Mellon Financial

(MEL)

posted a fourth-quarter profit as investment management fee revenue rose 15% from a year ago.

The Pittsburgh-based asset manager said it made $208 million, or 50 cents a share, in the quarter ended Dec. 31, up from the year-ago $192 million, or 46 cents a share. Revenue rose to $1.11 billion from $982 million a year earlier.

"Fourth quarter and full-year results for 2005 demonstrated how well we are capitalizing on the growth opportunities in Asset Management and Asset Servicing," said CEO Martin McGuinn. "Over each of the past two years we have achieved double-digit growth in the revenue and pretax income of Asset Management and Asset Servicing, and the fourth quarter of 2005 represented a continuation of this trend. The record level of assets under management, custody and administration resulted from strong institutional investment performance, excellent service quality and our ability to leverage the key strategic synergies of these two growth businesses. In the fourth quarter of 2005, our Asset Management and Asset Servicing businesses represented 83% of our pretax income, compared to only 67% in the fourth quarter of 2004. In the fourth quarter, we generated a superior return on common equity of 20%. In 2005, we continued to manage our capital base aggressively by supporting growth through investments and acquisitions, increasing the dividend and repurchasing shares."

Assets under management increased 11% to a record level of $781 billion at Dec. 31, 2005. Total fee and other revenue rose 13% from a year ago and represented 90% of total revenue. The increase was driven by a $69 million increase in investment management fees and a $51 million increase in institutional trust and custody fees. Investment management fee revenue increased 15% to $524 million on higher net inflows, improved market conditions and a higher level of performance fees.