NEW YORK, Jan. 17, 2014 /PRNewswire/ --
INVESTMENT MANAGEMENT FEES UP 5% YEAR-OVER-YEAR
-- Assets under management up 14% year-over-year -- Net long-term inflows of $95 billion over last 12 months
INVESTMENT SERVICES FEES UP 5% YEAR-OVER-YEAR
-- Assets under custody and/or administration up $1.3 trillion over last 12 months -- Clearing services revenue up 10% year-over-year
REPURCHASED 10 MILLION COMMON SHARES FOR $318 MILLION IN FOURTH QUARTER OF 2013
RETURN ON TANGIBLE COMMON EQUITY FOR FULL YEAR 2013 15%(a)
The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported fourth quarter net income applicable to common shareholders of $513 million, or $0.44 per diluted common share. Excluding the after-tax loss of $115 million, or $0.10 per diluted common share, related to an equity investment, net income applicable to common shareholders totaled $628 million, or $0.54 per diluted common share.(a) Net income applicable to common shareholders was $622 million, or $0.53 per diluted common share, in the fourth quarter of 2012 and $967 million, or $0.82 per diluted common share, in the third quarter of 2013. Excluding the benefit related to the U.S. Tax Court's partial reconsideration of a tax decision, net income applicable to common shareholders totaled $706 million, or $0.60 per diluted common share, in the third quarter of 2013.(a)
"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. 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," said Gerald L. Hassell, chairman and chief executive officer of BNY Mellon.
"We remain focused on controlling expenses and achieved our Operational Excellence Initiatives goals a full year ahead of schedule, setting the stage for a broader, continuous transformation process, which is expected to create significant financial benefit over the next few years. Our businesses continue to generate significant excess capital, which gives us increased financial flexibility going forward," added Mr. Hassell.
"Our accomplishments reflect the strength of our business model and the tremendous contributions of our colleagues across the company, who continue to serve our clients extraordinarily well and drive shareholder value," concluded Mr. Hassell.
Net income applicable to common shareholders totaled $2.047 billion, or $1.74 per diluted common share, for the full-year 2013 compared with $2.427 billion, or $2.03 per diluted common share, for the full-year 2012. Excluding the impact of the U.S. Tax Court's decisions related to the disallowance of certain foreign tax credits, net income applicable to common shareholders totaled $2.640 billion, or $2.24 per diluted common share, in 2013.(a)
Fourth Quarter Results - Sequential growth rates are unannualized. Please refer to the Quarterly Earnings Review for a detailed review of our businesses.
Total revenue
Reconciliation of total revenue 4Q13 vs. -------- (dollars in millions) 4Q13 3Q13 4Q12 4Q12 3Q13 -------------------- ---- ---- ---- ---- ---- Fee and other revenue $2,797 $2,963 $2,850 (2)% (6)% Income from consolidated investment management funds 36 32 42 Net interest revenue 761 772 725 -------------------- --- --- --- Total revenue - GAAP 3,594 3,767 3,617 (1) (5) Add: Loss related to an equity investment (pre-tax) 175 - - Less: Net income attributable to noncontrolling interests related to 17 8 11 consolidated investment management funds Total revenue - Non-GAAP $3,752 $3,759 $3,606 4% -% ------------------------ ------ ------ ------ --- ---
-- Assets under custody and/or administration ("AUC/A") amounted to $27.6 trillion at Dec. 31, 2013, an increase of 5% compared with the prior year and 1% sequentially. The year-over-year increase was primarily driven by higher market values and net new business. The sequential increase primarily reflects higher market value. Assets under management ("AUM") amounted to a record $1.58 trillion at Dec. 31, 2013, an increase of 14% compared with the prior year and 3% sequentially. The year-over-year increase primarily resulted from net new business and higher equity market values. The sequential increase primarily reflects higher equity market values. Long-term inflows totaled $2 billion and short-term inflows totaled $6 billion for the fourth quarter of 2013. -- Investment services fees totaled $1.68 billion, an increase of 5% year-over-year and a decrease of 3% sequentially. The year-over-year increase primarily reflects higher asset servicing fees driven by higher market values and organic growth, higher clearing services fees resulting from