Throughout this document, sequential growth rates are unannualized.

FULL-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS

2018

2017

2018 vs. 2017

(in millions, except per share amounts)

Results -

GAAP

Notable
items (a)

Results -
Non-GAAP

Results -

GAAP

Notable

items (b)

Results -
Non-GAAP

GAAP

Non-
GAAP

Fee revenue

$

12,842

$

(13)

$

12,855

$

12,162

$

(279)

$

12,441

6

%

3

%

Net securities (losses) gains

(48)

?

(48)

3

(37)

40

N/M

N/M

Total fee and other revenue

12,794

(13)

12,807

12,165

(316)

12,481

5

3

(Loss) income from consolidated
  investment management funds

(13)

?

(13)

70

?

70

N/M

N/M

Net interest revenue

3,611

?

3,611

3,308

(4)

3,312

9

9

Total revenue

16,392

(13)

16,405

15,543

(320)

15,863

5

3

Provision for credit losses

(11)

?

(11)

(24)

?

(24)

N/M

N/M

Noninterest expense

11,211

343

10,868

10,957

309

10,648

2

2

Income before income taxes

5,192

(356)

5,548

4,610

(629)

5,239

13

6

Provision (benefit) for income taxes

938

(188)

1,126

496

(789)

1,285

N/M

(12)

Net income (loss)

$

4,254

$

(168)

$

4,422

$

4,114

$

160

$

3,954

3

%

12

%

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

$

4,097

$

(168)

$

4,265

$

3,915

$

160

$

3,755

5

%

14

%

Operating leverage (c)

314

bps

135

bps

Diluted earnings per common share

$

4.04

$

(0.17)

$

4.21

$

3.72

$

0.15

$

3.57

9

%

18

%

Average common shares and equivalents
  outstanding - diluted

1,007,141

1,040,290

Pre-tax operating margin

32

%

34

%

30

%

33

%

(a)   See "Supplemental information ? Explanation of GAAP and Non-GAAP financial measures" beginning on page 12 for additional information.
Note:  Throughout this document, sequential growth rates are unannualized.

IMPACT OF NOTABLE ITEMS ON BUSINESS SEGMENTS

Notable items by business 
 segment

(dollars in millions)

4Q18

4Q17

Investment

Management

Investment

Services

Other

Total

Investment

Management

Investment

Services

Other

Total

Fee and other revenue

$

?

$

?

$

?

$

?

$

?

$

?

$

(316)

$

(316)

Net interest revenue

?

?

?

?

?

?

(4)

(4)

Total revenue

?

?

?

?

?

?

(320)

(320)

Total noninterest expense

28

110

131

269

30

199

(a)

53

(a)

282

Income before taxes

$

(28)

$

(110)

$

(131)

$

(269)

$

(30)

$

(199)

$

(373)

$

(602)

(a)   The impact on noninterest expense from the notable items reported in 4Q17 was adjusted in 4Q18 for Investment Services and Other with no impact to the reported segment results or in total.

INVESTMENT SERVICES BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)

4Q18 vs.

4Q18

3Q18

4Q17

3Q18

4Q17

Total revenue by line of business:

Asset Servicing

$

1,435

$

1,458

$

1,459

(2)

%

(2)

%

Pershing

558

558

569

?

(2)

Issuer Services

441

453

352

(3)

25

Treasury Services

328

324

322

1

2

Clearance and Collateral Management

278

264

252

5

10

Total revenue by line of business

3,040

3,057

2,954

(1)

3

Provision for credit losses

6

1

(2)

N/M

N/M

Noninterest expense

2,112

2,030

2,097

4

1

Income before taxes

$

922

$

1,026

$

859

(10)

%

7

%

Pre-tax operating margin

30

%

34

%

29

%

Foreign exchange and other trading revenue

$

163

$

161

$

168

1

%

(3)

%

Securities lending revenue

$

43

$

52

$

45

(17)

%

(4)

%

Metrics:

Average loans

$

35,540

$

35,044

$

38,845

1

%

(9)

%

Average deposits

$

203,416

$

192,741

$

204,680

6

%

(1)

%

AUC/A at period end (in trillions) (current period is preliminary) (a)

$

33.1

$

34.5

$

33.3

(4)

%

(1)

%

Market value of securities on loan at period end (in billions) (b)

$

373

$

415

$

408

(10)

%

(9)

%

Pershing

Average active clearing accounts (U.S. platform) (in thousands)

6,125

6,108

6,126

?

