BNY 8-K
Bank of New York Mellon Corp (BNY)
8-K
2021-01-20
For: 2021-01-20
View Original
Added on
April 09, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) – January 20, 2021
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code – (212 ) 495-1784
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Securities registered pursuant to Section 12(b) of the Act: Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
| (fully and unconditionally guaranteed by The Bank of New York Mellon Corporation) | ||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On January 20, 2021, The Bank of New York Mellon Corporation (“BNY Mellon”) released information on its financial results for the fourth quarter ended Dec. 31, 2020. Copies of the Earnings Release and the Financial Supplement are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference.
ITEM 7.01. REGULATION FD DISCLOSURE.
On January 20, 2021, BNY Mellon will hold a conference call and webcast to discuss its financial results for the fourth quarter ended Dec. 31, 2020 and outlook. A copy of the Financial Highlights presentation for the conference call and webcast is attached hereto as Exhibit 99.3.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) EXHIBITS.
| Exhibit | ||||||||
| Number | Description | |||||||
| 99.1 | ||||||||
| The quotation in Exhibit 99.1 (the “Excluded Section”) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of BNY Mellon under the Securities Act of 1933 or the Exchange Act. The information included in Exhibit 99.1, other than in the Excluded Section, shall be deemed “filed” for purposes of the Exchange Act. | ||||||||
| 99.2 | ||||||||
| The information included in Exhibit 99.2 shall be deemed “filed” for purposes of the Exchange Act. | ||||||||
| 99.3 | ||||||||
| The information included in Exhibit 99.3 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of BNY Mellon under the Securities Act of 1933 or the Exchange Act. | ||||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
The Bank of New York Mellon Corporation (Registrant) | |||||
| Date: January 20, 2021 | By: /s/ James J. Killerlane III | ||||
| Name: James J. Killerlane III Title: Secretary | |||||
3
| News Release |  | ||||
BNY MELLON REPORTS FOURTH QUARTER 2020 EARNINGS OF
$702 MILLION OR $0.79 PER COMMON SHARE,
INCLUDES $0.18 PER SHARE NEGATIVE IMPACT OF NOTABLE ITEMS
Revenue down 20% (a) | EPS down 48% (a) | ROE 7% ROTCE 13% (b) | CET1 13.1% Tier 1 leverage 6.3% | |||||||||||||||||
(a) Excluding notable items, revenue down 2% and EPS down 5%. See note (b).
NEW YORK, January 20, 2021 – The Bank of New York Mellon Corporation (“BNY Mellon”) (NYSE: BK) today reported:
| 4Q20 vs. | |||||||||||||||||
| 4Q20 | 3Q20 | 4Q19 | 3Q20 | 4Q19 | |||||||||||||
Net income applicable to common shareholders (in millions) | $ | 702 | $ | 876 | $ | 1,391 | (20) | % | (50) | % | |||||||
Net income applicable to common shareholders, excluding notable items (in millions) – Non-GAAP (b) | $ | 861 | $ | 876 | $ | 931 | (2) | % | (8) | % | |||||||
| Diluted earnings per common share | $ | 0.79 | $ | 0.98 | $ | 1.52 | (19) | % | (48) | % | |||||||
Diluted earnings per common share, excluding notable items – Non-GAAP (b) | $ | 0.96 | $ | 0.98 | $ | 1.01 | (2) | % | (5) | % | |||||||
| Notable items | ||
4Q20 results include $(159) million, or $(0.18) per share, for litigation, severance, losses on business sales and real estate charges.
4Q19 results include $460 million, or $0.50 per share, for the gain on sale of an equity investment, offset by severance, net securities losses and litigation.
| Fourth Quarter Results | ||
Total revenue of $3.8 billion, decreased 20%; 2% excluding notable items (b)
•Fee revenue decreased 22%; increased 1% excluding notable items (b)
•Money market fee waivers decreased fee revenue by 4%
•Net interest revenue decreased 17%
Provision for credit losses of $15 million
Total noninterest expense of $2.9 billion, decreased 1%; 1% excluding notable items (b)
Investment Services
•Total revenue decreased 4%
•Income before taxes decreased 17%
•AUC/A of $41.1 trillion, increased 11%
Investment and Wealth Management
•Total revenue increased 2%
•Income before taxes increased 30%
•AUM of $2.2 trillion, increased 15%
| CEO Commentary | ||
“During 2020, our business and operational resilience, enhanced by our technology and digital capabilities, enabled us to rapidly support our clients, employees and the financial system through immense stress and volatility. At the same time, we continued to advance our strategic priorities and longer-term growth agenda across all of our businesses. The investments we’ve made over the past several years, especially in technology and operations, served us and our clients well amid some difficult circumstances, and I want to thank our employees for their extraordinary efforts in supporting our clients during an unprecedented year,” Todd Gibbons, Chief Executive Officer, said.
“Full-year EPS was $3.83, down from $4.51, reflecting the impact of notable items. On an operating basis EPS was flat at $4.01, despite the impact of credit provisions, lower interest rates and associated money market fee waivers,” Mr. Gibbons added.
“While the full-year impact of low interest rates will be a significant headwind in 2021, we ended the year with momentum in our core franchise. We feel good about our business model and the power of the open architecture platforms and solutions we provide to help our clients grow their businesses. Our enterprise is incredibly strong and interconnected and our breadth of services and capabilities is unrivalled within our peer group, positioning us well for future growth. We have one of the industry’s best client rosters and a highly motivated group of talented employees executing our strategy, which is centered on driving growth and creating value for our clients, scaling and digitizing our operating model, and fostering a high-performance culture that is focused on delivering excellent client service in new and innovative ways,” Mr. Gibbons further noted.
“The combination of our capital generation, revenue growth and good cost control gives us the ability to drive meaningful EPS growth over time,” Mr. Gibbons concluded.
Media Relations: Madelyn McHugh (212) 635-1376 | Investor Relations: Magda Palczynska (212) 635-8529 | ||||
| (b) For information on this Non-GAAP measure and full-year diluted operating earnings per share, see “Supplemental Information – Explanation of GAAP and Non-GAAP financial measures” on page 10. | |||||
| Note: Above comparisons are 4Q20 vs. 4Q19, unless otherwise noted. | |||||
| BNY Mellon 4Q20 Earnings Release | ||
CONSOLIDATED FINANCIAL HIGHLIGHTS
| (in millions, except per share amounts and unless otherwise noted; not meaningful - N/M) | 4Q20 vs. | ||||||||||||||||
| 4Q20 | 3Q20 | 4Q19 | 3Q20 | 4Q19 | |||||||||||||
| Fee revenue | $ | 3,116 | $ | 3,108 | $ | 3,971 | — | % | (22) | % | |||||||
| Net securities gains (losses) | 6 | 9 | (25) | N/M | N/M | ||||||||||||
| Total fee and other revenue | 3,122 | 3,117 | 3,946 | — | (21) | ||||||||||||
| Income from consolidated investment management funds | 41 | 27 | 17 | N/M | N/M | ||||||||||||
| Net interest revenue | 680 | 703 | 815 | (3) | (17) | ||||||||||||
| Total revenue | 3,843 | 3,847 | 4,778 | — | (20) | ||||||||||||
| Provision for credit losses | 15 | 9 | (8) | N/M | N/M | ||||||||||||
| Noninterest expense | 2,925 | 2,681 | 2,964 | 9 | (1) | ||||||||||||
| Income before income taxes | 903 | 1,157 | 1,822 | (22) | (50) | ||||||||||||
| Provision for income taxes | 148 | 213 | 373 | (31) | (60) | ||||||||||||
| Net income | $ | 755 | $ | 944 | $ | 1,449 | (20) | % | (48) | % | |||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation | $ | 702 | $ | 876 | $ | 1,391 | (20) | % | (50) | % | |||||||
Operating leverage (a) | (921) | bps | (1,825) | bps | |||||||||||||
| Diluted earnings per common share | $ | 0.79 | $ | 0.98 | $ | 1.52 | (19) | % | (48) | % | |||||||
Average common shares and equivalents outstanding - diluted (in thousands) | 891,846 | 891,069 | 914,739 | ||||||||||||||
| Pre-tax operating margin | 24 | % | 30 | % | 38 | % | |||||||||||
Non-GAAP measures, excluding notable items (b): | |||||||||||||||||
| Fee revenue – Non-GAAP | $ | 3,177 | $ | 3,108 | $ | 3,156 | 2 | % | 1 | % | |||||||
| Net securities gains (losses) – Non-GAAP | 6 | 9 | — | N/M | N/M | ||||||||||||
Total revenue – Non-GAAP | 3,904 | 3,847 | 3,988 | 1 | (2) | ||||||||||||
| Noninterest expense – Non-GAAP | 2,760 | 2,681 | 2,778 | 3 | (1) | ||||||||||||
| Income before income taxes – Non-GAAP | 1,129 | 1,157 | 1,218 | (2) | (7) | ||||||||||||
| Provision for income taxes – Non-GAAP | 215 | 213 | 229 | 1 | (6) | ||||||||||||
Net income – Non-GAAP | 914 | 944 | 989 | (3) | (8) | ||||||||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP | 861 | 876 | 931 | (2) | (8) | ||||||||||||
Operating leverage – Non-GAAP (a) | (146) | bps | (146) | bps | |||||||||||||
| Diluted earnings per common share – Non-GAAP | $ | 0.96 | $ | 0.98 | $ | 1.01 | (2) | % | (5) | % | |||||||
| Pre-tax operating margin – Non-GAAP | 29 | % | 30 | % | 31 | % | |||||||||||
(a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.
(b) Notable items in 4Q20 include litigation expense, severance, losses on business sales and real estate charges. Notable items in 4Q19 include a gain on sale of an equity investment, severance, net securities losses and litigation expense. There were no notable items in 3Q20. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for additional information.
bps – basis points.
KEY DRIVERS (comparisons are 4Q20 vs. 4Q19, unless otherwise stated)
•Total revenue decreased 20%, or 2% excluding the notable items (a) primarily reflecting:
•Fee revenue decreased 22% primarily reflecting the gain on sale of an equity investment recorded in 4Q19. Excluding the notable items, fee revenue increased 1% (a) primarily reflecting higher market values, foreign exchange revenue, other client volumes and balances and the favorable impact of a weaker U.S. dollar, partially offset by higher money market fee waivers.
•Net interest revenue decreased 17% primarily reflecting lower interest rates on interest-earning assets and the impact of hedging activities (primarily offset in foreign exchange and other trading revenue). This was partially offset by the benefit of lower deposit and funding rates, a larger securities portfolio and higher deposit balances.
•Provision for credit losses of $15 million reflects additional reserves in the commercial real estate portfolio.
•Noninterest expense decreased 1% primarily reflecting lower severance expense, partially offset by higher litigation expense and real estate charges. Excluding the notable items, noninterest expense decreased 1% (a) primarily reflecting lower business development (travel and marketing) and distribution and servicing expenses, partially offset by continued investments in technology and the unfavorable impact of a weaker U.S. dollar.
•Effective tax rate of 16.4%. The notable items decreased the effective tax rate by approximately 2.5% in 4Q20.
(a) See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for additional information.
Note: Throughout this document, sequential growth rates are unannualized.
Page - 2 | ||
| BNY Mellon 4Q20 Earnings Release | ||
Assets under custody and/or administration (“AUC/A”) and Assets under management (“AUM”)
•AUC/A of $41.1 trillion, increased 11%, primarily reflecting higher market values and client inflows, the favorable impact of a weaker U.S. dollar and net new business.
•AUM of $2.2 trillion, increased 15%, primarily reflecting higher market values, net inflows and the favorable impact of a weaker U.S. dollar (principally versus the British pound).
Capital and liquidity
•Open market share repurchases temporarily suspended for 4Q20 for CCAR banks. Expect to resume open market share repurchases in 1Q21.
•Paid $278 million in dividends to common shareholders.
•Return on common equity (“ROE”) of 7%; Return on tangible common equity (“ROTCE”) of 13% (a).
•Common Equity Tier 1 (“CET1”) ratio – 13.1%.
•Tier 1 leverage ratio – 6.3%.
•Supplementary leverage ratio (“SLR”) – 8.6% (b).
•Average liquidity coverage ratio (“LCR”) – 110%.
•Total Loss Absorbing Capacity (“TLAC”) ratios exceed minimum requirements.
(a) See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for additional information.
(b) See “Capital and Liquidity” on page 8 for additional information.
FULL-YEAR CONSOLIDATED FINANCIAL HIGHLIGHTS
| (in millions, except per share amounts and unless otherwise noted; not meaningful - N/M) | 2020 vs. | ||||||||||
| 2020 | 2019 | 2019 | |||||||||
| Fee revenue | $ | 12,714 | $ | 13,236 | (4) | % | |||||
| Net securities gains (losses) | 33 | (18) | N/M | ||||||||
| Total fee and other revenue | 12,747 | 13,218 | (4) | ||||||||
| Income from consolidated investment management funds | 84 | 56 | N/M | ||||||||
| Net interest revenue | 2,977 | 3,188 | (7) | ||||||||
| Total revenue | 15,808 | 16,462 | (4) | ||||||||
| Provision for credit losses | 336 | (25) | N/M | ||||||||
| Noninterest expense | 11,004 | 10,900 | 1 | ||||||||
| Income before income taxes | 4,468 | 5,587 | (20) | ||||||||
| Provision for income taxes | 842 | 1,120 | (25) | ||||||||
| Net income | $ | 3,626 | $ | 4,467 | (19) | % | |||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation | $ | 3,423 | $ | 4,272 | (20) | % | |||||
Operating leverage (a) | (493) | bps | |||||||||
| Diluted earnings per common share | $ | 3.83 | $ | 4.51 | (15) | % | |||||
Average common shares and equivalents outstanding - diluted (in thousands) | 892,514 | 943,109 | |||||||||
| Pre-tax operating margin | 28 | % | 34 | % | |||||||
Non-GAAP measures, excluding notable items (b): | |||||||||||
| Fee revenue – Non-GAAP | $ | 12,775 | $ | 12,421 | 3 | % | |||||
| Net securities gains – Non-GAAP | 33 | 7 | N/M | ||||||||
| Net interest revenue – Non-GAAP | 2,977 | 3,258 | (9) | ||||||||
| Total revenue – Non-GAAP | 15,869 | 15,742 | 1 | ||||||||
| Noninterest expense – Non-GAAP | 10,839 | 10,787 | — | ||||||||
| Income before income taxes – Non-GAAP | 4,694 | 4,980 | (6) | ||||||||
| Provision for income taxes – Non-GAAP | 909 | 980 | (7) | ||||||||
| Net income – Non-GAAP | 3,785 | 4,000 | (5) | ||||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP | 3,582 | 3,805 | (6) | ||||||||
Operating leverage – Non-GAAP (a) | 32 | bps | |||||||||
| Diluted earnings per common share – Non-GAAP | $ | 4.01 | $ | 4.02 | — | % | |||||
| Pre-tax operating margin – Non-GAAP | 30 | % | 32 | % | |||||||
(a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.
(b) Notable items in 2020 include litigation expense, severance, losses on business sales and real estate charges recorded in 4Q20. Notable items in 2019 include a gain on sale of an equity investment, severance, net securities losses, litigation expense recorded in 4Q19 and a lease-related impairment and a net reduction of reserves for tax-related exposure of certain investment management funds both recorded in 3Q19. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for additional information.
bps – basis points.
Page - 3 | ||
| BNY Mellon 4Q20 Earnings Release | ||
INVESTMENT SERVICES BUSINESS HIGHLIGHTS
| (dollars in millions, unless otherwise noted; not meaningful - N/M) | 4Q20 vs. | ||||||||||||||||
| 4Q20 | 3Q20 | 4Q19 | 3Q20 | 4Q19 | |||||||||||||
| Total revenue by line of business: | |||||||||||||||||
| Asset Servicing | $ | 1,357 | $ | 1,354 | $ | 1,411 | — | % | (4) | % | |||||||
| Pershing | 563 | 538 | 579 | 5 | (3) | ||||||||||||
| Issuer Services | 385 | 435 | 415 | (11) | (7) | ||||||||||||
| Treasury Services | 325 | 323 | 329 | 1 | (1) | ||||||||||||
| Clearance and Collateral Management | 275 | 277 | 280 | (1) | (2) | ||||||||||||
| Total revenue by line of business | 2,905 | 2,927 | 3,014 | (1) | (4) | ||||||||||||
Provision for credit losses | 31 | (10) | (5) | N/M | N/M | ||||||||||||
Noninterest expense | 2,174 | 2,020 | 2,179 | 8 | — | ||||||||||||
| Income before taxes | $ | 700 | $ | 917 | $ | 840 | (24) | % | (17) | % | |||||||
| Pre-tax operating margin | 24 | % | 31 | % | 28 | % | |||||||||||
| Foreign exchange and other trading revenue | $ | 180 | $ | 146 | $ | 151 | 23 | % | 19 | % | |||||||
| Securities lending revenue | $ | 36 | $ | 37 | $ | 40 | (3) | % | (10) | % | |||||||
| Metrics: | |||||||||||||||||
| Average loans | $ | 41,437 | $ | 40,308 | $ | 38,721 | 3 | % | 7 | % | |||||||
| Average deposits | $ | 292,631 | $ | 263,621 | $ | 215,388 | 11 | % | 36 | % | |||||||
AUC/A at period end (in trillions) (current period is preliminary) (a) | $ | 41.1 | $ | 38.6 | $ | 37.1 | 6 | % | 11 | % | |||||||
Market value of securities on loan at period end (in billions) (b) | $ | 435 | $ | 378 | $ | 378 | 15 | % | 15 | % | |||||||
(a) Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5 trillion at Dec. 31, 2020, $1.4 trillion at Sept. 30, 2020 and $1.5 trillion at Dec. 31, 2019.
(b) Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $68 billion at Dec. 31, 2020, $62 billion at Sept. 30, 2020 and $60 billion at Dec. 31, 2019.
KEY DRIVERS
•The drivers of the total revenue variances by line of business are indicated below.
•Asset Servicing - The year-over-year decrease includes lower interest rates and higher money market fee waivers, partially offset by higher market values and foreign exchange volumes and volatility. Sequentially, higher foreign exchange volumes and market values were offset by the impact of some repricing on client renewals, lower interest rates and higher money market fee waivers.
•Pershing - The year-over-year decrease primarily reflects the impact of money market fee waivers, partially offset by higher clearing revenue, higher balances and the positive impact of equity markets. The sequential increase primarily reflects higher clearing revenue and market values, partially offset by higher money market fee waivers.
•Issuer Services - The year-over-year decrease primarily reflects lower interest rates and higher money market fee waivers in Corporate Trust. The sequential decrease primarily reflects the timing of Depositary Receipts revenue, higher money market fee waivers and lower interest rates in Corporate Trust.
•Treasury Services - The year-over-year decrease primarily reflects lower interest rates, including higher money market fee waivers, partially offset by higher client deposits, payment fees and money market balances. The sequential increase reflects higher foreign exchange revenue and payment volumes, partially offset by higher money market fee waivers.
•Clearance and Collateral Management - The year-over-year decrease primarily reflects lower investment income due to the 4Q19 sale of an equity investment and lower intraday credit fees, partially offset by growth in non-U.S. collateral management.
•Noninterest expense decreased slightly year-over-year primarily reflecting lower severance offset by higher litigation expense. Excluding the notable items, noninterest expense increased slightly (a), primarily reflecting the unfavorable impact of a weaker U.S. dollar, partially offset by lower business development (travel and marketing) expense. Sequentially, noninterest expense increased 8%, primarily reflecting higher litigation and severance expenses. Excluding the notable items, noninterest expense increased 2% (a), primarily reflecting higher professional, legal and other purchased services and the unfavorable impact of a weaker U.S. dollar. Both comparisons also reflect continued investments in technology.
(a) Notable items in 4Q20 and 4Q19 include severance and litigation expense. There were no notable items in 3Q20. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for additional information.
Page - 4 | ||
| BNY Mellon 4Q20 Earnings Release | ||
INVESTMENT AND WEALTH MANAGEMENT BUSINESS HIGHLIGHTS
| (dollars in millions, unless otherwise noted; not meaningful - N/M) | 4Q20 vs. | ||||||||||||||||
| 4Q20 | 3Q20 | 4Q19 | 3Q20 | 4Q19 | |||||||||||||
| Total revenue by line of business: | |||||||||||||||||
| Investment Management | $ | 714 | $ | 641 | $ | 692 | 11 | % | 3 | % | |||||||
| Wealth Management | 276 | 277 | 279 | — | (1) | ||||||||||||
| Total revenue by line of business | 990 | 918 | 971 | 8 | 2 | ||||||||||||
Provision for credit losses | (8) | 12 | — | N/M | N/M | ||||||||||||
Noninterest expense | 687 | 661 | 731 | 4 | (6) | ||||||||||||
| Income before taxes | $ | 311 | $ | 245 | $ | 240 | 27 | % | 30 | % | |||||||
| Pre-tax operating margin | 32 | % | 27 | % | 25 | % | |||||||||||
Adjusted pre-tax operating margin – Non-GAAP (a) | 34 | % | 29 | % | 27 | % | |||||||||||
| Metrics: | |||||||||||||||||
| Average loans | $ | 11,497 | $ | 11,503 | $ | 12,022 | — | % | (4) | % | |||||||
| Average deposits | $ | 18,144 | $ | 17,570 | $ | 15,195 | 3 | % | 19 | % | |||||||
AUM (in billions) (current period is preliminary) (b) | $ | 2,197 | $ | 2,041 | $ | 1,910 | 8 | % | 15 | % | |||||||
Wealth Management client assets (in billions) (current period is preliminary) (c) | $ | 286 | $ | 265 | $ | 266 | 8 | % | 8 | % | |||||||
(a) Net of distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for information on this Non-GAAP measure.