higher mutual fund fees, asset-based fees and volumes and higher issuer services fees driven by higher Depositary Receipts revenue, partially offset by the continued run-off of high margin securitizations in Corporate Trust and lower securities lending revenue primarily due to lower spreads. The sequential decrease primarily reflects seasonally lower Depositary Receipts revenue, partially offset by higher asset servicing fees and clearing services fees. -- Investment management and performance fees were $904 million, an increase of 6% year-over-year and 10% sequentially. The growth rates in both prior periods were negatively impacted by approximately 1% due to the sale of the Newton private client business. The year-over-year increase was primarily driven by higher equity market values, net new business and higher performance fees, partially offset by higher money market fee waivers and the average impact of the stronger U.S. dollar. The sequential increase primarily reflects seasonally higher performance fees and equity market values. -- Foreign exchange and other trading revenue totaled $146 million compared with $139 million in the fourth quarter of 2012 and $160 million in the third quarter of 2013. In the fourth quarter of 2013, foreign exchange revenue totaled $126 million, an increase of 19% year-over-year and a decrease of 18% sequentially. The year-over-year increase primarily reflects higher volumes and volatility. The sequential decrease was primarily driven by lower volatility, partially offset by higher volumes. Other trading revenue was $20 million in the fourth quarter of 2013 compared with $33 million in fourth quarter of 2012 and $6 million in the third quarter of 2013. The year-over-year decrease primarily reflects lower derivatives trading revenue. The sequential increase was primarily driven by higher fixed income trading revenue, partially offset by lower equity derivatives trading revenue. -- Investment and other income was a loss of $60 million in the fourth quarter of 2013 compared with income of $116 million in the fourth quarter of 2012 and income of $135 million in the third quarter of 2013. The decreases compared with both prior periods primarily reflect a loss related to an equity investment. -- Net interest revenue and the net interest margin (FTE) were $761 million and 1.09% in the fourth quarter of 2013 compared with $725 million and 1.09% in the fourth quarter of 2012 and $772 million and 1.16% in the third quarter of 2013. The year-over-year increase in net interest revenue was primarily driven by higher average interest-earning assets. The sequential decrease primarily reflects a change in the mix of interest-earning assets, partially offset by an increase in average interest-earning assets. -- The net unrealized pre-tax gain on our total investment securities portfolio was $309 million at Dec. 31, 2013 compared with $723 million at Sept. 30, 2013. The decrease was primarily driven by an increase in market interest rates.
The provision for credit losses was $6 million in the fourth quarter of 2013, a credit of $61 million in the fourth quarter of 2012 and a provision of $2 million in the third quarter of 2013. The provision in the fourth quarter of 2013 was driven by an increase in the allowance for a municipal-related entity.
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(a) See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 10 for the calculation of the Non-GAAP measures.
Total noninterest expense
Reconciliation of noninterest expense 4Q13 vs. -------- (dollars in millions) 4Q13 3Q13 4Q12 4Q12 3Q13 -------------------- ---- ---- ---- ---- ---- Noninterest expense - GAAP $2,877 $2,779 $2,825 2% 4% Less: Amortization of intangible assets 82 81 96 M&I, litigation and restructuring charges 2 16 46 Total noninterest expense excluding amortization of intangible assets, $2,793 $2,682 $2,683 4% 4% M&I, litigation and restructuring charges - Non-GAAP ----------------------------------------------------
-- Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges (Non-GAAP) increased 4% both year-over-year and sequentially. The year-over-year increase primarily resulted from higher staff, legal, consulting and marketing expenses. The sequential increase primarily resulted from higher legal, consulting and business development expenses.
The effective tax rate was 21.8% in the fourth quarter of 2013 and was positively impacted by the tax benefit associated with the loss related to an equity investment and lower state taxes.
