Attached files
| file | filename |
|---|---|
| EX-99.2 - 1Q 2011 FINANCIAL TRENDS - Bank of New York Mellon Corp | dex992.htm |
| 8-K - FORM 8-K - Bank of New York Mellon Corp | d8k.htm |
Exhibit 99.1
Quarterly Earnings Review
April 19, 2011
Table of Contents
| Organization of Our Businesses |
2 | |||
| First Quarter 2011 Financial Highlights |
3 | |||
| Financial Summary/Key Metrics |
4 | |||
| Business Metrics |
5 | |||
| Fee and Other Revenue |
7 | |||
| Foreign Exchange and Other Trading Revenue |
8 | |||
| Net Interest Revenue |
8 | |||
| Noninterest Expense |
9 | |||
| Investment Securities Portfolio |
10 | |||
| Capital |
10 | |||
| Nonperforming Assets |
11 | |||
| Allowance for Credit Losses, Provision and Net Charge-offs |
11 | |||
| Review of Businesses |
||||
| • Investment Management |
12 | |||
| • Investment Services |
14 | |||
| • Other segment |
16 | |||
| Supplemental Information – Explanation of Non-GAAP Financial Measures |
17 | |||
| Cautionary Statement |
20 | |||
BNY Mellon 1Q11 Quarterly Earnings Review
ORGANIZATION OF OUR BUSINESSES
In the first quarter of 2011, BNY Mellon realigned its internal reporting structure and business presentation to focus on its two principal businesses, Investment Management and Investment Services. The realignment reflects management’s current approach to assessing performance and decisions regarding resource allocations. Investment Management includes the former Asset Management and Wealth Management businesses. Investment Services includes the former Asset Servicing, Issuer Services and Clearing Services businesses as well as the Cash Management business previously included in the Treasury Services business. The credit-related activities previously included in the Treasury Services business, are now included in the Other segment. Accordingly, the income statement has been changed to reflect this realignment. The following are the changes to the income statement:
| • | Investment management and performance fees consist of the former asset and wealth management fee revenue; and |
| • | Investment services fees consist of the former securities servicing fees, including asset servicing, issuer services, clearing services, as well as treasury services fee revenue. |
All prior periods have been reclassified. The reclassifications did not affect the results of operations.
Also, in the first quarter of 2011, we revised the net interest revenue for our businesses to reflect a new approach to transfer pricing domestic deposits. All prior period business results have been restated to reflect this revision. This revision did not impact the consolidated results.
Page - 2
BNY Mellon 1Q11 Quarterly Earnings Review
FIRST QUARTER 2011 FINANCIAL HIGHLIGHTS
| Net income from continuing operations (a) |
EPS from continuing operations (a) (b) |
|||||||||||||||||||||||||||||||
| (in millions) | 1Q10 | 4Q10 | 1Q11 | 1Q11 vs. | ||||||||||||||||||||||||||||
| 1Q10 | 4Q10 | 1Q11 | 1Q10 | 4Q10 | ||||||||||||||||||||||||||||
| Earnings: |
||||||||||||||||||||||||||||||||
| Continuing operations – GAAP |
$ | 601 | $ | 690 | $ | 625 | $ | 0.49 | $ | 0.55 | $ | 0.50 | 2 | % | (9 | )% | ||||||||||||||||
| Non-GAAP adjustments (a) |
119 | 44 | 6 | 0.10 | 0.04 | — | ||||||||||||||||||||||||||
| Subtotal Non-GAAP operating basis |
720 | 734 | 631 | 0.59 | 0.59 | 0.50 | (15 | )% | (15 | )% | ||||||||||||||||||||||
| Intangible amortization |
62 | 72 | 68 | 0.05 | 0.06 | 0.05 | ||||||||||||||||||||||||||
| Continuing operations – Non-GAAP |
$ | 782 | $ | 806 | $ | 699 | $ | 0.64 | $ | 0.65 | $ | 0.55 | (14 | )% | (15 | )% | ||||||||||||||||
| Net income applicable to common shareholders – GAAP |
$ | 559 | $ | 679 | $ | 625 | $ | 0.46 | $ | 0.54 | $ | 0.50 | 9 | % | (7 | )% | ||||||||||||||||
KEY POINTS (comparisons are unannualized 1Q11 vs. 1Q10 unless otherwise stated)
| • | Earnings |
| - | Total revenue of $3.6 billion +9%. |
| - | Investment management fees +11% - benefiting from higher market values and net new business. |
| - | Investment services fees +27% - benefiting from impact of the Acquisitions, new business and higher market values. |
| - | Foreign exchange and other trading revenue decreased 24% primarily due to lower fixed income trading revenue. |
| - | Net interest revenue decreased 9% due to the continued impact of the low interest rate environment. |
| - | Non-U.S. revenue 37% +200 bps. |
| - | Total revenue decreased 3% sequentially driven by seasonality in performance fees and Depositary Receipts and lower foreign exchange volatility. |
| - | Noninterest expense +11% reflecting the impact of the Acquisitions, our revenue mix and higher employee benefits expense. (c) |
| - | Effective tax rate of 29.3% flat compared with 1Q10. |
| • | AUC/A and AUM |
| - | Record levels of AUC/A and AUM in 1Q11 reflecting higher market values and net new business. |
| - | AUC/A of $25.5 trillion, + 14%. |
| - | AUM of $1.2 trillion, + 11%. |
| - | Long-term inflows of $31 billion in 1Q11. |
| - | Short-term outflows of $5 billion in 1Q11. |
| • | Capital |
| - | We continued our strong capital generation in 1Q11. Our Tier 1 common equity increased $798 million, or 7%, (28% annualized) compared with Dec. 31, 2010. |
| - | Tier 1 common ratio 12.4% and return on Tier 1 common 21%. (a) |
| - | Increased quarterly dividend 44% to $0.13 per common share. |
| - | Repurchased 1.1 million common shares. |
| (a) | See Supplemental information beginning on page 17 for GAAP to Non-GAAP reconciliations. |
| (b) | Diluted earnings per share is determined based on the net income reported on the income statement less earnings allocated to participating securities of $5 million in the first quarter of 2010, $6 million in the fourth quarter of 2010 and $6 million in the first quarter of 2011, and the excess of redeemable value over the fair value of noncontrolling interests of $6 million in the first quarter of 2011. |
| (c) | Total noninterest expense on a GAAP basis is presented on page 4. |
Page - 3
BNY Mellon 1Q11 Quarterly Earnings Review
FINANCIAL SUMMARY
| (dollar amounts in millions, non-FTE basis unless otherwise noted; common shares in thousands) |
1Q11 vs. | |||||||||||||||||||||||||||
| 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q10 | 4Q10 | ||||||||||||||||||||||
| Revenue: |
||||||||||||||||||||||||||||
| Fee and other revenue – GAAP |
$ | 2,529 | $ | 2,555 | $ | 2,668 | $ | 2,972 | $ | 2,838 | ||||||||||||||||||
| Less: Net securities gains |
7 | 13 | 6 | 1 | 5 | |||||||||||||||||||||||
| Total fee revenue – GAAP |
$ | 2,522 | $ | 2,542 | $ | 2,662 | $ | 2,971 | $ | 2,833 | 12 | % | (5 | )% | ||||||||||||||
| Income of consolidated investment management funds, net of noncontrolling interests (a) |
41 | 32 | 49 | 45 | 66 | |||||||||||||||||||||||
| Net interest revenue – GAAP |
765 | 722 | 718 | 720 | 698 | (9 | ) | (3 | ) | |||||||||||||||||||
| Total revenue excluding net securities gains – Non-GAAP |
3,328 | 3,296 | 3,429 | (b) | 3,736 | (b) | 3,597 | (b) | 8 | (4 | ) | |||||||||||||||||
| Total revenue – GAAP |
3,359 | 3,342 | 3,423 | 3,751 | 3,646 | 9 | (3 | ) | ||||||||||||||||||||
| Provision for credit losses |
$ | 35 | $ | 20 | $ | (22 | ) | $ | (22 | ) | $ | — | ||||||||||||||||
| Expense: |
||||||||||||||||||||||||||||
| Noninterest expense – GAAP |
$ | 2,440 | $ | 2,316 | $ | 2,611 | $ | 2,803 | $ | 2,697 | 11 | (4 | ) | |||||||||||||||
| Less: Amortization of intangible assets |
97 | 98 | 111 | 115 | 108 | |||||||||||||||||||||||
| Restructuring charges |
7 | (15 | ) | 15 | 21 | (6 | ) | |||||||||||||||||||||
| M&I expenses |
26 | 14 | 56 | 43 | 17 | |||||||||||||||||||||||
| Special litigation reserves |
164 | N/A | N/A | N/A | N/A | |||||||||||||||||||||||
| Total noninterest expense – Non-GAAP |
2,146 | 2,219 | 2,429 | (b) | 2,624 | (b) | 2,578 | (b) | 20 | (2 | ) | |||||||||||||||||
| Income: |
||||||||||||||||||||||||||||
| Income from continuing operations before income taxes |
884 | 1,006 | 834 | 970 | 949 | |||||||||||||||||||||||
| Provision for income taxes |
258 | 304 | 220 | 265 | 279 | |||||||||||||||||||||||
| Income from continuing operations |
$ | 626 | $ | 702 | $ | 614 | $ | 705 | $ | 670 | 7 | % | (5 | )% | ||||||||||||||
| Net (income) loss attributable to noncontrolling interests (a) |
(25 | ) | (34 | ) | 11 | (15 | ) | (45 | ) | |||||||||||||||||||
| Net income from continuing operations |
601 | 668 | 625 | 690 | 625 | |||||||||||||||||||||||
| Net loss from discontinued operations |
(42 | ) | (10 | ) | (3 | ) | (11 | ) | — | |||||||||||||||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
$ | 559 | $ | 658 | $ | 622 | $ | 679 | $ | 625 | ||||||||||||||||||
| Key Metrics (c): |
||||||||||||||||||||||||||||
| Pre-tax operating margin – GAAP (d) |
26 | % | 30 | % | 24 | % | 26 | % | 26 | % | ||||||||||||||||||
| Non-GAAP adjusted (d) |
34 | % | 32 | % | 30 | % | 30 | % | 28 | % | ||||||||||||||||||
| Return on common equity (annualized) – GAAP (d) |
