Which Segment Drove BNY Mellon’s Earnings In 1Q16?

Can BNY Mellon's Stock Recover after Its Stellar 1Q16 Earnings?

(Continued from Prior Part)

BNY Mellon’s segments

Bank of New York Mellon (BK) operates under two primary business segments in the United States (SPY):

• Investment Services: This segment provides custody and related services, broker-dealer services, collateral services, and clearing services.

• Investment Management: This segment provides investment management services to institutional and retail clients including wealth and estate planning and private banking solutions.

Earnings for the investment services business

In 1Q16, BNY Mellon’s revenues from the investment services business increased by 2% to $2.7 billion. Investment services fees were flat year-over-year at $1.7 billion. Asset servicing fees remained flat at ~$1.0 billion during the quarter, backed by higher securities lending revenues and growth in new businesses.

Net interest revenues increased by 8% to $679 million compared to last year due to higher internal crediting rates for the deposits. Non-interest expenses declined by 3% to $1.8 billion, reflecting lower staff, professional, and legal expenses.

Earnings for the investment management business

The investment management segment generated revenues of $895 million during the first quarter, 10% lower than the same period last year. This decline is a reflection of low equity market values and net outflows in 2015 but was slightly offset by higher money market fees. Assets under management declined by 5% year-over-year to ~$1.6 trillion. Long-term inflows were $1 billion in 1Q16 while short-term outflows were $9 billion.

Investment management fees of $786 million, 5% lower year-over-year and reflected the impact of lower equity market values and net outflows.

Investors looking for exposure to the financial sector can invest in the Financial Select Sector SPDR ETF (XLF). Bank of New York Mellon constitutes ~8.5% of the Financial Select Sector SPDR ETF (XLF). Peers Northern Trust Corp. (NTRS) and State Street Corp. (STT) have weights of 0.53% and 0.73%, respectively.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - BNY Mellon’s 1Q16 Earnings Beat Estimates, Stock Gains 2.5%

• Part 3 - BNY Mellon Improves Profitability in a Tough Global Environment

• Part 4 - BNY Mellon’s Capital Ratios, Liquidity Position Improve in 1Q16