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BNY Mellon Reports Fourth Quarter Earnings of $513 Million or $0.44 Per Common Share; Including An After-Tax Loss of $115 Million, or $0.10 Per Common Share, Related To An Equity Investment

NEW YORK, Jan. 17, 2014 /PRNewswire/ -- 

INVESTMENT MANAGEMENT FEES UP 5% YEAR-OVER-YEAR

  • Assets under management up 14% year-over-year
  • Net long-term inflows of $95 billion over last 12 months

INVESTMENT SERVICES FEES UP 5% YEAR-OVER-YEAR

  • Assets under custody and/or administration up $1.3 trillion over last 12 months
  • Clearing services revenue up 10% year-over-year

REPURCHASED 10 MILLION COMMON SHARES FOR $318 MILLION IN FOURTH QUARTER OF 2013

RETURN ON TANGIBLE COMMON EQUITY FOR FULL YEAR 2013 15%(a)

The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported fourth quarter net income applicable to common shareholders of $513 million, or $0.44 per diluted common share.  Excluding the after-tax loss of $115 million, or $0.10 per diluted common share, related to an equity investment, net income applicable to common shareholders totaled $628 million, or $0.54 per diluted common share.(a)  Net income applicable to common shareholders was $622 million, or $0.53 per diluted common share, in the fourth quarter of 2012 and $967 million, or $0.82 per diluted common share, in the third quarter of 2013.  Excluding the benefit related to the U.S. Tax Court's partial reconsideration of a tax decision, net income applicable to common shareholders totaled $706 million, or $0.60 per diluted common share, in the third quarter of 2013.(a)

"2013 marked a year of strong growth in our core investment services and investment management fees, as we benefitted from improved market conditions and our focus on driving organic growth.  Our Investment Management business generated $95 billion of net long-term flows for the year and, in Investment Services, we realized strong fee growth in Asset Servicing, Clearing and Issuer Services," said Gerald L. Hassell, chairman and chief executive officer of BNY Mellon.

"We remain focused on controlling expenses and achieved our Operational Excellence Initiatives goals a full year ahead of schedule, setting the stage for a broader, continuous transformation process, which is expected to create significant financial benefit over the next few years.  Our businesses continue to generate significant excess capital, which gives us increased financial flexibility going forward," added Mr. Hassell.

"Our accomplishments reflect the strength of our business model and the tremendous contributions of our colleagues across the company, who continue to serve our clients extraordinarily well and drive shareholder value," concluded Mr. Hassell.

Net income applicable to common shareholders totaled $2.047 billion, or $1.74 per diluted common share, for the full-year 2013 compared with $2.427 billion, or $2.03 per diluted common share, for the full-year 2012.  Excluding the impact of the U.S. Tax Court's decisions related to the disallowance of certain foreign tax credits, net income applicable to common shareholders totaled $2.640 billion, or $2.24 per diluted common share, in 2013.(a)

Fourth Quarter Results – Sequential growth rates are unannualized.  Please refer to the Quarterly Earnings Review for a detailed review of our businesses. 

Total revenue

Reconciliation of total revenue



4Q13 vs.

(dollars in millions)

4Q13

3Q13

4Q12


4Q12

3Q13

Fee and other revenue

$ 2,797

$ 2,963

$ 2,850


(2)%

(6)%

Income from consolidated investment management funds

36

32

42




Net interest revenue

761

772

725




Total revenue – GAAP

3,594

3,767

3,617


(1)

(5)

Add:   Loss related to an equity investment (pre-tax)

175

-

-




Less:  Net income attributable to noncontrolling interests related to

           consolidated investment management funds

17

8

11




Total revenue – Non-GAAP

$ 3,752

$ 3,759

$ 3,606


4%

-%

 

