Bank of New York Mellon Corp., known as BNY Mellon (BK: Quote) on Wednesday reported higher earnings per share for its first quarter, which came in line with analysts' estimates. The custodian bank's net profit declined on provision for bad loans, margin pressure as well as flat revenues, owing to lower foreign exchange gross. The bank also declared a quarterly dividend.
Gerald Hassell, chairman, president and chief executive officer of BNY Mellon, said, "We are seeing the early results of our operational excellence initiatives as we generated significant positive operating leverage relative to the fourth quarter."
Among other custodian banks, State Street Corp.'s (STT: Quote) first-quarter profit declined from last year and missed analysts' estimates, hurt by higher expenses and lower servicing fees, while Northern Trust Corp.'s (NTRS) earnings matched estimates reflecting higher net revenues and a lower provision for credit losses.
For its first quarter, BNY Mellon generated net income applicable to common shareholders of $619 million, compared with last year's $625 million. Applicable net income after adjustments grew to $617 million from $613 million last year. Earnings per share increased to $0.52 from $0.50 a year earlier.
On average, 23 analysts polled by Thomson Reuters expected earnings per share of $0.52 for the quarter. Analysts' estimates typically exclude one-time items.
Both net income and earnings per share climbed sequentially as the company witnessed a solid sequential growth in investment management and services fees, benefited from new business wins and improved equity values.
Total revenue for the first quarter remained at the prior year level of $3.65 billion, while analysts were looking for revenues of $3.59 billion. Foreign exchange revenue plunged 21 percent to $136 million, due to lower volumes and volatility, and was down 26% sequentially. The majority revenue share of fee and other revenue remained flat, which offset a 10 percent growth in net interest revenue. On an adjusted basis, total revenues grew 3 percent.
The growth in net interest revenue primarily reflected higher average client deposits, investment in high quality investment securities and higher loan levels.
Net interest margin fell to 1.32 percent from 1.49 percent a year ago, primarily driven by increased client deposits nearly half of which were invested in liquid, lower-yielding assets, the company noted.
In the quarter, investment services fees decreased 4 percent and investment management and performance fees fell 2 percent.
The provision for credit losses was $5 million in the first quarter, while there was no provision in the last year.
As of March 31, assets under management, excluding securities lending assets, grew 6 percent to $1.3 trillion and assets under custody and administration rose 4 percent to $26.6 trillion - both primarily reflecting net new business and higher market values.
Further, the company said its Board declared a quarterly dividend of $0.13 per share, payable on May 8 to shareholders of record as of the close of business on April 30.
BNY Mellon shares closed Tuesday's trading at $23.80, up $0.51 or 2.19 percent.
by RTT Staff Writer
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