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TheStreet Open House

BNY Mellon Boasts Revenue Up 4%

NEW YORK ( TheStreet) -- Bank of New York Mellon (BK) on Friday reported a 4% rise in fourth-quarter revenue even while posting a declining profit year over year.  Profit applicable to common shareholders for the fourth quarter was $513 million, or 44 cents a share, declining from $622 million, or 53 cents a share, a year earlier.

The fourth-quarter results included an after-tax loss of $153 million, or 10 cents a share, on an equity investment.  Excluding that loss, the company said its fourth-quarter earnings would have been $628 million, or 54 cents a share, meeting the consensus estimate among analysts polled by Thomson Reuters.

Fourth-quarter revenue -- again excluding the equity investment loss -- rose year-over-year to $3.752 billion, with investment services fees rising 5% to $1.682 billion and investment management and performance fees rising 6% to $904 million.  Another bright spot for the bank during the fourth quarter was a 5% year-over-year increase in net interest income to $761 million, as interest-earning assets grew, more than offsetting a decline in the net interest margin to 1.09% in the fourth quarter from 1.16% a year earlier.

For all of 2013, Bank of New York Mellon's earnings applicable to common shareholders declined to $2.047 billion, or $1.74 a share, from $2.397 billion, or $2.03 a share, during 2012.

The company reported a return on tangible common equity (ROTCE) of 14.3% for the fourth quarter, declining from 18.8% a year earlier.  For all of 2013, ROTCE was 15.4%, down from 19.3% a year earlier.

Bank of New York Mellon's assets under management grew 4% year-over-year to $1.583 trillion as of Dec. 31, while the company's assets under custody or administration grew 5% to $27.6 trillion.

The company's total noninterest expense rose 4% year-over-year to an adjusted $2.793 billion during the fourth quarter.

"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," said Bank of New York Mellon CEO Gerald Hassell in a statement.  "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," he added.

Hassell went on to say the company was focused on cutting expenses and improving efficiency, "setting the stage for a broader, continuous transformation process, which is expected to create significant financial benefit over the next few years."

The 2013 ROTCE of 15% was down significantly from 2012, however, it was sufficient to raise the company's estimated Basel III Tier 1 common equity ratio to a solid 10.6%.

BNY Mellon repurchased 10 million common shares for $318 million during the fourth quarter.  The company's average share count declined by 2% from a year earlier. 

The bank's shares were down 2.6% in early trading to $33.01. This chart shows the performance of Bank of New York Mellon's stock against the KBW Bank Index (I:BKX) and the S&P 500 since the end of 2011:

BK Chart data by YCharts


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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 TheStreet.com 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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