In the first quarter of 2012, higher clearing services fees in the Bank of New York Mellon unit that includes the custody business for registered investment advisors helped BNY Mellon offset lower trading volumes versus a year ago, including a 21% drop in foreign-exchange trading as the bank fights a number of forex lawsuits.
Fees for BNY Mellon’s (BK) Clearing Service unit, which includes Pershing Advisor Services' (PAS) RIA custody business, totaled $303 million in Q1 compared with $292 million at this time a year ago, up 4%, and $278 million in the first quarter of 2011, up 9%, the bank reported Wednesday.
Pershing’s year-over-year increase was driven by new business and growth in mutual fund assets and retirement accounts, but was partially offset by lower trading volumes and higher money market fee waivers, according to BNY Mellon’s quarterly earnings review. The increase over last quarter reflected higher trading volumes and growth in mutual fund assets, the bank said.
BNY Mellon’s profits were nipped by allegations that it overcharged clients for currency trades, The Wall Street Journal on Thursday reported analysts as saying.
Along with State Street Corp., which also this week reported lower quarterly foreign-exchange revenue, BNY Mellon is battling law-enforcement probes examining whether “they allegedly defrauded investors by systematically overcharging them on currency trades,” according to the Journal, which reported that both banks deny wrongdoing.
“BNY Mellon, which is fighting lawsuits filed by six states seeking a total of more than $2 billion in damages in the matter, reported Wednesday that first-quarter revenue from foreign-exchange trading was $136 million, down 21% from the year-earlier period,” the Journal said.
However, the bank saw record growth in assets under custody and administration as well as assets under management.
Assets under custody and administration totaled a record $26.6 trillion on March 31, an increase of 4% compared with the prior year and 3% sequentially. The bank credited net new business and higher market values for the gain. Assets under management, excluding securities lending assets, posted a record $1.3 trillion on March 31, an increase of 6% compared with the prior year and 4% sequentially.
“We enjoyed solid sequential growth in investment management and services fees, as we benefited from new business wins and improved equity value,” said BNY Mellon Chairman, President and Chief Executive Gerald Hassell in a statement. “We are pleased with our performance on the recent regulatory stress test. The results reflect the strength of our business model, the excellent quality of our balance sheet and our continuing ability to return capital to our shareholders while maintaining a very strong capital position.”
Read full coverage of AdvisorOne's Q1 2012 earnings season.