BNY Mellon Profit Beats Estimates on Increase in Fee Revenue

  • Third quarter results helped by further reduction in expenses
  • Assets under custody, administration rose 7% to $30.5 trillion

Bank of New York Mellon Corp.’s third-quarter profit exceeded analysts’ estimates on an increase in fee revenue and lower costs. The shares rose the most since April.

Net income climbed 18 percent to 90 cents a share, the New York-based company said Thursday in a statement. Nine analysts in a Bloomberg survey expected profit of 81 cents.

BNY Mellon said revenue rose 4 percent to $3.94 billion and expenses fell on lower costs for items including legal services and equipment. The company, like its custody-bank rival State Street Corp., has been trimming expense to maintain profits in a period of low interest rates, which limits the returns the company can earn on deposits and forces it to forgo fees on money-market funds. Chief Executive Officer Gerald Hassell earlier sold the bank’s headquarters and streamlined technology operations.

"The company has not lost its focus on managing and reducing their operating expenses,” Gerard Cassidy, an analyst at RBC Capital Markets, said in an interview after earnings were released. “It is becoming part of their DNA, which will continue well into 2017.”

Assets under management increased 6 percent to $1.72 trillion, while assets under custody and administration rose 7 percent to $30.5 trillion. The jump in assets was helped by stock market gains and partially dampened by the rise of the dollar versus the British pound.

The firm saw $3 billion in net inflows into active strategies, while index offerings saw $2 billion in outflows. Net interest revenue rose 2 percent to $774 million. On Oct. 19, custody bank peer Northern Trust Corp. reported a 9.8 percent increase in profit helped in part by increased interest income.

BNY Mellon jumped 4.5 percent to $42.25 at 4:15 p.m. in New York trading. Before today, the shares fell 1.9 percent this year compared with a decline of 2.3 percent for the 10-member S&P 500 Asset Management & Custody Banks Index. 

Custody banks keep records, track performance and lend securities for institutional investors. The banks also manage money for individuals and institutions.

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