8.2 | % | 8.8 | % | 7.8 | % | 8.5 | % | 7.7 | % | ||||||||||||||||||
| Return on tangible common equity (annualized) Non-GAAP (d) |
25.8 | % | 25.7 | % | 26.3 | % | 27.5 | % | 24.3 | % | ||||||||||||||||||
| Fee revenue as a percentage of total revenue excluding net securities gains |
75 | % | 76 | % | 78 | % | 79 | % | 78 | % | ||||||||||||||||||
| Percentage of non-U.S. fee, net interest revenue and income of consolidated investment management funds, net of noncontrolling interests |
35 | % | 35 | % | 36 | % | 38 | % | 37 | % | ||||||||||||||||||
| Period end: |
||||||||||||||||||||||||||||
| Employees |
42,300 | 42,700 | 47,700 | 48,000 | 48,400 | |||||||||||||||||||||||
| Market capitalization |
$ | 37,456 | $ | 29,975 | $ | 32,413 | $ | 37,494 | $ | 37,090 | ||||||||||||||||||
| Common shares outstanding |
1,212,941 | 1,214,042 | 1,240,454 | 1,241,530 | 1,241,724 | |||||||||||||||||||||||
| (a) | Includes income of $(24) million, income of $(33) million, loss of $12 million, income of $(14) million and income of $(44) million, of noncontrolling interests related to consolidated investment management funds, respectively. |
| (b) | Includes total revenue of $237 million in the third quarter of 2010, $253 million in the fourth quarter of 2010 and $270 million in the first quarter of 2011 and noninterest expense of $185 million in the third quarter of 2010, $196 million in the fourth quarter of 2010 and $203 million in the first quarter of 2011 from the GIS and BAS acquisitions (collectively, the “Acquisitions”). |
| (c) | Key metrics for all periods in 2010 are presented on a continuing operations basis. |
| (d) | See Supplemental information beginning on page 17 for GAAP to Non-GAAP reconciliations. |
| N/A | – Not applicable. |
Page - 4
BNY Mellon 1Q11 Quarterly Earnings Review
BUSINESS METRICS
| Investment Management metrics | 1Q11 vs. | |||||||||||||||||||||||||||
| 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q10 | 4Q10 | ||||||||||||||||||||||
| Changes in market value of assets under management (in billions): |
||||||||||||||||||||||||||||
| Beginning balance |
$ | 1,115 | $ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | ||||||||||||||||||
| Net inflows: |
||||||||||||||||||||||||||||
| Long-term |
16 | 12 | 11 | 9 | 31 | |||||||||||||||||||||||
| Money market |
(25 | ) | (17 | ) | 18 | 6 | (5 | ) | ||||||||||||||||||||
| Total net inflows |
(9 | ) | (5 | ) | 29 | 15 | 26 | |||||||||||||||||||||
| Net market/currency impact |
(1 | ) | (53 | ) | 65 | 16 | 31 | |||||||||||||||||||||
| Ending balance |
$ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | (a) | 11 | % | 5 | % | |||||||||||||
| Composition of assets under management at period end (b): |
||||||||||||||||||||||||||||
| Equity |
31 | % | 30 | % | 31 | % | 32 | % | 34 | % | ||||||||||||||||||
| Money market |
30 | 30 | 29 | 29 | 27 | |||||||||||||||||||||||
| Fixed income |
28 | 30 | 30 | 29 | 30 | |||||||||||||||||||||||
| Alternative investments and overlay |
11 | 10 | 10 | 10 | 9 | |||||||||||||||||||||||
| Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
| Wealth management: |
||||||||||||||||||||||||||||
| Average loans (in millions) |
$ | 6,302 | $ | 6,350 | $ | 6,520 | $ | 6,668 | $ | 6,825 | 8 | % | 2 | % | ||||||||||||||
| Average deposits (in millions) |
$ | 7,325 | $ | 8,018 | $ | 8,455 | $ | 9,140 | $ | 9,272 | 27 | % | 1 | % | ||||||||||||||
| (a) | Preliminary. |
| (b) | Excludes securities lending cash management assets. |
| Investment Services metrics | 1Q11 vs. | |||||||||||||||||||||||||||
| 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q10 | 4Q10 | ||||||||||||||||||||||
| Market value of assets under custody and administration at period-end (in trillions) |
$ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | 14 | % | 2 | % | ||||||||||||||
| Market value of securities on loan at period-end (in billions) (a) |
$ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | 10 | % | — | % | ||||||||||||||
| Average loans (in millions) |
$ | 14,273 | $ | 17,053 | $ | 17,941 | $ | 19,053 | $ | 20,554 | 44 | % | 8 | % | ||||||||||||||
| Average deposits (in millions) |
$ | 122,350 | $ | 121,468 | $ | 123,212 | $ | 136,060 | $ | 141,115 | 15 | % | 4 | % | ||||||||||||||
| Asset servicing: |
||||||||||||||||||||||||||||
| New business wins (in billions) |
$ | 205 | $ | 419 | $ | 480 | $ | 350 | $ | 496 | ||||||||||||||||||
| Corporate Trust: |
||||||||||||||||||||||||||||
| Total debt serviced (in trillions) |
$ | 11.8 | $ | 11.6 | $ | 12.0 | $ | 12.0 | $ | 11.9 | 1 | % | (1 | )% | ||||||||||||||
| Number of deals administered |
141,904 | 140,551 | 135,613 | 138,067 | 133,416 | (6 | )% | (3 | )% | |||||||||||||||||||
| Depositary Receipts: |
||||||||||||||||||||||||||||
| Number of sponsored programs |
1,336 | 1,345 | 1,353 | 1,363 | 1,368 | 2 | % | — | % | |||||||||||||||||||
| Total depositary receipts outstanding (in billions) |
28.3 | 29.9 | 30.0 | 30.4 | 31.0 | 10 | % | 2 | % | |||||||||||||||||||
| Clearing services: |
||||||||||||||||||||||||||||
| DARTS volume (in millions) |
188.0 | 198.4 | 161.4 | 185.5 | 207.2 | 10 | % | 12 | % | |||||||||||||||||||
| Average active clearing accounts (in thousands) |
4,811 | 4,896 | 4,929 | 4,967 | 5,443 | 13 | % | 10 | % | |||||||||||||||||||
| Total mutual fund assets (U.S. platform) (in millions) |
$ | 224,219 | $ | 229,714 | $ | 243,573 | $ | 264,076 | $ | 287,682 | 28 | % | 9 | % | ||||||||||||||
| Average margin loans (in millions) |
$ | 5,229 | $ | 5,775 | $ | 6,261 | $ | 6,281 | $ | 6,978 | 33 | % | 11 | % | ||||||||||||||
| Broker-Dealer: |
||||||||||||||||||||||||||||
| Average tri-party repo collateral (in billions) |
$ | 1,540 | $ | 1,565 | $ | 1,631 | $ | 1,793 | $ | 1,805 | 17 | % | 1 | % | ||||||||||||||
| Treasury services: |
||||||||||||||||||||||||||||
| Global payments volume (in thousands) |
10,166 | 10,678 | 10,847 | 11,042 | 10,587 | 4 | % | (4 | )% | |||||||||||||||||||
| (a) | Represents the total amount of securities on loan, both cash and non-cash, managed by the Investment Services business. |
Page - 5
BNY Mellon 1Q11 Quarterly Earnings Review
| Market indices | 1Q11 vs. | |||||||||||||||||||||||||||
| 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q10 | 4Q10 | ||||||||||||||||||||||
| S&P 500 Index (a) |
1169 | 1031 | 1141 | 1258 | 1326 | 13 | % | 5 | % | |||||||||||||||||||
| S&P 500 Index – daily average |
1123 | 1135 | 1095 | 1204 | 1302 | 16 | 8 | |||||||||||||||||||||
| FTSE 100 Index (a) |
5680 | 4917 | 5549 | 5900 | 5909 | 4 | — | |||||||||||||||||||||
| FTSE 100 Index-daily average |
5431 | 5361 | 5312 | 5760 | 5945 | 9 | 3 | |||||||||||||||||||||
| Barclays Capital Aggregate BondSM Index (a) |
300 | 299 | 329 | 323 | 328 | 9 | 2 | |||||||||||||||||||||
| MSCI EAFE® Index (a) |
1584 | 1348 | 1561 | 1658 | 1703 | 8 | 3 | |||||||||||||||||||||
| NYSE and NASDAQ Share Volume (in billions) |
246 | 299 | 233 | 219 | 225 | (9 | ) | 3 | ||||||||||||||||||||
| (a) | Period end. |
Page - 6
BNY Mellon 1Q11 Quarterly Earnings Review
FEE AND OTHER REVENUE
| Fee and other revenue | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q11 vs. | ||||||||||||||||||||||
| (dollar amounts in millions) | 1Q10 | 4Q10 | ||||||||||||||||||||||||||
| Investment services fees: |
||||||||||||||||||||||||||||
| Asset servicing |
$ | 637 | $ | 668 | $ | 870 | $ | 914 | $ | 923 | 45 | % | 1 | % | ||||||||||||||
| Issuer services |
333 | 354 | 364 | 409 | 351 | 5 | (14 | ) | ||||||||||||||||||||
| Clearing services |
230 | 245 | 252 | 278 | 292 | 27 | 5 | |||||||||||||||||||||
| Treasury services |
131 | 125 | 132 | 129 | 128 | (2 | ) | (1 | ) | |||||||||||||||||||
| Total investment services fees |
1,331 | 1,392 | 1,618 | 1,730 | 1,694 | 27 | (2 | ) | ||||||||||||||||||||
| Investment management and performance fees |
686 | 686 | 696 | 800 | 764 | 11 | (5 | ) | ||||||||||||||||||||
| Foreign exchange and other trading revenue |
262 | 220 | 146 | 258 | 198 | (24 | ) | (23 | ) | |||||||||||||||||||
| Distribution and servicing |
48 | 51 | 56 | 55 | 53 | 10 | (4 | ) | ||||||||||||||||||||
| Financing-related fees |
50 | 48 | 49 | 48 | 43 | (14 | ) | (10 | ) | |||||||||||||||||||
| Investment and other income |
145 | 145 | 97 | 80 | 81 | (44 | ) | 1 | ||||||||||||||||||||
| Total fee revenue |
2,522 | 2,542 | 2,662 | 2,971 | 2,833 | 12 | (5 | ) | ||||||||||||||||||||
| Net securities gains |
7 | 13 | 6 | 1 | 5 | N/M | N/M | |||||||||||||||||||||
| Total fee and other revenue |
$ | 2,529 | $ | 2,555 | $ | 2,668 | (a) | $ | 2,972 | (a) | $ | 2,838 | (a) | 12 | % | (5 | )% | |||||||||||
| Fee revenue as a percentage of total revenue excluding net securities gains |
75 | % | 76 | % | 78 | % | 79 | % | 78 | % | ||||||||||||||||||
| (a) | Total fee revenue from the Acquisitions was $234 million in the third quarter of 2010, $246 million in the fourth quarter of 2010 and $261 million in the first quarter of 2011. |
N/M - Not meaningful.