  • Assets under custody and/or administration ("AUC/A") amounted to $27.6 trillion at Dec. 31, 2013, an increase of 5% compared with the prior year and 1% sequentially.  The year-over-year increase was primarily driven by higher market values and net new business.  The sequential increase primarily reflects higher market value.  Assets under management ("AUM") amounted to a record $1.58 trillion at Dec. 31, 2013, an increase of 14% compared with the prior year and 3% sequentially.  The year-over-year increase primarily resulted from net new business and higher equity market values.  The sequential increase primarily reflects higher equity market values.  Long-term inflows totaled $2 billion and short-term inflows totaled $6 billion for the fourth quarter of 2013. 
  • Investment services fees totaled $1.68 billion, an increase of 5% year-over-year and a decrease of 3% sequentially.  The year-over-year increase primarily reflects higher asset servicing fees driven by higher market values and organic growth, higher clearing services fees resulting from higher mutual fund fees, asset-based fees and volumes and higher issuer services fees driven by higher Depositary Receipts revenue, partially offset by the continued run-off of high margin securitizations in Corporate Trust and lower securities lending revenue primarily due to lower spreads.  The sequential decrease primarily reflects seasonally lower Depositary Receipts revenue, partially offset by higher asset servicing fees and clearing services fees. 
  • Investment management and performance fees were $904 million, an increase of 6% year-over-year and 10% sequentially.  The growth rates in both prior periods were negatively impacted by approximately 1% due to the sale of the Newton private client business.  The year-over-year increase was primarily driven by higher equity market values, net new business and higher performance fees, partially offset by higher money market fee waivers and the average impact of the stronger U.S. dollar.  The sequential increase primarily reflects seasonally higher performance fees and equity market values. 
  • Foreign exchange and other trading revenue totaled $146 million compared with $139 million in the fourth quarter of 2012 and $160 million in the third quarter of 2013.  In the fourth quarter of 2013, foreign exchange revenue totaled $126 million, an increase of 19% year-over-year and a decrease of 18% sequentially.  The year-over-year increase primarily reflects higher volumes and volatility.  The sequential decrease was primarily driven by lower volatility, partially offset by higher volumes.  Other trading revenue was $20 million in the fourth quarter of 2013 compared with $33 million in fourth quarter of 2012 and $6 million in the third quarter of 2013.  The year-over-year decrease primarily reflects lower derivatives trading revenue.  The sequential increase was primarily driven by higher fixed income trading revenue, partially offset by lower equity derivatives trading revenue.
  • Investment and other income was a loss of $60 million in the fourth quarter of 2013 compared with income of $116 million in the fourth quarter of 2012 and income of $135 million in the third quarter of 2013.  The decreases compared with both prior periods primarily reflect a loss related to an equity investment.
  • Net interest revenue and the net interest margin (FTE) were $761 million and 1.09% in the fourth quarter of 2013 compared with $725 million and 1.09% in the fourth quarter of 2012 and $772 million and 1.16% in the third quarter of 2013.  The year-over-year increase in net interest revenue was primarily driven by higher average interest-earning assets.  The sequential decrease primarily reflects a change in the mix of interest-earning assets, partially offset by an increase in average interest-earning assets. 
  • The net unrealized pre-tax gain on our total investment securities portfolio was $309 million at Dec. 31, 2013 compared with $723 million at Sept. 30, 2013.  The decrease was primarily driven by an increase in market interest rates. 

The provision for credit losses was $6 million in the fourth quarter of 2013, a credit of $61 million in the fourth quarter of 2012 and a provision of $2 million in the third quarter of 2013.  The provision in the fourth quarter of 2013 was driven by an increase in the allowance for a municipal-related entity. 

_________________________________________________________________________________

(a) See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 10 for the calculation of the Non-GAAP measures.

Total noninterest expense

Reconciliation of noninterest expense



4Q13 vs.

(dollars in millions)

4Q13

3Q13

4Q12


4Q12

3Q13

Noninterest expense – GAAP

$ 2,877

$ 2,779

$ 2,825


2%

4%

Less:  Amortization of intangible assets

82

81

96




          M&I, litigation and restructuring charges

2

16

46




Total noninterest expense excluding amortization of intangible assets,

 M&I, litigation and restructuring charges – Non-GAAP

$ 2,793

$ 2,682

$ 2,683


4%

4%

 

  • Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges (Non-GAAP) increased 4% both year-over-year and sequentially.  The year-over-year increase primarily resulted from higher staff, legal, consulting and marketing expenses.  The sequential increase primarily resulted from higher legal, consulting and business development expenses. 

The effective tax rate was 21.8% in the fourth quarter of 2013 and was positively impacted by the tax benefit associated with the loss related to an equity investment and lower state taxes. 

Capital ratios

Dec. 31,

Sept. 30,

Dec. 31,



2013 (a)

2013

2012


Estimated Basel III Tier 1 common equity ratio – Non-GAAP (b)(c):





Standardized Approach

10.6%

10.1%

N/A


Advanced Approach

11.3 (d)

11.1

9.8%


Basel I Tier 1 common equity to risk-weighted assets ratio – Non-GAAP (c)

14.5

14.2

13.5


Basel I Tier 1 capital ratio

16.2

15.8

15.0


Basel I Total (Tier 1 plus Tier 2) capital ratio

17.0

16.8

16.3


Basel I leverage capital ratio

5.4

5.6

5.3


BNY Mellon shareholders' equity to total assets ratio (c)

10.0

9.9

10.1


BNY Mellon common shareholders' equity to total assets ratio (c)

9.6

9.5

9.9


Tangible BNY Mellon shareholders' equity to tangible

assets of operations ratio – Non-GAAP (c)

6.8

6.4

6.4


(a)   Basel III and Basel I ratios are preliminary.


(b)   At Dec. 31, 2013 and Sept. 30, 2013, the estimated Basel III Tier 1 common equity ratio is based on our interpretation of and expectations regarding the final rules released by the Board of Governors of the Federal Reserve (the "Federal Reserve") on July 2, 2013, on a fully phased-in basis.  For periods prior to June 30, 2013, these ratios were estimated using our interpretation of the Federal Reserve's Notices of Proposed Rulemaking ("NPRs") dated June 7, 2012, on a fully phased-in basis.


(c)   See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 10 for a calculation of these ratios.


