The Bank of New York Mellon Corporation (BNY Mellon (NYSE:BK)) has reported first-quarter earnings that beat estimates as the spate of rate hikes over the past year boosted its interest income. However, like many of its peers, deposits have declined as investors switch to lower-risk investments such as money market funds or government bonds.
The financial services company reported an 11% rise in total revenue to $4.4 billion for the three months to March 31, 2023. Net interest revenue surged 62% to $1.1 billion while fee income was flat at $3.2 billion - but 3% lower excluding notable items.
Net income for the quarter rose 28% to $976 million, resulting in adjusted earnings per share of $1.13, up 20% from a year earlier and slightly ahead of the $1.12 expected by Wall Street.
It raised its provision for credit losses to $27 million, from $2 million in 1Q 2022, which it said reflected changes in the macroeconomic forecast.
Decline in average deposits
Average deposits were down 5% from December 31, 2022, at $167 billion. Compared to the same quarter a year ago, they were 13% lower.
While assets under custody and/or administration increased by 2% to $46.6 trillion, assets under management fell 16% to $1.9 trillion, due to lower market values, the effect of a strong US dollar, and its divestiture of Alcentra - partially offset by net inflows.
“The strength of BNY Mellon’s highly liquid, lower credit-risk and well-capitalized balance sheet in combination with the resilience of our platforms is the bedrock that supports our client franchise,” president and CEO Robin Vince said in a statement. “Time and again, BNY Mellon has been a port in the storm for our clients in times of market turmoil, and the recent weeks have been no different as we help our clients with solutions to navigate this complicated backdrop.”
BNY said it returned over $1.6 billion to shareholders over the period, including $1.3 billion of share buybacks and $304 million of dividends.
“While we will remain vigilant given the heightened uncertainty in the current environment, we are pushing forward with our strategic agenda to reinvigorate underlying growth by doing more for our clients across our extensive suite of products and services, while driving greater efficiency,” Vince concluded.
BNY’s shares were up 1.3% in late morning New York trade.
Contact the author at stephen.gunnion@proactiveinvestors.com