BNY MELLON (BK) REPORTS FOURTH QUARTER CONTINUING EPS OF $0.59 OR $712 MILLION
NEW YORK, Jan. 20, 2010 -- The Bank of New York Mellon Corporation (NYSE:BK) today reported fourth quarter income from continuing operations applicable to common shareholders of $712 million, or $0.59 per common
share, compared with $50 million, or $0.04 per common share, in the fourth quarter of 2008 and a loss of $2.439
billion, or $2.04 per common share, in the third quarter of 2009.
"We saw excellent growth in asset and wealth management revenues this quarter, which benefited from long-term
flows, the contribution from Insight Investment Management, higher equity values and stronger investment
performance. However, the persistent low interest rate environment globally increasingly challenged our net interest
revenue and fee revenue," said Robert P. Kelly, chairman and chief executive officer of BNY Mellon.
"In 2009, we completed our merger, raised equity and repaid TARP, successfully completed the restructuring of our
investment securities portfolio and ended the year with strong capital ratios. I want to thank all of our employees, as
our accomplishments in a very challenging year reflect their excellent work and dedication," added Mr. Kelly.
The net loss from continuing operations applicable to common shareholders totaled $1.097 billion, or $0.93 per
common share, for the full year 2009 compared to net income of $1.398 billion, or $1.21 per common share, for the
full year 2008. Net loss applicable to common shareholders, including discontinued operations, for the full-year 2009
totaled $1.367 billion, or $1.16 per common share, compared to net income of $1.386 billion, or $1.20 per common
share, for the full-year 2008.
and are compared to the fourth quarter of 2008, all information is reported on a continuing operations basis and
sequential growth rates are unannualized. Please refer to the Quarterly Earnings Review for detailed business
segment information.
Total revenue Reconciliation of total revenue 4Q09 vs.
4Q09 3Q09 4Q08 4Q08 3Q09
Total revenue
Reconciliation of total revenue 4Q09 vs.
(dollar amounts in millions)
Fee and other revenue - GAAP $ 2,595 $ (2,216) $ 1,817 N/M N/M
Less: Investment securities gains (losses) 15 (4,833) (1,241) N/M N/M
Total fee revenue - GAAP 2,580 2,617 3,058 (16)% (1)%
Net interest revenue - GAAP 724 716 1,047 (31) 1
Total revenue excluding investment
securities gains (losses) - Non-GAAP $ 3,304 $ 3,333 $ 4,105 (20)% (1)%
N/M - Not meaningful.
Fourth Quarter Results -
Unless otherwise noted, all comments begin with the results of the fourth quarter of 2009
NEW YORK, Jan. 20, 2010 --
The Bank of New York Mellon Corporation (NYSE:BK) today reported fourth
- Assets under custody and administration amounted to $22.3 trillion at Dec. 31, 2009, an increase of 10%
compared with the prior year and an increase of 1% sequentially. The year-over-year increase reflects higher
market values, and new business wins, while the sequential increase primarily reflects higher market values.
Assets under management
This represents an increase of 20% compared with the prior year, and a 15% sequential increase. Both increases
were primarily due to the acquisition of Insight Investment Management ("Insight") in the fourth quarter of 2009.
Net long-term inflows of $14 billion in the fourth quarter of 2009 were more than offset by $22 billion of shortterm
outflows.
- Securities servicing fees, excluding securities lending fee revenue, totaled $1.212 billion, a decrease of $54
million year-over-year and an increase of $17 million sequentially. A year-over-year increase in asset servicing
revenue was offset by lower clearing and issuer services revenue. Sequentially, higher asset servicing and issuer
services revenue were primarily offset by lower clearing revenue. Comparisons to both prior periods were
negatively impacted by lower money market distribution fees. Securities lending fee revenue totaled $29 million
in the fourth quarter of 2009 compared with $187 million in the prior year period and $43 million sequentially.
The year over year and sequential decreases reflect lower spreads and volumes.
- Asset and wealth management fees totaled $736 million, an increase of 5% compared with the prior year period
and 13% sequentially. Both increases reflect the impact of the Insight acquisition, stronger investment
performance and improved market values, partially offset by a reduction in money market related fees due to
outflows in money market products and higher fee waivers. The sequential increase also reflects positive longterm
net inflows of $14 billion. Asset and wealth management fees, excluding performance fees, increased 4%
sequentially.
- Foreign exchange and other trading activities totaled $246 million, a decrease of 52% compared with a record
$510 million in the prior year period and unchanged compared with the third quarter of 2009. The decrease yearover-
year primarily reflects lower foreign exchange revenue, driven by lower volatility and spreads, as well as a
lower valuation of the credit derivatives used to hedge the loan portfolio. The sequential results reflect higher
foreign exchange revenue and lower mark to market adjustments on credit default swaps, offset by lower fixed
income trading revenue.
- Investment income totaled $78 million, increasing $33 million year-over-year and decreasing $43 million
sequentially. The increase compared with the prior year period reflects higher seed capital and private equity
investment revenue, partially offset by lower lease residual gains. The sequential decrease primarily reflects
lower lease residual gains.
- Net interest revenue (FTE) totaled $729 million with a net interest margin of 1.77% compared with
$721 million and 1.85%, sequentially.