(d)   Changes in January 2014 to the probable loss model associated with unsecured wholesale credit exposures within our Advanced Approach capital model will impact risk-weighted assets.  The Company did not include the impact at Dec. 31, 2013.  However, a preliminary estimate of the revised methodology to the portfolio at Sept. 30, 2013 would have added approximately 6% to the risk-weighted assets.

N/A – Not available.


Dividends

Common – On Jan. 17, 2014, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.15 per common share.  This cash dividend is payable on Feb. 7, 2014 to shareholders of record as of the close of business on Jan. 31, 2014. 

Preferred – On Jan. 17, 2014, The Bank of New York Mellon Corporation also declared the following dividends for the noncumulative perpetual preferred stock, liquidation preference $100,000 per share, for the dividend period ending in March 2014, in each case, payable on March 20, 2014 to holders of record as of the close of business on March 5, 2014:

  • $1,000.00 per share on the Series A Preferred Stock (equivalent to approximately $10.00 per Normal Preferred Capital Security of Mellon Capital IV, each representing 1/100th interest in a share of Series A Preferred Stock); and
  • $1,300.00 per share on the Series C Preferred Stock (equivalent to approximately $0.33 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock).

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle.  Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets.  As of December 31, 2013, BNY Mellon had $27.6 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management.  BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

Supplemental Financial Information

The Quarterly Earnings Review and Supplemental Financial Trends for The Bank of New York Mellon Corporation have been updated through Dec. 31, 2013 and are available at www.bnymellon.com (Investor Relations - Financial Reports).

Conference Call Information

Gerald L. Hassell, chairman and chief executive officer and Thomas P. Gibbons, vice chairman and chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EST on Jan. 17, 2014.  This conference call and audio webcast will include forward-looking statements and may include other material information. 

Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (International), and using the passcode: Earnings, or by logging on to www.bnymellon.com.  The Earnings Release, together with the Quarterly Earnings Review and Supplemental Financial Trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EST on Jan. 17, 2014.  Replays of the conference call and audio webcast will be available beginning Jan. 17, 2014 at approximately 2 p.m. EST through Jan. 31, 2014 by dialing (866) 499-4577 (U.S.) or (203) 369-1811 (International).  The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

 

THE BANK OF NEW YORK MELLON CORPORATION

Financial Highlights


(dollar amounts in millions, except per common

amounts and unless otherwise noted; quarterly

returns are annualized)

Quarter ended


Year-to-date

Dec. 31,

2013

Sept. 30,

2013

Dec. 31,

2012


Dec. 31,

2013

Dec. 31,

2012









Return on common equity (a)

5.7%

11.2%

7.1%


5.9%

7.1%


Non-GAAP (a)

6.3%

8.9%

8.2%


8.3%

8.8%









Return on tangible common equity – Non-GAAP (a)

14.3%

28.4%

18.8%


15.4%

19.3%


Non-GAAP adjusted (a)

14.3%

21.5%

19.7%


19.7%

21.8%









Fee revenue as a percentage of total revenue excluding net securities gains

78%

79%

78%


78%

78%









Annualized fee revenue per employee (based on average headcount) (in thousands)

$ 215

$ 232

$ 227


$ 232

$ 232









Percentage of non-U.S. total revenue (b)

39%

39%

36%


37%

37%









Pre-tax operating margin (a)

20%

26%

24%


25%

23%


Non-GAAP (a)

22%

29%

27%


27%

29%









Net interest margin (FTE)

1.09%

1.16%

1.09%


1.13%

1.21%









Selected average balances:







Interest-earning assets

$285,779

$271,150

$270,215


$272,841

$250,450

Assets of operations

$344,629

$329,887

$324,601


$330,711

$304,102

Total assets

$356,135

$341,750

$335,995


$342,311

$315,381

Interest-bearing deposits

$157,020

$153,547

$142,719


$152,408

$134,259

Noninterest-bearing deposits

$ 79,999

$ 72,075

$ 79,987


$ 73,288

$ 69,951

Preferred stock

$ 1,562

$ 1,562

$ 1,066


$ 1,388

$ 437

Total The Bank of New York Mellon Corporation common

shareholders' equity

$ 35,698

$ 34,264

$ 34,962


$ 34,832

$ 34,333









Average common shares and equivalents

outstanding (in thousands):







Basic

1,142,861

1,148,724

1,161,212


1,150,689

1,176,485

Diluted

1,147,961

1,152,679

1,163,753


1,154,441

1,178,430









Period-end data:







Assets under management (in billions) (c)

$ 1,583 (d)

$ 1,532

$ 1,386


$ 1,583 (d)

$ 1,386

Assets under custody and/or administration (in trillions) (e)

$ 27.6 (d)

$ 27.4

$ 26.3


$ 27.6 (d)

$ 26.3

Market value of securities on loan (in billions) (f)

$ 235 (g)

$ 255

$ 237


$ 235 (g)

$ 237









Full-time employees

51,100

50,800

49,500


51,100

49,500

Book value per common share – GAAP (a)

$ 31.48

$ 30.82

$ 30.39


$ 31.48

$ 30.39

Tangible book value per common share – Non-GAAP (a)

