Bank of New York Mellon Corp., parent of Pershing and Dreyfus and the world’s biggest custody bank, said second-quarter earnings more than tripled on higher fees for overseeing and managing investor assets.
Net income climbed to $658 million, or 54 cents a share, from $176 million, or 15 cents a share, a year earlier, BNY Mellon said today in a statement from New York. Analysts expected earnings of 55 cents, according to the average of 11 estimates in a Bloomberg survey. Earnings a year ago were hurt by writedowns on securities backed by pools of home loans.
BNY Mellon joins State Street, the third-largest custody bank, in reporting higher profit after a 12 percent gain in the Standard & Poor’s 500 Index of large U.S. stocks in the year through June 30 lifted assets and fees. Income from lending cash and securities is being squeezed by the Federal Reserve’s decision to keep its main lending rate close to zero since December 2008. That’s also lowered profit from fixed-income and forced firms to waive fees on money-market funds.
“They are at the mercy of rates and the environment is against them,” Richard Bove, a Lutz, Florida-based analyst with Rochdale Securities LLC, said in an interview before BNY Mellon announced earnings.
BNY Mellon reported earnings before the start of regular U.S. trading. Before today, the shares had fallen 8.3 percent to $25.64 in New York Stock Exchange trading this year. State Street is down 14 percent.
State Street on July 7 reported second-quarter earnings of 87 cents a share, compared with a $7.12 loss a year earlier. The Boston-based company is scheduled to release detailed earnings later today.
Both companies have expanded abroad as banks are selling units to raise capital. State Street in December agreed to buy Mourant International Finance Administration in the U.K.’s Channel Islands and the securities-servicing unit of Italy’s Intesa Sanpaolo SpA. The two deals combined added more than $600 billion in custody assets.
BNY Mellon, led by Chief Executive Officer Robert P. Kelly, earlier this year agreed to buy Pittsburg-based PNC Financial Services Group Inc.’s global-investment servicing business for $2.31 billion to add hedge-fund and mutual-fund clients, and BHF Asset Servicing GmbH to expand in Europe. The PNC purchase gave BNY Mellon an additional $855 billion in custody assets.
Kelly “navigated around the financial crisis successfully,” said Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine. “Now he will need to deliver on growth.”
Custody banks earn fees from keeping records, tracking performance and lending securities to institutional investors including mutual funds, pensions and hedge funds.
BNY Mellon in the first quarter got 74 percent of its revenue from providing services, including custody, to investors and 26 percent from asset management, according to data compiled by Bloomberg. For State Street the comparable numbers were 88 percent and 12 percent.