- Investment securities pre-tax net gains totaled $15 million compared to pre-tax net losses of $1.241 billion in
the fourth quarter of 2008 and $4.833 billion in the third quarter of 2009.
The provision for credit losses decreased to $65 million in the fourth quarter of 2009 compared with $147 million in
the third quarter of 2009. The decrease in the provision reflects a lower number of downgrades in the fourth quarter
of 2009. During the fourth quarter of 2009, the total allowance for credit losses increased $32 million and net chargeoffs
totaled $33 million.
Total noninterest expense Reconciliation of noninterest expense 4Q09 vs.
(dollar amounts in millions) 4Q08 3Q09
Noninterest expense - GAAP $ 2,582 $ 2,318 $ 2,859 (10)% 11%
Restructuring charges (See page 10) 139 (5) 181 N/M N/M
Support agreement charges (5) 13 163 N/M N/M
M&I expenses 52 54 97 (46) (4)
Amortization of intangible assets 107 104 113 (5) 3
Total noninterest expense, excluding restructuring charges,
support agreement charges, M&I expenses and intangible
amortization - Non-GAAP $ 2,289 $ 2,152 $ 2,305 (1)% 6%
N/M - Not meaningful.
- Total noninterest expense (excluding restructuring charges, support agreement charges, M&I expenses and
intangible amortization) decreased 1% compared with the prior year period and increased 6% sequentially. The
decrease compared with the prior year reflects the impact of merger related synergies and the workforce
reduction program announced in the fourth quarter of 2008, primarily offset by expenses relating to the Insight
acquisition. The sequential increase principally reflects a seasonal increase in business development expense, the
Insight acquisition, employee benefit adjustments, and higher legal and FDIC expenses.
Results for the fourth quarter of 2009 include a net income tax benefit of $41 million which consists primarily of a
$51 million benefit from a higher proportion of foreign earnings, as well as a $133 million benefit from discrete tax
items primarily related to a tax loss on mortgages. Excluding the impact of the restructuring charges, M&I expenses,
securities gains and the discrete tax benefit, the effective tax rate was approximately 22% (Non-GAAP) in the fourth
quarter of 2009.
The unrealized net of tax losses on our investment securities portfolio was $783 million at Dec. 31, 2009
compared with a net of tax unrealized loss of $1.0 billion at Sept. 30, 2009.
Capital ratios 2009
Tier 1 capital ratio 12.0% 11.4% 13.2%
Tier 1 common equity to risk-weighted assets ratio (b) 10.5 9.9 9.4
Total (Tier 1 plus Tier 2) capital ratio 15.9 15.3 16.9
Leverage capital ratio 6.5 6.5 6.9
Common shareholders' equity to assets ratio (b) 13.7 13.3 10.6
Tangible common shareholders' equity to tangible assets ratio - Non-GAAP (b) 5.2 5.2 3.8
(a) Includes discontinued operations. (b) See the Supplemental information section beginning on page 10 for a calculation of these ratios.
Nonperforming assets Declaration of quarterly dividend
quarterly common stock dividend of $0.09 per common share. This cash dividend is payable on Feb. 9, 2010 to
shareholders of record as of the close of business on Feb. 1, 2010.
BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. BNY Mellon is a global financial
services company focused on helping clients manage and service their financial assets, operating in 34 countries and
serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations
and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer
services, clearing services and treasury services through a worldwide client-focused team. It has $22.3 trillion in
assets under custody and administration, $1.1 trillion in assets under management, services $12.0 trillion in
outstanding debt and processes global payments averaging $1.6 trillion per day. Additional information is available
at www.bnymellon.com.
Supplemental Financial Information
The Quarterly Earnings Review and supplemental financial trends for The Bank of New York Mellon Corporation
have been updated through Dec. 31, 2009 and are available at www.bnymellon.com (Investor Relations - Financial
Reports).
Conference Call Data
Robert P. Kelly, chairman and chief executive officer; Gerald L. Hassell, president; and Thomas P. Gibbons, chief
financial officer, along with other members of executive management from BNY Mellon, will host a conference call
and simultaneous live audio webcast at 8:00 a.m. EST on Wednesday, Jan. 20, 2010. This conference call and audio
webcast will include forward-looking statements and may include other material information. Persons wishing to
access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (210) 838-9221
(International) Passcode: Earnings, or by logging on to www.bnymellon.com. The Earnings Release, together with
the Quarterly Earnings Review and supplemental financial trends, will be available at www.bnymellon.com
beginning at approximately 6:30 a.m. EST on Jan. 20, 2010. Replays of the conference call and audio webcast will
be available beginning Jan. 20, 2010 at approximately 2:00 p.m. EST through Wednesday, Feb. 3, 2010 by dialing
(800) 664-4219 (U.S.) or (203) 369-3307 (International). The archived version of the conference call and audio
webcast will also be available at www.bnymellon.com for the same time period.