$ 13.97

$ 13.36

$ 12.82


$ 13.97

$ 12.82

Cash dividends per common share

$ 0.15

$ 0.15

$ 0.13


$ 0.58

$ 0.52

Common dividend payout ratio

34%

18%

25%


33%

26%

Closing stock price per common share

$ 34.94

$ 30.19

$ 25.70


$ 34.94

$ 25.70

Market capitalization

$ 39,910

$ 34,674

$ 29,902


$ 39,910

$ 29,902

(a) Non-GAAP excludes M&I, litigation and restructuring charges and the impact of the U.S. Tax Court's disallowance of certain foreign tax credits, if applicable. See "Supplemental information – Explanation of GAAP and Non-GAAP financial measures" beginning on page 10 for a calculation of these ratios.

(b) Includes fee revenue, net interest revenue and income from consolidated investment management funds, net of net income attributable to noncontrolling interests.

(c) Excludes assets managed in the Investment Services business.

(d) Preliminary.

(e) Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at both Dec. 31, 2013 and Sept. 30, 2013 and $1.1 trillion at Dec. 31, 2012.

(f) Represents the total amount of securities on loan managed by the Investment Services business. Excludes securities on loan relating to CIBC Mellon.
(g) Excludes securities booked on BNY Mellon beginning in the fourth quarter of 2013 resulting from the CIBC Mellon joint venture, which totaled $62 billion at Dec. 31, 2013.

 

 


THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement


(in millions)

Quarter ended


Year-to-date

Dec. 31,

2013

Sept. 30,

2013

Dec. 31,

2012


Dec. 31,

2013

Dec. 31,

2012


Fee and other revenue







Investment services fees:







Asset servicing

$  984

$  964

$  945


$ 3,905

$ 3,780

Clearing services

324

315

294


1,264

1,193

Issuer services

237

322

215


1,090

1,052

Treasury services

137

137

141


554

549

Total investment services fees

1,682

1,738

1,595


6,813

6,574

Investment management and performance fees

904

821

853


3,395

3,174

Foreign exchange and other trading revenue

146

160

139


674

692

Distribution and servicing

43

43

52


180

192

Financing-related fees

43

44

45


172

172

Investment and other income

(60)

135

116


416

427

Total fee revenue

2,758

2,941

2,800


11,650

11,231

Net securities gains

39

22

50


141

162

Total fee and other revenue

2,797

2,963

2,850


11,791

11,393

Operations of consolidated investment management funds







Investment income

109

134

137


548

593

Interest of investment management fund note holders

73

102

95


365

404

Income from consolidated investment management funds

36

32

42


183

189

Net interest revenue







Interest revenue

846

855

843


3,352

3,507

Interest expense

85

83

118


343

534

Net interest revenue

761

772

725


3,009

2,973

Provision for credit losses

6

2

(61)


(35)

(80)

Net interest revenue after provision for credit losses

755

770

786


3,044

3,053

Noninterest expense







Staff

1,522

1,516

1,457


6,019

5,761

Professional, legal and other purchased services

344

296

322


1,252

1,222

Software and equipment

241

226

233


933

855

Net occupancy

154

153

156


629

593

Distribution and servicing

110

108

108


435

421

Business development

96

63

88


317

275

Sub-custodian

68

71

64


280

269

Other

258

249

255


1,029

994

Amortization of intangible assets

82

81

96


342

384

Merger and integration, litigation and restructuring charges

2

16

46


70

559

Total noninterest expense

2,877

2,779

2,825


11,306

11,333

Income







Income before income taxes

711

986

853


3,712

3,302

Provision (benefit) for income taxes

155

(2)

207


1,520

779

Net income

556

988

646


2,192

2,523

Net (income) attributable to noncontrolling interests (includes $(17), $(8), $(11), $(80) and $(76) related to consolidated investment management funds, respectively)

(17)

(8)

(11)


(81)

(78)

Net income applicable to shareholders of The Bank of New York Mellon Corporation

539

980

635


2,111

2,445

Preferred stock dividends

(26)

(13)

(13)


(64)

(18)

Net income applicable to common shareholders of The Bank of New York Mellon Corporation

$  513

$  967

$  622


$ 2,047

$ 2,427

 

 

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement - continued


Net income applicable to common shareholders of The
 Bank of New York Mellon Corporation used for the
 earnings per share calculation

(in millions)




Quarter ended


Year-to-date

Dec. 31,

2013

Sept. 30,

2013

Dec. 31,

2012

Dec. 31,

2013

Dec. 31,

2012


Net income applicable to common shareholders of The

 Bank of New York Mellon Corporation

$ 513

$ 967

$ 622


$ 2,047

$ 2,427


Less:    Earnings allocated to participating securities

10

18

9


37

35


            Change in the excess of redeemable value over the
              fair value of noncontrolling interests

-

-

-


1

(5)


      Net income applicable to the common shareholders of
        The Bank of New York Mellon Corporation after
        required adjustments for the calculation of basic and
        diluted earnings per common share