KEY POINTS
| • | Asset servicing fees – Year-over-year and sequential results were positively impacted by higher market values, new business and asset inflows from existing clients. The year-over-year increase was primarily driven by the impact of the Acquisitions. |
| • | Issuer services fees – The increase year-over-year reflects higher depositary receipts revenue, reflecting higher corporate action and issuance and cancellation fees. The decrease sequentially was driven by seasonally lower depositary receipts revenue. |
| • | Clearing services fees – The year-over-year and sequential increases reflect strong growth in mutual fund assets and positions, increased daily average revenue trades (“DARTs”), higher market values and new business. The year-over-year increase was also driven by the impact of the GIS acquisition. |
| • | Investment management and performance fees totaled $764 million in the first quarter of 2011, an increase of 11% year-over-year and a decrease of 5% (unannualized) sequentially. Excluding performance fees, these fees totaled $747 million, an increase of 11% compared with the prior year period and 3% (unannualized) sequentially. Both increases were primarily due to higher market values and net new business. |
| • | Foreign exchange and other trading revenue totaled $198 million compared with $262 million in the prior year period and $258 million in the fourth quarter of 2010. In the first quarter of 2011, foreign exchange revenue totaled $173 million, a decrease of 1% year-over-year and 16% (unannualized) sequentially as increased volumes were more than offset by declines in volatility. Other trading revenue was $25 million in the first quarter of 2011, a decrease of $62 million compared with the first quarter of 2010 and $27 million compared with the fourth quarter of 2010. Both decreases were driven by lower fixed income and derivatives trading revenue. |
| • | Investment and other income totaled $81 million compared with $145 million in the prior year period and $80 million in the fourth quarter of 2010. The decrease year-over-year primarily reflects a reduction in foreign currency translation revenue and lower lease residual gains. |
Page - 7
BNY Mellon 1Q11 Quarterly Earnings Review
FOREIGN EXCHANGE AND OTHER TRADING REVENUE
| Foreign exchange and other trading revenue (in millions) |
1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | |||||||||||||||
| Foreign exchange |
$ | 175 | $ | 246 | $ | 160 | $ | 206 | $ | 173 | ||||||||||
| Fixed income |
80 | (32 | ) | (7 | ) | 39 | 17 | |||||||||||||
| Credit derivatives (a) |
(2 | ) | 4 | (6 | ) | (3 | ) | (1 | ) | |||||||||||
| Other |
9 | 2 | (1 | ) | 16 | 9 | ||||||||||||||
| Total |
$ | 262 | $ | 220 | $ | 146 | $ | 258 | $ | 198 | ||||||||||
| (a) | Used as economic hedges of loans. |
NET INTEREST REVENUE
| Net interest revenue | 1Q11 vs. | |||||||||||||||||||||||||||
| (dollar amounts in millions) | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q10 | 4Q10 | |||||||||||||||||||||
| Net interest revenue (non-FTE) |
$ | 765 | $ | 722 | $ | 718 | $ | 720 | $ | 698 | (9 | )% | (3 | )% | ||||||||||||||
| Net interest revenue (FTE) |
770 | 727 | 723 | 724 | 702 | (9 | ) | (3 | ) | |||||||||||||||||||
| Net interest margin (FTE) |
1.89 | % | 1.74 | % | 1.67 | % | 1.54 | % | 1.49 | % | (40 | ) bps | (5 | ) bps | ||||||||||||||
| Selected average balances: |
||||||||||||||||||||||||||||
| Cash/interbank investments |
$ | 71,788 | $ | 73,673 | $ | 74,803 | $ | 82,000 | $ | 82,524 | 15 | % | 1 | % | ||||||||||||||
| Trading account securities |
2,075 | 2,752 | 3,194 | 2,698 | 3,698 | 78 | 37 | |||||||||||||||||||||
| Securities |
55,352 | 54,030 | 57,993 | 65,370 | 65,397 | 18 | — | |||||||||||||||||||||
| Loans |
34,214 | 36,664 | 36,769 | 37,529 | 38,566 | 13 | 3 | |||||||||||||||||||||
| Interest-earning assets |
163,429 | 167,119 | 172,759 | 187,597 | 190,185 | 16 | 1 | |||||||||||||||||||||
| Interest-bearing deposits |
101,034 | 99,963 | 104,033 | 111,776 | 116,515 | 15 | 4 | |||||||||||||||||||||
| Noninterest-bearing deposits |
33,330 | 34,628 | 33,198 | 39,625 | 38,616 | 16 | (3 | ) | ||||||||||||||||||||
| Selected average yields/rates: |
||||||||||||||||||||||||||||
| Cash/interbank investments |
0.89 | % | 0.82 | % | 0.83 | % | 0.98 | % | 0.83 | % | ||||||||||||||||||
| Trading account securities |
2.49 | 2.62 | 2.57 | 3.02 | 2.44 | |||||||||||||||||||||||
| Securities |
3.67 | 3.62 | 3.41 | 3.02 | 2.96 | |||||||||||||||||||||||
| Loans |
2.46 | 2.30 | 2.23 | 2.12 | 2.08 | |||||||||||||||||||||||
| Interest-earning assets |
2.18 | 2.08 | 2.03 | 1.95 | 1.85 | |||||||||||||||||||||||
| Interest-bearing deposits |
0.16 | 0.17 | 0.19 | 0.22 | 0.23 | |||||||||||||||||||||||
| Average cash/interbank investments as a percentage of average interest-earning assets |
44 | % | 44 | % | 43 | % | 44 | % | 43 | % | ||||||||||||||||||
| Average noninterest-bearing deposits as a percentage of average interest-earning assets |
20 | % | 21 | % | 19 | % | 21 | % | 20 | % | ||||||||||||||||||
bps – basis points.
FTE – fully taxable equivalent.