(b) Excludes securities lending cash management assets and assets managed in the Investment Services business.
(c) Includes AUM and AUC/A in the Wealth Management business.
KEY DRIVERS
•The drivers of the total revenue variances by line of business are indicated below.
•Investment Management - The year-over-year increase primarily reflects higher market values and the favorable impact of a weaker U.S. dollar, partially offset by the impact of money market fee waivers. The sequential increase primarily reflects the timing of performance fees, higher market values and seed capital gains, net of hedges.
•Wealth Management - Total revenue decreased 1% year-over-year and decreased slightly sequentially primarily reflecting a loss on a business sale. Excluding the notable item, total revenue increased 1% (a) year-over-year and sequentially primarily reflecting higher market values, partially offset by a shift to lower fee investment products and the impact of net outflows.
•Noninterest expense decreased 6% year-over-year primarily reflecting lower staff expense, including severance, and lower business development expense. Excluding the notable items, noninterest expense decreased 5% (a), primarily reflecting lower incentives, business development and distribution and servicing expenses. Sequentially, noninterest expense increased 4% primarily reflecting higher severance expense. Excluding the notable items, noninterest expense increased 2% (a), primarily reflecting higher incentive and technology-related expenses.
(a) Notable items in 4Q20 include severance and a loss on a business sale. Notable items in 4Q19 include severance. There were no notable items in 3Q20. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for additional information.
Page - 5 | ||
| BNY Mellon 4Q20 Earnings Release | ||
OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, business exits and other corporate revenue and expense items.
| (in millions) | 4Q20 | 3Q20 | 4Q19 | ||||||||
| Fee (loss) revenue | $ | (23) | $ | 11 | $ | 817 | |||||
| Net securities gains (losses) | 6 | 9 | (23) | ||||||||
| Total fee and other (loss) revenue | (17) | 20 | 794 | ||||||||
| Net interest (expense) | (40) | (25) | (10) | ||||||||
| Total (loss) revenue | (57) | (5) | 784 | ||||||||
| Provision for credit losses | (8) | 7 | (3) | ||||||||
Noninterest expense | 64 | — | 54 | ||||||||
| (Loss) income before taxes | $ | (113) | $ | (12) | $ | 733 | |||||
KEY DRIVERS
•Fee revenue, net securities gains (losses) and net interest expense include corporate treasury and other investment activity, including hedging activity which offsets between fee revenue and net interest expense. Fee revenue decreased year-over-year primarily reflecting the gain on sale of an equity investment recorded in 4Q19. The sequential decrease in fee revenue primarily reflects a loss on a sale of a business, partially offset by higher corporate treasury activity. Net interest expense increased year-over-year and sequentially primarily reflecting corporate treasury activity.
•Noninterest expense for 4Q20 includes a notable item related to real estate. Both the 4Q20 and 4Q19 include severance expense.
NOTABLE ITEMS BY BUSINESS SEGMENT
Notable items by business segment (a) | 4Q20 | 4Q19 | |||||||||||||||||||||||||||
| (in millions) | IS | IWM | Other | Total | IS | IWM | Other | Total | |||||||||||||||||||||
| Fee and other revenue | $ | — | $ | (5) | $ | (56) | $ | (61) | $ | — | $ | — | $ | 790 | $ | 790 | |||||||||||||
| Net interest revenue | — | — | — | — | — | — | — | — | |||||||||||||||||||||
| Total revenue | — | (5) | (56) | (61) | — | — | 790 | 790 | |||||||||||||||||||||
| Total noninterest expense | 107 | 11 | 47 | 165 | 119 | 16 | 51 | 186 | |||||||||||||||||||||
| (Loss) income before taxes | $ | (107) | $ | (16) | $ | (103) | $ | (226) | $ | (119) | $ | (16) | $ | 739 | $ | 604 | |||||||||||||
(a) Notable items in 4Q20 include litigation expense, severance, losses on business sales and real estate charges. Notable items in 4Q19 include a gain on sale of an equity investment, severance, net securities losses and litigation expense.
Page - 6 | ||
| BNY Mellon 4Q20 Earnings Release | ||
MONEY MARKET FEE WAIVERS
The following table presents the impact of money market fee waivers on our consolidated fee revenue, net of distribution and servicing expense. In 4Q20, the net impact of money market fee waivers was $134 million, up from $101 million in 3Q20, driven by low short-term interest rates.
| Money market fee waivers | |||||||||||||||||
| (in millions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | YTD20 | ||||||||||||
| Investment services fees: | |||||||||||||||||
| Asset servicing fees | $ | (13) | $ | (1) | $ | — | $ | — | $ | (14) | |||||||
| Clearing services fees | (64) | (57) | (50) | (9) | (180) | ||||||||||||
| Issuer services fees | (6) | (1) | (1) | — | (8) | ||||||||||||
| Treasury services fees | (2) | (3) | (2) | — | (7) | ||||||||||||
| Total investment services fees | (85) | (62) | (53) | (9) | (209) | ||||||||||||
| Investment management and performance fees | (56) | (42) | (30) | (14) | (142) | ||||||||||||
| Distribution and servicing revenue | (8) | (6) | (3) | — | (17) | ||||||||||||
| Total fee and other revenue | (149) | (110) | (86) | (23) | (368) | ||||||||||||
| Less: Distribution and servicing expense | 15 | 9 | 7 | — | 31 | ||||||||||||
| Net impact of money market fee waivers | $ | (134) | $ | (101) | $ | (79) | $ | (23) | $ | (337) | |||||||
Impact to revenue by line of business (a): | |||||||||||||||||
| Asset Servicing | $ | (13) | $ | (4) | $ | (1) | $ | — | $ | (18) | |||||||
| Pershing | (85) | (73) | (60) | (9) | (227) | ||||||||||||
| Issuer Services | (10) | (2) | (1) | — | (13) | ||||||||||||
| Treasury Services | (5) | (1) | — | — | (6) | ||||||||||||
| Investment Management | (34) | (28) | (24) | (14) | (100) | ||||||||||||
| Wealth Management | (2) | (2) | — | — | (4) | ||||||||||||
| Total impact to revenue by line of business | $ | (149) | $ | (110) | $ | (86) | $ | (23) | $ | (368) | |||||||
(a) The line of business revenue for management reporting purposes reflects the impact of revenue transferred between the businesses.
Page - 7 | ||
| BNY Mellon 4Q20 Earnings Release | ||
CAPITAL AND LIQUIDITY
| Capital and liquidity ratios | Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 | ||||||||||||||
Consolidated regulatory capital ratios: (a) | |||||||||||||||||
| CET1 ratio | 13.1 | % | 13.0 | % | 11.5 | % | |||||||||||
| Tier 1 capital ratio | 15.8 | 15.7 | 13.7 | ||||||||||||||
| Total capital ratio | 16.7 | 16.6 | 14.4 | ||||||||||||||
| Tier 1 leverage ratio | 6.3 | 6.5 | 6.6 | ||||||||||||||
| SLR | 8.6 | (b) | 8.5 | (b) | 6.1 | ||||||||||||
| BNY Mellon shareholders’ equity to total assets ratio | 9.8 | % | 10.5 | % | 10.9 | % | |||||||||||
| BNY Mellon common shareholders’ equity to total assets ratio | 8.8 | % | 9.4 | % | 9.9 | % | |||||||||||
| Average LCR | 110 | % | 111 | % | 120 | % | |||||||||||
| Book value per common share | $ | 46.53 | $ | 45.58 | $ | 42.12 | |||||||||||
Tangible book value per common share – Non-GAAP (c) | $ | 25.44 | $ | 24.60 | $ | 21.33 | |||||||||||
Common shares outstanding (in thousands) | 886,764 | 886,136 | 900,683 | ||||||||||||||
(a) Regulatory capital ratios for Dec. 31, 2020 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for the periods noted above was the Advanced Approaches.
(b) Reflects the application of a rule effective April 1, 2020 to exclude certain central bank placements. Also effective on April 1, 2020 was the temporary exclusion of U.S. Treasury securities from the leverage exposure used in the SLR calculation which increased our consolidated SLR by 72 basis points at Dec. 31, 2020 and 78 basis points at Sept. 30, 2020.
(c) Tangible book value per common share – Non-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for information on this Non-GAAP measure.
•CET1 capital totaled $21.9 billion at Dec. 31, 2020, an increase of $704 million compared with Sept. 30, 2020. The increase primarily reflects capital generated through earnings and foreign currency translation, partially offset by capital deployed through dividend payments.
NET INTEREST REVENUE
| Net interest revenue | 4Q20 vs. | ||||||||||||||||
| (dollars in millions; not meaningful - N/M) | 4Q20 | 3Q20 | 4Q19 | 3Q20 | 4Q19 | ||||||||||||
Net interest revenue | $ | 680 | $ | 703 | $ | 815 | (3) | % | (17) | % | |||||||
Add: Tax equivalent adjustment | 3 | 2 | 2 | N/M | N/M | ||||||||||||
Net interest revenue, on a fully taxable equivalent (“FTE”) basis – Non-GAAP (a) | $ | 683 | $ | 705 | $ | 817 | (3) | % | (16) | % | |||||||
| Net interest margin | 0.72 | % | 0.79 | % | 1.09 | % | (7) | bps | (37) | bps | |||||||
Net interest margin (FTE) – Non-GAAP (a) | 0.72 | % | 0.79 | % | 1.09 | % | (7) | bps | (37) | bps | |||||||
(a) Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” on page 10 for information on this Non-GAAP measure.
bps – basis points.
•Net interest revenue decreased 17% year-over-year. The decrease primarily reflects lower interest rates on interest-earning assets and the impact of hedging activities (primarily offset in foreign exchange and other trading revenue). This was partially offset by the benefit of lower deposit and funding rates, a larger securities portfolio and higher deposit balances.
•Sequentially, the decrease was primarily driven by lower interest rates on interest-earning assets. This was partially offset by higher deposit balances and lower debt balances.
Page - 8 | ||
| BNY Mellon 4Q20 Earnings Release | ||
THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement
| (in millions) | Quarter ended | Year-to-date | ||||||||||||||||||
| Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | ||||||||||||||||
| Fee and other revenue | ||||||||||||||||||||
| Investment services fees: | ||||||||||||||||||||
Asset servicing fees | $ | 1,138 | $ | 1,168 | $ | 1,148 | $ | 4,638 | $ | 4,563 | ||||||||||
Clearing services fees | 418 | 397 | 421 | 1,716 | 1,648 | |||||||||||||||
Issuer services fees | 257 | 295 | 264 | 1,092 | 1,130 | |||||||||||||||
Treasury services fees | 156 | 152 | 147 | 601 | 559 | |||||||||||||||
Total investment services fees | 1,969 | 2,012 | 1,980 | 8,047 | 7,900 | |||||||||||||||
| Investment management and performance fees | 884 | 835 | 883 | 3,367 | 3,389 | |||||||||||||||
| Foreign exchange and other trading revenue | 167 | 137 | 168 | 789 | 654 | |||||||||||||||
| Financing-related fees | 46 | 49 | 46 | 212 | 196 | |||||||||||||||
| Distribution and servicing | 28 | 29 | 34 | 115 | 129 | |||||||||||||||
| Investment and other income | 22 | 46 | 860 | 184 | 968 | |||||||||||||||
Total fee revenue | 3,116 | 3,108 | 3,971 | 12,714 | 13,236 | |||||||||||||||
| Net securities gains (losses) | 6 | 9 | (25) | 33 | (18) | |||||||||||||||
Total fee and other revenue | 3,122 | 3,117 | 3,946 | 12,747 | 13,218 | |||||||||||||||
Operations of consolidated investment management funds | ||||||||||||||||||||
| Investment income | 42 | 27 | 17 | 85 | 57 | |||||||||||||||
| Interest of investment management fund note holders | 1 | — | — | 1 | 1 | |||||||||||||||
| Income from consolidated investment management funds | 41 | 27 | 17 | 84 | 56 | |||||||||||||||
| Net interest revenue | ||||||||||||||||||||
| Interest revenue | 776 | 820 | 1,721 | 4,109 | 7,548 | |||||||||||||||
| Interest expense | 96 | 117 | 906 | 1,132 | 4,360 | |||||||||||||||
Net interest revenue | 680 | 703 | 815 | 2,977 | 3,188 | |||||||||||||||
Total revenue | 3,843 | 3,847 | 4,778 | 15,808 | 16,462 | |||||||||||||||
| Provision for credit losses | 15 | 9 | (8) | 336 | (25) | |||||||||||||||
| Noninterest expense | ||||||||||||||||||||
| Staff | 1,554 | 1,466 | 1,639 | 5,966 | 6,063 | |||||||||||||||
| Professional, legal and other purchased services | 381 | 355 | 367 | 1,403 | 1,345 | |||||||||||||||
| Software and equipment | 359 | 340 | 326 | 1,370 | 1,222 | |||||||||||||||
| Net occupancy | 173 | 136 | 151 | 581 | 564 | |||||||||||||||
| Sub-custodian and clearing | 116 | 119 | 119 | 460 | 450 | |||||||||||||||
| Distribution and servicing | 75 | 85 | 92 | 336 | 374 | |||||||||||||||
| Bank assessment charges | 24 | 30 | 32 | 124 | 125 | |||||||||||||||
| Business development | 26 | 17 | 65 | 105 | 213 | |||||||||||||||
| Amortization of intangible assets | 26 | 26 | 28 | 104 | 117 | |||||||||||||||
| Other | 191 | 107 | 145 | 555 | 427 | |||||||||||||||
Total noninterest expense | 2,925 | 2,681 | 2,964 | 11,004 | 10,900 | |||||||||||||||
| Income | ||||||||||||||||||||
| Income before income taxes | 903 | 1,157 | 1,822 | 4,468 | 5,587 | |||||||||||||||
| Provision for income taxes | 148 | 213 | 373 | 842 | 1,120 | |||||||||||||||
Net income | 755 | 944 | 1,449 | 3,626 | 4,467 | |||||||||||||||
| Net (income) attributable to noncontrolling interests related to consolidated investment management funds | (5) | (7) | (9) | (9) | (26) | |||||||||||||||
Net income applicable to shareholders of The Bank of New York Mellon Corporation | 750 | 937 | 1,440 | 3,617 | 4,441 | |||||||||||||||
Preferred stock dividends | (48) | (61) | (49) | (194) | (169) | |||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation | $ | 702 | $ | 876 | $ | 1,391 | $ | 3,423 | $ | 4,272 | ||||||||||
Earnings per share applicable to the common shareholders of The Bank of New York Mellon Corporation | Quarter ended | Year-to-date | ||||||||||||||||||
| Dec. 31, 2020 | Sept. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | ||||||||||||||||
| (in dollars) | ||||||||||||||||||||
| Basic | $ | 0.79 | $ | 0.98 | $ | 1.52 | $ | 3.84 | $ | 4.53 | ||||||||||
Diluted | $ | 0.79 | $ | 0.98 | $ | 1.52 | $ | 3.83 | $ | 4.51 | ||||||||||
Page - 9 | ||
| BNY Mellon 4Q20 Earnings Release | ||
SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures on a tangible basis as a supplement to GAAP information, which exclude goodwill and intangible assets, net of deferred tax liabilities. We believe that the return on tangible common equity is additional useful information for investors because it presents a measure of those assets that can generate income, and the tangible book value per common share is additional useful information because it presents the level of tangible assets in relation to shares of common stock outstanding.
Net interest revenue, on a fully taxable equivalent (“FTE”) basis – Non-GAAP and net interest margin (FTE) – Non-GAAP and other FTE measures include the tax equivalent adjustments on tax-exempt income which allows for the comparison of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income.
BNY Mellon has also included the adjusted pre-tax operating margin – Non-GAAP, which is the pre-tax operating margin for the Investment and Wealth Management business net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds. We believe that this measure is useful when evaluating the performance of the Investment and Wealth Management business relative to industry competitors.
For the reconciliations of these Non-GAAP measures, see “Supplemental Information – Explanation of GAAP and Non-GAAP Financial Measures” in the Financial Supplement available at www.bnymellon.com.
BNY Mellon has presented revenue measures excluding notable items, including the gain on the sale of an equity investment, a lease-related impairment, losses on business sales and investment securities losses related to the sale of certain securities. Expense measures, excluding notable items, including severance, litigation, a net reduction of reserves for tax-related exposure of certain investment management funds and real estate charges are also presented. Litigation expense represents accruals for loss contingencies that are both probable and reasonably estimable, but exclude standard business-related legal fees. Income before tax measures, excluding the notable items mentioned above are provided. In addition, operating leverage, operating margins and diluted earnings per share, excluding the notable items impacting revenue, expense and income tax items mentioned above are adjusted to permit investors to view the financial measures on a basis consistent with how management views the businesses.
Page - 10 | ||
| BNY Mellon 4Q20 Earnings Release | ||
| Reconciliations of Non-GAAP measures, excluding notable items | 4Q20 vs. | ||||||||||||||||
| (in millions, except per share amounts) | 4Q20 | 4Q19 | 4Q19 | ||||||||||||||
| Fee revenue – GAAP | $ | 3,116 | $ | 3,971 | (22) | % | |||||||||||
Impact of notable items (a) | (61) | 815 | |||||||||||||||
| Fee revenue – Non-GAAP | $ | 3,177 | $ | 3,156 | 1 | % | |||||||||||
| Net securities gains (losses) – GAAP | $ | 6 | $ | (25) | N/M | ||||||||||||
Impact of notable items (a) | — | (25) | |||||||||||||||
| Net securities gains – Non-GAAP | $ | 6 | $ | — | N/M | ||||||||||||
| Total revenue – GAAP | $ | 3,843 | $ | 4,778 | (20) | % | |||||||||||
Impact of notable items (a) | (61) | 790 | |||||||||||||||
| Total revenue – Non-GAAP | $ | 3,904 | $ | 3,988 | (2) | % | |||||||||||
| Noninterest expense – GAAP | $ | 2,925 | $ | 2,964 | (1) | % | |||||||||||
Impact of notable items (a) | 165 | 186 | |||||||||||||||
| Noninterest expense – Non-GAAP | $ | 2,760 | $ | 2,778 | (1) | % | |||||||||||
| Income before income taxes – GAAP | $ | 903 | $ | 1,822 | (50) | % | |||||||||||
Impact of notable items (a) | (226) | 604 | |||||||||||||||
| Income before income taxes – Non-GAAP | $ | 1,129 | $ | 1,218 | (7) | % | |||||||||||
| Provision for income taxes – GAAP | $ | 148 | $ | 373 | (60) | % | |||||||||||
Impact of notable items (a) | (67) | 144 | |||||||||||||||
| Provision for income taxes – Non-GAAP | $ | 215 | $ | 229 | (6) | % | |||||||||||
| Net income – GAAP | $ | 755 | $ | 1,449 | (48) | % | |||||||||||
Impact of notable items (a) | (159) | 460 | |||||||||||||||
| Net income – Non-GAAP | $ | 914 | $ | 989 | (8) | % | |||||||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP | $ | 702 | $ | 1,391 | (50) | % | |||||||||||
Impact of notable items (a) | (159) | 460 | |||||||||||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP | $ | 861 | $ | 931 | (8) | % | |||||||||||
| Diluted earnings per common share – GAAP | $ | 0.79 | $ | 1.52 | (48) | % | |||||||||||
Impact of notable items (a) | (0.18) | 0.50 | |||||||||||||||
| Diluted earnings per common share – Non-GAAP | $ | 0.96 | (b) | $ | 1.01 | (b) | (5) | % | |||||||||
(a) Notable items in 4Q20 include litigation expense, severance, losses on business sales (reflected in fee revenue) and real estate charges. Notable items in 4Q19 include a gain on sale of an equity investment, severance, net securities losses and litigation expense.
(b) Does not foot due to rounding.
| Pre-tax operating margin reconciliation | ||||||||
| (dollars in millions) | 4Q20 | 4Q19 | ||||||
| Income before income taxes – GAAP | $ | 903 | $ | 1,822 | ||||
Impact of notable items (a) | (226) | 604 | ||||||
| Income before income taxes – Non-GAAP | $ | 1,129 | $ | 1,218 | ||||
| Total revenue – GAAP | $ | 3,843 | $ | 4,778 | ||||
Impact of notable items (a) | (61) | 790 | ||||||
| Total revenue – Non-GAAP | $ | 3,904 | $ | 3,988 | ||||
Pre-tax operating margin – GAAP (b) | 24 | % | 38 | % | ||||
Pre-tax operating margin, net of notable items – Non-GAAP (b) | 29 | % | 31 | % | ||||
(a) Notable items in 4Q20 include litigation expense, severance, losses on business sales and real estate charges. Notable items in 4Q19 include a gain on sale of an equity investment, severance, net securities losses and litigation expense.