$ 503

$ 949

$ 613


$ 2,009

$ 2,397









 

Earnings per share applicable to the common
 shareholders of The Bank of New York Mellon
 Corporation
(a)

(in dollars)



Quarter ended


Year-to-date

Dec. 31,

2013

Sept. 30,

2013

Dec. 31,

2012


Dec. 31,

2013

Dec. 31,

2012


Basic

$ 0.44

$ 0.83

$ 0.53


$ 1.75

$ 2.04


Diluted

$ 0.44

$ 0.82

$ 0.53


$ 1.74

 

$ 2.03


(a) Basic and diluted earnings per share under the two-class method are determined on the net income applicable to common shareholders of The Bank of New York Mellon Corporation reported on the income statement less earnings allocated to participating securities, and the change in the excess of redeemable value over the fair value of noncontrolling interests.










 

 


THE BANK OF NEW YORK MELLON CORPORATION

Consolidated Balance Sheet



Dec. 31,

Sept. 30,

Dec. 31,

(dollars in millions, except per share amounts)

2013

2013

2012

Assets




Cash and due from:




Banks

$    6,460

$     7,304

$     4,727

Interest-bearing deposits with the Federal Reserve and other central banks

104,359

95,519

90,110

Interest-bearing deposits with banks

35,300

41,390

43,910

Federal funds sold and securities purchased under resale agreements

9,161

9,191

6,593

Securities:




Held-to-maturity (fair value of $19,443, $20,300 and $8,389)

19,743

20,358

8,205

Available-for-sale

79,309

77,099

92,619

Total securities

99,052

97,457

100,824

Trading assets

12,098

12,101

9,378

Loans

51,657

50,138

46,629

Allowance for loan losses

(210)

(206)

(266)

Net loans

51,447

49,932

46,363

Premises and equipment

1,655

1,569

1,659

Accrued interest receivable

621

545

593

Goodwill

18,073

18,025

18,075

Intangible assets

4,452

4,527

4,809

Other assets

20,360

22,701

20,468

Subtotal assets of operations

363,038

360,261

347,509

Assets of consolidated investment management funds, at fair value:




Trading assets

10,397

10,725

10,961

Other assets

875

966

520

Subtotal assets of consolidated investment management funds, at fair value

11,272

11,691

11,481

Total assets

$ 374,310

$ 371,952

$ 358,990

Liabilities




Deposits:




Noninterest-bearing (principally U.S. offices)

$   95,475

$   87,303

$   93,019

Interest-bearing deposits in U.S. offices

56,640

58,505

53,826

Interest-bearing deposits in Non-U.S. offices

109,014

109,752

99,250

Total deposits

261,129

255,560

246,095

Federal funds purchased and securities sold under repurchase agreements

9,648

9,737

7,427

Trading liabilities

6,945

9,022

8,176

Payables to customers and broker-dealers

15,707

15,293

16,095

Commercial paper

96

1,851

338

Other borrowed funds

663

844

1,380

Accrued taxes and other expenses

6,985

6,467

7,316

Other liabilities (includes allowance for lending-related commitments of $134, $133 and $121)

4,608

5,848

6,010

Long-term debt

19,864

18,889

18,530

Subtotal liabilities of operations

325,645

323,511

311,367

Liabilities of consolidated investment management funds, at fair value:




Trading liabilities

10,085

10,380

10,152

Other liabilities

46

78

29

Subtotal liabilities of consolidated investment management funds, at fair value

10,131

10,458

10,181

Total liabilities

335,776

333,969

321,548

Temporary equity




Redeemable noncontrolling interests

230

203

178

Permanent equity




Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 15,826,

  15,826 and 10,826 shares

1,562

1,562

1,068

Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 

  1,268,036,220, 1,264,234,315 and 1,254,182,209 shares

13

13

13

Additional paid-in capital

24,002

23,903

23,485

Retained earnings

15,976

15,639

14,622

Accumulated other comprehensive loss, net of tax

(892)

(1,339)

(643)

Less:  Treasury stock of 125,786,430, 115,712,764 and 90,691,868 common shares, at cost

(3,140)

(2,819)

(2,114)

Total The Bank of New York Mellon Corporation shareholders' equity

37,521

36,959

36,431

Nonredeemable noncontrolling interests of consolidated investment management funds

