BNY Mellon Profit Rises as Trian Seeks to Boost SharesCharles Stein
Bank of New York Mellon Corp., under pressure from Trian Fund Management LP to lift its share price, said third-quarter profit climbed 11 percent, helped by the sale of assets.
Net income increased to $1.07 billion, or 93 cents a share, from $962 million, or 82 cents, a year earlier, the New York-based bank said today in a statement. Excluding certain items, BNY Mellon earned 64 cents a share, beating the 61-cent average estimate in a Bloomberg survey of 17 analysts.
Chief Executive Officer Gerald Hassell has jettisoned assets and cut costs to offset the drag caused by low interest rates on investment income and securities-lending revenue. Trian, the activist investment firm co-founded by Nelson Peltz, said in June it acquired a stake in the bank and was seeking talks with management.
“The steps they are taking will start to bear fruit by next year,” Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine, said in a telephone interview.
BNY Mellon rose 0.6 percent to close at $36.36 in New York. The shares increased 4.1 percent this year, compared with the 4.2 percent decline in the 18-company Standard & Poor’s index of asset managers and custody banks.
Custody banks keep records, track performance and lend securities for institutional investors. BNY Mellon also manages investments for institutions and individuals.
The bank said its asset-servicing fees rose 6.1 percent from a year earlier to $1.03 billion. Investment management and performance fees climbed 7.3 percent to $881 million.
During the quarter, BNY Mellon recorded a gain on the sale of its 1 Wall Street headquarters in lower Manhattan to a joint venture led by Harry Macklowe’s Macklowe Properties for $585 million. By relocating, the bank said it would cut its use of New York office space.
BNY Mellon also booked a gain on a sale of its stake in Hong-Kong-based Wing Hang Bank Ltd., which was announced in May.
The bank began charging a fee on euro-denominated deposits as of Oct. 1, Chief Financial Officer Todd Gibbons said today on a conference call. BNY Mellon made the move after the European Central Bank lowered the rate it pays on funds left at the bank to minus 20 basis points. A basis point is one-hundredth of a percentage point.
Like other custody banks, BNY Mellon has been hurt by low interest rates, which cut income from its investment portfolio, hold down revenue from securities lending and force the bank to waive fees on money-market funds.
BNY Mellon’s net interest margin, the spread that a bank makes on loans compared with what it pays on borrowings, expressed as a percentage, fell 22 basis points to 94 basis points for the third quarter.
BNY Mellon last month told a group of employees that it was shutting its derivatives sales and trading business, which will affect about 50 people, according to a person with knowledge of the matter.
Hassell in June gave two of his top deputies, Curtis Arledge and Brian Shea, added duties as part of what he called a strategic realignment. Arledge, chief executive officer of investment management, was given oversight of a newly formed markets group. Shea, who had been president of investment services, became CEO of that division.
Trian, founded in 2005 by Peltz, Peter May and Ed Garden, in June said it acquired a 2.5 percent stake in BNY Mellon. Trian stepped in after the bank’s pretax margin was smaller than rivals State Street Corp. and Northern Trust Corp. in four of the past five fiscal years, according to data compiled by Bloomberg.
Trian in October 2011 disclosed a stake in State Street, criticizing the Boston-based custody bank for poor performance. By the time the firm sold its holdings in the third quarter of 2013, the shares had more than doubled.