THE BANK OF NEW YORK MELLON CORPORATION Financial Highlights
Quarter ended Year ended
(dollar amounts in millions, except per common share amounts and unless otherwise noted) Continuing operations
Return on common equity (annualized) (a) 9.8% N/M 0.8% (b) N/M 5.0% (b)
Non-GAAP adjusted (a) 10.1% 10.0% 16.8% (b) 9.3% 14.2% (b)
Return on tangible common equity (annualized) - Non-GAAP (a) 33.0% N/M 6.5% (b) N/M 20.5% (b)
Non-GAAP adjusted (a) 31.0% 31.8% 61.3% (b) 32.2% 48.7% (b)
Fee and other revenue as a percent of total revenue (a) 78% N/M 63% 62% 79%
Non-GAAP adjusted (a) 78% 79% 74% 78% 79%
Annualized fee revenue per employee
(based on average headcount) (in thousands) $243 $248 $285 $242 $290
Percent of non-U.S. fee and net interest revenue 36% 31% 31% 32% 33% (c)
Pre-tax operating margin (a) 20% N/M (2)% N/M 14%
Non-GAAP adjusted (a) 29% 32% 43% 31% 39%
Net interest margin (FTE) (d) 1.77% 1.85% 2.32% 1.82% 1.89% (c)
Selected average balances
Interest-earning assets (e) $164,075 $155,159 $181,639 $160,955 $152,201
Total assets $214,205 $205,786 $243,962 $212,127 $209,955
Interest-bearing deposits (e) $ 98,404 $ 93,632 $ 95,726 $ 98,206 $ 91,913
Noninterest-bearing deposits (e) $ 34,991 $ 34,920 $ 51,729 $ 36,446 $ 33,724
Total shareholders' equity $ 28,843 $ 28,144 $ 28,771 $ 28,476 $ 28,704
Average common shares and equivalents outstanding (in thousands):
Basic 1,200,359 1,197,414 1,144,839 1,178,907 1,142,239
Diluted (f) 1,203,469 1,197,414 1,146,127 1,178,907 1,148,358
Period-end data
Assets under custody and administration (in trillions) $ 22.3 $ 22.1 $ 20.2 $ 22.3 $ 20.2
Cross-border assets (in trillions) $ 8.8 $ 8.6 $ 7.5 $ 8.8 $ 7.5
Market value of securities on loan (in billions) (g) $ 247 $ 299 $ 326 $ 247 $ 326
Assets under management (in billions) $1,115 $ 966 $ 928 $1,115 $ 928
Employees 42,200 42,000 42,500 42,200 42,500
Book value per common share - GAAP (a) $ 23.99 $ 23.50 $ 22.00 $ 23.99 $ 22.00
Tangible book value per common share - Non-GAAP (a) $ 7.90 $ 7.54 $ 5.18 $ 7.90 $ 5.18
Dividends per common share $ 0.09 $ 0.09 $ 0.24 $ 0.51 $ 0.96
Closing common stock price per common share $ 27.97 $ 28.99 $ 28.33 $ 27.97 $ 28.33
Market capitalization $33,783 $34,911 $32,536 $33,783 $32,536
(a) See Supplemental information beginning on page 10 for a calculation of these ratios. (b) Calculated before extraordinary loss. (c) Excluding the SILO/LILO charges, the percentage of non-U.S. fee and net interest revenue was 32% and the net interest margin was 2.21% for the full year of 2008. (d) Prior periods calculated on a continuing operations basis, even though the balance sheet, in accordance with GAAP, is not restated for discontinued operations. (e) Excludes the impact of discontinued operations. (f) Diluted earnings per share for the three months ended Sept. 30, 2009 and year ended Dec. 31, 2009 was calculated using average basic shares. Adding back the dilutive shares would result in anti-dilution. (g) Represents the securities on loan, both cash and non-cash, managed by the Asset Servicing segment. THE BANK OF NEW YORK MELLON CORPORATION Condensed Consolidated Income Statement
Quarter ended Year ended
Dec. 31, (in millions, except per common share amounts) Fee and other revenue
Securities servicing fees:
Asset servicing $ 650 $ 643 $ 786 (a) $2,573 $3,370 (a)
Issuer services 368 359 388 1,463 1,685
Clearing services 223 236 279 962 1,065
Total securities servicing fees 1,241 1,238 1,453 4,998 6,120
Asset and wealth management fees 736 650 701 2,639 3,218
Foreign exchange and other trading activities 246 246 510 1,036 1,462
Treasury services 134 128 132 519 514
Distribution and servicing 85 94 106 397 421
Financing-related fees 57 56 44 215 186
Investment income 78 121 45 226 207
Other 3 84 67 111 214
Total fee revenue 2,580 2,617 3,058 10,141 12,342
Net securities gains (losses) 15 (4,833) (1,241) (5,369) (1,628)
Total fee and other revenue 2,595 (2,216) 1,817 4,772 10,714
Net interest revenue
Interest revenue 854 829 1,525 3,507 5,524
Interest expense 130 113 478 592 2,665
Net interest revenue 724 716 1,047 2,915 2,859
Provision for credit losses 65 147 54 332 104
Net interest revenue after provision for credit losses 659 569 993 2,583 2,755
Noninterest expense
Staff 1,221 1,157 1,180 (a) 4,700 5,189 (a)
Professional, legal and other purchased services 278 265 273 (a) 1,017 1,021 (a)
Net occupancy 141 142 141 564 570
Distribution and servicing 109 104 123 426 517
Software 98 95 86 367 331
Sub-custodian and clearing 83 80 84 (a) 320 335 (a)
Furniture and equipment 80 76 86 309 323
Business development 76 45 76 214 278
Other 198 201 419 837 1,822
Subtotal 2,284 2,165 2,468 8,754 10,386
Amortization of intangible assets 107 104 113 426 473
Restructuring charges 139 (5) 181 150 181
Merger and integration expenses:
The Bank of New York Mellon Corporation 52 54 97 233 471
Acquired Corporate Trust Business - - - - 12
Total noninterest expense 2,582 2,318 2,859 9,563 11,523
Income
Income (loss) from continuing operations before income taxes 672 (3,965) (49) (2,208) 1,946
Provision (benefit) for income taxes (41) (1,527) (137) (1,395) 491
Income (loss) from continuing operations 713 (2,438) 88 (813) 1,455
Discontinued operations:
Income (loss) from discontinued operations (183) (29) 7 (421) 28