(b) Income before income taxes divided by total revenue.
Page - 11 | ||
| BNY Mellon 4Q20 Earnings Release | ||
| Reconciliations of Non-GAAP measures, excluding notable items | 2020 vs. | ||||||||||
| (in millions, except per share amounts) | 2020 | 2019 | 2019 | ||||||||
| Fee revenue – GAAP | $ | 12,714 | $ | 13,236 | (4) | % | |||||
Impact of notable items (a) | (61) | 815 | |||||||||
| Fee revenue – Non-GAAP | $ | 12,775 | $ | 12,421 | 3 | % | |||||
| Net securities gains (losses) – GAAP | $ | 33 | $ | (18) | N/M | ||||||
Impact of notable items (a) | — | (25) | |||||||||
| Net securities gains – Non-GAAP | $ | 33 | $ | 7 | N/M | ||||||
| Net interest revenue – GAAP | $ | 2,977 | $ | 3,188 | (7) | % | |||||
Impact of notable items (a) | — | (70) | |||||||||
| Net interest revenue – Non-GAAP | $ | 2,977 | $ | 3,258 | (9) | % | |||||
| Total revenue – GAAP | $ | 15,808 | $ | 16,462 | (4) | % | |||||
Impact of notable items (a) | (61) | 720 | |||||||||
| Total revenue – Non-GAAP | $ | 15,869 | $ | 15,742 | 1 | % | |||||
| Noninterest expense – GAAP | $ | 11,004 | $ | 10,900 | 1 | % | |||||
Impact of notable items (a) | 165 | 113 | |||||||||
| Noninterest expense – Non-GAAP | $ | 10,839 | $ | 10,787 | — | % | |||||
| Income before income taxes – GAAP | $ | 4,468 | $ | 5,587 | (20) | % | |||||
Impact of notable items (a) | (226) | 607 | |||||||||
| Income before income taxes – Non-GAAP | $ | 4,694 | $ | 4,980 | (6) | % | |||||
| Provision for income taxes – GAAP | $ | 842 | $ | 1,120 | (25) | % | |||||
Impact of notable items (a) | (67) | 140 | |||||||||
| Provision for income taxes – Non-GAAP | $ | 909 | $ | 980 | (7) | % | |||||
| Net income – GAAP | $ | 3,626 | $ | 4,467 | (19) | % | |||||
Impact of notable items (a) | (159) | 467 | |||||||||
| Net income – Non-GAAP | $ | 3,785 | $ | 4,000 | (5) | % | |||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP | $ | 3,423 | $ | 4,272 | (20) | % | |||||
Impact of notable items (a) | (159) | 467 | |||||||||
| Net income applicable to common shareholders of The Bank of New York Mellon Corporation – Non-GAAP | $ | 3,582 | $ | 3,805 | (6) | % | |||||
| Diluted earnings per common share – GAAP | $ | 3.83 | $ | 4.51 | (15) | % | |||||
Impact of notable items (a) | (0.18) | 0.49 | |||||||||
| Diluted earnings per common share – Non-GAAP | $ | 4.01 | $ | 4.02 | — | % | |||||
(a) Notable items in 2020 include litigation expense, severance, losses on business sales (reflected in fee revenue) and real estate charges recorded in 4Q20. Notable items in 2019 include a gain on sale of an equity investment, severance, net securities losses, litigation expense recorded in 4Q19 and a lease-related impairment and a net reduction of reserves for tax-related exposure of certain investment management funds both recorded in 3Q19.
Page - 12 | ||
| BNY Mellon 4Q20 Earnings Release | ||
| Pre-tax operating margin reconciliation | ||||||||
| (dollars in millions) | 2020 | 2019 | ||||||
| Income before income taxes – GAAP | $ | 4,468 | $ | 5,587 | ||||
Impact of notable items (a) | (226) | 607 | ||||||
| Income before income taxes – Non-GAAP | $ | 4,694 | $ | 4,980 | ||||
| Total revenue – GAAP | $ | 15,808 | $ | 16,462 | ||||
Impact of notable items (a) | (61) | 720 | ||||||
| Total revenue – Non-GAAP | $ | 15,869 | $ | 15,742 | ||||
Pre-tax operating margin – GAAP (b) | 28 | % | 34 | % | ||||
Pre-tax operating margin, net of notable items – Non-GAAP (b) | 30 | % | 32 | % | ||||
(a) Notable items in 2020 include litigation expense, severance, losses on business sales and real estate charges recorded in 4Q20. Notable items in 2019 include a gain on sale of an equity investment, severance, net securities losses, litigation expense recorded in 4Q19 and a lease-related impairment and a net reduction of reserves for tax-related exposure of certain investment management funds both recorded in 3Q19.
(b) Income before income taxes divided by total revenue.
| Reconciliations of Non-GAAP measures, excluding notable items - by business segment | 4Q20 vs. | ||||||||||||||||
| (in millions) | 4Q20 | 3Q20 | 4Q19 | 3Q20 | 4Q19 | ||||||||||||
| Investment Services | |||||||||||||||||
| Noninterest expense – GAAP | $ | 2,174 | $ | 2,020 | $ | 2,179 | 8 | % | — | % | |||||||
Impact of notable items (a) | 107 | — | 119 | ||||||||||||||
| Noninterest expense – Non-GAAP | $ | 2,067 | $ | 2,020 | $ | 2,060 | 2 | % | — | % | |||||||
| Investment and Wealth Management | |||||||||||||||||
| Noninterest expense – GAAP | $ | 687 | $ | 661 | $ | 731 | 4 | % | (6) | % | |||||||
Impact of notable items (a) | 11 | — | 16 | ||||||||||||||
| Noninterest expense – Non-GAAP | $ | 676 | $ | 661 | $ | 715 | 2 | % | (5) | % | |||||||
(a) Notable items in 4Q20 and 4Q19 include severance for both business segments. Notable items in 4Q20 and 4Q19 also include litigation expenses in the Investment Services business segment.
| Reconciliations of Non-GAAP measures, excluding notable items - by line of business | 4Q20 vs. | ||||||||||||||||
| (in millions) | 4Q20 | 3Q20 | 4Q19 | 3Q20 | 4Q19 | ||||||||||||
| Wealth Management | |||||||||||||||||
| Total revenue - GAAP | $ | 276 | $ | 277 | $ | 279 | — | % | (1) | % | |||||||
Impact of notable items (a) | (5) | — | — | ||||||||||||||
| Total revenue - Non-GAAP | $ | 281 | $ | 277 | $ | 279 | 1 | % | 1 | % | |||||||
(a) Notable items in 4Q20 includes a loss on business sale.
CAUTIONARY STATEMENT
A number of statements (i) in this Earnings Release, (ii) in our Financial Supplement, (iii) in our presentations and (iv) in the responses to questions on our conference call discussing our quarterly results and other public events may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our capital plans, strategic priorities, financial goals, organic growth, performance, organizational quality and efficiency, investments, including in technology and product development, resiliency, capabilities, revenue, net interest revenue, money market fee waivers, fees, expenses, cost discipline, sustainable growth, company management, deposits, interest rates and yield curves, securities portfolio, taxes, business opportunities, divestments, volatility, preliminary business metrics and regulatory capital ratios and statements regarding our aspirations, as well as our overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities, focus and initiatives, including the potential effects of the coronavirus pandemic on any of the foregoing. These statements may be expressed in a variety of ways, including the use of future or present tense language. Words such as “estimate,” “forecast,” “project,” “anticipate,” “likely,” “target,” “expect,” “intend,” “continue,” “seek,” “believe,” “plan,” “goal,”
Page - 13 | ||
| BNY Mellon 4Q20 Earnings Release | ||
“could,” “should,” “would,” “may,” “might,” “will,” “strategy,” “synergies,” “opportunities,” “trends,” “future,” “potentially,” “outlook” and words of similar meaning may signify forward-looking statements. These statements and other forward-looking statements contained in other public disclosures of BNY Mellon which make reference to the cautionary factors described in this Earnings Release are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon’s control). Actual results may differ materially from those expressed or implied as a result of a number of factors, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon’s Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2020, the Annual Report on Form 10-K for the year ended Dec. 31, 2019 and BNY Mellon’s other filings with the Securities and Exchange Commission. Statements about the effects of the current and near-term market and macroeconomic outlook on BNY Mellon, including on its business, operations, financial performance and prospects, may constitute forward-looking statements, and are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond BNY Mellon’s control), including the scope and duration of the pandemic, actions taken by governmental authorities and other third parties in response to the pandemic, the availability, use and effectiveness of vaccines and the direct and indirect impact of the pandemic on us, our clients, customers and third parties. Preliminary business metrics and regulatory capital ratios are subject to change, possibly materially, as BNY Mellon completes its Annual Report on Form 10-K for the year ended Dec. 31, 2020. All forward-looking statements in this Earnings Release speak only as of Jan. 20, 2021, and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
ABOUT BNY MELLON
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment and wealth management and investment services in 35 countries. As of Dec. 31, 2020, BNY Mellon had $41.1 trillion in assets under custody and/or administration, and $2.2 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.
CONFERENCE CALL INFORMATION
Todd Gibbons, Chief Executive Officer, and Emily Portney, Chief Financial Officer, will host a conference call and simultaneous live audio webcast at 8:00 a.m. ET on Jan. 20, 2021. This conference call and audio webcast will include forward-looking statements and may include other material information.
Investors and analysts wishing to access the conference call and audio webcast may do so by dialing (800) 390-5696 (U.S.) or (720) 452-9082 (International), and using the passcode: 444308, or by logging onto www.bnymellon.com/investorrelations. Earnings materials will be available at www.bnymellon.com/investorrelations beginning at approximately 6:30 a.m. ET on Jan. 20, 2021. Replays of the conference call and audio webcast will be available beginning Jan. 20, 2021 at approximately 2:00 p.m. ET through Feb. 19, 2021 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 3619155. The archived version of the conference call and audio webcast will also be available at www.bnymellon.com/investorrelations for the same time period.
Page - 14 | ||
| The Bank of New York Mellon Corporation | ||
| Financial Supplement | ||
| Fourth Quarter 2020 | ||
| Table of Contents |  | |||||||
| Consolidated Results | Page | |||||||
| Consolidated Financial Highlights | ||||||||
| Condensed Consolidated Income Statement | ||||||||
| Condensed Consolidated Balance Sheet | ||||||||
| Fee and Other Revenue | ||||||||
| Average Balances and Interest Rates | ||||||||
| Capital and Liquidity | ||||||||
| Business Segment Results | ||||||||
| Investment Services Business | ||||||||
| Investment and Wealth Management Business | ||||||||
| AUM by Product, AUM Flows and Wealth Management Client Assets | ||||||||
| Other Segment | ||||||||
| Other | ||||||||
| Securities Portfolio | ||||||||
| Allowance for Credit Losses and Nonperforming Assets | ||||||||
| Supplemental Information – Explanation of GAAP and Non-GAAP Financial Measures | ||||||||
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||||||||||||||||||||
| (dollars in millions, except per common share amounts, or unless otherwise noted) | 4Q20 vs. | FY20 vs. | |||||||||||||||||||||||||||||||||||||||
| 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q20 | 4Q19 | FY20 | FY19 | FY19 | ||||||||||||||||||||||||||||||||
| Selected income statement data | |||||||||||||||||||||||||||||||||||||||||
| Fee revenue | $ | 3,116 | $ | 3,108 | $ | 3,167 | $ | 3,323 | $ | 3,971 | — | % | (22) | % | $ | 12,714 | $ | 13,236 | (4) | % | |||||||||||||||||||||
| Net securities gains (losses) | 6 | 9 | 9 | 9 | (25) | N/M | N/M | 33 | (18) | N/M | |||||||||||||||||||||||||||||||
| Total fee and other revenue | 3,122 | 3,117 | 3,176 | 3,332 | 3,946 | — | (21) | 12,747 | 13,218 | (4) | |||||||||||||||||||||||||||||||
| Income (loss) from consolidated investment management funds | 41 | 27 | 54 | (38) | 17 | N/M | N/M | 84 | 56 | N/M | |||||||||||||||||||||||||||||||
| Net interest revenue | 680 | 703 | 780 | 814 | 815 | (3) | (17) | 2,977 | 3,188 | (7) | |||||||||||||||||||||||||||||||
| Total revenue | 3,843 | 3,847 | 4,010 | 4,108 | 4,778 | — | (20) | 15,808 | 16,462 | (4) | |||||||||||||||||||||||||||||||
| Provision for credit losses | 15 | 9 | 143 | 169 | (8) | N/M | N/M | 336 | (25) | N/M | |||||||||||||||||||||||||||||||
| Noninterest expense | 2,925 | 2,681 | 2,686 | 2,712 | 2,964 | 9 | (1) | 11,004 | 10,900 | 1 | |||||||||||||||||||||||||||||||
| Income before income taxes | 903 | 1,157 | 1,181 | 1,227 | 1,822 | (22) | (50) | 4,468 | 5,587 | (20) | |||||||||||||||||||||||||||||||
| Provision for income taxes | 148 | 213 | 216 | 265 | 373 | (31) | (60) | 842 | 1,120 | (25) | |||||||||||||||||||||||||||||||
| Net income | $ | 755 | $ | 944 | $ | 965 | $ | 962 | $ | 1,449 | (20) | % | (48) | % | $ | 3,626 | $ | 4,467 | (19) | % | |||||||||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation | $ | 702 | $ | 876 | $ | 901 | $ | 944 | $ | 1,391 | (20) | % | (50) | % | $ | 3,423 | $ | 4,272 | (20) | % | |||||||||||||||||||||
| Diluted earnings per common share | $ | 0.79 | $ | 0.98 | $ | 1.01 | $ | 1.05 | $ | 1.52 | (19) | % | (48) | % | $ | 3.83 | $ | 4.51 | (15) | % | |||||||||||||||||||||
Average common shares and equivalents outstanding - diluted (in thousands) | 891,846 | 891,069 | 890,561 | 896,689 | 914,739 | — | % | (3) | % | 892,514 | 943,109 | (5) | % | ||||||||||||||||||||||||||||
Financial ratios (Returns are annualized) | |||||||||||||||||||||||||||||||||||||||||
| Pre-tax operating margin | 24 | % | 30 | % | 29 | % | 30 | % | 38 | % | 28 | % | 34 | % | |||||||||||||||||||||||||||
| Return on common equity | 6.9 | % | 8.7 | % | 9.4 | % | 10.1 | % | 14.6 | % | 8.7 | % | 11.4 | % | |||||||||||||||||||||||||||
Return on tangible common equity – Non-GAAP (a) | 13.0 | % | 16.7 | % | 18.5 | % | 20.4 | % | 29.3 | % | 17.0 | % | 23.2 | % | |||||||||||||||||||||||||||
| Non-U.S. revenue as a percentage of total revenue | 38 | % | 37 | % | 36 | % | 36 | % | 31 | % | 37 | % | 35 | % | |||||||||||||||||||||||||||
| Period end | |||||||||||||||||||||||||||||||||||||||||
Assets under custody and/or administration (“AUC/A”) (in trillions) (b) | $ | 41.1 | $ | 38.6 | $ | 37.3 | $ | 35.2 | $ | 37.1 | 6 | % | 11 | % | |||||||||||||||||||||||||||
Assets under management (“AUM”) (in trillions) | $ | 2.20 | $ | 2.04 | $ | 1.96 | $ | 1.80 | $ | 1.91 | 8 | % | 15 | % | |||||||||||||||||||||||||||
| Full-time employees | 48,500 | 48,600 | 48,300 | 47,900 | 48,400 | — | % | — | % | ||||||||||||||||||||||||||||||||
| Book value per common share | $ | 46.53 | $ | 45.58 | $ | 44.21 | $ | 42.47 | $ | 42.12 | |||||||||||||||||||||||||||||||
Tangible book value per common share – Non-GAAP (a) | $ | 25.44 | $ | 24.60 | $ | 23.31 | $ | 21.53 | $ | 21.33 | |||||||||||||||||||||||||||||||
| Cash dividends per common share | $ | 0.31 | $ | 0.31 | $ | 0.31 | $ | 0.31 | $ | 0.31 | |||||||||||||||||||||||||||||||
| Common dividend payout ratio | 39 | % | 32 | % | 31 | % | 30 | % | 20 | % | |||||||||||||||||||||||||||||||
| Closing stock price per common share | $ | 42.44 | $ | 34.34 | $ | 38.65 | $ | 33.68 | $ | 50.33 | |||||||||||||||||||||||||||||||
| Market capitalization | $ | 37,634 | $ | 30,430 | $ | 34,239 | $ | 29,822 | $ | 45,331 | |||||||||||||||||||||||||||||||
Common shares outstanding (in thousands) | 886,764 | 886,136 | 885,862 | 885,443 | 900,683 | ||||||||||||||||||||||||||||||||||||
Capital ratios at period end (c) | |||||||||||||||||||||||||||||||||||||||||
| Common Equity Tier 1 ("CET1") ratio | 13.1 | % | 13.0 | % | 12.6 | % | 11.3 | % | 11.5 | % | |||||||||||||||||||||||||||||||
| Tier 1 capital ratio | 15.8 | % | 15.7 | % | 15.4 | % | 13.5 | % | 13.7 | % | |||||||||||||||||||||||||||||||
| Total capital ratio | 16.7 | % | 16.6 | % | 16.3 | % | 14.3 | % | 14.4 | % | |||||||||||||||||||||||||||||||
| Tier 1 leverage ratio | 6.3 | % | 6.5 | % | 6.2 | % | 6.0 | % | 6.6 | % | |||||||||||||||||||||||||||||||
| Supplementary leverage ratio ("SLR") | 8.6 | % | 8.5 | % | 8.2 | % | 5.6 | % | 6.1 | % | |||||||||||||||||||||||||||||||
(a) Non-GAAP information, for all periods presented, excludes goodwill and intangible assets, net of deferred tax liabilities. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 16 for the reconciliation of Non-GAAP measures. | |||||||||||||||||||||||||||||||||||||||||
(b) Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5 trillion at Dec. 31, 2020, $1.4 trillion at Sept. 30, 2020, $1.3 trillion at June 30, 2020, $1.2 trillion at March 31, 2020 and $1.5 trillion at Dec. 31, 2019. | |||||||||||||||||||||||||||||||||||||||||
(c) Regulatory capital ratios for Dec. 31, 2020 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for Dec. 31, 2020, Sept. 30,2020, June 30, 2020 and Dec. 31, 2019, was the Advanced Approaches, and for March 31, 2020 was the Standardized Approach for the CET1 and Tier 1 capital ratios and the Advanced Approaches for the Total capital ratio. | |||||||||||||||||||||||||||||||||||||||||
N/M - Not meaningful. | |||||||||||||||||||||||||||||||||||||||||
3
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED INCOME STATEMENT | |||||||||||||||||||||||||||||||||||||||||
(dollars in millions, except per share amounts; common shares in thousands) | 4Q20 vs. | FY20 vs. | |||||||||||||||||||||||||||||||||||||||
| 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q20 | 4Q19 | FY20 | FY19 | FY19 | ||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||
| Investment services fees: | |||||||||||||||||||||||||||||||||||||||||
| Asset servicing fees | $ | 1,138 | $ | 1,168 | $ | 1,173 | $ | 1,159 | $ | 1,148 | (3) | % | (1) | % | $ | 4,638 | $ | 4,563 | 2 | % | |||||||||||||||||||||
| Clearing services fees | 418 | 397 | 431 | 470 | 421 | 5 | (1) | 1,716 | 1,648 | 4 | |||||||||||||||||||||||||||||||
| Issuer services fees | 257 | 295 | 277 | 263 | 264 | (13) | (3) | 1,092 | 1,130 | (3) | |||||||||||||||||||||||||||||||
| Treasury services fees | 156 | 152 | 144 | 149 | 147 | 3 | 6 | 601 | 559 | 8 | |||||||||||||||||||||||||||||||
| Total investment services fees | 1,969 | 2,012 | 2,025 | 2,041 | 1,980 | (2) | (1) | 8,047 | 7,900 | 2 | |||||||||||||||||||||||||||||||
| Investment management and performance fees | 884 | 835 | 786 | 862 | 883 | 6 | — | 3,367 | 3,389 | (1) | |||||||||||||||||||||||||||||||
| Foreign exchange and other trading revenue | 167 | 137 | 166 | 319 | 168 | 22 | (1) | 789 | 654 | 21 | |||||||||||||||||||||||||||||||
| Financing-related fees | 46 | 49 | 58 | 59 | 46 | (6) | — | 212 | 196 | 8 | |||||||||||||||||||||||||||||||
| Distribution and servicing | 28 | 29 | 27 | 31 | 34 | (3) | (18) | 115 | 129 | (11) | |||||||||||||||||||||||||||||||
| Investment and other income | 22 | 46 | 105 | 11 | 860 | N/M | N/M | 184 | 968 | N/M | |||||||||||||||||||||||||||||||
