October 19, 2011

Q3 Earnings: BNY Mellon’s Pershing Unit Does Better Than Bank

Asset management firm meets analysts’ expectations; profits up 4.7% vs. Pershing’s 17.9% rise

Bank of New York Mellon Corp.'s (BK) Clearing Services unit, which includes Pershing Advisor Services' (PAS) RIA custody business, outperformed its parent in the third quarter of 2011, reporting a year-over-year rise in profits of 17.9% versus profits of just 4.7% for the larger bank.

BNY Mellon on Wednesday reported earnings per share of $0.53, matching analysts’ consensus estimate. EPS stood at $0.51 in the year-ago quarter and at $0.59 in the second quarter of 2011. The bank also saw net long-term inflows of $4 billion in assets under management in Q3 2011.

The bank saw net income of $651 million, 4.7% higher than the $622 million reported in Q3 2010, but 12.9% lower than the $735 million reported in the second quarter of 2011. That compares to Pershing’s quarterly profits of $297 million, up 17.9% year over year from last year’s quarterly profits of $252 million. Pershing’s profits were up 1.7% from the $292 million reported in Q2 2011.

In a June interview with AdvisorOne, PAS Chief Executive Mark Tibergien said Pershing Advisor Solutions is “carrying the momentum” from last year into 2011. Pershing signed up 98 new RIA relationships in 2010, bringing with them an average of $180 million in AUM.

These firms are attracted by Pershing’s “new-model custodian,” Tibergien said, which he characterized as a “B-to-B platform,” not an outgrowth of a retail model.

In the quarterly report, BNY Mellon Chairman, President and CEO Gerald Hassell took note of the third quarter’s “challenging environment” and pointed to BNY Mellon’s year-over-year 9% rise in fee revenue and 8% rise in total revenue despite the challenges.

In August, BNY Mellon Chief Executive and Chairman Robert Kelly quit his post due to “differences in approaches to managing the company,” the bank said. It has been accused along with other custody banks of shortchanging clients when making currency trades.

“Year over year, we achieved revenue and earnings growth as we benefited from new business wins, net long-term asset flows and increased deposits,” said Hassell in a statement. “We also delivered positive operating leverage despite higher legal and severance costs, and generated a 22% return on tangible common equity for the quarter.”

Assets under custody and administration amounted to $25.9 trillion at Sept. 30, an increase of 6% compared with the prior year and a decrease of 2% sequentially, the bank reported. The increase compared with Sept. 30, 2010 was driven by net new business.

The sequential decrease primarily reflected lower equity market values, partially offset by net new business.

For more Q3 news, go to AdvisorOne’s Earnings Calendar for the Finance Sector.

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