BNY Mellon Assets Fall, Hurt by Outflows and Strong Dollar

By Austen Hufford 

Bank of New York Mellon Corp. said outflows and exchange rates pushed down assets under management during its latest quarter on a sequential basis, even as higher interest rates helped bolster year-over-year profit.

As a custody bank, BNY Mellon derives much of its business from serving trillions in assets for money managers and other clients, in addition to managing clients' investments.

The bank saw assets under management fall during the period due to outflows, unfavorable exchange rates and market performance. Assets under management stood at $1.65 trillion at the end of the quarter compared with $1.72 trillion at the end of the prior quarter, but up from $1.63 trillion last year.

The stronger U.S. dollar, primarily compared with the British pound, hurt results.

The company reported $11 billion in net long-term outflows during the quarter, primarily from actively managed strategies.

Expenses fell 2.3% as the stronger U.S. dollar also helped decrease staff and severance expenses.

Fee revenue, which makes up nearly 80% of the bank's total revenue, grew 0.1% from a year prior as investment services fees increased on higher money market fees. Investment management and performance fees decreased due to the stronger dollar and lower performance fees.

Net interest revenue grew 8.9% on the increase in interest rates and interest-rate hedging.

In December the Federal Reserve approved its second rate increase in a decade and signaled that interest rates would rise at a faster pace than previously projected.

The bank's net interest margin, a key measure of lending profitability, grew to 1.17% from 1.06% in the third quarter and 0.99% in the prior year.

For the quarter, BNY Mellon reported a profit of $870 million, up from $693 million a year prior. Per-share earnings rose to 77 cents from 57 cents.

Total revenue increased 1.7% to $3.79 billion. Analysts polled by Thomson Reuters predicted 77 cents in adjusted earnings per share on $3.85 billion in revenue.

Late last year, the bank was unable to process client payment instructions sent over the Swift network for several hours in a rare outage that caused some payments to fail.

Write to Austen Hufford at [e-mail]

(END) Dow Jones Newswires

January 19, 2017 07:54 ET (12:54 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.