| Total fee revenue | 3,116 | 3,108 | 3,167 | 3,323 | 3,971 | — | (22) | 12,714 | 13,236 | (4) | |||||||||||||||||||||||||||||||
| Net securities gains (losses) | 6 | 9 | 9 | 9 | (25) | N/M | N/M | 33 | (18) | N/M | |||||||||||||||||||||||||||||||
| Total fee and other revenue | 3,122 | 3,117 | 3,176 | 3,332 | 3,946 | — | (21) | 12,747 | 13,218 | (4) | |||||||||||||||||||||||||||||||
| Income (loss) from consolidated investment management funds | 41 | 27 | 54 | (38) | 17 | N/M | N/M | 84 | 56 | N/M | |||||||||||||||||||||||||||||||
| Net interest revenue | 680 | 703 | 780 | 814 | 815 | (3) | (17) | 2,977 | 3,188 | (7) | |||||||||||||||||||||||||||||||
| Total revenue | 3,843 | 3,847 | 4,010 | 4,108 | 4,778 | — | (20) | 15,808 | 16,462 | (4) | |||||||||||||||||||||||||||||||
| Provision for credit losses | 15 | 9 | 143 | 169 | (8) | N/M | N/M | 336 | (25) | N/M | |||||||||||||||||||||||||||||||
| Noninterest expense | |||||||||||||||||||||||||||||||||||||||||
| Staff | 1,554 | 1,466 | 1,464 | 1,482 | 1,639 | 6 | (5) | 5,966 | 6,063 | (2) | |||||||||||||||||||||||||||||||
| Professional, legal and other purchased services | 381 | 355 | 337 | 330 | 367 | 7 | 4 | 1,403 | 1,345 | 4 | |||||||||||||||||||||||||||||||
| Software and equipment | 359 | 340 | 345 | 326 | 326 | 6 | 10 | 1,370 | 1,222 | 12 | |||||||||||||||||||||||||||||||
| Net occupancy | 173 | 136 | 137 | 135 | 151 | 27 | 15 | 581 | 564 | 3 | |||||||||||||||||||||||||||||||
| Sub-custodian and clearing | 116 | 119 | 120 | 105 | 119 | (3) | (3) | 460 | 450 | 2 | |||||||||||||||||||||||||||||||
| Distribution and servicing | 75 | 85 | 85 | 91 | 92 | (12) | (18) | 336 | 374 | (10) | |||||||||||||||||||||||||||||||
| Bank assessment charges | 24 | 30 | 35 | 35 | 32 | (20) | (25) | 124 | 125 | (1) | |||||||||||||||||||||||||||||||
| Business development | 26 | 17 | 20 | 42 | 65 | 53 | (60) | 105 | 213 | (51) | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | 26 | 26 | 26 | 26 | 28 | — | (7) | 104 | 117 | (11) | |||||||||||||||||||||||||||||||
| Other | 191 | 107 | 117 | 140 | 145 | 79 | 32 | 555 | 427 | 30 | |||||||||||||||||||||||||||||||
| Total noninterest expense | 2,925 | 2,681 | 2,686 | 2,712 | 2,964 | 9 | (1) | 11,004 | 10,900 | 1 | |||||||||||||||||||||||||||||||
| Income before income taxes | 903 | 1,157 | 1,181 | 1,227 | 1,822 | (22) | (50) | 4,468 | 5,587 | (20) | |||||||||||||||||||||||||||||||
| Provision for income taxes | 148 | 213 | 216 | 265 | 373 | (31) | (60) | 842 | 1,120 | (25) | |||||||||||||||||||||||||||||||
| Net income | 755 | 944 | 965 | 962 | 1,449 | (20) | (48) | 3,626 | 4,467 | (19) | |||||||||||||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (5) | (7) | (15) | 18 | (9) | N/M | N/M | (9) | (26) | N/M | |||||||||||||||||||||||||||||||
| Preferred stock dividends | (48) | (61) | (49) | (36) | (49) | N/M | N/M | (194) | (169) | N/M | |||||||||||||||||||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation | $ | 702 | $ | 876 | $ | 901 | $ | 944 | $ | 1,391 | (20) | % | (50) | % | $ | 3,423 | $ | 4,272 | (20) | % | |||||||||||||||||||||
| Average common shares and equivalents outstanding: Basic | 889,928 | 889,499 | 889,020 | 894,122 | 911,324 | — | % | (2) | % | 890,839 | 939,623 | (5) | % | ||||||||||||||||||||||||||||
| Diluted | 891,846 | 891,069 | 890,561 | 896,689 | 914,739 | — | % | (3) | % | 892,514 | 943,109 | (5) | % | ||||||||||||||||||||||||||||
| Earnings per common share: Basic | $ | 0.79 | $ | 0.98 | $ | 1.01 | $ | 1.05 | $ | 1.52 | (19) | % | (48) | % | $ | 3.84 | $ | 4.53 | (15) | % | |||||||||||||||||||||
| Diluted | $ | 0.79 | $ | 0.98 | $ | 1.01 | $ | 1.05 | $ | 1.52 | (19) | % | (48) | % | $ | 3.83 | $ | 4.51 | (15) | % | |||||||||||||||||||||
N/M - Not meaningful. | |||||||||||||||||||||||||||||||||||||||||
4
| THE BANK OF NEW YORK MELLON CORPORATION | | |||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | ||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||
| (in millions) | Dec. 31 | Sept. 30 | June 30 | March 31 | Dec. 31 | |||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and due from banks | $ | 6,252 | $ | 4,104 | $ | 4,776 | $ | 5,091 | $ | 4,830 | ||||||||||
| Interest-bearing deposits with the Federal Reserve and other central banks | 141,775 | 106,185 | 112,728 | 146,535 | 95,042 | |||||||||||||||
| Interest-bearing deposits with banks | 17,300 | 19,027 | 18,045 | 22,672 | 14,811 | |||||||||||||||
| Federal funds sold and securities purchased under resale agreements | 30,907 | 29,647 | 36,638 | 27,363 | 30,182 | |||||||||||||||
| Securities | 156,441 | 155,339 | 154,682 | 139,273 | 123,033 | |||||||||||||||
| Trading assets | 15,272 | 13,074 | 14,150 | 12,918 | 13,571 | |||||||||||||||
| Loans | 56,469 | 55,491 | 55,397 | 62,368 | 54,953 | |||||||||||||||
| Allowance for loan losses | (358) | (325) | (302) | (140) | (122) | |||||||||||||||
Net loans | 56,111 | 55,166 | 55,095 | 62,228 | 54,831 | |||||||||||||||
| Premises and equipment | 3,602 | 3,617 | 3,598 | 3,514 | 3,625 | |||||||||||||||
| Accrued interest receivable | 510 | 489 | 540 | 576 | 624 | |||||||||||||||
| Goodwill | 17,496 | 17,357 | 17,253 | 17,240 | 17,386 | |||||||||||||||
| Intangible assets | 3,012 | 3,026 | 3,045 | 3,070 | 3,107 | |||||||||||||||
Other assets | 20,468 | 20,779 | 21,306 | 27,446 | 20,221 | |||||||||||||||
Subtotal assets of operations | 469,146 | 427,810 | 441,856 | 467,926 | 381,263 | |||||||||||||||
| Assets of consolidated investment management funds, at fair value | 487 | 588 | 460 | 229 | 245 | |||||||||||||||
Total assets | $ | 469,633 | $ | 428,398 | $ | 442,316 | $ | 468,155 | $ | 381,508 | ||||||||||
| Liabilities | ||||||||||||||||||||
| Deposits | $ | 341,545 | $ | 296,312 | $ | 305,470 | $ | 336,717 | $ | 259,466 | ||||||||||
| Federal funds purchased and securities sold under repurchase agreements | 11,305 | 15,907 | 14,512 | 13,128 | 11,401 | |||||||||||||||
| Trading liabilities | 6,031 | 6,084 | 5,595 | 6,625 | 4,841 | |||||||||||||||
| Payables to customers and broker-dealers | 25,085 | 23,514 | 25,012 | 24,016 | 18,758 | |||||||||||||||
| Commercial paper | — | 671 | 665 | 1,121 | 3,959 | |||||||||||||||
| Other borrowed funds | 350 | 420 | 1,628 | 1,544 | 599 | |||||||||||||||
| Accrued taxes and other expenses | 5,696 | 5,347 | 5,029 | 4,705 | 5,642 | |||||||||||||||
Other liabilities | 7,514 | 8,671 | 12,869 | 11,425 | 7,612 | |||||||||||||||
| Long-term debt | 25,984 | 26,121 | 27,566 | 27,494 | 27,501 | |||||||||||||||
Subtotal liabilities of operations | 423,510 | 383,047 | 398,346 | 426,775 | 339,779 | |||||||||||||||
| Liabilities of consolidated investment management funds, at fair value | 3 | 4 | 4 | 1 | 1 | |||||||||||||||
Total liabilities | 423,513 | 383,051 | 398,350 | 426,776 | 339,780 | |||||||||||||||
| Temporary equity | ||||||||||||||||||||
| Redeemable noncontrolling interests | 176 | 179 | 157 | 140 | 143 | |||||||||||||||
| Permanent equity | ||||||||||||||||||||
Preferred stock | 4,541 | 4,532 | 4,532 | 3,542 | 3,542 | |||||||||||||||
Common stock | 14 | 14 | 14 | 14 | 14 | |||||||||||||||
| Additional paid-in capital | 27,823 | 27,741 | 27,702 | 27,644 | 27,515 | |||||||||||||||
| Retained earnings | 34,241 | 33,821 | 33,224 | 32,601 | 31,894 | |||||||||||||||
| Accumulated other comprehensive loss, net of tax | (985) | (1,359) | (1,943) | (2,827) | (2,638) | |||||||||||||||
Less: Treasury stock, at cost | (19,833) | (19,832) | (19,832) | (19,829) | (18,844) | |||||||||||||||
Total The Bank of New York Mellon Corporation shareholders’ equity | 45,801 | 44,917 | 43,697 | 41,145 | 41,483 | |||||||||||||||
Nonredeemable noncontrolling interests of consolidated investment management funds | 143 | 251 | 112 | 94 | 102 | |||||||||||||||
Total permanent equity | 45,944 | 45,168 | 43,809 | 41,239 | 41,585 | |||||||||||||||
Total liabilities, temporary equity and permanent equity | $ | 469,633 | $ | 428,398 | $ | 442,316 | $ | 468,155 | $ | 381,508 | ||||||||||
5
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||||||||||||||
| FEE AND OTHER REVENUE | |||||||||||||||||||||||||||||||||||||||||
| 4Q20 vs. | FY20 vs. | ||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q20 | 4Q19 | FY20 | FY19 | FY19 | |||||||||||||||||||||||||||||||
| Investment services fees: | |||||||||||||||||||||||||||||||||||||||||
Asset servicing fees (a) | $ | 1,099 | $ | 1,128 | $ | 1,117 | $ | 1,108 | $ | 1,104 | (3) | % | — | % | $ | 4,452 | $ | 4,384 | 2 | % | |||||||||||||||||||||
| Securities lending revenue | 39 | 40 | 56 | 51 | 44 | (3) | (11) | 186 | 179 | 4 | |||||||||||||||||||||||||||||||
Clearing services fees (b) | 418 | 397 | 431 | 470 | 421 | 5 | (1) | 1,716 | 1,648 | 4 | |||||||||||||||||||||||||||||||
| Issuer services fees | 257 | 295 | 277 | 263 | 264 | (13) | (3) | 1,092 | 1,130 | (3) | |||||||||||||||||||||||||||||||
| Treasury services fees | 156 | 152 | 144 | 149 | 147 | 3 | 6 | 601 | 559 | 8 | |||||||||||||||||||||||||||||||
| Total investment services fees | 1,969 | 2,012 | 2,025 | 2,041 | 1,980 | (2) | (1) | 8,047 | 7,900 | 2 | |||||||||||||||||||||||||||||||
Investment management and performance fees (c): | |||||||||||||||||||||||||||||||||||||||||
| Investment management fees | 839 | 828 | 781 | 812 | 835 | 1 | — | 3,260 | 3,306 | (1) | |||||||||||||||||||||||||||||||
| Performance fees | 45 | 7 | 5 | 50 | 48 | N/M | (6) | 107 | 83 | 29 | |||||||||||||||||||||||||||||||
Total investment management and performance fees (d) | 884 | 835 | 786 | 862 | 883 | 6 | — | 3,367 | 3,389 | (1) | |||||||||||||||||||||||||||||||
| Foreign exchange and other trading revenue: | |||||||||||||||||||||||||||||||||||||||||
| Foreign exchange | 198 | 151 | 174 | 253 | 138 | 31 | 43 | 776 | 577 | 34 | |||||||||||||||||||||||||||||||
| Other trading (loss) revenue | (31) | (14) | (8) | 66 | 30 | N/M | N/M | 13 | 77 | N/M | |||||||||||||||||||||||||||||||
| Total foreign exchange and other trading revenue | 167 | 137 | 166 | 319 | 168 | 22 | (1) | 789 | 654 | 21 | |||||||||||||||||||||||||||||||
| Financing-related fees | 46 | 49 | 58 | 59 | 46 | (6) | — | 212 | 196 | 8 | |||||||||||||||||||||||||||||||
| Distribution and servicing | 28 | 29 | 27 | 31 | 34 | (3) | (18) | 115 | 129 | (11) | |||||||||||||||||||||||||||||||
| Investment and other income: | |||||||||||||||||||||||||||||||||||||||||
| Corporate/bank-owned life insurance | 43 | 33 | 36 | 36 | 43 | N/M | N/M | 148 | 138 | N/M | |||||||||||||||||||||||||||||||
| Expense reimbursements from joint venture | 22 | 23 | 19 | 21 | 20 | N/M | N/M | 85 | 79 | N/M | |||||||||||||||||||||||||||||||
Seed capital gains (losses) (c) | 22 | 9 | 23 | (31) | 4 | N/M | N/M | 23 | 14 | N/M | |||||||||||||||||||||||||||||||
| Asset-related (losses) gains | (49) | 4 | 3 | 4 | 815 | N/M | N/M | (38) | 819 | N/M | |||||||||||||||||||||||||||||||
| Other (loss) income | (16) | (23) | 24 | (19) | (22) | N/M | N/M | (34) | (82) | N/M | |||||||||||||||||||||||||||||||
Total investment and other income (c) | 22 | 46 | 105 | 11 | 860 | N/M | N/M | 184 | 968 | N/M | |||||||||||||||||||||||||||||||
| Total fee revenue | 3,116 | 3,108 | 3,167 | 3,323 | 3,971 | — | (22) | 12,714 | 13,236 | (4) | |||||||||||||||||||||||||||||||
| Net securities gains (losses) | 6 | 9 | 9 | 9 | (25) | N/M | N/M | 33 | (18) | N/M | |||||||||||||||||||||||||||||||
| Total fee and other revenue | $ | 3,122 | $ | 3,117 | $ | 3,176 | $ | 3,332 | $ | 3,946 | — | % | (21) | % | $ | 12,747 | $ | 13,218 | (4) | % | |||||||||||||||||||||
(a) Asset servicing fees include the fees from the Clearance and Collateral Management business. | |||||||||||||||||||||||||||||||||||||||||
(b) Clearing services fees are almost entirely earned by our Pershing business. | |||||||||||||||||||||||||||||||||||||||||
(c) Excludes seed capital gains (losses) related to consolidated investment management funds, which are reflected in operations of consolidated investment management funds. | |||||||||||||||||||||||||||||||||||||||||
(d) On a constant currency basis (Non-GAAP), investment management and performance fees decreased 1% compared with 4Q19. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 16 for the reconciliation of this Non-GAAP measure. | |||||||||||||||||||||||||||||||||||||||||
N/M - Not meaningful. | |||||||||||||||||||||||||||||||||||||||||
6
| THE BANK OF NEW YORK MELLON CORPORATION | | |||||||||||||||||||||||||||||||||||||||||||
| AVERAGE BALANCES AND INTEREST RATES | ||||||||||||||||||||||||||||||||||||||||||||
| 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | ||||||||||||||||||||||||||||||||||||||||
| Average balance | Average rate | Average balance | Average rate | Average balance | Average rate | Average balance | Average rate | Average balance | Average rate | |||||||||||||||||||||||||||||||||||
| (dollars in millions; average rates are annualized) | ||||||||||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposits with the Federal Reserve and other central banks | $ | 112,274 | (0.04) | % | $ | 90,670 | (0.04) | % | $ | 94,229 | (0.03) | % | $ | 80,403 | 0.39 | % | $ | 61,627 | 0.60 | % | ||||||||||||||||||||||||
| Interest-bearing deposits with banks (primarily foreign banks) | 19,281 | 0.32 | 19,202 | 0.42 | 21,093 | 0.76 | 17,081 | 1.37 | 15,788 | 1.63 | ||||||||||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements (a) | 28,389 | 0.55 | 30,342 | 0.63 | 30,265 | 0.82 | 34,109 | 4.67 | 38,846 | 4.62 | ||||||||||||||||||||||||||||||||||
| Margin loans | 14,097 | 1.23 | 12,870 | 1.24 | 12,791 | 1.28 | 12,984 | 2.69 | 11,609 | 3.25 | ||||||||||||||||||||||||||||||||||
| Non-margin loans: | ||||||||||||||||||||||||||||||||||||||||||||
| Domestic offices | 30,855 | 2.08 | 30,053 | 2.12 | 31,185 | 2.21 | 31,720 | 3.02 | 29,690 | 3.36 | ||||||||||||||||||||||||||||||||||
| Foreign offices | 9,776 | 1.31 | 10,693 | 1.45 | 12,743 | 1.84 | 11,170 | 2.55 | 11,418 | 2.70 | ||||||||||||||||||||||||||||||||||
| Total non-margin loans | 40,631 | 1.90 | 40,746 | 1.94 | 43,928 | 2.10 | 42,890 | 2.89 | 41,108 | 3.18 | ||||||||||||||||||||||||||||||||||
| Securities: | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. government obligations | 27,783 | 1.46 | 30,073 | 1.36 | 27,901 | 1.52 | 23,175 | 1.87 | 18,444 | 2.08 | ||||||||||||||||||||||||||||||||||
| U.S. government agency obligations | 79,712 | 1.56 | 78,300 | 1.68 | 74,583 | 1.92 | 69,046 | 2.32 | 67,494 | 2.36 | ||||||||||||||||||||||||||||||||||
State and political subdivisions (b) | 2,104 | 2.01 | 1,500 | 2.51 | 1,025 | 2.98 | 1,033 | 3.06 | 1,134 | 3.03 | ||||||||||||||||||||||||||||||||||
Other securities (b) | 46,280 | 0.48 | 46,719 | 0.59 | 45,511 | 0.82 | 36,375 | 0.95 | 35,242 | 1.64 | ||||||||||||||||||||||||||||||||||
Total investment securities (b) | 155,879 | 1.23 | 156,592 | 1.30 | 149,020 | 1.51 | 129,629 | 1.86 | 122,314 | 2.11 | ||||||||||||||||||||||||||||||||||
Trading securities (b) | 8,123 | 0.95 | 7,212 | 0.91 | 6,236 | 1.13 | 6,840 | 2.36 | 6,695 | 2.41 | ||||||||||||||||||||||||||||||||||
Total securities (b) | 164,002 | 1.22 | 163,804 | 1.28 | 155,256 | 1.50 | 136,469 | 1.88 | 129,009 | 2.13 | ||||||||||||||||||||||||||||||||||
Total interest-earning assets (b) | $ | 378,674 | 0.82 | % | $ | 357,634 | 0.92 | % | $ | 357,562 | 1.06 | % | $ | 323,936 | 1.95 | % | $ | 297,987 | 2.30 | % | ||||||||||||||||||||||||
| Noninterest-earning assets | 58,814 | 57,231 | 57,797 | 61,342 | 56,354 | |||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 437,488 | $ | 414,865 | $ | 415,359 | $ | 385,278 | $ | 354,341 | ||||||||||||||||||||||||||||||||||
| Liabilities and equity | ||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||||||||||||||||||||||
| Domestic offices | $ | 119,012 | (0.02) | % | $ | 102,767 | (0.01) | % | $ | 102,135 | 0.06 | % | $ | 99,915 | 0.69 | % | $ | 87,162 | 0.98 | % | ||||||||||||||||||||||||
| Foreign offices | 112,306 | (0.10) | 108,733 | (0.09) | 108,508 | (0.12) | 97,717 | 0.29 | 95,262 | 0.49 | ||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 231,318 | (0.06) | 211,500 | (0.05) | 210,643 | (0.03) | 197,632 | 0.49 | 182,424 | 0.73 | ||||||||||||||||||||||||||||||||||
Federal funds purchased and securities sold under repurchase agreements (a) | 14,452 | 0.01 | 16,850 | 0.13 | 14,209 | 0.03 | 13,919 | 7.96 | 12,668 | 9.11 | ||||||||||||||||||||||||||||||||||
| Trading liabilities | 2,408 | 0.72 | 2,692 | 0.30 | 1,974 | 0.39 | 1,626 | 1.61 | 1,504 | 2.25 | ||||||||||||||||||||||||||||||||||
| Other borrowed funds | 338 | 1.71 | 873 | 1.40 | 2,272 | 1.30 | 719 | 2.27 | 709 | 2.83 | ||||||||||||||||||||||||||||||||||
| Commercial paper | 275 | 0.10 | 2,274 | 0.09 | 191 | 1.02 | 1,581 | 1.56 | 1,792 | 1.66 | ||||||||||||||||||||||||||||||||||
| Payables to customers and broker-dealers | 17,521 | (0.01) | 18,501 | (0.01) | 18,742 | (0.01) | 16,386 | 0.73 | 15,178 | 1.07 | ||||||||||||||||||||||||||||||||||
| Long-term debt | 25,704 | 1.88 | 26,511 | 2.01 | 28,122 | 2.42 | 27,231 | 2.83 | 28,117 | 3.09 | ||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 292,016 | 0.13 | % | $ | 279,201 | 0.16 | % | $ | 276,153 | 0.24 | % | $ | 259,094 | 1.17 | % | $ | 242,392 | 1.48 | % | ||||||||||||||||||||||||
| Total noninterest-bearing deposits | 75,840 | 67,610 | 72,411 | 60,577 | 49,632 | |||||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 23,783 | 23,393 | 24,121 | 24,229 | 20,681 | |||||||||||||||||||||||||||||||||||||||
| Total The Bank of New York Mellon Corporation shareholders’ equity | 45,539 | 44,456 | 42,486 | 41,206 | 41,384 | |||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests | 310 | 205 | 188 | 172 | 252 | |||||||||||||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 437,488 | $ | 414,865 | $ | 415,359 | $ | 385,278 | $ | 354,341 | ||||||||||||||||||||||||||||||||||
| Net interest margin | 0.72 | % | 0.79 | % | 0.88 | % | 1.01 | % | 1.09 | % | ||||||||||||||||||||||||||||||||||
Net interest margin (FTE) – Non-GAAP (c) | 0.72 | % | 0.79 | % | 0.88 | % | 1.01 | % | 1.09 | % | ||||||||||||||||||||||||||||||||||
(a) Includes the average impact of offsetting under enforceable netting agreements of approximately $41 billion for 4Q20, $43 billion for 3Q20, $67 billion for 2Q20, $80 billion for 1Q20 and $60 billion for 4Q19. On a Non-GAAP basis, excluding the impact of offsetting, the yield on federal funds sold and securities purchased under resale agreements would have been 0.23% for 4Q20, 0.26% for 3Q20 and 2Q20, 1.39% for 1Q20 and 1.82% for 4Q19. On a Non-GAAP basis, excluding the impact of offsetting, the rate on federal funds purchased and securities sold under resale agreements would have been 0.00% for 4Q20, 0.04% for 3Q20, 0.00% for 2Q20, 1.18% for 1Q20 and 1.59% for 4Q19. We believe providing the rates excluding the impact of netting is useful to investors as it is more reflective of the actual rates earned and paid. | ||||||||||||||||||||||||||||||||||||||||||||
