Financial services company Bank of New York Mellon Corp. (BK) Tuesday reported a loss for the third quarter of fiscal 2009, hurt by a hefty charge from the restructuring of its investment portfolio. Excluding various items, the bank reported a profit, that came lower than the previous year.
The company reported third-quarter net loss applicable to common shareholders, including discontinued operations, of $2.46 billion or $2.05 per common share, compared to net income of $303 million or $0.26 per common share, in the third quarter of 2008.
The bank said that consistent with its ongoing strategy to reduce risk from the balance sheet, and reflecting the recent improvement in the fixed income markets, it has sold or are in the process of restructuring its investment securities portfolio. The restructuring impacts approximately $12.1 billion of investment securities and the bank recognized a charge of $4.8 billion pre-tax, or $2.54 billion after tax.
Loss from continuing operations applicable to common shareholders reached $2.439 billion or $2.04 per common share, compared to income of $303 million or $0.26 per common share, in the third quarter of 2008 and $267 million or $0.23 per share in the second quarter of 2009.
Net income from continuing operations applicable to common shareholders excluding the investment securities losses, TARP redemption premium/dividend, FDIC special assessment, SILO/LILO/tax settlements, support agreement charges, M&I expenses and benefit of tax settlements for the quarter was $642 million, or $0.54 per share, compared to $929 million or $0.81 per share in the same quarter of fiscal 2008.
Analysts polled by Thomson Reuters expected the company to report earnings of $0.47 per share. Analysts' estimates typically exclude special items.
Bank of New York Mellon also reported total GAAP fee revenue of $2.617 billion, down 15% from $3.088 billion in the year ago-quarter. Total fee and other revenue was negative $2.22 billion, compared with positive $2.93 billion in the year-ago quarter.
Net securities losses were $4.83 billion, wider than a loss of $162 million in the previous year.
The bank's GAAP net interest revenue rose 5% to $716 million from $681 million in the previous year. Meanwhile, net interest revenue after provision for credit losses was down at $569 million compared with $658 million last year.
The bank also reported total revenue excluding investment securities losses and SILO/LILO charges of $3.33 billion, a decline of 14% from $3.88 billion in the prior-year quarter. Wall Street analysts projected revenues of $3.16 billion for the quarter.
Securities servicing fees totaled $1.238 billion, a decrease of 20% year-over-year, hurt by lower securities lending revenue and money market related distribution fees and a decline in market values.
Further, the bank's asset and wealth management fees, excluding performance fees, totaled $649 million, a decline of 18% compared with the prior year, reflecting global weakness in market values, partially offset by new business.
Foreign exchange and other trading activities were down 36% at $246 million, hurt by lower foreign exchange revenue, due to a decline in volumes and volatility, as well as a lower valuation of the credit derivatives used to hedge the loan portfolio.
The bank also reported higher investment income and other revenue of $205 million for the quarter, primarily due to leasing gains and a gain on the sale of VISA shares.
During the third quarter, the bank's provision for credit losses was $147 million, compared with $61 million in the second quarter of 2009. This increase is primarily related to downgrades in the insurance and media portfolios. Non-performing assets totaled $560 million, an increase of $182 million compared with June 30, 2009, primarily reflecting downgrades in the insurance portfolio, the bank noted.
Bank of New York Mellon also said that it declared a quarterly common stock dividend of 9 cents per common share, payable on November 10 to shareholders of record as of the close of business on October 30.
For the nine-month period, the bank reported a net loss applicable to common shareholders of the Bank of New York Mellon of $1.96 billion or $1.67 per share, compared with a profit of $1.36 billion or $1.17 per share a year ago. Loss from continuing operations was $1.53 billion, compared with a profit of $1.37 billion in the same period of fiscal 2008.
The bank's total fee revenue was $7.56 billion, down from $9.28 billion in the previous year. Total fee and other revenue declined to $2.18 billion from $8.897 billion in the prior-year period.
Robert Kelly, chairman and chief executive officer of the bank stated, "Consistent with our ongoing strategy to reduce balance sheet risk, we took advantage of the recent strength in the fixed income markets by selling or recognizing losses on a significant portion of our investment securities portfolio. This restructuring does not materially impact capital, is expected to benefit net interest revenue by $125-$175 million in 2010, and significantly reduces the risk of future securities losses."
Among others in the industry, JPMorgan Chase & Co. (JPM) has reported a sharp rise in its third-quarter profit, helped mainly by strong results in its Investment Bank and Retail Banking businesses, which offset losses in Card Services and Consumer Lending segments. The investment bank reported net earnings of $3.59 billion or $0.82 per share, compared with $527 million or $0.09 per share last year. Quarterly revenues were $26.62 billion, up 81% from $14.74 billion in the prior-year quarter.
Another peer, State Street Corp. (STT) Tuesday posted higher net profit for the third quarter. The company's net income available to common shareholders was $516 million, up 8% from $477 million in the prior-year quarter. Earnings per share declined 5% to $1.04 from $1.09 earned in the previous year. The company's total revenue declined 19% to $2.24 billion from last year's $2.77 billion.
BK is trading at $28.94, up $1.71, on a volume of 12.66 million shares.
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