BNY Mellon results hit by tepid markets and negative yield curve
Trust bank says it contended with ‘difficult operating environment’ in second quarter
Peter Wells in New York 9 HOURS AGO
Bank of New York Mellon continued to battle a “difficult operating environment” in its second quarter, characterised by a negative yield curve, low levels of market volatility and a stronger dollar.
The tough conditions combined to see revenue and earnings at the world’s biggest custodian bank fall compared with a year ago, although its assets under custody increased.
“The impact of the level and shape of the yield curve, as well as continued low levels of volatility and muted market activity, negatively impacted our results”, Charlie Scharf, chief executive, said.
The so-called yield curve turned negative this year, meaning long-term borrowing rates are lower than short-term ones. That represents tougher profit conditions for banks, which make money by borrowing short and lending long.
For the three months ended June 30, total revenue fell 5 per cent from a year ago to $3.9bn, which was in line with the median forecast among analysts surveyed by Refinitiv. The bank pinned the decline in revenue on factors including assets under management outflows since last year, a stronger US dollar and a drop in foreign exchange and securities lending revenue.
That filtered down to a 2 per cent decline in earnings from a year ago to $1.01 a diluted share, which was six cents ahead of Wall Street forecasts.
In BNY Mellon’s investment services business, assets under custody were 6 per cent higher than 12 months ago to $35.5tn, while in investment management its assets under management rose 2 per cent from a year ago to $1.8tn.
Bright spots for the bank in the quarter included a decline in expenses, higher fees in its issuer services division, growth in clearance volumes and collateral management, as well as an increase in client assets and volumes in its financial solutions business, Pershing.
BNY Mellon shares were down 0.1 per cent in pre-market trade on Wednesday morning. Three months ago, shares staged a hefty drop after the bank gave a disappointing outlook at its first-quarter results.