Capital ratios Dec. 31, Sept. 30, Dec. 31, 2013 (a) 2013 2012 ------- ---- ---- Estimated Basel III Tier 1 common equity ratio - Non-GAAP (b)(c): Standardized Approach 10.6% 10.1% N/A Advanced Approach 11.3 (d) 11.1 9.8% Basel I Tier 1 common equity to risk-weighted assets ratio - Non-GAAP (c) 14.5 14.2 13.5 Basel I Tier 1 capital ratio 16.2 15.8 15.0 Basel I Total (Tier 1 plus Tier 2) capital ratio 17.0 16.8 16.3 Basel I leverage capital ratio 5.4 5.6 5.3 BNY Mellon shareholders' equity to total assets ratio (c) 10.0 9.9 10.1 BNY Mellon common shareholders' equity to total assets ratio (c) 9.6 9.5 9.9 Tangible BNY Mellon shareholders' equity to tangible 6.8 6.4 6.4 assets of operations ratio - Non-GAAP (c) (a) Basel III and Basel I ratios are preliminary. (b) At Dec. 31, 2013 and Sept. 30, 2013, the estimated Basel III Tier 1 common equity ratio is based on our interpretation of and expectations regarding the final rules released by the Board of Governors of the Federal Reserve (the "Federal Reserve") on July 2, 2013, on a fully phased-in basis. For periods prior to June 30, 2013, these ratios were estimated using our interpretation of the Federal Reserve's Notices of Proposed Rulemaking ("NPRs") dated June 7, 2012, on a fully phased-in basis. (c) See "Supplemental information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 10 for a calculation of these ratios. (d) Changes in January 2014 to the probable loss model associated with unsecured wholesale credit exposures within our Advanced Approach capital model will impact risk-weighted assets. The Company did not include the impact at Dec. 31, 2013. However, a preliminary estimate of the revised methodology to the portfolio at Sept. 30, 2013 would have added approximately 6% to the risk-weighted assets. N/A - Not available.
Dividends
Common - On Jan. 17, 2014, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.15 per common share. This cash dividend is payable on Feb. 7, 2014 to shareholders of record as of the close of business on Jan. 31, 2014.
Preferred - On Jan. 17, 2014, The Bank of New York Mellon Corporation also declared the following dividends for the noncumulative perpetual preferred stock, liquidation preference $100,000 per share, for the dividend period ending in March 2014, in each case, payable on March 20, 2014 to holders of record as of the close of business on March 5, 2014:
-- $1,000.00 per share on the Series A Preferred Stock (equivalent to approximately $10.00 per Normal Preferred Capital Security of Mellon Capital IV, each representing 1/100(th) interest in a share of Series A Preferred Stock); and -- $1,300.00 per share on the Series C Preferred Stock (equivalent to approximately $0.33 per depositary share, each representing a 1/4,000th interest in a share of the Series C Preferred Stock).
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of December 31, 2013, BNY Mellon had $27.6 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.
Supplemental Financial Information
The Quarterly Earnings Review and Supplemental Financial Trends for The Bank of New York Mellon Corporation have been updated through Dec. 31, 2013 and are available at www.bnymellon.com (Investor Relations - Financial Reports).
Conference Call Information
Gerald L. Hassell, chairman and chief executive officer and Thomas P. Gibbons, vice chairman and chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EST on Jan. 17, 2014. This conference call and audio webcast will include forward-looking statements and may include other material information.
Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (773) 799-3611 (International), and using the passcode: Earnings, or by logging on to www.bnymellon.com. The Earnings Release, together with the Quarterly Earnings Review and Supplemental Financial Trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EST on Jan. 17, 2014. Replays of the conference call and audio webcast will be available beginning Jan. 17, 2014 at approximately 2 p.m. EST through Jan. 31, 2014 by dialing (866) 499-4577 (U.S.) or (203) 369-1811 (International). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.
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THE BANK OF NEW YORK MELLON CORPORATION Condensed Consolidated Income Statement - continued Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation (in millions) ------------ Quarter ended Year-to-date ------------- ------------ Dec. 31, Sept. 30, Dec. Dec. 31, Dec. 31, 31, 2013 2013 2012 2013 2012 Net income applicable to common shareholders of The $513 $967 $622 $2,047 $2,427 Bank of New York Mellon Corporation Less: Earnings allocated to participating securities 10 18 9 37 35 Change in the excess of redeemable value over the - - - 1 (5) fair value of noncontrolling interests -------------------------------------- Net income applicable to the common shareholders of $503 $949 $613 $2,009 $2,397 The Bank of New York Mellon Corporation after required adjustments for the calculation of basic and diluted earnings per common share --------------------------------- --- Earnings per share applicable to the common shareholders of The Bank of New York Mellon Corporation (a) (in dollars) ----------- Quarter ended Year-to-date ------------- ------------ Dec. 31, Sept. Dec. 31, Dec. 30, 31, Dec. 31, 2013 2013 2012 2013 2012 -------- ---- ---- ---- ---- Basic $0.44 $0.83 $0.53 $1.75 $2.04 Diluted $0.44 $0.82 $0.53 $1.74 $2.03 - --- ----- (a) Basic and diluted earnings per share under the two-class method are determined on the net income applicable to common shareholders of The Bank of New York Mellon Corporation reported on the income statement less earnings allocated to participating securities, and the change in the excess of redeemable value over the fair value of noncontrolling interests.