KEY POINTS
| • | Net interest revenue totaled $698 million in 1Q11, a decrease of $67 million compared with 1Q10 and $22 million sequentially. Both the year-over-year and sequential declines reflect lower spreads resulting from the continued impact of the low interest rate environment and lower discount accretion, partially offset by higher average assets. The sequential decline also reflects a lower day count. Net interest revenue in the first quarter of 2011 includes $10 million related to both timing differences on hedges and an interest payment on a deposit for a bankruptcy matter. |
| • | The net interest margin (FTE) was 1.49% in 1Q11, compared with 1.89% in 1Q10 and 1.54% in 4Q10. The declines primarily reflect the factors mentioned above. |
Page - 8
BNY Mellon 1Q11 Quarterly Earnings Review
NONINTEREST EXPENSE
| Noninterest expense | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q11 vs. | ||||||||||||||||||||||
| (dollar amounts in millions) | 1Q10 | 4Q10 | ||||||||||||||||||||||||||
| Staff: |
||||||||||||||||||||||||||||
| Compensation |
$ | 753 | $ | 763 | $ | 850 | $ | 871 | $ | 876 | 16 | % | 1 | % | ||||||||||||||
| Incentives |
284 | 272 | 289 | 348 | 325 | 14 | (7 | ) | ||||||||||||||||||||
| Employee benefits |
183 | 199 | 205 | 198 | 223 | 22 | 13 | |||||||||||||||||||||
| Total staff |
1,220 | 1,234 | 1,344 | 1,417 | 1,424 | 17 | — | |||||||||||||||||||||
| Professional, legal and other purchased services |
241 | 256 | 282 | 320 | 283 | 17 | (12 | ) | ||||||||||||||||||||
| Software and equipment |
169 | 162 | 187 | 207 | 206 | 22 | — | |||||||||||||||||||||
| Net occupancy |
137 | 143 | 150 | 158 | 153 | 12 | (3 | ) | ||||||||||||||||||||
| Distribution and servicing |
89 | 90 | 94 | 104 | 111 | 25 | 7 | |||||||||||||||||||||
| Business development |
52 | 68 | 63 | 88 | 56 | 8 | (36 | ) | ||||||||||||||||||||
| Sub-custodian |
52 | 65 | 60 | 70 | 68 | 31 | (3 | ) | ||||||||||||||||||||
| Other |
186 | 201 | 249 | 260 | 277 | 49 | 7 | |||||||||||||||||||||
| Subtotal |
2,146 | 2,219 | 2,429 | (a) | 2,624 | (a) | 2,578 | (a) | 20 | (2 | ) | |||||||||||||||||
| Amortization of intangible assets |
97 | 98 | 111 | 115 | 108 | 11 | (6 | ) | ||||||||||||||||||||
| Restructuring charges |
7 | (15 | ) | 15 | 21 | (6 | ) | N/M | N/M | |||||||||||||||||||
| M&I expenses |
26 | 14 | 56 | 43 | 17 | (35 | ) | (60 | ) | |||||||||||||||||||
| Special litigation reserves |
164 | N/A | N/A | N/A | N/A | N/M | N/M | |||||||||||||||||||||
| Total noninterest expense |
$ | 2,440 | $ | 2,316 | $ | 2,611 | $ | 2,803 | $ | 2,697 | 11 | % | (4 | )% | ||||||||||||||
| Total staff expense as a percentage of total revenue |
36 | % | 37 | % | 39 | % | 38 | % | 39 | % | ||||||||||||||||||
| (a) | Noninterest expense from the Acquisitions was $185 million in the third quarter of 2010, $196 million in the fourth quarter of 2010 and $203 million in the first quarter of 2011. |
N/A - Not applicable.
N/M - Not meaningful.
KEY POINTS
| • | Total noninterest expense (excluding amortization of intangible assets, restructuring charges, M&I expenses and special litigation reserves) (Non-GAAP) increased 20% compared with the prior year period, 11% excluding the Acquisitions, and decreased 2% (unannualized) sequentially. |
| - | The year-over-year increase, excluding the impact of the Acquisitions, reflects higher expenses associated with our revenue mix, $47 million of litigation expense in 1Q11, higher pension and healthcare expenses, and continued investment in our franchise. |
| - | The sequential decrease reflects seasonality, as well as higher expenses in the fourth quarter of 2010 primarily related to the full-year impact of adjusting compensation to market levels and the write-off of equipment, partially offset by higher litigation and pension and healthcare expenses. |
Page - 9
BNY Mellon 1Q11 Quarterly Earnings Review
INVESTMENT SECURITIES PORTFOLIO
At March 31, 2011, the fair value of our investment securities portfolio totaled $66.4 billion. The unrealized pre-tax net gain on our total securities portfolio was $569 million at March 31, 2011 compared with a pre-tax net gain of $353 million at Dec. 31, 2010 and an unrealized pre-tax net loss of $247 million at March 31, 2010. The investment securities previously included in the former Grantor Trust were marked down to approximately 60% of face value in 2009. At March 31, 2011, these securities were trading above adjusted amortized cost with a total unrealized pre-tax gain of $823 million.
The following table shows the distribution of our investment securities portfolio.
| Investment securities portfolio | ||||||||||||||||||||||||||||||||||||||||||||
| Dec. 31, 2010 |
1Q11 change in unrealized gain/ (loss) |
March 31, 2011 | Fair value as a % of amortized cost (a) |
Unrealized gain/(loss) |
Ratings | |||||||||||||||||||||||||||||||||||||||
| (dollar amounts in millions) | Fair value |
Amortized cost |
Fair value |
AAA/ AA- |
A+/ A- | BBB+/ BBB- |
BB+ and lower |
Not rated |
||||||||||||||||||||||||||||||||||||
| Watch list: (b) |
||||||||||||||||||||||||||||||||||||||||||||
| European floating rate notes (c) |
$ | 4,636 | $ | 39 | $ | 5,020 | $ | 4,628 | 91 | % | $ | (392 | ) | 86 | % | 11 | % | 3 | % | — | % | — | % | |||||||||||||||||||||
| Commercial MBS |
2,281 | 2 | 2,073 | 2,131 | 103 | 58 | 92 | 5 | 3 | — | — | |||||||||||||||||||||||||||||||||
| Non-agency RMBS |
2,577 | 67 | 2,652 | 2,428 | 84 | (224 | ) | 30 | 7 | 12 | 51 | — | ||||||||||||||||||||||||||||||||
| Credit cards |
517 | — | 437 | 442 | 99 | 5 | 2 | 96 | 2 | — | — | |||||||||||||||||||||||||||||||||
| Other |
331 | 13 | 305 | 341 | 50 | 36 | 6 | 1 | 24 | 16 | 53 | |||||||||||||||||||||||||||||||||
| Total Watch list (b) |
10,342 | 121 | 10,487 | 9,970 | 89 | (517 | ) | 67 | 12 | 6 | 13 | 2 | ||||||||||||||||||||||||||||||||
| Agency RMBS |
20,157 | (44 | ) | 18,894 | 19,227 | 102 | 333 | 100 | — | — | — | — | ||||||||||||||||||||||||||||||||
| Sovereign debt/ sovereign guaranteed |
8,585 | (27 | ) | 9,661 | 9,683 | 100 | 22 | 100 | — | — | — | — | ||||||||||||||||||||||||||||||||
| U.S. Treasury securities |
12,635 | (50 | ) | 13,683 | 13,618 | 100 | (65 | ) | 100 | — | — | — | — | |||||||||||||||||||||||||||||||
| Non-agency RMBS (d) |
4,496 | 245 | 3,560 | 4,383 | 75 | 823 | 2 | 1 | 3 | 94 | — | |||||||||||||||||||||||||||||||||
| Foreign covered bonds |
2,868 | (19 | ) | 3,122 | 3,087 | 99 | (35 | ) | 97 | 3 | — | — | — | |||||||||||||||||||||||||||||||
| FDIC-insured debt |
2,474 | (9 | ) | 2,460 | 2,497 | 101 | 37 | 100 | — | — | — | — | ||||||||||||||||||||||||||||||||
| U.S. Government agency debt |
1,005 | (4 | ) | 1,023 | 1,017 | 99 | (6 | ) | 100 | — | — | — | — | |||||||||||||||||||||||||||||||
| Other |
3,807 | 3 | 2,942 | 2,919 | 99 | (23 | ) | 32 | 11 | 4 | 1 | 52 | ||||||||||||||||||||||||||||||||
| Total investment securities |
$ | 66,369 | (e) | $ | 216 | $ | 65,832 | $ | 66,401 | (e) | 97 | % | $ | 569 | 85 | % | 3 | % | 1 | % | 8 | % | 3 | % | ||||||||||||||||||||
| (a) | Amortized cost before impairments. |
| (b) | The “Watch list” includes those securities we view as having a higher risk of impairment charges. |
| (c) | Includes RMBS, commercial MBS, and other securities. |
| (d) | These RMBS were previously included in the former Grantor Trust and were marked to market in 2009. We believe these RMBS would receive higher credit ratings if these ratings incorporated, as additional credit enhancement, the difference between the written-down amortized cost and the current face amount of each of these securities. |
| (e) | Includes net unrealized gains on derivatives hedging securities available-for-sale of $60 million at Dec. 31, 2010 and $92 million at March 31, 2011. |
CAPITAL
| Capital ratios | March 31, 2010 |
Dec. 31, 2010 |
March 31, 2011 (a) |
|||||||||
| Tier 1 capital ratio (b) |
13.3 | % | 13.4 | % | 14.0 | % | ||||||
| Total (Tier 1 plus Tier 2) capital ratio (b) |
17.2 | 16.3 | 16.8 | |||||||||
| Leverage capital ratio (b) |
6.5 | 5.8 | 6.1 | |||||||||
| Common shareholders’ equity to total assets ratio (c) |
13.5 | 13.1 | 12.5 | |||||||||
| Tangible common shareholders’ equity to tangible assets of operations ratio – Non-GAAP (c) |
6.1 | 5.8 | 5.9 | |||||||||
| Tier 1 common equity to risk-weighted assets ratio (b)(c) |
11.6 | 11.8 | 12.4 | |||||||||
| (a) | Preliminary. |
| (b) | On a regulatory basis as determined under Basel 1 guidelines. |
| (c) | See the Supplemental information section beginning on page 17 for a calculation of these ratios. |
We continued our strong capital generation in 1Q11. Our Tier 1 common equity increased $798 million, or 7%, compared with Dec. 31, 2010, primarily driven by earnings retention.
