Results Diverge at 2 Big Trust Concerns -- WSJ

By Justin Baer 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 21, 2017).

Bank of New York Mellon Corp. on Thursday posted a quarterly profit that beat estimates, renewing investor attention on a disappointing second quarter for rival Northern Trust Corp.

The shares of Northern Trust tumbled 8% on Wednesday and were down an additional 2% Thursday morning following a disclosure of profit that was below analysts' expectations. Bank of New York Mellon's shares rose 2% Thursday morning.

A key difference between the two trust banks: How each navigated the rise in short-term interest rates in the U.S. The U.S. Federal Reserve raised the benchmark federal-funds rate in March, and again in June.

BNY Mellon's net interest revenue rose 4% to $826 million from the first quarter. At Northern Trust, revenue on interest fell 7% from the same period.

Northern Trust attributed the decline to a drop in U.S. deposits and an increase in those from the U.K. and Europe, where lending rates have remained at historic lows. The shift in mix squeezed interest margins at the firm.

BNY Mellon has a smaller wealth-management business, whose clients tend to move their deposits more quickly than large institutions, said longtime finance chief Todd Gibbons in an interview Thursday. Contractual obligations with some of those clients limited defections even as rates rose, he said.

Bank of New York's net income rose to $926 million, or 88 cents a share, in the second quarter from $825 million, or 75 cents, a year earlier. Analysts had predicted per-share profit of 84 cents a share.

Fees from investment services, the bank's core custody business, rose 4% to $1.86 billion. Money-management fees climbed 6% to $879 million.

The results were the last for Gerald Hassell as BNY Mellon's chairman and chief executive. Mr. Hassell, who turns 66 this year, on Monday ceded his post to Charles Scharf, the former CEO of payments giant Visa Inc. Mr. Hassell has spent more than four decades at the bank.

"Charlie is the right guy, and people are excited about Charlie," Mr. Gibbons said, adding, "They will miss Gerald. There's a touch of apprehension, but also excitement. A little new blood can be a good thing."

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(END) Dow Jones Newswires

July 21, 2017 02:47 ET (06:47 GMT)

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