THE BANK OF NEW YORK MELLON CORPORATION Consolidated Balance Sheet Dec. 31, Sept. 30, Dec. 31, (dollars in millions, except per share amounts) 2013 2013 2012 ---------------------------------------------- ---- ---- ---- Assets Cash and due from: Banks $6,460 $7,304 $4,727 Interest-bearing deposits with the Federal Reserve and other central banks 104,359 95,519 90,110 Interest-bearing deposits with banks 35,300 41,390 43,910 Federal funds sold and securities purchased under resale agreements 9,161 9,191 6,593 Securities: Held-to-maturity (fair value of $19,443, $20,300 and $8,389) 19,743 20,358 8,205 Available-for-sale 79,309 77,099 92,619 ------------------ ------ ------ ------ Total securities 99,052 97,457 100,824 Trading assets 12,098 12,101 9,378 Loans 51,657 50,138 46,629 Allowance for loan losses (210) (206) (266) ------------------------- ---- ---- ---- Net loans 51,447 49,932 46,363 Premises and equipment 1,655 1,569 1,659 Accrued interest receivable 621 545 593 Goodwill 18,073 18,025 18,075 Intangible assets 4,452 4,527 4,809 Other assets 20,360 22,701 20,468 ------------ ------ ------ ------ Subtotal assets of operations 363,038 360,261 347,509 Assets of consolidated investment management funds, at fair value: Trading assets 10,397 10,725 10,961 Other assets 875 966 520 ------------ --- --- --- Subtotal assets of consolidated investment management funds, at fair value 11,272 11,691 11,481 -------------------------------------------------------------------------- ------ ------ ------ Total assets $374,310 $371,952 $358,990 ------------ -------- -------- -------- Liabilities Deposits: Noninterest-bearing (principally U.S. offices) $95,475 $87,303 $93,019 Interest-bearing deposits in U.S. offices 56,640 58,505 53,826 Interest-bearing deposits in Non-U.S. offices 109,014 109,752 99,250 --------------------------------------------- ------- ------- ------ Total deposits 261,129 255,560 246,095 Federal funds purchased and securities sold under repurchase agreements 9,648 9,737 7,427 Trading liabilities 6,945 9,022 8,176 Payables to customers and broker-dealers 15,707 15,293 16,095 Commercial paper 96 1,851 338 Other borrowed funds 663 844 1,380 Accrued taxes and other expenses 6,985 6,467 7,316 Other liabilities (includes allowance for lending-related commitments of $134, $133 and $121) 4,608 5,848 6,010 Long-term debt 19,864 18,889 18,530 -------------- ------ ------ ------ Subtotal liabilities of operations 325,645 323,511 311,367 Liabilities of consolidated investment management funds, at fair value: Trading liabilities 10,085 10,380 10,152 Other liabilities 46 78 29 ----------------- --- --- --- Subtotal liabilities of consolidated investment management funds, at fair value 10,131 10,458 10,181 ------------------------------------------------------------------------------- ------ ------ ------ Total liabilities 335,776 333,969 321,548 Temporary equity Redeemable noncontrolling interests 230 203 178 Permanent equity Preferred stock - par value $0.01 per share; authorized 100,000,000 shares; issued 15,826, 1,562 1,562 1,068 15,826 and 10,826 shares Common stock - par value $0.01 per share; authorized 3,500,000,000 shares; issued 13 13 13 1,268,036,220, 1,264,234,315 and 1,254,182,209 shares Additional paid-in capital 24,002 23,903 23,485 Retained earnings 15,976 15,639 14,622 Accumulated other comprehensive loss, net of tax (892) (1,339) (643) Less: Treasury stock of 125,786,430, 115,712,764 and 90,691,868 common shares, at cost (3,140) (2,819) (2,114) --------------------------------------------------------------------------------------- ------ ------ ------ Total The Bank of New York Mellon Corporation shareholders' equity 37,521 36,959 36,431 Nonredeemable noncontrolling interests of consolidated investment management funds 783 821 833 ---------------------------------------------------------------------------------- --- --- --- Total permanent equity 38,304 37,780 37,264 ---------------------- ------ ------ ------ Total liabilities, temporary equity and permanent equity $374,310 $371,952 $358,990 -------------------------------------------------------- -------- -------- --------
Supplemental information - Explanation of GAAP and Non-GAAP financial measures
BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures based upon Tier 1 common equity and tangible common shareholders' equity. BNY Mellon believes that the ratio of Tier 1 common equity to risk-weighted assets and the ratio of tangible common shareholders' equity to tangible assets of operations are measures of capital strength that provide additional useful information to investors, supplementing the Tier 1 and Total capital ratios which are utilized by regulatory authorities. The ratio of Basel I Tier 1 common equity to risk-weighted assets excludes preferred stock and trust preferred securities from the numerator of the ratio. Unlike the Basel I Tier 1 and Total capital ratios, the tangible common shareholders' equity ratio fully incorporates those changes in investment securities valuations which are reflected in total shareholders' equity. In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes. Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of BNY Mellon's performance in reference to those assets which are productive in generating income. BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding. BNY Mellon has presented its estimated Basel III Tier 1 common equity ratio based on its interpretation, expectations and understanding of the final Basel III rules released by the Federal Reserve on July 2, 2013, on a fully phased in basis and on the application of such rules to BNY Mellon's businesses as currently conducted. The estimated Basel III Tier 1 common equity ratio is necessarily subject to, among other things, BNY Mellon's further review and implementation of the final Basel III rules, anticipated compliance with all necessary enhancements to model calibration, and other refinements, further implementation guidance from regulators and any changes BNY Mellon may make to its businesses. Consequently, BNY Mellon's estimated Basel III Tier 1 common equity ratio may change based on these factors. Management views the estimated Basel III Tier 1 common equity ratio as a key measure in monitoring BNY Mellon's capital position and progress against future regulatory capital standards. Additionally, the presentation of the estimated Basel III Tier 1 common equity ratio is intended to allow investors to compare BNY Mellon's estimated Basel III Tier 1 common equity ratio with estimates presented by other companies.
BNY Mellon has presented revenue measures which exclude the effect of noncontrolling interests related to consolidated investment management funds and a loss related to an equity investment; and expense measures which exclude M&I expenses, litigation charges, restructuring charges and amortization of intangible assets. Return on equity measures and operating margin measures, which exclude some or all of these items, are also presented. Return on equity measures also exclude the (benefit) net charge related to the disallowance of certain foreign tax credits. BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon's control. The excluded items, in general, relate to certain ongoing charges as a result of prior transactions or where we have incurred charges. M&I expenses primarily relate to the acquisitions of Global Investment Servicing on July 1, 2010 and BHF Asset Servicing GmbH on Aug. 2, 2010. M&I expenses generally continue for approximately three years after the transaction and can vary on a year-to-year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased. Future periods will not reflect such M&I expenses, and thus may be more easily compared with our current results if M&I expenses are excluded. Litigation charges represent accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees. Restructuring charges relate to our Operational Excellence Initiatives and migrating positions to Global Delivery Centers. Excluding these charges permits investors to view expenses on a basis consistent with how management views the business.
In this Earnings Release, the net interest margin is presented on an FTE basis. We believe that this presentation provides comparability of amounts arising from both taxable and tax-exempt sources, and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income. Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and business-level basis.
The following tables present the reconciliation of net income and diluted earnings per common share.