%

?

%

Average long-term mutual fund assets (U.S. platform)

$

489,491

$

527,336

$

508,873

(7)

%

(4)

%

Average investor margin loans (U.S. platform)

$

10,921

$

10,696

$

9,822

2

%

11

%

Clearance and Collateral Management

Average tri-party collateral management balances (in billions)

$

3,181

$

2,995

$

2,606

6

%

22

%

INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)

4Q18 vs.

4Q18

3Q18

4Q17

3Q18

4Q17

Total revenue by line of business:

Asset Management

$

660

$

704

$

738

(6)

%

(11)

%

Wealth Management

303

311

310

(3)

(2)

Total revenue by line of business

963

1,015

1,048

(5)

(8)

Provision for credit losses

1

(2)

1

N/M

N/M

Noninterest expense

715

701

771

2

(7)

Income before taxes

$

247

$

316

$

276

(22)

%

(11)

%

Pre-tax operating margin

26

%

31

%

26

%

Adjusted pre-tax operating margin ? Non-GAAP (a)

29

%

35

%

29

%

Metrics:

Average loans

$

16,485

$

16,763

$

16,813

(2)

%

(2)

%

Average deposits

$

14,893

$

14,634

$

11,633

2

%

28

%

Wealth Management client assets (in billions) (current period is preliminary) (b)

$

239

$

261

$

251

(8)

%

(5)

%

Changes in AUM (in billions) (current period is preliminary) (c)

Beginning balance of AUM

$

1,828

$

1,805

$

1,824

Net (outflows) inflows:

Long-term strategies:

Equity

(8)

(2)

(6)

Fixed income

(1)

2

(2)

Liability-driven investments

14

16

23

Multi-asset and alternative investments

(2)

2

2

Total long-term active strategies inflows

3

18

17

Index

(11)

(3)

(1)

(8)

15

16

Short term strategies:

Cash

(10)

?

(4)

Total net (outflows) inflows

(18)

15

12

Net market impact

(69)

18

47

Net currency impact

(19)

(10)

10

Ending balance of AUM

$

1,722

$

1,828

$

1,893

(6)

%

(9)

%

OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, business exits and other corporate revenue and expense items.

(in millions)

4Q18

3Q18

4Q17

Fee revenue (loss)

$

29

$

7

$

(221)

Net securities (losses)

?

?

(26)

Total fee and other revenue (loss)

29

7

(247)

Net interest (expense)

(15)

(13)

(36)

Total revenue (loss)

14

(6)

(283)

Provision for credit losses

(7)

(2)

(5)

Noninterest expense

160

6

135

(Loss) before taxes

$

(139)

$

(10)

$

(413)

CAPITAL AND LIQUIDITY
Our consolidated capital and liquidity ratios are shown in the following table.

Capital and liquidity ratios

Dec. 31,
2018

Sept. 30,
2018

Dec. 31,
2017

Consolidated regulatory capital ratios: (a)(b)

CET1 ratio

10.6

%

11.2

%

10.3

%

Tier 1 capital ratio

12.7

%

13.3

%

12.3

%

Total capital ratio

13.5

%

14.1

%

13.0

%

Tier 1 leverage ratio

6.6

%

7.0

%

6.4

%

SLR

6.0

%

6.4

%

5.9

%

BNY Mellon shareholders' equity to total assets ratio

11.2

%

11.9

%

11.1

%

BNY Mellon common shareholders' equity to total assets ratio

10.2

%

10.9

%

10.1

%

Average LCR

118

%

121

%

118

%

Book value per common share (c)

$

38.63

$

38.45

$

37.21

Tangible book value per common share ? Non-GAAP (c)

$

19.04

$

19.35

$

18.24

Cash dividends per common share

$

0.28

$

0.28

$

0.24

Common dividend payout ratio

33

%

26

%

22

%

Closing stock price per common share

$

47.07

$

50.99

$

53.86

Market capitalization (in millions)

$

45,207

$

50,418

$

54,584

Common shares outstanding (in thousands)

960,426

988,777

1,013,442

NET INTEREST REVENUE

Net interest revenue

4Q18 vs.

