(Reuters) - BNY Mellon Corp’s (BK.N) top executives said on Wednesday that clients had started to flood the trust and custody bank with billions of dollars of deposits as they worry about the effects of the U.S. government shutdown.
The bank’s balance sheet has increased by about $10 billion in October, showing how clients are parking more cash, Chairman Gerald Hassell said on a conference call.
BNY Mellon, like other trust and custody banks, manages cash for companies and handles back-office processing of securities and banking transaction for fund managers, among its other businesses. The bank does not have retail branches.
Recent client behavior is reminiscent of what happened in the summer of 2011, when investors worried about the Greek debt crisis and an earlier stalemate in Washington over the U.S. debt ceiling, BNY Mellon Chief Financial Officer Todd Gibbons told Reuters.
At the end of 2011, noninterest-bearing deposits at the bank surged to $80 billion, or nearly double the amount reported earlier that year.
Such deposits totaled $72.1 billion at the end of September and surged in early October.
“There’s a lot of conversion into cash,” Gibbons said after the bank reported a higher-than-expected quarterly profit.
But stocks rose on Wednesday amid cautious optimism that U.S. politicians would strike a last-minute deal to prevent the country from defaulting on its debt. If a deal materializes, investors would probably rotate cash holdings into stocks and bonds.
BNY Mellon shares were up 0.5 percent at $31 at midday. The stock has risen 32 percent over the past 12 months.
The world’s largest custody bank by assets said it had earned $967 million, or 82 cents a share, in the third quarter, compared with $720 million, or 61 cents a share, a year earlier.
Without a benefit from a U.S. Tax Court decision, earnings were 60 cents a share. Still, that beat the analysts’ average estimate of 58 cents, according to Thomson Reuters I/B/E/S.
Investment services fees rose 4 percent to $1.7 billion, partly reflecting higher mutual fund and asset-based fees. Investment management and performance fees rose 5 percent from year-earlier levels to $821 million. The gains stemmed from new business and a rising stock market in the third quarter.
Foreign exchange revenue surged 27 percent to $154 million on higher volumes and volatility.
Reporting by Tim McLaughlin; Editing by Lisa Von Ahn