Reconciliation of net income and diluted EPS - GAAP to Non-GAAP 4Q13 3Q13 ---- ---- Net Diluted Net Diluted (in millions, except per common share amounts) income EPS income EPS ------------------------------- ------ --- ------ --- Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP $513 $0.44 $967 $0.82 Loss related to an equity investment (after-tax) 115 0.10 N/A N/A Benefit related to the U.S. Tax Court's partial reconsideration of a tax decision disallowing certain foreign tax credits N/A N/A 261 0.22 -------------------------------- --- --- --- ---- Net income applicable to common shareholders of The Bank of New York Mellon Corporation - Non- GAAP $628 $0.54 $706 $0.60 -------------------------------- ---- ----- ---- ----- N/A - Not applicable. ---------------------
Reconciliation of net income and diluted EPS - GAAP to Non-GAAP YTD13 ----- Net Diluted (in millions, except per common share amounts) income EPS ------------------------------- ------ --- Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP $2,047 $1.74 Net charge related to the U.S. Tax Court's decisions disallowing certain foreign tax credits (after-tax) 593 0.50 Net income applicable to common shareholders of The Bank of New York Mellon Corporation - Non- GAAP $2,640 $2.24 -------------------------------- ------ -----
The following table presents the calculation of the pre-tax operating margin ratio.
Pre-tax operating margin (dollars in millions) 4Q13 3Q13 4Q12 YTD13 YTD12 -------------------- ---- ---- ---- ----- ----- Income before income taxes - GAAP $711 $986 $853 $3,712 $3,302 Less: Net income attributable to noncontrolling interests of consolidated investment management funds 17 8 11 80 76 Add: Amortization of intangible assets 82 81 96 342 384 M&I, litigation and restructuring charges 2 16 46 70 559 Income before income taxes excluding net income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges - Non-GAAP $778 $1,075 $984 $4,044 $4,169 Fee and other revenue - GAAP $2,797 $2,963 $2,850 $11,791 $11,393 Income from consolidated investment management 36 32 42 183 189 funds - GAAP Net interest revenue - GAAP 761 772 725 3,009 2,973 --------------------------- --- --- --- ----- ----- Total revenue - GAAP 3,594 3,767 3,617 14,983 14,555 Less: Net income attributable to noncontrolling interests of consolidated investment management funds 17 8 11 80 76 ------------------------------------------------------------------------------------------------------ --- --- --- --- --- Total revenue excluding net income attributable to noncontrolling interests of consolidated investment management funds - Non-GAAP $3,577 $3,759 $3,606 $14,903 $14,479 Pre-tax operating margin (a) 20% 26% 24% 25% 23% Pre-tax operating margin excluding net income attributable 22% 29% 27% 27% 29% to noncontrolling interests of consolidated investment management funds, amortization of intangible assets and M&I, litigation and restructuring charges - Non-GAAP (a) ----------------------------------------------------------- (a) Income before taxes divided by total revenue.
The following table presents the calculation of the return on common equity and the return on tangible common equity.
Return on common equity and tangible common equity (dollars in millions) 4Q13 3Q13 4Q12 YTD13 YTD12 -------------------- ---- ---- ---- ----- ----- Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP $513 $967 $622 $2,047 $2,427 Add: Amortization of intangible assets, net of tax 53 52 65 220 247 -------------------------------------------------- --- --- --- --- --- Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets - Non-GAAP 566 1,019 687 2,267 2,674 Add: M&I, litigation and restructuring charges 1 12 31 45 339 (Benefit) net charge related to the disallowance of certain foreign tax credits - (261) - 593 - Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets, M&I, litigation and restructuring charges and the (benefit) net charge related to the disallowance of certain foreign tax $567 $770 $718 $2,905 $3,013 credits - Non-GAAP Average common shareholders' equity $35,698 $34,264 $34,962 $34,832 $34,333 Less: Average goodwill 18,026 17,975 18,046 17,988 17,967 Average intangible assets 4,491 4,569 4,860 4,619 4,982 Add: Deferred tax liability - tax deductible goodwill 1,302 1,262 1,130 1,302 1,130 Deferred tax liability - non-tax deductible intangible assets 1,222 1,242 1,310 1,222 1,310 ------------------------------------------------------------- ----- ----- ----- ----- ----- Average tangible common shareholders' equity - Non-GAAP $15,705 $14,224 $14,496 $14,749 $13,824 Return on common equity - GAAP (a) 5.7% 11.2% 7.1% 5.9% 7.1% Return on common equity excluding amortization of intangible assets, M&I, litigation and restructuring charges and the (benefit) net charge related to the disallowance of certain foreign tax credits - Non-GAAP (a) 6.3% 8.9% 8.2% 8.3% 8.8% Return on tangible common equity - Non-GAAP (a) 14.3% 28.4% 18.8% 15.4% 19.3% Return on tangible common equity excluding M&I, litigation and restructuring charges and the (benefit) net charge related to the disallowance of certain foreign tax credits - Non-GAAP (a) 14.3% 21.5% 19.7% 19.7% 21.8% ----------------------------------------------------------------------------------------------------------------- ---- ---- ---- ---- ---- (a) Annualized.