Page - 10
BNY Mellon 1Q11 Quarterly Earnings Review
NONPERFORMING ASSETS
| Nonperforming assets (dollar amounts in millions) |
March 31, 2010 |
Dec. 31, 2010 |
March 31, 2011 |
|||||||||
| Loans: |
||||||||||||
| Other residential mortgages |
$ | 204 | $ | 244 | $ | 245 | ||||||
| Wealth management |
58 | 59 | 56 | |||||||||
| Commercial real estate |
50 | 44 | 36 | |||||||||
| Commercial |
40 | 34 | 32 | |||||||||
| Foreign |
7 | 7 | 7 | |||||||||
| Financial institutions |
95 | 5 | 4 | |||||||||
| Total nonperforming loans |
454 | 393 | 380 | |||||||||
| Other assets owned |
5 | 6 | 6 | |||||||||
| Total nonperforming assets |
$ | 459 | $ | 399 | (a) | $ | 386 | (a) | ||||
| Nonperforming assets ratio |
1.4 | % | 1.1 | % | 1.0 | % | ||||||
| Allowance for loan losses/nonperforming loans |
114.5 | 126.7 | 122.9 | |||||||||
| Total allowance for credit losses/nonperforming loans |
140.5 | 145.3 | 145.8 | |||||||||
| (a) | Loans of consolidated investment management funds are not part of BNY Mellon’s loan portfolio. Included in these loans are nonperforming loans of $150 million at March 31, 2010, $218 million at Dec. 31, 2010 and $239 million at March 31, 2011. These loans are recorded at fair value and therefore do not impact the provision for credit losses and allowance for loan losses, and accordingly are excluded from the nonperforming assets table above. |
ALLOWANCE FOR CREDIT LOSSES, PROVISION AND NET CHARGE-OFFS
| Allowance for credit losses, provision and net charge-offs | Quarter ended | |||||||||||
| (in millions) | March 31 2010 |
Dec. 31, 2010 |
March 31, 2011 |
|||||||||
| Allowance for credit losses – beginning of period |
$ | 628 | $ | 608 | $ | 571 | ||||||
| Provision for credit losses |
35 | (22 | ) | — | ||||||||
| Net (charge-offs) recoveries: |
||||||||||||
| Other residential mortgages |
(12 | ) | (14 | ) | (17 | ) | ||||||
| Financial institutions |
(20 | ) | (1 | ) | 1 | |||||||
| Commercial |
12 | 2 | 1 | |||||||||
| Commercial real estate |
(5 | ) | (2 | ) | (2 | ) | ||||||
| Total net (charge-offs) recoveries |
(25 | ) | (15 | ) | (17 | ) | ||||||
| Allowance for credit losses – end of period |
$ | 638 | $ | 571 | $ | 554 | ||||||
| Allowance for loan losses |
$ | 520 | $ | 498 | $ | 467 | ||||||
| Allowance for unfunded commitments |
118 | 73 | 87 | |||||||||
There was no provision for credit losses recorded in the first quarter of 2011, compared with a charge of $35 million in the first quarter of 2010 and a credit of $22 million in the fourth quarter of 2010. During the first quarter of 2011, the total allowance for credit losses decreased $17 million and net charge-offs totaled $17 million.
Page - 11
BNY Mellon 1Q11 Quarterly Earnings Review
REVIEW OF BUSINESSES
INVESTMENT MANAGEMENT (provides investment management services to institutional and retail investors, as well as investment management, wealth and estate planning and private banking solutions to high net worth individuals and families, and foundations and endowments)
| (dollar amounts in millions, unless otherwise noted) |
1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q11 vs. | ||||||||||||||||||||||
| 1Q10 | 4Q10 | |||||||||||||||||||||||||||
| Revenue: |
||||||||||||||||||||||||||||
| Investment management and performance fees: |
||||||||||||||||||||||||||||
| Mutual funds |
$ | 249 | $ | 254 | $ | 270 | $ | 293 | $ | 283 | 14 | % | (3 | )% | ||||||||||||||
| Institutional clients |
265 | 262 | 264 | 283 | 302 | 14 | 7 | |||||||||||||||||||||
| Wealth management |
174 | 170 | 172 | 174 | 181 | 4 | 4 | |||||||||||||||||||||
| Performance fees |
13 | 19 | 16 | 75 | 17 | 31 | N/M | |||||||||||||||||||||
| Total investment management and performance fees |
701 | 705 | 722 | 825 | 783 | 12 | (5 | ) | ||||||||||||||||||||
| Distribution and servicing |
47 | 49 | 53 | 52 | 51 | 9 | (2 | ) | ||||||||||||||||||||
| Other (a) |
27 | 13 | 18 | 22 | 36 | 33 | 64 | |||||||||||||||||||||
| Total fee and other revenue (a) |
775 | 767 | 793 | 899 | 870 | 12 | (3 | ) | ||||||||||||||||||||
| Net interest revenue |
52 | 53 | 50 | 50 | 53 | 2 | 6 | |||||||||||||||||||||
| Total revenue |
827 | 820 | 843 | 949 | 923 | 12 | (3 | ) | ||||||||||||||||||||
| Provision for credit losses |
— | 1 | — | 2 | — | N/M | N/M | |||||||||||||||||||||
| Noninterest expense (ex. amortization of intangible assets) |
569 | 596 | 624 | 667 | 630 | 11 | (6 | ) | ||||||||||||||||||||
| Income before taxes (ex. amortization of intangible assets) |
258 | 223 | 219 | 280 | 293 | 14 | 5 | |||||||||||||||||||||
| Amortization of intangible assets |
58 | 59 | 59 | 61 | 55 | (5 | ) | (10 | ) | |||||||||||||||||||
| Income before taxes |
$ | 200 | $ | 164 | $ | 160 | $ | 219 | $ | 238 | 19 | % | 9 | % | ||||||||||||||
| Pre-tax operating margin |
24 | % | 20 | % | 19 | % | 23 | % | 26 | % | ||||||||||||||||||
| Pre-tax operating margin (ex. amortization of intangible assets) |
31 | % | 27 | % | 26 | % | 29 | % | 32 | % | ||||||||||||||||||
| Metrics: |
||||||||||||||||||||||||||||
| Changes in market value of assets under management (in billions): |
||||||||||||||||||||||||||||
| Beginning balance |
$ | 1,115 | $ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | ||||||||||||||||||
| Net inflows: |
||||||||||||||||||||||||||||
| Long-term |
16 | 12 | 11 | 9 | 31 | |||||||||||||||||||||||
| Money market |
(25 | ) | (17 | ) | 18 | 6 | (5 | ) | ||||||||||||||||||||
| Total net inflows |
(9 | ) | (5 | ) | 29 | 15 | 26 | |||||||||||||||||||||
| Net market/currency impact |
(1 | ) | (53 | ) | 65 | 16 | 31 | |||||||||||||||||||||
| Ending balance |
$ | 1,105 | $ | 1,047 | $ | 1,141 | $ | 1,172 | $ | 1,229 | (b) | 11 | % | 5 | % | |||||||||||||
| Composition of assets under management at period end (c): |
||||||||||||||||||||||||||||
| Equity |
31 | % | 30 | % | 31 | % | 32 | % | 34 | % | ||||||||||||||||||
| Money market |
30 | 30 | 29 | 29 | 27 | |||||||||||||||||||||||
| Fixed income |
28 | 30 | 30 | 29 | 30 | |||||||||||||||||||||||
| Alternative investments and overlay |
11 | 10 | 10 | 10 | 9 | |||||||||||||||||||||||
| Total |
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
| Wealth management: |
||||||||||||||||||||||||||||
| Average loans (in millions) |
$ | 6,302 | $ | 6,350 | $ | 6,520 | $ | 6,668 | $ | 6,825 | 8 | % | 2 | % | ||||||||||||||
| Average deposits (in millions) |
$ | 7,325 | $ | 8,018 | $ | 8,455 | $ | 9,140 | $ | 9,272 | 27 | % | 1 | % | ||||||||||||||
| (a) | Total fee and other revenue includes the impact of the consolidated investment management funds. See Supplemental information beginning on page 17. Additionally, other revenue includes asset servicing, clearing services and treasury services revenue. |
| (b) | Preliminary. |
| (c) | Excludes securities lending cash management assets. |
N/M – Not meaningful.
