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Bank of New York Mellon Beats as Fee Revenue Grows (Update 1)

A key element for Bank of New York -- and for most large banks in the current economic environment - is expense management. Total noninterest expenses were $2.705 billion during the third quarter, declining 11% from the previous quarter (mainly because of lower merger and integration expenses), and 2% from a year earlier.

Bank of New York Mellon said that its assets under management grew to $1.4 trillion at the end of the third quarter, an increase of 5% from June, and 14% from September of last year.

Assets under custody/administration grew 3% quarter-over-quarter and 8% year-over-year, to $27.9 trillion, as of Sept. 30.

The company's third-quarter return on tangible common equity was a strong 22%. The company repurchased over 13 million shares, for $288 million, during the third quarter.

Bank of New York Mellon CEO Gerald Hassell said he was "pleased to report solid earnings growth this quarter, led by the strength of Investment Management, which recorded its twelfth consecutive quarter of long-term inflows. New business trends for Asset Servicing were also strong, as we recorded the best quarter in new AUC wins since 2008, a testament to the breadth and quality of our capabilities."

Jefferies analyst Ken Usdin rates BNY Mellon a "Hold," with a $25 price target, and said after the earnings release that although "some may view the run-rate as unsustainable given overearning in fixed income/seed capital gains, we peg the EPS run-rate as no worse than the mid-$0.50's, which is supportive of 2013 consensus."

Usdin added that the company was continuing to make progress on its efficiency plan, as "core expenses held relatively flat (up $10mm) despite the annual merit increase driving a $21mm increase in the comp. line. Offsetting the higher compensation was incremental progress on the cost plan ($10mm of incremental saves) and leverage within a handful of line items (professional, legal & other down $17mm, business development down $11mm)."

Bank of New York Mellon's shares returned 21% year-to-date, through Tuesday's close at $23.56.

The shares trade for 10 times the consensus 2013 EPS estimate of $2.38.

Based on a quarterly payout of 13 cents, the shares have a dividend yield of 2.21%.

BK Chart BK data by YCharts

Interested in more on Bank of New York Mellon? See TheStreet Ratings' report card for this stock.


-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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