The following table presents the calculation of the equity to assets ratio and book value per common share.
Equity to assets and book value per common share Dec. 31, Sept. 30, Dec. 31, (dollars in millions, unless otherwise noted) 2013 2013 2012 -------------------------------------------- ---- ---- ---- BNY Mellon shareholders' equity at period end - GAAP $37,521 $36,959 $36,431 Less: Preferred stock 1,562 1,562 1,068 ---------------------- ----- ----- ----- BNY Mellon common shareholders' equity at period end - GAAP 35,959 35,397 35,363 Less: Goodwill 18,073 18,025 18,075 Intangible assets 4,452 4,527 4,809 Add: Deferred tax liability - tax deductible goodwill 1,302 1,262 1,130 Deferred tax liability - non-tax deductible intangible assets 1,222 1,242 1,310 ------------------------------------------------------------- ----- ----- ----- Tangible BNY Mellon common shareholders' equity at period end - Non-GAAP $15,958 $15,349 $14,919 Total assets at period end - GAAP $374,310 $371,952 $358,990 Less: Assets of consolidated investment management funds 11,272 11,691 11,481 --------------------------------------------------------- ------ ------ ------ Subtotal assets of operations - Non-GAAP 363,038 360,261 347,509 Less: Goodwill 18,073 18,025 18,075 Intangible assets 4,452 4,527 4,809 Cash on deposit with the Federal Reserve and other central banks (a) 105,384 96,316 90,040 ------------------------------------------------------------------- ------- ------ ------ Tangible total assets of operations at period end - Non-GAAP $235,129 $241,393 $234,585 BNY Mellon shareholders' equity to total assets - GAAP 10.0% 9.9% 10.1% BNY Mellon common shareholders' equity to total assets - GAAP 9.6% 9.5% 9.9% Tangible BNY Mellon common shareholders' equity to tangible assets of 6.8% 6.4% 6.4% operations - Non-GAAP Period-end common shares outstanding (in thousands) 1,142,250 1,148,522 1,163,490 Book value per common share $31.48 $30.82 $30.39 Tangible book value per common share - Non-GAAP $13.97 $13.36 $12.82 ----------------------------------------------- ------ ------ ------ (a) Assigned a zero percent risk-weighting by the regulators.
The following table presents the calculation of our Basel I Tier 1 common equity ratio - Non-GAAP.
Dec. 31, Sept. 30, Dec. 31, Calculation of Basel I Tier 1 common equity to risk-weighted assets ratio - Non-GAAP (dollars in millions) 2013 (a) 2013 2012 Total Tier 1 capital - Basel I $18,336 $18,074 $16,694 Less: Trust preferred securities 330 324 623 Preferred stock 1,562 1,562 1,068 --------------- ----- ----- ----- Total Tier 1 common equity $16,444 $16,188 $15,003 Total risk-weighted assets - Basel I $113,354 $114,404 $111,180 Basel I Tier 1 common equity to risk-weighted assets ratio - Non-GAAP 14.5% 14.2% 13.5% --------------------------------------------------------------------- ---- ---- (a) Preliminary.
The following table presents the calculation of our estimated Basel III Tier 1 common equity ratio under the Standardized Approach and Advanced Approach.