Page - 12
BNY Mellon 1Q11 Quarterly Earnings Review
INVESTMENT MANAGEMENT KEY POINTS
| • | Investment Management results reflect the benefit of new business in the investment management boutiques and wealth management platform, higher equity values, improved investment performance, seasonality (sequentially), and the adverse impact of the low interest rate environment. |
| • | Assets under management were a record $1.2 trillion at March 31, 2011, up 11% year-over-year and 5% (unannualized) sequentially, reflecting the impact of higher market values and net new business. |
| - | Net long-term inflows were $31 billion and short-term outflows were $5 billion in 1Q11. Long-term inflows benefited from strength in fixed income and equity indexed products. |
| • | Investment management and performance fees were up 12% year-over-year and decreased 5% (unannualized) sequentially. The year-over-year increase reflects net new business, higher market values and improved investment performance. The sequential decrease reflects seasonally lower performance fees, partially offset by higher market values and net new business. Excluding performance fees, these fees increased 11% year-over-year and 2% (unannualized) sequentially. |
| • | Net interest revenue increased 2% year-over-year and 6% (unannualized) sequentially as wealth management loans and deposits reached record levels in 1Q11 due to organic growth. |
| - | Average loans increased 8% year-over-year and 2% (unannualized) sequentially; Average deposits increased 27% year-over-year and 1% (unannualized) sequentially. |
| • | Noninterest expense (ex. amortization of intangible assets) increased 11% year-over-year and decreased 6% (unannualized) sequentially. The year-over-year increase primarily resulted from higher incentive expense driven by new business, and higher distribution and servicing expense. The sequential decrease reflects lower incentive expense driven primarily by a seasonal decrease in performance fees. |
| • | Generated 300 basis points and 100 basis points of positive operating leverage sequentially and year-over-year, excluding amortization of intangible assets. |
| • | 41% non-U.S. revenue in 1Q11 vs. 39% in 1Q10. |
Page - 13
BNY Mellon 1Q11 Quarterly Earnings Review
INVESTMENT SERVICES (provides global custody and related services, broker-dealer services, alternative investment services, corporate trust, depositary receipt and shareowner services, as well as clearing services and global payment/working capital solutions to global financial institutions)
| (dollar amounts in millions, unless otherwise noted) |
1Q11 vs. | |||||||||||||||||||||||||||
| 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | 1Q10 | 4Q10 | ||||||||||||||||||||||
| Revenue: |
||||||||||||||||||||||||||||
| Investment services fees: |
||||||||||||||||||||||||||||
| Asset servicing |
$ | 607 | $ | 627 | $ | 845 | $ | 888 | $ | 897 | 48 | % | 1 | % | ||||||||||||||
| Issuer services |
333 | 354 | 364 | 409 | 351 | 5 | (14 | ) | ||||||||||||||||||||
| Clearing services |
227 | 240 | 250 | 276 | 290 | 28 | 5 | |||||||||||||||||||||
| Treasury services |
130 | 124 | 131 | 128 | 127 | (2 | ) | (1 | ) | |||||||||||||||||||
| Total investment services fees |
1,297 | 1,345 | 1,590 | 1,701 | 1,665 | 28 | (2 | ) | ||||||||||||||||||||
| Foreign exchange and other trading revenue |
221 | 249 | 185 | 227 | 208 | (6 | ) | (8 | ) | |||||||||||||||||||
| Other (a) |
72 | 120 | 90 | 82 | 77 | 7 | (6 | ) | ||||||||||||||||||||
| Total fee and other revenue (a) |
1,590 | 1,714 | 1,865 | 2,010 | 1,950 | 23 | (3 | ) | ||||||||||||||||||||
| Net interest revenue |
653 | 608 | 589 | 598 | 639 | (2 | ) | 7 | ||||||||||||||||||||
| Total revenue (b) |
2,243 | 2,322 | 2,454 | 2,608 | 2,589 | 15 | (1 | ) | ||||||||||||||||||||
| Noninterest expense (ex. amortization of intangible assets) (c) |
1,419 | 1,521 | 1,630 | 1,759 | 1,763 | 24 | — | |||||||||||||||||||||
| Income before taxes (ex. amortization of intangible assets) |
824 | 801 | 824 | 849 | 826 | — | (3 | ) | ||||||||||||||||||||
| Amortization of intangible assets |
38 | 39 | 52 | 53 | 53 | 39 | — | |||||||||||||||||||||
| Income before taxes |
$ | 786 | $ | 762 | $ | 772 | $ | 796 | $ | 773 | (2 | )% | (3 | )% | ||||||||||||||
| Pre-tax operating margin |
35 | % | 33 | % | 31 | % | 31 | % | 30 | % | ||||||||||||||||||
| Pre-tax operating margin (ex. amortization of intangible assets) |
37 | % | 34 | % | 34 | % | 33 | % | 32 | % | ||||||||||||||||||
| Investment services fees as a percentage of noninterest expense (ex. amortization of intangible assets) |
91 | % | 88 | % | 98 | % | 97 | % | 94 | % | ||||||||||||||||||
| Metrics: |
||||||||||||||||||||||||||||
| Market value of assets under custody and administration at period-end (in trillions) |
$ | 22.4 | $ | 21.8 | $ | 24.4 | $ | 25.0 | $ | 25.5 | 14 | % | 2 | % | ||||||||||||||
| Market value of securities on loan at period-end (in billions) (d) |
$ | 253 | $ | 248 | $ | 279 | $ | 278 | $ | 278 | 10 | % | — | % | ||||||||||||||
| Securities lending revenue |
$ | 24 | $ | 30 | $ | 26 | $ | 27 | $ | 27 | 13 | % | — | % | ||||||||||||||
| Average loans (in millions) |
$ | 14,273 | $ | 17,053 | $ | 17,941 | $ | 19,053 | $ | 20,554 | 44 | % | 8 | % | ||||||||||||||
| Average deposits (in millions) |
$ | 122,350 | $ | 121,468 | $ | 123,212 | $ | 136,060 | $ | 141,115 | 15 | % | 4 | % | ||||||||||||||
| Asset servicing: |
||||||||||||||||||||||||||||
| New business wins (in billions) |
$ | 205 | $ | 419 | $ | 480 | $ | 350 | $ | 496 | ||||||||||||||||||
| Corporate Trust: |
||||||||||||||||||||||||||||
| Total debt serviced (in trillions) |
$ | 11.8 | $ | 11.6 | $ | 12.0 | $ | 12.0 | $ | 11.9 | 1 | % | (1 | )% | ||||||||||||||
| Number of deals administered |
141,904 | 140,551 | 135,613 | 138,067 | 133,416 | (6 | )% | (3 | )% | |||||||||||||||||||
| Depositary Receipts: |
||||||||||||||||||||||||||||
| Number of sponsored programs |
1,336 | 1,345 | 1,353 | 1,363 | 1,368 | 2 | % | — | % | |||||||||||||||||||
| Total depositary receipts outstanding (in billions) |
28.3 | 29.9 | 30.0 | 30.4 | 31.0 | 10 | % | 2 | % | |||||||||||||||||||
| Clearing services: |
||||||||||||||||||||||||||||
| DARTS volume (in millions) |
188.0 | 198.4 | 161.4 | 185.5 | 207.2 | 10 | % | 12 | % | |||||||||||||||||||
| Average active clearing accounts (in thousands) |
4,811 | 4,896 | 4,929 | 4,967 | 5,443 | 13 | % | 10 | % | |||||||||||||||||||
| Total mutual fund assets (U.S. platform) (in millions) |
$ | 224,219 | $ | 229,714 | $ | 243,573 | $ | 264,076 | $ | 287,682 | 28 | % | 9 | % | ||||||||||||||
| Average margin loans (in millions) |
$ | 5,229 | $ | 5,775 | $ | 6,261 | $ | 6,281 | $ | 6,978 | 33 | % | 11 | % | ||||||||||||||
| Broker-Dealer: |
||||||||||||||||||||||||||||
| Average tri-party repo collateral (in billions) |
$ | 1,540 | $ | 1,565 | $ | 1,631 | $ | 1,793 | $ | 1,805 | 17 | % | 1 | % | ||||||||||||||
| Treasury services: |
||||||||||||||||||||||||||||
| Global payments transaction volume (in thousands) |
10,166 | 10,678 | 10,847 | 11,042 | 10,587 | 4 | % | (4 | )% | |||||||||||||||||||
| (a) | Total fee and other revenue includes investment management fees and distribution and servicing revenue. |
| (b) | Total revenue from the Acquisitions was $237 million in the third quarter of 2010, $253 million in the fourth quarter of 2010 and $270 million in the first quarter of 2011. |
| (c) | Noninterest expense from the Acquisitions was $185 million in the third quarter of 2010, $196 million in the fourth quarter of 2010 and $203 million in the first quarter of 2011. |
| (d) | Represents the total amount of securities on loan, both cash and non-cash, managed by the Investment Services business. |
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BNY Mellon 1Q11 Quarterly Earnings Review
INVESTMENT SERVICES KEY POINTS
| • | Investment Services results reflect the impact of the Acquisitions (year-over-year), new business, improved market values and seasonality (sequentially). |
| • | Investment services fees totaled $1.7 billion, an increase of 28% year-over-year and a decrease of 2% (unannualized) sequentially. |
| - | Asset servicing revenue (global custody, broker-dealer services and alternative investment services) was $897 million in 1Q11 compared with $888 million in 4Q10 and $607 million in 1Q10. Year-over-year and sequential results were positively impacted by higher market values, new business and asset inflows from existing clients. The year-over-year increase was primarily driven by the impact of the Acquisitions. |
| - | Issuer services revenue (corporate trust, depositary receipts and shareowner services) was $351 million in 1Q11 compared with $409 million in 4Q10 and $333 million in 1Q10. The year-over-year increase was primarily driven by higher depositary receipts revenue, reflecting higher corporate action and issuance and cancellation fees. The decrease sequentially resulted from seasonally lower depositary receipts revenue. |
| - | Clearing services revenue (Pershing) was $290 million in 1Q11 compared with $276 million in 4Q10 and $227 million in 1Q10. The year-over-year and sequential increases reflect strong growth in mutual fund assets and positions, increased revenue from DARTs, higher market values and new business. The year-over-year increase also includes the impact of the GIS acquisition. |
| • | Foreign exchange and other trading revenue decreased 6% year-over-year and 8% (unannualized) sequentially, as increased foreign exchange volumes were more than offset by declines in volatility. |
| • | Net interest revenue was $639 million in 1Q11 compared with $598 million in 4Q10 and $653 million in 1Q10. The sequential increase reflects higher deposit balances partially offset by narrower spreads. |
| • | Noninterest expense (excluding amortization of intangible assets) increased 24% year-over-year and was flat sequentially. The year-over-year increase reflects the impact of the Acquisitions, higher litigation expenses and expenses in support of business growth. Sequentially, lower incentive expense was offset by higher litigation expense. |
| • | 36% non-U.S. revenue in both 1Q11 and 1Q10. |
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BNY Mellon 1Q11 Quarterly Earnings Review
OTHER SEGMENT (primarily includes credit-related services, the leasing portfolio, corporate treasury activities, business exits, M&I expenses and other corporate revenue and expense items)
| (dollar amounts in millions) | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | |||||||||||||||
| Revenue: |
||||||||||||||||||||
| Fee and other revenue |
$ | 205 | $ | 106 | $ | 59 | $ | 108 | $ | 84 | ||||||||||
| Net interest revenue |
60 | 61 | 79 | 72 | 6 | |||||||||||||||
| Total revenue |
265 | 167 | 138 | 180 | 90 | |||||||||||||||
| Provision for credit losses |
35 | 19 | (22 | ) | (24 | ) | — | |||||||||||||
| Noninterest expense (ex. amortization of intangible assets, restructuring charges, M&I expenses and special litigation reserves) |
158 | 102 | 175 | 198 | 185 | |||||||||||||||
| Income (loss) before taxes (ex. amortization of intangible assets, restructuring charges, M&I expenses and special litigation reserves) |
72 | 46 | (15 | ) | 6 | (95 | ) | |||||||||||||
| Amortization of intangible assets |
1 | — | — | 1 | — | |||||||||||||||
| Restructuring charges |
7 | (15 | ) | 15 | 21 | (6 | ) | |||||||||||||
| M&I expenses |
26 | 14 | 56 | 43 | 17 | |||||||||||||||
| Special litigation reserves |
164 | N/A | N/A | N/A | N/A | |||||||||||||||
| Income (loss) before taxes |
$ | (126 | ) | $ | 47 | $ | (86 | ) | $ | (59 | ) | $ | (106 | ) | ||||||
| Average loans and leases |
$ | 13,639 | $ | 13,261 | $ | 12,308 | $ | 11,808 | $ | 11,187 | ||||||||||
| Average deposits |
$ | 4,689 | $ | 5,105 | $ | 5,564 | $ | 6,201 | $ | 4,744 | ||||||||||
N/A – Not applicable.