Provision (benefit) for income taxes (64) (10) 3 (151) 14
Income (loss) from discontinued operations, net of tax (119) (19) 4 (270) 14
Extraordinary (loss) on consolidation of commercial paper conduits, net of tax - - (26) - (26)
Net income (loss) 594 (2,457) 66 (1,083) 1,443
Net (income) loss attributable to noncontrolling interests, net of tax (1) (1) (5) (1) (24)
Redemption charge and preferred dividends - - (33) (283) (33)
Net income (loss) applicable to common shareholders of
The Bank of New York Mellon Corporation $ 593 $(2,458) $ 28 $(1,367) $1,386
(a) See page 10 for an explanation of prior period income statement adjustments. THE BANK OF NEW YORK MELLON CORPORATION Condensed Consolidated Income Statement - continued Earnings per share applicable to the common shareholders of The Bank of New York Mellon Corporation Dec. 31, (in millions, except per common share amounts) Basic:
Income (loss) from continuing operations $ 0.59 $(2.04) $ 0.04 $(0.93) $ 1.21
Income (loss) from discontinued operations, net of tax (0.10) (0.02) - (0.23) 0.01
Extraordinary (loss), net of tax - - (0.02) - (0.02)
Net income (loss) applicable to common stock $ 0.49 $(2.05) (a) $ 0.02 $(1.16) $ 1.20
Diluted: (b)
Income (loss) from continuing operations $ 0.59 $(2.04) $ 0.04 $(0.93) $ 1.21
Income (loss) from discontinued operations, net of tax (0.10) (0.02) - (0.23) 0.01
Extraordinary (loss), net of tax - - (0.02) - (0.02)
Net income (loss) applicable to common stock $ 0.49 $(2.05) (a) $ 0.02 $(1.16) $ 1.20
(a) Does not foot due to rounding. (b) Diluted earnings per share for the three months ended Sept. 30, 2009 and the full-year ended Dec. 31, 2009, was calculated using average basic shares. Adding back the dilutive shares would result in anti-dilution.
Reconciliation of net income (loss) from continuing operations applicable to the common shareholders of The Bank of New York Mellon Corporation Dec. 31, (in millions)
Income (loss) from continuing operations $713 $(2,438) $88 $ (813) $1,455
Net (income) loss attributable to noncontrolling interests, net of tax (1) (1) (5) (1) (24)
Redemption charge and preferred dividends - - (33) (283) (33)
Income (loss) from continuing operations applicable to common shareholders
of The Bank of New York Mellon Corporation, net of tax 712 (2,439) 50 (1,097) 1,398
Income (loss) from discontinued operations, net of tax (119) (19) 4 (270) 14
Extraordinary (loss), net of tax - - (26) - (26)
Net income (loss) applicable to the common shareholders of The Bank of
New York Mellon Corporation $593 $(2,458) $28 $(1,367) $1,386
THE BANK OF NEW YORK MELLON CORPORATION Consolidated Balance Sheet Dec. 31, (dollar amounts in millions, except per share amounts) Assets
Cash and due from:
Banks $ 3,671 $ 4,881
Federal Reserve and other central banks (includes $7,362 and $53,270 of interest-bearing deposits) 7,423 53,278
Other short-term investments - U.S. government-backed commercial paper, at fair value - 5,629
Interest-bearing deposits with banks 56,302 39,126
Federal funds sold and securities purchased under resale agreements 3,535 2,000
Securities:
Held-to-maturity (fair value of $4,240 and $6,333) 4,417 7,371
Available-for-sale 51,632 32,064
Total securities 56,049 39,435
Trading assets 6,001 11,102
Loans 36,689 43,394
Allowance for loan losses (503) (415)
Net loans 36,186 42,979
Premises and equipment 1,602 1,686
Accrued interest receivable 639 619
Goodwill 16,249 15,898
Intangible assets 5,588 5,856
Other assets 16,737 15,023
Assets of discontinued operations 2,242 -
Total assets $212,224 $237,512
Liabilities
Deposits:
Noninterest-bearing (principally domestic offices) $ 33,477 $ 55,816
Interest-bearing deposits in domestic offices 32,944 32,386
Interest-bearing deposits in foreign offices 68,629 71,471
Total deposits 135,050 159,673
Borrowing from Federal Reserve related to asset-backed commercial paper, at fair value - 5,591
Federal funds purchased and securities sold under repurchase agreements 3,348 1,372
Trading liabilities 6,396 8,085
Payables to customers and broker-dealers 10,721 9,274
Commercial paper 12 138
Other borrowed funds 477 755
Accrued taxes and other expenses 4,484 4,052
Other liabilities (including allowance for lending related commitments of $125 and $114) 3,891 4,618
Long-term debt 17,234 15,865
Liabilities of discontinued operations 1,608 -
Total liabilities 183,221 209,423
Equity
Preferred stock - par value $0.01 per share; authorized 100,000,000 shares;
issued - shares and 3,000,000 shares - 2,786
Common stock-par value $0.01 per common share; authorized 3,500,000,000
common shares; issued 1,208,861,641 and 1,148,507,561 common shares 12 11
Additional paid-in capital 21,917 20,432
Retained earnings 8,912 10,250
Accumulated other comprehensive loss, net of tax (1,835) (5,426)
Less: Treasury stock of 1,026,927 and 40,262 common shares, at cost (29) (3)
Total The Bank of New York Mellon Corporation shareholders' equity 28,977 28,050
Noncontrolling interest 26 39
Total equity 29,003 28,089
Total liabilities and equity $212,224 $237,512
Investment Securities Portfolio
At Dec. 31, 2009, the fair value of our investment securities portfolio totaled $55.9 billion. The unrealized pre-tax
loss on our securities portfolio was $1.2 billion at Dec. 31, 2009 compared with $1.4 billion at Sept. 30, 2009 and
$7.6 billion at Dec. 31, 2008.