Dec. 31, Sept. 30, Dec. 31, Estimated Basel III Tier 1 common equity ratio - Non-GAAP (a) (dollars in millions) 2013 (b) 2013 2012 Total Tier 1 capital - Basel I $18,336 $18,074 $16,694 Adjustment to determine estimated Basel III Tier 1 common equity: Deferred tax liability - tax deductible intangible assets 70 82 78 Preferred stock (1,562) (1,562) (1,068) Trust preferred securities (330) (324) (623) Other comprehensive income (loss) and net pension fund assets: Securities available-for-sale 387 487 1,350 Pension liabilities (900) (1,348) (1,453) Net pension fund assets (713) (279) (249) Total other comprehensive income (loss) and net pension fund assets (1,226) (1,140) (352) Equity method investments (445) (479) (501) Deferred tax assets (49) (26) (47) Other 16 18 18 ----- --- --- --- Total estimated Basel III Tier 1 common equity $14,810 $14,643 $14,199 Under the Standardized Approach: Total risk-weighted assets - Basel I $113,354 $114,404 N/A Add: Adjustments (c) 26,511 31,185 N/A -------------------- ------ ------ --- Total estimated Basel III risk-weighted assets $139,865 $145,589 N/A Estimated Basel III Tier 1 common equity ratio - Non-GAAP 10.6% 10.1% calculated under the Standardized Approach N/A Under the Advanced Approach: Total risk-weighted assets - Basel I $113,354 $114,404 $111,180 Add: Adjustments (c) 17,495 17,179 33,104 -------------------- ------ ------ ------ Total estimated Basel III risk-weighted assets $130,849 $131,583 $144,284 Estimated Basel III Tier 1 common equity ratio - Non-GAAP 11.3% (d) 11.1% 9.8% calculated under the Advanced Approach -------------------------------------- --- (a) At Dec. 31, 2013 and Sept. 30, 2013, the estimated Basel III Tier 1 common equity ratio is based on our interpretation of and expectations regarding the final rules released by the Federal Reserve on July 2, 2013, on a fully phased-in basis. For periods prior to June 30, 2013, these ratios were estimated using our interpretation of the NPRs dated June 7, 2012, on a fully phased-in basis. (b) Preliminary. (c) Following are the primary differences between risk-weighted assets determined under Basel I and Basel III. Credit risk is determined under Basel I using predetermined risk-weights and asset classes and relies in part on the use of external credit ratings. Under Basel III both the Standardized and Advanced Approaches use a broader range of predetermined risk-weights and asset classes and certain alternatives to external credit ratings. Securitization exposure receives a higher risk-weighting under Basel III than Basel I, and Basel III includes additional adjustments for market risk, counterparty credit risk and equity exposures. Additionally, the Standardized Approach eliminates the use of the VaR approach for determining risk- weighted assets on certain repo-style transactions. Risk-weighted assets calculated under the Advanced Approach also include the use of internal credit models and parameters as well as an adjustment for operational risk. (d) Changes in January 2014 to the probable loss model associated with unsecured wholesale credit exposures within our Advanced Approach capital model will impact risk-weighted assets. The Company did not include the impact at Dec. 31, 2013. However, a preliminary estimate of the revised methodology to the portfolio at Sept. 30, 2013 would have added approximately 6% to the risk-weighted assets. N/A - Not available.
Quarterly impact to the estimated Basel III Tier 1 common equity ratio - Non-GAAP Standardized Advanced Approach Approach -------- -------- Estimated Basel III Tier 1 common equity ratio - Non-GAAP at Sept. 30, 2013 10.1% 11.1% Impacted by: Net capital generation 5 bps 5 bps Change in accumulated other comprehensive income (loss) and net pension fund assets (6) bps (6) bps Change in risk-weighted assets 42 bps 6 bps Other (a) 12 bps 14 bps Estimated Basel III Tier 1 common equity ratio - Non-GAAP at Dec. 31, 2013 10.6% 11.3% -------------------------------------------------------------------------- ---- ---- (a) Includes foreign currency translation. bps - basis points.
Cautionary Statement
The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including our estimated capital ratios and expectations relating to those ratios, preliminary business metrics and statements made regarding our focus on driving organic growth, our focus on controlling expenses, a broader, continuous transformation process and our businesses generating significant capital and giving us increased financial flexibility. These statements, which may be expressed in a variety of ways, include the use of future or present tense language. These statements and other forward-looking statements contained in other public disclosures of BNY Mellon which make reference to the cautionary factors described in this Earnings Release, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control). Factors that could cause BNY Mellon's results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2012 and its other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Release speak only as of Jan. 17, 2014 and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
Contacts: MEDIA: ANALYSTS: ------ --------- Kevin Heine Andy Clark (212) 635-1590 (212) 635-1803
SOURCE The Bank of New York Mellon Corporation