(b) Average rates were calculated on an FTE basis, at tax rates of approximately 21%. | ||||||||||||||||||||||||||||||||||||||||||||
(c) See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 16 for the reconciliation of this Non-GAAP measure. | ||||||||||||||||||||||||||||||||||||||||||||
7
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||
| CAPITAL AND LIQUIDITY | |||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| (dollars in millions) | Dec. 31 | Sept. 30 | June 30 | March 31 | Dec. 31 | ||||||||||||||||||||||||
Consolidated regulatory capital ratios (a) | |||||||||||||||||||||||||||||
| Standardized Approach: | |||||||||||||||||||||||||||||
| CET1 capital | $ | 21,875 | $ | 21,171 | $ | 20,035 | $ | 18,465 | $ | 18,540 | |||||||||||||||||||
| Tier 1 capital | 26,310 | 25,611 | 24,478 | 21,933 | 21,996 | ||||||||||||||||||||||||
| Total capital | 28,037 | 27,327 | 26,183 | 23,494 | 23,449 | ||||||||||||||||||||||||
| Risk-weighted assets | 163,799 | 156,698 | 157,290 | 163,006 | 148,695 | ||||||||||||||||||||||||
| CET1 ratio | 13.4 | % | 13.5 | % | 12.7 | % | 11.3 | % | 12.5 | % | |||||||||||||||||||
| Tier 1 capital ratio | 16.1 | 16.3 | 15.6 | 13.5 | 14.8 | ||||||||||||||||||||||||
| Total capital ratio | 17.1 | 17.4 | 16.6 | 14.4 | 15.8 | ||||||||||||||||||||||||
| Advanced Approaches: | |||||||||||||||||||||||||||||
| CET1 capital | $ | 21,875 | $ | 21,171 | $ | 20,035 | $ | 18,465 | $ | 18,540 | |||||||||||||||||||
| Tier 1 capital | 26,310 | 25,611 | 24,478 | 21,933 | 21,996 | ||||||||||||||||||||||||
| Total capital | 27,793 | 27,081 | 25,937 | 23,281 | 23,233 | ||||||||||||||||||||||||
| Risk-weighted assets | 166,387 | 163,108 | 159,340 | 162,561 | 160,898 | ||||||||||||||||||||||||
| CET1 ratio | 13.1 | % | 13.0 | % | 12.6 | % | 11.4 | % | 11.5 | % | |||||||||||||||||||
| Tier 1 capital ratio | 15.8 | 15.7 | 15.4 | 13.5 | 13.7 | ||||||||||||||||||||||||
| Total capital ratio | 16.7 | 16.6 | 16.3 | 14.3 | 14.4 | ||||||||||||||||||||||||
| Tier 1 leverage ratio: | |||||||||||||||||||||||||||||
| Average assets for Tier 1 leverage ratio | $ | 417,982 | $ | 394,945 | $ | 394,394 | $ | 366,058 | $ | 334,869 | |||||||||||||||||||
| Tier 1 leverage ratio | 6.3 | % | 6.5 | % | 6.2 | % | 6.0 | % | 6.6 | % | |||||||||||||||||||
| SLR: | |||||||||||||||||||||||||||||
| Leverage exposure | $ | 304,521 | (b) | $ | 300,265 | (b) | $ | 297,300 | (b) | $ | 392,807 | $ | 362,452 | ||||||||||||||||
| SLR | 8.6 | % | (b) | 8.5 | % | (b) | 8.2 | % | (b) | 5.6 | % | 6.1 | % | ||||||||||||||||
| Average liquidity coverage ratio | 110 | % | 111 | % | 112 | % | 115 | % | 120 | % | |||||||||||||||||||
(a) Regulatory capital ratios for Dec. 31, 2020 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for Dec. 31, 2020, Sept. 30, 2020, June 30, 2020 and Dec. 31, 2019, was the Advanced Approaches, and for March 31, 2020 was the Standardized Approach for the CET1 and Tier 1 capital ratios and the Advanced Approaches for the Total capital ratio. | |||||||||||||||||||||||||||||
(b) Reflects the application of a rule effective April 1, 2020 to exclude certain central bank placements. Also effective on April 1, 2020 was the temporary exclusion of U.S. Treasury securities from the leverage exposure used in the SLR calculation which increased our consolidated SLR by 72 basis points at Dec. 31, 2020, 78 basis points at Sept. 30, 2020 and 40 basis points at June 30, 2020. | |||||||||||||||||||||||||||||
8
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||||||||||||||
| INVESTMENT SERVICES BUSINESS | |||||||||||||||||||||||||||||||||||||||||
| 4Q20 vs. | FY20 vs. | ||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q20 | 4Q19 | FY20 | FY19 | FY19 | |||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||||||||
| Investment services fees: | |||||||||||||||||||||||||||||||||||||||||
Asset servicing fees (ex. securities lending revenue) (a) | $ | 1,094 | $ | 1,119 | $ | 1,113 | $ | 1,101 | $ | 1,098 | (2) | % | — | % | $ | 4,427 | $ | 4,350 | 2 | % | |||||||||||||||||||||
| Securities lending revenue | 36 | 37 | 51 | 46 | 40 | (3) | (10) | 170 | 163 | 4 | |||||||||||||||||||||||||||||||
Clearing services fees (b) | 418 | 397 | 431 | 470 | 421 | 5 | (1) | 1,716 | 1,649 | 4 | |||||||||||||||||||||||||||||||
| Issuer services fees | 257 | 295 | 277 | 263 | 264 | (13) | (3) | 1,092 | 1,130 | (3) | |||||||||||||||||||||||||||||||
| Treasury services fees | 156 | 152 | 144 | 149 | 147 | 3 | 6 | 601 | 558 | 8 | |||||||||||||||||||||||||||||||
| Total investment services fees | 1,961 | 2,000 | 2,016 | 2,029 | 1,970 | (2) | — | 8,006 | 7,850 | 2 | |||||||||||||||||||||||||||||||
| Foreign exchange and other trading revenue | 180 | 146 | 178 | 261 | 151 | 23 | 19 | 765 | 621 | 23 | |||||||||||||||||||||||||||||||
Other (c) | 94 | 100 | 145 | 146 | 115 | (6) | (18) | 485 | 455 | 7 | |||||||||||||||||||||||||||||||
| Total fee and other revenue | 2,235 | 2,246 | 2,339 | 2,436 | 2,236 | — | — | 9,256 | 8,926 | 4 | |||||||||||||||||||||||||||||||
| Net interest revenue | 670 | 681 | 768 | 806 | 778 | (2) | (14) | 2,925 | 3,126 | (6) | |||||||||||||||||||||||||||||||
| Total revenue | 2,905 | 2,927 | 3,107 | 3,242 | 3,014 | (1) | (4) | 12,181 | 12,052 | 1 | |||||||||||||||||||||||||||||||
| Provision for credit losses | 31 | (10) | 145 | 149 | (5) | N/M | N/M | 315 | (16) | N/M | |||||||||||||||||||||||||||||||
| Noninterest expense (ex. amortization of intangible assets) | 2,157 | 2,002 | 1,971 | 1,969 | 2,160 | 8 | — | 8,099 | 8,016 | 1 | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | 17 | 18 | 18 | 18 | 19 | (6) | (11) | 71 | 80 | (11) | |||||||||||||||||||||||||||||||
| Total noninterest expense | 2,174 | 2,020 | 1,989 | 1,987 | 2,179 | 8 | — | 8,170 | 8,096 | 1 | |||||||||||||||||||||||||||||||
| Income before taxes | $ | 700 | $ | 917 | $ | 973 | $ | 1,106 | $ | 840 | (24) | % | (17) | % | $ | 3,696 | $ | 3,972 | (7) | % | |||||||||||||||||||||
| Pre-tax operating margin | 24 | % | 31 | % | 31 | % | 34 | % | 28 | % | 30 | % | 33 | % | |||||||||||||||||||||||||||
| Total revenue by line of business: | |||||||||||||||||||||||||||||||||||||||||
| Asset Servicing | $ | 1,357 | $ | 1,354 | $ | 1,463 | $ | 1,531 | $ | 1,411 | — | % | (4) | % | $ | 5,705 | $ | 5,634 | 1 | % | |||||||||||||||||||||
| Pershing | 563 | 538 | 578 | 653 | 579 | 5 | (3) | 2,332 | 2,287 | 2 | |||||||||||||||||||||||||||||||
| Issuer Services | 385 | 435 | 431 | 419 | 415 | (11) | (7) | 1,670 | 1,723 | (3) | |||||||||||||||||||||||||||||||
| Treasury Services | 325 | 323 | 340 | 339 | 329 | 1 | (1) | 1,327 | 1,275 | 4 | |||||||||||||||||||||||||||||||
| Clearance and Collateral Management | 275 | 277 | 295 | 300 | 280 | (1) | (2) | 1,147 | 1,133 | 1 | |||||||||||||||||||||||||||||||
| Total revenue by line of business | $ | 2,905 | $ | 2,927 | $ | 3,107 | $ | 3,242 | $ | 3,014 | (1) | % | (4) | % | $ | 12,181 | $ | 12,052 | 1 | % | |||||||||||||||||||||
(a) Asset servicing fees include the fees from the Clearance and Collateral Management business. | |||||||||||||||||||||||||||||||||||||||||
(b) Clearing services fees are almost entirely earned by our Pershing business. | |||||||||||||||||||||||||||||||||||||||||
(c) Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue, securities gains and losses and investment and other income. | |||||||||||||||||||||||||||||||||||||||||
N/M - Not meaningful. | |||||||||||||||||||||||||||||||||||||||||
9
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||||||||||||||
| INVESTMENT SERVICES BUSINESS | |||||||||||||||||||||||||||||||||||||||||
| 4Q20 vs. | FY20 vs. | ||||||||||||||||||||||||||||||||||||||||
| (dollars in millions, unless otherwise noted) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q20 | 4Q19 | FY20 | FY19 | FY19 | |||||||||||||||||||||||||||||||
| Average loans | $ | 41,437 | $ | 40,308 | $ | 43,113 | $ | 41,789 | $ | 38,721 | 3 | % | 7 | % | $ | 41,657 | $ | 37,344 | 12 | % | |||||||||||||||||||||
| Average assets | $ | 358,270 | $ | 329,324 | $ | 335,288 | $ | 304,089 | $ | 278,098 | 9 | % | 29 | % | $ | 331,809 | $ | 267,278 | 24 | % | |||||||||||||||||||||
| Average deposits | $ | 292,631 | $ | 263,621 | $ | 268,467 | $ | 242,187 | $ | 215,388 | 11 | % | 36 | % | $ | 266,789 | $ | 204,979 | 30 | % | |||||||||||||||||||||
AUC/A at period end (in trillions) (a)(b) | $ | 41.1 | $ | 38.6 | $ | 37.3 | $ | 35.2 | $ | 37.1 | 6 | % | 11 | % | $ | 41.1 | $ | 37.1 | 11 | % | |||||||||||||||||||||
Market value of securities on loan at period end (in billions) (c) | $ | 435 | $ | 378 | $ | 384 | $ | 389 | $ | 378 | 15 | % | 15 | % | $ | 435 | $ | 378 | 15 | % | |||||||||||||||||||||
| Pershing | |||||||||||||||||||||||||||||||||||||||||
Net new assets (U.S. platform) (in billions) (d) | $ | 28 | $ | 12 | $ | 11 | $ | 31 | $ | 33 | N/M | N/M | $ | 82 | $ | 73 | N/M | ||||||||||||||||||||||||
Average active clearing accounts (U.S. platform) (in thousands) | 6,635 | 6,556 | 6,507 | 6,437 | 6,340 | 1 | % | 5 | % | 6,534 | 6,262 | 4 | % | ||||||||||||||||||||||||||||
Average long-term mutual fund assets (U.S. platform) | $ | 630,086 | $ | 597,312 | $ | 547,579 | $ | 549,206 | $ | 573,475 | 5 | % | 10 | % | $ | 581,046 | $ | 540,247 | 8 | % | |||||||||||||||||||||
Average investor margin loans (U.S. platform) | $ | 10,097 | $ | 9,350 | $ | 9,235 | $ | 9,419 | $ | 9,420 | 8 | % | 7 | % | $ | 9,526 | $ | 9,541 | — | % | |||||||||||||||||||||
| Clearance and Collateral Management | |||||||||||||||||||||||||||||||||||||||||
Average tri-party collateral management balances (in billions) | $ | 3,555 | $ | 3,417 | $ | 3,573 | $ | 3,724 | $ | 3,562 | 4 | % | — | % | $ | 3,566 | $ | 3,446 | 3 | % | |||||||||||||||||||||
(a) Dec. 31, 2020 information is preliminary. | |||||||||||||||||||||||||||||||||||||||||
(b) Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon of $1.5 trillion at Dec. 31, 2020, $1.4 trillion at Sept. 30, 2020, $1.3 trillion at June 30, 2020, $1.2 trillion at March 31, 2020 and $1.5 trillion at Dec. 31, 2019. | |||||||||||||||||||||||||||||||||||||||||
(c) Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $68 billion at Dec. 31, 2020, $62 billion at Sept. 30, 2020 and June 30, 2020, $59 billion at March 31, 2020 and $60 billion at Dec. 31, 2019. | |||||||||||||||||||||||||||||||||||||||||
(d) Net new assets represent net flows of assets excluding dividends and interest (e.g., net cash deposits and net securities transfers) in customer accounts in Pershing LLC, a U.S. broker-dealer. | |||||||||||||||||||||||||||||||||||||||||
N/M - Not meaningful. | |||||||||||||||||||||||||||||||||||||||||
10
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||||||||||||||
| INVESTMENT AND WEALTH MANAGEMENT BUSINESS | |||||||||||||||||||||||||||||||||||||||||
| 4Q20 vs. | FY20 vs. | ||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q20 | 4Q19 | FY20 | FY19 | FY19 | |||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||||||||
Investment management fees (a) | $ | 839 | $ | 828 | $ | 782 | $ | 812 | $ | 836 | 1 | % | — | % | $ | 3,261 | $ | 3,307 | (1) | % | |||||||||||||||||||||
| Performance fees | 45 | 7 | 5 | 50 | 48 | N/M | N/M | 107 | 83 | 29 | |||||||||||||||||||||||||||||||
Investment management and performance fees (b) | 884 | 835 | 787 | 862 | 884 | 6 | — | 3,368 | 3,390 | (1) | |||||||||||||||||||||||||||||||
| Distribution and servicing | 29 | 31 | 34 | 43 | 44 | (6) | (34) | 137 | 178 | (23) | |||||||||||||||||||||||||||||||
Other (a) | 27 | 5 | 17 | (59) | (4) | N/M | N/M | (10) | (83) | N/M | |||||||||||||||||||||||||||||||
Total fee and other revenue (a) | 940 | 871 | 838 | 846 | 924 | 8 | 2 | 3,495 | 3,485 | — | |||||||||||||||||||||||||||||||
| Net interest revenue | 50 | 47 | 48 | 52 | 47 | 6 | 6 | 197 | 222 | (11) | |||||||||||||||||||||||||||||||
| Total revenue | 990 | 918 | 886 | 898 | 971 | 8 | 2 | 3,692 | 3,707 | — | |||||||||||||||||||||||||||||||
| Provision for credit losses | (8) | 12 | 7 | 9 | — | N/M | N/M | 20 | (1) | N/M | |||||||||||||||||||||||||||||||
| Noninterest expense (ex. amortization of intangible assets) | 678 | 653 | 650 | 687 | 722 | 4 | (6) | 2,668 | 2,610 | 2 | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | 9 | 8 | 8 | 8 | 9 | 13 | — | 33 | 37 | (11) | |||||||||||||||||||||||||||||||
| Total noninterest expense | 687 | 661 | 658 | 695 | 731 | 4 | (6) | 2,701 | 2,647 | 2 | |||||||||||||||||||||||||||||||
| Income before taxes | $ | 311 | $ | 245 | $ | 221 | $ | 194 | $ | 240 | 27 | % | 30 | % | $ | 971 | $ | 1,061 | (8) | % | |||||||||||||||||||||
| Pre-tax operating margin | 32 | % | 27 | % | 25 | % | 22 | % | 25 | % | 26 | % | 29 | % | |||||||||||||||||||||||||||
Adjusted pre-tax operating margin – Non-GAAP (c) | 34 | % | 29 | % | 28 | % | 24 | % | 27 | % | 29 | % | 32 | % | |||||||||||||||||||||||||||
| Total revenue by line of business: | |||||||||||||||||||||||||||||||||||||||||
| Investment Management | $ | 714 | $ | 641 | $ | 621 | $ | 620 | $ | 692 | 11 | % | 3 | % | $ | 2,596 | $ | 2,562 | 1 | % | |||||||||||||||||||||
| Wealth Management | 276 | 277 | 265 | 278 | 279 | — | (1) | 1,096 | 1,145 | (4) | |||||||||||||||||||||||||||||||
| Total revenue by line of business | $ | 990 | $ | 918 | $ | 886 | $ | 898 | $ | 971 | 8 | % | 2 | % | $ | 3,692 | $ | 3,707 | — | % | |||||||||||||||||||||
| Average loans | $ | 11,497 | $ | 11,503 | $ | 11,791 | $ | 12,124 | $ | 12,022 | — | % | (4) | % | $ | 11,728 | $ | 12,143 | (3) | % | |||||||||||||||||||||
| Average assets | $ | 30,804 | $ | 30,160 | $ | 30,327 | $ | 30,543 | $ | 28,481 | 2 | % | 8 | % | $ | 30,459 | $ | 29,479 | 3 | % | |||||||||||||||||||||
| Average deposits | $ | 18,144 | $ | 17,570 | $ | 17,491 | $ | 16,144 | $ | 15,195 | 3 | % | 19 | % | $ | 17,340 | $ | 14,923 | 16 | % | |||||||||||||||||||||
(a) Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. Additionally, other revenue includes asset servicing fees, treasury services fees, foreign exchange and other trading revenue and investment and other income. | |||||||||||||||||||||||||||||||||||||||||
(b) On a constant currency basis (Non-GAAP), investment management and performance fees decreased 1% compared with 4Q19. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 16 for the reconciliation of this Non-GAAP measure. | |||||||||||||||||||||||||||||||||||||||||
(c) Net of distribution and servicing expense. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 16 for the reconciliation of this Non-GAAP measure. | |||||||||||||||||||||||||||||||||||||||||
N/M - Not meaningful. | |||||||||||||||||||||||||||||||||||||||||
11
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||||||||||||||
| AUM BY PRODUCT, AUM FLOWS AND WEALTH MANAGEMENT CLIENT ASSETS | |||||||||||||||||||||||||||||||||||||||||
| 4Q20 vs. | FY20 vs. | ||||||||||||||||||||||||||||||||||||||||
| (dollars in billions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | 3Q20 | 4Q19 | FY20 | FY19 | FY19 | |||||||||||||||||||||||||||||||
AUM by product type (a)(b) | |||||||||||||||||||||||||||||||||||||||||
| Equity | $ | 170 | $ | 149 | $ | 141 | $ | 120 | $ | 154 | 14 | % | 10 | % | |||||||||||||||||||||||||||
| Fixed income | 258 | 241 | 224 | 211 | 224 | 7 | 15 | ||||||||||||||||||||||||||||||||||
| Index | 393 | 350 | 333 | 274 | 339 | 12 | 16 | ||||||||||||||||||||||||||||||||||
| Liability-driven investments | 843 | 788 | 752 | 705 | 728 | 7 | 16 | ||||||||||||||||||||||||||||||||||
| Multi-asset and alternative investments | 208 | 193 | 185 | 171 | 192 | 8 | 8 | ||||||||||||||||||||||||||||||||||
| Cash | 325 | 320 | 326 | 315 | 273 | 2 | 19 | ||||||||||||||||||||||||||||||||||
| Total AUM by product type | $ | 2,197 | $ | 2,041 | $ | 1,961 | $ | 1,796 | $ | 1,910 | 8 | % | 15 | % | |||||||||||||||||||||||||||
Changes in AUM (a)(b) | |||||||||||||||||||||||||||||||||||||||||
| Beginning balance of AUM | $ | 2,041 | $ | 1,961 | $ | 1,796 | $ | 1,910 | $ | 1,881 | $ | 1,910 | $ | 1,722 | |||||||||||||||||||||||||||
| Net inflows (outflows): | |||||||||||||||||||||||||||||||||||||||||
| Long-term strategies: | |||||||||||||||||||||||||||||||||||||||||
| Equity | (2) | (4) | (2) | (2) | (6) | (10) | (16) | ||||||||||||||||||||||||||||||||||
| Fixed income | 5 | 1 | 4 | — | 5 | 10 | 6 | ||||||||||||||||||||||||||||||||||
| Liability-driven investments | 15 | 14 | (2) | (5) | (3) | 22 | (1) | ||||||||||||||||||||||||||||||||||
| Multi-asset and alternative investments | — | (3) | — | (1) | 3 | (4) | (1) | ||||||||||||||||||||||||||||||||||
| Total long-term active strategies inflows (outflows) | 18 | 8 | — | (8) | (1) | 18 | (12) | ||||||||||||||||||||||||||||||||||
| Index | (3) | (3) | 9 | 3 | (5) | 6 | (32) | ||||||||||||||||||||||||||||||||||
| Total long-term strategies inflows (outflows) | 15 | 5 | 9 | (5) | (6) | 24 | (44) | ||||||||||||||||||||||||||||||||||
| Short-term strategies: | |||||||||||||||||||||||||||||||||||||||||
| Cash | 5 | (10) | 11 | 43 | (7) | 49 | 8 | ||||||||||||||||||||||||||||||||||
| Total net inflows (outflows) | 20 | (5) | 20 | 38 | (13) | 73 | (36) | ||||||||||||||||||||||||||||||||||
| Net market impact | 79 | 41 | 143 | (91) | (20) | 172 | 191 | ||||||||||||||||||||||||||||||||||
| Net currency impact | 57 | 44 | 2 | (61) | 62 | 42 | 33 | ||||||||||||||||||||||||||||||||||
| Ending balance of AUM | $ | 2,197 | $ | 2,041 | $ | 1,961 | $ | 1,796 | $ | 1,910 | 8 | % | 15 | % | $ | 2,197 | $ | 1,910 | 15 | % | |||||||||||||||||||||
Wealth Management client assets (a)(c) | $ | 286 | $ | 265 | $ | 254 | $ | 236 | $ | 266 | 8 | % | 8 | % | |||||||||||||||||||||||||||
(a) Dec. 31, 2020 information is preliminary. | |||||||||||||||||||||||||||||||||||||||||
(b) Excludes securities lending cash management assets and assets managed in the Investment Services business. | |||||||||||||||||||||||||||||||||||||||||
(c) Includes AUM and AUC/A in the Wealth Management business. | |||||||||||||||||||||||||||||||||||||||||
12
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||
| OTHER SEGMENT | |||||||||||||||||||||||||||||
| (in millions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | FY20 | FY19 | ||||||||||||||||||||||
| Fee (loss) revenue | $ | (23) | $ | 11 | $ | 29 | $ | 21 | $ | 817 | (a) | $ | 38 | $ | 853 | ||||||||||||||
| Net securities gains (losses) | 6 | 9 | 9 | 9 | (23) | 33 | (16) | ||||||||||||||||||||||
| Total fee and other (loss) revenue | (17) | 20 | 38 | 30 | 794 | 71 | 837 | ||||||||||||||||||||||
| Net interest (expense) | (40) | (25) | (36) | (44) | (10) | (145) | (160) | ||||||||||||||||||||||
| Total (loss) revenue | (57) | (5) | 2 | (14) | 784 | (74) | 677 | ||||||||||||||||||||||