783

821

833

Total permanent equity

38,304

37,780

37,264

Total liabilities, temporary equity and permanent equity

$ 374,310

$ 371,952

$ 358,990

Supplemental information – Explanation of GAAP and Non-GAAP financial measures

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based upon Tier 1 common equity and tangible common shareholders' equity.  BNY Mellon believes that the ratio of Tier 1 common equity to risk-weighted assets and the ratio of tangible common shareholders' equity to tangible assets of operations are measures of capital strength that provide additional useful information to investors, supplementing the Tier 1 and Total capital ratios which are utilized by regulatory authorities.  The ratio of Basel I Tier 1 common equity to risk-weighted assets excludes preferred stock and trust preferred securities from the numerator of the ratio.  Unlike the Basel I Tier 1 and Total capital ratios, the tangible common shareholders' equity ratio fully incorporates those changes in investment securities valuations which are reflected in total shareholders' equity.  In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes.  Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of BNY Mellon's performance in reference to those assets which are productive in generating income.  BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding.  BNY Mellon has presented its estimated Basel III Tier 1 common equity ratio based on its interpretation, expectations and understanding of the final Basel III rules released by the Federal Reserve on July 2, 2013, on a fully phased in basis and on the application of such rules to BNY Mellon's businesses as currently conducted.  The estimated Basel III Tier 1 common equity ratio is necessarily subject to, among other things, BNY Mellon's further review and implementation of the final Basel III rules, anticipated compliance with all necessary enhancements to model calibration, and other refinements, further implementation guidance from regulators and any changes BNY Mellon may make to its businesses.  Consequently, BNY Mellon's estimated Basel III Tier 1 common equity ratio may change based on these factors.  Management views the estimated Basel III Tier 1 common equity ratio as a key measure in monitoring BNY Mellon's capital position and progress against future regulatory capital standards.  Additionally, the presentation of the estimated Basel III Tier 1 common equity ratio is intended to allow investors to compare BNY Mellon's estimated Basel III Tier 1 common equity ratio with estimates presented by other companies.

BNY Mellon has presented revenue measures which exclude the effect of noncontrolling interests related to consolidated investment management funds and a loss related to an equity investment; and expense measures which exclude M&I expenses, litigation charges, restructuring charges and amortization of intangible assets.  Return on equity measures and operating margin measures, which exclude some or all of these items, are also presented.  Return on equity measures also exclude the (benefit) net charge related to the disallowance of certain foreign tax credits.  BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon's control.  The excluded items, in general, relate to certain ongoing charges as a result of prior transactions or where we have incurred charges.  M&I expenses primarily relate to the acquisitions of Global Investment Servicing on July 1, 2010 and BHF Asset Servicing GmbH on Aug. 2, 2010.  M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration.  BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased.  Future periods will not reflect such M&I expenses, and thus may be more easily compared with our current results if M&I expenses are excluded.  Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees.  Restructuring charges relate to our Operational Excellence Initiatives and migrating positions to Global Delivery Centers.  Excluding these charges permits investors to view expenses on a basis consistent with how management views the business.

In this Earnings Release, the net interest margin is presented on an FTE basis.  We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice.  The adjustment to an FTE basis has no impact on net income.  Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and business-level basis. 

The following tables present the reconciliation of net income and diluted earnings per common share.

Reconciliation of net income and diluted EPS – GAAP to Non-GAAP

4Q13

3Q13


Net

Diluted

Net

Diluted

(in millions, except per common share amounts)

income

EPS

income

EPS

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

$ 513

$ 0.44

$ 967

$ 0.82

Loss related to an equity investment (after-tax)

115

0.10

N/A

N/A

Benefit related to the U.S. Tax Court's partial reconsideration of a tax decision disallowing certain foreign tax credits

N/A

N/A

261

0.22

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP

$ 628

$ 0.54

$ 706

$ 0.60

N/A – Not applicable.





 

Reconciliation of net income and diluted EPS – GAAP to Non-GAAP

YTD13


Net

Diluted

(in millions, except per common share amounts)

income

EPS

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

$ 2,047

$ 1.74

Net charge related to the U.S. Tax Court's decisions disallowing certain foreign tax credits (after-tax)

593

0.50

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP

$ 2,640

$ 2.24

The following table presents the calculation of the pre-tax operating margin ratio.

Pre-tax operating margin








(dollars in millions)

4Q13

3Q13

4Q12


YTD13

YTD12


Income before income taxes – GAAP

$    711

$    986

$    853


$   3,712

$   3,302

Less:  Net income attributable to noncontrolling interests of consolidated investment management funds

17

8

11


80

76

Add:  Amortization of intangible assets

82

81

96


342

384

M&I, litigation and restructuring charges

2

16

46


70

559

Income before income taxes excluding net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP

$    778

$ 1,075

$    984


$   4,044

$   4,169








Fee and other revenue – GAAP

$ 2,797

$ 2,963

$ 2,850


$ 11,791

$ 11,393

Income from consolidated investment management

funds – GAAP

36

32

42


183

189

Net interest revenue – GAAP

761

772

725


3,009

2,973

Total revenue – GAAP

3,594

3,767

3,617


14,983

14,555

Less:  Net income attributable to noncontrolling interests of consolidated investment management funds

17

8

11


80

76

Total revenue excluding net income attributable to noncontrolling interests of consolidated investment management funds – Non-GAAP

$ 3,577

$ 3,759

$ 3,606


$ 14,903

$ 14,479








Pre-tax operating margin (a)

20%

26%

24%


25%

23%

Pre-tax operating margin excluding net income attributable

  to noncontrolling interests of consolidated investment

  management funds, amortization of intangible assets

  and M&I, litigation and restructuring charges – Non-GAAP (a)

22%

29%

27%


27%

29%

(a)   Income before taxes divided by total revenue.


















