The Bank of New York Mellon Corp. 's BK third-quarter 2015 earnings per share of 74 cents comfortably surpassed the Zacks Consensus Estimate of 71 cents, driven by a dip in costs and a slight improvement in the top line. Further, the figure compared favorably with the prior-year quarter adjusted earnings of 64 cents.
Lower expenses and a rise in net interest income largely drove better-than-expected results. However, a decrease in non-interest income, mainly due to the absence of several one-time gains recorded in the prior-year quarter, acted as a headwind. Deterioration in provision for loan losses acted as another undermining factor.
Net income applicable to common shareholders totaled $820 million, down from $1.07 billion in the prior-year quarter.
Net revenue (non-GAAP) increased 1% year over year to $3.80 billion. However, the figure lagged the Zacks Consensus Estimate of $3.85 billion.
Net interest revenue, on a fully taxable equivalent basis, was $773 million, up 5% year over year. The increase mainly reflected higher securities and loans, and lower interest expense on deposits.
Moreover, net interest margin increased 4 basis points to 0.98%.
Total fee and other revenues plunged 21% year over year to $3.05 billion. This was mainly triggered by lower investment management and performance fees, distribution and servicing income as well as a drastic slump in investment and other income.
Total non-interest expenses (non-GAAP) amounted to $2.60 billion, down 3% year over year. This reflected a decline in all components except other expenses.
AUM was $1.63 trillion as of Sep 30, 2015, on par with the prior-year quarter level. This reflected higher market values, the Cutwater acquisition and net new business, which were offset by the unfavorable impact of a stronger U.S. dollar.
Moreover, assets under custody and administration totaled $28.5 trillion, up 1% year over year. Net new business was partially offset by the unfavorable impact of a stronger U.S. dollar and lower equity market values.
BNY Mellon's credit quality depicted a mixed picture. Non-performing assets fell 16% year over year to $123 million. Moreover, allowance for loan losses declined 5% to $181 million.
Provision for credit losses was $1 million compared with a benefit of $19 million recorded in the prior-year quarter.
BNY Mellon's capital ratios deteriorated during the quarter. As of Sep 30, 2015, common equity tier-1 capital ratio (Standardized Basel 3 fully phased-in) came in at 9.9% compared with 10.6% as of Dec 31, 2014. Tangible common equity ratio stood at 6.2% compared with 6.5% as of Dec 31, 2014.
During the reported quarter, BNY Mellon bought back 15.8 million shares for $690 million. This was part of the company's 2015 capital plan that includes a $3.1-billion share repurchase program.
We believe BNY Mellon's restructuring initiatives, cost-control measures and acquisitions will go a long way in supporting its bottom-line growth. Moreover, a sturdy capital position and enhanced capital deployment activities will continue to boost investors' confidence in the stock. However, a low interest rate environment weighs on the company's revenues slightly but persistently.
Currently, BNY Mellon carries a Zacks Rank #3 (Hold).
Performance of Other Major Regional Banks
BB&T Corp.'s BBT third-quarter 2015 earnings came in at 64 cents per share, down from the prior-year figure of 70 cents. The Zacks Consensus Estimate was pegged at 66 cents per share. Results were driven by a rise in revenues, which were supported by the Susquehanna acquisition. However, higher expenses as well as provision for loan losses acted as headwinds.
SunTrust Banks, Inc. STI third-quarter 2015 earnings came in at $1.00. The results included certain non-recurring items. The Zacks Consensus Estimate was pegged at 83 cents. Results were driven by higher non-interest income, lower provision for credit losses and an almost stable expense level. However, a strained net interest income was the downside.
Northern Trust Corp. NTRS is scheduled to announce results on Oct 21.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.