| Provision for credit losses | (8) | 7 | (9) | 11 | (3) | 1 | (8) | ||||||||||||||||||||||
| Noninterest expense | 64 | — | 39 | 30 | 54 | 133 | 157 | ||||||||||||||||||||||
| (Loss) income before taxes | $ | (113) | $ | (12) | $ | (28) | $ | (55) | $ | 733 | $ | (208) | $ | 528 | |||||||||||||||
| Average loans and leases | $ | 1,794 | $ | 1,805 | $ | 1,815 | $ | 1,961 | $ | 1,974 | $ | 1,843 | $ | 1,836 | |||||||||||||||
| Average assets | $ | 48,414 | $ | 55,381 | $ | 49,744 | $ | 50,646 | $ | 47,762 | $ | 51,050 | $ | 49,198 | |||||||||||||||
(a) Includes a gain on sale of an equity investment. | |||||||||||||||||||||||||||||
13
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| SECURITIES PORTFOLIO | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | Sept. 30, 2020 | 4Q20 change in unrealized gain (loss) | Dec. 31, 2020 | Fair value as a % of amortized cost (a) | Unrealized gain (loss) | % Floating rate | Ratings (c) | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortized cost | Fair value | AAA/ AA- | A+/ A- | BBB+/ BBB- | BB+ and lower | A1+/ A2 & SP-1 | Not rated | ||||||||||||||||||||||||||||||||||||||||||||||
| Fair value | (b) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency RMBS | $ | 62,922 | $ | (108) | $ | 60,274 | $ | 61,740 | 102 | % | $ | 1,466 | 15 | % | 100 | % | — | % | — | % | — | % | — | % | — | % | |||||||||||||||||||||||||||
| U.S. Treasury | 26,964 | (47) | 26,495 | 26,958 | 102 | 463 | 52 | 100 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Sovereign debt/sovereign guaranteed | 15,086 | 22 | 13,252 | 13,452 | 102 | 200 | 11 | 65 | 6 | 28 | 1 | — | — | ||||||||||||||||||||||||||||||||||||||||
| Agency commercial MBS | 11,777 | (16) | 11,264 | 11,685 | 104 | 421 | 31 | 100 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Supranational | 7,176 | 12 | 7,141 | 7,208 | 101 | 67 | 51 | 100 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Foreign covered bonds | 5,841 | 3 | 6,658 | 6,725 | 101 | 67 | 32 | 100 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
U.S. government agencies | 5,646 | 1 | 6,496 | 6,577 | 101 | 81 | 26 | 100 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| CLOs | 4,657 | 47 | 4,706 | 4,703 | 100 | (3) | 100 | 99 | — | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||
Foreign government agencies | 3,967 | 3 | 4,086 | 4,132 | 101 | 46 | 23 | 95 | 5 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Other asset-backed securities | 2,930 | 2 | 3,135 | 3,164 | 101 | 29 | 21 | 100 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Non-agency commercial MBS | 2,684 | 9 | 2,864 | 2,992 | 104 | 128 | 22 | 99 | 1 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Non-agency RMBS (d) | 2,013 | 2 | 2,236 | 2,387 | 107 | 151 | 54 | 68 | 4 | 1 | 16 | — | 11 | ||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | 1,705 | 10 | 2,285 | 2,324 | 102 | 39 | 1 | 69 | 9 | — | — | 21 | 1 | ||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | 1,030 | 7 | 1,945 | 1,994 | 102 | 49 | — | 17 | 68 | 15 | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Commercial paper and certificates of deposits (e)(f) | 652 | (2) | 249 | 249 | 100 | — | 100 | 21 | — | — | — | 79 | — | ||||||||||||||||||||||||||||||||||||||||
| Other | 1 | — | 1 | 1 | 100 | — | — | — | — | — | — | — | 100 | ||||||||||||||||||||||||||||||||||||||||
Total securities | $ | 155,051 | (g) | $ | (55) | $ | 153,087 | $ | 156,291 | (g)(h) | 102 | % | $ | 3,204 | (g)(i) | 28 | % | 95 | % | 2 | % | 3 | % | — | % | — | % | — | % | ||||||||||||||||||||||||
| (a) Amortized cost reflects historical impairments. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (b) Includes the impact of hedges. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(c) Represents ratings by S&P, or the equivalent. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(d) Includes RMBS that were included in the former Grantor Trust of $512 million at Sept. 30, 2020 and $487 million at Dec. 31, 2020. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(e) Includes amounts purchased from affiliated money market funds of $357 million at Sept. 30, 2020 and $249 million at Dec. 31, 2020. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(f) Includes amounts funded by borrowings from the Federal Reserve Bank under its Money Market Mutual Fund Liquidity Facility program of $295 million at Sept. 30, 2020 and $- million at Dec. 31, 2020. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(g) Includes net unrealized losses on derivatives hedging securities available-for-sale (including terminated hedges) of $1,650 million at Sept. 30, 2020 and $1,428 million at Dec. 31, 2020. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(h) The fair value of available-for-sale securities totaled $107,067 million at Dec. 31, 2020, net of hedges, or 69% of the fair value of the securities portfolio, net of hedges. The fair value of the held-to-maturity securities totaled $49,224 million at Dec. 31, 2020, or 31% of the fair value of the securities portfolio, net of hedges. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (i) Includes unrealized gains of $1,926 million at Dec. 31, 2020 related to available-for-sale securities, net of hedges, and $1,278 million related to held-to-maturity securities. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note: The amortizable purchase premium (net of discount) relating to securities was $2,153 million at Dec. 31, 2020 and the amortization of that net purchase premium was $173 million in 4Q20. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
14
| THE BANK OF NEW YORK MELLON CORPORATION | | |||||||||||||||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES AND NONPERFORMING ASSETS | ||||||||||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||||||||
| (dollars in millions) | Dec. 31 | Sept. 30 | June 30 | March 31 | Dec. 31 | |||||||||||||||||||||||||||
| Allowance for credit losses - beginning of period: | ||||||||||||||||||||||||||||||||
| Allowance for loan losses | $ | 325 | $ | 302 | $ | 140 | $ | 122 | $ | 127 | ||||||||||||||||||||||
| Allowance for lending-related commitments | 135 | 152 | 148 | 94 | 97 | |||||||||||||||||||||||||||
| Allowance for other financial instruments | 26 | (a) | 21 | (a) | 41 | (a) | N/A | N/A | ||||||||||||||||||||||||
| Allowance for credit losses - beginning of period | $ | 486 | $ | 475 | $ | 329 | $ | 216 | $ | 224 | ||||||||||||||||||||||
Impact of adopting ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, effective Jan. 1, 2020 | N/A | N/A | N/A | (55) | (b) | N/A | ||||||||||||||||||||||||||
| Net (charge-offs) recoveries: | ||||||||||||||||||||||||||||||||
| Charge-offs | (1) | — | — | (1) | (1) | |||||||||||||||||||||||||||
| Recoveries | 1 | 2 | 3 | — | 1 | |||||||||||||||||||||||||||
| Total net recoveries (charge-offs) | — | 2 | 3 | (1) | — | |||||||||||||||||||||||||||
| Provision for credit losses | 15 | (b) | 9 | (b) | 143 | (b) | 169 | (b) | (8) | |||||||||||||||||||||||
| Allowance for credit losses - end of period | $ | 501 | $ | 486 | $ | 475 | $ | 329 | $ | 216 | ||||||||||||||||||||||
| Allowance for credit losses - end of period: | ||||||||||||||||||||||||||||||||
| Allowance for loan losses | $ | 358 | $ | 325 | $ | 302 | $ | 140 | $ | 122 | ||||||||||||||||||||||
| Allowance for lending-related commitments | 121 | 135 | 152 | 148 | 94 | |||||||||||||||||||||||||||
| Allowance for other financial instruments | 22 | (a) | 26 | (a) | 21 | (a) | 41 | (a) | N/A | |||||||||||||||||||||||
| Allowance for credit losses - end of period | $ | 501 | $ | 486 | $ | 475 | $ | 329 | $ | 216 | ||||||||||||||||||||||
| Allowance for loan losses as a percentage of total loans | 0.63 | % | 0.59 | % | 0.55 | % | 0.22 | % | 0.22 | % | ||||||||||||||||||||||
| Nonperforming assets | $ | 89 | $ | 84 | $ | 88 | $ | 88 | $ | 89 | ||||||||||||||||||||||
(a) Includes allowance for credit losses on federal funds sold and securities purchased under resale agreements, available-for-sale securities, accounts receivable, cash and due from banks and interest-bearing deposits with banks. | ||||||||||||||||||||||||||||||||
(b) Includes all instruments within the scope of ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. | ||||||||||||||||||||||||||||||||
N/A - Not applicable. | ||||||||||||||||||||||||||||||||
15
| THE BANK OF NEW YORK MELLON CORPORATION | | |||||||||||||||||||||||||
| SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||||||||
| BNY Mellon has included in this Financial Supplement certain Non-GAAP financial measures on a tangible basis as a supplement to GAAP information, which exclude goodwill and intangible assets, net of deferred tax liabilities. We believe that the return on tangible common equity is additional useful information for investors because it presents a measure of those assets that can generate income, and the tangible book value per common share is additional useful information because it presents the level of tangible assets in relation to shares of common stock outstanding. | ||||||||||||||||||||||||||
| Net interest revenue, on a fully taxable equivalent ("FTE") basis – Non-GAAP and net interest margin (FTE) – Non-GAAP and other FTE measures include the tax equivalent adjustments on tax-exempt income which allows for the comparison of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income. | ||||||||||||||||||||||||||
| BNY Mellon has also included the adjusted pre-tax operating margin – Non-GAAP, which is the pre-tax operating margin for the Investment and Wealth Management business net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds. We believe that this measure is useful when evaluating the performance of the Investment and Wealth Management business relative to industry competitors. | ||||||||||||||||||||||||||
| The presentation of the growth rates of investment management and performance fees on a constant currency basis permits investors to assess the significance of changes in foreign currency exchange rates. Growth rates on a constant currency basis were determined by applying the current period foreign currency exchange rates to the prior period revenue. We believe that this presentation, as a supplement to GAAP information, gives investors a clearer picture of the related revenue results without the variability caused by fluctuations in foreign currency exchange rates. | ||||||||||||||||||||||||||
| Notes: | ||||||||||||||||||||||||||
| Certain immaterial reclassifications/revisions have been made to prior periods to place them on a basis comparable with the current period's presentation. | ||||||||||||||||||||||||||
| In businesses where average deposits are greater than average loans, average assets include an allocation of investment securities equal to the difference. | ||||||||||||||||||||||||||
| Return on common and tangible common equity ratios are annualized. | ||||||||||||||||||||||||||
| Return on common equity and tangible common equity reconciliation | ||||||||||||||||||||||||||
| (dollars in millions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | FY20 | FY19 | |||||||||||||||||||
Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP | $ | 702 | $ | 876 | $ | 901 | $ | 944 | $ | 1,391 | $ | 3,423 | $ | 4,272 | ||||||||||||
| Add: Amortization of intangible assets | 26 | 26 | 26 | 26 | 28 | 104 | 117 | |||||||||||||||||||
| Less: Tax impact of amortization of intangible assets | 6 | 7 | 6 | 6 | 7 | 25 | 28 | |||||||||||||||||||
Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP | $ | 722 | $ | 895 | $ | 921 | $ | 964 | $ | 1,412 | $ | 3,502 | $ | 4,361 | ||||||||||||
| Average common shareholders’ equity | $ | 40,712 | $ | 39,924 | $ | 38,476 | $ | 37,664 | $ | 37,842 | 39,200 | 37,505 | ||||||||||||||
| Less: Average goodwill | 17,411 | 17,357 | 17,243 | 17,311 | 17,332 | 17,331 | 17,329 | |||||||||||||||||||
| Average intangible assets | 3,019 | 3,039 | 3,058 | 3,089 | 3,119 | 3,051 | 3,162 | |||||||||||||||||||
| Add: Deferred tax liability – tax deductible goodwill | 1,144 | 1,132 | 1,119 | 1,109 | 1,098 | 1,144 | 1,098 | |||||||||||||||||||
| Deferred tax liability – intangible assets | 667 | 666 | 664 | 666 | 670 | 667 | 670 | |||||||||||||||||||
| Average tangible common shareholders’ equity – Non-GAAP | $ | 22,093 | $ | 21,326 | $ | 19,958 | $ | 19,039 | $ | 19,159 | $ | 20,629 | $ | 18,782 | ||||||||||||
| Return on common equity – GAAP | 6.9 | % | 8.7 | % | 9.4 | % | 10.1 | % | 14.6 | % | 8.7 | % | 11.4 | % | ||||||||||||
| Return on tangible common equity – Non-GAAP | 13.0 | % | 16.7 | % | 18.5 | % | 20.4 | % | 29.3 | % | 17.0 | % | 23.2 | % | ||||||||||||
16
| THE BANK OF NEW YORK MELLON CORPORATION | | ||||||||||||||||||||||
| SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||||
| Book value and tangible book value per common share reconciliation | 2020 | 2019 | |||||||||||||||||||||
| (dollars in millions, except common shares) | Dec. 31 | Sept. 30 | June 30 | March 31 | Dec. 31 | ||||||||||||||||||
| BNY Mellon shareholders’ equity at period end – GAAP | $ | 45,801 | $ | 44,917 | $ | 43,697 | $ | 41,145 | $ | 41,483 | |||||||||||||
| Less: Preferred stock | 4,541 | 4,532 | 4,532 | 3,542 | 3,542 | ||||||||||||||||||
| BNY Mellon common shareholders’ equity at period end – GAAP | 41,260 | 40,385 | 39,165 | 37,603 | 37,941 | ||||||||||||||||||
| Less: Goodwill | 17,496 | 17,357 | 17,253 | 17,240 | 17,386 | ||||||||||||||||||
| Intangible assets | 3,012 | 3,026 | 3,045 | 3,070 | 3,107 | ||||||||||||||||||
| Add: Deferred tax liability – tax deductible goodwill | 1,144 | 1,132 | 1,119 | 1,109 | 1,098 | ||||||||||||||||||
| Deferred tax liability – intangible assets | 667 | 666 | 664 | 666 | 670 | ||||||||||||||||||
| BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP | $ | 22,563 | $ | 21,800 | $ | 20,650 | $ | 19,068 | $ | 19,216 | |||||||||||||
Period-end common shares outstanding (in thousands) | 886,764 | 886,136 | 885,862 | 885,443 | 900,683 | ||||||||||||||||||
| Book value per common share – GAAP | $ | 46.53 | $ | 45.58 | $ | 44.21 | $ | 42.47 | $ | 42.12 | |||||||||||||
| Tangible book value per common share – Non-GAAP | $ | 25.44 | $ | 24.60 | $ | 23.31 | $ | 21.53 | $ | 21.33 | |||||||||||||
| Net interest margin reconciliation | |||||||||||||||||||||||
| (dollars in millions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | ||||||||||||||||||
| Net interest revenue – GAAP | $ | 680 | $ | 703 | $ | 780 | $ | 814 | $ | 815 | |||||||||||||
| Add: Tax equivalent adjustment | 3 | 2 | 2 | 2 | 2 | ||||||||||||||||||
| Net interest revenue (FTE) – Non-GAAP | $ | 683 | $ | 705 | $ | 782 | $ | 816 | $ | 817 | |||||||||||||
| Average interest-earning assets | $ | 378,674 | $ | 357,634 | $ | 357,562 | $ | 323,936 | $ | 297,987 | |||||||||||||
Net interest margin – GAAP (a) | 0.72 | % | 0.79 | % | 0.88 | % | 1.01 | % | 1.09 | % | |||||||||||||
Net interest margin (FTE) – Non-GAAP (a) | 0.72 | % | 0.79 | % | 0.88 | % | 1.01 | % | 1.09 | % | |||||||||||||
| (a) Net interest margin is annualized. | |||||||||||||||||||||||
17
| THE BANK OF NEW YORK MELLON CORPORATION | | |||||||||||||||||||||||||
| SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||||||||
| Pre-tax operating margin reconciliation - Investment and Wealth Management business | ||||||||||||||||||||||||||
| (dollars in millions) | 4Q20 | 3Q20 | 2Q20 | 1Q20 | 4Q19 | FY20 | FY19 | |||||||||||||||||||
| Income before income taxes – GAAP | $ | 311 | $ | 245 | $ | 221 | $ | 194 | $ | 240 | $ | 971 | $ | 1,061 | ||||||||||||
| Total revenue – GAAP | $ | 990 | $ | 918 | $ | 886 | $ | 898 | $ | 971 | $ | 3,692 | $ | 3,707 | ||||||||||||
| Less: Distribution and servicing expense | 76 | 85 | 86 | 91 | 93 | 338 | 376 | |||||||||||||||||||
| Adjusted total revenue, net of distribution and servicing expense – Non-GAAP | $ | 914 | $ | 833 | $ | 800 | $ | 807 | $ | 878 | $ | 3,354 | $ | 3,331 | ||||||||||||
Pre-tax operating margin – GAAP (a) | 32 | % | 27 | % | 25 | % | 22 | % | 25 | % | 26 | % | 29 | % | ||||||||||||
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a) | 34 | % | 29 | % | 28 | % | 24 | % | 27 | % | 29 | % | 32 | % | ||||||||||||
| (a) Income before income taxes divided by total revenue. | ||||||||||||||||||||||||||
| Constant currency reconciliations | 4Q20 vs. | |||||||||||||||||||||||||
| (dollars in millions) | 4Q20 | 4Q19 | 4Q19 | |||||||||||||||||||||||
| Consolidated: | ||||||||||||||||||||||||||
| Investment management and performance fees – GAAP | $ | 884 | $ | 883 | — | % | ||||||||||||||||||||
| Impact of changes in foreign currency exchange rates | — | 10 | ||||||||||||||||||||||||
| Adjusted investment management and performance fees – Non-GAAP | $ | 884 | $ | 893 | (1) | % | ||||||||||||||||||||
| Investment and Wealth Management business: | ||||||||||||||||||||||||||
| Investment management and performance fees – GAAP | $ | 884 | $ | 884 | — | % | ||||||||||||||||||||
| Impact of changes in foreign currency exchange rates | — | 10 | ||||||||||||||||||||||||
| Adjusted investment management and performance fees – Non-GAAP | $ | 884 | $ | 894 | (1) | % | ||||||||||||||||||||
18
Fourth Quarter 2020 Financial Highlights J a n u a r y 2 0 , 2 0 2 1
2 Fourth Quarter 2020 – Financial Highlights 4Q20 Financial Highlights $0.79 ex-notable items: $0.96 EPS $0.90 bn ex-notable items: $1.13 bn Pre-tax income ROE: 6.9% ROTCE: 13.0% Returns CET1: 13.1 Tier 1 Leverage: 6.3% Capital ratios › Revenue, ex-notable items, down 2% year-over- year(a) due to the low interest rate environment and associated money market fee (“MMF”) waivers › Fee revenue, ex-notable items and MMF waivers, up 5%(a) › Net interest revenue, down 17% › Investment Services (“IS”) benefited from higher market levels and higher balances and clearing volumes in Pershing › Investment and Wealth Management (“I&WM”) mainly benefited from higher market levels › $15 million provision for credit losses and no net charge-offs › Returned $0.3 billion to common shareholders in dividends and accreted substantial capital (a) $3.84 bn ex-notable items: $3.90 bn Revenue 24% ex-notable items: 29% Pre-tax margin (a) (a) (a) (a) (a) Represents a non-GAAP measure. Throughout this presentation, references to revenue, ex-notable items; EPS, ex-notable items; pre-tax income, ex-notable items; pre-tax margin, ex-notable items; fee revenue, ex-notable items and MMF waivers; and ROTCE are to non-GAAP measures. See pages 21, 22 and 24 in the Appendix for the corresponding reconciliations of non-GAAP measures excluding notable items and ROTCE, respectively. Revenue and fee revenue decreased year-over-year 20% and 22%, respectively.