The following table presents the calculation of the return on common equity and the return on tangible common equity.

Return on common equity and tangible common equity







(dollars in millions)

4Q13

3Q13

4Q12


YTD13

YTD12

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP

$ 513

$ 967

$ 622


$ 2,047

$ 2,427

Add: Amortization of intangible assets, net of tax

53

52

65


220

247

Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP

566

1,019

687


2,267

2,674

Add:   M&I, litigation and restructuring charges

1

12

31


45

339

(Benefit) net charge related to the disallowance of certain foreign tax credits

-

(261)

-


593

-

Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets, M&I, litigation and restructuring charges and the (benefit) net charge related to the disallowance of certain foreign tax

credits – Non-GAAP

$ 567

$ 770

$ 718


$ 2,905

$ 3,013








Average common shareholders' equity

$ 35,698

$ 34,264

$ 34,962


$ 34,832

$ 34,333

Less:  Average goodwill

18,026

17,975

18,046


17,988

17,967

           Average intangible assets

4,491

4,569

4,860


4,619

4,982

Add:   Deferred tax liability – tax deductible goodwill

1,302

1,262

1,130


1,302

1,130

Deferred tax liability – non-tax deductible intangible assets

1,222

1,242

1,310


1,222

1,310

Average tangible common shareholders' equity – Non-GAAP

$ 15,705

$ 14,224

$ 14,496


$ 14,749

$ 13,824








Return on common equity – GAAP (a)

5.7%

11.2%

7.1%


5.9%

7.1%

Return on common equity excluding amortization of intangible assets, M&I, litigation and restructuring charges and the (benefit) net charge related to the disallowance of certain foreign tax credits – Non-GAAP (a)

6.3%

8.9%

8.2%


8.3%

8.8%








Return on tangible common equity – Non-GAAP (a)

14.3%

28.4%

18.8%


15.4%

19.3%

Return on tangible common equity excluding M&I, litigation and restructuring charges and the (benefit) net charge related to the disallowance of certain foreign tax credits – Non-GAAP (a)

14.3%

21.5%

19.7%


19.7%

21.8%

(a)   Annualized.

The following table presents the calculation of the equity to assets ratio and book value per common share.

Equity to assets and book value per common share

Dec. 31,

Sept. 30,

Dec. 31,

(dollars in millions, unless otherwise noted)

2013

2013

2012

BNY Mellon shareholders' equity at period end – GAAP

$  37,521

$  36,959

$  36,431

Less:  Preferred stock

1,562

1,562

1,068

BNY Mellon common shareholders' equity at period end – GAAP

35,959

35,397

35,363

Less:  Goodwill

18,073

18,025

18,075

Intangible assets

4,452

4,527

4,809

Add:  Deferred tax liability – tax deductible goodwill

1,302

1,262

1,130

Deferred tax liability – non-tax deductible intangible assets

1,222

1,242

1,310

Tangible BNY Mellon common shareholders' equity at period end – Non-GAAP

$ 15,958

$ 15,349

$  14,919





Total assets at period end – GAAP

$374,310

$371,952

$358,990

Less:  Assets of consolidated investment management funds

11,272

11,691

11,481

Subtotal assets of operations – Non-GAAP

363,038

360,261

347,509

Less:  Goodwill

18,073

18,025

18,075

Intangible assets

4,452

4,527

4,809

Cash on deposit with the Federal Reserve and other central banks (a)

105,384

96,316

90,040

Tangible total assets of operations at period end – Non-GAAP

$235,129

$241,393

$234,585





BNY Mellon shareholders' equity to total assets – GAAP

10.0%

9.9%

10.1%

BNY Mellon common shareholders' equity to total assets – GAAP

9.6%

9.5%

9.9%

Tangible BNY Mellon common shareholders' equity to tangible assets of

operations – Non-GAAP

6.8%

6.4%

6.4%





Period-end common shares outstanding (in thousands)

1,142,250

1,148,522

1,163,490





Book value per common share

$ 31.48

$ 30.82

$ 30.39

Tangible book value per common share – Non-GAAP

$ 13.97

$ 13.36

$ 12.82

(a)   Assigned a zero percent risk-weighting by the regulators.




The following table presents the calculation of our Basel I Tier 1 common equity ratio – Non-GAAP.


Calculation of Basel I Tier 1 common equity to risk-weighted

    assets ratio – Non-GAAP

Dec. 31,

Sept. 30,

Dec. 31,

(dollars in millions)

2013 (a)

2013

2012

Total Tier 1 capital – Basel I

$   18,336

$  18,074

$   16,694

Less:  Trust preferred securities

330

324

623

Preferred stock

1,562

1,562

1,068

Total Tier 1 common equity

$   16,444

$   16,188

$   15,003





Total risk-weighted assets – Basel I

$ 113,354

$ 114,404

$ 111,180





Basel I Tier 1 common equity to risk-weighted assets ratio – Non-GAAP

14.5%

14.2%

13.5%

(a)   Preliminary.




The following table presents the calculation of our estimated Basel III Tier 1 common equity ratio under the Standardized Approach and Advanced Approach.


