Bank of New York Mellon reported higher profits in the third quarter as a robust stock market, busy clientele and new business all contributed to higher revenue.
The custodian bank’s results, along with rival State Street, beat Wall Street’s expectations and extended earnings for the shares of both companies. BNY Mellon and State Street are each up more than 30% so far this year.
The custodian banks, which track assets and provide other administrative and accounting services to money managers, have benefited from the turnaround in the financial world from the early days of the coronavirus pandemic. The market has risen and more money has flowed from investors into the funds of BNY Mellon’s clients. Both BNY Mellon and State Street are also attracting new clients and adding more clients for existing clients to its asset servicing divisions.
Those same factors have helped improve the performance of their own asset management businesses.
“Our financial performance this quarter reflects healthy and broad-based organic growth in our business,” said Todd Gibbons, chief executive of BNY Mellon, during a meeting with analysts.
BNY Mellon said on Oct. 19 that net income attributable to common shareholders rose to $943 million, or $1.04 per share, in the third quarter from $876 million or 89 cents a year earlier. Analysts polled by FactSet expected earnings of $1.01 per share.
Total revenue rose 4.9% to $4.04 billion, better than analysts’ average estimate of $3.95 billion. Fee revenue increased 8% to $3.39 billion.
The bank’s asset services business increased revenue by 3% and is on track to increase new business by nearly 40% this year, Gibbons said. “And we’re winning bigger, more complex deals that span our product offerings,” he said.
BNY Mellon closed the quarter with $45.3 trillion in assets under custody, up 17% from a year earlier.
BNY Mellon’s asset management business posted net inflows for the sixth straight quarter, with new client money outpacing losses. Revenue was up 12% and assets under management were up 13% to $2.3 trillion.
Net interest income, or what the custodian bank collected in loans, declined 9% to $641 million.
The loan loss provision was a $45 million benefit, the company said. It recorded a loan loss provision of $9 million in the prior year quarter. The company said it saw an improvement in its macroeconomic forecast.
BNY Mellon also said it had repurchased approximately $2 billion in company stock during the quarter.
This article was published by Dow Jones