KEY POINTS
| • | Total fee and other revenue decreased $121 million compared to 1Q10 and $24 million compared to 4Q10. Both decreases reflect lower fixed income and derivative trading revenue. The year-over-year decrease also reflects a reduction in foreign currency translation revenue and lower lease residual gains. |
| • | The year-over-year and sequential declines in net interest revenue reflect a reduction in the net interest margin resulting from the continued impact of the low interest rate environment. The year-over-year decline also reflects lower average loan and lease balances resulting from our credit strategy to reduce targeted risk exposure. |
| • | Noninterest expense (excluding amortization of intangible assets, restructuring charges, M&I expenses and special litigation reserves) increased $27 million compared to 1Q10 and decreased $13 million sequentially. The year-over-year increase reflects higher pension and healthcare expenses. The decrease sequentially primarily reflects the write-off of equipment in the fourth quarter of 2010 and a seasonal decrease in marketing and donations. |
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BNY Mellon 1Q11 Quarterly Earnings Review
SUPPLEMENTAL INFORMATION – EXPLANATION OF NON-GAAP FINANCIAL MEASURES
BNY Mellon has included in this Earnings Review certain Non-GAAP measures based upon tangible common shareholders’ equity. BNY Mellon believes that the ratio of tangible common shareholders’ equity to tangible assets of operations is a measure of capital strength that adds additional useful information to investors, supplementing the Tier 1 and Total capital ratios which are utilized by regulatory authorities. Unlike the Tier 1 capital ratio, the tangible common shareholders’ equity ratio fully incorporates those changes in investment 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 BNY Mellon 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 BNY Mellon’s common stock because, unlike the Tier 1 capital ratio, it excludes trust preferred securities issued by BNY Mellon. Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of BNY Mellon’s performance in reference to those assets which are productive in generating income.
BNY Mellon has provided the 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. BNY Mellon has presented revenue measures which exclude the effect of net securities gains and expense measures excluding items, such as merger and integration (“M&I”) expenses, amortization of intangible assets expenses and special litigation reserves taken in the first quarter of 2010. Return on equity measures and operating margin measures which exclude some or all of these items are also presented. The presentation of financial measures excluding special litigation reserves taken in the first quarter of 2010 provides investors the ability to view performance metrics on the basis that management views results. The presentation of income of consolidated investment management funds, net of noncontrolling interest related to the consolidation of certain asset management funds permits investors to view revenue on a basis consistent with prior periods. BNY Mellon believes that these measures are useful to investors because they permit a focus on period to period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon’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 we have incurred charges unrelated to operational initiatives. M&I expenses primarily relate to the Acquisitions which were consummated in the third quarter of 2010 and the merger with Mellon Financial Corporation in 2007. M&I expenses generally continue for approximately three years after the transaction, and can vary on a year-to-year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon’s business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased, typically after approximately three years. Future periods will not reflect such M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded. With regards to the exclusion of net securities gains, BNY Mellon’s primary businesses are Investment Management and Investment Services. The management of these businesses is evaluated on the basis of the ability of these businesses to generate fee and net interest revenue and to control expenses, and not on the results of BNY Mellon’s investment securities portfolio. The investment securities portfolio is managed within the Other group of businesses. The primary objective of the investment securities portfolio is to generate net interest revenue from the liquidity generated by BNY Mellon’s processing businesses. BNY Mellon does not generally originate or trade the securities in the investment securities portfolio. With regards to higher yields related to the restructured investment securities portfolio, client deposits serve as the primary funding source for our investment securities portfolio and we typically allocate all interest revenue to the businesses generating the deposits. Accordingly, the higher yield related to the restructured investment securities portfolio has been included in the results of our businesses. The presentation of financial measures excluding special litigation reserves taken in the first quarter of 2010 provides investors the ability to view performance metrics on the basis that management views results. The presentation of income of consolidated investment management funds, net of noncontrolling interest related to the consolidation of certain assets management funds permits investors to view revenue on a basis consistent with prior periods. Restructuring charges relate to migrating positions to global growth centers and the elimination of certain positions. Excluding these charges permits investors to view expenses on a basis consistent with prior
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BNY Mellon 1Q11 Quarterly Earnings Review
periods. BNY Mellon believes that these presentations, as a supplement to GAAP information, gives investors a clearer picture of the results of its primary businesses.
In this Earnings Review, 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-level basis.
| Reconciliation of net income and EPS – GAAP to Non-GAAP | 1Q10 | 4Q10 | 1Q11 | |||||||||||||||||||||
| (in millions, except per common share amounts) | Net income | EPS (a) | Net income | EPS (a) | Net income | EPS (a) | ||||||||||||||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP – Diluted EPS basis (a) |
$ | 559 | $ | 0.46 | $ | 679 | $ | 0.54 | $ | 625 | $ | 0.50 | ||||||||||||
| Loss from discontinued operations |
(42 | ) | (0.03 | ) | (11 | ) | (0.01 | ) | — | — | ||||||||||||||
| Continuing operations – GAAP |
601 | 0.49 | 690 | 0.55 | 625 | 0.50 | ||||||||||||||||||
| Add: Restructuring charges |
5 | N/A | 15 | 0.01 | (5 | ) | N/A | |||||||||||||||||
| M&I expenses |
16 | 0.01 | 29 | 0.02 | 11 | N/A | ||||||||||||||||||
| Special litigation reserves |
98 | 0.08 | N/A | N/A | N/A | N/A | ||||||||||||||||||
| Net income from continuing operations applicable to common shareholders excluding restructuring charges, M&I expenses and special litigation reserves – Non-GAAP |
720 | 0.59 | (b) | 734 | 0.59 | (b) | 631 | 0.50 | ||||||||||||||||
| Add: Amortization of intangible assets |
62 | 0.05 | 72 | 0.06 | 68 | 0.05 | ||||||||||||||||||
| Net income from continuing operations applicable to common shareholders excluding restructuring charges, M&I expenses, special litigation reserves and amortization of intangible assets – Non-GAAP |
$ | 782 | $ | 0.64 | $ | 806 | $ | 0.65 | $ | 699 | $ | 0.55 | ||||||||||||
| (a) | Diluted earnings per share are determined based on the net income reported on the income statement less earnings allocated to participating securities of $5 million in the first quarter of 2010, $6 million in the fourth quarter of 2010 and $6 million in the first quarter of 2011, and the excess of redeemable value over the fair value of noncontrolling interests of $6 million in the first quarter of 2011. |
| (b) | Does not foot due to rounding. |
| N/A | – Not applicable. |
| Investment management and performance fee revenue | 1Q11 vs. | |||||||||||||||||||
| (dollars in millions) | 1Q10 | 4Q10 | 1Q11 | 1Q10 | 4Q10 | |||||||||||||||
| Investment management and performances fee revenue |
$ | 686 | $ | 800 | $ | 764 | 11 | % | (5 | )% | ||||||||||
| Less: Performance fees |
13 | 73 | 17 | |||||||||||||||||
| Investment management and performance fee revenue excluding performance fees |
$ | 673 | $ | 727 | $ | 747 | 11 | % | 3 | % | ||||||||||
| Income from consolidated investment management funds, net of noncontrolling interests | ||||||||||||||||||||
