Bank Of New York Mellon says revenue from interest-earning assets dropped due to three consecutive rate cuts in 2019

on Jan 17, 2020
Updated: Mar 11, 2020
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  • BNY Mellon says its revenue from interest-earning assets dropped due to 2019's rate cuts.
  • BNY Mellon misses analysts' estimate for profit in the fourth quarter.
  • Total revenue climbed 19% and was recorded at $4.8 billion.
  • At $46.72, the stock is currently trading around the same level at which it opened in January 2019.

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Bank of New York (BNY) Mellon announced its quarterly profit results on Thursday. Having missed the analysts’ forecast for profit in the fourth quarter, the bank blamed consecutive rate cuts from the U.S Federal Reserve that resulted in lower than expected profits from the interest-earning assets.

All major U.S banks reported their earnings earlier in the week with all of them highlighting to have taken a blow due to the added monetary policy leniency from the U.S Fed that was directed at regaining the economic losses that stemmed from the ongoing trade war with China.

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Revenue From Interest-Earning Assets Dropped By 8% In Q4

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Revenue from interest-earning assets saw a massive decline of 8% in the fourth quarter and was reported at $815 million. The non-interest assets, on the other hand, dropped marginally by 1% only in Q4.

BNY Mellon’s previous Chief Executive, Charles Scharf, had expanded the bank’s investments in technology directed at cost-cutting via automation of various processes. Following his departure to join Wells Fargo towards the end of the last year, the new CEO, Todd Gibbons has announced plans of extending the strategy into 2020.

BNY Mellon has the reputation of serving the bigger bank and clients such as hedge funds in managing their money. Thursday’s report highlighted BNY’s fee revenue to have climbed 26% in Q4 that was largely associated with a sale of an investment that the bank refrained from divulging. Apart from the one-time benefit, the fee revenue remained flat.

The report further highlighted the bank’s custody and administration assets to have hit $37.1 trillion valuation that marked a 4% increase in the fourth quarter.

Net Income Climbed To $1.39 Billion Versus $832 Million In The Same Quarter Last Year

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In the fourth quarter, the bank recorded $1.39 billion in net income. In the same quarter last year, the net income was capped at $832 million. BNY Mellon printed $1.52 of earnings per share as compared to a much lower 84 cents of earnings per share in 2018’s Q4.

Based on Refinitiv’s data, analysts had anticipated $1.04 of earnings per share (excluding items) for BNY Mellon in Q4. Missing the estimate, the earnings report highlighted a slightly lower $1.01 of earnings per share (excluding items) in the fourth quarter. The bank’s total revenue, however, posted a significant 19.2% growth and was recorded at $4.8 billion.

Following the quarterly performance results, BNY Mellon was seen trading around 8% lower in the stock market on Thursday. At $46.72, the stock is currently trading around the same level at which it opened in January 2019.

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