Bank of New York earnings fall but estimates are slightly higher
BNY Mellon (symbol:
) reported earnings of 86 cents per share, narrowly beating FactSet’s estimate for 85 cents per share. Earnings were 97 cents per share a year earlier.
Revenue of $3.9 billion was flat year over year and largely in line with guidance of $3.94 billion. Total revenue would have increased 2% had it not been for an $88 million reduction resulting from government sanctions related to Russia’s invasion of Ukraine.
“We generated a significant amount of capital and returned nearly 60% of earnings to our shareholders, primarily through ordinary dividends,” CEO Todd Gibbons said. “Throughout the quarter, we took action in the investment securities portfolio to mitigate the immediate impact on capital of rising interest rates. And we expect higher interest rates to be positive for commissions and net interest income in the future.
The bank updated its outlook for fiscal 2022, forecasting a roughly 13% increase in non-interest income from 2021, assuming a scenario in which interest rates follow the forward curve. and market values remain relatively stable. Management expects commission revenue to grow 4% to 5%, including a tailwind of approximately 5% from the reduction in fee waivers and a headwind of 1% to 2% from from Russia. Spending is expected to increase by around 5%, slightly less than the previous guidance.
“We remain cautious on near-term buyouts, and based on the environment we described earlier, we expect to eventually return at least 75% of earnings to shareholders this year,” said Emily Portney, chief executive. financial, during a call to investors. . “We continue to expect to return nearly 100% of profits to our shareholders over time.”
The company repurchased 1.9 million common shares for $118 million during the first quarter and approved a quarterly dividend of 34 cents per share, payable May 11.
Revenues fell flat or declined across all segments of the business in the first quarter. Revenues from the Securities Services and Markets and Wealth Management Services segments were flat, while pre-tax profit for the two segments fell 33% and 10%, respectively. Total investment and wealth management revenue fell 3%, or 24% before tax.
The company’s assets under custody and/or administration reached $45.5 trillion, up 9%, and assets under management increased 2% to $2.3 trillion.
Bank of New York stock fell 2.5% to $46.23 on Monday. The stock has lost 21% this year.
Kyle Sanders, equity analyst at Edward Jones, said Monday’s decline could be due to lower capital levels, which could “lead to a minimum or even a pause in share buybacks over the next few quarters.” The bank’s Tier 1 core capital ratio fell 110 basis points to 10.1%, it added, while the Tier 1 leverage ratio was 5.3%, lower. management’s target of 5.5%. That will be disappointing for investors, he added, and could overshadow the “decent” first-quarter results for the bank.
This is Gibbons’ penultimate term as the bank’s chief executive. He plans to step down on August 31, paving the way for current president and CEO-elect Robin Vince to step into the role. Vince will be BNY Mellon’s second CEO in approximately three years.
Write to Sabrina Escobar at [email protected]