In the fourth quarter of 2009, we securitized $5.0 billion, fair value, of our investment securities portfolio into a
Grantor Trust. The Grantor Trust contains Alt-A, prime and subprime RMBS which were previously written down to
fair value as part of the 3Q09 restructuring of the investment securities portfolio. As a result of this transaction, we
received $771 million in cash for a Class A senior tranche that was sold to third parties and retained Class B
certificates with a fair value of $4.2 billion, which is included in the tables below. The transaction resulted in a $39
million net loss in the fourth quarter of 2009, which was offset by $54 million of net gains on the sale of $3.6 billion
of investment securities. The following table presents the fourth quarter 2009 activity related to restructuring and
reducing risk in the investment securities portfolio.
Investment securities portfolio rollforward of 4Q09 activity (dollar amounts in millions) Watch list:
European floating rate notes $ 7,092 $ (178) $ - $ - $ (767) $ 35 $ 6,182
Commercial MBS 2,685 (14) - - (272) - 2,399
Prime RMBS 4,324 (240) - (2,069) (86) 3 1,932
Alt-A RMBS 4,619 (158) - (2,603) (949) (17) 892
Subprime RMBS 1,158 (20) - (128) (222) - 788
Credit cards 649 (3) - - (22) 2 626
Home equity lines of credit 226 (13) - - (264) 51 -
Other 526 (8) - - (27) (15) 476
Total Watch list (a) 21,279 (634) - (4,800) (2,609) 59 13,295
Grantor Trust Class B Certificates - 23 - 4,969 (771) (39) 4,182
Agency RMBS 16,560 (866) 3,084 - - - 18,778
Sovereign debt/sovereign guaranteed 6,590 (148) 2,259 - - - 8,701
U.S. Treasury securities 5,052 (161) 1,463 - - - 6,354
FDIC-insured debt 1,962 1 - - - - 1,963
Government agency debt 1,241 (6) - - - - 1,235
Other 2,850 (74) 39 - (265) (5) 2,545
Total investment securities $55,534 $(1,865) $6,845 $ 169 $(3,645) $ 15 $57,053
Investment securities portfolio Dec. 31, 2009
as a % of Ratings
(dollar amounts in millions) Watch list:
European floating rate notes $6,182 $5,503 88% $ (679) 97% 3% -% -% -%
Commercial MBS 2,399 2,302 96 (97) 93 4 3 - -
Prime RMBS 1,932 1,684 86 (248) 60 23 5 12 -
Alt-A RMBS 892 779 67 (113) 27 15 1 57 -
Subprime RMBS 788 470 60 (318) 75 14 5 6 -
Credit cards 626 610 95 (16) 1 98 1 - -
Other 476 465 56 (11) - - 16 76 8
Total Watch list (a) 13,295 11,813 84 (1,482) 77 12 2 9 -
Grantor Trust Class B Certificates 4,182 4,160 60 (22) - - - - 100
Agency RMBS 18,778 19,016 99 238 100 - - - -
Sovereign debt/sovereign guaranteed 8,701 8,709 100 8 100 - - - -
U.S. Treasury securities 6,354 6,374 100 20 100 - - - -
FDIC-insured debt 1,963 2,003 98 40 100 - - - -
Government agency debt 1,235 1,260 98 25 100 - - - -
Other 2,545 2,537 100 (8) 69 11 7 1 12
Total investment securities $57,053 $55,872 92% $(1,181) 86% 3% 1% 2% 8%
(a) The "Watch list" includes those securities we view as having a higher risk of impairment charges. (b) Amortized cost before impairments. Restructuring charge
As part of an ongoing effort to improve efficiency and develop a global operating model that provides the highest
quality of service to our clients, BNY Mellon continues to execute its global location strategy. This strategy includes
migrating positions to our global growth centers and the elimination of certain positions.
In December 2009, we recorded a pre-tax restructuring charge of $139 million, or $0.07 per common share. This
charge was comprised of $102 million for severance costs and $37 million for asset write-offs and other costs. The
restructuring charge is recorded as a separate line on the income statement.
