The Bank of New York Mellon Corp.
) first-quarter 2014 earnings per share of 57 cents surpassed the
Zacks Consensus Estimate of 54 cents reflecting improvement in
asset under management. Also, this was 14% above the prior-year
quarter's adjusted figure of 50 cents.
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Better-than-expected results were driven by rise in net interest
revenue and fee income coupled with a fall in operating expenses.
Further, improved asset position and strong capital position were
the other tailwinds. However, lower benefit from provision was a
Net income applicable to common shareholders was $661 million
compared with net loss of $266 million in the prior-year quarter.
The year-ago quarter included a charge related to the U.S. Tax
Court's disallowance of certain foreign tax credits of $854
BNY Mellon's total revenue came in at $3.63 billion, almost in
line with the year-ago quarter. However, it lagged the Zacks
Consensus Estimate of $3.73 billion.
Fully taxable equivalent net interest revenues were $744 million,
up 2% year over year. The rise mainly reflected a change in the
mix of assets and higher average deposits, partly offset by lower
yields on investment securities. However, net interest margin
declined 6 basis points to 1.05%.
Total fee and other revenues rose 2% year over year to $2.86
billion due to higher investment services fees, investment
management and performance fees, and investment and other income.
These were partially offset by decrease in distribution and
servicing income, foreign exchange and other trading revenues as
well as financing-related fees.
Excluding merger & integration expenses, amortization of
intangible assets, litigation costs and restructuring charges,
non-interest expense was $2.68 billion, down 1% year over year.
The fall was primarily due to lower other expenses and decline in
amortization of intangible assets, partially offset by increase
in staff, professional, legal and other purchased services.
Assets under management totaled $1.62 trillion as of Mar 31,
2014, up 14% from the year-ago quarter. Assets under custody and
administration totaled $27.9 trillion as of Mar 31, 2014,
increasing 6% year over year. Both the increases were
attributable to rise in market values as well as net new
BNY Mellon's capital ratios remained strong. At the end of the
reported quarter, the company's common equity tier 1 capital
ratio Standardized Approach (Basel 3 Transition) was 11.0%
compared with 9.4% at the end of the prior-year quarter. Tangible
common equity ratio was 6.6% compared with 5.9% at the end of the
BNY Mellon's credit quality depicted a mixed bag. Non-performing
assets fell 38% year over year to $146 million. Likewise,
allowance for loan losses declined 16% from the prior-year
quarter to $198 million in the reported quarter.
However, provision for credit losses was a benefit of $18 million
in the quarter, compared with a benefit of $24 million in the
prior-year quarter level.
Capital Deployment Activities
During the reported quarter, BNY Mellon bought back 11.6 million
shares for $375 million. This was part of the company's capital
plan approved by the Federal Reserve, which sanctioned share
repurchases worth $1.35 billion through the first quarter of
Further, in March, BNY Mellon received the Federal Reserve's
approval for its 2014 capital plan that included share
repurchases up to $1.74 billion between the second quarter of
2014 and the first quarter of 2015. Additionally, earlier this
month, the company (as part of its 2014 capital plan) raised its
quarterly cash dividend by 13% to 17 cents per share.
We believe BNY Mellon's enhanced capital deployment activity will
boost investors' confidence in the stock. Further, the top line
is expected to benefit from restructuring initiatives. However, a
low interest rate environment and stringent regulatory landscape
will likely hamper revenue growth in the coming quarters.
Currently, BNY Mellon carries a Zacks Rank #3 (Hold).
Performance of Other Major Banks
SunTrust Banks, Inc.
) outpaced the Zacks Consensus Estimate. While SunTrust benefited
from prudent expense management and lower provisions, KeyCorp's
results were driven by lower expenses, a decline in provision for
loan and lease losses and higher fee income.
However, a decline in the top line led
) first-quarter earnings to miss the Zacks Consensus Estimate.
This was partially offset by prudent expense management.