January 18, 2012

Q4 Earnings: BNY Mellon Profits Drop 25%; Pershing Flat

Declines disappoint analysts as low trading volumes and market volatility cut into profits

http://www.advisorone.com/2012/01/18/advisorones-2011-q4-earnings-calendar-for-the-finaThe Bank of New York Mellon Corp. (BK) on Wednesday reported a 25% decrease in quarterly profits compared to last year. Clearing services revenue for Pershing was flat as trading volumes were lower.

BNY Mellon’s Q4 2011 profits totaled $505 million, or $0.42 per share, compared with $679 million, or $0.54 per share, in the fourth quarter of 2010. Analysts had anticipated Q4 2011 profits of $0.52.

Profits also were down compared with the prior quarter. In Q3 2011, net income stood at $651 million, or $0.53 per common share.

In the Clearing Services unit, which includes Pershing Advisor Services' (PAS) RIA custody business, revenues were essentially flat, at $275 million in Q4 2011 compared with $276 million in Q4 2010. Third-quarter 2011 revenues were 7% higher than the fourth quarter’s, totaling $294 million.

“The year-over-year results [at Pershing] were driven by new business, which was offset by higher money market fee waivers and lower trading volumes. The sequential decrease reflects lower trading volumes and higher money market fee waivers,” according to BNY Mellon’s Q4 2011 earnings review.

Overall, assets under custody and administration amounted to $25.8 trillion on Dec. 31, 2011, an increase of 3% compared with the prior year and flat quarter over quarter.  The increase compared with Dec. 31, 2010 was driven by net new business.

Assets under management, excluding securities lending assets, amounted to $1.26 trillion, an increase of 8% compared with the prior year and 5% compared with Q3 2011.

The year-over-year AUM increase primarily reflected net new business, while the quarter-to-quarter increase resulted from higher equity markets and net new business. Long-term inflows totaled $16 billion, benefiting from fixed income and equity indexed products. Short-term inflows totaled $7 billion.

Like many other big banks in Q4, BNY Mellon worked on offsetting the volatile market conditions by shoring up its capital position.

"I am pleased with the meaningful progress we made in improving our capital position and reducing operating expenses,” said Gerald L. Hassell, chairman, president and CEO Gerald Hassell in a statement. “Our Basel III Tier 1 common equity ratio was 7.1% at the end of the quarter, and we continued to generate strong returns on tangible common equity.  It was a challenging revenue quarter, as general uncertainty in the financial markets resulted in lower-than-normal levels of client activity. Our results were also impacted by seasonality in our Depositary Receipts business.”

Read about BNY Mellon’s Q3 2011 earnings at AdvisorOne.com

See AdvisorOne's Q4 earnings calendar for the financial sector.

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