* Fourth-quarter profit 53 cents/share vs 42 cents a year
* Investment management and performance fees rise 17 pct
* Assets under management up 10 pct
* Deposit surge hurt net interest margin
* Shares down 2.8 pct
(Recasts to show stock decline)
By Tim McLaughlin
BOSTON, Jan 16 BNY Mellon Corp said
fourth-quarter earnings rose 23 percent, but its shares fell as
investors showed disappointment with declines in foreign
exchange activity, subdued revenue from deposits and an uptick
The bank's profit matched Wall Street estimates, but its
shares fell 2.8 percent to $26.02 on Wednesday. With interest
rates scraping along the bottom, BNY Mellon's net interest
margin - largely the difference between what it gets from loans
and what it pays on deposits - was 1.09 percent in the fourth
quarter, down from 1.27 percent a year ago.
With the fiscal cliff looming, the bank experienced a surge
in deposits, hurting that margin, BNY Mellon Chief Executive
Gerald Hassell explained on a conference call.
"We saw a run-up of $20 billion, $30 billion in our
deposits," Hassell said. "I think the debt ceiling is going to
put another potential concern in the eyes of investors ... We
are seeing people trying to put some money to work, but still
there's an enormous amount of cash sitting on the sidelines
waiting for better certainty and clarity."
The bank also has been hurt by declines in revenue in some
business segments that have relatively high fixed costs, BNY
Mellon Chief Financial Officer Todd Gibbons said in a telephone
interview. But that has been offset by strong gains in revenue,
for example, from the bank's investment management business.
Nomura analyst Glenn Schorr said strong investment
management fees, good deposit growth and solid capital ratios
were partially offset by higher expenses, weak trading revenue
and flat servicing fees.
"All in, progress on some fronts and great asset management
results, but the net earnings picture still hovers in a similar
range," Schorr said in a research note. "Expect the stock to be
a bit soft post the recent run."
Net income was $622 million, or 53 cents a share, up from
$505 million, or 42 cents a share, a year earlier.
Investment management and performance fees surged 17 percent
to $853 million on buoyant stock market returns. Assets under
management were up 10 percent to $1.39 billion. Fees from
investment services rose 1 percent to $1.6 billion.
Assets under custody and administration climbed 9 percent to
Revenue from trading foreign currencies continued to be a
weak spot. Foreign exchange revenue totaled $106 million, down
42 percent, on declining volatility and volumes.
The bank is battling several lawsuits, defending itself
against allegations of overcharging pension funds and other
customers on forex fees, a charge it denies.
(Reporting by Tim McLaughlin; Editing by John Wallace, Grant
McCool, Marguerita Choy and Nick Zieminski)