BNY Mellon Reports Second Quarter 2020 Earnings Of $901 Million Or $1.01 Per Common Share

NEW YORK, July 15, 2020 /PRNewswire/ --

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported:

KEY DRIVERS (comparisons are 2Q20 vs. 2Q19, unless otherwise stated)

• Total revenue increased 2% primarily reflecting:
• Fee revenue increased 2% primarily reflecting higher fees in Pershing and Asset Servicing, partially offset by money market fee waivers, lower investment management fees and the unfavorable impact of a stronger U.S. dollar.
• Net interest revenue decreased 3% primarily reflecting lower interest rates on interest-earning assets, partially offset by the benefit of lower deposit and funding rates and higher deposits, securities portfolio and loans.
• Provision for credit losses of $143 million primarily reflecting increased downgrades and the continuation of the challenging macroeconomic outlook.
• Noninterest expense increased 1% primarily reflecting the continued investments in technology and higher staff and pension expenses, partially offset by lower business development (travel and marketing) expense and the favorable impact of a stronger U.S. dollar.
• Effective tax rate of 18.3%.

Assets under custody and/or administration ("AUC/A") and Assets under management ("AUM")

• AUC/A of $37.3 trillion, increased 5%, primarily reflecting higher client inflows, market values and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar.
• AUM of $2.0 trillion, increased 6%, primarily reflecting higher market values and net inflows, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).

Capital and liquidity

• Open market share repurchases temporarily suspended for 2Q20 and 3Q20.
• Paid $278 million in dividends to common shareholders.
• Return on common equity ("ROE") of 9%; Return on tangible common equity ("ROTCE") of 19% (a).
• Common Equity Tier 1 ("CET1") ratio ? 12.6%.
• Tier 1 leverage ratio ? 6.2%.
• Supplementary leverage ratio ("SLR") ? 8.2% (b).
• Average liquidity coverage ratio ("LCR") ? 112%.
• Total Loss Absorbing Capacity ("TLAC") ratios exceed minimum requirements.

KEY DRIVERS

• The drivers of the total revenue variances by line of business are indicated below.
• Asset Servicing - The year-over-year increase reflects higher foreign exchange and other trading revenue, partially offset by lower net interest revenue. The sequential decrease reflects lower foreign exchange and other trading revenue and net interest revenue. Total revenue in 2Q20 also benefited from higher volumes from existing clients and a one-time fee.
• Pershing - The year-over-year increase primarily reflects higher money market fund balances and clearing volumes, partially offset by the impact of rate-driven money market fee waivers. The sequential decrease primarily reflects the impact of rate-driven money market fee waivers, a one-time fee recorded in 1Q20 and lower clearing volumes, partially offset by higher money market fund balances.
• Issuer Services - The year-over-year decrease reflects lower Depositary Receipts and Corporate Trust fees. The sequential increase primarily reflects higher Depositary Receipts fees.
• Treasury Services - The year-over-year increase primarily reflects higher net interest revenue driven by deposit growth and higher fees.
• Clearance and Collateral Management - The year-over-year increase primarily reflects higher net interest revenue and growth in collateral management and clearance volumes, mostly from non-U.S. clients. The sequential decrease primarily reflects lower collateral management fees.
• Noninterest expense increased 1% year-over-year primarily driven by continued investments in technology, partially offset by lower business development and staff expenses. Sequentially, noninterest expense increased slightly reflecting continued investments in technology, offset by lower staff expense.

KEY DRIVERS

• The drivers of the total revenue variances by line of business are indicated below.
• Investment Management (formerly Asset Management) - The year-over-year decrease primarily reflects the unfavorable change in the mix of AUM since 2Q19 and the impact of money market fee waivers, partially offset by equity investment gains (net of hedges), including seed capital. The sequential increase primarily reflects equity investment gains (net of hedges), including seed capital, partially offset by the timing of performance fees and the impact of money market fee waivers.
• Wealth Management - Both decreases primarily reflect lower net interest revenue and a shift within portfolios to lower fee asset classes.
• Noninterest expense increased slightly year-over-year primarily reflecting higher continued investments in technology. The sequential decrease primarily reflects lower staff and other expenses.