(dollars in millions; not meaningful - N/M)

4Q18

3Q18

4Q17

3Q18

4Q17

Net interest revenue

$

885

$

891

$

851

(1)

%

4

%

Add: Tax equivalent adjustment

4

5

11

N/M

N/M

Net interest revenue, on a fully taxable equivalent ("FTE")

basis ? Non-GAAP (a)

$

889

$

896

$

862

(1)

%

3

%

Net interest margin

1.24

%

1.27

%

1.14

%

(3)

 bps

10

bps

Net interest margin (FTE) ? Non-GAAP (a)

1.24

%

1.28

%

1.16

%

(4)

 bps

8

bps

Selected average balances:

Cash/interbank investments (b)

$

107,425

$

102,645

$

117,446

5

%

(9)

%

Trading securities

5,543

4,261

2,723

30

104

Securities

118,904

118,505

120,225

?

(1)

Loans

53,834

53,807

56,772

?

(5)

Interest-earning assets

$

285,706

$

279,218

$

297,166

2

%

(4)

%

Interest-bearing deposits

$

161,663

$

148,636

$

147,763

9

%

9

%

Federal funds purchased and securities sold under repurchase agreements (b)

10,980

14,199

20,211

(23)

(46)

Long-term debt

28,201

28,074

28,245

?

?

Other interest-bearing liabilities

20,313

23,251

26,086

(13)

(22)

Interest-bearing liabilities

$

221,157

$

214,160

$

222,305

3

%

(1)

%

Noninterest-bearing deposits

$

58,972

$

60,677

$

69,111

(3)

%

(15)

%

Selected average yields/rates: (c)

Cash/interbank investments (b)

2.36

%

1.79

%

0.98

%

Trading securities

2.77

3.05

2.02

Securities

2.31

2.25

1.85

Loans

3.69

3.50

2.60

Interest-earning assets

2.60

2.33

1.65

Interest-bearing deposits

0.86

%

0.63

%

0.17

%

Federal funds purchased and securities sold under repurchase agreements (b)

10.95

5.33

1.83

Long-term debt

3.29

3.17

2.29

Other interest-bearing liabilities

1.76

1.53

0.71

Interest-bearing liabilities

1.75

1.37

0.65

Average cash/interbank investments as a percentage of average interest-earning
  assets

38

%

37

%

40

%

Average noninterest-bearing deposits as a percentage of average interest-earning
  assets

21

%

22

%

23

%

NONINTEREST EXPENSE

Noninterest expense

4Q18 vs.

(dollars in millions)

4Q18

3Q18

4Q17

3Q18

4Q17

Staff

$

1,602

$

1,478

$

1,628

8

%

(2)

%

Professional, legal and other purchased services

383

332

339

15

13

Software and equipment

300

262

297

15

1

Net occupancy

196

139

153

41

28

Sub-custodian and clearing

115

106

102

8

13

Distribution and servicing

95

99

106

(4)

(10)

Business development

64

51

66

25

(3)

Bank assessment charges

22

49

53

(55)

(58)

Amortization of intangible assets

35

48

52

(27)

(33)

Other

175

174

210

1

(17)

Total noninterest expense

$

2,987

$

2,738

$

3,006

9

%

(1)

%

THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement

(in millions)

Quarter ended

Year-to-date

Dec. 31,
2018

Sept. 30,
2018

Dec. 31,
2017

Dec. 31,
2018

Dec. 31,
2017

Fee and other revenue

Investment services fees:

Asset servicing

$

1,126

$

1,157

$

1,130

$

4,608

$

4,383

Clearing services

389

383

400

1,578

1,553

Issuer services

286

287

197

1,099

977

Treasury services

139

137

137

554

557

Total investment services fees

1,940

1,964

1,864

7,839

7,470

Investment management and performance fees

893

922

962

3,685

3,584

Foreign exchange and other trading revenue

181

155

166

732

668

Financing-related fees

50

52

54

207

216

Distribution and servicing

35

34

38

139

160

Investment and other income (loss)

47

41

(198)

240

64

Total fee revenue

3,146

3,168

2,886

12,842

12,162

Net securities (losses) gains

?

?

(26)

(48)

3

Total fee and other revenue

3,146

3,168

2,860

12,794

12,165

Operations of consolidated investment management funds

Investment (loss) income

(24)

10

17

(12)

74

Interest of investment management fund note holders

?

?

?

1

4

(Loss) income from consolidated investment management funds

(24)

10

17

(13)

70

Net interest revenue

Interest revenue

1,864

1,634

1,219

6,432

4,382

Interest expense

979

743

368

2,821

1,074

Net interest revenue

885

891

851

3,611

3,308

Total revenue

4,007

4,069

3,728