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

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Earnings review

As the world’s second-largest custody bank, Bank of New York Mellon (BK) reported its first-quarter earnings on April 21. The company’s earnings of $0.73 per share beat consensus estimates of $0.67 and were 9% higher year-over-year. Shares of the company were up by 2.5% after the earnings release.

The company benefited from the quarter-point rate hike in December. Higher interest rates boosted income from investments for the bank and helped recover fee waivers on money market funds. Assets under management, however, displayed weakness during the quarter.

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Management’s comments

“In challenging market conditions, we generated solid earnings growth as we executed on our strategic priorities,” Gerald L. Hassell, BK’s chairman and CEO, said. “We are intently focused on enhancing the client experience and driving further efficiencies. Our business improvement process has enabled funding for important strategic investments for regulatory compliance and risk management excellence, technology and servicing platform improvements, and the delivery of new solutions for our clients.”

Company overview

The Bank of New York Mellon (BK) is a custodian bank. A custodian bank keeps records, tracks performance, and lends securities for institutional investors. BNY Mellon also manages investments for individuals and institutions.

BNY Mellon’s two primary businesses are Investment Services and Investment Management, which offer services for each stage of investment, from creation to trading, holding, management, distribution, and restructuring. As of December 2015, the bank had $28.9 trillion in assets under custody and/or administration and ~$1.6 trillion in assets under management.

Its closest competitors are State Street Corp. (STT) and Northern Trust Corp. (NTRS). Investors seeking broad-based exposure to these stocks could invest in the Financial Select Sector SPDR ETF (XLF) (VFH).

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