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

KEY DRIVERS

• Fee revenue, net securities gains and net interest expense include corporate treasury and other investment activity, including hedging activity which offsets between fee revenue and net interest expense. Fee revenue increased year-over-year and sequentially primarily reflecting higher equity investment income, partially offset by sequentially lower foreign currency translation gains. Net interest expense decreased year-over-year and sequentially primarily reflecting corporate treasury activity.
• Noninterest expense increased year-over-year and sequentially primarily reflecting higher staff expense.

• CET1 capital totaled $20.0 billion at June 30, 2020, an increase of $1.57 billion compared with March 31, 2020. The increase primarily reflects capital generated through earnings and unrealized gains on securities available-for-sale, partially offset by capital deployed through dividend payments.
• The SLR reflects the application of a new rule effective April 1, 2020 to exclude certain central bank placements as well as the temporary exclusion of U.S. Treasury securities from the leverage exposure used in the SLR calculation. The temporary exclusion of U.S. Treasury securities from the SLR's leverage exposure increased our SLR by 40 basis points.

Net interest revenue decreased year-over-year, primarily reflecting lower interest rates on interest-earning assets, partially offset by the benefit of lower deposit and funding rates and higher deposits, securities portfolio and loans.

Sequentially, the decrease was primarily driven by lower interest rates on interest-earning assets.  This was partially offset by the benefit of lower deposit and funding rates, higher securities portfolio and the impact of hedging activities (primarily offset in foreign exchange and other trading revenue).

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, which exclude goodwill and intangible assets, net of deferred tax liabilities.  We believe that the return on tangible common equity is additional useful information for investors because it presents a measure of those assets that can generate income, and the tangible book value per common share is additional useful information because it presents the level of tangible assets in relation to shares of common stock outstanding.

Net interest revenue, on a fully taxable equivalent ("FTE") basis ? Non-GAAP and net interest margin (FTE) ? Non-GAAP and other FTE measures include the tax equivalent adjustments on tax-exempt income which allows for the comparison 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.

BNY Mellon has also included the adjusted pre-tax operating margin ? Non-GAAP, which is the pre-tax operating margin for the Investment and Wealth Management business net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds.  We believe that this measure is useful when evaluating the performance of the Investment and Wealth Management business relative to industry competitors.

For the reconciliations of these Non-GAAP measures, see "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" in the Financial Supplement available at www.bnymellon.com.

CAUTIONARY STATEMENT

A number of statements (i) in this Earnings Release, (ii) in our Financial Supplement, (iii) in our presentations and (iv) 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 statements about our capital plans, strategic priorities, financial goals, organic growth, performance, organizational quality and efficiency, investments, including in technology and product development, resiliency, capabilities, revenue, net interest revenue, fees, expenses, cost discipline, sustainable growth, company management, deposits, interest rates and yield curves, securities portfolio, taxes, business opportunities, divestments, volatility, preliminary business metrics and regulatory capital ratios and statements regarding our aspirations, as well as our overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities, focus and initiatives, including the potential effects of the coronavirus pandemic on any of the foregoing.  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 may signify forward-looking statements.  These statements and other forward-looking statements contained in other public disclosures of BNY Mellon which make reference to the cautionary factors described in this Earnings Release are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control).  Actual results may differ materially from those expressed or implied as a result of a number of factors, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, the Annual Report on Form 10-K for the year ended Dec. 31, 2019 and BNY Mellon's other filings with the Securities and Exchange Commission.  Statements about the effects of the current and near-term market and macroeconomic outlook on BNY Mellon, including on its business, operations, financial performance and prospects, may constitute forward-looking statements, and are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond BNY Mellon's control), including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on us, our clients, customers and third parties.  Preliminary business metrics and regulatory capital ratios are subject to change, possibly materially, as BNY Mellon completes its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.  All forward-looking statements in this Earnings Release speak only as of July 15, 2020, 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 and wealth management and investment services in 35 countries.  As of June 30, 2020, BNY Mellon had $37.3 trillion in assets under custody and/or administration, and $2.0 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

Todd Gibbons, Chief Executive Officer, and Mike Santomassimo, Chief Financial Officer, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on July 15, 2020.  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: 807070, or by logging onto www.bnymellon.com/investorrelations.  Earnings materials will be available at www.bnymellon.com/investorrelations beginning at approximately 6:30 a.m. EDT on July 15, 2020.  Replays of the conference call and audio webcast will be available beginning July 15, 2020 at approximately 2:00 p.m. EDT through Aug. 14, 2020 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 5375940.  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