Estimated Basel III Tier 1 common equity ratio – Non-GAAP (a)

Dec. 31,

Sept. 30,

Dec. 31,

(dollars in millions)

2013 (b)

2013

2012

Total Tier 1 capital – Basel I

$   18,336

$   18,074

$   16,694

Adjustment to determine estimated Basel III Tier 1 common equity:




Deferred tax liability – tax deductible intangible assets

70

82

78

Preferred stock

(1,562)

(1,562)

(1,068)

Trust preferred securities

(330)

(324)

(623)

Other comprehensive income (loss) and net pension fund assets:




Securities available-for-sale

387

487

1,350

Pension liabilities

(900)

(1,348)

(1,453)

    Net pension fund assets

(713)

(279)

(249)

Total other comprehensive income (loss) and net pension fund assets

(1,226)

(1,140)

(352)

Equity method investments

(445)

(479)

(501)

Deferred tax assets

(49)

(26)

(47)

Other

16

18

18

Total estimated Basel III Tier 1 common equity

$   14,810

$   14,643

$   14,199





Under the Standardized Approach:




Total risk-weighted assets – Basel I

$ 113,354

$ 114,404

N/A

Add:  Adjustments (c)

26,511

31,185

N/A

Total estimated Basel III risk-weighted assets

$ 139,865

$ 145,589

N/A





Estimated Basel III Tier 1 common equity ratio – Non-GAAP

   calculated under the Standardized Approach

10.6%

10.1%

 

N/A









Under the Advanced Approach:




Total risk-weighted assets – Basel I

$ 113,354

$ 114,404

$ 111,180

Add:  Adjustments (c)

17,495

17,179

33,104

Total estimated Basel III risk-weighted assets

$ 130,849

$ 131,583

$ 144,284





Estimated Basel III Tier 1 common equity ratio – Non-GAAP

   calculated under the Advanced Approach

11.3% (d)

11.1%

9.8%

(a)   At Dec. 31, 2013 and Sept. 30, 2013, the estimated Basel III Tier 1 common equity ratio is based on our interpretation of and expectations regarding the final rules released by the Federal Reserve on July 2, 2013, on a fully phased-in basis.  For periods prior to June 30, 2013, these ratios were estimated using our interpretation of the NPRs dated June 7, 2012, on a fully phased-in basis.

(b)   Preliminary.  

(c)    Following are the primary differences between risk-weighted assets determined under Basel I and Basel III.  Credit risk is determined under Basel I using predetermined risk-weights and asset classes and relies in part on the use of external credit ratings.  Under Basel III both the Standardized and Advanced Approaches use a broader range of predetermined risk-weights and asset classes and certain alternatives to external credit ratings.  Securitization exposure receives a higher risk-weighting under Basel III than Basel I, and Basel III includes additional adjustments for market risk, counterparty credit risk and equity exposures.  Additionally, the Standardized Approach eliminates the use of the VaR approach for determining risk-weighted assets on certain repo-style transactions.  Risk-weighted assets calculated under the Advanced Approach also include the use of internal credit models and parameters as well as an adjustment for operational risk.

(d)   Changes in January 2014 to the probable loss model associated with unsecured wholesale credit exposures within our Advanced Approach capital model will impact risk-weighted assets.  The Company did not include the impact at Dec. 31, 2013.  However, a preliminary estimate of the revised methodology to the portfolio at Sept. 30, 2013 would have added approximately 6% to the risk-weighted assets.

N/A – Not available.

 

Quarterly impact to the estimated Basel III Tier 1 common equity ratio – Non-GAAP




Standardized

Approach

Advanced

Approach

Estimated Basel III Tier 1 common equity ratio – Non-GAAP at Sept. 30, 2013

10.1%

11.1%

Impacted by:



Net capital generation

5 bps

5 bps

Change in accumulated other comprehensive income (loss) and net pension fund assets

(6) bps

(6) bps

Change in risk-weighted assets

42 bps

6 bps

Other (a)

12 bps

14 bps

Estimated Basel III Tier 1 common equity ratio – Non-GAAP at Dec. 31, 2013

10.6%

11.3%

(a)   Includes foreign currency translation.



bps – basis points.



Cautionary Statement

The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including our estimated capital ratios and expectations relating to those ratios, preliminary business metrics and statements made regarding our focus on driving organic growth, our focus on controlling expenses, a broader, continuous transformation process and our businesses generating significant capital and giving us increased financial flexibility.  These statements, which may be expressed in a variety of ways, include the use of future or present tense language.  These statements and other forward-looking statements contained in other public disclosures of BNY Mellon which make reference to the cautionary factors described in this Earnings Release, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control).  Factors that could cause BNY Mellon's results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2012 and its other filings with the Securities and Exchange Commission.  All forward-looking statements in this Earnings Release speak only as of Jan. 17, 2014 and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

Contacts:

MEDIA:

 ANALYSTS:


Kevin Heine

 Andy Clark


(212) 635-1590

 (212) 635-1803

SOURCE The Bank of New York Mellon Corporation

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