October 19, 2010

BNY Mellon's Q3 EPS Bounces Back; Record AUM of $1.14 Trillion

BNY Mellon also sees record $24.4 trillion of assets under custody administration

Bank of New York Mellon Corp. (BK) on Tuesday reported third-quarter 2010 profits of $625 million, or $0.51 per common share, compared with a loss of $2.44 billion, or $2.04, in the third quarter of 2009.

In BNY Mellon's Clearing Services unit, which includes its correspondent broker-dealer clearing operation and Pershing Advisor Services' RIA custody business, total third-quarter revenue increased to $383 million, paced by an 8% increase in clearing services revenue, which totaled $251 million.

The parent company also reported a record level of assets under management totaling $1.14 trillion, up 18% versus a year ago, and continued strong flows in asset and wealth management. The bank saw $11 billion of long-term inflows and $18 billion of short-term inflows along, with a record $24.4 trillion of assets under custody administration, up 10% compared to last year.

The bank missed analysts’ expectations for earnings per share of $0.55, but nevertheless held its position as the world’s largest custody bank.

In its third-quarter 2010 earnings release, BNY Mellon pointed to its recovery after a debt-restructuring loss in 2009, with takeovers and improved market performance boosting assets in Q3. Profits also were up in the second quarter, at $668 million, or $0.55 per common share.

“During the quarter, we successfully completed the Global Investment Servicing (GIS) and BHF Asset Servicing GmbH acquisitions,” said Robert Kelly, chairman and chief executive of BNY Mellon, in a statement. “The acquisitions, combined with the underlying resilience of our business model, helped to offset weakness in the capital markets. The strength of our balance sheet and meaningful capital generation position us well to meet the proposed new capital standards.”

BK stock after the earnings release was trading in a range of $25.95 to $26.58 per share versus the prior day’s close of $26.62.

The quarterly earnings report showed that BNY Mellon subsidiary Pershing LLC, which works with institutional and retail financial organizations, broker-dealers and RIAs, had $802.7 billion in assets held in custody as of Sept. 30, 2010.

The $24.4 trillion of assets held at BNY Mellon was 10% higher compared to the prior year and 12% sequentially. Both increases primarily reflected the acquisitions of GIS on July 1 and BHF on Aug. 2, as well as higher market values and new business.

The $1.14 trillion of assets under management represented an increase of 18% compared with the prior year and 9% sequentially. The year-over-year increase was primarily due to the acquisition of Insight Investment Management. The sequential increase primarily reflected higher market values and new business.

Asset and wealth management fees were $696 million in the third quarter. Adjusted for performance fees and income from consolidated asset management funds, net of noncontrolling interests, these fees totaled $716 million, an increase of 8% compared with the prior-year period and 3% sequentially. The year-over-year increase reflected the impact of the Insight acquisition, as well as improved market values and net new business.

The Q3 provision for credit losses was a credit of $22 million compared with a Q2 charge of $20 million and a Q3 2009 charge of $147 million. The decrease in the provision year-over-year and sequentially reflected a decline of 26% in substandard loans in Q3 2010.

For Q2 2010 on July 20, BNY Mellon reported income from continuing operations of $668 million, or $0.55 per share, compared with $267 million, or $0.23 per share, in the second quarter of 2009. The Q2 results beat analysts' estimates by $0.01 per share.

Read more about Bank of New York Mellon’s Q2 2010 earnings at AdvisorOne.com.

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