Discontinued operations
In the second quarter of 2009, we adopted discontinued operations accounting for Mellon United National Bank
located in Florida. It was determined that this business no longer fit our strategic focus on our asset management and
securities servicing businesses. In July 2009, we signed a definitive agreement to sell Mellon United National Bank.
The transaction was completed on Jan. 15, 2010. This business was formerly included in the Other segment. In the
fourth quarter of 2009, we recorded an after-tax loss on discontinued operations of $119 million largely related to
additional write-downs primarily for retained South Florida real estate loans. The value of these loans, which are
carried at the lower of cost or market, was $383 million (face value of $635 million) at Dec. 31, 2009. The after-tax
loss of $270 million for the full-year of 2009 primarily reflects the loan write-downs and the elimination of $82
million of goodwill recorded in the second quarter of 2009.
Consolidated net income applicable to common shareholders, including discontinued operations
Net income applicable to common shareholders, including discontinued operations, totaled $593 million, or $0.49 per
common share, in the fourth quarter of 2009, compared with $28 million, or $0.02 per common share, in the fourth
quarter of 2008 and a net loss of $2.458 billion, or $2.05 per common share, in the third quarter of 2009.
Income statement adjustments
The following reclassifications were made to the income statement in the second quarter 2009.
- Global sub-custodian out-of-pocket expense related to client reimbursements was reclassified from subcustodian
expense to asset servicing revenue. This reclassification totaled $4 million in the fourth quarter of
2008 and $22 million in the full-year of 2008.
- Certain temporary/consulting expenses were reclassified from professional, legal and other purchased
services to staff expense. This reclassification totaled $33 million in the fourth quarter of 2008 and $100
million in the full-year of 2008.
Supplemental information - Explanation of Non-GAAP financial measures
BNY Mellon has included in this release certain Non-GAAP financial measures based upon tangible common
shareholders' equity. BNY Mellon believes that the ratio of tangible common shareholders' equity to tangible assets
is a measure of capital strength that adds additional useful information to investors supplementing the Tier 1 capital
ratio which is utilized by regulatory authorities. Unlike the Tier 1 ratio, the tangible common shareholders' equity
ratio fully incorporates those changes in investment securities valuations which are reflected in shareholders' equity.
In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a
risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its
calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes. This
ratio is also informative to investors in BNY Mellon's common stock because, unlike the Tier 1 capital ratio, it
excludes preferred stock and trust preferred securities issued by BNY Mellon. Further, BNY Mellon believes that the
return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax
liabilities, is a useful additional measure for investors because it presents a measure of BNY Mellon's performance in
reference to those assets which are productive in generating income.
BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful
information as to the level of such assets in relation to shares of common stock outstanding. BNY Mellon has
presented revenue and earnings measures which exclude the effect of investment securities gains (losses) and
SILO/LILO charge; expense measures which exclude restructuring charges, an FDIC special assessment, support
agreement charges, asset-based taxes, M&I expenses and intangible amortization expenses; and measures which
utilize net income excluding tax items such as the benefit of tax settlements and discrete tax benefits related to a tax
loss on mortgages. Return on equity measures and operating margin measures which exclude some or all of these
items are also presented. BNY Mellon believes that these measures are useful to investors because they permit a
focus on period to period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit
expenses in circumstances where such matters are within BNY Mellon's control. The excluded items in general
relate to situations where accounting rules require certain ongoing charges as a result of prior transactions, or where
valuation or other accounting/regulatory requirements require charges unrelated to operational initiatives. M&I
expenses relates to our Corporate Trust acquisition in 2006 and to the merger with Mellon Financial Corporation in
2007. M&I expenses generally continue for approximately three years after the transaction, and can vary on a yearto-
year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses
provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis,
after such M&I expenses have ceased, typically after approximately three years. Future periods will not reflect such
M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded. With
regards to the exclusion of investment securities gains (losses), BNY Mellon's primary businesses are Asset and
Wealth Management and Institutional Services. The management of these sectors is evaluated on the basis of the
ability of these businesses to generate fee and net interest revenue and to control expenses, and not on the results of
BNY Mellon's investment securities portfolio. Management of the investment securities portfolio is a shared service
contained in the Other segment. The primary objective of the investment securities portfolio is to generate net
interest revenue from the liquidity generated by BNY Mellon's processing businesses. BNY Mellon does not
generally originate or trade the securities in the investment securities portfolio. As a result, BNY Mellon believes
that presenting measures that exclude investment securities gains (losses) from its results, as a supplement to GAAP
information, gives investors a clearer picture of the results of its primary businesses. The SILO/LILO charges relate
to a one-time settlement with the IRS of tax structured lease transactions in 2008. Restructuring charges relate to
migrating positions to global growth centers and the elimination of certain positions. In this Earnings Release,
certain amounts are presented on an FTE basis. We believe that this presentation provides comparability of amounts
arising from both taxable and tax exempt sources, and is consistent with industry practice. The adjustment to an FTE
basis has no impact on net income.
Each of these measures as described above is used by management to monitor financial performance, both on a
company-wide and on a business segment basis.
