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BNY Mellon Gains on Q3 Earnings Beat, Revenues & AUM Rise Y/Y

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The Bank of New York Mellon Corporation’s (BK - Free Report) third-quarter 2024 adjusted earnings of $1.52 per share surpassed the Zacks Consensus Estimate of $1.41. Also, the bottom line reflects a rise of 19.7% from the prior-year quarter.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

BK shares have gained 1.3% in the pre-market trading on better-than-expected results.

Results have been primarily aided by a rise in fee revenues and net interest income (NII). The assets under custody and/or administration (AUC/A) and assets under management (AUM) balances grew on a solid market rally. However, a rise in non-interest expenses and provisions hurt the results to some extent.

Net income applicable to common shareholders (GAAP basis) was $1.11 billion or $1.50 per share, up from $958 million or $1.22 per share in the year-ago quarter. We had projected a net income applicable to common shareholders of $986.3 million.

BK’s Revenues Improve, Expenses Rise

Total revenues increased 5.2% year over year to $4.65 billion. The top line surpassed the Zacks Consensus Estimate of $4.52 billion.

NII was $1.05 billion, up 3.1% year over year. The rise reflected improved investment securities portfolio yields and balance sheet growth, partly offset by changes in the deposit mix. Our estimate for the metric was $898.3 million.

The net interest margin (NIM) contracted 2 basis points (bps) to 1.16%. Our estimate for NIM was 1.10%.

Total fee and other revenues increased 5.8% year over year to $3.6 billion. The rise was primarily driven by an increase in investment services fees, foreign exchange revenues, investment management and performance fees, financing-related fees, and investment and other revenues. Our estimate for the same was $3.59 billion.

Total non-interest expenses (GAAP basis) were $3.1 billion, up marginally from the prior-year quarter. The rise was due to a fall in costs related to software and equipment charges, professional, legal and other purchased services, distribution and servicing costs, business development costs, and other costs. We had projected non-interest expenses of $3.07 billion.

BNY Mellon’s Asset Balances Improve

As of Sept. 30, 2024, AUM was $2.14 trillion, up 17.7% year over year. The rise reflected higher market values and the favorable impact of a weaker U.S. dollar. Our estimate for AUM was $2.06 trillion.

AUC/A of $52.1 trillion increased 14% year over year, primarily reflecting higher market values, client inflows and net new business.

BK’s Credit Quality Deteriorates

The allowance for loan losses, as a percentage of total loans, was 0.43%, up 11 bps from the prior-year quarter. As of Sept. 30, 2024, non-performing assets were $211 million, up significantly from $48 million in the year-ago quarter.

In the reported quarter, the company recorded $23 million of provision for credit losses. In the prior-year quarter, provisions were $3 million. We had expected the metric to be $6.6 million.

BNY Mellon Capital Position: Mixed Bag

As of Sept. 30, 2024, the common equity Tier 1 ratio was 11.9%, the same as of the Sept. 30, 2023 level. Tier 1 leverage ratio was 6%, down from 6.1% as of Sept. 30, 2023.

BK’s Share Repurchase Update

In the reported quarter, BNY Mellon repurchased shares worth $725 million.

Our Take on BNY Mellon

High interest rates, BK’s global expansion efforts, and a strong balance sheet position are likely to keep supporting its top-line growth. Also, robust AUM balance is another positive. However, concentration risk due to the company’s higher dependence on fee-based revenues, higher funding costs, and elevated expenses are worrisome.

Currently, BNY Mellon carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Major Banks

BankUnited, Inc. (BKU - Free Report) is scheduled to report quarterly results on Oct. 22. The Zacks Consensus Estimate for BKU’s third-quarter earnings has been unchanged over the past seven days. Currently, BKU carries a Zacks Rank of 3 (Hold).

Truist Financial Corporation (TFC - Free Report) is slated to report quarterly results on Oct. 17. The Zacks Consensus Estimate for TFC’s third-quarter earnings has been unchanged over the past seven days. TFC also carries a Zacks Rank of 3 at present.


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