Bank of New York Mellon Results Get Chilly Reception
20 July 2018 - 3:24AM
Dow Jones News
By Justin Baer
Bank of New York Mellon Corp. on Thursday reported quarterly
results that disappointed some investors, who sent the custody
bank's stock sharply lower.
The stock fell $3.36, or 6%, to $52.28 by midday, putting it on
pace for its biggest one-day decline in more than two years.
"Revenues were weaker than we hoped," said Jeff Harte, an
analyst with Sandler O'Neill + Partners. "Missing on revenues is
not something the Street is going to like for a group that's
already revenue constrained."
Total revenue during the second quarter was $4.14 billion. The
average estimate among analysts was $4.13 billion, according to
S&P Global Market Intelligence, though some analysts, including
Mr. Harte, had been expecting more.
BNY Mellon and other custody banks have drawn scrutiny in recent
years for failing to rack up higher fees from the key back-office
functions they serve for investment managers, brokers and other
financial firms. They have responded by slashing expenses. While
the cuts have lifted profits, progress toward revenue gains has
come more slowly.
BNY Mellon last year tapped former Visa Inc. executive Charles
Scharf as CEO to help jump start a new era at the custody bank. He
has revamped his management team, built out sales coverage in
certain businesses and increased the firm's technology budget by
$300 million this year.
On Thursday, he reminded investors those investments take time
to bear fruit. "We are focused on increasing the rate of revenue
growth," Mr. Scharf said during a conference call with analysts.
"Given the nature of our business, it takes time and therefore, it
is very hard to draw any conclusions in individual quarters good or
bad."
BNY Mellon's net income rose 14% to $1.06 billion, or $1.03 a
share, from $926 million, or 88 cents a share, a year earlier.
Analysts polled by S&P Global had predicted a per-share profit
of $1.02.
Total revenue rose 5%, led by gains in net interest income,
while fee revenue climbed 3% to $3.21 billion. Revenue at the
bank's investment-services business rose 8% to $3.1 billion, aided
by higher interest rates, a pickup in currency trading and more
securities-lending activity.
Results from BNY Mellon's Pershing business, which clears trades
and lends to brokerage clients, were hurt by the loss of two
clients.
The New York company's asset-management division reported
revenue of $1.02 billion, up 3% from a year ago. The business,
which mostly manages money for pensions and other institutional
clients, had net outflows of $26 billion.
(END) Dow Jones Newswires
July 19, 2018 13:09 ET (17:09 GMT)
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