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Which Segment Drove BNY Mellon’s 2Q16 Earnings?

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BNY Mellon’s operating 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, among others.
  • Investment Management – This segment provides investment management services to institutional and retail clients, including wealth and estate planning and private banking solutions.
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Earnings for the Investment Services business

In the second quarter, revenues from BK’s investment services business rose by 1% to $2.7 billion. Investment services fees were flat year-over-year at $1.8 billion. Asset servicing fees rose to $1.0 billion during the quarter, backed by net new business and higher money market fees and offset by a stronger US dollar.

Net interest revenue rose to $690 million due to higher changes in internal crediting rates for deposits. Non-interest expenses fell to $1.8 billion, reflecting lower legal expenses.

Earnings for the Investment Management business

The investment management segment generated revenue of $938 million during 2Q16, 5% lower than the same period last year. The fall was a reflection of net outflows in 2015 and the impact of the stronger US dollar, but it was slightly offset by higher money market fees. Assets under management fell by 2% year-over-year to ~$1.7 trillion. Long-term inflows were $5 billion in 2Q16, while short-term outflows were $4 billion.

Investment management fees of $808 million, 3% lower year-over-year, reflecting 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 XLF. Peers Northern Trust (NTRS) and State Street (STT) have weights of 0.53% and 0.73%, respectively, in XLF.

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