3 Fourth Quarter 2020 – Financial Highlights › Revenue, ex-notable items, up 1% year-over-year despite impact of low interest rates(a) › Fee revenue increased 5%, ex-notable items and MMF waivers(a) › EPS flat ex-notable items(a) › Sustained investments while keeping expenses flat, ex-notable items(a) › Achieved solid pre-tax margin and ROTCE(a) › Supported clients, employees, communities and the financial system during covid-19 › Demonstrated operational resiliency and balance sheet strength in an unprecedented environment › Generated significant excess capital as share buybacks suspended 2Q-4Q 2020 for CCAR banks 2020 Financial Highlights $3.83 ex-notable items: $4.01 EPS $4.47 bn ex-notable items: $4.69 bn Pre-tax income ROE: 8.7% ROTCE: 17.0% Returns (a) $15.81 bn ex-notable items: $15.87 bn Revenue 28% ex-notable items: 30% Pre-tax margin (a) (a) (a) (a) (a) Represents a non-GAAP measure. References in this slide to revenue, ex-notable items; EPS, ex-notable items; pre-tax income, ex-notable items; pre-tax margin, ex-notable items; fee revenue, ex-notable items and MMF waivers; expenses, ex-notable items and ROTCE are to non-GAAP measures. See pages 22 and 24 in the Appendix for the corresponding reconciliations of non-GAAP measures excluding notable items and ROTCE, respectively. Compared to 2019, revenue and fee revenue decreased by 4%.
4 Fourth Quarter 2020 – Financial Highlights 4 Q 2 0 3 Q 2 0 4 Q 1 9 T O T A L R E V E N U E $3,843 - % (20)% Fee revenue 3,116 - (22) Net interest revenue 680 (3) (17) Provision for credit losses 15 N/M N/M Noninterest expense 2,925 9 (1) Income before income taxes 903 (22) (50) Net income applicable to common shareholders $702 (20)% (50)% E A R N I N G S P E R C O M M O N S H A R E $0.79 (19)% (48)% Operating leverage (a) (921) bps (1,825) bps Pre-tax operating margin 24% (656) bps (1,464) bps Return on common equity (annualized) 6.9% (186) bps (773) bps Return on tangible common equity – non-GAAP (annualized) (b) 13.0% (370) bps (1,627) bps 4Q20 Financial Highlights ($ millions, except per share data) Note: See page 20 in the Appendix for corresponding footnotes. N/M - not meaningful Increase / (decrease) Revenue Expense EPS 4Q20 (61) 165 $(0.18) 4Q19 790 186 $0.50 Notable items impacting the fourth quarter › 4Q20 includes litigation expense, severance, losses on business sales and real estate charges › 4Q19 includes a gain on sale of an equity investment, severance, net securities losses and litigation expense
5 Fourth Quarter 2020 – Financial Highlights 14.6 8.7 6.9 0 5 10 15 20 25 30 35 4Q20 Key Financial Trends 924 871 945 47 47 50 995971 4Q19 3Q20 4Q20 918 +2% Ad j . I & W M r e v e n u e ($ millions) 2,7602,778 4Q19 3Q20 4Q20 2,681 (1)% 13.0 29.3 4Q19 3Q20 4Q20 16.7 (1,627) bps I S r e v e n u e ($ millions) Ad j . n o n i n t e r e s t e x p e n s e ($ millions) R O T C E / R O E (%) 10 15 20 25 30 35 40 45 501,1291,218 4Q19 3Q20 4Q20 31% 30% 1,157Adj. pre-tax operating margin Ad j . p r e - t a x i n c o m e ($ millions) (7)% 0.961.01 4Q19 3Q20 4Q20 0.98 Ad j . E P S ($) ROE Adj. I&WM total fee and other revenue Net interest revenue 2,236 2,246 2,235 778 681 670 2,9053,014 4Q19 3Q20 4Q20 2,927 (4)% Total fee and other revenue Net interest revenue (b) 29% (a) Represents a non-GAAP measure, excluding notable items. Adj. I&WM revenue and Adj. I&WM total fee and other revenue exclude notable items in 4Q20; there were no notable items in 4Q19 and 3Q20. Adj. noninterest expense, Adj. pre-tax income, Adj. pre-tax operating margin and Adj. EPS exclude notable items in 4Q19 and 4Q20; there were no notable items in 3Q20. See pages 20 and 21 of the Appendix for additional information and the corresponding reconciliation of these non-GAAP measures. (b) Represents a non-GAAP measure, see page 24 for the corresponding reconciliation of ROTCE. (5)% (a) (a) (a) (a) (a) (a)
6 Fourth Quarter 2020 – Financial Highlights 2 0 2 0 2 0 1 9 T O T A L R E V E N U E $15,808 (4)% Fee revenue 12,714 (4) Net interest revenue 2,977 (7) Provision for credit losses 336 N/M Noninterest expense 11,004 1 Income before income taxes 4,468 (20) Net income applicable to common shareholders $3,423 (20)% E A R N I N G S P E R C O M M O N S H A R E $3.83 (15)% Operating leverage (a) (493) bps Pre-tax operating margin 28% (568) bps Return on common equity (annualized) 8.7% (266) bps Return on tangible common equity – non-GAAP (annualized) (b) 17.0% (624) bps 2020 Financial Highlights ($ millions, except per share data) Note: See page 20 in the Appendix for corresponding footnotes. N/M – not meaningful Increase / (decrease) Revenue Expense EPS 2020 (61) 165 $(0.18) 2019 720 113 $0.49 Notable items impacting the full-year › 2020 includes litigation expense, severance, losses on business sales and real estate charges recorded in 4Q20 › 2019 includes a gain on sale of an equity investment, severance, net securities losses, litigation expense recorded in 4Q19 and a lease-related impairment and a net reduction of reserves for tax-related exposure of certain investment management funds both recorded in 3Q19
7 Fourth Quarter 2020 – Financial Highlights 11.4 8.7 0 5 10 15 20 25 2020 Key Financial Trends 3,485 3,495 222 197 3,6923,707 2019 2020 - % I & W M r e v e n u e ($ millions) 10,83910,787 2019 2020 - % 17.0 23.2 2019 2020 (624) bps I S r e v e n u e ($ millions) Ad j . n o n i n t e r e s t e x p e n s e ($ millions) R O T C E / R O E (%) 10 15 20 25 30 35 40 45 504,694 4,980 2019 2020 32% Adj. pre-tax operating margin Ad j . p r e - t a x i n c o m e ($ millions) (6)% 4.014.02 2019 2020 Ad j . E P S ($) ROE Total fee and other revenue Net interest revenue 8,926 9,256 3,126 2,925 12,18112,052 2019 2020 +1% Total fee and other revenue Net interest revenue (b) 30% (a) Represents a non-GAAP measure, excluding notable items. See pages 20 and 22 of the Appendix for additional information and the corresponding reconciliation of these non-GAAP measures. (b) Represents a non-GAAP measure, see page 24 for the corresponding reconciliation of ROTCE. - % (a) (a) (a) (a)
8 Fourth Quarter 2020 – Financial Highlights Capital and Liquidity Note: See page 20 in the Appendix for corresponding footnotes. 4 Q 2 0 3 Q 2 0 4 Q 1 9 Consolidated regulatory capital ratios: (a) Common Equity Tier 1 (“CET1”) ratio 13.1% 13.0% 11.5% Tier 1 capital ratio 15.8 15.7 13.7 Total capital ratio 16.7 16.6 14.4 Tier 1 leverage ratio 6.3 6.5 6.6 Supplementary leverage ratio (“SLR“) 8.6 8.5 6.1 Average liquidity coverage ratio (“LCR“) 110% 111% 120% Book value per common share $46.53 $45.58 $42.12 Tangible book value per common share – non-GAAP (c) $25.44 $24.60 $21.33 Cash dividends per common share $0.31 $0.31 $0.31 Common shares outstanding (thousands) 886,764 886,136 900,683 (b) (b)
9 Fourth Quarter 2020 – Financial Highlights Net Interest Revenue ($ millions) - Impact of lower interest rates on interest- earning assets - Hedging and other + Benefit of lower funding and deposit rates D R I V E R S O F S E Q U E N T I A L N I R C H A N G E 4Q203Q20 703 680 + Benefit of higher securities balances and balance sheet mix 4Q203Q20 (3)% 0.14 0.27 0.64 0.15 0.37 0.86 0.16 0.25 0.15 0.22 USD LIBOR AVERAGE 1m 3m 5Y2Y 10Y US TREASURY AVERAGE (%) (%)
10 Fourth Quarter 2020 – Financial Highlights 105 130 128 24 33 36 2.13% 1.28% 1.22% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0 Balance Sheet Trends AV E R A G E D E P O S I T S Interest-bearing deposits rate ($ billions) AV E R A G E S E C U R I T I E S ($ billions) Average securities portfolio rate High Quality Liquid Assets (“HQLA”) Non-HQLA 129 164 164 3Q204Q19 4Q20 +27% - % Note: May not foot due to rounding. Non-HQLA balances includes credit sensitive securities such as corporates, muni’s and ABS. (a) Average securities include trading securities which are primarily non-HQLA. Excluding these, non-HQLA securities were $17 billion, $26 billion and $28 billion in 4Q19, 3Q20 and 4Q20, respectively. (b) Non-HQLA in 3Q20 included approximately $1.6 billion of CP and CDs purchased from money market funds, the majority of which has since matured. (c) Average rates were calculated on an FTE basis, at tax rates of approximately 21%. (a) (c) 50 68 76 182 212 231 0.73% (0.05)% (0.06)% 3Q204Q19 4Q20 280 232 307 Interest-bearing deposits +32% Noninterest-bearing deposits +10% (b)
11 Fourth Quarter 2020 – Financial Highlights 116 140 160 129 164 164 53 54 55 Credit Risk Profile (a) Preliminary data as of 12/31/20. L O A N S ( $ 5 6 b n ) Wealth management & Other residential mtges Financial institutions Margin loans CRE Commercial Overdrafts and other AV E R A G E I N T E R E S T - E A R N I N G A S S E T S Securities Loans Cash/ Reverse repo 4Q203Q204Q19 379 298 358 +6% +27% › Secured by marketable securities and/or residential property › No net charge-offs; limited forbearance requests › Mostly secured, 95% of exposure and 83% of loans are investment grade; 90% due < 1 year › $6.7bn banks; $2.3bn securities industry › Collateralized with marketable securities in excess of 100% of loan value › 74% secured loans, predominantly office and residential › Unsecured consists of predominantly investment grade REITs and real estate operating companies › Concentrated in NY Metro area › Well collateralized with assets under custody › $0.6bn services and other; $0.5bn manufacturing; $0.3bn energy and utilities › 92% of exposure and 83% of loans are investment grade (a) ($ billions) 30% 27% 20% 11% 2% 10% 4Q20
12 Fourth Quarter 2020 – Financial Highlights Noninterest Expense › Noninterest expenses down 1% year-over-year, primarily reflecting lower severance expense, partially offset by higher litigation expense and real estate charges, and down 1% excluding notable items(a) › Other than notable items, the decrease primarily reflects lower business development and distribution and servicing expenses, partially offset by continued investments in technology and the unfavorable impact of a weaker U.S. dollar › Technology expenses are included in staff, software and .equipment, and professional, legal and other purchased services 4 Q 2 0 3 Q 2 0 4 Q 1 9 Staff $1,554 6% (5)% Professional, legal and other purchased services 381 7 4 Software and equipment 359 6 10 Net occupancy 173 27 15 Sub-custodian and clearing 116 (3) (3) Distribution and servicing 75 (12) (18) Bank assessment charges 24 (20) (25) Business development 26 53 (60) Amortization of intangible assets 26 - (7) Other 191 79 32 Total noninterest expense $2,925 9% (1)% ($ millions) (a) Represents a Non-GAAP measure. See page 21 in the Appendix for the corresponding reconciliation of this non-GAAP measure.
13 Fourth Quarter 2020 – Financial Highlights Investment Services Note: See page 20 in the Appendix for corresponding footnotes. N/M – not meaningful › Asset Servicing down year-over-year primarily on lower interest rates and MMF waivers, partially offset by higher market levels and foreign exchange volumes and volatility › Pershing down primarily due to MMF waivers, partially offset by higher clearing revenue and balances › Issuer Services down primarily on lower interest rates and MMF waivers › Treasury Services down primarily on lower interest rates and MMF waivers, partially offset by higher client deposits, payment fees and money market balances › Clearance and Collateral Management down primarily on lower investment income due to the 4Q19 sale of an equity investment, partially offset by the growth in non- U.S. collateral management › AUC/A of $41.1 trillion up primarily on higher market values and client inflows, the favorable impact of a weaker U.S. dollar and net new business F I N A N C I A L H I G H L I G H T S ($ millions unless otherwise noted) 4 Q 2 0 3 Q 2 0 4 Q 1 9 Total revenue by line of business: Asset Servicing $1,357 - % (4)% Pershing 563 5 (3) Issuer Services 385 (11) (7) Treasury Services 325 1 (1) Clearance and Collateral Management 275 (1) (2) Total revenue 2,905 (1) (4) Provision for credit losses 31 N/M N/M Noninterest expense 2,174 8 - Income before taxes $700 (24)% (17)% Pre-tax operating margin 24% (724) bps (376) bps K E Y M E T R I C S Net interest revenue $670 (2)% (14)% Foreign exchange and other trading revenue 180 23 19 Securities lending revenue 36 (3) (10) Average loans 41,437 3 7 Average deposits 292,631 11 36 AUC/A at period end (tr) (a) 41.1 6 11 Market value of securities on loan at period end (bn) (b) 435 15 15 Pershing Net new assets (U.S. platform) (bn) (c) $28 N/M N/M Average active clearing accounts (U.S. platform) (thousands) 6,635 1 5 Clearance and Collateral Management Average tri-party collateral mgmt. balances (tr) $3.6 4% - %
14 Fourth Quarter 2020 – Financial Highlights Investment Services - Revenue Drivers A S S E T S E R V I C I N G I S S U E R S E R V I C E SP E R S H I N G T R E A S U R Y S E R V I C E S C L E A R A N C E A N D C O L L A T E R A L - Interest rates - MMF waivers + Market levels + Deposit balances + FX volumes - MMF waivers + Clearing volumes + Money market balances - Interest rates - MMF waivers + Deposit balances + Payment fees - Equity investment income – investment sold in 4Q19 + Non-U.S. average tri-party repo balances 1,411 1,357 4Q19 4Q20 579 563 415 385 329 325 280 275 (4)% (3)% (7)% (1)% (2)% ($ millions) 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 - Interest rates - MMF waivers + Deposit balances + Corporate Trust new business Note: Graphs not to scale.