| (in millions) | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | |||||||||||||||
| Operations of consolidated investment management funds |
$ | 65 | $ | 65 | $ | 37 | $ | 59 | $ | 110 | ||||||||||
| Less: Noncontrolling interest of consolidated investment management funds |
24 | 33 | (12 | ) | 14 | 44 | ||||||||||||||
| Income from consolidated investment management funds, net of noncontrolling interests |
$ | 41 | $ | 32 | $ | 49 | $ | 45 | $ | 66 | ||||||||||
| Income from consolidated investment management funds, net of noncontrolling interests | ||||||||||||||||||||
| (in millions) | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | |||||||||||||||
| Investment management and performance fees |
$ | 25 | $ | 29 | $ | 36 | $ | 35 | $ | 31 | ||||||||||
| Investment and other income |
16 | 3 | 13 | 10 | 35 | |||||||||||||||
| Income from consolidated investment management funds, net of noncontrolling interests |
$ | 41 | $ | 32 | $ | 49 | $ | 45 | $ | 66 | ||||||||||
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BNY Mellon 1Q11 Quarterly Earnings Review
| Reconciliation of income from continuing operations before income taxes – pre-tax operating margin | ||||||||||||||||||||
| (dollars in millions) | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 1Q11 | |||||||||||||||
| Income from continuing operations before income taxes – GAAP |
$ | 884 | $ | 1,006 | $ | 834 | $ | 970 | $ | 949 | ||||||||||
| Less: Net securities gains |
7 | 13 | 6 | 1 | 5 | |||||||||||||||
| Noncontrolling interests of consolidated investment management funds |
24 | 33 | (12 | ) | 14 | 44 | ||||||||||||||
| Add: Special litigation reserves |
164 | N/A | N/A | N/A | N/A | |||||||||||||||
| Restructuring charges |
7 | (15 | ) | 15 | 21 | (6 | ) | |||||||||||||
| M&I expenses |
26 | 14 | 56 | 43 | 17 | |||||||||||||||
| Amortization of intangible assets |
97 | 98 | 111 | 115 | 108 | |||||||||||||||
| Income from continuing operations before income taxes excluding net securities gains, noncontrolling interests of consolidated investment management funds, special litigation reserves, restructuring charges, M&I expenses and amortization of intangible assets – Non-GAAP |
$ | 1,147 | $ | 1,057 | $ | 1,022 | $ | 1,134 | $ | 1,019 | ||||||||||
| Fee and other revenue – GAAP |
$ | 2,529 | $ | 2,555 | $ | 2,668 | $ | 2,972 | $ | 2,838 | ||||||||||
| Income of consolidated investment management funds – GAAP |
65 | 65 | 37 | 59 | 110 | |||||||||||||||
| Net interest revenue – GAAP |
765 | 722 | 718 | 720 | 698 | |||||||||||||||
| Total revenue – GAAP |
3,359 | 3,342 | 3,423 | 3,751 | 3,646 | |||||||||||||||
| Less: Net securities gains |
7 | 13 | 6 | 1 | 5 | |||||||||||||||
| Noncontrolling interests of consolidated asset management funds | 24 | 33 | (12 | ) | 14 | 44 | ||||||||||||||
| Total revenue excluding net securities gains and noncontrolling interests of consolidated investment management funds – Non-GAAP |
$ | 3,328 | $ | 3,296 | $ | 3,429 | $ | 3,736 | $ | 3,597 | ||||||||||
| Pre-tax operating margin (a) |
26 | % | 30 | % | 24 | % | 26 | % | 26 | % | ||||||||||
| Pre-tax operating margin excluding net securities gains, noncontrolling interests of consolidated asset management funds, special litigation reserves, restructuring charges, M&I expenses and amortization of intangible assets – Non-GAAP (a) |
34 | % | 32 | % | 30 | % | 30 | % | 28 | % | ||||||||||
| (a) | Income before taxes divided by total revenue. |
| N/A | – Not applicable. |
| Return on common equity and tangible common equity (dollars in millions) |
1Q10 (a) | 2Q10 (a) | 3Q10 (a) | 4Q10 (a) | 1Q11 | |||||||||||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP |
$ | 559 | $ | 658 | $ | 622 | $ | 679 | $ | 625 | ||||||||||
| Less: Loss from discontinued operations, net of tax |
(42 | ) | (10 | ) | (3 | ) | (11 | ) | — | |||||||||||
| Net income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation |
601 | 668 | 625 | 690 | 625 | |||||||||||||||
| Add: Amortization of intangible assets |
62 | 60 | 70 | 72 | 68 | |||||||||||||||
| Net income from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP |
$ | 663 | $ | 728 | $ | 695 | $ | 762 | $ | 693 | ||||||||||
| Average common shareholders’ equity |
$ | 29,715 | $ | 30,462 | $ | 31,868 | $ | 32,379 | $ | 32,827 | ||||||||||
| Less: Average goodwill |
16,143 | 16,073 | 17,798 | 18,073 | 18,121 | |||||||||||||||
| Average intangible assets |
5,513 | 5,421 | 5,956 | 5,761 | 5,664 | |||||||||||||||
| Add: Deferred tax liability – tax deductible goodwill |
720 | 746 | 763 | 816 | 862 | |||||||||||||||
| Deferred tax liability – non-tax deductible intangible assets |
1,660 | 1,649 | 1,634 | 1,625 | 1,658 | |||||||||||||||
| Average tangible common shareholders’ equity – Non-GAAP |
$ | 10,439 | $ | 11,363 | $ | 10,511 | $ | 10,986 | $ | 11,562 | ||||||||||
| Return on common equity – GAAP (b) |
8.2 | % | 8.8 | % | 7.8 | % | 8.5 | % | 7.7 | % | ||||||||||
| Return on tangible common equity – Non-GAAP (b) |
25.8 | % | 25.7 | % | 26.3 | % | 27.5 | % | 24.3 | % | ||||||||||
| (a) | Presented on a continuing operations basis. |
| (b) | Annualized. |
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BNY Mellon 1Q11 Quarterly Earnings Review
| Equity to assets and book value per common share (dollars in millions, unless otherwise noted) |
March 31, 2010 |
Dec. 31, 2010 |
March 31, 2011 |
|||||||||
| Common shareholders’ equity at period end – GAAP |
$ | 29,683 | $ | 32,354 | $ | 33,258 | ||||||
| Less: Goodwill |
16,077 | 18,042 | 18,156 | |||||||||
| Intangible assets |
5,449 | 5,696 | 5,617 | |||||||||
| Add: Deferred tax liability – tax deductible goodwill |
720 | 816 | 862 | |||||||||
| Deferred tax liability – non-tax deductible intangible assets |
1,660 | 1,625 | 1,658 | |||||||||
| Tangible common shareholders’ equity at period end – Non-GAAP |
$ | 10,537 | $ | 11,057 | $ | 12,005 | ||||||
| Total assets at period end – GAAP |
$ | 220,551 | $ | 247,259 | $ | 266,444 | ||||||
| Less: Assets of consolidated investment management funds |
12,568 | 14,766 | 14,699 | |||||||||
| Subtotal assets of operations – Non-GAAP |
207,983 | 232,493 | 251,745 | |||||||||
| Less: Goodwill |
16,077 | 18,042 | 18,156 | |||||||||
| Intangible assets |
5,449 | 5,696 | 5,617 | |||||||||
| Cash on deposit with the Federal Reserve and other central banks (a) |
14,709 | 18,566 | 24,613 | |||||||||
| Tangible assets of operations at period end – Non-GAAP |
$ | 171,748 | $ | 190,189 | $ | 203,359 | ||||||
| Common shareholders’ equity to total assets – GAAP |
13.5 | % | 13.1 | % | 12.5 | % | ||||||
| Tangible common shareholders’ equity to tangible assets of operations – Non-GAAP |
6.1 | % | 5.8 | % | 5.9 | % | ||||||
| Period end common shares outstanding (in thousands) |
1,212,941 | 1,241,530 | 1,241,724 | |||||||||
| Book value per common share |
$ | 24.47 | $ | 26.06 | $ | 26.78 | ||||||
| Tangible book value per common share – Non-GAAP |
$ | 8.69 | $ | 8.91 | $ | 9.67 | ||||||
| (a) Assigned a zero percent risk weighting by the regulators.
|
||||||||||||
| Calculation of Tier 1 common equity to risk-weighted assets ratio (a) (dollars in millions) |
March 31, 2010 |
Dec. 31, 2010 |
March 31, 2011 (b) |
|||||||||
| Total Tier 1 capital |
$ | 13,426 | $ | 13,597 | $ | 14,405 | ||||||
| Less: Trust preferred securities |
1,667 | 1,676 | 1,686 | |||||||||
| Total Tier 1 common equity |
$ | 11,759 | $ | 11,921 | $ | 12,719 | ||||||
| Total risk-weighted assets |
$ | 101,197 | $ | 101,407 | $ | 102,963 | ||||||
| Tier 1 common equity to risk-weighted assets ratio |
11.6 | % | 11.8 | % | 12.4 | % | ||||||
| (a) | On a regulatory basis using Tier 1 capital as determined under Basel I guidelines. |
| (b) | Preliminary. |
| Return on Tier 1 common equity (dollars in millions) |
1Q11 | |||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation |
$ | 625 | ||
| Average Tier 1 common equity |
$ | 12,320 | ||
| Return on Tier 1 common equity (a) |
21 | % | ||
| (a) | Annualized. |
Cautionary Statement
A number of statements (i) in this Quarterly Earnings Review, (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. These statements may be expressed in a variety of ways, including the use of future or present tense language. 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 Review, 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, 2010 and BNY Mellon’s other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Review speak only as of April 19, 2011 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.
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