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Subprime Hits BONY Profits

The New York bank writes down $200 million worth of collateralized debt obligations.
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Bank of New York Mellon

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on Thursday reported sharply lower fourth-quarter profits hit by a $206 million writedown to mortgage-related and asset-backed securities.

The bank posted net income of $520 million, or 45 cents a share, vs. $1.63 billion, or $2.27 a share, in the fourth quarter of 2006. Bank of New York Mellon realized a big boost in the fourth quarter of 2006, after

JPMorgan Chase

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bought its retail banking business for $1.4 billion. The bank posted $3.80 billion in total revenue for the fourth quarter of 2007.

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Less one-time items, the bank reported income 67 cents a share. Analysts polled by Thomson Financial were expecting a profit of 69 cents a share on $2.75 billion in revenue.

Impacting continuing operations profits by 10 cents a share was the bank's decision to write down $200 million pre-tax to its $379 million portfolio of collateralized debt obligations, or CDOs, that contained exposure to subprime mortgages.

Bank of New York Mellon also wrote down $6 million of a $375 million portfolio of structured investment vehicles, or SIVs, acquired in the third quarter and brought onto its balance sheet. The bank sold $174 million of the securities at an $8 million loss and $75 million of the securities matured.

The bank also took a $180 million charge to consolidate and restructure the bank-sponsored conduit, Three Rivers Funding.

For the full year, the bank reported net income of $2.04 billion, or $2.18 a share, vs. $2.85 billion, or $3.94 a share, in 2006. It reported revenue of $11.33 billion, vs. $6.84 billion last year.

Excluding items, the bank earned $2.62 a share. Analysts expected a profit of $2.60 a share on revenue of $13.20 billion.

Shares were gaining 2.6% to $46.27 in Thursday morning trading.

This article was written by a staff member of