15 Fourth Quarter 2020 – Financial Highlights Investment and Wealth Management (a) Net of distribution and servicing expense. See page 25 in the Appendix for the corresponding reconciliation of this non-GAAP measure. (d) Represents a non-GAAP measure. See page 21 in the Appendix for the corresponding reconciliation of this non-GAAP measure. Note: see page 20 in the Appendix for corresponding footnotes (b) and (c). N/M – not meaningful › Investment Management up year-over-year primarily on higher market levels and the weaker U.S. dollar, partially offset by MMF waivers › Wealth Management down 1% on a loss on a business sale, or up 1% excluding the notable item(d) › Other than notable items, the increase primarily reflects higher market levels, partially offset by a shift to lower fee investment products and net outflows › Noninterest expense down 6%, on lower staff expense, including severance, and business development expense, or down 5% excluding notable items(d) › Other than notable items, the decrease primarily reflects lower incentives expense and business development › AUM of $2.2 trillion up primarily on higher market values, net inflows and the favorable impact of a weaker U.S. dollar F I N A N C I A L H I G H L I G H T S ($ millions unless otherwise noted) 4 Q 2 0 3 Q 2 0 4 Q 1 9 Total revenue by line of business: Investment Management $714 11% 3% Wealth Management 276 - (1) Total revenue 990 8 2 Provision for credit losses (8) N/M N/M Noninterest expense 687 4 (6) Income before taxes $311 27% 30% Pre-tax operating margin 32% 499 bps 676 bps Adjusted pre-tax operating margin – non-GAAP (a) 34% 487 bps 674 bps K E Y M E T R I C S Net interest revenue $50 6% 6% Average loans 11,497 - (4) Average deposits 18,144 3 19 Wealth Management client assets (bn) (b) 286 8 8 C H A N G E S I N A U M ( b n ) ( C ) 4 Q 2 0 3 Q 2 0 4 Q 1 9 Beginning balance $2,041 $1,961 $1,881 Equity (2) (4) (6) Fixed income 5 1 5 Liability-driven investments 15 14 (3) Multi-asset and alternatives investments - (3) 3 Index (3) (3) (5) Cash 5 (10) (7) Total net inflows (outflows) 20 (5) (13) Net market impact 79 41 (20) Net currency impact 57 44 62 Ending balance $2,197 $2,041 $1,910
16 Fourth Quarter 2020 – Financial Highlights Other Segment › Fee revenue, net securities gains (losses) and net interest expense include corporate treasury and other investment activity, including hedging activity which offsets between fee revenue and net interest expense › Fee revenue in 4Q20 includes a loss from a business sale; the year-over-year decrease primarily reflects the gain on sale of an equity investment recorded in 4Q19 › Net interest expense increased year-over-year primarily reflecting corporate treasury activity › Noninterest expense for 4Q20 includes a notable item related to real estate. Both 4Q20 and 4Q19 include severance expense F I N A N C I A L H I G H L I G H T S ($ millions unless otherwise noted) 4 Q 2 0 3 Q 2 0 4 Q 1 9 Fee (loss) revenue $(23) $11 $817 Net securities gains (losses) 6 9 (23) Total fee and other (loss) revenue (17) 20 794 Net interest (expense) (40) (25) (10) Total (loss) revenue (57) (5) 784 Provision for credit losses (8) 7 (3) Noninterest expense 64 - 54 (Loss) income before taxes $(113) $(12) $733
17 Fourth Quarter 2020 – Financial Highlights Unique Franchise with Global Scale and Leading Positions › #1 clearing firm for broker dealers and top 3 for RIA segment(d) › Independent open platform approach › Strong distribution capabilities for third-party AM products › Leading digital advisor and investor solutions provider › Leading market share in both Corporate Trust and Depositary Receipts(b) › Treasury Services: #4 in CHIPS payment volumes(c); processes over $2T/day in electronic payments › Clearance & Collateral Management: Sole clearer of US Treasuries; tri-party collateral balances of $3.6tr › Providing critical platforms and services for our clients’ capital markets payments and infrastructure › World’s largest custodian at $41tr AUC/A(a) › 1,000+ clients across our suite of software/IP-based products › Global financial technology, outsourcing and data management & solutions provider Asset Servicing Pershing Issuer Services, Treasury Services and C&CM Investment and Wealth Management › IM: top 7 globally with ~$2.2tr AUM(e); expertise across broad array of asset classes and wide range of traditional and alternative investment strategies › WM: client assets of $286bn, #5 bank and trust company(f); Ultra-high-net-worth, high-net-worth and family office focus; 200 year+ brand history Securities Servicing WealthTech Capital Markets Infrastructure Powerful platform and interconnected businesses position us well for future growth Note: See page 20 in the Appendix for corresponding footnotes regarding ranking and positioning.
18 Fourth Quarter 2020 – Financial Highlights 2021 Outlook Organic fee growth: expect ~1.5% organic fee growth in 2021 and accelerating in 2022 as benefits of sustained investments become more meaningful Revenue: impacted by headwinds from low-rate environment and associated money market fee waivers, offsetting organic fee growth Expenses: expect approximately flat versus 2020 excluding notable items and the impact of currency, as we offset increased investments through internal efficiencies Capital returns: highly capital generative model; committed to returning at least 100% of earnings over time to shareholders
Appendix
20 Fourth Quarter 2020 – Financial Highlights Footnotes 4Q20 Financial Highlights, Page 4 a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. b) See page 24 for corresponding reconciliation of this non-GAAP measure. 4Q20 Key Financial Trends, Page 5 a) 4Q19 reported results: noninterest expense of $2,964 million, pre-tax income of $1,822 million, pre-tax operating margin of 38% and EPS of $1.52. 4Q20 reported results: I&WM total revenue of $990 million and I&WM total fee and other revenue of $940 million. 2020 Financial Highlights, Page 6 a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. b) See page 24 for corresponding reconciliation of this non-GAAP measure. 2020 Key Financial Trends, Page 7 a) 2019 reported results: noninterest expense of $10,900 million, pre-tax income of $5,587 million, pre-tax operating margin of 34% and EPS of $4.51. Capital and Liquidity, Page 8 a) Regulatory capital ratios for December 31, 2020, are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for the periods presented was the Advanced Approaches. b) Reflects the application of a rule effective April 1, 2020 to exclude certain central bank placements. Also effective on April 1, 2020 was the temporary exclusion of U.S. Treasury securities from the leverage exposure used in the SLR calculation which increased our consolidated SLR by 72 basis points at December 31, 2020 and 78 basis points at September 30, 2020. c) Tangible book value per common share – non-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities. See page 24 for corresponding reconciliation of this non-GAAP measure. Investment Services, Page 13 a) Current period is preliminary. Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce of $1.5 trillion at December 31, 2020, $1.4 trillion at September 30, 2020 and $1.5 trillion at December 31, 2019. b) Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $68 billion at December 31, 2020, $62 billion at September 30, 2020 and $60 billion at December 31, 2019. c) Net new assets represent net flows of assets excluding dividends and interest (e.g., net cash deposits and net securities transfers) in customer accounts in Pershing LLC, a U.S. broker-dealer. Investment and Wealth Management, Page 15 b) Current period is preliminary. Includes AUM and AUC/A in the Wealth Management business. c) Current period is preliminary. Excludes securities lending cash management assets and assets managed in the Investment Services business. Unique Franchise with Global Scale and Leading Positions, Page 17 (a) Current period is preliminary. Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth Management businesses. Includes the AUC/A of CIBC Mellon, a joint venture with the Canadian Imperial Bank of Commerce of $1.5 trillion at December 31, 2020. Source of ranking based on peer group company filing as of September 30, 2020. Peer group included in ranking analysis: STT, JPM, C, BNP, HSBC, NTRS and RBC. (b) Corporate Trust source rankings as of September 30, 2020: Thomson Reuters/Refinitiv, Dealogic, Asset-Backed Alert, Concept ABS and Artemis; #1 in Straight debt based on deal count source Dealogic and Thomson Reuters/Refinitiv, #3 in Structured based on deal size source Asset-Backed Alert and Concept ABS, #2 in U.S. municipal debt based on deal count source Thomson Reuters/Refinitiv, and #1 in Catastrophe bonds based on deal size source Artemis. Depositary Receipts: ranked #1 based on market share sourced from BNY internal analysis. (c) Ranked #4 on overall year-to-date volumes through November 30, 2020 on the Clearing House Interbank Payments System (“CHIPS”). (d) Ranked #1 in clearing firms by number of broker dealer clients source LaRoche Database, Pershing, introducing firm accounts only as of June 30, 2020. Ranked #2 in RIA custodians by Aite Group, New Realities in Wealth Management: Growth Amplifies Prior to the Storm, 2020. Assets on leading corresponding clearing platforms and RIA custodians as of December 31, 2019. (e) 7th Largest Asset Manager Worldwide: Pensions & Investments, June 1, 2020. Ranked by total worldwide institutional assets under management as of December 31, 2019. (f) Cerulli Associates, The Cerulli Report—U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2020: Implications of Wealth Concentration. Assets under management as of December 31, 2019.
21 Fourth Quarter 2020 – Financial Highlights 4 Q 2 0 4 Q 1 9 4 Q 2 0 v s 4 Q 2 0 v s ($ millions, except per share amounts and unless otherwise noted) R e s u l t s - G A A P N o t a b l e i t e m s R e s u l t s N o n - G A A P R e s u l t s - G A A P N o t a b l e i t e m s R e s u l t s N o n - G A A P 4 Q 1 9 R e s u l t s – G A A P 4 Q 1 9 R e s u l t s – N o n - G A A P Fee revenue $3,116 $(61) $3,177 $3,971 $815 $3,156 (22)% 1% Net securities gains (losses) 6 - 6 (25) (25) - n/m n/m Total fee and other revenue 3,122 (61) 3,183 3,946 790 3,156 (21) 1 Total revenue 3,843 (61) 3,904 4,778 790 3,988 (20) (2) Noninterest expense 2,925 165 2,760 2,964 186 2,778 (1) (1) Income before income taxes 903 (226) 1,129 1,822 604 1,218 (50) (7) Provision for income taxes 148 (67) 215 373 144 229 (60) (6) Net income applicable to common shareholders 702 (159) 861 1,391 460 931 (50) (8) Diluted earnings per common share $0.79 $(0.18) $0.96 $1.52 $0.50 $1.01 (48)% (5)% Average common shares and equivalents outstanding – diluted (in thousands) 891,846 914,739 Pre-tax operating margin 24% 29% 38% 31% 4Q20 4Q19 ($ millions) IS IWM Other Total IS IWM Other Total Fee and other revenue $ - $(5) $(56) $(61) $ - $ - $790 $790 Net interest revenue - - - - - - - - Total revenue - (5) (56) (61) - - 790 790 Total noninterest expense 107 11 47 165 119 16 51 186 (Loss) income before taxes $(107) $(16) $(103) $(226) $(119) $(16) $739 $604 Fourth Quarter – Impact of Notable Items (a) (a) Notable Items by Business Segment The tables above reconcile adj. I&WM revenue; adj. I&WM total fee and other revenue; EPS, ex-notable items (also referred to as adj. EPS); noninterest expense, ex-notable items (also referred to as adj. noninterest expense); pre-tax income, ex-notable items (also referred to as adj. pre-tax income); pre-tax operating margin, ex-notable items (also referred to as adj. pre-tax operating margin); revenue, ex-notable items; and Wealth Management total revenue, ex-notable items, to the corresponding GAAP measure. Note: May not foot due to rounding. (a) Notable items in 4Q20 include litigation expense, severance, losses on business sales (reflected in fee revenue) and real estate charges. Notable items in 4Q19 include a gain on sale of an equity investment, severance, net securities losses and litigation expense. There were no notable items in 3Q20. (b) Notable items in 4Q20 includes a loss on business sale. (c) Notable items in 4Q20 and 4Q19 include severance for both business segments. Notable items in 4Q20 and 4Q19 also include litigation expenses in the Investment Services business segment. (by business segment) I&WM total fee and other revenue $940 $(5) $945 $924 - $924 2% 2% I&WM total revenue 990 (5) 995 971 - 971 2 2 Wealth Management total revenue 276 (5) 281 279 - 279 (1) 1 Investment and Wealth Management noninterest expense 687 11 676 731 16 715 (6) (5) Investment Services noninterest expenses $2,174 $107 $2,067 $2,179 $119 $2,060 -% -%(c) (b) (c) (c) (c) (b) (b) (a)
22 Fourth Quarter 2020 – Financial Highlights 2 0 2 0 2 0 1 9 2 0 2 0 v s 2 0 2 0 v s ($ millions, except per share amounts and unless otherwise noted) R e s u l t s - G A A P N o t a b l e i t e m s R e s u l t s N o n - G A A P R e s u l t s - G A A P N o t a b l e i t e m s R e s u l t s N o n - G A A P 2 0 1 9 R e s u l t s - G A A P 2 0 1 9 R e s u l t s – N o n - G A A P Fee revenue $12,714 $(61) $12,775 $13,236 $815 $12,421 (4)% 3% Net securities gains (losses) 33 - 33 (18) (25) 7 n/m n/m Total fee and other revenue 12,747 (61) 12,808 13,218 790 12,428 (4) 3 Net interest revenue 2,977 - 2,977 3,188 (70) 3,258 (7) (9) Total revenue 15,808 (61) 15,869 16,462 720 15,742 (4) 1 Noninterest expense 11,004 165 10,839 10,900 113 10,787 1 - Income before income taxes 4,468 (226) 4,694 5,587 607 4,980 (20) (6) Provision for income taxes 842 (67) 909 1,120 140 980 (25) (7) Net income applicable to common shareholders 3,423 (159) 3,582 4,272 467 3,805 (20) (6) Diluted earnings per common share $3.83 $(0.18) $4.01 $4.51 $0.49 $4.02 (15)% -% Average common shares and equivalents outstanding – diluted (in thousands) 892,514 943,109 Pre-tax operating margin 28% 30% 34% 32% Full Year – Impact of Notable Items The table above reconciles EPS, ex-notable items (also referred to as adj. EPS); noninterest expense, ex-notable items (also referred to as adj. noninterest expense); pre-tax income, ex-notable items (also referred to as adj. pre-tax income); pre-tax operating margin, ex-notable items (also referred to as adj. pre-tax operating margin); and revenue, ex-notable items, to the corresponding GAAP measure. Note: May not foot due to rounding. (a) Notable items in 2020 include litigation expense, severance, losses on business sales (reflected in fee revenue) and real estate charges recorded in 4Q20. Notable items in 2019 include a gain on sale of an equity investment, severance, net securities losses, litigation expense recorded in 4Q19 and a lease-related impairment and a net reduction of reserves for tax-related exposure of certain investment management funds both recorded in 3Q19. (b) Notable items in 4Q20 include losses on business sales. Notable items in 4Q19 include a gain on sale of an equity investment. (c) Notable items in 2020 include losses on business sales recorded in 4Q20. Notable items in 2019 include a gain on sale of an equity investment recorded in 4Q19. (a) (a) 4 Q 2 0 v s 2 0 2 0 v s ($ millions) 4 Q 2 0 4 Q 1 9 2 0 2 0 2 0 1 9 4 Q 1 9 2 0 1 9 Fee revenue – GAAP $3,116 $3,971 $12,714 $13,236 (22)% (4)% Notable items (61) 815 (61) 815 n/m n/m Fee revenue, ex-notable items – non-GAAP 3,177 3,156 12,775 12,421 1 3 Fee waivers (149) (13) (368) (49) n/m n/m Fee revenue, ex-notable items and fee waivers – non-GAAP $3,326 $3,169 $13,143 $12,470 5% 5% Fee revenue, Excluding Notable Items and Fee Waivers Reconciliation (c) (c)(b) (b)
23 Fourth Quarter 2020 – Financial Highlights Money Market Fee Waiver Impact ($ millions) 4 Q 2 0 3 Q 2 0 2 Q 2 0 1 Q 2 0 2 0 2 0 Investment services fees: Asset servicing fees $(13) $(1) $ - $ - $(14) Clearing services fees (64) (57) (50) (9) (180) Issuer services fees (6) (1) (1) - (8) Treasury services fees (2) (3) (2) - (7) Total investment services fees (85) (62) (53) (9) (209) Investment management and performance fees (56) (42) (30) (14) (142) Distribution and servicing revenue (8) (6) (3) - (17) Total fee and other revenue (149) (110) (86) (23) (368) Less: Distribution and servicing expense 15 9 7 - 31 Net impact of money market fee waivers $(134) $(101) $(79) $(23) $(337) Impact to revenue by line of business: (a) Asset Servicing $(13) $(4) $(1) $ - $(18) Pershing (85) (73) (60) (9) (227) Issuer Services (10) (2) (1) - (13) Treasury Services (5) (1) - - (6) Total Investment Services (113) (80) (62) (9) (264) Investment Management (34) (28) (24) (14) (100) Wealth Management (2) (2) - - (4) Total Investment and Wealth Management (36) (30) (24) (14) (104) Total impact to revenue by line of business $(149) $(110) $(86) $(23) $(368) (a) The line of business revenue for management reporting purposes reflects the impact of revenue transferred between the businesses.
24 Fourth Quarter 2020 – Financial Highlights Return on Common Equity and Tangible Common Equity Reconciliation ($ millions) 4 Q 2 0 3 Q 2 0 4 Q 1 9 2 0 2 0 2 0 1 9 Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP $702 $876 $1,391 $3,423 $4,272 Add: Amortization of intangible assets 26 26 28 104 117 Less: Tax impact of amortization of intangible assets 6 7 7 25 28 Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – non-GAAP $722 $895 $1,412 $3,502 $4,361 Average common shareholders’ equity $40,712 $39,924 $37,842 $39,200 $37,505 Less: Average goodwill 17,411 17,357 17,332 17,331 17,329 Average intangible assets 3,019 3,039 3,119 3,051 3,162 Add: Deferred tax liability – tax deductible goodwill 1,144 1,132 1,098 1,144 1,098 Deferred tax liability – intangible assets 667 666 670 667 670 Average tangible common shareholders’ equity – non-GAAP $22,093 $21,326 $19,159 $20,629 $18,782 Return on common equity (annualized) – GAAP 6.9% 8.7% 14.6% 8.7% 11.4% Return on tangible common equity (annualized) – non-GAAP 13.0% 16.7% 29.3% 17.0% 23.2% Book Value and Tangible Book Value Per Common Share Reconciliation ($ millions, except common shares) December 31, 2020 September 30, 2020 December 31, 2019 BNY Mellon shareholders’ equity at period end – GAAP $45,801 $44,917 $41,483 Less: Preferred stock 4,541 4,532 3,542 BNY Mellon common shareholders’ equity at period end – GAAP 41,260 40,385 37,941 Less: Goodwill 17,496 17,357 17,386 Intangible assets 3,012 3,026 3,107 Add: Deferred tax liability – tax deductible goodwill 1,144 1,132 1,098 Deferred tax liability – intangible assets 667 666 670 BNY Mellon tangible common shareholders’ equity at period end – non-GAAP $22,563 $21,800 $19,216 Period-end common shares outstanding (in thousands) 886,764 886,136 900,683 Book value per common share – GAAP $46.53 $45.58 $42.12 Tangible book value per common share – non-GAAP $25.44 $24.60 $21.33
25 Fourth Quarter 2020 – Financial Highlights Pre-tax Operating Margin Reconciliation – Investment and Wealth Management Business (a) Income before income taxes divided by total revenue. 4 Q 2 0 3 Q 2 0 4 Q 1 9 Income before income taxes – GAAP $311 $245 $240 Total revenue – GAAP $990 $918 $971 Less: Distribution and servicing expense 76 85 93 Adjusted total revenue, net of distribution and servicing expense – non-GAAP $914 $833 $878 Pre-tax operating margin – GAAP (a) 32% 27% 25% Adjusted pre-tax operating margin, net of distribution and servicing expense – non-GAAP (a) 34% 29% 27% ($ millions)
26 Fourth Quarter 2020 – Financial Highlights Cautionary Statement A number of statements in The Bank of New York Mellon Corporation’s (the “Corporation”) presentations, the accompanying slides and the responses to your questions are “forward-looking statements.” Words such as “estimate,” “forecast,” “project,” “anticipate,” “likely,” “target,” “expect,” “intend,” “continue,” “seek,” “believe,” “plan,” “goal,” “could,” “should,” “would,” “may,” “might,” “will,” “strategy,” “synergies,” “opportunities,” “trends,” “future”, “potentially”, “outlook” and words of similar meaning may signify forward-looking statements. These statements relate to, among other things, the Corporation’s expectations regarding: capital plans, strategic priorities, financial goals, organic growth, performance, organizational quality and efficiency, investments, including in technology and product development, capabilities, resiliency, revenue, net interest revenue, money market fee waivers, fees, expenses, cost discipline, sustainable growth, company management, deposits, interest rates and yield curves, securities portfolio, taxes, business opportunities, divestments, volatility, preliminary business metrics and regulatory capital ratios and statements regarding the Corporation's aspirations, as well as the Corporation’s overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities, focus and initiatives, including the potential effects of the coronavirus pandemic on any of the foregoing. These forward-looking statements are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the Corporation’s control). Actual outcomes may differ materially from those expressed or implied as a result of a number of factors, including, but not limited to, those discussed in “Risk Factors” in the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (the “Third Quarter 2020 Form 10-Q”) and the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”) and in other filings of the Corporation with the Securities and Exchange Commission (the “SEC”). Statements about the effects of the current and near-term market and macroeconomic outlook on the Corporation, including on its business, operations, financial performance and prospects, may constitute forward-looking statements, and are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the Corporation's control), including the scope and duration of the pandemic, actions taken by governmental authorities and other third parties in response to the pandemic, the availability, use and effectiveness of vaccines, and the direct and indirect impact of the pandemic on the Corporation, its clients, customers and third parties. Preliminary business metrics and regulatory capital ratios are subject to change, possibly materially, as the Corporation completes its Annual Report on Form 10-K for the year ended December 31, 2020. All forward-looking statements speak only as of January 20, 2021, and the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. For additional information regarding the Corporation, please refer to the Corporation's SEC filings available at www.bnymellon.com/investorrelations. Non-GAAP Measures: In this presentation we discuss certain non-GAAP measures in detailing the Corporation’s performance, which exclude certain items or otherwise include components that differ from GAAP. We believe these measures are useful to the investment community in analyzing the financial results and trends of ongoing operations. We believe they facilitate comparisons with prior periods and reflect the principal basis on which the Corporation’s management monitors financial performance. Additional disclosures relating to non-GAAP measures are contained in the Corporation’s reports filed with the SEC, including the Third Quarter 2020 Form 10-Q and the 2019 Annual Report, and are available at www.bnymellon.com/investorrelations.