Reconciliation of net income (loss) and EPS - GAAP to Non-GAAP 4Q09
(in millions, except per common share amounts) (a)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP $593 N/A
Earnings allocated to participating securities (a) (5) N/A
Net income applicable to common shareholders of The Bank of New York Mellon
Corporation - GAAP - Diluted EPS basis 588 $0.49
Less: Discontinued operations (loss) (119) (0.10)
Continuing operations - GAAP - Diluted EPS basis 707 0.59
Net investment securities (gains) (31) (0.03)
M&I expenses 33 0.03
Restructuring charges 86 0.07
Discrete tax benefits (133) (0.11)
Net income from continuing operations applicable to common shareholders excluding the investment
securities (gains), M&I expenses, restructuring charges and discrete tax benefits - Non-GAAP 662 0.55
Intangible amortization 66 0.06
Net income (loss) from continuing operations applicable to common shareholders excluding the investment
securities (gains), M&I expenses, restructuring charges, discrete tax benefits and intangible
amortization - Non-GAAP $728 $0.60 (b)4Q09 3Q09 4Q08
(a) Diluted earnings per share under the two-class method was calculated after deducting earnings allocated to participating securities.
(b) Does not foot due to rounding.
N/A - Not applicable.
Securities servicing fees
(in millions)
Securities servicing fees $1,241 $1,238 $1,453
Less: Securities lending fee revenue 29 43 187
Securities servicing fees excluding securities lending fee revenue $1,212 $1,195 $1,266
Asset and wealth management fee revenue 4Q09 vs.
(dollars in millions) 4Q08 3Q09
Asset and wealth management fee revenue $736 $650 $701 5% 13%
Less: Performance fees 59 1 44 34 N/M
Asset and wealth management fee revenue excluding performance fees $677 $649 $657 3% 4%
Reconciliation of fee and other revenue as a percent of total revenue
(dollars in millions)
Fee and other revenue - GAAP $2,595 $(2,216) $1,817 $ 4,772 $10,714
Less: Investment securities gains (losses) 15 (4,833) (1,241) (5,369) (1,628)
Fee and other revenue excluding investment
securities gains (losses)- Non-GAAP 2,580 2,617 3,058 10,141 12,342
Net interest revenue - GAAP 724 716 1,047 2,915 2,859
Less: SILO/LILO charges - - - - (489)
Net interest revenue excluding SILO/LILO
charges - Non-GAAP 724 716 1,047 2,915 3,348
Total revenue - GAAP $3,319 $(1,500) $2,864 $ 7,687 $13,573
Total revenue excluding investment securities gains (losses)
and SILO/LILO charges - Non-GAAP $3,304 $ 3,333 $4,105 $13,056 $15,690
Fee and other revenue as a percentage of total revenue 78% N/M 63% 62% 79%
Fee and other revenue as a percentage of total revenue
excluding investment securities gains (losses) and
SILO/LILO charges - Non-GAAP 78% 79% 74% 78% 79%
N/M - Not meaningful.
Reconciliation of income (loss) from continuing operations before income taxes - pre-tax operating margin
(dollars in millions)
Income (loss) from continuing operations before income taxes - GAAP $ 672 $(3,965) $ (49) $ (2,208) $ 1,946
Investment securities (gains) losses (15) 4,833 1,241 5,369 1,628
SILO/LILO charges - - - - 489
Support agreement charges (5) 13 163 (15) 894
Asset-based taxes - 20 - 20 -
FDIC special assessment - - - 61 -
M&I expenses 52 54 97 233 483
Restructuring charges 139 (5) 181 150 181
Intangible amortization 107 104 113 426 473
Income (loss) from continuing operations before income taxes
excluding investment securities (gains) losses, SILO/LILO charges,
support agreement charges, asset-based taxes, FDIC special
assessment, M&I expenses, restructuring charges and intangible
amortization - Non-GAAP $ 950 $ 1,054 $1,746 $ 4,036 $ 6,094
Fee and other revenue - GAAP $2,595 $(2,216) $1,817 $ 4,772 $10,714
Net interest revenue - GAAP 724 716 1,047 2,915 2,859
Total revenue -GAAP 3,319 (1,500) 2,864 7,687 13,573
Add: Investment securities (gains) losses (15) 4,833 1,241 5,369 1,628
SILO/LILO charges - - - - 489
Total revenue excluding investment securities (gains) losses and
SILO/LILO charges - Non-GAAP $3,304 $ 3,333 $4,105 $13,056 $15,690
Pre-tax operating margin (a) 20% N/M (2)% N/M 14%
Pre-tax operating margin excluding investment securities (gains) losses,
SILO/LILO charges, support agreement charges, asset-based taxes,
FDIC special assessment, M&I expenses, restructuring charges and
intangible amortization - Non-GAAP (a) 29% 32% 43% 31% 39%
(a) Income (loss) before taxes divided by total revenue. N/M - Not meaningful. Return on common equity and tangible common equity - continuing operations
(dollars in millions)
Net income (loss) applicable to common shareholders of
The Bank of New York Mellon Corporation - GAAP $ 593 $ (2,458) $ 28 $ (1,367) $ 1,386
Less: Discontinued operations income (loss), net of tax (119) (19) 4 (270) 14
Extraordinary (loss), net of tax - - (26) - (26)
Net income (loss) from continuing operations applicable to common
shareholders of The Bank of New York Mellon Corporation 712 (2,439) 50 (1,097) 1,398
Intangible amortization 66 65 70 265 292
Net income (loss) from continuing operations applicable to common
shareholders of The Bank of New York Mellon Corporation
excluding intangible amortization - Non-GAAP 778 (2,374) 120 (832) 1,690
Investment securities (gains) losses (31) 3,047 752 3,374 983
SILO/LILO/tax settlements - - - - 410
Support agreement charges (3) 8 97 (9) 533
FDIC special assessment - - - 36 -
M&I expenses 33 34 58 144 288
Restructuring charges 86 (3) 107 94 107
Discrete tax benefits and the benefit of tax settlements (133) - - (267) -
Net income (loss) from continuing operations excluding investment
securities (gains) losses, SILO/LILO/tax settlements, support agreement
charges, FDIC special assessment, M&I expenses, restructuring charges,
discrete tax benefits and the benefit of tax settlements and intangible
amortization- Non-GAAP $ 730 $ 712 $ 1,134 $ 2,540 $ 4,011
Average common shareholders' equity $28,843 $28,144 $26,812 $27,198 $28,212
Less: Average goodwill 16,291 16,048 16,121 16,042 16,525
Average intangible assets 5,587 5,608 5,763 5,654 5,896
Add: Deferred tax liability - tax deductible goodwill 720 666 599 720 599
Deferred tax liability - non-tax deductible intangible assets 1,680 1,717 1,841 1,680 1,841
Average tangible common shareholders' equity - Non-GAAP $ 9,365 $ 8,871 $ 7,368 $ 7,902 $ 8,231
Return on common equity- GAAP (a) 9.8% N/M 0.8% (b) N/M 5.0% (b)
Return on common equity excluding investment securities (gains)
losses, SILO/LILO/tax settlements, support agreement charges,
FDIC special assessment, M&I expenses, restructuring charges,
discrete tax benefits and the benefit of tax settlements and intangible
amortization- Non-GAAP (a) 10.1% 10.0% 16.8% (b) 9.3% 14.2% (b)
Return on tangible common equity - Non-GAAP (a) 33.0% N/M 6.5% (b) N/M 20.5% (b)
Return on tangible common equity excluding investment securities
(gains) losses, SILO/LILO/tax settlements, support agreement charges,
FDIC special assessment, M&I expenses, restructuring charges and
discrete tax benefits and the benefit of tax settlements - Non-GAAP (a) 31.0% 31.8% 61.3% (b) 32.2% 48.7% (b)
(a) Annualized.
(b) Calculated before extraordinary loss.
N/M - Not meaningful.
Equity to assets and book value per common share Dec. 31, (dollars in millions, unless otherwise noted)
Common shareholders' equity at period end - GAAP $ 28,977 $ 28,295 $ 25,264
Less: Goodwill 16,249 16,022 15,898
Intangible assets 5,588 5,574 5,856
Add: Deferred tax liability - tax deductible goodwill 720 666 599
Deferred tax liability - non-tax deductible intangible assets 1,680 1,717 1,841
Tangible common shareholders' equity at period end - Non-GAAP $ 9,540 $ 9,082 $ 5,950
Total assets at period end - GAAP $212,224 $212,007 $237,512
Less: Goodwill 16,249 16,022 15,898
Intangible assets 5,588 5,574 5,856
Cash on deposit with the Federal Reserve and other central banks (a) 7,375 15,003 53,278
U.S. government-backed commercial paper - - 5,629
Tangible total assets at period end - Non-GAAP $183,012 $175,408 $156,851
Common shareholders' equity to assets - GAAP 13.7% 13.3 % 10.6%
Tangible common shareholders' equity to tangible assets - Non-GAAP 5.2% 5.2 % 3.8%
Period end common shares outstanding (in thousands) 1,207,835 1,204,244 1,148,467
Book value per common share $ 23.99 $ 23.50 $ 22.00
Tangible book value per common share - Non-GAAP $ 7.90 $ 7.54 $ 5.18
(a) Assigned a zero percent risk weighting by the regulators.
Calculation of Tier 1 common equity to risk-weighted assets ratio (dollars in millions)
Total Tier 1 capital $ 12,853 $ 12,543 $ 15,402
Less: Trust preferred securities 1,686 1,682 1,654
Series B preferred stock - - 2,786
Total Tier 1 common equity $ 11,167 $ 10,861 $ 10,962
Total risk-weighted assets $106,805 $110,135 $116,713
Tier 1 common equity to risk-weighted assets ratio 10.5% 9.9 % 9.4%
(a) On a regulatory basis.
The information presented in this Earnings Release may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements, which may be expressed in a variety of ways,
including the use of future or present tense language, relate to, among other things, expectations with respect to BNY
Mellon's global location strategy. These statements and other forward-looking statements contained in other public
disclosures of The Bank of New York Mellon Corporation which make reference to the cautionary factors described
in this earnings release, are based upon current beliefs and expectations and are subject to significant risks and
uncertainties (some of which are beyond BNY Mellon's control). Factors that could cause BNY Mellon's results to
differ materially from those described in the forward-looking statements can be found in the risk factors set forth in
BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2008, the Form 10-Q for the quarter ended
March 31, 2009 and BNY Mellon's other filings with the Securities and Exchange Commission. All forward-looking
statements in this earnings release speak only as of Jan. 20, 2010 and BNY Mellon undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of
unanticipated events.